Annual Report 2022

Redefining

Packaging for

a Changing World

DS Smith Plc Annual Report 2022

2021/22 Highlights

1. Based upon continuing operations, before adjusting items and amortisation.

These are all non-GAAP performance measures – see note 32 to the consolidated financial statements.

2. From continuing operations.

3. Based on constant currency.

Financial Non-financial

Contents

Strategic Report

Introduction from the Leadership team

Our business – at a glance

Our investment case

Our Purpose framework

Now and Next Sustainability Strategy

Our Purpose-led approach

Chair’s statement

Section 172 statement

Our business model

Group Chief Executive’s review

Stakeholder engagement

Our strategy – customers

Our strategy – people

Our strategy – sustainability

Our strategy – financial

Operating review

Financial review

Risk management

Viability statement

Principal risks

Task Force on Climate-related Financial

Disclosures (TCFD)

EU Taxonomy

Non-financial information statement

Governance

Board of Directors

Chair’s introduction to governance

Division of responsibilities

Board leadership and Company Purpose

Composition, succession and evaluation

Nomination Committee Report

Audit, risk and internal control

Audit Committee Report

Remuneration Committee Report

112

Additional information

29%

e per tonne reduction since 2015

(5% CO

e per tonne reduction vs 2021)

£7,241m

Revenue

(2021: £5,976m) (2022: +26%

)

15.0p

Dividend per share

(2021: 12.1p) (2022: +24%)

reduction in accident frequency

rate vs 2021

£378m

Profit before tax

(2021: £231m) (2022: +71%

)

£519m

Free cash flow

(2021: £486m) (2022: +7%)

100%

reusable or recyclable packaging

(target achieved)

8.5%

Return on sales

(2021: 8.4%) (2022: +10bps)

£1,484m

Net debt

(2021: £1,795m)

(2022: improvement of £311m)

313m

units of plastic replaced since 2020

(target of one billion units of plastic

replaced by 2025)

+5.4%

Corrugated box volumes

(2021: +3.5%)

+29%

Adjusted operating profit

(2021: £502m) (2022: £616m)

Financial Statements

115

Independent Auditor’s report

125

Consolidated income statement

126

Consolidated statement of

comprehensive income

127

Consolidated statement of

financial position

128

Consolidated statement of

changes in equity

129

Consolidated statement of cash flows

130

Notes to the consolidated

financial statements

187

Parent Company statement of

financial position

188

Parent Company statement of

changes in equity

189

Notes to the parent Company

financial statements

196

Five-year financial summary

Shareholder information

STRATEGIC REPORT

“Our circular business

model positions us

well to be the leading

supplier of sustainable

packaging solutions.”

Geoff Drabble

Chair

“I am proud of the way

the Group has performed

in the year, supporting

our customers, improving

our profits and investing

for growth. ”

Miles Roberts

Group Chief Executive

“Strong financial performance

and cash generation have

driven a significant reduction

in our leverage during the

year, positioning us well for

the future.”

Adrian Marsh

Group Finance Director

Leading the change for

the circular economy

Annual Report 2022 dssmith.com 1

At a glance

Our business model overview

Delivering more circular solutions for customers and wider society:

What we do

• Provide sustainable solutions

• Replace problem plastics

• Take carbon out of supply chains

• Employ Circular Design Principles

• Provide innovative recycling

solutions

• Work with resilient fast moving

consumer goods (FMCG) customers

The value we create

• Satisfied customers

• Packaging that is sustainable

• Returns to our capital providers

• Safety and opportunities for

our people

• Leadership in sustainability

• Community involvement

• An inclusive workplace

Find out more on page 14

DS Smith is a leading provider of sustainable fibre-based packaging across Europe and the US which is

supported by recycling and papermaking operations. It plays a central role in the value chain across

sectors including e-commerce, fast moving consumer goods and industrials. We have created a circular

business focused on sustainable packaging.

Packaging

We are a leading international sustainable

packaging company, delivering innovative

corrugated products with a high quality

service across Europe and North America.

We are fully fibre-based and our product

portfolio includes packaging for consumer

products, e-commerce, promotion, transit

and industrial packaging.

We partner with customers to provide

innovative packaging solutions. We use our

Circular Design Principles to improve the

sustainability of our solutions. We

complement our product range with

consultancy services on supply chain

optimisation and creative design.

Our packaging is fully sustainable and made

from largely recycled and/or recyclable

material, which means the packaging we

produce helps our customers to achieve

their own sustainability targets. Our

corrugated packaging is typically produced

within c. 200km of its destination due to

the requirements for just-in-time delivery

and the increased focus on sustainability.

c. 25,000 employees

c. 9.3 billion m

corrugated

board sold in 2021/22

Paper

We are a leading international manufacturer of

corrugated case material (CCM), which is the

paper used for conversion into corrugated board.

We also manufacture some specialist paper

grades such as plasterboard liner. DS Smith is

overall ‘short paper’, meaning we are a net buyer

of paper for our packaging requirements. We

operate a paper sourcing platform that ensures

we procure the paper that is right for our

customers’ packaging. We determine whether we

make or buy our required paper, and then we sell

some of our paper output. Paper is readily

transportable and is traded globally, so in some

cases it is more efficient to sell our paper and buy

in other regions, depending on local pricing.

We operate 13 CCM paper mills, 11 in Europe

and two in the US. Of those, two are kraftliner

mills (virgin paper – one in the US, one in Europe)

and the remainder are principally dedicated

to the production of recycled CCM (testliner).

We also have two small mills in Europe producing

specialist paper grades. Fibre for our testliner

is principally sourced from our own

recycling operations.

c. 4,000 employees

c. 4.5 million tonnes CCM produced

in 2021/22

Recycling

We provide a full recycling and

waste management service. We are

Europe’s largest cardboard and

paper recycler and are also one of

the leading full service recycling and

waste management companies in

Europe. We collect quality paper and

cardboard for recycling from a range

of sectors, including retailers,

manufacturers, local authorities,

and other recycling and waste

management companies. The used

paper and board we collect provides

cost efficient raw material for the

Group’s recycled paper making

processes. We also sell used fibre to

third parties globally.

c. 1,000 employees

c. 6.2 million tonnes fibre

managed in 2021/22

OUR BUSINESS

Where we operate

Our business operates in four geographic segments with three in Europe

and one in North America.

Eastern Europe

Austria, Bosnia-Herzegovina,

Bulgaria, Croatia, Czechia,

Estonia, Greece, Hungary,

Latvia, Lithuania, North

Macedonia, Poland, Romania,

Serbia, Slovakia, Slovenia

and Türkiye

North America

United States

Northern Europe

Belgium, Denmark, Finland,

Germany, Netherlands,

Norway, Sweden, Switzerland

and United Kingdom

Southern Europe

France, Italy, Portugal

andSpain

Our strategy

Our strategy is based on balancing the requirements of our core stakeholders:

To delight our

customers

How we engage with

customers

See more on page 20

To realise the potential

of our people

How we engage

with our people

See more on page 24

To lead the way in

sustainability

How we engage

with society

See more on page 30

To double our size

and profitability

How we engage with

our investors

See more on page 34

£2,790m

£2,736m

£1,118m

£597m

c. 11,000

c. 9,000

c. 8,000

c. 2,000

2021/22 Revenue 2021/22 Employees

Annual Report 2022 dssmith.com 3

STRATEGIC REPORT

1. Based on constant currency.

We are a sector-leading, innovative business, aligned with powerful growth drivers.

Our scale, innovation, sustainability credentials and strong purpose set us apart.

Why invest in DS Smith?

We are a sustainability leader

• We are the only solely fibre-based major packaging company in Europe and

Europe’s largest cardboard and paper recycler.

• We are driving the transition to the circular economy with a fully circular

business model, operating a ’short paper’ model to drive long-term, consistent

return on capital.

• We have a leading sustainability strategy which includes ambitious targets in

plastic replacement and carbon reduction, resulting in excellent environmental,

social and governance (ESG) ratings.

Strong market drivers

• Rapid growth in e-commerce – Our sustainable, omni-channel packaging is

revolutionising packaging for the entire retail sector, both bricks and mortar

and online.

• Increasing importance of sustainability – We are helping our customers

respond by designing out waste, keeping valuable materials in use and making

it easier for consumers to reuse and recycle packaging.

• Plastic replacement – We have already replaced over 300 million items of

single-use plastic from our customers’ supply chains with fibre alternatives.

Proven track record and strong

balance sheet

• Strong corrugated box volume growth of 5.4 per cent.

• Adjusted operating profit growth +29 per cent

• Strong free cash flow and leverage reduced to 1.6 times net debt/EBITDA.

• Investment grade credit rating.

Strong customer base

• We have ever-deeper relationships with our predominant customer base of

blue-chip, resilient FMCG and e-commerce brands.

• Customer driven growth through investment in innovation, sustainability,

digital enablement and packaging capacity to gain further market share.

• Consolidation of suppliers – Our scope, scale and reach will further strengthen

our position with some of the world’s leading consumer goods companies as they

reduce the number of suppliers they work with.

We are an industry leader

• We are a leading supplier of innovative, sustainable packaging solutions

employing around 30,000 people in more than 30 countries mostly in the

developed world.

• Well-invested asset base and footprint to deliver for multinational

customers spanning 400+ sites in Europe, and in North America, where we are

expanding rapidly.

• Strong commitment to investment in our asset base, research and

development (R&D) and innovation.

OUR INVESTMENT CASE

Redefining Packaging for a Changing World

Underpinned by our values

Be caring

We take pride in what we do

and we care about our

customers, our people and the

world around us

Be challenging

We are not afraid to

constructively challenge each

other and ourselves to find a

better way forward

Be responsive

We seek new ideas and

understanding and are quick to

react to opportunities

...which help us to deliver our vision

To be the leading supplier of sustainable packaging solutions

Our Purpose

‘Redefining Packaging for a Changing World’

Our Purpose is ’Redefining Packaging for

a Changing World’. It is our reason for

being. It sets out why we exist and the

value we bring to our customers and all

stakeholder groups.

Our Purpose focuses our DS Smith team

on the rapidly changing world around us

as consumers’ lives and shopping habits

are changing due to the acceleration of

the digital world. It encourages us to look

outside of the confines of the packaging

industry and forward to see how these

changes influence shopping patterns,

such as switches from stores to home

shopping, and will impact on the

environment and how packaging plays

its part in a more sustainable

experience for all.

Our Purpose sharpens our instincts

and encourages us to tackle some of the

world’s biggest challenges, such as

replacing problem plastics.

Our Purpose feeds all parts of our

organisation, including people, policies,

research and development (R&D), design

and customer interactions. We are

redefining packaging through our four

strategic goals: delighting our customers,

realising the potential of our people,

leading the way in sustainability and

doubling our size and profitability.

We believe that if we deliver in this

way, we will meet our vision to be

the leading supplier of sustainable

packaging solutions.

We deliver our Purpose through our strategic goals...

To delight our customers:

by delivering outstanding

results to them as we

increase their sales, reduce

their costs, manage their risk

and become circular ready

To realise the potential of

our people: by creating a

safe environment where

every colleague can develop

their skills and ideas

To lead the way in

sustainability: by bringing

our customers into the

circular economy using

recyclable materials

responsibly in our

circular business

To double our size and

profitability: by driving

operational and commercial

excellence, growing our

market share and expanding

into new markets

Be tenacious

We get things done

Be trusted

We can always be trusted

to deliver on our promises

Annual Report 2022 dssmith.com 5

STRATEGIC REPORTOUR PURPOSE FRAMEWORK

Now and Next Sustainability Strategy

Now and Next is our sustainability strategy that sets out how we will tackle the sustainability

challenges we are facing today, as well as those that will impact future generations.

How we contribute to the UN Sustainable Development Goals (SDGs)

Responsible Consumption and

Production: We keep materials in

use for longer, reduce waste and

pollution and protect

natural resources.

Life on Land: We minimise

our use of sustainably sourced

fibre, protecting and restoring

ecosystems.

Climate Action: We reduce our

emissions to combat climate

change and its impacts.

Decent Work and Economic Growth:

We commit to being a responsible

employer, with high ethical, labour

and employment standards.

Alignment with international frameworks

We support several international frameworks including United Nations Global Compact (UNGC),

United Nations Declaration of Human Rights and the Convention on the Rights of the Child,

International Labour Organization (ILO) Eight Fundamental Conventions and Organisation for

Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

NOW

By 2023, manufacture 100 per cent

reusable or recyclable packaging

We work with customers to design circular

packaging solutions that achieve more from less,

delivering for rapidly changing consumer

lifestyles with minimum impact on the world

around us.

People are the foundation of our success and we prioritise their health,

safety and wellbeing and contribution to our communities

Now and Next strategy

Closing the loop

through better

design

Protecting natural

resources by

making the most of

every fibre

Reducing waste

and pollution

through circular

solutions

Equipping people to

lead the transition

to a circular

economy

Our focus is on:

We will continue to:

Drive carbon reduction

Care for forests and their biodiversity

By 2025, measure and

improve biodiversity

in our own forests

By 2030, reduce Scope 1, 2

and 3 GHG emissions by 46

per cent compared to 2019

and reach Net Zero

emissions by 2050

By 2025, optimise fibre use for

individual supply chains in 100 per cent

of our new packaging solutions

By 2025, take one billion pieces of

problem plastics off supermarket

shelves and work with partners to find

solutions for ‘hard to recycle’ packaging

By 2025, engage 100 per cent of our

people on the circular economy

NOW AND NEXT

By 2030, aim for all of our packaging to

be recycled or reused and pilot 20 new

business models for improving

post-consumer waste quality

and recycling rates

By 2030, aim to optimise every fibre

for every supply chain

By 2030, aim to use packaging and

recycling to enable the circular

economy by replacing problem plastics,

reducing value chain emissions and

eliminating consumer packaging waste

By 2030, engage five million people

on the circular economy and

circular lifestyles

We will work together with partners to

develop fully circular strategies, from

design to production and supply to

recycling, creating positive impact

packaging for our changing world.

Progress against our Now and Next sustainability targets

In 2021/22, we continued to deliver strong progress against our Now and Next sustainability targets. Turn to pages 30-33 to learn more

and see the DS Smith Sustainability Report 2022 for a complete progress review.

Now and Next sustainability target 2020/21 2021/22 Status

Closing the loop

through better design

By 2023, manufacture 100% recyclable or reusable packaging

99%

100%

Achieved

By 2030, aim for all our packaging to be recycled or reused

Ongoing

On track

By 2030, pilot twenty new business models for improving

post-consumer waste quality and recycling rates

Ongoing

On track

Reducing waste and

pollution

By 2025, take 1 billion pieces of problem plastics off

supermarket shelves

313

million

Ahead

By 2025, work with partners to find solutions for ‘hard

to recycle’ packaging

Ongoing

On track

Protecting natural

resources

By 2025, optimise fibre for individual supply chains in 100%

of new packaging solutions

23%

26%

On track

By 2030, aim to optimise every fibre for every supply chain

Ongoing

On track

Maintain FSC® certification at 100% of our sites

100%

Achieved

Maintain forest management certification at 100% of our forests

100%

Achieved

Driving carbon

reduction

By 2030, reduce Scope 1, 2 and 3 GHG emissions

by 46% compared to 2019

Ongoing

On track

By 2050, reach Net Zero GHG emissions

Ongoing

On track

Maintain 100% of our energy consumption is ISO 50001 certified

100%

Achieved

Measuring and

improving biodiversity

By 2025, measure and improve biodiversity in our own forests

Ongoing

On track

By 2025, launch 100 biodiversity projects across

Europe and North America

100

Achieved

By 2025, run a biodiversity programme in the local

communities of our mills

Ahead

Managing water

responsibly

By 2025, achieve zero non-conformances with consents

to discharge

On track

By 2030, reduce water withdrawal by 1% per tonne of

production per year at mills in areas at risk of

water stress compared to 2019

8.10m

8.08m

Ahead

Maintain a water stress mitigation plan at 100% of our sites

in areas at risk of water stress

100%

Achieved

Sending zero waste to

landfill

By 2030, send zero waste to landfill

258,225

tonnes

255,920

tonnes

On track

Equipping people to

lead the transition to

the circular economy

By 2025, engage 100% of our people on the circular economy

50%

Ahead

By 2030, engage five million people on the circular economy

and circular lifestyles

519,000

2.3 million

Ahead

Respecting and

promoting human rights

By 2022, conduct a human rights risk assessment

Ongoing

Delivered

Achieved

Contributing to our

communities

Maintain 100% of sites engage in community

activities each year

100%

Achieved

Sourcing sustainably

By 2025, ensure 100% of suppliers comply with

our sustainability standards

45%

78%

Ahead

Maintain that 100% of the papers we use are recycled or

chain of custody certified

100%

Achieved

1. We now consider this target ‘achieved’ because greater than 99.5% of our packaging volume meets this standard, enabling recyclability in practice and at scale.

For the remaining less than 0.5% volume that is presently not either recyclable in practice or at scale, such as some barrier coatings and foam, we continue to push

for circular alternatives.

2. Cumulative total of plastic units replaced with recyclable alternatives during 2020/21 and 2021/22.

3. Our environmental metrics were previously reported on a calendar year reporting period. All of our metrics are now reported on a financial year reporting period,

and therefore historic environmental metrics have been restated.

Annual Report 2022 dssmith.com 7

STRATEGIC REPORT

Inventing, re-imagining

and redefining to deliver the

circular economy

The events of the past year have impacted our customers all over

the world, but through our global scale and innovative, customer-

led approach we are well positioned to respond.

We must continue to lead, to predict and show our customers the

way to tackle the huge challenges of new retail channels such as

e-commerce and providing more sustainable, circular solutions at

scale wherever they operate.

This is why we are leading the way with innovative new thinking

that will accelerate the transition to the circular economy.

From our packaging to our processes, our designers and innovators

are relentlessly pursuing every new opportunity to create circular

solutions designed to eliminate waste and pollution, re-use or

recycle products and materials, and regenerate nature.

Many of our customers are multinational industry-leading brands

who require a global, consistent approach to their packaging; and

they are increasingly looking for closer partnerships to grow and

innovate with them.

As part of our five-year commitment to invest £100 million in

research and development (R&D), we have opened a state-of-the-

art laboratory at Kemsley Mill, the second largest paper mill in

Europe, to advance our research into alternative fibre sources for

paper and packaging products.

We have also announced a new flagship innovation centre for

ideation, design, testing, piloting and collaboration near

Birmingham, UK. This facility will allow us to install and test pilot

product and service lines to enable customers to visualise the

value that we can bring to them.

Redefining

Packaging

for a Changing World

OUR PURPOSE-LED APPROACH

NEW

DESIGNS

NEW

APPLICATIONS

NEW

PROCESSES

NEW

MATERIALS

NEW

TECHNOLOGIES

Designers &

Innovators

E-COMMERCE

CHANNEL

AGILITY

CONSUMER

PACKAGING

CIRCULAR

READY

SMART

PACKAGING

NEW

BUSINESS MODELS

“70 per cent of waste is determined at the

product’s design stage. That means

innovative design, and the materials and

processes we use, is at the heart of the

transition to the circular economy.”

Alan Potts, Design & Innovation Director

DS Smith is applying science to fibre

We are exploring a range of new materials through our

£100 million R&D programme, but more than this, we are

partnering with our customers to help them realise the

significant benefits of the circular economy. We are

embedding circularity into all of our products which is felt

throughout the whole life cycle.

See more online dssmith.com

Fibre harvested from the ocean floor

Beyond optimising traditional paper fibres, this year in an

industry first, we conducted initial trials exploring how

seaweed fibres may be used as a raw material in a range

of packaging solutions.

In particular, it could play a significant role in removing

problem plastics by acting as a barrier coating to protect

items like foodstuffs.

“Seaweed has exciting applications

that could become the next generation

of sustainable packaging solutions. Our

research into alternative fibre sources

has the potential to lessen pressure on

forests, protecting natural resources.”

Thomas Ferge, Paper and Board Development Director

at DS Smith

Packaging innovation is the lifeblood of our organisation and is

vital in keeping global supply chains running as they become more

integrated, demanding and focused on sustainability.

A crucial part of making sure our packaging meets the evolving

demands of the supply chain is ensuring that circularity is built in at

the start.

We have embedded our pioneering Circular Design Metrics across

all our packaging sites to ensure that we can measure the

environmental impact of all our design solutions. An industry first,

our metrics enable us to quantify the sustainability performance

of each of our packaging designs across eight key different

indicators: carbon footprint, design for reuse, supply chain

optimisation, recyclability, planet safety, material utilisation,

renewable sourcing and recycled content.

We are committed to ensuring that the performance of our

packaging matches these needs and our industry-first science-

based optimisation programme PACE™ (Performance, Assurance,

Consistency & Environmental excellence) enables us to guarantee

our boxes deliver the right specification, efficiency, carbon savings

and cost for our customers.

Annual Report 2022 dssmith.com 9

STRATEGIC REPORT

£100m

investing in innovation for the

next five years

Every change brings innovation

and with it significant opportunities

The past 12 months have seen the environment in which we

operate continue to evolve at pace. Large scale events including

Covid-19, climate change and macroeconomic factors have

been a catalyst for consumers to consider the way they relate

to packaging.

This changing landscape has resulted in consumers becoming

increasingly aware of the world around them and their role

within it. They see their purchasing choices as a way to have

influence and will actively seek out companies offering more

sustainable solutions.

“Small steps made now can have the biggest

impact. Our customers like to play their part

and by offering to bring used packaging

directly back to us to then recycle into new

packaging with DS Smith again and again is a

significant step towards a circular economy.”

Jacquie Silvester, Head of Sustainability and

Improvement at Cotswold Co.

Redefining Packaging

for a

Changing World

SCALE

INNOVATION

SUSTAINABILITY

AND CIRCULAR

ECONOMY

RESPONDING

TO RETAIL

CHANNEL

CHANGES

E-COMMERCE

SUSTAINABILITY

OUR PURPOSE-LED APPROACH CONTINUED

Investing

to respond

to change

With global e-commerce predicted to account for 21 per cent of

total sales in 2022 and 24.5 per cent by 2025, there is mounting

pressure on retailers and brands to live up to consumers’

sustainability expectations, with consumers more likely to choose

a clearly marked sustainable alternative and 64 per cent of

consumers willing to pay more for sustainable packaging.

Sustainable packaging has also risen up the agenda for

governments, with many implementing legislative changes,

including introducing taxes, aimed at curbing the use of plastics

and plastic packaging. Such legislation is driving innovation with a

sizeable opportunity at stake.

Our research has demonstrated that 1.5 million tonnes of single-

use plastic, or 70 billion units, could be removed from supermarket

shelves across Europe each year and replaced with alternative

renewable and recyclable materials.

We are at the forefront of this effort having already helped to

remove 313 million pieces of problem plastic from supermarkets

and online retailers globally since 2020. To achieve this, we have

created more than 1,000 wholly recyclable fibre-based packaging

solutions for both traditional and e-commerce retailers.

Not only are sustainable packaging and services impacting

consumer preferences, how and where consumers choose their

products have also been impacted by the changing world around

us. Covid-19 accelerated developing consumer preferences for

buying their products through a range of different channels,

leading to increased growth of e-commerce shipments.

The customer ‘unboxing experience’ must not be forgotten and is a

key driver for brands as they look to truly differentiate their

engagement with consumers.

As the world continues to evolve and consumer preferences shift,

we will remain agile, helping our customers to respond to these

trends while meeting our shared sustainability ambitions.

Collaborating with our customers to replace

problem plastics

Globally, our design teams have been innovating to find

solutions to our customers’ single-use and hard to recycle

packaging, with more than 1,000 recyclable, fibre-based

solutions developed for products from wine boxes and

ready meal trays to shrink wrap and fruit punnets.

See more online dssmith.com

Asda

As part of Asda’s accelerated target to reduce own brand

plastic by 15 per cent by the end of 2021, the retailer

worked to make in-store displays more sustainable,

cutting down on plastic and non-recyclable materials.

We helped Asda find a sustainable alternative for shelf

edge label holders that will replace one million pieces

of unnecessary plastic from its displays this year.

“Removing unnecessary plastic is at the

top of our minds and is very important to

our customers. This project with DS Smith

has enabled us to remove the plastic shelf

edge label holder, making it easier for

our shipper units to flow through our

cardboard recycling stream.”

Lisa Walker, Packaging and Print Specialist at Asda

Annual Report 2022 dssmith.com 11

STRATEGIC REPORT

64%

of consumers actively reduced

their use of plastic packaging

last year (Euromonitor)

78%

of people are more likely to

purchase a product that is

clearly labelled as

environmentally friendly

85%

agree that they ‘want to buy

products which use as little

packaging as possible’

A year of momentum

2021/22 has been a year of strong

momentum in the business despite

continuing to operate within a Covid-19

environment for much of the year and more

recently the uncertainty caused by the

Russian invasion of Ukraine and the impact

on the macroeconomic environment.

I am pleased with our performance, with

record volume growth translating to 29 per

cent profit growth through managing our

supply chain and cost base and increasing

packaging prices to recover the

significantly increasing input costs. We saw

good growth across all our customer base,

with volumes from our bedrock of fast

moving consumer goods customers

growing particularly well.

We have seen particularly strong

performances from regions where we have

invested significantly recently, with the

North America and Southern Europe

regions delivering the highest margins of

the Group. In the US, we are seeing the

benefit of the Indiana site contributing to

exceptional volume growth in the region,

and in the Southern region, Europac has

delivered a very strong operational and

financial performance.

We are driving the transition to the circular

economy with a fully circular business

model which has delivered during the

period, with excellent cash generation,

despite increasing our investment in the

business and an inflationary environment.

We have reduced our leverage down to

1.6 times EBITDA versus our medium-term

target of 2.0 times, and have made good

progress in our return on sales and in

particular return on average capital

employed during the year.

Investing in our business

We have consistently invested to benefit

from long-term growth drivers of a

changing retail environment and

sustainable solutions in anticipation of the

growth which is now playing out, with

e-commerce in particular accelerated by

Covid-19. That investment has taken the

form of designers, technicians and

equipment, resulting in a range of

innovative and sustainable solutions via

our Circular Design Principles and

e-commerce products and services, so that

our packaging adds value, helping our

customers in the transition to a more

circular economy and achieve their own

sustainability targets.

We have also invested in additional

capacity with two new packaging sites in

Italy and Poland. Our site in Italy is now

operational, with the site in Poland

currently being commissioned ready for

production to commence in the next few

weeks, all in line with customer driven

demand for ever more sustainable

packaging and we are confident in the

returns these sites will deliver.

Health and safety

Our values and priorities remain

unchanged. The primary areas of focus for

the Board and management team are for

the safety, health and wellbeing of our

employees together with serving our

customers in these challenging times.

Our people have responded magnificently,

despite the ongoing impact of Covid-19,

adapting ways of working where needed,

enabling us to continue to serve our

customers in a safe operating environment.

Despite the many challenges we have

faced, this is the 13th consecutive year we

have seen an improvement in our health

and safety KPIs.

Sustainability

Sustainability is at the heart of our

business, both in how we operate our own

business, but also how we help our

customers solve their sustainability

challenges. In the year, we announced our

commitment to a science-based target in

line with the 1.5°C trajectory which

equates to a 46 per cent absolute

reduction in CO

by 2030 versus 2019 and

are committed to Net Zero carbon

emissions by 2050. We saw a greater

acceleration in our customers’ aspirations

for plastic replacement and we continue to

take a leadership position in the debate

with our presence at COP26 and our

collaboration with the Ellen MacArthur

Foundation. Our engagement with

stakeholders on the topic of ESG has

increased significantly as the interests and

requirements of customers, investors and

consumers continue to grow.

The Board

In January 2022 Rupert Soames informed

the Company that he planned to retire from

the Board at the conclusion of the Annual

Chair’s statement

“Our Purpose of ‘Redefining Packaging for a Changing World’ has never

been more relevant for our business and society at large. A number of the

structural growth drivers have been accelerated by the pandemic and our

assets, strategy and people position us well to benefit. As a fully fibre-based

company, our circular model supports our vision to be the leading supplier

of sustainable packaging solutions.”

Geoff Drabble,

Chair

CHAIR’S STATEMENT

Engaging with stakeholders: Section 172 statement

The Board aims to promote the success of the Company for the benefit of its shareholders as a whole, taking into account the long-term consequences

of its decisions and looking at those decisions through a variety of lenses. This involves the Board and management considering in detail and discussing

the interests of the Company’s stakeholders including our customers, our people, our investors, our suppliers, local communities and non-governmental

organisations; the importance of maintaining our reputation for high standards of business conduct; and the environment. More information about our

stakeholders is set out on page 18 and 19. More information about the Board balancing stakeholder interests is set out on page 69. Examples of what

that has looked like in practice over the past year are summarised below. Engagement with all our stakeholders is led by our executive teams, who in

turn regularly update Board members, via presentations and briefings. In the governance section of this Annual Report we use

s172

to highlight the

examples referred to below:

Stakeholder Strategic Report Governance

Our customers

Pages 10 and 11 (collaboration), 18

(engagement)

Page 74 (engagement with our customers via updates from sales,

marketing and innovation functions)

Our people

Pages 18 and 25 (engagement and feedback), 25

(decisions made in consultation with employees),

26 (engagement on health and safety), 28

(global recognition programme)

Pages 73 (engagement with our workforce), 73 (EWC meetings), 73 (EWC

representative attending Remuneration Committee meeting and

Remuneration Committee Chair attending EWC Executive meetings)

Our investors

Page 18 (engagement) Pages 73 (engagement with our shareholders)

Our suppliers

Page 19 (engagement and supplier standards) Page74 (engagement with our suppliers via updates from Group

procurement)

The environment and

communities

Pages 19 (engagement with stakeholders on

environmental matters and charitable giving), 32

(engagement with ESG rating agencies)

Pages 73 (discussion of commitment to align to a 1.5

C scenario), 74

(engagement with other stakeholders including briefing on community

engagement)

Governments

and non-

governmental

organisations

Page 19 (engagement) Page 73 (engagement with other stakeholders including briefing on

COP26)

This statement is made in conformity with the requirement to explain how directors fulfil section 172 of the Companies Act 2006.

General Meeting on 6 September 2022.

Rupert handed over his Senior

Independent Director duties to David

Robbie from 28 February 2022. On behalf

of the Board and the Company, I would like

to thank Rupert for his great contribution

and commitment to the Board and the

Company and wish him continued success

in the future. His tireless work in

completion of the recent Chair succession

process and his subsequent assistance

in my integration into the role have

been invaluable.

I am also pleased to welcome David’s

appointment as Senior Independent

Director, a role in which I am sure he will

excel given his already considerable

contribution as Audit Committee Chair.

I am delighted that Alan Johnson has been

appointed to the Board as a Non-Executive

Director. He also joins the Audit,

Nomination and Remuneration

Committees of the Board. Alan has a strong

financial background in consumer goods

and retail, having held a number of senior

finance positions at Unilever during a

30-year career, including Chief Audit

Executive and Chief Financial Officer of the

Global Foods Division.

Dividend

The Board considers the dividend to be a

very important component of shareholder

returns and it is integral to our capital

allocation policy of delivering a return to

shareholders while maintaining a robust

balance sheet with the flexibility for

reinvestment in projects expected to

deliver returns in our return on capital

range, in the medium term. We have a

longstanding capital allocation and

dividend policy of paying a dividend with

cover of 2.0 – 2.5 times to adjusted EPS. In

respect of 2021/22, we paid an interim

dividend of 4.8 pence and propose a final

dividend of 10.2 pence, together 15.0

pence, representing cover of 2.0 times, in

line with our policy.

Outlook

On behalf of the Board, I would like to

welcome colleagues who have joined

DS Smith during the year and to thank

everyone for their commitment

and hard work.

We have seen real progress in the business

during the year and our customer driven

investment into research and

development, people and new sites

positions us well to continue that

momentum into the future.

The new financial year has started well,

building on the momentum from the

previous year. Whilst there remains

considerable uncertainty about the overall

economic environment, our expectations

remain unchanged. Strong customer

demand reinforces our confidence to

invest in the business, with capital

expenditure expected to further increase

in the current year. We currently expect to

see 2-4 per cent growth in our volumes,

aided by our focus on resilient end markets,

a strong performance in the US and the

opening of new sites in regions where

demand is buoyant. This growth, combined

with the benefits of ongoing pricing

momentum and careful management of

our cost base gives us confidence for the

year ahead and is expected to result in

a further substantial improvement in

our performance.

Annual Report 2022 dssmith.com 13

STRATEGIC REPORT

To be the leader in

sustainable packaging solutions

Our relationships

and resources

Our people and values

We employ around 30,000 people

globally and invest in and develop

them so they can realise their

potential. Our values and

management standards guide how

we operate.

Manufacturing and other

physical assets

We have an extensive network of

packaging manufacturing sites,

paper mills, recycling depots and

innovation centres, supported by

the infrastructure of the countries

in which we operate.

Our relationships

We interact in a way consistent

with our corporate values to build

and maintain trusted relationships

with our customers, suppliers

and communities.

Intellectual capital

We have substantial customer

understanding, innovation and

patented designs.

Data and digital

Integration of data and digital will

help increase manufacturing

capacity, service levels, and deliver

best in class customer experience.

Financial capital

We are funded by a combination of

shareholder equity, debt and

reinvested cash flow.

Natural capital

We operate a circular model

through the recycling of natural

material, in particular wood fibre.

CCM: corrugated case material, the paper used to form corrugated board

OCC: old corrugated cases, i.e. used corrugated board, a feedstock for recycled paper

CCM

Paper is converted

into corrugated

board and then

into packaging

Used

packaging

Used packaging is

collected and brought

to our recycling

facilities

Boxes

Packaging is used by

our customers,

retailers and

consumers

OCC and

recovered fibre

OCC and recovered

fibre are converted

into paper again

1 32 4

Recycling

3 2

DS Smith

operations

Customers

Retailers

Consumers

Corrugated

packaging

Paper

manufacturing

OUR BUSINESS MODEL

The value we

create

Satisfied customers

We develop packaging that helps

our customers sell more, reduce

costs, manage risks and become

circular-ready.

Packaging that is

sustainable

Our packaging is usually fully

recyclable and made from largely

recycled material. We recycle more

packaging than we produce.

Replacing plastic

We have replaced 313 million units

of plastic with alternative fibre-

based solutions since 2020.

Returns to our capital

providers

Investors benefit from strong

operational and financial

performance.

Safety and opportunity for

our people

We aim to create equality of

opportunity for people to grow and

develop throughout their career in a

safe working environment.

Leadership in sustainability

We are leading the transition on

packaging sustainability through

our engagement with major

organisations such as the Ellen

MacArthur Foundation.

Community involvement

We have an active programme of

community involvement in addition

to satisfying a societal need for

recyclable packaging.

How we create value

1. Insight

Our strong relationships with our

customers in fast moving consumer

goods (FMCG), retail and industrial

sectors help us gain insights in

changing consumer, retail and

regulatory trends and how they impact

use of packaging. We use this

knowledge to inform our innovation.

3. Design

All of our designers use our Circular

Design Principles to improve the

sustainability of packaging. Through our

network of designers and PackRight

Centres, we create packaging that fulfils

our customers’ requirements for all

stages of the primary product’s journey,

whether replacing plastic, improving

protection in transit, ease of

identification in the supply cycle, or

presenting the primary product to

maximise sales.

4. Manufacturing

Our paper mills manufacture CCM and

our corrugated plants convert CCM into

corrugated board, then print, cut and

pre-glue the boxes, which are then

shipped flat on pallets, ready for

assembly and filling at our customers’

factories. We maximise the efficiency of

our manufacturing, for example, using

light-weight papers where possible to

reduce the cost and carbon impact of

the packaging produced.

Our differentiators Market drivers

See more on page 10

2. Innovation

Innovation is at the heart of our

business. We have a five-year, £100

million investment programme in

research and development to accelerate

our work in the circular economy and

plastic replacement.

We collaborate with our customers to

create sustainable packaging solutions

in our impact centres and are able to

test and pilot designs and then share

best practice across all regions.

We are also innovators in the use of

light-weight corrugated board. Our

proprietary technology to test the

strength of corrugated board as it is

manufactured means we can use the

optimum paper weight required.

Annual Report 2022 dssmith.com 15

STRATEGIC REPORT

Scale

Responding to retail

channel changes

Sustainability and

circular economy

Sustainability

Innovation

E-commerce

At the time of writing this passage, we are of course trying to help

where we can to support those affected by the Russian invasion of

Ukraine. We have colleagues in the region and our thoughts are

with them and their loved ones. This terrible shock to our society,

along with the new world of living with Covid-19, reinforces to me

more than ever the need to be a purposeful Company and for all of

us at DS Smith to think about how we can be a positive force.

In these uncertain times, our long-term vision allows us to remain

dynamic in response to these challenges, while driving us to realise

the growth opportunity within the changing world inwhich we

operate. We partner with our customers and stakeholders to meet

these challenges, to ensure security of supply and to keep

delivering innovative, sustainable solutions.

To realise growth, we are increasing our investment in innovation,

developing value generating digital platforms and developing new

products and services to meet the new packaging needs of our

resilient FMCG and e-commerce customers.

We announced in 2021 a doubling of our R&D investment to £100

million by 2025 to explore new materials, design and innovation.

We have added an additional 4 per cent capacity through new

greenfield packaging sites in Italy and Poland. Our site in Italy is

now operational, with the site in Poland currently being

commissioned ready for production to commence in the next few

weeks, all in line with customer driven demand for ever more

sustainable packaging. We have also launched our Digital & Data

Hub, allowing us to accelerate value creation and transform the

way we work.

We are now approaching two years since we implemented our

updated sustainability vision and strategy, which maps out

ambitious commitments and goals for the next decade. Over the

past year, we furthered our ambitions, committing to a 1.5°C

science-based target, as well as committing to reach Net Zero

greenhouse gas (GHG) emissions by 2050.

We also recognise that this changing world has placed increased

demands on our employees and as well as a focus on wellbeing and

diversity and inclusion, our ‘development for all’ programme aims

to give everyone the chance to grow their skills and enjoy a career

in our world leading, sustainable business. Importantly, our safety

statistics have again improved, for the 13thyear in a row.

We are well positioned to respond to continued macroeconomic

and geopolitical challenges and the structural growth in demand

for our products and services is stronger than ever. We have

strategically positioned the business well to capture these drivers

– from the surge in e-commerce to plastic replacement – while

continuing to maintain our security of supply.

Ultimately, we are very proud of how we have responded over the

past year to a number of different challenges. We continued to

drive the way our customers see value in packaging; and when

they expected more from us, we partnered with them to enable

the transition to a more circular economy. Through this,

we are delivering on our Purpose to Redefine Packaging for

a Changing World.

Miles Roberts

Group Chief Executive

Q&A: Leading the transition to the

circular economy

“Leading the transition to a circular economy is embedded at the

very heart of how we operate and drives many of our innovative

products and services from plastic replacement and closed loop

solutions to our industry-first Circular Design Metrics.”

Miles Roberts,

Group Chief Executive

GROUP CHIEF EXECUTIVE’S REVIEW

How are you supporting employees through

the challenges of the past year?

I am extremely proud of the commitment, professionalism and

flexibility of our employees in this extraordinary time. We invested

significantly to ensure that we had the right procedures in place to

ensure the wellbeing and safety of every one of our employees.

We always aim to delight our customers and that cannot be

achieved without having the best people in our industry. We have

a strong Purpose and values to underpin our culture and we aim to

give every one of our colleagues the platform to realise their

potential. We do this through a number of programmes including

our Diversity & Inclusion initiatives and networks, development for

all activities and wellbeing support.

The wider macroeconomic environment

has been particularly challenging – how

are you delivering security of supply and

value to customers?

It is vital that we have, and continue to, manage the inflationary

cost pressures experienced in the market through long-term paper

and other supplier relationships, significant risk management and

hedging and the excellent work that is happening within the

procurement team.

As a result of this security of supply, alongside the excellent service,

quality, and innovative, sustainable solutions we provide to our

customers, we have been able to continue to deliver real value to

our customers. This has meant we continue to grow volumes with

our customers and further strengthen our long-term partnerships.

As you approach the two-year anniversary of

Now and Next, what progress has been made?

Our

Now and Next Sustainability Strategy positions DS Smith at

the forefront of the packaging industry and sets a clear roadmap to

address immediate challenges, while also working to meet the

needs of the next generation. Leading the transition to a circular

economy is embedded in our operating model and drives many of

our innovative solutions including plastic replacement, recyclable

closed-loop solutions and our Circular Design Metrics.

We have delivered excellent progress on our Now and Next

Sustainability Strategy: achieving our targets to manufacture 100

per cent recyclable or reusable packaging and to fund 100

biodiversity projects across Europe and North America. We have

also increased our ambition on CO

emissions, setting a 1.5°C

science-based target, as set out in the Paris Climate Agreement

and committing to reach Net Zero GHG emissions by 2050. Our

target is to reduce our Scope 1, 2 and 3 GHG emissions 46% by

2030 compared to 2019. We are already seeing progress in

improvements across five major ESG ratings – for CDP achieving an

A- in climate change.

How are you working to influence the wider

sustainability agenda for your industry?

DS Smith will be taking the lead in positively influencing all our

stakeholders and society – we are doing this through our Now and

Next Sustainability Strategy. We are taking leadership positions in

the major trade associations at European and national level to

drive advocacy on all the major issues that affect our business –

critical areas such as decarbonisation of our supply chain, the

Our strategy

Our strategy is based on balancing the requirements of our

core stakeholders and delivering on our Purpose:

To delight our customers

How we engage with customers

See more on pages 20 to 23

To realise the potential of our people

How we engage with our people

See more on pages 24 to 29

To lead the way in sustainability

How we engage with society

See more on pages 30 to 33

To double our size and profitability

How we engage with our investors

See more on pages 34 and 35

debate on reuse and recycling, and the continuing evolution of

extended producer responsibility for packaging in all our markets.

All of these industry efforts will be built on by our own DS Smith

engagement with regulators, politicians and consumers to help

people understand the special position of the fibre packaging

supply chain in the circularity agenda.

Do you expect the momentum in the

US to continue?

We are extremely pleased to see the continued strong

performance in the US, reflecting the improved volumes across our

packaging plants, the improved paper and packaging market

pricing and the US export paper price. Packaging volumes in the

region have seen significant increases within the Group, on the

back of continued excellent customer traction as well as growth in

a number of packaging sites as we continue to see excellent

momentum in our new box plant in Indiana.

The recovery in the past year is testament to the support and

confidence of many existing and new customers to our new

products, production capacity and ways of working. It also

reinforces the strategic rationale and allows us to serve our

multinational customers in both the US and Europe.

What do you see the coming year bringing for

DS Smith?

Through the global pandemic, we have continued to grow our

business, building on our existing customer relationships as well as

winning new customers with a focus on the resilient FMCG and

e-commerce markets. By leveraging our scale, our deep customer

relationships and innovative solutions, we have a strong platform to

grow our market share over the next year. The pandemic has

accelerated our key growth drivers – changing retail channels

including e-commerce, and demand for sustainability – and we are

ideally placed to capitalise on this opportunity. As a business, we are

focused on delivering for all our stakeholders including employees,

customers, suppliers and shareholders to deliver real value for all.

Annual Report 2022 dssmith.com 17

STRATEGIC REPORT

Our stakeholders

Our people

Read more on pages 20 to 23

Our customers

Why this stakeholder is

important to us

Our customers are largely fast moving consumer

goods (FMCG) companies that produce goods

typically sold in supermarkets and increasingly

via e-commerce channels. We make corrugated

packaging for some of the largest global food

brands, online retailers and industrial customers

and sell paper and recycling to third parties.

Their concerns

Customers are increasingly concerned about

sustainability, both in terms of recyclable

packaging materials and reducing overall

lifecycle impact, including optimisation in the

supply chain. They are interested in transparency

in the supply chain, compliance with laws and

regulation and competitive pricing. They are also

focused on the quality of the product and

security of the supply chain and meeting their

own sustainability targets.

Our response

Our customers require an innovative and flexible

partner with reliable world-class supply chains

and scale. We continue to innovate with new

sustainable solutions and provide more ways to

work with customers than ever before. Our

packaging is fully sustainable which means it

helps our customers achieve their own

sustainability targets.

Our people

Why this stakeholder is

important to us

We are around 30,000 people across 34

countries worldwide, speaking 26 languages.

We are inspired by our Purpose and are diverse in

our thinking.

Their concerns

Our people are interested in a company they can

be proud of and a strong supportive culture in

which they feel safe, recognised, included

and fairly rewarded and in which they can fulfil

their potential.

Our response

By giving everyone a voice, we provide a

meritocracy with development opportunities for

all and recognition of personal achievement,

regardless of gender, ethnicity, age or religion.

We encourage feedback and have mechanisms

through our employee works councils including

the European Works Council, biennial employee

survey and more regular pulse surveys,

which inform local action plans and sharing

of best practice.

We are committed to ensuring our employees

work in a safe, fair and productive environment

and invest in their development. We base our

approach to, and expectation of, our employees

on our five DS Smith values (see page 5).

Our investors

Why this stakeholder is

important to us

Our shares are listed on the London Stock

Exchange, and we raise our debt from banks and

through listed bonds. Our equity and bonds are

owned by a wide range of investors in the UK,

Europe, the US and beyond.

Their concerns

Our investors are concerned about financial and

operational performance, sustainability strategy

and ESG scores, compliance with laws and

industrial relations.

Our response

We engage with equity investors and analysts

through regular meetings and conferences, and

similarly engage with our banking syndicate,

fixed income investors and ratings agencies

periodically. We aim to provide long-term

shareholder value creation.

Our strategic goals are aligned with the requirements of all our stakeholders,

so that we are delivering for all.

STAKEHOLDER ENGAGEMENT

The environment

and communities

Read more on pages 30 to 33

Our suppliers

Why this stakeholder is

important to us

We have approximately 40,000 suppliers,

ranging from small suppliers of goods and

services to large paper manufacturers, from

whom we source substantial volumes of paper

for our corrugated board.

Their concerns

Our suppliers are also concerned with compliance

with laws, competitive pricing and sustainability.

Our response

We engage with suppliers to enforce our

established supplier standards and supplier Code

of Conduct, which set out our ways of working,

including for example, in relation to our

obligations under anti-modern slavery laws.

The environment

and communities

Why this stakeholder is

important to us

Leading in sustainability and care for the

environment is core to our Purpose and is one of

our four strategic goals.

Their concerns

Reducing GHG (greenhouse gas) emissions,

water consumption and waste to landfill are

priorities as well as education on the importance

of the circular economy and how everyone can

help care for the environment and our

communities.

Our response

In January 2022, we announced our ambitious

commitment to align our global operations to a

1.5°C scenario as set out in the Paris Climate

Agreement, by committing to reduce our Scope

1, 2 and 3 Green House Gas (GHG) emissions 46

per cent by 2030, compared to 2019 and to reach

Net Zero GHG emissions by 2050.

Our Purpose also guides our community

programmes and charitable foundation which

supports local and larger initiatives, from

sponsoring local educational projects to

donations to environmental and education-

focused charities, such as the Arkwright

Foundation. Our DS Smith Charitable Foundation

has donated over £350,000 to causes aligned

with our Purpose in 2021/22.

Governments and non-

governmental organisations

Why this stakeholder is

important to us

We engage in detailed consultations with

governments on the topics of recycling and

reuse, extended producer responsibility and the

decarbonisation of heat. We participate in

industry organisations across the UK, EU and

North America to combine our influence.

Their concerns

The circular economy, reducing CO₂ and energy

usage, water usage and waste and landfill and

focus on sustainability.

Our response

We take a leadership role with relevant

non-governmental organisations, such as our

global partnership with the Ellen MacArthur

Foundation. We are engaging with leading ESG

organisations such as the Science Based Targets

initiative to set meaningful and ambitious goals

around our carbon emissions

Annual Report 2022 dssmith.com 19

STRATEGIC REPORT

To delight

our customers

Our KPI

On-time, in-full deliveries

(OTIF)

Definition

The proportion of our orders that are delivered

on time, in full across our businesses.

Why this is a KPI

Packaging is an essential part of an efficient

supply chain. Delivering as promised is a critical

component to ensuring we remain a trusted

partner to our customers.

2021/22 performance

In the year 2021/22, our overall OTIF was 94 per

cent. This is below our target of 97 per cent due

to disruption caused to supply chains by

Covid-19 and the Russian invasion of Ukraine.

We continue to strive for higher service

levels and have seen improvements in our

underlying operations.

We do this by:

• Delivering on our commitments for quality

and service

• Providing value-adding packaging solutions

• Driving innovation

In 2021/22 we:

• Supported our customers throughout the pandemic

by maintaining our continuity of service

• Strengthened our value proposition and helped

customers better position themselves for a more

circular economy

• Accelerated innovation programmes, including

plastic replacement

• Flexibility and agility in our co-operation with

customers

In 2022/23 we will:

• Drive circularity and continue to deliver market

leading sustainable solutions

• Accelerate our leadership on e-commerce

• Continue to scale up innovations

• Drive improvement of service levels

2022 Target: 97%

2022

2021

2020

94%

95%

0 100

“People are becoming more

conscious of their impact

on the world. We help our

customers by designing

sustainable packaging

solutions, to help achieve

their sustainability goals

and meet growing

demand for sustainable

packaging solutions.”

Marc Chiron,

Sales, Marketing and Innovation

Director, Packaging

OUR STRATEGY

We work with many of the world’s biggest

and most iconic brands. We add value by

enhancing their consumers’ experience,

ensuring they are available when shoppers

look for them online or in-store and helping

to create value recognition and maintain

price-points. In addition, we focus on

transforming the design of point-of-sale

packaging and displays, to minimise

supply chain complexities and enable

speed to market.

Our end-to-end approach is adopted by

many of our multinational customers and

has been a real source of value growth in

these relationships. By working in close

partnership, we gain insight that allows us

to develop packaging that supports the

delivery of increased sales, lower costs,

manages risks and allows for a circular

ready approach.

Our packaging customers

We have a globally diverse customer base,

with over 80 per cent of our customers

being fast moving consumer goods (FMCG)

and other consumer products. FMCG

customers require high-quality, innovative,

value-adding packaging. We invest in the

insights and innovation needed to meet

this demand; and deliver this on a

multinational scale.

Our exposure to this market makes us more

resilient and less cyclical as demand for

these products remains consistent. Our

multinational customers require a partner

that has a geographic footprint which

matches their own. DS Smith is exceptional

in having the scale, expertise and

innovative approaches to support our

customers around the world. Over the past

year, we have seen real growth in our US

operations as we continue to partner with

global customers and expand our

operations at our Indiana site.

In the changing global landscape, our FMCG

customers demand security of supply of

packaging. We continue to support our

customers by investing in our existing

capability and in new sites to build capacity

as their demand for our products and

services grows. We are tracking well

with the construction of our two new

sites in Italy and Poland in line with

customer driven demand for ever

more sustainable packaging.

While consumers’ relationships with

packaging have undeniably changed, so

too have the needs of our customers and

the challenges they have faced. We have

responded with tailor-made solutions that

helped our customers respond to trends

such as increased e-commerce demand or

the need for more sustainable packaging.

We continue to help new and existing

customers navigate this period of

uncertainty through security of supply,

quality and innovation.

Through our ePack online platform, we

have helped both small and large

customers, and it has continued its

expansion across Europe to operate in

markets including Spain and Italy. The

platform offers 100 per cent eco-friendly

packaging to support e-retailers build on

the transformations happening across

e-commerce and boost growth in sectors

like apparel and online groceries, while also

offering plastic-free alternatives such as

paper mailing bags or fully recyclable

insulated fibre-based boxes for delivery.

We have worked hard to continue

innovating with our customers to respond

to these trends, transforming our

sustainability and innovation workshops

through new digital platforms.

Value proposition for customers

Case study: Switch from

polystyrene to fibre to

reduce emissions and cost

We partnered with Fresco y del Mar,

a Galician company selling fish and

seafood from the region, to switch

from expanded polystyrene to

fibre-based packaging.

The cardboard solution aligns to

Fresco y del Mar’s commitment to

respecting nature, marine

environments and fair fishing. It

keeps the product fresh while also

reducing logistics emissions and

cost, as 410 empty corrugated

boxes can be transported per

pallet, compared to 36 expanded

polystyrene boxes of the

same volume.

“It is motivating to work with a

company sharing the same

challenges constructively to find the

best way forward to a more

sustainable future. We share

circularity in our DNA.”

Pablo Sueiro,

Fresco y del Mar

Annual Report 2022 dssmith.com 21

STRATEGIC REPORT

Circular ready

We help our customers with

circular packaging solutions

Risk managed

We help our customers

address risk throughout the

supply chain

Lower cost

We help our customers

eliminate unnecessary cost

More sales

We help our customers

generate more sales with the

right packaging

Circular Design Principles

Following the launch of ourCircular Design

Principles, we have developed Circular

Design Metrics for packaging. With this

pioneering tool we can give a clear

identification of a packaging design’s

sustainability performance.

We have embedded our Circular Design

Metrics across all our packaging sites,

training over 700 designers to support

the transition to the circular economy

and help customers achieve their

sustainability goals.

In an industry first, we can now measure

and quantify the sustainability

performance of each of our packaging

designs across eight key different

indicators: carbon footprint, design for

reuse, supply chain optimised, recyclable,

planet safe, material utilisation, renewable

source, and recycled content.

We are the only packaging producer to

offer this unique tool which gives its

customers across a wide range of sectors

such as FMCG, industrial, retail and

e-commerce a clear view of their packaging

designs’ circularity performance.

As more than 70 per cent of a product’s

environmental impact is determined at the

design stage, data from the Circular Design

Metrics enables brands and retailers to

compare different design solutions,

helping them to reduce waste and pollution

and keep materials and products in use

for longer.

Through our Circular Design Principles,

brands can keep materials in use, design

out waste so that it is easier for consumers

to reuse and recycle packaging, and

regenerate natural systems.

Moreover, we have been working to reduce

plastic packaging by innovating in sectors

where sustainable fibre-based packaging

can make a big difference in reducing

plastic use. Through innovations, such as

Ecobowl, we have extended our ability to

tackle ‘hard to recycle’ plastics and we’ve

developed over 1,000 designs focused

specifically on plastic replacement – with

over 300 million units of plastic replaced

since 2020.

As companies and retailers embrace the

transition to more sustainable packaging,

there is an opportunity to make significant

progress against their environmental and

social responsibilities while also responding

to changing consumer behaviours.

Our paper customers

Supplying customers across the globe, we

are a leading manufacturer of sustainable

packaging and speciality papers made from

100 per cent recycled or chain of custody

certified fibre sources. Our mills in Europe

and the US produce around 4.5 million

tonnes of corrugated case materials and

specialist industrial products annually.

The high performing packaging papers we

produce, such as recycled corrugated case

materials and kraftliners, are integral in

allowing the Group’s packaging division to

produce sustainable paper-based

packaging solutions. Our customers for

speciality papers, such as plasterboard

liners, come from a variety of industries

including construction, printing, food

manufacturing, stationery supplies

and education.

Combining our expertise of 15 mills across

Europe and North America, which are

strategically located near raw material

sources and our customers, with forward-

thinking research and development

focus, enables us to provide customers

with the high performing quality

papers they need for their onward

manufacturing operations.

Through our stringent quality

measurement systems and ability to track

fibre through the complete papermaking

process, we ensure delivery of high-quality

finished papers to all our customers. Our

commitment is to create sustainable, high

performing papers, that deliver the

packaging solutions needed in an ever-

changing world.

Examples of fibre-based solutions to replace

common sources of problem plastics

TO DELIGHT OUR CUSTOMERS CONTINUED

Our recycling customers

We provide recycling and waste

management services to companies of all

sizes across a diverse range of sectors in

both Europe and North America. From

municipalities and waste management

companies, to printers, manufacturers,

wholesalers, and some of the best-known

brands and retailers the world over, our

customers benefit from our recycling

expertise. We partner with organisations

large and small to keep significant amounts

of paper and cardboard out of landfill and

incineration every year.

The paper and cardboard we collect for

recycling serves our own paper mills as part

of our closed loop recycling business

model, while also being sold into our global

network of third-party paper mills.

With a full recycling and waste

management service, we work with our

customers to reduce waste and recycle

more. By innovating around collection

infrastructures and working with

customers to build recyclability into their

supply chains, we are helping to provide

solutions for our customers’ and wider

society’s biggest recycling challenges.

DS Smith has a higher proportion of FMCG

customers than the market average

Our corrugated packaging

customers by volume

European industry average

corrugated packaging by volume

Source: DS Smith analysis

FMCG and other consumer goods Industrial

17%

83%

26%

74%

Case study: Contributing to

Lidl Sustainability Vision

We are helping Lidl in France close

the loop on its cardboard recycling

and deliver on its commitments to

recovering valuable resources and

reducing its impact on the

environment.

By partnering with DS Smith, Lidl is

able to close the loop on its on-shelf

packaging and, within a six month

period, Lidl France recycled more

than 95,000 tonnes of cardboard,

including 22,621 tonnes of

cardboard using our closed-

loop model.

“At Lidl, we are convinced that the

best waste is the one that is not

produced. But we are also realistic as

we know that every act of

production and consumption

involves waste. It is therefore our

responsibility to manage it by first

limiting it as much as possible, then

by recycling it.“

Camille Fossano,

Logistics Environment

Manager, Lidl France

Through our digitalisation of recycling

systems, we are working with customers to

create impactful data-led solutions for our

customers to make the right decisions

relating to their recycling.

We are currently workingwith IBMto

explore the use of image recognition to

better identify contaminates in recycling

that can hinder the recycling process. We

are also harnessingNear Infra-Red (NIR)

scannersto tackle plastic contamination in

recycling. First trialled in our mills in the UK

and Italy, NIR scanners are now being rolled

out across our European mill network and

can identify quantities of plastic in paper

and cardboard collected for recycling even

before the paper is unloaded at our mills.

This technology allows us to work with our

customers to improve the quality of

material they collect for recycling.

Annual Report 2022 dssmith.com 23

STRATEGIC REPORT

To realise the

potential of our people

We do this by:

• Ensuring the health, safety and wellbeing of all our

employees and creating a working environment

where they feel proud, engaged, included and

developed to perform at their best

In 2021/22 we:

• Conducted a global engagement survey to

understand what is working and areas to improve; to

listen, respond and act

• Continued celebrating the contribution and success

of employees with our second Smithies awards

event held virtually

• Provided managers with a set of tools to drive high

levels of health and safety and wellbeing

engagement

• Continued to develop our leadership pipeline from

early talent through to mid and senior leadership

• Provided more opportunities for employees to

develop by offering new ways of accessing learning

• Accelerated our diversity and inclusion ambition by

increasing diverse senior leadership hires,

continuing to raise awareness and activating

employee resource groups

• Implemented functional talent meetings with

diversity data to support career coaching and

accelerated development of diverse talents

In 2022/23 we will:

• Run listening groups to drive action as part of our

engagement evolution with regular pulse surveys

and feedback

• Continue to recognise the contribution of our

employees through the Smithies recognition

programme

• Consolidate our employee feedback to develop a

compelling proposition that describes how people

can thrive at DS Smith

• Embed the health and safety and wellbeing culture

through our local site networks

• Continue to invest in the capability of our managers

and leaders to support our employees

• Provide consistent training to develop our technical

and operational capability using new immersive

learning technology

• Review the ongoing success of widening

opportunities for employees to access development

• Focus on embedding diversity and inclusion by

expanding employee resource groups, local

networks and roundtables

• Continue to scale functional and cross-divisional

talent meetings and support the development of

diverse talents through our leadership programmes

“To realise our Purpose of ‘Redefining

Packaging for a Changing World’ we need a

modern, diverse, motivated and engaged

workforce where everyone has the

opportunity to realise their potential. We are

passionate about working together and

exploring new ways to innovate and delight

our customers; it is fundamental to our

business success. Our priority has been the

health and wellbeing of our employees,

continuing to serve our customers and to

support our local communities. At the same

time, we have not lost focus or momentum

on building an inclusive, engaging workplace,

recognising employees and providing

development opportunities.

As we look forward, we are building on the

learnings from the Covid-19 pandemic to

shape new sustainable ways of working. We

are developing a compelling proposition to

attract and retain employees where they can

thrive, and grow and sustain our business in

a changing world by developing strategic

capabilities (innovation, data & digital,

sustainability and capital projects).”

Jacky Wearn,

Group Human Resources Director

OUR STRATEGY

Engaging our employees

Employees increasingly want to work for

organisations that align with their own

values and bring meaning to their everyday

lives. By engaging employees, we enable

them to identify and feel ownership of our

Purpose, which in turn drives productivity,

innovation, retention and performance.

Ensuring we fully understand what

matters to employees, how we help them

thrive and where we need to improve,

continue to be fundamental to our

engagement strategy.

Our global engagement survey enables us

to monitor the engagement of our

employees with our business, culture and

Purpose. As well as traditional themes such

as management practices, communication

and personal development, our latest

survey was designed to help us better

understand areas that we did not ask about

previously, such as ethics and inclusion.

The survey enables us to understand how

the different issues that drive positive

engagement have changed as the

world changes.

Alongside engagement, we measure and

track employee enablement, which is the

creation of a working environment in

which everyone can do their best work

and where their skills and abilities are

fully utilised. When employees feel both

engaged and enabled, we see higher

levels of productivity.

Our 2021 survey results also show that the

topics that are the core of our strategic

ambition, such as health and safety,

sustainability, diversity and inclusion and

customer focus, are also shared by our

employees, being the highest-ranking

items in the survey. This survey highlighted

increasing demand from employees for

additional learning and development. In

2022/23 we will continue to focus on these

areas with our learning and development

offers, line manager capability

development and The Smithies

recognition awards.

We continue to discuss the themes of the

survey findings with employees through

listening groups and our European Works

Council (see case study opposite) and will

evolve our listening approach to ensure

continuous feedback conversations

happen and timely local action is taken. As

well as challenges around development,

we know the attraction and retention of

employees will be critical to our future

success. In 2022/23 we will also

consolidate our employee feedback to

progress our plans and develop a

compelling proposition that describes how

people can thrive.

European Works Council

A further opportunity for us to listen

to and learn from the views of

employees comes from the

important partnership with our

European Works Council (EWC).

The EWC brings together employee

representatives from across

Europe, engaging them through

an effective information and

consultation process.

The full council of up to 50

representatives meets with the

management team twice a year to

share feedback, exchange views and

discuss opportunities to improve; an

event which is interpreted live to

ensure everyone is included and

can participate.

In addition the EWC Executive holds

monthly meetings with their

Regional representatives in order to

ensure we have a regular two-way

dialogue on employee matters

across Europe.

Our KPI

Accident frequency rate (AFR)

Definition

The number of lost time accidents (LTAs)

per million hours worked.

Why this is a KPI

We believe all employees contribute to a

safe working environment and culture

and our focus is on individual ownership.

Health and safety key

performance indicators

2021/20

2021/22

Reported Pro forma

Variance vs. pro forma

Total LTAs

96 102 101 -5%

AFR

1.91 2.06 2.04 -6%

1. LTA: number of accidents resulting in lost time of one shift or more.

2. AFR: number of LTAs per million hours worked.

3. Pro forma data adjusted for acquisitions and disposals.

2021/22 performance

The effect of the Covid-19 pandemic

has been felt throughout the

organisation creating significant

absenteeism challenges. Despite this,

we have improved our health and safety

performance, which is a significant

achievement.

Annual Report 2022 dssmith.com 25

STRATEGIC REPORT

Health and safety engagement

Engaged employees who work proactively

in identifying and eliminating risks are

driving a resilient and interdependent

health and safety culture. We consistently

see that when employee engagement

increases, the number of accidents

decreases. Equally, when the workplace

feels ‘safe’ to employees, we see their

engagement and commitment increasing.

The health and safety engagement index

measures the participation rate of

employees in risk identification and

elimination activities. This index has

increased by 50 per cent this year.

Key figures (rounded):

• Safety observations and near miss

reporting: 360,000

Engagement with robust health and safety

processes is essential to ensure safe

working environments. In 2022/23 we will

continue working through our local site

networks to further increase health and

safety engagement.

Health and safety processes

The easing of the travel restrictions

worldwide allowed us to return to on-site

health and safety auditing which aims to

drive continuous improvements and

accelerate the implementation of our

global health and safety standards such as

workplace transport (see case study),

machine guarding or working at heights.

Ensuring the health, safety and

wellbeing of all

The Covid-19 pandemic continued to affect

many aspects of our daily life but, despite

these challenges, we progressed towards

our Vision Zero ambition, developing our

four strategic goals and providing a

working environment where engaging in

health and safety activities is integral to

our business success.

Health and safety leadership

Leadership behaviours are critical to drive

engagement; when our leaders engage in

health and safety, we see a positive impact

on our health and safety employee

engagement index. This is the central

theme of our health and safety onboarding

programme, which continued this year and

trains all new and promoted site managers

on the behaviours and mindsets required

as health and safety leaders. To further

develop our safety culture, we introduced

leadership focused safety programmes

which helped create health and safety role

models, whilst encouraging and

recognising safe behaviours and their

value, raising awareness and placing

health and safety at the centre of

everyday activities.

Key figures (rounded):

• Leadership delivered safety talks:

32,000

• Verification of critical controls performed

by leadership: 36,000

• Safety observation tours performed by

leadership: 85,000

• Leadership lead risk assessments:

133,000

We have seen a 25 per cent increase in

leadership led health and safety activities

and an increase in employee engagement.

In 2022/23 we will continue embedding

the health and safety leadership

behaviours through our local site networks.

“This is an important

example of how technology

can help us to better protect

workers and employees

in our dynamic work

environment. Our

commitment in seeking

new smart solutions is

an essential element

to achieve our health

and safety vision.”

Luigi Marini, MD Italy

Health and safety culture

Our focus on leadership, engagement and

processes is designed to develop and drive

an interdependent safety culture in which

every person in the organisation feels

responsible for safety and acts proactively

to identify and eliminate risks.

Key figures:

• Recycling: 83 per cent LTA reduction

year-on-year

• Paper: 43 per cent LTA reduction

year-on-year

• EU packaging: six per cent increase

year-on-year

• North America packaging: 25 per cent

LTA reduction year-on-year

• Sites with zero accidents: 266

We firmly believe that our drive towards

Vision Zero has been key in having a safe

and healthy working environment. Despite

multiple external challenges, not only do

we celebrate significant improvements

across all divisions, but the overall number

of employee accidents and accident

frequency rate have reduced by 27 per

cent year on year to a record low. In

2022/23 we will continue striving towards

our Vision Zero ambition and ensure the

health and safety culture is adopted across

our site network.

Workplace transport health

and safety standards

The health and safety standards for

workplace transport (forklifts)

includes risk assessments, training

and certification of drivers, and

physical barriers where possible or

well-marked pedestrian routes and

aids. To provide pedestrians with

further safety, we have introduced

proximity technology which detects

nearby pedestrians and automatically

slows down forklifts. After a

successful pilot in Italy, the

implementation has been accelerated

and is now being introduced across

Europe and North America

in 2022/23.

TO REALISE THE POTENTIAL OF OUR PEOPLE CONTINUED

100

120

18/19 19/20 20/21 21/22

8.4%

100%

96%

70%

51%

Consistent reduction in

employee accidents

Health and wellbeing

The health and wellbeing of our employees

has long been our top priority and recently

more so than ever. With the

unprecedented scale of the pandemic, it

has caused increased pressures and

demands on our employees’ physical and

mental wellbeing. We have developed and

promoted a broad set of tools and resource

through our local site network as well as

external partners to support employee

health and wellbeing (see case study).

These include toolkits, such as wellbeing

ideas for remote employees, anxiety

management and resilience hints and tips.

This year, we built on the Health and

Wellbeing framework and launched

initiatives across the business to build

positive, healthy working environments,

including a variety of wellbeing

programmes to address the needs across

the organisation. Leadership role modelling

has encouraged and inspired employees to

care for their own wellbeing across the

organisation. This year we also introduced

bitesize training building resilience and

wellbeing eLearning such as mindfulness,

physical and digital workspace, resilience

and remote working. In 2022/23 we will

continue working with our local site

networks encouraging employees to

access the resources available to strive

towards a consistent approach to health

and wellbeing.

Supporting wellbeing

through massage in the

Netherlands

As an outcome of listening to the

feedback from employees at our site

in Eerbeek, a pilot wellbeing

programme was launched in May

2021. Given the physical and mental

strain that work can cause, all

employees can have a regular

massage on a bi-weekly basis.

“In addition to an ergonomic

workspace, the bi-weekly massage

is a very welcome and helpful

moment for me to relax. This

reduces the tension, is well-

appreciated and improves my focus.”

Team Manager Maintenance,

Eerbeek

DS Smith learning

The number of employees accessing online

learning continued to increase this year.

We invested in adding new earning paths

including Sales, Marketing and Innovation,

Finance, Diversity and Inclusion,

Sustainability, Legal and Compliance.

Extending access and the successful

delivery of engaging and innovative

learning content has made employees

more curious about what learning

is available.

Development for all

Our commitment to development for all

continues to explore and test options

which provide ease of access for

employees who are not connected to our

systems (see case study). We have done so

by directing learning to specific employee

groups, installing learning kiosks on sites

and providing learning applications which

can be used on mobile devices. This offers

personal, professional and technical

related development, encouraging our

employees to embrace lifelong learning.

Kemsley Mill development

for all

The management team at Kemsley

Mill have fully supported

development for all opening

a new learning centre and flexing

shift patterns to ensure everyone

could attend launch sessions

where they explore opportunities

for their professional and

personal development.

“During the launch week, March

2022, one third of employees

attended sessions, many

downloaded the learning app to

their mobiles, completed learning

modules and enquired about

qualifications on offer.”

Steve Maxwell,

HR Business Partner

Leadership development

We continue to invest in leadership

development to grow a strong, robust and

diverse pipeline of talent. Partnering with

Oxford Saïd Business School (OSBS) this

year we have relaunched our two Group-

wide programmes; Global Leadership

Programme (GLP) which is our senior

leadership offer, with 24 places; and Aspire

which targets high performing and high

potential future leaders, with 50 places.

Both programmes have evolved to reflect

our organic growth ambition, the changing

context in which we operate and the world

of business. In addition, we have added a

new Continuous Professional Development

webinar series led by thought leading

Oxford faculty.

The Fundamentals of First Line

Management programme implementation

continues to cascade across the

organisation and several new 90-minute

virtual bitesize training sessions have been

added this year. This provides an expanded

learning resource which has seen 1,567

participants this year across 13 subjects

and we will continue enhancing line

manager capability in 2022/23.

Annual Report 2022 dssmith.com 27

STRATEGIC REPORT

Developing an inclusive

culture through reverse

mentoring

After the inclusive leadership

workshop, several leaders, including

some senior leaders, were paired

with reverse mentors of different

backgrounds. Reverse mentoring is

an opportunity to connect with our

diversity and inclusion agenda on a

personal level and drive action to

create cultural transformation.

It builds a bridge between

different backgrounds, benefiting

both parties.

• “It provided a great opportunity to

have a trusted conversation about

the diversity and inclusion

agenda. We focused on how we

can improve awareness and

challenged what I can do as a

leader to be more inclusive.”

Socky Angel, North Sales

Director (UK), Reverse Mentor.

• “We talked about areas we can

improve and will explore these in

future conversations.”

Adam Platts, Sales Director

(UK), Mentee.

Developing diverse

leadership talent

This year, we launched our targeted

development offer called Accelerate for

high-potential, mid-level female talent who

have the potential to progress to senior

leadership positions. It is aimed at those

transitioning into leadership roles,

considering their next role and those

consolidating their career decisions. As at

April 2022, 30 women have completed the

programme and recommended it as an

impactful investment in their development.

In 2022/23 we will continue Accelerate and

have additional cohorts planned.

To support diverse talents deeper in the

organisation, this year we are launching an

inclusive development centre approach to

inspire individuals who are not currently in

management roles to self-nominate, explore

their strengths and create development

plans which will guide their future growth.

Linking directly with our innovation agenda

we create a space for participants to

consider how they can directly influence the

creation of new ideas, ways of working and

product development.

Creating a modern, inclusive and

diverse culture

A diverse workforce better reflects the

communities we operate in and customers

we serve, improving our response to local

contexts and diverse customer needs. Our

engagement survey feedback tells us that

employees are more productive and more

likely to succeed when they are part of an

inclusive workplace, where everyone is

valued, respected, engaged and feels safe

to be themselves at work. This can lead to

improved business performance, giving

room for more creativity and innovation.

Creating an inclusive culture where

employees thrive is core to our Purpose

and is key to our continued success. This

year, we launched our diversity and

inclusion strategy with three pillars.

In the first year of this strategy, we are

on a journey to embed our approach

across the business.

Visible leadership

Active networks

People and processes

Leadership lead by example

Engaging with our people in a different

way to build a sense of inclusion and to

drive action

Policies and procedures that create an

environment where people can do their

best work

Visible leadership

Every employee has an important role to

play in creating a diverse and inclusive

workplace culture. By role modelling

inclusive behaviours, leaders can help

create a workplace where all employees

can realise their potential. We launched our

inclusive leadership workshop to help

leaders take ownership and drive action

(see case study). We have over 200 leaders

who are part of a global, diverse alumni

network supporting each other. In 2022/23

we will embed the inclusive leadership

workshops throughout the organisation.

In October 2021 we launched our Diverse

Voices campaign where everyone can

share their perspective and experience to

help raise awareness of events across the

year, e.g., men’s mental health awareness,

Black History Month, and International

Women’s Day. These stories help raise

awareness of cultural differences,

celebrating diversity, and highlighting

important issues faced by different groups.

Active networks

Everyone has a role to play to make the

organisation a more diverse and inclusive

environment. We recognise that real

change comes from employees by treating

others fairly with respect. We continue

making good progress through our Global

Diversity and Inclusion Forum, where

individuals are committing to driving action

personally in 2022/23. Our partnership

with the European Works Council Diversity

and Inclusion Committee is driving

significant opportunities to help embed our

ambition locally through our site networks.

To raise awareness, build a sense of

inclusion and drive action, we mobilised

and engaged employees through active

networks. This year, we launched our first

Employee Resource Groups (ERGs),

LGBTQ+ and Allies Network, an Ethnic and

Cultural Diversity Network and set up local

site networks e.g., Kemsley Mill’s diversity

and inclusion network.

As part of a healthy diet programme, baskets

of fruit are available for employees in the

Belgium office.

TO REALISE THE POTENTIAL OF OUR PEOPLE CONTINUED

Gender diversity

All employees – Total: 29,584 / 22.5%

Senior management

– Total: 88 / 31.8%

Board of Directors – Total: 8 / 37.5%

60 28

22,935 6,649

Female

Male

As a result of active networks, inclusion

events have taken place such as our

diversity and inclusion roundtables with

external speakers, helping employees raise

awareness, engage and hear how they can

drive action. In 2022/23 we will continue

exploring additional ERGs and run local

roundtables across the business.

People processes

We recognise that policies turn the open

conversations in our active networks into

meaningful action to provide opportunities

to address inequalities and create an

environment where employees can thrive.

This year, we made progress to build

awareness and embed in the business

practices of our global Equal Opportunities

and Anti-Discrimination Policy. We also

ensured that business language is

non-discriminatory throughout the

organisation. In 2022/23, we are working

to ensure the policy and training are

embedded throughout our site network

supported by employee groups such as the

European Works Council.

To attract diverse talents, we refreshed

our career site and showcase diverse

career journeys. We set targets for gender

diverse pipelines in professional roles,

senior search and our graduate

programme. We track metrics throughout

the hiring process which helps address

under representation resulting in an

improvement in female hiring for

professional roles. We launched the Career

Transition Partnership for veterans and in

2022/23 we will explore opportunities to

support inclusive employability initiatives.

Diversity of our Executive team

In November 2021, the Department for

Business, Energy & Industrial Strategy

announced government support for a new

five-year independent review, the FTSE

Women Leaders Review. The purpose is to

monitor the representation of women

among leaders of FTSE 350 companies,

focusing on both board membership (with

a voluntary target increase to 40 per cent

by 2025) and senior leadership roles.

We voluntarily take part and have adopted

the review’s definition of senior leadership

to provide a consistent measure of

progress year on year, which includes

direct reports of our four Executive

Committees: Group Operating Committee,

Group Strategy Committee, Group Health,

Safety, Environment and Sustainability

Committee and the Group M&A Committee.

For more information about these

Committees, please see page 71. The 2021

report was published in January 2022 and

represents our position as of 31 October

2021:

Overall FTSE ranking 41

Women on DS Smith Plc

Board

37.5%

Female Executive

Committee and direct

reports

32.9%

1. Compared to FTSE 100 average of 39.1%.

2. Compared to FTSE 100 average of 32.5%.

We acknowledge diversity is broader than

gender and we are making progress

through our employee resource groups and

recruitment searches. We recognise it

continues to be a challenge to attract

women into manufacturing, however we

are making progress. Targeted recruitment

actions resulted in increasing diverse

senior leadership hires, with 38 per cent

female hire ratio at the senior level and we

exceeded gender parity of graduate offers

for the second year in a row. We continue

to support the acceleration of our female

leadership pipeline with mentoring and

executive coaching support, and ensuring

representation of women in leadership

programmes, with 32 female participants

across cohorts. This year, we have

implemented function talent meetings

using gender diversity analytics to

understand the diversity profile at every

level of the talent pipeline, driving action to

ensure transparent conversations and

career coaching take place. In 2022/23 we

will continue to scale the function and

across division talent meetings and support

the development of female talents through

the leadership programmes.

For gender pay gap reporting we choose to

report not only on the UK legal entities

where headcount is above 250, but on the

UK total figures to provide a

comprehensive view. This year, the mean

gender pay gap improved to 2.2 per cent

(3.5 per cent in 2020). We are working hard

to deepen our leadership pipeline, with 32

per cent of our global senior management

positions occupied by women. We know

that gaining exposure to strategy

development is key for executive

succession and three of our female

leadership talents now sit on four of the

Group Executive Committees. For more

information search ‘gender pay gap report’

on dssmith.com. However, the UK only

represents a small proportion of our total

workforce and our policies and practices

are applied globally.

1. As at 30 April 2022.

2. Definition of senior management: our four Group Executive Committees and their direct reports.

Annual Report 2022 dssmith.com 29

STRATEGIC REPORT

Q&A with Wouter van Tol:

Head of Sustainability,

Government and Community Affairs

How can the circular economy help the world

to tackle climate change?

The circular economy rethinks how we all live our lives and run our

businesses, challenging us to use our finite resources many times

over. We can cut greenhouse gas emissions by evolving from a

linear system to a circular system that eliminates waste and

pollution, keeps products and materials in use and regenerates

natural systems.

How significant is the commitment to a 1.5°C

science-based target?

Our business has ambitious growth plans over the coming years as

we lead the transition to a circular economy. Delivering our

commitment will require cutting emissions as we grow through

investment in next- generation engineering solutions, self-

generated renewable energy sources and power purchasing

agreements to replace grid electricity, which are significant steps

to take in an energy intensive industry.

What were your highlights from being

at COP26?

Arguably COP26 was the most significant global climate change

conference since the Paris Agreement in 2015. Being surrounded

by world leaders and other businesses reinforced the imperative

to take serious action in this crucial decade to 2030. By building a

common agenda together, businesses can be a part of the

solution. This is why we joined the UN Race to Zero and the Get

Nature Positive campaigns as collective platforms to accelerate

change towards a low carbon and circular economy, protecting the

natural world that we depend on.

To lead the way

in sustainability

We do this by:

• Closing the loop through better design

• Reducing waste and pollution through circular

solutions

• Equipping people to lead the transition to a circular

economy

• Protecting natural resources by making the most of

every fibre

In 2021/22 we:

• Set our 1.5°C science-based target to reduce Scope

1, 2 and 3 GHG emissions by 46 per cent by 2030

compared to 2019 and reach Net Zero emissions

by 2050

• Delivered progress on our Now and Next

Sustainability Strategy; achieving our targets to

manufacture 100 per cent recyclable or reusable

packaging and to fund 100 biodiversity projects

across Europe and North America ahead of our plans

• Placed on the prestigious ‘A List’ for CDP Water

Security, increased our CDP Climate Change score to

A- and earned EcoVadis ‘Platinum’ rating

• Played our part at COP26, with a sustainable

packaging installation at the Ellen MacArthur

Foundation Café in the New York Times Climate Hub

where we launched our Circular Economy Lesson

Plan as part of our goal to engage five million people

on the circular economy and circular lifestyles

by 2030

In 2022/23 we will:

• Drive our circular design and innovation agenda to

maintain that all of our packaging is reusable or

recyclable, replace problem plastics and optimise

solutions to ensure that we use no more natural

resources than necessary

• Deliver further progress on our Now and Next

Sustainability Strategy

See DS Smith Sustainability Report 2022 for

more information about how we are leading the

way in sustainability with our Now and Next

Sustainability Strategy.

Additional non-financial metrics can be found in

DS Smith ESG Databook 2022.

Redefining Packaging

for a Changing World

Sustainability Report 2022

OUR STRATEGY

Highlights of 2021/22

Now and Next progress

Closing the loop through

better design

In 2021/22, 99.6 per cent (2020/21: 99.2

per cent) of packaging manufactured met

our 100 per cent reusable or recyclable

standard. Our community of over 700

designers continues to apply our Circular

Design Principles to ensure that new

packaging solutions are fit for the circular

economy and recyclable by design. We now

consider this target ‘achieved’ because

greater than 99.5 per cent of our packaging

volume meets this standard, enabling

recyclability in practice and at scale. For the

remaining less than 0.5 per cent volume

that is presently not either recyclable in

practice or at scale, such as some barrier

coatings and foam, we continue to push for

circular alternatives. These hard-to-recycle

materials are being targeted with action

plans through research and development

efforts and our Group-wide Recyclability

Forum. These are significant steps on the

journey for all our packaging to be recycled

or reused by 2030.

Reducing waste and pollution

Our progress to replace one billion pieces

of problem plastic by 2025 continued

strongly, with 313 million units replaced

with corrugated alternatives by the end of

2021/22. This equates to on average more

than 3 million units per week, boosting

recyclability and reducing waste and

pollution, since May 2020 when this target

was set. We continue to work tirelessly to

find solutions for our customers’ single-use

and hard-to-recycle packaging, with more

than 1,000 recyclable fibre-based

solutions developed for hundreds of

thousands of products, from wine boxes to

ready-meal trays to shrink wrap and fresh

fruit punnets. With our Circular Design

Metrics, our customers are able to compare

the performance of different solutions to

make more sustainable choices, for

example switching from a plastic to

fibre-based punnet for cherry tomatoes,

substituting plastic for corrugated material

that is recyclable and planet safe.

Protecting natural resources

In 2021/22, we optimised fibre use for

individual supply chains in 26 per cent

(2020/21: 23 per cent) of new solutions,

ensuring that fibre use is minimised as far

as practicable by tailoring specifications to

our customers’ unique supply chain

conditions and performance requirements.

As we aim to optimise fibre for individual

supply chains in 100 per cent of our new

packaging solutions by 2025, we continue

to find ways to deliver more for our

customers but using fewer natural

resources. This includes reducing fibre use,

which in turn decreases energy and water

consumption during manufacture, whilst

reducing greenhouse gas (GHG) emissions

in the supply chain. It has been challenging

to increase fibre optimisation over the past

year as supply chains have necessarily had

to flex to meet changing customer needs in

response to Covid-19. However, we

continue to analyse our customers’ supply

chain data with our performance prediction

tool to optimise circular solutions for

storage, transit and operational conditions.

Driving carbon reduction

In 2021/22, the Group GHG emissions

intensity was 194 kg CO

e per tonne of net

saleable production (2020/21: 205 kg

e/t nsp), a reduction of 5 per cent

compared to last year and 29 per cent

compared to 2015 (274 kg CO

e/t nsp), the

base year for our old carbon target.

This year, we undertook a strategic

assessment to achieve Net Zero by 2050,

defining a series of scenarios with best

cost estimates, optimising for the lowest

cost to reach the most ambitious science-

based target. This informed our decision to

commit to a 1.5°C target, which aims to

reduce Scope 1, 2 and 3 GHG emissions 46

per cent by 2030 compared to 2019 and to

reach Net Zero GHG emissions by 2050. We

will encourage 100 per cent of our strategic

suppliers to adopt science-based targets

by 2027. The target has been validated by

the Science Based Targets initiative (SBTi).

As this is an ‘absolute’ reduction target,

from next year we will begin reporting

carbon reduction progress in ‘absolute’

tonnes of CO

e, across all three scopes.

During the year, Kemsley K4 Combined

Heat and Power (CHP) plant started up,

delivering steam and electricity to the Mill

with a c. 7 per cent energy efficiency

improvement compared to its predecessor,

decreasing overall emissions. Further

steam supply to the Mill from the

neighbouring K3 waste-to-energy plant

made c. 30,000 tonnes of saving compared

to the natural gas powered solution it

replaced. At Contoire-Hamel Mill, the

biogas from the anaerobic wastewater

treatment plant began delivery, removing

c. 1,300 tonnes CO

e. Our €7.5 million

expansion of the anaerobic waste water

treatment facility at Rouen Mill has

boosted biogas production to deliver green

electricity with an expected c. 2,600

tonnes CO

e saving annually. At Alcolea

Mill, stationary steam siphons are

beginning to deliver thermal improvements

of around 10 per cent and a vacuum system

upgrade at Kemsley Mill is expected to save

c. 4,800 tonnes CO

e annually. Projects to

increase energy efficiency through

measures such as equipment upgrades

were implemented at Dueñas Mill, Lucca

Mill and Viana Mill. Our LED lighting rollout

continued, with 37,587 lamps installed at

101 sites delivering over c. 14,000 tonne

e saving per annum. A power

purchasing agreement (PPA) was

introduced to cover a portion of our

electrical energy demand in Iberia, saving c.

17,000 tonnes CO

e annually. At our

Packaging plants, we are continuing to

review opportunities for wind and solar,

including electrical supply to charging

stations for electric vehicles. We

maintained ISO 50001:2018 certification at

100 per cent of our in-scope sites, which

drives our Group-wide energy

management programme.

Measuring and improving

biodiversity

In 2021/22, we began a project with the

the University of Georgia to baseline the

biodiversity in our forests in Georgia, North

America. This included developing an

inventory of potential species through a

Geographic Information System (GIS)

review of all properties, field surveys and

laboratory, computer and literature

research. The findings will form the basis of

our plans to measure and improve the

biodiversity of the forest. We achieved our

target to launch 100 (2020/21: 57)

Annual Report 2022 dssmith.com 31

STRATEGIC REPORT

biodiversity projects in our local

communities ahead of our 2025 deadline,

improving local environments for plants

and animals, protecting natural habitats

and enhancing species diversity in the

areas in which we operate. Alongside these

projects, 12 (2020/21: three) of our mills

have launched longer-term biodiversity

programmes. For example, at

Aschaffenburg Mill, wildflower meadows,

native plants and shrubs and a landscaped

area for lizards have been introduced.

Aschaffenburg is the only paper mill to

receive the ‘Blossoming Company Award’

from the German Ministry for the

Environment and Consumer Protection.

At Alcolea Mill, work has begun to protect

the white stork, a local endangered

species, with nesting poles, native tree

planting and bat boxes.

Managing water responsibly

Throughout 2021/22, we maintained

water stress mitigation plans at 100 per

cent of sites at current or future risk of

water stress, building water stress risk into

business continuity planning. Given that in

the long-term, competition for finite water

resources could increase in the river basins

from which we withdraw water, we set a

new Now and Next sustainability target to

decrease water withdrawal by 1 per cent

per year, every year to 2030, compared to

2019 at our paper mills located in regions at

high or extremely high risk of water stress.

This was achieved for 2021/22, operating

at 8.08m

/t nsp (2020/21: 8.10 m

/t nsp)

and therefore lessening pressure on

natural water systems through water

reduction, reuse and recycle opportunities.

Finally, we received notification of

non-conformance with water discharge

consents 10 times in 2021/22 (2020/21:

21), delivering progress on our journey to

zero by 2025.

Sending zero waste to landfill

From glass to metals, we are collaborating

with others to identify innovative circular

solutions for the non-fibre waste that

enters our circular business. In 2021/22,

255,920 tonnes of waste was sent to

landfill (2020/21: 258,225 tonnes), a less

than anticipated reduction owing to delays

to a number of key landfill diversion

projects. At Kemsley Mill, c. 8,000 tonnes

ESG ratings

We are delighted that over the past

year, our leading ESG and

sustainability performance was

recognised by our ESG ratings, with

improvements in CDP, DJSI (S&P Global

Corporate Sustainability Assessment),

EcoVadis, MSCI and Sustainalytics.

• CDP – ‘A List’ (Water Security), A-

(Climate Change), B (Forests)

• DJSI (S&P Global CSA) – 67

• EcoVadis – Platinum

• MSCI – AA

• Sustainalytics – ‘Low ESG Risk’

• Circulytics – A-

• FTSE4Good – Included since 2012

• ISS – ‘Prime’ B-

• Support the Goals – 4 of 5 stars

• UN Global Compact – Member

since 2013

of landfill waste will be diverted annually

through the K3 waste-to-energy facility,

producing steam for the mill in the process.

At Alcolea Mill and Belisce Mill, landspread

and sludge opportunities are set to divert c.

9,000 tonnes per year and at Dueñas Mill,

an alternative use has been identified for c.

11,000 tonnes annually. At our Packaging

plants, we maintained a recycling rate of

99 per cent and Aschaffenburg Mill,

Coullons Mill, Kaysersberg Mill and

Witzenhausen Mill sent zero waste to

landfill in the period.

Sourcing sustainably

Throughout the year, we continued to roll

out our Global Supplier Standard (GSS) to

our suppliers. In 2021/22, 78 per cent

(2020/21: 45 per cent) of our suppliers

overall agreed to our GSS, reflecting

progress towards our target of 100 per

cent of suppliers agreeing by 2025. We

continued our engagement programme

with our strategic suppliers, encouraging

suppliers to complete sustainability

assessments and share best practice and

learning, including on the circular economy.

We maintained our standard that 100 per

cent of papers purchased are recycled or

chain of custody certified.

Equipping people to lead the

transition to the circular

economy

We continued to immerse our people in

circular economy learning and

development opportunities, engaging 50

per cent (2020/21: nine per cent) of our

people with targeted circular economy

engagement campaigns. We rolled out

bespoke circular economy eLearning

modules and building on the success of last

year, another cohort attended the Ellen

MacArthur Foundation Circular Economy

Masterclass. We are further embedding

circular economy into our brand and

Purpose campaign so that it remains

front-and-centre of everything we do.

Beyond our own people, we are reaching

our industry, communities and the next

generation to promote the circular

economy and circular lifestyles. In 2021/22,

we engaged over 2.3 million (2020/21:

519,000) people from all over the world

TO LEAD THE WAY IN SUSTAINABILITY CONTINUED

Group greenhouse gas (GHG) emissions

Metric Unit

2019/20

(base year) 2020/21 2021/22

Compared

to last year

Compared

to base year

Direct (Scope 1) GHG emissions tonnes CO

e 2,181,890 2,047,265 2,023,278

-1% -7%

Indirect (Scope 2) GHG emissions

tonnes CO

e 792,275 763,727 759,257

-1% -4%

Indirect (Scope 3) GHG emissions tonnes CO

e 5,671,258 5,562,318 5,468,167 -2% -4%

Total GHG emissions tonnes CO

e 8,645,693 8,373,310 8,250,702 -1% -5%

GHG emissions from energy export tonnes CO

e 791,810 666,283 647,258

-3% -18%

Total GHG emissions (net)

tonnes CO

e 2,182,355 2,144,709 2,135,278

0% -2%

Energy consumption

MWh 15,707,667 15,446,255 15,324,120

-1% -2%

Energy exported MWh 1,977,616 1,739,114 1,774,539

2% -10%

Total production tonnes 10,222,065 10,445,145 11,014,256

5% 8%

GHG emissions per tonne production kg CO

e / t nsp

213 205 194

-5% -9%

Out of scope GHG emissions tonnes CO

e 37,850 36,762 33,517 -5% -9%

1. Calculated using the market-based approach. Both market-based and location-based figures are provided in DS Smith ESG Databook 2022.

2. Calculated as (‘Scope 1’ + ‘Scope 2 (market-based)‘) – ‘GHG emissions from energy exports’. 19 per cent generated by UK-based operations in 2021/22.

3. 14 per cent of energy consumption by UK-based operations in 2021/22.

4. t nsp – metric tonnes net saleable production.

* Independent Assurance has been obtained for these metrics – see assurance statement below.

Methodology

Greenhouse gas emissions are reported in accordance with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard

(Revised) under a financial control boundary. All figures are reported on a like-for-like basis, including in the base year, to provide a

meaningful comparison over time. See DS Smith ESG Databook 2022, which can be downloaded from the DS Smith ESG Reporting Hub,

which contains the basis of preparation, including definitions and methodology notes.

Additional non-financial metrics can be found in DS Smith Sustainability Report 2022.

Independent Assurance Statement

Deloitte have provided independent third-party limited assurance in accordance with the International Standard for Assurance

Engagements 3000 (ISAE 3000) and Assurance Engagements on Greenhouse Gas Statements (ISAE 3410) issued by the International

Auditing and Assurance Standards Board (IAASB) over the 2021/22 selected information, identified with * in the above table, and other

selected information relating to carbon, energy, water, waste and production identified with * within DS Smith Annual Report 2022 and

DS Smith Sustainability Report 2022. Deloitte’s full unqualified assurance opinion, which includes details of the selected information

assured, can be found on our website at https://www.dssmith.com/sustainability/reporting-hub.

Independent verification to a limited level of assurance for the 2019/20 base year was provided by Bureau Veritas.

across various platforms. At COP26, we

launched our circular economy lesson plan

as a free resource for young people and

their teachers to educate them about the

circular economy and how we can all play a

part in protecting our planet’s natural

resources. Outside of the classroom, we

continue to reach the general public

through engaging circular economy

content, social media and video posts.

Contributing to our communities

In our local communities, 100 per cent of

our in-scope sites contributed to their

communities throughout 2021/22, with

engagement focused on (but not limited

to) our Community Programme themes of

circular economy education and

biodiversity. From engaging young people

on the International Day of Education to

improving local environments on World

Cleanup day, our people contributed

hundreds of hours to support community

initiatives throughout the year.

Respecting and promoting

human rights

We achieved our Now and Next

sustainability target to undertake a human

rights high-level risk and gap analysis,

identifying potential human rights risks.

This involved country and sector risk

analysis, in addition to stakeholder

interviews and engagement to highlight

improvement opportunities. The findings

set out areas of strong performance as well

as opportunities to develop our roadmap to

strengthen due diligence on human rights.

As next steps, we developed a Human

Rights policy and established a multi-

disciplinary Modern Slavery and Human

Rights Committee, which reports to our

Group Operating Committee, thereby

strengthening the governance of human

rights due diligence.

Annual Report 2022 dssmith.com 33

STRATEGIC REPORT

Q&A with Adrian Marsh

Group Finance Director

How have you performed against your

financial KPIs?

We have made good progress in the year against our medium term

target metrics. We saw record corrugated box volume growth

during the year in the first half of the year, with growth slowing in

the second half as we hit stronger comparators. Despite the

growth, we were behind our GDP +1 per cent target, reflecting the

large fluctuations in GDP as the economy bounced back very

strongly after a period of decline during the pandemic. This has

meant the comparison to GDP +1 per cent has been hard to

achieve (following our outperformance of 9 per cent in our last

financial year). While behind our KPIs for the year, we grew both

our return on sales and return on average capital employed

(ROACE) compared to the prior year and during the period and we

exit the year with ROACE for the six month period in the second

half in our medium-term target range.

Cash flow has been a continued focus for the business and we are

delighted to have delivered another strong cash flow conversion in

line with our target and significant reduction to our net debt ratio

(net debt: EBITDA), down to 1.6 times from 2.2 times a year ago,

principally due to strong free cash flow generation of £519 million.

To double our size

and profitability

Our KPIs

Like-for-like corrugated box

volume growth

Definition

Like-for-like volume of corrugated box products

sold (excluding the effect of acquisitions),

measured by area.

Why this is a KPI

We target volume growth of at least GDP +1 per

cent because we expect to win market share by

delivering value to our customers across their

supply chain on a multinational basis.

2022 Performance

Corrugated box volumes grew strongly by a

record 5.4 per cent. Despite the growth, it is

behind our target of GDP +1 per cent of +9.0 per

cent, which was particularly volatile due to

Covid-19 with major declines seen in the

comparative period and hence a stronger bounce

back post pandemic. Over the two-year period

the average of GDP +1 per cent was 1.6 per cent

and our compound average box volume growth

over the same period was 4 per cent.

We do this by:

• Being well positioned in developed markets

• Work with major global FMCG brands

• Driving market share gains

• Investing behind fundamental growth drivers

In 2021/22 we:

• 5.4 per cent like-for-like corrugated box volume

growth

• 29 per cent growth in adjusted EBITA

• 7 per cent growth in free cash flow, with net debt:

EBITDA at 1.6 times

In 2022/23 we will:

• Continue to drive volume growth of 2-4 per cent

• Continue to manage costs in an inflationary

environment

• Invest in growth, innovation and environmental

efficiency

OUR STRATEGY

2022 Target: GDP +1%

2022

2021

2020

5.4%

3.5%

0.6%

Further information on the calculation of financial KPIs and

other non-GAAP performance measures is given in note 32

to the consolidated financial statements.

OUR STRATEGY

Return on sales

Definition

Earnings before interest, tax, amortisation and adjusting items as

a percentage of revenue.

Why this is a KPI

The margin we achieve reflects the value we deliver to our

customers and our ability to charge for that value. It is also driven

by our scale. A higher return on sales makes the profit more

resilient to adverse effects.

2022 Performance

Return on sales (RoS) grew 10 basis points to 8.5 per cent due to

the 23 per cent improvement in adjusted operating profit more

than offsetting the dilutive impact on RoS of the significant cost

inflation pricing.

Cash conversion

Definition

Free cash flow before tax, net interest, growth capex, pension

payments and adjusting items as a percentage of earnings before

interest, tax, amortisation and adjusting items. Free cash flow is

thenet movement on debt before cash outflow for adjusting

items, dividends paid, acquisition and disposal of subsidiary

businesses (including borrowings acquired) and proceeds from

issue of share capital.

Why this is a KPI

We focus on cash conversion as part of our wider focus on capital

management and maintaining a prudent balance sheet. Working

capital is a key focus within the business in order that all capital is

employed where it can best deliver returns for the business.

2022 Performance

Cash conversion was 142 per cent, in line with our target, driven by

higher cash inflows from operating activities.

Net debt/EBITDA

Definition

Net debt (calculated at average FX rates and after deducting

IFRS 16 lease liabilities) over earnings before interest,

tax,depreciation, amortisation, and adjusting items for the

preceding 12 month period (adjusted for acquisitions and

disposals made during the financial year, and to remove the

income effect of IFRS 16

Leases

). This definition is in accordance

with the Group’s covenants.

Why this is a KPI

Net debt/EBITDA is a key measure of balance sheet strength and

financial stability.

2022 Performance

Net debt as at 30 April 2022 was £1,484 million and 1.6 times

EBITDA with the reduction principally due to excellent cash

management.

Adjusted return on average capital employed

Definition

Earnings before interest, tax, amortisation and adjusting items as

a percentage of average capital employed, including goodwill, over

the prior 12 month period.

Why this is a KPI

Our target ROACE to be delivered throughout the economic cycle is

above our cost of capital. ROACE is a key measure of financial

success and sustainability of returns and reflects the returns

available for investment in the business and for the servicing of

debt and equity. All investments and acquisitions are assessed

with reference to this target.

2022 Performance

Adjusted ROACE progressed significantly during the year, by 260

basis points to 10.8 per cent , reflecting the improvement in

adjusted operating profit. The improving trend in profitability

combined with the improving returns from recent acquisitions and

investments means ROACE was 12.1 per cent for the second six

months of the year.

2022 Target:

2.0x

2022

2021

2020

1.6x

2.2x

2.1x

2022 Target: 12% - 15%

2022

2021

2020

10.8%

8.2%

10.6%

2022 Target: 10% - 12%

2022

2021

2020

8.5%

8.4%

10.9%

2022 Target:

100%

2022

2021

2020

142%

150%

103%

Annual Report 2022 dssmith.com 35

STRATEGIC REPORT

Operating review

A year of growth and momentum

Organic corrugated box volumes have shown record growth of 5.4

per cent across the year, reflecting continued growth in the

resilient fast moving consumer goods (FMCG) and other consumer

related sectors, which represent over 80 per cent of our volumes,

together with a recovery in the industrial sector following the

impact of the pandemic in the prior year. In a challenging supply

chain environment, our large scale, security of supply and high

service levels have driven ongoing gains with our customers

including large multinational companies. Regionally, we have

seen particularly good performances in the US, Southern and

Eastern Europe.

The structural market drivers of plastic replacement, consumer

and retail channel evolution and e-commerce continue to help

accelerate growth. We have continued to invest in innovation and

have embedded our pioneering Circular Design Metrics across all

our packaging sites. We are the only packaging producer to offer

this unique tool, which gives our customers across a wide range of

sectors such as FMCG, industrial, retail and e-commerce a clear

view of their packaging designs’ circularity performance and helps

them achieve their sustainability goals.

Looking forward, customer demand remains strong and we

expect to see continued volume growth of 2-4 per cent in the

current financial year.

For the full year, revenue grew by £1.5 billion (26 per cent) on a

constant currency basis and 21 per cent on a reported basis, driven

by corrugated box volume growth (£203 million) and higher selling

prices (£1,279 million) across the Group. External paper, recycling,

and other packaging revenues increased (£23 million) as higher

pricing more than offset reduced volumes sold externally as the

organic growth of our packaging volumes meant we utilised a

greater proportion of our paper production internally.

Raw material, energy and transportation input costs all rose

significantly over the comparative period. However, these were

mitigated by effective supplier arrangements, long-term hedging

positions and rising packaging selling prices.

Volume growth combined with increased packaging selling prices,

partly offset by the increased input costs, resulted in adjusted

operating profit growing by 29 per cent on a constant currency

basis and 23 per cent on a reported basis to £616 million.

Corrugated box volume growth contributed £65 million and the

effect of an increase in the average sales price and mix was £1,279

million versus the comparable period. £714 million of this increase

was due to an increase in packaging prices with the remainder of

£565 million due to increases in price of external sales of paper,

recycling material and energy. These increases reflect the

recovery through increased sales pricing (with a lag) of the

significant increases in input costs during 2021 and 2022.

Compared to the comparative period, input costs increased by

£1,207 million with rises in raw material costs of £720 million,

energy costs of £297 million and other costs of £190 million. The

net energy cost increase, after the price benefit of energy sales,

was £174 million. The energy impact, while significant, was

mitigated by the Group’s three-year rolling hedging programme.

Group return on sales grew during the year to 8.5 per cent

(2020/21: 8.4 per cent) with the second half at 8.8 per cent,

reflecting the significant growth in profitability more than

offsetting the dilutive effect of higher cost and selling prices.

Adjusted basic earnings per share from continuing operations

grew 35 per cent on a constant currency basis to 30.7 pence

(2020/21: 24.2 pence). Basic earnings per share of 20.4 pence

grew by 61 per cent compared to the prior year on a constant

currency basis (2020/21: 13.3 pence), reflecting the growth in

operating profit.

Cash generation during the year was strong, with £519 million of

free cash flow (2021: £486 million) driving a reduction in net debt

to £1,484 million (2021: £1,795 million). The free cash flow was

driven by increased profitability and a positive working capital

inflow of £215 million, more than offsetting the increased capital

expenditure. £109 million of working capital inflow relates to

margin calls to manage our energy hedging counter-party risk and

this is expected to reverse in the financial year 2022/23.

The continued reduction in net debt, together with the increasing

profitability, improved our leverage ratio of net debt/EBITDA to 1.6

times, compared to 2.2 times as at 30 April 2021, and within our

medium-term target of at or less than 2 times.

The increased profitability of the Group, together with tight capital

management, drove a 260 basis point increase in return on

average capital employed (ROACE) to 10.8 per cent, with excellent

momentum throughout the year, reflected in a ROACE in the

second half of the year of 12.1 per cent, within our medium-term

target range.

Investing for growth

Within our financial metric priorities of maintaining our investment

grade credit rating and a net debt/EBITDA ratio of below 2 times,

our capital allocation priorities remain focused on disciplined

investment to support growth with our customers and drive

shareholder returns.

With strong structural market drivers and growth with our

customers, we continue to see attractive opportunities to invest

organically in our business via focused innovation, expansion of

current and new sites and improving efficiency.

Our new site in Italy is now operational, with the site in Poland

currently being commissioned ready for production to commence

in the next few weeks, all in line with customer driven demand for

ever more sustainable packaging. Together they represent

approximately an additional 3 to 4 per cent packaging capacity at

full utilisation and are 80 per cent pre-sold. These are expected to

make a 15 to 20 per cent return on capital once operating at full

capacity, which is anticipated to be in the third year of operation.

While the Board recognises the current macroeconomic

uncertainties, strong customer pull underpins our confidence in

the organic growth opportunities and accordingly capital

expenditure for 2022/23 is expected to increase by approximately

20 per cent to around £500 million. This will be allocated across

three main areas: investing for growth by systematically

enhancing the capability and efficiency at existing packaging

plants; further aligning our paper capacity with our packaging

customers; and replacing assets with more environmentally

efficient options as part of the usual capital replacement cycle. All

the growth projects undertaken have estimated returns on capital

in excess of the Group target ROACE range of 12 to 15 per cent.

Innovation

Many of our customers are multinational industry-leading brands

who require a pan-continental, consistent approach to their

packaging, and they are increasingly looking for closer

partnerships to grow and innovate with them.

As part of the commitment we announced in 2021 to invest £100

million in research and development (R&D) over five years, we

have opened a state-of-the-art laboratory at Kemsley Mill, one of

the largest paper mills in Europe, to advance our research into

alternative fibre sources for paper and packaging products.

We have also announced a new flagship innovation centre for

ideation, design, testing, piloting and collaboration near

Birmingham, UK. This facility will allow us to install and test pilot

product and service lines to enable customers to visualise the

value that we can bring to them.

Packaging innovation is the lifeblood of our organisation and is

vital in keeping global supply chains running as they become more

integrated, demanding and focused on sustainability.

Leading the way in sustainability

Sustainability has been at the heart of our business for many years

as we have developed and grown into a solely fibre-based

corrugated packaging business. We continue to work actively with

our customers to help them address their sustainability

challenges. Our Circular Design Principles combined with our

carbon reduction programme and focus on plastic replacement are

allowing us to meet our customers’ increasing sustainability

requirements. Momentum in plastic replacement is accelerating

and we have replaced 313 million units of plastic since 2020.

We continue to make good progress in delivering against our

sustainability targets. We have reduced our CO

per tonne of

production by 29 per cent from 2015, achieved a 5 per cent

reduction in water abstraction within paper mills in areas at risk of

water stress, achieved our target of 100 per cent reusable or

recyclable packaging and launched 100 biodiversity projects.

Weare delighted that this progress has been recognised with an

improvement in rating by a number of external indices including

MSCI ACWI Index, Dow Jones Sustainability Index, EcoVadis,

Sustainalytics and CDP.

Looking forward, we have the most ambitious carbon reduction

targets in our industry with a Science Based Targets initiative

approved CO

reduction target of 46 per cent from 2019 to 2030

and a commitment to achieving net zero carbon emissions

by 2050.

Dividend

The Board considers the dividend to be a very important

component of shareholder returns. Our policy is that dividends will

be progressive and that, in the medium term, dividend cover

should be on average 2.0 to 2.5 times (relative to adjusted

earnings per share), through the cycle. Accordingly, and reflecting

the strong growth in the business and our confidence in the

outlook, we are announcing a final dividend for this year of 10.2

pence, taking the total dividend for the year to 15.0 pence per

share (2020/21: 12.1 pence), in line with our policy and an increase

of 24 per cent over the prior period.

Subject to approval of shareholders at the AGM to be held on 6

September 2022, the final dividend will be paid on 1 November

2022 to shareholders on the register at the close of business on 7

October 2022.

Our medium-term targets and key performance

indicators

We measure our performance according to both our financial and

non-financial medium-term targets and key performance

indicators. We have seen an improvement in our performance for

all measures.

As set out above, like-for-like corrugated box volumes grew by a

record 5.4 per cent driven by growth with our FMCG and consumer-

focused customers. Although volume growth was behind our

target of GDP +1 per cent, GDP has been particularly impacted by

Covid-19 with major declines seen in the comparative period in the

prior year, when we exceeded our target by 9.0 per cent, followed

by a strong recovery in the financial year 2021/22. Over the

two-year period the average of GDP +1 per cent was 1.6 per cent

and our compound average box volume growth over the same

period was 4.0 per cent.

Return on sales grew 10 basis points to 8.5 per cent. Despite the

29 per cent improvement in adjusted operating profit, the dilutive

impact of the significant cost and selling price inflation limited the

annual improvement in return on sales, which was below our

target range of 10 to 12 per cent. The margin progressively

improved during the period, with the margin in the second half

being 8.8 per cent, underpinning our confidence in achieving our

medium-term target.

Adjusted ROACE grew 260 basis points 10.8 per cent (2020/21: 8.2

per cent), reflecting the significant growth in adjusted operating

profit. The improving trend in profitability through the year

combined with the improving returns from recent acquisitions and

investments means ROACE was within our medium-term target

range of 12 to 15 per cent at 12.1 per cent for the second half of

the year.

Annual Report 2022 dssmith.com 37

STRATEGIC REPORT

Net debt as at 30 April 2022 was £1,484 million (30 April 2021:

£1,795 million), with the reduction principally due to free cash flow

of £519 million. Working capital performance was extremely good

with both a strong focus in the business and the benefit of rising

input costs such as paper and OCC on our payables. It also

benefitted from £109 million of working capital inflow which

relates to margin calls to manage our energy hedging counterparty

risk which is expected to reverse in the financial year 2022/23.

Cash generated from operations before adjusting cash items of

£1,092 million was used to invest in net capex of £415 million,

which increased by 28 per cent on the prior year, principally

reflecting the investment in two new packaging plants in Italy and

Poland. Net debt/EBITDA (calculated in accordance with our

banking covenant requirements) is 1.6 times (2020/21: 2.2 times),

substantially below our banking covenant of 3.75 times.

The Group remains fully committed to maintaining its

investment grade credit rating.

During the year, the Group generated free cash flow of

£519 million (2020/21: £486 million), reflecting increased

profitability and strong cash and working capital management.

Cash conversion, as defined in our financial KPIs (note 32),

was 142 per cent, well ahead of our target of being at or above

100 per cent.

DS Smith is committed to providing all employees with a safe and

productive working environment. We are pleased, once again, to

report improvements in our safety record, with our accident

frequency rate (defined as the number of lost time accidents per

million hours worked) reducing by a further 6 per cent to 1.9,

reflecting our ongoing commitment to best practice in health and

safety. We are proud that 266 out of a total of 325 reporting sites

achieved our target of zero accidents this year and we continue to

strive for zero accidents for the Group as a whole.

The Group has an industry leading target for customer service of

97 per cent on-time, in-full deliveries. In the year we achieved a

good performance at 94 per cent, despite the impact on supply

chains of the pandemic and latterly the Russian invasion of

Ukraine. Management remains fully committed to the target and

the highest standards of service, quality and innovation to all our

customers and we will continue to strive to meet the demanding

standards our customers expect. Other markers of quality such as

our defects rate (measured in parts-per-million) have improved

significantly, having reduced 13 per cent.

Operating review

Unless otherwise stated, any commentary and comparable

analysis in the operating review is based on constant

currency performance.

Group

£m

Year ended

30 April 2022

Year ended

30 April 2021

Change –

reported

Change –

constant

currency

Revenue £7,241m £5,976m +21% +26%

Adjusted

operating profit

£616m £502m +23% +29%

Operating profit £443m £311m +42% +49%

1. Operating profit before amortisation and adjusting items (refer to note 4 of

the financial statements).

Revenue grew 26 per cent driven by packaging volume growth and

higher selling prices across the Group. Operating profit grew 29 per

cent with growth in corrugated box volume and increased sales

price partly offset by increased input costs.

Northern Europe

£m

Year ended

30 April 2022

Year ended

30 April 2021

Change –

reported

Change –

constant

currency

Revenue £2,790m £2,370m +18% +21%

Adjusted

operating profit

£139m £138m +1% +5%

Return on sales

5.0% 5.8% (80bps) (80bps)

1. Operating profit before amortisation and adjusting items (refer to note 4 of

the financial statements).

The Northern Europe division has seen good corrugated box

volume growth in Germany and Benelux offset by declines in the

UK where there was a particularly strong comparator following the

exceptional e-commerce related growth during the pandemic.

Revenues have increased by 21 per cent in the region due to a

combination of the increases in corrugated box volumes and

pricing and the increased sales prices for externally sold paper,

recycled fibre and energy. Adjusted operating profit grew 5 per

cent, reflecting the increased pricing in packaging, recycling and

external paper sales more than offsetting increased input costs,

principally OCC and energy. Return on sales reduced by 80 basis

points, reflecting the greater impact of lower margin external

recycled fibre sales, together with greater cost inflation than

other regions.

OPERATING REVIEW CONTINUED

Southern Europe

£m

Year ended

30 April 2022

Year ended

30 April 2021

Change –

reported

Change –

constant

currency

Revenue £2,736m £2,156m +27% +33%

Adjusted

operating profit

£324m £223m +45% +53%

Return on sales

11.8% 10.3% +150bps +150bps

1. Operating profit before amortisation and adjusting items (refer to note 4 of

the financial statements).

Southern Europe saw very strong growth in volumes driven by

Iberia in particular, which had been significantly impacted by

reduced tourism in the financial year 2020/21.

Revenue grew by 33 per cent, due to the impact of higher box

volumes and increases in both box and paper pricing. Adjusted

operating profit grew by 53 per cent compared to the prior period,

with the packaging operations benefitting from the pass through

of higher paper prices, together with a very positive impact from

paper sold externally. Return on sales improved by 150 basis

points reflecting the strong improvement in operating profit.

Since the acquisition of Europac in 2019, the region has grown its

profitability significantly, with Europac contributing not only to the

improved profit and margin growth in the region but also the

overall strength of the Group’s security of supply of paper. In

2021/22, the return on invested capital from the acquisition was

12 per cent, in line with our target of being in our ROACE target

range of 12 to 15 per cent in the third full year of ownership.

Eastern Europe

£m

Year ended

30 April 2022

Year ended

30 April 2021

Change –

reported

Change –

constant

currency

Revenue £1,118m £909m +23% +30%

Adjusted

operating profit

£73m £78m (6%) 0%

Return on sales

6.5% 8.6% (210bps) (200bps)

1. Operating profit before amortisation and adjusting items (refer to note 4 of

the financial statements).

Organic corrugated box volumes in Eastern Europe have grown the

fastest within Europe and well across the whole region, reflecting

the business mix and comparative performance in the prior year.

Revenues grew 30 per cent, principally reflecting increases in

corrugated box volumes and pricing. Adjusted operating profits were

flat, reflecting the timing lag in the recovery of higher paper prices

through increased packaging pricing. The region has the lowest

proportion of paper capacity relative to packaging production within

the regions in the Group, which impacts margin in the short term via

the increased paper costs.

North America

£m

Year ended

30 April 2022

Year ended

30 April 2021

Change –

reported

Change –

constant

currency

Revenue £597m £541m +10% +14%

Adjusted

operating profit

£80m £63m +27% +31%

Return on sales

13.4% 11.6% +180bps +180bps

1. Operating profit before amortisation and adjusting items (refer to note 4 of

the financial statements).

Packaging volumes in the region have continued to see the

strongest increases within the Group, reflecting continued

excellent customer traction with growth across a number of

packaging sites and the increasing utilisation of the box plant in

Indiana. Full utilisation is expected to be completed on plan in the

financial year 2022/23.

Revenues increased by 14 per cent, principally reflecting the

packaging volume and pricing growth and the increase in export

paper prices more than offsetting reduced volumes in external

paper sales as we utilised, as planned, more of our paper

production. Adjusted operating profit grew by 31 per cent,

reflecting the improvement in paper and packaging pricing,

resulting in a 180 basis point increase in return on sales to 13.4 per

cent, the highest region within the Group.

Outlook

The new financial year has started well, building on the momentum

from the previous year. Whilst there remains considerable

uncertainty about the overall economic environment, our

expectations remain unchanged. Strong customer demand

reinforces our confidence to invest in the business, with capital

expenditure expected to further increase in the current year. We

currently expect to see 2-4 per cent growth in our volumes, aided by

our focus on resilient end markets, a strong performance in the US

and the opening of new sites in regions where demand is buoyant.

This growth, combined with the benefits of ongoing pricing

momentum and careful management of our cost base gives us

confidence for the year ahead and is expected to result in a further

substantial improvement in our performance.

Annual Report 2022 dssmith.com 39

STRATEGIC REPORT

Pricing power in a highly

volatile environment

Overview

2021/22 has seen the Group continue to demonstrate the

strength of its business model in the face of significant macro-

economic volatility as the global economy emerged from the

impact of Covid-19. The benefits of the rising demand for fibre

based packaging in general and the security of supply that DS

Smith offers its customers in particular have more than offset

sharply rising prices of key raw materials and energy prices.

This environment has been further hardened by the current

conflict in the Ukraine.

Box volume growth, year-on-year, of 5.4 per cent was again

extremely good and recognised the Covid-specific dynamics of the

various markets we operate in. The growth drivers of the business

particularly around single use plastic replacement have continued

to gather momentum and the opportunity to grow further in the

US, with the greenfield plant in Lebanon, Indiana, remaining

extremely positive. Customers are clearly recognising the strength

and scale of DS Smith and with security of supply, quality and

service major issues for them, it has been pleasing to see this

reflected in the Group’s strong volume growth.

The business has experienced unprecedented rises in its input

costs, with our net energy and recyclate costs increasing year-on-

year by 81 per cent and 49 per cent respectively on a constant

currency basis. These increases have been mitigated through the

size, scale, and expertise of our procurement operations, long-

term buying relationships for both recyclate and paper, and our

long-running three year rolling energy hedging programme which

we believe has been a real competitive advantage during this

highly volatile period.

The second half of the year saw the Group continue to improve its

profitability and cash performance, consolidating the good

performance of the first half, with further box price rises reflecting

the level of inflation in the markets we serve. During the first half

of the year, the Group disposed of its non-core Dutch paper mill

operations, consistent with the Group’s paper strategy and track

record of recycling capital from non-core operations to higher

returning packaging assets.

During this significant period of macroeconomic uncertainty, the

Group remains committed to achieving its medium-term financial

measures and key performance indicators, as established by the

Board, together with maintaining its investment grade credit

rating. The principal measure of return on average capital

employed (ROACE) for the year was 10.8 per cent (2020/21: 8.2

per cent), with the second half year at approximately 12.1 per cent,

which was within the target of 12 to 15 per cent. The results are

described below:

• Organic corrugated box volume growth of 5.4 per cent

(2020/21: 3.5 per cent)

• Revenue increased 26 per cent on a constant currency and 21

per cent on a reported basis to £7,241 million (2020/21: £5,976

million)

• Adjusted operating profit of £616 million, an increase of 29 per

cent on a constant currency basis and 23 per cent on a reported

basis (2020/21: £502 million)

• 42 per cent increase in operating profit to £443 million on a

reported basis; 49 per cent increase on a constant currency

basis (2020/21: £311 million)

FINANCIAL REVIEW

“Significantly improved profitability and returns, good volume growth and

robust cash performance were delivered through our agile business model,

which responded to a fast changing and highly volatile market environment

while continuing to meet our customers evolving needs through our supply

of sustainable, innovative fibre-based packaging solutions.”

Adrian Marsh,

Group Finance Director

Annual Report 2022 dssmith.com 41

STRATEGIC REPORT

• 71 per cent increase in statutory profit before tax to £378

million on a constant currency basis and 64 per cent increase on

a reported basis (2020/21: £231 million)

• Adjusted return on sales at 8.5 per cent (2020/21: 8.4 per cent)

• Adjusted return on average capital employed of 10.8 per cent

(2020/21: 8.2 per cent)

• Net debt to EBITDA ratio of 1.6 times (2020/21: 2.2 times)

• Cash conversion 142 per cent (2020/21: 150 per cent).

Unless otherwise stated, the commentary below references the

continuing operations of the Group.

Non-GAAP performance measures

The Group presents non-GAAP measures alongside reported

measures, in order to provide a balanced and comparable view of

the Group’s overall performance and position. Non-GAAP

performance measures eliminate amortisation and unusual or

non-operational items that may obscure understanding of the key

trends and performance. These measures are used both internally

and externally to evaluate business performance, as a key

constituent of the Group’s planning process, they are applied in the

Group’s financial and debt covenants, as well as comprising targets

against which compensation is determined. Amortisation relates

primarily to customer contracts and relationships arising from

business combinations. Unusual or non-operational items include

business disposals, restructuring, acquisition related and

integration costs and impairments, and are referred to as

adjusting items.

Reporting of non-GAAP measures alongside statutory measures is

considered useful by investors to understand how management

evaluates performance and value creation, enabling them to track

the Group’s performance and the key business drivers which

underpin it and the basis on which to anticipate future prospects.

Note 32 explains further the use of non-GAAP performance

measures and provides reconciliations as appropriate to

information derived directly from the financial statements. Where

a non-GAAP measure is referred to in the review, the equivalent

measure stemming directly from the financial statements (if

available and appropriate) is also referred to.

Trading results

Revenue increased by 21 per cent on a reported basis to £7,241

million (2020/21: £5,976 million). Strong demand throughout the

year saw volume growth of 5.4 per cent and this was coupled with

higher selling prices of packaging, paper and recyclate to mitigate

the unprecedented price rises of raw materials and key input costs.

Volumes rose in all European regions and were noticeably higher in

North America as a result of the continued growth at the

greenfield packaging site at Lebanon, Indiana.

Reported revenues are subject to foreign currency translation

effects. In the year, the euro accounted for 61 per cent of Group

revenue. As such, the movements of the euro against sterling

during the year constituted the majority of the £240 million of

negative foreign exchange translation impact. On a constant

currency basis, revenues increased by 26 per cent.

Corrugated box volume growth of 5.4 per cent (2020/21: 3.5 per

cent growth) reflects the momentum seen in the Group’s core

markets and segments, with both new and existing customers.

The Group’s current year volume growth should be set against a

backdrop of exceptionally distorted Covid related GDP data. As a

Group, c. 83 per cent of corrugated box volumes are sold to

consumer goods customers, substantially ahead of the industry

average, an indicator that our continued development of tailored

and innovative packaging solutions is regarded as a differentiated

offering in the market. Annualised growth over the past two years

is estimated at 4.0 per cent, compared to a GDP +1 figure of 1.6 per

cent.

Adjusted operating profit of £616 million on a reported basis is an

increase of 23 per cent (2020/21: £502 million). This is largely

attributable to volume growth of (£65 million) consolidated by

price rises of £1,279 million exceeding input cost increases of

£1,207 million and FX and other impacts (£23 million).

Operating profit at £443 million, is an increase of 49 per cent on a

constant currency and 42 per cent on a reported basis (2020/21:

£311 million). The Group benefitted from a strong performance

across its whole business responding to a fast changing economic

environment. Costs are proactively managed, of which the largest,

energy, is predominantly managed and hedged on a 3 year rolling

basis. As at the year end the Group has £714 million of net “in the

money” commodity derivatives recognised as assets on the

balance sheet, the benefits of which will flow through in future

accounting periods.

On a reported basis, depreciation declined to £290 million

(2020/21: £304 million) as the underlying increase was offset by

the effects of exchange and the disposal of the non-core De Hoop

paper mill in the Netherlands. Amortisation decreased marginally

to £138 million.

The key measure of return on average capital employed (ROACE)

improved to 10.8 per cent (2020/21: 8.2 per cent). This

performance, as expected, was below the Group’s medium-term

target of 12 to 15 per cent for the year. However, the strong

momentum in the second half of the year delivered an estimated

return within this target range and the Board is confident this will

be repeated for the full year 2022/23.

The Group has continued to focus on margin recovery through

commercial disciplines and ongoing cost management and

efficiency programmes. Adjusted return on sales increased by 10

basis points to 8.5 per cent (2020/21: 8.4 per cent) – whilst this is

still below the medium term target of 10 to 12 per cent, the Board

remains confident that target will progressively be achieved over

the next couple of years.

FINANCIAL REVIEW CONTINUED

Income statement – from continuing operations

(unless otherwise stated)

2021/22

£m

2020/21

£m

Revenue 7,241 5,976

Adjusted operating profit

616 502

Operating profit 443 311

Adjusted return on sales

8.5% 8.4%

Adjusted net financing costs

(70) (78)

Share of profit of equity-accounted

investments, net of tax 7 5

Profit before income tax 378 231

Adjusted profit before income tax

553 429

Adjusted income tax expense

(131) (97)

Adjusted earnings

422 332

Profit from discontinued operations,

net of tax – 12

Adjusted basic earnings per share

30.7p 24.2p

Profit for the year attributable to

owners of the parent (including

discontinued operations) 280 194

Basic earnings per share from continuing

and discontinued operations 20.4p 14.2p

Basic earnings per share from continuing

operations 20.4p 13.3p

1. Adjusted to exclude amortisation and adjusting items (see note 4).

Adjusting items

Adjusting items before tax and financing costs were £35 million

(2020/21: £49 million) which includes £29 million in relation to an

investment in an associate in Ukraine. Without the impairment

linked to the catastrophic Russian invasion of Ukraine, adjusting

items would have been £6 million (2020/21: £49 million), in line

with guidance.

The £29 million consisted of the full impairment of the Group’s

49.6 per cent investment in the Ukrainian associate, RKTK. The

Group has provided support to RKTK and its employees following

the invasion of Ukraine by Russia. However, the invasion has

caused significant damage to the assets of RKTK and impacted its

ability to trade. Accordingly, an impairment of the entire

investment has been recognised, together with amounts in

connection with the trading activities conducted by the Group with

the associate. There was no cash impact from this impairment.

Within restructuring costs, £8 million (2020/21: £27 million)

principally relates to the completion of the major restructuring

programme in Germany and the structured review of the

underlying, indirect cost base of the European Packaging business.

Merger and acquisition-related costs of £1 million (2020/21: £2

million) were incurred, being predominantly professional advisory

fees and purchase of minority interests.

On 12 October 2021 the Group sold its non-core Dutch paper mill

operations. Cash consideration, net of cash and cash equivalents

and transaction costs, was £35 million and net assets divested

were £28 million, resulting in a net gain of £7 million. In addition,

there were £4 million of other site disposal costs.

Non-acquisition and disposal adjusting items in 2022/23 are

expected to be £nil.

Interest, tax and earnings per share

Net finance costs were £72 million (2020/21: £85 million). The

decrease of £13 million on last year is primarily a result of lower

levels of debt throughout the year. The employment benefit net

finance expense of £3 million has remained at a similar level to the

prior year.

Adjusting financing costs of £2 million (2020/21: £7 million) relate

to the final unwind of the Interstate Resources put option.

The share of profits of equity-accounted investments was £7

million (2020/21: £5 million).

Profit before tax increased by 64 per cent on a reported basis to

£378 million (2020/21: £231 million), driven by the increase in

operating profit and a reduction in financing costs. Adjusted profit

before tax of £553 million (2020/21: £429 million) increased by 29

per cent on a reported basis, again due to the increase in the

underlying adjusted operating profit.

The tax charge of £98 million (2020/21: £49 million) reflects the

impact of higher profits. The Group’s effective tax rate on adjusted

profit, excluding amortisation, adjusting items and associates, was

24.0 per cent (2020/21: 23.0 per cent). The tax credit through

adjusting items was £2 million (2020/21: £16 million).

Reported profit after tax, amortisation and adjusting items for

continuing and discontinued operations was £280 million

(2020/21: £194 million). The increase in operating profit led to an

increase of 53 per cent in basic earnings per share from continuing

operations on a reported basis to 20.4 pence (2020/21: 13.3

pence), with adjusted earnings per share from continuing

operations 27 per cent higher at 30.7 pence (2020/21: 24.2 pence)

on a reported basis, 35 per cent higher on a constant

currency basis.

Acquisitions and disposals

In recent years, the Group’s strategy has focused on organic

growth in order to support growth with our major customers.

During 2019/20, the Group agreed to the purchase of a further 10

per cent holding in Interstate Resources for £106 million, following

the exercise of part of the pre-existing put option by the former

owners of that business. A cash settlement of £82 million was

made in June 2020 with the balance paid in October 2021. The final

10 per cent stake remains subject to the put option conditions,

which will crystalise in the 2022/23 financial year.

In the first half of 2021/22, the Group disposed of its non-core

Dutch paper mill operations for a consideration net of transaction

costs of £35 million.

Annual Report 2022 dssmith.com 43

STRATEGIC REPORT

Cash flow

Reported net debt of £1,484 million (30 April 2021: £1,795 million)

has decreased from the prior year, driven by higher cash inflows

from operating activities. The rise in EBITDA from the strong

business performance was combined with a net working capital

inflow of £215 million, partly due to the ongoing focus on cash

management, in particular cash collection and inventory

management but also in no small part from higher commodity

prices, most notably paper and energy, leading to increases in

trade payables at the year-end compared to the prior year. The

Group’s energy and carbon hedges increased significantly in value

during the year and in order to manage our counterparty risk there

were margin calls made, of which £109 million relating to positions

maturing after the year end. This £109 million is reflected within

the cash flow statement as a working capital inflow which will

reverse in 2022/23 and should, therefore, not be considered as an

underlying working capital improvement.

Trade receivables factoring is £26 million lower than April 2021 at

£381 million. Going forward the Group expects to continue to sell

high credit quality receivables under this programme within the

range £350-400 million outstanding at any one time. This is a

reduction of some 30 per cent from the peak balance of £559

million in 2018.

Net capital expenditure increased by £92 million to £415 million in

the year. The Group continued to focus on growth and efficiency

capital projects, which represented 56 per cent of the reported

spend in the year. Major investments in greenfield packaging

plants in Italy and Poland were a significant portion of this, with

operations in Italy starting up at the very end of the year and

meaningful production at both sites expected during 2022/23.

Proceeds from the disposal of property, plant and equipment were

£16 million (2020/21: £8 million).

Tax paid of £96 million is £30 million higher than the prior year,

which benefitted from tax receipts of £20 million in North America.

Net interest payments of £62 million decreased by £6 million over

the prior year driven by the maturity of debt bearing higher

interest rates and a lower net debt position throughout the year.

The remainder of interest principally comprises interest on the

Euro medium-term notes and US private placements, with

amortisation of debt issuance and other finance costs accounting

for the majority of the difference between cash interest paid and

finance costs reported in the income statement.

Cash outflows associated with adjusting items decreased by £35

million to £13 million, and include restructuring and integration

costs. The current year reduction is driven by a further decrease in

merger and acquisition costs incurred in prior years. The

impairment of the investment in RKTK had no cash flow effect.

Acquisitions and disposals of £13 million in the year (including

leases divested of £1 million) include the settlement of £23 million

of payments relating primarily to the October 2021 payment to the

former owners of Interstate Resources and £35 million of inflows

relating to the disposal of businesses, predominantly the Group’s

non-core Dutch paper mill.

Cash generated from operations before adjusting cash items

increased by £149 million to £1,092 million. Net cash inflow was

£333 million, a £33 million decrease on the prior year, following

the resumption of the dividend payments (£166 million in

2021/22, nil in 2020/21).

Cash flow

2021/22

£m

2020/21

£m

Cash generated from operations before

adjusting cash items 1,092 943

Capital expenditure (net of disposal of

fixed assets) (415) (323)

Tax paid (96) (66)

Net interest paid (62) (68)

Free cash flow 519 486

Cash outflow for adjusting items (13) (48)

Dividends (166) –

Acquisitions and disposals of businesses,

net of cash and cash equivalents 12 (74)

Other (19) 2

Net cash flow 333 366

Issue of share capital 7 3

Loans, borrowings and finance leases

divested 1 3

Foreign exchange, fair value and other

movements (30) (56)

Net debt movement –

continuing operations 311 316

Net debt movement –

discontinued operations – (10)

Opening net debt (1,795) (2,101)

Closing net debt (1,484) (1,795)

FINANCIAL REVIEW CONTINUED

Statement of financial position

At 30 April 2022, shareholder funds increased to £4,232 million,

from £3,533 million in the prior year. Profit attributable to

shareholders of £280 million contributed to the increase

(2020/21: £194 million), together with a net increase in the cash

flow hedge reserve of £712 million (2020/21: £112 million gain),

and an actuarial gain on employee benefits of £68 million

(2020/21: £5 million loss) offset by foreign currency translation

losses of £40 million (2020/21: loss of £95 million). Dividends paid

in the year were £166 million (2020/21: nil). Equity attributable to

non-controlling interests was £2 million (2020/21: £2 million).

The Group’s bank and private placement debt covenants stipulate

the methodology upon which the net debt to adjusted earnings

before interest, tax, depreciation and amortisation (EBITDA) ratio

is to be calculated. The effects of IFRS 16

Leases

, adopted since

1 May 2019, are excluded by the banks from the ratio’s

determination. The ratio has reduced to 1.6 times, with an increase

in adjusted EBITDA and a reduction in adjusted net debt. This

represents an improvement from the H1 position of 1.9 times. The

ratio remains compliant with the covenant requirements, which

across all banking debt is 3.75 times. We retain a 3.25 times level in

the remaining US Private Placement loan notes ($268 million)

which will mature during the 2022/23 financial year. As the

exercise of the second tranche of the Interstate Resources put

option is still outstanding at 30 April 2022, this has not been

factored in to the calculated ratio. If the exercise of the remaining

10 per cent stake subject to the put option was included, the ratio

would increase to c. 1.7 times. The Group’s publicly traded euro and

sterling bonds are not subject to any financial covenants. The

bonds are, however, subject to a coupon step up of 125 basis

points for any period the Group falls below an investment grade

credit rating.

The Group is also compliant with a second financial covenant in the

remaining US Private Placement loan notes, requiring an adjusted

EBITDA to net interest payable ratio of not less than 4.50 times.

The covenant will fall away when the US Private Placement loan

notes mature in August 2022.

The covenant calculations also exclude income statement items

identified as adjusting by the Group and any interest arising from

the defined benefit pension schemes. At 30 April 2022, the Group

has substantial headroom under its covenants, with the future

outlook assessed as part of the annual going concern review. The

Group’s investment grade credit rating from Standard and Poor’s

remains stable at BBB-, which takes into account all the items

excluded from covenant calculations and working capital.

Statement of financial position

30 April 2022

£m

30 April 2021

£m

Intangible assets 2,906 2,995

Property, plant and equipment 3,128 3,050

Right-of-use assets 199 226

Inventories 703 537

Trade and other receivables 1,229 819

Cash and cash equivalents 819 813

Derivative financial instruments 811 115

Other 91 145

Total assets 9,886 8,700

Bank overdrafts (73) (94)

Borrowings (2,072) (2,301)

Trade and other payables (2,540) (1,849)

Provisions (55) (56)

Employee benefits (86) (175)

Lease liabilities (203) (230)

Derivative financial instruments (84) (56)

Other (539) (404)

Total liabilities (5,652) (5,165)

Net assets 4,234 3,535

Net debt 1,484 1,795

Net debt to EBITDA ratio 1.6x 2.2x

Energy costs

Production facilities, in particular paper mills, are energy intensive

which results in energy being a significant cost for the Group. In

2021/22, costs for gas, electricity and other fuels, net of periodic

local incentives, were £609 million (2020/21: £325 million). The

year saw significant increases from the first to the second half, in

addition to the previous year increases, with energy costs for the

first half year of £240 million increasing to £369 million in the

second half year (2020/21: H1 £146 million, H2 £179 million). The

net impact on the Group was mitigated by an increase in energy

sales revenue of £119 million. The energy impact was also

mitigated by the Group’s three-year rolling hedging programme

and the benefits of free allowances following the introduction of

phase 4 of the EU Emissions Trading Scheme. The Group’s energy

and carbon hedges increased significantly in value during the year

and in order to manage our counterparty risk there were margin

calls made, of which £109 million relates to derivatives that

mature after the year end. There was no impact on income from

these margin calls. The Group continues to invest in energy

efficiency projects and limits the exposure to volatile energy

pricing by hedging energy costs with suppliers and financial

institutions, managed by the Group’s Energy Procurement team.

Annual Report 2022 dssmith.com 45

STRATEGIC REPORT

The Group continues to sell trade receivables without recourse, a

process by which the trade receivables balance sold is de-

recognised, with proceeds then presented within operating cash

flows. Such arrangements enable the Group to optimise its

working capital position and reduces the quantum of early

payment discounts given. The balance of trade receivables sold as

part of the factoring programme decreased by £26 million to £381

million at 30 April 2022 (30 April 2021: £407 million).

In November 2019, the Group established a €1 billion Euro

Commercial Paper Programme. At 30 April 2022, the programme

was undrawn due to the positive cash position in the Group.

Facilities Currency

Maturity

Date

£m

equivalent

Syndicated RCF 2018 Various 2024-25 1,400

Euro medium-term notes EUR 2022-26 1,552

Euro RCF 2020 EUR 2024 50

Sterling bond medium-term

note GBP 2029 250

US dollar private placement USD 2022 213

Euro term loan EUR 2025 23

Committed facilities at

30 April 2022 3,488

Impairment

The net book value of goodwill and other intangibles at 30 April

2022 was £2,906 million (30 April 2021: £2,995 million).

IAS 36 Impairment of Assets

requires annual testing of goodwill

and other intangible assets, as well as an assessment of any other

assets for which there may be indicators of impairment. As part of

this testing, the Group compares the carrying amount of the assets

subject to testing with the higher of their net realisable value and

value-in-use to identify whether any impairment exists. The asset

or group of assets, value-in-use is determined by discounting the

future cash flows they expect to generate from the basis of the

Group’s weighted average cost of capital (WACC) of 9.5 per cent

(2020/21: 9.5 per cent), plus a blended country risk premium for

each group of assets. Asset values were tested as at 30 April 2022,

with no impairment identified as a result of the testing performed.

Presented within the adjusting items summary is the outcome

of the decision to impair the investment in our Ukrainian

associate, RKTK.

Capital structure and treasury management

In addition to its trading cash flow, the Group finances its

operations using a combination of borrowings, property and

equipment leases, shareholders’ equity and, where appropriate,

disposals of non-core businesses. The Group’s funding strategy is

to achieve a capital structure that provides an appropriate cost of

capital whilst providing the desired flexibility in short and medium-

term funding to enable the execution of material investments or

acquisitions, as required.

The Group aims to maintain a strong balance sheet enabling

significant headroom within the financial covenants and to ensure

continuity of funding by having a range of maturities from a

variety of sources. The Group has an investment grade rating from

Standard and Poor’s of BBB–, with a stable outlook.

The Group’s overarching treasury objective is to ensure sufficient

funds are available for the Group to execute its strategy and to

manage the financial risks to which the Group is exposed.

In November 2018, the Group signed a £1.4 billion five-year

committed syndicated revolving credit facility (RCF) with its core

banks. The second extension option was exercised in November

2020. £1.1 billion of the facility now matures in 2025 with the

remaining £0.3 billion maturing in 2024.

Available cash and debt facilities are reviewed regularly to ensure

sufficient funds are available to support the Group’s activities. At

30 April 2022, the Group’s committed facilities totalled £3.5 billion,

of which £1.5 billion remained undrawn and £2.8 billion matures

beyond one year or more. Undrawn committed borrowing facilities

are maintained to provide protection against refinancing risk.

At 30 April 2022, the committed borrowing facilities had a

weighted average maturity of 3.0 years (30 April 2021: 3.9 years).

Additional detail on these facilities is provided below. Total gross

borrowings at 30 April 2022 were £2,072 million (30 April 2021:

£2,301 million). The committed borrowing facilities described do

not include the £420 million of three-year committed factoring

facilities, which allow the sale of receivables without recourse.

Given the three-year committed nature of these facilities, they

fully protect the Group from any short-term liquidity risks which

may arise from volatility in financial markets.

FINANCIAL REVIEW CONTINUED

Pensions

The Group’s primary funded defined benefit pension scheme,

based in the UK, is closed to future accrual. There are a variety of

other post-retirement and employee benefit schemes operated

locally for overseas operations, and an additional unfunded

scheme in the UK relating to three former directors which is

secured against assets of the UK business. In accordance with

IAS

19 Employee Benefits (Revised 2011)

, the Group is required to

make assumptions surrounding rates of inflation, discount rates

and current and future life expectancies, amongst others, which

could materially impact the value of any scheme surplus or liability.

A material revaluation of the relevant assets and liabilities could

result in a change to the cost to fund the scheme liabilities.

The assumptions applied are subject to periodic review. A

summary of the balance sheet position as at 30 April is as follows:

30 April

2022

£m

30 April

2021

£m

Aggregate gross assets of schemes 1,113 1,178

Aggregate gross liabilities of schemes (1,199) (1,353)

Gross balance sheet deficit (86) (175)

Deferred tax assets 21 40

Net balance sheet deficit (65) (135)

The net deficit has decreased versus prior year driven by

significant increase in discount rate assumptions at 30 April 2022

and a less than corresponding fall in the asset valuations.

The 2019 triennial valuation of the main UK scheme incorporated

updates to underlying scheme assumptions, including

demographic and life expectancy rates, which, along with updates

surrounding mortality and proportion married assumptions and

future improvements, resulted in a net c. 1 per cent increase in the

valuation of the scheme liabilities. No changes were made to the

previously approved funding plan following the triennial valuation.

Total cash contributions paid into the Group pension schemes,

reported within cash generated from operations in the cash flow,

were £21 million in 2021/22 (2020/21: £32 million), which

primarily constitute the agreed contributions under the UK

defined benefit scheme deficit recovery plan.

Turning risk into resilience

Our Group risk policy

Our Group risk policy provides the framework to ensure there is a

common understanding of risk management practices across all

parts of the Group and is fully integrated with our annual corporate

planning process. We use these practices to evaluate and accept

those risks that we believe we have the capacity, know-how and

experience to manage, or to understand and tolerate those risks

that we cannot influence, in order to realise the potential

opportunities for growth and development.

Risk activities in 2021/22

We recognise that risks are evolving rapidly in our changing world

and that requires new ways of thinking and working to identify,

assess, manage and take risks effectively. We continue to build on

the solid foundation that we have already established and which

has proven effective to maintain resilience during events such as

the Covid-19 pandemic, supply chain shocks and geopolitical

turmoil from the Russian invasion of Ukraine. Our aim is to

continuously review and improve the risk process to obtain better

quality output from the corporate planning process and year-end

risk assessments. Areas of focus during the past year include:

• Updating and maturing our business continuity plans across the

business to adhere to our Group policy, whilst providing the

training and tools and raising awareness of the importance of

preparedness amongst our people

• Energy management, where our dynamic hedging strategy has

minimised short-term pricing risk

• Supply chain management, such as identifying critical supplies

to our operations with single source suppliers and/or with

connections to Ukraine and Russia

• Updating and enhancing scenario analysis specifically on cyber

and climate risks.

Risk governance

Our governance framework remains robust and largely unchanged

in the past year. In summary:

• The Board sets out the Group’s risk appetite annually,

based on the level of risk it is willing to accept in pursuit

of corporate targets

• The risk strategy and setting of objectives is executed by the

Group Operations Committee (GOC) with oversight from the

Audit Committee and Board

• Our GOC, management committees and specialist Group

functions provide guidance to the businesses on how to better

integrate risk management processes into day-to-day activities.

The Group’s risk policy sets out how this governance framework

translates into the annual risk reporting cycle (see page 81), which

links with our Internal Audit cycle, and informs our management

and governance processes specifically for climate-related risks

(see pages 56-60).

Report on our principal risks

Like many businesses we are subject to general external risks and

the impact of macro factors such as changes in social, political,

financial, regulatory and legislative environments, which can play

alongside and/or amplify internal risks in operational and strategic

categories for example. Our principal risks and uncertainties are

those that may have the greatest impact on our key priorities when

considering our current controls and mitigation plans on a net risk

basis within a three-year horizon. These risks have been discussed at

Audit Committee meetings during 2021/22. They are summarised

with details of our key mitigating activities on pages 52 to 55.

Risks identified and assessed

The 12 principal risks disclosed in our 2021 Annual Report remain

the most relevant to the Group according to our latest assessment,

including risks across strategic, market, operational, financial,

geopolitical and technological risk categories. The same top three

risks are considered to be the most disruptive to our plans. These

have been placed in the highest priority category:

• Eurozone and macroeconomic impacts continue to have an

increasingly negative outlook, especially when considering

trends such as cost inflation, energy prices, supply chain

shortages and logistics challenges, many of which are amplified

by the war in Ukraine, with the Group potentially left vulnerable

given the international nature of our supply chain, the

competitiveness of our markets, and the performance of major

economies impacting the level of consumer spend and demand

for our packaging products.

• Paper/fibre price volatility continues to put pressure on our

integrated paper and packaging business model and our ability

to ensure packaging prices appropriately reflect this volatility.

• Cyber attacks targeting businesses’ informational and

operational technologies are seemingly becoming increasingly

common and sophisticated, requiring significant investment in

technological and human defences to keep pace.

The risk of our sustainability commitments not meeting the

expectations placed on the Group, both in terms of speed and scale

of change, has been assessed to have reduced in severity since the

2021 Annual Report and so is no longer in the highest priority

category. This reflects the positive performance against our

current sustainability targets and the setting of our new 1.5°C

science-based target for carbon reduction and Net Zero emissions

commitment by 2050.

Covid-19

The evolving impacts arising from the ongoing Covid-19 pandemic

continued to be considered in our assessment of each of the

principal risks. Whilst the associated impacts from the Covid-19

disease are reducing, our assessments recognise that new or

repeating waves may still arise. We continue to learn to live with

pandemic risks and to build operational resilience and adapt our

ways of working.

Annual Report 2022 dssmith.com 47

STRATEGIC REPORTRISK MANAGEMENT

Prioritising our risk management efforts

Mitigating and/or preventing the effect of risk on our Corporate

Plan remains a cornerstone of our Executive and operational

management team efforts. Our risk heat map provides a summary

of how we assess and evaluate the relationship between the

likelihood and severity of our principal risks and uncertainties,

taking into account the effectiveness of current mitigations,

andinforms where the Group should prioritise investments to

managethem.

Risk likelihood (with mitigation)

List of risks

Eurozone and macroeconomic impacts

Paper/fibre price volatility

Cyber attacks

Regulation and governance

Sustainability commitments

Security of paper/fibre supply

Packaging capacity limits to growth

Organisation capability

Disruptive market players

Substitution of fibre packaging

Digital enablement

Shopping habits

Bubble colour reflects risk relative priority (red highest

risk, amber second level, green third level priority)

Net (mitigated) risk heat map results

Risk severity (with mitigation)

Emerging risks

Our risk management programme includes a formal review of

emerging risks. We define emerging risks as those which are not

meaningfully impacting the Group today but are highly uncertain

because their evolution is rapid, indirect or both, and have the

potential for significant impact. These risks will typically have

longer-term impacts which may fall outside of our Corporate Plan

horizon but warrant attention now to avoid the worst effects.

Emerging risks require regular monitoring of external trends and

insights, which, when combined with our existing knowledge and

expertise, identifies the risks that could become relevant to the

Group in the future. Collating information from both internal and

external sources builds our list of key emerging risks to watch or

act upon, which is formally reviewed at least twice per year with

the GOC alongside our principal risks. In 2021/22, we completed

our first internal emerging risk surveys with sample employee

populations to support the assessment.

Of the emerging risks identified and assessed, three risks were

considered to have the highest impact on the Group and detailed in

the table below. The assessment concluded that there is no single

emerging risk identified where there is disproportionate impact to

the Group’s plans considering the mitigation/investments.

Emerging risks Summary mitigations

New information security risks

(cyber-physical convergence):

The risk that a mass integration of

previously unconnected physical

devices/assets with the internet

increases the Group’s vulnerability

to current and new forms of cyber

attacks, especially if security

procedures for Internet of Things

(IoT) devices, smart buildings and

other operational technologies

lag behind.

Our Operational Technology

Steering Committee operates to

improve operational technology

security and facilitate digital

initiative preparedness and

effective change management to

drive performance and reliability

improvements across operations.

Inflationary pressures: The risk

that significantly increased prices of

goods and services over a prolonged

period of time will raise the cost of

doing business and/or reduce

customer/consumer buying power.

The Group is deploying a multitude

of tools to mitigate or offset

inflation, including:

• Focused hedging strategy on

energy-traded commodities

• Continuous cost improvement

throughout our operations

• Major programmes with suppliers

and customers on value/price

parameters.

Reusable packaging regulation:

The risk of an introduction of

stricter EU legislation on the

sustainability of products (e.g.

reusability vs recyclability) or

consumer sentiment turning

against single-use packaging

of any form.

• Our dedicated Government

Affairs team tracks/monitors

relevant legislation with the

Group actively involved in trade

associations to build the

reputation of fibre-based

materials

• Increased level and focused

investments in innovative

packaging solutions to drive

and support the circular

economy agenda.

RISK MANAGEMENT CONTINUED

Viability Statement

Context

The Group’s strategy and key differentiators are detailed on page

5 and pages 8 to 11, and our risk management framework is

described on pages 79 to 81. Understanding of our business

model, our strategy and our principal risks is a key element in the

assessment of the Group’s prospects, as well as the formal

consideration of viability.

The Group’s Corporate Plan cycle is the primary annual strategic

and financial planning activity through which the Board assesses

the prospects of the Group, extending for the three successive

financial years that follow beyond the year ending after the

assessment date. The planning process involves modelling under a

series of assumptions surrounding both internal and external

parameters, with key assumptions including economic growth

projections, input pricing (including paper, fibre, energy and

labour), foreign exchange rates and packaging volume growth;

combined with the effects of major capital initiatives. The robust

Corporate Plan process is led by the Group Chief Executive, the

Group Finance Director and the Group Head of Strategy, in

conjunction with divisional management. The Board undertakes

a detailed review of the Corporate Plan during its December

Board meeting.

The most recent Corporate Plan process was undertaken against

the backdrop of the return to pre-Covid-19 levels of activity/

profitability in 2022/23. The budget process for 2022/23,

conducted subsequent to the Corporate Planning process,

reflected different dynamics, particularly with regard to fibre,

energy and paper prices, but validated the overall Group

profitability as set out in the Corporate Plan in the first financial

year. Similarly, the going concern exercise which builds on the

budget validated the overall Group profitability as set out in the

Corporate Plan for the second year. On that basis, the Directors are

satisfied that the Corporate Plan provides a suitable basis for the

viability assessment.

Although the Directors have no reason to believe that the Group

will not be viable over a longer period, the three-year period was

chosen for this assessment, having considered the speed and

degree of change possible in the key assumptions influencing the

Group, as well as the speed of evolution in the footprint of the

Group, which limits the Directors’ ability to predict beyond this

period reliably. Indeed, given the pace of change in the primary

sectors in which the Group operates, particularly FMCG and

e-commerce, as illustrated by the recent moves away from plastic

packaging and the acceleration into e-commerce driven by the

Covid-19 pandemic, the Directors believe that three years

represents the most realistic and appropriate timescale over which

to assess the Group’s viability.

Assessment of longer-term viability

In accordance with the UK Corporate Governance Code, the

Directors have assessed the viability of the Group over a three-

year period to 30 April 2025, which is a longer period than the

12-month outlook required in adopting the going concern basis of

accounting. This assessment period remains appropriate given the

timescale of the Group’s planning and investment cycle.

The Directors confirm that they have performed a robust

assessment of the principal risks facing the Group as detailed on

page 47, including those that will threaten its business model,

future performance and solvency or liquidity.

The assessment of the Group’s viability considers a pessimistic but

plausible scenario aligned to the principal risks and uncertainties

set out on pages 53 to 55 where the realisation of these risks is

considered remote, considering the effectiveness of the Group’s

risk management and control systems and current risk appetite.

The degree of severity applied in this scenario was based on

management’s experience and knowledge of the industry to

determine plausible movements in assumptions. The Directors

note that the Group enjoyed a large degree of resilience

to the consequential downturns from the Covid-19 pandemic

and through the increased economic volatility in the post-

pandemic period.

The Group has significant financial resources including committed

and uncommitted banking and debt facilities, detailed in note 20.

In assessing the Group’s viability, the Directors have assumed that

the existing banking and debt facilities will remain in place or

mature as intended.

The Directors have also considered mitigating actions available to

the Group to respond to the stress scenarios such as restrictions

on capital investment, further cost reduction opportunities, and

dividend suspension or restriction on dividend levels. The Directors

have assumed that these mitigating actions can be applied on a

timely basis and at insignificant or no cost.

Confirmation of viability

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 three-year period of

their assessment.

Annual Report 2022 dssmith.com 49

STRATEGIC REPORT

Going concern

The Board has reviewed a detailed consideration of going concern,

based on the Group’s recent trading and forecasts, and including

scenario analysis. This takes into account reasonably foreseeable

changes in trading performance, including the continued

uncertainty of the long-term impacts on the economic landscape

presented by an inflationary economic environment and the

ongoing war in Ukraine. More detail of the assessment performed

is included in note 1 to the financial statements.

At 30 April 2022 there was significant headroom on the Group’s

committed debt facilities at a level of c. £1.9 billion. The going

concern assessment covered a forecast period of 12 months from

the date of approval of this financial report. Based on the resilience

of the Group’s operations to both Covid-19 and the high-cost

environment experienced throughout the financial year, as well as

the current and forecast liquidity available, the Board believes that

the Group is well placed to manage its business risks successfully

despite the uncertainties inherent in the current economic

outlook, and to operate within its current debt facilities.

The Group’s current committed bank facility headroom, its forecast

liquidity headroom over the going concern period of assessment

and potential mitigating activities available to management have

been considered by the Directors in forming their view that it is

appropriate to conclude that there is a reasonable expectation

that the Group has adequate resources to continue in operational

existence for the foreseeable future. For this reason, the

going concern basis has been adopted in preparing the

financial statements.

The financial statements have been prepared on the going

concern basis with no material uncertainty identified, after a

detailed assessment, this year.

Further details, including the analysis performed and conclusion

reached, are set out below.

Liquidity and financing position

The total drawn debt facilities at 30 April 2022 were £2.0 billion, of

which, £1.8 billion is publicly listed debt with no attached

covenants and £0.2 billion carries a covenant of net debt:EBITDA

of less than 3.25 times. In addition, the Group has access to c. £1.5

billion committed bank facilities, which were undrawn at 30 April

2022, which provide liquidity to the Group and carry the same

covenant of net debt:EBITDA of less than 3.75 times. The Group is

not forecast to increase net debt in the going concern analysis.

There is significant liquidity/financing headroom across the going

concern forecast period. For this reason, the going concern review

has focused more on forecast covenant compliance.

Overview

In determining the going concern basis for preparing the financial

statements, the Directors consider the Company’s objectives and

strategy, its principal risks and uncertainties in achieving its

objectives and its review of business performance and financial

position. The economic environment reflected in this Going

Concern assessment is based on the 2022/23 budget which

anticipates robust organic box volume growth across each of our

regions, consistent with the prevailing rates of growth in 2021/22

recognising the inflationary pressures in the Group’s raw materials,

energy and overhead cost bases. In preparing the financial

statements, the Group has modelled two scenarios in its

assessment of going concern. These are:

• The base case is derived from the 2022/23 full year budget. The

key inputs and assumptions include: Packaging volume growth

at moderate levels across the future periods considered by the

modelling, driven by continued FMCG and e-commerce demand,

together with a conservative recovery in industrial volumes.

Both paper sales price and input fibre price are consistent with

those anticipated in the budget.

• The downside case assumes European packaging volumes

largely stagnating at 2021/22 levels, reflecting no future

growth and a continued spike in energy prices not mitigated by a

commensurate increase in paper prices. With a significant

portion of the Group’s packaging contracts being either directly

linked/referenced to a paper index this would result in higher

input costs for the Group that are more difficult to pass through

to end customers. A significant cash outflow from working

capital is incorporated into 2023/24, providing an additional

headwind to the Group’s net debt and covenant ratios.

RISK MANAGEMENT CONTINUED

Mitigating actions

The outturns of the above scenario modelling, combined with the

strong performance operating throughout 2021/22, provide the

Group a level of comfort that no significant cost/cash flow

mitigations need to be built in to the going concern modelling.

However, a range of options remain at the Group’s disposal should

they be required which provide the opportunity to support

EBITDA, cash flow and net debt, including:

• Action in respect of variable and controllable costs such as

discretionary bonuses, pay rises, recruitment freezes

and wider labour force actions in response to higher levels

of volume reductions

• Limiting capital expenditure to minimum maintenance levels by

pausing growth spend (including greenfield sites and other

expansionary spend)

• Satisfaction of the outstanding Interstate put option for shares

instead of cash

• Strategic actions in respect of the Group’s asset base could be

considered in respect of disposals, mothballing and closures

• A reduction or temporary suspension of the Group’s dividend

The Group could also consider actions to assist covenant

compliance, such as increased utilisation of debt factoring facilities

and optimising working capital by negotiating longer payment

terms whilst continuing to pay suppliers in full and in line with

contractual terms.

At a high level, it is estimated that the Group EBITA would have to

fall by about 45 per cent from 2021/22 levels for a breach of the

net debt:EBITDA covenant to occur.

Going concern basis

Based on the forecast and the scenarios modelled, together with

the performance of the Group in the current year, the Directors

consider that the Group has significant covenant and liquidity

headroom in its borrowing facilities to continue in operational

existence for the foreseeable future. Accordingly, at the June 2022

Board meeting, the Directors concluded from this analysis it was

appropriate to continue to adopt the going concern basis in

preparing the financial statements.

Annual Report 2022 dssmith.com 51

STRATEGIC REPORT

Risk priority

classification

1 1 1 2 2 2

Risk

1. Eurozone and

macroeconomic impacts

Multiple political/economic factors from

Brexit, foreign exchange/interest rates,

to weakening major economies

significantly impact the level of

consumer spend and customer demand

for our packaging products.

2. Paper/fibre price

volatility

Volatile commodity pricing for recovered

paper (including old corrugated cases

(OCC)) and containerboard grades can

create significant short-term challenges

to capture appropriate returns by

aligning raw material costs to packaging

sales revenues.

3. Cyber attacks

A major cyber incident on our information or

operational technology (e.g. ransomware)

and/or a failure to stop/identify

sophisticated malicious cyber intruders on

our IT infrastructure (i.e. phishing attacks)

resulting in short-term trading impacts,

financial losses and reputational harm –

impacting us, our suppliers and customers.

4. Regulation and governance

Our governance model fails to support the way we

are organised and our geographical spread,

resulting in unauthorised, illegal, unethical or

inappropriate actions (including breach of

anti-bribery, data privacy, etc.).

5. Sustainability commitments

Our efforts to decarbonise and transition our

supply chain to a circular, low carbon economy are

not enough or are too slow against the growing

expectations of the Group to play a positive role

in society and address global climate change

and related environmental, social and

business challenges.

6. Security of paper/fibre

supply

Large fluctuations in the availability of

recovered paper (including OCC) and

containerboard could adversely affect our

performance, as the Group remains a net

purchaser of specific grades of paper and faces

recycling collection/segregation challenges.

Inherent risk

expected change

Key mitigating

actions

• A robust corporate planning process

where macroeconomic trends are

evaluated alongside investments to

improve production cost base,

efficiency and deliver other initiatives

such as sustainable growth priorities

to strengthen resilience

• Focus remains on supplying

packaging to fast moving consumer

goods (FMCG) customers with a

constant focus on quality, service and

volume growth, as these customers

tend to show greatest resilience

against GDP volatility

• Our dynamic energy hedging strategy

over two to five-year horizons

smooths pricing volatility, and other

developments in our procurement

and logistics flows (e.g. due to Brexit)

are helping to evolve our operating

model and maintain resilience.

• Maximise our commercial credentials,

services and contract management to

build up box prices and sell the added

value of our products, services,

innovations, sustainability

credentials, and customer brand

benefits

• Focus on providing sufficient paper

from internal manufacturing

operations to support our Packaging

division, whilst determining the

optimal integration level, to ensure

that we balance the external effects

of paper availability over the

long term

• Initiatives to implement productivity

improvements, demand forecasting

improvements and the development

of skills and tools in our sales and

paper sourcing teams.

• Regular awareness training and testing

to better equip our employees with the

knowledge to identify potential

phishing/other social engineering

techniques, led by our Chief Information

Security Officer and expanding internal

IT resourcing as well as external partner

support

• Investments in IT security controls to

improve our capability to detect, respond

to and prevent malicious cyber activity,

including network segregation between/

within IT and operational technology

environments

• Regular improvements in, and testing of,

IT disaster recovery planning, policies

and procedures, including penetration/

vulnerability testing, to inform and

ensure the Group’s ability to progress

towards cyber resilience.

• The Group continues to maintain detailed and

extensive arrangements for the management

of standards, domestic and international

compliance rules and new regulations, with

regular business unit legal compliance and

control reviews including health, safety,

environment, supply chain and product

integrity/safety

• Training employees on a variety of compliance

modules including antitrust, anti-bribery and

corruption, and modern slavery to ensure full

understanding of the applicable laws and high

standards expected

• The Group operates a workplace malpractice

helpline (‘Speak Up!’), providing a confidential

route for employees to report perceived

malpractice of any type.

• Focused on deploying our roadmap of carbon

reduction investments towards Net Zero,

focused on energy efficiency, plant upgrades

and switching to alternative energy sources,

whilst monitoring and adapting to regulatory

changes such as in carbon taxes and resource

extraction

• Ensuring we meet the growing consumer,

customer and investor demand for sustainable

packaging, through a focus on packaging and

related supply chain designed for a circular

economy

• Regular reviews of, and governance and

reporting on, our sustainability priorities to

ensure they align with the expectations of

stakeholders, wider society and scientific

climate projections, as well as implementing

TCFD recommendations and submission to ESG

ratings, such as CDP.

• Our Paper Sourcing division’s capability

(knowledge, experience and buying

strength) to optimise the make, buy, sell

decision across the Group, ensuring the

Group sources key paper grades from

external suppliers to deliver and flex to

paper volume needs

• A clearly defined fibre strategy based on

performance packaging, and a ‘best fit’

footprint alignment between internal paper

production, quality fibre sourcing and the

capacity needs of our Packaging division

• The Group has the skills and experience to

mitigate short-term paper scarcities, such as

through using different papers, improved

stock management, and better forecasting

and communication with customers and

across divisions.

Net risk expected

change

Key Risk Indicator

Eurozone GDP growth rate Paper/recovered fibre market price and

box selling price

IT security training effectiveness and

phishing campaign statistics

Group and divisional compliance training and

reviews

Reduction of CO

e per tonne of production Paper/recovered fibre supply volumes

Risk tolerance to

Corporate Plan

priorities

Opportunity

examples

Ability to reposition our business model

outside of our traditional geographic

markets and sources of supply.

Accelerate improvements in commercial

awareness and expertise of pricing

fluctuations and strengthen the

effectiveness of fibre and efficiency

programmes.

Accelerated investments to strengthen our

technology infrastructure and operational

resilience to prevent losses and enhance

business continuity credentials.

Ability to demonstrate a standard of ethics and

behaviours beyond the standards requested of us

and potentially influence how the regulatory

landscape changes.

Capitalise on efficiencies in energy upgrade

projects and meet the growing societal demand for

sustainable products in a circular economy.

Our closed loop model and paper sourcing

strategy offer significant customer

opportunities and ability to generate a ‘best fit’

cost and quality solution.

Alignment with

strategic priority

To double our size and profitability To double our size and profitability To double our size and profitability

To delight our customers To lead the way in sustainability To double our size and profitability

Governance

oversight

Group Chief Executive and Group

Finance Director present reviews and

forecasts on the impact of the

macroeconomic environment at each

Board meeting.

The Group Chief Executive and Group

Finance Director present regular

updates on paper and OCC prices to

the Board.

Cyber security assessment reports, IT

network management and external

advisory guidance are reviewed by the

Executive Directors and Audit Committee.

Results of internal control reports and internal

corporate governance, ethics and compliance

updates are regularly reviewed by the Audit

Committee and Board.

The Board receives regular updates on the Group’s

sustainability performance and strategy.

Paper sourcing opportunities are discussed

with the Board, with specific focus on

critical papers.

RISK MANAGEMENT CONTINUED

Increasing Stable Decreasing

Risk change key

Unacceptable Re-assess Acceptable

Net risk tolerance key

Risk priority

classification

1 1 1 2 2 2

Risk

1. Eurozone and

macroeconomic impacts

Multiple political/economic factors from

Brexit, foreign exchange/interest rates,

to weakening major economies

significantly impact the level of

consumer spend and customer demand

for our packaging products.

2. Paper/fibre price

volatility

Volatile commodity pricing for recovered

paper (including old corrugated cases

(OCC)) and containerboard grades can

create significant short-term challenges

to capture appropriate returns by

aligning raw material costs to packaging

sales revenues.

3. Cyber attacks

A major cyber incident on our information or

operational technology (e.g. ransomware)

and/or a failure to stop/identify

sophisticated malicious cyber intruders on

our IT infrastructure (i.e. phishing attacks)

resulting in short-term trading impacts,

financial losses and reputational harm –

impacting us, our suppliers and customers.

4. Regulation and governance

Our governance model fails to support the way we

are organised and our geographical spread,

resulting in unauthorised, illegal, unethical or

inappropriate actions (including breach of

anti-bribery, data privacy, etc.).

5. Sustainability commitments

Our efforts to decarbonise and transition our

supply chain to a circular, low carbon economy are

not enough or are too slow against the growing

expectations of the Group to play a positive role

in society and address global climate change

and related environmental, social and

business challenges.

6. Security of paper/fibre

supply

Large fluctuations in the availability of

recovered paper (including OCC) and

containerboard could adversely affect our

performance, as the Group remains a net

purchaser of specific grades of paper and faces

recycling collection/segregation challenges.

Inherent risk

expected change

Key mitigating

actions

• A robust corporate planning process

where macroeconomic trends are

evaluated alongside investments to

improve production cost base,

efficiency and deliver other initiatives

such as sustainable growth priorities

to strengthen resilience

• Focus remains on supplying

packaging to fast moving consumer

goods (FMCG) customers with a

constant focus on quality, service and

volume growth, as these customers

tend to show greatest resilience

against GDP volatility

• Our dynamic energy hedging strategy

over two to five-year horizons

smooths pricing volatility, and other

developments in our procurement

and logistics flows (e.g. due to Brexit)

are helping to evolve our operating

model and maintain resilience.

• Maximise our commercial credentials,

services and contract management to

build up box prices and sell the added

value of our products, services,

innovations, sustainability

credentials, and customer brand

benefits

• Focus on providing sufficient paper

from internal manufacturing

operations to support our Packaging

division, whilst determining the

optimal integration level, to ensure

that we balance the external effects

of paper availability over the

long term

• Initiatives to implement productivity

improvements, demand forecasting

improvements and the development

of skills and tools in our sales and

paper sourcing teams.

• Regular awareness training and testing

to better equip our employees with the

knowledge to identify potential

phishing/other social engineering

techniques, led by our Chief Information

Security Officer and expanding internal

IT resourcing as well as external partner

support

• Investments in IT security controls to

improve our capability to detect, respond

to and prevent malicious cyber activity,

including network segregation between/

within IT and operational technology

environments

• Regular improvements in, and testing of,

IT disaster recovery planning, policies

and procedures, including penetration/

vulnerability testing, to inform and

ensure the Group’s ability to progress

towards cyber resilience.

• The Group continues to maintain detailed and

extensive arrangements for the management

of standards, domestic and international

compliance rules and new regulations, with

regular business unit legal compliance and

control reviews including health, safety,

environment, supply chain and product

integrity/safety

• Training employees on a variety of compliance

modules including antitrust, anti-bribery and

corruption, and modern slavery to ensure full

understanding of the applicable laws and high

standards expected

• The Group operates a workplace malpractice

helpline (‘Speak Up!’), providing a confidential

route for employees to report perceived

malpractice of any type.

• Focused on deploying our roadmap of carbon

reduction investments towards Net Zero,

focused on energy efficiency, plant upgrades

and switching to alternative energy sources,

whilst monitoring and adapting to regulatory

changes such as in carbon taxes and resource

extraction

• Ensuring we meet the growing consumer,

customer and investor demand for sustainable

packaging, through a focus on packaging and

related supply chain designed for a circular

economy

• Regular reviews of, and governance and

reporting on, our sustainability priorities to

ensure they align with the expectations of

stakeholders, wider society and scientific

climate projections, as well as implementing

TCFD recommendations and submission to ESG

ratings, such as CDP.

• Our Paper Sourcing division’s capability

(knowledge, experience and buying

strength) to optimise the make, buy, sell

decision across the Group, ensuring the

Group sources key paper grades from

external suppliers to deliver and flex to

paper volume needs

• A clearly defined fibre strategy based on

performance packaging, and a ‘best fit’

footprint alignment between internal paper

production, quality fibre sourcing and the

capacity needs of our Packaging division

• The Group has the skills and experience to

mitigate short-term paper scarcities, such as

through using different papers, improved

stock management, and better forecasting

and communication with customers and

across divisions.

Net risk expected

change

Key Risk Indicator

Eurozone GDP growth rate Paper/recovered fibre market price and

box selling price

IT security training effectiveness and

phishing campaign statistics

Group and divisional compliance training and

reviews

Reduction of CO

e per tonne of production Paper/recovered fibre supply volumes

Risk tolerance to

Corporate Plan

priorities

Opportunity

examples

Ability to reposition our business model

outside of our traditional geographic

markets and sources of supply.

Accelerate improvements in commercial

awareness and expertise of pricing

fluctuations and strengthen the

effectiveness of fibre and efficiency

programmes.

Accelerated investments to strengthen our

technology infrastructure and operational

resilience to prevent losses and enhance

business continuity credentials.

Ability to demonstrate a standard of ethics and

behaviours beyond the standards requested of us

and potentially influence how the regulatory

landscape changes.

Capitalise on efficiencies in energy upgrade

projects and meet the growing societal demand for

sustainable products in a circular economy.

Our closed loop model and paper sourcing

strategy offer significant customer

opportunities and ability to generate a ‘best fit’

cost and quality solution.

Alignment with

strategic priority

To double our size and profitability To double our size and profitability To double our size and profitability

To delight our customers To lead the way in sustainability To double our size and profitability

Governance

oversight

Group Chief Executive and Group

Finance Director present reviews and

forecasts on the impact of the

macroeconomic environment at each

Board meeting.

The Group Chief Executive and Group

Finance Director present regular

updates on paper and OCC prices to

the Board.

Cyber security assessment reports, IT

network management and external

advisory guidance are reviewed by the

Executive Directors and Audit Committee.

Results of internal control reports and internal

corporate governance, ethics and compliance

updates are regularly reviewed by the Audit

Committee and Board.

The Board receives regular updates on the Group’s

sustainability performance and strategy.

Paper sourcing opportunities are discussed

with the Board, with specific focus on

critical papers.

Annual Report 2022 dssmith.com 53

STRATEGIC REPORT

Risk priority

classification

2 2 3 3 3 3

Risk

7. Packaging capacity limits

to growth

Our performance and volume growth

expectations, and an increasing demand

for packaging, is limited by our

production capacity and ability to grow

organically at the pace required.

8. Organisation capability

Our management approach to our people

and assets, including succession and

workforce planning, talent retention and

development, hybrid working models, and

strategy for ageing assets, fails to identify

and resource for future capability needs,

resulting in critical gaps in skills, knowledge

and equipment, limiting productivity gains

across key business areas.

9. Disruptive market players

Disruptive behaviours in our key markets,

should significant suppliers or competitors

combine, reduce our capability to

purchase paper or restrict our ability to

compete more effectively, and these

larger combined groups could also dispose

of assets leading to new market entrants,

increasing competition and causing loss in

market share.

10. Substitution of fibre

packaging

Fibre-based packaging loses its credentials as a

sustainable product of choice against

developments in plastic packaging or other

materials that can be reused and recycled,

resulting in our products being substituted and/

or replaced by competitor products.

11. Digital enablement

Digital transformation initiatives, from

point-of-sale through to manufacture and

delivery to customers, are too slow or the

investments required too high to adequately

adapt our ways of working or we miss the

opportunity to meet the demand for smart

products, including customer ease of access to

our products and services.

12. Shopping habits

We fail to match or adapt our offer to the pace and

direction of change in consumer spending across

the full retail FMCG spectrum, from the mega-

large brands, micro-brands and omni-channel

distribution networks of the big box superstores

and discounters, to the rise in e-commerce and

importance of consumers’ values.

Inherent risk

expected change

Key mitigating

actions

• Targeted organic growth in our

existing key markets from strategic

investments in new greenfield

packaging manufacturing sites,

including our new builds in Poland and

Italy coming online in 2022

• Further expansions/developments of

our current packaging and paper sites

through multi-year capital plans,

enhancing equipment utilisation and

efficiency, whilst improving the

customer-production footprint

alignment

• Developing clusters of production

sites to improve capacity loading,

implementing new shift patterns and

sales and operational performance

programmes to optimise a full system

of supply/demand loading, inventory

and logistics planning.

• People performance, potential and

succession management is formally

reviewed and subject to calibration by

senior management, and core skills gaps

are identified to inform clear action plans

and address key talent retention or

attraction risks, including an increasing

focus on diversity and inclusion actions

• Annual senior talent reviews address

strategic workforce questions, and

evaluate the capability profile of the

senior leadership population and the

talent bench strength

• Our HR and operational leaders

collaborate to prioritise key business

transformation activities aimed at new

and foreseeable work realities, run

in-house learning academies to build the

necessary skills and reduce reliance on

external labour markets, and review

operating models to improve

organisation flexibility and productivity.

• A strong corporate planning ethos

focused on growth and reputation in

order to be a market leader, and an

evolving approach by introducing

concepts such as agility, adaptability,

and responsiveness to emerging

threats in the key areas of innovation,

sustainability and digitalisation

• Continuous improvement of our

procurement and supply chain

processes for all paper grades and

critical raw materials, including

enhanced contingency plans if critical

suppliers were to be disrupted

• Focused on strong, long-standing

relationships with all of our existing

customers, across large FMCG, regional

and local customers, whilst incubating

areas of potential breakthrough

innovations to stand out from

competitors and attract new business.

• Collaboration between our Paper and

Packaging divisions, innovation and research

and development teams to deliver innovative

papers and corrugated products, and develop

new materials with our suppliers and partners

for barrier/lamination concepts and plastic

replacements

• Our Recycling division uses commercial

insights and works to create pan-European

alignment in our services, including providing

our key packaging customers with closed loop

opportunities

• Our Government Affairs team tracks

proposed government legislation, the

potential impact on DS Smith, and sets/drives

focused and proactive communication

strategies, including involvement in related

industry trade associations to maintain and

build the reputation of fibre-based materials

in terms of recyclability, circularity, quality

standards and innovation potential.

• A new Group-wide focus to identify/leverage

digital revenue opportunities as part of a key

priority in the Corporate Plan, supported by

developing a clearly defined digital operating

model and governance framework to enable

faster decision-making and strong delivery

• Delivering digital customer experiences, such

as customer and investor online events, and

the continued expansion of the DS Smith

ePack webshop model to provide online

ordering to meet small and medium sized

business’s packaging needs

• Investments to digitalise and optimise our

manufacturing assets and supply chain

management, such as advancements in

operational technology and logistics

management, with a focus on digital security.

• A Corporate Plan focused on growing

e-commerce, packaging volumes and through

incremental and breakthrough innovations

(including new materials, partnerships and

business models) with our FMCG customers and

continuing to explore business opportunities

such as plastic replacements, point-of-sale

packaging and end-to-end services

• Applying a differentiated service offering to

different customer categories, including the

digitalisation of our customer experience, our

Impact Centres, and through training our

designers and sales teams on circularity

principles

• Trend and insights teams working on

understanding customer and consumer habits,

needs and behavioural changes to inform

research and development options and

operational capabilities.

Net risk expected

change

Key Risk Indicator

Packaging demand and production

volume metrics

Employee turnover including external/

internal hiring ratios and diversity and

inclusion metrics

Proportion of market share

Fibre packaging volume and market share

growth and level of legislative protection

Customer satisfaction surveys and website

visitor traffic

Revenue and production growth for FMCG sector

Risk tolerance to

Corporate Plan

priorities

Opportunity

examples

Develop and grow our own business in

line with our customers’ growth,

working together to serve the changing

consumer demand, whilst maintaining

high quality and service offering.

Our HR and operational priorities focused

on improving processes, productivity and

ways of working to capture and enhance

people and equipment capabilities.

Strengthen our differentiation and

reputation, and capture additional market

share during times of disruption amongst

key competitors.

Accelerated research, development and

investment into new and enhanced fibre-based

products to serve the sustainable packaging

demand and grow our reputation.

Capitalise on digital investments which build our

reputation as an easy and accessible business to

work with and buy from.

Changes in consumer needs and behaviours lead

to new opportunities to actively engage

customers on cardboard packaging solutions.

Alignment with

strategic priority

To delight our customers To realise the potential of our people To double our size and profitability

To lead the way in sustainability To delight our customers To double our size and profitability

Governance

oversight

Demand and production metrics are

reported through monthly divisional

trading update meetings, and multi-year

demand forecasts reviewed by the

Group Strategy Committee.

The Nomination Committee regularly

reviews Board succession planning and

receives updates on senior talent

management programmes.

The Group Finance Director provides the

Board with regular updates on the market.

The GOC and Board receive regular product

innovation and government affairs updates.

The GOC and Board are provided with updates

on digital initiatives and customer experience.

Trading, customer and consumer trends and the

innovation pipeline are regularly discussed with

the Board.

RISK MANAGEMENT CONTINUED

Increasing Stable Decreasing

Risk change key

Unacceptable Re-assess Acceptable

Net risk tolerance key

Risk priority

classification

2 2 3 3 3 3

Risk

7. Packaging capacity limits

to growth

Our performance and volume growth

expectations, and an increasing demand

for packaging, is limited by our

production capacity and ability to grow

organically at the pace required.

8. Organisation capability

Our management approach to our people

and assets, including succession and

workforce planning, talent retention and

development, hybrid working models, and

strategy for ageing assets, fails to identify

and resource for future capability needs,

resulting in critical gaps in skills, knowledge

and equipment, limiting productivity gains

across key business areas.

9. Disruptive market players

Disruptive behaviours in our key markets,

should significant suppliers or competitors

combine, reduce our capability to

purchase paper or restrict our ability to

compete more effectively, and these

larger combined groups could also dispose

of assets leading to new market entrants,

increasing competition and causing loss in

market share.

10. Substitution of fibre

packaging

Fibre-based packaging loses its credentials as a

sustainable product of choice against

developments in plastic packaging or other

materials that can be reused and recycled,

resulting in our products being substituted and/

or replaced by competitor products.

11. Digital enablement

Digital transformation initiatives, from

point-of-sale through to manufacture and

delivery to customers, are too slow or the

investments required too high to adequately

adapt our ways of working or we miss the

opportunity to meet the demand for smart

products, including customer ease of access to

our products and services.

12. Shopping habits

We fail to match or adapt our offer to the pace and

direction of change in consumer spending across

the full retail FMCG spectrum, from the mega-

large brands, micro-brands and omni-channel

distribution networks of the big box superstores

and discounters, to the rise in e-commerce and

importance of consumers’ values.

Inherent risk

expected change

Key mitigating

actions

• Targeted organic growth in our

existing key markets from strategic

investments in new greenfield

packaging manufacturing sites,

including our new builds in Poland and

Italy coming online in 2022

• Further expansions/developments of

our current packaging and paper sites

through multi-year capital plans,

enhancing equipment utilisation and

efficiency, whilst improving the

customer-production footprint

alignment

• Developing clusters of production

sites to improve capacity loading,

implementing new shift patterns and

sales and operational performance

programmes to optimise a full system

of supply/demand loading, inventory

and logistics planning.

• People performance, potential and

succession management is formally

reviewed and subject to calibration by

senior management, and core skills gaps

are identified to inform clear action plans

and address key talent retention or

attraction risks, including an increasing

focus on diversity and inclusion actions

• Annual senior talent reviews address

strategic workforce questions, and

evaluate the capability profile of the

senior leadership population and the

talent bench strength

• Our HR and operational leaders

collaborate to prioritise key business

transformation activities aimed at new

and foreseeable work realities, run

in-house learning academies to build the

necessary skills and reduce reliance on

external labour markets, and review

operating models to improve

organisation flexibility and productivity.

• A strong corporate planning ethos

focused on growth and reputation in

order to be a market leader, and an

evolving approach by introducing

concepts such as agility, adaptability,

and responsiveness to emerging

threats in the key areas of innovation,

sustainability and digitalisation

• Continuous improvement of our

procurement and supply chain

processes for all paper grades and

critical raw materials, including

enhanced contingency plans if critical

suppliers were to be disrupted

• Focused on strong, long-standing

relationships with all of our existing

customers, across large FMCG, regional

and local customers, whilst incubating

areas of potential breakthrough

innovations to stand out from

competitors and attract new business.

• Collaboration between our Paper and

Packaging divisions, innovation and research

and development teams to deliver innovative

papers and corrugated products, and develop

new materials with our suppliers and partners

for barrier/lamination concepts and plastic

replacements

• Our Recycling division uses commercial

insights and works to create pan-European

alignment in our services, including providing

our key packaging customers with closed loop

opportunities

• Our Government Affairs team tracks

proposed government legislation, the

potential impact on DS Smith, and sets/drives

focused and proactive communication

strategies, including involvement in related

industry trade associations to maintain and

build the reputation of fibre-based materials

in terms of recyclability, circularity, quality

standards and innovation potential.

• A new Group-wide focus to identify/leverage

digital revenue opportunities as part of a key

priority in the Corporate Plan, supported by

developing a clearly defined digital operating

model and governance framework to enable

faster decision-making and strong delivery

• Delivering digital customer experiences, such

as customer and investor online events, and

the continued expansion of the DS Smith

ePack webshop model to provide online

ordering to meet small and medium sized

business’s packaging needs

• Investments to digitalise and optimise our

manufacturing assets and supply chain

management, such as advancements in

operational technology and logistics

management, with a focus on digital security.

• A Corporate Plan focused on growing

e-commerce, packaging volumes and through

incremental and breakthrough innovations

(including new materials, partnerships and

business models) with our FMCG customers and

continuing to explore business opportunities

such as plastic replacements, point-of-sale

packaging and end-to-end services

• Applying a differentiated service offering to

different customer categories, including the

digitalisation of our customer experience, our

Impact Centres, and through training our

designers and sales teams on circularity

principles

• Trend and insights teams working on

understanding customer and consumer habits,

needs and behavioural changes to inform

research and development options and

operational capabilities.

Net risk expected

change

Key Risk Indicator

Packaging demand and production

volume metrics

Employee turnover including external/

internal hiring ratios and diversity and

inclusion metrics

Proportion of market share

Fibre packaging volume and market share

growth and level of legislative protection

Customer satisfaction surveys and website

visitor traffic

Revenue and production growth for FMCG sector

Risk tolerance to

Corporate Plan

priorities

Opportunity

examples

Develop and grow our own business in

line with our customers’ growth,

working together to serve the changing

consumer demand, whilst maintaining

high quality and service offering.

Our HR and operational priorities focused

on improving processes, productivity and

ways of working to capture and enhance

people and equipment capabilities.

Strengthen our differentiation and

reputation, and capture additional market

share during times of disruption amongst

key competitors.

Accelerated research, development and

investment into new and enhanced fibre-based

products to serve the sustainable packaging

demand and grow our reputation.

Capitalise on digital investments which build our

reputation as an easy and accessible business to

work with and buy from.

Changes in consumer needs and behaviours lead

to new opportunities to actively engage

customers on cardboard packaging solutions.

Alignment with

strategic priority

To delight our customers To realise the potential of our people To double our size and profitability

To lead the way in sustainability To delight our customers To double our size and profitability

Governance

oversight

Demand and production metrics are

reported through monthly divisional

trading update meetings, and multi-year

demand forecasts reviewed by the

Group Strategy Committee.

The Nomination Committee regularly

reviews Board succession planning and

receives updates on senior talent

management programmes.

The Group Finance Director provides the

Board with regular updates on the market.

The GOC and Board receive regular product

innovation and government affairs updates.

The GOC and Board are provided with updates

on digital initiatives and customer experience.

Trading, customer and consumer trends and the

innovation pipeline are regularly discussed with

the Board.

Annual Report 2022 dssmith.com 55

STRATEGIC REPORT

Adapting to a changing climate

In our circular business, materials are kept in use for longer as

we turn waste into recyclable paper-based packaging solutions.

Although this reduces pressure on natural systems, including

forests, and prevents waste from entering landfills and oceans,

we use energy-intensive processes to transform materials as they

move through our circular system, which generates greenhouse

gas (GHG) emissions, contributing to climate change.

Our greatest opportunity is to harness the benefits of operating

a circular business, whilst adopting resource efficiency measures

and renewable technologies to reduce the GHG emissions that

contribute to climate change. We are committed to decarbonising

our circular business by achieving our 1.5°C science-based target, to

reduce Scope 1, 2 and 3 GHG emissions 46 per cent by 2030

compared to 2019, and to reach Net Zero GHG emissions by 2050.

Compliance statement

DS Smith Plc has complied with the requirements of Listing Rule

9.8.6R(8) by including climate-related financial disclosures

consistent with the TCFD recommendations in this Annual Report.

Scope 1, 2 and 3 greenhouse gas emission information can be found

on page 33. DS Smith ESG Databook 2022, which can be downloaded

from the DS Smith ESG Reporting Hub, contains the basis of

preparation, including definitions and methodology notes.

Governance

Members of the Board and Audit Committee maintain oversight

of climate-related risks and opportunities. The Board and Audit

Committee receive regular updates on risk assessments,

mitigation methods and progress, and are involved in significant

strategic decisions, for example, the adoption of a science-based

target. The Board and related committees, members of whom

have relevant ESG and sustainability experience, receive frequent

updates on goals and targets for addressing climate-related issues

alongside wider ESG and sustainability performance, including the

delivery of our Now and Next Sustainability Strategy.

Members of the Health, Safety, Environment and Sustainability

(HSES) Committee, chaired by the Group Chief Executive, assess

and manage climate-related risks and opportunities. This group

met 12 times during 2021/22. Climate-related risks are monitored

as part of our standard operating processes to ensure that

appropriate mitigations are in place and are regularly reviewed by

management. Management is supported by the Sustainability

Leadership Team (SUS LT) when developing strategies and

policies. These committees draw on specialist insight from Group

Risk and Insurance, Group Strategy, Group Sustainability, Group

Finance and external expertise. They report to executive

management on an ongoing basis, providing updates on the

delivery of plans. Performance on climate-related issues, such as

energy and water, is reviewed at least monthly by management

teams. Within-year and longer-term progress against our targets,

challenges, trends and opportunities for addressing climate issues

are discussed by senior management on a monthly basis and

monitored by the HSES Committee quarterly and long-term

progress is presented to the Board annually.

Strategy

Climate-related risks and opportunities could impact the Group’s

business, strategy and financial planning over the short term

(0-3 years), medium term (3-10 years) and long term (10+ years).

The Board, Group Operating Committee and its management

commitees consider climate-related issues when reviewing and

setting strategy, developing policies and for financial planning.

In the short term, using fossil fuels to power our circular business

generates GHG emissions, bringing exposure to policy and legal

transition risks related to increasing the cost of emissions,

e.g. carbon taxes. In a transition scenario, as renewable energy

sources and new technologies become readily available at the

scale needed to meet our energy demands, we have an

opportunity to decrease our reliance on fossil fuels.

Our decarbonisation investments will fundamentally reduce our

fossil fuels dependence, providing clean energy as initiatives are

delivered. Implementing this plan will reduce our exposure to

future fossil fuel price increases and regulatory or other costs

designed to reduce GHG emissions. It will reduce the carbon

footprint of our packaging solutions, responding to customer

pressure to decrease their supply chain emissions and exploit

consumer preference for sustainable packaging.

In a business-as-usual scenario, where society fails to transition to

a low emissions economy, there could be greater risk of increased

raw material costs or threat to supply (e.g. pulp, recyclate or

starch), which could be linked either directly or indirectly to climate

change. In the medium to long term, it is possible that without

climate action, greater disruptive physical risks such as water

stress could take hold, within our operations and supply chain.

This invites opportunities to reduce reliance on key resources

through resource efficiency and technological measures that

decrease operating costs and increase supply chain resilience

and our ability to operate under various conditions.

There is divisional and functional leadership responsibility

and a Sustainability Network, supported by specialist networks

and project teams which cascade ESG and sustainability, including

climate-related matters, throughout the business.

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Board

Sustainability

Leadership Team

(SUS LT)

Group ESG Reporting

Team (Finance)

Group Sustainability,

Government and

Community Affairs Team

(Corporate Affairs)

Sustainability

Network

SitesProject Teams

Health, Safety, Environment and Sustainability (HSES) Committee

(A management commitee chaired by the Group Chief Executive)

Divisional and Functional Leadership

In summary, short-term climate-related risks include increasing

spend on carbon taxes (policy and legal transition risk) and medium

to long-term risks include increasing cost of raw materials or threat

to supply (market transition and acute or chronic physical risk)

and increased likelihood of water stress (physical risk). Short-term

climate-related opportunities include growth in demand for

sustainable packaging (products and services), increasing resource

efficiency (resource efficiency) and use of emerging renewable

technologies (energy source). The following sections describe the

approach taken to climate scenario analysis and conclude with

summary comments on the resiliency of our strategy.

Climate scenario analysis

Building on our climate scenario analysis conducted last year,

in 2021/22, we have:

• Utilised scenario analysis as part of our strategic assessment to

achieve Net Zero by 2050, modelling multiple trajectories to

compare investment requirements and define our roadmap

• Extended our scenario analysis to include the new IEA

(International Energy Agency) Pulp and Paper Net Zero Scenario

(November 2021), updated our analysis with our latest data to

better reflect the business we have today and enhanced our

methodologies to increase the quality of the analysis

• Continued to use forecasts relating to climate issues to inform

planning, from carbon market analysis and projections to

exposure to water stress risk over a range of time horizons.

Methodology

We selected the reference scenarios recommended by the TCFD

guidance that are most relevant to our business to evaluate the

potential effect of various future conditions. The scenarios reflect

a range of trajectories, based on different assumptions, that lead

to worlds in which the increase in global temperature varies from

1.5°C to 6°C by 2100 compared to pre-industrial levels. In each

scenario, we assumed that we have the same activities as today.

IEA Sustainable Development Scenario (SDS) 1.5°C Pulp

& Paper: In this scenario, growth in production and energy

consumption are decoupled to achieve decarbonisation to

the extent required to be on track with the Sustainable

Development Scenario by 2030.

IEA Net Zero Emissions by 2050 Pulp & Paper: In this

scenario, annual production expands, necessitating greater

recycling. Using a higher share of bioenergy is important to

align with the Net Zero Emissions by 2050 trajectory.

IEA ETP SDS 2°C: In this scenario, mitigation measures are

applied to carbon intensive industries, alongside technological

advancements to the extent required to limit global warming

to within 2°C by 2100 versus pre-industrial levels.

IPCC RCP 8.5 6°C: In this scenario, a ‘business as usual’ state

of no policy changes leads to growth in emissions, causing

some of the physical effects of climate change to be felt

with greater severity.

We combined quantitative and qualitative analysis, alongside

knowledge of our business and operating environment, which

enhances the scenario evaluations. Financial implications are

calculated as illustrative estimates, given within the context set

out by each scenario. Some of these evaluations changed

compared to last year because of the application of the new Net

Zero Emissions by 2050 scenario or adjustments to the

parameters of our model to reflect our business more closely.

Therefore, where illustrative estimates are incomparable to those

previously reported, no comparison figure is given. The estimated

impacts should be considered in the context of 2021/22

performance and the future implications will vary according to

prevailing future costs and pricing. There are ways that we can

increase the sophistication of our climate scenario analysis. For

example, we have not considered the financial implications of

secondary impacts, such as reputational damage that may occur

under some of the scenarios. As new high-quality data becomes

available (for example, long-term projections of future raw

material supply under various conditions), we will continue to use

climate scenario analysis to assess the effects climate change may

have on our business and ensure we have appropriate mitigations

in place to remain competitive in the future environment in which

we will operate.

Quantifying our climate risks

Increasing spend on carbon taxes

Our European paper mills must purchase allowances to

cover their emissions under the EU Emissions Trading

System (EU ETS) and in the United Kingdom, the UK Emissions

Trading System (UK ETS). In 2021/22, we paid c. £26 million

(2020/21: £33 million) to these schemes. Under EU ETS, the

free-issued allowances are reducing as the price of additional

allowances is increasing, therefore increasing our operating costs.

If, for example, by 2030 the cost increased to €110 per tonne of

carbon (based on reputable analyst views), the estimated

additional annual cost could be c. €122 million, depending on the

future allocation of free allowances. It is possible that the scheme

could be extended, or new carbon taxes could be introduced in

other parts of the world. For example, the IEA ETP 2°C scenario

describes the introduction of a North American carbon tax rising to

$210 per tonne by 2050. Although this tax does not exist today, if

this tax were applied to all of our projected future emissions in

North America, this could result in a new cost of c. £15 million in

2030. Delivering our GHG reduction roadmap will reduce emissions

and therefore costs associated with them. For example, this cost

reduces to c. £12.8 million if identified projects within our roadmap

were implemented at one of our North American sites, including

switching from natural gas to biomethane. This would increase

renewable energy consumption of that asset by c. one third,

reducing exposure to the cost of carbon, although costs would be

incurred to achieve this transition. We continue to factor the cost

of carbon into our roadmap analysis and optimisation, alongside

the availability of biofuels and future growth and strategy.

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STRATEGIC REPORT

Increasing cost of raw materials or

threat to supply

Raw materials (e.g. pulp, recyclate or starch) could

become more expensive or difficult to acquire because of extreme

weather events related to climate change. This could be due to

chronic physical reasons (e.g. extreme variability in weather

patterns leading to crop failure), regulatory change (e.g. caps on

resource extraction) or market disincentives (e.g. licences for

extraction). Aspects of climate change are likely to affect forest

growth and productivity, impacting the virgin fibre market.

Although our exposure to this market is limited as our packaging

is primarily manufactured from recycled fibres (c. 80 per cent of

the papers used by our Packaging division are from 100 per cent

recycled content), potential future yield losses could drive up the

price of virgin fibre and changing input prices may be passed on to

us by suppliers and have a subsequent impact on papers for

recycling. Using data from the Global Forest Products Model to

assume, for example, that average virgin paper price increases by

five per cent by 2030 owing to climate-related challenges, this

could result in an additional cost which would likely have to be

recovered through increased pricing to our end customers. Paper

and fibre price volatility and security of supply are considered

principal risks for the Group and are balanced over the long term by

optimising the best fit between paper production, fibre sourcing

and packaging demand.

Increasing likelihood of water stress

In the long term, competition for finite water resources

could increase in the river basins from which we

withdraw water. Refreshing our annual analysis using the WRI

Aqueduct tool, we identified 26 sites (2020/21: 25 sites) at risk

of future water stress, based on the latest datasets obtained from

the WRI. In the IPCC RCP 8.5 6°C scenario, the worst-case scenario

suggests that c. 31 per cent (2020/21: c. 36 per cent) of the

Group’s total water withdrawal is in regions that could be at high or

extremely high risk of water stress by 2030. This has decreased

compared to last year having removed our non-core Dutch paper

mill from the analysis, following its disposal. In our most pessimistic

scenario, were our highest value site identified as at risk of water

stress to suffer business interruption due to water use limitations

for 14 days, this could present a business interruption incident

valued at c. £3.3 million in 2030. As a mitigation, we continue to

maintain water stress mitigation plans at 100 per cent of sites

identified as at current or future risk. This involves an annual check

on business continuity planning, regular contact with relevant

stakeholders (e.g. the water authority and local community) and

monthly performance management review, which is reported to

the Group Operating Committee (GOC).

Quantifying our climate opportunities

Growth in demand for sustainable packaging

As society transitions to a low emissions economy, we see

an opportunity for circular packaging to play a powerful

role in helping brands and consumers reduce their carbon footprint

and replace plastic with recyclable fibre-based packaging. There is

an opportunity to grow market share and value by demonstrating

the benefits of widely recycled packaging and as part of our

packaging value proposition that can help our customers to reduce

cost, whilst driving circular economy principles into our customers’

business models. In the IEA Net Zero Emissions by 2050 scenario,

annual paper production is described as growing by 1.5 per cent

annually over the decade to 2030, with greater need for packaging

and paper as a result of population and economic growth,

necessitating greater recycling. This could be estimated as a growth

opportunity which, within the context of the reference scenario,

could be valued at c. £25 million increase in EBITDA by 2030

compared to 2021. We are driving the replacement of plastic with

widely recycled fibre-based alternatives, having set a Now and

Next sustainability target to remove 1 billion pieces of problem

plastics from supermarket shelves by 2025. We have replaced 313

million plastic units with our recyclable fibre-based alternatives to

the end of 2021/22, helping our customers meet consumer demand

for recyclable packaging. Our designers have already created over

1,000 designs for millions of products geared towards reducing the

use of problem plastic and even small changes, such as replacing

plastic sealing tape with self-locking flaps or plastic labels with print

direct onto cardboard, can help capitalise on the growth in demand

for sustainable packaging.

Increasing resource efficiency

There are multiple ways at various stages of the circular

product lifecycle in which we can achieve greater

efficiency of the resources we use. In our packaging, the efficient

use of materials that are regenerative and recyclable and the

avoidance of over-specification helps remove unnecessary waste

and save natural resources. This not only results in a leaner finished

product but also less impact overall, as transporting fewer fibres

through the production process requires less water and energy use.

In 2021/22, we optimised the fibre used in 26 per cent (2020/21: 23

per cent) of new packaging solutions for unique supply chains,

progressing closer to our Now and Next sustainability target to

optimise fibre use for individual supply chains in 100 per cent of our

new packaging solutions by 2025. Minimising fibre consumption

also decreases use of natural resources throughout the value chain.

In 2021/22 we set a new Now and Next sustainability target to

decrease water withdrawal by 1 per cent per year, every year, to

2030 compared to 2019 at our paper mills located in regions at high

or extremely high risk of water stress by 2030. This was achieved

for 2021/22, operating at 8.08m

per tonne of net saleable

production (2020/21: 8.10 m

/t nsp) compared to 8.48m

/t nsp in

the base year (2019/20). Our actions have lowered pressure on

natural water systems through water reduction, reuse and recycle

opportunities, which reduce operating costs. For example at Lucca

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Mill, in a circular water system withdrawn water is recirculated

before it is returned to the natural environment.

Once the packaging is used and ready to be collected for recycling,

we can achieve greater resource efficiency by encouraging

markets to invest in improved recycling infrastructure, including

increasing waste segregation to create raw material streams that

are cleaner and require less processing. Access to high quality

wastepaper for recycling means less processing and less volume

of recyclate needed overall, which reduces water and energy

consumption, generating cost savings for our papermaking

operations. We continue to advocate for separate collection of

recyclables to improve quality of material by reducing

contamination, increasing recycling rates, lowering environmental

impact and cost for local authorities as part of our engagement

with policymakers to contribute to realising this opportunity,

as well as engaging with our customers on integrated closed-loop

solutions and appropriately specified performance packaging

for individual supply chains.

Use of emerging renewable technologies

In order to avoid the most catastrophic consequences of

climate change, the global energy system must radically

transform, with the rapid deployment of low carbon fuel sources

to displace fossil fuels. The recycled paper production process

predominantly utilises natural gas as a fuel source. Therefore,

delivering our commitment to Net Zero emissions by 2050 will

require our operations to transition from fossil fuels to renewable

fuels, such as biomass, biomethane and hydrogen. As energy

systems and technologies evolve, there is an opportunity to be

at the forefront of adoption of increased efficiency measures,

alongside new technologies. As an example, in the IEA SDS 1.5°C

scenario, energy use in the Pulp and Paper sector is assumed to

decline by 0.6 per cent per year to be on track with the Sustainable

Development Scenario (SDS) by 2030. This reduction in energy

consumption in our operations would result in a lower cost, an

opportunity estimated in our analysis that could be valued at c.

£12 million in 2030 compared to 2021, although costs would be

incurred in realising these benefits. In the IEA Net Zero Emissions

scenario, a 0.5 per cent increase per year to 2030 is assumed as

strong paper production growth necessitates greater recycling

and a resulting increased energy cost of c. £10 million in 2030

compared to 2021. This emphasises the opportunity to grow

without generating additional GHG emissions if growth in new

production is powered by renewable fuels. Our carbon reduction

roadmap sets out initiatives that allow our business to grow whilst

realising the benefits of harnessing emerging renewable

technologies. Energy performance is managed using our Group-

wide ISO 50001:2018 energy management system, driven by our

Now and Next target to maintain certification at 100 per cent of

relevant sites. Our objective is to maintain continuous

improvement in energy performance, cost and therefore

greenhouse gas emissions.

Summary of our scenario analysis

The climate scenario analysis suggests that our strategies are

resilient to climate-related risks and opportunities. There is low

financial risk by 2030, predominantly due to increased costs which

would need to be managed. We would not have to make

fundamental changes to our business model. By committing

to a 1.5°C science-based target for 2030, we are responding to

climate-related risks and opportunities in accordance with the

latest climate science. As we decarbonise alongside the entire

industry, we see opportunities to be at the forefront of leading

the transition to a circular economy, which, compared to the linear

economy, is a better system for tackling climate change, pollution

and biodiversity loss.

Risk management

We undertake regular materiality analysis to ensure our

sustainability priorities remain aligned to those of our

stakeholders. In our latest analysis, we consulted stakeholders on

a range of climate issues, asking them about their perception of

each issue as a risk or opportunity to our sustainability strategy.

This assessment, combined with a range of other credible sources

(such as CDP, CEPI and the TCFD recommendations), is used to

grade these risks using the likelihood of the risk occurring and an

estimate of the severity of resulting financial or strategic impact

over various time horizons. Based on this risk grading, the highest

graded risks are evaluated in greater depth, considering our

operations, supply chain, stakeholder expectations and regulation.

Transition risks are assessed by Group strategy and Group

sustainability teams, working across functions to develop

responses to the financial and strategic implications.

Physical risks are assessed by each division, supported

by the Group Risk and Insurance team, drawing on expertise

from specialist organisations.

Whether to avoid, transfer, mitigate or accept a risk is influenced

by a range of factors, such as site location, investment needed

and projected volume demand. Our risk management processes

require that our principal business risks, including climate risks,

are graded on a scale from negligible to critical using specific

impact criteria such as a financial value range. By way of example,

a financial impact between 2.5 per cent and 10 per cent of

operating income or net profit is graded of moderate strategic

or financial risk.

Climate risks are evaluated using the Group’s common risk

language and are integrated into our principal risk assessments

where such risks could significantly affect the business during

our Corporate Plan time horizon. All divisions and Group functions

produce formal principal risk assessment reports twice per year,

and undertake frequent risk reviews, considering the grading,

trends and controls. The most critical climate risks and

opportunities are selected for climate scenario analysis,

prioritising those for which high-quality data is available.

Annual Report 2022 dssmith.com 59

STRATEGIC REPORT

Summary of metrics and targets

The following table summarises the metrics and targets used to assess and manage relevant climate-related risks and opportunities.

Climate-related risk or opportunity – metrics and targets Unit 2019/20 2020/21 2021/22 Trend

Risk: Increasing spend on carbon taxes

Gross global Scope 1 emissions

tonnes CO

e 2,181,890 2,047,265 2,023,278

Percentage covered under emissions-limiting regulations

% 81 80 79

Target: Reduce Scope 1, 2 and 3 GHG emissions by 46% by 2030 compared to 2019 and reach Net Zero GHG emissions by 2050

Risk: Increasing cost of raw material or threat to supply

Percentage of fibre use optimised for individual supply chains

% – 23 26

Target: Optimise fibre use for individual supply chains in 100% of new packaging solutions by 2025

Risk: Increasing likelihood of water stress

Total water withdrawn

57,451,994 55,237,583 54,644,995

Total water consumed

12,908,260 14,150,530 13,604,030

Percentage of water withdrawn from areas at risk of water stress

% 36 36 31

Percentage of sites with water stress mitigation plan in place

% 70 100 100

Target: Maintain water stress mitigation plans at 100% of our sites in current or future water stressed areas

Opportunity: Growth in demand for sustainable packaging

Number of pieces of problem plastics replaced

million units – 313 since 1

May 2020

Target: Replace 1 billion pieces of problem plastics by 2025

Opportunity: Use of renewable energy technologies

Total energy consumption

MWh 15,707,667 15,446,255 15,324,120

Percentage of energy consumption from renewable sources %

17 17 21

Opportunity: Increasing resource efficiency

Water withdrawal at mills in areas at risk of water stress

/t nsp

8.48 8.10 8.08

Target: Decrease water withdrawal by 1% per year to 2030 compared to 2019 at our paper mills in current or future water stressed

areas

* Independent Assurance has been obtained for these metrics – see assurance statement on page 33.

Independent verification to a limited level of assurance for the 2019/20 base year was provided by Bureau Veritas.

1. tnsp – metric tonne net saleable production

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Metrics and targets

We use a range of metrics and targets to assess and manage

climate-related risks and opportunities in line with our Now and

Next Sustainability Strategy and risk management process. A

range of targets in our Now and Next Sustainability Strategy relate

to climate risks and opportunities, and the most relevant ones are

presented below. We report progress to external audiences

annually and review performance internally on a monthly basis.

Scope 1, 2 and 3 greenhouse gas emission information can be

found on page 33. DS Smith ESG Databook 2022 contains the basis

of preparation, which includes methodology notes. Independent

assurance is obtained for selected metrics relating to carbon,

energy, waste, water and production, indicated in the table below

with asterisks.

Climate-related remuneration

Our Now and Next Sustainability Strategy, including our

commitment to reach Net Zero GHG emissions by 2050, helps us to

differentiate as a circular economy leader. This drives ongoing

profitability and cash flow, which are the current performance

measures for our incentive plans. The underlying importance of

ESG and sustainability, including our response to climate change,

continues to be emphasised by the use of a variety of ESG

considerations as an underpin to the annual bonus. In 2021/22, the

three elements of the ESG underpin were met, including the

commitment to carbon reduction in the business, based on

science-based targets. For 2022/23, the Remuneration Committee

will continue to take into account and report on, amongst other

ESG factors, the development of initial plans to achieve the

longer-term science-based targets for carbon reduction in the

business. For more information, see page 102.

EU Taxonomy

The EU Taxonomy is a classification system that identifies certain

economic activities as ‘environmentally sustainable’. It aims to

meet the objectives of the European green deal by scaling up

sustainable investment. It introduces mandatory disclosure

obligations on certain companies, requiring disclosure of the

proportion of EU Taxonomy-aligned activities. An economic

activity qualifies as ‘environmentally sustainable’ if:

• It contributes substantially to one or more environmental

objectives or is an enabling activity,

• It does not significantly harm any environmental objectives,

• It is carried out in compliance with minimum safeguards, and

• It complies with technical screening criteria.

The EU Taxonomy Regulation requires disclosure of turnover

derived from products or services associated with economic

activities that qualify as environmentally sustainable and capital

expenditure and operational expenditure related to assets or

processes associated with economic activities that qualify as

environmentally sustainable.

Although our industry is not presently identified within the scope

of EU Taxonomy Regulation, we acknowledge the proposals made

and have identified that some of our activities are taxonomy-

eligible environmentally sustainable activities, predominantly the

economic activities associated with our Recycling operations.

Based on our mapping of our activities to the EU Taxonomy-

eligible business activities, we have identified turnover, capital

expenditure and operating expenditure relating to EU taxonomy-

eligible activities. In 2021/22, c. four per cent of turnover, c. two

per cent of capital expenditure and c. one per cent of operating

expenditure related to taxonomy-eligible activities.

As the delegated acts continue to be approved by the European

Commission, we expect that more of our economic activities

will be classified as environmentally sustainable. Given our

position as a leading provider of sustainable packaging solutions,

operating a circular business model focused on recycled cardboard

and with 100 per cent of our papers either recycled or chain of

custody certified, we expect to be well-positioned for the

vast majority of our economic activities to be considered

environmentally sustainable.

We will monitor the development of this emerging legislation

and evolve our disclosure accordingly.

Annual Report 2022 dssmith.com 61

STRATEGIC REPORT

Non-financial information statement

The table below sets out where stakeholders can find information in our Strategic Report that relates to non-financial matters as

required under the Non-Financial Reporting Directive requirements:

Reporting requirements Some of the relevant policies

Where to read more in this report about our impact,

including the principal risks relating to these matters Page(s)

Environmental

matters

• Group Sustainability policy

• Our sustainability approach, strategy, focus and targets

• Our sustainability performance

• Our differentiators

• Risk – sustainability

Employees • Code of Conduct

• Speak Up!

• Group Health and Safety policy

• Equal Opportunities and Anti-

Discrimination policy

• Personal Data Protection policy

• Document Retention policy

• Confidential Information policy

• Conflicts of Interest policy

• What we create for our people

• Diversity and Inclusion

• To realise the potential of our people – performance

• Health, safety and wellbeing

• Risk – organisation capability

• Gender pay gap reporting

• Our Purpose

Human rights • Code of Conduct

• Anti-Slavery and Human Trafficking policy

• Sustainable governance

• Risk – governance

Social matters • Code of Conduct

• Gifts and Hospitality policy

• Contributing to our communities 33

Compliance • Corporate Criminal Offence (Anti-

Facilitation of Tax Evasion) policy

• Anti-Bribery and Corruption policy

• Competition Law Compliance policy

• Commercial Agents policy

• Conflicts of Interest policy

• Risk – governance 53

Business model • Our business model 14

Non-financial KPIs • Employees: accident frequency rate

• Sustainability: CO

equivalent emissions

• Customers: on-time in-full deliveries

1. Available to all employees through the DS Smith intranet. Not published externally.

2. Available both on our website www.dssmith.com and to employees through the DS Smith intranet.

Our policies

A combination of online and in person training on all the key policies is carried out across the Group and there is also a system of bi-annual

certification for senior managers, certifying that they have read and understood the policies, have cascaded down to their direct reports

and that they are not aware of any breach of such policies. All employees, contractors and third parties are encouraged to report any

circumstances where there is a suspected or actual breach of any of the DS Smith policies, applicable laws, or the high standards as set

out in the Code of Conduct, either through their managers, the confidential ‘Speak Up!’ helpline or directly to the Group General Counsel

and Company Secretary. All reported incidences of actual or suspected breach of any of the policies are promptly and thoroughly

investigated. The Compliance Committee and the Audit Committee also consider any high-risk areas identified by the Internal Audit

function, the legal team or the divisional compliance teams.

Policy Description

Code of Conduct

DS Smith Plc (DS Smith), its subsidiaries and affiliates (Group) are committed to the highest ethical standards in the way in which

we engage with each other, our customers, employees, shareholders, suppliers, contractors and other stakeholders. Our Code

of Conduct sets out what these commitments mean and the behaviours which are expected of all our employees, consultants

and officers. This includes our expectations on health and safety, business practice, human rights, compliance, prevention of tax

evasion, and employee relations among other key areas for the business. Alongside the Code of Conduct we have an Employee

Charter drawn up in partnership with the European Works Council which builds on our Code of Conduct and reinforces our

standing commitment to comply with applicable legislation and regulatory requirements. We also have other key Group policies

outlined below, which serve to further expand upon the provisions in the Code of Conduct.

Community

engagement and

charitable

donations policy

DS Smith has an ambitious, Group-wide community programme which supports our Group Sustainability Strategy ‘Now and

Next’. Now and Next includes engagement in community programmes at all of our sites (with 50 or more full time employees)

each year. We believe that as a responsible and sustainable business, investing in the communities where we operate and can

make a positive difference is the right approach. We have developed parts of this policy in line with both the B4SI Framework

(global standard in measuring and managing a company’s social impact) and DS Smith Anti-Bribery and Corruption policy. This

policy outlines the importance of community engagement, the focus of our community programme, allocation of funds, and

processes for community engagement and charitable donations.

Conflicts of

Interest policy

Conflicts of interest, whether actual, potential or perceived, may impair our ability to act in accordance with our ethical standards

and values. It is therefore important for all of us to be aware of, and adhere to, the policies and procedures that we have in place

to manage such conflicts. This policy outlines the requirements and processes in respect of conflicts of interest and advises

employees of their obligations. It also includes a self-assessment tool to assist in determining whether there may be a conflict.

Confidential

Information

policy

DS Smith keeps certain types of information confidential for important business reasons, including to comply with legal

requirements (such as data protection and competition law), and to maintain a competitive edge. Confidential Information is

information that is not generally known or publicly available and is only available to employees or workers as a result of their

employment/engagement with DS Smith. It is information that may harm DS Smith if disclosed and, as such, it must be

protected. This policy sets out how Confidential Information should be handled and outlines the procedures that safeguard it.

Anti-Bribery and

Corruption policy

DS Smith has zero tolerance for any form of bribery or corruption and is committed to complying with all applicable anti-bribery

and corruption laws. In addition to ensuring that our employees and contractors are compliant with the Group’s Anti-Bribery and

Corruption policy, we require that all third parties engaging with any DS Smith entity comply with these policies in order to

ensure compliance with applicable anti-bribery and corruption laws and preserve our own and our customers’ reputations.

Anti-Slavery and

Human

Trafficking policy

DS Smith does not tolerate any form of modern slavery both within the Group and within its supply chain. DS Smith respects

fundamental human rights and is committed to the principles set out in the United Nations Universal Declaration of Human

Rights and this is documented in our Code of Conduct, Employee Charter and Anti-Slavery and Human Trafficking policy. Our

progress in the area of modern slavery is set out in our annual Modern Slavery statement. The ultimate responsibility for

prevention of modern slavery rests with the Group’s leadership with the Board of Directors having overall responsibility for

ensuring this policy is implemented across the Group.

Commercial

Agents policy

It is important to our ongoing success that DS Smith avoids damage to its reputation due to an act carried out by an agent in our

name. The Commercial Agents policy outlines the rules that we expect to be followed across the Group when engaging and

monitoring our relationships with agents. This policy also offers guidance to our agents on what is expected of them as an agent

of DS Smith. Such guidance is supplemented by additional e-learning compliance training where appropriate. This ensures that

agents are properly vetted and monitored.

Competition Law

Compliance policy

DS Smith is committed to ensuring that its activities within the European Union (EU) and outside the EU are conducted in

compliance with the principles of the EU competition rules as well as all applicable national rules that apply to the Group. This

policy provides guidance on competition laws, information exchanges, SWAPS, trade associations and dawn raids. Additional

e-learning training is available to support this policy.

Corporate

Criminal Offence

(Anti-Facilitation

of Tax Evasion)

policy

DS Smith’s Corporate Criminal Offence (CCO) (Anti-Facilitation of Tax Evasion) policy must be communicated to all suppliers and

customers and is part of due diligence when considering new acquisitions. Training on this policy takes place virtually and where

possible face to face with relevant personnel across the Group encompassing all new acquisitions as well as all new joiners.

Document

Retention policy

In the course of carrying out its various business activities, DS Smith collects information from individuals and external

organisations and generates a wide range of data and information which is recorded and stored. DS Smith is therefore

committed to ensuring that it continues to ensure the accuracy of any data stored and ensuring that data (especially personal

data) is only retained for as long as is necessary.

Annual Report 2022 dssmith.com 63

STRATEGIC REPORT

Policy Description

Equal

Opportunities

and Anti-

Discrimination

policy

DS Smith is committed to promoting equal opportunities in employment. Job applicants, employees and contingent workers will

receive equal treatment regardless of age, disability, race, religion or belief, sex, sexual orientation, gender reassignment,

marriage and civil partnership, pregnancy and maternity or any other characteristic protected by applicable law. For DS Smith it is

imperative to provide a respectful work environment and we have a zero tolerance approach to discrimination. All parties are

encouraged to raise concerns if they find conduct within DS Smith that is offensive or a violation of this policy, through their line

manager, local human resources (HR) or use of the ‘Speak Up!’ process so the Group can investigate and take appropriate

remedial measures to end any conduct that violates this policy. The Group Operations Committee (GOC) has overall responsibility

for the effective operation of this policy and for ensuring compliance with anti-discrimination laws. The HR team has

responsibility for implementation, management and ensuring compliance. All managers must set an appropriate standard of

behaviour, lead by example and promote the Company’s policies and standards on this matter.

Gifts and

Hospitality policy

We recognise that the act of giving and accepting gifts and hospitality can be part of building normal business relationships.

However, our Gifts and Hospitality policy aims to ensure that our employees and contractors never accept gifts or hospitality

which could break the law, compromise their judgement, conflict with their duty to DS Smith or our customers, or which could

appear to others that their business judgement has been improperly influenced. Equally, our employees and contractors must

never offer a gift or hospitality which could have this effect on the recipient. In order to monitor compliance with these

principles, each division is required to maintain a gifts and hospitality register in accordance with the policy.

Group Health and

Safety policy

Health and safety is the top priority and DS Smith actively strives for the continuous improvement of health and safety in the

workplace. We aim to provide a healthy and safe working environment for all our employees and to ensure the safety of our

contractors, site visitors, the public and all others affected by our operations. The ultimate responsibility for health and safety

rests with the Group Chief Executive, the Board members and the executive management team. This responsibility is cascaded

through the organisation via divisional/regional Chief Executive Officers and their leadership teams, enabling us to comply with

local health and safety laws and regulations in addition to our own standards and guidelines.

Group

Sustainability

policy

Our sustainability strategy is supported by policies which align the management of sustainability issues across our organisation.

Risks arising from sustainability issues are considered as being among the key risks to the Group’s operations. To manage and

mitigate such risks we have policies for existing and emerging sustainability issues. Our policies include Conflict Minerals, Carbon

and Energy Efficiency, Community Engagement, Global Supplier Standards, Water Stewardship, Zero Waste to Landfill and

Sustainable Forest Management and Fibre Sourcing. These policies are periodically reviewed and updated, with action plans

communicated to the heads of each business unit. The Board receives regular reports on performance and the Group Chief

Executive is responsible for addressing sustainability-related issues. The Health, Safety, Environment and Sustainability

Committee meets monthly and the Sustainability Steering Group oversees the process for addressing sustainability-related

issues and sets and monitors internal targets and strategies to ensure sustainability-related risks and opportunities are

appropriately managed.

Personal Data

Protection policy

DS Smith takes the issue of the protection of individuals’ personal data very seriously. Compliance with data protection laws is

critical to the success of our business. Compliance with statutory data protection is the basis of the relationship with our

employees, customers, suppliers and business partners. The management of the relevant DS Smith company is responsible for

cascading this policy and each site is responsible for confirming compliance with this policy. The Divisional Heads of Privacy will

send an annual confirmation form to check that each site is compliant with these policies.

‘Speak Up!’ policy

All DS Smith employees, those providing services to DS Smith (contingent workers), shareholders, and Non-Executive Directors

are expected to conduct Company business in a legal and ethical manner as detailed in our Code of Conduct. They have a

responsibility not only to be aware of the Code of Conduct but to bring to the attention of management any activity which may

be in violation of Company policy, local law or does not meet the standards set out in the Code of Conduct. Employees are

encouraged in the first instance to report any concerns to their line manager, local HR or employee representative. If not

comfortable to do so, then there are three ‘Speak Up!’ options available, where a report can be made through a dedicated free

phone line or a website (both maintained by an independent third party that is under a duty of confidentiality). The phone and

website support a majority of languages spoken across DS Smith. Alternatively the Group General Counsel and Company

Secretary can be contacted via email or letter. All options are available 24 hours a day seven days a week. All ‘Speak Up!’ reports

are treated in the strictest confidence and are investigated. Findings from the investigations may include corrective actions and

lessons to be learned. Twice a year, a summary of reports made and findings from the investigations is shared with the Audit

Committee and the EWC Executive. It is DS Smith’s policy to build a climate of support if concerns are raised, including suspected

breach of our Code of Conduct, and where there is an avenue to report concerns which will be confidentially investigated.

NON-FINANCIAL INFORMATION STATEMENT CONTINUED

Statement of approval

This Strategic Report, including pages 1 to 65, was approved by the Board of Directors on 20 June 2022 and is signed on its behalf by

Miles Roberts

Group Chief Executive

STRATEGIC REPORT

Annual Report 2022 dssmith.com 65

Geoff Drabble

Chair

Key strengths

• Wealth of industrial and

international experience

• Extensive experience of

chairing boards

External appointments

• Geoff is non-executive

chair of Ferguson plc and

a non-executive director

of Howden Joinery Group

Plc

Geoff was appointed to the

Board on 1 September 2020

as a Non-Executive Director

and became the Chair of the

Board and the Nomination

Committee on 3 January

2021. Geoff served for 12

years as Chief Executive of

Ashtead Group plc, the FTSE

100 industrial equipment

rental company. He was

previously an executive

director of The Laird Group

plc and held a number of

senior management

positions at Black & Decker.

Geoff’s wealth of industrial

and international

experience, combined with

his experience of chairing

boards of listed companies

and his awareness of both

the non-executive and chief

executive perspective,

means that his skills and

experience contribute to

the Board’s practical

understanding of good

governance in action,

balancing stakeholders’

interests across the range

of issues considered by the

Board, including

environmental, social and

governance (ESG) matters.

Miles Roberts

Group Chief Executive

Key strengths

• Clear strategic mindset

• Strong leadership skills

External appointment

• None

Miles was appointed to the

Board on 4 May 2010 as

Group Chief Executive.

Following his engineering

degree he became a

chartered accountant and

brings to the Board extensive

financial and operational

experience. He was

previously Chief Executive of

McBride plc, having originally

joined as its Group Finance

Director. He was Senior

Independent Director of

Poundland Group plc until

September 2016 and

non-executive director of

Aggreko plc until August

2021.

As Group Chief Executive

Miles leads the executive

management of the Group

and is responsible for DS

Smith’s overall ESG

performance and its clear

objectives at the centre of our

business model, taking into

account the Board’s risk

appetite. He chairs the

Group’s Health, Safety,

Environment and

Sustainability Committee that

monitors the establishment

of goals, management of risks

and opportunities, reporting

and related governance

procedures in that area.

Miles’ strong leadership skills

combined with his clear

strategic mindset, rooted in

the practicality of his

engineering and accountancy

training, means that his skills

and experience, and ability to

identify material risks and

sustainable growth

opportunities for the Group’s

business, contribute to the

Board’s clear strategic vision.

Adrian Marsh

Group Finance Director

Key strengths

• Strong financial and risk

management expertise

within an international

context

• Wealth of finance

experience in large listed

multinationals

External appointment

• Adrian is a non-executive

director and audit

committee chair at John

Wood Group PLC

Adrian was appointed to the

Board on 24 September

2013 as Group Finance

Director.

As the former head of Tax,

Treasury and Corporate

Finance at Tesco PLC,

Adrian has helped DS Smith

to significantly build the

finance function and deliver

strong financial results. As a

qualified accountant, and

coming from a FTSE

background, he has held

divisional CFO positions at

both AstraZeneca plc and

Pilkington plc.

Adrian’s depth of

experience in a range of

financial roles in large listed

multinationals means that

his skills and experience

contribute to the Board’s

understanding of all aspects

of the financial implications,

whether risks to be

assessed and managed, or

opportunities to be

identified and realised, of

both the day to day and

project aspects of the

Group’s business and

operations.

Celia Baxter

Non-Executive Director

Key strengths

• Extensive HR experience

and ESG knowledge and

experience

• Board experience in

non-UK listed companies

External appointment

• Celia is the Senior

Independent Director and

the remuneration

committee chair at Senior

plc

Celia was appointed to the

Board as a Non-Executive

Director and Chair of the

Remuneration Committee

on 9 October 2019.

Most recently Celia was

Director of Group HR and

responsible for all ESG

activities at Bunzl plc for 13

years. Her early executive

career was with Ford Motor

Company and KPMG. She

has held HR positions with

Hays plc, Enterprise Oil Plc

and Tate & Lyle Plc. As a

non-executive director she

was on the board of NV

Bekaert SA until May 2020

and on the board of RHI

Magnesita N.V. until

June 2021.

Celia’s background of

working in a range of

sectors means that, as well

as her experience as a

remuneration committee

chair and her understanding

of employee dynamics and

ESG issues, she brings

extensive and practical

business knowledge to the

Board.

Alan Johnson

Non-Executive Director

Key strengths

• Strong financial

background in the FMCG

sector

• Extensive international

experience

External appointments

• Alan is a non-executive

director of Imperial

Brands plc and William

Grant & Sons Holdings

Limited

• He is President and Chair

of the Board of the

International Federation

of Accountants and chairs

the audit committee of

the International

Valuation Standards

Council

Alan was appointed to the

Board as a Non-Executive

Director on 1 June 2022.

Alan held a number of senior

finance positions at Unilever

during a 30-year career,

including Chief Audit

Executive and Chief

Financial Officer of the

Global Foods Division. He

was previously Chief

Financial Officer and then a

non-executive director at

food retailer Jerónimo

Martins, SGPS, SA until

April 2016.

Alan’s extensive financial

and international

experience working within

the consumer goods and

retail sectors and his

experience of chairing

international accountancy

bodies, will bring a range of

important different

perspectives to contribute

to the Board’s discussions.

N RNA

RNA

N R

Board of Directors

BOARD OF DIRECTORS

David Robbie

Senior Independent

Director

Key strengths

• Strong financial, risk

management and

corporate finance

experience

• International and

strategic mindset

External appointment

• David is a non-executive

director of easyJet plc

David was appointed to the

Board as a Non-Executive

Director on 11 April 2019

and became Chair of the

Audit Committee at the

conclusion of the 2019 AGM.

He was appointed Senior

Independent Director on

28 February 2022.

David was the Senior

Independent Director and

chair of the audit committee

at FirstGroup plc until June

2021. He was previously

Finance Director of Rexam

PLC. Prior to his role at

Rexam, David served in

senior finance roles at BTR

plc before becoming Group

Finance Director at CMG plc

in 2000 and then Chief

Financial Officer at Royal

P&O Nedloyd N.V. in 2004.

He served as a non-

executive director of the

BBC between 2006 and

2010 and as chair of their

audit committee. David

qualified as a chartered

accountant at KPMG.

David’s strong financial, risk

management and corporate

finance experience

combined with his

international and strategic

mindset and practical

governance experience

with over 20 years serving

as a director on FTSE boards

means that his skills and

experience add depth to

the Board’s discussions in

these areas.

Louise Smalley

Non-Executive Director

Key strengths

• Strong HR experience

• Extensive knowledge of

people management,

rewards and

remuneration schemes

External appointment

• Louise is a non-executive

director and

remuneration committee

chair of Informa PLC

Louise was appointed to the

Board on 23 June 2014 as a

Non-Executive Director.

She was Group Human

Resources Director of

Whitbread PLC and for nine

years until August 2021 an

executive director of

Whitbread PLC, where she

held several key

transformation and HR

roles. She previously

worked as a HR professional

in the oil industry, with BP

and Esso Petroleum. Louise

is an alumna of the

Cambridge Institute for

Sustainability Leadership

and has experience of

leading timely evolutions of

sustainability strategies.

Louise’s recent experience

as a serving listed company

executive director,

combined with her

extensive knowledge of

progressive people

management practices in

multi-site large scale

businesses, means that her

skill and experience

contribute to the Board’s

focus on the importance of

enabling everyone who

works for the Group,

whatever their background,

to realise their potential.

Rupert Soames OBE

Non-Executive Director

Key strengths

• Wealth of international

operational experience

• Extensive understanding

of UK plc environment as

a serving CEO

External appointment

• Rupert is Group Chief

Executive Officer at Serco

Group plc

Rupert was appointed to

the Board on 1 March 2019

as a Non-Executive Director

and became Senior

Independent Director on

3 September 2019. He

handed over his Senior

Independent Director duties

to David Robbie on 28

February 2022, following

his decision to retire from

the Board at the conclusion

of the 2022 AGM.

He was previously Chief

Executive at Aggreko plc

and Chief Executive of Misys

plc Banking and Securities

Division. Until July 2016

Rupert was also Senior

Independent Director of

Electrocomponents plc and

a member of its

remuneration, nomination

and audit committees.

Rupert’s hands on

experience of the UK plc

environment as a serving

CEO, balancing the

management of risk and

reward, combined with the

wealth of his international

operational experience

means that his skills and

experience contribute to

the Board’s international

outlook, embedded in a

clear-sighted view of

operational realities in

today’s world.

Alina Kessel

Non-Executive Director

Key strengths

• Broad and wide-ranging

marketing experience

• International outlook

External appointment

• Alina is a Global Client

Leader at WPP, a leading

international marketing

communications

company

Alina was appointed to the

Board on 1 May 2020 as a

Non-Executive Director.

She has over 25 years of

experience building global

brands for large

multinational clients,

helping them grow their

business through

communications,

experience, commerce and

technology. Her current role

with WPP includes working

with global clients on their

sustainability agenda.

Originally from Ukraine and

a US national, Alina has lived

and worked in the UK, US,

Australia and Germany.

Alina’s experience of living,

as well as working, in a

number of different

countries, including the US,

combined with her

expertise in marketing and

communications means that

her skills and experience

contribute an additional

perspective to the Board’s

discussions, particularly

when considering the

interests of employees

(based in over 30 countries)

and our global customers

and discussing how to

communicate key

non-financial aspects of

our business.

Iain Simm

Group General Counsel

and Company Secretary

Key strengths

• Legal expertise

• Wealth of experience in

assisting boards with

legal and governance

matters

External appointment

• None

Iain was appointed Group

General Counsel and

Company Secretary on 6

June 2016.

He has previously held

General Counsel and

Company Secretary roles

with Signature Aviation plc

and P&O Ports Ltd. He

undertook his legal training

with Slaughter and May and

worked for a number of

years in their corporate and

commercial department.

Principal Board

Committees key:

Audit

Committee

Nomination

Committee

Remuneration

Committee

Chair

RNARNA

RNA RNA

GOVERNANCE

Annual Report 2022 dssmith.com 67

Introduction

This section of the Annual Report focuses on corporate

governance. Having a structured corporate governance

framework, bringing the right information before the right people

at the right time to make informed decisions, supports good

decision making and the delivery of the Group’s strategy.

The past 12 months have continued to present us all with

challenges in all aspects of our lives and as a Board and as a Group

we continue to remain watchful and nimble in our decision making.

I have been impressed with the Group’s performance, despite the

challenges of the Covid-19 pandemic and more recently the

implications of the war in Ukraine and economic volatility, in

continuing to deliver both financial results and on the Group’s

ambitious ESG agenda.

UK Corporate Governance Code

Your Board understands that good corporate governance is an

essential element in helping to build a successful business in a

sustainable manner. There are five sections to the UK’s Corporate

Governance Code (Code) and the governance section of our Annual

Report follows the same order as the Code.

Board leadership and Company Purpose

The Code provides that a board should establish a company’s

purpose and values as well as its strategy and that its directors

should lead by example and promote the desired culture.

More information about how we engage with our stakeholders as

part of our Board activities is set out on pages 73 and 74 and how

we do so as a Group is summarised on pages 18 and 19.

Division of responsibilities

My role as Chair is to lead the Board and be responsible for its

overall effectiveness in directing the Company. It is important that

each member of the Board is clear about their responsibilities and

also that each member of the Board is able to contribute fully to all

aspects of the discussions we have as a Board.

The approval of certain Group policies (including some of those

listed in the non-financial information statement on pages 63 and

64) is one of the matters reserved to the Board and is one of the

ways as a Board we have oversight of longer-term aspects of the

Group’s operations, including our leadership on sustainability

matters and our progress in addressing climate-related issues.

Board composition, succession planning and

evaluation

As at 1 May 2022 our eight member Board was made up of three

women and five men. Alan Johnson joined the Board with effect

from 1 June 2022 and Rupert Soames will retire from the Board

after the conclusion of the Annual General Meeting on 6

September 2022.

For each Board appointment made we follow a similar process (as

summarised on page 77) as the Board seeks to appoint an

outstanding candidate, with a different range of experience, to

maximise Board effectiveness. When we think about diversity we

recognise that diversity can take many forms, including diversity

of gender, social and ethnic backgrounds, and of cognitive and

personal strengths, and that diversity at Board level and

throughout the Company is a valuable strength. We also recognise

that the mix of skills needed by Board members will change as the

landscape in which the Group operates changes. Therefore, as we

consider each new Board appointment, the role specification is not

a direct replication of the role of a retiring Board member.

Information about the external evaluation of the Board and its

Committees and how they have contributed to the overall

effectiveness of the Group is set out on page 75.

Chair’s introduction to Governance

“I have been impressed with the Group’s performance, despite

the challenges of the Covid-19 pandemic and more recently the

implications of the war in Ukraine and economic volatility, in

continuing to deliver both financial results and on the Group’s

ambitious ESG agenda.”

Geoff Drabble,

Chair

CHAIR’S INTRODUCTION TO GOVERNANCE

Balancing stakeholders’ interests

Each Board pack for Board meetings includes on the agenda a

reminder of each Director’s duties under section 172 of the

Companies Act 2006, framing our deliberations at meetings in the

context of a reminder that every Director must act in the way they

consider, in good faith, would be most likely to promote the

success of the Company for the benefit of its members as a whole,

while thinking about the likely consequences of any decision in the

long term, the interests of the Company’s employees, the need to

foster the Company’s business relationships with suppliers,

customers and others, the impact of the Company’s operations on

the community and the environment, the desirability of the

Company maintaining a reputation for high standards of business

conduct, and the need to act fairly as between the members of

the Company.

The principal decisions that the Board takes can be divided into

two categories: there are decisions taken relating to matters

considered each year (such as approving the Corporate Plan, the

budget and the Annual Report or considering the level of dividend

payment to propose) and there are decisions that relate to a new

project or an identified inflection point, when a new direction is

to be taken.

The Board’s approval of the Group’s commitment to a 1.5°C

science-based target, validated by the Science Based Targets

initiative was a significant strategic decision, which will impact all

our stakeholders, including our suppliers, our customers and the

wider community, as well as the environment. Delivering progress

on our science-based targets will play a powerful role in helping

brands and consumers reduce their own carbon footprint. Given

that our greenhouse gas emissions are our customers’ Scope 3

emissions, the commitment we have made to carbon reduction

has a positive impact on reducing Scope 3 emissions for our

customers, many of whom are already making progress towards

their own science-based targets and expect the same of their

packaging supplier.

Alongside our commitment to science-based targets, we have also

committed to encourage our strategic suppliers to adopt science-

based targets by 2027. This follows feedback from stakeholders

who are seeking to work with like-minded businesses, committed

to science-based targets and net zero, alongside a commitment to

the circular economy.

The Group’s commitment to a science-based target means we will

work closely with partners, suppliers, customers and policymakers

collectively to tackle climate change through the circular economy

in line with our ambitious goals.

The Board takes a close interest in our progress in realising our

strategic goal of leading the way in sustainability. Our progress to

date is summarised on pages 30 to 33 of this report, with more

details being available in our Sustainability Report.

As your Chair I look forward to both supporting and challenging the

executive team to adapt and evolve to the long-term benefit of all

our stakeholders as we realise our Purpose of ‘Redefining

Packaging for a Changing World’.

Geoff Drabble

Chair

20 June 2022

We use boxes like this throughout the governance section

of the Annual Report to highlight why we are telling you the

information. We hope that this will help you both find what

you are looking for in our report and understand the way we

have structured our disclosures to be both compliant with

regulation and, we hope, readable.

s172

We use this symbol throughout the governance

section of the Annual Report to highlight examples

referred to in the section 172 statement on page 13.

The governance section of the Annual Report opens by

summarising what each Board member contributes to the

governance of the Company and its long-term success. The

Chair’s introduction to governance puts DS Smith’s approach

to matters of corporate governance into our DS Smith

context. This year, after the summary of division of

responsibilities there follows a brief summary of our

approach to each of the five sections of the Code.

The regulatory requirement is to include in the Strategic

Report a statement about the Directors’ compliance with

section 172 of the Companies Act 2006 concerning taking

into account the interests of a variety of stakeholders. This

is on page 13. Examples that illustrate aspects of that

statement are set out in this part of the report, which also

links to the topics covered in section 1 of the Code (board

leadership and company purpose). Here we also explain how

we have applied aspects of Code principles A to E and how

we have put the related provisions of the Code into practice.

GOVERNANCE

Annual Report 2022 dssmith.com 69

Section 2 of the Code (division of

responsibilities) sets out matters

relating to independence of Directors

and the structure of the Board and its

Committees. We cover these items

(including the application of aspects

of Code principles F to I) in this part of

the report and in the Nomination

Committee Report, where we also

have more information about the

independence of Directors.

The Board

The Board is collectively responsible for

the long-term success of the Group and

for ensuring leadership within a

framework of effective controls. The

key roles of the Board are:

• Setting the strategic direction of the

Group

• Overseeing implementation of the

strategy by ensuring that the Group

is suitably resourced to achieve its

strategic aspirations

• Providing entrepreneurial leadership

within a framework of prudent and

effective controls which enables risk

to be assessed and managed

• Ensuring that the necessary financial

and human resources are in place for

the Group to meet its objectives

• Setting the Group’s values.

Chair

• Primarily responsible for overall

operation, leadership and

governance of the Board

• Leads the Board, sets the agenda

and promotes a culture of open

debate between Executive and

Non-Executive Directors

• Regularly meets with the Group

Chief Executive and other senior

management to stay informed

• Ensures effective communication

with our shareholders.

Group Chief Executive

• Responsible for executive

management of the Group as

a whole

• Delivers strategic and commercial

objectives within the Board’s stated

risk appetite

• Builds positive relationships with all

the Group’s stakeholders.

Senior Independent

Director

• Provides a sounding board to the

Chair and appraises their

performance

• Acts as intermediary for other

Directors, if needed

• Available to respond to shareholder

concerns if contact through the

normal channels is inappropriate.

Non-Executive Directors

• Constructively challenge and help

develop proposals on strategy

• Scrutinise the performance

of management

• Monitor the reporting of

performance.

Board and Board Committee meetings attendance

Board

Nomination

Committee

Audit

Committee

Remuneration

Committee

Total number of meetings in

2021/22 8 4 5 6

Executive Directors

Miles Roberts 8/8 4/4 n/a n/a

Adrian Marsh 8/8 n/a n/a n/a

Non-Executive Directors

Geoff Drabble 8/8 4/4 n/a 6/6

Celia Baxter 8/8 4/4 5/5 6/6

Alina Kessel 8/8 4/4 5/5 6/6

David Robbie 8/8 4/4 5/5 6/6

Louise Smalley 8/8 4/4 5/5 6/6

Rupert Soames 7/8 4/4 5/5 5/6

The Chair also holds meetings with the Non-Executive Directors without the Executive Directors present.

Division of responsibilities

Division of responsibilities of the Board and its principal Committees

GOVERNANCE

Annual Report 2022 dssmith.com 71

Audit Committee

• Monitors the integrity of the Group’s

reporting process and financial

management, its accounting processes

and audits (internal and external)

• Ensures that risks are carefully

identified and assessed and that sound

systems of risk management and

internal control are in place

• Oversees fraud prevention

arrangements and reports received

under the ‘Speak Up!’ policy.

For more information see page 82

Nomination Committee

• Reviews the structure, size and

composition of the Board and its

Committees

• Identifies and recommends suitable

candidates to be appointed to the

Board and reviews the wider senior

management talent pool

• Considers wider elements of

succession planning below Board level,

including diversity.

For more information see page 76

Remuneration Committee

• Recommends the policy for the

remuneration of the Chair, the

Executive Directors, the Company

Secretary and senior executives, in

alignment with the Group’s

reward principles

• Reviews workforce remuneration

and related policies and alignment

of incentives and rewards with

culture, to help inform setting of

remuneration policy

• Considers the business strategy of the

Group and how the remuneration policy

reflects and supports that strategy.

For more information see page 88

Disclosure

Committee

which oversees the

Company’s compliance with

its disclosure obligations.

Group Health, Safety,

Environment and

Sustainability

Committee

Meets monthly

Oversees the management

processes, targets and

strategies designed to

manage health and safety

and environmental and

sustainability risks and

opportunities, including

reviewing performance on

climate-related issues and

the Group’s health and

safety and environmental

and sustainability

responsibilities and

commitments.

Group Operating

Committee

Meets monthly

Considers Group-wide

initiatives and priorities.

Reviews the

implementation of

operational plans. Reviews

changes to policies and

procedures and facilitates

the discussion of the

development of

new projects.

Group Strategy

Committee

Meets once every two

months

Plans the business strategy

implementation as approved

by the Board and set out by

the annual Corporate Plan

process. The Corporate Plan

is used to develop the

Group’s strategy, based on

the set strategic direction.

The Corporate Plan’s focus is

primarily on strategic

actions, supported by high

level financial information. It

covers a three-year time

horizon and is reviewed

annually by the Board.

US Sub

Committee

which oversees the strategic

direction of business in the

US, together with any

associated risks or

opportunities in

the business.

Group Compliance Committee

Meets quarterly

Oversees compliance with all legal,

regulatory and organisational

requirements including the effective

interface between the financial, legal, risk

and internal audit functions, reporting

back to both the Group Operating

Committee and the Audit Committee.

Group M&A Committee

Meets once every two months

Considers potential acquisitions and

disposals and other related aspects that

may impact the realisation of the

Corporate Plan.

General Purposes

Committee

which facilitates efficient

operational management

decision-making in relation

to day-to-day financing and

administrative matters.

Share Schemes

Committee

which facilitates

administrative matters in

relation to the Group’s

share schemes.

Board’s principal Committees

Board standing sub-committees

In addition to the three principal Committees of the Board there are four further standing sub-committees of the Board.

Management committees

Four management committees, chaired by the Group Chief Executive, and the Group Compliance Committee also support the work of

the Board and its principal Committees.

Corporate Governance in action

The 2018 UK Corporate Governance Code (Code) published by the

Financial Reporting Council (FRC) and available at www.frc.org.uk

asks companies to focus on the application of the principles of

good governance in their specific context. In the introduction to

the Code the FRC recognises that high-quality reporting on the

provisions of the Code may include an explanation of how the spirit

of the principles has been applied, which, in some cases, may be by

a different route from that suggested in the Code’s provisions.

Our compliance with the UK Corporate Governance Code’s five sections

Board leadership and Company Purpose

Your Board rigorously challenges strategy, assesses

performance and balances the interests of all our stakeholders

to ensure that every decision we make is of the highest quality.

From page 73

Division of responsibilities

Your Board and its Directors, both executive and non-executive,

operate within a clear framework of roles and responsibilities.

One of the roles of Non-Executive Directors is to broaden the

diversity of viewpoints shared in the boardroom discussion,

drawing on the full range of their experience in other industries

and other countries, while considering a range of other

stakeholders’ perspectives.

From page 70

Composition, succession and evaluation

Your Board scrutinises the effectiveness of its performance in

an annual Board evaluation and evaluates the balance of skills,

experience, knowledge and independence of the Directors.

That then informs the succession planning process, which also

takes into account the contribution made by having a diversity

of backgrounds (whether of gender, of social or ethnic

backgrounds, or of the less immediately visible cognitive

differences). All new Directors receive a tailored induction

programme, which builds on their personal experience and

ensures that appointments can be made from a wider pool of

talent than one limited to only those with previous experience

of holding a directorship with a UK listed company.

From page 75

Audit, risk and internal control

All your Board’s decisions are discussed within the context of

the risks involved. Effective risk management, set in the

context of a well-structured internal control framework, is

central to achieving our strategic objectives, particularly

as we balance the sometimes conflicting interests of

our stakeholders.

From page 79

Remuneration

Our remuneration policy, which was approved at the 2020 AGM,

is designed to support our long-term strategy and to promote

long-term sustainable success. It was developed taking into

account wider circumstances as your Board currently

understands them and setting those in the context of the

longer-term future of DS Smith in this ever changing world.

Each element of remuneration is looked at, both individually

and cumulatively.

As described on page 91 in the Remuneration Report, the

pension contribution rates for Executive Directors are not, at

the date of this report, fully aligned to that available to the

workforce, although they will be so aligned by 31 December

2022. (The Group Chief Executive’s pension contribution

reduced by 10 per cent in 2020 and by a further 5 per cent on

1 August 2021 to 15 per cent of annual salary. The Group

Finance Director’s pension contribution was reduced by 5 per

cent in 2020 and a further 5 per cent on 1 August 2021 to 10 per

cent of annual salary.)

Our remuneration policy is aligned to our Purpose of ‘Redefining

Packaging for a Changing World’. Each year we look afresh at our

reward principles and test that they continue to support our

values as a Group.

From page 88

The governance section of the Annual Report outlines how we

have applied the Code’s main principles. All relevant provisions

of the Code have been complied with, other than provision 38,

where our approach (summarised in the box below) differs from

the Code’s.

The FRC and investors agree that, as long as ample, transparent

explanation is given, it may be appropriate for a company to

choose to depart from a provision of the Code.

Corporate Governance in context

Board leadership in action

As the 2021/22 financial year drew to a close the war in Ukraine

dominated the headlines. The Board has been inspired by the

numerous examples of humanitarian support offered by our

colleagues in eastern Europe to refugees from Ukraine and has

noted the heightened understanding of the importance of the

Group’s cyber awareness. The Board receives regular updates on

matters such as the financial hedging of energy costs and the

measures to enhance security of commodity supply put in place by

our Procurement team.

The Board was pleased that the Group was, after much work,

able to make public its commitment to align its global

operations to a 1.5°C scenario as set out in the Paris Climate

Agreement and to achieve validation from the Science Based

Targets initiative (SBTi), committing to reduce Scope 1, 2 and 3

greenhouse gas emissions 46 per cent by 2030 compared to 2019

and to reach net zero emissions by 2050. This (as further described

on page 69) was a significant strategic decision, taking into

account the interests stakeholders.

Health and safety is always a priority item on the Board’s agenda.

Setting the example from the top down is critically important and

the Board was pleased to hear that the Group-wide lost time

accident frequency rate has fallen again to a new low of 1.91.

The Code highlights the importance of effective engagement with

shareholders and other stakeholders. The Group’s key

stakeholders and their differing perspectives are identified and

taken into account, not only as part of the Board’s annual strategy

and corporate planning discussions, but also in our project

assessments and in other Board conversations. The Board

understands that the Group has a role as an employer and as a

taxpayer as well as a member of the wider communities in which

our sites are based and as a key link in the supply chains through

which so many goods pass, and that these roles are broader than

the more traditional single role of a corporate entity reporting on

its financial results to its shareholders. The balancing of the

differing perspectives of all our key stakeholders is a recurrent

theme in our Board’s conversations.

All discussions, assessments and conversations focus not only on

delivering increased value for shareholders, but also assess the

impacts of our decisions and strategies on the Group’s wider

stakeholders. (The concerns of, and our response to, our

stakeholders are summarised on page 18 and 19.) The Board

recognises the importance of regular, open and constructive

dialogue with shareholders and other stakeholders and this has

long been a key aspect of our culture and of our decision-making.

Engagement with our shareholders

Dialogue with investors continues throughout the year, not only

ahead of the AGM.

The Group’s Investor Relations team coordinates ongoing

communication with shareholders and analysts, and the

Board receives regular updates on the views of the Group’s

shareholders from our internal team and also from the Company’s

Board leadership and Company Purpose

brokers, so all Board members have a clear understanding of the

views of the shareholders. Celia Baxter, as Chair of the

Remuneration Committee, leads the engagement with

shareholders when we have remuneration matters to discuss.

Each year shareholders (and other interested bodies) issue

materials concerning their expectations of companies. These are

summarised for, and considered by, the Board, which also informs

the comments that Board members make on the working drafts

of the Annual Report that they review, prior to its final approval

and publication.

Engagement with our workforce

Our engagement with our workforce makes good use of the

well-established European Works Council (EWC) structure.

EWC representatives meet regularly with our Group Chief Executive

and Group HR Director to discuss a wide range of topics. While health

and safety, Group performance and sustainable employment are

always on the agenda for these discussions, this year topics have

also included providing input into the updated Group Code of

Conduct document, comparing the Group- wide engagement survey

results to the pledges set out in our Employee Charter, and giving

guidance on the industrial relations landscape across Europe.

Members of management continued to attend EWC meetings

throughout the year, held virtually on a platform that enables live

interpretation. Again this year an EWC representative joined a

meeting of the Remuneration Committee to support and inform

discussions about Sharesave and employee wellbeing

programmes and to brief the Committee about some of the topics

discussed at recent meetings of the EWC. Celia Baxter, the Chair

of our Remuneration Committee, has also met with the EWC

Executive twice in 2022, building further on the dialogue started

in 2020.

The regular schedule of reporting to the Board includes, in relation

to our workforce, such matters as reviewing the outcomes from

the topic-based, pulse employee engagement surveys that are

one of the ways in which the Board assesses and monitors culture.

The regular schedule of reporting to the Nomination Committee

includes the review of employee talent, development and

succession plans as well as insight into the progress made on

diversity, equity and inclusion. All these activities ensure that the

voice of our workforce is heard regularly in the boardroom and

provides richer context for the Board’s decision-making. The Board

plans to review the insight from the recent Group-wide

engagement survey and the action plans that have arisen from the

listening groups held across the organisation.

Engagement with our suppliers, customers and

other stakeholders

The business relationships with our suppliers, customers and

other stakeholders, such as regulators and non-governmental

organisations, are matters which the Group Chief Executive covers

in his regular reports to the Board. His report to the Board in

December 2021 highlighted that, while COP26 focused heavily on

carbon reduction, it also provided a number of platforms for the

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GOVERNANCE

Annual Report 2022 dssmith.com 73

Group to debate the importance of recycling/reusing of resources.

As Group Chief Executive, Miles Roberts is responsible for the

Group’s overall ESG performance and its clear objectives at the

centre of our business model. The Board recognises the crucial

importance of delivering on our sustainability ambitions, helping

reduce waste and protect natural resources as our designers

realise the opportunities within the circular economy by

applying our Circular Design Principles.

The Board receives regular updates from the Group

procurement function which has first-line responsibility for

relationships with suppliers. In the past year the Board has

discussed the supply of energy and raw materials (such as starch),

inflation in the cost of such supplies and logistics shortages.

The most recent update to the Board on sales, marketing and

innovation highlighted the range of customers we serve, our

focus on recovery of cost inflation and the importance of

leveraging our circular ready proposition, as well as how much our

customers have appreciated our responsive support through the

past challenging 18 months.

Complementing the regular briefings from operational and

functional management about Group-specific matters (such as

reports from our Corporate Affairs Director on progress made

during the year on both sustainability and our programme of wider

engagement in the community and the report to each Board

meeting on health and safety), the Board also has a programme of

briefings from the Group’s external advisers on a range of topics.

This enables current and future plans to be set in the wider

context of the broader environment. This covers not just topics

that are currently visible, but emerging areas of interest and

concern across a diverse range of fields.

Our engagement with the local communities of which our sites and

employees are a part has been a developing area of focus in recent

years. A key target in our Now and Next Sustainability Strategy is

to engage in community programmes at all our sites that have

more than 50 employees, which we have again achieved in

2021/22. These programmes are guided by our Purpose and focus

on supporting the improvement and protection of the

environment and inspiring and educating. In 2021/22, we achieved

our Now and Next Sustainability Strategy target to fund 100

biodiversity projects in our local communities. These projects

improve local environments for plants and animals, protecting

natural habitats and enhancing species diversity in the areas in

which we operate. Alongside these projects, 12 of our paper mills

have launched longer-term biodiversity programmes.

An illustrative example of improving local communities that the

Board was briefed on in October was the involvement of over

300 employees based at more than 35 sites in 17 countries in

World Cleanup Day in September 2021. Sadly the war in Ukraine

has provided the opportunity for our colleagues in eastern Europe

to rally round, offering humanitarian support to the Ukrainian

people through many locally and regionally coordinated charitable

initiatives, including organising food and other donations and

taking refugees into their homes.

Statement about the Company’s engagement

with the wider UK workforce

More detail about how we realise the potential of our people by

engaging with our wider workforce (a term that is wider than the

term employees, who are those employed directly by the Group

under contracts of service) wherever they are based (not just those

based in the UK) is set out on pages 24 to 29 of the Strategic Report.

Statement about the Company’s engagement

with suppliers and customers

More detail about how we engage with our customers and the

importance of sustainability throughout our supply chain is set out

on pages 20 to 23 and 30 to 33 of the Strategic Report.

Throughout the uncertain times of Covid-19 the safety and

wellbeing of our people has been our first priority, while recognising

our responsibility to support our customers as they keep essential

goods such as food and pharmaceuticals moving. All our decisions

have been taken in that context.

In addition to the regulatory requirement to include a

statement about section 172 of the Companies Act 2006 in

the Strategic Report, there is also a requirement to make a

statement about the Company’s engagement with the

wider UK workforce and with suppliers and customers. The

methods of engagement in the UK and across the wider

workforce are broadly the same, so we have cross-

referenced, not repeated, our disclosures on these matters.

Board engagement through site visits

Board site visits are an important way in which Board members can

engage with our employees, assess and monitor culture, and

understand more about our customers and suppliers, but the

ongoing impact of the Covid-19 pandemic in much of 2021/22 has

limited the possibilities for in-person visits. The Board plans to go

to Madrid for its October 2022 meetings to assess the integration

of Europac and see first hand the strengths and culture of that

business and the qualities our employees there bring to the overall

Group. It is also hoped that during 2022/23 it will be possible for

Non-Executive Directors to be able to visit sites as individuals.

At each Board meeting health and safety is reported on, including

the total number of near misses and safety observations and the

number per employee. These are seen as indicators of employee

engagement in observing and reporting positive behaviour and

identifying health and safety risks. The level of engagement is

seen as a reflection of the culture and health and safety leadership

at a site and in 2021/22 the number of safety observations per

employee (the health and safety engagement index) was 11.5,

the highest figure since the Group started tracking it in 2017.

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BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED

In this report we sometimes report on ‘employees’ and

sometimes on ‘workforce’. This is because sometimes the

regulatory requirements specifically ask us to report on

matters relating to ‘employees’ (those who are employed

directly by the Group under contracts of service). When we

use the term ‘workforce’ we are including all those who work

for the Group, including those sub-contracted to work for

the Group.

Board evaluation in practice

Board evaluation is an iterative process. After each evaluation

(whether internal or external and including evaluations of

Committees and Directors) the Board sets itself objectives. The

Board set itself a number of objectives for 2021 including looking

at insights around global, societal and consumer trends (including

those outside the immediate categories in which the Company

operates) and ensuring appropriate frequency of Board

discussions of briefings on topics such as relationships with

customers, suppliers and the businesses’ efforts and involvement

in the many and diverse communities in which we operate. The

Board found realising these objectives helped keep a wider lens on

the Board’s discussions.

In 2022 the Board and its Committees completed a formal

external evaluation with Claire Chalmers Limited (which has no

other involvement with the Group or with any of the Directors).

The process started in October 2021 when an independent

external evaluator was able to attend in-person meetings of

the Board and its Committees, which gave the opportunity for

richer insight and more valuable feedback than would have been

possible earlier (or later) in the financial year when meetings

were via video technologies.

The formal evaluation report was presented by the evaluator at

the January Board meeting when Board members discussed the

findings with the evaluator and how, for example, the evaluator

had seen collective board training operate to best effect in other

organisations. At the March and April Board meetings the Directors

considered what further changes to suggest to the rolling

schedules of periodic agenda items that are maintained as a

framework for the Board and each of its main Committees, to

ensure that those documents continue to be aligned with the

focus areas of the Corporate Plan. At that time David Robbie, as

Senior Independent Director, met with all the Directors

individually, to appraise the Chair’s performance and subsequently

discussed this with him. The Directors also considered and adopted

Board objectives for 2022, taking forward from the external

evaluation a focus on a structured approach to succession

planning with improved oversight of talent and development

programmes. After the pandemic’s disruption of physical site visits

and the limited opportunities for virtual site visits, the Board is

particularly keen to set itself an objective of arranging additional

physical or virtual visits to sites in 2022 and 2023, choosing

locations by reference to the strategic priorities of the business.

As with every high performing board, the Directors will continue to

watch for areas of improvement, not just when Board evaluation is

a formal agenda item at a Board meeting.

This section and the Nomination Committee Report that

follows explain how we have applied aspects of Code

principles J to L in section 3 (composition, succession and

evaluation) and how we have put the provisions of that

section of the Code into practice.

Succession and composition

More details about succession planning are set out in the

Nomination Committee Report, later in this Report and details

about the current composition of the Board are set out in the

biographies of the Directors on pages 66 and 67. Alan Johnson

joined the Board on 1 June 2022, but all the other Directors held

office throughout the year under review. Rupert Soames informed

the Company that he planned to retire from the Board at the

conclusion of its Annual General Meeting on 6 September 2022

and he handed over his Senior Independent Director duties to

David Robbie on 28 February 2022.

Composition, succession and evaluation

GOVERNANCE

Annual Report 2022 dssmith.com 75

Dear shareholders

The Nomination Committee supports the Board in executive and

non-executive succession planning. Our principal objective as a

Nomination Committee is to make sure the Board has individuals

with the necessary range of skills and knowledge and diversity of

experiences to lead the Company. As a Committee we continue to

focus on senior executive succession planning, as well as Board

composition, as we progress towards a greater range of diversity

of experiences across the Group’s senior leadership team and

welcome Alan Johnson to the Board.

Our key responsibilities

As a Committee we have delegated authority from the Board to

focus on Board and Committee composition and succession

planning. In discharging those key responsibilities in relation to

succession planning we also consider ways to:

• Improve diversity in the pipeline for senior management roles

• Further strengthen the senior management team.

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

our meetings.

Board changes

Rupert Soames handed over his Senior Independent Director

duties to David Robbie on 28 February 2022 and is retiring from

the Board at the conclusion of the Annual General Meeting on 6

September 2022.

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

Our priorities over the year were:

• To keep under review succession planning at the Executive

Director level and support succession planning at senior

management levels

• To improve the diversity on the Board and in the pipeline for

senior management

• To monitor the Group’s progress towards increasing the relative

number of women in senior management positions

• To keep under review our leadership needs, both executive and

non-executive, with a view to ensuring the continued ability of

DS Smith to compete effectively in the marketplace.

Membership and operation of the Committee

Member Since

Geoff Drabble (Chair) 2020

Celia Baxter 2019

Alina Kessel 2020

Miles Roberts 2010

David Robbie 2019

Louise Smalley 2014

Rupert Soames 2019

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

During the year, the Committee held four formal meetings and

there were updates between formal meetings and a number of ad

hoc briefings. Details of individual Directors’ attendance can be

found on page 70. The Group General Counsel and Company

Secretary acts as Secretary to the Committee.

Nomination Committee Report

“As a Committee we continue to focus on senior executive

succession planning, as well as Board composition, as we

progress towards a greater range of diversity of experiences

across the Group’s senior leadership team and welcome Alan

Johnson to the Board.”

Geoff Drabble,

Chair of Nomination Committee

Succession planning and recruitment

The process for the appointment of Alan Johnson as a new

Non-Executive Director began with inviting a number of

recruitment firms to participate in a selection process in order to

identify the appropriate consultants to support our search. Inzito

were selected in that process.

A role specification was agreed and provided to Inzito, who then

put forward a shortlist of candidates for review by the Committee.

The shortlisted candidates were interviewed by a number of the

Executive and Non-Executive Directors and the Committee made a

recommendation to the Board. When making decisions on new

appointments, Board members consider the skills, experience and

knowledge already represented on the Board and the benefits of

diversity, in all its forms, including of gender, ethnicity and life

experience. A similar process will be followed for the recruitment

of future Non-Executive Directors to the Board.

Apart from assisting with recruitment, Inzito has no other

connection to the Company. Inzito has no connection with any

individual Directors.

The Committee keeps under regular review succession planning at

the Executive Director level and supports succession planning at

senior management levels. The Committee’s annual rolling

schedule of periodic agenda items includes a deep dive into senior

talent management and succession planning, informed by a

presentation given by the Group HR Director.

Induction, training and development programmes

Upon appointment to the Board, Directors undertake an induction

programme, receiving a broad range of information about the

Group tailored to their previous experience. This includes

information on the operational and sustainability performance and

business of the Group and details of Group strategy, corporate

governance and Board procedures.

Assisted by the Group Company Secretary, I have responsibility for

Directors’ induction programmes, and also for the Board’s training

and professional development. Directors have been given training

and presentations during the course of the year to keep their

knowledge current and enhance their experience. This has

included topics such as cyber security and developments in

corporate governance (in particular on stakeholders’ expectations

on remuneration reporting and on Task-Force on Climate-related

Financial Disclosures reporting).

Directors will continue to receive regular training updates from

appropriate internal and external specialists on governance issues,

financial and reporting standards, digital development, cyber

security and sustainability. In addition, Directors are fully aware of

their own responsibility for identifying and satisfying their own

specific training requirements.

Time commitments

Under the Code the reasons for the Board permitting its members

to enter into significant new external appointments should be

explained in the Annual Report.

Louise Smalley took on the role of non-executive director at

Informa PLC shortly after she had retired from her full-time

executive role at Whitbread PLC and so the Board was confident

that the new appointment would not adversely impact the time

she committed to her DS Smith role. As part of the process of

appointing Alan Johnson to the Board, the Board noted the value

that the variety of his current roles will bring to the Group.

The experience gained in external roles held by our Board

members broadens and deepens the knowledge and experience of

the Directors, which in turn benefits the Company.

Diversity

DS Smith acknowledges the importance of diversity of thought,

skills and experience in the effective functioning of the Board and

the wider organisation. This diversity may arise from any number

of sources, including differences in age, gender, ethnicity,

disability, sexual orientation, cultural background and religious

belief. Our Directors have experience of a wide range of industries

and backgrounds, as well as of complex organisations with a

global reach.

The Board diversity and inclusion policy is a policy which

acknowledges the importance of diversity and includes an explicit

requirement to take into account diversity when considering

appointments to the Board. The Board recognises that some

challenges in achieving diversity arise from social contexts with

impacts not limited to the DS Smith Group, but the Board remains

committed to ensuring that all have an equal chance of developing

their careers within our business. At its meeting in September

2021 the Committee discussed with the Group HR Director and the

Group Head of Talent that the initial actions to improve the

diversity mix in the Group have focused on gender, but that as

networks are built and the local priorities are better understood,

this will extend to other under-represented groups. Regular

updates on the progress will be given to the Committee. Currently

the Group’s leadership populations are internationally diverse but

the Group is aware that more needs to be done to improve the

gender and ethnic mix and address the ageing demographic in the

leadership population. (See pages 27 to 29 for more about our

programmes to develop diverse leadership talent, from whom

might be drawn a future generation of non-executive directors,

and to improve the gender balance of those in senior management

and their direct reports.)

GOVERNANCE

Annual Report 2022 dssmith.com 77

As at 1 May 2022 our eight member Board was made up of three

women and five men. With 37.5 per cent of the Board being

women, we exceeded the Hampton-Alexander Review’s target of

one-third of Board members being women, but we note the

recommendations of the FTSE Women Leaders Review, including

that boards should have a minimum of 40 per cent women by the

end of 2025. With the appointment of Alan Johnson on 1 June 2022

the Board now meets the Parker Review recommendation that

each FTSE 100 board should have at least one director from an

ethnic minority background.

Our most recently published UK gender pay gap report is available

on our website. We know that we have a relative lack of women in

senior management positions and year by year the percentage of

women in the roles that are defined as senior management roles

will fluctuate (see page 29 for details), but the trend in recent

years has been towards a better gender balance.

Independence and re-election of Directors

Biographical details of each Director, including their other

directorships, their skills and experience, can be found on pages

66 and 67.

The Nomination Committee makes an assessment each year of the

criteria set out in the Code concerning independence and the

Committee also reviews the time commitment of Non-Executive

Directors to assess whether each has sufficient time to discharge

their duties. The Committee confirms that all the Non-Executive

Directors are independent and each has sufficient time to

discharge their duties. The Committee also considered Geoff

Drabble to be independent on his appointment to the Board.

The Nomination Committee this year considered the then current

term of appointment to the Board of Rupert Soames, Celia Baxter,

David Robbie and Louise Smalley. Rupert informed the Board that

he planned to retire from the Board at the conclusion of the Annual

General Meeting on 6 September 2022 and therefore the expiry

date of his then current term of appointment was extended to the

conclusion of the Annual General Meeting on 6 September 2022.

All other current Directors are standing for re-election or, in the

case of Alan Johnson, election, at that AGM.

Board members reviewed the commitment and contribution to the

Board and its Committees of Celia, David and Louise, as well as the

balance of their skills, knowledge and experience with those of the

other Directors and it was agreed that Celia’s and David’s term

should be renewed for a further three years and Louise’s should be

renewed for a further year. (Directors do not participate in any

debate or decision about their own re-appointment.) The expiry

date of the current term of each of the Non-Executive Directors is

set out on page 106.

Information about this year’s external evaluation of the Board and

its Committees can be found on page 75.

Looking forward

As well as the regular cycle of matters that the Committee

schedules for consideration each year, we are planning over the

next 12 months to:

• Oversee the increase in capabilities and bench strength of our

core employee base in order to properly support our growth in

areas such as innovation and digital enablement

• Encourage the spotlight on talent rising up through the

organisation, enabled by the focus on training and development

for all

• Improve the Nomination Committee‘s understanding of the

challenges and benefits of improving our reporting on diversity.

Geoff Drabble

Chair of the Nomination Committee

20 June 2022

NOMINATION COMMITTEE REPORT CONTINUED

Risk management and internal control

Along with overall responsibility for establishing and maintaining

the Group’s systems of risk management and internal control

(including financial, operational and compliance controls), the

Board also retains ultimate accountability for the effectiveness of

the systems and processes implemented. The Board confirms it

has conducted an annual review of the overall effectiveness of the

Group’s system of internal controls and risk management

procedures implemented during the year and up to the date of

approval of this Annual Report, as well as a robust assessment of

the Group’s emerging and principal risks, summarised on pages 47

and 48 and pages 52 to 55.

The systems and processes implemented are designed to identify,

manage and, where appropriate, avoid or eliminate significant

risks that might affect delivery of the Group’s business objectives;

and to provide reasonable, but not absolute, assurance against

material misstatement or loss. There is an established and ongoing

process for identifying, evaluating and managing the significant

risks and uncertainties faced by the Group. This includes a process

of self-certification by senior divisional management, confirming

that their divisions have complied with Group policies and

procedures and reporting any significant control weaknesses

identified during the past year. In addition, it includes reviewing

the results of the work of the Group’s Internal Audit function and

Group Governance team and the adherence to the risk

identification and management processes identified above. These

procedures have continued to be in place throughout the year and

up to the date of approval of this Annual Report.

The Board also has procedures in place to ensure that its powers to

authorise and manage conflicts are operated effectively. These

procedures were followed throughout the year and up to the date

of approval of this Annual Report.

Risk management

Our risk management framework and processes remained robust

during the year despite the ongoing and fluctuating impacts of the

Covid-19 pandemic and the volatility of the external economic

environment. Management and employees have continued to

manage the day-to-day risks that the Group faces and have been

able to adapt and respond to changing situations. Our risk reviews,

embedded within our strategic planning processes, support

effective management of the Group’s principal risks and

uncertainties and inform the regular updates on specific risk

areas that are brought for discussion and review at the

Audit Committee.

The Board discusses regularly the Group’s cyber security

programme, as well as benefitting from presentations from

external cyber advisers. Cyber security is also discussed by senior

executive management at the Group Operating Committee

meetings, along with other aspects of IT infrastructure and

security controls.

The Audit Committee has kept up to date with risk developments

throughout the year with in-depth discussion of the Group’s

principal risks and mitigation efforts and has noted the way in

which our divisions and Group functions have continued to

demonstrate resilience and revise risk mitigation remedies in their

plans where appropriate. Our businesses have also been updating/

enhancing their business continuity plans in light of the Covid-19

pandemic and other business challenges, in line with the Group’s

business continuity planning policy.

The Group Compliance Committee has continued to meet regularly

and to expand its oversight of the business. Recent topics have

included reviews of the Corporate Criminal Offence risk

assessment, updates from Group functions and/or divisions on key

compliance risk areas such as GDPR, developments in the IT

security programme and proposed changes to financial control

procedures, as well as more detailed risk reviews undertaken by

selected Group functions. The Board remains encouraged by the

work undertaken across the Group with investment being made in

financial, operational and reputational risk management to ensure

effort is well directed and with the right level of intensity, enabling

the Group to remain in a strong position to respond rapidly to those

risks that do emerge.

Further details on the Group’s risk management and mitigation

approach for each principal risk, including its emerging risks

reporting, are set out in the risk management section on pages 47

to 55, which also includes the Group’s viability statement on page

49. Our Task Force on Climate-related Financial Disclosures are set

out on pages 56 to 60. Emerging risks are reported on as part of

the risk management reviews. Integrating them into the reporting

processes supports the Board in maintaining a clear overview,

taking account of the experiences gained from Covid-19, the

increasing disclosure requirements in relation to ESG risks and the

effect of macroeconomic uncertainty.

Audit, risk and internal control

GOVERNANCE

Annual Report 2022 dssmith.com 79

Internal control

The Board determines the objectives and broad policies of the

Group and has a set schedule of matters which are required to be

brought to it for decision. Overall management of the Group’s risk

appetite, its tolerance of risk and discussion of key aspects of

execution of the Group’s strategy remain the responsibility of the

Board. The Board has delegated to the Audit Committee the

responsibility for establishing a system of internal controls

appropriate to the business environments in which the Group

operates. Key elements of this system include:

• A clearly defined divisional organisation structure for monitoring

the conduct and operations of individual business units

• Clear delegation of authority throughout the Group, starting

with the matters reserved for the Board

• A formal process for ensuring that key risks affecting operations

across the Group are identified and assessed on a regular basis,

together with the controls in place to mitigate those risks. Risk

consideration is embedded in decision-making processes at all

levels and the most significant risks are periodically reviewed by

the Board. The risk process is reviewed by the Audit Committee

• Control policies and procedures in functions including finance,

tax, IT, HR, procurement and legal, are reviewed and updated as

appropriate and supplemented by mandatory training

• Assurance processes over the internal financial control

environment such as annual controls self-assessment and

ongoing divisional control review programmes

• The preparation and review of comprehensive annual divisional

and Group budgets; and an annual review and approval by the

Board of the three-year Corporate Plan

• The monthly reporting of actual results using the Group

consolidation system and their review against budget, forecasts

and the previous year, with explanations obtained for all

significant variances

• The Operating Framework which outlines key control

procedures and policies to apply throughout the Group. This

includes clearly defined policies and escalating authorisation

levels for capital expenditure and investment, with larger capital

projects, acquisitions and disposals requiring Board approval.

This framework is kept under periodic review

• Regular formal meetings between the Group Chief Executive,

the Group Finance Director and divisional management to

discuss strategic, operational and financial issues

• Communicating key corporate values through our Code of

Conduct and associated policies to all employees to ensure

relevant staff are properly equipped to exercise management

oversight and control.

The Group Governance team is a centrally-led function, as opposed

to being regionally and divisionally based, that maintains and

develops the internal control framework, provides support and

training to the business in complying with that framework and

provides management with assurance about compliance with the

framework through a site and risk-based work programme. An

important part of this function’s role is to support the business in

development of remediation plans and corrective actions for

control weaknesses identified through the governance and

compliance work programme, or through Group Internal Audit’s

activities. The Governance team has commenced a readiness

assessment in relation to the currently expected direction of the

UK Government’s proposals for reform of audit and corporate

reporting and has implemented a number of ‘no regrets’ actions

identified in the first phase of that assessment to develop further

the controls framework in preparation for the implementation of

those proposals.

The framework of internal control has continued to operate

throughout the Covid-19 pandemic.

Internal Audit

The Internal Audit function moved in-house with effect from

1 May 2021 after previously being outsourced to KPMG. An Internal

Audit charter was drawn up and approved by the Audit Committee,

to set out the purpose, scope and authority of the function, and a

team was established to deliver the Internal Audit plan.

The Internal Audit function’s remit is to undertake regular reviews

of the operations of Group sites, service centres, functions,

projects and processes in accordance with a previously agreed

plan, including an assessment of implemented systems of internal

control. The Internal Auditor then makes recommendations on

potential control process improvements and conducts

supplementary reviews to ensure that management implements

the recommendations made. During the year, Internal Audit’s

activities were supported and complemented by management’s

Group Governance team.

The Internal Audit plan is designed each year to align to key risks

faced by the Group, as well as provide rotational assurance. The

annual Internal Audit plan, and any revisions required to respond

to emerging risks or areas of concern, are approved by the Audit

Committee. The Internal Audit plan considers the scope and

effectiveness of the management assurance programme

undertaken by the Group Governance team in determining

rotational coverage of financial controls audit activities, as

well as providing assurance over the management assurance

programme itself.

AUDIT, RISK AND INTERNAL CONTROL CONTINUED

This section explains how we have applied aspects of

Code principles M, N and O in section 4 (audit, risk and internal

control) of the Code and how we have put the provisions of that

section into practice, firstly through matters that come before

the full Board and secondly through the detailed work of the

Audit Committee which is reported on in the Audit Committee

Report that follows.

Annual risk reporting cycle

May – Jul Aug – Oct

Group Compliance

Committee reviews a selection

of Group function and/or

divisional risks including ‘deep

dive’ risk discussion

Internal Audit reviews their

programme and key control

risks

Audit Committee reviews

Group risks, viability and risk

management effectiveness

including go forward actions to

implement

Group Risk provides feedback

and guidance to divisions and

Group functions on risk

assessments in preparation for

the Corporate Plan process

Divisions and Group

functions update risk

assessments and integrate into

their corporate plans

Group Compliance

Committee reviews a selection

of Group function and/or

divisional risks including, in

2021, data protection and

information security

Group Strategy Committee

undertakes an assessment of

the Group’s principal and

emerging risks

Internal Audit considers

response to emerging risks

Audit Committee reviews the

progress of risk management in

relation to the Corporate Plan,

and reviews and approves

completed Internal Audit

reports and reviews status of

programme – this included in

2021 an in-depth discussion of

IT system controls of our

principal risks

Nov – Jan Feb – Apr

Internal Audit updates review

of Internal Audit programme

and key control risks

Audit Committee further

updates and approves

completed Internal Audit

reports and ongoing Internal

Audit work

Group Risk provides feedback

to divisions and Group functions

on risk assessments

Board reviews principal risks

and uncertainties, risk appetite

and tolerance, and business

viability as part of Corporate

Plan discussions

Group Compliance

Committee reviews a

selection of Group function

and/or divisional risks

Group functions, divisions

and regions produce year-end

review of principal and key

business risks and reconsider

effectiveness of risk

management actions

implemented

Group Strategy Committee

undertakes an assessment of

the Group’s principal and

emerging risks

Internal Audit undertakes the

year-end assessment of

Internal Audit needs and

presents a plan for the year

ahead

Group Compliance

Committee reviews a selection

of Group function and/or

divisional risks including in 2022

the Corporate Criminal Offence

risk assessment, GDPR, IT

security and procurement

Audit Committee reviews

Group and divisional risk

reports, annual Internal Audit

needs assessment, including

audit plans and

recommendations

The Internal Audit team needed to adapt to fluctuating Covid-19

protocols, with a large proportion of the audit plan delivered

remotely. As new ways of working become more embedded, and

as some countries open up as the Covid-19 pandemic abates, the

Internal Audit team has taken the best of remote and hybrid

working to widen reach and efficiency, as well as taking advantage

of opportunities to reintroduce in-person or hybrid approaches

where in-depth, in-person discussion is safe and worthwhile.

Findings from the Internal Audit and Group Governance teams are

reported to Group and divisional business management as well as

to the Audit Committee to give a holistic assurance picture.

GOVERNANCE

Annual Report 2022 dssmith.com 81

Dear shareholders

I am pleased to present the Audit Committee Report, which

provides an overview of the Audit Committee’s role supporting the

Board in its oversight of the control framework across the Group.

Details of the Board’s procedures and processes in relation to that

oversight of risk management and internal control are set out on

pages 79 to 81.

Our principal objectives as an Audit Committee are:

• To monitor the integrity of the Group’s reporting process and

adherence to the Group’s accounting policies and procedures

• To ensure that risks are carefully identified and assessed; and

that sound systems of risk management and internal control

are implemented.

Our role as a Committee is pivotal in ensuring the robustness of the

Group’s risk management activities and internal control

environment, thereby ensuring the integrity of the financial

reporting process. During the year under review, the Group’s

procedures and systems to identify, mitigate and manage risks

adapted to allow the internal control and financial reporting

processes to continue uninterrupted, despite the continuing

restrictions presented by Covid-19.

Deloitte has now completed their final audit as the Group’s

external Auditor and I thank them for their continued rigour and

robust challenge throughout the year and during their tenure. I

look forward to engaging with our new external Auditor, Ernst &

Young LLP, whose first task will, subject to the approval at the

annual general meeting (AGM) of their appointment, be reviewing

the financial results for the six months to 31 October 2022.

As a Committee we continue to monitor the level of adjusting

items and I am pleased to note that their level is low. The

Committee always takes a close interest in the regular review

of the Group’s gearing levels and the security of its balance

sheet, particularly taking into account the risks in the

trading environment.

Looking forward

As well as the regular cycle of matters that the Committee

schedules for consideration each year, we are planning over the

next 12 months to:

• Expand scrutiny, both by the Committee and Internal Audit, over

sustainability, climate and broader ESG reporting

• Monitor the transition to the new external Auditor, Ernst &

Young LLP

• Continue to monitor emerging risks for the Group

• Continue to monitor legislative and regulatory changes that may

impact the work of the Committee, particularly the development

of the requirements from the UK Government’s restoring trust in

audit and corporate governance initiative, both in terms of UK

SOx and more widely.

As Chair of the Audit Committee I make myself available at the

Company’s AGM to answer any shareholder questions on the

Committee’s remit.

David Robbie

Chair of Audit Committee

20 June 2022

Audit Committee Report

“As members of the Audit Committee, we continue to challenge

ourselves to ensure our scrutiny and oversight of the Group’s

risk management and control environment keeps pace with the

dynamic nature of change, both within the Group and in the

external economic and regulatory environments.”

David Robbie,

Chair of Audit Committee

Annual Report 2022 dssmith.com 83

Other matters particularly focused on by the Audit Committee in its discussions with management include:

• Oversight of external audit tender and transition processes

• Risk management, internal control and compliance

enhancements

• Quality of earnings

• Financial commitments and liabilities

• Pensions

• Taxation matters, including review of strategy and risks

• Internal Audit and in-house governance, compliance and

corporate governance activities updates

• Climate and sustainability risks and disclosures

• Review of the 2020/21 Annual Report and

announcement, including a review to ensure

the report was fair, balanced and

understandable

• Going concern and viability statement

• Impairment assessment review

• Effectiveness of internal control framework

update

• Review of adjusting items

• Review of risk appetite and tolerance

statement, risk heat maps and

assurance matrix

• Internal Audit report

• External Auditor report

• Review of external Auditor effectiveness

paper and recommendation to the Board to

re-appoint Deloitte for 2021/22

• Review of external audit tender paper and

recommendation of appointment of Ernst &

Young LLP with effect from 2022/23

• Review of adjusting items

• Impairment assessment review

• 2021/22 external Auditor plan for the half year

• Review of letter to management from external

Auditor on 2020/21 audit

• Internal Audit report

• Ethics and compliance report review

• Consideration of UK SOx likely developments

• Discussion on governance of sustainability

• Risk update

• Update on half year forecast results

• Going concern

• Review of announcement of half year results

• External Auditor half year report, including

confirmation of independence and objectivity

• Internal Audit report

• Non-audit fees review

• Review of Governance report, including

discussion of initial ‘no regrets’ actions to

prepare for UK SOx

• Update on full year forecast results and

trading outlook and emerging year-end

accounting issues and matters of judgement

• Interim going concern assessment and

consideration of significant accounting

policies and judgements

• Annual impairment review

• Effectiveness of internal controls review

• Ethics and compliance report review

• Update on external Auditor plan and fees

• Review of emerging risks and risk update

• Review and approval of Internal Audit plan for

2022/23 including confirmation of non-

financial areas to be targeted

• Update on UK SOx preparation activities

• Review of the 2021/22 Annual Report and

announcement, including a review to ensure

the report was fair, balanced and

understandable

• Going concern and viability statement

• Impairment assessment review

• Effectiveness of internal control framework

update

• Review of adjusting items

• Review of risk appetite and tolerance

statement

• Internal Audit report

• External Auditor report

• Review of external Auditor effectiveness

paper

• Review of Internal Audit effectiveness

• Audit transition

2021 2022

June 2021 April 2022

June 2022

October 2021

December 2021

Audit Committee meetings’ key topics

GOVERNANCE

Membership and operation of the Committee

Member Since

David Robbie (Chair) 2019

Celia Baxter 2019

Alina Kessel 2020

Louise Smalley 2014

Rupert Soames 2019

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

The Audit Committee met on five occasions during the year, with

meetings scheduled to align with the Group’s external financial

reporting obligations. Details of the attendance of individual

Directors can be found on page 70. As and when required, the

Audit Committee members were joined by the Group Chief

Executive, the Group Finance Director, the Group Financial

Controller, the Group Risk Officer and representatives from the

external Auditor, Internal Audit and Governance teams for parts of

these meetings, by invitation. The external Auditor was not

present at meetings where their performance and/or

remuneration was discussed. The Audit Committee also met

privately with the external Auditor as appropriate.

The Group General Counsel and Company Secretary acts as

Secretary to the Committee.

The Board is satisfied that the Chair of the Committee and other

members of the Audit Committee have both current and relevant

financial experience (as set out on pages 66 and 67) and that the

Audit Committee, as a whole, has competence relevant to the

sector (namely manufacturing) in which the Company operates.

In addition to the scheduled Committee meetings, the Chair of the

Audit Committee held separate individual meetings during the

year with the Group Finance Director and his team, the Group

Risk Officer, representatives from Internal Audit and the

external Auditor.

The Audit Committee received sufficient, reliable and

timely information from management to enable it to fulfil

its responsibilities.

Risk management, internal control and Internal Audit

In fulfilling the Committee’s oversight of the risk management

and control environment, a number of key activities are

undertaken during the year, including regular meetings with

senior management.

The Audit Committee considered the Group’s risk management

activities during the year (with specific discussions of such topics

as sustainability, cyber security, packaging capacity, security of

paper/fibre supply, disruptive market forces, changes in shopping

habits and emerging risks). The Audit Committee continued its

regular review of risk reporting to ensure that the balance

between risk and opportunity was in keeping with the Group’s risk

appetite and tolerance. The Audit Committee is satisfied that the

Group’s executive compensation arrangements do not prejudice

robust controls and good stewardship.

A key element of the Committee’s oversight role is to challenge

management and test the validity of any critical assumptions and

matters of significant judgement. Areas debated include cyber

risks and the response to increased exposures during the

pandemic, as well as probing IT controls in relation to key

applications more specifically. The Committee has continued to

focus on the pandemic and the treatment of systemic risk,

enhancing the work in relation to identifying and assessing

emerging risks, and the level of engagement at all levels of the

Group within the risk management process. The Board received an

update from the IT security team during the year and is satisfied

that the approach to cyber security risks is robust.

ESG has had an ever increasing focus on the Committee’s and the

Board’s agenda, both as the Group’s strategy evolves to lead the

way in the circular economy and as external stakeholders’

changing expectations have accelerated. The Committee has

challenged management on their governance of key ESG data,

considered disclosure under the Task Force on Climate-related

Financial Disclosures (TCFD) and Streamlined Energy and Carbon

Reporting (SECR) requirements and reviewed the climate-related

risk management activities.

The Committee approved the Group’s annual Internal Audit plan,

which was primarily risk-based, focusing on the assurance of core

processes and projects, as well as overseeing internal

management compliance activities. During the year, the

Committee received regular reports summarising findings from

the Internal Audit reviews performed, action plans to address any

areas highlighted for improvement and additional activity review

summaries from internal compliance teams. The Committee

reviewed the effectiveness and performance of the Internal Audit

function, focusing on the content and delivery of the regularly

received reviews, action plans and activity summaries, and noting

the assurance provided in relation to the internal control

framework. This annual review enabled the Committee to remain

satisfied that the performance of the function was effective

and that its quality, experience and expertise is appropriate for

the business.

Fraud risk

The Group takes steps to protect itself from the consequences of

fraud, be that misappropriation of assets, financial misstatement,

or bribery and corruption. The Group’s internal financial control

framework provides the first line of defence against

misappropriation and misstatement. This is complemented with

Group-wide training and the confidential ‘Speak Up!’ reporting

structure together with a comprehensive fraud response policy

and guidance. Training and the confidential ‘Speak Up!’ reporting

programme also support the policy framework that protects

against bribery and corruption. All instances of alleged and actual

fraud are investigated fully and lessons learnt incorporated, as

appropriate, into the frameworks and training. The Internal Audit

function takes the lead on these investigations and the Audit

Committee is informed fully on these activities. The Committee is

satisfied that the Group’s overall framework to mitigate the risk of

fraud is appropriate and proportionate.

AUDIT COMMITTEE REPORT CONTINUED

Confidential reporting

Twice a year the Committee receives separate reports on matters raised through ‘Speak Up!’, the Group’s confidential reporting channel,

and any related investigations. The Code specifies that reports arising from such confidential reporting channels should either be

reviewed by the Board or an explanation given. All Board members attend that part of the Audit Committee meeting when ‘Speak Up!’

and any related investigations are reported on. This means that representatives from both Internal Audit and the external Auditor (who

attend the Audit Committee meetings but not Board meetings) can contribute their perspectives, which is a valuable part of the review

process. Internal Audit are also able to provide specialist support where such assurance is considered necessary.

Financial reporting

The Code requires the Board to confirm that the Annual Report presents a fair, balanced and understandable assessment of the Group’s

performance, business model and strategy. This is an important area of focus for the Committee. At the request of the Board, the

Committee undertook procedures to advise the Board on this. Committee members gave input at various stages during the planning and

drafting process, as well as taking the opportunity to review the Annual Report as a whole and discuss, prior to the June Audit Committee

meeting, any areas requiring additional clarity or better balance in the messaging.

Significant matters considered in relation to the financial statements

Issue Review and conclusion

Classifications

and

presentation of

adjusting items

The Committee considered the application of the Group’s accounting policies, principles and disclosures in the

financial statements that relate to critical accounting estimates and judgements, and challenged the underlying

assumptions applied in areas including provisions (such as litigation and restructuring) and adjusting items.

Continued scrutiny over the appropriateness and application of the adjusting items policy was applied during the

year. Such items include acquisition costs, integration costs, impairments and gains or losses on business disposals,

which are classified as adjusting items because of their nature, incidence or size. The Directors have considered the

ongoing regulator focus on Alternative Performance Measures but believe that identification and separate

classification of these items assists in enhancing the understanding of the trading and ﬁnancial results of the Group.

The Audit Committee has reviewed the appropriateness of the income and costs both included in and excluded from

adjusting items by challenging and seeking explanations from management. The Committee reviewed reports on

the items provided by management and the external Auditor. This item is a recurring agenda item in all Audit

Committee meetings.

The Audit Committee is satisfied that the resulting presentation and disclosure of all accounting policies and

principles is appropriate.

Taxation

Taxation remains a key area of focus for the Committee, due to the continued level of fiscal authority activity,

ongoing tax enquiries and disputes, and the Group’s M&A activity. The Group is exposed to differing tax regimes and

risks which affect both the carrying values of tax balances (including deferred tax) and the resultant income

statement charges. The Audit Committee reviewed the tax charge for the half year and the full year, including the

underlying tax charge, the appropriateness of and movement in tax provisions recognised and the risks associated

with them. The Audit Committee is satisfied that the amounts recognised and the disclosure provided

are appropriate.

ESG reporting

The ESG reporting environment has been an area of significant regulatory development recently, and this is set to continue and the pace

of change increase in the short to medium term. Guidance on reporting (particularly in the environmental area) has been issued in the

past by a number of bodies. Recent events, in particular at COP26 with the announcement of the creation of the ISSB (International

Sustainability Standards Board) which consolidated the VRF (Value Reporting Foundation) and the CDSB (Climate Disclosure

Standards Board) under the umbrella of the IFRS Foundation, to develop a single set of sustainability standards, will create further

focus on this area.

The Group continues to strengthen its ESG-related disclosures, reporting under the requirements of the TCFD (Task Force on Climate-

related Financial Disclosures) on pages 56 to 60 and in alignment with the GHG (Greenhouse Gas) protocol on page 33. Our internal ESG

reporting function has been integrated within the Group finance and governance functions. The Audit Committee has received briefings

during the year covering the evolving reporting, disclosures and standard setting body changes, recognising the increasing link between

ESG-related measures and the presentation of financial information and associated business commitments.

GOVERNANCE

Annual Report 2022 dssmith.com 85

During the year under review and following the conclusion of the

former provider’s engagement (Bureau Veritas), the Group

undertook a tender process for the provision of independent

assurance services, including assurance over the environmental

indicators presented in the Annual Report. The outcome of the

tender was the appointment of Deloitte LLP as the independent

assurance provider providing assurance for the financial year

2021/22. The Audit Committee is satisfied that the appointment

meets the requirements for maintaining the independence of the

financial audit provider.

Other activities of the Committee

Preparation for ‘UK SOx’

On 18 March 2021, the Department for Business, Energy and

Industrial Strategy (BEIS) released its consultation paper

‘Restoring trust in audit and corporate governance’ outlining its

proposals for strengthening the UK’s framework for major

companies and the way that they are audited.

The reforms in the BEIS consultation paper address the findings of

the previous Kingman, CMA and Brydon reports and include

proposed new measures in relation to directors, auditors,

shareholders and the audit regulator. On 31 May 2022, the UK

Government published its response to the consultation, setting

out its plans for action which will be implemented through a

variety of mechanisms, including audit development and work by

the professional bodies, primary and secondary legislation, and

changes by the regulator. The response set out how and to what

extent the proposals in the consultation would be carried forward.

The measures include proposals for strengthening the UK’s

approach to internal controls over financial reporting, including

more disclosure and attestation requirements, so called ‘UK SOx’.

The May 2022 response envisages a strengthening of the Code in

this area as opposed to legislation.

The Group has a well-established internal financial controls

framework and has begun addressing these provisional guidelines

through a set of ‘no regret’ actions, as a further evolution of this

framework. It has also engaged external advisers to support the

development of a roadmap that will enable the Group to be

prepared to meet the final requirements. The Committee is

satisfied that, following the May 2022 response, management’s

proposal to continue its ‘no regret’ approach is appropriate.

The ongoing developments in this area will continue to be

reviewed by the Audit Committee.

Financial Reporting Council (FRC) correspondence

As part of their thematic review of IAS 37,

Provisions, Contingent

Liabilities and Contingent Assets

, the FRC reviewed the Group’s

2021 Annual Report. No questions or queries arose from this

review, although some disclosure improvements were

recommended which the Group has responded to in the current

year’s financial statements.

Committee’s continued development

In order to help the Committee continue to meet its

responsibilities, Committee meetings include regular corporate

governance updates and briefings from external advisers or from

members of senior management.

The Committee’s effectiveness was reviewed as part of the wider

Board’s external evaluation and review of effectiveness, as

described on page 75.

External Auditor

Effectiveness

In addition to the external Auditor confirming their independence

and objectivity, the Audit Committee also evaluates and monitors

their effectiveness through a review of the qualifications,

expertise and resources of the engagement team.

Our key responsibilities

As a Committee we have delegated authority from the Board to

focus on the following key responsibilities:

• Ensuring the integrity of financial reporting and associated

external announcements

• Reviewing and challenging the application of the

accounting policies and principles reflected in the Group’s

financial statements

• Assessing the basis on which the viability statement and

going concern statement are being made and challenging the

assumptions underlying them

• Managing the appointment, independence, effectiveness

and remuneration of the Group’s external Auditor, including

the policy on the supply of non-audit services

• Initiating and conducting the audit tender process for the

external audit

• Monitoring the adequacy and effectiveness of the internal

control environment

• Challenging the plans and effectiveness of the Internal

Audit function, which is independent from the Group’s

external Auditor

• Overseeing the Group’s risk management processes and

performance

• Reviewing the effectiveness of established fraud prevention

arrangements and reports made through the confidential

‘Speak Up!’ policy process

• Assessing the Group’s compliance with the 2018 UK

Corporate Governance Code (Code)

• Providing advice to the Board on whether the Annual Report

and financial statements, when taken as a whole, are fair,

balanced and understandable and provide all the necessary

information for shareholders to assess the Group’s position,

performance, business model and strategy.

AUDIT COMMITTEE REPORT CONTINUED

This is conducted through direct assessment and recurring

activities. As part of the current assessment of effectiveness, the

Audit Committee has taken into consideration the guidance issued

by the FRC. Based on evidence from management, the external

Auditor and, as appropriate, external sources together with its

own experience, the Audit Committee assessed the mindset and

culture, skills, character and knowledge, quality control and

judgement of the Auditor. The assessment considered the degree

of challenge to management, the issues identified and the quality

of explanations. The Audit Committee recognises that the quality

of an audit is paramount. The Committee is satisfied with the

effectiveness of the Auditor and that the current year audit was

one of high quality.

Separate from the meetings of the Audit Committee, the Chair

of the Committee meets regularly with the external Auditor’s

lead engagement partner, as do other individual members of

the Committee.

Independence and objectivity

In order to ensure the independence and objectivity of the

external Auditor, the Audit Committee maintains and regularly

reviews the Auditor Independence policy which covers non-audit

services which may be provided by the external Auditor, and

permitted fees.

The Group has a policy on the supply of non-audit services by the

external Auditor, which was most recently updated in April 2020.

The policy prohibits certain categories of work in accordance with

guidance such as the FRC Ethical Standard. It specifies that the

Group should not employ the external Auditor to provide non-audit

services where either the nature of the work or the extent of such

services might impair their independence or objectivity. The

external Auditor is permitted to undertake some non-audit

services under the Group’s policy, providing it has the skill,

competence, integrity and appropriate independence safeguards

in place to carry out the work in the best interests of the Group, for

example, permissible reporting accountant work associated with

significant acquisitions. All proposed permitted non-audit services

are subject to the prior approval of the Audit Committee.

Non-audit services and fees are reported to the Audit Committee

twice each year. During 2021/22, total non-audit fees paid to the

external Auditor of £0.5 million were 10 per cent of the annual

Group audit fee (2020/21: £0.4 million: 9 per cent): see note 3 to

the consolidated financial statements. In addition, £7.7 million was

paid to other accounting firms for non-audit work, including

£0.4 million for specific work projects allocated by the Internal

Audit team.

The EU Audit Regulation (Retained Legislation) and the FRC’s

revised Ethical Standard mean that, with effect from the Group’s

2020/21 year, a cap on the ratio of non-audit fees to audit fees

paid to the external Auditor of 70 per cent applies, which places a

further constraint on the non-audit services permitted.

Annually, the Audit Committee receives written confirmation from

the external Auditor of the following:

• Whether they have identified any relationships that might have

a bearing on their independence

• Whether they consider themselves independent within the

meaning of the UK regulatory and professional requirements

• The continued suitability of their quality control processes and

ethical standards.

The external Auditor also confirms that no non-audit services

prohibited by the FRC’s Revised Ethical Standard were provided to

the Group or parent Company.

On the basis of the Committee’s own review, approval

requirements in the non-audit services policy, and the external

Auditor’s confirmations, the Audit Committee is satisfied with the

external Auditor’s effectiveness and independence.

External Audit fee, appointment, tender and transition

process

External audit fee negotiations are approved by the Audit

Committee each year. There are no contractual restrictions on the

Group in regard to the current external Auditor’s appointment.

Deloitte LLP were first appointed as external Auditor to the Group

in 2006. Nicola Mitchell became the lead audit partner for the

2018/19 year-end.

Pursuant to the terms of the Statutory Audit Services for Large

Companies Market Investigation (Mandatory Use of Competitive

Tender Process and Audit Committee Responsibilities) Order 2014

(Competition & Markets Authority Order), which is now in force,

the Audit Committee is solely responsible for negotiating and

agreeing the external Auditor’s fee, the scope of the statutory

audit and initiating and supervising any competitive tender

process for the external audit. When a tender is undertaken, the

Committee is responsible for making recommendations to the

Board as to the external Auditor’s appointment. The Committee’s

policy is that the role of external Auditor will be put out to tender

at least every ten years in line with the applicable rules. At its June

2021 meeting the Committee recommended to the Board that

Ernst & Young LLP (EY) be appointed external Auditor with effect

from the 2022/23 audit. The Group has commenced engagement

and planning actions through its audit transition project team and

EY audit leads, with an initial focus on maintaining independence

in advance of the appointment date.

The Committee has been overseeing this proposed external

Auditor transition process. To assist in this oversight, the

Committee has been provided with reports by EY on their

transition process, validated EY’s independence, and

ensured shadowing and meeting attendance has taken

place when appropriate.

The Audit Committee confirms that the Company has complied

with the provisions of the Competition & Markets Authority Order

with regards to external audit tendering and audit responsibilities

throughout its financial year ended 30 April 2022.

GOVERNANCE

Annual Report 2022 dssmith.com 87

“The Group’s strong financial performance is underpinned by its

continuing progress on ESG and this is reflected in the structure

of our incentives.”

Celia Baxter,

Chair of Remuneration Committee

Dear shareholders

Introduction

On behalf of the Board, I am pleased to present the Directors’

Remuneration Report for the year ended 30 April 2022, which

sets out our implementation of the remuneration policy that was

approved by shareholders at the annual general meeting (AGM)

in September 2020.

As usual, my letter on pages 88 to 90, the summary on pages 91

and 92 and the Annual Report on Remuneration on pages 98 to

111 will also be presented for approval by an advisory

vote at our AGM in September 2022.

Our purpose as a Remuneration Committee is to develop a reward

package that supports our vision and strategy as a Group and to

ensure the rewards are performance-based and encourage

long-term shareholder value creation. Our Purpose as a Group is

‘Redefining Packaging for a Changing World’. Examples of how we

put our purpose-led approach into practice as a Group are set out

on pages 8 to 11 of this year’s Annual Report.

Our achievements and variable pay outcome

Our Purpose informs the Group’s approach to strategy, which in

turn has led, not only to the financial and non-financial results

highlighted on the inside front cover, but also to even further

improved scores among the environmental, social and governance

(ESG) ratings published by MSCI (AA) and EcoVadis (Platinum) as

well as those issued by Sustainalytics, the Dow Jones Sustainability

Index (DJSI) and CDP.

You can read about the achievements of our business during

2021/22 in more detail in the Strategic Report starting on page 1.

Highlights for the 2021/22 financial year include:

• Adjusted operating profit of £616 million

• 6 per cent reduction in accident frequency rate

• Commitment to a 1.5°C science-based target

• Achievement of ‘A List’ for CDP Water Security

In respect of the variable pay elements linked to the 2021/22

financial year, the financial targets for the performance share plan

(PSP) award made in 2019 were set in 2019 in the context of the

expectation of a stable economy and were not adjusted to reflect

the negative impact of the pandemic on the 2019/20, 2020/21

and 2021/22 results. Unfortunately, that PSP award made in 2019,

which had performance conditions based on the three year

average earnings per share (EPS) and return on average capital

employed (ROACE) performance and the three year cumulative

relative total shareholder return (TSR) performance between

2019/20 and 2021/22 , did not meet the threshold targets for the

two financial measures and fell below median for the relative

TSR measure.

The Group’s performance against the bonus measures of adjusted

earnings before tax and amortisation (EBTA) and free cash flow

represents uplifts of 37 per cent and 14 per cent respectively

year-on-year. The formulaic outcome of the bonus was 100 per

cent of the maximum bonus opportunity. The details of the

2021/22 annual bonus performance are set out on pages 100 and

101. In considering whether to apply discretion to override the

annual bonus formulaic outcome, an ESG underpin is used. The

Committee took into account three ESG factors: commitment to

using longer-term science-based targets for carbon reduction in

the business; maintenance of high health and safety standards;

and continued work with our communities. The Committee

reviewed the evidence of performance against these factors (see

summary on page 101) and concluded this was satisfactory and

that no discretion needed to be applied.

The Committee has

therefore decided that the Executive Directors will receive 100 per

cent of the maximum annual bonus opportunity.

When deciding the level of these variable pay elements, the

Committee also considered the experience of a wide range of the

Group’s key stakeholders during the 2021/22 financial year.

In the 2021/22 financial year all regions in which the Group

operates continued to be affected by the Covid-19 pandemic, but

all our sites continued to remain operational as essential suppliers

to critical supply chains. We continued to deliver to our customers

and to develop new and improved ways of meeting their needs.

For example, we have further developed, ePack, our new web-

REMUNERATION COMMITTEE REPORT

Remuneration Committee Report

based business, and we have opened our first virtual innovation

hub in Lisbon, supporting our customers with a virtual/digital

customer innovation collaboration option. Most importantly for our

customers, and for their customers, the impact of the steps we

took during 2020/21 mean that production has been maintained in

2021/22, enabling volume growth and supporting our agile

responsiveness to changes in customers’ needs. The proportion

of orders that are delivered on time, in full has been 94 per cent

across our businesses, despite the circumstances of the past

12 months.

Group-wide we have kept a strong focus on employee health and

wellbeing. The Group’s connection with the local communities

where our sites are based has continued to strengthen, supported

by increased engagement in community programmes.

Our commitment to carbon reduction has continued, with

validation by the Science Based Targets initiative of our target to

reduce Scope 1, 2 and 3 emissions 46 per cent by 2030, when

compared to 2019 levels. This builds on our prior commitment to

reach net zero greenhouse gas emissions by 2050, as a member of

the UN’s Race to Zero initiative. More information about the

targets we have set as part of our Now and Next Sustainability

Strategy are set out on page 7 and pages 30 to 33 and in our latest

Sustainability Report. Each of these targets helps differentiate DS

Smith not only as a leader in sustainable fibre-based packaging,

but also as a circular economy leader. All these factors drive the

Group’s ongoing profitability and cash flow, impacting the

performance measures of our incentive plans. The underlying

importance of these factors continues to be emphasised by the

use of a variety of these ESG considerations as an underpin to the

annual bonus.

In respect of the 2021/22 financial year, an interim dividend has

been paid and a final dividend has been recommended, subject to

the approval of shareholders at the forthcoming AGM.

Set in the context of the wider experience of our key stakeholders,

the Committee concluded that the total variable pay outcome

(both the annual bonus and PSP) in respect of 2021/22

appropriately reflected the Company’s performance in the period

and was commensurate with the broader stakeholder experience

in the period. It was therefore not felt necessary to apply any

discretion to amend the outcome. The Committee also concluded

that the remuneration policy has operated as intended, both in

terms of appropriately incentivising corporate performance and in

respect of quantum.

Our year under review

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

• Considering the impact of Covid-19 on the business when

deciding on the appropriate approach for bonus and PSP: for

determining vesting levels and the grant size and selecting

performance measures and targets. Making sure that such

decisions take into account the evolving economic context,

including inflationary pressures, that impacts the wider

workforce and the expectations of other stakeholders, such as

our investors, suppliers and customers. Ensuring at the same

time that an appropriate balance is achieved with the business

need for meaningful incentivisation for management and

recognition for leading through the protracted challenges of the

ongoing turbulent times

• Reviewing the salaries of the Group Chief Executive and Group

Finance Director and the next layer of management

• Reviewing further the timeline for alignment of the Executive

Directors’ pension contributions with that available to the

workforce in the UK and agreeing that they would be aligned by

31 December 2022

• Setting the targets for the annual bonus and PSP awards made

in 2021/22 and the performance measures and weighting for

the 2022/23 awards. The Committee considered whether to

include specific ESG measures in the bonus and PSP awards,

instead of the current ESG underpin in the bonus. Sustainability

is one of the key values of DS Smith and our progress and our

leading position in promoting the circular economy have been

achieved without the need to directly incentivise ESG.

Accordingly, the Committee decided to maintain the current

ESG underpin to the annual bonus, but will continue to review

this matter.

Our conversation with our workforce

The diagram on page 93 sets out the approach the Group is taking

to collate ideas and hear any concerns from the workforce around

reward. One of the consequences of the continuing restrictions on

travel due to Covid-19 has been a further delay to our planned

expansion of this programme of engagement at site level. While

there are many things that can be done through the medium of

electronic meetings, focus sessions at site level are most valuable

and insightful when held in person.

A European Works Council (EWC) representative joined a

Committee meeting this year to support and inform discussions

about Sharesave and employee wellbeing programmes and to

brief the Committee about some of the topics discussed at recent

meetings of the EWC.

In addition, I once again attended meetings of the EWC Executive

to engage and consult with them on executive remuneration and

wider employee remuneration issues. We continued in our

meetings in March and May 2022 the ongoing discussion on

Sharesave, covering the take-up of the 2022 grant, and received

feedback on the communications programme prior to launch and

on how to encourage greater take-up of Sharesave across the

Group. Further topics discussed were the effectiveness and

coverage of employee wellbeing programmes (in general and in

light of the Covid-19 pandemic) and in support of DS Smith’s

sustainability objectives, the current provision of sustainable

benefits. Representatives were also keen to share their views on

other aspects of the remuneration of the wider workforce,

including the provision of healthcare and pension provision and

education and they suggested the Group raise the profile and

broaden the scope of the current health and wellbeing benefits.

These meetings are a regular feature of the annual timetable as

both I and the EWC Executive value the opportunity they provide

to understand more about matters relating to the Executive

GOVERNANCE

Annual Report 2022 dssmith.com 89

Directors’ remuneration and its alignment with that of the

wider workforce.

Looking forward

As well as the regular annual cycle of matters that the Committee

schedules for consideration, we are planning over the next 12

months to:

• Undertake the triennial review of our remuneration policy

and consult our shareholders on any material changes proposed

• Regularly review any changes to remuneration practices to

ensure that employees continue to be appropriately rewarded in

line with the performance of the business

• Consider further steps to consult employees more widely

on remuneration issues, as this becomes more achievable

post Covid.

Due to the current geopolitical situation, target setting for

incentive plans continues to be challenging. In addition the

Committee continues to monitor the fluctuations in share price,

both since the 2021 PSP grant and in relation to the proposed

2022 PSP grant. The Committee recognises that it may need to

exercise discretion on any vesting of the respective plans in

forthcoming years.

The Committee has been impressed with the progress in relation

to sustainability matters that DS Smith continues to make. This has

been driven by the Group’s values, not by having ESG targets in

either the annual bonus or the long-term incentive plans (although

an ESG underpin is used to determine the final outcome of the

annual bonus). The Committee will continue to monitor further

developments in this area and will take those into account in

considering whether a different approach to using ESG in

remuneration might be appropriate in the future.

Our conversation with our shareholders

Shareholder views, whether directly or indirectly expressed,

together with relevant guidance and emerging trends, are

carefully considered when reviewing reward design and

outcomes. At the AGM in September 2022, shareholders will be

asked to vote on the Remuneration Report. I hope that the

Committee will have your support.

As Committee Chair, I continue to be available to engage with

shareholders, as they so wish, on remuneration matters.

Celia Baxter

Chair of Remuneration Committee

20 June 2022

REMUNERATION COMMITTEE REPORT CONTINUED

Salary

Salary increases with effect from 1 August

2022 are set out below and on page 99.

Remuneration at a glance

Single total figure of remuneration for 2021/22 (£’000s) (Audited)

Vesting as a % of maximum 2021/22 annual bonus

2019/20 PSP vesting in

2022/23

Miles Roberts 100% 0%

Adrian Marsh 100% 0%

Total single remuneration figure

£’000

Increase

(decrease)

2021/22 2020/21

Miles Roberts

2,580

2,525 2%

Adrian Marsh

1,347

1,319 2%

For more information on how this is calculated see page 98.

2022/23 application

The table below sets out a summary of how the remuneration policy for 2020-23 will apply during 2022/23.

Remuneration element Application of the remuneration policy

Base salary

• Salaries will be increased by 4% (in line with the average increase of 4% for the UK workforce as a whole) as

follows:

• Group Chief Executive £846,600; and

• Group Finance Director £532,000.

Annual bonus

• No changes to maximum award levels of:

• Group Chief Executive 200%; and

• Group Finance Director 150%.

• Bonus paid half in cash and half in deferred shares, under the deferred share bonus plan (DSBP), with the shares

vesting after three years.

• The performance measures for 2022/23 remain as adjusted EBTA and free cash flow with equal weighting.

(Details of the ESG underpin are set out on page 102.)

Performance

share plan (PSP)

• No change to maximum award level for Group Chief Executive of 225% and for Group Finance Director of 200%.

• The performance measures for 2022/23 will remain as adjusted EPS, adjusted ROACE and relative TSR with

equal weighting.

• Any shares that vest under this award must be retained for a further two years before they can be sold and they

are also subject to a post-employment holding condition.

Pension

• Contribution or cash alternative rate for Group Chief Executive is 15% and for Group Finance Director is 10%,

until 31 December 2022, when it will be aligned with that available to the UK workforce.

Shareholding

guidelines

• Shareholding target remains at 225% of salary for the Group Chief Executive and at 200% of salary for the

Group Finance Director.

• Actual holding (valued at 30 April 2022 share price) was 912% and 243% respectively.

Any shares that vest under the PSP awards granted in 2020/21 or subsequent years will be held in a nominee

arrangement for the appropriate period, because they are also subject to a post-employment holding condition (in

addition to the two-year post-vesting holding condition).

Pension

The contribution rates for incumbent

Executive Directors have been reduced.

Miles Roberts receives an annual pension

allowance which was reduced from 30% of

base salary to 20% with effect from 1

August 2020 and further reduced to 15%

with effect from 1 August 2021. Adrian

Marsh receives an annual pension

allowance which was reduced from 20%

of base salary to 15% with effect from 1

August 2020 and further reduced to 10%

with effect from 1 August 2021. The

pension allowance of both Miles Roberts

and Adrian Marsh will be reduced further so

that their pension benefit will be aligned

with that available to the workforce in the

UK (being the country where they are

based for employment purposes) with

effect from 31 December 2022.

Miles Roberts

Adrian Marsh

£962 £1,618

Fixed pay (salary,

benefits and pension)

Annual bonus

£[xx]

£584 £763 £[xx]

GOVERNANCE

Annual Report 2022 dssmith.com 91

Miles Roberts

Adrian Marsh

£961 £1,677

Fixed pay: 18%

Bonus: 31%

PSP: 51%

£5,385£2,747

£961 £1,677

Fixed pay: 22%

Bonus: 37%

PSP: 41%

£4,470£1,832

£961 £839

Bonus: 37%

PSP: 20%

£2,258

£458

Fixed pay: 100%

£961

£591

£790

Fixed pay: 20%

Bonus: 27%

PSP: 53%

£2,916

£1,535

£591

£790

Fixed pay: 25% Bonus: 33%

PSP: 42%

£2,404£1,023

Fixed pay: 100%

£591

Fixed pay: 43%

£591 £395

Bonus: 32%

PSP: 20%

£1,242

£256

Fixed pay: 48%

Key attributes to consider in reviewing remuneration matters

Under the 2018 Corporate Governance

Code (the Code) the Remuneration

Committee is asked to describe with

examples how it has considered six

specific factors.

In 2021 the Committee reviewed the

reward principles (set out on page 93)

These principles are periodically reviewed

by management and considered by the

Remuneration Committee. The Committee

noted that these principles are clear and

expressed simply. Under our reward

principles incentive levels are to be

proportionate and designed in a way

to minimise any behavioural risks.

All the criteria for each element of an

individual’s remuneration are explained,

so that each individual has a clear and

predictable line of sight as to what

actions will impact their remuneration

outcomes, so that all remuneration is

appropriately earned for genuine

business performance aligned to

Company strategy.

The decisions made in relation to

remuneration matters are taken in

alignment with these over-arching

reward principles that apply to all

executive management.

Later in 2022/23 the Committee will begin

its review of the remuneration policy to be

put before the 2023 AGM and will, as it did

in its review of the current remuneration

policy, take the importance of all six factors

into account in that review.

Minimum (fixed remuneration only, i.e. latest known salary, benefits and pension) £’000s

Target (fixed remuneration plus half of maximum annual bonus opportunity plus 25% vesting at threshold of performance

shares) £’000s

Maximum (fixed remuneration plus maximum annual bonus opportunity plus 100% vesting of performance shares) and share price

appreciation of 50%: £’000s

Maximum (fixed remuneration plus maximum annual bonus opportunity plus 100% vesting of performance shares) £’000s

The remuneration sections of this report explain how we have applied aspects of principles P, Q and R in section 5 (remuneration)

of the Code and how we have put the provisions of that section into practice, as well as how we have complied with the Companies

Act 2006 and other regulatory requirements in relation to remuneration matters. After the introductory letter from the Chair of

the Remuneration Committee, we summarise the remuneration of the Executive Directors in our ‘at a glance’ section. More

detailed sections follow about how the implementation of the remuneration policy has operated in practice in 2021/22, the year

under review, and how the remuneration policy will operate in 2022/23. Finally there are some other required disclosures.

REMUNERATION AT A GLANCE CONTINUED

Illustration of the application in 2022/23 of the remuneration policy

The balance between fixed and variable ‘at risk’ elements of remuneration changes with performance. Our remuneration policy results

in a significant proportion of remuneration received by Executive Directors being dependent on performance. The total remuneration of

the Executive Directors for maximum, target and minimum performance in 2022/23 is presented in the charts below. (The basis of the

calculation of the share price appreciation is that the share price embedded in the calculation for the PSP awards in the maximum bar

chart is assumed to increase by 50% across the performance period.) These figures are indicative as future share prices and future

dividends are not known at present and, within fixed pay, pension contributions have been prorated pre and post 31 December 2022

using the existing executive pension contribution and the current UK workforce pension contribution rates respectively.

GOVERNANCE

Annual Report 2022 dssmith.com 93

Include a reward session at the

regular meetings with the EWC

Executive led by the Group HR

Director and the Group Head

of Reward

Invite EWC representative to speak

regularly atRemuneration

Committeemeetings

Sessions led by GroupReward

Particular focus on regions not

covered by the EWC

Information

flow

Any reward-related

feedback also shared

with Remuneration

Committee

Use of existing

European Works

Council (EWC)

structure

Run reward

focus sessions

at site level

DS Smith reward principles

As part of good practice for any reputable company we apply the following baseline principles when setting reward across

the organisation:

• Meets legal and regulatory requirements

• Simple and clear to understand

• Affordable and sustainable

• Is competitive in the market on a total reward basis to enable DS Smith to attract and retain the right level of talent.

However, to differentiate our employee value proposition and ensure that our approach to reward aligns to our culture, we have

developed the following DS Smith reward principles:

• We support a culture of meritocracy where our people are encouraged to reach their potential and are clear on what they need

to do to succeed. For salaried employees, reward should be differentiated using our Group salary and incentive ranges for entry,

established and high performers. Where pay is determined through collective bargaining and there is less scope to differentiate

by individual, the highest performers should be rewarded through development, promotion and other recognition opportunities.

• We strive to have consistent policies and practices at a local level and transparency in our benefits offering and policies.

• Incentives are designed to reward collective rather than individual effort, to support our one DS Smith culture. For senior

managers, this is Group financial performance but for middle managers and frontline employees, performance measures can be

the key value drivers that the individuals are able to influence directly such as cost, quality and service.

• All employees should have the opportunity to share in the success of the Group.

• Share ownership is fundamental at senior levels and desirable across the Group.

• The Group respects the need for employees to make their own choices around what they value, although there are

certain reward components linked to health and wellbeing where the Group may decide it is appropriate to set a minimum

Group standard.

• Our pension offering should be competitive with the local market where this is a benefit valued by employees.

• When determining rewards, demonstration of an individual’s behaviours in line with the Group’s values (be caring,

be challenging, be trusted, be responsive and be tenacious) are considered alongside the results achieved.

• In managed exits people should be treated fairly, in line with the Group’s values and with dignity, but failure should

not be rewarded.

• Safeguards are applied to ensure that incentive levels are proportionate, appropriately earned for genuine business

performance aligned to Company strategy and designed in a way to minimise any behavioural risks.

Employee voice in the boardroom

Information flow

Other sources

of feedback on

the total employee

experience

Board

Remuneration

Committee

REMUNERATION POLICY

Set out below are the key elements of our Directors’ remuneration policy applicable from 8 September 2020 when the policy was

approved by our shareholders. The full policy can be found in the Annual Report 2020 on our website at https://www.dssmith.com/

investors/annual-reports/archive. Since the policy was approved at the 2020 AGM, the Committee has in 2022 undertaken a further

review of the timeline for alignment of the Executive Directors’ pension contributions with that available to the workforce in the UK

(being the country where they are based for employment purposes) and agreed that the maximum pension contribution for the

Executive Directors will be aligned with that available to the workforce in the UK by 31 December 2022.

Element, purpose and link

tostrategy Operation and performance metrics Maximum opportunity

Basic salary

To help recruit and retain

key senior executives.

To provide a competitive

salary relative to

comparable companies, in

terms of size and

complexity.

Normally reviewed by the Committee annually and fixed for the

12 months commencing 1 August.

The Committee takes into account:

• role, competence and performance;

• average change in broader workforce salary; and

• total organisational salary budgets.

When external benchmarking is used, the comparator groups are

chosen having regard to:

• size: market capitalisation, turnover, profits and the number

of employees;

• diversity and complexity of the business;

• geographical spread of the business; and

• domicile of the Executive Director.

Salaries will normally be increased in line with

increases for the workforce in general, unless

there has been an increase in the scope,

responsibility or complexity of the role, when

increases may be higher. Phased higher

increases may also be awarded to new Executive

Directors who were hired at a discount to the

market level to bring salary to the desired

mid-market positioning, subject to individual

performance.

The aim is to position salaries around the

mid-market level, although higher salaries may

be paid, if necessary, in cases of external

recruitment or retention.

Annual bonus

To incentivise executives to

achieve or exceed specific,

predetermined objectives

during a one-year period.

To reward ongoing delivery

and contribution to

strategic initiatives.

Deferred proportion of

bonus, awarded in shares,

provides a retention

element and additional

alignment of interests with

shareholders.

Targets are set annually. The performance measures, targets

and weightings may vary from year to year in order to align with

the Company’s strategy and goals during the year to which the

bonus relates.

Performance measures can include some or all of the following:

financial measures, strategic measures and ESG measures.

Bonus payouts are determined by the Committee after the year

end, based on performance against predetermined objectives, at

least the majority of which will be financial.

Up to half of the bonus is paid in cash and the balance is deferred

into shares.

The deferred bonus shares vest after three years. Dividend

equivalents arising over the period between the grant date and

the vesting date are paid in cash or shares in respect of the

shares which vest.

The annual bonus plans are not contractual and bonuses under

the plans are not eligible for inclusion in the calculation of the

participating executives’ pension plan arrangements.

Malus and clawback provisions apply to the annual bonus plan

and the deferred bonus shares so that individuals are liable to

repay/forfeit some or all of their bonus if there is a material

misstatement of results, error in calculation, gross misconduct,

payments based on erroneous or misleading data, significant

reputational damage or corporate failure. The Committee will act

reasonably in the application of malus and clawback.

Maximum bonus potential of 200% of base

salary, with target bonus being one half of

the maximum.

Bonus starts to be earned at the threshold level

(below which 0% is payable).

Current maximum potential for each Executive

Director is set out in the Annual Report on

Remuneration.

Remuneration policy

(approved in 2020)

GOVERNANCE

Annual Report 2022 dssmith.com 95

Element, purpose and link

tostrategy Operation and performance metrics Maximum opportunity

Performance

share plan (PSP)

To incentivise Executive

Directors and other senior

executives to achieve

returns for shareholders

over a longer time frame.

To help retain executives

and align their interests

with shareholders through

building a shareholding in

the Company.

Awards of nil-cost options are made annually with vesting

dependent on the achievement of performance conditions over

the three subsequent years.

Awards will vest, subject to performance, on the third

anniversary of grant and will be subject to an additional two-year

holding period post-vesting, during which time awarded shares

may not be sold (other than for tax purposes).

The Committee reviews the quantum of awards annually to

ensure that they are in line with market levels and appropriate,

given the performance of the individual and the Company.

Performance measures can include some or all of the following:

financial measures, strategic measures, ESG measures and

relative TSR.

Dividend equivalents arising over the period between the grant

date and the vesting date are paid in cash or shares in respect of

the shares which vest.

Malus and clawback provisions apply to the PSP so that

individuals are liable to repay/forfeit some or all of their shares if

there is a material misstatement of results, error in calculation,

gross misconduct, vesting based on erroneous or misleading

data, significant reputational damage or corporate failure. The

Committee will act reasonably in the application of malus

and clawback.

The maximum annual award under the PSP that

may be granted to an individual in any financial

year is 225% of salary in normal circumstances

and 400% of salary in exceptional

circumstances, which is limited to buy-out

awards under recruitment.

Actual award levels to Executive Directors are set

out in the Annual Report on Remuneration.

25% of the relevant part of the award will vest

for achieving threshold performance (which for a

relative TSR performance measure would be

median performance), increasing to full vesting

for the achievement of maximum performance.

Share ownership

guidelines

To further align the

interests of executives with

those of shareholders.

During employment

Executive Directors are expected to build and maintain a

shareholding in the Company’s shares as a multiple of their base

salary within five years of appointment as an Executive Director

(Group Chief Executive 225%, Group Finance Director 175%

1. Since the policy was approved at the 2020 AGM the Committee

has in 2021 decided to increase the expected shareholding

requirement of the Group Finance Director from 175% to 200%.

To achieve this, Executive Directors are expected to retain at

least 50% of shares (net of tax) which vest under the Company’s

share plans until the share ownership guidelines are met. Nil cost

options which have vested but that the Executive Director has

yet to exercise and unvested nil cost options awarded under the

DSBP (if they are only subject to a time-based condition) are

considered to count towards the shareholding on a notional

post-tax basis.

Non-Executive Directors are expected to build and maintain a

shareholding that is equivalent to 50% of their annual fee from

the Company within two years of their date of appointment.

Post-employment

In respect of share plan awards granted from 2020 onwards,

Executive Directors will be required to retain, for two years after

leaving the Company, a holding of shares at a level equal to the

lower of the shareholding requirement they were subject to

during employment and their actual shareholding on departure

(excluding shares purchased with own funds and any shares

from share plan awards made before 2020).

Not applicable

REMUNERATION POLICY CONTINUED

Element, purpose and link

tostrategy Operation and performance metrics Maximum opportunity

All employee share plan

Encourages long-term

shareholding in the

Company.

Executive Directors have the opportunity to participate in the UK or

international sharesave plans on the same terms as other eligible

employees (which is currently an opportunity to save up to £250, or local

currency equivalent, per month). There are no performance conditions

applicable to awards.

Up to £500 per month (or local currency

equivalent).

Pension

To remain competitive in

the marketplace and

provide income in

retirement.

Executive Directors can elect to:

• participate in the Group’s registered defined contribution plan (DC

Plan); or

• receive a salary supplement; or

• a combination of the above.

Maximum: 20% (for Group Chief Executive)

and 15% (for Group Finance Director) of base

salary from 1 August 2020 (combined cash

supplement and DC Plan contribution).

On 1 August 2021 the maximum pension

contribution was reduced to 15% (for Group

Chief Executive) and 10% (for Group Finance

Director) of base salary.

A further review of the level of pension

contribution will take place in 2022

1. Since the policy was approved at the

2020 AGM, the Committee has in 2022

undertaken a further review of the timeline

for alignment of the Executive Directors’

pension contributions with that available

to the workforce in the UK (being the

country where they are based for

employment purposes) and agreed that

the maximum pension contribution for

the Executive Directors will be aligned

with that available to the workforce in the

UK by 31 December 2022.

Future appointments to the Board or any

Board member changing roles would be given

a pension benefit aligned with that available

to the workforce in the country where they

are based for employment purposes.

Benefits

To help retain employees

and remain competitive in

the marketplace.

Directors, along with other UK senior executives, receive a car allowance

or company car equivalent, income protection insurance, four times life

cover, family medical insurance and subsidised gym membership.

Additional benefits (including a relocation allowance) may be provided

from time to time, where they are in line with market practice.

Any reasonable business related expenses may be reimbursed (including

tax thereon, if deemed to be a taxable benefit).

Benefit levels may be increased in line with

market levels to ensure they remain

competitive and valued by the recipient.

However, as the cost of the provision of

benefits can vary without any change in the

level of provisions, no maximum is

predetermined.

Non-Executive

Directors and Chair

Attract and retain high

performing individuals.

Reviewed annually by the Board (after recommendation by the

Committee in respect of the Chair).

Fee increases, if applicable, are normally effective from

1 August. The Board and, where appropriate, the Committee, considers

pay data at comparable companies of similar scale.

The Senior Independent Director and the Chairs of the Audit and

Remuneration Committees receive additional fees.

No eligibility for participation in bonuses, retirement plans or share plans

but limited benefits may be delivered in relation to the permanency of

their duties as a Director (e.g. hospitality, provision of a mobile phone,

tablet/laptop and travel-related expenses). Tax may be reimbursed if

these benefits are deemed to be a taxable benefit.

If there is a temporary yet material increase in the time commitments for

Non-Executive Directors, the Board may pay extra fees on a pro-rata

basis to recognise the additional workload.

No prescribed maximum annual increase.

Details of current fees are set out in the

annual report on remuneration.

Aggregate annual fees limited to £1,000,000

by Articles of Association.

GOVERNANCE

Annual Report 2022 dssmith.com 97

Discretions and judgements

The Committee will operate the annual bonus plan and long-term

plans according to the rules of each respective plan, their

respective ancillary documents and the UK Financial Conduct

Authority’s Listing Rules, which, consistent with market practice,

include discretion in a number of respects in relation to the

operation of each plan. Discretions include:

• Who participates in the plan

• Determining the timing of grants of awards and/or payments

• Determining the quantum of an award and/or payment

• Determining the extent of vesting

• How to deal with a change of control or restructuring

of the Group

• Whether an Executive Director or a senior manager is a good/

bad leaver for incentive plan purposes and whether the

proportion of awards that vest do so at the time of leaving or at

the normal vesting date(s)

• How and whether an award may be adjusted in certain

circumstances (e.g. for a rights issue, a corporate restructuring

or for special dividends)

• What the weighting, measures and targets should be for the

annual bonus plan and PSP awards from year to year

• The Committee also retains the ability, within the policy, if

events occur that cause it to determine that the conditions set

in relation to an annual bonus plan or a granted PSP award are

unable to fulfil their original intended purpose, to adjust targets

and/or set different measures or weightings for the applicable

annual bonus plan and PSP awards.

The Committee can use its judgement to make adjustments to

published outturns for significant events or changes in the

Company’s asset base that were not envisaged when the targets

were originally set or for changes to accounting standards,

to ensure that the performance conditions achieve their

original purpose.

The Committee also has the discretion to reduce or apply other

restrictions to an award if, after taking into account all

circumstances known to the Committee, it determines that the

amount which a participant would otherwise receive pursuant to

an incentive award in accordance with its terms would result in the

participant receiving an amount which the Committee considers

cannot be justified or which the Committee considers to be an

unfair or undeserved benefit to the participant.

The Committee has the discretion to override formulaic outcomes

to the bonus and the PSP or DSBP in order to ensure that outcomes

reflect true underlying business performance or to reduce awards

if the business has suffered an exceptional negative event in order

to ensure that outcomes reflect overall corporate performance.

The Committee can use its discretion to waive the post-

employment shareholding requirement in the event of ill health

or death.

Any historic share awards (other than those granted in 2020) that

were granted before 8 September 2020 (when the revised policy

came into force) and still remain outstanding will remain eligible to

vest or be exercised or sold based on their original award terms

and the remuneration policy that was in force when those awards

were granted.

In summary: key objectives

ofour remuneration policy

The purpose of our remuneration policy is to deliver a

remuneration package that:

• Attracts and retains high calibre Executive Directors and

senior managers in a challenging and competitive

business environment

• Reduces complexity, delivering an appropriate balance

between fixed and variable pay for each Executive

Director and the senior management team

• Encourages long-term performance by setting

challenging targets linked to sustainable growth

• Is strongly aligned to the achievement of the Group’s

objectives and to the delivery of sustainable value to

shareholders and other key stakeholders

• Seeks to avoid creating excessive risks in the

achievement of performance targets

• Is consistent with the Group’s Purpose and values

• Is commensurate with pay conditions across the Group

• Is aligned to the DS Smith reward principles (as set out on

page 93)

• Takes into account overall corporate performance as well

as business performance.

All our decisions as a Remuneration Committee are taken in

this context.

ANNUAL REPORT ON REMUNERATION

The tables below show how we have applied the remuneration policy during 2021/22. They disclose all the elements of remuneration

earned by the Directors during the year. Full details of the policy that was voted on in 2020 are included in the 2020 Annual Report and is

available on our website.

Deloitte LLP has audited, as required by the applicable regulations, those tables labelled as audited.

Single total figure of remuneration for each Director (audited)

Executive Directors

Salary

£’000

Benefits

£’000

Pensions

£’000

Total fixed

remuneration

Annual bonus

£’000

Long-term

incentives

£’000

Total variable

remuneration

Total single

remuneration

figure

Miles Roberts

Group Chief Executive

2020/21 786 21 177 984 1,541 0 1,541 2,525

2021/22 809 22 131 962 1,618 0 1,618 2,580

Adrian Marsh

Group Finance Director

2020/21 494 19 80 593 726 0 726 1,319

2021/22 508 19 57 584 763 0 763 1,347

1. Taxable benefits in 2020/21 and 2021/22 principally include a car allowance of £20,000 for Miles Roberts and £17,500 for Adrian Marsh. Both Directors also

receive income protection, life and health cover.

2. In lieu of membership of the defined contribution scheme Miles Roberts receives an annual pension allowance which was reduced from 30% with effect from 1

August 2020 to 20% of base salary and was further reduced to 15% with effect from 1 August 2021 and Adrian Marsh receives an annual pension allowance

which was reduced from 20% with effect from 1 August 2020 to 15% of base salary and was further reduced to 10% with effect from 1 August 2021. The annual

pension allowances are not pensionable and are not considered to be salary for the purpose of calculating any bonus payment or long-term incentive. More details

about the further planned reductions in pension benefits to be aligned with that of the workforce in the UK by 31 December 2022 are set out on page 96.

3. The annual bonus, when paid, is paid 50% in cash and 50% in deferred shares as described in the policy table on page 94.

Fees

£’000

Total

2021/22

£’000

Total

2020/21

£’0002021/22 2020/21

Non-Executive Directors

Geoff Drabble

330 128 330 128

Celia Baxter 77 76 77 76

Alina Kessel 62 61 62 61

David Robbie

78 76 78 76

Louise Smalley 62 61 62 61

Rupert Soames

70 71 70 71

Total 679 473 679 473

1. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021, when his fee increased to £330,000 per

annum (fixed for three years).

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

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

4. Non-Executive Directors received no taxable benefits, annual bonus, long-term incentives or pension payments during 2020/21 or 2021/22.

Alan Johnson joined the Board on 1 June 2022.

Annual report on remuneration

GOVERNANCE

Annual Report 2022 dssmith.com 99

Fixed pay

Basic salary (audited)

Salaries for Executive Directors (audited)

Salaries effective from

Earned in

2021/22

(£)

1 August 2020

(£)

1 January 2021

(£)

1 August 2021

(£)

1 August 2022

(£)

Miles Roberts 782,300 794,000 814,000 846,600 809,000

Adrian Marsh 491,600 499,000 511,500 532,000 508,375

When reviewing salaries the Committee takes account of a number of factors, with particular focus on the general level of salary

increases awarded to employees throughout the Group. Where relevant, the Committee also considers external market data on salary

and total remuneration. When initially considering the Executive Directors’ salary increase for 2022, the Committee also looked at the

data for the peer group of FTSE 51-150 companies (excluding Financial Services companies). It chose that comparator group as one that

(in line with the remuneration policy) reflected a similar size and complexity of business and of geographical spread as well as the

domicile of the Executive Directors. The Committee applies judgement when considering such data.

The usual review of executive remuneration was held in June 2022 and it was agreed that a pay increase of 4% (in line with the average

increase for the UK workforce as a whole) would be implemented on 1 August 2022.

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

In addition to a base fee of £62,000, the Chair of the Audit Committee and the Chair of the Remuneration Committee each receive a fee

of £15,000 per annum and the Senior Independent Director receives a fee of £10,000 per annum. The fee for the Chair with effect from

3 January 2021 was set taking into account market rates for comparable positions and is fixed for three years. It was agreed that an

increase of 4% (in line with the average increase for the UK workforce as a whole) would be implemented in respect of the base fee for

Non-Executive Directors with effect from 1 August 2022.

Base fee effective from

Earned in

2021/22

(£)

1 August 2020

(£)

1 August 2021

(£)

1 August 2022

(£)

Geoff Drabble

– 330,000 330,000 330,000

Celia Baxter 60,500 62,000 64,500 76,625

Alina Kessel 60,500 62,000 64,500 61,625

David Robbie

60,500 62,000 64,500 78,330

Louise Smalley 60,500 62,000 64,500 61,625

Rupert Soames

60,500 62,000 64,500 69,920

1. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021. His fee as a Non-Executive Director was

£60,500 per annum. His total fee as Non-Executive Chair is £330,000 per annum, which will not be reviewed for three years from his appointment.

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

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

Alan Johnson joined the Board on 1 June 2022.

100

ANNUAL REPORT ON REMUNERATION CONTINUED

Variable pay

The Committee believes it is important that a significant portion of the Executive Directors’ package is performance-related and that the

performance conditions support the delivery of the Group’s strategy and its long-term sustainable success. The remuneration policy

encourages long-term performance by setting challenging targets linked to sustainable growth for the variable pay, which consists of

the annual bonus and the longer-term PSP. The Remuneration Committee has discretion to adjust retrospectively the targets, for

example after a substantial restructuring, and would normally discuss this with its larger shareholders. Alternatively adjustments to

published outturns may be appropriate for significant events or changes in the asset base that were not envisaged when the targets

were originally set, to ensure that the performance conditions achieve their original purpose. Full disclosure of this would be given in the

Remuneration Report. The Remuneration Committee has the discretion to override formulaic outcomes in order to ensure that outcomes

reflect true underlying business performance. When considering that discretion in relation to the annual bonus for 2021/22 the

Committee took, and in relation to the annual bonus for 2022/23 the Committee will take, into account various ESG matters (as described

on pages 101 and 102).

Performance measures

An explanation of the performance measures for the annual bonus (assessed on a constant currency basis) and PSP (assessed on an

actual currency basis without adjustments for exchange rate movements) is set out below. The strategic rationale for the choice of these

performance measures is to focus on the key financial measures both over the longer performance period for the PSP of three years and

the shorter performance period for the annual bonus of one year.

Adjusted earnings per share (EPS) applicable to the PSP

Adjusted EPS is disclosed in the Annual Report and is the portion of the Group’s adjusted after tax profit allocated to each outstanding

share. Adjusted EPS is an indicator of the underlying performance of the Group.

Adjusted return on average capital employed (ROACE) applicable to the PSP

ROACE is disclosed in the Annual Report. It is defined as earnings before interest, tax, amortisation and adjusting items as a percentage

of average capital employed, including goodwill. This is a measure of the efficiency and profitability of the assets and investments.

Total shareholder return (TSR) applicable to the PSP

TSR is the increase (or decrease) in the value of a notional investment in a share in the Company and each of the companies in the

Industrial Goods and Services Supersector within the FTSE 350 Index over the three-year PSP performance period, taking account of

share price movement and the value of dividends (which are deemed to be re-invested) over that period. This is a measure that takes

into account the experience of shareholders over the applicable period.

Adjusted earnings before tax and amortisation (EBTA) applicable to annual bonus

EBTA is adjusted earnings before taxation, amortisation and income from associates. This measure gives a snapshot of the performance

of the Group in the short term of a single financial year.

Free cash flow applicable to annual bonus

Free cash flow is the net movement on debt before cash outflow for adjusting items, dividends paid, acquisition and disposal of

subsidiary businesses (including borrowings acquired), and proceeds from issue of share capital, adjusted for the effects of changes in

factoring balances. This measure focuses on liquidity, a key area in an uncertain economic environment.

Annual bonus

Bonus in 2021/22

The Executive Directors’ targets for the 2021/22 bonus were based on the financial targets set out in the tables on the next page, with

annual bonus payments determined by reference to performance over the financial year ended 30 April 2022. Achievement is calculated

on a straight-line basis between threshold and target and between target and maximum. Adjusted EBTA and free cash flow have equal

weighting as annual bonus performance measures.

GOVERNANCE

Annual Report 2022 dssmith.com 101

Targets and outcomes (audited)

Financial measure

Threshold

0% of maximum

Target

50% of maximum Maximum Achieved

Adjusted EBTA £504m £524m £544m £585m

Free cash flow £202m £217m £232m £558m

ESG underpin

ESG underpin element Assessment of performance in 2021/22

Commitment to using longer-

term science-based targets for

carbon reduction in the

business

Announced our commitment to reach net zero emissions by 2050 and to science-based targets

which require at least a 40% reduction of CO

emissions per tonne of product by 2030,

compared with 2019 levels. Since 30 April 2022, our target to reduce Scope 1, 2 and 3 emissions

46 per cent by 2030, when compared to 2019 levels, has been validated by the Science Based

Targets initiative. For more information see page 31.

Maintenance of high health and

safety standards

Group-wide lost time accident performance is 5% better than 2020/21. Group-wide H&S

engagement index has increased in each of the last five years, further evolving our safety

culture and contributing to the reduction in the total number of accidents by 27% year-over-

year. For more information see pages 25 to 27.

Continued work with our

communities

The Group has completed the planned community programme activity in all 161 targeted sites.

Outcomes (audited)

Miles Roberts Adrian Marsh

Adjusted EBTA (as a proportion of the maximum opportunity) 50/50 50/50

Free cash flow (as a proportion of the maximum opportunity) 50/50 50/50

Total (as a proportion of the maximum opportunity) 100/100 100/100

Maximum bonus opportunity as a % of salary 200% 150%

Value of bonus paid in cash £809,000 £381,281

Value of bonus deferred into shares £809,000 £381,281

Overall award level £1,618,000 £762,562

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

budgeted exchange rates.

Bonus awards are measured against the achievement of the Group’s objectives. Maximum bonus opportunity for 2021/22 for Miles

Roberts was 200% of salary and for Adrian Marsh was 150% and was between 50% and 110% for the other most senior executives.

When deciding the level of variable pay, including the annual bonus, the Committee considered the experience of the Group’s

stakeholders during the 2021/22 financial year (as summarised on pages 88 and 89). The Committee concluded that the outcome of the

annual bonus in respect of 2021/22 appropriately reflected the Company’s performance in 2021/22 and was commensurate with the

broader stakeholder experience in that period; and that appropriate progress and actions have continued to be made to realise our ESG

agenda. It was therefore not felt necessary to apply any discretion to amend the outcome of the overall award level.

Implementation for 2022/23

The annual bonus for 2022/23 will remain in line with the remuneration policy and with a maximum opportunity of 200% of salary for

the Group Chief Executive and 150% for the Group Finance Director.

For 2022/23 it will be based on EBTA and free cash flow, each with equal weighting. In the event of an unbudgeted acquisition or

disposal in the year, the Committee will assess how the financial performance of the acquired or disposed of company should be treated.

In the opinion of the Committee, the annual bonus targets for 2022/23 are commercially sensitive and accordingly are not disclosed

prospectively. These will be disclosed next year in the Directors’ remuneration report, so that achievement against those targets will be

visible, in retrospect.

102

ANNUAL REPORT ON REMUNERATION CONTINUED

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

into account the following factors:

• The development of initial plans to achieve the longer-term science-based targets for carbon reduction in the business

• The continuing maintenance of high health and safety standards

• The continued work with our communities.

The Committee will report on its assessment of the Group’s performance in those areas in the Annual Report 2023 (following a similar

format to its assessment for 2022 on page 101).

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

strategic goal to lead the way in sustainability.

Performance Share Plan (PSP)

Overview of the Performance Share Plan

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

further two years by the Executive Directors.

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

The Committee’s policy is that no adjustments for exchange rate movements are made to EPS and ROACE over the three-year

performance period as these are of a long-term nature and fluctuations are more likely to average out over the period.

The relative TSR vesting scale is median to upper quartile performance, with no vesting below median performance. 25% of the award

vests for achieving threshold performance, increasing on a straight-line basis to full vesting for maximum performance.

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

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

Unfortunately, the performance share plan (PSP) award made in 2019, which had performance conditions based on the three year

average earnings per share (EPS) and return on average capital employed (ROACE) performance and the three year cumulative relative

total shareholder return (TSR) performance between 2019/20 and 2021/22, did not meet the threshold targets for the two financial

measures and fell below median for the relative TSR measure. The financial targets were set in 2019 in the context of the expectation of

a stable economy and were not adjusted to reflect the negative impact of the pandemic on the 2019/20, 2020/21 and 2021/22 results.

EPS, ROACE and TSR performance targets for 2019/20 awards based on performance in the three-year

period to 2021-22 (audited)

Weighting

Threshold

(25% vests)

Maximum

(100% vests) Outcome

Three-year average adjusted EPS One third 37.4p 42.0p 29.3p

Three-year average adjusted ROACE One third 12.4% 13.6% 9.8%

Relative TSR

One third Median Upper quartile Below median

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

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

Deferred share bonus plan (DSBP) awards vesting in 2022

The DSBP award vesting in 2022 relates to the deferral into shares of half of the bonus paid in June 2019 in relation to the financial year

2018/19. The number of shares vesting in 2022 under the DSBP award granted on 15 July 2019 is 157,055 for Miles Roberts and 74,015

for Adrian Marsh. Details of those awards and the single total figure of remuneration that included them were set out in the

remuneration report for 2019/20. Dividend equivalents for the DSBP award also accrued during the three-year vesting period. Those

dividend equivalents will be paid in shares (11,889 for Miles Roberts and 5,602 for Adrian Marsh) shortly after the award vests on 15 July

2022, the third anniversary of grant of the award.

GOVERNANCE

Annual Report 2022 dssmith.com 103

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

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

remuneration report, were:

• 225% of salary for the Group Chief Executive and 200% of salary for the Group Finance Director

• Any shares that vest under the PSP awards granted in 2021/22 must be retained for a further two years before they can be sold (a

total of five years from original grant) and they are also subject to a post-employment holding condition, meaning that any shares that

vest will be held in a nominee arrangement for the appropriate period. For any PSP awards which vest following departure that have

been granted good leaver treatment, the Committee will reduce the two year post-vesting holding period so that it does not extend

beyond the second anniversary of departure, provided that the three year vesting period has been completed

• The PSP awards were granted as nil-cost options and are subject to three performance measures: adjusted EPS, adjusted ROACE and

relative TSR, with equal weighting on each element.

The DSBP awards made in 2021 relate to the deferral into shares of half of the bonus paid in July 2021 in relation to the bonus award

included in the single total figure of remuneration for 2020/21. They were granted as nil-cost options and are not subject to performance

conditions, but are subject to continued employment.

Executive Director Award

Number of options granted under award

on 8 July 2021

Face value of award at time of grant

(£)

Miles Roberts PSP 411,635 1,786,496

DSBP 177,529 770,476

Adrian Marsh PSP 229,953 997,996

DSBP 83,672 363,136

The awards were made on 8 July 2021. The face value in the above table is calculated using 434.0p which was the average price of a DS

Smith share for the three trading days preceding the grant of the award and the price used in the calculation of the number of options

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

maximum performance. The applicable performance period for these PSP awards ends on 30 April 2024.

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

% vesting as a proportion

Adjusted EPS

One third

Adjusted ROACE

One third

Relative TSR

One third

100% 40.0p 13.1% Upper quartile

Between 25% and 100% 35.2-40.0p 11.2-13.1% Between median and upper quartile

25% 35.2p 11.2% Median

Awards vest on a straight-line basis between threshold and maximum performance. The performance measurement period for the adjusted EPS and adjusted ROACE

targets is the 2023/24 financial year and for the relative TSR target is the three years to 30 April 2024.

1. The 2020/21 baseline results are 24.2p for adjusted EPS and 8.2% for adjusted ROACE.

2. The comparator group for measurement of relative TSR is the FTSE 350 Industrial Goods and Services Supersector, as it was in 2019/20 and 2020/21.

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

The PSP awards to be made in 2022 in respect of 2022/23 will remain in line with the remuneration policy, with grants being made of up

to 225% of salary for the Group Chief Executive and 200% of salary for the Group Finance Director. As a matter of best practice, before

finalising the PSP award levels, the Committee considered the movements in the share price since the 2021 PSP grant and will monitor

performance against the targets to consider whether discretion should be applied to the formulaic outturn when determining the

vesting outturn.

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

award will be:

% vesting as a proportion

Adjusted EPS

One third

Adjusted ROACE

One third

Relative TSR

One third

100% 42p 13.8% Upper quartile

Between 25% and 100% 36-42p 12 – 13.8% Between median and upper quartile

25% 36p 12% Median

Awards vest on a straight-line basis between threshold and maximum performance. The performance measurement period for the adjusted EPS and adjusted ROACE

targets is the 2024/25 financial year and for the relative TSR target is the three years to 30 April 2025.

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

2019/20.

104

ANNUAL REPORT ON REMUNERATION CONTINUED

The Committee’s aim, as always, has been to set robust targets with a strong degree of stretch. In setting the target ranges the

Committee took into account a number of factors which included our medium term growth targets. Our desire continues to be to set

targets which balance stretch with the ability to at least achieve the threshold level so that awards remain motivating and meaningful to

the c.150 plan participants. The Committee will, as a matter of good practice, take a step back when determining the vesting outturn in

three years’ time to consider whether any discretion should be applied to the formulaic outturn.

DSBP awards in 2022

As set out on page 94, half of the value of the bonus to be paid in 2022 in respect of the performance over the financial year

ended 30 April 2022, will be deferred into shares, which will not vest until 2025.

Outstanding PSP and DSBP share awards during 2021/22 and as at 30 April 2022 (audited)

The table below sets out details of Executive Directors’ outstanding share awards, both under the PSP and the DSBP, during the year

under review. Unvested awards will vest in future years subject to performance and/or continued service. Vested awards will expire if

not exercised before the relevant expiry date.

Award date

Awards held

at 30 April

2021 Granted

Dividend

equivalents

Exercised/

vested

Lapsed/

forfeited

Grant price

for award

(p)

Market price

on date of

exercise (p)

Awards held

at 30 April 2022

Vesting date

(if any

performance

conditions

applicable

are met) Expiry date

Miles Roberts

PSP 1 Jul 16 256,822 – – 256,822 – 379.80 457.30 0 1 Jul 19 1 Jul 26

PSP 18 Jul 17 139,690 – – 139,690 – 484.70 457.30 0 18 Jul 20 18 Jul 27

PSP 22 Jun 18 341,748 – – – 341,748 523.47 – 0 22 Jun 21 22 Jun 28

PSP 15 Jul 19 481,039 – – – – 357.00 – 481,039 15 Jul 22 15 Jul 29

PSP 14 Jul 20 647,123 – – – – 272.00 – 647,123 14 Jul 23 14 Jul 30

PSP 8 Jul 21 – 411,635 – – – 434.00 – 411,635 8 Jul 24 8 Jul 31

DSBP 1 Jul 16 156,676 – – 156,676 – 379.80 457.30 0 1 Jul 19 1 Jul 26

DSBP 18 Jul 17 79,368 – – 79,368 – 484.70 457.30 0 18 Jul 20 18 Jul 27

DSBP 22 Jun 18 132,849 – 10,588 143,437 – 523.47 457.30 0 22 Jun 21 22 Jun 28

DSBP 15 Jul 19 157,055 – – – – 357.00 – 157,055 15 Jul 22 15 Jul 29

DSBP 8 Jul 21 – 177,529 – – – 434.00 – 177,529 8 Jul 24 8 Jul 31

1,874,381

Adrian Marsh

PSP 22 Jun 18 167,015 – – – 167,015 523.47 – 0 22 Jun 21 22 Jun 28

PSP 15 Jul 19 235,098 – – – – 357.00 – 235,098 15 Jul 22 15 Jul 29

PSP 14 Jul 20 316,286 – – – – 272.00 – 316,286 14 Jul 23 14 Jul 30

PSP 8 July 21 – 229,953 – – – 434.00 – 229,953 8 Jul 24 8 Jul 31

DSBP 22 Jun 18 62,603 – 4,989 67,592 – 523.47 444.50 0 22 Jun 21 22 Jun 28

DSBP 15 Jul 19 74,015 – – – – 357.00 – 74,015 15 Jul 22 15 Jul 29

DSBP 8 Jul 21 – 83,672 – – – 434.00 – 83,672 8 Jul 24 8 Jul 31

– 939,024

1. The figure in this column is the average price of a DS Smith share for the three trading days preceding the award and is the price used in the calculation of the

number of options originally awarded. The number of options originally awarded in 2016 and 2017 was subsequently adjusted for the rights issue in 2018 as

described in the Annual Report for 2019.

GOVERNANCE

Annual Report 2022 dssmith.com 105

The target ranges for the 2019/20 PSP awards are set out on page 102. The target ranges for the 2021/22 awards are set out on page

103. The relative TSR target for the 2020/21 award is the same as it was for the 2019/20 award. For the 2020/21 awards the target

ranges for EPS and ROACE are set out in the audited table below.

PSP plan EPS range ROACE range

2020/21 34.2p-36.5p 11.0%-12.5%

It is currently intended that any ordinary shares required to fulfil entitlements under the DSBP will be provided by Computershare

Trustees (Jersey) Limited in its capacity as trustee of the employee benefit trust (the Trust), which buys shares to do so. The Trust

may also be used to fulfil certain entitlements under the PSP and the employee sharesave plans or those may be fulfilled by newly-

issued shares.

Sharesave – employee share plans (audited)

Our sharesave (SAYE) plans align our employees’ interests with those of our long-term shareholders. Our commitment is to deliver an

opportunity for our employees to be engaged with the strategic direction of DS Smith and to share in its financial success. Executive

Directors are eligible to participate in the SAYE on the same terms as all other UK-based employees of the Company and participating

subsidiaries of the Group. Options are granted under the SAYE, which, in the UK, is an HMRC tax-advantaged plan. Participants contract

to save up to the equivalent of £250 per month over a period of three years (two years in the US). The current maximum permitted

monthly saving of the equivalent of £250 is set by the Company. Under the applicable plan rules (and the remuneration policy) the

monthly maximum could be increased in the future to up to the equivalent of £500 per month. The option price is discounted by up to

20% (15% in the US) of the average closing mid-market price of the Company’s shares on the three dealing days prior to invitation

(20-day average to the day before grant in France and the higher of the mid-market average price on the day before invitation and the

mid-market average on the day before grant in the US). In common with most plans of this type, there are no performance conditions

applicable to options granted under the SAYE.

Name of Director

Options

held at

30 April 2021

Options

granted during

the year

Options

exercised

during the year

Options lapsed

during the year

Market price on

date of exercise

(p)

Options held at

30 April 2022

Exercise price

(p)

Date

from which

exercisable Expiry date

Miles Roberts 2,769 – – – – 2,769 325.00 1 Apr 24 30 Sep 24

Adrian Marsh 2,769 – – – – 2,769 325.00 1 Apr 24 30 Sep 24

Share ownership guidelines

Executive Directors are required to build a significant shareholding in the Company within five years from the date of their appointment.

Executive Directors’ shareholdings (including those of their connected persons) are summarised in the following audited table.

Name of Director

Total

shareholding as at

30 April 2021

Total

shareholding as at

30 April 2022

Unvested only

subject to continued

employment

Vested awards

(not exercised)

Shareholding

required

(% salary)

Shareholding at

30 April 2022

(% salary)

Requirement

met

Executive Directors

Miles Roberts 1,989,927 2,063,831 179,300 0 225% 912% Yes

Adrian Marsh 577,889 291,021 84,502 0 200% 243% Yes

1. Includes the awards of deferred bonus shares granted in 2019 and 2021. A reduction to the gross award levels of 48.25% has been applied for the expected level

of tax and social security deductions that will ultimately be due on these shares.

2. Based on the salary as at 30 April 2022 and a share price of 330.9p (being the closing price on 29 April 2022, the last trading day of the financial year) multiplied by

the current year shareholding and interests in shares which count towards the shareholding requirement.

The PSP awards granted in 2020 and 2021 are unvested and remain subject to performance conditions so are not included in the

above table as they do not count towards the shareholding requirement. Nil-cost options which have vested but have yet to be

exercised are considered to count towards the shareholding requirement, other than any such shares that correspond to the estimated

tax and national insurance contributions. Miles Roberts and Adrian Marsh as at 30 April 2022 did not hold any such vested but

unexercised awards.

Failure to meet the minimum shareholding requirement is taken into account when determining eligibility for share-based incentive

awards for Executive Directors. There have been no changes to the shareholdings set out above between the financial year-end and the

date of this report.

106

ANNUAL REPORT ON REMUNERATION CONTINUED

Non-Executive Directors are required to build up a holding of 50% of their fees in shares within two years of their date of appointment.

Non-Executive Directors’ shareholdings (including those of their connected persons) are summarised in the following audited table:

Name of Director

Total

shareholding as at

30 April 2021

Total

shareholding as at

30 April 2022

Shareholding

required

(% fee)

Shareholding at

30 April 2022

(% fee)

Requirement

met

Non-Executive Directors

Geoff Drabble

60,000 60,000 50% 60% Yes

Celia Baxter 10,993 10,993 50% 47% No

Alina Kessel 7,000 12,000 50% 64% Yes

David Robbie 20,000 20,000 50% 86% Yes

Louise Smalley 18,600 18,600 50% 99% Yes

Rupert Soames 28,800 28,800 50% 110% Yes

1. Based on the fee as at 30 April 2022 and a share price of 330.9p (being the closing price on 29 April 2022, the last trading day of the financial year) multiplied by

the current year shareholding and interests in shares which count towards the shareholding requirement.

2. Geoff Drabble joined the Board with effect from 1 September 2020 and became Chair with effect from 3 January 2021. He has not yet been on the Board for

two years.

Alan Johnson joined the Board on 1 June 2022.

External appointments

The Board supports Executive Directors taking up appointments outside the Company to broaden their knowledge and experience.

Each Executive Director is permitted to accept one non-executive appointment (or in exceptional circumstances two appointments)

from which they may retain any fee. Any external appointment must not conflict with a Director’s duties and commitments to DS Smith.

Miles Roberts was a non-executive director of Aggreko plc until August 2021 and retained fees of £37,225 for the year ended 30 April

2022 (£61,000 for the year ended 30 April 2021). Adrian Marsh is a non-executive director of John Wood Group PLC and retained fees of

£67,450 for the year ended 30 April 2022 (£61,975 for the year ended 30 April 2021).

Directors’ contracts and notice periods

Date of contract/date of

initial appointment to the Board

Expiry date of current term

for Non-Executive Directors

Geoff Drabble Chair 1 September 2020 31 August 2023

Miles Roberts Group Chief Executive 4 May 2010 not applicable

Adrian Marsh Group Finance Director 24 September 2013 not applicable

Celia Baxter Chair of Remuneration Committee 9 October 2019 8 October 2025

Alan Johnson 1 June 2022 30 May 2025

Alina Kessel 1 May 2020 30 April 2023

David Robbie Chair of Audit Committee and Senior Independent Director 11 April 2019 10 April 2025

Louise Smalley 23 June 2014 22 June 2023

Rupert Soames 1 March 2019 6 September 2022

Miles Roberts and Adrian Marsh each have a notice period of 12 months exercisable by either the Company or the individual. Non-

Executive Directors have letters of appointment for an initial term of three years whereupon they are normally renewed. The current

terms of the Non-Executive Directors are set out in the table above. The notice period is one month exercisable by either the Company

or the Non-Executive Director. Non-Executive Directors are not eligible for payments on termination. In line with the UK Corporate

Governance Code, all Directors (including Non-Executive Directors) are subject to annual re-election by shareholders at the AGM. Their

letters of appointment detail the time commitment expected of each Non-Executive Director. Both these and the Executive Directors’

service contracts are available for inspection at the registered office during normal business hours and at each AGM.

Payments to past Directors or for loss of office (audited)

No payments were made to past Executive Directors during the year ended 30 April 2022 (2020/21: Nil). No payments were made

in respect of loss of office during the year ended 30 April 2022 (2020/21: Nil).

GOVERNANCE

Annual Report 2022 dssmith.com 107

Relative importance of spend on pay

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

2021/22

£m

2020/21

£m

Percentage

change

Overall expenditure on employee pay

1,381 1,363 1.3%

Dividend paid during the year 166 0 n/a

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

for further information.

Remuneration of the Group Chief Executive

The table below shows the total remuneration figure for the Group Chief Executive for each of the last ten financial years. The total

remuneration figure includes the annual bonus and long-term incentive awards which vested, based on performance in those years.

The annual bonus and long-term incentive awards percentages show the payout for each year as a percentage of the maximum

available for the financial year.

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Total

remuneration

(£’000) 6,057 3,696 5,527 4,447 4,861 4,220 3,065 1,422 2,525 2,580

Annual bonus

payout 82% 85% 88% 79% 45% 88% 74% 0% 98% 100%

Long-term

incentive

vesting 100% 98% 92% 94% 100% 93% 52% 35% 0% 0%

21 22201918171615141312

DS Smith

FTSE 100

FTSE 250

Total shareholder return

100

200

300

400

+184%

Review of past performance — total shareholder return graph

The graph above illustrates the Company’s TSR performance since 1 May 2012 (the period required by the applicable regulations),

relative to the FTSE 100 Index as well as the FTSE 250 Index. In December 2017 the Company joined the FTSE 100 Index from the FTSE

250 Index. Therefore, both indices are considered appropriate comparator indices for the Company. As at 30 April 2022 DS Smith ranked

91 by market capitalisation. This graph looks at the value, over the ten years to 30 April 2022, of an initial investment of £100 in DS Smith

shares compared with that of £100 invested in both the FTSE 100 and FTSE 250 Index. The other points plotted are the values at

intervening financial year ends.

108

ANNUAL REPORT ON REMUNERATION CONTINUED

Group Chief Executive pay ratio disclosures (audited)

Method

25th percentile Median 75th percentile

Total pay ratio Total pay ratio Total pay ratio

2018/19 B 100:1 91:1 72:1

2019/20 B 52:1 44:1 35:1

2020/21 B 90:1 71:1 60:1

2021/22 B 81:1 60:1 56:1

The table above sets out how the single total figure of remuneration (STFR) for the Group Chief Executive compares to the STFR of the

UK employees at the 25th percentile, median and 75th percentile. All STFRs for the 2021/22 financial year have been based on full-time

equivalent values and annualised where necessary. The table below sets out the split between total remuneration (fixed and variable

pay and benefits) and the salary component of that total for UK employees used in the above total pay ratio calculations. DS Smith has

chosen to use methodology B (as defined in the applicable regulations) to calculate the figures in the tables above and below.

Remuneration used to calculate the Group Chief Executive pay ratio disclosures

25th percentile pay ratio Median pay ratio 75th percentile pay ratio

Total remuneration (£) Base salary (£) Total remuneration (£) Base salary (£) Total remuneration (£) Base salary (£)

2018/19 30,744 26,608 33,804 32,051 42,277 31,622

2019/20 27,244 26,647 32,342 31,479 40,349 36,202

2020/21 28,042 25,729 35,384 33,566 42,142 39,756

2021/22 31,877 28,282 42,645 37,647 46,215 42,210

As DS Smith uses methodology B, the 2021 UK gender pay gap data has been used to identify the relevant comparator employee falling

at the relevant percentile and to calculate the annual total remuneration relating to 2021/22 for the three identified employees on the

same basis as the Group Chief Executive’s annual total remuneration for the same period in the single figure table. In 2021/22, there

were multiple bonus plans in place across the UK which are not payable in some cases in advance of the Directors’ remuneration report

being approved by the Board. It was therefore not practical to collate the bonus amounts relating to performance during 2021/22 for

every UK employee in advance of the report being approved. We are confident that the three employee STFR figures (which include

applicable bonus) used in the pay ratio reporting are as representative of the respective percentiles as would have been the case if the

2021/22 STFR had been calculated for all UK employees. (The data reference date was 18 May 2022.)

The decrease in the ratio since last year is the result of the combination of a number of factors, including the reduction in the Group Chief

Executive’s pension contribution. As a result of the large proportion of variable pay in the Group Chief Executive’s total reward, the ratio

can be subject to a high degree of volatility from one year to the next.

We will continue to report on trends in these figures, which are expected to fluctuate as variable pay outcomes fluctuate for the Group

Chief Executive. The Company does believe that the median pay ratio for 2021/22 is consistent with the pay, reward and progression

policies for UK employees taken as a whole.

GOVERNANCE

Annual Report 2022 dssmith.com 109

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

The table below shows the percentage change in three aspects of remuneration (salary or fee, benefits and bonus) for the Group Chief

Executive, the Group Finance Director and the Non-Executive Directors who were Directors at 30 April 2022 compared to full-time

equivalent employees of the Company. (The format of the table is prescribed by regulation. Benefits and bonus are not applicable to

Non-Executive Directors. The increase in fees for certain Non-Executive Directors relates to their change of role in the applicable period,

as noted below.) The column headed ’% change 2021/22’ sets out the change from financial year 2020/21 to financial year 2021/22. The

normal date for any implementation of a pay review is 1 August, not the start of the financial year. However, as explained on page 95 of

the 2021 Annual Report, for Directors (unlike employees in the wider Group) there was not a pay or fee increase in August 2020, but

there was a pay increase with effect from 1 January 2021 for Executive Directors and Company employees. (Other explanatory notes

concerning the figures for the prior year were set out in the 2021 Annual Report.)

Salary/Fee Benefits Bonus Salary/Fee Benefits Bonus

% change

2021/22

% change

2021/22

% change

2021/22

% change

2020/21

% change

2020/21

% change

2020/21

Miles Roberts 2.9 2.8

5.0 1.1 (1.2) n/a

Adrian Marsh 2.9 1.2

5.1 1.1 (2.3) n/a

Geoff Drabble

0 n/a n/a n/a n/a n/a

Celia Baxter

1.5 n/a n/a 0 n/a n/a

Alina Kessel

1.9 n/a n/a n/a n/a n/a

David Robbie

3.7 n/a n/a 8.1 n/a n/a

Rupert Soames

(0.8) n/a n/a 5.9 n/a n/a

Louise Smalley 1.9 n/a n/a 0.6 n/a n/a

Company employees 4.1 11.2

8.3 2.0 1.3 n/a

1. Geoff Drabble joined the Board on 1 September 2020 and became Chair with effect from 3 January 2021, and Alina Kessel joined the Board on 1 May 2020 so in

2020/21 they had no prior year to compare 2020/21 with.

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

annualised.

3. Rupert Soames stepped down from his role as Senior Independent Director and David Robbie became Senior Independent Director on 28 February 2022 (part way

through 2021/22), hence the change in their fees due to the change in their respective roles, part way through 2021/22.

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

Alan Johnson joined the Board on 1 June 2022.

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

At the AGM held in 2021, votes cast by proxy and at the meeting in respect of the Directors’ remuneration report were 911,292,156

(87.33%) voting in favour and 132,264,013 voting against (12.67%) with 3,616,456 votes withheld, being votes that are not recognised

as a vote in law.

At the AGM held in 2020, votes cast by proxy and at the meeting in respect of the remuneration policy were 916,656,836 (93.13%)

voting in favour and 67,569,543 voting against (6.87%) with 24,228,039 votes withheld, being votes that are not recognised as a

vote in law.

110

ANNUAL REPORT ON REMUNERATION CONTINUED

Remuneration Committee governance

The Board is ultimately accountable for executive remuneration and delegates this responsibility to the Remuneration Committee.

The Committee’s principal function is to support the Group’s strategy by ensuring that its delivery is underpinned by the Company’s

overall remuneration policy, as described earlier in this report. It also determines the specific remuneration package, including service

contracts and pension arrangements, for each Executive Director and our most senior executives, as well as the fees paid to the Chair.

The Remuneration Committee’s Terms of Reference can be found at www.dssmith.com/investors/corporate-governance/committees/

All members of the Committee are independent Non-Executive Directors. This is fundamental to ensuring Executive Directors’ and

senior executives’ remuneration is set by people who are independent and have no personal financial interest, other than as

shareholders, in the matters discussed. There are no potential conflicts of interest arising from cross-directorships and there is no

day-to-day involvement in running the business. The Committee consults with the Group Chief Executive, who may attend meetings of

the Committee, although he is not involved in deciding his own remuneration. The Committee is assisted by the Group Head of Reward,

the Deputy Company Secretary, the Group General Counsel and Company Secretary and the Group Human Resources Director. No-one

is allowed to participate in any matter directly concerning the details of their own remuneration or conditions of service.

As described earlier in the report, the Company has discussed with the EWC Executive matters relating to Executive Directors’

remuneration. When considering matters relating to the remuneration of the Executive Directors, the Committee takes into account

the overall approach to reward for, and the pay and employment conditions of, other employees in the Group.

To differentiate our employee value proposition and reinforce our strong DS Smith culture, the Group has developed the DS Smith

reward principles (set out on page 93) which are endorsed by the Committee and were last reviewed by the Committee in 2021.

Current policies and future decision making are matched against these to drive continuous improvement in this area.

Members Since

Celia Baxter (Chair since October 2019) 2019

Geoff Drabble 2020

Alina Kessel 2020

David Robbie 2019

Louise Smalley 2014

Rupert Soames 2019

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

Details of individual Directors’ attendance can be found on page

70. The Group General Counsel and Company Secretary acts as

Secretary to the Committee.

Key responsibilities of the

Remuneration Committee

• Designing the remuneration policy

• Implementing the remuneration policy

• Ensuring the competitiveness of reward, within an

appropriate governance framework

• Designing the incentive plans

• Setting incentive targets and determining award levels

• Overseeing all share awards across the Group.

Each of these responsibilities impacts the other.

The Committee is very conscious of the importance

of the wider context in which it operates in discharging

these responsibilities.

GOVERNANCE

Annual Report 2022 dssmith.com 111

Topics considered as part of regular annual decision-making cycle of

Remuneration Committee

• How the business has performed against financial targets and ESG expectations

• Forecasts for the year to come

• Feedback from both the employee survey and pulse surveys on how employees feel about the quality of the Group’s leadership.

This includes whether the leadership team continues to demonstrate living our values, how we measure employee performance

and whether employees believe we have the right approach to reward

• Review of guidance from the government and investor bodies

• Holistic view of market practices

• Assessing whether our remuneration framework is appropriately aligned with our culture and continues to motivate our leaders

to achieve the Group’s strategic objectives and does not inadvertently motivate inappropriate behaviour giving rise to ESG or

other risks

• Consideration of remuneration and related policies across the Group

• Discussion of the relevant aspects of this year’s Board effectiveness review.

In January 2021, following a thorough tender process, Korn Ferry were appointed as the Committee’s advisers. During the financial year

of 2021/22 the Committee was advised by Korn Ferry in relation to various aspects of the remuneration of Executive Directors for which

they were paid £28,811, partly on a fixed fee basis and partly on a time and materials basis. Korn Ferry in the financial year 2021/22 has

also provided executive search and talent assessment services to the Group. The teams providing this advice are separate from the

Remuneration Committee advisers and there was no conflict of interest. The Committee is satisfied that the advice it receives from its

advisers is objective and independent. Korn Ferry is a member of the Remuneration Consultants Group and adheres to the Code of

Conduct for Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com).

This report has been prepared in accordance with applicable legislation and regulatory requirements, including those of the Large and

Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Regulations). The Regulations require

the Auditor to report to shareholders on the audited information within this report and to state whether, in their opinion, the relevant

sections have been prepared in accordance with the Companies Act 2006. The Auditor’s opinion is set out in the Independent Auditor’s

report and we have clearly marked the audited sections of this annual report on remuneration.

On behalf of the Board

Celia Baxter

Chair of the Remuneration Committee

20 June 2022

Acquisitions and disposals

Acquisitions and disposals in the year ended 30 April 2022 are

described in note 30 to the consolidated financial statements.

Events after the reporting date

There are no subsequent events after the reporting date which

require disclosure.

Share capital

Details of the issued share capital and the rights and restrictions

attached to the shares, together with details of movements in the

Company’s issued share capital during the year, are shown in note

24 to the consolidated financial statements. Pursuant to the

Company’s employee share option schemes 2,694,364 ordinary

shares of 10 pence each were issued during the year. Between 1

May and 20 June 2022 inclusive, 325,431 shares were issued

pursuant to the Company’s employee share option schemes. The

Company has not utilised its authority to make market purchases

of 137,344,296 shares granted to it at the 2021 annual general

meeting (AGM) but, in line with market practice, will be seeking to

renew such authority at this year’s AGM.

The trustee of the employee benefit trust, which is used to

purchase shares on behalf of the Company as described in note 24

to the consolidated financial statements, has the power to vote or

not vote, at its absolute discretion, in respect of any shares in the

Company held unallocated in that trust. However, in accordance

with good practice, the trustee adopts a policy of not voting in

respect of such shares. The trustee has a dividend waiver in place

in respect of shares which are the beneficial property of the trust.

Dividends

An interim dividend for 2021/22 of 4.8 pence per ordinary share

was paid on 3 May 2022 and the Directors recommend a final

dividend of 10.2 pence per ordinary share, which together with the

interim dividend, increases the total dividend for the year to 15.0

pence per ordinary share (2020/21: 12.1 pence). Subject to

approval of shareholders at the AGM to be held on 6 September

2022, the final dividend will be paid on 1 November 2022

to shareholders on the register at the close of business on

7 October 2022.

Political donations

No political donations were made during the year ended 30 April

2022 (2020/21: nil). DS Smith has a policy of not making donations

to political organisations or independent election candidates or

incurring political expenditure, as defined in the Political Parties,

Elections and Referendums Act 2000, anywhere in the world.

Directors’ and officers’ liability insurance

The Company has purchased and maintains appropriate insurance

cover in respect of Directors’ and officers’ liabilities. The Company

has also entered into qualifying third-party indemnity

arrangements for the benefit of all its Directors and qualifying

third-party indemnity arrangements have been entered into by a

subsidiary of the Company for the benefit of certain directors of

companies within the Group, all in a form and scope which comply

with the requirements of the Companies Act 2006 (the Act). These

indemnities were in force throughout the year and up to the date

of this Annual Report.

Additional employee disclosures

In our Strategic Report on pages 24 to 29 we set out some of the

ways in which we realise the potential of our people, including how

we engage with our workforce. As part of creating a modern,

diverse and inclusive culture all companies within the Group strive

to operate fairly at all times and this includes not permitting

discrimination against any employee, applicant for employment or

contingent worker on the basis of race, religion or belief, colour,

gender, disability, national origin, age, military service, veteran

status, sexual orientation, gender reassignment, marital status or

any other characteristic protected by local law. This also includes

giving full and fair consideration to suitable applications for

employment from disabled persons, making reasonable

adjustments in the hiring process to ensure fairness and equity in

the selection process. For existing employees who develop a

disability we will make all reasonable adjustments to support their

continued employment, in their same job or, if this is not

practicable, making every effort to find suitable alternative

employment and to provide relevant training and career

development opportunity.

Through the Group’s engagement survey, via our European Works

Council which brings together employee representatives from the

different European countries where we operate, as well as

through site and team meetings and briefing newsletters, the

Group provides employees with various opportunities to obtain

information on matters of concern to them, to improve their

awareness of the financial and economic factors that affect the

performance of the Group and to provide their feedback.

Additional information

112

Substantial shareholdings

Information provided to the Company pursuant to the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules (DTRs)

is published on a Regulatory Information Service and on the Company’s website. The following information has been received, in

accordance with DTR 5, from holders of notifiable interests in the Company’s issued share capital.

As at 30 April 2022 As at 20 June 2022 Nature of holding

Aviva plc and its subsidiaries 6.79% 6.79% Direct & indirect

BlackRock, Inc. 5.18% Below 5% Indirect

abrdn plc Below 5% Below 5% Indirect

Ameriprise Financial, Inc. and its group 4.981% 4.981% Direct & indirect

Black Creek Investment Management Inc. 4.034428% 4.034428% Direct & indirect

Norges Bank 3.862390% 3.862390% Direct

Sarasin & Partners LLP 3.01% 3.01% Indirect

Merpas (UK) Limited 2.985% 2.985% Direct & indirect

Auditor

Each of the persons who is a Director at the date of the approval of

this Annual Report confirms that:

• so far as the Director is aware, there is no relevant audit

information of which the Company’s Auditor is unaware; and

• the Director has taken all the steps he/she ought to have taken

as a Director in order to make him/herself aware of any relevant

audit information and to establish that the Company’s Auditor is

aware of that information.

This confirmation is given and should be interpreted in accordance

with the provisions of section 418 of the Companies Act 2006.

A resolution to appoint Ernst & Young LLP as Auditor will be

proposed at the forthcoming AGM.

Other disclosures

Certain information is included in our Strategic Report (pages 1 to

65) or financial statements that would otherwise be required to be

disclosed in this section of the report. This is as follows:

Subject matter Page

Likely future developments in the business 8 to 11

Research and development 14 and 15

Use of financial instruments 45

Greenhouse gas emissions 33

As is customary, our principal financing facilities incorporate

market standard change of control clauses.

A complete list of the Group’s subsidiaries is set out in note 33 to

the consolidated financial statements to comply with s409 of the

Act. Companies within the Group have branches in Norway, Poland

and Slovakia.

The information that fulfils the requirements of the corporate

governance statement for the purposes of DTR 7 can be found on

pages 66 to 87, and that governance report also forms part of the

Directors’ report.

The Strategic Report on pages 1 to 65 and the governance report

and Directors’ Remuneration Report on pages 66 to 113 together

represent the management report for the purpose of compliance

with DTR 4.1.8R.

The Directors’ report was approved by the Board of Directors on 20

June 2022 and is signed on its behalf by:

Iain Simm

Group General Counsel and Company Secretary

20 June 2022

GOVERNANCE

Annual Report 2022 dssmith.com 113

Directors’ responsibilities

The Directors are responsible for preparing the Annual Report

and the financial statements in accordance with applicable law

and regulations.

Company law requires the Directors to prepare such financial

statements for each financial year. Under that law the Directors

are required to prepare the Group financial statements in

conformity with the requirements of the Companies Act 2006 and

UK-adopted international accounting standards. The Group

financial statements also comply with International Financial

Reporting Standards as issued by the International Accounting

Standards Board (IASB). The Directors have also chosen to prepare

the parent Company financial statements in accordance with

Financial Reporting Standard 101 Reduced Disclosure Framework.

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 Company and of the profit or loss

of the Company for that period.

In preparing the parent Company financial statements, the

Directors are required to:

• select suitable accounting policies and then apply them

consistently;

• make judgements and accounting estimates that are reasonable

and prudent;

• state whether Financial Reporting Standard 101 Reduced

Disclosure Framework has been followed, subject to any

material departures disclosed and explained in the financial

statements; and

• prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the Company will

continue in business.

In preparing the Group financial statements, International

Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner

that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the

specific requirements in IFRSs is insufficient to enable users to

understand the impact of particular transactions, other events

and conditions on the entity’s financial position and financial

performance; and

• make an assessment of the Company’s ability to continue as a

going concern.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Company’s

transactions and disclose with reasonable accuracy at any time the

financial position of the Company and enable them to ensure that

the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the

Company and hence for taking reasonable steps for the prevention

and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of

the corporate and financial information included on the Company’s

website. Legislation in the UK governing the preparation and

dissemination of financial statements may differ from legislation

in other jurisdictions.

Directors’ responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the

relevant financial reporting framework, give a true and fair view

of the assets, liabilities, financial position and profit or loss of the

Company and the undertakings included in the consolidation

taken as a whole;

• the Strategic Report includes a fair review of the development

and performance of the business and the position of the

Company and the undertakings included in the consolidation

taken as a whole, together with a description of the principal

risks and uncertainties that they face; and

• the Annual Report and financial statements, taken as a whole,

are fair, balanced and understandable and provide the

information necessary for shareholders to assess the Company’s

position, performance, business model and strategy.

This responsibility statement was approved by the Board of

Directors on 20 June 2022 and is signed on its behalf by:

Miles Roberts

Group Chief Executive

20 June 2022

Adrian Marsh

Group Finance Director

20 June 2022

114

Independent Auditor’s report to the members of DS Smith Plc

Annual Report 2022 dssmith.com 115

Report on the audit of the financial statements

1. Opinion

In our opinion:

• the financial statements of DS Smith Plc (the 'parent Company') and its subsidiaries (the 'group') give a true and fair view of the state of the

group's and of the parent Company's affairs as at 30 April 2022 and of the group's profit for the year then ended;

• the group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting

standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB);

• the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice, including Financial Reporting Standard 101 "Reduced Disclosure Framework"; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise :

• the consolidated income statement;

• the consolidated statement of comprehensive income;

• the consolidated and parent Company balance sheets;

• the consolidated and parent Company statements of changes in equity;

• the consolidated cash flow statement;

• the related notes 1 to 34 to the consolidated financial statements; and

• the related notes 1 to 17 to the parent Company financial statements.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law, international

accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the United Kingdom and

IFRSs as issued by the International Accounting Standards Board (IASB). The financial reporting framework that has been applied in the

preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101

Reduced Disclosure Framework

(United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under

those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the

financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest

entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the

group and parent Company for the year are disclosed in note 3 to the financial statements. We confirm that the non-audit services prohibited

by the FRC’s Ethical Standard were not provided to the group or the parent Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 115

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

116

3. Summary of our audit approach

Key audit

matters

The key audit matters that we identified in the current year were:

• Classification and presentation of adjusting items; and

• Valuation of uncertain tax position provisions

These key audit matters have a similar level of risk to the prior year and were presented as key audit matters in our

2021 audit report.

Materialit

The materiality that we used for the group financial statements was £23m (2021: £20m) which was determined on

the basis of c. 6% of statutory profit before tax (2021: 0.33% of revenue).

As a listed entity we typically seek to apply a profit based measure as the primary basis for materiality. The revision to

our approach to determining materiality from the prior year is due to the more stable performance across the group’s

operations in FY22 following a year of volatility in profit in the year to 30 April 2021 from the impact of the Covid-19

pandemic on the group’s operations and consumer demand in the markets in which the group operates.

Scoping

Our full scope audits and specified audit procedures resulted in coverage of 86% (2021: 83%) of the group’s profit

before tax before adjusting items and 73% (2021: 73%) of the group’s revenue.

Significant

changes in

our approach

In determining our materiality we have reverted to using a profit-based benchmark, our preferred approach for

determining materiality for listed entities, following the volatility in this measure in 2021 financial year due to the

impact of Covid-19.

Our key audit matters remain consistent with those identified in the prior year.

FINANCIAL STATEMENTS

116

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

116

3. Summary of our audit approach

Key audit

matters

The key audit matters that we identified in the current yearwere:

• Classification and presentation of adjusting items; and

• Valuation of uncertain tax position provisions

These key audit matters have a similar level of risk to the prior year and were presented as key audit matters in our

2021 audit report.

Materialit

The

materiality that we usedfor the group financial statements was £23m (2021:£20m)whichwas determined on

the basis of c. 6% of statutory profit before tax (2021: 0.33%of revenue).

As a listed entity we typically seek to apply a profit basedmeasure as the primary basis for materiality. The revision to

our approach to determining materiality from the prior year is due to the morestable performance across the group’s

operations inFY22following ayear of volatility inprofit intheyearto 30 April 2021 from the impact of theCovid-19

pandemic on the group’s operations and consumer demand in the markets in which the group operates.

Scoping

Our full scope audits and specified audit procedures resulted in coverage of 86% (2021: 83%) of the group’s profit

before tax before adjusting items and 73% (2021: 73%) of the group’s revenue.

Significant

changes in

our approach

In determining our materiality we have reverted to using a profit-based benchmark, our preferred approach for

determining materiality for listed entities, following the volatility in this measure in 2021 financial year due to the

impact of Covid-19.

Our key audit matters remain consistent with those identified in the prioryear.

Annual Report 2022 dssmith.com 117

4. Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of

the financial statements is appropriate.

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

accounting included:

• assessing the group's financing facilities including the nature of facilities, repayment terms, covenants and available undrawn

committed facilities;

• considering the reasonableness of the projections and the appropriateness of the sensitivities performed by management;

• evaluating the key assumptions used in the forecasts;

• recalculating the amount of headroom in the forecasts (liquidity and covenants);

• assessing the linkage to the group’s business model and identified principal risks;

• performing additional sensitivity scenario analysis;

• assessing the historical accuracy of forecasts prepared by management;

• assessing the mathematical accuracy of the model itself; and

• assessing the disclosures relating to going concern.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or

collectively, may cast significant doubt on the group's and parent Company's ability to continue as a going concern for a period of at least

twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw

attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt

the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of

the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.

These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and

directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these matters.

5.1. Classification and presentation of adjusting items

Key audit

matter

description

The classification and presentation of costs and income within adjusting items in the income statement is a key

determinant in assessing the quality of the group’s earnings and also presents the opportunity for management bias

in the presentation of results. Management judgement is required in determining the accounting policy for identifying

if an item is adjusting based on the size, nature and incidence of the item. Additionally, this is an area that attracts

greater scrutiny from the financial reporting regulator.

For the year ended 30 April 2022, the group recognised net adjusting items before taxation in continuing operations

of £37m (2021: £56m). Such items include business disposals, restructuring, acquisition and integration costs,

and impairments.

Refer to note 4 for details of adjusting items in the year and note 1(x) for management’s policy for identifying

adjusting items and note 1(aa) where adjusting items are identified as a critical accounting judgement.

The classification and presentation of adjusting items is also considered to be a significant matter for the

Audit Committee (page 85).

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 117

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

118

How the scope

of our audit

responded to

the key audit

matter

As a response to the identified key audit matter, we performed the following audit procedures:

• We obtained an understanding of relevant controls in respect of the classification and presentation of

adjusting items;

• We considered and challenged the appropriateness and classification of the items which are included within

adjusting items by testing a sample and agreeing them back to relevant supporting documentation;

• We tested and considered items within underlying results which may be adjusting by nature but not

separately identified;

• We assessed the appropriateness of the adjusting items recorded in accordance with management’s policy and the

latest guidance from the FRC including the latest thematic review on this topic; and

• We assessed the related disclosure in the group financial statements for consistency with the prior period and

current market best practice.

Key

observations

We are satisfied that the amounts classified as adjusting items are in accordance with the group’s accounting policy

and the related disclosure of these items in the financial statements is appropriate.

5.2. Valuation of uncertain tax position provisions

Key audit

matter

description

The value of the tax provisions against a number of uncertain tax positions requires judgement in relation to the likely

outcome of negotiations with various tax authorities. Areas of particular focus included transfer pricing provisioning

and other uncertain tax positions in the UK and overseas. The total tax risk provision (including interest thereon) held

by the Group is £117.8m (2021: £115.6m).

Refer to note 1(w) for management’s process for estimating and recording tax provisions and note 1(z) for further

detail in respect of the range of possible outcomes with regards to those uncertain tax positions. Taxation is also

identified in note 1(z) as a key source of estimation uncertainty and to be a significant matter for the Audit Committee.

How the scope

of our audit

responded to

the key audit

matter

As a response to the identified key audit matter, we performed the following audit procedures:

• We obtained an understanding of relevant controls in respect of the provisioning for uncertain tax positions;

• We involved our tax specialists, including those in local jurisdictions as required, to challenge the estimates and

judgements made by management when calculating the income tax payable in each territory and the associated

provisions held in relation to tax exposures. This included consideration of tax exposures relating to transfer pricing

and consideration of specific provisions made in relation to UK and overseas tax risks;

• Specifically, we have reviewed and assessed the correspondence with the taxation authorities in significant

locations and the supporting evidence or opinions received from external counsel or other advisors where

management has utilised such opinions to estimate the likely outcome of technical tax treatments in order to

assess the reasonableness of the provisions made and

• We assessed the mathematical accuracy and appropriateness of the underlying source data used to calculate UK

and overseas taxation provisions.

Key

observations

We are satisfied that the estimates and judgements made by management used in the recording and valuation of the

uncertain tax provisions are reasonable.

FINANCIAL STATEMENTS

118

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

118

How the scope

of our audit

responded to

the key audit

matter

As a response to the identified key audit matter, we performed thefollowing audit procedures:

• We obtained an understanding of relevant controls in respect of the classification and presentation of

adjusting items;

• We considered and challenged the appropriateness and classification of the items which are included within

adjusting items by testing a sample and agreeing them back to relevant supporting documentation;

• We tested and considered items within underlying results which may be adjusting by nature but not

separately identified;

• We assessed the appropriateness of the adjusting items recorded in accordance with management’s policy and the

latest guidance from the FRC including the latest thematic review on this topic; and

• We assessed the related disclosure in the group financial statements for consistency with the prior period and

current market bestpractice.

Key

observations

We are satisfied that the amounts classified as adjusting items are in accordance with the group’s accounting policy

and the related disclosure of these items in the financial statements is appropriate.

5.2. Valuation of uncertain tax position provisions

Key audit

matter

description

The value of the tax provisions against a number of uncertain tax positions requires judgement in relation to the likely

outcome of negotiations with various tax authorities. Areas of particular focus included transfer pricing provisioning

and other uncertain tax positions in theUK and overseas. The total tax risk provision (including interest thereon) held

by the Group is £117.8m (2021: £115.6m).

Refer to note 1(w) for management’s process for estimating and recording taxprovisions and note 1(z) for further

detail in respectof therange of possible outcomes with regards to those uncertain tax positions.Taxationis also

identified in note 1(z) as a key source of estimation uncertainty andto be a significant matter for theAudit Committee.

How the scope

of our audit

responded to

the key audit

matter

As a response to the identified key audit matter, we performed thefollowing audit procedures:

• We obtainedan understanding of relevant controlsin respect of the provisioning for uncertain tax positions;

• We involved our tax specialists, including those in local jurisdictions as required, to challenge the estimates and

judgements made by management when calculating the income tax payable in each territory and the associated

provisions held in relation to tax exposures. This included consideration of tax exposures relating to transfer pricing

and consideration of specific provisions made in relation to UKand overseas tax risks;

• Specifically, we have reviewed and assessed the correspondencewith the taxation authorities in significant

locations and the supporting evidence or opinions received from external counsel or other advisors where

management has utilisedsuch opinions toestimate thelikely outcome of technical tax treatments in order to

assess the reasonableness of the provisions made and

• We assessed the mathematical accuracy and appropriateness of the underlying source data used to calculate UK

and overseas taxation provisions.

Key

observations

We are satisfied that the estimates and judgements made by management used in the recording and valuation of the

uncertain tax provisions are reasonable.

Annual Report 2022 dssmith.com 119

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a

reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in

evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements Parent Company financial statements

Materialit

£23m (2021: £20m) £11.5m (2021: £10m)

Basis for

determining

materiality

We have used statutory profit before tax as the primary

benchmark in determining materiality and the materiality

equates to 6.0% of statutory profit before tax.

In the prior year, we used revenue as the benchmark in

determining materiality and this equates to 0.33% of revenue

and approximately 7% of statutory profit before tax.

Parent Company materiality equates to less than 1%

(2021: less than 1%) of net assets, and is capped at

50% (2021: 50%) of group materiality.

Rationale for

the benchmark

applied

In determining our materiality we have reverted to using a profi

based benchmark, our preferred approach for determining

materiality for listed entities following the volatility in this

measure in 2021 financial year due to the impact of Covid-19.

Profit before tax is a key metric for users of the financial

statements and is consistent with the group’s internal and

external reporting.

Net assets is typically considered an appropriate

benchmark for materiality as the parent Company is

the holding Company, but given the quantum of net

assets on the parent Company balance sheet, we

have limited materiality to 50% of group materiality.

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected

misstatements exceed the materiality for the financial statements as a whole.

Group financial statements Parent Company financial statements

Performance

materialit

70% (2021: 65%) of group materialit

70% (2021: 65%) of parent Company materialit

Basis and

rationale for

determining

performance

materiality

On the basis of our risk assessment, our assessment of the group’s control environment, the number and quantum of

misstatement identified and management’s willingness to correct misstatements that may be identified, we set

performance materiality for the group and parent Company as 70% (2021: 65%) of group materiality. The increase on

the prior year audit reflects the group’s recovery against the impact of the pandemic and its underlying performance

this year.

Accordingly, we set performance materiality for the group at £16.1m (2021: £13.0m) and parent Company at £8.0m

(2021: £6.5m).

Materiality £23mStatutory profit

before tax £378m

Audit Committee

reporting threshold £1m

Statutory profit before tax

Materiality

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 119

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

120

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1m (2021: £1m), as well as

differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on

disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing

the risks of material misstatement at the group level.

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

North America.

Based on that assessment, we focused our group audit scope primarily on the audit work at seventeen components (2021: sixteen) located

across the United Kingdom, Spain, Portugal, France, Germany, North America, Italy, Hungary, Poland, Denmark, Netherlands and Sweden.

These seventeen components represent the principal business units within the group’s key reportable segments and accordingly provide an

appropriate basis for undertaking audit work to address the risks of material misstatement. Component materiality was capped at £8.0m

(2021: £6.5m). In total, these components accounted for 73% (2021: 73%) of revenue and 86% (2021: 83%) of profit before tax and

adjusting items.

The group audit team takes an active part in the conduct of the audits at these components. For each component, we included the component

audit teams in our team briefings held over video conference call facilities to discuss the group risk assessment and audit instructions, to

confirm their understanding of the business, and to discuss their local risk assessment. Throughout the audit, we maintained regular contact

in order to support, challenge and direct their audit approach. We also attended local audit close meetings with local management, performed

reviews of their working papers of significant and material components, and reviewed their reporting to us of the findings from their work.

At the head office level, we also tested the consolidation process and carried out analytical procedures to verify our conclusion that there

were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit.

Revenue Profit before tax and adjusting items

7.2. Our consideration of the control environment

Our approach to controls testing across the group reflects the geographical spread of the group, its decentralised nature and the complex

systems landscape. We do not take a centralised approach to controls testing and controls reliance across the group. A number of component

audit teams took a controls reliance approach in respect of some business process cycles (e.g. revenue) whilst other components do not.

The ability to take controls reliance is impacted by the effectiveness of IT controls in place. We involved IT specialists in performing tests

related to IT controls.

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

Full audit scope

Analytical reviews

73%

27%

Full audit scope

Analytical reviews

86%

14%

FINANCIAL STATEMENTS

120

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

120

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1m (2021: £1m), as well as

differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on

disclosure matters that we identified when assessing theoverall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing

the risks of material misstatement at the group level.

The group operates in fourgeographic segments, three in Europe (Northern Europe, Eastern Europe and Southern Europe) and another in

North America.

Based on that assessment, we focused our group audit scope primarilyon the audit work at seventeen components (2021: sixteen) located

across the United Kingdom, Spain, Portugal, France, Germany, North America, Italy, Hungary, Poland, Denmark, Netherlands and Sweden.

These seventeen components represent theprincipal business units within the group’s key reportable segments and accordingly provide an

appropriate basis for undertaking audit work to address the risks of material misstatement. Component materiality was capped at £8.0m

(2021: £6.5m). In total, thesecomponents accounted for 73% (2021: 73%) of revenue and 86% (2021: 83%) of profit before tax and

adjusting items.

The group audit team takes an activepart in the conduct of the audits at these components. For each component, we included thecomponent

audit teams in our team briefings held over video conference call facilities to discuss the group risk assessment and audit instructions, to

confirm their understanding of the business, and to discuss their local risk assessment. Throughout the audit, wemaintained regularcontact

in order to support, challenge and direct their audit approach. We also attendedlocal audit closemeetings with local management, performed

reviews of their working papers of significant and material components, and reviewed their reporting to us of the findings from their work.

At the head office level, we also tested the consolidation process and carried outanalytical procedures to verify our conclusion that there

were no significant risks of material misstatement of the aggregated financialinformation of the remaining components not subject to audit.

Revenue Profit before tax and adjusting items

7.2. Our consideration of the control environment

Our approach to controls testing across thegroup reflects thegeographicalspread of thegroup, its decentralised nature and the complex

systems landscape. We do not take acentralisedapproach to controls testing and controls reliance across the group. A number of component

audit teams took a controls reliance approach in respect of some business process cycles (e.g. revenue) whilst other components do not.

The ability to take controls reliance is impacted by the effectiveness of IT controls in place. We involved IT specialists in performing tests

related to IT controls.

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

Annual Report 2022 dssmith.com 121

7.3 Our consideration of climate-related risks

As highlighted in management’s TCFD report on pages 56 to 60 and the principal risks on pages 47 to 55 the group is exposed to the impacts

of climate change on its business and operations. In considering the scope of our audit procedures we have obtained management’s

assessment on the impact of climate change on their financial statements and built this into our risk assessment through consideration of the

risks in climate change. The key areas in the group financial statement considered for FY22 were the statements used in the goodwill

impairment review and in the directors’ assessment of the adoption of the going concern basis and long-term viability alongside consideration

across all financial statement account balances. The group continues to develop its assessment of the potential impacts of climate change and

identified the extensive climate related strategic goals, climate commitments, scenario evaluation, risk management processes and the link

through the group’s governance processes all of which are articulated in the Annual Report.

We performed our own qualitative risk assessment of the potential impact of climate change on the group’s account balances and classes of

transaction and did not identify any reasonably possible risks of material misstatement. We also involved climate change and sustainability

specialists for assessment of the Task Force on Climate-Related Financial Disclosures reporting and considering whether it is materially

consistent with the financial statements and our knowledge obtained in the audit.

8. Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report

thereon. The directors are responsible for the other information contained within the Annual Report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our

report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a

material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

9. Responsibilities of Directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial

statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to

enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent Company’s ability to continue as a

going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors

either intend to liquidate the group or the parent Company or to cease operations, or have no realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable 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.

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 auditor’s report.

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

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities, including fraud is detailed below.

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 121

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

122

11.1 Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and

regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the group's remuneration

policies, key drivers for directors' remuneration, bonus levels and performance targets;

• results of our enquiries of management, which this year also included a fraud brainstorming session held with key members of

management, together with further enquiries of internal audit, and the audit committee about their own identification and assessment of

the risks of irregularities;

• any matters we identified having obtained and reviewed the group's documentation of their policies and procedures relating to:

– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

• the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists,

including tax, valuations, pensions, financial instruments and IT specialists regarding how and where fraud might occur in the financial

statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified

the greatest potential for fraud related to the classification and presentation of adjusting items. In common with all audits under ISAs (UK), we

are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws

and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws

and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation and tax legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance

with which may be fundamental to the group's ability to operate or to avoid a material penalty. These included the regulatory solvency

requirements and environmental regulations.

11.2 Audit response to risks identified

As a result of performing the above, we identified classification and presentation of adjusting items as a key audit matter. The key audit

matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that

key audit matter.

In addition to the above, our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant

laws and regulations described as having a direct effect on the financial statements;

• enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims.

Where relevant we also met directly with external advisers and legal counsel;

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due

to fraud;

• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence

with HMRC;

• understanding safeguards management have in place, such as whistleblower hotlines, and making enquiries of internal audit as to the

nature of matters reported; and

• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other

adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the

business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal

specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations

throughout the audit.

FINANCIAL STATEMENTS

122

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

122

11.1 Identifying and assessing potential risks related to irregularities

In identifying and assessing risks ofmaterial misstatementinrespect of irregularities,including fraud and non-compliance with laws and

regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the group's remuneration

policies, key drivers for directors' remuneration, bonus levels and performance targets;

• results of our enquiries of management, which this year also included afraud brainstorming session held with key members of

management, togetherwith further enquiries of internal audit, and the audit committee about their own identification and assessment of

the risks of irregularities;

• any matters we identified havingobtained and reviewed the group's documentation of their policiesand procedures relating to:

– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

– detecting and responding to the risks of fraud andwhether they have knowledge of any actual, suspected or alleged fraud;

– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

• the matters discussed among the audit engagement team including significant component audit teams and relevant internalspecialists,

including tax, valuations, pensions, financial instrumentsand IT specialists regarding how and where fraud might occur in the financial

statements and any potential indicators of fraud.

As a result of these procedures, we considered theopportunities and incentives that may exist within the organisation for fraud and identified

the greatest potential for fraud related to the classification and presentation of adjusting items. In common with all audits under ISAs (UK), we

are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws

and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws

and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation and tax legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance

with which may be fundamental to thegroup's ability to operate or to avoid amaterial penalty. Theseincluded the regulatory solvency

requirements and environmental regulations.

11.2 Audit response to risks identified

As a result of performing the above, we identified classification and presentation of adjusting items as a key audit matter. The key audit

matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that

key auditmatter.

In addition to the above, our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant

laws and regulations described as having a direct effect on the financial statements;

• enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigationand claims.

Where relevantwe also met directly with external advisers and legal counsel;

• performing analytical procedures to identify any unusual or unexpected relationships thatmay indicate risks of material misstatement due

to fraud;

• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence

with HMRC;

• understanding safeguards management have in place, such as whistleblower hotlines, and making enquiries of internal audit as to the

nature of matters reported; and

• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other

adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the

business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal

specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations

throughout theaudit.

Annual Report 2022 dssmith.com 123

Report on other legal and regulatory requirements

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

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

Act 2006.

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

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared

is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent Company and their environment obtained in the course of the

audit, we have not identified any material misstatements in the strategic report or the directors' report.

13. Corporate Governance Statement

The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate

Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance

Statement is materially consistent with the financial statements and our knowledge obtained during the audit:

• the directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified set out on pages 50 and 51;

• the directors' explanation as to its assessment of the group's prospects, the period this assessment covers and why the period is

appropriate set out on page 49;

• the directors' statement on fair, balanced and understandable set out on page 114;

• the board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 79;

• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on

pages 79 to 81; and

• the section describing the work of the audit committee set out on page 82 to 87.

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

14.1. Adequacy of explanations received and accounting records

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

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from

branches not visited by us; or

• the parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

14.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been

made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.

We have nothing to report in respect of these ma

ters.

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 123

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

124

15. Other matters which we are required to address

15.1. Auditor tenure

Following the recommendation of the audit committee, we were appointed by the shareholders on 13 October 2006 to audit the financial

statements for the year ended 30 April 2007 and subsequent financial periods. Following a competitive tender process, we were reappointed

as auditor for the year ended 30 April 2014 and subsequent financial years. The period of total uninterrupted engagement including previous

renewals and reappointments of the firm is 16 years, covering the years ended 30 April 2007 to 30 April 2022. The year to 30 April 2022 will

be our final year as auditor of DS Smith Plc.

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

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

16. Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit

work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s

report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the

Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial statements

form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the

UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the

annual financial report has been prepared using the single electronic format specified in the ESEF RTS.

Nicola Mitchell

(Senior Statutory Auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

20 June 2022

FINANCIAL STATEMENTS

124

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

124

15. Other matters which we are required to address

15.1. Auditor tenure

Following the recommendation of the audit committee,we were appointed by the shareholders on 13 October2006 to audit the financial

statements for the year ended30 April 2007 and subsequentfinancial periods. Following a competitive tenderprocess, we were reappointed

as auditor for the year ended 30 April 2014 and subsequent financial years. The period of total uninterrupted engagement includingprevious

renewals and reappointments of thefirm is 16 years, covering the years ended 30 April 2007 to 30 April 2022. The year to 30 April 2022 will

be ourfinal year as auditor of DS Smith Plc.

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

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

16. Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit

work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s

report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the

Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule(DTR) 4.1.14R, these financial statements

form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of the

UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance overwhether the

annual financial report has been prepared using the single electronic format specified in theESEF RTS.

Nicola Mitchell

(Senior Statutory Auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

20 June 2022

Consolidated income statement

Year ended 30 April 2022

Annual Report 2022 dssmith.com 125

Continuing operations

Note

Before

adjusting

items

2022

£m

Adjusting

items

2022

(note 4)

£m

After

adjusting

items

2022

£m

Before

adjusting

items

2021

£m

Adjusting

items

2021

(note 4)

£m

After

adjusting

items

2021

£m

Revenue 2 7,241 – 7,241 5,976 – 5,976

Operating costs 3,4 (6, 625) (37) (6,662) (5,474) (44) (5,518)

Operating profit before amortisation,

acquisitions and divestments

2 616 (37) 579 502 (44) 458

Amortisation of intangible assets;

acquisitions and divestments

10, 4 (138) 2 (136) (142) (5) (147)

Operating profit 4 478 360 (49) 311

Finance income 5

443

1 – 1

Finance costs 5, 4 (68) (2) (70) (76) (7) (83)

Employment benefit net finance expense 25 (3) – (3) (3) – (3)

Net financing costs (70) (2) (72) (78) (7) (85)

Profit after financing costs 408 282 (56) 226

Share of profit of equity accounted investments,

net of tax 13

371

5 – 5

Profit before income tax 415 (37) 3 78 287 (56) 231

Income tax (expense)/credi

7, 4 (100) 2 (98) (65) 16 (49)

Profit for the year from continuing operations 315

(35)

222 (4 0) 182

Discontinued operations

Profit for the year from discontinued operations,

net of tax 30(b) – – – – 12 12

Profit for the year 315 (35) 280 222 (28) 194

Profit for the year attributable to:

Owners of the paren

315 (35) 280 222 (28) 1 94

Non-controlling interests –––– – –

Earnings per share

Earnings per share from continuing and discontinued operations

Basic 8 20.4p 14.2p

Diluted 8 20.3p 14.1p

Earnings per share from continuing operations

Basic 8 20.4p 13.3p

Diluted 8 20.3p 13.2p

Adjusted earnings per share from continuing operations

Basic 8, 33 30. 7p 24.2p

Diluted 8 30.5p 24.1p

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 125

(3 5) 28 0

–

(37)

–

Consolidated statement of comprehensive income

Year ended 30 April 2022

126

Note

2022

£m

2021

£m

Profit for the year 280 1 94

Items which will not be reclassified subsequently to profit or loss

Actuarial gain/(loss) on employee benefits 25 68 (5)

Equity interest at FVTOCI – net change in fair value – (3)

Income tax on items which will not be reclassified subsequently to profit or loss 7 (14) (5)

Items which may be reclassified subsequently to profit or loss

Foreign currency translation differences (40) (95)

Reclassification from translation reserve to income statement arising on divestment (3) –

Cash flow hedges fair value changes 1,069 103

Reclassification from cash flow hedge reserve to income statemen

(357) 9

Movement in net investment hedge 28 (2)

Income tax on items which may be reclassified subsequently to profit or loss 7 (162) (21)

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

Total

comprehensive income for the year

869 175

Total

comprehensive income attributable to:

Owners of the paren

869 175

Non-controlling interests – –

FINANCIAL STATEMENTS

126

Consolidated statement of comprehensive income

Year ended 30 April 2022

126

Note

2022

£m

2021

£m

Profit for the year 280 194

Items which will not be reclassified subsequently to profit or loss

Actuarial gain/(loss) on employee benefits 25 68 (5)

Equity interest at FVTOCI – net change in fair value – (3)

Income tax on items which will not be reclassified subsequently to profit or loss 7 (14) (5)

Items which may be reclassified subsequently to profit or loss

Foreign currency translation differences (40) (95)

Reclassificationfrom translation reserve to income statement arising on divestment (3) –

Cash flow hedges fair value changes 1,069 103

Reclassificationfrom cash flow hedge reserve to income statemen

(357) 9

Movement in netinvestment hedge 28 (2)

Income tax on items which may be reclassified subsequently toprofit orloss 7 (162) (21)

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

Total comprehensive income for the year

869 175

Total comprehensive income attributable to:

Owners of the paren

869 175

Non-controlling interests – –

Consolidated statement of financial position

At 30 April 2022

Annual Report 2022 dssmith.com 127

Note

2022

£m

2021

£m

Assets

Non-current assets

Intangible assets

10 2,906 2,995

Biological assets

10 9

Property, plant and equipmen

11 3,128 3,050

Right-of-use assets

12 199 226

Equity accounted investments

13 17 38

Other investments

14 16 13

Deferred tax assets

22 7 37

Other receivables

16 – 1

Derivative financial instruments

21 495 35

Total non-current assets

6,778 6,404

Current assets

Inventories

15 703 537

Biological assets

7 6

Income tax receivable

34 41

Trade and other receivables

16 1,229 818

Cash and cash equivalents

19 819 813

Derivative financial instruments

21 316 80

Assets classified as held for sale

– 1

Total current assets

3,108 2,296

Total assets

9,886 8,700

Liabilities

Non-current liabilities

Borrowings

(

1,391

)

(

2,066

)

Employee benefits

(

)

(

175

)

Other payables

(

)

(

)

Provisions

(

)

(

)

Lease liabilities

(

140

)

(

159

)

Deferred tax liabilities

(

396

)

(

271

)

Derivative financial instruments

(

)

(

)

Total non-current liabilities

(

2,085

)

(

2,709

)

Current liabilities

Bank overdrafts

(

)

(

)

Borrowings

(

681

)

(

235

)

Trade and other payables

(

2,503

)

(

1,834

)

Income tax liabilities

(

143

)

(

133

)

Provisions

(

)

(

)

Lease liabilities

(

)

(

)

Derivative financial instruments

(

)

(

)

Total current liabilities

(

3,567

)

(

2,456

)

Total liabilities

(

5,652

)

(

5,165

)

Net assets

4,234 3,535

uit

Issued capital

24 137 137

Share premium

2,248 2,241

Reserves

24 1,847 1,155

Total equity attributable to owners of the paren

4,232 3,533

Non-controlling interests

2 2

Total equity

4,234 3,535

Approved by the Board of Directors of DS Smith Plc on 20 June 2022 and signed on its behalf by:

M W Roberts A R T Marsh

Director Director

The accompanying notes are an integral part of these consolidated financial statements.

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 127

Consolidated statement of changes in equity

Year ended 30 April 2022

128

Note

capital

£m

premium

£m

Hedging

reserve

£m

Translation

reserve

£m

Own

£m

Retained

earnings

£m

Total equit

attributable

to owners

of the

parent

£m

Non-

controlling

interests

£m

Total

equity

£m

At 1 May 2020 137 2,238 (39) 14 (3) 1,003 3,350 1 3,351

Profit for the yea

– – – – – 194 194 – 194

Actuarial loss on employee benefits 25 – – – – – (5) (5) – (5)

Equity interest at FVTOCI – change in

fair value

– – – – – (3) (3) – (3)

Foreign currency translation differences – – – (95) – – (95) – (95)

Cash flow hedges fair value changes – – 103 – – – 103 – 103

Reclassification from cash flow hedge

reserve to income statement 21(c) – – 9 – – – 9 – 9

Movement in net investment hedge – – – (2) – – (2) – (2)

Income tax on other comprehensive income – – (20) (1) – (5) (26) – (26)

Total comprehensive income/(expense) – – 92 (9 8) – 181 17 5 – 17 5

Issue of share capital – 3 – – – – 3 – 3

Employee share trus

– – – – – (2) (2) – (2)

Share-based payment expense

(net of tax)

– – – – – 10 10 – 10

Transactions with non-controlling interests – – – – – (3) (3) 1 (2)

Other changes in equity in the year – 3 – – – 5 8 1 9

At 30 April 2021 137 2,241 53 (84) (3) 1,189 3,533 2 3,535

Profit for the yea

– – – – – 280 280 – 280

Actuarial gain on employee benefits 25 – – – – – 68 68 – 68

Foreign currency translation differences – – – (4 0) – – (40) – (4 0)

Reclassification from translation reserve

to income statement arising on

divestment

– – – (3) – – (3) – (3)

Cash flow hedges fair value changes – – 1,069 – – – 1,069 – 1,069

Reclassification from cash flow hedge

reserve to income statement

21(c) – – (357) – – – (357) – (357)

Movement in net investment hedge – – – 28 – – 28 – 28

Income tax on other comprehensive income – – (163) 1 – (14) (176) – (176)

Total comprehensive income/(expense) – – 549 (14) – 334 869 – 86 9

Issue of share capital – 7 – – – – 7 – 7

Employee share trus

– – – – (6) (15) (21) – (21)

Share-based payment expense

(net of tax) – – – – – 10 10 – 1 0

Dividends paid 9 – – – – – (166) (166) – (166)

Reclassification – – 7 (7) – – – – –

Other changes in equity in the year – 7 7 (7) (6) (1 71) (17 0) – (1 70)

At 30 April 2022 137 2, 248 6 09 (105) (9) 1,352 4,23 2 2 4,234

1. Retained earnings include a reserve related to merger relief (note 24).

FINANCIAL STATEMENTS

128

Consolidated statement of changes in equity

Year ended 30 April 2022

128

Note

capital

£m

premium

£m

Hedging

reserve

£m

Translation

reserve

£m

Own

£m

Retained

earnings

£m

Total equit

attributable

to owners

of the

parent

£m

Non-

controlling

interests

£m

Total

equity

£m

At 1 May 2020 137 2,238 (39) 14 (3) 1,003 3,350 1 3,351

Profit for the yea

– – – – – 194 194 – 194

Actuarial loss on employee benefits 25 – – – – – (5) (5) – (5)

Equity interest at FVTOCI – change in

fair value

– – – – – (3) (3) – (3)

Foreign currency translation differences – – – (95) – – (95) – (95)

Cash flow hedges fair value changes – – 103 – – – 103 – 103

Reclassification from cash flow hedge

reserve to income statement 21(c) – – 9 – – – 9 – 9

Movement in net investment hedge – – – (2) – – (2) – (2)

Income tax on other comprehensive income – – (20) (1) – (5) (26) – (26)

Total comprehensive income/(expense) – – 92 (98) – 181 175 – 175

Issue of share capital – 3 – – – – 3 – 3

Employee share trus

– – – – – (2) (2) – (2)

Share-based payment expense

(net of tax)

– – – – – 10 10 – 10

Transactions with non-controlling interests – – – – – (3) (3) 1 (2)

Other changes in equity in the year – 3 – – – 5 8 1 9

At 30 April 2021 137 2,241 53 (84) (3) 1,189 3,533 2 3,535

Profit for the yea

– – – – – 280 280 – 280

Actuarial gain on employee benefits 25 – – – – – 68 68 – 68

Foreign currency translation differences – – – (40) – – (40) – (40)

Reclassification from translation reserve

to income statement arising on

divestment

– – – (3) – – (3) – (3)

Cash flow hedges fair value changes – – 1,069 – – – 1,069 – 1,069

Reclassification from cash flow hedge

reserve to income statement

21(c) – – (357) – – – (357) – (357)

Movement in net investment hedge – – – 28 – – 28 – 28

Income tax on other comprehensive income – – (163) 1 – (14) (176) – (176)

Total comprehensive income/(expense) – – 549 (14) – 334 869 – 869

Issue of share capital – 7 – – – – 7 – 7

Employee share trus

– – – – (6) (15) (21) – (21)

Share-based payment expense

(net of tax) – – – – – 10 10 – 10

Dividends paid 9 – – – – – (166) (166) – (166)

Reclassification – – 7 (7) – – – – –

Other changes in equity in the year – 7 7 (7) (6) (171) (170) – (170)

At 30 April 2022 137 2,248 609 (105) (9) 1,352 4,232 2 4,234

1. Retained earnings include a reserve related to merger relief (note 24).

Consolidated statement of cash flows

Year ended 30 April 2022

Annual Report 2022 dssmith.com 129

Continuing operations

Note

2022

£m

2021

£m

Operating activities

Cash generated from operations 27 1,07 9 895

Interest received 1 1

Interest paid (63) (69)

Tax paid (96) (66)

Cash flows from operating activities 921 761

Investing activities

Acquisition of subsidiary businesses, net of cash and cash equivalents 30 (23) (90)

Divestment of subsidiary businesses, net of cash and cash equivalents 30 35 16

Capital expenditure (431) (331)

Proceeds from sale of property, plant and equipment and intangible assets 16 8

Cash (outflows)/ inflows from res

ricted cash and other deposits (2) 4

Othe

investing activities 2 2

Cash flows used in investing activities (403) (391)

Financing activities

Proceeds from issue of share capital 7 3

Repayment of borrowings (529) (1,213)

Proceeds from borrowings 334 1, 157

Payments in respect of derivative financial instruments (35) (16)

Repayment of principal on lease liabilities (73) (73)

Dividends paid to Group shareholders 9 (166) –

Othe

(21) –

Cash flows used in financing activities (483) (142)

Increase in cash and cash equivalents from continuing operations 35 228

Discontinued operation

Cash flows used in discontinued operation 30(b) – (10)

Increase in cash and cash equivalents 35 218

Net cash and cash equivalents at beginning of the yea

719 505

Exchange losses on cash and cash equivalents (8) (4)

Net cash and cash equivalents at end of the year 19 746 719

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 129

Notes to the consolidated financial statements

130

1. Significant accounting policies

(a) Basis of preparation

(i) Consolidated financial statements

These financial statements are the consolidated financial statements

for the Group consisting of DS Smith Plc, a company registered in

England and Wales, and all its subsidiaries. The consolidated financial

statements have been prepared and approved by the Directors in

accordance with international accounting standards in conformity

with the requirements of the Companies Act 2006 and International

Financial Reporting Standards as issued by the International

Accounting Standards Board (IASB).

On 31 December 2020 EU-adopted IFRS was brought into UK law and

became UK adopted international accounting standards, with future

changes to IFRS being subject to endorsement by the UK

Endorsement Board. This transition constitutes a change in

accounting framework. The Group transitioned to UK-adopted

International Accounting Standards in its consolidated financial

statements on 1 May 2021. However, there is no change in relation to

recognition, measurement or disclosures, as well as no changes in the

accounting policies from the transition. The principal accounting

policies adopted are set out below in this note and were applied

consistently throughout the current and preceding year.

The consolidated financial statements are prepared on the historical

cost basis with the exception of biological assets, other investments,

assets and liabilities of certain financial instruments and employee

benefit plans that are stated at their fair value and share-based

payments that are stated at their grant date fair value.

The consolidated financial statements have been prepared on a going

concern basis as set out on pages 50-51 of the Directors’ report. The

Directors consider that adequate resources exist for the Company to

continue in operational existence for the foreseeable future.

The preparation of consolidated financial statements requires

management to make judgements, estimates and assumptions

that affect whether and how policies are applied, and the reported

amounts of assets and liabilities, income and expenses. Estimates

with a significant risk of material adjustment and the critical

accounting judgement are discussed in accounting policies 1(z)

and 1(aa).

(ii) Discontinued operations

The Group classifies non-current assets and disposal groups as held

for sale if their carrying amounts will be recovered principally through

a sale transaction rather than through continuing use. Non-current

assets and disposal groups classified as held for sale are measured

at the lower of their carrying amount and fair value less costs to sell.

Costs to sell are the incremental costs directly attributable to the

disposal of an asset or disposal group, excluding finance costs and

income tax expense.

The criteria for held for sale classification is regarded as met only

when the sale is highly probable and the asset or disposal group is

available for immediate sale in its present condition. Actions required

to complete the sale should indicate that it is unlikely that significant

changes to the sale will be made or that the decision to sell will be

withdrawn. Management must be committed to the plan to sell the

asset and the sale is expected to be completed within one year from

the date of the classification.

Assets and liabilities classified as held for sale are presented

separately as current items in the statement of financial position.

Discontinued operations are excluded from the results of continuing

operations and are presented as a single amount as profit or loss after

tax from discontinued operations in the income statement. Cash

flows generated from discontinued operations are presented as a

single item in the statement of cash flows.

All other notes to the financial statements include amounts for

continuing operations.

(iii) New accounting standards adopted

The following new accounting standards, amendments or

interpretations have been adopted by the Group as of 1 May 2021:

•

Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,

IAS 39, IFRS 7, IFRS 4 and IFRS 16);

and

•

Covid 19 Related Rent Concessions – amendments to IFRS 16

The adoption of new accounting standards, amendments and

interpretations have not had a material effect on the results for the

year or the financial position at the year end.

The accounting policies set out above have been applied consistently

in all periods presented in these consolidated financial statements.

The accounting policies have been applied consistently by all

Group entities.

(iv) Changes to accounting standards not yet adopted

These standards are currently not expected to have a material impact

on the consolidated financial statements of the Group.

FINANCIAL STATEMENTS

130

Notes to the consolidated financial statements

130

1. Significant accounting policies

(a) Basis of preparation

(i) Consolidated financial statements

These financial statements are the consolidated financial statements

for the Group consisting of DS Smith Plc, a company registered in

England and Wales, and all its subsidiaries. The consolidated financial

statements have been prepared and approved by the Directors in

accordance with international accounting standards in conformity

with the requirements of the Companies Act 2006 and International

Financial Reporting Standards as issued by the International

Accounting Standards Board (IASB).

On 31 December 2020 EU-adopted IFRS was brought into UK law and

became UK adopted international accounting standards, with future

changes to IFRS being subject to endorsement by the UK

Endorsement Board. This transition constitutes a change in

accounting framework. The Group transitioned to UK-adopted

International Accounting Standards in its consolidated financial

statements on 1 May 2021. However, there is no change in relation to

recognition, measurement or disclosures, as well as no changes in the

accounting policies from the transition. The principal accounting

policies adopted are set out below in this note and were applied

consistently throughout the current and preceding year.

The consolidated financial statements are prepared on the historical

cost basis with the exception of biological assets, other investments,

assets and liabilities of certain financial instruments and employee

benefit plans that are stated at their fair value and share-based

payments that are stated at their grant date fair value.

The consolidated financial statements have been prepared on a going

concern basis as set out on pages 50-51 of the Directors’ report. The

Directors consider that adequate resources exist for the Company to

continue in operational existence for the foreseeable future.

The preparation of consolidated financial statements requires

management to make judgements, estimates and assumptions

that affect whether and how policies are applied, and the reported

amounts of assets and liabilities, income and expenses. Estimates

with a significant risk of material adjustment and the critical

accounting judgement are discussed in accounting policies 1(z)

and 1(aa).

(ii) Discontinued operations

The Group classifies non-current assets and disposal groups as held

for sale if their carrying amounts will be recovered principally through

a sale transaction rather than through continuing use. Non-current

assets and disposal groups classified as held for sale are measured

at the lower of their carrying amount and fair value less costs to sell.

Costs to sell are the incremental costs directly attributable to the

disposal of an asset or disposal group, excluding finance costs and

income tax expense.

The criteria for held for sale classification is regarded as met only

when the sale is highly probable and the asset or disposal group is

available for immediate sale in its present condition. Actions required

to complete the sale should indicate that it is unlikely that significant

changes to the sale will be made or that the decision to sell will be

withdrawn. Management must be committed to the plan to sell the

asset and the sale is expected to be completed within one year from

the date of the classification.

Assets and liabilities classified as held for sale are presented

separately as current items in the statement of financial position.

Discontinued operations are excluded from the results of continuing

operations and are presented as a single amount as profit or loss after

tax from discontinued operations in the income statement. Cash

flows generated from discontinued operations are presented as a

single item in the statement of cash flows.

All other notes to the financial statements include amounts for

continuing operations.

(iii) New accounting standards adopted

The following new accounting standards, amendments or

interpretations have been adopted by the Group as of 1 May 2021:

•

Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9,

IAS 39, IFRS 7, IFRS 4 and IFRS 16);

and

•

Covid 19 Related Rent Concessions – amendments to IFRS 16

The adoption of new accounting standards, amendments and

interpretations have not had a material effect on the results for the

year or the financial position at the year end.

The accounting policies set out above have been applied consistently

in all periods presented in these consolidated financial statements.

The accounting policies have been applied consistently by all

Group entities.

(iv) Changes to accounting standards not yet adopted

These standards are currently not expected to have a material impact

on the consolidated financial statements of the Group.

Annual Report 2022 dssmith.com 131

1. Significant accounting policies continued

(b) Basis of consolidation

(i) Subsidiaries

The financial statements of subsidiaries are included in the

consolidated financial statements from the date that control

commences until the date that control ceases. Control is achieved

when the Group is exposed to, or has rights to, variable returns from

its involvement with the entity and has the ability to affect those

returns through its power over the entity. Intra-group balances and

any unrealised gains and losses or income and expenses arising from

intra-group transactions are eliminated in preparing the consolidated

financial statements.

(ii) Interests in equity accounted investments

The Group’s interests in equity accounted investments comprise

interests in associates and joint ventures. An associate is an entity

over which the Group has significant influence, but not control or joint

control, over the financial and operating policy decisions of the

investment. A joint venture is an entity in which the Group has joint

control, whereby the Group has rights to the net assets of the entity,

rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the

equity method. They are recognised initially at cost, which includes

transaction costs. Subsequent to initial recognition the consolidated

financial statements include the Group’s share of the profit or loss

and other comprehensive income of equity accounted investments,

until the date on which significant influence or joint control ceases.

(iii) Non-controlling interests

Non-controlling interests are shown as a component of equity in the

consolidated statement of financial position net of the value of

options over interests held by non-controlling interests in the

Group’s subsidiaries.

(iv) Business combinations

The acquisition method is used to account for the acquisition of

subsidiaries. Identifiable net assets acquired (including intangibles)

in a business combination are measured initially at their fair values

at the acquisition date.

Where the measurement of the fair value of identifiable net assets

acquired is incomplete at the end of the reporting period in which the

combination occurs, the Group will report provisional fair values.

Final fair values are determined within a year of the acquisition date

and applied retrospectively.

The excess of the consideration transferred and the amount of any

non-controlling interest over the fair value of the identifiable assets

(including intangibles), liabilities and contingent liabilities acquired is

recorded as goodwill.

The consideration transferred is measured as the fair value of

the assets given, equity instruments issued (if any), and liabilities

assumed or incurred at the date of acquisition.

Acquisition related costs are expensed as incurred.

The results of the subsidiaries acquired are included in the

consolidated financial statements from the acquisition date.

The Group is in the business of providing sustainable packaging

solutions, sustainable paper products, recycling and waste

management services. The Group has concluded that it is the principal

in its revenue arrangements.

Revenue comprises the fair value of the sale of goods and services,

net of value added tax and other sales taxes, rebates and discounts

and after eliminating sales within the Group. Revenue from contracts

with customers is recognised when control of the goods or services

is transferred to the customer at an amount that reflects the

consideration to which the Group expects to be entitled in exchange for

those goods or services and the fulfilment of the related performance

obligations. Generally this occurs when the goods are loaded into the

collection vehicle if the buyer is collecting them, or when the goods are

unloaded at the delivery address if the Group is responsible for delivery.

The transaction price is the contractual price with the customer

adjusted for rebates and discounts. Rebates and discounts are

estimated using historical data and experiences with the customers.

Revenue is recognised to the extent that it is highly probable that

a significant reversal will not occur. Returns from customers are

negligible. No element of financing is deemed present as typical

sales contracts with customers are usually shorter than 12 months.

A receivable is recognised when the goods are delivered or services

provided at a point in time that consideration is unconditional because

only the passage of time is required before the payment is due.

Revenue by function is not provided in the Group’s disclosures as

the year-on-year variability in the degree of integration would be

misrepresentative of the level of activity.

(d) Supplier rebates

The Group receives income from its suppliers, mainly in the form

of volume based rebates and early settlement discounts. These are

recognised as a reduction in operating costs in the year to which they

relate. At the period end, where appropriate, the Group estimates

supplier income due from annual agreements for volume rebates.

(e) Government grants

Government grants are recognised in the statement of financial

position initially as deferred income when there is reasonable

assurance that they will be received and that the Group will comply

with the conditions attached to them. Grants that compensate the

Group for expenses incurred are offset against the expenses in the

same periods in which the expenses are incurred. Grants relating to

assets are released to the income statement over the expected

useful life of the asset to which they relate on a basis consistent

with the depreciation policy. Depreciation is provided on the full

cost of the assets before deducting grants.

(f) Dividends

Dividends attributable to the equity holders of the Company paid

during the year are recognised directly in equity.

FINANCIAL STATEMENTS

Annual Report 2022 dssmith.com 131

Notes to the consolidated financial statements (continued)

132

1. Significant accounting policies continued

(g) Foreign currency translation

The consolidated financial statements are presented in sterling,

which is the Group’s presentational currency. Transactions in foreign

currencies are translated into the respective functional currencies of

Group companies at the foreign exchange rates ruling at the dates

of the transactions. Monetary assets and liabilities denominated

in foreign currencies at the reporting date are translated into the

functional currency at the foreign exchange rates ruling at that date.

Foreign exchange differences arising on translation of monetary

assets and liabilities are recognised in the consolidated income

statement. Non-monetary assets and liabilities that are measured

at historical cost in a foreign currency are translated using the

exchange rates at the dates of the transactions.

The assets and liabilities of all the Group entities that have a

functional currency other than sterling are translated at the closing

exchange rate at the reporting date. Income and expenses for each

income statement are translated at average exchange rates (unless

this average is not a reasonable approximation of the cumulative

effect of the rates prevailing on the transaction dates, in which case

income and expenses are translated at the date of the transactions).

On consolidation, exchange differences arising from the translation

of the net investment in foreign entities, borrowings, and other

financial instruments designated as hedges of such investments,

are recognised in the translation reserve. On the disposal of foreign

currency entities, the cumulative exchange difference recorded in the

translation reserve is taken to the consolidated income statement as

part of the gain or loss on disposal.

(h) Intangible assets

(i) Goodwill

The recognition of business combinations requires the excess of the

purchase price of acquisitions over the net book value of identifiable

assets acquired to be allocated to the assets and liabilities of the

acquired entity. The Group makes judgements and estimates in

relation to the fair value allocation of the purchase price.

Goodwill is stated at cost less accumulated impairment losses. The useful

life of goodwill is considered to be indefinite. Goodwill is allocated to the

cash generating units (CGUs), or groups of CGUs, that are expected to

benefit from the synergies of the combination and is tested annually for

impairment, or more frequently if an impairment is indicated.

On disposal of a subsidiary or a jointly controlled entity, the attributable

amount of goodwill is included in the determination of the profit or

loss recognised in the consolidated income statement.

(ii) Intellectual property

Intellectual property is stated at cost less accumulated amortisation

and impairment.

(iii) Computer software

Computer software that is integral to a related item of hardware is

included within property, plant and equipment. All other computer

software is treated as an intangible asset.

(iv) Customer related

Customer relationships, acquired as part of a business combination,

are capitalised separately from goodwill and are carried at cost less

accumulated amortisation and impairment.

(v) Other intangible assets

Other intangible assets that are acquired by the Group are carried at

cost less accumulated amortisation and impairment.

(vi) Amortisation

Amortisation of intangible assets (excluding goodwill) is charged to

the income statement on a straight-line basis over the estimated

useful lives of intangible assets, unless such lives are indefinite.

Intangible assets (other than goodwill) are amortised from the

date they are available for use.

The estimated useful lives are as follows:

Intellectual propert

Up to 20 years

Computer sof

ware 3–5 years

Customer relationships 5–15 years

(i) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated

depreciation and impairment.

Depreciation is charged to the income statement on a straight-line

basis over the estimated useful lives of each item of property,

plant and equipment, and major components that are accounted

for separately (or in the case of leased assets, the lease period,

if shorter). Land is not depreciated.

The estimated useful lives are as follows:

Freehold and long leasehold properties 10–50 years

Plant and equipmen

– motor vehicles 3–5 years

Plant and equipmen

– othe

, fixtures and fittings

(including IT hardware)

2–30 years

Gains or losses arising on the sale of surplus property assets are

recorded through operating profit before adjusting items.