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Synthomer plc
Annual Report 2021
Our products
areallaround you.
On your walls.
In your car.
Under your carpet and floor tiles –
or wrapped around yourlunch.
They’re in the wires and cables that connect you to
theworld, in the clinics and hospitals that keep us all
healthy, and in the factories, construction sites and
officesthat drive our economy.
And if you’re holding a printed copy of this report,
theycould even be in your hands.
Our teams of experts make many of the high-performance,
highly specialised chemical products that bind themodern
world together, using water-based solutions that eliminate
carbon emissions. We serve customers in a huge range of
markets, whose own end-products are a vital part of all our
daily lives. And we’re growing fast, by fulfilling our purpose:
creating innovative and sustainable polymer solutions for
the benefit of customers and society.
Strategic report Corporate governance Financial statements
Who we are and what we do Review of the year Business foundations
Governance
84 Our Board of Directors
88 Our Executive Committee
90 Introduction to corporate governance
94 The Board’s year
96 Stakeholder engagement
(s.172compliance)
98 Audit Committee report
106 Nomination Committee report
109 Compliance with the Code
Directors’ Remuneration report
112 Remuneration Committee:
introduction from the Chair
114 At a glance
116 Annual report on remuneration
127 Directors’ report
129 Statement of Directors’
responsibilities
Group financial statements
131 Independent auditors’ report
137 Consolidated income statement
138 Consolidated statement
ofcomprehensive income
138 Consolidated statement
ofchangesinequity
139 Consolidated balance sheet
140 Consolidated cash flow statement
140 Reconciliation of net cash flow from
operating activities to movement in
net debt
141 Notes to the consolidated
financialstatements
Company financial statements
174 Company statement of financial
position
175 Company statement of changes
inequity
176 Notes to the Company
financialstatements
Other information
182 Environmental performance summary
184 Global Reporting Initiative (GRI)
content index
186 Glossary of terms
187 Historical financial summary
188 Advisers
Our high-performance, differentiated
and highly specialised products, and
our leadership in sustainable water-
based polymer solutions, are at the
heart of our strategy of driving
long-term sustainable growth.
Our six-pillar strategy for organic
and inorganic growth has driven
outstanding performance across
the Group. Record Group EBITDA
was underpinned by EBITDA
growth in all our business divisions
in FY2021.
Synthomer and sustainability
Our Vision 2030 sustainability
roadmap underpins our strategy.
It harnesses our leadership in
water-based polymer solutions
toset out our pathway to net zero,
and is built on the foundation of
ourcommitment to Safety, Health
and Environment (SHE), one of our
core values.
Risk
Understanding and managing risk
enables the delivery of our strategy.
Our risk management framework
hascontinued to evolve in FY2021.
02 Synthomer at a glance
04 Our business model
06 What we make – and who we
makeitfor
08 Chair’s statement
10 Chief Executive Officer’s review
14 Our new platform for growth:
Ourplanned Adhesive
Technologiesdivision
15 Synthomer strategy
16 Our progress – KPIs
20 – CFO’s introduction to
theFinancialreview
22 – Financial review
Divisional reviews
26 – Performance Elastomers
30 – Functional Solutions
34 – Industrial Specialities
37 – Acrylate Monomers
38 Innovation
42 A sustainable agenda for
agrowingbusiness
44 Our approach to sustainability
48 Products
48 – Innovating sustainable products
51 – Sustainable procurement
54 Operations
55 – Health and safety
58 – Environment
62 People
63 – Our employees
67 – Our communities
69 Risk report
77 Task Force on Climate-related Financial
Disclosures (TCFD) report
81 Viability statement
82 Non-financial disclosures and s.172
Decorative
paints and
coatings
Packaging
andtapes
Strategic report Corporate governance Financial statements
Who we are and what we do Review of the year Business foundations
Governance
84 Our Board of Directors
88 Our Executive Committee
90 Introduction to corporate governance
94 The Board’s year
96 Stakeholder engagement
(s.172compliance)
98 Audit Committee report
106 Nomination Committee report
109 Compliance with the Code
Directors’ Remuneration report
112 Remuneration Committee:
introduction from the Chair
114 At a glance
116 Annual report on remuneration
127 Directors’ report
129 Statement of Directors’
responsibilities
Group financial statements
131 Independent auditors’ report
137 Consolidated income statement
138 Consolidated statement
ofcomprehensive income
138 Consolidated statement
ofchangesinequity
139 Consolidated balance sheet
140 Consolidated cash flow statement
140 Reconciliation of net cash flow from
operating activities to movement in
net debt
141 Notes to the consolidated
financialstatements
Company financial statements
174 Company statement of financial
position
175 Company statement of changes
inequity
176 Notes to the Company
financialstatements
Other information
182 Environmental performance summary
184 Global Reporting Initiative (GRI)
content index
186 Glossary of terms
187 Historical financial summary
188 Advisers
Our high-performance, differentiated
and highly specialised products, and
our leadership in sustainable water-
based polymer solutions, are at the
heart of our strategy of driving
long-term sustainable growth.
Our six-pillar strategy for organic
and inorganic growth has driven
outstanding performance across
the Group. Record Group EBITDA
was underpinned by EBITDA
growth in all our business divisions
in FY2021.
Synthomer and sustainability
Our Vision 2030 sustainability
roadmap underpins our strategy.
It harnesses our leadership in
water-based polymer solutions
toset out our pathway to net zero,
and is built on the foundation of
ourcommitment to Safety, Health
and Environment (SHE), one of our
core values.
Risk
Understanding and managing risk
enables the delivery of our strategy.
Our risk management framework
hascontinued to evolve in FY2021.
02 Synthomer at a glance
04 Our business model
06 What we make – and who we
makeitfor
08 Chair’s statement
10 Chief Executive Officer’s review
14 Our new platform for growth:
Ourplanned Adhesive
Technologiesdivision
15 Synthomer strategy
16 Our progress – KPIs
20 – CFO’s introduction to
theFinancialreview
22 – Financial review
Divisional reviews
26 – Performance Elastomers
30 – Functional Solutions
34 – Industrial Specialities
37 – Acrylate Monomers
38 Innovation
42 A sustainable agenda for
agrowingbusiness
44 Our approach to sustainability
48 Products
48 – Innovating sustainable products
51 – Sustainable procurement
54 Operations
55 – Health and safety
58 – Environment
62 People
63 – Our employees
67 – Our communities
69 Risk report
77 Task Force on Climate-related Financial
Disclosures (TCFD) report
81 Viability statement
82 Non-financial disclosures and s.172
Our specialised,
emissions-reducing
formulations help
customers make
thousands of products
that bind the modern
world together.
Decorative laminates
including luxury
vinyltiles
Nitrile
medical
gloves
Paper and
filmiclabels
Mortar and other
construction
products
High-performance
industrial paints
Oil and gas
drilling products
Non-woven
nappies
Artificial turf
Carpets and foam
Technical textiles
including glass
fibre eaves
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
01
Who we are and what we do
Synthomer at a glance
We make high-performance, highly specialised
chemical products to serve customers all over
the world, and we’re aleadre a leading supplier of
sustainable water-based polymer solutions
which help eliminate harmful emissions.
Through our differentiated portfolio, our
widecustomer base, and our track record of
outstanding innovation, we’re delivering on
ourstrategy: drivinglong-termsustainable
growthorganically andthrough acquisitions.
2021 Highlights
Volume
1,671.5ktes
2
020
1,638.2ktes
2
019
1,465.7ktes
2
021
1,517.6ktes
1,443.8ktes
2
018
2017
Revenue
2
021 £2.3
bn
2
020
£1.6bn
2
019
£1.4bn
£1.6bn
£1.4bn
2
018
2017
EBITDA
2
021 £522.2
m
2
020 £259.4
m
2
019
2
018
2017
£177.9
m
£181.0
m
£176.2m
Sales volume from new products
24%
2
020
22%
2
019
22%
2
021
21%
20%
2
018
2017
Underlying PBT
2
020 £160.0
m
2
019
£116.2
m
2
021 £420.1
m
2
018
2017
£135.1
m
£130.0m
IFRS PBT
2
020 £20.3
m
2
019
£100.5
m
2
021 £283.9
m
2
018
2017
£120.3
m
£86.4m
Underlying EPS
2
020 28.9
p
2
019
25.3
p
30.7
p
28.7
p
2
021
75.2p
2
018
2017
IFRS EPS
2
020 0.7
p
2
019
21.5
p
2
021
48.3p
27.4
p
20.3
p
2
018
2017
Free Cash Flow
2
020 £167.6
m
2
019
£92.8
m
2
021 £217.6
m
2
018
2017
£27.8
m
£81.5m
Recordable accident case rate
*
2
021
0.31
2
020
0.36
2
019
0.20
0.23
0.13
2
018
2017
Underlying performance statement
The Group’s performance management uses Underlying performance to plan for, control and assess the performance of the Group. Underlying performance
differsfrom the statutory IFRS performance as it excludes the effect of Special Items, which are detailed in note 4 to the financial statements. The Board’s view is
that Underlying performance provides additional clarity for the Group’s investors and stakeholders and so it is the primary focus of the Group’s narrative reporting.
Where appropriate, IFRS performance inclusive of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in the commentary on
Underlying performance.
Unit margin (or margin) is calculated on selling price less variable raw material and logistics costs.
EBITDA is calculated as operating profit before depreciation, amortisation and Special Items.
Free Cash Flow is the movement in net debt before financing activities, foreign exchange and the cash impact of Special Items, asset disposals and business
combinations.
* per 100,000 hours for employees and contractors
Synthomer plc
Annual Report 2021
02
Successfully integrated
our OMNOVA acquisition
ahead of schedule
Launched our Vision
2030 roadmap to a more
sustainable future
Announced proposed
$1billion acquisition
toform our Adhesive
Technologies division
See page 21 See page 18 See page 14
£2.3bn
revenue
2020: £1.6bn
4,600+
employees
2020: 4,200+
37
production sites
2020: 38
6,000+
customers
12
principal end markets
34%
reduction in Scope 1 and 2
GHG emissions since 2019
Our global reach
Our four divisions:
Performance Elastomers
Delivering water-based Nitrile Butadiene
Rubber latex (NBR) and Styrene Butadiene
Rubber latex (SBR) products.
Functional Solutions
Delivering acrylic and vinylic water-based
dispersions.
Industrial Specialities
Delivering speciality chemical additives and
non-water-based chemistry for a broad range
of applications as well as laminates & films.
Acrylate Monomers
Supplying acrylic monomers to our European
Functional Solutions Division and to third-
party customers.
Share of revenue
byendmarket
A 23.2% Health & Protection
B 11.6% Carpet, Compounds & Foam
C 6.3% Paper & Packaging
D 14.3% Coatings
E 8.4% Construction
F 7.6% Technical Textiles
G 6.1% Adhesives
H 2.0% Oil & Gas
I 8.5% Polymer Additives
J 6.3% Laminates & Films
K 1.7% Coated Fabrics
L 4.0% Acrylate Monomers
A
B
C
D
E
F
G
H
I
J
K
L
North America
EMEA
Asia
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
03
Global demand...
…shapes our
strategy…
…for serving
diverse global
markets…
…and fulfilling
our purpose…
…by making
specialist, high-
performance
products…
…and create
value for all
stakeholders.
…that add value
for customers…
…through
four divisions
across three
continents…
Who we are and what we do
Our business model
Innovation, sustainability and customer service
areat the heart of our business model, which
draws on our unique teams and assets to deliver
high-performance speciality chemical products
and create value for all our stakeholders.
Focus on consumer
end-usedemand
Understanding the
macrotrends
Entrepreneurial
people and culture,
underpinned by our values
Integrated risk strategy and risk
management processes
Track record of integrating
acquisitions
Strong relationships with
customers in highly
differentiated markets
Global technical
servicesteams
Growing
international breadth
and reach, with
increasingly balanced
sales across Americas,
EMEA and Asia
…for lower-
carbon, more
circular products
…for construction
and urbanisation
…for health and
hygiene products
…for adhesives
and packaging
To drive long-term
sustainable growth
organically and
through acquisitions
through six priorities:
• Research and development
and technical expertise to
exploit new consumer markets
• Driving efficiency and
excellence through operations
• Capacity utilisation
• Investment in capacity
• Bolt-on acquisitions
• Transformational transactions
Over 6,000
customers in:
• Health & Protection
• Carpet, Compounds & Foam
• Paper & Packaging
• Coatings
• Construction
• Technical Textiles
• Adhesives
• Oil & Gas
• Polymer Additives
• Laminates & Films
• Coated Fabrics
• Acrylate Monomers
Performance
Elastomers
Functional
Solutions
Industrial
Specialities
Acrylate
Monomers
Focus
on execution,
efficiency, and
business excellence
Strong relationships with
raw materials’ suppliers
and a resilient
supply chain
Synthomer plc
Annual Report 2021
04
Global demand...
…shapes our
strategy…
…for serving
diverse global
markets…
…and fulfilling
our purpose…
…by making
specialist, high-
performance
products…
…and create
value for all
stakeholders.
…that add value
for customers…
…through
four divisions
across three
continents…
...creating
innovative and
sustainable
polymer solutions
for the benefit
of customers
and society
Global
leadership
inwater-based
polymersolutions
Vision 2030,
ourESGroadmap
Highly
differentiatedportfolio
Improved products with
improved margins
Formulations
designed foruse
incustomer-
specificproducts to meet
consumer needs
Close technical services
partnerships with customers
to advise on applications,
sustainability and
end-use
Over 14 product lines
including:
• Water-based Nitrile latex and
Performance Materials products
for thehealthcare, carpet, foam
and paper markets.
• Acrylic and vinylic water-based
dispersions for the coatings,
construction, technical textiles,
adhesives and oil&gasmarkets.
• Speciality chemical
additivesand non-water-
basedchemistry for a
broadrangeofapplications
frompolymer additives
andpolymermanufacture
toemergingmaterials.
• Acrylate monomers that
improve the performance
characteristics of polymer
formulations including
latexandsolution
copolymersand cross-
linkablepolymersystems.
Responding to
consumer needs
inthousands
ofapplications
Outstanding global
and divisional
innovation
Focusing on product
sustainability benefits
£522.2m
2020: £259.4m
EBITDA
4,632
2020: 4,601 employees
Employees in 24 countries
£243.7m
2020: £211.3m
payroll
£28.9m
2020: £25.8m
R&D spend
43%
of new products with
sustainability benefits
£1.6bn
2020: £1.2bn
spend with suppliers
£73.5m
2020: £12.8m
returned to shareholders
£86.4m
2020: £31.4m
corporate tax paid
Our
values
Safety, health and
environment
Accessibility
Integrity
Teamwork
Innovation
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
05
Who we are and what we do
What we make – and who we make it for
Differentiation. Specialisation. Sustainability.
And high performance. We’re able to lead the way
in water-based polymers because of the breadth
and diversity of the end markets we serve, our
strong relationships with more than 6,000
customers, and our commitment to innovate and
deliver the high-performing products they need.
We draw on our unique business strengths...
Global leadership in
water-based polymers
which eliminate the need
for the volatile organic
compounds in solvent-
based products
Worldwide reach
through innovation
andmanufacturing sites
inAsia, EMEA and
NorthAmerica
Powerful connections
tocustomers through
ourtechnical service and
research teams
Cutting-edge
innovation focused on
consumer needs including
specialisation and
sustainability
Synthomer plc
Annual Report 2021
06
...to serve over 6,000 customers
in diverse, strategic end markets:
...by making speciality products
used in thousands of applications
that consumers use every day:
Health &
Protection
23.2% of revenue
We are a world leader in Acrylonitrile Butadiene Rubber (NBR
latex) for glove-dipping and associated healthcare industries.
Gloves made from our speciality NBR latex ensure a combination
of high tensile strength, good elongation and relaxation.
• Medical and examination gloves
• Industrial and fabric-supported gloves
• Medical devices and balloons
Carpet,
Compounds &
Foam
11.6% of revenue
Our specialist High-Solid Styrene Butadiene (HS-SBR), Styrene
Acrylic (SA) and SBR-compounded products provide high-
performance binders for the backing of carpet and artificial turf,
and as gel foam elastomers for floor coverings, footwear and
mattresses.
• Carpet
• Tufted carpets
• Woven carpets
• Needle felt carpets
• Automotive carpets
• Gel foam elastomer
backings
• Bedding foam
• Footwear foam
Paper &
Packaging
6.3% of revenue
We are Europe’s largest manufacturer of SBR and SA high-
performance binders for graphic, packaging and speciality paper
coatings. Our products help customers meet stringent regulatory
requirements and comply with rules on food contact.
• Graphic paper
• Packaging
• Speciality paper
• Paper additives
Coatings
14.3% of revenue
We develop speciality binders to meet the performance
andregulatory requirements of the architectural and
industrialcoatings market, using acrylic and vinylic copolymer
dispersions that are low Volatile Organic Compounds (VOCs),
low odour and alkylphenol ethoxylate (APEO) free.
• Architectural coatings
• Masonry coatings
• Intumescent coatings
• Metal coatings
Construction
8.4% of revenue
Our dry and liquid specialist polymers provide binding or
bonding properties for many construction applications,
including mortar modification, liquid-applied waterproofing
membranes, ceramic tile adhesives, and flooring adhesives.
• Mortar modification
• Waterproofing
• Flooring adhesives
• Sport surfaces
• Additives for
construction
Technical Textiles
7.6% of revenue
Our products are used in a broad range of woven and
non-woven applications, including to bind mesh insulation
systems intechnical textiles, to provide the binder in distribution
layers innon-woven nappies, and in decorative laminates.
• Glass fibre
• Roofing
• Decorative laminates
• Technical fibre
• Footwear
• Hygiene and wipes
Adhesives
6.1% of revenue
Our specialist polymers bond dispersions and bind industrial
and consumer adhesives, meeting our customers’ stringent
technical and regulatory requirements.
• PSA packaging tapes
• PSA speciality tapes
• PSA labels
• Caulks and sealants
• Packaging
specialities
• Release coatings
• Tape saturants
Oil & Gas
2.0% of revenue
We are a global leader in speciality polymeric solutions that
promote wellbore stability and drilling efficiency in the most
challenging high-temperature, high-pressure and high-
differential pressure operating environments.
• Oil and gas cementing
• Drilling fluid additives
Polymer
Additives
8.5% of revenue
We make a broad range of specialist polymer solutions,
including suspending agents for PVC manufacture,
thermosetting polyester resins for powder coatings,
andthermal stabilisers in polyamide engineering plastics.
• Elastomeric modifier for
thermoplastics and friction
• Reinforcing resins for rubber
compounds
• Tyre cord
Laminates &
Films
6.3% of revenue
We produce decorative laminates for residential
andcommercial interiors and recreational vehicles,
andperformance films for luxury flooring, signage
andindustrial applications.
• Luxury flooring
• Bathroom fittings
• Kitchen fittings
• Recreational vehicle fittings
• Durable surfaces for
retail and domestic
applications
Coated Fabrics
1.7% of revenue
We manufacture high-performance polyurethane and vinyl coated
fabrics used in seating and trims in cars, buses, boats and ships,
and in healthcare, hospitality, education and corporate offices.
Our range includes our industry-leading PreFixx protective finish.
• Automotive and bus seating
• Marine seating and trim
• Healthcare, hospitality, education
and corporate seating
Acrylate
Monomers
4.0% of revenue
We make acrylic acid and acrylate monomers which improve
the performance characteristics of thousands of polymer
formulations including latex and solution copolymers and
cross-linkable polymer systems.
• Compounds and curing pastes
• Monomers
• Antioxidants
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
07
Who we are and what we do
Chair’s statement
Our people have risen to the unique demands
and delivered exceptional performance in 2021–
the Board expected and planned for this,
andithas allowed us to carefully invest for
future growth, maintaining prudent leverage.
‘In 2021, the Board
focused on the
significant demands of
the business as well as
succession planning,
business excellence
anddelivering on the
OMNOVA acquisition.
The acquisition of
Eastman’s Adhesive
Resins business was a
strategic and important
step and we thank
shareholders for their
support.’
Caroline Johnstone
Chair
Exceptional performance,
builton robust foundations
Our business ended the year with record
results, and with the foundations in place
forgrowth that will enable us to create value
intothe future. This was made possible by
twothings: further delivering our consistent
strategy of long-term sustainable growth
organically and through acquisitions,
including the $1 billion acquisition of
Eastman’s Adhesive Resins business which is
expected to complete in March 2022; and the
resilience and skill of our employees, who
have continued to put our values into practice
despite the ongoing challenges of the
Synthomer plc
Annual Report 2021
08
COVID-19 pandemic. I would like to thank
them all personally, and also on behalf of the
Board. The safety of employees is our first
priority and the Board oversaw progress
towards achieving top quartile performance
across all our sites during 2021.
A smooth leadership transition,
andaconsistent strategy
In June, we announced the appointment of
Michael Willome as our new Group Chief
Executive Officer, after Calum MacLean
announced hisintention to step down at the
start of the year.
I was delighted to welcome Michael in
November, following an extensive search
process which identified him as a high-
calibre, proven business leader with
experience in the global speciality chemicals
industry and a strong track record of driving
growth (see page 84 for details). The smooth
transition since his appointment has
confirmed that Michael has the right
capabilities to lead Synthomer through the
next phase of its development. He has
already demonstrated his appetite fororganic
and inorganic growth, a passion for building
our teams and developing our people, and an
instinctive understanding of the importance of
sustainability to our future.
This seamless handover was due in no small
part to Calum, and on behalf of the Board
Iwould like to thank him for his outstanding
leadership over the past seven years. I extend
the same thanks to Stephen Bennett, our
Chief Financial Officer, who in August
announced his intention to stand down.
As we discuss on page 107, we look forward
towelcoming Lily Liu this summer.
Calum and Stephen have helpedtransform
Synthomer into a diversified, differentiated,
global speciality chemicals business, and the
benefits can be clearly seen in the Company’s
performance. They have built a strong
platform for continued success, and leave
behind ahighlyexperienced leadership team.
We wish them both the very best.
Growth that supports our purpose
One of the most exciting developments of
theyear was October’s announcement of our
proposed acquisition of Eastman’s Adhesive
Resins, which will bring clear benefits, as
discussed on page 14. It is a great example
ofSynthomer’s growth strategy in action,
andI’dlike to comment on two points.
First, the Company’s ability to deliver
growth.The year’s results show that
acrossthe business, our teams have
workedsuperbly tocreate organic growth –
through innovation, capacity utilisation, anda
continuous focus on meeting strong customer
demand. This was despite the challenges
presented bydisruptions in the global supply
chain, which were navigated withgreat skill
by our procurement, operations,and
commercial teams. The results also show that
the integration ofOMNOVA – Synthomer’s
largest acquisition at the time – is complete,
well ahead of schedule and is delivering
higher synergies than originally announced.
The synergies outlined have all been realised,
despite the COVID-19 pandemic making it
difficult for new teams to meet in person.
This is a tribute to everyone involved,
especially colleagues who have joined
Synthomer from OMNOVA, the teams who
made the transaction in the first place, and
the management and finance teams
whooversaw the integration process.
My second point is really a question. What is the
purpose of growth? Synthomer does not seek
growth for its own sake. Of course, we want to
keep creating value for shareholders. But we
also want to embed sustainability intoevery
aspect of the business, to help Synthomer
play a greater role in creating afairer, more
sustainable future and respond to the climate
emergency. Growth, with the scale it brings,
makes us more resilient. It enables us to invest
in our people, our infrastructure, and our assets,
and means we are better able to deliver on our
purpose of creating innovative and sustainable
polymer solutions for the benefit of customers
and society. That is why the Board spent a lot
of time on another highlight of Synthomer’s
year – the launch of our Vision 2030 roadmap
toamore sustainable business.
Regulatory fine
During 2018, the European Commission (the
Commission) initiated an investigation into
practices relating to the purchase of styrene
monomer by several companies, including
Synthomer, operating in the European
Economic Area. The Company has and will
continue to fully co-operate with the
Commission during its investigation. Based on
the information available and the resulting
assessment of the expected outcome of the
investigation a provision of £57.2 million has
been made in relation to this case.
A more diverse, inclusive Synthomer,
underpinned by sound governance
The full details of our Vision 2030 roadmap
– which includes our commitment to net zero
as well as expanding on Synthomer’s
longstanding work on safety, health and
environment (SHE) – canbe found in our
Sustainability report on pages 42 to 68.
We have, for the first time, fully integrated this
into our Annual Report so thatstakeholders
can understand how sustainability is
inextricably linked to our financial
performance.
Along with the rest of the Board, I
wholeheartedly endorse Vision 2030.
It isahuge step forward, strengthening
thebusiness and helping Synthomer meet
therising expectations ofstakeholders over
the next decade. The Board has been fully
involved in the development of Vision 2030
and will be regularly revisiting and challenging
the targets, and where we can be bolder
andgo faster, in a balanced way.
At the same time, we know that launching
Vision 2030 is not an end in itself. We have more
to do in many areas – including one particularly
close to my heart, which is making our culture
more diverse, inclusive, and supportive of the
employees who drive our success, with further
equality of career development opportunities.
We have made progress in many areas – and
there is a clear appetite from everyone inthe
business to enhance our ability to plan and
develop people’s careers to ensure
theirengagement and success, and our
business growth.
Like every other aspect of our strategy,
Vision2030 must be underpinned by sound
governance – and I talk more about this in my
introduction to the Governance report, on
page 90, where I also thank Dr Just Jansz for
his valued service to the Board, and welcome
Roberto Gualdoni, who joined Synthomer as
an Independent Non-Executive Director in
July.
Dividend of 21.3 pence
The Board has recommended a final ordinary
dividend of 21.3 pence (2020: 8.6 pence) per
share, consistent with our dividend policy, this
exceptional increase reflecting the unique
year of profitability.
Caroline Johnstone
Chair
3 March 2022
Looking ahead/
priorities for 2022
• Oversee the completion of our
acquisition of Eastman’s Adhesive
Resins to create our new Adhesive
Technologies division
• Ensure that Adhesive Technologies is
effectively integrated into Synthomer,
and synergies are being captured
• Continue to focus on nitriles capacity
expansion and investment
• Oversee our leadership team transition
and succession planning
• Further drive our Vision 2030
sustainability agenda and oversee
progress on Task Force on Climate-
related Financial Disclosures (TCFD)
• Continue to engage with investors and
all stakeholders
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
09
Who we are and what we do
Chief Executive
Officer’s review
Exceptional results, built on a platform
ofunderlying growth – and with great
opportunities ahead.
‘When I look beyond the
most obvious figures,
Isee a more important
narrative. That’s a story
of consistent growth
built on the core assets
of this business.’
Michael Willome
Chief Executive Officer
Synthomer plc
Annual Report 2021
10
Building on an outstanding year
to consistently deliver growth
and value
Synthomer has delivered record results
thisyear. But in a way, those results don’t
tellthe full story of our Company. When I look
beyond the most obvious figures, I see a more
important narrative. That’s a story of consistent
growth built on the core assets of this business.
Today Synthomer enjoys leadership positions
ina wide range of attractive, global markets,
based on a broad portfolio of differentiated
speciality products. We have proven expertise
in acquiring and integrating new businesses.
Furthermore, our powerful sustainability
credentials, including our leadership in
water-based polymers in our dispersions
business and our sustainability innovations in
areas such as Nitrile latex for medical gloves,
or lower carbon footprint products in our
Functional Solutions division mean that we
are well positioned in this vitally important
area. Our platform for future growth is strong.
The exciting thing for me is that there is more
we can do in all these areas. The unique
conditions of the past two years, and
particularly those affecting our Performance
Elastomers division, may not come back for a
long time –but our underlying position means
we will have the opportunity to strengthen our
business further in the future. Our innovative,
sustainable products perform a vital role in
people’s lives – and our strategy of investing
in organic and inorganic growth in attractive
end markets has consistently created value
for all our stakeholders over several years,
and given usa platform to continue to deliver
in the years ahead.
Excellent EBITDA performance in all
divisions, creating a platform for the future
All our divisions have achieved record EBITDA
growth in 2021 as described in our divisional
reports on pages 26 to 37. The strongest growth
came from Performance Elastomers, which
grew EBITDA by 136.9%, mainly as aresult of
the unprecedented, and one-off, demand for
Nitrile latex caused by the COVID-19 pandemic
in 2020 and 2021 – though other areas of the
division also grew their profitability. At the same
time, Functional Solutions grew by 49.8%,
and Industrial Specialities by 18.9%.
Acrylate Monomers has returned to profitability
with £35.3 million EBITDA. Overall, Group
EBITDA grew by 109.8% to £522.2 million
andresulted in an EBITDA margin of 22.4%
ofnet sales (2020: 15.8%).
This outstanding performance meant we
further strengthened our balance sheet.
We successfully deleveraged to 0.3x EBITDA,
through strong Free Cash Flow and the equity
placing, creating the conditions to pursue
further inorganic and organic growth
opportunities, and add further value.
The most significant strategic event in
2021was our acquisition of the Eastman’s
Adhesive Resins business, which on
completion will create our new Adhesive
Technologies division.
This is a highly complementary opportunity
with a strong focus on attractive end markets
such as packaging, hygiene, building and
construction, and high-performance tyre
additives. It will enable us to further develop,
manufacture and sell tackifying resins and
additives for adhesive products and,
aswedescribe on page 14, it will expand
ourportfolio and our geographical reach,
especially in the US, one of our focus markets.
People and teams making the difference
Everything we have achieved this year is
theresult of the agility, dedication and
commitment of Synthomer people, all over
the world.
It is one thing to invest in attractive markets
and technologies, as the business has done
consistently over the years – but that does not
produce strong performance on its own.
That isdown to people going the extra distance,
time and again, despite challenges such
asthe COVID-19 pandemic, or significant raw
material and energy price increases, or supply
chain disruption, or unprecedented demand.
Robust investment case in line with global megatrends
Globally
differentiated
chemical
company
Growing
proportion of
speciality
chemicals
Resilient
demand
Strong organic
and inorganic
growth drivers
Sustainable and
responsible
operator
Attractive
financial metrics
Shifting economic
power
Climate change and
sustainability
Demographic and
social change
Accelerating
urbanisation
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
11
I have met outstanding people and teams
everywhere I have been – and I look forward
toworking with them on future opportunities
based on the success achieved so far.
As a speciality chemicals player with 37
production sites worldwide, our first priority
isto continue our journey towards becoming
a top quartile work environment in terms of
personal and process safety. We are on the
right track, but we still have further to go
toensure that our safety performance is
consistent across the business, site by site.
Safety remains both a core value and a
strategic priority for Synthomer, and we
discuss our performance in detail on
pages54 to 57.
I would also like to mention another
priority,‘people development’. We will
spendsignificant time and effort on this
area,creating an excellent environment
forallstages of people’s professional life,
startingwith our well-established and
highlysuccessful graduate programme,
ourtalent development initiative for more
experienced employees, and senior
leadership development. Our aim is to
createa culture which fosters trust, open
andfast communication between people,
unitsand regions, and strong performance
forour customers.
I would also highlight our need for more
diversity of all kinds in our Company.
As recent nominations to our Executive
Committee show, we have already made
firststeps on a journey that clearly builds
value for the business, and we will continue
itin 2022 and beyond.
Maintaining our strategic focus
Once again, our results demonstrate how
critical it is to have leadership positions in our
markets. They have also shown how valuable
it is to have a growing global footprint, which
is why we continue to address opportunities
inthe US, South East Asia and China, as well
as Europe.
Above all, we need to make sure we are
always ‘market-orientated’ – which means
always thinking about the end consumers
who will ultimately benefit from our products.
What do they need from the buildings theylive
or work in, or the surface coatings solutions
we all need in daily life, or the health and
hygiene products that serve them, or the
functional textiles, and automotive products
thatsurround them?
We make specialised chemical products for
our customers, who sell them to consumers
– so understanding the consumer means we
can serve our customers better.
Who we are and what we do
Chief Executive Officer’s review continued
SyNovus
TM
Plus – sustainable innovation in action
Our specialised SyNovus
TM
nitrile products,
widely used in latex glove manufacture, have
played an important part this year in the
success of our Performance Elastomers
division – and of Synthomer overall.
In 2021, teams at our Asia Innovation
Centrein Malaysia worked on making
theSyNovus
TM
range even more attractive
toourcustomers – and more sustainable
–through developments in content and
manufacture. They created SyNovus
TM
Plus,a new nitrile product that we will
launch in2022.
High-performing. Recyclable. And with
a lower carbon footprint.
SyNovus
TM
Plus provides the same
high-performance barrier protection as
conventional nitrile latex, but has several
critical differences – including the potential
for gloves made using SyNovus
TM
Plus to be
recycled into other products after they are
worn for applications such as food handling
and hygiene (all gloves used for medical
applications have to be incinerated).
The way we make SyNovus
TM
Plus also
enables our customers to reduce the
carbon footprint of their gloves. Our Life
Cycle Assessment has demonstrated that
customers need less nitrile latex and can be
more energy efficient in their manufacturing
because SyNovus
TM
Plus can be used in
alow-energy cure process.
And by eliminating the use of rubber
accelerators, which can leave residues
thatcause reactions to people with latex
allergies, gloves made with SyNovus
TM
Plus
can be used by more professionals and
consumers in our customers’ markets.
We believe SyNovus
TM
Plus has the potential
to transform our approach to NBR latex
– and shows that sustainable innovation
canbe good for customers, consumers,
and our business.
Synthomer plc
Annual Report 2021
12
We are also striving for innovation excellence,
always driven by consumer and customer
demand illustrated by our new, patented
SyNovus™ Plus Nitrile latex for gloves
combining exacting consumer requirements
and sustainability.
Innovation continues to be a core pillar
ofourgrowth strategy, helping us secure
differentiated market positions and generate
added value for our customers. This year, the
full integration of OMNOVA has significantly
strengthened our innovation pipeline, and our
network of four global innovation centres of
excellence supported by local application and
technical service centres is a key strategic
asset, as we describe on page 38.
Inspired by our purpose, and committed
to Vision 2030
The demand for more ‘sustainableproducts’
has never been so great.
Here, too, we are in a strong position for future
growth. Our expertise in water-based polymers,
which have a lower environmental impact than
solvent-based alternatives, makes us leaders
in many fields of specialised chemical products.
This year, we were awarded the London Stock
Exchange’s GreenEconomy Mark, given to
companies that derive more than 50% of their
revenues from sustainable solutions. We are
closing thecoal-fired power station at Sokolov
(CzechRepublic), which ends our use of
coalfor power generation across Synthomer,
and we moved to electricity from renewable
sources in Europe and North America. And our
Vision 2030 roadmap, aligned with the UN’s
Sustainable Development Goals and reported
on in full for the first timeon page 18 of this
Annual Report, sets out our course to make
our business increasingly sustainable. It makes
clear that our ESG priorities, beyond safety,
remain combating climate change, becoming
more diverse andinclusive, and developing
our supply chain assurance.
We are well-embarked on this journey, but we
know we have much more to do because as
well as being the right thing to do, we know
that consumers, and therefore our customers,
will increasingly demand sustainable products,
and prefer companies that can produce them.
Looking ahead
I would like to thank everyone at Synthomer
– and my predecessor, Calum MacLean, whose
leadership over seven years at the company did
so much to create the differentiated, global
business we are today – for their dedication
over the last year.
Exceptional levels of profitability in 2021 have
enabled the Group to make major inorganic and
organic investments to significantly strengthen
our platform for future growth. As set out in the
February trading statement, Nitrile latex margins
have normalised to pre-COVID levels and
theGroup does not expect any Nitrile latex
pandemic premium in 2022. Year-to-date, Nitrile
latex demand remains subdued due to high
inventory levels of medical gloves and reduced
demand due to the easing of the COVID-19
pandemic. However, trading conditions in Nitrile
latex are expected to normalise by the end of
H1 with market growth returning to 2019 levels
in the second half. All other divisions have
hadan encouraging start to the year, and the
Group expects to make continued strategic,
commercial and operational progress in 2022.
We have very limited exposure to Russia and
Ukraine, with both countries accounting for less
than 1% of Group revenue, and we continue to
carefully monitor the situation and its potential
implications on our business. The acquisition
of Eastman’s Adhesive Resins business is
expected to complete in Q1. The Group
continues to look for further bolt-on acquisition
opportunities geared towards attractive
end-markets that are value accretive to
Synthomer’s portfolio. The Board remains
confident that the benefits of recent acquisitions
and disciplined capital allocation focused on
organic growth, inorganic growth and dividends
will underpin growing sustainable profits and
value creation in the coming years.
Michael Willome
Chief Executive Officer
3 March 2022
£522.2m
EBITDA
+10 9. 8 %
Increase in EBITDA vs 2020
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
13
At-a-glance:
What Adhesive Technologies
will add to Synthomer
1. Well-invested assets with a global
leading position in adhesives
2. Around 650 talented employees
worldwide, and a strong management
team
3. Six plants with strong SHE standards
and a track record of manufacturing
excellence
4. More access to attractive end markets
with resilient growth fundamentals
5. Greater scale and diversity to our
portfolio, and greater geographic reach
6. Strong R&D, and opportunities for
further innovation-led growth
7. A large and growing portfolio of
sustainable products and alignment
with our Vision 2030 sustainability goals
8. Potential synergies following integration
9. Compelling financial metrics with
accretive unit gross margins
Key product lines for
Adhesive Technologies
Hydrocarbon Resins (HCR)
• Hydrogenated HCR (H
2
HCR)
• Non-Hydrogenated HCR (Non-H
2
HCR)
• Pure Monomer Resins (PMR)
Non-Hydrocarbon Resins (Non-HCR)
• Amorphous Polyolefins (APO)
• Oleo Chemicals, Rosins and Dispersions
(OCRD)
Increasing our reach in
attractive end markets
• Tapes and labels
• Packaging
• Hygiene
• Building and construction
• Tyres
• Other, including woodwork,
automotive,windows, rubber,
foodandcare, and inks
Who we are and what we do
Our new platform for growth: Our planned Adhesive Technologies division
Our growth strategy in action
Building on our success –
Adhesive Technologies
On 17 December 2021, Synthomer
shareholders approved the acquisition of
Eastman’s Adhesive Resins. Subject to
regulatory approvals and customary closing
conditions, we intend to complete
thetransaction in March 2022, and
createanew division for Synthomer:
Adhesive Technologies.
For details of the Eastman’s Adhesive
Resins transaction, please see our investor
presentation on Synthomer.com.
Speciality products that broaden our
portfolio and extend our reach
It is an exciting moment in our growth story,
and a demonstration of our organic and
inorganic growth strategy in action. In the
largest acquisition in our history, valued at
$1bn on a cash/debt free basis, Synthomer
will gain a US-based global business which
develops, manufactures and sells tackifying
resins and additives foradhesive products,
making us a global leader in the field.
Adhesive Technologies will have a strong
focus on attractive end markets such as
hygiene, packaging and high-performance
tyre additives. On completion, it will mean
we can extend and diversify our portfolio,
reach more customers in more end markets,
and further expand our geographical reach.
A platform for growth
The transaction is in line with our
conservative capital allocation policy,
andhas been enabled by the outstanding
performance of our existing divisions as
wellas our effective integration of OMNOVA,
ahead of schedule. Our track record and
experience of integrating OMNOVA gives
usconfidence that we have the people
andskills to realise synergies through
thecreation of Adhesive Technologies.
And withits alignment with our sustainability
objectives – including through a focus on
renewable raw materials, circular economy
approaches, and solvent-free product
lines– we believe Adhesive Technologies
will provide us with a platform for further
sustainable growth.
Synthomer plc
Annual Report 2021
14
Our six-pillar strategy
1 Innovation and technical expertise to exploit new markets
• Anticipate consumer market trends and customer requirements to
deliver improved and differentiated products
• Focus on development rather than pure research
3 Capacity utilisation
• Drive profitability through maximum
utilisation of assets
• Identify the causes of production bottlenecks
and find innovative solutions
4 Investment in capacity
• Seek to add capacity, particularly
in high-growth attractive end markets
6 Transformational transactions
• Not to occur before deleveraging to within the range of our strict capital policy
• Transformational acquisitions not limited by geography or chemistry
• Growth, stable EBITDA margins, and innovation are some of the target criteria
Who we are and what we do
Synthomer strategy
2 Driving efficiency and excellence through operations
• Operate continuous improvement across operations
• Identify good practices and share throughout the business
• Improve commercial, HR, IT and procurement functions
5 Bolt-on acquisitions
• Actively seek opportunistic bolt-on M&A in similar chemistries
Organic
M&A
Our Vision 2030 roadmap sets us on the path to net zero
and contains a series of targets across three key areas:
(See page 48) (See page 54) (See page 62)
• Products • Operations • People
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
15
Who we are and what we do
Our progress – KPIs
Measuring the progress
ofourstrategy
Financial
021 £522.2
020 £259.4
019
£177.9
018
£181.0
Strategy
Definition
Operating profit before depreciation, amortisation
andSpecialItems.
Comment
Group EBITDA increased 109.8% to £522.2 million, with strong
growth across all four divisions. Performance Elastomers EBITDA
grew by 136.9%. Functional Solutions EBITDA grew by 49.8%.
Industrial Specialities EBITDA grew by 18.9%. Acrylate Monomers
EBITDA returned to profit, delivering £35.4 million.
021 75.2
020 28.9
019
25.3
018
30.7
Strategy
Definition
Basic Underlying earnings per share before Special Items.
Comment
The 160.2% increase in underlying EPS reflects the strong increase
in underlying profit before tax, offset by a slight increase in the
weighted average number of shares in issue. Figures previous to
2019 have been restated for the Rights Issue which completed in
July 2019.
021 £420.1
020 £160.0
019
£116.2
018
£135.1
Strategy
Definition
Underlying profit before tax comprising IFRS profit before tax
before charging/crediting Special Items.
Comment
Group underlying profit before tax increased 162.6% to
£420.1 million, driven by strong growth in EBITDA across all
four divisions.
021 £217.6
020 £167.6
019
£92.8
018
£27.8
Strategy
Definition
Movement in net debt before financing activities, foreign exchange
and the cash impact of Special Items, asset disposals and
business combinations.
Comment
Free Cash Flow was driven by the rise in EBITDA and reflected the
increase in activity levels and raw material prices which drove a first
half 2021 net outflow, which was partly offset through working
capital management in the second half of the year when raw
material prices remained high.
Capital expenditure was £82.2 million (2020: £53.8 million) as the
Company focused on organic growth projects, business system
platforms and site sustenance expenditure.
Underlying performance statement
The Group’s performance management uses Underlying performance to plan for, control and assess the performance of the Group. Underlying performance differs
from the statutory IFRS performance as it excludes the effect of Special Items, which are detailed in note 4. The Board’s view is that Underlying performance
provides additional clarity for the Group’s investors and stakeholders and so it is the primary focus of the Group’s narrative reporting. Where appropriate, IFRS
performance inclusive of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in the commentary on Underlying performance.
Unit margin (or margin) is calculated on selling price less variable raw material and logistics costs.
EBITDA is calculated as operating profit before depreciation, amortisation and Special Items.
Free Cash Flow is the movement in net debt before financing activities, foreign exchange and the cash impact of Special Items, asset disposals
andbusinesscombinations.
Synthomer plc
Annual Report 2021
16
Non-financial
021
020
019
018
017
Strategy
Definition
Recordable injury rate for accidents involving more than first aid
treatment, expressed as accidents per 100,000 hours worked by
employees and all contractors.
Comment
Our Group recordable injury case rate (RCR) reduced to 0.31,
largely due to improved performance at former OMNOVA sites,
which saw RCR fall from 0.64 in 2020 to 0.47 in 2021. The Group
recorded 34 injuries in 2021, versus 37 in 2020. We reported no
cases of disease caused by occupational factors and there were
noaccidents that resulted in fatality or permanent disability.
021
020
019
018
Strategy
Definition
Volume of our products sold in thousands of tonnes (ktes).
The volume is based on wet volumes – i.e. the volumes including
water content.
Comment
The growth in our volumes was driven by the full-year benefits of
our integration of OMNOVA (compared to months in 2020) and the
increase in activity in Functional Solutions and Industrial Specialities
markets. This is offset by lower Performance Elastomers volumes,
which reflect the rationalisation of our SBR business and lower
nitriles volumes in H2 2021 caused by restrictions in output in
Malaysia and lower levels of demand.
021 3.16
020
019
018
017
Strategy
Definition
Metered Energy (GJ) (including gas, electricity, steam and fuel oil)
used at each of our plants divided by the number of tonnes of
product made. The energy excludes transport of goods to and
from site and the movement of the associated vehicles on site,
butinternal transport on site is included.
Comment
COVID-19 continued to disrupt supply chains leading to inefficient
operations. Key energy efficiency processes were also delayed.
021
020
019
018
Strategy
Definition
Percentage of sales volume in the year that can be attributed to
new and patented products launched in the past five years.
Comment
Our strong performance in 2021 reflects our greater scale in
innovation following the integration of OMNOVA, and the full
opening of our new Asia Innovation Centre, demonstrating our
continued investment in innovation.
Link to strategy
Innovation and technical expertise to exploit new markets
Driving efficiency and excellence through operations
Capacity
Capacity utilisation
Bolt-on acquisitions/Transformational transactions
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
17
Who we are and what we do
Our progress – KPIs continued
In July 2021, we set out our Vision 2030 roadmap as our starting point for
realising our commitment to sustainability and toreaching net zero by 2050.
Itincludes targets for each of the three key areas ofsustainability: products,
operations andpeople, aligned with the seven UN’sSustainable Development
Goals most material to our business. Here we set out ourfirst year of progress
against these targets. We will continuously review the targets to ensure that
they remain appropriately challenging. For more details, see pages 42 to 68.
1. Products
2. Operations
3. People
The UN’s Sustainable Development Goals (SDGs) most relevant to our Vision 2030 goals
Our targets are underpinned by a series of short-term objectives and are aligned with the UN’s SDGs thatare most material to our business.
New products
2021
2030
Target
60%
43%
At least 60% of new products with
enhanced sustainability benefits.
Sustainable procurement
2021
2030
Target
80%
26%
80% procurement spend with
a sustainability rating
Health & safety
Recordable accident case rate (RCR)
(per 100,000 hours for employees
and contractors)
Process safety event rate (PSER)
(per 100,000 hours for employees
and contractors)
2021
2030
Target
2030
Target
0.20
0.31
2021
0.100.16
Health & safety
Recordable accident case rate (RCR)
(per 100,000 hours for employees
and contractors)
Process safety event rate (PSER)
(per 100,000 hours for employees
and contractors)
2021
2030
Target
2030
Target
0.200.31
2021
0.10
0.16
Environment
40% reduction in Scope 1 and 2
GHG emissions intensity
(vs 2019)
10% reduction in Scope 3
emissions intensity
(vs 2019)
2021
2030
Target
34%
40%
80% of our Electricity from renewable
sources
plus improving energy efficiency
in all our operations
2021
2030
Target
80% 90%*
*Fluctuations in the EAC market mean
this figure may rise and fall between
now and 2030. PPAs will become
increasingly important to our energy
management approach.
Externally assessed Scope 3 emissions
data for 2021 was not available at time of
publication, but is available in our data pack,
available to download on our website. For
baseline Scope 3 emissions data, please
see our 2020 Sustainability Report, which
is also available on our website.
Environment
40% reduction in Scope 1 and 2
GHG emissions intensity
(vs 2019)
10% reduction in Scope 3
emissions intensity
(vs 2019)
2021
2030
Target
34% 40%
80% of our Electricity from renewable
sources
plus improving energy efficiency
in all our operations
2021
2030
Target
80% 90%*
*Fluctuations in the EAC market mean
this figure may rise and fall between
now and 2030. PPAs will become
increasingly important to our energy
management approach
Externally assessed Scope 3 emissions
data for 2021 was not available at time
of publication, but our data pack can be
downloaded via our website. For baseline
Scope 3 emissions data, please
see our
2020 Sustainability Report,
which can also be accessed on
our website.
Environment
40% reduction in Scope 1 and 2
GHG emissions intensity
(vs 2019)
10% reduction in Scope 3
emissions intensity
(vs 2019)
2021
2030
Target
34% 40%
80% of our Electricity from renewable
sources plus improving energy efficiency
in all our operations
202
1
2030
Target
80%
90%*
*Fluctuations in the EAC market mean
this figure may rise and fall between
now and 2030. PPAs will become
increasingly important to our energy
management approach
Externally assessed Scope 3 emissions
data for 2021 was not available at time
of publication, but our data pack can be
downloaded via our website. For baseline
Scope 3 emissions data, please
see our 2020 Sustainability Report,
which can also be accessed on
our website.
Water
Manage and minimise water
consumption
at all locations.
Introduce water management plans
in water-stressed areas and highest
consumption sites
Our Employees
70% Employee participation
in our employee engagement surveys
at a global and country level
50% Gender diversity in new hires
in senior leadership, management
and professional roles
2021
2030
Target
20%* 50%
202
1
2030
Target
70%
73%*
*females in senior leadership
*While we exceeded our Your Voice target
globally in 2021, not all participating
countries reached 70%
Our Employees
70% Employee participation
in our employee engagement surveys
at a global and country level
50% Gender diversity in new hires
in senior leadership, management
and professional roles
2021
2030
Target
20%*
50%
2021
2030
Target
70%
73%*
*females in senior leadership
*While we exceeded our Your Voice target
globally in 2021, not all participating
countries reached 70%.
Communities
Provide volunteer support and financial
contributions in excess of £1million a year
2021
2030
Target
£1.0m+£0.93m
2030
Target
10%
2030
Target
10%
Synthomer plc
Annual Report 2021
18
Review
of the year
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
19
Synthomer specialist polymers
are used to bond and bind
industrial and consumer adhesives
fora wide range of applications.
Packaging and speciality tapes, paper
and filmic labels, contact adhesives and
can sealings all rely on our superior
products which deliver solutions to
ourcustomers’ technical and
regulatory requirements.
Review of the year
Group financials
CFO’s introduction to
the Financial review
2021 has been a year of strong performance
byallour divisions and a truly exceptional
performance in our Nitriles business delivering
arecord EBITDA of £522.2 million.
‘EBITDA grew in each
ofour divisions. Our
investment in organic
growth, and our
successful integration
ofOMNOVA, has created
a powerful platform for
future growth.’
Stephen Bennett
CFO
Synthomer plc
Annual Report 2021
20
Volume
+2.0%
2021: 1,671.5ktes 2020: 1,638.2ktes
2019:1,465.7ktes
EBITDA
+10 9. 8 %
2021: £522.2m 2020: £259.4m 2019: £177.9m
Underlying PBT
+16 2.6 %
2021: £420.1m 2020: £160.0m 2019: £116.2m
IFRS PBT
+1,298.5%
2021: £283.9m 2020: £20.3m 2019: £100.5m
Underlying EPS
+16 0. 2 %
2021: 75.2p 2020: 28.9p 2019: 25.3p
IFRS EPS
+6,800%
2021: 48.3p 2020: 0.7p 2019: 21.5p
Free Cash Flow
+29.8%
2021: 217.6m 2020: £167.6m 2019: £92.8m
A proven strategy, good
execution and a strengthened
balance sheet
Our performance this year is a tribute to thehard
work of everyone at Synthomer, whoput in an
extraordinary effort to meet theneeds of our
customers. It also reflects the success of our
strategy, as our investment in organic growth,
and our successful integration of OMNOVA,
created a powerful platform for our performance.
Strong performance from all divisions
despite global supply chain disruption
EBITDA grew in each of our divisions.
Performance Elastomers EBITDA growth of
136.9% to £320.7 million reflected more than
thestrong demand for hygiene products, with
improved demand and margins in Performance
Materials also making an important contribution.
Functional Solutions EBITDA grew by 49.8%, to
£139.2 million reflecting our stronger global reach
and increased market diversity following the
integration of OMNOVA, factors which also saw
Industrial Specialities EBITDA grow by 18.9% to
£47.8 million. Acrylate Monomers EBITDA grew
to £35.3 million, from a small loss in 2020.
The growth across the business took place
against a backdrop of squeezed supply chains
– and is tribute to the work of our procurement
and customer service teams, who kept
meeting our customers’ needs.
Growth in gross margin per tonne
reflects increasing specialisation
This long-term growth reflects the fact that
ourdifferentiated portfolio contains many
specialised, high-performance products.
This year, extraordinary demand for Nitrile latex
products during the COVID-19 pandemic meant
that our Nitrile business in particular performed
exceptionally and, even as this demand
softened, in line with our expectations, our
specialised portfolio will continue to benefit
from the underlying market growth trend
thatexisted before the pandemic.
One of the most pleasing aspects of our
performance has been the consistent growth
in our gross margin per tonne over recent
years, a trend which continued in FY21 and
not just attributable to the impact from the
Nitrile latex business.
Rapid integration of OMNOVA
realises$42 million in synergies
Despite the pandemic, we completed the
integration of OMNOVA ahead of schedule.
The synergies we identified in our acquisition
investment case have also been realised faster
than budgeted, and have created greater value,
with $42 million realised in the first 18 months
ofintegration. This has strengthened the
business, and built the acquisition and
integration skills of our teams.
Free Cash Flow up 29.8% to £217.6 million
Strong cash generation and the £203.1 million
equity placing ahead of our acquisition of
Eastman’s Adhesive Resins business has helped
drive a rapid reduction of our net debt to
£114.2 million leading to leverage of 0.3x EBITDA.
This strengthened balance sheet underpinned
our proposed acquisition of Eastman’s Adhesive
Resins business, which was approved by our
shareholders on 17 December 2021, and which
supports our overall strategy for organic and
inorganic investment. We expect the acquisition
to complete in March 2022.
Reduced pension liabilities
As a result of more favourable market conditions
and several years of work, including a detailed
review of our pension investment strategy,
ourpension liability has decreased to
£122.4 million from £221.4 million at
31 December 2020. Strong asset returns,
cashcontributions of £27.0 million and actuarial
gains of £51.2 million have all contributed.
Dividend of 21.3 pence
The Board has recommended a final ordinary
dividend of 21.3 pence (2020: 8.6 pence) per
share, this exceptional increase reflecting the
unique year of profitability.
Taken with the 2021 interim ordinary
dividendof8.7 pence (2020: 3.0 pence)
pershare, the total ordinary dividend is
30.0pence (2020: 11.6pence).
The total dividend for the year is in line with
theGroup’s dividend policy with the dividend
representing 40% of the Underlying earnings
pershare. The final dividend per share is subject
to shareholder approval at the Annual General
Meeting on 28 April 2022 and will be payable
on5 July 2022 to those shareholders registered
at the close of business on 6 June 2022.
Looking ahead
The exceptional performance in 2021 has
enabled the Group to deleverage quickly and
has paved the way for the $1 billion acquisition
of Eastman’s Adhesive Resins business, the
largest acquisition in the Group’s history.
The acquisition in the attractive adhesives
marketprovides further differentiation and
diversification to the Group.
Coupled with our continued organic growth
investment programme, particularly in Nitriles,
theGroup has created a powerful and multi-
faceted platform to underpin future growth.
Stephen Bennett
CFO
3 March 2022
EBITDA reconciliation £m
259.4
195.1
47.6
7.8
37.6
(3.2)
(22.1)
522.2
2
020
P
erformance Elastomers
F
unctional Solutions
I
ndustrial Specialities
A
crylate Monomers
C
orporate
F
X
2
021
500450400300 350100 200 250150500
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
21
Review of the year
Group financials continued
Financial review
• Amortisation of acquired intangibles
increased in 2021, reflecting the first
fullyear charge since the acquisition of
OMNOVA Solutions Inc on 1 April 2020.
The fair values of the intangible assets
arising on the acquisition of OMNOVA
amounting to £330.1 million are being
amortised over a period of 9-11 years
mainly dependent on the characteristics of
the customer relationships.
• Restructuring and site closure costs
in2021comprise:
– A £13.2 million charge in relation to the
substantially completed integration of the
OMNOVA acquisition net of a £1.2 million
pension curtailment credit in relation to
the French business;
– A £11.6 million charge to demolish and
rationalise assets at a small number of
sites, to bring them into line with our ESG
strategy; and
– A further £4.9 million for the completion
ofthe rationalisation of the Group’s
European Performance
Materialsnetwork.
Restructuring and site closure costs in 2020
comprised £19.5 million for integration of
OMNOVA, £20.9 million for the
rationalisation of the Group’s European
Performance Materials network and
£2.1 million to rationalise the Acrylate
Monomers’ site.
Special Items
2021
£m
2020
£m
Amortisation of acquired intangibles (36.2) (30.9)
Restructuring and site closure costs (29.7) (42.5)
Acquisition costs and related gains (11.9) (14.6)
Sale of business (7.4) (6.6)
Regulatory fine (57.2) –
Impairment charge – (36.6)
Total impact on operating profit (142.4) (131.2)
Fair value gain/(loss) on unhedged interest rate derivatives 6.2 (3.6)
Loss on extinguishment of financing facilities – (4.9)
Total impact on profit before tax (136.2) (139.7)
Taxation Special Items 8.8 (4.9)
Taxation on Special Items 11.8 20.5
Total impact on profit for the year (115.6) (124.1)
The following items of income and expense have been reported as Special Items:
Presentation of
financial results
The Group has consistently used two
significant Alternative Performance
Measures (APMs) since its adoption
ofInternational Financial Reporting
Standards (IFRS) in 2005:
• Underlying performance, which excludes
Special Items from IFRS profit measures
• EBITDA, which excludes Special Items,
amortisation and depreciation from IFRS
operating profit.
The Board’s view is that Underlying
performance provides additional clarity
forthe Group’s investors and so it is the
primary focus of the Group’s narrative
reporting. Further information and the
reconciliation to the IFRS measures
areincluded in note 5 of the
financialstatements.
• Acquisition costs and related gains are
forthe acquisition of Eastman’s Adhesive
Resins business and comprise £15.0 million
of costs, mainly professional adviser fees,
offset by a £3.1 million gain on a foreign
exchange derivative entered into in October
2021 to hedge the acquisition price.
Acquisition costs in 2020 related to the
acquisition of OMNOVA.
• Sale of business mainly comprised a further
£7.1 million loss on the onerous contract for
the disposal of Synthomer’s European Tyre
Cord business as production is relocated to
Caojing (China) to enable the Marl 3 asset
(Germany) to be fully closed. This is
incremental to the charge taken in 2020.
• During 2018, the European Commission
initiated an investigation into practices
relating to the purchase of Styrene
monomer by several companies, including
Synthomer, operating in the European
Economic Area. The Company has and
willcontinue to fully cooperate with the
Commission during its investigation.
Based on the information available and
theresulting assessment of the expected
outcome of the investigation a provision
of£57.2 million has been made in relation
tothis case.
• In 2020, a £36.6 million impairment charge
was booked relating to four sites.
• In July 2018 the Group entered into swap
arrangements to fix Euro interest rates
onthe full value of the then €440 million
committed unsecured revolving credit
facility. The fair value movement
of the unhedged interest rate derivatives
relates to the movement in the mark-to-
market of the swap at 31 December 2021
inexcess of the Group’s current borrowings.
• Following the Group’s successful
refinancing in 2020, capitalised debt
costsrelating to the 2018 refinancing
andthe 2019 bridge to bond were written
off, leading to a loss on extinguishment
of£4.9 million.
• Taxation Special Items comprise the release
of uncertain tax provisions in relation to
historical tax issues in France and Malaysia.
• Taxation on Special Items is mainly deferred
tax credits arising on the amortisation of
acquired intangibles and restructuring and
site closure costs.
Synthomer plc
Annual Report 2021
22
Finance costs
2021
£m
2020
£m
Net interest payable (26.9) (24.3)
Net interest expense on defined benefit obligation (2.4) (3.7)
Interest element of lease payments (1.5) (1.6)
Underlying finance costs (30.8) (29.6)
Fair value gain/(loss) on unhedged interest derivatives 6.2 (3.6)
Loss on extinguishment of financing facilities – (4.9)
Total finance costs (24.6) (38.1)
We have designed our new
sustainability brand Lipolan™ TERRA
to help reduce the carbon footprint
typically associated with making latex
foam.
Our first product is called Lipolan™ TERRA
2022F and is made using processes that
can reduce that footprint by up to 60%.
It also contains 70% total solids, making it
more efficient to transport, which means we
can lower the associated logistics carbon
footprint by up to 5%. This is just the start
though – we’re now planning ways in which
to use bio-based and recycled feedstock.
Underlying finance costs increased to
£30.8 million (2020: £29.6 million) and
comprise interest on the Group’s financing
facilities, interest rate swaps, amortisation of
associated debt costs and IAS 19 pensions
interest costs in respect of our defined benefit
pension schemes.
The rise in the net interest payable mainly
reflects the higher interest rate on the
€520 million, 3.875% senior unsecured loan
notes due 2025 bond issued in June 2020,
refinancing the OMNOVA acquisition finance
bridge, as offset by the lower level of
borrowings in 2021 relative to 2020 as a result
of the strong Free Cash Flow and the equity
placing in anticipation of the acquisition of
Eastman’s Adhesive Resins business.
The Group’s committed unsecured facilities
comprise the $260 million term loan, the
€520 million bond and the €460 million
revolving credit facility. The revolving credit
facility was fully undrawn throughout 2021
and, as a result, the interest rate derivatives
were fully unhedged and the full movement in
fair value was taken to Special Items.
Taxation
The Group’s effective tax rate is affected by
the tax charge/credit of Special Items. It is
therefore helpful to consider the Underlying
and Special Items tax rates separately:
• The effective tax rate on Underlying profit
before tax for the year decreased to 22.5%
(2020: 23.4%) due to the impact of
COVID-19 on the geographical mix
ofprofits.
• The effective tax rate for Special Items was
15.1% (2020: 11.2%) and was driven by
deferred tax credits on the amortisation of
acquired intangibles and restructuring and
site closure costs, and a current tax credit
in relation to historical tax issues in France
and Malaysia.
Non-controlling interest
The Group continues to hold 70% of
Revertex(Malaysia) Sdn Bhd and its
subsidiaries. These entities form a relatively
minor part of the Group so the impact on
Underlying performance from non-controlling
interests is not significant.
Earnings per share
Earnings per share is calculated based on
theaverage number of shares in issue during
the year. The weighted average number of
shares for 2021 increased to 432,290,000
(2020: 424,843,000) following the equity
share placing on 28 October 2021 where
42,485,080 shares were issued raising net
proceeds of £203.1 million.
Underlying earnings per share for the year
is75.2p, up from 28.9p in 2020, reflecting the
exceptional performance in the year. The IFRS
earnings per share is 48.3p (2020: 0.7p).
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
23
Review of the year
Group financials continued
Financial review continued
Balance sheet
Net assets of the Group increased by
64.5%to £1,033.0 million, mainly reflecting
the£210.0 million profit for the year, the
£203.1 million share issue and actuarial gains
of£66.8 million offset by dividend payments
of £74.0 million.
Provisions
As a result of the regulatory fine and the
restructuring and site closure costs set
outabove, provisions have increased
to£103.2 million (2020: £31.6 million).
The closing balance includes £57.2 million
forthe regulatory fine, £15.8 million and
£1.0 million in relation to the rationalisation of
the Group’s European Performance Materials
network in Marl and Oulu respectively and
£10.6 million in relation to the onerous
contract arising on the disposal of the
European Tyre Cord business.
In the year, a £5.1 million provision was
recognised for the closure of OMNOVA’s
administrative and R&D site in Villejust
(France) and the site transformation
inKluang(Malaysia) was completed.
A £11.6 million provision has been made to
demolish and rationalise assets at a small
number of sites, to bring them into line with
our ESG strategy.
Retirement benefit plans
The Group’s principal funded defined benefit
pension schemes are in the UK and the US
and are both closed to new entrants and
future accrual. The Group also operates an
unfunded defined benefit scheme in Germany
and various other defined contribution
overseas retirement benefit arrangements.
The Group’s net retirement obligation
decreased by 44.7% to £122.4 million
at31 December 2021 (31 December
2020: £221.4 million) and reflects the market
value of assets and the valuation of liabilities
inaccordance with IAS 19. This £99.0 million
reduction in the net retirement obligation
isprincipally attributable to the conservative
investment strategy, £66.8 million of actuarial
gains and Group funding contributions
of£27.0 million. The actuarial gain arose
duetoa £15.6 million return on assets,
a£32.2 million impact from increases in
discount rates, an £11.8 million gain from
experience adjustments and a £7.2 million
gainon demographic assumptions.
The most recent triennial valuation of the
UKscheme took place at April 2021 and
isprogressing in line with expectations.
The value of liabilities under this method
differs slightly from IAS 19, but we expect
thefinalised valuation to result in an improved
funding status relative to the 2018 valuation
completed in 2019.
2021
£m
2020
£m
Opening net (debt)/cash (462.2) 20.7
Underlying operating profit (excluding joint ventures) 448.3 188.4
Movement in working capital (82.8) 23.5
Depreciation of property, plant and equipment 64.2 64.9
Amortisation of other intangible assets 7.1 4.9
Share-based payments charge 2.1 2.0
Capital expenditure (82.2) (53.8)
Business cash flow 356.7 229.9
Net interest paid (27.6) (14.0)
Tax paid (86.4) (31.4)
Pension funding (27.0) (18.8)
Dividends received from joint ventures 1.9 1.9
Free Cash Flow 217.6 167.6
Cash impact of restructuring and site closure costs (17.8) (25.3)
Cash impact of acquisition costs (6.6) (7.4)
Purchase of business – (587.6)
Sale of business 1.7 0.1
Proceeds on issue of shares 203.1 –
Repayment of principal portion of lease liabilities (9.7) (9.7)
Dividends paid (73.5) (12.8)
Dividends paid to non-controlling interests (0.5) (3.1)
Foreign exchange and other movements 33.7 (4.7)
Movement in net debt 348.0 (482.9)
Closing net debt (114.2) (462.2)
Underlying operating profit more than doubled
to £448.3 million due to exceptionally strong
trading but this was offset in part by an
£82.8 million investment in working capital
mainly due to significant rises in raw material
costs partially reflecting disruptions in raw
material supply chains. Working capital as
apercentage of sales – the key performance
measure monitored by the Group – remains at
around 10% in line with historical performance.
Depreciation and amortisation of other
intangibles are in line with the previous year.
Capital expenditure increased to £82.2 million,
recovering from the COVID-19 measures
introduced in 2020 to preserve cash and
liquidity. Our Nitrile latex capacity expansion
project in Malaysia is nearing completion, as
is the project to replace the coal-fired power
station in Sokolov (Czech Republic). The Group
continues to invest in its Pathway Programme
systems transformation project, the first phase of
which was successfully deployed in May 2021.
Interest paid increased to £27.6 million
reflecting the first full period of additional
borrowings drawn for the OMNOVA acquisition
and the successful issue in June 2020 of the
€520 million, 3.875% senior unsecured loan
notes due 2025, for which thefirst biannual
interest payment was dueinJanuary 2021.
Cash performance
The Group’s primary focus is on managing net debt by maximising Free Cash Flow. The following
table summarises the movement in net debt and is in the format used by management:
Synthomer plc
Annual Report 2021
24
Tax paid increased by £55.0 million to
£86.4 million. The Group’s overall effective
taxrate reduced slightly, from 23.4% to
22.5%, and the increase in cash payments
ismainly due to higher profitability in 2021.
The cash impact of restructuring and site
closure costs was £17.8 million, which
comprises £6.0 million of OMNOVA synergy
costs, £10.5 million utilisation of restructuring
provisions and £1.3 million of other
restructuring costs in the year.
The cash impact of acquisition costs was
£6.6 million, arising from the acquisition
ofEastman’s Adhesive Resins business.
The 2020 net outflow of £7.4 million related
tothe OMNOVA acquisition and comprised
£20.1 million of costs offset by a £12.7 million
cash gain on deal-contingent foreign
exchange contracts.
The 2020 cash outflow for the purchase
business related to OMNOVA.
On 28 October 2021, the Group successfully
completed a share placing, raising £203.1 million,
net of issue costs, again relating to the financing
of the proposed acquisition of Eastman’s
Adhesive Resins business.
Dividends paid in the year increased. The final
dividend payment for 2020 was paid in July
2021, whereas the 2019 final dividend was
cancelled in order to preserve cash, liquidity
and balance sheet strength at theonset of the
COVID-19 pandemic inMarch2020.
Our debt is denominated in euros and dollars.
The euro weakened relative tosterling during
2021, leading to a foreign exchange gain in
net debt.
Currency
The Group presents its consolidated financial
statements in sterling and conducts business
in many currencies. As a result, it is subject
toforeign currency risk due to exchange
ratemovements, which affect the Group’s
translation of the results and Underlying net
assets of its operations. To manage this risk,
the Group uses foreign currency borrowings,
forward contracts and currency swaps to
hedge non-sterling net assets, which are
predominantly denominated in euros, US
dollars and Malaysian ringgits.
In 2021, the Group experienced an overall
currency headwind with average FX rates
against our three principal currencies
increasing by 3.4% to €1.165, 6.3% to $1.374
and 5.5% to 5.70 ringgits. This resulted
inanet £22.1 million translation headwind
inreported EBITDA.
Given the global nature of our customer and
supplier base, the impact of transactional
foreign exchange can be very different from
translational foreign exchange. We are able
topartially mitigate the transaction impact
bymatching supply and administrative cost
currencies with sales currencies.
To reduce volatility which might affect
theGroup’s cash or income statement,
theGroup hedges net currency transaction
exposures at the point of confirmed order,
using forward foreign exchange contracts.
The Group’s policy is, where practicable,
tohedge all exposures on monetary assets
and liabilities.
Financing and liquidity
At 31 December 2021, the Group had net
debt of £114.2 million compared to net debt
of£462.2 million at 31 December 2020.
The reduction in net debt reflects the
strongFree Cash Flow in the year and
theproceeds on the equity share placing.
This cash generation resulted in a
reductionin theGroup’s leverage, from
1.8xat 31 December 2020 to 0.3x at
31 December 2021, leaving the Group
wellplaced to finance the acquisition
ofEastman’s Adhesive Resinsbusiness.
Ahead of the Eastman’s Adhesive Resins
acquisition, a new committed unsecured
$300 million loan facility was entered into
on28 October 2021 which will be drawn,
alongside a portion of the revolving credit
facility on completion. An equity share
placing was also undertaken on 28 October
2021 raising £203.1 million net of issue
costs. These proceeds were swapped into
US dollars on the day of the placing in order
to hedge against the dollar-denominated
acquisition price.
While arranging the new $300 million loan
facility the Group took the opportunity to
transition the reference rates for $260 million
term loan and non-Euro borrowings under
the €460 million rolling credit facility away
from inter-bank interest rate to risk-
freerates.
At 31 December 2021, the Group
hadcommitted borrowing facilities of
approximately £1,250 million through until
July 2024 with a single financial leverage
ratio covenant of 3.5x for 2022 and 3.25x
for2023 and 2024.
Free Cash Flow Bridge (£m)
167.6
259.9 (106.3)
(28.4)
(13.6)
(55.0)
1.5
(8.2)
217.6
0.1
0
2020 Underlying
operating
profit
Movement
in working
capital
Capex OtherPension
funding
Depreciation Interest
payments
Tax
payments
2021
50.0
150.0
100.0
200.0
250.0
450.0
400.0
350.0
300.0
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
25
Review of the year
Divisional reviews
Performance
Elastomers
A year of exceptional
growth–and clear
opportunities forthe future,
driven byinnovation and
capacityexpansion.
‘We’ve been able to meet
the exceptional demand
of 2020 and early 2021
because of the dedication
of our people and our
investment in innovation
and increased capacity.
That has created
significant value to
support Synthomer’s
future growth.’
Neil Whitley
President, Performance Elastomers
Division and Asia, M&A and HR
Main markets
Health & protection
Carpet, compounds & foam
Paper & packaging
Main product lines
• Nitrile Butadiene Latex emulsion (NBR)
• Styrene Butadiene Latex emulsion (SBR)
• Antioxidants
• Speciality SBR
• Performance Materials
• Elastomeric Modifiers
947 people in 12 plants in Europe, Middle
East, South East Asia and China, and in two
US plants we share with Functional Solutions.
Our contribution to sustainability
Performance Elastomers has a strong
trackrecord of innovation, increasingly
driven by consumers’ demand for products
with reduced impact on the environment.
In line with the Group’s 2030 target of more
than 60% of new products having a positive
sustainability impact, the division has
anexciting innovation funnel in both
SBRand NBR which set the standards
forsustainability.
Highlights of our performance
£320.7m
EBITDA
+13 6 .9 %
in constant currency
Synthomer plc
Annual Report 2021
26
2021 2020 %
Constant
currency
%
Safety (RCR) 0.11 0.31 (65)
Volumes (ktes) 844.2 896.0 (5.8)
Revenue (£m) 951.5 680.3 39.9 46.2
EBITDA (£m) 320.7 142.5 125.1 136.9
Operating profit – Underlying performance (£m) 294.9 116.8 152.5 166.0
Operating profit – IFRS (£m) 286.9 80.8 255.1
This has been a record year
forEBITDA, and for me,
three factors stand out about
our very strong performance
across the division.
Dedicated people and strong teamwork
The first is that it was only possible because
of the commitment of our people and teams
to working through challenges – whether
those were the constraints imposed by
COVID-19, which had a particular impact in
Malaysia and on the people working in our
NBR business, or the disruptions to global
supply chains that affected the whole
industry. Across the division, our teams kept
our manufacturing going throughout, working
safely, and consistently going the extra mile
tomeet the needs of our customers, resulting
instrong performances from both our NBR
and SBR businesses.
Clear benefits from long-term
investment
The second is that there was a clear link
between our consistent investment in organic
growth and capacity utilisation, and our ability
to meet demand, particularly for Nitrile latex
tosupport the healthcare sector during
theCOVID-19 pandemic.
We know that extraordinary Nitrile latex
demand for glove manufacturing during the
pandemic resulted in exceptional earnings
and cash generation this year, and we
expected conditions to normalise as supply
and demand became more balanced.
That began to happen in H2 2021.
Putting aside the exceptional demand created
by the pandemic, we intend to continue
investing in Nitrile latex because we, along
with other industry experts, expect the
underlying growth in demand for Nitrile
latexexperienced pre-pandemic to continue,
given the global trends in the healthcare and
hygiene product markets and the fact that
nitrile latex is increasingly substituting PVC
and natural rubber in personal protective
equipment. We have a very strong position
inthis market with a high market share,
industry-leading manufacturing technology
and a track record of product innovation.
There are exciting opportunities on the
horizon and we will continue our focus
onproduct, process and application
improvements. We are currently
commissioning our ‘JOB6’ expansion
projectin Pasir Gudang, Malaysia, creating
60ktes of additional Nitrile latex capacity
which will provide additional products for our
local and growing US customer bases. At the
same time, we have carried out siting reviews
in Asia to ensure that the required Nitrile latex
capacity is available in the coming years to
meet our customers’ continuing growth plans.
Added to this, we have some of the most
innovative, highly-skilled people in the industry
– and the full opening this year of our Asian
Innovation Centre (AIC) has enhanced
ourability to lead the way on innovations
in products and processes, many of which
willhave defined sustainability benefits for
customers and consumers – including
SyNovus
TM
Plus, described in the case
studyon page 12.
Divisional
snapshot
Volume
2021
2020
2019
2018
Lorem
844.2
896.0
849.1
859.5
00
Revenue
2021
2020
2019
2018
Lorem
951.5
680.3
623.7
704.5
00
EBITDA
2021
2020
2019
2018
Lorem
320.7
142.5
96.3
107.9
107.9
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
27
Review of the year
Divisional reviews continued
Performance Elastomers continued
Ensuring we have the structure
inplacefor future success
While results this year have been strong,
weneed to remain focused on staying
competitive in all our markets. This year, in
line with the findings of our review of our SBR
business, we closed SBR facilities in Oulu,
Finland, and Marl, Germany, shifting our
production to our other sites, where we have
been able to focus on our strategic move
towards greater capacity utilisation.
Performance review
Safety
Performance Elastomers achieved a
recordable injury case rate of 0.11 in FY21, and
a process safety rate of 0.18. The three-year
average recordable injury case rate of 0.14
illustrates consistent delivery of upper-quartile
safety performance across all sites, with an
ongoing focus on slips, trips and falls which
now account for most of the small number
ofincidents each year. Our major nitrile project
(JOB6) in Pasir Gudang achieved more than
750,000 hours without a recordable accident.
Significant management attention and
reporting focuses on further improving
processsafety performance, including leading
indicators for permit to work and management
of change. We are launching behavioural
safety programmes in 2022 todrive safety
performance to industry-leading levels.
Volumes
Performance Elastomers achieved overall
volumes of 844.2ktes in FY21, a reduction
onthe exceptional volumes of 896.0ktes in
FY20, and in line with our FY19 performance
of849.1ktes. Within this overall figure,
volumesin our Nitrile latex business were
lower than in 2020. Nitrile latex performance
was affected by Emergency Movement
Control Orders put in place in Malaysia in
response to the pandemic in Q3, as well
assome customer de-stocking in H2 2021
that followed exceptional demand in FY20
and H1 2021. Our further investment in Nitrile
latex capacity, including JOB6 and our
announced plans for significant further
investment in South East Asia, demonstrate
our long-term commitment tothe growing
Nitrile latex market.
We closed our Performance Materials facility
in Oulu, Finland, inFebruary 2021, reducing
SBR capacity by55ktes in FY21. Our oldest
SBR plant inMarlis closing and arange of
products previously made at this plant are
being successfully transferred across
thewider Synthomer network. This will
significantly improve the utilisation of the
Performance Elastomers Performance
Materials assets in Europe.
Revenue
The division achieved revenues of £951.5 million
in FY21, with particularly strong demand, driven
by the global COVID-19 pandemic, for Nitrile
latex for a range of medical and industrial
gloves. Glove prices rose to record levels and
with demand for Nitrile latex exceeding supply in
H1, margins rose well above normalised levels.
As demand reduced during H2 both glove and
Nitrile latex prices reduced significantly,
returning to historical levels since January 2022.
Industry analysts forecast that demand for
Nitrile latex, the preferred material of choice for
medical gloves, will continue to grow strongly as
glove usage per capita continues to increase
indeveloping countries. Synthomer also has
astrong product development pipeline arising
from our industry-leading Asia Innovation Centre
inMalaysia, including SyNovus
TM
Plus, samples
of which were approved by customers in
Q12022.
Synthomer plc
Annual Report 2021
28
EBITDA
This was an exceptional year for the division,
andwe achieved EBITDA of £320.7 million.
This compares to divisional EBITDA of
£142.5 million in FY20. The underlying margins
within the NBR business were at exceptional
levels as demand for Nitrile latex exceeded
supply and record production rates for medical
gloves continued in H1. Demand for Nitrile
latex started to slow through H2, partly due
tode-stocking, with margins reducing to
more normal levels since January 2022.
Performance Materials margins improved
following our asset rationalisation programme,
and helped by movement in raw materials
through the year.
Extending our SyNovus™
product range, building
ourcapacity and reducing
energy use
We are proud of the innovation that goes into
developing new products for our customers,
especially those that support our – and our
customers’ – sustainability ambitions.
But innovation is equally important when
itcomes to our processes, supporting
ourstrategy by increasing our capacity,
maintaining the high performance of our
speciality products, and making us more
energy efficient.
To support our family of patented SyNovus™
products, our new Asian Innovation Centre
in Malaysia launched a process innovation
programme designed to further improve the
way we make the NBR nitrile grades that
arevital to the manufacture of thin latex
examination gloves – a critical product
tous,and to the healthcare sector during
the COVID-19 pandemic.
Harnessing the energy from
chemical reactions
While at all times ensuring that our nitriles
product maintains its high performance in
our customers’ applications, our innovation
teams have adapted our systems to harness
the heat created by the chemical reactions
that lead to polymerisation, and used that
heat in the product process, reducing our
need for steam.
In the second year of a three-year programme
that has involved cooperation between our
operations, commercial and technical support
teams in Malaysia, the project has boosted
capacity by a further 10%, while reducing
the energy consumption in use for both
Synthomer and our customers. It has meant
we could increase our supply to customers at
a time of very high demand – and is creating
opportunities to use the technology within
other plants and product lines.
Priorities for FY22
Our strategic priorities for FY22 include:
• Commissioning our new plant capacity
inMalaysia
• Commercialising SyNovus
TM
Plus
• Exploring further projects to bring on
significant additional nitrile capacity
• Exploring investment support to
helpde-risk this investment in
additionalcapacity
• Innovation, with a continued focus on
enhancing the sustainability of products
across the portfolio
• Maintaining our SHE focus
• Focusing on our people agenda and
career development to continue
recruiting and retaining the best talent.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
29
Review of the year
Divisional reviews continued
Functional
Solutions
Building on our growth
platform through innovation
and sustainability.
‘Very strong demand
across all end markets
served by Functional
Solutions has led to
robust business growth
despite substantial
supply chain disruptions
in all regions.’
Rob Tupker
President, Functional Solutions and
Europe
Main markets
Coatings
Construction
Technical Textiles
Adhesives
Oil & Gas
Main product applications
• Architectural paint
• Intumescent paint
• Wood and metal coatings
• Tile and flooring adhesives
• Speciality tapes
• Sealants
• Waterproofing
• Repair mortar
• Glass fibre scrim
• Non-woven and woven textiles
• Drilling additives
• Cement enhancement
1,807 people in 16 plants in Europe, the USA,
the Middle East, South East Asia and China.
11 technology and innovation centres.
Our contribution to sustainability
With a strong focus on its development
pipeline, the division is making good
progress towards meeting the Group’s 2030
target of more than 60% of new products
having a positive impact on sustainability.
Many of Functional Solutions’ newly
developed products replace solvent with
water, contribute to energy savings for
thecustomer, reduce the use of materials
ofconcern or have a positive impact
onrecyclability.
Highlights of our performance
£139.2m
EBITDA
+49.8%
in constant currency
Synthomer plc
Annual Report 2021
30
2021 2020 %
Constant
currency
%
Safety (RCR) 0.37 0.39 (5)
Volumes (ktes) 655.9 591.2 10.9
Revenue (£m) 900.3 646.7 39.2 43.9
EBITDA (£m) 139.2 95.6 45.6 49.8
Operating profit – Underlying performance (£m) 111.1 69.1 60.8 65.6
Operating profit – IFRS (£m) 69.8 31.1 124.4
Our extensive portfolio of
innovative and sustainable
products are used in diverse
applications by our
customers around the world.
Though consumers will rarely see
Synthomer’s name on consumer products,
Functional Solutions’ wide range of products
play a vital role in people’s lives, and with our
leadership positions in sustainable, water-
based dispersions and our broad customer
base, wehave a clear platform for growth.
Our commitment to innovation, capacity
expansion and operational excellence ensures
we stay ahead and remain one of the leaders
in speciality dispersions, and this year helped
drive an outstanding 49.8% growth in
EBITDA. Both top- and bottom-line growth
were delivered despite a succession of
disruptions to raw material supplies, including
COVID-19-related supplier closures in Asia,
the Texas freeze in February 2021, and force
majeures in Europe.
Harnessing innovation and sustainability
to drive growth
With more than 80% of our products
consisting of water-based dispersions which
eliminate the VOCs associated with solvents,
Functional Solutions plays a key part in
Synthomer’s Vision 2030 ambitions.
Demand from our more than 3,000 customers
across the world for sustainable polymer
solutions is growing, driven in many regions
byregulation as well as customers’ own
sustainability objectives. At the same time,
our innovation teams are working with
customers to develop products that push
thepossibilities further – meeting needs for
formaldehyde-free, biocide-free or lower-VOC
applications, and developing biodegradable,
bio-based or industry-compostable products
to support circular economy approaches
tosustainability. Our 11 technology and
innovation centres are state-of-the-art
facilities for all our main technology functions:
polymer synthesis, materials characterisation,
applications technology, technical service
andproduction scale-up.
Synthomer people dedicated to meeting
needs of customers in diverse markets
An essential element in the division’s success
this year has been the commitment of
Synthomer people to meeting customer
needs. This takes many forms – keeping
ourplants running through the COVID-19
pandemic, overcoming the disruptions in
global supply chains, maintaining close
partnerships with customers when it comes
to innovation and delivery. There is no doubt
that our strong performance is owed in large
part to our people and teams, and to the
focus we have placed on both commercial
and manufacturing excellence programmes
inrecent years.
This was especially important in the context
of recovering and rising demand. The year
saw a notable improvement in demand in the
Coatings, Adhesives, Sealants and Elastomers
(CASE), and Oil & Gas segments, and
products that found their end-application
inconsumers’ houses performed very well,
asso many people turned their hand to DIY
inthe pandemic. Investment in capacity over
the past few years served us well here, as
ourWorms plant ran at increased capacity
and allowed us to deliver differentiated
products across our European network,
partof an overall increase in capacity in our
plant networks in Europe and North America
inparticular.
Divisional
snapshot
Volumes
2021
2020
2019
2018
Lorem
655.9
591.2
487.4
526.0
00
Revenue
2021
2020
2019
2018
Lorem
900.3
646.7
612.8
680.1
00
EBITDA
2021
2020
2019
2018
Lorem
139.2
95.6
69.9
64.1
00
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
31
Review of the year
Divisional reviews continued
Functional Solutions continued
Delivering on the benefits of OMNOVA
integration
Last year we completed the integration of
OMNOVA, helping to increase the scale and
geographic diversity of our division. As well
asdelivering cost synergies, the successful
integration of the Functional Solutions’
salesteam with that of the former OMNOVA
business has opened up significant new sales
opportunities, many of which were realised
during 2021.
The integration significantly broadened our
global reach as a division, with around a third
of revenue now coming fromour Americas
and APAC markets.
It has also expanded our technological
capability – so we can continue to innovate
and meet the needs of our diverse
customerbase.
There is still work to do to ensure that SHE
performance is consistently high across
thedivision including the heritage
OMNOVAsites.
Performance review
Safety
Functional Solutions achieved a recordable
injury case rate of 0.37 in FY21, and a process
safety rate of 0.28.
Both metrics are higher than 2020, reflecting
the integration of former OMNOVA sites
forafull year. Our strong focus on safety
transformation initiatives at key sites is already
beginning to show success, with all-injury
rates at an all-time low for the division.
For 2022, we will focus on completing
transformation initiatives at all Functional
Solutions’ sites as we push for world-class
safety rates across our whole site network.
Volumes
Functional Solutions achieved overall
volumesof 655.9ktes in FY21, an increase
on591.2ktes in FY20, and substantially
greater than our FY19 performance
of487.4ktes.
This strong overall performance reflects
robust demand in all our main markets as
wellas the fact that we have grown as a
division, including through the successful
integration ofOMNOVA, which has created
new sales opportunities as well as increased
ourcapacity.
In addition to an extra quarter of volumes
from OMNOVA, the division benefited from
growth in our CASE businesses in Europe
and USA, offset in part by the impact of
prolonged COVID-19 effects in South East
Asia. Demand was particularly strong in
construction and textiles. The Oil & Gas
business also saw healthy growth, driven by
increased drilling activity and higher oil prices.
Revenue
The Functional Solutions division achieved
revenues of £900.3 million in FY21, a growth
of 39.2% on FY20. The extra volumes noted
above, both from the OMNOVA integration
and organic growth, contributed to this
increase, along with an improvement
inunitmargins incertain segments.
Another driver for the increase was the
pass-through to customers of substantial
increases in unit rawmaterialcosts.
‘This was a record year
forthe division, and
weachieved EBITDA of
£139.2m. This compares
to divisional EBITDA of
£95.6m in FY20. Aided by
strong cost control and
synergy realisation, all
regions contributed to
a46% growth in EBITDA.’
Synthomer plc
Annual Report 2021
32
EBITDA
This was a record year for the division,
andwe achieved EBITDA of £139.2 million.
This compares to divisional EBITDA
of£95.6 million in FY20. Aided by strong cost
control and synergy realisation, all regions
contributed to a 45.6% growth in EBITDA.
This excellent result was achieved despite
significant prolonged US disruption from
the‘Texas freeze’ and multiple force
majeuresaffecting our key raw material
suppliers inEurope. Functional Solutions
delivered recordmargin growth, with all
ourglobal businesses contributing.
Volume increases, strong margin
management in the face ofsteeply
risingmonomer prices, cross-selling
ofourspeciality product portfolio
andtheongoing shift towards a more
differentiated and sustainable product
portfolio all contributed to this improved
margin profile.
LITEX
TM
Shield technology – helping builders keep
the weather out, more sustainably
Energy-efficient housing is the future for
builders and homeowners – and it is an
important focus for our sustainable
innovation programmes.
Our LITEX™ Shield XSBR technology
supports builders by improving the technical
textiles they need in products such as glass
fibre and roofing felt, materials they use to
protect building interiors from the outside
temperature and rain. These materials need
to have mechanical stability, chemical
resistance and water-proofing properties –
all of which the LITEX™ Shield provides.
But LITEX™ Shield goes much further
thancompetitor products. Thanks to
thework of our innovation teams in Marl,
Germany, LITEX™ Shield technology is free
from formaldehyde – a critical competitive
advantage in a market where regulations
aredemanding ever-higher standards – and
has low Volatile Organic Compound (VOC)
content. Fast-drying, it helps our customers
increase their productivity and reduce their
energy consumption. And by helping people
insulate their buildings better, it contributes
to a lower energy consumption and carbon
footprint for consumers, too.
Regular sales of LITEX™ Shield began
in2020 in Europe – and by 2021, following
our launch in North America, global sales
reached €17 million in revenue.
And in another example of our approach
tocommercialising successful innovations,
wehave applied the formaldehyde-free XSBR
technology that underpins LITEX™ Shield
tonew products. REVACRYL
TM
Design
creates low-emission acrylics that are used
inhousehold applications such as decorative
laminates for furniture and glass fibre
wallcoverings. Sales began in 2020, and by
2021 had expanded to €2 million in revenue.
Both REVACRYL
TM
Design and LITEX
TM
Shield
won categories in our annual Innovation
Awards in 2021.
Priorities for FY22
To build on the strong performance
ofFY21, in FY22 we aim to:
• Complete safety transformation
programmes for major divisional sites
particularly focusing on our heritage
OMNOVA sites, to deliver further
improvements in safety performance
• Achieve top-line growth from new
product launches, globalising our
product portfolio and delivering on
further revenue synergyopportunities
• Continue strong margin management
withafocus on commercial excellence
• Pursue organic and inorganic
opportunities to expand our capacity to
meet rising demand in our growth
markets
• Deliver a variety of innovation and capital
projects to meet the rising demands
ofconsumers and our customers for
sustainable offerings and in support of
Group targets on energy consumption
andemission reductions.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
33
Review of the year
Divisional reviews continued
Industrial
Specialities
Driven by innovation,
delivering excellence
andgrowth.
‘The successful
integration of OMNOVA
and excellent operating
performance across our
highly-specialised
product range has
delivered strong business
growth.’
Ana Perroni Laloe
President, Industrial Specialities
Main markets
Polymer Additives
Laminates & Films
Coated Fabrics
Main businesses
• Laminates & Films
• Coated Fabrics
• Vinyl Polymers
• Polybutadiene Lithene
• William Blythe (speciality chemical
products)
• Speciality Additives
• Powder Coatings
1,192 people in 8 plants in Europe, the USA,
the Middle East, and South East Asia.
Our contribution to sustainability
The division is assessing a number of
sustainability initiatives, including developing
a pilot site for water metering at our
Speciality Vinyl Polymers plant in Harlow
(UK) and reviewing options for improved
technology to help reduce waste at our
Speciality Additives plant in Ghent, Belgium.
In addition, there are a number of active
R&D projects across the division with
sustainability as a core driver.
Highlights of our performance
£ 47. 6 m
EBITDA
+18 . 9 %
in constant currency
Synthomer plc
Annual Report 2021
34
2021 2020 %
Constant
currency
%
Safety (RCR)* 0.40 0.36 11
Volumes (ktes) 115.5 91.1 26.8
Revenue (£m) 382.5 264.9 44.4 48.9
EBITDA (£m) 47.6 41.2 15.5 18.9
Operating profit – Underlying performance (£m) 33.9 29.0 16.9 20.3
*IS and AM are combined for operational reasons
Commercial and scientific
innovation is at the heart of
ourbusiness. What does the
end-consumer want? How
can we help our customers
meet that demand in the
many markets they serve?
Can we innovate to create
new and better products
– and how do we make our
operations even safer, more
efficient and more
sustainable, so we can
create further value?
This year’s growth in sales, volumes and
EBITDA show that we are succeeding in
finding answers to these questions. The seven
businesses in our division supply specialised
products for niche markets around the world
from their manufacturing sites in Europe, the
US and South East Asia. They have
succeeded in meeting the diverse and
specialist requirements of our global customer
base, inthe context of a year in which we
have had to address the twin challenges of
COVID-19 and disrupted raw material supply
chains. That is tribute to the commitment and
talent of our 1,192 people – and shows that
we have solid foundations for future growth.
Outstanding customer service and
consistent, safe production
Disruption across the industry has meant that
this year, more than ever, customers wanted
to know that when they picked up the
telephone to their supplier, there would be
someone there going the extra mile to help
them. Our customer service, purchasing and
logistics teams have done exactly that.
But of course, they could not meet customer
demand without the dedication of the people
in our operations who have kept our sites
running throughout the pandemic – and who
have done so while delivering our division’s
best-ever process safety performance.
Their commitment to safety, backed up by
ourconsistent investment in manufacturing
excellence, has seen a 16% reduction in the
recorded case rate since 2019. It means that
we can point to examples such as our
powder coating business in Italy, which has
now gone five years without a recordable
incident, to drive further improvements
acrossthe division.
Manufacturing excellence brings other
benefits too: our ‘Value Gap’ programme
continues to deliver debottlenecking, cycle
time improvements and additional capacity.
It has improved productivity, increased
utilisation, and helped identify opportunities
tominimise our environmental profile and
reduce emissions.
Responding to strong consumer and
customer demand across all end
markets
Sales volumes across the division grew
by26.8% as demand grew in all our main
markets, and particularly in the automotive
and consumer-facing industrial sectors.
Laminates & Films, and Vinyl Polymers have
continued to grow significantly, as consumers
seek out high-performing products for the
furniture and floors of their kitchens and
bathrooms, and where our teams are
succeeding through a winning blend of
material performance and aesthetic design.
Our relationships with major retail customers
are critical here – and anticipating their needs
and delivering with fast, effective service is
spurring our growth.
The recovery in automotive demand has
benefited our Polybutadiene Lithene and
Powder Coatings businesses, which also
serve the construction, rubber modification
and adhesives sectors.
We continue to see opportunities for all
ourbusinesses, and we have set out further
investment for growth.
Divisional
snapshot
Volumes
2021
2020
2019
2018
Lorem
115.5
91.1
67.3
70.7
00
Revenue
2021
2020
2019
2018
Lorem
382.5
264.9
157.9
164.1
00
EBITDA
2021
2020
2019
2018
Lorem
47.6
41.2
23.8
20.0
00
Priorities for FY22
The keypriorities in FY22 are:
• Further embedding SHE practices in our
surfaces plants, and continuing to drive
improved performance through
strengthening SHE processes and
practices in the chemicals plants
• Delivering further production capacity
across the plants through
debottlenecking projects and
operational efficiency
• Ensuring a continuous supply of raw
materials to sites
• Enhancing our customer services and
logistics processes to ensure the
challenging logistical environment is
efficiently and effectively handled
• Growing sales volumes from additional
production capacity, and continuing
todeliver GDP+ growth.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
35
Review of the year
Divisional reviews continued
Industrial Specialities continued
Leading innovation, and strengthened
reach and scale
The integration of OMNOVA has given our
division further diversification, both in terms
ofthe end markets we serve, and our
geographical reach. We have really seen
thebenefits this year, with cost synergies
being realised and significant new sales
opportunities, particularly in the US.
It has also expanded our innovation
capabilities, which remain a key focus
inourability to meet end consumer and
customer needs.
Performance review
Safety
Industrial Specialities achieved a recordable
case rate of 0.40 in FY21, and a process
injury safety rate of 0.04.
Across our chemicals plants, we have
continued our sustained focus on strengthening
practices and processes, particularly on permit
to work and management of change system
improvements. The recordable injury case rate
across the chemicals plants inFY21 was 0.27,
which is slightly above FY20 but comparable
to top quartile performance in the industry.
The focus for our surfaces plants (Laminates
&Films, and Coated Fabrics) has been on
improving occupational health and safety
performance by simplifying and embedding
fundamental SHE practices, with three of
foursurfaces sites graduating from SHE
‘supported site’ status in FY21, and the
remaining site expected to graduate in the
firstquarter of FY22. In FY21, the surfaces
sites recorded their lowest-ever recordable
injury case rate of 0.53, although we
recognise there is much more still to
doandare committed to ensuring safety
remainsatthe heart of everything we
doforallemployees.
Volumes
Industrial Specialities achieved overall
volumes of 115.5ktes in FY21, an increase
onour volumes of 91.1ktes in FY20, and
substantially greater than our FY19
performance of 67.3ktes.
Robust demand in all our main markets
drovethe strong volumes, while we have also
grown as a division through the successful
integration of OMNOVA. Our reliability
programme at Harlow, as well as smaller
de-bottlenecking projects across other
plants,have also helped us increase capacity.
Revenue
The division achieved revenues of £382.5 million
inFY21, a significant increase on FY20.
The increase in revenue was attributable
toincreased volumes, consistent focus
onproduct pricing and margin management,
and the impact of the OMNOVAintegration.
EBITDA
We achieved EBITDA of £47.6 million for
Industrial Specialities in FY21, compared to
divisional EBITDA of £41.2 million in FY20.
Laminates & Films, integrated from OMNOVA,
continued to grow revenue in FY21 through
strong volumes and further market share
gains, following a very strong year in FY20.
The business continues to grow ahead of the
market through substitution of the superior
performance and lower cost of laminates and
films compared to traditional wood and stone
materials. The business is well placed to
deliver another year of growth in FY22.
The Coated Fabrics business also integrated
since the acquisition of OMNOVA, benefited
from growth in the Asian automotive and
motorcycle markets. The business experienced
strong volumes during FY21, and delivered
very strong year-on-year growth.
The Vinyl Polymers business had a resilient
year, delivering strong volumes, but was
adversely affected by weaker unit margins
following unprecedented raw material price
increases and a weaker US dollar. With the
recovery of unit margins during the second
half of the year following sales price
increases, this business is in a good
positionto deliver growth in FY22.
The Polybutadiene Lithene business delivered
year-on-year growth through strong volumes,
partly helped by the recovery in the
automotive sector.
William Blythe delivered excellent year-on-
year growth with strong underlying volumes
from existing and new product sales.
Our Speciality Additives business, which
supplies speciality coatings, delivered an
exceptional performance with record volumes
and strong unit margins. The business also
benefited from the cost improvement plan
delivered during FY21.
The Powder Coating business delivered
strong volumes and unit margins, and
delivered a record EBITDA year.
Tidal Wave
TM
– new technology keeping marine
upholstery stain-free
‘Pinking’ is a real problem for boat builders
and owners. It appears as a red or pink
stain on vinyl marine upholstery caused
byaspecific strain of bacteria that thrives
inmarine environments. There is usually
noalternative but to replace the
upholsterycompletely.
Thanks to innovation by our Coated Fabrics
technical teams in Columbus, US, and
Rayong, Thailand, we have developed a
new,patent-protected barrier technology
that stops the bacteria’s pink dye from
spreading to the surface of the upholstery.
Our new Tidal Wave
TM
marine vinyl
upholstery, sold in our Nautolex
®
range,
means boat owners can keep their cushions
white – and creates savings and competitive
advantage for our boat-building customers.
Launched in 2018, Tidal Wave
TM
had its
best-ever year of sales in 2021, and was
recognised in our annual Innovation
Awardsthis year.
Synthomer plc
Annual Report 2021
36
Acrylate
Monomers
2021 2020 %
Constant
currency
%
Safety (RCR)* 0.40 0.36 11
Volumes (ktes) 55.9 59.9 (6.7)
Revenue (£m) 95.2 52.3 82.0 81.8
EBITDA (£m) 35.3 (2.4)
Operating profit – Underlying performance (£m) 34.5 (5.6)
Operating profit – IFRS (£m) 29.3 (26.3)
*IS and AM are combined for operational reasons
Our Acrylate Monomers
division operates from our
production plant at Sokolov
(Czech Republic), which we
share with the Functional
Solutions dispersion
business. We manufacture
and supply monomer
products to Functional
Solutions, as well asbeing a
medium-sized supplier to the
European Acrylatesmarket.
Set up as a division in early 2021, Acrylate
Monomers has made significant progress
onits long-term transformation programme,
which set out to return the division to
profitability and establish a strong,
sustainable foundation for future growth.
Our ability to make good progress with the
programme in 2021 reflects the commitment
ofour people at Sokolov, who have driven
itthrough while maintaining operations,
allinthe face of the disruptions caused
byCOVID-19. Whilst the exceptional
performance in 2021 is principally driven
bystrong unit margins brought about
bydisruption in the monomers market,
thetransformation projecthas undoubtedly
benefited the site and has placed it on
amoreresilient and sustainable footing.
Ending coal use in Synthomer
A key element of our transformation
programme at Sokolov, was beginning
theclosure of the site’s coal-fired power
station. This will mark the end ofcoal use
inSynthomer, contributing to our target to
reduce GHG emissions by 40% bythe end
of2030 (compared to 2019), andreinforcing
our strong commitment to reducing our
carbon footprint. Our investment at the site
will also reduce our site water requirements
by 23%.
Divisional
snapshot
Volumes
2021
2020
2019
2018
Lorem
55.9
59.9
61.9
61.4
00
Revenue
2021
2020
2019
2018
Lorem
95.2
52.3
64.7
70.2
00
EBITDA
2021
2020
2019
2018
Lorem
35.3
(2.4)
1.0
3.5
00
Continuing focus on safety
Improving safety performance is another
central component of the transformation
oftheSokolov site. We have focused on
strengthening practice and processes
including permit to work, management
ofchange, and local involvement and
accountability for driving SHE culture
acrossthe site.
We will continue to invest in improved safety
as part of our Group-wide commitment to
SHE as a core Synthomer value, and of our
Vision 2030 sustainability roadmap.
Performance review
Safety
Acrylate Monomers achieved a recordable
case rate of 0.2 in FY21. This represents
asignificant decrease in the recordable injury
case rate from FY20, when it was 0.42.
The division demonstrated significant
improvement in a number of SHE focus areas
as part of our transformation programme at
the Sokolov site. The division also graduated
from SHE ‘supported site’ status at the end
ofFY21. No process safety events were
recorded in FY21, an improvement on the
FY20 process safety rate of 0.10.
Volumes
Acrylate Monomers achieved overall volumes
of55.9ktes in FY21, compared to volumes
of59.9ktes in FY20. This decrease is partly
attributable to a change in product mix,
supplying greater volumes to our Functional
Solutions dispersions business as well
asthechallenging operational and raw
materialenvironment.
Revenue
The division achieved revenues of
£95.2 million inFY21, a significant increase
onFY20. This increase reflects a substantial
rise in sales prices due to strong demand,
and thetemporary tightening of supply in
both European and global markets in FY21.
Among the events which had an impact
onsupply were a number of acrylic monomer
supplier force majeures within Europe, the
USwinter storm and the blockage of the
SuezCanal, which began in March 2021.
This temporary tightening of supply is
expected to normalise over the course
ofFY22 as competitors restore levels of
production and shipping constraints ease.
EBITDA
The division delivered EBITDA of £35.3 million
inFY21, compared to a small loss of £2.4 million
in FY20. This return to profit was primarily driven
by a substantial increase in unit margins, as
aresult of the period of strong demand and
temporary tightening ofsupply in our markets,
described above.
In addition, Acrylate Monomers has delivered
a number of cost savings in FY21 as part of
our transformation programme, the full-year
benefits of which willbe realised during FY22.
Priorities for FY22
Having restored the Acrylate Monomers
division to profitability in FY21 in part
through delivering the site transformation
project, our key priorities for FY22 include:
• Continuing to strengthen SHE practices
andprocesses to drive improved
performance at the plant
• Diversifying our product base by
reviewingpotential options to produce
otherproducts, including more
sustainableproducts.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
37
Review of the year
Innovation
Innovation:
creating value
forcustomers,
driving our growth
Highlights in 2021
• Integrated innovation centres from
OMNOVA into our three global divisions
• New target of 60% of new products with
sustainability benefits by 2030
• Implemented our new Sustainability
Impact Assessments
• Launched our Innovation Excellence
Framework
• Our new Asia Innovation Centre (AIC)
inMalaysia now fully operational
• Achieved 24% NPP
• Implemented annual Innovation Awards,
presenting eight awards of which six had
a sustainability benefit.
Why we innovate, what we
innovate – and how we do it
Everyone working in innovation at Synthomer
should have two words on their mind, every
day: ‘specialisation’, and ‘sustainability’.
Whatever we are doing – investigating
newtechnology platforms, designing new
products, researching new applications
– wemust focus on what will drive growth
forthe business. That comes from customers
choosing our products – and more and more,
specialisation and sustainability are the
criteria they use to make that choice.
Our strategic priorities reflect this. We have
introduced a target that 60% of new products
should have a defined sustainability benefit
by2030, and we are aiming to ensure that
newand protected products make up at least
20% of our sales volume (the NPP metric).
These are challenging goals – but I am
convinced we have the right innovation
process, the right people, and the right
spiritto achieve them.
Where we focus our
innovationefforts
Innovating to support sustainable growth
forSynthomer means adding distinctive,
differentiated value for our customers, while
making our own business more efficient
andeffective.
New product innovation within our customer-
facing innovation teams means tailoring
solutions based on our current technologies to
meet new customer needs, or in anticipation of
consumer and market trends. To enable more
game-changing innovations in the future we
have established a new Technology Platform
Innovation team focused on investigating new
chemistries designed to meet the changing
needs of the market.
The three pillars of our
Technology Platform’s
innovation approach
1
Sustainability
Supporting Synthomer’s Vision 2030 roadmap
through technologies and products that:
• Are based on more sustainable raw
materials, including bio-based materials
• Have lower environmental impacts when
in use
• Have lower environmental impacts at the
end of their lives.
2
Enhanced performance
Expanding and diversifying Synthomer’s
portfolio by investigating new monomer and
polymer systems that perform better at:
• Binding, bonding and coating
• Improving adhesion, repellency,
oraesthetics
• Material and formulation efficiency.
3
Formulation and process efficiency
Developing efficient technical approaches
and methodologies that:
• Make us more efficient
• Get our products to market quicker
• Enhance our product knowledge
• Give us a better return on investment.
Across these pillars, we have developed a
new Innovation Excellence Framework to help
keep everyone in our teams focused on our
objectives. The framework gives us all six
‘ways of working’ – the principles that guide
how we work every day.
‘Our global innovation
network is at the heart of
serving customer needs,
meeting our sustainability
objectives and driving
ourgrowth’.
Marshall Moore
Chief Technology Officer
Synthomer plc
Annual Report 2021
38
Priorities for 2022
• Implement global SHE standards
• Work towards 60% of new products
withsustainability benefits
• Maintain pace of new product
commercialisation to ensure > 20% NPP
• Build differentiated, value-adding
technologies that create profitable and
sustainable new products
• Implement additional elements of our
Innovation Excellence Framework to
improve innovation yield, accelerate
commercialisation, and develop our
innovation talent
• Attract, develop and retain innovative,
collaborative scientists and engineers.
Global coverage – with direct
links to manufacturing sites
Worldwide, we have 16 innovation sites.
Our four centres of excellence in the UK,
Germany, Malaysia, and the United States
provide leading research and development,
and capabilities to support product and
process innovation across all our divisions.
The other 12 are technical centres and pilot
lines located close to our manufacturing
sitesthat respond to market-specific
customer needs.
Putting innovation to work in
every aspect of our business
Each business unit within Performance
Elastomers, Functional Solutions and
Industrial Specialities has its own dedicated
innovation team. Our Global Technology and
Innovation function oversees our worldwide
innovation network, conducts research on
new technology platforms and provides
centralised support for safety management,
material characterisation, process
development, intellectual property
andregulatory compliance.
Our centres of
excellence:
Akron, USA
Harlow, UK
Marl, Germany
AIC (Kulai), Malaysia
Our market-specific
technology centres:
USA: Auburn, Chester,
Jeannette, Monroe,
Roebuck and Stafford
Rayong, Thailand
Sant’Albano, Italy
Shanghai, China
Sintra, Portugal
Villejust, France
Accrington, UK
Innovation
snapshot
Our new Innovation
Excellence Framework gives
us six ‘ways of working’
1. Clearly aligning innovation resources
tothe business strategy
2. Fostering creativity within our team
andthrough collaborations
3. Incorporating process safety and
sustainability into product design
4. Investing in people, working in teams
5. Delivering excellence in project and
portfolio management
6. Focusing on delivering results.
Global Technology and Innovation
021
020
019
018
017
016
015
014
SHE
Oversees occupational safety in our
innovation centres and labs, and our
Responsible Care Management System.
Intellectual Property and Knowledge
Management
Protects our proprietary knowledge
andmaximises the value of inventions
through patents.
Material Characterisation
Builds understanding of materials at
amolecular level to enable smarter
productdesign.
Advanced Process Innovation
Industrialises new innovations and engineers
safer, more effective and efficient ways to
manufacture our products.
Product Stewardship and
RegulatoryCompliance
Ensures that the products we sell are
safeand compliant, and guides safe
product design.
Platform Technology and External
Innovations
Innovates new technology platforms that
help us make differentiated products at
scale to meet customer demand.
Sustainability
Oversees our sustainability governance
framework and sets goals to guide how
weinnovate and operate.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
39
Review of the year
Innovation continued
Innovating sustainably
We see sustainability as one of the main
drivers of innovation – and product and
process innovation as an essential enabler for
making our business both more sustainable,
and more competitive. Developing more
sustainable products and processes is a
critical way we can add value for customers
–which is why we’ve set a target of 60%
ofnew products with defined sustainability
benefits, including:
• Eliminating ingredients of concern
• Reducing energy consumption and
carbonemissions
• Reducing water consumption
• Reducing waste generation
• Reducing or eliminating hazards in
ourproducts
• Improving product end-of-life management
• Enabling sustainability benefits in
downstream use.
We’ve created new benchmarks to assess
theimpact of our innovation projects against
thegoals of Synthomer’s Vision 2030
roadmap. We conduct Sustainability Impact
Assessments on all of our product innovation
projects, and we’re developing the capability
toconduct life cycle assessments on
candidate products during the innovation
process. We’vedeveloped new capabilities
toenable the design of biodegradable
products, and we’re exploring how we can
increase our use of bio-based raw materials.
We already use them in several of our
products and they could play a big part
inourlower-carbon future.
At the same time, by optimising or
redesigning our manufacturing processes,
wecan help make our plants safer and more
efficient while reducing greenhouse gas
emissions. For more on our contribution,
seethe Sustainability section of this report,
pages 42-68.
Our innovations are
all around you...
...and you will find examples
throughout this report.
SyNovus
TM
Plus – sustainable
innovation in action
SyNovus
TM
Plus is our new nitrile product
that provides the same high-
performance barrier protection as
conventional Nitrile latex while being
recyclable and reducing GHG emissions
– see page 12.
Lipolan
TM
TERRA – making latex
foam more sustainable
Lipolan
TM
TERRA is helping to reduce the
carbon footprint associated with making
and transporting latex foam – see page 23.
Innovating our processes to deliver
SyNovus
TM
products
Our Asia Innovation Centre has launched
a process innovation programme
designed to further improve the way we
make NBR nitrile grades – see page 29.
LITEX
TM
Shield XSBR technology –
supporting construction
Our LITEX
TM
Shield XSBR technology
supports builders by improving the
technical textiles they need in products
such as glass fibre and roofing felt –
seepage 33.
Tidal Wave
TM
– helping marine
upholsterers combat ‘pinking’
Our new technology helps keep marine
upholstery stain-free – see page 36.
Suncryl
®
– bio-based and circular
Our new Suncryl
®
HP 114 water-based
polymer contains more than 56%
bio-based raw material – see page 50.
Investing in innovation
in Asia to meet
customer needs
Our Asia Innovation Centre (AIC) in Malaysia
became fully operational in April 2021.
The AIC is leading the way on research and
development to support our Performance
Elastomers and Functional Solutions
business units.
We invested RM35 million in the 6,000m
2
facility in the iPark near Senai Airport, Johor
Bahru, as part of our commitment to meet
growing demand from customers for
product development and applications
support. The AIC has accelerated innovation
in key markets such as Healthcare and
Protection (nitrile gloves) through state-of-
the-art R&D reactor capabilities and
investment in new Application Technology
including a robotic glove-dipping laboratory.
“Our new flagship facility
leads our innovation in
novelnitriles and ensures
Synthomer stays at the
forefront of nitrile latex
product development and
applications. It will also create
the right environment to
attract and retain the best
talent in theindustry.”
Gan Boon Teck
Vice President and General Manager of
Performance Elastomers division in Asia
“This is the first phase
ofwhat we expect to be
anongoing investment in
innovation in Asia, supporting
all divisions of the company.
As well as expanding our pilot
lab reactor capacity, we are
also investing in a new
robotic dipping arm to
moreeffectively mimic
ourcustomers’ processes
and accurately predict the
behaviour of our polymers.”
Dr Zhenli Wei
Vice President of Innovation for
Performance Elastomers division
Synthomer plc
Annual Report 2021
40
Business
foundations
Synthomer
specialist polymers in
liquid or dry form provide
binding or bonding properties in a
broad range of industrial and
consumer construction applications.
From mortar modification to liquid-
applied waterproofing membranes,
ceramic tile adhesives to flooring
adhesives, our SBR and acrylic
dispersions deliver excellent
performance across the various
technologies in use in the
construction market.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
41
Business foundations
Synthomer and sustainability
A sustainable
agenda for a
growing business
This has been an important
year for Synthomer and our
sustainability agenda.
‘As a speciality chemicals
company we recognise
that we have a role to
play in meeting society’s
expectations for a more
sustainable future. The
launch of our new Vision
2030 roadmap in 2021 is
an important step. It will
help guide our actions
over the next decade as
we work towards our net
zero ambitions.’
Tim Hughes
President, Corporate Development
https://www.synthomer.com/company/
corporate-responsibility/
sustainability/?region=EUROPE
For many years, our speciality water-based
polymers have helped replace solvent-based
products that contain harmful volatile organic
compounds. However, if last year’s COP26
event proved anything, it is that society’s
expectations of businesses like ours continue
to grow.
As a speciality chemicals company, we
recognise the role we must play, which is why in
2020 we announced our commitment to reach
net zero by 2050. We’ve since launched our
Vision 2030 roadmap as our starting point for
realising that commitment. This roadmap sets
out a series of sustainability targets, aligned with
the UN’s Sustainable Development Goals, and
reflects the issues we know matter most to
our stakeholders. Many of these targets are
underpinned by short-term objectives, so
thatwe can track and report progress over
the coming decade.
Taking action – and making progress
Targets must be backed by action, and
I’mpleased to say we’ve put a lot of wheels
inmotion this year. For example, we’ve
established a new sustainability governance
structure, introduced new sustainability
champions across key operations and
functions, and launched new scorecards
toassessall new product development
andlarge-scale capital projects against
sustainability criteria. And so that stakeholders
can better understand our financial and
non-financial performance side-by-side,
we’veintegrated our sustainability reporting
into our Annual Report. To coincide with the
publication of this Annual Report, we will also
publish a data pack on ourwebsite, giving our
stakeholders easier, faster, more transparent
access to our sustainability data.
Meanwhile, we’ve also hit our interim
renewable electricity objective ahead of
schedule, published externally assessed
Scope3emissions for the first time, and
established a new diversity and inclusion
steering committee, led by our Chair, Caroline
Johnstone. I am also particularly pleased
thatour commitment to sustainable products
and services was externally recognised with
anLSE Green Economy mark in July 2021.
This isawarded to companies who earn
morethan 50% of their revenue from
environmental solutions.
Synthomer plc
Annual Report 2021
42
Putting safety first – and responding
toCOVID-19
Of course, as a chemical manufacturing
business, safety must always be our first
priority and sits at the centre of our core
values (see page 55). We’re proud of our
long-term record and know we must maintain
our focus as we grow. We anticipate some
short-term fluctuation in our safety, health
andenvironment (SHE) performance when
integrating new businesses like OMNOVA.
We allow three years from the date of a new
acquisition to help our new businesses to
meet our SHE standards and align with our
sustainability goals. We are now almost two
years into that process with OMNOVA and
arestarting to see their efforts show in our
results. This is thanks to the excellent
workour SHE teams have done to help
ournew colleagues introduce our tools
andprocesses.
It’s impossible to talk about health and
safetyand not mention the ongoing COVID-19
pandemic. Demand for our products has
remained high and I would like to thank
everyone for continuing to protect one
another while keeping our sites running
safely.I believe the dedication and care
they’ve shown are clear expressions of
allourcore values in action.
0 .15 3
tonnes of CO
2
e Scope 1 and 2 GHG
emissions per sales production tonne
34%
reduction
vs 2019 baseline
We have continued to adapt to local regulations
throughout the pandemic, including having
fewer people on site and closing labs when
needed. Our customers have faced similar
challenges. This is likely to have a short-term
impact on our innovation pipeline – but we’ve
made progress nonetheless. In 2021, we
launched 14 new products, of which 43%
include a defined sustainability benefit.
We also introduced new innovation awards,
which include a sustainability category.
Going further on diversity and inclusion
We also continued to embed our people
agenda, with a growing focus on key areas
such as diversity and inclusion, career
development and employee engagement.
We’re particularly pleased that we met our
2021 objective of 20% of women in senior
leadership roles. In February 2022, Ana
Perroni Laloe was appointed President,
Industrial Specialities, joining our Executive
Committee. The appointment of Lily Liu
asour Chief Financial Officer will further
accelerate our progress. Once Lily is
officiallyon board, womenwill make up
44%of ourBoard.
We have a good gender and ethnic split at
agraduate level. And the global Engender
women’s network had a busy first year.
We also reviewed our recruitment processes
to keepimproving representation on our
candidate lists.
Of course, diversity must be backed by
asense of belonging. I think the speed with
which we completed the OMNOVA integration
is an example of our commitment to this, with
many OMNOVA leaders taking up senior
positions in Synthomer.
But we have a lot more to do, and my
Executive Committee colleagues and I are
personally committed to encouraging greater
diversity across Synthomer and to creating an
environment where people see opportunities
to grow their career with us.
Driving down emissions
We’ve done a lot of work over the past
fewyears to address our Scope 1 and 2
emissions. In 2021, we took a big step
forward when we installed new gas boilers
toallow closure of our only coal-fired
powerstation, and ensured that 90%
oftheelectricity we use at our sites came
from certified renewable sources. These are
fantastic achievements, but our teams remain
busy finding further ways to improve our
energy efficiency, source long-term
renewableelectricity and manage
ourwaterand wastelevels.
Meanwhile, we started work this year to
report in line with the recommendations of
theTask Force on Climate-related Financial
Disclosures (TCFD). This work focused
onourgovernance, assessing our climate
risks anddeveloping one scenario analysis.
During 2022, we will develop further scenario
analyses inour key operations and supply
chains todevelop our understanding of our
climate opportunities and risks.
We’re now building on our TCFD work to
determine science-based targets, due for
completion in the coming year. See page 77
forour TCFD report.
Starting the next decade from
astrongplatform
Our teams have achieved a great deal
thisyear, including ongoing work to
integrateOMNOVA in the face of COVID-19
travel bansand operational restrictions.
Once ourproposed acquisition of Eastman’s
Adhesive Resins is complete, and we create
ournew Adhesive Technologies division,
we’llrealign our baseline sustainability
metrics. This will beabig task, but it’s also
anopportunity toembed our sustainability
agenda into ournewdivision from day one.
Working in partnership to build a more
sustainable world
This next decade will be crucial for the world’s
ability to limit temperature rises and meet the
commitments set out under COP26. And,
integrations aside, we will have our own
challenges to address. Many of our chemical
processes require heat, which we typically
generate with natural gas. And most of our
raw materials are made from fossil fuels.
Indeed, more than 90% of our Scope 3
emissions come from our supply chain.
So, while we continue to invest in our own
sites and processes, we know that we can’t
solve all these challenges on our own. We’re
going to need to forge new partnerships to
change the way we use energy and find more
sustainable ways to select our raw materials.
We’re already working with our customers
tocreate innovative new products with better
sustainability credentials. Now, we want to
increase the number of suppliers we work
with who can provide the most sustainable
products and services, so that we can help
drive down emissions across the whole
supply chain.
Through our speciality chemicals, we can and
do make a meaningful contribution to society.
Our growing stature gives us the chance to
play an even greater role in helping the world
tread a more sustainable, fairer path. We’ve
done a lot of work over the past couple of
years to put strong foundations in place.
There will be challenges as we move
throughthis next decade, but there are
alsoopportunities. I know that our people
willrise to both.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
43
Business foundations
Synthomer and sustainability continued
Our approach to
sustainability
We want to embed
sustainability into every
aspectof our business, to
helpus play a greater role
increating a fairer, more
sustainable future and respond
to the climate emergency.
Our commitment to net zero
We made a public commitment in 2020 to
reach net zero by 2050, in line with the Paris
Agreement. To achieve this, we are:
• Using our innovation skills to develop new
products made with lower-carbon raw
materials and more efficient manufacturing
processes
• Ending coal use at our operations (seepage
59 in our Operations section for more
information on how we achieved this
in2021)
• Starting work to define new science-
basedtargets
• Using new sustainability scorecards to
assess our innovation programmes and
capital expenditure
• Establishing internal life cycle assessments
to assess the viability and resource needs
of our products
• Establishing partnerships with suppliers
todrive down emissions across our
supplychain
• Addressing end-of-life product
management across our markets
• Working to incorporate a carbon price into
our capital planning.
And, as we grow and acquire new
businesses, this approach is part of how
welook to integrate them into Synthomer.
We introduce our tools and processes into
new acquisitions to help them meet our
sustainability objectives, which we expect
them to do within three years of acquisition.
In considering our approach, we concentrate
on the issues where we can have the most
impact and that are most material to our
stakeholders. This year, we reorganised our
priorities, moving from our six pillars to three
key areas:
1. Products
2. Operations
3. People
Vision 2030: our roadmap to a more
sustainablefuture
We have developed our Vision 2030 roadmap to help guide our decisions over the next
decade and set us on the path to net zero. It contains a series of targets across our three
key areas:
1. Products
We will continue to increase the number of products we make that
have sustainability benefits, and source more raw materials with
suppliers who have a sustainability rating and who share our ethical
standards:
• At least 60% of new products with enhanced sustainability benefits
• 80% procurement spend with suppliers with a sustainability rating.
2. Operations
While aiming for zero harm, we will achieve top quartile performance
for personal and process safety. We will also drive down emissions
and minimise our broader environmental impact:
• Recordable injury case rate of no more than 0.20 per 100,000
hours foremployees and contractors
• Process safety event rate of no more than 0.10 per 100,000 hours
• 40% reduction in Scope 1 and 2 greenhouse gas emissions
intensity (vs 2019)
• 10% reduction in Scope 3 emissions intensity (vs 2019)
• 80% of our electricity from renewable sources, plus improving
energy efficiency in all our operations
• Manage and minimise water consumption, and introduce water
management plans in water-stressed areas and at the sites where
we use most water.
3. People
We will become a more diverse and inclusive company, find new
ways to listen to our employees, and increase our support
forlocalcommunities:
• 50% gender diversity in leadership, management and professional
new hires
• 70% participation in our employee engagement surveys at global
and country levels
• Provide volunteer support and financial contributions in excess
of£1 million a year for local education, public health, diversity and
environmental projects.
The UN’s SDGs most relevant to our Vision 2030 goals
Our targets are underpinned by a series of short-term objectives and
are aligned with the UN’s Sustainable Development Goals (SDGs) that
are most material to our business. We outline these objectives and
describe our approach to each of our material issues across pages
48to 68. Over time, and where appropriate, we will look to update
andadd new short-term objectives as we move towards 2030.
Synthomer plc
Annual Report 2021
44
Membership of industry associations
We work closely with the main sector groups in
our industry, including the Chemical Industries
Association (CIA) in the UK, the European
Polymer Dispersion and Latex Association
(EPDLA) in the EU, the American Chemistry
Council (ACC) in the USA, and theMalaysian
Rubber Glove Manufacturers Association
(MARGMA) and Malaysian Rubber Products
Manufacturers Association (MRPMA)
inMalaysia. In many cases, this work includes
taking a seat on the sustainability committees
and actively participating in sustainability
workshops within these groups.
‘Our commitment to
sustainability can be seen
at all levels of Synthomer
– from engagement with
our Board and Executive
Committee, to our frontline
employees. Finding ways
to help our business and
the products we make
creates a positive impact
on the world around us.
And ourteam of dedicated
sustainability specialists
is growing across our
global business, too.’
Susana Carvalho
Group Sustainability Director
Governing our sustainability approach
How we oversee progress
Over the past three years, we have evolved our governance structure to ensure sustainability
is discussed at the highest levels of the company, and to help further embed sustainability
into every aspect of our business.
Board of Directors
Responsibilities
Oversees our Group-level sustainability agenda.
Actions
Reviews sustainability topics at Board meetings, with particular
focus on our most material issues.
Executive Committee Steering Group
Responsibilities
Our CEO is responsible for delivering our sustainability agenda
and meeting policy commitments on behalf of the Board, and leads
the Executive Committee Steering Group.
Approves all sustainability-related strategic planning, including on climate-related issues.
Actions
Reviews sustainability topics monthly/quarterly.
Sustainability Steering Committee
Responsibilities
This cross-functional group of senior leaders defines our sustainability targets and roadmap.
Coordinates sustainability activities across the business.
Reports directly to the Executive Committee Steering Group.
Actions
Our Sustainability Director hosts quarterly meetings of the committee to monitor progress
across our business.
Sustainability Delivery Board
Responsibilities
This Board consists of our Group-wide network of sustainability champions who manage
cross-functional sustainability projects and programmes.
Actions
Our Sustainability Director hosts monthly meetings with this Board to discuss
projectprogress.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
45
Business foundations
Synthomer and sustainability continued
Approach to sustainability continued
Our materiality assessment
We assess our material issues every two
years to ensure we report on those that
matter most to our stakeholders.
We carried out our latest assessment in April
2021, speaking to a range of stakeholders,
including customers, employees, shareholders
and legislators. During thisprocess we:
• Incorporated ‘Quality’ into ‘Customer
satisfaction and engagement’ and added
three new topics
• Focused on ‘Communication and training’,
to ensure clear understanding of our
procedures, targets and achievements
during our integration with OMNOVA
• Introduced ‘Digitalisation’ to reflect new
opportunities to use digital technology
toreduce our carbon footprint
• Incorporated product life cycle
intoanew‘Circular economy’ topic.
We sent an online sustainability survey
to400people from our main stakeholder
groups. We received feedback from 37%,
which confirmed that these topics remain
material. Our Sustainability Steering
Committee reviewed concerns and
suggestions raised by the survey to identify
potential areas for action. While we have
made no significant changes, we will give
greater attention to ‘Community engagement’
and ‘Circular economy’.
Understanding our climate-related risks
and opportunities
Climate-related risks have always been
embedded in the principal risks of our Group
risk framework. During the last quarter of 2021,
we expanded the framework to consider
abroader scope of climate-related risks as a
result of the work carried out to report against
TCFD. This helps us better understand what
impact the climate emergency might have on
our business and ensure we remain resilient
toclimate change. See our Risk report on
pages 69 to 76.
In 2021, we met our objective, set out in our
Sustainability Report 2020, to begin reporting
against TCFD. This will help usassess any
future impact on our business arising from
technology changes and the financial impact
of carbon pricing. See pages 77 to 80 for our
TCFDreport.
Materiality assessment chart
Important Very important
Importance to company
Importance to stakeholders
Very importantImportant
21
18
6
23
14
22
20
19
12
15
16
1
2
3
17
11
9
8
7
5
4
24
13
10
Materiality assessment
Products
1 Sustainable procurement page 51
2 Technology and innovation page 48
3 Manufacturing excellence page 54
4 Product safety page 50
5 Customer satisfaction and engagement page 50
6 Circular economy page 48
Operations
7 Occupational health and safety pages 54 and 55
8 Process safety page 56
9 Energy management and reduction page 59
10 Water stewardship page 60
11 Greenhouse gas emissions reduction page 60
12 Waste generation and minimisation page 61
People
13 Ethics and integrity page 66
14 Communication and training pages 65 and 66
15 Employee conditions page 63
16 Diversity and inclusion pages 63 and 64
17 Talent development page 65
18 Community engagement pages 67 and 68
Strategy and governance
19 Sustainable growth pages 26 to 40
20 Risk management pages 69 to 76
21 Digitalisation page 66
22 Responsible and involved management from pages 83 to 129
23 Stakeholder involvement andengagement pages 96 and 97
24 Compliance pages 83 to 129
Synthomer plc
Annual Report 2021
46
External benchmarking and accreditation
We obtain independent assurance of our sustainability practices and performance –
andbenchmark ourselves against our peers so we can better understand our progress and
opportunities for improvement. We do this through voluntary participation in several external
programmes (such as CDP) and by reviewing our ratings on several recognised indices such
asISS ESG.
We engage with, and are assessed by, key sustainability ratings organisations:
We have reported our climate change performance to CDP since
2013 and water management performance since 2015. In2021,
weretained our B- score in both categories.
CDP – D to A (maximum)
We submit annual data to the EcoVadis platform and use its
assessment to identify ways to improve. In 2021, we improved
ourscore from 58 to 63 and retained our silver status. We also
usethe platform to understand the sustainability rating of existing
and future suppliers.
EcoVadis – scale 0-100, medals, bronze to platinum
We have been a member of this organisation since 2004. In 2021,
our overall score was 3.6. We remain committed to our membership
and aim to improve our overall rating as we grow.
FTSE4Good – scale 0 to 5
ISS Corporate Solutions uses a data-driven scoring system and
screening analysis to evaluate our sustainability agenda. Our 2021
overall score was C-. This is the same as our 2020 score and
continues to place us well above average in our peer group.
ISS – D- to B- (maximum for our industry sector)
MSCI measures our resilience to long-term, financially relevant
sustainability risks. In 2021, we scored an ‘A’. This reflects our growing
commitment to continuously improve our sustainability practices.
MSCI – CCC to AAA (maximum)
Factsheet
8 October 2019
1
1.0 Why has it been created?
A growing number of companies generate commercial revenues from
products and services that contribute to positive environmental
outcomes, for example: renewable energy helps to mitigate climate
change; recycling technologies reduce waste such as plastics; zero
emission vehicles contribute to improved air quality.
Asset owners and managers increasingly seek to deploy capital into
these areas, based on expectations of investment returns being
driven by trends such as changing consumer appetites, evolving
technologies and financial risks relating to changing growth models.
The Green Economy is diverse. Companies and investment vehicles
of all sizes, in all geographies and across every industry are part of it.
London Stock Exchange’s Green Economy Mark harnesses the
diversity and breadth of commercial activity in the green economy.
Being cross-sector, no single, specific industrial classification is
relevant.
The Green Economy Mark enables investors to identify an investible
universe of ‘green economy’ equities, enabling a broad exposure,
rather than a focus on one area, such as renewable energy
infrastructure. Less obvious environmental solutions are more visible
and able to attract green or climate aware investors and capital.
2.0 How does it work?
London Stock Exchange’s Green Economy classification and Mark is
available to all equity issuers on all segments of the Main Market and
AIM that meet the criteria outlined below. It facilitates visibility and
investment by addressing the information gap around what
constitutes commercial activity relating to environmental solutions.
The Green Economy Mark (above) identifies London-listed
companies and funds that generate between 50% and 100% of total
annual revenues from products and services that contribute to the
global green economy.
The underlying methodology is the Green Revenues taxonomy
developed by FTSE Russell as part of the FTSE Environmental
Markets Classification System. It identifies industrial sectors and sub-
sectors that are contributors to a greener, more sustainable economy
such as climate change mitigation and adaptation, water, resource
extraction, pollution and sustainable agriculture.
The 50%+ threshold for the Mark recognises businesses who have a
material revenue contribution from the Green Economy. In this way it
includes but also looks beyond ‘pure-play’ green or clean technology
companies to highlight those of all sizes, across all industries, driving
the transition to a sustainable, low carbon economy.
Through its consistent application across London Stock Exchange’s
markets and segments, the Green Economy Mark and Green
Revenue tracking improves visibility to investors and other
stakeholders that are interested in Green Economy activities.
Green Economy Mark
Green Economy Mark
October 2020
We were recognised with a London Stock Exchange Green Economy
mark in July 2021. This is awarded to companies who earn more
than 50% of their revenue from environmental solutions. It is
designed to recognise both green technology companies and
businesses across all industries that are making a significant
contribution to the transition to a more sustainable,
low-carboneconomy.
Our approach
to reporting and
assurance
In past years, we have published a
separate Sustainability Report – the
mostrecent being that for the fiscal year
2020, published in July 2021. Given the
importance of sustainability issues, and
their relevance to our overall business
performance, this year we decided to
incorporate our Sustainability Report
intothe Annual Report, with supporting
technical information published as data
downloads on our website.
This Annual Report, together with those
downloads, meet the requirements of the
Global Reporting Initiative (GRI). We have
prepared them to comply with GRI’s ‘core’
option, and the topics we cover are those
we and our stakeholders have identified as
the most material. The details of specific
GRI disclosures can be found in the annex
on pages 184 and 185.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
47
Business foundations
Synthomer and sustainability continued
Products
Delivering products that meet
the ever-changing needs of
ourcustomers and the markets
they serve is essential for
thesuccess of our business.
It hasalways been our goal
tomake them using efficient
manufacturing processes
andin ways that ensure
theyare safe for people
andthe environment.
Now more than ever we strive to design
products and processes that are less energy
intensive, generate fewer carbon emissions,
use fewer resources, eliminate substances
ofconcern, and support a more circular
economy. And we want to source theraw
materials that we use to make those products
from more sustainable sources. It iswhat
ourcustomers are asking for, and our
otherstakeholders expect. Increasingly,
sustainability will become the benchmark
bywhich we assess every aspect of our
productpipeline and supply chain.
Innovating
sustainable
products
As a leading supplier of water-based
polymers, we have always been proud
ofourability to make products that have
sustainability benefits built into them.
Our speciality chemical products provide
essential building blocks to support modern
life.For decades, we have made most
ofthem ina way that uses water rather than
solvents in their manufacturing and in their
end-use. This helps keep harmful volatile
organic compounds (VOCs) out of the
atmosphere. It istestament to the talent in our
innovation team that we continue to find ways
toadapt our existing portfolio while designing
new products with even greater benefits.
Product sustainability performance in 2021
In July 2021, we received the London Stock
Exchange’s Green Economy Mark, which
acknowledges the fact that more than 50%
ofour revenues come from environmental
solutions. We are proud ofthisrecognition, but
we know there is plenty more to do. It is our aim
to deliver an ever-more sustainable portfolio,
so we have set a product sustainability target
as part ofour Vision 2030roadmap.
We made good progress in our innovation
pipeline in 2021, launching 19 new products,
of which 43% included a defined sustainability
benefit. We also introduced new innovation
awards, including a sustainability category.
See page 33 for more information on our Shield
XSBR technology, which won this award in 2021
byreducing exposure to substances of concern.
Our central innovation team also introduced
asustainability scorecard to assess new
product ideas, and is developing in-house
capabilities to conduct life cycle assessments
on existing and new products. This will help
us improve the way we report on the profile
ofour products and allow us to develop new
products with reduced carbon emissions.
‘We made good progress
in our innovation pipeline
in 2021, despite ongoing
challenges related to
COVID-19 and global
supply chain problems.
For example, we’re
making new products to
replace additives that
contain volatile organic
compounds.’
Marshall Moore
Chief Technology Officer
Setting a new baseline to track
ourprogress
Innovation is one of our five core values and
isan essential part of our plans to achieve
our2030 targets. To track our progress over
the next decade, we need to understand our
baseline. So we used our new sustainability
scorecard to assess all our existing products
and our development pipeline.
This exercise showed that across our
business, 57% of all the new products in
ourpipeline today will deliver a net positive
sustainability benefit. Of those, 50% will
improve carbon emissions or have a positive
impact on the environment, 35% will reduce
the use of hazardous ingredients, and 15%
will help create a more circular economy.
Many of these products will offer more
thanone sustainability benefit.
Our progress
against2030targets
• At least 60% of new products with
enhancedsustainability benefits.
2021
2030
Target
60%43%
Our short-term objectives
2022
• Technology platform to develop
products that contain a minimum of 20%
raw materials that come from low-
carbon sources.
Synthomer plc
Annual Report 2021
48
Our sustainability scorecard criteria
We now assess all the products in our innovation pipeline under four key areas:
Raw materials Eliminating ‘ingredients of concern’ (listed as high hazard or of
regulatory concern)
Using raw materials from lower-carbon sources
Manufacturing
processes
Ability to reduce energy consumption
Ability to reduce water consumption
Ability to reduce waste in our manufacturing processes
Product safety and
support for circular
economy
Product hazard classification (whether a product contains regulated
hazardous ingredients)
End-of-life management (e.g. longer product life cycle, better recycling
or biodegradable properties)
Benefit to supply
chain and
customers
Customers able to eliminate ingredients of concern or lower their
product hazard classification
Helping customers use less energy or water, lower carbon emissions
or waste, support the circular economy, or otherwise meet their
sustainability goals.
We know we will need to move at
rapidpaceto meet our 2030 target.
Ongoing COVID-19 restrictions and global
supply chain problems affected scheduling
ofthe scale-up of new products in our plants
and the ability of ourcustomers to evaluate
them during 2021,resulting in a slower pace
ofcommercialisation that will carry into 2022.
But these delays have not halted progress
altogether. We have a strong base on which
to build, and our integration with OMNOVA
has increased our capacity to design new
products by 50%.
Innovative products for a more
sustainable future
We continued to progress our innovation
pipeline in 2021, designing and making
products that replace ingredients of concern,
have a lower carbon footprint, and help
support a more circular economy.
For example, we continued developing new
products for water-based paints that remove
the need for certain additives. While these
additives help paint spread across a surface,
they typically produce VOCs. Replacing those
additives therefore means we can prevent even
more VOCs from entering the atmosphere.
We are also making products that help
support a more circular economy, such as
our new SyNovus
TM
Plus product line, which
ishelping to recycle rubber gloves into new
applications, including soles for safety shoes.
See page 12 for a case study.
In addition, our central innovation group
carried out initial research in 2021 to evaluate
abroad range of low-carbon-impact raw
materials. This led to a shortlist of raw
materialcandidates with potential for further
development. Our divisional innovation teams
are now exploring technically and
commercially viable opportunities.
Introducing our new product
sustainabilityscorecard
In 2021, we rolled out a new sustainability
scorecard to assess our innovation pipeline
against nine sustainability criteria (see box).
The scorecard is designed to give us a qualitative
indication of the net impact that a product may
have on our overall sustainability performance.
Products are scored on a scale from -5 to +5
(with +5 indicating a highly positive impact) in
each area. Projects that have a negative
sustainability impact score are re-assessed
toidentify approaches to improve the score.
As well as helping us set the baseline for our
2030 target, we are now using the scorecard
toidentify opportunities to improve the
sustainability credentials of existing and new
products, compare them against alternatives,
and share their benefits with our customers.
We have also introduced a similar scorecard to
help our sites assess the potential environmental
impact of large-scale capital projects (see page
42 for more information on this scorecard).
Developing in-house life cycle assessment
We run our major product lines and strategic
new products through external life cycle
assessment to help us understand their
sustainability benefits and identify areas
forimprovement. In 2020, for example, the
European Polymer Dispersion and Latex
Association’s cradle-to-grave life cycle
assessment showed that our key emulsion
polymers (typically used to make awide
range of products, including coatings,
adhesives, construction and non-wovens)
perform better than the benchmark in all
categories. Bureau Veritas has also carried
out a cradle-to-grave life cycle assessment
onour SyNovus
TM
Plus products.
These external assessments are useful,
butthe cost and time needed make them
impractical for evaluating each product of
interest. We have begun a project to develop
new in-house life cycle assessments, starting
with a handful of our biggest-selling products.
These assessments will improve our own
understanding so we can report against
ourproducts’ sustainability credentials on
anongoing basis and continue to develop
new products with even greater benefits.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
49
Business foundations
Synthomer and sustainability continued
Products continued
Product safety
The majority of our products are notclassified
as hazardous, in accordance withthe Globally
Harmonised System of Classification and
Labelling, as they do not haveany components
or additives that require labelling atthe
concentration in which we use them. However,
asmall proportion of what wesell contains
hazardous materials, includingacrylic
monomers. We provide customers with
up-to-date, legally compliant safety data
sheets for all products in all the markets
wherewe operate. In 2021, we had no
reportedincidents of non-compliance
regarding our product safety information,
labelling or marketing.
Less than 2% of our products contain
substances of high concern at a concentration
higher than 0.1%. Wherever possible, we look
for ways to avoid using them at all. For example,
in 2021 we completed the reformulation of our
sustainable coated fabric product line typically
used in healthcare, office and hospitality
furniture, to eliminate ingredients that we know
regulators are increasingly concerned about.
To maintain our focus in this area, eliminating
ingredients of concern isone of the nine
criteriain our product innovation
sustainabilityscorecard.
Our statement on substances of very high concern
can be found at www.synthomer.com
Following the UK’s transition out of
theEuropean Union, Synthomer UK has
completed the grandfathering of its existing EU
REACH registrations into the UK programme.
We submitted more than 500 downstream user
import notifications to the UK Health and Safety
Executive before its 28 October 2021 deadline.
The products thatwe make and/or import into
the UK now comply with UK REACH.
We also conducted a due diligence exercise
to ensure the products we make in the UK
comply with EU REACH. This process
confirmed that all the ingredients in these
products are either sourced directly
fromtheEuropean Economic Area
orareregistered by Synthomer’s
OnlyRepresentative.
All legal requirements regarding provision of
safety information have been complied with,
and we have had no reported incidents of
non-compliance regarding product safety
information, labelling or marketing.
Customer satisfaction
Our innovation and manufacturing technology
teams and sales teams work closely with our
customers to understand the technical and
sustainability challenges they face in their own
manufacturing processes. This helps us keep
improving the products we make for them.
For example, we worked with a USA label
manufacturer to develop grades for clear
filmic labels for use in the USA. We also
helped them expand their business into
Europe, evaluating a new coating line and
transferring our technology from the USA
toour Sokolov site in the Czech Republic.
We track customer complaints as a
measureof our reputation and success
inthemarket. In 2021, we defined a new
‘customer complaint rate’ baseline, to include
our legacy OMNOVA sites within our Group
and divisional performance metrics.
While the COVID-19 pandemic and
globalsupply chain difficulties continued
tochallenge our manufacturing teams, we
significantly improved our customer complaint
performance (number of complaints per
1,000deliveries). We achieved this thanks
toseveral improvement programmes, including
adopting new hygiene best practice guidance
and performing specific process confirmations
for critical-to-quality steps at some of our sites.
As a result, our global complaint rate in 2021
was 4.1. This is more than 30% lower when
compared to 2020.
We also assess our manufacturing
effectiveness via a ‘right-first-time’ rate
andscored 97.4% in 2021. This represents
the percentage of products that are made to
their correct specification inthe first instance.
Here, too, we set new baselines in 2021 to
include our legacy OMNOVA sites in our
performance metrics.
We introduced several measures to
improveperformance at some of our sites.
For example, we rolled out our ‘problem grade
methodology’ to all our new sites. This helps
sites fix the root causes of recurrent product
orprocess quality issues.
We also established a ‘site-supported’
modelfor sites that need specific help.
This increased support from our central
functions that helps sites understand the root
causes of specific issues and provides more
frequent monitoring of site performance and
progress against agreed corrective actions.
This model has helped improve one site’s
right-first-time percentage by 10%, and an
overall Group-level improvement of 0.4%.
Bio-based and circular: Suncryl
®
HP-114
“Our Suncryl
®
HP 114 water-based polymer
contains more than 56% bio-based raw
materials, making it a fantastic example of
how we can replace chemicals made from
fossil fuels with lower-carbon options.
Suncryl
®
HP 114 is used inwater-based
release coatings on paper or plastic
packaging tape (tocreate a non-adhesive
surface that means the tape can beeasily
pulled free) and replaces traditional
solvent-based release coatings. In other
applications, it can be used to replace
release coatings that traditionally contain
silicone. This makes the final product,
suchas a self-wound adhesive label,
morerecyclable. In certain applications like
papertape, it can even be re-pulped and
reused in new paper products. So, it has
real potential to help support a more circular
economy. We’re so excited about that
potential thatwe’re now exploring its use in
other applications, like variable information
print labels, which can be customised
ondemand for fast foodorders or
warehouse shipments.”
Dr Carla McBain
Vice President of Innovation
forFunctional Solutions
Synthomer plc
Annual Report 2021
50
Sustainable
procurement
We are part of a global, highly
complex supply chain. We rely
on our suppliers to provide
high-quality raw materials,
goods and services, such
aspetrochemical monomers
(including styrene, butadiene,
butyl acrylate and acrylonitrile),
additives, packaging,
machinery parts, gas and
electricity to runour plants
andensure our products
meetthe standards our
customers expect.
Our progress
against2030 targets
• 80% procurement spend with
asustainability rating
2021
2030
Target
80%26%
Our short-term objectives
2022
• Audit five key suppliers’ sites
• Ensure that all our highest risk suppliers
adhere to our Supplier Code of Conduct
or equivalent standards
• 20% of procurement spend covered
bya sustainability rating and
improvement plan
2025
• 50% of procurement spend covered
bya sustainability rating and
improvement plan
Our specialist procurement teams around the
world work with thousands of suppliers, and
in 2021 we spent approximately £1.5 billion
with third parties.
In order to move these supplies, as well
asour products, around the world, we have
to buy a range of logistics services across
allforms of transport, including shipping,
railandroad. As well as the large, bulk
shipments, we also buy and sell many raw
materials and products at different quantities,
including what is known as intermediate bulk,
or in drums and small packaging.
Our factories rely on machinery to operate
safely and we need spare parts and site
services to keep them in good working order.
As a large, multinational business we also
need to buy corporate services such as
travel, IT, financial and, where necessary,
weappoint specialist partners to help us.
Our progress in 2021
This year, we have achieved our commitment
tobuy renewable electricity through a
combination of having renewable sources
innew supply contracts, on-site or off-site
power purchase agreements (PPAs),
andthrough the purchase of certificates.
As aresult, 90% of all the electricity our
manufacturing sites and offices use comes
from renewable sources, marking a significant
step forward in driving down our operational
greenhouse gas emissions (GHG).
See page 59 in Operations for more
information on whywe expect to see some
fluctuation in ourrenewable electricity
statistics over the next decade.
We also set important new sustainable
procurement targets and short-term objectives
as part of our Vision 2030 roadmap.
For the purposes of disclosure and reporting,
we gather our Scope 1, 2 and 3 emissions
data together in our Operations section
onpage 60. We provide more detailed
information on the work our procurement
teamdid in 2021 to achieve 90% of our
sitesbeing supplied by renewable electricity
onpage 60.
Tracking supplier sustainability ratings
with new tools
In the past two years, we have taken steps to
strengthen our focus on sustainability within
our procurement processes, including our
sustainable procurement policy, launched
in2020, and our conflict minerals policy.
This year, we invested in a sustainability rating
platform to help us identify sustainability risk in
our supply chain and we have started to track
and report how much of our procurement
spend is covered by a sustainability rating.
We have also revised our supplier risk
assessment processes to include sustainability
risk so that we canuse the platform in the most
effective way. We began using the platform in
2021, andnow have 26% of our spend covered
byarating – some way ahead of our 2022
objective. This is the first time we have
beenable to assess our spend in this way.
The platform also gives us an important
newtool to assess potential suppliers
duringa competitive tender process and
review our existing suppliers against externally
recognised sustainability criteria.
In future, we plan to use the sustainability ratings
platform to help influence and encourage our
important suppliers to identify areas to improve
their performance and sustainability rating.
It will also help us identify suppliers who do
notmeet our minimum requirements.
In the same way, our customers are using
similar ratings platforms to assess us and we
are currently looking for opportunities to keep
improving our business.
Addressing the carbon footprint
ofourraw materials
One of the most significant ways in which
wecan address the climate change impact
ofour products is through the raw materials
that we use to make them. But this is also
oneof our toughest challenges, since many
ofthese are derived from oil and natural gas.
As a result, more than 90% of all our GHG
emissions come from ourupstream supply
chain. However, we arelooking for ways
toidentify and source more sustainable
rawmaterials.
For example, our innovation and procurement
teams are working together to identify and
source alternative raw materials that have a
lower carbon footprint. These could be made
from renewable sources, such as wood
waste, be manufactured in a more energy
efficient way, be sourced closer to our
factories or contain recycled content.
We can introduce some of these raw
materials without significant investment.
One of the first steps we can take is to track
theamount of raw materials with a lower
impact in our supply chain using accounting
principles and external auditing. For example,
if we buy10% of a raw material with a lower
carbon footprint, we can state that 10%
content in our products. This is often referred
toas a ‘mass balance’ approach.
This is becoming an area of increasing
innovation, with growing interest from our
customers and society in general, and it is
something that our teams are working on
closely with our suppliers and customers.
One example of using this mass balance
approach is the opportunity to buy a certain
amount of butadiene made from recycled
orbio-based sources, instead ofvirgin,
fossil-fuel-based sources. We plan touse
thisbutadiene to manufacture our HSSBR
polymers, tomake foam for bedding.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
51
Business foundations
Synthomer and sustainability continued
Products continued
This process is monitored and certified
bytheInternational Sustainability and Carbon
Certification forBiomass and Bioenergy,
under its ISCCPLUS programme.
Once in full production, our customers will be
able to declare a lower carbon footprint for
their own products, using the same or similar
certification programme.
It will take some years for alternative lower-
carbon raw materials to become available
atthe required scale and cost to transform our
supply chains. And it is likely that governments
will introduce further legislation, taxation and
incentives to drive future innovation and
growth, for example carbonpricing.
Updating our policies to set clear
expectations
We will only work with suppliers who act
inaccordance with our new Supplier Code
ofConduct or who have their own codes
andpolicies with equivalent standards.
Our suppliers must also make sure that
theirsubsidiaries and sub-contractors
dothesame.
Our Supplier Code of Conduct sets out our
minimum acceptable standards on issues
such as conflicts of interest, bribery and
doing business in sanctioned countries.
We recognise that our position in our supply
chains means that we have the opportunity
and responsibility to work in partnership with
suppliers, peers and customers to create a
more sustainable supply chain. And as we
continue to grow, we will use our global scale
and increased influence to make an even
greater impact and reduce risk further.
As well as our Supplier Code of Conduct, we
have also published a sustainable procurement
policy, which we developed after completing
our last materiality assessment. The policy
brings together our expectations and targets in
important sustainability areas that are directly
relevant to our suppliers, such as safety, health
and environmental management, diversity
andinclusion, and quality management.
It alsosets out a series of objectives, such
ascommunicating the policy to our
procurement team and stakeholders,
whichwehave achieved.
In October 2021, our procurement leadership
team took part in a dedicated sustainable
procurement workshop to reassess the policy
and set new performance measures that will
help us realise our Vision 2030 targets.
Read our full sustainable procurement policy online
at https://www.synthomer.com/fileadmin/
files/company/group_policies/English/
Synthomer_Procurement_Strategy.pdf
Understanding the risks and
opportunities in our supply chain
As Synthomer continues to grow in a
dynamicenvironment, we need to stay
alerttochanges in the risks and opportunities
inour supply chain. Every year, we carry
outdue diligence to manage the risks related
tobribery and corruption when working with
third parties.
In 2020, we asked external advisers to carry
out an independent assessment of our most
material sustainability risks. The assessment
identified carbon emissions and energy
use,waste generation, and logistics (e.g.
road transport, rail and shipping) as our top
three material sustainability risks. Our existing
measures and tools systematically identify,
control and mitigate these risks. For example,
we have processes in place to ensure we
have alternative suppliers or substitute
materials should we face any issues with
existing orders. When a supply risk occurs
weidentify it as an incident and manage our
responses appropriately. We then apply any
lessons learned from the incident to help
reduce the risk of it occurring again. We have
integrated the assessment’s findings into
ourexisting risk governance processes by
incorporating our largest waste and logistics
suppliers into our sustainability ratings.
We also started using a sustainability
risk-scanning tool in 2021 that helps us
identify existing supply chain risks using
criteria such as geography and industry type.
This tool helps us spot broader sustainability
risks in our supply chain, such as exposure to
bribery and corruption and human rights risk.
We want to continue to improve our risk
assessment process and are exploring
waystocreate stronger connections between
our Group and local site risk assessments.
This will allow us to better understand the
supply chain risks we face at a local level, and
our central procurement team is now working
closely withour sites on this issue.
Taking a lead on sustainability issues
inoursupply chain creates competitive
advantage. Like us, our customers are
lookingfor suppliers who are committed
tosustainability. That is why our innovation,
manufacturing and procurement teams are
focusing on areas where we can increase
ourproduct sustainability and energy
efficiency, and lower our carbon footprint.
The improvements we are making in the way
we collect and analyse our sustainability data
and use that information to make decisions
will help us demonstrate progress and build
our reputation.
Upholding human rights in our
supplychain
We believe everyone has the right to be treated
with dignity and we respect and recognise
human rights for all as outlined in the
International Bill of Human Rights. We are also
committed to acting in a way that meets the UN
Guiding Principles on Business and Human
Rights. Our Group-wide diversity, human rights
and equal opportunity policy isaligned with
the UN’s Sustainable Development Goal 8.
We work in parts of the world where the
riskof human rights abuses is higher than
others. These risks are also higher in certain
sectors, such as road transport logistics,
construction and temporary sitework.
Synthomer plc
Annual Report 2021
52
We do not tolerate modern slavery
andhuman trafficking in any part of our
business or supply chain, as outlined in our
2021 Modern Slavery statement. We expect
our suppliers to comply with all domestic
employment legislation. They should also
follow the International Labour Organization
(ILO) conventions and protocols and the
United Nations’ Universal Declaration of
Human Rights that are relevant to their
activities. These include:
• Not using forced or slave labour, or
anyother form of involuntary labour
• Complying with all child labour laws,
andbeyond that, not employing anyone
under the age of 15
• Not allowing any activity that restricts
freemovement.
In 2020, we rolled out an updated due
diligence process to a small number of our
suppliers in China. In future, all new suppliers
in China will have to complete this due
diligence in order to work with us.
As part of our ongoing work to standardise
the way we qualify new suppliers, we moved
our North America processes onto our global
qualification platform in 2021. This platform
contains a standard set of qualification and
due diligence questions plus supporting
evidence that the procurement team can
useto review and qualify suppliers. In all,
31sites now use the platform, and we have
plans forthe remaining seven to join within
the next two years.
Read our Modern Slavery statement online at
https://www.synthomer.com/fileadmin/files/
company/group_policies/English/Modern%20
Slavery%20Statement%202020.pdf
‘The steps we are
takingwill make
sustainability part of
everything we do in the
procurement function.
This is transforming
theway we do business
and will help to lower
thecarbon impact
ofoursupply chain
ontheplanet.’
Dr Steve Blackburn
Vice President, Group Procurement
Our commitment to avoid using
conflictminerals
Our conflict minerals policy commits us
toavoiding the use of conflict minerals in
allouractivities. This is relevant for gold,
tin,tantalum and tungsten, known as 3TG
minerals, which can be mined in parts ofthe
world where armed conflict and human rights
abuses are known to take place.
We continually assess our 3TG minerals.
This includes tin, which we use in one of
ourmanufacturing processes and is also
presentin other materials that we use,
suchas catalysts.
Our policy also outlines our expectations of
our suppliers, which includes conducting their
own due diligence to verify the origin of their
materials and provide certification under
recognised initiatives.
Read our full conflict minerals policy online at:
https://www.synthomer.com/fileadmin/files/
company/group_policies/English/Conflict%20
Minerals%20Policy%20Statement%20
Dec%202019.pdf
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
53
Business foundations
Synthomer and sustainability continued
Operations
We strive to make our
productsin ways that keep
ouremployees, contractors
and communities safe.
Our ultimate goal is to have
zero accidents and no adverse
impact on the health of our
employees or the people
wholive near our sites. It is
also our goal to minimise the
environmental burden of our
activities and to reduce the
consumption of resources.
As the world responds to the climate
emergency, it is more urgent than ever
thatwe play our part and address the
environmental impact of our operations.
So,while we continue to use our innovation
skills to make ever more sustainable
products, we are also optimising our
manufacturing processes to lower our
carbon, water and waste footprint.
We took an important step in 2020 when we
announced our commitment to reach net zero
by 2050, in line with the Paris Agreement.
Now, our Vision 2030 roadmap, launched in
2021, sets out the path we will take to turn
that commitment into a reality. The roadmap
is made of a series of targets and short-term
objectives, and our SHE-specific targets can
be found in their relevant sections.
Embedding SHE at every level
ofthebusiness
At Synthomer, everyone is responsible for
SHE and we want everyone who works with
us to feel able to speak up if they see unsafe
or harmful behaviour. All our sites must align
their processes and policies with our
Group-wide Safety, Health and Environment
Management System(SHEMS).
Our President, Operations is responsible for
internal SHE performance and management
at an executive committee level. He is
supported by a Global SHE Director and
asmall global team, as well as a SHE
networkthat includes heads for each
division.This network also supports site
leaders and local SHE teams.
Working with suppliers to meet operational
SHEstandards
We expect our suppliers to work in a way that complies with our Group SHE policy and
requirements, as set out in our sustainable procurement policy. This includes making sure
suppliers have effective health, safety and environment management systems in place that
are appropriate to the nature and scale of their business. We are also starting to gather data
that will help us consider the carbon footprint of suppliers’ products and processes when
making our procurement decisions.
Read our full sustainable procurement policy online at https://www.synthomer.com/fileadmin/files/
company/group_policies/English/Synthomer_Procurement_Strategy.pdf
See page 51 for more information on working with suppliers.
Our SHE management systems
We certify our management systems against several externally recognised standards
and initiatives:
• ISO 14001: today, all our operating sites are either covered by the Group’s ISO 14001
certification or have site-specific certificates in place.
• ISO 50001 Energy Management System: our UK, German, Czech and Le Havre,
France sites are accredited to this standard. We continue to apply the lessons we have
learned from this structured approach to other sites around the world.
• ISO 45001: two of our sites in Italy and one in the Czech Republic comply with this
standard to meet legal requirements.
• ISO 9001: 93% of our sites are covered by the Group’s ISO 9001 certification.
Our SHE management systems, including those aspects linked to ISO 9001 and ISO 14001,
cover common areas found within ISO 45001. Given that our internal audit processes look
at all aspects of SHE management and the confidence we have in these processes, we do
not intend to certify the Group to the ISO 45001 standard.
We align our management systems with the global chemical industry’s voluntary
Responsible Care
®
programme to drive continuous improvement in safe chemicals
management. In addition, seven sites in the US are conforming to the requirements of
theAmerican Chemistry Council’s RCMS
®
. We are also a long-term signatory of the UK
Chemical Industries Association’s (CIA) sustainable development guiding principles.
Synthomer plc
Annual Report 2021
54
Health and
safety
Keeping our people and contractors safe is
our highest priority. It is enshrined in our core
SHE value that states ‘we always have time
towork safely’. And it is the most mature
aspect of all our sustainability activities:
ourglobal employee survey tells us that
employees understand our safety messages
and their responsibilities (see page 65 for
more onemployee engagement). We have
incorporated occupational health and
processsafety targets within our
Vision2030roadmap.
recent years, we must continue to improve
toreach our ultimate aim of ‘zero’.
In 2021, our recordable injury case rate (RCR)
fell to 0.31. This is largely due to improved
performance at our former OMNOVA sites,
which saw RCR fall from 0.64 in 2020 to 0.47.
In all, we recorded 34 injuries in 2021, versus
37 in 2020.
During the year, we reported no cases
ofdisease caused by occupational factors
and there were no accidents resulting in
fatality or permanent disability.
Our occupational safetyperformance
Recordable accident case rate
Accidents per 100,000 hours
0.31
0.36
0.20
0.23
0.13
2021
2020
2019
2018
2017
Synthomer acquired OMNOVA in 2020
We track our recordable accident case rate
(RCR) forinjuries that need more than first aid
treatment. Our figures include employees and
contractors working at our sites, as well as
short-stay visitors, such as truck drivers and
cleaners. While our metrics are in line with the
USA OSHA standard, wereport our RCR per
100,000 working hours, instead of the OSHA
standard of 200,000. This isforhistorical
reasons linked to UK HSE reportingmetrics.
Continuing to support our employees
through COVID-19
Throughout 2021 we adapted to living with
COVID-19, managing occupational health
bycontinuing to operate in line with local
guidelines. In countries where employees
could return to our offices, we put in
additional measures, such as one-way
systems at our sites, temperature screening,
limits on the number of people in common
areas and more frequent cleaning of common
contact points, such as door handles.
At ouroperational sites, we continued to
carryout COVID-19 risk assessments and
routine testing.
This was particularly important in Malaysia,
where infection rates rose quickly across
thecountry and at our sites. We introduced
weekly PCR testing at all our sites and
distributed face masks to all employees
everyFriday for use outside work.
We alsoprovided extra disinfection
andhygiene products on site, and every
twoweeks handed out products to take
home. As aresult, our COVID-19 infection
numbers inMalaysia fell steadily throughout
theyear.
Later in the year, we participated in
thegovernment’s national vaccination
programme, and 100% of our Malaysia
employees were fully immunised. This allowed
us to increase employee capacity at our sites,
inline with ongoing national rules.
Occupational safety
We want our employees to go home safely at
the end of every day. While we have reduced
the number and severity of injuries over
Our progress
against2030 targets
Recordable accident case rate
0.20 per 100,000 hours for employees
andcontractors
2021
2030
Target
0.20
0.31
Process safety event rate (PSER)
(per100,000 hours for employees
andcontractors)
2021
2030
Target
0.10
0.16
Our short-term objectives
2022
• A recordable injury case rate of 0.30
• A process safety event rate of 0.14
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
55
Business foundations
Synthomer and sustainability continued
Operations continued
Process safety
It is essential that we keep our equipment and
plants in good working order to help prevent
process safety related incidents. We also
strive to prevent the unexpected release of
dangerous chemicals in our manufacturing
processes. To that end, we carry out routine
inspections and maintenance at all our sites
that help us spot warning signs so we can
address problems before they occur.
Our process safety event rate (PSER)
roseto0.16 in 2021 (versus 0.10 in 2020).
In our legacy Synthomer businesses, our
PSER rose to 0.13 (2020: 0.11) and at our
former OMNOVA sites we saw a rate of 0.23.
All of our reportable PSEs this year were
releases which we contained on site. None of
them caused injury, damage or environmental
harm. One-third of our PSEs occurred at one
site in the USA. In 2022, we will introduce a
transformation project to help the site rapidly
improve its performance.
Synthomer monitors, reports and investigates
all spills, ranking any loss against the
associated hazard of the material involved,
aswell as quantity spilled, where the spill
occurs and its actual impact.
Preventing and managing the loss of any
material (hazardous or otherwise) is an
important part of our SHE approach, which
iswhy we include it in our key performance
indicators. We analyse the root causes, such
as human factors or types of mechanical
failure, to identify appropriate site, business
orGroup-level actions to reduce the potential
for recurrence.
In 2021, we recorded 23 spills in our top
twotiers (covering reportable PSEs, high-
scoring loss of containment and reportable
environmental losses). None of these
spillshadan impact on the environment.
Throughout 2021, we used our process safety
confirmation routines to help assure ourselves
that employees who carry out critical
operations have the correct knowledge and
understanding of what they should be doing
and how to respond to abnormal situations.
We ran Group process safety training courses
at our legacy OMNOVA sites in theUSA and
Portugal, to explain the fundamentals of our
process safety standard, principles and
golden rules. We also worked with site teams
to identify the barriers they have in place to
prevent, control and mitigate identified
potential major accident scenarios.
We also carried out a review of our data
relating to flammable losses of containment
and tracked what are known as ‘weak signal’
PSEs, including reports of mischarge, high
pressure, loss of cooling and failed reactions.
These signals indicate weaknesses in our
barriers that could lead toa significant PSE.
After analysing mischarge events in 2021
within one business division, we developed
aself-assessment questionnaire tool.
This isnow being used by all our sites to
identify possible weaknesses in engineering,
organisational or procedural controls that
increase the risk of mischarge and action plans
are being developed to close these gaps.
Our 2021 process safety performance
Process safety event rate
Events per 100,000 hours
2021
2020
2019
2018
2017
0.16
0.10
0.11
0.14
0.19
We record, rate and track our PSEs using a four-tier
scoring system. Tiers 1 and 2 (with tier 1 being more
severe) meet the International Council of Chemical
Associations’ (ICCA) definition of a ‘reportable PSE’.
Tracking and auditing SHE performance
We collect, analyse and report on industry-
recognised leading and lagging indicators,
such as recordable injuries, reportable
process safety events andnear misses.
We record all incidents inour Group-wide
accident and incident management system
database. And we track our near misses on
amonthly basis. This is astandard measure
in our industry and one we use to identify
occupational and process safety issues
before they become significant events
sothatwe can continue to improve our
processes and barriers.
While COVID-19 made it difficult to carry out
in-person site audits, we were able to carry
out remote auditing at eight sites, using digital
collaboration tools to work with sites and
review their systems and documentation.
Towards the end of 2021, we reintroduced
face-to-face audits at three of our sites.
Integrating a new business during a pandemic
“Integrating a new business under normal
circumstances involves a lot of time and
care. It’s not just about introducing new
policies and processes, although that is an
important partof the process. We also want
to help our new colleagues understand why
our standards are so important to us so that
we can create a drumbeat of safety and a
consistent culture across our sites, so that
everyone is working towards our 2030
target for top-quartile performance.
This work has been even more challenging
during our integration with OMNOVA, since
ithas taken place in the middle of the
COVID-19 pandemic. Ordinarily, our teams
would be working on site with our new
colleagues to help embed our SHE culture.
Throughout the year, the corporate team
delivered hundreds of hours of virtual
training and support to sites globally, and in
November we held a global ‘virtual’ SHE
conference with well over 150 attendees to
share good practice and improvement goals
for 2022. It has been a challenge for
everyone, but I think we’ve achieved ahuge
amount under very difficult circumstances.”
Phil Wrigley
President, Operations and SHE
Synthomer plc
Annual Report 2021
56
Managing health and safety with strong
systemsand behaviours
Safe operations rely on clear processes and systems, and responsible behaviours.
Everyone at Synthomer is accountable for keeping themselves and others safe – from
ourleaders to our site operators – and anyone can lead by example, regardless ofseniority.
The combination of our SHEMS, safety leadership training and employee engagement help
us stay vigilant:
Action Our expectations What we did in 2021
1. A strong SHEMS Every site must align their standards and
policies against SHEMS.
We conduct Group SHEMS audits over
athree-year cycle and expect sites to
self-assess against changes and report
non-conformance.
Carried out 11 Group
SHE audits, 8 remotely
due to travel restrictions
and 3 in person. Two
SHE audits were carried
out on our behalf in
China by a third party.
2. Great leaders
who are
accountable for
people,
equipment and
the environment
Our leaders must commit to our targets,
demonstrate key safety behaviours and be
open to change.
To increase our focus on
safety we carried out
competence assurance
for two-thirds of our new
site leaders.
3. Employee
engagement
andtraining
Everyone is accountable for safety at
Synthomer and we expect our employees to
identify and address specific risks and
adopt key behaviours.
Employees must follow our 10 SHE
principles and our golden rules.
Site leaders must host quarterly safety
committee meetings with employees to
discuss local safety issues.
We introduced two new
shopfloor engagement
tools at our sites:
Workplace engagement
checklist to identify and
address specific on-site
occupational health
hazards.
Embedded process
safety confirmation
routines to provide
assurance that
procedural and
organisational barriers
against major accident
hazards remained robust.
Sharing lessons learned across
Synthomer
Our 2021 global employee survey continued
to demonstrate that our safety messages
arewell understood across the business.
(Seepage 65 in our People section for
moreon our 2021 Your Voice survey).
Sharing knowledge, tools and processes
isanessential part of how we make sure
wecontinuously improve in safety. That includes
creating an open culture inwhich our employees
feel able to discuss data and progress.
In 2021, we introduced new measures to help
our leaders and operational teams learn from
one another. We introduced new regional
process safety networks which meet on a
monthly basis to discuss performance and
exchange good practices. Additionally, we
have rolled out our ‘Yellow Book’ of common
injuries across all our sites and continue to
share root causes of high-profile incidents
internally, as well as lessons learned from
major industry incidents.
Other regular knowledge-sharing activities
include ‘code red’ calls for site leadership
teams which take place after any significant
incident or series of related events, and our
annual global health and safety conference.
We also look for opportunities to share good
practice with our industry peers. For example,
we shared some of the tools we have developed
to manage the COVID-19 pandemic, such as
on-site lateral flow testing programmes, with
Chemical Industry Association members via
their weekly COVID-19 operational calls.
Maintaining our focus as we grow
As we grow and integrate new businesses,
we want to ensure that we continue to embed
consistent, high-quality safety standards and
processes across the Company. But this
takes time, and we expect our metrics to
fluctuate over the next few years as we carry
out this work. While our Vision 2030 targets
represent top-quartile industry performance,
they also reflect this expectation.
We have seen this most recently during
theOMNOVA integration. While our 2021 SHE
incident rates are higher than expectations,
we have reduced the gap, thanks to our SHE
experts and legacy OMNOVA colleagues.
Together, they havefast-tracked gap analysis
and action plans andintroduced a new
dashboard, which we will complete in 2022,
to track progress againstnine core safety
elements, includingcompetence, legal
compliance, employeeengagement and
process safety.We also carried out site
leadership competency assurance for
two-thirds of our new leaders to ensure they
have the knowledge and understanding of the
major hazard risks and required controls to
keep our plants safe while we keep improving
our performance. We will assess the rest
ofour new site leaders during 2022.
We are particularly pleased with progress atone
of our sites in Portugal, which had theworst
occupational safety performance anywhere
inSynthomer, with eight recordable injuries
in2020 alone. As well as the dashboard and
training, we established a dedicated SHE
transformation team, deploying on-site
resources to help develop and introduce 90-day
targeted improvement plans. These plans cover
all aspects of occupational and process safety,
and included implementing new systems for
permit to work and management of change,
carrying out process hazard assessments
and reviewing risk assessments. The team
also strengthened existing workplace
engagementactivities and introduced
newones. As a result, the site experienced
one recordable injury in2021.
We are now using the lessons we have
learned from Portugal and our broader
integration work to create a more structured
safety programme to help new and existing
sites that require specialist support. This will
be important in the coming months as we
integrate the Eastman’s Adhesive Resins
acquisition and begin the process of
embedding all our SHE standards and
processes into our newest sites.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
57
Business foundations
Synthomer and sustainability continued
Operations continued
2021 environment
highlights
• Installed new gas boilers to allow closure
of the coal-fired power station
• 90% of total electricity used at our sites
is now renewable
• Total CO
2
equivalent emissions
decreased by 34% vs 2019
Our progress
against2030 targets
40% reduction in Scope 1 and 2 GHG
emissions intensity (vs 2019)
10% reduction in Scope 3
emissions intensity
(vs 2019)
2021
2030
Target:
34% 40%
80% of our Electricity from
renewable sources
plus improving energy
efficiency in all our operations
2021
2030
Target:
80% 90%*
Externally assessed 2021 Scope 3
data is not available on time for the
publication of this report. For
reference our 2019 Scope 3 upstream
emissions baseline is 1.79 tonnes
CO2e /produced tonne.
Please see our online data pack.
*Fluctuations in the EAC market mean
this figure may rise and fall between
now and 2030. PPAs will become
increasingly important to our energy
management approach.
10% reduction in Scope 3
emissions intensity (vs 2019)
Externally assessed Scope 3
emissions data for 2021 was not
available at time of publication, but
our data pack can be downloaded via
our website. For baseline Scope 3
emissions data, please see our 2020
Sustainability Report, which can also
be accessed on our website.
2030
Target:
10%
2030
Target:
10%
10% reduction in Scope 3
emissions intensity
(vs 2019)
2021
2030
Target:
34% 40%
80% of our Electricity from
renewable sources plus improving energy
efficiency in all our operations
2021
2030
Target:
80% 90%*
Externally assessed 2021 Scope 3
data is not available on time for the
publication of this report. For
reference our 2019 Scope 3 upstream
emissions baseline is 1.79 tonnes
CO2e /produced tonne.
Please see our online data pack.
*Fluctuations in the EAC market mean
this figure may rise and fall between
now and 2030. PPAs will become
increasingly important to our energy
management approach.
Our short-term objectives 2022
• Reduce Scope 1 and 2 intensity by 20%
• At least 50% of total electricity
consumption from renewable sources
• Improve specific energy efficiency by 5%
• Evaluate Scope 3 emissions from three
suppliers of our four main raw materials
• Define medium- and long-term plan to
reduce Scope 1 and 2 emissions
Environment
Our water-based polymers help keep harmful
volatile organic compounds (VOCs) out of the
atmosphere. However, the raw materials and
manufacturing processes we use to make
them can have a negative impact on the
environment – with more than 90% of all
ouremissions coming from our supply chain.
We rely on monomers to make our products.
These molecules are traditionally made from
fossil fuels, which requires a significant amount
of energy in the conversion process. As the
energy still mainly comes from non-renewable
sources, our monomers carry associated
carbon emissions along the value chain.
We also use a lot of water in our products
andprocesses and require energy to transport
our products around the world.
We must find ways to address all these areas
ifwe are to realise our net zero ambitions.
It isalso good business: our customers are
increasingly interested in the sustainability
benefits of our products.
More information on how we are improving
the sustainable benefits of our products can
be found on pages 48-53.
Defining our ambitions
This year, we set new environmental targets in
areas where we can make the biggest impact,
which includes water as well as carbon.
These targets are part of our Vision 2030
roadmap and are supported by short-term
objectives to help us track our progress
(details can be found in the relevant sections).
In 2022, we will also complete the work to
determine new science-based targets in line
with the objectives we set ourselves in our
2020 Sustainability Report.
We laid a lot of groundwork in 2021 to
improve how we track and report our
environmental data, as well as continuing
todevelop projects that help tackle our
environmental footprint. For example we:
• Met our objective to introduce a new
sustainability scorecard to help sites
assessthe potential environmental
impactof large-scale capital projects
• Launched a new environmental dashboard
to provide more accurate, frequent
environmental data at Group, divisional
andsite levels
• Began assessing options to develop our
own internal product life cycle assessment
(LCA) programme.
Synthomer plc
Annual Report 2021
58
‘This year has been about
setting ourselves new
environmental targets
and laying important
foundations. Now we
must get to work to
achieve those targets.’
Guy Scudder
Sustainability Manager, Group Operations
Introducing our project
sustainabilityscorecard
Following on from the successful roll out ofour
product sustainability scorecard (seepage 49),
we have introduced a similar scorecard to
assess capital projects. We will now review new
projects against six criteria, including energy,
emissions and water, scoring each criteria -5 to
+5 (+5 representing the biggest positive impact).
Projects with higher scores will be considered
more favourably during our screening and
approval processes. In 2022, we will also look
at incorporating a carbon price into this
process to help align our projects with our
Vision 2030 targets and net zero ambition.
Updating our reported environmental data
This year, we are reporting metered electricity
instead of primary electricity.
We have amended our 2019 baseline values
toreflect changes in our Company. In the first
quarter of 2021, we sold one site, stopped
production at a second and closed an office.
We have removed associated data from our
calculations to provide a more accurate
comparison. We have also made some minor
modifications due to reporting mistakes during
2019 and 2020. The impact is limited (between
1-3% depending on theKPI).
Our energy use and carbon footprint
Our absolute and specific energy
consumption rose this year by 4.7% and
2.4%respectively versus our 2020 numbers.
While our energy performance is not yet
where we would like to be, we have, however,
made excellent progress in reducing our
GHGemissions. At the end ofthe year,
wecompleted the installation ofnew highly
efficient gas boilers at our plantin Sokolov,
Czech Republic. Commissioning began
inDecember 2021 with full operation
inFebruary 2022, allowing us to close
ourcoal-fired power station. This eliminates
coalas an energy source from all our global
operations and willsignificantly reduce
ourScope 1 emissions in 2022.
Our second milestone saw a dramatic fall
inour Scope 2 emissions – testament to
thework from our procurement teams to
buycertified renewable electricity. We now
have 90% of renewable electricity usage
inour sites. This is well ahead of our
short-term2022 target to reach 50%.
The increase in both absolute and specific
energy consumption compared with the
previous year is related in part to changes
inproduct mix, with increased production
ofsome higher-energy-intensive products.
Several of these products have downstream
sustainability benefits for our customers.
Meanwhile, our laminates and films sites
sawincreased demand, which led to higher
energy consumption, and on the Group-wide
intensity metric, a poorer performance.
Other factors also affected our 2021
performance, including higher than average
demand for our products in some countries.
Keeping our plants full can typically lead to
greater energy efficiency. However, the need
tomaximise production at one of our sites
meant we hadto introduce more intensive
cooling, and,therefore, higher relative energy
use, toreduce cycle times in our reactors.
Meanwhile, our operations were affected
byongoing COVID-19 restrictions in countries
such as Malaysia and Vietnam and the
Texaspower crisis in February 2021,
whichled to supply chain difficulties
andstop/start operations.
As well as our project to install new gas
boilers at our plant in Sokolov, we expect
several other projects to help reduce our
energy use by at least 3% during 2022.
We are also planning to carry out detailed
energy diagnostic work and develop site-level
decarbonisation roadmaps, both of which
willhelp us identify further opportunities
forimprovement.
In future, we will expect our suppliers to
provide us with carbon metrics associated
with their products so that we can report
onthe carbon footprint we are passing on
toour customers.
See pages 51-53 in our Products section
formore information on the work our
procurement teams are doing to help us
address Scope 3 emissions and support
amore sustainable supply chain.
While we no longer include VOCs in our GHG
calculations, we do continue to monitor them.
We aggregate our number on a Group basis
and convert them to a carbon dioxide
equivalent (CO
2
e), using a factor of 11 – a
figure used by UK CIA member companies
since 2005. CO
2
e emissions associated with
VOCs in2021 were 6,548 tonnes (18%
increase vs2020).
We collect data on the release of refrigerant
gases and aggregate these tocreate a Group
total. We convert each reported release into
aCO
2
e value using therelevant DEFRA GHG
factor for the refrigerant inquestion. These
are included as Scope 1 emissions. In 2021,
they accounted for 1,805 tonnes, a 7%
increase versus 2020 and 30% reduction
versus our 2019 baseline.
Total metered energy use
Gigajoules (GJ) per sales production tonne
2021
2020
2019
2018
2017
3.16
3.09
3.08
2.47
2.51
See annex on pages 182-183 for our
UK-specific energy use data.
Metered energy use by division
GJ/tonne
1.96
2.28
10.68
Performance Elastomers
Industrial Specialities
(includes Acrylate
Monomers)
Functional Solutions
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
59
Business foundations
Synthomer and sustainability continued
Operations continued
Our progress
against2030 targets
• Manage and minimise water
consumption at all locations.
Introduce water management plans in
water-stressed areas and highest
consumption sites.
Our short-term objectives
2022
• Maintain water consumption at 2019
levels
• Carry out gap analysis of water and
effluent monitoring abilities at key sites.
We agreed a new Group-wide water
policywith our Sustainability Committee,
whichwas approved by our Board
inDecember 2021.
Our water policy can be found online at
https://www.synthomer.com/company/
corporate-responsibility/group-policies/
To address present and future challenges, we
carried out third-party-assisted assessments
at two of our seven sites located in water-
stressed areas. These assessments explored
the potential to introduce more extensive
water and automated metering and
infrastructure monitoring, as well as
optionstoassess the sites against the
Alliance for Water Stewardship framework.
We will continue this work throughout 2022,
exploring options at some of our other key sites,
as well as developing upgrade proposals and
assessing water balances and opportunities
to reduce and reuse water.
Our water performance in 2021
Overall, we saw an 8.6% increase
intotalwater withdrawal at our sites.
Overall production rose 2.2%, which led
toa6.2% increase in specific water use
in2021 versus 2020, and 8.6% versus our
2019 baseline. Our water withdrawal statistics
rose in 2021, with our most significant
increases occurring because of specific
events at some of our Synthomer sites.
For example, in France and the UK, we saw
rises at two of our sites due to the impact
oflow rainfall on our reserves and the need
toensure we had water available for water
treatment and effluent dilution. We saw
ourmost significant increase at one of our
German sites, which is currently using river
water for ‘once-through’ cooling. A 13% rise
in production combined with relatively warm
temperatures meant the site had to increase
its water withdrawal by 25% to meet its
cooling needs. The site has now set up a
project to assess alternative, more efficient
options for cooling.
Scope 1 and 2 emissions (hybrid approach)
Tonnes CO
2
equivalent released per sales
production tonne (includes CO
2
from energy
generation and use), and refrigerant losses.
2021
2020
2019
2018
2017
0.153
0.216
0.232
0.195
0.201
Scope 1 and 2 emissions by division
tonnes CO
2
e/per sales production tonne
0.079
0.102
0.610
Performance Elastomers
Industrial Specialities
(includes Acrylate
Monomers)
Functional Solutions
Scope 1 and 2 – location-based and market-
based – GHG emissions have been verified
bya third party.
See page 183 for information on our reporting
methodology.
Scope 3 emissions
In 2021, we worked with a third-party
specialist to establish our Scope 3 emissions
forthe whole Group. This involved analysing 15
categories that contribute to these emissions.
Given the diversity in application and end
markets for our products, we do not have
sufficient visibility of the emissions associated
with processing our products andtheir
end-of-life treatment.
Preliminary data from this assessment
indicates that, overall, in 2021, our Scope 3
emissions were up to 10%* lower versus our
2019 baseline. This is largely due to reduced
carbon intensity in the mix of monomers we
used during the year.
Scope 3 emissions account for more than 90%
of Synthomer’s total emissions and of those,
more than 90% come from the goods and
services we buy. Which means that upstream
categories are most relevant to our business.
Our innovation and procurement teams are
actively looking for alternatives that could help
rapidly reduce our Scope 3 emissions.
Read our full Scope 3 emissions report in our
online data pack.
* The actual percentage will be subject to change
when presented in the data pack.
Changing our approach to energy
toaddress future emissions
Renewable energy attribute certificates
(EACs) are traded on the open market and
helpcompanies like ours prove that our
electricity is made from renewable sources.
While buying certificates in this way is a
well-established process, it is just one of the
ways in which we are increasing the amount
of renewable electricity at our sites. We have
also set up new supply contracts and on- and
off-site power purchase agreements (PPAs),
with solar panels installed at several of our
sites around the world and a long-standing
PPA at our site in Stallingborough, UK.
EACs are a significant part of our short-to
medium-term energy plans but, as a traded
commodity, their price may rise and it may
become more difficult to buy them in future
as more companies enter the market.
Fluctuations in the EAC market mean that
while we hit our 2030 target this year, we
anticipate seeing this figure rise and fall
between now and 2030. That is why, in the
longer term, PPAs will become increasingly
important to our energy management
approach. But they will take time to set up.
Replacing natural gas is harder, since we
needit to generate the heat required to
powersome of our chemical processes.
We do have an advantage, since our
processes run at relatively modest
temperatures. Here, too, we have the
optionin future to switch to renewable
electricity. Some options, such as electric
boilers, could involve significant capital
investment, however.
In the meantime, we are exploring possible
options that could help us capture and use
more of the excess heat that is a by-product in
our exothermic reaction processes, and setting
up projects to improve our energy efficiency.
For example, at our largest site in Malaysia,
projects are underway to optimise the way
weuse our chillers through improved data
monitoring and process control, with the aim
ofmaking them 5-10% more energy efficient.
We also have an opportunity to become
muchmore energy efficient as we grow.
Integration allows us to improve production
processes or upgrade equipment at new sites,
while introducing our standard tools, policies
and processes to embed Synthomer’s culture
of manufacturing excellence. All our existing
sites in theUSA have signed up to the
Department ofEnergy’s ‘Better Climate’
pledge to reduce emissions and improve
energy efficiency by25% over the next
10years.
Water
We need a significant amount of water to make
our polymers, which help avoid more harmful
solvents entering the atmosphere. We also use
a lot of water in our manufacturing processes,
such ascoolingand steam generation.
Given ourconsiderable reliance on water,
wehave a particular responsibility to use
thisnatural resource carefully.
Synthomer plc
Annual Report 2021
60
At our legacy OMNOVA sites, a combination
ofhigher production (compared with 2020)
meant that our absolute volume increased.
However, some sites saw a double-digit
improvement in their specific water use. As a
whole, these sites saw a 4.9% improvement
in water withdrawal compared to 2020.
We estimate that leaks in our water lines
accounted for 10-15% of our net additional
water withdrawal this year. As part of our
commitment to our new water policy, we
arelooking to improve the way we monitor
sites and establish more effective leak
management programmes. Together, this
should help reduce the risk of leaks as well
asminimising their impact in future.
Total water withdrawal
m
3
per sales production tonne
2021
2020
2019
2018
2017
4.39
4.13
4.04
3.90
3.79
Water withdrawal and consumption
bydivision
m
3
per sales production tonne
2.33
1.11
5.45
0.80
9.02
2.72
Performance Elastomers
Industrial Specialities
(includes Acrylate
Monomers)
Functional Solutions
Withdrawal Consumption
Waste
Our sites look for ways to reduce waste at
source. For example, our site in Le Havre,
France, reduced material out of specification
by morethan 350 tonnes compared to 2020.
Sites also look for opportunities to support
amore circular economy, by recycling and
recovering waste where possible or finding
potential buyers for waste streams. We are
also developing several projects to identify
ways in which we might reduce and treat
thethree most significant hazardous waste
streams within our Industrial Specialities
division, which account for more than
one-third of our Group total.
Our waste performance in 2021
We made changes to our 2019 baseline and
our 2020 numbers to remove waste figures
from sites that have been closed and sold in
the first quarter of 2021. This resulted in a
reduction of about 1.1%. Our 2019 baseline
and 2020 data also reflect corrections to
reported data. This includes one significant
waste stream inChina, which we previously
reported as wastebut was, in fact, recycled
at our site. This reduced our waste figure
byafurther 1.7%.
Our total waste in 2021 was higher than 2020,
due, in part, to a 2.2% increase in production
across the Group. We saw a particular rise in
total hazardous waste because of two one-off
events – the disposal of old contaminated soil
and raw materials, and the disposal of used
solvent from one of our sites after we were
unable to identify a secondary buyer. We also
saw an increase at one of our sites in the USA
after we identified gaps in our historical waste
tracking amounting to 850 tonnes total waste
and 500 tonnes of additional landfill waste.
With more robust measurement, tracking and
analysis of our data now in place, we do not
expect to identify errors of this kind in future.
Overall, the outlook against our 2019 baseline
remains positive, with total waste around 15%
lower on an absolute and per tonne intensity
basis. Meanwhile, waste to landfill is down
17% per tonne ahead of our 2022 objective
of12%. This overall trend reflects product
quality improvements at a number of sites,
aswell as greater re-use of by-products that
we would previously have disposed, and
projects to reduce solid waste generated
byour wastewater treatment plants.
Total waste
Kg per sales production tonne
2021
2020
2019
2018
2017
23
22
27
22
19
Our short-term
objective to reduce
waste:
2022
• 12% reduction of waste to landfill per
produced tonne
Waste disposal to landfill
Kg waste per sales production tonne
2021
2020
2019
2018
2017
6.28
5.96
7.58
5.08
3.57
Total waste and waste to landfill by
division
Kg per sales produced tonne
10.53
0.96
23.39
11.63
70.59
9.83
Performance Elastomers
Industrial Specialities
(includes Acrylate
Monomers)
Functional Solutions
Total waste Waste to landfill
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
61
People
Business foundations
Synthomer and sustainability continued
Our success relies on
ourtalented employees.
We willneed plenty more
oftheir skillsand experience
aswe continue to grow,
integrating new businesses
likeOMNOVA andEastman’s
Adhesive Resins.
These acquisitions are changing Synthomer’s
scope and scale. Indeed, once the transaction
with Eastman is complete, 25% ofall our sales
willbe based in the USA and our global
workforce will be three times largerthan
itwasjust six years ago.
If we are to take full advantage of our new
scope and scale, we need to ensure we have
a consistent culture across the Company –
‘Our goal is to establish
an inclusive culture where
our people feel valued,
engaged, empowered and
able to use their strengths
to help Synthomer to
thrive. Our core values are
our guiding compass: they
describe what we aspire
to as a company and what
is expected of each of us.’
Matt Freeland
Group HR Director
Our values
In 2020, we launched our five core values, designed to support our purpose
one with a clear set of shared values; where
every employee feels engaged, empowered
and valued, and sees opportunities to
develop their career. We are focused on
building a diverse talent pipeline, developing
leadership skills, creating efficient and
effective organisational structures and
processes, and creating a winning culture.
This will take time, and to support our work
we have incorporated two of our employee
targets into our Vision 2030 roadmap.
At the same time, we want to take a
morestrategic approach to our community
engagement, applying lessons learned from
ourSynthomer Foundation to the way in
which we provide funding and support for
local community activities. Here, too, we
haveset a community-based target as part
ofVision 2030.
People at a glance
4,632
employees
1.21%
turnover
13.2%
new hires
67%
under collective bargaining agreements
60
number of years the Synthomer Foundation
has supported local communities
To help teams get to know the core values, we have rolled out a structured workshop and
discussion guide across Synthomer. And our values are now embedded in ourannual
performance cycle, with all employees expected to assess their work against them.
Safety, health and environment
– we always have time to work safely
Integrity
– we act with integrity and show respect
Innovation
– we welcome change and new ideas
Accountability
– we deliver on our promises
Teamwork
– we are stronger as one team
SHE
Integri t y
Teamwork
Innovation
Accountability
Synthomer plc
Annual Report 2021
62
Our core employee objectives
1. Build a sustainable, diverse talent pipeline
Continuously improve our development programmes and ensure we have the right people
with the right skills in the right job at the right time.
2. Strengthen leadership capability at all levels
Help our leaders become role models, coach and develop their teams and lead the way
insuccessfully driving our business strategy.
3. Drive organisational effectiveness
Strengthen our ability to manage business transformation in an agile way.
4. Establish a winning workplace culture
Where our people feel valued, engaged and empowered to use their strengths
tohelpSynthomer thrive.
Our
employees
This was another busy year for our
employees. Demand for our products was
high,especially in healthcare. And once
again, our teams worked tirelessly to protect
themselves and each other, and keep our
sites running safely throughout the COVID-19
pandemic (see page 55 for more on our
COVID-19 safety and health measures).
Nevertheless, we continued to make progress
against our longer-term employee agenda,
including the ongoing roll-out of our diversity
and inclusion vision and action plan, and the
launch of our second Your Voice global
employee survey.
We also introduced new tools and processes
tocreate a more structured approach to
career development – focusing particularly
onearly careers, functional career paths, and
leadership skills to help develop our leaders
of the future. And to ensure we have robust
succession plans in place at all levels of the
business, we continued to develop our global
talent toolkit and review process.
Supporting employee wellbeing
duringthe pandemic
COVID-19 has challenged everyone’s physical
and mental health over the past two years.
Whether working from home or on site at one
ofour plants, our employees have had to
juggle everything from family care to health
worries to feelings of isolation. We are
awarethat all these issues can have
repercussions on individual performance.
To continue supporting our employees’ mental
health in 2021, we set up a number ofcountry-
specific programmes, including a new
well-being hub for UK employees located
onour Syntranet. The hub provides
information on Company-led programmes and
resources, including our Employee Assistance
Programme, as well as advice on issues
likeresilience, healthy shift working
andasking for help.
Also in the UK, we ran a well-being calendar
ofmonthly activities to highlight issues such
as fighting fatigue, personal fitness and
hydration. In Malaysia, we marked mental
health month with a series of talks to help
employees identify ways to deal with stress,
anxiety and burnout in the workplace.
Almost 100 employees attended the
sessions. We also offered employees who
came into contact with the virus access to
counselling to talk to professionals about
thechallenges they faced, and get medical
advice and emotional support.
We have learned a great deal throughout
thepast two years and are now developing
along-term supportive workplace programme
to take usbeyond the pandemic. This includes
assessing employee data andemployee
feedback on their needs andexpectations,
examining our current resources and
identifying gaps, and benchmarking
ourapproach against ourcompetitors.
Building a diverse, inclusive workplace
Building a more diverse and inclusive business
is key to our growth ambitions and our ability
to attract and retain the best people. In 2020,
we launched our diversity and inclusion vision,
and this year incorporated our gender target
as part of our Vision 2030 roadmap. This year
has been about raising awareness to help
employees understand why it matters and
therole they have to play.
We had an early opportunity to do this in
March 2021 with a series of events around
the world to mark International Women’s Day.
In June, we celebrated Pride month and have
since set up a new LGBT employee group.
And in December, we marked International
Day of Persons with Disability, publishing
newguidance on our Syntranet tohelp
employees support their disabled colleagues,
and sharing two new videos frommanagers
living withdisabilities.
In November, our executive sponsor for
diversity and inclusion, Rob Tupker, and
Group HR Director, Matt Freeland, launched
anew global awareness campaign, hosting
aseries of calls with our top 100 leaders to
discuss their role in supporting ourvision.
Our progress
against2030 targets
• 50% gender diversity in new hires in
leadership, management and
professional roles.
2021
2030
Target:
20%*
50%
*females in senior leadership
Our short-term objectives:
2022
• 25% female senior leaders
2025
• 33% female senior leaders
• 20% senior leaders from ethnically
diverse backgrounds
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
63
Business foundations
Synthomer and sustainability continued
People continued
Engender: our first
employee group
“I’m proud to be part of Synthomer’s first
employee group. We set up ENGENDER
– our women’s network – to create a safe
environment for discussion on issues that
women face in the workplace and to help
support one another through our careers.
We’re delighted with the support received
in organising a number of events on topics
such as imposter syndrome, and voice
and power for women in business. We are
equally happy to have some men join our
sessions, too.
Our first year was very busy, with regional
groups starting activities in the US and
Asia, catering for local discussions and
face-to-face networking opportunities.
One of our highlights was having Caroline
and Holly, Synthomer’s Chair and one of
our female Non-Executives respectively,
attend one of our panel sessions. It was
afantastic opportunity for our network
tohear about their career stories first
hand. We hope more people will sign
upand help us spread the word.”
Ana Perroni Laloe
President, Industrial Specialities
Our diversity and inclusion vision
We value the difference everyone brings
towork and are committed to creating a
diverse and inclusive workplace, where
people are supported to make their best
contribution in creating a vibrant and
successful business.
Gender diversity
Board
33%
Female 3
Male 6
Total 9
Gender diversity
Senior management
20%
Female 10
Male 39
Total 49
Gender diversity
All employees
21%
Female 976
Male 3,656
Total 4,632
‘We know that diverse
thinking and inclusive
cultures create
tremendous business
value. It powers innovation
and performance and
itwill drive Synthomer’s
success in the future.’
Caroline Johnstone
Chair of Synthomer’s Diversity and
Inclusion Steering Committee
As part of the campaign we also shared
additional tools and materials on topics such
as unconscious bias and self-awareness via
aSyntranet hub to help leaders support their
work to share our diversity and inclusion vision.
Meanwhile, we have started using a new
diversity and inclusion dashboard to track
progress, spot gaps and improve succession
planning. And we have established a new
diversity and inclusion governance structure
toensure we stay on course and embed
accountability for diversity and inclusion
across all levels of the business. The structure
includes a steering committee comprising
Synthomer’s Chair of the Board, diversity
andinclusion Executive Committee sponsor
and Group HR Director, as well as a regional
network ofdiversity and inclusion champions.
Looking ahead, our plans for 2022 include
newinterviewing skills and inclusive
recruitment training for hiring managers,
inclusive leadership training and a new
ambassador programme designed to create
opportunities for employees to share their
personal diversity and inclusion stories.
Our Board and Executive Committee will be
involved and will regularly review progress.
Our diversity and inclusion
performancein2021
We are pleased that we met our 2021
objective of 20% of women in senior
leadership roles, finishing the year at 20.4%.
In all, we saw a5%rise in the number of
women in senior leadership versus 2020.
We also appointed Lily Liu as our new Chief
Financial Officer who will join Synthomer no
later than 1 July 2022. Once Lily is officially
onboard, women will make up 44% of our
Board. In February 2022,we also appointed
Ana Perroni Laloe asPresident, Industrial
Specialities and she has now joined our
Executive Committee. We also met the
expectations laid out in the Parker Report,
byhaving at least one Board member from
anethnically diverse background.
Synthomer plc
Annual Report 2021
64
Employee engagement
Listening to our employees helps us
understand what is working well and tells
uswhere we have more to do. But we need
tohear from everyone, so, as part of our
Vision 2030 roadmap, we set a 70% target
forparticipation in our global Your Voice
survey. We introduced our first survey in 2019.
With 63% taking part, it revealed areas of
strength, such as our commitment to safety,
and areas for improvement, such as
communication and knowledge sharing.
Good communication has become even
moreimportant over the past two years
withthe pandemic keeping many people
athome, andrestricting our numbers on site.
To help people feel connected and ensure
they understand our priorities, we launched
new quarterly (virtual) global townhalls
during2021 hosted bysenior leaders.
Around 1,000 employees attended each
townhall. We ensured employees could ask
questions before and during the calls and
submit those questions anonymously if
theywished. Employees were keen to hear
more on a number of issues, including our
sustainability agenda, diversity and inclusion
plans, and flexible working. While our leaders
answered questions duringthe calls, we also
intend tofeed some ofthese topics into future
communications tocontinue raisingawareness.
We also relaunched our internal Syntranet
site, creating one global site for all our
employees. It contains news and key
information on important areas such as
ourstrategy, Code of Conduct and policies
tohelp ensure everyone has access to a
consistent set of messages and guidelines.
What we heard from employees in 2021
Our second Your Voice survey ran in
December 2021. We were very pleased
thatwe exceeded our 2030 target at a global
level, with an overall response rate of 73%
fromour employees. This was achieved by
anextensive multi-channel communication
campaign delivered across the business,
which included manager briefings, messaging
via our Syntranet and poster campaigns.
Not all countries achieved a 70% response
rate and that will remain a focus forfuture
surveys. The survey included some new
questions on topics such as our core
values,to help us learn how well employees
understand them.
We saw a rise in positive responses
inmanyareas, including diversity and
inclusion, (12%), career progression (9%)
andcommunication (7%). We also continued
tosee strong results in health and safety,
ethics, and values. All these results reflect the
work we have done in the past few years to
raise awareness on these important issues.
Our employees told us that they want tohear
more about the Your Voice results andwhat
we plan to do in response to their feedback.
To this end, we are working with leaders in
our divisions and functions to provide relevant
data so that they can share and discuss
specific topics with their teams.
As part of our Board employee voice
activities, one of our Non-Executive Directors,
Alexander Catto, met groups of employees
personally in the UK and by video conference
in Germany and the USA throughout the year.
Discussions and feedback covered a range of
topics such as Company strategy, leadership,
COVID-19, flexible working, diversity and
communication issues.
We look for other opportunities to hear from
our employees. For example, we ran a survey
in March and December 2021 asking our UK
employees what they thought of our support
for them during the pandemic. Most feedback
was positive: 65% said they had attended one
of our resilience workshops, and more than
half said they would do something different
based on what they had learned. However, a
minority told us that they want us to do more
on flexible working. This is something we are
assessing as part of our supportive
workplace programme.
Career development and training
We have a good record of attracting new
talent. Fairness in progression and promotion
isessential, so at a corporate level we are
introducing new digital tools and processes,
including a new global HR information
system.We also continued our global talent
review in 2021. As part of that review, we
introduced a new ‘talent toolkit’ to help our
leaders and managers assess gaps and
opportunities in areas such as succession
planning and personal development plans.
We want to do more to help retain a larger
percentage of our graduates and address
YourVoice feedback, which tells us
employees want to see more opportunities
incareer planning and development. We are
currently focusing on three key areas to help
our people make progress: early careers,
functional excellence and leadership.
Our progress
against 2030 targets
• 70% employee participation in our
employee engagement surveys at
aglobal and country level.
202
1
2030
Target:
70% 73%*
*While we exceeded our Your Voice target
globally in 2021, not all participating
countries reached 70%.
Early careers: helping graduates flourish
atSynthomer
Since 2018 we have expanded and improved
our graduate recruitment programme, looking
at everything from when we recruit to how
wemake an offer. In that time, we have hired
around 50 new graduates, largely in Europe
and Asia, with a 50:50 gender split and
avariety of ethnic backgrounds.
We have also created a blended development
plan, providing graduates with a combination
of mentoring programmes, and on-the-job
and workshop-style training in areas such
asnetworking, managing others and
businessacumen.
Functional excellence: consistent
pathways for all
Our Group HR team is also working with
ourfunctions to develop new ‘excellence’
frameworks that set out clear career
pathways through each of the functions
andthe standard of skills we expect. A new
Functional Excellence Steering Committee is
coordinating this work across the Company.
Our manufacturing and commercial functions
were the first to launch their frameworks in
2021. Our commercial function appointed a
dedicated excellence director and ran its first
training sessions on contract management
viaa new academy.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
65
Business foundations
Synthomer and sustainability continued
People continued
Embracing digital
resources to
support leadership
development
“We believe in continuous conversations
asakey driver for employee engagement.
In that spirit, we expect our leaders to
become coaches for ongoing staff
development, providing regular feedback
opportunities to their teams. Wehave
launched a new leadership development
portal, which contains awealth of useful
resources and tools. The next generation
ofSynthomer leaders will particularly
benefit from our ‘first-time leader’
roadmap, which provides practical
guidance on coaching others.
Our learninganddevelopment team
heldaseries of global briefing calls to help
leaders at all levels start using the portal.”
Christoph Bartels
Director Talent Development
Leadership: training the leaders
oftomorrow
Because we are growing so quickly and
integrating new acquisitions, different
leadership styles, approaches, and even
language, can become part of daily business
life. This can make it difficult for newer leaders
to know what is expected of them. To address
this, in 2019 we introduced six leadership
attributes, including inspiring vision and
purpose, settingstandards and dealing
withambiguity, to provide a common
language and consistent behaviours for
allleaders at every level of our business.
Alongside our core values, we are also
usingour leadership attributes as a way
ofassessing potential newrecruits.
Ethics and compliance
We published our current Code of Conduct
in2018. It is available in 14 languages, both
online and in print. We plan to review and
refresh the Code later in 2022 and launch
anupdated version in 2023.
Our 2021 Your Voice survey showed that 87%
of employees understand how the Code
applies to their job, while 81% know how to
report suspected unethical and/or unlawful
business practices.
We promote our Ethics Helpline across
thebusiness, including through our Code.
In 2021, we launched a new ‘protection from
retaliation’ policy to continue encouraging
anopen and transparent culture within
Synthomer. We also updated the investigation
process that supports our helpline to ensure
clear lines of responsibility and that reports
are followed up in an appropriate manner.
Continuing to provide
compliancetraining
During 2021, we continued to develop our
e-learning offer, which included the launch
ofrefreshed modules on anti-bribery and
corruption and anti-competitive practices.
Our Learning Management System helps
ustrack training completion and escalate
instances when required training is not
completed in a timely manner. In 2022,
weplan to introduce new e-learning modules
for our Code of Conduct and GDPR/data
protection, which will replace our existing
face-to-face and online training.
Our anti-bribery, corruption and competition
law policies are important parts of our Code
and the scenario-based workshops and
e-learning that we run as part of our Code
ofConduct training. We will continue to
support employees who are more exposed
tocompetition law risk with additional,
specific e-learning modules and
face-to-face/online workshops.
In 2021, we launched a short campaign to
remind employees of our policy on gifts and
hospitality as set out in our Code. As part of
this, we rolled out revised standard-form gifts
and hospitality registers.
We also published new internal guidance
onhow to respond to, and manage,
unannounced inspections from regulators
(so-called ‘dawn raids’), which will be supported
by a phased roll-out of training, starting in 2022.
And we ran our first campaign on the United
Nations Anti-Corruption Day, which included
anarticle onour Syntranet and on social media.
Making changes to support our
compliance programme
We appointed a Global Compliance
Managerin 2021 to help us navigate the
changing regulatory landscape as we
grow.The manager will lead our Group
legaland compliance team’s compliance
work. Their initial focus in 2022 will be to
enhance our risk assessment and third-party
due diligence processes.
In December 2021, we established a new
compliance brand called ‘Syntegrity’, which
aligns with our value of integrity. We are now
using the brand to support our compliance
initiatives. This includes a new quarterly
compliance blog for all senior leaders that
willaim to communicate new compliance
initiatives, remind employees about existing
policies and requirements and share lessons
learned from recent reported cases. The blog
will also provide compliance topics for
discussion at team meetings.
See page 51–53 for more information on how
we work with our suppliers to ensure high
ethical standards, including respecting human
rights.
Our short-term ethics
and compliance
objectives:
2022
• Deliver a plan to continuously improve
our compliance framework
• Enhance our risk assessment processes
• Further enhance our compliance training
• Review our Code of Conduct for
2023relaunch
Synthomer plc
Annual Report 2021
66
Our progress
against2030 targets
• Provide volunteer support and financial
contributions in excess of £1 million a
year to advance education, public
health, diversity and environmental
stewardship.
A significant proportion of this funding will
be provided by the Synthomer Foundation
for community projects in the USA.
Based on the Foundation’s performance
inrecent years, we expect that
contribution to be at least £850,000.
2021
2030
Target
£1.0m+
£0.93m
Our
communities
We want the local communities who live
nearour sites to see us as a good neighbour.
While we have always looked for ways to
support local projects, our acquisition of
OMNOVA has given us the opportunity
toreassess our approach to
communityengagement.
Since 1961, the Synthomer Foundation
(formerly the OMNOVA Foundation) has acted
as an independent endowment, providing
essential funding for local community
projects, primarily in Ohio, USA. Over the
years, the Foundation has broadened its
remitto support projects across the USA.
In the 60 years since it was first created, the
Foundation has changed hands – and name
– several times, but its mission remains the
same: to support non-profit organisations
who provide programmes and services that
enhance the quality of lifefor those in need.
At least 50% of annual funding is dedicated
toeducation initiatives, with the rest
supporting arts, civic, health andhuman
service organisations.
Since acquiring OMNOVA, the Foundation has
sparked a lot of interest from our employees in
other parts of the world whowant to be more
involved in their local communities. With more
than 40 sites and sales offices across the
globe today – and more to come as we
continue to grow – Synthomer has an
opportunity, therefore, todraw on the
Foundation’s experience to expand our
community engagement.
And we want to take a more strategic
approach to reflect our growth ambitions.
So,we have set a community target as part
ofour Vision 2030 roadmap.
Supporting communities – growing our
network in 2021
To help us take a more strategic approach,
weused the Foundation’s governance
structure to set up a new Synthomer-wide
global volunteering network in February 2021.
That network includes a community
champion at each site, as well as three
regional coordinators who meet quarterly
todiscuss project proposals. Funding is
approved by our executive sponsor after
aproposal from our Sustainability Director.
In thisfirst year, the coordination group
identified site-level champions and aligned
activities around our priority themes,
developing the tools to support the network
ofvolunteers and capture their activities with
neighbouring communities.
In 2022, the network will prioritise local projects
that support education. For example, in Vietnam
we are collaborating with several partners,
including the Ministry of Labour and Vietnam
Bank for Social Policies, to help poor and
disabled children continue their education.
In Portugal, some of our employees are running
‘lessons’ at local schools to help children learn
more about our business. And in the UK, we
took part in British Science Week, hosting
workshops for schoolchildren to help inspire
an interest in chemistry from an early age.
Synthomer Foundation will continue
tosupport more than 10 universities and
colleges such as the University of Akron
andthe University of Wisconsin.
Synthomer Foundation support in 2021
Of the £930,000 that the Synthomer
Foundation gave in 2021, 56% of the funds
went to education programmes. The rest was
split between projects that support arts
andculture, civic activities, and health
andhuman services.
‘Sixty years is an amazing,
notable achievement;
andwe look forward
tocontinuing this great
legacy of supporting
ourcommunities for
many years to come.’
Theresa Carter
Synthomer Foundation President
One of the Foundation’s largest single
donations wentto the American Institute
ofChemical Engineers, which will receive
around £70,000 over the next four years.
This money will helptwo students attend a
Historically BlackCollege or University and
participate ina leadership development
programme.
Our annual highlight: Synthomer
Caresweek
This year, we ran our first Synthomer
Caresweek in May 2021, based on a
conceptfirst developed by our OMNOVA
colleagues. During the week, employees
around the world get involved in activities
toraise funds, support local communities
andfeel connected to one another.
In the USA, for example, employees in
Ohiohelped sortdonated clothes and pick
uplitter for ahomeless shelter, while in South
Carolina, employees donated personal care
items toa women’s shelter. And employees
inPennsylvania donated just under 230kg
offood to a local food bank.
In Malaysia, 43 employees took part in
acharity run during Synthomer Cares
weektoraise money forCOVID-19 care kits
for20 less fortunate families. Support for the
runners was so positive that in the end they
raised enough to buy kits for 30 families.
The top five runners were also given
adonation to share with the charity
oftheirchoice.
Employees in Italy and Portugal maintained
thatsense of connection later in the year,
during a two-week exercise challenge.
Individuals recorded the time they spent
running, walking or cycling via an app which
Synthomer then converted into donations.
Participating employees could then choose
which social organisation would receive the
funds. The winning teamwas given a 25%
bonus to donate totheir organisation. In all,
the two teams completed 1,093 hours of
exercise and travelled a total of five million
steps, raising £1,560 in the process.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
67
Business foundations
Synthomer and sustainability continued
People continued
A snapshot of community activities at our sites
While the COVID-19 pandemic meant we were unable to run community activities in some countries, such as Vietnam and China, many of
ourcommunity teams around the world have continued to support local projects and organisations, while our employees have helped raise
essential funds.
Location Activity
UK In December 2021, the operational team donated Christmas presents to a local school.
Germany – Marl In November 2021, our site team provided volunteer support to help cleaning and rebuilding
houses following devastating floods across Germany earlier in the year.
Czech Republic – Sokolov Members of the operational team participated in Open Doors Daystohelp students understand
more about our work at Sokolov. This included an on-site session for careers counsellors and
chemistryteachers.
France Three sites each donated €1,000 to Fondation de France to help families and schoolchildren
particularly affected by the pandemic.
Portugal We continued to play a role on the board of Grace, a non-profit association that promotes
social responsibility and sustainability within companies. We also participated in working
groups for the Portuguese Charter for Diversity and Inclusion, including helping to develop
asocial responsibility good practice guide.
Malaysia – Pasir Gudang Employees auctioned their skills, such as baking and painting, to their colleagues to raise
money for Calvary Homes, an organisation that helps people who have been abused and
abandoned by their families or face serious disadvantages. Together with matched funding
from Synthomer, they raised £1,000.
Malaysia – Kuala Lumpur Our community team ran activities to raise awareness about food waste and to support The
Lost Food Project. As well as a talk from the organisation’s chief executive, employees took
part in a challenge to reduce their own food waste. With matched funding from Synthomer,
theyalso helped raise just over £1,000 for the project.
USA – Akron and Mogadore 38% of the employees from these two sites have joined the initiative ‘Candy gram fundraiser’,
raising more than $300 and providing 266 meals to people in need around the site.
USA – Auburn Our colleagues in Auburn held an internal ‘corn hole’ throwing tournament to raise funds for
Haven Heroes, a local organisation that supports educational success in primary schoolchildren.
USA – Beachwood A colleague through the Employee Community Leadership Award raised funds for Pink Ribbon
Girls who provide a range of support for breast and gynaecological cancer patients and their
families. In total we donated $500.
Building our volunteer
network in Asia
“In 2021, we took our first steps
tomaking our communities network
presence in Asia more prominent.
There is still so muchto do, but we
haveput some strong foundations
inplace to continue on our journey
ofgiving and contributing to the
communities who live near our sites.
Our position as a market leader in Asia
allows us to be closely engaged with
the communities, especially at the sites
in Malaysia. I am grateful to everyone
who has helped us get this far, but this
is only thebeginning and we will aim
togo further in future!”
Emidiyana Ahmad
Talent Development Executive and Asia
CSR coordinator
Synthomer plc
Annual Report 2021
68
Risk report
Business foundations
Risk management
Synthomer’s strategic objectives can only
beachieved by taking anappropriate level
ofriskinaccordance with ourriskappetite.
HighLikelihood + VelocityLow
2
6
7
9
1
8
How we manage risk
We use leading risk management techniques
which help us make good decisions about
business opportunities while protecting
oursites, systems, employees and other
keystakeholders.
Principal risk Trend
1
Volatility and
competition
see page
72
2
Innovation &
intellectual
property
see page
72
3
Change
programmes
see page
73
4
Mergers &
acquisitions
see page
73
5 People & talent
see page
73
6
Loss or failure of
a Synthomer site
see page
74
7 IT security
see page
74
8
Safety, health
& environment
see page
75
9
Security
of supply
see page
75
10
Ethics and
regulatory
compliance
see page
76
11 Financial risks
see page
76
The heatmap illustrates the relative positioning of our principal risks. This is based on the
residual (net) ratings after taking into account any mitigating controls in place. The heatmap
illustrates our principal risk positioning based on the three dimensions we use to assess our
risks: the likelihood of the risk materialising; its potential impact; and its velocity – the time
between the risk crystallising and the impact being felt. Pages 72 to 76 provide more detailon
our principal risks, activities undertaken in 2021 and planned for 2022, and the riskmovement
in the year.
11
10
3
4
5
Impact – Reputational/Financial HighLow
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
69
Business foundations
Risk management continued
Risk report continued
Risk governance and oversight
Synthomer plc Board
The Board has overall responsibility for
ensuring that risk is effectively managed
across the Group and for creating the
framework for the Group’s risk management
tooperate effectively. The Board continues
toset the risk culture and the risk appetite it
isprepared to accept to achieve the Group’s
objectives, and the wider risk tolerance within
which it empowers the Executive Committee
to manage the business. In 2021, the Board
completed a review and refresh of its appetite
by mapping its principal risks against a sliding
scale from ‘risk-averse’ to ‘risk-neutral’, to
‘risk-taking’. This is now embedded in our risk
management framework.
Audit Committee
On behalf of the Board, the Audit Committee
reviews and assesses the effectiveness of the
Group’s risk management and internal control
processes and monitors the Group’s risk
exposure. In 2021, the Audit Committee
continued its programme of deep dives
intoour risk management process, giving
management the opportunity to explain
directly to the Audit Committee the
assessedrisks, associated controls in
place,and any further planned mitigating
actions. The AuditCommittee carried
outdeep dive risk reviews for each of the
Group’s divisions. Specialist functional risk
reviews were also undertaken, these included
IT & Cyber Security, Innovation & Intellectual
Property, Plant Control Systems, Business
Continuity Planning, and Pensions. The Audit
Committee also reviews summaries of the
work undertaken by the Internal Audit team,
which operates a risk-based audit plan.
The risk management system, Audit
Committee deep dives, and associated
assurance work are designed to ensure
thatrisk is managed within Synthomer’s
riskappetite, rather than to eliminate risk
completely, and the Audit Committee and
other assurance reviews provide reasonable
assurance in line with good practice.
Executive Committee
The Executive Committee is responsible for the
identification and management of our strategic,
operational, compliance and financial risks
using the risk management framework, and
for ensuring risk management policy is
implemented and embedded in the business.
Division and functional risk owners
We have a structured risk management
framework operated at division and
Groupfunctional level. We use a standard
methodology to quantify risk, with a risk
assessment matrix to ensure risks are
assessed consistently.
Risk management methodology
Risk management framework
Top-down
Principal risks
Bottom-up
Risk assessment
Divisional and functional
Board of Directors Risk and Assurance
Sets the risk culture and risk appetite. Has overall responsibility for
reviewing and approving the principal risks.
• Establishes the risk
management framework
• Provides guidance and
challenge to divisional and
functional risk owners
• Aggregates risk information
and assists management in
identifying principal risks
Audit Committee
Supports the Board in monitoring risk exposure. Reviews principal
and emerging risks and the effectiveness of risk management and
internal control processes. Provides challenge to Executive
Management where appropriate.
Executive Committee
Reports on principal and emerging risks to the Audit Committee
andBoard. Conducts top-down risk identification and review.
Ensures risk management policy is implemented and embedded in
the business, and appropriate responses are taken to manage risks.
Division and functional risk owners
Responsible for risk identification, management and controls within
their division and function. Identify and assess risks, determine and
monitor risk responses and ensure operating effectiveness of key
controls and progress of actions to manage risk.
Identify
Assess
and
evaluate
Determine
response
Monitor
and
report
Synthomer plc
Annual Report 2021
70
Our risk management methodology was
reviewed and refreshed this year. The risk matrix
previously considered two risk dimensions:
the likelihood of the risk materialising, and its
potential impact. In 2021, we updated the
matrix to include a third dimension: risk velocity.
Risk velocity considers the time between the
risk crystallising and the impact being felt.
Divisions and functional departments conduct
their own bottom-up assessment of risks and
record them in a risk register using the
Group’s standard risk management
methodology. They assess risks at both an
inherent (gross) level and a residual (net) level,
taking into account the mitigating controls in
place. Risk owners also identify any additional
activities that could further mitigate the risk in
line with our risk appetite, accepting that
some level of risk-taking is necessary.
Three lines of defence – assurance
Synthomer operates a ‘three lines of defence’
assurance model. As our first line of defence,
our operational management and employees
have a responsibility to manage day-to-day
riskin their own areas, guided by Group policies,
procedures and control frameworks. Our second
line of defence includes our Group Risk function,
who develop and manage the risk management
framework and engage with management to
identify, agree and update risk information.
It also includes other compliance and assurance
functions, for example Group Safety, Health
and Environment (SHE), Regulatory Affairs
and ISO audits, who reviewthe effectiveness
of mitigating actions and controls.
Our Internal Audit team provides our third line
of defence, providing independent assurance
on internal controls and risk management
processes. External assurance is provided
byour statutory auditors, in respect of the
financial statements, and also by an external
specialist in respect of ISO standards.
Assessment of principal risks
Risks affect us in many ways. Across our
business, we identify the likelihood, potential
impact and velocity of risks through our formal
twice-yearly risk assessment submissions by
divisions and Group functions. Management is
also empowered and actively manages and
reacts to risks as part of normal day-to-day
decision making. We use the Group’s risk
methodology to assess the risks in all significant
projects, including change programmes and
the integration of acquisitions. These reviews,
together with our three lines of defence model,
enable us to establish effective controls to
manage these uncertainties.
Our key risks
We categorise our risks, taking into account
the effectiveness of mitigating actions and
controls, in the following areas:
• Strategic risks that could prevent us
fromachieving our strategic objectives.
• Operational risks which, if not successfully
managed, would threaten our viability.
These relate to our ability to operate
asustainable and safe business.
• Compliance risks where a breach of
regulations or laws could lead to fines from
regulators, and reputational risk that may
affect our standing in the investor and wider
community in a disproportionate manner to
the size of the event leading to such damage.
• Financial risks relating to the funding and
fiscal security of the Group.
During 2021, the Executive Committee and
the Board carried out a robust assessment of
Synthomer’s principal risks and uncertainties.
Following this review, we can confirm there
are no changes proposed to our principal
risks.
The table on pages 72 to 76 provides more
detail on our principal risks identified at the end
of 2021. Our Board and management consider
that these pose the greatest threats to our
business and they score highest on our risk
assessment matrix. They fall into categories
that relate closely to our business model.
Not all risks facing Synthomer are listed and
the risks are not listed in any order of priority.
The nature of risk changes over time with
newrisks emerging and the impact of
otherschanging. Our risk management
andassurance programme can only provide
reasonable, not absolute, assurance that key
risks are managed to an acceptable level, and
therefore cannot provide absolute assurance
against misstatement or loss.
Emerging risks
In addition to known risks, we identify
andanalyse emerging risks and the need
formitigation as part of our existing risk
management processes. Emerging risks are
events that present uncertainty. They may
potentially affect us in the longer term, but we
do not currently have sufficient information to
understand and assess the likelihood, impact
or velocity of the risk, ortodefine an
appropriate risk response. We continue to
embed emerging risks inourrisk programme
toensure they are appropriately considered
and monitored. In some cases, emerging
risks are superseded by others or cease to be
relevantas the environment in which we
operate evolves and changes. We continue
toreview and identify new emerging risk
trends to evaluate theimpact and effect
theywould have, including any changes
toour principal risks.
Climate change
We assess climate change risk as an
integral part of our risk management
processes. We have integrated climate-
related risks, including physical risks
(primarily the potential impact of droughts
and flooding on business operations) and
transitional risks (primarily thepotential
impacts of carbon taxes, market changes,
and environmental policy changes), into our
wider risk framework. They are reviewed in
line with the Synthomer riskmanagement
framework and governanceprocesses.
Having completed a thorough review of
climate risks and opportunities, we have
concluded that these risks would be most
appropriately managed by including their
impact within existing principal risks, rather
than defining a separate climate change
principal risk. We have therefore taken
theopportunity to update the definitions
toinclude the impact of climate change
inthefollowing principal risks:
• Volatility and competition in chemicals
and polymers market
• Innovation and intellectual property
• Mergers and acquisitions
• Change programmes
• Loss or failure of Synthomer site
• Security of supply of raw materials,
goods and services
• Ethics and regulatory compliance
• Financial
Throughout 2022, we will continue
todevelop our approach to climate risk
reporting, to ensure the risk management
framework continues to address all
relevant requirements of the Task Force
onClimate-related Financial Disclosures
(TCFD), which are discussed further on
pages 77 to 80. Failure to effectively
respond to this risk may compromise our
reputation and strategy for growth, so we
are closely monitoring this risk and will
continue toevaluate whether this should
be considered a principal risk in the future.
COVID-19
At the time of writing, the COVID-19 pandemic
continues to impact the global economic,
social and political landscape. We will
continue to remain agile in managing the
risksthat this presents.
We have reviewed the impact of the pandemic
on our principal risks to identify new
opportunities or material changes to existing
principal risks. As with our assessment
ofclimate risks, our review concluded that
COVID-19 would be more appropriately
managed by including its impact within existing
principal risks rather than defining aseparate
COVID-19 risk. We also took thisapproach
in2020. We will keep this riskunder review.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
71
Business foundations
Risk management continued
Risk report continued
Principal risks and uncertainties
This table shows the most significant risks
that affect our business. There are other,
lower-level risks that can have an impact
onthe Group’s performance: these are
alsoactively managed through our risk
management framework.
Strategic risks
Volatility and competition in chemicals
and polymers market
The markets we operate in are inherently
volatile due to global macroeconomic and
political uncertainty, and we expect this
volatility to continue in 2022. Such volatility
may affect our raw material costs, volumes
and margins, potentially adversely affecting
the results of the Group. The introduction of
acarbon tax could further affect margins.
The Group could lose market share to other
producers of speciality chemicals if we fail
toremain competitive.
Innovation and intellectual property
The Group could lose market share to other
producers of speciality chemicals if we fail
toinnovate new products that meet market
needs and stakeholder expectations with
respect to differentiated performance
orsustainability. Shareholder value is
alsodependent on our ability to identify
andprotect our own intellectual property
andensure we do not breach third parties’
intellectual property rights, which could lead
to reputational damage and additional costs.
Link to strategy
Link to strategy
Change in risk No change Change in risk No change
2021 response 2021 response
• The Group continued to maintain a largely
differentiated portfolio of products serving a
wide range of diverse global end markets.
The successful integration of OMNOVA
significantly increased our presence in key
North American and China markets.
• Segment performance at business unit level
is closely monitored and we take corrective
actions as necessary to mitigate the risk as
far as reasonably practicable.
• We continued to review costs in our key
sites to ensure we can price our products
competitively.
• We enhanced our entrepreneurial,
customer-focused approach to innovation
by implementing a Group-wide portfolio
management process focused on
alignment to business strategy, value
delivery, and sustainability goals.
• The global pandemic and supply chain
disruptions posed a challenge to the launch of
new products. In the face of this challenge, our
teams learned new ways of working remotely
and in hybrid work environments which has
strengthened collaboration between our
innovation centres around the world.
• A new central team was formed with the
charter to investigate new product chemistries
focused on climate change, sustainability,
step-change performance enhancement, and
inherently safer and more efficient processes.
• We implemented new policies and enhanced
procedures to ensure new innovations and
trade-secret knowledge is protected and
readily accessible for future innovation.
2022 plans 2022 plans
• New product development and our
acquisition strategy will continue to
furtherdiversify the Group’s risk, including:
– The completion of the acquisition of
Eastman’s Adhesive Resins business,
which will further add to our differentiated
portfolio of products and global
endmarkets
– The roll out of SyNovus
TM
Plus will
enhance our competitive advantage
intheNBR market.
• We will implement new elements of our
Innovation Excellence Framework which
establishes best practices for opportunity
identification, employee development,
intellectual property and knowledge
management, teamwork, product
stewardship and laboratory safety.
• We will increase our focus on new
processes with the formation of an
Advanced Process Innovation team
whichwill investigate step changes
inprocess efficiency and sustainability.
• Through these initiatives, we aim to
increase the success rate of innovation
programmes, accelerate the time to
market,and deliver new levels of product
performance alongside sustainability
improvements inboth products
andprocesses.
Link to strategy
Innovation and technical
expertise to exploit new markets
Driving efficiency and
excellence through operations
Capacity
Capacity utilisation
Bolt-on acquisitions/
Transformational transactions
Synthomer plc
Annual Report 2021
72
Strategic risks
Mergers and acquisitions (M&A)
The Group’s strategic plan continues to
include significant M&A to further grow,
differentiate and diversify our business.
There is a risk that we fail to identify and
secure any targets or identify the wrong
targets, pay too high a price, fail to integrate
acquired assets and drive planned synergies,
or encounter performance, funding, cash
flow, or climate-related and environmental
issues and potentially unknown liabilities.
Change programmes
Poor execution of change programmes,
including capacity expansion projects,
thedelivery of streamlined and efficient
standardised processes through our Pathway
programme, the rollout of our shared service
centres, and our ESG programmes, could
affect our ability to deliver our strategy.
People and talent retention
People are a key asset for Synthomer
indriving our Company strategy to grow
andenabling us to operate in our diverse
marketswhile complying with regulations
andcorporate responsibility. If we are unable
toattract, retain and build our people
resources, this could adversely affect the
delivery of the Group’s strategic priorities.
Link to strategy
Link to strategy Link to strategy
Change in risk No change Change in risk No change Change in risk No change
2021 response 2021 response 2021 response
• We successfully completed the central
integration activities related to the OMNOVA
transaction in Q3 2021, delivering synergies
ahead of plan and properly incorporating
‘the Synthomer Way’ into processes
andculture.
• In October 2021, we announced the
proposed acquisition of Eastman’s
Adhesives Resins business and have begun
working through the carveout separation
tofacilitate a close in Q1 2022. Integration
planning for this acquisition is underway.
• Continued commitment to our Project
Excellence methodology and robust capital
appraisal process have delivered a well-
controlled portfolio of capital investments.
• We have begun the migration of local entity
transactional finance activities into
centralised shared services and are
developing our business partnering
talenttomeet business needs.
• We have successfully deployed our
Pathway global template processes and
systems at our wave 1 sites in 2021.
• We have developed a mechanism to
monitor progress against our ESG agenda
and goals.
• We deployed a standardised global talent
management process, and held talent and
succession reviews at division, function,
Executive Committee and Board level.
• We implemented Workday as a new
globalHR Information System including
recruitment, learning, and talent
management modules with enhanced
employee data reporting and analysis
capability.
• We rolled out our Your Voice employee survey.
• We launched an internal communication
improvement plan and recognition scheme
to drive increased employee engagement.
• Our long-term incentive plan was extended
to former OMNOVA employees.
• A single global LinkedIn contract was
implemented with enhanced career page,
functionality and recruitment tools, and a
globalised talent acquisition process.
2022 plans 2022 plans 2022 plans
• The Group’s M&A activity and the
completion of the Eastman’s Adhesives
Resins acquisition and subsequent
integration will continue to be closely
scrutinised by the Board.
• External advice will continue to be used to
help identify targets, prepare bids, conduct
due diligence, and assess progress against
integration plans and synergies.
• We will complete our NBR capacity
increase expansion in Q1 2022 in Malaysia
and continue to develop our plans for
further NBR expansion in South East Asia
and other territories.
• We will complete the migration of all local
entity transactional finance activities to
centralised shared services.
• We will roll out our Pathway solution to
further sites according to our deployment
strategy.
• As part of our ESG agenda, we will develop
science-based targets and track delivery
against published goals.
• We will launch a standardised global
performance management process to improve
the consistency and quality of performance
management, coaching and development.
• Work will continue on functional excellence
with a specific ongoing focus on
commercial excellence.
• We will deploy the 2022 Diversity
andInclusion (D&I) global action plan
witharange of initiatives and workstreams
designed to increase D&I and therefore
ourability to attract and retain talent.
• We will use the results of the 2021 Your
Voice survey to develop and deliver an
action plan.
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
73
Business foundations
Risk management continued
Risk report continued
Operational risks
Loss or failure of a Synthomer site
Risk events, including natural disasters (physical
chronic or acute climate change or
environmental factors), pandemics (including
COVID-19), safety incidents, failure of key
suppliers or the supply chain, sabotage and
cyber-attack, would have an adverse impact on
operations and business unit profitability.
There is a risk that our response does not
ensure the site is able to return to its operational
capacity in the planned time frame and that we
suffer losses and reputational damage.
IT security
An IT security breach that has an adverse
impact on our systems, including Enterprise
Resource Planning (ERP), SHE databases,
communications and industrial control
systems, may affect our ongoing operations
and result in a loss of intellectual property
orregulatory fines which might undermine
ourcompetitive position and cause
reputational damage.
Link to strategy
Link to strategy
Change in risk No change Change in risk No change
2021 response 2021 response
• We have continued to use our crisis
management procedures and COVID-19
response protocols to operate consistently
across our 37 manufacturing sites
throughout 2021, despite the ongoing
pandemic.
• We have continued to enhance our IT
security defences, including:
– End of Life/unsupported hardware
replacement
– Multi-factor authentication with increased
security standards
– USB mass storage device controls
embedded to prevent data loss
– Upgraded password standards
– Anti phishing/fraud awareness campaign
enhancing user awareness and response
to phishing and social engineering attacks
– Enhanced back-up and recovery
standards across the Group
– SAP disaster recovery testing programme
executed
– Firewall roll-out programme completed
– Integration and standardisation of IT
security across the enlarged Group.
2022 plans 2022 plans
• We expect to continue our COVID-19
protocols into 2022.
• Crisis management procedures are
maintained throughout our operating
network and we will implement them on day
one of our Eastman’s Adhesive Resins
acquisition.
• Continue to enhance business continuity
plans.
• We will continue to enhance our security
defences through further security
investment and the ongoing implementation
of the Group security risk reduction plan.
Planned activities include:
– Further enhancements to privileged
account management (PAM)
– Training programme to increase
awareness of upgraded Group
Acceptable Use Policy
– Enhanced reporting against IT security
key risk indicators
– Additional crisis response plan scenario
simulation and testing
– Rolling out our DMARC anti-fraud email
tool to authenticate email traffic.
Link to strategy
Innovation and technical
expertise to exploit new markets
Driving efficiency and
excellence through operations
Capacity
Capacity utilisation
Bolt-on acquisitions/
Transformational transactions
Synthomer plc
Annual Report 2021
74
Security of supply of raw materials
goods and services
A disruption in the supply of key raw materials
or services to a manufacturing site could
potentially affect our ability to make and deliver
products to customers, leading to interruption
in supply, lost revenue and damage to our
reputation as a reliable supplypartner.
Potential factors which couldcontribute to
such an impact include market shortages,
short-term and/or long-term physical
climate-related disruption of upstream supply
chains, or disruption dueto global events.
Link to strategy
Change in risk Increase
2021 response
• Our programme to diversify our supply base
and reduce supply chain risk has enabled
us to respond to the challenges presented
by very high demand for many of our key
raw materials and supply chain disruption,
and meant we could frequently approve
and access alternative sources when
required. An active risk-based approach to
diversifying our supply base remains a
strategic priority for our procurement team.
• We have standardised and strengthened
our supply risk tools for our important raw
materials, prioritised based on EBIT impact
at site level. In addition, we have integrated
the findings of a sustainability materiality
assessment, to ensure that we now include
impacts such as climate change, and
adopted the use of a full supply base
scanning tool for sustainability risk.
• We completed awareness training on our
sustainable procurement policy and
strategy within the procurement team.
• We have started to use a sustainability
ratings tool to assess our high sustainability
risk suppliers.
2022 plans
• We will use our risk assessment tools to
continue the programme to diversify our
supply base and reduce supply chain risk.
We will increase our focus on, and approval
of, alternative sources of raw materials.
• Continuous review and improvement of the
risk assessment process and adoption of
the sustainability risk ratings tool.
• Develop a strategy for supplier audit and
assessment, and consider the adoption of
any industry programmes and best practices.
• Focus on Vision 2030 goal of ensuring 80%
of procurement has a sustainability rating.
Operational risks
Safety, Health and Environment (SHE)
Our industry is inherently dangerous, involving
the transport, storage and manufacture of
hazardous chemicals. There is a risk that a
significant accident or environmental incident
leads to injury to staff or local communities,
reputational damage, fines and loss of
permissions to operate
Link to strategy
Change in risk No change
2021 response
• We have continued to develop a central
safety audit function dedicated to SHE
issues and provided support, advice and
monitoring of all global sites.
Three additional specialist resources have
been recruited into the central team to
support the organisation’s growth.
• We have completed nine SHE audits in
2021 using a mixed model of site visits and
remote review due to COVID-19 restrictions.
• The OMNOVA site integration has
progressed throughout the year with the
majority completing the integration process
and moving towards normal operation.
• SHE improvement plans have been completed
with all 290 major actionscompleted.
• The Group has continued to improve its
SHE performance with a 11% reduction
ininjuries.
2022 plans
• We have specific 2022 SHE improvement
plans for the Group, for each business, and
for all sites and labs.
• As part of an updated SHE strategy, we will
implement a further detailed approach to
operational safety with increased focus
and transparency of major risk controls
at key sites.
• We will launch an annual Site Health Check
process to assess key SHE performance
and processes at each site. This will be
linked to a new Group Site Recognition
Award to encourage world-class
achievement.
• We will deliver a SHE integration of our new
Adhesives Technologies division, with
planned actions to deliver a top quartile
SHE performance within three years.
Strategic report Governance Group financial statements Company financial statements Other information
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Annual Report 2021
75
Financial risks
As a UK-registered Group with a diverse
presence across the world, we continue to
beexposed to financial volatility from foreign
exchange risks, credit markets, and also
funding risks relating to our defined benefit
pension plans. These risks could significantly
affect the results of the Group. They have
been heightened by global economic
uncertainty resulting from COVID-19 and
maybe further affected by the potential
introduction of a carbon tax.
Link to strategy
Change in risk No change
2021 response
• The Group hedges significant foreign
exchange exposure, borrowing a proportion
of its funding in overseas currencies to
hedge net assets held in those currencies.
• The Group swapped the proceeds of the
£203m share placing into US dollars on the
dayof the placing in anticipation of the
acquisition of the Eastman’s Adhesive
Resinsbusiness in Q1 2022.
• The implementation of global and regional
Pension and Benefits Governance
Committees to enhance pension risk
oversight and management.
2022 plans
• Currency risks will continue to be hedged in
line with Group policy.
• Our global pensions team will continue to
monitor pension risks through active
scheme management, including the
implementation of investment strategies
in line with the maturity of each of our
pension schemes.
• The Group’s funding arrangements will
continue to be reviewed in light of market
conditions and tenure of existing financing
facilities.
Financial risks
Business foundations
Risk management continued
Risk report continued
Ethics and regulatory compliance
A failure to prevent anti-competitive practices, personal data breaches, bribery, tax evasion,
product regulatory violations, other regulatory breaches or unethical behaviour could lead to
substantial penalties, withdrawal of operating licences and reputational damage that could
adversely affect the Group’s ability to pursue its strategy.
A failure to proactively address ESG goals, mandates and regulations may result in future
penalties, loss of competitiveness and reduced shareholder value.
Link to strategy
Change in risk No change
2021 response
• We have continued to enhance our ethics and regulatory compliance through:
– Starting to implement the action plan agreed in response to the 2021 internal audit of
Synthomer’s compliance framework, including the appointment of a Global Compliance
manager.
– Further publicising our Ethics Helpline, refreshing the procedure for conducting corporate
investigations and updating the process to reflect EU Whistleblowing Directive changes.
– Publishing a new Protection from Retaliation Policy.
– Completing the integration of OMNOVA into the Synthomer compliance framework.
– Corporate support for UN Anti-Corruption Day – including a news article on our intranet
and social media activity.
– Developing our compliance key risk indicators.
– Launching our new compliance e-learning content and face-to-face training, and our
escalation policy for managing non-completion.
– The creation and communication of our new Dawn Raid Policy on how to respond
toanunannounced inspection from a regulator.
– Continued development of our approach to modern slavery compliance.
– The creation of new gift and hospitality registers, and communicating these to our
business areas.
– Enhancing our global capability in product stewardship and regulatory compliance by
integrating a global team with stronger regional presence which includes new dedicated
resources on regulatory intelligence, trade compliance and toxicology.
– Establishing an ESG Governance framework, setting our Vision 2030 goals and 2022
targets, increasing external communications on our achievements, and implementing
aproject sustainability assessment tool to guide priorities.
2022 plans
• Deliver a compliance plan, including continued implementation of the 2021 audit
recommendations.
• Develop a compliance brand to support continuous communications and awareness of
compliance areas.
• Implement our compliance integration plan for newly acquired businesses.
• Enhance our risk assessment processes, incorporating third-party due diligence.
• Migrate our compliance training to a new learning management system, and create new
compliance training offerings including GDPR and Code of Conduct training.
• Commence the review and refresh of our Code of Conduct.
• Report against TCFD in 2021 and develop science-based targets.
• Increase our focus on product and process innovations that deliver sustainability benefits.
• Further strengthen product regulatory governance through quantitative performance
management of regulatory work processes.
Ethics and regulatory compliance risks
Link to strategy
Innovation and technical
expertise to exploit new markets
Driving efficiency and
excellence through operations
Capacity
Capacity utilisation
Bolt-on acquisitions/
Transformational transactions
Synthomer plc
Annual Report 2021
76
TCFD report
Butwhere we are different isin the
opportunities it presents us as a speciality
chemicals company, a producer of water-
based polymers, whose benchmark for
newproducts is their sustainability
(seepages48).
The new requirement to report against
theTask Force on Climate-related Financial
Disclosures (TCFD) this year has been a
catalyst for further action. It made us think
ina more collective, joined-up and holistic
way about what climate change and
thetransition to a low-carbon world may
bringforSynthomer, and to accelerate
thedevelopment of a Group-wide approach
tointegrating climate thinking into our
business at every level in the short, medium
andlong term. To this end, in April 2021,
weengaged aspecialist adviser to analyse
our current position against the requirements
of TCFDandto workwith us to develop
andimplement a plan, including qualitative
and quantitative scenarios, that would ensure
we are taking climate changeproperly into
account in our planning and operations.
With this being our first report against
TCFD,we felt it would be most useful for
stakeholders to include it as a standalone
section within our Annual Report. To avoid
unnecessary repetition, however, we have
summarised our approach and progress
under each of the four categories of
TCFDhere – governance, strategy, risk
management, and metrics and targets –
withcross-references to more details
elsewhere in the report as appropriate.
In summary
Overall, we are pleased with the workwe
have done, and how it has contributed
toourunderstanding of climate risk and
opportunities, and that it has enabled us
toreport our compliance against all 11
requirements of TCFD.The enhancements
togovernance andrisk management we
havemade give us confidence that we are in
a good position to embed an understanding
of climate change in our decision making,
both at Group level and across the business.
The qualitative and quantitative scenario
analysis we have carried out so far, modelled
on one of our product lines from one of our
European Functional Solutions sites, has
given us useful insights into the potential
impacts – both positive and negative – we
may see from the transition to a low-carbon
economy, and the reality of living in awarmer
world. However, we have more to do, by
modelling further product lines in other
geographies, to ensure the scenario analysis
is thorough and robust enough to be
representative of Synthomer as a whole.
On metrics and targets, we are already in a
good position with our existing environmental
reporting, and with our 2030 environmental
targets (including applying for their verification
as science-based, due in 2022). We are also
looking at possibilities for building on these
targets to help us manage climate risk and
opportunity as the world evolves.
In the coming year, we have four priorities
fordeveloping our understanding of climate
risk and opportunity which we will report
onin2022:
• Review our 2030 GHG targets and apply
forthem to be confirmed as science-based;
• Extend our quantitative scenario analysis
beyond Europe to include products from
sites in Asia and the USA;
• Develop our climate-related metrics and
targets, including setting an internal carbon
price to stress test the resilience of key
product lines and investment projects;
• Develop decarbonisation plans for our
keysites and longer-term renewable
energyarrangements to reduce our
climate-related risks.
What really matters, though, is what all this
means in practice for developing the products
the world needs for a low-carbon, circular
economy – and, indeed, creating the
environment that will enable such an
economy to evolve. There is no immediate
technological solution that will switch the
world over from a fossil fuel economy.
Moving to renewable energy through the
supply chain is one of the big transitions
thatmust occur. Decarbonising industrial
processes and products is another challenge.
And these can only be achieved by working
ina collaborative way with consumers,
customers andsuppliers, with technical
partners, with the wider industry, and with
policy makers. This partnership approach will
be the real focus for us in the coming years.
Climate change, with itsmany associated
environmental impacts, isone of the
biggest and most urgent challenges
facingthe world today. Itposes risks for
allof us,and Synthomer is no different in
thatrespect.
Strategic report Governance Group financial statements Company financial statements Other information
77
Synthomer plc
Annual Report 2021
Business foundations
TCFD report continued
Governance
– Principle 1: Describe
theBoard’s oversight
ofclimate-related risks
andopportunities
– Principle 2: Describe
management’s role in
assessing and managing
climate-related risks
andopportunities
Climate change has been a key focus for the
Board, which has been actively involved in
considering the business approach to
climate-related opportunities and roles during
the year. Nonetheless, the 2021 review
revealed opportunities for improving
governance atexecutive level, so during the
year we determined that the CEO would be
responsible for climate change on behalf of
the Board. We also established an Executive
Sustainability Steering Committee, chaired by
the CEO, which now meets quarterly (as of
January 2022) and is attended by the full
Executive Committee and the Group
Sustainability Director. Each of our Vision 2030
sustainability goals is owned and sponsored
by an executive member who is responsible
for ensuring we have the right plans in place
to deliver within the timeframe. Overall, the
Committee will enable the CEO to carry out his
responsibility on behalf of the Board by:
• Ensuring that our plans for climate change
are aligned across the Group, and are
properly resourced and coordinated.
• Ensuring that our climate-related metrics
and targets are managed effectively.
For more on governance, see our
Governancereport, pages 84-129.
Including climate-related targets
inremuneration
We have reflected the importance of making
progress on climate-related targets in our
Executive Committee’s remuneration. As of
2020, 10% of executives’ annual Performance
Share Plan award has been based on the
reduction of Scope 1 and Scope 2 carbon
dioxide equivalent emissions.
For more on remuneration, see our
Remuneration report, pages 112-126.
Next steps
To improve our governance still further, we are
looking at developing new roles throughout the
business dedicated to assessing and managing
climate-related risks and opportunities.
Strategy
– Principle 3: Describe
theclimate-related risks
andopportunities the
organisation has identified
over the short, medium
andlong term
– Principle 4: Describe the
impact of climate-related
risks and opportunities
onthe Company’s
businesses, strategy,
andfinancial planning
– Principle 5: Describe
theresilience of the
Company’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C orlower
scenario
Our strategy for a robust, resilient growth
business has been built on how we can
differentiate our products through their impact
on the environment. Over the years, through
our water-based polymers, we have helped
customers avoid the use of considerable
amounts of carbon and solvents, and our
2030 targets include that at least 60% of new
products launched each year must have
enhanced sustainability benefits, and that
80% of procurement spend must have a
sustainability rating. During that time, we
have also focusedon manufacturing and
operational efficiency, namely minimising
resources formaximumoutput.
In the past year, the world has become
increasingly aware of the risks posed by
climate change, with more frequent severe
weather events affecting more parts of the
world. And, in the run-up to COP26 in
November 2021, we have seen greater
urgency to address those risks. This also
presents us with opportunities, because
people are increasingly looking for products
that will help to mitigate the negative impacts
of climate change – namely those like ours with
lower carbon emissions that eliminate the use
of solvents and encourage a circular economy.
For more on our business strategy,
seepage15.
Determining our climate-related risks
and opportunities under 1.5°C, 2°C
and3°C scenarios
Reporting against TCFD has given us the
impetus to quantify the opportunities and risks
presented by climate change, such that we
can use real data to help us focus our strategy.
To understand the potential opportunities
andimpacts of physical climate risks and
thetransition to a low-carbon economy,
ourspecialist adviser carried out qualitative
and quantitative analyses for three different
climate scenarios: a rise in temperature of
1.5°C, 2°C and 3°C over short- (to 2025),
medium- (to 2035) and long-term (to 2050)
horizons. In determining financial materiality,
we used the same approach as we do for all
financial risks – the likelihood of the hazard
occurring and the nature and magnitude of its
impact on the business.
To perform their analysis, our adviser looked
at the impact of these scenarios on one
product line – styrene acrylic water-based
emulsion, a Functional Solutions product
made in our Worms, Germany plant.
We chose this product with the aim of
covering as many variables as possible.
The product uses two of our top raw
materials, styrene and butyl acrylate; it is
used in many applications from coatings to
industrial textiles to construction; and it travels
by water and by road.
We recognise that the results from this single
product are not sufficient to enable us to
extrapolate the financial impact of the various
climate scenarios on the Group as a whole.
Indeed, doing so would no doubt be
misleading. We will therefore be expanding
the scenarios beyond Europe to include a
wider range of products from the USA and
Asia. Nonetheless, the results from this year’s
work are a useful indication of the risks and
opportunities we should consider.
Potential physical and transition risks
The physical risks identified by the study were
determined as being more frequent extreme
weather events such as floods or droughts
which could affect our plants’ ability to
operate efficiently, and which could increase
costs from our supply chain. The transition
risks were determined as being the potential
of global or regional carbon taxes, and market
and environmental policy changes.
Both types of risk were present in all
temperature scenarios and under all
timeframes, but their relative severity and
impact on our business, and our resilience,
islikely to vary between timeframes, as
discussed below.
Synthomer plc
Annual Report 2021
78
Potential opportunities
The opportunities for Synthomer, under all
temperature scenarios and timeframes, were
determined as:
• Growth in demand for products and services
that will service a low-carbon or circular
economy in various markets and regions
• Cost savings and market growth through the
early adoption of low-carbon technologies,
for example using renewable energy or
switching to renewable raw materials
• Our network of sites across the world
makes us a more reliable supplier: it is seen
as a competitive advantage, meaning we
are more resilient to physical operational
risks, since we can service customers from
a variety of plants.
The potential impact of these opportunities on
the strategy and performance of the business
is discussed below.
Results by temperature scenario
To summarise: in both the 1.5°C and 2°C
futures, the biggest risks come from the
transition to a low-carbon, circular economy,
but this transition also presents significant
opportunities for Synthomer. Under a 3°C
future, while the opportunities remain, the
physical risks are much more severe,
primarilythe impacts on our sites of
droughtand flooding.
• If we see globally coordinated carbon pricing,
we may achieve a 1.5°C future: in this
scenario, Synthomer could face higher prices
from transition costs. However, demand for
low-carbon and ‘circular’ products could
increase, leading to new, low-carbon market
opportunities, while government purchasing
agreements could put pressure on consumers
in our end markets to decarbonise, leading
to greater demand for our products.
• Without globally coordinated carbon pricing,
a 1.5°C future becomes far less likely, and,
under a 2°C future, Synthomer could face
different operating costs in different markets,
for example, high carbon costs in the EU,
and a patchwork of regulations across USA
states. This kind of lack of coordination
drives market volatility, so it could also result
in erratic changes in costs in the supply
chain. All of Synthomer’s operational sites
would be more vulnerable to the physical
risks of climate change under this than
under the 1.5°C scenario.
• Should a 3+°C future become a reality, due
to the greater physical risks, our river-based
sites could flood regularly, while our coastal
locations in Asia and North America could
be affected by storm surges, and it could
be difficult to find alternatives given that
asignificant number of sites would be
affected simultaneously. Overall, markets
could become severely unstable given the
likelihood of social and economic upheaval
resulting from widespread, severe weather
events, with a corresponding impact on our
customers, our supply chain and our costs.
Business resilience: considering the
impact of climate-related risks and
opportunities over all timeframes
In the short to medium term (to 2025 and
2035), transition risks, particularly global or
regional carbon taxes, are most likely to affect
us. The physical risks of climate change, while
already starting to occur in the form of more
frequent extreme weather in more parts of the
world, are likely to increase and therefore
become more costly over the medium to
long term (2035 and 2050).
More specifically, in the short term (to 2025),
under a 1.5ºC temperature rise scenario, from
our analysis we estimate that around 75%
ofthe impact of the risks from climate change
willcome from transitioning to a low-carbon,
circular economy (notably higher costs),
withjust 25% coming from physical risks
(more extreme weather events affecting our
operations). In that context however, in the
event that there is global coordination of
carbon pricing and environmental taxes then
it is likely that we would be able to pass most
climate-related cost through to our customers.
At the same time, with increasing awareness
ofclimate-related issues, we expect to see
growing demand from our customers and their
consumers for products like ours which offer
lower carbon or circularity benefits. Both of
these give aconsiderable measure of
resilience toourbusiness.
It is difficult to look beyond 2025 with any
degree of certainty, because much depends
on the political will to act now in accordance
with the conclusions reached at COP26, to
bring in the measures such as coordinated
carbon taxation and environmental regulation
that would enable the world to constrain the
temperature increase. Should these measures
occur, in the short term Synthomer would
face higher carbon pricing as noted above,
but should be able to pass the costs on;
however such measures should mean a
1.5ºCtemperature rise remains possible
andtherefore the physical risks to Synthomer
in the medium to long term would decrease.
Should these measures not occur, or occur
too slowly, then a 2°C or even 3+°C
temperature rise becomes increasingly likely,
and with it an increase in physical risks over
the medium to longer term. We are, however,
in a relatively strong position to withstand the
impact of these risks, because our network of
manufacturing sites across the world is wider,
meaning we can supply customers from an
alternative site if one is affected by extreme
weather. Moreover, our strategy is to broaden
our footprint in speciality chemicals through
organic and acquisitive growth, which means
that in the future, our network is likely to be
wider still, thus rendering us more resilient
toclimate change.
Next steps
To embed climate thinking more deeply in our
business strategy, in the coming year we will:
• Develop a plan for how scenario analysis
will feed into our annual strategy-setting
process
• Extend our quantitative scenario analysis
toinclude products from sites in Asia and
the USA.
Risk management
– Principle 6: Describe the
Company’s processes for
identifying and assessing
climate-related risks
– Principle 7: Describe the
Company’s processes
formanaging climate-
relatedrisks
– Principle 8: Describe how
processes foridentifying,
assessing, and managing
climate-related risks
areintegrated into
theCompany’s overall
riskmanagement
Our philosophy, approach and processes
relating to risk management are set out
inourRisk report on pages 69-76.
Given the wide-ranging potential impacts of
climate change, during 2021 we considered
all our principal risks in that context, and
revised them where necessary to take into
account the physical and transition risks of
climate change. We also established in our
analysis the timeframe over which we expect
these risks to occur. The principal risks that
now include the impact of climate change are
as follows – for more details see pages 72-76:
• Volatility and competition in chemicals and
polymers market
• Innovation and intellectual property
• Mergers and acquisitions
• Change programmes
• Loss or failure of Synthomer site
• Security of supply of raw materials goods
and services
• Ethics and regulatory compliance
• Financial.
From 2022, we will review the risks associated
with climate change every six months as part
of our regular risk management process.
Next steps
In the coming year, we will continue to
develop our understanding of climate-related
risks and their potential impact on our
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
79
financial performance. Aside from the further
scenario analysis described above under
Strategy, we will develop our understanding
of potential financial impact of the physical
and transition risks and opportunities of
climate change.
Metrics and targets
– Principle 9: Disclose
themetrics used by
theCompany to assess
climate-related risks
andopportunities in line
withitsstrategy and risk
management processes
– Principle 10: Disclose
Scope 1, Scope 2, and,
ifappropriate, Scope 3,
greenhouse gas (GHG)
emissions, and the
relatedrisks
– Principle 11: Describe
thetargets used by the
Company to manage
climate-related risks
andopportunities and
performance against targets
The metrics we use to assess climate-related
risks and opportunities are:
• The proportion of new products we
makethat have sustainability benefits
(seepage48)
• Proportion of raw material procurement
spend covered by a sustainability rating and
improvement plan (see page 51)
• Energy consumption and usage of
renewable energy (see page 58)
• GHG emissions, including Scopes 1 and 2
and related risks (see page 58); for Scope 3
emissions, (see page 58)
• Water usage (see page 61)
Our Vision 2030 sustainability metrics and
targets, which we aim to have certified as
science-based during 2022, have a strong
focus on climate. We have published our
ambition to reach net zero by 2050, and
our2030 targets towards this aim include:
• At least 60% of new products with
enhanced sustainability benefits
(seepage48)
• 80% procurement spend with suppliers
with a sustainability rating (see page 51)
• 40% reduction in Scopes 1 and 2 GHG
emissions intensity, vs 2019 (see page 58)
• 10% reduction in Scope 3 GHG emissions
intensity, vs 2019 (see page 58)
• 80% of electricity from renewable sources,
plus improving energy efficiency in all our
operations (see page 58)
• Manage and minimise water consumption,
and introduce water management plans in
water-stressed areas and at the sites where
we use most water (see page 60).
Achieving our Scope 1 and 2 emission
targetsis factored into Executive Committee
annual Performance Share Plan awards, as
described in the remuneration section above.
For more on our sustainability metrics and
targets, including performance, see the
Sustainability section on pages 42-68.
Next steps
We are looking into defining further
metricsand targets, aligned with TCFD’s
recommendations of October 2021, that
would help us better measure climate risk
andour resilience to it. This will include
setting an internal carbon price to stress
testthe resilience of key product lines.
Business foundations
TCFD report continued
Synthomer plc
Annual Report 2021
80
Viability statement
In accordance with the requirements of the UK
Corporate Governance Code (‘the Code’), the
Directors have assessed the viability of the
Group over a five-year period to December
2026, being the period covered by the Group’s
approved strategic plan. This plan is updated
annually, in a process led by the Executive
Committee with input from the respective
businesses and functions. It includes analysis
of product and profit performance, cash
flow,investment programmes and returns
toshareholders. The plan is presented to
theBoard each year as a part of its annual
strategic review.
The Directors consider five years to be an
appropriate time horizon for the strategic plan,
being the period over which the Group actively
focuses on its long-term product development
and capital expenditure investments. A period
above five years is considered by the Directors
to be too long, given the uncertainties that
exist beyond this time frame.
In making their assessment, the Directors
have considered the diverse activities and
product offering of the Group in terms of
geographies, chemistry and end markets.
The Directors have also considered the
Group’s current strong financial position,
including the existing and future committed
financing facilities, which have been assumed
to be refinanced at maturity.
A sensitivity analysis has been undertaken,
focusing on the impact of the principal risks
(detailed above on pages 72-76) over the
five-year period and the availability and likely
effectiveness of mitigating actions. The risks
have been assessed for their potential impact
on the Group’s business model, future trading
and funding structure.
The sensitivity analysis has considered a
number of severe but plausible scenarios,
linked to the risks considered to have the
most significant financial impact. In all cases,
the impact was considered on both liquidity
and the borrowing covenant.
The scenarios included:
• Trading downturns as a result of increased
competition or lack of demand
• Delays in project delivery
• Failure to successfully commercialise
new products
• The temporary loss of a major
manufacturing site
• Significant foreign exchange rate
appreciation against sterling.
None of these scenarios individually, or
whencombined, threaten the Group, and
thecombined impact of these scenarios
hasbeen evaluated as the most severe stress
scenario. No mitigating actions have been
included for any of the scenarios and, should
it need to, the Group could take action quickly
to significantly reduce costs and cash outflows
as demonstrated during the course of the
COVID-19 pandemic in 2020.
While this sensitivity analysis did not consider all
ofthe risks that the Group may face, the Directors
consider that it is reasonable in the circumstances
of the inherent uncertainty involved.
Based on the analysis, the Directors have
areasonable expectation that the Group will
be able to continue in operation and meet its
liabilities as they fall due over the five-year
period of their assessment.
Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
81
Strategic report
Business foundations
Non-financial disclosures and section 172 statement
Section 172(1) statement and
stakeholder engagement
We value our engagement with all our
stakeholders, including our key stakeholders:
customers, employees, communities,
suppliers, shareholders, and governments and
authorities. Our section 172(1) statement is on
pages 96-97. It describes how the Directors
have had regard to stakeholders’ interests and
other matters when discharging Directors’
duties set out in section 172 of the Companies
Act 2006. It includes examples of how
stakeholders’ interests were considered during
principal decisions taken during the year.
Non-financial information statement
The table below summarises where key elements of our governance reporting (including non-financial matters as required by theNon-Financial
Reporting Directive) can be found, some of which are integrated into other sections of our Annual Report.
Reporting requirement Relevant policies and standards that govern our approach Where to read more in this report
Environmental matters • Code of Conduct
• Group SHE Policy
• Sustainable Procurement Policy and Strategy
• Taskforce on Climate-related Financial Disclosures (TCFD)
• Risk assessment page 69 to 71
• Health and safety page 55
• Sustainable procurement page 51
• TCFD report pages 77-80
Employees • Our values
• Code of Conduct
• Group SHE Policy
• Our values page 62
• Gender pay gap page 113
• Section 172 page 97
• Health and safety page 55
Social matters • Responsible Care Principles
• Synthomer Cares
• Section 172 page 97
• Our communities page 67
Respect for Human Rights • Code of Conduct
• Modern Slavery Act Statement
• Conflict Minerals Policy Statement
• Sustainable Procurement Policy and Strategy
• Upholding human rights page 52
• Ethics and compliance page 66
• Sustainable procurement page 51
Anti-corruption and
anti-bribery
• Code of Conduct
• Ethics Helpline
• Core values
• Ethics and compliance page 66
• Our values page 62
Our business model • How it links to strategy and delivers value to stakeholders • Our business model page 15
Principal risks and
uncertainties
• Risk assessment • Managing risk page 69 to 76
Non-financial KPIs • Relevant key performance indicators • Key performance indicators page 17
The Strategic Report was approved by
order of the Board.
R Atkinson
Company Secretary
3 March 2022
Synthomer plc
Annual Report 2021
82
Synthomer offers an
extensive range of binders
specifically developed to meet the
performance and regulatory
requirements of the architectural and
industrial coatings market. Our acrylic and
vinylic copolymer dispersions are low
VOC, low odour and APEO free to meet
the increasingly demanding
environmental standards without
compromising application
properties or durability.
Governance
Group financial statementsGovernanceStrategic report Company financial statements Other information
Synthomer plc
Annual Report 2021
83
Corporate Governance
Our Board of Directors
Caroline A Johnstone
Chair
N
D
Nationality: British
Position and date of appointment
Chair of the Board and the Nomination and
Disclosure Committees. Caroline joined the
Board in March 2015 and was appointed Chair
in December 2020 having previously been Chair
of the Audit Committee and a member of the
Nomination and Remuneration Committees.
Key appointments
Caroline is a Non-Executive Director and chair
of the employee engagement committee of
Spirax-Sarco Engineering plc, and a Non-
Executive Director and chair of the audit
committee of Shepherd Building Group
Limited, a private company which owns
Portakabin Limited. She has an honorary role
on the board of the University of Manchester.
Skills and experience
Caroline has nearly 40 years’ experience
ofworking with large global organisations
inthe chemicals sector and other industries.
Her experience includes delivering value from
M&As, turnaround, culture change and cost
optimisation. She was a partner in and sat
onthe board of the Assurance practice of
PricewaterhouseCoopers (PwC) with
responsibility for all people matters.
Caroline is a chartered accountant
andamember of the Institute of
CharteredAccountants of Scotland.
Michael Willome
Chief Executive Officer
D
Nationality: Swiss
Position and date of appointment
Chief Executive Officer since November 2021;
member of the Disclosure Committee.
Key appointments
Michael is a Non-Executive Director of
Glaston Oyj (Nasdaq Helsinki) and sits on
subsidiary boards of the Indutrade Group.
Skills and experience
Michael is an established public market CEO
with a track record of driving performance
through strong operational management and
strategic actions, including M&A. He was
previously CEO of Conzzeta AG, Zurich,
(nowBystronic AG), aglobal industrial
company listed on the SIX Swiss exchange.
Prior to Conzzeta, Michael spent 18 years
with Clariant, leading its global Industrial &
Consumer Specialities division from 2010
to2015. This followed 13 years in leadership
roles in Asia Pacific, based in Hong Kong,
Canada and Turkey.
Stephen G Bennett
Chief Financial Officer
D
Nationality: British
Position and date of appointment
Chief Financial Officer since May 2015;
member of the Disclosure Committee.
Key appointments
No external appointments.
Skills and experience
Stephen was previously at INEOS where he
had been chief financial officer at Petroineos
Refining since 2006. Stephen was also CFO
of INEOS Upstream Limited, a start-up oil
andgas exploration business, and of INEOS
Olefins and Polymers South and INEOS
Phenol. He joined Coopers & Lybrand in
1986and is a qualified chartered accountant.
He was at Full Circle Industries plc as
company secretary and group controller
before moving to PricewaterhouseCoopers
(PwC) in 1997 as a Director in
transactionservices.
Synthomer plc
Annual Report 2021
84
Board committee key
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
D
Disclosure Committee
Committee Chair
The Hon. Alexander G Catto
Non-Executive Director
N
Nationality: British
Position and date of appointment
Non-Executive Director since 1981.
Member of Nomination Committee and
designated Non-Executive Director to lead
workforce engagement.
Key appointments
Alexander is managing director of CairnSea
Investments Limited, a private investment
company, and a Non-Executive Director of
several early stage companies that have been
backed by CairnSea.
Skills and experience
Prior to the establishment of CairnSea,
Alexander was a Director of Morgan Grenfell
& Co and then Lazard Brothers & Co.
Brendan WD Connolly
Senior Independent Director
A
R
N
D
Nationality: British
Position and date of appointment
Independent Non-Executive Director since
January 2014; Chair of the Remuneration
Committee; member of the Audit, Disclosure
and Nomination Committees. Senior
Independent Director since April 2015.
Key appointments
Brendan is a Non-Executive Director of
Victrex PLC, Pepco Group NV and Applus,
and two private equity backed companies,
one of which he chairs.
Skills and experience
Brendan has over 30 years’ experience in the
oil and gas industry. Until June 2013 Brendan
was a senior executive at Intertek Group plc
and had previously been chief executive
officer of Moody International (which was
acquired by Intertek in 2011). Prior to Moody,
he was managing director of Atos Origin UK,
and spent more than 25 years of his career
with Schlumberger in senior international
roles over three continents. Brendan has
previous experience as chairman
oftheremuneration committee
ofaUK-listedcompany.
Cynthia S Dubin
Independent Non-Executive Director
A
R
N
Nationality: American and British
Position and date of appointment
Independent Non-Executive Director since
July 2020; Chair of the Audit Committee
anda member of the Nomination and
Remuneration Committees.
Key appointments
Cynthia is a Non-Executive Director of the
Competition and Markets Authority, where
sheis chairof the audit, risk and assurance
committee, an independent Non-Executive
Director and member of the audit committee
ofHurco Companies Inc, anindependent
Non-Executive Director, andmember of the
audit and risk committee ofICE Futures
Europe, a subsidiary ofIntercontinental
Exchange, and an independent Non-
Executive Director, chair ofthe audit
committee and a member of the
compensation committee of Franchise
Group,Inc.
Skills and experience
Cynthia has served in senior finance and
business roles in the power, oil, gas and
broader clean energy technology sector,
having started her career in the banking
industry in New York specialising in advising
and lending to large energy projects before
relocating to London in 1992.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
85
GovernanceStrategic report
Corporate Governance
Our Board of Directors continued
Holly A Van Deursen
Independent Non-Executive Director
A
R
N
Nationality: American
Position and date of appointment
Independent Non-Executive Director since
September 2018; member of the Audit,
Nomination and Remuneration Committees.
Key appointments
Holly is a Non-Executive Director of Kimball
Electronics Inc, where she chairs the
Compensation & Governance Committee.
She serves as a Non-Executive Director of
Albermale Corporation and as a member of
the Executive Compensation and Capital
Investment Committees.
Skills and experience
Until 2005, Holly was group vice president,
Petrochemicals, at BP. She has worked in the
global chemical industry for over 25 years and
held senior positions across North America,
Europe and Asia. In addition, Holly has since
2006 held Non-Executive Director roles for
global companies headquartered in the USA
and spent 12 years on the board of a
Norwegian-listed company.
Roberto Gualdoni
Independent Non-Executive Director
A
R
N
Nationality: German and Italian
Position and date of appointment
Independent Non-Executive Director since
July 2021; member of the Audit,
Remuneration and Nomination Committees.
Key appointments
Roberto is chair of CABB Group and
amember of the board of directors of
AerogelCorporation.
Skills and experience
Roberto has over 25 years’ chemical sector
experience at BASF where he held senior
operational roles covering international sales,
marketing, procurement and M&A and served
on a number of joint venture boards. His final
role at BASF was as president of its Styrenics
business, which was carved out as part
ofajoint venture as Styrolution, and which
Roberto led as chief executive for three years
until 2014. Roberto has previous board-level
experience in Saudi Arabia, Finland
andBelgium.
Dato’ Lee Hau Hian
Non-Executive Director
N
Nationality: Malaysian
Position and date of appointment
Non-Executive Director since 2002; first
joined the Board in 1993 and stood down
in2000 to become an Alternate Director.
Member of Nomination Committee.
Key appointments
Hau Hian is a Director of Kuala Lumpur
Kepong Bhd and is the president of the Perak
Chinese Maternity Association. He also
serves as a Director of Yayasan De La Salle.
Skills and experience
Hau Hian is the Managing Director of Batu
Kawan Bhd, a listed Malaysian investments
holding company, with interests in plantations
and chemicals manufacturing. He has
experience in organisational transformations,
acquisitions, chemical and manufacturing
operations and sustainability issues.
Synthomer plc
Annual Report 2021
86
Richard Atkinson
Chief Counsel and Company Secretary
Position and date of appointment
Company Secretary since 1998; Group Chief
Counsel.
Key appointments
No external appointments.
Other Executive responsibilities
Member of the Executive Committee
Sustainability Steering Group; deputy chair
ofthe boards of the Group’s Middle Eastern
joint venture companies; trustee of the UK
pension scheme.
Skills and experience
Richard qualified as a solicitor in 1988 and
worked in private practice as a corporate and
banking lawyer before moving into industry as
an in-house lawyer working in the USA and
UK. He has extensive M&A experience and
led on the legal aspects of all the Group’s
acquisitions over the last 20 years. He has a
law degree from the University of Birmingham.
Our two non-Independent Board members
The Board recognises the unusual nature of having two non-Independent members.
This isa voluntary arrangement that has been in place for 40 years.
Dato’ Lee Hau Hian is the Board’s representative for our largest shareholder, Kuala Lumpur
Kepong Bhd (21.3%) which provided financial support for our recent acquisitions, via share
placing and a rights issue with his extensive leadership experience in chemical
manufacturing. He offers the Board and Executive Committee invaluable insights when
making business decisions as well as a perspective on the Malaysian and southeast Asian
business landscape.
The Hon. Alexander Catto is a member of Synthomer’s founding family. Today, the Catto
family ownsa5% shareholding. Some of our investors continue to vote against Alexander’s
Board membership, but we believe he provides deep knowledge of Synthomer’s past and a
unique long-term shareholder perspective. His background in investment banking and time
on other boards also give him extensive business, finance, investor engagement and
governance experience.
Board committee key
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
D
Disclosure Committee
Committee Chair
Technology = 1
Chemicals and engineering = 9
International = 9
Senior Management = 9
Strategy = 9
M&A = 9
Finance = 3
Commercial = 3
Innovation = 2
Operations = 3
People = 4
Individual Directors’ skills
Technology = 1
Chemicals and engineering = 9
International = 9
Senior Management = 9
Strategy = 9
M&A = 9
Finance = 3
Commercial = 3
Innovation = 2
Operations = 3
People = 4
Individual Directors’ skills
Technology = 1
Chemicals and engineering = 9
International = 9
Senior Management = 9
Strategy = 9
M&A = 9
Finance = 3
Commercial = 3
Innovation = 2
Operations = 3
People = 4
Individual Directors’ skills
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
87
GovernanceStrategic report
Ana Perroni Laloe
President,
Industrial Specialities
Nationality: Brazilian
Position and date of appointment
President, Industrial Specialities since
February 2022.
Other Executive responsibilities
Ana is the driving force in the team that
founded and have been leading our
ENGENDER women’s network.
Skills and experience
Ana joined Synthomer in March 2018 as
Global Business Development Manager in
ourIS Division. She holds a BSc in Chemical
Engineering from IMT in Sao Paulo.
She started her career at Ciba Specialty
Chemicals in Brazil, followed by commercial
roles in the UK, Brazil again and Switzerland.
She then took a career break and founded
and ran a small business as she started
afamily before joining Synthomer.
Corporate Governance
Our Executive Committee
Rob Tupker
President,
Functional Solutions and Europe
Nationality: Dutch
Position and date of appointment
President, Functional Solutions and Europe
since September 2018.
Other Executive responsibilities
Executive sponsor of Diversity and Inclusion
Leadership Committee, Member of Executive
Committee Sustainability Steering Group, and
Pathway programme Steering Committee.
Skills and experience
Rob was previously with Honeywell, where
heheld a variety of senior business leadership
positions in the performance materials and
home and building technologies divisions.
Prior to Honeywell, he worked with Süd-
Chemie (now Clariant) and Unilever’s/ICI’s
(nowGivaudan’s) flavour and fragrance
division. Rob worked and lived for seven
yearsin Asia Pacific, five years in the USA
and20 years across Europe. He hasa
chemical engineering degree from Eindhoven
Technical University, an MSc from MIT and
anMBA fromINSEAD.
Neil Whitley
President,
Performance Elastomers Asia
Nationality: British
Position and date of appointment
President, Performance Elastomers Asia
since January 2021. President, Global HR
since 2015.
Other Executive responsibilities
HR, member of the Executive Committee
Sustainability Steering Group and the
Pathway programme Steering Committee.
Skills and experience
Since joining Synthomer in 2015, Neil has
hadresponsibility for the Industrial Specialities
and Acrylate Monomers divisions and led
theintegration of the OMNOVA acquisition.
Neil was previously with Johnson Matthey
where he was a member of their executive
management committee and division director
of the process technologies catalyst and
chemicals refining divisions. Prior to Johnson
Matthey, Neil worked in business, finance and
HR roles at ICI. He is an economics graduate
from Leeds University and analumnus of
INSEAD’s Advanced LeadershipProgramme.
Biographies for Michael Willome,
Stephen Bennett and Richard Atkinson
can be found on pages 84 and 87.
Synthomer plc
Annual Report 2021
88
Marshall Moore
Chief Technology Officer and President,
Americas
Nationality: American
Position and date of appointment
Chief Technology Officer and President,
Americas since April 2020.
Other Executive responsibilities
Chairman of the Synthomer Foundation
Board of Trustees and a member of the
Executive Committee Sustainability Steering
Group.
Skills and experience
Marshall was previously chief technology
officerand senior vice president of operations
with OMNOVA Solutions. He has35 years
ofexperience in polymers andspeciality
chemicals, working with Borden Chemicals,
GEPlastics and Chemtura, prior tojoining
OMNOVA in 2015. Assignments have
includedleadership positions in technology
andinnovation, quality assurance and process
excellence, operations, government affairs
andadvocacy, marketing, and information
technology. He holds a degree inchemistry
andis a certified Six Sigma BlackBelt.
Philip Wrigley
President,
Operations and SHE.
Nationality: British
Position and date of appointment
President Operations and SHE since
May2021.
Other Executive responsibilities
Member of the Executive Committee
Sustainability Steering Group.
Skills and experience
Phil joined Synthomer in March 2019 and
waspreviously Vice President, Operations
forFunctional Solutions. Prior to Synthomer,
Phil worked in the chemical industry for
morethan 30 years across speciality and
commodity sectors for Venator, Huntsman,
RioTinto Alcan, Rohm and Haas, Hickson
andWelch and ICI. He has significant
experience of global operational and
SHEimprovement programmes. He is the
operational lead for due diligence, integration
and synergy delivery for several large
acquisitions at Synthomer. Phil is also a
chartered engineer and member of I.Mech.E.
Board committee key
A
Audit Committee
R
Remuneration Committee
N
Nomination Committee
D
Disclosure Committee
Committee Chair
Tim Hughes
President,
Corporate Development
Nationality: British
Position and date of appointment
President, Corporate Development since
2018. Tim joined Synthomer in June 2009
and became a member of the Executive
Committee in 2013.
Other Executive responsibilities
Member of the Executive Committee
Sustainability Steering Group.
Skills and experience
Tim was previously group managing director,
Urethane Technologies, Chemtura Inc having
previously led the Urethane Speciality
Chemicals joint venture between Chemtura
andCroda plc since 1998. Prior to Chemtura,
Tim spent 14 years with Courtaulds plc in
business leadership and marketing roles in
the speciality chemicals and fibres divisions.
During his career at Synthomer he has been
responsible for the Industrial Specialities
division and the Americas, Middle East
andAfrica region.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
89
GovernanceStrategic report
Introduction from the Chair
Corporate Governance
Introduction to corporate governance
Even for a business as dynamic as
Synthomer, 2021 was notable as a year
inwhich the Board oversaw Executive
andBoard appointments, major strategic
activity and monitored significant progress
against our key priorities.
Overseeing ambition,
supportinggrowth
The Executive changes saw us welcoming
Michael Willome as our new Group Chief
Executive Officer and Lily Liu, who will join
usby July 2022, as our new Chief Finance
Officer. We describe the search processes
that led to their recruitment – along with that
of our new Independent Non-Executive
Director, Roberto Gualdoni – on page 107.
Here, I would like to repeat the Board’s warm
welcome to them, and to say how pleased we
are to have found people whose skills,
mindsets and personalities will add huge
value and diversity to Synthomer.
Scrutinising decisions
andmonitoringprogress
As well as guiding strategic recruitment,
in2021 the Board oversaw two significant
decisions that will shape the future of our
business for years to come. The first, in the
Board priority area of environment, society
and governance (ESG), was the development
and launch of Synthomer’s Vision 2030
sustainability roadmap. The Board engaged
indetailed discussions of the appropriate
targets for Vision 2030, taking a long-term
view of the interests of the business and its
ability to deliver on our purpose. We were
pleased to approve the final version which
gives us a clear direction to steer in the
decade ahead. We will continue to review
Synthomer’s ESG targets and challenge
theExecutive team to ensure they remain
asstretching as possible. For more detail
onVision 2030, see page 18.
The second significant decision concerned
our proposed acquisition of Eastman’s
Adhesive Resins business. This very
significant transaction – the largest in our
history – was the subject of detailed Board
oversight, planning and discussion over
muchof 2021.
Synthomer plc
Annual Report 2021
90
As well as discussions with Synthomer teams,
we sought expert inputs on market dynamics,
prospects and pricing, the acquisition process,
and the likely transition. We considered the
impact of the acquisition on our full range of
stakeholders through a detailed section 172
process, concluding that the transaction
served all their interests – andstrengthened
our ability to offer a broaderportfolio of
products with sustainability benefits.
We also continued to ensure that Synthomer’s
approach to risk evolved with the changing
circumstances we face. As part of this effort,
led by our Group Internal Audit and Risk
Director and following discussion with
external consultants, we made important
adaptations to our risk management
framework. We re-assessed our Board
appetite for our significant business and
strategic risks. In addition, the Board will
nowconsider the speed at which a risk might
occur, as well as its probability and impact.
For more details, see our Audit Committee
report on page 98.
In a year of growth and high performance,
theBoard was also closely involved in a wide
range of major projects, receiving regular
updates on ongoing programmes such as
Synthomer’s capacity expansion in nitriles,
the OMNOVA integration, the new Asian
Innovation Centre in Malaysia, and the
business process and system transformation
Pathway programme.
Continuous improvement for the Board
We continued to act on, and benefit from,
thelearnings of our external 2020 Board
evaluation. As the Board continues to evolve
to serve the business, we focused on our
priorities in the crucial areas of succession
planning and diversity and inclusion.
Having compared our skills with those
ofother leading companies in 2020, we
concluded that we have a strong blend
ofskills and experience, but wanted to add
toour industry, innovation and European
experience – and this guided us in our NED
recruitment in 2021. Recently, we undertook
adeeper review of skills and experience of
the Board moving into 2022 and this guided
our succession planning. We have very strong
international representation, for instance, and
will look to deepen our UKpublic company
experience in futurerecruitment.
We also made progress in our drive to have
amore diverse and inclusive leadership team;
setting a goal of 50% gender diversity in new
hires to senior roles by 2030. We got off to
agood start by reaching our first milestone
– 20% of women in such positions – by the
end of 2021. More details on our succession
planning are on page 106.
Changes to our
governancereporting
We have changed the way in which we
report on governance this year to make
the information more accessible. The main
body of the report (see ‘The Board’s year’)
sets out key activities that our Board
members have undertaken during 2021.
We have also developed a new, separate
compliance section, set out on pages
109-110, which describes how we have
complied with UK Corporate Governance
Code (2018 version), with emphasis on
how we have applied its principles.
I hope that I will meet shareholders at the
AGM and I am always happy to hear from
and speak with shareholders at any time.
I am also developing the Board agenda with
the help of my Board colleagues. We have
included thematic deep dives for the Board
tostrengthen focus on strategic priorities.
We had sustainability as a Board meeting
standing item in 2021, to drive our progress
inthis area. During the year, we expanded the
opportunities for strategic discussion, debate
and expert input at Board meetings – for
example, by hearing from external specialists
on our ESG priorities while we considered
Vision 2030. This is something we want to
domore of. We also intend to increase our
engagement with stakeholders, now that
COVID-19 restrictions are lifting. I am
particularly keen to heighten our engagement
with employees at former OMNOVA sites,
which have been difficult to visit during
the pandemic.
Following our 2020 external evaluation of
theBoard and Committees, this year we
conducted an internal review. The feedback
suggests that we have made good progress
on all our 2021 priorities.
Having had two closed Annual General
Meetings due to COVID-19, I am particularly
looking forward to meeting more shareholders
than I was able to during 2021 at our coming
AGM. We aspire towards making our AGMs
more inclusive by adopting virtual attendance
mechanisms. However, for the time being,
wewill monitor how market practice develops
and this coming meeting will be solely
physical. We will continue to invite questions
to be submitted in advance of the meeting.
Caroline Johnstone
Chair of the Board
3 March 2022
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
91
GovernanceStrategic report
Corporate Governance
Introduction to corporate governance continued
Our governance structure
The governance structure is designed to ensure that the Board focus is on strategy, monitoring performance and ensuring appropriate risk
appetite, risk management and controls.
In 2018, Synthomer formed a cross-functional Sustainability Committee comprising representatives from all the key functions and businesses,
aswell as divisional presidents. The Committee meets quarterly and is chaired by the Group Sustainability Director who reports directly to the
Executive Committee. This ensures Synthomer’s sustainability agenda is aligned with Group strategy and helps to embed sustainability issues
within our businesses.
See page 42 for more information on our approach to sustainability including sustainability governance.
See page 111, Compliance with the Code, for more information on the division of responsibilities.
Board
• Responsible for Synthomer’s long-term success and setting the Group’s purpose, values and culture, and strategic direction
• Oversees Group strategy and risk assessment
• Responsible for corporate governance and overall financial performance
The Company Secretary provides advice to the Board and its Committees and supports the Chair in all governance matters.
Executive Committee
Chief Executive Officer
Chief
Financial
Officer
Company
Secretary
and Chief
Counsel
President,
Performance
Elastomers/
President
Asia and
Global HR
President,
Functional
Solutions/
President,
Europe
President,
Industrial
Specialities
President,
Corporate
Development
President,
Operations
Chief
Technology
Officer/
President,
Americas
Audit
Committee
Nomination
Committee
Remuneration
Committee
Disclosure
Committee
• Monitors integrity of financial
statements
• Oversees internal controls
and risk management
process
• Manages relationship with
external auditor, including
recommendations to Board
and shareholders on
appointment and
reappointment
• Reviews size, skills, diversity,
experience and Board
composition
• Leads process to appoint
new Directors and senior
management succession
planning
• Oversees development
ofaBoard and
seniormanagement
successionpipeline
• Keeps non-executive and
executive leadership needs
under review
• Oversees the Board
evaluation processes
• Sets, reviews and
recommends remuneration
policy for the Chair,
Executive Directors, and
Executive Committee
• Ensures the Remuneration
Policy is properly
implemented
• Reviews the design and
approves targets of
performance-related
payschemes
• Reviews workforce
remuneration and
relatedpolices
• Monitors compliance with
disclosure controls and
procedures for material
information
• Responsible for identifying
inside information
Read more on page 98 Read more on page 106 Read more on page 112
Synthomer plc
Annual Report 2021
92
Board and Committee meeting attendance
The table below outlines all Board and Committee meeting attendance. When a Director is unable to attend, their views are sought in advance
and incorporated into discussions.
Non-Executive Directors must disclose to the Board other significant commitments before their appointment. Any proposed new significant
commitments require Board approval before they are accepted.
Board Nomination Audit Remuneration Disclosure
Total number of scheduled meetings 20 10 6 5 5
Members Attended Attended Attended Attended Attended
Caroline Johnstone 20 10 5
Calum MacLean – stepped down in November 2021 18 (18) 4 (4)
Michael Willome – joined Synthomer in November 2021 2 (2) 1 (1)
Stephen Bennett 19 5
Brendan Connolly 19 10 6 5 5
Lee Hau Hian – joined the Nomination Committee in
March 2021 19 8 (8)
Alexander Catto – joined the Nomination Committee in
March2021 20 8 (8)
Holly Van Deursen – joined the Nomination Committee
in March 2021 20 8 (8) 6 5
Cynthia Dubin 18 10 6 5
Roberto Gualdoni – joined Synthomer in July 2021 7 (7) 3 (3) 3 (3) 3 (3)
Just Jansz – joined the Nomination Committee in
March2021, stepped down inSeptember 2021 13 (13) 7 (7) 3 (3) 4 (4)
For Directors who only served for part of the year, the numbers in brackets indicate how many meetings they were eligible to attend.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
93
GovernanceStrategic report
Corporate Governance
The Board’s year
This has been an exceptional year for Synthomer with a heavier
than usual workload for the Board. Due to COVID-19, the majority
of its 20 meetings were held online. In December 2021, the
Board held its first full face-to-face meeting, with only one Non-
Executive Director attending virtually due to illness. In light of
changing work practices, the Board will now hold two of its
scheduled meetings virtually from 2022.
As well as the major areas highlighted below, we established
longer-term succession planning for key roles and were therefore
well prepared when our Chief Financial Officer (CFO), Stephen
Bennett, announced his decision to step down in August 2021.
The Board also approved ongoing site transformation projects,
including closing our only coal-fired power station at our site in
Sokolov, Czech Republic (see page 59 in our Sustainability report
for more information). It also approved the financial plan to
transfer production from our Marl 3 site in Germany, which we
are closing, to our location in Austria.
We created a comprehensive induction
programme for Michael, which is set out in
our Nomination Committee report on page
108. Details of Michael’s reward package
areset out on page 112 of our Remuneration
Committee report.
CFO: selecting a candidate with a strong
record in growth
To help us identify our new CFO, we carried
out a thorough search across several key
candidate groups, including sitting CFOs in
other FTSE 250 companies. We announced
Lily Liu’s appointment in November 2021,
andshe will join the Company no later than
July 2022. For more information on Lily’s
appointment, see page 107 in our Nomination
Committee report and pages 112 to 113 in our
Remuneration Committee report.
NED: bringing wide experience of the
chemical sector and board membership
We appointed Roberto Gualdoni as a new
Non-Executive Director to replace Just Jansz,
who retired in 2021 having completed his
nine-year tenure. Roberto has extensive
knowledge of the international chemical
industry and a wealth of board-level
experience. Information about Roberto’s
induction can be found in our Nomination
Committee report on page 108.
Eastman’s Adhesive Resins acquisition
We met regularly throughout 2021 to
discussprogress, due diligence and our own
business core assessment of the proposed
acquisition. The Board worked with both
Calum and Michael to ensure we considered
all opportunities and risks of the transaction
and that everyone was aligned. We carefully
considered the timing of the proposed
acquisition alongside the senior management
transaction – the whole of the executive team
joined the Board discussions and showed,
with their experience, support and planning
for the integration of the acquisition.
Knowing that our new CEO was in place and
supportive, and given the compelling business
case, we concluded that his acquisition was
inthe interests of all stakeholders.
Training and development
We are committed to providing relevant,
ongoing training for our Board members
tohelp them strengthen their understanding
of key governance issues. Every year, our
Remuneration Committee asks an external
specialist to provide updates on market
practice, remuneration trends and corporate
governance developments at its August
meeting. That meeting is attended by
thewhole Board. In 2021, the Board
alsoundertook workshops and training
onreporting requirements under the TCFD
and the UK’s Department for Business,
Energy and Industrial Strategy (BEIS) white
paper Restoring Trust in Audit and Corporate
Governance. See our Audit Committee report
Transition to a new managementteam
This year, we carried out an extensive
recruitment process to hire a new Chief
Executive Officer (CEO), a new Chief Financial
Officer (CFO) and anew Independent
Non-Executive Director(NED).
We appointed recruitment specialists Egon
Zehnder to help us search for our CEO and
NED. Meanwhile, we hired Spencer Stuart
tohelp us recruit a new CFO. Both agencies
helped us create clear role and candidate
specifications. They were asked to consider
diversity in its widest sense when developing
long- and shortlists of candidates for all roles.
As stated in our Annual Report 2020,
EgonZehnder led our Board skills review
andan external evaluation of Synthomer’s
Board and Committees in 2020. This work
aside, the Company and its Directors do not
have any connection with Egon Zehnder nor
Spencer Stuart.
CEO: comprehensive selection process
andinduction
We selected Michael Willome as our new
CEO following a comprehensive search
across more than 100 companies in a range
of sectors, including speciality chemicals
andother industrial businesses.
Michael joined Synthomer in November
2021and brings established public market
experience and a strong performance track
record, including in M&A. He also has a deep
understanding of speciality chemicals and our
end markets.
“The induction process
was very thorough and
comprehensive and
helped me to get under
the skin of the business.”
Michael Willome, CEO
Synthomer plc
Annual Report 2021
94
on page 102 for more information on the
actions we have taken as a result of the
whitepaper. The Board also received
refresher training on Directors’ duties and
responsibilities as part of our Eastman’s
Adhesive Resins acquisition work.
Outcomes of our 2021 internal
Boardreview
We hold external evaluations of the Board
everythree years, with internal reviews in the
intervening years. In 2021, we held an internal
evaluation, with the main points for follow up
relating to enhancing our strategy process;
maintaining our culture of learning lessons from
past experiences; and further development of
our stakeholder engagement and succession
pans. We have a clear action plan for 2022.
Making progress against our 2020
Boardevaluation
We implemented actions from our latest
external Board and Committee evaluation in
2020 (facilitated byEgon Zehnder) reviewing
key areas such as Board processes and
composition, succession planning,
stakeholder relationships and quality
ofdiscussion.
Key recommendations from
our 2020 evaluation Actions we took in 2021
Strengthen focus on
Board agenda
priorities
A series of special
topics and deep
dives were agreed as
part of the Board
annual planner.
Enhance learning
opportunities
We increased the
number of externally
supported
workshops and
training sessions that
the Board receives.
Further develop
Board dynamics
We increased the
regularity of our
Chair’s one-to-one
discussions with our
Non-Executive
Directors and
Executive Directors.
Drive progress in
sustainability
We added
sustainability as a
standing item at
each Board meeting.
Board engagement: strengthening
stakeholder connections
Understanding the needs and expectations
ofour stakeholders is an important part of
ensuring Synthomer’s success. The Board
has a role to play in this and members
makethemselves available to stakeholders
throughout the year. Our Executive Directors
play an important role in engaging with our
shareholders and report back to the Board
after results presentations. Our brokers
provided insights and feedback from
shareholders throughout the year and
asweannounced our acquisition of
Eastman’s Adhesive Resins business.
Our employees are one of our most important
stakeholder groups. In 2021, the Board
assessed its employee engagement
approach against FRC guidance.
This demonstrated that we have important
strengths, such as a clearly designated
Non-Executive Director who acts as the
Board’s ‘employee voice’; and a flexible
structure that allows employees to raise
issues. It also showed we have more work
todo in some areas, such as in letting
employees know how the Board has
usedtheir feedback to make decisions.
Ways that we take the pulse of our culture
Employee engagement is one of the key
waysthe Board fulfils its responsibilities to
setSynthomer’s cultural tone and assess and
monitor adherence to our values. The Board
is particularly aware that it needs to increase
its engagement with employees at former
OMNOVA sites – which has proved difficult
during the pandemic – and has plans to
dosoin 2022. The Board will also engage
with employees transferring from the
Eastman’sAdhesive Resins acquisition
onceithas completed.
During the year, although COVID-19
restrictions hampered plans for face-to-face
contact, Alexander Catto, our designated
Non-Executive Director for workforce
engagement, was able to meet employees
atour site in Harlow, in the UK. Holly Van
Deursen, one of our Independent Non-
Executive Directors, is now supporting
Alexander in his engagement role. During the
year, they joined employees in Germany and
the USA in virtual meetings. Their findings
were discussed by the Board at our
December meeting.
Board members also took part in other
employee activities. For example, Caroline
Johnstone and Holly Van Deursen engaged
with Synthomer’s new Engender women’s
network. Brendan Connolly also hosted
twoemployee sessions on executive
compensation. The Board continued to assess
employee opinions by drawing on such inputs
as employee survey data, the use of our ethics
helpline, progress against environmental
targets, and health and safetydata.
See page97 for more information on Board
engagement, in oursection 172 statement.
Strengthening our focus
onsustainability
In 2021, Synthomer introduced its new
Vision2030 roadmap, outlining a series
ofsustainability targets in three key areas:
products, operational health, safety and
environment, and people.
The Board held numerous discussions
withthe Executive Committee to agree
thesetargets, which are supported by
aseries ofshort-term objectives to guide
theCompany through the next decade.
Those conversations ensured that our new
commitments provide Synthomer with a
cleardirection for the next decade while
recognising that there will be more to
doalong the way. We appointed Deloitte
tohelpus prepare to report on TCFD
requirements. As part of that work, the firm
interviewed all our Non-Executive Directors
toget their views on the subject. Deloitte also
provided progress reports on this work at
several Board meetings throughout the year.
Meanwhile, the Board continues to receive
reports on Synthomer’s occupational health
and safety, and process safety performance
for discussion at every Board meeting.
See pages 42-68 in the Strategic report for
more information on our sustainability agenda
and targets.
Risk management and internal control
The Board of Directors has ultimate
responsibility for the Group’s systems of risk
management and internal control and for
reviewing their effectiveness and sets
appropriate policies to ensure that the Code
requirements are met. The Group’s internal
controls over the financial reporting and
consolidation processes are designed under
the supervision of the Chief Financial Officer
to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation and fair presentation of the
Group’s published financial statements for
external reporting purposes in accordance
with IFRS.
The Group risk management framework is set
out on pages 70-71. Risks associated with
safety, health and the environment are, by the
nature of the Group’s business, always of the
utmost concern and the sustainability report
on pages 55-57 reviews the Group’s current
year performance.
The Board confirms that a robust assessment
of the emerging and principal risks facing the
Group has been carried out and that it has
monitored and reviewed the effectiveness of
the Group’s risk management and internal
control systems in 2021.
Group financial statements Company financial statements Other information
95
GovernanceStrategic report
Synthomer plc
Annual Report 2021
Corporate Governance
Stakeholder engagement (s.172 compliance)
Understanding the issues that are
important to our stakeholders is essential
to the way in which we develop and
execute our business strategy. It is also
critical to our long-term success.
Our approach to section 172
Our section 172 statement describes the
ways in which the Board has carried out its
responsibility to promote the success of the
Company, recognising that the key decisions
it makes today will affect long-term
performance. The statement considers
paragraphs A to F of the Companies Act
2006 and includes details on how the
Boardhas considered and engaged
withstakeholders.
When making decisions, the Board considers
the needs of our different stakeholder groups
as well as the likely consequences that any
action taken might have on Synthomer’s
reputation. To help, the Board receives papers
that include a table setting out section 172
information. It uses this information to inform
strategic discussions, including implications for
the resilience of our business and the potential
impact on our community and environment.
It is the Chair’s responsibility to ensure that
the Board considers section 172 when
making itsdecisions.
When making decisions, the Board and
itsCommittees consider the interests
ofouremployees. We primarily engage
withemployees via Alexander Catto,
ourdesignated Non-Executive Director
forworkforce engagement. However, other
Board members met with employees during
2021 to discuss executive pay and diversity
and inclusion. More information about how
we engage with employees can be found in
our sustainability report on pages 62-68.
Board members make themselves available
to investors. In 2021, however, most direct
engagement was carried out by our CEO
andCFO and reported back to the Board.
We recognise that it is not always possible
toprovide a positive outcome for most
stakeholders and that sometimes the Board
has to make decisions based on competing
priorities. The Board regularly assesses the
outcomes of its decisions and is available
totalk to stakeholders when needed.
This engagement helps the Board better
understand what matters most to our
stakeholders, as well supporting discussion
on relevant issues. It also helps the Board
choose the course of action that best leads
tohigh standards of business conduct and
success for Synthomer in the long term.
Stakeholder engagement in 2021
There were no changes to the Board’s
identified key stakeholders, as listed in the
table opposite. In carrying out its duties, the
Board continued to ensure it understands,
and considers, the issues that matter most
tothese stakeholder groups, particularly
when making material decisions.
The pandemic continued to have an impact on
the Board’s engagement with stakeholders in
2021. For example, the full Board was unable to
carry out site visits and physical meetings with
employees. Instead, members received regular
updates on how employees across the Group
were coping and how Synthomer helped them
manage the ongoing operational, physical and
mental demands associated with running our
plants and businesses under COVID-19-related
constraints. Management provided feedback
onhow teams met strong demand from our
customers, particularly those involved in the
manufacture of nitrile latex gloves. We were,
however, able to go ahead with our twice-yearly
materiality assessment, when we appraise what
sustainability issues matter most to our
stakeholders. During the April 2021
assessment, we spoke to a range
ofstakeholders, including customers,
employees, shareholders and legislators.
Their feedback led us to make a number of
revisions to our approach. For more details,
seepage 46 of the strategic report.
For the second year running, it was necessary
to hold our AGM as a closed meeting, due to
the UK Government’s COVID-19 regulations
which prevented shareholders from attending
a physical meeting. We did, however,
putmeasures in place that allowed
shareholders to submit questions
inadvanceof the meeting.
Principal decisions in 2021
This was a particularly busy year for the Board,
with several changes in Synthomer’s Executive
Committee, our proposed acquisition of
Eastman’s Adhesive Resins business and the
launch of the Company’s new Vision 2030
sustainability roadmap and targets. Below we
set out two examples of the Board’s principal
decisions in2021 and how it considered
section 172 matters in the process.
Acquiring Eastman’s Adhesive
Resinsbusiness
To carry out our acquisition of Eastman’s
Adhesive Resins business, we had to raise
additional finance. We canvassed opinion
from key shareholders to ensure we had
theirsupport and determined that it was
inthe best interests of the business and
ourinvestors to raise both our borrowing
restriction from £1.5 billion to £2 billion and
additional equity through a £200 million
equityplacing. That placing was heavily
oversubscribed. The Board also considered
the acquired business’s impact on the
environment, requesting appropriate
information from Eastman’s management.
The acquisition aligns with our sustainability
roadmap, with many of its products being
used in the making sustainable adhesives.
For our employees the Board was of the
viewthat the acquisition would bring a
number of career and training advantages
and opportunities.
In December 2021, we put the borrowing
restriction to a vote at an Extraordinary General
Meeting and received 99.80% approval.
We also put the proposed acquisition to a vote
at the same meeting and received 99.98%
approval. We are very pleased with by the
level of support from investors, including
Kuala Lumpur Kepong Bhd.
Vision 2030
The Board spent several months engaged
indetailed discussions with the Executive
Committee to set appropriate targets as part
of the Vision 2030 roadmap. (See page 18 for
more details.) During these discussions, the
Board interrogated and challenged the planned
targets and considered the views and
expectations of a range of stakeholders,
including our employees, shareholders,
customers and suppliers. It also took a
long-term view of the business and its ability to
deliver on our purpose. The Board reviewed the
short-term objectives which were put forward
by the Executive Committee to underpin the
delivery of the 2030 targets. They considered
their alignment with matters of most concern
to our stakeholders and most material to our
business – carbon and climate change, diversity
and inclusion, and supply chain assurance.
Synthomer plc
Annual Report 2021
96
Stakeholder groups How the Board engaged in 2021
Customers
We work with more than 6,000 customers
worldwide, providing the products they
need to address technical and sustainability
challenges intheir ownmanufacturing
processes.
• The Executive Committee attended all
scheduled Board meetings with divisional
Presidents providing additional customer-
related context when needed.
• The Board discussed the exceptional demand
from our nitrile glove customers, including
managing supply and pricing and
consideringthe next phase of our
nitrilecapacity expansion.
• Since all areas of the business have seen
very strong demand, the Board has stayed
abreast of operational issues, such as plant
capacity and shift planning to meet the
additional demand.
• Historically, the Board receives ad hoc
reports on product quality. However, it has
asked for a more formal process of regular,
periodic reporting from 2022.
Employees
Our success relies on the talent of our
employees. We want them to feel part ofa
culture that values diversity and inclusion,
fairness and transparency.
• The Board received three presentations on
employee engagement in 2021, including a
proposal for a second Your Voice survey and
initial survey findings later in the year.
The Board received a full report on the survey
results and follow-up action plans in Q1 2022.
• The Board continued to monitor the impact of
COVID-19 at every Board meeting, receiving
statistics on employee infection rates, testing
regimes, number of employees isolating and
working from home and the subsequent
impact on operations.
• The Board reviewed plans for 2021
Employee Voice engagement in April,
although these had to be amended because
of the pandemic. Nonetheless, Alexander
Catto visited employees at our Harlow, UK,
site in Q2 and held two virtual meetings with
Holly Van Deursen for employees in
Germany and the USA in Q4. The Board
received feedback on these meetings
inDecember 2021.
Communities
We want the communities wholivenear our
sites to see us asagood neighbour.
• In September, the Board approved a proposal
to adapt the Synthomer Foundation’s
governance model to create a new global
volunteering network. See page 67 of our
sustainability report for more information.
• In future, the Board will receive regular
reports from the Executive Committee on
progress against our Vision 2030 targets.
Suppliers
Our suppliers deliver the raw materials and
services we need to make our products.
We look for ways to workin partnership with
suppliers to create a more sustainable
supply chain.
• In January and March, the CEO reported to
the Board on the impact that the end of the
Brexit transition period had on our operations,
including on freight and logistics.
• Our Vice President of Procurement and the
Director of Procurement Excellence presented
their work to create a more sustainable supply
chain, including a new global procurement
excellence network and sustainable
procurement policy.
• In June, the Vice President of Procurement
and the Procurement Director for Strategic
Raw Materials presented to the Board on
supply challenges over the past 18 months
caused by exceptional supply and demand
volatility and extremely high demand for our
products. The presentation demonstrated
how the procurement team had overcome
these challenges, using the Group’s
expertise and relationships with its
suppliers. See page 51 of our sustainability
report for more information on how we work
with suppliers.
Shareholders
As a public company listed on the London
Stock Exchange and included inthe FTSE
250 index, we have a responsibility to deliver
value for ourshareholders.
• The CEO and CFO provide updates on their
meetings with investors, and our President
ofCorporate Development shares investor
relations developments at every Board
meeting.
• Each Board pack includes analysts’
forecasts and consensus for financial
performance, as well as a summary of the
externally prepared shareholder analysis
report. This shows our top 20 shareholders
and their movements alongside top buyers
and sellers. Analysts’ reports and notes are
shared with the Board as they are issued.
Governments and authorities
As a member of the chemical industry and
scientific community, it is important we
engage on issues such as policy,
compliance and collaboration.
• Our Chair of the Board corresponded with the
Financial Reporting Council (FRC) to answer
questions about closing our Sokolov
coal-fired plant following the FRC’s thematic
review of IAS 37 ‘Provisions, Contingent
Liabilities and Contingent Assets’.
• The Board indirectly engaged with the
FRC’s waiver of the non-audit fee cap via
our auditor, PwC.
• The Board received reports on the changing
regulatory landscape, including the BEIS
consultation, TCFD reporting and corporate
governance.
• The Board receives a report three times a
year on legal compliance with operational
laws and regulations at our sites.
• During the year, Synthomer’s previous CEO
chaired a committee of the Chemical
Industries Association which engaged with
the Cabinet Office on post-Brexit issues
affecting the UK chemical industry.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
97
GovernanceStrategic report
Audit Committee: an
introduction from the Chair
My first full year as Chair of Synthomer’s
Audit Committee has been a busy one, with
new arrivals, a major acquisition and
developments in the way we track and
manage our risks.
As a Board member, I have a fundamental
duty to help recruit new members of the
management team. And, as Audit Committee
Chair, I was particularly keen to ensure
werecruited a new chief executive who
understands that, done well, risk
management and audit are essential tools
tohelp a business make better decisions.
I am pleased we have found that person
inMichael.
A year of progress
I was also personally very pleased that
Synthomer began rolling out the new Pathway
business transformation programme to our
first sites in 2021. This has been a big
capital-intensive project that will help
standardise and digitalise the way we manage
core business processes, such as inventory
management, invoicing and procurement.
During the year, the Audit Committee focused
on several key areas, including testing the
financial robustness of our new acquisition from
Eastman, strengthening our risk management
framework and reviewing our Internal Audit
function and environmental reporting
methodology. We also considered more routine,
but important, areas such asresponding to
regulatory changes andadjusting our approach
to Committee meetings to make best use of
everybody’s time.
Oversight of our proposed acquisition
The announcement of Synthomer’s plans to
acquire Eastman’s Adhesive Resins business
in October 2021 marked a big step forwards
in our growth ambitions. I am pleased with
how well we have worked with our auditor,
PwC, this year. The level of diligence
exercised on the reporting accountant
workfor the Eastman deal, for example,
wasexceptional and I am particularly grateful
toour new lead audit partner, David Beer,
andhis team for their hard work.
The proposed acquisition required PwC to
request the Financial Reporting Council (FRC)
for a second waiver to allow them to breach
their cap on fees to auditors for non-audit-
related services. While the FRC approved
ourrequest, they made it clear they would
notapprove a further waiver request for at
least two years. I am, however, satisfied that
we did everything possible to avoid making
the request and, on page 105, we explain our
reasoning and the steps we’re taking to avoid
a recurrence.
Corporate Governance
Audit Committee report
Synthomer plc
Annual Report 2021
98
PLACEHOLDER IMAGE
Improving our risk and audit processes
External consultants worked with us on
important changes to our risk management
framework. In particular, they helped the
Board and management team understand
good practice when defining risk appetite.
As part of that work we have added a third
dimension to our risk framework: we now
consider the speed at which a risk might
occur as well as its probability and impact.
Our Group Internal Audit and Risk Director,
Ginette Grant, has made great progress
inherfirst full year at Synthomer. As well
asreviewing our risk management strategy,
processes and team structure, Ginette
hasbeen very proactive with the Board,
interviewing individual members to
understand their audit priorities for 2022.
Supporting Synthomer’s
sustainabilityagenda to meet
stakeholders’ expectations
To reflect the growing significance of
sustainability and the need to track progress
against our Vision 2030 targets, our Internal
Audit team will begin reviewing aspects
ofSynthomer’s environmental reporting
methodology. We, as a Board, are now
reviewing all our capital allocation plans
withsustainability in mind.
Responding to regulatory
developmentsand reviews
Addressing sustainability is just one way
wecan meet society’s expectations of us
asaresponsible business. We must remain
proactive in other key areas, such as public
trust, which regulators are looking at very
closely. In 2021 the UK’s Department for
Business, Energy and Industrial Strategy
(BEIS) held a consultation on this subject and,
while final recommendations are due in 2022,
with companies expected to implement them
in the coming years, the direction of travel is
clear: businesses like ours must be prepared
for the introduction of some new Sarbanes-
Oxley-like regulation. We have begun building
a roadmap that will put us in a good position
whatever the outcomes. Synthomer has
adistinct advantage since our acquired
OMNOVA business, being originally an
American company, has an internal control
environment and processes which were
compliant with Sarbanes-Oxley.
The FRC’s May thematic review on interim
reporting was another of this year’s regulatory
developments. We moved quickly, mapping
our 2021 half-year results work against the
review and applying the lessons learned to
this Annual Report.
I started this introduction by saying that
thishas been a busy year – it’s also been
arewarding one. As a committee we’ve
continued to work well, albeit virtually, and
Iam pleased with how we adapted some
ofour meetings to enable thematic deep
divesessions with more time for questions
and answers.
It’s been a pleasure to work with
colleaguesacross Synthomer who bring
diverse thinking, respect and even passion
forrisk management and audit to the
table.I would like to thank everyone for
theirdedication in such a busy year. I look
forward to continuing that work in 2022
andbeyond.
Cynthia Dubin
Chair
3 March 2022
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
99
GovernanceStrategic report
Corporate Governance
Audit Committee: How the committee operates
Audit Committee role
We assist the Board’s oversight of our
financial systems and reporting, and the
adequacy and effectiveness of our internal
controls and risk management. We also lead
the oversight of both external and internal
audit. Our full terms of reference, reviewed
and updated during the year, are available
atwww.synthomer.com.
Committee members
The Committee comprised four members
untilJuly 2021 when Roberto Gualdoni joined
the Committee (and the Board) bringing it up
to five members. The Committee reverted
tofour members on the resignation of
JustJanszin September 2021. Roberto
undertook a rigorous induction on his
appointment, meeting with members of the
Executive Committee, senior members of the
finance team, Group Internal Audit and Risk
Director,and the lead external audit partner.
The Board considers that each member is
independent within the definition of the Code.
Our Committee Chair, Cynthia, has recent
andrelevant financial experience in line with
Provision 24 of the Code. She has had a long
career in finance, including having been CFO
of a premium-listed LSE company and a
member and chair of audit committees at
bothNasdaq- and NYSE-listed companies.
Together, Committee members have a wide
range of financial, operational and commercial
experience across the chemicalsand
engineering sectors.
The skills and experience ofCommittee
members aresetout on pages84-87.
Committee meetings andoperation
Other Board members have a standing
invitation to attend our meetings, unless
notified otherwise. We are very pleased that
our CEO and CFO attend our Committee
meetings, often with the rest of the Board.
Our programme of risk reviews and updates
has also allowed us to invite high-potential
and diverse members of the management
team to attend. These include senior Group
finance team members, the Group Internal
Audit and Risk Director, and PwC, led by
audit partner David Beer.
The Committee meets regularly with PwC
andwith the Group Internal Audit and Risk
Director without management present.
The Chair also liaises with Brendan Connolly,
the Senior Independent Non-Executive
Director and Chair of the Remuneration
Committee, to discuss matters such
assetting Executive Director
compensationtargets.
Outside formal meetings, the Chair meets
regularly on a one-to-one basis with the CEO,
the CFO, Group finance team members, the
Group Internal Audit and Risk Director and
PwC, to develop the Committee’s programme
of work and to review progress in actions we
have agreed. This enables us to explore and
understand key issues as they arise and
toensure we have appropriate information
prepared for, and sufficient time to address,
key issues in Committee meetings.
Correspondence with the FRC
In December 2020 the FRC advised us
thatSynthomer had been selected for
thethematic review into IAS 37 ‘Provisions,
Contingent Liabilities and Contingent Assets’
in the Annual Report and Accounts for the
year ended 31 December 2020.
Subsequently, in October 2021 the FRC
asked us to explain whether we were obliged
to decommission our coal-fired utility plant
inthe Czech Republic and to confirm the
amount was included in provisions for the
expected outflows. We clarified that the
restructuring charge and provision included
the estimated cost to meet the legal obligation
to decommission the plant. We explained
thatthe amount was not material to the Group
but acknowledged, with hindsight, that the
disclosure would havebeen improved
ifithadstated that therestructuring
chargeandprovision included the
decommissioningcosts.
Synthomer plc
Annual Report 2021
100
Activities during the year
To address our core remit in 2021, we:
Integrity of corporate
and financial
reporting, significant
judgements and
estimates
• Reviewed and approved the Group’s annual and interim financial statements, including preliminary results
announcement
• Reviewed and approved significant accounting policies, estimates and judgements and reported alternative
performance measures
• Reviewed and challenged the assumptions and sensitivities in the scenarios modelled to support the preparation
ofthe accounts on a going concern basis and in assessing the longer-term viability of the Group
• Reviewed the FRC guidance for 2021 covering interim reporting, annual accounts and corporate governance
reporting, along with a summary ofthe management’s approach to implementation
• Assessed the processes for assuring the Board that the 2021 Annual Report and Accounts, when taken together,
isfair, balanced and understandable
• Regularly reviewed the Group’s material litigation and concluded, in the February 2022 Committee meeting, that the
provisions are appropriate
• Reviewed the UK payment practices report, discussed the underlying data and challenged management on certain
aspects of the report
External audit • Approved the external audit plan for 2021; discussed the experience and expertise of the key members of the
engagement team, in the light of a mainly remote audit; and approved the audit fee
• Carried out a review of the auditor’s reports, including PwC views on significant accounting judgements, estimates
and the internal control environment
• Reviewed compliance with the FRC’s Ethical Standard for auditors and the restrictions on auditors in providing
non-audit services. Approved the provision of certain permissible non-audit services by PwC (for detail, see page 105)
• Considered and confirmed PwC’s independence (see page 104). Monitored PwC’s work as reporting accountants
onthe acquisition of Eastman’s Adhesive Resins business and the subsequent year-end audit, to ensure there was
noimpact ontheirindependence
• Reviewed and assessed the performance of PwC and our lead audit partner
• Considered the need to put the external audit out to tender. After discussion and challenge, we recommended PwC’s
reappointment
Internal audit, risk
management and
internal controls
• Reviewed risk processes across the business to identify and mitigate risks
• Implemented changes to our risk management framework, adding an additional dimension of the speed at which
therisk might occur to probability and impact
• Continued our programme of deep dive reviews on the risk management of our global businesses and functions.
Alongside our reviews of Performance Elastomers, Functional Solutions, Industrial Specialities and Acrylate
Monomers, we also considered pensions, tax, Group-wide cyber security, the security and reliability ofour industrial
automation andcontrol systems, and strategic sourcing operations
• Drafted a detailed delivery plan to build the content of the Audit and Assurance Policy and developed a high-level
assurance map
• Received updates at each meeting on ongoing and completed internal audits and actions arising
• Considered the results of the 2021 controls assurance internal audits and IT audits, the self-assessment process
andthe adequacy and speed of management’s response to matters raised
• Reviewed and approved the 2022 internal audit plan and ensured there is sufficient resource to deliver it
Governance • Reviewed the corporate governance reporting and whether, as part of the Annual Report, it was fair, balanced
andunderstandable
• Reviewed the effectiveness of the Group’s anti-bribery and anti-fraud procedures
– Discussed the effectiveness of the Group’s Code of Conduct and Ethics Helpline
– Received reports on the independent investigations conducted in response to concerns raised under the
whistleblowing policy and reported to the Board that we were satisfied with the outcomes
– Met with Group Internal Audit and Risk Director and the external auditor without management onseveraloccasions
– Undertook a Committee effectiveness review, assessed the results and concluded that the Committee was
operating effectively
– Reviewed the Committee’s terms of reference to ensure our role and responsibilities are aligned with the Code.
Group financial statements Company financial statements Other information
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Annual Report 2021
101
GovernanceStrategic report
Corporate Governance
Audit Committee: How the committee operates continued
BEIS consultation paper
The Board received a presentation from
external consultants at its June meeting,
outlining the key topics raised in the BEIS
consultation paper, Restoring Trust in Audit
and Corporate Governance, and rating each
topic on the impact on the Group and
itsurgency.
Executive management assessed how the
Group could best respond to each topic and
presented its findings to the Committee in
August. A number of projects were initiated,
inline with the likely outcomes of the
consultation, each with a project lead/owner.
We receive updates on project progress at
each Committee meeting.
The largest project relates to internal
controls.This aims to ensure that our control
environment is sufficiently robust to be
audit-ready, for any new regulation, and for
Directors to be able continue to attest to its
effectiveness. Our acquisition of OMNOVA
brought us a business which was Sarbanes-
Oxley (SOX) compliant and had never
reported a material deficiency. The former
Chief Accounting Officer and his deputy, who
have remained with us, have experience of
SOX implementation and of maintaining and
reporting on a SOX environment. They will
lead this project.
Going concern and viability statements
To enable the Board and Committee
toassess going concern and viability,
management sets out its assumptions
andthe potential risks to the business and
possible mitigations, together with economic
and business scenarios. During the year,
there was a particular focus on the impact
ofthe proposed acquisition of Eastman’s
Adhesive Resins business and the expected
reduction in Performance Elastomers’ 2022
profitability. The process – conducted
bymanagement, and reviewed bythe
Committee to support the Board’s
statement– included:
• Reviewing the Group’s sources of funding
and, in particular, testing the leverage
covenant in our financing arrangements
and assessing available headroom
• Reviewing the short-, medium- and
long-term cash flow forecasts in various
severe but plausible scenarios, as well as
reverse stress testing forecasts.
• Assessing the Group’s current and forecast
activities and factors likely to affect its
future performance and financial position.
The Committee discussed the going
concernand viability statements at the February
2022 Committee meeting and recommended
that the Board provide the statement set out on
page 128 and page 81, respectively.
Fair, balanced and understandable
The work undertaken by management
(andreviewed by the Committee) to
supportthe Board’s statement on our
AnnualReport being ‘fair, balanced and
understandable’ includes:
• Establishing a working group of
appropriately qualified Group people to
oversee the drafting of the Annual Report
and Accounts. This group met regularly to
ensure that disclosures were appropriate
for all stakeholders and that drafting was
progressing well
• Engaging a corporate communications
andreporting adviser, to assist
indrafting,editing and proof-reading
theAnnual Report
• Ensuring that the FRC’s October 2021
guidance, along with other relevant
guidance, were taken intoaccount
• The CEO and CFO confirming that, in
theiropinion, the Annual Report was fair,
balanced and understandable
• Requesting that certain key contributors,
for example, Presidents and Finance
Directors of our global divisions, sign
adeclaration confirming the accuracy
oftheirinformation
• Arranging for our remuneration
consultantsto review the Directors’
Remuneration report
• An audit trail being completed by the
VP,Group Finance for material data
underpinning non-financial information
inthe Annual Report
• Circulating drafts of the Annual Report
toPwC, the Committee and the Board
forreview
• Discussing material disclosures at their
February 2022 Committee meeting
The Committee discussed the fair, balanced
and understandable statement at their
February 2022 Committee meeting and,
inlight of the above, recommended that
theBoard provide the statement as set out
onpage 129.
Synthomer plc
Annual Report 2021
102
Significant areas of judgement and estimate The Committee’s review, challenge and conclusion
Taxation
The Group holds total tax provisions of £23.7 million relating
tomatters raised by tax authorities in several jurisdictions.
Significant judgement has to be exercised by management,
withadvice from tax advisers, todetermine tax provisions, as the
finaltax outcome is uncertain andmay not be known for several
years. The scale of the Group’s uncertain tax provisions has
reduced significantly over recent years as various long outstanding
tax matters have been settled, both for and against theGroup.
The Group Tax Director presented to the Board and the Committee
during the year. In assessing the year-end judgements for 2021, she
reported on the basis for calculating the effective tax rate of 22.5% and
the reconciliation to the statutory tax rates of the Group. She provided
regular updates on interactions with tax authorities that regulate the
jurisdictions in which we operate, setting out management’s detailed
rationale and judgement for each current tax liability. The Committee
challenged management’s judgements to ensure that they were
alignedwith our Group tax strategy. The Committee concluded that the
estimates and disclosures wereappropriate. PwC presented its findings
on management’s judgements, using tax specialists as required, and
provided the Committee with its assessment of their appropriateness.
Pensions
The Group operates a number of defined benefit schemes
(predominantly in the UK, USA and Germany) which have significant
liabilities, as outlined in note 26 to the Group financial statements.
Although the UK and USA schemes are closed to new entrants
andto future accrual, theassessment of liabilities of each of the
schemes is sensitive to changes in actuarial assumptions.
Our Group Pensions and Benefits Director regularly attended the
Committee in 2021 to provide updates on our pension arrangements.
The Group continues to review our pension scheme investment
advisers and investment strategies to ensure we have a lower risk,
liability-driven investment approach, as well as undertaking a review
ofmajor scheme documentation to ensure it is up to date.
We received a report from management setting out the key assumptions
and rationale in valuing the liabilities of the main plans inthe UK, USA and
Germany. The Group uses appropriately qualified external actuarial
advisers to help establish the assumptions used inthevaluation of
theGroup’s pension liabilities. PwC evaluated theassumptions and
methodologies used by our actuarial advisers andmanagement and
assessed whether their assumptions were appropriate and not materially
different from external benchmarks forsimilar schemes.
The Committee reviewed the assumptions and methodology used
bymanagement, including comparisons to those of other companies,
andconcurred with the conclusions.
PwC reported that they were satisfied with the assumptions used and
the way the schemes had been accounted for.
Other areas of judgement
Alternative performance measures – Special Items
The Group discloses Special Items separately, to provide a
clearerindication of underlying performance. Special Items are
eitherirregular, and therefore their inclusion in the assessment
ofasegment’s performance would distort trends, or are technical
adjustments which ensure the Group’s financial statements are
incompliance with IFRS, but do not reflect the year’s operating
performance; or both. An example of the latter is the amortisation
ofacquired intangibles, which principally relates to acquired
customer relationships. The Group incurs costs, recognised
asanexpense in the income statement, in maintaining these
customerrelationships. The Group considers that the
exclusionofthe amortisation charge onacquired intangibles
fromUnderlyingperformance avoids the potential double-
countingofsuch costs and therefore excludes itasaSpecial
ItemfromUnderlying performance.
The Committee regularly challenges management on what is
considered Special Items. It reviews in detail every such item which
isexcluded or separated from reported Underlying profit and takes
intoconsideration guidance from the FRC and the external auditors.
The Committee is satisfied that it is helpful to a reader of the financial
statements to report Underlying profit, together with IFRS profit,
without Special Items and that all Special Items reported met with
theGroup’s definition of such items.
European Commission investigation
During 2018, the European Commission (the Commission) initiated
aninvestigation into practices relating to the purchase of Styrene
monomer by companies, including Synthomer, operating in the
European Economic Area. The Company has and will continue
tofullycooperate with the Commission during its investigation.
In prior years given the ongoing investigation and the inherent
uncertainties associated with it, it was not possible to determine
whether or not a liability existed. Similarly, given the many variables
in the Commission’s fining framework and accordingly the range of
possible outcomes, the Directors were not able to reliably estimate
any potential possible liability. Therefore a contingent liability was
disclosed in each set of financial statements. Now based on the
information available and the resulting assessment of the expected
outcome of the investigation a provision of £57.2 million has been
made in relation to this case.
During the course of this ongoing investigation the Committee
received from management regular updates on the facts and
circumstances inrelation to this investigation along with the
associatedaccounting analysis. PwC reported that they were
satisfiedwith the judgements and related disclosures made by
management. The Committee discussed the matter and concurred
withthe conclusions made.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
103
GovernanceStrategic report
Risk management and internal
control environment
Each year, the Board is required to conduct
areview of the effectiveness of the Group’s
systems of risk management and internal
control. The Board’s statement relating to this
review is set out on page 95. At its February
2022 meeting, the Committee reviewed
management’s assessment of the key
elements of these systems and confirmed
their overall effectiveness. Their conclusion
drew on the following:
• The internal audit programme completed
during 2021 and progress in implementing
resulting actions
• Our programme of risk reviews and
discussions with senior managers and other
staff across the Group throughout the year
• Ongoing management assurance (via
Committee papers, Board and Committee
presentations and discussions) to review
the Group’s key financial controls to ensure
they support our continued growth
• The key controls questionnaire, which is
completed and signed by each Group
operating unit each quarter
• Representations to the CFO from the
divisions’ financial and commercial
management that the financial information
reported to the Group has been prepared
inaccordance with our accounting policies
and that all relevant information has been
provided for the preparation of the
Group’sAnnual Report and Accounts.
These representations are made twice
eachyear in line with our external
reportingtimetable.
Internal audit and risk
management function
The Group Internal Audit and Risk Director has
a direct reporting line to the Audit Committee
Chair and provides an independent assessment
of our internal control and risk management
processes’ effectiveness; highlights key issues;
makes recommendations; and monitors
implementation of mitigations and
recommendations. We have a dedicated
in-house Internal Audit function, which draws
on specialist resources as required. At each
meeting, the Committee reviewed progress
against the Internal Audit annual plan and
explored areas identified for action. We also
reviewed completed audit reports, focusing on
recurring themes, which might require Group
actions, and areas where there was divergence
from self-assessments. Developments in our
internal audit arrangements are set out in my
introduction on pages 98 to 99.
External audit
We reappointed PwC as our external auditor
in 2016, following a full re-tender process.
The firm has been the Group’s auditor
since2012.
The Committee discussed the 2021 audit
process at its December 2021 and February
2022 meetings. During the year, the
Committee Chair was in regular discussion
with PwC’s lead audit partner to discuss the
progress of the audit. The Committee met
PwC without management being present
after the February 2022 Committee meeting.
No significant issueswere raised.
Auditor independence and
objectivity and auditor-provided
non-audit services
The Committee has a clear policy on the
provision of non-audit services by the
externalauditor and has defined the very
limited non-audit services they can provide.
Services can only be provided if approved by
the Committee and they are subject to a cap
of 70% of the average of audit fees for the
preceding three years. All engagements for
non-audit services with an external audit firm
must be pre-approved by the Committee to
ensure that as many firms as possible would
be independent in an audit tender. Details of
audit and non-audit fees paid to the auditor
in2021 are set out in note 7 on page 149.
PwC produced a report setting out how
theyassessed themselves as independent.
This referred to reporting accountant work
undertaken as part of the acquisition of
Eastman’s Adhesive Resins business.
PwC confirmed thatthey remained
independentin respect ofthe 2021 audit.
The Committee concluded that PwC’s
independence and objectivity were not
compromised by providing these services
and that, due to their knowledge of the
Groupand its financial statements, it was
inSynthomer’s interests to engage PwC.
Having considered the steps taken by
PwCtopreserve their independence and
theapproach to non-audit services set out
above,the Committee concluded that PwC
continues to demonstrate appropriate
independence and objectivity.
Corporate Governance
Audit Committee: How the committee operates continued
December 2021 Outcome/action taken by the Committee
PwC’s audit risk assessment – set out on
pages 131 to 132
PwC undertook a detailed risk assessment, setting out their view of the significance of key risks
and the potential risk ofmaterial mis-statement. Following discussion, the Committee agreed
with PwC that climate change, whilst not an area at significant risk, should be considered in the
overall context of their audit opinion.
Materiality level forthe audit (page133) PwC proposed an audit materiality level of £11.6 million, based on 5% of Underlying profit
before tax of the average Underlying profit before tax for the last three years, rather than just for
the year ended 31 December 2021. It did so on the basis that current year profits were above a
‘normal’ recurring level. After debating this with PwC and Executive Management, the
Committee felt it was an appropriate methodology for 2021.
PwC’s audit plan We reviewed the audit coverage and agreed scope (set out on page 131 to 134) in detail and
agreed they were appropriate. We asked PwC to perform work on the cut-over procedures
used in implementing the Pathway programme and to perform on-site fraud assessment work
in some smaller entities where they are not the statutory auditor. The Committee noted and
approved the continued high level of coverage.
PwC’s resources We reviewed and discussed PwC’s resources with the firm, particularly the experience and
tenure of their audit partners in our key overseas territories. The Chair and Executive
Management interviewed the proposed audit partner for Malaysia, where the existing partner
had completed their tenure.
Audit fee and terms of engagement The Committee reviewed PwC’s fee proposal in light of the risks identified and proposed scope
and approved the proposed fee of £1.6 million, compared to £1.8 million in 2020.
104
Synthomer plc
Annual Report 2021
Use of PwC as reporting accountants for the acquisition of Eastman’s Adhesive Resins business
Reasoning
The Group was in a bilateral negotiation with
Eastman in relation to its Adhesive Resins
business, in an exceptionally buoyant M&A
market and the timetable setby the seller
was short. As PwC performed similar work
for the Company inrespect of the OMNOVA
acquisition in2019, and in respect of
theissue of aS144a bond in June 2020,
theyhave astrong understanding of our
processes, systems and people. However,
we proactively sought to engage another
audit firm to undertake this work. Other large
and challenger firms were approached but
were conflicted due to other work they carry
out for the Group, or did not have theskills
or resources available to meet our timetable.
Steps to avoid a recurrence
As part of the planning for a Group audit
tender in 2025 we are monitoring all non-audit
work given to the large and challenger audit
firms. We will seek, as far as is practicable, to
concentrate all work that would impact these
firms’ ability to bid for the audit, or provide
other independent assurance services, into
as few firms as possible to ensure we have
the biggest selection available from which to
choose. We will select a firm as a potential
partner for future reporting accounting work
that includes those areas of work subject to
the Ethical Standards fee cap and invest
inmaking the chosen firm familiar with
theGroup to allow them to operate
asourreporting accountant on any
futureacquisition.
How we assured independence
The Committee challenged judgements
made by management and asked PwC
toconfirm that they complied with their
commitment to the FRC by having the work
on the 2021 audit reviewed by an internal
technical panel. The Committee also
confirmed with management and PwC that
all fees relating to the reporting accountant
work were paid before the audit opinion on
the 2021 financial statements was signed.
February 2022 Outcome/action taken by the Committee
Confirmation of PwC’s audit plan PwC confirmed no material changes to the agreed plan.
Audit findings,
significant issuesandother accounting
judgements (pages132 to 133)
These were discussed with PwC and management – the work of the Committee is set out on
the previous pages.
Management representation letter The Committee reviewed and approved this.
PwC’s independence and objectivity and
quality control procedures
The Committee evaluated and confirmed PwC’s independence, objectivity and quality control
procedures.
Audit quality – how we reviewed PwC’s performance
During the year, the Committee evaluated the performance and effectiveness of the external auditor, PwC and our audit partner, David Beer in
the following ways:
External evidence The Committee reviewed the FRC’s 2020 Audit Quality Inspection Report covering its
conclusions from a review of a selection of PwC audits which showed an improvement
yearonyear. David Beer shared details of actions taken by PwC in response to this report.
Management evidence At our request, management sought feedback from people across the business who were
involved in working on the year end with PwC teams. The feedback was positive to all
questions asked and indicated that PwC had performed their audit well with particularly
highratings were for planning and quality of people and service.
Audit Committee evidence David Beer attended all Committee meetings during the year and was involved as the Group
undertook the acquisition of Eastman’s Adhesive Resins business acting in the capacity of
Reporting Accountant. He has demonstrated in Committee meetings how he has challenged
management in relation to significant accounting judgements and estimates and also worked
with management to ensure that the relevant guidance from the FRC issued in the year was
incorporated into both the Interim and Annual Reports.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
105
GovernanceStrategic report
Nomination Committee:
introduction from the Chair
This has been a significant year
forSynthomer – and the Nomination
Committee – with a new CEO starting
on1November, a new CFO being
appointed shortly afterwards, and
anewNon-Executive member joining
theBoard in July.
The Committee – which expanded this year toinclude all our
Non-Executive Directors –was closely involved with each of
these appointments and in planning inductions for our new
Directors. Committee members have also been involved in
discussions around Synthomer’s gender target and in further
strengthening our succession planning.
Corporate Governance
Nomination Committee report
Succession planning forcontinued growth
Ensuring that we have future leaders with
theright skills, experience and mindset is
asimportant as having the right people in
place today. Succession planning continued
to beastrong focus throughout the year for
theNomination Committee and the wider
Board,as we worked to embed the ongoing
development of a strong talent pipeline into
the way we operate.
In late 2021, we built on the previous year’s
independent skills review – which assessed
our Board’s capabilities against other plc
companies to help identify and address gaps
– by looking at the functional skills the Board
will need to stay competitive in the future.
The crucial skills identified included
marketing, digitalisation and sustainability.
As part of this process, all Board members
assessed themselves against these skills.
We will feed the intelligence gained, and those
from our Board evaluation, into short-term
recruitment and longer-term succession
planning for the Board, as well as emergency
succession planning for the CEO and CFO.
Our succession planning draws not only
onnecessary skills but also on our strategy
and direction, which we discussed at length
in January 2021 in setting the scene for the
2021 CEO and NED searches, in alliance
withEgon Zehnder. Our ability to move fast
torecruit a new CFO in November 2021,
when Stephen Bennett announced his attention
tostep down in August, reflected the
proactive work we werealready doing in
long-term executive succession planning
withsearch experts Spencer Stuart.
The Board and Nomination Committee’s
succession planning focus extends to
Executive Committee members. Our new CEO
started reviewing the skills and scope ofthe
Executive team soon after he joined. We are
supporting him as he develops a blueprint to
strengthen and support the current team and
will develop longer-term succession plans for
each of the Executive roles.
Setting the tone on diversity
andinclusion from the top
Diversity is as fundamental as skill and
experience in a strong leadership team.
Reflecting the society in which we operate
isboth the right thing to do and – research
shows – the best thing for business.
Diversity of thought and inclusive cultures
drive innovation and lead to better business
outcomes. For all these reasons, in 2021 we
strove to ensure that our current and future
leaders are truly diverse.
Synthomer plc
Annual Report 2021
106
The process for appointing ournew CEO and NED.
CEO CFO NED
Setting role
requirements
Following Calum’s decision to step
down, the Nomination Committee
and the Board worked closely with
the Senior Independent Director,
HRPresident and Group HR
Director, and recruitment specialists
Egon Zehnder to develop aclear
roleand person specification
forournewCEO.
We implemented succession
planning for key roles, including the
CFO, early in 2021 and that allowed
us to accelerate our recruitment
process, working on this occasion
with search company Spencer
Stuart. We wanted someone with
animpressive track record and
experience of working in a complex,
international business.
Following the retirement of Just
Jansz in2021, with the completion of
his nine-year tenure, the Nomination
Committee, the Board, our Senior
Independent Director, HR President
andGroup HR Director worked with
Egon Zehnder to develop a clear role
and person specification for our new
Non-Executive Director.
Identifying
candidates
In January 2021, the Board
confirmed its strategy of organic
andinorganic growth and that set
abackdrop to the CEO recruitment.
Egon Zehnder then interviewed all
members of the Board, and the
Nomination Committee debated
andagreed a detailed candidate
specification, with clear skills,
experience and attributes against
which to assess potential candidates.
Early in 2021, we appointed Spencer
Stuart to develop our succession
planning for key roles, including
theCFO. They developed a role
specification, with input from all
members of the Board.
Egon Zehnder developed long and
shortlistslists of NED candidates.
In doing so,they considered the
broadest definition of diversity.
Process A significant number of internal and
external candidates were initially
assessed by Egon Zehnder against
the agreed criteria. They presented
the most suitable candidates through
aprocess of interview, discussion
and assessments. Five candidates
met with all members ofthe Board
and, afterdetailed debate and further
discussions with the final two
candidates, the Nomination
Committee unanimously agreed
torecommend Michael Willome.
Spencer Stuart considered over
300candidates and reduced this
toa shortlist of seven internal and
external candidates who were
assessed by Spencer Stuart against
the required criteria, and then
interviewed by the Chair and
incoming CEO. Three candidates
where taken forward forfurther
assessment by members of the
Nominations Committee and two
final candidates were interviewed
byallmembers of the Board.
The Nominations Committee
reflected and debated the feedback
and unanimously agreed to
recommend Lily Liu.
Egon Zehnder interviewed and
assessed some 20 candidates and
the Chair met with seven potential
candidates. The most suitable
candidates were then presented
tothe Senior Independent Director
and then all other members of the
Board. Having reviewed the process
and evaluated the candidates,
theNominations Committee
unanimously agreed to
recommendRoberto Gualdoni.
Recruitment After an extensive search process,
weannounced Michael Willome’s
appointment in July 2021.
In November, we announced that Lily
Liu would be our new CFO, joining us
no later than July 2022.
Roberto Gualdoni joined the Board
inJuly 2021 and is a member
ofourAudit, Remuneration and
NominationCommittees.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
107
GovernanceStrategic report
Setting a new 2030 gender target
In 2021, Synthomer took an important step
bysetting a target of 50% gender diversity
innew hires in leadership, management and
professional roles as part of our Vision 2030
roadmap. Agreeing our Vision 2030 targets
involved a great deal of discussion between
the Executive Committee and Board during
the first half of 2021. Diversity is particularly
important for Nomination Committee
discussions around succession planning,
andwe pushed the Executive Committee
toset the bar high. It’s important to get the
right balance between challenge and delivery
and I think we achieved that. (See page 44
inthe Strategic report for more information
on the Vision 2030 roadmap.)
Our target is underpinned by several short-term
objectives, including 20% of women in senior
roles by the end of 2021. I am pleased to see
that we met this objective, finishing the year at
20.4%. In all, we saw a 5% rise in the number
of women in senior leadership versus 2020.
One-third of Board members are now women
and one member is from an ethnically diverse
background, in line with the Hampton-
Alexander and Parker reviews respectively.
Encouraging greater diversity
beyondgender
Nevertheless, Synthomer needs to do
alotmore to address diversity across the
business, including making more progress
onethnic diversity. Here, too, we have set
ashort-term objective to have 20% of senior
leaders from ethnically diverse backgrounds
by 2025.
New governance to track our progress on
diversity and inclusion
As Chair of Synthomer’s new Diversity and
Inclusion Steering Committee, it was also my
pleasure to host panel sessions, alongside
Holly Van Deursen, organised by Synthomer’s
Engender women’s network.
For more information on the progress
Synthomer has made and our plans to
continue focusing on diversity and inclusion,
see pages 62-66 of the Strategic report.
We have the vision, processes and tools in
place. We must now embed diversity and
inclusion into our everyday thinking.
A comprehensive induction programme
An induction programme is an essential part
ofa new Director’s first weeks and months at
Synthomer. It is a structured way of ensuring
they receive the information and support they
need to take on their new role quickly and
confidently. I know from my own experience
ofjoining Synthomer and then stepping up
asChair of the Board how helpful this
process is.
The Committee designed a tailored induction
for Michael that included:
• Working with Calum, the Committee
designed a two-week programme of
introductions to help Michael get up to
speed quickly on our most important
activities
• Meetings with the Executive Committee for
briefings on their businesses and functions
• Meetings with external advisers and our top
institutional shareholders to hear their
views on Synthomer
• A workshop hosted by a partner from both
KPMG and Herbert Smith Freehills on
Directors’ duties and the UK listing regime.
Roberto also attended this workshop
• First site visits to meet employees in the
UK, Germany and the USA.
While Roberto hasn’t yet been able to
makeany site visits, he plans to do so
in2022.
Our priorities for 2022
Our priorities for the coming financial
yearinclude identifying a suitable successor
for Brendan Connolly when he steps down
asour Senior Independent Director and
Remuneration Committee Chair at our 2023
Annual General Meeting. We will also be
developing emergency succession plans
forour new CEO and CFOand embedding
long-term succession planning for their roles
for the future. As Michael develops his team,
we will also bereviewing the skills, balance
and experience of the Executive Committee.
Another important priority will be establishing
a comprehensive, bespoke induction
programme for Lily, and continuing
tosupport Michael’s immersion
inthebusiness.
A year of progress
I am pleased with the progress we’ve made
as a Committee this year. We have continued
to work well despite ongoing COVID-19
restrictions. We’ve had some challenging
conversations along the way, but challenge
ishow we help the Company make progress.
I look forward to working alongside our new
Directors as well as my fellow Committee
members to support Synthomer as it grows
in size and ambition.
Caroline Johnstone
Chair of the Nomination Committee
3 March 2022
Board diversity
and tenure at
aglance
Gender
1/3
Representation of women
on the Synthomer Board
Female 3
Male 6
Ethnicity
White
Asian
08
01
Nationality
British
Swiss
Malaysian
American
German/Italian*
4
1
1
1
1
American/British**
1
* Roberto Gualdoni holds dual German and Italian
citizenship
** Cynthia Dubin holds dual citizenship
Board tenure
0-5 years
5-10 years
4
3
>10 years
2
Corporate Governance
Nomination Committee report continued
Synthomer plc
Annual Report 2021
108
Corporate Governance
Compliance with the Code
1. Board leadership and Company purpose
A. Board’s role The Board sets the Company’s purpose, values and standards, establishes overall policies and
long-term objectives and approves strategic aims and goals. It is responsible for the Company’s
long-term success, and for how opportunities and risks are assessed in relation to this. The Board
establishes, communicates and reviews the corporate governance framework under which the
Company operates. There is a formal schedule of matters reserved for the Board which is reviewed
annually to ensure an appropriate delegation of duties to the CEO is maintained. An annual Board
planner is prepared at the start of each year to ensure important and relevant topics are discussed
atBoard meetings throughout the year.
For more details about 2021 activity see The Board’s year section on page 94.
B. Purpose and culture The Board adopted the Company’s statement of its purpose in 2020 and worked with management
during 2021 to develop and launch our Vision 2030 roadmap, which will underpin the delivery of our
purpose over the coming decade.
Management have rolled out a programme to embed our new Core Values since their launch in 2020,
with alignment with our culture being monitored and assessed by the Board using the tools described
on page 62. The Board was mindful of maintaining the Company’s strategic direction in the
appointment process for our new CEO.
C. Resources and controls Strategic projects and priorities are considered and monitored at each Board meeting with, as part of
that process, members receiving and considering reports on developments and progress against
plans and resourcing. Financial and operational performance against budget and KPIs is reported at
each Board meeting.
The Board has designated Synthomer’s CEO responsible for developing and preparing the Group
strategy, business plan and annual budget for recommendation to the Board. The CEO is also
responsible for all aspects of day-to-day operational control and for executing Group strategy.
The CEO is chair of the Executive Committee (which includes the CFO, the Chief Counsel and
Company Secretary, and operational and functional Group presidents), and meets once a month.
The CFO shares a monthly management report withall Directors, containing business, financial, and
health, safety and environmental reviews.
D. Stakeholder engagement The Board fully consider shareholders’ and wider stakeholders’ views when making strategic
decisions. Further information can be found on pages 96 and 97.
E. Workforce engagement Alexander Catto, Non-Executive Director, is the Board’s designated employee voice. In this role, he is
supported by Holly Van Deursen, one of our other NEDs. Other workforce engagement is undertaken
directly by the Board, such as via our new Engender women’s network.
2. Division of responsibilities
F. Role of the Chair The Chair’s responsibilities include:
• Leading an effective Board
• Promoting a culture of openness and debate
• Coordinating performance evaluation of the CEO and individual Non-Executive Directors
• Holding meetings with and without Executive Directors present
• Leading on all aspects of corporate governance
• Setting the agenda and managing meeting timetables and encouraging open and constructive
dialogue and challenge.
G. Composition of theBoard The composition of the Board is set out in Our Board of Directors section on page 84. Half of the
Board, excluding the Chair, are independent NEDs, with that independence being assessed annually.
This ensures no one person or group of interests can dominate Board decision making or debates.
We document the roles of the Board, Board Committees, Chair and CEO in the Introduction to
corporate governance on page 92. We have a clear division of responsibilities between the Board and
Executive leadership, with a list of matters reserved for the Board.
For the year ended 31 December 2021, we are pleased to report that we have applied the principles and complied with the provisions of the
2018 UK Corporate Governance Code (the Code). The full Code is available on the FRC’s website, www.frc.org.uk.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
109
GovernanceStrategic report
2. Division of responsibilities continued
H. Role of the non-executive
directors
The main responsibilities of our NEDs are to provide constructive challenge and scrutiny; to hold
management and individual Executive Directors to account against agreed performance objectives,
and to oversee employee engagement.
In addition, our Senior Independent Director acts as a sounding board to the Chair; is an alternative
contact for the other Directors and shareholders; leads an annual meeting process to evaluate and
feed back on the Chair’s performance, and provides constructive challenge, strategic guidance and
specialist advice.
We assess on appointment whether a candidate has sufficient time to be a NED, with any proposed
significant external appointment requiring the Board’s agreement.
I. Role of the Company
Secretary
Our Company Secretary’s main remit is to advise the Board on all governance matters and on
important legal and regulatory issues and to ensure it has the necessary policies, processes,
information, time and resources to function effectively and efficiently.
3. Composition, succession and evaluation
J. Appointments to the
Board and succession
planning
Our Nomination Committee is responsible for assessing the composition of the Board, making
recommendations for new appointments, and succession planning. In making recommendations for
appointments to the Board, the Committee considers the balance of skills, experience and knowledge
needed to enhance the Board and support the Company in the execution of our strategy. For more
details, see our Nomination Committee report on page 106.
K. Skills, experience and
knowledge of the Board
The Nomination Committee ensures the Board has an appropriate mix of skills, experience and
knowledge, with due regard for the benefits of all types of diversity. This year we built on our 2020
skillsreview – which assessed our Board’s capabilities against other plc companies to help identify
and address gaps – by looking at the functional skills we will need to stay competitive. All Board
members assessed themselves against the crucial skills, which included marketing, digitalisation and
sustainability. We will feed the intelligence gained, and those from our Board evaluation, into short-term
recruitment and longer-term succession planning for the Board, along with emergency succession
planning for the CEO and CFO.
L. Board evaluation Our last external Board evaluation, facilitated by Egon Zehnder, was undertaken during 2020.
An internal review, focusing on recommendations stemming from the 2020 evaluation, was carried
outin 2021. See page 91 for actions taken.
4. Audit, risk and internal control
M. Internal and external
audit
The Audit Committee is responsible for reviewing the relationship and independence of the Group’s
external auditor, PwC, and for overseeing the independence and effectiveness of internal audit.
In 2021, the Committee oversaw Synthomer’s granted application to the FRC for a second waiver to
breach the cap on fees to auditors for non-audit related services, to progress our plans to buy
Eastman’s Adhesive Resins business. For more details see page 98.
N. Fair, balanced and
understandable
The Board considers this 2021 Annual Report is fair, balanced and understandable and that it provides
information necessary for shareholders to assess the Company’s performance, business model and
strategy. We enabled this by such means as having a dedicated working group overseeing drafting;
ensuring that FRC guidance was observed; requiring key contributors to confirm the accuracy of their
information; and circulating drafts to PwC, Committee chairs and the Board for review.
O. Risk management
andinternal control
framework
The Board sets the company’s risk appetite and annually reviews the effectiveness of the company’s
risk management and internal control systems. A description of the principal risks facing the company
is set out on pages 69-76.
5. Remuneration
P. Remuneration policies
and practices
Synthomer aims to reward employees fairly. Our Remuneration Policy is designed to promote the
long-term success of the Company while aligning the interests of the Directors and shareholders.
The policy was last approved by investors at our 2020 AGM. A summary of the latest Executive
Director Remuneration Policy can be found on page 114.
Q. Executive remuneration The Remuneration Committee is responsible for setting the remuneration for all Executive Directors
and the Executive Committee. No Director is involved in deciding their own remuneration arrangements
or outcomes.
R. Remuneration outcomes
and independent judgement
Details of the work of the Remuneration Committee are set out in the Directors’ Remuneration report
on pages 112 to 126.
Corporate Governance
Compliance with the Code continued
Synthomer plc
Annual Report 2021
110
Division of responsibilities
The table below provides a summary of the main responsibilities of our Board and CEO.
Position: Responsibilities include:
Chair • Leading an effective Board
• Promoting a culture of openness and debate
• Coordinating performance evaluation of the CEO and individual Non-Executive Directors
• Holding meetings with and without Executive Directors present
• Leading on all aspects of corporate governance
Chief Executive Officer • Operational management of the Group
• Developing, preparing and implementing Group strategy, as approved by the Board
• Communicating Group culture and values
• Communicating Group financial performance to investors alongside the CFO
• Keeping the Board informed on material issues
Senior Independent Director • Being a sounding board to the Chair
• Alternative contact for the other Directors and shareholders
• Leading an annual meeting process to evaluate and feed back on the Chair’s performance
• Providing constructive challenge, strategic guidance and specialist advice
Non-Executive Directors • Constructive challenge and scrutiny to hold management and individual Executive Directors to account
against agreed performance objectives
• Employee engagement
Company Secretary and
ChiefLegal Counsel
• Advising the Board on all governance and compliance matters
• Ensuring the Board has the necessary policies, processes, information, time and resources to function
effectively and efficiently
• Advising the Board on important legal and regulatory matters
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
111
GovernanceStrategic report
Remuneration Committee:
introduction from the Chair
While 2021 was a busy yearfor the
Remuneration Committee, much of our
attention was focused on two key issues:
agreeing remuneration for our newCEO
and CFO and completing our work
toalignExecutive Directors’ pensions with
that of the UKworkforce.
Agreeing the right packages for our new
CEO and CFO
Designing a new Director’s remuneration
package is one of this Committee’s more
important tasks. It involves working closely with
the Group HR Director to create an offer that
rewards a new recruit’s skills and experience
while remaining consistent with the terms of our
Directors’ Remuneration Policy. It must also
reflect the fact that Synthomer is growing, and
will continue to grow, in size and complexity.
CEO: higher base salary plus covering
relocation costs
The package we have designed for
Synthomer’s new CEO, Michael Willome, takes
all of this into account. So while it is in line with
previous CEO arrangements, it includes a 9%
higher base salary at £650,000. This figure is
lower than Michael’s salary was at Bystronic AG
(formerly Conzzeta AG) and takes into account
the larger Group size following the acquisition
of Eastman’s Adhesive Resins business.
Michael will be eligible for a maximum annual
bonus of 150% of base salary and a PSP award
of 200% of salary per year. He will also be
required to build a shareholding equal to
220% of his annual basic salary.
Since Michael has moved from Switzerland
tothe UK, Synthomer also agreed a monthly
relocation allowance for the next four years.
We paid Michael a one-off payment of
£100,000 for the loss of pension-related
compensation he would have received
hadheserved out his full notice period at
Bystronic. This amount is no greater than
thathe forfeited. He also received a pro-rated
Performance Share Plan (PSP) award for 2021.
Given that he joined towards the end of the
financial year, Michael did not receive a bonus
in 2021.
In my introduction to last year’s report, I said
we intended to align our new CEO’s pension
with the workforce rate of 7%. And we have
done exactly that with Michael’s pension.
We will do the same in 2022 for Lily Liu as our
incoming CFO.
CFO: higher salary to reflect growing
ambitions
While Lily does not officially join us until
the2022 financial year, we announced her
appointment and remuneration package at
the end of November 2021. As such, Lily
willreceive a base salary of £440,000.
This is16% higher than the previous CFO
salary, in line with Synthomer’s policy and
growing stature, taking into account the
Corporate Governance
Directors’ remuneration report
Synthomer plc
Annual Report 2021
112
futureadditional size and complexity of the
organisation and the increasing regulatory
environment. Lily will be eligible for a
maximum annual bonus of 150% of base
salary and a PSP award of 150% of salary
peryear. Lily will participate in both plans,
inline with ourpolicy. She will be required
tobuild ashareholding that is equal to 200%
of herannual basic salary. This exceeds the
guideline for the current CFO of 175% of
salary. For more details see page 122.
Arrangements for Synthomer’s
departing CEO
Of course, new arrivals mean the Committee
also has a role in agreeing terms with departing
directors. While Calum stepped down as CEO
at the start of November 2021, as he provided
a full handover to Michael, he did not formally
leave Synthomer until January 2022. This meant
he was entitled to an annual bonus for 2021.
We also treated him as a ‘good leaver’ for
thepurpose of his remaining share awards.
These awards will vest at the normal time
andwill be pro-rated to 31 December 2021.
Though not subject to post-employment
shareholding, as he resigned prior to the
implementation of the policy Calum will still
hold shares due to past and current bonus
andPSP plans. For more details, see page 123.
Fee increase for Synthomer’s Chair
toreflect a more complex landscape
As of 1 January 2022, we increased
CarolineJohnstone’s fee to £235,000
ayearto reflect the greater time the role
requires, and the fact that both Synthomer
and the external governance landscape are
becoming more complex. We also found
thatCaroline’s fee was below the lower
market quartile. In future, she will be eligible
for increases in line with our employees.
Near-maximum bonuses paid in 2021 but
a mixed LTIP outcome
Both the CEO and CFO achieved 95% of
maximum bonus outcomes in 2021 as did the
wider organisation, in an extraordinary year
with exceptional results on the back of the
Covid-related lift in Nitrile latex (Performance
Elastomers) serving the medical gloves industry.
Even without this uplift to performance, and
normalising the results, the full financial goal
(Adjusted PBT) would have been achieved.
The Committee therefore considered that this
payout level was appropriate. The only shortfall
against targets set was the SHE process safety
metric which was missed by 0.03 while the
recordable injury case rate (RCR) metric was
met, as were the strategic goals. No discretion
has been exercised in relation to incentive
outcomes. For the 2019 PSP, Relative TSR was
at the median level, reflecting the end of year
share price volatility, but EPS growth was fully
achieved. As with the PBT, on a normalised
basis the EPS would have been fully
metirrespective of the Nitrile latex uplift.
The strategicmeasures were broadly met.
The overall vesting was therefore 64% of the
maximum. The Committee considered that this
outcome was a fair reflection of performance
and the shareholder experience and therefore
no discretion has been exercised.
The Committee discussed the £57.2 million
provision recognised in respect of the
EuropeanCommission Styrene investigation.
The Committee will consider the implications
of the outcome of the investigation once it has
been concluded.
Performance measures for variable
elements of executive pay in 2022
The Committee aims to ensure that executive
remuneration matches Synthomer’s underlying
performance. We set annual bonuses using
three measures – Underlying profit before tax
(80%), safety, health and environment targets
(10%), and strategic personal targets (10%).
Our 2022 measures will reflect the above and
those for 2021.
For the 2022 PSP awards, the measures will
be split as follows:
• 30% – relative total shareholder return
• 30% – earnings per share (EPS) growth
• 20% – cost efficiencies as a result of the
Eastman’s Adhesive Resins acquisition
• 20% – strategic, of which half will be a
sustainability measure.
EPS is an important part of our PSP, since
itacts as a performance incentive for our
executives and the 80 or so participants in the
PSP. It remains a useful tool for retaining senior
talent in a currently very competitive market.
In 2021, Synthomer delivered a record EPS
of75.2p, due to an exceptional increase in
margins in its Nitrile latex business servicing
the medical gloves industry. Holding senior
executives to that level in 2022 would make the
2022-24 PSP unachievable. For the purpose
ofsetting targets for the 2022 PSP award the
Committee therefore considered that it was
appropriate to re-base EPS performance for
2021 to remove the impact of the exceptional
margins experienced during the year.
The target growth ranges applied to this
rebased EPS remain unchanged, with 4.5%
per annum growth required for threshold
vesting and 10% per annum growth required
formaximum vesting.
Applying these growth rates to the re-based EPS
for 2021 of 40.9p gives an EPS target for 2024
of 46.7p for threshold performance and 54.4p
for maximum performance. The Committee
considers that these targets are stretching for
a normalised price environment. The intention is
that this rebasing will apply for one year only and
we will return to our normal methodology in 2023.
As I reported last year, we added a new
sustainability measure to the PSP in March
2021, which is a 25% reduction in CO
2
.
This will continue to be a feature of our PSP
going forward, with a 40% reduction target
forthe 2022 PSP.
Discussing executive pay
with employees
While there is considerable interest in
remuneration, it is, in my experience, a
misunderstood subject, particularly around
executive liabilities and responsibilities.
So,inDecember 2021, we held two virtual
employee events, open to everyone, to
explain how it works and to ask for people’s
opinions. I was pleased to note that many of
theemployees who joined the sessions are
aware that executive pay is publicly available
information and we received no suggestions
on how to do things differently.
Staying on top of key stakeholder issues
To help the Committee stay informed on
theremuneration issues that matter to our
stakeholders, I ask our remuneration adviser
to provide the Committee with training every
August. This year, we focused on the policies
and approaches disliked by institutional
investors, and to consider any new guidance
from investors, the Investment Association
and proxy agencies.
Continuing to address our gender pay gap
We were pleased to show a reduction in both
our mean and median pay gaps in our 2021
UK gender pay gap report, with our median
pay gap having consistently improved over
the last three years. We recognise that our
continuing gender pay gaps are primarily
related to the lower number of women than
men in our senior leadership population and
we set out how we are addressing this in the
sustainability section of the strategic report.
Extra Committee meetings and adjusting
to a post-pandemic world
Given the amount of work involved in
arranging pay for two incoming Directors,
theCommittee held two extra sessions
in2021. Meetings remained mainly virtual in
2021 due to the ongoing COVID-19 pandemic.
Preparing for changes in 2023
My tenure as Senior Independent Director
and, therefore, Chair of this Committee, will
end at the 2023 AGM when I will retire from
the Board. I am now working with Caroline
toidentify my replacement and ensure we have
a smooth handover plan in place. And, of
course, we will need to update and share our
new Remuneration Policy in time to put it to
ashareholder vote at the 2023 AGM. I look
forward to sharing more details on both issues
in what will be my final report next year.
My sincere thanks to all involved in the
Remuneration Committee in 2021. It has
indeed been a busy year.
Brendan Connolly
Chair of the Remuneration Committee
3 March 2022
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
113
GovernanceStrategic report
Policy for Executive Directors
The table below summaries the policy
approved by the shareholders at the AGM on
29 April 2020. This is valid until a new policy is
approved at the 2023 AGM.
Synthomer’s full remuneration policy can be
found online – https://www.synthomer.com/
fileadmin/files/ir/governance/Synthomer_plc_
Remuneration_Policy_2019.pdf
This includes reference to our joiners and
leavers policy, which has been particularly
relevant this year due to Executive Director
changes.
In setting Executive Director remuneration the
Committee takes account of pay and
conditions throughout the Group to ensure
that arrangements are appropriate in the
context of internal pay ratios.
Corporate Governance
Directors’ remuneration report continued
At a glance
Base salary
Generally reviewed annually. Following the appointment of the new CEO and CFO for 2022,
Executive Director salaries are as follows:
CEO £650,000
(no increase in 2022 on 2021 salary of
£650,000)
Incoming CFO £440,000
pro-rated (no increase as joining the
Company during 2022).
Benefits
Includes private health insurance, life insurance, car allowance and costs related to business
moves (relocation) or international assignments. The CEO will also receive a housing
allowance for a four-year period.
Pension
Cash allowance of 7% of base salary for new CEO and incoming CFO, which is aligned with
that of the UK workforce.
Annual bonus
Maximum up to 150% of base salary. At least 70% assessed against Underlying profit
before tax (80% in 2022), with up to 30% assessed against strategic and operational
measures (20% in 2022). Awards in relation to financial performance of:
A proportion of the bonus earned is deferred for two years. For current Executive Directors
this is one third of any bonus.
Performance Share Plan (PSP)
Shares awarded may not exceed 200% of salary, for 2022 annual maximum awards are
200% of base salary for the CEO and 150% for the CFO.
Vesting based on performance of three years, with at least 80% based on financial
measures and up to 20% on performance measures linked to the delivery of the business
strategy. No single measure will constitute more than 50% of an annual award. There is a
two-year post-vesting holding period requirement.
For 2022 awards, performance measures will be:
30%
relative TSR
30%
EPS
20%
cost efficiencies related to
the Eastman’s Adhesive
Resins business
20%
strategic, of which half is a
sustainability measure
Maximum of 25% for each element will vest for threshold performance.
Shareholding requirements
CEO 220% and incoming CFO 200% of base salary.
Requirements to be built up over five years.
0%
of maximum for
threshold
50%
of maximum for target
performance
100%
of maximum for out
performance.
Synthomer plc
Annual Report 2021
114
2021 performance
Annual bonus
Actual performance against the three elements of the annual bonus are set out below. As noted in the Chair’s introduction, Michael Willome
was not awarded a bonus during 2021 as he did not start until the beginning of November 2021.
Weighting Threshold Target Maximum Actual
Underlying PBT 80%
£165.0m £173.0 m £191.1m
£453.0m
SHE (recordable injuries) 10% 0.33 or less 0.31
SHE (process safety) 10% 0.33 or less 0.16
Individual strategic and operational goals 10% See page 117 10%
Total outcome 100% 95%
Weighting Threshold Target Actual
Relative TSR 40%
Median quartile Upper quartile
50th percentile
EPS growth 40%
35.2p 41.0p
75.2p
Strategic measures 20% See page 118 14.0%
Total outcome 100% 64.0%
Performance share plan (PSP) – 2019 award
Actual performance against the three elements of the annual bonus are set out below. Michael Willome did not receive a 2019 award as he
did not start until the beginning of November 2021.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
115
GovernanceStrategic report
Single figure of remuneration for Executive Directors (audited)
Year
Base
salary
£
Benefits
£
Pension
£
Total fixed
remuneration
£
Annual
bonus
£
Long-term
incentives
3,4
£
Total variable
remuneration
£
Total
£
Executive Directors
M Willome
1
2021 108,333 31,692 107,583 247,608 – – – 247,608
2020 – – – – – – – –
CG MacLean
2
2021 495,627 11,000 114,909 621,536 706,268 703,638 1,409,906 2,031,442
2020 558,735 13,200 137,891 709,826 838,103 257,518 1,095,621 1,805,447
SG Bennett 2021 378,052 13,349 75,610 467,011 538,724 381,851 920,575 1,387,586
2020 355,158 13,530 71,032 439,720 532,737 128,711 661,448 1,101,168
Notes:
1. M Willome joined Synthomer as CEO on 1 November 2021. He received a one-off payment of £100,000 in compensation for the loss of pension-related pay from
his previous employer which is no greater than the amount he would have received had he served out his full notice period. M Willome also received £52,500 for
services prior to his appointment as a Director.
2. CG MacLean stepped down as a Director on 1 November 2021. His remuneration disclosed here has been pro-rated to reflect this period.
3. For 2021 the values relate to awards granted under the 2011 PSP in 2019 which vest on 11 March 2022. Further information about the level of vesting is provided
in this report. As these awards have not yet vested they have been valued based on the average share price for the period 1 October 2021 to 31 December 2021
of 466.3p, along with accrued dividends from the date of grant. There was no share price appreciation that affected the value of the award and so Remuneration
Committee did not exercise discretion in respect of the share price changes.
4. 2018 PSP awards vested on 8 March 2021. For the purpose of the 2020 single figure these awards were valued based on the average share price for the period
1 October 2020 to 31 December 2020 of 403.8p. These awards have been re-valued based on the share price on the date of vesting of 459.6p. The values
disclosed in the 2020 single figure were: CG MacLean, £241,326 and SG Bennett, £120,617. The share price used to value the awards on the date of grant of
8 March 2018 was 488.4p. The share price used to value the PSP for single figure purposes of 459.6p represents a decrease of 28.8p per share. The proportion
of the PSP value disclosed in the single figure attributable to share price movement was therefore a reduction of 5.9%. The Remuneration Committee did not
exercise discretion in respect of the share price changes.
Additional information for single figure remuneration
Benefits
Car expenses/
benefit
£
Others
£
Total
£
M Willome
1
2,200 29,492 31,692
CG MacLean 11,000 – 11,000
SG Bennett 12,500 849 13,349
Note:
1. Since M Willome has moved from Switzerland to the UK, he will receive a monthly relocation allowance for the next four years. This allowance will be £7,800 per
month for the first year then £5,000 per month for the following three years, and will be grossed up for tax.
Annual bonus
2021 award
For 2021 the Company operated a cash bonus plan for the Executive Directors related to the achievement of Underlying profit before tax targets,
SHE targets and individual strategic and operational goals.
The achievement of the Underlying profit before tax target represented up to 80% of the maximum bonus opportunity achievable of 150% of
annual basic salary for CG MacLean and SG Bennett.
The SHE targets were given a 10% weighting of the maximum achievable, with the balance of 10% relating to individual strategic and operational
goals.
Bonus for the year ended 31 December 2021
Executive Directors
Maximum bonus
as a % of salary
Total bonus as a
% of maximum
Total bonus
£
CG MacLean 150 95 706,268
SG Bennett 150 95 538,724
2021 saw performance that was ahead of financial targets and meaningful progress and achievements against individual strategic and
operational goals. The recordable injury portion of the SHE target was met but the process safety portion was missed.
This 2021 bonus outcome of 95% of maximum is reflected across the wider organisation. 2021 was an extraordinary year, partly due to the
Covid-related lift in nitriles margins. Even without this uplift to performance, the full PBT target would have been achieved. The Committee
therefore considered that this payout level was appropriate.
Corporate Governance
Annual report on
remuneration
Synthomer plc
Annual Report 2021
116
Further information on the three elements of the bonus is as follows:
1. Underlying profit before tax (80%)
The Underlying profit before tax targets set and achievement are set out below:
Threshold Target Maximum Achieved
2
Level of award (% of element) 0% 50% 100% 261%
Underlying profit before tax
1
£165.0m £173.7m £191.1m £453.0m
Notes:
1. Targets are set by reference to the Board-approved internal budget for the Group and measured on a constant currency basis.
2. For the purposes of calculating achieved Underlying profit before tax, adjustments were made for currency.
2. SHE (10%)
Targets with an aggregate weighting of 10% related to improvements in recordable injury and process safety.
Recordable injury
(measured as injury rate)
Process safety
(measured as process
safety event rate)
Target 0.33 or less 0.13 or less
Level of award 0% for a rate greater than 0.33 0% for a rate greater than 0.13
5% for a rate less than 0.33 5% for a rate less than 0.13
Rate achieved 0.31 0.16
Award outcome 5% 0%
Further details of the definition and measurement of the recordable injury rate and the process safety event rate are given on page 55.
3. Individual strategic and operational goals (10%)
Individual goals and achievements against them considered by the Remuneration Committee with an aggregate weighting of 10% included:
Chief Executive Officer Chief Financial Officer
Target 1. Drive development of a five-year NBR investment plan
2. Review profitability at site level and create an action plan
3. Develop and lead business-wide ESG strategy
1. Review and make recommendations in respect of the
control environment
2. Roll out planned implementation phases of the Pathway
programme
3. Oversee tax review of the OMNOVA acquisition and NBR
investment plan
Level of award Up to 10% Up to 10%
Chief Executive Officer Chief Financial Officer
Performance
againsttargets
Drive development of a five-year NBR investment plan
• The CEO led a team through 2021 which considered all aspects of
this potential investment, including demand and supply, location
comparatives and options and timing. The team reported to the
Board regularly through 2021, which had detailed discussions
onvarious aspects of the potential investment and agreed further
work to be undertaken. The CEO guided the team and advised
the board on the strategic aspects and personally led some
specific aspects of the thinking as well as leading discussions
with potential partners and investors.
Review profitability at a site level and create an action plan
• In 2021, there were a number of projects where the CEO oversaw
substantial progress in planning for transformation, including the
closure of Marl 3 (and transformation of the Marl site generally), the
Le Havre site transformation, the Sokolov site transformation (and
closure of the site’s coal-fired power station) and Oulu site closure.
A strong team was guided and led in addressing the various aspects
and considerations – the complexity of product and site interactions
was particularly important to address. The team presented to the
Board on several occasions and addressed the Board’s questions
and suggestions, leading to approval of the proposals.
Develop and lead business-wide ESG strategy
• The business had undertaken a lot of work “under the radar” ahead
of 2021, and Calum led the team in developing Vision 2030 and
debating and proposing key targets in the main ESG priorities
forSynthomer. He empowered the team to develop the plan and
showed leadership in debating some quite new areas of focus for the
business. His investor communications instilled a level of confidence
in Synthomer’s sustainability position in water based polymers.
Review and made recommendations in respect of the
controlenvironment
• The CFO led his team in reflecting on the changing environment,
the growth in the scale of the Group as well as the potential
changes which might arise from the 2021 audit and assurance
BEIS consultation. As well as Board training sessions in April
andJune 2021, the CFO and the team engaged KPMG to advise
onimplementing an Audit and Assurance Policy and developing
aplanfor putting in place an Assurance Map. He also engaged
Deloitte to advise on climate change and TCFD reporting.
His teamthen developed plans to ready the controls environment
for any Sarbanes Oxley type audit requirements leveraging the
skillsof members of the former OMNOVA Finance team. A clear
assessment of impact and urgency of actions was produced.
Roll out planned implementation phases of the
Pathwayprogramme
• The Pathway programme was realigned in 2020, during the
pandemic and the CFO has overseen the team as they worked
through to the successful go-live of the first sites in 2021.
The business is now moving forward with the next phase.
Oversee tax review of the OMNOVA acquisition and NBR
investment plan
• The CFO oversaw significant progress was made in tax matters
and investment in tax resources during 2021. The Board received
regular updates on the potential tax implications of the proposed
NBR investment.
Award outcome 10% 10%
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
117
GovernanceStrategic report
Additional information for single figure remuneration (audited)
Long-term incentives - Performance share plan
The awards made on 11 March 2019 for CG MacLean and for SG Bennett under the PSP were subject to a relative total shareholder return (TSR)
performance condition, an absolute Underlying earnings per share performance condition and a strategic measures condition, as follows:
Relative TSR condition EPS condition
1
Company relative TSR
performance against the FTSE
250 Index (excluding investment
trusts and financial services
companies) over a three-year
period ended
31 December 2021
EPS for the 2021 financial year Percentage of award that vests Performance achieved
Upper quartile 41.0p or more 40% EPS of 75.2p gives full 40%
vesting of the award.
TSR performance at the 50th
percentile gives vesting of 10.0%
of award.
Between median and upper
quartile
Between 35.2p and 41.0p On a straight-line basis between
10% and 40%
Median 35.2p 10%
Below median Less than 35.2p 0%
Note:
1. The targets have been adjusted to take account of the bonus factor of 1.0713 for the rights issue in 2019 and additional OMNOVA earnings from 1 April 2020.
A further 20% of the award was subject to three equally weighted strategic measures:
• Percentage of Group sales (by volume) in the 2021 financial year derived from new products launched in the last five years and patented
products.
New product percentage
1
Percentage of award that vests Percentage achieved
< 15% 0% 24% gives full vesting of 6.6% of award.
15% - 20% 1.65% - 6.6%
> 20% 6.6%
Note:
1. Excluding volume attributable to Monomers, where there is no scope for new product development.
• Cumulative Underlying profit before tax (PBT) added through acquisitions for the three years ended 31 December 2021.
Cumulative PBT added through acquisitions Percentage of award that vests Percentage achieved
< £30.0m 0% £39.4m gives vesting of 3.2% of award.
£30.0m - £60.0m 1.65% - 6.6%
> £86.5m 6.6%
• Return on Invested Capital (ROIC) target tracks three growth projects commissioned in 2019 that were expected to impact the Group in the
2021 financial year. The three projects selected were JOB5 in Malaysia, Worms in Germany and Roebuck in the USA. An overall ROIC
threshold was set at 18.3%, based on the weighted average of the three individual project targets. Given the greater importance of the larger
projects, the ROIC part of the award was weighted at 50% for JOB5, 25% for Worms and 25% for Roebuck. The award started to vest for each
individual project at 80% of the anticipated ROIC, based on the original investment cases that were brought before the Board at the time the
projects were approved. The overall ROIC on these projects was 57.0% which exceed the threshold of 18.3%. Of the individual projects, JOB5
and Roebuck reached the vesting threshold attaining 523.3% and 85.9% of their targets. This led to 61.7% vesting of the ROIC portion and
therefore 4.2% of the overall award.
In aggregate, 64.0% of the 2019 award vested, and the Committee did not exercise any discretion with the level of vesting.
The 2019 award will vest for CG MacLean and SG Bennett in March 2022 as follows:
No. of shares in
original award
1
No. of shares
that lapse
2
No. of shares
that vest
Estimated value
of shares that
vest
CG MacLean 235,069 94,097 140,972 £703,638
SG Bennett 119,536 43,033 76,503 £381,851
Note:
1. Number of shares in original award were adjusted to take account of the bonus factor of 1.0713 for the rights issue in July 2019.
2. CG MacLean left Synthomer on 13 January 2022 triggering a time-apportioned lapse of 14,800 shares.
Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2021 and that the pay outcomes are aligned
with the experience of shareholders and other stakeholders.
Corporate Governance
Annual Report on Remuneration continued
Synthomer plc
Annual Report 2021
118
Pension entitlements (audited)
Both Executive Directors receive a cash allowance in lieu of pension contributions as outlined above. No additional benefit is receivable in the
event of a Director retiring early.
Single figure of remuneration for Non-Executive Directors (audited)
Non-Executive Directors Base fee
Committee
membership
fee
Committee
Chair fee Total
CA Johnstone 2021 189,500 – – 189,500
2020 46,367 15,000 4,783 66,150
The Hon. AG Catto 2021 43,500 – – 43,500
2020 41,571 – – 41,571
BWD Connolly
1
2021 48,500 15,000 5,000 68,500
2020 45,731 15,000 5,000 65,731
Cynthia Dubin 2021 43,500 15,000 5,000 63,500
2020 18,965 6,935 217 26,117
RC Gualdoni
2
2021 20,815 7,177 – 27,992
2020 – – – –
Dr JJC Jansz
3
2021 32,625 11,250 – 43,875
2020 40,742 15,000 – 55,742
Dato’ Lee Hau Hian 2021 43,500 – – 43,500
2020 41,849 – – 41,849
HA Van Deursen 2021 43,500 15,000 – 58,500
2020 40,742 15,000 – 55,742
Notes:
1. Base fee includes an amount of £5,000 per annum for role as Senior Independent Director.
2. Appointed to the Board on 8 July 2021.
3. Resigned on 29 September 2021.
Directors’ shareholding and share interests (audited)
Directors
Interests in
Company
shares
31 December
2021
Vested
unexercised
performance
related options
31 December
2021
Total
unfettered
interests in
shares and
vested options
31 December
2021
Unvested
performance
related options
31 December
2021
1
Share options
exercised
during
2021
Share
ownership
requirements
(% of salary)
2
Interests in
shares at
31 December
2021
(% of salary)
M Willome – – – 198,295 – 220% 0%
CG MacLean
3
1,060,347 – 1,060,347 512,067 56,031 n/a n/a
SG Bennett 195,817 – 195,817 426,467 36,660 175% 209%
The Hon. AG Catto 1,649,239
7,072,441*
BWD Connolly 6,000
CS Dubin –
RC Gualdoni 20,000
Dato’ Lee Hau Hian 148,453
CA Johnstone 24,131
Dr J J C Jansz
4
12,500
HA Van Deursen 11,000
Notes:
* Non-beneficial interest.
1. Unvested performance related options comprise: (i) the awards made under the PSP in 2019, which were adjusted to take account of the bonus factor of 1.0713
for the rights issue in 2019 and (ii) the awards made under the PSP in 2020 and 2021. Details of the performance conditions attaching to the 2019 awards are set
out on page 118; 2020 and 2021 awards are set out below.
2. Until this requirement is met, no sales of shares that vest under long-term incentive plans are permitted other than to satisfy tax liabilities that arise on the exercise
of share awards under such plans. The Committee considers that unfettered unexercised vested nil-cost awards are economically equivalent to shares and as
such that they should count (on a net of tax basis) toward compliance with the share ownership guidelines.
3. The figures for CG MacLean reflect his shareholding and time pro-rated share interests on 1 November 2021, the date that he stepped down as a Director.
4. The figure for JJC Jansz reflect his shareholding on 29 September 2021, the date that he stepped down as a Director.
There have been no changes in the interests of the Directors in shares between 31 December 2021 and 3 March 2022.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
119
GovernanceStrategic report
2020 award (audited)
The awards made on 12 March 2020 to CG MacLean and SG Bennett were as follows:
Scheme Basis of award
Number of
shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
CG MacLean PSP – nil-cost options 150% of salary 321,524 £827,346 25% 31/12/2022
SG Bennett PSP – nil-cost options 120% of salary 163,500 £420,718 25% 31/12/2022
The face value of the awards was calculated using a share price of 257.32p per share, the average share price on the five dealing days prior to
the date of grant.
Further awards were made on 6 May 2020 to CG MacLean and SG Bennett, following the approval of the Directors’ Remuneration Policy at the
AGM held on 29 April 2020, as follows:
Scheme Basis of award
Number of
shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
CG MacLean PSP – nil-cost options 25% of salary 49,780 £137,891 25% 31/12/2022
SG Bennett PSP – nil-cost options 15% of salary 18,985 £52,588 25% 31/12/2022
The face value of the awards was calculated using a share price of 277p per share, the average share price on the five dealing days prior to the
date of grant.
Therefore, the total awards for CG MacLean and SG Bennett in 2020 was:
Scheme Basis of award
Number of
shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
CG MacLean PSP – nil-cost options 175% of salary 371,304 £965,237 25% 31/12/2022
SG Bennett PSP – nil-cost options 135% of salary 182,485 £473,306 25% 31/12/2022
1. CG MacLean left Synthomer on 13 January 2022 triggering a time-apportioned lapse of 150,005 shares leaving a balance of 221,299 shares.
The 2020 awards under the PSP are subject to the following performance conditions:
Relative TSR condition EPS condition
1
Synergies delivered from the OMNOVA acquisition
Company-relative TSR performance against
the FTSE 250 Index (excluding investment
trusts and financial services companies) over
three-year period ending 31 December 2022 EPS for the 2022 financial year Synergy delivery run rate by 31/12/2022 Percentage of award that will vest
Upper quartile 33.8p or more $29.6m or more 30%
Between median and upper quartile
Between 29.0p
and 33.8p
Between $25.0m
and $29.6m
On a straight-line basis between
7.5% and 30%
Median 29.0p $25.0m 7.5%
Below median Less than 29.0p Less than $25.0m 0%
1. The targets were adjusted to take account of the additional OMNOVA earnings from 1 April 2020.
A further 10% of the award is subject to a strategic measure relating to a 10% reduction of carbon dioxide equivalent emissions over the
performance period, excluding additional emissions from the acquired OMNOVA business.
Corporate Governance
Annual Report on Remuneration continued
Synthomer plc
Annual Report 2021
120
2021 awards (audited)
The awards made on 11 March 2021 to CG MacLean and SG Bennett were as follows:
Scheme Basis of award
Number of
shares
1
Face value
Percentage
vesting at
threshold
performance
Performance
period end date
CG MacLean PSP – nil-cost options 200% of salary 261,039 £1,189,476 25% 31/12/2023
SG Bennett PSP – nil-cost options 150% of salary 124,446 £567,063 25% 31/12/2023
1. CG MacLean left Synthomer on 13 January 2022 triggering a time-apportioned lapse of 190,540 shares leaving a balance of 70,499 shares.
The face value of the awards was calculated using a share price of 455.67p per share, the average share price on the five dealing days prior to
the date of grant.
The award made on 8 November 2021 to M Willome was as follows:
Scheme Basis of award
Number of
shares Face value
Percentage
vesting at
threshold
performance
Performance
period end date
M Willome PSP – nil-cost options 200% of salary 198,295 £1,011,106 25% 31/12/2023
The face value of the awards was calculated using a share price of 509.9p per share, the average share price on the five dealing days prior to the
date of grant. This award was time-apportioned from M Willome’s starting date.
Relative TSR condition EPS condition
Company-relative TSR performance against
the FTSE 250 Index (excluding investment
trusts and financial services companies) over
three-year period ending 31 December 2023
EPS for the 2023 financial year Percentage of award that will vest
Upper quartile 38.5p or more 40%
Between median and upper quartile Between 33.0p and 38.5 pence On a straight-line basis between 10% and 40%
Median 33.0p 10%
Below median Less than 33.0p 0%
A further 20% of the award is subject to strategic measures comprising: a 15% reduction of carbon dioxide equivalent emissions compared to
the 2019 baseline and greater than 15% of 2023 sales volume to come from new products launched in the five years to December 2023.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
121
GovernanceStrategic report
Annual Report on Remuneration for the year ended 31 December 2021
Operation of the Executive Director Remuneration Policy for 2022
The current policy has been in force since 29 April 2020. The specific remuneration arrangements for 2022 are described below.
Base salary A salary increase was awarded with effect from 1 January 2022 of 3.0% for the current Chief Financial Officer in line
withthat for the average of the UK workforce. The Chief Executive Officer did not receive a salary increase for 2022.
2022 salaries are as follows:
• M Willome: £650,000
• SG Bennett: £389,394
• L Liu: £440,000
Pension and
benefits
Pension contributions for new directors are aligned with that of the UK workforce. Executives receive a cash allowance in
lieu of pension contributions, car allowance and private health insurance. Since M Willome has moved from Switzerland to
the UK, the Company also agreed a monthly relocation allowance for the next four years. This allowance will be £7,800 per
month for the first year then £5,000 per month for the following three years, and will be grossed up for tax.
2022 cash allowances in lieu of pension contributions are:
• M Willome: 7% of salary
• SG Bennett: 20% of salary
• L Liu: 7% of salary
Annual bonus For 2022, performance under the annual bonus will be measured on the following basis:
• 80% subject to performance against Underlying profit before tax targets
• 10% subject to performance measures against key SHE targets
• 10% subject to performance against individual strategic and operational goals
• Targets and objectives for 2022 are, by their financial and commercial nature, considered by the Board to be unsuitable
for disclosure in advance. However, the Committee will provide information on targets and objectives retrospectively.
2022 maximum award opportunity:
• M Willome: 150% of salary
• SG Bennett: 150% of salary
• L Liu: 150% of salary
Performance
shareplan
For awards to be made in 2022, performance will be measured as follows:
• 30% based on relative TSR performance versus FTSE 250 (excluding investment trusts and financial
servicescompanies):
– 25% of this element will vest for median performance
– 100% vesting for upper-quartile performance
– Vesting on a straight-line basis between these points
• 30% based on Underlying EPS growth:
– 25% of this element will vest for EPS growth of 4.5% per annum
– 100% vesting for EPS growth of 10% per annum
– Vesting on a straight-line basis between these points
– This target range was set following consideration of the long-term strategy and the outlook for the markets in which
weoperate
– 2021 EPS has been rebased for target setting purposes, to take account of the exceptional margins in Nitrile latex.
See page 115.
• 20% based on cost efficiencies as a result of the Eastman’s Adhesive Resins business
• 20% based on strategic targets, of which half will be a sustainability measure linked to a reduction in CO
2
emissions
ofupto 40% from the 2019 baseline and half will be linked to the introduction of new and protected products.
2022 maximum award opportunity:
• M Willome: 200% of salary
• SG Bennett: 150% of salary
• L Liu: 150% of salary
Shareholding
guidelines during
employment
The Chief Executive Officer and the current Chief Financial Officer are expected to build interests in shares of at least 220%
and 175% of salary respectively. L Liu will be expected to build interests in shares of at least 200% of salary.
Chair and Non-
Executive Directors
The fees to be paid in 2022 to the Chair and the Non-Executive Directors were reviewed in December 2021 and as a result:
• The Chair’s fee was increased from £189,500 to £235,000 per annum with effect from 1 January 2022 to reflect the
greater time commitment that the role requires and its increased complexity.
• The fees for Non-Executive Directors were increased in line with the average pay increase for the Group’s UK workforce
with effect from 1 January 2022.
Corporate Governance
Annual Report on Remuneration continued
Synthomer plc
Annual Report 2021
122
Payments to past directors (audited)
While CG MacLean stepped down as CEO at the start of November 2021, his agreed formal leaving date was 13 January 2022, meaning he
wasentitled to an annual bonus for 2021. The bonus payment will be paid entirely in cash on the normal bonus payment date and will be subject
to the Remuneration Committee’s right under the Rules to apply malus and clawback provisions. He will not be eligible to receive any bonus in
respect of the financial year ending 31 December 2022.
The Remuneration Committee determined that, taking into account the circumstances of the departure, the transition between the leadership
ofthe Company and CG MacLean’s contribution to the business during his tenure, he would be treated as a ‘good leaver’ for the purpose of his
unvested awards under the Performance share plan. In line with the approved policy, the awards will be reduced on a time-apportioned basis,
which will be calculated to 31 December 2021. Awards will be subject to the relevant performance conditions which will be measured at the
normal time.
Award date Number of shares subject to award
Pro-rated maximum number of shares
whichcould vest Vesting date
2019 235,069 220,269 11 March 2022
2020 371,304 221,299 12 March 2023
2021 261,039 70,499 11 March 2024
Any dividend equivalents accrued in respect of these awards would be paid in cash following vesting and will be pro-rated in line with the level
ofvesting of the relevant PSP award. Any shares acquired on the exercise of the awards will be subject to the Remuneration Committee’s right
under the PSP to apply clawback provisions.
Details of the vesting of the award made to CG MacLean in 2019 together with all other remuneration paid to CG MacLean in 2021 are contained
in this report.
The Synthomer post-employment shareholding guidelines which came into effect in April 2021 have not been applied as CG MacLean gave
notice of termination before they were introduced. He is, however, contractually bound to hold Synthomer’s shares post-employment as follows:
Shares Earliest date shares can be sold
6,311 shares deferred from 2019 bonus paid in March 2020 26 March 2022
17,316 shares from vesting of 2017 PSP award in May 2020 4 May 2022
31,979 shares deferred from 2020 bonus paid in March 2021 26 March 2023
56,031 shares from vesting of 2018 PSP award in March 2021 8 March 2023
Payments for loss of office (audited)
No payments for loss of office were made during the year.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
123
GovernanceStrategic report
Performance graph and table
The graph and table below allow comparison of the TSR of the Company and the Chief Executive Officer remuneration outcomes over the last
10 years.
TSR chart
December
2011
December
2012
December
2013
Synthomer plc
December
014
FTSE 250 (excluding investment trusts)
December
2015
December
2016
December
2017
December
2020
December
2021
December
2019
December
2018
0
50
100
150
200
250
400
350
300
The graph above compares the TSR performance of the Company with that of the FTSE 250 (excluding investment trusts). This is considered to
be the most appropriate index against which to make a comparison and was chosen because it represents a broad equity market index of which
the Company is a constituent.
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Chief Executive
Officer total single
figure of remuneration
(£’000) 1,487 923 967 1,246 1,218 2,516 1,807 893 1,805 2,279
Bonus (% of
maximum awarded) 27.0 0.0 57.3 96.7 100.0 100.0 76.5 20.0 100.0 95.0
PSP (% of maximum
vesting) 100.0 50.0 0.0 n/a n/a 96.3 86.2 10.0 31.8 64.0
The Chief Executive Officer total single figure of remuneration includes salary, benefits and pension contributions paid in the year, together with
bonuses and long-term incentive awards which vested based on performance in the year.
The 2021 single figure comprises the figure for CG MacLean, which covers the period to 31 October and the figure for M Willome, which covers
the period from 1 November to 31 December 2021.
Chief Executive Officer to all employee pay ratio
The following table provides pay ratio data in respect of the Chief Executive Officer’s total remuneration compared to the 25th, median and 75th
percentile employee.
Financial year Method
25th percentile
pay ratio Median pay ratio
75th percentile
pay ratio
2021 Option B 54:1 44:1 31:1
2020 Option B 37:1 28:1 22:1
2019 Option B 28:1 23:1 16:1
The employees used for the purposes of compiling the table above were identified on a full-time equivalent basis at the pay period during which
5 April 2021 fell. Option B, which involves identifying the employees at the 25th, 50th and 75th percentile from our gender pay gap report, was
chosen as the calculation methodology.
Option B is considered to be the most simple and accurate way of identifying the relevant employees. Using this methodology we were able to
identify specific employees to make the required comparisons.
The ratio has increased for 2021 chiefly due to the increase in the PSP outcome.
Corporate Governance
Annual Report on Remuneration continued
Synthomer plc
Annual Report 2021
124
The definition of pay used included the following:
• Annual salary
• Car allowances
• All other cash allowances
• All bonuses and incentive scheme payments for services delivered in the year
• Private medical insurance value
The following table provides salary and total remuneration information in respect of the employees at each quartile.
Financial year Element of pay
25th percentile
employee Median employee
75th percentile
employee
2021 Salary 36,394 43,425 57,756
Total remuneration 42,277 52,342 72,622
Our Chief Executive Officer pay is made up of a higher proportion of incentive pay than that of the majority of our employees. This is likely to
introduce more variability in the Chief Executive Officer total compensation.
The Board have confirmed that the ratios are consistent with the Company’s wider policies on employee pay, reward and progression.
Percentage change in remuneration of the Directors
The table below sets out the increase in salary, benefits and annual bonus of the Directors compared with a selected group of employees.
The parent company, Synthomer plc, does not have any direct employees so a comparator group of employees of the Group’s main UK trading
subsidiary has been used, comprising 463 employees. The Directors consider that this employee population is the most relevant for comparison
purposes, taking into account geographical location and remuneration structure.
2021 2020
Salary and fee %
increase
Benefits %
increase/
(decrease)
Annual bonus %
increase
Salary and fee %
increase
Benefits %
increase/
(decrease)
Annual bonus %
increase
M Willome
1
n/a n/a n/a n/a n/a n/a
CG MacLean 2.5 – 1.1 1.3 – 507.8
SG Bennett 2.5 (1.3) 1.1 1.3 (24.1) 560.7
CA Johnstone 2.5 n/a n/a n/a n/a
The Hon. AG Catto 5.6 n/a n/a 0.9 n/a n/a
BWD Connolly 5.4 n/a n/a 1.1 n/a n/a
C Dubin 3.1 n/a n/a n/a n/a n/a
RC Gualdoni
1
n/a n/a n/a n/a n/a n/a
Dr JJC Jansz 3.6 n/a n/a 1.3 n/a n/a
Dato’ Lee Hau Hian 2.8 n/a n/a 1.6 n/a n/a
HA Van Deursen 3.6 n/a n/a 1.3 n/a n/a
Average change for employees 2.6 3.2 36.5 1.4 (4.4) 622.7
Note:
1. M Willome and R Gualdoni were appointed to the Board in 2021.
Relative importance of spend on pay
The table below shows the relative importance of the Group’s all employee remuneration expense compared with returns to shareholders by way
of dividends.
2021
£m
2020
£m % change
Dividends paid 73.5 12.8 474.2
Total employee remuneration 243.7 211.3 15.3
Dividends are the dividends paid in the year. The final 2019 dividend was cancelled at the onset of COVID-19 in March 2020. Total employment
remuneration is the consolidated salary and bonus cost for all Group employees.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
125
GovernanceStrategic report
External appointments
Executive Directors are permitted to accept external appointments with the prior approval of the Board, provided that there is no adverse impact
on their role and duties to the Company. Any fees arising from such appointments may be retained by the Executive Directors where the
appointment is unrelated to the Group’s business.
M Willome has been a non-executive director of Glaston Oyj (Nasdaq Helsinki) since May 2020 and received a Board membership fee of EUR
38,000 in 2021. M Willome has sat on European subsidiary boards of Indutrade AB since 2013 and received a board membership fee of CHF
30,000 in 2021.
SG Bennett does not currently hold any external appointments.
Remuneration Committee
Remuneration Committee membership since 1 January 2021:
Brendan Connolly (Chair)
Cynthia Dubin
Roberto Gualdoni (from 8 July 2021)
Just Jansz (to 29 September 2021)
Holly A Van Deursen
Attendance at Committee meetings is set out on page 93.
Key duties of the Committee
During 2021 the Committee was responsible for determining, in agreement with the Board, the Company’s policy on executive remuneration
andthe specific remuneration for the Chair and each of the Executive Directors, including pension rights, within the terms of the agreed policy.
The Committee was also responsible for the specific remuneration of the Executive Committee and for reviewing remuneration elsewhere
intheGroup.
Advisers
The Chief Executive Officer, Company Secretary and Group HR Director are invited to attend Committee meetings to contribute to the
Committee in its deliberations. However, no individual is involved in discussions, or is part of any decisions, relating to their own remuneration.
The Committee received independent advice from Deloitte LLP (Deloitte) which was appointed as the Committee’s independent remuneration
adviser in April 2013.
During the year, Deloitte provided advice on governance and market trends and other remuneration matters that materially assisted the
Committee. The fees paid to Deloitte in respect of this work were charged on a time and expenses basis and totalled £13,000 for advice in 2021.
The Committee is comfortable that the Deloitte engagement team that provides remuneration advice to the Committee do not have connections
with the Company or its Directors that may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that
there were appropriate safeguards against such conflicts. Deloitte also provided tax services to part of the Group and advice on implementation
of TCFD to the Board in the year. The Committee was satisfied that this did not compromise the independence of the advicereceived.
Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code of Conduct. Deloitte was appointed directly by
the Committee, and the Committee is satisfied that the advice received was objective and independent.
Statement of voting at the AGM
The table below sets out the results of the votes on the Directors’ remuneration at the 2021 AGM (Annual Report on Remuneration) and the 2020
AGM (Directors’ Remuneration Policy).
Votes for Votes against
Votes withheld
NumberNumber % of vote Number % of vote
2021 Annual Report on Remuneration 341,442,799 96.53 12,278,209 3.47 26,045
2020 Directors’ Remuneration Policy 322,152,827 91.98 28,090,122 8.02 28,501
By order of the Board
R Atkinson
Company Secretary
03 March 2022
Corporate Governance
Annual Report on Remuneration continued
Synthomer plc
Annual Report 2021
126
Corporate Governance
Directors’ report
The Directors submit their Annual Report and
the audited consolidated financial statements
for the year ended 31 December 2021. None
of the matters required to be disclosed by
Listing Rule 9.8.4R apply to the Company,
except for the following:
• The amount of capitalised interest –
seeFinancial statements note 2
• Details of long-term incentive programmes
– see Directors’ Remuneration report on
pages 112-126
• Shareholder waiver of dividends –
seeFinancial statements note 31.
The Directors’ report is covered on pages
126-128 as well as in the following sections of
the Annual Report:
Item
Location in Annual
Report
Statement of Directors’
responsibilities
Page 129
Financial risk management Financial
statements –
note22
Present Board
membership
Pages 84-87
Corporate Governance
report
Pages 90-97
Strategic report (including
principal activities)
Inside
front cover
to page 82
Management of risk and
viability statement
Pages 69-81
Employee engagement Pages 62-66
Directors’ remuneration
report
Pages 112-126
Share capital Financial
statements –
note 27
Greenhouse gas emissions Pages 182-183
Sustainability report Pages 42-68
Results and dividends
The profit attributable to shareholders for
theyear was £208.7 million. An interim
dividend of 8.7 pence per share was paid
on4 November 2021. The total dividend paid
for the year was£73.5 million. The Directors
recommend afinal ordinary dividend of 21.3
pence per share payable on 5 July 2022 to
those shareholders registered at the close
ofbusiness on 6 June 2022. A dividend
reinvestment plan is available to shareholders
and this alternative will continue to be offered
until further notice.
Acquisitions and disposals
On 7 April 2021 the Company completed the
sale of Synthomer Thailand Limited to Rimrise
FZE. On 28 October 2021 the Company agreed
to acquire Eastman’s Adhesive Resins business
for$1 billion.
Directors
All the Directors will retire and seek election
orre-election at the forthcoming AGM.
None of the Directors seeking re-election
hasa service contract except Michael
Willome and Stephen Bennett, who both have
aservice contract that contains a 12-month
notice period. Stephen Bennett gave notice of
termination on 4 August 2021 and has agreed
a termination date with the Company of
4 November 2022.
Director indemnity provisions
Under the Company’s Articles of Association,
the Directors of the Company have the benefit
of a qualifying third-party indemnity provision.
This means the Company indemnifies them
against certain liabilities, as permitted by
Sections 232 and 234 of the Companies Act
2006, and against costs incurred by them in
relation to any liability for which they are
indemnified. The Company has purchased
and maintains insurance against Directors’
and officers’ liabilities in relation to
theCompany.
Share capital and control
On 28 October 2021 the Company
completedaplacing of 42,485,080
newordinary shares of 10 pence each.
This represented approximately 10% of the
Company’s issued share capital immediately
before the placing and was connected to
thefinancing of the acquisition of Eastman’s
Adhesive Resins business, which was
announced that day. During 2021 no shares
were purchased. A total of 99,927 shares
were purchased on the open market on
behalf of the shareholders who elected to
participate in the dividend reinvestment plan.
The Company’s Articles of Association set
outthe rights and obligations attached to
theCompany’s ordinary shares, being the
only class of issued share capital, alongside
thepowers of the Company’s Directors.
Copies can be obtained from Companies
House or downloaded from the Company’s
website: www.synthomer.com. There are
norestrictions on the voting rights attached
tothe Company’s ordinary shares or on
thetransfer of securities in the Company.
No person holds securities in the Company
that carry special rights with regard to the
control of the Company. The Company is not
aware of any agreements between holders
ofsecurities that may result in restrictions on
the transfer of securities or on voting rights.
Unless expressly specified to the contrary
inthe Company’s Articles of Association,
those Articles of Association may be
amended by special resolution of the
Company’s shareholders.
Other than in relation to its borrowings,
whichbecome repayable on a takeover
unless certain conditions are satisfied,
theCompany is not party to any significant
agreements that would come into effect,
alteror terminate upon a change of control
prompted by a takeover bid. The Company
does not have agreements with any
Directoror employee that would provide
compensation for loss ofoffice or
employment resulting from atakeover.
All of the Company’s share programmes
contain provisions relating to a change of
control. Outstanding options and awards
would normally vest and become exercisable
on a change of control, subject to the
satisfaction of any performance conditions
atthat time.
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
127
GovernanceStrategic report
Major shareholdings
Other than the shareholdings disclosed as Directors’ interests in the Directors’ remuneration
report as at 18 February 2022, the Company had been notified under Section 5 of the
Disclosure and Transparency Rules of the UK Listing Authority of the following significant
holdings of voting rights in its ordinary shares:
Ordinary shares
(number)
Percentage of
ordinary shares in
issue Nature of holding
Kuala Lumpur Kepong Bhd 99,745,012 21.34 Direct interest
Jupiter Fund Management plc 24,965,862 5.34 Indirect interest
Ameriprise Financial Inc 21,103,757 4.52 Direct and indirect interest
Aegon Asset Management UK PLC 12,425,941 2.66 Direct and indirect interest
Employment policies and employee
involvement
The Group gives every consideration
tojobapplications from disabled people.
Employees who become disabled are
givenevery opportunity to continue working
forSynthomer under normal terms and
conditions with appropriate training, career
development and promotion wherever
possible. The Group seeks to achieve
equalopportunities in employment
throughrecruitment and training policies.
The Group encourages employee involvement
in its affairs. The Company regularly engages
with employees to make them aware of the
financial and economic factors affecting
Group performance. Performance-related
bonus programmes are in operation
throughout the Group. Alexander Catto
isthedesignated Non-Executive Director
responsible for gathering the views of the
workforce. Further information on the Board’s
workforce engagement methods can be
found on pages 95 to 97. The Group’s
approach to diversity and inclusion is
explained on pages 42 and 63-65.
Authority to purchase own shares
The Company has a general authority to
make market purchases of not more than
42,485,096 of the Company’s ordinary
shares, in accordance with the terms of the
special resolution passed at the 2021 AGM.
This expires at the conclusion of the 2022
AGM. A resolution will be tabled at the 2022
AGM to renew this authority for an amount
representing approximately 10% of the
Company’s issued share capital as at
2 March 2022.
Political donations
No political donations were made in the year.
UK pension funds
The trustees have reviewed the independent
investment management of the assets of
theCompany’s UK pension schemes and
assured themselves of the security and
controls in place. In particular, it is the
trustees’ policy not to invest in Synthomer plc
shares nor lend money to the Company.
Subsidiaries
All the Group’s subsidiaries, joint ventures
and related undertakings are listed on pages
179 -180.
Statement as to disclosure of
information to auditor
Each Director of the Company confirms
that,tothe best of their knowledge, the
Company’s auditor is aware of all relevant
audit information. Each Director also confirms
that he or she has taken all necessary steps
as a Director to make themselves aware of
any relevant audit information and to establish
that the information has been shared with
theCompany’s auditor. For these purposes,
relevant audit information means information
needed by the Company’s auditor in
connection with preparing its report on
pages131-136. This confirmation is given
andshould be interpreted in accordance
withsection 418 of the Companies Act 2006.
Going concern
The Directors have acknowledged the latest
guidance on going concern and in reaching
their conclusions have taken into account
factors that include:
• A $260 million term loan and a €460 million
revolving credit facility with five-year terms
ending on3 July 2024
• A €520 million bond due 2025
• The new committed $300 million term
loanfacility entered into on 28 October
2021 in connection with the financing
oftheacquisition of Eastman’s Adhesive
Resins business.
After making enquiries and taking account
ofreasonably possible changes in trading
performance, the Directors are satisfied
that,at the time of approving the financial
statements, it is appropriate to adopt the
going concern basis in preparing the
financialstatements ofboth the Group
andthe Company.
Cautionary statement
The purpose of this report is to provide
information to the members of the Company.
It contains certain forward-looking statements
with respect to the operations, performance
and financial condition of the Group. By their
nature, these statements involve uncertainty,
since future events and circumstances
cancause results and developments to
differmaterially from those anticipated.
The forward-looking statements reflect
knowledge and information available at
thedate of preparation of this report and
theCompany isunder no obligation to
updatethese forward-looking statements.
Nothing inthis report should be construed
asa profit forecast.
Independent auditors
A resolution to appoint
PricewaterhouseCoopers LLP as the
Company’s auditor will be proposed at the
next AGM.
Annual General Meeting
The AGM will be held at the offices of the
Company at 45 Pall Mall, London SW1Y 5JG
on 28 April 2022 at 11.00 am.
By order of the Board
Richard Atkinson
Company Secretary
3 March 2022
Corporate Governance
Directors’ report continued
Synthomer plc
Annual Report 2021
128
Corporate Governance
Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report 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 UK Generally
Accepted Accounting Practice (UK Accounting
Standards, comprising FRS 101 Reduced
Disclosure Framework, and applicable law).
The Group has also prepared the financial
statements in accordance with IFRSs adopted
pursuant to Regulation (EC) No 1606/2002
asit applies in the European Union.
Under company law the 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 and Company 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
IFRSs and IFRSs adopted pursuant to
Regulation (EC) No 1606/2002 as it applies
in the European Union have been followed
for the Group financial statements and UK
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 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 UK 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, taken asa whole,
isfair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed in the Directors’ report
confirm that, to the best of their knowledge:
• the Group financial statements, which
havebeen prepared inaccordance with
UK-adopted international accounting
standards IFRSs as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies
in the European Union;
• the Company financial statements, which
have been prepared inaccordance with
UKaccounting standards, comprising
FRS101 givea true and fair view of the
assets, liabilities andfinancial position
oftheCompany; and
• the Directors’ 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.
By order of the Board
M Willome
Chief Executive Officer
SG Bennett
Chief Financial Officer
Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
129
GovernanceStrategic report
Group
financial
statements
Our specialist high
solid SBR and SA and SBR
compounded products provide
high performance binders for the
backing of carpet and artificial turf and
as gel foam elastomers for floor
coverings, footwear and mattresses.
In alltypes of carpet (from wovens to
automotive) and artificial turf we provide
compounded products with technical
service and support to optimise
the performance of the
floorcovering.
130
Synthomer plc
Annual Report 2021
Group financial statements
Independent auditors’ report
to the members of Synthomer plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Synthomer 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 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, which comprise: the Consolidated balance sheet
andCompany statement of financial position as at 31 December 2021;
the Consolidated income statement, the Consolidated statement of
comprehensive income, the Consolidated cash flow statement, the
Consolidated and Company statements of changes in equity, and
Reconciliation of net cash flow from operating activities to movement
in net debt 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 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.
In August 2021, we applied to the FRC for a one-year waiver in respect
of the UK non-audit services fee cap for our audit of Synthomer Plc’s
financial period ending 31 December 2021. The waiver was in respect
of fees relating to private reporting in relation to the Eastman’s
Adhesive Resins business acquisition and followed a similar waiver
request in 2020. The application was approved as the exceptional
circumstances test was met, with mitigations put in place by us and
the Company to manage the risks to auditor independence.
Other than those disclosed in note 7 to the consolidated financial
statements, we have provided no non-audit services to the Company
in the period under audit.
Our audit approach
Context
In planning and executing our audit we have considered the Group’s
climate risk assessment process (as described in the Sustainability
report and TCFD report). This, together with discussions with our own
climate change specialists, provided us with a good understanding
ofthe potential impact of climate change on the financial statements.
Management consider that the impact of climate change does not give
rise to a material financial statement impact. We used our knowledge
of the Group to evaluate management’s assessment. The Group is
targeting net zero carbon emissions by 2050, and with Vision 2030
they are working on their pathway towards this. The Group has started
to quantify some of the impacts that may arise on this pathway and
wehave discussed with management and the Audit Committee that
the estimated financial impacts of climate change will need to be
frequently reassessed and our expectation that climate change
disclosures will continue to evolve as greater understanding of the
actual and potential impacts on the Group’s future operations are
obtained. We considered how climate change risks would impact the
assumptions made in the forecasts prepared by management used in
their impairment analyses and going concern. We also considered the
consistency of the disclosures in relation to climate change made in
the other information within the Annual Report with the financial
statements and our knowledge from our audit.
Overview
Audit scope
• Audit procedures provide coverage of 84% of revenue and 93% of
underlying operating profit.
• Audit scope covers 8 countries, performing procedures over 14
components.
• Financially significant components in the USA, Germany and
Malaysia.
Key audit matters
• Uncertain Tax Provisions (Group)
• Valuation of defined benefit pension liabilities and level 3 assets
(Group)
• Presentation and quantum of Special Items (Group)
• Recoverability of investment in, and amounts owed by, Group
undertakings (Company)
Materiality
• Overall Group materiality: £11,605,000 (2020: £7,900,000) based
onapproximately 5% of three-year average of underlying profit
before taxation (2020: underlying profit before taxation).
• Overall Company materiality: £10,444,500 (2020: £18,660,000)
based on 1% of total assets capped at 90% of Group materiality.
• Performance materiality: £8,703,000 (2020: £5,925,000) (Group)
and £7,830,000 (2020: £2,250,000) (Company).
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.
Synthomer plc
Annual Report 2021
131
Strategic report Governance Group financial statements Company financial statements Other information
Group financial statements
Independent auditors’ report continued
to the members of Synthomer plc
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.
Presentation of special items is a new key audit matter this year.
The impact of the COVID-19 pandemic and OMNOVA acquisition
accounting, which were key audit matters last year, are no longer
included because of the ability of the Group to continue to generate
profits and operate despite disruption related to the COVID-19
pandemic, and the accounting related to the OMNOVA acquisition
being finalised in the prior year. Otherwise, the key audit matters below
are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Uncertain Tax Provisions (Group)
The Group has a wide geographical footprint
and is subject to a range of tax laws in a
number of different tax jurisdictions. As set
outin Note 10, the Group has a number
ofuncertain tax provisions totalling £23.7m
(2020: £45.9m) as at 31 December 2021.
By nature, uncertain tax positions require a
significant element of judgement to determine
an appropriate provision. As such, we have
assessed that a significant risk exists in relation
to valuation and presentation and disclosure
assertions to ensure that provisions made
areappropriate.
In order to assess the valuation and appropriateness of presentation and disclosure we:
• Engaged our tax specialists (including transfer pricing specialists) to assess the level
ofprovision held against various tax exposures was materially appropriate. In our
assessment we had regard to the nature of individual exposures, including their origin,
and any developments in the year to assess the rationale for their continued validity
atthecurrent year end.
• Inspected correspondence with tax authorities and the Group’s tax advisors to evaluate
valuation and completeness of provisions.
• Challenged judgements made by management by assessing individual provisions against
our expectations of potential exposures, having regard to the facts of each case.
• Considered the adequacy of disclosure in the annual report.
No significant issues arose from this work to suggest that the judgements made, amounts
provided or disclosures were inappropriate.
Valuation of defined benefit pension liabilities
and level 3 assets (Group)
As set out in note 26, the Group had £122.4m
(2020: £221.4m) net liabilities as at
31 December 2021 in relation to defined
benefit pension schemes. These primarily
represent the Yule Catto Group retirement
benefits scheme in the UK, the OMNOVA
Solutions Consolidated Pension Plan in the US
and an unfunded scheme in Germany, which
account for £4.6m, £27.7m, and £74.7m
respectively of the net pension deficit.
The Group uses third party actuaries to
calculate the pension liabilities. The valuation of
these liabilities is based on a number of
assumptions and the calculation is highly
sensitive to small changes in the assumptions.
For instance, changes in inflation, mortality
tables and discount rate can have a significant
impact on the valuation of the liability recorded.
The pension asset also contains level 3 and
other complex assets (complex PIVs where
assets are not traded on Recognised
Investment Exchanges (RIE)) totalling £266m
as at 31 December 2021 (31 December
2020: £320m), which are complex in nature to
value and therefore we deem there to be a risk
with respect to the valuation of these assets.
In order to assess the identified risks we:
• We reviewed external actuarial reports of the UK and German schemes which set out
thecalculations and assumptions underpinning the year end pension scheme liabilities
valuation and our US component team reviewed an external actuarial report for the
USscheme .
• We (and PwC US) held discussions with the external actuaries and were satisfied that the
scope of their work was such that we could use this work to provide evidence for the
purpose of our audit.
• We assessed the competency and objectivity of the external actuaries commissioned by
the Group to perform the year end calculations by considering their technical expertise
and independence from the Group.
• We used our own specialist actuarial team to evaluate the key assumptions used in each
of the three schemes by comparing these assumptions to our expectations for similar
schemes as at the year end.
• With respect to the level 3 and other more complex assets, we tested values through a
combination of the following procedures: reviewed audited accounts of pooled investment
vehicles; reviewed internal controls reports of the service provider responsible for the
valuation of the fund, including obtaining bridging letters where the control report does
not cover the current financial period of Synthomer plc; obtained fund transactions close
to the year end (where available), and obtained third party confirmation from the
investment managers.
• We also considered the appropriateness of the disclosures within the financial statements
We found management’s assumptions to be within an acceptable range. We identified no
concerns over their competency or objectivity.
132
Synthomer plc
Annual Report 2021
Key audit matter How our audit addressed the key audit matter
Presentation and quantum of Special Items
(Group)
The Group presents two measures of
performance in the income statement;
statutory and underlying, the latter after
adjusting for certain items of income or
expenses as management believes these
measures provide additional useful information
on the underlying trends, performance and
position of the Group.
The determination of which items of income
orexpense are classified as Special items
issubject to judgement and therefore
usersofthe financial statements could be
misled ifamounts are not classified or
calculatedappropriately.
Description of the amounts presented as
Special items are included in note 4 to the
financial statements.
We considered the appropriateness of amounts classified as Special items. To do this
weconsidered:
• The Group’s accounting policy on special items; and Pronouncements by the Financial
Reporting Council on this matter.
• We challenged management on the appropriateness of the classification of such Special
items, being mindful that classification should be even-handed between gains and losses,
the basis the classification should be clearly disclosed and a clear reconciliation to
statutory measures provided and applied consistently one year to the next.
• We challenged management on the quantum of the elements of the Special items, and
the estimates underpinning some of them, including discussions with the Group’s legal
advisors where appropriate.
Our work highlighted certain items that management had classified as special items which
were judgemental. Having considered the nature and quantum of these items, overall we are
satisfied that the presentation of special items in the financial statements for the year ended
31 December 2021 is appropriate.
Recoverability of investment in, and amounts
owed by, Group undertakings (Company)
As disclosed in Note 3 of the Parent Company
financial statements, the Company held an
investment in subsidiaries of £536.7m
(2020: £370.5) and amounts owed by Group
undertakings of £1,275m (2020: £1443.4m)
at31 December 2021.
The assessment of the recoverability of these
assets required the application of management
judgement, particularly in determining whether
any impairment indicators have arisen that
trigger the need for a formal impairment
assessment and in assessing whether the
carrying value of each investment and amounts
owed by Group undertakings are recoverable.
As changes to these judgements and estimates
could have a material impact on the Company
financial statements, we consider this to be
akeyaudit matter.
Our procedures included the following:
• Evaluating management’s assessment of whether any indicators of impairment existed.
• Assessing the recoverable value by reference to the net assets of the underlying
subsidiaries and amounts owed by Group undertakings with reference to the Director’s
intentions for the settlement of Group-wide intercompany balances.
• Verifying that the recoverable values of the investment was consistent with the recoverable
value of the CGU tested for goodwill impairment purposes, leveraging the audit work
undertaken as part of the Group audit.
Based on the procedures performed, we noted no material issues from our work.
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.
As set out in note 5 ‘Segmental analysis’, the Group reports its results
as four segments: ‘Performance Elastomers’, ‘Functional Solutions’,
‘Industrial Specialities’ and ‘Acrylate Monomers’. The Group financial
statements are a consolidation of reporting units, being holding
companies, intermediate holding companies and operating
companies, across 24 countries. Three countries, being the USA,
Germany and Malaysia, account for the majority of the Group’s results.
We accordingly focused our work on three of the reporting units in
these countries, which were subject to audits of their complete
financial information. In addition, to increase our coverage of the
Group’s revenue and underlying profit before tax we performed full
scope audit procedures at an additional eleven reporting units located
in the UK, Italy, Germany, Malaysia, the Czech Republic, Austria and
France. These components accounted for 84% of the Group’s
revenue, 93% of the Group’s underlying operating profit.
Where work was performed by component auditors, we determined
the level of involvement we needed to have in the audit work at those
reporting units to be able to conclude whether sufficient appropriate
audit evidence had been obtained as a basis for our opinion on the
Group financial statements as a whole. During the audit, senior
members of the Group team held a number of meetings with the audit
teams from key reporting units in the UK, Germany, Malaysia and the
USA, and reviewed the work performed by these teams over those
areas of higher audit risk.
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 determine the scope of our
audit and the nature, timing and extent of our audit procedures on
individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Synthomer plc
Annual Report 2021
133
Strategic report Governance Group financial statements Company financial statements Other information
Group financial statements
Independent auditors’ report continued
to the members of Synthomer plc
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 £11,605,000 (2020: £7,900,000). £10,444,500 (2020: £18,660,000).
How we determined it
approximately 5% of three-year average of underlying profit
before taxation (2020: underlying profit before taxation).
Based on 1% of total assets capped at 90% of Group
materiality.
Rationale for
benchmark applied
Underlying profit before taxation, being profit before tax
adjusted for special items, is a key metric for investors and
is used by the Board in measuring the Group’s financial
performance.
Total assets is the primary measure used by the
shareholders in assessing the performance of the Company,
and is a generally accepted benchmark. The value is
capped at 90% of the Group overall materiality.
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 £1,300,000
to £10,706,500. 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 £8,703,000 (2020: £5,925,000) for the
Groupfinancial statements and £7,830,000 (2020: £2,250,000) 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 Committee that we would report to
themmisstatements identified during our audit above £580,000
(Groupaudit) (2020: £395,000) and £522,000 (Company audit)
(2020: £395,000) 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 members’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
• We reviewed the Directors’ model supporting their going concern
assumption. We discussed with management the assumptions
applied in the going concern review so we could understand and
challenge the rationale for those assumptions, using our knowledge
of the business. We tested the model’s mathematical accuracy
andconsidered the reasonableness of the revenue and cost
assumptions made and the available headroom throughout
aperiodof at least twelve months from the date of approval
ofthefinancial statements.
• We reviewed management’s sensitivity scenarios including their
severe but plausible downside. We considered potential mitigating
actions available to the Group that are achievable and within
management’s control. We then assessed the availability of
liquidresources under the different scenarios and the associated
covenant tests applicable; and
• We also assessed additional downside sensitivities and considered
the impact on covenants and liquidity headroom.
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
members’ 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 members’ reporting on how they have applied the
UKCorporate Governance Code, we have nothing material to add or
draw attention to in relation to the members’ statement in the financial
statements about whether the members considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the members 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 members are responsible for the other information,
whichincludes reporting based on the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations. Our opinion on
the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.
134
Synthomer plc
Annual Report 2021
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 Annual Report on Remuneration to
beaudited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the members’ 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 members’ 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 members’ 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 members’ explanation as to their assessment of the Group’s
and Company’s prospects, the period this assessment covers and
why the period is appropriate; and
• The members’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related 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 members’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
Group’s and Company’s position, performance, business model
and strategy;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the
AuditCommittee.
We have nothing to report in respect of our responsibility to report
when the members’ statement relating to the Company’s compliance
with the Code does not properly disclose a 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 members for the financial statements
As explained more fully in the Statement of Directors’ responsibilities,
the members 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 members
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 members 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
members 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.
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 breaches of environmental, health and safety and competition
regulations, tax legislation and equivalent local laws and regulations
applicable to significant component teams, and we considered the extent
to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have
a direct impact on the financial statements such as the Companies Act
2006. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk
of override of controls), and determined that the principal risks were
related to posting inappropriate journal entries to increase revenue and
management bias in accounting estimates. 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:
• Discussions with management and internal audit, including
consideration of known or suspected instances of non-compliance
with laws and regulations and fraud;
• Evaluation of management’s controls designed to prevent and
detect irregularities;
Synthomer plc
Annual Report 2021
135
Strategic report Governance Group financial statements Company financial statements Other information
Group financial statements
Independent auditors’ report continued
to the members of Synthomer plc
• Challenging assumptions and judgements made by management
intheir significant accounting estimates, in particular in relation to
provisions for uncertain tax positions, the European Commission
provision and the valuation of defined benefit scheme liabilities.
Where we considered appropriate, we held discussions with the
Group’s legal advisors.
• Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations (for example
credit to revenue with a debit entry to an unexpected account) or
journals posted by senior management.
There are inherent limitations in the audit procedures described above.
We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items
fortesting, rather than testing complete populations. We will often
seek totarget particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable
usto draw a conclusion about the population from which the sample
is selected.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for and only for
the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our
prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of members’ remuneration specified by law are
not made; or
• the Company financial statements and the part of the Annual Report
on Remuneration 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 Committee, we were
appointed by the members on 12 July 2012 to audit the financial
statements for the year ended 31 December 2012 and subsequent
financial periods. The period of total uninterrupted engagement
is10years, covering the years ended 31 December 2012 to
31 December 2021.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial statements 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
has been prepared using the single electronic format specified in the
ESEF RTS.
David Beer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
3 March 2022
136
Synthomer plc
Annual Report 2021
Group financial statements
Consolidated income statement
for the year ended 31 December 2021
2021 2020
Note
Underlying
performance
£m
Special
Items
£m
IFRS
£m
Underlying
performance
£m
Special
Items
£m
IFRS
£m
Revenue 5 2,329.5 – 2,329.5 1,644.2 – 1,644.2
Company and subsidiaries operating profit before Special Items 448.3 – 448.3 188.4 – 188.4
Amortisation of acquired intangibles 4 – (36.2) (36.2) – (30.9) (30.9)
Restructuring and site closure costs 4 – (29.7) (29.7) – (42.5) (42.5)
Acquisition costs and related gains 4 – (11.9) (11.9) – (14.6) (14.6)
Sale of business 4 – (7.4) (7.4) – (6.6) (6.6)
Regulatory fine 4 – (57.2) (57.2) – – –
Impairment charge 4 – – – – (36.6) (36.6)
Company and subsidiaries 448.3 (142.4) 305.9 188.4 (131.2) 57.2
Share of joint ventures 18 2.6 – 2.6 1.2 – 1.2
Operating profit/(loss) 6 450.9 (142.4) 308.5 189.6 (131.2) 58.4
Interest payable 9 (27.9) – (27.9) (25.5) – (25.5)
Interest receivable 9 1.0 – 1.0 1.2 – 1.2
Fair value gain/(loss) on unhedged interest rate derivatives 4 – 6.2 6.2 – (3.6) (3.6)
Loss on extinguishment of financing facilities 4 – – – – (4.9) (4.9)
Net interest expense on defined benefit obligations 9 (2.4) – (2.4) (3.7) – (3.7)
Interest element of lease payments 9 (1.5) – (1.5) (1.6) – (1.6)
Finance costs (30.8) 6.2 (24.6) (29.6) (8.5) (38.1)
Profit/(loss) before taxation 420.1 (136.2) 283.9 160.0 (139.7) 20.3
Taxation 10 (94.5) 20.6 (73.9) (37.4) 15.6 (21.8)
Profit/(loss) for the year 325.6 (115.6) 210.0 122.6 (124.1) (1.5)
Profit/(loss) attributable to non-controlling interests 0.4 0.9 1.3 (0.3) (4.3) (4.6)
Profit/(loss) attributable to equity holders of the parent 325.2 (116.5) 208.7 122.9 (119.8) 3.1
325.6 (115.6) 210.0 122.6 (124.1) (1.5)
Earnings per share
– Basic 13 75.2p (26.9)p 48.3p 28.9p (28.2)p 0.7p
– Diluted 13 74.9p (26.8)p 48.1p 28.8p (28.1)p 0.7p
137
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2021
2021 2020
Note
Equity
holders of
the parent
£m
Non-
controlling
interests
£m
Total
£m
Equity
holders of
the parent
£m
Non-
controlling
interests
£m
Total
£m
Profit/(loss) for the year 208.7 1.3 210.0 3.1 (4.6) (1.5)
Actuarial gains/(losses) 26 66.8 – 66.8 (7.6) – (7.6)
Tax relating to components of other comprehensive income 10 (11.8) – (11.8) 3.5 – 3.5
Total items that will not be reclassified to profit or loss 55.0 – 55.0 (4.1) – (4.1)
Exchange differences on translation of foreign operations 27 2.8 (0.2) 2.6 (37.5) (0.3) (37.8)
Exchange differences recycled on sale of business 27 0.3 – 0.3 – – –
Fair value gain/(loss) on hedged interest derivatives 27 3.4 – 3.4 (0.8) – (0.8)
Gains on net investment hedges taken to equity 27 3.3 – 3.3 15.9 – 15.9
Total items that may be reclassified subsequently
toprofitor loss 9.8 (0.2) 9.6 (22.4) (0.3) (22.7)
Other comprehensive income/(expense) for the year 64.8 (0.2) 64.6 (26.5) (0.3) (26.8)
Total comprehensive income/(expense) for the year 273.5 1.1 274.6 (23.4) (4.9) (28.3)
Consolidated statement of changes in equity
for the year ended 31 December 2021
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedging
and
translation
reserve
£m
Retained
earnings
£m
Total equity
holdings of
the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 January 2021 42.5 421.1 0.9 (41.9) 192.4 615.0 13.1 628.1
Profit for the year – – – – 208.7 208.7 1.3 210.0
Other comprehensive income fortheyear – – – 9.8 55.0 64.8 (0.2) 64.6
Total comprehensive income forthe year – – – 9.8 263.7 273.5 1.1 274.6
Dividends 12 – – – – (73.5) (73.5) (0.5) (74.0)
Issue of shares 27 4.2 198.9 – – – 203.1 – 203.1
Share-based payments – – – – 1.2 1.2 – 1.2
At 31 December 2021 46.7 620.0 0.9 (32.1) 383.8 1,019.3 13.7 1,033.0
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedging
and
translation
reserve
£m
Retained
earnings
£m
Total equity
holdings of
the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 January 2020 42.5 421.1 0.9 (19.5) 204.4 649.4 21.1 670.5
Profit/(loss) for the year – – – – 3.1 3.1 (4.6) (1.5)
Other comprehensive expense fortheyear – – – (22.4) (4.1) (26.5) (0.3) (26.8)
Total comprehensive expense fortheyear – – – (22.4) (1.0) (23.4) (4.9) (28.3)
Dividends 12 – – – – (12.8) (12.8) (3.1) (15.9)
Share-based payments – – – – 1.8 1.8 – 1.8
At 31 December 2020 42.5 421.1 0.9 (41.9) 192.4 615.0 13.1 628.1
138
Synthomer plc
Annual Report 2021
Group financial statements
Consolidated balance sheet
as at 31 December 2021
Note
2021
£m
2020
£m
Non-current assets
Goodwill 14 487.0 493.4
Acquired intangible assets 15 297.6 341.0
Other intangible assets 16 46.4 36.6
Property, plant and equipment 17 508.3 521.8
Deferred tax assets 11 29.2 23.8
Investment in joint ventures 18 7.4 6.6
Total non-current assets 1,375.9 1,423.2
Current assets
Inventories 19 253.7 170.3
Trade and other receivables 20 312.8 262.4
Cash and cash equivalents 21 505.3 201.8
Derivative financial instruments 22 3.2 1.4
Total current assets 1,075.0 635.9
Total assets 2,450.9 2,059.1
Current liabilities
Borrowings 21 – (20.1)
Trade and other payables 24 (414.2) (334.1)
Lease liabilities 23 (8.8) (10.6)
Current tax liabilities 10 (45.2) (58.5)
Provisions for other liabilities and charges 25 (85.2) (25.7)
Derivative financial instruments 22 (10.1) (19.4)
Total current liabilities (563.5) (468.4)
Non-current liabilities
Borrowings 21 (619.5) (643.9)
Trade and other payables 24 (2.3) (3.7)
Lease liabilities 23 (34.7) (44.4)
Deferred tax liabilities 11 (57.5) (43.3)
Retirement benefit obligations 26 (122.4) (221.4)
Provisions for other liabilities and charges 25 (18.0) (5.9)
Total non-current liabilities (854.4) (962.6)
Total liabilities (1,417.9) (1,431.0)
Net assets 1,033.0 628.1
Equity
Share capital 27 46.7 42.5
Share premium 27 620.0 421.1
Capital redemption reserve 0.9 0.9
Hedging and translation reserve 27 (32.1) (41.9)
Retained earnings 27 383.8 192.4
Equity attributable to equity holders of the parent 1,019.3 615.0
Non-controlling interests 13.7 13.1
Total equity 1,033.0 628.1
The financial statements on pages 137 to 172 were approved by the Board of Directors and authorised for issue on 3 March 2022. They are
signed on its behalf by:
M Willome S G Bennett
Director Director
139
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Consolidated cash flow statement
for the year ended 31 December 2021
2021
2020
Note £m £m £m £m
Operating
Cash generated from operations 28 387.5 232.2
Interest received 1.0 1.2
Interest paid (27.1) (13.6)
Interest element of lease payments (1.5) (1.6)
Net interest paid (27.6) (14.0)
UK corporation tax paid – –
Overseas corporate tax paid (86.4) (31.4)
Total tax paid (86.4) (31.4)
Net cash inflow from operating activities 273.5 186.8
Investing
Dividends received from joint ventures 18 1.9 1.9
Purchase of property, plant and equipment and intangible assets (82.2) (53.8)
Purchase of business – (314.0)
Proceeds from sale of business 1.7 0.1
Net cash outflow from investing activities (78.6) (365.8)
Financing
Dividends paid 12 (73.5) (12.8)
Dividends paid to non-controlling interests (0.5) (3.1)
Proceeds on issue of shares 27 203.1 –
Settlement of equity-settled share-based payments (0.9) (0.2)
Repayment of principal portion of lease liabilities (9.7) (9.7)
Repayment of borrowings – (718.3)
Repayment of borrowings on acquisition – (273.6)
Proceeds of borrowings – 1,290.9
Net cash inflow from financing activities 118.5 273.2
Increase in cash, cash equivalents and bank overdrafts during the year 313.4 94.2
Cash, cash equivalents and bank overdrafts at 1 January 21 191.3 103.6
Foreign exchange and other movements 21 0.6 (6.5)
Cash, cash equivalents and bank overdrafts at 31 December 21 505.3 191.3
Reconciliation of net cash flow from operating activities to movement
innet debt
for the year ended 31 December 2021
Note
2021
£m
2020
£m
Net cash inflow from operating activities 273.5 186.8
Add back: dividends received from joint ventures 18 1.9 1.9
Less: net capital expenditure (82.2) (53.8)
Less: purchase of business – (587.6)
Add back: proceeds from sale of business 1.7 0.1
194.9 (452.6)
Ordinary dividends paid 12 (73.5) (12.8)
Issue of shares 27 203.1 –
Dividends paid to non-controlling interests (0.5) (3.1)
Settlement of equity-settled share-based payments (0.9) (0.2)
Repayment for principal portion of lease liabilities (9.7) (9.7)
Foreign exchange and other movements 21 34.6 (4.5)
Decrease/(increase) in net debt 348.0 (482.9)
140
Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements
31 December 2021
1 General information
Synthomer plc (the ‘Company’) is a public limited company
incorporated and domiciled in the United Kingdom under the
Companies Act. The address of the registered office is given on
page188. The Company is listed on the London Stock Exchange.
The principal activities of the Company and its subsidiaries
(the‘Group’) and the nature of the Group’s operations are set out
inthe Strategic Report.
The consolidated financial statements are prepared in pounds sterling,
the functional currency of the Company. Foreign operations are
included in accordance with the policies set out in note 2.
New and amended standards adopted by the Group
There are no standards or interpretations that are not yet effective
andthat would be expected to have a material impact on the entity
inthe current or future reporting periods and on foreseeable
futuretransactions.
2 Significant accounting policies
Basis of preparation
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 Company
transitioned to UK-adopted International Accounting Standards in its
consolidated financial statements on 1 January 2021. This change
constitutes a change in accounting framework. However, there is
noimpact on recognition, measurement or disclosure in the period
reported as a result of the change in framework.
These consolidated financial statements have been prepared in
accordance with UK-adopted International Accounting Standards
andwith the requirements of the Companies Act 2006 as applicable
tocompanies reporting under those standards.
The financial statements have been prepared on the historical cost
basis, except for the revaluation of financial instruments that are
measured at fair value at the end of each reporting period, as
explained in the accounting policies below.
The principal accounting policies adopted are set out below.
Going concern
The Group meets its day-to-day working capital requirements through
its bank facilities. The current economic conditions continue to create
uncertainty, particularly over the level of demand for the Group’s
products. The Group’s forecasts and projections take account of
reasonably possible changes in trading performance and a severe but
plausible downside scenario has been prepared, linked to our principal
risks. This scenario does not threaten the Group’s ability to operate
within the level of its current facilities. No mitigating actions have been
included for any of the scenarios and, should it need to, the Group
could take action quickly to significantly reduce costs and cash
outflows as demonstrated during the course of the COVID-19
pandemic in 2020.
Having assessed the principal risks and the other matters discussed
inconnection with the viability statement (see page 81), the Directors
considered it appropriate to adopt the going concern basis of
accounting in preparing its consolidated financial statements.
Further information on the Group’s borrowings is given in note 21.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved when the Company:
• has the power over the investee;
• is exposed, or has rights, to variable returns from its involvement
with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins from the date the Company
obtains control and ceases from the date the Company loses control.
Where necessary on obtaining control, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies
into line with those used by the Group.
The results of joint ventures are accounted for using equity accounting.
Non-controlling interests in subsidiaries are identified separately
fromthe Group’s equity therein. Subsequent to the date on which
theCompany obtains control, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus
thenon-controlling interests’ share of subsequent changes in equity.
All intra-group assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group
areeliminated on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum
of the acquisition date fair values of assets transferred by the Group,
liabilities incurred by the Group to former owners of the acquiree and
the equity interest issued by the Group in exchange for control of
theacquiree. Acquisition related costs are recognised in profit or
lossas incurred.
At acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value, except that:
• deferred tax assets or liabilities are recognised and measured in
accordance with IAS 12 Income Taxes;
• liabilities or assets related to employee benefit arrangements are
recognised and measured in accordance with IAS 19 Employee
Benefits; and
• assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-Current Assets Held for Sale and
Discontinued Operations are measured in accordance with
thatstandard.
If the initial accounting for a business combination is incomplete
bytheend of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted
during a measurement period (see below), or additional assets or
liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that,
ifknown, would have affected the amounts recognised as of that date.
A measurement period is the period from the date of acquisition
tothedate the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject
toa maximum of one year.
If a business combination is achieved in stages, the Group’s previously
held interest in the acquired entity is remeasured to its acquisition date
fair value and the resulting gain or loss, if any, is recognised in profit
orloss.
141
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
2 Significant accounting policies continued
Goodwill
Goodwill is measured as the excess of the consideration transferred
over the Group’s interest in acquisition-date identifiable assets
acquired less liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at least
annually. For the purpose of impairment testing, goodwill is allocated
to each of the Group’s cash generating units expected to benefit from
the synergies of the combination. Cash generating units are defined as
our reportable segments: Performance Elastomers, Functional
Solutions, Industrial Specialities and Acrylate Monomers.
Cash generating units to which goodwill has been allocated are tested
for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash
generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit.
An impairment loss for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, associate or joint venture, the attributable
amount of goodwill is included in the determination of the profit or loss
on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS
has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves
under UK GAAP prior to 1998 has not been reinstated and is not
included in determining any subsequent profit or loss on disposal.
Joint ventures
Joint ventures are accounted for using the equity method of
accounting. Under the equity method, interests in joint ventures are
initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses and movements
in other comprehensive income.
Revenue
General
Synthomer manufactures and sells mainly water-based polymers
across a diverse range of end use applications. Our products are
predominantly sold in liquid form, in bulk containers.
Revenue is measured based on the consideration to which the
Groupexpects to be entitled in a contract with a customer when
performance obligations are satisfied. Revenue is recognised
atthepoint in time when control of the product is transferred
fromSynthomer to the customer.
The customer is deemed to obtain control of the resultant asset in line
with the Incoterms under which it is sold. The significant majority of
Synthomer’s products are sold under Carriage Paid To (CPT) and
Carriage and Insurance Paid (CIP) International Commercial Terms.
Under these terms, control of the product is transferred when the goods
reach their destination. At this point the risks of obsolescence and loss
have been transferred and there is no unfulfilled obligation that could
affect the customer’s acceptance of the product. A receivable is
recognised at this point in time as consideration isunconditional and
only the passage of time is required before payment is due.
Rebates
Synthomer may grant customers rebates if the goods purchased by
the customer exceed a contractually defined threshold within the
specified period. Rebates are usually deducted from the amounts
payable by the customer. Depending on the terms of the underlying
contract, Synthomer uses either the expected value or the most likely
amount to estimate the variable consideration for expected future
rebates. Historical, current and forecast information is considered
when calculating rebates.
The majority of rebate programmes are aligned with the Group’s
financial year end, providing certainty around how much should be
recognised in the financial statements.
Other
The Group does not have any contracts where the period between
thetransfer of promised goods to the customer and payment by the
customer exceeds one year. As a consequence, the Group applies
thepractical expedient in IFRS 15 and does not adjust any of the
transaction prices for the time value of money.
Foreign currencies
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity’s functional currency
are recognised at the rates of exchange prevailing on the dates of
thetransactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated
atthe rates prevailing on the balance sheet date. Non-monetary
assets and liabilities carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
notretranslated.
Exchange differences are recognised in profit or loss in the period in
which they arise except for:
• exchange differences on transactions entered into to hedge certain
foreign currency risks (see below under ‘hedge accounting’); and
• exchange differences on monetary items receivable or payable to
aforeign operation for which settlement is neither planned nor likely
tooccur in the foreseeable future (therefore forming part of the net
investment in the foreign operation), which are recognised initially in
other comprehensive income and reclassified from equity to profit
orloss on disposal of the net investment.
On consolidation, the assets and liabilities of the Group’s non-Sterling
operations are translated at exchange rates prevailing on the balance
sheet date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if any,
arerecognised in other comprehensive income and accumulated in
aseparate component of equity.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. The Group elected to treat goodwill
and fair value adjustments arising on acquisitions before the date of
transition to IFRS as sterling-denominated assets and liabilities.
Operating profit
Operating profit represents profit from continuing activities before
financing costs and taxation.
Taxation
The tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit before tax as reported in the income
statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that
are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
A provision is recognised for those matters for which the tax
determination is uncertain but it is considered probable that there
willbe a future outflow of funds to a tax authority. The provisions are
measured at best estimate of the amount expected to become payable.
The assessment is based on the judgement of tax professionals within
the Company supported by previous experience in respect of such
activities and in certain cases based on specialist independent tax advice.
142
Synthomer plc
Annual Report 2021
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
computation of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will
beavailable against which deductible temporary differences can
beutilised.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of investments
in foreign operations where the Group is able to control the reversal of
the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
orpart of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply
inthe period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement,
exceptwhen it relates to items charged or credited directly to other
comprehensive income, in which case the deferred tax is also dealt
within other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate
to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention
tosettle the balances on a net basis.
Leases
The Group assesses whether a contract is or contains a lease,
atinception of the contract. The lease term is determined from the
commencement date of the contract and covers the non-cancellable
term. If considered reasonably certain, extension or termination
options are included in the lease term.
At the commencement date, a lease liability is recognised, measured
at the present value of the future lease payments and discounted
using the Group’s incremental borrowing rate. Subsequently, the lease
liability is adjusted by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to reflect any
reassessment or lease modifications.
At the commencement date, a right of use asset is recognised,
measured at an amount equal to the lease liability plus any lease
payments made before the commencement date and any initial direct
costs, less any lease incentive payments. An estimate of costs to be
incurred in restoring an asset, in accordance with the terms of the
lease, is also included in the right of use asset at initial recognition.
Subsequently, right of use assets are measured in accordance with
the accounting policy for property, plant and equipment and are
depreciated over the shorter period of lease term and the useful life
ofthe underlying asset. Any adjustments to the corresponding lease
liability are reflected in the corresponding right of use asset.
Short-term leases and low value leases are not recognised as lease
liabilities and right of use assets, but are recognised as an expense
straight-line over the lease term.
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation and any recognised impairment loss. Cost comprises
original purchase price and the costs attributable to bringing the asset
to its working condition for its intended use, including, where
appropriate, capitalised finance costs.
Freehold land is not depreciated.
Depreciation is recognised so as to write-off the cost of assets less
their residual values over their useful lives, using the straight-line
method, on the following bases:
Freehold buildings – 50 years
Leasehold land and buildings – the lesser of 50 years and the
period of the lease
Plant and equipment – between 3 and 15 years
Assets in the course of construction are carried at cost, less any
recognised impairment loss. Finance costs directly attributable to the
acquisition or construction of qualifying assets are capitalised as part
of the cost of those assets. Depreciation of these assets commences
when the assets are ready for their intended use.
The estimated useful lives, residual values and depreciation method
are reviewed at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis.
Acquired intangible assets
Intangible assets acquired in a business combination are initially
recognised at their fair value at the acquisition date, which is regarded
as their cost. Where necessary the fair value of assets at acquisition and
their estimated useful lives are based on independent valuation reports.
Acquired intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
recognised on a straight-line basis over estimated useful lives, on the
following bases:
Customer relationships – between 5 and 15 years
Other intangibles – up to 10 years
Assets with an indefinite life are not subject to amortisation.
Acquired intangible assets are derecognised upon reaching the end of
their useful lives.
Other intangible assets
Other intangible assets that are not acquired through a business
combination are initially measured at cost and amortised on a
straight-line basis over their estimated useful lives of up to ten years.
An internally generated intangible asset arising from development (or
from the development phase of an internal project) is recognised only if
all of the following conditions have been demonstrated:
• the technical feasibility of completing the asset;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the asset once development has been
completed;
• the probability that the asset created will generate future economic
benefits;
• the availability of adequate technical, financial and other resources
to complete the development; and
• the asset created can be separately identified and the development
cost can be measured reliably.
143
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
2 Significant accounting policies continued
The amount initially recognised for internally generated intangible
assets is the sum of the expenditure incurred from the date when
theintangible asset first meets the recognition criteria listed above.
Where no internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period
inwhich it is incurred.
Impairment of property, plant and equipment and intangible
assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts
ofits plant, property and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
theextent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash generating
unittowhich the asset belongs.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is
estimated to be less than its carrying amount, the carrying amount
ofthe asset (or cash generating unit) is reduced to its recoverable
amount. An impairment loss is recognised in the income statement.
When an impairment loss subsequently reverses, the carrying amount
of the asset (or cash generating unit) is increased to the revised
estimate of its recoverable amount to the extent that the increased
carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised in
prior years. A reversal of an impairment loss is recognised immediately
in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is calculated
using the weighted average method. Net realisable value represents
the estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution. Provision is
made for obsolete, slow-moving or defective items where appropriate.
Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the instrument.
The Group classifies its financial instruments in the
followingcategories:
• financial assets and liabilities at amortised cost (AC);
• financial assets and liabilities at fair value through profit and loss
(FVTPL); and
• financial assets and liabilities at fair value through other
comprehensive income (FVTOCI).
Financial assets and liabilities are initially measured at fair value
including, where permitted, any directly attributable transaction costs.
All recognised financial assets are subsequently measured in
theirentirety at either amortised cost or fair value, depending
ontheirclassification.
Financial assets and liabilities measured at amortised cost
Financial assets measured at amortised cost include cash and
cashequivalents and trade and other receivables. Cash and cash
equivalents comprise cash held in bank accounts with no access
restrictions, bank term deposits repayable on demand or maturing
within three months of inception.
At each reporting date the Group recognises a loss allowance for
expected credit losses on financial assets measured at amortised
cost. In establishing the appropriate amount of loss allowance to
berecognised, the Group applies either the general approach or the
simplified approach, depending on the nature of the underlying class
of financial assets:
• Under the general approach, the Group recognises a loss allowance
for a financial asset at an amount equal to the 12 month expected
credit losses, unless the credit risk on the financial asset has
increased significantly since initial recognition, in which case a loss
allowance is recognised at an amount equal to the lifetime expected
credit losses.
• The simplified approach is applied to the impairment assessment
oftrade and other receivables. Under this approach, the Group
recognises expected lifetime losses upon initial recognition.
Financial liabilities measured at amortised cost include trade and other
payables, lease liabilities and borrowings. Borrowings are measured at
amortised cost unless they form part of a fair value hedge relationship.
The difference between the initial carrying amount of borrowings and
the redemption value is recognised in the income statement over the
contractual terms using the effective interest rate method.
Financial assets and liabilities held at fair value
Financial assets and liabilities are measured at fair value through
profitor loss when they do not meet the criteria to be measured at
amortised cost or at fair value through other comprehensive income.
Financial assets and liabilities at FVTPL are measured at fair value
atthe end of each reporting period with fair value gains or losses
recognised in profit or loss to the extent they are not part of a
designated hedging relationship (see below).
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to
manage its exposure to interest rate and foreign exchange rate risk,
including foreign exchange forward contracts, interest rate swaps and
foreign currency options. Further details of derivative financial
instruments are set out in note 22.
Derivatives are initially recognised at fair value at the date the derivative
contracts are entered into and are subsequently remeasured to their
fair value at the end of each reporting period. The resulting gain or
lossis recognised in the income statement immediately unless the
derivative is designated and effective as a hedging instrument, in
which event the timing of the recognition in the income statement
depends on the nature of the hedge relationship.
Hedge accounting
To mitigate foreign currency and interest rate risk, the Group
designates certain derivatives as hedging instruments in fair value
hedges, cash flow hedges, or hedges of net investments in foreign
operations as appropriate.
At the inception of the hedge relationship, the Group documents
therelationship between the hedging instrument and the hedged
item,along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception
of the hedge and on an ongoing basis, the Group documents whether
the hedging instrument is effective in offsetting changes in fair value or
cash flows of the hedged item attributable to the hedged risk.
On adoption of IFRS 9, the Group elected to continue to apply the
hedge accounting requirements of IAS 39 as permitted by the standard.
144
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Annual Report 2021
Fair value hedges
The Group only applies fair value hedge accounting for foreign
currency risk.
The fair value change on qualifying hedging instruments is recognised
in the income statement and is recognised in the same line as the
hedged item.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated under the heading of cash
flow hedging reserve, limited to the cumulative change in fair value of
the hedged item from inception of the hedge.
Gains or losses relating to an ineffective portion are recognised
immediately in the income statement.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified in the income statement in the
periods when the hedged item affects profit or loss, in the same line
asthe recognised hedged item. However, when the hedged forecast
transaction results in the recognition of a non-financial asset or a
non-financial liability, the gains and losses previously recognised in
other comprehensive income and accumulated in equity are removed
from equity and included in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge accounting.
Any gain or loss accumulated at that time in equity is recognised
whenthe forecast transaction is ultimately recognised in profit or loss.
When a forecast transaction is no longer expected to occur, the
cumulative gain or loss in equity is recognised immediately in profit
orloss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for
similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognised
in other comprehensive income in the foreign currency translation
reserve. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Gains and losses on the hedging instrument relating to the effective
portion of the hedge accumulated in the foreign currency translation
reserve are reclassified to profit or loss on the disposal of the
foreignoperation.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
recognised as an expense when employees have rendered service
entitling them to the contributions. Payments made to state-managed
retirement benefit schemes are treated as payments to defined
contribution schemes where the Group’s obligations under the schemes
are equivalent to those arising in a defined contribution scheme.
For defined benefit schemes, the cost of providing benefits is
calculated using the projected unit credit method, with actuarial
valuations carried out at the end of each reporting period.
Defined benefit costs are split into three categories, namely:
• service costs, which includes current service cost, past service cost
and gains and losses on curtailments and settlements;
• net interest expense; and
• remeasurements.
The Group presents service costs within cost of sales and
administrative expenses in its consolidated income statement.
Past service cost is recognised when the plan amendment or
curtailment occurs.
Net interest expense is recognised within finance costs and is calculated
by applying a discount rate to the net defined benefit liability.
Remeasurement comprising actuarial gains and losses and the return
on scheme assets (excluding interest) are recognised immediately in
the balance sheet with a charge or credit to the statement of other
comprehensive income in the period in which they occur and are not
subsequently reclassified to profit and loss.
Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle that obligation and a reliable estimate
can be made of the amount of the obligation. Provisions are measured
as the best estimate of the expenditure required to settle the obligation
at the balance sheet date and are discounted to present value where
the effect is material.
Provisions for restructuring costs are recognised when the Group
hasa detailed formal plan for the restructuring that has been
communicated to affected parties.
Share-based payments
The Group issues equity-settled share-based payments to certain
employees. These are measured at the fair value of the equity
instruments at grant date. The fair value excludes the effect of
non-market-based vesting conditions. The fair value determined
atthegrant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
theGroup’s estimate of equity instruments that will eventually vest.
At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect
of non-market-based vesting conditions. The impact of the revision
ofthe original estimates, if any, is recognised in profit or loss such
thatthe cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves. The Group will on
occasion, at its own discretion, settle these share-based payments
incash rather than equity.
For cash-settled share-based payments, a liability is recognised for
the goods or services acquired, measured initially at the fair value of
the liability. At each balance sheet date until the liability is settled, and
at the date of settlement, the fair value of the liability is remeasured,
with any changes in fair value recognised in profit or loss for the year.
Alternative Performance Measures
The Group has consistently used two significant Alternative
Performance Measures (APMs) since its adoption of IFRS in 2005:
• Underlying performance, which excludes Special Items from IFRS
profit measures; and
• EBITDA, which excludes Special Items, amortisation and
depreciation from IFRS operating profit.
The Board’s view is that Underlying performance provides additional
clarity for the Group’s investors and so it is the primary focus of the
Group’s narrative reporting. It is not intended to be a superior measure
to IFRS, however, these measures are used internally to manage
thebusiness.
Further information and the reconciliation to the IFRS measures are
included in notes 4 and 5.
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
2 Significant accounting policies continued
Critical accounting judgements and estimates
In the application of the Group’s accounting policies, the Directors are
required to make judgements (other than those involving estimations)
that have a significant impact on the amounts recognised and to make
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of
estimation uncertainty at the reporting date that may 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.
The assumptions for each estimate are set out in the relevant note
referenced below.
• Defined benefit obligation (note 26):
Calculation of the Group’s defined benefit obligation includes a
number of assumptions which impact the carrying value of the
obligation.
• Valuation of goodwill and intangible assets on acquisition:
In a business combination, intangible assets are identified and
recognised at fair value. The assumptions involved in valuing these
intangible assets require the use of estimates that may differ from
the actual outcome. These estimates cover future growth rates,
expected inflation rates and the discount rate used. Changing the
assumptions selected by management could significantly affect the
allocation of the purchase price paid between goodwill and other
acquired intangibles.
• Current tax liability and deferred tax (notes 10 and 11):
The Group annually incurs significant amounts of income taxes
payable to various jurisdictions around the world and it also
recognises significant changes in deferred tax assets and
deferredtax liabilities, all of which are based on management’s
interpretations of applicable laws, regulations and relevant
courtdecisions.
Critical judgements in applying the Group’s accounting
policies
During 2018, the European Commission (the Commission) initiated
aninvestigation into practices relating to the purchase of Styrene
monomer by companies, including Synthomer, operating in the
European Economic Area. The Company has and will continue to
fullycooperate with the Commission during its investigation. In prior
years given the ongoing investigation and the inherent uncertainties
associated with it, it was not possible to determine whether or not a
liability existed. Similarly, given the many variables in the Commission’s
fining framework and accordingly the range of possible outcomes,
theDirectors were not able to reliably estimate any potential possible
liability. Therefore a contingent liability was disclosed in each set of
financial statements. Now based on the information available and the
resulting assessment of the expected outcome of the investigation
aprovision of £57.2 million has been made in relation to this case.
There are no other critical judgements, apart from those involving
estimations (which are discussed above), that the Directors have made
in the process of applying the Group’s accounting policies.
3 Adoption of new and revised standards
No new or revised accounting standards were adopted in the year.
In April 2021, the IFRS Interpretations Committee issued a new
interpretation in relation to accounting for customisation and
configuration costs of cloud computing arrangements. Following
adetailed review, it was confirmed that the new interpretation does
materially impact the accounting treatment for costs incurred on the
Group’s Pathway programme.
There are a number of other amendments and clarifications to IFRS,
effective in future years, which are not expected to significantly impact
the Group’s consolidated results or financial position.
4 Special Items
IFRS and Underlying performance
The IFRS profit measures show the performance of the Group
asawhole and as such include all sources of income and expense,
including both one-off items and those that do not relate to the
Group’s ongoing businesses. To provide additional clarity on the
ongoing trading performance of the Group’s businesses, management
uses ‘Underlying’ performance as an Alternative Performance
Measure to plan for, control and assess the performance of the
segments. Underlying performance differs from the IFRS
measuresasit excludes Special Items.
Special Items
Special Items are disclosed separately in order to provide a clearer
indication of the Group’s Underlying performance.
Special Items are either irregular, and therefore including them in
theassessment of a segment’s performance would lead to a distortion
of trends, or are technical adjustments which ensure the Group’s
financial statements are in compliance with IFRS but do not reflect the
operating performance of a segment in the year, or both. An example
of the latter is the amortisation of acquired intangibles, which
principally relates to acquired customer relationships. The Group
incurs costs, which are recognised as an expense in the income
statement, in maintaining these customer relationships. The Group
considers that the exclusion of the amortisation charge on acquired
intangibles from Underlying performance avoids the potential double
counting of such costs and therefore excludes it as a Special Item
from Underlying performance.
The following are consistently disclosed separately as Special
Itemsinorder to provide a clearer indication of the Group’s
Underlyingperformance:
• Restructuring and site closure costs;
• Sale of a business or significant asset;
• Acquisition costs;
• Amortisation of acquired intangible assets;
• Impairment of non-current assets;
• Fair value adjustments in respect of derivative financial instruments
where hedge accounting is not applied;
• Items of income and expense that are considered material, either by
their size and/or nature;
• Tax impact of above items; and
• Settlement of prior period tax issues.
146
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Special Items comprise:
Note
2021
£m
2020
£m
Amortisation of acquired intangibles 15 (36.2) (30.9)
Restructuring and site closure costs (29.7) (42.5)
Acquisition costs and related gains (11.9) (14.6)
Sale of business (7.4) (6.6)
Regulatory fine (57.2) –
Impairment charge – (36.6)
Total impact on operating loss (142.4) (131.2)
Finance costs
Fair value gain/(loss) on unhedged interest rate derivatives 9 6.2 (3.6)
Loss on extinguishment of financing facilities 9 – (4.9)
Total impact on profit before taxation (136.2) (139.7)
Taxation Special Items 10 8.8 (4.9)
Taxation on Special Items 10 11.8 20.5
Total impact on profit for the year (115.6) (124.1)
Amortisation of acquired intangibles increased in 2021, reflecting the first full year charge since the acquisition of OMNOVA Solutions Inc on
1 April 2020. The fair value of the intangible assets arising on the acquisition of OMNOVA amounting to £330.1 million are being amortised over
aperiod of 9–11 years mainly dependent on the characteristics of the customer relationships.
Restructuring and site closure costs in 2021 comprise:
• A £13.2 million charge in relation to the substantially completed integration of the OMNOVA acquisition net of a £1.2 million pension curtailment
credit in relation to the French business;
• A £11.6 million charge to demolish and rationalise assets at a small number of sites, to bring them into line with our ESG strategy; and
• A further £4.9 million for the completion of the rationalisation of the Group’s European Performance Materials network.
Restructuring and site closure costs in 2020 comprised £19.5 million for integration of OMNOVA, £20.9 million for the rationalisation of the
Group’s European Performance Materials network and £2.1 million to rationalise the Acrylate Monomers site.
Acquisition costs and related gains are for the acquisition of Eastman’s Adhesive Resins business and comprise £15.0 million of costs, mainly
professional adviser fees, offset by a £3.1 million gain on a foreign exchange derivative entered into in October 2021 to hedge the acquisition
price. Acquisition costs in 2020 related to the acquisition of OMNOVA.
Sale of business mainly comprised a further £7.1 million loss on the onerous contract for the disposal of Synthomer’s European Tyre Cord
business as production is relocated to Caojing (China) to enable the Marl 3 asset (Germany) to be fully closed. This is incremental to the charge
taken in 2020.
During 2018, the European Commission initiated an investigation into practices relating to the purchase of Styrene monomer by companies,
including Synthomer, operating in the European Economic Area. The Company has and will continue to fully cooperate with the Commission
during its investigation. Based on the information available and the resulting assessment of the expected outcome of the investigation a provision
of £57.2 million has been made in relation to this case.
In 2020, a £36.6 million impairment charge was booked relating to four sites.
In July 2018 the Group entered into swap arrangements to fix Euro interest rates on the full value of the then €440 million committed unsecured
revolving credit facility. The fair value movement of the unhedged interest rate derivatives relates to the movement in the mark-to-market of the
swap at 31 December 2021 in excess of the Group’s current borrowings.
Following the Group’s successful refinancing in 2020, capitalised debt costs relating to the 2018 refinancing and the 2019 bridge to bond were
written off, leading to a loss on extinguishment of £4.9 million.
Taxation Special Items comprised the release of uncertain tax provisions in relation to historical tax issues in France and Malaysia.
Taxation on Special Items is mainly deferred tax credits arising on the amortisation of acquired intangibles and restructuring and site
closurecosts.
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
5 Segmental analysis
The Group’s Executive Committee, chaired by the Chief Executive Officer, examines the Group’s performance.
The Group’s reportable segments are as follows:
Performance Elastomers
Performance Elastomers is focused on healthcare, paper, carpet, compounds and foam markets through our Nitrile Butadiene Rubber latex
(Nitrile latex) and Styrene Butadiene Rubber latex and Elastomeric Modifiers businesses (Performance Materials).
Functional Solutions
Functional Solutions is focused on coatings, construction, adhesives and technical textiles markets through our water-based acrylic and vinylic
based dispersions products.
Industrial Specialities
Industrial Specialities is focused on speciality chemical additives and non-water-based chemistry for a broad range of applications from polymer
additives, coated fabrics, and laminates and films to emerging materials and technologies.
Acrylate Monomers
Acrylate Monomers is focused on the production of acrylate monomers which are sold to external customers in European markets as well as our
European Functional Solutions dispersions business.
The Group’s Executive Committee is the chief operating decision maker and primarily uses a measure of earnings before interest, tax,
depreciation and amortisation (EBITDA) to assess the performance of the operating segments. No information is provided to the Group’s
Executive Committee at the segment level concerning interest income, interest expense, income tax or other material non-cash items.
No single customer accounts for more than 10% of the Group’s revenue.
A segmental analysis of Underlying performance and Special Items is shown below.
2021
Performance
Elastomers
£m
Functional
Solutions
£m
Industrial
Specialities
£m
Acrylate
Monomers
£m
Corporate
£m
Total
£m
Revenue
Total revenue 951.5 900.3 382.5 110.3 – 2,344.6
Inter-segmental revenue – – – (15.1) – (15.1)
951.5 900.3 382.5 95.2 – 2,329.5
EBITDA 320.7 139.2 47.6 35.3 (20.6) 522.2
Depreciation and amortisation (25.8) (28.1) (13.7) (0.8) (2.9) (71.3)
Operating profit/(loss) before Special Items 294.9 111.1 33.9 34.5 (23.5) 450.9
Special Items (8.0) (41.3) (14.1) (5.2) (73.8) (142.4)
Operating profit/(loss) 286.9 69.8 19.8 29.3 (97.3) 308.5
Finance costs (24.6)
Profit before taxation 283.9
2020
Performance
Elastomers
£m
Functional
Solutions
£m
Industrial
Specialities
£m
Acrylate
Monomers
£m
Corporate
£m
Total
£m
Revenue
Total revenue 680.3 646.7 264.9 64.4 – 1,656.3
Inter-segmental revenue – – – (12.1) – (12.1)
680.3 646.7 264.9 52.3 – 1,644.2
EBITDA 142.5 95.6 41.2 (2.4) (17.5) 259.4
Depreciation and amortisation (25.7) (26.5) (12.2) (3.2) (2.2) (69.8)
Operating profit/(loss) before Special Items 116.8 69.1 29.0 (5.6) (19.7) 189.6
Special Items (36.0) (38.0) (10.2) (20.7) (26.3) (131.2)
Operating profit/(loss) – IFRS 80.8 31.1 18.8 (26.3) (46.0) 58.4
Finance costs (38.1)
Profit before taxation 20.3
Finance costs for the period include a £6.2 million gain in Special Items (2020: £8.5 million loss) as set out in note 4.
148
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Annual Report 2021
Geographical information
The Group’s revenue from external customers and its non-current assets (excluding deferred tax) by geographical location are detailed below:
Revenue by destination Non-current assets
2021
£m
2020
£m
2021
£m
2020
£m
UK 103.6 75.6 154.8 140.6
Germany 257.2 183.2 189.4 194.6
Italy 102.9 63.2 33.9 52.7
Netherlands 81.4 57.5 10.9 15.1
France 97.2 64.6 99.2 111.4
Belgium 49.2 36.0 62.3 70.2
Other Europe 389.6 293.4 75.8 78.8
Malaysia 392.4 304.5 170.5 162.7
China 145.9 93.3 22.3 22.3
Other Asia 205.5 144.2 22.5 30.3
USA 399.6 254.6 497.5 514.1
Rest of World 105.0 74.1 7.6 6.6
2,329.5 1,644.2 1,346.7 1,399.4
6 Operating profit
Note
2021
£m
2020
£m
Revenue 2,329.5 1,644.2
Cost of sales (1,620.3) (1,206.8)
Gross profit 709.2 437.4
Sales and marketing costs (55.8) (53.9)
Administrative expenses (133.8) (125.3)
Share of joint ventures 18 2.6 1.2
EBITDA 522.2 259.4
Depreciation and amortisation – Underlying performance (71.3) (69.8)
Operating profit – Underlying performance 450.9 189.6
Special Items (142.4) (131.2)
Operating profit – IFRS 308.5 58.4
Note
2021
£m
2020
£m
Operating profit is stated after charging the following:
Amortisation of acquired intangibles 15 36.2 30.9
Amortisation of other intangibles 16 7.1 4.9
Depreciation of property, plant and equipment 17 54.4 54.0
Depreciation of right of use assets 17 9.8 10.9
Research and development expenditure 28.9 25.8
Net loss/(gain) on foreign exchange 0.7 (1.0)
7 Auditors’ remuneration
2021
£’000
2020
£’000
Fees payable to the Company’s auditors for:
audit of the Company’s annual financial statements and the consolidated annual financial statements 332 222
Fees payable to the Company’s auditors and their associates for other services to the Group:
audit of the Company’s subsidiaries’ annual financial statements 1,291 1,594
Total audit fees 1,623 1,816
Audit related assurance services 42 40
Other assurance services 1,582 567
Total non-audit fees 1,624 607
Details of the Company’s policy on the use of auditors for non-audit services, the reasons why the auditors were used rather than another
supplier and how the auditors’ independence and objectivity was safeguarded are set out in the Audit Committee section of the Corporate
Governance report on page 101. No services were provided pursuant to contingent fee arrangements.
149
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
8 Staff costs
2021 2020
The average monthly number of employees during the year by segment was:
Performance Elastomers 944 893
Functional Solutions 1,826 1,656
Industrial Specialities 1,176 963
Acrylate Monomers 344 351
Corporate 324 321
4,614 4,184
2021
£m
2020
£m
The aggregate remuneration of all Group employees comprised:
Wages and salaries 243.7 211.3
Social security costs 26.5 25.6
Other pension costs 13.9 14.0
Share-based payments 2.1 2.0
286.2 252.9
Directors’ emoluments are disclosed in the Directors’ Remuneration report on pages 112 to 126.
9 Finance costs
2021
£m
2020
£m
Interest payable on bank loans and overdrafts 27.9 25.5
Less: interest receivable (1.0) (1.2)
Net interest expense on defined benefit obligations 2.4 3.7
Interest element of lease payments 1.5 1.6
Underlying finance costs 30.8 29.6
Fair value (gain)/loss on unhedged interest derivatives (6.2) 3.6
Loss on extinguishment of financing facilities – 4.9
Finance costs 24.6 38.1
10 Taxation
2021
£m
2020
£m
Current tax
UK corporation tax 0.3 –
Overseas tax 89.0 39.9
89.3 39.9
Deferred tax
Origination and reversal of temporary differences 5.2 (2.5)
94.5 37.4
Special Items
Current tax:
Historical issues (8.8) 4.9
Purchase and sale of business (0.2) (0.2)
Restructuring and site closure costs (4.2) (0.2)
Deferred tax:
Restructuring and site closure costs (6.1) (10.5)
Amortisation of acquired intangibles (6.9) (10.7)
Acquired tax attributes 5.6 –
Other deferred tax on acquisition of business – 1.1
(20.6) (15.6)
Total tax on profit before taxation 73.9 21.8
UK corporation tax is calculated at 19.0% (2020: 19.0%) of the estimated assessable profit for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
150
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Annual Report 2021
Reconciliation of tax expense to profit before taxation
The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the
profit before tax is as follows.
2021
£m
2020
£m
Profit before taxation 283.9 20.3
Tax on profit before taxation at standard UK corporation tax rate of 19.0% (2020: 19.0%) 53.9 3.9
Effects of:
Expenses not deductible for tax purposes 16.7 5.8
Tax incentives and items not subject to tax (0.6) (3.6)
Higher tax rates on overseas earnings 16.6 6.0
Other deferred tax asset not recognised less amounts now recognised (7.6) 7.2
Adjustments to tax charge in respect of prior periods (7.5) 3.3
Effect of change of rate on deferred tax 2.4 (0.8)
Tax charge for year 73.9 21.8
Tax relating to components of other comprehensive income
2021
£m
2020
£m
Current tax credit in respect of actuarial losses 1.4 1.3
Deferred tax (charge)/credit in respect of actuarial movements (13.2) 2.2
Total tax (charge)/credit in respect of actuarial movements (11.8) 3.5
Current tax liabilities
2021
£m
2020
£m
Current tax liabilities (45.2) (58.5)
The expenses not deductible for tax purposes includes a disallowance of the £57.2 million in relation to the European Commission
Styreneinvestigation.
11 Deferred taxation
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets to the
extent that it is probable that these assets will be recovered.
The movements in deferred tax assets and liabilities are shown below.
Deferred tax liabilities
2021
Accelerated
tax
depreciation
£m
Acquired
intangibles
£m
Sub-total
£m
Right of
Offset
£m
Total
£m
At 1 January (32.8) (81.6) (114.4) 71.1 (43.3)
(Charged)/credited to income statement (1.2) 6.9 5.7
Exchange adjustment 0.8 1.2 2.0
At 31 December (33.2) (73.5) (106.7) 49.2 (57.5)
2020
Accelerated
tax
depreciation
£m
Acquired
intangibles
£m
Other
£m
Sub-total
£m
Right of
Offset
£m
Total
£m
At 1 January (17.9) (11.8) (1.1) (30.8) – (30.8)
Purchase of business (10.0) (76.0) – (86.0)
(Charged)/credited to income statement (5.2) 10.7 1.1 6.6
Exchange adjustment 0.3 (4.5) – (4.2)
At 31 December (32.8) (81.6) – (114.4) 71.1 (43.3)
Deferred tax liabilities not recognised
No deferred tax liability has been recognised on temporary differences relating to unremitted earnings of overseas subsidiaries of £71.7 million
(2020: £30.5 million), as the Group is able to control the timing of the reversal of the temporary differences and it is not probable that the
differences will reverse in the foreseeable future.
151
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
11 Deferred taxation continued
Deferred tax assets
2021
Losses
£m
Pension
£m
Restructuring
£m
Other
£m
Sub-total
£m
Right of
Offset
£m
Total
£m
At 1 January 29.0 37.2 10.5 18.2 94.9 (71.1) 23.8
(Charged)/credited to income statement (3.1) (3.4) 6.1 (3.1) (3.5)
Charged to statement of other comprehensive income – (13.2) – – (13.2)
Exchange adjustment 0.2 (0.6) (0.5) 1.1 0.2
At 31 December 26.1 20.0 16.1 16.2 78.4 (49.2) 29.2
2020
Losses
£m
Pension
£m
Restructuring
£m
Other
£m
Sub-total
£m
Right of
Offset
£m
Total
£m
At 1 January 2.2 18.7 – 1.9 22.8 – 22.8
Purchase of business 26.5 18.9 – 10.1 55.5
Credited/(charged) to income statement 2.9 (1.9) 10.5 4.5 16.0
Credited to statement of other comprehensive income – 2.2 – – 2.2
Exchange adjustment (2.6) (0.7) – 1.7 (1.6)
At 31 December 29.0 37.2 10.5 18.2 94.9 (71.1) 23.8
Tax losses not recognised
The amounts of tax losses for which no deferred tax asset has been recognised at the balance sheet dates are as follows:
2021
£m
2020
£m
Tax losses 53.4 110.3
53.4 110.3
All of the unrecognised tax losses set out above can be carried forward indefinitely.
12 Dividends
2021
Pence
per share
2021
£m
2020
Pence
per share
2020
£m
Interim dividend 8.7p 36.9 3.0p 12.8
Proposed final dividend 21.3p 99.5 8.6p 36.6
30.0p 136.4 11.6p 49.4
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial
statements.
Dividends paid
2021
£m
2020
£m
Interim dividend 36.9 12.8
Prior year final dividend 36.6 –
73.5 12.8
The proposed final 2019 dividend was suspended and subsequently cancelled to preserve cash, liquidity and balance sheet strength at the
onset of COVID-19 in March 2020.
13 Earnings per share
2021 2020
Underlying
performance
Special
Items IFRS
Underlying
performance
Special
Items IFRS
Earnings
Profit/(loss) attributable to equity holders of the parent
£m 325.2 (116.5) 208.7 122.9 (119.8) 3.1
Number of shares
Weighted average number of ordinary shares — basic ’000 432,290 424,843
Effect of dilutive potential ordinary shares ’000 1,654 2,505
Weighted average number of ordinary shares — diluted ’000 433,944 427,348
Earnings per share
Basic earnings per share pence 75.2 (26.9) 48.3 28.9 (28.2) 0.7
Diluted earnings per share pence 74.9 (26.8) 48.1 28.8 (28.1) 0.7
152
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14 Goodwill
2021
£m
2020
£m
Cost
At 1 January 508.8 338.5
Measurement period adjustment 2.1 –
Purchase of business – 180.2
Exchange adjustments (8.5) (9.9)
At 31 December 502.4 508.8
Accumulated impairment losses
At 1 January 15.4 14.1
Impairment charge – 1.3
At 31 December 15.4 15.4
Net book value
At 31 December 487.0 493.4
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from
that business combination.
In March 2021, a £2.1 million measurement period adjustment was recognised, relating to the acquisition of OMNOVA Solutions Inc.
The allocation of the carrying value of goodwill is represented below:
Net book
value at
1 January
2020
£m
Purchase of
business
£m
Impairment
£m
Exchange
adjustments
£m
Net book
value at
31 December
2020
£m
Measure-
ment period
adjustment
£m
Exchange
adjustments
£m
Net book
value at
31 December
2021
£m
Performance Elastomers 119.0 – – 4.2 123.2 – (5.9) 117.3
Functional Solutions 180.0 138.0 – (11.6) 306.4 1.9 (1.4) 306.9
Industrial Specialities 24.1 42.2 – (2.5) 63.8 0.2 (1.2) 62.8
Acrylate Monomers 1.3 – (1.3) – – – – –
Total 324.4 180.2 (1.3) (9.9) 493.4 2.1 (8.5) 487.0
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts for CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are the
discount rate, profitability and growth rate. These assumptions have been revised in the year in light of the current economic environment.
Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks
specific to the Group. The discount rate is based on the Group’s weighted average cost of capital adjusted, where appropriate, for the risk
premium attributable to a particular CGU’s activities and geography of operation. A pre-tax discount rate of 10.2% has been used in the above
calculations for each CGU (2020: 9.7%).
The Group prepares cash flow forecasts for each CGU, derived from the most recent five-year business plans approved by the Board. The final
year cash flow is then assumed to apply into perpetuity with estimated annual growth rates of 3.1%, 1.9% and 2.0% for Performance Elastomers,
Functional Solutions and Industrial Specialities respectively (2020: 1.7%, 1.6% and 1.6% for Performance Elastomers, Functional Solutions and
Industrial Specialities respectively). These rates do not exceed average long-term growth rates for relevant markets.
A sensitivity analysis has been undertaken on these impairment tests, with scenarios covering increased cost of capital, the impact of potential
carbon taxes, reduced margins and reduction in customer demand. For each CGU, the Directors believe that there is no reasonably possible
change in the key assumptions on which the recoverable amount is based that would cause the aggregate carrying amount to exceed the
aggregate recoverable amount of the CGU.
153
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Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
15 Acquired intangible assets
Customer
relationships
£m
Other
acquired
intangibles
£m
Total
£m
Cost
At 1 January 2021 373.2 21.6 394.8
Derecognition of fully amortised assets (3.1) – (3.1)
Exchange adjustments (8.4) (0.5) (8.9)
At 31 December 2021 361.7 21.1 382.8
Accumulated amortisation and impairment
At 1 January 2021 48.8 5.0 53.8
Amortisation charge for the year 34.1 2.1 36.2
Derecognition of fully amortised assets (3.1) – (3.1)
Exchange adjustments (1.3) (0.4) (1.7)
At 31 December 2021 78.5 6.7 85.2
Net book value
At 31 December 2021 283.2 14.4 297.6
Customer
relationships
£m
Other
acquired
intangibles
£m
Total
£m
Cost
At 1 January 2020 71.3 9.1 80.4
Purchase of business 316.9 13.2 330.1
Derecognition of fully amortised assets (0.9) – (0.9)
Exchange adjustments (14.1) (0.7) (14.8)
At 31 December 2020 373.2 21.6 394.8
Accumulated amortisation and impairment
At 1 January 2020 20.8 2.8 23.6
Amortisation charge for the year 29.0 1.9 30.9
Impairment charge 0.1 – 0.1
Derecognition of fully amortised assets (0.9) – (0.9)
Exchange adjustments (0.2) 0.3 0.1
At 31 December 2020 48.8 5.0 53.8
Net book value
At 31 December 2020 324.4 16.6 341.0
154
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Annual Report 2021
16 Other intangible assets
Other
intangible
assets
£m
Assets under
construction
£m
Total
£m
Cost
At 1 January 2021 14.8 29.9 44.7
Additions 9.5 6.4 15.9
Transfers 36.1 (36.1) –
Exchange adjustments 1.4 (0.2) 1.2
At 31 December 2021 61.8 – 61.8
Accumulated amortisation and impairment
At 1 January 2021 8.1 – 8.1
Amortisation charge for the year 7.1 – 7.1
Exchange adjustments 0.2 – 0.2
At 31 December 2021 15.4 – 15.4
Net book value
At 31 December 2021 46.4 – 46.4
Other
intangible
assets
£m
Assets under
construction
£m
Total
£m
Cost
At 1 January 2020 8.2 17.9 26.1
Additions 1.4 12.4 13.8
Purchase of business 5.7 – 5.7
Transfer 0.2 (0.2) –
Disposals (0.8) – (0.8)
Exchange adjustments 0.1 (0.2) (0.1)
At 31 December 2020 14.8 29.9 44.7
Accumulated amortisation and impairment
At 1 January 2020 4.1 – 4.1
Amortisation charge for the year 4.9 – 4.9
Impairment 0.1 – 0.1
Disposals (0.8) – (0.8)
Exchange adjustments (0.2) – (0.2)
At 31 December 2020 8.1 – 8.1
Net book value
At 31 December 2020 6.7 29.9 36.6
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
As disclosed in note 2, there are various conditions required by IAS 38 for an internally generated intangible asset to be recognised.
During the year the Group invested a further £12.9 million in its Pathway programme (2020: £12.2 million). This programme is designed to deliver
a unified operating model on a single set of integrated systems to improve the efficiency and effectiveness of the Group. The investment in this
programme was shown as an asset under construction until the deployment phase began.
155
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
17 Property, plant and equipment
Owned assets Right of use assets
Freehold
land and
buildings
£m
Leasehold
land and
buildings
£m
Plant and
equipment
£m
Assets under
construction
£m
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 January 2021 181.4 8.7 739.4 25.1 36.9 29.4 1,020.9
Additions 6.0 – 48.5 13.4 1.6 2.1 71.6
Sale of business (3.6) – (3.6) – – – (7.2)
Disposals (1.1) – (9.9) – (1.7) (8.0) (20.7)
Transfer from assets under construction 0.2 – 9.9 (10.1) – – –
Exchange adjustments (4.2) – (23.3) (0.5) (0.2) (0.5) (28.7)
At 31 December 2021 178.7 8.7 761.0 27.9 36.6 23.0 1,035.9
Accumulated depreciation and impairment
At 1 January 2021 59.0 5.1 417.8 – 6.0 11.2 499.1
Depreciation charge for the year 16.6 0.1 37.7 – 3.6 6.2 64.2
Sale of business (2.4) – (3.6) – – – (6.0)
Disposals (0.7) – (9.6) – (0.9) (4.9) (16.1)
Exchange adjustments (1.9) – (12.6) – 0.7 0.2 (13.6)
At 31 December 2021 70.6 5.2 429.7 – 9.4 12.7 527.6
Net book value
At 31 December 2021 108.1 3.5 331.3 27.9 27.2 10.3 508.3
Owned assets Right of use assets
Freehold land
and buildings
£m
Leasehold
land and
buildings
£m
Plant and
equipment
£m
Assets under
construction
£m
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 January 2020 106.1 8.7 636.7 13.4 21.5 24.4 810.8
Additions 7.9 – 9.0 19.8 1.6 2.9 41.2
Purchase of business 68.2 – 87.2 8.2 15.0 5.9 184.5
Disposals (0.1) – (10.3) – (0.9) (4.5) (15.8)
Transfer from assets under construction 1.5 – 14.1 (15.6) – – –
Exchange adjustments (2.2) – 2.7 (0.7) (0.3) 0.7 0.2
At 31 December 2020 181.4 8.7 739.4 25.1 36.9 29.4 1,020.9
Accumulated depreciation and impairment
At 1 January 2020 40.5 4.9 353.5 – 2.4 4.6 405.9
Depreciation charge for the year 7.7 0.2 46.1 – 4.5 6.4 64.9
Impairment 9.7 – 23.1 – – 0.7 33.5
Disposals (0.1) – (9.1) – (0.9) (0.8) (10.9)
Exchange adjustments 1.2 – 4.2 – – 0.3 5.7
At 31 December 2020 59.0 5.1 417.8 – 6.0 11.2 499.1
Net book value
At 31 December 2020 122.4 3.6 321.6 25.1 30.9 18.2 521.8
Freehold land is not depreciated and is held at historical cost. At 31 December 2021, the Group’s freehold land was recognised at £50.4 million
(31 December 2020: £54.3 million).
At 31 December 2021 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£18.8 million (2020: £18.9 million).
156
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Annual Report 2021
18 Investment in joint ventures
Details of the Group’s joint ventures are as follows:
Name of entity
Place of
incorporation Ownership Principal activity Segment
Synthomer Middle East Company Ltd Saudi Arabia 49% Manufacture and sale of acrylic and vinyl resin emulsions Functional Solutions
Synthomer Functional Solutions FZCO UAE 49% Trading in adhesives and oilfield chemicals Functional Solutions
Synthomer FZCO UAE 49% Sales and marketing support for Synthomer companies Functional Solutions
Super Sky Ltd UK 50% Non-trading Corporate
Joint ventures are accounted for using the equity method in these financial statements. The ownership of entities has not changed since
theprioryear.
Summarised financial information in respect of the joint ventures is set out below. This information represents amounts in the joint ventures’
financial statements prepared in accordance with IFRS.
Summarised balance sheet (100%)
2021
£m
2020
£m
Non-current assets 6.4 4.6
Cash and cash equivalents 2.6 4.2
Other current assets 24.5 14.6
Total current assets 27.1 18.8
Other current liabilities (18.5) (9.9)
Total current liabilities (18.5) (9.9)
Net assets 15.0 13.5
Group share:
2021
£m
2020
£m
Total assets 16.5 11.5
Total liabilities (9.1) (4.9)
Net assets 7.4 6.6
Summarised statement of comprehensive income (100%)
2021
£m
2020
£m
Revenue 61.8 39.4
Operating profit 5.4 2.7
Taxation – (0.2)
Profit for the year 5.4 2.5
Exchange differences on translation 0.2 (0.4)
Total comprehensive income 5.6 2.1
Dividends paid (3.9) (3.8)
Movement in retained earnings 1.7 (1.7)
Group share:
Profit for the year 2.6 1.2
Exchange differences on translation 0.1 (0.2)
Dividends paid (1.9) (1.9)
157
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
18 Investment in joint ventures continued
The following table reconciles the summary information above to the carrying amount of the Group’s interest in the joint ventures:
Investment in joint ventures
2021
£m
2020
£m
At 1 January 6.6 7.5
Profit from continuing operations 2.6 1.2
Exchange differences on translation 0.1 (0.2)
Dividend paid (1.9) (1.9)
At 31 December 7.4 6.6
19 Inventories
2021
£m
2020
£m
Raw materials and consumables 120.4 78.9
Finished goods 133.3 91.4
253.7 170.3
Stock written off during the year 5.9 0.5
Cost of inventory recognised as an expense and included in cost of sales 1,338.4 926.2
The nature of the chemical reaction necessary to produce finished goods from raw materials is such that ‘work in progress’ is not a material part
of the Group’s inventory at any given point of time.
20 Trade and other receivables
2021
£m
2020
£m
Trade receivables 275.1 229.3
Other receivables 25.4 23.6
Prepayments 12.3 9.5
312.8 262.4
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Before accepting a new customer, the Group uses appropriate procedures to assess the potential customer’s credit quality in order to set a
credit limit.
The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the lifetime
expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to past default
experience and credit rating, adjusted as appropriate for current observable data. The Group has no significant concentration of credit risk,
withexposure spread over a large number of customers. The following table details the risk profile of trade receivables based on the Group’s
provision matrix.
Trade receivables – days past due
2021
Not yet due
£m
< 60
£m
61–120
£m
> 120
£m
Total
£m
Gross carrying amount 249.3 25.3 0.3 1.7 276.6
Expected credit loss rate 0.06%
Lifetime expected credit loss (1.5)
Total 275.1
Trade receivables – days past due
2020
Not yet due
£m
< 60
£m
61–120
£m
> 120
£m
Total
£m
Gross carrying amount 214.1 15.1 0.3 1.7 231.2
Expected credit loss rate 0.12%
Lifetime expected credit loss (1.9)
Total 229.3
158
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Annual Report 2021
The following table shows the movement in the lifetime expected credit loss that has been recognised for trade receivables in accordance with
the simplified approach set out in IFRS 9:
2021
£m
2020
£m
At 1 January 1.9 0.9
Exchange adjustments (0.1) (0.1)
Acquisition of business – 1.4
Transfer (from)/to credit impaired (0.2) 0.1
Uncollectable amounts written off or recovered (0.1) (0.4)
At 31 December 1.5 1.9
21 Cash and borrowings
1 January
2021
£m
Cash
inflows/
(outflows)
£m
Exchange
and other
movements
£m
31 December
2021
£m
Bank overdrafts (10.5) 10.5 – –
Current borrowings (9.6) – 9.6 –
Current liabilities (20.1) 10.5 9.6 –
Bank loans (186.2) – (1.7) (187.9)
€520m 3.875% senior unsecured loan notes due 2025 (457.7) – 26.1 (431.6)
Non-current liabilities (643.9) – 24.4 (619.5)
Total borrowings (664.0) 10.5 34.0 (619.5)
Cash and cash equivalents 201.8 302.9 0.6 505.3
Net debt (462.2) 313.4 34.6 (114.2)
Capitalised debt costs shown in the tables above, which have been recognised as a reduction in borrowings in the financial statements,
amounted to £9.9 million at 31 December 2021 (31 December 2020: £11.2 million).
Analysis of net debt by currency:
2021 2020
Cash and
cash
equivalents
£m
Total
borrowings
£m
Cash and
cash
equivalents
£m
2020
Total
borrowings
£m
Sterling 211.5 – 12.5 –
Euro 50.7 437.3 38.8 484.7
US dollar 124.8 192.1 54.1 190.5
Malaysian ringgit 51.0 – 61.0 –
Other 67.3 – 35.4 –
Total 505.3 629.4 201.8 675.2
The principal features of the Group’s borrowings are as follows:
The Group has committed unsecured borrowing facilities comprising a $260 million term loan, a €460 million revolving credit facility both of
which have terms ending July 2024. The Group also has a $300 million term loan with a term ending in October 2024 and €520 million 3.875%
unsecured senior loan notes due in June 2025.
Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows are classified in the Group’s consolidated cash flow statement as cash
flows from financing activities.
Non cash changes
1 January
2021
£m
Financing
cash
outflows
£m
Acquisitions
£m
Exchange
and other
movements
£m
31 December
2021
£m
Borrowings (653.5) – – 34.0 (619.5)
Lease liabilities (55.0) 9.7 – 1.8 (43.5)
Total (708.5) 9.7 – 35.8 (663.0)
159
Strategic report Governance Group financial statements Company financial statements Other information
Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
22 Financial instruments
The table below sets out the Group’s accounting classification of each class of financial assets and liabilities:
2021 2020
Valuation
category in
accordance
with IFRS 9
1
Fair value
hierarchy
level
Carrying
amount
£m
Carrying
amount
within scope
of IFRS 7
£m
Fair value
£m
Carrying
amount
£m
Carrying
amount within
scope of
IFRS 7
£m
Fair value
£m
Trade receivables AC Level 2 275.1 275.1 275.1 229.3 229.3 229.3
Other receivables AC Level 2 25.4 15.0 15.0 23.6 13.9 13.9
Cash and cash equivalents AC Level 2 505.3 505.3 505.3 201.8 201.8 201.8
Derivatives – no hedge accounting FVTPL Level 2 3.2 3.2 3.2 1.4 1.4 1.4
Total assets 809.0 798.6 798.6 456.1 446.4 446.4
Borrowings AC Level 2 (619.5) (619.5) (629.4) (664.0) (664.0) (675.2)
Trade and other payables AC Level 2 (416.5) (404.6) (404.6) (337.8) (324.9) (324.9)
Derivatives – no hedge accounting FVTPL Level 2 (10.1) (10.1) (10.1) (19.4) (19.4) (19.4)
Total liabilities (1,046.1) (1,034.2) (1,044.1) (1,021.2) (1,008.3) (1,019.5)
Note:
1. AC: amortised cost; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in note 2.
The fair value of the Group’s borrowings at 31 December 2021 was £629.4 million (31 December 2020: £675.2 million).
Financial risk management
The Group’s policies, approved by the Board, provide written principles on financial risk management and the use of financial derivatives.
These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The Group has a policy of hedging significant foreign exchange transactional exposure at operating company level. The Group regularly reviews
its net assets and borrowing currency exposures, borrowing in overseas currencies in order to hedge the net assets held in those currencies as
appropriate. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Currency risk
The Group presents its consolidated financial statements in sterling and conducts business in many currencies. As a result, it is subject to
foreign currency risk due to exchange rate movements, which will affect the Group’s transactions and the translation of the results and underlying
net assets of its operations.
To manage the currency risk the Group uses foreign currency borrowings, forward contracts and currency swaps to hedge overseas net assets,
which are predominantly denominated in Euros, US dollars and Malaysian ringgits. Profit translation exposures are not hedged.
The Group hedges currency transaction exposures at the point of confirmed order, using forward foreign exchange contracts. The Group’s
policy is, where practicable, to hedge all exposures on monetary assets and liabilities. Consequently, there are no material currency exposures to
disclose (2020: none).
Interest rate risk
The Group has an exposure to interest rate risk, arising principally on changes in US dollar and Euro interest rates. To manage interest rate risk,
the Group manages its proportion of fixed to floating rate borrowings, and utilises interest rate swaps. These practices aim to minimise the
Group’s net finance charges with acceptable year-on-year volatility.
At 31 December 2021 the Group had in place swap arrangements to fix interest rates on €440 million of borrowings.
The Group’s interest rate derivatives are designated as fair value hedges with fair value movement on the hedged portion recognised in equity.
Interest paid on these derivatives is recognised in the income statement, within Underlying interest costs. Fair value movement in the unhedged
portion is also recognised in profit and loss, as a Special Item.
After taking account of interest rate swaps, the Group’s currency and interest rate exposure as at 31 December 2021 was:
2021 2020
Floating rate
borrowings
£m
Fixed rate
borrowings
£m
Total
borrowings
£m
Floating rate
borrowings
£m
Fixed rate
borrowings
£m
Total
borrowings
£m
Euro – 437.3 437.3 10.3 474.4 484.7
US dollar 192.1 – 192.1 190.5 – 190.5
Total 192.1 437.3 629.4 200.8 474.4 675.2
160
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Annual Report 2021
Market risk sensitivity analysis
The Group’s main exposure to market risk is in the form of interest rate risk and foreign currency risk. The Group uses a sensitivity analysis that
estimates the impacts on the consolidated income statement and other comprehensive income of either an instantaneous increase or decrease
of 1.0% in market interest rates or a 10% strengthening or weakening in sterling against all other currencies, from the rates applicable at
31 December 2021 and 31 December 2020 with all other variables remaining constant. The sensitivity analysis excludes the impact of market
risks on the net post employment benefit liabilities and assets, and corporate tax payable. This analysis is for illustrative purposes only, as
interest and foreign exchange rates rarely change in isolation.
There has been no change to the Group’s exposure to market risks or the manner in which these risks are managed and measured.
2021 2020
Income statement Equity Income statement Equity
Underlying
-/+ £m
IFRS
-/+ £m
IFRS
-/+ £m
Underlying
-/+ £m
IFRS
-/+ £m
IFRS
-/+ £m
Interest rate sensitivity analysis
UK interest rate +/- 1.0% 2.1 – – – – –
Euro interest rate +/- 1.0% 0.5 4.4 – 0.4 4.4 –
US interest rate +/- 1.0% 0.7 – – 1.4 – –
Foreign currency sensitivity analysis
Sterling -/+ 10% 19.9 19.9 23.0 3.4 3.4 31.3
Euro exchange rate -/+ 10% 1.0 1.0 10.0 2.8 2.8 7.6
US dollar exchange rate -/+ 10% 19.6 19.6 11.6 1.0 1.0 21.5
Malaysian ringgit exchange rate -/+ 10% 0.5 0.5 – – – –
The interest rate sensitivity analysis has been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming that the amount of liability outstanding at the
balance sheet date was outstanding for the whole year.
For interest rate derivatives the mark-to-market adjustment, and amount recognised in equity as part of a hedging arrangement, is estimated
using the interest rate sensitivity against the nominal amount.
The foreign currency sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at
the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations
within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or borrower.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises
on cash balances, derivative financial instruments and credit exposures to customers.
The carrying amount of financial assets represents the Group’s exposure to credit risk at the balance sheet date as disclosed at the start of this
note. A financial asset is in default when the counterparty fails to pay its contractual obligations. Financial assets are written-off when there is no
reasonable expectation of recovery. Credit risk is managed separately for financial and business-related credit exposures.
Financial credit risk
Synthomer aims to minimise its financial credit risk through the application of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to major banks and financial institutions with a credit rating of investment grade and the policy restricts
the exposure to any one counterparty by setting credit limits. The Group’s policy is designed to ensure that individual counterparty limits are
adhered to and that there are no significant concentrations of credit risk. The Board also defines the types of financial instruments which may be
transacted. Synthomer annually reviews the credit limits applied and regularly monitors the counterparties’ credit quality, reflecting market credit
conditions.
Business related credit risk
Trade and other receivables exposures are managed locally in the operating units where they arise and active risk management is applied,
focusing on country risk, credit limits, ongoing credit evaluation and monitoring procedures. There is no significant concentration of credit risk
with respect to receivables as the Group has a large number of customers which are internationally dispersed. See note 20 for information on
credit risk with respect to trade and other receivables.
Liquidity risk
Liquidity risk is the risk that Synthomer is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow
funds at an acceptable price to fund actual or proposed commitments. The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity
profiles of assets and liabilities.
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Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
22 Financial instruments continued
The following tables provide an analysis of the anticipated undiscounted contractual cash flows including interest payable for the Group’s
financial liabilities and derivative instruments. The liquidity analysis for lease liabilities is included in note 23. Where interest payments are
calculated at a floating rate, rates of each cash flow until maturity of the instruments are calculated based on the forward yield curve prevailing at
the respective year ends. Derivative contracts are presented on a net basis.
2021 2020
Amount due Amount due
within
1 year
£m
between
1 and
2 years
£m
between
2 and
5 years
£m
within
1 year
£m
between
1 and
2 years
£m
between
2 and
5 years
£m
Overdrafts – – – (10.5) – –
Financial liabilities in trade and other payables (402.3) (1.5) (0.8) (321.2) (2.0) (1.7)
Bank loans – principal – – (192.1) – – (190.2)
€520m 3.875% senior unsecured loan notes due 2025 – – (437.3) – – (464.9)
Interest payments on borrowings (20.5) (20.5) (27.5) (22.1) (22.0) (60.0)
Total non-derivative financial liabilities (422.8) (22.0) (657.7) (353.8) (24.0) (716.8)
2021 2020
Amount due Amount due
within
1 year
£m
between
1 and
2 years
£m
between
2 and
5 years
£m
within
1 year
£m
between
1 and
2 years
£m
between
2 and
5 years
£m
Currency forwards 3.2 – – 1.4 – –
Total derivative financial assets 3.2 – – 1.4 – –
Interest rate swaps (4.0) (4.0) (7.1) (4.2) (4.3) (11.5)
Currency forwards (1.2) – – (0.8) – –
Total derivative financial liabilities (5.2) (4.0) (7.1) (5.0) (4.3) (11.5)
The financial covenant at 31 December 2021 for the RCF is that net debt must be less than 4.0 times EBITDA. At 31 December 2021 the actual
covenant for the net debt was 0.3 times EBITDA.
Any non-compliance with covenants underlying Synthomer’s financing arrangements could, if not waived, constitute an event of default with
respect to any such arrangements, and any non-compliance with covenants may, in particular circumstances, lead to an acceleration of maturity
on certain borrowings and the inability to access committed facilities. Synthomer was in full compliance with its financial covenants in respect of
its borrowings throughout each of the years presented.
At the year end, Synthomer had undrawn committed bank facilities as follows:
2021 2020
Expiring
between
2and 5
years
£m
Total
£m
Expiring
between
2and 5
years
£m
Total
£m
Unsecured €460m multi-currency RCF expiring 3 July 2024 373.3 373.3 397.0 397.0
Unsecured $300m Term Loan Facility expiring 28 October 2024 221.7 221.7 – –
595.0 595.0 397.0 397.0
Fair value measurement
Certain of the Group’s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date.
As prescribed by IFRS 13 Fair Value Measurement, fair values are measured using a hierarchy where the inputs are as follows:
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – not level 1 but are observable for that asset or liability either directly or indirectly.
• Level 3 – not based on observable market data.
Interest rate swaps and foreign currency forwards and swaps are valued using discounted cash flow techniques. These techniques incorporate
inputs such as foreign exchange rates and interest rates, which are used in a discounted cash flow calculation incorporating the instrument’s
term, notional amount and discount rate, and taking credit risk into account. As significant inputs to the valuation are observable in active
markets, all of the Group’s financial instruments are classified as level 2 financial instruments.
The fair value of forward foreign exchange contracts, interest rate swaps and currency swaps is estimated by discounting the future contractual
cash flows using forward exchange rates, interest rates and prices at the balance sheet date.
There were no transfers of any financial instrument between the levels of the fair value hierarchy during the current or prior year.
162
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Hedge relationships
The Group targets a one-to-one hedge ratio. Strengths of the economic relationship between the hedged item and the hedging instrument is
analysed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of timing, cash flows or
value except when the critical terms of the hedging instrument and hedged item are closely aligned. The change in the credit risk of the hedging
instruments or the hedged items is not expected to be the primary factor in the economic relationship.
The notional amounts, contractual maturities and rates of the hedging instruments designated in hedging relationships as of 31 December 2021
by the main risk categories are as follows:
Hedged risk Notional amount Maturity Range of hedged rates
2021
Cash flow hedges
Interest rate swap Interest rate Up to €440m 28/08/2018 – 28/08/2025 0.517% to 0.535% fixed
Net investment hedges
Net investment Currency Up to €560m 01/04/2020 – present 1.11 – 1.20
Net investment Currency Up to $370m 01/04/2020 – present 1.33 – 1.42
2020
Cash flow hedges
Interest rate swap Interest rate Up to €440m 28/08/2018 – 28/08/2025 0.517% to 0.535% fixed
Net investment hedges
Net investment Currency Up to €560m from 01/04/2020 1.08 – 1.15
Net investment Currency Up to $370m from 01/04/2020 1.23 – 1.37
Where hedge accounting is applied, hedges are documented and tested for effectiveness on an ongoing basis.
The ratio for hedging instruments designated in both net investment and cash flow hedge relationships was 1:1. Ineffectiveness could occur on
either hedging relationship due to significant changes in counterparty credit risk or a reduction in the notional amount of the hedged item during
the designated hedging period.
Cash flow hedges
The Group designated as a cash flow hedge the interest rate swaps used to manage interest rate risk on its Euro borrowings.
In 2021 a gain of £3.4 million (2020: £0.8 million loss) was recognised in the cash flow hedge reserve in respect of these derivatives.
At 31 December 2021 the cash flow hedge reserve includes a cumulative loss of £10.0 million (2020: loss of £13.4 million), all of which relates to
continuing cash flow hedges. The cash flows are expected to occur between 2022 and 2025.
In the year, the Group’s borrowings fell below the total of the interest rate derivative contracts, leading to a reduction in the balance designated as
a cash flow hedge. The change in fair value relating to the unhedged portion of the interest rate swaps was a gain of £6.2 million (2020: loss of
£3.6 million) which was recognised in the income statement within finance costs as a Special Item.
Capital management
The Board is committed to enhancing shareholder value in the long term, both by investing in the business so as to deliver continued
improvement in the return from those investments and by managing the capital structure.
Synthomer manages its capital structure to achieve capital efficiency and to provide flexibility to invest through the economic cycle and give
efficient access to debt markets at attractive cost levels. This is achieved by targeting a net debt to EBITDA ratio between 1.0 and 2.0. In order to
finance acquisitions, the Group may increase the ratio to 3.0, with deleveraging within 12-24 months.
As at 31 December 2021 the net debt to EBITDA ratio was 0.3 times (2020: 1.8 times).
The Board maintains a dividend policy to 2.5 times earnings cover. Should excess capital not be deployed for acquisitions or capital expenditure,
the Board will periodically consider one-off capital returns to shareholders in order to maintain an efficient balance sheet.
23 Lease liabilities
The Group has a portfolio of leases mainly comprising land and buildings, chemical storage tanks and vehicles. Further details are given in note 2.
Information in respect of right of use assets, including the carrying amount, additions and depreciation, are set out in note 17 to these financial
statements. Information in respect of the carrying value is set out below and information in respect of interest arising on lease liabilities is set out
in note 9.
Synthomer also enters into short-term leases and low value leases which are not recognised as right of use assets and lease liabilities.
The expense recognised in the year in relation to these leases is not material. Synthomer has no material exposure to variable lease payments,
extension options or committed leases not yet commenced.
The total cash outflow for leases in the year was as follows:
2021
£m
2020
£m
Payments for the principal portion of lease liabilities 9.7 9.7
Payments for the interest portion of lease liabilities 1.5 1.6
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
23 Lease liabilities continued
Lease liabilities included in the balance sheet are as follows:
31 December
2021
£m
31 December
2020
£m
Current 8.8 10.6
Non-current 34.7 44.4
43.5 55.0
The following table details the maturity of contractual undiscounted cash flows for lease liabilities:
2021
£m
2020
£m
Less than one year 9.4 11.2
Between one and two years 8.1 10.5
Between two and five years 11.3 17.1
More than five years 17.0 19.0
24 Trade and other payables
2021
£m
2020
£m
Amount due within one year
Trade payables 264.0 204.6
Other payables 50.8 40.5
Accruals 99.4 89.0
414.2 334.1
Amount due after one year
Accruals 2.3 3.7
2.3 3.7
Average trade payable days in 2021 was 60 (2020: 64). This figure represents trade payable days for all trading operations within the Group,
calculated as a weighted average based on cost of sales.
The Directors consider that the carrying amount of trade payables, other payables and accruals approximates to their fair value.
25 Provisions for other liabilities and charges
Restructuring
& site closure
£m
Regulatory
fine
£m
Total
£m
At 1 January 2021 31.6 – 31.6
Charged to the income statement 26.9 57.2 84.1
Utilised during the year (10.5) – (10.5)
Exchange adjustments (2.0) – (2.0)
At 31 December 2021 46.0 57.2 103.2
Analysis of provisions
31 December
2021
£m
31 December
2020
£m
Non-current 18.0 5.9
Current 85.2 25.7
103.2 31.6
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Annual Report 2021
Analysis of charge to the income statement
2021
£m
2020
£m
Underlying performance – –
Special Items 84.1 27.0
84.1 27.0
The closing balance includes £57.2 million for the European Commission fine, £15.8 million and £1.0 million in relation to the rationalisation of the
Group’s European Performance Materials network in Marl and Oulu respectively and £10.6 million in relation to the onerous contract arising on
the disposal of the European Tyre Cord business. In the year, a £5.1 million provision was recognised for the closure of OMNOVA’s administrative
and R&D site in Villejust (France). A £11.6 million provision was recognised to demolish and rationalise assets at a small number of sites, to bring
them into line with our ESG strategy.
26 Retirement benefit obligations
The Group operates a variety of retirement benefit arrangements, covering both defined contribution and defined benefit schemes.
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees. Costs recognised in respect of defined contribution pension
plans across the Group for the year ended 31 December 2021 were £10.9 million (2020: £9.2 million).
The risk relating to benefits to be paid to the dependants of scheme members (widow and orphan benefits) is re-insured with an external
insurance company.
Multi-employer schemes
The Group participates in several tariffs of the Pensionskasse Degussa in Germany, which is a multi-employer pension scheme.
Regular contributions are payable to the scheme by each participating employer for new benefits accruing. The assets of all participating
employers are pooled, and contributions are calculated based on aggregated demographic experience. Therefore sufficient information is not
available to identify the Group’s share of the assets on a consistent and reliable basis and the Group accounts for the scheme on a defined
contribution basis. The Group expects to make a regular contribution of £2.4 million to the scheme in 2022.
To the extent that there is underfunding in the scheme, deficit contributions are payable based on an actuarial assessment of each participating
employer’s share of the future benefit accrual. At 31 December 2021 there is no indication of any commitment for additional deficit contributions
in excess of regular contributions.
Defined benefit schemes
UK
The Group’s UK defined benefit scheme is administered by a fund that is legally separate from the Company. The trustees of the pension fund
are required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees of the pension scheme are
responsible for the investment policy with regard to the assets of the fund.
The scheme was closed to future accrual in 2009 and all retirement benefits since that time are provided by way of a defined contribution
scheme. The assets of the scheme are held separately from those of the companies concerned. A triennial actuarial valuation of the scheme was
undertaken in 2021 and is in the process of being finalised by the trustees of the scheme and the Company.
USA
The Group’s US defined benefit scheme was acquired as part of the OMNOVA acquisition and is administered by a fund which is legally separate
from OMNOVA Solutions Inc. The fiduciary committee is required by law to act in the interest of the fund and is responsible for the investment
policy with regard to the assets of the fund.
The scheme was closed to future accrual in 2011 and all retirement benefits since that time are provided by way of a defined contribution
scheme. The assets of the scheme are held separately from those of the companies concerned and a formal valuation is undertaken on an
annual basis.
Germany
The Group operates a number of defined benefit schemes in Germany. These schemes are closed to new members. In line with common
practice, these schemes are unfunded and liabilities are settled on a cash basis as they fall due. At each balance sheet date, obligations are
calculated by external actuaries.
Other
The Group operates a number of smaller overseas pension and retirement benefit schemes. For the funded schemes, assets are held separately
from those of the Group. The aggregated pension disclosures for the other defined benefit schemes have been compiled from a number of
actuarial valuations at 31 December 2021.
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
26 Retirement benefit obligations continued
Retirement benefit risks
Defined benefit schemes expose the Group to a number of risks, the most significant of which are detailed below:
Asset return risk The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will increase the deficit.
Interest rate risk A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase
inthevalue of the plan assets in bond holdings.
Longevity risk The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy
willresult in an increase in the plans’ liabilities.
Charges to the income statement in respect of the Group’s defined benefit pension schemes are as follows:
2021 2020
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
Service cost 0.9 1.7 0.4 – 3.0 1.6 1.6 0.6 1.0 4.8
Net interest expense 0.6 1.0 0.6 0.2 2.4 1.0 1.4 1.0 0.3 3.7
1.5 2.7 1.0 0.2 5.4 2.6 3.0 1.6 1.3 8.5
Amounts recognised in the statement of comprehensive income are set out below:
2021 2020
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
Return on plan assets
excludingamounts included
ininterest expense (3.1) 19.5 – (0.8) 15.6 32.0 33.1 – 0.6 65.7
Gains/(losses) from changes in
assumptions 34.5 7.2 6.9 2.6 51.2 (43.3) (20.8) (7.6) (1.6) (73.3)
Actuarial gains/(losses) 31.4 26.7 6.9 1.8 66.8 (11.3) 12.3 (7.6) (1.0) (7.6)
Amounts included in the Group’s consolidated balance sheet arising from the Group’s defined benefit scheme obligations are:
2021 2020
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
Present value of defined
benefitobligations (410.1) (206.2) (77.6) (24.9) (718.8) (456.4) (220.3) (91.0) (30.0) (797.7)
Fair value of schemes’ assets 405.5 178.5 2.9 9.5 596.4 404.1 158.5 3.2 10.5 576.3
Net liability arising from
definedbenefit obligations (4.6) (27.7) (74.7) (15.4) (122.4) (52.3) (61.8) (87.8) (19.5) (221.4)
Fair value of the schemes’ assets are set out below:
2021 2020
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
At 1 January 404.1 158.5 3.2 10.5 576.3 366.5 – 3.1 9.0 378.6
Interest income 5.7 2.4 – – 8.1 7.2 2.8 – – 10.0
Amounts recognised in income in
respect of defined benefit schemes 5.7 2.4 – – 8.1 7.2 2.8 – – 10.0
Remeasurement:
Return on plan assets excluding amounts
included in interest income (3.1) 19.5 – (0.8) 15.6 32.0 33.1 – 0.6 65.7
Amounts recognised in the statement
ofcomprehensive income (3.1) 19.5 – (0.8) 15.6 32.0 33.1 – 0.6 65.7
Contributions:
Employers 16.9 10.0 – 0.6 27.5 16.5 0.4 – 0.7 17.6
Payments from plans:
Benefit payments (18.1) (13.9) – (0.2) (32.2) (18.1) (11.5) – (0.8) (30.4)
(1.2) (3.9) – 0.4 (4.7) (1.6) (11.1) – (0.1) (12.8)
Plan assets from acquired entities – – – – – – 148.6 – 0.5 149.1
Exchange adjustments – 2.0 (0.3) (0.6) 1.1 – (14.9) 0.1 0.5 (14.3)
At 31 December 405.5 178.5 2.9 9.5 596.4 404.1 158.5 3.2 10.5 576.3
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Annual Report 2021
Plan assets for the principal schemes comprised:
2021 2020
UK
£m
USA
£m
Germany
£m
UK
£m
USA
£m
Germany
£m
Hedge funds 17.5 – – 20.8 – –
Equities 96.5 97.2 1.5 107.2 88.8 1.6
Debt instruments 270.1 56.8 1.4 258.3 49.1 1.6
Property 9.2 24.5 – 8.8 20.6 –
Annuity assets 3.1 – – 5.2 – –
Cash 9.1 – – 3.8 – –
Fair value of schemes’ assets 405.5 178.5 2.9 404.1 158.5 3.2
All investments in equities, bonds and property are quoted.
Present value of defined benefit obligations comprised:
2021 2020
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
UK
£m
USA
£m
Germany
£m
Other
£m
Total
£m
At 1 January (456.4) (220.3) (91.0) (30.0) (797.7) (422.2) – (79.3) (17.1) (518.6)
Current service cost (0.9) (1.7) (0.4) (1.2) (4.2) (0.8) (1.6) (0.5) (1.0) (3.9)
Past service cost – – – 1.2 1.2 (0.8) – (0.1) – (0.9)
Interest expense (6.3) (3.4) (0.6) (0.2) (10.5) (8.2) (4.2) (1.0) (0.3) (13.7)
Amounts recognised in income in
respect of defined benefit schemes (7.2) (5.1) (1.0) (0.2) (13.5) (9.8) (5.8) (1.6) (1.3) (18.5)
Remeasurement gains/(losses) from:
changes in financial assumptions 14.3 10.9 7.0 – 32.2 (43.3) (19.6) (7.6) (1.8) (72.3)
changes in demographic assumptions 6.4 (0.3) – 1.1 7.2 – – – 0.3 0.3
experience adjustments 13.8 (3.4) (0.1) 1.5 11.8 – (1.2) – (0.1) (1.3)
Amounts recognised in the statement
of comprehensive income 34.5 7.2 6.9 2.6 51.2 (43.3) (20.8) (7.6) (1.6) (73.3)
Contributions:
Employers 0.9 – 2.2 0.6 3.7 0.8 2.0 2.1 0.3 5.2
Payments from plans:
Benefit payments 18.1 13.9 – 0.2 32.2 18.1 11.5 – 0.8 30.4
19.0 13.9 2.2 0.8 35.9 18.9 13.5 2.1 1.1 35.6
Scheme liabilities from acquired entities – – – – – – (228.7) – (10.2) (238.9)
Disposals of subsidiary – – – 0.2 0.2 – – – – –
Exchange adjustments – (1.9) 5.3 1.7 5.1 – 21.5 (4.6) (0.9) 16.0
At 31 December (410.1) (206.2) (77.6) (24.9) (718.8) (456.4) (220.3) (91.0) (30.0) (797.7)
The Group remains committed to funding the deficits for the UK and US defined benefit schemes.
Following the 2018 triennial valuation of the UK scheme, which completed in 2019, the Company committed to paying contributions for the
period to 5 April 2023, increasing from £16.4 million in the year commencing 6 April 2019 to £18.2 million for the year commencing 6 April 2022.
Contributions from the sponsoring companies are expected to be £17.9 million in 2022. The 2021 triennial valuation will be completed in 2022.
The defined benefit obligation of the US scheme was £73.4 million on acquisition. This has reduced to £27.7 million at 31 December 2021.
The Group is currently contributing $6 million per annum to help reduce this deficit.
The Group’s other defined benefit schemes are largely unfunded, with minimal plan assets. Liabilities from these schemes are settled on a cash
basis as they fall due.
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
26 Retirement benefit obligations continued
Actuarial assumptions
The major assumptions used for the purposes of the actuarial valuations were as follows:
2021 2020
UK
%
USA
%
Germany
%
Other
%
UK
%
USA
%
Germany
%
Other
%
Rate of increase in pensions in payment 3.20 0.00 1.00 2.00–3.40 2.80 0.00 1.00 1.90–2.75
Rate of increase in pensions in deferment 2.90 0.00 2.50 2.00–3.40 2.20 0.00 2.50 1.50–2.75
Discount rate 1.80 2.66 1.20 0.27–2.48 1.40 2.19 0.70 (0.80)–1.94
Inflation assumption 3.40 0.00 1.75 1.20–2.00 2.90 0.00 1.75 1.00–2.00
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics. Mortality assumptions are based
on country-specific mortality tables and, where appropriate, include an allowance for future improvements in life expectancy. In addition, where
credible data exists, actual plan experience is taken into account. The Group’s most substantial pension liabilities are in the UK, the US and
Germany where, using the mortality tables adopted, the expected lifetime of average members currently at age 65 and average members at age
65 in 20 years’ time is as follows:
2021 2020
Retiring today Retiring in 20 years Retiring today Retiring in 20 years
UK USA Germany UK USA Germany UK USA Germany UK USA Germany
Male 87.2 86.4 85.5 88.8 87.4 88.2 87.3 86.4 85.3 88.9 87.3 88.1
Female 89.5 87.5 88.9 90.9 88.5 91.1 89.5 87.4 88.8 91.4 88.4 91.0
The weighted average duration of the benefit obligation at the end of the reporting period is 14.9 years for the UK scheme (2020: 16.2 years),
10.7 years for the US scheme (2020: 11.3 years) and 17.2 years for the German schemes (2020: 18.4 years).
Sensitivity analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and mortality. The sensitivity analysis
below has been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, assuming
that all other assumptions are held constant:
Increase in scheme liabilities
UK
£m
USA
£m
Germany
£m
Discount rate (decrease of 1%) 72 23 14
Future mortality rate (one year increase in expectancy) 19 7 3
The above sensitivities are based on a change of assumption while holding all other assumptions constant. In practice this is unlikely to occur
and changes in some of the assumptions may have some correlation. When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit
method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the balance sheet.
27 Share capital and reserves
Share capital
2021
Number
2020
Number
2021
£m
2020
£m
Ordinary shares of 10 pence
Shares in issue at 1 January 424,850,961 424,850,961 42.5 42.5
Issued in year 42,485,080 – 4.2 –
Shares in issue at 31 December 467,336,041 424,850,961 46.7 42.5
Ordinary shares carry no right to fixed income.
On 28 October 2021 the Group completed a share placing, resulting in the issue of 42,485,080 ordinary shares at 485 pence per share.
Share premium
2021
£m
2020
£m
Balance at 1 January 421.1 421.1
Premium arising on issue of shares 201.7 –
Expenses of issue of shares (2.8) –
Balance at 31 December 620.0 421.1
The share premium account represents the difference between the issue price and the nominal value of shares issued.
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Retained earnings
2021
£m
2020
£m
Balance at 1 January 192.4 204.4
Dividends paid (73.5) (12.8)
Net profit for the year 208.7 3.1
Actuarial gains/(losses) recognised in other comprehensive income 66.8 (7.6)
Tax relating to components of other comprehensive income (11.8) 3.5
Charge to equity for equity-settled share-based payments 1.2 1.8
Balance at 31 December 383.8 192.4
Hedging and translation reserve
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Total
£m
Balance at 1 January 2021 (13.4) (28.5) (41.9)
Exchange differences on translation of foreign operations – 2.8 2.8
Gains on net investment hedges taken to equity – 3.3 3.3
Gain recognised on cash flow hedges:
Interest rate swaps 3.4 – 3.4
Reclassification to profit or loss:
Exchange difference recycled on sale of business – 0.3 0.3
Balance at 31 December 2021 (10.0) (22.1) (32.1)
Balance at 1 January 2020 (12.6) (6.9) (19.5)
Exchange differences on translation of foreign operations – (37.5) (37.5)
Gains on net investment hedges taken to equity – 15.9 15.9
Loss recognised on cash flow hedges:
Interest rate swaps (0.8) – (0.8)
Balance at 31 December 2020 (13.4) (28.5) (41.9)
Cash flow hedging reserve
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges.
The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the
profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.
Translation reserve
Exchange differences relating to the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only, from their
functional currency into the parent’s functional currency, being sterling, are recognised directly in the translation reserve. Gains and losses on
hedging instruments that are designated as hedges of net investments in foreign operations are included in the translation reserve.
169
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
28 Reconciliation of operating profit to cash generated from operations
2021
£m
2020
£m
Operating profit – continuing operations 308.5 58.4
Less: share of profits of joint ventures (2.6) (1.2)
305.9 57.2
Adjustments for:
Depreciation of property, plant and equipment 54.4 54.0
Depreciation of right of use assets 9.8 10.9
Amortisation of other intangibles 7.1 4.9
Share-based payments 2.1 2.0
Special Items 142.4 131.2
Cash impact of restructuring and site closure costs (17.8) (25.3)
Cash impact of acquisition costs and related gains (6.6) (7.4)
Pension funding in excess of service cost (27.0) (18.8)
Movement in working capital (82.8) 23.5
Cash generated from operations 387.5 232.2
Reconciliation of movement in working capital
(Increase)/decrease in inventories (87.7) 17.1
(Increase)/decrease in trade and other receivables (64.8) 19.1
Increase/(decrease) in trade and other payables 69.7 (12.7)
Movement in working capital (82.8) 23.5
29 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included
in this note. Transactions between the Company and its subsidiaries are disclosed in the Company’s financial statements where appropriate.
The UK defined benefit scheme is a related party; see note 26.
A summary of the key management compensation relates to the Directors and members of the Executive Committee, is set out below:
Key management compensation
2021
£m
2020
£m
Short-term employee benefits 8.3 9.1
Pension costs 0.5 0.4
Share-based payments 2.1 2.0
10.9 11.5
30 Contingent assets, contingent liabilities and guarantees
Guarantees and contingent liabilities of the Group amount to £2.5 million (2020: £2.7 million) and relate to an environmental liability inFrance.
The Company and its subsidiaries have, in the normal course of business, entered into guarantees and counter-indemnities in respect
ofperformance bonds, relating to the Group’s own contracts.
170
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31 Share-based payments
Performance Share Plan
The Group’s Performance Share Plan is described in the Directors’ Remuneration report on pages 112 to 126. In addition to the two Executive
Directors, it is available to other senior management. Movement in the options held under the scheme are defined as follows:
Options
2021
number
Weighted av.
exercise
price (£)
2021
number
Options
2020
number
Weighted av.
exercise
price (£)
2020
number
Outstanding at 1 January 2,551,622 – 1,936,998 –
Granted during the year 875,330 – 1,134,333 –
Exercised during the year (214,389) – (40,146) –
Lapsed during the year (821,270) – (479,563) –
Outstanding at 31 December 2,391,293 – 2,551,622 –
Exercisable at 31 December 22,367 – 49,554 –
The outstanding share options were all issued under the Performance Share Plan. As at 31 December 2021 the following options
wereoutstanding:
Number
Exercisable between 2016 and 2023 8,316
Exercisable between 2017 and 2024 6,945
Exercisable between 2018 and 2025 7,106
Exercisable between 2022 and 2029 729,704
Exercisable between 2023 and 2030 954,432
Exercisable between 2024 and 2031 684,790
2,391,293
The total exercise price for all the above grants is £nil.
For options outstanding as at 31 December 2021, the exercise price was £nil and the weighted average remaining contractual life was 4.95 years
(2020: 5.16 years).
The weighted average share price at the date of exercise was £4.64 (2020: £2.83).
The weighted average fair value of the options at the measurement date granted during the year was £3.60 (2020: £1.94). The valuation was
based on the following inputs and assumptions, using a Monte Carlo simulation model:
2021 2020
Weighted average share price (£) 4.68 2.59
Option price (£) – –
Value of optionality nil nil
Vesting assumption 77% 75%
The vesting assumption is the estimate at the measurement date of the percentage of the options that will ultimately vest and is based on market
conditions and management’s assessment of the likelihood of achievement of the performance criteria.
The Group also operates a cash-settled share-based payment scheme for which there was an expense in the year of £1.8 million
(2020: £2.4 million) and for which there was a liability at the year end of £4.0 million (2020: £2.9 million).
The Synthomer Employee Benefit Trust
The Company established a trust, formerly the Yule Catto Employee Benefit Trust, on 17 July 1996 to distribute shares to employees enabling the
obligations under the Yule Catto Longer-Term Performance Share Plan and the Yule Catto Longer-Term Deferred Bonus Plan to be met.
The Trust is managed by the RBC Trustees (Guernsey) Limited, an independent company located in Guernsey.
At 31 December 2020, the Trust held 2,547 (2020: 8,939) ordinary shares in the Company with a market value of £0.0 million (2020: £0.0 million).
The dividends on these shares have been waived. All of the shares are under option. Costs are amortised over the life of the plans.
32 Share price information
The middle market value of the listed ordinary shares at 31 December 2021 was 399.6 pence (31 December 2020: 449.6 pence).
During theyear,the market price ranged between 388.6 pence and 564.0 pence. The latest ordinary share price is available
ontheGroup’swebsite, www.synthomer.com
171
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Synthomer plc
Annual Report 2021
Group financial statements
Notes to the consolidated financial statements continued
31 December 2021
33 Audit exemptions
The following subsidiaries have taken advantage of the exemption from an audit for the year ended 31 December 2021 available under S479a of
the Companies Act 2006, as the Company has given a statutory guarantee of all of the outstanding liabilities of these subsidiaries as at
31 December 2021.
Company
Company
registration
Dimex Limited 01763129
Ecatto Limited 00978441
Harlow Chemical Company Limited 00778831
OMNOVA Performance Chemicals Limited 03734749
OMNOVA UK Holding Limited 07682224
PolymerLatex Limited 03439041
Revertex Limited 00873653
Super Sky Limited 02021871
Synthomer Overseas Limited 06349474
Temple Fields 510 01415496
Temple Fields 514 Limited 04541637
Temple Fields 515 Limited 00692510
Temple Fields 522 Limited 05516912
Temple Fields 523 Limited 05516913
Temple Fields 530 Limited 00831113
172
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Annual Report 2021
Company
financial
statements
Synthomer is a global leading
supplier of Acrylonitrile Butadiene
Rubber (NBR latex) for glove dipping
andassociated healthcare industries.
These products are designed to meet the highest
performance requirements of medical and industrial
glove manufacturers, providing high flexibility and
comfort as well as a high barrier protection for the
end user. Gloves manufactured from Synthomer’s
speciality NBR latex ensure a combination of high
tensile strength, good elongation and relaxation
to cater to the specific needs of medical,
examination, clean room, food handling,
medical drug handling and chemical
laboratory applications
173
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Synthomer plc
Annual Report 2021
Company financial statements
Company statement of financial position
as at 31 December 2021
Note
2021
£m
2020
£m
Non-current assets
Property, plant and equipment 4 4.4 5.6
Other intangible assets 5 41.5 –
Investment in subsidiaries and joint ventures 3 537.9 370.8
Deferred tax assets 1.8 –
Total non-current assets 585.6 376.4
Current assets
Other debtors 6 1,279.7 1,445.6
Cash and cash equivalents 248.9 42.6
Derivative financial instruments 9 3.0 1.4
Total current assets 1,531.6 1,489.6
Current liabilities
Borrowings 8 (10.4) (44.0)
Other payables 7 (180.8) (164.8)
Provisions (57.2) –
Derivative financial instruments 9 (9.1) (18.8)
Lease liabilities (0.7) (0.7)
Total current liabilities (258.2) (228.3)
Net current assets 1,273.4 1,261.3
Total assets less current liabilities 1,859.0 1,637.7
Non-current liabilities
Borrowings 8 (619.5) (643.9)
Lease liabilities (1.7) (2.3)
Total non-current liabilities (621.2) (646.2)
Net assets 1,237.8 991.5
Equity
Share capital 10 46.7 42.5
Share premium 10 620.0 421.1
Revaluation reserve 0.8 0.8
Capital redemption reserve 0.9 0.9
Retained earnings 569.4 526.2
Total equity 1,237.8 991.5
As disclosed in note 2, the Company’s profit for the year was £112.1 million (2020: £193.5 million).
The notes on pages 176 to 180 are an integral part of these financial statements.
The financial statements of Synthomer plc (registered number 98381) on pages 174 to 180 were approved by the Board of Directors
andauthorised for issue on 3 March 2022. They are signed on its behalf by:
M Willome S G Bennett
Director Director
174
Synthomer plc
Annual Report 2021
Company financial statements
Company statement of changes in equity
for the year ended 31 December 2021
Share
capital
£m
Share
premium
£m
Revaluation
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2021 42.5 421.1 0.8 0.9 526.2 991.5
Profit for the year – – – – 112.1 112.1
Total comprehensive income for the year – – – – 112.1 112.1
Issue of shares 4.2 198.9 – – – 203.1
Dividends – – – – (73.5) (73.5)
Share-based payments – – – – 1.2 1.2
Fair value gain on hedged interest rate derivatives – – – – 3.4 3.4
At 31 December 2021 46.7 620.0 0.8 0.9 569.4 1,237.8
Share
capital
£m
Share
premium
£m
Revaluation
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2020 42.5 421.1 0.8 0.9 344.6 809.9
Profit for the year – – – – 193.5 193.5
Total comprehensive income for the year – – – – 193.5 193.5
Dividends – – – – (12.8) (12.8)
Share-based payments – – – – 1.8 1.8
Fair value loss on hedged interest rate derivatives – – – – (0.9) (0.9)
At 31 December 2020 42.5 421.1 0.8 0.9 526.2 991.5
175
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Synthomer plc
Annual Report 2021
Company financial statements
Notes to the Company financial statements
31 December 2021
1 Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of
a qualifying entity under FRS 100 ‘Application of Financial Reporting Requirements’ issued by the FRC. Accordingly, these financial statements
were prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of a cash flow statement, standards not yet effective and
certain related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
The financial statements have been prepared on the historical cost basis except for the remeasurement of certain financial instruments that are
measured at fair values at the end of each reporting period.
The basis of accounting and the principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial
statements except as noted below.
Investments in subsidiaries and joint ventures are stated at cost less, where appropriate, provisions for impairment. The carrying amounts of the
Company’s investments are reviewed at each reporting date to determine whether there is an indication of impairment. If such an indication
exists, then the asset’s recoverable amount is estimated. Losses are recognised in the income statement and reflected in an allowance against
the carrying value. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed
through the income statement.
Intercompany balances are shown gross unless a right of set-off exists. Balances are valued at fair value at inception and are repayable on
demand. All intercompany loans are repayable on demand and the Company has the ability to refinance any of its subsidiaries using equity
allowing the subsidiary to repay any receivables owed to Synthomer plc.
Dividend distributions to the Company’s shareholders are recognised as a liability in the Company’s financial statements in the period in which
the dividends are approved by the Company’s shareholders.
There are no significant accounting judgements and estimates applied in preparing the Company’s account except for the impairment testing of
amounts owed by subsidiary undertakings. When measuring the potential impairment of receivables from subsidiaries, forward-looking
information based on assumptions for the future movement of different economic drivers are considered.
2 Profit for the year
As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account or statement of comprehensive income is
presented for Synthomer plc. The Company reported a profit of £112.1 million for the year ended 31 December 2021 (2020: profit of
£193.5 million).
Auditor remuneration for audit and other services is disclosed in note 7 to the consolidated financial statements.
The Company had no employees during the current or prior year.
3 Investment in subsidiaries and joint ventures
2021 2020
Subsidiaries
£m
Joint
ventures
£m
Total
£m
Subsidiaries
£m
Joint
ventures
£m
Total
£m
Cost
At 1 January 370.5 0.5 371.0 264.3 0.5 264.8
Additions 167.1 – 167.1 106.2 – 106.2
At 31 December 537.6 0.5 538.1 370.5 0.5 371.0
Provisions
At 1 and 31 December January – (0.2) (0.2) – (0.2) (0.2)
Net book value
At 31 December 537.6 0.3 537.9 370.5 0.3 370.8
Details of the Group’s subsidiaries and joint ventures are included in note 12 on pages 179 and 180.
In March 2021 the Company capitalised a loan receivable from Temple Fields 514 Limited.
The Directors consider the value of investments to be supported by underlying assets.
176
Synthomer plc
Annual Report 2021
4 Property, plant and equipment
2021 2020
Right of use
buildings
£m
Freehold
land and
buildings
£m
Plant and
equipment
£m
Total
£m
Right of use
buildings
£m
Freehold land
and buildings
£m
Plant and
equipment
£m
Total
£m
Cost
At 1 January 4.1 3.0 0.6 7.7 4.1 3.0 – 7.1
Additions – – 0.1 0.1 – – 0.6 0.6
Transfers to other intangible assets – – (0.6) (0.6) – – – –
At 31 December 4.1 3.0 0.1 7.2 4.1 3.0 0.6 7.7
Accumulated depreciation
At 1 January 1.2 0.9 – 2.1 0.6 0.9 – 1.5
Charge for the year 0.7 – – 0.7 0.6 – – 0.6
At 31 December 1.9 0.9 – 2.8 1.2 0.9 – 2.1
Net book value
At 31 December 2.2 2.1 0.1 4.4 2.9 2.1 0.6 5.6
Freehold land amounting to £1.8 million (2020: £1.8 million) has not been depreciated.
5 Other intangible assets
2021
£m
2020
£m
Cost
At 1 January – –
Additions 2.1 –
Transfers from Group undertakings 40.9 –
Transfers from property, plant and equipment 0.6 –
At 31 December 43.6 –
Accumulated depreciation
At 1 January – –
Charge for the year 2.1 –
At 31 December 2.1 –
Net book value
At 31 December 41.5 –
The first phase of the Group’s Pathway Programme systems transformation project was successfully deployed in May 2021. Now that the system
is operational, costs have been transferred to the Company.
In April 2021, the IFRS Interpretations Committee issued a new interpretation in relation to accounting for customisation and configuration costs
of cloud computing arrangements. Following a detailed review, it was confirmed that the new interpretation does materially impact the
accounting treatment for costs incurred on the Group’s Pathway programme.
6 Debtors
2021
£m
2020
£m
Amounts owed by Group undertakings 1,275.0 1,443.4
Other receivables 0.6 1.1
Prepayments and accrued income 4.1 1.1
1,279.7 1,445.6
Amounts owed by Group undertakings are valued at fair value at inception and are repayable on demand.
Of the Company’s amounts owed by Group undertakings, £149.0 million is impaired (2020: £149.0 million). Future expected credit losses
onamounts receivable from subsidiaries are immaterial.
177
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Synthomer plc
Annual Report 2021
Company financial statements
Notes to the Company financial statements continued
31 December 2021
7 Other creditors
2021
£m
2020
£m
Amounts owed to Group undertakings 142.5 148.2
Other creditors 3.5 4.2
Accruals and deferred income 34.8 12.4
180.8 164.8
Amounts owed to Group undertakings are valued at fair value at inception and are repayable on demand.
8 Borrowings
2021
£m
2020
£m
Current borrowings
Overdrafts 10.4 34.4
Current borrowings – 9.6
10.4 44.0
Non-current borrowings
Bank loans 187.9 186.2
€520m 3.875% senior unsecured loan notes due 1 July 2025 431.6 457.7
619.5 643.9
Details of borrowings are provided in note 21 to the consolidated financial statements.
9 Financial instruments
The fair value of the financial instruments disclosed in the Company’s statement of financial position are as follows:
2021 2020
Valuation
category in
accordance
with IFRS 9
1
Fair value
hierarchy
level
Carrying
amount
£m
Carrying
amount
within scope
of IFRS 7
£m
Fair value
£m
Carrying
amount
£m
Carrying
amount within
scope of IFRS
7
£m
Fair value
£m
Other receivables AC Level 2 1,279.7 1,275.6 1,275.6 1,445.6 1,445.6 1,445.6
Cash and cash equivalents AC Level 2 248.9 248.9 248.9 42.6 42.6 42.6
Derivatives – no hedge accounting FVTPL Level 2 3.0 3.0 3.0 1.4 1.4 1.4
Total assets 1,531.6 1,527.5 1,527.5 1,489.6 1,489.6 1,489.6
Borrowings AC Level 2 (629.9) (629.9) (639.8) (687.9) (687.9) (699.1)
Trade and other payables AC Level 2 (180.8) (180.6) (180.6) (164.8) (164.0) (164.0)
Derivatives – no hedge accounting FVTPL Level 2 (9.1) (9.1) (9.1) (18.8) (18.8) (18.8)
Total liabilities (819.8) (819.6) (829.5) (871.5) (870.7) (881.9)
1. AC: amortised cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss.
Further disclosures on financial instruments are included in note 22 of the consolidated financial statements.
10 Share capital and share premium
Details of the Company’s share capital and share premium are shown in note 27 of the consolidated financial statements.
11 Guarantees and other financial commitments
The Company has provided financial guarantees amounting to £20.1 million (2020: £31.9 million) in respect of bank and other facilities of
subsidiaries and joint ventures.
178
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Annual Report 2021
12 Subsidiaries and joint ventures
Country of incorporation and registered address
Principal
activity
Ownership
%
United Kingdom
Central Road, Harlow, Essex, CM20 2BH
Dimex Limited Holding Company 100
Ecatto Limited Holding Company 100
3
Harlow Chemical Company Limited Holding Company 100
2
OMNOVA Performance Chemicals Limited Dormant 100
OMNOVA UK Holding Limited Dormant 100
PolymerLatex Limited Holding Company 100
Revertex Limited Dormant 100
3
S.A. (300) Limited Holding Company 100
3
Star Pharma Limited Dormant 100
Super Sky Limited Holding Company 50
1,3
Synthomer (UK) Limited Trading 100
Synthomer Holdings Limited Holding Company 100
3
Synthomer Overseas Limited Holding Company 100
3
Temple Fields 510 Dormant 100
Temple Fields 514 Limited Holding Company 100
3
Temple Fields 515 Limited Holding Company 100
Temple Fields 522 Limited Holding Company 100
3
Temple Fields 523 Limited Holding Company 100
3
Temple Fields 530 Limited Holding Company 100
William Blythe Limited Trading 100
45 Pall Mall, London, SW1Y 5JG
Synthomer Trading Limited Trading 100
44 Esplanade, St Helier, Jersey, JE4 9WG
Synthomer Jersey Limited Dormant 100
3
Australia
58 Gipps Street, Collingwood, Victoria, 3066
Synthomer Australia Pty Limited Trading 100
Austria
Industriepark, Pischelsdorf, 3435
Synthomer Austria GmbH Trading 100
China
Building 53-55, 1000 Zhangheng Road, Zhangjiang Hi-Tech Park,
Pudong, Shanghai, 201203
Shanghai Synthomer Chemicals Co Ltd Trading 100
8 Hua Jing Road, China (Shanghai) Pilot Free Trade Zone, Shanghai,
200131
OMNOVA Performance Chemicals Trading
(Shanghai) Co Ltd Trading 100
210 Zhou Gong Road, Shanghai Chemical Industry Park, Shanghai
201507
OMNOVA Shanghai Co Ltd Trading 100
308 Jiangbin Road, Xiaogang United Development Zone, Ningbo
Economic & Technical Development Zone, Ningbo, 315803
OMNOVA Ningbo Co Ltd Trading 100
55 Xi Li Road, China (Shanghai) Pilot Free Trade Zone, Shanghai,
200131
Eliokem Trading (Shanghai) Co Ltd Trading 100
Czech Republic
Tovární 2093, Sokolov, 356 01
Synthomer AS Trading 100
V Celnici 1031/4, Prague, 110 00
Synthomer Holdings (CZE) SRO Non-Trading 100
Country of incorporation and registered address
Principal
activity
Ownership
%
Egypt
Industriel Zone 1-B, 10th of Ramadam City, Sharkiya
Synthomer SAE Trading 88
Finland
PO Box 175, Oulu, FI 90101
Synthomer Finland Oy Dormant 100
France
14 avenue des Tropiques, Z.A. de Courtaboeuf 2, Villejust, 91955
OMNOVA Solutions France Holding SAS Holding Company 100
OMNOVA Solutions International SAS Holding Company 100
OMNOVA Solutions SAS Trading 100
704 rue Pierre et Marie Curie, Ribécourt-Dreslincourt, 60170
Synthomer France SAS Trading 100
6 Place de la Madelaine, Paris, 75008
Yule Catto International SA Non-Trading 100
Germany
Werrastrasse 10, Marl, 45768
Synthomer Deutschland GmbH Trading 100
Temple Fields GmbH Non-Trading 100
Yule Catto Holdings GmbH Holding Company 100
India
1001, Meadows, Sahar Plaza, Andheri-Kurla Road, Andheri East,
Mumbai 400059
OMNOVA India Trading LLP Trading 100
Italy
Via delle Industrie 9, Filago, BG, 24040
Synthomer S.r.l. Trading 100
Via Morozzo 27, Sant’Albano Stura, CN, 12040
Synthomer Specialty Resins S.r.l. Trading 100
Piazza Cavour 3, Milano, MI, 20121
UQUIFA Italia S.r.l. Non-Trading 100
Malaysia
Unit 16-2, Wisma Uoa Damansara II, 6 Changkat Semantan, Damansara
Heights, Kuala Lumpur, 50490
Desa Baiduri Sdn Bhd Property Letting 70
Kind Action (M) Sdn Bhd Trading 70
PolymerLatex Sdn Bhd Trading 100
Quality Polymer Sdn Bhd Trading 70
Revertex (Malaysia) Sdn Bhd Trading 70
Rexplas Sdn Bhd Dormant 70
Synthomer Sdn Bhd Trading 100
Terra Simfoni Sdn Bhd Holding Company 100
Mauritius
c/o Citco (Mauritius) Limited, Tower A, 1 Cybercity, Ebene
OMNOVA Asia Pacific Corp Holding Company 100
Standard Charted Tower, 19 Cybercity, Ebene
OMNOVA Holding Limited Holding Company 100
179
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Synthomer plc
Annual Report 2021
Company financial statements
Notes to the Company financial statements continued
31 December 2021
Country of incorporation and registered address
Principal
activity
Ownership
%
Netherlands
Ijsselstraat 41, Oss, 5347 KG
Synthomer BV Trading 100
Yule Catto BV Non-Trading 100
Yule Catto Nederland BV Non-Trading 100
Speltdijk 15704Rj Helmond
Xyntra Investments BV Non-Trading 33
Portugal
Rua Francisco Lyon de Castro, 28, 2725-397 Mem Martins
OMNOVA Solutions Portugal SA Trading 100
Lyon28 – Imobiliario SA Non-Trading 100
Saudi Arabia
27 Street, 2nd Industrial City, Dammam, 31472
Synthomer Middle East Company Ltd Trading 49
1
Singapore
Ocean Financial Centre, 10 Collyer Quay, 049315
OMNOVA Performance Chemicals Singapore
Pte Ltd Trading 100
Spain
Camino de Sangroniz 8, Sondika, 48150
Synthomer Asua SL Trading 100
Paseo de la Castellana 177, Madrid, 28046
OMNOVA Solutions (Espana) SL Non-Trading 100
Rambla de Catalunya 53, Barcelona, 08007
Yule Catto Spain SL Non-Trading 100
Sweden
Tostarpsvagen 11, Kavlinge, 244 32
Synthomer Speciality Additives AB Trading 100
Country of incorporation and registered address
Principal
activity
Ownership
%
Thailand
111/7 Moo 2, Nikompattana District, Rayong, 21180
OMNOVA Engineered Surfaces (Thailand) Co
Ltd Trading 100
UAE
Building 2101, Office S10122A2, Jabel Ali Free Zone, Dubai
Synthomer Functional Solutions FZCO Trading 49
1
East Wing 2, Office 201, Po Box 54645, Dubai Airport Free Zone, Dubai
Synthomer FZCO Trading 49
1
USA
1201 Peachtree Street NE, Atlanta, GA, 30361
Synthomer LLC Trading 100
Yule Catto Inc Non-Trading 100
160 Greentree Drive, Suite 101, Dover, DE, 19904
Synthomer USA LLC Trading 100
25435 Harvard Road, Beachwood, Ohio 44122-6201
Decorative Products Thailand Inc Holding Company 100
OMNOVA Overseas Inc Non-Trading 100
OMNOVA Solutions Inc Trading 100
OMNOVA Wallcovering (USA) Inc Holding Company 100
Synthomer NBR Solutions LLC Dormant 100
Vietnam
8, 6th Street, Song Than Industrial Park, Di An
Synthomer Vietnam Co Ltd Trading 60
Notes
1. Joint ventures.
2. Harlow Chemical Company Limited is incorporated in UK but is resident in Netherlands.
3. Shares directly held by Synthomer plc.
12 Subsidiaries and joint ventures continued
180
Synthomer plc
Annual Report 2021
Other
information
Synthomer’s Laminates & Films
business provides decorative
laminates for residential and
commercial interior environments.
The products include innovative, durable
surfaces for a wide range of applications
from kitchen to bathroom, retail to
recreational vehicles, and performance
films for luxury flooring, signage and
industrial applications.
181
Strategic report Governance Group financial statements
Synthomer plc
Annual Report 2021
Other informationCompany financial statements
Other information
Environment performance summary
10
182
Synthomer plc
Annual Report 2021
2021 2020 2019
2021 vs
2020
8
2021 vs
2019
7, 8
Energy consumption – metered (GJ)
1
Total
Enlarged Group 5,662,464 5,410,255 5,466,905 4.66% 3.58%
UK only 338,554 340,477 329,741 -0.56% 2.67%
Energy consumption by source
Gas 2,574,818 2,422,543 2,479,253 6.29% 3.85%
Light and Heavy Oils 26,297 26,364 30,354 -0.26% -13.37%
Steam and hot water (metered) 892,030 838,485 933,895 6.39% -4.48%
Electricity (metered) 1,418,872 1,426,718 1,420,687 -0.55% -0.13%
Coal 750,448 696,145 602,716 7.80% 24.51%
Specific energy consumption (GJ/tonne production)
Enlarged Group 3.16 3.09 3.08 2.36% 2.67%
UK only 4.31 3.95 4.22 9.00% 2.13%
Refrigerant Releases – HCFC and others
Total refrigerant releases (tonne) 1,805 1,687 2,581 7.01% -30.08%
Specific refrigerant releases (kg/tonne production) 0.0010 0.0010 0.0015 4.66% -30.69%
Greenhouse Gas emissions (tonne CO
2
e)
2, 3, 4, 5
Total Scope 1 emissions
Enlarged Group 211,205 200,856 198,786 5.15% 6.25%
UK only 12,721 12,867 12,429 -1.13% 2.35%
Total Scope 2 emissions – Hybrid approach
Enlarged Group 63,352 178,017 213,258 -64.41% -70.29%
UK only 5,893 6,266 5,308 -5.96% 11.01%
Total Scope 2 emissions – Market Base
Enlarged Group 69,914 182,701 227,400 -61.73% -69.26%
UK only 5,893 6,266 5,308 -5.96% 11.01%
Total Scope 2 emissions – Location Base
Enlarged Group 211,059 222,317 225,542 -5.06% -6.42%
UK only 7,826 8,785 8,367 -10.91% -6.46%
Total GHG emissions
Enlarged Group 274,557 378,873 412,044 -27.53% -33.37%
UK only 18,613 19,133 17,737 -2.72% 4.94%
Specific GHG emissions (tonne CO
2
e/tonne production)
Enlarged Group 0.153 0.216 0.232 -29.12% -33.95%
UK only 0.237 0.222 0.227 6.64% 4.39%
Greenhouse Gas emissions by source (tonne CO
2
e)
From energy
3
269,536 373,984 403,570 -27.93% -33.21%
From refrigerant releases 5,021 4,887 8,474 2.72% -40.76%
Other emissions to air
Sulphur Dioxide (SO
2
) (tonne) 122.202 132.312 126.322 -7.64% -3.26%
Kilos SO
2
/tonne production 0.068 0.076 0.071 -9.67% -4.11%
Nitrous Oxides (NO
x
) (tonne)
6
239.822 236.186 207.396 1.54% 15.63%
Kilos NO
x
/tonne production 0.134 0.135 0.117 -0.69% 14.63%
Volatile Organic Compounds (VOCs) (tonne) 595.286 504.932 515.008 17.89% 15.59%
Kilos VOCs/tonne production 0.332 0.288 0.290 15.31% 14.58%
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Synthomer plc
Annual Report 2021
Other informationCompany financial statements
2021 2020 2019
2021 vs
2020
8
2021 vs
2019
7, 8
Water Usage
Total water withdrawal (m
3
) 7,862,459 7,241,228 7,177,835 8.58% 9.54%
Water usage by source (m
3
)
Public Potable Supply 1,712,967 1,683,337 1,811,592 1.76% -5.44%
Raw Water from River 3,357,138 2,978,227 2,791,844 12.72% 20.25%
Raw Water from Borehole 1,358,196 1,172,020 1,200,902 15.89% 13.10%
Raw Water form Canal 115,771 106,553 107,642 8.65% 7.55%
Raw Water from Other 1,318,387 1,301,091 1,265,856 1.33% 4.15%
Specific water withdrawal (m
3
/tonne production)
Enlarged Group 4.39 4.13 4.04 6.20% 8.58%
Waste Management
Total Hazardous Waste (tonne) 24,110 22,116 23,909 9.01% 0.84%
Hazardous waste by source (tonne)
Recycled – energy recovery 2,931 3,244 3,777 -9.67% -22.41%
Recycled – separated – reprocessed 5,065 6,418 5,959 -21.09% -15.00%
Incinerated – no energy recovery 2,738 1,611 1,430 69.94% 91.47%
Disposed by landfill 3,235 2,276 1,643 42.16% 96.91%
Other 10,141 8,567 11,100 18.38% -8.64%
Specific hazardous waste (kg/tonne production) 13.46 12.63 13.47 6.62% -0.04%
Total Non-Hazardous Waste (tonne) 17,126 16,783 24,310 2.04% -29.55%
Non-hazardous waste by source (tonne)
Recycled – energy recovery 4,278 4,475 8,176 -4.41% -47.68%
Recycled – separated – reprocessed 2,836 2,377 2,275 19.32% 24.66%
Incinerated – no energy recovery 22.31 17.03 186.00 30.97% -88.01%
Disposed by landfill 8,011 8,170 11,808 -1.95% -32.16%
Other – municipality 1,979 1,745 1,865 13.44% 6.11%
Specific non-hazardous waste (kg/tonne production) 9.56 9.58 13.70 -0.20% -30.17%
Total Waste (tonne) 41,235 38,900 48,219 6.00% -14.48%
Specific total waste (kg/tonne production) 23.03 22.21 27.16 3.68% -15.23%
Total waste to landfill (kg) 11,246 10,445 13,451 7.66% -16.39%
Specific waste to landfill (kg/tonne production) 6.28 5.96 7.58 5.30% -17.12%
Production volume (tonne) 1,790,719 1,751,406 1,775,092 2.24% 0.88%
Footnote:
1. Data relates to site usage of all fuels, excluding transport of goods to and from site and the movement of these vehicles on site. Internal transport on site is included.
2. Emissions to air have been calculated from the usage of all fuels, excluding transport fuel. They therefore include both direct emissions and indirect emissions related to bought-in
electricity, steam, compressed air, cooling water etc., with the exception of transmission and distribution losses for electricity (these losses are in Scope 3, this report is for Scope 1 and 2).
3. CO
2
equivalent emissions include contributions from CH
4
and N
2
O associated with combustion.
4. All direct energy production from fossil fuels has been aggregated on a Group-wide basis and converted to CO2
e by using the appropriate emissions factors. No allowance has been made
for possible country to country variation in calorific value or CO2
emission factors for primary fuels. Electricity has been converted to CO
2
e on a country by country basis. Scope 2
emissions have been calculated using three different approaches:
Market Base: using market-based emissions factors for electricity from suppliers of standard grid fuel mix tariffs. In case of suppliers emissions factors not available, the residual mix was
used for the EU sites and Location Base approach for non-EU sites.
Location Base: using emissions factors from DEFRA (dataset published in June 2021) were used for UK grid electricity and for overseas grid electricity from the relevant IEA (International
Energy Authority) ‘World CO
2
Emissions from Fuel Combustion’ databases. In accordance with UK Government guidance, factors used for 2021 reporting are based on 2019 validated
data.
Hybrid Approach: using Location Base info except for sites within the Group that purchase renewable energy attribute certificates. Electricity for these locations has been given a CO
2
e
emissions factor of zero in calculating energy-related emissions totals.
The hybrid approach is the approach that has been used by the Group in previous years to establish the baseline and the targets. In order to be able to compare historical performance
year to year, the total emissions (Scope 1 and 2) have been calculated using the hybrid approach.
5. The total CO
2
e figure is the total of the CO
2
equivalent from energy and the refrigerant contribution.
6. NO
x
emissions are predominantly those from combustion processes. The CO
2
equivalent Global Warming Potential contribution from these releases is already included in the CO
2
from the
energy figure above.
7. 2020 data has been modified according to the details provided in the Environment section.
8. Percentage changes are calculated from the base data and may differ slightly from changes calculated from the data in the tables because of rounding.
9. Our Stallingborough site in the UK draws electricity from an adjacent waste incinerator. But since the waste is both renewable and non-renewable, the site has some associated emissions.
In 2021, the emissions from this electricity were 0.438kg CO
2
e per kWh, based on our determination of the factors used for the Climate Change Agreement submission.
10. Environmental performance data covers all manufacturing operations and major office/technical centres. It excludes all non-trading and office/sales-related subsidiaries and joint ventures
listed on pages 179 and 180 of this Report.
Other information
GRI Content Index
184
Synthomer plc
Annual Report 2021
GRI Standard Disclosure Page
GENERAL DISCLOSURES
Organisational profile
GRI 102-1 Name of the organisation front cover
GRI 102-2 Activities, brands, products, and services 3-7
GRI 102-3 Location of headquarters back cover
GRI 102-4 Location of operations 3, 26, 30, 34, 39
GRI 102-5 Ownership and legal form 127-128
GRI 102-6 Markets served 6-7
GRI 102-7 Scale of the organisation 2-5
GRI 102-8 Information on employees and other workers online data pack
GRI 102-9 Supply chain 51-53
GRI 102-10 Significant changes to the organisation and its supply chain 9, 22
GR I 10 2-11 Precautionary principle or approach 69-80
GRI 102-12 External initiatives 44, 47, 54
GRI 102-13 Membership of associations 45
Strategy
GRI 102-14 Statement from senior decision-maker 8-13
Ethics and integrity
GRI 102-16 Values, principles, standards, and norms of behaviour 62, 65-67
Governance
GRI 102-18 Governance structure 45, 84-93
Stakeholder engagement
GRI 102-40 List of stakeholder groups 46, 96-97
GRI 102-41 Collective bargaining agreements 62
GRI 102-42 Identifying and selecting stakeholders 46, 96-97
GRI 102-43 Approach to stakeholder engagement 46, 96-97
GRI 102-44 Key topics and concerns raised 46, 96-97
Reporting practice
GRI 102-45 Entities included in the consolidated financial statements 179-180, 183
GRI 102-46 Defining report content and topic Boundaries 179-180, 183
GRI 102-47 List of material topics 46
GRI 102-48 Restatements of information 59, 61,183
GRI 102-49 Changes in reporting 59, 61,183
GRI 102-50 Reporting period 47
GRI 102-51 Date of most recent report 47
GRI 102-52 Reporting cycle 47
GRI 102-53 Contact point for questions regarding the report 188
GRI 102-54 Claims of reporting in accordance with the GRI Standards 47
GRI 102-55 GRI content index 184-185
GRI 102-56 External assurance 47
SPECIFIC DISCLOSURES
Strategy and Business
GRI 103-1 Explanation of the material topic and its Boundary 44
GRI 103-2 The management approach and its components 44
GRI 103-3 Evaluation of the management approach 44
Risk Management
GRI 102-15 Key impacts, risks, and opportunities 46, 69-80
Governance and Compliance
GRI 103-1 Explanation of the material topic and its Boundary 45, 66, 81
GRI 103-2 The management approach and its components 45, 66, 92
GRI 103-3 Evaluation of the management approach 45, 66
Responsible and involved management
GRI 102-20 Executive-level responsibility for economic, environmental, and social topics 45
Stakeholder involvement
GRI 102-21 Consulting stakeholders on economic, environmental, and social topics 46, 97
Compliance
GRI 205-2 Communication and training about anti-corruption policies and procedures 66
185
Strategic report Governance Group financial statements
Synthomer plc
Annual Report 2021
Other informationCompany financial statements
GRI Standard Disclosure Page
Ethics and Integrity
GRI 102-17 Mechanisms for advice and concerns about ethics 66
People
GRI 103-1 Explanation of the material topic and its Boundary 62-63
GRI 103-2 The management approach and its components 62-63
GRI 103-3 Evaluation of the management approach 62-64
Employment conditions
GRI 401-1 New employee hires and employee turnover 62
Employees diversity and inclusion
GRI 405-1 Diversity of governance bodies and employees 64
Employees development, training and education
GRI 404-1 Average hours of training per year per employee online data pack
GRI 404-3 Percentage of employees receiving regular performance and career development reviews online data pack
Communities support
GRI 413-1 Operations with local community engagement, impact assessments, and development programs 67-68
Safety
GRI 103-1 Explanation of the material topic and its Boundary 54
GRI 103-2 The management approach and its components 54
GRI 103-3 Evaluation of the management approach 55-57
Occupational Health andSafety
GRI 403-1 Occupational health and safety management system 57
GRI 403-2 Hazard identification, risk assessment, and incident investigation 55-57
GRI 403-4 Worker participation, consultation, and communication on occupational health and safety 54-57
GRI 403-5 Worker training on occupational health and safety 55-57
GRI 403-6 Promotion of worker health 55
GRI 403-8 Workers covered by an occupational health and safety management system 54-57
GRI 403-9 Work-related injuries 55
GRI 403-10 Work-related ill health 55
Environment
GRI 103-1 Explanation of the material topic and its Boundary 54, 58
GRI 103-2 The management approach and its components 58-59
GRI 103-3 Evaluation of the management approach 58-61
Energy
GRI 302-1 Energy consumption within the organisation 182
GRI 302-3 Energy intensity 59, 182
GRI 302-4 Reduction of energy consumption 59-60, 182
Water
GRI 303-3 Water withdrawal 60-61, 183
GRI 303-5 Water consumption 60-61
Emissions
GRI 305-1 Direct (Scope 1) GHG emissions 182
GRI 305-2 Energy indirect (Scope 2) GHG emissions 182
GRI 305-4 GHG emissions intensity 60, 182
GRI 305-5 Reduction of GHG emissions 60, 182
GRI 305-7 Nitrogen oxides (NO
x
), sulphur oxides (SO
x
), and other significant air emissions 182
GRI 306-2 Waste by type and disposal method 61, 183
Sustainable Value Chain
GRI 103-1 Explanation of the material topic and its Boundary 51
GRI 103-2 The management approach and its components 51-53
GRI 103-3 Evaluation of the management approach 51-53
Procurement
GRI 308-1 New suppliers that were screened using environmental criteria 51
GRI 414-1 New suppliers that were screened using social criteria 51
Product Safety
GRI 416-1 Assessment of the health and safety impacts of product and service categories 50
GRI 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services 50
GRI 417-1 Requirements for product and service information and labelling 50
GRI 417-2 Incidents of non-compliance concerning product and service information and labelling 50
GRI 417-3 Incidents of non-compliance concerning marketing communications 50
Other information
Glossary of terms
AC Amortised Cost
ACC American Chemical Council
AGM Annual General Meeting
AIMS Accident and Incident Management System
AM Acrylate Monomers
APMs Alternative Performance Measures
BAME Black, Asian and Minority Ethnic
C&C Construction and Coatings
C&F Carpet and Foam
Capital
employed
Net assets excluding third party net debt
CASE Coatings, Adhesives, Sealants and Elastomers
CDP Carbon Disclosure Project
CGU Cash Generating Unit
CH
4
Methane
CHP Combined Heat and Power
CIA Chemical Industries Association
CO
2
Carbon Dioxide
CO
2
e Carbon Dioxide equivalent
Constant
currency
Reflects current year results for existing business
translated at the prior year’s average exchange rates,
and includes the impact of acquisitions
CRM Customer Relationship Management system
CSR Corporate Social Responsibility
DEFRA Department for Environment, Food and Rural Affairs
EBITDA EBITDA is calculated as operating profit before
depreciation, amortisation and Special Items
EGM Extraordinary General Meeting
EPDLA European Polymer Dispersion and Latex Association
EPS Earnings Per Share
ERP Enterprise Resource Planning
ESG Environmental, Social and Governance
EUUS Europe, Middle East, Africa and Americas
FEED Front End Engineering Design
FP Functional Polymers
FRC Financial Reporting Council
Free Cash
Flow
The movement in net debt before financing activities,
foreign exchange and the cash impact of Special
Items, asset disposals and business combinations
FRS Financial Reporting Standard
FS Functional Solutions
FVTOCI Fair Value Through Other Comprehensive Income
FVTPL Fair Value Through Profit or Loss
GDP Gross Domestic Product
GDPR General Data Protection Regulation
GHGs Greenhouse Gases
GJ Gigajoule
GRI Global Reporting Initiative
GTI Global Technology and Innovation
GWP Global Warming Potential
H&P Health & Protection
HR Human Resources
HSSBR High Solids Styrene Butadiene Rubber
IAS International Accounting Standard
IBORS Inter-Bank Offered Rates
ICCA International Council of Chemical Associations
IFRS International Financial Reporting Standards
IS Industrial Specialities
ISA International Standards of Auditing
KPIs Key Performance Indicators
ktes Kilotonne or 1,000 tonnes (metric)
LIBOR London Inter-Bank Offer Rates
LMS Learning Management System
LTA Lost Time Accident
LTIP Long-Term Incentive Plan
M&A Mergers and Acquisitions
ManEx Manufacturing Excellence
MCO Movement Control Order
MOC Management of Change
MYR Malaysian Ringgits
N
2
O Nitrous Oxide
NBR Nitrile Butadiene Rubber
NED Non-Executive Director
Net debt Cash and cash equivalents together with short- and
long-term borrowings
NO
x
Nitrogen Oxides
OEM Original Equipment Manufacturer
Operating
profit
Operating profit represents profit from continuing
activities before finance costs and taxation
PBT Profit Before Tax
PE Performance Elastomers
PHA Process Hazard Assessment
PPE Property, Plant and Equipment
PSA Pressure Sensitive Adhesive
PSE Process Safety Events
PSP Performance Share Plan
PTW Permit to Work
PVC Polyvinyl Chloride
R&D Research and Development
RC Responsible Care
ROIC Return on Invested Capital is calculated as Group
Underlying operating profit as a percentage of Group
capital employed
SBR Styrene Butadiene Rubber
SD Sustainable Development
SDG Sustainable Development Goals
SEC Specific Energy Consumption
SHE Safety, Health and Environment
SHEMS Safety, Health and Environment Management
System
SOFR Secured Overnight Financing Rate
SONIA Sterling Overnight Index Average
STEM Science, Technology, Engineering and Mathematics
TCFD Taskforce on Climate-related Financial Disclosures
The Code The UK Corporate Governance Code
TSR Total Shareholder Return
UK GAAP UK Generally Accepted Accounting Practice
Underlying
performance
Underlying performance represents the statutory
performance of the Group under IFRS, excluding
Special Items
VOCs Volatile Organic Compounds
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Synthomer plc
Annual Report 2021
Other information
Historical financial summary
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
Revenue 2,329.5 1,644.2 1,459.1 1,618.9 1,480.2 1,045.7 870.1
Underlying performance (a)
EBITDA (b) 522.2 259.4 177.9 181.0 176.2 160.1 125.0
Operating profit (c) 450.9 189.6 125.8 142.1 139.0 130.2 102.9
Finance costs (30.8) (29.6) (9.6) (7.0) (9.0) (8.0) (7.6)
Profit before taxation 420.1 160.0 116.2 135.1 130.0 122.2 95.3
Basic earnings per share (f) 75.2p 28.9p 25.3p 30.7p 28.7p 26.4p 20.1p
Dividends per share (f) 30.0p 11.6p 4.0p
(g)
12.2p 11.4p 10.5p 8.0p
Dividend cover 2.5 2.5 6.3 2.5 2.5 2.5 2.5
IFRS
Operating profit (c) 308.5 58.4 110.6 128.7 95.4 144.7 80.3
Finance costs (24.6) (38.1) (10.1) (8.4) (9.0) (8.0) (7.8)
Profit before taxation 283.9 20.3 100.5 120.3 86.4 136.7 72.5
Basic earnings per share (f) 48.3p 0.7p 21.5p 27.4p 20.3p 30.3p 16.6p
Dividends per share (f) 30.0p 11.6p 4.0p
(g)
12.2p 11.4p 10.5p 8.0p
Dividend cover 1.6 0.1 5.4 2.2 1.8 2.9 2.1
Net debt (d) (114.2) (462.2) 20.7 (214.0) (180.5) (150.3) (80.1)
Capital expenditure (e) 82.2 53.8 69.1 75.7 60.3 45.6 22.8
Notes:
(a) As presented in the consolidated income statement on page 137.
(b) As defined in the accounting policies note and reconciled in note 5.
(c) As defined in the accounting policies note on page 142.
(d) As reconciled in note 21.
(e) As presented on the consolidated cash flow statement.
(f) Dividends and earnings per share figures for 2018 and prior have been restated to reflect the bonus factor of 1.0713 arising from the rights issue which completed on 29 July 2019.
(g) The proposed final 2019 dividend was cancelled to preserve cash, liquidity and balance sheet strength at the onset of COVID-19 in March 2020.
187
Strategic report Governance Group financial statements
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Annual Report 2021
Other informationCompany financial statements
Other information
Advisers
Registered office
Synthomer plc
Temple Fields
Harlow
Essex
CM20 2BH
Registered number 98381
Company Secretary
Richard Atkinson
Bankers
Barclays Bank plc
Citibank
Commerzbank AG
HSBC Bank plc
Santander
Goldman Sachs
SEB
Joint stockbrokers
Barclays Bank plc and Numis Securities Ltd
Registrars
Computershare Investor Services plc
Lochside House
7 Lochside Avenue
Edinburgh Park
Edinburgh
EH12 9DJ
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
Solicitors
Herbert Smith Freehills LLP
Squire Patton Boggs (UK) LLP
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Synthomer plc
Annual Report 2021
Synthomer plc
45 Pall Mall
London
SW1Y 5JG
United Kingdom
www.synthomer.com