Eurocell plc

Annual Report

and Accounts 2021

Eurocell plc Annual Report and Accounts 2021

DELIVERING

SUSTAINABLE

GROWTH

Mark Kelly

Chief Executive Officer

“We have delivered a very

good sales performance

for the year, underpinned

by the success of our

commercial strategies

and ongoing high levels

of demand in the market.”

WE ARE EUROCELL

The UK’s leading manufacturer, distributor

and recycler of UPVC building products.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

CONTENTS

2021 HIGHLIGHTS

Revenue

£343.1m

33%

2020: £257.9m

Gross Margin

50.5%

110bps

2020: 49.4%

Profit/(Loss)

Before Tax

£ 27.0 m

£28.5m

2020: £(1.5)m

Adjusted Profit

Before Tax

£ 27.0 m

218%

2020: £8.5m

Adjusted Basic

Earnings Per

18.9p

12.4p

2020: 6.5p

Basic Earnings/

(Losses) Per Share

18.9p

20.9p

2020: (2.0)p

Adjusted EBITDA

£51.7m

73%

2020: £29.8m

Net Debt

£69.7m

£11.4m

2020: £58.3m

Pre-IFRS 16

Net Debt

£11.0m

£1.1m

2020: £9.9m

1 Adjusted measures are stated before

non-underlying income and costs,

and the related tax effect (see page

55). 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.

View the latest

results online at

investors.eurocell.co.uk

Strategic Report

1 Highlights

2 What We Do

4 Chair’s Report

6 Our Operation

8 Market Overview

10 Chief Executive Officer’s Report

14 Our Business Model

16 Our Strategy

20 Our Strategy in Action

28 Divisional Review

32 Responsible Business

54 Chief Financial Officer’s Report

58 Principal Risks and Uncertainties

66 Viability Statement

Corporate Governance

68 Board of Directors

70 Chair’s Introduction

72 Corporate Governance Statement

83 Nomination Committee Report

86 Audit and Risk Committee Report

91 Directors’ Remuneration Report

109 Directors’ Report

112 Statement of Directors’

Responsibilities

Financial Statements

113 Independent Auditors’ Report

122 Consolidated Statement of

Comprehensive Income

123 Consolidated Statement of

Financial Position

124 Consolidated Cash Flow Statement

125 Consolidated Statement of

Changes in Equity

126 Notes to the Consolidated

Financial Statements

155 Company Statement of

Financial Position

156 Company Statement of

Changes in Equity

157 Notes to the Company

Financial Statements

164 Company Information

Eurocell plc Annual Report and Accounts 20212

WHAT WE DO

We manufacture

Manufacturing expertise

We manufacture both PVC rigid

and foam products in our centrally

located extrusion facilities.

We distribute

Distribution network

We distribute through

our nationwide network.

We recycle

Sustainable sourcing

We have two recycling

facilities which puts recycling

at the heart of our operation.

TWO DIVISIONS

LEADING THE WAY

57.2k tonnes

Total amount of profile produced

16.8k tonnes

Recycled product used

in our rigid PVC profile

219

Number of branches

SEE OUR DIVISIONAL REVIEWS ON PAGES 28 TO 31

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Ranges of window

and door profile

Aspect bi-fold doors

Skypod pitched

skylights

Fascias, soffits and

guttering

Conservatories and

Equinox tiled roofs

Traded goods

We operate our business through two divisions that

reflect the principal routes to market for our products:

Profiles Division

The Profiles division manufactures extruded rigid PVC profiles

and foam PVC products. We make rigid and foam products

using virgin PVC compound, the largest component of which is

resin. Our rigid products also include recycled PVC compound,

produced at our market-leading recycling facilities.

Rigid PVC profiles are sold to third-party fabricators, who

produce windows, trims, cavity closer systems, patio doors and

conservatories for their customers.

There are broadly four types of fabricator:

• Trade frame – supply finished products to tradesmen or small

retail outlets.

• New build – supply and install the products they make for

house builders.

• Commercial – supply and install products used in

applications such as office 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 profiles from a single supplier, which in turn

creates a stable and loyal customer base.

Foam PVC products are used for roofline and are supplied

to customers through our nationwide branch network in the

Building Plastics division (see below). All of our manufacturing

margin is recorded within the Profiles division, which therefore

also benefits from expansion of the branch network.

The Profiles division also includes:

Manufacturer of

composite and

PVC entrance

doors

Manufacturer of

plastic injection

moulded products/

services

Recycler of PVC

windows

Building Plastics Division

The Building Plastics division distributes a range of Eurocell

manufactured and branded foam PVC roofline 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 Profiles division.

Distribution is through our national network of over 200

branches to installers, small and independent builders, house

builders and nationwide maintenance companies. The branches

also sell roofline products to independent wholesalers.

The Building Plastics division also includes:

Supplier of locks

and hardware

Eurocell plc Annual Report and Accounts 20214

CHAIR’S REPORT

“We are well placed to capitalise on

opportunities as markets develop

and deliver sustainable growth in

shareholder value.”

Bob Lawson

Chair

DELIVERING

SUSTAINABLE

GROWTH

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Introduction

The business has responded remarkably well to the impact of

COVID-19, and to the new challenges posed in 2021, including

supply chain disruption, major raw material cost inflation and tight

labour markets. So I start this year’s report by offering, on behalf

of shareholders and of the Board, my sincere thanks to our teams

in every part of the Group. The progress we made during 2021 is

testament to their commitment, hard work and dedication during

a period of continuing and unprecedented uncertainty.

Financial and operating performance

The business has delivered good results for 2021, underpinned

by a strong repair, maintenance and improvement (‘RMI’) market

and the continued successful deployment of our strategy. We

acted decisively in response to significant supply chain challenges,

recovered successfully the impact of unprecedented raw material

cost inflation and secured the resources we need to service

demand, despite tight labour markets.

Fit-out of our new warehouse was completed during the year,

alongside the next phase of our manufacturing capacity expansion,

leaving the business well placed to deliver ongoing sustainable

growth with good operating efficiencies and improving returns.

Sales for the full year were £343 million, up 23% compared to

2019 and 33% compared to 2020, and profit before tax was £27.0

million (2020: loss of £1.5 million; 2019: profit of £22.7 million).

Net debt at 31 December 2021 on a pre-IFRS 16 basis stood at

£11.0 million (31 December 2020: £9.9 million), demonstrating

significant headroom on our bank facility. We have a strong balance

sheet, which provides flexibility and options for the future.

Dividends

We paid an interim dividend of 3.2 pence per share in October

2021. The Board proposes a final dividend of 6.4 pence per share,

resulting in total dividends for the year of 9.6 pence per share.

No dividends were paid in respect of 2020 due to the impact of

COVID-19.

Strategy

Our overall strategic objective remains to deliver sustainable growth

in shareholder value, by increasing sales and profits above our

market growth rates. We have seven strategic priorities to deliver

this objective, and we continue to make good progress against

each of them, with the key aspects of our performance described

in the Chief Executive Officer’s Report.

In 2021, we made further progress developing our approach

to improving the sustainability of the Group, including carbon

footprint and emissions reduction, supporting our people and their

wellbeing, and improving the environment in which they work.

Further information on our sustainability initiatives is included in the

Responsible Business section.

Overall, we are confident that, through the successful progression

of our strategy, we will continue to outperform markets and deliver

sustainable growth in shareholder value.

Governance

As a Board, we are committed to the highest standards of

corporate governance and we continue to comply with the UK

Corporate Governance Code.

After 7 enjoyable years as Chair of Eurocell, I have notified the

Board of my intention to step down and a process to recruit my

successor has begun, led by Frank Nelson, the Senior Independent

Director. During my tenure, it has been a delight to lead the Board

and witness the transformation of Eurocell by the executive team,

to become the market-leading business that it is today.

I would like to thank my fellow Board and Committee members

for their valuable contribution and support throughout my

whole tenure.

Finally, I would like to wish everyone at Eurocell, and all of its

stakeholders, continued success for the future.

Bob Lawson

Chair

Eurocell plc Annual Report and Accounts 20216

OUR OPERATION

Revenue by division

■ Profiles £140.7m

■ Building Plastics £202.4m

Operating profit

by division

■ Profiles £20.7m

■ Building Plastics £11.9m

SEE PAGES 28 TO 31 FOR MORE INFORMATION

Distribution

Manufacturing

Eurocell Profiles

Fabricator customers

c.400 window and door

fabricators

Manufactured

product sales:

rigid profiles

Production

18.1k tonnes

of foam profile

39.1k tonnes

of rigid profile

Raw material

consumption

61.4k tonnes

of virgin compound

, recycled

compound plus other raw

materials

consumed

Manufactured product

sales:

– Foam profiles

– Made to order product sales: e.g.

windows, conservatories,

conservatory roofs, skylights,

patio / bi-fold doors

Our operations

• 64 extrusion lines, with current

capacity for a further 15, in

addition to a newly upgraded

PVC compound mixing plant

• A specialist manufacturing

site for secondary operations

including foiling and

conservatory roofs

• 2 recycling sites which together

form the leading UK-based

PVC window recycling

operation

• 260k square feet of state-

of-the-art warehouse with

cantilever racking and mobile

platform picking

• A dedicated technical centre,

focussed on product-

development and enhancement

Third-party product

suppliers

e.g. rainwater products,

sealants, tools

Eurocell Building Plastics

Branch customers

>10,000 owner managed

businesses and contractors

A VERTICALLY INTEGRATED

MODEL TO MAXIMISE EFFICIENCY

All of our manufacturing margin is recorded within the Profiles division,

which therefore also benefits from expansion of the branch network

1 Virgin resin: stabiliser, titanium oxide, impact modifier, filler.

2 Other raw materials: e.g. skin and rubber flex.

3 Tonnages shown are approximate based on 2021 volumes.

4 Repairs, Maintenance and Improvement.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

■ Eurocell locations

■ New Head Office, Alfreton

■ New branch locations in 2021

Where we operate

SEE PAGE 38 FOR MORE INFORMATION

Our markets

Recycling

Eurocell Recycle

16.8k tonnes

of recycled compound consumed

(27% of raw materials consumed)

RMI

Proportion of revenue

in RMI market

c.85%

New build

Proportion of revenue in

new build housing market

c.10%

Public Sector

Proportion of revenue in public

new build housing market

c.5%

219

Number of branches

The coordination of our manufacturing, distribution

processes and recycling activities helps us to be

efficient throughout all stages of our value chain.

Two recycling sites

Our recycling operations are based

at two sites located in Selby and

Ilkeston which recycle post-consumer

and post-industrial PVC-U waste

into re-usable raw materials for our

manufacturing process.

Our route to market

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. The key decision makers include

fabricators, installers, developers,

architects, local authorities and

planning departments. By influencing

the influencers we earn the loyalty of

our customers by helping them grow

their businesses.

SEE PAGE 8 FOR MORE INFORMATION

Eurocell plc Annual Report and Accounts 20218

MARKET OVERVIEW

GENERALLY SUPPORTIVE

MARKET DRIVERS AND

STRONG EUROCELL DRIVERS

The level of UK economic activity, in particular the state of the repair,

maintenance and improvement (‘RMI’) and new-build housing markets,

are important drivers of our performance.

Eurocell Markets and Drivers

The Construction Products Association (‘CPA’) Industry Forecasts (published January 2022) show a strong recovery in the private housing

RMI market in 2021, with growth of 17% following a COVID-19 driven decline of 12.5% in 2020. The CPA forecasts a flat year for private

housing RMI in 2022 and a small decline in 2023. In this context, it is important to note that Eurocell has consistently outperformed CPA

market growth estimates.

Market conditions at present are generally supportive and we have good potential to outperform, capitalising on our strong market

positions and clear strategy.

Market drivers:

Slow to return post COVID

Continued hesitancy caused by

delays to funding release from

government

Eurocell drivers:

Only brand maintaining a sizeable

salesforce displacing aluminium

withPVC

Better U-values and, historically,

30% cheaper

More fabricators working in

commercial

Market drivers:

Renovation activity driven by:

– c.1-in-16 homes changed hands

in 2021

– Desire to improve / extend

homes, especially post-COVID

– Pension drawdown and desire for

maintenance-free property

– Change in family circumstances

Consumer confidence / uncertainty

– Unclear how post-COVID markets

will develop in 2022, especially

H2, but likely full employment will

continue

– Potential for RMI super-cycle,

driven by under-investment and

permanent hybrid working

– Potential adverse impact of high

inflation and situation in Ukraine

Eurocell drivers:

Increase propositions in

Building Plastics

– Maturing branches

– Conservatory / roof development

– Outdoor living products

– New larger format stores

Strong competitive position in

Building Plastics

Sales of windows and other big

ticket made-to-order products

through branches

Strong competitive position in

Profiles with trade fabricators

serving the RMI market, and

competitor difficulties

Good pipeline of potential new

trade fabricator customers in Profiles

Market drivers:

Mortgage remains attractive vs

rental cost

High levels of mortgage approvals

currently, with mortgage guarantee

scheme available until December

2022

Help to Buy remains, but restricted

to first-time buyers

Large builders maintaining

conversions

Long-term shortage of housing may

attract government intervention, but

affordability remains an issue

Right to Buy in public sector

Eurocell drivers:

Benefit of differentiated

specifications

New build competitor difficulties may

present a significant opportunity to

grow share

Strong competitive position with

new build fabricators

Opportunity to leverage

Environmental, Social and

Governance (‘ESG’) credentials

Building regulations (Future Homes

Standard) beneficial to Eurocell skill

set

Low-cost fabricators leaving

market and work taken by Eurocell

fabricators

Growth of Eurocell cavity closer

driving contact with house builders

Vista increasing market share in

doors

Private RMI

(c.85% Eurocell revenue)

New build

(c.10% Eurocell revenue)

Commercial

(c.5% Eurocell revenue)

2017 2018 2019 2020 2021E 2022F 2023F

Total housing growth

15%

17%

(21)%

3% 3%

2017 2018 2019 2020 2021E 2022F 2023F

Private housing RMI growth

Eurocell sales growth and

private housing RMI growth

0% 0%

17%

(13)%

(2)%

2017 2018 2019 2020 2021E 2022F 2023F

10%

13%

(15)%

Total construction output growth

2017 2018 2019 2020 2021E

17%

(13)%

10%

13%

10%

28%

(8)%

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

RMI c.85%

New build c.10%

Public Sector c.5%

(New build & RMI)

External Market Data

Interest rates

UK interest rates remain very low at 0.5% and are

expected to remain low relative to historical levels in

the medium-term.

GDP

After an estimated fall of 10% in 2020, real UK

GDP recovered with growth of 8% in 2021 and is

forecast to grow by a further 2% in 2022 and 1%

in 2023.

Construction

Total construction activity was down 15% in 2020,

but recovered with growth of 13% in 2021 and is

forecast to grow by a further 4% in 2022 and 3%

in 2023.

Housing market

Total housing activity was down 21% in 2020,

but recovered with growth of 17% in 2021 and

is forecast to grow by a further 3% in 2022 and

3% in 2023.

The private housing RMI market was down 13% in

2020, but recovered very strongly with growth of

17% in 2021 and is forecast to be flat in 2022 and

down 2% in 2023.

Eurocell Revenue by Market (%)

Private home improvement and new build housing are

currently the most important market segments for Eurocell.

Key to potential impact on demand for Eurocell products:

Positive

Neutral

Negative

Sources: Bank of England forecasts for the UK economy (published

February 2022), CPA Forecasts 2021-23 (published January 2022).

Sources: CPA Construction Industry Forecasts (published January 2022)

CPA central scenario

Eurocell

CPA Construction Industry

Forecasts (2021-23)

Eurocell plc Annual Report and Accounts 202110

CHIEF EXECUTIVE OFFICER’S REPORT

“We delivered a strong performance

in 2021 and continue to see good

potential to deliver further progress

and improving returns in 2022.”

Mark Kelly

Chief Executive Officer

WELL POSITIONED

FOR 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Introduction

We entered 2021 well placed to take advantage of the continued

recovery in our markets.

We have delivered a very good sales performance for the year,

underpinned by the success of our commercial strategies and

ongoing high levels of demand in the RMI market. Our products

have continued to resonate well with customers seeking to improve

their homes and create more usable space, both inside and outside

their properties.

We also navigated successfully the challenges posed by supply

chain disruption, major raw material cost inflation and tight labour

markets. As a result, we have reported good financial results for

the year.

Fit-out of our new warehouse was completed in 2021, along with

a further step up in the expansion of our manufacturing capacity.

With constraints resolved, we can now focus on delivering

improved operating efficiencies from the new warehouse and

production facilities.

Whilst demand has moderated from the unprecedented levels

experienced in H2 2020 and H1 2021, the RMI sector remains

strong and customer demand levels are good going into 2022.

We also expect continued growth in new build and the return of

commercial projects, which struggled to gain traction through 2021.

Financial results

For the purposes of this report, where appropriate, we have

compared financial and operating performance to 2020 and 2019,

with the latter a more meaningful comparator given the disruption

in 2020 due to COVID-19.

Sales for the year were £343 million, or 33% above 2020 and

23% above 2019. We reported a profit before tax of £27.0 million,

up 19% or £4.3 million on 2019 (£22.7 million), driven by higher

sales volumes.

Adjusted profit before tax for 2020 was lower at £8.5 million,

reflecting the impact of COVID-19. The reported loss before tax

was £1.5 million.

Further information on our financial performance is included in the

Chief Financial Officer’s Report and Divisional Reviews.

Operational performance

Health and safety

The safety and wellbeing of our employees and contractors is our

first operational priority and we continue to maintain a good safety

performance.

Our Lost Time Injury Frequency Rate (‘LTIR’) was 0.8 in 2021,

compared to 0.7 in 2020 and 0.9 in 2019. There were no major

injuries and 28 minor accidents recorded under the Reporting of

Injuries, Diseases and Dangerous Occurrences Regulations 2013

(‘RIDDOR’) in the year (2020 and 2019: 19 and 17 minor injuries

respectively). We have improved our procedures for incident

reporting during the year, leading to more incidents being included

in the data, which contributed to the slight deterioration in the

reported figures for 2021. COVID-19 safety procedures remained

a priority throughout the year, with many good practices retained,

despite the relaxation in government guidance.

Production

In 2021 we manufactured 57.2k tonnes of rigid and foam PVC

profiles at our primary extrusion facilities, 26% higher than 2020

and 5% higher than 2019. This reflects the sales for each year, as

well as, in 2019, higher production to increase stock holding at our

branches and to mitigate the risk of raw material supply interruption

due to Brexit. Overall Equipment Effectiveness (‘OEE’, a measure

which takes into account machine availability, performance and yield)

was 68% in 2021 (2020 and 2019: 75% and 73% respectively), with

2021 impacted by supply chain disruption and labour availability (see

below). Having resolved these issues, we expect OEE to improve,

with our target for 2022 being to reach 75% for the year.

Raw material supply chain, labour and transport

Strong demand in our markets put sector supply chains under

pressure, and we have experienced tighter supply and an inflationary

environment, with prices of certain raw materials, particularly PVC

resin, rising significantly in 2021. However, we have continued to

secure the raw materials we require and we expect past constraints

to ease over the coming months. We have also recovered raw

material cost inflation with selling price increases and surcharges.

Our market-leading recycling plants also supported continuity

of supply of resin in tight markets, whilst continuing to improve

the proportion of recycled material used in our primary extrusion

operations. These plants supplied 27% of our raw material

consumption for the year (2020: 25%), driving significant cost

and carbon savings compared to the use of virgin material (see

Recycling overleaf).

Availability of the incremental operational labour we needed

to service strong demand in 2021 was very tight, and we also

experienced an elevated level of absence through the summer

months due to employees being required to self-isolate. In addition,

in the light of a well-publicised shortage of HGV drivers in the UK,

our outsourced transport provider faced challenges providing the

required number of vehicles to service higher than expected sales.

However, the decisive action we took during the year to secure

more labour and transport ensured that we have the resources

necessary to operate efficiently and support our growth aspirations

for revenue and margins.

Strategy

Strategic priorities

Our overall strategic objective remains to deliver sustainable growth

in shareholder value, by increasing sales and profits above our

market growth rates. We have seven strategic priorities to help us

achieve this objective:

• Grow market share in Profiles

• Expand the branch network

• Increase the use of recycled materials

• Develop innovative new products

• Explore potential bolt-on acquisition opportunities

• Deliver sustained operational excellence

• Develop a sector-leading digital proposition

We have made good progress with our strategic priorities in 2021,

with the key aspects described throughout this report.

Grow market share in Profiles

In 2018 we became the leading supplier of rigid PVC profile 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 18%.

Our objective is to increase this to at least 22% over the medium

term. See the Profiles Divisional Review for further information on

our progress.

Eurocell plc Annual Report and Accounts 202112

CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED

Expand the branch network

Our strategic objective for Building Plastics is to achieve sector-

leading operations from 270-300 sites. The growth will come by

taking business from independent operators, who currently have

more than 60% market share. We opened 12 new branches in

2021, resulting in a total estate of 219 sites. See the Building

Plastics Divisional Review for further information on our progress.

Increase the use of recycled material

In 2021 we increased our use of recycled material to 27% of

materials consumed (2020: 25%). Our objective is to increase

this to around 33% over the new few years. See Sustainability for

further information on our progress.

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. Particularly for new build,

we have been cooperating on product designs to meet technical

compliance with Future Homes building regulations, which come into

force in 2022, with a further upgrade in 2025.

Highlights for 2021 include:

• Development of the Aspect bi-fold door system to include

flush French doors, which complement our Modus and Logik

range of flush sash windows.

• Following the launch of our slate-effect Envirotile composite

roof tiles in 2020, we have now extended the offering to

include a solid tiled Equinox conservatory roof.

• Skypod Plus was added to the Skypod roof lantern range in

2021, with improved architectural aesthetics.

• Composite fencing products, made from sustainable

materials, have been added to our decking range.

• Following the launch of the Kyube garden room in 2020, the

range was expanded in 2021 to reflect continuing strong

demand for affordable extra work and leisure space at home.

Outdoor living products have been one of our strongest growth

categories in 2021, with sales of £8.6 million compared to £5.6

million in 2020 and £2.9 million in 2019. Conservatories, warm

roofs, fencing and decking have all been particularly strong,

alongside new products such as garden rooms. Building on this

success, looking forward to 2022 we will be launching a new range

of modern conservatories, alongside other garden products such

as pergolas and awnings.

Explore potential bolt-on acquisitions

We have completed six acquisitions since our IPO in 2015. This

remains an important strategic objective for the Group and we will

continue to assess and consider bolt-on acquisition opportunities

in the markets in which we operate as and when they arise.

Deliver sustained operational excellence

In 2021 we introduced a new strategic priority to ‘deliver sustained

operational excellence’. Through 2016–19, the success of our

commercial strategies resulted in a strong compound annual

growth rate in sales of 12%, which is well ahead of our markets.

However, profits for that period were impacted by sales running

substantially ahead of our expectations, thereby exceeding the

available operating capacity and leading to inefficiencies and extra

costs.

Manufacturing and warehousing constraints have now been resolved

through major investments in new capacity.

Transition to the new warehouse was completed successfully in

2021, against a background of record volumes and supply chain

disruption. As well as being central to increasing capacity, the facility

is key to delivering further improvements in operational efficiencies as

the new plant, systems and processes become embedded.

The new warehouse has also unlocked the operational footprint

for the whole Group. In 2021, we converted our old warehouse to

a specialist manufacturing site, relocating secondary operations,

including foiling and conservatory roofs, providing a better

environment to drive these businesses forward. This also freed up

space to future-proof extrusion capacity for the medium-term.

We increased our extrusion capacity by more than 20% in 2018/19.

With ongoing strong growth, we completed a further expansion

in 2021, with the addition of five new extrusion lines, along with

the associated mixing plant upgrade and tooling. With space now

available, we plan to add a further five lines in 2022. Together,

these investments increase extrusion capacity by more than 15%

compared to the end of 2020, thereby enabling future sales and

market share growth.

Our focus in 2022 will be on delivering improved operating

efficiencies from the new warehouse and production facilities.

Looking ahead, with constraints resolved, we expect the benefit of

our strong sales growth to flow through to improved margins.

Develop a sector-leading digital proposition

Also in 2021, we introduced a new strategic priority to ‘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.

During the year we selected platforms for a new website, product

information management system, e-commerce solution and

employee management system. Development is under way, with

these systems expected to launch in 2022 and 2023.

Sustainability

Sustainability strategy and KPIs

During 2021 we published our sustainability strategy. Our objective

is to continue to improve the sustainability of the Group. We have

defined a suite of environmental and social targets and KPIs against

which to measure our progress.

Our KPIs recognise the breadth of the Environmental, Social and

Governance (‘ESG’) agenda. Taking into account the specific

circumstances of 2021, we made good progress against these

targets in the year.

However, increasing our use of recycled PVC compound in the

manufacture of co-extruded rigid profiles will always be at the heart

of sustainability for Eurocell, and therefore this Chief Executive’s

Review is focused on our environmental targets. The full suite of

KPIs and commentary on our 2021 performance is set out in the

Responsible Business section on pages 32 to 55.

Recycling (circular economy)

Expanding recycling improves product and business sustainability,

with less plastic going to landfill. 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 specifications for our products.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Recycling also increases our profits, because the cost of recycled

compound is typically lower through the cycle than the price of

virgin material, and it reduces our exposure to volatile commodity

prices. This is very important at the moment, with the price of virgin

resin reaching historic high levels in 2021.

We have been investing to increase our recycling capability through

the expansion of our two market-leading recycling plants and by

investment in new co-extrusion tooling, which allows a greater

proportion of recycled material to be used in our products.

We have become 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 27%

of consumption (or 16.8k tonnes) in 2021. In doing so, in 2021

we saved the equivalent of more than 3 million end-of-life window

frames from landfill.

Overall, we estimate that our recycling operation saved more than

48k tonnes of carbon in the year compared to the use of virgin PVC

(equivalent to the annual CO

output of over 7,000 UK homes).

In terms of economic benefits, in 2021 our recycling operation

drove a substantial cost saving compared to the use of virgin PVC

compound, reflecting increased volumes and much higher prices

for virgin compound.

In addition, substantially all scrap generated in extrusion is recycled

back into our production processes, further reducing waste sent to

landfill.

Emissions and energy management

Central to our environmental targets is reducing the carbon

footprint of the business and our products. 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.

The emissions intensity ratio was 51 tCO

e per £m sales in 2021,

resulting in a 27% reduction compared to 2020. The energy use

intensity ratio was £222 MWh / £m sales in 2021, representing a

17% reduction compared to 2020.

The main drivers for these reductions in emissions and energy

usage ratios are the increasing proportion of renewable electricity

in the national mix, alongside the improving energy efficiency of our

own plant and machinery reflecting our recent investments (new

extrusion lines are significantly more efficient than our legacy fleet).

Responsible PVC sector

There are a number of major initiatives in progress across the PVC

industry to address sustainability challenges, which Eurocell is proud

to support. These initiatives look through the value chain at extraction

and refining of raw materials, energy production and supply, and

resource inputs and emissions. There is also a strong sector focus

on recycling, and on seeking to differentiate between short life single-

use plastics and those with longer more circular life cycles.

For example, VinylPlus 2030 is a 10-year commitment from

the European PVC industry to a framework of sustainable

development. The British Plastics Federation (‘BPF’) has

established targets to increase energy efficiency and reduce CO

emissions, and launched Operation Clean Sweep, an initiative to

reduce plastic pellet loss to the environment.

Eurocell is also aligned with the Ellen MacArthur Foundation New

Plastics Vision, which seeks to: (i) eliminate the plastics we do not

need, (ii) innovate to ensure the plastics we do use can be recycled

and (iii) circulate the plastics we use, to keep them in the economy

and out of the environment.

Inovyn is Europe’s leading chlorovinyls producer and the largest

supplier of PVC resin to UK window profile systems houses,

including Eurocell. They are focused on sustainable development,

including responsible production, carbon neutrality and circularity.

Inovyn’s carbon footprint for PVC is well below the industry average.

Inovyn has now launched the world’s first commercially produced

bio-attributed PVC (Biovyn), made using renewable feedstock

derived via wood-based residue from sustainable forestry. The

supply chain for Biovyn has been certified by the Roundtable on

Sustainable Biomaterials to deliver a 90% greenhouse gas saving

compared to conventional PVC.

Products such as Biovyn provide the potential for our longer-term

transition towards carbon neutrality and net zero for PVC. We

intend to begin trials using small quantities of Biovyn in our primary

extrusion processes in 2022.

Looking to a sustainable future

Looking forward, there are four key themes to our work on

sustainable development.

• Carbon, energy and water – defining 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 the regional employer of choice

and stepping up community engagement.

• Governance – reporting progress against published ESG targets

and aligning with recognised sustainability indices.

Further information is provided in the Responsible Business section.

Summary and outlook

We entered 2021 well placed to take advantage of the continued

recovery in our markets. A very good sales performance has been

underpinned by the success of our commercial strategies and high

levels of demand in the RMI market, and we are very pleased to

report good profit growth and a return to the payment of dividends.

We expect supply chain constraints to ease over the coming

months, and the actions we took last year have ensured we have

the resources necessary to operate efficiently and support our

growth aspirations for revenue and margins.

The RMI sector remains robust, new build continues to grow

and customer demand levels are good. With operating constraints

resolved, our focus for 2022 will be on delivering improved returns

from our strong sales growth.

Notwithstanding the events in Ukraine and the attendant

macroeconomic uncertainties, the year has started well, with

sales to the end of February up 6% on 2021. We therefore

continue to see good potential to outperform our markets and

deliver further progress.

Mark Kelly

Chief Executive Officer

WE DISTRIBUTE

The Profiles division supplies our manufactured

profile to a network of fabricators, who in turn

supply end products to installers, retail outlets

and house builders.

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 Profiles division.

Customers are mainly installers, small builders,

roofing contractors and independent stockists.

>3 million

products delivered in 2021

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 2021

WE MANUFACTURE

We are a leading manufacturer of rigid and

foam PVC profiles, 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.

57.2k tonnes

produced in 2021

OUR BUSINESS MODEL

Eurocell plc Annual Report and Accounts 202114

CONTINUALLY DEVELOPING

What we do How we create value

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.

We operate well-invested and modern

extrusion facilities.

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 efficiency, with pull-through

demand driving higher factory utilisation.

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.

Our experienced management team have a

proven track record of achieving 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.

Our branches are conveniently located and

have readily available inventory, thereby

providing excellent service to local customers

and national groups alike.

We also strive to help our customers

through the provision of technical, business

development and marketing support services.

Vertically

integrated

model

Scale

Innovative

products

People

and

culture

Local

footprint

We have a strong brand image and our

marketing activities seek to maximise our

brand awareness.

Brand

strength

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 benefit

from the one-stop-shop offering

we provide.

House builders

House builders appreciate

the quality of our products

and benefit from Eurocell

coordinating our fabricators’

offering to meet their

requirements.

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.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

1 Return on sales is Operating Profit (including the impact of IFRS 16) divided by revenue.

Outputs Key beneficiaries

Our initiatives to support sales

and deliver high levels of

customer service differentiate

Eurocell from our competitors.

We expect this to drive good

sales growth.

Sales

growth

Sales growth (vs 2019)

23%

We have a track record of solid

profitability and our continued

investment in expanding capacity

and improving operational

efficiency, coupled with strong

sales growth, should drive

increased returns.

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

profitability

Profit

Before Tax

£27.0m

Our operating cash flow

conversion is good, 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

£29.6m

Our strong brand, well-invested

facilities and capital-light branch

expansion programme deliver a

good return on sales.

Good

return

on sales

Return on sales

8.5%

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

£41.5m

Eurocell plc Annual Report and Accounts 202116

OUR STRATEGY

WE HAVE SEVEN KEY

STRATEGIC PRIORITIES

Our overall corporate objective is to deliver sustainable growth in

shareholder value by increasing sales and profits 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, 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 profiles,

and drive sales and profit

growth in Building Plastics

TARGET GROWTH

IN MARKET SHARE

Increase market share of rigid

PVC profiles to drive sales

and profit growth in Profiles

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

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 profits 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

Eurocell plc Annual Report and Accounts 202118

OUR STRATEGY

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 profiles, and

drive sales and profit growth in

Building Plastics

STRATEGIC PROGRESS IN 2021

TARGET GROWTH

IN MARKET SHARE

Increase market share of rigid

PVC profiles to drive sales and

profit growth in Profiles

• Benefit of new account wins –

75 added over the last 5 years

• Strong demand from trade

fabricators focused on the

RMI market and excellent

performance from Vista doors

• Increasing share of the new

build market, driven by strong

relationships with large and

medium-sized housebuilders

and benefit of pull-through

specifications

• Increasing share in cavity

closures market, where

competition has reduced

See pages 28 to 29 for further

details of the Profile division’s

performance.

• Strong performance across full

range of manufactured products

and traded goods

• Continued growth in the

outdoor living product range,

including decking, fencing and

garden rooms

• 12 new sites opened, including

4 larger format branches

• Introduced more large format

stores, with showroom-style

displays to drive big-ticket

purchases

• Trials of new format for standard

size stores – see below

See pages 30 to 31 for further

details of the Building Plastics

division’s performance.

• Continued investment to

expand recycling capacity and

improve reliability in both plants,

with capex of £1.1 million (2020:

c.£1.5million)

• Long-term sustainability KPIs

and targets defined, including

commitment to 1% year-on-year

increase in use of recycled

material

See pages 38 to 41 for further

details of recycling operations.

• Investment in additional

capacity now coming on line

• Exploit the case for trade

fabricators to switch to Eurocell,

through specification, service,

opportunities to supply

branch network and product

development

• Continue to develop technical

specifications with housebuilders,

with a focus on sustainability

• Leverage building regulations

(Future Homes Standard),

beneficial to Eurocell skill set

• Target commercial sector

projects, promoting energy

efficiency and lower cost

benefits of PVC over

aluminium for sub-sectors

such as purpose-built student

accommodation and education

• Roll-out of improved format

for standard and large stores,

which better showcase the

product range

• Continue development of

market-leading product

range proposition, including

redesigned best-in-class

conservatory offering,

development of new product

categories and range extensions

• Be recognised as first for

service for the tradesperson via:

– Seamlessly connect the

customer shopping journey

from online through to

branches

– Clear data-driven customer

engagement plans

– Development of sector-

leading digital platform

• Maximise throughput and

operational efficiency/reliability

at both recycling sites

• Implement best-in-class

processes and elimination/

mitigation of single points of

failure risk, through suppler

partnerships and enhanced

maintenance management

• Reduce the amount of waste

going to landfill through yield

and efficiency benefits, coupled

with multiple projects to find

alternative purposes for the

waste produced

Profiles sales growth:

22% (vs 2019)

Estimated market share in

Profiles:

18% (2019: 15%)

New accounts

(following 60 in 3 years 2017–19)

Building Plastics like-for-

like sales growth:

20% (vs 2019)

Estimated market share

in Building Plastics

(foam PVC profiles):

25% (2019: 22%)

Total estate at 219 branches at

31 December 2021, with 78 (net)

new branches opened from 2015

Total tonnes of waste

processed in the recycling

plants:

48.2k

% yield of recycled

material produced:

59%

Use of recycled material

for primary extrusion:

16.8k tonnes

27% of consumption

2021

PROGRESS

KEY

STRATEGIC

PRIORITIES

KPIs

2022

FOCUS

1 OEE is overall equipment

effectiveness, a KPI measuring our

manufacturing efficiency which takes

into account machine availability,

performance and yield.

2 OTIF is on time in full, a KPI measuring

the efficiency and accuracy of our

logistics and delivery operation.

3 Based on the 2 months to

February2022.

(2020: 33.7k)

(2019: 41.3k)

(2020:

63%)

(2019: 60%)

(2020:

12.4k tonnes/25%)

(2019: 13.4k tonnes/23%)

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

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

profits 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

contemporary look, along

with improved environmental

characteristics, including

– Aspect flush French doors

– Improved conservatory roof

range

– Garden rooms

– Skypod Plus roof lantern

See pages 24 to 25 for further

details of new products.

• Several opportunities

considered and investigated

against strict strategic and

financial criteria – none

progressed in 2021

• Principal focus was completing

the warehouse transition and

expanding manufacturing

capacity, along with opening

12 new branches

• New warehouse launched

in January and transition

completed successfully through

2021, against a background of

record volumes and challenging

supply chain dynamics, with

raw material constraints and

labour shortages

• Further progress with

manufacturing capacity

expansion, with 5 new

extrusion lines, together

with the associated mixing

plant upgrade and tooling,

commissioned in Q4

• Product Information

Management (‘PIM’) solution

scoped and platform selected,

with implementation ongoing

• Website and e-commerce

platforms selected and

development ongoing

• Employee management

systems fully scoped and

solution platform identified

• Customer Relationship

Management (‘CRM’) /

Enterprise Resource Planning

(‘ERP’) solutions – business

needs, requirements analysis

and scoping ongoing

• Continue to assess and

consider bolt-on acquisition

opportunities in the markets in

which we operate

• Continue to enhance/develop

new products which include

for 2022:

– Redesigned best-in-class

conservatory range

– Vertical cladded Coastline /

garden rooms

– Other outdoor living products

including pergolas and

gazebos

– Fire-resistant cavity closers

• Ongoing technical

collaborations with larger

customers to develop new

product applications to meet

changing building regulations

requirements

• Deliver operational efficiencies

in manufacturing and

warehousing, as new plant,

systems and processes

become embedded

• Continue manufacturing

capacity expansion, with 5

further primary extrusion lines

ordered for 2022, plus additional

lines to support growth in cavity

closure products and fencing,

along with the required tooling

and mixing plant improvements

• Progress prioritised road map

projects, including:

– Implement the new PIM

solution and website/e-

commerce platforms for

operational use

– Complete new website

and e-commerce platform

implementation

– Commence the development

and implementation of the

employee management

systems

– Complete the planning and

costing of the CRM and ERP

solutions

Product ranges launched

in 2021:

Acquisitions completed in

2021:

Nil

Acquisitions completed

since IPO:

OEE

68%

OTIF

78%)

Number of digital projects

in progress:

(2019: 73%)

(2022 current

run rate

: 71%)

(2019:

89%)

(2022 current

run rate

: 93%)

Eurocell plc Annual Report and Accounts 202120

OUR STRATEGY IN ACTION

The recent success of our commercial

strategies has resulted in a strong

compound annual growth rate in sales

since 2016 (excluding the impact of

COVID-19 on 2020) of 14%.

INVESTMENT IN

BUSINESS EXPANSION

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

INVESTMENT IN

BUSINESS EXPANSION

This growth reflects significant gains in market share across both

divisions, with Profiles share up from c.14% in 2017 to 18% in

2021, and Building Plastics increasing from 20% to 25% over the

same period. However, profits for the early part of that period were

impacted by sales running ahead of our expectations, thereby

exceeding the available operating capacity and leading

to inefficiencies and extra costs.

Therefore, from 2019, we stepped up investment in the business

to build out the operating infrastructure required to deliver

strong growth and an efficient operation. This investment has

included significantly increasing our manufacturing, recycling and

warehousing capacity, strengthening our teams and working with

them to improve operational capability and efficiency.

This section draws these investments and initiatives together

todemonstrate how the business has been developed over the

period, leaving Eurocell now well placed to continue to deliver

goodgrowth with improving returns.

Capital expenditure 2016-21

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

2016

7.2

7.5

8.7

15.2

13.7

16.7

2017 2018 2019 2020 2021

Capital expenditure £m 2018 2019 2020 2021

Manufacturing capacity 3 5 – 7

Recycling capacity

7 6 2 1

New warehouse – – 8 2

Other (inc. new branches) 4 4 4 7

Total 14 15 14 17

1 Adjusted to include acquisition consideration for Eurocell Recycle North.

Investment in manufacturing capacity

In 2018, a combination of strong sales growth and larger than

expected mix changes towards co-extruded and foiled products

resulted in volumes above the immediately available manufacturing

capacity. This impacted negatively on the efficiency of our

manufacturing operations, leading to increased costs, and on

customer service, thereby delaying our ability to recover input cost

inflation with selling price increases.

In response, we strengthened our operational teams and launched

a substantial capex programme to bring forward planned capacity

increases. This programme included the addition of seven new

extrusion lines and associated tooling in 2019, which cost c.£5

million, resulting in a capacity uplift of c.13% compared to 2018.

The investment in our new warehouse, described below,

has delivered a step-change in our storage capacity and the

opportunity to drive further operational efficiencies. However,

importantly, it has also has unlocked the operational footprint for

the whole Group. We have converted our previous warehouse to

a specialist manufacturing site, relocating secondary operations,

including foiling and conservatory roofs. This has freed up the

space to future-proof extrusion capacity.

Since returning from the first UK lockdown mid-2020, we have

benefited from strong underlying markets and continued to

deliver good sales growth. We therefore took the decision to

further expand manufacturing capacity in 2021, with the addition

of another five extrusion lines, the associated tooling and an

upgrade to the PVC compound mixing plant at a cost of c.£7

million (including the previous warehouse conversion noted

above). All the new lines were operational by the end of 2021.

In 2022, with ongoing good market conditions and further

opportunities to take market share, we are planning to continue

this expansion. We have placed orders for a further five primary

extrusion lines, plus additional lines to support growth in cavity

closure products and fencing, along with the required tooling and

mixing plant improvements with a combined cost of c.£6 million.

This investment results in an uplift in primary extrusion capacity of

c.15% compared to 2020.

Looking further ahead, we have the space available in our

extrusion halls to add at least another ten lines, representing a

further increase in capacity of c.15%. It is also worth noting that,

following technological improvements, the machinery and tooling

added over the last three years is more efficient than our existing

plant, which should improve capacity beyond the baseline

estimates included here.

Primary extrusion lines at 31 December (number)

2017 2018 2019 2020 2021 *2022

Co-extrusion 12 17 22 22 25 26

Rigid PVC 15 12 11 11 15 16

Foam PVC 21 23 26 26 24 27

Total lines 48 52 59 59 64 69

Production (kt) 44.4 49.8 54.6 45.5 57.2 n/a

* estimated

Investment in recycling capacity

The Responsible Business section on pages 32 to 53

describes the substantial carbon footprint reduction and other

environmental benefits delivered by our two market-leading

recycling plants. In this section, we focus on investment.

Between 2016 and 2021, we invested £6.3 million to expand

our Eurocell Recycle Midlands site, to increase output and

improve reliability, including new co-extrusion and other tooling

to support the increased usage of recyclate on key product

lines. In addition, we acquired Eurocell Recycle North in August

2018 for a consideration of £6 million (including debt assumed).

As expected, investment was required to improve the operating

environment and reliability of the plant, to eliminate bottlenecks

from production processes and to expand capacity. Total

investment post-acquisition is £4.5 million.

As a result of these investments, we have become the leading

UK-based recycler of PVC windows. Our use of recycled material

in primary extrusion increased from 4.1k tonnes in 2015 (or 9%

of materials consumed) to 16.8k tonnes in 2021 (or 27% of

consumption). Our total output of recycled material, including

Eurocell plc Annual Report and Accounts 202122

OUR STRATEGY IN ACTION CONTINUED

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

that used in products made from 100% recycled material or sold

to trade extruders, increased from 11.6k tonnes in 2016 to 28.5k

tonnes in 2021.

In terms of economic benefits, in 2021 our recycling operation

drove a substantial cost saving compared to the use of virgin PVC

compound, reflecting increased volumes and much higher prices

for virgin compound, illustrating the very good returns on these

investments.

As noted above, details of the environmental benefits are included

in the Responsible Business section, but in summary, we estimate

that our recycling operation saved approximately 48k tonnes

of carbon in 2021 (2020: 36k tonnes; 2019: 42k tonnes), also

compared to the use of virgin PVC, and prevented the equivalent of

over 3 million window frames from landfill.

Our 2021 performance is in line with our target to increase the

percentage of recycled material used in production by at least 1%

per annum and to deliver year-on-year increases in carbon saved.

Use of recycled PVC in manufacturing

(% of raw materials used and tonnes consumed)

30%

25%

20%

15%

10%

20162015

14%

17% 17%

23%

25%

27%

7.3

2017 2018 2019 2020 2021

4.1 6.0 8.3 9.5 13.4 12.4 16.8

Investment in warehousing capacity

Towards the end of 2019 we concluded that our existing main

warehouse was a major constraint to future growth and operating

efficiency. Early in 2020 we secured a new facility, located within

3miles of our primary manufacturing site, previous main warehouse

and Head Office. The new site has 260,000 square feet of high bay,

state-of-the-art warehouse accommodation.

We have invested c.£9 million to fit out the new warehouse,

incurred mostly in 2020. This has increased capacity by more

than 60%, via high density storage using state-of-the-art mobile

cantilever racking, and efficient processing through GPS guided

picking equipment with proximity and obstacle awareness

sensors. We can now store up to 12 stillages high (our previous

warehouse was restricted to 7). Mobile platforms have replaced

manual techniques, thereby providing a safer and more productive

solution. The warehouse management systems behind the physical

attributes allow us to store product in the areas of the racking for

optimal efficiency based on shipping velocity.

Commercial operations began from the new site in January 2021,

with a progressive ramp-up in activity through the first half of the

year. We have now proved the ability pick at 3x the efficiency of our

traditional methods, with significantly more output capacity.

Looking forward, our focus for 2022 is to ‘turn’ the operation fast

and deliver improvements in operating efficiencies, thereby making

the facility the cornerstone of our supply chain for future growth.

Improving operational capability and delivering

operational excellence

Alongside these capital investments, we have worked with

our teams to ensure all colleagues are engaged in the overall

business strategy deployment and understand what is important

to our customers and other stakeholders.

We have developed our operational KPIs to be better aligned

with our strategy and objectives and implemented a standard

operating system across all operational sites. This work has

been supported with investment in areas such as automated

data gathering to support our KPI’s for key processes and visual

factory enhancements to empower employees.

Summary

Through substantial investments in operating infrastructure and

our teams’ capabilities, we are developing a footprint, operational

controls and a continual improvement culture which will support

our growth and performance for years to come.

With operating constraints now resolved, we introduced a

new strategic priority in 2021 to ‘deliver sustained operational

excellence’, which, looking ahead, we expect to result in the full

benefit of our sales growth flowing through to improved profits

and margins.

Eurocell plc Annual Report and Accounts 202124

OUR STRATEGY IN ACTION CONTINUED

NEW PRODUCTS

RESONATED WELL

WITH CUSTOMERS

Following the success of the Aspect bi-fold door

system, we have developed this range in 2021

to include Aspect flush French doors, which

complement our Modus and Logik range of flush

windows.

These flush French doors, with no bulky dummy mullion

and super slim sight lines and hinges, are a premium

take on this classic door style and the stylish looks

have proved popular with homeowners.

ASPECT FRENCH FLUSH DOORS

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

We have continued to develop our conservatory roof

proposition and, following the successful launch of our

slate-effect Envirotile composite tiles in 2020, we have

now extended the offering to include our solid tiled

Equinox conservatory roof.

This range includes four roof tile finishes for this ‘warm’

Equinoxroof, as well as overhanging soffit features with

downlighters for a more modern look. Precision manufactured

from recycled polymer, these eco-friendly tiles combine an

aesthetically pleasing finish with excellent environmental

credentials.

In addition, we now offer full height glazing panels for our

conservatory roof systems. This new glazed version, Equinox

Vega, allows for lighter, more sunlit conservatories, giving an

impression of enhanced space.

Outdoor living products have been our strongest growth

category in 2021.

We are now one of the biggest suppliers of decking to the trade.

Composite fencing products, made from sustainable materials,

have proved a popular addition to the decking range. With its

modern sleek look and simple tongue and groove system it is ideal

for a wide range of gardens and combines colourfast appearance

and low maintenance with great sustainability characteristics.

In 2021 we added artificial turf and decorative wall panelling

into the outdoor living range. We also continued to expand our

range of garden rooms (see adjacent column).

NEW PRODUCTS FOR 2022

In the light of the recent success of the outdoor living

range, in 2022 we will be launching a new range of modern

conservatories, alongside other garden products such as

pergolas and awnings.

Following the successful launch of the Kyube garden

room last year, we have developed the range in 2021, to

reflect the continuing demand for affordable extra work

and leisure space at home.

Garden buildings are becoming a significant product category,

built using several Eurocell products including Coastline

cladding and Syncro patio doors. We now offer a range of

sizes and styles, with both timber and steel frame options.

Skypod Plus was a new addition to the successful Skypod

range in 2021, offering attractive architectural aesthetics.

The Skypod Plus system comes with a choice of four self-

cleaning, temperature controlling glass options, with good

environmental properties, including reducing heat loss on cold

days, and protecting from strong sunshine in the summer.

SKYPOD PLUS

GARDEN ROOMS

CONSERVATORY ROOFS

OUTDOOR LIVING PRODUCTS

Eurocell plc Annual Report and Accounts 202126

OUR STRATEGY IN ACTION CONTINUED

Our strategy is to develop our position

as the UK’s leading manufacturer,

distributor and recycler of UPVC

building products.

GROWING OUR

MARKET SHARE

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Production waste

recycling

2000 2008 2017 2021

Old frames or

‘post-consumer’ recycling

1m+

frames recycled

by Eurocell

>3m

frames recycled

by Eurocell

GROWING OUR

MARKET SHARE

Branches – winning format

• Improved format for standard

branches, which better showcases

our product range

• Introduce large format stores, with

showroom-style displays to drive

big-ticket purchases

Market very fragmented,

with >60% served by

small independents

• No barriers to further

consolidation

Service – be recognised

as first for service for the

tradesperson

• Seamlessly connect customer

shopping journey from online

through to branches

• Clear data-driven customer

engagement plans

• Development of sector-leading

digital platform

Products – create the

market-leading proposition

• Including redesigned best-in-class

conservatory offering

• Further development of new product

categories and range extensions

Consumer online

proposition trial

Opportunities to grow market share

• Investment in additional capacity

• Building regulations complexity plays to

Eurocell technical expertise

• Continued range extension

• Consolidation of the market by large

fabricators

• Branch generated demand and pull-through

• Lead supplier for cavity closures to new

build

• Strong new build specifications and

fabricator community

Building Plastics

Strategic objective

To target world class operations from 270–300 sites

Profiles

Strategic objective

To target > 20% share and consolidate position as largest supplier of rigid PVC profile to UK market

Eurocell plc Annual Report and Accounts 202128

DIVISIONAL REVIEW

c.18% (2015: c.12%)

Market share

Profiles Highlights

22%

Sales vs 2019

c.400 fabricators

Total accounts

(2017-19: 60)

New accounts

PROFILES

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Strategy

In 2018 we became the leading supplier of rigid PVC profile 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 18%.

Our strategic objective is to increase this to at least 22% over the

medium term.

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 flush windows),

a more contemporary look to roofing and door products and

improved environmental characteristics. In addition, the benefits

of pull-through profile and hardware specifications and increasing

opportunities to supply our branches, all delivered via improving

service, remain attractive to prospective fabricator accounts.

In the Profiles division, new build represents approximately one-third

of sales. 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, and we believe favourable market

dynamics are set to continue. We have strong relationships with large

and medium-sized housebuilders, maintained by our specification

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.

In the commercial sector, energy efficiency and lower cost underpin

a strong case for the benefits of using PVC profile 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.

Revenue

Profiles third-party revenue for the year was £140.7 million, 41%

higher than 2020 and up 22% on 2019. We have seen good

contributions from trade fabricators, who are substantially focused

on the RMI market, and a very strong performance from Vista

doors. new build has also enjoyed good sales, with increasing

housing market activity supported by continued high levels of

mortgage approvals and demand.

During the last five years we have added 75 new accounts, and our

prospect pipeline remains good.

Operating profit

Adjusted operating profit for 2021 was £20.7 million, 162% higher

than 2020 and up 16% on 2019, with the growth against both prior

periods reflecting higher sales volumes.

The adjusted operating profit in 2020 is net of support received

under the Coronavirus Job Retention Scheme (c.£3.5 million),

offset by an increase to the IFRS 9 impairment charge (bad debts)

in respect of certain fabricator customers (£0.7 million). The overall

operating loss of £1.0 million is stated after non-underlying charges

of £8.9 million, comprising the impairment of goodwill (£5.8 million),

the impairment of right-of-use assets (£0.6 million), warehouse dual

running costs (£2.3 million) and restructuring costs (£0.2 million).

Further information on non-underlying charges is included in the

Chief Financial Officer’s Report.

Profiles

2021

£m

2020

£m

Change

2019

£m

Change

Third-party revenue 140.7 99.7 41% 115.7 22%

Inter-segmental revenue 63.9 56.4 13% 59.5 7%

Total revenue 204.6 156.1 31% 175.2 17%

Adjusted operating profit

20.7 7.9 162% 17.9 16%

Operating profit/(loss) 20.7 (1.0) n/a 17.9 16%

1 Before non-underlying items (no non-underlying items in 2019 and 2021).

Eurocell plc Annual Report and Accounts 202130

DIVISIONAL REVIEW CONTINUED

c.25% (2015: c.20%)

Market share

Building Plastics Highlights

20%

Like-for-like

sales

219 branches

Total estate

(2015-21: 78 (net))

New branches

BUILDING

PLASTICS

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Strategy

Our strategic objective for Building Plastics is to achieve world

class operations from 270–300 sites. The growth will come mostly

from independent operators, who currently have more than 60%

market share.

Our goal is to be recognised as first for service for the

tradesperson, seamlessly connecting the customer shopping

journey from online through to the branches, with clear data-driven

customer engagement plans (including targeting lapsed customers)

and through the development of a sector-leading digital platform.

In terms of products, we intend to create the market leading

proposition, including a redesigned best-in-class conservatory

offering, and to exploit a significant market opportunity to extend

our outdoor living product range, including decking, fencing and

garden rooms.

In the existing estate, we are now testing an improved format for

standard size branches, which better showcases the breadth of

our range. We will also continue to identify opportunities for large

format stores, with an expanded trade counter and showroom-

style displays designed to engage customers and drive big-ticket

purchases, such as windows and doors. This follows successful

trials of this format in 2019/20.

We also continue to test an opportunity to develop and implement

a sector-leading consumer online windows and doors proposition,

using the branch network to provide infrastructure where needed

(e.g. delivery point for installers). We began a trial in the North West

towards the end of 2020. This proposition aligns well with our

commercial strategy of continuing to create pull-through demand for

our products, and we will provide a progress update in due course.

Revenue

Building Plastics third-party revenue for the year was £202.4

million, 28% higher than 2020 and up 24% on 2019. This is

equivalent to like-for-like

sales growth of 20% compared to 2019,

representing a strong performance across our full range of own-

manufactured products and traded goods.

We opened 12 branches in total in 2021, with 8 new standard

format branches, and 4 the new larger format. We are also

making good progress reducing the time taken to reach break-

even in new stores. At 31 December 2021, we had a total of 219

branches providing national coverage across the UK, which offers a

significant competitive advantage. Branches opened in 2019/20/21

added £6.0 million to sales in 2021.

Operating profit

Adjusted operating profit for 2021 was £11.9 million, 198% higher

than 2020 and up 38% on 2019, with the profit growth against

both prior periods reflecting strong sales and good cost control.

The adjusted operating profit in 2020 is net of support received,

including the Coronavirus Job Retention Scheme (£3.0 million)

and retail grants / business rates relief (£1.8 million), offset by an

increase to the IFRS 9 impairment charge (bad debts) to reflect

higher risk in the Building Plastics receivables book (£1.5 million).

The overall operating profit in 2020 of £3.4 million is stated after

non-underlying costs of £0.6 million, comprising right-of-use asset

impairment charges (£0.3 million) and restructuring costs (£0.3

million). Further information on non-underlying charges is included

in the Chief Financial Officer’s Report.

Indicative branch economics (rounded)

Branch open < 2 years 2–4 years > 4 years

No. of Branches 16 15 188

Average Sales per Branch

(£000) 280 680 920

Return on Sales per

Branch (%)

Small loss Early teen % >20%

1 Operating profit as % of revenue, before regional infrastructure and central costs,

and IFRS 16 adjustments.

Building Plastics

2021

£m

2020

£m

Change

2019

£m

Change

Third-party revenue 202.4 158.2 28% 163.4 24%

Inter-segmental revenue 0.5 1.3 (62)% 1.3 (62)%

Total revenue 202.9 159.5 27% 164.7 23%

Adjusted operating profit

11.9 4.0 198% 8.6 38%

Operating profit

11.9 3.4 250% 8.6 38%

1 Before non-underlying items (no non-underlying items in 2019 and 2021).

2 Like-for-like excludes acquisitions and new branches opened in 2019/20/21.

Eurocell plc Annual Report and Accounts 202132

RESPONSIBLE BUSINESS

ONE TEAM OPERATING

A RESPONSIBLE BUSINESS

In operating a responsible business,

our main areas of focus are 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.

It 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. The

governance aspects of responsible business are covered in the

Governance Report beginning on page 68.

This section of the Strategic Report also includes our Non-financial

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 define 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

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.38

• Minimising our environmental

impact pp.38

VALUING OUR PEOPLE

Employees

• Corporate Vision and Values

• Corporate Social Responsibility Policy

• Employee Handbook

• Valuing our people pp.46

Respect for

human rights

• Corporate Vision and Values

• Corporate Social Responsibility Policy

• Privacy Policy

• Recruitment Policy

• Anti-Slavery and Human Trafficking

Policy

• Anti-Bullying and Harassment Policy

• Various information Security Policies

• Whistleblowing Policy

• Equality and diversity pp.50

• Modern slavery pp.52

WORKING RESPONSIBLY

Social matters and

community issues

• Corporate Social Responsibility Policy • Customers pp.52

• Community and charity pp.51

Anti-corruption

and anti-bribery

• Corporate Social Responsibility Policy

• Anti-Bribery Policy

• Whistleblowing and

bribery pp.90

Description of principal

risks and impact of

business activity

• Risk management pp.58

• Principal risks and

uncertainties pp.60

Description of the

business model

• Overview pp.6

• Our business model pp.14

Non-financial key

performance indicators

• Operational performance

pp.18

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

1 Certain Group policies and internal standards as guidelines are not published externally.

Reporting requirement Policies and standards which

govern our approach

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.38

• Minimising our environmental

impact pp.38

VALUING OUR PEOPLE

Employees

• Corporate Vision and Values

• Corporate Social Responsibility Policy

• Employee Handbook

• Valuing our people pp.46

Respect for

human rights

• Corporate Vision and Values

• Corporate Social Responsibility Policy

• Privacy Policy

• Recruitment Policy

• Anti-Slavery and Human Trafficking

Policy

• Anti-Bullying and Harassment Policy

• Various information Security Policies

• Whistleblowing Policy

• Equality and diversity pp.50

• Modern slavery pp.52

WORKING RESPONSIBLY

Social matters and

community issues

• Corporate Social Responsibility Policy • Customers pp.52

• Community and charity pp.51

Anti-corruption

and anti-bribery

• Corporate Social Responsibility Policy

• Anti-Bribery Policy

• Whistleblowing and

bribery pp.90

Description of principal

risks and impact of

business activity

• Risk management pp.58

• Principal risks and

uncertainties pp.60

Description of the

business model

• Overview pp.6

• Our business model pp.14

Non-financial key

performance indicators

• Operational performance

pp.18

Eurocell plc Annual Report and Accounts 202134

RESPONSIBLE BUSINESS CONTINUED

KPIs AND TARGETS DRIVING

IMPROVED SUSTAINABILITY

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

2020

Base

2021

Result Target

Link to

UN SDGs

ENVIRONMENTAL –

CIRCULAR ECONOMY

Recycled material used in production

% used 25% 27% 1% increase per

year

saved by recycling operation

Tonnes saved 36kt 48kt Year-on-year

increase

Waste recycled

% recycled 79% 82% Year-on-year

increase

ENVIRONMENTAL – EMISSIONS

AND ENERGY MANAGEMENT

Greenhouse gas (‘GHG’) emissions

GHG intensity ratio 70t CO

/ £m sales 51t CO

/ £m sales 5% reduction by 2025

Energy consumption

Energy use intensity ratio 267 MWh / £m sales 222 MWh / £m sales 5% reduction by 2025

Renewable energy

Renewable energy used 19% total energy 78% total energy 50% reduction by 2025

SOCIAL

Health & safety

Lost time injury rate 0.7 per 100,000 hours 0.8 per 100,000 hours 50% reduction by 2025

Employee engagement and recruitment

Labour turnover 21% 26% Year-on-year reduction

Employee satisfaction

Annual survey response

rate and overall

satisfaction level

n/a 60% and 68% Year-on-year increase

Diversity

Female employees 12.8% 13.4% Year-on-year increase

Remuneration

National Living Wage

(‘NLW’)

All employees at

or above NLW

All employees at

or above NLW

All employees above

NLW by 2023

Education

Apprenticeships /

Kickstarters

32 79 20% increase by 2025

Our overall objective in this area is to

continue to improve all material aspects

of the sustainability of the Group.

We have defined a suite of environmental and social

targets and KPIs against which to measure our

progress, which are set out in the table, together

with the outturn for 2021. The sections which follow

provide further information and commentary in

relation to our performance in each category.

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 increasing our use of recycled

PVC compound in the manufacture of co-extruded rigid profiles

has been, and will continue to be, at the heart of carbon reduction

for Eurocell.

Our social objectives are broad and cover areas such as health

and safety, diversity and education.

These objectives align well with several relevant United Nations

Sustainable Development Goals, as well the UK’s transition towards

a net zero carbon economy.

We intend to report our progress against these targets on an

annual basis.

In terms of governance, we apply the principles of the UK

Corporate Governance Code, with which we continue to comply

in all material respects. For further information on our governance

arrangements, please see our Corporate Governance Statement

on pages 72 to 82.

Key to United Nations Sustainable Goals (‘UN SDGs’):

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 35

KPI

2020

Base

2021

Result Target

Link to

UN SDGs

ENVIRONMENTAL –

CIRCULAR ECONOMY

Recycled material used in production

% used 25% 27% 1% increase per

year

saved by recycling operation

Tonnes saved 36kt 48kt Year-on-year

increase

Waste recycled

% recycled 79% 82% Year-on-year

increase

ENVIRONMENTAL – EMISSIONS

AND ENERGY MANAGEMENT

Greenhouse gas (‘GHG’) emissions

GHG intensity ratio 70t CO

/ £m sales 51t CO

/ £m sales 5% reduction by 2025

Energy consumption

Energy use intensity ratio 267 MWh / £m sales 222 MWh / £m sales 5% reduction by 2025

Renewable energy

Renewable energy used 19% total energy 78% total energy 50% reduction by 2025

SOCIAL

Health & safety

Lost time injury rate 0.7 per 100,000 hours 0.8 per 100,000 hours 50% reduction by 2025

Employee engagement and recruitment

Labour turnover 21% 26% Year-on-year reduction

Employee satisfaction

Annual survey response

rate and overall

satisfaction level

n/a 60% and 68% Year-on-year increase

Diversity

Female employees 12.8% 13.4% Year-on-year increase

Remuneration

National Living Wage

(‘NLW’)

All employees at

or above NLW

All employees at

or above NLW

All employees above

NLW by 2023

Education

Apprenticeships /

Kickstarters

32 79 20% increase by 2025

Eurocell plc Annual Report and Accounts 202136

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

confirm that we have made disclosures consistent with the TCFD

Recommendations and Recommended Disclosures in the Annual

Report save for Scope 3 emissions. We currently disclose partial

Scope 3 greenhouse gas 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 page 35 references these

targets and other sections of our report where you can find 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. In

2021, our Non-executive Director Sucheta Govil assumed oversight

responsibility for ensuring ESG matters are considered properly by

the Board, further strengthening governance in this area.

Looking forward, the Board will support management in defining

our pathway to carbon neutrality and thereafter on to net zero,

which we intend to develop starting in 2022.

Metrics and targets

This year we have published our environmental and social KPIs and

targets for the first time. We have generally made good progress

against these targets in 2021, as set out on page 35 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 38 to 41. In 2021,

we estimate that our recycling operation saved approximately 48k

tonnes of carbon in 2021 compared to the use of virgin PVC.

Our emissions are also reported in the Greenhouse Gas Emissions

and Energy Use section on page 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 decreased by 28%

in 2021 compared to 2019, with the latter a more meaningful

comparator given the disruption to and temporary closure of the

business in 2020 due to COVID-19. It is also important to recognise

that we have reduced our total emissions by 33% since 2016.

Using a market-based reporting approach, which recognises that

78% of the electricity we purchased in 2021 was renewable, our

2021 emissions are around one-third lower than 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, then

investors and lenders may show a preference to allocate capital

tobusinesses with smaller climate impacts.

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 confident 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 45 for some

examples of work in progress in the PVC sector.

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 across our Group, we

influence 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

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 37

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, see page 60

• TCFD, see page 36

Strategy

• Describe the climate-related risks and opportunities the

organisation has identified over the short and longer term

• Describe the impact of climate-related risks and

opportunities on the organisation’s business, strategy and

financial planning

• Describe the resilience of the organisation, taking into

consideration different future climate scenarios

• Minimising our environmental

impact, see page 42

• Looking to a sustainable future,

see page 32

• TCFD, see page 36

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 page 34

• Greenhouse gas emissions and

energy use, see page 43

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 60

• TCFD, see page 36

living and ensuring that emissions reduction is a core consideration

in our product and solution designs.

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 sufficient

inventory to avoid the impact of short-term disruption.

Transition opportunities

We are the leading UK-based recycler of PVC windows. Our

rigid profiles contain significantly higher recycled material content

than any of our UK competitors. In addition, our rigid profiles

are designed for enhanced thermal efficiency 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 beneficial to our skill

set. Wehave an opportunity to leverage energy saving and other

benefits of our products and solutions with our existing customer

base, consumers and other stakeholders.

Looking further to the future, our largest PVC resin supplier has

launched the world’s first 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 45.

Scenario analysis

We have made an initial use of qualitative scenario analysis to

assess our risks and opportunities and have considered a 1.5°C

and 4°C scenario to provide a broad view of outcomes. Under a

1.5°C scenario, risks relate primarily to the transition to a net zero

world, the regulatory response, and the changing political, consumer

and investor expectations. Under a 4°C scenario, the physical

impacts of a changing climate will become more apparent. We will

continue to develop our scenario analysis in 2022 and beyond.

Eurocell plc Annual Report and Accounts 202138

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 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 landfill.

Theprincipal benefits fall into 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

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 specifications for our products.

Economic

Recycling also increases our profits, because the cost of recycled

compound is typically lower through the cycle than the price of

virgin material, and it reduces our exposure to volatile commodity

prices. This is particularly important at the moment, with the price

of virgin resin reaching historic high levels in 2021.

What we do

Our recycling process essentially turns old window profiles into new

window profiles. 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 profile core. External surfaces are protected

using virgin PVC compound, providing a high-quality, resilient finish.

The recycling process actually enhances product stability and

can be repeated around 10 times, giving the product an effective

lifetime of approximately 100 years.

Our co-extruded profiles are designed to deliver enhanced thermal

efficiency, with better U-values than wood or aluminium alternatives

and low thermal conductivity.

We have two recycling plants, which are 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 2021.

How much we invest

The Strategy in Action section on pages 20 to 27 describes how,

between 2016 and 2021, we invested c.£11 million to expand

capacity at our two recycling plants to become the leading

UK-based recycler of PVC windows, along with the associated

economic benefits.

How much we recycle

During the year, our two sites recycled 40.5k tonnes (equivalent

to more than 3 million window frames) of post-consumer waste,

which would have otherwise been sent to landfill, and 7.7k tonnes

of post-industrial waste. Total waste collected of 48.2k tonnes

represents a significant step up on 2020 (33.7k tonnes).

Together the two sites used this waste to produce 28.5k tonnes of

recycled material (2020: 21.1k tonnes). A slightly lower yield in 2021

follows the significant increase in waste collected, which resulted in

some deterioration in the quality of post-consumer feedstock.

“Our well-developed

channels for recovery and

recycling allow old frames to

be recycled and reprocessed

into new products up to ten

times without any loss of

quality.”

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 39

RECYCLED

Proportion of recycled

plastic consumption

27%

VIRGIN

Proportion of virgin

compound consumption

73%

vs 2020 vs 2019

k tonnes 2021 2020* 2019 Change Change % Change Change %

Inputs – waste recycled

Post-consumer 40.5 27.0 31.4 13.5 50% 9.1 29%

Post-industrial 7.7 6.7 9.9 1.0 15% (2.2) (22)%

48.2 33.7 41.3 14.5 43% 6.9 17%

Output – recycled material produced 28.5 21.1 24.9 7.4 35% 3.6 14%

Yield % 59% 63% 60% (4)% (1)%

Usage

Primary extrusion 16.8 12.4 13.4 4.4 35% 3.4 25%

Products made from 100% recycled material 7.3 4.3 6.7 3.0 70% 0.6 9%

Sales to trade extruders 4.3 3.4 5.1 0.9 26% (0.8) (16)%

28.4 20.1 25.2 8.3 41% 3.2 13%

Primary extrusion usage as % of total consumption 27% 25% 23% 2% 4%

* volumes affected by COVID-19 shutdowns.

Of the recycled material produced, 16.8k tonnes (generated

predominately from post-consumer waste) was used alongside

virgin resin in the manufacture of many of our PVC rigid profiles,

representing 27% of total raw material consumption, up from

25%in 2020.

The remaining 11.6k 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

48k tonnes of carbon in 2021 (2020: 36k tonnes; 2019: 42k tonnes),

also compared to the use of virgin PVC, and prevented the equivalent

of over 3 million window frames from landfill.

Our 2021 performance is in line with our target to increase the

percentage of recycled material used in production by at least 1%

per annum and to deliver year-on-year increases in carbon saved.

In addition, in terms of economic benefits, in 2021 our recycling

operation drove a substantial cost saving compared to the use

of virgin PVC compound, reflecting increased volumes and much

higher prices for virgin compound.

We use a significant proportion

of recycled plastic in our window

profile and doors

STRONG ON

SUSTAINABILITY

LESS IS MORE

RECYCLED

48.2K

TONNES IN 2021

Eurocell plc Annual Report and Accounts 202140

RESPONSIBLE BUSINESS CONTINUED

HOW WE RECYCLE

Our 9-step process to create new feedstock from end-of-life materials

01 03 05

Waste

collection

Waste is taken

from 3 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 filters out the granules

of rubber leaving only clean,

colour sorted PVC-U.

Shredding

Waste is shredded into

processable pieces.

Granulation

The waste is granulated

into uniform size. At this

stage rubber gaskets are

still present.

02 04

c.170

recycling jobs provided

to people in the local area

Manufactured product ranges

from recycled PVC-U

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 41

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 landfill

By recycling old windows (‘post-consumer’)

we reduce the amount of waste sent to landfill.

Protecting our margin

The use of recycled material in the manufacture of

PVC 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.

07 09

Pelletisation /

pulverisation

The PVC-U granules are

processed into finished

material ready for extrusion.

Extrude finished

products

The loop is closed as we

manufacture the PVC-U into

new products, frequently

to higher specification than

those being recycled. Such

‘upcycling’ is key to being a

sustainable part of the

Circular Economy.

Washing

Using a series of water

tanks, contaminants

are ‘floated’ 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-first-life frames

recycled in 2021

153%

increase in recycled

material produced

since 2016

c.70k

windows recycled

perweek, on average,

during 2021

Eurocell plc Annual Report and Accounts 202142

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 reflects

contributions to the global green economy.

The LSE recognised that our PVC profiles can be recycled

up to 10 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.33%,

along with a steady downward trend in emissions

intensity, as consumption has dropped through energy

efficiency 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 Year 2018

• the National Fenestration Awards 2020 –

Recycling Company of the 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 we strive to use

pollution prevention and environmental best practice in all that

we do. The Company experienced no reportable environmental

incidents during 2021.

• We promote the efficient 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 of

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 significant 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 sufficient 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 34 to 35, in September 2021 we published

our sustainability KPIs and targets. This included 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 2020 to 30 September 2021, 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 difficulties in collating actual data for the final

months of the year due to timing lags on supplier invoicing. All

of our emissions and energy use relate to UK operations apart

from negligible amounts which relate to our two branches in the

Republic of Ireland.

MINIMISING OUR

ENVIRONMENTAL IMPACT

CONTINUED

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 43

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.

GHG emissions for the Group for the period ending 30 September

2021 in tonnes of carbon dioxide equivalent (tCO

e), using location-

based reporting is 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).

Change

Source 2021 2020 2019 vs 2020 vs 2019

Fuel combustion

(stationary) 337 274 335 23% 1%

Fuel combustion

(mobile) 5,051 6,325 7,910 (20)% (36)%

Refrigerant gases 42 104 91 (60)% (54)%

Purchased

electricity 12,214 11,441 16,061 7% (24)%

Total 17,644 18,144 24,397 (3)% (28)%

Despite sales growth of 23%, total emissions decreased by 28%

(when compared to 2019, being a more meaningful comparator

given the disruption in 2020 due to COVID-19).

GHG emissions for the Group for the period ending 30 September

2021 in tonnes of carbon dioxide equivalent (tCO

e), by scope and

source, are as follows:

Source Scope 1 Scope 2 Scope 3 Total

Fuel combustion

(stationary) 337 – – 337

Fuel combustion

(mobile) 4,743 – 308 5,051

Refrigerant gases 42 – – 42

Purchased electricity – 11,221 993 12,214

Total 5,122 11,221 1,301 17,644

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 verified.

Scope 3 emissions are usually defined 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.

In 2022, we will determine the extent to which we are able to report

all of our Scope 3 emissions in the future.

The emissions intensity ratio was as follows:

Change

tCO

e 2021 2020 2019 vs 2020 vs 2019

Total emissions 17,644 18,144 24,397 (3)% (28)%

Emissions intensity

51 70 87 (27)% (41)%

1 Expressed in tCO

e per £m revenue.

The emissions intensity ratio was 51 tCO

e per £m revenue in 2021,

resulting in a 27% year-on-year reduction when compared to 2020.

Energy use for the Group for the period ending 30 September 2021

in MWh is as follows:

Change

Source 2021 2020 2019 vs 2020 vs 2019

Natural gas 1,839 1,489 1,611 24% 14%

Electricity 52,846 45,187 50,830 17% 4%

Diesel 14,715 16,348 22,470 (10)% (35)%

Petrol 436 n/a n/a n/a n/a

LPG 4,631 4,472 4,616 4% 0%

Gas oil 1,839 1,345 n/a 37% n/a

Total 76,306 68,841 79,527 11% (4)%

The 2021 energy use intensity ratio was £222 MWh / £m sales

(2020: £267 MWh / £m sales) representing a 17% year-on-year

reduction.

The main driver for the reduction in energy and emissions intensity

ratios was the increasing proportion of renewable electricity in the

national mix, alongside the improving energy efficiency of our own

plant and machinery (new extrusion lines are significantly more

efficient than our legacy fleet). The electricity purchased included

investment in a zero-carbon electricity tariff at our Eurocell Profiles

sites from January 2021 and at our Eurocell Building Plastics sites

from April 2021 onwards.

The above 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 2021 conversion factors provided

by the Department for Business, Energy & Industrial Strategy.

Electricity consumption (69% of 2021 energy use)

We continue to encourage behavioural changes to reduce

consumption levels, to be less wasteful and drive operational

efficiencies, 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.

Eurocell plc Annual Report and Accounts 202144

RESPONSIBLE BUSINESS CONTINUED

MINIMISING OUR

ENVIRONMENTAL IMPACT

CONTINUED

In addition, our previously published target is to increase the use

of renewable energy by 50% by 2025, compared to the 2020

baseline. However, following a decision taken to significantly increase

renewable energy purchases in 2021, renewable energy use

increased to 78%, compared to 19% in 2020. We therefore intend

torevise our long-term target accordingly.

Note that following a market-based methodology, our emissions

from electricity in 2021 were 5,592 tCO

e (compared to 12,214

tCO

e reported for the same period under the location-based

approach in the table above).

Waste management

During 2021, we continued our work towards a ‘zero to landfill’

aspiration. Our current target is to deliver year-on-year increases

inthe level of our waste which is recycled. In 2021, 82% of our

waste was recycled, compared to 79% in 2020.

We are developing our production material flows, particularly

through the recycling operation, to close resource loops, improve

in-house waste recovery and reduce material sent to landfill i.e.

essentially engineering in recycling and designing out waste. The

chart illustrates that substantially all scrap material generated in

Recycled

material

collected

48kt

Use in

primary

extrusion

17kt

(27%)

3rd party recycling and recovery (10kt)

Pellet sales and 100% recycled products (12kt)

In-house

production

waste

4kt

Virgin input

materials

44kt

(73%)

Waste windows collected

(post-consumer)

40kt

Waste collection

Fabricator off-cuts

collected

(post-industrial)

8kt

Volumes are FY 2021

Extrusion

profile

production

57kt

Third-party use of our products

Total infeed

stock

61kt

(100%)

In-house recovery c.4kt

Production Material Flows

our extrusion process is recycled. Finding new applications for

waste products from the recycling operation which were previously

landfilled is also a priority.

We have strategies in place to increase the amount of post-

consumer and post-industrial waste we collect. For example,

at our recycling sites, a number of equipment trials and plant

modifications are being conducted, with the aim of improving

operational efficiency 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 landfill’.

Green arrow – closed-loop recycling

Grey to black bars – material use,

reflecting reducing level

Amber arrows – material losses

to landfill or third-party

Third party processing and landfill (9kt)

Strategic Report

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 2021 45

Financial

Statements

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 benefits and minimise the impacts of the new plastic packaging tax, which

comes into effect from April 2022.

Responsible PVC sector

There are a number of major initiatives in progress across the PVC

industry to address sustainability challenges, right through the value

chain.

Supply chain – Inovyn

Inovyn is Europe’s leading chlorovinyls producer and the largest

supplier of PVC resin to UK window profile system houses,

including Eurocell.

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 first 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 refining 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 first

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

certified 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 profiles.

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 2022.

Supply chain – industry initiatives

We are also proud to support a number of other initiatives in the

PVC industry.

VinylPlus 2030 is a 10-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

of PVC production.

Recovinyl is a series of initiatives to encourage and develop PVC

recycling in Europe.

The British Plastics Federation (‘BPF’) promotes the versatility and

sustainability benefits 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 efficiency and reduce CO

emissions.

Operation Clean Sweep is an initiative to reduce plastic pellet loss

to the environment, with the aim of ensuring that the plastic pellets,

flakes and powders that pass through UK manufacturing facilities

do not end up in our rivers or seas.

Eurocell is also aligned with the Ellen MacArthur Foundation New

Plastics Vision, which focuses on three concepts:

• Eliminate – the plastics we don’t need

• Innovate – to ensure that the plastics we do need are reusable,

recyclable or compostable

• Circulate – all the plastic items we use to keep them in the

economy and out of the environment

Pollution prevention

We have continued to make our vehicle fleet more environmentally friendly, as the choice

of full electric and hybrid electric options continues to grow.

Lower benefit 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 fleet,

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.

Eurocell plc Annual Report and Accounts 202146

RESPONSIBLE BUSINESS CONTINUED

ONE

TEAM

EXECUTE

INCLUSIVE

CUSTOMER

FIRST

INTEGRITY

Health and safety

We employ over 2,000 people and the safety and the welbeing of

these employees and our contractors is our first operational priority.

Our health and safety performance continues to benchmark well

with industry standards. The 2021 reported statistics showed

a slight deterioration on 2020, but generally compare well to

2019. There was some adverse impact, particularly for RIDDOR-

reportable injuries, from improved reporting mechanisms which

were implemented during the year, leading to more incidents being

included in the data. All of the RIDDOR-reportable injuries were

classed as minor.

2021 2020 2019

Injury frequency rate

3.7 3.6 4.8

Lost time injury frequency rate

0.8 0.7 0.9

RIDDOR-reportable injuries 28 19 17

1 Injuries per 100,000 hours worked.

2 Lost time accidents per 100,000 hours worked.

The new incident investigation and management process, which

was introduced across the business in 2021, included further

training and guidance for operational management teams which

should yield future benefits in terms of more thorough investigation,

the identification of more effective countermeasures, and improved

absence management.

COVID-19 safety procedures remained a significant priority throughout

the year, with many good practices retained despite the relaxation in

government guidance. Our incidences of positive cases and isolations

remained below national average rates for most of the year.

Reassuringly, all 21 contacts with health and safety enforcement

authorities during the year resulted in a clean bill of health, with no

requirement for any improvement action. In addition, the ISO 45001

accreditation was maintained across the Profiles division.

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 keep us on a successful path

towards achieving our business

objectives.

VALUING

OUR PEOPLE

ONE TEAM: EXECUTE, CUSTOMER FIRST, INCLUSIVE, INTEGRITY

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

During 2021, good progress has been made on a number of health

and safety initiatives including:

• A new Health and Safety Policy, clarifying responsibilities and

accountabilities for employees at all levels, was launched with

a single, simple objective: to send everyone safely home every

day, with three simple watchwords: awareness; action; and

accountability.

• A new incident investigation process was introduced across the

business, with training and guidance provided to operational

management teams, which should yield benefits in terms of

more thorough investigation and the identification of more

effective countermeasures.

• A formal Group health and safety improvement plan was

cascaded to all business units, with site-specific improvement

plans dovetailing into the Group plan.

• An employee health and safety survey was conducted in

December to obtain opinions and feedback on current

performance, direction and commitment. Survey results will be

analysed and used to inform future work programmes.

• Resources have been increased through the recruitment of an

additional health and safety manager and a second advisor,

with specific responsibility for our national branch network.

• Extensive training programmes have been delivered, including

licence to trade, driver and vehicle safety, and incident

investigation modules, all of which have raised awareness,

commitment and capability.

• Continued colleague engagement on health and safety issues

resulted in various improvements, including:

– safe methods of loading and unloading designed for our full

range of branch products from delivery vehicles;

– modifications made to the extrusion lines to allow an

operator’s free hand to be kept well away from the staple gun;

– improvements to ventilation, air movement, and rest break

regimes at our recycling sites, including each operator being

provided with a water bottle to encourage them to remain

hygienically hydrated; and

– upgrades to the dust extraction system at Vista Panels,

with the installation of a new venting system, which also

offers substantial environmental benefits with lower energy

consumption and reduced frequency for waste collection.

Eurocell plc Annual Report and Accounts 202148

RESPONSIBLE BUSINESS CONTINUED

VALUING

OUR PEOPLE

CONTINUED

Resourcing and recruitment

Our resourcing function has continued to attract and place a high

number of employees across all business areas throughout 2021,

despite the significant and well-documented national candidate

shortages affecting many sectors of the economy. In particular,

in response to significant shortfall in operational labour through

the summer months, we successfully recruited over 100 new

colleagues in order to service higher than expected sales volumes,

reduce our dependency on agency labour and facilitate our

ongoing growth ambitions.

We achieved this by developing our resourcing systems and

methods to ensure that we are best placed to attract candidates,

maximising all available opportunities to select and engage the

best available talent for our business, as well as implementing

forward-thinking technologies such as digital hiring events, video

screening and interviewing, electronic contracts of employment and

digital onboarding. We have succeeded in engaging and securing

potential employees quicker than in the past, expediting the

recruitment process, and positively impacting the candidate journey

at every opportunity.

We have evolved our resourcing function and applied a scalable

resourcing model, which is heavily focused on proactively attracting

talent and promoting Eurocell’s appeal to prospective colleagues.

We continue driving down reliance on temporary labour in favour

of permanent or fixed term contract engagements, providing a

competitive edge to our employer proposition. We remain focused

on attracting, retaining and upskilling talent to secure our future.

Eurocell is an equal opportunity employer and is fully committed

to treating our employees and job applicants equally without bias

and discrimination. Eurocell’s recruitment policy ensures that

irrespective of any disability, full and fair consideration is given to

all applicants based purely on their aptitude. We recognise that

our people are our greatest asset, irrespective of disability and we

continue to promote flexible solutions tailored to and supportive of

individual needs. Our internal processes support all employees who

may require help and support through our Occupational Health

provision, enabling them to fulfil their day-to-day work activities.

Inline with our Company Values we continue to enhance our

policies, procedures and associated management training to further

develop a culture of diversity and inclusivity.

Talent pipelines through the Apprenticeship and

Kickstart schemes

We continue to support the creation of new apprenticeships

and support existing employees to upskill through appropriate

apprenticeship programmes. Our apprenticeships covered

a range of key skills required in the business, including trade

supplier, finance, manufacturing and engineering and business

administration.

In 2021 we had 49 live apprenticeships registered, although a

number did withdraw from their programmes due to the disruption

caused by the pandemic, particularly within the branch network.

However, we had five Trade Counter Assistant/Drivers (‘TCAD’)

achieve a Trade Supplier Level 2 Distinction and a further TCAD

received a merit award. Furthermore, one of our Procurement

apprentices was nominated for an award within the fenestration

industry.

We anticipate an upward growth in the availability of

apprenticeships in 2022, to further support our focus on talent

development and internal growth.

Eurocell was also pleased to be part of the Government’s Kickstart

scheme. Along with other employers, we experienced some of the

well-publicised national difficulties in filling Kickstart jobs, particularly

in the Derbyshire area. Despite this, we were pleased to recruit 30

young people into Kickstart roles, and we will continue to recruit for

as long as the scheme allows.

Our retention has been excellent, with 87% of our Kickstarts still

in their six-month placement positions with us. So far, two of our

early appointed Kickstarts have gone on to be registered for full-

time apprenticeships in our manufacturing function. In the branch

network, where there is an appropriate vacancy, we are taking our

Kickstarts into permanent full-time Trade Counter Assistant roles.

Owen Lilley, Eurocell’s first Kickstart employee, progressed to

become a Trade Counter Assistant at our Barnstaple branch.

Of those who left, most went on to full-time work

inothercompanies.

We see these programmes as a great success in helping young

people into work and we’re proud of our association with the

Kickstart scheme. Overall, our target is to deliver a 20% increase

in apprenticeships and Kickstarters by 2025, against the 2020

baseline of 32 positions, and we believe our plans put us on

track to deliver that. Although a total of 79 apprenticeships and

Kickstarters were registered in 2021, this number will fall in 2022,

as the Government has now closed the Kickstart scheme.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

People Toolkit

A major initiative, the People Toolkit, was launched in November

2021 to help our managers complete everyday people

management activities with more consistency and fairness.

Available to managers across the whole business, the Toolkit

consists of ‘How To’ guides in ten key management topics, which

contain over 50 checklists, flowcharts, forms, step-by-step guides

and guiding principles. The topics covered range from recruitment

through to managing performance.

Each resource has been carefully created to ensure legal

compliance and guidance in line with the Company’s own policies

and procedures. The Toolkit aims to build confidence in a ‘One

Team’ approach to people management and saves time by

eliminating the need for local management teams to create their

own resources.

We will continue to build the Toolkit with additional topics and

resources throughout 2022. Feedback indicates that the Toolkit is

welcomed as a valuable one-stop-shop for our managers.

Incentives and rewards

We want to ensure that we attract the best people, either internally

through our talent pipeline or from outside the business, who

provide the right skills and knowledge to support the continued

growth of our Company. It is therefore important that we continue

to benchmark our remuneration packages to ensure that they

remain competitive.

Every employee has access to a range of benefits 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 defined contribution pension scheme, life insurance,

Save as You Earn (‘Sharesave’) schemes, and access to a range

of savings and special offers through our Eurxtras platform. This

platform also facilitates user-friendly communication with all

employees, allowing the business to provide the latest news from

across the organisation, in addition to providing a range of savings

and special offers.

Also, during the year, another tranche of employee share options

reached their maturity under the Group’s Save As You Earn (‘SAYE’)

scheme, resulting in gains available to all participants at the time of

maturity and further increases in employee share-ownership for our

colleagues who chose to retain their shares. We intend to continue

to launch SAYE schemes on an annual basis.

In order to support our recruitment and retention efforts across

the business, during the year we began a major project to review

the level of pay and reward for our branch and operational teams.

This project will complete in 2022, but has already resulted in a

significant mid-year pay uplift in 2021 for several large employee

groups in order to maintain competitiveness, improve staff welfare

and support our objective to become an employer of choice.

At the end of 2021, 98% of our employees were paid above the

National Living Wage. Our target is to increase this to all employees

by 2023.

Colleague wellbeing

Over the last 12 months, where appropriate, we have continued to

adopt the hybrid working principles introduced during the first UK

COVID-19 lockdown in 2020. Our colleagues across the business

continue to value the flexibility of working this way.

2021 saw the launch of our ‘Pulse Survey’, the primary purpose

of which was to reach out to all of our employees and better

understand their views and opinions, including those where

face-to-face contact has been lower than normal due to COVID-19.

Employees responded positively to the survey, with an overall

completion rate of 60%, and an overall satisfaction level of 68%.

We will run the survey annually, and our target is to deliver year-

on-year improvements in both measures. The 2021 results have

subsequently been used to create action and improvement plans.

The results of the survey have also been used to signpost our

strategy on developing our employee wellbeing initiatives.

With regard to wellbeing, in recognition of the pressures our

employees experienced during the pandemic, we ran a flyer

campaign in January 2021 full of tips for staying resilient and

healthy. This included information about getting professional

advice through the Employee Assistance Programme (‘EAP’),

theSamaritans, Shout and Mind UK.

To further support our employees’ wellbeing, we ran a daily

campaign during the UK’s 2021 Mental Health Awareness Week

in May. Each day offered every employee a simple click to a short

60-second video on topics such as reducing money worries, health

and fitness, coping with anxiety and stress, and links to useful

sources of help. We plan to build on this work in 2022.

Eurocell plc Annual Report and Accounts 202150

RESPONSIBLE BUSINESS CONTINUED

Diverse and inclusive culture

In line with our values, we continue to enhance our policies, procedures and associated management training to further develop a

culture of diversity and inclusiveness at Eurocell.

The recruitment platform and processes we introduced in 2020 continue to ensure that our equality and diversity standards are

transparent, and this enables us to make decisions without bias or discrimination.

We provide specific support for specific groups and individuals throughout our business, including the provision of free English

and maths tuition for non-English speakers, access to improved occupational health support, mental wellbeing support and a free

Employee Assistance Programme. We have stepped up our communication in a variety of ways this year, to enable our people to

access what they need in order to feel supported and included, whatever their background or needs.

We recognise the benefits of encouraging diversity across the business and believe that this will contribute to our continued

success. All appointments are made based on merit and are measured against specific objective criteria, including the skills and

experience needed for the position.

We remain committed to increasing the participation of women throughout the Group while recognising we operate in a historically

male-dominated industry. Our target is to deliver year-on-year increases in the proportion of female employees in the Group.

Thiswas achieved in 2021, with female employees increasing to 13.4% (2020: 12.8%).

Talent Development Review (‘TDR’) and Leadership

Development (‘LD’)

For the first time at Eurocell, we designed and launched a pilot TDR

process in 2021 to support our commitment to develop our people

and to ensure that the business has the right people with the right

skills for the future. The TDR pilot was deployed successfully in the

Building Plastics division. The outputs were used to help create an

LD programme. We now have nine colleagues taking part in the

scheme, which consists of a series of modules covering topics

such as finance, sales and project management. The programme

also includes one-to-one coaching for participants.

It is anticipated that the TDR and LD programmes will be rolled out

into other areas of the business beginning in 2022.

New policies and procedures

As described above, the health and wellbeing of our colleagues is

of the upmost importance to us. We have continued to review and

develop our company policies and procedures in this area to reflect

our evolving business and the environment in which we operate.

These revised policies provide our people with the help, support

and guidance on all employee-related issues. For example, during

2021 we have continued to update a range of policies that align

to the Eurocell values and drive a culture of fairness, equality and

transparency.

Labour turnover

Our objective is that the initiatives and actions described in this

section combine to drive improved employee wellbeing, better pay

and reward, successful recruitment and retention, and exciting

development opportunities for our teams. Over time, we expect this

strategy to drive year-on-year reductions in labour turnover.

However, as described above, we were impacted by the well-

publicised national labour shortages affecting many sectors of

the economy in 2021. In response to a significant shortfall in

operational labour through the summer months, we successfully

recruited over 100 new colleagues in order to service higher than

expected sales volumes, reduce our dependency on agency labour

and facilitate our ongoing growth ambitions. Our labour turnover

calculation includes the impact of all starters and leavers, including

this programme. As a result, in 2021, labour turnover for the Group

increased to 26%, compared to 21% in 2020.

However, we remain confident that our initiatives will drive future

reductions in labour turnover.

Learning and development (‘L&D’)

In the Building Plastics division, the L&D team have made

improvements to the employee induction and product training

programmes for branch colleagues and have worked to ensure

active participation through a blend of eLearning (delivered through

our Learning Management System), and face-to-face training

delivered online through Teams.

Elsewhere in the business, we have seen an increase in mechanical

handling equipment training within our manufacturing and

warehouse teams, with the sophisticated equipment used in the

new warehouse demanding a greater blend of skills and licences

for our employees.

In terms of compliance training, in 2021, we introduced a new

supplier for First Aid training, which has improved the efficiency,

effectiveness and lowered the cost of training. We have also

moved much of our Standard Operating Procedures (‘SOPs’)

training resources online, to make the deployment and tracking of

completion more effective.

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

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Strategic Report

WORKING RESPONSIBLY

WITH COMMUNITIES AND

OTHER STAKEHOLDERS

Community and charity

Our manufacturing and recycling centres, warehouses and branches can have

a significant impact on, and benefit from, the communities in which we operate.

We believe it is important to support the communities local to our sites.

LOCAL

HOSPITALS

The staff at our Alfreton

Head Office, manufacturing

and warehousing facilities

donated Christmas presents

to children spending the

festive period in local

Derbyshire hospitals. The

Eurocell team also provided

a Christmas hamper for

the Royal Derby Hospital

Chemotherapy ward, and

sponsored a 5k Santa Run,

which raised funds for local

hospital charities.

PARKINSON’S UK

Two of our senior managers in the

Building Plastics division completed

a 140-mile coast-to-coast cycle

ride, taking in Eurocell branches at

Workington, Penrith and finishing up in

Newcastle, which raised over £5,000

for research into helping find a cure for

Parkinson’s disease.

CARE HOME

RESIDENTS

Our team at Eurocell Recycle

North donated more than 50

Easter Eggs to the residents of a

local care home, many of whom

had not been able to see their

friends or family in over a year

due to the COVID restrictions.

CHILDREN’S

SPORT

We sponsored the junior

section of a local Derbyshire

football club, Holme Rovers

FC, which runs 10 junior

football teams for c.180

children from under 6s up

to under 16s, including

the provision of smart rain

jackets.

Eurocell plc Annual Report and Accounts 202152

RESPONSIBLE BUSINESS CONTINUED

Customers

Service levels

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 (see

below), which captures the way we aspire to work at Eurocell.

Quality Policy Statement

Customers

To be trusted by our customers in everything we do. Working in

partnership with them to ensure that they are able to differentiate

their service and product offerings from their competitors. Easy

to do business with and always responsive to their needs, in a

consistent, timely, courteous and flexible manner.

Quality

Adherence to industry-leading specifications and ISO-based

standards for Quality & Environmental Management and British

Standards for Health and Safety. Ensuring that suppliers

understand and work with us to meet our aspirations.

Constant improvement

Uniform standards across our business benchmarked against

industry best practice with constant review and improvement

of processes. Best practice transferred across businesses

and customers with a view to reducing waste and improving

consistency. Always tracking and measuring through business

and departmental KPIs reflecting the business objectives.

Everyone’s responsibility

All departments are responsible for constantly reviewing,

measuring, checking and improving the quality of their work

and ensuring that the necessary training, facilities and tools are

available to get the job done right first time through a culture of

continuous improvement. All departments working together and

supporting each other with no barriers and no silos.

Sustainable and quality products

We adhere to industry-leading specifications and ISO-based

standards for Quality & Environmental Management and British

Standards for health and safety.

Suppliers

Ethical and sustainable sourcing

We strive to develop and maintain supplier relationships which

are ethical, sustainable and responsible, forming the basis of

our commitment to responsible sourcing. In addition, we have

established supplier pre-appointment checks to evaluate the

environmental and humanitarian impact of our products and supply

chain.

In particular, we ensure that all relevant raw material suppliers are

compliant with the current Registration, Evaluation, Authorisation

and Restriction of Chemicals regulation (‘REACH’) and continually

monitor all of our suppliers’ quality management processes and

controls as part of the set-up and approval process.

We have a loyal supplier base, of which a significant majority have

been suppliers to Eurocell for several 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 social-economic

issues from its supply chain.”

In addition, all of our suppliers are required to confirm their

commitment to the following principles:

• The obligation to the global and local environment;

• Respect for fundamental human entitlements;

• In purchasing activities, a commitment to improving the

organisation’s performance in relation to fairness to all;

• A system of internal and external reporting which matches

espoused values;

• A proactive promotion of sustainable practices and products;

• Recognition that there is responsibility to add value to

communities and societies upon which the organisation has

influence; and

• An ethical approach to purchasing activities.

To support all of the above initiatives, we recruited a Head of

Procurement during the year to manage supplier relationships

and provide a consistent strategy and sustainable approach to

purchasing.

Modern slavery

We are absolutely committed to preventing slavery and human

trafficking in our business activities, and to ensuring that our supply

chains are free from these practices.

We aim to identify modern slavery risks and prevent slavery and

human trafficking in all our operations. We continue to identify any

potential risks in the top 80% of our suppliers and, in cases where

medium or high risk is identified, further assessments are carried

out which may result in the supplier not being used.

Our full Anti-Slavery and Human Trafficking Statement is published

on our website at investors.eurocell.co.uk.

Government

Taxation

The Fair Tax Mark is an independent certification 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 certified 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 and customers, and assists us in creating a

fair and successful business environment.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Strategic Report

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 efficiency

Building on the strong platform we already have, a key next step

forthe business is to define our pathway to carbon neutrality and

net zero. This will likely include:

• Continuing to reduce Scope 1 and 2 emissions,

particularly in PVC extrusion and recycling

• Further work to reduce transport and mobile plant

emissions

• Working with suppliers and sector partners to better

understand and improve Scope 3 emissions

• Further developing our closed-loop water cooling

Waste minimisation and circularity

Here we will focus on further strengthening our materials recovery

and process optimisation, driving leaner and more sustainable

resource use over time. We also intend to create Environmental

Product Declarations (‘EPDs’) to differentiate our key products

fromcompetitors on sustainability grounds.

People and places

The events of the last two years, dominated by the COVID-19

pandemic, have served to increase our focus on employee

wellbeing, including mental health, remote working, diversity and

fair wages. Our aim remains to become the regional employer of

choice in the communities in which we operate.

We will also continue to develop and refurbish our facilities for our

people and step up our community engagement.

Governance

As described above, we will report our progress against the

published ESG targets and KPIs on an annual basis. We also

intend to enhance our non-financial disclosures, improve

sustainability scores against recognised indices (e.g. MCSI,

Sustainalytics) and align as closely as practical with reporting

bodies such as the Sustainability Accounting Standards Board

(‘SASB’) and FTSE4Good.

Eurocell plc Annual Report and Accounts 202154

CHIEF FINANCIAL OFFICER’S REPORT

“Our effective response to the

challenges of 2021 has allowed

the business to capitalise on the

continued strength in the RMI

market and report good financial

results for the year.”

Michael Scott

Chief Financial Officer

STRONG FINANCIAL

RESULTS FOR 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Introduction

Our effective response to the challenges of supply chain disruption,

major raw material cost inflation and tight labour markets has

allowed the business to capitalise on the continued strength in the

RMI market and report good financial results for 2021.

Revenue

Revenue for 2021 was £343.1 million, 33% higher than 2020

(£257.9 million) and up 23% on 2019 (£279.1 million). Growth

compared to 2019 is comprised of 15% from volume and 8% from

selling price increases / surcharges.

We experienced an inflationary environment in 2021, with prices for

certain raw materials, particularly PVC resin increasing significantly.

We recovered these higher costs through our market-leading

recycling plants, as well as through selling price increases and a

surcharge adjusted monthly in response to cost changes, with

selling price inflation becoming a larger component of sales growth

as the year progressed.

Growth compared to 2019 is also equivalent to a like-for-like

increase of 21%, representing a strong performance across

the business. Like-for-like excludes new branches opened in

2019/20/21.

Gross margin

Gross margin for the year was 50.5%, up from 49.4% in 2020 but

down 70 basis points compared to 2019. As described above, the

surcharge successfully recovered the higher material costs in 2021,

and is therefore broadly neutral to profit, but it is dilutive to the

margin percentage.

Distribution costs and administrative expenses

(overheads) and IFRS 9 impairments

Overheads and IFRS 9 impairments were together £121.7 million,

up 25% on underlying costs in 2020 (£97.6 million) and 21% higher

than 2019 (£100.5 million), reflecting higher production and sales

volumes.

Underlying overheads in 2020 included COVID-related UK

Government support of £8.3 million, comprising receipts under the

Job Retention Scheme of £6.5 million, retail grants of £0.7 million

and retail rates relief of £1.1 million. Overheads in 2021 include

retail rates relief of £1.0 million.

Following the first COVID-19 lockdown, we assessed the level

of customer credit risk to have increased materially. As a result,

IFRS 9 impairment charges of £3.7 million were reflected in the

underlying income statement 2020. Subsequently, cash receipts

have been good and the ageing profile in our ledgers has improved,

and consequently an IFRS 9 credit of £0.7 million has been

recorded in 2021.

Depreciation and amortisation

Depreciation and amortisation was £22.7 million compared to an

underlying charge of £19.5 million in 2020 (reported: £20.8 million)

and £17.8 million in 2019.

Alternative performance measures

Alternative performance measures are used alongside statutory

measures to facilitate a better understanding of financial

performance and comparison with prior periods, and in order to

provide audited financial information against which the Group’s

bank covenants, which are all measured on a pre-IFRS 16 basis,

can be assessed.

Group

2021

£m

2020

£m

2019

£m

Revenue 343.1 257.9 279.1

Gross profit 173.4 127.4 142.9

Gross margin % 50.5% 49.4% 51.2%

Overheads (122.4) (93.9) (99.0)

IFRS 9 impairments 0.7 (3.7) (1.5)

Adjusted

EBITDA 51.7 29.8 42.4

Depreciation and amortisation (22.7) (19.5) (17.8)

Adjusted

operating profit 29.0 10.3 24.6

Finance costs (2.0) (1.8) (1.9)

Adjusted

profit before tax 27.0 8.5 22.7

Taxation (5.9) (1.5) (3.4)

Adjusted

profit after tax 21.1 7.0 19.3

Adjusted

basic EPS (pence per share) 18.9 6.5 19.3

Non-underlying items — (10.0) —

Tax on non-underlying items — 0.8 —

Reported operating profit 29.0 0.7 24.6

Reported profit/(loss) before tax 27.0 (1.5) 22.7

Reported profit/(loss) after tax 21.1 (2.2) 19.3

Reported basic earnings/(losses) per share (pence) 18.9 (2.0) 19.3

1 See alternative performance measures.

Eurocell plc Annual Report and Accounts 202156

CHIEF FINANCIAL OFFICER’S REPORT CONTINUED

Alternative performance measures (continued)

Adjusted EBITDA, adjusted operating profit and adjusted profit

before tax all exclude non-underlying items. Adjusted profit after tax

and adjusted earnings per share exclude non-underlying items and

the related tax effect.

Pre-IFRS 16 EBITDA is stated inclusive of operating lease rentals

under IAS 17 Leases. Pre-IFRS 16 net debt is defined as total

borrowings and lease liabilities less cash and cash equivalents,

excluding the impact of IFRS 16 Leases.

We classify some material items of income and expense as

non-underlying when the nature and infrequency merit separate

presentation. Alongside statutory measures, this facilitates a better

understanding of financial performance and comparison with prior

periods.

Non-underlying items

No non-underlying items were recognised in 2021 and 2019.

Non-underlying items for 2020 of £10.0 million included a

non-cash goodwill impairment charge of £5.8 million, right-of-use

asset impairment charges of £0.9 million, restructuring costs of

£0.6 million and warehouse dual-running costs of £2.7 million.

Finance costs and taxation

Finance costs for 2021 were £2.0 million, compared to £1.8million

in 2020 on an underlying basis and £2.2 million in total, with

£0.4million of IFRS 16 lease interest classified as non-underlying

in 2020, as it related to warehouse dual-running costs (see Non-

underlying items).

The tax charge for 2021 was £5.9 million (2020: £1.5 million on an

underlying basis, and £0.7 million in total). The effective tax rate

on underlying profit before tax for 2021 of 22.0% is higher than

the standard rate of corporation tax of 19% due to the impact of

the change in the standard rate that will take effect in 2023 on the

measurement of deferred taxes.

The effective underlying tax rate in 2020 of 17.6% was lower than

the standard rate of 19%, due to the benefit of Patent Box relief.

The effective tax rate on non-underlying items was 7.0% due to the

£5.8 million goodwill impairment charge being non-deductible for

tax purposes.

We were pleased to retain the Fair Tax Mark accreditation in 2021,

reflecting our commitment to paying the right amount of tax at the

right time.

Profit/(loss) before tax and earnings/(losses) per share

The profit before tax for the year was £27.0 million compared to an

adjusted profit before tax of £8.5 million in 2020 and a profit before

tax of £22.7 million in 2019. Improved profits compared to 2020

and 2019 reflect higher sales volumes.

The reported loss before tax in 2020 was £1.5 million.

Basic earnings per share for the year were 18.9 pence (2020:

adjusted basic earnings per share of 6.5 pence; 2019: 19.3 pence),

reflecting the increase in the weighted average number of shares

issued (2021: 111.7 million shares; 2020: 108.2 million shares;

2019: 100.3 million shares). Reported basic losses per share for

2020 were 2.0 pence.

Diluted earnings per share for the year were 18.8 pence (2019:

19.2 pence). As a loss was recorded in 2020, share options were

not considered to have a dilutive effect.

Dividends

We paid an interim dividend 3.2 pence per share in October 2021

(£3.6 million). The Board proposes a final dividend of 6.4 pence

per share, taking total dividends for the year to 9.6 pence, or

£10.8 million (2019: 3.2 pence or £3.2 million). The dividend will

be paid on 18 May 2022 to Shareholders registered at the close

of business on 22 April 2022. The ex-dividend date will be 21 April

2022.

Retained earnings as at 31 December 2021 were £83.1 million

(2020: £65.5 million). The Company takes steps to ensure

distributable reserves are maintained at an appropriate level

through intra-Group dividend flows.

Capital expenditure

Capital expenditure for 2021 was £16.7 million (2020: £13.7

million). 2021 includes c.£7 million to expand manufacturing

capacity across a number of key product lines, c.£2 million to

increase logistics capability and c.£2 million for new branches.

Other capital expenditure in the period of c.£6 million includes

recycling, branch refurbishments, IT and maintenance capex.

Cash flow

Net cash generated from operating activities was £29.6 million

(2020: £32.9 million).

A net outflow from working capital for 2021 of £19.4 million includes

the substantial impact of inflation (c.£8 million net across all working

capital components). The outflow is comprised of an increase in

stocks of £17.8 million, an increase in trade and other receivables

of £6.0 million and an increase in trade and other payables of £4.4

million. For stocks, the inflation impact alone is c.£7 million, with the

year-on-year increase also including a build in Q4, when PVC resin

was readily available, providing an opportunity to protect against

any adverse impact from COVID-19 isolations in Q1 2022. This

compares to a net inflow from working capital of £4.7 million in 2020.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Other items include payments for capital investments of £15.5

million (2020: £14.0 million) and financing costs paid of £0.6 million

(2020: £0.7 million). Tax paid in the year was £3.5 million (2020: £1.0

million). Dividends of £3.6 million were paid in the year (none paid

in 2020).

The principal elements of lease payments of £10.1 million (2020:

£10.7 million) are presented within cash flows arising from financing

activities. The finance elements of lease payments were £1.2 million

(2020: £1.3 million).

Net debt

Net debt on a pre-IFRS 16 basis at 31 December 2021 was

£11.0 million (31 December 2020: £9.9 million).

Lease liabilities increased by £10.3 million. Reported net debt at

31 December 2021 was £69.7 million (31 December 2020:

£58.3 million).

Group

2021

£m

2020

£m

Change

£m

Cash 6.6 7.1 (0.5)

Bank overdrafts (5.9) (4.5) (1.4)

Borrowings (11.7) (12.5) 0.8

Net debt (pre-IFRS 16) (11.0) (9.9) (1.1)

Lease liabilities (58.7) (48.4) (10.3)

Net debt (reported) (69.7) (58.3) (11.4)

Bank facility

We have an unsecured Revolving Credit Facility (‘RCF’) of £75

million which matures at the end of 2023. In 2020 we converted

the facility into a Sustainable RCF, where modest adjustments to

the margin are applied based on our achievement against annual

recycling targets. We were pleased to meet our target for 2021,

and plan to invest the interest saved in sustainability-related

initiatives.

We operate comfortably within the terms of the facility and in

compliance with our financial covenants, which are measured on a

pre-IFRS 16 basis.

Michael Scott

Chief Financial Officer

1 Like-for-like sales up 21%.

2 Distribution costs and administrative expenses

Revenue

(£m)

400

350

300

250

200

150

2019

279.1

12.8

22.0

23.2

6.0 343.1

337.1

Profiles

LFL

Building

Plastics

LFL

Selling price

increase and

surcharge

New

branches

Group

LFL

2021

Gross profit (£m)

180

170

160

150

140

130

120

2019

142.9

18.4

7.5

2.0

2.6 173.4

Volume Price Recycling New

branches

2021

Cashflow (£m)

-10

2021

EBITDA

Financing

51.7

(19.4)

(15.5)29.6

(0.8)

0.5

(21.6)

(3.6)

(11.4)

(2.7)

Working

capital

issued

Tax

and

other

Leases

(non-cash)

Net cash

from

operating

activities

Dividends

paid

Capex Change

in net

debt

Overheads

(£m)

130

120

110

100

2019

100.5

14.8

6.1

(2.2) 2.5

121.7

Volume Wage

inflation,

bonus and

SBP

Bad

debts

New

branches

2021

Eurocell plc Annual Report and Accounts 202158

PRINCIPAL RISKS AND UNCERTAINTIES

Identify risks

Quantify net risk

Identify any further

action required

Assess gross risk

Identify existing

mitigation

Monitor

and control

RISK MANAGEMENT

Risk management is the responsibility of the Board and is

a key factor in delivering the Group’s strategic objectives.

Risk is managed across the Group in the following ways:

• The Board meets annually to review strategy and set the risk

appetite.

• Risks faced by the Group are identified during the formulation

of the annual business 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 identifies the level of severity and probability, ownership

and mitigation measures, as well as any proposed further

actions (and timescale for completion) for each significant risk.

• The Group has an executive Risk Management Committee,

chaired by the Chief Financial Officer. This Committee meets

on a regular basis. The status of the most significant risks

and mitigations are reviewed at each meeting, with other risks

reviewed on a cyclical basis.

• The Executive Directors also meet with senior managers on

a regular basis throughout the year. This allows the Executive

Directors to ensure that they maintain visibility over the material

aspects of strategic, financial and other risks.

• The Group’s Audit and Risk Committee assists the Board

in assessing and monitoring risk management across the

Group. The role of the Committee includes ensuring the timely

identification and robust management of inherent and emerging

risks, by reviewing the suitability and effectiveness of risk

management processes and controls. The Committee also

reviews the risk register to ensure net risk and proposed further

actions are together consistent with the risk appetite set by the

Board.

Approach to Risk Management

The Board is responsible for setting the risk appetite, establishing a

culture of effective risk management and for ensuring that effective

systems and controls are in place and maintained.

Senior managers take ownership of specific risks and implement

policies and procedures to mitigate exposure to those risks.

Risk Management Process

The risk management process sits alongside our strong

governance culture and effective internal controls to provide

assurance to the Board that risks are being appropriately

identified and managed.

How we manage risk

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Low Medium

High

Probability

01 04

1310 11

06 09

Impact

Low Medium

High

Principal risks

Macroeconomic conditions

Manufacturing capacity

constraints

Cyber security

Warehousing and distribution

capacity constraints

Regulatory risks, including

health & safety

Unplanned plant downtime

Shortages or increased costs of

appropriately skilled labour

Failure to develop new products

Competitor activity

Failure to identify, complete and

integrate bolt-on acquisitions

Digital and IT system development

Raw material supply

Ability to attract and retain key

personnel and highly skilled individuals

Raw material and traded

goods pricing

Customer credit risk

Sustainability

Internal control

The Group has well-defined systems of internal control.

The Group has a robust process of financial planning and

monitoring, which incorporates Board approval of operating and

capital expenditure budgets. Performance against the budget is

subsequently monitored and reported to the Board on a monthly

basis. The Board also monitors overall performance against

operating, safety and other targets set at the start of the year.

Performance is reported formally to shareholders through the

publication of results both annually and half-yearly. Operational

management regularly reports on performance to the Executive

Directors.

Day-to-day operations are supported by a clear schedule of

authority limits that define processes and procedures for approving

material decisions. This ensures that projects and transactions are

approved at the appropriate level of management, with the largest

and most complex projects being approved by the Board. The

schedule of authority limits is reviewed on a regular basis so that it

matches the needs of the business.

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.

Eurocell plc Annual Report and Accounts 202160

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

The principal risks monitored by the Board are as follows:

RISK MANAGEMENT

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

construction projects.

Our private RMI business is strongly

correlated to the level of household

disposable incomes. Our new build

business is particularly influenced

by the level of activity in the house

building industry.

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 inflation) in the UK.

Government economic and social

policy can also have a significant

impact on our business.

• Notwithstanding macro

conditions, we expect our

strategic priorities and self-

help initiatives to support

sales and profit growth and

drive good cash conversion.

• Initiatives include: growing

market share, expanding the

branch network, delivering

sustained operational

excellence and increasing

recycling.

• We operate comfortably

within the terms of our bank

facility and related financial

covenants.

• The UK economy is close

to full employment, but with

growth currently limited by

supply chain shortages and

the rising cost of living.

• CPA now forecasts the

private housing RMI market

to be flat in 2022 (after

growth of 17% in 2021).

• We may now be in a RMI

super-cycle, driven by

historical under-investment

in the UK housing stock and

the shift to permanent hybrid

working.

• The UK is also experiencing

high levels of mortgage

approvals, with 1 in 16

homes changing hands in

2021.

• The UK base rate increased

twice in consecutive months

in early 2022 in response to

rising inflation.

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.

• Physical security of servers

at third-party off-site data

centre, with full disaster

recovery capability.

• Password and safe-use

policies in place, internet

usage monitored and anti-

malware used.

• External cyber review

and internal audit reviews

conducted periodically,

resulting in significant

enhancements in defence.

• Cyber awareness/IT security

campaign active for all

employees.

• Enhanced monitoring and

vigilance in response to

increased remote working.

• Financial crime protection

and cyber liability insurance

in place.

• Potential for increased

cyber activity due to current

tensions between Russia and

the UK and its allies.

• Recent cyber attacks on

companies within our sector

have caused considerable

disruption to IT systems.

• This remains a high-profile

area and continues to receive

considerable management

attention.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Movement key:

Increase No change Decrease

Strategic Priorities key:

Increase the use of recycled

materials

Develop innovative new

products

Deliver sustained operational

excellence

Target growth in market share

in Profiles

Explore potential bolt-on

acquisitions

Develop a sector-leading

digital platform

Expand the branch network

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 & safety

matters.

• Introduction of a range

of COVID-safe protection

measures, in line with

recommended guidance and

designed and implemented

collaboratively with input

from the workforce.

• Internal and third-party site

audits to test compliance

with our policies.

• COVID-19 has increased

health & safety risks.

• 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’).

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.

The recycling feedstock supply

market is fragmented and can be

unpredictable.

Failure to receive raw materials on

a timely basis could impact on our

ability to manufacture products and

meet customer demand.

• We generally 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.

• A spot market exists for

resin, that we are able to

access at certain times.

• Contractual arrangements for

certain key suppliers include

liquidated damages for failure

to supply.

• Regular reviews to test

financial stability of key

suppliers.

• Potential remains for

increased resin supply

originating from the US to

come on line and deliver into

Europe.

• Brexit-related supply chain

issues were exacerbated

by strong demand and

a lack of sea freight

container capacity, leading

to increased freight prices

and sector-specific material

shortages.

• High demand for PVC

put sector supply chains

under pressure, which also

significantly impacted pricing

(see overleaf).

• Our market-leading recycling

plants supported continuity

of supply of resin in tight

markets.

• Due to strong relationships

with our suppliers, most of

the raw materials and traded

goods we require were

secured throughout 2021,

although sometimes subject

to delays.

• Supply chains in early 2022

remain tight, although we

do expect this to ease in the

coming months.

Eurocell plc Annual Report and Accounts 202162

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Principal Risk

and Impact

Strategic

Priorities

Mitigation Risk Change in

Reporting Period

Movement

RAW MATERIAL AND TRADED

GOODS 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 fluctuations 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 our customers.

• Increasing the use of

recycled material in our

manufacturing partially

mitigates exposure to resin

prices, although prices for

recycling feedstock can also

be volatile.

• We consider fixed price

supply arrangements

with suppliers where it is

economic to do so.

• Resin and other raw material

prices increased sharply in

2021, due to a combination

of high demand and supply

shortages.

• We have mitigated raw

material cost inflation to date

with selling price increases

and surcharges.

• It is difficult to predict what

will happen to raw material

prices in 2022.

• We have elected not to enter

into a fixed price contract

for PVC resin so far in 2022,

as the premium currently

required by suppliers is

prohibitive.

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 the

business.

• Regular process for in-depth

credit reviews for existing

and new customer accounts.

• Following onset of COVID-19

pandemic and first lockdown,

increased frequency of

credit reviews and greater

involvement of relevant

Executive Committee

members in managing

position on key accounts.

• Credit insurance in place

to the extent available for

selected large accounts.

• Significantly increased bad

debt provisions recorded in

2020 in response to impact

of COVID-19. Subsequent

cash receipts in 2021 were

good and ageing profile of

receivables much improved.

SUSTAINABILITY

Demonstrating improving business

sustainability is becoming increasingly

important to all stakeholders.

We published a Group-wide

sustainability strategy in 2021,

including KPIs and targets linked to

relevant UN Sustainable Development

Goals and the UK Government’s

transition towards a net zero carbon

economy.

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 set out a

credible pathway to carbon neutrality

and net zero, then investors and

lenders may show a preference to

allocate capital to businesses with

smaller climate impacts.

• Strong underlying position on

sustainability underpinned by

window recycling operation,

which drives significant

carbon savings compared to

the use of virgin PVC resin.

• Publication of verified carbon

savings data for the first 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 first time in the 2021

Annual Report, including

consideration of climate-

related risks.

• Launch of a Group-wide

sustainability strategy, with

long-term goals linked to

relevant UN Sustainable

Development Goals and the

UK Government’s transition

towards a net zero carbon

economy.

• Defined a suite of

environmental and social

targets and KPIs against

which to measure our

progress.

• Appointment of a new

Environmental Sustainability

Manager.

• Awarded the FTSE Green

Economy Mark certification.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Principal Risk

and Impact

Strategic

Priorities

Mitigation Risk Change in

Reporting Period

Movement

MANUFACTURING CAPACITY

CONSTRAINTS

Demand running above our

manufacturing capacity may result in

production-related inefficiencies, 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.

• Investment in 2018/19

increased manufacturing

capacity by more than

20% and removed historic

constraints.

• A further five new extrusion

lines were commissioned in

2021.

• Operations management

team now providing the

strong leadership required

to install additional capacity

and address operational

challenges as the business

grows.

• New warehouse facility (see

below) frees up space in the

existing footprint to future-

proof extrusion capacity.

• Customer demand for our

manufactured products in

2021 was very strong, and

the business has significant

opportunities to continue

strong growth and deliver

further market share gains.

• A further five extrusion lines

will be added in H2 2022.

Together with the 2021

expansion, this increases

capacity by a further 15%

relative to the end of 2020.

• Space is available in the

current footprint for a further

increase beyond that of

around 15%.

WAREHOUSING AND

DISTRIBUTION CAPACITY

CONSTRAINTS

We exceeded the capacity of our

existing warehouse in 2018/19,

resulting in inefficiencies and

additional labour and distribution

costs.

As a result the business invested in

a new warehouse, commissioned in

2021, which significantly increases

our warehousing capacity and is key

to delivering further improvements in

operational efficiencies as the new

plant, systems and processes become

embedded.

On-time execution of the fit-out

project and successful operation from

the new site are critical to unlocking

future growth potential and the

delivery of anticipated improvements

in operating efficiencies.

• Fit-out of the new warehouse

and transition completed in

2021.

• The focus for 2022 will be

to deliver the anticipated

operational efficiencies

and we are optimistic that

performance will exceed our

original expectations.

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 fire); extended

power outages; withdrawal of permits

and licences (e.g. the regulated

operation of the recycling facility);

breakdowns in machinery; equipment

or information systems; prolonged

maintenance activity; strikes or other

extended workforce absences; natural

disasters; and other unforeseen

events.

• 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.

• Recycling facilities spread

over two sites.

• Group-wide disaster recovery

plans in place.

• Continued maintenance

capital investment in the

extrusion facility, and in the

recycling plants.

• Financial impact of recycling

plant downtime increasing

due to elevated cost of

virgin resin. Initiatives to

progress in 2022 to eliminate

bottlenecks and single

points of failure in recycling

processes.

Eurocell plc Annual Report and Accounts 202164

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 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

leadership team.

• Equity-based long-term

incentive plans in place for

senior team.

• People plan includes

focus on improving

employee engagement and

communication.

• Progressive implementation

of people plan.

• Strengthened Operational

management in

Manufacturing, Recycling

and Supply Chain.

SHORTAGES OR INCREASED

COSTS OF APPROPRIATELY

SKILLED LABOUR

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.

• Resourcing, recruitment and

on-boarding procedures

enhanced in 2021 along with

improvements to training

programmes.

• Pay and benefits

benchmarking and review

conducted in 2021 to ensure

we offer market level or

better salaries and good

benefits package.

• Annual SAYE share-save

scheme available to all

personnel.

• People plan includes

focus on improving

employee engagement and

communication.

• Risk increased initially

mid-2021 due to very tight

labour supply, particularly for

agency workers.

• Further adverse impact mid-

2021 when absence rates

were high due to COVID-19

related isolations.

• Risk subsequently reduced

by successful H2 recruitment

programme, replacing

agency staff with permanent

employees. Programme

underpinned by results of

pay and benefits review and

improvements to recruitment

and on-boarding procedures.

• We now have the resources

in place to operate efficiently

and achieve our growth

ambitions.

• Sixth SAYE scheme planned

for 2022.

• Progressive implementation

of people plan.

FAILURE TO DEVELOP NEW

PRODUCTS

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.

• We work closely with

customers and technical

advisers on product

development.

• We have a strong product

pipeline with more than 25

projects in development.

• Recent successes include:

flush sash French doors,

improved conservatory roof

and roof lantern ranges

and a further extension to

the outdoor living product

categories.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Principal Risk

and Impact

Strategic

Priorities

Mitigation Risk Change in

Reporting Period

Movement

COMPETITOR ACTIVITY

We have a number of 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

competitor activity.

• Absolute focus on customer

proposition and points of

differentiation in product and

service offering.

• We have developed a strong

new customer pipeline.

• The more uncertain market

environment may have

weakened some of our

competitors.

• We believe we continued to

take market share in 2021.

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.

• Public communication of

bolt-on acquisitions being a

strategic priority.

• 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 and a good track

record of recent success.

• Whilst we continue to assess

and consider acquisition

opportunities, our focus for

2022 will be on delivering

operational efficiencies

from recent investments

in manufacturing and

warehousing capacity.

DIGITAL AND IT SYSTEMS

DEVELOPMENT

We have introduced a new strategic

priority to develop a sector-leading

digital proposition.

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.

• In 2021, we introduced a new

strategic priority to ‘develop

a sector-leading digital

proposition’.

• Three-year IT road map

launched in 2020, including

significant investment in

additional resources and

application landscape to

support development of

business efficiency and

digital proposition.

• During the year we selected

platforms for a new website,

product information

management system,

e-commerce solution and

employee management

system.

• Development is under way,

with these systems expected

to launch in 2022 and 2023.

Eurocell plc Annual Report and Accounts 202166

VIABILITY STATEMENT

Scenario 3

Scenario 1 and 2 combined

There is a possibility that both of the above scenarios could

materialise at the same time, therefore we have assessed the

combined impact through the three-year plan period.

The Board considers these tests to be sufficient to test the viability

of the Group given our size and the markets we operate within.

As described in Principal Risks and Uncertainties above, we have

measures in place to help mitigate the impact of these events

should they occur.

The Group has a £75 million Revolving Credit Facility. Monthly cash

flow projections show significant headroom throughout the period

to December 2024. 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 2024.

The Directors confirm that we have a reasonable expectation that

the Company and the Group will continue in operation and meet

our liabilities as they fall due in the next three years.

Going Concern

The Directors have reviewed the Company’s and the Group’s

forecast and projections, which demonstrate that the Company

and the Group will have sufficient headroom on our bank facilities

for the foreseeable future 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 17 March

2022 and signed on its behalf by:

Mark Kelly Michael Scott

Chief Executive Officer Chief Financial Officer

As required by section 4 of

the UK Corporate Governance

Code, the Directors have taken

into account forecasts to assess

the future funding requirements

of the Group, and compared

them with the level of committed

available borrowingfacilities.

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 flows and key ratios. Operational plans

and financing options are considered as part of this

process.

In preparing the plan, we adopt a prudent forecast in

respect of like-for-like sales growth, but assume other

initiatives, in line with the published strategy. We have

also taken into account the current and potential range

of future impacts of COVID-19 and related economic

uncertainty.

The plan is stress tested by applying the

following scenarios:

Scenario 1

Macroeconomic conditions lead to a

decline in sales

Decreases in revenues have been applied over the

three-year plan period.

Scenario 2

Commodity prices and/or exchange

rates or raw material shortages lead to a

sustained increase in resin prices

Increases in resin costs have been applied over the

three-year plan period.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 202168

ONE TEAM

ALL TOGETHER BETTER

BOARD OF DIRECTORS

Bob Lawson

Non-executive Chair

Date of appointment:

4 February 2015

Experience:

Bob was previously the Chair for Genus

plc (until November 2020), Barratt

Developments plc, Hays plc and the

Federation of Groundwork Trust. Prior

to this, he was Managing Director

for the Vitec Group for 4 years, Chief

Executive Officer of Electrocomponents

plc for 11 years and subsequently

Chair for a further 6 years.

External appointments:

• None

Committee membership:

Mark Kelly

Chief Executive Officer

Date of appointment:

29 March 2016

Experience:

Mark joined the Group in March

2016 and was appointed Chief

Executive Officer 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 Duraflex and

Celuform.

External appointments:

• None

Committee membership:

Michael Scott

Chief Financial Officer

Date of appointment:

1 September 2016

Experience:

Michael joined the Group as Chief

Financial Officer in September 2016.

He previously worked for Drax Group

plc, where he held senior financial

positions including Group Financial

Controller and Head of Corporate

Finance & Investor Relations. Prior

to Drax, Michael worked for MT

International and Arthur Andersen.

He is a member of the Institute of

Chartered Accountants in England

and Wales.

External appointments:

• None

Committee membership:

• None

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Frank Nelson

Senior Independent

Non-executive Director

Date of appointment:

4 February 2015

Experience:

Frank is a qualified accountant with

over 30 years’ experience in the

housebuilding, infrastructure and

energy sectors. He was previously a

Non-Executive Director for 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 (AIM)

• Senior Independent Non-executive

Director of HICL Infrastructure plc

(FTSE 250)

• Chair of Nobel Topco Ltd

(Private Equity)

Committee membership:

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 Officer 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 Officer of Marshalls

plc (FTSE 250)

• Director of Mineral Products

Association Ltd (Private)

Committee membership:

Sucheta Govil

Independent

Non-executive Director

Date of appointment:

1 October 2018

Experience:

Sucheta, prior to her current role

at Covestro AG (see below), was

previously the Chief Marketing Officer

for Royal DSM and also held various

management positions in marketing,

innovation, strategy and general

management worldwide, among

others, for GlaxoSmithKline, PepsiCo

and AkzoNobel. Sucheta has a

BA Honours degree in Economics

and a Masters degree in Business

Administration.

External appointments:

• Chief Commercial Officer of Covestro

AG and member of the Managing

Board (German listed)

Committee membership:

Committee key:

Member of the Audit and Risk Committee

Member of the Remuneration Committee

Member of the Nomination Committee

Denotes Committee Chair

Eurocell plc Annual Report and Accounts 202170

CHAIR’S INTRODUCTION

“I am pleased to introduce

Eurocell plc’s Corporate

Governance Report for the

year, on behalf of the Board.”

Bob Lawson

Chair

LETTER FROM

THE CHAIR

Dear Shareholder,

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.

The Board recognises that the effectiveness of our

governance relies on a culture of open communication,

mutual trust and honest assessment of our strengths

and areas for development, and I am pleased to report

that these principles continue to underpin the basis of

our Board discussions. The Board also recognises that

good governance is essential to support resilience and

drive innovation in our business activities.

The Board has continued to support the Executive

Committee in progressing the Group’s strategic

priorities, and has worked well with the senior

management team to help address new challenges

arising in 2021, including the launch of our new state-

of-the-art warehouse facility at a time of unprecedented

levels of customer demand, as well as the impact of

significant cost inflation and labour and raw material

supply constraints.

Environmental, social and governance (‘ESG’)

considerations are an increasing area of focus for our

stakeholders and I am pleased with the progress made

during the year, particularly in relation to sustainability

matters (see our sustainability KPIs on pages 34 to 35)

and colleague engagement (see pages 46 to 51).

As always, I am very grateful for the continued strong

shareholder support that we receive, which has allowed

us to continue to invest in expanding our operating

capacity and build a platform for long-term sustainable

growth. I hope to see this support continue into 2022.

Succession planning is an essential aspect of

good governance. As described in the Nomination

Committee Report (see pages 83 to 85), I have notified

the Board of my intention to step down and a process

to recruit my successor has begun, led by Frank

Nelson, the Senior Independent Director.

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.

Bob Lawson

Chair

17 March 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Role of the Board

The Board comprises a Non-executive Chair, three 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 68 and 69.

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 Sucheta Govil, Martyn Coffey and Frank Nelson 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 significant value or major strategic importance, including acquisitions.

• Approving significant changes to the Group’s capital, corporate or management structure.

• Monitoring and assessing the overall effectiveness of the Group’s risk management processes and internal control systems, including

those related to health and safety, financial controls and anti-bribery policies and procedures.

• Approving the Annual and Half-Year Reports, including Financial Statements.

• Approving other corporate communications related to matters decided by the Board.

• Board appointments and succession planning and setting terms of reference for Board Committees.

• Remuneration matters, including the general framework for remuneration and share and incentive schemes.

Subject to those matters reserved for its decision, the Board has delegated to its Audit and Risk, Nomination 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 83 to 108.

Eurocell plc Annual Report and Accounts 202172

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 qualified to do so in a timely manner. Day-to-day management and

the implementation of strategies agreed by the Board are delegated to the Executive Directors. Key to this delegation is the Executive

Committee, which meets each month.

This structure enables the Board to make informed decisions on a range of key issues including strategy and risk management.

All the Directors have the right to have their opposition to, or concerns over, the operations of the Board and/or the management of the

Company, noted in the minutes.

During the year, no such opposition or concerns were noted.

The Chair and the Non-executive Directors met, either virtually or in-person, during the year without the Executive Directors present.

Executive Committee

The Executive Committee comprises senior managers, including the 2 Executive Directors who act as a bridge

between the Board and this Committee. Management teams report to members of the Executive Committee. The

Board receives regular updates from the Executive Committee in relation to business issues and developments.

Eurocell plc Board

Members:

Independent Non-executive Chair

3 Independent Non-executive Directors

2 Executive Directors

Audit and

Risk Committee

Members:

3 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 financial

reporting, internal controls, risk

management, compliance and audit.

Remuneration Committee

Members:

Independent Non-executive Chair

3 Independent Non-executive Directors

The Remuneration Committee recommends

the Group’s policy on executive

remuneration and determines the levels of

remuneration for Executive Directors, the

Chair of the Board and senior management.

Nomination Committee

Members:

Independent Non-executive Chair

3 Independent Non-executive Directors

1 Executive Director

The Nomination Committee assists the

Board in reviewing the structure, size and

composition of the Board and succession

planning for senior management.

SEE COMMITTEE REPORT ON PAGES 86 TO 90 SEE COMMITTEE REPORT ON PAGES 91 TO 108 SEE COMMITTEE REPORT ON PAGES 83 TO 85

SEE PAGE 85

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

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 Officer.

The Chair is responsible for ensuring that the Board functions

effectively. He sets the agenda for Board meetings and ensures

that adequate time is devoted to discussion of all agenda items,

particularly strategic issues, facilitating the effective contribution of

all Directors and ensuring that the Board as a whole is involved in

the decision-making process.

Role of the Chief Executive Officer

The Chief Executive Officer 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 Officer 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 Officer or other Executive Directors has failed to

resolve, or for which such contact is not appropriate.

Frank Nelson has served as Senior Independent Non-executive

Director throughout the year.

All Non-executive Directors are required to allocate sufficient time

to the Company to discharge their responsibilities effectively. The

Non-executive Directors act in a way they consider will promote the

long-term sustainable success of the Group for the benefit of, and

with regard to the interests of, its stakeholders.

Board composition, commitment and election of

Directors

The Nomination Committee leads the process for Board

appointments and makes recommendations to the Board.

Prior to appointment, Board members, in particular the Chair and

the Non-executive Directors, disclose their other commitments and

agree to allocate sufficient time to the Company to discharge their

duties effectively and ensure that these other commitments do not

affect their contribution.

The Executive Directors may accept an outside appointment

provided that such appointment does not in any way prejudice

their ability to perform their duties as Executive Directors of the

Company. 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 sufficient time to fulfil

their duties.

The current Board commitments of all Directors are shown on

pages 68 and 69. Their terms of appointment are reported on page

99 and length of service on the Board is set out in the chart below:

0 1

2 3 4 5

Michael Scott

Mark Kelly

Sucheta Govil

Martyn Coffey

Frank Nelson

Bob Lawson (Chair)

Years

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 Directors intend to offer themselves

for re-election. Following the conclusion of the Board evaluation

process, the Board considers all the Directors to be effective,

committed to their roles and to have sufficient time available to

perform their duties.

Eurocell plc Annual Report and Accounts 202174

CORPORATE GOVERNANCE STATEMENT CONTINUED

The Board has determined that the Non-executive Directors are independent and the Board, as a whole, has a complementary set of

skills and experience as follows:

Principal skills and experience

Construction

industry Manufacturing

Multi-site

operations

Industrial

plastics Finance

Governance &

regulatory Marketing

Bob Lawson (Chair)

Frank Nelson (Senior Independent Non-executive Director)

Martyn Coffey (Independent Non-executive Director)

Sucheta Govil (Independent Non-executive Director)

Mark Kelly (Chief Executive Officer)

Michael Scott (Chief Financial Officer)

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 March 2022 Board meeting.

This year, this evaluation was performed internally using a framework based on three of the Board’s key priorities, being:

• gaining insight and foresight;

• clarifying priorities and defining expectations; and

• holding to account and seeking assurance.

A survey covering each area in the framework was completed by Board members and the Group Company Secretary, all of whom

fully engaged with the process resulting in a 100% response rate. The survey included quantitative responses and valuable qualitative

comments. The anonymity of respondents was ensured to promote an open and frank exchange of views.

The survey identified a number of perceived areas of strength in the way that the Board currently operates, and also identified some areas

for enhancement which are set out below.

Key strengths of the Board:

1. Governance structure – good blend of Board/Committee experience/skills and effective performance of duties

2. Leadership/dynamics of the Board/Committees – strong leadership complemented by an ethos of openness and trust

3. Clarity of priorities and expectations – clear vision and values within a culture of performance improvement and innovation

4. Board information – accurate and timely information provided to facilitate considered decision making

Area Detail Proposed actions

Board engagement Due to COVID-19, Board interaction with the

business, and subsidiaries, has been limited in

the last couple of years

Face-to-face meetings and site visits to be reinstated

wherever safe and appropriate to do so

Board composition Board diversity and tenure-range are limited by

coinciding IPO appointments made in 2015

Succession planning for Non-executive Directors, led

by the Nomination Committee, to continue

Professional

development

Potential to provide more formal opportunities for

Board members to undertake regular professional

development

Attendance of external professional advisers at

Board meetings to continue to be reviewed and

developed as appropriate

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Overall, the results of the survey indicated that the Board members

are satisfied that the Board is operating at an acceptable level in a

constructive and collaborative way.

The Board believes that the evaluation process described above is

thorough, robust and works well. All Directors engage fully, with a

genuine desire to enhance overall Board performance. The process

includes sufficient objectivity and confidentiality to ensure that

challenge is acknowledged and acted upon. Taking all of the above

into account, the Board is satisfied that the current composition of

the Board, and its Committees, provides an appropriate balance of

skills, experience, independence and knowledge to allow the Board

and its Committees to discharge their duties and responsibilities

effectively and in line with the Code.

Conflicts of interest

The duties to avoid potential conflicts and to disclose such

situations for authorisation by the Board are the personal

responsibility of each Director. All Directors are required to ensure

that they keep these duties under review and to inform the Group

Company Secretary of any change in their respective positions.

The Company’s conflict of interest procedures are reflected in its

Articles of Association (‘Articles’). In line with the Companies Act

2006, the Articles allow the Directors to authorise conflicts and

potential conflicts of interest, where appropriate. The decision to

authorise a conflict can only be made by non-conflicted Directors.

The Board, and its Committees, considers conflicts or potential

conflicts at each meeting and, where such instances are identified,

takes appropriate action, usually by excluding the conflicted party

from any related discussions/decisions.

The Articles require the Company to indemnify its officers, including

officers of wholly-owned subsidiaries, against liabilities arising from

the conduct of the Group’s business, to the extent permitted by law.

For a number of years, the Group has purchased Directors’ and

Officers’ liability insurance and this is anticipated to continue.

Board meetings and attendance

There were six regular Board meetings scheduled during 2021,

three meetings of the Audit and Risk Committee, three meetings of

the Remuneration Committee and two meetings of the Nomination

Committee. Due to COVID-19, all of the meetings were held

virtually and therefore planned site visits by Non-executive Directors

were postponed accordingly.

In addition, following the introduction of regular virtual Board

update meetings in 2020, in order to maintain the highest possible

standards of governance and to keep the Board fully updated on all

financial and operational matters, five such update meetings were

held during 2021. Attendance at these additional meetings was

c.90%, with any non-attendance due to unavoidable clashes with

existing commitments.

The Chair of the Board, Chief Executive Officer and Chief Financial

Officer are usually invited to attend Audit and Risk Committee

meetings, although the Audit and Risk Committee also meets with

the external auditor without any Executive Directors being present.

The Chief Executive Officer and Chief Financial Officer are invited to

attend Remuneration Committee meetings when appropriate, but

are 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

Board

Audit

and Risk

Committee

Remuneration

Committee

Nomination

Committee

Bob Lawson 6/6 – 3/3 2/2

Frank Nelson 6/6 3/3 3/3 2/2

Martyn Coffey * 5/6 * 2/3 3/3 2/2

Mark Kelly 6/6 – – 2/2

Michael Scott 6/6 – – –

Sucheta Govil 6/6 3/3 3/3 2/2

* Absence due to a clash with pre-existing engagement, following an unavoidable

rearrangement of meeting dates.

Board packs are distributed in the week prior to each meeting

to provide sufficient time for Directors to review their papers in

advance. If Directors are unable to attend a Board meeting for

any reason, they nonetheless receive the relevant papers and are

consulted prior to the meeting and their views are made known to

the other Directors.

The Group Company Secretary

All the Directors have access to the advice and services of the

Group Company Secretary. The Group Company Secretary has

responsibility for ensuring that all Board procedures are followed

and for advising the Board, through the Chair, on all governance

matters. The Group Company Secretary provides updates to

the Board on regulatory and corporate governance issues, new

legislation, and Directors’ duties and obligations. The appointment

and removal of the Group Company Secretary is one of the matters

reserved for the Board.

Paul Walker has served as Group Company Secretary throughout

the year.

Whenever necessary, Directors may take independent professional

advice at the Company’s expense. Board Committees are provided

with sufficient resources to undertake their duties, including the

option to appoint external advisers when they deem it appropriate.

Eurocell plc Annual Report and Accounts 202176

CORPORATE GOVERNANCE STATEMENT CONTINUED

Board induction, development and support

New Directors receive a formal induction on joining the Board,

which covers Group policies and other key information. Tailored

training may be arranged to meet individual needs, for example

to refresh knowledge of the Listing Rules and regulatory

compliance. Typically, a new Director will meet the Chair and

other Non-executive Directors in one-on-one sessions; he or she

will have meetings with key management, briefings with external

advisers and shareholders, and a programme of site visits will be

arranged at which the Director meets site-based staff to gain a full

understanding of the business.

Looking forward, it is the Company’s expectation that training will

be built in to the annual Board programme, designed to incorporate

a range of in-depth topics of particular relevance to the business.

Training needs will be identified through the Board evaluation

process and through individual reviews between the Directors

and the Chair. Directors are expected to attend external courses

and seminars as appropriate to maintain and develop their Board

competencies.

Risk management and internal control

The Board acknowledges its responsibility for determining the

nature and extent of the significant risks it is willing to take in

achieving its strategic objectives, and for the Group’s system of

internal control.

The Board has carried out a review of the effectiveness of the

Group’s risk management and internal control systems, including

financial, operational and compliance controls, for the period

covered by this Annual Report.

The Strategic Report comments in detail (pages 60 to 65) on the

nature of the principal risks and uncertainties facing the Group; in

particular those that would threaten our business model, future

performance, solvency or liquidity and the measures in place to

mitigate them. In conducting its review, the Board has included a

robust assessment of these risks and the effectiveness of mitigating

controls.

The Audit and Risk Committee Report on pages 86 to 90 describes

the internal control system and how it is managed and monitored.

The Board confirms that no significant failings or weaknesses were

identified in relation to the review. The Board also acknowledges

that such systems are designed to manage, rather than eliminate,

the risk of failure to achieve business objectives and can only

provide reasonable and not absolute assurance against material

misstatement or loss.

Stakeholder engagement and Section 172

statement

Engagement with our shareholders and wider stakeholder groups

plays a vital role across the Group, including at Board level. One of

the primary areas of focus for the Board at any time is the impact

its decisions or actions may have on key stakeholder groups

represented within the Board’s duty under s172 of the Companies

Act 2006.

The Board is mindful of the levels of engagement with key

stakeholder groups and how their respective views may be

incorporated into relevant decision making. Board discussions

therefore seek to appropriately consider the impact of its decisions

and views of key stakeholder groups thereon, whilst always

ensuring the need to promote the success of the Company for the

benefit of its members as a whole.

In doing so s172 requires the Directors to have regard (amongst

other matters) to:

(a) the likely consequences of any decision in the long term;

(b) the interests of the Company’s employees;

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, financial and operational performance, as well

as information covering areas such as key risks, and legal and

regulatory compliance.

This information is provided to the Board, and its Committees,

through reports sent in advance of each meeting, and through

in-person presentations, where appropriate. As a result of these

activities, the Board has developed a good understanding of the

interests and views of all stakeholders, and other relevant factors,

which enables the Directors to comply with the requirements of

section 172 of the Companies Act 2006.

The table overleaf sets out the Board’s approach to stakeholder

engagement, why stakeholders matter and some key decisions

made during 2021. 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.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Eurocell plc Annual Report and Accounts 202178

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 in

our sector.

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,

financial and operating

performance. Ad hoc

meetings are also

held following trading

updates and otherwise

throughout the year.

The Chair, the Senior

Independent Director

and the other Directors

are available to engage

in dialogue with major

shareholders as

appropriate.

Shareholders have

the opportunity to

meet members of the

Board and the senior

management team at

the Annual General

Meeting and to ask any

questions they may

have.

The Group conducts

periodic staff surveys.

In 2021 this included

a ‘Pulse’ survey and

a ‘Safety, Health,

Environment and

Quality’ survey, to

source the views

of colleagues on

several important

topics. Results are

analysed, shared

with colleagues

and used to drive

appropriate change

and improvement.

Management regularly

‘walk the floor’ to

understand first-hand

the experiences of our

shopfloor 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

action plans.

Regular team-briefings

on operational and

financial performance,

coupled with

the publishing of

internal bulletins

(‘In the Know’)

and newsletters

(‘Eurocellebrate’),

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 ‘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 we

can.

The Company

applies the principles

and provisions of

the UK Corporate

Governance Code

and operates

structures and

policies to ensure

ongoing compliance.

We also operate

clear and effective

policies to help

prevent wrongdoing,

including

whistleblowing,

bribery and

corruption, fraud,

financial crime and

modern slavery, with

training provided

where appropriate.

Regular meetings

are held with

tax advisers

to discuss tax

compliance, HMRC

correspondence and

other relevant issues

pertinent to the

Group’s finances and

tax position.

The Company is

a member of both

the Windows and

Recycling groups of

the British Plastics

Federation and the

British Fenestration

Rating Council,

which provide a

forum to understand

changes in relevant

legislation and

building standards.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Shareholders Employees Customers Suppliers Communities and

environment

Government

and regulatory/

industry bodies

How the

Board

complements

engagement

efforts

During 2021, the Chair

attended a number of

investor meetings with

the Executive Directors

and also met with

some of our largest

shareholders without

the Executive Directors

being present.

The Board also

received regular

updates on shareholder

engagement and

investor feedback,

analyst reports

and share price

developments from the

Chief Financial Officer.

During 2021, 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

supporting proposed

improvements to pay

and reward for several

large employee

groups (see below).

Board members were

also able to share

their own experiences

and ideas to address

the retention and

recruitment challenges

that arose mid-2021.

The Chief Executive

Officer provided regular

updates to the Board

on health and safety

matters, including

issues in relation to

the ongoing impact

of COVID-19 on our

colleagues and the

steps taken to ensure

appropriate safety,

wellbeing and flexible

working arrangements

were in place.

Throughout 2021,

the Board received

regular updates on

our performance

against customer

service-related KPIs,

compared to historical

and industry / sector

benchmarks.

The Board has

significant experience

in supply chain

management.

During 2021, raw

material availability

and pricing have

been regularly

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

operating and financial

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

Investor relations is

covered at all Board

meetings and updates.

During the year, the

Board approved

the reinstatement of

dividend payments,

following a temporary

suspension in 2020

as a result of the

COVID-19 pandemic.

During the year, the

Board approved

management’s

proposals to

implement significant

mid-year salary

uplifts for certain

large employee

groups, to maintain

competitiveness,

improve staff welfare

and support our

objective to become

an employer of

choice.

During the year, the

Board approved

the increase in, and

acceleration of, capital

expenditure to expand

our operating capacity

in order to meet

increased customer

demand and improve

customer service

levels.

During the year, the

Board approved

management’s plans

to accept supplier

cost increases where

appropriate and

to secure supply,

and to pass a fair

proportion of such

increases on to our

own customers

through selling

price increases and

potentially reversible

surcharges.

During the year,

theBoard approved

management’s

proposed suite of

sustainability KPIs,

and targets which

were published

in the Group’s

Half-Year Report.

The KPIs cover

circular economy

(including recycling),

emissions and energy

management and

social targets.

During the year, the

Board supported

management’s

initiative to introduce

/ improve/

relaunch several

compliance-related

policies, including

Financial Crime,

Gifts and Hospitality,

Whistleblowing,

Anti-bribery and

Conflicts of Interests.

We also worked

with the Financial

Conduct Authority

in connection with

an approval to offer

consumer finance

with our Eurocell

Home initiative.

Further

details

See Chief Financial

Officer’s Report

on page 54

See Valuing

Our People

on page 46

See Chief Executive

Officer’s Report

on page 10

See Working

Responsibly

on page 52

See Investing

In Recycling

on page 21

See Valuing

Our People

on page 46

Eurocell plc Annual Report and Accounts 202180

CORPORATE GOVERNANCE STATEMENT CONTINUED

We are one team,

committed to

working together to

deliver our goals.

ONE TEAM

Customers are

always our priority,

we keep our

promises.

CUSTOMER FIRST

We conduct

ourselves in a

professional

manner and we

value honesty

and trust.

INTEGRITY

We support,

value and respect

each other.

INCLUSIVE

Together we will

go the extra mile

to achieve our

targets.

EXECUTE

Our Culture

The Group’s culture is based on the following Vision and Values which were formally introduced in 2018:

Our Vision:

One team, customer centric, driving world class solutions everywhere we operate.

ONE TEAM

ALL TOGETHER BETTER

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

We are one team, committed to working

together to deliver our goals

We will: Empower, Be Collaborative, Be Committed,

Deliver on Time

Customers are always our priority,

we keep our promises

We will: Listen, Be Passionate about Quality &

Services, Innovate, Drive Consistency

We conduct ourselves in a professional

manner and we value honesty and trust

We will be: Honest, Trustworthy, Ethical, Accountable

We support, value &

respect each other

We will be: Engaged, Supportive, Respectful, Fair

Together we will go the extra mile

to achieve our targets

We will be: Entrepreneurial, Creative & Flexible,

Tenacious, Resilient

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 satisfied the policies, practices and behaviours

throughout the Group are aligned with our Vision and Values

described above and no corrective action is currently required.

Nevertheless, this will be reviewed on an ongoing basis to ensure a

positive culture endures.

Engagement with the workforce

As described in Stakeholder engagement on pages 76 to 79,

we recognise that our colleagues underpin the performance and

success of our business and active engagement has never been

more important than in recent times as we have adapted to new

ways of working.

During 2021, the Group implemented a number of colleague

engagement initiatives to complement the existing team briefings,

continuous improvement workshops, newsletters and health and

safety forums currently in place, including:

• group-wide ‘Pulse’ and ‘Safety, Health, Environment and

Quality’ surveys, with encouraging response rates;

• review of retention and recruitment challenges, resulting in

mid-year salary reviews for certain large employee groups;

• enhancement of the induction process for new colleagues,

leading to reduced short-term staff turnover;

• introduction of more flexible approaches to work, including

home/hybrid working where possible with appropriate IT

resources;

• enhancement of colleague facilities and rest-room

arrangements, including refurbishment of the Clover Nook

building;

• continued focus on strong COVID-19 safety measures, which

go beyond government guidance, to reduce the infection risk

and associated absenteeism;

• continued opportunity for all colleagues to become shareholders

via the Save As You Earn scheme; and

• update and relaunch of the Whistleblowing Policy, and the

associated reporting mechanisms, to increase colleague

awareness and assurance.

Due to the ongoing effects and restrictions in relation to COVID-19,

it has not been possible for Sucheta Govil, the designated Non-

executive Director, to attend colleague focus groups during 2021 as

originally intended. Nevertheless, regular contact with management

has been maintained throughout the year, in order to monitor

activities and ensure the good progress made to date is continued.

Our Values:

Eurocell plc Annual Report and Accounts 202182

CORPORATE GOVERNANCE STATEMENT CONTINUED

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 within Eurocell plc during 2021.

It is the Board’s view that 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, do not yet match the wider workforce. Changes

proposed in the Directors’ Remuneration Policy, will see the

pension contributions for the incumbent Executive Directors being

reduced to 10% of salary, to be aligned with those with the highest

rate below the Board level, and then further reduced to be aligned

with the workforce rate from 1 January 2023, in line with the

Investment Association’s guidance. Further details regarding the

Executive Directors’ pension contributions are set out on page 92

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

109 to 111.

Annual General Meeting

Our AGM will be held at our Head Office (see Company Information

on page 164 for details) on 12 May 2022. However, in line with the

last two years, shareholder attendance in-person may be restricted

in accordance with COVID-19 guidance.

The notice of our AGM (including any related COVID-19 guidance),

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.

Subject to COVID-19 restrictions, 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.

Bob Lawson

Chair

17 March 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

NOMINATION COMMITTEE REPORT

Bob Lawson

Frank Nelson Martyn Coffey

MembersChair

Sucheta Govil Mark Kelly

Dear Shareholder,

I am pleased to report to you on the main activities of the

Committee and how it has performed its duties during 2021.

This year, the Committee’s main focus has been on overseeing

the continued development of the Executive Committee, which

included the recruitment for a new position of Marketing Director

and the addition to the Executive Committee of the IT Director, both

of which strengthen the senior management team and support

progression of our strategic priorities.

I am pleased to have attracted such high-calibre individuals, and

these appointments, along with further development of commercial

and operational responsibilities, result in an Executive Committee

very well equipped to take the business forward (see page 85 for

further details of the current members).

In addition, following on from last year’s activities, the Committee

has continued to consider succession planning for the Board, given

the length and concurrency of service of the Chair and the majority

of the Non-executive Directors. In particular, a detailed review of

the Board’s skills and experience has been undertaken during the

year to develop desired role profiles and identify the attributes to be

sought in future appointments.

After 7 enjoyable years as Chair of Eurocell, I have notified the

Board of my intention to step down and a process to recruit my

successor has begun, led by Frank Nelson, the Senior Independent

Director.

I would like to thank my fellow Board and Committee members, all of

whom have served throughout the year, for their valuable contribution

and support throughout my whole tenure, and I welcome any

comments or questions from shareholders.

Bob Lawson

Chair of the Nomination Committee

17 March 2022

Role and responsibilities:

The principal duties of the Nomination Committee are to:

• regularly review the structure, size and composition of the

Board (including its skills, knowledge, experience, length

of service and diversity) and make recommendations to

the Board with regard to any changes;

• identify and nominate, for approval by the Board,

candidates to fill Board vacancies;

• review the time commitments required from Non-

executive Directors; 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 formally twice during the

year and attendance at the meetings is shown on page 75.

The main activities of the Committee included:

• overseeing the development of the Executive Committee

to support the strategy and governance of the wider

Group;

• succession planning for the Board, given the length and

concurrency of service of the Chair and the majority of the

Non-executive Directors;

• the ongoing review of talent for the Board and senior

management, including an assessment of their training

and development needs;

• considering the results of the internal review of the

Committee’s effectiveness (see page 74 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.

Eurocell plc Annual Report and Accounts 202184

NOMINATION COMMITTEE REPORT CONTINUED

Composition

The Nomination Committee is chaired by Bob Lawson, except

where it is dealing with matters relating to his reappointment or

replacement and comprises all three of the Non-executive Directors

along with the Chief Executive Officer, all of whom have served on

the Committee throughout the whole year.

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 policy adopted throughout the Group’s

workforce. The Board recognises and embraces the benefits of

diversity and, in particular, the value that different perspectives and

experience bring to the quality of debate and decision making.

There are several considerations which are taken into account

when considering appointments at all levels such as background,

experience and skill set, as well as shareholder perspectives.

However, the Board believes that setting targets for the number

of people from a particular background or gender is not the most

effective approach to take. The Board will therefore look to follow

the principles of this policy rather than specified quotas or targets.

In line with this approach, the Group has maintained the policy to

ensure female applicants for all supervisory, managerial and senior

managerial vacancies are given an automatic right to interview,

to ensure greater opportunity and encouragement of internal

promotion and cross-departmental shift.

The Board recognises the Group operates in a historically male-

dominated industry. At present, 17% (1 out of 6) of the Board is

female, along with 26% (12 out of 46) of the senior management.

We have an ongoing commitment to consider diversity as a key

factor in future senior appointments. However, the overriding policy

in any new appointment is to select candidates based on merit to

ensure the continued success of the business.

Gender balance

The gender balance of those in the senior management and their

direct reports is included within the Responsible Business section

on page 50.

Succession planning

In 2021, the Committee continued its work on succession planning

for the Board, given the length and concurrency of service of the

Chair (approximately 7 years) and the Non-executive Directors

(approximately 7 years for two Non-executive Directors).

As part of this process, a detailed review of the Board’s current

skills and experience was undertaken during the year to develop

desired role profiles and identify the preferred attributes to be

sought in future appointments. The results of this review were

integrated into the current search for the new Chair of the Board,

which should result in an appointment which complements the

existing Board and provides a new perspective on the business

and strategic matters.

As part of the development of the Executive Committee, the

Nomination Committee has also considered 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 identified and includes

contingency plans for the sudden or unexpected departure of

Executive Directors or other senior managers.

The benefits of this proactive approach are illustrated by the

smooth evolution of the Executive Committee over the last 18

months, ensuring the Company is well placed, with the best people

and the right balance of skills to secure future success. In particular,

the successful recruitment of a Marketing Director will now support

development of the Eurocell brand, alongside our growth objectives

and opportunities to progress our digital and e-commerce offering.

The inclusion of our IT Director onto the Executive Committee

reflects the strategic priority to develop a sector-leading digital

proposition and recognises that effective IT systems will be at the

heart of everything we do.

In summary, we are confident that the Board has a good

understanding of succession planning across the Group and the

range of measures being used to continue to develop and recruit

talented senior employees.

Bob Lawson

Chair of the Nomination Committee

17 March 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Executive Committee

(in addition to Mark Kelly and Michael Scott)

Beth Boulton

Marketing Director

Beth joined Eurocell in November 2021.

She previously worked for Magnet kitchens

where she was Head of Marketing

and Digital. Prior to that role, Beth was

Marketing Director at Utopia Bathrooms

and has also held positions at Topps Tiles

and Jewson.

Andy McDonnell

Commercial Managing Director

Andy joined Eurocell in May 2018, initially as

Managing Director for the Building Plastics

division, and more recently has stepped

up to the role of Commercial Managing

Director, with responsibility for the majority

of commercial activities in both divisions. He

previously held senior leadership positions

in retail and trade at B&Q, TradePoint and

Oak Furniture Land.

Paul Walker

Group Company Secretary

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.

Mike McKay

Group IT Director

Mike joined Eurocell in March 2020. He

previously worked for Polypipe Group

(now Genuit Group) where he was Group

Information Services Director for 15 years.

Immediately prior to this, Mike was Head

of Information Services for William Grant &

Sons and he has also held positions with

Ascent Technology and APV Baker.

Bruce Stephen

Group Human Resources Director

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).

Eurocell plc Annual Report and Accounts 202186

AUDIT AND RISK COMMITTEE REPORT

Frank Nelson Sucheta GovilMartyn Coffey

Dear Shareholder,

I am pleased to report to you on the Audit and

Risk Committee’s objectives and activities during

2021.

This report, which is part of the Directors’ Report,

explains how the Audit and Risk Committee has

discharged its responsibilities during 2021.

During the year, the Committee has continued to

consider the ongoing impact, both direct and indirect,

of COVID-19 on the Company’s financial position,

reporting and risk management.

In addition, the business faced new challenges during

2021, including the impact of Brexit and strong demand

on our raw material supply chain, as well as the effect of

labour shortages and significant cost inflation.

These factors have demanded an agile approach to

risk management and I am pleased to report that our

teams have responded well. In addition, in response

to an increasingly demanding environment, the Group

has added senior resources to the areas of financial

reporting, risk management and internal controls.

I am also satisfied with the progress made by the

Internal Audit programme during the year, which

included a review of our business continuity planning

and crisis management arrangements, which have

been relied upon heavily during the COVID period.

Collectively, this work has provided the necessary

assurance to the Committee that internal controls

and governance are both adequate and working

effectively. A summary of our activities, including the key

accounting estimates and judgements made, is set out

in this report.

Finally, I would like to thank my fellow Committee

members, all of whom have served throughout the

year, and both the internal and external auditors, for

their valuable contribution and support during another

challenging year.

Frank Nelson

Chair of the Audit and Risk Committee

17 March 2022

MembersChair

Role and responsibilities:

The key responsibilities of the Committee are to:

• review the Annual Report, Half-Year Report and any other formal

announcements relating to the Group’s financial performance, giving

due consideration to significant accounting issues and judgements

contained therein, as well as compliance with accounting standards

and other legal and regulatory requirements;

• review the Annual Report and Financial Statements to advise the

Board on whether they give a fair, balanced and understandable

explanation of the Group’s business and performance over the

relevant period;

• review the Group’s financial 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 Officer and

Chief Executive Officer, together with reports from the Group’s

outsourced internal auditor 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 auditor’s independence and objectivity, audit and

non-audit fees and make recommendations regarding audit tender

and the appointment and remuneration of the auditor, together with

the terms of their engagement;

• review the annual audit plan and monitor the effectiveness of the

external audit process;

• monitor and review the effectiveness of the outsourced internal audit

function, including a review of the internal audit plan, all internal

audit reports, and management’s responses to the findings and

recommendations of the internal audit function;

• consider the adequacy of the Group’s finance function;

• review the Group’s Tax Strategy; and

• review the Committee terms of reference.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

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 75.

The areas of particular focus for the Committee in 2021,

and up to the date of this Annual Report, were as follows:

• Reviewed the 2020 and 2021 Annual Reports, as well

as the 2021 Half-Year Report, including preliminary

announcements;

• Considered information presented by management on

significant accounting estimates and judgements adopted

in respect of the Group’s 2020 and 2021 Financial

Statements and the 2021 Half-Year Report;

• Considered the impact of COVID-19 on the Company’s

financial position and reporting, including potential asset

impairments and related disclosures;

• Reviewed documentation prepared to support the viability

statement and going concern assumption set out on page

66;

• Reviewed the external auditors’ plan for their audit for the

year ended 31 December 2021;

• Reviewed reports from the external auditor setting out

their findings as a result of their audits for the years ended

31 December 2020 and 2021, as well as their review of

the 2021 Half-Year Report;

• Considered the impact of any new accounting standards

and financial 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

emerging risks;

• Considered reports prepared by the Group’s outsourced

internal audit function;

• Considered the results of the internal assessment of the

Committee’s effectiveness;

• Approved updates to the Committee’s terms of reference;

and

• Reviewed, and approved updates where applicable, to

Group policies for anti-bribery, whistleblowing, capital

expenditure and treasury, along with the Group Tax

Strategy.

The Committee was also kept up to date with changes

to accounting standards and developments in financial

reporting, company law and other regulatory matters through

presentations from the external auditor, Chief Financial Officer

and the Company’s finance function.

The role of the Audit and Risk Committee is to oversee

financial 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 2020 year end, at the March 2021 meeting, the

Committee reviewed and recommended for approval by the

Board, the financial results for the year ended 31 December 2020,

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 financial position

was such that it continued to be appropriate for accounts to be

prepared on a going concern basis.

This additional review by the Audit and Risk Committee,

supplemented by advice received from external advisers during the

drafting process, assisted the Board in determining that the report

was fair, balanced and understandable at the time that it

was approved.

Composition

The Audit and Risk Committee is chaired by Frank Nelson and

comprises all three of the Non-executive Directors, but not the

Chair of the Board, all of whom have served on the Committee

throughout the whole year.

The Governance Code recommends that all members of the Audit

and Risk Committee are Non-executive Directors, independent

in character and judgement and free from any relationship or

circumstance which may, could or would be likely to, or appear to,

affect their judgement and that one such member has recent and

relevant financial experience.

The Board considers that, by virtue of his extensive experience,

details of which are set out on page 69, Frank Nelson, a Fellow of

the Chartered Institute of Management Accountants, has recent

and relevant financial experience and the Company complies

with the requirements of the Governance Code in this respect.

Furthermore, all Committee members have extensive relevant

commercial and operational experience, particularly in building/

construction and industrial organisations, which both benefit the

Committee and collectively illustrate its competence relevant to the

sector in which the Group operates.

Only members of the Committee have the right to attend

Committee meetings, but both the internal and external auditors

were invited to attend all meetings during the year, as a matter of

course. Other individuals, such as the Chief Executive Officer, the

Chief Financial Officer and other members of the Board were invited

to attend the Committee meetings as and when appropriate.

Eurocell plc Annual Report and Accounts 202188

AUDIT AND 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 2021

Financial Statements (including a review of PricewaterhouseCoopers LLP’s report and a discussion of their observations and

findings in this area) as follows:

Area Estimate/judgement Management’s approach Committee’s review

Inventory valuation Impact of raw material

price inflation on stock

valuation

Provisions for slow-

moving items and

discontinued product

lines

Review of raw material price variances (vs historic

standard cost) included in stock valuation

Assessment of the appropriate level of provisioning

against obsolescence, undertaken in the context of

current trading and the forecast for the next financial

year and beyond

Critically reviewed the carrying value

of the Group’s inventory, the approach

taken by management and assessed the

reasonableness of the underlying assumptions

and financial forecasts used

Accounts receivable

recoverability

Provisions for bad and

doubtful debts

Application of IFRS 9’s expected credit loss approach

to the impairment of receivables (which requires

the use of forward-looking statistical modelling to

determine the appropriate level of provision), plus

overlays to take into account other material factors

affecting recoverability, including credit insurance

Critically evaluated the methodology with

respect to setting provisions for potential bad

and doubtful debts, including management’s

assessment of macro uncertainty, as well as

the absolute level of provisions held

Notes:

1 The Committee’s review also considered the specific nature and characteristics of customers in the Group’s 2 major divisions.

In addition, the external auditor met regularly with the Committee

without executive management being present and met separately

with each of the Audit and Risk Committee Chair and the Chief

Financial Officer.

The Audit and Risk Committee will meet as often as it deems

necessary but, in accordance with its terms of reference, at least

three times a year.

Risk management

The Group’s risk management processes are set out in detail on

pages 60 to 61.

The Group maintains a risk register that identifies key and emerging

risks, the probability of those risks occurring and the impact they

would have on the Group if unmitigated. Against each gross risk,

the controls that exist to manage and, where possible, minimise

or eliminate those risks are also listed, and an assessment of

net risk is provided. The risk register also identifies any further

actions required such that net residual risk is consistent with the

risk appetite set by the Board. The register is regularly updated to

reflect changes in circumstances.

The Group’s Risk Management Committee is chaired by the Chief

Financial Officer. This Committee reviews significant risks and the

status of related mitigating actions each quarter.

The Audit and Risk Committee reviews the risk register twice per

year to ensure the timely identification and robust management of

inherent and emerging risks is taking place. To the extent that any

failings or weaknesses are identified during the review process,

appropriate measures are taken to remedy these.

Information relating to the management of risks and any changes

to the assessment of key risks is reported by the Audit and Risk

Committee to the Board.

Internal controls

The Board is responsible for the overall system of internal controls

for the Group and for reviewing its effectiveness. In accordance

with FRC guidance, it carries out such a review at least annually,

covering all material controls including financial, operational and

compliance controls and risk management systems.

In particular, the Board discharges its duties in this area by:

• holding regular Board meetings to consider the matters reserved

for its consideration;

• receiving regular management reports which provide an

assessment of key risks and 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 defined

responsibilities and levels of authority which are regularly reviewed;

• ensuring there are documented policies and procedures in

place; and

• scheduling regular Board reviews of performance against

financial budgets and forecasts.

In reviewing the effectiveness of the system of internal controls, the

Audit and Risk Committee:

• reviews the risk register compiled and maintained by senior

managers within the Group at least bi-annually and question and

challenge where necessary;

• regularly reviews the systems of financial and accounting

controls; and

• reports to the Board on the risk and control culture within the

Group.

The Group has several operating policies and controls in place

covering a range of issues including financial reporting, capital

expenditure, business continuity and information technology,

including cyber security, and appropriate employee policies. These

policies are designed to ensure the accuracy and reliability of financial

reporting and govern the preparation of financial statements.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

In respect of the Group’s financial reporting, the Finance function

is responsible for preparing the Group financial statements using

a well-established process and ensuring that accounting policies

are in accordance with International Financial Reporting Standards.

All financial information published by the Group is subject to the

approval of the Audit Committee.

The internal control environment was strengthened in 2020, in

response the impact of the COVID-19 pandemic, with the changes

now embedded in the business. For example, as described in last

year’s report, the Board increased the regularity and frequency

of its business review meetings, which proved to be a significant

benefit to the business. As a result, the Board meeting calendar

was amended to incorporate these additional review meetings as a

matter of course for 2021 and beyond.

In addition, with the Group’s finance and administrative teams

continuing to work substantially from home during the year,

the enhanced controls which were introduced relating to the

processing of cash payments and receipts (e.g. higher levels of

approval required for transactions over certain limits), have also

been retained. Furthermore, the Group’s IT team have remained

particularly vigilant and alive to cyber risks during this year and we

continue to invest in our cyber security.

Finally, in response to an increasingly complex and demanding

environment, in 2021 we have strengthened our financial reporting,

risk management and internal control activities, with the recruitment

of a Group Controls Manager and new senior resource added into

the Group Finance team.

Other than as described above, there have been no changes in the

Company’s internal control systems during the financial year under

review that have materially affected, or are reasonably likely to

materially affect, the Company’s control over financial reporting.

As part of its horizon scanning, the Committee is considering the

potential impact of the recently published BEIS White Paper with

regards to a new internal control regime over financial reporting.

The Board, with advice from the Audit and Risk Committee, is

satisfied that an effective system of internal controls and risk

management is in place which enables the Company to identify,

evaluate and manage key and emerging risks and which accords

with the guidance published by the FRC.

These processes have been in place since the start of the financial

year and up to the date of approval of the accounts. Further details

of specific material risks and uncertainties facing the business can

be found on pages 60 to 65.

Internal audit

KPMG LLP provide an outsourced Internal Audit function which

complements the internal finance-based checks performed on the

branch network operations.

The Committee, working in conjunction with KPMG LLP, approved

a full programme for 2021 which was compiled based on the

following specific categories:

• Risk: internal audit reviews specifically linked to Eurocell’s key

financial and operational risks;

• Routine: internal audit reviews covering financial, regulatory,

compliance and IT operations which require cyclical assurance

coverage; and

• Request: internal audit reviews that have been specifically

included at the request of either management or the Audit

Committee.

A summary of the 2021 programme is as follows:

Internal audit programme Summary of findings

Business continuity

planning and

COVID-19 lessons

learned

• Crisis management governance

structure worked well and swift and

decisive actions were taken as the

COVID-19 crisis escalated.

• Other notable strengths include:

– Successful adoption of remote

working by employees

– Clear decision making in

relation to, and management of,

furloughed staff

– Efficient and effective closure

and reopening of operations

– Staff wellbeing considerations

enhanced

IT General Controls • Areas of good practice include:

– Board-approved IT/Digital

Strategy in place

– Document storage and access

controlled by secure links

– Annual review of IT assets

undertaken to determine

replacement requirements

– Regular review of proposed

system changes undertaken

prior to live release

• Recommendations made to

formalise/document certain policies

and procedures

Treasury and

Cash Flow

• Areas of good practice include:

– Good awareness of Group

Treasury team of control

strengths and weaknesses

– Treasury-specific risks included

within the Group Risk Register

– Strong trend analysis performed

to understand and predict future

cash flows

– Strong governance structure,

with the activities of the Group

Treasury Committee underpinned

by a comprehensive Treasury

Policy

• Recommendations included the

formalisation of cash management

procedures and improvements to

the forecasting of foreign exchange

requirements

Eurocell plc Annual Report and Accounts 202190

AUDIT AND RISK COMMITTEE REPORT CONTINUED

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, who monitor a report on the status of the

outstanding actions. Whilst inevitably COVID-19 caused some

delays to implementation, 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

following approval by the Committee, relaunched during the 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 5 (2020: nil) reports received through

the whistleblowing process, all of which were fully investigated and

addressed in accordance with the policy, and no significant trends

were identified.

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 satisfied 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

• Conflicts of interest

• Gifts and hospitality

• 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 the

year.

The Group’s Modern Slavery Statement, which sets out details of

the policies in relation to slavery and human trafficking, as well as

its due diligence processes with its partners, has been published

on the Group’s website (www.eurocell.co.uk).

The Group has also updated its Tax Strategy Statement, again

published on our website, in compliance with the Finance Act

2016, which sets out details of the Group’s attitude to tax planning

and tax risk.

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 auditor is required periodically to assess whether, in its

professional opinion, it is 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 auditor.

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 auditor

without re-tender for ten years from that date, until the completion

of the 2025 annual audit. The Committee considers the need to

tender the audit on an annual basis and there are no current plans

to perform such a tender.

In accordance with best ethical standards,

PricewaterhouseCoopers LLP has processes in place designed

to maintain independence, including the rotation of the audit

engagement partner at least every five years. As a result of these

processes, the current audit engagement partner assumed full

responsibility at the conclusion of the 2019 audit.

The Committee has also adopted policies to safeguard the

independence of its external auditors. Any work awarded to the

external auditors with a value of more than £5,000 in aggregate

in any financial year, other than an audit, requires the specific

approval of the Committee. Where the Committee perceives that

the independence of the auditors could be compromised, the work

will not be awarded to the auditors. Details of amounts paid to

PricewaterhouseCoopers LLP for audit and audit-related assurance

services in 2021 are set out on page 137. The audit-related

assurance services provided during the year were in relation to the

Half-Year Report (£35,000) and the sustainability measure which

was introduced into the Company’s banking facility (£16,000).

Prior to recommending the appointment of PricewaterhouseCoopers

LLP at the forthcoming AGM to the Board, the Committee reviewed

the audit process, the performance of the auditor and its ongoing

independence, taking into consideration:

• an assessment of the lead audit partner and the audit team,

including their responses to questions from the Committee;

• a review of the audit approach, scope, determination of

significant risk areas and materiality;

• the execution of the audit, including the increased use of

technology, and the audit findings reported;

• input from, and interaction with, management and

communication with, and support to, the Committee;

• the quality of any recommendation points; and

• a review of independence, objectivity, scepticism and their ability

to challenge.

Based on this review, the Committee concluded that the

external audit process had been run efficiently and that

PricewaterhouseCoopers LLP has been effective in its role as

external auditor.

The Committee is satisfied that the independence of the external

auditor 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 its independence. In conclusion,

the Committee has assessed the performance and independence

of the external auditor and recommended to the Board the

reappointment of PricewaterhouseCoopers LLP as auditor until

theAGM in 2023.

Frank Nelson

Chair of the Audit and Risk Committee

17 March 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

DIRECTORS’ REMUNERATION REPORT

Martyn Coffey

Bob Lawson Frank Nelson Sucheta Govil

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 benefit structures

throughout the Group.

Summary of activities during the year

The Committee met three times during 2021. 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 2020 annual bonus awards;

• agreeing Executive Director and senior management base

salaries from 1 April 2021;

• setting the performance targets for the 2021 annual

bonus;

• agreeing the award levels and appropriate targets for the

2021 Performance Share Plan (‘PSP’) awards;

• overseeing the operation of the Group’s Save as You Earn

scheme;

• reviewing the Committee terms of reference; and

• undertaking a review of the Directors’ Remuneration

Policy.

Dear Shareholder,

I am pleased to report to you on the main activities of the

Committee and how it has performed its duties during 2021.

As described elsewhere in this Annual Report, the business

has made a strong recovery from the COVID-19 pandemic.

Performance in 2021 has benefited from the continued successful

deployment of the Group’s strategy and the decisive actions taken

in response to new challenges arising during the year, including

supply chain disruption, major cost inflation and tight labour

markets.

This has resulted in a strong financial performance for 2021, with

sales, profit before tax and cash generated from operations all

well ahead of pre-pandemic levels. It is in this context that the

Committee has assessed 2021 bonus outcomes, and approved

new basic salary levels, awards and targets.

During the year, the Committee reviewed the Directors’

Remuneration Policy, given that we have reached the end of its

3-year shareholder approved policy period. The proposed new

policy, details of which are included later in this report, will be

subject to shareholder vote at the 2022 AGM, in addition to the

advisory shareholder vote on the Annual Report on Remuneration,

and I look forward to a continued strong level of shareholder

support in this regard.

Finally, I would like to thank my fellow Committee members,

all of whom have served throughout the year, for their valuable

contribution and support.

Martyn Coffey

Chair of the Remuneration Committee

17 March 2022

MembersChair

Eurocell plc Annual Report and Accounts 202192

DIRECTORS’ REMUNERATION REPORT CONTINUED

Outcome for 2021

Reflecting the strong financial performance described above,

sales for the year of £343.1 million were 33% up on 2020 and

23% above 2019, with adjusted profit before tax of £27.0 million,

compared to £8.5 million in 2020 and £22.7 million in 2019.

Cash generated from operations for the year was £33.1 million,

which included the significant adverse impact of major cost inflation

on working capital of approximately £8 million. Cash generated

from operations was £33.9 million in 2020 and £29.0 million in

2019.

As a result of this strong performance, the outturn for the Annual

Bonus Plan results in a maximum achievement of 100% of salary

for the profit before tax element, and an achievement of 100% for

the cash flow element. After the appropriate weightings are applied,

this provides an overall pay-out of 100% of salary being awarded to

the Executive Directors in respect of 2021, further details of which

can be found on page 103 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 104.

The PSP awards originally granted in 2019 are expected to lapse in

2022 as a result of earnings per share and cash flow performance

in the three years to 31 December 2021 being below the required

vesting threshold.

Proposed changes to the Remuneration Policy

In conjunction with our external remuneration consultants, a

detailed review of the Remuneration Policy was performed by the

Committee during the year. This process involved reviewing the

current policy against the business strategy, pay and conditions

in the wider Group and market practices. In addition, potential

conflicts of interest were considered in line with the requirements of

the Companies Act 2006.

The Committee’s conclusions were that the main features of the

current policy, originally set and approved by shareholders at the

2019 AGM, continue to remain appropriate for Eurocell. As such,

the Committee is only proposing minor updates in respect of recent

developments in governance and to ensure the policy is not out

of line with that of similarly sized FTSE SmallCap companies. No

increases to variable pay levels are proposed.

The proposed changes to Eurocell’s Remuneration Policy are as

follows:

• Pension contributions for the incumbent Executive Directors are

being reduced to 10% of salary to be aligned with those with the

highest rate below the Board level, and then further reduced to

be aligned with the workforce rate from 1 January 2023, in line

with the Investment Association’s guidance.

• Remuneration Committee ability to adjust the formulaic PSP

outturn has been incorporated (this ability was already in place

for the annual bonus);

• A post-cessation share ownership guideline is being introduced.

Implementation of the Remuneration Policy for 2022

The Remuneration Committee intends to operate the Remuneration

Policy for 2022 as follows:

Base salaries

Salary levels are positioned to reflect performance, experience and

responsibility. Mark Kelly’s and Michael Scott’s current base salaries

are £403,103 and £257,538 respectively.

The Committees believe that, in order to better reflect experience

and responsibility, it is appropriate to increase the base salaries

of the Executive Directors at a rate above the rate of increase for

the wider workforce. In doing so, the Committee notes that the

resulting base salaries still remain below the median level seen in

similar sized FTSE SmallCap companies.

With effect from 1 April 2022, the salaries will therefore be

increased by 7.5% to £433,336 and £276,853 respectively.

Pensions/benefits

A defined contribution/salary supplement of 10% of salary will be

offered to the current Executive Directors, together with a standard

suite of other benefits. The pension level will be aligned to the wider

workforce from 1 January 2023.

Annual bonus

The maximum annual bonus remains at 100% of salary. For 2022,

70% of the bonus will be based on adjusted profit before tax and

30% will be based on adjusted cash flow targets. The targets will

be subject to a health and safety underpin. Any bonus in excess of

75% of salary will be deferred into shares for 3 years.

Long-term incentives

PSP awards are expected to be made in April 2022. Award levels

will be set at 150% of salary for Mark Kelly and Michael Scott.

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.

The Committee believes that the above approach takes due

account of market and best practice and, importantly, also reflects

and supports Eurocell’s strategy and promotes the Company’s

long-term success.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Remuneration Policy links to strategy

The Group’s strategy has seven key priorities, as set out on pages

16 and 17, established to deliver sustainable growth in shareholder

value by increasing sales and profits at above market level growth

rates through leadership in products, operations, sales, marketing

and distribution.

Reflecting the strategic emphasis on profitability, short-term

performance is incentivised with an annual bonus scheme which is

based on the key Company financial objectives of profit before tax

and operating cash flow. Together, these performance conditions

ensure that the Executive Directors are focused on driving

increased profitable growth but not at the expense of its quality

and sustainability.

The importance of health and safety in operations is also reflected

by the associated underpin that can reduce the bonus pay-out,

demonstrating the Group’s commitment to employee wellbeing and

the need to ensure that growth and profitability are not achieved

in a way that is detrimental to the employees nor in a way that

promotes short-term, high-risk behaviour.

Long-term performance is incentivised with a performance share

plan (‘PSP’), which is based on the achievement of demanding

earnings per share and return on capital employed targets. These

performance conditions ensure that the Executive Directors are

focused on driving increased profitable growth, as noted above,

as well as ensuring that capital is appropriately invested to provide

sustainable returns to shareholders over the longer-term.

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, and is split into two

parts, as follows:

• Part A: The Directors’ Remuneration Policy – which sets out

the Remuneration Policy for which shareholder approval will be

sought at the 2022 AGM, given that Eurocell has reached the

end of its 3-year shareholder approved policy period.

• 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 2021 and

how the policy will be operated for 2022.

The auditors have reported on certain parts of the Annual Report

on Remuneration and stated whether, in their opinion, those parts

have been properly prepared in accordance with the Companies

Act 2006. Those parts which have been subject to audit are clearly

indicated.

Part A: Directors’ Remuneration Policy

Policy scope

The Policy applies to the Chairman, Executive Directors and Non-

executive Directors.

Policy duration

The new Directors’ Remuneration Policy will be put to a binding

shareholder vote at the 2022 AGM and, subject to receiving

majority shareholder support, the policy will apply from the date of

approval for a maximum of 3 years.

Changes from the 2019 Remuneration Policy

In devising the new Directors’ Remuneration Policy, the Committee

undertook a review of the existing policy and determined that it,

as approved by 99.4% of shareholders at the 2019 AGM, remains

aligned with the Group’s remuneration principles.

The minor amendments to the policy are primarily driven

by emerging requirements under the Code and regulatory

remuneration reporting, which the Committee continues to monitor.

The main changes from the 2019 Remuneration Policy are

summarised below:

• Incumbent Executive Directors will receive a pension

contribution of 10% of salary through to the end of 2022 in

line with those with the highest available rate below the Board

level, and then will be aligned to the rate available to the wider

workforce, which is currently 5% of salary. Future Executive

Director appointments will also be offered a pension in line with

this wider workforce rate.

• Clarified the ability of the Committee to adjust the PSP formulaic

outcomes from performance conditions where appropriate.

• Application of a share ownership guideline for a 1-year period

post termination of employment.

The following table summarises the key aspects of the Directors’

Remuneration Policy:

Eurocell plc Annual Report and Accounts 202194

DIRECTORS’ REMUNERATION REPORT CONTINUED

Executive Directors

Element and purpose Policy and operation Maximum Performance measures

Base salary

This is the core

element of pay and

reflects the individual’s

role and position

within the Group with

some adjustment to

reflect their capability

and contribution.

Base salaries will be reviewed each

year by the Committee.

The Committee does not strictly

follow data, but uses the median

position (as against appropriate

size and/or sector peers) as a

reference point in considering, in

its judgement, the appropriate level

of salary having regard to other

relevant factors including corporate

and individual performance and any

changes in an individual’s role and

responsibilities.

Base salary is normally paid monthly

in cash.

It is anticipated that salary increases

will generally be in line with those

awarded to salaried employees.

However, in certain circumstances

(including, but not limited to,

changes in role and responsibilities,

market levels, individual and

Company performance), the

Committee may make larger salary

increases to ensure they are market

competitive. The rationale for any

such increase will be disclosed

in the relevant Annual Report on

Remuneration.

n/a

Benefits

To provide benefits

valued by recipients.

The Executive Directors can receive

a car allowance or Company car

(and fuel), private family medical

cover, permanent health insurance

and life assurance.

The Committee reserves discretion

to introduce new benefits where

it concludes that it is appropriate

to do so, having regard to the

particular circumstances and to

market practice.

Where appropriate, the Company

will meet certain costs relating to

Executive Director relocations.

It is not possible to prescribe the

likely change in the cost of insured

benefits or the cost of some of the

other reported benefits year-to-

year, but the provision of benefits

will operate within an annual limit

of £100,000 (plus a further 100%

of base salary in the case of

relocations).

The Committee will monitor the

costs of benefits in practice and

will ensure that the overall costs

do not increase by more than the

Committee considers appropriate in

the circumstances.

n/a

Pension

To provide retirement

benefits.

Executive Directors can receive

pension contributions to personal

pension arrangements or, if a

Director is impacted by annual or

lifetime limits on contribution levels

to qualifying pension plans, the

balance can be paid as a cash

supplement.

The maximum employer’s

contribution (or cash supplement) is

10% of base salary.

Pension contributions for new

Executive Director appointments will

be aligned with the pension benefits

available to the wider workforce,

currently 5% of salary.

From the introduction of the new

policy, contributions are 10% of

salary for the Chief Executive Officer

and 10% of salary for the Chief

Financial Officer. These levels will be

aligned to the wider workforce from

1 January 2023.

n/a

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Element and purpose Policy and operation Maximum Performance measures

Annual Bonus Plan

To motivate

executives and

incentivise delivery of

performance over a

one-year operating

cycle, focusing on

the short-to-medium-

term elements of our

strategic aims.

Annual Bonus Plan levels and

the appropriateness of measures

are reviewed annually at the

commencement of each financial

year to ensure they continue to

support our strategy.

Once set, performance measures

and targets will generally remain

unchanged for the year, except to

reflect events such as corporate

acquisitions or other significant

events where the Committee

considers it to be necessary in

its opinion to make appropriate

adjustments.

Any annual bonus award above

75% of salary will be compulsorily

deferred into Eurocell shares, under

the Company’s Deferred Share Plan

(‘DSP’), for 3 years from grant.

The number of shares subject

to vested DSP awards may be

increased to reflect the value of

dividends that would have been paid

in respect of any ex-dividend dates

falling between the grant of awards

and the expiry of the vesting period.

Malus and clawback provisions apply

to the Annual Bonus Plan and DSP,

as explained in more detail below.

The maximum level of Annual

Bonus Plan outcomes is 100%

of base salary per annum for the

duration of this policy.

The performance measures applied

may be financial or non-financial

and corporate, divisional or

individual and in such proportions

as the Committee considers

appropriate.

Attaining the threshold level of

performance for any measure will

not produce a pay-out of more than

20% of the maximum portion of

overall annual bonus attributable to

that measure.

However, the Annual Bonus

Plan remains a discretionary

arrangement and the Committee

retains a standard power to apply

its judgement to adjust the outcome

of the Annual Bonus Plan for any

performance measure (from zero to

any cap) should it consider that to

be appropriate.

Long-term

incentives

To motivate and

incentivise delivery

of sustained

performance over

the long term, and to

promote alignment

with shareholders’

interests, the

Company operates

PSP.

Awards under the PSP take the

form of nil-cost options which

vest to the extent performance

conditions are satisfied over a

period of at least 3 years.

The number of shares subject

to vested PSP awards may be

increased to reflect the value of

dividends that would have been

paid in respect of any ex-dividend

dates falling between the grant of

awards and the expiry of the vesting

period (or at the end of any holding

period in respect of unexercised

awards).

A two-year post-vesting holding

period applies to PSP awards

granted to Executive Directors after

the 2019 AGM.

Malus and clawback provisions

apply to PSP awards, as explained

in more detail below.

The PSP allows for awards over

shares with a maximum value of

150% of base salary per financial

year.

The Committee expressly reserves

discretion to make such awards as

it considers appropriate within these

limits.

The Committee may set such

performance conditions on PSP

awards as it considers appropriate

(whether financial or non-financial

and whether corporate, divisional or

individual).

Performance periods may be over

such periods as the Committee

selects at grant, which will not

normally be less than (but may be

longer than) 3 years.

No more than 25% of awards

vest for attaining the threshold

level of performance conditions.

The Committee also has standard

power to apply its judgement to

adjust the outcome of the PSP for

any performance measure (from

zero to any cap) should it consider

that to be appropriate.

Eurocell plc Annual Report and Accounts 202196

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 of

shareholders.

Executive Directors are required

to retain at least 50% of the net

of tax shares which vest under

the PSP and DSP awards until

the guideline is met. Any PSP

performance vested shares subject

to a holding period and any shares

awarded in connection with annual

bonus deferral will be credited

for the purpose of the guidelines

(discounted for anticipated tax

liabilities).

From the 2022 AGM, Executive

Directors will be 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

share plans

To encourage

share ownership by

employees, thereby

allowing them to

share in the long-

term success of the

Group and align their

interests with those of

the shareholders.

These are all-employee share plans

established under HMRC tax-

advantaged regimes and follow the

usual form for such plans.

Executive Directors will be able to

participate in all-employee share

plans on the same terms as other

Group employees.

The maximum participation levels

for all-employee share plans will

be the limits for such plans set by

HMRC from time to time.

Consistent with normal practice,

such awards will not be subject to

performance conditions.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

Chair and Non-executive Directors

Element and purpose Policy and operation Maximum Performance measures

Chair/Non-

executive Director

fees

To enable the

Company to recruit

and retain Chairs

and Non-executive

Directors of the

highest calibre, at

the appropriate cost.

The fees paid to the Chair and

Non-executive Directors aim to be

competitive with other fully listed

companies of equivalent size and

complexity.

The fees payable to the Non-

executive Directors are determined

by the Board, with the Chair’s fees

determined by the Remuneration

Committee. Fees are paid monthly

in cash.

The Chair and Non-executive

Directors will not participate

in any cash or share incentive

arrangements.

The Company reserves the right

to provide benefits (including

travel and office support) to the

Chair and Non-executive Directors

where appropriate. Should any

assessment to tax be made on

such reimbursement, the Company

reserves the ability to settle such

liability on behalf of the Non-

executive Director.

The aggregate fees (and any

benefits) of the Chair and Non-

executive Directors will not

exceed the limit from time to time

prescribed within the Company’s

Articles of Association.

If the Chair and/or Non-executive

Directors devote special attention

to the business of the Company, or

otherwise perform services which

in the opinion of the Directors are

outside the scope of the ordinary

duties of a Director, they may be

paid such additional remuneration

as the Directors or any Committee

authorised by the Directors may

determine.

n/a

Notes to the policy table

Performance targets

Details of the performance targets applying to annual bonus awards and PSP grants, which are set to reflect the Company’s strategic

goals and to align with shareholder’s interests, can be found in the relevant sections of the Annual Report on Remuneration.

Malus and clawback

Malus (being the forfeiture of unpaid or unvested awards) and clawback (being the ability of the Company to claim repayment of paid

amounts) provisions apply to the Annual Bonus Plan, DSP and PSP in certain circumstances (e.g. material misstatement of accounts,

miscalculation of vesting/pay-outs and conduct that would or could justify summary dismissal). Normally, clawback can operate for up to

three years following the vesting of an award.

Stating maximum amounts for the Remuneration Policy

The DRR regulations and related investor guidance encourages companies to disclose a cap within which each element of the

Directors’ Remuneration Policy will operate. Where maximum amounts for elements of remuneration have been set within the Directors’

Remuneration Policy, these will operate simply as caps and are not indicative of any aspiration.

Travel and hospitality

While the Committee does not consider it to form part of benefits in the normal usage of that term, it has been advised that corporate

hospitality (whether paid for by the Company or another) and business travel for Directors (and exceptionally their families) may technically

come within the applicable rules and so the Committee expressly reserves the right for the Committee to authorise such activities within

its agreed policies.

Differences between the policy on remuneration for Directors and remuneration of other employees

While the appropriate benchmarks vary by role, the Company seeks to apply the philosophy behind this policy across the Company as a

whole. Where Eurocell’s pay policy for Directors differs from its pay policies for groups of employees, this reflects the appropriate market

rate position and/or typical practice for the relevant roles. The Company takes into account pay levels, bonus opportunity and share

awards applied across the Group as a whole when setting the Executive Directors’ Remuneration Policy.

Eurocell plc Annual Report and Accounts 202198

DIRECTORS’ REMUNERATION REPORT CONTINUED

Committee discretions

The Committee will operate the Annual Bonus Plan, DSP and PSP according to their respective rules and the above policy table.

TheCommittee retains discretion, consistent with market practice, in a number of respects, in relation to the operation and administration

of these plans. These discretions include, but are not limited to, the following:

• the selection of participants;

• the timing of grant of an award/bonus opportunity;

• the timing of vesting an award/bonus opportunity;

• the size of an award/bonus opportunity subject to the maximum limits set out in the policy table;

• the determination of the extent to which performance targets are satisfied and the resultant vesting/bonus pay-outs;

• discretion required when dealing with a change of control or restructuring of the Group;

• determination of the treatment of leavers based on the rules of the plan and the appropriate treatment chosen;

• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends);

• the annual review of performance measures, weightings and targets from year-to-year; and

• application of malus and/or clawback provisions.

In addition, while performance measures and targets used in the Annual Bonus Plan and PSP will generally remain unaltered, if events

occur which, in the Committee’s opinion, would make a different or amended target a fairer measure of performance, such amended or

different target can be set, provided it is not materially more or less difficult to satisfy (having regard to the event in question).

Any use of these discretions would, where relevant, be explained in the Directors’ Remuneration Report and may, where appropriate and

practicable, be the subject of consultation with the Company’s major Shareholders. In addition, for the avoidance of doubt, in approving

this policy report, authority is given to the Company to honour any commitments entered into with current or former Directors under

previous policies.

The Committee may make minor amendments to the policy set out above (for regulatory, exchange control, tax or administrative

purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment.

Recruitment remuneration policy

The Company’s recruitment remuneration policy aims to give the Committee sufficient flexibility to secure the appointment and promotion

of high-calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.

In terms of the principles for setting a package for a new Executive

Director, the starting point for the Committee will be to apply

the general Policy for Executive Directors as set out above and

structure a package in accordance with that policy. Any caps

contained within the policy for fixed pay do not apply to new

recruits, although the Committee would not envisage exceeding

these caps in practice.

The Annual Bonus Plan, DSP and PSP will operate (including

the maximum award levels) as detailed in the general Policy in

relation to any newly appointed Executive Director. For an internal

appointment, any variable pay element awarded in respect of the

prior role may either continue on its original terms or be adjusted to

reflect the new appointment as appropriate.

For external and internal appointments, the Committee may agree

that the Company will meet certain relocation expenses as it

considers appropriate.

For external candidates, it may be necessary to make additional

awards in connection with the recruitment to buy-out awards

forfeited by the individual on leaving a previous employer.

For the avoidance of doubt, buy-out awards are not subject to a

formal cap. Any recruitment-related awards which are not buy-

outs will be subject to the limits for Annual Bonus Plan and PSP

as stated in the general policy. Details of any recruitment-related

awards will be appropriately disclosed.

For any buy-outs the Company will not pay more than is, in the view

of the Committee, necessary and will in all cases seek, in the first

instance, to deliver any such awards under the terms of the existing

Annual Bonus Plan, DSP or PSP. It may, however, be necessary

in some cases to make buy-out awards on terms that are more

bespoke than the existing Annual Bonus Plan, DSP or PSP.

All buy-outs, whether under the Annual Bonus Plan, DSP, PSP

or otherwise, will take due account of the service obligations and

performance requirements for any remuneration relinquished by

the individual when leaving a previous employer. The Committee

will seek (where it is practicable to do so) to make buy-outs subject

to what are, in its opinion, comparable requirements in respect of

service and performance. However, the Committee may choose to

relax this requirement in certain cases (such as where the service

and/or performance requirements are materially completed, or

where such factors are, in the view of the Committee, reflected in

some other way, such as a significant discount to the face value of

the awards forfeited) and where the Committee considers it to be in

the interests of shareholders.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

A new Chair/Non-executive Director would be recruited on the terms explained above in respect of the main policy for such Directors.

Service contracts

Executive Directors

The Committee’s policy is that each Executive Director’s service agreement should be of indefinite duration, subject to termination

upon no more than twelve months’ notice by either party. The service agreements of both Executive Directors comply with that policy.

Contracts contain provisions allowing the Company to make payments in lieu of notice (albeit not including bonus or benefits) but do not

contain change of control provisions.

The Committee reserves flexibility to alter these principles, if necessary, to secure the recruitment of an appropriate candidate including, if

appropriate, a longer initial notice period (of up to two years) reducing over time.

The date of each Executive Director’s contract is:

Mark Kelly 29 March 2016

Michael Scott 1 September 2016

Chair/Non-executive Directors

The Chair and each Non-executive Director is engaged for an initial period of three years. These appointments can be renewed following

the initial three-year term. These engagements can be terminated by either party on twelve months’ notice.

Neither the Chair nor any Non-executive Directors can participate in the Company’s incentive plans, are not entitled to any pension

benefits and are not entitled to any payment in compensation for early termination of their appointment beyond the twelve months’ notice

referred to above.

Name Date of original appointment Date of latest appointment Term

Bob Lawson 4 February 2015 2 February 2021 3 years

Frank Nelson 4 February 2015 2 February 2021 3 years

Martyn Coffey 4 February 2015 2 February 2021 3 years

Sucheta Govil 1 October 2018 1 October 2021 3 years

The Directors’ service agreements and letters of appointment are available for shareholders to view from the Group Company Secretary

on request.

Termination/change of control policy summary

It is appropriate for the Committee to consider treatments on a termination having regard to all of the relevant facts and circumstances

available at that time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that the

Committee may choose to apply under the discretions available to it under the terms of the Annual Bonus Plan, DSP and PSP. The

potential treatments on termination under these plans are summarised in the table below:

Incentives

If a leaver is deemed to be a ‘good leaver’; for example, leaving through

injury, ill-health, disability, retirement, redundancy, sale of business or

otherwise at the discretion of the Committee If a leaver is not a ‘good leaver’ Change in control

Annual bonus Committee has discretion to determine an annual

bonus which may be limited to the period actually

worked.

Annual bonus not generally

paid.

Committee has discretion to

determine annual bonus.

DSP Awards normally vest either on cessation or the

normal vesting date. The Committee can pro-rate

awards if considered appropriate.

All awards will normally lapse. Awards vest on a pro rata

basis, unless the Committee

determines not to pro-rate.

PSP Will receive a pro-rated award subject to the

application of the performance conditions at the end

of the normal performance period.

Committee retains standard discretions to either vary/

disapply time pro-rating or to accelerate vesting to the

earlier date of cessation (determining the performance

conditions at that time).

All awards will normally lapse. Will receive a pro-

rated award subject to

the application of the

performance conditions at

the date of the event, unless

the Committee determines

not to pro-rate.

On death, the Annual Bonus Plan, DSP and PSP awards typically vest in full (with pro-rating also potentially applying).

Eurocell plc Annual Report and Accounts 2021100

DIRECTORS’ REMUNERATION REPORT CONTINUED

The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal claims.

In addition, and consistent with market practice, in the event of the termination of an Executive Director, the Company may make a

contribution towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees will

be disclosed as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not include an explicit cap on

the cost of termination payments.

External appointments

The Company’s policy is to permit an Executive Director to serve as a non-executive director elsewhere when this does not conflict with

the individual’s duties to the Company, and where an Executive Director takes such a role they will be entitled to retain any fees which

they earn from that appointment (unless the Committee determines otherwise).

Statement of consideration of employment conditions elsewhere in the Group

Pay and employment conditions generally in the Group are taken into account when setting Executive Directors’ remuneration. The

Committee receives regular updates on overall pay and conditions in the Group, including (but not limited to) changes in base pay and

any staff bonus pools in operation, and uses this information to ensure consistency and fairness of approach throughout the Group. As

a result, the Committee did not consider it necessary to formally consult with employees in drawing up this policy or the Remuneration

Report although it is intended to develop future annual staff engagement surveys to potentially include discussion on parts of the Group’s

remuneration approach.

Statement of consideration of shareholder views

When determining executives’ remuneration, the Committee takes into account views of shareholders and best practice guidelines

issued by institutional shareholder bodies. The Committee is always open to feedback from shareholders on Remuneration Policy and

arrangements, and commits to undergoing shareholder consultation in advance of any significant changes to Remuneration Policy.

The Committee will continue to monitor trends and developments in corporate governance and market practice to ensure that the

structure of the executive remuneration remains appropriate.

Illustrations of application of Remuneration Policy

The charts above aim to show how the Remuneration Policy for Executive Directors will be applied in 2022 using the assumptions in the

table below.

200

400

600

800

1000

1200

1400

1600

2000

1800

Maximum

with share

price growth

MaximumTarget Minimum

CEO

100% 57%

25%

18%

32%

27%

41%

26%

23%

34%

17%

£1,013k

£564k

£321k

£1,221k

£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

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

101

The charts above aim to show how the Remuneration Policy for Executive Directors will be applied in 2022 using the assumptions in the

table below.

Minimum • Consists of base salary, benefits and pension.

• Base salary is the salary to be paid with effect from 1 April 2022.

• Estimated value of a full year’s benefits, including car (and fuel) or car allowance, private family medical

cover, permanent health insurance and travel insurance.

• Pension measured as the cash allowance in lieu of Company contributions at 10% of salary.

Base salary Benefits Pension Total fixed

Mark Kelly £433,336 £8,903 £43,334 £485,573

Michael Scott £276,853 £16,766 £27,685 £321,304

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.

Part B: The Annual Report on Remuneration

The Committee (unaudited)

The members of the Remuneration Committee are: Martyn Coffey (Chair), Bob Lawson, Frank Nelson and Sucheta Govil.

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 benefit structures throughout the Group.

The Chief Executive Officer is invited to attend meetings of the Committee, except when his own remuneration is being discussed, and

the Chief Financial Officer and other Executive and Non-executive Directors attend meetings as required. Bob Lawson takes no part in

any discussions relating to his own remuneration.

The Committee met three times during the year, with all members of the Committee present at these meetings.

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.

Eurocell plc Annual Report and Accounts 2021102

DIRECTORS’ REMUNERATION REPORT CONTINUED

In addition, the Committee has ensured that the Directors’ Remuneration Policy and practices are consistent with the

six factors set out in Provision 40 of the Corporate Governance Code:

Clarity – Our Directors’ Remuneration Policy is well understood by our senior executive team and has been clearly articulated to our

shareholders and representative bodies (both on an ongoing basis and during a consultation when changes are being proposed).

Simplicity – The Committee is mindful of the need to avoid overly complex remuneration structures which can be misunderstood

and deliver unintended outcomes. Therefore, a key objective of the Committee is to ensure that our Directors’ Remuneration Policy

and practices are straightforward to communicate and operate.

Risk – Our Directors’ Remuneration Policy has been designed to ensure that inappropriate risk-taking is discouraged and will not

be rewarded via (i) the balanced use of both annual incentives and long-term incentives which employ a blend of targets, (ii) the

significant role played by shares in our incentive plans (together with bonus deferral and shareholding guidelines) and (iii) malus/

clawback provisions within all our incentive plans.

Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to standard dilution limits. The

use of shares within our incentive plans results in the actual pay received being highly aligned to the experience of our shareholders.

Proportionality – There is a clear link between individual awards, delivery of strategy and our long-term performance. In addition, the

significant role played by variable pay, together with the composition of the Executive Directors’ service contracts, ensures that poor

performance is not rewarded.

Alignment to culture – Our executive pay policies are fully aligned to the Company’s culture through the use of metrics in both

the annual bonus and PSP that measure how we perform against key aspects of our strategy, which has the objective of delivering

sustainable growth in revenue, profit and cash flow.

FIT Remuneration Consultants LLP (‘FIT’), signatories to the Remuneration Consultants Group’s Code of Conduct, are appointed by the

Committee and provide advice to the Committee on all matters relating to remuneration, including best practice. FIT provided no other

services to the Group and, accordingly, the Committee was satisfied that the advice provided by FIT was objective and independent. FIT’s

fees in respect of 2021 were £16,326 (excluding VAT). FIT’s fees were charged on the basis of the firm’s standard terms of business for

advice provided.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

103

Audited information

Single total figure table (audited)

The remuneration for the Chair, Executive and Non-executive Directors of the Company who performed qualifying services during the

relevant financial year is detailed below. The Chair and Non-executive Directors received no remuneration other than their annual fee.

For the year ended 31 December 2021:

Name

Salary/fees

£000

Taxable

benefits

£000

Pension

£000

Other

£000

Total fixed

remuneration

£000

Bonus

£000

Long-term

incentives

£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

For the year ended 31 December 2020:

Name

Salary/fees

£000

Taxable

benefits

£000

Pension

£000

Other

£000

Total fixed

remuneration

£000

Bonus

£000

Long-term

incentives

£000

Total variable

remuneration

£000

Total

remuneration

£000

Mark Kelly 380 29 57 – 466 – – – 466

Michael Scott 243 16 36 – 295 – – – 295

Robert Lawson 116 – – – 116 – – – 116

Frank Nelson 46 – – – 46 – – – 46

Martyn Coffey 44 – – – 44 – – – 44

Sucheta Govil 39 – – – 39 – – – 39

Notes:

1 Taxable benefits 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 financial year.

4 The Directors took a 20% reduction in salary/fees, for 2 months, during the first lockdown period in 2020.

The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2021 was £1,706,000

(2020: £1,006,000).

Further information on the 2021 annual bonus (audited)

In 2021, the annual bonus metrics were a blend of targets relating to profit before tax (70% of the bonus opportunity) and cash flow

(30% of the bonus opportunity). In addition, a health and safety adjustment underpin applied which, if not achieved, could reduce the

bonus pay-out (including to zero).

More particularly, the profit before tax and cash flow bonus targets were as follows:

£m Threshold Target Maximum Actual

Achievement

(% of max)

Profit before tax 17.5 18.4 19.8 27.0 100%

Cash generated from operations 29.1 30.6 32.9 33.1 100%

In order to reflect the level of stretch within the targets, the Committee determined that a pay-out of 75% of base salary would

be appropriate for an on-target performance for 2021. Performance against the profit before tax element of the bonus resulted in

an achievement of 100% of that element (70% of salary). Performance against the cash flow element of the bonus resulted in an

achievement of 100% of that element (30% of salary). The health and safety underpin was also considered satisfied and no discretion has

been applied to the formulaic outcome by the Committee.

In total, this results in a total bonus pay-out of 100% of salary. Under our Directors’ Remuneration Policy, 25% of the annual bonus paid

to Mark Kelly and Michael Scott will be deferred into shares for three years from the date of grant under the DSP.

Eurocell plc Annual Report and Accounts 2021104

DIRECTORS’ REMUNERATION REPORT CONTINUED

PSP awards vesting in respect of 2021 (audited)

The PSP values included under long-term incentives in the single figure table above (£nil) relate to awards granted in 2019 which vest

in 2022, dependent on EPS and cash flow performance measured over the 3-year period ended 31 December 2021. As noted below,

these share awards are not expected to vest, primarily reflecting the impact of COVID-19 on the financial results for 2020.

Under the EPS performance target (two-thirds of awards) which uses a sliding scale, 25% of this part of an award vests where the mean

average annual growth of adjusted earnings per share of 4% p.a. is achieved over the three-year performance period, increasing pro rata

to full vesting where mean average annual growth of 10% p.a. is achieved.

Performance target Base EPS

EPS at

31 December

2021

Average

annual EPS

growth

Threshold

4% p.a.

Maximum

10% p.a.

Vesting

Adjusted basic EPS (pre IFRS 16) 19.1p 18.8p (0.5)% 21.4p 24.8p 0%

Under the cash-flow target (defined as aggregate of EBITDA less working capital and excluding capital expenditure over the 3-year

period) (one-third of awards), 25% of this part of an award vests for cash flow of £79.4 million, increasing pro rata to full vesting for cash

flow of £97.0 million.

Performance target Threshold Maximum Actual

Vesting

Cash flow £79.4m £97.0m £59.3m 0%

As a result of EPS and cash flow performance, no PSP share awards are expected to vest in 2022. No discretion to the formulaic

outcome has been applied by the Committee.

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 2021:

Director

Beneficially

owned

31 December

2020

Beneficially

owned

31 December

2021

Vested but

unexercised

awards

Unvested

DSP

Unvested

PSP

Unvested

SAYE

Shareholding

guideline

(% of salary)

Shareholding

guideline

met?

Mark Kelly 161,717 195,346 – – 713,191 10,465 200 No

Michael Scott 38,488 59,971 – – 455,648 10,465 200 No

Robert Lawson 101,311 101,311 – – – – – n/a

Frank Nelson 49,090 49,090 – – – – – n/a

Martyn Coffey 16,428 16,428 – – – – – n/a

Sucheta Govil 5,714 5,714 – – – – – n/a

Notes:

1 The beneficial shareholdings set out above include those held by Directors and their respective connected persons.

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 2021 (audited)

The following awards were made under the PSP in 2021:

Performance target Date of grant

Basis of award

(% salary) Share price

Number of

Face value

of award

Vesting

Mark Kelly 22 April 2021 150% 258p 234,362 £604,654 April 2024 to April 2025

Michael Scott 22 April 2021 150% 258p 149,731 £386,306 April 2024 to April 2025

Notes:

1 Rounded to one decimal place for the purposes of presentation in this report.

The performance conditions applying to the awards made in April 2021 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.

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

105

More specifically:

Adjusted basic EPS

for the year ended 31 December 2023 Portion of award vesting

Above 20.2p 100%

Between 18.6p and 20.2p Pro rata on straight-line between 25% and 100%

18.6p 25%

Below 18.6p 0%

Group ROCE

for the year ended 31 December 2023 Portion of award vesting

Above 25.5% 100%

Between 20.4% and 25.5% Pro rata on straight-line between 25% and 100%

20.4% 25%

Below 20.4% 0%

1 Defined as adjusted basic earnings per share as shown in the consolidated audited accounts of the Company, excluding non-underlying items, for the third financial year of the

performance period.

2 Defined as Group adjusted operating profit divided by average totals of opening and closing assets less trade and other payables (all on a pre-IFRS 16 basis), for the third

financial year of the performance period.

DSP awards granted in 2021 (audited)

No DSP awards were granted during the year.

Outstanding share plan awards (audited)

Details of all outstanding share awards made to Executive Directors are set out below:

Executive Award type

Exercise

price

(p) Grant date

Interest at

1 January

2021

Awards

granted

in the year

Awards

lapsed

in the year

Awards

exercised

in the year

Interest at

31 December

2021 Exercise period Notes

Mark Kelly PSP 0 18/04/18 173,549 – (173,549) – – Apr 21 – Apr 22 1

PSP 0 24/04/19 170,247 – – – 170,247 Apr 22 – Apr 23 2

PSP 0 17/11/20 308,582 – – – 308,582 Nov 23 – Nov 24 3

PSP 0 22/04/21 – 234,362 – – 234,362 Apr 24 – Apr 25 4

DSP 0 18/04/18 33,708 – – (33,708) – Apr 21 – Apr 22 5

DSP 0 09/09/20 26,863 – – (26,863) – Apr 21 – Apr 22 6

SAYE 172.0 09/04/20 10,465 – – — 10,465 Jun 23 – Nov 23 9

Michael Scott PSP 0 18/04/18 110,879 — (110,879) – – Apr 21 – Apr 22 1

PSP 0 24/04/19 108,768 — – – 108,768 Apr 22 – Apr 23 2

PSP 0 17/11/20 197,149 — – – 197,149 Nov 23 – Nov 24 3

PSP 0 22/04/21 – 149,731 – – 149,731 Apr 24 – Apr 25 4

DSP 0 18/04/18 21,535 – – (21,535) – Apr 21 – Apr 22 7

DSP 0 09/09/20 17,162 – – (17,162) – Apr 21 – Apr 22 8

SAYE 172.0 09/04/20 10,465 – – – 10,465 Jun 23 – Nov 23 9

All figures above exclude dividend equivalent shares, where applicable.

Notes:

1 See ‘PSP Awards Vesting in Respect of 2020’ section in the 2020 Directors’ Remuneration Report.

2 See ‘PSP Awards Vesting in Respect of 2021’ section above.

3 As disclosed in the 2020 Directors’ Remuneration Report.

4 See ‘PSP Awards Granted in 2021’ section above.

5 DSP awards in respect of the deferred element of the 2017 annual bonus award. On 22 April 2021, an option was exercised by Mark Kelly when the share price was 258.0p.

In accordance with the rules of the DSP, 2,880 dividend-equivalent shares were added to the original share award and therefore 36,588 shares were due to be acquired under

the option. The Company exercised its right to satisfy a proportion of the above options in cash, to cover the associated tax and national insurance liabilities. The gain made by

Mark Kelly was £94,397.

6 DSP awards in respect of the deferred element of the 2019 annual bonus award. On 22 April 2021, an option was exercised by Mark Kelly when the share price was 258.0p.

In accordance with the rules of the DSP, no dividend-equivalent shares were added to the original share award and therefore 26,863 shares were due to be acquired under the

option. The Company exercised its right to satisfy a proportion of the above options in cash, to cover the associated tax and national insurance liabilities. The gain made by

Mark Kelly was £69,307.

7 DSP awards in respect of the deferred element of the 2017 annual bonus award. On 22 April 2021, an option was exercised by Michael Scott when the share price was

258.0p. In accordance with the rules of the DSP, 1,837 dividend-equivalent shares were added to the original share award and therefore 23,372 shares were due to be

acquired under the option. The Company exercised its right to satisfy a proportion of the above options in cash, to cover the associated tax and national insurance liabilities.

The gain made by Michael Scott was £60,300.

8 DSP awards in respect of the deferred element of the 2019 annual bonus award. On 22 April 2021, an option was exercised by Michael Scott when the share price was

258.0p. In accordance with the rules of the DSP, no dividend-equivalent shares were added to the original share award and therefore 17,162 shares were due to be acquired

under the option. The Company exercised its right to satisfy a proportion of the above options in cash, to cover the associated tax and national insurance liabilities. The gain

made by Michael Scott was £44,278.

9 Awards granted under the Eurocell plc Save As You Earn Scheme in 2020. Awards are based on a 3-year savings contract with an exercise price of 172.0p.

Eurocell plc Annual Report and Accounts 2021106

DIRECTORS’ REMUNERATION REPORT CONTINUED

During the year ended 31 December 2021, the highest mid-market price of the Company’s shares was 288.0p and the lowest mid-

market price was 208.0p. At 31 December 2021 the share price was 241.0p.

The aggregate gains by all Directors during 2021 was £268,282 (2020: £142,791).

Payments to past Directors (audited)

No payments to past Directors were made during the year.

Payments for loss of office (audited)

No payments for loss of office were made during the year.

Performance graph and CEO remuneration table (unaudited)

The following graph shows the Total Shareholder Return (‘TSR’) performance of an investment of £100 in Eurocell plc’s shares from

itslisting in March 2015 to 31 December 2021, compared with a £100 investment in the FTSE SmallCap Index over the same period.

TheFTSE SmallCap Index was chosen as a comparator because it represents a broad equity market index of similar-sized companies.

Total Shareholder Return Index (unaudited)

Eurocell

FTSE SmallCap

Source: Datastream

31 Dec

2016

31 Dec

2015

3 Mar

2015

31 Dec

2018

31 Dec

2019

31 Dec

2020

31 Dec

2021

31 Dec

2017

100

150

200

The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR Index graph:

Year CEO

Single figure of total

remuneration

Annual bonus pay-out

against maximum %

Long-term incentive vesting rates

against maximum opportunity %

Year-on-year change in

CEO remuneration %

Year-on-year change in

employee remuneration %

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

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.

Notes:

1 Based on all Group employees in order to provide a more meaningful comparison (Eurocell plc employees comprise the Executive and Non-Executive directors only).

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

107

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:

Salary/fee increase/decrease

Annual bonus increase/decrease

Taxable benefits increase/decrease

Mark Kelly 5% n/a

(73)%

Michael Scott 5% n/a

Robert Lawson 3% n/a n/a

Frank Nelson 3% n/a n/a

Martyn Coffey 3% n/a n/a

Sucheta Govil 3% n/a n/a

All employees 6% 232% 0%

Notes:

1 All the Directors took a 20% reduction in salary/fees, for 2 months, during the first lockdown period in 2020.

2 Percentage increase is not available due to 2020 bonuses being £nil.

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

2021 Option B 42 : 1 33 : 1 27 : 1

2020 Option B 23 : 1 19 : 1 15 : 1

2019 Option B 34 : 1 27 : 1 21 : 1

Notes to the CEO to employee pay ratio:

1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.

2 In line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5 April for each

financial year.

3 The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date of

5 April 2021.

4 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.

5 The Chief Executive Officer’s salary, benefits, pension, bonus and long-term incentives from the single total figure have been used.

The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile, the median

and the 75th percentile are shown below:

Year

Salary £000 Total pay and benefits £000

25th percentile Median 75th percentile 25th percentile Median 75th percentile

2021 21 25 32 21 27 32

Based on the salary profile of the Group’s UK employees, the median pay ratio is consistent with the pay, reward and progression policies

of the Group as a whole.

Relative importance of spend on pay (unaudited)

The table below details the change in total employee pay between 2020 and 2021 as detailed in Note 8 of the Financial Statements,

compared with distributions to shareholders by way of dividend, share buybacks or any other significant distributions or payments.

% change

2021

£m

2020

£m

Total gross employee pay 35% 81.9 60.7

Dividends/share buybacks n/a 3.6 nil

Staff costs in 2020 are stated net of Coronavirus Job Retention Scheme income amounting to £6.5 million.

The average number of employees during the year was 2,143 (2020: 1,945).

Eurocell plc Annual Report and Accounts 2021108

DIRECTORS’ REMUNERATION REPORT CONTINUED

Statement of voting at the Annual General Meeting (unaudited)

The following table shows the results of the binding Remuneration Policy vote at the 10 May 2019 AGM and the advisory Directors’

Remuneration Report vote at the 13 May 2021 AGM.

(Binding Vote – 10 May 2019)

Approval of the Directors’ Remuneration Policy

(Advisory Vote – 13 May 2021)

Annual Report on Remuneration

Total number of votes % of votes cast Total number of votes % of votes cast

For (including discretionary) 87,361,882 99.41% 95,287,108 100%

Against 518,633 0.59% 226 0%

Votes withheld 1,737,500 – – –

Implementation of policy for 2022 (unaudited)

Base salary

• Base salaries from 1 April 2021 were as follows: £403,103 for Mark Kelly, and £257,538 for Michael Scott. With effect from 1 April

2022, these salaries will be increased by 7.5% to £433,336 and £276,853 respectively. The salary increase reflects the individuals’

performance in their respective roles and the resulting salaries remain below the median for similar sized companies.

Pension

• Contribution rates for Executive Directors will be initially 15% of salary in 2022 and then reducing to 10% following the adoption of the

new policy. These rates will be aligned with the general workforce rate from 1 January 2023.

Benefits

• Details of the benefits received by Executive Directors are set out in Note 1 to the Single Total Figure Table on page 103. There is no

intention to introduce additional benefits in 2022.

Annual bonus

• The annual bonus opportunity for 2022 will be structured in a similar manner to 2021. The maximum bonus will be 100% of salary and

will be payable based on performance against a blend of adjusted profit before tax (70% of the bonus opportunity) and operating cash

flow (30% of the bonus opportunity) targets.

• These targets 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 specific performance targets for 2022 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

2022 bonus outturn.

Long-term incentives

• Awards will be made under the PSP in 2022 to the Executive Directors structured in a similar manner to the awards made in 2021,

in that awards will be made which will vest subject to three-year earnings per share (two-thirds of the award) and return on capital

employed (one-third) targets.

• 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 2021 PSP awards.

Chair and Non-executive Directors’ fees

• The fees for the Chair and Non-executive Directors have not changed since the IPO in 2015 and, following a benchmarking exercise,

are to be increased from 1 April 2022 in order to align with similar sized listed companies.

• The fees for the Chair will increase to £141,000 p.a. and the base fees for Non-executive Directors will increase to £48,000 p.a.

• Additional fees for the Chair of the Audit Committee and Chair of the Remuneration Committee will increase to £8,000 p.a. and the

additional fee for the Senior Independent Director will increase to £8,000 p.a.

By Order of the Board

Martyn Coffey

Chair of the Remuneration Committee

17 March 2022

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

109

DIRECTORS’ REPORT

The Directors present their audited consolidated financial

statements for the year ended 31 December 2021. Eurocell plc

(‘theCompany’) is a company incorporated and domiciled in

the UK, with registration number 08654028, and is the holding

company of the Eurocell Group of companies (‘the Group’). All

of the Group’s activities are within the United Kingdom, with the

exception of two overseas branches in the Republic of Ireland.

The shares of the Company have been traded on the main

marketof the London Stock Exchange throughout the year ended

31 December 2021.

The Directors’ Report includes the Corporate Governance

Statement set out on pages 72 to 82.

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 are listed on pages 68 and 69 and

were in place on the date this Directors’ Report was approved, all

of whom served throughout the year and up to the date of signing

the Financial Statements, with no changes in the intervening period.

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 69. Specifically, this relates to information on the Group’s strategy,

business model, likely future developments and risk management.

UK Corporate Governance Code

Matters related to corporate governance and our compliance with

the Code are set out in the Corporate Governance Statement on

pages 72 to 82, which is incorporated herein by reference.

Results

Our Financial Statements for the year ended 31 December 2021

are set out on pages 122 to 163. The Financial Statements should

be read in conjunction with the Chief Executive Officer’s Report,

Divisional Reviews and the Chief Financial Officer’s Report.

Dividends

The Board is recommending a final dividend of 6.4 pence (2020: nil

pence) per share for 2021 which, together with the interim dividend

of 3.2 pence (2020: nil pence) per share, makes a combined

dividend of 9.6 pence (2020: nil pence) per share.

Payment of the final dividend, if approved at the Annual General

Meeting (‘AGM’), will be made on 18 May 2022 to Shareholders

registered at the close of business on 22 April 2022. The ex-

dividend date will be 21 April 2022.

Dividends paid in the year to 31 December 2021 and disclosed in

the Consolidated Cash Flow Statement of £3.6 million (2020: £nil),

is comprised exclusively of the 2021 interim dividend of

3.2 pence per share which was paid in October 2021.

Tax governance

Our tax policy is set out below. It is determined by the Board and

overseen by the Audit and Risk Committee. The Board reviews the

policy, and our compliance with it, on an annual basis. Operational

responsibility for the execution of the Group’s tax policy rests with

the Chief Financial Officer, who reports the Group’s tax position to

the Audit and Risk Committee on a regular basis.

Tax policy

We are committed to compliance with tax law and practice in the

UK. Compliance for us means paying the amount of tax we are

legally obliged to pay and doing so in the right place, at the right

time. It involves disclosing all relevant facts and circumstances to

the UK tax authorities in ways that reflect the economic reality of

the transactions we undertake, and claiming appropriate reliefs and

incentives where available.

Risk management of tax affairs

The level of risk that we accept in relation to UK tax is consistent

with our overall objective of achieving certainty in the Group’s tax

affairs. At all times, we seek to comply fully with our regulatory

and other obligations, and to act in a way that upholds our core

values and reputation as a responsible corporate citizen. We see

compliance with tax legislation as key to managing tax risk, and

understand the importance of tax in the wider context of business

decisions.

Processes have been put in place to ensure tax is considered

as part of our overall decision-making processes, with tax risks

managed by local finance teams and escalated through to

appropriate levels of management and, ultimately, to the Board

when necessary.

Tax planning

In structuring our commercial activities, we will always consider –

among other factors – the relevant tax laws. We believe that it is fair

to mitigate tax using generally available reliefs in the spirit in which

they are intended. However, any tax planning that we undertake

will have commercial and economic substance and we will not use

aggressive tax planning or enter into complicated tax avoidance

schemes.

Although for commercial reasons we may trade with customers

and suppliers genuinely located in countries considered to be

tax havens, we will not use such jurisdictions for the purpose of

avoiding tax, nor will we seek to take advantage of the secrecy

afforded to transactions recorded in these jurisdictions.

Engaging with HMRC

We aim to have a good working relationship with HMRC. We will

engage with honesty and integrity, and in a spirit of cooperative

compliance. We will make all returns and pay tax on a timely basis,

across all types of tax.

Eurocell plc Annual Report and Accounts 2021110

DIRECTORS’ REPORT CONTINUED

Share capital

Details of our issued share capital, including movements during

the year, are shown in Note 25 to the Financial Statements. We

have one class of ordinary shares, which carries no fixed income.

Each share carries the right to one vote at our general meetings.

The ordinary shares are listed on the Official List and traded on the

London Stock Exchange.

As at 31 December 2021, we had 111,972,477 (2020: 111,486,709)

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 25 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 and some members of senior management

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 30 to the

Financial Statements and in relation to the employment of Directors,

details of which are provided in the Remuneration Committee

Report on pages 91 to 108, 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 2021, the Company’s major shareholders were

as follows:

Shareholder No. of Shares % of voting rights

Soros Fund Management 18,337,234 16.4

Alantra Asset Management 15,188,715 13.6

Aberforth Partners 14,977,666 13.4

JO Hambro Capital Management 9,683,055 8.7

AXA Framlington Investment

Managers 7,480,435 6.7

Schroder Investment Management 6,546,157 5.9

Chelverton Asset Management 5,137,685 4.6

Columbia Threadneedle Investments 5,020,929 4.5

Premier Miton Investors 3,633,000 3.2

Janus Henderson Investors 3,375,404 3.0

Royal London Asset Management 3,365,000 3.0

The Takeover Directive

The rights and obligations attached to the issued share capital are

set out in the Articles of Association (see below).

There are no agreements in place between the Company, its

employees or Directors for compensation for loss of office or

employment that trigger as a result of a takeover bid.

Articles of Association

The Company’s Articles of Association can only be amended by

special resolution of the shareholders. Our current articles are

available on our website at www.investors.eurocell.co.uk.

The Company’s Articles of Association give powers to the Board

to appoint Directors. All Board members are required to retire and

submit themselves for re-election by Shareholders at each Annual

General Meeting.

The Board of Directors may exercise all the powers of the

Company, subject to the provisions of relevant legislation, the

Company’s Articles of Association and any directions given by the

Company in general meetings. The powers of the Directors include

those in relation to the issue and buyback of shares.

Directors’ retirement by rotation

In accordance with above and in line with the Code, all Directors

in office will retire and offer themselves for re-election at the 2022

AGM.

The Articles of Association provide that a Director may be

appointed by an ordinary resolution of shareholders or by existing

Directors, either to fill a vacancy or as an additional Director.

The Executive Directors serve under contracts that are terminable

with twelve months’ notice from the Company and twelve months’

notice from the Executive Director. The Non-executive Directors

serve under letters of appointment and do not have service

contracts with the Company

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

111

Copies of the service contracts of the Executive Directors and

the letters of appointment of the Non-executive Directors are

available for inspection at the Company’s registered office during

normal business hours and will be available for inspection at the

Company’s AGM.

There are no specific company rules in relation to the appointment/

replacement of Directors and all such matters are managed by the

Board in accordance with the Articles of Association, the Companies

Act 2006 and any directions given by special resolution.

Directors’ interests

Details of Directors’ remuneration, interests in the share capital (or

derivatives or other financial instruments relating to those shares)

of the Company and of their share-based payment awards are

contained in the Remuneration Committee Report on pages 91 to

108. No change in the interests of the Directors has been notified

between 31 December 2021 and the date of this report.

Directors’ indemnities

Pursuant to the Articles of Association, the Company has executed

a deed poll of indemnity for the benefit of the Directors of the

Company, and persons who were Directors of the Company, in

respect of costs of defending claims against them and third-party

liabilities. These provisions, deemed to be qualifying third-party

indemnity provisions pursuant to section 234 of the Companies

Act 2006, were in force during the year ended 31 December 2021

and remain in force. The indemnity provision in the Company’s

Articles of Association also extends to provide a limited indemnity in

respect of liabilities incurred as a director, secretary or officer of an

associated company of the Company.

A copy of the deed poll of indemnity is available for inspection at

the Company’s registered office during normal business hours and

will be available for inspection at the Company’s AGM.

Conflicts of interest

Under the Companies Act 2006, Directors must avoid situations

where they have, or could have, a direct or indirect interest that

conflicts or possibly may conflict with the Company’s interests. As

permitted by the Act, the Company’s Articles of Association enable

Directors to authorise actual or potential conflicts of interest.

Legal and regulatory compliance

The executive team is responsible for identifying and carrying out

assessments of those areas of the business where material legal

and regulatory risks may be present. Where issues are identified,

mitigating actions are built into an action plan involving the drafting

and communication of policies and the delivery of training where

appropriate, or are approached by way of a revision to key

contractual terms. The Board receives regular reports on material

litigation and the legal action taken to support our strategy.

Health and safety

We are committed to providing a safe place for employees to work.

Our policies are reviewed on an ongoing basis to ensure that the

approach to training, risk assessment, safe systems of working and

accident management is appropriate.

As part of this process, a rolling audit programme is in place to

ensure that health, safety, environmental and security risks are

assessed stringently and that robust control measures are in place

to limit or mitigate risk as appropriate.

Events after the balance sheet date

The Directors are not aware of any material events that have

occurred after 31 December 2021 which would require disclosure.

Other matters

Employee disclosure (including equality, diversity and

disabled employees)

See Responsible Business section on pages 32 to 53.

Employee engagement statement

See Corporate Governance Statement on pages 72 to 82.

Statement on engagement with suppliers, customers and

others in a business relationship with the Company

See Corporate Governance Statement on pages 72 to 82.

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 67.

Payments to suppliers

It is Group policy to abide by the payment terms agreed with

suppliers, provided that the supplier has performed its obligations

under the contract.

Political donations

In accordance with the Group’s policy, no political donations were

made and no political expenditure was incurred during 2021

(2020: £nil).

Greenhouse gas emissions and energy use

See Responsible Business section on page 43.

Disclosure of information to auditors

See the Directors’ confirmations on page 112.

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

17 March 2022

Eurocell plc Annual Report and Accounts 2021112

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and

Accounts 2021 and the Financial Statements in accordance with

applicable law and regulation.

Company law requires the Directors to prepare Financial

Statements for each financial year. Under that law the Directors

have prepared the Group Financial Statements in accordance with

UK-adopted international accounting standards and the Company

Financial Statements in accordance with United Kingdom Generally

Accepted Accounting Practice (United Kingdom Accounting

Standards, comprising FRS 101 ‘Reduced Disclosure Framework’,

and applicable law).

Under company law, Directors must not approve the financial

statements unless they are satisfied that they give a true and fair

view of the state of affairs of the Group and Company and of the

profit or loss of the Group for that period. In preparing the Financial

Statements, the Directors are required to:

• select suitable accounting policies and then apply them

consistently;

• state whether applicable UK-adopted international accounting

standards have been followed for the group financial statements

and United Kingdom Accounting Standards, comprising FRS

101 have been followed for the Company Financial Statements,

subject to any material departures disclosed and explained in

the Financial Statements;

• make judgements and accounting estimates that are reasonable

and prudent; 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 sufficient to show and explain the Group’s and

Company’s transactions and disclose with reasonable accuracy

at any time the financial position of the Group and Company

and enable them to ensure that the Financial Statements and

the Directors’ Remuneration Report comply with the Companies

Act2006.

The Directors are responsible for the maintenance and integrity

of the Company’s website. Legislation in the United Kingdom

governing the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

Directors’ confirmations

The Directors consider that the Annual Report and Accounts

2021 and accounts, taken as a whole, is fair, balanced and

understandable and provides 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

Corporate Governance Report confirm that, to the best of their

knowledge:

• the Group Financial Statements, which have been prepared

in accordance with UK-adopted international accounting

standards, give a true and fair view of the assets, liabilities,

financial position and profit of the Group;

• the Company Financial Statements, which have been prepared

in accordance with United Kingdom Accounting Standards,

comprising FRS 101, give a true and fair view of the assets,

liabilities and financial position of the Company; 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 office at the date the directors’

report is approved:

• so far as the Director is aware, there is no relevant audit

information of which the Group’s and Company’s auditors are

unaware; 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 17 March 2022.

Mark Kelly Michael Scott

Chief Executive Officer Chief Financial Officer

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OPINION

In our opinion:

• Eurocell plc’s Group Financial Statements and Company Financial Statements (the ‘Financial Statements’) give a true and fair view of

the state of the Group’s and of the Company’s affairs as at 31 December 2021 and of the Group’s profit and the Group’s cash flows

for the year then ended;

• the Group Financial Statements have been properly prepared in accordance with UK-adopted international accounting standards;

• the Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law); and

• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the Financial Statements, included within the Annual Report and Accounts 2021 (the ‘Annual Report’), which comprise:

the Consolidated Statement of Financial Position and the Company Statement of Financial Position as at 31 December 2021; the

Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes

in Equity and the Company Statement of Changes in Equity for the year then ended; and the notes to the Financial Statements, which

include a description of the significant 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 Financial Statements section of our report. We

believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial

Statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our

other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.

Other than those disclosed in Note 5, we have provided no non-audit services to the Company or its controlled undertakings in the period

under audit.

OUR AUDIT APPROACH

Overview

Audit scope

• A component was considered to be a company or division where discrete financial data was prepared. Financially significant

components were determined to be those which contributed more than 15% of the underlying profit before tax (measured on an

absolute basis).

• For components that were not financially significant audit work was performed over specific Financial Statement Line Items (‘FSLI’s’)

if they contributed more than 5% 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 36 to 45, management have considered the impact of climate change. Given the

headroom noted on the impairment assessments as disclosed in Note 17 we have considered this assessment and our wider risk

assessment and concluded that there were no other 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: £1,350,000 (2020: £891,000) based on 5% of underlying profit before taxation (2020: 5% of the average

underlying profit before taxation for the past three years).

• Overall Company materiality: £602,000 (2020: £647,000) based on 1% of total assets.

• Performance materiality: £1,000,000 (2020: £668,000) (Group) and £451,000 (2020: £485,000) (Company).

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS

OF EUROCELL PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Eurocell plc Annual Report and Accounts 2021114

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the Financial

Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)

identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the

audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures

thereon, were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Impairment of assets at a Cash Generating Unit (‘CGU’) level (Group) and COVID-19 (Group and Parent), which were key audit matters

last year, are no longer included because of the level of headroom available in the goodwill impairment assessment and the absence of

other specific impairment triggers for the impairment of assets at a CGU level. The COVID-19 key audit matter has been removed as the

impact of COVID-19 has been considered as part of our normal risk assessment and no heightened areas of risk were identified in the

current year. Otherwise, the key audit matters below are consistent with last year.

Key audit matter How our audit addressed the key audit matter

Trade receivables provisions (Group)

Refer to pages 58 to 65 (Risk management and Principal risks and

uncertainties), pages 86 to 90 (Audit and Risk Committee Report),

Note 1 (Accounting Policies), Note 2 (Critical Accounting Estimates

and Judgements) and Note 19 (Trade and other receivables).

The Group had gross trade receivables of £41.3 million at 31

December 2021 (2020: £38.6 million) against which provisions of

£2.6 million (2020: £4.4 million) were held in accordance with IFRS

9. We focused on this area, and specifically the valuation assertion,

because the Directors’ assessment of the provisions required

in respect of trade receivables included complex and subjective

judgements. These increased in complexity in the prior year due

to the uncertain economic environment, which has continued into

2021.

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 confirmed that the amounts included in the IFRS 9 model

agreed back to the underlying ledgers as at 31 December 2021;

• 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 identified no material exceptions from the procedures noted

above. Based on the results of our audit work we concluded that

the provisions recorded were materially accurate, calculated in line

with the requirements of IFRS 9 and that appropriate disclosures

have been made.

INDEPENDENT AUDITORS’ REPORT CONTINUED

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Assessment of the valuation of inventory (Group)

Refer to pages 58 to 65 (Risk management and Principal risks and

uncertainties), pages 86 to 90 (Audit and Risk Committee Report),

Note 1 (Accounting Policies), Note 2 (Critical Accounting Estimates

and Judgements) and Note 18 (Inventories). Inventory totalled

£55.9 million as at 31 December 2021 (2020: £38.1 million) after

provisions of £4.9 million (2020: £4.2 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.

Specifically, the determination of inventory provisions for slow

moving, obsolete and discontinued line items, reflecting the level

of inventory held across the branch network and manufactured

goods at the year end, requires the exercise of judgement. In

addition, during the year there has been significant raw materials

cost price inflation leading to a risk that inventory may not be held

at the lower of cost and net realisable value.

Our audit procedures over the valuation of inventory consisted of:

• 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 valuations 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:

• Our attendance at the physical inventory counts, conducted

by management, highlighted no 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 future forecast usage and validated historic usage and

compared this to forecasted future sales;

• Where inventory provisions were based upon expected future

demand or 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

2021 and verified that sales recorded in 2022 were made above

cost; and

• Where specific impairments were made, outside of the

standard impairment reviews, we challenged management

of the completeness and appropriateness of these additional

amounts.

Based on the results of our audit work, we concluded that 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 34 (Accounting Policies), Note 35 (Critical

Accounting Estimates and Judgements), Note 37 (Investments)

and Note 38 (Trade and other receivables). The Company has

investments in subsidiary companies of £17.8 million (2020:

£17.8million) and intercompany receivables of £41.6 million

(2020: £46.2 million). Material impairment to these could result

inimplications for future dividends.

We obtained management’s impairment assessment regarding the

investment’s carrying value and management’s IFRS 9 expected

credit loss model in respect of the intercompany receivables.

The recoverability of the investment’s carrying value was based

upon the same underlying data noted in other Group calculations

such as the going concern assessment and goodwill impairment

model. We also noted that the market capitalisation of the Group

was c.£269 million as at 31 December 2021 which is significantly

in excess of the Parent Company’s total assets. We considered

the IFRS 9 model and noted that a significant change in the key

assumption (being the expected loss rate of 0.1%) would be

required prior to a material impairment being noted. The amounts

owed to the Company were due from profitable subsidiaries,

with sufficient net assets. We tested the integrity of the models

and the validity of the key data inputs. No exceptions were

noted in the performance of the above procedures. We therefore

concluded that the investments and intercompany receivables

were accounted for in line with IFRS 9 and IAS 36, with appropriate

disclosures beingmade.

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INDEPENDENT AUDITORS’ REPORT CONTINUED

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements

as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry

inwhich they operate.

Eurocell operates in the market of the extrusion of UPVC (unplasticised polyvinyl chloride) window and building products to the new and

replacement window market and the sale of building plastics materials. The Group has sites throughout the UK with its headquarters in

Alfreton.

The business is managed as two primary divisions:

• Eurocell Building Plastics, focusing on sales and distribution across over 200 branches within the UK and 2 in Ireland to generally

smaller scale customers. This segment includes the trading subsidiary companies Eurocell Building Plastics Limited and Security

Hardware Limited; and

• Eurocell Profiles, focusing on manufacture and distribution to large-scale customers. This division includes the trading subsidiaries

Eurocell Profiles Limited, Vista Panels Limited, and Ecoplas Limited.

Other than Vista Panels Limited, which has its own finance team, all finance and operational management functions are located at the

Alfreton headquarters. Therefore all audit work, including work on components, was completed by a single Group audit team.

For the purposes of our audit of the Group we considered components to be operations where there was discrete financial data

maintained by management, including a separate trial balance. For the consolidated audit of Eurocell plc this related to the individual

subsidiary companies, with Eurocell Profiles Limited the statutory entity, being seen as two components (as S&S Plastics is now a division

within Eurocell Profiles Limited but this component is out of scope).

A component was included within our full scope audit procedures, and considered to be a financially significant component, if it

represented 15% or more of the reported underlying profit before taxation, measured on an absolute basis (as some entities act as

cost centres 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 financially significant component). There were three financially significant components (Eurocell Profiles Limited, excluding

the S&S plastics division, Eurocell Building Plastics Limited and Vista Panels Limited). Vista Panels Limited met the criteria to be classified

as a financially significant component for the first time this year end. These components represented 96% of the reported consolidated

revenues and 84% of the reported consolidated underlying profit 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 5% of the consolidated FSLI and was individually above Group planning

materiality we included that specific FSLI within our scope of testing and performed audit procedures over this FSLI to Group materiality.

Due to the relative size of the acquisitions between 2015 and 2019 a number of additional FSLIs 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 specific components or areas included within our Group audit scope due to specific risk factors.

Work was performed over the consolidation adjustments separately to the above scoping of components, due to the relative simplicity

of the Group and the nature of the consolidation (performed by the Head Office Finance function with mainly UK operations). This was

performed using Group materiality.

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 Task Force on Climate-related Financial Disclosures (‘TCFD’) on page 36 to 45, management have considered the

impact of climate change. Given the headroom noted on the impairment assessments as disclosed in Note 17 we have considered this

assessment and our wider risk assessment and concluded that there were no other material impacts on the audit.

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Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,

together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit

procedures on the individual FSLIs and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on

the Financial Statements as a whole.

Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

Financial statements – Group Financial statements – Company

Overall materiality £1,350,000 (2020: £891,000). £602,000 (2020: £647,000).

How we determined it 5% of underlying profit before taxation

(2020:5% of the average underlying profit

before taxation for the past three years)

1% of total assets (2020: 1% of total assets)

Rationale for benchmark applied We believe that underlying profit before tax is

the key measure used by the shareholders in

assessing the performance of the Group, and

is a generally accepted auditing benchmark. In

2021 underlying profit before tax is the same as

reported profit before tax.

We believe that total assets is the primary

measure used by the shareholders in

assessing the financial position of the

entity, and is a generally accepted auditing

benchmark.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The

range of materiality allocated across components was between £124,000 and £1,282,500. Certain components were audited to a local

statutory audit materiality that was also less than our overall Group materiality.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected

misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the

nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.

Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to £1,000,000 (2020: £668,000) for the Group

Financial Statements and £451,000 (2020: £485,000) for the Company Financial Statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and

aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £67,000

(group audit) (2020: £44,500) and £30,000 (company audit) (2020: £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 flow projections for the

Group. This included discussions around the forecast cash requirements and sufficiency of available facilities to deal with a severe but

plausible downside to these projections;

• We obtained management’s analysis and cash flow model. We checked 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 flows in the past four

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 financial covenants

and sufficiency of facilities/available cash;

• We considered the reported headroom on facilities at each month end for the review period (i.e. until 31 December 2023);

• 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;

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INDEPENDENT AUDITORS’ REPORT CONTINUED

• We reviewed the debt facilities to ascertain if management had correctly factored in financial 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

31 December 2023);

• We audited management’s compliance with the covenants during 2021;

• 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 flows,

checked for consistency with the consolidated model (including the mathematical accuracy of the model), reviewed the committed

cash outflows compared to the available funds (being cash reserves and forecast dividend receipts from subsidiaries), considered the

sufficiency of management’s assessment of headroom and critically assessed the disclosures in Note 34. No issues were noted arising

from these procedures.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually

or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least

twelve months from when the Financial Statements are authorised for issue.

In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the

preparation of the Financial Statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the

company’s ability to continue as a going concern.

In relation to the Directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or

draw attention to in relation to the Directors’ statement in the Financial Statements about whether the Directors considered it appropriate

to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of

thisreport.

REPORTING ON OTHER INFORMATION

The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors’ report

thereon. The Directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related

Disclosures (‘TCFD’) recommendations. Our opinion on the Financial Statements does not cover the other information and, accordingly,

we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider

whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise

appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform

procedures to conclude whether there is a material misstatement of the Financial Statements or a material misstatement of the other

information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies

Act 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 2021 is consistent with the Financial Statements and has been prepared in accordance with

applicable legal requirements.

In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,

we did not identify any material misstatements in the Strategic Report and Directors’ Report.

Directors’ Remuneration

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the

Companies Act 2006.

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CORPORATE GOVERNANCE STATEMENT

The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of the

Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code

specified for our review. Our additional responsibilities with respect to the Corporate Governance Statement as other information are

described in the Reporting on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance

Statement is materially consistent with the Financial Statements and our knowledge obtained during the audit, and we have nothing

material to add or draw attention to in relation to:

• The Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;

• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an

explanation of how these are being managed or mitigated;

• The Directors’ statement in the Financial Statements about whether they considered it appropriate to adopt the going concern basis of

accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to

do so over a period of at least twelve months from the date of approval of the Financial Statements;

• The Directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and

why the period is appropriate; and

• The Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation

and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any

necessary qualifications or assumptions.

Our review of the Directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and

only consisted of making inquiries and considering the Directors’ process supporting their statement; checking that the statement is in

alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with

the Financial Statements and our knowledge and understanding of the Group and Company and their environment obtained in the course

of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the Financial Statements and our knowledge obtained during the audit:

• The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides

the information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;

• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

• The section of the Annual Report describing the work of the Audit and Risk Committee.

We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance

with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review

bythe auditors.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

Responsibilities of the Directors for the Financial Statements

As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the Financial

Statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also

responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from

material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as

a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the

Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

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INDEPENDENT AUDITORS’ REPORT CONTINUED

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations

related to UK tax legislation and UK employment laws and regulations, both indirectly and could have a direct impact, and we considered

the extent to which non-compliance might have a material effect on the Financial Statements. We also considered those laws and

regulations that have a direct impact on the Financial Statement such as the Companies Act 2006 and the listing rules. We evaluated

management’s incentives and opportunities for fraudulent manipulation of the Financial Statement (including the risk of override of

controls), and determined that the principal risks were related to posting inappropriate journal entries to revenue, expenses or cash and

management bias in accounting estimates and judgemental areas of the Financial Statement. The Group engagement team shared this

risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their

work. Audit procedures performed by the Group engagement team and/or component auditors included:

• Enquiry of management and those charged with governance around actual and potential frauds, litigations or claims against or by the

company;

• Reviewing Financial Statement disclosures and testing supporting documentation to assess compliance with applicable laws and

regulations;

• Auditing the risk of management override of controls, through testing journal entries (using our data analysis tools to confirm

completeness of data) by adopting a risk based approach for appropriateness, testing significant accounting estimates (as defined in

the notes to the Financial Statements) because of the risk of potential management bias, and evaluating the business rationale and

accounting for any significant or unusual transactions outside the normal course of business;

• Auditing the risk of fraud in revenue recognition by using our data analysis tools to identify unusual credits to revenue for further

investigation;

• Performing unpredictable audit procedures, which are changed year-on-year;

• Understanding of management’s internal controls designed to prevent and detect irregularities; and

• Reviewing minutes of meetings of the Board of Directors.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of

non-compliance with laws and regulations that are not closely related to events and transactions reflected in the Financial Statements.

Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as

fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing

techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will

often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to

enable us to draw a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at: www.frc.org.uk/

auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3

of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for

any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed

by our prior consent in writing.

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OTHER REQUIRED REPORTING

COMPANIES ACT 2006 EXCEPTION REPORTING

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

• we have not obtained all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from

branches not visited by us; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• the Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns.

We have no exceptions to report arising from this responsibility.

APPOINTMENT

Following the recommendation of the Audit and Risk Committee, we were appointed by the Directors on 29 April 2015 to audit the

Financial Statements for the year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted

engagement is 7 years, covering the years ended 31 December 2015 to 31 December 2021.

OTHER MATTER

In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial

statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct

Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over

whether the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.

Christopher Hibbs (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Birmingham

17 March 2022

Eurocell plc Annual Report and Accounts 2021122

Note

Year ended

31 December

2021

Underlying

£m

Year ended

31 December

2021

Non-underlying

£m

Year ended

31 December

2021

Total

£m

Year ended

31 December

2020

Underlying

£m

Year ended

31 December

2020

Non-underlying

£m

Year ended

31 December

2020

Total

£m

Revenue 4,9 343.1 — 343.1 257.9 — 257.9

Cost of sales

(169.7) — (169.7)

(130.5) —

(130.5)

Gross profit 173.4 — 173.4 127.4 — 127.4

Distribution costs (24.5) — (24.5) (15.8) — (15.8)

Administrative expenses (120.6) — (120.6) (97.6) (3.8) (101.4)

Impairment of goodwill

— — — — (5.8) (5.8)

IFRS 9 impairments

0.7 — 0.7

(3.7) —

(3.7)

Operating profit 9 29.0 — 29.0 10.3 (9.6) 0.7

Finance expense 10

(2.0) — (2.0)

(1.8) (0.4)

(2.2)

Profit/(loss) before tax 9 27.0 — 27.0 8.5 (10.0) (1.5)

Taxation 11

(5.9) — (5.9)

(1.5) 0.8

(0.7)

Profit/(loss) for the year and

total comprehensive income/

(expense)

21.1 — 21.1

7.0 (9.2)

(2.2)

Basic earnings/(losses)

per share 12 18.9p 18.9p 6.5p (2.0)p

Diluted earnings/(losses)

per share 12 18.8p 18.8p 6.5p (2.0)p

1 Non-underlying items in 2020 are detailed in Note 7. The Group’s policy regarding the recognition of non-underlying items is outlined on page 127.

2 The impairment of goodwill and IFRS 9 impairments have been disclosed on the face of the Consolidated Statement of Comprehensive Income due to the material nature of the

credits/(charges).

The Notes on pages 126 to 154 are an integral part of these Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2021

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Note

2021

£m

2020

£m

Assets

Non-current assets

Property, plant and equipment 14 59.2 50.8

Right-of-use assets 15 54.8 47.0

Intangible assets 16

18.6 19.9

Total non-current assets 132.6 117.7

Current assets

Inventories 18 55.9 38.1

Trade and other receivables 19 44.5 38.5

Cash and cash equivalents

6.6 7.1

Total current assets

107.0 83.7

Total assets 239.6 201.4

Liabilities

Current liabilities

Trade and other payables 21 (48.7) (42.8)

Lease liabilities 22 (11.9) (8.9)

Bank overdrafts (5.9) (4.5)

Provisions 23 (0.7) (0.8)

Corporation tax

— (0.7)

Total current liabilities (67.2) (57.7)

Non-current liabilities

Borrowings 20 (11.7) (12.5)

Trade and other payables 21 (0.3) (0.3)

Lease liabilities 22 (46.8) (39.5)

Provisions 23 (0.8) (0.7)

Deferred tax 24

(6.6) (3.5)

Total non-current liabilities

(66.2) (56.5)

Total liabilities

(133.4) (114.2)

Net assets 106.2 87.2

Equity attributable to equity holders of the parent

Share capital 25 0.1 0.1

Share premium account 25 21.9 21.1

Share-based payment reserve 26 1.1 0.5

Retained earnings

83.1 65.5

Total equity

106.2 87.2

The Financial Statements on pages 122 to 154 were approved and authorised for issue by the Board of Directors on 17 March 2022 and

were signed on its behalf by:

Mark Kelly Michael Scott

Director Director

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2021

Eurocell plc Annual Report and Accounts 2021124

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2021

Note

Year ended

31 December

2021

£m

Year ended

31 December

2020

£m

Cash generated from operations 31 33.1 33.9

Income taxes paid (3.5) (1.0)

Net cash generated from operating activities 29.6 32.9

Investing activities

Purchase of property, plant and equipment (15.1) (13.8)

Purchase of intangible assets (0.4) (0.2)

Net cash used in investing activities (15.5) (14.0)

Financing activities

Proceeds from new share capital issued 25 0.5 19.2

Costs relating to issuance of new share capital — (0.5)

Repayment of bank and other borrowings (1.0) (27.2)

Principal elements of lease payments (10.1) (10.7)

Finance elements of lease payments (1.2) (1.3)

Finance expense paid (0.6) (0.7)

Dividends paid to equity Shareholders 13 (3.6) —

Net cash used in financing activities (16.0) (21.2)

Net decrease in cash and cash equivalents

(1.9)

(2.3)

Cash and cash equivalents at beginning of year 32

2.6

4.9

Cash and cash equivalents at end of year 32 0.7

2.6

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

Note

capital

£m

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 65.5 87.2

Comprehensive income for the year

Profit for the year — — — 21.1 21.1

Total comprehensive income for the year — — — 21.1 21.1

Contributions by and distributions to owners

Exercise of share options 26 — 0.8 (0.6) 0.1 0.3

Share-based payments 26 — — 1.2 — 1.2

Dividends paid 13 — — — (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 83.1 106.2

Note

capital

£m

premium

account

£m

Share-based

payment

reserve

£m

Retained

earnings

£m

Total

equity

£m

Balance at 1 January 2020 0.1 2.4 0.9 67.1 70.5

Comprehensive expense for the year

Loss for the year — — — (2.2) (2.2)

Total comprehensive expense for the year — — — (2.2) (2.2)

Contributions by and distributions to owners

Issue of new share capital — 17.1 — — 17.1

Exercise of share options 26 — 1.6 (0.6) 0.6 1.6

Share-based payments 26 — — 0.3 — 0.3

Deferred tax on share-based payments 24

— — (0.1) — (0.1)

Total transactions with owners recognised

directly in equity

— 18.7 (0.4) 0.6 18.9

Balance at 31 December 2020 0.1 21.1 0.5 65.5 87.2

Eurocell plc Annual Report and Accounts 2021126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2021

1 ACCOUNTING POLICIES (GROUP)

Corporate information

Eurocell plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a publicly listed company incorporated and domiciled in the

United Kingdom. The registered office is located in England at the following address: Eurocell Head Office and Distribution Centre, High

View Road, South Normanton, Alfreton, Derbyshire, DE55 2DT.

The Group is principally engaged in the extrusion and supply of PVC window and building products to the new and replacement window

market and the sale of building materials across the UK.

Basis of preparation

The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been

consistently applied to all years presented, unless otherwise stated.

The Group has adequate resources to continue in operational existence for the foreseeable future and, as a result of this, the going

concern basis has been adopted in preparing the Financial Statements (see below).

The Group Financial Statements have been prepared in accordance with UK-adopted international accounting standards in conformity

with the requirements of the Companies Act 2006 (‘IFRS’) and the applicable legal requirements of the Companies Act 2006. On 31

December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK adopted international

accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to

UK-adopted international accounting standards in its Consolidated Financial Statements on 1 January 2021. There were no changes in

accounting policies arising from the transition, and therefore no impact on recognition, measurement or disclosure in the periodsreported.

The Financial Statements have been prepared under the historical cost convention, as modified by fair values in respect of acquisition

accounting. The functional currency is Sterling, and the Financial Statements are presented in millions, unless otherwise stated.

The preparation of the Group Financial Statements requires the use of certain critical accounting estimates. It also requires management

to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or

areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 2.

Basis of consolidation

The Consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries at 31 December 2021

and present the results as if they formed a single entity. Where the Company has power, either directly or indirectly, to govern the financial

and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. Subsidiaries

are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be consolidated until

the date when such control ceases. Intercompany transactions and balances, unrealised gains and losses resulting from intra-Group

transactions and dividends are eliminated in full.

The Group’s functional currency is Sterling. The vast majority of the Group’s revenues are denominated in Sterling, and as a result the

consolidation of non-UK revenues has minimal foreign exchange impact.

The Consolidated Financial Statements incorporate the results of business combinations using the purchase method. In the Consolidated

Statement of Financial Position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair

values at the acquisition date.

All dormant subsidiaries prepare and file financial statements in accordance with section 394A of the Companies Act 2006, which are

filed with the registrar at Companies House.

Going concern

The Group funds its activities through a £75 million Revolving Credit Facility, provided by Barclays and HSBC, which matures in December

2023. The facility includes two key financial covenants, which are tested at 30 June and 31 December on a pre-IFRS 16 basis. These are

that net debt should not exceed 3 times adjusted EBITDA (Leverage), and that adjusted EBITDA should be at least 4 times the interest

charge on the debt (Interest Cover). Adjusted EBITDA is defined as operating profit before depreciation, amortisation and non-underlying

items. See alternative performance measures on page 132.

For the next measurement period, being 31 December 2021, and going forward, the Group expects to comply with its covenants.

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In assessing going concern, the Directors have considered financial 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 ’Downside’ scenario, which reflects 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 2022–24,

theGroup operates with significant headroom on its RCF facility and remains compliant with its original covenants.

After reviewing the Group’s projected financial performance and financing arrangements, the Directors consider that the Group has

adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in preparing

these Financial Statements.

Changes in accounting policies and disclosures applicable to the Company and the Group

The Group has applied the following amendments for the first time for the financial reporting period commencing 1 January 2021,

withno material impact:

• Interest Rate Benchmark Reform – Phase 2 – amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16; and

• Covid-19-Related Rent Concessions – amendments to IFRS 16.

Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not

mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards, amendments or

interpretations are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable

future transactions.

Revenue

The Group manufactures and distributes a range of building plastic materials, along with associated ancillary products, via direct sales

to its fabricator customers and through its branch network. Revenue is recognised when control of the products has transferred. Control

is considered to have transferred once the customer has taken delivery of the products, or has collected them from the branch, has full

discretion over the future use of those products, and where there is no unfulfilled obligation that could affect the customer’s acceptance

of the products.

Revenue is recognised based upon the price specified on the customer’s invoice. A receivable is recognised on the transfer of the

products, as this is the point at which consideration is deemed to be unconditional. There are no variable elements to the consideration

received that require estimation. No significant element of financing is present as sales are made with a credit term of 30 days end of

month, which is consistent with market practice.

Where costs are incurred by the Group in securing a contract to supply products, those costs (subject to a de-minimis limit) are

recognised as customer contract assets (within trade and other receivables) in the Consolidated Statement of Financial Position. The

balance is amortised over the period in which revenue pertaining to those costs is recognised, which in the vast majority of cases is three

years. Reviews are performed to assess expected credit losses and adjust if necessary.

Due to the fact that the Group’s customers typically collect or take delivery of products for immediate use in their intended purpose,

the likelihood of items being returned is small. Therefore, it is highly probable that a significant reversal of revenue will not occur. The

Group’s obligations to repair or replace faulty manufactured products under the standard warranty terms is recognised as a provision,

seeNote23.

Non-underlying items

The Group presents some material items of income and expense as non-underlying items. This is done when, in the opinion of the

Directors, the nature and expected infrequency of the circumstances merit separate presentation in the Financial Statements. This

includes, but is not limited to, acquisition-related expenditure, costs incurred in the act of securing debt or equity funding, the financial

impact of events that impact upon our ability to trade for an extended period of time and non-trading impairment losses.

This treatment allows users of the Financial Statements to better understand the elements of financial performance in the year, it facilitates

comparison with prior periods, and it helps in understanding trends in financial performance. Further details are provided in Note 7.

There are no non-underlying items in the current year.

Eurocell plc Annual Report and Accounts 2021128

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

1 ACCOUNTING POLICIES (GROUP) CONTINUED

Government grants

In 2020, the Group took advantage of government support made available to businesses to help mitigate the impact of COVID-19, these

include cash contributions of £6.5 million under the Coronavirus Job Retention Scheme. In recognising this support in the Financial

Statements, the Group applied IAS 20 Government Grants. Grant income is recognised only when it is reasonably certain that the cash

will be received, and that all eligibility criteria have been met. Grant income is recognised within administration expenses, with staff costs

presented net of grant income. To the extent that there are ongoing eligibility or performance criteria, grant income is spread over the

relevant period of measurement.

In addition to the Job Retention Scheme, the business claimed and received grants under the Retail, Hospitality and Leisure Grant fund of

£0.7 million in 2020. These were shown as a reduction in administrative expenses within the year. No further claims were made in 2021.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the

fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in

exchange for control of the acquiree. Direct costs of acquisition are recognised immediately as an expense.

Goodwill is initially measured at cost, being the excess of the cost of a business combination over the fair value of the identifiable assets,

liabilities and contingent liabilities acquired at the acquisition date. Goodwill is capitalised as an intangible asset with any impairment

in carrying value being charged to the Consolidated Statement of Comprehensive Income. Where the fair value of identifiable assets,

liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the Consolidated Statement

of Comprehensive Income on the acquisition date.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful

economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/

legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. Useful economic lives and

the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Intangible asset Useful economic life Valuation method

Software 5 to 10 years Cost to acquire

Technology-based 10 to 17 years Cost to acquire

Customer-related 5 to 10 years Cost to acquire

Marketing-related 10 to 15 years Cost to acquire

The amortisation charge for the year is included within administration costs within the Consolidated Statement of Comprehensive Income.

Impairment of tangible assets, intangible assets, right-of-use assets and investments

Impairment tests on non-current assets are undertaken annually at the financial year end or at any other time when an indication of

impairment arises. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less

costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest

group of assets to which it belongs for which there are separately identifiable cash flows – its cash-generating unit (‘CGU’). Goodwill is

allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise

to thegoodwill.

Individual right-of-use lease property assets relating to the Group’s branch network are also tested for impairment when an indication

of impairment arises, such as a branch becoming loss-making. In considering individual branch performance, central overheads are

allocated to each branch in proportion to sales.

Impairment charges are included in the Consolidated Statement of Comprehensive Income, except to the extent they reverse gains

previously recognised in Other Comprehensive Income. An impairment loss recognised for goodwill is not reversed.

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Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable

costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is

recognised within provisions.

Freehold land is not depreciated. Assets in the course of construction are not depreciated until they are in a condition that would allow

them to be deployed in their intended use without further changes to their condition. Depreciation is provided on all other items of

property, plant and equipment so as to write off their cost less residual value over their expected useful economic lives. It is provided at

the following rates:

Asset class Depreciation policy

Freehold property 2.5% per annum straight-line

Leasehold improvements Equal instalments over the period of the lease

Plant and machinery

Mixing plant Between 20% and 25% per annum on cost

Extruders 13 years based on production usage

Stillages and tooling 5 to 10 years based on production usage

Other Between 10% and 25% per annum on cost

Motor vehicles Between 20% and 25% per annum on cost

Office equipment and fixtures Between 20% and 25% per annum on cost

Right-of-use lease assets

Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the

commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and

impairmentlosses. Discount rates are based on our external financing rates and then a lease specific adjustment is applied.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers

ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the

related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date of the

lease. Leases are assessed for indicators for impairment based on value in use and impaired where this is below book value. Reversals of

impairments can occur where assets are subsequently found to have further value in use.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of

purchase and conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the

cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used. For work in progress

and finished goods, cost is taken as production cost, which includes a proportion of attributable overheads.

Net realisable value is based on estimated normal selling price, less further costs expected to be incurred up to completion and disposal.

Provision is made for obsolete, slow-moving or defective items where appropriate.

Financial assets

The Group records all of its financial assets at amortised cost and has not classified any of its financial assets at fair value through

profit and loss or other comprehensive income. The Group’s financial assets comprise trade and other receivables and cash and cash

equivalents in the balance sheet. These are non-derivative financial assets with fixed or determinable payments that are not quoted in

an active market. They arise principally through the provision of goods and services to customers, but also incorporate other types of

contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition

or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Customer

rebates are offset against receivable amounts in line with the terms of the customer agreements.

The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for

tradereceivables.

Expected loss rates are derived based upon the payment profile of sales over the three-year period up to the reporting date, and

the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on

macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate of unemployment, new housing

starts, interest rates and household disposable income. Insured balances are excluded to the extent that no loss would arise in the event

of default by the customer.

Eurocell plc Annual Report and Accounts 2021130

1 ACCOUNTING POLICIES (GROUP) CONTINUED

Financial assets continued

Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and the

amount credited or charged on a net basis to operating expenses within the Consolidated Statement of Comprehensive Income.

While cash and cash equivalents and contract assets are also subject to the impairment requirements of IFRS 9, the identified impairment

loss was immaterial.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with

original maturities of three months or less from inception, and – for the purpose of the Statement of Cash Flows – bank overdrafts.

Bankoverdrafts are shown within current liabilities in the balance sheet.

Financial liabilities

The Group classifies its financial liabilities as financial liabilities measured at amortised cost which include the following items:

• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the

instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,

which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the

balance sheet.

• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at

amortised cost using the effective interest method.

Taxation

Tax on the profit/(loss) for both the current and prior periods comprises both current and deferred tax and is recognised in the

Consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised directly in equity.

Current tax is the expected tax payable on taxable income for the year, using tax rates that have been enacted at the balance sheet date,

and any adjustment to tax payable in respect of prior years.

The Group recognises a current tax asset in respect of relief claimed under the Patent Box when the inflow of economic benefits arising

from that asset is virtually certain, deemed to be the submission of a claim to HM Revenue and Customs.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax

base, except for differences arising on:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction

affects neither accounting nor taxable profit; and

• investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference

and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profits will arise against which

the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date

and are expected to apply when the deferred tax liabilities/assets are settled/recovered.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and

the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable Group company; 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 significant amounts of deferred tax assets or liabilities are expected to be

settled or recovered.

Lease liabilities

The Group leases certain properties, vehicles and material handling equipment. The Group has no leases previously classified as finance

leases. Liabilities for leases previously classified as operating leases have been measured in accordance with IFRS 16 using the modified

retrospective approach.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

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In applying IFRS 16, the Group has taken advantage of a number of practical expedients permitted by the standard:

• the application of a single discount rate to a portfolio of leases with reasonably similar characteristics;

• reliance on previous assessments as to whether leases are onerous;

• accounting for leases with a remaining term of less than 12 months as short-term leases; and

• the exclusion of initial direct costs in measuring the right-of-use asset at the date of initial application.

Leases with a remaining term of less than 12 months have been accounted for as short-term leases. Leased assets with a value of less

than £5,000 are omitted on the basis of materiality.

The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-use asset

and a corresponding lease liability with respect to all lease agreements in which it is the lessee except for short-term leases (defined as

leases with a lease term of 12 months or less) and leases of low-value assets (defined as leases with a value of less than £5,000). For

these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless

another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted

by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The

incremental borrowing rate is calculated based upon a combination of the risk-free rate, financing and asset-specific credit spreads,

adjusted for the term of each lease.

Lease payments included in the measurement of the lease liability comprise fixed lease payments, less any lease incentives. The lease

liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest

method) and by reducing the carrying amount to reflect the lease payments made.

The principal and finance elements of lease payments are presented separately on the face of the Consolidated Cash Flow Statement

within financing activities.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event,

and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are

determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of

money and, when appropriate, the risks specific to the liability.

The Group has recognised provisions for liabilities of uncertain timing or amount in respect of leasehold dilapidations and warranty claims.

The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a

pre-tax rate as described above.

Dilapidations provisions are recognised in two ways. Firstly, known specific obligations relating to repairs required or structural changes

made to a building are recognised as soon as the timing and amount of the liability can be reliably estimated. Secondly, wear and tear

provisions relating to the Group’s branches are accrued at a standard rate over the life of each lease, reflecting the cost of returning each

branch to its prior condition at the end of the lease.

Share capital

The Group’s ordinary shares are classified as equity instruments.

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when paid.

Inthe case of final dividends, this is when approved by the Shareholders at the Annual General Meeting.

Retirement benefits: defined contribution scheme

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in

an independently administered fund. The amount charged to the Consolidated Statement of Comprehensive Income represents the

contributions payable to the scheme in respect of the accounting period. The Group has no obligation to pay future pension benefits.

Eurocell plc Annual Report and Accounts 2021132

1 ACCOUNTING POLICIES (GROUP) CONTINUED

Foreign currency

The Group’s Financial Statements are presented in Sterling. For each entity, the Group determines the functional currency, and items

included in the Financial Statements of each entity are measured using that functional currency.

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they

operate (their ‘functional currency’) are recorded at the prevailing rate when the transactions occur. Foreign currency monetary assets and

liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary

assets and liabilities are recognised immediately in the Consolidated Statement of Comprehensive Income.

Share-based payment transactions

The Group has applied the requirements of IFRS 2 Share-based Payment.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined at the grant date using

the Black-Scholes valuation model and equity-settled share-based payments are expensed on a straight-line basis over the vesting

period, based upon the Company’s estimate of the shares that will eventually vest and adjusted for the effect of non-market-based

vesting conditions.

Fair value is measured based on the value of options over shares on the date of grant and the likelihood of all or part of the option vesting.

Alternative performance measures

The Group uses alternative performance measures alongside statutory measures to facilitate a better understanding of financial

performance and comparison with prior periods, and in order to provide audited financial information against which the Group’s bank

covenants, which are all measured on a pre-IFRS 16 basis, can be assessed.

EBITDA is defined as operating profit before depreciation and amortisation charges. Pre-IFRS 16 EBITDA is stated inclusive of operating

lease rentals under IAS 17 Leases.

2021

£m

2020

£m

Operating profit 29.0 0.7

Depreciation and amortisation 22.7 20.8

EBITDA 51.7 21.5

Non-underlying items — 8.3

Adjusted EBITDA 51.7 29.8

Operating lease rentals under IAS 17 (13.9) (11.8)

Other lease (credits)/charges (0.5) —

Pre-IFRS 16 adjusted EBITDA 37.3 18.0

Pre-IFRS 16 total net debt is defined as total borrowings and lease liabilities less cash and cash equivalents, excluding the impact of

leases recognised under IFRS 16 Leases.

2021

£m

2020

£m

Total net debt 69.7 58.3

Lease liabilities (58.7) (48.4)

Pre-IFRS 16 net debt 11.0 9.9

Covenants are assessed on an adjusted EBITDA basis. Adjusted EBITDA, profits and earnings per share in the prior year exclude non-

underlying items. There are no non-underlying items in the current year.

Adjusted profit measures allow users of the Financial Statements to better understand financial performance in the year by removing

certain material items of income and expense that are unusual due to their nature or infrequency, thus facilitating better comparison with

prior periods.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

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133

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based

on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the

circumstances. In the future, actual experience may differ from these estimates and judgements.

Critical estimates and judgements

The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities within the next financial year are discussed below.

a) Carrying value of inventories

The Group reviews the market value of, and demand for, its inventories on a periodic basis to ensure inventory is recorded in the financial

statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of inventories.

The key estimate is the extent to which items of inventory remain saleable as they age. Management use their knowledge of market

conditions to assess future demand for the Group’s products and achievable selling prices.

If the realised selling prices of the stock lines captured by the Slow and Obsolete stock provision were, on average, 500 basis points

lower than current estimates, the provision would increase by approximately £1,000,000. Further disclosures relating to inventories are

provided in Note 18.

b) Recoverability of trade receivables

The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for trade

receivables. Expected loss rates are derived based upon the payment profile of sales over the three-year period up to the reporting date,

and the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on

macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate of unemployment, new housing

starts, interest rates and household disposable income.

Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and

the amount credited or charged on a net basis to operating expenses within the Consolidated Statement of Comprehensive Income. The

key judgement is the extent to which macroeconomic factors impact upon the recoverability of trade receivables. The key estimate is the

adjusted loss rate applied to each age category.

During the prior year there was an increase in uncertainty over these estimates, in particular through the impact of COVID-19 on customer

payment behaviour, with many customers struggling to make payments that fell due during the initial lockdown period. The resulting

temporary deterioration in the ageing of balances, along with a weaker outlook for the UK economy, resulted in a higher provision

being implied by the IFRS 9 expected credit loss model. IFRS 9 impairments and bad debt charges of £3.7 million were recognised in

2020. This is consistent with the credit losses incurred in the year, compared to the historically low level of credit losses prior to the end

of March 2020. In the current year a credit of £0.7 million has been recognised in the Consolidated Income Statement, reflecting an

improvement in the ageing of balances and a return to normal payment patterns for the vast majority of the Group’s customers.

If future realised loss rates for current receivables were, on average, 500 basis points higher than current estimates, the provision for

impairment would increase approximately £900,000. Further disclosures relating to trade receivables are provided in Note 19.

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT

The Group is exposed through its operations to the following financial risks:

• credit risk;

• market risk;

• foreign exchange risk; and

• liquidity risk.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes

the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative

information in respect of these risks is presented throughout these Financial Statements. There have been no substantive changes in the

Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks, or the methods used to

measure them from previous periods unless otherwise stated in this note.

Eurocell plc Annual Report and Accounts 2021134

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

• trade and other receivables;

• cash and cash equivalents;

• trade and other payables;

• bank overdrafts;

• floating-rate bank loans; and

• lease liabilities.

The Group finances its activities using cash generated from operations and its Revolving Credit Facility. It does not use invoice

discounting or any other financing facilities. The fair value for cash and cash equivalents is approximate to its book value.

A summary of the financial instruments held by category is provided below:

Financial assets

2021

£m

2020

£m

Cash and cash equivalents 6.6 7.1

Trade and other receivables

37.3 33.4

Total financial assets 43.9 40.5

Financial liabilities

2021

£m

2020

£m

Trade and other payables 48.7 42.8

Lease liabilities 58.7 48.4

Bank overdrafts 5.9 4.5

Borrowings

12.0 13.0

Total financial liabilities 125.3 108.7

The analysis above does not correspond to the values reported in the Consolidated Statement of Financial Position as excluded from the

analysis above are assets and liabilities from which no future cash flows are expected to arise, including unamortised arrangement costs

relating to the Group’s borrowings.

Impairment of financial assets

Impairments of trade receivables are outlined in Note 19. No further impairments to financial assets are considered necessary. The Group

applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for trade receivables.

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining

ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective

implementation of the objectives and policies to the Group’s finance function.

The Board receives monthly reports from the Chief Financial Officer through which it reviews the effectiveness of the processes put in

place and the appropriateness of the objectives and policies it sets. These are then discussed at regular Board meetings.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s

competitiveness and flexibility. Further details regarding these policies are set out below:

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations. The Group is mainly exposed to credit risk through its trade receivables arising from its normal commercial activities. It is

Group policy, implemented locally, to assess the credit risk of new customers before entering into contracts.

Existing credit risks associated with trade receivables are managed in line with Group policies as discussed in the financial assets section

of accounting policies.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

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135

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. This risk is mitigated by ensuring

that deposits are only made with banks and financial institutions with a good rating issued by an industry-recognised independent third

party (e.g. Standard and Poor’s).

Further disclosures regarding financial assets are provided in Note 19.

Market risk

The Group is exposed to market risk from bank borrowings which incur variable interest rate charges linked to base rate plus a margin.

The Group’s policy aims to manage the interest cost of the Group within the constraints of its financial covenants and forecasts.

If variable interest rates were 50 basis points higher/lower, the Group’s finance expense would increase/decrease by £100,000.

During 2021 and 2020 the Group’s borrowings at variable rate were denominated in Sterling. Further disclosures relating to bank

borrowings are provided in Note 20.

Foreign exchange risk

Foreign exchange risk is the risk that the fair value of a financial instrument or future cash flow will fluctuate because of changes in foreign

exchange rates. The Group’s exposure to foreign exchange risk arises when individual Group entities enter into transactions denominated

in a currency other than their functional currency. The Group manages its exposure to fluctuations in currency rates by wherever possible

negotiating both purchases and sales to be denominated in Sterling. The profit or loss arising from likely changes in foreign exchange is

not significant.

Liquidity risk

Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt

instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To

achieve this aim, cash flow forecasts are prepared and updated on a regular basis to ensure that the Group has adequate headroom

initsfacilities. The Board receives monthly updates on the Group’s liquidity position and any issues are reported by exception.

At the end of the financial year, the most recent cash flow projections indicated that the Group expected to have sufficient liquid

resources to meet its obligations under all reasonably foreseeable circumstances. The following table sets out the contractual maturities

(representing undiscounted contractual cash flows) of financial liabilities:

At 31 December 2021

Total

£m

Up to 3

months

£m

Between

3 and 12

months

£m

Between

1 and 2

years

£m

Between

2 and 5

years

£m

Over

5 years

£m

Trade and other payables (48.7) (48.4) — — (0.3) —

Lease liabilities (64.1) (3.2) (9.9) (12.8) (19.1) (19.1)

Bank overdrafts (5.9) (5.9) — — — —

Borrowings

(12.0) — — (12.0) — —

Total (130.7) (57.5) (9.9) (24.8) (19.4) (19.1)

At 31 December 2020

Total

£m

Up to 3

months

£m

Between

3 and 12

months

£m

Between

1 and 2

years

£m

Between

2 and 5

years

£m

Over

5 years

£m

Trade and other payables (42.8) (42.6) — — (0.2) —

Lease liabilities (53.4) (1.6) (8.4) (9.4) (17.3) (16.7)

Bank overdrafts (4.5) (4.5) — — — —

Borrowings

(13.0) — — — (13.0) —

Total (113.7) (48.7) (8.4) (9.4) (30.5) (16.7)

Excluded from the analysis above are assets and liabilities from which no future cash flows are expected to arise.

Eurocell plc Annual Report and Accounts 2021136

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT CONTINUED

Capital management

The Group’s objective when managing capital, which is deemed to be total equity plus total debt and which totalled £176.6 million (2020:

£148.1 million) at the balance sheet date, is to safeguard the Group’s ability to continue as a going concern, through the optimisation of

the debt and equity balance, and to maintain good headroom on its debt facilities and financial covenants. The Group manages its capital

structure and makes appropriate decisions in the light of current economic conditions and its strategic objectives.

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and sustain the future

development of the business.

The funding requirements of the Group are met by the utilisation of external borrowings together with available cash.

A key objective of the Group’s capital management is to maintain comfortable headroom over the covenants set out in its existing facility

agreements.

The financial covenants which are in place, all measured on a pre-IFRS 16 basis, are as follows:

• Leverage: the ratio of total net debt to consolidated EBITDA of any relevant period of not more than 3:1.

• Interest cover: the ratio of EBITDA to net interest payable in respect of any relevant period of not less than 4:1.

Covenants are measured at half year and year end on a rolling 12-month basis. As at 31 December 2021 Leverage and Interest Cover

were 0.3:1 and 47:1 respectively (2020: 0.6:1 and 20:1). The Group operated well within the terms of its covenants throughout the

current and prior periods. The Group anticipates that it will comfortably meet all future covenant obligations.

The following table sets out the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date:

As at 31 December 2021

GBP

£m

EUR

£m

USD

£m

Total

£m

Trade and other receivables 36.6 0.5 0.2 37.3

Cash and cash equivalents 5.2 1.4 — 6.6

Bank overdrafts (5.9) — — (5.9)

Lease liabilities (58.7) — — (58.7)

Other interest-bearing borrowings (12.0) — — (12.0)

Trade and other payables

(46.8) (0.3) — (47.1)

(81.6) 1.6 0.2 (79.8)

As at 31 December 2020

GBP

£m

EUR

£m

USD

£m

Total

£m

Trade and other receivables 33.1 0.3 — 33.4

Cash and cash equivalents 6.5 0.5 0.1 7.1

Bank overdrafts (4.5) — — (4.5)

Lease liabilities (48.4) — — (48.4)

Other interest-bearing borrowings (13.0) — — (13.0)

Trade and other payables

(42.1) (0.4) (0.3) (42.8)

(68.4) 0.4 (0.2) (68.2)

4 REVENUE

Revenue arises from:

2021

£m

2020

£m

Sale of goods 343.1 257.9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

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Corporate

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137

External revenue by destination:

2021

£m

2020

£m

United Kingdom 340.1 255.5

European Union 2.3 1.9

Rest of World

0.7 0.5

343.1 257.9

There are no customers with sales in excess of 10% of total Group revenues.

Revenue is disclosed net of contract asset amortisation and related expenses in the year of £1.8 million (2020: £2.6 million).

Further details are provided in Note 19.

5 AUDITORS’ REMUNERATION

Total amounts payable to the Group’s auditors were as follows:

2021

£000

2020

£000

Audit of these Financial Statements 85 60

Amounts receivable by auditors and their associates in respect of:

Audit of Financial Statements of subsidiaries pursuant to legislation 169 151

Audit-related assurance services

51 60

305 271

6 EXPENSES BY NATURE

2021

£m

2020

£m

Depreciation of property, plant and equipment (Note 14) 7.7 6.8

Depreciation of right-of-use assets (Note 15) 13.1 12.4

Amortisation of intangible assets (Note 16) 1.9 1.6

Impairment of goodwill — 5.8

Impairment of right-of-use assets (Note 15) (0.4) 0.9

Other non-underlying operating expenses — 2.9

Cost of inventories 156.0 120.0

Other variable costs 13.8 10.5

Employee benefits expense (Note 8) 81.9 60.7

Other expenses

40.1 35.6

Total cost of sales, distribution costs and administration expenses 314.1 257.2

7 NON-UNDERLYING ITEMS

Amounts included in the Consolidated Statement of Comprehensive Income are as follows:

2021

£m

2020

£m

Impairment of goodwill — 5.8

Impairment of right-of-use assets — 0.9

Warehouse dual-running costs — 2.3

Restructuring costs — 0.6

Non-underlying operating expenses — 9.6

Finance expense — 0.4

Total non-underlying expenses — 10.0

Tax on non-underlying expenses

— (0.8)

Impact on profit after tax — 9.2

There were no non-underlying items in the current year.

Eurocell plc Annual Report and Accounts 2021138

7 NON-UNDERLYING ITEMS CONTINUED

Goodwill impairment charge

The goodwill in respect of Eurocell Recycle North (‘ERN’, formerly Ecoplas) was impaired in full in 2020, leading to a non-underlying

charge of £5.8m. This charge arose as a result of lower projected short-term cash flows than previously expected, reflecting the impact of

COVID-19 on selling prices, customer demand and production volumes (and therefore profitability) of the ERN Cash Generating Unit.

Right-of-use assets impairment charge

Right-of-use assets impairment charges were made in respect of a small number of loss-making branches and a number of leased

assets no longer required following transition to the new warehouse. In total, right-of-use asset impairment charges amounted to

£0.9million in 2020. The majority of the lease contracts in relation to these assets have subsequently been terminated.

Warehouse dual-running costs

In January 2020 the Group entered into a lease arrangement for a new warehouse and Head Office facility close to its primary

manufacturing operations. The warehouse was fitted-out during the year and was brought into active service in early 2021. Certain

costs incurred during the fit-out process in 2020, such as IFRS 16 lease charges (including the related IFRS 16 finance expense), rates

and other property-related costs were classified as non-underlying, as the warehouse was not operational in 2020, and therefore not

contributing to the underlying performance of the business in that period.

Restructuring costs

Restructuring costs in 2020 relate to redundancies, with 35 roles impacted at a one-off cost of £0.6 million in the second half of 2020.

These costs were classified as non-underlying as they related to roles that no longer exist within the organisation and therefore would not

reoccur in future reporting periods.

8 EMPLOYEE BENEFITS EXPENSE

2021

£m

2020

£m

Staff costs (including Directors) comprise:

Wages and salaries 70.8 53.2

Share-based payments 1.2 0.3

Social security costs 7.6 5.3

Other pension costs

2.3 1.9

81.9 60.7

Staff costs in 2020 are stated net of Coronavirus Job Retention Scheme income amounting to £6.5 million.

2021

No.

2020

No.

The average monthly number of employees, including Directors, during the year was as follows:

Production 750 669

Office and administration 453 405

Distribution

940 871

2,143 1,945

Key management personnel compensation and Directors’ remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of

the Group, which is considered to be the Directors of the Company and the Directors of the Group’s subsidiary companies.

2021

£m

2020

£m

Emoluments 1.7 1.1

Share-based payments 0.5 0.1

Pension and other post-employment benefit costs

0.1 0.1

2.3 1.3

Directors’ remuneration is set out in the Remuneration Report on pages 91 to 108. The highest paid Director received remuneration of

£879,000 (2020: £466,000).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

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Corporate

Governance

Financial

Statements

139

During the year, retirement benefits were accruing to two Directors in respect of defined contribution pension schemes (2020: two). The

value of contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £60,000 (2020:

£57,000).

99,268 share options were exercised by Directors of the Group during the current year (2020: 63,322), of which 60,571 were exercised

by the highest paid Director (2020: 51,049).

The Group’s policy for consulting with, sharing information with, and encouraging the involvement of employees is discussed on pages

72 to 82.

9 SEGMENTAL INFORMATION

The Group organises itself into a number of operating segments that offer different products and services. They are managed separately

because each business requires different technology and marketing strategies. Internal reporting provided to the chief operating decision-

maker, which has been identified as the executive management team including the Chief Executive Officer and the Chief Financial Officer,

reflects this structure.

The Group has aggregated its operating segments into three reported segments, as these business units have similar products,

production processes, types of customer, methods of distribution, regulatory environments, and economic characteristics:

• Profiles – extrusion and sale of PVC window and building products to the new and replacement window market across the UK.

Thissegment includes Vista Panels, S&S Plastics and Eurocell Recycle North.

• Building Plastics – sale of building plastic materials across the UK. This segment includes Security Hardware, Kent Building Plastics

and Trimseal.

• Corporate – represents costs relating to the ultimate Parent Company and includes amortisation in respect of acquired

intangibleassets.

Inter-segmental sales relate to manufactured products distributed by the Building Plastics division.

Profiles

2021

£m

Building

Plastics

2021

£m

Corporate

2021

£m

Total

2021

£m

Revenue

Total revenue 204.6 202.9 — 407.5

Inter-segmental revenue

(63.9) (0.5) — (64.4)

Total revenue from external customers 140.7 202.4 — 343.1

EBITDA

31.8 20.8 (0.9) 51.7

Amortisation of intangible assets — — (1.9) (1.9)

Depreciation of property, plant and equipment (6.0) (1.0) (0.7) (7.7)

Depreciation of right-of-use assets

(5.1) (7.9) (0.1) (13.1)

Operating profit/(loss) 20.7 11.9 (3.6) 29.0

Finance expense

(2.0)

Profit before tax 27.0

1 Included within EBITDA are IFRS 9 impairment credits of £1.0 million (Profiles) and charges of £0.3 million (Building Plastics).

Eurocell plc Annual Report and Accounts 2021140

9 SEGMENTAL INFORMATION CONTINUED

Profiles

2020

£m

Building

Plastics

2020

£m

Corporate

2020

£m

Total

2020

£m

Revenue

Total revenue 156.1 159.5 — 315.6

Inter-segmental revenue

(56.4) (1.3) — (57.7)

Total revenue from external customers 99.7 158.2 — 257.9

Adjusted EBITDA

16.5 12.7 0.6 29.8

Amortisation of intangible assets — — (1.6) (1.6)

Depreciation of property, plant and equipment (5.1) (1.1) (0.6) (6.8)

Depreciation of right-of-use assets

(3.5) (7.6) — (11.1)

Adjusted operating profit 7.9 4.0 (1.6) 10.3

Impairment of goodwill (5.8) — — (5.8)

Other non-underlying operating expenses (3.1) (0.6) (0.1) (3.8)

Operating (loss)/profit (1.0) 3.4 (1.7) 0.7

Finance expense

(2.2)

Loss before tax (1.5)

2 Included within adjusted EBITDA are IFRS 9 impairment and bad debt charges of £3.7 million (Profiles: £1.7 million; Building Plastics: £2.0 million).

Profiles

2021

£m

Building

Plastics

2021

£m

Corporate

2021

£m

Total

2021

£m

Additions to plant, property, equipment and intangible assets 13.2 2.5 1.0 16.7

Segment assets 132.6 87.9 19.1 239.6

Segment liabilities (61.2) (45.0) (8.9) (115.1)

Borrowings (11.7)

Deferred tax liability (6.6)

Total liabilities (133.4)

Total net assets 106.2

Profiles

2020

£m

Building

Plastics

2020

£m

Corporate

2020

£m

Total

2020

£m

Additions to plant, property, equipment and intangible assets 12.3 0.9 0.5 13.7

Segment assets

116.6 64.9 19.9 201.4

Segment liabilities (57.6) (32.9) (7.0) (97.5)

Borrowings (12.5)

Corporation tax payable (0.7)

Deferred tax liability (3.5)

Total liabilities (114.2)

Total net assets 87.2

3 Adjusted to reflect a more consistent classification between the segments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

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Corporate

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141

Geographical information

Revenue

2021

£m

Non-current

assets

2021

£m

Revenue

2020

£m

Non-current

assets

2020

£m

United Kingdom 341.6 132.6 256.3 117.7

Republic of Ireland

1.5 — 1.6 —

Total 343.1 132.6 257.9 117.7

4 Non-current assets in the Republic of Ireland are less than £50,000.

10 FINANCE EXPENSE

2021

£m

2020

£m

Finance expense

Bank borrowings 0.8 0.9

Interest on lease liabilities 1.2 0.9

Underlying finance expense 2.0 1.8

Non-underlying finance expense (Note 7)

— 0.4

Total finance expense 2.0 2.2

11 TAX ATION

2021

£m

2020

£m

Current tax expense/(credit)

Current tax on profits/(losses) for the year 2.7 (0.1)

Adjustment in respect of prior years

0.1 —

Total current tax 2.8 (0.1)

Deferred tax expense

Origination and reversal of temporary differences 2.2 0.5

Adjustment in respect of change in rates 0.9 0.1

Adjustment in respect of prior years — 0.2

Total deferred tax

3.1 0.8

Total tax expense 5.9 0.7

The reasons for the difference between the actual current tax charge/(credit) for the year and the standard rate of corporation tax in the

United Kingdom applied to profits/(losses) for the year are as follows:

2021

£m

2020

£m

Profit/(loss) before tax 27.0 (1.5)

Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.0%

(2020: 19.0%) 5.1 (0.3)

Taxation effect of:

Expenses not deductible for tax purposes 0.5 0.4

Capital allowance super-deduction utilised (0.7) —

Impairment of goodwill not deductible for tax purposes — 1.1

Patent Box claims — (0.7)

Deferred tax impact of share-based payments 0.2 —

Tax impact on share-based payments recognised in equity — (0.1)

Adjustment in respect of prior years 0.1 —

Tax effect of accelerated capital allowances

(2.4) (0.5)

Total tax expense/(credit) 2.8 (0.1)

Eurocell plc Annual Report and Accounts 2021142

11 TAX ATION CONTINUED

The reasons for the difference between the total tax charge for the year and the standard rate of corporation tax in the United Kingdom

applied to profits for the year are as follows:

2021

£m

2020

£m

Profit/(loss) before tax 27.0 (1.5)

Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.0%

(2020: 19.0%) 5.1 (0.3)

Taxation effect of:

Expenses not deductible for tax purposes 0.5 0.4

Capital allowance super-deduction utilised (0.7) —

Impairment of goodwill not deductible for tax purposes — 1.1

Patent Box claims — (0.7)

Adjustments in respect of prior years 0.1 0.2

Tax impact on share-based payments recognised in equity — (0.1)

Adjustment in respect of change in rates

0.9 0.1

Total tax expense 5.9 0.7

Changes in tax rates and factors affecting the future tax charge

An increase in the mainstream rate of UK corporation tax from 19% to 25% from April 2023 was enacted during 2021. Consequently,

deferred taxes have been remeasured using a higher rate based on expected reversal dates and reflected in the Financial Statements.

There are no material uncertain tax provisions.

Tax included in Other Comprehensive Income

The tax credit arising on share-based payments within Other Comprehensive Income is £nil (2020: £110,000).

Based on the current investment plans of the Group, and assuming the rates of capital allowances on capital expenditure continue into

the future, there is little prospect of any significant part of the deferred tax liability becoming payable over the next three years.

Tax residency

Eurocell plc and its subsidiaries are all registered in the United Kingdom and are resident in the UK for tax purposes, except as described

below.

The Group has two branches in the Republic of Ireland, with combined annual revenues of £1.5 million (2020: £1.6 million), total assets

of less than £50,000 (2020: below £50,000) and 8 full-time employees (2020: 8 full-time employees). For tax purposes these two trading

locations form a single branch within Eurocell Building Plastics Limited, and therefore any profits generated are subject to tax in the

Republic of Ireland. The tax charge in relation to the Group’s Republic of Ireland operations in 2021 is €nil (2020: €1,000) and no tax

payments were made during the year (2020: €1,000). This is due to utilisation of losses brought forward. No deferred tax assets are

recognised on unutilised losses due to the uncertainty of future profits.

12 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average

number of ordinary shares outstanding during the year. Adjusted earnings per share excludes the impact of non-underlying items.

Diluted earnings per share is calculated by adjusting the earnings and number of shares for the effects of dilutive options. In the event that

a loss is recorded for the period, share options are not considered to have a dilutive effect.

2021

£m

2020

£m

Profit/(loss) attributable to ordinary Shareholders 21.1 (2.2)

Profit attributable to ordinary Shareholders excluding non-underlying items 21.1 7.0

Number Number

Weighted average number of shares – basic 111,709,049 108,218,827

Weighted average number of shares – diluted 112,219,319 108,218,827

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

143

2021

Pence

2020

Pence

Basic earnings/(losses) per share 18.9 (2.0)

Adjusted basic earnings per share 18.9 6.5

Diluted earnings/(losses) per share 18.8 (2.0)

Adjusted diluted earnings per share 18.8 6.5

13 DIVIDENDS

2021

£m

2020

£m

Dividends paid during the year

Interim dividend for 2021 of 3.2p per share 3.6 —

Dividends proposed

Final dividend for 2021 of 6.4p per share 7.2 —

Due to the impact of COVID-19, no dividends were paid in 2020.

14 PROPERTY, PLANT AND EQUIPMENT

Freehold

property

£m

Leasehold

improvements

£m

Plant and

machinery

£m

Motor

vehicles

£m

Office

equipment

and fixtures

£m

Assets under

construction

£m

Total

£m

Cost

Balance at 1 January 2020 9.0 0.2 60.8 0.3 0.1 2.5 72.9

Additions — — 3.1 — — 10.4 13.5

Disposals — — (1.5) — — — (1.5)

Transfers — — 3.2 — — (3.3) (0.1)

Balance at 31 December

2020 9.0 0.2 65.6 0.3 0.1 9.6 84.8

Additions — — 3.5 — — 12.8 16.3

Disposals — (0.1) (24.1) (0.1) (0.1) — (24.4)

Transfers

— — 9.8 0.2 — (10.2) (0.2)

Balance at 31 December

2021 9.0 0.1 54.8 0.4 — 12.2 76.5

Accumulated

depreciation

Balance at 1 January 2020 1.3 0.1 27.1 0.1 0.1 — 28.7

Charge for the year 0.2 — 6.6 — — — 6.8

Disposals — — (1.5) — — — (1.5)

Balance at 31 December

2020 1.5 0.1 32.2 0.1 0.1 — 34.0

Charge for the year 0.2 — 7.4 0.1 — — 7.7

Disposals

— (0.1) (24.1) (0.1) (0.1) — (24.4)

Balance at 31 December

2021 1.7 — 15.5 0.1 — — 17.3

Net book value

At 31 December 2021 7.3 0.1 39.3 0.3 — 12.2 59.2

At 31 December 2020 7.5 0.1 33.4 0.2 — 9.6 50.8

Included within freehold property is non-depreciable land of £2.3 million (31 December 2020: £2.3 million).

An exercise was undertaken during the year to dispose of fully written down assets no longer in use. As a result, plant and machinery with

a net book value of £nil, and a gross cost and accumulated depreciation of £24.4 million, were removed from the Group balance sheet.

Eurocell plc Annual Report and Accounts 2021144

15 RIGHT-OF-USE ASSETS

Leasehold

improvements

£m

Motor

vehicles

£m

Office

equipment

and fixtures

£m

Total

£m

Cost

Balance at 1 January 2020 28.4 16.3 0.1 44.8

Additions 24.0 1.0 — 25.0

Disposals (0.6) (0.9) — (1.5)

Balance at 31 December 2020 51.8 16.4 0.1 68.3

Additions 13.1 7.5 — 20.6

Disposals

(2.3) (1.9) — (4.2)

Balance at 31 December 2021 62.6 22.0 0.1 84.7

Accumulated amortisation

Balance at 1 January 2020 6.0 3.5 — 9.5

Charge for the year 7.9 4.5 — 12.4

Impairment charges 0.3 0.6 — 0.9

Disposals (0.6) (0.9) — (1.5)

Balance at 31 December 2020 13.6 7.7 — 21.3

Charge for the year 8.3 4.8 — 13.1

Impairment charges — (0.4) — (0.4)

Disposals

(2.3) (1.8) — (4.1)

Balance at 31 December 2021 19.6 10.3 — 29.9

Net book value

At 31 December 2021 43.0 11.7 0.1 54.8

At 31 December 2020 38.2 8.7 0.1 47.0

16 INTANGIBLE ASSETS

Software

£m

Technology

-based

£m

Customer

-related

£m

Marketing

-related

£m

Goodwill

£m

Total

£m

Cost

Balance at 1 January 2020 2.6 1.6 7.5 6.3 16.8 34.8

Additions 0.2 — — — — 0.2

Transfers 0.1 — — — — 0.1

Balance at 31 December 2020 2.9 1.6 7.5 6.3 16.8 35.1

Additions 0.4 — — — — 0.4

Transfers

0.2 — — — — 0.2

Balance at 31 December 2021 3.5 1.6 7.5 6.3 16.8 35.7

Accumulated amortisation

Balance at 1 January 2020 1.0 0.6 4.0 2.2 — 7.8

Charge for the year 0.3 0.1 0.9 0.3 — 1.6

Impairment charge — — — — 5.8 5.8

Balance at 31 December 2020 1.3 0.7 4.9 2.5 5.8 15.2

Charge for the year 0.4 0.1 0.9 0.5 — 1.9

Balance at 31 December 2021 1.7 0.8 5.8 3.0 5.8 17.1

Net book value

At 31 December 2021 1.8 0.8 1.7 3.3 11.0 18.6

At 31 December 2020 1.6 0.9 2.6 3.8 11.0 19.9

Included within customer-related and marketing-related intangible assets are the acquired intangibles in relation to the acquisition of

Vista Panels in 2016, which have a combined carrying value of £1.2 million (2020: £1.5 million) and a remaining amortisation period of

four years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

145

17 IMPAIRMENT

For the purpose of impairment testing, goodwill is allocated to Cash Generating Units (‘CGUs’) as follows:

2021

£m

2020

£m

Eurocell Building Plastics 5.1 5.1

Eurocell Profiles 3.3 3.3

Ecoplas — —

Vista Panels 2.2 2.2

S&S Plastics 0.2 0.2

Security Hardware

0.2 0.2

11.0 11.0

CGUs are determined with reference to the smallest identifiable groups of assets that generate cash flows independently of other groups

of assets, with reference to the business or product sectors in which they operate and CGUs are smaller than the disclosed segments.

The recoverable amounts of the CGUs have been determined from ‘value-in-use’ calculations which have been predicated on discounted

pre-tax cash flow projections based on a three-year business plan approved by the Board. These projections are based on all available

information and growth rates do not exceed growth rates achieved in prior periods.

The key assumptions in preparing these forecasts are in line with the Group’s published strategy, which includes continuing to open new

branches, developing new products and increasing the use of recycled materials. The cash flow forecasts take into consideration climate

change as discussed in the Responsible Business section of the Strategic Report on pages 32 to 53.

All of the Group’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a

combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making time frame is also consistent

across all CGUs. Consequently, the key assumptions detailed below are applied consistently across each CGU:

2021 2020

Period on which management-approved forecasts are based (years) 3 3

Discount rate (pre-tax) 12% 11%

Profit growth rate in perpetuity 2% 2%

The period on which management-approved forecasts are based is consistent with the Board’s strategic planning time frame.

Thediscount rate reflects an estimate of the Group’s pre-tax Weighted Average Cost of Capital, based on past experience and sector-

weighted assumptions. Goodwill is considered to have an indefinite useful life. The profit growth rate in perpetuity is consistent with the

average annual growth in UK Gross Domestic Product between 1990 and 2019 (source: Office for National Statistics).

For CGUs with a higher risk profile due to their size or historical performance, management forecasts are risk-adjusted by applying a sales

sensitivity of 5%. This adjustment has been made for all CGUs with the exception of Eurocell Building Plastics and Eurocell Profiles, prior

to the application of further sensitivities (see below).

The Group assessed the recoverable amount in respect of goodwill for each CGU to be greater than the carrying amount and therefore

no impairment arises. No reasonably possible change in assumptions would result in an impairment for these CGUs.

Sensitivities

The following sales reduction or discount rate increase sensitivities would reduce headroom on each CGU to nil:

2021

Sales

2021

Discount rate

2020

Sales

2020

Discount rate

Eurocell Building Plastics 62% 40% 76% 48%

Eurocell Profiles 86% 73% 70% 52%

Vista Panels 90% 93% 72% 41%

S&S Plastics 68% 35% 74% 45%

Security Hardware 50% 13% 38% 18%

Eurocell plc Annual Report and Accounts 2021146

18 INVENTORIES

2021

£m

2020

£m

Raw materials 7.6 3.9

Work in progress 3.0 2.6

Finished goods and goods for resale

45.3 31.6

55.9 38.1

All inventories are carried at cost less a provision to take account of slow-moving and obsolete items. At 31 December 2021 the inventory

provision amounted to £4.9 million (2020: £4.2 million).

19 TRADE AND OTHER RECEIVABLES

2021

£m

2020

£m

Trade receivables 41.3 38.6

Less: provision for impairment of trade receivables (2.6) (4.4)

Less: provision for rebates payable (1.4) (0.8)

Net trade receivables 37.3 33.4

Contract assets 0.4 1.4

Total financial assets other than cash and cash equivalents classified as financial assets 37.7 34.8

Prepayments 6.7 3.7

Other receivables

0.1 —

Total trade and other receivables 44.5 38.5

Trade receivables are non-interest-bearing and are generally on 30 days’ credit. The fair values of trade and other receivables classified as

financial assets are not materially different to their carrying values.

Contract assets are amortised over the period in which revenue pertaining to those costs is recognised, which in the vast majority of

cases is three years. They are presented net of a provision for impairment of £nil (2020: £0.1 million). Additions of £0.3 million were

recognised during the year (2020: £0.7 million), and amounts amortised against revenue were £1.3 million (2020: £1.8 million). Impairment

charges of £nil were recorded in the year (2020: £0.6 million).

The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance

for all financial assets. In measuring expected credit losses for trade receivables, receivables have been grouped based on shared

characteristics and days past due. Insured balances are excluded to the extent that no loss would arise in the event of default by the

customer.

Expected loss rates are derived based upon the payment profile of sales over a three-year period before 31 December 2021, and

the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on

macroeconomic factors affecting the ability of customers to settle receivables, GDP, the rate of unemployment, new housing starts,

interest rates and household disposable income.

The closing loss allowances for trade receivables and contract assets as at 31 December 2021 reconcile to the opening loss allowances

as follows:

Trade receivables Contract assets

2021

£m

2020

£m

2021

£m

2020

£m

At 1 January 4.4 1.6 0.1 —

(Credited)/charged during the year (0.7) 3.7 — 0.6

Released or utilised during the year (0.1) (0.3) (0.1) (0.1)

Receivables written off during the year as uncollectible

(1.0) (0.6) — (0.4)

At 31 December 2.6 4.4 — 0.1

Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no

reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a

failure to make contractual payments for a period of greater than 120 days past due.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

147

Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts

previously written off are credited against the same line item.

The rate of expected loss decreased in 2021 as the macroeconomic outlook for the UK improved in 2021.

At 31 December 2021

Current

£m

More than 30

days past due

£m

More than 60

days past due

£m

More than 90

days past due

£m

More than 120

days past due

£m

Total

£m

Expected loss rate 2% 7% 29% 69% 69% 6%

Gross carrying amount – trade receivables 34.0 4.5 0.9 0.3 1.6 41.3

Gross carrying amount – contract assets

0.4 — — — — 0.4

Loss allowance 0.8 0.3 0.2 0.2 1.1 2.6

At 31 December 2020

Current

£m

More than 30

days past due

£m

More than 60

days past due

£m

More than 90

days past due

£m

More than 120

days past due

£m

Total

£m

Expected loss rate 4% 20% 65% 65% 65% 11%

Gross carrying amount – trade receivables 31.5 3.3 0.8 0.5 2.5 38.6

Gross carrying amount – contract assets

1.4 — — — — 1.4

Loss allowance 1.2 0.7 0.6 0.3 1.6 4.4

20 BORROWINGS

The book value and fair value of borrowings are as follows:

Non-current

Book value

2021

£m

Fair value

2021

£m

Book value

2020

£m

Fair value

2020

£m

Non-current

Bank borrowings unsecured

11.7 11.7 12.5 12.5

Total borrowings 11.7 11.7 12.5 12.5

The bank borrowings outstanding at 31 December 2021 are classified as non-current liabilities as they relate to committed facilities

available to the Group until 2023. The book value and fair value are not considered to be materially different.

Borrowings

In March 2020 the Group amended its multi-currency revolving unsecured credit facility held with Barclays Bank plc and HSBC UK

Bank plc, increasing the facility from £60 million to £75 million, but with all other key terms remaining unchanged. Costs amounting

to £0.2 million were incurred in amending the facility. These costs have been capitalised within borrowings and are being released

to the Consolidated Statement of Comprehensive Income within finance expense over the period of the facility, which expires in

December2023.

Borrowings of £12.0 million were drawn down at 31 December 2021 (2020: £13.0 million). Total unamortised costs, which are presented

as a deduction to borrowings, were £0.3 million as at 31 December 2021 (2020: £0.5 million).

Interest is charged at an excess over base rate of between 1.25% and 2.25% 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 £12.0 million

would not lead to a significant change in finance expense.

All of the Group’s borrowings are denominated in Sterling.

Details of the Company’s banking covenants are given in Note 3.

Eurocell plc Annual Report and Accounts 2021148

20 BORROWINGS CONTINUED

Borrowings continued

The analysis of repayments on the combined borrowings is as follows:

2021

£m

2020

£m

Within 1 year or repayable on demand — —

Between 1 and 2 years 12.0 —

Between 2 and 5 years

—

13.0

12.0 13.0

21 TRADE AND OTHER PAYABLES

2021

£m

2020

£m

Current liabilities

Trade payables 37.4 28.5

Other tax and social security 3.7 4.8

Other payables 0.9 0.7

Accruals

6.7 8.8

Total current trade and other payables 48.7 42.8

Non-current liabilities

Other payables 0.3 0.3

Book values approximate to fair value at 31 December 2021 and 2020.

22 LEASE LIABILITIES

2021

£m

2020

£m

Lease liabilities

Current 11.9 8.9

Non-current

46.8 39.5

Total discounted lease liabilities at 31 December 58.7 48.4

2021

£m

2020

£m

Maturity analysis

– Less than one year 13.1 10.0

– One to five years 31.9 26.7

– More than five years

19.1 16.7

Total undiscounted lease liabilities at 31 December 64.1 53.4

2021

£m

2020

£m

Finance expense

Interest on lease liabilities 1.2 0.9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

149

23 PROVISIONS

Dilapidations and

environmental

provisions

£m

Warranty

provisions

£m

Total

£m

At 1 January 2020 0.8 — 0.8

Charged to Statement of Comprehensive Income 0.1 0.8 0.9

Utilised — (0.2) (0.2)

At 31 December 2020 0.9 0.6 1.5

Charged to Statement of Comprehensive Income 0.3 0.1 0.4

Utilised

— (0.4) (0.4)

At 31 December 2021 1.2 0.3 1.5

Current 0.4 0.3 0.7

Non-current 0.8 — 0.8

At 31 December 2021 1.2 0.3 1.5

Dilapidations and environmental provisions

Under property lease agreements, the Group has obligations to maintain all properties to the standard that prevailed at the inception of

the respective leases. The provision represents the Directors’ best estimate of the costs associated with this obligation.

The timing of the utilisation of the provision is variable dependent on the lease expiry dates of the properties concerned, which vary

between one and ten years.

Warranty provisions

The Group makes provision to cover known potential warranty issues. The provision represents the Directors’ best estimate of the costs

associated with this obligation. The timing of the utilisation is variable depending on the circumstances of each individual claim under

warranty.

24 DEFERRED TAX

The movement in the net deferred tax liability is as follows:

2021

£m

2020

£m

At 1 January (3.5) (2.6)

Charged to Statement of Comprehensive Income (3.1) (0.8)

Charged to equity

— (0.1)

At 31 December (6.6) (3.5)

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets

where the Directors believe it is probable that these assets will be recovered. There are no unrecognised deferred tax assets. The vast

majority of the deferred tax liability is expected to unwind over a period greater than one year.

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12)

during the year, together with amounts recognised in the Consolidated Statement of Comprehensive Income and amounts recognised in

Other Comprehensive Income are as follows:

Asset

2021

£m

Liability

2021

£m

Net

2021

£m

Statement of

Comprehensive

Income

2021

£m

Equity

2021

£m

Accelerated capital allowances/intangible fixed assets — (7.2) (7.2) (3.4) —

Other temporary differences

0.6 — 0.6 0.3 —

Net tax assets/(liabilities) 0.6 (7.2) (6.6) (3.1) —

Eurocell plc Annual Report and Accounts 2021150

24 DEFERRED TAX CONTINUED

Asset

2020

£m

Liability

2020

£m

Net

2020

£m

Statement of

Comprehensive

Income

2020

£m

Equity

2020

£m

Accelerated capital allowances/intangible fixed assets — (3.8) (3.8) (0.8) —

Other temporary differences

0.3 — 0.3 — (0.1)

Net tax assets/(liabilities) 0.3 (3.8) (3.5) (0.8) (0.1)

Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further

disclosure has been provided. Other temporary differences relate to the tax impact of share-based payment transactions and tax losses

deemed to be recoverable in future periods.

25 SHARE CAPITAL

Allotted, called up and

fully paid

2021

Number

2020

Number

Ordinary shares of £0.001 each 111,972,477 111,486,709

2021

£m

2020

£m

Ordinary shares of £0.001 each

0.1 0.1

Share premium account 21.9 21.1

The ordinary shares carry the rights to attend and vote at general meetings, the right to receive payment in respect of dividends declared

and the right to participate in the distribution of capital. The ordinary shares are not redeemable.

The Group issued 298,061 (2020: 1,030,189) new shares in respect of its Save As You Earn sharesave scheme, in the process receiving

consideration from employees of £0.5 million (2020: £1.6 million). The consideration received above the nominal value of the shares

issued has been recorded as share premium.

During the year no (2020: none) shares were issued in respect of share-based payment transactions for Directors and 187,707

(2020:90,127) shares vested and were issued in respect of share-based payment transactions for other key management personnel.

26 SHARE-BASED PAYMENTS

The Group enters into equity-settled payment transactions with its employees. For the year ended 31 December 2021, the share-based

payment charge was £1.2 million (2020: £0.3 million). A corresponding credit to equity is recognised in the share-based payment reserve.

On exercise of options, balances are removed from the share-based payment reserve with corresponding entries made to share

premium, retained earnings and cash. The balance on the share-based payment reserve at 31 December 2021 was £1.1 million

(2020:£0.5 million).

a) Employee Save As You Earn scheme

Each year all employees have the right to participate in a Save As You Earn (‘SAYE’) scheme. Employees may make monthly contributions

of up to £500, the proceeds being aggregated and then used to purchase ordinary shares at the end of the three-year vesting period.

The cost to the participants is set at the inception of the scheme, with the balance being funded by the Company. Typically, participants

are offered a discount on the share price at the date of issuance.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

151

Set out below are summaries of options granted under the plan:

2021 2020

Average

exercise price per

share option

Number

of options

Average

exercise price per

share option

Number

of options

As at 1 January 1.773 1,561,217 1.692 2,757,495

Granted during the year 1.832 925,755 1.720 627,823

Exercised during the year 1.704 (298,061) 1.632 (1,030,189)

Forfeited during the year 1.704 (183,408) 1.632 (793,912)

As at 31 December 1.817 2,005,503 1.773 1,561,217

Vested and exercisable at 31 December — —

The weighted average share price at the date of exercise of options exercised during the year ended 31 December 2021 was £2.70.

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Grant date Expiry date

Exercise price

31 December

2021

Number

31 December

2020

Number

1 June 2017 1 June 2020 1.632 — —

1 June 2018 1 June 2021 1.704 — 481,469

1 June 2019 1 June 2022 1.920 451,925 451,925

1 June 2020 1 June 2023 1.720 627,823 627,823

1 June 2021

1 June 2024 1.832 925,755 —

2,005,503 1,561,217

Weighted average remaining contractual life of options outstanding at end of period. 1.65 years 1.51 years

Fair value of options granted

The assessed fair value at grant date of options granted during the year ended 31 December 2021 was £0.28 per option. The fair value

at the grant date is determined using a form of the Black-Scholes model.

Options are granted for the consideration set at the inception of the scheme. The model inputs for options granted during the year ended

31 December 2021 included:

2021

Grant date 1 June 2021

Expiry date 1 June 2024

Exercise price £1.832

Share price at grant date £2.080

Expected price volatility of the Company's shares 20%

Expected dividend yield 4%

Risk-free interest rate 1%

The expected price volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any expected

changes to future volatility due to publicly available information.

Eurocell plc Annual Report and Accounts 2021152

26 SHARE-BASED PAYMENTS CONTINUED

b) Deferred Share Plan

Annual Bonus Plan outcomes can be paid in a mix of cash and deferred shares granted under the Company’s Deferred Share Plan

(‘DSP’), following the determination of achievement against performance measures and targets. Performance measures applied may

be financial or non-financial and corporate, divisional or individual and in such proportions as the Remuneration Committee considers

appropriate. The maximum level of Annual Bonus Plan outcomes is 100% of base salary per annum for the duration of this policy. Awards

under the DSP are deferred for such a period as the Remuneration Committee considers to be appropriate which will normally be less

than (but may be longer than) three years, and are subject to continued employment.

The following table shows the deferred shares granted and outstanding at the beginning and end of the reporting period:

2021

Number

of options

2020

Number

of options

As at 1 January 575,498 169,685

Granted during the year — 488,391

Exercised during the year (187,707) (82,578)

Forfeited during the year (62,509) —

As at 31 December 325,282 575,498

Vested and exercisable at 31 December — —

Weighted average remaining contractual life of options outstanding at end of period 1.45 years 1.55 years

Fair value of options granted

The fair value at the grant date is determined using a form of the Black-Scholes model. No DSP options were granted in 2021.

Theassessed fair value at grant date of the rights granted during the year ended 31 December 2020 was between £1.46 and £1.92

peroption, a weighted average of £1.58 per option.

c) Long-term incentive plan (‘PSP’)

Awards under the PSP take the form of nil-cost options which vest to the extent performance conditions are satisfied over a period of

at least three years. The share award is based on a percentage of salary, a proportion of the maximum will vest based on performance

targets of which earnings per share equates to two-thirds of the award and cash flow one-third of the award. Vested awards may also be

settled in cash and the PSP allows for awards over shares with a maximum value of 150% of base salary per financial year.

The following table shows the deferred shares granted and outstanding at the beginning and end of the reporting period:

2021

Number

of options

2020

Number

of options

As at 1 January 1,749,941 1,309,316

Granted during the year 884,402 505,731

Exercised during the year — —

Forfeited during the year (561,283) (65,106)

As at 31 December 2,073,060 1,749,941

Vested and exercisable at 31 December — —

Weighted average remaining contractual life of options outstanding at end of period. 1.59 years 1.48 years

Fair value of options granted

The fair value at the grant date is determined using a form of the Black-Scholes model. The assessed fair value at grant date of the rights

granted during the year ended 31 December 2021 was between £2.29 and £2.44 per option, the weighted average price was £2.30

(2020: £1.69), and the share price at 31 December 2021 was £2.41.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

153

d) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were

as follows:

2021

£m

2020

£m

Options issued under SAYE scheme 0.1 0.1

Deferred shares issued under the DSP scheme 0.4 0.2

Shares issued under the PSP scheme 0.7 —

1.2 0.3

27 CONTINGENT ASSETS AND LIABILITIES

The Group has entered into a cross-guarantee arrangement to cover the bank borrowings of all other Group companies in the event of

default. As at 31 December 2021 the bank borrowings were £12.0 million (2020: £13.0 million).

The Group had no other material contingent assets or liabilities (31 December 2020: £nil).

28 CAPITAL COMMITMENTS

The Group had capital commitments of £8.1 million at the balance sheet date (2020: £1.0 million).

29 RETIREMENT BENEFITS

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group

in an independently administered fund. The pension cost represents contributions payable by the Group to the fund and amounted to

£2.3million (2020: £1.9 million).

30 RELATED PARTY TRANSACTIONS

The Group’s subsidiary undertakings are detailed in Note 37. The Group has taken advantage of the exemption from disclosing

transactions with wholly owned subsidiaries.

Transactions with key management personnel

The remuneration of Executive and Non-executive Directors is disclosed on pages 91 to 108.

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.

2021

£000

2020

£000

Kellmann Recruitment Limited – recruitment services

147

Amounts outstanding at the period end were £nil (31 December 2020: £3,000).

31 RECONCILIATION OF PROFIT/(LOSS) AFTER TAX TO CASH GENERATED FROM OPERATIONS

2021

£m

2020

£m

Profit/(loss) after tax 21.1 (2.2)

Taxation 5.9 0.7

Finance expense 2.0 2.2

Operating profit 29.0 0.7

Adjustments for:

Depreciation of property, plant and equipment 7.7 6.8

Depreciation of right-of-use assets 13.1 12.4

Amortisation of intangible assets 1.9 1.6

Impairment of goodwill — 5.8

Impairment of right-of-use assets (0.4) 0.9

Share-based payments 1.2 0.3

Increase in inventories (17.8) (0.8)

(Increase)/decrease in trade and other receivables (6.0) 2.4

Increase in trade and other payables 4.4 3.1

Increase in provisions

— 0.7

Cash generated from operations 33.1 33.9

Eurocell plc Annual Report and Accounts 2021154

32 RECONCILIATION OF NET DEBT

1 January

2021

£m

Cash flows

£m

New leases

£m

Non-cash

movements*

£m

31 December

2021

£m

Cash and cash equivalents 7.1 (0.5) — — 6.6

Bank overdrafts (4.5) (1.4) — — (5.9)

Lease liabilities (48.4) 11.3 (20.6) (1.0) (58.7)

Borrowings

(12.5) 1.0 — (0.2) (11.7)

Total (58.3) 10.4 (20.6) (1.2) (69.7)

1 January

2020

£m

Cash flows

£m

New leases

£m

Non-cash

movements*

£m

31 December

2020

£m

Cash and cash equivalents 4.9 2.2 — — 7.1

Bank overdrafts — (4.5) — — (4.5)

Lease liabilities (34.1) 12.0 (26.3) — (48.4)

Borrowings

(39.5) 27.2 — (0.2) (12.5)

Total (68.7) 36.9 (26.3) (0.2) (58.3)

* Non-cash movements relate to the amortisation of arrangement fees in respect of the Group’s borrowings and finance charges accrued on leases.

31 December 2021

Current

assets

£m

Current

liabilities

£m

Non-current

liabilities

£m

Total

£m

Cash and cash equivalents 6.6 — — 6.6

Bank overdrafts — (5.9) — (5.9)

Lease liabilities — (11.9) (46.8) (58.7)

Borrowings

— — (11.7) (11.7)

Total 6.6 (17.8) (58.5) (69.7)

31 December 2020

Current

assets

£m

Current

liabilities

£m

Non-current

liabilities

£m

Total

£m

Cash and cash equivalents 7.1 — — 7.1

Bank overdrafts — (4.5) — (4.5)

Lease liabilities — (8.9) (39.5) (48.4)

Borrowings — — (12.5) (12.5)

Total 7.1 (13.4) (52.0) (58.3)

33 EVENTS AFTER THE BALANCE SHEET DATE

The Directors are not aware of any material events that have occurred after 31 December 2021 which would require disclosure under

IAS10.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONTINUED

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

155

Note

2021

£m

2020

£m

Assets

Non-current assets

Investments 37 17.8 17.8

Total non-current assets 17.8 17.8

Current assets

Trade and other receivables 38 42.1 46.7

Deferred tax 39 0.3 0.1

Cash and cash equivalents — 0.1

Total current assets 42.4 46.9

Total assets 60.2 64.7

Liabilities

Current liabilities

Trade and other payables 40 (0.2) —

Total current liabilities (0.2) —

Non-current liabilities

Borrowings 41 (11.7) (12.5)

Total non-current liabilities (11.7) (12.5)

Total liabilities (11.9) (12.5)

Net assets 48.3 52.2

Issued capital and reserves attributable to owners of the Company

Share capital 25 0.1 0.1

Share premium account 21.9 21.1

Share-based payment reserve 1.1 0.5

Retained earnings 25.2 30.5

Total equity 48.3 52.2

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 loss of £1.8 million in the year (2020: loss of £0.8 million).

The Financial Statements on pages 155 to 163 were approved and authorised for issue by the Board of Directors on 17 March 2022 and

were signed on its behalf by:

Mark Kelly Michael Scott

Director Director

COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2021

Eurocell plc Annual Report and Accounts 2021156

capital

£m

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

capital

£m

premium

account

£m

Share-based

payment

reserve

£m

Retained

earnings

£m

Total

equity

£m

Balance at 1 January 2020 0.1 2.4 0.9 30.7 34.1

Comprehensive expense for the year

Loss for the year — — — (0.8) (0.8)

Total comprehensive expense for the year — — — (0.8) (0.8)

Contributions by and distributions to owners

Share capital issued — 17.1 — — 17.1

Exercise of share options — 1.6 (0.6) 0.6 1.6

Share-based payments — — 0.3 — 0.3

Deferred tax on share-based payments — — (0.1) — (0.1)

Total transactions with owners recognised directly

inequity — 18.7 (0.4) 0.6 18.9

Balance at 31 December 2020 0.1 21.1 0.5 30.5 52.2

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

Strategic Report

Eurocell plc Annual Report and Accounts 2021

Corporate

Governance

Financial

Statements

157

34 ACCOUNTING POLICIES (COMPANY)

Corporate information

Eurocell plc (the ‘Company’) is a publicly listed company incorporated and domiciled in the United Kingdom. The registered office is

located in England, at the following address: Eurocell Head Office and Distribution Centre, High View Road, South Normanton, Alfreton,

DE55 2DT.

The Company is principally engaged as a holding company for its subsidiaries which are engaged in the extrusion and supply of PVC

window and building products to the new and replacement window market and the sale of building materials across the UK.

Basis of preparation

The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been

consistently applied to all 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 FRS 101 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 and HSBC, which matures in December 2023. The facility includes two key financial covenants,

which are tested at 30 June and 31 December on a pre-IFRS 16 basis. These are that net debt should not exceed 3 times adjusted

EBITDA (Leverage), and that adjusted EBITDA should be at least 4 times the interest charge on the debt (Interest Cover). Adjusted

EBITDA is defined as operating profit before depreciation, amortisation and non-underlying items. See alternative performance

measureson page 132.