Eurocell plc Annual Report and Accounts 2022
ANNUAL REPORT
AND ACCOUNTS
2022
WE ARE EUROCELL
The UK’s leading manufacturer, distributor
and recycler of UPVC building products.
GROW
WITH US
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 01
2022 HIGHLIGHTS
1
Revenue
£381.2m
12%
2021: £339.8m
Gross Margin
48.4%
220bps
2021: 50.6%
Prot Before Tax
£26.2m
£1.5m
2021: £27.7m
Adjusted Prot
Before Tax
2
£28.7m
1.0m
2021: £27.7m
Adjusted Basic
Earnings Per
Share
2
21.4p
2.0p
2021: 19.4p
Basic Earnings
Per Share
19.6p
0.2p
2021: 19.4p
Adjusted EBITDA
2
£55.2m
5%
2021: £52.4m
Net Debt
£78.1m
£8.4m
2021: £69.7m
Pre-IFRS 16
Net Debt
£14.4m
£3.4m
2021: £11.0m
1 All gures, including comparatives, exclude discontinued
operations.
2 Adjusted measures are stated before non-underlying items
and the related tax effect (see page 142). We use alternative
performance measures to assess business performance and
they are provided here in addition to statutory measures to help
describe the underlying results of the Group.
CONTENTS
View the latest
results online at
investors.eurocell.co.uk
Strategic Report
01 Highlights
02 Our Purpose
04 Chair’s Report
06 What We Do
10 Market Overview
12 Chief Executive Officer’s Report
18 Our Business Model
20 Our Strategy
24 Our Strategy in Action
36 Divisional Reviews
40 Responsible Business
66 Chief Financial Officer’s Report
70 Principal Risks and Uncertainties
78 Viability Statement
Corporate Governance
80 The Board
82 Chair’s Introduction
84 Corporate Governance Statement
93 Nomination Committee Report
98 Audit and Risk Committee Report
104 Directors’ Remuneration Report
120 Directors’ Report
123 Statement of Directors’
Responsibilities
Financial Statements
124 Independent Auditors’ Report
132 Consolidated Statement of
Comprehensive Income
133 Consolidated Statement of
Financial Position
134 Consolidated Cash Flow Statement
135 Consolidated Statement of
Changes in Equity
136 Notes to the Consolidated
Financial Statements
168 Company Statement of
Financial Position
169 Company Statement of
Changes in Equity
170 Notes to the Company
Financial Statements
177 Company Information
Eurocell plc Annual Report and Accounts 202202
OUR PURPOSE
GROW WITH US
Our overall corporate objective is to deliver sustainable growth in shareholder value by increasing sales and prots at above market
growth rates through leadership in products, operations, sales, marketing and distribution. We have seven strategic priorities to
support the delivery of our overall objective:
Grow
market
share in
Proles
Increase
the use of
recycled
materials
No poverty Good
health and
well-being
Quality
education
Gender
equality
Affordable
clean energy
Decent
work and
economic
growth
Responsible
consumption
& production
Climate
action
Expand our
branch
network
Develop
innovative
new products
Deliver
sustained
operational
excellence
Explore
potential
bolt-on
acquisitions
Develop a
sector-
leading digital
proposition
SEE OUR STRATEGY ON PAGES 20 TO 23
We have dened a suite of environmental and social KPIs which are linked to the following UN Sustainable Development Goals
SEE PAGES 42 AND 43 FOR FURTHER DETAILS
WE CREATE SUSTAINABLE BUILDING SOLUTIONS TO BUILD
AND GROW – TOGETHER
It is our ambition to be
the customers’ preferred
choice in all markets and
segments we decide to
compete in
We want to be an
attractive brand to
partner with, work for
and invest in
And to build a
reputation for being
a truly responsible
company
WHAT WE CARE ABOUT
OUR STRATEGY
OUR RESPONSIBLE BUSINESS
Eurocell plc Annual Report and Accounts 2022 03
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 202204
CHAIR’S REPORT
The last twelve months have seen
major changes and signicant
challenges for the Group and in our
markets. The progress we made during
2022 is testament to the commitment,
hard work and dedication of our teams
in every part of the Company, so I start
this year’s report by offering, on behalf
of shareholders and of the Board,
mysincere thanks to them all.
Financial and operating performance
Against a backdrop of unprecedented levels of ination and weakening
markets, particularly in the second half of the year, the business has
delivered a solid nancial performance in 2022, keeping pace with an
exceptionally strong comparative period.
Sales for the year were £381 million, up 12% compared to 2021, and
adjusted prot before tax from continuing operations was up 4% at
£28.7 million (2021: £27.7 million). Reported prot before tax, also on a
continuing basis, was down 5% at £26.2 million (2021: £27.7 million),
reecting the cost of a restructuring programme, which will benet our
nancial results in 2023.
We are mindful of the uncertain macroeconomic background and its
impact on our markets and we have therefore taken steps to prepare the
business for 2023 and beyond. This included a restructuring programme
completed in the fourth quarter of 2022, which will reduce operating
costs by c.£5 million per annum from the start of 2023. In December,
following a review, and to further simplify the business, we completed
the disposal of Security Hardware, a supplier of window hardware with
sales of c.£3 million per annum. These actions leave the business better
placed for 2023.
Net debt at 31 December 2022 on a pre-IFRS 16 basis stood at £14.4
million (31 December 2021: £11.0 million). We have signicant headroom
on our bank facility and a strong balance sheet, which provides exibility
and options for the future.
Derek Mapp
Chair
Eurocell plc Annual Report and Accounts 2022 05
Financial
Statements
Corporate
Governance
Strategic
Report
THE LAST TWELVE MONTHS
HAVE SEEN SOME MAJOR
CHANGES AND SIGNIFICANT
CHALLENGES FOR THE GROUP
AND IN OUR MARKETS.”
Dividends
We paid an interim dividend of 3.5 pence per share in October 2022.
The Board proposes a nal dividend of 7.2 pence per share (2021: 6.4
pence per share), which results in total dividends for the year of 10.7
pence per share, up 11% (2021: 9.6 pence per share), reecting our
solid nancial performance and a lower tax rate in 2022.
Strategy
In November, the Board conducted a review of the Group’s strategy,
our markets and activities. We concluded that our overall strategic
objective, to deliver sustainable growth in shareholder value by
increasing sales and prots above our market growth rates,
remainsappropriate.
Over the last few years, we have targeted seven strategic priorities to
deliver this objective. We agreed that, whilst the seven priorities remain
relevant for the medium to long term, we will focus on certain specic
aspects of the strategy in 2023. In particular, we have an opportunity
to exploit our spare operational capacity and grow market share in
Proles by acquiring new fabricator customers. We also intend to
temporarily pause our branch opening programme until the economic
outlook is clearer, and will instead focus on optimising returns from
the existing branch estate. We will also continue to develop and
improve the rewards and other benets of working for Eurocell for our
employees. Finally, we agreed that acquisitions would not be a focus
for 2023.
The key aspects of our performance against each of the seven
priorities is described in the Chief Executive Ofcer’s Report.
Overall, we are condent that, through the successful progression of
our strategy, we will continue to outperform our markets and deliver
sustainable growth in shareholder value.
Board changes and governance
This has also been a period of transition for the Board.
I succeeded Bob Lawson as Chair, following his retirement in July
2022, and I would like to thank Bob for his tremendous contribution to
the development of Eurocell since our IPO in 2015.
Kate Allum and Alison Littley joined the Board in July 2022 and Iraj
Amiri joined in November, all as independent Non-executive Directors.
Kate, Alison and Iraj bring valuable commercial insight and extensive
board committee and ESG knowledge, as well as recent and relevant
nancial experience, and have strengthened the expertise of the Board
in these areas.
Sucheta Govil left the Board in July and Martyn Coffey has indicated
his intention to step down at our AGM in May. I would also like to
thank Sucheta and Martyn for their contribution to the Group.
As previously announced, in January 2023, Mark Kelly, Chief Executive
Ofcer, notied the Board of his intention to retire later this year. He will
be succeeded as CEO by Darren Waters, currently Chief Operating
Ofcer of Ibstock plc, who will join the Board as Chief Executive
Designate in April.
Mark has led the Group successfully from 2016, overseeing positive
change throughout the business, delivering on signicant growth since
then, as well as completing substantial investment to expand capacity
and provide a strong platform for the future. We are extremely grateful
to Mark for his immense contribution to the Group, and on behalf of
the Board, I thank him for his signicant achievements and we wish
him all the very best for the future.
To ensure a smooth transition, Mark will remain in his role until a handover
period has been completed, following which he will retire from the
Board and the position of Chief Executive Ofcer at the Group’s AGM
in May.
Darren has extensive experience and knowledge of the building
products and fenestration sectors in the UK, both from his current role
at Ibstock and from his previous position at Tyman plc, where he was
the Chief Executive of UK and Ireland from 2012 to 2020.
Whilst this has been a period of signicant change, I am very pleased
that we have been able to attract such high-calibre individuals into the
Company.
Finally, I can conrm that we aim to comply with the UK Corporate
Governance Code and that as a Board, we are committed to the
highest standards of corporate governance and ensuring effective
communication with shareholders.
Derek Mapp
Chair
Eurocell plc Annual Report and Accounts 202206
WHAT WE DO
OUR
OPERATIONS
Our operations
• We manufacture both PVC rigid
and foam products in our well
invested extrusion facilities.
• We currently have 68 extrusion
lines, supported by a PVC
compound mixing plant, along with
a specialist manufacturing site for
secondary operations, including
foiling and conservatoryroofs.
• In addition, we have a dedicated
technical centre, focused
on product development
andenhancement.
Our recycling sites
• We are the leading UK-based
recycler of PVC windows.
• We have two recycling facilities
located in Selby and Ilkeston,
which recycle factory offcuts
(post-industrial waste) and old
windows that have been replaced
with new (post-consumer waste)
into re-usable raw materials for our
manufacturing process.
Our route to market
• We distribute through our
nationwide network of over 200
branches which is supported by our
state-of-the-art central warehouse,
with cantilever racking and mobile
platform picking.
• Our sales and distribution strategy
is implemented through our cross
functional sales and business
development teams, which target
the key decision makers in the
supply chain, including fabricators,
installers, developers, architects,
local authorities and planning
departments.
WE MANUFACTURE WE RECYCLE WE DISTRIBUTE
MANUFACTURING
EXPERTISE
We manufacture both PVC
rigid and foam products
in our centrally located
extrusion facilities.
SUSTAINABLE SOURCING
We have two recycling
facilities which puts
recycling at the heart
DISTRIBUTION NETWORK
We distribute through our
nationwide network.
54.1k tonnes
Total amount of
proleproduced
219 (at 31 December 2022)
Number of branches
16.7k tonnes
Recycled product used
in our rigid PVC prole
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 07
Logik
Cavalok Cavity
Closers
Ovolo Modus
Vertical
Sliders
Syncro Patio
Doors
Bi-fold
Doors
Composite
Doors
Studio Glide
Conservatory Roofs
We operate our business through two divisions that reect the principal routes
to market for our products:
SEE THE PROFILES DIVISIONAL REVIEW ON PAGES 36 AND 37
Proles Division
The Proles division manufactures extruded rigid PVC
proles and foam PVC products. We make rigid and
foam products using virgin PVC compound, the largest
component of which is resin. Our rigid products also
include recycled PVC compound, produced at our market-
leading recycling facilities.
Rigid PVC proles are sold to third-party fabricators, who
produce windows, trims, cavity closer systems, patio doors and
conservatories for their customers.
There are broadly four types of fabricator:
• Trade frame – supply nished products to tradesmen or small
retail outlets.
• New build – supply and install the products they make for
housebuilders.
• Commercial – supply and install products used in applications
such as ofce space and education facilities.
• Retail – make products for sale via their own retail operation,
which may be a large national business, or a small company
servicing the local community. We are not particularly exposed
to retail fabricators.
Fabricators have production facilities which are customised to
the window or door system they make. As a result, fabricators
predominately buy proles from a single supplier, which in turn
creates a stable and loyal customer base.
Foam PVC products are used for rooine and are supplied to
customers through our nationwide branch network in the Building
Plastics division (see overleaf). All of our manufacturing margin is
recorded within the Proles division, which therefore also benets
from expansion of the branch network.
The Proles division also includes:
• Vista Doors – manufacturer of composite and PVC
entrancedoors.
• S&S Plastics – manufacturer of plastic injection moulded
products/services.
• Eurocell Recycle (Midlands and North) – recycler of
PVCwindows.
Eurocell Proles Division – Product Mix (%)
Window Prole Doors
Roofs
10%
10%
80%
Eurocell plc Annual Report and Accounts 202208
SEE THE BUILDING PLASTICS DIVISIONAL REVIEW ON PAGES 38 AND 39
The Building Plastics division distributes a range of Eurocell
manufactured and branded foam PVC rooine products and
Vista doors, as well as third-party manufactured ancillary
products. These include sealants, tools and rainwater
products, as well as windows fabricated by third parties using
products manufactured by the Proles division.
Distribution is through our national network of over 200 branches
to installers, small and independent builders, housebuilders and
nationwide maintenance companies. The branches also sell rooine
products to independent wholesalers.
White Rooine
& Trims
Eco-fencing
Foiled Rooine
& Trims
Coastline
Cladding
Rainwater
&Drainage
Sealants
&Cleaners
Outdoor
Living
Windows
Composite
Doors
Conservatory
Roofs
25%
30%
45%
Eurocell Building Plastics Division –
Product Mix (%)
Manufactured Products
Traded Goods
Made-To-Order
Building Plastics Division
WHAT WE DO CONTINUED
OUR
OPERATIONS CONTINUED
Eurocell plc Annual Report and Accounts 2022 09
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Eurocell plc Annual Report and Accounts 202210
MARKET OVERVIEW
CHALLENGING
MARKET DRIVERS FOR 2023
2018 2019 2020 2021 2022E 2023F 2024F
Total construction output growth
0%
10%
(15)%
4%
13%
(5)%
1%
Eurocell Revenue by Market (%)
2018 2019 2020 2021 2022E 2023F 2024F
Total housing growth
4%
15% 15%
(21)%
3%
(11)%
(1)%
2018 2019 2020 2021 2022E 2023F 2024F
Private housing RMI growth
0%
9%
(13)%
0%
21%
(9)%
1%
5%
15%
80%
External market data
Key to potential impact on demand for Eurocell products:
Positive Neutral Negative
RMI c.80%
New Build c.15%
Public Sector
(New Build and RMI) c.5%
CPA Construction Industry
Forecasts (2022-24)
Private home improvement and new build housing are
currently the most important market segments for Eurocell.
GDP
UK GDP is projected to continue to fall throughout
2023, and 2024 H1, as materially tighter nancial
conditions weigh on spending.
Interest rates
UK interest rates are currently at 4.0%, and are
expected to potentially rise further in 2023, to address
inationary pressures in the UK economy.
Private housing RMI
Having reached historic high levels of growth as the
UK emerged from the COVID-19 pandemic (21%
growth in 2021 and at in 2022), output in the private
housing RMI market is expected to decline by 9% in
2023, before marginal growth of 1% in 2024.
Housing market
Following two years of growth (15% in 2021 and 3%
in 2022), activity housing is forecast to reduce by 11%
in 2023, and by a further 1% in 2024.
Construction
Construction output is forecast to fall by 5% in 2023,
although from a historic high after two years of growth
(13% in 2021 and 4% in 2022) that raised activity to
levels higher than pre-pandemic, before growth of 1%
in 2024.
Sources: Bank of England forecasts for the UK economy (published
November 2022), Construction Industry Forecasts 2022-24 (published
January 2023).
Source: CPA Construction Industry Forecasts (central scenario –
published January 2023)
Eurocell plc Annual Report and Accounts 2022 11
Financial
Statements
Corporate
Governance
Strategic
Report
The level of UK economic activity, in particular the state of the repair,
maintenance and improvement (‘RMI’) and new-build housing markets,
areimportant drivers of our performance.
Eurocell markets and drivers
The Construction Products Association (‘CPA’) Industry Forecasts (published January 2023) estimate a at year in the private housing RMI
market in 2022, followed by decline of 9% in 2023, before marginal growth of 1% in 2024. In terms of the new build market, the CPA data
estimates total housing growth of 3% in 2022, followed by a decline of 11% in 2023 and a further 1% in 2024.
In this context of these forecasts, it is important to note that Eurocell has consistently outperformed CPA market growth estimates.
However, whilst market conditions at present are challenging, we believe we have good potential to outperform and take market share,
capitalising on our strong market positions and clear strategy.
Market drivers:
Increased focus on re safety and
basic repairs/maintenance of existing
public housing stock
Record-high student numbers,
and a full return to campus, may
support investment in education
accommodation schemes
Eurocell drivers:
Only brand maintaining a sizable
salesforce displacing aluminium
withPVC
Better U-values and 30% cheaper
More fabricators working
incommercial
Market drivers:
Moderation from post-pandemic
highs
Adverse impact of higher ination, real
wage falls and higher interest rates on
disposable income
Demand for larger RMI project work
has remained robust
Pension draw down and desire for a
maintenance-free property
Change in family circumstances
Eurocell drivers:
Strong competitive position in Proles
coupled with potential competitor
difculties
Increased run rate on new fabricator
account acquisitions and healthy
pipeline of other potential new
fabricator customers
Enhanced proposition in
BuildingPlastics:
– Maturing branches with
improvedformat
– New website/enhanced digital
experience
– Redesigned conservatory/
roofproducts
– Range extensions including
outdoor living products
– Value-added services including
installer scheme
Sales of windows, conservatories,
outdoor living products and other
big ticket made to order products
throughbranches
Market drivers:
Housebuilders’ strong pipeline of
plot builds but uncertainty regarding
starts/completions targets
Homeowner demand although
suppressed by increased mortgage
rates
Help to Buy remains, but restricted
to rst time buyers
Ongoing long-term shortage of
housing may attract government
intervention, but affordability remains
an issue
Right to Buy in public sector
Eurocell drivers:
Benet of differentiated
specications and dedicated
salesforce to pull-through demand
New build competitor difculties may
present a signicant opportunity to
grow share
Opportunity to leverage ESG
credentials
Building regulations (Future Homes
Standard) benecial to Eurocell
skillset
Strong relationships with large and
medium sized housebuilders and
new build fabricators
Large and professional Eurocell
fabricators consolidating supply
Growth of Eurocell cavity closer
driving contact with housebuilders
Vista increasing market share
indoors
PRIVATE RMI
(c.85% Eurocell revenue)
NEW BUILD
(c.10% Eurocell revenue)
COMMERCIAL
(c.5% Eurocell revenue)
Eurocell plc Annual Report and Accounts 202212
CHIEF EXECUTIVE OFFICER’S REPORT
RESPONDING
WELL TO
CHALLENGES
Mark Kelly
Chief Executive Ofcer
Eurocell plc Annual Report and Accounts 2022 13
Financial
Statements
Corporate
Governance
Strategic
Report
CHALLENGES
AGAINST AN EXCEPTIONALLY
STRONG PRIOR PERIOD, WE
REPORTED PROGRESS IN SALES
Introduction
We entered 2022 well placed to take advantage of favourable
conditions in our markets and delivered a strong rst six months
of the year. However, whilst new build, large contract and repair,
maintenance and improvement (‘RMI’) project work continued to be
robust throughout the second half, this was offset by the impact of
the previously reported cyber incident and a slow-down in smaller
discretionary RMI work experienced by our branch network and trade
fabricators in H2.
Price was the signicant driver of sales growth in 2022. Whilst we
continue to recover input cost ination with selling price increases
and surcharges, we experienced margin pressure in the second half,
reecting lower volumes and not all cost ination being fully recovered
until early in 2023.
Overall, despite these second half challenges, and against an
exceptionally strong prior period, we reported progress in sales
andadjusted prots for the year.
After a period of very strong demand, the Construction Product
Association’s latest forecast, published in January, predicts declines in
the RMI and new build markets of 9% and 11% respectively for 2023,
before starting to recover in 2024.
In anticipation of weaker markets in 2023, we completed a
restructuring programme in Q4, which along with other measures will
reduce operating costs by approximately £5 million per annum from
the start of 2023. Following a review, and to further streamline the
business, in December we completed the sale of Security Hardware,
a supplier of window hardware to the RMI market with annual third-
party sales of c.£3 million, to UAP Limited, a UK-based door hardware
supplier, who will supply hardware to all our branches.
Looking ahead, we continue to take market share and have increased
the run rate on new fabricator account acquisitions, with our pipeline
of other potential new fabricator customers remaining healthy. Market
share gains are further supported by the impact of maturing branches
and a widening product range, all underpinned by good product
availability and increasingly efcient operations, reecting the benet
ofour recent investments in operating capacity.
Financial Results
We delivered a solid nancial performance in 2022, against a very
strong prior period.
Sales for the year were £381 million, or 12% above 2021 and adjusted
prot before tax from continuing operations was £28.7 million, up 4%
or £1.0 million on 2021 (£27.7 million).
Reported prot before tax was down 5% at £26.2 million (2021:
£27.7million), after non-underlying costs totalling £2.5 million,
primarilyreecting the cost of our Q4 2022 restructuring programme.
Following the sale of Security Hardware, we have presented the
trading loss for the year and loss on disposal of that business (in total
£2.3 million) as a discontinued operation.
Further information on our nancial performance is included in the
Chief Financial Ofcer’s Report and Divisional Reviews.
Sustainability
Our objective is to continue to improve the sustainability of the Group.
We have a dened suite of environmental and social targets and
KPIs against which to measure our progress, which are set out in the
Responsible Business section of this Annual Report.
Central to our environmental targets, which cover both the circular
economy as well as emissions and energy management, is reducing
the carbon footprint of the business and our products. Our social
objectives are broad and cover areas such as health & safety, diversity
and education. In addition to the matters covered by these KPIs,
we are progressing similar work on related topics such as transport
emissions, employee well-being and community engagement. Our
objectives align well with several relevant UN Sustainable Development
Goals, as well the UK’s transition towards a net zero carbon economy.
We report our progress against these KPIs on an annual basis (see
Responsible Business on pages 42 and 43).
Eurocell plc Annual Report and Accounts 202214
CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
Looking forward there are four key themes to our work on sustainable
development:
• Carbon, energy and water – dening our pathway to carbon
neutrality and net zero, which will be driven primarily by reducing
Scope 1 and 2 emissions in extrusion and recycling;
• Waste minimisation and circularity – further strengthening materials
recovery and process optimisation;
• People and places – becoming a regional employer of choice and
stepping up community engagement; and
• Governance – reporting progress against published ESG targets
and aligning with recognised indices.
As a measure of commitment to achieving our goals, our new £75
million sustainable Revolving Credit Facility (renancing completed in
May, see the Chief Financial Ofcer’s Report) contains annual recycling,
emissions and waste reduction targets, with modest adjustments to
the margin based upon performance.
In May, we also approved a c.£1.5 million investment in solar panels
to be installed at our primary manufacturing facilities, which will
supply more than 5% of the energy used in the manufacture of our
extrudedproducts.
Towards the end of 2022, the Group’s Social Values and ESG
Committee was formed to provide formal and transparent oversight of
the Group’s ESG programme. This includes sustainability, employee
welfare and responsible business practices, as well as our contribution
to the societies we operate in. The committee also monitors progress
against our sustainability KPIs. It is comprised of two independent
Non-executive Directors; Alison Littley (Chair) and Iraj Amiri, as well
as the Group’s Sustainability Manager, Simon Drury, and Human
Resources Director, Bruce Stephen.
Further information is provided in the Responsible Business section on
pages 40 to 65.
Operational Performance
Health and safety
The safety and wellbeing of our employees and contractors is our
rst operational priority and we continue to maintain a good safety
performance. Our Lost Time Injury Frequency Rate (‘LTIR’) was
1.0 in 2022, compared to 0.8 in 2021. Our RIDDOR (Reporting of
Injuries, Diseases and Dangerous Occurrences Regulations 2013)
performance was better than the industry average. There were no
major injuries and 23 minor accidents recorded under RIDDOR in the
year (2021: no major injuries, 28 minor injuries). We have improved
the reporting of near misses and unsafe acts and conditions, as part
of a proactive approach to risk management, with the aim of reducing
the likelihood of future workplace injuries. This improvement, when
combined with the effective and timely implementation of corrective
and preventive action, supports our positive safety culture and we are
targeting an improvement in the LTIR in 2023.
Production
In 2022 we manufactured 54.1k tonnes of rigid and foam PVC proles
at our primary extrusion facilities, 5% lower than 2021. This reects
our work to start reducing inventories, after the very high levels of
production in 2021, when we built stock to mitigate the risk of raw
material supply interruption and volatile pricing.
Overall Equipment Effectiveness (‘OEE’, a measure which takes
into account machine availability, performance and yield) increased
to 71% in 2022 (2021: 68%) due to improved efciency and labour
availability across our operations. In addition, our initiatives to increase
compliance with the production plan at a line-item level have been
successful, which helped drive a reduction in manufactured stock of
c.£5 million in the second half.
Recycling
We have made further progress in 2022, with the use of recycled
material in our primary extrusion increasing to 29% (16.7k tonnes) of
materials consumed, compared to 27% in 2021. This drives signicant
cost and carbon savings compared to the use of virgin material. In
addition, substantially all scrap generated in extrusion is recycled back
into our production processes, further reducing waste sent to landll.
Supply Chain and Ination
Strong demand in our markets over the last two years put sector
supply chains under pressure, and we experienced tighter supply
and an inationary environment, with prices of certain raw materials,
particularly PVC resin, rising signicantly over this period.
Throughout this period we have taken effective action to offset
ongoing input cost ination, including a dynamic approach to selling
prices and surcharges. Higher resin costs were also partially offset
by our market-leading recycling plants. In addition, our progressive
forward hedging policy for electricity provided some protection from
rising energy costs in 2022.
The cost of key raw materials does now appear to be stabilising, and
in some cases beginning to fall. However, the delay on recovering
some raw material cost increases from the second half of 2022,
combined with continued signicant increases in the cost of energy
and labour, has resulted in the implementation of further selling price
increases from the beginning of2023.
Strategy
Strategic priorities overview
Our overall strategic objective remains to deliver sustainable growth in
shareholder value, by increasing sales and prots above our market
growth rates. We have seven strategic priorities to help us achieve
this objective. Our progress for each priority is covered in this Annual
Report as follows:
Progress update included in:
Strategic priority
CEO
Report
Divisional
Review
Strategy in
Action
Responsible
Business
Grow market share in Proles
Expand the branch network
Increase the use of
recycledmaterials
Develop innovative
newproducts
Deliver sustained
operationalexcellence
Develop a sector-leading
digital proposition
Explore potential bolt-on
acquisition opportunities
Where the strategic priority is also covered elsewhere, only a brief
description is set out in this CEO Report, along with a cross-reference
to the other relevant sections.
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 15
Grow market share in Proles
In 2018 we became the leading supplier of rigid PVC prole to the
UK market, with a share of c.15%. We continue to consolidate
our position and believe we now have a share of around 20%.
Ourobjective is to increase this over the medium term.
We have a sector-led strategy, with initiatives focused primarily on
the trade/retail and new build sectors. We aim to be recognised
as the number one choice for the trade/retail fabricator, and to
further consolidate our position as the leading supplier to the new
build market. Central to our plans for 2023 is exploiting our spare
operational capacity to acquire new fabricator customers in both
sectors. See the Proles Divisional Review (pages 36 and 37) and
Strategy in Action – Grow Market Share in Proles (pages 24 to 27)
sections for further information.
Expand the branch network
Our medium term strategic objective for Building Plastics is to achieve
sector-leading operations from 270-300 sites. The growth will come
mostly by taking market share from independent operators, who
currently have more than 60% market share. In 2022 we believe
we continued to take market share, and estimate that we now have
c.25% of the UK rooinemarket.
Our aim is to be the number one choice for relevant trades across
the UK, by creating the market-leading proposition and becoming
recognised as rst for service to the tradesperson.
Given the uncertain macroeconomic outlook, we will for now pause
our branch opening programme, and focus in 2023 on optimising
returns from the existing estate. See Building Plastics Divisional Review
(pages 38 and 39) and Strategy in Action – Expand the Branch
Network (pages 28 and 29) for further information.
Increase the use of recycled material
Expanding recycling improves product and business sustainability,
with less plastic going to landll. Recycling also increases our prots,
because the cost of recycled compound is typically lower through
the cycle than the price of virgin material. This is very important at
the moment, with the price of virgin resin reaching historic high levels
in2022.
We have been investing to increase our recycling capability through
the expansion of our two recycling plants and by investment in
co-extrusion tooling, which allows a greater proportion of recycled
material to be used in our products.
We are now the leading UK-based recycler of PVC windows. As
well as keeping pace with increased demand, we have continued
to improve the proportion of recycled material consumed in our
primary extrusion operations. Usage increased from 9% of materials
consumed (or 4.1k tonnes) in 2015 to 29% of consumption (or 16.7k
tonnes) in 2022, driving a signicant cost saving compared to the use
of virgin material. Our objective is to increase this to around 33% over
the new few years.
In 2022, we estimate that our recycling operation saved the equivalent
of c.three million end-of-life window frames from landll and c.47k
tonnes of carbon compared to the use of virgin PVC (equivalent to
the annual CO
2
output of over 7,000 UK homes). Furthermore, we are
nding more ways of using all the product generated by our recycling
plants and expect to progressively reduce waste sent to landll to less
than 5% in the near term.
A weaker RMI market and less window replacements restricted
feedstock availability for our recycling business in the second half of
2022, leading to increased purchase prices. However, we are making
good progress securing additional sources of feedstock for 2023.
See Responsible Business – Recycling Operations on pages 48 to 51
for further information on our recycling operations.
Develop innovative new products
We are committed to maintaining market leadership by offering the
very latest in product improvement, both through development of
existing products and the introduction of new ones. We work closely
with our customers and technical advisors on development and to
help maintain our product pipeline. Highlights for 2022 include:
• Improved conservatory and roof system range, including more
contemporary styles and design features that rival the specialist
conservatory companies, with a ‘tter friendly’ installation process;
• A new aluminium at rooight (Luma), with security accreditation
and strong thermal characteristics;
• A premium garden room (Kyube Plus), with a canopy and additional
glazing/cladding options; and
• Expansion of our outdoor living range to include premium pergolas
and verandas (aluminium-clad and maintenance-free).
Looking forward to 2023, we will continue to work with housebuilders
to further develop t-for-purpose window and door solutions for the
Future Homes Standard. In addition, reecting the continuing strong
demand for affordable extra work and leisure space at home, we are
developing ‘extension kits’, which provide an alternative and affordable
method to add space at a fraction of the cost, time and inconvenience
compared to traditional extensions or moving house.
See Strategy in Action – New Products section on pages 30 to 33 for
further information.
Deliver sustained operational excellence
Historical manufacturing and warehousing constraints have now been
resolved through major investments in new capacity, thereby providing
a strong platform for efcient future sales and market share growth.
With the addition of ve new lines in 2022, we have now increased
extrusion capacity by c.40% compared to 2018, thereby providing
good headroom against current levels of demand. Transition to our
new state-of-the-art warehouse, completed in 2021, was also central
to increasing capacity and to delivering improvements in operational
efciencies. This new site also unlocked the operational footprint
for the Group, via the conversion in 2021 of our old warehouse to
a specialist manufacturing site, and the relocation of secondary
operations, including foiling and conservatory roofs, providing a better
environment to drive these businesses forward. In addition, this freed
up space to future-proof extrusion capacity for the medium-term.
Operating efciencies in 2022 were good, with OEE improving to
71% (2021: 68%). Our focus is now on delivering further efciencies
from the new warehouse and production facilities. Whilst the
unprecedented level of ination of the last 18 months has provided a
major headwind to operating margin expansion, looking ahead, with
constraints resolved, we expect the benet of sales growth to ow
through to improved margins.
Eurocell plc Annual Report and Accounts 202216
Develop a sector-leading digital proposition
Stakeholders increasingly require full end-to-end digital solutions,
a trend accelerated by the COVID pandemic. We expect a sector-
leading digital proposition to act as an enabler to our other priorities
and improve the supplier, customer and employee experience, making
Eurocell an even better business partner all round.
Having selected software for a new website (including an integrated
product management system and e-commerce platform) and an
employee management system in 2021, our focus in 2022 was on
the development of these two key components of our digital strategy.
These projects are now well advanced, with both systems due to be
launched in 2023.
Following a full review in 2022, we believe that the age prole of our
principal Enterprise Resource Planning (‘ERP’) operating system has
become a limiting factor in the development of our business. This
conclusion recognises that our current SAP system was implemented
in 2006, when the Group was primarily a manufacturer of PVC
prole, with no recycling and only a small branch operation. We are
therefore starting a project to upgrade or replace our SAP system,
with the principal tasks for 2023 being scoping and system selection.
Thereafter, we anticipate implementation to be a 2-3 year process and,
whilst it is very early in the process, we estimate the total capital costs
of the project will be in the region of £6-8 million.
See Strategy in Action on pages 34 and 35 for further information.
Explore potential bolt-on acquisitions
Exploring potential acquisitions in the markets in which we operate
remains a medium to long term option for the Group, but will not be a
priority in 2023.
CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
THE BUSINESS RESPONDED WELL
TO SOME MAJOR CHALLENGES
IN 2022 TO REPORT SOLID
FINANCIAL RESULTS FOR THE
YEAR, WITH PROGRESS IN SALES
AND PROFITS AGAINST A VERY
STRONG 2021.”
Summary and outlook
In 2022, the business responded well to major challenges to report
solid nancial results for the year, with progress in sales and adjusted
prots against a very strong 2021.
Looking ahead, in preparation for tougher market conditions, we
completed a restructuring programme in Q4 2022 to reduce operating
costs, and in December, to further simplify the business, we sold the
trade and assets of Security Hardware.
We continue to take market share and have increased the run rate on
new fabricator account acquisitions, with our pipeline of other potential
new fabricator customers remaining healthy. Market share gains are
further supported by the impact of maturing branches and a widening
product range, all underpinned by very high product availability and
increasingly efcient operations.
For the current year, the latest construction industry forecasts
recognise the currently challenging market conditions and ongoing
macroeconomic uncertainty. However, we have acted swiftly on cost
to prepare the business for 2023 and we expect our strategy to enable
us to optimise performance in our markets.
Mark Kelly
Chief Executive Ofcer
Eurocell plc Annual Report and Accounts 2022 17
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 202218
OUR BUSINESS MODEL
CONTINUALLY DEVELOPING
What we do How we create value
WE DISTRIBUTE
The Proles division supplies our manufactured
prole to a network of fabricators, who in turn
supply end products to installers, retail outlets and
housebuilders.
The Building Plastics division sells, through its
network of branches, our manufactured foam
products and entrance doors, along with a
range of third-party related products, as well as
windows fabricated by third parties using products
manufactured by the Proles division. Customers
are mainly installers, small builders, roong
contractors and independent stockists.
>3 MILLION
products delivered in 2022
WE RECYCLE
We recycle both customer factory offcuts (‘post-
industrial’ waste) and old windows that have been
replaced with new (‘post-consumer’ waste). The
recycled material is used to generate brand new
extruded plastic products.
>3 MILLION
windows recycled in 2022
WE MANUFACTURE
We are a leading manufacturer of rigid and foam
PVC proles, composite and PVC entrance doors
for the window and building home improvement
sectors. Our manufacturing process uses raw
materials including PVC resin and our own
produced recycled material.
54.1k tonnes
produced in 2022
Vertically
integrated
model
The coordination of our procurement,
manufacturing and distribution processes enables
us to capture margin throughout all stages of our
value chain.
Our recycling activities help lower material costs
and improve product stability.
Scale
We operate well-invested and modern
extrusionfacilities.
We are the UK’s largest window recycler.
Our extensive branch network is a driver of sales
growth and market share. It also helps improve
manufacturing efciency, with pull-through demand
driving higher factory utilisation.
Innovative
products
We are committed to a strategy of continually
developing new and existing products.
We support the use of Building Information
Modelling (‘BIM’) software, giving architects and
contractors access to a library of Eurocell products,
making it easier to specify them.
Brand
strength
We have a strong brand image and our marketing
activities seek to maximise our brandawareness.
People
and
culture
Our experienced management team have a proven
track record of achieving sales growth.
Our corporate culture is one of openness, trust,
encouragement and clarity of purpose. We train
and empower our people to help our customers
grow their businesses.
Local
footprint
Our branches are conveniently located and
havereadily available inventory, thereby
providingexcellent service to local customers
andnational groups alike.
We also strive to help our customers through
theprovision of technical, business development
and marketing support services.
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 19
Outputs Key beneciaries
Shareholders
Our overall strategic objective is
to deliver sustainable growth in
shareholder value.
Employees
We work hard to train and develop
our people, and provide rewards
commensurate with our goal to be
an employer of choice.
Fabricators
Through high-quality products
and a strong focus on customer
service, we have developed a very
loyal customer base.
Small builders
and installers
The independent sole traders
that visit our branches benet
from the one-stop-shop offering
weprovide.
Housebuilders
Housebuilders appreciate the
quality of our products and
benet from Eurocell coordinating
our fabricators’ offering to meet
theirrequirements.
Installers
We aim to make our products as
easy as possible to work with,
which is very attractive to our
direct or indirect installer base.
Our initiatives to support sales and
deliver high levels of customer
service differentiate Eurocell from
our competitors. We expect this to
drive good sales performance.
Sales
performance
Sales growth (vs 2021)
1
12%
We have a track record of solid
protability and our continued
investment in expanding capacity
and improving operational
efciency, coupled with strong
sales performance, should drive
good returns.
Although temporarily paused,
expanding the branch network
(including larger format branches),
whilst dilutive until new branches
become established, should
deliver healthy medium-term
results as new branches mature.
Increased use of recycled
materials can help mitigate raw
material pricing pressure.
Solid
protability
Adjusted prot
beforetax
1,2
£28.7m
Our operating cash ow
conversion is robust, particularly
in Building Plastics, where a high
proportion of customers pay at
point of sale or shortly thereafter.
This has allowed us to invest in
working capital to support sales
growth and protect the business
from any raw material supply
interruption that may take place.
Good cash
generation
Net cash generated
from operating activities
£35.1m
Our strong brand, well-invested
facilities and capital-light branch
expansion programme deliver a
good return on sales.
Solid
return
on sales
Return on sales
1,2,3
8.2%
Our dividend policy, supported by
sales growth and cash generation,
delivers progressive dividend
returns to shareholders.
Progressive
returns to
shareholders
Total dividends returned
to shareholders since
the IPO in 2015
£52.6m
1 Excludes discontinued operations.
2 Stated before non-underlying items.
3 Return on sales is adjusted operating prot (including the impact of IFRS 16) divided by revenue.
Eurocell plc Annual Report and Accounts 202220
OUR STRATEGY
WE HAVE SEVEN
STRATEGIC PRIORITIES
Our overall corporate objective is to deliver sustainable growth in
shareholder value by increasing sales and prots at above market
growthrates through leadership in products, operations, sales,
marketing anddistribution.
We have seven strategic priorities to support the delivery of our overall
objective, which are summarised below.
INCREASE THE USE OF
RECYCLED MATERIALS
Increased use of recycled material to help
mitigate raw material pricing pressure, as well
as enhance the stability and reduce the carbon
footprint of our manufactured products
EXPAND OUR
BRANCH NETWORK
Investment in existing estate and
new branches to increase market
share of foam PVC proles, and
drive sales and prot growth in
Building Plastics
GROW MARKET
SHARE IN PROFILES
Increase market share of
rigid PVC proles, composite
and PVC entrance doors to
drive sales and prot growth
inProles
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 2022 21
DEVELOP
INNOVATIVE
NEW PRODUCTS
Maintain market leadership
by offering the latest in
product innovation
DELIVER SUSTAINED
OPERATIONAL
EXCELLENCE
Optimise returns on recent
investment in manufacturing
and warehousing capacity to
enhance prots and return
onsales
EXPLORE
POTENTIAL BOLT-ON
ACQUISITIONS
Consider acquisition
opportunities when
they arise
DEVELOP A
SECTOR-LEADING
DIGITAL PROPOSITION
Develop end-to-end digital
solutions to enable our
strategic priorities and improve
the supplier, customer and
employeeexperience
Eurocell plc Annual Report and Accounts 202222
STRATEGIC PROGRESS IN 2022
1 OEE is overall equipment
effectiveness, a KPI measuring our
manufacturing efciency which takes
into account machine availability,
performance and yield.
2 OTIF is on time in full, a KPI measuring
the efciency and accuracy of our
logistics and delivery operation.
3 Warehouse stock turns is calculated
as cost of sales for December divided
by warehouse stock at 31 December.
2022
PROGRESS
KEY
STRATEGIC
PRIORITIES
KPIs
2023
FOCUS
OUR STRATEGY CONTINUED
INCREASE THE USE OF
RECYCLED MATERIALS
Increased use of recycled material
to help mitigate raw material pricing
pressure, enhance stability and
reduce the carbon footprint of our
manufactured products
EXPAND OUR
BRANCH NETWORK
Investment in existing estate and new
branches to increase market share of
foam PVC proles, and drive sales and
prot growth in Building Plastics
GROW MARKET
SHARE IN PROFILES
Increase market share of rigid PVC
proles to drive sales and prot
growth in Proles
• 29 new account wins since the
beginning of 2022
• Healthy pipeline of potential new
fabricator and new build customers
established
• Further strengthening of the
relationships with large and
medium-sized housebuilders,
maintained by our specication and
technical teams
• Development of our sales and
technical teams in the Commercial
sector, to provide an unrivalled
added-value service to both
our fabricator base and installer
networks
See pages 36 and 37 for further
details of the Proles division’s
performance.
• Continued development of
market-leading product range, with
better aesthetics and improved
environmental characteristics
• Above includes more contemporary
look to roong and door products,
plus a new best-in-class conservatory
offering and an extended outdoor
living product range
• Ongoing review of branch sizes,
locations and formats to better
showcase the breadth of our product
range, engage our customers and
drive big-ticket purchases
See pages 38 and 39 for further
details of the Building Plastics
division’s performance.
• Continued investment to optimise
site utilisation and improve reliability
in both plants, with capex of
£0.6million (2021: £1.1 million)
• Long-term sustainability KPIs
and targets imbedded within the
business, including commitment to
1% year-on-year increase in use of
recycled material
• Usage in 2022 increased to 29%
(2021: 27%)
See pages 48 to 51 for further details
of recycling operations.
• Exploit spare operational capacity
to accelerate acquisition of new
fabricator customers
• Target weaker competitors who may
be vulnerable to leaving the market
• Explore modest investment to
reduce on-boarding time period e.g.
in-house software engineers
• Extend our national housebuilder
proposition to the regional
housebuilders
• Provide a t-for-purpose solution for
the Future Homes Standard
• Temporary pause in branch opening
programme until the economic
outlook is clearer
• Focus on increasing sales from
existing branch network with
improved margins
• Deep dive analysis to determine
criteria that drive the most
successful branches and the best
return on invested capital, including
consideration of optimal branch
format and scale
• Development of value added
services, including Select Installer
scheme and centralised quotation
system for windows and doors
• Use of articial intelligence to
improve customer loyalty and target
lapsing/lapsed customers
• Investment to improve and better
maintain branch welfare and other
facilities
• Other initiatives to reduce labour
turnover, including simplied
systems and processes, increased
colleague engagement and
enhanced staff training
• Improve the reliability of both
plants through the improvement
of existing planned and preventive
maintenance processes
• Develop new feedstock sources for
post-consumer and post-industrial
waste to support volume and cost
pricing, including expansion of the
feedstock hub network
• Develop more uses for by-products
to minimise waste removal, with a
continued focus on reducing waste
going to landll
• Develop an optimal cost and
operating structure through
realignment of processes and
resources
Proles sales growth:
15% (vs 2021)
Estimated market share
inProles:
20% (2021: 18%)
New accounts since 2015:
100
Building Plastics sales
growth:
10% (vs 2021)
Estimated market share
in Building Plastics
(foam PVC proles):
25% (2021: 25%)
Number of branches:
219
branches at 31 December
2022, with 78 (net) new
branches opened since 2015
Total tonnes of waste
processed in the recycling
plants:
46.4k
% yield of recycled
material produced:
59%
Use of recycled material
for primary extrusion:
16.7k tonnes
29% of consumption
(2021: 16.8k tonnes/27%)
(2021:
48.2k)
(2021: 59%)
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 2022 23
DEVELOP
INNOVATIVE
NEW PRODUCTS
Maintain market leadership by offering
the latest in product innovation
DELIVER SUSTAINED
OPERATIONAL
EXCELLENCE
Optimise returns on recent investment
in manufacturing and warehousing
capacity to enhance prots and return
on sales
EXPLORE
POTENTIAL BOLT-ON
ACQUISITIONS
Consider acquisition opportunities
when they arise
DEVELOP A
SECTOR-LEADING
DIGITAL PROPOSITION
Develop end-to-end digital solutions
to enable our strategic priorities and
improve the supplier, customer and
employee experience
• Development and introduction
of products which feature better
aesthetics, and a more modern look,
along with improved environmental
characteristics, including:
– Contemporary conservatories
– Luma at rooights
– Extended garden room range
– Pergolas and verandas (Oasis)
– Vertical sliding windows
(Charisma)
See pages 30 to 33 for further details
of new products.
• Several opportunities considered
and investigated against strict
strategic and nancial criteria –
noneprogressed in 2022
• Completed investment in ve new
extrusion lines, increasing capacity
by a further 5%. Capacity now
c.40% higher than 2018, creating a
good level of headroom to support
efciency improvements
• Further efciency improvements in
the warehouse supported by the
installation of new carousel racking
for small picks
• Improvements in the planning
process to realign supply and
demand leading to higher stockturns
• Improved manufacturing
conformance to, and attainment
of, extrusion production plan, with
cross-functional team established to
address weekly exceptions
See page 14 for further details of
operational performance.
• Product Information Management
(‘PIM’) solution developed and
congured for launch in 2023
• Website and e-commerce platforms
developed and being nalised for
launch in 2023
• Employee management systems
developed and congured for
launch in 2023
See pages 34 and 35 for further the
development of our digital proposition.
• Whilst we will continue to assess
and consider bolt-on acquisition
opportunities over the medium-term,
this is not a priority for 2023
• Continue to enhance/develop new
products, which include for 2023:
– Slim rebate Logik sash
– Aluminium at roof lantern
– ‘Extension in a Box’ kits
– Vertical Coastline
– Vertical slider system
– New composite door system
• Phased implementation of centralised
planning, inventory control and stock
replenishment, to increase stock
turns, reduce stock holdings and
therefore improve working capital
• Manufacturing focus on:
– Waste minimisation – through
reductions in lead times, change-
over times and material movements
– Resource optimisation – through
more integrated manpower
planning and yield improvements
– Footprint optimisation – through
consideration of ‘make vs buy’,
vertical integration
– Improvements to factory welfare
facilities
• In the warehouse, implementation of
nger scanners to improve picking
accuracy and stock traceability
(following successful trial in Q4 2022)
• Successfully launch:
– the new PIM solution and
website/e-commerce platforms for
operational use
– the new employee management
systems
• Scope out potential future solutions
to upgrade or replace Enterprise
Resource Planning (‘ERP’) systems
and complete selection process
New products launched
in2022:
10
Acquisitions completed
since IPO:
6
OEE
1
:
71%
OTIF
2
:
93%
Warehouse stock turns
3
:
10.1 tim es
(2021: 68%)
(2021: 7.3 times)
Number of digital projects
inprogress:
5
(2021: 78%)
Eurocell plc Annual Report and Accounts 202224
GROW MARKET SHARE
IN PROFILES
In 2018 we became the leading supplier of
rigid PVC prole to the UK market, with a
share of c.15%. We continue to consolidate
our position and believe we now have a
share of around 20%. Our overall objective
is to increase this over the medium term.
OUR STRATEGY IN ACTION
In 2022, we continued to take market share, driven by the
successful implementation of our Proles strategy. The demand
created by our specication and marketing teams has supported
growth for our existing fabricator customers over the last few years.
Looking forward, we have an opportunity to exploit our spare
operational capacity to accelerate the acquisition of new fabricator
customers. We have already increased the run rate, with 29 new
accounts added since the beginning of 2022, and our pipeline of
other potential new fabricator customers remainshealthy.
In this section of the report we have set out our strategy to grow
market share in Proles.
Sector-led strategy
We have a sector-led strategy, with initiatives focused primarily on
the trade/retail and new build sectors, which together represent
c.90% of Proles sales (c.55% for trade and c.35% for new build).
Our overall strategic objectives by sector may be summarised as
follows:
• Trade/retail – be recognised as the number one choice for the
trade/retail fabricator.
• New build – maintain our number one position in the new
buildmarket.
We also operate in the commercial sector, although this represents
only around 10% of Proles sales. Our objective here remains to
establish ourselves as a credible solution for the commercial market,
where energy efciency and lower cost underpin a strong case for
the benets of using PVC prole over aluminium, particularly in sub-
sectors such as private rentals, build-to-rent, purpose-built student
accommodation, education and local authority refurbishment (all
habitual users of aluminium).
Eurocell plc Annual Report and Accounts 2022 25
Financial
Statements
Corporate
Governance
Strategic
Report
P
r
o
d
u
c
t
C
u
s
t
o
m
e
r
B
r
a
n
d
LEADING THE INDUSTRY
To become the number 1 sustainable choice for fabricators across the UK
SECTOR-LED STRATEGY
TRADE/
RETAIL
Be recognised
as the number
1 choice for the
Trade/Retails
fabricator
NEW
BUILD
Maintain our
number 1
position in
the New Build
market
COMMERCIAL
Establish ourselves
as a credible
solution for the
Commercial market
NEW
BUSINESS
Identify
strategic
partners
that deliver
protable
growth for
theGroup
In each sector, we look at strategy through three lters: customer,
product and brand, as follows:
• Customer – build strategic, customer-centric relationships.
• Product – providing market leading innovative and sustainable
product solutions.
• Brand – to be recognised as the number one trusted brand in
theindustry.
Our team are focused on growing business with existing customers
through new routes to markets and new product development.
Intargeting new business, we look to identify strategic partners
thatwill deliver protable growth for the Group.
Trade/retail sector
There is a compelling case for larger trade fabricators to switch to
Eurocell. This includes a strong product range and continued product
development e.g. better aesthetics (such as ush windows), a more
contemporary look to roong and door products and improved
environmental characteristics. For further information on product
development, see New Products on pages 30 to 33. In addition,
the benets of pull-through prole and hardware specications and
increasing opportunities to supply our branches, all delivered via
improving service, remain attractive to prospective fabricator accounts.
Our customer, product and brand priorities for the trade/retail sector
are as follows:
Customer priorities Product priorities Brand priorities
• Connecting,
establishing and
building a plan
which is mutually
benecial for our
customers
• Investment for
growth under the
philosophy of “you
grow, we grow”
• Easy to do
businesswith
• Investing added
value services for
customers
• Proactive approach
to customer
communication
• Ensuring small
fabricators
that cease
manufacturing
use Eurocell
trade fabricators
forsupply
• Helping our
customers
develop a broader
productrange
• Leading a
customer-centric
approach to
new product
development
(‘NPD’) – see New
Products on pages
30 to 33
• Creating a seamless
digital experience
• Increasing the
volume of recycled
material used in
ourproducts
• Reputation
• Trust
• Quality
• Reliability (OTIF)
• Sustainability
Eurocell plc Annual Report and Accounts 202226
OUR STRATEGY IN ACTION CONTINUED
GROW MARKET SHARE IN PROFILES CONTINUED
New build sector
Expanding our share of the new build market has been a key driver
of recent growth, driven by sales of cavity closures where we are
the clear market leader. We have strong relationships with large and
medium-sized housebuilders, maintained by our specication and
technical teams.
Building regulations for windows are becoming increasingly
complicated and our technical teams are working with our larger
customers to enable them to conform to the regulations, including
development of new product applications to meet changing
requirements. In addition, with a focus on sustainability, we believe
our use of recycled material is becoming increasingly attractive to
housebuilders.
Our customer, product and brand priorities for the new build sector are
as follows:
Customer priorities Product priorities Brand priorities
• Being the
bridge between
housebuilders
and fabricators to
facilitate sustainable
customer growth
• Leverage our
proposition within
the regional new
build market
• Connecting all
aspects of the
industry around
legislative and
regulatory changes
• Strategically identify
future new build
fabricator partners
• Provide a t-for-
purpose solution for
the Future Homes
Standard (see
below)
• Proactive
engagement with
our customer base
for customer-led
NPD – see New
Products on pages
30 to 33
• Lead and inuence
the industry with our
sustainable product
solutions
• Provide a best-
in-class technical
support service
• Reposition
ourselves as the
leading brand
for both national
and regional
housebuilders (see
across column)
• Being recognised
for leading the
sustainability
agenda
• Being seen as the
trusted brand in the
industry to facilitate
growth
Future Homes Standard
The Future Homes Standard (the ‘Standard’) will complement the
existing Building Regulations to ensure new homes built from 2025
produce 75-80% less carbon emissions than homes delivered under
the old regulations. To help lay the groundwork for the Standard’s
introduction, the government introduced major Building Regulations
changes in June 2022, with new homes in England now needing to
produce around 30% less carbon emissions compared to the old
regulations. Ahead of the Standard coming into effect, a technical
specication will be consulted on in 2023, with the legislation
introduced in 2024, ahead of implementation in 2025.
The housebuilders have already taken signicant steps to reduce
emissions through walls, oors and roofs. However, to comply with
the proposed new regulations, solutions to reduce emissions through
windows and doors are likely to be required. This plays well to
Eurocell’s technical expertise.
We are engaged directly with the housebuilders, fabricators, glass and
hardware suppliers on this topic and participate actively on an industry
working group tasked by government with nding an acceptable
solution to future compliance. We believe our Modus prole system
can be modied to meet the proposed new requirements, which may
include using a triple glazed window.
Regional housebuilders
Extending our focus to the regional housebuilders leverages our
reputation and existing knowledge and experience in this sector to
more customers. We have invested in additional resources for this
purpose and intend to duplicate our successful national housebuilder
operating model with selected regional builders.
Summary
Overall, we believe our strategy will drive volume and market share
gains for proles successfully trough all channels, particularly trade/
retail and new build.
The fabricator market is consolidating, with a number of smaller rms
exiting, and many of our competitors have been challenged by the
loss of key fabricator accounts. Our approach is to invest in strategic
partnerships with existing and new fabricator accounts, under the
philosophy of “you grow, we grow”.
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 27
Assured business continuity
It’s crucial that new customers experience a
smooth transition to ensure business continuity.
With an experienced and dedicated team, we are
experienced in this process.
Leading new build market
We have trusted partnerships with leading
national housebuilders, built from years of
developing innovative solutions that drive
efciency for our housebuilders and improve
thehomeownerexperience.
Industry leading product
We are the market leader for our innovative
Cavalok cavity closer solutions and are committed
to the continual improvement of their insulation
and thermal performance.
Future Homes agenda
We are leading the PVC-U Future Homes agenda.
We chair an industry forum and are working
closely with large housebuilders to agree the
bestwayforward.
Our Team is your Team
We provide continuous and ongoing technical
and specication support for customers, plus
contractors and installers on their behalf.
We have excellent technical resources to ensure
customers receive the support they need during
changeover and beyond.
Eurocell brand
Eurocell lead the market in terms of brand
awareness and customer preference and we have
the insights to back this up. Our customers prefer
us because of our national coverage, breadth of
our range, our quality products and our friendly
reliable service. We demonstrably place our
customers needs at the heart of our business.
Marketing support
We have our own in-house design studio and
marketing team. Our skilled professionals are here
to help promote our customers’ business and
maintain a competitive edge.
Driving Demand
We equally offer great opportunities for
commercial growth, working closely with
customers to determine which of our support
solutions ts best with their business and
operation.
OUR POINTS OF DIFFERENTIATION FOR NEW CUSTOMERS
The Eurocell Difference – Pulling Volume Through All Channels
Assured business
continuity
Leading new build &
future homes agenda
Agile and
market-leading NPD
Working in
partnership
Our Team is
your Team
Leading the
Sustainability Agenda
Quality products you
can rely on
On time and in full
every time
Driving
Demand
Eurocell brand and
marketing support
Eurocell plc Annual Report and Accounts 202228
OUR STRATEGY IN ACTION CONTINUED
EXPAND OUR
BRANCH NETWORK
Our overall medium term strategic
objective for Building Plastics is to
achieve sector-leading operations
from 270-300sites.
Branch format
Our branch format has evolved considerably over the last few years,
generally to put more products and a broader range on display.
Wehave two main formats:
• Standard format (209 branches) – typical size 3,600 square feet,
small trade counter, with samples of product on display.
• Large format (10 branches) – larger product display areas
and extended range available, show-casing a solution for our
customer’s customer.
Both current and potential future formats are part of the review.
We will also consider extending our footprint through space and/
or brand partners, as well as the opportunity to sell via independent
stockists, as potentially cost-effective routes to gaining access to
new customers in our markets.
New product development
Customer centric new product development is also a fundamental
pillar of our strategy to expand the branch network. In 2022 this
included development of our conservatory and roofs proposition,
launch of a new at roof lantern and expansion of our outdoor living
product range. For further information on product development,
see pages 30 to 33.
Reducing labour turnover
Our best performing branches are generally those with the lowest
rates of labour turnover. Our initiatives to reduce labour attrition
across the network are focused on four key drivers: systems
and processes; environment and engagement; pay and reward;
andtraining.
• Systems and processes – our branch operations team have
been working to simplify processes across the network to
facilitate more efcient working practices, including better use of
technology (e.g.bar code scanning for stock control), all to be
documented ina ‘Network Essentials’ guide for staff.
In 2022 we believe we continued to take market share and estimate
that we now have 25% of the rooine market. We expect future
growth to come by taking business from independent operators,
who currently have more than 60% market share (measured by
number of sites).
5-point strategic plan
To achieve our overall goal in Building Plastics, we believe we must
become the number one choice for relevant trades across the
UK. We have a 5-point strategic plan to help us achieve our goals,
whichcan be summarised under the following headers:
• Become rst for service for the tradesperson.
• Create the market leading proposition.
• Listen and engage.
• Deliver value through services.
• Operate for less.
In this section of the report we have set out the initiatives which
underpin achievement of our goals, which matrix across the 5-point
plan headers.
As noted elsewhere in this report, we are mindful of the currently
uncertain macroeconomic background and its impact on our
markets. As a result, we have temporarily paused our branch
opening programme until the economic outlook is clearer. However,
this does allow our team to review and focus on improvements
we can make to the existing estate, which will also support the
expansion and growth of the network.
Our review is in progress, and includes a deep dive to better
understand the key characteristics of our best performing branches,
with a view to replicating these across the network and optimising
returns on invested capital. This includes consideration of branch
format, scale and infrastructure costs (including rent), product range
and new product development, labour turnover (and other people
metrics), value added services, and nally, operational efciencies.
These topics are explored more in the following paragraphs.
Eurocell plc Annual Report and Accounts 2022 29
Financial
Statements
Corporate
Governance
Strategic
Report
• Environment and engagement – we have improved our
communication with branch colleagues, with regular contact to
keep everyone in the network up to date with our progress. Based
on feedback from our colleagues, in 2023 we plan to invest to
improve the working environment and staff welfare facilities in our
branch estate, including kitchens and break-out areas.
• Pay and reward – through 2021 and 2022 we have made
investments to bring our branch team base salaries into line with
competitive market rates, including the introduction of salary
bandings for branch managers based on sales performance
and more competitive spot salaries for trade counter assistants
and drivers. We are also developing our incentive schemes so
that all members of a branch team are well rewarded for good
performance.
• Training – we now have a much improved, comprehensive
induction and onboarding plan for new colleagues, starting
with the basics on day one, to a more detailed product training
programme over the course of the rst four months of employment.
For established staff, our National Learning and Development
Manger now delivers a comprehensive branch training programme,
supported by a suite of e-learning modules, including a focus on
core sales and customer engagement skills. This helps branch
managers to develop clear customer engagement plans, which
create a structured two-way dialogue and support customer
retention. We have also recently introduced a Management
Development Programme to assist with the personal development
of our branch teams, and a Leadership Development Programme
to support succession planning for key roles in the network and
across the Group.
Value added services
We believe we can drive further growth in the network by developing
value added services for our customers. For example, we expect our
recently established Select Installer Scheme for conservatory roofs
to create a nationwide network of Eurocell advocates, as we channel
customer leads through the installer community.
Other services under development include a centralised window
and door quotation system, using a straight-forward congurator to
facilitate the customer journey across our range of products. We are
also beginning to use articial intelligence to segment customers and
track behaviours. We believe this can improve loyalty and grow sales
by targeting customers with the right products at the right time.
Operational efciency gains
Finally in this section, we expect to support protability and returns
in the network through a series of on-going continuous improvement
activities. These are focused on margin control, underperforming
branches, asset protection, range simplication and stock
optimisation.
Summary
Overall, we believe the initiatives described above, underpinned by
our 5-point strategic plan, will drive volume and market share gains for
Building Plastics. Despite a temporary pause in the branch opening
programme in 2023, we expect these activities to deliver our medium-
term objectives for the network.
Listen and engage
• Employee engagement
• Branch simplication
programme
• Training and development
• Growing our own talent
Operate for less
• Range simplication
• Stock optimisation programme
• Locks and hardware proposition
Deliver value
through services
• Extend services that add value
• Select installer scheme
• Data-driven customer
contactplan
• Improve customer loyalty
and grow sales with
articialintelligence
First for service for
thetradesperson
• Customer engagement plan
• Seamless digital experience
• Website range development
• “you grow, we grow…”
Create the market
leading proposition
• Standard and large branch
formats
• City branches
• New branch break-even
• Range extension
• Market penetration through NPD
• Conservatory and roofs offer
Target to become the number 1 choice for
relevant trades across the UK
Medium-term objective to target world class operations
from 270-300 sites
2016 2017 2018 2019 2020 2021 2022
Number of Branches
159
208
206
202
190
219219
Customers
Operations
Talent
Products &
Services
Fragmented market with
> 60% served by small
independents
Gaining market share
– estimate now c.25%
(rooine)
Eurocell plc Annual Report and Accounts 202230
OUR STRATEGY IN ACTION CONTINUED
DEVELOP INNOVATIVE
NEW PRODUCTS
We are committed to maintaining market
leadership by offering the very latest
in product improvement, both through
development of existing products and the
introduction of new ones. We work closely
with our customers and technical advisers
on development and to help maintain our
product pipeline.
In this section of the report we have set out our progress on product
development during 2022, as well as some of our key plans for 2023.
PRODUCT DEVELOPMENT IN 2022
Flat roof lanterns
We are targeting becoming a one-stop shop for roof lanterns. Building
on our Skypod range, in 2022 we introduced the Luma rooight
product, which recognises that recent strong demand for at rooights
provides a further opportunity for growth and market share gains.
Luma is a contemporary aluminium at rooight, with no bars across
the glass to interrupt the view or cast shadows across a room. The
product comes with a unique security accreditation and strong thermal
insulation characteristics, which opens up the new build market
and looking forward can contribute to compliance with the Future
HomesStandard.
Eurocell plc Annual Report and Accounts 2022 31
Financial
Statements
Corporate
Governance
Strategic
Report
Conservatories and roofs
The chart below shows the breadth of our conservatory roof systems
range, which has been the subject of signicant development over the
last three years. This began with the introduction of our slate-effect
Envirotile composite tiles in 2020, followed by the solid tiled Equinox
conservatory roof in 2021.
Reecting customers’ feedback, we have developed our product
range to include a more contemporary style, with new design features
which rival specialist conservatory companies, and a simplied
installation process which makes our range more ‘tter friendly’.
Aswell as supporting our existing customers with continuous product
improvement, we believe the new range will deliver new customers
and market share gains.
Outdoor living
We recognise that the outdoor living market has provided a signicant
opportunity, particularly since the COVID-19 pandemic, to provide
access to new customer types, including homeowners (online and in
branch) and garden centres (on display). We have been evolving our
product range, which now includes decking, fencing, garden rooms
and associated accessories.
In particular, we have continued to develop our garden room range,
where we continue to see a good market opportunity, reecting the
continuing demand for affordable extra work and leisure space at
home. Our new dedicated garden room sales team target both retail
and trade leads.
Our garden rooms utilise a wide range of Eurocell products for both
the external and internal design. They are prefabricated off-site and
can be installed relatively quickly. We offer steel and timber frame
products, providing a broad range of options for customers at varying
price points.
Our 2022 development included the launch of Kyube Plus, a premium
garden room with a canopy and additional glazing/cladding options.
Also in 2022, we extended our outdoor living range with the
introduction of premium pergolas and verandas, which are aluminium-
clad and maintenance-free.
Conservatory Roof
System Range
Conservatory
Traditional
Conservatory
Equinox
Warm Roof
Traditional
Orangery
Flat Roof
Extension
Contemporary
Conservatory
Lusso/
Lusso Light
Pitched
Extension
Orangery Extension
Contemporary
Highline Gutter
Slimline Conservatory
Roof Design/
Equinox Option
Pilasters (incl. option
of vertical cladding
or PVC panels)
OUR STRATEGY IN ACTION CONTINUED
DEVELOP INNOVATIVE
NEW PRODUCTS
CONTINUED
Eurocell plc Annual Report and Accounts 202232
OUR STRATEGY IN ACTION CONTINUED
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 33
Continuous in-house product innovation
Our in-house product design and development team work
continuously to improve our existing product range and enhance
features, including sustainability credentials. Examples of this
development in 2022 includes:
• Coastline trim – to strengthen our Coastline cladding range, we
have added trims which protect reveals, corners and stop ends,
resulting in a more professional nish to exterior edges.
• Windowsill reinforcement – we
have added a length of steel to
our windowsills to enhance their
loading performance.
• Charisma vertical sliding windows – we
have developed dual-coloured windows,
with different external and internal nishes,
in addition to increasing the recycled
content.
Extension-in-a-Box
We are developing ‘extension kits’, which provide an alternative and
affordable method for homeowners to add space at a fraction of the
cost, time and inconvenience when compared to traditional extensions
or moving house.
Vertical Coastline
There is a market demand for some garden rooms and standard
housing ts to have a vertical cladding system, and so a vertical board
is being developed to run in Coastline material with emboss plus foam
for foiling.
Eurocell plc Annual Report and Accounts 202234
OUR STRATEGY IN ACTION CONTINUED
DEVELOP A SECTOR-
LEADING
DIGITAL
PROPOSITION
Stakeholders increasingly require full
end-to-end digital solutions, a trend
accelerated by the COVID pandemic. We
expect a sector-leading digital proposition
to act as an enabler to our other priorities
and improve the supplier, customer and
employee experience, making Eurocell an
even better business partner all round.
Back in 2021, we selected platforms for two key components of our digital
proposition: a new website and a new employee management system. Our
progress developing these systems in 2022 and our launch plans for 2023 are
described below, along with the work we have done recently using articial
intelligence to improve customer insight and engagement.
Finally, following a comprehensive review of our principal Enterprise Resource
Planning (‘ERP’) operating system in 2022, we also look further ahead to the
likely upgrade or replacement of our SAP system over the medium-term.
New website
The new website incorporates an integrated product information management
system and an e-commerce platform. Implementation work was ongoing
throughout 2022 and the new platform is expected to launch in 2023.
The product information management system provides the core data enrichment,
maintenance, governance and modelling capability to ensure we present
our products, their features and benets as completely as possible, with the
capability to scale this as the business grows and we expand our ranges.
The e-commerce platform will drive a signicantly improved customer experience
and journey. This includes the following features:
• Straightforward and intuitive customer account registration process.
• Enhanced personalisation.
• Mobile platform design to support busy trade customers ‘on the move’.
• Improved quotation processing and integration with back-ofce systems.
• Enhanced product presentation and attribution supporting optimised product
selection.
• Automated and personalised product recommendations.
Looking forward, we intend to develop the new website to provide further
customer account management options, expand our range with integration of
more drop-ship partners and further enhance our library of technical and support
documentation.
Eurocell plc Annual Report and Accounts 2022 35
Financial
Statements
Corporate
Governance
Strategic
Report
New employee management system
The new employee management system includes an integrated
payroll, HR and employee information management systems and
benet platform. Similar to the new website, implementation work was
ongoing throughout 2022 and the new system is expected to launch
in 2023.
The new system will provide simplied digital access to employee
information, benets and processes and we expect it to underpin
a signicantly enhanced employee experience and much improved
employee communication.
Customer insight and engagement
Over the past 18 months we have invested in the use of articial
intelligence and machine learning technologies to improve our
customer insight and engagement. In particular, the use of these tools
has supported:
• A clearer understanding of customer buying behaviours and
product baskets.
• The use of automated marketing to support tailored customer
engagement.
• The development of automated and personalised product
recommendation integration with the e-commerce platform.
• The use of targeted pay-per-click tools.
Looking forward, we intend to further optimise customer journeys with
enhanced product presentation and personalisation. This information
will be deployed further to support localised customer engagement
across our branch network.
Other digital priorities for 2023
In addition to the work described above, in 2023 we will also be
working on the following aspects of our digital strategy:
• Completing a business requirements analysis, scoping and costing
exercise to determine the future path for our Customer Relationship
Management (‘CRM’) and ERP systems.
• Development of product conguration tools to enhance customer
product visualisation, quotation and lead generation activity.
ERP system
Following a full review in 2022, we believe that the age prole of our
principal ERP system has become a limiting factor in the development
of our business. This conclusion recognises that our current SAP
system was implemented in 2006, when the Group was primarily
a manufacturer of PVC prole, with no recycling and only a small
branchoperation.
We are therefore starting a project to upgrade or replace our SAP
system, with the principal tasks for 2023 being scoping and system
selection. Thereafter, we anticipate implementation to be a two to three
year process and, whilst it is very early in the process, we estimate the
total capital costs of the project will be in the region of £6-8 million.
Eurocell plc Annual Report and Accounts 202236
DIVISIONAL REVIEW
PROFILES
Proles Highlights
15%
Sales vs 2021
c.400 fabricators
Total accounts
80 (2017-19: 60)
New accounts 2019-22
c.20% (2015: c.20%)
Market share
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 37
Strategy
In 2018 we became the leading supplier of rigid PVC prole to the
UK market, with a share of c.15%. We continue to consolidate
our position and believe we now have a share of around 20%.
Ourstrategic objective is to increase this over the mediumterm.
The demand created by our specication and marketing teams,
together with continuing new product introductions, have supported
growth for our existing fabricator customers over the last few years.
We have also increased the run rate on new fabricator account
acquisitions and our pipeline of other potential new fabricator
customers remains healthy. Looking forward, there is an opportunity
to capitalise on our recent investments in warehousing and production
plant, to exploit spare operational capacity and continue to grow
market share in Proles.
Our plans to achieve this are sector-led, with initiatives focused
primarily on the trade/retail and new build sectors, which together
represent c.90% of Proles sales (c.55% for trade and c.35% for
newbuild).
There is a compelling case for larger trade fabricators to switch to
Eurocell. This includes a strong product range and continued product
development e.g. better aesthetics (such as ush windows), a more
contemporary look to roong and door products and improved
environmental characteristics. In addition, the benets of pull-through
prole specications and increasing opportunities to supply our
branches, all delivered via improving service, remain attractive to
prospective fabricator accounts.
Expanding our share of the new build market has been key to recent
growth, driven by sales of cavity closures where we are the clear
market leader. Looking forward, building regulations for windows
are becoming increasingly complicated and our technical teams
are working with our larger customers to enable them to conform,
including development of new product applications to meet changing
requirements.
This includes the Future Homes Standard, which will complement the
existing Building Regulations to ensure new homes built from 2025
produce 75-80% less carbon emissions than homes delivered under
the old regulations. The housebuilders have already taken signicant
steps to reduce emissions through walls, oors and roofs. However,
to comply with the proposed new regulations, solutions to reduce
emissions through windows and doors are likely to be required. This
plays well to Eurocell’s technical expertise and we are working with the
housebuilders and our customers to design a t-for-purpose solution.
We have strong relationships with large and medium-sized
housebuilders, maintained by our specication and technical teams.
We now plan to target regional housebuilders to further consolidate
our position of strength within the new build sector.
See Strategy in Action – Grow Market Share in Proles on pages 24 to
27 for more information.
Proles
2022
£m
2021
£m
Change
%
Third-party Revenue 161.7 140.7 15%
Inter-segmental Revenue 72.3 63.9 13%
Total Revenue 234.0 204.6 14%
Adjusted
1
operating prot 20.2 20.7 (2)%
Operating Prot 19.3 20.7 (7)%
1 Adjusted performance measures are stated before non-underlying items.
Proles third-party revenue for the year was £161.7 million, 15% higher
than 2021, with price the signicant driver of higher sales.
As described above, we continue to take market share. During
2017-21 we added c.75 accounts (an average of 15 per annum).
Afurther 29 accounts were added in 2022, which are coming online
progressively (typically 6 months from the point of signing) and will
provide support for 2023, and our prospect pipeline remains healthy.
Adjusted operating prot for 2022 of £20.2 million was 2% below
the previous year (2021: £20.7 million), reecting at volumes and
cost control, but with not all cost ination being fully recovered until
early in 2023. Reported operating prot is stated after non-underlying
restructuring costs and associated asset impairments totalling £0.9
million. Further information on non-underlying items is included in the
Chief Financial Ofcer’s Report on page 68.
38 Eurocell plc Annual Report and Accounts 2022
DIVISIONAL REVIEW CONTINUED
BUILDING
PLASTICS
(BRANCH NETWORK)
c.25% (2015: c.20%)
Market share
Building Plastics Highlights
10%
Sales vs 2021
219 branches
Total sites
78 (net) 2015-22
New branches
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 39
Strategy
Our medium term strategic objective for Building Plastics is to achieve
sector-leading operations from 270-300 sites. The growth will come
mostly by taking market share from independent operators, who
currently have more than 60% market share. In 2022 we believe
we continued to take market share, and estimate that we now have
c.25% of the UK rooine market.
Our aim is to be the number one choice for relevant trades across the
UK, by creating the market-leading proposition and being recognised
as rst for service to the tradesperson.
We are mindful of the uncertain macroeconomic background and
its impact on our markets. We therefore intend to temporarily pause
our branch opening programme until the economic outlook is clearer.
However, this allows our team to review and focus on improvements
we can make to the existing estate, which will also support the future
expansion and growth of the network.
Our review is already in progress, and includes a deep dive to better
understand the key characteristics of our best performing branches,
with a view to replicating these across the network and improving
returns on invested capital. This includes consideration of branch
format, scale and infrastructure costs (including rent), product range
and new product development, labour turnover (and other people
metrics), value added services and operational efciencies.
We have two branch formats: standard (209 branches), and large (10
branches), the latter with bigger display areas and a wider product
range available. Both current and potential future formats are part of
the review.
Customer centric new product development is also a fundamental
pillar of our strategy to expand the branch network. In 2022 this
included development of our conservatory and roofs proposition,
launch of a new at roof lantern and expansion of our outdoor living
product range to include pergolas and verandas.
Our best performing branches are generally those with the lowest
rates of labour turnover. Our initiatives to reduce labour attrition across
the network are focused on four key drivers: systems and processes;
environment and engagement; pay and reward; and training.
We believe we can drive further growth in the network by developing
value added services for our customers. For example, we expect our
recently established Select Installer scheme for conservatory roofs to
create a nationwide network of Eurocell advocates, as we channel
customer leads through the installer community.
Finally, we also expect to support protability and returns in the
network through a series of ongoing continuous improvement
activities. These are focused on margin control, underperforming
branches, asset protection, range simplication and stock
optimisation.
See Strategy in Action – Expand the Branch Network on pages 28
and 29 for more information.
Building Plastics
2022
£m
2021
£m
Change
%
Third-party Revenue 219.5 19 9.1 10%
Inter-segmental Revenue 0.3 0.5 (40)%
Total Revenue 219.8 199.6 10%
Adjusted
1
operating prot 12.2 12.6 (3)%
Operating Prot 10.9 12.6 (13)%
1 Adjusted performance measures are stated before non-underlying items.
Building Plastics third-party revenue for the year was £219.5 million,
10% higher than 2021, with price the signicant driver of sales growth.
Adjusted operating prot for 2022 was £12.2 million, 3% below the
previous year (2021: £12.6 million), reecting lower volumes and
cost control, but with not all cost ination being fully recovered until
early in 2023. Reported operating prot is stated after non-underlying
restructuring costs and associated asset impairments totalling £1.3
million. As part of the restructuring exercise, we concluded that ve
underperforming branches would be closed in Q1 2023, leaving
a network of 214 sites. These branches were selected based on
performance, remaining lease duration and ability to transfer sales to
other nearby sites.
Further information on non-underlying items is included in the
ChiefFinancial Ofcer’s Report.
Indicative branch economics (rounded)
Branch open < 2 years 2–4 years > 4 years
No. of Branches 12 12 195
Average Sales per
Branch (£000)
650 680 970
Return on Sales per
Branch (%)
2
Small loss % Small prot % >15%
2 Operating prot as % of revenue, before regional infrastructure and central costs,
and IFRS 16 adjustments.
Eurocell plc Annual Report and Accounts 202240
RESPONSIBLE BUSINESS
A RESPONSIBLE BUSINESS
In operating a responsible business, our
main areas of focus generally relate to
improving the long-term sustainability
of the Group. This includes carbon
footprint and emissions reduction,
supporting our people, their wellbeing
and seeking to improve the environment
in which they live and work.
This also includes how we interact with other
stakeholders and the communities in which we
operate, as well as ensuring good governance, strong
business ethics and appropriate conduct. Responsible
Business sub-sections are as follows:
• Sustainability strategy, including performance against our
environmental and social KPIs and targets.
• Task Force on Climate-related Financial Disclosures (‘TCFD’).
• Minimising our environmental impact, including recycling operations.
• Valuing our people.
• Working responsibly with our communities and other stakeholders.
• Looking to a sustainable future.
Throughout these sections, we provide further detail in relation
to progress against our sustainability targets and objectives.
Thegovernance aspects of responsible business are covered in
theGovernance Report beginning on page 84.
This section of the Strategic Report also includes our Non-nancial
Information Statement, produced to comply with sections 414CA and
414CB of the Companies Act. The information listed is incorporated by
cross-reference as described in the table.
The policies noted opposite form part of our policy framework which
is founded on our risk management principles. The policies which
underpin these principles dene mandatory requirements in respect
of risk management. Controls and processes are in place to ensure
compliance.
Reporting requirement Policies and standards which
govern our approach
1
Information necessary to understand
our business and its impact, policy,
due diligence and outcomes
ENVIRONMENTAL
IMPACT
Environmental matters
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Recycling operations pp.48
• Minimising our environmental
impact pp.48
VALUING
Employees
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Employee Handbook
• Valuing our people pp.56
Respect for other people
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Privacy Policy
• Recruitment Policy
• Anti-Slavery and Human
TrafckingPolicy
• Anti-Bullying and Harassment Policy
• Various information Security Policies
• Whistleblowing Policy
• Equality and diversity pp.58
• Modern slavery pp.63
WORKING
RESPONSIBLY
Social matters and community issues
• Corporate Social Responsibility Policy • Customers pp.62
• Community and charity pp.61
Anti-corruption and anti-bribery
• Corporate Social Responsibility Policy
• Anti-Bribery Policy
• Whistleblowing and
bribery pp.102
Description of principal risks and
impactofbusiness activity
• Risk management pp.70
• Principal risks and
uncertainties pp.70
Description of the business model
• Overview pp.6
• Our business model pp.18
Non-nancial key performance indicators
• Operational performance
pp.14
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 41
1 Certain Group policies and internal standards as guidelines are not published externally.
Reporting requirement Policies and standards which
govern our approach
1
Information necessary to understand
our business and its impact, policy,
due diligence and outcomes
ENVIRONMENTAL
IMPACT
Environmental matters
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Recycling operations pp.48
• Minimising our environmental
impact pp.48
VALUING
Employees
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Employee Handbook
• Valuing our people pp.56
Respect for other people
• Corporate Vision and Values
• Corporate Social Responsibility Policy
• Privacy Policy
• Recruitment Policy
• Anti-Slavery and Human
TrafckingPolicy
• Anti-Bullying and Harassment Policy
• Various information Security Policies
• Whistleblowing Policy
• Equality and diversity pp.58
• Modern slavery pp.63
WORKING
RESPONSIBLY
Social matters and community issues
• Corporate Social Responsibility Policy • Customers pp.62
• Community and charity pp.61
Anti-corruption and anti-bribery
• Corporate Social Responsibility Policy
• Anti-Bribery Policy
• Whistleblowing and
bribery pp.102
Description of principal risks and
impactofbusiness activity
• Risk management pp.70
• Principal risks and
uncertainties pp.70
Description of the business model
• Overview pp.6
• Our business model pp.18
Non-nancial key performance indicators
• Operational performance
pp.14
Eurocell plc Annual Report and Accounts 202242
KPIs AND TARGETS DRIVING
IMPROVED SUSTAINABILITY
Our overall objective in this area is to
continue to improve all material aspects
of the sustainability of the Group.
We have dened a suite of environmental and
social targets and KPIs against which to measure
our progress, which are set out in the following
table, which includes the outturn for 2021 and
2022 compared to the baseline from 2020. The
sections which follow provide further information
and commentary in relation to our performance in
eachcategory.
Our KPIs recognise the breadth of the sustainability, or Environmental,
Social and Governance (‘ESG’) agenda.
Central to our environmental targets, which cover both the circular
economy as well as emissions and energy management, is reducing
the carbon footprint of the business and our products. Our unique
recycling operation and focus on increasing our use of recycled PVC
compound in the manufacture of co-extruded rigid proles has been,
and will continue to be, at the heart of carbon reduction for Eurocell.
Our social objectives are broad and cover areas such as health and
safety, diversity and education.
These objectives align well with several relevant United Nations
Sustainable Development Goals, as well the UK’s transition towards
anet zero carbon economy.
Commentary in relation to our performance against these KPIs is set
out in the sections which follow. We will continue to report our progress
against these targets on an annual basis.
For information on our governance arrangements, please see our
Corporate Governance Statement on pages 82 to 92.
Key to United Nations Sustainable Goals (‘UN SDGs’):
Gender equality
Responsible
production and
consumption
Climate action
Affordable
clean energy
Decent work and
economic growth
No poverty Good health
and well-being
Quality education
KPI
2022
Result
2021
Result
2020
Base Target vs 2020 Base
Link to
UN SDGs
ENVIRONMENTAL –
CIRCULAR ECONOMY
Recycled material used in production
% used 29% 27% 25% 1% increase
per year
CO
2
saved by recycling operation
Tonnes saved 47kt 48kt 36kt Year-on-year
increase
Waste recycled
% recycled 82% 82% 79% Year-on-year
increase
ENVIRONMENTAL – EMISSIONS
AND ENERGY MANAGEMENT
Greenhouse gas (‘GHG’) emissions
GHG intensity ratio 49t CO
2
/
£m sales
53t CO
2
/
£m sales*
70 t CO
2
/
£m sales
5% reduction
by 2025
Energy consumption
Energy use
intensityratio
226 MWh /
£m sales
231 MWh /
£m sales*
267 MWh /
£m sales
5% reduction
by 2025
Renewable energy
Renewable
energyused
100% total energy 78% total energy 19% total energy More than 90%
by2025
SOCIAL
Health & safety
Lost time injuryrate 1.0 per
100,000 hours
0.8 per
100,000 hours
0.7 per
100,000 hours
50% reduction
by 2025
Employee engagement and recruitment
Labour turnover 32% 34% 21% Year-on-year
reduction
Employee satisfaction
Annual survey
response rate
andoverall
satisfaction level
69% and 77% 60% and 68% n/a Year-on-year
increase
Diversity
Female employees 15.3% 13.5% 12.8% Year-on-year
increase
Remuneration
National Living
Wage(‘NLW’)
All employees at
or above NLW
All employees at
or above NLW
All employees at
or above NLW
All employees
above NLW
by 2023
Education
Apprenticeships /
Kickstarters
69 79 32 20% increase
by 2025
RESPONSIBLE BUSINESS CONTINUED
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 43
KPI
2022
Result
2021
Result
2020
Base Target vs 2020 Base
Link to
UN SDGs
ENVIRONMENTAL –
CIRCULAR ECONOMY
Recycled material used in production
% used 29% 27% 25% 1% increase
per year
CO
2
saved by recycling operation
Tonnes saved 47kt 48kt 36kt Year-on-year
increase
Waste recycled
% recycled 82% 82% 79% Year-on-year
increase
ENVIRONMENTAL – EMISSIONS
AND ENERGY MANAGEMENT
Greenhouse gas (‘GHG’) emissions
GHG intensity ratio 49t CO
2
/
£m sales
53t CO
2
/
£m sales*
70 t CO
2
/
£m sales
5% reduction
by 2025
Energy consumption
Energy use
intensityratio
226 MWh /
£m sales
231 MWh /
£m sales*
267 MWh /
£m sales
5% reduction
by 2025
Renewable energy
Renewable
energyused
100% total energy 78% total energy 19% total energy More than 90%
by2025
SOCIAL
Health & safety
Lost time injuryrate 1.0 per
100,000 hours
0.8 per
100,000 hours
0.7 per
100,000 hours
50% reduction
by 2025
Employee engagement and recruitment
Labour turnover 32% 34% 21% Year-on-year
reduction
Employee satisfaction
Annual survey
response rate
andoverall
satisfaction level
69% and 77% 60% and 68% n/a Year-on-year
increase
Diversity
Female employees 15.3% 13.5% 12.8% Year-on-year
increase
Remuneration
National Living
Wage(‘NLW’)
All employees at
or above NLW
All employees at
or above NLW
All employees at
or above NLW
All employees
above NLW
by 2023
Education
Apprenticeships /
Kickstarters
69 79 32 20% increase
by 2025
* GHG emissions and energy consumption figures for 2021 have been restated as a result of increased data availability. These adjustments
have been made throughout this section.
Eurocell plc Annual Report and Accounts 202244
SASB
STANDARDS
We are also in the process of
transitioning to reporting further
information under the Sustainability
Accounting Standards Board (‘SASB’)
standards.
We have selected a number of relevant metrics from
three applicable standards: Construction Materials,
Waste Management and Multiline, Specialist Retailer
and Distributors standards. Our performance in
2022, along with 2021 base year data is set out in
the table on pages 42 and 43.
Where appropriate, and unless otherwise stated, commentary in
relation to our performance against these SASB standards is set out in
Minimising Our Environmental Impact on pages 48 to 54. We plan to
continue to develop our reporting against the SASB standards.
Metric Topic Unit of Measure 2022 2021 SASB Reference
CONSTRUCTIONS
MATERIALS
Gross global Scope 1 emissions, percentage
covered under emissions-limiting regulations
Greenhouse gasemissions Metric tons(t) CO
2
-e,
Percentage (%)
7,096
88% electricity and
9% gas
5,805
91% electricity
and32% gas
EM-CM-110a.1
Discussion of long-term and short-term
strategy or plan to manage Scope 1 emissions,
emissions reduction targets, and an analysis
of performance against those targets
Greenhouse gasemissions N/A See details of the short-term and long-
term strategy within “Looking to a
Sustainable Future” section on pages 64
and 65
EM-CM-110a.2
Production by major product line
(see Chief Executive Ofcer’s Report
onpages12 to 17)
Activity Metrics Metric tons (kt) Rigid PVC
prole: 36.9
Foam PVC
prole: 17.2
Rigid PVC
prole: 38.6
Foam PVC
prole: 18.6
EM-CM-000.A
WASTE
MANAGEMENT
(1) Amount of waste incinerated;
(2) percentage hazardous; and
(3) percentage used for energy recovery
Recycling & Resource Recovery Metric tons (kt),
Percentage (%)
1) –
2) –
3) –
1) –
2) –
3) –
IF-WM-420a.1
Percentage of customers receiving
(1) recycling; and
(2) composting services, by customer type
Recycling & Resource Recovery Percentage (%)
1) 69%
2) 0%
1) 72%
2) 0%
IF-WM-420a.2
Amount of material
(1) recycled;
(2) composted; and
(3) processed as waste-to-energy
Recycling & Resource Recovery Metric tons (kt)
1) 46.4
2) –
3) –
1) 48.2
2) –
3) –
IF-WM-420a.3
MULTILINE, SPECIALIST RETAILER
AND DISTRIBUTORS
Description of approach to identifying and
addressing data security risks
Data security N/A See details of the cyber security risk within
‘Principal Risks’ section on page 72
CG-MR-230a.1
(1) Number of data breaches;
(2) percentage involving personally
identiableinformation (PII); and
(3) number of customers affected
Data security Number, Percentage
(%)
1) 1
2) 100%
3) –
1) –
2) 0%
3) –
CG-MR-230a.2
Total amount of monetary losses as a result
of legal proceedings associated with labour
law violations
Labour Practices GBP – – CG-MR-310a.3
Total amount of monetary losses as a
result of legal proceedings associated with
employment discrimination
Workforce Diversity & Inclusion GBP – – CG-MR-330a.2
RESPONSIBLE BUSINESS CONTINUED
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 45
Metric Topic Unit of Measure 2022 2021 SASB Reference
CONSTRUCTIONS
MATERIALS
Gross global Scope 1 emissions, percentage
covered under emissions-limiting regulations
Greenhouse gasemissions Metric tons(t) CO
2
-e,
Percentage (%)
7,096
88% electricity and
9% gas
5,805
91% electricity
and32% gas
EM-CM-110a.1
Discussion of long-term and short-term
strategy or plan to manage Scope 1 emissions,
emissions reduction targets, and an analysis
of performance against those targets
Greenhouse gasemissions N/A See details of the short-term and long-
term strategy within “Looking to a
Sustainable Future” section on pages 64
and 65
EM-CM-110a.2
Production by major product line
(see Chief Executive Ofcer’s Report
onpages12 to 17)
Activity Metrics Metric tons (kt) Rigid PVC
prole: 36.9
Foam PVC
prole: 17.2
Rigid PVC
prole: 38.6
Foam PVC
prole: 18.6
EM-CM-000.A
WASTE
MANAGEMENT
(1) Amount of waste incinerated;
(2) percentage hazardous; and
(3) percentage used for energy recovery
Recycling & Resource Recovery Metric tons (kt),
Percentage (%)
1) –
2) –
3) –
1) –
2) –
3) –
IF-WM-420a.1
Percentage of customers receiving
(1) recycling; and
(2) composting services, by customer type
Recycling & Resource Recovery Percentage (%)
1) 69%
2) 0%
1) 72%
2) 0%
IF-WM-420a.2
Amount of material
(1) recycled;
(2) composted; and
(3) processed as waste-to-energy
Recycling & Resource Recovery Metric tons (kt)
1) 46.4
2) –
3) –
1) 48.2
2) –
3) –
IF-WM-420a.3
MULTILINE, SPECIALIST RETAILER
AND DISTRIBUTORS
Description of approach to identifying and
addressing data security risks
Data security N/A See details of the cyber security risk within
‘Principal Risks’ section on page 72
CG-MR-230a.1
(1) Number of data breaches;
(2) percentage involving personally
identiableinformation (PII); and
(3) number of customers affected
Data security Number, Percentage
(%)
1) 1
2) 100%
3) –
1) –
2) 0%
3) –
CG-MR-230a.2
Total amount of monetary losses as a result
of legal proceedings associated with labour
law violations
Labour Practices GBP – – CG-MR-310a.3
Total amount of monetary losses as a
result of legal proceedings associated with
employment discrimination
Workforce Diversity & Inclusion GBP – – CG-MR-330a.2
Eurocell plc Annual Report and Accounts 202246
RESPONSIBLE BUSINESS CONTINUED
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES
Tackling climate change is embedded
in our sustainability strategy
We recognise the importance and value of the recommendations
from the Financial Stability Task Force on Climate-related Financial
Disclosures (‘TCFD’) and are committed to open and transparent
disclosures. The information set out on this, and the following page,
aims to provide key climate-related information and cross-references
to where additional information can be found. In this context, we
have considered our ‘comply or explain’ obligation under the UK’s
Financial Conduct Authority’s Listing Rules and conrm that we have
made disclosures consistent with the TCFD Recommendations and
Recommended Disclosures in the Annual Report save for Scope 3
greenhouse gas emissions. We currently disclose partial Scope 3
emissions, where this information is available. This is a complex and
evolving area and therefore, looking forward, we will be working to
further disclose these emissions, where possible.
Tackling climate change is embedded in our sustainability strategy,
primarily through our objectives related to the circular economy
(increasing recycling and reducing waste) and energy and emissions
management (reducing emissions and increasing our use of renewable
electricity). The table on pages 42 and 43 references these targets and
other sections of our report where you can nd further information on
our approach to addressing climate change through improving our
sustainability.
Governance
The Board reviews principal risks, including those concerning
climate change and associated regulatory responses. The Board’s
engagement has been important in shaping our sustainability strategy,
carbon reduction plans and other environmental targets. Towards the
end of 2022, the Group’s Social Values and Environmental, Social
and Governance (‘ESG’) Committee was formed to ensure these
matters are considered properly by the Board, further strengthening
governance in this area.
The purpose of the committee is to provide formal and transparent
oversight of the Group’s ESG programme. This includes sustainability,
employee welfare and responsible business practices, as well as
our contribution to the societies we operate in. The committee also
monitors progress against our ESG KPIs. It includes two independent
Non-executive Directors: Alison Littley (Chair) and Iraj Amiri, as well
as the Group’s Sustainability Manager (Simon Drury) and Human
Resources Director (Bruce Stephen).
Looking forward, the Board will support management in establishing
apathway to carbon neutrality and thereafter on to net zero.
Metrics and targets
We have published our progress against these targets for the second
year, comparing the results against both 2021 and the 2020 base. We
have generally made good progress against these targets, as set out on
pages 42 and 43 and throughout this Responsible Business section.
In terms of climate change, the most important metrics for Eurocell are
increasing our recycling operation and reducing our emissions.
Our recycling operation is described on pages 48 to 51. In 2022, we
estimate that our recycling operation saved approximately 47k tonnes
of carbon compared to the use of virgin PVC.
Our emissions are also reported in the Greenhouse Gas Emissions
and Energy Use section on pages 42 and 43. Using a location-based
methodology (which does not consider the electricity supply contracts
we purchased, but instead uses a national carbon emissions factor
for electricity), total emissions increased by 4% in 2022 compared to
2021, reecting an increased return to ofce- and site-based working.
It is also important to recognise that we have reduced our total
emissions by 28% since 2016.
Using a market-based reporting approach, which recognises that
100% of the electricity we purchased in 2022 was renewable, our
2022 emissions are less than half of those reported under the location-
based methodology.
Risk management
Climate change and associated regulatory response risks are included
as part of our overall risk management framework. Further information
in relation to our assessment of climate-related risks and opportunities
is set out below.
Transition and physical risks and opportunities
Transition risk: reputation and investor preference
If we do not deliver on our environmental targets and set out a
credible pathway to carbon neutrality and net zero in due course, then
investors and lenders may show a preference to allocate capital to
businesses with smaller climate impacts and/or better dened paths
ofimprovement.
Our response
Improving sustainability, primarily through increasing recycling and
reducing emissions, is at the heart of business and a clear strategic
priority. We have appropriate governance and KPIs in place to ensure
delivery of our objectives. We continue to engage with our investors
and lenders and are condent our strategy is well understood.
Transition risk: government action
Governments may implement taxes or charges which penalise
businesses that do not reduce carbon, potentially increasing the input
cost of energy, freight, and raw materials.
Our response
Our own commitments to carbon and emissions reduction will ensure
that we are part of the solution. In addition, the PVC sector is driving
a strong sustainability agenda, and we engage positively with our
suppliers and industry bodies to support their carbon reduction and
waste elimination initiatives. See page 54 for some examples of work
in progress in the PVC sector.
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 47
Transition risk: regulatory changes
Governments may implement stricter regulation, which could render
elements of our product portfolio non-compliant.
Our response
As active members of trade associations, we inuence directional
change in areas such as building and product regulations and improve
industry guidance. We are committed to investing in innovation
to support breakthroughs in sustainable living and ensuring that
emissions reduction is a core consideration in our product and
solutiondesigns.
Physical risk: disruption to our assets and operations
Changing weather patterns, linked to climate change, may directly
damage our production facilities, or disrupt our supply chain.
Our response
All our production facilities are UK-based and are not located in areas
exposed to direct risks of extreme weather. We engage with our
supply chain and maintain alternative sources and sufcient inventory
to avoid the impact of short-term disruption.
Transition opportunities
We are the leading UK-based recycler of PVC windows. Our rigid
proles contain signicantly higher recycled material content than
any of our UK competitors. In addition, our rigid proles are designed
for enhanced thermal efciency and deliver better U-values and
low thermal conductivity relative to alternatives such as wood and
aluminium. We believe building regulations, such as the Future Homes
Standard, are also benecial to our skill set. We have an opportunity
to leverage energy saving and other benets of our products
and solutions with our existing customer base, consumers, and
otherstakeholders.
Looking further to the future, our largest PVC resin supplier has
launched the world’s rst commercially produced bio-attributed PVC
(Biovyn), which is made using renewable feedstock derived via wood-
based residue from sustainable forestry. Products such as this provide
the potential to support our longer-term transition to carbon neutrality
and net zero. Further information is included in Responsible PVC
Sector on page 54.
Scenario analysis
We have made initial use of qualitative scenario analysis to assess our
risks and opportunities and have considered 2C and a 4C scenario
to provide a broad view of outcomes.
We have considered a 2C global warming scenario to assess our
risks and opportunities. Under a 2°C scenario, risks relate primarily
to the transition to a net zero world, the regulatory response, and
the changing political, consumer and investor expectations. Our
assessment is that the impact of a rise in global temperatures of less
than 2°C on the Group’s cash ows would be broadly neutral, on the
basis that any negative impact of the transition to a low-carbon society
would be offset by both the increased recycling of PVC windows and
Government legislation to reduce emissions through the replacement
of old windows with newer windows with better thermal qualities (such
as the Future Homes Standard), both long term drivers of growth
for the business. We continue to replace and upgrade our eet of
extruders and vehicles as part of our normal maintenance capex cycle,
and therefore do not anticipate any risk of asset obsolescence or
signicant additional costs in this scenario.
We have not modelled the impact of a 4
o
C global warming scenario
due to the lack of available data. We will develop our modelling over
the coming years as data becomes available.
Reporting requirement Reporting recommendation Section and reference
Governance • Describe the Board’s oversight of climate-related risks and
opportunities
• Describe management’s role in assessing and managing climate-
related risks and opportunities
• Risk management and principal risks,
seepage 70
• TCFD, see page 46
Strategy • Describe the climate-related risks and opportunities the
organisation has identied over the short and longer term
• Describe the impact of climate-related risks and opportunities on
the organisation’s business, strategy and nancial planning
• Describe the resilience of the organisation, taking into
consideration different future climate scenarios
• Minimising our environmental impact,
seepage 48
• Looking to a sustainable future, see above
• TCFD, see page 46
Metrics • Disclose the metrics used by the organisation to assess climate-
related risks and opportunities
• Disclose Scope 1 and 2 and, if appropriate, Scope 3 emissions
• Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets
• Sustainability strategy, KPIs and targets,
see pages 42 and 43
• Greenhouse gas emissions and energy
use, see pages 52 and 53
Risk • Describe the organisation’s processes for identifying, assessing,
and managing climate-related risks
• Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall
risk management
• Risk management and principal risks,
see page 70
• TCFD, see page 46
Eurocell plc Annual Report and Accounts 202248
RESPONSIBLE BUSINESS CONTINUED
MINIMISING OUR
ENVIRONMENTAL IMPACT
Recycling Operations
Recycling sits at the very heart of our operations, and we are proud to be the
leading UK-based recycler of PVC windows.
Why we recycle
Our recycling operation will always be at the heart of our sustainability
strategy. Expanding recycling improves product and business
sustainability, with less plastic going to landll. The principal benets
fallinto three categories:
Carbon savings
An independent study by the University of Manchester found that
displacing 1 tonne of virgin PVC with 1 tonne of recycled window PVC
results in a reduction of approximately 1.7 tonnes of CO
2
emissions.
This calculation compares the full life cycle carbon emissions
associated with the production of virgin PVC with emissions from the
window recycling process. As a result, our recycling operation saves
substantial amounts of carbon compared to the use of virgin PVC.
Commercial
We can leverage the sustainability aspects of our recycling operation
with our customer base, consumers, and other stakeholders.
Closed-loop recycling (where windows being replaced are recycled
into the new product) is attractive to decision makers such as local
authorities and architects, which helps us develop tight specications
for ourproducts.
Economic
Recycling also increases our prots, because the cost of recycled
compound is typically lower through the cycle than the price of virgin
material, and it reduces our exposure to volatile commodity prices.
This is particularly important at the moment, with prices remaining
highand signicant uncertainty in the market.
What we do
Our recycling process essentially turns old window proles into new
window proles. We recycle both customer factory offcuts (post-
industrial waste) and old windows that have been replaced with new
(post-consumer waste) to produce recycled material in the form of
pellets, micronised and granulate material which are then used to
generate brand new extruded products.
We operate an advanced co-extrusion process, which delivers
recycled material to the prole core. External surfaces are protected
using virgin PVC compound, providing a high-quality, resilient nish.
The recycling process actually enhances product stability and can be
repeated around ten times, giving the product an effective lifetime of
approximately 100 years.
Our co-extruded proles are designed to deliver enhanced thermal
efciency, with better U-values than wood or aluminium alternatives
and low thermal conductivity.
We have two recycling plants, located in Ilkeston (Eurocell Recycle
Midlands) and Selby (Eurocell Recycle North). Both sites operate
under Integrated Pollution Prevention and Control (‘IPPC’) permit
conditions, and both successfully retained their permitted status. The
environmental management systems and manuals forming the basis
of our ISO 14001 accreditations continue to evolve, with particular
progress being made at Eurocell Recycle North. All accreditations
were successfully maintained in 2022.
How much we invest
Between 2016 and 2022, we invested c.£12 million to expand
capacity at our two recycling plants to become the leading UK-
based recycler of PVC windows, along with the associated
economicbenets.
How much we recycle
During the year, our two sites recycled 37.9k tonnes (equivalent to
more than three million window frames) of post-consumer waste,
which would have otherwise been sent to landll, and 8.5k tonnes of
post-industrial waste. Total waste collected of 46.4k tonnes represents
a small reduction from 2021 (48.2k tonnes), reecting slightly lower
primary extrusion production volumes.
Together the two sites used this waste to produce 27.4k tonnes of
recycled material (2021: 28.5k tonnes), at a similar percentage yield
to 2021. It should be noted that very little of the resulting by-product
goes to landll, with a signicant proportion representing scrap metal,
which is sold.
OUR WELL-DEVELOPED
CHANNELS FOR RECOVERY
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 2022 49
Of the recycled material produced, 16.7k tonnes (generated
predominately from post-consumer waste) was used alongside virgin
resin in the manufacture of many of our PVC rigid proles, representing
29% of total raw material consumption, up from 27% in 2021.
The remaining 10.7k tonnes of recycled material produced is used
either in products which are manufactured from 100% recycled
material, including thermal inserts and cavity closer systems (which
are almost exclusively derived from post-industrial waste), or sold to a
range of trade extruders.
We estimate that, in total, our recycling operation saved approximately
47k tonnes of carbon in 2022 (2021: 48k tonnes), also compared
to the use of virgin PVC, and prevented the equivalent of over three
million window frames from landll.
Our 2022 performance is in line with our target to increase the
percentage of recycled material used in production by at least 1% per
annum. A reduction in the amount of carbon saved reects slightly
lower production volumes in 2022.
In addition, in terms of economic benets, in 2022 our recycling
operation drove a substantial cost saving compared to the use of
virginPVC compound, reecting higher prices for virgin compound.
k tonnes 2022 2021
vs 2021
Change Change %
Inputs – waste recycled
Post-consumer 37. 9 40.5 (2.6) (6)%
Post-industrial 8.5 7.7 0.8 10%
46.4 48.2 (1.8) (4)%
Output – recycled material produced 27.4 28.5 (1.1) (4)%
Yield % 59% 59% -%
Usage
Primary extrusion 16.7 16.8 (0.1) (1)%
Products made from 100% recycled material 6.1 7. 3 (1.2) (16)%
Sales to trade extruders 4.1 4.3 (0.2) (5)%
26.9 28.4 (1.5) (5)%
Primary extrusion usage as %oftotalconsumption 29% 27% 2%
We use a signicant proportion
of recycled plastic in our window
prole and doors
STRONG ON
SUSTAINABILITY
LESS IS MORE
RECYCLED
Proportion of recycled
plastic consumption
29%
VIRGIN
Proportion of virgin
compound consumption
71%
RECYCLED
46.4K
TONNES IN 2 022
Eurocell plc Annual Report and Accounts 202250
RESPONSIBLE BUSINESS CONTINUED
HOW WE RECYCLE
Our 9-step process to create new feedstock from end-of-life materials
SHREDDING
Waste is shredded into
processable pieces.
GRANULATION
The waste is granulated
into uniform size. At this
stage rubber gaskets are
stillpresent.
02 04
01 03 05
WASTE
COLLECTION
Waste is taken
from three sources:
• Post-consumer windows.
• Fabricator off-cuts.
• Bar length.
SEPARATION
Using magnetic processes,
metals are separated from
the rest of the waste and
recycled separately.
COLOUR
SORTING
An advanced process
utilising high speed cameras,
ultra-violet light and jets of
air lters out the granules
of rubber leaving only clean,
colour sorted PVC-U.
c.200
recycling jobs provided
to people in the local area
9
Manufactured product ranges
from recycled PVC-U
Eurocell plc Annual Report and Accounts 2022 51
Financial
Statements
Corporate
Governance
Strategic
Report
WASHING
Using a series of water
tanks, contaminants
are ‘oated’ out, using a
closed-loop water system.
BULK
TRANSPORTATION
A proportion of the recycled
material is used onsite, whilst
the rest is transported in tankers
to our main extrusion facility,
minimising our carbon footprint.
06 08
>3 million
end-of-rst-life frames
recycled in 2022
136%
increase in recycled material
produced since 2016
c.70k
windows recycled perweek,
on average, during 2022
07 09
PELLETISATION/
PULVERISATION
The PVC-U granules are
processed into nished
materialready for extrusion.
EXTRUDE
FINISHED
PRODUCTS
The loop is closed as we
manufacture the PVC-U into
new products, frequently
to higher specication than
those being recycled. Such
‘upcycling’ is key to being
a sustainable part of the
CircularEconomy.
BENEFITS OF
EUROCELL RECYCLING
Sustainability
The use of recycled material enhances product
stability and lowers the carbon footprint of our
manufactured products.
Reducing waste to landll
By recycling old windows (‘post-consumer’)
we reduce the amount of waste sent to landll.
Protecting our margin
The use of recycled material in the manufacture of
PVC-U rigid products provides a substantial saving
in cost compared to virgin compound. We also aim
to increase our use of recycled material in order to
maintain gross margin as our sales grow.
Mitigating pricing pressures
Increasing the use of recycled material in our
manufactured products helps to mitigate raw
material price increases and to reduce our
exposure to volatile commodity prices.
Eurocell plc Annual Report and Accounts 202252
RESPONSIBLE BUSINESS CONTINUED
Accreditation
FTSE Green Economy Mark
During 2021, we were very pleased to receive the London Stock
Exchange’s Green Economy Mark, which is awarded to companies
that derive more than 50% of revenues from environmental solutions
and reects contributions to the global green economy. In 2022 we
have retained this accreditation.
The LSE recognised that our PVC proles can be recycled up to ten
times and have a life span of around 100 years which, along with the
fact that we operate recycling plants and use recycled material in our
products, contributes to the transition to a sustainable, low carbon
economy.
Our footprint
Since 2016, we have reduced total emissions by c.28%, along with
a steady downward trend in emissions intensity. Consumption has
dropped through energy efciency programmes, whilst revenues have
generally been increasing (source: Eurocell Greenhouse Gas Report,
Inenco Group, February 2022).
Recognition
We have been proud winners of:
• the Future Manufacturing Awards – Sustainability 2018.
• the MRW National Recycling Awards – Manufacturer of the
Year2018.
• the National Fenestration Awards 2020 – Recycling Company
ofthe Year.
We are committed to protecting and minimising our impact on the
environment. Our policy is as follows:
• We recognise that our operations result in emissions and waste
and we are committed to control, recover, and reuse PVC waste
wherever possible. We operate in compliance with all relevant
environmental legislation, and strive to use pollution prevention
and environmental best practice in all that we do. The Company
experienced no reportable environmental incidents during 2022.
• We promote the efcient use of all materials and resources
throughout our facilities, particularly non-renewable resources, and
continue our development of sustainably sourced products using
recycled materials wherever possible.
• Environmental concerns and impacts are a consideration in all
our decision making and activities. We promote environmental
awareness amongst our employees and encourage them to
work in an environmentally responsible manner. This is achieved
through training and education, informing our employees about
environmental issues that may affect their work.
• Emergency response procedures are maintained where required
by legislation or where signicant health, safety or environmental
hazards exist.
• Our general environmental objectives are set in alignment with
legislation and are continually reviewed to ensure they are being
met. Our environmental policies apply to all our operations, and
we make sure sufcient resources are made available to ensure
that they are implemented. We strive to continually improve our
environmental performance and review our policies regularly in the
light of planned future activities.
As described on pages 42 and 43, we have also published our
sustainability KPIs and targets. These include our environmental
targets, which cover both the circular economy as well as emissions
and energy management, where the central theme is reducing the
carbon footprint of the business and our products. Further details of
our performance against these environmental targets is included in the
following sections.
Greenhouse gas emissions and energy use
We report our greenhouse gas (‘GHG’) emissions and energy use
as part of our Strategic Report and our reporting period is 1 October
2021 to 30 September 2022, with comparatives for the corresponding
period in the previous year. Reliable reporting of GHG emissions and
energy use on a calendar year basis is not possible due to difculties
in collating actual data for the nal months of the year due to timing
lags on supplier invoicing. All our emissions and energy use relate to
UK operations apart from negligible amounts which relate to our two
branches in the Republic of Ireland.
Our target is to deliver a 5% reduction in both the energy use intensity
ratio and emissions intensity ratio by 2025, compared to the 2020
baseline. Thereafter, these targets will be re-based to ensure they
are aligned to our ongoing long-term emissions reduction objectives,
which we expect to develop over time.
GHG emissions for the Group for the period ending 30 September
2022 in tonnes of carbon dioxide equivalent (tCO
2
e), using location-
based reporting are as follows. Note that location-based reporting
does not consider the electricity supply contracts we purchased, but
instead uses a national carbon emissions factor for electricity (see also
market-based reporting analysis within Electricity consumption below).
Source 2022 2021
1
Change
vs 2021
Fuel combustion (stationary) 820 337 143%
Fuel combustion (mobile) 6,603 5,734 15%
Refrigerant gases 33 42 (21)%
Purchased electricity 11,537 12,214 (6)%
Total 18,993 18,327 4%
1 2021 numbers have been restated to take into account increased data availability.
For 2022, we reported sales growth of 12% and a slight reduction in
production volumes. A small increase in total emissions for the year of
4% reects an increased return to ofce/site working practices, with
much of the 2021 comparative reecting remote working.
MINIMISING OUR
ENVIRONMENTAL IMPACT
CONTINUED
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 53
GHG emissions for the Group for the period ending 30 September
2022 in tonnes of carbon dioxide equivalent (tCO
2
e), by scope and
source, are as follows:
Source Scope 1 Scope 2 Scope 3
1
Total
Fuel combustion (stationary) 820 – – 820
Fuel combustion (mobile) 6,244 – 359 6,603
Refrigerant gases 33 – – 33
Purchased electricity – 10,570 967 11,5 37
Total 7,097 10,570 1,326 18,993
1 See below for details of Scope 3 emissions included in this analysis.
Scope 1 emissions are direct emissions from fuel combusted in
our own facilities and vehicles and Scope 2 emissions are indirect
emissions from the generation of electricity or heating that we
purchase for use in our business. These emissions have been reliably
measured and independently veried.
Scope 3 emissions are usually dened as emissions from all other
activities in the supply chain as well as the positive impact of using our
products. The Scope 3 emissions included in the table above include
only those associated with electricity distribution and transmission
losses, along with business travel in private vehicles. We are working
with key suppliers to determine the extent to which we will be able to
report all our Scope 3 emissions in the future.
The emissions intensity ratio was as follows:
tCO
2
e 2022 2021
2
Change
vs 2021
Total emissions 18,993 18,327 4%
Emissions intensity
1
49 53 (8)%
1 Expressed in tCO
2
e per £m revenue.
2 2021 numbers have been restated to take into account increased data availability.
The emissions intensity ratio was 49 tCO
2
e per £m revenue in 2022,
resulting in an 8% year-on-year reduction when compared to 2021, in line
with our target. This ratio is driven by increases in revenue of 48% since
the base year, compared to an increase in emissions of 5%.
Energy use for the Group for the period ending 30 September 2022 in
MWh is as follows:
Source 2022 2021
1
Change
vs 2021
Natural gas 4,494 1,839 144%
Electricity 54,662 52,846 3%
Diesel 19,358 17, 5 6 5 10%
Petrol 1,116 471 137%
LPG 4,536 4,631 (2)%
Gas oil 2,724 1,839 48%
Total consumption (kWh) 86,890 79,191 10%
Total Group sales (£m) 38 4.1 343.1 12%
Intensity: (kWh per £m) 226 231 (2)%
1 2021 numbers have been restated to take into account increased data availability.
The 2022 energy use intensity ratio was £226 MWh/£m sales (2021:
£231 MWh/£m sales) representing a 2% year-on-year reduction, and
a 15% reduction from the 2020 base year. We continue to improve
the energy efciency of our own plant and machinery (new extrusion
lines are signicantly more efcient than our legacy eet), however,
wehave seen an increase in total energy consumed of 26% since the
base year, as a direct result of producing more, offset by an increase in
revenue of 48%.
This information was collected, calculated, and reported in line with the
methodology set out in the UK Government’s Environmental Reporting
Guidelines, 2019 (PB 13944). Emissions have been calculated using
the 2022 conversion factors provided by the Department for Business,
Energy & Industrial Strategy.
Electricity consumption (61% of 2022 energy use)
We continue to encourage behavioural changes to reduce
consumption levels, to be less wasteful and drive operational
efciencies, including reducing idle time and optimising temperatures
on extrusion lines and chillers. In addition, during the year, we have
also reviewed machine start-ups, standby and shut-down processes,
the usage of compressed air and the Company’s lighting policy, all of
which have had a positive impact on our electricity usage.
In addition, our previously published target was to increase the use of
renewable energy by 50% by 2025, compared to the 2020 baseline.
However, following a decision taken to signicantly increase renewable
energy purchases, renewable energy use increased to 78% in 2021
and 100% in 2022, compared to 19% in 2020. We have therefore
revised our long-term target to be more than 90% renewable by 2025.
Note that following a market-based methodology, our emissions
from electricity in 2022 were 983 tCO
2
e (compared to 11,537 tCO
2
e
reported for the same period under the location-based approach in the
table above).
Waste management
During 2022, we continued our work towards a ‘zero to landll’
aspiration. Our current target is to deliver year-on-year increases in the
level of our waste which is recycled. In 2022, 82% of our waste was
recycled, compared to 82% in 2021.
We are developing our production material ows, particularly through
the recycling operation, to close resource loops, improve in-house
waste recovery and reduce material sent to landll i.e. essentially
engineering in recycling and designing out waste. The chart illustrates
that substantially all scrap material generated in our extrusion process
is recycled. Finding new applications for waste products from the
recycling operation which were previously landlled is also a priority.
We have strategies in place to increase the amount of post-consumer
and post-industrial waste we collect and improve the performance of
our recycling plants. For example, at our recycling sites, a number of
equipment trials and plant modications are being conducted, with
the aim of improving operational efciency and product yield. We are
increasingly using quality management approaches to develop more
effective process control, allowing greater focus on critical process
points whereby quality and yield can be maximised. This leads to
cleaner waste streams, with greater potential for sale and/or reuse.
In addition, trials have commenced at third-party sites which act as
a collection/delivery hub for old windows which have been replaced
(post-consumer waste). At these hubs, the post-consumer waste is
separated and collected for our recycling operations which:
• provides our customers with a simple, easily-accessible and
cheaper disposal route for post-consumer waste, thus increasing
recycling volumes; and
• increases our recycling yields, due to less unwanted material, thus
contributing to our target of ‘zero to landll’.
Eurocell plc Annual Report and Accounts 202254
Recycled
material
collected
46kt
Use in
primary
extrusion
17kt
(29%)
3rd party recycling and recovery (10kt)
Pellet sales and 100% recycled products (12kt)
In-house
production
waste
4kt
Virgin
input
materials
41kt
(71%)
Waste windows
collected
(post-consumer)
38kt
Waste collection
Fabricator off-cuts
collected
(post-industrial)
8kt
Volumes are FY 2022
Extrusion
prole
production
54kt
Third-party use of our products
Total
infeed
stock 58kt
(100%)
In-house recovery c.4kt
Green arrow – closed-loop recycling
Grey to black bars – material use,
reecting reducing level
Amber arrows – material losses
to landll or third-party
Third party processing and landll (9kt)
Plastic packaging
Our procurement team has been working with packaging suppliers
to identify, trial and introduce new types of plastic packaging. The aim
is to reduce overall plastic content, while increasing the proportion of
recycled plastic within the packaging. This will yield both environmental
benets and minimise the impacts of the new plastic packaging tax,
which came into effect in April 2022.
Pollution prevention
We have continued to make our vehicle eet more environmentally
friendly, as the choice of full electric and hybrid electric options
continues to grow.
Lower benet-in-kind values, free-to-use charging points at our main
sites, and support with installation of home charging points, all provide
natural incentives for company drivers to take up these options.
Furthermore, investigations continue into non-diesel options for our
light commercial eet, and discussions have commenced with our
third-party logistics provider to examine ways in which we can work
together to reduce the environmental impact of the logistics and
distribution operation.
Responsible PVC sector
There are a number of major initiatives in progress across the PVC
industry to address sustainability challenges, right through the
valuechain.
Supply chain – Inovyn
Inovyn is Europe’s leading chlorovinyls producer and the largest
supplier of PVC resin to UK window prole system houses,
includingEurocell.
Inovyn is an industry leader on sustainability, focused on development
in four areas: responsible production, carbon neutrality, circularity and
value to society.
In following this path, Inovyn was the rst European chemical company
to launch Environmental Product Declarations (‘EPDs’) covering a PVC
product range. In this respect, their products are assessed against
parameters such as: extraction and rening of raw materials; energy
production and supply; and resource inputs and emissions. In doing
this work, Inovyn has demonstrated that its carbon footprint for PVC is
lower than the industry average.
Looking further to the future, Inovyn has launched the world’s rst
commercially produced bio-attributed PVC (Biovyn). This product is
made using renewable feedstock derived via wood-based residue
from sustainable forestry, which importantly does not compete
with the food chain. Biovyn’s supply chain has been independently
certied by the Roundtable on Sustainable Biomaterials to deliver a
90% greenhouse gas saving compared to conventional PVC. Further,
Inovyn believe that products made using Biovyn can be recycled in the
same way as traditional PVC proles.
Products such as this provide the potential to support Eurocell’s
longer-term transition to carbon neutrality and net zero. We intend to
begin trials using small quantities of Biovyn in our primary extrusion
processes in 2023.
Supply chain – industry initiatives
We are also proud to support a number of other initiatives in the
PVCindustry.
VinylPlus 2030 is a ten-year commitment from the European PVC
industry to sustainable development, using a long-term framework
to drive the transition to circularity, advance the PVC value chain
towards carbon neutrality and minimise the environmental footprint
ofPVCproduction.
Recovinyl is a series of initiatives to encourage and develop PVC
recycling in Europe.
The British Plastics Federation (‘BPF’) promotes the versatility and
sustainability benets of plastics, with programmes that seek to
differentiate between short-life, single-use plastics, and those with
more circular life cycles. The BPF leads a range of initiatives to reduce
energy, increase recycling and prevent litter.
For example, BPF energy is a voluntary agreement setting out targets
to increase energy efciency and reduce CO
2
emissions. Operation
Clean Sweep is an initiative to reduce plastic pellet loss to the
environment, with the aim of ensuring that the plastic pellets, akes
and powders that pass through UK manufacturing facilities do not end
up in our rivers or seas.
RESPONSIBLE BUSINESS CONTINUED
Production Material Flows
MINIMISING OUR
ENVIRONMENTAL IMPACT
CONTINUED
Eurocell plc Annual Report and Accounts 2022 55
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 202256
ONE
TEAM
EXECUTE
INCLUSIVE
CUSTOMER
FIRST
INTEGRITY
RESPONSIBLE BUSINESS CONTINUED
VALUING
OUR PEOPLE
Our people remain at the heart of
our success. We strongly believe
that engaging all employees and
galvanising their efforts in line
with the Company’s Vision and
Values will set us on a successful
path to achieving all our business
objectives.
Health and safety
We are committed to conduct our business in a responsible manner,
ensuring the health, safety and welfare of our employees, visitors
and contractors who undertake work on our behalf. We believe that
effective health and safety management and continual improvement
inperformance is critical to our continued success.
Our aim is to create a positive safety culture within our organisation,
not just to ensure that employees at all levels full their legal
responsibilities, where effective health and safety management
isafundamental and integral part of our business.
During 2022 the number of RIDDOR incidents reduced by 18%,
reecting the fact that fewer more serious incidents were experienced
in the year. Our RIDDOR record is below the industry average,
although the Injury Frequency Rate and Lost Time Injury Rate both
increased when compared to the previous year.
We have improved the reporting of near misses and unsafe acts and
conditions, as part of a proactive approach to risk management,
with the aim of reducing the likelihood of future workplace injuries.
This improvement, when combined with the effective and timely
implementation of corrective and preventive action, supports our
positive safety culture and we are targeting an improvement in these
KPIs in 2023.
KPI 2022 2021
Injury frequency rate
1
4.8 3.7
Lost time injury frequency rate
2
1.0 0.8
RIDDOR-reportable injuries 23 28
Near misses 102 29
1 Injuries per 100,000 hours worked.
2 Lost time accidents per 100,000 hours worked.
During 2022, we introduced an escalation reporting process, whereby
the relevant senior managers are notied of all lost time incidents and
are required to attend root cause analysis meetings, to help ensure lost
time incidents and other more serious incidents gain the attention they
need to prevent recurrence.
There were no site visits by the Health & Safety Executive during the
year and only a small number of recommendations were forthcoming
from insurance surveys and inspections, all of which have been
appropriately addressed.
Certication to ISO 45001 was maintained for our main manufacturing
sites in Alfreton, with a small number of minor non-conformances and
opportunities for improvement identied. As part of our Safety, Health
and Environment (SHE) strategy we aim to achieve certication to the
standard across all Eurocell operational facilities by the end of 2025.
Strategic
Report
Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 57
Throughout the year, we successfully implemented numerous initiatives
and plans to improve Health and Safety including:
• Appointment of a new Head of SHE, with over 40 years of industrial
experience in senior SHE roles within large international companies.
• Strengthening of the SHE leadership within the Building Plastics
division, through the appointment of a new SHE lead and an
additional SHE manager for the Southern region.
• Implementation of a QR Code system for recording safety
inspections to improve and streamline record-keeping.
• Review of workplace transport plans, at several sites, to improve
pedestrian safety.
• Upgrade of staff welfare facilities on several manufacturing sites,
reecting our continued commitment to colleague wellbeing.
• Development of ‘Cardinal Rules’ (i.e. rules that, if violated, may
result in serious threat to the life and health of our employees) to
be communicated in 2023 and implemented through a training
programme and integration into safe operating procedures.
• Introduction of visible leadership tours, where senior leaders tour
a site and engage with employees to raise safety awareness and
demonstrate safety leadership.
Resourcing and recruitment
Agile working practices continue to be applied by our Resourcing
team with a rm emphasis on sourcing talent proactively, reducing
reliance on temporary agency labour, and maximising internal talent
development opportunities. As a result, we have continued to
successfully attract, engage and recruit a large number of employees
across all areas, despite ongoing challenges regarding candidate
shortages across all sectors, signicantly reducing time to hire and
costs accordingly. We offer tailored recruitment solutions to meet each
challenge and maximise every opportunity to select and engage the
best available talent.
We continue to identify and engage new technologies to embed
innovative, efcient and cost-effective resourcing and recruitment
solutions to meet business needs. This includes new technologies
such as digital hiring events and pay-per-click campaigns, while
applying new technologies such as digital Right-to-Work checks,
digital employment contracts and digital onboarding, in order to secure
and onboard new employees efciently. In addition, we continue
to upskill our hiring manager population with recruitment training
andsupport.
Induction and retention
We have continued to drive several initiatives and actions, as part of
an employee value proposition, to drive improved employee wellbeing,
better pay and reward, successful recruitment and retention, and
career development opportunities for our colleagues. Over time, we
expect this strategy to drive year-on-year reductions in labour turnover,
so that we both attract and retain the talent we need.
During the year, we held Branch Manager listening groups across
our branch network that provided rst-hand insight into ways to help
improve induction and training within the branch teams which resulted
in the creation of:
• An improved ‘SharePoint’ site – internal website to help branch
teams operate effectively.
• ‘Network Essentials’ – induction workbook to help inform new
colleagues.
• ‘Branch Rituals and Routines’ – operational processes to help
colleagues meet and exceed standards.
• ‘The Big Red Product Book’ – product reference guide to all
products available to customers.
Also, to support these initiatives, we have been focusing on the
simplication of systems and processes, improvement of staff welfare
areas, as well as pay and reward and training.
We know how important it is to ensure that we recruit and retain the
right person for the right role and ensure that all new starters receive a
supportive and comprehensive induction. This, in addition to training
tools being available and utilised by the branch teams, will help to build
condence and connectivity within the business.
Incentives and benets
Every employee has access to a variety of benets that will support
them both inside and outside of work. Our total reward strategy
ensures that all employees are eligible for a range of incentives that
include a dened-contribution pension scheme, life insurance, Save
as You Earn (‘Sharesave’) schemes, and access to a range of savings
and special offers through our Eurxtras platform.
Eurxtras was re-designed and relaunched in 2022 in order to make
it a more comprehensive platform than just a savings portal – it now
provides employees with information on health and wellbeing, a means
of communicating to our colleagues and an opportunity for managers
and employees to recognise others.
New pay structures were launched in April 2022, following a
detailed review of the levels of pay and reward in our branch-based,
manufacturing and warehousing teams, and has resulted a continued
reduction in labour turnover since. This initiative supported our
continued commitment to our employees, to help drive retention
andplace us in the best position to attract the best people, with
theright skills and knowledge into our business.
Eurocell plc Annual Report and Accounts 202258
RESPONSIBLE BUSINESS CONTINUED
Diversity and inclusivity
We recognise the benets of encouraging diversity and inclusivity
across the business and believe that this will contribute to our
continued success.
In keeping with our commitment to equal opportunity and, irrespective
of any disability, we treat all employees and job applicants equally,
without bias or discrimination and our recruitment policy ensures that
full and fair consideration is given to all applicants based purely on
their aptitude. All appointments are made based on merit and are
measured against specic objective criteria, including the skills and
experience needed for the position.
We continue to promote exible solutions tailored to, and supportive
of, individual needs. Our internal processes support all employees who
may require help and support, including employees who are disabled/
become disabled during their employment, to full their day-to-day
work activities through our occupational health provision. We provide
specic support for specic groups and individuals throughout our
business, including the provision of free English and maths tuition for
non-English speakers, access to mental wellbeing support and a free
employee assistance programme.
Whilst we operate in a historically male-dominated industry, we are
very committed to increasing the participation of women throughout
the Group. Our target is to deliver year on year increases in the
proportion of female employees in the Group. This was achieved in
2022, with female employees increasing to 15% (2021: 14%).
Following implementation of the new HR information system, we are
hoping to be able to also report on ethnicity data from 2023 onwards.
However, we acknowledge that our people have no legal obligation
to provide this information and therefore this data may be limited to
certain employees.
2022 Gender analysis* Male no. %
Female
no. %
Total
average
no.
Directors 6 75% 2 25% 8
Executive
Committee 5 83% 1 17% 6
Other senior
management 27 69% 12 31% 39
Senior
management 38 72% 15 28% 53
Other employees 1,868 85% 329 15% 2,197
Total 1,906 85% 344 15% 2,250
* 2022 excludes Security Hardware as the business was sold on 2 December 2022.
The comparative period includes Security Hardware.
Wellbeing
We carried out another staff ‘Pulse’ survey in 2022, following its initial
launch in 2021, to provide colleagues with the opportunity to tell us
how they feel.
KPI 2022 2021 Change
Response rate 69% 60% 9%
Employee satisfaction 77% 68% 9%
Encouragingly, both the response rate and, more importantly, the
Employee satisfaction rate saw an overall increase and the results of
the survey have been used to signpost our people strategy along with
building action plans based on the detailed colleague feedback.
In addition, colleague focus groups with the designated Non-executive
Director, Alison Littley, have now started to ensure workforce views
are heard by the Board. These sessions have received a very
positiveresponse.
We have continued to support hybrid and other exible working
practices where appropriate. The ability for some employees to work
from home, coupled with some exibility in working hour patterns, has
provided the business with enhanced coverage through the working
day and helped a large number of colleagues strike an improved work-
life balance.
In recognition of the economic pressures our employees may be
experiencing, we are continuing to provide tips for staying resilient
and healthy through our Eurxtras platform. This includes information
about getting professional advice through the Employee Assistance
Programme (‘EAP’), the Samaritans, Shout and Mind UK.
Furthermore, we have introduced an enhanced occupational
health provision, which provides additional support to employees
experiencing mental health issues, trauma and bereavement. We also
plan to further improve our occupational health provision in 2023, with
more targeted health surveillance, along with the introduction of a
healthcare cash plan for all employees.
TELL US
HOW YOU
FEEL
Dear Colleague,
Eurocell Pulse Survey 2022
Please tell us what it’s like working here.
We’ve made some great progress because of the feedback you gave us
last year and we want to continue to improve your work experience.
It will only take 5 minutes and is completely anonymous so be honest.
(CTA – visit xxxx to complete)
Many Thanks
Bruce Stephens
HR Director
SURVEY IS LIVE SUNDAY 19TH JUNE 2022
UNTIL FRIDAY 8TH JULY 2022
VALUING
OUR PEOPLE
CONTINUED
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Eurocell plc Annual Report and Accounts 2022 59
2021 Gender analysis Male no. %
Female
no. %
Total
average
no.
Directors 5 83% 1 17% 6
Executive
Committee 6 86% 1 14% 7
Other senior
management 26 70% 11 30% 37
Senior
management 37 74% 13 26% 50
Other employees 1,816 87% 277 13% 2,093
Total 1,853 86% 290 14% 2,143
Leadership and Management Development
In 2021, we developed our rst framework for Leadership and
Management Development and during 2022 we have continued to
bring to life various activities, resources and programmes to enable our
people to develop critical leadership and management skills. These are
described in the following paragraphs.
Manager’s Toolkit – for all managers across
thebusiness
Originally called the People Toolkit, the Manager’s Toolkit has had a
rebrand this year and continues to provide managers with a one-
stop-shop of information to help them complete everyday people
management activities. The toolkit contains owcharts of processes,
forms and step by step self-help guides.
Additionally, this year, we have piloted half-day workshops to help
managers make full use of the toolkit resources. The pilots have
covered how to conduct investigations, managing underperformance
and how to manage absence. We plan to run similar sessions in other
management toolkit topics in 2023 and have a full programme of
workshops from April onwards.
‘Lead’
Middle Manager ‘Develop’ Level 5
First Line/Team Leader ‘Grow’ Level 3
Aspiring Managers ‘Step Up’ Level 2
New Managers ‘Managers Induction’
Manager’s Toolkit ‘how to’
resources and workshops
Leadership Development Programme
In August 2022, our initial Leadership Development Programme
within the Building Plastics division concluded, with nine colleagues
successfully completing the programme. Of those nine colleagues,
four have subsequently been promoted and the others are all involved
in important cross-functional projects to support the business. The
plan is to drive forwards with this programme into 2023 and beyond
with further cohorts from across the business.
Regional Managers Development Programme
In September 2022, we also launched a Regional Operations
Manager Development Programme. In collaboration with a third
party training provider, we have created a bespoke programme to
support the development of Regional Operations Managers in leading
teams, supported with coaching sessions delivered by the divisional
HRBusiness partners.
Eurocell plc Annual Report and Accounts 202260
RESPONSIBLE BUSINESS CONTINUED
Aspire2b Supply Chain Warehouse
OperativeProgramme
One of our new bespoke in-house apprenticeship programmes is the
Aspire2b Supply Chain Warehouse Operative Programme which
commenced in September 2022.
This level 2 programme is a collaboration between the warehouse
management team, our in-house Learning and Development and our
external apprenticeship provider. Running over 12 months, it is for
existing warehouse operatives who have a passion to develop their
careers with us.
The programme provides structured, job-relevant training to develop
existing and new skills in a variety of warehouse activities. Participants
will also brush up their English and maths, and our rst cohort of
seven participants will gain level 2 qualications, demonstrating their
competence using industry recognised systems.
We plan to run further cohorts in 2023 and to explore Aspire2b
programmes for other business critical roles.
Cyber security training
During 2022 we rolled out an extensive programme of mandatory
cyber security training to all colleagues in a series of monthly short
videos and quizzes covering a range of security threats and ways to
mitigate the risks.
Alongside the training, we continue to run simulations to test
colleague’s responses to potential cyber-attack routes and, where
appropriate, held follow-up sessions which covered an in-depth
discussion about the risks, how to spot them, how to mitigate
them and why this is so important to get right. Feedback has been
overwhelmingly positive.
Aspire2b a qualified supply chain warehouse operative?
The Aspire2b Eurocell development programme is for
new and existing warehouse operatives who have a
passion to meet customers’ expectations by providing a
quality service that encourages repeat business.
What it is:
Structured job-relevant training to develop existing and new skills
in a variety of warehouse activities.
Personal and professional development.
A qualification proving your high competence in using industry
recognised systems.
Time to train given within your existing work hours.
It will enable you to:
Enhance your current skills.
Share best practice with your colleagues.
Get noticed as someone who wants to progress and develop.
Build yourself, build your team, build the business.
What we require of you:
Maths and English level 1 or equivalent and prepared to complete
functional skills as part of the programme if required.
Want to progress, willing to put in the effort and be stretched out
of your comfort zone.
Able to use a laptop for elearning and online portfolio systems.
Gain internal recognition and a nationally
recognised industry qualification.
12 month programme
+ individual work assignments
+ end point assessment.
Qualification on successful completion
Level 2 Supply Chain Warehouse Operative.
How the programme works
Apply now!
Speak with your line manager for more information and
Learning and Development
Apprenticeships
We continue to utilise the Apprenticeship Levy, with two new bespoke
apprenticeship programmes commencing for the rst time this year:
‘Grow’ and ‘Aspire2b’.
In addition, we had 32 individuals working through their
apprenticeships in 2022, covering business relevant training
ranging from nance, manufacturing and engineering, maintenance,
procurement, learning and development and business administration.
Combined with our bespoke programmes, we had a total of 69 live
apprenticeships in the year, 68 of which are still with the business and
14 of which have already been promoted.
Due to its success in helping to retain and engage our people, in
addition to the positive impact on both the individuals themselves
and the business, we anticipate further growth in the use of
apprenticeships in 2023.
‘Grow’ programme for rst-line leaders/team leaders
Our new level 3 management development programme for team
leaders commenced this year, with a total of 31 team leaders enrolled,
primarily from the operations side of the business.
The 12-month programme is built around the Chartered Management
Institute (CMI) and Institute of Apprenticeships level 3 Standard,
leading to recognised management qualications that our people can
feel proud to have achieved.
The design and delivery is a collaboration between our external
apprenticeship provider and our internal Learning and Development
team, supported by line managers to reinforce and mentor throughout
the learning. The programme aims are to foster condence,
consistency and competence in self, team and business leadership.
VALUING
OUR PEOPLE
CONTINUED
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Eurocell plc Annual Report and Accounts 2022 61
Alzheimer’s Society
Our valued customer, A&B Glass reached
their 40th anniversary this year. In recognition
for their strong support over the years, they
asked that we make a donation to their
charity of choice. We were very pleased to
donate £20,000 to the Alzheimer’s Society
inDecember.
Cancer support
Staff at our Eurocell Recycle
Midlands site organised a
coffee morning and cake sale
to raise money for Macmillan
CancerSupport.
Harvest festival
Staff organised a collection of food and
essentials for local people inneed.
Local food banks
Several employees donated Asda
vouchers, provided as a Christmas
gift to all Eurocell employees,
to Hope Nottingham, a charity
which supports foodbanks around
Nottingham to provide food parcels
for those in need.
Children’s hospitals
Branch Sales Managers from the Skegness
and Scunthorpe branches ran 31km in
31days to raise funds for Great Ormond
Street Children’sHospital.
Muscular Dystrophy
Eurocell supported a charity golf day,
organised by a former employee, to raise
funds to help run a Midlands-based support
centre for muscular dystrophy.
Children’s sport
Eurocell sponsored Stanton Ilkeston U11s
football team with new kit for the whole team.
Local hospitals
Staff at our Alfreton Head Ofce,
manufacturing and warehousing facilities
donated Christmas presents to children
spending the festive period in local
Derbyshirehospitals.
Community and charity
Our manufacturing and recycling centres, warehouses and branches
can have a signicant impact on, and benet from, the communities
in which we operate. We believe it is important to support the
communities local to our sites.
WORKING RESPONSIBLY
WITH COMMUNITIES AND
OTHER STAKEHOLDERS
Eurocell plc Annual Report and Accounts 202262
RESPONSIBLE BUSINESS CONTINUED
Suppliers
Ethical and sustainable sourcing
We are committed to the continuous development of supplier
relationships, that support our ethical, and sustainability expectations;
working in partnership to deliver a responsible value chain. Eurocell
is committed to building relationships with partners that support and
evolve with us, as we form the basis of our commitment to responsible
sourcing. To support this we have established supplier pre-
appointment checks to evaluate the environmental and humanitarian
impact of our products and supplier base.
As part of our continuing commitment to legal compliance and
protecting our environment we ensure that all relevant raw material
suppliers are compliant with current regulatory and industrial
standards. This includes compliance with the Registration, Evaluation,
Authorisation and Restriction of Chemicals regulation (‘REACH’). We
continually monitor supplier performance to ensure they meet our
quality and environmental standards.
We are also committed to paying our suppliers on time in accordance
with agreed terms of business. We have a loyal supplier base, of which
a signicant majority have been suppliers to Eurocell for many years.
All supply and tender agreements include the following statement:
“The supplier advocates the principles of Corporate Social
Responsibility and requires a serious approach to Sustainability
(including Economic, Social and Environmental considerations)
issuesfrom its value chain and partners.”
In addition, all our suppliers are required to conrm their commitment
to:
• Protecting the environment as it relates to these activities at a
global and local level.
• Respect for fundamental human rights.
• Enforce ethical and legal trading rules with regards to anti-bribery
and corruption.
• A system of internal and external reporting which matches
espoused values.
• A proactive approach to the innovation of sustainable practices
andproducts.
• Recognition that all businesses have a responsibility to be a good
neighbour and accept their active role within the communities
inwhich they operate.
• An ethical approach to managing and maintaining all purchasing
activities.
Our Head of Procurement is tasked with overseeing and managing
supplier relationships and a value chain that delivers shared value, in
an ethical and sustainable manner.
Customers
Customer services
We operate with a customer centric focus and therefore make
customer service a priority and support our customers in a number
ofways including:
Order processing
We have a dedicated team who process and check customer orders
for accuracy to ensure they receive the right goods at the right time.
We have recently successfully implemented automated ordering
processes, which now accounts for c.67% of all orders received,
andhas signicantly reduced the number of processing errors.
Issue resolution
When customers raise an issue, it is categorised in relation to the
impact for the customer, with actions taken to resolve within agreed
timeframes. As part of our issue investigation process, we conduct
thorough root-cause analysis to determine how the issue arose, the
underlying causes and how we can mitigate or eradicate the issues
going forward.
Relationship management
All of our customers now have a dedicated Relationship Coordinator
at Eurocell, who conducts regular reviews of our performance with our
customers, providing a more proactive and personalised service.
Quality
In terms of quality, our focus has been on implementing key principles
of quality management and measuring systems. These are captured
in our customer-focused Quality Policy Statement and Commitment,
which reects the way we aspire to work at Eurocell.
Policy statement and commitment
At Eurocell we believe that achieving the highest standards of
productand service quality is essential to our continuing success
asamarketleader.
Our quality aim is simple: to totally satisfy our customers. Our vision for
quality is to create an operation in which we get things right rst time,
every time. These commitments are critical to our continuing success
and a key element of our corporate value of putting our customer rst.
We can only achieve our vision if every person in the company
commits to playing an active role in improving the quality of our
products and services; and to fullling their responsibilities.
We will continually work to improve our performance and ensure
compliance with ISO9001 and the other quality standards to which
we are accredited. We will operate clearly dened systems and
procedures and will work closely with our customers to address
concerns and resolve complaints. We will also provide the necessary
instruction, training, guidance and commitment to ensure that all
colleagues are able to play their part in continually raising Eurocell
standards of product and service quality performance.
WORKING RESPONSIBLY
WITH COMMUNITIES AND
OTHER STAKEHOLDERS
CONTINUED
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Corporate
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Financial
Statements
Eurocell plc Annual Report and Accounts 2022 63
Modern slavery
We are absolutely committed to preventing slavery and human
trafcking in our business activities, and to ensuring that our supply
chains are free from these practices.
We prioritise the identication of modern slavery risks and will take
action to prevent slavery and human trafcking in all our operations.
We conduct an ongoing review of our suppliers to identify any potential
risks and carry out further assessments and audits where these are
deemed necessary and reserve the right to deselect any supplier
found in breach of this law.
Our full Anti-Slavery and Human Trafcking Statement is published on
our website at investors.eurocell.co.uk.
Government
Taxation
The Fair Tax Mark is an independent certication scheme, which
recognises organisations that demonstrate they are paying the right
amount of corporation tax in the right place, at the right time.
Since August 2019, we have been certied as an accredited Fair Tax
Mark business, following successful assessments against the Fair Tax
Mark criteria.
We recognise the responsibility we have to our stakeholders and
communities to set the highest standards of corporate conduct and
paying the right amount of tax in the right place is fundamental to this.
The ability to measure ourselves against an independent benchmark,
like the Fair Tax Mark, allows us to continually improve the quality of
information that we provide to our investors, employees, suppliers
andcustomers, and assists us in creating a fair and successful
business environment.
Eurocell plc Annual Report and Accounts 202264
RESPONSIBLE BUSINESS CONTINUED
LOOKING TO A
SUSTAINABLE FUTURE
Throughout this Responsible
Business section, we have
described the work currently
in progress to achieve our
objective of continually
improving all aspects of the
sustainability of the Group.
Carbon, energy and water efciency
As described elsewhere in this Responsible Business section, reducing
our carbon footprint and increasing our energy efciency has many
benets, including cost reduction, and mitigates several business risks,
including regulatory compliance.
Our existing published target for Scope 1 and 2 emissions is to reduce
our greenhouse gas emissions intensity ratio by 5% per annum and
our energy consumption intensity ratio by 5% per against the 2020
base. We believe this is a challenging but realistic target up to 2025.
Thereafter, we will aim to set science-based targets to ensure a clearly-
dened path to reduce emissions, so far as practicable, in line with the
Paris Agreement and the UK Government’s aspirations, which are as
follows (relative to a 2014 baseline):
• 68% reduction by 2030.
• 78% reduction by 2035.
• Net zero by 2050.
Along the way, we aspire to achieve carbon neutrality as part of the
pathway to a 2035 target.
Our key initiatives designed to reduce Scope 1 and 2 emissions
include:
• On-going replacement of PVC extruder eet with modern, more
efcient plant and equipment.
• Progressive conversion of mobile plant and company vehicles to
electric power.
• Investment in on-site energy generation, with the addition of solar
panels to the roof of our largest manufacturing sites.
• Development of staff engagement plans, training, workshops
and appointment of site champions, to drive reduced energy
consumption at a local level.
• Continuing to increase the proportion of renewable energy used.
We will continue to develop and rene these and other initiatives, to
support the journey to carbon neutrality and net zero for Scope 1 and
2 emissions.
In order to provide more timely information on our carbon emissions
and energy usage, in 2023 we plan to invest in enhanced metering
and data analytics technology.
In addition, we are working with suppliers and sector partners to
better understand and improve Scope 3 emissions, including the
potential for using increasing quantities of bio-attributed PVC resin in
the production of our extruded proles (see Responsible PVC sector
on page 54).
We are also reviewing initiatives to improve our existing closed-loop
water cooling systems.
Strategic
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Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 65
Waste minimisation and circularity
Our focus here is on further strengthening our materials recovery and
process optimisation, driving leaner and more sustainable resource
use over time. Similar to reducing our carbon footprint, this will also
lead to lower costs and tighter regulatory compliance. We have now
dened our targets as follows:
• 2% per annum increase of waste recycled (resulting in 88% by
2025), then reducing to 1% per annum thereafter (resulting in 93%
by 2030).
• No more than 5% of waste to landll by 2025 and 1% by 2030.
We also intend to develop a number of Environmental Product
Declarations (‘EPDs’) to build our understanding of the environment
lifecycle impacts of our key products, with the rst two for major
product lifecycle assessments to be completed in 2023.
Key to achieving these targets are:
• A strong sustainable procurement strategy and supplier risk
assessment, covering ethical sourcing of raw materials, traded
goods and consumables.
• Partnerships with the right waste services providers, to optimise
end to end material recovery.
• Reduced use of packaging, including quantity and use of
virginmaterials.
• Continued investment in machinery and processing for the
recycling plants to improve material recovery.
• On-going investigation of alternate usage for recycling by-products.
In addition to meeting our waste minimisation targets, we believe
successful delivery of these (and our carbon footprint) objectives will
be attractive to customers and thereby support our strategic priority
togrow market share.
People and places
The events of the last three years, including the impact of the
COVID-19 pandemic, have served to increase our focus on employee
wellbeing, including mental health, hybrid working, diversity and fair
wages. We will also continue to develop and refurbish our facilities
and step up our community and charitable engagement, focused
on causes that our employees have told us are important to them.
Our aim remains to become the regional employer of choice in the
communities in which we operate, with lower labour turnover and
improving employee retention.
More information on our main initiatives in this area, including those
which look to the future, are set out in the Valuing Our People
section on pages 56 to 63. Our work recognises that a good ESG
story is becoming increasingly important to existing and potential
new employees, alongside other key stakeholders (e.g. suppliers,
customers, investors and banks).
Governance
We described on page 46 that in 2022, the Group’s Social Values and
ESG Committee was formed to ensure these matters are considered
properly by the Board, further strengthening governance in this area.
The purpose of the committee is to provide formal and transparent
oversight of the Group’s ESG programme. This includes sustainability,
employee welfare and responsible business practices, as well as our
contribution to the societies we operate in.
As set out earlier in this Responsible Business section, we continue to
report our progress against our published ESG targets and KPIs on
an annual basis and will now develop our reporting against the most
appropriate SASB standards applicable to Eurocell.
Leading UN Sustainable Development Goals
forEurocell
v
Eurocell plc Annual Report and Accounts 202266
CHIEF FINANCIAL OFFICER’S REPORT
SOLID
FINANCIAL
RESULTS
“The business overcame
signicant challenges in
2022 to deliver solid results
for the nancial year.”
Michael Scott
Chief Financial Ofcer
v
Eurocell plc Annual Report and Accounts 2022 67
Financial
Statements
Corporate
Governance
Strategic
Report
Introduction
The business overcame signicant challenges in 2022 to deliver solid
nancial results for the year, with, on a continuing basis, sales of £381.2
million up 12% and adjusted prot before tax of £28.7 million up 4% on
2021. We also took decisive action to prepare the business for 2023,
with the completion of a restructuring programme and disposal of
Security Hardware. Reported prot before tax was £26.2 million (2021:
£27.7 million), stated after the cost of the restructuring programme.
After a strong rst half, our markets began to slow down in H2,
particularly smaller discretionary RMI work. However, the inationary
environment continued throughout the year, and whilst we continued
to offset input cost ination with selling price increases and surcharges,
we experienced margin pressure in the second half, reecting lower
volumes and not all cost ination being fully recovered until early in
2023, when additional selling price increases were implemented.
As reported at the Half Year, we experienced a cyber incident
towards the end of July, which resulted in some temporary disruption.
The incident was efciently resolved, with the business remaining
operational throughout and trading normally from mid-August. We
have now partially resolved our cyber insurance claim and recognised
compensation of £1.1 million as underlying other income in our
2022 nancial statements, primarily for business interruption. Work is
ongoing with the insurer to resolve the remaining aspects of the claim.
In anticipation of weaker markets in 2023, we completed a
restructuring programme in Q4 2022, which along with other cost
saving measures, will reduce operating costs by approximately
£5million per annum from the start of 2023. The programme included
a headcount reduction and closure of ve underperforming branches.
The costs associated with this restructuring have been classied as a
non-underlying item.
Following a review, and to further streamline the business, in
December 2022 we completed the sale of Security Hardware to UAP
Limited for a total consideration of £1.2 million. Security Hardware has
been classied as a discontinued operation, as it represents a major
line of business, is material and was an operating segment (reported
as part of the Building Plastics division). Discontinued operations are
excluded from the results of continuing operations and are presented
in the income statement as a single amount as prot or loss after tax
from discontinued operations. The loss after tax from discontinued
operations was £2.3 million, comprised of a trading loss of £1.1 million
(inclusive of costs incurred to prepare the business for sale) and a loss
on disposal of £1.2 million.
Revenue
Revenue for 2022 was £381.2 million, 12% higher than 2021 (£339.8
million), with price the signicant driver of sales growth.
Group
2022
£m
2021
£m
Revenue 381.2 339.8
Gross prot 184.5 172.1
Gross margin % 48.4% 50.6%
Overheads (130.4) (119.7 )
Other income
3
1.1 —
Adjusted
1
EBITDA 55.2 52.4
Depreciation and amortisation (23.9) (22.7)
Adjusted
1
operating prot 31.3 29.7
Finance costs (2.6) (2.0)
Adjusted
2
prot before tax 28.7 27.7
Taxation (4.7) (6.1)
Adjusted
2
prot after tax 24.0 21.6
Adjusted
2
basic EPS (pence) 21.4 19.4
Non-underlying overheads (2.2) —
Non-underlying nance costs (0.3) —
Tax on non-underlying items 0.5 —
Reported operating prot 2 9.1 29.7
Reported prot before tax 26.2 27.7
Reported prot after tax 22.0 21.6
Loss after tax from discontinued operations (2.3) (0.5)
Reported basic earnings per share (pence) 19.6 19.4
Prot for the year 19.7 21.1
1 Results are stated on a continuing basis i.e. before discontinued operations (see below).
2 See alternative performance measures.
3 Other income is amounts received under the Group’s cyber insurance policy, net of excess paid, in respect of business interruption to the Group’s continuing trading
activities as a result of a cyber incident in July and August 2022.
Eurocell plc Annual Report and Accounts 202268
CHIEF FINANCIAL OFFICER’S REPORT CONTINUED
Gross margin
Gross margin for the year was 48.4%, down from 50.6% in 2021.
Asdescribed above, we experienced margin pressure in the second
half, reecting lower volumes and not all cost ination being fully
recovered until early in 2023. However, the cost of key raw materials
does now appear to be stabilising, and in some cases beginning tofall.
Distribution costs and administrative expenses
(overheads) and other income
Underlying overheads were together £130.4 million, up 9% on 2021
(£119.7 million) reecting the impact of ination on our cost base.
Other income is the amount received under our cyber insurance policy
in compensation for business interruption (lost sales) suffered due to
the cyber incident in July and August.
Depreciation and amortisation
Depreciation and amortisation was £23.9 million compared to
£22.7million in 2021.
Alternative performance measures
Alternative performance measures are used alongside statutory
measures to facilitate a better understanding of nancial performance
and comparison with prior periods, and in order to provide audited
nancial information against which the Group’s bank covenants, which
are all measured on a pre-IFRS 16 basis, can be assessed.
Adjusted EBITDA, adjusted operating prot and adjusted prot before
tax all exclude non-underlying items. Adjusted prot after tax and
adjusted earnings per share exclude non-underlying items and the
related tax effect.
Pre-IFRS 16 EBITDA is stated inclusive of operating lease rentals
under IAS 17 Leases. Pre-IFRS 16 net debt is dened as total
borrowings and lease liabilities less cash and cash equivalents,
excluding the impact of IFRS 16 Leases.
We classify some material items of income and expense as
non-underlying when the nature and infrequency merit separate
presentation. Alongside statutory measures, this facilitates a better
understanding of nancial performance and comparison with
priorperiods.
Non-underlying items
Non-underlying items for 2022 of £2.5 million included restructuring
costs of £2.2 million, comprising £1.6 million of redundancy payments
and £0.6 million of asset impairment charges. Also included are
nance costs of £0.3 million arising as a result of the renancing of our
Revolving Credit Facility in May (see below).
No non-underlying items were recognised in 2021.
Finance costs and taxation
Underlying nance costs for 2022 were £2.6 million, compared to £2.0
million in 2021. Total nance costs of £2.9 million include £0.3 million
of unamortised borrowing costs expensed to the Consolidated Income
Statement following the renancing of the Group’s Revolving Credit
Facility (see below).
The underlying tax charge for 2022 was £4.7 million (2021: £6.1
million). The effective tax rate on underlying prot before tax for 2022 of
16.4% is lower than the standard rate of corporation tax of 19% due
to the benet of Patent Box relief.
We were pleased to retain the Fair Tax Mark accreditation in 2022,
reecting our commitment to paying the right amount of tax at the
righttime.
Prot before tax and earnings per share
Adjusted prot before tax for the year was £28.7 million compared to
£27.7 million in 2021, up 4% reecting lower sales volumes (including
the impact of the cyber incident), cost control, operating efciencies
and the recovery of signicant cost ination.
Reported prot before tax in 2022 was £26.2 million (2021:
£27.7million), reecting the above, and £2.5 million of non-
underlyingitems.
Adjusted basic earnings per share for the year were 21.4 pence (2021:
19.4 pence), reecting the increased protability and lower tax charge.
Adjusted diluted earnings per share for the year were 21.3 pence
(2021: 19.3 pence). Total basic and diluted earnings per share were
19.6 pence and 19.5 pence respectively (2021: 19.4 pence and 19.3
pence respectively).
Dividends
We paid an interim dividend of 3.5 pence per share in October 2022
(£3.9 million). The Board proposes a nal dividend of 7.2 pence per
share (2021: 6.4 pence per share), which results in total dividends for
the year of 10.7 pence per share, or £12.0 million, up 11% (2021: 9.6
pence or £10.8 million). This reects our solid nancial performance
and a lower tax rate in 2022. The dividend will be paid on 17 May
2023 toShareholders registered at the close of business on 21 April
2023. The ex-dividend date will be 20 April 2023.
Retained earnings as at 31 December 2022 were £91.7 million
(2021:£83.1 million). The Company takes steps to ensure distributable
reserves are maintained at an appropriate level through intra-Group
dividend ows.
Capital expenditure
Capital expenditure for 2022 was £12.3 million (2021: £16.7 million).
2022 includes c.£4 million to expand manufacturing capacity across
a number of key product lines and c.£2 million for IT infrastructure
improvements, our new website and HR information system, both
of which will be launched in the rst half of 2023. The remaining c.£6
million relates mostly to maintenance capex, and includes warehouse
improvements, branch refurbishments and critical spares in recycling,
as well as solar panels for our primary manufacturing facilities.
Cash ow
Net cash generated from operating activities was £35.1 million (2021:
£29.6 million).
A net outow from working capital for 2022 of £13.1 million includes
the substantial impact of ination (c.£8 million net across all working
capital components). The outow is comprised of an increase in
stocks of £5.7 million, an increase in trade and other receivables of
£5.6 million and a decrease in trade and other payables of £1.8 million.
For stocks, the ination impact alone is c.£7 million. This compares to
a net outow from working capital of £19.4 million in 2021, which also
included a signicant inationary component (c.£8 million).
Strategic
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Corporate
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Financial
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Eurocell plc Annual Report and Accounts 2022 69
Cash Flow (£m)
60
50
40
30
20
10
0
-10
Adjusted
EBITDA
Financing/
shares
issued
55.2 (13.1)
(1.3)
(1.6)
(12.4)
35.1
1.1
(1.4)
(19.7)
(11.1)
(8.4)
(4.1)
Working
capital
Security
Hardware
trading
loss
Non-
underlying
items
Tax and
other
Leases
(non-cash)
Net cash
from
operating
activities
Sale of
Security
Hardware
Dividends
paid
Capex Change
in net
debt
Adjusted Operating Profit (£m)
34
32
30
28
26
24
22
20
2021
29.7
(1.5)
3.5
1.5
(0.1) 0.4 (1.2)
31.3
(1.0)
Vol/price/
cost/cyber
(net)
Variable
labour
costs
Operating
efciences
RecyclingBad
Debts
New
branches
Depreciation 2022
Sales (£m)
400
350
300
250
200
150
2021
339.8 (0.3) (3.3)
48.6
(3.6)
381.2
Proles
volume
Building
Plastics
volume
Sales price
increase and
surcharges
Impact
of cyber
incident
2022
Other items include payments for capital investments of £12.4 million
(2021: £15.5 million), net proceeds from the disposal of Security
Hardware of £0.3 million and nancing costs paid of £1.2 million
(2021: £0.6 million). Tax paid in the year was £3.6 million (2021:
£3.5 million). Dividends of £11.1 million were paid in the year (2021:
£3.6million).
The principal elements of lease payments of £13.3 million (2021:
£10.1million) are presented within cash ows arising from nancing
activities. The nance elements of lease payments were £1.4 million
(2021: £1.2million).
Net debt
Net debt on a pre-IFRS 16 basis at 31 December 2022 was
£14.4million (31 December 2021: £11.0 million).
Lease liabilities increased by £5.0 million. Reported net debt at
31 December 2022 was £78.1 million (31 December 2021:
£69.7 million).
2022
£m
2021
£m
Change
£m
Cash 5.1 6.6 (1.5)
Deferred consideration 0.8 — 0.8
Bank overdrafts — (5.9) 5.9
Borrowings (20.3) (11.7 ) (8.6)
Net debt (pre-IFRS 16) (14.4) (11.0) (3.4)
Lease liabilities (63.7) (58.7) (5.0)
Net debt (reported) (78.1) (69.7) (8.4)
Bank facility
We have an unsecured multi-currency Revolving Credit Facility (‘RCF’)
of £75 million. In May 2022 the Group renanced this facility, with
the key terms unchanged. The facility is held with Barclays Bank
plc, NatWest Bank plc and Bank of Ireland, and expires in May
2026. The facility is a Sustainable RCF, where modest adjustments
to the margin are applied based on our achievement against annual
targets for usage of recycling in our products, waste recycled and
carbonemissions.
We operate comfortably within the terms of the facility and in
compliance with our nancial covenants, which are measured on a
pre-IFRS 16 basis.
Michael Scott
Chief Financial Ofcer
Eurocell plc Annual Report and Accounts 202270
PRINCIPAL RISKS AND UNCERTAINTIES
Risk management is the responsibility of the Board and is a key factor
in delivering the Group’s strategic objectives.
Approach to Risk Management
The Board is responsible for setting the risk appetite, establishing a
culture of effective risk management and for ensuring that effective
systems and controls are in place and maintained.
Senior managers take ownership of specic risks and implement
policies and procedures to mitigate exposure to those risks.
Risk Management Process
The risk management process sits alongside our strong governance
culture and effective internal controls to provide assurance to the
Board that risks are being appropriately identied and managed.
How we manage risk
Risk is managed across the Group in the following ways:
• The Board meets annually to review strategy and set the
riskappetite.
• Risks faced by the Group are identied during the formulation of the
annual business plan and budget process, which sets objectives
and agrees initiatives to achieve the Group’s goals, taking account
of the risk appetite set by the Board.
• Senior management and risk owners consider the root cause of
each risk and assess the impact and likelihood of it materialising.
The analysis is documented in a risk register, which identies
the level of severity and probability, ownership, and mitigation
measures, as well as any proposed further actions (and timescale
for completion) for each signicant risk.
• The Group has an executive Risk Management Committee,
chaired by the Chief Financial Ofcer. This Committee meets
on a regular basis. The status of the most signicant risks and
mitigations are reviewed at each meeting, with other risks reviewed
at leastannually.
• The Executive Directors also meet with senior managers on
a regular basis throughout the year. This allows the Executive
Directors to ensure that they maintain visibility over the material
aspects of strategic, nancial and other risks.
• The Group’s Audit and Risk Committee assists the Board in
assessing and monitoring risk management across the Group. The
role of the Committee includes ensuring the timely identication and
robust management of inherent and emerging risks, by reviewing
the suitability and effectiveness of risk management processes and
controls. The Committee also reviews the risk register to ensure net
risk and proposed further actions are together consistent with the
risk appetite set by the Board.
Internal control
The Group has well-dened systems of internal control.
The Group has a robust process of nancial planning and monitoring,
which incorporates Board approval of operating and capital
expenditure budgets. Performance against the budget is subsequently
monitored and reported to the Board monthly. The Board also
monitors overall performance against operating, safety and other
targets set at the start of the year.
Performance is reported formally to shareholders through the
publication of results both annually and half-yearly. Operational
management regularly reports on performance to the
ExecutiveDirectors.
Day-to-day operations are supported by a clear schedule of authority
limits that dene processes and procedures for approving material
decisions. This ensures that projects and transactions are approved
at the appropriate level of management, with the largest and most
complex projects being approved by the Board. The schedule of
authority limits is reviewed on a regular basis so that it matches the
needs of the business.
The Group also has processes in place for ensuring business
continuity and emergency planning.
In order to further enhance the internal control and risk management
processes, KPMG provides an outsourced internal audit service to the
Group. KPMG work closely with the Risk Management Committee in
delivering the Group’s internal audit programme.
Identify risks
Quantify net risk
Identify any further
action required
Assess gross risk
Identify existing
mitigation
Monitor
and control
RISK MANAGEMENT
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Financial
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Eurocell plc Annual Report and Accounts 2022 71
Low Medium
High
Probability
0201
04
03
05
1411 12
16
06 08
10
13
07
09
17
15
18
Impact
Low Medium
High
09
10
11
12
13
14
07
15
18
08
16
17
Macroeconomic conditions
Sustainability, climate
change and natural disaster
Cyber security
Manufacturing capacity
constraints
Regulatory risks,
includinghealth & safety
Ability to attract and retain key
personnel and highly skilled individuals
Shortages or increased costs of
appropriately skilled labour
Failure to develop new products
Competitor activity
Fraud
Failure to identify, complete and
integrate bolt-on acquisitions
Digital and IT system development
Raw material supply
Unplanned plant downtime
Warehousing and distribution
capacity constraints
Raw material and traded
goods pricing
06
Recycling feedstock
supplyand pricing
Customer credit risk
Principal risks
01
02
03
04
05
Eurocell plc Annual Report and Accounts 202272
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
The principal risks monitored by the Board are as follows:
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
MACROECONOMIC CONDITIONS
Our products are used in the
residential and commercial building
and construction markets, both within
the RMI sector, for new residential
housing developments and for new
constructionprojects.
Our private RMI business is strongly
correlated to the level of household
disposable incomes. Our new build
business is particularly inuenced
by the level of activity in the house
buildingindustry.
As such, our business and ability to fund
ongoing operations is dependent on the
level of activity and market demand in
these sectors, itself often a function of
general economic conditions (including
interest rates and ination) in the UK.
Government economic and social policy
can also have a signicant impact on
ourbusiness.
• Notwithstanding macro conditions,
we expect our strategic priorities and
self-help initiatives to support sales
and prot growth and drive good
cash conversion.
• Initiatives include: various initiatives
to win market share in Proles
and expand the Building Plastics
branchnetwork.
• We operate comfortably within the
terms of our bank facility and related
nancialcovenants.
• The UK is currently experiencing
signicant increases in the cost-
of-living, driven by essentials
such as gas and electricity and
food, with expectations of a
recession in 2023.
• CPA now forecasts the private
housing RMI market to fall by
9% in 2023 (at in 2022) and
new build to fall by 11% in 2023.
• Major UK lenders put a hold
on approving new mortgage
applications in September 2022
due to interest rate uncertainty.
Whilst these have now resumed,
rates remain signicantly higher
than previous levels.
• The UK base rate increased
signicantly throughout 2022
rising from 0.25% to 3.5% (and
4.0% in February 2023), with
rates unlikely to begin to fall
before the end of 2023.
• The rate of ination is
currently above 10% and
although this is expected to
fall in 2023 it remains above
historicaverages.
CYBER SECURITY
A breach of IT security (externally or
internally) could result in an inability
to operate systems effectively (e.g.
viruses) or the release of inappropriate
information (e.g. hackers).
• Ongoing investment in cyber risk
detection and prevention tools,
accelerated signicantly since the
cyber incident in July2022.
• New 2022 measures include
managed detection and response
(MDR), security instant event
monitoring (SIEM), privileged access
management (PAM) and rewall
hardening.
• Physical security of servers at third-
party off-site data centre, with full
disaster recovery capability.
• Password and safe-use policies in
place, internet usage monitored and
anti-malware used.
• External cyber review and internal
audit reviews conducted periodically,
resulting in signicant enhancements
in defence.
• Cyber awareness/IT security
campaign active for all employees.
• Financial crime protection and cyber
liability insurance in place.
• The Group experienced a cyber
incident in July 2022, causing
signicant disruption to our
operations.
• This remains a high-prole
area and continues to receive
considerable management
attention.
RISK MANAGEMENT CONTINUED
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Financial
Statements
Eurocell plc Annual Report and Accounts 2022 73
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
REGULATORY RISKS, INCLUDING
HEALTH & SAFETY
We may be adversely affected by the
crystallisation of unexpected corporate
or regulatory risks.
These include health & safety, data,
reputational and environmental risks
(including regulations related to our
recycling operations), or other legal,
taxation and compliance matters.
• Procedures and policies in place to
support compliance with all relevant
regulations.
• Regular communication and training
on policy compliance.
• Monitoring procedures in place,
including near miss and potential
hazard reporting for health &
safetymatters.
• A three-year health and safety
strategy was launched in 2022.
• Internal and third-party site audits to
assess compliance with our policies.
• Whilst national COVID-19
restrictions are no longer in
place we continue to operate in
a Covid-safe manner.
• More generally, recent
developments widen the scope
and increase the penalty regime
for breaches in these areas. For
example: Corporate Criminal
Offence of Failure to Prevent
the Facilitation of Tax Evasion
(‘CCO’) legislation and General
Data Protection Regulations
(‘GDPR’).
• Increased focus on the
regulatory environment, with the
implementation of reforms to
corporate governance following
the BEIS consultation.
RAW MATERIAL SUPPLY
There are only a limited number of PVC
resin and certain other raw material
suppliers, and we operate with limited
raw material storage capacity.
Failure to receive raw materials on a
timely basis could impact on our ability
to manufacture products and meet
customer demand.
• We mostly operate with at least two
suppliers for all critical raw materials,
including PVC resin, to support
security of supply.
• Ongoing raw material tests to identify
potential alternative suppliers,
resulting in several new approvals
in2022.
• A spot market exists for resin, that we
can access whenrequired.
• Contractual arrangements for certain
key suppliers include liquidated
damages for failure to supply.
• Regular reviews to evaluate nancial
stability of keysuppliers.
• Potential remains for increased resin
supply originating from the US to
come online and deliver into Europe.
• In 2021, high demand for
PVC put sector supply chains
under pressure. Issues were
exacerbated by a lack of sea
freight container capacity,
leading to increased freight
prices and sector-specic
material shortages. Through
2022 we have seen an easing in
supply chain pressures.
• Our recycling plants have
supported continuity of supply
of resin in tight markets.
• Due primarily to strong
relationships with our suppliers,
all of the raw materials and
traded goods we require were
secured throughout 2022,
although sometimes subject to
minor delays.
Movement key:
Increase No change Decrease
Strategic Priorities key:
Increase the use of
recycled materials
Expand the
branch network
Explore potential
bolt-on acquisitions
Develop a sector-leading
digital proposition
Target growth in
market share in Proles
Develop innovative
new products
Deliver sustained
operational excellence
Eurocell plc Annual Report and Accounts 202274
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
RAW MATERIAL AND
TRADEDGOODS PRICES
Our manufacturing operations depend
on the supply of PVC resin, a material
derivative of ethylene which in turn is a
derivative of crude oil.
The price of PVC resin can therefore
be subject to uctuations based on the
markets for crude oil and ethylene, as
well as the market for resin itself.
In addition, although we pay for resin
in Sterling, crude oil and ethylene
are priced in US dollars and Euros
respectively. As such, the price of resin in
Sterling is also impacted by international
currency markets.
Our ability to pass on resin and other raw
material or traded goods price increases
to our customers will depend on market
conditions at the time.
• We generally operate with at least two
suppliers for all critical raw materials
and traded goods, including PVC
resin, to provide competitive pricing.
• Where possible we pass through
raw material or traded goods price
increases to ourcustomers.
• Increasing the use of recycled
material in our manufacturing
partially mitigates exposure to resin
prices, although prices for recycling
feedstock can also bevolatile.
• We consider xed price supply
arrangements with suppliers where it
is economic to do so.
• We hedge our energy prices on a
rolling 12-month basis.
• Resin and other raw material
prices continued to increase
throughout 2022, due to a
combination of high demand
and the impact of war
inUkraine.
• We have mitigated raw material
cost ination to date with selling
price increases and surcharges.
• Energy prices increased
signicantly in 2022 and
are expected to remain
well above historical levels
throughout2023.
RECYCLING FEEDSTOCK
SUPPLYAND PRICING
The recycling feedstock supply market is
fragmented and can be unpredictable.
We may not be able to access sufcient
levels of feedstock to use within the
recycling operation.
This may result in paying higher prices
for additional virgin resin, and have a
negative impact on our sustainability
objectives.
• Procurement strategy in place to
ensure sufcient access to feedstock.
• Increased virgin resin prices give us
greater scope to pay higher prices for
feedstock.
• Increased competition for
feedstock during 2022 has led
to reduced availability levels and
increased prices.
• Reduction in RMI activity
in 2023 may further reduce
feedstock supply and
increaseprices.
• Developing rm plans to
secure new supply lines for
post-consumer and post-
industrialwaste.
CUSTOMER CREDIT RISK
Default by a large customer or multiple
smaller customers could result in a
material bad debt(s).
The loss of a major customer(s) could
limit our ability to continue to grow
thebusiness.
• Regular in-depth credit reviews for
existing and new customer accounts
with the involvement of relevant
Executive Committee members in
managing position on keyaccounts.
• Credit insurance in place to the extent
available for selected large accounts.
• Signicant inationary increases
in material prices, labour and
energy costs, as well as a
deteriorating economic outlook,
may place signicant nancial
pressure on some customers.
WAREHOUSING AND DISTRIBUTION
CAPACITY CONSTRAINTS
Similarly, demand running above our
warehousing capacity may also result
in inefciencies, customer service and
customer acquisition issues.
• We invested in a new warehouse,
commissioned in 2021, which
has signicantly increased our
warehousing capacity and is key to
delivering further improvements in
operational efciencies.
• Fit-out of the new warehouse and
transition completed in2021.
• Meaningful operational
efciencies are now being
realised, with more to come.
RISK MANAGEMENT CONTINUED
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Corporate
Governance
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 75
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
SUSTAINABILITY, CLIMATE CHANGE
AND NATURAL DISASTER
Demonstrating improving business
sustainability is becoming increasingly
important to all stakeholders.
We have built upon our published suite
of KPIs from 2021 and this year for the
rst time have included reporting against
SASB standards.
Failure to improve in all material
aspects of ESG (environmental, social,
governance) could lead to regulatory
and other challenges (e.g. employee
recruitment and retention).
If we do not deliver on our environmental
targets and in due course establish a
credible pathway to carbon neutrality
and net zero, investors and lenders may
show a preference to allocate capital
to businesses with better understood
climate impacts and a clear plan
toimprove.
• Strong underlying position on
sustainability underpinned by window
recycling operation, which drives
signicant carbon savings compared
to the use of virgin PVC resin.
• Publication of veried carbon savings
data for the rst time in the 2020
Annual Report.
• Investor and other stakeholder
feedback indicates published ESG
targets and KPIs have been well
received and understood.
• Task Force on Climate-related
Financial Disclosures (‘TCFD’)
introduced for the rst time in the
2021 Annual Report, including
consideration of climate-related risks.
• Reporting against SASB standards
for the rst time in2022.
• Appointment of a new
Environmental Sustainability
Manager and awarded the
FTSE Green Economy Mark
certication towards the end
of2021.
• Further progress on
development of Group-wide
sustainability strategy in 2022,
with long-term goals linked
to relevant UN Sustainable
Development Goals and the UK
Government’s transition towards
a net zero carbon economy.
• Further progress against dened
suite of environmental and
social targets and KPIs in 2022.
• Establishment of new ‘ESG and
Social Values’ Board committee
towards the end of 2022.
MANUFACTURING CAPACITY
CONSTRAINTS
Demand running above our
manufacturing capacity may result in
production-related inefciencies, as well
as customer service issues if a backlog
of customer orders develops.
A shortage of capacity may also prevent
the acquisition of new customers,
thereby limiting our ability to continue to
grow the business.
• Investments have increased
manufacturing capacity by c.40%
since 2018 and removed historic
constraints.
• Space is available in the current
footprint for a further increase beyond
that of around 15%.
• Productivity improvement plans have
been embedded and are actively
being tracked.
• Completion of the 2021/22
extrusion capacity expansion
has resulted in signicant
capacity headroom over
expected demand.
• The latest CPA forecasts predict
a decline in volumes in 2023,
further increasing capacity
headroom.
UNPLANNED PLANT DOWNTIME
The business is dependent on
the continued and uninterrupted
performance of our production facilities.
Each of the facilities is subject to
operating risks, such as: industrial
accidents (including re); extended
power outages; lack of access to power;
withdrawal of permits and licences (e.g.
the regulated operation of the recycling
facility); breakdowns in machinery;
equipment or information systems;
prolonged maintenance activity;
strikes or other extended workforce
absences; natural disasters; and other
unforeseenevents.
• Regular planned maintenance to
reduce the risk of plant failure,
including maintenance capital
investment of >£5 million per annum
across the Group.
• Extrusion facilities spread over three
manufacturing sites and recycling
facilities spread over two sites.
• Comprehensive Business Continuity
Plan (‘BCP’) in place.
• Critical spare parts are held on site to
reduce potential downtime.
• Continued maintenance
capital investment in the
extrusion facility, and in the
recyclingplants.
• Effectiveness of BCP tested
through the response to cyber
incident in 2022.
Eurocell plc Annual Report and Accounts 202276
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
ABILITY TO ATTRACT AND RETAIN
KEY PERSONNEL AND HIGHLY
SKILLED INDIVIDUALS
Our success depends, inter alia, on
the efforts and abilities of certain key
personnel and our ability to attract and
retain such people, with the appropriate
skills and experience.
• Developing a successful track record
and clear strategic direction provides
an attractive backdrop to joining the
senior team at Eurocell.
• Market rate compensation for all
personnel, including leadershipteam.
• Equity-based long-term incentive
plans in place for senior team, with
refreshedtargets.
• Progressive implementation of
people plan.
• Strengthened Operational
management in Manufacturing,
Recycling and Supply Chain.
• Critical role and employee
analysis performed, and action
plan implemented.
SHORTAGES OR INCREASED
COSTSOF APPROPRIATELY
SKILLEDLABOUR
We are subject to supply risks related to
the availability and cost of labour, both in
our manufacturing operations and in our
branch business. Our headquarters and
several manufacturing and operational
sites are located in areas of generally full
employment.
We may also experience labour cost
increases (including those related to the
National Living Wage) or disruptions
in circumstances where we have
to compete for employees with the
necessary skills and experience in tight
labour markets.
• People plan includes a number of
initiatives to support recruitment,
retention and reduce labour turnover.
• Plan also includes a focus on
improving employee engagement and
communication.
• Successful recruitment drive in H2
2021 replaced agency staff with
permanent employees, giving the
business the resources needed to
operate efciently and achieve our
growth ambitions.
• Annual SAYE share-save scheme
available to all personnel.
• Continued progressive
implementation of people plan.
• Resourcing, recruitment,
and on-boarding procedures
enhanced in 2022, along with
improvements to training
programmes.
• Pay and benets benchmarking
and review conducted in 2022,
with pay rates adjusted where
necessary to ensure we offer
market level or better salaries
and good benets package.
• Seventh SAYE scheme planned
for 2023.
FAILURE TO DEVELOP
NEWPRODUCTS
Failure to innovate could reduce our
growth potential or render existing
products obsolete.
The launch of new products and new
variants of existing products is an
inherently uncertain process. We cannot
guarantee that we will continuously
develop successful new products or new
variants of existing products.
Nor can we predict how customers and
end-users will react to new products or
how successful our competitors will be
in developing products which are more
attractive than ours.
• We invest continuously in research
and development through our in-
house team.
• The team is highly focused on new
ways to develop existing products
and to be innovative with new ones.
• Specic targets are in place looking at
the level of sales from new products.
• We collaborate with customers
and technical advisers on product
development.
• Recent successes include: ush
sash French doors, improved
conservatory roof and roof
lantern ranges and a further
extension to the outdoor living
product categories.
• New product introductions for
2023 include ‘extension kits’
and vertical cladding system.
COMPETITOR ACTIVITY
We have several existing competitors
that compete on range, price, quality
and service. Increased competition
could reduce volumes and margins on
manufactured and traded products.
• Strong market and customer
awareness, with good intelligence
around competitoractivity.
• Absolute focus on customer
proposition and points of
differentiation in product and
serviceoffering.
• We have developed a healthy new
customer pipeline.
• We believe we increased market
share in 2022 and have plans
to exploit our spare operating
capacity and capture further
share gains in 2023.
• Uncertain macroeconomic
outlook expected to be
a challenge for several
competitors, presenting a further
opportunity to grow share.
RISK MANAGEMENT CONTINUED
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Corporate
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Financial
Statements
Eurocell plc Annual Report and Accounts 2022 77
Principal Risk
and Impact
Strategic
Priorities Mitigation
Risk Change in
Reporting Period Movement
FAILURE TO IDENTIFY, COMPLETE
AND INTEGRATE ACQUISITIONS
We may not be able to identify
and complete appropriate bolt-on
acquisitions (one of our strategic
priorities).
Any future acquisition we do make poses
integration risks which may affect our
results or operations.
The acquisition and integration of
companies is a complex, costly and
time-consuming process involving
a number of possible risks. These
include diversion of management
attention, failure to retain personnel,
failure to maintain customer service
levels, disruption to relationships with
various third parties, system risks and
unanticipated liabilities.
• Good knowledge of companies
operating in our sector and related
sectors.
• Six acquisitions completed since our
IPO in 2015.
• Tried and tested procedure for the
integration of new acquisitions.
• Given the uncertain macro-
economic outlook, acquisitions
will not be a priority for 2023.
DIGITAL AND IT SYSTEMS
DEVELOPMENT
Stakeholders in most organisations
increasingly require full end-to-end digital
solutions, a trend exacerbated by the
COVID-19 pandemic.
Failure to develop a leading digital
proposition could lead to a competitive
disadvantage, hinder progression of
our other priorities and detract from
the supplier, customer, and employee
experience of working with Eurocell.
• We have a strategic priority to
develop a sector-leading digital
proposition.
• Three-year IT road map launched
in 2021, including signicant
investment in additional resources
and application landscape to support
development of business efciency
and digital proposition.
• During 2022 we developed
platforms for a new website,
product information
management system,
e-commerce solution and
employee management system.
• These new systems are an
important part of our digital
proposition, and all are expected
to launch in H1 2023.
FRAUD
We may be subjected to fraudulent
activity, either intentionally or
accidentally.
• Business sets a strong tone at the top.
• Controls set-up throughout the
company to both prevent and detect
any fraudulent activity.
• Asset protection team in place
performing regular reviews over the
branch network.
• With a declining economy and
weaker outlook for 2023, there
may be additional pressure
and incentive to perpetrate
fraudulent activity.
• Payment processes have been
substantially automated within
the year.
Eurocell plc Annual Report and Accounts 202278
VIABILITY STATEMENT
As required by section 4 of the
UK Corporate Governance Code,
the Directors have taken into
account forecasts to assess the
future funding requirements of the
Group, and compared them with
the level of committed available
borrowingfacilities.
Scenario 3
Scenario 1 and 2 combined
There is a possibility that both of the above scenarios could materialise
at the same time, therefore we have assessed the combined impact
through the three-year plan period.
The Board considers these tests to be sufcient to test the viability
of the Group given our size and the markets we operate within.
As described in Principal Risks and Uncertainties above, we have
measures in place to help mitigate the impact of these events should
they occur.
The Group has a £75 million Revolving Credit Facility. Monthly cash
ow projections show signicant headroom throughout the period to
December 2025. The facility includes standard covenants for leverage
and interest cover, which are measured twice per annum at June
and December. The projections also show good headroom on the
covenants at each measurement date to December 2025.
The Directors conrm that we have a reasonable expectation that
the Company and the Group will continue in operation and meet our
liabilities as they fall due in the next three years.
Going Concern
The Directors have reviewed the Company’s and the Group’s forecast
and projections, which demonstrate that the Company and the Group
will have sufcient headroom on our bank facilities for the foreseeable
future and that the likelihood of breaching the related covenants in this
period is remote.
Accordingly, the Directors continue to adopt the going concern basis
in preparing the Annual Financial Statements.
This Strategic Report was approved by the Board on 15 March 2023
and signed on its behalf by:
Mark Kelly Michael Scott
Chief Executive Ofcer Chief Financial Ofcer
A period of three years has been adopted as this is the time frame
used by the Board as our strategic and planning horizon. The
assessment of viability has been made with reference to the Group’s
current position and long-term future prospects, our strategy,
management of risk, and also the Board’s assessment of the outlook
in the marketplace, all of which are covered in detail within the
Strategic Report.
The Board considers its strategy and risks on strategy away-days, and
revisits these annually when considering the next year’s budget. The
three-year plan considers revenue and earnings growth and how this
impacts on cash ows and key ratios. Operational plans and nancing
options are considered as part of this process.
In preparing the plan, we adopt a prudent forecast in respect of
like-for-like sales growth, but assume other initiatives, in line with the
published strategy.
The plan is stress tested by applying the following plausible
downside scenarios:
Scenario 1
Macroeconomic conditions lead to a decline in sales
Decreases in revenues have been applied over the three-year
planperiod.
Scenario 2
Commodity prices and/or exchange rates or raw
material shortages lead to a sustained increase in
resinprices
Increases in resin costs have been applied over the three-year
planperiod.
Eurocell plc Annual Report and Accounts 2022 79
Financial
Statements
Corporate
Governance
Strategic
Report
Eurocell plc Annual Report and Accounts 202280
BOARD OF DIRECTORS
Frank Nelson
Senior Independent Non-executive
Director
Alison Littley
Independent Non-executive Director
Martyn Coffey
Independent Non-executive Director
Michael Scott
Chief Financial Ofcer
Iraj Amiri
Independent Non-executive Director
Derek Mapp
Non-executive Chair
Mark Kelly
Chief Executive Ofcer
Kate Allum
Independent Non-executive Director
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 81
Corporate
Governance
Strategic
Report
Committee key:
Member of the Audit and Risk Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Denotes Committee Chair
Derek Mapp
Non-executive Chair
Date of appointment:
16 May 2022 (Chair from 1 July 2022)
Experience:
Derek is an experienced chair and has a wealth of
commercial and operational knowledge. Previously,
he was Chair of Informa plc from March 2008 until
his retirement in June 2021 and was also Chair of
Huntsworth plc from December 2014 to March
2019. Prior to that, Derek was Chief Executive
Ofcer of Tom Cobleigh plc, Executive Chair of
Leapfrog Day Nurseries Limited, Chair of East
Midlands Development Agency and Sport England
and also served on a number of Government
agencies and boards.
External appointments:
• Chair of Mitie Group plc (FTSE 250)
• Director of several private companies which
relate tohis other business interests
Committee membership:
Alison Littley
Independent Non-executive Director
Date of appointment:
1 July 2022
Experience:
Alison has substantial experience within international
blue-chip organisations, including multinational
manufacturing, supply chain operations and
marketing services. Previously, Alison was a
Non-executive Director of Headlam Group plc and
James Hardie Industries plc and held a variety of
senior management positions at Diageo plc and
Mars Inc, and was Chief Executive Ofcer of Buying
Solutions, an agency to HM Treasury.
External appointments:
• Non-executive Director of musicMagpie plc
(FTSEAIM)
• Non-executive Director of Xaar plc
(FTSE All-Share)
• Non-executive Director of Norcros plc
(FTSE All-Share)
Committee membership:
Frank Nelson
Senior Independent
Non-executiveDirector
Date of appointment:
4 February 2015
Experience:
Frank is a qualied accountant with over 30 years’
experience in the housebuilding, infrastructure and
energy sectors. He was previously a Non-executive
Director for McCarthy & Stone plc and Telford
Homes Plc. Prior to this, Frank was Finance Director
for Galliford Try plc for 12 years and Finance Director
for Try Group plc. He is a fellow of the Chartered
Institute of Management Accountants.
External appointments:
• Chair of Van Elle Holdings plc (FTSE AIM)
• Senior Independent Non-executive Director
ofHICL Infrastructure plc (FTSE 250)
• Chair of DSM SFG Group Holdings Ltd
(PrivateEquity)
Committee membership:
Mark Kelly
Chief Executive Ofcer
Date of appointment:
29 March 2016
Experience:
Mark joined the Group in March 2016 and was
appointed Chief Executive Ofcer in May 2016.
He was formerly Chief Executive for Grafton
Merchanting GB and previously worked for BDR
Thermea Group BV, IMI and Novar. Mark has
previous experience of the PVC windows and doors
industry having worked for Duraex andCeluform.
External appointments:
None
Committee membership:
None
Iraj Amiri
Independent Non-executive Director
Date of appointment:
7 November 2022
Experience:
Iraj has recent and relevant nancial experience. He
was a partner with Deloitte for 20 years, leading its
national internal audit group and serving clients in
the nancial, retail and public sectors, and was a
recognised global expert and authority on internal
audit and assurance functions. During this time, he
was also Global Head of Internal Audit for Schroders
plc, on a secondment basis, for over ten years.
Previously, Iraj was a member of the FCA’s
Regulatory Decisions Committee and a trustee
of the National Employment Savings Trust
(NEST). Heis a fellow of the Institute of Chartered
Accountants in England and Wales.
External appointments:
• Non-executive Director of Coventry Building
Society (Private)
• Non-executive Director of Development Bank
ofWales plc (Government-owned)
• Non-executive Director of Aon UK Ltd (Private)
Committee membership:
Kate Allum
Independent Non-executive Director
Date of appointment:
1 July 2022
Experience:
Kate has extensive experience at board level,
holding a variety of senior executive and non-
executive roles in the commercial sector in a wide
variety of companies, cultures and countries.
Previously, she was a Non-executive Director of
Cranswick plc, SIG plc, Stock Spirits Group plc
and Origin Enterprises plc and was Chief Executive
Ofcer of First Milk Limited and CeDo Limited, and
the Head of European supply chain at McDonalds.
External appointments:
• Chair of Anpario plc (FTSE AIM)
• Non-executive Director of Co-op Group
(Privateco-operative)
• Chair of the Court at the University of the
WestofScotland (Private)
Committee membership:
Michael Scott
Chief Financial Ofcer
Date of appointment:
1 September 2016
Experience:
Michael joined the Group as Chief Financial Ofcer
in September 2016. He previously worked for Drax
Group plc, where he held senior nancial positions
including Group Financial Controller and Head of
Corporate Finance & Investor Relations. Prior to
Drax, Michael worked for MT International and
Arthur Andersen. He is a member of the Institute of
Chartered Accountants in England andWales.
External appointments:
None
Committee membership:
None
Martyn Coffey
Independent Non-executive Director
Date of appointment:
4 February 2015
Experience:
Martyn, prior to his current role at Marshalls plc (see
below), was Divisional Chief Executive Ofcer for
BDR Thermea Group BV and Chief Executive for
the private equity-owned Baxi Group. He also held
the position of Managing Director for Pirelli Cable.
Martyn has a BSc in Mathematics.
External appointments:
• Chief Executive Ofcer of Marshalls plc
(FTSE250)
• Director of Mineral Products Association Ltd
(Private)
Committee membership:
Eurocell plc Annual Report and Accounts 202282
CHAIR’S INTRODUCTION
LETTER FROM
THE CHAIR
“On behalf of the
Board, I am pleased
to introduce Eurocell’s
Corporate Governance
Report for the year.”
Derek Mapp
Chair
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 83
Corporate
Governance
Strategic
Report
Dear Shareholder,
At Eurocell, we recognise the importance of effective corporate
governance in delivering long-term success and sustainability for the
Company. This report sets out the Group’s corporate governance
framework and explains how it underpins and supports the Executive
Committee and senior management in delivering the Group’s strategy.
2022 has been a year of transition for the Board. Following a well
managed succession planning process, myself and three new
Non-executive Directors joined the Board. This process will continue
into 2023, as we welcome Darren Waters as Chief Executive Ofcer
designate, to replace Mark Kelly, who retires at our 2023 AGM.
I am pleased to have inherited a culture of open communication
and mutual trust, and these principles, which are essential to good
governance, have underpinned our Board discussions.
The Board has continued to provide oversight of, and support for, the
Executive Committee in progressing the Group’s strategic priorities, and
has worked well with the senior management team to help address
the challenges arising in 2022. These include the on-going impact of
signicant cost ination and an uncertain macroeconomic outlook,
as well as Company specic factors, such as the cyber incident
we experienced in the summer. As we look ahead to 2023, and in
anticipation of weaker markets, in Q4 2022 the Board approved a
signicant cost reduction programme and the sale of Security Hardware.
Both of these actions leave the business better placed for the future.
In November, the Board performed a review of the Group’s strategy,
our markets and activities. We concluded that our overall strategic
objective to deliver sustainable growth in shareholder value by increasing
sales and prots above our market growth rates, remains appropriate.
We agreed that our medium-term focus will be to capitalise on the
opportunities we have to grow market share in Proles, to drive more
value from the existing branch network and on improving our employee
value proposition. More details on the progression of our strategy are set
out in Strategy in Action on pages 24 to 35.
Environmental, Social and Governance (‘ESG’) considerations are
an increasing focus for our stakeholders, and I am pleased with the
progress made in 2022. In December, the Board established a new
‘Social Values and ESG’ Committee, which will operate from early
2023, to provide oversight of the Group’s ESG programme, as well as
our contribution to the societies in which we operate. Further details
on our progress with ESG and the new Committee are set out in the
Responsible Business section on pages 40 to 65.
I am very grateful for the continued strong shareholder support that we
receive, which enables us to build a platform for long-term sustainable
growth, and I hope to see that continuing into the future.
Throughout the year, we have continued to apply the principles and
provisions of the UK Corporate Governance Code (the ‘Code’), under
which this report has been prepared, and the following reports provide
details of the Board’s activities during the year, including how it, and its
Committees, have discharged their governance duties.
Derek Mapp
Chair
15 March 2023
Role of the Board
The Board currently comprises a Non-executive Chair, ve Non-
executive Directors and two Executive Directors, who are equally and
collectively responsible for the proper stewardship and leadership
of the Company. Their biographical details are set out on pages 80
and81.
In accordance with the Code, at least half the Board, excluding the
Chair, should be Non-executive Directors, who are determined by the
Board to be independent in character and judgement and free from
relationships or circumstances which may affect, or could appear to
affect, this judgement. The Company regards Frank Nelson, Martyn
Coffey, Kate Allum, Alison Littley and Iraj Amiri and as ‘independent
Non-executive Directors’ within the meaning of the Code and therefore
is considered to be compliant in this area.
The formal schedule of matters reserved for the Board’s consideration
includes the following:
• Approval of the Group’s strategy, long-term objectives, annual
operating budgets and capital expenditure plans.
• Approving transactions of signicant value or major strategic
importance, including acquisitions.
• Approving signicant changes to the Group’s capital, corporate or
management structure.
• Monitoring and assessing the overall effectiveness of the Group’s
risk management processes and internal control systems, including
those related to health and safety, nancial controls and anti-bribery
policies and procedures.
• Approving the Annual and Half-Year Reports, including Financial
Statements.
• Approving other corporate communications related to matters
decided by the Board.
• Board appointments and succession planning and setting terms of
reference for Board Committees.
• Remuneration matters, including the general framework for
remuneration and share and incentive schemes.
Subject to those matters reserved for its decision, the Board has
delegated to its Audit and Risk, Nomination and Remuneration
Committees certain authorities. There are written terms of reference
for each of these Committees which are available on the Group’s
corporate website, www.investors.eurocell.co.uk. Separate reports
for each Committee are included in this Annual Report from pages 93
to 119.
Eurocell plc Annual Report and Accounts 202284
CORPORATE GOVERNANCE STATEMENT
Governance Framework
The Board meets regularly to discuss key business issues and prescribe actions as appropriate. The Group’s reporting structure below
Board level is designed so that all decisions are made by those most qualied to do so in a timely manner. Day-to-day management and the
implementation of strategies agreed by the Board are delegated to the Executive Directors. Key to this delegation is the Executive Committee,
which meets each month.
This structure enables the Board to make informed decisions on a range of key issues including strategy and risk management.
All the Directors have the right to have their opposition to, or concerns over, the operations of the Board and/or the management of the
Company, noted in the minutes.
During the year, no such opposition or concerns were noted.
The Chair and the Non-executive Directors met during the year without the Executive Directors present.
Eurocell plc Board
Members:
Independent Non-executive Chair
5 Independent Non-executive Directors
2 Executive Directors
Audit and Risk Committee Members:
3 Independent Non-executive Directors
Remuneration Committee Members:
3 Independent Non-executive Directors
Nomination Committee Members:
Independent Non-executive Chair
5 Independent Non-executive Directors
The Audit and Risk Committee’s role is
to assist the Board with the discharge
of its responsibilities in relation to
nancial reporting, internal controls, risk
management, compliance and audit.
The Remuneration Committee
recommends the Group’s policy on
executive remuneration and determines
the levels of remuneration for Executive
Directors, the Chair of the Board
andsenior management.
The Nomination Committee assists
the Board in reviewing the structure,
size and composition of the Board
and succession planning for
seniormanagement.
See Committee report on
pages 98 to 103
See Committee report on
pages 104 to 119
See Committee report on
pages 93 to 96
Executive Committee
The Executive Committee comprises senior managers, including the two Executive Directors who act as a bridge between the Board
and this Committee. Management teams report to members of the Executive Committee. The Board receives regular updates from the
Executive Committee in relation to business issues and developments.
See page 97
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 85
Corporate
Governance
Strategic
Report
Role of the Chair
The Board has concluded that the Chair has met the independence criteria of the Code on appointment.
There is a clear division of responsibilities between the Chair and the Chief Executive Ofcer.
The Chair is responsible for ensuring that the Board functions effectively. He sets the agenda for Board meetings and ensures that adequate
time is devoted to discussion of all agenda items, particularly strategic issues, facilitating the effective contribution of all Directors and ensuring
that the Board as a whole is involved in the decision-makingprocess.
Role of the Chief Executive Ofcer
The Chief Executive Ofcer has principal responsibility for all operational activities and the day-to-day management of the business, in
accordance with the strategies and policies approved by the Board. The Chief Executive Ofcer also has responsibility for communicating to the
Group’s employees the expectations of the Board in relation to culture, values and behaviours.
Role of the Senior Independent Director and
Non-executive Directors
The Senior Independent Director has an important role on the Board, providing a sounding board for the Chair, leading on corporate governance
issues and serving as an intermediary for the other Directors. He is available to shareholders if they have concerns which contact through
the normal channels of the Chair, Chief Executive Ofcer or other Executive Directors has failed to resolve, or for which such contact is
notappropriate.
Frank Nelson has served as Senior Independent Non-executive Director throughout the year.
All Non-executive Directors are required to allocate sufcient time to the Company to discharge their responsibilities effectively. The Non-executive
Directors act in a way they consider will promote the long-term sustainable success of the Group for the benet of, and with regard to the
interests of, its stakeholders.
Board composition, commitment and electionofDirectors
The Nomination Committee leads the process for Board appointments and makes recommendations to the Board. Prior to appointment, Board
members, in particular the Chair and the Non-executive Directors, disclose their other commitments and agree to allocate sufcient time to the
Company to discharge their duties effectively and ensure that these other commitments do not affect their contribution.
The Executive Directors may accept an outside appointment provided that such appointment does not in any way prejudice their ability to
perform their duties as Executive Directors of the Company. Mark Kelly and Michael Scott do not currently hold any outside appointments.
The Non-executive Directors’ appointment letters anticipate a minimum time commitment of 20 days per annum, recognising that there
is always the possibility of an additional time commitment and ad hoc matters arising from time to time, particularly when the Company is
undergoing a period of increased activity. The average time commitment inevitably increases where a Non-executive Director assumes additional
responsibilities such as being appointed to a Board Committee.
All new Non-executive Directors undergo an induction programme and as such spend considerably more than the minimum commitment
during the course of a year. All Non-executive Directors are required to inform the Chair before accepting another position in order to ensure the
Director has sufcient time to full their duties. The current Board commitments of all Directors are shown on pages 80 and 81 and their terms of
appointment are reported on page 110.
Eurocell plc Annual Report and Accounts 202286
CORPORATE GOVERNANCE STATEMENT CONTINUED
The Company’s Articles of Association contain powers of removal, appointment, election and re-election of Directors and provide that all of the
Directors must retire and may offer themselves for re-election at each Annual General Meeting (‘AGM’).
At the upcoming AGM, all the current Directors intend to offer themselves for election/re-election, with the exception of Mark Kelly and Martyn
Coffey both of whom have decided to step-down after seven and eight years of service respectively. Following the conclusion of the Board
evaluation process, the Board considers all the Directors to be effective, committed to their roles and to have sufcient time available to perform
theirduties.
Summaries of the Board members’ length of service, ethnicity, gender and age (at 31 December each year) is set out in the charts below:
Length of service
Gender
2022
2022
2022
2022
2021
2021
2021
2021
Ethnicity
Age
2
2
2
2
1
1
2
1
4
1
4
6
7
5
6
5
2
3
0-2 years 3-7 years 8-9 years
Male Female
White British Other ethnic group
50-59 60-69 70-79
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 87
Corporate
Governance
Strategic
Report
The Board has a process in place to assess the current and future skills and experience needed by the Non-executive Directors against a
matrix of requirements, through which it has determined that the Non-executive Directors are independent and that the Board, as a whole, has
appropriate and complementary skills and experience.
Board evaluation and effectiveness
In accordance with the Code, a formal evaluation of the performance of the Board, its Committees, the Chair and individual Directors was
conducted during the year, with the results presented and discussed at the December 2022 Board meeting.
Given the number of relatively new appointments to the Board during 2022, this evaluation was performed internally by the Chair of theBoard.
Interviews were conducted with each Board member and the Group Company Secretary, all of whom fully engaged with the process and
provided their qualitative feedback. The anonymity of respondents was ensured to promote an open and frank exchange of views.
The interviews identied a number of perceived areas of strength and some areas for enhancement. It was also recognised that a combination
of the continuity provided by longer-standing Board members, together with the fresh thinking from newer members, were together working well
to support the Board through its transition.
An overview of the conclusions includes:
• The Board refresh had promoted a positive and healthy reection on previously held views and assumptions.
• The new Board was gaining familiarity of each other, the business, its people and its challenges.
• More strategic, and less operational, updates at meetings would continue to further improve the quality of the Board’s debate.
• ESG, culture and people engagement would be given increased board focus in 2023, including the creation of a new ‘Social Values and
ESG’ Board Committee.
• A clear plan regarding Board succession was in place, including the potential future recruitment of an additional Non-executive Director in
due course.
• Greater Board visibility and interaction with the leadership team was to be developed.
Overall, the results of the interviews indicated that the Board members are satised that the Board is operating at an acceptable level in a
constructive and collaborative way.
The Board believes that the evaluation process described above was appropriate, given the number of relatively new appointments to the
Board, but will be reviewed for future years. Taking all of the above into account, the Board is satised that the current composition of the Board,
and its Committees, provides an appropriate balance of skills, experience, independence and knowledge to allow the Board and its Committees
to discharge their duties and responsibilities effectively and in line with the Code.
Conicts of interest
The duties to avoid potential conicts and to disclose such situations for authorisation by the Board are the personal responsibility of each
Director. All Directors are required to ensure that they keep these duties under review and to inform the Group Company Secretary of any
change in their respective positions.
The Company’s conict of interest procedures are reected in its Articles of Association (‘Articles’). In line with the Companies Act 2006, the
Articles allow the Directors to authorise conicts and potential conicts of interest, where appropriate. The decision to authorise a conict can
only be made by non-conicted Directors.
The Board, and its Committees, considers conicts or potential conicts at each meeting and, where such instances are identied, takes
appropriate action, usually by excluding the conicted party from any related discussions/decisions.
The Articles require the Company to indemnify its ofcers, including ofcers of wholly-owned subsidiaries, against liabilities arising from the
conduct of the Group’s business, to the extent permitted by law.
For a number of years, the Group has purchased Directors’ and Ofcers’ liability insurance and this is anticipated to continue.
Eurocell plc Annual Report and Accounts 202288
CORPORATE GOVERNANCE STATEMENT CONTINUED
Board meetings and attendance
There were seven full Board meetings scheduled during 2022,
threemeetings of the Audit and Risk Committee, three meetings of
the Remuneration Committee and ve meetings of the Nomination
Committee. All of these meetings were held in-person, with the
exception of one Board meeting and one Audit and Risk Committee
meeting, which were held virtually to accommodate pre-existing
commitments and therefore ensure full attendance.
In addition, two virtual Board update meetings were held during 2022,
following their successful introduction in 2020, in order to keep the
Board fully updated on nancial and operational matters. There was
fullattendance for both of these update meetings which help maintain
a high level of Board awareness and support good governance.
The Chair of the Board, Chief Executive Ofcer and Chief Financial
Ofcer are usually invited to attend Audit and Risk Committee
meetings, although the Audit and Risk Committee also meets with
theexternal auditor without any Executive Directors being present.
The Chief Executive Ofcer and Chief Financial Ofcer are invited
toattend Remuneration Committee meetings when appropriate,
butare never involved in discussions and decisions regarding their
own remuneration.
The Group Company Secretary is also Secretary to the Audit and Risk,
Remuneration and Nomination Committees, and attends meetings for
this purpose.
Number of meetings attended/
eligible to attend Board
Audit
and Risk
Committee
Remuneration
Committee
Nomination
Committee
Derek Mapp (appointed
16 May 2022) 5/5 – 1/1 3/3
Bob Lawson (retired
30June 2022) 2/2 – 1/1 1/1
Frank Nelson 7/7 3/3 3/3 5/5
Martyn Coffey 6/7 2/3 3/3 5/5
Mark Kelly 7/7 – – 4/4
Michael Scott 7/7 – – –
Sucheta Govil (stepped-
down 31 July 2022) 2/3 1/1 1/1 1/3
Kate Allum (appointed
1July 2022) 4/4 2/2 2/2 2/2
Alison Littley (appointed
1July 2022) 4/4 1/2 1/1 2/2
Iraj Amiri (appointed
7November 2022) 2/2 1/1 –/– –/–
All absences were due to a clash with a pre-existing engagement.
Board packs are distributed in the week prior to each meeting to
provide sufcient time for Directors to review their papers in advance.
If Directors are unable to attend a Board meeting for any reason, they
nonetheless receive the relevant papers and are consulted prior to the
meeting and their views are made known to the other Directors.
The Group Company Secretary
All the Directors have access to the advice and services of the Group
Company Secretary. The Group Company Secretary has responsibility
for ensuring that all Board procedures are followed and for advising
the Board, through the Chair, on all governance matters. The Group
Company Secretary provides updates to the Board on regulatory and
corporate governance issues, new legislation, and Directors’ duties
and obligations. The appointment and removal of the Group Company
Secretary is one of the matters reserved for the Board.
Paul Walker has served as Group Company Secretary throughout
theyear.
Whenever necessary, Directors may take independent professional
advice at the Company’s expense. Board Committees are provided
with sufcient resources to undertake their duties, including the option
to appoint external advisers when they deem it appropriate.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 89
Corporate
Governance
Strategic
Report
Board induction, development and support
Following appointment, a new Director undergoes an induction
programme, which includes a teach-in from Executive Committee
members on key aspects of the business, including the background
to our industry and markets, as well as the Company’s strategy,
commercial approach, manufacturing and logistics operations,
administrative functions and culture.
Summary of induction programme:
Understand
the business
• Meet, on a one-to-one basis, the Chair, Executive
Directors and other Non-executive Directors
• Receive teach-in presentations from all key
functions within the Group, including Commercial,
Operations, Human Resources, Finance, Marketing
and IT
• Meet with external stakeholders where appropriate
e.g. customers, suppliers, advisers, and in some
cases, major shareholders
• Review previous Board and Committee
papers, Committee terms of reference, investor
presentations and staff survey results
Meet our
colleagues
• Meet with the Executive Committee and senior
management teams
• Visit all major operational sites, including factories,
the main warehouse, a selection of branches and
the main ofces, including an opportunity to meet
with colleagues from these areas
Individual development and training needs are identied through the
Board evaluation process and through individual reviews between the
Directors and the Chair.
Risk management and internal control
The Board acknowledges its responsibility for determining the nature
and extent of the signicant risks it is willing to take in achieving its
strategic objectives, and for the Group’s system of internal control.
The Board has carried out a review of the effectiveness of the Group’s
risk management and internal control systems, including nancial,
operational and compliance controls, for the period covered by this
Annual Report.
The Strategic Report comments in detail (pages 70 to 77) on the
nature of the principal risks and uncertainties facing the Group; in
particular those that would threaten our business model, future
performance, solvency or liquidity and the measures in place to
mitigate them. In conducting its review, the Board has included
a robust assessment of these risks and the effectiveness of
mitigatingcontrols.
The Audit and Risk Committee Report on pages 98 to 103 describes
the internal control system and how it is managed and monitored.
The Board conrms that no signicant failings or weaknesses were
identied in relation to the review. The Board also acknowledges that
such systems are designed to manage, rather than eliminate, the
risk of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement
or loss.
The cyber incident noted above was not the result of a breakdown
in internal controls. Our investments over the last several years in
enhanced cyber security played a major role in identifying the incident,
enabling core systems to be restored quickly and mitigating the
overall impact on the Group. Following the incident, we have also
implemented further resilience and security in this area.
Stakeholder engagement and Section 172(1) statement
Engagement with our shareholders and wider stakeholder groups
plays a vital role across the Group, including at Board level. One of
the primary areas of focus for the Board at any time is the impact its
decisions or actions may have on key stakeholder groups represented
within the Board’s duty under s172 of the Companies Act 2006.
The Board is mindful of the levels of engagement with key stakeholder
groups and how their respective views may be incorporated into
relevant decision making. Board discussions therefore seek to
appropriately consider the impact of its decisions and views of key
stakeholder groups thereon, whilst always ensuring the need to
promote the success of the Company for the benet of its members
as a whole.
In doing so, s172 requires the Directors to have regard (amongst other
matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships with
suppliers, customers and others;
(d) the impact of the Company’s operations on the community and
the environment;
(e) the desirability of the Company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly as between members of the Company.
The Board considers information from across the organisation to
help understand the impact of its operations and decisions, and the
interests and views of our key stakeholders. This includes reviews of
strategy, nancial and operational performance, as well as information
covering areas such as key risks, and legal and regulatory compliance.
This information is provided to the Board, and its Committees, through
reports sent in advance of each meeting, and through in-person
presentations, where appropriate. As a result of these activities, the
Board has developed a good understanding of the interests and
views of all stakeholders, and other relevant factors, which enables
the Directors to comply with the requirements of section 172 of the
Companies Act 2006.
The table overleaf sets out the Board’s approach to stakeholder
engagement, why stakeholders matter and some key decisions
made during 2022. The Board will sometimes engage directly with
certain stakeholders on certain issues, but the size and distribution of
our stakeholders and of the Eurocell Group dictate that stakeholder
engagement often takes place at an operational level.
To give greater understanding to this, we have provided clear cross-
referencing to where more detailed information can be found in this
Annual Report and Financial Statements.
Eurocell plc Annual Report and Accounts 202290
CORPORATE GOVERNANCE STATEMENT CONTINUED
Shareholders Employees Customers Suppliers
Communities and
environment
Government and
regulatory/industry
bodies
Why they matter The Board recognises
the importance of
engaging with all
shareholders and
prioritises effective
dialogue to ensure
that we capture and
embrace feedback
relating to areas
of interest and of
concern, and to
ensure that our
obligations are met.
The Board understands
that our colleagues
underpin the
performance and
success of our business
and, therefore, the
importance of providing
a safe working
environment that
promotes inclusion
and diversity, as well as
ensuring they have the
opportunity to realise
their potential and
progress in their careers.
The Board recognises
the dependence of
our growth plans on
building strong and
lasting relationships
with our customers.
Inter alia, this requires
that we continuously
improve product
ranges, quality,
availability and service
to become the
supplier of choice.
The Board appreciates
that to operate
effectively we must
ensure secure supplies
of good quality
sustainable materials
at a fair price from
suppliers with high
ethical standards,
and monitor supplier
performance against
appropriate metrics.
The Board
understands the role
all organisations have
to play in protecting
the environment and in
mitigating the impact
of climate change.
The Board also
recognises the need
to support the local
communities in which
our larger facilities are
located.
The Board recognises
the critical importance
of ensuring the highest
standards of corporate
governance, including
compliance with
the rules for listed
companies and other
relevant regulations
(e.g. health & safety,
taxation), which
together give us our
licence to operate.
How we engage The Group runs
a comprehensive
investor relations
programme that
results in regular
dialogue with
the investment
community.
This includes formal
presentations made
to institutional
shareholders and
analysts, following
the announcement of
the Group’s half-year
and full-year results,
covering a range of
key topics affecting
the Group’s strategy,
nancial and operating
performance. Ad hoc
meetings are also
held following trading
updates and otherwise
throughout the year.
The Chair, the Senior
Independent Director
and the other Directors
are available to engage
in dialogue with major
shareholders as
appropriate.
Shareholders have
the opportunity to
meet members of the
Board and the senior
management team at
the Annual General
Meeting and to ask
any questions they
may have.
The Group conducts
periodic staff surveys.
In 2022 this included
the annual ‘Pulse’
survey, combined with
subsequent listening
groups, to source the
views of colleagues
directly on several
important topics and
develop appropriate
action plans. All
results are analysed,
shared with colleagues
and used to drive
appropriate change and
improvement.
Management regularly
‘walk the oor’ to
understand rst-hand
the experiences of
our colleagues and
also undertake visits
to operating sites and
branches to ensure
all parts of the Group
are understood and
taken into account in
formulating plans.
Regular team-briengs
on operational and
nancial performance,
coupled with the
publishing of internal
bulletins (‘In the
Know’), help to keep
our colleagues well
informed.
All whistleblowing
reports and grievances
are investigated and
appropriate changes
implemented to help
prevent reoccurrence.
Regular contact takes
place between senior
management and key
customers, with our
sales teams ensuring
we engage properly
across the full range of
customers.
Customer
reviews discuss
our operational
performance, including
service levels and
other relevant matters.
We perform customer
insight surveys on
a regular basis to
assess satisfaction
and understand ‘Net
Promoter Scores’.
In addition, quarterly
forums are held with
customer groups
to discuss product
design and innovation.
Regular monitoring
of social media
platforms for relevant
comments/issues,
coupled with Trustpilot
customer reviews/
ratings and direct
comments received
from customers
visiting our branches,
provide valuable
customer insight.
Our objective is to
build and maintain
strong and lasting
working relationships
with our supplier base.
Regular review
meetings are held
between senior
management and key
suppliers to discuss
relevant topics, such
as pricing, supply
continuity and service
levels.
Formal tender
processes are
undertaken for large
and/or high value
supplies, which helps
develop relationships
and creates a better
understanding for
all parties of the key
issues involved.
We believe
sustainability sits right
at the heart of our
business.
We are the leading
UK-based recycler
of PVC windows,
through our two
recycling sites in
Selby and Ilkeston,
which drive a very
large carbon saving
compared to the use
of virgin materials.
Our major sites
engage with and
support their local
communities on an
ongoing basis. We
seek to recruit locally,
retain a skilled local
workforce, build
relationships with
local community
organisations and
support charitable
initiatives where
possible.
The Company
applies the principles
and provisions of
the UK Corporate
Governance Code and
operates structures
and policies to ensure
ongoing compliance.
We also operate clear
and effective policies
to help prevent
wrongdoing, including
whistleblowing, bribery
and corruption, fraud,
nancial crime and
modern slavery, with
training provided
where appropriate.
Regular meetings
are held with tax
advisers to discuss tax
compliance, HMRC
correspondence
and other relevant
issues pertinent to the
Group’s nances and
tax position.
The Company is
a member of both
the Windows and
Recycling groups of
the British Plastics
Federation and the
British Fenestration
Rating Council, which
provide a forum to
understand changes in
relevant legislation and
building standards.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 91
Corporate
Governance
Strategic
Report
Shareholders Employees Customers Suppliers
Communities and
environment
Government and
regulatory/industry
bodies
How the Board
complements
engagement
efforts
During 2022, the Chair
met with some of our
largest shareholders
without the Executive
Directors being
present.
The Board
also received
regular updates
on shareholder
engagement and
investor feedback,
analyst reports
and share price
developments from
the Chief Financial
Ofcer.
During 2022, the Board
received updates on
the progress of our
colleague engagement
initiatives and, in
particular, considered
the results of the
staff surveys and the
proposed action plan to
address matters arising.
This included the Board
being instrumental
in driving proposed
improvements to
the employee value
proposition, including
staff welfare and
facilities.
Board members were
also able to share
their own experiences
and ideas to address
the retention and
recruitment challenges
that continued through
the year.
The Chief Executive
Ofcer provided
regular updates to the
Board on health and
safety matters and the
steps taken to ensure
appropriate safety and
wellbeing arrangements
were in place.
Throughout 2022,
the Board received
regular updates on
our performance
against customer
service-related KPIs,
compared to historical
and industry/sector
benchmarks.
The Board has
signicant experience
in supply chain
management.
During 2022, raw
material availability
and pricing have
been discussed at
all Board meetings
and updates. Board
members have
shared their ideas
and experiences on
supplier relationships
and engagement, in
the light of current
supply chain risks and
challenges.
The Board is actively
engaged with the
development and
implementation of the
Group’s ESG strategy.
The Board receives
regular updates
on sustainability
issues, including the
performance of the
two recycling sites.
The Audit and Risk
Committee receives
regular reports on
governance, regulatory
and compliance
matters from
management and from
external and internal
auditors. The internal
audit programme is
designed to provide
assurance in this area.
In addition, the Board
receives updates
on matters such as
developments in
building regulations
and our associated
new product
development
initiatives.
How their interests
were considered
during 2022
Investor relations
is covered at all
Board meetings and
updates.
The Board reviewed
the strategy of the
business and identied
where emphasis
should be placed in
the medium-term,
including capitalising
on opportunities
for market share
growth in Proles,
driving value from
the existing branch
network and improving
the employee value
proposition. The
Board also approved
defensive measures in
Q4, including a cost
saving programme
and the sale of
Security Hardware.
These actions leave
the business better
placed for the future.
The Board approved
management’s
proposals to improve
staff welfare facilities and
also introduce:
• a healthcare
cash plan for all
colleagues;
• an enhanced
maternity and
paternity policy; and
• improved recognition
of, and reward for,
long-service.
The Board also
approved capital
expenditure for a new
HR information system,
which is expected to
signicantly improve the
employee experience at
Eurocell when launched
in 2023.
These actions support
our objective to become
an employer of choice in
the regions we operate.
The Board approved
capital expenditure to
improve operational
efciency and
ultimately customer
service, including new
carousel warehouse
racking.
Approved capital
expenditure also
included a new
website and
e-commerce platform,
which will be launched
in 2023, with the
aim of signicantly
improving the
customer journey.
The Board also
approved a medium-
term contract with
a new supplier of
rainwater products,
which is expected to
signicantly improve
product quality and
availability in the
branches.
The Board continued
to work with and
advise management
on their approach,
including:
• to accept supplier
cost increases,
where appropriate,
to provide security
of supply; and
• to pass a fair
proportion of such
increases on to our
own customers
through selling
price increases and
potentially reversible
surcharges.
The Board approved
the formation of a
‘Social values and
ESG’ committee.
The purpose of the
committee is to
provide oversight
of the Group’s ESG
programme, including:
• sustainability;
• employee welfare;
• responsible
business practices;
and
• the Company’s
contribution to the
societies in which it
operates.
The Board supported
management’s
ongoing initiative
to engage and
collaborate with
industry bodies,
house builders,
energy consultants
and glass/hardware
manufacturers
to develop new
products to meet the
Government’s ‘Future
Homes Standard’ for
the new build sector.
Further details See Chief Financial
Ofcer’s Report
on page 66
See Valuing our People
on page 56
See Chief Executive
Ofcer’s Report
on page 12
See Working
Responsibly
on page 61
See Working
Responsibly
on page 61
See Working
Responsibly
on page 61
Eurocell plc Annual Report and Accounts 202292
Engagement with the workforce
As described in Stakeholder engagement on pages 89 to 91, we
recognise that our colleagues underpin the performance and success
of our business and active engagement has never been more
important in the current social, economic and political environment.
The Group organises a number of colleague engagement initiatives
to complement the existing team briengs, continuous improvement
workshops, newsletters and health and safety forums currently in
place, including:
• colleague focus groups with the designated Non-executive
Director, Alison Littley, to ensure workforce views are heard by
theBoard;
• departmental ‘listening groups’ to allow colleagues to give direct
feedback from which appropriate action plans can be formulated;
• group-wide ‘Pulse’ and ‘Safety, Health, Environment and
Quality’ staff surveys, to provide invaluable insight into how our
colleaguesfeel;
• review of retention and recruitment challenges, to identify areas
for improvement and ensure we remain competitive in the
labourmarket;
• enhancement of the induction process for new colleagues, to help
address short-term staff turnover;
• more exible approaches to working, including hybrid working
where appropriate;
• enhancement of colleague facilities and rest-room arrangements,
as part of overall staff welfare improvements; and
• continued opportunity for all colleagues to become shareholders
via the Save As You Earn scheme, to share in the Group’s success.
In addition, the Board assesses and monitors culture through:
• reviews of staff survey results and response rates;
• reviews of staff turnover rates;
• reviews of health and safety data, including near misses;
• reviews of employee whistleblowing cases;
• interaction with senior management and workforce; and
• observation of attitudes towards regulators such as HMRC and
HSE, as well as internal and external auditors.
The Board is satised the above practices and behaviours throughout
the Group are developing well to support improved employee
engagement. In addition, as set out in ‘Valuing our people’ on pages
56 to 60, we have a number of in-progress and planned initiatives to
improve our employee value proposition and retention rates, and drive
down labour turnover.
Statement of compliance with the Code
This Corporate Governance Statement, together with the Nomination
Committee Report, the Audit and Risk Committee Report and the
Remuneration Committee Report, provide a description of how the
principles and provisions of the Code have been applied during 2022.
It is the Board’s view that, during 2022, Eurocell plc was in compliance
with the relevant provisions set out in the Code in all material respects
except for Provision 38.
Provision 38 provides that Executive Director pension contribution
rates (or payments in lieu) should be in line with those available to the
workforce. Our incumbent Executive Directors’ pension contribution
rates, while in line with the policy for existing Executive Directors, did
not match the wider workforce during the year, although they have
been subsequently adjusted from 1 January 2023 onwards – see
below for further details.
During the year, the changes proposed to the Directors’ Remuneration
Policy, resulted in the pension contributions for the incumbent
Executive Directors being reduced to 10% of salary from April 2022
onwards, in order to be aligned with those with the highest rate below
the Board level. From 1 January 2023, in line with the Investment
Association’s guidance, the contributions were further reduced
for Michael Scott to 5% to be aligned with those available to the
workforce. In the light of Mark Kelly’s upcoming retirement, his pension
contributions have not been reduced.
Further details regarding the Executive Directors’ pension contributions
are set out on page 113 of the Directors’ Remuneration Report.
This statement complies with sub-sections 2.1, 2.2(1), 2.3(1), 2.5,
2.7 and 2.10 of Rule 7 of the Disclosure Rules and Transparency
Rules of the Financial Conduct Authority. The information required to
be disclosed by sub-section 2.60 of Rule 7 is shown on pages 120
to122.
Annual General Meeting
Our AGM will be held at our Head Ofce (see Company Information on
page 177 for details) on 11 May 2023.
The notice of our AGM, together with the Directors’ voting
recommendations on the resolutions to be proposed, is included on
a separate circular to shareholders and will be dispatched at least 20
working days before the meeting. The notice will be available to view at
investors.eurocell.co.uk.
All Directors intend to attend the AGM, including the Chairs of the
Audit and Risk, Remuneration and Nomination Committees, who are
available to answer questions. The Board welcomes questions from
shareholders who have an opportunity to raise issues informally or
formally before or during the meeting.
For each proposed resolution, the proxy appointment forms provide
shareholders with the option to direct their proxy vote either for or
against the resolution or to withhold their vote. The proxy form and
any announcement of the results of a vote make it clear that a ‘vote
withheld’ is not a vote in law and will not be counted in the calculation
of the proportion of the votes for and against the resolution.
All valid proxy appointments are properly recorded and counted by
Equiniti, the Company Registrars. Information on the number of shares
represented by proxy, the proxy votes for and against each resolution,
and the number of shares in respect of which the vote was withheld
for each resolution, together with the proxy voting result, are given
at the AGM. The total votes cast, including those at the AGM are
published on our website (investors.eurocell.co.uk) immediately
after the meeting.
Derek Mapp
Chair
15 March 2023
CORPORATE GOVERNANCE STATEMENT CONTINUED
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 93
Corporate
Governance
Strategic
Report
NOMINATIONS COMMITTEE REPORT
Chair Members
Derek Mapp Frank Nelson Martyn Coffey Kate Allum Alison Littley Iraj Amiri
Role and responsibilities:
The principal duties of the Nomination Committee are to:
• regularly review the structure, size and composition of the Board
(including its skills, knowledge, experience, length of service and
diversity) and make recommendations to the Board with regard to
any changes;
• identify and nominate, for approval by the Board, candidates to ll
Board vacancies;
• review the time commitments required from Non-executive
Directors, along with the number of external directorships held, to
ensure all duties are being fullled; and
• maintain an effective succession plan for the Board and senior
management considering the challenges and opportunities facing
the Company, along with the skills and expertise needed in the
future, while promoting diversity of ethnicity, gender, background
and skills.
Summary of activities during the year
The Nomination Committee met ve times during the year and
attendance at the meetings is shown on page 88.
The main activities of the Committee included:
• the search, selection and recruitment of Derek Mapp as Chair of
the Board, following Bob Lawson’s retirement, and of Alison Littley,
Kate Allum and Iraj Amiri, as Non-executive Directors, recognising
succession requirements and taking account of the required skill
sets and experience for the Board’s composition;
• the search, selection and recruitment of Darren Waters, as
Chief Executive Ofcer Designate, in preparation for Mark Kelly’s
retirement;
• continued succession planning for the Board, given the length and
concurrency of service of Martyn Coffey and Frank Nelson;
• overseeing the ongoing development of the Executive Committee;
• considering the results of the internal review of the Committee’s
effectiveness (see page 87 for further details);
• a review of Directors’ time commitments and independence;
• consideration of the re-election of Directors at the Annual General
Meeting; and
• approving updates to the Committee’s terms of reference.
Dear Shareholder,
I am pleased to report to you on the main activities of the
Committee and how it has performed its duties during 2022.
A key responsibility of the Committee is to ensure orderly Board
succession and, this year, the Committee’s main focus has been on
executing succession plans for a number of Board changes as follows:
• The retirement in May 2022 of Bob Lawson, my predecessor
asChair.
• Sucheta Govil stepping down from the Board in July 2022.
• Martyn Coffey intending to step down from the Board at the
2023AGM.
• The retirement of Mark Kelly, also at the 2023 AGM.
On behalf of the Board, may I take this opportunity to thank Bob,
Sucheta, Martyn and Mark for their valuable contributions to
theGroup.
On the recommendation of the Committee, there have been several
new appointments to the Board. In 2022, myself, Alison Littley, Kate
Allum and Iraj Amiri were appointed to the Board as Non-executive
Directors. Alison, Kate and Iraj bring valuable commercial insight and
extensive board committee and ESG experience and have further
strengthened the expertise of the Board in these areas. Darren Waters
will join the Board in spring 2023, as Chief Executive Ofcer Designate,
and will bring a wealth of commercial and operational experience to
the Group, alongside good knowledge of the building products and
fenestration sectors in the UK.
I am very pleased that we have been able to attract such high-calibre
individuals into the Company.
The Committee also continues to consider succession planning for
the Board in the medium-term, given the length and concurrency of
service of other Non-executive Directors, and to oversee the continued
development and evolution of the Executive Committee which, this
year, has included the recruitment of a new Chief Operating Ofcer.
The Committee’s activities have considered diversity and ethnicity as
important priorities, and we have made progress with both over the
last twelve months.
Finally, I would like to thank my fellow Board and Committee members
who have served throughout the year, for their valuable contribution
and support.
Derek Mapp
Chair of the Nomination Committee
15 March 2023
Eurocell plc Annual Report and Accounts 202294
NOMINATIONS COMMITTEE REPORT CONTINUED
Nomination Committee members
During 2022, the Nomination Committee comprised:
Chair:
Derek Mapp (from 1 July 2022), Bob Lawson* (to 30 June 2022)
Committee members:
Frank Nelson (throughout 2022)
Martyn Coffey (throughout 2022)
Kate Allum (from 7 October 2022)
Alison Littley (from 7 October 2022)
Iraj Amiri (from 7 November 2022)
Sucheta Govil (to 31 July 2022)
Mark Kelly (to 6 October 2022)
* Where the Committee was dealing with matters relating to Bob Lawson’s
succession, Frank Nelson, the Senior Independent Non-executive Director,
assumed role of Committee Chair.
The Code recommends that a majority of the Nomination Committee
be Non-executive Directors, independent in character and judgement
and free from any relationship or circumstance which may, could or
would be likely to, or appear to, affect their judgement. The Board
considers that the Company complies with the Code in this respect.
Only members of the Committee have the right to attend Committee
meetings, but the Committee may invite others, including the Human
Resources Director and external advisers, to attend all or part of any
meeting if it thinks it is appropriate, necessary, or pursuant to the terms
of any agreement with shareholders.
The Nomination Committee will meet as often as it deems necessary
but, in accordance with its terms of reference, at least twice a year.
Diversity and inclusion
All Board and senior management appointments are made on merit,
in line with the approach adopted throughout the Group’s workforce.
TheBoard recognises and embraces the benets of diversity and, in
particular, the value that different perspectives and experience bring to
the quality of debate and decision making.
The Board recognises the Group operates in a historically male-
dominated industry, but is committed to consider diversity as a
key element in senior appointments. The relatively small size of the
Board and the existing Directors’ service contracts currently in place
will inevitably limit the potential pace of change. Nevertheless, as
vacancies arise, the Board will seek to move towards the FCA’s
targetsof:
• at least 40% of the Board being women;
• at least one of the senior board positions (Chair, Chief Executive
Ofcer, Senior Independent Director or Chief Financial Ofcer) being
a woman; and
• at least one member of the Board being from an ethnic minority
background.
However, the overriding policy in any new appointments will continue
to one of selecting candidates with an appropriate mix of skills,
capabilities and market knowledge, to ensure the continued success
of the business.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 95
Corporate
Governance
Strategic
Report
Details of the Board and Executive Committee’s gender/ethnicity is as follows:
Gender representation:
At 31 December 2022
Number of
Board members
% of
the Board
Number of senior positions
on the board (CEO, CFO,
SID and Chair)
Number in
executive management
% of executive
management
Men 6 75% 4 5 83%
Women 2 25% – 1 17%
Total 8 100% 4 6 100%
At 31 December 2021
Number of
Board members
% of
the Board
Number of senior positions
on the board (CEO, CFO,
SID and Chair)
Number in
executive management
% of executive
management
Men 5 83% 4 4 80%
Women 1 17% – 1 20%
Total 6 100% 4 5 100%
Ethnicity representation:
At 31 December 2022
Number of
Board members
% of
the Board
Number of senior positions
on the board (CEO, CFO,
SID and Chair)
Number in
executive management
% of executive
management
White British or other
White(including minority-
white groups)
7 88% 4 6 100%
Other ethnic group,
includingArab
1 12% – – –
Total 8 100% 4 6 100%
At 31 December 2021
Number of
Board members
% of
the Board
Number of senior positions
on the board (CEO, CFO,
SID and Chair)
Number in
executive management
% of executive
management
White British or other
White(including minority-
white groups)
5 83% 4 5 100%
Other ethnic group,
includingArab
1 17% – – –
Total 6 100% 4 5 100%
The above data was collected on the basis of self-reporting by the individuals concerned who were asked to select their gender/ethnicity from a
list of options derived from the FCA’s template.
No changes to the Board or Executive Committee have occurred since 31 December 2022 that would affect the above data.
The gender balance of those in the senior management and their direct reports is included within the Responsible Business section on page58.
Eurocell plc Annual Report and Accounts 202296
NOMINATIONS COMMITTEE REPORT CONTINUED
Succession planning
In 2022, the Committee continued its proactive work on succession planning for the Board, taking account of:
• the notications received from Bob Lawson, the previous Chair, and, more recently, Sucheta Govil and Martyn Coffey, both Non-executive
Directors, of their respective intentions to retire/step-down from the Board;
• the length of service of Frank Nelson, a Non-executive Director, whose Board membership will reach nine years during 2024; and
• general succession considerations regarding the Executive Directors.
As part of this process, a detailed review of the composition, skills and experience of the Board, and each of its Committees, was undertaken
to develop desired role proles and identify the preferred attributes to be sought in future appointments. In the light of strong recent growth, this
review also identied the benets of increasing the number of Non-executive Directors on the Board.
All appointments to the Board are subject to a formal, rigorous and transparent appointment process, and are made based on merit and
objective criteria. After a selection process involving several rms, the Committee engaged Lygon Group as the search rm to support the
recruitment of myself as Chair, and subsequently of Alison Littley, Kate Allum and Iraj Amiri, as new Non-executive Directors and Darren Waters,
as Chief Executive Ofcer Designate. Lygon Group have no connection with the Company or any individual Director.
The process for these appointments is detailed below:
1 Candidate requirements A detailed candidate prole setting out required capabilities and experience was agreed. After a selection
process, Lygon Group was appointed to facilitate the process
2 Search Lygon Group prepared an initial longlist of candidates and conducted the rst round of interviews to assess
the candidates’ t with the role and key competencies
3 Interviews The Committee then considered a shortlist of candidates and interviews were held with all Board members
4 Board approval and
announcement
The Committee made a recommendation to the Board for its consideration. Following Board approval, the
appointments were announced to the market
As part of the development of the Executive Committee, the Nomination Committee has continued to consider succession planning for senior
management, in order to maintain an appropriate balance of skills, experience and diversity within the Company in line with our strategic
priorities. This ongoing planning process includes an analysis of any succession gaps or risks identied and includes contingency plans for the
sudden or unexpected departure of Executive Directors or other senior managers.
The benets of this proactive approach are illustrated by the ongoing evolution of the Executive Committee, ensuring the Company is well
placed, with the best people and the right balance of skills to secure future success. In 2022, the successful recruitment of a new Chief
Operating Ofcer supports our strategic priority to deliver sustained operational excellence and optimise returns on recent investments in
operating capacity.
In summary, we are condent that the Board has a good understanding of succession planning across the Group and the range of measures
being used to continue to develop and recruit talented senior employees.
Derek Mapp
Chair of the Nomination Committee
15 March 2023
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 97
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Executive Committee
(in addition to Mark Kelly and Michael Scott)
Colin Hales
Chief Operating Ofcer
Mike McKay
Group IT Director
Bruce Stephen
Group Human Resources Director
Beth Boulton
Marketing Director
Andy McDonnell
Commercial Managing Director
Paul Walker
Group Company Secretary
Beth joined Eurocell in November 2021. She
previously worked for Magnet Kitchens where
she was Head of Marketing and Digital. Prior
to that role, Beth was Marketing Director at
Utopia Bathrooms and has also held positions
at Topps Tiles and Jewson.
Colin joined Eurocell in May 2022. He
previously worked for Envases where he
was Managing Director and has extensive
experience across multi-site operations
where he has led and managed functions
incorporating manufacturing, distribution
and supply chain planning. Previously, Colin
held roles at Kingspan Insulation Boards and
also at Kongsberg Automotive where, most
recently, he was Vice President of Business
Area Interior Systems.
Andy joined Eurocell in May 2018, initially as
Managing Director for the Building Plastics
division, and more recently has stepped
up to the role of Commercial Managing
Director, with responsibility for the majority
of commercial activities in both our major
divisions. He previously held senior leadership
positions in retail and trade at B&Q,
TradePoint and Oak Furniture Land.
Mike joined Eurocell in March 2020. He
previously worked for Polypipe Group
(now Genuit Group) where he was Group
Information Services Director for 15 years.
Immediately prior to this, Mike was Head of
Information Services for William Grant & Sons
and he has also held positions with Ascent
Technology and APV Baker.
Bruce joined Eurocell in July 2019. He
previously worked for Greencore holding
various roles including, most recently,
Corporate Services Human Resources
Director. Prior to Greencore, Bruce worked
for Danone (Dairy) and Walkers Snacks
(PepsiCo).
Paul joined Eurocell in August 2019 and
was appointed Group Company Secretary
in September 2019. He previously worked
for DFS Furniture plc where he was Financial
Controller and, most recently, Director
of Central Finance and Group Company
Secretary. He is a member of the Institute of
Chartered Accountants in England and Wales.
Eurocell plc Annual Report and Accounts 202298
AUDIT & RISK COMMITTEE REPORT
Dear Shareholder,
I am pleased to report to you on the Audit and Risk
Committee’s objectives and activities during 2022.
This report explains how the Audit and Risk Committee has
discharged its responsibilities during2022.
From a risk management perspective, the cyber incident we
experienced in July was signicant. It resulted in some temporary
disruption, but our core systems were restored quickly, with the
business remaining operational throughout and trading normally from
mid-August. Our business continuity plans responded well to a live
event. In the immediate aftermath of the incident, the Committee
reviewed the status of our cyber defences, and recommended
additional investments in IT infrastructure to further enhance our
resilience and security. This area will remain a very high priority for the
Committee.
In reviewing the 2022 Annual Report, in addition to the review of the
key areas of accounting estimates and judgements as noted on page
100, the Committee considered the accounting treatment of three key
items: the cyber incident business interruption insurance claim income,
the sale of Security Hardware and restructuring costs incurred in the
year, and concluded that, in each case, it was appropriate.
The Internal Audit programme for 2022 included a review of our
Whistleblowing policy, tax risks and ESG strategy. These reviews all
demonstrated solid foundations upon which further developments and
improvements can be based.
Collectively, this work has provided the necessary assurance to the
Committee that internal controls and governance are both adequate
and working effectively. A summary of our activities, including the key
accounting estimates and judgements made, is set out in this report.
Looking forward, the Committee has now also reviewed and
considered the impacts of the BEIS White Paper on Audit and
Corporate Governance reforms and believes the Company is in a
good position to meet the new requirements as/when they become
applicable.
Finally, I would like to thank my fellow Committee members, and both
the internal and external auditors, for their valuable contribution and
support during year.
Frank Nelson
Chair of the Audit and Risk Committee
15 March 2023
Role and responsibilities:
The key responsibilities of the Committee are to:
• review the Annual Report, Half-Year Report and any other formal
announcements relating to the Group’s nancial performance,
giving due consideration to signicant accounting issues and
judgements contained therein, as well as compliance with
accounting standards and other legal and regulatory requirements;
• review the Annual Report and Financial Statements to advise the
Board on whether they give a fair, balanced and understandable
explanation of the Group’s business and performance over the
relevant period;
• review the Group’s nancial reporting systems and procedures;
• review the Group’s internal controls and risk management systems
and advise the Board whether they are adequate, by considering
reports on their effectiveness from the Chief Financial Ofcer and
Chief Executive Ofcer, together with reports from the Group’s
outsourced internal auditors and from the external auditor;
• review and update the Group’s risk register, as part of the
assessment of emerging and principal risks;
• review the Group’s procedures to ensure compliance with the
provisions of the Bribery Act 2010 and the Group’s Whistleblowing
Policy;
• review the external auditors’ independence and objectivity, audit
and non-audit fees and make recommendations regarding audit
tender and the appointment and remuneration of the auditors,
together with the terms of their engagement;
• review the annual audit plan and monitor the effectiveness of the
external audit process;
• monitor and review the effectiveness of the outsourced internal
audit function, including a review of the internal audit plan, all
internal audit reports, and management’s responses to the ndings
and recommendations of the internal audit function;
• consider the adequacy of the Group’s nance function;
• review the Group’s Tax Strategy; and
• review the Committee terms of reference.
Chair Members
Frank Nelson Alison Littley Iraj Amiri
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 99
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Report
Summary of activities during the year
The Audit and Risk Committee met formally three times during the
year and attendance at the meetings is shown on page 88.
The areas of particular focus for the Committee in 2022, and up to the
date of this Annual Report, were as follows:
• Considered the operational and nancial impact of the cyber
incident in July/August on the Company’s IT infrastructure, nancial
reporting and control, including assessment of existing cyber
defences, oversight for further investments to improve resilience
and security in this area and the associated business interruption
insurance recoverability;
• Considered the appropriate accounting treatment, reporting and
presentation of the:
– cyber incident and the business interruption insurance claim
(noted above);
– sale of Security Hardware’s trade and assets; and
– restructuring costs incurred in the year;
• Reviewed documentation prepared to support the viability
statement and going concern assumption set out on page 78;
• Reviewed the external auditors’ plan for their audit for the year
ended 31 December 2022;
• Reviewed reports from the external auditors setting out their
ndings as a result of their audits for the years ended 31 December
2021 and 2022, as well as their review of the 2022 Half-Year
Report;
• Considered the impact of any new accounting standards and
nancial reporting requirements, including guidance issued by the
Financial Reporting Council (‘FRC’);
• Considered reports by management related to the effectiveness of
the Group’s systems of risk management and internal control;
• Reviewed the Group’s risk register, including principal and
emergingrisks;
• Considered reports prepared by the Group’s outsourced internal
audit function;
• Considered the results of the internal assessment of the
Committee’s effectiveness; and
• Approved updates to the Committee’s terms of reference.
The Committee was also kept up to date with changes to accounting
standards and developments in nancial reporting, company law
and other regulatory matters through presentations from the external
auditors, Chief Financial Ofcer and the Company’s nance function.
The role of the Audit and Risk Committee is to oversee nancial
reporting. The Committee reviews the ongoing effectiveness of the
Group’s internal controls and provides assurance on the Group’s risk
management processes. The Committee also assesses information
received from the external and internal audit functions.
Following the 2022 year end, at the March 2023 meeting, the
Committee reviewed and recommended for approval by the Board,
the nancial results for the year ended 31 December 2022, including a
review of the full-year external audit.
As part of that review process, the members of the Committee
reviewed the Annual Report, including the adequacy of the disclosure
with respect to going concern and viability reporting. The Committee
considered the appropriateness of preparing the accounts on a
going concern basis, including consideration of forecast plans, and
supporting assumptions, as well as sensitivity analysis and concluded
that the Company’s nancial position was such that it continued to be
appropriate for accounts to be prepared on a going concern basis.
This additional review by the Audit and Risk Committee, supplemented
by advice received from external advisers during the drafting process,
assisted the Board in determining that the report was fair, balanced
and understandable at the time that it was approved.
Audit and Risk Committee members
During 2022, the Audit and Risk Committee comprised:
Chair:
Frank Nelson (throughout 2022)
Committee members:
Alison Littley (from 7 October 2022)
Iraj Amiri (from 7 November 2022)
Sucheta Govil (to 31 July 2022)
Martyn Coffey (to 6 October 2022)
The Governance Code recommends that all members of the Audit and
Risk Committee are Non-executive Directors, independent in character
and judgement and free from any relationship or circumstance which
may, could or would be likely to, or appear to, affect their judgement
and that one such member has recent and relevant nancial
experience.
The Board considers that the Company complies with the
requirements of the Governance Code in this respect and that,
by virtue of his extensive experience, details of which are set out
on page 81, Frank Nelson, a Fellow of the Chartered Institute
of Management Accountants, has recent and relevant nancial
experience. Furthermore, all Committee members have extensive
relevant commercial and operational experience, including in building/
construction and industrial organisations, which both benet the
Committee and collectively illustrate its competence relevant to the
sector in which the Group operates.
Only members of the Committee have the right to attend Committee
meetings, but both the internal and external auditors were invited
to attend all meetings during the year, as a matter of course. Other
individuals, such as the Chair of the Board, the Chief Executive Ofcer,
the Chief Financial Ofcer and other members of the Board were
invited to attend the Committee meetings as and when appropriate.
In addition, the external auditors met regularly with the Committee
without executive management being present and met separately with
each of the Audit and Risk Committee Chair and the Chief Financial
Ofcer.
The Audit and Risk Committee will meet as often as it deems
necessary but, in accordance with its terms of reference, at least three
times a year.
Eurocell plc Annual Report and Accounts 2022100
AUDIT & RISK COMMITTEE REPORT CONTINUED
Key accounting estimates and judgements
As described above, the Committee reviewed the key estimates and judgements used in the preparation of the Group’s 2022 Financial
Statements (including a review of PricewaterhouseCoopers LLP’s report and a discussion of their observations and ndings in this area)
asfollows:
Area Estimate/judgement Management’s approach Committee’s review
Inventory valuation Impact of raw material price
ination on stock valuation
Review of raw material price variances
(vs historic standard cost) included in
stock valuation
Review of standard costs in early 2022
followed by a full re-costing exercise,
due to be completed during H1 2023
Critically reviewed the carrying
value of the Group’s inventory, the
approach taken by management and
assessed the reasonableness of the
underlying assumptions and nancial
forecastsused
Provisions for slow-moving items
and discontinued product lines
Review of raw material price variances
(vs historic standard cost) included in
stock valuation.
Review of standard costs in early 2022
followed by a full re-costing exercise,
due to be completed in H1 2023.
Assessment of the appropriate level
of provisioning against obsolescence,
undertaken in the context of current
trading and the forecast for the next
nancial year and beyond
Accounts receivable
recoverability
Provisions for bad and
doubtfuldebts
Application of IFRS 9’s expected credit
loss approach to the impairment of
receivables (which requires the use of
forward-looking statistical modelling
to determine the appropriate level of
provision), plus overlays to take into
account other material factors affecting
recoverability, including credit insurance
Critically evaluated the methodology
with respect to setting provisions for
potential bad and doubtful debts,
including management’s assessment
of macro uncertainty, as well as the
absolute level of provisions held
1
1 The Committee’s review also considered the specic nature and characteristics of customers in the Group’s two major divisions.
Risk management
The Group’s risk management processes are set out in detail on pages
70 and 71.
The Group maintains a risk register that identies key and emerging
risks, the probability of those risks occurring and the impact they
would have on the Group if unmitigated. Against each gross risk,
the controls that exist to manage and, where possible, minimise or
eliminate those risks are also listed, and an assessment of net risk is
provided. The risk register also identies any further actions required
such that net residual risk is consistent with the risk appetite set by
the Board. The register is regularly updated to reect changes in
circumstances.
The Group’s Risk Management Committee is chaired by the Chief
Financial Ofcer. This Committee reviews signicant risks and the
status of related mitigating actions each quarter.
The Audit and Risk Committee reviews the risk register twice per year
to ensure the timely identication and robust management of inherent
and emerging risks is taking place. To the extent that any failings or
weaknesses are identied during the review process, appropriate
measures are taken to remedy these.
Information relating to the management of risks and any changes
to the assessment of key risks is reported by the Audit and Risk
Committee to the Board.
Internal controls
The Board is responsible for the overall system of internal controls
for the Group and for reviewing its effectiveness. In accordance with
FRC guidance, it carries out such a review at least annually, covering
all material controls including nancial, operational and compliance
controls and risk management systems.
In particular, the Board discharges its duties in this area by:
• holding regular Board meetings to consider the matters reserved
for its consideration;
• receiving regular management reports which provide an
assessment of key risks and controls;
• scheduling annual Board reviews of strategy including reviews of
the material risks and uncertainties facing the business;
• ensuring there is a clear organisational structure with dened
responsibilities and levels of authority which are regularly reviewed;
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 101
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Report
• ensuring there is a strong tone from the top, with regards
to compliance and controls, which is cascaded through the
organisation;
• ensuring there are documented policies and procedures in place;
and
• scheduling regular Board reviews of performance against nancial
budgets and forecasts.
In reviewing the effectiveness of the system of internal controls, the
Audit and Risk Committee:
• reviews the risk register compiled and maintained by senior
managers within the Group at least bi-annually and question and
challenge where necessary;
• regularly reviews the systems of nancial and accounting controls;
• regularly reviews the internal audits performed and the progress
against previously raised recommendations; and
• reports to the Board on the risk and control culture within
theGroup.
The Group has several operating policies and controls in place
covering a range of issues including nancial reporting, capital
expenditure, business continuity and information technology, including
cyber security, and appropriate employee policies. These policies are
designed to ensure the accuracy and reliability of nancial reporting
and govern the preparation of nancial statements.
In respect of the Group’s nancial reporting, the Finance function is
responsible for preparing the Group nancial statements using a well-
established process and for ensuring that accounting policies are in
accordance with International Financial Reporting Standards.
Consolidated accounts are prepared directly within the Group’s
SAP system. All business units report on SAP, with no adjustments
processed outside of the system, other than the accounting entries
to reect IFRS16 (Leases), which are produced by a specialist lease
accounting software package. Full balance sheet reconciliations are
prepared every month and independently reviewed by senior nance
staff. The Chief Financial Ofcer reviews consolidated and business
unit nancial statements with the Chief Executive every month. All
nancial information published by the Group is subject to the approval
of the Audit and Risk Committee.
During 2022, the Group’s nance and administrative teams returned
to ofce working. However, the enhanced controls that were
implemented as a result of home working during the COVID-19
pandemic have remained in place and in certain places enhanced.
For example the supplier payments process is now substantially
automated, signicantly reducing the risks associated with manual
processing.
Following the cyber incident, the Group’s IT team have remained ever
more vigilant to the risks in this area. As described above, we have
further strengthened our defences. We have also rolled-out additional
and more regular cyber training to staff. In addition, following the
migration of our subsidiary, Vista Panels, all Group companies are now
operating on our SAP system, further improving the nancial control
environment.
Other than as described above, there have been no changes in
the Company’s internal control systems during the nancial year
under review that have materially affected, or are reasonably likely to
materially affect, the Company’s control over nancial reporting.
In addition, management have reviewed and considered the impacts
of the BEIS White Paper on Audit and Corporate Governance
reforms and have provided recommendations to the Committee on
the potential changes required for compliance. The business is in
a good position to meet the new requirements as and when they
becomeapplicable.
The Board, with advice from the Audit and Risk Committee, is satised
that an effective system of internal controls and risk management
is in place which enables the Company to identify, evaluate and
manage key and emerging risks and which accords with the guidance
published by the FRC.
These processes have been in place since the start of the nancial
year and up to the date of approval of the accounts. Further details
of specic material risks and uncertainties facing the business can be
found on pages 70 to 77.
Internal audit
KPMG LLP provide an outsourced Internal Audit function which
complements the internal nance-based checks performed on the
branch network operations.
The Committee, working in conjunction with KPMG LLP, approved a
full programme for 2022 which was compiled based on the following
specic categories:
• Risk: internal audit reviews specically linked to Eurocell’s key
nancial and operational risks;
• Routine: internal audit reviews covering nancial, regulatory,
compliance and IT operations which require cyclical assurance
coverage; and
• Request: internal audit reviews that have been specically included
at the request of either management or the Audit Committee.
Eurocell plc Annual Report and Accounts 2022102
AUDIT & RISK COMMITTEE REPORT CONTINUED
A summary of the 2022 programme is as follows:
Internal audit programme Summary of ndings
Whistleblowing &
Codeof Conduct
• Sound framework is in place including
relevant policies regarding Whistleblowing,
Conicts of Interest, Financial Crime and
Gifts and Entertainment
• Improvement opportunities, include:
– strengthening the ‘tone from the top’
messaging;
– enhancing some of the detail within the
Whistleblowing policy; and
– further development of training, awareness
raising, reporting and lessons learned.
Tax risk • Creation of a tax risk register has helped
drive more effective and transparent tax risk
controls across the business
• Improvement opportunities, include:
– further development of the tax risk
process by enhancing process and
role documentation, and increasing the
formality around key elements
– further formalisation of the tax risk
governance arrangements.
ESG • A sound ESG strategy and plan is in place
to embed the key objectives in the business,
with KPIs which are well-aligned to the UN’s
Sustainability Development Goals
• Improvement opportunities, include:
– further development of the framework,
systems, controls, processes and data
governance to enhance the KPIreporting
– renement of objectives/goals and KPI
improvement targets in-line with sector
best practice.
The Committee also formally reviews the Group’s progress in
implementing the improvement recommendations raised through the
internal audit process in conjunction with the Executive Committee
members, and overall progress remains satisfactory.
Whistleblowing, bribery and business ethics
The Group is committed to the highest standards of openness,
honesty, integrity and accountability.
The Group has a Whistleblowing Policy, which was updated and
relaunched last year, with a focus on improving awareness and
understanding.
This policy makes employees and third parties aware that they should
report any serious concerns or suspicions about any wrongdoing or
malpractice on the part of any employee of the Group, without fear
of criticism, discrimination or reprisal, as well as the procedure for
raising such concerns. Examples include fraud, breakdown in internal
controls, misleading customers, bribery, modern slavery, dishonesty,
corruption and breaches of data protection or health and safety.
During the year, there were no reports received through the
whistleblowing process (2021: 5), and therefore no signicant trends
were identied.
The Committee also takes responsibility for reviewing the policies and
procedures adopted by the Group to prevent bribery. The Group is
committed to a zero-tolerance position with regard to bribery. The
Committee is satised that the Group’s procedures with respect to
these matters are adequate.
The Group also maintains a suite of other policies which support our
commitment to strong business ethics and for which we take a strict
approach to non-compliance. This includes policies related to:
• Financial crime;
• Conicts of interest;
• Gifts and hospitality; and
• Share dealing.
In accordance with the obligations under the Reporting on Payment
Practices and Performance Regulations 2017, the Company has
submitted its bi-annual reports in line with the legislation during
theyear.
The Group’s Modern Slavery Statement, which sets out details of
the policies in relation to slavery and human trafcking, as well as its
due diligence processes with its partners, has been published on the
Group’s website (www.eurocell.co.uk).
The Group has also updated its Tax Strategy Statement, again
published on our website, in compliance with the Finance Act 2016,
which sets out details of the Group’s attitude to tax planning and
taxrisk.
External audit and auditors’ independence
The Audit and Risk Committee has primary responsibility for making
a recommendation to the Board on the appointment, reappointment,
removal and remuneration of the external auditors. It keeps under
review the scope and results of the audit, its cost-effectiveness and the
independence and objectivity of the auditors.
The external auditors are required periodically to assess whether, in
their professional opinion, they are independent and those views are
shared with the Audit and Risk Committee.
The Committee has authority to take independent advice as it deems
appropriate in order to resolve issues on auditor independence. No
such advice has been required to date. There are no contractual
obligations in place that restrict the choice of statutory auditors.
The Group’s current auditors, PricewaterhouseCoopers LLP were
appointed at the Audit and Risk Committee meeting on 29 April
2015, following the Company’s IPO in March 2015. As a result,
PricewaterhouseCoopers LLP may remain as external auditors without
re-tender for ten years from that date, until the completion of the 2024
annual audit. The Committee considers the need to tender the audit
on an annual basis and a detailed review will be undertaken, in due
course, in light of the approaching deadline noted above.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 103
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In accordance with best ethical standards, PricewaterhouseCoopers
LLP has processes in place designed to maintain independence,
including the rotation of the audit engagement partner at least
every ve years. As a result of these processes, the current audit
engagement partner assumed full responsibility since the 2020 audit.
The Committee has also adopted policies to safeguard the
independence of its external auditors which are underpinned by
principles that ensure that the external auditors do not:
• audit their own work;
• make management decisions for the Group;
• create a conict of interest; or
• nd themselves in the role of advocate for the Group.
Any work awarded to the external auditors with a value of more
than £5,000 in aggregate in any nancial year, other than an
audit, requires the specic approval of the Committee. Where the
Committee perceives that the independence of the auditors could be
compromised, the work will not be awarded to the auditors.
Details of amounts paid to PricewaterhouseCoopers LLP for audit
and audit-related assurance services in 2022 are set out on page
147. The audit-related assurance services provided during the year
were in relation to the Half-Year Report (£38,500) and the sustainability
measure which was introduced into the Company’s banking facility
(£26,400).
Prior to recommending the appointment of PricewaterhouseCoopers
LLP at the forthcoming AGM to the Board, the Committee reviewed
the audit process, the performance of the auditors and their ongoing
independence, taking into consideration:
• an assessment of the lead audit partner and the audit team,
including their responses to questions from the Committee;
• a review of the audit approach, scope, determination of signicant
risk areas and materiality;
• the execution of the audit, including the increased use of
technology, and the audit ndings reported;
• input from, and interaction with, management and communication
with, and support to, the Committee; and
• the quality of any recommendation points; and a review of
independence, objectivity, scepticism and their ability to challenge.
Based on this review, the Committee concluded that the external audit
process had been run efciently and that PricewaterhouseCoopers
LLP has been effective in their role as external auditors.
The Committee is satised that the independence of the external
auditors is not impaired and the level of fees paid for non-audit
services, details of which are set out in Note 5 to the Financial
Statements, does not jeopardise their independence. In conclusion,
the Committee has assessed the performance and independence
of the external auditors and recommended to the Board the
reappointment of PricewaterhouseCoopers LLP as auditors until the
AGM in 2024.
Frank Nelson
Chair of the Audit and Risk Committee
15 March 2023
Eurocell plc Annual Report and Accounts 2022104
DIRECTORS’ REMUNERATION REPORT
Dear Shareholder,
I am pleased to report to you on the main activities of
the Committee and how it has performed its duties
during 2022.
As described elsewhere in this Annual Report, in 2022 the
business responded well to some major challenges to deliver solid
nancial results for the year. Despite demand moderating from the
unprecedented levels experienced in the prior year, continued cost
ination and the impact of a cyber incident, the Group reported
progress in both sales and prots against a very strong 2021. In
addition, decisive action was taken to prepare the business for 2023,
with a restructuring programme completed in Q4, and in December, to
further streamline our operations, we sold the trade and assets of our
window hardware subsidiary, Security Hardware.
It is in this context that the Committee has assessed 2022 variable
compensation outcomes, and approved new basic salary levels,
awards and targets.
As noted in the Governance report on page 93, I intend to step-down
from the Board, and its Committees, at the 2023 AGM in May at
which point Kate Allum, who joined the Committee in October 2022,
will assume the role of Committee chair. Kate brings considerable
experience in remuneration matters and has served on a remuneration
committee for at least 12 months at her other Non-executive
appointments (see page 81).
At the 2022 AGM, shareholders approved the Directors’ Remuneration
Policy, as well as the advisory shareholder vote on the Annual Report
on Remuneration, with both resolutions receiving 100% votes in
favour. I would like to thank shareholders for their continued strong
level of support.
Finally, I would like to thank my fellow committee members for their
valuable contributions during the year.
Martyn Coffey
Chair of the Remuneration Committee
15 March 2023
Role and responsibilities:
The Committee’s principal responsibilities are to:
• recommend to the Board the remuneration strategy and framework
for the Chair, Executive Directors and senior managers;
• determine, within that framework, the individual remuneration
arrangements for the Executive Directors and senior managers; and
• oversee any major changes in employee benet structures
throughout the Group.
Summary of activities during the year
The Remuneration Committee met formally three times during the year
and attendance at the meetings is shown on page 88.
The main Committee activities during the year (full details of which are
set out in the relevant sections of this report) included:
• agreeing the performance against the targets and pay-out for the
2021 annual bonus awards;
• nalising the Directors’ Remuneration Policy for
shareholderapproval;
• agreeing Executive Director and senior management base salaries
from 1 April 2022;
• setting the performance targets for the 2022 annual bonus;
• agreeing the award levels and appropriate targets for the 2022
Performance Share Plan (‘PSP’) awards;
• agreeing the remuneration package for Darren Waters, the
Chief Executive Ofcer designate, who will join the Company in
spring2023;
• overseeing the operation of the Group’s Save as You Earn scheme;
and
• reviewing the Committee terms of reference.
Outcome for 2022
Annual Bonus Plan
On a continuing basis, sales for the year were £381 million, up 12%
compared to 2021, and adjusted prot before tax was up 4% at
£28.7million (2021: £27.7 million).
Cash generated from operations for the year was £38.7 million,
which included the signicant adverse impact of major cost ination
on working capital of approximately £8 million. Cash generated from
operations was £33.1 million in 2021.
Security Hardware, which as described above was sold in December
2022, has been classied as a discontinued operation, excluded
from the results of continuing operations and presented in the income
statement as a single loss after tax from discontinued operations for
the year of £2.3 million. This includes a pre-tax trading loss of £1.3
million, which has been deducted from adjusted prot before tax for
the purposes of the Annual Bonus Plan achievement calculations
(resulting in a lower achieved prot of £27.4 million), to provide
comparability with the basis on which the original targets for the
year were set. Adjusted cash generated from operations has been
calculated on a consistent basis.
Chair Members
Martyn Coffey Frank Nelson Kate Allum
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 105
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As a result of this performance, an overall pay-out of 23% of salary is
being awarded to the Executive Directors in respect of 2022, further
details of which can be found on pages 113 and 114 of this report.
PSP awards granted in 2020
On a continuing basis, adjusted basic earnings per share for the year
was 21.4 pence (2021: 19.4 pence).
Return on capital employed (ROCE) at 31 December 2022 was
20.6%.
For the purposes of the PSP achievement calculations, an adjustment
has been made to deduct from adjusted basic earnings per share
the impact of the post-tax trading loss of Security Hardware of £1.1
million (resulting in a lower achieved earnings per share of 20.4pence).
Asimilar adjustment has been made to the ROCE calculation.
As a result of this performance, 63% of the PSP awards originally
granted in 2020 are expected to vest in 2023, further details of which
can be found on page 114 of this report.
As in previous years, annual PSP awards were made during the
year, with targets based on earnings per share and return on capital
employed, and further details can be found on page 115.
Implementation of the Remuneration Policy for 2023
The Remuneration Committee intends to operate the Remuneration
Policy for 2023 on a consistent basis with 2022, details of which are
included within Part B: The Annual Report on Remuneration on page
119, with no changes to the structure of the annual bonus and long-
term incentives.
The Committee will continue to ensure that salary levels are positioned
to reect performance, experience and responsibility and therefore
may be increased at a rate above the rate of increase for the wider
workforce, where it is considered appropriate.
The Committee believes its approach takes due account of market
and best practice and, importantly, also reects and supports
Eurocell’s strategy and promotes the Company’s long-term success.
Remuneration Policy links to strategy
The Group’s strategy has seven key priorities, as set out on pages
20 and 21, established to deliver sustainable growth in shareholder
value by increasing sales and prots at above market level growth
rates through leadership in products, operations, sales, marketing
anddistribution.
Reecting the strategic emphasis on protability, short-term
performance is incentivised with an annual bonus scheme which is
based on the key Company nancial objectives of prot before tax and
operating cash ow. Together, these performance conditions ensure
that the Executive Directors are focused on driving increased protable
growth but not at the expense of its quality and sustainability.
The importance of health and safety in operations is also reected
by the associated underpin that can reduce the bonus pay-out,
demonstrating the Group’s commitment to employee wellbeing and
the need to ensure that growth and protability are not achieved in a
way that is detrimental to the employees nor in a way that promotes
short-term, high-risk behaviour.
Long-term performance is incentivised with a performance share plan
(‘PSP’), which is based on the achievement of demanding earnings
per share and return on capital employed targets. These performance
conditions ensure that the Executive Directors are focused on driving
increased protable growth, as noted above, as well as ensuring
that capital is appropriately invested to provide sustainable returns to
shareholders over the longer-term.
Explanatory foreword
This report contains the material required to be set out as the
Directors’ Remuneration Report for the purposes of Part 4 of The
Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013.
Notwithstanding the fact that:
(i) we will not be seeking shareholder approval for any changes to
our Remuneration Policy at the 2023 AGM; and
(ii) the relevant Regulations do not require us to reproduce our
Remuneration Policy in this report;
The report is split into two parts as follows:
Part A: The Directors’ Remuneration Policy – which sets out for
ease of reference, a summary of our Directors’ Remuneration Policy
for which shareholder approval was given at the 2022 AGM. The full
Directors’ Remuneration Policy was disclosed in the 2021 Annual
Report and is available on the Company’s website.
Part B: The Annual Report on Remuneration – which sets out
payments and awards made to the Directors and details the link
between Company performance and remuneration for 2022 and how
the policy will be operated for 2023, in respect of which we will be
holding an advisory vote at the forthcoming AGM.
The auditors have reported on certain parts of the Annual Report on
Remuneration and stated whether, in their opinion, those parts have
been properly prepared in accordance with the Companies Act 2006.
Those parts which have been subject to audit are clearly indicated.
Eurocell plc Annual Report and Accounts 2022106
DIRECTORS’ REMUNERATION REPORT CONTINUED
Part A: Directors’ RemunerationPolicy
Policy scope
The Policy applies to the Chair of the Board, Executive Directors and Non-executive Directors.
Policy duration
The Directors’ Remuneration Policy was put to a binding shareholder vote at the 2022 AGM and applies from the date of approval for a
maximum of three years.
Executive Directors
The following table summarises the key aspects of the Directors’ Remuneration Policy:
Element and purpose Policy and operation Maximum Performance measures
Base salary
This is the core
element of pay and
reects the individual’s
role and position within
the Group with some
adjustment to reect
their capability and
contribution.
Base salaries will be reviewed each year by the
Committee.
The Committee does not strictly follow data, but
uses the median position (as against appropriate
size and/or sector peers) as a reference point in
considering, in its judgement, the appropriate
level of salary having regard to other relevant
factors including corporate and individual
performance and any changes in an individual’s
role and responsibilities.
Base salary is normally paid monthly in cash.
It is anticipated that salary
increases will generally be in line
with those awarded to salaried
employees. However, in certain
circumstances (including, but
not limited to, changes in role
and responsibilities, market
levels, individual and Company
performance), the Committee
may make larger salary increases
to ensure they are market
competitive. The rationale for any
such increase will be disclosed
in the relevant Annual Report on
Remuneration.
n/a
Benets
To provide benets
valued byrecipients.
The Executive Directors can receive a car
allowance or Company car (and fuel), private
family medical cover, permanent health
insurance andlifeassurance.
The Committee reserves discretion to introduce
new benets where it concludes that it is
appropriate to do so, having regard to the
particular circumstances and to marketpractice.
Where appropriate, the Company will meet
certain costs relating to Executive Director
relocations.
It is not possible to prescribe
the likely change in the cost
of insured benets or the cost
of some of the other reported
benets year-to-year, but the
provision of benets will operate
within an annual limit of £100,000
(plus a further 100% of base
salary in the case of relocations).
The Committee will monitor the
costs of benets in practice and
will ensure that the overall costs
do not increase by more than the
Committee considers appropriate
in the circumstances.
n/a
Pension
To provide retirement
benets.
Executive Directors can receive pension
contributions to personal pension arrangements
or, if a Director is impacted by annual or lifetime
limits on contribution levels to qualifying pension
plans, the balance can be paid as a cash
supplement.
The maximum employer’s
contribution (or cash supplement)
is 10% of base salary.
Pension contributions for new
Executive Director appointments
will be aligned with the pension
benets available to the
widerworkforce.
From 1 January 2023, the
contribution levels for the Chief
Executive Ofcer designate and
the Chief Financial Ofcer are
aligned to the wider workforce,
currently 5%.
n/a
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 107
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Element and purpose Policy and operation Maximum Performance measures
Annual Bonus Plan
To motivate executives
and incentivise delivery
of performance over
a one-year operating
cycle, focusing on
the short-to-medium-
term elements of our
strategic aims.
Annual Bonus Plan levels and the
appropriateness of measures are reviewed
annually at the commencement of each nancial
year to ensure they continue to support our
strategy.
Once set, performance measures and targets
will generally remain unchanged for the year,
except to reect events such as corporate
acquisitions or other signicant events where the
Committee considers it to be necessary in its
opinion to make appropriate adjustments.
Any annual bonus award above 75% of salary
will be compulsorily deferred into Eurocell
shares, under the Company’s Deferred Share
Plan (‘DSP’), for three years from grant.
The number of shares subject to vested DSP
awards may be increased to reect the value of
dividends that would have been paid in respect
of any ex-dividend dates falling between the
grant of awards and the expiry of the vesting
period.
Malus and clawback provisions apply to the
Annual Bonus Plan and DSP, as explained in
more detail below.
The maximum level of Annual
Bonus Plan outcomes is 100%
of base salary per annum for the
duration of this policy.
The performance
measures applied may
be nancial or non-
nancial and corporate,
divisional or individual and
in such proportions as
the Committee considers
appropriate.
Attaining the threshold level
of performance for any
measure will not produce
a pay-out of more than
20% of the maximum
portion of overall annual
bonus attributable to that
measure.
However, the Annual
Bonus Plan remains a
discretionary arrangement
and the Committee
retains a standard power
to apply its judgement to
adjust the outcome of the
Annual Bonus Plan for
any performance measure
(from zero to any cap)
should it consider that to
be appropriate.
Long-term
incentives
To motivate and
incentivise delivery of
sustained performance
over the long term, and
to promote alignment
with shareholders’
interests, the Company
operates PSP.
Awards under the PSP take the form of nil-cost
options which vest to the extent performance
conditions are satised over a period of at least
three years.
The number of shares subject to vested PSP
awards may be increased to reect the value of
dividends that would have been paid in respect
of any ex-dividend dates falling between the
grant of awards and the expiry of the vesting
period (or at the end of any holding period in
respect of unexercised awards).
A two-year post-vesting holding period applies
to PSP awards granted to Executive Directors
after the 2019 AGM.
Malus and clawback provisions apply to PSP
awards, as explained in more detail below.
The PSP allows for awards over
shares with a maximum value
of 150% of base salary per
nancialyear.
The Committee expressly
reserves discretion to make
such awards as it considers
appropriate within these limits.
The Committee may
set such performance
conditions on PSP awards
as it considers appropriate
(whether nancial or
non-nancial and whether
corporate, divisional or
individual).
Performance periods may
be over such periods as
the Committee selects
at grant, which will not
normally be less than
(but may be longer than)
threeyears.
No more than 25% of
awards vest for attaining
the threshold level of
performance conditions.
The Committee also has
standard power to apply
its judgement to adjust the
outcome of the PSP for
any performance measure
(from zero to any cap)
should it consider that to
be appropriate.
Eurocell plc Annual Report and Accounts 2022108
DIRECTORS’ REMUNERATION REPORT CONTINUED
Element and purpose Policy and operation Maximum Performance measures
Share ownership
guidelines
To further align the
interests of Executive
Directors with those
ofshareholders.
Executive Directors are required to retain at
least 50% of the net of tax shares which vest
under the PSP and DSP awards until the
guideline is met. Any PSP performance vested
shares subject to a holding period and any
shares awarded in connection with annual
bonus deferral will be credited for the purpose
of the guidelines (discounted for anticipated
taxliabilities).
From the 2022 AGM, Executive Directors
are required to maintain a shareholding in the
Company for a one-year period after stepping
down from that position, being 100% of salary
or the Executive Directors’ actual relevant
shareholding at leaving this position, if lower.
The Executive Directors’ actual relevant
shareholding will include shares vesting under
any of the Company’s discretionary share
incentive arrangements (including any deferred
bonus shares) from awards granted after the
date the Policy was adopted but excludes
shares acquired through purchase and the
release of shares under share incentive plans
where the grant occurred prior to the adoption
of the Policy.
200% of base salary for all
Executive Directors.
n/a
All-employee
shareplans
To encourage
share ownership by
employees, thereby
allowing them to
share in the long-term
success of the Group
and align their interests
with those of the
shareholders.
These are all-employee share plans established
under HMRC tax-advantaged regimes and
follow the usual form for suchplans.
Executive Directors will be able to participate in
all-employee share plans on the same terms as
other Group employees.
The maximum participation levels
for all-employee share plans will
be the limits for such plans set by
HMRC from time to time.
Consistent with normal
practice, such awards
will not be subject to
performance conditions.
Chair/Non-
executive Director
fees
To enable the
Company to recruit
and retain Chairs
and Non-executive
Directors of the
highest calibre, at the
appropriate cost.
The fees paid to the Chair and Non-executive
Directors aim to be competitive with other
fully listed companies of equivalent size and
complexity.
The fees payable to the Non-executive
Directors are determined by the Board, with the
Chair’s fees determined by the Remuneration
Committee. Fees are paid monthly in cash.
The Chair and Non-executive Directors will
not participate in any cash or share incentive
arrangements.
The Company reserves the right to provide
benets (including travel and ofce support) to
the Chair and Non-executive Directors where
appropriate. Should any assessment to tax be
made on such reimbursement, the Company
reserves the ability to settle such liability on
behalf of the Non-executive Director.
The aggregate fees (and any
benets) of the Chair and
Non-executive Directors will not
exceed the limit from time to time
prescribed within the Company’s
Articles of Association.
If the Chair and/or Non-executive
Directors devote special attention
to the business of the Company,
or otherwise perform services
which in the opinion of the
Directors are outside the scope of
the ordinary duties of a Director,
they may be paid such additional
remuneration as the Directors or
any Committee authorised by the
Directors maydetermine.
n/a
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 109
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Other elements of our policy include:
Recruitment remuneration policy
The Company’s recruitment remuneration policy aims to give the Committee sufcient exibility to secure the appointment and promotion of
high-calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive
Director, the starting point for the Committee will be to apply the
general Policy for Executive Directors as set out above and structure
a package in accordance with that policy. Any caps contained within
the policy for xed pay do not apply to new recruits, although the
Committee would not envisage exceeding these caps in practice.
The Annual Bonus Plan, DSP and PSP will operate (including the
maximum award levels) as detailed in the general Policy in relation to
any newly appointed Executive Director. For an internal appointment,
any variable pay element awarded in respect of the prior role may
either continue on its original terms or be adjusted to reect the new
appointment as appropriate.
For external and internal appointments, the Committee may agree that
the Company will meet certain relocation expenses as it considers
appropriate.
For external candidates, it may be necessary to make additional
awards in connection with the recruitment to buy-out awards
forfeited by the individual on leaving a previous employer.
For the avoidance of doubt, buy-out awards are not subject to a
formal cap. Any recruitment-related awards which are not buy-
outs will be subject to the limits for Annual Bonus Plan and PSP
as stated in the general policy. Details of any recruitment-related
awards will be appropriately disclosed.
For any buy-outs the Company will not pay more than is, in the view
of the Committee, necessary and will in all cases seek, in the rst
instance, to deliver any such awards under the terms of the existing
Annual Bonus Plan, DSP or PSP. It may, however, be necessary
in some cases to make buy-out awards on terms that are more
bespoke than the existing Annual Bonus Plan, DSP or PSP.
All buy-outs, whether under the Annual Bonus Plan, DSP, PSP
or otherwise, will take due account of the service obligations and
performance requirements for any remuneration relinquished by
the individual when leaving a previous employer. The Committee
will seek (where it is practicable to do so) to make buy-outs subject
to what are, in its opinion, comparable requirements in respect of
service and performance. However, the Committee may choose to
relax this requirement in certain cases (such as where the service
and/or performance requirements are materially completed, or
where such factors are, in the view of the Committee, reected in
some other way, such as a signicant discount to the face value of
the awards forfeited) and where the Committee considers it to be in
the interests of shareholders.
A new Chair/Non-executive Director would be recruited on the terms explained above in respect of the main policy for such Directors.
Service contracts
Executive Directors
The Committee’s policy is that each Executive Director’s service agreement should be of indenite duration, subject to termination upon no
more than twelve months’ notice by either party. The service agreements of both Executive Directors comply with that policy. Contracts contain
provisions allowing the Company to make payments in lieu of notice (albeit not including bonus or benets) but do not contain change of
controlprovisions.
The Committee reserves exibility to alter these principles, if necessary, to secure the recruitment of an appropriate candidate including,
ifappropriate, a longer initial notice period (of up to two years) reducing over time.
The date of each current Executive Director’s contract is:
Mark Kelly 29 March 2016
Michael Scott 1 September 2016
Eurocell plc Annual Report and Accounts 2022110
DIRECTORS’ REMUNERATION REPORT CONTINUED
Chair/Non-executive Directors
The Chair and each Non-executive Director is engaged for an initial period of three years. These appointments can be renewed following the
initial three-year term. These engagements can be terminated by either party on twelve months’ notice.
Neither the Chair nor any Non-executive Directors can participate in the Company’s incentive plans, are not entitled to any pension benets and
are not entitled to any payment in compensation for early termination of their appointment beyond the twelve months’ notice referred to above.
Name Date of original appointment Date of latest appointment Term
Derek Mapp 16 May 2022 16 May 2022 3 years
Frank Nelson 4 February 2015 2 February 2021 3 years
Martyn Coffey 4 February 2015 2 February 2021 3 years
Kate Allum 1 July 2022 1 July 2022 3 years
Alison Littley 1 July 2022 1 July 2022 3 years
Iraj Amiri 7 November 2022 7 November 2022 3 years
The Directors’ service agreements and letters of appointment are available for shareholders to view from the Group Company Secretary
onrequest.
Termination/change of control policy summary
It is appropriate for the Committee to consider treatments on a termination having regard to all of the relevant facts and circumstances available
at that time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that the Committee may
choose to apply under the discretions available to it under the terms of the Annual Bonus Plan, DSP and PSP. The potential treatments on
termination under these plans are summarised in the table below:
Incentives
If a leaver is deemed to be a ‘good leaver’; for example, leaving through
injury, ill-health, disability, retirement, redundancy, sale of business or
otherwise at the discretion of the Committee
If a leaver is not
a ‘good leaver’ Change in control
Annual bonus Committee has discretion to determine an annual bonus
which may be limited to the period actually worked.
Annual bonus not
generally paid.
Committee has discretion to
determine annual bonus.
DSP Awards normally vest either on cessation or the normal
vesting date. The Committee can pro-rate awards if
considered appropriate.
All awards will
normally lapse.
Awards vest on a pro rata basis,
unless the Committee determines
not to pro-rate.
PSP Will receive a pro-rated award subject to the application
of the performance conditions at the end of the normal
performance period.
Committee retains standard discretions to either vary/
disapply time pro-rating or to accelerate vesting to the
earlier date of cessation (determining the performance
conditions at that time).
All awards will
normally lapse.
Will receive a pro-rated award
subject to the application of the
performance conditions at the
date of the event, unless the
Committee determines not to
pro-rate.
On death, the Annual Bonus Plan, DSP and PSP awards typically vest in full (with pro-rating also potentially applying).
The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal claims.
Inaddition, and consistent with market practice, in the event of the termination of an Executive Director, the Company may make a contribution
towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees will be disclosed
as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not include an explicit cap on the cost of
terminationpayments.
Other policy matters
The 2021 Annual Report also set out formal details of our approach to:
• Performance targets;
• Malus and clawback;
• Stating maximum amounts for the Remuneration Policy;
• Travel and hospitality;
• Differences between the policy on remuneration for Directors and remuneration of other employees;
• Committee discretions;
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 111
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• External appointments;
• Statement of consideration of employment conditions elsewhere in the Group; and
• Statement of consideration of shareholder views.
Illustrations of application of Remuneration Policy
The charts above aim to show how the Remuneration Policy for Executive Directors will be applied in 2023 using the assumptions in the
tablebelow.
Minimum • Consists of base salary, benets and pension.
• Base salary is the salary to be paid with effect from 1 April 2023.
• Estimated value of a full year’s benets, including car (and fuel) or car allowance, private family medical
cover, permanent health insurance and travel insurance.
• Pension measured as the cash allowance in lieu of Company contributions at 10% of salary for
MarkKelly and 5% of salary for Michael Scott.
Base salary Benets Pension Total xed
Mark Kelly £433,336 £9,403 £43,334 £486,073
Michael Scott £296,233 £ 17, 07 8 £14,812 £328,123
Target • Annual bonus: consists of an assumed payment of 50% of maximum opportunity.
• Long-term incentives: consists of the threshold level of vesting (25% vesting) under the PSP.
Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• Annual bonus: consists of maximum bonus of 100% of base salary.
• Long-term incentives: consists of the maximum level of vesting under the PSP.
Maximum with
share price growth
• As per the maximum but with a 50% share price growth assumption for the PSP awards.
0
200
400
600
800
1000
1200
1400
1600
2000
1800
Maximum
with share
price growth
MaximumTarget Minimum
CEO
100% 56%
25%
19%
31%
28%
41%
25%
23%
35%
17%
£1,069k
£587k
£328k
£1,291k
£000
Maximum
with share
price growth
MaximumTarget Minimum
CFO
100%
£1,569k
£865k
£486k
£1,894k
56% 31% 26%
25%
19%
28%
41%
23%
34%
17%
Share price growth
PSP
Annual bonus
Fixed pay
Eurocell plc Annual Report and Accounts 2022112
DIRECTORS’ REMUNERATION REPORT CONTINUED
Part B: The Annual Report on Remuneration
The Committee (unaudited)
Remuneration Committee members
During 2022, the Remuneration Committee comprised:
Chair:
Martyn Coffey
Committee members:
Frank Nelson
Derek Mapp (from 16 May 2022 to 6 October 2022)
Kate Allum (from 7 October 2022)
Sucheta Govil (to 31 July 2022)
As noted in the Governance report on page 96, the current Committee Chair, Martyn Coffey, intends to step-down from the Board at the 2023
AGM in May at which point Kate Allum will assume the role of Committee Chair. Kate has served on a remuneration committee for at least
12months at her other Non-executive appointments (see page 81).
The Chief Executive Ofcer and Chief Financial Ofcer are invited to attend meetings of the Committee, except when their own remuneration is
being discussed, and other Executive and Non-executive Directors attend meetings as required.
The Committee has formal terms of reference which can be viewed on the Company’s website (www.investors.eurocell.co.uk).
During the year, the Committee considered its obligations under the Code and concluded that:
• the Directors’ Remuneration Policy supports the Company’s strategy (including in the performance measures chosen); and
• remuneration for our Directors remains appropriate.
In addition, the Committee has ensured that the Directors’ Remuneration Policy and practices are consistent with the
sixfactors set out in Provision 40 of the Corporate Governance Code:
Clarity – Our Directors’ Remuneration Policy is well understood by our senior executive team and has been clearly articulated to our
shareholders and representative bodies (both on an ongoing basis and during a consultation when changes are being proposed).
Simplicity – The Committee is mindful of the need to avoid overly complex remuneration structures which can be misunderstood and
deliver unintended outcomes. Therefore, a key objective of the Committee is to ensure that our Directors’ Remuneration Policy and
practices are straightforward to communicate and operate.
Risk – Our Directors’ Remuneration Policy has been designed to ensure that inappropriate risk-taking is discouraged and will not be
rewarded via (i) the balanced use of both annual incentives and long-term incentives which employ a blend of targets, (ii) the signicant role
played by shares in our incentive plans (together with bonus deferral and shareholding guidelines) and (iii) malus/clawback provisions within
all our incentive plans.
Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to standard dilution limits. The use of
shares within our incentive plans results in the actual pay received being highly aligned to the experience of our shareholders.
Proportionality – There is a clear link between individual awards, delivery of strategy and our long-term performance. In addition, the
signicant role played by variable pay, together with the composition of the Executive Directors’ service contracts, ensures that poor
performance is not rewarded.
Alignment to culture – Our executive pay policies are fully aligned to the Company’s culture through the use of metrics in both the annual
bonus and PSP that measure how we perform against key aspects of our strategy, which has the objective of delivering sustainable growth
in revenue, prot and cash ow.
FIT Remuneration Consultants LLP (‘FIT’), signatories to the Remuneration Consultants Group’s Code of Conduct, are appointed by the
Committee and provide advice to the Committee on all matters relating to remuneration, including best practice. FIT provided no other services
to the Group and, accordingly, the Committee was satised that the advice provided by FIT was objective and independent. FIT’s fees in respect
of 2022 were £13,810 (excluding VAT). FIT’s fees were charged on the basis of the rm’s standard terms of business for advice provided.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 113
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Audited information
Single total gure table (audited)
The remuneration for the Chair, Executive and Non-executive Directors of the Company who performed qualifying services during the relevant
nancial year is detailed below. The Chair and Non-executive Directors received no remuneration other than their annual fee.
For the year ended 31 December 2022:
Name
Salary/
fees
£000
Taxable
benets
1
£000
Pension
£000
Other
2
£000
Total xed
remuneration
£000
Bonus
3
£000
Long-term
incentives
4
£000
Total variable
remuneration
£000
Total
remuneration
£000
Mark Kelly 426 9 47 - 482 99 276 375 857
Michael Scott 272 17 30 - 319 63 176 239 558
Derek Mapp
5
94 – – – 94 – – – 94
Frank Nelson 60 – – – 60 – – – 60
Martyn Coffey 53 – – – 53 – – – 53
Kate Allum
6
24 – – – 24 – – – 24
Alison Littley
6
24 – – – 24 – – – 24
Iraj Amiri
7
7 – – – 7 – – – 7
Robert Lawson
8
65 – – – 65 – – – 65
Sucheta Govil
9
26 – – – 26 – – – 26
For the year ended 31 December 2021:
Name
Salary/
fees
£000
Taxable
benets
1
£000
Pension
£000
Other
2
£000
Total xed
remuneration
£000
Bonus
3
£000
Long-term
incentives
4
£000
Total variable
remuneration
£000
Total
remuneration
£000
Mark Kelly 401 8 60 7 476 403 – 403 879
Michael Scott 256 17 38 5 316 258 – 258 574
Robert Lawson 120 – – – 120 – – – 120
Frank Nelson 48 – – – 48 – – – 48
Martyn Coffey 45 – – – 45 – – – 45
Sucheta Govil 40 – – – 40 – – – 40
Notes:
1 Taxable benets comprise Company car (and fuel) or car allowance, private family medical cover, permanent health insurance and travel insurance.
2 Other comprises the buy-out of unused holiday entitlement.
3 Bonuses are calculated on the salary in operation at the end of the nancial year.
4 Value of long-term incentives vesting in 2023 is based on an estimated market value using the average share price during the last three months of 2022.
5 Derek Mapp was appointed to the Board on 16 May 2022 and became Non-executive Chair from 1 July 2022.
6 Kate Allum and Alison Littley were appointed to the Board on 1 July 2022.
7 Iraj Amiri was appointed to the Board on 7 November 2022.
8 Robert Lawson stepped-down from the Board on 1 July 2022.
9 Sucheta Govil stepped-down from the Board on 31 July 2022.
The aggregate emoluments (being salary/fees, bonuses, benets and pension allowances) of all Directors for 2022 was £1,768,000 (2021:
£1,706,000).
Further information on the 2022 annual bonus (audited)
In 2022, the annual bonus metrics were a blend of targets relating to prot before tax (70% of the bonus opportunity) and cash ow (30% of the
bonus opportunity). In addition, a health and safety adjustment underpin is applied which, if not achieved, could reduce the bonus pay-out.
Security Hardware, which was sold in December 2022, has been classied as a discontinued operation, excluded from the results of continuing
operations and presented in the income statement as a single loss after tax from discontinued operations for the year of £2.3 million. This
includes a pre tax trading loss of £1.3 million, which has been deducted from adjusted prot before tax for the purposes of the Annual Bonus
Plan achievement calculations (resulting in a lower achieved prot of £27.4 million), to provide comparability with the basis on which the targets
for the year were set.
Eurocell plc Annual Report and Accounts 2022114
DIRECTORS’ REMUNERATION REPORT CONTINUED
As a result, the prot before tax and cash ow bonus targets and achievements were as follows:
£m Threshold Target Maximum Actual
Achievement
(% of max)
Adjusted prot before tax 27.1 28.5 30.6 27. 4
1
33%
Adjusted cash generated from operations 43.7 46.0 49.5 40.3
2
0%
1 Adjusted prot before tax from continuing operations of £28.7 million, less Security Hardware pre-tax trading loss of £1.3 million (included separately within loss after tax
from discontinued operations – see Note 12 to the Consolidated Financial Statements).
2 Cash generated from operations of £38.7 million (which includes the Security Hardware pre-tax trading loss), plus cash paid in respect of non-underlying items of
£1.6 million (see Note 7 to the Consolidated Financial Statements).
In order to reect the level of stretch within the targets, the Committee determined that a pay-out of 75% of base salary would be appropriate for
an on-target performance for 2022.
Performance against the prot before tax element of the bonus resulted in an achievement of 33% of that element. Performance against the
cash ow element of the bonus resulted in an achievement of 0% of that element. After the appropriate weightings are applied, this provides an
overall pay-out of 23% of salary being awarded to the Executive Directors in respect of 2022, which is to be paid in cash.
The health and safety underpin was also considered satised and no discretion has been applied to the formulaic outcome by the Committee.
PSP awards vesting in respect of 2022 (audited)
The PSP values included under long-term incentives in the single gure table above relate to awards granted in 2020 which vest in 2023,
dependent on EPS and ROCE performance measured over the three-year period ended 31 December 2022, as described in the tables below.
For the purposes of the PSP achievement calculation, a similar adjustment has been made to deduct from adjusted basic earnings per share
the impact of the post-tax trading loss of Security Hardware of £1.1 million (resulting in a lower achieved earnings per share of 20.4 pence).
Under the EPS performance target (two-thirds of awards) which uses a sliding scale, 25% of this part of an award vests where adjusted
earnings per share of 19.3p is achieved for the year ended 31 December 2022, increasing pro rata to full vesting where adjusted earnings per
share of 20.9p is achieved.
Performance target Threshold Maximum Actual
Achievement
(% of max)
Adjusted basic EPS
1
19.3p 20.9p 20.4p
1
77%
1 Adjusted basic earnings per share from continuing operations of 21.4 pence, less impact of Security Hardware post tax trading loss of £1.1 million (or 1.0 pence per share,
included separately within loss after tax from discontinued operations – see note 12 to the Consolidated Financial Statements).
Under the Group ROCE target (one-third of awards), which uses a sliding scale, 25% of this part of an award vests where Group ROCE of 20%
is achieved for the year ended 31 December 2022, increasing pro rata to full vesting where Group ROCE of 25% is achieved.
Performance target Threshold Maximum Actual
Vesting
%
Group ROCE
2
20% 25% 20.6% 34%
2 Adjusted operating prot for the year ended 31 December 2022 less Security Hardware pre-tax losses, divided by average totals of opening and closing assets less trade
and other payables, all measured on a pre-IFRS 16 basis.
Performance against the adjusted earnings per share element of the PSP results in an expected vesting of 77% of that element. Performance
against the Group ROCE element of the PSP results in an expected vesting of 34% of that element. After the appropriate weightings are
applied, this results in an expected vesting of 63% of the PSP granted in 2020.
As a result, 192,926 PSP share awards for Mark Kelly and 123,258 PSP share awards for Michael Scott are expected to vest in 2023 (excluding
dividend equivalent shares). For the purposes of the single gure table above, these awards have been valued based on an estimated market
value using the average share price during the last three months of 2022, being 143.06 pence per share. The grant share price for the award
was 191.0 pence per share and accordingly the relevant gures are not reective of an increase in share price. No discretion to the formulaic
outcome has been applied by theCommittee.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 115
Corporate
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Strategic
Report
Statement of Directors’ shareholding and share interests (audited)
The table below details for each Director, the total number of Directors’ interests in shares at 31 December 2022:
Director
Benecially
owned
31 December
2021
Benecially
owned
31 December
2022
1
Vested but
unexercised
awards
Unvested
DSP
Unvested
PSP
2
Unvested
SAYE
Shareholding
guideline
(% of salary)
3
Shareholding
guideline
met?
3
Mark Kelly 195,346 234,020 – 44,74 9 831,449 10,465 200 No
Michael Scott 59,971 72,862 – 28,589 531,202 10,465 200 No
Derek Mapp – 91,000 – – – – – n/a
Frank Nelson 49,090 – – – – – – n/a
Martyn Coffey 16,428 – – – – – – n/a
Kate Allum – – – – – – – n/a
Alison Littley – – – – – – – n/a
Iraj Amiri – – – – – – – n/a
Robert Lawson 101,311 – – – – – – n/a
Sucheta Govil 5,714 – – – – – – n/a
1 The benecial shareholdings set out above include those held by Directors and their respective connected persons as at 31 December 2022 or at the date of stepping
down from the Board if earlier.
2 Performance-based share awards.
3 Shareholding guidelines for Executive Directors are 200% of salary. Executive Directors will be required to retain at least 50% of the net of tax shares which vest under the
PSP and DSP until the guideline is met.
PSP awards granted in 2022 (audited)
The following awards were made under the PSP in 2022:
Director Date of grant
Basis of award
(% salary) Share price
1
Number of
shares
Face value
of award Vesting period
Mark Kelly 13 April 2022 150% 225.3p 288,505 £650,002 April 2025 to April 2026
Michael Scott 13 April 2022 150% 225.3p 184,322 £415,277 April 2025 to April 2026
1 Rounded to one decimal place for the purposes of presentation in this report.
The performance conditions applying to the awards made in April 2022 relate to: (i) adjusted Earnings per Share for two-thirds of the award; and
(ii) Group Return on Capital Employed for one-third of the award.
More specically:
Adjusted basic EPS
1
for the year ended 31 December 2024 Portion of award vesting
Above 22.8p 100%
Between 21.2p and 22.8p Pro rata on straight-line between 25% and 100%
21.2p 25%
Below 21.2p 0%
Group ROCE
2
for the year ended 31 December 2024 Portion of award vesting
Above 26% 100%
Between 21% and 26% Pro rata on straight-line between 25% and 100%
21% 25%
Below 21% 0%
1 Dened as adjusted basic earnings per share as shown in the consolidated audited accounts of the Company, excluding non-underlying items, for the third nancial year of
the performance period.
2 Dened as Group adjusted operating prot divided by average totals of opening and closing assets less trade and other payables (all on a pre-IFRS 16 basis), for the third
nancial year of the performance period.
Eurocell plc Annual Report and Accounts 2022116
DIRECTORS’ REMUNERATION REPORT CONTINUED
DSP awards granted in 2022 (audited)
The following awards were made under the DSP in 2022 in respect to the 2021 annual bonus. As required under our Director’s Remuneration
Policy annual bonus awards above 75% of salary was deferred into shares to the third anniversary of the normal bonus payment date under
theDSP.
Director Date of grant
Basis of award
(% salary) Share price
1
Number of
shares
Face value
of award Vesting period
Mark Kelly 13 April 2022 25% 225.2p 44,749 £100,775 April 2025 to April 2026
Michael Scott 13 April 2022 25% 225.2p 28,589 £64,382 April 2025 to April 2026
1 Rounded to one decimal place for the purposes of presentation in this report.
Outstanding share plan awards (audited)
Details of all outstanding share awards made to Executive Directors are set out below:
Number of shares
Executive
Award
type
Exercise
price
(p) Grant date
Interest at
1 January
2022
Awards
granted
in the year
Awards
lapsed
in the year
Awards
exercised
in the year
Interest at
31 December
2022 Exercise period Notes
Mark Kelly PSP 0 24/04/19 170,247 – (170,247) – – Apr 22 – Apr 23 1
PSP 0 17/11/20 308,582 – – – 308,582 Nov 23 – Nov 24 2
PSP 0 22/04/21 234,362 – – – 234,362 Apr 24 – Apr 25 3
PSP 0 13/04/22 – 288,505 – – 288,505 Apr 25 – Apr 26 4
DSP 0 13/04/22 – 44,749 – – 44,749 Apr 25 – Apr 26 5
SAYE 172.0 09/04/20 10,465 – – – 10,465 Jun 23 – Nov 23 6
Michael Scott PSP 0 24/04/19 108,768 – (108,768) – – Apr 22 – Apr 23 1
PSP 0 17/11/20 197,149 – – – 197,149 Nov 23 – Nov 24 2
PSP 0 22/04/21 149,731 – – – 149,731 Apr 24 – Apr 25 3
PSP 0 13/04/22 – 184,322 – – 184,322 Apr 25 – Apr 26 4
DSP 0 13/04/22 – 28,589 – – 28,589 Apr 25 – Apr 26 5
SAYE 172.0 09/04/20 10,465 – – – 10,465 Jun 23 – Nov 23 6
All gures above exclude dividend equivalent shares, where applicable.
Notes:
1 See ‘PSP Awards Vesting in Respect of 2021’ section in the 2021 Directors’ Remuneration Report.
2 See ‘PSP Awards Vesting in Respect of 2022’ section above.
3 As disclosed in the 2021 Directors’ Remuneration Report.
4 See ‘PSP Awards Granted in 2022’ section above.
5 See ‘DSP Awards Granted in 2022’ section above.
6 Awards granted under the Eurocell plc Save As You Earn Scheme in 2020. Awards are based on a three-year savings contract with an exercise price of 172.0p.
During the year ended 31 December 2022, the highest mid-market price of the Company’s shares was 266.0p and the lowest mid-market price
was 132.5p. At 31 December 2022 the share price was 147.5p.
The aggregate gains by all Directors during 2022 was £nil (2021: £268,282), as no share awards vested in the year.
Payments to past Directors (audited)
No payments to past Directors were made during the year.
Payments for loss of ofce (audited)
No payments for loss of ofce were made during the year.
Performance graph and CEO remuneration table (unaudited)
The following graph shows the Total Shareholder Return (‘TSR’) performance of an investment of £100 in Eurocell plc’s shares from its listing in
March 2015 to 31 December 2022, compared with a £100 investment in the FTSE SmallCap Index over the same period. The FTSE SmallCap
Index was chosen as a comparator because it represents a broad equity market index of similar-sized companies.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 117
Corporate
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Strategic
Report
Total Shareholder Return Index (unaudited)
The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR Index graph:
Year CEO
Single gure of
total remuneration
Annual bonus pay-out
against maximum %
Long-term incentive vesting
rates against maximum
Year-on-year change in
CEO remuneration %
Year-on-year change in
employee remuneration %
2022 Mark Kelly £857,090 23% 63% (3)% (1)%
2021 Mark Kelly £879,271 100% 0% 89% 10%
2020 Mark Kelly £465,945 0% 0% (31)% 2%
2019 Mark Kelly £673,262 49% 0% 47% 2%
2018 Mark Kelly £459,294 0% 0% (50)% 2%
2017 Mark Kelly £916,442 40% n/a 8% 2%
2016 Mark Kelly
Patrick Bateman
£560,558
£284,457
80%
33%
n/a
n/a
33% 2%
2015 Patrick Bateman £637,098 87% n/a n/a n/a
As the Company listed in March 2015, part of the 2015 remuneration relates to when Eurocell was a privately owned Company.
Note:
Based on all Group employees in order to provide a more meaningful comparison (Eurocell plc employees comprise the Executive and Non-executive Directors only).
Annual change in remuneration of each Director compared to employees (unaudited)
The table below presents the year-on-year percentage change in remuneration for each Director and for all Group employees:
% change from 2021 to 2022 % change from 2020 to 2021
Salary/fee
increase/(decrease)
%
Annual bonus
increase/decrease
%
Taxable benets
increase
%
Salary/fee
increase/decrease
1
%
Annual bonus
increase/decrease
%
Taxable benets
(decrease)/increase
%
Mark Kelly 6% (75)% 14% 5% n/a
2
(73)%
Michael Scott 6% (76)% 25% 5% n/a
2
2%
Derek Mapp n/a
3
n/a n/a n/a n/a n/a
Frank Nelson 25% n/a n/a 3% n/a n/a
Martyn Coffey 18% n/a n/a 3% n/a n/a
Kate Allum n/a
3
n/a n/a n/a n/a n/a
Alison Littley n/a
3
n/a n/a n/a n/a n/a
Iraj Amiri n/a
3
n/a n/a n/a n/a n/a
Robert Lawson (46)%
4
n/a n/a 3% n/a n/a
Sucheta Govil (35)%
5
n/a n/a 3% n/a n/a
All employees 4% (76)% 2% 6% 232% 0%
1 All the Directors took a 20% reduction in salary/fees, for two months, during the rst lockdown period in 2020.
2 Percentage increase is not available due to 2020 bonuses being £nil.
3 Directors appointed to the Board during 2022.
4 Robert Lawson stepped-down from the Board on 1 July 2022.
5 Sucheta Govil stepped-down from the Board on 31 July 2022.
Eurocell
FTSE SmallCap
Source: Datastream
31 Dec
2016
31 Dec
2015
3 Mar
2015
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
31 Dec
2017
100
150
200
Eurocell plc Annual Report and Accounts 2022118
DIRECTORS’ REMUNERATION REPORT CONTINUED
CEO to employee pay ratio (unaudited)
The table below shows the CEO to employee pay ratio.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2022 Option B 37 : 1 31 : 1 24 : 1
2021 Option B 42 : 1 33 : 1 27 : 1
2020 Option B 23 : 1 19 : 1 15 : 1
2019 Option B 34 : 1 27 : 1 21 : 1
Notes to the CEO to employee pay ratio:
1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.
2 In line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5 April for each
nancial year.
3 The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date of
5April 2022.
4 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
5 The Chief Executive Ofcer’s salary, benets, pension, bonus and long-term incentives from the single total gure have been used.
The total pay and benets and the salary component of total pay and benets for the employee at each of the 25th percentile, the median and
the 75th percentile are shown below:
Salary £000 Total pay and benets £000
25th percentile Median 75th percentile 25th percentile Median 75th percentile
2022 23 27 33 23 28 35
Based on the salary prole of the Group’s UK employees, the median pay ratio is consistent with the pay, reward and progression policies of the
Group as a whole.
Relative importance of spend on pay (unaudited)
The table below details the change in total employee pay between 2021 and 2022 as detailed in Note 8 of the Financial Statements, compared
with distributions to shareholders by way of dividend, share buybacks or any other signicant distributions or payments.
% change
2022
£m
2021
£m
Total gross employee pay 5% 84.9 81.0
Dividends/share buybacks 208% 11.1 3.6
The average number of employees during the year was 2,250 (2021: 2,120).
Statement of voting at the Annual General Meeting (unaudited)
The following table shows the results of the binding Remuneration Policy vote and the advisory Directors’ Remuneration Report vote at the
12May 2022 AGM.
(Binding Vote – 12 May 2022)
Approval of the Directors’ Remuneration Policy
(Advisory Vote – 12 May 2022)
Annual Report on Remuneration
Total number of votes % of votes cast Total number of votes % of votes cast
For (including discretionary) 97,411,403 100% 95,245,725 100%
Against – 0% – 0%
Votes withheld – – 2,165,678 –
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 119
Corporate
Governance
Strategic
Report
Implementation of policy for 2023 (unaudited)
Base salaries
In light of Mark Kelly’s approaching retirement at the 2023 AGM in May, his base salary will remain at £433,336 p.a. until that date. Darren
Waters, the Chief Executive Ofcer designate will join the Company in spring 2023 with a base salary of £410,000 p.a. Michael Scott’s current
base salary of £276,853 p.a. has been subject to a detailed market benchmarking exercise and, as a result, will be increased to £296,233 p.a.
with effect from 1 April 2023.
The Committee notes that the resulting base salaries still remain below the median level seen in similar sized FTSE SmallCap companies.
Pensions
A dened contribution/salary supplement of 5% of salary, which is aligned to the wider workforce, will be offered to Michael Scott and Darren
Waters (see above). In light of Mark Kelly’s approaching retirement, his pension salary supplement will remain at 10% of salary until his retirement
at the 2023 AGM in May.
Benets
Details of the benets received by Executive Directors are set out in Note 1 to the Single Total Figure Table on page 113. There is no intention to
introduce additional benets in 2023.
Annual bonus
The annual bonus opportunity for 2023 will be structured in a similar manner to 2022. The maximum bonus will be 100% of salary and will be
payable based on performance against a blend of adjusted prot before tax (70% of the bonus opportunity) and operating cash ow (30% of the
bonus opportunity) targets.
These targets will be set in light of internal and external forecasts and will require outperformance to generate higher levels of pay-out. In
addition, a health and safety adjustment underpin will apply which, if not achieved, could reduce the bonus pay-out. Any bonus earned above
75% of salary will be deferred into shares for three years.
Given the competitive nature of the Company’s sector, the specic performance targets for 2023 are considered to be commercially sensitive
and, accordingly, are not disclosed at this time, although the targets will be disclosed in next year’s report in relation to the 2023 bonus outturn.
Long-term incentives
PSP awards are expected to be made in April 2023 to Michael Scott and Darren Waters at 150% of salary. In light of Mark Kelly’s approaching
retirement at the 2023 AGM, no awards will be made to him.
Performance targets will be based on earnings per share (two-thirds of the award) and return on capital employed improvement (one-third) in the
third year of the performance period. Full details of these targets will be disclosed in next year’s report, with these targets no less challenging in
relative terms than the targets applied to the 2022 PSP awards.
Recruitment bonus
As part of his recruitment package to provide compensation for share awards granted by his former employer that will be forfeited on
leaving, Darren Waters, on joining the Company, will be awarded £550,000 worth of shares under the DSP (in compliance with the Directors’
Remuneration Policy and based on the share price as at the date of grant of the award), which will vest upon the expiry of a two-year deferral
period subject to continued employment (with standard ‘good leaver’ provisions).
Chair and Non-executive Directors’ fees
The fee for the Chair is £150,000 p.a. and the base fees for Non-executive Directors will be increased from £48,000 to £50,000 p.a. with effect
from 1 April 2023.
Additional fees for the Chair of the Audit and Risk Committee, Chair of the Remuneration Committee and Chair of the Social Values and ESG
Committee will be increased from £8,000 to £10,000 p.a. and the additional fee for the Senior Independent Director will be increased from
£8,000 to £10,000 p.a. all with effect from 1 April 2023.
By Order of the Board
Martyn Coffey
Chair of the Remuneration Committee
15 March 2023
Eurocell plc Annual Report and Accounts 2022120
DIRECTORS’ REPORT
The Directors present their audited consolidated nancial statements
for the year ended 31 December 2022. Eurocell plc (‘the Company’)
is a company incorporated and domiciled in the UK, with registration
number 08654028, and is the holding company of the Eurocell Group
of companies (‘the Group’). All of the Group’s activities are within the
United Kingdom, with the exception of two overseas branches in the
Republic of Ireland.
The shares of the Company have been traded on the main
market of the London Stock Exchange throughout the year ended
31December2022.
Director Position Service in the year and up to date of report approval
Current directors:
Derek Mapp Chair Appointed on 16 May 2022, Chair from 1 July 2022
Mark Kelly Chief Executive Ofcer Served throughout
Michael Scott Chief Financial Ofcer Served throughout
Frank Nelson Senior Independent Non-executive Director Served throughout
Martyn Coffey Independent Non-executive Director Served throughout
Kate Allum Independent Non-executive Director Appointed on 1 July 2022
Alison Littley Independent Non-executive Director Appointed on 1 July 2022
Iraj Amiri Independent Non-executive Director Appointed on 7 November 2022
Former directors:
Bob Lawson Chair Served up to 30 June 2022
Sucheta Govil Independent Non-executive Director Served up to 31 July 2022
Strategic Report
As permitted by section 414C of the Companies Act 2006, certain
information required to be included in the Directors’ Report has been
included in the Strategic Report, which is set out on pages 1 to 79.
Specically, this relates to information on the Group’s strategy, business
model, likely future developments and risk management.
UK Corporate Governance Code
Matters related to corporate governance and our compliance with the
Code are set out in the Corporate Governance Statement on pages
84 to 92, which is incorporated herein by reference.
Results
Our Financial Statements for the year ended 31 December 2022 are
set out on pages 124 to 177. The Financial Statements should be
read in conjunction with the Chief Executive Ofcer’s Report, Divisional
Reviews and the Chief Financial Ofcer’s Report.
Dividends
The Board is recommending a nal dividend of 7.2 pence (2021: 6.4
pence) per share for 2022 which, together with the interim dividend of
3.5 pence (2021: 3.2 pence) per share, makes a combined dividend of
10.7 pence (2021: 9.6 pence) per share.
Payment of the nal dividend, if approved at the Annual General
Meeting (‘AGM’), will be made on 17 May 2023 to shareholders
registered at the close of business on 21 April 2023. The ex-dividend
date will be 20 April 2023.
Dividends paid in the year to 31 December 2022 and disclosed in
the Consolidated Cash Flow Statement of £11.1 million (2021: £3.6
million), is comprised the 2021 nal dividend of 6.4 pence per share,
The Directors’ Report includes the Corporate Governance Statement
set out on pages 84 to 92.
The Directors’ Report and Strategic Report comprise the
‘Management Report’ for the purpose of the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules (DTR 4.1.8R).
The Directors of the Company, and their biographical details, are listed
on pages 80 and 81 and were all in place on the date this Directors’
Report was approved. Changes to the Directors during the year, and
up to the date of this report, are set out below:
which was paid in May 2022, and the 2022 interim dividend of 3.5
pence per share which was paid in October 2022.
Tax governance
Our tax policy is set out below. It is determined by the Board and
overseen by the Audit and Risk Committee. The Board reviews the
policy, and our compliance with it, on an annual basis. Operational
responsibility for the execution of the Group’s tax policy rests with the
Chief Financial Ofcer, who reports the Group’s tax position to the
Audit and Risk Committee on a regular basis.
Tax policy
We are committed to compliance with tax law and practice in the UK.
Compliance for us means paying the amount of tax we are legally
obliged to pay and doing so in the right place, at the right time. It
involves disclosing all relevant facts and circumstances to the UK tax
authorities in ways that reect the economic reality of the transactions
we undertake, and claiming appropriate reliefs and incentives
whereavailable.
Risk management of tax affairs
The level of risk that we accept in relation to UK tax is consistent with
our overall objective of achieving certainty in the Group’s tax affairs.
At all times, we seek to comply fully with our regulatory and other
obligations, and to act in a way that upholds our core values and
reputation as a responsible corporate citizen. We see compliance
with tax legislation as key to managing tax risk, and understand the
importance of tax in the wider context of business decisions.
Processes have been put in place to ensure tax is considered as part
of our overall decision-making processes, with tax risks managed by
local nance teams and escalated through to appropriate levels of
management and, ultimately, to the Board when necessary.
Financial
Statements
Eurocell plc Annual Report and Accounts 2022 121
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Tax planning
In structuring our commercial activities, we will always consider –
among other factors – the relevant tax laws. We believe that it is fair to
mitigate tax using generally available reliefs in the spirit in which they
are intended. However, any tax planning that we undertake will have
commercial and economic substance and we will not use aggressive
tax planning or enter into complicated tax avoidance schemes.
Although for commercial reasons we may trade with customers and
suppliers genuinely located in countries considered to be tax havens,
we will not use such jurisdictions for the purpose of avoiding tax, nor
will we seek to take advantage of the secrecy afforded to transactions
recorded in these jurisdictions.
Engaging with HMRC
We aim to have a good working relationship with HMRC. We will
engage with honesty and integrity, and in a spirit of cooperative
compliance. We will make all returns and pay tax on a timely basis,
across all types of tax.
Share capital
Details of our capital structure, including movements in issued
share capital during the year, are shown in Note 26 to the Financial
Statements. We have one class of ordinary shares, which carries no
xed income. Each share carries the right to one vote at our general
meetings. The ordinary shares are listed on the Ofcial List and traded
on the London Stock Exchange.
As at 31 December 2022, there were 112,095,184 (2021:
111,972,477) ordinary shares of 0.1 pence each in nominal value in
issue (the ‘issued share capital’). Details of the shares issued in the
year are shown in Note 26 to the Consolidated Financial Statements.
Holders of ordinary shares are entitled to receive dividends when
declared, to receive the Company’s Annual Report, to attend and
speak at general meetings of the Company, to appoint proxies and to
exercise voting rights.
Whilst the Board has the power under the Articles of Association to
refuse to register a transfer of shares, there are no such restrictions on
the transfer of shares in place.
Under the Company’s Articles of Association, the Directors have the
power to suspend voting rights and the right to receive dividends
in respect of shares in circumstances where the holder of those
shares fails to comply with a notice issued under section 793 of the
Companies Act 2006. The Company is not aware of any agreements
between shareholders that may result in restrictions on the transfer of
securities or voting rights.
Share schemes
The Company operates a number of share schemes.
Long-Term Incentive Plans payable to executives and senior managers
are operated under our Performance Share Plan (‘PSP’). Executive
Directors may have a proportion of their annual bonus deferred for up
to three years under our Deferred Share Plan (‘DSP’). The Company
also operates Save As You Earn (or ‘Sharesave’) schemes, which are
available to all employees.
All shares issued under these plans carry the same rights as those
already in issue.
Related party transactions
Other than in respect of arrangements set out in Note 31 to the
Financial Statements and in relation to the employment of Directors,
details of which are provided in the Remuneration Committee Report
on pages 104 to 119, there is no material indebtedness owed to or by
us to any employee or any other person or entity considered to be a
related party.
Substantial shareholders
As at 31 December 2022, the Company’s major shareholders, with a
shareholding above 3%, were as follows:
Shareholder No. of Shares
% of
voting rights
Aberforth Partners 21,395,803 19.1
Soros Fund Management 18,337,234 16.4
Alantra Asset Management 12,368,036 11.0
JO Hambro Capital Management 11,16 2,514 10.0
Schroder Investment Management 6,314,271 5.6
Chelverton Asset Management 5,000,000 4.5
Columbia Threadneedle Investments 4 , 8 47, 6 0 1 4.3
Huntington Management 4,365,500 3.9
Royal London Asset Management 3,549,000 3.2
The Takeover Directive
The rights and obligations attached to the issued share capital are set
out in the Articles of Association (see below).
There are no agreements in place between the Company, its
employees or Directors for compensation for loss of ofce or
employment that trigger as a result of a takeover bid.
Articles of Association
The Company’s Articles of Association can only be amended by
special resolution of the shareholders. Our current articles are available
on our website at www.investors.eurocell.co.uk.
The Company’s Articles of Association give powers to the Board
to appoint Directors. All Board members are required to retire and
submit themselves for re-election by shareholders at each Annual
GeneralMeeting.
The Board of Directors may exercise all the powers of the Company,
subject to the provisions of relevant legislation, the Company’s Articles
of Association and any directions given by the Company in general
meetings. The powers of the Directors include those in relation to the
issue and buyback of shares.
Directors’ retirement by rotation
In accordance with above and in line with the Code, all Directors in
ofce will retire and offer themselves for election/re-election at the 2023
AGM, with the exception of Martyn Coffey, who has decided to step-
down after eight years of service, and Mark Kelly who is retiring.
Eurocell plc Annual Report and Accounts 2022122
DIRECTORS’ REPORT CONTINUED
The Articles of Association provide that a Director may be appointed
by an ordinary resolution of shareholders or by existing Directors, either
to ll a vacancy or as an additional Director.
The Executive Directors serve under contracts that are terminable
with twelve months’ notice from the Company and twelve months’
notice from the Executive Director. The Non-executive Directors serve
under letters of appointment and do not have service contracts with
theCompany.
Copies of the service contracts of the Executive Directors and the
letters of appointment of the Non-executive Directors are available for
inspection at the Company’s registered ofce during normal business
hours and will be available for inspection at the Company’s AGM.
There are no specic Company rules in relation to the appointment/
replacement of Directors and all such matters are managed by the
Board in accordance with the Articles of Association, the Companies
Act 2006 and any directions given by special resolution.
Directors’ interests
Details of Directors’ remuneration, interests in the share capital (or
derivatives or other nancial instruments relating to those shares) of
the Company and of their share-based payment awards are contained
in the Remuneration Committee Report on pages 104 to 119. No
change in the interests of the Directors has been notied between
31December 2022 and the date of this report.
Directors’ indemnities
Pursuant to the Articles of Association, the Company has executed a
deed poll of indemnity for the benet of the Directors of the Company,
and persons who were Directors of the Company, in respect of costs
of defending claims against them and third-party liabilities. These
provisions, deemed to be qualifying third-party indemnity provisions
pursuant to section 234 of the Companies Act 2006, were in force
during the year ended 31 December 2022 and remain in force. The
indemnity provision in the Company’s Articles of Association also
extends to provide a limited indemnity in respect of liabilities incurred
as a director, secretary or ofcer of an associated company of
theCompany.
A copy of the deed poll of indemnity is available for inspection at the
Company’s registered ofce during normal business hours and will be
available for inspection at the Company’s AGM.
Conicts of interest
Under the Companies Act 2006, Directors must avoid situations where
they have, or could have, a direct or indirect interest that conicts or
possibly may conict with the Company’s interests. As permitted by
the Act, the Company’s Articles of Association enable Directors to
authorise actual or potential conicts of interest.
Legal and regulatory compliance
The executive team is responsible for identifying and carrying out
assessments of those areas of the business where material legal
and regulatory risks may be present. Where issues are identied,
mitigating actions are built into an action plan involving the drafting
and communication of policies and the delivery of training where
appropriate, or are approached by way of a revision to key contractual
terms. The Board receives regular reports on material litigation and the
legal action taken to support our strategy.
Health and safety
We are committed to providing a safe place for employees to work.
Our policies are reviewed on an ongoing basis to ensure that the
approach to training, risk assessment, safe systems of working and
accident management is appropriate.
As part of this process, a rolling audit programme is in place to ensure
that health, safety, environmental and security risks are assessed
stringently and that robust control measures are in place to limit or
mitigate risk as appropriate.
Events after the balance sheet date
The Directors are not aware of any material events that have occurred
after 31 December 2022 which would require disclosure.
Other matters
Employee disclosure (including equality, diversity
anddisabled employees)
See Responsible Business section on pages 40 to 65.
Employee engagement statement
See Corporate Governance Statement on pages 84 to 92.
Statement on engagement with suppliers, customers
and others in a business relationship with the Company
See Corporate Governance Statement on pages 84 to 92.
Financial risk management
See Note 3 of the Financial Statements.
Research and development
The Group undertakes research and development work in support
of its objectives. Further details of our research and development
activities can be found in the Strategic Report on pages 1 to 79.
Payments to suppliers
It is Group policy to abide by the payment terms agreed with suppliers,
provided that the supplier has performed its obligations under
thecontract.
Political donations
In accordance with the Group’s policy, no political donations were
made and no political expenditure was incurred during 2022
(2021:£nil).
Greenhouse gas emissions and energy use
See the Responsible Business section on pages 52 and 53.
Disclosure of information to auditors
See the Directors’ conrmations on page 123.
Disclosures required by Listing Rule 9.8.4R
There were no waivers of dividends during the year. There are no other
disclosures to be made under the above listing rule.
By Order of the Board
Paul Walker
Group Company Secretary
15 March 2023
Financial
Statements
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and
Accounts 2022 and the Financial Statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare Financial Statements
for each nancial year. Under that law the Directors have prepared
the Group Financial Statements in accordance with UK-adopted
international accounting standards and the Company Financial
Statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 ‘Reduced Disclosure Framework’, and
applicablelaw).
Under company law, Directors must not approve the nancial
statements unless they are satised that they give a true and fair
view of the state of affairs of the Group and Company and of the
prot or loss of the Group for that period. In preparing the Financial
Statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable UK-adopted international accounting
standards have been followed for the Group Financial Statements
and United Kingdom Accounting Standards, comprising FRS 101
have been followed for the Company Financial Statements, subject
to any material departures disclosed and explained in the Financial
Statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting
records that are sufcient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy at
any time the nancial position of the Group and Company and enable
them to ensure that the Financial Statements and the Directors’
Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of nancial statements may differ from
legislation in other jurisdictions.
Directors’ conrmations
The Directors consider that the Annual Report and Accounts for 2022,
taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Group’s and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
Directors’ Report conrm that, to the best of their knowledge:
• the Group Financial Statements, which have been prepared in
accordance with UK-adopted international accounting standards,
give a true and fair view of the assets, liabilities, nancial position
and prot of the Group;
• the Company Financial Statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities and nancial position of the Company; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties that it faces.
In the case of each Director in ofce at the date the Directors’ Report
isapproved:
• so far as the Director is aware, there is no relevant audit information
of which the Group’s and Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Group’s and Company’s
auditors are aware of that information.
The Directors’ Responsibility Statement was approved by the Board
on 15 March 2023.
Mark Kelly Michael Scott
Chief Executive Ofcer Chief Financial Ofcer
Eurocell plc Annual Report and Accounts 2022124
OPINION
In our opinion:
• Eurocell plc’s group nancial statements and company nancial statements (the “nancial statements”) give a true and fair view of the state
of the group’s and of the company’s affairs as at 31 December 2022 and of the group’s prot and the group’s cash ows for the year then
ended;
• the group nancial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006;
• the company nancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the nancial statements, included within the Annual Report and Accounts 2022 (the “Annual Report”), which comprise: the
Consolidated Statement of Financial Position and the Company Statement of Financial Position as at 31 December 2022; the Consolidated
Statement of Comprehensive Income, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the
Company Statement of Changes in Equity for the year then ended; and the notes to the nancial statements, which include a description of the
signicant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the nancial statements section of our report. We believe that the
audit evidence we have obtained is sufcient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the nancial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fullled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 5, we have provided no non-audit services to the company or its controlled undertakings in the period
underaudit.
OUR AUDIT APPROACH
Overview
Audit scope
• A component was considered to be a company or division where discrete nancial data was prepared. Financially signicant components
were determined to be those which contributed more than 15% of the underlying prot before tax (measured on an absolute basis) in either
the current or prior year.
• For components that were not nancially signicant audit work was performed over specic Financial Statement Line Items (“FSLI’s”) if they
contributed more than 15% of the consolidated FSLI and were above group performance materiality. For all other balances/components
disaggregated analytical review procedures were performed to group materiality.
• Work on the consolidation was considered separately to the component scoping exercise and performed to group materiality.
• All work was performed by the group audit team.
• As disclosed within the TCFD disclosures on page 46 to 55, management have considered the impact of climate change. Given the
headroom noted on the impairment assessments as disclosed in note 18, managements TCFD assessment and our wider risk assessment
we have concluded that there were no material impacts on the audit.
Key audit matters
• Trade receivables provisions (group).
• Assessment of the valuation of inventory (group).
• Impairment to intercompany investments and intercompany receivables (parent).
Materiality
• Overall group materiality: £1,400,000 (2021: £1,350,000) based on 5% of underlying prot before taxation.
• Overall company materiality: £751,000 (2021: £602,000) based on 1% of total assets.
• Performance materiality: £1,050,000 (2021: £1,000,000) (group) and £563,000 (2021: £451,000) (company).
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF EUROCELL PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
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The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the nancial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most signicance in the audit of the nancial
statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) identied
by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identied by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Trade receivables provisions (group)
Refer to pages 70 to 77 (Risk management and Principal risks and
uncertainties), pages 98 to 103 (Audit and Risk Committee report),
Note 1 (Accounting Policies), Note 2 (Critical Accounting Estimates
and Judgements) and Note 20 (Trade and other receivables).
The Group had gross trade receivables of £43.5 million at 31
December 2022 (2021: £41.3 million) against which provisions of
£1.8 million (2021: £2.6 million) were held in accordance with IFRS
9. We focusedon this area, and specically the valuation assertion,
becausethe Directors’ assessment of the provisions required in
respect of trade receivables included subjective judgements. These
remain a heightened risk in the current year due to the uncertain
economic environment, which is expected to continue into 2023.
We understood the Directors’ methodology for calculating trade
receivables provisions across the Group and considered if these
complied with IFRS 9. Audit procedures performed included:
• We conrmed that the amounts included in the IFRS 9 model
agreed back to the underlying ledgers as at 31 December 2022;
• We tested the ageing of amounts due at the balance sheet date to
verify the data had been analysed correctly;
• We tested the accuracy of the calculations in the model;
• We reviewed the accuracy of past management estimates;
• We considered the results of our other audit procedures over trade
receivables (for example review of post year end payments made
by customers) for inconsistencies with the IFRS 9 models; and
• We challenged management over the expected credit loss
percentage applied to each category.
We identied no material exceptions from the procedures noted
above. Based on the results of our audit work we concluded that the
provisions recorded were materially accurate, calculated in line with
the requirements of IFRS 9 and that appropriate disclosures have
beenmade.
Eurocell plc Annual Report and Accounts 2022126
Key audit matter How our audit addressed the key audit matter
Assessment of the valuation of inventory (group)
Refer to pages 70 to 77 (Risk management and Principal risks
and uncertainties), pages 98 to 103 (Audit and Risk Committee
report), Note 1 (Accounting Policies), Note 2 (Critical Accounting
Estimates and Judgements) and Note 19 (Inventories). Inventory
totalled £59.9 million as at 31 December 2022 (2021: £55.9 million)
after provisions of £3.5 million (2021: £4.9 million). We focused on
this area because the Directors’ assessment of the absorption of
labour and overhead costs into inventory and the assessment of the
recoverability of inventory involved subjective judgements. Specically,
the determination of inventory provisions for slow moving,obsolete
and discontinued line items, reecting the level of inventory held
across the branch network and manufactured goods at the year
end, requires the exercise of judgement. In addition, during the year
there has been signicant raw materials cost price ination leading
to a riskthat inventory may not be held at the lower of cost and net
realisable value.
Our audit procedures over the valuation of inventory comprised:
• We understood the nature of the costs that the Directors absorbed
into inventory and determined their appropriateness in line with IAS
2 ‘Inventories’ (“IAS 2”);
• We tested, on a non-statistical sampling basis, the valuation and
calculation of costs absorbed into inventory;
• We re-performed the valuation of inventory on a non-statistical
sampling basis; and
• We challenged management over the costs included within
inventory, the setting of the standard costs and the accounting for
variances.
Our audit procedures over the impairment of inventory consisted of:
• We attended physical inventory counts, conducted by
management, to highlight any increased areas of concern,
regarding excess/unused stock held at either the branches we
visited or the manufacturing sites;
• We understood the Directors’ methodology for calculating
inventory provisions;
• We evaluated the Directors’ assumptions over usage and validated
historic usage which is then used to forecast future sales rates;
• Where inventory provisions were based upon historical sales data,
we tested the underlying report to validate the data on which
management’s calculations were based;
• We selected a sample of inventory held as at 31 December 2022
and veried that sales recorded in 2023 were made above cost;
and
• Where specic impairments were made, outside of the standard
impairment reviews, we challenged management of the
completeness and appropriateness of these additional amounts.
Based on the results of our audit work, we concluded that the
inventory recognised by the Directors was at an appropriate value
and was consistent with the requirements of IAS 2. Appropriate
disclosures regarding the above have also been made.
Impairment to intercompany investments and intercompany
receivables (parent)
Refer to Note 35 (Accounting Policies), Note 36 (Critical Accounting
Estimates and Judgements), Note 38 (Investments) and Note 39
(Trade and other receivables). The company has investments in
subsidiary companies of £17.8 million (2021: £17.8 million) and
intercompany receivables of £56.3 million (2021: £41.6 million).
Material impairment to these could result in implications for
futuredividends.
We obtained management’s impairment assessment regarding the
investment’s carrying value and management’s IFRS 9 expected
credit loss model in respect of the intercompany receivables. The
recoverability of the investment’s carrying value was based upon
the same underlying data noted in other group calculations such as
the going concern assessment and goodwill impairment model. We
also noted that the market capitalisation of the group was c. £147.5
million as at 31 December 2022 which is signicantly in excess of
the parent company’s total assets. We considered the IFRS 9 model
and noted that a signicant change in the key assumption (being
the expected loss rate of 0.1%) would be required prior to a material
impairment being noted. The amounts owed to the company were
ultimately due from protable subsidiaries, with sufcient net assets.
We tested the integrity of the models and the validity of the key data
inputs. No exceptions were noted in the performance of the above
procedures. We therefore concluded that the investments and
intercompany receivables were accounted for in line with IFRS 9 and
IAS 36, with appropriate disclosures being made.
INDEPENDENT AUDITORS’ REPORT CONTINUED
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the nancial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which
theyoperate.
Eurocell operates in the market of the extrusion of UPVC (unplasticised polyvinyl chloride) window and building products to the new and
replacement window market and the sale of building plastics materials. The Group has sites throughout the UK with its headquarters in Alfreton.
The business is managed as two primary divisions:
• Eurocell Building Plastics, focusing on sales and distribution across over 200 branches within the UK and 2 in Ireland to generally smaller
scale customers. This segment includes the trading subsidiary companies Eurocell Building Plastics Limited and before the disposal in
November 2022, Security Hardware Limited; and
• Eurocell Proles, focusing on manufacture and distribution to large-scale customers. This division includes the trading subsidiaries Eurocell
Proles Limited, Vista Panels Limited, and Ecoplas Limited.
Other than Vista Panels Limited, which has its own nance team, all nance and operational management functions are located at the Alfreton
headquarters. Therefore all audit work, including work on components, was completed by a single Group audit team.
For the purposes of our audit of the group we considered components to be operations where there was discrete nancial data maintained by
management, including a separate trial balance. For the consolidated audit of Eurocell plc this related to the individual subsidiary companies;
Eurocell Building Plastics Limited and Vista Panels Limited, with Eurocell Proles Limited the statutory entity, being seen as two components (as
S&S Plastics is now a division within Eurocell Proles Limited but this component is out of scope).
A component was included within our full scope audit procedures, and considered to be a nancially signicant component, if it represented
15% or more of the reported underlying prot before taxation, measured on an absolute basis (as some entities act as cost centres then all
results of components were added together and then if a component represented 15% or more of this total it was included as a nancially
signicant component) in either the current or prior year. There were three nancially signicant components (Eurocell Proles Limited, excluding
the S&S plastics division, Eurocell Building Plastics Limited and Vista Panels Limited). These components represented 97% of the reported
consolidated revenues and 76% of the reported consolidated underlying prot before taxation on an absolute basis.
We then considered the remaining components to ascertain if further procedures would be required. Where these had an individual Financial
Statement Line Item (“FSLI”) that represented more than 15% of the consolidated FSLI and was individually above group planning materiality
we included that specic FSLI within our scope of testing and performed audit procedures over this FSLI to group materiality. Due to the relative
size of the acquisitions between 2015 and 2019 a number of additional FSLI’s were included as a result of the above assessment. For all other
balances not considered for detailed testing, analytical review procedures were performed, to group materiality.
There were no specic components or areas included within our group audit scope due to specic risk factors.
Work was performed over the consolidation adjustments separately to the above scoping of components, due to the relative simplicity of the
group and the nature of the consolidation (performed by the head ofce nance function with mainly UK operations). This was performed using
group materiality.
For the Eurocell plc company audit the only material transactions and balances related to the intercompany investments (including amounts
owed by subsidiary companies) the debt held by the Company and the related operating expenses and tax charges, and the share based
payment charge. These were all included in the scope of our audit and tested using the company materiality by the group audit team.
As disclosed within the TCFD disclosures on page 46 to 55, management have considered the impact of climate change. Given the headroom
noted on the impairment assessments as disclosed in note 18, managements TCFD assessment and our wider risk assessment we have
concluded that there were no material impacts on the audit.
Eurocell plc Annual Report and Accounts 2022128
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process management adopted to assess the extent of the potential
impact of climate risk on the Group’s nancial statements and support the disclosures made within the Task Force on Climate-related Financial
Disclosures (‘TCFD’) on page 46 to 55.
In addition to enquiries with management, we also:
• Read the governance processes in place to assess climate risk; and
• Read additional reporting made by the entity on climate including its sustainability section in the front half of the nancial statements.
We challenged the completeness of management’s climate risk assessment by challenging the consistency of management’s climate impact
assessment with internal climate plans and board minutes, including whether the time horizons management have used take account of all
relevant aspects of climate change such as transition risks.
Management have made commitments to reduce the emissions intensity ratio by 5% and the energy use intensity ratio by 5% per year
until 2025 and to a 1% year on year increase in the use of recycled material. These commitments do not directly impact nancial reporting,
as management has not yet developed a pathway to deliver this commitment and will only be able to model the impact once the pathway
isdeveloped.
The key areas of the nancial statements where management evaluated that climate risk has a potential signicant impact are the disclosures
relating to intangible assets and impairment. Using our knowledge of the business we evaluated management’s risk assessment, its estimates
as set out in note 2 of the nancial statements and resulting disclosures where signicant. We considered the following areas to potentially be
materially impacted by climate risk and consequently we focused our audit work in these areas being impairment of non current assets.
To respond to the audit risks identied in these areas we tailored our audit approach to address these, in particular, we:
• Challenged management on how the impact of climate commitments made by the Group would impact the assumptions within the
discounted cash ows prepared by management that are used in the Group’s impairment analysis,
• Challenged whether the impact of climate risk in the Directors’ assessments and disclosures of going concern and viability were consistent
with management’s climate impact assessment; and
• Where appropriate, performed independent sensitivity analysis to determine to what extent reasonably possible changes in these
assumptions could result in material changes to the impairment headroom and assessed the appropriateness of the associated disclosures.
We also considered the consistency of the disclosures in relation to climate change (including the disclosures in the Task Force on Climate-
related Financial Disclosures (TCFD) section) within the Annual Report with the nancial statements and our knowledge obtained from our audit.
Our procedures did not identify any material impact in the context of our audit of the nancial statements as a whole, or our key audit matters for
the year ended 31 December 2022.
Materiality
The scope of our audit was inuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual nancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
nancial statements as a whole.
Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows:
Financial statements – group Financial statements – company
Overall materiality £1,400,000 (2021: £1,350,000). £751,000 (2021: £602,000).
How we determined it 5% of underlying prot before taxation 1% of total assets
Rationale for benchmark applied We believe that underlying prot before tax is
the key measure used by the shareholders in
assessing the performance of the group, and
is a generally accepted auditing benchmark.
In 2022 underlying prot before tax is £2.5m
higher than reported prot before tax.
We believe that total assets is the primary
measure used by the shareholders in
assessing the nancial position of the
entity, and is a generally accepted auditing
benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £290,000 and £1,265,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
INDEPENDENT AUDITORS’ REPORT CONTINUED
Eurocell plc Annual Report and Accounts 2022 129
Strategic
Report
Financial
Statements
Corporate
Governance
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specically, we use
performance materiality in determining the scope of our audit and
the nature and extent of our testing of account balances, classes
of transactions and disclosures, for example in determining sample
sizes. Our performance materiality was 75% (2021: 75%) of overall
materiality, amounting to £1,050,000 (2021: £1,000,000) for the group
nancial statements and £563,000 (2021: £451,000) for the company
nancial statements.
In determining the performance materiality, we considered a number
of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that
an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to
them misstatements identied during our audit above £70,000 (group
audit) (2021: £67,000) and £37,500 (company audit) (2021: £30,000)
as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
CONCLUSIONS RELATING TO GOING CONCERN
Our evaluation of the directors’ assessment of the group’s and the
company’s ability to continue to adopt the going concern basis of
accounting included:
• Discussions with management and those charged with governance
regarding the future plans and cash ow projections for the group.
This included discussions around the forecast cash requirements
and sufciency of available facilities to deal with a severe but
plausible downside to these projections;
• We obtained management’s analysis and cash ow model. We
checked this for consistency (i.e the integrity of the model) and that
the base projections agreed to the approved budgets and were
consistent with our work in other areas, for example the projections
were consistent with those used for the impairment reviews;
• We considered the accuracy of management’s forecasting in prior
years by comparing actual to forecast cash ows in the past ve
years (i.e.the period for which the senior management team has
remained materially unchanged);
• We discussed with management the basis of the “base case” and
what factors had been considered in their downside “sensitised
case”. We recalculated management’s assessment of the impact
of these scenarios on the forecasted compliance with nancial
covenants and sufciency of facilities/available cash;
• We considered the reported headroom on facilities at each month
end for the review period (i.e until 31 December 2024);
• We challenged management around which scenarios would be
required prior to the covenant facilities being breached or available
facilities being breached and considered if these were plausible or
possible. This included performing our own sensitivities to ascertain
the levels of underperformance required to breach;
• We reviewed the debt facilities to ascertain if management had
correctly factored in nancial covenants to their model, including
that covenants were appropriately calculated at each measurement
point, and expected to be met during the assessment period (i.e.
until 31December 2024);
• We audited management’s compliance with the covenants
during2022;
• We critically assessed the disclosures in relation to going concern
compared to the evidence obtained above, our understanding of
the group and the various requirements detailed within Company
Law, the Listing Rules and accounting standards; and
• For the Eurocell plc company going concern assessment we
have reviewed management’s analysis of the company cash
ows, checked for consistency with the consolidated model
(including the mathematical accuracy of the model), reviewed the
committed cash outows compared to the available funds (being
cash reserves and forecast dividend receipts from subsidiaries),
considered the sufciency of management’s assessment of head
room and critically assessed the disclosures in note 35. No issues
were noted arising from these procedures.
Based on the work we have performed, we have not identied any
material uncertainties relating to events or conditions that, individually
or collectively, may cast signicant doubt on the group’s and the
company’s ability to continue as a going concern for a period of at
least twelve months from when the nancial statements are authorised
for issue.
In auditing the nancial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the nancial statements is appropriate.
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the group’s and the company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the nancial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual
Report other than the nancial statements and our auditors’ report
thereon. The directors are responsible for the other information,
which includes reporting based on the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations. Our opinion on
the nancial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the
extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the nancial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the nancial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material
misstatement of the nancial statements or a material misstatement of
the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based
on these responsibilities.
Eurocell plc Annual Report and Accounts 2022130
With respect to the Strategic report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 31 December 2022 is consistent with
the nancial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report
and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act2006.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the company’s compliance
with the provisions of the UK Corporate Governance Code specied
for our review. Our additional responsibilities with respect to the
corporate governance statement as other information are described in
the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the nancial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
• The directors’ conrmation that they have carried out a robust
assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
• The directors’ statement in the nancial statements about whether
they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identication of any material
uncertainties to the group’s and company’s ability to continue to do
so over a period of at least twelve months from the date of approval
of the nancial statements;
• The directors’ explanation as to their assessment of the group’s
and company’s prospects, the period this assessment covers and
why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable
expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the group and company was substantially less in scope
than an audit and only consisted of making inquiries and considering
the directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement
is consistent with the nancial statements and our knowledge and
understanding of the group and company and their environment
obtained in the course of theaudit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the nancial
statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
group’s and company’s position, performance, business model and
strategy;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit
and Risk Committee.
We have nothing to report in respect of our responsibility to report
when the directors’ statement relating to the company’s compliance
with the Code does not properly disclose a departure from a relevant
provision of the Code specied under the Listing Rules for review by
the auditors.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Responsibilities of the directors for the nancial
statements
As explained more fully in the Statement of Directors’ Responsibilities,
the directors are responsible for the preparation of the nancial
statements in accordance with the applicable framework and for
being satised that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary
to enable the preparation of nancial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the nancial statements, the directors are responsible for
assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the nancial
statements
Our objectives are to obtain reasonable assurance about whether the
nancial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to inuence the economic decisions of users
taken on the basis of these nancial statements.
INDEPENDENT AUDITORS’ REPORT CONTINUED
Eurocell plc Annual Report and Accounts 2022 131
Strategic
Report
Financial
Statements
Corporate
Governance
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the group and industry, we identied
that the principal risks of non-compliance with laws and regulations
related to UK employment laws and regulations, and we considered
the extent to which non-compliance might have a material effect on the
nancial statements. We also considered those laws and regulations
that have a direct impact on the nancial statements such as UK tax
legislation, the Companies Act 2006 and the listing rules. We evaluated
management’s incentives and opportunities for fraudulent manipulation
of the nancial statements (including the risk of override of controls), and
determined that the principal risks were related to posting inappropriate
journal entries to revenue, expenses or cash and management bias in
accounting estimates and judgemental areas of the nancial statements.
Audit procedures performed by the engagement team included:
• Enquiry of management and those charged with governance
around actual and potential frauds, litigations or claims against or
by the company;
• Reviewing nancial statement disclosures and testing supporting
documentation to assess compliance with applicable laws and
regulations;
• Auditing the risk of management override of controls, through
testing journal entries (using our data analysis tools to conrm
completeness of data) by adopting a risk based approach for
appropriateness, testing signicant accounting estimates (as
dened in the notes to the nancial statements) because of the
risk of potential management bias, and evaluating the business
rationale and accounting for any signicant or unusual transactions
outside the normal course of business;
• Auditing the risk of fraud in revenue recognition by using our data
analysis tools to identify unusual credits to revenue for further
investigation;
• Performing unpredictable audit procedures, which are changed
year on year;
• Understanding of management’s internal controls designed to
prevent and detect irregularities; and
• Reviewing minutes of meetings of the Board of Directors.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to
events and transactions reected in the nancial statements. Also, the
risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items
for testing, rather than testing complete populations. We will often
seek to target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable
us to draw a conclusion about the population from which the sample
isselected.
A further description of our responsibilities for the audit of the
nancial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our
auditors’report.
Use of this report
This report, including the opinions, has been prepared for and only for
the company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our
prior consent in writing.
OTHER REQUIRED REPORTING
COMPANIES ACT 2006 EXCEPTION REPORTING
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specied by law are
not made; or
• the company nancial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Audit and Risk Committee,
we were appointed by the directors on 29 April 2015 to audit the
nancial statements for the year ended 31 December 2015 and
subsequent nancial periods. The period of total uninterrupted
engagement is 8 years, covering the years ended 31 December 2015
to 31December2022.
OTHER MATTER
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these nancial
statements will form part of the ESEF-prepared annual nancial report
led on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditors’ report provides no assurance over
whether the annual nancial report will be prepared using the single
electronic format specied in the ESEF RTS.
Christopher Hibbs (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
15 March 2023
Eurocell plc Annual Report and Accounts 2022132
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended 31 December 2022 Year ended 31 December 2021 (re-presented
3
)
Note
Underlying
£m
Non-underlying
(1)
£m
Total
£m
Underlying
£m
Non-underlying
(1)
£m
Total
£m
Revenue 4,9 3 8 1. 2 — 3 8 1. 2 3 39. 8 — 3 39. 8
Cost of sales (19 6 .7 ) — (19 6 .7 ) (1 6 7. 7 ) — (1 6 7. 7 )
Gross prot 18 4 . 5 — 18 4 . 5 17 2 .1 — 17 2 .1
Distribution costs (2 3.9 ) (0.4 ) (2 4.3 ) (23.0 ) — (23.0 )
Administrative expenses (1 30.4 ) (1. 8 ) (132.2 ) (11 9 . 4 ) — (11 9 . 4 )
Other income
2
Operating prot 9 3 1. 3 (2 . 2 ) 2 9 .1 2 9 .7 — 29 .7
Finance expense 10 (2 .6 ) (0. 3 ) (2 .9 ) (2. 0 ) — (2. 0 )
Prot before tax from
continuingoperations 9 2 8 .7 (2 .5 ) 2 6.2 2 7. 7 — 2 7. 7
Taxation 11 (4 .7 ) 0.5 (4 . 2 ) ( 6 .1 ) — (6 .1 )
Prot after tax from
continuingoperations 24.0 (2 .0 ) 22 .0 21. 6 — 2 1. 6
Discontinued operations
Loss after tax from discontinued
operations 12 (2 .3 ) (0.5 )
Prot for the year and total
comprehensive income 19. 7 2 1 .1
Basic earnings per share from
continuing operations 13 2 1. 4 p 19. 6 p 19 . 4 p 19 . 4 p
Diluted earnings per share from
continuing operations 13 2 1. 3 p 19 . 5 p 19 . 3 p 19 . 3 p
1 Non-underlying items are detailed in Note 7. The Group’s policy regarding the recognition of non-underlying items is outlined on page 137.
2 Other income is amounts received under the Group’s cyber insurance policy, net of excess paid, in respect of business interruption to the Group’s continuing trading
activities as a result of a cyber incident in July and August 2022.
3 The prior year comparatives have been re-presented to remove the results of Security Hardware, which have been presented as discontinued operations in both the
current and prior year following the sale of the business on 2 December 2022.
The Notes on pages 136 to 167 are an integral part of these Consolidated Financial Statements.
Eurocell plc Annual Report and Accounts 2022 133
Strategic
Report
Financial
Statements
Corporate
Governance
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Note
2022
£m
2021
£m
Assets
Non-current assets
Property, plant and equipment 15 6 1.7 5 9.2
Right-of-use assets 16 5 9 .7 54. 8
Intangible assets 17 16. 9 18 . 6
Total non-current assets 13 8 . 3 13 2 . 6
Current assets
Inventories 19 59. 9 5 5.9
Trade and other receivables 20 50.0 4 4.5
Corporation tax 0.2 —
Deferred consideration 12 0.8 —
Cash and cash equivalents 5 .1 6.6
Total current assets 116 . 0 1 0 7. 0
Total assets 254.3 239. 6
Liabilities
Current liabilities
Trade and other payables 22 (4 7. 4 ) (4 8 .7 )
Lease liabilities 23 (13 . 0 ) (11 . 9 )
Bank overdrafts — (5.9 )
Provisions 24 (0.2 ) (0 .7 )
Total current liabilities (60.6 ) ( 6 7. 2 )
Non-current liabilities
Borrowings 21 (20.3 ) (11 . 7 )
Trade and other payables 22 — (0. 3 )
Lease liabilities 23 (5 0 .7 ) (46.8 )
Provisions 24 (1. 0 ) (0.8 )
Deferred tax 25 (6. 8 ) (6.6 )
Total non-current liabilities (78 .8 ) (6 6. 2 )
Total liabilities (13 9 . 4 ) (13 3 . 4 )
Net assets 114 . 9 10 6 . 2
Equity attributable to equity holders of the parent
Share capital 26 0 .1 0 .1
Share premium account 26 22.2 2 1. 9
Share-based payment reserve 27 0. 9 1.1
Retained earnings 91. 7 8 3 .1
Total equity 114 . 9 10 6 . 2
The Financial Statements on pages 132 to 167 were approved and authorised for issue by the Board of Directors on 15 March 2023 and were
signed on its behalf by:
Mark Kelly Michael Scott
Director Director
Eurocell plc Annual Report and Accounts 2022134
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
Note
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Cash generated from operations 32 3 8 .7 3 3 .1
Income taxes paid (3.6 ) (3.5 )
Net cash generated from operating activities 3 5 .1 2 9.6
Investing activities
Purchase of property, plant and equipment (11 . 9 ) (1 5 .1 )
Purchase of intangible assets (0.5 ) (0 .4 )
Net cash ow arising on sale of business 12 0.3 —
Net cash used in investing activities (1 2 .1 ) (1 5.5 )
Financing activities
Proceeds from new share capital issued 26 0.2 0.5
Repayment of bank and other borrowings (22 .0 ) (1. 0 )
Proceeds from bank borrowings 31. 0 —
Bank borrowings arrangement costs (0.8 ) —
Principal elements of lease payments (13 . 3 ) (1 0 .1 )
Finance elements of lease payments (1. 4 ) (1. 2 )
Finance expense paid (1. 2 ) (0.6 )
Dividends paid to equity Shareholders 14 (11 .1 ) (3.6 )
Net cash used in nancing activities (18 . 6 ) (16 . 0 )
Net increase/(decrease) in cash and cash equivalents
1
Cash and cash equivalents
1
at beginning of year 33 0 .7 2. 6
Cash and cash equivalents
1
at end of year 33 5 .1 0 .7
1 Cash and cash equivalents includes bank overdrafts.
2 Cash ows arising on discontinued operations are outlined in Note 12.
Eurocell plc Annual Report and Accounts 2022 135
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Statements
Corporate
Governance
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Note
Share
capital
£m
Share
premium
account
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2022 0 .1 21. 9 1 .1 8 3 .1 10 6 . 2
Comprehensive income for the year
Prot for the year — — — 19 .7 19 .7
Total comprehensive income for the year — — — 19 .7 19 .7
Contributions by and distributions to owners
Exercise of share options 27 — 0.3 — — 0.3
Share-based payments 27 — — (0.2 ) — (0. 2 )
Dividends paid 14 — — — (11 .1 ) (11 .1 )
Total transactions with owners recognised
directlyinequity — 0.3 (0. 2 ) (11 .1 ) (11 . 0 )
Balance at 31 December 2022 0 .1 22. 2 0.9 9 1.7 11 4 . 9
Note
Share
capital
£m
Share
premium
account
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2021 0 .1 2 1 .1 0. 5 6 5.5 8 7. 2
Comprehensive income for the year
Prot for the year — — — 2 1 .1 2 1 .1
Total comprehensive income for the year — — — 2 1 .1 2 1 .1
Contributions by and distributions to owners
Exercise of share options 27 — 0.8 (0.6 ) 0 .1 0.3
Share-based payments 27 — — 1. 2 — 1. 2
Dividends paid 14 — — — (3.6 ) (3.6 )
Total transactions with owners recognised directly in equity — 0.8 0.6 (3.5 ) (2 .1 )
Balance at 31 December 2021 0 .1 2 1. 9 1 .1 8 3 .1 10 6 . 2
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Corporate
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Note
2022
£m
2021
£m
Assets
Non-current assets
Investments 38 17. 8 17. 8
Total non-current assets 17.8 17. 8
Current assets
Trade and other receivables 39 56.8 42.1
Deferred tax 40 0.3 0.3
Cash and cash equivalents 0.2 —
Total current assets 57. 3 42.4
Total assets 75.1 60.2
Liabilities
Current liabilities
Trade and other payables 41 (0.2) (0.2)
Total current liabilities (0.2) (0.2)
Non-current liabilities
Borrowings 42 (20.3) (11.7 )
Total non-current liabilities (20.3) (11.7 )
Total liabilities (20.5) (11.9)
Net assets 54.6 48.3
Issued capital and reserves attributable to owners of the Company
Share capital 26 0.1 0.1
Share premium account 22.2 21.9
Share-based payment reserve 0.9 1.1
Retained earnings 31.4 25.2
Total equity 54.6 48.3
A separate Statement of Comprehensive Income for the Company is not presented, in accordance with Section 408 of the Companies Act
2006. The Company recognised a prot of £17.3 million in the year (2021: loss of £1.8 million), including dividend income received from Group
companies of £18.0 million (2021: £nil).
The Financial Statements on pages 168 to 176 were approved and authorised for issue by the Board of Directors on 15 March 2023 and were
signed on its behalf by:
Mark Kelly Michael Scott
Director Director
Eurocell plc Annual Report and Accounts 2022 169
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Statements
Corporate
Governance
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share
capital
£m
Share
premium
account
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2022 0.1 21.9 1.1 25.2 48.3
Comprehensive income for the year
Prot for the year — — — 17.3 17.3
Total comprehensive income for the year — — — 17.3 17.3
Contributions by and distributions to owners
Share capital issued — — — — —
Exercise of share options — 0.3 — — 0.3
Share-based payments — — (0.2) — (0.2)
Dividends paid — — — (11.1) (11.1)
Total transactions with owners recognised directly in equity — 0.3 (0.2) (11.1) (11.0)
Balance at 31 December 2022 0.1 22.2 0.9 31.4 54.6
Share
capital
£m
Share
premium
account
£m
Share-based
payment
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 January 2021 0.1 21.1 0.5 30.5 52.2
Comprehensive expense for the year
Loss for the year — — — (1.8) (1.8)
Total comprehensive expense for the year — — — (1.8) (1.8)
Contributions by and distributions to owners
Share capital issued — — — — —
Exercise of share options — 0.8 (0.6) 0.1 0.3
Share-based payments — — 1.2 — 1.2
Dividends paid — — — (3.6) (3.6)
Total transactions with owners recognised directly in equity — 0.8 0.6 (3.5) (2.1)
Balance at 31 December 2021 0.1 21.9 1.1 25.2 48.3
Eurocell plc Annual Report and Accounts 2022170
35 ACCOUNTING POLICIES (COMPANY)
Corporate information
Eurocell plc (the ‘Company’) is a publicly listed company incorporated and domiciled in England, United Kingdom. The registered
ofce is located in England, at the following address: Eurocell Head Ofce and Distribution Centre, High View Road, South Normanton,
Alfreton,DE552DT.
The Company is principally engaged as a holding company for its subsidiaries which are engaged in the extrusion of PVC window and building
products to the new and replacement window market and the sale of building materials across the UK.
Basis of preparation
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
The Company has adequate resources to continue in operational existence for the foreseeable future and, as a result of this, the going concern
basis has been adopted in preparing the Financial Statements (see below).
These Financial Statements have been prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework in
conformity with the requirements of the Companies Act 2006 (‘FRS 101’) and the applicable legal requirements of the Companies Act 2006.
These Financial Statements have been prepared under the historical cost convention in accordance with FRS101 and the Companies Act 2006.
Going concern
The position of the Company mirrors that of the Eurocell Group. The Eurocell Group funds its activities through a £75 million Revolving Credit
Facility, provided by Barclays, NatWest and Bank of Ireland, which matures in May 2026. The facility includes two key nancial covenants, which
are tested at 30 June and 31 December each year on a pre-IFRS 16 basis. These are that net debt should not exceed three times adjusted
EBITDA (Leverage), and that adjusted EBITDA should be at least four times the interest charge on the debt (Interest Cover). Adjusted EBITDA is
dened as operating prot before depreciation, amortisation and non-underlying items. See alternative performance measures (see page 142).
For the next measurement period, being 30 June 2023, and going forward, the Group expects to comply with its covenants.
In assessing going concern, the Directors have considered nancial projections for the period to December 2024, which is consistent with
the Board’s strategic planning horizons. These forecasts have been compiled based on the best estimates of our commercial and operational
teams. This includes a severe but plausible ‘Downside’ scenario, which reects demand for our products being severely weakened.
In all scenarios tested, including sensitivities reducing sales forecasts to 10% below management’s estimates for the period 2023-24, the Group
operates with signicant headroom on its RCF facility and remains compliant with its original covenants.
After reviewing the Group’s projected nancial performance and nancing arrangements, the Directors consider that the Group has adequate
resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in preparing these Financial
Statements.
The going concern assessment performed is intrinsically linked to the Group’s nancing arrangements and therefore letters of support have
been provided from Eurocell plc to a number of Group companies, providing support over that individual Company’s future cash ows in the
period. This letter covers the period up to 31 December 2024.
Changes in accounting policies and disclosures applicable to the Company
The Company adopted no new accounting standards in the year. See Note 1 for more details.
Investments in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for impairment. Eurocell plc provides letters of Group support to its subsidiary
entities where required.
Financial assets
The Company’s nancial assets comprise trade and other receivables and cash and cash equivalents in the balance sheet. The Company
records all of its nancial assets at amortised cost and has not classied any of its nancial assets as fair value through prot and loss or other
comprehensive income.
Financial assets are non-derivative assets with xed or determinable payments that are not quoted in an active market. They arise principally
through the provision of funding to Group companies, but also incorporate other types of contractual monetary asset. They are initially
recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised
cost using the effective interest rate method, less provision for impairment.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Eurocell plc Annual Report and Accounts 2022 171
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Governance
The Company applies the simplied approach to measuring expected credit losses, which uses a lifetime expected loss allowance for intra-
Group receivables.
Expected loss rates are derived based upon the payment prole of Group companies over a three-year period up to the reporting date, and the
corresponding credit losses experienced. These rates are then adjusted to reect current and forward-looking information on macroeconomic
factors affecting the ability of Group companies to settle receivables, including GDP, the rate of unemployment, new housing starts, interest rates
and household disposable income. Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value
of amounts owed by Group undertakings and the amount credited or charged on a net basis to operating expenses within the Statement of
Comprehensive Income.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identied impairment loss was immaterial.
Financial liabilities
The Company classies its nancial liabilities as other nancial liabilities which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.
Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that
any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet. Further
information is provided in Note 3.
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base,
except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting nor taxable prot; and
• investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable prot will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which signicant amounts of deferred tax assets or liabilities are expected to be settled
orrecovered.
Share capital
The Company’s ordinary shares are classied as equity instruments.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when paid. In the
case of nal dividends, this is when approved by the shareholders at the Annual General Meeting.
Further information regarding dividends is provided in Note 14.
FRS 101 exemptions
The following exemptions from the requirements of IFRS have been applied in the preparation of the Company Financial Statements, in
accordance with FRS 101:
Paragraphs 45(b) and 46 to 52 of IFRS 2, Share-based Payment (details of the number and weighted-average exercise prices of share options,
and how the fair value of goods or services received was determined).
Eurocell plc Annual Report and Accounts 2022172
35 ACCOUNTING POLICIES (COMPANY) CONTINUED
FRS 101 exemptions continued
Paragraph 38 of IAS 1, Presentation of Financial Statements, comparative information requirements in respect of:
i. paragraph 79(a)(iv) of IAS 1;
ii. paragraph 73(e) of IAS 16 Property, Plant and Equipment; and
iii. paragraph 118(e) of IAS 38 Intangible Assets (reconciliations between the carrying amount at the beginning and end of the period).
The following paragraphs of IAS 1, Presentation of Financial Statements:
• 10(d), (statement of cash ows);
• 10(f) (a statement of nancial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively
or makes a retrospective restatement of items in its Financial Statements, or when it reclassies items in its Financial Statements);
• 16 (statement of compliance with all IFRS);
• 38A (requirement for minimum of two primary statements, including cash ow statements);
• 38B-D (additional comparative information);
• 40A-D (requirements for a third statement of nancial position);
• 111 (cash ow statement information); and
• 134-136 (capital management disclosures).
Paragraph 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (requirement for the disclosure of information
when an entity has not applied a new IFRS that has been issued but is not yet effective).
Paragraph 17 and 18A of IAS 24, Related Party Disclosures (key management compensation).
The requirements in IFRS 7 Financial Instruments: Disclosures.
The requirements in IAS 24, Related Party Disclosures to disclose related party transactions entered into between two or more members of
agroup.
36 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events, that are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates and judgements.
Critical estimates and judgements
The estimates and judgements that have a signicant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next nancial year are discussed below.
a) Recoverability of amounts owed by Group undertakings
The Company applies the simplied approach to measuring expected credit losses, which uses a lifetime expected loss allowance for amounts
owed by Group undertakings. Expected loss rates are derived based upon the payment prole of Group companies over a three-year period
up to the reporting date, and the corresponding credit losses experienced. These rates are then adjusted to reect current and forward-looking
information on macroeconomic factors affecting the ability of Group companies to settle receivables, including GDP, the rate of unemployment,
new housing starts, interest rates and household disposable income.
Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of amounts receivable from Group
undertakings and this amount is credited or charged on a net basis to operating expenses within the Statement of Comprehensive Income.
Thekey judgement is the extent to which macroeconomic factors impact upon the recoverability of amounts owed by Group companies.
If loss rates were, on average, 100 basis points higher than current estimates, the provision for impairment would increase by less
than£600,000.
b) Carrying value of investments
The Company assesses the carrying value of its investments at least annually, or when an indication of impairment arises. Where the carrying
value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down
accordingly. Recoverable amounts are determined from value-in-use calculations applied to each investment, which have been predicated on
discounted cash ow projections from approved budgets and forecasts covering a three-year period.
The Company assessed the recoverable amount in respect of each of its investments to be greater than the carrying amount and therefore no
impairment arises.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2022
Eurocell plc Annual Report and Accounts 2022 173
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Corporate
Governance
36 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS CONTINUED
Critical estimates and judgements continued
The key estimates are the discount rate and the level of prot growth assumed in perpetuity. If the discount rate increased by 100 basis points,
or if the level of prot growth in perpetuity was zero, none of the Company’s investments would be at risk of material impairment, and therefore
no further sensitivity disclosures have been provided.
37 EMPLOYEE BENEFITS EXPENSE
2022
£m
2021
£m
Staff costs (including Directors) comprise:
Wages and salaries 0.4 0.3
Social security costs — —
0.4 0.3
The average number of monthly employees was ve (2021: four), all of whom are Directors of the Company.
Key management personnel compensation and Directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Company, which is considered to be the Directors of the Company.
2022
£m
2021
£m
Emoluments 1.7 1.6
Share-based payments (0.1) 0.5
Pension and other post-employment benet costs 0.1 0.1
1.7 2.2
The emoluments are paid by Eurocell Group Limited. Directors’ remuneration is set out in the Remuneration Report on pages 104 to 119.
The highest paid Director received remuneration of £857,000 (2021: £879,000).
During the year, retirement benets were accruing to two Directors in respect of dened contribution pension schemes (2021: two).
No share options were exercised by Directors of the Company during the current year (2021: 99,267). In the prior year, 60,571 options were
exercised by the highest paid Director. No other shares were issued to Directors of the Company in either period.
The value of contributions paid to a dened contribution pension scheme in respect of the highest paid Director amounted to £47,000
(2021:£60,000).
Eurocell plc Annual Report and Accounts 2022174
38 INVESTMENTS
Cost
Investments in
subsidiary
undertakings
£m
At 31 December 2021 and 31 December 2022 17.8
The subsidiaries of Eurocell plc, all of which have been incorporated in the United Kingdom, are included in these Consolidated Financial
Statements, as follows:
Holding (and voting rights)
Name Principal activity 2022 2021
Eurocell Holdings Limited* Holding company 100% 100%
Eurocell Group Limited Holding company 100% 100%
Eurocell Building Plastics Limited Sale of building plastic materials 100% 100%
Eurocell Proles Limited Manufacture and sale of building plastic materials 100% 100%
Vista Panels Limited Manufacture and sale of doors 100% 100%
Ecoplas Limited** Recycler of PVC windows 95% 95%
Security Hardware Limited*** Dormant 100% 100%
Kent Building Plastics Limited Dormant 100% 100%
Trimseal Limited Dormant 100% 100%
S&S Plastics Limited Dormant 100% 100%
Fairbrook Group Limited Dormant 100% 100%
Fairbrook Limited Dormant 100% 100%
Fairbrook Holdings Limited Dormant 100% 100%
Eurocell Window Systems Limited Dormant 100% 100%
Eurocell Plastics Limited Dormant 100% 100%
Cavalok Building Products Limited Dormant 100% 100%
Merritt Plastics Limited Dormant 100% 100%
Merritt Engineering Limited Dormant 100% 100%
Deeplas Limited Dormant 100% 100%
Deeplas Building Plastics Limited Dormant 100% 100%
Ampco 113 Limited Dormant 100% 100%
* Directly held by Eurocell plc.
** Ecoplas Limited is treated as a wholly-owned subsidiary for the purposes of consolidating the nancial statements due to the fact that the remaining 5% shareholding is
held under a put and call option which expires in 2024.
*** The trade and assets of Security Hardware Limited were sold on 2 December 2022.
All of the above have a registered address of Eurocell Head Ofce and Distribution Centre, High View Road, South Normanton, Alfreton,
Derbyshire, DE55 2DT.
The Company assesses that the recoverable amounts of these investments are supportable. Recoverable amounts have been determined
from ‘value-in-use’ calculations which have been predicated on discounted pre-tax cash ow projections based on a three-year business plan
approved by the Board. These projections are based on all available information and growth rates do not exceed growth rates achieved in
priorperiods.
All of the Company’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a
combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making timeframe is also consistent across all
CGUs. Consequently, the key assumptions detailed below are applied consistently across the Group’s entities:
2022 2021
Period on which management-approved forecasts are based (years) 3 3
Discount rate (pre-tax) 10% 12%
Prot growth rate in perpetuity 2% 2%
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2022
Eurocell plc Annual Report and Accounts 2022 175
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Statements
Corporate
Governance
39 TRADE AND OTHER RECEIVABLES
2022
£m
2021
£m
Prepayments and other debtors 0.5 0.5
Amounts owed by Group undertakings 56.3 41.6
Total trade and other receivables 56.8 42.1
Amounts owed by Group undertakings attract interest of 2.75% and are repayable on demand.
The Company applies the simplied approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all
nancial assets. In measuring expected credit losses, receivables have been grouped based on shared characteristics and days past due.
The Directors have assessed the risk of impairment of its amounts owed by Group undertakings as at 31 December 2022. After considering the
projected future cash ows expected to arise in its subsidiary entities, the Directors believe that any provision over the amounts owed by Group
undertakings are trivial.
40 DEFERRED TAX
2022
£m
2021
£m
At 1 January 0.3 0.1
Credited to the Statement of Comprehensive Income — 0.2
At 31 December 0.3 0.3
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where
the Directors believe it is probable that these assets will be recovered.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during
the year, together with amounts recognised in the Statement of Comprehensive Income and amounts recognised in Other Comprehensive
Income are as follows:
Asset
2022
£m
Liability
2022
£m
Net
2022
£m
Statement of
Comprehensive
Income
2022
£m
Equity
2022
£m
Other temporary differences 0.3 — 0.3 — —
Net tax assets 0.3 — 0.3 — —
Asset
2021
£m
Liability
2021
£m
Net
2021
£m
Statement of
Comprehensive
Income
2021
£m
Equity
2021
£m
Other temporary differences 0.3 — 0.3 0.2 —
Net tax assets 0.3 — 0.3 0.2 —
Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further disclosure has
been provided.
41 TRADE AND OTHER PAYABLES
2022
£m
2021
£m
Trade and other payables 0.2 0.2
Total current liabilities 0.2 0.2
Book values approximate to fair value at 31 December 2022 and 31 December 2021. Trade payables are non-interest-bearing and are generally
settled on 30-60 day terms.
Eurocell plc Annual Report and Accounts 2022176
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2022
42 BORROWINGS
The book value and fair value of borrowings are as follows:
Book value
2022
£m
Fair value
2022
£m
Book value
2021
£m
Fair value
2021
£m
Non-current
Bank borrowings unsecured 20.3 20.3 11.7 11.7
Total borrowings 20.3 20.3 11.7 11.7
Borrowings
In May 2022 the Group renanced its £75 million multi-currency revolving unsecured credit facility. The new facility is held with Barclays Bank
plc, NatWest Bank plc and Bank of Ireland, and expires in May 2026. The key terms of the facility remain unchanged.
Costs amounting to £0.8 million were incurred in arranging the new facility. These costs have been capitalised within borrowings and are
being released to the Consolidated Statement of Comprehensive Income within nance expense over the period of the facility. Unamortised
arrangement costs associated with the previous facility of £0.3 million were expensed to the Consolidated Statement of Comprehensive Income
and classied as non-underlying items (see Note 7).
Borrowings of £21.0 million were drawn down at 31 December 2022 (2021: £12.0 million). Total unamortised costs, which are presented as a
deduction to borrowings, were £0.7 million as at 31 December 2022 (2021: £0.3 million).
Interest is charged at an excess over base rate of between 1.5% and 2.5% per annum and is dependent upon the ratio of total net debt to
consolidated EBITDA (on a pre-IFRS 16 basis).
Based upon current economic and market trends, management consider that the Sterling SONIA rate (which replaced LIBOR in 2021) will
remain relatively stable during the next year, and any changes, when applied to the Group’s current bank borrowings of £21.0 million would not
lead to a signicant change in nance expense.
All borrowings are denominated in Sterling.
Details of the Company’s banking covenants are given in Note 3.
43 RELATED PARTY TRANSACTIONS
Transactions with key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group, which is considered to be the Directors of the Company and the Directors of the Group’s subsidiary companies.
The remuneration for key management personnel is disclosed on pages 104 to 119. The Group has taken advantage of the exemption from
disclosing transactions with wholly owned subsidiaries.
Other related party transactions
Kellmann Recruitment Limited is controlled by T Kelly, a close family member of M Kelly who is a Director of Eurocell plc.
2022
£000
2021
£000
Kellmann Recruitment Limited – recruitment services 211 147
Amounts outstanding at the year end were £nil (31 December 2021: £nil).
Eurocell plc Annual Report and Accounts 2022 177
Strategic
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Corporate
Governance
COMPANY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
Directors Derek Mapp
Frank Nelson
Martyn Coffey
Alison Littley
Kate Allum
Iraj Amiri
Mark Kelly
Michael Scott
Registered Number 08654028
Registered Ofce Eurocell Head Ofce and Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT
Independent Auditors PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
One Chamberlain Square
Birmingham
B3 3AX
Bankers Barclays Bank plc
1 Churchill Place
London
E14 5HP
National Westminster Bank plc
2 St Phillips Place
Birmingham
B3 2RB
Bank of Ireland
26 Cross Street
Manchester
M2 7AF
For more investor information, visit www.eurocell.co.uk/investors
Eurocell Head Ofce and Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT
Printed by a CarbonNeutral® Company certied to ISO 14001 environmental management system.
Printed on material from well-managed, FSC™ certied forests and other controlled sources.
100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the
chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals
are recycled for further use and, on average 99% of any waste associated with this production will be
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The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset
carbon emissions through the purchase and preservation of high conservation value land. Through
protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released.
CBP00019082504183028
Eurocell plc
High View Road
Alfreton
Derbyshire
DE55 2DT
www.eurocell.co.uk
Eurocell plc Annual Report and Accounts 2022