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Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
File name: CoversX_XIntro_v78
Modification Date: 12 March 2024 5:44 pm
Elementis is a global specialty
chemicals company.
We offer performance driven additives
that help create innovative formulations
for consumer and industrial applications.
Our purpose
Unique chemistry, sustainable solutions
At Elementis, we bring a distinctive
combination of expertise, innovation
and teamwork to every formulation
challenge. We create high value specialty
additives that enhance the performance
of our customers’ products and
make a positive change in the world.
Read more about how our purpose guides our strategy, culture and values on
pages 6, 45-50 and 82.
Cautionary statement
The Annual Report and Accounts for the financial year ended 31 December 2023, as contained in
this document (“Annual Report”), contains information which viewers or readers might consider to
be forward-looking statements relating to or in respect of the financial condition, results, operations
or businesses of Elementis plc. Any such statements involve risk and uncertainty because they
relate to future events and circumstances. There are many factors that could cause actual results
or developments to differ materially from those expressed or implied by any such forward looking
statements. Nothing in this Annual Report should be construed as a profit forecast.
© 2020 Friend Studio Ltd
File name: CoversX_XIntro_v78
Modification Date: 12 March 2024 5:44 pm
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Financial highlights1
Operational highlights1
Revenue
$713.4m
2022: $736.4m
Profit/(loss) before tax
Total recordable injury rate
$39.7m
2022: $(54.8)m
0.33
2022: 0.67
Adjusted operating profit
Diluted earnings/(loss) per share
Environmental incidents
$103.9m
2022: $100.5m
4.7c
2022: (10.7)c
7
2022: 0
Adjusted operating margin
Adjusted diluted earnings per share
Scope 1 and 2 GHG emissions
14.6%
2022: 13.6%
10.8c
2022: 10.9c
Operating profit/(loss)
Dividend per share
$58.9m
2022: $(41.8)m
2.1c
2022: 0.0c
63 kt CO2e
2022: 67 kt CO2e
1 Refer to explanations and definitions, including alternative performance measures, on pages 24-25 and 190-191.
Contents
Strategic Report
2
Elementis at a glance
4 Chair’s statement
Corporate Governance
Financial Statements
73
Chair’s introduction to governance
127
Independent auditor’s report
74 Board of Directors
135 Consolidated income statement
6
The foundation of Elementis
77 Division of responsibilities
7 Our business model
78 Board and engagement highlights
10 Chief Executive Officer’s review
79 Board in action
13
Investment case
80 Workforce engagement
14 Our market environment
82 Purpose, culture and values
16 Strategic progress
83 Board evaluation
24 Key performance indicators
84 Nomination Committee report
26 Stakeholder engagement
87 Diversity
28 Section 172
29 Sustainability
88 Audit Committee report
92 Compliance statement
33 Materiality and strategy
96 Directors’ Remuneration report
123 Directors’ report
126 Directors’ responsibilities
34 Climate
42 Environment
45 People
51 Responsible business
54
Non-financial information statement
55 Finance report
60 Operating review
63 Risk management
67 Principal risks and uncertainties
72 Viability and going concern statement
136 Consolidated statement of
comprehensive income
137 Consolidated balance sheet
138 Consolidated statement
of changes in equity
139 Consolidated cash flow statement
140 Notes to the consolidated
financial statements
183 Company balance sheet
184 Company statement of
changes in equity
185 Notes to the company financial
statements of Elementis plc
Shareholder Information
190 Alternative performance measures
and unaudited information
192 Five year record
193 Shareholder services
194 Corporate information
195 GRI index
197
SASB index
198 Glossary
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
01
Elementis at a glance
What we do
Our products don’t have everyday names, but there is a little bit of Elementis in many everyday
items. We create specialty chemicals that deliver crucial end product attributes across a range
of industries. Innovation is at the heart of what we do: our focus is on creating solutions that
deliver performance improvements and enhanced sustainability credentials.
1,281
employees
23
FTSE 250
Two
locations worldwide
constituent
focused businesses
Global footprint
Americas
38%
of Group
revenues
31%
of employees
9
offices
Europe
42%
of Group
revenues
36%
of employees
8
offices
1
2
Asia
20%
of Group
revenues
3
33%
of employees
6
offices
Key
Office
Laboratory
Manufacturing
02 Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
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Modification Date: 12 March 2024 11:08 am
1 Cologne, Germany office closing end of 2024.
2 Porto, Portugal office opening in H1 2024.
3 We have two sites in Taiwan 1km from each other.
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Our businesses
Personal Care
Revenue
$209m
% of Group operating profit
Segment operating margin
42%1
24%
Key markets and our positioning
Colour cosmetic and skin
care rheology leader; global
antiperspirant actives leader
Competitive advantage
Innovation and
formulation
leadership
Customised
rheology
modifiers
Active
ingredients
High-quality
hectorite
resource
Global
reach
Skin care
We offer a broad selection of natural and
naturally-derived ingredients, facilitating
the development of natural skincare
products, while providing exceptional
texture, great sensory properties and
long-lasting stability.
Antiperspirants
Leader in antiperspirant actives,
we cater to consumer needs with
effective and sustainable solutions.
Our customers value our supply resilience
driven by our global production footprint.
We are the leading industry innovators,
responding to consumer trends for
high-performance actives that ensure
long-lasting sweat and odour protection.
Colour cosmetics
As the market leader in oil-based
rheology modification, we offer
a wide range of solutions and
technologies that help formulate
make-up products with vibrant colour
and excellent sensory properties.
Read more about Personal Care on pages 16-23 and 60-61.
Performance Specialties
Revenue
$504m
% of Group operating profit
Segment operating margin
58%1
14%
Key markets and our positioning
Deco and industrial coatings;
auto plastics; global rheology
additives leader; leading talc player
Competitive advantage
Innovation and
formulation
leadership
Rheology
modifiers
and additives
High-quality
hectorite
resource
High
performance
talc
Coatings
We supply rheology modifiers and other
complementary specialty additives to
manufacturers of industrial coatings
and decorative paints. Our products
help make industrial coatings last longer,
decorative paints more stain resistant
and sealants apply more evenly.
Talc
We are the second largest global
supplier of talc-based additives.
We use proprietary flotation technology,
which produces consistent talc purity
and allows customisation. Our talc makes
long life plastics stronger and lighter,
gasoline particulate filters work,
and food packaging recyclable.
Read more about Coatings and Talc on pages 16-23 and 61-62.
1 Pre central costs. Refer to alternative performance measures definitions on pages 190-191.
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Elementis plc
Annual Report and Accounts 2023
03
Chair’s
statement
“ Elementis delivered
a resilient performance
in 2023, in a continued
challenging demand
environment. These
results reflect the
commitment and hard
work of all our people
and their relentless
customer focus,
underpinned by our
specialist high-value
product offering.”
John O’Higgins
Chair
Introduction
The 2023 financial year has been
challenging for our sector, with prolonged
destocking by our customers across
both the industrial and personal care
segments. Against this backdrop,
Elementis demonstrated the resilience
of its integrated business model,
delivering both profit growth and margin
improvement. This also included a marked
improvement in the Talc business under
new leadership, which has further potential
for improvement in the near term.
Balance sheet and
shareholder returns
The Group made further progress in
2023 on strengthening the balance sheet.
Net debt fell to $202 million at year end,
helped by the proceeds from the sale of
our Chromium business earlier in the year.
Net debt, along with the higher earnings,
resulted in the net debt to EBITDA ratio
reducing to 1.4x (2022: 2.2x).
Considering this and also taking into
account the promising near-term
prospects for the business, the Board
is recommending a reinstatement of the
ordinary dividend to an amount of 2.1 cents
per share to shareholders at the upcoming
Annual General Meeting (“AGM”).
The final dividend will be paid on 31 May
2024 in pounds sterling at an exchange
rate of £1.00:$1.2705 (equivalent to
a sterling amount of 1.65 pence per
share) to shareholders on the register
at 3 May 2024.
Our updated Dividend Policy is intended
to provide a reliable annual return to our
shareholders. We will seek to maintain
balance sheet flexibility and strength,
in line with the Group’s capital allocation
framework, outlined in our recent Capital
Markets Day (“CMD”) presentation.
Elementis is a highly cash generative
business, so as leverage further reduces,
we will consider returns of excess capital
to our shareholders.
Strategic priorities and
new financial targets
Following the sale of Chromium, Elementis
has been transformed into a higher-quality
business, with strong market position in
attractive and structural growth segments.
Our strategy, as confirmed recently, is built
on the three pillars of Innovation, Growth
and Efficiency, underpinned by our
sustainability objectives. I am confident
that this will support our growth objectives
over the coming years. In addition,
we have set out updated 2026 targets
for adjusted operating margin of 19%+,
three-year average operating cash
conversion of at least 90%, and added
a new target for return on capital employed
(excluding goodwill) of over 20%. These
are ambitious targets which require both
detailed planning and relentless focus on
our core business and execution. Your
Board is fully committed to their delivery.
The plans include new efficiency and
growth programmes, which were
presented to investors by the members
of the Executive Leadership Team (“ELT”),
at our CMD in November. The efficiency
programmes aim to deliver $30 million
of annual savings by 2025, through
organisational restructuring, and further
operational and procurement savings.
04 Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Governance and Board
There were no changes to the Board
composition in the year.
After nine years’ dedicated service,
Steve Good will retire from the Board
at the conclusion of the AGM. On behalf
of the Board, I would like to thank Steve
for his immense contribution to Elementis
over that time.
Clement Woon will assume the role of
Chair of the Remuneration Committee
from 30 April 2024, the date of the AGM.
We were pleased to welcome Maria
Ciliberti to the Board as a Non-Executive
Director on 11 March 2024. Maria brings
a strong track record of global operational
experience in the chemical industry.
On appointment to the Board, Maria
will become a member of the Audit,
Nomination and Remuneration
Committees. Her appointment further
contributes to the strength and diversity
of the range of skills, backgrounds and
operational experience to the Board.
Shareholder engagement
As Chair, I welcome the opportunity
to maintain an active dialogue with our
shareholders, and seek their feedback
on a range of topics. This year, I have
spent a significant amount of time talking
to our shareholders about the strategic
direction of Elementis.
Following the publication of a letter by
our largest shareholder in which they
recommended the sale of Elementis,
I reached out to other major shareholders,
seeking their views on this matter.
Discussions highlighted the different
needs and views of our shareholders,
which the Board considered.
The Board fully understands the need to
demonstrate that Elementis can deliver
attractive and sustainable value for our
shareholders, noting the lack of progress
in achieving our 2019 objectives. We
believe that the strategy and efficiency
programmes outlined at the CMD,
alongside the updated financial targets,
go some way towards addressing
shareholders’ concerns. Clearly,
the proof will lie in delivery.
We are confident that the Group’s financial
strength gives us flexibility to demonstrate
growth and attractive capital distribution
to our shareholders, including our decision
to reinstate dividend payments.
Section 172 statement
The Board of Directors confirms that
during the year ended 31 December
2023, it has acted to promote the
long term success of Elementis for the
benefit of its shareholders, whilst having
due regard to the matters set out in
section 172(1) of the Companies Act
2006, being:
(a) the likely consequences of
any decision in the long term;
(b) the interests of the Company’s
employees;
(c) the need to foster the Company’s
business relationships with
suppliers, customers and others;
(d) the impact of the Company’s
operations on the community
and the environment;
(e) the desirability of the Company
maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly between
members of the Company.
Throughout the year, the Board
discussed its obligations, including
how stakeholder engagement is
incorporated into our long term
decision making. The Board regularly
discusses progress against strategic
priorities, focusing on the long term
strategic direction of Elementis.
As part of these discussions, the
Board considered relevant market
and industry trends and their potential
impact on our stakeholders.
Details of the Board’s engagement
with key stakeholders and key decisions
taken over the year are included on
pages 26-28.
Further details of the Board’s activities
are described in the Governance Report
on pages 78-81.
Outlook
Elementis has two attractive businesses
well positioned in markets with structural
growth drivers. I am confident that we
have the right team and the right strategy
to deliver on our ambitious new targets
and create long term sustainable value
for all our stakeholders.
John O’Higgins
Chair
The top-line growth programme covers
seven growth platforms across Personal
Care and Performance Specialties. It
targets a delivery of $90 million of above
market revenue by 2026 and is an integral
part of the margin improvement target.
We made good progress in 2023 on our
sustainability objectives, further reducing
emissions across our operations and in
our supply chain. Our ongoing work to
identify the risks and opportunities of
climate change to our business model
remains a top priority for the Board and
the ELT. We continue to look at ways to
optimise our energy and raw materials
supply to renewable sources and to
improve the safety and sustainability
profile of our products.
Nearly 70% of our revenue is generated
from products classed as natural,
or naturally-derived, leaving us well
positioned to address the sustainability
drivers in our markets, and support our,
and our customers’ commitments to
achieving Net Zero by 2050. In this
regard, we are committed to setting
new science-based target (“SBT”)
which will be published in 2024.
You can read more about our climate
disclosures on pages 34-41 of this report.
Our people, culture
and values
At Elementis, our people are the key
ingredient of our success and play a
pivotal role in bringing our purpose to life.
We have a value led culture, which is
demonstrated daily through supporting
and respecting each other and ensuring
that we meet the needs of our customers.
We place significant importance on
ensuring the safety and wellbeing of all
employees, and we performed strongly
in this area in 2023. We have also made
good progress against our objective of
creating a more diverse and inclusive
environment, and further increased
the proportion of senior female leaders
across our business.
The Board is committed to a high level of
employee engagement, and we welcomed
the opportunity to meet with employees
in several of our locations over the year.
In 2023, we partnered with a new external
provider to help us improve employee
engagement throughout the business,
moving to a biannual employee survey
process. We believe this new approach will
allow us to better engage with our people,
provide relevant and timely support and
training throughout the year. You can
read more about the results of the
Gallup employee survey on page 49.
On behalf of the Board, I would like
to thank all our employees for their
continued dedication in delivering
this resilient performance.
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
05
The foundation of Elementis
Our purpose
Unique chemistry,
sustainable solutions.
Our culture
Our supportive culture is
the catalyst to successful
delivery of our strategy.
Our strategy
The right strategy is important
to deliver business growth.
Sustainability
Sustainability flows
through every aspect of
our organisation, starting
with our purpose.
Our Values are core to our high performance culture and reflect
everything that we do
Safety
Solutions
Ambition
Respect
Team
Our commitment
to safety is our
way of life.
We make a difference
through our expertise,
responsiveness and
focus on quality.
We have a passion for
excellence and a drive
to create value.
Read more about our culture and values on pages 45-53.
We do the right thing
for all our stakeholders.
We work, grow, and
succeed together.
Our strategy ensures we continue to deliver long term,
sustainable growth…
Innovation
Growth
Efficiency
Read more about our strategy and strategic progress on pages 16-23.
…enabling us to create value for our stakeholders
Customers
Employees
Suppliers
Investors
Communities and environment
Government, trade bodies and regulators
Read more about how we engage with, and create value for, our stakeholders on pages 9 and 26-27.
Sustainability flows through every aspect of our organisation
It underpins our strategy, allowing us to unlock value, provide better outcomes for our stakeholders and deliver on our purpose.
Our sustainability strategy is based on a three pillar framework.
People
Environment
Responsible business
Read more about our approach to sustainability and our sustainability strategy on pages 16-23 and 29-44.
06 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Our business model
Elementis is a business-to-business specialty chemicals
company, offering performance driven additives
for consumer and industrial applications.
We operate globally via two focused businesses
Personal
Care
We are a leading supplier of rheology
modifiers, based on natural and synthetic
ingredients, and antiperspirant actives.
We offer a wide range of products to
customers across personal care, home
care, industrial cleaning, agriculture
and pharma. Our products help make
skin creams smoother, antiperspirants
work longer, home care products more
natural and plant protection products
more efficient.
Performance
Specialties
We supply rheology modifiers and
complementary specialty additives to
manufacturers of industrial coatings,
decorative paints, additives for oil and
gas drilling and stimulation fluids,
adhesives and sealants.
Our talc grades enhance the mechanical
strength of plastic parts, resulting in
high-quality end products. We supply
talc to customers in a wide range of
sectors including automotive, plastics,
paper, paint and agriculture.
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Elementis plc
Annual Report and Accounts 2023
07
Our business model
continued
Our competitive advantage
Premium assets
We combine advantaged positions in hectorite and talc, with our distinctive technologies, to create value added customer solutions.
Hectorite is a natural mineral that delivers excellent rheology
in both water- and oil-based systems, making it an attractive
alternative to synthetic materials. It can be processed at
lower temperatures, leading to lower costs and improved
sustainability. It also delivers important attributes, such as
excellent texture and colour for Personal Care and long term
stability for Performance Specialties applications.
We use proprietary flotation technology, which enables
production of talc that is consistently over 95% pure and can
be customised for colour, size and shape. Our talc grades
enhance the mechanical strength of plastic parts, resulting in
high-quality end products. Furthermore, talc can help reduce
carbon emissions by enabling lighter, thinner plastic designs
that can replace metal parts, while maintaining strength.
Engaged and skilled people with unparalleled expertise in rheology and formulation solutions
Our people are fundamental to the
continued success of our business.
We have a skilled and engaged global
workforce, and we place great focus on
recognising and valuing their contributions
and the expertise they share.
Formulation solutions
We are experts at formulation
solutions. This is the process of
optimising formulation ingredients to
achieve the desired functionality and
performance of the final product. Our
additives represent a small percentage
of a formulation’s cost, but are critical
to delivering end product performance.
Rheology
Rheology is essential to the
performance of a formulation –
it makes the ingredients work together.
We have expertise across multiple
technologies and, with our global asset
footprint, we can cater to large global
clients as well as smaller, but faster
growing, regional players.
We collaborate with our customers
We work in partnership with our
customers, providing technical support
and collaboration to develop innovative
products, tailored to their needs and
goals. We have an established global
key account programme which
enables us to focus on deepening
our customer relationships.
We develop innovative solutions
We are known innovators, with
significant technical expertise.
Leveraging our capabilities in rheology,
surface chemistry and formulation,
we focus on creating solutions for
our customers that deliver product
performance improvements,
efficiency gains and enhanced
sustainability credentials.
~100
scientists working in seven laboratories
across four continents
Customer centric,
with global reach
Our global footprint allows us to build
long lasting relationships with our clients
and serve them in their local markets,
as well as large clients across multiple
locations. Our manufacturing footprint
provides flexibility and supply resilience.
17
manufacturing sites around the world
08 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Sustainable solutions
We have a high natural and naturally-derived material content
in our product portfolio. We continue to work with suppliers and
customers to further increase our use of bio-based materials,
both as a direct replacement of fossil-derived petrochemicals
and to create new products together. Many of our products
already help our customers use less energy and their operations
emit less greenhouse gas (“GHG”).
Strong cash generation
Strong cash generation enables us to invest for
the long term growth, reduce financial leverage
and generate returns for stakeholders.
68%
77%
of revenues from natural or naturally-derived ingredients
average three-year operating cash conversion
Our integrated business model, combined with our technology and market leading formulation capabilities and the continuous
improvement focus, supports margin enhancement and drives returns. We re-invest in our business to expand our capabilities,
so we can continue to meet the requirements of our customers and generate long term sustainable growth and stakeholder returns.
How we create value
For customers
For suppliers
For our people
By partnering with our customers,
we can provide innovative solutions
that help solve their toughest
formulations challenges, and create
value enhancing products.
28
joint development
projects
By committing to driving transparency
throughout our value chains and
partnering with suppliers who share
our commitments.
Elementis promotes a supportive
culture where our people feel safe,
valued and can maximise their potential.
3.86
mean Gallup Q12 score
(out of 5)
Read more about our approach to
innovation on pages 16-19.
Read more about how we work with
suppliers and our approach to sustainable
sourcing on pages 51-53.
Read more about our people and culture
on pages 45-49.
For communities and
environment
Behaving responsibly and with integrity
in the communities in which we operate,
and focusing on reducing the
environmental impact of both our
activities and our customers’ products.
60%
reduction in absolute Scope 1 and 2
market-based GHG (vs 2019 baseline)
Read more about our sustainability
and community involvement on
pages 27-44 and 50.
For investors
For government, trade
bodies and regulators
We seek to generate reliable returns for
our shareholders over time, through
sustained earnings growth and
shareholder distribution.
We are committed to continuing high
standards of business conduct in
line with regulatory, governmental
and legal expectations.
2.1 cents
dividend per share
– reinstated
Read more about our investor proposition
on page 13.
Read more about our business conduct
on pages 51-53.
Read more about how we engage with our stakeholders on pages 26-27.
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Elementis plc
Annual Report and Accounts 2023
09
Chief
Executive
Officer’s review
Paul Waterman
Chief Executive Officer
Performance
Elementis delivered a resilient financial
performance in 2023, with revenue of
$713 million, down 3% on prior year
(2022: $736 million). Adjusted operating
profit increased 3% to $104 million
(2022: $101 million), and adjusted
operating margin improved by 100bps
to 14.6% (2022: 13.6%). Growth in profit
was driven by improved pricing and
favourable product mix benefits, offsetting
lower volumes in the year. Statutory
operating profit increased to $59 million
(2022: loss of $42 million).
Performance Specialties revenues were
4% lower than prior year at $504 million
(2022: $525 million) while adjusted
operating profit was even with the prior
year at $70 million. Talc performance
recovery and $36 million of new business
was offset by continued Coatings
de-stocking through 2023.
Coatings performance, which represents
approximately half of Elementis revenues,
reflected a combination of customer
destocking throughout the year and
a weaker demand environment. In Asia,
where over 80% of our sales come from
industrial activity, we saw revenue up 2%
on a constant currency basis, with a
modest growth across several countries
including China, helped by the easing of
COVID-19 restrictions in the second half
of the year. The premium decorative sector
in the Americas region was affected by
a weaker housing market and customer
destocking. European revenues were
also lower, reflecting the continued weak
macroeconomic environment, and ongoing
inflationary pressure that impacted
customer demand in both the decorative
and industrial coatings sectors. We
continued to leverage new product
launches and in 2023 worked on
19 customer joint development projects.
The adjusted operating profit margin of
15% (2022: 18%), demonstrates both
the quality and resilience of this business
in challenging market conditions.
Talc revenue remained broadly flat on the
prior year, with pricing actions and better
product mix offsetting lower volumes, due
to weaker end market demand. Sales into
automotive plastics customers were below
the prior year, impacted by destocking.
Despite the flat revenues, the self-help
measures implemented over the year
led to a material improvement in Talc
profitability, with much improved adjusted
operating margin of 10% (2022: negative
0.3%). Looking ahead, we see attractive
growth opportunities in higher value
talc applications and remain focused
on driving improvement in this business.
Personal Care performed well during the
year, with sales marginally lower compared
to the strong prior year and adjusted
operating profit higher at $50 million
(2022: $49 million). Revenues were
impacted by lower market related volumes
but were partly offset by $15 million of
new business, improved pricing and a
higher value product mix. In Cosmetics,
we saw growth across all regions, with
a particularly strong growth in Asia, driven
by continued investment in sales and
marketing capabilities. We also saw
continued growth in Skin Care revenues,
supported by new product innovation.
Antiperspirants (“AP”) Actives sales were
below the strong prior year, reflecting
input driven price adjustments and lower
volumes. Overall, in Personal Care,
product mix improvements and price
actions offset the weaker volumes resulting
in an improved segment adjusted
operating margin of 24% (2022: 23%).
Innovation,
Growth and
Efficiency
strategy driving
profit growth
and improved
margins.
“ Elementis delivered
a resilient profit
performance and an
improved operating
margin in the face
of challenging
market conditions.”
10 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
In 2023, we made significant progress on
our deleveraging ambition, with net debt
reducing to $202 million (2022: $367
million) benefitting from the $139 million
of proceeds from the sale of Chromium
earlier in the year and improved
profitability. As a result, the net debt to
EBITDA ratio reduced to 1.4x (2022: 2.2x),
and we are pleased to reinstate dividend
payments and propose a final dividend
of 2.1 cents per share. Going forward,
we plan to pay a sustainable progressive
dividend, while further reducing leverage.
Strategic progress and
new financial targets
We made good progress implementing
our strategy, launching 12 new products,
and delivering $51 million of new business.
We delivered 14% of revenues from
innovation sales and had a record new
business opportunities (“NBO”) pipeline of
$363 million at the end of 2023. Through
discipline and focus, we have managed
both costs and pricing well, and the financial
recovery of our Talc business is on track.
At the November CMD, we communicated
the growth and efficiency initiatives that
will underpin our performance through
2026 as well as our sustainability strategy.
Going forward, we will focus on seven
growth platforms across Personal Care
and Performance Specialties, targeting
$90 million of above market revenue
growth by 2026. This will be driven by
ongoing innovation, utilising our
advantaged technologies, supported
by key industry trends.
We also announced two efficiency
programmes that will deliver $30 million
of cost savings over the next two years.
The Fit for the Future restructuring
programme will deliver $20 million cost
savings by 2025. This programme is
well underway, with significant progress
in the outsourcing and consultation
processes. We announced the opening
of a new support base and research and
development (“R&D”) laboratory in Porto,
Portugal, with the build out and new hires
in this location already underway. A further
$10 million annual savings by 2025 will
come from supply chain optimisation and
procurement savings. To underpin this, we
will further streamline our manufacturing
footprint by consolidating our AP Actives
plants from three to two locations in 2024.
We believe the combination of growth
and efficiency programmes announced
in November will deliver our ambitious
2026 performance objectives:
Adjusted operating profit margin
of 19%+
Three-year average operating
cash conversion above 90%
Return on capital employed
(excluding goodwill) above 20%
At the end of the year, we completed
a multi-year project of transferring our
enterprise resource planning (“ERP”)
systems into a single global system.
We expect this to enable improved data
standardisation and analytics, improving
both efficiency and effectiveness.
Safety
Safety is fundamental to the success of
Elementis and a core part of our culture.
We made a good progress on our objective
of becoming a zero-injury business,
continuing to drive our TogetherSAFE
campaign across all our sites. In 2023, we
achieved a 50% reduction in work-related
injuries, with 90% of our sites remaining
injury free over the year.
We continued to strengthen our processes in
2023 making good progress on our process
safety management improvement plan and
developing enhanced health, safety and
environment (“HSE”) standards.
The number of environmental events
increased over the year, with seven Tier 2
events reported in 2023. A thorough
analysis of each incident was conducted
with learnings communicated across
our manufacturing sites to prevent
future occurrences.
Sustainability
We place sustainability at the core of
our strategy. Our aim is to develop
high-performance additives that deliver
positive, sustainable outcomes for the
environment and for society. We seek to
design products that use fewer resources
and create less pollution. Our areas of focus
include reducing GHG emissions with
an ambition to reach Net Zero by 2050;
improving water and energy management;
and leveraging improved product design
to deliver better lifecycle impacts.
In 2019, we set our 2030 environmental
targets, and this year we have met the waste
and water emissions target reduction.
We are working towards setting a SBT,
which we plan to finalise in 2024. In 2023,
we reduced Scope 1 and 2 (market based)
GHG emissions by 6.7% compared to the
prior year, with 77% of our purchased
electricity coming from renewable or low
carbon sources.
We focus our capabilities on finding
unique solutions to emerging sustainability
challenges. For example, our organoclay-
based gels improve the water resistance
of consumer sunscreens, increasing their
effectiveness and lowering loss to the
environment. We have a high natural material
content in our product portfolio, and 68%
of Group revenues (2022: 67%) were
generated from natural or naturally-derived
ingredients (as defined by ISO 16128).
Our products also help customers do
more with less resources, such as
additives that help adhesives instantly
grip heavy ceramic tiles without slipping,
thus saving materials, time, and money.
We continue to improve our environmental,
social and governance (“ESG”) disclosure
processes and had our Scope 3 emissions
verified by a third party for the first time
in 2023. We are also pleased to have
achieved a Gold rated score from
EcoVadis for the third year, and a B rating
from Climate Disclosure Project.
People and culture
The financial results achieved this year
are a testament to the hard work and
commitment of our people, who continue
to be dedicated to the success of the
company. This year we launched a
biannual engagement survey with a new
external provider, which will allow more
regular employee engagement and provide
better opportunities to support our people.
In 2023, we have announced changes
that have impacted our global workforce.
In January 2023 we sold our Chromium
business and shortly after we started
working on a restructuring programme,
Fit for the Future, that will streamline and
optimise our organisation. This restructuring
programme, which will trigger c.190
redundancies, was announced in
September 2023, followed by extensive
consultations and support for employees
impacted by these changes. Our people
have demonstrated incredible resilience as
we make the required, but difficult, changes
that will position the company for future
success. It is encouraging to see how teams
have supported one another through this
change, showcasing our values at their best.
I would like to thank the whole Elementis
team for their fortitude, adaptability and
commitment over the year and look
forward to together creating a successful
future for the Company.
Outlook
Elementis has seen a good start to the
year, with sales ahead on the prior year.
The global macroeconomic environment
remains uncertain. Notwithstanding this,
we are focused on executing our self-help
efficiency and growth programmes as
this will support ongoing performance
improvement, regardless of the demand
environment that we face.
We have a portfolio of high-quality
businesses, and a clear and consistent
strategy based on Innovation, Growth and
Efficiency. We have a strong pipeline of
new products that is driving new business,
and we continue to invest in our business
for long-term growth.
Most importantly, we have a talented
and dedicated team that is completely
focused on delivering the 2026 objectives
communicated at our November CMD.
Paul Waterman
Chief Executive Officer
Elementis plc
Annual Report and Accounts 2023
11
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We announced closure of our Cologne
office in 2024 and a creation of new global
support and R&D support centre in Porto.
We are making good progress already
and expect to deliver $20 million of cost
savings, with c. one third delivered in
2024 and the remainder in 2025.
In addition, we have a great opportunity to
build on our momentum further improving
Global Supply Chain and Procurement
efficiency. We expect to deliver further
$10 million of annual cost savings by
2025 through more automated processes,
more efficient energy uses as well as
optimising our manufacturing footprint.
Q
Talc has delivered much
improved performance
in 2023, can this business
continue to improve?
A
Talc performance improved materially
in 2023, despite a difficult demand
environment, due to pricing actions
and effective cost management.
We have a new leadership team in place
and the implementation of Performance
Specialties has improved our execution.
We continue to target high-value
segments, focusing on value over volume.
Vehicle light-weighting, where talc is
used to improve the strength of plastic,
and technical ceramics, where highly
engineered talc enhances the ceramic’s
stability, are two key examples.
We are also targeting continued synergies
with our Coatings business, where
talc is used as an additive in various
applications such as protective coatings.
Talc will also benefit from the Elementis
efficiency program.
This focus on high-value applications while
continuing to drive efficiency will support
further performance improvement in the
near term.
Q
How will you achieve
the above market
revenue growth?
A
We set out seven key growth platforms,
three for Personal Care and four for
Performance Specialties. Growth across
those platforms will be driven by innovative
new products, utilising our advantaged
technologies, and benefitting from key
industry trends.
For example, in Personal Care, most
of our products are made out of natural
ingredients, which is a real benefit given
the strong market demand from our
customers and ultimately consumers,
for more sustainable solutions. We have
a global reach, which positions us well
to grow in the future.
In Performance Specialties, which includes
Coatings and Talc, we see customers
demanding more natural ingredients,
that can deliver real efficiency benefits,
for example, by helping reduce processing
or logistics costs. We have the expertise
and technology to solve our customers
biggest formulation challenges. Over the
years, this allowed us to expand into new
market segments and enlarge our
addressable markets.
At the end of 2023, our new business
pipeline stood at a record $363 million,
with over 50 products that we plan to
launch over the next three years. This will
support our target of $90 million of above
market revenue growth by 2026.
Q
How will you achieve
the $30 million of
annual cost savings?
A
The announced $30 million of cost
savings will come through two efficiency
programmes. The first one, Fit for the
Future is a project we initiated following
the sale of Chromium early in 2023.
This includes around 190 redundancies,
moving roles to lower-cost locations and
outsourcing back-office transactional
roles to India.
Q
&A
Paul Waterman
answering key
stakeholder questions
Q
What gives you confidence
you will achieve the new
operating margin target
of 19%+?
A
The improvement in our operating margin
is supported by growth and efficiency
programmes we announced at our CMD.
Around a third of the improvement
is driven by the above market revenue
growth across the Personal Care
and Performance Specialties where
we are focusing on higher margin
market segments.
The other two thirds are supported by our
new efficiency programmes, which will
deliver $30 million of savings by 2025.
These programmes are already underway,
and we are on track to achieve the first
$12 million of savings in 2024. We see
attractive growth opportunities across
many of our markets, where we are well
positioned, with innovative technologies
and long-standing customer relationships.
Even if the demand environment is
unchanged, this self-help program will
underpin performance delivery. This gives
me the confidence we can achieve the
19%+ operating margin target we set
in November.
12 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Investment case
Our shareholder value proposition is built on:
1. Differentiated premium assets
2. Two attractive, resilient businesses
Focused on market segments with
structural growth opportunities,
supported by industry trends.
Our California based mine is the
largest high quality hectorite mine in
the world, with substantial reserves
of white coloured hectorite.
Hectorite:
>50
We also own significant deposits
of high-quality talc in Finland.
Our vertically-integrated model
utilises our natural mineral
resources which, combined
with our technology and market
leading formulation capabilities,
creates unique product sets and
compelling competitive advantages.
years of estimated
resource life
Talc:
>90
years of estimated
resource life
3. Customer centric and innovation focus
4. Global reach
28
joint development
projects
Our manufacturing and R&D
capabilities in key regions allow us
to serve customers globally and
provide supply chain resilience.
A leading supplier of specialty
chemicals, we leverage
our capabilities in rheology,
surface chemistry and formulation
to solve our customers’
formulation challenges.
Through our key account
partnerships, we develop
customised solutions and provide
ongoing technical support, adding
further value to our customers.
Personal Care:
42%
of Group
operating profit1
Performance
Specialties:
58%
of Group
operating profit1
17
manufacturing
plants and seven
technology
centres across
four continents
5. Sustainable solutions
6. Strong cash generation
68%
revenue from
natural products
Our strong cash generation,
alongside our Innovation, Growth
and Efficiency strategy, support
re-investment for long-term
growth, financial deleveraging and
sustainable shareholder returns.
>90%
operating cash
conversion target2
We combine our expertise in
natural clay and talc minerals
with bio-based molecules to
create more sustainable solutions
for our customers.
We take pride in our extensive
portfolio of natural products and
sustainable formulation concepts,
meeting consumer needs while
minimising our, as well as our
customers’, environmental impact.
1 Pre central costs.
2 Three-year average.
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Elementis plc
Annual Report and Accounts 2023
13
Our market environment
We identified three key drivers which are creating and changing trends in the markets
in which we operate. We have positioned our strategy to address the needs of our
clients, while maximising the growth opportunities arising from those megatrends.
Sustainability
Climate change and the increasing
consumption of resources and pressures
on nature require new solutions to
address the complex global and societal
issues they cause. This includes the
transition to cleaner energy, and the
creation of a circular economy that
can benefit everyone.
What this means for our industry
Consumers are becoming more
sustainability focused, demanding
natural products that have low negative
impact on the environment, communities
and workers in the value chain
It is increasingly important that
companies can support claimed product
benefits with credible, science-based
evidence and standards
Increased desire for solutions that
contribute positively to the health
and wellbeing of society
Demand for solutions that help
resources go further and contribute
towards the circular economy
Pressure to minimise the social and
environmental impact of production
throughout supply chains
Our opportunities
Leverage our naturally-derived products
and high-quality hectorite clay resource
to help customers use less material,
energy and water
Innovatively designed products
to help minimise pollution in
downstream applications
Growth in natural and naturally-derived
rheology modifiers as a replacement
to synthetic alternatives
Improved manufacturing processes and
supply chain management, resulting in
better outcomes for all stakeholders
Demographics
The United Nations expects the
world’s population to increase to nearly
10 billion by 2050, driven by increased
longevity, increasing urbanisation and
accelerating migration.
Most of this population growth will be in the
developing world. Economic development,
along with an expanding middle class,
is fuelling consumption and demand
for higher quality products. In the West,
older consumers with greater disposable
income, are becoming more health and
sustainability focused, with increasing
interest in services and experiences.
What this means for our industry
Increasing demand for construction and
infrastructure related solutions
Rise of new ‘giant brands’ in emerging
markets, demanding quality products
and faster speed to market
Rising demand for personal care
products such as colour cosmetics
and skin creams
Increased demand for longer lasting and
more technologically advanced products
Demand for products that make
consumers’ lives easier and provide
premium and feel good characteristics
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How are we responding Innovation focused on specialty additives that deliver improved product performance, lower operational costs and enhanced sustainability claims, e.g. low-temperature organic thixotropes and powdered non-ionic synthetic associative thickeners (“NiSATs”) Identifying new applications for our natural personal care ingredients, bringing long lasting and more efficacious benefits from the whole formulation Setting challenging environmental targets that help us to innovate better solutions, such as our science-based target initiative (“SBTi”) commitment to reduce GHG emissions Investing in our capabilities to assess risk and quantify impacts of our supply chain, portfolio and products, to better prioritise our most impactful actions Continuing to improve product verification against leading certification standards such as COSMOS and Ecolabel to highlight the credentials of our products Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Our opportunities
New geographic markets for consumer
and industrial products that require
premium performance additives
Our manufacturing and R&D capabilities
in key regions allow us to serve
customers globally and provide
supply chain resilience
Our high-quality hectorite clay resource
has a chemical structure that can retain
various active ingredients, delivering
a combination of benefits for a wide
range of personal care products
Consumers are willing to pay a premium
for products that deliver superior
performance with additional benefits
Higher demand for additives
that deliver premium product
performance characteristics
Opportunities for natural or naturally-
derived ingredients (e.g. hectorite,
talc or castor wax-based)
Technology/digital
Technology progress is advancing rapidly,
and technologies are becoming ever more
interconnected. Computing power and
materials science are the key enablers
to drive technology changes, providing
options for process and product innovation
and increased personalisation.
Technology is also being used to drive
improvements to customer experiences:
for example, through providing richer
data insights, better monitoring of
customer engagement and automating
non-value-adding processes.
Our opportunities
Access to digitalised processes and
customer interface increases the speed,
flexibility and service level we can
provide to our customers
We can achieve safer and more
efficient production technologies
via manufacturing automation and
digitalised supply chain
Increased market penetration amongst
the SMEs is boosting creation of indie
brands on a global scale
Use of AI driven tools to accelerate
product development and formulation
solution creation
New technologies may open new
value pockets in fast growing markets
What this means for our industry
Ability to move fast and adapt
the right technology provides
competitive advantage
A growing use of simulation and software
is required to generate smarter insights
early on and to develop products
faster, more efficiently and in a more
sustainable manner
Renewable energy applications
require more demanding materials
to deliver performance
Digitalisation, with generation of big
data and its interpretation using artificial
intelligence (“AI”), will impact consumers’
behavioural changes through better
access to information, improve decision
making processes, and change the way
the different players interact across
value chains
Multichannel approach to customer
engagement increases transparency
across the supply chain
Technological changes increase
customer need and willingness to
reformulate, while digital support
to testing and trials can speed up
innovation projects
Virtual reality opens opportunities for
remote training and technical support
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Elementis plc
Annual Report and Accounts 2023
15
How are we responding We are developing digital data management capability to scale new products faster across the globe Continue to explore innovative technologies and testing our products’ suitability for new applications Better use of customer data to analyse search behaviours and product reviews, generating insights on new trends in our target markets. Ability to process data quickly and accelerate innovation will lead to better customer proposition We are setting up our Product Information Management system, one centralised repository for our product information, which will create a user-friendly and intuitive interface for Elementis’ employees, partners and customers Increased digital media outreach, online customer education, sophisticated formulation support and close collaboration with distribution partners Increased Product Stewardship and Regulatory Affairs efforts and proactive positioning of technologies as being natural and safe Continuing to improve our automation capability, enhancing both productivity and safety in our plantsHow are we responding Expanded our capabilities in China and Brazil, allowing us to make local formulations, and develop new products that comply with local regulations Expanded resources in Asia in new and existing regions, generating more insights on local market needs and deepening innovation dialogue In 2023, we announced plans to open a new R&D facility in Porto, which will enhance our customer proposition Leveraging our leading rheology position and high-quality hectorite resource to launch new natural rheology modifiers for Personal Care In 2024, we plan to launch our first natural film formers for sun care and colour cosmetics Planning product launches that are suitable for the ‘mass’ market and reduce speed to market Launching new product solutions with better durability, workability and aesthetics for the decorative and construction markets Strategic progress
Elementis operates via two focused businesses, well positioned in attractive and
structural growth segments. Our strategy is built on the three pillars of Innovation,
Growth and Efficiency, underpinned by our sustainability objectives.
Innovation
We are a global leader in
performance driven additives that
help create innovative solutions
for our customers. Leveraging
our capabilities in rheology,
surface chemistry and formulation,
we help our customers create
better products.
Read more about our approach to innovation on pages 18-19.
Growth
Our two businesses operate in
attractive markets with structural
growth opportunities, supported
by clear market and industry trends.
Read more about our growth strategy on pages 20-21.
Efficiency
We constantly seek to be a fit
for purpose and more efficient
business, agile and growing, with
our impact on the environment
and the communities in which
we operate at the forefront of
our minds.
Read more about our approach to efficiency on pages 22-23.
Our sustainable approach
We respond to sustainability
drivers (Climate, Circularity,
Nature and Health) in our
markets and use our expertise
to find new ways to add value.
For example, innovating with
a new natural skincare
ingredient, introducing a novel
bio-based coating additive,
developing an antiperspirant
using waste aluminium or
enabling our customers to
use safer ingredients.
2023 progress
Launched 12 new products
68% of revenue from natural
or naturally-derived products
Total innovation sales
increased to 14.3%
(2022: 13.3%)
28 customer joint
development projects
Our sustainable approach
As innovation becomes
established in the market,
we help our customers to
maximise their positive impacts.
We add to the health and
wellbeing of society with natural
personal care products,
coatings additives with low
volatile organic compounds
(“VOC”), avoiding the use of
biocides and contributing to
the effectiveness of vehicle
pollution control systems.
2023 progress
$51 million of NBO created
15% revenue growth
in Colour Cosmetics
10% revenue growth
in Personal Care Asia,
driven by growing interest
in our new generation
hectorite-based gels
Record NBO pipeline of
$363 million (2022: $282m)
Our sustainable approach
We contribute to our customers’
sustainability goals. Our
additives and ingredients
help to make our customers’
products more durable, and
can lower processing energy
requirements and improve
transportation efficiency.
We also strive to make our own
operations more efficient and
reduce their environmental
impact by increasing our use
of renewable energy, recycling
water and reducing waste.
2023 progress
Delivered $10 million of cost
savings in 2023
Met two out of four 2030
sustainability targets
Completed ramp up of
our antiperspirant actives
plant in India
Completed the multi-year
programme to consolidate
all our ERPs into a single
global system
50% reduction in work related
injuries and progress on
process safety improvements
Link to KPIs
Refer to the Key performance indicators section on pages 24-25 for further detail, including how those link to our strategy.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Material growth and efficiency opportunities announced at our November CMD
Seven growth platforms across
Personal Care and Performance Specialties
Near term, larger
efficiency platforms
50+
new products
$90m
above market revenue
growth by 2026
$30m
of savings by 2025
Growth platforms aligned to industry trends
Growth platforms
Sustainability
Trends
Technology/
digital
Demographics
Opportunity
Personal
Care
Skin care
Colour cosmetics
Antiperspirants
Performance
Specialties
Architectural
coatings
Industrial coatings
Adhesives, sealants
and construction
additives
Talc
Natural solutions to replace
synthetic ingredients
Skinification, individualisation,
speed-to-market
High-efficacy and natural products
Expand share in premium segment
Expand sustainable coatings
Offering more sustainable
product solutions
Gain share in selected
high-value target segments
Two efficiency platforms delivering $30 million of annual cost savings by 2025
Fit for the Future organisational restructuring
Global Supply Chain and Procurement
Supports strategy implementation
Simpler, streamlined and lower cost organisation
Leverages digital infrastructure and enhances capability
Implementation initiated in Q3 2023, complete during 2025
Global Supply Chain: optimising manufacturing network
and scaling continuous improvement delivery
Procurement: enhanced organisational capabilities
and practices
$20m
annual savings by end 2025
$10m
annual savings by end 2025
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Elementis plc
Annual Report and Accounts 2023
17
Strategy in action
Innovation
Priorities for 2024
Launch at least 15 new products
Increase new and proprietary products
to 15% of sales vs 14% in 2023
Expand alternative sourcing and
innovation solutions for secure
new material supply
Link to risk
1 Global economic conditions and
competitive market pressures
4 Regulatory compliance and
product stewardship challenges
7 Intellectual property and know-how
8 Portfolio innovation and technology
For detail about our approach to risk,
see pages 63-71.
Innovation sales %
13.5
13.5
13.3
14.3
2020
2021
2022
2023
68%
of revenue generated from natural
or naturally-derived products
In addition, through our established
global key account programme, we work
closely with our customers, offering our
expertise and innovation, and keeping
them at the forefront of their industries.
Our scientists are formulation experts
in our core markets and our laboratories
are equipped to facilitate formulation of
finished goods similar to our customers’
products. We can test these materials
to mimic real life conditions for
demonstration. This allows us to build
strong technical and commercial
relationships with major customers and
co-operate in the development of new
formulations to enhance their products
and processes. This drives volume and
sales growth, increases our share of
these customers’ spend and opens up
major new business opportunities. In
2023, we worked on 28 joint development
projects with customers across Personal
Care and Performance Specialties,
of which 15 were with our global
key accounts (“GKA”). In Coatings,
we increased the share of revenues
from GKA by 45% since 2020.
Our revenue from new and innovation
products increased to 14% compared to
13% in 2022. Our new business pipeline
stood at over $360 million at the end
of 2023, with over 50 products in the
pipeline, of which approximately 15 are
scheduled to launch in 2024. This will
support our ambition to achieve an
adjusted operating profit margin target
of 19%+.
We are a global leader in performance
driven additives and are focused on
creating solutions for our customers
that deliver product performance
improvements, efficiency gains and
enhanced sustainability credentials. We
continued to leverage our relationships
and digital capabilities to drive the launch
of 12 new products in 2023.
Our innovation focus is clear. We want
to create solutions for the biggest
challenges that our customers face
which in turn, are reflected in our
growth platform focus.
In Personal Care, consumers no longer
just want natural ingredients that deliver
superior performance. They are looking
for more sophisticated products, for
example, with additional skin care
benefits. An example is CeraVe, a face
care product which uses hectorite and
promotes it on its packaging, due to
its rheology modification properties,
but also as an active ingredient for
oil absorption.
Likewise, the Coatings industry wants
high-performance additives that offer
sustainability and new efficiency benefits.
Our Rheolate® powder, which we
expanded this year, provides excellent
paint performance and enhanced film
build. Given its powder form, it requires
only half the storage space compared
with liquid alternatives, and reduces
the shipping volumes, leading to lower
transportation emissions. It is also
biocide free with low VOC.
Innovation at Elementis goes hand in
hand with sustainability. All our new
product launches and pipeline projects
must have clear sustainability credentials.
In 2023, nearly 70% of our revenue
was from natural or naturally-derived
chemistries, for example, castor wax
based organic thixotropes. In addition,
we are conscious of the need for our
products to contribute to the overall
wellbeing of society, whether it is through
bio-based Thixatrol® technology or
utilisation of recycled aluminium in
antiperspirant actives.
18
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Strategic Report
Corporate Governance
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Shareholder Information
BENTONE® PLUS GLOW
– Radiance unleashed! Hectorite X Actives
The skin glow trend has taken the
beauty industry by storm. Consumers
are no longer content with simply having
clear, matte skin; they are seeking
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luminous complexion. Glowing skin
is a sign of health and vitality, and no
wonder, as it is universally flattering.
Whether labelled as dolphin skin, glass
skin, glazed donut skin or other current
skin terms, all these multi-functional
claims and cross-category products are
required to improve the skin condition of
the consumer and ultimately blend skin
care and colour cosmetics seamlessly.
Responding to the emerging ‘skin glow’
trend, BENTONE® PLUS GLOW, a new
hectorite-gel technology, joins forces
with naturally-derived active ingredients
to provide a speed to market solutions
that blends skin care and colour
cosmetics seamlessly.
BENTONE® PLUS GLOW combines
natural ingredients that promote the
skin’s barrier function, creating a healthy
glow and providing lasting hydration.
It is designed to impart rheological
control and suspension to the oil phase
of cosmetics and skincare products,
allowing for an optimal distribution of the
active ingredients on the skin’s surface.
In colour cosmetic products,
BENTONE® PLUS GLOW also allows
an optimal distribution of pigments,
which enables an immediate benefit
for the consumer.
Cosmetic products developers value
it for its high formulation flexibility,
delivered through an increased
hectorite clay content.
Powdered NiSAT Rheolate® PHX 7025
that reduced the high water content,
thus eliminating the need to ship water
around the globe, while maintaining
the superior performance benefits
that make our Rheolate® family the
preferred choice.
With this goal in mind, we applied
our innovation expertise and have
developed Rheolate® PHX 7025,
expanding our family of 100% solid
urethane rheology modifiers.
These 100% active powders significantly
reduce the global shipping volumes. In
addition, they can be easily incorporated
into paint formulations, resulting in
improved handling, increased efficiency
and meeting the latest health and safety
demands. All this, whilst preserving the
high quality we are known for.
Sustainability: Realise up to 80%
CO2 reduction on transportation and
reducing storage space with these
solvent-free modifiers
Safer ingredients: Biocide and
VOC free and compatible with
allergy and asthma friendly paints
Performance: Experience a higher
efficiency, improved rheology and
excellent dry film properties
We introduced the Rheolate® PHX 7025
during the 2023 edition of the European
Coating Show in Nuremberg, Germany,
a leading event in the coatings industry
and currently have over 50 customers
testing it in their formulations.
Synthetic rheology modifiers like our
Rheolate® family of urethane-technology
additives are extensively used in
architectural paint formulations.
They are supplied in liquid form
and typically contain 80% water.
With customers demanding higher
performing, safer and more sustainable
paints, we wanted to create a solution
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Elementis plc
Annual Report and Accounts 2023
19
Strategy in action
Growth
Priorities for 2024
Deliver target revenue growth across
seven growth platforms
Generate $50 million of new business
Expand manufacturing capabilities at
new India plant
Link to risk
1 Global economic conditions and
competitive market pressures
2 Business interruption due to supply
chain failure of key raw materials
and/or third-party service provision
5 Business interruption due to a major
event or a natural catastrophe
For detail about our approach to risk,
see pages 63-71.
NBO pipeline $m
363
281
282
248
2020
2021
2022
2023
$90m
above market revenue growth by 2026
Our hectorite-based additives are well
positioned to benefit from this trend,
as they work equally effectively in both
water-based and oil-based products.
We entered the skin care market in 2019
and have seen good momentum in this
business since. Going forward we will
focus our innovation efforts on natural
rheology with more sophisticated
products, but in addition we will also
create products that offer attractive
new functionalities. Our ambition is to
deliver growth at two to three times
the market by 2026.
Finally, the third area of focus,
Antiperspirants, where we have a global
leading position in antiperspirant actives.
We see trends for longer lasting sweat
protection, and increasingly, growing
demand for more natural products,
including natural actives.
As recognised innovation leaders
in this field, we are focusing on new
products that address these demands,
for example, our new range of
antiperspirants utilising waste aluminium,
and we have an ambition to develop
actives that bring antiperspirant benefits
to the deodorant product category.
We believe our ambitious plans will help
us to deliver mid-single-digit revenue and
margin growth over the next three years.
We set out seven growth platforms
across Personal Care and Performance
Specialties. Here we focus on market
segments with structural growth
opportunities, utilising our key
technologies. Together, they are
expected to generate over $90 million
of above market revenue by 2026.
Our Personal Care business operates
across three core market segments, in
which we have built a strong competitive
position: Skin Care, Colour Cosmetics
and Antiperspirants.
For further detail on Personal Care
performance and strategy, see pages 60-61.
We have seen good growth in Colour
Cosmetics, especially in Asia, where
we recently enhanced our sales and
marketing capabilities.
We expect further growth in Colour
Cosmetics sales in the coming years,
supported by our innovative products,
such as Bentone® Luxe XO and the
Bentone® Plus Glow. We have a strong
new products pipeline for 2024, which
includes a range of patent pending
Bentone® Ultimate products and a natural
film former that will enhance the
wear resistance of colour cosmetics,
for example in lipsticks.
We believe these products will further
strengthen our leading position in colour
cosmetics and allow us to expand in
new regions and market segments.
As a result, we target a delivery of
$10 million of above market revenue
growth by 2026 for this application.
Skin Care is an attractive part of the
personal care market, where we have
historically had limited participation.
This segment has been growing at
around 4-5% annually, supported by
increasing demand from consumers
looking for more sustainable products
with natural ingredients.
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Growth platforms
Key technologies
Benefits
Personal
Care
Skin care
Hectorite, hectorite derivatives,
natural oils
Natural, luxurious touch and feel,
formulation stability
Colour cosmetics
Hectorite derivatives, natural oils
Antiperspirants
Inorganic actives, hectorite derivatives
Natural, suspension of actives and
pigments, formulation flexibility
Long lasting sweat protection,
dispersion of actives
Performance
Specialties
Architectural
coatings
NiSAT, dispersants, bio-based defoamers
Improved hiding and stain resistance,
safer and more sustainable paint
Industrial coatings
Adhesives, sealants
and construction
additives
Organoclays, organic thixotropes,
dispersants
More sustainable coatings
enhanced aesthetics
Organic thixotropes, hectorite
rheology agents
Improved time and material efficiency,
safer handling
Talc
High-purity talc through unique flotation
Improved plastics rigidity and strength
The final growth platform focuses on
Talc. Our medium-term strategy focuses
on high-value applications across
selected market segments, with an
estimated market size of $800 million,
and growing at approximately 4% per
annum. Those include, for example
electric vehicle manufacturing, which
utilises lighter, reinforced plastics.
We have a strong track record of
identifying and developing new product
applications, with five new products
launched over the year, and a new
business pipeline of $50 million. We
believe this will help us deliver $15 million
of above market revenue growth by 2026.
For further detail on Talc performance
and strategy, see page 62.
In Coatings, the three growth platforms
are all positioned to respond to specific
market needs or major market trends.
For further detail on Coatings performance
and strategy, see page 61-62.
The first of these, Architectural Coatings,
is an important market for Elementis,
with the premium decorative segment
estimated at approximately $1 billion
and growing 4% per annum. We have
developed a suite of innovative,
high-performance products.
We believe this, alongside our
manufacturing footprint across three
key regions, will support our ambition
to grow at twice the market by 2026,
in this attractive market segment.
The second growth platform is Industrial
Coatings, where we see growing demand
for more sustainable coatings and
coating additives, driven by regulations
and market trends. We focus on
an addressable market of around
$800 million, which includes additives
for high-performance segments such
as marine, protective and automotive
industries, growing at c.4% annually.
Across this market segment, we expect
to deliver $30 million of incremental
revenues by 2026, focusing on
ingredients that make customers’
formulations more sustainable
without sacrificing performance.
Our third growth platform comprises
Adhesives, Sealants and Construction
Additives. This is a relatively new
application for Elementis, with the target
market valued at around $700 million,
growing at 5% per year. Growth in this
market segment is driven by trends such
as lightweighting and more efficient
manufacturing processes. Our ambition
is to double our market share from 3%
to 6% by 2026, by focusing on innovative
products, such as our low activation
temperature Thixatrol® technology.
A major component of our growth
strategy is our key account management
programme. We have built strong
technical and commercial relationships
with major customers and cooperate in
the development of new formulations to
enhance their products and processes.
This drives volume and revenue growth
and deepens our relationships with
major customers. In 2023 we worked
on 28 customer joint development
projects, generating material revenues
and contributing to improved
product mix.
28
joint development
projects
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21
Strategy in action
Efficiency
Priorities for 2024
Deliver targeted efficiency savings
of $12 million
Implement continuous improvement
projects in the supply chain to lower
cost and reduce environmental impact
Improvement in working capital
leading to higher cash conversion
Make further progress vs 2030
environmental targets and develop
updated SBT
Launch ESG risk assessment
process, enhancing our responsible
sourcing system
Develop site decarbonisation plans
Link to risk
2 Business interruption due to a supply
chain failure of key raw materials
and/or third-party service provision
5 Business interruption due to a major
event or a natural catastrophe
9 Health and safety
For detail about our approach to risk,
see pages 63-71.
We continuously work towards improving
our organisation, driving efficiency
gains, and becoming a more resilient
business. Over the last year we delivered
$10 million of savings, completing the
$25 million of savings programmes
announced in 2021.
This was achieved through a combination
of continuous improvement, procurement
savings and strict cost management over
the year, as well as delivery of Coatings
and Talc synergies. Furthermore, we
eliminated the first $4 million of stranded
costs following the sale of Chromium.
This year, at our CMD, we announced
two efficiency programmes, delivering
$30 million of additional cost savings by
2025. The first one is Fit for the Future,
targeted to deliver $20 million annual
savings by end 2025. The large majority
of these will come from staff cost savings
in three areas. Firstly, through optimising
of our organisational structure – following
the sale of Chromium, we are a smaller
company, and we believe the size our
workforce should reflect this. We are
restructuring into a simpler and more
efficient organisation, focused on our
three key regions. We will also close
our Cologne, Germany, office in 2024.
Secondly, we will create a new R&D
and support centre in Porto, Portugal.
This location is a proven global business
services location, with the added
advantages of being a source of great
R&D talent as well as being a lower
cost location. Since the announcement
of the Fit for the Future programme in
Q3 2023, we have hired multiple roles
in Porto, Portugal, and expect to further
consolidate roles from higher cost
locations, into the new Porto office.
We are excited about creating a new
showcase laboratory, which will allow us
to strengthen our customer proposition.
$30m
annual savings by 2025
Finally, we will outsource over
20 back office roles to India. This
move will provide access to stronger
processes, digital tools, and automation
opportunities that we would not be
able to deploy quickly ourselves.
The second efficiency programme
focuses on supply chain optimisation
and procurement efficiencies, where we
target an additional $10 million of annual
savings. Half of those are expected to
materialise in 2024 and half in 2025.
In our supply chain, we have built
capability in continuous improvement.
Examples of recent successes include
the optimisation of raw material usage
in New Martinsville, US, site and the
transfer of hectorite technology to our
organoclay manufacturing plant at Anji,
China, enabling the site to produce
higher value products while increasing
global capacity for hectorite production.
We will drive better overall equipment
effectiveness through more automated
processes, reduce production
bottlenecks and improve overall energy
use across our business. In addition
to running our plants better, we see
scope to optimise our manufacturing
footprint, especially as we completed
the ramp up of our antiperspirant
actives plant in India.
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Continuous improvement – dust filter
cleaning method change at Sotkamo
At Elementis, we use a pneumatic
conveying system to move dry talc
products and remove dust. This
process uses airflow to carry powder
in a conveyor pipe and filters are
required to separate solids and
excess air.
In the filter housing, air passes through
the filter bags removing talc dust,
which enables air to be discharged
from the top of the baghouse into
the atmosphere. During this process,
the filter cloth gaps become filled
with particles and the filter becomes
less efficient. To clean the filter bags,
an air pulse is given to clean the
particles from the filter cloth
re-opening the gaps.
In our Sotkamo plant, we were looking
at ways to lower the air compressors’
energy consumption by reducing
their running time. Dust filter cleaning
consumes a lot of compressed air
and most of the filters had pulse jet
cleaning running continuously.
We recognised that we could save
energy by changing the cleaning
method based on differential pressure.
This releases the cleaning pulse only
when the pressure difference gets
lower than the set limit. So far, the
process has withstood the Finnish
winter conditions, and the cold has
not affected the cleaning method.
Photo: Example dust filter at Sotkamo plant.
Changes were implemented between
April and June 2023 in 38 bag houses
in the Sotkamo Micro Talc plant, and
the compressed air consumption in the
instrument air network reduced 40% in
this period. We continue to monitor the
energy usage and expect to not only
deliver annual energy savings and CO2
reduction, but also increase the lifetime
of wearing parts of the equipment used.
Across procurement, we expect
to drive benefits from better use of
vendor management, digital tools
including e-sourcing, cutting back
the number of raw materials that are
single sourced, and standardising
our procurement processes.
We see the combination of our growth
platforms, together with these material
efficiency programmes, delivering much
improved financial performance by 2026.
Another key enabler of our efficiency
is our sustainability focus. Our products
help customers do more with less
resources, for example, additives that
help adhesives instantly grip heavy
ceramic tiles without slipping, saving
end users materials, time and money.
Efficiency is also a foundational
requirement for sustainability
improvements in our own operations
and supply chain. This year, we made
further progress in this area, for example
in our Sotkamo plant, where we reduced
electricity consumption by changing
filter cleaning method, or a reduction
in water consumption in Ludwigshafen,
Germany, by transferring product line
to a different filter press utilising
different cleaning technology.
Our focus on efficiency has helped
us to achieve two of our four 2030
environmental targets, meaning we
are emitting less GHG and using less
water per tonne of production than
in our 2019 baseline year.
For detail about our sustainability strategy
and sustainability targets, see pages 29-44.
Throughout our operations, our global
process excellence teams have identified
over 60 projects that are beneficial from
both an efficiency and environmental
perspective. Their implementation
will drive delivery of both our cost
saving ambitions and our 2030
sustainability targets.
We also completed the multi-year
project to deliver one global ERP
programme. This provides a single
source of information including financial,
manufacturing and supply chain data on
the same system, cutting out duplication
and inefficiency. And we also updated the
Elementis corporate website, to improve
the end user experience, including
a more efficient customer interaction.
See our new website at: elementis.com
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Key performance indicators
Our key performance indicators (“KPIs”) enable us to monitor our strategic progress.
Financial KPIs
Adjusted operating
cash flow ($m)
$105.3m
2021
2022
2023
76.0
64.2
105.3
Adjusted operating cash
conversion (%)
106%
2021
2022
2023
70
55
106
Adjusted Group profit
before tax ($m)
$84.4m
2021
2022
2023
59.6
80.9
84.4
Adjusted operating
profit ($m)
$103.9m
2021
2022
2023
88.0
100.5
103.9
Adjusted operating
profit margin (%)
14.6%
2021
2022
2023
12.4
13.6
14.6
Contribution margin (%)
49.4%
2021
2022
2023
46.6
47.3
49.4
Definition
Performance
The net cash flow from operating
activities less net capital
expenditure, but excluding
income taxes paid or received,
interest paid or received, pension
contributions net of current
service cost and adjusting items.
Further information can be found
on pages 58.
Link to strategy
Link to remuneration
No direct link.
Definition
Performance
Adjusted operating profit divided
by adjusted operating cash
flow plus provisions and share
based payments.
Figures for 2021 and 2022 include
results for the Chromium business.
2023 exclude Chromium.
Further information can be found
on pages 190-191.
Link to strategy
Link to remuneration
No direct link.
Target
Three-year average operating
cash conversion of over 90%.
Definition
Performance
The Group profit before tax
after adjusting items, excluding
adjusting items relating to tax.
Further information can be found
on pages 150-153.
Link to strategy
Link to remuneration
Key element of the bonus plan
for the Executive Directors.
Further information can be found
within the Directors’ Remuneration
report on pages 101 and 113.
Definition
Performance
Profit derived from the normal
operations of the business after
adjusting items.
Further information can be found
on pages 190-191.
Link to strategy
Link to remuneration
No direct link.
Definition
Performance
Adjusted operating profit divided
by revenues.
Further information can be found
on pages 190-191.
Link to strategy
Link to remuneration
No direct link.
Target
2026 adjusted operating profit
margin of 19%+.
Definition
Performance
Revenue less all variable costs,
divided by revenue, expressed
as a percentage.
Further information can be found
on pages 190.
Link to strategy
Link to remuneration
No direct link.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Average trade working
capital to sales ratio (%)
25.1%
2021
2022
2023
17.7
22.5
25.1
Adjusted return on
operating capital employed
(%)
15%
2021
2022
2023
13
14
15
Definition
Performance
Further information can be found
on pages 191.
Link to strategy
The 12 month average trade
working capital divided by revenue,
expressed as a percentage.
Trade working capital comprises
inventories, trade receivables
and trade payables. It specifically
excludes prepayments, capital
or interest related receivables
or payables, changes due to
currency movements and items
classified as other receivables
and other payments.
Definition
Performance
Further information can be found
on pages 190.
Link to strategy
Adjusted operating profit divided
by operating capital employed,
expressed as a percentage.
Operating capital employed
comprises fixed assets (excluding
goodwill), working capital and
operating provisions. Operating
provisions include self-insurance and
environmental provisions but exclude
retirement benefit obligations.
2023 return on capital employed
(“ROCE”) including goodwill
was 9% (2022: 9%).
Non-financial KPIs
Total recordable
injury rate (“TRIR”)
0.33
2021
2022
2023
0.33
0.90
0.67
Scope 1 and 2
GHG emissions (kt CO2e)
63 kt CO2e
2021
2022
2023
75.2
67
63
Environmental incidents
(Tier 21)
7
0
0
2021
2022
2023
7
1 No Tier 1 incidents recorded.
Definition
Performance
We use the US Occupational
Safety and Health Administration
(“OSHA”) definition for recordable
injuries and illnesses. TRIR is
the total number of recordable
incidents multiplied by 200,000
divided by total hours worked by
all employees during the year.
Further information can be found
on pages 45-46.
Link to strategy
Definition
Performance
Total Scope 1 and 2 (market
based) GHG emissions as
defined by the GHG Protocol.
Further information can be found
on pages 39-41.
Link to strategy
Definition
Performance
Further information can be found
on pages 46.
Link to strategy
We record and categorise
environmental incidents into tiers
based on the severity or actions
taken by regulatory authorities.
Tier 1 incidents are those that have a
significant impact on the environment
and require reporting to an external
authority and where enforcement
action is likely. Tier 2 incidents
have a minor impact and require
notification but are likely to result
in minimal action by the authorities.
Link to remuneration
Key element of the bonus plan
for the Executive Directors.
Further information can be found
within the Directors’ Remuneration
report on pages 113.
Link to remuneration
ROCE is an underpin for the
long term incentive plan.
Further information can be found
on page 102.
Target
2026 ROCE of over 20%.
This is equivalent to over 12%
ROCE including goodwill.
Link to remuneration
Non-financial targets within the
Executive Directors’ annual bonus
structure typically include a
component of individual objectives
relating to safety performance.
See page 114 for detail.
Link to remuneration
Non-financial targets within the
Executive Directors’ annual bonus
structure include a component
of individual objectives relating
to sustainability objectives.
See page 114 for detail.
Link to remuneration
Non-financial targets within the
Executive Directors’ annual bonus
structure include a component of
individual objectives relating
to safety performance.
See page 114 for detail.
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Stakeholder engagement
The Board has considered the interests of stakeholders throughout the year.
Customers
Our customers rely on us to deliver
high quality products with superior
performance, efficiency and
sustainability features. We deliver
a range of products to customers
around the world and, by providing
expertise and innovation, we keep
our customers at the forefront of
their industries.
What matters to them
Customer service and performance
Supply reliability and quality
Responsible investment
Affordability and value
Suppliers
A resilient and ethical supply chain
is critical to our business. We rely
on our suppliers to be able to meet
the needs of our customers so that
we can meet our growth opportunities
and portfolio potential.
What matters to them
Responsible supply chain
Sustainability
Collaboration
Employees
Our employees are crucial to the
success of our business, and many
of our decisions have an impact on
them. Our employees want to feel
valued and empowered to make
a difference. A safe, ethical and
sustainable workplace with the
possibility of creating real impact
remain important hallmarks of our
employee proposition.
What matters to them
Health, safety and wellbeing
Diverse and inclusive workplace
Fair pay and reward
Opportunities for learning
and growth
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Annual Report and Accounts 2023
How we engage
Continuous customer dialogue helps
inform our innovation, which aligns
with market trends
Provide technical support services
to our customers: an established
global key account programme
enables us to focus on deepening
our customer relationships
Continuous feedback loop with
key large customers drives more
sustainable, innovative products that
will meet their needs, strengthening
partnerships and collaborations
Participation and launching of new
products at conferences and trade
shows, and active participation in
Industry associations
How we engage
Onboarding process provides
two-way communication to build
relationships with our suppliers
Direct engagement with suppliers by
senior management and regular contact
with procurement team to address
any issues or potential issues
Corporate responsibility and
ethics reporting
Actions and outcomes
Launched 12 new products
28 innovation projects in development
$51 million new business won
$16 million spend on R&D and
technical support
Customer support trainings was
approximately 50 formulators trained
per month
$97.5 million total Innovation sales
Read more on pages 18-19.
Actions and outcomes
Suppliers are held to high
ethical standards
Reliability of supply/key raw materials
– development of additional raw
material supply sources
Read more on pages 14, 22-23 and 51-53.
How we engage
Actions and outcomes
Initiatives around health, safety and
wellbeing, and our organisational culture
Promote diversity and inclusion,
with a full month dedicated to
the theme in October, and regional
activities facilitated by the employee
resource group
Bi-annual engagement survey to obtain
feedback and develop action plans
Global and local townhall meetings
Regular leadership briefings
and intranet updates for the
Fit for the Future programme
Performance reviews and appraisals
provide feedback on agreed objectives
and career development discussions
Unlimited access to LinkedIn Learning
Global 24-hour, confidential employee
assistance programme
90% of sites without a recordable incident
Over 80% participation in the
engagement survey, with a grand mean
of 3.86 out of 5 in both 2023 surveys
Over 1,720 hours logged on
LinkedIn Learning
Over 2,400 hours logged on
learning platform Lzdxedu.com,
available in China
Three global townhall meetings
Collective consultation process
for Fit for the Future programme
completed as required in Germany,
the Netherlands and Finland
Read more on pages 45-50.
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Shareholder Information
Communities and
the environment
Engagement helps us to understand
our impact on wider society and the
ways in which we can work together
to make a valuable difference.
What matters to them
Local employment
Economic contribution
Operational impact and disruption
Environmental considerations
Investors
As owners of the Company, it is
important to engage actively and
listen and respond to investor
feedback throughout the year.
What matters to them
Successful delivery of our strategy
and financial targets
Transparent and regular updates
Capital generation and
shareholder returns
Robust governance practices and
responsible corporate citizenship
How we engage
Environmental and social reporting
on our website, including corporate
responsibility, modern slavery,
gender pay, water stewardship
and carbon emissions
Actions and outcomes
Water Stewardship Policy
Volunteering and fundraising activities
Gold rating from EcoVadis and
B rating for CDP Climate and Water
Philanthropy and employee-matched
funding for charity policy
Alignment with UN Sustainability
Development Goals (“UN SDG”)
Local volunteering activities
Read more on pages 29-44 and 51-53.
Carbon Disclosure Project (“CDP”),
UN Global Compact (“UN GC”)
communication on progress
Local biodiversity initiatives such
as recycling rainwater for banana
plantations in Brazil
How we engage
Interim and full-year results
presentations, investor roadshows,
attendance at conferences, site visits
and ad-hoc meetings with existing
and potential investors
The AGM is an important event,
attended by all Directors, where
all shareholders can access the
meeting and ask questions
Governance roadshow with the
Chair and meetings with the SID
and Committee Chairs as required
Actions and outcomes
Maintained a comprehensive
programme of communication
throughout the year, with regular
market updates
70 investor meetings with over
90 institutions
CMD in London, with over 50% of the
shareholder register represented either
in person or via a live webcast
Updated financial targets, including
a new ROCE target, reflecting
investor feedback
Hybrid AGM, with all resolutions passed
Our Chair held a corporate
governance roadshow, meeting
five of the top shareholders
Following a public letter by a major
shareholder, the Chair reached out
to top shareholders to collect their
feedback, which was shared with
the Board
Investor feedback is collated and
considered by the Board on
a regular basis
Read more on pages 78
Government, trade
bodies and regulators
Engagement with governments and
local regulatory authorities helps to
ensure we understand changing
regulatory requirements and can
maintain a constructive dialogue
to meet these requirements.
What matters to them
Governance and compliance
Trust and transparency
Environmental impact
Sustainable procurement
How we engage
Direct engagement with regulatory
authorities, including permit compliance,
reporting breaches, annual technical
submissions and regulatory guidance
Establishing and maintaining key
contact relationships with the
Company’s main regulators
Active engagement with industry bodies
Actions and outcomes
Clear commitment to complying with
legal obligations
Code of Conduct and relevant policies
reflect legal and ethical standards
Through our membership of the
European Talc trade association,
Eurotalc, we have participated in
dialogue representing the industry’s
views in relation to the proposed
harmonised classification and
labelling of talc
In relation to our talc mines in Finland,
we have launched a programme of
engagement activities with regional
and national regulatory bodies to
ensure meaningful engagement
Consultations with trade unions and
works councils
Read more on pages 51-53.
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27
Section 172
To be able them to fulfil their duties when
making decisions, it is essential that our
Directors understand what matters to,
and the impact on, our stakeholders
and, equally, that it is not always possible
to provide positive outcomes for all
stakeholders when considering the long
term success of the Company. Details
of our stakeholder groups and how the
business and the Board have engaged
with them during the year are set out
on pages 26-27.
The Board receives information on
stakeholder engagement matters through
regular reports and presentations from
senior management throughout the year.
All Board papers for principal Board
decisions include a specific section on
s.172(1) and stakeholder interests. In
addition to s.172(1) duties, there are also
other factors that are taken into account or
may be considered relevant in the context
of decision making: for example, pension
scheme members or engagement with
regulatory authorities, as well as an
overarching governance framework which
includes Group policies and the Code of
Conduct. Directors bring additional value
by sharing knowledge or insight gained
from other previous or current roles.
The Board visited several of our sites
during 2023 (Hsinchu (Taiwan), Livingston
(Scotland) and Songjiang (China)).
These visits provided opportunities
for our employees to engage with the
Directors during their tours of the sites,
management overview presentations and
social events with the Board. In addition,
the Directors engaged directly with our
investors (see page 78 for more detail)
and participated in a wider programme
of engagement with our employees.
Christine Soden, our Designated
Non-Executive Director (“DNED”) for
Workforce Engagement, ensures that the
views and concerns of the workforce are
brought to the Board, understood and
taken into account. Further information on
our approach to workforce engagement
can be found on pages 80-81.
Key decisions in the year
Fit for the Future organisational restructuring
S.172(1) considerations
How the restructuring would be
perceived by the global workforce and
uncertainty it might bring to staff during
the transition period
The long term financial benefits to the
Group and a wide range of stakeholders
The Board’s role
Following the sale of the Chromium
business, the Board felt it was the right
time to focus on creating an organisational
design that would make the Company
more financially and operationally resilient.
An external consultancy, Q5 Partners, was
selected to help transition the business to a
new operating model and ways of working,
making Elementis Fit for the Future.
Reintroduction of dividend
The Board began to evaluate the detailed
design proposals for the project during
Q1 2023, including ensuring that the
Group’s innovation and commercial
capabilities would be protected, and
approved the announcement of Fit for the
Future in Q3 2023. The new organisational
structure for the Group is expected
to be completed during 2025. Changes
announced include the creation of
a simpler and more efficient organisational
structure based around our three
regions; the opening of an R&D unit
and global centre of excellence in
Porto, Portugal; and the outsourcing
of several financial processes.
As a result of the proposed changes,
the Cologne site, in Germany, will close.
Full consultation took place with the
Dutch and German works councils
and the Finnish shop stewards, with the
appropriate agreements finalised and
communicated to employees during
January 2024.
Key stakeholders identified
Employees
Customers
Suppliers
Communities and the environment
Investors
The Board has recommended a dividend
of 2.1 cents per share in respect of the
2023 financial year, and will be put to
shareholder approval at the AGM
on 30 April 2024.
Key stakeholders identified
Employees
Investors
S.172(1) considerations
Importance of dividends for long-term
success of the Company
Ensuring there would be no material
impact on the security of the Elementis
Group Pension Scheme
The Board’s role
The Board is regularly updated on the
Company’s performance and its capital,
funding and liquidity position.
Following the recovery from COVID-19
and strengthening of the balance sheet,
the Board discussed the possibility of
declaring a dividend for the full year.
Important element of the Group’s
investment case for investors
Expectations of shareholders to be
taken into account
Ensuring the company had sufficient
resources to continue supporting
customers and employees, whilst
maximising opportunities
Broader economic uncertainty
and the potential medium and
longer term impact on the group
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Sustainability
Overview
Guided by our purpose – unique chemistry, sustainable solutions – we strive to use our
expertise to shape positive outcomes for the world. Our product innovations and responsible
management of natural resources help us to create better additives that help our customers
meet their own sustainability and performance ambitions.
We support the UN SDGs and are committed to maintaining a business which contributes to
their delivery. We are a signatory to the UN GC and our annual communication on progress
is available on their website. We are committed to slavery-free supply chains. Our Board of
Directors approves our annual Modern Slavery transparency statement, available on our website.
2023 sustainability highlights
Total recordable injury rate
vs 2022
Revenue share from products that
are natural or naturally-derived1
Absolute GHG emissions (combined
Scopes 1 and 2 market based) vs 2022
50%
Women in senior
leadership positions
37%
Third-party ratings
Climate
B
Water
B
68%
6.7%
2030 environmental targets
met in 2023
Purchased electricity from renewable
or low carbon sources
2 / 4
77%
EcoVadis rating
Gold 75/100
Medium risk
A
Constituent member
We believe that transparency on risks, actions and data is crucial to demonstrating sustainability improvements and we support
various external rating agencies in their assessment of our performance. Our CDP disclosures are available on both our website and
CDP’s website. In 2023, we again achieved EcoVadis Gold, further improving to reach the top 2% of companies rated by EcoVadis.
Our ratings from Sustainalytics, MSCI and FTSE4Good were unchanged from 2022.
Reporting
approach
We have reported with reference to the Global Reporting Initiative Standards (“GRI”)
for the period 1 January 2023 to 31 December 2023, and to Sustainability Accounting
Standards Board (“SASB”) chemicals sector standards. How we identify ESG topics
of material importance is described on page 31.
1 ISO 16128 definition. 2022: 67%; 2021: 65%. Prior years restated after reclassification of some products.
GRI content index: page 195
SASB index: page 197
Elementis plc
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29
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Sustainability
Overview
continued
Progress against our 2030 environmental intensity targets
2030 Target1
25%
Combined Scope 1
and Scope 2 market
based emissions
(tonne CO2e/tonne)
20%
Energy from fuels
(GJ/tonne)
10%
Water withdrawal
(m3/tonne)
10%
Waste sent to
third parties
(tonne/tonne)
Performance
vs 2019 baseline
42%
Target exceeded
0.5% 16%
Target exceeded
5%
Performance
2023 vs 2022
16% 4% 2% 10%
We met two of four 2030 environmental targets (GHG intensity and water withdrawal intensity in 2023 (2022: two2)). Our environmental
performance in 2023 was impacted by product mix, with relatively higher volumes of higher intensity chemical products and lower
volumes of lower intensity mineral-based products compared with 2022. In addition, our improvement projects this year were not of
large enough impact to counteract the mix effect. In addition, our GHG intensity reflects the first full year of high volume operation at
our Taloja, India. This site had a particularly negative impact due to the high emission electricity grid in the country. Sourcing clean
electricity for the site is one of the largest single actions we can now take to lower emissions intensity and absolute emissions further.
In 2024, we plan to refresh our sustainability targets to ensure we continue to improve. This activity includes setting a SBT for GHG
emission reductions for all three scopes via the SBTi. We will also define new targets to cover specific aspects of our value chain.
Strategy
We recognise that it is important for our business to create value for all our stakeholders, and successfully doing so improves the
performance and resilience of our business. Our strategy of Innovation, Growth and Efficiency captures the opportunities that come from
making sustainability improvements. We continue to grow our capabilities to better assess sustainability risks and opportunities – using
industry standard approaches and tools – to help guide our priorities and decisions and communicate our impacts in a balanced way.
1 All targets are per tonne of production and have a 2019 baseline year.
2 After correction of 2022 waste data due to internal methodological standardisation.
30 Elementis plc
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InnovationWe focus our capabilities on finding unique solutions to emerging sustainability challenges. For example, our organoclay-based gels improve the water resistance of consumer sunscreens, increasing their effectiveness and ensuring they stay longer on the skin.GrowthMany of our products are well-established in end-use applications that already improve sustainability outcomes, and we aim to increase our participation in these applications further. Examples are the use of our talc for vehicle pollution control ceramics and our additives for paints with low VOC.EfficiencyOur products help customers do more with fewer resources, such as additives that help adhesives instantly grip heavy ceramic tiles without slipping, saving end users materials, time and money. Efficiency is also a foundational requirement for sustainable improvement in our own operations and supply chain. Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
To respond to the sustainability drivers in the markets we serve, we focus on a three pillar framework: environment, people and
responsible business.
Environment
Reducing GHG emissions
Becoming more natural
Improving product safety
Driver: Climate change
Our focus is on lowering GHG
emissions throughout the value chain.
We are committed to setting an SBT,
covering Scopes 1, 2 and 3, and plan
for validation of this target in 2024.
We also work to increase our resilience
to the risks climate change brings.
Driver: Resource efficiency and
lowering environmental impacts
Driver: Products that have
lower health risks
We work to increase our use of natural,
renewable and recycled raw materials.
Nature supplies many of our raw
materials, so we focus on reducing
environmental impacts.
We aim for a more circular and efficient
use of resources in our own operations,
for customers and for end-users.
We work to find ways to lower the
hazards associated with the use of
our products, including substitution
with lower risk materials.
We can also help our customers
formulate new products with less
risk for end-users.
See pages 34-41 for detail.
See pages 42-44 for detail.
See pages 52-53 for detail.
Example
Example
Example
Our site in Sotkamo, Finland, has
replaced the use of polluting heavy
fuel oil with new equipment that uses
cleaner liquified petroleum gas (“LPG”).
We completed our first set of product
carbon footprints, based on ISO
14040/44 standards.
Our bio-based defoamers replace
fossil-derived chemicals and offer
better performance.
We are introducing aluminium
metal from factory wastes in
our antiperspirant actives,
replacing virgin metal.
We have developed a new additive
for clear sealants that helps
formulators replace phthalate
containing plasticisers.
Our natural hectorite clay can be
used to replace synthetic ingredients
in skin care products.
People
Responsible business
We are reliant on our greatest asset, our people. We have
a particularly strong focus on employee safety and engagement
and ensuring a diverse, inclusive culture.
We conduct ourselves with integrity, giving transparency to
stakeholders, sourcing responsibly, and engaging our value
chains to better address our material topics.
See pages 45-50 for detail.
See pages 51-53 for detail.
Example
Example
Continued focus on our TogetherSAFE employee safety
program has brought steady improvements in our total
recordable injuries rate.
We continue to improve our senior leader gender diversity.
Continuously improving our screening systems for customers
and suppliers to better manage risks.
Improving our cyber security processes to better secure our
data systems.
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Elementis plc
Annual Report and Accounts 2023
31
Sustainability
Overview
continued
Sustainability governance
Oversight of our sustainability strategy,
risks and opportunities, and progress is at
Board level. Our Board has a diverse set of
skills and experience (page 87), helping
to embed sustainability and climate related
considerations into our strategy in a
balanced way. At Board level, the standing
CEO’s report highlights progress in
sustainability (including against our
climate strategy and related risks and
opportunities), with further detailed
management updates provided on a
bi-annual basis. This year, these included
improvements to sustainability risk and
opportunity assessment methods for
our product portfolio and supplier base,
and progress on calculating product
carbon footprint and life-cycle analysis.
The governance of sustainability
and climate risks and opportunities is
integrated into our overall risk management
framework, with the Audit Committee
having oversight of our sustainability
and climate risk processes and disclosure
recommendations through internal
audit reports and management
prepared materials.
Our CEO has ultimate accountability for
our strategic response to sustainability,
including climate related risks and
opportunities. The CEO and ELT approve
the sustainability programme and provide
senior level support to the Sustainability
Director and Environmental Sustainability
Council (“ESC”) to embed sustainability
and climate action across the business
via project and business teams.
Progress towards our 2030 environmental
targets (see page 30) is part of the
performance objectives of both the CEO
and Chief Financial Officer (“CFO”)
(see page 114). The ELT members are
responsible for delivering aspects of our
sustainability and climate strategy and
managing related risks and opportunities.
The Sustainability Director is responsible
for driving our overall sustainability
strategy, providing the Board and ELT with
formal updates biannually, and chairs the
ESC. The Sustainability Director works with
the Head of Risk and Controls to integrate
sustainability and climate related risks into
the broader enterprise risk picture. The
ESC meets monthly, oversees progress
and identifies further necessary actions
on sustainability and climate related topics.
Sustainability and climate governance
Board
Audit Committee
Remuneration Committee
Executive Leadership
Team
Internal Audit
Environmental
Sustainability Council
Risk & Control
Management
Climate related
working groups
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Sustainability
Materiality and strategy
We aim for our strategic priorities to maximise beneficial impacts and minimise
negative impacts to society and the environment. To do this, our priorities must
reflect the full reality of the world in which we operate.
Early in 2022, we conducted a materiality
assessment to help us identify the
sustainability issues that matter most
to our stakeholders (such as customers,
investors, regulators and our employees).
Full details of the process we followed
are in our Annual Report 2022.
We considered issues highlighted by
leading institutions, such as the UN SDGs,
the UN GC and the SASB. We also
considered if there were additional issues
arising from stakeholder feedback and
emerging from our core business strategy.
We weighted the issues for importance to
stakeholder groups and for the resilience
of our business. The outcome was used
to confirm our sustainability priorities
across our global business. For example,
following our materiality assessment,
we have committed to set an SBT
for GHG emissions reduction.
Our material topics and matrix
Environment
1 GHG emissions
2 Ecological impacts
3 Water management
4 Customer sustainability solutions
People
9 Labour practices
10 Community relations
11 Employee health, safety
and wellbeing
Responsible business
13 Business ethics
14 Management of regulatory aspects
15 Product quality and safety
16 Responsible supply chain
5 Energy management
6 Waste and hazardous
material management
7 Air emissions
8 Product design and
life-cycle management
UN SDG supported
12 Employee diversity, inclusion
management
and engagement
UN SDG supported
17 Competitive behaviour
18 Data security
19 Efficient and resilient supply
of raw material
20 Critical incident risk management
21 Physical impact of climate change
UN SDG supported
h
g
H
i
e
c
n
a
t
r
o
p
m
i
l
r
e
d
o
h
e
k
a
t
S
i
m
u
d
e
M
Communicate actions/plans widely
Listen sensitively
9
Opportunities to generate wide ranging
value/benefits with proactive, innovative
action plans and frequent dialogue
13
2
10
3
Targeted activities
12
6
7
15
14
16
17
18
1
Best practice/risk management
20
4
19
8
11
5
21
Medium
Business impact
High
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Elementis plc
Annual Report and Accounts 2023
33
Sustainability
Climate
Climate strategy
Climate change shapes our product
designs as customers demand new and
increasingly impactful product benefits.
It drives our actions to reduce emissions,
and to improve the environmental footprint
of our products. In addition, the uncertain
effects of climate change mean our value
chains must be more resilient and agile.
Our ambition is to reach Net Zero by 2050
at the latest. Our priority is to minimise
emissions as much as possible, before using
sequestration offsets for remaining hard-to-
abate emissions. We do see a medium-term
path for us to reduce Scope 1, 2 and 3
emissions in line with Paris climate agreement,
and are committed to setting an SBT via the
SBTi. We will finalise our SBT in 2024.
Beyond our planned SBT, we recognise
that to decarbonise many of our own high
temperature processes – and those of
our suppliers – new technologies such as
renewable fuels or carbon capture need be
commercialised in the locations where we
operate. There is significant uncertainty
about these technologies and therefore,
today, we are unable to specify the balance
between sequestration offsets and low
emissions technology that we can use to
achieve Net Zero. We expect our Net Zero
ambition to cover Scope 1 and 2, and
we leave open the possibility of including
Scope 3 as our approach matures.
Governance
The Board oversees our climate related
strategy and reviews progress against
our climate targets with quarterly written
updates. The Audit Committee has
oversight of our climate related risks and
opportunities process and disclosure
recommendations through management
prepared materials. Our CEO has ultimate
accountability for our strategic response to
climate related risks and opportunities. For
more detail about our approach to climate
and sustainability governance, see page 32.
Strategy
Net Zero transition plan
We are taking immediate actions in
the short term to lower Scope 1 and 2
emissions, improving energy efficiency
through operational gains and equipment
upgrades. Our low carbon electricity
purchases involve purchasing renewable
or nuclear energy certificates.
Delivering on fuel switching opportunities
(including full or partial electrification)
is important. We are electrifying a large
fossil fuel-based process at our Sotkamo,
Finland, site. The new process can utilise
both LPG and electricity. The site already
sources low carbon electricity. If we find
we can run on 100% electricity, this has
the potential to prevent approximately
3,000 tonnes of CO2e emissions per year.
Securing more clean electricity through
high quality contractual agreements –
subject to local market conditions – is key.
It is especially important for our new site
in Taloja, India, which had its first high
volume operating year in 2023, and thus
made a substantial addition to our
emissions footprint (an extra 7,500
tonnes CO2e compared to prior year).
Our Scope 3 emissions will benefit from
product design improvements and portfolio
management opportunities that result in
products with a lower carbon footprint,
supported by life-cycle assessments and
supplier collaborations. Our own operational
gains such as energy efficiency, logistics
efficiencies and waste reduction also help.
Longer term, we have high uncertainty
about the availability of renewable fuels
and carbon sequestration technologies,
both for our own operations and for our
diverse global supplier base. We need such
technologies to meet the 90-95% emissions
reduction required for a science-based
Net Zero target under the SBTi framework.
Therefore, we take a pragmatic position,
where an SBT commitment drives our
medium term actions to lower emissions
Elementis plc has complied with
the requirements of LR 9.8.6(8)R
by including climate related financial
disclosures consistent with the Task
Force on climate-related Financial
Disclosures (“TCFD”) recommendations
and recommended disclosures. The
climate related financial disclosures
made by Elementis plc comply with
the requirements of the Companies Act
2006 as amended by the Companies
(Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022.
in line with science, while allowing time
for new technologies outside our control
to develop further.
The focus areas and external
dependencies in our transition plan
are summarised on the following page.
Climate scenarios
To help us with our climate planning,
we conducted an annual climate scenario
analysis. We use climate scenarios defined
by the Network for Greening the Financial
Systems (“NGFS”). NGFS is internationally
recognised for its work to advance
climate science and contributes to the
Intergovernmental Panel on Climate
Change’s (“IPCC”) work. NGFS has
defined seven future scenarios that explore
possible economic and financial impacts
of climate change. We selected three of
these scenarios for analysis – Net Zero
2050 (“NZ”), Delayed Transition (“DT”)
and Current Policies (“CP”). NZ and CP
represent very clear outer boundaries of
climate futures, allowing us to apply clear
differences in how we consider different
risks. We used the November 2023 NGFS
update in our scenario analysis. In 2021
and 2022, we used the Divergent Net Zero
scenario, but this is no longer available in
the NGFS data sets, so we substituted it
with DT scenario. We expect DT to be a
more likely description of the future than
NZ and CP. These scenarios are
summarised in the table below.
NGFS Scenario descriptions
Characteristic
Net Zero 2050
Delayed transition
Current policies
Summary
Limits global warming to 1.5°C
through stringent climate
policies and innovation,
reaching net zero CO2
emissions around 2050.
Global annual emissions do not
decrease until 2030. Strong
policies are then needed to
limit warming to below 2°C.
Negative emissions are limited.
Only currently implemented
policies are preserved,
leading to higher physical risks.
Policy ambition
Policy reaction
1.4°C
Immediate and smooth
Technology change
Fast
1.6°C
Delayed
Slow then fast
Carbon sequestration
Medium then high use
Low then medium use
Regional policy variation
Medium
High
3°C+
None
Slow
Low use
Low
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In our supply chain, we:
For our customers, we:
Dependencies
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Net Zero transition plan
Short term (2024 to 2026)
We continue to work towards
our 2030 goals, with the
following priorities:
Continue to implement
energy efficiency
improvements
Further increase our
purchase of renewable
and low carbon electricity
Finalise decarbonisation
plans for each
manufacturing site
Continue to implement
product designs that
use recycled or reused
raw materials, such as
bio-based chemicals to
replace petrochemicals
and using waste aluminium
to replace virgin metal
Will increase supplier
engagement to understand
their emissions and
associated reduction
opportunities, particularly
for key raw materials and
logistics providers
Medium term (2027 to 2034)
To meet our SBT, we will
further extend our focus areas.
In our operations, we plan to:
Expand fuel switching and
electrification projects
Strive for 100% renewable
or low-carbon electricity
purchases
In our supply chain, we will:
Work with suppliers
to reduce emissions
associated with key raw
materials and logistics
Identify new bio-derived
and recycled/reused
materials
Continue to market and
innovate products that help
our customers and end
consumers to use fewer
resources and less energy
Will generate cradle-to-
gate life-cycle analysis
for our products, to
help us quantify their
environmental impacts
and communicate
improvements we make
For our customers, we will:
Continue to innovate
products with lower life
cycle impacts, less
resource use and
improved functionality
Possible additional actions include:
Long term (beyond SBT target year)
As we move beyond an
SBT and closer towards
Net Zero, we will continue
activities described in the
short and medium term.
Introduction of green
hydrogen or other
renewable fuels into our
hard to abate processes
We will also investigate
the introduction of
new technologies.
Introduction of carbon
capture technology
downstream of our hard
to abate processes
Purchasing carbon
sequestration offsets
Reducing volumes
purchased from
suppliers with relatively
higher emissions
Supply of low carbon
electricity and steam at
Ludwigshafen, Germany,
and New Martinsville, US,
is also subject to our
landlord’s energy
purchasing strategy
Quality and performance
requirements could limit
the amount of recycled
or reused content we can
incorporate into products
Global market demand for
solutions that bring more
sustainable outcomes
Dependencies
The availability of high
quality low emission power
contracts in the locations
we operate
The decarbonisation extent
at our raw material suppliers
and logistics providers
Demand levels and
product mix effects
impacting activity volume
levels – especially
Scope 1 and Scope 3
Dependencies
Development and
commercialisation
of renewable fuels and
carbon sequestration
technologies
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Elementis plc
Annual Report and Accounts 2023
35
Sustainability
Climate
continued
Material climate related risks for our business
Carbon pricing
Customer demands
Consumer trends
Investor demands
Raw material supply/prices
Energy prices
Water scarcity
Access to renewable electricity
Extreme weather events
We annually review our material climate
risks with internal functional leaders,
informed by the different climate
scenarios. This allows us to identify new
or obsolete risks. It also allows us to create
a comprehensive picture of potential
climate related risks and opportunities
in each scenario, and the dynamics
over three time horizons: a) short term
(2024-2026, our three year business plan
period); b) medium term (2027-2034,
expected to be close to our SBT year); and
c) long term (beyond our SBT, reaching
our Net Zero ambition). With the functional
leaders, we also assess the impact and
likelihood of these nine risks over these
time horizons in each of the three climate
scenarios using our enterprise risk scoring
framework covered on page 64.
We initially assess climate risks through
a global perspective before bringing in
sector-specific or geographically local
considerations as necessary. Why they are
important to us, our risk assessment score
and our strategy to mitigate them are
described on pages 37-38, with additional
detail on impacts provided below. These
impacts should not be considered as
forecasts – we use these calculations to
understand a range of potential futures
and use them to inform our strategy and
tolerance to different climate risks.
The carbon pricing risk is highest in
2034 in the NZ and DT scenarios, before
dropping in the long term. This reflects
our underlying assumption that we will
maximise decarbonisation in line with
Net Zero requirements, minimising our
exposure in the long term. This results
in a highest theoretical annual cost of
$13.6 million around 2030 under the NZ
scenario. If we do not decarbonise at all,
and a global carbon price is introduced,
under the NZ scenario it could potentially
cost us $46 million by 2040, demonstrating
the importance of our decarbonisation to
mitigate this risk.
Energy prices increase in all scenarios,
with gas becoming relatively more
expensive compared to electricity in
the long term (especially in DT and NZ
scenarios). Our continued focus on
energy efficiency and opportunities to
decarbonise by replacing fossil fuels
with clean electricity help minimise
our overall energy cost increases.
Especially in the NZ and DT scenarios,
we expect that changing customer
demands are likely to increase
opportunities for our innovative and more
sustainable products, while not meeting
customer expectations, even in the short
term CP scenario, brings a high risk of
limiting our business. We are asked about
our climate strategy and product carbon
footprint by customers spanning all sectors
and geographies that we serve. Therefore,
we see more opportunities for our natural
and naturally-derived additives for personal
care products, for bio-based additives
replacing fossil-derived additives in
coatings applications and for our talc
additives used in plastics for vehicle
light-weighting. For examples, see our
strategy on pages 16-23.
On the consumer trends, we have potential
medium and long term exposure to
reduced fossil fuel demand in the NZ and
DT scenarios. For example, demand for
our organoclay additives for fossil fuel
drilling applications could slow if extraction
drops over time. Another risk is that
demand for our talc additives used in
combustion engine pollution control
ceramics could drop as new vehicle fleets
become increasingly electrified. In 2023,
revenue from our products directly related
to fossil fuel demand comprised 7% of our
revenues (2022: 6%). The NZ scenario
has the largest potential impact on these
revenues, with a 55% drop in primary
energy demand from fossil fuels by 2040.
In the short term, our growth platforms
target $90 million above market revenue
growth (see page 17 for details). These
growth platforms include short term
opportunities for talc in pollution control
ceramics, but do not include organoclay
additives for drilling applications. Thus, we
consider that the medium and long term
market opportunities we could access with
our portfolio would more than compensate
for the market risks we identified during
a low carbon transition.
To deliver to the market, we also need
a climate resilient operation. We assess
each of our sites for physical risks, in
discussion with local site leaders. Extreme
weather risks and high water stress already
exist due to their locations, and our sites
are already designed with these risks in
mind. Due to this built-in resilience, there
is low additional risk (medium under CP
scenario in the long term) expected as long
as we keep up maintenance. Additionally,
we do not think our supply chains are
overly exposed to suppliers or materials
from specific geographies.
Overall, our short and medium term
planning includes actions to ensure we
take climate related opportunities and
manage risks, including in:
Marketing, to allow early identification
of trends and opportunities
Our innovation pipeline and supply
chain management to deliver new
products with both improved
performance and sustainability impacts
Operational activities, such as energy
efficiency and decarbonisation projects
Based on this assessment, we believe
our strategy is fundamentally resilient to
market dynamics in different climate
scenarios (including a 1.5°C Net Zero
scenario), and other risks over short/
medium, long and extended periods,
and provides a solid foundation to
capitalise on climate related opportunities.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Risk score1 in horizon
Scenario Short Medium Long Strategic mitigations
Risk type
Carbon pricing
Why the risk is important to us
Transition
A high carbon price could cause
a significant increase in operating
costs, making us uncompetitive.
CP
NZ
DT
Set an SBT to support our continued
Scope 1, 2 and 3 emission reductions
Continue energy efficiency and fuel
switching projects
Increase low carbon electricity purchases
Product price adjustments
Climate and sustainability benefits
described in our product marketing
New product innovations
Finalise SBT and deliver on
GHG reduction plans
Develop product life-cycle analysis
Innovate to ensure we are well positioned
to address new market trends
Increase our high naturally derived content
in products
Ensure sustainable practices through
the supply chain
Maintain our portfolio diversity
Monitor revenues that are directly
dependent on fossil fuel consumption
Clearly describe how our business strategy
supports climate mitigation and brings
commercial opportunities
Clear disclosure of our climate strategy,
metrics and progress
Meet our SBT commitment and achieve
Net Zero ambition
Engage with third-party rating agencies to
ensure we are fairly assessed on ESG
Qualification of multiple suppliers
Inventory management
Encourage climate resilience actions
at key suppliers
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Customer demands
Transition
As part of their own climate
response and to lower their own
Scope 3 emissions, our customers
preferentially source products with
lower climate impacts than we
offer, resulting in lower revenues.
CP
NZ
DT
Consumer trends
Transition
Consumers change buying habits
to lower consumption or to lower
climate impact products than we
offer, resulting in lower revenues.
Technology or regulatory
developments may dramatically
alter the consumer market for
certain end-use applications
of our products.
CP
NZ
DT
Investor demands
Transition
As part of their own climate
response, our investors place
capital in companies with better
sustainability and climate
credentials, increasing our cost
of capital or even limiting our
capability to invest in the business.
CP
NZ
DT
Raw material supply/prices
Transition
Key raw materials have lower
availability, damaging our ability to
fulfil orders, potentially lowering
revenues, and/or higher raw
material prices mean our cost
base may become uncompetitive.
CP
NZ
DT
High risk
Medium risk
Low risk
1 Risk scores are estimated impact on Elementis multiplied by probability of occurrence.
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Risk score1 in horizon
Scenario
Short Medium Long Strategic mitigations
Sustainability
Climate
continued
Risk type
Access to renewable electricity
Why the risk is important to us
Transition
Access to renewable/low carbon
electricity is a crucial lever for us
to make progress on our emission
reduction plans in the near term.
If demand outstrips supply,
we may find it too costly to use
renewable electricity, impacting
our competitiveness.
Energy prices
Transition
A high energy price causes
significant increase in
operating costs.
Our cost base may become
uncompetitive.
Water scarcity
Physical
Our sites are disrupted by lack
of access to clean fresh water
for manufacturing product.
Extreme weather events
Physical
Our sites are disrupted due to
weather related factors, leading
to delayed order fulfilment
and potentially lower revenues,
while increasing our cost base
for repairs/prevention.
CP
NZ
DT
CP
NZ
DT
CP
NZ
DT
CP
NZ
DT
High risk
Medium risk
Low risk
1 Risk scores are estimated impact on Elementis multiplied by probability of occurrence.
Risk management
Our climate risk management approach
is incorporated into our enterprise risk
management framework (detailed on
pages 63-71), and all nine climate related
risks identified through the climate
scenario analysis (described above)
are included in our Group risk register.
Some of these climate risks (for example,
extreme weather events) also contribute
to our principal risks.
The Audit Committee and Board
have oversight of our climate risk and
internal controls (pages 90-91) through
management prepared materials.
To ensure we do not over or under
emphasise climate related risks in relation
to other enterprise risks, we use the
same risk scoring framework as for our
enterprise risks. We annually reassess
our climate related risk scores under
each scenario and time frame with
our functional leaders.
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Investigate renewable/low carbon electricity
supplies with multi-year contracts
Assess opportunities to build additional
capacity exclusively for our use
Purchase a mix of renewable and nuclear
emission certificates to secure low
carbon electricity at a balanced price
Energy purchase strategy that balances
spot, hedged and contracted purchases
Management of energy supplier contracts
Increased electrification to minimise
exposure to gas and liquid fuels
Energy efficiency projects
Projects to minimise water withdrawal and
improve water and effluent management
Some sites have access to their own
borehole for water supplies
Continuous assessment maintenance
and investment in extreme weather
adaptations at sites
Supply chain and inventory management
to cover shorter duration disruptions
Risk mitigations are monitored by the ELT
and delivered by the ESC-coordinated
working teams (such as Scope 1 and 2
emissions reduction) or by functional
teams (such as new product innovation
and product marketing).
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Metrics and targets
We have a range of established metrics
and environmental targets that we use to
address our climate related risks and
opportunities. Progress against our climate
and environmental targets makes up part
of the performance related remuneration
of our CEO and CFO (page 114).
The table below shows which of these
metrics and targets are relevant mitigations
for which of our climate related risks.
The table also shows which risk,
target and metric are most strongly
related with our Scope 1, 2 and 3 GHG
emissions, and where in this report to
find more information about our actions
and progress.
We continue to review our metrics and
targets in line with developing practices
and regulatory requirements. For example,
as we embed our use of climate scenarios
deeper into strategic processes,
we may introduce internal price of
carbon scenarios to help assess
capital investment projects.
GHG emissions
Our priority is to reduce absolute levels of
emissions – which is better for the planet
and all our stakeholders – and this is a
focus of our climate strategy to be Net Zero
by 2050. We have committed to set an
SBT to help keep our focus on emission
reduction over the medium term. Our GHG
emissions footprint is detailed on page 41.
In 2023, we prevented 799 tonnes CO2e
by replacing heavy fuel oil with LPG in
Sotkamo, Finland. Combined with lower
activity, we saw a 17.7% drop in Scope 1
emissions vs 2022.
There was no change in which sites
purchased clean electricity in 2023.
Renewable and low carbon (nuclear)
electricity made up 77% of our total
purchased energy during 2023
(2022: 77%). We continue to assess
opportunities to increase our purchase
of clean electricity, a key element of
our Net Zero transition plan.
Versus 2022, our Scope 2 (market based)
emissions increased by 3,979 tonnes
CO2e, and Scope 2 (location-based)
emissions increased by 1,652 tonnes
CO2e, driven by a higher activity at our
Taloja, India, site which uses relatively
high emission grid electricity.
Overall, our combined Scope 1 and
Scope 2 (market based) emissions
dropped by 6.7% vs 2022. A 19%
lower overall production volume was
counterbalanced by a product mix that
contained lower amounts of low emission
intensity talc output relative to our higher
intensity specialty chemical products,
and increased activity at Taloja, India.
Our target is to reduce our combined
Scope 1 and Scope 2 (market based)
emissions per tonne of production by 25%
by 2030, from a 2019 baseline (2030
target: 0.20). Our intensity increased to
0.15 tCO2e/tonne production (2022: 0.13).
Nevertheless, we met our 2030 target for
the third year in succession. This target will
be revised in 2025 when we set our SBT.
Climate related targets and metrics
Climate
related risk
Carbon pricing
Customer demands
Consumer trends
Investor demands
Raw material
supply/prices
Access to renewable
electricity
Energy prices
Water scarcity
Extreme
weather events
Related
emission scope
Additional
information
2030 intensity target
Business metric
Scope 1 and 2
GHG
emissions
Energy
from fuels
Water
withdrawn
Waste sent
to third
parties
Renewable
electricity
Value chain
emissions
Natural
content of
products
New
products
launched
Absolute
GHG
emissions
1,2
1
3
3
2
3
3
3
1,2,3
Page 41
Page 40
Page 42
Page 42
Page 40
Page 41
Page 29
Page 18
Page 41
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39
Sustainability
Climate
continued
In 2023, as we prepare for our SBT,
we expanded the process-based data
that we use in our highest contributing
Scope 3 categories of purchased goods
and transportation. 100% of direct raw
materials purchased now use specific
mass-based emissions factors from
a third party database (2022: 50%).
For transportation, we also use mode,
mass and distance for 100% of shipped
product and for an increased volume
of raw materials. We also took a more
pessimistic assumption about how our
products are treated at end-of-life.
Methodologies for other categories
were largely unchanged from 2022 –
our detailed methodology document
is available on the Sustainability section
of our website. Due to resource limitations
and absence of a current Scope 3
target, we have not recalculated
2022 Scope 3 emissions.
With these data methodology
improvements, our total Scope 3 emissions
were calculated to be similar to 2022
despite lower production volumes.
The largest single contributor is virgin
aluminium ingots (94,387 tonnes CO2e)
– our work to introduce waste aluminium
can help lower these emissions.
We have screened Forest, Land and
Agriculture (“FLAG”) emissions across all
scopes. We estimated that 7% (43,000
tonnes CO2e) of our 2022 emissions
footprint are FLAG related. Over 99%
of our FLAG emissions are in Scope 3
Category 1, with the largest contributions
coming from castor and palm oil
derivatives. The balance falls under Scope
1 land use change at our own mines.
Given this result, we do not anticipate
setting a specific FLAG target as part
of our future SBT. Our 2023 emission
footprint includes all FLAG emissions
we have identified. This year, we have
obtained third party verification of our
Scope 3 emissions for the first time.
Third party verification
We commissioned TÜV SÜD,
an experienced and independent
verification body, to verify our 2023
data for Scope 1, Scope 2 location
and market based, Scope 3, energy
consumption, water withdrawal and
waste generation. GHG emissions
were verified regarding compliance
with the ISO 14064-1:2018 standard
using a reasonable level of verification.
TÜV SÜD’s full verification statement
is available on our website.
Energy
We recognise that responsible usage
of energy (whatever the source) reduces
demands on resources and infrastructure
and helps lower our costs and emissions.
Our 2030 target aims to reduce our energy
use from fuels per tonne of production by
20%, from a 2019 baseline (target: 1.52).
In 2023, 83% of our energy from fuels
came from natural gas (2022: 85%).
In 2023, sites continued to improve energy
efficiency, for example:
Our Sotkamo, Finland, site introduced
a fuel switching project to convert from
fuel oil to LPG for a key drying process
Our sites in Songjiang, China, and
Livingston, UK, fixed compressed air
leaks across the sites, saving almost
2,000 GJ of energy (annualised)
Our site in Livingston, UK, introduced
heat recovery to pre-heat a boiler
feed, saving an estimated $40,000
(annualised)
In total in 2023, we spent $386,000 of
CAPEX on energy efficiency projects
(2022: $73,000) to save an estimated
9,000 GJ of annual energy demand
(2022: 2,300 GJ).
Our total energy usage in our continuing
operations was 13.5% lower in 2023
compared with 2022, primarily due
to a drop in production volume, with
a contribution from our energy efficiency
projects. Our energy from fuels intensity
increased by 3.9%. This was primarily
due to product mix, with relatively lower
talc production. Talc uses relatively
low amounts of energy from fuel per
tonne produced compared with our
other products.
Examples of how we plan to improve
energy efficiency further in 2024 include
process optimisations in Songjiang,
China, motor upgrades in Ludwigshafen,
Germany, and electrification of a drying
process in Sotkamo, Finland.
Net Zero transition financial metrics
While many of our activities are attributable
to multiple drivers, we can attribute 1%
of 2023 CAPEX directly to our climate
response. This may increase over the
medium term as we work to decarbonise
our manufacturing sites. Our operating
costs directly related to climate change
include low carbon electricity premiums
and projects to enhance our emission
measurement capabilities. Compared
with total operating expenditure, these
costs are low (<0.5%). Our revenue
generating activities are not eligible for
current climate taxonomy frameworks.
However, our natural and naturally-derived
revenue metric is an indicator (page 29)
of how we generate value from renewable
rather than fossil-derived feedstocks.
Global energy metric
Total energy (GWh)
Total energy (GJ)
Energy from fuels (GJ)
Purchased energy (GJ)
Purchased energy certified
renewable/low carbon (%)
Total energy intensity (GJ/tonne produced)
Energy from fuels intensity
(GJ from fuels/tonne produced)
% change
in year
-13.5
-13.5
-15.7
-10.9
0
6.5
3.9
2023
416.0
2022
480.7
2021
518.4
2020
517.3
2019
(baseline)
598.4
1,497,493
1,730,694
1,866,229
1,862,302
2,154,225
787,982
709,510
934,364
796,331
958,322
907,907
952,622
1,145,924
909,680
1,008,301
77
3.59
1.89
77
3.37
1.82
72
3.05
1.57
0
3.46
1.77
0
3.58
1.90
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Global GHG metric1
Scope 1 (tonne CO2e)
Scope 2 (tonne CO2e)
Total Scope 1 and 2 (tonne CO2e)
GHG intensity (total Scope 1 and 2
tonne CO2e/tonne production)
GHG intensity (total Scope 1 and 2
tonne CO2e/$m revenue)
Outside of scopes – GHG from
biomass (tonne CO2e)
Scope 2 basis
% change
in year
Market
Location
Market
Location
Market
Location
Market
Location
-17.7
20.5
3.8
-6.7
-7.5
16
11
-3
-4
-4
2023
39,217
23,380
44,608
62,597
83,825
0.15
0.20
88
118
3,850
2022
47,666
19,401
42,956
67,067
90,622
0.13
0.18
91
123
4,011
2021
2020
49,060
26,183
53,447
75,243
102,507
0.12
0.17
106
145
5,165
49,050
94,332
60,501
143,382
109,551
0.27
0.20
237
181
5,732
2019
(baseline)
58,469
99,957
64,457
158,426
122,926
0.26
0.20
225
175
6,301
Scope 3 GHG emissions by category (tonne CO2e)
% change
in year2
2023
20222
Purchased goods and services
Capital goods
Fuel and energy related
Upstream transportation
Waste generated
Business travel
Employee commuting
Upstream leased assets
Total upstream Scope 3 emissions
Downstream transportation
Processing of sold products
Use of sold products
Product end-of-life
Downstream leased assets
Franchises
Investments
Not calculated, not relevant
Not calculated, not relevant
Not applicable
Total downstream Scope 3 emissions
Total Scope 3 emissions
Total Scope 1, 2 (market based), 3 emissions
Total Scope 1, 2 (location based), 3 emissions
UK only GHG and energy metric1
Scope 1 (tonne CO2e)
Scope 2 (tonne CO2e)
Total Scope 1 and 2 (tonne CO2e)
GHG intensity (total Scope 1 and 2
tonne CO2e/tonne production)
Market
Location
Market
Location
Market
Location
Total energy (GWh)3
Total energy intensity (GWh/tonne produced)
2023
% of global
13.6
4.2
3.4
10.1
8.2
–
–
8.8
–
2023
5,350
973
1,532
6,323
6,882
0.48
0.52
2022
7,726
321
1,737
8,047
9,463
0.42
0.50
21.0
-31.6
-1.9
-45.4
-53.5
0.1
-41.1
29.7
-3.3
37.4
–
–
212.0
2.4
–
-17.3
115.8
1.5
0.6
0.2
2021
7,740
2,712
2,062
10,452
9,802
0.52
0.49
386,217
15,338
20,916
86,449
4,371
4,779
873
191
519,133
16,257
–
–
31,698
319
–
95
48,368
567,502
630,100
651,329
2020
5,866
2,686
1,986
8,552
7,852
0.53
0.48
319,208
22,421
21,321
158,201
9,397
4,772
1,483
147
536,950
11,832
–
–
10,159
311
–
115
22,417
559,367
626,434
649,989
2019
(baseline)
7,735
3,026
2,031
10,761
9,766
0.56
0.51
36.6
0.0028
51.3
51.4
0.0027
0.0026
40.9
0.0025
50.4
0.0026
1 For further data breakdowns, see the environmental data tables on our website.
2 2022 data not recalculated with 2023 methodology due to resource limitations and absence of a specific Scope 3 reduction target.
3 1 GWh = 1 million kilowatt hours (kWh). Total 2023 UK energy was 36,631,594 kWh.
We calculate GHG emissions in line with the GHG Reporting Protocol. For GHG emissions and all other environmental metrics, we report with an operational control
boundary that aligns with our financial statements. For more information on our calculation approach, see our non-financial data reporting methodology document on
our website.
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Sustainability
Environment
Ensuring we minimise the negative impacts of our activities on the natural world is crucial to how
we operate our business, helping the planet and supporting our own sustainable access to the
natural materials we require.
Our Health, Safety and Environment
(“HSE”) team manages environmental
compliance and performance is
monitored monthly by our manufacturing
organisation. Our ESC and the ELT reviews
performance of our strategic environmental
KPIs and major improvement projects on
a quarterly basis. Seven of our sites have
an environmental management system
certified to ISO 14001. Further information
on our environmental data methodologies
is available on our website.
Water
We see water as a precious natural
resource, and we continue to work to
mitigate our water use, risks and impacts.
Our target is to reduce water withdrawal
per tonne of production by 10% by
2030, from a 2019 baseline (2030 target:
3.38). Our Water Stewardship Policy is
available on our website. We have also
considered climate related water risks at
our sites (page 38). We publicly report
our water performance through CDP,
achieving a B rating in 2023 (2022: C).
Overall, our water withdrawal decreased
by 17% compared with 2022 (page 43),
primarily due to lower production volumes.
We met our 2030 target for the third year
in succession, although product mix
effects meant our actual intensity metric
was 2.5% higher year on year. We will
publish an updated water target alongside
our SBT in 2025.
We have worked to increase efficiency
of water use across our portfolio. For
example, we changed how we allocated
products to our filtering equipment in
Ludwigshafen, Germany, and were able
to save approximately 30,000 m3 of water
withdrawal (annualised). We also located
and repaired a leak in our underground
supply pipe in Songjiang, China.
Our water discharge (page 43) is
significantly higher than withdrawals,
primarily due to groundwater and rainwater
management at our mines in Finland.
For the rest of our sites, discharge is
generally lower than withdrawal due to
process water being lost to evaporation
as we dry our products, and sometimes
shipped as part of a product.
We use the World Resources Institute
(“WRI”) Aqueduct tool to help us
understand water risks. This year,
our site in Newberry Springs, US,
has been newly classified as within a high
water stress area, along with our two
manufacturing sites in China (Songjiang and
Anji). Our water withdrawal intensity in those
areas was 6.1 m3 per tonne produced in
2023 (2022: 4.1 m3 per tonne produced).
Waste
We recognise how valuable resources
are and we aim to use them as efficiently
as possible to support a more circular
economy. To this end, our target is to
reduce the waste (including hazardous
waste) we send for third party treatment
per tonne of production by 10% by 2030,
from a 2019 baseline (2030 target: 0.032).
We have re-baselined our data for
this metric as we better standardised
our data management of this KPI to
exclude wastewater trucked offsite at
two sites. Data from 2019 to 2022 has
been corrected.
Our waste per tonne of production
increased by 9.7% in 2023 (page 43).
We will publish an updated waste target
alongside our SBT in 2025.
We conducted activities to reduce our
waste, including at our Hsinchu, Taiwan,
facility where the recycling of process
residues and recycling of raw material
drum packaging saved over five tonnes of
waste (annualised). Future projects include
the potential reclassification of clay wastes
from our Livingston, UK, site as products
for use within agricultural and construction
businesses. If realised, this could reduce
our waste by thousands of tonnes. Similar
wastes from our Anji, China, site are
treated by our waste services provider
and then used in construction materials.
In 2023, 50% of our total waste sent offsite
for third party treatments was landfilled,
the majority of this being non-metallic
mineral wastes. 8% of waste was
incinerated and 41% was recycled or
reused. 8% of our waste was classified
as hazardous (2022: 4%).
Air emissions
We control the emission of dust and
gaseous pollutants – including VOC,
Nitrogen Oxides (“NOx”) and Sulfur
Oxides (“SOx”) – in compliance with our
local operating permits, using scrubbers
where necessary. Significant air emissions
are detailed on page 43. The large drop
in SOx emissions in 2023 is due to the
replacement of heavy fuel oil with
LPG at our Sotkamo, Finland, site.
Photo: Our site in Sotkomo, Finland.
This site has prevented 799 tonnes of GHG
emissions and approximately 20 tonnes of SOx
emissions by executing a fuel switching project,
moving from heavy fuel oil to LPG, with future
potential to electrify the process.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Water metric
% change
in year
2023
2022
2021
2020
2019
(baseline)
Total water withdrawal (m3)
-16.7
1,310,825
1,573,678
1,700,117
2,048,730
2,254,182
Water withdrawal intensity (m3/tonne produced)
2.5
3.15
3.07
2.78
3.80
3.75
Water withdrawn from high water stress
areas (m3)1
Water withdrawn from high water stress
areas intensity (m3/tonne produced)
-8.4
188,033
205,248
308,809
291,866
223,422
48.8
6.1
4.1
5.2
10.4
6.4
1 Newberry Springs, CA, US, was classified as in a high water stress area in the WRI Aqueduct tool for the first time in 2023. The site water withdrawal has been
added to 2019-2022 figures to aid comparison of trends.
Water metric (m3)
Water withdrawal by source
Total water withdrawn
Water discharge by destination
Total water discharged
Total water consumed
Waste sent for third party treatment
Mass of hazardous waste (tonne)
Mass of non-hazardous waste (tonne)
Total waste (tonne)
Total waste intensity
(tonne generated/tonne produced)
Treatment method of waste
(tonne)
Hazardous
waste
Landfilled
Incinerated
Recycled/reused
Total
138
1,126
12
1,276
All locations
Water stressed locations
Ground
Surface
Third party
Ground
Surface
Third party
248,877
185,539
876,410
1,310,825
0
3,286,514
756,977
4,043,491
-2,732,666
% change
in year
70
-15.9
-11.1
2023
1,276
14,269
15,545
2022
750
16,728
17,478
2021
293
18,842
19,135
48,461
103,531
36,041
188,033
0
68,370
11,785
80,156
107,878
2019
(baseline)
–
–
2020
–
–
19,704
21,297
9.7
0.037
0.034
0.031
0.037
0.035
Non-
hazardous
waste
7,664
185
6,420
7,802
1,310
6,432
14,269
15,545
Total
Emission to air (tonne)
Sulfur oxides
Nitrogen oxides
Volatile organic
compounds
Hazardous
air pollutants
Particulate matter
2023
0.5
19.5
65.6
6.3
1.7
2022
24.0
29.6
48.8
4.1
2.5
Production volume (tonne)
Global total
UK only
% change
in year
-19
-30
2023
2022
2021
2020
416,738
513,300
611,533
538,495
13,253
19,056
19,926
16,282
2021
33.5
37.3
58.3
3.9
20.3
2019
(baseline)
601,753
19,233
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Elementis plc
Annual Report and Accounts 2023
43
California, US
We operate one open cast mine in
California for hectorite clay mineral.
We can mine 220 hectares of land and
have additional claims (mineral rights)
on US federal land surrounding the
current operation.
By design and geological location,
no stormwater leaves the site.
Occasionally, rainwater in active mining
areas is pumped to other parts of the
property to evaporate while allowing
mining to continue. Water from an on-site
owned well is used for dust control, to
remain in compliance with the reclamation
plan and regional California Air Quality
Management District requirements.
All mined material is segregated such that
further uses can be found for it in future
(e.g. in agriculture, highway construction
or landfill liners). We sell a small amount of
rock as storm erosion protection and clay
for agriculture amendments and residential
pond liners.
Our mine is within the habitat range of the
Mojave Desert tortoise, which is on the
International Union for Conservation of
Nature red list as critically endangered.
We have an approved tortoise barrier
surrounding the site to prevent tortoises
entering the site. Should a tortoise be
found inside the fence, we work with
a trained biologist to return the animal
safely to its natural habitat.
Finland
We operate four active open cast mines
for high purity talc minerals. Our talc mines
are members of the Finnish Network for
Sustainable Mining, which aims to advance
responsible mining practices, and we
are committed to the Finnish Towards
Sustainable Mining Standard.
We continuously monitor environmental
impacts with our own laboratories or
qualified third parties, including the
quality of groundwater and surface water.
We reuse the water from our tailings
storage facility in our ore processing,
minimising freshwater withdrawal and
resulting in a water recycling rate of
over 95%. As we mine, we pump out
accumulating groundwater and rainwater,
treating it before discharge.
As we process the talc ore, we produce
nickel concentrate and magnesite sand as
by-products, which are utilised in on-site
infrastructure or sold externally. We also
use rocks in road construction on site.
The land area actively mined at these
sites is 1,792 hectares. Our land
management and remediation plans
include consideration of landscape
value when designing landfill areas.
There are no endangered species
identified in our mining areas. The impact
of our mining activities on biodiversity
is monitored in compliance with local
operating permits and regulations.
Our permits are susceptible to challenges
from environmental lobbyists and where
this occurs, we work constructively with
the permitting authorities and follow legal
due process to defend our rights.
Sustainability
Environment
continued
Responsible mining
We operate mines in Finland and
California, US, that give us direct access
to key mineral resources incorporated
into our products. We work to protect
the environment and nature, reducing or
avoiding our impact on sensitive species,
habitats and ecosystems. Our biodiversity
statement is available on our website.
We engage openly and constructively
with local communities, seek continuous
improvements in our practices,
and work to minimise negative impacts
of our operations.
Overburden, tailings and ore beneficiation
residues remain in tailing storage facilities
on our mine sites. Some of these materials
are sold as products, and there is further
potential for valorisation in the future.
Photo: Our California mine.
Supporting reforestation
We partnered with Forestmatic to plant
a tree for every visitor who left a business
card at our marketing stand at a major
conference. We planted 275 trees in
Peru, supporting a project run locally
by Camino Verde. The local community
benefits economically from the resulting
non-timber products, and degraded land
is rehabilitated to a healthy forest.
275
Trees planted in Peru
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Sustainability
People
At Elementis, our people are the key ingredients of our success. They are vital members of a local
team and a dynamic, global, inclusive company, and they play a pivotal role in bringing our purpose
to life – delivering unique chemistry and sustainable solutions to the world.
Our Values define our culture and guide
our journey. Safety is more than a
standard; it’s a way of life, showcasing our
unwavering commitment to our workforce’s
well-being. Our ambition is demonstrated
in our passion for excellence and our
drive to create solutions that bring value.
Respect is woven into all interactions,
whether with colleagues, customers,
communities or the environment. And
teams are the foundation of our success,
creating an environment where collective
efforts result in exceptional achievements.
Health and safety
Safety is a core value at Elementis.
Our focus is on keeping our employees
safe, protecting people, and operating
responsibly. Accountability for health
and safety is held by our CEO, supported
by the Senior Vice President (“SVP”)
Global Supply Chain and Manufacturing
and the Global Director for HSE. Our
Board receives a detailed update on our
health and safety performance at each
meeting and the ELT receives updates
monthly as part of the review of overall
Group performance.
Our health and safety strategic plan
reflects how we turn focus into action.
Our objective is to deliver excellence in
HSE performance and drive continuous
improvement through continual investment
in our people, management systems and
our facilities. A copy of our HSE Policy is
available on our website.
We operate a comprehensive management
system that supports our Values and
the delivery of our health and safety
programme TogetherSAFE. We
continuously develop key parts of the
management system. This year, we
expanded our development of a global
HSE framework and publication of HSE
standards in line with International
Organisation for Standardisation (“ISO”)
standards. We continued our safety
leadership certification programme for
new site management, certifying six new
leaders on performance, compliance and
risk management. We awarded our third
annual CEO TogetherSAFE Award to our
Huguenot and Wallkill (US) sites for their
safety initiatives in merging TogetherSAFE
and hazard recognition, expanding ‘Stop
Work Authority’ reporting, and increasing
the number of HSE champions.
We held our third annual Global Safety
Week in April, with all our sites uniting
globally to celebrate and nurture our safety
culture. Speakers covered topics on
wellness, sustainability and a shared
personal story on confined space hazards.
Organisational roles and responsibilities,
and mechanisms to communicate
information and data management
supporting the measurement and tracking
of HSE incidents, are operated under
our global HSE Leadership Council.
The Council meets monthly and comprises
functional and business segment
representatives spearheading the HSE
management system throughout the
organisation. All sites’ local management
systems are based on Plan, Do, Check,
Act principles to ensure sufficient
control and drive continual performance
improvement. Each manufacturing site
operates a safety committee covering
matters that impact employee health
and safety, performance, incidents and
concerns. All suggestions are tracked
as corrective and preventative actions.
To ensure compliance with our safe work
procedures and compliance with legislative
requirements, employees are given training
tailored to their specific job requirements
and required level of competence. Training
consists of both in-person and virtual,
with each site maintaining a training plan.
Safety critical training and competencies
are clearly identified and kept up to date.
Our corporate HSE team conducts
regular audits to determine compliance
with country and local regulations,
completing five audits (eight in 2022)
of our manufacturing sites.
Health and safety performance
Our total recordable injury and illness rate
was 0.33, compared with 0.67 in 2022.
There were four employee recordable
injuries (2022: eight). There were four lost
time accidents (“LTAs”) (2022: three).
Most of our employee injuries were
lacerations (32%) and sprains/contusions
(24%). Key improvement opportunities
identified from these incidents are risk
assessment of tasks before work
commences, overseeing work during
operations, safe lifting practices, early
reporting of symptoms, and adherence
to procedures and rules. There were zero
fatalities reported in 2023 (2022: zero).
Total recordable injuries
4
2021
2022
2023
8
7
4
Total recordable injuries rate
0.33
2021
2022
2023
0.33
0.9
0.67
Total lost time injuries
4
2021
2022
2023
3
2
4
Contractor recordable injuries
2
2021
2022
2023
4
2
7
Total PSE Tier 1 and 2
2
2021
2022
2023
1
2
2
2021 and 2022 data excludes divested sites.
Process safety
Process safety management ensures that
systems and procedures are implemented
to prevent and control hazards associated
with toxic releases, fires, explosions,
uncontrolled reactions and energy releases
that can result in catastrophic incidents.
A formalised process safety management
standard was created in 2023 to guide
our plants in managing risk according to
requirements and best practices. Aligned
with the standard increased training in
process safety events (“PSE”), hazard
analysis, and defined competency
requirements, were conducted and a
process safety improvement plan for high
risk processes executed. Phase 1 of the
plan included sites identified as high
hazard, which were prioritised due to
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Sustainability
People
continued
overall risk (severity and frequency).
The plan included completion of
associated process hazard analysis
(“PHA”), management of risks raised in
PHAs and identification of deficiencies
in the maintenance of safety critical
equipment. Phase 2 will include the
remaining high risk locations as well
goal of 100% PHA coverage by 2025.
A PSE is an unplanned incident or accident
that occurs during the operation of a
chemical or industrial plant, where a
hazardous material is being used or
processed. We had two Tier 1 or Tier 2
PSEs in 2023 (2022: two). Both incidents
involved seal failure. One resulted in the
loss of primary containment to secondary
containment; the other a slow leak
over a period of several days. Corrective
actions implemented include upgraded
preventative maintenance plans and
increased visual inspections of
critical equipment.
In 2023, we had seven Tier 2
environmental incidents (2022: zero).
Our local incident response teams followed
procedures to recover the situation
and declared each incident to the local
authorities as soon as we became
aware of a problem. The two most
potentially impactful of these events
were caused by third party tampering of
a pipeline, and investigation is ongoing.
Four of the incidents have been closed
in collaboration with the authorities.
The root cause was either equipment
malfunction (three incidents) or failure
to follow procedure (one incident).
A thorough analysis of each incident was
conducted and learnings communicated
across our manufacturing network to
prevent future occurrences. The remaining
incident was an administrative error made
during an air permit renewal application.
Safety metric methodology
We use the US OSHA Regulation
definition for a recordable injury:
A work related accident or illness that
results in one or more of: death; loss of
consciousness; absence of more than
one day; medical treatment beyond
first aid; restricted work or transfer to
another job.
TRIR is the number of recordable
cases multiplied by 200,000 divided
by total hours worked by all employees
(including directly supervised
contracted/temporary employees)
over a calendar year. We exclude
contractors from the TRIR calculation,
separately tracking the number of
contractor recordable injuries.
Contractor safety
A contractor is defined as a third party
contracted to undertake work on behalf
of the Company, or to provide a specific
service to the Company. All new
contractors are given HSE orientation prior
to commencement of work to understand
their on-site responsibilities and to ensure
compliance with our safe work procedures.
Each site conducts specific contractor
orientation, covering life critical rules,
safe work permitting, emergency
procedures and incident reporting.
Contractors deemed as high risk are
vetted by reviewing the suitability of
their programmes and training, and their
organisation for regulatory violations.
A contractor recordable injury is a work
related accident, meeting the definition
of recordable injury, that occurs to a
contractor while working at an Elementis
site. Contractor recordable injuries
decreased in 2023 to two (2022: four).
A LTA is a work related injury or illness
that requires greater than three days
away from work (excluding the day of
the incident).
A Tier 1 or Tier 2 PSE involves loss of
primary containment with consequence.
It is an unplanned or uncontrolled
release of any material from a process.
Tier 1 has a higher magnitude of
consequence than Tier 2, as defined
in the American Petroleum Institute
Recommended Practice 754.
A Tier 1 or Tier 2 environmental incident
is a release of materials at a level in
breach of our permit limits that requires
notification to the authorities. Tier 1 has
a higher magnitude of consequence,
either in impact or in remediation costs.
Focus for 2024
In 2024, we will continue implementation
of global HSE standards and framework
within the operations and develop
meaningful KPIs to support the rollout.
We will heighten engagement by
leveraging the success of initiatives
such as the TogetherSAFE CEO Award,
Global Safety Week and our ‘Call to Action’
initiative and embed process management
practices by continuing to drive execution
of the process safety improvement plan.
To reduce associated injury risks,
continued work is needed on ergonomic
assessments of our manual handling
tasks, promotion of hazard recognition,
work permitting and risk assessment
processes at all manufacturing sites.
We will support training of new HSE
leaders, and promote stop work
authority and near miss reporting.
In 2023, several of our sites celebrated extended periods of
safe operation.
90%
52%
of sites had zero recordable
injuries for >1 year
of sites had zero recordable
injuries for >3 years
The following sites celebrated significant milestones without
an employee recordable injury, showing strong employee
engagement in driving continuous improvements in safety
culture and taking responsibility for their own and others’ safety:
Katwijk (12 years)
Livingston (6 years)
Milwaukee (11 years)
Songjiang (4 years)
Newberry mine (8 years)
Middletown (7 years)
Palmital, Huguenot, Anji
(3 years)
46 Elementis plc
Annual Report and Accounts 2023
‘Call to Action’ initiative
600 employees, 46 meetings and over
100 actions developed
Following an increase in incidents in the first half of the year,
all sites globally were requested to step up efforts to improve
HSE performance by engaging with employees, which sent
a clear message about the value we place on safety.
To ensure future occurrences are minimised, all sites
participated in small group sessions discussing the events,
suggesting areas for improvements, and documenting key
learnings for follow up sessions. Key improvement
areas identified included reducing risk from manual handling
tasks, improved employee and contractor training, better
oversight of work and permits, promotion of Stop Work
Authority (“SWA”), reporting near misses, and a continued
drive towards hazard recognition within operations.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Our people
In 2023, we continued to promote and
further integrate our employee value
proposition – Connect, Grow, Make an
Impact – launched in 2022. These areas
were identified by our employees as our
core areas of strength. Connect – as our
people value the collaboration and being
part of a global team. Grow – as there are
plenty of opportunities to participate in
projects and gain new perspectives and
experiences. Make an Impact – because
everyone’s contributions are valued,
and our work has a meaningful impact.
Our policies and practices
Our HR policies demonstrate how
our values are put into practice. They
underscore our commitment to providing
equal opportunities in employment, striving
to ensure that the work environment is
free of harassment and bullying and
that everyone is treated with dignity and
respect. Our policies are available to all
employees via the company intranet and
local HR. Mandatory training is provided
to all employees.
While the Company has fewer than 250
employees in the UK and is therefore not
required to report under the gender pay
gap regulations, the Group reviews gender
pay globally on a biennial basis, with the
most recent one completed and reviewed
by the Board in December 2022. This
showed significant progress globally
with the UK data showing that female
employees were paid slightly higher than
their male counterparts. A further review
will take place in 2024.
We are committed to providing fair, market
competitive, pay and benefits to attract,
engage and motivate employees at all
levels. We aim to pay fully competent
individuals who consistently meet
performance expectations at competitive
market levels. We review benchmark salary
increase data on an annual basis and
complete a full survey every three years
to ensure we maintain this position.
We are accredited by the UK Living
Wage Foundation in respect of our pay
commitment to direct and third party
employees at all UK locations.
We provide a variety of leave programmes
to support employees through life events,
including family leave to care for sick family
members, paternity and maternity leave,
and bereavement leave. Leave entitlement
varies greatly across countries but the
offerings are all in line with or above
market norms.
Employee headcount by gender and region
Effective as of 31/12/2023
Metric
Americas
Europe1
Asia
Global
1 One employee chose not to disclose.
Male
employees
Female
employees
293
326
320
939
110
128
103
341
Total
403
454
423
1,280
Human rights
Our approach to upholding human
rights is guided by international
conventions and standards, including
the UN Universal Declaration of Human
Rights, the UN Guiding Principles on
Business and Human Rights and the
International Labour Organization’s
Declaration on Fundamental Principles
and Rights at Work. We prohibit
the use of child and forced labour
throughout our supply chain. We are
committed to the principles of freedom
of association, equality of treatment
and non-discrimination.
In addition, each country offers multiple
forms of personal and family support which
aim to enhance work-life balance and
increase employees’ sense of well-being.
Examples are child education and
childcare support, meal allowance
or meal vouchers, on-site canteen,
transportation support, and gifts
for holidays and life events.
From our employee population, 7.3%
are union members and 28% are subject
to collective bargaining agreements
(data excludes Ludwigshafen, Germany,
where we have no right to this information).
Voluntary attrition reduced to 8.8%
(2022: 10.6%), well below manufacturing
industry benchmarks.
Metric
Union membership
Collective bargaining
agreement
Voluntary attrition
2023
7.3%
28%
8.8%
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Elementis plc
Annual Report and Accounts 2023
47
Sustainability
People
continued
Benefits and rewards
Our total rewards package goes beyond
competitive compensation and benefits.
It encompasses a safe and healthy work
environment, a commitment to work-life
balance, meaningful recognition and
continuous learning and development.
Guided by our global principles, benefit
programmes vary from one country to
another as government mandates, cultural
factors and market norms shape local
programme design and employee
expectations. These local offerings are
well aligned to and within the scope of
our global principles.
All countries offer some form of retirement
scheme, ranging from the employee
invested 401k plan in the US to wholly
state provided and cash lump sums after
retirement. In countries where state
programmes are at a basic level, the
Company offers private plans in addition
to the mandatory contributions to the
state programme.
Employees in all countries have access
to a government health plan, to which the
company contributes, and/or a company
sponsored plan. Employees in India, the
US and Brazil are provided with company
sponsored healthcare plans as there is no
national healthcare system or the coverage
is limited. In the UK and Germany, the
Company offers supplemental health
insurance in addition to mandatory
contributions to the national programmes.
The offering of a supplemental plan in UK
is above market norms as private medical
schemes are not common and only offered
by 10% of employers. Our new site in
Portugal will be set up on the same basis,
aligned to our global principles.
% female
Senior leaders1
Total employees
2023
2022
2021
2020
37
27
35
24
31
24
30
24
1 ELT and direct reports, excluding administrative personnel. Numbers do not include Ludwigshafen.
% ethnically diverse (US only)
Total
2023
26
2022
26
2021
22
2019
25
23
2020
21
US ethnic diversity has held steady over
2022 at 26% (against a target of 30%)
and increased 5% since 2020. We
continue to ensure diverse candidate
pools and interviewing panels. We expect
our diverse talent to be reflected within
our Board and leadership teams, and have
started our journey to voluntarily collect
ethnic diversity data globally.
Elementis is an equal opportunities
employer and considers applications
for employment from all backgrounds.
We provide facilities, equipment and
training to assist all employees. Should
an employee become disabled during
their employment, efforts would be made
to retain them in their current role or to
explore opportunities for redeployment
in the Group. In 2023, we completed
the vast majority of the Facility Access
Programme removing physical barriers
in all but one of our sites.
Employee-led initiatives
foster DE&I
In 2023, our Women in Leadership
forum conducted listening lounges
globally coupled with local initiatives.
This plays a crucial role in
understanding the unique challenges
faced by women in the workplace,
allowing us to address these issues
effectively. They also gathered inspiring
career stories from five women leaders
for International Women’s Day and
hosted a global workshop on resilience.
We also saw the establishment of
a new Employee Resource Group – the
Women Engineers of Elementis. This
initiative aims to create a supportive
community for our women engineers,
offering networking opportunities,
resources for professional development,
and a collaborative environment that
empowers women to reach their
full potential.
A diverse and inclusive environment
Elementis strives to create a culture where
all employees feel safe, respected, valued,
and empowered to contribute ideas and
perspectives. We recognise that the
diversity of our people and the inclusive
nature of our culture are intrinsic to better
business decisions and fundamental to
the success of our strategy.
During the year, the Board has received
updates on Diversity, Equity and Inclusion
(“DE&I”) matters and has performed in
line with the Board Diversity Policy and
objectives. We have a Board composition
of 37.5% female Board members,
a Director from an ethnic minority
background and one of the four senior
Board positions occupied by a female.
By the end of 2024, we expect to reach
our goal of >40% female, surpassing the
requirements of the Women FTSE Leaders
and the Parker review. In 2023, we
ascended from 74th to 49th place in
the FTSE Women Leaders Review.
Additionally, we attained the leading
position within the Chemical sector.
Our DE&I Leadership Council, created
in 2020, is co-chaired by the CEO and
Chief Human Resources Officer (“CHRO”)
and is represented by senior leaders who
have a passion for DE&I. During 2023, the
Council delivered functional and business
segment DE&I strategies, driving greater
accountability within the organisation. The
Council has continued to deliver against its
road map, with initiatives centred around
knowledge and culture, process and
policy, and communications and reporting.
One of the significant developments in our
commitment to DE&I is the introduction
of a Culture of Inclusion Index, measured
through our engagement survey. Our
Culture of Inclusion index currently stands
at a 3.9 mean out of 5.0, an indicator of
the positive impact of our DE&I efforts on
our workplace culture.
Our strategy to increase gender diversity
continues to result in a greater proportion
of females in senior positions, up to 37%
in 2023 (from 35% in 2022). We align with
the FTSE Women Leaders definition of senior
positions: that is, our ELT and direct reports
excluding administrative roles. Across the
whole employee population, gender diversity
increased to 27% (2022: 24%).
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
We recognise the importance of
developing talent internally, as well
as attracting talent from outside the
organisation, to provide our employees
with the skills they need to succeed in
the future.
Managing and supporting
performance
With the performance management
process in Elementis, we align individual
and business goals to drive organisational
success. We stimulate a culture of
performance and develop our employees.
This connects the different HR processes
and ensures a fair and consistent
approach. The performance management
process starts with goal setting, where
employees are asked to set goals that
contribute to the key priorities of Elementis.
We use the mid-year review to review the
goals and actions and adjust if needed.
During the year end review employees and
managers evaluate their performance and
managers are asked to give a performance
rating. The ratings are calibrated to ensure
fairness. The final performance rating is
connected to a salary increase and bonus.
All employees who join before October in
the year participate in the performance
management process.
Listening to our colleagues:
engagement survey
Elementis is committed to improving
employee engagement throughout the
business. Our engagement survey enables
our people to provide feedback about what
they need to become happier and more
successful at work. We use the feedback
and external trend analysis to make data
driven decisions that improve employee
engagement and Company performance.
In 2023, we changed providers and started
using Gallup, the leading provider of
insights into employee engagement.
The process is now biannual, with surveys
occurring on a fixed schedule in March
and September, no matter what is
happening in the business. Previously
employees were only surveyed once
per year.
In both surveys of 2023, we had over
80% participation rates. Overall, our
grand mean score in the 12 key areas
(also known as ‘Gallup Q12’) remained
the same in both surveys: 3.86 out of 5.
Our ambition is to be at the 75th percentile
of companies by 2025. Currently, we are
at the 35th percentile and with the
right focus, we are confident we can
achieve this.
The survey results serve as a foundation
for managers to initiate meaningful
discussions with their teams. These
discussions involve recognising and
celebrating successful practices,
as well as adapting strategies to enhance
engagement where necessary. In the
September 2023 survey, 62% of
participants agreed/strongly agreed
with “My team has made progress on
the goals set during our action planning
sessions after the last Employee
Engagement Survey”.
We disseminate survey highlights
globally, fostering a culture of transparency
and shared understanding across
the organisation.
Supporting the wellbeing of
our people
We continue to highlight the importance
of wellbeing and mental health. In 2023,
we extended our employee assistance
programme to all the countries where
we have operations, offering counselling,
legal and financial consultation, and crisis
intervention services to all our employees
and their family at no cost to them.
We are committed to accommodating
flexible work arrangements including
working from home, flexible work
schedules and part-time work, as long
as the role allows, and we promote
meaningful and open conversations about
what works best to balance individual
needs and deliver against goals and
business requirements.
Continuous learning and development
We encourage our people to develop
their expertise and expand their skills,
so we can all confidently create value in
everything we do. We embed learning
and development in our core processes
via Performance Management and Talent
& Succession. With these processes
we have a fair and consistent approach
to assess individual learning and
development needs, provide clear learning
and development targets and create
learning and development opportunities.
Through live (virtual and in-person)
workshops and via our online platform,
we provide training supporting our key
priorities. All employees have unlimited
access to LinkedIn Learning where they
can take e-learnings that suit their personal
learning needs. Over 1,720 hours were
logged on LinkedIn Learning in 2023.
In China we also provide unlimited
access to a local learning platform
called Lzdxedu.com, where 2,747 hours
were logged during 2023.
Mean Gallup
Q12 score
3.86
out of 5
>80%
employee participation
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Elementis plc
Annual Report and Accounts 2023
49
Fit for the Future
In 2023, Elementis announced a series
of proposed changes to the organisation
and our ways of working that will make
Elementis Fit for the Future. These
changes started in Q3 2023 and will be
completed during 2025. They include a
simpler and more efficient organisational
structure based around our three regions;
the opening of an R&D unit and global
centre of excellence in Porto, Portugal;
and the outsourcing of several financial
processes. As a result of the proposed
changes, around 190 roles will be
impacted globally and the Cologne site,
in Germany, will be closed. Employees
were notified as soon as possible, and
consultation took place with the Dutch
and German works councils and the
Finnish shop stewards, with the
appropriate agreements being finalised
from October 2023 to January 2024
and communicated to employees.
As a way to demonstrate our value of
respect, we are committed to being as
transparent as possible with employees
about the changes. We created an intranet
page with FAQs and other relevant content
in all languages, and we have provided
frequent updates via leadership briefings
and town hall meetings.
Supporting leaders
through change
To support leaders through these
changes, the ELT undertook change
readiness workshops in London and
in the US. In addition, approximately
60 senior leaders within the business
in the US and Europe undertook
change leadership workshops and
approximately another 70 people
managers attended a virtual change
workshop in December 2023. We will
continue to review support for our
people managers and leaders over
2024 to ensure that they are effectively
leading the organisation through the
changes over the next year.
Sustainability
People
continued
Supporting our communities
We offer our employees paid time off to spend volunteering and encourage them
to participate in volunteering activity as teams. A few examples of activities done
in 2023:
The Women in Leadership group at SciPark, New Jersey, US, organised an offsite
volunteering activity at Lawrence Community Centre. A total of 11 employees from
SciPark helped paint and refresh the classroom, game room and bathroom of the
community centre that is used during the summer by young children in need
Employees from our Hsinchu site, in Taiwan, participated in a beach clean-up
organised by the Government of Hsinchu City, and collected litter and debris
from the local beach
Employees from Elementis’ Anji site, in China, visited a school in Anji for
immigrant workers’ children. They provided books and stationery to the children.
The Anji Plant Manager spoke to the children about the importance of studying
to build a bright future
The HR team from our Taloja, India, operation supported a local school with
International Yoga Day celebrations on 21 June, providing free yoga lessons
with an accredited instructor, emphasising the benefits of the practice for health
and wellbeing
50 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Sustainability
Responsible business
We are committed to ensuring that Integrity is our Specialty by conducting business fairly
and ethically.
Ethics and compliance
We are committed to conducting business
with integrity around the world and to fair
and ethical behaviour throughout
our organisation. Our Code of Conduct
and Ethics (“Code”), entitled ‘Integrity
is our Specialty’, is the cornerstone of
our ethics and compliance programme.
It helps us communicate our commitment
to responsible business and promotes
a culture of complying with the law and
doing business ethically. It provides the
framework for:
Making a culture of ethics and
compliance apparent and accessible
to all employees and third parties doing
business with Elementis
Providing training, information and
guidance on key compliance areas
Guaranteeing that all concerns are
addressed appropriately
Ensuring ethical and compliance
matters are considered and weighted
appropriately in all Elementis’
business decisions
Our Code is available on our intranet
and our website in seven languages.
The Code is also promoted through our
organisation via printed materials as well as
in communications on compliance topics.
Our Integrity is our Specialty logo is used
as a visual reminder of the importance of
ethics and compliance at Elementis.
Our governance structure
The Ethics and Compliance Council
(“ECC”) continued to hold quarterly
meetings throughout 2023. The ECC
comprises the Group General Counsel
& Chief Compliance Officer (Chair),
the Head of Compliance, the executive
leaders from each business segment and
function, and Internal Audit. The ECC
reports to the CEO after each meeting
and to the Board twice a year. Its purpose
is to uphold and oversee an ethics and
compliance culture at Elementis and to
ensure the Code, and related Elementis
policies and standards, are effectively
communicated and implemented.
Risk assessment
Following on from the risk assessments
conducted in 2022, we continue to
monitor our compliance risks. This
includes reviewing internal data from
the compliance programme as well
as external information on new laws,
enforcement proceedings, corruption
risks and benchmark data.
Key topics in 2023
Trade sanctions continued to be a major
area of focus: in particular, compliance
with international sanctions on Russia,
covering products, organisations and
individuals. The Legal & Compliance team
worked closely with colleagues across the
business units to manage compliance and
resolve questions. Adjustments were also
made in our ordering system to improve
control mechanisms in relation to
trade sanctions.
We implemented our new screening
system for customers and suppliers during
2023, and supported the launch with
a new Global Policy on Customer and
Supplier Screening, as well as providing
training and guidance on use of the system
to colleagues. The system is a key part of
our compliance and responsible sourcing
efforts. We also launched our first Business
Partner Code of Conduct, setting out the
expectations we have of our suppliers and
other third parties with whom we work.
The Business Partner Code is available
on our website in English and Chinese
languages. We also ran e-learning training
on trade sanctions and Modern Slavery to
further enhance employee understanding
of those risks and the role of screening in
managing them.
Another major project in 2023 was
designing and implementing a new system
for the management of our Global
Policies to improve controls and increase
efficiency. The new system is explained in
our new Policy on Creation, Approval and
Review of Global Documents, including
a Document Hierarchy and a Standard
Template for Global Policies. A functional
review of documentation was conducted,
to identify and document our current
Global Policies. Following this review,
a new searchable Global Policies library,
available on our intranet, was created,
so that the standards we expect everyone
to follow are easily accessible.
Ethics & Compliance week
Our first Ethics & Compliance Week was held in May 2023 to mark a year since the
launch of our new Code of Conduct. Colleagues gathered together at various sites,
including London, Amsterdam, Hsinchu and Livingston, to celebrate that milestone
and learn more about ethics and compliance. The theme of the week was ‘Speak Up,
Listen Up, Follow Up’, and it was publicised throughout our company with branded
posters and digital media.
Global events through the week included:
Training for line managers on creating
psychological safety and trust
A webinar on ethical decision making
and sustainability
Keynote speech by a former FBI agent
entitled ‘Wilful & inattentional blindness:
Why we fail to see what we need to see’
South East Asia compliance case
study session
A virtual townhall, in which our CEO
and members of the ELT focused on the
importance of speaking up and shared
powerful personal experiences across
different compliance areas
Events were well attended, with good engagement levels and very positive feedback.
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Annual Report and Accounts 2023
51
Sustainability
Responsible Business
continued
Our Speak Up culture
We increased our focus on Speak Up
to ensure that we foster a culture where
everyone feels able to speak up and be
heard. In March 2023, we conducted
a Speak Up survey to gain insights into
whether employees felt comfortable
speaking up, and potential barriers to
speaking up within our organisation.
The results were reviewed by the ELT
and the Board, and discussed during the
Ethics & Compliance Week townhall.
Appropriate actions were taken based
on the findings, including promoting
Speak Up throughout Ethics and
Compliance Week and delivering
bespoke line manager training.
We value open and honest communication,
and encourage employees and third
parties to speak up about any concern
as it arises, to their manager, HR, other
Elementis function (such as HSE or
Finance), or Legal & Compliance. Where
an individual does not feel able to raise the
matter with anyone at Elementis, it can
be raised confidentially and anonymously
(where local law permits) to a reporting
service hosted independently of Elementis,
IntegrityCounts, which is available 24
hours a day, 7 days a week, in multiple
languages. These Speak Up channels
are publicised in various ways including in
our Code, on our intranet, on the training
portal and on posters at sites.
All reports are reviewed and appropriate
action taken, which may include
investigation at the direction of the
Group General Counsel & Chief
Compliance Officer. We ensure that all
necessary steps are taken based on the
outcome of the investigation, following
our internal investigations procedures,
including provision of regular updates
to the reporter. We have a clear stance
on non-retaliation and are committed to
protecting from retaliation any employee
who reports a violation in good faith,
even if the report is not substantiated
in an investigation.
We received a total of 17 reports (three in
2022). Of these, six reports were received
via the independent reporting service
(2022: one) and 11 via other routes
such as direct contact with Compliance
(2022: two). This increase brings our
Speak Up rate closer to the benchmark
level for a company of our size, reflecting
the work we have done on improving our
Speak Up culture. No issues which were
material in the context of the Group
were reported to the helpline or via
other means during the year.
52 Elementis plc
Annual Report and Accounts 2023
Our training programme
We delivered an updated programme of
e-learning, tailored to the risks to which
Elementis and its employees were exposed
over the year. There were over 2,700 hours
of compliance training completed on the
portal in 2023. This was supplemented
by bespoke in-person training to targeted
groups to address specific compliance
risks arising during the year.
Data privacy
We remain committed to ensuring the
security and confidentiality of our data.
The Data Protection Steering Committee
continues to meet regularly, overseeing
the Group’s compliance with the
ever-changing landscape of privacy
and data protection regulation.
In 2023, as cyber attacks continued to
surge across the globe, we launched
a revised Incident Response Plan which
provides a structured and systematic
incident response process for all
information security incidents. We remain
committed to the security of our network
and systems and continue to run regular
simulated phishing campaigns to raise
employee awareness of cyber security
threats. The overall simulated compromise
rate remained considerably below the
average predicted rate. To address
incident reports, we introduced technical
controls to help prevent emails being
sent in error and launched advanced
anti-phishing technologies which help
guide our users and raise security
awareness through coaching-in-context.
We continue to encourage the timely, open
and transparent reporting of actual and
potential incidents concerning personal
data, and have dealt with the following
reports during 2023:
Cause of report
Disclosed
in error
7
Reports
Technical/
procedural failure
4
Reports
Loss or theft of
data/device
Third
party
3
Reports
Cyber
1
Reports
3
Reports
Other
2
Reports
Replacing phthalates
in clear sealants
Phthalates are a class of chemicals
under increasing scrutiny by regulators,
with many being listed in Europe as
SVHC and under Annex XIV for
‘restrictions’. They may become
restricted for certain uses in various
US states.
Our innovative rheology additive
with high natural content (>75%)
allows formulators to replace phthalate-
based plasticisers in clear sealants,
such as those used in home kitchens
and bathrooms, eliminating these
hazardous materials while simplifying
the formulation with a more
sustainable alternative.
Product stewardship
We are committed to a safer future,
minimising product and chemical-related
hazards to people or the environment by
design where possible, and throughout
product manufacture, use and disposal.
We are active members of the Scientific
Association of European Talc Producers
and the European Bentonite Association,
which are both sections of the Industrial
Minerals Association Europe.
Our global Product Stewardship
organisation monitors local and regional
regulations for impacts to our products
and supply chain and ensures our
products are compliant with current
regulations. A member of the ELT oversees
the group and provides the consistency
and strategy needed to ensure harmonised
approaches to global customers while
ensuring local regulatory compliance.
Our Product Stewardship team is actively
involved with our R&D and Supply Chain
organisation. When a new product is
conceptualised, Product Stewardship
is engaged from the beginning to
ensure the materials, processes,
and sales are compliant with appropriate
regulations. If they are not, we manage the
authorisation process so that the product
can be safely sold and used as intended.
We track Substances of Very High
Concern (“SVHC”), taking proactive action
to eliminate these substances whenever it
is technically feasible and when required
by customers. SVHC and other chemicals
of concern are brought to the attention of
the Product Development teams so they
can either avoid them or manage them
to expectations.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
We use a software system to ensure that
our safety data sheets (“SDS”) and
product labelling comply with current
regulations in the region where the product
is sold. Commercial SDS for our products
are available on our website in English and
in local languages.
Lowering the use
of biocides
We have launched new dry powder
non-ionic associative thickeners as an
alternative to our water-based version.
These powders avoid the use of toxic
biocides in the product, which are
necessary to prevent microbial growth
in the water-based versions. In addition,
the technical performance of the dry
powder product is also improved, and
its much lower weight means shipping
emissions are reduced.
Elementis seeks to avoid animal testing
whenever possible. If we are required by
regulation to do so (for example, under
European Union (“EU”) Registration,
Evaluation, Authorisation and restriction
of Chemicals (“REACH”) requirements),
we engage third parties to conduct the
tests in the least impactful way possible.
Our Animal Testing Policy is available on
our website.
Responsible sourcing
We operate a complex, international supply
chain of over 500 suppliers for our direct
materials, and thousands more for indirect
procurement. Supported by our new
Business Partner Code of Conduct and
enhanced supplier screening system
(page 51), we are committed to improving
supply chain transparency, improving how
we assess and manage sustainability risks
in the supply chain, and partnering with
suppliers who share our commitments. We
conducted site visits to 12 key suppliers in
2023 to better understand their operating
environment and potential risk areas. One
of these suppliers is in a high risk location,
and we checked specifically for indications
of child or forced labour, and reviewed
their human rights policies for alignment
with our requirements. No concerns were
noted during the visit.
We continue to develop ways to
systematically integrate supplier
sustainability risk analysis into our business
systems. One tool we are assessing is
the EcoVadis platform. For example, we
analysed our 2022 direct material supplier
base and found that 25% of our spend was
with 28 suppliers who had an EcoVadis
Gold rating or higher, indicating they have
a higher level of sustainability maturity
and a lower level of sustainability risk.
We support the use of certified sustainable
palm oil and derivatives. Our Livingston,
UK, site purchases palm oil derivatives
for use in certain products. The site is
third party certified to the Roundtable on
Sustainable Palm Oil Mass Balance Supply
Chain Model. In 2023, we engaged directly
with our key palm oil derivative suppliers
to better understand their processes for
managing slavery and labour risks further
upstream in the palm-derivative supply
chain, receiving satisfactory responses.
We purchase a small quantity of
tin-containing chemicals in the UK
and China. Using the conflict minerals
reporting template from the Responsible
Minerals Initiative, we confirmed there was
no conflict mineral risk associated with
these purchases.
Tax transparency
On an annual basis, we develop and
publish our tax strategy. This statement
is approved by the Board and is available
on the Company’s website. We aim for
proactive and transparent relationships
with relevant tax authorities to facilitate
meeting our statutory and legislative
obligations. For further details,
see page 89.
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Elementis plc
Annual Report and Accounts 2023
53
Non-financial information statement
Sections 414CA and 414CB of the Companies Act 2006 require the Company to
provide information to help stakeholders understand our position on non-financial matters.
The table below sets out where you can find this information.
Reporting requirement
Anti-corruption
and anti-bribery
Employees
Environmental matters
Policies and standards that
govern our approach1
― Code of Conduct
― Business Partner Code of Conduct
― Anti-corruption Policy
― Anti-trust Policy (global competition)
― Code of Conduct
― Business Partner Code of Conduct
― Health, Safety and Environmental Policy
― Life saving rules
― Data protection and privacy policies
― Equality and diversity policies
― Whistleblowing policies
― Code of Conduct
― Business Partner Code of Conduct
― Health, Safety and Environmental Policy
― Net Zero transition plan
― Water Stewardship Statement and Policy
― Biodiversity Statement
Respect for human rights ― Code of Conduct
― Business Partner Code of Conduct
― Equality and diversity policies
― Data protection and privacy policies
― Purchasing Code of Practice
― Modern Slavery Statement
Where to read more in this Report about our
impact, including the principal risks relating
to these matters
― Responsible business
― www.elementis.com
― People
― Data privacy
― Responsible business
― Workforce engagement
― Diversity Policy and objectives
― Whistleblowing
― Directors’ Remuneration report
― Sustainability
― Materiality and strategy
― Climate
― Environment
― People
― Responsible business
― www.elementis.com
― People
― Data privacy
― Diversity Policy and objectives
Social matters
― Code of Conduct
― Volunteering Policy
― While we do not have a specific policy on
― Stakeholder engagement
― Environment
― People
social/community matters, we engage directly
with our communities wherever we operate
Stakeholders
― Section 172
Description of the
business model
Description of principal
risks and impact on
business activity
Innovation
Non-financial KPIs
― Section 172
― Business model
― Climate
― Risk management
― Principal risks and uncertainties
― Audit Committee report
― Strategic progress
― Innovation
― Non-financial KPIs
― Sustainability
― Materiality and strategy
― Climate
― Environment
Page
51-53
45-50
52
51-53
80-81
86-87
91
96-122
29-32
33
34-41
42-44
45-50
51-53
45-50
52
86-87
26-27
42-44
45-50
05, 28
07-09
38
63-66
67-71
88-91
16
18-19
24-25
29-32
33
34-41
42-44
1 The Company’s policies, statement and codes are available on the Company’s website, www.elementis.com
Further information
Reference to our policies, due diligence processes and information on how we are performing in these areas is contained
throughout the Strategic report. Information on key performance indicators used to assess progress against targets used to
manage climate-related risks and opportunities can be found on page 39. Certain Group policies and internal standards and
guidelines are not published externally.
54 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Finance
report
Ralph Hewins
Chief Financial Officer
Significant
leverage reduction
and further
improvement in
performance.
Group results
In 2023 revenue decreased 3% on a
reported basis to $713m (2022: $736m)
with improved pricing and mix offset by
lower volumes across all businesses.
On a constant currency basis, revenue
decreased 4%. Reported operating profit
increased to $59m (2022: loss of $42m)
as a result of a reduction in one-off items
during 2023.
Adjusted operating profit increased 2% on
a constant currency basis, 3% on reported
basis, to $104m (2022: $101m), with cost
savings and improved price/mix more than
offsetting the impact of lower revenues.
Profit from continuing operations for the
year was $28m (2022: loss of $63m).
$m
Coatings
Talc
Performance Specialties
Personal Care
Revenue
$m
Coatings
Talc
Performance Specialties
Personal Care
Central costs
Operating profit/(loss)
1 After adjusting items, see Note 5 for further detail.
Effect of
exchange
rates
Decrease
2023
(1.5)
3.1
1.6
1.3
2.9
(20.0)
(2.4)
(22.4)
(3.5)
(25.9)
2023
367.6
136.5
504.1
209.3
713.4
2022
389.1
135.8
524.9
211.5
736.4
2023
2022
Operating
profit/(loss)
Adjusting
items
Adjusted
operating
profit/(loss)1
Operating
profit/(loss)
Adjusting
items
Adjusted
operating
profit/(loss)1
55.2
8.6
63.8
43.2
(48.1)
58.9
0.9
5.4
6.3
7.1
31.6
45.0
56.1
14.0
70.1
50.3
(16.5)
103.9
66.2
(134.0)
(67.8)
40.6
(14.6)
(41.8)
4.1
133.6
137.7
8.4
(3.8)
142.3
70.3
(0.4)
69.9
49.0
(18.4)
100.5
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Elementis plc
Annual Report and Accounts 2023
55
Finance Report
continued
Adjusted operating profit
$m
Coatings
Talc
Performance Specialties
Personal Care
Central costs
Adjusted operating profit
1 After adjusting items, see Note 5 for further detail.
Adjusting items
In addition to the statutory results the Group uses alternative
performance measures, to provide additional analysis of the
performance of the business. The Board considers these
non-GAAP measures as an alternative way to measure the
Group’s performance. Adjusting items in 2023 resulted in a charge
of $44.7m before tax (2022: $135.7m). The key categories of
adjusting items are summarised below. For more information on
adjusting items and the Group’s policy for adjusting items, please
see Note 5 and Note 1 to the financial statements respectively.
Business transformation
In November 2020, the closure of the Charleston plant was
announced. Costs of $0.7m (2022: $2.9m) associated with
the closure of the site are classified as an adjusting item and the
site is planned to be disposed of in the future. Since November
2020, $23.4m has been incurred in relation to the closure of
the site. In September 2023, the Fit for the Future organisation
restructuring programme was announced, for which a
restructuring provision of $25.4m was recognised in 2023, in line
with the requirements of IAS 37. Total overall estimated costs
for the programme are $31.3m, of which $5.4m was utilised in
2023. The programme is expected to be completed in 2025.
Environmental provisions
The Group’s environmental provision is calculated on a discounted
cash flow basis, reflecting the time period over which spending is
estimated to take place. The movement in the provision relates to
changes in discount rates which has resulted in the reduction of
$0.4m to the liability (2022: $7.2m), and extra remediation work
identified in the year which has resulted in a $6.6m increase to the
liability (2022: $3.4m). As these costs relate to non-operational
facilities they are classified as adjusting items.
Amortisation of intangibles arising on acquisitions
Amortisation of $12.7m (2022: $14.9m) represents the charge
in respect of the Group’s acquired intangible assets. As in
previous years, these are included in adjusting items as they are
a non-cash charge arising from historical investment activities.
Operating
profit
20231
Effect of
exchange
rates
Increase/
(Decrease)
2023
Operating
profit
20221
56.1
14.0
70.1
50.3
(16.5)
103.9
0.3
(0.3)
–
1.2
–
1.2
(14.5)
14.7
0.2
0.1
1.9
2.2
70.3
(0.4)
69.9
49.0
(18.4)
100.5
Unrealised mark to market of derivatives
The unrealised movements in the mark to market valuation of
financial instruments that are not in hedging relationships are
treated as adjusting items as they are unrealised non-cash fair
value adjustments that will not affect the cash flows of the Group.
Interest on EU state aid receivable
Finance income of $1.4m has been recognised in respect of
interest due to the Group if the EU state aid case settles in
favour of the Group. Refer to Note 30 for further details on
the tax recoverable asset.
Hedging
The Group uses cash flow hedges to manage exposure to interest
rate and commodity price risks, particularly those associated with
US dollar and euro interest payments and aluminium and nickel
pricing. In 2023 interest rate and commodity price movements
resulted in a net gain from the hedge transactions of $6.3m
(2022: loss of $1.6m) recycled to the income statement.
Central costs
Central costs are those costs that are not identifiable as expenses
of a particular business segment and comprise expenditures of
the Board of Directors and corporate head office. Adjusted central
costs reduced to $16.5m (2022: $18.4m), reflecting continued
focus on cost discipline.
Other expenses
Other expenses are administration costs incurred and paid by
the Group’s pension schemes that relate primarily to former
employees of legacy businesses. These costs were $2.3m
in 2023 (2022: $1.3m).
Credit/(charge)
$m
Business transformation
Environmental provisions
Amortisation of intangibles arising on acquisitions
Total charge to operating profit
Unrealised mark to market of derivatives
Interest on EU state aid receivables
Total
Coatings
(0.7)
–
(0.2)
(0.9)
–
–
Talc
–
–
(5.4)
(5.4)
–
–
Performance
Specialties
Personal
Care Central costs
(0.7)
–
(5.6)
(6.3)
–
–
–
–
(7.1)
(7.1)
–
–
(25.4)
(6.2)
–
(31.6)
(1.1)
1.4
Total
(26.1)
(6.2)
(12.7)
(45.0)
(1.1)
1.4
(0.9)
(5.4)
(6.3)
(7.1)
(31.3)
(44.7)
56 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Net finance cost
$m
Finance income
Finance cost of borrowings
Net pension finance income
Discount unwind on provisions
Fair value movement on derivatives
Interest on EU state aid receivable
Interest on lease liabilities
Net finance costs
2023
0.5
(17.5)
(17.0)
1.0
(1.4)
0.4
1.4
(1.3)
(16.9)
2022
0.2
(19.5)
(19.3)
0.6
(0.7)
9.1
–
(1.4)
(11.7)
Net finance costs increased to $16.9m (2022: $11.7m). Net
finance costs comprise interest payable on borrowings, calculated
using the effective interest rate method, facility arrangement
fees, the unwinding of discounts on the Group’s environmental
provisions, net pension interest income/expense, fair value
movement on derivatives, interest receivable on the EU state
aid receivable balance and interest charged on lease liabilities.
The increase in net finance costs is primarily due a lower fair
value movement on derivatives of $0.5m (2022: $9.1m). Reduction
in the fair value movement on derivatives, which are unrealised
mark to market movements on derivatives that are not in hedging
relationships, was driven by the contractual maturity of these
derivative contracts in 2023. These benefits are not expected
to recur in the next financial year.
Finance cost of borrowings have decreased by $2.0m,
primarily due to a lower net debt level during 2023.
Net pension finance income of $1.0m (2022: $0.6m) is
a function of discount rates under IAS 19, and the value of
the schemes’ deficit or surplus positions.
The Group’s environmental provisions are calculated on a
discounted basis, reflecting the time period over which the
spending is estimated to take place. The discount unwind on
provisions of $1.4m in 2023 was greater than prior year due
to higher discount rates.
Interest receivable of $1.4m has been recognised in respect
of interest due to the Group if the EU state aid case settles in
favour of the Group. Refer to Note 30 for further details on the
tax recoverable asset.
Both finance income and the interest on lease liabilities were
broadly consistent with the prior year.
Taxation
2023
2022
Effective
rate
%
29.0
–
23.5
$m
11.5
(8.4)
19.9
Effective
rate
%
(14.2)
–
20.0
$m
7.8
(8.3)
16.1
Reported tax charge/(credit)
Adjusting items tax credit
Adjusted tax charge
The Group incurred a tax charge of $19.9m (2022: $16.1m)
on adjusted profit before tax, resulting in an effective tax rate
of 23.6% (2022: 20.0%). The increase in effective tax rate was
largely due to an increase in the UK corporation tax rate to 25%
from April 2023.
Tax on adjusting items relates primarily to the amortisation of
intangible assets and the Fit for the Future restructuring programme.
The medium-term expectation for the Group’s adjusted effective
tax rate is around 26%.
Earnings per share
To aid comparability of the underlying performance of the Group,
earnings per share (“EPS”) reported under IFRS is adjusted for
items classified as adjusting.
Profit after tax ($m)
Adjusting items net of tax ($m)
Adjusted profit after tax ($m)
Weighted average number of shares
for the purposes of basic EPS (m)
Effect of dilutive shares options (m)
Weighted average number of shares
for the purposes of diluted EPS (m)
Basic EPS before adjusting
items (cents)
Diluted EPS before adjusting
items (cents)
Adjusted basic EPS (cents)
Adjusted diluted EPS (cents)
2023
28.2
36.3
64.5
2022
(62.6)
127.4
64.8
585.7
11.2
582.6
9.7
596.9
592.3
4.8
(10.7)
4.7
11.0
10.8
(10.7)
11.1
10.9
Adjusted diluted EPS decreased by 1% to 10.8 cents (2022:
10.9 cents), primarily due to a lower adjusted profit after tax.
Basic EPS before adjusting items increased to 4.8 cents (2022:
negative 10.7 cents), principally due to a higher profit after tax.
Note 9 provides disclosure of EPS calculations both including
and excluding the effects of adjusting items and the potential
dilutive effects of outstanding and exercisable options.
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
57
Finance Report
continued
Distributions to shareholders
The Board has considered the strength of the balance sheet
and the near-term prospects for the business and recommended
the reinstatement of the ordinary dividend to an amount of
2.1 cents per share, which will be paid in pounds sterling.
Dividend of 1.65 pence per share has been determined by
converting the 2.1 cents into pound sterling using the forward rate
of £1.00:$1.2705, as determined on 4 March 2024. If approved at
the AGM, the dividend will be paid on 31 May 2024 to
shareholders included on the share register on 3 May 2024.
Cash flow
As per the statutory cash flow statement, net cash inflow from
operating activities of $76.8m (2022: $77.0m), was in line with the
prior year. A net working capital inflow of $2.1m (2022: outflow of
$37.2m) related to movements in inventories, debtors and creditors,
offset by higher interest and tax payments, and net cash outflow
from discontinued operations of $12.5m (2022: inflow of $5.6m).
Net cash inflow in relation to investing activities increased to
$101.1m (2022: negative $46.9m) primarily due to the gross cash
proceeds from the sale of the Chromium business of $139.2m.
Net cash outflow in relation to financing activities increased to
$168.0m (2022: $57.8m) primarily due to the repayment of
borrowings following the sale of the Chromium business.
The adjusted cash flow, which excludes the effect of adjusting
items from operating cash flow and is therefore distinct from the
statutory cash flow referenced above, is summarised below.
A reconciliation between statutory operating profit to EBITDA
is shown in the alternative performance measures (“APM”)
section on page 190.
Adjusted cash flow
$m
EBITDA1
Change in working capital
Capital expenditure
Other
Adjusted operating cash flow
Pension payments
Interest
Tax
Adjusting items
Payment of lease liabilities
Free cash flow
Issue of shares, net of share
repurchases by ESOT
Dividends paid
Acquisitions and disposals
Discontinued operations
Currency fluctuations
Movement in net debt
Net debt at start of year
Net debt at end of year
2023
145.8
2.1
(38.2)
(4.4)
105.3
(3.3)
(17.8)
(27.3)
(5.6)
(6.3)
45.0
(1.0)
–
139.2
(12.5)
(5.9)
164.8
2022
141.8
(43.3)
(33.1)
0.3
65.7
(0.7)
(14.4)
(13.3)
(5.2)
(7.1)
25.0
0.9
–
–
(2.1)
10.4
34.2
(366.8)
(202.0)
(401.0)
(366.8)
Adjusted operating cash flow increased to $105.3m
(2022: $65.7m), primarily driven by a $2.1m working capital
inflow compared to an outflow of $43.3m in the prior year.
Free cash flow increased to $45.0m (2022: $25.0m), primarily
driven by improved operating cashflow, partly offset by higher
tax payments as a result of higher corporation tax rates in the
countries in which the Group operates, an increase in net interest
paid and an increase in pension payments.
Net debt decreased to $202.0m (2022: $366.8m), a reduction of
$164.8m. Net debt to adjusted EBITDA decreased to 1.4x in 2023
on a pre-IFRS 16 basis (2022: 2.2x). The decrease in leverage
was largely driven by lower net debt as well as the improvement
in adjusted EBITDA, reflective of the Group’s higher earnings.
Balance sheet
$m
Intangible fixed assets
Tangible fixed assets
Working capital
Net tax liabilities
Provisions and retirement
benefit obligations
Financial assets and liabilities
Lease liabilities
Unamortised syndicate fees
Net debt
Net assets held for sale
Total equity
2023
650.6
423.6
147.2
2022
660.2
386.4
141.5
(101.5)
(102.2)
(48.8)
11.3
(36.2)
3.1
(12.2)
5.9
(36.3)
4.3
(202.0)
(366.8)
–
847.3
103.1
783.9
Group equity increased to $847.3m (2022: $783.9m), principally
driven by lower net debt. Intangible fixed assets decreased by
$9.6m due to $13.3m of amortisation, offset by $4.1m of foreign
exchange gain. Increase in tangible fixed assets was driven by
gross additions of $66.6m, right-of-use asset capitalisation of
$5.1m and exchange gains of $24.0m, offset by depreciation
of $41.6m.
Working capital, which comprises inventories, trade and other
receivables and trade and other payables, increased to $147.2m
(2022: $141.5m). The increase was driven by lower payables and
higher receivables, partially offset by lower inventories at the end
of the year.
Net tax liabilities decreased to $101.5m (2022: $102.2m) primarily
as a result of the amortisation of the intangible fixed assets
leading to a reduction in the associated deferred tax liability.
Adjusted ROCE (excluding goodwill) increased to 15%
(2022: 14%), with higher adjusted operating profit partially
offsetting increased total operating capital employed
(see the APM section on page 190 for detail).
1 Earnings before interest, tax, adjusting items, depreciation, and amortisation.
58 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Foreign currency
The financial information is prepared and presented in US dollars,
the Group’s reporting currency. The main dollar exchange rates
relevant to the Group are set out below.
Pensions and other post retirement
benefits
$m
Net (surplus)/liability:
Pounds sterling
Euro
2023
2022
Year end
Average
Year end
Average
0.78
0.91
0.81
0.93
0.83
0.94
0.81
0.95
UK
US
Other
2023
2022
(38.7)
(26.4)
–
5.6
3.5
5.4
(33.1)
(17.5)
Provisions
The Group records a provision in the balance sheet when it has
a present obligation as a result of past events, which is expected
to result in an outflow of economic benefits in order to settle the
obligation and the amount can be reliably estimated. The Group
calculates provisions on a discounted basis. At the end of 2023,
the Group held provisions of $81.9m (2022: $29.7m) consisting
of environmental provisions of $60.5m (2022: $27.5m), self-
insurance provisions of $0.5m (2022: $0.5m), restructuring
provisions of $20.1m (2022: $0.6m) and other provisions of
$0.8m (2022: $1.1m).
The increase in environmental provisions was largely driven by
additional rehabilitation and closure costs of $28.4m in relation to
the Group’s Finnish talc mines, arising from increased rehabilitation
standards imposed by the Finnish regulators. These costs will be
incurred over the expected life of our talc mines and are not
expected to have a material cash impact in the near term.
The remaining increase related to an expense of $6.6m relating
to extra remediation work required primarily at the Eaglescliffe site,
which was partially offset by a $0.4m credit relating to a change
in the discount rate applied to the liabilities. The remaining
movement in the environmental provisions relates to the unwind
of the discount in the year of $1.5m, offset by currency translation
of $1.3m and utilisation of $4.4m.
The self-insurance provision represents the Group’s estimate of its
liability arising from retained liabilities under the Group’s insurance
programme and remained flat during the period.
The restructuring provision reflects the adjustment to head count
and other costs of restructuring where a need to do so has been
identified by management. The restructuring provision increased
by $25.4m as a result of the Fit for the Future restructuring
programme, of which $5.4m was utilised in 2023.
UK plan
The largest of the Group’s retirement plans is the UK defined
benefit pension scheme (“UK Scheme”), which at the end of 2023
had a surplus, under IAS 19, of $38.7m (2022: $26.4m). The UK
Scheme is relatively mature, with approximately two thirds of its
gross liabilities represented by pensions in payment, and is closed
to new members. The increase in net surplus was largely driven
by returns on plan assets of $9.7m (2022: loss of $200.4m) which
was offset by liability adjustments, primarily due to lower discount
rates, of $0.3m (2022: $3.0m). Company contributions of $1.8m
(2022: $0.5m) reflect the funding agreement reached with the UK
trustees following the 2020 triennial valuation, which concluded in
2021. The 2023 triennial valuation will be concluded in 2024.
US plan
In the US, the Group reports two post retirement plans under IAS
19: a defined benefit pension plan with a net surplus at the end of
2023 of $3.4m (2022: $nil), and a post retirement medical plan
with a liability of $3.4m (2022: $3.5m). The US pension plans are
smaller than the UK plan and in 2023 the overall deficit on the
US plans decreased by $3.5m, as a result of the return on plan
assets of $4.3m (2022: loss of $26.1m) and employer
contributions of $1.4m being offset by actuarial increases
in the liability of $1.3m (2022: $28.7m).
Other plans
Other pension plans amounted to $5.6m (2022: $5.4m) and
relate to pension arrangements for a relatively small number of
employees in Germany, certain UK legacy benefits and one pension
scheme acquired as part of the SummitReheis transaction in 2017.
Financial assets and liabilities
Net financial assets are represented by net derivative financial
assets of $11.3m (2022: $5.9m) which relate to the valuation of
various risk management instruments.
The movements in the mark to market valuation of cross-currency
swaps that are not in hedging relationships are treated as adjusting
items, as they are unrealised non-cash fair value adjustments and
will not affect the cash flows of the Group. The cross-currency
swaps matured in 2023.
Events after the balance sheet date
On 6 March 2024, Elementis entered into an agreement to sell
its former Chromium manufacturing site at Eaglescliffe to Flacks
Group for negative purchase consideration of £11.5m ($14.5m).
Completion of the transaction is conditional on regulatory approval.
There were no other significant events after the balance sheet date.
Ralph Hewins
Chief Financial Officer
6 March 2024
Elementis plc
Annual Report and Accounts 2023
59
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Operating review
Personal Care
Stijn Dejonckheere
SVP Global Personal Care
Revenue
$209.3m
Adjusted operating profit
$50.3m
Revenue by region %
Asia
Europe
Americas
15%
37%
48%
Financial performance
Personal Care revenue reduced 2%
(or 1% excluding currency impact) to
$209.3 million (2022: $211.5 million),
reflecting continued strong growth in
cosmetics, offset by weaker revenues
in antiperspirant actives.
Volumes remained below the strong prior
year, reflecting the prolonged destocking
of our customers. Lower volumes were
partly offset by $15 million of new business,
improved pricing and higher value product
mix, especially in Cosmetics. In Cosmetics,
sales increased in all regions, with
a particularly strong growth in Asia.
Adjusted operating profit was 3% higher
at $50.3 million (2022: $49.0 million),
or flat on an underlying basis. The adjusted
operating margin improved to 24.1%
(2022: 23.2%).
Strategy
Personal Care operates in attractive
growth markets globally. It develops
and delivers high-value additives to its
customers, based on unique chemistry
and formulation expertise. Our medium
term growth strategy is focused on three
core market segments, in which we built
a strong competitive position: Colour
Cosmetics, Skin Care and Antiperspirants.
We have seen good growth in Colour
Cosmetics, especially in Asia, where
we significantly enhanced our sales and
marketing capabilities, in recent years. This
provides better access and penetration
into new and existing Asian regions, either
direct or via a specialised distributor.
We expect further growth in Colour
Cosmetics sales in the coming years,
supported by our innovative products,
such as Bentone® Luxe XO and Bentone®
Plus Glow. Those combine our white
hectorite clay with either emulsifiers or
actives, allowing our customers to make,
for example, skincare claims for make-up
products. We have a strong new products
pipeline for 2024, which includes a range
of patent pending Bentone® Ultimate
products, with a higher load of hectorite
clay and a new activation mechanism.
We also plan to launch a natural film former
that will enhance the wear resistance of
colour cosmetics, for example in lipsticks.
These innovative products will further
strengthen our leading position in colour
cosmetics and support further growth.
We target a delivery of $10 million of
above market revenue growth by 2026,
in this application.
Skin Care is an attractive part of the
personal care market, where we have
historically had limited participation. The
natural rheology and film formers market
segment has been growing at around
4-5% annually, supported by increasing
demand from consumers looking for
more sustainable products with natural
ingredients. Our hectorite-based additives
are well positioned to benefit from this
trend, as they work equally effectively in
both water-based and oil-based products.
Since 2019 we generated $10 million
of incremental sales for this application,
and have more than doubled our NBO
pipeline. We now have strong foundation
on which we will build.
Going forward we will continue our
innovation efforts on natural rheology
with more sophisticated products, and
in addition, we will create products that
offer attractive new functionalities.
As an example, in 2024, we plan to
launch water-resistant film formers for
sun care, as well as ingredients supporting
ultra-light and highly liquid skin care
products, which are highly desirable by
Asian consumers. We are also developing
skincare ingredients that leverage the
unique chemical properties of hectorite
as a natural active.
Our ambition is to deliver growth at two
to three times the market by 2026.
Finally, the third area of focus,
Antiperspirants, where we have a global
leading position in antiperspirant actives.
Sales in 2023 were below the strong prior
year, due to softer market demand and
destocking, especially in the second half
of the year.
Looking ahead, our leading position in this
market positions us well for future growth,
further supported by favourable industry
trends. We see trends for longer lasting
sweat protection, and increasingly,
growing demand for more natural
products, including natural actives.
60 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
As recognised innovation leaders
in this field, we are focusing on new
products, that address these demands.
For example, our new range of
antiperspirants utilising waste aluminium
will reduce emissions for Elementis,
as well as our customers. In addition,
we have an ambition to develop actives
that bring antiperspirant benefits for
the deodorant product category.
Our production plant in Taloja, India is now
fully operational. Throughout 2023 we
continued to test and qualify products with
our major customers. We expect this to
strengthen our competitive position in
AP Actives through lower production
and distribution costs. Furthermore, it
enhances our supply resilience, allowing
us to deliver products to customers from
multiple sources.
We believe, that our ambitious plans in
the area of AP Actives, will help us deliver
mid-single digit revenue and margin
growth over the next three years.
Colour cosmetics, Skin care and AP
Actives all represent material growth
opportunities with a $70 million NBO
pipeline. We remain focused on helping our
clients with their formulation challenges
and building strong partnerships with
global key accounts.
Innovation remains a key driver of growth
in Personal Care. We have introduced
25 new products since 2020, many of
which are gaining good momentum with
our customers and driving revenue growth.
Sales from new and innovation products
increased to 11% in 2023 (2022: 9%).
Those products offer sustainability benefits
to our customers, either because of a
higher efficacy or because they are
replacing a product of synthetic origin.
As a result, we increased revenues from
natural or naturally-derived products,
which in 2023 represented more than
80% of our total Personal Care sales.
We continue to invest in our capabilities,
having recently announced the opening
of new R&D facility in Porto, Portugal,
which will support further growth and
strengthen our customer proposition.
Performance Specialties
Luc van Ravenstein
SVP Global Performance Specialties
Revenue
$504.1m
Adjusted operating profit
$70.1m
Revenue by region %
Coatings
Revenue
$367.6m
Adjusted operating profit
$56.1m
Financial performance
Overall revenue decreased 6% on
a reported basis, down 5% excluding
currency impact, to $367.6million
(2022: $389.1 million).
Performance in the year reflected
a combination of customer destocking
and weaker demand environment. In Asia,
where over 80% of our sales come from
industrial activity, we saw underlying
revenue marginally up, with modest growth
across a number of countries including
China, helped by the easing of COVID-19
restrictions in the second half of the year.
The premium decorative sector in
the Americas was affected by weaker
housing market and customer destocking.
European revenues were also lower,
reflecting the continued weak macro-
economic environment, and inflationary
pressures impacting customer demand
in both the decorative and industrial
coatings sectors.
Asia
Europe
Americas
23%
43%
34%
Coatings also includes our specialised
Energy business, which accounts for
just over 10% of total Coatings sales.
Adjusted operating profit decreased
20% on both the reported and underlying
basis, to $56.1 million (2022: $70.3 million),
reflecting lower volumes, offsetting price
and mix benefits.
Adjusted operating margin of 15.3%
(2022: 18.1%) demonstrates resilience
in the challenging market conditions.
Performance Specialties was created at
the beginning of 2023, by combining the
Talc and Coatings businesses.
As the two businesses share many
distribution channels and end markets,
the combined segment will enable a
stronger end market focus on attractive
growth opportunities, under a single
leadership team.
We will continue to report Coatings’
and Talc’s performance separately,
for transparency.
Elementis plc
Annual Report and Accounts 2023
61
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Operating review
Performance Specialties
continued
Strategy
At our November CMD, we unveiled
our ambitious new targets for the Group,
supported by efficiency and growth
initiatives. To drive growth and enhance
our margins in Coatings, we will focus on
three differentiated, technology-led growth
platforms. These are all positioned to
respond to specific market needs or
to meet major market trends.
The first of these, architectural coatings,
is an important market for Elementis,
with the premium decorative segments
estimated at approximately $1 billion
and growing 4% per annum. We have
developed a suite of innovative, high-
performance products, including rheology
solutions for one-coat hide paint and
powdered associative thickener which
gained significant traction with major
customers in the US and Europe.
Encouraged by this success and seeing
increasing demand from Chinese paint
manufacturers for high-quality and more
sustainable paints, we started producing
architectural additives in our Shanghai site,
aimed at the local market. We believe this,
alongside our manufacturing footprint
across three key regions, will support our
ambition to grow at twice the market by
2026, in this attractive market segment.
The second growth platform is industrial
coatings, where we see growing demand
for more sustainable coatings and coating
additives, driven by regulations and market
trends. We focus on an addressable
market of around $800 million, which
includes additives for high-performance
segments such as marine, protective
and automotive industries, growing at
c.4% annually.
Across this market segment, we expect
to deliver $30 million of above market
revenues by 2026, focusing on ingredients
that make customers’ formulations
more sustainable, without sacrificing
performance. Those include bio-based
organic thixotropes and defoamers,
and additives for water-based systems.
In addition, we see powder coatings
gaining traction as a more sustainable
option compared to traditional solvent-
or water-based solutions. Powder coatings
do not require solvents and the latest
technology developments are enabling
lower curing temperatures. This makes
them suitable for heat sensitive materials
such as wood coatings, creating additional
growth opportunities.
62 Elementis plc
Annual Report and Accounts 2023
Our third growth platform comprises
adhesives, sealants and construction
additives, where we offer high-
performance additives for a range of
applications, for example, pressure
sensitive adhesives, water-based
construction sealants or cement-based
tile mortars. This is a relatively new
application for Elementis, with the target
market valued at around $700 million,
growing at 5% per year.
Growth in this market segment is driven
by trends such as light weighting and
more efficient manufacturing processes.
Our ambition is to double our market
share from 3% to 6% by 2026 by focusing
on innovative products, such as, our
low activation temperature Thixatrol®
technology. Today it is mainly used as
an adhesives additive. This innovative
technology can reduce energy processing
costs when compared with other
amide-based technologies, also leading
to lower overall emissions. In addition,
when compared with fumed silica,
it offers improved process efficiency
and safety benefits (through reduced
exposure to inhalation).
A major component of our growth
strategy is our key account management
programme. We have built strong technical
and commercial relationships with
major customers and cooperate in the
development of new formulations to
enhance their products and processes.
This drives volume and revenue growth
and deepens our relationships with major
customers. In 2023, we worked on 19 joint
development projects with our customers,
generating material revenues and
contributing to improved product mix.
This approach, combined with our
innovation focus, is helping us explore
new market segments and create new
growth opportunities.
Talc
Revenue
$136.5m
Adjusted operating profit
$14.0m
Financial performance
Talc revenue remained broadly flat at
$136.5 million (2022: $135.8 million)
or 2% down, excluding currency impact.
Pricing actions and a better product mix
successfully offset lower volumes, due to
weaker demands in many end markets.
The automotive sector remains our main
market for talc, and sales into this market
were below the prior year, impacted by
destocking in the auto plastic segment.
Despite the flat revenues, we saw material
improvement in Talc profitability, with
adjusted operating profit growing to
$14.0 million (2022: loss $0.4 million).
Profit growth was driven by improved
pricing and product mix, which offset
the lower volumes.
As a result, we delivered a much improved
operating margin of 10.2% compared
with the prior year (2022: negative 0.3%).
Looking ahead, we see attractive growth
opportunities in higher value talc
applications and remain focused on
driving improvement in this business.
Strategy
Our medium term strategy focuses on
high-value applications across selected
market segments, with an estimated
market size of $800 million, and growing
at approximately 4% per annum. Those
include, for example, electric vehicle
manufacturing, which utilises lighter,
reinforced plastics. We recently launched
the Finntalc K-line, which can strengthen
plastic by up to 20%, helping us gain
share in this high-growth market.
Talc is also a key raw material used in gas
particular filters, enhancing the ceramic’s
thermal stability. We have a strong track
record of identifying and developing
new product applications, with five new
products launched over the year, and
a new business pipeline of $50 million.
We believe this will help us deliver $15 million
of above market revenue growth by 2026.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Risk management
Elementis faces a number of risks, uncertainties and opportunities in the ordinary course of
its operations. The effective identification, mitigation and ongoing management of these risks
underpins the delivery of the Group’s strategic objectives. Elementis has an established risk
management framework and system of internal controls to support decision making throughout
the financial year.
Risk management systems are intended
to mitigate and reduce risk to the lowest
possible level, as complete elimination of
all risks is not possible. Risk management
processes can therefore only provide
reasonable assurance against material
misstatement or loss.
Our framework for
risk management
The Board has overall responsibility for
risk management and sets the Group’s
policies, culture and tone on risk as well
as providing oversight to management.
A comprehensive risk management
framework is in place to identify, assess,
mitigate and monitor the risks faced.
The Company places the highest priority
on preventing loss of life, harm to people
and the environment, legal and regulatory
breaches, and damage to reputation or
brand. The Group has in place policies,
procedures and guidance in order to
help the ELT and employees manage
risk in these areas.
Our risk management framework
Board
The Board has overall responsibility for risk
management and sets the Group’s policies,
culture and tone on risk as well as providing
oversight to management.
Top down
Oversight, identification,
assessment and
mitigation of risks
at a Group level
Audit Committee
CEO
The Audit Committee
supports the Board
and has specific
responsibility for
monitoring financial
reporting as well as
the internal and external
audit programmes,
one of the primary
purposes of which is
to provide assurance
on financial, operational
and compliance
controls.
The CEO is responsible
for implementing
Group policies,
risk management
performance,
identifying principal
risks and ensuring that
resources are allocated
for effective risk
management
and mitigation.
ELT individuals and
risk champions
ELT members have
responsibility for
managing and
monitoring risks
relevant to their
business or function on
an ongoing basis, and
work with the support
of risk champions to
further embed risk
management within
the organisation.
Operational and supporting functions
Data Protection Steering Committee, HSE Council, Manufacturing
Council, Ethics & Compliance Council, Environmental Sustainability
Council, Diversity, Equity and Inclusion Council, Investment
Commitment Forum (Capital expenditure and allocation),
Product Stewardship & Regulatory Affairs and Internal Audit.
Bottom up
Identification, assessment
and mitigation of risks
across operational
and functional areas
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63
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Risk management
continued
1
First line roles:
Business operations
2
Second line roles:
Oversight functions
3
Third line roles:
Internal audit
Our first line of defence is our
employees. They have a responsibility
to manage day-to-day risk in their
own areas, guided by Group policies,
procedures and control frameworks.
Local management, and ultimately the
ELT, ensure that risks are managed,
maintained, reviewed and actioned
according to these frameworks.
The second line of defence is
provided by the oversight functions,
which review and monitor current
and emerging risks using a bottom up
and top down approach and provide
relevant frameworks, policies and
processes for managing those risks.
The third line of defence is assurance
over the effectiveness of mitigating
controls. This is provided by internal
and external assurance providers,
which are reviewed by management
and monitored and challenged by
the Audit Committee and the Board.
Risk heat map (gross impact)
h
g
H
i
7
=
t
c
a
p
m
I
i
m
u
d
e
M
w
o
L
5
=
6
=
9
-
8
=
1
=
2
=
1 Global economic conditions and competitive
market pressures
2 Business interruption as a result of supply
chain failure of key raw materials and/or
third party service provision
4
=
10
+
3
+
3 Cyber security, IT networks,
data security and privacy
4 Regulatory compliance and
product stewardship
5 Business interruption as a result of a major
event or a natural catastrophe
6 Major regulatory enforcement action, litigation
and/or other claims arising from products
and/or historical and ongoing operations
7 Intellectual property and know-how/protection
8 Portfolio innovation and technology
9 Health and safety
10 People, talent and succession
Change vs 2022
= Same
+ Increasing
- Decreasing
Low
Medium
Probability
High
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Risk culture
Every individual at Elementis has a
responsibility to manage risk, irrespective
of function, business or role. Risk
awareness exists throughout decision
making processes and is embedded in
systems, policies, procedures, leadership
and behaviours, and specific standards
such as the Code of Conduct. All
Company employees are responsible
for complying with related Company
policies and guidance and share
responsibility for ensuring that the
Company conducts its business in
a safe, lawful and ethical manner.
Risk appetite and tolerance
Risk appetite at Elementis is understood
as being the amount of risk that the
Board is prepared to accept in return for
reward. There is a degree of variability in
determining risk appetite, which may be
based on strategic objectives, as well as
guidance from management or advisers
with an understanding and analysis of the
nature of the risk. The strategic appetite for
risk is decided on a case-by-case basis at
Board level: for example, with respect to a
corporate transaction or significant capital
expenditure project, and delegated to
the ELT to implement as appropriate. The
maximum risk that can be taken before the
Company experiences financial distress is
also decided at Board level and mitigated,
as far as possible, by internal controls,
business continuity plans, insurance,
financial instruments and contracts.
Our risk review processes
Our Risk Management Policy defines
our approach to risk management.
The Board maintains an annual forward
planner to ensure that appropriate
focus is given at scheduled meetings
to discuss, review and monitor business
and operational performance, strategic
priorities, governance, compliance
and risk matters. This approach enables
the Board to engage directly with each
of the business units and functional
departmental leaders.
Each ELT member is responsible for
identifying, assessing and monitoring
their respective business and functional
risks as well as measuring the impact
and likelihood of the risk to the business.
Each identified risk is categorised as
strategic, commercial, operational,
financial or compliance.
On an annual basis the ELT collectively
reviews the enterprise risk universe
and the Board carries out a review of
the principal risks and uncertainties.
During the year the following risk
management activities have been
carried out:
Renewal of insurance programme
Risk registers reviewed and updated
quarterly, with clear ownership of
mitigating controls
Review of climate related risks and
scenario analysis
Launch of customer and supplier
risk screening policy and new
screening process
Continued compliance activity to
effectively manage risks relating
to trade sanction risks
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Key areas of focus
during the year
During 2023 the Board carried out two
comprehensive reviews of the Group’s
principal risks; being those which
if they were to materialise, could have
a significant impact on the Group’s ability
to meet its strategic objectives over the
medium term.
The risk heat map on page 64 identifies
the key risks, pre-mitigation, that
Management consider most impactful to
the Group’s business model and the
delivery of its strategic objectives.
Movements on the risk heat map
reflect changes to the risk environment
since 31 December 2022 and are
summarised below:
Inflationary pressures and rising
interest rates continued to impact the
macroeconomic environment in which
the Group operates. During 2023
management focused on cost reduction
initiatives to help mitigate such
pressures. In particular, the Group
announced its Fit for the Future
programme which will deliver $20m
of cost savings by the end of 2025
Cyber security continues to be a
significant risk to the business. Process
improvements have been made,
including a new Crisis Framework and
Incident Response Plan. Management
continue to highlight potential cyber
threats to employees and additional
security controls were implemented
in the IT operating environment
People, talent and succession risks
have increased in light of the Fit for
the Future programme, which impacts
15% of the global workforce. Mitigating
controls have been put in place to
ensure adequate handover periods
between departing employees and
new hires, detailed knowledge transfer
plans have been created, and there are
frequent reviews of contingency plans
by the ELT
Health and safety risks have reduced
with the sale of the Chromium business.
Excluding Chromium, our TRIR in 2023
was 50% below 2022. This success is
due to the implementation of robust
management systems, safety culture
programmes, risk management
processes, and a continued focus
on process safety
There have been no material changes to
the risk profiles for the other principal risks,
although management continue to monitor
and review as appropriate.
Elementis plc
Annual Report and Accounts 2023
65
Risk management
continued
Priorities for 2024
Successful execution of the Fit for the
Future programme
Assessment of the opportunities and
risks posed by AI
Continued horizon scanning for new and
emerging risks and detailed proposed
plans for mitigating such risks
Further enhancements to the risk
management framework, including
more systematic assessment of
sustainability risks in the Group’s
supply chain, in line with corporate
governance best practice
Finalising the Group’s SBT for GHG
emissions reduction, thereby helping
to minimise exposure to climate
change risks
Strengthen information security
governance with the appointment of
a dedicated Information Security Officer
Implementation of a partner risk
assessment programme for
supplier selection
Develop a supplemental database to
more effectively manage and review
the Group’s harmonised tariff codes
Leverage the outsourcing process to
streamline, automate and conform
our control processes globally
Continue to work constructively on
the challenges to the Group’s Finnish
mining permits, combined with
wider stakeholder engagement to
underpin the Group’s commitment
to responsible mining
Internal control
The key elements of the Group’s internal
control framework are monitored
throughout the year. The Audit Committee
has conducted a review of the
effectiveness of the Group’s risk
management and internal control
systems on behalf of the Board.
To support the Board’s annual assessment,
a report is prepared by the Global Head of
Risk and Controls on the Group’s principal
risks and internal controls. The report sets
out the Group’s risk management systems
and key internal controls, as well as the
work conducted in the year to assess and
improve the risk and control environment.
The internal control framework is intended
to effectively manage, rather than
eliminate, the risk of failure to achieve
business objectives. It can only provide
reasonable, not absolute, assurance
against the risk of material misstatement
or financial loss.
In accordance with the Financial Reporting
Council’s (“FRC’s”) guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting, the
Board confirms that there is an ongoing
process for identifying, evaluating and
managing the principal risks faced by the
Group. This process has been in place
for the year under review and up to the
date of approval of the Annual Report
and Accounts. The process is regularly
reviewed by the Board and accords with
the relevant guidance.
For further information on internal controls,
please refer to pages 90-91.
Emerging risks
Emerging risks and opportunities are
identified and documented through the
existing risk management framework
using a variety of horizon scanning
methods, such as:
Monthly performance calls with
each business unit, including deep
dives on new business opportunities,
supply chain resiliency and
procurement matters
Annual and five year financial plans
and budgets
Board, ELT and other internal
governance forums
Customer/market insight and
industry specific data
Materiality assessment with regard
to ESG
Management continue to consider how the
Group could be affected by emerging risks
over the longer term and how strategic,
market and customer initiatives might
manage risks and seize new opportunities.
It is often possible to identify the potential
impacts of emerging risks, but it is more
challenging to predict their financial
impact, likelihood and timeframe – for
example, the climate scenario analysis
which was carried out as part of our
TCFD statement on pages 42-56.
Climate change
Climate change is an important
consideration for the Group (see pages
34-41), and management’s response
is a crucial part of the Group’s business
strategy; shaping both how products
are designed and how they are brought
to market. Climate change also brings
opportunities – for example, some of
the Group’s products can contribute
to lower energy and resource use
(see page 38). Elementis has an ambition
to reach Net Zero by 2050 and in 2024
management will set an SBT (via SBTi)
for GHG reductions.
The Group assesses climate related risks
using the same impact and likelihood
criteria as for the rest of its enterprise risks.
Management have used climate scenarios
from NGFS to help understand how climate
risks change in different futures and time
horizons. Climate change has been
identified as a contributing factor to many
of our principal risks and long term
uncertainties and further information on
the Group’s approach to climate related
risks can be found on pages 67-71.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Principal risks and uncertainties
Innovation
Growth
Efficiency
1
Global economic conditions and
competitive market pressures
Description of risks
The performance of the specific end-user markets served is affected
by macroeconomic conditions. Adverse developments that may
result in a downturn in macroeconomic conditions, or in the industries
in which our customers operate, may include political uncertainty,
retaliatory tariffs or other disputes between trading partners.
Suboptimal global economic conditions can affect sales,
raw material costs, foreign exchange rates, capacity, utilisation and
cash generation, which can impact the financial health of the Group.
Increased competitive pressure in the marketplace can
result in significant pricing pressure and loss of market share.
The impact of non-delivery of operating plans can lead to market
expectations of Group earnings not being met, and slower delivery
of strategic priorities.
Link to strategic objective:
Movement in year:
2
Business interruption as a result
of supply chain failure or
key raw materials and/or
third party service provision
Description of risks
The Group is dependent on raw materials from various sources.
In the event of a long term supply disruption, or market volatility,
it may not be possible to secure sufficient supplies of raw materials
from alternative sources on a timely basis, or in sufficient quantities
or qualities, or on commercially reasonable terms. The lead time and
effort needed to establish a relationship with a new supplier could be
lengthy and could result in additional costs, diversion of resources
and reduced production yields.
Link to strategic objective:
Movement in year:
=
=
Links with climate change
Links with climate change
The global response to climate change introduces additional
uncertainties in macroeconomic and market trends which may
have both positive and negative impacts on the Group. Customers
increasingly collect climate related information in preparation for
future sourcing decisions. The Group understands its emissions
footprint, including Scope 3, and aims to reach Net Zero emissions
by 2050. Management are in the process of quantifying carbon and
environmental footprints at a product level to better demonstrate
impact and progress. See page 37.
Controls and mitigating activities
Financial performance (monthly sales, profit and cash flows and
position against key banking covenants) is closely monitored with
full year scenario planning of key risks, regular reforecasts and
prompt investigation of variances
Contingency and cost reduction plans can be implemented in
the event of an economic downturn to reduce operating costs,
including non-essential capital expenditure items and
discretionary spend
Interest, currency and commodity hedging actions are taken
as appropriate to mitigate the impact of rising interest rates
and inflation
Global key account management programme to deepen existing
relationships with our largest customers and help to pre-empt
end market changes
Balanced geographic footprint and supply chain and broad
differentiated product offering across different sectors
Developments in year
Continued focus on cost reduction, capital expenditure
effectiveness, working capital and discretionary spend
Price rises implemented to mitigate the impact of raw
material, logistics and energy cost increases
Climate change will increase the frequency and severity of extreme
weather events that may result in supply chain disruption. Elementis
manages its supply chain through maintaining minimum stock levels
and qualifying multiple suppliers. See page 38.
Controls and mitigating activities
Review of single source materials; find and qualify alternatives
Market research to understand and monitor the impact of
short term events
Recalibration of inventory stock levels and lead times on
a regular basis
Business continuity scenario planning overseen by the ELT
Proactively identify and mitigate risks across the supply chain
Implement robust contingency plans to address potential
disruptions and maintain resilience
Increase flexibility in the Group’s manufacturing network
to supply products from different regions, including new
manufacturing locations
Developments in year
Continued leverage of strategic supplier relationships to secure
required raw material volume
Accelerated production qualification programme to ensure
the ability to redistribute production volume across our global
manufacturing network
Continued focus on qualification of new sources of supply
Enhancement of the Group’s global supply chain and
procurement teams
Continued focus on the Group’s Global Supply strategy to ensure
a resilient global production footprint, enabling Elementis to
continue to produce as new risks materialise in the years to come
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67
Principal risks and uncertainties
continued
3
Cyber security, IT networks,
data security and privacy
4
Regulatory compliance and
product stewardship
Description of risks
Description of risks
The Group increasingly relies on IT systems for its internal
communications, controls, reporting and relationships with customers
and suppliers.
A significant disruption could cause delays to key operations and
an inability to meet customers’ requirements, thereby resulting in
increased operating costs, legal liability and reputational damage.
In addition, continuing developments in data protection legislation
globally have created a range of compliance obligations with
increased financial penalties for non-compliance.
Cyber security continues to be an increasingly significant risk to
the business and there remains ongoing work to review and
strengthen the Group’s security systems.
Link to strategic objective:
Movement in year:
+
Links with climate change
Not applicable.
Controls and mitigating activities
Security controls, including policies and procedures, staff
awareness and training, risk management and compliance,
systems and information management and protection process
Regular IT, cyber and data protection updates to the Board
Business continuity and emergency response plans for
each manufacturing site
Regular internal audit reviews
Privacy and data protection platform
Developments in year
Continued phishing simulations in order to raise awareness and
assess training needs
Introduction of a Global Crisis Framework and a revised Incident
Response Plan
Crisis response workshop completed with ELT
Implementation of advanced phishing controls to further address
human risk
Improved data protection through enhanced access controls
Introduction of an operational technology detection and
response tool
Decision made to appoint a dedicated Information Security
Officer in 2024
Emerging and existing regulations in global markets can lead to
hurdles and additional costs in delivering on strategic objectives.
Non-compliance or suspected non-compliance could lead to
regulatory action.
Link to strategic objective:
Movement in year:
=
Links with climate change
Elementis continuously works to improve energy efficiency at all
sites (see page 34). International Sustainability Standards Board
(“ISSB”) and Corporate Sustainability Reporting Directive (“CSRD”)
regulations ensure rigour in our corporate disclosure and marketing
documents, and management are preparing for full ISSB and
CSRD compliance.
Controls and mitigating activities
The Global Product Stewardship & Regulatory Affairs team
oversees, manages and monitors regulatory developments in
various jurisdictions
SDS, labels and regulatory information are provided for global
customers specific to the requirements in their jurisdiction
Active compliance and risk management programmes in place
(including policies, procedures and training)
Regular reviews of the evolving regulatory landscape in current
and new markets
Regulatory Compliance and Product Stewardship risks
continue to be regularly updated and reviewed with the Board
Developments in year
The Company’s expansion permits in relation to two of its
talc mines in Finland were revoked by the Finnish courts after
challenge by environmental groups. In relation to these decisions,
the Company has filed an appeal and an application for leave
to appeal, with decisions expected between 2025 and 2026.
The Company continues to enhance its Responsible Mining
programme and, as part of this, to engage with local stakeholders
in Finland in relation to its activities
UK REACH, Turkey REACH and South Korea REACH planning
and assessment
Ingredient notifications in existing markets with new requirements
were completed
Ongoing support of manufacturing optimisation change through
regulatory activities
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Corporate Governance
Financial Statements
Shareholder Information
Innovation
Growth
Efficiency
5
Business interruption as a result of a
major event or a natural catastrophe
Description of risks
The ability of the Group to manage its operations successfully and
achieve performance in line with its strategy, business plans and
budgets depends on the efficient and uninterrupted operation of
planning processes, operational delivery capabilities and the internal
control environment. Production facilities may be subject to planned
and unplanned shutdowns, turnarounds and outages including
for natural catastrophes, weather, climate change or disruption
associated with transportation, utilities and distributors, which could
result in increased costs in securing alternative facilities, significant
time to increase production or customer qualification.
A major event is categorised as an operational, HSE, transport or
workplace incident caused by system failure and/or human error,
or by fire, storm, flood or pandemic.
Link to strategic objective:
Movement in year:
=
Links with climate change
Climate change is likely to increase the frequency and severity of
extreme weather events which may result in operational and supply
chain disruption. Elementis’ sites are designed and maintained
to withstand extreme weather and the Group’s supply chain
management ensures minimum stock levels and the qualification
of multiple suppliers. See page 37.
Controls and mitigating activities
Preventative maintenance, critical spares, process and other
safety procedures to mitigate the effects of a major incident
Property damage and business interruption insurance coverage
Each site has developed a business continuity plan that includes
emergency response and business recovery protocols, annual
reviews, periodic updates, training and practising the plan
via periodic drills or table top exercises
Management verify the emergency response and crisis
preparedness elements of business continuity through the
HSE compliance auditing process
Business continuity scenario planning overseen by ELT
HSE management programme includes corporate compliance
audits and insurance property surveys
HSE matters reviewed by ELT on a monthly basis
Developments in year
Internal audit review of manufacturing sites
Continued focus on operational reliability
Insurance property survey recommendations adopted and tracked
6
Major regulatory enforcement
action, litigation and/or other
claims arising from products and/or
historical and ongoing operations
Description of risks
The scale and complexity of the Group’s operations means that it is
subject to a wide range of international regulation spanning all aspects
of its business. The regulatory sphere includes multiple corporate
taxation regimes, national and supra-national anti-corruption, fair
competition and data privacy laws, as well as applicable environmental
regulations and standards relating to the Group’s past and present
operations. Failure to comply can lead to complex cross border
claims, litigation, damages, fines, penalties and remediation orders.
The Group may be involved in legal proceedings and claims within the
ordinary course of business, including legacy claims in relation
to businesses that have been acquired or disposed of by the Group.
Adverse results in legal proceedings could result in reputational and
financial damages, loss of business, and diversion of management
time and resources.
Link to strategic objective:
Movement in year:
=
Links with climate change
Not applicable.
Controls and mitigating activities
Cross functional expertise including Legal, Compliance, Finance,
HSE and Product Stewardship & Regulatory Affairs, supported by
external consultants and advisers, actively monitoring emerging
risks and ensuring controls in relation to known risks, is effective
Products are routinely and rigorously tested to the highest standards
Continuous evolution of the global compliance programme
to identify, address, monitor and mitigate compliance risks,
including through new processes, training and other activities
Insurance programme and risk transfer strategy in place to
mitigate potential financial losses
Audit Committee and Board exercise oversight through regular
reports on all threatened and actual litigation from the Group
General Counsel & Company Secretary
Employees are subject to a range of policies and procedures
setting out required behaviours and standards, and consequences
for non-compliance
The Ethics & Compliance Council, chaired by the Group General
Counsel & Company Secretary, meets regularly to monitor the
Group’s compliance culture and ensure that ethics and compliance
considerations are appropriately weighted in business decisions
The Data Protection Steering Committee meets regularly to
oversee compliance with applicable data privacy laws
Regulatory Compliance and Product Stewardship risks continue
to be updated and reviewed with the Board as new risks arise and
new developments are made on ongoing issues. Working groups
are in place for a number of regulatory areas
Developments in year
The divestiture of the Chromium business in January 2023
reduced the Group’s overall exposure to claims and enforcement
actions relating to environmental matters
Launch of Customer and Supplier Risk Screening Policy and
new screening process
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Principal risks and uncertainties
continued
7
Intellectual property and
know-how/protection
8
Portfolio innovation
and technology
Description of risks
Description of risks
Failure to adequately protect and preserve IP and proprietary
know-how in both existing and new markets could harm the
Group’s competitive position.
Link to strategic objective:
Movement in year:
=
Links with climate change
Not applicable.
Controls and mitigating activities
Active management of the Group’s trademark portfolio via
an internal Trademark Committee (TMC), attended by the
Group’s external trademark advisors, comprising the business
segment’s Marketing Directors, Corporate Communications and
Legal. The TMC meets regularly to take decisions in relation to
the registration of new trademarks and defensive activity in relation
to existing marks. The TMC is supported by a global network
of trademark agents who represent the Group’s interests in all
relevant jurisdictions
The Group’s Science Director works closely with the Legal team
and external patent attorneys to ensure emerging inventions are
appropriately protected
Employees are trained on the importance of appropriate handling
and disclosure of proprietary and confidential information
The Legal team reviews confidentiality agreements entered into by
the Group to assess the suitability of the proposed purpose and
the duration of the confidentiality obligations. A central record of
all confidentiality agreements entered into globally is maintained
by the Legal team
Contentious IP matters are reported to the Audit Committee
and Board
The Group’s stage gate system incorporates IP and freedom to
operate as requirements to launch new products
Developments in year
Patent and IP disclosures to keep distinction in new launches
Enforcement of proprietary advantage
Annual patent portfolio review
The ability of the Group to compete is highly dependent on its ability
to meet the changing needs of customers and keep pace with
technological innovations and sustainability trends.
New or substitute products and technologies developed by
competitors could erode the Group’s ability to compete and lead
to declines in sales and market share.
Link to strategic objective:
Movement in year:
=
Links with climate change
Climate change and increased focus on sustainability drives demand
for products with lower climate impacts and more efficient resource
use. The Group is increasing the range of products it offers with
high naturally-derived material content. In addition, management are
assessing the Group’s portfolio in a systematic way to identify and
prioritise opportunities to improve product sustainability.
Controls and mitigating activities
The Global R&D team aims to develop new products and
technologies used in an evolving market to meet the changing
needs of the Group’s sophisticated customers
Collaborative relationships with customers and industry
formulators ensures efforts are aligned with the latest
market trends
Use of an innovation tool to manage stage gate process,
with systematic prioritisation to deliver high value solutions
for the market
The Group’s proprietary Hectorite and Talc enable the Group
to consistently deliver high performance innovation
Developments in year
12 new products launched in 2023
Open innovation with strategic partners
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Innovation
Growth
Efficiency
Health and safety
9
People, talent and succession
10
Description of risks
Description of risks
The inherent nature of manufacturing activities, such as material
handling, production, storage and transport have wide ranging
occupational safety and process safety risks. Failure to recognise,
evaluate and mitigate health and safety risks would leave the Group
vulnerable to employee and contractor injuries, lost production time,
equipment damage, impact to the community, potential regulatory
compliance challenges, and reputational damage.
Link to strategic objective:
Movement in year:
-
Links with climate change
Not applicable.
Controls and mitigating activities
Safety Leadership – HSE certification process required for all site
leaders, setting clear expectations of their responsibility for ensuring
employee safety and providing them with leadership training/tools
Reshaped Global HSE Strategy and Roadmap (through 2026)
aligned with goals and incident trends, and establishment of
meaningful leading and lagging key performance indicators
Compliance and insurance audits, root cause analyses,
management of change, routine inspections, risk assessments,
training, contractor management and work permits
Safety culture promotion – increased employee engagement
via an incentive programme promoting safety through SWA;
near miss reporting, hazard recognition, inspections and risk
assessments participation. ‘Call to Action’ initiative leading to
over 100 actions developed based on employee feedback
Continued implementation of hazard recognition processes to
improve employee awareness and mitigation of hazards
Process safety management – phase 1 process improvement
plans for all high risk tasks through process hazard analyses, and
ensuring equipment mechanical integrity through capital investment,
equipment assessments and suitable preventative maintenance
Developments in year
Improved accountability and analytics in the management of
HSE and quality incidents, action tracking, audit management,
and regulatory compliance
Increased use of innovation and technology for incident reporting
and risk assessments
Development of a global HSE framework aligned to ISO standards
and publication of life critical HSE standards
Implementation of a formalised process safety management
standard including key elements such as management of change,
hazard analyses and mechanical integrity
Third annual Global Safety and Health Week, including technical
speakers and local activities
Enhanced communication of HSE through centralised document
repository, including HSE standards and incident learnings
Implementation of a formalized process safety standard including
integration of key essential elements such as management of
change, hazard analyses and mechanical integrity
Embedding TogetherSAFE, our value for safety, into our work
planning and business processes; holding third annual CEO
TogetherSAFE award promoting team safety initiatives
The Group operates in highly competitive labour markets and relies
upon the expertise and services of talented individuals and teams
to succeed.
Loss of key people or disruption to teams without timely action
could result in disruption to business operations.
Link to strategic objective:
Movement in year:
+
Links with climate change
Employees increasingly wish to contribute to addressing climate
change. The Group’s Net Zero ambition and commitment to SBTs
supports the Employee Value Proposition.
Controls and mitigating activities
Performance management process for all employees to set
goals aligned to key priorities and actions for personal and
professional development
Career profile allowing employees to create their personal profile
and future aspirations
Succession planning to build a diverse leadership pipeline;
the senior leaders are reviewed twice a year by the ELT and
the ELT are reviewed once a year by the Board
Measurement of employee engagement to create actionable plans
People manager training and toolkits, empowering growth
and impact
Unlimited access to LinkedIn Learning to allow employees to
expand their skills based on their own learning needs
Flexible working
Creation of knowledge transfer plans facilitated by external
consultants, retention packages for key employees and
creation of searchable databases to ensure historic knowledge
remains accessible
Developments in year
New engagement survey in collaboration with Gallup
Performance management approach transitioned from
task-orientation to focusing on engagement and development
Global and local people manager training sessions conducted
in local languages, aligned with the specific needs of
people managers
Change management training provided to people managers
to allow additional support in leading through change as we
deliver the Fit for the Future programme
Introduction of a new onboarding app to ensure a smooth
transition into Elementis for new hires
Continued enhancements to succession planning in order
to improve internal talent development and progression.
Orderly transition to new leaders in global supply chain,
manufacturing and procurement
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Elementis plc
Annual Report and Accounts 2023
71
Viability and going concern statement
Going concern
The Directors are satisfied that it
is appropriate for the Group and
the Company to adopt the going concern
basis of accounting in preparing these
Group and parent company financial
statements and that there are no material
uncertainties impacting the ability of
the Group and Company to continue
to operate over a period of at least
12 months from the date of approval
of these financial statements.
To support this assessment the Directors
produced three models, covering a future
period of five years from the date of these
accounts, demonstrating the position of
the Group regarding its two financial
covenants, net debt/EBITDA and interest
cover, at each measurement period for the
12 months following the date of signing of
these accounts and annually thereafter.
These models comprised:
A base case scenario, aligned to the
latest Group annual operating plan
for 2024, as well as the Group’s five
year plan;
A possible downside scenario that
assumes the global economic
environment is severely depressed
over the assessment period; and
A reverse stress test, flexing
sales to determine what circumstance
would be required to breach the
financial covenants.
No breaches in the required covenant
tests were reported during the year and
under both the base case and severe but
plausible downside scenarios the Group
is expected to remain within its financial
covenants throughout the going concern
period. The conditions necessary for the
reverse stress scenario to be applicable
were deemed to be remote.
The Directors also considered factors
likely to affect future performance and
development, the Group’s financial
position, the current excess liquidity
position, the high level of cash conversion
and the principal risks and uncertainties
facing the Group; including the Group’s
exposure to credit, liquidity and market
risk and the mechanisms available for
mitigating these risks.
The Group’s net debt position as at
31 December 2023 was $202m. It has
access to a syndicated revolving credit
facility of $375m, of which $71.6m has
an expiry date of September 2024 and
$303.4m has an expiry date of September
2025, and long term loan facilities of
$100m and €142m which have an
expiry date of June 2026.
72 Elementis plc
Annual Report and Accounts 2023
The Group had further borrowing facilities
available to it, aside from the syndicated
revolving credit facility and term loans,
of over $12m as at 31 December 2023.
In conclusion, after reviewing the base
case scenario, the severe but plausible
downside scenario and considering the
likelihood of the reverse stress test
scenario occurring to be remote, as well as
having considered the uncertainty relating
to the Group’s principal risks and the
mitigating actions available, the Directors
have formed the judgement that at the
time of approving these consolidated
financial statements there are no material
uncertainties that cast doubt on
the Group’s going concern status for
next 12 months and that it is therefore
appropriate to prepare the consolidated
accounts on the going concern basis.
Business viability
assessment
The basis of the assessment included
a detailed review of strategic and operating
plans, underpinned by five year financial
forecasts, including profit and loss and
cash flows. Consideration was given to
capital expenditure, investment plans,
returns to shareholders and other financial
commitments, as well as the Company’s
debt bearing capacity, its financial
resources, borrowings and the availability
of finance. No review of business plans
and financial forecasts would be complete
without a robust assessment of the risks
and opportunities in such planning models
and the assumptions used. The review
included consideration and discussion of
the materials prepared and presented to
the Board by management and its advisers
(where appropriate), as well as additional
information requested by the Board.
The Board’s programme of monitoring
major risks is an important component
of the business viability assessment and
the financial impact of the principal risks
was modelled over the five year period.
Business and segment growth scenarios,
rate of return on investments, assumptions
on global GDP growth rates, relevant
currency rates, and commodity prices
in business plans and financial forecasts
were all considered, with stress testing on
financial models where appropriate. Finally,
a review of litigation and tax reports, legal
and compliance risks throughout the year
and a formal year end risk review, ensures
that the viability statement is made with
a reasonable degree of confidence.
Principal risks
For each principal risk that is deemed to be
both permanent and likely to have a high
impact, a severe but plausible scenario
was considered. In making the business
viability statement, the Board reviewed and
discussed the overall process undertaken
by management and assessed the
outcome of the stress-testing carried
out using the Group’s five year financial
forecast as the base case. The five year
financial forecast considers the Group’s
cash flows, interest cover covenant, net
debt/EBITDA covenant, and other key
financial ratios over the period. These
metrics were assessed against the Group
risk register to determine the most
impactful ones to stress test against.
Consideration was also given to the
potential impact of the Group’s climate
risk scenarios.
Business viability statement
In accordance with the UK Corporate
Governance Code provision 31, the
Directors have reviewed the Group’s
current position and carried out a robust
assessment of the principal risks and
uncertainties that might threaten the
business model, future performance,
and solvency and liquidity of the Group,
including resilience to such threats, and
consider that they have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over a period of at least five
years. A period of five years was chosen as
being consistent with the Group’s business
and financial planning models, R&D plans,
a number of key supply contracts and
requirements for external borrowing
facilities. Regarding accessibility to
financing, the majority of the RCF currently
has an expiry of September 2025 and the
term loans have an expiry of June 2026;
both of these are within the five year
period and so will require renegotiation
or replacement. Elementis has, to date,
had a very supportive banking syndicate
and due to recent deleveraging there is
now a materially lower requirement for
debt financing; as such the Directors
do not believe that there will be any
issues in renegotiating lending facilities
when necessary.
Strategic report
The Strategic report was approved by the
Board of Directors on 6 March 2024 and
is signed on its behalf by:
Paul Waterman
CEO
Ralph Hewins
CFO
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Chair’s introduction to governance
John O’Higgins
Chair
Purpose, culture and values
Our purpose – unique chemistry,
sustainable solutions – guides our strategy
and priorities and underpins our decision
making as a Board. The Company’s values
of Safety, Solutions, Ambition, Respect and
Team underpin our culture, align with our
purpose and drive our business success.
The completion of the sale of our
Chromium business in 2023 resulted
in the Company becoming a focused
specialty chemicals business which
will operate in a regional organisational
structure in a way that is Fit for the Future,
driving the innovation of specialty chemical
products that deliver cleaner and better
performance for our customers.
Board succession
and diversity
Steve Good will step down from the Board
at the conclusion of the Annual General
Meeting (“AGM”) after reaching a tenure of
nine years on the Board in October 2023.
I would like to take this opportunity to thank
Steve for his very significant contribution
to the Board and his leadership of the
Remuneration Committee.
In anticipation of Steve’s retirement from
the Board, succession planning was
a focus for the Board during the year and
a thorough recruitment process for a new
Non-Executive Director was conducted.
Following this process, we were delighted
to welcome Maria Ciliberti to the Board
in March 2024. Maria’s skills, background
and experience strongly complement the
existing skills and experience of Board
members. Maria will stand for election
at the AGM in 2024.
Dear Shareholders,
On behalf of the Board, I am pleased to introduce our
Governance report for year ended 31 December 2023.
This report sets out our approach to effective corporate
governance and outlines key areas of focus of the Board and
the activities it undertook during the year, as we continue to
drive long-term value creation for our stakeholders. I am grateful
to my fellow Board members for their continued support.
I can report that, as at 31 December 2023,
37.5% of the Board were women (there
were five men and three women on our
Board). With the appointment of Maria
Ciliberti, I am pleased to report that we
now meet the new Listing Rules target
(also referred to in the FTSE Women
Leaders Review) for female representation
on the Board to be at least 40%, with
44.5% of the Board now women. Following
Steve Good’s retirement from the Board
at the conclusion of the AGM, female
representation on the Board is expected
to be 50%.
The Board also meets the target referred
to in the new Listing Rules and in the
Parker Review for there to be at least one
individual on the Board from a minority
ethnic background. We will continue to
ensure that the benefits of diversity are
appropriately considered in the context
of any future Board recruitment.
Further information on Board diversity is
set out on pages 86-87.
Net Zero transition plan
The Board carefully considered the
proposed adoption of a science-based
target (“SBT”) for reduction in our
greenhouse gas (“GHG”) emissions
by c.2030, and a related update to the
Company’s long-term ambition statement
from ‘carbon neutral’ to ‘Net Zero by 2050’,
at the latest.
As part of these considerations, the Board
took into account the expectations of its
stakeholders with regard to management
of the Company’s GHG footprint and its
alignment with the UK’s commitment to
a GHG reduction pathway.
As a result, the Board was pleased to
approve the form of the Company’s first
Net Zero transition plan, and a proposal
to validate an SBT via the science-based
target initiative (“SBTi”) by the end of
2024. Further information on our climate
strategy can be found on pages 34-41.
Board effectiveness
The Board undertook the annual evaluation
of its effectiveness internally this year,
having completed a full externally facilitated
Board performance evaluation in 2021.
I am pleased to report that this resulted in
a positive assessment of the effectiveness
of the Board and its Committees, with the
focus on strategy seen as a particular
highlight (as demonstrated during the
Capital Markets Day (“CMD”) held in
November 2023).
Wider employee feedback from those who
interacted with the Board during the year
reflected the view that the Board was
approachable and engaged. Further
details of the process followed and its
outcomes are set out on page 83.
During 2023, the Group General Counsel
& Company Secretary conducted a tender
process on behalf of the Board to identify
and appoint a new external evaluator to
perform an externally facilitated evaluation
of the Board’s performance in 2024
(the Board having worked with the
same external evaluator for two prior
external evaluations).
Annual General Meeting
The AGM is an important event in the
Company’s corporate calendar, providing
an opportunity to engage with shareholders.
This year, we will again be holding a hybrid
AGM, with shareholders able to attend the
meeting in person to vote and ask questions,
or view the meeting via a live webcast.
Shareholders can also ask questions
in advance of the meeting via email:
company.secretariat@elementis.com.
Instructions on how to register and join
the webcast are set out in the Notice
of Meeting, which is available on the
Company’s website.
John O’Higgins
Chair
Elementis plc
Annual Report and Accounts 2023
73
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Board of Directors
The right skills to deliver our strategy
John O’Higgins
Chair
Paul Waterman
Chief Executive Officer
Ralph Hewins
Chief Financial Officer
N
R
Tenure
John was appointed Non-Executive Chair
and Chair of the Nomination Committee on
1 September 2021. John joined the Board as a
Non-Executive Director on 4 February 2020 and
was appointed Senior Independent Director on
29 April 2020 prior to his appointment as Chair.
Independent
Yes1
Experience and role
John served as chief executive of Spectris plc
from January 2006 to September 2018, leading
the business through a period of significant
strategic transformation and development.
Prior to Spectris plc, John spent 14 years at
Honeywell International in a number of senior
management roles, including chairman of
Honeywell Automation India and president
of Automation & Control for Asia-Pacific.
His early career was spent at Daimler Benz
A.G. as a research and development engineer.
Previous non-executive director roles include
Exide Technologies, a US based supplier of
battery technology to automotive and industrial
users (from 2010 to 2015).
John holds a master’s degree in Mechanical
Engineering from Purdue University (US)
and an MBA from INSEAD.
Tenure
Paul was appointed Chief Executive Officer
(“CEO”) on 8 February 2016.
Independent
No
Experience and role
Paul has a proven track record in developing
markets, products and opportunities for creating
value, business optimisation and transformation.
Paul’s global experience provides the skill set
required to deliver the Company’s strategy
and provide inspiring leadership.
Prior to joining Elementis, Paul was global
CEO of the BP Lubricants business in 2013 after
having overseen the BP Australia/New Zealand
downstream business. In 2010, Paul was
country president of BP Australia. Prior to this
he was CEO of BP’s global aviation, industrial,
marine and energy lubricants businesses
(2009 to 2010) and CEO of BP Lubricants
Americas (2007 to 2009). He joined BP after
it acquired Burmah-Castrol in 2000, having
joined the latter in 1994 after roles at Reckitt
Benckiser and Kraft Foods.
Paul holds a BSc in Packaging Engineering
from Michigan State University and an MBA
in Finance and International Business from
New York University, Stern School of Business.
Tenure
Ralph was appointed CFO-Designate and
Executive Director on 12 September 2016
and became the Elementis Group Chief
Financial Officer (“CFO”) on 1 November 2016.
Independent
No
Experience and role
Ralph is an accomplished CFO who has a strong
track record in finance, strategy development
and implementation, and M&A which enables
him to provide effective financial leadership to
underpin the delivery of the Company’s strategy.
Ralph had a 30 year career with BP, where
he held a number of significant leadership
positions, including roles in financial
management, sales and marketing, corporate
development, M&A, strategy and planning.
In 2010, Ralph was CFO of BP Lubricants
and served on the board of Castrol India
Limited from 2010 until 2016.
Ralph holds an MA in Modern History and
Economics from the University of Oxford
and an MBA from INSEAD.
External appointments
None
External appointments
Trustee of the Wincott Foundation
External appointments
None
Non-executive director of Oxford
Nanopore Technologies plc and a member
of the audit, risk, remuneration and
nomination committees
Non-executive director of Johnson Matthey
plc and a member of the audit, nomination
and remuneration committees
Adviser to Envea Global, a market leader
in environmental air and emissions
measurement and majority owned by
The Carlyle Group
1 On appointment.
Committee
Chair
A Audit
Committee
N Nomination
Committee
R Remuneration
Committee
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Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Trudy Schoolenberg
Senior Independent Director
Steve Good
Independent Non-Executive Director
Dorothee Deuring
Independent Non-Executive Director
A
N
R
R
N
A
N
R
Tenure
Dorothee was appointed a Non-Executive
Director on 1 March 2017.
Independent
Yes
Experience and role
Dorothee provides the Board with valuable
insight into the wider European chemicals
and Industrial sectors as well as sector
specific acquisition expertise.
Dorothee manages her own corporate advisory
consultancy serving a number of European
clients in the pharma/biotech sector. She is
active in various industry bodies. Her previous
executive roles included managing director
and head of Corporate Advisory Group (Europe)
at UBS in Zurich, head of M&A chemicals
and healthcare at a private investment bank
in Germany and a senior executive in the
corporate finance department at the
Roche Group.
Dorothee served as non-executive director
of the supervisory board of Bilfinger SE
and member of the audit committee
(May 2016–May 2021).
Dorothee holds a master’s degree in Chemistry
from the Université Louis Pasteur, Strasbourg,
and an MBA from INSEAD.
External appointments
Non-executive director of
PolyPeptide Group AG
Non-executive director of Temenos AG
Tenure
Steve joined the Board as a Non-Executive
Director on 20 October 2014 and became
Chair of the Remuneration Committee on
25 April 2017.
Independent
Yes
Experience and role
Steve has strong and relevant international
experience in specialty chemicals businesses,
manufacturing and diverse industrial markets,
which enables him to provide guidance and
challenge to management. Steve’s involvement
with remuneration committees in other
organisations enables him to provide judgement
and demonstrate sound knowledge of topical
remuneration matters in his capacity as
Remuneration Committee Chair.
Steve was chief executive of Low & Bonar
plc between September 2009 and
September 2014.
Prior to that role, he was managing director of its
technical textiles division (2006-2009), director
of new business (2005-2006), and managing
director of its plastics division (2004-2005).
Prior to Low & Bonar, he spent ten years with
BTP plc (now part of Clariant) in a variety of
leadership positions managing international
specialty chemicals businesses. Steve served
as non-executive director and chairman of
the remuneration committee of Cape plc
(2015-2017), non-executive director of
Anglian Water Services and member of the
audit committee, nomination committee and
remuneration committee (2015-2018) and non-
executive director of Dialight plc (2018-2020).
Steve holds a degree in Economics and
Financial Management from Sheffield University.
He is a chartered accountant.
External appointments
Non-executive director and non-executive
board chair of Norcros plc
Tenure
Trudy was appointed Non-Executive Director
on 15 March 2022 and become Senior
Independent Director on 26 April 2022.
Independent
Yes
Experience and role
Trudy has over 30 years’ experience of
working in the chemicals, engineering and
high performance product sectors.
Having built her executive career with global
organisations such as Shell, Wartsila and
Akzo Nobel, she brings a strong international
perspective and a proven track record for
driving sustainability through innovation.
In addition, Trudy has strong operational
knowledge, gained during her time at Shell
as production manager at the Pernis refinery
in the Netherlands, the largest refinery in
Europe and one of the largest in the world.
Trudy currently serves as a non-executive
director and senior independent director
of Accsys Technologies plc (AIM listed
sustainable building materials business),
a supervisory board member of SPIE SA
(a listed technical services business) and
as a non-executive director and senior
independent director of TI Fluid Systems plc
(a listed global manufacturer of automotive
systems). Trudy previously served as a board
member of The Netherlands Petroleum
Stockpiling Agency (COVA) (2011-2021),
non-executive director and senior independent
director at Spirax-Sarco Engineering plc
(2012-2021), non-executive director and
senior independent director of Low and Bonar
plc (2013-2020) and as a supervisory board
member of Avantium N.V. (2020-2022).
Trudy has a PhD in Technical Physics
from the Delft University of Technology
(the Netherlands) and holds a master’s
degree in Industrial Engineering.
External appointments
Non-executive director and chair of
Accsys Technologies plc
Independent director of SPIE SA
Senior independent director of
TI Fluid Systems plc
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Elementis plc
Annual Report and Accounts 2023
75
Board of Directors
continued
Christine Soden
Independent Non-Executive Director
Clement Woon
Independent Non-Executive Director
Anna Lawrence
Group General Counsel &
Company Secretary
A
N
R
A
N
R
Tenure
Christine was appointed a Non-Executive
Director on 1 November 2020 and is the
Designated Non-Executive Director for
workforce engagement and Chair of the
Audit Committee.
Independent
Yes
Experience and role
Christine brings significant experience of
innovation and the commercialisation of
technology to the Board. Christine is an
experienced CFO with a strong track record
of leading a range of private and public
companies rooted in innovation with
a particular focus on biotechnology, life
sciences and pharmaceutical products.
Christine was CFO and company secretary
of Acacia Pharma Group plc, a public quoted
provider of pharmaceutical products designed
to improve the outcomes and recovery for
surgical patients (2015-2020). Prior to Acacia
Pharma Group plc, Christine served as CFO
and then non-executive director of AIM-listed
Electrical Geodesics, Inc., which was acquired
by Philips NV in 2017. Other CFO and finance
leadership roles include Optos plc, BTG plc
(former FTSE250 constituent), Oxagen
Limited and Celltech Chiroscience Group plc.
Christine started her life-sciences career
as financial controller of Medeva plc.
Christine has previously served as chair of
the audit committee at e-therapeutics plc,
an AIM listed technology based drug discovery
platform (2017-2020) and at Provalis plc,
a quoted healthcare business (2000-2005).
She was also non-executive director of
Futurenova Limited, a provider of antimicrobial
cases for iPads and iPhones from 2017 to 2021.
Christine is a chartered accountant and holds
a degree in Mathematics from the University
of Durham.
External appointments
Non-executive director of Cell and
Gene Therapy Catapult
Non-executive director of
Arecor Therapeutics plc
Tenure
Clement was appointed a Non-Executive
Director on 1 December 2022.
Independent
Yes
Experience and role
Clement brings broad managerial experience
in globally operating technology and consumer
related industries. He has a strong track record
of renewing traditional industries and revitalising
growth through strategic interventions and
in-depth experience and knowledge of markets
within the Asia Pacific region.
Clement was Group CEO of Saurer Intelligent
Technology Co Ltd, a €1 billion textile machinery
and components business listed on the
Shanghai Stock Exchange, between August
2016 and March 2020. Clement continued to
serve on the board of Saurer as non-executive
director until August 2021. Between March
2021 and January 2023, Clement served as
Chairman of PFI Foods Industries Pte Ltd.
Between April 2014 and July 2016, Clement
was Adviser and co-CEO of Jinsheng Industry
Co. Ltd, an industrial company in China with
diverse interests including biotech, automotive
and textiles. Clement also previously held
various senior positions at companies based
in Switzerland and Singapore, including Division
CEO of Leica Geosystems AG, President &
CEO of SATS Ltd, and CEO Textile Division
of OC Oerlikon AG.
Clement holds an MSc in Industrial Engineering
and a BEng in Electrical Engineering from the
National University of Singapore, as well as
an MBA in Technology Management from
Nanyang Technological University, Singapore.
External appointments
Non-independent non-executive director
of PFI Foods Industries Pte. Ltd
Non-executive director of
Morgan Advanced Materials plc
Committee
Chair
A Audit
Committee
N Nomination
Committee
R Remuneration
Committee
76 Elementis plc
Annual Report and Accounts 2023
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Tenure
Anna joined Elementis in March 2021.
Experience and role
Anna has responsibility for all legal and
compliance matters across the Group and
is the Group Company Secretary. Anna also
serves as the Group’s Chief Compliance Officer
and chairs the Ethics & Compliance Council.
She has extensive international experience
gained through holding senior legal positions
in companies across diverse sectors including
Rolls-Royce plc, Johnson Matthey plc and
Kingfisher plc. She qualified as a solicitor at
Allen & Overy LLP. She holds a BA in Modern
Languages from the University of Oxford,
a Postgraduate Diploma in Law and Legal
Practice from BPP Law School and is an
Associate of the Chartered Governance Institute.
Maria Ciliberti
Independent Non-Executive Director
Maria’s appointment as a Non-Executive
Director is effective as of 11 March 2024.
Maria’s professional experience spans over
35 years in the petrochemical industry
and includes roles in manufacturing, R&D,
commercial and business management.
She worked at The Dow Chemical Company,
Columbia Gas of Ohio and Container
Corporation of America in the USA.
She also spent over a decade in global
leadership roles in Europe, with Celanese,
General Electric Plastics (now owned by
SABIC) and Borealis, where her last role
was Commercial Vice President for Borealis’
Global Specialty Solutions Business.
Since 2022, Maria has held the role of
President for the USA & Canada business
of Royal Vopak, a global, independent
infrastructure provider. Maria sits on the
board of Vopak’s USA and Canadian joint
ventures, which include Vopak Industrial
Infrastructure Americas, Vopak Exolum
Houston, Vopak Energy Storage Texas,
Ridley Island Propane Export Terminal
and Ridley Island Energy Export Facility.
Maria holds a Bachelor of Science degree
in Chemical Engineering and a Master of
Business Administration – both from
The Ohio State University.
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Division of responsibilities
Governance framework
Shareholders
Board of Directors
The Board is responsible for ensuring long term sustainability and the delivery of long term value and success
for our shareholders. It also provides effective challenge and support to the Executive Leadership Team (“ELT”)
in relation to strategy, while ensuring the Group maintains effective risk management and internal controls systems.
Board Committees
The Board is supported in its activities by Board Committees that have specific delegated responsibilities,
as set out in separate terms of reference, which are available on the website: www.elementis.com
Audit Committee
Overseeing financial
reporting and the Group’s
financial systems
Providing oversight and
governance of internal
controls and risk
management
Monitoring the
independence and
effectiveness of the
external auditors
Maintaining an
appropriate relationship
with our internal and
external auditors
Nomination Committee
Responsibility for the
structure, size and
composition of the
Board, ensuring the
Board and Committees
have the correct balance
of skills, knowledge
and experience
Ensuring and overseeing
succession planning
and responsibility for
the annual review of
Board effectiveness
Identifying and nominating
suitable candidates for
appointment to the Board
Promoting diversity
Remuneration Committee
Setting the Remuneration
Policy and determining the
review structure for the
Chair, Executive Directors
and ELT, to align their
remuneration with the
long term interests of
the company
Approving bonus plan,
long term incentive plan
targets and share awards
Disclosure Committee
Advising the Board
regarding, and to ensure
that Elementis makes,
accurate and timely
disclosure of price
sensitive information that
is required to be disclosed
to meet its legal and
regulatory obligations
For further information,
please see pages 88-91.
For further information,
please see page 84-87.
For further information,
please see page 96-122.
CEO
The CEO is responsible for the day-to-day running of the business and overseeing
its performance, development and strategy.
ELT
The ELT is led by the CEO and meets quarterly to review various reports from all
areas of the business as well as the external operating environment and associated risks and opportunities.
Relevant matters are reported to the Board by the CEO or the CFO.
Diversity,
Equality &
Inclusion
Council
Ethics &
Compliance
Council
Health, Safety and
Environmental
Council
Sustainability
Council
Data Protection
Steering
Committee
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77
Board and engagement highlights
Board meeting attendance
The attendance of the Directors at the Board meetings in the year ended 31 December 2023 is as follows:
Member
John O’Higgins
Dorothee Deuring
Steve Good
Trudy Schoolenberg
Christine Soden
Clement Woon
Scheduled meetings
during the year
Business and financial performance 27.5%
Strategic 49%
Governance, risk and compliance 23.5%
The allocation of agenda time for
the eight scheduled meetings
was categorised into: Business and
financial performance; strategic; and
governance, risk and compliance.
Board changes
There were no changes to the Board
during the year. Steve Good reached
a tenure of nine years in October 2023.
In order to facilitate an orderly handover
of the Remuneration Committee Chair to
Clement Woon after the AGM, Steve
was re-appointed for a six month period
until the conclusion of the AGM. Further
information can be found on page 85.
In March 2024, Maria Ciliberti was
appointed to the Board and will stand
for election at the upcoming AGM.
Member since
Eligible meetings (max 8)
Attendance
February 2020
March 2017
October 2014
March 2022
November 2020
December 2022
8
8
8
8
8
8
8
8
8
8
8
8
Shareholder engagement
Investor meetings
The Board values the importance of
an active engagement programme and
we are continuously looking to improve
our engagements to build and develop
open and trusted relationships with
our shareholders.
The investor relations function has
primary responsibility for managing
day-to-day communications with
institutional shareholders and supports
the Chair, Senior Independent Director
(“SID”), CEO and CFO in conducting a
comprehensive shareholder engagement
programme during each financial year.
The CEO and CFO are the Company’s
principal spokespeople. Throughout the
year, they engaged extensively with
existing and prospective investors during
individual and group meetings, as well as
conferences and fireside discussions. In
2023, a total of 70 meetings were held with
investors, of which 14 were with the Chair.
The Chair conducted a governance
roadshow in April, meeting with the top
shareholders. Discussions focused on the
Group strategy, including the successful
disposal of Chromium and ways to improve
Talc performance. The Chair used this
opportunity to gain feedback on dividend
reinstatement and other governance
related matters. Later in the year,
the Chair initiated meetings with top
shareholders, asking for their feedback
following a letter published by Elementis’
largest shareholder. Feedback from the
meetings was shared with the Board.
In addition, the SID and other members
of the Board, for example, the Chairs of
the Audit, Nomination or Remuneration
Committees, are available to meet with
shareholders as appropriate.
The Board receives an investor relations
report at each of its meetings outlining
recent dialogue with investors and
feedback received, and updates from
our corporate brokers JP Morgan
and Numis. Analysts’ reports are
also made available to the Board.
Retail investors
The Board is keen to hear the views of
our private shareholders and they are
encouraged to use our shareholder mailbox,
company.secretariat@elementis.com.
The Company’s website is kept
updated with Company reports and
related information.
Enquiries may also be addressed to
the Group General Counsel & Company
Secretary and sent to the registered office.
Annual General Meeting
The Company held a hybrid AGM on
26 April 2023 which shareholders were
invited to attend in person or to view
the AGM proceedings via a webcasting
facility, with a telephone line available
for shareholders to ask questions.
The proceedings of the AGM are
available on demand. All resolutions
were approved by shareholders on a poll.
Shareholders were able to submit
questions ahead of the AGM, as well as
ask them during the AGM. One question
was submitted prior to the AGM and
answered during the meeting; there were
no questions raised during the meeting.
A recording of the AGM can be found on
our website.
The 2024 AGM will be held on
30 April 2024 at 10.00am as a hybrid
AGM and further information can be
found in the Notice of Meeting.
Read more about how we engage with,
and create value for our stakeholders
on pages 7-9 and 26-27.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Board in action
Board meetings
The Board has a formal annual programme
of activities which is supplemented by
ad-hoc meetings and conference calls,
when appropriate.
At each of its formal meetings, the Board
receives standing reports on business
performance, operations (including HSE
performance), sustainability, innovation,
IT investor engagement, governance
and compliance.
During 2023, the Board considered
a number of topics:
2023-2028 financial shape
Five-year strategy
Annual Operating Plan
Capital Markets Day
Environmental, social and governance
(“ESG”) and Sustainability
Ethics & Compliance
HSE and Global process safety review
Innovation
IT and Cyber Security
Legal matters (including litigation)
People related topics including:
Fit for the Future (organisational
restructure); strategy; diversity,
equity and inclusion (“DE&I”);
people engagement; employee
value proposition; and succession
Performance Specialties
Personal Care
Procurement
The Elementis Group Pension Scheme
The Board regularly invites ELT members
to Board meetings to report on their
relevant business and functional areas.
The Non-Executive Directors make
themselves available for discussion
with ELT members in advance of Board
meetings where a particularly strategic
subject is tabled, to enable an in-depth
exploration of the subject matter in
preparation for the meeting.
Time is set aside at the end of each
meeting for a nominated Director to
provide constructive feedback on the
proceedings, including the quality and
usefulness of the materials presented.
It is customary for the Board, or the
Non-Executive Directors and the Chair,
to meet the evening before in-person
to allow them to discuss relevant
matters in a less formal setting.
Key activities during the year
Completion of Chromium
business divestment
Jan
The sale of the Chromium business
completed on 31 January 2023,
and finance, IT, sales and HR
transitional services were
provided post-completion.
June/
Sep
Sep
Site visits to China,
Taiwan and UK
With its people as its core asset, the
Board recognises the importance of
ongoing face to face engagement
with the workforce on all levels.
Site visits to Songjiang (China),
Livingston (UK) and Hsinchu
(Taiwan) during 2023 enabled
to the Board to gain insights
from discussions with the
local management teams and
colleagues about the opportunities
and challenges they face, in
management presentations as well
as less formal networking events.
Response to open letter
from major shareholder
Sep
Nov
An open letter to the Board
was published by one of our
shareholders requesting that the
Board initiate an immediate sale
process in respect of the Company.
The Board regularly considers the
Company’s strategic alternatives
with its financial advisors, and
reviewed the shareholder’s letter
carefully, concluding that initiating
an immediate sale process would
not be in the best interests of its
shareholders, given the substantial
value still to be realised through
the execution of its strategy.
A copy of the response can
be found on our website.
2023
Consolidation of
business segments
We consolidated our Talc and
Coatings business segments
into a new segment, Performance
Specialties. The integration of the
product portfolio and strong market
focus allowed us to further leverage
synergies between these two
business segments.
Fit for the Future
Following the sale of the Chromium
business, the Board felt it was the
right time to focus on creating an
organisational design that would
make the Company more financially
and operationally resilient, and
“fit for the future”. The proposed
changes were announced
in September, with the new
organisational structure to be
in place by the end of 2024.
Capital Markets Day
We held a Capital Markets
Day for analysts and investors
in London and via webcast,
which was attended by
representatives from over
half of our institutional investors.
During the event, we communicated
our 2026 targets, to be delivered
through our seven growth platforms
and two efficiency programmes,
as well as highlighting how we
are living our purpose of “unique
chemistry, sustainable solutions”
through our sustainability strategy.
Guests were able to watch live
demonstrations showcasing
recent innovations developed
to address global trends,
and a sustainability update.
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Annual Report and Accounts 2023
79
Workforce engagement
Engaged activities throughout the year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Board meeting
Board site visit
DNED engagement with employees
Employee survey
Speak Up survey
Global townhall
Board visits
The Non-Executive Directors visit at least
two of the Company’s manufacturing sites
each year, to gain insights into the Group’s
activities and to meet and engage with
colleagues across the business. This
enables the Directors to maximise their
contribution to Board discussions and
their understanding of stakeholders.
June
UK
Livingston, UK
The Board visited our Livingston plant,
where organoclay is processed for the
Performance Specialties and Personal
Care business segments. Members of the
management team gave presentations
on the plant’s activities, followed by
a tour of the manufacturing site and
laboratory, which included presentations
by colleagues on specific activities
undertaken at the site. A Board meeting
was also held at the Livingston plant.
The Board continued the discussions
with management over dinner.
Sept
Taiwan and China
Day 1 – Hsinchu, Taiwan
The Board visited our two plants in
Hsinchu and received an overview of
the plants’ activities from management,
with an opportunity for Q&A, before a full
site tour of both the North Plant and the
South Plant. After the tour, a Board
meeting was held at the North Plant.
The Board engaged with employees
from a range of functions over dinner
in the evening.
Day 2 – Songjiang, China
Having last visited the Songjiang site
in 2019, the Board was keen to hear
the local team’s perspectives on
how the marketplace had evolved
in the intervening period.
The Songjiang management team
provided the Board with an overview
of the plant’s activities, including resilience
during COVID-19 and innovative plans
for the future, as well as commercial
opportunities in the region, before
undertaking a site tour.
This was followed by a lunch with the
management team, during which
employees had the opportunity to
engage directly with the Board.
North Plant
South Plant
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
All
year
Engaged activities
throughout the year
In line with the requirements of the
UK Corporate Governance Code, the
Board considered the mechanisms for
ensuring that the views and concerns
of the workforce are taken into account
and agreed that a specific Board
accountability for workforce engagement
would be formalised by appointing
a Board member to serve as the
Designated Non-Executive Director
for workforce engagement (“DNED”).
Christine Soden currently serves as
the DNED, having assumed the role on
appointment as a Board member on
1 November 2020.
DNED engagement
While visiting the various sites during
the year, Christine Soden, as DNED,
held a number of focus groups which
gave her an opportunity to meet with
a selection of employees and encourage
them to share their views and raise any
issues or concerns.
Christine then ensures that employees’
questions and concerns are heard during
Board discussions, that appropriate
steps are taken to evaluate the impact
of proposals and developments on the
workforce, and that the Board considers
what steps should be taken to mitigate
any adverse impact.
Non-Executive
Director for workforce
engagement
Christine Soden
Values and
culture
Local/global
ways of
working
Processes
Examples of
workforce
engagement
themes
Remuneration
and benefits
Communications
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81
Learnings and responsesThemes identified from the focus group sessions during the year included: Importance of keeping a focus on communication with employees on Fit for the Future, which has been reflected in the communication plans at global and local levels The Company’s approach to remuneration was generally well understood and satisfactory to employees, although clarity was sought as to how pay parity is maintained between long serving and new employees. Data examined from recent hires showed that there was parity and that current processes work The introduction of the Company-wide engagement survey had been well received and had provided actionable insights to teams Although access to IT systems was good, further training on using the Company’s different IT platforms would be useful in some cases. The Company is reviewing its use of different platforms as part of the evolution of the IT function under the Fit for the Future programme Purpose, culture and values
Our purpose
Our purpose is Unique Chemistry,
Sustainable Solutions.
We are collaborative industrial innovators,
developing long term partnerships with
our customers, innovating at pace to
keep them at the forefront of their markets.
Combining our access to unique
natural resources with our unmatched
rheology and technological expertise,
we responsibly transform raw materials
into advantaged ingredients that provide
crucial end product benefits. This enables
our customers to solve their product
performance and sustainability challenges.
Our culture
The Board is satisfied that the Company’s
culture continues to be aligned with its
purpose, values and strategy:
Strategy is discussed regularly and
includes the three-year plan and
annual operating plan, and is formally
agreed as part of the Board’s
annual programme
The Company’s Values underpin
the behaviours expected to cultivate
an open and inclusive culture
Further information on Elementis culture
can be found on pages 45-50.
How the Board monitors culture
Promoting integrity
and accountability
Valuing
diversity
Cultural indicators
Being responsive
to the view of
stakeholders
Culture aligned
to purpose
and Values
Culture aligned
to strategy
Cultural identifier
Employee engagement
survey insight
Employee retention,
promotion and attrition data
Reports on progress on
diversity, equity and inclusion
Whistleblowing reports
HSE performance
Internal Audit reports
and findings
Ethics & Compliance
programme
Our values
Our values are core to our high-performance culture and are reflected in everything that we do.
Safety
Solutions
Ambition
Respect
Team
Our way
of life
Creating value
for our customers
Passion for
excellence
We do the
right thing
The power of
collaboration
Further information regarding our values can be found on page 6.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Board evaluation
Process for the year
2023
The Group General Counsel & Company Secretary and
Board Chair agreed the timetable and process of the
internal evaluation, and the content of the questionnaire
The Group General Counsel & Company Secretary
discussed the key themes of the evaluation with the
Chair and prepared a formal paper for discussion
The Chair met with each Director individually
to provide a forum for sharing any more
detailed or specific feedback
The SID led a performance evaluation of the
Chair with the other Board members
Jul
Aug
Sep
Oct
Dec
The questionnaire was sent to Directors for completion
Anonymous feedback was solicited from employees
who had interacted with the Board during the year
The individual responses were collated into a report
summarising key themes by the Group General
Counsel & Company Secretary
The Board discussed the key findings and agreed
on focus areas for 2024
The Board undertakes a rigorous
evaluation of its effectiveness and that of
its Committees and individual Directors
annually. The results of the evaluation
enable the Board to reflect on the
continuing effectiveness of its activities
and quality of decisions, and to identify any
areas for further focus in the coming year.
At least every three years, an externally
facilitated evaluation of Board effectiveness
is carried out. The last externally facilitated
evaluation was carried out in 2021, with
the next scheduled to take place in 2024.
In 2023, the Board undertook an
internal evaluation of its performance.
Board members completed a detailed
questionnaire compiled by the General
Counsel & Company Secretary and
approved by the Chair. The questionnaire
focused on:
How the Board had managed
opportunities and challenges
during the year
Board dynamics, Chair/Committee
Chair and individual Board
member performance
The operation and effectiveness
of the Board and its Committees
Priorities for 2024
In addition, employees who presented to
the Board during the year were given the
opportunity to provide feedback on their
experience anonymously.
Suggested topics for this feedback
were whether they felt welcomed by
the Board, that the Board listened and
was actively engaged in the discussion,
and asked relevant, thoughtful and
challenging questions.
Evaluation findings
and recommendations
The responses of Board members to
the questionnaire were largely positive
in relation to the continued effective
operation of the Board and its Committees.
The Board’s relationship with management
was seen as constructively challenging
and characterised by a high degree of
trust and respect. The Board was felt to
have received robust and comprehensive
reporting from management in relation
to key areas such as strategic priorities,
talent and succession, sustainability
and financial resilience.
The wider employee feedback was largely
favourable, and highlighted that the Board
was felt to listen carefully and to ask
challenging, but constructive, questions.
The Board was considered approachable
and engaged, inside and outside of formal
Board meetings.
The agreed focus areas for 2024
include maintaining oversight over the
implementation of the Fit for the Future
programme, maintaining the strong focus
on strategy and the growth agenda,
and ensuring that sustainability continues
to be seen as a differentiator.
With regard to the actions and focus
areas agreed as a result of the 2022
Board evaluation, it was generally felt
by Board members that these had
progressed well, particularly in relation
to the continued focus on the execution
of the Chromium divestiture (which had
completed in Q1 2023) and on strategy
(as demonstrated during the Capital
Markets Day held in Q4 2023).
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Nomination Committee report
Dear Shareholders,
As Chair of the Nomination Committee (the ‘Committee’), I am
pleased to present the Nomination Committee report covering
the work of the Committee during 2023. This report should be
read in conjunction with the separate section on compliance
under the UK Corporate Governance Code on page 92.
Attendance at Nomination Committee meetings
Member
John O’Higgins
Dorothee Deuring
Steve Good
Trudy Schoolenberg
Christine Soden
Clement Woon
Member since
February 2020
March 2017
October 2014
March 2022
November 2020
December 2022
Eligible meetings
(max 61)
Attendance
6
6
6
6
6
6
6
6
6
6
6
6
The CEO and CFO were invited to attend where appropriate.
1 Four meetings were scheduled, and two were ad hoc.
John O’Higgins
Chair, Nomination Committee
Highlight areas of focus
Ongoing Board
succession planning
Executive progression
Oversight of Group’s
Diversity Policy
Board effectiveness review
Role of the committee
The Committee is responsible for the structure and composition
of the Board and ensuring that the Board and Committees have
an appropriate balance of skills, knowledge and experience to
support the strategy of the Company now and in the future.
Programme of business
Annual review of Directors’ independence and conflicts
in accordance with the Committee’s terms of reference
Reviewing structure, size, diversity and composition of
the Board
Key responsibilities
Regularly reviewing the structure and composition of the Board
Succession planning for the Board, ELT leadership
development, and oversight of senior management
succession plans
Ensuring the right leadership, balance of skills and experience
to deliver the Company’s strategy and enable the Board to
fulfil its obligations effectively
Succession planning for the Board and ELT
Leading on the annual performance evaluation of the Board
and its Committees
Identifying and managing any potential conflicts of interests
The Committee’s terms of reference, which are reviewed and
approved annually, are available at www.elementis.com.
Ensuring that at least annually the Non-Executive
Directors meet without the Executive Directors present
Annual evaluation of the Board Chair, led by the SID
Approval of Nomination Committee report for inclusion
in the Annual Report
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Board effectiveness processes
Annually, the Board is responsible for conducting an evaluation
of the performance of the Board and its Committees.
The Committee oversees the effectiveness of the process,
which for 2023 comprised an internal evaluation by way of
comprehensive questionnaire covering the effective performance
of the Board and the functioning of the Committees. The last
externally facilitated evaluation was carried out in 2021 and
the next external review will be conducted in 2024. Following
the evaluation, the Board is satisfied of the continued effective
operation of the Board and its Committees. Further information
regarding the process can be found on page 83.
Directors’ conflicts
The Committee has oversight of Directors’ potential
conflicts of interest and, during the year, in accordance with
policy, considered and approved the following additional
external appointments:
Steve Good as non-executive director and non-executive board
chair of Norcros plc
Dorothee Deuring as non-executive director of PolyPeptide
Group AG and as non-executive director of Temenos AG
Board composition and skills
A matrix is maintained which serves as a record of Directors’
experience, attributes and expertise. The Committee reviews
this matrix annually to ensure that the Board has an appropriate
composition and range of skills, experience and diversity
to prevent any dominance, either individually or collectively,
over the Board’s decision making processes. Highlights from
this matrix are noted on page 87.
Re-appointments to the Board and
succession planning
The re-appointments of Christine Soden (for a second three
year term from November 2023) and Steve Good (for a six month
period at the end of his nine year tenure in October 2023, primarily
in order to facilitate an orderly handover to Clement Woon, as
Remuneration Committee Chair, in early 2024) were considered
and approved by the Committee, and recommended to the
Board during the year. The recommendations were supported by
considerations regarding the Directors’ independence, experience
and contribution made to the Board and its Committees. The
Committee considered that Steve would continue to demonstrate
independence in character and judgement despite having served
nine years on the Board as of October 2023, and that the Board
would benefit from his extensive knowledge of the Company
and experience for the additional six month period.
These matters were subsequently confirmed following the Board
evaluation process and a review of conflicts and independence.
The Board followed the Nomination Committee’s recommendation
to appoint Clement Woon as Remuneration Committee Chair
with effect from the conclusion of the AGM. In addition to having
served 16 months as a member of the Remuneration Committee,
Clement has served as a member of the remuneration committee
of Morgan Advanced Materials plc since May 2019.
The Chair of the Board, assisted by the Nomination Committee
members, led the search process for a new Non-Executive
Director during the year. A role specification was considered
and approved by the Committee, with input from the Executive
Directors and Korn Ferry, which was awarded the mandate by the
Committee to search for the Board’s next three members in 2021.
(Korn Ferry was appointed as an advisor by the Remuneration
Committee following a competitive tender process in 2017, but
otherwise has no connection with the Company or with any
individual Director. The services provided by Korn Ferry to the
Remuneration Committee were carried out by a separate team to
the human capital related services. Further information regarding
the role of Korn Ferry in advising the Remuneration Committee
can be found on page 121).
The Committee agreed that the Non-Executive Director
candidates should:
be current, proven and well-regarded executives from the
broad industrial/manufacturing sector
exhibit significant international business experience in their
executive careers as either a CEO, or main board executive,
of a complex multinational B2B company
be strategic thinkers, able to play a role in Board discussions
on Elementis’ strategy
Korn Ferry prepared a long list comprising candidates from the
widest talent pool, against the above objective criteria and with
regard for the benefits of diversity, including gender and ethnicity.
The Committee duly discussed the merits of each candidate
and agreed a shortlist to be interviewed by Board members.
Committee meetings were held to discuss feedback. Following
the interviews and taking of references for the preferred candidate,
external responsibilities and potential conflicts, the Committee
agreed to recommend to the Board that Maria Ciliberti be
appointed as Non-Executive Director, with effect from
11 March 2024. Please see page 76 for Maria’s biography.
In light of the Board’s programme of activity, the Nomination
Committee is evaluating further strengthening the depth and
expertise of the Board through the appointment of an additional
Non-Executive Director during 2024.
Re-election of Directors
The Board has concluded, following the appraisal process, that
each of the Directors standing for (re-)election continued to make
an effective contribution to the Board and committed sufficient
time to the Board and Committee meetings and any other duties.
With the exception of Steve Good, who will step down from
the Board at the conclusion of the AGM in April 2024 having
completed a nine and a half year tenure, all Directors will stand
for (re-)election at the 2024 AGM, and an explanation of how
they contribute to the success of the Company can be found in
the Notice of Meeting.
Diversity Policy
The Board has adopted a Diversity Policy, which is available on the
Company’s website. The Board acknowledges the importance of
diversity in its broadest sense in the boardroom as a key element
of Board effectiveness. Diversity includes perspective, experience
(including working internationally), background (including
nationality), cognitive and personal strengths and other personal
attributes, as well as diversity of gender, social background and
ethnicity. We consider overall Board balance when appointing
new Board members.
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Nomination Committee report
continued
Progress on our diversity objectives
Our external advisers are selected on their commitment and
ability to deliver diverse long-lists in the recruitment processes
The composition of the Board is reviewed on an annual basis,
with an assessment of skills, expertise, backgrounds and
experience prior to Directors joining the Board and on an
ongoing basis using a diversity matrix
The proportion of female Directors on the Board as at
31 December 2023 was 37.5% (three women and five men).
After the conclusion of the 2024 AGM, the gender balance of
the Board is expected to be 50:50 (four women and four men).
The Board is aware of the target specified in recent updates
to the Listing Rules for female representation on Boards of at
least 40% and will ensure that the benefits of diversity are
appropriately considered in the context of any future Board
recruitment. The Board currently meets the targets referred
to in the new Listing Rules for there to be at least one woman
in a senior Board role (the role of Senior Independent Director
being held by Dr Trudy Schoolenberg) and at least one member
of the Board from a minority ethnic background (following the
appointment of Clement Woon, a Singaporean national, to the
Board in December 2022)
Oversight of gender and ethnic diversity profile across the
Group including promotion of talent into management roles
(see page 48 for progress on female leadership)
We note the new Parker Review target to set a percentage
goal for senior management positions that will be occupied by
ethnic minority individuals, to be achieved by December 2027,
and have started a process to identify how best to approach
this in order to set a meaningful target which will take into
account our global presence. We expect to be in a position
to set our target during 2024
Oversight of executive and senior management succession
Continuing to monitor regulatory developments and best
practice in respect of diversity
Our gender identity and ethnicity data in accordance with Listing
Rule 9.8.6R(10) is set out below as at 31 December 2023. To
compile this data, at year end, Board and ELT members were
asked to complete a diversity disclosure to confirm which of the
categories contained in the tables below that they identify with.
Gender representation among Board and Executive Management as at 31 December 2023
Male
Female
Not specified/
prefer not to say
Number of
Board members
5
3
–
Percentage
of Board
62.5%
37.5%
–
Number of
Senior Positions
on Board1
Number in
Executive
Management
Percentage of
Executive
Management
3
1
–
8
1
–
88.9%
11.1%
–
Ethnicity representation among Board and Executive Management as at 31 December 2023
Number of
Board members
Percentage
of Board
Number of
Senior Positions
on Board1
Number in
Executive
Management
Percentage of
Executive
Management
White British or other
White (including minority
white groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/
Black British
Other ethnic group,
including Arab
Not specified/prefer
not to say
1 CEO, CFO, SID, Chair.
5
0
1
0
0
2
62.5%
0%
12.5%
0%
0%
25%
4
0
0
0
0
–
8
0
0
1
0
–
88.9%
0%
0%
11.1%
0%
–
Priorities for the year ahead
Review Board and senior management succession plans
Review Board Diversity Policy and objectives
Review management progress towards achieving
diversity objectives
Review of 2024 external evaluation outcomes and
planning for 2025 internal evaluation
John O’Higgins
Chair, Nomination Committee
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Diversity
Composition of the Board1
Gender of the Board
Chair
1
12.5%
Male
Independent
Non-Executive Directors
5
62.5%
Female
Executive Directors
2
25%
5
3
62.5%
37.5%
Length of tenure
6-9 years
3-6 years
Less than 3 years
2
2
2
Gender of ELT
33.3%
Male
33.3%
Female
1
33.3%
8
88.9%
11.1%
Nationality of the Board
Gender balance of ELT and direct reports
1
1
1
1
1
American
Austrian
British
Dutch
Irish
Singaporean
Board ethnicity
White British or
other white
12.5%
Male
12.5%
Female
37
22
63%
37%
3
37.5%
12.5%
12.5%
12.5%
Gender Company-wide
Male
Female
Age
7
87.5%
Under 50
0
341
939
73.4%
26.6%
4
4
0%
50%
50%
Asian/Asian British
1
12.5%
50-60
60+
1 Senior Independent Director is female.
Note: As at 31 December 2023
Board expertise and experience matrix
John
O’Higgins
Paul
Waterman
Ralph
Hewins
Dorothee
Deuring
Steve
Good
Christine
Soden
Trudy
Schoolenberg
Clement
Woon
Manufacturing/industrial processing
Specialty chemicals
International business and markets
Pension trustee
M&A/capital raising
Financial/accounting/risk expertise (recent/relevant)
Sales/marketing/customer
Strategy/business development
Research/technology/innovation/product dev
Risk management
HR/people
Sustainability/climate
Digital/e-commerce/cyber
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Elementis plc
Annual Report and Accounts 2023
87
Audit Committee report
Dear Shareholders,
As Chair of the Audit Committee (the ‘Committee’), I am pleased
to present the Audit Committee report covering the work of
the Committee during 2023. This report should be read in
conjunction with the separate section on compliance under
the UK Corporate Governance Code on page 92.
Attendance at Audit
Committee meetings
Member
Member since
Eligible meetings
(max 3)
Attendance
Christine Soden (Chair)
November 2020
Dorothee Deuring
Trudy Schoolenberg
Clement Woon
March 2017
March 2022
December 2022
3
3
3
3
3
3
3
3
Christine Soden
Chair, Audit Committee
Highlight areas of focus
Recommended approval of the
2022 Annual Report and Accounts
and 2023 Half Year Interim
Statements to the Board
Approval of audit plans
(external and internal) for 2023
Review of going concern
and viability statement
Presentation of adjusting items
Goodwill and indefinite life
intangible assets impairment review
Key responsibilities
Monitoring the integrity of the Group’s financial statements,
financial reporting and related statements
Ensuring the appropriateness of accounting policies,
any changes to these, and any significant estimates and
judgements made
Reviewing the effectiveness of internal control,
compliance and risk management systems
(including whistleblowing arrangements)
Overseeing all aspects of the relationship with the internal and
external auditors; approving the policy on non-audit services;
making recommendations to the Board for their dismissal or
changes; and supervising any tender process
The Committee’s terms of reference, which are reviewed and
approved annually, are available at www.elementis.com.
Role of the committee
To assist the Board by establishing, reviewing and monitoring
the Group’s financial reporting, internal controls framework
and risk management, internal audit programmes and changes
in regulatory requirements.
Composition of the committee and
meetings attendance
In accordance with the Code, the Board has confirmed that all
members of the Committee are independent Non-Executive
Directors and have been appointed to the Committee based
on their individual financial and commercial experience.
The Board is satisfied that Christine Soden, as Chair of the
Committee, has recent and relevant financial experience to chair
this Committee through her previous executive roles as CFO at
Acacia Pharma Group plc (2015-2020) and CFO of Electrical
Geodesics, Inc. Christine is a chartered accountant (FCA).
The Committee, as a whole, has financial and commercial
competence relevant to the sector in which the Group operates.
Further information on the skills, expertise and experience of
Committee members can be found on page 87.
The Chair of the Board, CEO, CFO and Group Financial Controller
& Head of Tax, and representatives from the external auditors
(Deloitte) and internal auditors (PwC), have a standing invitation
to attend Committee meetings. All Board members have access
to Committee papers.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Activities during the year
The Committee’s focus in 2023 has been on:
Meetings with both the internal and external auditors to review
their key findings
Reviewing the internal control systems and considering the
output of internal audit reviews and management’s action plans
Reviewing the integrity, consistency and key accounting
judgements made by management in both the Company’s
full and half year results
Advising the Board on whether the Annual Report and
Accounts preparation process is fair, balanced and
understandable, and provides the information necessary to
shareholders to assess the Group’s position and performance,
business model and strategy
Reviewing the going concern and viability statements and the
supporting assumptions and assessments in the Company’s
half year report and Annual Report and Accounts
Ensuring compliance with applicable accounting standards,
monitoring developments in accounting regulations which
affect the Group and reviewing appropriateness of accounting
policies and practices currently in place
Reviewing effectiveness of the internal and external auditors,
their independence and objectivity and terms and scope of
engagement, and recommending their re-appointment
Overseeing matters relating to tax including the impact of
tax rates on the financial statements, the position on EU state
aid and approval of the Company’s tax strategy
Litigation and compliance reports for both the full and half year
Considering the material legal risks impacting the Company
and the associated provisioning for both the full and half year
Receiving updates on the Code of Conduct and Ethics and
the associated training and whistleblowing reports
Technical updates on the Annual Report and Accounts
key developments, 2023 year end report environment,
corporate governance matters and future developments
Reviewing the Group’s risk management activities undertaken
by each business area, and at Group level to identify and
assess the Group’s principal and key operational risks
Monitoring and assessing the Group’s insurance arrangements
Preparation, and reviewing progress, for CFD and TCFD
disclosure requirements
Identifying, assessing and mitigating climate related risks
Monitoring proposed Audit and Corporate Governance reforms
and the Group’s preparedness for these
Committee effectiveness
The Committee’s performance and effectiveness was reviewed in
the year as part of the Board and Committee effectiveness review
conducted by the Group General Counsel & Company Secretary
on behalf of the Chair of the Board. Further details can be found
on page 83.
External auditors
Deloitte has served as external auditors for seven years.
The Committee engaged with Deloitte to ensure this key area
of oversight was appropriately maintained. The Committee
periodically meets privately with the lead audit partner and senior
members of the audit team to discuss their work and findings.
Audit of the 2023 Annual Report
and Accounts
At the end of 2023, Deloitte presented its audit plan for the year
ahead, which the Committee considered and approved. Deloitte
highlighted the key areas of risk, which were primarily identified
as areas of judgement and complexity, and were consistent with
the areas identified by the Committee.
As part of the audit process, Deloitte prepared a detailed
report of its audit findings, which was reviewed and discussed
by the Committee. A similar process was undertaken for the
half year results.
Audit effectiveness
To support the Committee in evaluating the effectiveness of the
external auditors, a questionnaire-based evaluation is circulated to
internal stakeholders who have had the most interaction with the
external auditors during the audit process. The data is collated
into a score card which is used to assess the strengths and any
weaknesses of the external auditors.
Management and the external auditors then address any areas
of weakness in their regular review meetings and the lead audit
partner from Deloitte updates the Committee on how areas of
weakness are being addressed.
The Committee also monitors audit effectiveness by reviewing
the Audit Quality Inspection reports published by the FRC.
The Committee will formally assess Deloitte’s performance in
relation to the 2023 audit following its completion. It is intended
that a resolution to re-appoint Deloitte as the external auditors
is proposed at the 2024 AGM.
Audit independence and objectivity
The Committee considers the external auditors’ objectivity and
independence at least twice a year. It takes into account the
information and assurances provided by the auditor confirming
that all its partners and staff involved with the audit are
independent of any links to Elementis. The Committee also
monitors changes in legislation related to auditor independence
and objectivity to assist the Company to remain compliant.
Deloitte has confirmed that all its partners and staff complied
with their ethics and independence policies and procedures
which are fully consistent with the FRC’s Ethical Standard,
including that none of its employees working on the Company’s
audit hold any shares in Elementis plc.
Deloitte is required to provide written disclosure at the planning
stage of the audit in the form of an independence confirmation
letter. Their letter discloses matters relating to its independence
and objectivity, including any relationships that may reasonably be
thought to have an impact on its independence and the integrity
and objectivity of the audit engagement partner and the audit staff.
The audit engagement partner must change every five years and
other senior audit staff rotate at regular intervals.
Elementis plc
Annual Report and Accounts 2023
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Audit Committee report
continued
The Committee develops and recommends to the Board the
Company’s policy on non-audit services and associated fees that
are paid to Deloitte. In accordance with the FRC’s Revised Ethical
Standard, an auditor is only permitted to provide certain non-audit
services to public interest entities (e.g. Elementis plc) that are
closely linked to the audit itself or that are required by law or
regulation, as such services could impede their independence.
Permitted non-audit services fees paid to the statutory auditor are
subject to a fee cap of no more than 70% of the average annual
statutory audit fee for the three consecutive financial periods
preceding the financial period in which the cap applies. The 70%
non-audit services fee cap has been applied to the Group for
the year ended 31 December 2023. The average of audit fees is
$2.3m (calculated as the average of the audit fees for the three
preceding financial years (2022: $2.4m; 2021: $2.2m; 2020: $2.2m).
Non-audit services fees during the year were $0.0m, (2022:
$0.0m; 2021: $0.0m; 2020: $0.1m;) so significantly below the cap
of $1.6m (70% of $2.3m). In 2023, fees for non-audit services
represent 0% of the average audit fees on which the cap is based.
The Committee is of the view that Deloitte was objective and
independent throughout the 2023 audit process.
Auditor rotation and tendering, and
competition and markets authority
order – statement of compliance
The Committee carried out an audit tender process in 2015,
resulting in the appointment of Deloitte as external auditors in
April 2016. Deloitte’s re-appointment in 2023 was approved
by shareholders at the Company’s AGM in April 2023.
Under the Companies Act 2006, the lead audit partner must
be mandatorily replaced after five years to ensure auditor
independence. The external auditors, as a whole, can only
be appointed for a maximum term of ten years before
a competitive tender is required to be undertaken.
The year ended 31 December 2023 is the third year for the lead
audit partner, Lee Welham, who was appointed in January 2022.
Following this rotation of the lead external audit partner in FY2021,
the Committee considers a full tender for the Group’s external
audit services, subject to its annual reviews, be undertaken as
per the indicative tendering timeline below.
The Committee confirms that the Company is compliant with the
provisions of the Statutory Audit Services for Large Companies
market investigation (mandatory use of Competitive Tender
processes and Audit Committee Responsibilities) Order 2014,
for the year ended 31 December 2023.
External audit – indicative
tendering timeline
2016: Deloitte appointed as external auditors
2021: Mandatory appointment of new audit partner
2025: Full competitive tender to be undertaken
2026: Re-appointment of, or appointment of new,
external auditors
Non-audit services
The Group has an agreed policy with regard to the provision
of audit and non-audit services by the external auditors,
which has operated throughout 2023 and is available on
the Company’s website.
90 Elementis plc
Annual Report and Accounts 2023
Under the policy, the CFO may approve individual engagements
where the fee is up to 15% of the Group’s audit fee for the year,
provided that the non-audit fees in the year do not exceed 50%
of that Group audit fee. Decisions above these thresholds must
be referred to the Committee for determination.
Audit fees ($m)
Assurance related services ($m)
Non-audit fees ($m)
Ratio of non-audit fees to
audit fees (%)
Total fees ($m)
Key Judgements
2023
2022
2.1
0.3
–
0%
2.4
2.4
0.3
–
0%
2.7
Key judgements How the Committee has addressed these matters
Adjusting
Items
Revenue
recognition
The presentation and consistency of costs and
income within adjusting items is a key determinant
in the assessment of the quality of the Group’s
adjusted earnings. Adjusting items was a particularly
important area of judgement during the current year
due to the announcement of the fit for the future
restructuring programme. The restructuring gives
rise to an IAS 37 provision, with the expense of
$25.4m being included as an adjusting item as part
of business transformation costs. The Committee
carefully reviewed the appropriateness of
classification of the costs as adjusting items,
as well as the accuracy of the costs.
The main area of judgement continues to be in
relation to recognition of revenue from shipments
by sea. The Committee satisfied itself that the
Group had appropriately recognised revenues
in accordance with their contractual obligations
during the period, paying particular attention to
period end cut-off.
Internal controls, risk and risk management
The Committee’s role is to review the effectiveness of the internal
control, compliance and risk management systems, which it
carries out in support of the Board’s formal review of significant
risks and material controls, as summarised in the Risk
management report on pages 63-66.
The Committee also has oversight of associated readiness activity
and implementation timelines, and allocates appropriate resources
to continue the development of our framework of controls in line
with guidance.
PwC provides an outsourced internal audit function. The
Committee considers that the value of internal audit is enhanced
by having a third party perform this function, to support the
independent challenge of management and give greater access
to expertise and resources than an internal function could provide.
The internal audit plan is based on a review of the Group’s key
risks which are considered high risk, or have not been subject
to a recent audit. The 2023 internal audit plan was discussed
and agreed between management and PwC ahead of it being
considered and subsequently approved by the Committee.
Management review the schedule with PwC on a quarterly basis
and adapt the schedule during the year to incorporate any new
or increased risks. The outcomes of these reports are provided
to the Committee, alongside any management actions.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Following an evaluation of the services provided by PwC in respect
of the internal audit, the Committee confirms that both the process
for determining the internal audit programme, and the programme
itself, are appropriate and effective.
Management are committed to address all control findings
identified by both the internal and external auditors. The Group
has continued to remediate control deficiencies as they are
identified. The Group also continues to invest in its finance,
operational and IT capabilities, and management are committed
to maintaining a strong control environment. Set out below is
a summary of the key features of the Group’s internal controls
and risk management system.
Internal and external audit programmes, and regular litigation
and compliance reviews with the Group General Counsel
& Company Secretary
A programme of compliance audits, regulatory inspections,
environmental reviews and property surveys by external specialists
The Company’s Code of Conduct and Ethics, on which
all employees receive training, and which summarises the
Company’s key policies, including anti-bribery and corruption,
whistleblowing arrangements and anti-retaliation. In 2023, we
launched our “Business Partner Expectations Document” which
sets out our key requirements of third parties that we do business
with, as well as our third party compliance risk screening tool
Control environment
The Group has policies and procedures that set out the
responsibilities of business and site management, including
authority levels, reporting disciplines, and responsibility for
risk management and internal controls. In addition, annual
compliance statements on internal controls are certified by
each operating segment.
Risk identification and review
A formal risk review process exists at Board and ELT levels for the
identification, evaluation, mitigation and ongoing monitoring of risks,
including emerging risks. Further details can be found on pages 67-71.
Internal audit programme
An internal audit programme is proposed by PwC in consultation
with the CFO and approved by the Committee each year, setting
out a programme of audits over the course of the next 12 months.
The programme covers the monitoring of the effectiveness
of internal controls and the design of processes to test the
effectiveness of controls. As well as conducting audits of operating
facilities, sales offices and tolling sites on a two to three year
rotational basis, the internal audit programme includes reviews
of Group functions and processes.
During 2023, the following audits were undertaken:
ESG review (phase 2)
Brazil review
Supplier Assurance review
Forecasting, planning and budgeting review
Internal auditor effectiveness
To support the Committee in evaluating the effectiveness of the
internal audit programme, a questionnaire-based evaluation is
completed by employees who have had the most interaction with
PwC during the year. A scorecard is reviewed by the Committee
to assess the strengths and weaknesses of the internal auditors.
The effectiveness of the internal audit function was considered
and confirmed by the Committee.
Controls assurance
The controls assurance framework at Elementis is as follows:
Board leadership supported by an open and transparent
culture of ‘no surprises’, good governance and compliance.
This means knowing and understanding the businesses
and quality interactions between the Board and the ELT
(including a regular programme of presentations and reports
to the Board, as well as operational site visits)
Whistleblowing
If an individual is not comfortable speaking up to their line
manager, to HR or to the Compliance team regarding potential
breaches of law, Company policy or values (including those
related to accounting, auditing, risk, internal control and related
matters), they have access to an independently hosted,
anonymous (if preferred) whistleblowing facility (IntegrityCounts),
available 24 hours a day, 365 days of the year. Details of how
to access this service are referenced in the Code of Conduct
and Ethics, and actively advertised at all Elementis locations.
Information is also available online. The Committee has oversight
of reports of this nature, which are investigated by the Group
General Counsel & Company Secretary with the involvement
of other senior colleagues as required. During 2023, there were
17 reports. As a result of the Committee’s review, it was satisfied
that all had been duly investigated and appropriate actions
identified by management.
Fair, balanced and understandable
The Committee adopted a similar approach as in previous years
to ensure that the Annual Report is fair, balanced and
understandable. The process was as follows:
An internal Annual Report team was set up to manage the
process. The team consisted of members drawn from Group
Finance, Company Secretariat, Investor Relations, Sustainability
and Communication teams. The team was responsible for
regularly reviewing work and ensuring balanced reporting with
appropriate links between key messages and sections of the
Annual Report
The Committee Chair held meetings with the audit partner,
and the Committee held meetings with the external auditors
without management being present
An audit clearance meeting was held with the Committee Chair,
CFO and members of the Finance team alongside the audit
partner and audit team members
The Committee received updates from management on the
Annual Report progress and audit throughout the process
as well as from the Company’s brokers and other advisers
The Committee, Chair and Executive Directors reviewed the
Annual Report in its final stages
Following this process, the Committee and then the Board were
able to confirm that the Annual Report, taken as a whole, is fair,
balanced and understandable, and provides the necessary
information for shareholders to assess the Group’s position,
performance, business model and strategy.
Christine Soden
Chair, Audit Committee
Elementis plc
Annual Report and Accounts 2023
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Compliance statement
The UK Corporate Governance Code
For the year ended 31 December 2023, Elementis plc was
subject to the UK Corporate Governance Code 2018 (“the
Code”). The Code sets standards of good practice in relation
to all areas of corporate governance in the UK. In this Annual
Report, we report on how we applied the main principles of
the Code and complied with its relevant provisions.
We consider ourselves to be fully compliant throughout the year
ended 31 December 2023 and from that date up to the date of
approval of this Annual Report, save in relation to Listing Rule
LR9.8.6R(9) due to having 37.5% female Directors on the Board
as at 31 December 2023 and from that date up to the date of
approval of this Annual Report. The Board focused on Board
succession planning during 2023 and was pleased to announce
the appointment of Maria Ciliberti, effective from 11 March 2024.
The appointment of Maria brings the proportion of female
Directors on the Board to 50%, bringing the Board into full
compliance with Listing Rule LR9.8.6R(9). We note that Provision
10 of the Code provides that a tenure of more than nine years
on the board is considered a circumstance that could, or could
appear to, impair the independence of a non-executive director.
Steve Good reached a nine year tenure on the Board in October
2023 and was reappointed for a further six month period,
to April 2024. The Nomination Committee considered that Steve
would continue to demonstrate independence in character and
judgement despite having served nine years on the Board, and
that the Board would benefit from his extensive knowledge of the
Company and experience for the additional six month period,
which would enable the conclusion of the process to appoint
a new Non-Executive Director, as well as an orderly handover
of the Remuneration Committee Chair. Further information
regarding Steve’s independence can be found on page 85.
The Code is currently available at www.frc.org.uk.
1. Board leadership and company purpose
A. Board of Directors
B.
Purpose, values, strategy and culture
C. Resource and control framework
D.
Stakeholder engagement
E. Workforce policies and practices
2. Division of responsibilities
Leadership of Board by Chair
F.
G. Board composition and responsibilities
H. Role of the Non-Executive Directors
74
82
66
26
47
93
93
93
I.
Board policies, processes, information, time and resources 94
3. Composition, succession and evaluation
J.
Board appointments and succession
K.
L.
Board skills, experience and knowledge
Annual Board and Committee evaluation
4. Audit, risk and internal controls
M.
Financial reporting, external auditor and internal audit
N. Fair, balanced and understandable assessment
O.
Internal financial controls and risk management
5. Remuneration
P.
Linking remuneration with purpose and strategy
Q. Remuneration Policy review
R.
Remuneration performance outcomes
85
87
83
89
91
90
99
104
113
92 Elementis plc
Annual Report and Accounts 2023
How the Board operates
The Board held eight scheduled meetings during the year and
additional Board meetings were also held to discuss emerging
matters such as capital markets day and shareholder engagement.
For each Board and Committee meeting, meeting papers are
provided in advance through a secure portal. Board papers
include standing items, such as financial performance and investor
relations updates, and special business such as strategic,
operational or governance matters, which are prepared by
Executive Directors, senior management, the Group General
Counsel & Company Secretary and/or external advisers. The
Board regularly invites ELT members to attend Board meetings
and receives presentations and updates from their relevant
business and functional areas.
Other key information, such as analyst/investor reports, Company
policies and governance guidelines, is available through the
secure portal.
Matters reserved for the Board
To ensure there is a clear division of responsibilities between the
Board and the running of the Company business, the Board has
a formal schedule of matters reserved for its decision. This is
reviewed on a periodic basis and is available on our website:
www.elementis.com.
Group financial report
Risk management and internal controls
Corporate governance
Group strategy
Acquisitions and disposals
Talent and succession
Culture and Values
Sustainability
Health and safety
Engagement with key stakeholders
Financial and trading statements
Board allocation of agenda time
Agendas for each Board meeting are prepared by the Group
General Counsel & Company Secretary as a rolling programme
over a 12 month period, but are reviewed regularly and updated
where appropriate. The agenda for each Board meeting is
agreed with the Chair, CEO and CFO.
Shareholder communications
The Chair is responsible for effective communication
with shareholders. The CEO and CFO are the Company’s
principal contacts for investors, analysts, press and other
interested stakeholders.
There is a dedicated investor relations programme for current
and potential investors, which is managed by the Head of Investor
Relations who reports to the CFO. Further information regarding
shareholder services can be found on page 193.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Roles and responsibilities of the Directors
The Board members have clearly defined roles and responsibilities, as set out in the table below. They also have a range of skills,
knowledge and experience that is relevant to the successful operation of the Board (see the biographies on pages 74-76 and
Board Composition and Skills table on page 87).
Non-Executive Directors
Chair
John O’Higgins
Leads the Board and is responsible for its overall effectiveness
Sets the agendas in consultation with the CEO, CFO and Group General Counsel & Company Secretary
Promotes open, honest and constructive debate, challenges during meetings and guides the CEO and
CFO in delivery of the strategy
Ensures the Board conforms with the highest standards of corporate governance
Chairs the Nomination Committee and ensures the Board has an appropriate balance of skills,
diversity and experience
Ensures effective succession planning is in place and leads the annual Board effectiveness review
Engages with shareholders and other stakeholders, and ensures that their views are understood and
considered appropriately in Board decision making
Acts as a sounding board to the Chair, providing support and advice where necessary
Is the point of contact for shareholders and other stakeholders to discuss matters of concern
Leads the Board’s appraisal of the Chair’s performance with the Non-Executive Directors
Provide independent oversight objectivity to the Board’s deliberations
Use their broad range of experience and expertise to challenge management and aid decision making
Serve on various Committees and play a leading role in the effectiveness of those Committees
Day-to-day management of the business
Execution of strategy and operational performance
Provides regular updates to the Board on all significant matters relating to the Group
Ensures the Company has a strong team of high calibre executives
Puts in place management succession and development plans
Supports the CEO in the delivery of the Company’s strategy and financial performance
Leads the Group Finance function and is responsible for financial reporting, investor relations,
IT, risk, insurance and tax matters
Plays a key role in external stakeholder relationships, including investment community, lenders
and pension trustees
Senior Independent
Director
Trudy Schoolenberg
Independent
Non-Executive
Directors
Maria Ciliberti,
Dorothee Deuring,
Steve Good,
John O’Higgins,
Trudy Schoolenberg,
Christine Soden,
Clement Woon
Executive Directors
CEO
Paul Waterman
CFO
Ralph Hewins
Group General Counsel & Company Secretary
Anna Lawrence
Supports the Chair in ensuring the Board operates efficiently and effectively
Provides the Board with advice on governance developments
Facilitates the Directors’ induction programmes and assists with ongoing training and development
Assists the Chair with the Board effectiveness review process
Designated Non-Executive Director for workforce engagement
Christine Soden
Represents the Board when engaging and communicating with employees and provides communication
on any outcomes
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Elementis plc
Annual Report and Accounts 2023
93
Compliance statement
continued
Independence of the
Non-Executive Directors
Each of the Non-Executive Directors is considered independent in
character and judgement. The Chair was considered independent
on appointment and the Board confirms that he remains effective.
The independence of Non-Executive Directors is reviewed
annually by the Nomination Committee, with the continuing
independence of Steve Good being subject to a particularly
rigorous review, in view of his longer service, as described
further on page 85.
The biographies of the Directors can be found on pages 74-76 and
details of the membership of each Board Committee can be found
on pages 84, 88 and 96 respectively.
Time commitment
Following the Board evaluation process, as detailed on page 83,
the Board has considered the individual Directors’ attendance,
contribution and external appointments, and is satisfied that each
of the Directors is able to allocate sufficient time to the Group to
discharge their responsibilities effectively. Information on Directors’
external appointments can be found on pages 74-76. The
Directors’ commitments register is maintained by the Group
General Counsel & Company Secretary and is regularly reviewed
by the Nomination Committee. All Directors are expected to
commit sufficient time to the Board, and the Company, as is
necessary to carry out their duties as a Director.
Additional appointments
If a Non-Executive Director wishes to take on an additional
external appointment, they are required to seek permission
from the Board. The Board will take into consideration the time
commitment required by the Non-Executive Director in their role
as a Board Director, Committee Chair or Committee member
before any permission is given.
Executive Directors are not permitted to take on more than
one non-executive directorship of a FTSE 100 company or
other significant appointment. No such external appointments
are currently held by any of the Executive Directors.
In March 2023 and April 2023, Dorothee Deuring notified
the Board of her wish to take on additional appointments as
a board member of PolyPeptide Group AG and Temenos AG.
The Board considered Dorothee’s external commitments and
additional time required for the new proposed roles and concluded
that Dorothee would still have sufficient time to perform her role
with the Company.
In May 2023, Steve Good notified the Board of his wish to take
on an additional appointment as non-executive director and
non-executive board chair designate of Norcros PLC. The Board
considered Steve’s external commitments and additional time
required for the new proposed role and concluded that Steve would
still have sufficient time to perform his role with the Company.
In September 2023, Trudy Schoolenberg notified the Board of her
wish to take on an additional appointment as Senior Independent
Director of Accsys Technologies PLC. The Board considered
Trudy’s external commitments and additional time required for
the new proposed role and concluded that Trudy would still have
sufficient time to perform her role with the Company.
The Board also considered whether the new appointments for
Dorothee, Trudy and Steve would be a conflict of interest and
concluded that they would not.
94 Elementis plc
Annual Report and Accounts 2023
Conflicts of interest
Elementis plc has a Conflicts of Interest Policy in place for all
Group companies. Our Board and its Committees consider
potential conflicts at the outset of every meeting and the Board
formally reviews the authorisation of any potential conflicts of
interest throughout the year, with any conflicts being recorded
in the Conflicts of Interest Register.
The Conflicts of Interest Register sets out any actual or potential
conflict of interest situations which a Director has disclosed to the
Board in line with their statutory duties and the practical steps that
are to be taken to avoid conflict situations. When reviewing conflict
authorisations, the Board considers any other appointments held
by the Director as well as the findings of the Board effectiveness
evaluation. Directors are required to seek Board approval for any
actual or potential conflicts of interest. Ralph Hewins is in receipt of
a conflict authorisation from the Company in respect of him acting
as a trustee of the Elementis Group Pension Scheme. Further
details can be found in the Directors’ report on page 123.
Directors’ insurance and indemnities
The Company maintains Directors’ and Officers’ liability insurance,
in the event of legal action brought against its Directors.
The Company has also granted indemnities to each of the
Directors. These indemnities are uncapped in amount, in relation
to certain losses and liabilities which they may incur to third parties
in the course of acting as a Director of the Company. Neither the
indemnity nor insurance provides coverage in the event that
a Director is proved to have acted fraudulently or dishonestly.
Board training and independent advice
All Directors have access to the advice and services of the
Group General Counsel & Company Secretary and may take
independent professional advice, as appropriate, at the expense
of the Company.
Directors are given the opportunity throughout the year to
undertake training and attend seminars, as necessary, to keep
their skills and knowledge up to date. In addition, technical
briefings are regularly included in Board and Committee papers.
The Group General Counsel & Company Secretary supports
the Chair in ensuring that the Board and its Committees operate
within the governance framework and that communication
and information flows within the Board and its Committees,
and between management and Non-Executive Directors,
remain effective.
Information flows
The Chair and the Group General Counsel & Company Secretary
ensure that the Directors receive clear and timely information on all
relevant matters. Board papers are circulated in a timely manner in
advance of the meetings to ensure that there is adequate time for
them to be read and to facilitate robust and informed discussion.
A fully encrypted electronic Board portal is used to distribute
Board and Committee papers and to provide efficient distribution
of business updates and other resources to the Board.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Board induction
The Chair, with support from the Group General Counsel & Company Secretary, is responsible for preparing and coordinating
an appropriate induction programme, which is to be tailored to the needs of each newly appointed Non-Executive Director.
Newly appointed Directors will be provided with a thorough briefing on their fiduciary duties and continuing obligations from
the Group General Counsel & Company Secretary, supported by external legal advisers, if required.
Board induction programme
Induction –
general topics
Induction –
Board
Committees
(as appropriate)
The role of the Director
Board and Committees
Board meetings
Rules, regulations and guidance
Board procedures
Current issues
Nature of the Company, its business and its markets
The Company’s main relationships
Role and remit of the Committee
Link between the Committee’s policy and the Company’s strategic objectives
The annual meeting schedule for the Committee
The main business conducted by the Committee
The legal requirements relevant to the Committee’s operations
Market practice and current trends relevant to the Committee
Current issues
Views of investors on matters considered by the Committee and potential areas of focus
Any technical training on key matters
Induction –
external advisers
Meetings with:
External auditors
Internal audit function
Remuneration consultants
Brokers
Lawyers
Meetings with:
All ELT members
IT Director
Group Financial Controller & Head of Tax
Head of Investor Relations
Global Director Sustainability
Key Elementis operating and corporate sites globally
Induction –
senior
management
meetings
Induction –
site visits
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Elementis plc
Annual Report and Accounts 2023
95
Directors’ Remuneration report
Annual statement of the Chair of the Remuneration Committee
Dear Shareholders,
As Chair of the Remuneration Committee the (‘Committee’),
I am pleased to present the Directors’ Remuneration report
for the year ended 31 December 2023. This report should be
read in conjunction with the separate section on compliance
under the UK Corporate Governance Code on page 92.
Steve Good
Chair, Remuneration Committee
The Directors’
Remuneration report
The Directors’ Remuneration report
is set out in the following parts:
1. This Annual Statement from
the Chair of the Remuneration
Committee summarising how our
Remuneration Policy has been
implemented and the key decisions
taken by the Committee
2. At a glance section providing an
overview of how we implemented
the Remuneration Policy during the
year under review
3. The Directors’ Remuneration Policy
for which shareholder approval was
received in a binding vote at the
AGM held on 26 April 2022 with
c.97% votes in support
4. The Annual Report on Remuneration
which provides full detail on how we
paid Directors during 2023 and how
we propose to implement the Policy
in 2024
The Directors’ Remuneration
Report (excluding the Directors’
Remuneration Policy) will be presented
to shareholders for approval at the
AGM on 30 April 2024 and I hope you
will vote in support of the resolution.
Index page
96
Annual statement of the Chair
of the Remuneration Committee
99 Remuneration at a glance
Directors’ Remuneration Policy
103 Policy report
104 Policy table
106 Share ownership guidelines
109 Recruitment policy
110 Service contracts
110 Payment for loss of office
110 Treatment of incentive plans
111
Non-Executive Directors’
– terms of appointment
111 Shareholder engagement
Annual Report on Remuneration
Remuneration payable
112
to Directors for 2023
113
Annual bonus for performance
in 2023
115 Directors’ share based awards
117 Directors’ scheme interests
118 Directors’ share interests
118 Directors’ retirement benefits
118
Payments to past Directors
for loss of office
119
Total shareholder return
119 CEO to all-employee pay ratio
120 Relative importance of spend on pay
120 Percentage change in remuneration
of the Directors
121
Statement of shareholder voting
121
Other information about the
Committee’s membership
and operation
121
Terms of reference
122
Activities during the year
Attendance at Remuneration committee meetings
Member
Steve Good (Chair)
Dorothee Deuring
John O’Higgins
Christine Soden
Trudy Schoolenberg
Clement Woon
Member since
October 2014
March 2017
February 2020
November 2020
March 2022
December 2022
Eligible
meetings
(max 4)
Attendance
4
4
4
4
4
4
4
4
4
4
4
4
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Remuneration policy
As a global specialty chemicals company, Elementis offers
performance driven additives that help create innovative
formulations for consumer and industrial applications. We have
market leading positions in high performance ingredients in the
Performance Specialties and Personal Care markets. We have
a global footprint, with sites in Europe, Asia and the America’s,
and a talented leadership team located across the world. Our
strategy is to deliver long term sustainable shareholder value
through innovation-led growth and the execution of efficiency
savings. We continue to deliver solid progress against this
strategy, improving both our margin and leverage.
Our Remuneration Policy has been purposefully designed to
support our strategy detailed above. Our overall policy is set with
reference to UK benchmarks, with flexibility retained to pay above
UK norms where executives are recruited from overseas. Our pay
model is UK-centric and includes base salary, pension and benefits,
annual bonus, and a performance share plan (the same policy
cascades below Executive Director level but includes restricted
stock as well as performance shares in recognition of local market
practice in the geographic locations in which we operate).
Remuneration is weighted towards long term variable pay which
supports the long term nature of the investment decisions we
make. Our performance metrics are fully aligned with strategy
as set out above.
At the 2022 AGM, we received 97% support from shareholders
for the 2022 Directors’ Remuneration Policy which is intended
to apply until the 2025 AGM.
Remuneration in 2023
As detailed in the Strategic report, performance in 2023 was
extremely resilient with good progress against our Innovation,
Growth and Efficiency strategy. This was achieved notwithstanding
the challenging external market context and as a direct result of the
strong leadership of our executive team and the commitment and
motivation of our talented workforce. In 2023, adjusted Group profit
before tax grew 4% representing strong performance in very
challenging markets. However, our performance in relation to average
trade working capital to sales ratio, one of our bonus metrics, was
marginally below the lower end of the range of bonus targets with
our performance against this metric continuing to be impacted by
a combination of industry destocking and supply chain disruption.
In line with the strategic focus on Innovation, Growth and Efficiency,
we achieved a 14.3% contribution to revenue from our innovation
pipeline, delivered $51m of new business, increasing our future
pipeline, and delivered over $10m of annualised cost savings. This
was all achieved while delivering our safety targets and continuing to
progress our sustainability agenda. Furthermore, we also completed
the sale of our Chromium business in January 2023 which resulted in
Elementis becoming a more focused specialty chemicals business.
Annual bonus
As a result of the above, following the Committee undertaking
a formal assessment of performance against the targets, bonuses
were payable at 74% of maximum for the Executive Directors.
Across Elementis, circa 95% of employees are expected to receive a
bonus with awards to be paid up to circa 80% of maximum depending
upon individual performance and specific bonus plan targets.
The Committee was comfortable with the bonus earned in the
context of the performance delivered, and the bonuses awarded
across the Company, and so did not consider it necessary to
use discretion in relation to the bonus outturn.
Further details of the targets set for 2023 and the actual
performance achieved are disclosed on page 100.
Long term incentive plan (“LTIP”)
The 2023 LTIP awards were granted on 3 April 2023 based on
normal award levels of 200% of salary for the Chief Executive and
175% of salary for the Chief Financial Officer.
The metrics were equally weighted on earnings per share (“EPS”),
total shareholder return (“TSR”) and cash conversion. The vesting
of the award is also subject to a return on capital employed
underpin which requires the Committee to consider whether the
return generated is in line with the Board’s expectations and,
if not, to reduce the vesting to a more appropriate level. In addition,
the Committee will retain discretion to reduce the number of
shares on vesting should it be considered appropriate to do
so (e.g. in the event that there was perceived windfall gain).
Full details of the targets and the awards are set out on page 100. To
the extent these awards vest at the end of the three year performance
period, shares will be required to be held for a further two years.
Based on the performance measured over the three years to
31 December 2023, the 2021 LTIP awards will vest at 54.7% of
the maximum. This is based on achievement against the targets set at
grant, including delivering a growth in earnings per share of 66% and
a TSR of 21.5% over the three year period, and satisfying the ROCE
financial underpin to the award, with ROCE increasing significantly over
the three year performance period in challenging market conditions.
Following the divestment of the Chromium business, the 2021
LTIP performance targets were reviewed with EPS re-stated to
reflect the change (also applied to the 2022 Awards). This ensured
the targets were no more or less challenging than when originally
set (i.e. Chromium was excluded from the base and end targets
so the condition was tested on a consistent basis).
In determining vesting, the Committee also considered the
potential for windfall gains and concluded that the value on vesting
of the 2021 awards did not benefit from windfall gains. In reaching
this conclusion, the Committee noted that the share prices used
as the basis of converting awards set as a multiple of salary into
shares was £1.2550 which was consistent with the share price in
February 2020 prior to the onset of the Covid pandemic and the
market wide fall in share prices. Accordingly, the Committee
did not use any discretion in connection with the 2021 award.
Further details are included on page 100.
The Committee believes that the overall incentive outturns and
approach to target setting (as detailed above) were appropriate
based on the Company’s performance over the whole
performance period and demonstrates that the Committee has,
and will continue to, set performance targets which it considers
to be meaningful and appropriately stretching. As a result,
the Committee is comfortable that its general approach to
remuneration and the overall policy framework are working as
intended. In reaching this conclusion, the Committee did consider
the quantum of remuneration earned at both executive level and
across the Company (including considering pay ratios) and
determined that our overall remuneration policy and outcomes
were appropriate and proportionate. As detailed in the sections
above, the Committee did not use discretion during the year.
Remuneration in 2024
The Committee considers the Policy to be operating effectively.
As a result, the only change that the Committee is making for FY
2024 is a modest refinement to the choice of performance metrics
for this year’s long term incentive award. The change will better
align our long term incentive plan performance targets, measured
to the end of the 2026 financial year, with the 2026 financial
targets set out in our November 2023 CMD presentation.
Elementis plc
Annual Report and Accounts 2023
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Annual statement of the Chair of the Remuneration Committee
continued
Salary review: The Executive Directors’ base salary increases
will be 4% for the CEO and CFO for 2024. These increases are
below the workforce salary increase budgets for each location,
which was 4.5% in both the US and UK, in recognition of current
market conditions and a modest weighting of salary budgets
towards the wider workforce.
2024 annual bonus: There will be no change to the quantum of
the Executive Director bonus opportunity and as such the CEO
will have the opportunity to earn up to 150% of salary and the
CFO up to 125% of salary.
As for 2023, the bonus will be based 70% against a challenging
range of financial targets (50% on adjusted Group profit before
tax and 20% on average trade working capital (“AWC”) to
sales ratio on total operations), with the remaining 30% based on
non-financial strategic objectives which are specific and measurable
objectives that are related to the Company’s strategic priorities.
The non-financial targets for 2024 will again be focused on
sustainability and strategic targets. Reflecting the continued
Group-wide focus, half of the non-financial targets will relate to
sustainability, with the balance of the non-financial targets relating
to Innovation, Growth, and Efficiency which aim to support
strengthening of our operating margin over the next three years.
Summary details of our approach to target setting are detailed
on page 101 and full details of the financial target ranges and
our performance against them will be disclosed on a retrospective
basis in next year’s report. The Committee has discretion to modify
the overall amount of bonus payable to ensure it is appropriate.
50% of any bonus earned is deferred in shares for two years.
2024 LTIP awards: Subject to final Committee review prior to grant,
awards are expected to be granted at 200% of salary for the CEO and
175% of salary for the CFO. The awards will be subject to an overriding
Committee discretion to reduce the awards at vesting should there be
a perceived windfall gain.
The primary performance targets will be as per the 2023 awards
plus the addition of an operating profit margin target to align with
CMD, with 25% based on EPS, 25% based on cash conversion,
25% based on TSR performance conditions and 25% based upon
operating profit margin.
The EPS targets will be set based on the level of EPS achieved
in 2026, with vesting to take place from 14.0 cents to
18.5 cents, with threshold vesting set at 0% and to take place
from 14.0 cents, with vesting increasing to 50% at 17.0 cents
and then increasing further to maximum vesting at 18.5 cents
or greater. Vesting between performance points will occur on a
straight line basis. The range of EPS targets is more demanding
than those set for the 2023 LTIP award. The target range was
set to align with the outcomes of our CMD commitments.
External expectations for our future performance were also
considered as part of the target setting process
The three year average operating cash conversion targets will
be set based on a range of 80% to 100%, consistent with
the range that applied to the 2023 awards, reflecting market
conditions, and aligned with the Company’s publicly stated
ambitious medium term target of 90% (or greater) three year
average operating cash conversion by 2026. Threshold to
maximum vesting runs from 0% to 100% on a straight-line basis
TSR will continue to be assessed against the constituents of the
FTSE All-Share Index (excluding investment trusts). Threshold
vesting starting at 25% for median performance, increasing on
a straight-line basis, with 100% vesting for achieving at least
upper quartile performance
98 Elementis plc
Annual Report and Accounts 2023
Operating profit margin (“OPM”) targets will be set based
upon the level of OPM achieved in 2026 to align with the CMD
commitments, with vesting to take place from 18.0% (threshold)
to 20% (maximum). Threshold vesting is set at 0% and to take
place at an OPM of 18%, with vesting increasing to 50% at an
OPM of 19%, and then increasing further to maximum vesting
at an OPM of 20%. Vesting between performance points will
take place on a straight-line basis
Vesting based on the primary performance conditions will be
subject to a return on capital employed underpin. This will require
the Committee to consider the vesting result determined based
on the application of the EPS, TSR, OPM and operating cash
conversion performance conditions in light of the return on
capital employed achieved during the three-year period ending
31 December 2026 relative to the Board’s internal targets and
planning over the period. If the Committee does not consider
the vesting result appropriate considering the return on capital
employed achieved, the underpin enables vesting to be reduced
to a more appropriate level.
Context of Directors’ pay within the Company
Christine Soden is the Designated Non-Executive Director
(“DNED”) for workforce engagement. During the year Christine
held focus groups with employees in UK, China and Taiwan, each
of which included discussion around compensation. Two further
focus groups were held with all people managers globally (c.250)
in January 2023 by myself, Christine Soden and Chris Shepherd,
Chief Human Resource Officer (“CHRO”) to explain governance
of remuneration at Elementis, to show how the policy is applied
throughout the organisation, and to take feedback. The session
including polling questions to assess understanding and questions
and answers. The output of these sessions included the Board
gaining confirmation that managers understand the basis on which
our pay programmes are set, including the link to strategy, and how
Directors’ remuneration is determined.
A Company-wide external pay benchmarking exercise was
undertaken during 2022 as part of a standard three year review
process. This review concluded that employees are generally
well positioned against industry benchmarks.
The Group is not required to provide disclosure of the CEO to
all-employee pay ratio given the Group has less than 250 employees
in the UK. However, given the external focus on pay ratios, the
Committee has included full pay ratio disclosure on page 119 and is
comfortable that the ratio is in line with the Company’s pay policies
and in line with current FTSE market practice.
The Group is also not required to report under the gender pay
gap regulations. Despite this, the Group reviews gender pay
on a biennial basis. The last gender pay review was completed
towards the end of 2022 concluding that the approach to pay
was fair and equitable with any anomalies adjusted accordingly.
The CEO pay ratio and gender pay gaps are taken into account
when there is a full review of the Executive Director and wider
Remuneration Policy.
Concluding remarks
The Committee believes that the Policy and our approach to
implementation are in the best interests of the Company and we
hope that you will support the actions the Committee has taken
by voting in favour at the 2024 AGM. If you have any feedback,
please feel free to contact me via the Group General Counsel
& Company Secretary at company.secretariat@elementis.com.
Steve Good
Chair, Remuneration Committee
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
2023 at a glance
Our 2023 measures
Annual bonus
Adjusted Group profit before tax (“PBT”):
50% weighting
Adjusted AWC to sales ratio:
20% weighting
Non-financial objectives (aligned with strategic
implementation, safety and environment, and people):
15% weighting – Sustainability targets
15% weighting – Strategic targets
2023 LTIP How our measures link to strategy
Performance metrics
Bonus
Financial: (70%)
Adjusted Group PBT
AWC to sales ratio
Non-financial: (30%)
Sustainability targets
Innovation, Growth and Efficiency
LTIP
EPS (33%)
Relative TSR versus FTSE All-Share (33%)
Cash conversion (33%)
ROCE underpin
2023 LTIP
EPS:
33% weighting
Relative TSR:
33% weighting
Cash conversion:
33% weighting
ROCE underpin
Strategic priorities
Innovation
Growth
Efficiency
Implementation of Remuneration Policy in 2023
The section below summarises how the Policy was implemented in the financial year ended 31 December 2023. Further details are
provided on pages 109 to 118.
Key Policy features
Salary
Performance assessment
Not applicable
Increases normally guided by
the general increase for the
local workforce and/or broader
workforce as a whole
Pension/benefits/all employee
share schemes
Not applicable
Pension: In line with the phased pension
contribution detailed in the 2021
Remuneration Policy, the CEO and
CFO pension contribution reduced
to a maximum of 21% from 1 December
2022, to align with the typical UK
workforce pension funding rate of
21% of salary
Benefits: Directors receive market
competitive benefits and may participate
in all-employee share schemes
How we implemented in 2023
Paul
Waterman
Ralph
Hewins
2023 salary
£804,1971
£397,691
1 Equivalent to $995,033.
The salaries of the CEO and CFO were increased
by 3.2% and 4.5% respectively. These were
below the average increases awarded to the US
and UK salaried workforce. These changes were
effective from 1 January 2023.
Paul
Waterman
Ralph
Hewins
Pension
£161,8421
£83,515
1 Equivalent to $200,247.
Elementis plc
Annual Report and Accounts 2023
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Directors’ Remuneration report
continued
Key Policy features
Annual bonus
Performance related scheme
which delivers value for achievement
against annual targets
Committee may adjust outturn where
formulaic assessment is inconsistent
with Company’s overall performance
50% of bonus earned deferred into
shares for two years
Recovery and withholding
provisions apply
Long term incentive plan
Performance measures based on
financial and/or relative TSR metrics
and measured over three years
Committee may adjust outturn where
formulaic assessment is inconsistent
with Company’s overall performance
Holding period applies for two years
following vesting
Recovery and withholding
provisions apply
ROCE underpin
Performance assessment
How we implemented in 2023
Opportunity
PBT
Payout
(50% of bonus)
Paul
Waterman
150% of
salary
Ralph
Hewins
125% of
salary
$84.5m vs target
of $71.2m
100% of PBT
maximum
AWC to sales ratio 25.1% vs target of 22.3%
Payout
(20% of bonus)
Non-financial
Payout
(30% of bonus)
Total
0% of AWC
maximum
See page 115
80% of
Non-
financial
maximum
80% of
Non-
financial
maximum
74% of
maximum
74% of
maximum
Further information can be found on
pages 113-114.
2021 Award
Weighting
Threshold
target
Maximum
target
Actual
Vesting
EPS
growth
Average
cash
conversion
TSR vs
FTSE All
Share
33.3%
33.3%
33.3%
8.4 cents
85% Median
10.9
cents
10.82
cents
95%
Upper
quartile
77%
66.5
percentile
32.3%/
33.3%
0%/
33.3%
22.44%/
33.3%
Further information can be found on pages
115-117.
As detailed in the Annual Statement on
page 96, 2023 was a year of continued
progress against our Innovation, Growth
and Efficiency strategy.
We delivered 4.4% growth in adjusted
operating profit to $84.5m which was above
our internal planning; however the AWC ratio
of 25.1% was slightly below the lower end of
the performance range.
The PBT targets for 2023 were lower than
2022 as a result of excluding Chromium post
its sale but were no more or less challenging
when they were set than in prior years.
The relative TSR and EPS over the
performance period were above the threshold
target; however, the average operating cash
conversion target was not met. Overall, this has
resulted in 54.7% of the award vesting. With
regard to the ROCE underpin, the Committee
considered the vesting result appropriate
having had regard to the ROCE increasing
during the period by 64% with this achieved
in difficult economic conditions.
The Committee considered the potential for
any windfall gains on vesting, but noting that
the awards were granted from a share price of
£1.2550, which was consistent with the share
price in February 2020 prior to the onset
of the COVID-19, concluded that there were
no windfall gains. Shares are subject to the two
year holding period. Further details are set out
on page 113.
Share ownership guidelines
Build up and maintain a shareholding
equal to 200% of salary
Guideline
The guideline also applies for two
years post cessation of employment
Level
Paul
Waterman
200% of
salary
Achieved
203% of
salary1
Ralph
Hewins
Both the CEO and CFO increased their
holdings during the year.
Further information can be found on
page 118.
200% of
salary
On track
97% of
salary1
1 For the purposes of the guideline, an estimate
has been made in relation to the after tax number
of shares in relation to vested/unexercised
share awards.
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Financial Statements
Shareholder Information
Implementation of Remuneration Policy for 2024
As a UK Listed business, our primary reference points for both quantum and remuneration structure for our Executive Directors are
UK benchmarks. However, as noted in our policy, we retain flexibility as to where we position individuals against UK benchmarks to
take into account the locations in which they work and also the relevant market for talent. With our CEO being a US Citizen, based in the
US, splitting his time between the UK and US, his remuneration quantum is set to be aligned with UK market practice both in terms of
structure and quantum. However, recognising that remuneration quantum is above UK levels in US businesses of a similar size and
complexity, his total remuneration package is positioned towards upper quartile versus UK FTSE 250 benchmarks. For completeness,
this market positioning is considered appropriate on the basis that versus US companies of a comparable size and complexity his
remuneration quantum falls between lower quartile and median.
The section below summarises how the Committee intends to implement the Policy for the forthcoming financial year ending
31 December 2024.
Key Policy features
Salary
Level based on the scope and
responsibilities of the role
Increases normally guided by the
general increase for the local workforce
and/or broader workforce as a whole
Pension/benefits/All-employee
share schemes
Pension: CEO participates in US specific
arrangements and receives a salary
supplement and the CFO receives
a salary supplement
Any new Director appointment will
have pension set at 8% of salary in line
with that offered to new joiners across
the wider workforce
Benefits: Directors receive market
competitive benefits and may participate
in all-employee share schemes
Annual bonus
Policy maximum of 150% of salary for
CEO and 125% of salary for CFO
Performance related scheme which
delivers value for achievement against
annual targets
Committee may adjust outturn where
formulaic assessment is inconsistent
with Company’s overall performance
2024 implementation
The Committee reviewed salaries and decided to award Paul Waterman and Ralph
Hewins each a salary increase as shown in the table below, which is lower than 4.5%
budgeted for the US and UK salaried workforce
Salary as at 1 January 23
Salary as at 1 January 24
2024 increase
Implementation in line with the Policy
Paul Waterman
$995,033
$1,034,834
4.0%
Ralph Hewins
£397,691
£413,599
4.0%
Pension rates for incumbent Directors for 2024 are aligned with the typical UK
individual pension funding rates (see page 118 for further detail)
Opportunity
Performance metrics
Adjusted Group PBT: 50%
AWC to sales ratio: 20%
Paul Waterman
150% of salary
Ralph Hewins
125% of salary
Non-financial strategic priorities: 30% of which 15% based on appropriately structured
sustainability priorities with the remaining 15% set on Innovation, Growth and
Efficiency targets.
50% of bonus earned deferred into shares
for two years
Recovery and withholding provisions apply
The targets are fully aligned with the Company’s current strategy and have been set
to be challenging in the context of the Company’s performance expectations for the
year ahead
Link to KPIs
Adjusted Group PBT
AWC to sales ratio
Individual objectives linked to sustainability
and strategic priorities
The Committee considers that the bonus targets are commercially sensitive and
therefore plans to disclose them only on a retrospective basis in next year’s Directors’
Remuneration report
The range of targets around budgeted performance levels to apply in 2024 has been
calibrated to take into account the current external environment and internal planning
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101
Directors’ Remuneration report
continued
Key Policy features
Long term incentive plan
2024 implementation
Policy maximum is 250% of salary
Awards vest to the extent performance
conditions are achieved
Performance measures based on financial
and/or relative TSR metrics and measured
over three years with a ROCE underpin
Committee may adjust outturn where
formulaic assessment is inconsistent with
Company’s overall performance and/or
there is a perceived windfall gain
Holding period applies for two years
following vesting
Recovery and withholding provisions apply
ROCE underpin introduced for the 2019
awards continues to apply
Link to KPIs
EPS
Relative TSR
Cash conversion
OPM
The choice of targets relates to measuring
the Company’s success in delivering
profitable growth and sustainable
shareholder returns
Chair and NED fees
To attract individuals with the relevant
skills, knowledge and experience that the
Board considers necessary in order to
maintain an optimal mix that ensures the
effectiveness of the Board as a whole in
carrying out its duties and responsibilities
LTIP Award
Performance metrics
Paul
Waterman
Ralph
Hewins
200% of salary
175% of salary
Weighting
Threshold
target
Threshold
vesting
Intermediate
Target
Intermediate
Target
vesting
Maximum
target
Maximum
Vesting
25% 14 cents
per share
25%
25%
18.0%
80%
0% 17 cents
per share
50% 18.5 cents
per share
0%
0%
19%
N/A
50%
N/A
20%
100%
25% Median
25%
N/A
N/A
Upper
quartile
100%
100%
100%
100%
2026 EPS
2026 OPM
Cash
conversion
Relative
TSR vs FTSE
all-share index
Straight line vesting takes place between performance points.
The range of EPS targets is more demanding than those set for the 2023 LTIP award.
The target range was set to align with the outcomes of our CMD commitments and
external expectations for our future performance. Note (i) that vesting takes place from
0% (as opposed to the market norm of 25%), and (ii) in line with institutional investor
expectations, the range straddles consensus growth expectations
Cash conversion is the three year average operating cash conversion. The target
remains set to align with the medium term goal, whilst the wider range used in 2023
continues to apply in recognition of continuing market conditions
OPM – introduced in 2024 to align with CMD commitments made in November 2023
for end 2026
The terms of the above awards will be subject to a final review prior to grant and the
awards will be subject to an overriding Committee discretion to reduce the awards at
vesting should there be a perceived windfall gain
Fees will increase by 4% for the upcoming year, which is lower than the UK workforce,
where the budgeted increase is 4.5%.
Basic fees
Chair
Non-Executive Director
Additional fees
Senior Independent Director
Chair of Audit or Remuneration Committee
Workforce engagement NED
2024
2023
2023
increase
£216,225
£207,909
£58,538
£56,286
£10,172
£10,172
£5,087
£9,780
£9,780
£4,891
4.0%
4.0%
4.0%
4.0%
4.0%
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Financial Statements
Shareholder Information
Remuneration Policy report
The 2021 Remuneration Policy (approved by shareholders at the AGM on 26 April 2022) has been summarised here for ease of
reference, with factual data updated where appropriate (e.g. scenario charts, contractual terms, page references etc.). The Policy as
approved by shareholders can be found in the Elementis plc Annual Report and Accounts 2021 available on the corporate website.
The Committee determines the Remuneration Policy taking into account all relevant factors. The Committee receives input from
management and external advisers with respect to the design of the Policy and consider the context of the relevant stakeholders when
considering their input. The Committee determines the Policy applicable to the Executive Directors and the Chair, with the Policy for
Non-Executive Directors agreed by the Board, excluding the Non-Executive Directors. This also applies when with respect to the
implementation of the Policy so that no individuals are involved in decisions as to their own remuneration. The Committee concluded
that the Policy continues to support the long term strategy of the company and as such only minor changes were required.
The Policy is aligned with the six factors listed in Provision 40 of the UK Corporate Governance Code:
Clarity – the Policy is set out as transparently as possible and the workforce engagement Director retains oversight of employee
communication and education. We proactively consult our shareholders on any proposed changes to remuneration policy
Simplicity – the Remuneration Policy is structured as simply as possible; however, a degree of complexity is required to align pay
and performance. Performance metrics are chosen to focus on the key operational, financial and strategic performance objectives
of the business
Risk – the Remuneration Policy has been shaped to discourage inappropriate risk taking, including long term performance
measurement, deferral and shareholding guidelines which extend into post employment. The Committee retains discretion to override
formulaic outcomes
Predictability – elements of the Policy are subject to caps and dilution limits. Examples of how remuneration varies depending on
performance is set out in the scenario charts
Proportionality – there is a sensible balance between fixed pay and variable pay, and incentive pay is weighted to sustainable
long term performance
Alignment to culture – the Policy is weighted towards performance related pay which supports a performance based culture and
the non-financial targets encourage innovation and optimisation which are also central to the Elementis culture and is aligned to
Company Values
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Directors’ Remuneration report
continued
Policy table
The information in the table below sets out the Remuneration Policy for Directors.
Basic salary
Purpose and link
to Company’s
strategy
How it operates
in practice
Maximum
potential value
Benefits
Purpose and link
to Company’s
strategy
How it operates
in practice
Targeted at a level to attract and retain world class executives who are essential to drive the business
forward and deliver the Company’s strategic goals.
Annual salary increases that are broadly in line with the local workforce (in percentage of salary terms),
subject to Committee approval.
Increases beyond the average of those granted to the local workforce (in percentage of salary terms)
may be awarded in certain circumstances, such as where there is a material change in responsibility or
experience of the individual, to recognise exceptional performance over a sustained period or a significant
increase in the complexity, size or value of the Company.
Where new joiners or recent promotions have been placed on a below market rate of pay initially, a series
of increases above those granted to the local workforce (in percentage of salary terms) may be given over
the following few years subject to individual performance and development in the role.
Salaries are normally reviewed in December and any changes are effective from 1 January in the
following year.
There is no prescribed maximum for salary increases. The Committee will be guided by the general
increase for the local workforce and/or broader workforce as a whole, as well as the circumstances
listed above.
To aid retention and to remain competitive in the marketplace. Healthcare benefits in order to minimise
business disruption.
Executive Directors may also participate along with other employees in the Group’s HMRC approved
SAYE or other equivalent savings based share schemes to share in the success of the Group.
Life assurance and private medical health insurance are provided.
Provision of either a company car (for business and personal purposes) or a car allowance.
Payments in connection with an international assignment and payments in connection with a relocation,
which would typically be paid for a transitionary period only, tailored to the location of each executive.
The benefits may include provision of tax advice where, at the Company’s request, the international
location (or balance of time spent in different locations) is changed.
Participation in all-employee/savings based share option schemes as above.
In addition, benefits in the US, where it is standard, include cover for dental costs, accidental death and
disablement, long term disability and club membership.
Maximum
potential value
SAYE/savings based schemes are subject to individual limits. These are $2,000 per month in the US and
up to the HMRC prescribed limit (£500 per month) in the UK.
Other benefits: the Committee will determine the level of benefit as it considers appropriate, taking into
consideration local market practice.
Pension
Purpose and link
to Company’s
strategy
To aid retention and remain competitive in the marketplace.
To provide appropriate retirement benefits commensurate with local market practice, seniority of the role
and tenure with the Company.
How it operates
in practice
Executive Directors are eligible to participate in a Company sponsored pension scheme, a statutory
pension arrangement, receive cash in lieu of a Company pension or a combination of these.
Maximum
potential value
For incumbent Executive Directors, pensions are set to be aligned with the rate of pension provision most
commonly provided to a typical UK employee (as at the time of setting the current remuneration policy)
of 21%.
Any new Director appointment will have pension set to be aligned with the average of the appropriate
wider workforce rate (currently 8% of salary).
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Shareholder Information
Annual bonus scheme
Purpose and link
to Company’s
strategy
To incentivise the senior management team to exceed the annual operating plan approved by the Board at
the start of each financial year.
To ensure that a significant proportion of an executive’s total remuneration is based on corporate/business
financial performance that is linked to the Company’s annual operating plan.
Through the part deferral of bonuses into deferred shares this enables incentive pay to help executives
build and maintain meaningful shareholdings and thereby provides a long term focus.
How it operates
in practice
An annual bonus is based on over performance against selected performance measures which are linked
to the Company’s key performance indicators, or the achievement of strategic and/or operational objectives.
Bonus payments are paid following the approval of full year results. Payments are based on salaries at the
time of payment.
Bonus deferral element: 50% of any cash bonus payable is normally awarded in shares and deferred for
two years. Dividends accrue on deferred shares (which are normally structured as nil cost options or
conditional share awards) that vest during the vesting period. Deferred shares are forfeitable for gross
misconduct (dismissal for cause).
The Committee may seek recovery and/or withholding of bonuses paid that are later found to have been
based on performance that was mis-stated or incorrectly calculated, or where the amount of any bonus
may have been reduced or withheld due to reasons of gross misconduct. Recovery and withholding
provisions will apply for a period of three years following payment of any bonus. Detailed provisions are
incorporated into the rules of the various schemes which govern the terms of a bonus payment and/or
the making of any deferred share or conditional award.
Maximum
potential value
CEO: 150% of basic salary.
CFO: 125% of basic salary.
A higher annual bonus limit of 200% of basic salary may apply for new recruits.
Framework
used to assess
performance
Performance measures will be mainly financial measures. The Committee reserves the right to select
other non-financial targets (including the basis of their measurement) as appropriate considering the
Company’s strategic objectives for the year ahead.
The financial element of the bonus may include (but is not limited to) the Company’s key performance
indicators which include:
Profit before tax or other measures of profitability
Group average trade working capital to sales ratio expressed as a percentage or other cash flow
indicators
For any profit related metric, targets will be set at threshold, plan and stretch levels and the amount
payable for threshold performance is 0% for financial targets rising on a graduated basis through to 100%,
becoming payable at the stretch performance level. With regard to non-financial targets, it is not always
practicable to set targets on a sliding scale and so targets may be set based on the achievement of specific
milestones and/or on a graduated scale.
The Committee will consider the bonus outcome each year based on the Company’s performance against
the measures set at the start of the year. If it considers the quantum to be inconsistent with the Company’s
overall performance during the year it can override the result of the performance test. For the avoidance of
doubt, this can be to zero and bonuses may not exceed the maximum levels detailed above. Any use of
such discretion would be detailed in the Annual Report on Remuneration.
The Committee keeps performance metrics under review on an annual basis to ensure they continue to
remain appropriate and has the discretion to introduce new metrics or remove existing ones and amend
their relative weightings. As a result, the performance metrics and weightings may vary in line with the
Company’s evolving strategy during the life of the Policy. The profit related element of annual bonus shall
not be less than 50% of the overall bonus opportunity.
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105
Directors’ Remuneration report
continued
Long term incentives
Purpose and link
to Company’s
strategy
The LTIP is the sole long term incentive mechanism for Executive Directors and is intended to align the
interests of the executives and shareholders in growing the value of the Group over the long term.
When granting awards under the LTIP the Committee generally takes into consideration the need to
motivate and retain the Executive Directors and other participants.
How it operates
in practice
Awards are normally structured as either nil cost options or conditional share awards which are eligible
to be granted annually. Options may be exercisable three years from, and within ten years of, the date of
award. Share awards normally vest on the third anniversary of the date of award.
Maximum
potential value
A post vesting holding period of two years will normally apply to annual awards.
Recovery and withholding provisions similar to those described in respect of annual bonus payments
but relating to the vesting of LTIP awards will apply to awards.
Dividends may accrue on shares that vest during the vesting period (and during the post vesting holding
period where awards are structured as nil cost options) and may be paid in cash or shares.
The maximum award limit is set at 250% of basic salary.
Current practice is as follows:
CEO: 200% of basic salary
CFO: 175% of basic salary
Framework
used to assess
performance
Awards are subject to achievement of financial (e.g. EPS and operating cash conversion) and/or relative
TSR performance conditions, measured over a minimum of three financial years beginning with the financial
year in which the award is made. The Committee also retains flexibility to introduce strategic targets as
a performance measure for a minority of an award.
The threshold vesting level may be up to 25% of maximum, increasing to 100% vesting on a graduated
basis for achieving stretch targets.
For the TSR portion of the 2022 awards, the threshold vesting for achieving median will be 25% of
maximum. For the EPS and operating cash conversion performance conditions applying to the 2022
awards, the threshold vesting level will start from 0%.
In relation to strategic targets, the structure of the target will vary based on the nature of the target set
(i.e. it will not always be practicable to set strategic targets using a graduated scale and so vesting may
take place in full if specific criteria are met in full).
The metrics and their weighting and targets within the LTIP will be reviewed each year.
The Committee will consider the LTIP vesting outcomes for awards based on applying the performance
conditions and, if it considers the level of vesting to be inconsistent with the Company’s overall performance
during the performance period (including its underlying financial performance), it can override the result of
the performance test. For the avoidance of doubt, this can be to zero. Any use of such discretion would be
detailed in the Annual Report on Remuneration.
Share ownership guidelines
Purpose and link
to Company’s
strategy
How it operates
in practice
To align an executive’s interests with those of shareholders and to encourage executives to participate and
share in the long term success of the Group.
Executive Directors are expected to build up a shareholding in the Company that is equal in value to
200% of their basic annual salaries. The guideline will also apply for two years post cessation of
employment such that Executive Directors are expected to hold shares equal to the value of the lower
of the actual shareholding at cessation of employment and the current guideline (200% of salary).
The post cessation guideline only applies to shares vesting under incentive plans from 2022.
Shares vesting from share awards, or transferred pursuant to an exercise of any option, granted under
any share incentive or employee share saving scheme may not be sold (other than to meet a tax liability)
until the above shareholding level has been met. In exceptional circumstances the Committee may allow
the Director to sell some, or all, shares received from a share incentive scheme even if the individual
has not met the share ownership guidelines, provided they are satisfied that shareholder interests are
adequately aligned.
The Committee monitors compliance with these guidelines and can make changes to them from time
to time.
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Shareholder Information
Non-Executive Chair and Directors’ fees
Purpose and link
to Company’s
strategy
How it operates
in practice
To attract individuals with the relevant skills, knowledge and experience that the Board considers necessary
in order to maintain an optimal mix that ensures the effectiveness of the Board as a whole in carrying out its
duties and responsibilities.
Non-Executive Directors’ fees are determined by the Chair and the Executive Directors, having commitment
and responsibilities of the role.
In the case of the Chair, the fee level is determined by the Committee. As well as taking into consideration
the above factors, the Committee sets the fee at an appropriate level necessary to attract a role holder
qualified to effectively lead the board of a company of a similar size and prestige as Elementis.
Fees are payable in cash and Non-Executive Directors are not eligible to participate in any pension,
bonus or share incentive schemes.
All Non-Executive Directors are reimbursed for travel and related business expenses reasonably
incurred in performing their duties so that they are fully recompensed on a pre-tax basis for undertaking
Company business.
No individual is allowed to vote on his/her own remuneration.
Fees will be reviewed annually with changes taking effect from 1 January in the following year.
It is the Company’s policy (other than where there is a step change in the time commitment required of
the Non-Executive Directors) that fees paid to the Chair and other Non-Executive Directors are increased
annually in line with the average increase awarded to the UK salaried workforce.
Maximum
potential value
Link between policy, strategy and structure
The Remuneration Policy is principally designed to attract,
motivate and retain the Executive Directors and other members
of the Executive Leadership team (senior management team) to
execute the Company’s corporate and business strategies in order
to deliver the annual operating plan and sustainable year on year
profitable growth, as well as to generate and preserve value for
shareholders over the longer term, without encouraging excessive
levels of risk taking. The principles and values that underpin the
remuneration strategy are applied on a consistent basis for all
Group employees.
The remuneration structure for Executive Directors is made
up of two elements: fixed remuneration (consisting of basic
salary, benefits including, for example, non-contributory
health insurance and life assurance, and pension provision),
and variable remuneration (annual bonus scheme and long term
share incentives).
It is Company policy to reward all employees fairly, responsibly and
by reference to local market practices, by providing an appropriate
balance between fixed and variable remuneration.
Choice of performance measures and
approach to target setting
The performance metrics that are used for annual bonus,
and long term incentive plans are drawn from a suite of Company
KPIs monitored by the Board that are closely linked to the financial
KPIs on pages 24-25.
In the annual bonus scheme, the financial measures currently
used are adjusted Group PBT and AWC to sales ratio. Adjusted
Group PBT is a clear measure of the Company’s trading
performance and AWC to sales ratio encourages the most efficient
use of working capital and is how earnings are converted into
cash. These metrics are aligned with the Company’s objectives
and strategy.
In addition, non-financial criteria also form part of the targets
set in the bonus scheme and these are based on Company
specific sustainability objectives (e.g. health and safety,
DE&I and environment) and/or strategic business objectives
(e.g. relating to Innovation, Growth and Efficiency targets).
With regard to long term performance targets, EPS is currently
used since it is aligned with the Company’s strategy of
delivering profitable growth and creating long term shareholder
returns. Cash conversion is also used to encourage efficient
working practices. Use of relative TSR also further aligns
shareholders and executives. OPM is being introduced to
align to CMD commitments.
Targets for financial metrics are set relative to internal planning
expectations after having regard to general economic conditions,
external market data, current and past performance of the
business and any organic or acquisitive growth plans.
Where appropriate, targets are set based on sliding scales.
Only modest rewards are available for delivering performance
at threshold levels or above, with maximum rewards requiring
outperformance of our challenging plans approved at the start
of each year.
The Committee keeps the choice of metrics and targets under
review for both the annual and long term incentive plans each year
to ensure they are appropriate in light of the Company’s current
circumstances. The Committee retains discretion to revise the
choice of metric and weightings within the incentives as detailed
above. Should the Committee make material changes to the
application of the Remuneration Policy from year to year the
Committee would give consideration to an appropriate form
of dialogue with the Company’s major shareholders.
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Directors’ Remuneration report
continued
Differences in Executive Remuneration
Policy compared with other employees
The Committee is informed of pay structures across the wider
Group when setting the Remuneration Policy for Executive
Directors. The Committee considers the general basic salary
increase for the broader Group and, in particular the employees
based in the US, UK and Europe, when determining salary
increases for the Executive Directors.
The same principles and values behind the design of remuneration
for the Executive Directors apply to other members of the ELT and
employees throughout the rest of the Group, with modifications to
reflect local market practice and the level of seniority and ability to
influence Group performance. Overall, the Remuneration Policy
for Executive Directors is more heavily weighted towards variable
pay than for other employees. This ensures that there is a clear link
between the value created for shareholders and the remuneration
received by the Executive Directors, given it is the Executive
Directors who are considered to have the greatest potential to
influence shareholder value creation.
Committee discretion with regard to
incentive plans
The Committee will operate the annual bonus plan, Deferred
Share Bonus Plan, LTIP and all employee plans according to their
respective rules and in accordance with the Financial Conduct
Authority’s Listing Rules (‘Listing Rules’) and HMRC rules where
relevant. The Committee retains discretion, consistent with
market practice, in a number of regards to the operation and
administration of these plans. These include the following
(plan limits and performance targets restricted to the descriptions
detailed in the preceding policy table):
Who participates in the plans
The timing of grant of award and/or payment
The size of an award and/or payment
The determination of vesting
Dealing with a change of control (e.g. the timing of testing
performance targets) or restructuring
The level of variable pay varies by level of employee within the
Group and is informed by the specific responsibilities of each role
and local market practice as appropriate.
Determination of a good/bad leaver for incentive plan
purposes based on the rules of each plan and the appropriate
treatment chosen
In 2018, the Board introduced the ability to grant restricted shares
into the new LTIP. The majority of the ELT are based in the US
where it is common market practice to grant restricted shares.
It is considered that the ability to grant restricted shares in tandem
with performance related share awards enables the Company to
compete for the best talent. Where restricted shares are used, the
award levels are generally lower than if performance shares were
granted, since restricted share awards are more valuable to a
recipient given there is no performance requirement attached to
the vesting of the award. Restricted shares will not be granted to
Executive Directors.
How the views of employees are taken
into account
The Board has established a DNED for workforce engagement
as a direct response to the UK Corporate Governance Code,
enabling the workforce voice in Board matters. The role of the
workforce engagement Director is to review and monitor employee
insight informed by engagement activities and employee
engagement surveys. During 2021, global reward principles were
communicated with additional detail on determination of pay,
irrespective of position. The DNED engaged with the workforce
on these principles during 2023, and feedback was sought during
focus groups held. For more information on engaging with the
workforce, please refer to pages 105-107.
Adjustments required in certain circumstances (e.g. rights
issues, corporate restructuring and special dividends)
The annual review of performance conditions, including metrics
and weightings, for the annual bonus plan and LTIP The
Committee also retains the ability to adjust the targets
and/or set different measures and alter weightings for the
annual bonus plan and to adjust targets for the LTIP if events
occur (e.g. material divestment of a Group business) which
cause it to determine that the conditions are no longer
appropriate and the amendment is required so that the
conditions achieve their original purpose and are not materially
less difficult to satisfy. The Committee has discretion to override
incentive pay outcomes in the event that payouts are not
considered reflective of overall Company performance having
applied the performance conditions for the annual bonus and LTIP.
CEO and CFO rewards scenario analysis
The bar charts overleaf illustrate the potential pay opportunities
for Executive Directors under three different scenarios for 2023.
The CEO’s remuneration has been converted into pounds sterling
using the average exchange rate for 2023 ($1.2373:£1.00).
Fixed: comprises fixed pay, being the value of salary, benefits
and pension (based on 2023 Company contributions)
On target: the amount receivable assumes performance in
which 50% of annual bonus is payable and 50% of LTIP
awards vest
Maximum: the maximum amount receivable should all stretch
targets be met and vesting under both the annual bonus
scheme and LTIP is 100%
Maximum with share price growth: in addition, we have
provided an illustration of the maximum outcome assuming
50% share price appreciation for the purpose of the LTIP value
The LTIPs also relate to awards to be made in 2024 rather than
any awards vesting in 2024.
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Financial Statements
Shareholder Information
CEO
£’000
£6,000k
£5,000k
£4,000k
£3,000k
£2,000k
£1,000k
0
£4,045k
41%
31%
28%
£4,882k
50%
26%
23%
£2,582k
32%
24%
43%
£1,181k
100%
Minimum
On target
Maximum
Maximum
(with share price growth)
CFO
£’000
£2,500k
£2,000k
£1,500k
£1,000k
£500k
0
£1,769k
41%
29%
30%
£2,131k
51%
24%
25%
£1,149k
32%
24%
46%
£528k
100%
Minimum
On target
Maximum
Maximum
(with share price growth)
Fixed pay
LTIP value with 50% share price growth
Annual Bonus
LTIP
Fixed pay
LTIP value with 50% share price growth
Annual Bonus
LTIP
Recruitment policy
For Executive Director recruitment and/or promotion situations, the Committee will follow the policy outlined below:
Element
Basic salary
Benefits
Pension
Annual bonus
Policy
Basic salary levels will be set in accordance with the Company’s Remuneration Policy, taking into account
the experience and calibre of the individual (e.g. typically around market rates prevalent in companies of
comparable size and complexity) or salary levels may be set below this level (e.g. if the individual was
promoted to the Board). Where it is appropriate to offer a below market rate of pay initially, a series of
increases to the desired salary positioning may be given over the following few years subject to individual
performance and development in the role.
New Directors may be entitled to benefits such as life assurance, private medical health insurance, cover
for dental costs, accidental death and disablement, long term disability and provision of either a company
car (for business and personal purposes) or a car allowance, club membership or any other appropriate
benefit as the Committee reasonably determines.
Where necessary, the Committee may approve the payment of reasonable relocation expenses to facilitate
recruitment for a maximum period of 12 months.
Any new Executive Directors will have their pension level set to be aligned with the appropriate wider
workforce rate (currently 8% of salary).
The annual bonus would operate as outlined for current Executive Directors but, where necessary to aid
recruitment, the maximum bonus opportunity is 200% of basic salary for the life of this policy. Bonus will
be pro-rated for the proportion of the year served. Depending on the timing and responsibilities of the
appointment, it may be necessary to set different performance measures and targets initially.
Long term
incentive
Awards under the LTIP will be granted in line with the policy outlined for the current Executive Directors on
an annual basis but, where necessary to aid recruitment, the maximum award is 250% of basic salary for
the life of this policy.
Buyout awards
An award may be made shortly after an appointment (subject to the Company not being in a prohibited
period). For an internal hire, existing awards would continue over their original vesting period and remain
subject to their terms as at the date of grant. In addition, if the grant of awards for that individual precedes
his or her appointment as a Board Director for that financial year, the Committee’s policy would include
flexibility to top up awards for that year (subject to the overall individual salary limit) based on the Executive
Director’s new salary.
In the case of an external hire, if it is necessary to buy out incentive pay or benefit arrangements which
would be forfeited on leaving the previous employer, this would be provided for, taking into account the
form (cash or shares), timing and expected value (i.e. likelihood of meeting any existing performance
criteria) of the remuneration being forfeited.
Replacement share awards may be granted using the Company’s LTIP (up to the individual limit) or outside
of the LTIP if necessary and as permitted under the Listing Rules.
Interim
appointments
Where a Director is appointed on an interim basis (e.g. to cover a role until a permanent successor is
appointed), the Company may pay additional remuneration to an individual in line with the policy for the role.
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109
Directors’ Remuneration report
continued
Outside Board appointments
The Company’s policy is to support executives should they wish
to take on an external board appointment, provided that there is
no conflict of interest and the role does not interfere with the
executive’s commitment or duties. If an executive does take on
an external appointment, they may retain any fees paid and will
be restricted generally to only one such external appointment.
Service contracts
Executive Directors’ service contracts contain a termination notice
period not exceeding 12 months.
Name
Date of contract1
Notice period
Paul Waterman, CEO
6 November 2015 12 months
Ralph Hewins, CFO
27 June 2016
12 months
1 The date of the service contract is not the same as the date of appointment,
which for Paul Waterman was 8 February 2016 and Ralph Hewins
12 September 2016.
Copies of the Executive Directors’ service contracts are available
for inspection at the Company’s registered office during normal
business hours and will be available for inspection at the AGM.
Policy on payment for loss of office
Termination payments
The maximum amount payable under both the CEO’s and CFO’s
contract is basic salary, benefits and pension for 12 months while
each serves his notice period. For the Executive Directors, the
terms covering termination were agreed at the date their contracts
were made and both are required to mitigate their loss in the event
of loss of office by making efforts to secure a new position.
The Company may pay compensation in lieu of the notice period
of basic salary only, to be paid in monthly instalments (pro-rated
for the actual notice period). This would apply if the Company
terminates his/her contract for any reason other than for cause,
or if he/she serves notice to terminate his/her contract in
12 months’ time.
Payments in lieu of notice to both the CEO and CFO may be
reduced or ceased if either secures a new position. In both cases,
the payments will only be ceased if the salary in a new position
is equal to or more than the salary on termination; if not, the
monthly payments will be reduced by the gross salary earned by
the CEO or CFO in his/her new position each month.
The above summary only addresses contractual rights to
payments in lieu of notice, or during the relevant Director’s notice
period, and may not reflect any settlement or compromise sums
which are separately agreed at the point of termination.
Treatment of incentive plans
Annual bonus plan
If an Executive Director resigns and serves his/her notice period,
the Committee retains discretion to make a pro-rata payment
based on performance. The same applies in certain circumstances
such as if the individual’s employment is terminated on the
grounds of ill health or disability. No bonus is payable for
termination for cause.
In line with the Company’s policy, rules of the annual bonus
scheme incorporate a requirement to defer half of the amount of
bonus vesting for two years in the form of share awards under the
Deferred Share Bonus Plan. In certain ‘good leaver’ circumstances
(e.g. ill health, death), the Committee, acting fairly and reasonably,
may waive deferral.
Deferred share bonus plan
If an Executive Director’s employment is terminated before
a deferred share award vests (after two years), then the awards
would vest in full on the date of leaving unless termination is for
cause, in which case the awards would lapse.
LTIP
As with the annual bonus plan, the Company’s LTIP also includes
a number of discretions in connection with an Executive Director
leaving employment. Other than in certain defined ‘good leaver’
circumstances, awards lapse on cessation of employment.
Where an individual ceases employment for one of the defined
‘good leaver’ events (i.e. ill health, disability, redundancy within the
meaning of UK legislation or its overseas equivalent, transfer out of
the Group/sale of business or retirement with employer’s consent
and, in the case of the new LTIP, any other reason at the discretion
of the Committee), the award will remain eligible to vest on its
normal vesting date (unless the Committee uses its discretion
to vest the award on the date of cessation of employment), in all
cases subject to a pro-rata reduction to reflect the portion of the
vesting period that has elapsed (unless the Committee determines
otherwise) and the application of the performance condition.
In the event of a death of an Executive Director, the default is
for the award to vest at the date of death unless the Committee
determines otherwise, in which case it will vest at the normal
vesting date with pro-rating and performance conditions applied
as described in other ‘good leaver’ circumstances.
Similar provisions apply in the event of a change of control,
with performance measured up to the date of the relevant event,
and a pro-rata reduction applying unless the Committee
determines otherwise.
It is the Committee’s policy to exercise these discretions in a way
that would be in the best interests of the Company and depending
on the individual circumstances of each case.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Payments agreed prior to the effective date of this policy
Any agreements entered in good faith prior to the commencement of the 2022 Remuneration Policy will remain eligible to operate on their
original terms.
Non-Executive Directors’ terms of appointment
Non-Executive Directors are appointed for a three year term, subject to annual re-election by shareholders. For Non-Executive Directors
who have served for nine years or more, they may be appointed for a further year at a time. Each letter of appointment currently provides
that the Director’s appointment can be terminated by the Company on six months’ notice on any grounds without claim for compensation.
Following the 2018 AGM, the letters of appointment of the Non-Executive Directors were amended to 30 days’ notice by either party,
which is the application of the new Remuneration Policy where a limit of up to three months is permitted. All other terms will remain the
same. The Chair’s letter of appointment will remain with a six months’ notice period.
Non-Executive Directors are not eligible to participate in any pension, bonus or share incentive schemes. No individual is allowed to vote
on his/her own remuneration.
The table below provides further details of the letters of appointment that the Non-Executive Directors held with the Company
during 2023.
Name
Non-Executive Director
Dorothee Deuring
Steve Good
John O’Higgins
Trudy Schoolenberg
Christine Soden
Clement Woon
Date of appointment
Date of last re-appointment
Date of expiry
1 March 2017
1 March 2023
20 October 2014
21 October 2023
1 March 20261
29 April 20242
4 February 2020
4 February 2023
4 February 20261
15 March 2022
n/a
15 March 2025
1 November 2020
1 November 2023
1 November 20262
1 December 2022
n/a
1 December 2025
1 Dorothee Deuring and John O’Higgins’ reappointments were approved by the Nomination Committee on 6 December 2022.
2 Steve Good and Christine Soden’s reappointments were approved by the Nomination Committee on 29 September 2023.
Shareholder engagement
The views of shareholders are important to the Committee. Regular dialogue and engagement with the Company’s shareholders is
undertaken. For example, the Committee wrote to its major shareholders and the leading advisory bodies in 2021 with the proposed
changes to the Policy and its operation going forward. In particular, the Committee has introduced a post cessation of employment
share ownership guideline in response to shareholder views, which has applied since 2022.
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Annual Report and Accounts 2023
111
Directors’ Remuneration report
continued
Annual report on remuneration (‘report’)
This report details how the Company’s policies and practices on Directors’ remuneration were applied in respect of the financial year
ended 31 December 2023 and how they will be applied in the 2024 financial year.
Remuneration payable to directors for 2023 (audited)
Although the Company reports its results in US dollars, the remainder of this report on remuneration is presented in pounds sterling
because the majority of the Directors are UK based and paid in pounds sterling.
A breakdown of the Directors’ remuneration for the year ended 31 December 2023 is set out in the table below.
£’000
Year
Salary/fees
Benefits2
Pension
Total fixed
Bonus
LTIP
Other3
Fixed
Performance related
Executive Directors
Paul Waterman1, CEO
Ralph Hewins, CFO
Non-Executive
Directors
John O’Higgins, Chair
Dorothee Deuring
Steve Good4
Trudy Schoolenberg5
Christine Soden6
Clement Woon
Former Directors
Anne Hyland7
Total
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
804
778
398
381
208
199
60
54
66
66
65
50
71
65
56
4
–
20
106
85
28
28
162
171
84
85
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,072
1,034
510
494
208
199
60
54
66
66
65
50
71
65
56
4
–
20
928
903
383
373
710
235
339
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42
42
18
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
variable
1,680
1,180
740
491
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
2,752
2,214
1,250
985
208
199
60
54
66
66
65
50
71
65
56
4
–
20
1,728
1,617
134
113
246
256
2, 108
1,986
1,311
1,276
1,049
335
60
60
2,420
1,671
4,002
3,657
1 Paul Waterman is based in the US and paid in US dollars. He received an annual salary of $995k (2022: $964k). His pension comprises a salary supplement
and employer contributions to defined contribution retirement schemes. The foreign exchange rate applied is the 2023 average rate of $1.2373:£1.00
(2022: $1.2392:£1.00).
2 Taxable benefits for Paul Waterman consist of a car allowance (£19,000), private health care (£23,849), dental, life assurance, accidental death and disablement
cover and long term disability insurance (£31,354), and tax advice (£24,246). The tax advice benefit allows appropriate tax filings to be made in both the UK and
US as a result of Company business travel requirements during 2022/23, which exceeded the normal business expectations agreed on appointment and gave
rise to the need for dual filings. Taxable benefits for Ralph Hewins consist of a car allowance (£18,000), private health care and life assurance.
3 As required by remuneration reporting regulations, the valuation of Paul Waterman’s US Savings Related Share Option Scheme (SRSOS) award and
Ralph Hewin’s SAYE grant are based on the face value of shares at grant (September 2022), less the exercise price. There are no performance measures
for either the SRSOS or SAYE.
4 Steve Good was appointed SID upon John O’Higgins’ appointment as Chair until 15 March 2022. He is also Chair of the Remuneration Committee.
5 Trudy Schoolenberg was appointed a NED on 15 March 2022 and assumed the role of SID at the conclusion of the 2022 AGM held on 26 April 2022.
6 Christine Soden is the DNED for workforce engagement. She is also Chair of the Audit Committee.
7 Anne Hyland stepped down from the Board on 26 April 2022.
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Corporate Governance
Financial Statements
Shareholder Information
Determination of annual bonus outcome for performance in 2023 (audited)
This section shows the performance targets set in respect of the 2023 annual bonus scheme and the level of performance achieved.
Full details of the bonus assessment for the Executive Directors is set out below. The bonus targets were set prior to the start of the
financial year based on the continuing operations of the Company (i.e. excluding Chromium). The range of targets were set to be similarly
challenging to those set in prior years having had regard to both internal planning and prevailing market conditions. The PBT targets for
2023 were lower than 2022 as a result of excluding Chromium post its sale but were no more or less challenging when they were set
than in prior years. The total bonuses payable based on the performance achieved are 74% of maximum for the CEO and CFO. The
Committee was comfortable with the bonus earned in the context of the performance delivered and did not consider it necessary to use
discretion in relation to the bonus out-turn. Accordingly, and in line with the Policy, 50% of the bonus payable will be deferred over shares
which will be released to the Director after two years and which are forfeitable for gross misconduct.
Relative
weighting of
performance
conditions
50%
20%
30%
100%
Full year bonus
Maximum
PBT ($m)
AWC to sales
(%)
Non-financial
Total full year
2023 bonus plan targets
Threshold
Plan
Stretch
Actual
result
Percentage
of maximum
64.1
71.2
78.3
84.5
50%
24.3
n/a
22.3
n/a
20.3
n/a
25.1
24/30
0%
24%
Percentage of maximum
bonus earned
Percentage of
salary earned
Paul
Waterman
CEO
100%
50%
0%
24%
74%
Ralph
Hewins
CFO
100%
50%
0%
24%
74%
Paul
Waterman
CEO
150%
75%
0%
36%
111%
Ralph
Hewins
CFO
125%
62.5%
0%
30%
92.5%
In relation to the targets, 0% is payable at the threshold performance levels, 50% at plan and 100% at the stretch performance level.
Set out below is a summary of the Committee’s assessment of the challenging 2023 non-financial targets. The objectives were
categorised into two categories: (1) sustainability priorities (15% weighting) and (2) Innovation, Growth and Efficiency (15% weighting).
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Annual Report and Accounts 2023
113
Directors’ Remuneration report
continued
2023 bonus assessment for CEO and CFO: Non-financial targets
Measure
Performance indicator
Achievements
Sustainability objectives
Safety, compliance,
and risk management
Focus on maintaining and
strengthening responsible
workplace practices through
plant based safety engagement
Diversity, Equity and Inclusion
Continue to build organisational
capability through actions that
increase employee engagement
and create a more diverse,
equitable and inclusive organisation
Environmental
Continue to demonstrate clear
progress towards achieving our
2030 goals through implementation
of key energy efficiency and
environmental projects, and
continue to put actions in place to
minimise environmental tier 2 and 3
incidents. Prepare for regulatory
and best practice driven changes
(e.g. corporate disclosure, net zero
transition plan, setting a SBT)
Strategic objectives
Innovation and Growth
Pipeline of new products in place to
be launched in 2024/2025 to ensure
innovation revenue contribution
on track for 17% of total by 2025,
from 2022 actual of 13.3%
Underpin future revenue growth
through continuing to maintain
a healthy NBO pipeline leading
to >50m NBO delivery in 2024
and 2025
Strategy
Set out ‘Post Chromium’ direction
and goals in 2025-2030 strategy
work, gaining Board alignment with
clear implementation roadmap.
Talc recovery plan
Deliver 2023 Operating Profit,
improved margin and cost savings
versus 2022
Summary
scoring
4.75% / 5%
4% / 5%
3% / 5%
Recordable injuries:
Threshold 9; Target 7; Stretch 5
Plant safety engagement;
Threshold 75% engagement
minimum 2 activities/employee
per quarter; Maximum 75%
engagement 4 activities/
employee per quarter
Gender diversity: Increase
Senior Leadership female
representation towards
2025 goal of 40%
Ethnic diversity: diverse
workforces throughout the
organisation
DE&I Engagement Index
Progress DE&I Council
lead initiatives
Overall GHG emissions
2030 target progress
Scope 3 data verification
Progress on carbon footprint
and life cycle analysis
Recordable injuries: 4
Safety engagement: Weighted average of
3.8 = 90% of maximum
Improved gender diversity in senior population
from 34% to 37%, making progress towards
40% goal; overall gender diversity improved
from 24% to 27%
US ethnic diversity maintained at 26%
Culture of inclusion index launched
scoring 3.9/5
Further embedded Women in Leadership
programme, launched Women Engineers
in Elementis, Gallup training on Inclusion
and Engagement
Absolute GHG emissions reduced by
6.7% versus 2022
2 out of 4 met but all 4 declined vs 2022 due
to product mix and India plant start up
Obtaining verification of our Scope 3 data for
the first time for 2023 and completed FLAG
(Forest, Land Agriculture) emissions screening
across all Scopes
Product carbon footprints were calculated (for
talc products) and full environmental life-cycle
analysis (“LCA”) was commenced for a range
of Personal Care products (due in April 2024)
Innovation revenue
contribution
New product launches
NBO revenue in 2023
Growth of NBO pipeline
Innovation grew from 13.3% to 14.3% of sales
12 new products launched vs target of 15 with
pipeline for 15 in 2024
$51m of NBO revenue delivered in 2023 with
pipeline growing to $363m from $291m in 2022
3.25% / 5%
2025-2030 Strategy
progressed with
Board alignment
Execution of CMD
Board fully engaged in strategy development
process in readiness for H1 2024 approval
CMD well received with high level of attendance
and engagement
2023 Operating Profit
Margin improvement
Performance Specialties
synergies
The target was $11m and was exceeded
with $14m of Operating Profit
Operating Margins 10.2% versus 0% in 2022
supported by lower costs versus 2022
Further revenue synergies of $5.7m
4% / 5%
5% / 5%
Key to summary scoring
Achieved in full or predominantly achieved
Partially achieved
Not achieved
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10.82 cents
per share
Above threshold
77%
Below threshold
Payout
32.3%
0%
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Directors’ share based awards
Determination of 2021 LTIP awards (audited)
Under the 2021 award, the performance is assessed against EPS growth, relative TSR and cash conversion performance metrics,
as summarised below.
The EPS growth and relative TSR threshold targets were partially met. However, the average operating cash conversion target was not
met. Overall this has resulted in 54.7% of the award vesting. The Committee considers this to be in line with underlying performance.
In determining vesting, the Committee considered:
ROCE (including goodwill) over the performance period which increased from 5.5% to 9.0% in challenging market conditions and as
such the Committee confirmed the formulaic outcome
The potential for windfall gains and given the share price used to determine the number of shares included in awards in
February 2021 was £1.2550, which was consistent with the share price in February 2020 shortly before the impact of the
COVID-19, the Committee concluded that the value on vesting of the 2020 awards did not benefit from windfall gains.
Accordingly, the Committee did not use any discretion in connection with the 2021 award.
Performance metric
Weighting
Threshold
target
Threshold
payout
Maximum
target
Elementis
achievement
EPS1
33.3% 8.4 cents per share
0% 10.9 cents
per share
Three year operating
cash conversion
Relative TSR vs
FTSE All-Share Index
33.3%
33.3%
85%
0%
95%
Median
3.85%
Upper
quartile
Above threshold
22.44%
1 As disclosed in last year’s Directors’ Remuneration Report , the targets were restated to exclude earnings from Chromium in connection with the sale of the
business. The range of targets were reduced to reflect the forecast earnings expected from Chromium at the time the targets were set so as to ensure that the
restated target was no more or less challenging than when they were originally set. Accordingly, the threshold target was adjusted from 10.0 cps to 8.4 cps and
the maximum from 13.0 cps to 10.9 cps.
Based on this performance assessment, the table below illustrates the value receivable under the 2021 Awards. Any shares vesting will
be subject to a two year holding period.
Award holder
Paul Waterman
Ralph Hewins
Number of
awards
granted
1,789,362
515,214
Payout
(% of
maximum)
54.7%
54.7%
Number of
shares
due to vest
590,483
281,856
Value from
share price
increase1
Value of
dividend
equivalents2,3
£0
£0
£0
£0
Total value
vesting3
£710,056
£338,932
1 There was no share price appreciation from the date of grant (£1.2550) to the three-month average share price to 31 December 2023 (£1.2025).
2 Value of dividend equivalents estimated based on dividends until 31 December 2023.
3 Value of shares based on a three-month average share price of £1.2025 to 31 December 2023. This value will be restated next year based on the actual
share price on the date of vesting.
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Annual Report and Accounts 2023
115
Directors’ Remuneration report
continued
Annual LTIP awards granted in the year (audited)
On 03 April 2023, LTIP awards were granted in line with the Remuneration Policy. The CEO was granted an award over shares to the
value of 200% of salary and 175% of salary for the CFO. Share awards will ordinarily vest after three years, with any shares vesting
(other than those sold to meet associated tax liabilities) subject to a two year holding requirement.
Details of the main terms of the 2023 LTIP awards are summarised in the table below. In addition, the Committee retain the discretion
to reduce the number of shares on vesting should it be considered appropriate to do so (e.g. in the event that there was perceived
windfall gain).
Award holder
Paul Waterman
Ralph Hewins
Type of share award
Grant date
Number of
awards
Face value of
award at grant
(£000s)1
Nil cost (restricted
stock unit)
03.04.2023
1,350,978
£1,607,664
Nil cost option 03.04.2023
584,349
£695,959
The awards are subject to EPS, TSR and operating cash conversion performance conditions (equally weighted), each measured over the
three years to 31 December 2025 as shown in the table below.
Performance metric
EPS
Cash conversion
Relative TSR vs FTSE All-Share Index
Weighting
Threshold target
33.3%
33.3%
33.3%
2025 EPS of
13 cents per share
80%
Median
Threshold
payout
0%
0%
25%
Stretch target
2025 EPS of
17 cents per share
Stretch
payout
End of the
performance
period
100% 31.12.2025
100%
100% 31.12.2025
Upper quartile
100% 31.12.2025
1 The share price used to determine the number of awards granted was £1.19, based on the share price on the day prior to grant (3 April 2023).
2 The vesting of the award is also subject to a return on capital employed underpin which requires the Company to consider whether the return generated is in line
with the Board’s expectations and if not, to reduce the vesting to a more appropriate level. The Committee also retains discretion to reduce the number of shares
on vesting should it be considered appropriate, including in the event of a perceived windfall gain.
3 The rationale for the range of financial targets set was detailed in last year’s Directors’ Remuneration Report.
Sourcing shares for our share plans
Employee share plans comply with the Investment Association’s guidelines on dilution, which provide that overall issuance of shares
under all plans should not exceed an amount equivalent to 10% of the Company’s issued share capital over any ten year period,
with a further limitation of 5% in any ten year period on discretionary plans. Based on the number of awards that remain outstanding
as at the year end, the Company’s headroom for all plans is 4.53% and for discretionary plans is 3.84% of issued share capital.
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Corporate Governance
Financial Statements
Shareholder Information
Directors’ scheme interests (audited)
The interests of the persons who were Directors during the year in the issued shares of the Company were:
Interest
type
Grant
date
Option price
(p)
01.01.231
Granted
during 2023
Exercised
during 2023
Lapsed
during 2023
Scheme interests
Vested but
unexercised
share options
31.12.23
Executive
Directors
Paul Waterman
Total scheme
interests
Ralph Hewins
LTIP1 07.04.2020
LTIP1 06.04.2021
DSBP2 05.03.2022
LTIP1 04.04.2022
– 2,037,577
– 1,079,362
–
490,383
– 1,236,244
SRSOS5 20.09.2022
92.31
45,584
–
–
–
–
–
–
–
374,376
1,350,978
225,967
1,811,610
–
–
–
–
–
–
–
–
–
–
–
–
–
1,079,362
490,383
1,236,244
45,584
374,376
1,350,978
–
–
–
–
–
–
–
4,889,150
1,725,354
225,967
1,811,610
4,576,927
Nil
DSBP2 08.03.2023
LTIP1 03.04.2023
DSBP2 07.03.2017
RA3 07.03.2017
RA4 07.03.2017
DSBP2 05.03.2018
DSBP2 06.03.2019
DSBP2 05.03.2020
LTIP1 07.04.2020
LTIP1 06.04.2021
DSBP2 05.03.2022
LTIP1 04.04.2022
–
–
–
–
–
–
–
–
–
–
–
–
7,140
92,262
17,458
73,123
48,865
76,266
862,469
515,214
213,105
559,656
SAYE6 20.09.2022
88.00
20,454
DSBP2 08.03.2023
LTIP1 03.04.2023
–
–
–
–
147,833
584,349
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
95,647
766,822
–
–
–
–
–
–
–
–
–
–
–
–
7,140
92,262
17,458
73,123
48,865
76,266
–
515,214
213,105
559,656
20,454
147,833
584,349
7,140
92,262
17,458
73,123
48,865
76,266
–
–
–
–
–
–
–
Total scheme
interests
2,486,012
732,182
95,647
766,822
2,355,725
Nil
Notes
1 LTIP awards are subject to performance conditions. The same relative TSR performance conditions apply in respect of all awards. The EPS target for the 2020
awards required annual growth of 3% to 12%. The EPS target for the 2021 awards is based on FY23 EPS of between 8.4 cents and 10.9 cents, for the 2022
awards is based on FY24 EPS of between 10.9 cents and 14.7 cents. The operating cash conversion performance conditions for the 2021 and 2022 awards is
based on three year targets between 85% and 95%. These awards ordinarily vest on the third anniversary of the grant date. Full detail of the vesting conditions
for the 2023 awards are set out on page 97.
2 Conditional share award under the Deferred Share Bonus Plan (“DSBP”). Structured as restricted stock units for Paul Waterman and nil cost options for
Ralph Hewins. The 2020 DBSP vested on 5 March 2022. Paul Waterman’s tax liability crystallised on vesting which he self funded and he therefore retained
the 188,130 shares. Ralph Hewin’s 2020 DSBP Award has vested but has not yet been exercised. For DSBP awards granted in March 2020, the share price
at date of grant was 98.95 pence. The face value of awards at grant were £186,155 and £75,466 for Paul Waterman and Ralph Hewins respectively. Both
Executive Directors recommended and the Committee agreed that no bonus be payable in respect of 2020, therefore no DSBP awards were granted in 2021.
For DSBP awards granted in March 2022, the share price at date of grant was 103.8 pence with the face value of awards at grant of £509,018 and £221,204
for Paul Waterman and Ralph Hewins respectively. For DSBP awards granted in March 2023, the share price at date of grant (7 April 2020) was 126.1 pence
with the face value of awards at grant of £472,088 and £186,418 for Paul Waterman and Ralph Hewins respectively.
3 Replacement Awards structured as nil cost options made under standalone arrangements that borrow terms from the LTIP as amended. In line with the
remuneration forfeited on leaving his former employer, the 2017 Award did not have performance conditions, but shares were required to be held for two years.
4 Replacement Awards structured as nil cost options made under standalone arrangements that borrow terms from the DSBP as amended.
5 Grant under the Elementis plc US Savings Related Share Option Scheme 2018. The options granted in 2020 became exercisable from 15 September 2022
with an option price of 63.11 pence per share. The options are made pursuant to a two year savings contract and the exercise price is based on the share price
at close of business on 15 September 2020, being the date of the grant. A 2022 grant was made on 20 September 2022 with an option price of 92.31 pence
per share.
6 Options held under the UK SAYE scheme. This is a savings based share option scheme that is not subject to performance conditions. The 2018 grant vested on
1 January 2022 and 10,981 shares lapsed on 1 July 2022 due to the shares being underwater. A 2022 grant was made on 20 September 2022 with an option
price of 88.00 pence per share. Further details on this scheme is shown in Note 26 to the consolidated financial statements on page 178.
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Annual Report and Accounts 2023
117
Directors’ Remuneration report
continued
Directors’ share interest (audited)
The interests of the Directors (including any connected persons) during the year (and from the year end to 6 March 2024) in the issued
shares of the Company were:
Executive Directors
Paul Waterman
Ralph Hewins
Non-Executive Directors
Dorothee Deuring
Steve Good
John O’Higgins
Trudy Schoolenberg
Christine Soden
Clement Woon
01.01.23
Acquired
during 2023
Disposed
during 2023
31.12.23
Shareholding
level met as at
31.12.23
1,116,780
92,995
151,701
50,775
26,250
62,500
125,600
–
20,000
–
–
30,000
30,000
20,000
–
10,000
–
–
–
–
–
–
–
–
1,268,481
143,770
26,250
82,500
125,600
30,000
30,000
30,000
Yes1
No1
n/a
n/a
n/a
n/a
n/a
n/a
1 As per the Policy, Executive Directors are expected to build up a shareholding that is equal in value to 200% of their basic annual salaries. Share awards vesting
over time will contribute to meeting the shareholder requirement.
The market price of ordinary shares at 31 December 2023 was £1.278 pence (2022: £1.20 pence) and the range during 2023 was
£0.9775 pence to £1.296 pence (2022: £0.88 pence to £1.47 pence).
As at 31 December 2023, the trustee of the Company’s Employee Share Ownership Trust (“ESOT”) held 1,458,404 shares
(2022: 258,404). As Executive Directors and as potential beneficiaries under the ESOT, Paul Waterman and Ralph Hewins are
deemed to have an interest in any shares that become held in the ESOT.
As at 6 March 2024, no person who was then a Director had any interest in any derivative or other financial instrument relating to the
Company’s shares and, so far as the Company is aware, none of their connected persons had such an interest. There was no other
change, so far as the Company is aware, in the relevant interests of other Directors or their connected persons.
Other than their service contracts, letters of appointment and letters of indemnity with the Company, none of the Directors had an interest
in any contract of significance in relation to the business of the Company or its subsidiaries at any time during the financial year.
Directors’ retirement benefits (audited)
The table below shows the breakdown of the retirement benefits of the Executive Directors, comprising employer contributions to defined
contribution plans and salary supplements paid in cash.
Paul Waterman received a salary supplement and participated in US contractual retirement schemes. Further detail can be found in the
Policy. The amount shown in the table below represents employer matching contributions, and both this and the salary supplement are
included in the Directors’ emoluments table shown on page 112.
Ralph Hewins received a salary supplement in lieu of any other retirement benefit. The amount received is shown in the table below and in
the Directors’ emoluments table.
Paul Waterman
Ralph Hewins
Defined contribution plans
Salary supplement
2023
£’000
37
n/a
2022
£’000
40
n/a
2023
£’000
125
84
2022
£’000
131
85
Note: The pensions received were consistent with the Company’s remuneration policy at up to a total of 21% of salary and for Paul Waterman included contributions
to his US pension arrangements (which included a tax qualified 401k plan and a non-qualified plan).
Payments to past directors or payments for loss of office (audited)
There were no payments in the financial year.
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Financial Statements
Shareholder Information
Total shareholder return performance and change in CEO’s pay
The graph below illustrates the Company’s total shareholder return for the ten years ended 31 December 2023, relative to the FTSE 250
Index, along with a table illustrating the change in CEO pay over the corresponding period. The table also details the payouts for the
annual bonus scheme and LTIP.
As the Company’s shares are denominated and listed in pence, the graph below looks at the total return to 31 December 2023 of
£100 invested in Elementis on 31 December 2013 compared with that of the total return of £100 invested in the FTSE 250 Index.
This index was selected for the purpose of providing a relative comparison of performance because the Company is a member of it.
TSR performance since 2013 (rebased to 100)
£
200
150
100
50
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Elementis plc
FTSE 250 index (excl. Investment Trusts)
CEO pay (total remuneration – £’000s)
Annual bonus payout (% of maximum)
LTIP vesting (% of maximum)
2014
1,573
50%
65%
2015
763
2016
2017
2018
2019
2020
2021
2022
2023
1,5531
2,539
1,229
1,114
1,007
1,946
2,214
2,752
0% 27.5% 93.0% 35.0% 17.3%
0% 91.2%2 91.4%3
0%
0%
0%
0%
93%
75%
74%
0% 11.1% 54.7%
1 Includes remuneration for Paul Waterman and David Dutro for the period in which each was CEO during 2016.
2 Relates to Paul Waterman’s buy-out awards which vested in March 2017.
3 Relates to Paul Waterman’s buy-out awards vesting in March 2018.
CEO to all-employee pay ratio
Whilst Elementis is not required to publish a CEO to all-employee pay ratio given it has less than 250 UK employees, voluntary disclosure
of the pay ratio is included below. In line with the relevant legislation, the analysis has been completed using Option A (i.e. actual total
remuneration earned has been used as the basis for comparison). The reference date for the analysis was 31 December 2023.
Whilst this is only based upon 80 UK employees, there is a mix of factory based employees (c.75%) and corporate Head Office
employees. Option A was used as it was deemed the most accurate and prevalent amongst recent FTSE 250 disclosures. The 2023
ratio is greater than the equivalent 2022 figure due to the higher ratio of variable pay within the CEO’s overall compensation as a result
of the vesting of the 2021 LTIP award. Circa 10% of UK employees are eligible for LTIP. The ratio is consistent with the pay, reward
and progression policies for the Company’s UK employees taken as a whole. The pay ratio illustrates the greater leverage in Director
packages versus the wider workforce in that in years where Elementis performs strongly against its performance targets, the ratio is
generally higher.
CEO pay ratio
Method
CEO single figure
Upper quartile
Median
Lower quartile
2019
A
2020
A
2021
A
2022
A
2023
A
£1,114
£1,007
£1,946
£2,214
£2,752
15
21
25
14
19
23
23
34
42
24
40
49
31
52
67
The salary and total pay for the individuals identified at the Lower quartile, Median and Upper quartile positions in 2023 are set out below:
2023
Upper quartile individual
Median individual
Lower quartile individual
Salary
Total pay
£72,509
£48,346
£37,476
£90,125
£52,843
£41,214
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Directors’ Remuneration report
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Relative importance of spend on pay
The table below shows the total remuneration paid across the Group together with the total dividends paid in respect of 2023 and the
preceding financial year.
£m
Remuneration paid to all employees1
Total dividends paid in the year
2023
89.2
0
2022
91.3
0
Change
-2.4%
0%
1 See Note 8 to the consolidated financial statements. The amounts for 2023 and 2022 have been converted from dollars into pounds sterling using the average
USD/GBP exchange rates for those years.
Percentage change in the remuneration of the directors (unaudited)
The table below shows the change in the Directors’ pay and the corresponding change of these elements across all UK employees within
the Group from 2022 to 2023.
Average percentage change
2019-20
Average percentage change
2020-21
Average percentage change
2021-22
Average percentage change
2022-23
Salary
Taxable
benefits
Annual
bonus
Salary
Taxable
benefits
Annual
bonus
2.0% 8.5%
2.2% 2.8%
0%
0%
n/a
2.2%
2.2%
–
n/a
–
-9.4%
2.8%
2.2%
2.2%
2.2%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2% 26% 100%
2%
131%
2%
7%
–
512%
–
11.1%
–
-31%
–
2%
4% 100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Salary
3%
3%
86%
3%
3%
–
14%
–
1.8%
–
–
–
-67%
Taxable
benefits
Annual
bonus
Salary
Taxable
benefits
Annual
bonus
-4% -17%
3.2% 24.7% 2.7%
4% -16%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-12%
–
–
–
–
4.5%
4.5%
10.5%
-0.2%
31.9%
9.3%
4.5%
0.4%
0% 2.7%
–
–
–
–
–
–
–
–
–
–
–
–
– -20.7%
–
–
–
–
–
–
–
–
–
–
–
–
CEO1,2,3,4
CFO1,2
John O’Higgins5
Dorothee Deuring
Steve Good6
Trudy Schoolenberg7
Christine Soden8
Clement Woon9
Employees3
Former Directors
Sandra Boss10
Andrew Duff5
Nick Salmon11
Anne Hyland12
1 All percentages are based on converting relevant local currencies into pounds sterling using the average rates for the respective year.
2 The Executive Directors recommended and the Committee agreed that no bonuses should be payable in relation to 2020 performance.
3 The 2019-20 year on year change in the CEO’s benefits are driven by increased private medical insurance subscription as a result of a change in coverage,
while changes in employee salary, benefits and bonus are driven by changes to the employee population and movements in exchange rates.
4 The actual benefits cost for FY2022 were effectively understated in FY2022 by approximately £15k due to the timing of the medical payments. This has been
corrected for 2023 and accounts for the majority of the 26% increase. FX rates and changes in costs due to age and salary also impact 2023.
5 Andrew Duff stepped down as Chair on 1 September 2021, with John O’Higgins assuming the role.
6 Steve Good assumed the interim role of SID on 1 September 2021 until April 2022.
7 Trudy Schoolenberg was appointed NED on 15 March 2022 and assumed the role of SID in April 2022.
8 Christine Soden joined the Board as NED and DNED for workforce engagement on 1 November 2020.
9 Clement Woon was appointed NED on 1 December 2022.
10 Sandra Boss was appointed as DNED for workforce engagement in October 2019 and retired from the Board in April 2020.
11 Nick Salmon retired from the Board in April 2020.
12 Anne Hyland retired from the Board in April 2022.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Statement of shareholding voting
The resolutions to approve the 2021 Directors’ Remuneration Policy and the 2022 Directors’ Remuneration report were passed by a poll
at the Company’s 2022 and 2023 AGM respectively. Set out in the table below are the votes cast by proxy in respect of these resolutions.
2022 Directors’ Remuneration report (2023 AGM)
2021 Directors’ Remuneration Policy (2022 AGM)
Votes for
% for
Votes against
% against
394,335,860
460,112,804
82.73 82,320,489
96.99 14,282,696
17.27
3.01
Votes
withheld1
16,032
42,939
1 Votes withheld are not included in the final figures as they are not recognised as a vote in law.
Other information about the Committee’s membership and operation
Committee composition
The Chair and members of the Committee are shown on pages 74 to 76, together with their biographical information. Four meetings were
held during 2023 and the attendance of Committee members is shown on page 96.
The Chair, CEO and other Non-Executive Directors who are not members of the Committee have a standing invite to attend, and the
CFO and CHRO also attend meetings by invitation, as appropriate. The Executive Directors are not present when their own remuneration
arrangements are discussed or, if they are, they do not participate in the decision making process.
External advisor
Korn Ferry was appointed as external independent advisor to the Committee in 2017 following a competitive tender process.
During 2023, Korn Ferry provided advice to the Committee in relation to emerging market practice and benchmarking. Through a
separate advisory team to the remuneration advisory team, Korn Ferry provided other human capital related services to the Nomination
Committee. The Committee is therefore satisfied that the advice received was objective and independent. Korn Ferry is a member of the
Remuneration Consultants Group and abides by the voluntary code of conduct of that body, which is designed to ensure objective and
independent advice is given to remuneration committees. More information regarding the role of Korn Ferry in advising the Nomination
Committee can be found on page 85. Fees paid to Korn Ferry for remuneration advisory services in 2023 were £31,047 (excluding VAT)
and were charged on a time and materials basis.
Terms of reference
A full description of the Committee’s terms of reference is available on the Company’s website at www.elementis.com.
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Elementis plc
Annual Report and Accounts 2023
121
Directors’ Remuneration report
continued
Activities during the year
The Committee operated in line with its Terms of Reference during the year, setting the pay for the Executive Directors and wider senior
leadership team, having oversight of pay across the organisation and setting the Board Chair’s fee. The Committee considered the
following at its meetings during 2023:
Committee meeting dates
Agenda items
February 2023
2020 LTIP performance outcomes
2022 Executive Director bonus awards
2023 LTIP targets/performance conditions and delegated authority to grant the 2023 awards
Adjustments to 2021 and 2022 LTIP performance targets as a result of the sale of Chromium
ELT salary review and bonus payments
CEO pay ratio calculations
Approval of final draft of Directors’ Remuneration report
July 2023
Market update and Remuneration Policy review discussion proposals
October 2023
Application of Remuneration Policy in 2024
Employee share schemes
December 2023
Institutional investor and proxy agency update
Update on 2023 performance against annual bonus targets and 2021 LTIP
Workforce engagement
Update on workforce pay reviews
2024 salary reviews for Paul Waterman and Ralph Hewins
Chair’s fee review
Update on 2023 performance against annual bonus targets and 2021 LTIP
Gender pay gap review
Global benefits review
Committee terms of reference
Outside of the above meeting dates, the Committee considered and confirmed operational matters in appropriate forums
(e.g. the Executive Directors’ annual bonus targets, and granting of the 2023 LTIP awards).
Evaluation, training and development
On an annual basis, the Committee’s effectiveness is reviewed as part of the evaluation of the Board. Following the evaluation
last year, there were no major issues to report. During 2023, Committee members were updated on the latest developments
on executive remuneration and all members received briefings from the Group General Counsel & Company Secretary and the
Committee’s remuneration advisers throughout the year, to keep them updated on topical matters and developments relating to
executive remuneration.
Auditable sections of the Directors’ remuneration report
The sections of the Annual Report on Remuneration that are required to be audited by law are as follows: Remuneration payable to
Directors for 2023 and Directors’ retirement benefits; and tables headed Annual LTIP awards granted in the year, Directors’ scheme
interests, Directors’ share interests and Directors’ retirement benefits.
Approved by the Board on 6 March 2024
Steve Good
Chair, Remuneration Committee
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Directors’ report
The Directors present their report together with the Annual Report
and Accounts, together with the audited consolidated financial
statements of the Company, and the Group, for the year ended
31 December 2023.
The Directors’ report is set out on pages 123 to 125, together with
the information required to be disclosed (referred to below) which
is incorporated by reference. The Company, in accordance with
Section 414(C)(11) of the Companies Act 2006, has chosen to set
out certain information required to be included in the Directors’
report in the Strategic report. Such information is identified in the
table below. The Governance report is set out on pages 73 to 126.
Information from the consolidated financial statements referred to
in this Directors’ report is incorporated by reference.
Disclosure of information under Listing Rule 9.8.4
39
Carbon emissions, energy consumption and energy efficiency
77
Corporate Governance Framework
112
Directors’ remuneration
117
Directors’ share interests
94
48
49
29
63
16
97
73
Directors’ training and development
Employee equality, diversity and inclusion
Employee engagement
Environmental matters
Financial instruments and financial risk management
Innovation, Growth and Efficiency strategy
Long term incentive schemes
Membership of Board
29 Modern Slavery Statement
54
67
55
28
26
Non-financial and sustainability information
Principal risks
Results and dividend
Section 172(1) statement
Stakeholder engagement
126
Statement of Directors’ responsibilities
29
72
Sustainability
Viability and going concern
The Company has chosen, in accordance with section 414C(11) of
the Companies Act 2006, and as noted in this Directors’ report, to
include certain matters in its Strategic report that would otherwise
be required to be disclosed in this Directors’ report. The Strategic
report can be found on pages 1 to 72 and includes an indication
of future likely developments in the Company, details of important
events and the Company’s business model and strategic progress.
Directors
Directors and their interests
The biographical details of the Directors of the Company who
held office during the year, and up to the date of the signing of
the financial statements, are set out on pages 123 and 125.
Appointment and replacement of directors
The Articles of Association (the ‘Articles’) give the Directors power
to appoint and replace Directors. Under the terms of reference of
the Nomination Committee, appointments are recommended by
the Nomination Committee for approval by the Board. In line with
the UK Corporate Governance Code, the Articles also require
all Directors to retire and submit themselves for election at each
AGM except for any Director appointed by the Board after
the notice of the AGM has been given. The service contracts
of the Executive Directors and letters of appointment of the
Non-Executive Directors are available for inspection at the
Company’s registered office.
Amendment of articles
Amendments to the Articles may be made by way of special
resolution, in accordance with the Companies Act 2006.
The most recent amendments to the Articles were approved
at the AGM held on 30 April 2019.
Directors’ powers
The business of the Company is managed by the Board, which
may exercise all the powers of the Company, subject to the
Articles, the Companies Act 2006 and any special resolution of
the Company. The exercise of certain powers, including in relation
to the issuing or buying back of shares, requires authority from
the Company’s shareholders. The Articles may only be amended
by special resolution of the Company at a general meeting of
its shareholders.
Directors’ conflicts of interest
Ralph Hewins is in receipt of a conflict authorisation from the
Company in respect of him acting as a trustee of the Elementis
Group Pension Scheme. The conflict authorisation enables
Ralph Hewins to continue to act as a trustee, notwithstanding that
this role could give rise to a situation in which there is a conflict of
interest. The Board considers that it is appropriate for the trustees
of the UK pension scheme to benefit from the financial expertise
of the CFO and that his contribution at trustees’ meetings
demonstrates the Board’s commitment to supporting the UK
pension scheme. The Board’s conflict authorisation is subject to
annual review and, under the terms of the conflict authorisation,
reciprocal provisions have been put in place with a view to
safeguarding information that is confidential to the Group,
as well as to the trustees. Were a conflict of interest to arise,
Ralph Hewins is required to excuse himself from reading the
relevant papers and absent himself from participating in relevant
discussions. Procedures are in place to ensure compliance with
the Companies Act 2006. These procedures have been complied
with during the year. Details of any new conflicts or potential
conflict matters are submitted to the Board for consideration
and, where appropriate, are approved. Authorised conflicts and
potential conflict matters are reviewed on an annual basis and
more frequently where required.
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Annual Report and Accounts 2023
123
Directors’ report
continued
Directors’ insurance and indemnities
In addition to the indemnities granted by the Company to Directors
in respect of the liabilities incurred as a result of their office
(which are qualifying third party indemnity provisions under the
Companies Act 2006), a directors’ and officers’ liability insurance
policy is maintained throughout the year. Neither the indemnity
nor the insurance provides cover in the event that a Director
has proven to have acted dishonestly or fraudulently. Similar
arrangements also exist for directors of Group subsidiary entities.
Directors’ share interests
The Directors’ interests in the ordinary shares and options of the
Company can be found within the Directors’ Remuneration report
on pages 117 and 118.
Shares
Share capital
As at 31 December 2023, the Company’s issued share capital
was 587,824,987 ordinary shares, with a nominal value of 5 pence
each. Each issued share carries a voting right of one vote per
share. All of the Company’s issued shares are fully paid up and
rank equally in all respects. The rights attached to the shares, in
addition to those conferred on their holders by law, are set out in
the Company’s Articles. From time to time, the ESOT holds shares
in the Company for the purposes of various share incentive plans
and the rights attached to them are exercised by independent
trustees, who may take into account any recommendation by the
Company. As at 31 December 2023, the ESOT held 1,458,404
shares in the Company (2022: 258,404). A dividend waiver is in
place in respect of all shares that may become held by the ESOT.
Further details of the authorised and issued share capital during the
financial year are provided in Note 17 to the accounts on page 162.
Voting rights
In a general meeting of Elementis plc, the provisions of the
Companies Act 2006 apply in relation to voting rights, subject
to the provisions of the Articles and to any special rights or
restrictions as to voting attached to any class of shares in
Elementis plc (of which there are none). Shareholders are entitled
to attend and vote at any general meeting of the Company and
a poll will be held on every resolution. Every member present in
person or by proxy has, upon a poll, one vote for every share held.
In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted
to the exclusion of the votes of the other joint holders and, for this
purpose, seniority shall be determined by the order in which the
names stand in the Register of Members in respect of the joint
holding. Full details of the deadlines for exercising voting rights in
respect of the resolutions to be considered at the AGM to be held on
30 April 2024 will be set out in the Notice of Annual General Meeting.
Authority to purchase own shares
The Company did not purchase any of its ordinary shares
(2022: nil) during the year. All of the Company’s 5p ordinary shares
held in treasury were issued in satisfaction of awards under the
Company’s share-based incentive plans during the year and no
shares were held in treasury at 31 December 2023 (2022: nil).
A special resolution will be proposed at the forthcoming AGM to
renew the Company’s authority to purchase its own shares in the
market up to a limit of 20% of its issued ordinary share capital. The
maximum and minimum prices will be stated in the resolution at
the date of the AGM. The Directors believe that it is advantageous
for the Company to have this flexibility to make market purchases
of its own shares. The Directors may consider holding repurchased
shares pursuant to the authority conferred by this resolution as
124 Elementis plc
Annual Report and Accounts 2023
treasury shares. This will give the Company the ability to reissue
treasury shares quickly and cost effectively, and will provide
the Company with additional flexibility in the management of its
capital base. Any issues of treasury shares for the purposes of the
Company’s employee share schemes will be made within the 20%
anti-dilution limit set by The Investment Association. The Directors
will only exercise this authority if they are satisfied that a purchase
would result in an increase in expected earnings per share and
would be in the interests of shareholders generally.
Employee share schemes
The Company operates a number of employee share plans,
details of which are set out in Note 26 to the consolidated financial
statements and on page 117 of the Directors’ Remuneration report.
Substantial shareholders
In accordance with the Disclosure Guidance and Transparency
Rules (DTR), as at 31 December 2023, the interests in voting
rights over the issued share capital of the Company had
been notified.
Information provided to the Company pursuant to the DTRs
is published on a regulatory information service and on the
Company’s website.
Ordinary shares
% of issued share
capital
Franklin Templeton
Columbia Threadneedle
Fidelity International
Soros Fund Management
Vanguard Group
57,618,174
42,850,084
35,084,692
34,411,898
27,236,692
9.80
7.29
5.97
5.85
4.63
Between 31 December 2023 and 15 February 2024 (being the
latest available register date), the Company has been notified of
the following changes:
Franklin Templeton increased their shareholding to
58,477,949 or 9.95%;
Columbia Threadneedle reduced their shareholding to
42,508,599 or 7.23%; and
Fidelity International increased their shareholding to
38,121,330 or 6.49%.
Employees
Employment policies and equal opportunities
Group policies seek to create a workplace that has an open
atmosphere of trust, honesty and respect. Harassment or
discrimination of any kind based on race, colour, religion, gender,
age, national origin, citizenship, mental or physical disabilities,
sexual orientation, veteran status, or any other similarly protected
status is not tolerated. This principle applies to all aspects of
employment, including recruitment and selection, training,
development, promotion, and retirement. Employees are free
to join a trade union and participate in collective bargaining
arrangements. It is also a Group policy to reasonably
accommodate applicants and employees who have a disability,
where practicable, and to provide training, career development
and promotion, as appropriate. It is Group policy not to
discriminate on the basis of any unlawful criteria and its practices
include prohibition on the use of child or forced labour. Elementis
plc supports the wider fundamental human rights of its employees
worldwide, as well as those of our customers and suppliers,
and further details are set out in the People and Responsible
business sections on pages 45 to 53.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Employee communications and involvement
The Company is committed to employee involvement throughout
the business. Employees are kept informed of the performance
and strategy of the Group via email. Videoconference calls are
held by the CEO to employees worldwide and these serve as an
informal forum for employees to ask topical questions about the
Group. Further information can be found on page 26.
Engagement with other stakeholders
Details of engagement with other stakeholders and information on
how the Directors have had regard to their interests in the context
of principal decisions taken by the Board during the year are set
out on pages 26 to 27.
R&D activities
Innovation is a core strategic priority. Our innovation expertise
and capability is focused on delivering products that address our
customers’ needs. As at 31 December 2023, over 100 employees
were engaged in global R&D activities. For further information on
our approach to innovation, please refer to pages 18 and 19.
During the year ended 31 December 2023, costs relating to
R&D activities were $16m (2022: $16m).
Additional information
Going Concern and Viability Statement
The Directors consider that the Group and the Company have
adequate resources to remain in operation for the foreseeable
future and have therefore continued to adopt the going concern
basis in preparing the financial statements. The UK Corporate
Governance Code requires the Directors to assess and report on
the prospects of the Group over a longer period. The full viability
statement and associated explanations are set out on page 72.
Audit information
Each Director of the Company on 6 March 2024, the date this
Directors’ report was approved, confirms that so far as they
are aware, there is no relevant audit information of which the
Company’s auditors, Deloitte LLP, are unaware and that they
have taken all the steps that they ought to have taken as
a Director to make themselves aware of any relevant audit
information and to establish that the Company’s auditors
are aware of that information.
Auditors
Following recommendation by the Audit Committee, resolutions
to re-appoint Deloitte LLP as auditors and to authorise the
Audit Committee to fix their remuneration will be proposed at
the forthcoming AGM. The remuneration of the auditors for the
year ended 31 December 2023 is fully disclosed in Note 7 to
the financial statements on page 155.
Annual general meeting
The 2024 AGM will be held at 10.00am on Wednesday 30 April
2024 at the offices of Allen & Overy LLP, One Bishops Square,
London, E1 6AD. Details of the resolutions to be proposed at the
AGM are set out in the Notice of AGM, which has been sent to
shareholders and is available on the Elementis corporate website:
www.elementis.com.
Significant agreements – change of control
There are a number of significant agreements which the Company
is party to that take effect, alter or terminate in the event of change
of control of the Company. The Company is a guarantor under the
Group’s $100m and €143m long term loans, and $375m revolving
credit facility and, in the event of a change of control, any lender
among the facility syndicate, of which there are 13 with
commitments ranging from $10m to $93m, may withdraw from
the facility and that lender’s participation in any loans drawn down
are required to be repaid.
The rules of the Company’s various share incentive schemes set
out the consequences of a change of control of the Company on
the rights of the participants under those schemes. Under the
rules of the respective schemes, participants would generally be
able to exercise their options on a change of control, provided
that the relevant performance conditions have been satisfied
and, where relevant, options are not exchanged for new options
granted by an acquiring company.
In the event of a takeover or other change of control (usually
excluding an internal reorganisation), outstanding awards
under the Group’s incentive plans vest and become exercisable
(including DSBP cash awards and LTIP awards), to the extent any
performance conditions (if applicable) have been met, and subject
to time pro-rating (if applicable) unless determined otherwise by
the Board in its discretion, in accordance with the rules of the
plans. In certain circumstances, the Board may decide (with the
agreement of the acquiring company) that awards will instead be
cancelled in exchange for equivalent awards over shares in the
acquiring company.
Political donations
The Group made no political donations during the year (2022: $nil).
Branches
As a global Group, Elementis’ interests and activities are held or
operated through subsidiaries, branches, joint arrangements or
associates which are established in, and subject to the laws and
regulations of, many different jurisdictions.
Other information
Information about the Group’s financial risk management and
exposure to financial market risks are set out in Note 23 to
the financial statements on pages 168-172.
Events after the balance sheet date
On 6 March 2024, Elementis entered into an agreement to sell
its former Chromium manufacturing site at Eaglescliffe to Flacks
Group for negative purchase consideration of £11.5m ($14.5m).
Completion of the transaction is conditional on regulatory approval.
There were no other significant events after the balance sheet date.
By order of the Board:
Anna Lawrence
Group General Counsel
& Company Secretary
6 March 2024
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Directors’ responsibilities
Statement of directors’ responsibilities
in respect of the annual report and
financial statements
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
are required to prepare the Group financial statements in
accordance with UK-adopted international accounting standards
in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards (IFRSs)
as adopted by the UK. The financial statements also comply with
the IFRSs as issued by the International Accounting Standards
Board (IASB).
The Directors have also chosen to prepare the parent company
financial statements in accordance with United Kingdom Generally
Accepted Practice (United Kingdom Accounting Standards and
applicable law) including Financial Reporting Standard 101
Reduced Disclosure Framework – Disclosure exemptions
from EU-adopted IFRS for qualifying entities (FRS 101).
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and
of the profit or loss 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 applicable UK Accounting Standards have
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 appropriate to presume that the Company will
not continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that the 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 are 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. The Directors 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.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors’ report,
Directors’ Remuneration report and Corporate Governance
statement which comply with that law and regulations.
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
Each of the Directors, who are appointed at the date of approval
of this report, confirm that, to the best of their knowledge:
the financial statements, which have been 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 6 March 2024 and is signed on its behalf by:
Paul Waterman Ralph Hewins
CEO
CFO
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Independent Auditor’s report to the members
of Elementis plc
Report on the audit of the
financial statements
1. Opinion
In our opinion:
the financial statements of Elementis 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 31 December 2023 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
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 7 to the financial statements.
We confirm that we have not provided any non-audit services
prohibited by the FRC’s Ethical Standard 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.
3. Summary of our audit approach
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Key audit
matters
The key audit matters that we identified in the
current year were:
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 consolidated financial statement related notes 1 to 32; and
the parent company financial statement related notes 1 to 11.
The financial reporting framework that has been applied in
the preparation of the group financial statements is applicable
law and United Kingdom adopted international accounting
standards and IFRSs as issued by the 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).
Adjusting items – transformation costs; and
Revenue recognition, including cut off.
Within this report, key audit matters are identified
as follows:
! Newly identified
Increased level of risk
Similar level of risk
Materiality
Scoping
The materiality that we used for the group
financial statements was $3.7 million (2022:
$3.8 million). Materiality was based on 5% of
adjusted profit before tax from all operations
(“adjusted PBT”) (2022: 5% of adjusted profit
before tax). See section 6.1 for more details.
We have performed full scope audits or audits of
specified account balances of four components
which contribute 83% of the group’s revenue,
90% of the group’s profit before tax and 80%
of the group’s net assets.
Significant
changes in
our approach
In the current year, we reduced the scope of
work previously performed in speciality
operations in China.
In the previous year we identified a key audit
matter relating to impairment of goodwill of the
Talc CGU. As this was fully impaired in 2022,
we have no longer identified a fraud risk or key
audit matter in relation to this balance. We have
pinpointed our fraud risk in the current year to
transformation costs classified within adjusting
items, which has significantly increased
by $21.3m in the year due to the group’s
commitment to restructuring plans in 2023.
We have also identified a new key audit matter
in this area.
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Independent Auditor’s report to the members of Elementis plc
continued
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:
evaluating the group’s financing facilities including the nature of
facilities, repayment terms and covenants set out on page 72 of
the annual report;
recalculating and assessing of the amount of forecast headroom
on the loan covenants to testing dates;
evaluating the reverse stress test prepared by management and
performing a sensitivity analysis to consider specific scenarios,
including a reduction in revenue and associated profits;
challenged management on the assumptions used in the cash
flow model used to prepare the going concern forecast,
including with consideration to current macro-economic factors
such as the inflationary environment and international conflicts.
This includes testing of clerical accuracy of the model,
assessment of the historical accuracy of forecasts prepared
by management and reviewing the balance sheet for items
which could potentially result in a cash outflow; and
evaluating management’s going concern disclosures in the
financial statements.
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. Adjusting Items – transformation costs
!
Key audit matter
description
The group have recorded total adjusting items of $26.1 million (2022: $133.7 million). Adjusting items are a key
determinant of the groups adjusted operating profit.
We have identified new adjusting items in the year which has increased the risk associated with the accuracy
and classification of the adjusting items. The group has undertaken a group-wide restructuring programme
branded “Fit for Future”. This was announced internally to the group in September 2023 and was announced
externally at the capital markets day in November 2023. Management has recognised a current year provision
of $25.4 million in line with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, classified as an
adjusting item under FRC guidance. There is an element of estimation in determining the associated future
costs, and judgement in identifying which costs are appropriate to recognise within the provision. Therefore,
we identified a key audit matter in this area.
See note 5 to the financial statements for further details of adjusting items.
Our procedures included:
obtaining an understanding of the relevant controls over identification and evaluation of adjusting items;
testing a sample of adjusting items related to transformation costs by agreeing to source documentation and
underlying financial records to evaluate their nature and amounts; and
verifying the nature of the costs included in the “Fit for Future” restructuring provision, to assessed whether
they meet the recognition requirements in IAS 37, and are appropriate to be classified as adjusting items in
line with FRC guidance.
How the scope of our
audit responded to
the key audit matter
Key observations
We completed our planned audit procedures with no exceptions noted. We are satisfied that the valuation of and
classification as an adjusting item of the restructuring provision is appropriate.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
5.2. Revenue recognition, including cut-off
Key audit matter
description
During the year the group recognised revenue from all operations of $713.4m (2022: $736.4m) and recorded a
cut off adjustment of $6.6m (2022: $5.8m).
How the scope of our
audit responded to
the key audit matter
At the year end, manual adjustments are made by management for goods which have been despatched but
where, under the terms of sale, the control of the goods has yet to pass to the customer; this is done because
the group’s systems record revenue on despatch. Management determines the point at which the performance
obligation has been fulfilled based on different shipping terms and estimates the delivery times to the point at
which control passes to the customer. The group trades globally and a change in the number of days estimated
for shipments to transfer to the customer can have a material impact on the cut off adjustment. This remains a
higher risk for the audit and an area of significant audit effort and therefore we determined it a key audit matter.
The accounting policy is described in note 1 where this is also included as a critical accounting judgement.
This area of judgement areas is also referred to within the Audit Committee report on page 90.
Our procedures included:
testing the relevant controls over each significant class of revenue transaction;
assessing the commercial arrangements, to determine the correct point of revenue recognition for different
shipping arrangements and agreements with customers;
testing a sample of revenue transactions at each component and obtaining support for appropriate revenue
recognition including shipping documentation and payments received;
selecting a sample of international shipments made pre-year end for time periods varying by destination port
and therefore transit time for shipments and agreeing these to invoice, shipment and order details and goods
receipt notes;
developing an understanding of how current global supply chain disruption could impact the timing of delivery
of group’s products to its customers;
assessing management’s assumptions used in their cut off calculation for reasonableness and consistency
with consideration to macroeconomic factors and substantively testing of international shipments both pre and
post year-end; and
testing a sample of post year end credit notes raised to determine if revenue was inappropriately recognised
in 2023.
Key observations
We completed our planned audit procedures with no exceptions noted. We are satisfied that management has
completed appropriate cut off adjustments at the year end to take into account those sales where control has
not transferred.
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129
Independent Auditor’s report to the members of Elementis plc
continued
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:
Materiality
Basis for
determining
materiality
Rationale for the
benchmark applied
Group financial statements
$3.7 million (2022: $3.8 million)
Parent company financial statements
$1.2 million (2022: $1.1 million)
The materiality that we used for the group financial
statements was $3.7 million (2022: $3.8 million) which
was determined on the basis of 5% (2022: 5%) of
adjusted profit before tax from all operations without
adjustment for amortisation of purchased intangibles
arising on acquisition.
We have considered the users of the financial
statements when selecting the appropriate benchmark.
Earnings based metrics tend to be of more interest
to the shareholders, analyst and investor-based
communities. Adjusted profit before tax is a suitable
measurement for profit orientated entities.
A factor of 3% of net assets (2022: 3%) was used
capped to an appropriate component materiality
of 50% (2022: 50%) of group materiality.
We have used net assets in determining materiality
as we believe this is an appropriate basis for materiality
as it reflects the nature of the parent company
as a holding company and its contribution to the
group performance.
Adjusted PBT
$74.2m
Adjusted PBT
Group materiality
Group materiality $3.7m
Component materiality range $1.2m to $1.5m
Audit Committee reporting threshold $0.184m
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.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial statements
Parent company financial statements
70% (2022: 60%) of group materiality
70% (2022: 60%) of parent company materiality
In determining performance materiality, we considered our past experience of the group and our risk
assessment, including our assessment of the group’s overall control environment and low number of
misstatements identified in the prior year.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $184,000 (2022: $191,000),
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.
130 Elementis plc
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Financial Statements
Shareholder Information
At the parent entity level we also tested the consolidation process
and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the
aggregated financial information of the remaining components not
subject to full scope audit or audit of specified account balances.
The parent company is located in the UK and is audited directly by
the group audit team.
7.2. Our consideration of the control environment
Our audit for the prior period identified a number of general
IT control deficiencies primarily related to the user access and
segregation of duties within the IT systems specific to the Talc
operations. We note that the control deficiencies remain in 2023
but acknowledge that this business will adopt the wider group’s
ERP system in 2024 as outlined in the CEO statement on Page 11.
With involvement of our IT specialists, we have tested general
IT controls over the key IT systems. We have obtained an
understanding of the relevant internal controls over financial
reporting and management’s review controls of key estimates
and judgements. We have tested relevant controls over revenue
recognition cycle. Based on our testing, we have not relied on
controls and we therefore adopted a fully substantive approach.
As described in the internal controls and risk management
section of pages 90 and 91, the Audit Committee will continue
to oversee the actions taken to monitor and improve the internal
control environment.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
There are four components in scope for the 2023 year-end audit
(2022: seven including two Chromium entities which have been
disposed in 2023), of which the first three below are significant
to the group:
the Talc operation in Netherlands and Finland;
the specialty products operations in the US;
the specialty products operations in the UK; and
the specialty products operations in India.
All of these locations were subject to full scope audits or audits
of specified accounts balances.
We have increased the number of specified account balances in
the scope of work performed on speciality product operations in
India because of the manufacturing plant becoming operational.
Given the appropriate coverage achieved in the current year,
we reduced the scope of work previously performed on operations
in China to review procedures.
Each component was set a specific component materiality,
considering its relative size and any component specific risk
factors such as internal control findings and history of error.
Our audit work on the four components was executed at levels
of performance materiality applicable to each individual entity
which were lower than group materiality and ranged from
$1.2 million to $1.5 million (2022: $1.1 million to $1.5 million).
The in-scope locations represent the principal business units
within the group’s operating divisions and account for 83%
(2022: 95%) of the group’s revenue, 90% (2022: 95%) of the
group’s profit before tax and 80% (2022: 96%) of the group’s
net assets.
Revenue
Profit before tax
Net assets
Full audit scope
Review at group level
83%
17%
Full audit scope
Specificed audit procedures
Review at group level
87%
3%
10%
Full audit scope
Specificed audit procedures
Review at group level
77%
3%
20%
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131
Independent Auditor’s report to the members of Elementis plc
continued
7.3. Our consideration of climate-related risks
Climate change and the transition to a low carbon economy
(“climate change”) were considered in our audit where they have
the potential to directly or indirectly impact key judgements and
estimates within the financial statements. The group continues to
develop its assessment of the potential impacts of climate change,
as explained in the Chief Executive Officer’s review within the
strategic report on page 11. Management has disclosed their
climate risk considerations on page 141 primarily in relation to the
key judgements and estimates in the assessment of the carrying
value of non-current assets and environmental provisions. The key
judgements and estimates included in the financial statements
incorporate actions and strategies, to the extent they have been
approved and can be reliably estimated in accordance with the
group’s accounting policies. With the involvement of our
Environmental, Social and Governance (“ESG”) specialists,
we assessed this disclosure by performing inquiries with
management and independent industry research, and we did not
identify any climate related material risks of misstatement. We also
considered whether information included in the climate related
disclosures in the Annual Report were materially consistent with
our understanding of the business and the financial statements.
7.4. Working with other auditors
The group audit was conducted by the UK group audit team with
exception of Talc operations in Netherlands and Finland where
work was performed by local Deloitte member firms under the
direction and supervision of the UK group audit team. Component
auditors were assigned to perform audit procedures in line with
the scoping of the respective components within their jurisdiction.
Further work was performed at a group level over the
consolidation and components not in scope. Dedicated
members of the group audit team were assigned to each
component to facilitate an effective and consistent approach
to component oversight.
The planned programme which we designed as part of our
involvement in the component auditor’s work was delivered over
the course of the group audit. The extent of our involvement
which commenced from the planning phase included:
Setting the scope of the component auditor and assessment
of the component auditor’s independence.
Designing the audit procedures for all significant risks to be
addressed by the component auditors and issuing group audit
instructions detailing the nature and form of the reporting
required by the group engagement team.
Holding frequent calls and meetings (including in person
meetings) between the group and component teams.
Providing direction on enquiries made by the component
auditors through online and telephone conversations.
Reviewing of each component auditor’s engagement file
by a senior member of the group audit team.
Attending local component audit close meetings virtually
or in-person.
Visiting components in the Netherlands and Finland sites.
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.
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Financial Statements
Shareholder Information
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.
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 noncompliance
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;
the group’s own assessment of the risks that irregularities may
occur either as a result of fraud or error;
results of our enquiries of management, internal audit, the
directors and the audit committee about their own identification
and assessment of the risks of irregularities, including those
that are specific to the group’s sector;
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; and
– 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, ESG, IT and environmental 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 in transformation costs
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 include the UK Companies Act, Listing Rules, pensions
legislation and tax legislation and the sector it operates in.
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 which included
environmental regulation.
11.2. Audit response to risks identified
As a result of performing the above, we identified transformation
costs adjusting items as a key audit matter related to the potential
risk of fraud. 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;
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 and environmental regulators; 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.
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.
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Independent Auditor’s report to the members of Elementis plc
continued
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 page 72;
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 72;
the directors’ statement on fair, balanced and
understandable set out on page 126;
the board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 63;
the section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on page 63; and
the section describing the work of the audit committee set
out on page 88.
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
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 Board on 27 April 2016 to audit the financial
statements for the year ending 31 December 2016 and
subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments
of the firm is 8 years, covering the years ending 31 December
2016 to 31 December 2023.
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) 4.1.15R – DTR 4.1.18R,
these financial statements will form part of the Electronic Format
Annual Financial Report filed on the National Storage Mechanism
of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This
auditor’s report provides no assurance over whether the Electronic
Format Annual Financial Report has been prepared in compliance
with DTR 4.1.15R – DTR 4.1.18R.
Lee Welham
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Cambridge, United Kingdom
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
06/03/2024
the parent company financial statements are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report
if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the directors’ remuneration
report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
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Corporate Governance
Financial Statements
Shareholder Information
Consolidated income statement
For the year ended 31 December 2023
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit/(loss)
Other expenses1
Finance income
Finance costs
Profit/(loss) before income tax
Tax
Profit/(loss) from continuing operations
(Loss)/profit from discontinued operations
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Earnings per share
From continuing operations
Basic earnings/(loss) (cents)
Diluted earnings/(loss) (cents)
From continuing and discontinued operations
Basic earnings/(loss) (cents)
Diluted earnings/(loss) (cents)
1 Other expenses comprise administration expenses for the Group’s pension schemes.
Note
2
2
25
3
4
6
7
32
9
9
9
9
2023
$m
713.4
(429.1)
284.3
(108.7)
(116.7)
58.9
(2.3)
4.4
(21.3)
39.7
(11.5)
28.2
(1.7)
26.5
2022
$m
736.4
(437.5)
298.9
(125.0)
(215.7)
(41.8)
(1.3)
9.9
(21.6)
(54.8)
(7.8)
(62.6)
11.5
(51.1)
26.5
(51.1)
4.8
4.7
4.5
4.4
(10.7)
(10.7)
(8.8)
(8.8)
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Annual Report and Accounts 2023
135
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Profit/(loss) for the year
Other comprehensive income:
Items that will not be reclassified subsequently to profit and loss:
Remeasurement of retirement benefit obligations
Deferred tax associated with retirement benefit obligations
Items relating to discontinued operations, net of tax
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Effective portion of change in fair value of net investment hedge
Tax associated with change in fair value of net investment hedge
Tax associated with changes in cash flow hedges
Recycling of deferred foreign exchange losses on disposal
Effective portion of changes in fair value of cash flow hedges
Fair value of cash flow hedges transferred to income statement
Exchange differences on translation of share options reserves
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Attributable to:
Equity holders of the parent
Note
25
25
22
22
22
22
2023
$m
26.5
12.3
(2.8)
–
(5.1)
14.8
(0.1)
(0.6)
9.3
12.7
(6.3)
0.2
34.4
60.9
2022
$m
(51.1)
(18.5)
5.3
0.3
(100.9)
46.2
(2.8)
0.8
–
(2.6)
1.6
(0.9)
(71.5)
(122.6)
60.9
(122.6)
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Corporate Governance
Financial Statements
Shareholder Information
Consolidated balance sheet
As at 31 December 2023
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Tax recoverable
Financial assets
Deferred tax assets
Net retirement benefit surplus
Total non-current assets
Current assets
Inventories
Trade and other receivables
Financial assets
Current tax assets
Cash and cash equivalents
Total current assets
Assets classified as held for sale
Total assets
Current liabilities
Bank overdrafts and loans
Trade and other payables
Financial liabilities
Current tax liabilities
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Retirement benefit obligations
Deferred tax liabilities
Lease liabilities
Provisions
Financial liabilities
Total non-current liabilities
Liabilities classified as held for sale
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to holders of the parent
Total equity
2023
31 December
$m
2022
31 December
$m
Note
10
11
30
21
16
25
12
13
21
20
32
19
14
21
24
15
21
25
16
24
15
21
32
17
18
650.6
423.6
20.0
6.0
19.6
42.1
660.2
386.4
17.5
1.3
24.8
26.4
1,161.9
1,116.6
163.3
101.8
7.4
11.2
65.8
349.5
–
182.0
94.9
10.7
7.0
54.9
349.5
160.9
1,511.4
1,627.0
–
(117.9)
–
(13.6)
(5.9)
(21.5)
(2.7)
(135.4)
(3.3)
(20.2)
(6.1)
(5.8)
(158.9)
(173.5)
(264.7)
(414.7)
(9.0)
(8.9)
(138.7)
(131.3)
(30.3)
(60.4)
(2.1)
(505.2)
–
(664.1)
847.3
52.5
239.2
70.1
485.5
847.3
847.3
(30.2)
(23.9)
(2.8)
(611.8)
(57.8)
(843.1)
783.9
52.3
238.7
42.1
450.8
783.9
783.9
The financial statements on pages 135 to 182 were approved by the Board on 6 March 2024 and signed on its behalf by:
Paul Waterman Ralph Hewins
CEO
CFO
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Consolidated statement of changes in equity
For the year ended 31 December 2023
Balance at 1 January 2022
Comprehensive income:
Loss for the year
Other comprehensive loss:
Exchange differences (see Note 22)
Fair value of cash flow hedges transferred to the income
statement (see Note 22)
Effective portion of changes in fair value of cash flow hedges
(see Note 22)
Tax associated with changes in cash flow hedges
Tax associated with change in fair value of net investment hedge
Remeasurements of retirement benefit obligations (see Note 25)
Deferred tax associated with retirement benefit obligations
Transfer
Total other comprehensive (loss)/income
Total comprehensive (loss)/income
Transactions with owners:
Issue of shares by the Company
Deferred tax on share based payments recognised within equity
Share based payments (see Note 26)
Fair value of cash flow hedges transferred to net assets
(see Note 22)
Reserve reclassification
Total transactions with owners
Balance at 31 December 2022
Comprehensive income:
Profit for the year
Other comprehensive income:
Exchange differences (see Note 22)
Fair value of cash flow hedges transferred to the income
statement (see Note 22)
Effective portion of changes in fair value of cash flow hedges
(see Note 22)
Tax associated with changes in cash flow hedges
Tax associated with change in fair value of net investment hedge
Remeasurements of retirement benefit obligations (see Note 25)
Deferred tax associated with retirement benefit obligations
Recycling of deferred foreign exchange losses on disposal
Transfer
Total other comprehensive income/(loss)
Total comprehensive income/(loss)
Transactions with owners:
Issue of shares by the Company
Purchase of shares by Employee Share Options Trust (“ESOT”)
Deferred tax on share based payments recognised within equity
Share based payments (see Note 26)
Fair value of cash flow hedges transferred to net assets
(see Note 22)
Total transactions with owners
Balance at 31 December 2023
138 Elementis plc
Annual Report and Accounts 2023
Share
capital
$m
Share
premium
$m
Translation
reserve
$m
Hedging
reserve
$m
Other
reserves
$m
Retained
earnings
$m
Total
equity
$m
52.2
240.8
(67.7)
(8.6)
167.0
517.3
901.0
238.7
(122.4)
(1.0)
165.5
450.8
783.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.8
–
–
–
–
0.1
52.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
52.5
–
–
–
(2.9)
(2.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
(54.7)
–
–
–
–
–
–
–
(54.7)
(54.7)
–
–
–
–
–
–
–
1.6
(2.6)
–
–
–
–
7.8
6.8
6.8
–
–
–
0.8
–
0.8
–
(51.1)
(51.1)
(0.9)
–
–
–
–
–
–
(4.0)
(4.9)
(4.9)
–
–
3.4
–
–
3.4
–
–
–
0.8
(2.8)
(55.6)
1.6
(2.6)
0.8
(2.8)
(18.2)
(18.2)
5.3
(3.8)
5.3
–
(18.7)
(71.5)
(69.8)
(122.6)
–
0.4
–
–
2.9
3.3
0.9
0.4
3.4
0.8
–
5.5
–
9.7
–
–
–
–
–
–
9.3
–
19.0
19.0
–
–
–
–
–
–
–
–
(6.3)
12.7
–
–
–
–
–
–
6.4
6.4
–
–
–
–
0.5
0.5
5.9
–
26.5
26.5
0.2
–
–
–
–
–
–
–
(2.3)
(2.1)
(2.1)
–
–
–
4.2
–
4.2
–
–
–
(0.6)
(0.1)
12.3
(2.8)
–
2.3
11.1
37.6
–
(1.6)
(1.3)
–
–
(2.9)
9.9
(6.3)
12.7
(0.6)
(0.1)
12.3
(2.8)
9.3
–
34.4
60.9
0.7
(1.6)
(1.3)
4.2
0.5
2.5
167.6
485.5
847.3
0.2
0.5
239.2
(103.4)
© 2020 Friend Studio Ltd
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Consolidated cash flow statement
For the year ended 31 December 2023
Operating activities:
Profit/(loss) from continuing operations
Adjustments for:
Other expenses
Finance income
Finance costs
Tax charge
Depreciation and amortisation
Impairment loss on property, plant and equipment
Increase/(decrease) in provisions and financial liabilities
Pension payments net of current service cost
Share based payments expense
Impairment of goodwill
Operating cash flow before movement in working capital
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated by operations
Income taxes paid
Interest paid
Net cash flow used in operating activities from discontinued operations
Net cash flow from operating activities
Investing activities:
Interest received
Disposal of property, plant and equipment
Purchase of property, plant and equipment
Disposal of business
Acquisition of intangible assets
Net cash flow used in investing activities from discontinued operations
Net cash flow used in investing activities
Financing activities:
Issue of shares by the Company, net of repurchases of shares by ESOT
Net movement on existing debt
Payment of interest on lease liabilities
Payment of gross lease liabilities
Net cash flow used in financing activities from discontinued operations
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Foreign exchange on cash and cash equivalents
Less: cash and cash equivalents classified as held for sale
Cash and cash equivalents at 31 December
1 2022 has been re-presented following the sale of the Chromium business, see Note 32 for further details.
Note
2023
$m
20221
$m
28.2
(62.6)
2.3
(4.4)
21.3
11.5
55.7
–
16.7
(3.1)
4.4
–
132.6
22.5
(0.3)
(20.1)
134.7
(27.3)
(18.1)
(12.5)
76.8
0.4
–
(38.1)
139.2
(0.1)
(0.3)
101.1
(1.0)
(160.5)
(1.3)
(5.2)
–
(168.0)
9.9
54.9
1.0
–
65.8
1.3
(9.9)
21.6
7.8
56.9
23.0
(7.7)
(0.7)
3.4
103.4
136.5
(57.5)
6.5
13.8
99.3
(13.3)
(14.6)
5.6
77.0
0.2
(0.4)
(33.1)
–
(0.2)
(13.4)
(46.9)
0.9
(51.6)
(1.4)
(5.7)
–
(57.8)
(27.7)
84.6
(2.0)
–
54.9
11
25
26
10
4
32
11
32
10
32
28
24
24
32
32
20
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Elementis plc
Annual Report and Accounts 2023
139
Notes to the consolidated financial statements
For the year ended 31 December 2023
1. Accounting policies
Elementis plc is a public company limited by shares incorporated
and domiciled in England and is the parent company of the Group.
The address of its registered office is The Bindery, 5th Floor,
51-53 Hatton Garden, London, EC1N 8HN. The Group financial
statements have been prepared and approved by the Directors in
accordance with UK adopted international accounting standards.
The Company has elected to prepare its parent company financial
statements in accordance with FRS 101. These are presented
on pages 183 to 189.
Basis of preparation
The financial statements have been prepared in accordance with
UK adopted international accounting standards in conformity with
the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRS) as adopted by the UK.
These financial statements also comply with IFRS as issued
by the IASB.
The financial statements have been prepared on the historical cost
basis except that derivative financial instruments are stated at their
fair value. The preparation of financial statements requires the
application of estimates and judgements that affect the reported
amounts of assets and liabilities, revenues and costs and related
disclosures at the balance sheet date.
The financial statements have been prepared on a going concern
basis. The rationale for adopting this basis is discussed in the
Directors’ report on page 125.
Reporting currency
As a consequence of the majority of the Group’s sales and
earnings originating in US dollars or US dollar linked currencies,
the Group has chosen the US dollar as its presentational currency.
This aligns the Group’s external reporting with the profile of
the Group, as well as with internal management reporting.
The functional currency of the parent is pounds sterling.
Critical accounting judgements and key sources of
estimation uncertainty
When applying the Group’s accounting policies, management
must make a number of key judgements on the application of
applicable accounting standards and estimates and assumptions
concerning the carrying amounts of assets and liabilities that are
not readily apparent from other sources. These estimates and
judgements are based on factors considered to be relevant,
including historical experience, which may differ significantly
from the actual outcome. The key assumptions concerning the
future and other key sources of estimation uncertainty that have
a significant risk of causing a material adjustment to the amounts
recognised in the financial statements within the next year are
discussed below. The development of the estimates and
disclosures related to each of these matters has been
discussed by the Audit Committee.
Critical accounting judgements
The following is the sole critical judgement, as opposed to those
involving estimations which are dealt with separately below, that
the Directors have made in the process of applying the Group’s
accounting policies that has significant effect on the amounts for
the year ended 31 December 2023 recognised in the financial
statements. Where relevant and practicable, sensitivity analyses
are disclosed in the relevant notes to demonstrate the impact of
changes in estimates or assumptions used.
A. Revenue recognition
Judgement is exercised over how to determine the timing of
revenue recognition for orders where the agreed terms are
delivery to the destination point. The Group has compiled shipping
estimates based on the destination country which are used to
inform the timing of revenue recognition. In compiling these
estimates management have used past experience and carrier
standard shipping estimates to inform their decision making.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting period that may have
a significant risk of causing a material misstatement to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
A. Environmental provisions
Provisions for environmental restoration are recognised where:
the Group has a present legal or constructive obligation as
a result of past events; it is probable that an outflow of resources
will be required to settle the obligation; and the amount can be
estimated reliably.
Environmental provisions are measured at the present value of the
expenditures expected to be required to settle the obligation using
a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the obligation.
Due to the long time horizons over which costs are anticipated,
small changes in recurring annual cash outflows can have a
significant cumulative impact on the total provision required.
At 31 December 2023 the carrying value of environmental
provisions was $60.5m. Further details of these provisions
and a sensitivity assessment are given in Note 15.
B. Valuation of a defined benefit pension obligation
The key estimates made in relation to defined benefit pensions
relate to the discount rate used to determine the present value of
future benefit, the rate of inflation applied to plan assets, mortality
rates and rates of salary growth. At 31 December 2023 the UK
scheme, the largest of the Group’s retirement plans, had a surplus
of $38.7m, the US pension scheme had a surplus of $3.4m whilst
the US PRMB scheme and other schemes were in a net deficit
position of $9.0m in aggregate. Further details of pensions and
a sensitivity analysis are given in Note 25.
C. Impairment testing of Talc Cash Generating Unit (“CGU”)
The Group performed an assessment as to whether the intangible
and tangible fixed assets of the Talc CGU are required to be
impaired. Based on the assessment performed no impairment
has been recognised. The assessment is sensitive to the higher
expected rehabilitation costs for the Finnish mines, for which
a reliable estimate cannot be made (see Note 30), as well as the
current ongoing appeal regarding the revocation certain mining
permits. The Group cannot reliably estimate the impact that these
events could have on future operations, however if they were to
result in a deterioration of future operating profits of the Talc CGU
then an impairment of the intangible and tangible fixed assets may
be required.
140 Elementis plc
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Shareholder Information
1. Accounting policies continued
Climate related risks
The financial statements have been prepared with consideration
of risks resulting from climate change, our ambition to reach net
zero by 2050, and in accordance with our Task Force for Climate
Change Related Financial Disclosures (“TCFD”) disclosures.
In conjunction with our net zero ambition and TCFD, a review
has been performed in the following areas that are deemed most
at-risk of being impacted by climate change:
A. Five year forecasting model
To support the carrying value of assets, impairment of goodwill
testing, going concern, and the viability statement, management
prepare a five year forecasting model. The five year forecasting
model includes actions already taken by management to work
towards achieving the Group’s net zero ambition. Specifically,
for the impairment of goodwill and the carrying value of the CGUs,
management considered the risks associated with: carbon pricing;
customer, consumer and investor demands; raw material supply/
prices; access to renewable electricity; energy prices; water
scarcity; and extreme weather events. Based on that consideration
management have not made any adjustments to the five year
forecasting model.
B. Useful economic lives of property, plant and equipment,
right of use assets and intangible assets.
Management have reviewed the useful economic life of the
Group’s non-current assets with respect to the physical risk
resulting from extreme weather events and our net zero ambition
and have concluded that the current economic useful lives are
in line with all current and foreseeable plans.
C. Environmental provisions
Management have considered the Group’s legal, regulatory and
social obligations in determining the estimate of costs associated
the closure and remediation of our sites. A provision has been
recognised where management can make a reliable estimate of
the costs associated with the closure and remediation of these
sites (see Note 15). Where a reliable estimate cannot be made,
a contingent liability has been disclosed (see note 30).
After detailed consideration of the aforementioned climate risks,
management are comfortable that no adjustments are required
to the carrying value of non-current assets and liabilities for the
year ended 31 December 2023.
Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries for the year.
Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity 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. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date on which that
control ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the liabilities
incurred to the former owners of the acquiree, and the equity
interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair value
at the acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis,
either at fair value or at the non-controlling interest’s proportionate
share of the recognised amounts of the acquiree’s identifiable
net assets.
Acquisition costs are accounted for as an expense in the
period incurred.
Intragroup balances and any unrealised gains and losses or
income and expenses arising from intragroup transactions,
are eliminated in preparing the consolidated financial
statements. Unrealised losses are eliminated in the same way
as unrealised gains, but only to the extent that there is no
evidence of impairment.
A full list of the Group’s subsidiaries is shown in Note 6 of the
parent company financial statements.
Changes in accounting policies
The accounting policies adopted are consistent with those of
the previous financial year.
Foreign currency
A. Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on
translation are recognised in the income statement. Non-monetary
assets and liabilities denominated in foreign currencies that are
stated at fair value are translated at exchange rates ruling at the
dates the fair value was determined.
B. Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on consolidation, are translated
at exchange rates ruling at the balance sheet date. The revenues
and expenses of foreign operations are translated at the average
rates of exchange ruling for the relevant period. Exchange
differences arising since 1 January 2004 on translation are taken
to the translation reserve. They are recognised in the income
statement upon disposal of the foreign operation. The Group may
hedge a portion of the translation of its overseas net assets
through US dollar and euro borrowings. From 1 January 2005,
the Group has elected to apply net investment hedge accounting
for these transactions where possible. Where hedging is applied,
the effective portion of the gain or loss on an instrument used to
hedge a net investment is recognised in equity. Any ineffective
portion of the hedge is recognised in the income statement.
Intangible assets
A. Goodwill
Goodwill arises on the acquisition of subsidiaries and represents
the excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the
fair value of the identifiable net assets acquired. If the total of
consideration transferred, non-controlling interest recognised and
previously held interest measured at fair value is less than the fair
value of the net assets of the subsidiary acquired, in the case of
a bargain purchase, the difference is recognised directly in the
income statement.
Elementis plc
Annual Report and Accounts 2023
141
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Notes to the consolidated financial statements
continued
1. Accounting policies continued
B. Research and development
Expenditure on pure research is recognised in the income
statement as an expense as incurred. Under IAS 38, expenditure
on development where research findings are applied to a plan or
design for the production of new or substantially improved
products and processes is capitalised if the product or process
will give rise to future economic benefits and where the cost of
the capitalised asset can be measured reliably. Expenditure
capitalised is stated as the cost of materials, direct labour and
an appropriate proportion of overheads less accumulated
amortisation. The length of development lifecycles, broad nature of
much of the research undertaken and uncertainty until a late stage
as to the ultimate commercial viability of a potential product can
mean that the measurement criteria of IAS 38 regarding the
probability of future economic benefits and the reliability of
allocating costs may not be met, in which case expenditure is
expensed as incurred.
C. Customer relationships, brands and other intangible assets
Customer relationships, brands and other intangible assets
are stated at cost or when arising in a business combination,
estimated fair value, less accumulated amortisation.
D. Amortisation
Amortisation is charged to the income statement on a straight line
basis over the estimated useful lives of intangible assets through
the administrative expenses line item, unless such lives are
indefinite. Goodwill is systematically tested for impairment
each year. Other intangible assets, comprising customer lists,
customer relationships, manufacturing processes and procedures,
trademarks, non-compete clauses and patents are amortised
over their estimated useful lives which range from 4 to 23 years.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Freehold land
is not depreciated. Leasehold property is depreciated over the
period of the lease. Freehold buildings, plant and machinery,
fixtures, fittings and equipment are depreciated over their
estimated useful lives on a straight line basis. Depreciation
methods, useful lives and residual values are assessed at the
reporting date. No depreciation is charged on assets under
construction until the asset is available for use.
Depreciation is charged on a straight-line basis over the estimated
useful economic lives of the assets as follows:
Buildings
10 – 50 years
Plant and machinery
2 – 20 years
Fixtures, fittings and
equipment
Right of use assets
2 – 20 years
Shorter of the useful economic life
of the asset and the lease term
The cost of replacing part of an item of property, plant and
equipment is recognised in the carrying amount of the item if it is
probable that the future economic benefits embodied within it will
flow to the Group and its cost can be measured reliably. The costs
of the day-to-day servicing of property, plant and equipment are
recognised in the income statement as incurred.
Management regularly considers whether there are any indicators
of impairment to carrying values of property, plant and equipment.
Impairment reviews are based on risk adjusted discounted
cash flow projections. Significant judgement is applied to the
assumptions underlying these projections which include estimated
discount rates, growth rates, future selling prices and direct costs.
Changes to these assumptions could have a material impact on
the financial position of the Group and on the result for the year.
Impairment of non-current non-financial assets
The carrying amount of non-current assets other than deferred tax
is compared to the asset’s recoverable amount at each balance
sheet date where there is an indication of impairment. For goodwill,
assets that have an indefinite useful life and intangible assets that
are not yet available for use, the recoverable amount is estimated
at each balance sheet date.
Annually the Group carries out impairment tests of its goodwill and
other indefinite life intangible assets which requires an estimate
to be made of the value in use of its CGUs. These value in use
calculations are dependent on estimates of future cash flows
and long term growth rates of the CGUs. Further details of these
estimates are given in Note 10.
An impairment loss is recognised whenever the carrying
amount of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to
CGUs and then to reduce the carrying amount of the other assets
in the unit on a pro-rata basis. A CGU is the smallest identifiable
group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups
of assets.
The recoverable amount is the greater of their fair value less costs
to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset(s).
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the CGU to
which the asset belongs.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Net realisable value is the estimated selling price, less estimated
costs of completion and selling expenses. Cost, which is based
on a weighted average, includes expenditure incurred in acquiring
stock and bringing it to its existing location and condition. In the
case of manufactured inventories and work in progress, cost
includes an appropriate share of overheads attributable to
manufacture, based on normal operating capacity.
Trade and other receivables
Trade receivables and other receivables are due for payment
within one year and are thus classified as current. They are
non-interest bearing and are stated at their nominal amount
which is the original invoiced amount, less allowance for expected
future credit losses. Estimates of future expected credit losses are
informed by historical experience and management’s expectations
of future economic factors, further information on expected credit
loss impairment is given in the impairment of financial assets
accounting policy. Individual trade receivables are written off
when management deem them to be no longer collectable.
142 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
1. Accounting policies continued
Impairment of financial assets – expected credit losses
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
To measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics
and the days past due. The expected loss rates are based on
payment profiles and the corresponding historical credit losses
experienced. The historical loss rates are adjusted to reflect
current and forward looking information in relation to
macroeconomic factors that could affect the ability of
customers to settle receivables.
The Group usually considers a financial asset in default when
contractual payments are 120 days past due. In certain cases,
the Group may also consider a financial asset to be in default
when internal or external information indicates that the Group
is unlikely to receive the outstanding contractual amounts in full
before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
Trade and other payables
Trade payables are non-interest bearing borrowings and are
initially measured at fair value and subsequently carried at
amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with an original maturity of three months or less. Bank
overdrafts that are repayable on demand and form an integral part
of the Group’s cash management are included as a component of
cash and cash equivalents for the purpose of the statement of
cash flows.
Borrowings
Borrowings are initially measured at cost, which is equal to the fair
value at inception, and are subsequently measured at amortised
cost using the effective interest rate method. Any difference
between the proceeds, net of transaction costs and the settlement
or redemption of borrowings is recognised over the terms of
the borrowings using the effective interest rate method.
Pension and other post retirement benefits
In respect of the Group’s defined benefit schemes, the Group’s net
obligation in respect of defined benefit pension plans is calculated
by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods,
that benefit is discounted to determine its present value, and the
fair value of any plan assets is deducted. The liability discount rate
is the yield at the balance sheet date on AA credit rated bonds
that have maturity dates approximating to the terms of the Group’s
obligations. Pension and post retirement liabilities are calculated
by qualified actuaries using the projected unit credit method.
Following the introduction of the revised IAS 19 Employee Benefits
standard, the net interest on the defined benefit liability consists
of the interest cost on the defined benefit obligation and the
interest income on plan assets, both calculated by reference to
the discount rate used to measure the defined benefit obligation
at the start of the period.
The Group recognises actuarial gains and losses in the period
in which they occur through the statement of comprehensive
income. The Group also operates a small number of defined
contribution schemes and the contributions payable during the
year are recognised as incurred. Due to the size of the Group’s
pension scheme assets and liabilities, relatively small changes in
the assumptions can have a significant impact on the expense
recorded in the income statement and on the pension liability
recorded in the balance sheet.
Leases
A lease liability is recognised when the Group obtains control of
the right-of-use asset that is the subject of the lease. The lease
liability is subsequently measured using the effective interest
method, with interest charged to finance costs. Right-of-use assets
are generally depreciated over the shorter of the asset’s useful
life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use
asset is depreciated over the underlying asset’s useful life.
At inception, the Group evaluates whether it is reasonably certain
that any option to extend a lease term will be exercised or likewise
whether any option to terminate the lease will be exercised.
The Group continues to evaluate the likelihood of exercising
such options throughout the initial lease term. When the Group
is committed to extending or terminating the lease, having
considered the alternative options available, and where
appropriate lessor consent to the extension or termination has
been obtained, the Group will consider the option to be reasonably
certain to be exercised. When an option is reasonably certain to
be exercised, the right-of-use asset and lease liabilities recognised
are adjusted to reflect the extended or curtailed lease term.
Leases, which at inception have a term of less than 12 months or
relate to low-value assets, are not recognised on balance sheet.
Payments made under such leases are recognised as an expense
in the income statement on a straight-line basis over the period of
the lease.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a past
event, it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be
made. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
A provision for restructuring is recognised when the Group has
approved a detailed and formal restructuring plan and the
restructuring has either commenced or has been announced
publicly. In accordance with the Group’s environmental policy
and applicable legal requirements, a provision for site restoration
in respect of contaminated land is recognised when the land is
contaminated. Provisions for environmental issues are judgemental
by their nature, particularly when considering the size and timing
of remediation spending, and are more difficult to estimate when
they relate to sites no longer directly controlled by the Group.
Self-insurance provisions relate to personal injury and other
claims from former employees or third parties and represent
the aggregate of outstanding claims plus a projection of losses
incurred but not yet reported which together make up the full
liability recognised as a provision. Insurance recoveries are
recognised as a separate reimbursement asset.
Elementis plc
Annual Report and Accounts 2023
143
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Modification Date: 15 March 2024 1:25 pm
Notes to the consolidated financial statements
continued
1. Accounting policies continued
Derivative financial instruments
The Group uses derivative financial instruments, such as forward
currency contracts, interest rate swaps and commodity swap
contracts, to hedge its foreign currency risks, interest rate risks
and commodity price risks, respectively. The Group does not hold
or issue derivative financial instruments for speculative trading
purposes. However, derivatives that do not qualify for hedge
accounting are accounted for as trading instruments. Due to the
requirement to assess the effectiveness of hedging instruments,
changes in market conditions can result in the recognition of
unrealised gains or losses on hedging instruments in the
income statement.
Derivative financial instruments are recognised initially at fair value
and are shown within derivatives if they are in an asset position or
within financial liabilities if they are in a liability position. The gain
or loss on remeasurement to fair value is recognised immediately
in the income statement. However, where derivatives qualify
for hedge accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged.
A. Cash flow hedges
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or liability,
or a highly probable forecast transaction, the effective part of any
gain or loss on the derivative financial instrument is recognised
directly in the hedging reserve. Any ineffective portion of the
hedge is recognised immediately in the income statement.
Amounts previously recognised in other comprehensive income
and accumulated in equity are reclassified to profit and loss in
the periods when the hedged item is recognised in profit or loss,
in the same line of the income statement as the recognised
hedged item. However, when the forecast transaction that is
hedged results in the recognition of a non-financial asset the
gains or losses previously accumulated in equity are transferred
from equity and included in the initial measurement of the cost of
the non-financial asset.
B. Fair value hedges
Where a derivative financial instrument is designated as a hedge of
the variability in a fair value of a recognised asset or liability or an
unrecognised firm commitment, all changes in the fair value of the
derivative are recognised immediately in the income statement.
The carrying value of the hedged item is adjusted by the change
in fair value that is attributable to the risk being hedged, even if it
is normally carried at amortised cost, and any gains or losses
on remeasurement are recognised immediately in the income
statement, even if those gains would normally be recognised
directly in reserves.
C. Hedges of a net investment in a foreign operation
The Group designates the foreign exchange gain or loss on
a proportion of the Group’s euro and US dollar denominated
borrowings as a hedge of the Group’s net investment in foreign
operations. As such the foreign exchange gain or loss on those
borrowings is recognised in other comprehensive income and
accumulated in equity until such time as the operations are
disposed of at which point the corresponding amounts are
recycled to profit or loss.
Share capital
Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from
equity. When share capital recognised as equity is repurchased,
the amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from equity. Shares
repurchased by the Company are classified as treasury shares
and are presented as a deduction from total equity.
Own shares held by ESOT
Transactions of the Group sponsored ESOT are included
in the consolidated financial statements. In particular,
the ESOT’s purchases of shares in the Company are charged
directly to equity.
Non-current assets held for sale and
discontinued operations
A non-current asset or a group of assets containing a non-current
asset (a disposal group), is classified as held for sale if its carrying
amount will be recovered principally through sale rather than
through continuing use, it is available for immediate sale and sale
within one year is highly probable. On initial classification as held
for sale, non-current assets and disposal groups are measured at
the lower of previous carrying amount and fair value less costs to
sell with any adjustments taken to profit or loss. The same applies
to gains and losses on subsequent remeasurement.
A discontinued operation is a component of the Group’s business
that represents a separate major line of business or geographic
area of operations or is a subsidiary acquired exclusively with
a view to resale, that has been disposed of, has been abandoned,
or that meets the criteria to be classified as held for sale.
Revenue
Revenue is recognised upon transfer of promised goods to
customers (the performance obligation) in an amount that reflects
the consideration the Company expects to receive in exchange
for those goods. This may occur, depending on the individual
customer relationship, when the product has been transferred
to a freight carrier, when the customer has received the product
or, for consignment stock held at customers’ premises, when
usage reports for the relevant period have been compiled.
All revenue is from contracts with customers and pertains to the
sale of specialty chemicals products. Selling prices are agreed
in advance and hence are directly observable.
The Group’s payment terms offered to customers are within
a certain number of days of receipt of invoice and standard
contracts do not include a significant financing component.
The Group does not expect to have any contracts where the
period between the transfer of the promised goods to the
customer and payment by the customer exceeds one year.
As a consequence, the Group does not adjust any of the
transaction prices for the time value of money.
Provisions for returns, trade discounts and rebates are recognised
as a reduction in revenue at the later of when revenue is
recognised for the transfer of the related goods and the entity
pays or promises to pay the consideration. The promise to pay
rebates is contractually agreed in advance and thus the point of
transferring the goods to the customer is deemed to be the later
of the two circumstances. Rebates and discounts are estimated
using historical data and experiences with the customers.
Returns from customers are negligible.
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
1. Accounting policies continued
Operating profit
Operating profit includes net profits realised on the sale of tangible
fixed assets, current and long term assets and liabilities but
excludes gains and losses on the disposal of businesses.
Other expenses
Other expenses are administration costs incurred and paid by
the Group’s pension schemes, which relate primarily to former
employees of legacy businesses.
Finance income and finance costs
Finance income comprises interest income on funds invested
and changes in the fair value of financial instruments at fair value
taken to the income statement. Interest income is recognised
as it accrues, using the effective interest method.
Finance costs comprise interest expense on borrowings, lease
liabilities, unwinding of the discount on provisions, dividends on
preference shares classified as debt, foreign currency gains/losses
and changes in the value of financial instruments at fair value taken
to the income statement. All borrowing costs are recognised in
the income statement using the effective interest method.
Taxation
Income tax on the profit or loss for the year comprises current and
deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly
in equity or in other comprehensive income. Current tax is the
expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax is provided on temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not provided
for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit
other than in a business combination; and differences relating to
investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred
tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet
date. Deferred tax assets are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
The Group is required to estimate the income tax in each of the
jurisdictions in which it operates. This requires an estimation of
current tax liability together with an assessment of the temporary
differences which arise as a consequence of different accounting
and tax treatments. The Group operates in a number of countries
in the world and is subject to many tax jurisdictions and rules.
As a consequence the Group is subject to tax audits, which by
their nature are often complex and can require several years to
conclude. Management’s judgement is required to determine the
total provision for income tax. Amounts are accrued based on
management’s interpretation of country specific tax law and
likelihood of settlement. However, the actual tax liabilities could
differ from the position and in such events an adjustment would
be required in the subsequent period which could have a material
impact. Tax benefits are not recognised unless it is probable that
the tax positions are sustainable. Once considered to be probable,
management reviews each material tax benefit to assess whether
a provision should be taken against full recognition of the benefit
on the basis of potential settlement through negotiation. This
evaluation requires judgements to be made including the forecast
of future taxable income.
Share based payments
The fair value of equity settled share options, cash settled shadow
options and LTIP awards granted to employees is recognised
as an expense with a corresponding increase in equity. The fair
value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the
options/awards. The fair value of the options/awards granted is
measured using a binomial model, taking into account the terms
and conditions upon which the options/awards were granted.
The amount recognised as an employee expense is adjusted to
reflect the actual number of share options/awards that vest except
where forfeiture is only due to share prices not achieving the
threshold for vesting.
Short-term employee benefits
Short-term employee benefits, such as salaries, paid absences,
and other benefits including any related payroll taxes are
accounted for on an accrual basis over the period which
employees have provided services. Bonuses are recognised
to the extent that the Group has a present obligation to its
employees that can be measured reliably and are accounted for in
accordance with the requirements of IAS 19, ‘Employee benefits’.
All expenses relating to employee benefits (other than pension
costs) are recognised in the income statement within wages and
salaries, or social security costs.
Termination benefits
Termination benefits are recognised as an expense when the
Group is demonstrably committed, without realistic possibility
of withdrawal, to a formal detailed plan to terminate employment
before the normal retirement date. Termination benefits for
voluntary redundancies are recognised if the Group has made
an offer encouraging voluntary redundancy, it is probable that
the offer will be accepted, and the number of acceptances can
be estimated reliably.
Government grants
Government grants are recognised at fair value when there is
reasonable assurance that the conditions associated with the
grants have been complied with and the grants will be received.
Grants compensating for expenses incurred are recognised as
a deduction of the related expenses in the consolidated income
statement on a systematic basis in the same periods in which the
expenses are incurred.
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Annual Report and Accounts 2023
145
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Notes to the consolidated financial statements
continued
1. Accounting policies continued
Alternative performance measures
In the analysis of the Group’s operating results, earnings per
share and cash flows, information is presented to provide readers
with additional performance indicators that are prepared on a
non-statutory basis. This presentation is regularly reviewed by
management to identify items that are unusual and other items
relevant to an understanding of the Group’s performance and long
term trends with reference to their materiality and nature. This
additional information is not uniformly defined by all companies
and may not be comparable with similarly titled measures and
disclosures by other organisations. The non-statutory disclosures
should not be viewed in isolation or as an alternative to the
equivalent statutory measure. Information for separate
presentation is considered as follows:
Material costs or reversals arising from a significant restructuring
of the Group’s operations are presented separately
Disposal of entities or investments in associates or joint ventures
or impairment of related assets are presented separately
Other matters arising due to the Group’s acquisition, such as
adjustments to contingent consideration, payment of retention
bonuses, acquisition costs and fair value adjustments for
acquired assets made in accordance with IFRS 13 are
separately disclosed in aggregate
If a change in an accounting estimate for provisions, including
environmental provisions, results in a material gain or loss,
that is presented separately
Other items the Directors may deem to be unusual as a result
of their size and/or nature.
Adoption of new and revised standards
In the current year, the Group has applied a number of
amendments to IFRSs issued by the International Accounting
Standards Board (“IASB”) that are mandatorily effective for
accounting periods that began on or after 1 January 2023.
Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements:
International Accounting Standards
(IAS/IFRSs) and Interpretations (IFRICs):
IFRS 17 Insurance Contracts
Amendments to IFRS 17: Initial
Application of IFRS 17 and IFRS 9 –
Comparative Information
Amendments to IAS 1 and IFRS
Practice Statement 2: Disclosure of
Accounting Policies
Amendments to IAS 8: Definition of
Accounting Estimates
Amendments to IAS 12: Deferred Tax
related to Assets and Liabilities arising
from a Single Transaction
UK
Endorsement
status
Endorsed
Endorsed
Endorsed
Endorsed
Endorsed
Amendment to IAS 12 - International
tax reform - pillar two model rules
Endorsed
Effective date
1 January
2023
1 January
2023
1 January
2023
1 January
2023
1 January
2023
1 January
2023
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised international
accounting standards (“IAS”/“IFRSs”) and interpretations
(“IFRICs”) that have been issued but are not effective for periods
starting on 1 January 2023 but will be effective for later periods:
International Accounting Standards
(IAS/IFRSs) and Interpretations (IFRICs)
not yet endorsed for use in the EU or UK:
Amendments to IAS 1: Classification of
Liabilities as Current or Non-current
UK
Endorsement
status
Endorsed
Amendments to IFRS 16 Leases:
Lease Liability in a Sale and Leaseback
Endorsed
Amendments to IAS 1: Non-Current
Liabilities with Covenants
Amendment to IAS 7 and IFRS 7 –
Supplier finance
Amendments to IAS 21 –
Lack of Exchangeability
IFRS S1: General requirements for
disclosure of sustainability-related
financial information
IFRS S2: Climate-related disclosures
Endorsed
Not yet
endorsed
Not yet
endorsed
Not yet
endorsed
Effective
for annual
reporting
periods
beginning
on or after
1 January
2024
1 January
2024
1 January
2024
1 January
2024
1 January
2025
1 January
2024
Not yet
endorsed
1 January
2024
2. Operating segments
Business segments
The Group has determined its operating segments on the basis
of those used for management, internal reporting purposes and
the allocation of strategic resources. The key measure used for
review of the performance of the operating segments is adjusted
operating profit. In accordance with the provisions of IFRS 8, the
Group’s chief operating decision maker is the Board of Directors.
Effective from 1 January 2023 the results of the Coatings and
Talc segments were merged and are now reported under a new
segment called Performance Specialties, which reflects a change
in the internal organisation structure used for management,
internal reporting purposes and the allocation of strategic
resources. We will continue to report results for the Coatings
and Talc businesses.
The two reportable segments, Performance Specialties and
Personal Care each have distinct product groupings and separate
management structures. Segment results, assets and liabilities
include items directly attributable to a segment and those that may
be reasonably allocated from corporate activities. Presentation of
the segmental results is on a basis consistent with those used for
reporting Group results. The principal activities of the reportable
segments are as follows:
Performance Specialties
Which consists of:
Coatings: Production of rheological modifiers and additives for
decorative and industrial coatings.
Talc: Production and supply of talc for use in plastics, coatings,
technical ceramics and the paper sectors.
Personal Care
Production of rheological modifiers and compounded products,
including active ingredients for AP deodorants, for supply to
personal care manufacturers.
146 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
2. Operating segments continued
Segmental analysis for the year ended 31 December 2023
Coatings
$m
Performance
Specialties
totals
$m
Talc
$m
Personal
Care
$m
Segment
totals
$m
Central
costs
$m
2023
Revenue
Internal revenue
367.6
136.5
504.1
209.3
713.4
–
–
–
–
Revenue from external customers
367.6
136.5
504.1
209.3
Adjusted operating profit/(loss)
Adjusting items (see Note 5)
Operating profit/(loss)
56.1
(0.9)
55.2
14.0
(5.4)
8.6
70.1
(6.3)
63.8
50.3
(7.1)
43.2
–
713.4
120.4
(13.4)
107.0
Total
$m
713.4
–
713.4
103.9
(45.0)
58.9
(2.3)
4.4
(21.3)
(11.5)
(1.7)
26.5
Total
$m
1,074.2
163.3
101.8
20.0
13.4
30.8
42.1
65.8
–
–
–
(16.5)
(31.6)
(48.1)
Central
costs
$m
15.8
0.1
4.6
20.0
13.4
30.8
42.1
65.8
(21.3)
(13.0)
(2.9)
(117.9)
(81.9)
(36.2)
(264.7)
(264.7)
(13.6)
(9.0)
(13.6)
(9.0)
(138.7)
(138.7)
(2.1)
(465.3)
(272.7)
6.5
(2.6)
(2.1)
(664.1)
847.3
71.7
(54.9)
Personal
Care and
Coatings1
$m
763.0
135.8
77.4
–
–
–
–
–
976.2
(74.1)
(32.3)
(23.9)
–
–
–
–
–
2023
Segment
totals
$m
Talc
$m
295.4
1,058.4
27.4
19.8
163.2
97.2
–
–
–
–
–
–
–
–
–
–
(22.5)
(36.6)
(9.4)
(96.6)
(68.9)
(33.3)
–
–
–
–
–
–
–
–
–
–
(130.3)
845.9
13.6
(27.8)
(68.5)
274.1
51.6
(24.5)
(198.8)
1,120.0
65.2
(52.3)
342.6
1,318.8
192.6
1,511.4
Other expenses
Finance income
Finance expense
Tax
Loss from discontinued operations
Profit for the year
Fixed assets
Inventories
Trade and other receivables
Other tax recoverable
Derivatives
Tax assets
Retirement benefit surplus
Cash and cash equivalents
Total assets
Trade and other payables
Operating provisions
Lease liabilities
Bank overdrafts and loans
Current tax liabilities
Retirement benefit obligations
Deferred tax liabilities
Financial liabilities
Total liabilities
Net assets
Capital additions
Depreciation and amortisation
1 Due to the shared nature of the production facilities for the Personal Care segment and the Coatings business a split of assets and liabilities by segment is not
available and the cost to determine such a split would be prohibitive, therefore the assets and liabilities are shown in aggregate for these segments.
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
147
Notes to the consolidated financial statements
continued
2. Operating segments continued
Analysis by geography
2023
Revenue from external customers
Fixed assets
Capital additions
Depreciation and amortisation
North
America
$m
United
Kingdom
$m
231.8
652.5
10.0
(22.9)
24.8
30.6
4.9
(1.6)
Rest of
Europe
$m
263.4
316.7
51.6
(26.4)
Rest of
the World
$m
193.4
74.4
5.2
(4.0)
Total
$m
713.4
1,074.2
71.7
(54.9)
Revenue is based on the location of the customer. The Group’s largest customer accounts for 8.5% of revenue ($60.3m).
Segmental analysis for the year ended 31 December 2022
Revenue
Internal revenue
Revenue from external customers
Adjusted operating profit/(loss)
Adjusting items (see Note 5)
Operating profit/(loss)
Other expenses
Finance income
Finance expense
Tax
Profit from discontinued operations
Loss for the year
Coatings
$m
389.1
–
389.1
70.3
(4.1)
66.2
Performance
Specialties
totals
$m
524.9
–
524.9
69.9
(137.7)
(67.8)
Talc
$m
135.8
–
135.8
(0.4)
(133.6)
(134.0)
2022
Personal
Care
$m
211.5
–
211.5
49.0
(8.4)
40.6
Segment
totals
$m
736.4
–
736.4
118.9
(146.1)
(27.2)
Central
costs
$m
–
–
–
(18.4)
3.8
(14.6)
Total
$m
736.4
–
736.4
100.5
(142.3)
(41.8)
(1.3)
9.9
(21.6)
(7.8)
11.5
(51.1)
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Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
2. Operating segments continued
Fixed assets
Inventories
Trade and other receivables
Other tax recoverable
Derivatives
Tax assets
Retirement benefit surplus
Cash and cash equivalents
Segment assets
Assets classified as held for sale
Total assets
Trade and other payables
Operating provisions
Lease liabilities
Bank overdrafts and loans
Current tax liabilities
Retirement benefit obligations
Deferred tax liabilities
Financial liabilities
Segment liabilities
Liabilities classified as held for sale
Total liabilities
Net assets
Capital additions
Depreciation and amortisation
Personal
Care, and
Coatings1
$m
774.6
151.6
70.9
–
–
–
–
–
2022
Segment
totals
$m
1,034.0
181.9
88.1
–
–
–
–
–
Talc
$m
259.4
30.3
17.2
–
–
–
–
–
Central
costs
$m
12.6
0.1
6.8
17.5
12.0
31.8
26.4
54.9
997.1
306.9
1,304.0
162.1
(83.6)
(0.8)
(26.1)
(27.3)
(4.6)
(9.6)
(110.9)
(5.4)
(35.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(24.5)
(24.3)
(0.6)
(417.4)
(20.2)
(8.9)
(131.3)
(6.1)
(110.5)
(41.5)
(152.0)
(633.3)
888.6
18.3
(28.6)
265.4
17.1
(24.8)
1,152.0
(471.2)
35.4
(53.4)
3.2
(3.2)
Total
$m
1,046.6
182.0
94.9
17.5
12.0
31.8
26.4
54.9
1,466.1
160.9
1,627.0
(135.4)
(29.7)
(36.3)
(417.4)
(20.2)
(8.9)
(131.3)
(6.1)
(785.3)
(57.8)
(843.1)
783.9
38.6
(56.6)
1 Due to the shared nature of the production facilities for the Personal Care segment and the Coatings business a split of assets and liabilities by segment is not
available and the cost to determine such a split would be prohibitive. Assets and liabilities are therefore shown in aggregate for these segments.
Analysis by geography
2022
Revenue from external customers
Fixed assets
Capital additions
Depreciation and amortisation
North
America
$m
234.6
666.9
20.1
(24.0)
United
Kingdom
$m
23.2
26.4
6.0
(1.5)
Rest of
Europe
$m
250.3
280.9
5.3
(27.9)
Rest of
the World
$m
228.3
72.4
7.2
(3.2)
Total
$m
736.4
1,046.6
38.6
(56.6)
Revenue is based on the location of the customer. The Group’s largest customer accounts for 7.5% of revenue ($55.6m).
© 2020 Friend Studio Ltd
File name: Financials_XNotesX1_9_v98
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Elementis plc
Annual Report and Accounts 2023
149
Notes to the consolidated financial statements
continued
3. Finance income
Interest on bank deposits
Pension and other post
retirement liabilities
Fair value movement on derivatives
Interest on EU state aid receivable
Total finance income
4. Finance costs
Interest on bank loans
Unwind of discount on provisions
Interest on lease liabilities
Fair value movements on derivatives
Total finance costs
5. Adjusting items
Business transformation
Environmental provisions
Increase in provisions due
to additional remediation
work identified
Decrease in provisions due
to change in discount rate
Impairment of property,
plant and equipment
Impairment of goodwill
Amortisation of intangibles
arising on acquisition
Unrealised mark to market of
derivative financial instruments
Interest on EU state aid receivable
Tax credit in relation to adjusting items
2023
$m
0.5
1.0
1.5
1.4
4.4
2023
$m
17.5
1.4
1.3
1.1
21.3
2023
$m
26.1
6.6
(0.4)
–
–
12.7
45.0
1.1
(1.4)
(8.4)
36.3
2022
$m
0.2
0.6
9.1
–
9.9
2022
$m
19.5
0.7
1.4
–
21.6
2022
$m
4.8
3.4
(7.2)
23.0
103.4
14.9
142.3
(6.6)
–
(8.3)
127.4
A number of items have been recorded under ‘adjusting items’
by virtue of their size and/or one time nature, in line with our
accounting policy in Note 1, in order to provide additional useful
analysis of the Group’s results. The Group considers the adjusted
results to be an important measure used to monitor how the
businesses are performing as they achieve consistency and
comparability between reporting periods. The net impact of
these items on the Group profit before tax for the year is a debit
of $44.7m (2022: $135.7m). The items fall into a number of
categories, as summarised below:
Business transformation – In November 2020, the closure of
the Charleston plant was announced. Costs of $0.7m ($2.9m in
2022) associated with the closure of the site are classified as
an adjusting item and the site is planned to be disposed of in
the future. Since November 2020, $23.4m has been incurred
in relation to the closure of the site.
In September 2023, the Fit for Future organisation restructuring
programme was announced, for which a restructuring provision
of $25.4m was recognised in 2023; reflecting the discounted
future expected cash outflows for the programme. Total estimated
costs for the programme are $31.3m, of which $5.4m was utilised
in 2023. The programme is expected to be completed in 2025.
Environmental provisions – The Group’s environmental
provision is calculated on a discounted cash flow basis, reflecting
the time period over which spending is estimated to take place.
The movement in the provision relates changes in discount rates
which has resulted in the reduction of $0.4m to the liability
(2022: $7.2m), and extra remediation work identified in the
year which has resulted in a $6.6m increase to the liability
(2022: $3.4m). As these costs relate to non-operational facilities
they are classified as adjusting items.
Impairment of property, plant and equipment – In 2022 the
Group recognised a non-cash $23.0m impairment in respect of
non-operational bioleaching property, plant and equipment in the
Talc business. The Group determined that the operational, health
and safety and financial commitments required to operate the
equipment were not the best use of the Group’s resources.
Impairment of goodwill – In 2022, the performance of the Talc
business was adversely impacted by a lower demand environment,
global inflationary pressures, higher energy costs and the Russian
invasion of Ukraine. These factors, as well as a reduction in the
near term forecasted profitability of the Talc business and a rise
in the pre-tax discount rate resulted in an impairment charge of
$103.4m being recognised in 2022.
Amortisation of intangibles arising on acquisition –
Amortisation of $12.7m (2022: $14.9m) represents the charge in
respect of the Group’s acquired intangible assets. As in previous
years, these are included in adjusting items as they are a non-cash
charge arising from historical investment activities.
Unrealised mark to market of derivatives – The unrealised
movements in the mark to market valuation of financial instruments
that are not in hedging relationships are treated as adjusting items
as they are unrealised non-cash fair value adjustments that will not
affect the cash flows of the Group.
Interest on EU state aid receivables – Finance income of
$1.4m has been recognised in respect of interest due to the
Group if the EU state aid case settles in favour of the Group.
Refer to Note 30 for further details on the tax recoverable asset.
Tax on adjusting items – this is the net impact of tax relating to
the adjusting items listed above.
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5. Adjusting items continued
To support comparability with the financial statements as presented in 2023, a reconciliation to the adjusted consolidated income
statement is shown below.
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Other expenses
Finance income
Finance costs
Profit before income tax
Tax
Profit from continuing operations
Earnings per share
From continuing operations
Basic earnings (cents)
Diluted earnings (cents)
2023
Profit
and loss
$m
713.4
(429.1)
284.3
(108.7)
(116.7)
58.9
(2.3)
4.4
(21.3)
39.7
(11.5)
28.2
2023
Adjusting
items
$m
2023
Adjusted
profit
and loss
$m
–
–
–
–
45.0
45.0
–
(1.4)
1.1
44.7
(8.4)
36.3
713.4
(429.1)
284.3
(108.7)
(71.7)
103.9
(2.3)
3.0
(20.2)
84.4
(19.9)
64.5
4.8
4.7
6.2
6.1
11.0
10.8
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Elementis plc
Annual Report and Accounts 2023
151
Notes to the consolidated financial statements
continued
5. Adjusting items continued
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating (loss)/profit
Other expenses
Finance income
Finance costs
(Loss)/profit before income tax
Tax
(Loss)/profit from continuing operations
Earnings per share
From continuing operations
Basic (loss)/earnings (cents)
Diluted (loss)/earnings (cents)
2022
Profit
and loss
$m
736.4
(437.5)
298.9
(125.0)
(215.7)
(41.8)
(1.3)
9.9
(21.6)
(54.8)
(7.8)
(62.6)
2022
Adjusting
items
$m
–
–
–
–
142.3
142.3
–
(6.6)
–
135.7
(8.3)
127.4
2022
Adjusted
profit
and loss
$m
736.4
(437.5)
298.9
(125.0)
(73.4)
100.5
(1.3)
3.3
(21.6)
80.9
(16.1)
64.8
(10.7)
(10.7)
21.8
21.6
11.1
10.9
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5. Adjusting items continued
To support comparability with the financial statements as presented in 2023, a reconciliation from operating profit/(loss) to adjusted
operating profit/(loss) by segment is shown below for each year.
Operating profit/(loss)
Adjusting items:
Business transformation
Increase in environmental
provisions due to additional
remediation work identified
Decrease in environmental provisions
due to change in discount rate
Amortisation of intangibles
arising on acquisition
Adjusted operating profit/(loss)
Coatings
$m
55.2
0.7
–
–
0.2
56.1
Talc
$m
8.6
–
–
–
5.4
14.0
2023
Performance
Specialties
totals
$m
Personal
Care
$m
Segment
totals
$m
63.8
43.2
107.0
Central
costs
$m
(48.1)
Total
$m
58.9
0.7
–
–
5.6
70.1
–
–
–
0.7
25.4
26.1
–
–
6.6
6.6
(0.4)
(0.4)
7.1
50.3
12.7
120.4
–
(16.5)
12.7
103.9
Operating profit/(loss)
Adjusting items:
Business transformation
Increase in environmental
provisions due to additional
remediation work identified
Decrease in environmental provisions
due to change in discount rate
Impairment of property,
plant and equipment
Impairment of goodwill
Amortisation of intangibles
arising on acquisition
Adjusted operating profit/(loss)
Coatings
$m
Talc
$m
Performance
Specialties
totals
$m
69.2
(134.0)
(64.8)
2.9
1.9
4.8
–
–
–
–
1.2
73.3
–
–
23.0
103.4
5.3
(0.4)
–
–
23.0
103.4
6.5
72.9
2022
Personal
Care
$m
44.4
–
–
–
–
–
8.4
52.8
Segment
totals
$m
(20.4)
Central
costs
$m
(21.4)
Total
$m
(41.8)
4.8
–
4.8
–
–
23.0
103.4
14.9
125.7
3.4
(7.2)
–
–
–
(25.2)
3.4
(7.2)
23.0
103.4
14.9
100.5
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Elementis plc
Annual Report and Accounts 2023
153
Notes to the consolidated financial statements
continued
6. Income tax expense
Current tax:
UK corporation tax
Overseas corporation tax
Adjustments in respect of prior years:
United Kingdom
Overseas
Total current tax
Deferred tax:
United Kingdom
Overseas
Adjustment in respect of prior years:
United Kingdom
Overseas
Total deferred tax
Income tax expense for the year
Comprising:
Income tax expense for the year
Adjusting items1:
Overseas taxation on adjusting items
UK taxation on adjusting items
Taxation on adjusting items
Income tax expense for the year after adjusting items
1 See Note 5 for details of adjusting items.
2023
$m
6.2
8.7
(0.7)
(3.0)
11.2
(0.2)
(1.6)
–
2.1
0.3
11.5
11.5
(4.0)
(4.4)
(8.4)
19.9
2022
$m
11.2
6.5
(0.6)
(3.8)
13.3
3.1
(8.4)
–
(0.2)
(5.5)
7.8
7.8
(6.3)
(2.0)
(8.3)
16.1
The tax charge on profits represents an effective rate of 29.0% (2022: 14.2%) and an effective tax rate after adjusting items of 23.5%
(2022: 20.0%).
The tax impact of the adjusting items outlined within Note 5 and within the consolidated income statement relates to the following:
Business transformation
Environmental provisions
Impairment of property, plant and equipment
Impairment of goodwill
Mark to market of derivative financial instruments
Interest on EU state aid receivable
Amortisation of intangibles arising on acquisition
Reversal of uncertain tax provision
Tax charge
2023
Gross
$m
26.1
6.2
–
–
1.1
(1.4)
12.7
–
44.7
2023
Tax impact
$m
5.2
1.3
–
–
0.2
(0.4)
2.1
–
8.4
2022
Gross
$m
4.8
(3.8)
23.0
103.4
(6.6)
–
14.9
–
135.7
2022
Tax impact
$m
1.1
(0.7)
4.9
–
(1.3)
–
2.9
1.4
8.3
The Group is international and has operations across a range of jurisdictions. Accordingly, tax charges of the Group in future periods will
be affected by the profitability of operations in different jurisdictions and changes to tax rates and regulations in the jurisdictions within
which the Group has operations. The Group’s adjusted effective tax rate in 2023 is higher than the prior year due to an increase in the
UK corporation tax rate to 25% from April 2023. The medium-term expectation for the Group’s adjusted effective tax rate is around 26%.
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Shareholder Information
6. Income tax expense continued
On 20 December 2021 the OECD published its Global Anti-Base Erosion Model Rules (Pillar Two). The report provided a model for a
coordinated system of taxation that imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined
on a jurisdictional basis, is below the minimum tax rate of 15%. The UK enacted legislation to enshrine this into domestic law in July 2023.
The Group is below the revenue threshold for the legislation to apply and therefore there is no impact on the financial statements.
The total charge for the year can be reconciled to the accounting profit as follows:
Profit/(loss) before tax
Tax at 23.5% (2022: 19.00%)
Difference in overseas effective tax rates
Income not taxable
Expenses not deductible for tax purposes
Adjustments in respect of prior years
Tax rate changes
Tax associated with disposal of discontinued operations
Movement in unrecognised deferred tax
Total charge and effective tax rate for the year
2023
$m
39.7
9.4
1.9
–
7.1
(1.5)
–
(12.8)
7.4
11.5
2023
%
23.5
4.9
–
17.9
(3.7)
–
(32.2)
18.6
29.0
7. Profit/(loss) from continuing operations
Profit from continuing operations of $28.2m (2022: loss of $62.6m) has been arrived at after charging/(crediting):
Employee costs (see Note 8)
Net foreign exchange gains
Research and development costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Total depreciation and amortisation expense
(Loss)/profit on disposal of property, plant and equipment
Write off of inventory
Cost of inventories recognised as expense
Fees payable to company’s auditors and its associates:
Audit of company1
Audit of subsidiaries1
Audit related services – interim review1
1 Includes auditing of the financial statements.
2022
$m
(54.8)
(10.4)
2.3
(0.4)
21.8
(4.6)
0.2
–
(1.1)
7.8
2023
$m
131.2
(0.6)
7.8
41.6
13.3
54.9
(0.8)
4.6
2022
%
(19.0)
4.2
(0.7)
39.7
(8.4)
0.4
–
(2.0)
14.2
2022
$m
133.1
(1.3)
8.1
41.2
15.4
56.6
0.3
3.0
295.9
302.9
1.2
0.9
0.3
1.4
1.0
0.3
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Elementis plc
Annual Report and Accounts 2023
155
Notes to the consolidated financial statements
continued
8. Employees
Employee costs:
Wages and salaries
Social security costs
Pension costs
Share based payment costs
Total employee costs
Number of shares:
2023
$m
110.4
9.0
7.4
4.4
2022
$m
113.2
9.6
7.2
3.1
131.2
133.1
Weighted average number of
shares for the purposes of basic
earnings per share
Effect of dilutive share options
Weighted average number of
shares for the purposes of
diluted earnings per share
2023
m
2022
m
585.7
11.2
582.6
9.7
596.9
592.3
Average number of FTE employees1:
Personal Care and Coatings
Talc
Central
Total
2023
Number
1,031
228
19
1,278
2022
Number
1,076
235
17
1,328
1 Full time equivalent includes contractors.
The aggregate amount of Directors’ remuneration (salary, bonus
and benefits) is shown in the Remuneration Report on page 112:
The aggregate amount of gains made by Directors on exercise
of share options was $nil (2022: $nil).
The remuneration of the highest paid Director was $3.4m
(2022: $2.7m).
Payments have been made to a defined contribution
pension scheme on behalf of 1 Director (2022: 1 Director).
For the highest paid Director, pension contributions of
$0.2m (2022: $0.2m) were made.
9. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the parent is
based on the following:
Earnings:
The dilutive (loss)/earnings per share calculation for 2022 in the
table below, does not include the impact of the 9.7m dilutive share
options, as the inclusion of these potential shares would have an
anti-dilutive impact on the diluted loss per share from continuing
operations; it would decrease the diluted loss per share from
continuing operations.
Earnings per share:
Earnings per share from
continuing operations:
Basic earnings/(loss)
Diluted earnings/(loss)
Basic after adjusting items
Diluted after adjusting items
Earnings per share from
discontinued operations:
Basic (loss)/earnings from
discontinued operations
Diluted (loss)/earnings from
discontinued operations
Earnings per share
from continuing and
discontinued operations:
2023
cents
2022
cents
4.8
4.7
11.0
10.8
(0.3)
(0.3)
(10.7)
(10.7)
11.1
10.9
2.0
2.0
Adjusted earnings
Adjusting items net of tax
Earnings/(loss) for the purpose
of basic earnings per share
(Loss)/earnings from
discontinued operations
Earnings/(loss) from continuing
and discontinued operations
2023
$m
64.5
(36.3)
2022
$m
64.8
(127.4)
Basic earnings/(loss) from continuing
and discontinued operations
Diluted earnings/(loss) from continuing
and discontinued operations
4.5
4.4
(8.8)
(8.8)
28.2
(62.6)
(1.7)
11.5
26.5
(51.1)
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10. Goodwill and other intangible assets
Cost:
At 1 January 2022
Exchange differences
Additions
Transferred to assets held for sale
At 31 December 2022
Exchange differences
Additions
At 31 December 2023
Amortisation and impairment:
At 1 January 2022
Exchange differences
Charge for the year
Impairment
Transferred to assets held for sale
At 31 December 2022
Exchange differences
Charge for the year
Impairment
At 31 December 2023
Carrying amount:
At 31 December 2023
At 31 December 2022
At 1 January 2022
Goodwill
$m
Brand
$m
Customer
lists
$m
Other
intangible
assets
$m
Total
$m
725.6
(26.2)
–
–
699.4
12.8
–
712.2
112.6
2.5
–
103.4
–
218.5
11.4
–
–
26.9
(1.6)
–
–
25.3
0.1
–
25.4
3.2
(0.7)
–
–
–
2.5
–
–
–
229.9
2.5
166.4
(3.2)
–
–
163.2
1.8
–
104.6
1,023.5
(3.3)
0.2
(2.6)
98.9
2.5
0.1
(34.3)
0.2
(2.6)
986.8
17.2
0.1
165.0
101.5
1,004.1
39.6
(1.9)
8.8
–
–
46.5
1.5
8.6
–
56.6
52.4
1.4
6.9
–
(1.6)
59.1
0.7
4.7
–
207.8
1.3
15.7
103.4
(1.6)
326.6
13.6
13.3
–
64.5
353.5
482.3
480.9
613.0
22.9
22.8
23.7
108.4
116.7
126.8
37.0
39.8
52.2
650.6
660.2
815.7
The net book value of customer lists includes $82.6m (2022: $89.3m) in relation to the acquisition of SummitReheis which have remaining
lives of between 3 and 18 years (2022: between 4 and 19 years) and $25.9m (2022: $27.5m) in relation to the acquisition of Mondo
Minerals which have remaining lives of 10 years (2022: 11 years).
The brand intangibles represent the value ascribed to the trading name and reputation of the Deuchem, Fancor, Watercryl, Hi-Mar and
SummitReheis acquisitions. The Group, with the exception of SummitReheis, considers these to have significant and ongoing value to
the business that will be maintained and it is therefore considered appropriate to assign these assets an indefinite useful life. The brand
relating to SummitReheis has been amortised over a period of three years, and is fully amortised.
The carrying amount of brand intangibles with an indefinite useful life is $22.9m (2022: $22.8m). Brand intangibles with an indefinite
useful life are tested annually for impairment as part of the annual goodwill impairment test and have been allocated to the Personal
Care and Coatings CGUs.
Included within other intangible assets above are technology related intangible assets of $28.3m (2022: $30.1m) arising from the
acquisition of Mondo Minerals which have remaining useful lives of 10 years (2022: 11 years), and know how related intangible assets
of $4.5m (2022: $6.2m) which have remaining useful lives of between 3 and 4 years (2022: 4 and 5 years).
The remaining intangible assets comprise the value ascribed to customer lists, patents and non-compete clauses, which are being
amortised over periods of 5 to 24 years.
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Elementis plc
Annual Report and Accounts 2023
157
Notes to the consolidated financial statements
continued
Discount rates
Management estimates discount rates using pre-tax rates that
reflect current market assessments of the time value of money
and the risks specific to the CGUs.
Personal Care
The recoverable amount of the CGU was calculated using forecast
cash flows based on budgets and plans for 2024 to 2028,
a pre-tax discount rate of 12.8% (2022: 12.0%) and a long-term
growth rate of 5.0% (2022: 5.0%) based on the long term
historical growth rate seen in this CGU. The recoverable amount
exceeded the carrying value of the CGU by $211.7m (2022:
$230.9m). The Directors do not consider that any reasonably
possible changes to the key assumptions would reduce the
recoverable amount to its carrying value.
Coatings
The recoverable amount of the CGU was calculated using forecast
cash flows based on budgets and plans for 2024 to 2028,
a pre-tax discount rate of 12.4% (2022: 11.9%) and a long-term
growth rate of 3.0% (2022: 3.0%). The recoverable amount
exceeded the carrying value of the CGU by $402.1m (2022:
$531.8m). The Directors do not consider that any reasonably
possible changes to the key assumptions would reduce the
recoverable amount to its carrying value.
10. Goodwill and other intangible assets
continued
Goodwill and brand intangibles with an indefinite useful life
impairment testing
Goodwill and brand intangibles with an indefinite useful life are
allocated to the Group’s cash-generating units (CGUs) as follows:
Personal Care
Coatings
At 31 December
2023
$m
296.6
208.6
505.2
2022
$m
296.0
207.7
503.7
The Group tests annually for impairment at 31 October, or more
frequently, if there are events or circumstances that indicate that
the carrying amount may not be recoverable.
Basis of the recoverable amount
The recoverable amounts of the Group’s CGUs are determined
from value in use calculations which use cash flow projections
based on financial budgets approved by the directors covering
a five year period.
Management’s judgement in estimating the cash flows of a CGU
The key assumptions for the value in use calculations are expected
changes to sales volumes, selling prices and direct costs during
the forecast period, growth rates used to extrapolate beyond the
forecast period and the discount rates applied to the resulting cash
flows. Changes in sales volumes, selling prices and direct costs
are based on past practices and expectations of future changes
in the market. A 5 year forecasting model is used for all CGUs.
Growth rates
Cash flows for periods beyond the forecast period are extrapolated
based on estimated long-term growth rates. The rates do not
exceed the average long-term growth rate for the relevant
products or markets.
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Financial Statements
Shareholder Information
11. Property, plant and equipment
Land and
buildings
$m
Plant and
machinery
$m
Fixtures
fittings and
equipment
$m
Under
construction
$m
Land and
buildings
$m
Plant and
machinery
$m
Fixtures
fittings and
equipment
$m
Right-of-use assets
Cost:
At 1 January 2022
127.1
680.6
Additions
Exchange differences
Disposals
Reclassifications
Transferred to assets
held for sale
At 31 December 2022
Additions
Exchange differences
Disposals
Reclassifications
–
(5.0)
–
1.6
(34.0)
89.7
1.5
1.8
(0.8)
7.9
13.5
(25.1)
(5.7)
33.5
(186.2)
510.6
62.3
13.3
(6.4)
15.1
At 31 December 2023
100.1
594.9
Accumulated
depreciation and
impairment losses:
At 1 January 2022
Charge for the year
Exchange differences
Disposals
Impairment losses
Reclassifications
Transferred to assets
held for sale
At 31 December 2022
Charge for the year
Exchange differences
Disposals
Impairment losses
Reclassifications
66.4
2.6
(2.5)
–
–
0.4
(26.4)
40.5
2.1
1.2
(0.8)
–
–
330.3
39.6
(10.9)
(4.9)
23.0
3.2
(134.3)
246.0
33.0
6.1
(6.1)
–
1.0
At 31 December 2023
43.0
280.0
Net book value:
At 31 December 2023
At 31 December 2022
At 1 January 2022
57.1
49.2
60.7
314.9
264.6
350.3
43.8
–
(1.4)
(0.2)
1.6
(11.7)
32.1
0.1
0.1
(0.3)
0.5
32.5
34.8
1.6
(0.7)
(0.2)
–
(3.6)
(8.6)
23.3
1.2
0.1
(0.2)
–
(1.0)
23.4
9.1
8.8
9.0
45.1
33.4
(1.6)
–
(36.7)
(7.3)
32.9
2.7
0.2
–
(23.5)
12.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.3
32.9
45.1
53.7
4.0
(0.9)
(1.5)
–
–
55.3
4.1
0.5
(5.5)
–
54.4
23.1
4.1
(0.3)
(0.7)
–
–
–
26.2
4.1
0.3
(4.9)
–
–
25.7
28.7
29.1
30.6
6.0
0.8
(0.3)
(1.5)
–
(0.8)
4.2
0.3
0.1
(2.3)
–
2.3
2.8
0.9
–
(0.1)
–
–
(0.6)
3.0
0.9
0.1
(2.3)
–
–
1.7
0.6
1.2
3.2
2.9
0.5
–
–
–
(0.6)
2.8
0.7
0.2
(1.9)
–
1.8
2.1
0.5
–
–
–
–
(0.4)
2.2
0.3
–
(1.6)
–
–
0.9
0.9
0.6
0.8
Total
$m
959.2
52.2
(34.3)
(8.9)
–
(240.6)
727.6
71.7
16.2
(17.2)
–
798.3
459.5
49.3
(14.4)
(5.9)
23.0
–
(170.3)
341.2
41.6
7.8
(15.9)
–
–
374.7
423.6
386.4
499.7
Group capital expenditure contracted but not provided for in these financial statements amounted to $nil (2022: $nil).
In 2022, the Group recognised a $23.0m non-cash impairment of the non-operational bioleaching property, plant and equipment
acquired as part of the Mondo Minerals acquisition, impairing the asset to a nil carrying value. The impairment was a result of the Group
concluding that the operational, health and safety and financial commitments required to operate the equipment were not the best use
of the Group’s resources.
In 2023 and 2022, the Group reclassified items of property, plant and equipment from under construction to their relevant categories
upon the assets becoming available for use.
In 2023, additions for the year included $28.4m related to the non-cash rehabilitation and closure provisions (see Note 15).
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159
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Notes to the consolidated financial statements
continued
12. Inventories
14. Trade and other payables
Raw materials and consumables
Work in progress
Finished goods and goods
purchased for resale
At 31 December
2023
$m
43.9
7.2
112.2
163.3
2022
$m
55.4
10.7
115.9
182.0
Inventories are disclosed net of provisions for obsolescence of
$6.1m (2022: $5.6m).
13. Trade and other receivables
Trade receivables
Other receivables
Prepayments
At 31 December
2023
$m
80.1
13.5
8.2
101.8
2022
$m
77.5
10.4
7.0
94.9
The Group entered into an accounts receivable purchase
programme. The net balance outstanding in relation to this
programme was $19.8m (2022: $22.6m).
15. Provisions
At 1 January 2023
Increase/(decrease) in provisions
Unused amounts reversed
Unwinding of discount
Utilised during the year
Currency translation differences
At 31 December 2023
Due within 1 year
Due after 1 year
Trade payables
Other payables
Accruals
At 31 December
2023
$m
60.5
14.2
43.2
2022
$m
74.0
13.5
47.9
117.9
135.4
The Group entered into supplier financing arrangements with
Santander and US Bank. At the end of the period the net balance
outstanding on the Santander facility was $nil (2022: $nil)
and the net balance outstanding on the US bank facility was
$0.8m (2022: $0.5m).
Environmental
$m
Self insurance
$m
Restructuring
$m
27.5
34.6
–
1.5
(4.4)
1.3
60.5
4.5
56.0
0.5
0.5
–
–
(0.5)
–
0.5
0.3
0.2
0.6
25.4
(0.6)
–
(5.4)
0.1
20.1
15.9
4.2
Other
$m
1.1
–
(0.4)
–
–
0.1
0.8
0.8
–
Total
$m
29.7
60.4
(1.0)
1.5
(10.3)
1.5
81.9
21.5
60.4
Environmental provisions include restoration provisions relating to manufacturing and distribution sites including certain sites no longer
owned by the Group, as well as rehabilitation and closure provisions related to the mining activities of the Talc business.
Restoration provisions have been derived using a discounted cash flow methodology and reflect the extent to which it is probable that
expenditure will be incurred over the next 25 years. The level of these provision are based on management’s best estimate of the most
likely outcome for each individual exposure. These provisions are discounted using discount rates which reflect market assessments
and the risks specific to the liabilities. The discount rates used were 4.0% in the US, 4.1% in the UK and 3.0% in Canada. Included
within these provisions are amounts in respect of all anticipated costs related to the closure and remediation of the Eaglescliffe site.
Rehabilitation and closure provisions have been derived using a discounted cash flow methodology and reflects management’s best
estimate of the current obligation for restoration and closure of mining sites in Finland, excluding passive mines, in line with latest best
practice guidelines and Finnish mining regulatory guidelines. The provisions will not be utilised until the mines are closed. The provisions
are discounted using discount rates which reflect market assessments and the risks specific to the liabilities. The discount rate used
was 2.7%.
The following table shows the timeframes over which undiscounted costs in relation to all environmental provisions are expected to
be incurred:
Environmental provisions
160 Elementis plc
Annual Report and Accounts 2023
1-10 years
$m
11-20 years
$m
20-25 years
$m
25+ years
$m
46.8
29.3
12.4
13.1
Total
$m
101.6
© 2020 Friend Studio Ltd
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
15. Provisions continued
Additional environmental provisions of $35.0m were recognised due to extra remediation and rehabiliation work identified during the year,
which was offset by a reduction of $0.4m due to changes in the discount rates used. $6.2m of overall increase in provisions is included
within adjusting items (see Note 5) with $28.4m included as an addition to property, plant and equipment (see Note 11). If the cost
estimates on which the provisions are based were to change by 10%, which is reasonably possible, the provisions recognised would
increase by approximately $5.9m.
Whilst a range of outcomes is possible, the Directors believe that the reasonably possible range for the environmental provision is from
$59.6m to $66.9m.
Self-insurance provisions relate to personal injury and other claims from former employees or third parties and represent the aggregate
of outstanding claims plus a projection of losses incurred but not yet reported which together make up the full liability recognised as
a provision. Insurance recoveries are recognised as a separate reimbursement asset. The self-insurance provisions are expected to
be utilised within five years.
Restructuring provisions relate to costs of adjusting head count and other costs of restructuring where a need to do so has been
identified by management. Additional restructuring provisions of $25.4m were recognised due costs related to the Fit for the Future
programme which was announced during the year. This additional restructuring provision is included within adjusting items (see Note 5).
The additional restructuring provisions are based on management’s best estimate of the cash outflow required to settle the obligation.
The restructuring provisions are discounted using discount rates which reflect market assessments and the risks specific to the liability
in the jurisdiction in which the provision has been recognised. If the cost estimates on which the additional restructuring provisions are
based were to change by 10%, which is reasonably possible, the provision recognised would increase by approximately $2.5m.
16. Deferred tax
At 1 January 2022
Credit/(charge) to the income statement
Credit to other comprehensive income
Credit to retained earnings
Currency translation differences
Transferred to assets/(liabilities)
held for sale
At 31 December 2022
(Charge)/credit to the income statement
(Charge)/credit to other
comprehensive income
Credit to retained earnings
Disposal
Currency translation differences
At 31 December 2023
Deferred tax assets
Deferred tax liabilities
Retirement
benefit plans
$m
(12.4)
–
5.3
–
1.7
(0.7)
(6.1)
(0.5)
(2.8)
–
–
(0.3)
(9.7)
–
(9.7)
Accelerated
tax
depreciation
$m
Amortisation
of US
goodwill
$m
Other
intangible
assets
$m
Other
temporary
differences
$m
Unrelieved
tax losses
$m
(42.8)
(0.1)
–
–
(0.1)
8.7
(63.4)
(31.4)
0.4
–
–
–
–
2.0
–
–
1.5
–
(34.3)
(63.0)
(27.9)
(4.8)
0.2
2.0
–
–
3.2
(3.7)
(39.6)
–
–
–
–
(62.8)
–
–
–
(0.7)
(26.6)
–
–
–
(39.6)
(62.8)
(26.6)
20.1
0.6
0.8
0.4
(0.2)
(6.5)
15.2
0.8
(0.6)
(1.4)
–
2.4
16.4
16.4
–
7.9
1.5
–
–
0.2
–
9.6
(6.1)
–
–
–
(0.3)
3.2
3.2
–
Total
$m
(122.0)
4.4
6.1
0.4
3.1
1.5
(106.5)
(8.4)
(3.4)
(1.4)
3.2
(2.6)
(119.1)
19.6
(138.7)
Deferred tax assets have been recognised to the extent that it is considered more likely than not that there will be taxable profits from
which the future reversal of the underlying timing differences can be deducted. Where this is not the case, deferred tax assets have not
been recognised.
Deferred tax liabilities are reduced for any deferred tax assets which exist within a jurisdiction where consolidated tax returns are filed
and where tax assets and liabilities may be netted.
At the balance sheet date the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which
deferred tax liabilities have not been recognised was $30.9m (2022: $37.9m). No liability has been recognised in respect of these
differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers
that it is probable that such differences will not reverse in the foreseeable future. As at the balance sheet date the Group had an
unrecognised deferred tax asset of $4.5m (gross $21.4m) (2022: $4.5m (gross $21.4m)) in relation to restricted US interest deductions,
an unrecognised deferred tax asset of $4.9m (gross $24.6m) (2022: $3.8m (gross $18.9m)) in relation to restricted Finnish interest
deductions and an unrecognised deferred tax asset of $11.1m (gross $33.7m) (2022: $8.6m (gross $26.1m)) in respect of German
net operating losses.
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Annual Report and Accounts 2023
161
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Modification Date: 12 March 2024 5:26 pm
Notes to the consolidated financial statements
continued
17. Share capital
At 1 January
Issue of shares
At 31 December
2023
$m
52.3
0.2
52.5
2022
$m
52.2
0.1
52.3
At 31 December 2023, the Group held 1,458,404 (2022: 258,404) Elementis plc shares through the Employee Share Options Trust with
a value of $1.8m (2022: $0.2m). These shares are held to settle share options and awards granted to employees. Refer to Note 26 for
further details.
18. Other reserves
At 1 January 2022
Share based payments
Exchange differences
Fair value of cash flow hedges transferred to the income statement
Effective portion of changes in fair value of cash flow hedges
Fair value of cash flow hedges transferred to net assets
Transfer
At 31 December 2022
Share based payments
Exchange differences
Fair value of cash flow hedges transferred to the income statement
Effective portion of changes in fair value of cash flow hedges
Fair value of cash flow hedges transferred to net assets
Recycle deferred foreign exchange losses on disposal
Transfer
At 31 December 2023
Capital
redemption
reserve
$m
Translation
reserve
$m
Hedging
reserve
$m
158.8
(67.7)
(8.6)
–
–
–
–
–
–
–
(54.7)
–
–
–
–
–
–
1.6
(2.6)
0.8
7.8
158.8
(122.4)
(1.0)
–
–
–
–
–
–
–
–
9.7
–
–
–
9.3
–
158.8
(103.4)
–
–
12.7
(6.3)
0.5
–
–
5.9
Share
options
reserve
$m
8.2
3.4
Total
$m
90.7
3.4
(0.9)
(55.6)
–
–
–
(4.0)
6.7
4.2
0.2
–
–
–
–
(2.3)
8.8
1.6
(2.6)
0.8
3.8
42.1
4.2
9.9
12.7
(6.3)
0.5
9.3
(2.3)
70.1
The Company can redeem shares by repaying the market value to the shareholder, whereupon the shares are cancelled. Redemption
must be from distributable profits. The capital redemption reserve represents the nominal value of the shares redeemed.
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred. The transfer from the hedging reserve to retained earnings is as a result
of adjusting the hedging reserve to reflect the balance of open cash flow hedges at the end of the year.
The share options reserve comprises amounts accumulated in equity in respect of share options and awards granted to employees.
The transfers from the share options reserve to retained earnings is as a result of the exercise and expiry of share options and awards
during the year.
162 Elementis plc
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Strategic Report
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Financial Statements
Shareholder Information
19. Borrowings
Bank loans
Unamortised syndicate loan fees
Short-term borrowings
Carrying value of borrowings at 31 December
The borrowings are repayable as follows:
Within one year
Within two to four years
In the fifth year
The weighted average interest rates paid were as follows:
Bank loans
Group borrowings were denominated as follows:
US dollar
Euro
Total bank loans
2023
$m
267.8
(3.1)
–
264.7
71.6
196.2
–
267.8
2023
%
5.8
2023
$m
110.0
157.8
267.8
2022
$m
419.0
(4.3)
2.7
417.4
2.7
419.0
–
421.7
2022
%
3.0
2022
$m
233.1
185.9
419.0
The Group’s bank loans include term loans and a revolving credit facility (“RCF”). The term loans mature in June 2026. $71.6m of the
RCF matures in September 2024 and $303.4m in September 2025.
The US dollar borrowings comprised of a fully drawn $100.0m term loan (2022: $150.0m) and $10.0m of RCF drawings (2022: $83.1m).
The euro borrowings comprised a fully drawn €142.9m term loan (2022: €142.9m) and €nil of RCF drawings (2022: €31.4m).
The RCF and term loans are governed by the Group’s bank syndicate facilities agreement, under which certain Group entities act as
guarantors. The guarantors to the facilities agreement are required to constitute at least 75% of the Group’s total fixed assets plus
current assets less current liabilities and 75% of the Group’s profits before interest expense and tax.
Each guarantor irrevocably and unconditionally jointly and severally guarantees the punctual performance under the Group’s bank
syndicate facilities agreement. There are no fixed or floating charges over assets.
20. Cash and cash equivalents
Cash and cash equivalents for the purpose of the consolidated cash flow statement comprise the following:
Cash at bank and on hand at 31 December
2023
$m
65.8
2022
$m
54.9
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
163
Notes to the consolidated financial statements
continued
21. Financial instruments
At 31 December 2023:
Current:
Trade and other receivables (see Note 13)
Derivative financial instruments (see Note 22)1
Cash and cash equivalents (see Note 20)
Non-current:
Derivative financial instruments (see Note 22)1
Financial assets
Current:
Bank overdrafts and loans (see Note 19)
Trade and other payables (see Note 14)
Derivative financial instruments (see Note 22)1
Lease liabilities (see Note 24)
Non-current:
Loans and borrowings2 (see Note 19)
Lease liabilities (see Note 24)
Derivative financial instruments (see Note 22)1
Financial liabilities
Total
At 31 December 2022:
Current:
Trade and other receivables (see Note 13)
Derivative financial instruments (see Note 22)1
Cash and cash equivalents (see Note 20)
Non-current:
Derivative financial instruments (see Note 22)1
Financial assets
Current:
Bank overdrafts and loans (see Note 19)
Trade and other payables (see Note 14)
Derivative financial instruments (see Note 22)1
Lease liabilities (see Note 24)
Non-current:
Loans and borrowings2 (see Note 19)
Lease liabilities (see Note 24)
Derivative financial instruments (see Note 22)1
Financial liabilities
Total
Held at fair value
Held at amortised cost
Through
profit
and loss
$m
Derivatives
used for
hedging
$m
Loans and
receivables
$m
Liabilities
$m
Total
book value
$m
Total
fair value
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.4
–
93.6
–
65.8
6.0
13.4
–
159.4
–
–
–
–
–
93.6
7.4
65.8
93.6
7.4
65.8
6.0
172.8
6.0
172.8
–
–
–
–
–
–
(2.1)
(2.1)
11.3
–
–
–
–
–
–
–
–
159.4
–
(117.9)
–
(5.9)
(264.7)
(30.3)
–
(418.8)
(418.8)
–
(117.9)
–
(5.9)
(264.7)
(30.3)
(2.1)
(420.9)
(248.1)
–
(117.9)
–
(5.9)
(267.8)
(30.3)
(2.1)
(424.0)
(251.2)
Held at fair value
Held at amortised cost
Through
profit
and loss
$m
Derivatives
used for
hedging
$m
Loans and
receivables
$m
Liabilities
$m
Total
book value
$m
Total
fair value
$m
–
6.9
–
–
6.9
–
–
(0.5)
–
–
–
(0.5)
6.4
–
3.8
–
1.3
5.1
–
–
(2.8)
–
–
–
(2.8)
(5.6)
(0.5)
87.9
–
54.9
–
142.8
–
–
–
–
–
–
–
–
142.8
–
–
–
–
–
87.9
10.7
54.9
87.9
10.7
54.9
1.3
154.8
1.3
154.8
(2.7)
(135.4)
–
(6.1)
(414.7)
(30.2)
–
(589.1)
(589.1)
(2.7)
(135.4)
(3.3)
(6.1)
(414.7)
(30.2)
(2.8)
(595.2)
(440.4)
(2.7)
(135.4)
(3.3)
(6.1)
(419.0)
(30.2)
(2.8)
(599.5)
(444.7)
1 Derivatives in an asset and liability position at 31 December 2023 and 31 December 2022 are shown within current or non current financial assets and current or
non current financial liabilities in the consolidated balance sheet.
2 The total book value of loans and borrowings are shown net of facility fees of $3.1m (2022: $4.3m).
164 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
21. Financial instruments continued
Fair values measurement and hierarchy
Basis for determining fair values
The Group measures fair values in respect of financial instruments
in accordance with IFRS 13, using the following fair value hierarchy
that reflects the significance of the inputs used in making the
measurements:
Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
Level 2: Valuation techniques based on observable inputs,
either directly or indirectly.
Level 3: Valuation techniques using significant unobservable
inputs. This category includes contingent consideration.
The following summarises the significant methods and
assumptions used in estimating the fair values of
financial instruments:
The Group assesses that the fair values of cash and cash
equivalents, trade and other receivables, trade and other
payables, and the current portion of floating rate bank and other
borrowings, approximate to book values due to the short maturity
periods of these financial instruments. For trade and other
receivables, allowances are made within their book value for credit
risk. The fair values of lease liabilities approximate to their book
values due to the measurement of lease liabilities at the Group’s
incremental borrowing rate, which has not changed significantly
since the inception of the lease liabilities presented. Leases are
also negotiated at market rates with independent, unrelated third
parties and are subject to periodic rental reviews.
Derivatives (Level 2)
Fair value is estimated by discounting the difference between the
contractual forward price and the current forward price for the
residual maturity of the contract using a risk free interest rate
(based on government bonds).
Non-derivative non-current financial liabilities (Level 2)
Fair value is calculated based on the present value of future
principal and interest cash flows, discounted at the market
rate of interest at the reporting date.
The following table shows amounts recognised in profit or loss in
relation to financial assets and liabilities within the scope of IFRS 9:
Recognised in profit or loss
Revenue – fair value of cash flow
hedges transferred from equity
to the income statement
Interest income on bank deposits
held at amortised cost
Fair value movement on derivatives
Financial income
Interest on bank loans
Fair value of cash flow hedges
transferred from equity to the
income statement
Fair value movement on derivatives
Interest on lease liabilities
Financial costs
2023
$m
2022
$m
0.4
1.7
0.5
1.5
2.0
0.2
9.1
9.3
(23.4)
(19.6)
5.9
(1.1)
(1.3)
(19.9)
0.1
–
(1.4)
(20.9)
The following table shows amounts recognised directly in equity in
relation to financial assets and liabilities within the scope of IFRS 9:
Recognised directly in equity
Effective portion of changes in fair
value of cash flow hedge (gain/(loss))
Fair value of cash flow hedges
transferred to income statement
Fair value of cash flow hedges
transferred to net assets
Effective portion of change in fair
value of net investment hedge
Foreign currency translation
differences for foreign operations
Recycle deferred foreign exchange
losses on disposal of subsidiary
Recognised in:
Hedging reserve
Translation reserve
2023
$m
2022
$m
12.7
(2.6)
(6.3)
0.5
1.6
0.8
14.8
46.2
(5.1)
(100.9)
9.3
6.9
19.0
(0.2)
(54.7)
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
165
Notes to the consolidated financial statements
continued
22. Derivative financial instruments and hedging activities
At 31 December 2023:
Current:
Interest rate swaps – cash flow hedges
Interest rate swaps
Nickel swaps – cash flow hedges
Aluminium swaps – cash flow hedges
Total
Non current:
Interest rate swaps – cash flow hedges
Nickel swaps – cash flow hedges
Total
At 31 December 2022:
Current:
Interest rate swaps – cash flow hedges
Nickel swaps – cash flow hedges
Aluminium swaps – cash flow hedges
Cross currency swaps
Foreign exchange forwards
Swaptions
Total
Non current:
Nickel swaps – cash flow hedges
Total
Contract or underlying
principal amount
Assets
Liabilities
Fair Value
Assets
$m
Liabilities
$m
$100m
$50m
324MT
2,460MT
–
–
–
–
–
€142m
576MT
–
2.0
0.6
4.4
0.4
7.4
–
6.0
13.4
–
–
–
–
–
(2.1)
–
(2.1)
Contract or underlying
principal amount
Assets
Liabilities
Fair Value
Assets
$m
Liabilities
$m
€120m/$50m
–
–
288MT
2,580MT
1,380MT
€100m/$110m
€100m/$109m
$150m
–
–
–
216MT
720MT
3.7
–
0.1
3.1
–
3.8
10.7
1.3
1.3
–
(2.6)
(0.2)
–
(0.5)
–
(3.3)
(2.8)
(2.8)
Hedging activities
The Group is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments
are foreign currency risk, commodity price risk and interest rate risk.
The Group’s risk management strategy is explained in Note 23.
Derivatives designated as hedging instruments
Commodity price risk
The Group enters into commodity swap contracts to reduce the volatility attributable to price fluctuations of aluminium and nickel.
To the extent they continue to meet the criteria for hedge accounting, the commodity forward contracts are accounted for as cash flow
hedges. The weighted average strike price on outstanding aluminium hedges was $2,266.6 (2022: $2,616.0) and the weighted average
strike price on outstanding nickel hedges was $30,931.4 (2022: $29,453.4).
There is an economic relationship between the hedged items and the hedging instruments as the terms of the commodity swap contracts
match the terms of the expected highly probable forecast transactions (i.e. notional amount and expected payment date). During the year
ended 31 December 2023, the group recognised a gain of $0.6m (2022: $0.5m) within revenue in the consolidated income statement
as a result of a discontinuation of nickel hedges. For all other commodity hedges, as all critical terms matched during the year, hedge
ineffectiveness was immaterial. The hedge ratio is 1:1.
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22. Derivative financial instruments and hedging activities continued
Interest rate risk
The Group enters into interest rate swaps to swap a portion of the interest arising from the Group’s bank borrowings from floating to fixed.
Interest payments are highly probable, the hedged risk is the change in the market interest rate. The hedged items are the interest rate
cash flows on $100.0m of USD denominated debt and €142.0m of EUR denominated debt. The Group’s total borrowings are shown in
Note 19 to the financial statements.
The principal terms (notional, reset date, tenor) of the hedged items and the hedged instruments have been matched along with
the contractual interest cash flows, therefore creating an exact offset for these transaction resulting in a net fixed interest payable.
The interest rate swaps and the hedged items are matched (equal and opposite terms of interest rate, date and maturity) this results
in a designated hedge ratio of 1:1 or 100%.
Hedge ineffectiveness can arise from:
Changes in timing of the hedged item
A reduction in the amount of the hedged item considered to be highly probable
A change in the credit risk of Elementis or the counterparty to the derivative contract
Foreign currency basis spreads
The effect of cash flow hedges in the consolidated income statement and the consolidated statement of other comprehensive income
(“OCI”) is as follows:
Year ended 31 December 2023
Interest rate swaps – cash flow hedges
Nickel forward contracts – cash flow hedges
Aluminium forward contracts – cash flow hedges
Year ended 31 December 2022
Interest rate swaps – cash flow hedges
Nickel forward contracts – cash flow hedges
Aluminium forward contracts – cash flow hedges
Total hedging
(loss)/gain
recognised
in OCI
$m
Amount
reclassified
from OCI to
profit or loss
$m
Amount
reclassified
from OCI to
the Balance
Sheet
$m
Line item
in the profit or loss
statement or
Balance Sheet
$m
2.2
(15.0)
0.1
3.6
(5.4)
(0.8)
5.9
0.4
–
(0.1)
1.7
–
–
–
(0.5)
Finance costs
Revenue
Inventory
–
–
0.8
Finance costs
Revenue
Inventory
Amounts reclassified from other comprehensive income to profit or loss are due to the hedged item affecting profit or loss in the period.
There were no instances of non-occurrence of hedged cashflows in either the current or comparative period.
Hedge of net investments in foreign operations
The Group seeks to denominate the currency of its borrowings in euros and US dollars in order to match the currency of its cash flows,
earnings and assets which are principally denominated in those currencies.
The euro and US dollar borrowings in Elementis Holdings Limited are designated as net investment hedges, as the company’s functional
currency is pounds sterling. The Group does not undertake derivative transactions to hedge the foreign currency translation exposures.
The Group analyses the euro and US dollar net assets by subsidiary, and the foreign currency borrowings in the name of Elementis
Holdings Limited are allocated against certain tranches of net assets. The critical terms of the euro and US dollar borrowings and their
corresponding hedged items are therefore the same.
The Group performs a qualitative assessment of effectiveness and it is expected that the value of the euro and US dollar borrowings in
pounds sterling and the value of the corresponding hedged items in pounds sterling will systematically move in the opposite direction
in response to movements in the underlying exchange rates.
The main source of ineffectiveness in these hedging relationships is the impact of a decline in the carrying value of the hedged
item compared to the euro and US dollar borrowings, with the result that the value of the hedged item is less than the value of
hedging instrument.
Foreign currency revaluation on the euro and US dollar borrowings in the name of Elementis Holdings Limited are recorded in other
comprehensive income and deferred in the foreign currency translation reserve on the balance sheet as long as the hedge is effective.
Any ineffectiveness is recognised in the income statement for that year.
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Elementis plc
Annual Report and Accounts 2023
167
Notes to the consolidated financial statements
continued
22. Derivative financial instruments and
hedging activities continued
The impact of the hedged items on the statement of
comprehensive income is as follows:
23. Financial risk management
Risk management objectives
The Group has exposure to the following risks from its use of
financial instruments:
Year ended 31 December
2023
Foreign
currency
translation
reserve
$m
2022
Foreign
currency
translation
reserve
$m
Net investment in foreign subsidiaries
(5.1)
(100.9)
Impact of hedging on equity
Set out below is the reconciliation of each component of equity
and the analysis of other comprehensive income:
At 1 January 2022
Effective portion of changes
in fair value arising from:
Derivative cash flow
hedging instruments
Amount reclassified to profit or loss
Amount reclassified to net assets
Transfer
Foreign currency revaluation of
the net foreign operations
Foreign currency revaluation
of borrowings
At 31 December 2022
Effective portion of changes
in fair value arising from:
Derivative cash flow
hedging instruments
Amount reclassified to profit or loss
Amount reclassified to net assets
Recycling of deferred foreign exchange
losses on disposal of subsidiary
Foreign currency revaluation of
the net foreign operations
Foreign currency revaluation
of borrowings
At 31 December 2023
Cash flow
hedge
reserve
$m
Foreign
currency
translation
reserve
$m
(8.6)
(67.7)
(2.6)
1.6
0.8
7.8
–
–
–
–
–
–
(100.9)
46.2
(1.0)
(122.4)
12.7
(6.3)
0.5
–
–
–
5.9
–
–
–
9.3
(5.1)
14.8
(103.4)
Credit risk
Liquidity risk
Market risk
The Board of Directors has overall responsibility for the
establishment and oversight of the Group’s risk management
framework. The Group’s risk management policies are established
to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls and to monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and
the Group’s activities.
The Group’s Audit Committee oversees how management
monitors compliance with the Group’s risk management policies
and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. The Group’s
Audit Committee is assisted in its oversight role by Internal Audit.
Internal Audit undertakes both regular and ad hoc reviews of risk
management controls and procedures, the results of which are
reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables
from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The demographics
of the Group’s customer base, including the default risk of the
industry and country in which customers operate, has less
influence on credit risk. No single customer accounts for
a significant proportion of the Group’s revenue.
Each new customer is analysed individually for creditworthiness
before the Group’s standard payment and delivery terms and
conditions are offered. The Group’s review includes external
ratings, where available, and in some cases bank references.
Purchase limits are established for each customer, which
represents the maximum open amount without requiring approval
from the Board of Directors. Customers that fail to meet the
Group’s benchmark creditworthiness may transact with the
Group only on a prepayment basis.
The Group applies the IFRS 9 simplified approach in establishing
an allowance for expected credit losses (“ECLs”). The Group
therefore does not track changes in credit risk but instead
recognises a loss allowance based on lifetime ECLs at each
reporting date. A provision matrix is used to calculate lifetime
ECLs which takes into account the Group’s historical credit loss
experience adjusted for historical conditions that are not relevant
to future cashflows and forward looking factors specific to the
debtor and economic environment.
Investments
The Group limits its exposure to credit risk through a treasury
policy that imposes graduated limits on the amount of funds
that can be deposited with counterparties by reference to the
counterparties’ credit ratings, as defined by Standard & Poor’s
or Moody’s. Management does not expect any counterparty to
fail to meet its obligations.
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23. Financial risk management continued
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was:
Trade receivables
Cash and cash equivalents
At 31 December
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
North America
Europe
Rest of the World
At 31 December
Carrying amount
2023
$m
80.1
65.8
2022
$m
77.5
54.9
145.9
132.4
Carrying amount
2023
$m
26.0
32.4
21.7
80.1
2022
$m
25.5
27.2
24.8
77.5
Expected credit losses
Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due > 121 days
Total
Gross
2023
$m
71.0
7.5
1.8
0.7
81.0
Expected
credit loss
rate
Expected
credit loss
2023
$m
0.1%
0.0%
13.2%
97.1%
–
–
(0.3)
(0.6)
(0.9)
Expected
credit loss
rate
0.1%
0.0%
0.0%
87.5%
Gross
2022
$m
67.9
6.3
3.2
1.6
79.0
The movement in the allowance for expected credit losses during the year was as follows:
At 1 January
Released to income statement – administrative expenses
Amounts written off
Transferred to assets held for sale (see Note 32)
At 31 December
2023
$m
1.5
(0.6)
–
–
0.9
Expected
credit loss
2022
$m
(0.1)
–
–
(1.4)
(1.5)
2022
$m
1.7
0.5
(0.5)
(0.2)
1.5
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Elementis plc
Annual Report and Accounts 2023
169
Notes to the consolidated financial statements
continued
23. Financial risk management continued
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s funding policy is
to have committed borrowings in place to cover at least 125% of the maximum forecast net borrowings for the next 12 month period.
The committed facilities at 31 December were as follows:
US dollar term loan
Euro term loan
RCF
Lines of credit
Total
of which expires after more than 1 year
Total
committed
facilities
2023
$m
Undrawn
committed
facilities
2023
$m
Drawn
committed
Facilities
2023
$m
Total
committed
facilities
2022
$m
Undrawn
committed
facilities
2022
$m
Drawn
committed
Facilities
2022
$m
100.0
157.8
375.0
22.9
657.7
–
–
365.0
22.9
387.9
303.4
100.0
157.8
10.0
–
267.8
150.0
152.5
408.5
22.4
733.4
–
–
291.9
22.4
314.3
301.9
150.0
152.5
116.6
–
419.1
In addition, some suppliers have access to utilise the Group’s supplier finance programmes, which are provided by Santander and
US Bank. There is no cost to the Group for providing these programmes as the cost is borne by the suppliers. These programmes
allow suppliers to choose whether they want to accelerate the payment of their invoices, by the financing banks, at a low interest cost.
The amounts outstanding to the banks are presented within trade and other payables, and the cashflows are presented with cash
flows from operating activities. At the end of the period, the total facility with Santander was $17.8m (2022 $15.9m) with the net
balance outstanding of $nil (2022: $nil) and the total facility with US Bank was $3.5m (2022: $1.5m) with the net balance outstanding
of $0.8m (2022: $0.5m).
Exposure to liquidity risk
The maturity analyses for financial liabilities showing the anticipated remaining contractual undiscounted cash flows, including future
interest payments, at current year exchange rates and assuming floating interest rates remain at the latest fixing rates are:
Non-derivative financial liabilities:
Bank overdrafts
Secured bank loan
Trade and other payables
Lease liabilities
Total
Derivative financial liabilities:
Interest rate swaps
Commodity swap contracts
Total
31 December 2023
1 to 2 years
$m
2 to 5 years
$m
After 5 years
$m
Total
$m
–
16.2
–
5.5
21.7
(0.1)
(4.5)
(4.6)
–
265.8
–
12.0
277.8
–
(3.1)
(3.1)
–
–
–
19.6
19.6
–
–
–
–
309.6
117.9
43.0
470.5
(3.7)
(12.5)
(16.2)
Within
1 year
$m
–
27.6
117.9
5.9
151.4
(3.6)
(4.9)
(8.5)
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23. Financial risk management continued
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, whilst optimising the return on risk.
The Group uses derivatives in the ordinary course of business, and also incurs financial liabilities, in order to manage market risks.
All such transactions are carried out within the guidelines set by the Board.
Market risk – Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a foreign currency other than the
respective functional currencies of Group entities, primarily the US dollar and the euro. The Group hedges up to 100% of current and
forecast trade receivables and trade payables denominated in a foreign currency. The Group uses forward exchange contracts to hedge
its currency risk, with a maturity of less than one year from the reporting date.
Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations of the Group,
primarily US dollar, but also euro and pounds sterling. This provides an economic hedge in instances where hedging derivatives are not
entered into. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure
is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term imbalances.
The Group’s net investment in overseas subsidiaries creates exposure to foreign exchange fluctuations. The risk is hedged by US dollar
and euro denominated drawdowns under the syndicated facility designated as the hedged item in net investment hedge relationships.
This mitigates the currency risk arising from the retranslation of a subsidiary’s net assets into pounds sterling, the functional currency of
the ultimate parent Elementis plc.
Currency risk sensitivity analysis
The following table illustrates the effect on the income statement and items that are recognised directly in equity that would result from
a 10% strengthening of US dollar against the following currencies, before the effect of tax. The analysis covers only financial assets and
liabilities held at the balance sheet date and assumes that all other variables, in particular interest rates, remain constant.
Gain from US Dollar strengthening 10% against Euro
Gain/(loss) from US Dollar strengthening 10% against Sterling
2023
2022
Income
statement
$m
0.4
0.2
Equity
$m
0.9
(12.0)
Income
statement
$m
0.4
0.8
Equity
$m
–
(20.3)
Market risk – Interest rate
The Group’s policy is to borrow at both fixed and floating interest rates and to use interest rate swaps to generate the required interest
profile. These interest swaps are designated within cashflow hedging relationships with the interest payments on the borrowings they
are hedging. The risk being hedged is the exposure of the Group to market rate volatility on a portion of the core Group debt. The Group
policy does not require that a specific proportion of the Group’s borrowings are at fixed rates of interest.
Interest rate sensitivity analysis
A change of 100 basis points (1%) in interest rates would have impacted profit or loss by the amounts shown below. This analysis
assumes that all other variables, in particular foreign currency rates, remain constant.
Variable rate instruments – gain/(loss)
2023
2022
100bps
increase
$m
100bps
decrease
$m
0.7
(0.7)
100bps
increase
$m
2.8
100bps
decrease
$m
(2.0)
Market risk – Commodity price risk
The group is exposed to movements in the prices of commodities it purchases and sells such as aluminium and nickel. The volatility in the
prices of these commodities has led to the decision to enter into commodity swap contracts. The swap contracts do not result in physical
delivery, but are designated as cash flow hedges to offset the effect of price changes.
Commodity price sensitivity analysis
In 2023 and 2022 the Group’s aluminium purchases were fully hedged and all aluminium swap derivatives achieved hedge accounting;
there was no impact on profit or loss and no sensitivity is presented.
Other market price risk
Equity price risk arises from equity securities held within the Group’s defined benefit pension obligations. In respect of the US schemes,
management monitors the mix of debt and equity securities in its investment portfolio based on market expectations. The primary goal
of the Group’s investment strategy is to maximise investment returns, without excessive risk taking, in order to meet partially the Group’s
unfunded benefit obligations; management is assisted by external advisers in this regard. In respect of the UK scheme, the investment
strategy is set by the trustees and the Board is kept informed.
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171
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Notes to the consolidated financial statements
continued
23. Financial risk management continued
Capital management
The Board’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence, sustain future
development of the business and maximise shareholder value.
The capital structure of the Group consists of debt (see Note 19),
cash and cash equivalents (see Note 20) and equity attributable
to equity holders of the parent comprising capital, reserves
and retained earnings (see Statement of Changes in Equity).
The Group utilises a mix of debt funding sources including term
loans and revolving credit facilities (RCF) from the Group’s
syndicated borrowing facility with differing maturities to ensure
continuity and provide flexibility. The group is subject to two
financial covenants which apply to the Group’s syndicated
borrowing facilities. Following the refinancing on 1 July 2022
the Group is required to maintain a ratio of net debt/EBITDA
(post IFRS 16) of less than 3.50x and a minimum net interest cover
of 3.1x (in relation to earnings before net interest expense and tax).
The post IFRS 16 net debt/EBITDA ratio stood at 1.6x times at
31 December 2023 (2022: 2.3x) and the directors anticipate
the strong cash generation of the Group will continue to drive
a deleveraging profile going forwards. Net interest cover at
31 December 2023 was 6.2x (2022: 6.6x).
The Board monitors the adjusted return on operating capital
employed (“ROCE”) both including and excluding goodwill,
as defined on page 190.
The dividend policy is set out in the Chairman’s statement on
page 4.
24. Leases
Group as lessee
The Group has lease contracts for various items of property, plant,
machinery, vehicles and other equipment used in its operations.
Disclosures in relation to Right of Use Assets are included within
Note 11 – Property, plant and equipment.
The Group also has certain leases with lease terms of 12 months
or less and leases of low-value assets to which the Group
applies the ‘short-term lease’ and ‘lease of low-value assets’
recognition exemptions.
The weighted average incremental borrowing rate applied to lease
liabilities is 3.0% (2022: 3.6%).
The following are the amounts recognised in profit or loss:
Depreciation expense on
right-of-use assets
Interest expense on lease liabilities
Expense related to short-term
leases and low-value assets
Expense relating to variable
lease payments not included
in lease liabilities
2023
$m
2022
$m
5.3
1.3
0.3
0.5
5.5
1.4
0.4
1.2
Set out below are the carrying amounts of lease liabilities and the
movements during the period:
At 1 January
Additions
Disposals
Interest expense
Payments
Foreign exchange movements
Transferred to liabilities held for sale
(see Note 32)
At 31 December
2023
$m
36.3
5.1
(0.6)
1.3
(6.5)
0.6
–
36.2
The maturity analysis of lease liabilities is as follows:
Within one year
In the second to fifth years inclusive
After five years
At 31 December
2023
$m
5.9
17.5
12.8
36.2
2022
$m
40.2
5.5
(2.2)
1.4
(7.1)
(1.1)
(0.4)
36.3
2022
$m
6.1
15.2
15.0
36.3
At 31 December 2023 there were $2.4m of leases that had not yet
commenced to which the Group had committed to.
25. Retirement benefit obligations
The Group has a number of contributory and non-contributory
post retirement benefit plans providing retirement benefits for the
majority of employees and Executive Directors. At 31 December
2023 the main schemes in the UK and US were of the defined
benefit type, the benefit being based on number of years of
service and either the employee’s final remuneration or the
employee’s average remuneration during a period of years
before retirement. The assets of these schemes are held in
separate trustee administered funds or are unfunded but
provided for on the Group balance sheet.
The UK defined benefit scheme had a surplus under IAS 19
of $38.7m (2022: $26.4m). In addition, the US defined benefit
scheme also had a surplus under IAS 19 of $3.4m (2022: $nil).
In accordance with the requirements of IFRIC 14 management
have concluded that the unconditional right to a refund of any
surplus under any winding up of the plan provides sufficient
evidence that an asset ceiling does not exist and as such the
full surplus has been recognised.
In addition the Group operates an unfunded post retirement
medical benefit (“PRMB”) scheme in the US. The entitlement
to these benefits is usually based on the employee remaining
in service until retirement age and completion of a minimum
service period.
Other employee benefit schemes included in the table overleaf
relate to two unfunded pension schemes, a long term service
award scheme in Germany and a special benefits programme
for a small number of former employees of the Eaglescliffe plant.
The Group also acquired two further unfunded pension schemes
and two long term service award schemes all in Germany as part
of the SummitReheis acquisition in 2017. These are included
within this category.
The Group also operates a small number of defined contribution
schemes and the contributions payable during the year are
recognised as incurred. The pension charge for the defined
contribution pension schemes for the year is $6.7m (2022: $6.0m).
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25. Retirement benefit obligations continued
Net defined benefit liability
The net liability was as follows:
2023
Total market value of assets
Present value of scheme liabilities
Net asset/(liability) recognised in the balance sheet
2022
Total market value of assets
Present value of scheme liabilities
Net asset/(liability) recognised in the balance sheet
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
Other
$m
Total
$m
483.6
(444.9)
38.7
93.8
(90.4)
3.4
–
(3.4)
(3.4)
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
462.8
(436.4)
26.4
91.6
(91.6)
–
–
(3.5)
(3.5)
–
(5.6)
(5.6)
Other
$m
–
(5.4)
(5.4)
577.4
(544.3)
33.1
Total
$m
554.4
(536.9)
17.5
Employer contributions in 2023 were $1.8m (2022: $0.5m) to the UK scheme and $1.4m (2022: $1.2m) to US schemes. Top up
contributions to the UK scheme in 2024 will be $0.7m based on the 2021 triennial valuation.
Movement in net defined benefit asset/(liability)
The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit liability and
its components.
Surplus/(deficit) in schemes at 1 January 2023
Included in profit or loss:
Current service cost
Running costs
Net interest income/(expense)
Total
Included in other comprehensive income:
Re-measurements:
Return on plan assets excluding interest income
Actuarial gains arising from demographic assumptions
Actuarial losses arising from financial assumptions
Actuarial (losses)/gains arising from experience adjustment
Exchange differences
Total
Contributions:
Employers
Surplus/(deficit) at 31 December 2023
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
26.4
–
(3.5)
(0.1)
(1.9)
1.4
(0.6)
9.7
12.2
(9.5)
(3.0)
1.7
11.1
1.8
38.7
(0.3)
(0.4)
–
(0.7)
4.3
–
(1.9)
0.8
–
3.2
0.9
3.4
–
–
(0.2)
(0.2)
–
–
(0.2)
–
–
(0.2)
0.5
(3.4)
Other
$m
(5.4)
(0.1)
–
(0.1)
(0.2)
–
0.1
(0.1)
–
(0.4)
(0.4)
0.4
(5.6)
Total
$m
17.5
(0.5)
(2.3)
1.1
(1.7)
14.0
12.3
(11.7)
(2.2)
1.3
13.7
3.6
33.1
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
173
Notes to the consolidated financial statements
continued
25. Retirement benefit obligations continued
Surplus/(deficit) in schemes at 1 January 2022
Included in profit or loss
Current service cost
Running costs
Net interest income/(expense)
Total
Included in other comprehensive income
Re-measurements:
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
56.6
(1.7)
(6.6)
(0.5)
(1.0)
1.0
(0.5)
(0.6)
(0.4)
–
(1.0)
(0.1)
–
(0.3)
(0.4)
Return on plan assets excluding interest income
(200.4)
(26.1)
Actuarial gains arising from demographic assumptions
Actuarial losses arising from financial assumptions
Actuarial (losses)/gains arising from experience adjustment
Exchange differences
Total
Contributions:
Employers
Transferred to liabilities held for sale (see Note 32)
Surplus/(deficit) at 31 December 2022
Plan assets
Plan assets for the major schemes comprise:
–
191.3
(14.5)
(6.6)
(30.2)
0.5
–
26.4
0.1
26.1
1.3
–
1.4
0.6
0.7
–
–
–
1.2
–
–
1.2
0.6
1.7
(3.5)
Other
$m
(9.0)
–
–
(0.1)
(0.1)
0.1
–
2.8
(0.1)
0.6
3.4
0.3
–
(5.4)
Equities
Bonds1
Cash/liquidity funds
At 31 December 2023
Equities
Bonds1
Cash/liquidity funds
At 31 December 2022
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
100.8
339.4
43.4
483.6
80.2
316.3
66.3
462.8
22.4
58.6
12.8
93.8
26.4
53.2
12.0
91.6
–
–
–
–
–
–
–
–
Total
$m
39.3
(1.2)
(1.4)
0.6
(2.0)
(226.4)
0.1
221.4
(13.3)
(6.0)
(24.2)
2.0
2.4
17.5
Total
$m
123.2
398.0
56.2
577.4
106.6
369.5
78.3
554.4
1 Including LDI repurchase agreement liabilities.
To reduce volatility risk a liability driven investment (LDI) strategy forms part of the Trustees’ management of the UK defined benefit
scheme’s assets, including government bonds, corporate bonds and derivatives. The bond assets category in the table above includes
gross assets of $587.0m (2022: $566.8m) and associated repurchase agreement liabilities of $247.6m (2022: $250.5m). Repurchase
agreements are entered into with counterparties to better offset the scheme’s exposure to interest and inflation rates, whilst remaining
invested in assets of a similar risk profile. Interest rate and inflation rate derivatives are also employed to complement the use of fixed
and indexed linked bonds in matching the profile of the scheme’s liabilities.
All equities, bonds and liquidity funds have quoted prices in active markets. Other assets include insured annuities, an insurance fund
and various swap products.
Within the UK pension scheme, the current asset allocation is approximately 44% in a liability matching fund consisting of gilts
(fixed interest and index linked), bonds, cash and swaps, 26% in a buy and maintain fund and 30% in an investment fund that includes
various equity and equity like funds. The aim of the trustees is to manage the risk relative to the liabilities associated with the scheme’s
investments through a combination of diversification, inflation protection and hedging of risk (currency, interest rate and inflation risk).
The US scheme currently has approximately 24% of its asset value invested in a range of equity funds designed to target higher returns
and thus reduce the pension deficit, with the balance invested in fixed income bonds and cash. The strategy is that as the deficit reduces,
a greater proportion of investments will be made into liability matching funds.
174 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
25. Retirement benefit obligations continued
Fair value of plan assets
Changes in the fair value of plan assets for the major schemes are as follows:
At 1 January 2022
Expected return
Running costs
Actuarial gains
Contributions by employer
Benefits paid
Exchange differences
Transferred to assets held for sale
At 31 December 2022
Expected return
Running costs
Actuarial gains
Contributions by employer
Benefits paid
Exchange differences
At 31 December 2023
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
774.9
12.6
(1.0)
(200.4)
0.5
(34.7)
(89.1)
–
462.8
23.3
(1.9)
9.7
1.8
(39.2)
27.1
483.6
130.1
3.3
(0.4)
(26.1)
0.6
(7.7)
–
(8.2)
91.6
4.4
(0.4)
4.3
0.9
(7.0)
–
93.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Defined benefit obligation
Changes in the present value of the defined benefit obligation for the major schemes are as follows:
At 1 January 2022
Service cost
Past service cost
Interest cost
Actuarial gains/(losses)
– demographic assumptions
– financial assumptions
– experience adjustments
Benefits paid
Exchange differences
Transferred to assets held for sale
At 31 December 2022
Service cost
Past service cost
Interest cost
Actuarial gains/(losses)
– demographic assumptions
– financial assumptions
– experience adjustments
Benefits paid
Exchange differences
At 31 December 2023
UK pension
scheme
$m
US pension
schemes
$m
US PRMB
scheme
$m
(718.3)
(0.5)
–
(11.6)
–
191.3
(14.5)
34.7
82.5
–
(436.4)
(0.1)
–
(21.9)
12.2
(9.5)
(3.0)
39.2
(25.4)
(444.9)
(131.8)
(0.6)
–
(3.3)
0.1
26.1
1.3
7.7
–
8.9
(91.6)
(0.3)
–
(4.4)
–
(1.9)
0.8
7.0
–
(90.4)
(6.6)
(0.1)
–
(0.3)
–
1.2
–
0.6
–
1.7
(3.5)
–
–
(0.2)
–
(0.2)
–
0.5
–
(3.4)
Total
$m
905.0
15.9
(1.4)
(226.5)
1.1
(42.4)
(89.1)
(8.2)
554.4
27.7
(2.3)
14.0
2.7
(46.2)
27.1
577.4
Total
$m
(856.7)
(1.2)
–
(15.2)
0.1
218.6
(13.2)
43.0
82.5
10.6
(531.5)
(0.4)
–
(26.5)
12.2
(11.6)
(2.2)
46.7
(25.4)
(538.7)
© 2020 Friend Studio Ltd
File name: Financials_XNotesX22_25_v65
Modification Date: 15 March 2024 1:30 pm
Elementis plc
Annual Report and Accounts 2023
175
Notes to the consolidated financial statements
continued
25. Retirement benefit obligations continued
Actuarial assumptions
A full actuarial valuation was carried out as at 30 September 2020 for the UK scheme and as at 31 December 2015 for the US schemes.
The principal assumptions used by the actuaries for the major schemes have been updated by the actuaries at the balance sheet date
and were as follows:
2023
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation
2022
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate
Inflation
The assumed life expectancies on retirement are:
Retiring at 31 December
Males
Females
Retiring in 20 years
Males
Females
UK %
US %
4.2
3.1
4.5
3.2
4.5
3.3
4.8
3.5
US
2023
years
21
22
21
23
3.0
N/A
5.1
2.4
3.0
N/A
5.1
2.4
2022
years
21
22
21
23
UK
2023
years
21
24
23
25
2022
years
22
24
23
26
The main assumptions for the PRMB scheme are a discount rate of 4.8% (2022: 5.1%) per annum and a health care cost trend of 6.9%
(2022: 6.7%) per annum for claims pre age 65, reducing to 4.1% per annum by 2033 (2022: 4.2%). Actuarial valuations of retirement
benefit plans in other jurisdictions have either not been updated for IAS 19 purposes or disclosed separately because of the costs
involved and the considerably smaller scheme sizes and numbers of employees involved.
At 31 December 2023, the weighted average duration of the defined benefit obligations for the major schemes was as follows:
UK: 10 years
US: 8 years.
Sensitivity analysis
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Assumption
Discount rate
Rate of inflation
Change in assumption
Impact on UK scheme
Impact on US scheme
Increased/decreased by 0.5%
Decreased/increased by 5%
Decreased/increased by 4%
Increased/decreased by 0.5%
Increased/decreased by 3%
Increased/decreased by 0%
Rate of salary growth
Increased/decreased by 0.5%
Increased/decreased by 0%
Increased/decreased by 0%
Rate of mortality
Increased by 1 year
Increased by 5%
Increased by 3%
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as
a result of reasonable changes in key assumptions occurring at the end of the reporting period. These sensitivities have been calculated
to show the movement of the defined obligation following a change in a particular assumption in isolation, assuming no other changes in
market conditions.
176 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
26. Share based payments
The Group maintains a number of active share option and award
plans and schemes for its employees. These are as follows:
Savings-related options
Options are granted under the tax-advantaged Save As You
Earn (“SAYE”) share option scheme in the UK. The SAYE
allows UK-based eligible employees to acquire options over the
Company’s shares at a discount of up to 20% of their market value
at the date of grant. Options are normally exercisable during the
six month period following either the third or fifth anniversary of
the start of the relevant savings contract. Savings contracts are
subject to the statutory savings limit of £500 per month.
US-based employees can enter into a similar share save scheme.
Employees can enter into two year savings contracts saving up to
a maximum of $2,000 per month, allowing eligible employees to
acquire options over the Company’s shares at a discount of up to
15% of their market value at the date of grant.
Long-term incentive plan (“LTIP”) awards
The LTIP is a discretionary employee share scheme for Executive
Directors and senior managers. The vesting of the awards are
subject to performance conditions over a three year period at the
discretion of the Remuneration Committee. The performance
conditions of the LTIP are detailed in the Remuneration Report
on pages 115 and 116. As approved at the 2018 AGM, restricted
shares (i.e. shares that vest based on time only) are awarded to
participants below Board level. Shadow LTIPs are in place for
senior managers based in China and Malaysia.
Deferred share bonus plan (“DSBP”) awards
The DSBP operates exclusively for the Executive Directors.
Under this scheme, 50% of any cash bonus payable is awarded
in shares and deferred for two years. There are no other
performance conditions other than continued employment.
Legacy schemes
Prior to the introduction of the LTIP for senior managers, certain
employees participated in the Executive Share Option Scheme
(“ESOS”). The ESOS which, except for outstanding awards which
will run their course, has been discontinued. The Company
operated shadow ESOS for a number of senior managers,
who were employed or based in China or Malaysia.
Share-based payment awards were valued (as shown in the table
below) using the binomial option pricing model. The weighted fair
value per award granted and the weighted average assumptions
used in the calculations are as follows:
Fair value per option (pence)
Expected volatility (%)
Risk free rate (%)
Expected dividend yield (%)
2023
104.2
38.0
4.7
2.4
2022
95.2
44.0
3.3
3.0
Expected volatility was determined by calculating the historical
volatility of the Company’s share price over the previous five years.
The expected life used in the model has been adjusted, based on
management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The Group recognised total expenses of $4.4m for continuing
operations (2022: $3.1m) with $4.4m recognised for total
operations (2022: $3.4m) related to share based payment
transactions during the year.
© 2020 Friend Studio Ltd
File name: Financials_XNotesX26_32_v55
Modification Date: 12 March 2024 4:28 pm
Elementis plc
Annual Report and Accounts 2023
177
Notes to the consolidated financial statements
continued
26. Share based payments continued
At 31 December 2023 the following options/awards to subscribe for ordinary shares were outstanding:
Year of grant
Exercise price
(p)1
From
UK savings related share option scheme
Exercisable
At 1 January
2023
’000
To
Granted
’000
Exercised
’000
Expired
’000
At 31
December
2023
’000
2019
2020
2021
2022
2022
2023
2023
121.33
01/11/22
01/05/23
58.00
01/11/23
01/05/24
117.00
01/11/24
01/05/25
88.00
88.00
91.00
91.00
01/11/25
01/11/27
01/11/26
01/11/28
01/05/26
01/15/28
01/05/27
01/05/29
US savings related share option scheme
2020
2021
2022
2023
63.11
16/09/22
16/12/22
133.71
15/09/23
15/12/23
92.31
15/09/24
15/12/24
94.86
15/09/25
15/12/26
Executive share option schemes/awards granted under the LTIP7
2015
2015
2016
20173
20175
20176
20172
20185
20195
20194,7
20205
20204,7
2020
20204,7
20204,7
2020
20204,7
20217
20217
2021
2021
2021
2021
20217
2021
20227
20225
20224,7
20224,7
290.20
01/04/18
01/04/25
Nil
27/04/18
27/04/25
218.17
04/04/19
04/04/26
Nil
Nil
Nil
07/03/17
07/03/19
07/03/20
07/03/27
07/03/27
07/03/27
264.66
03/04/20
03/04/27
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
05/03/20
05/03/28
06/03/21
06/03/29
01/04/22
01/04/22
05/03/23
05/03/30
07/04/23
07/04/30
07/04/22
07/04/22
07/04/23
07/04/23
03/08/23
03/08/23
11/09/23
11/09/23
30/12/23
30/12/23
06/04/24
06/04/31
06/04/24
06/04/31
07/04/24
24/05/31
06/04/24
16/08/31
06/04/24
01/09/31
06/04/24
13/09/31
06/04/24
06/04/24
01/10/31
13/12/31
05/03/25
05/03/32
05/03/25
05/03/32
04/04/25
04/04/32
04/04/25
04/04/25
12
789
46
166
34
–
–
1,047
156
83
909
–
1,148
16
7
21
92
7
17
31
73
49
26
76
4,798
106
2,309
121
16
127
2,621
1,461
13
20
9
23
151
84
213
490
3,082
1,286
–
–
–
–
–
315
49
364
–
–
–
211
211
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(779)
–
–
–
–
–
(12)
(10)
(27)
(36)
(34)
–
–
(779)
(119)
–
–
(20)
–
(20)
–
–
–
–
–
–
–
–
–
–
–
(523)
(106)
(2,197)
(88)
(16)
(94)
–
–
–
–
–
–
–
–
–
–
–
–
(49)
(83)
(295)
–
(427)
(16)
–
–
–
–
–
–
–
–
(26)
–
(4,268)
–
(57)
–
–
(3)
(73)
(172)
(13)
–
–
(5)
(18)
(14)
–
–
(170)
(180)
–
–
19
130
–
315
49
513
107
–
594
211
912
–
7
21
92
7
17
31
73
49
–
76
–
–
55
33
–
30
2,548
1,289
–
20
9
18
133
70
213
490
2,912
1,106
178 Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
File name: Financials_XNotesX26_32_v55
Modification Date: 12 March 2024 4:28 pm
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
26. Share based payments continued
Exercisable
Year of grant
Exercise price
(p)1
From
At 1 January
2023
’000
To
Granted
’000
Exercised
’000
Expired
’000
At 31
December
2023
’000
20227
20227
2022
2022
2022
2022
2022
20235
20238
20234,7
20234,7
2023
2023
20237
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
04/04/25
04/04/25
04/04/25
04/04/25
06/04/24
06/04/24
04/04/25
04/04/25
06/04/24
06/04/24
04/04/25
04/04/25
04/04/25
04/04/25
08/03/26
08/03/33
08/03/26
08/03/33
04/04/26
04/04/33
04/04/26
04/04/26
21/06/25
21/06/25
24/07/25
24/07/25
03/04/25
03/04/25
450
133
16
12
13
13
18
–
–
–
–
–
–
–
18,000
–
–
–
–
–
–
–
374
148
3,234
1,299
20
14
320
5,409
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
–
–
(13)
(13)
–
–
–
(51)
(51)
–
–
–
450
120
16
12
–
–
18
374
148
3,183
1,248
20
14
320
(3,024)
(5,156)
15,229
1 Where necessary option prices were adjusted for by a factor of 1.092715 to reflect the dilutive effects of the 2018 Rights Issue.
2 These options include cash settled shadow executive options granted to a number of executives on the same basis as the executive options (with the same
performance conditions and exercise provisions). These shadow options are included in the calculation of the total expenses recognised by the Group related
to share based payments. The closing balance of the 2011, 2012 and 2017 options shown above include no shadow options.
3 Awards made as one-off agreements that borrow from the terms of the LTIP.
4 These options include cash settled shadow LTIPs granted to a number of executives on the same basis as the LTIP (with the same performance conditions and
exercise provisions). These shadow LTIPs are included in the calculation of the total expenses recognised by the Group related to share based payments.
5 Conditional share award under the Deferred Share Bonus Plan.
6 Awards made as one-off agreements under the Deferred Share Bonus Plan (nil cost options).
7 The closing balance of 2020, 2021, 2022 and 2023 LTIPs shown above include approximately 124,933, 130,995, 282,174 and 113,154 shadow LTIPs respectively.
8 Conditional share award under the Deferred Share Bonus Plan (nil cost award, structured as restricted share units).
The weighted average remaining contractual life of the above shares outstanding at 31 December 2023 was 5.6 years
(2022: 5.2 years).
The weighted average exercise prices of options disclosed in the previous table were as follows:
At 1 January
Granted
Exercised
Expired
At 31 December
Exercisable at 31 December
2023
Average
exercise
price (p)
2022
Average
exercise
price (p)
9.6
8.9
12.3
10.0
8.6
31.8
11.9
14.9
30.6
20.4
9.6
49.3
The weighted average share price at the date of exercise of share options exercised during the year was 12.3 pence (2022: 31.5 pence).
The number of exercisable options outstanding as at 31 December 2023 was 676,151 (2022: 613,228).
© 2020 Friend Studio Ltd
File name: Financials_XNotesX26_32_v55
Modification Date: 12 March 2024 4:28 pm
Elementis plc
Annual Report and Accounts 2023
179
Notes to the consolidated financial statements
continued
27. Related party transactions
The Company is a guarantor to the UK pension scheme under
which it guarantees all current and future obligations of UK
subsidiaries currently participating in the pension scheme to
make payments to the scheme, up to a specified maximum
amount. The maximum amount of the guarantee is that which
is needed (at the time the guarantee is called on) to bring the
scheme’s funding level up to 105% of its liabilities, calculated in
accordance with section 179 of the Pensions Act 2004. This is
also sometimes known as a Pension Protection Fund (“PPF”)
guarantee, as having such a guarantee in place reduces the
annual PPF levy on the scheme.
The Group consists of the parent company, Elementis plc,
being the ultimate parent company of the Group, incorporated
in the United Kingdom and its subsidiaries and associates. In
accordance with Section 409 of the Companies Act 2006 a full
list of related undertakings, the country of incorporation and the
effective percentage of equity owned as at 31 December 2023 is
disclosed in Note 6 to the parent company financial statements.
28. Movement in net borrowings
Change in net cash resulting from cash flows:
Increase/(decrease) in cash and cash equivalents
Decrease/(increase) in borrowings repayable within one year
Decrease in borrowings repayable after one year
Currency translation differences
Decrease in net borrowings
Net borrowings at 1 January
Net borrowings at 31 December
At 1 January 2022
Exchange rate adjustments
Cash flows from financing activities
Other movements
Transferred to liabilities held for sale
At 31 December 2022
Exchange rate adjustments
Cash flows from financing activities
Other movements
At 31 December 2023
The remuneration of key management personnel of the Group,
which is defined as the Board of Directors, is shown below:
Salaries and short term
employee benefits
Post-employment benefits
Other long term benefits
Share based payments
Total
2023
$m
2022
$m
3.6
0.3
0.4
1.3
5.6
3.4
0.3
0.4
0.4
4.5
Full details of all elements of the remuneration of Directors is set
out in the Directors’ Remuneration report on pages 96 to 122.
2023
$m
9.9
2.5
158.0
170.4
(5.6)
164.8
(366.8)
(202.0)
Bank and
other
borrowings
$m
Lease
liabilities
$m
Total
financing
liabilities
$m
Cash and
cash
equivalents
$m
(485.6)
(40.2)
(525.8)
12.3
51.6
–
–
(421.7)
(6.6)
160.5
–
1.1
7.1
(4.7)
0.4
13.4
58.7
(4.7)
0.4
(36.3)
(458.0)
(0.7)
6.5
(5.0)
(7.3)
167.0
(5.0)
(267.8)
(35.5)
(303.3)
84.6
(2.0)
(57.8)
30.1
–
54.9
1.0
9.9
–
65.8
2022
$m
(27.8)
(3.0)
54.6
23.8
10.4
34.2
(401.0)
(366.8)
Net debt
and lease
liabilities
$m
(441.2)
11.4
0.9
25.4
0.4
(403.1)
(6.3)
176.9
(5.0)
(237.5)
Included in the net movement of borrowings of $160.5m (2022: $51.6m) are total draw downs of $122.3m (2022: $137.9m) and total
repayments of $282.8m (2022: 189.5m).
180 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
The UK Government’s appeal against the European Commission’s
decision was heard by the General Court of the European Union
during October 2021 and on 8 June 2022 the General Court of
the European Union ruled against the UK Government. The UK
Government lodged a further appeal to the European Court of
Justice during Q3 2022 and the case was heard during January
2024, with a decision expected during Q2 2024. As Elementis
continues to consider that the appeal process will ultimately be
successful, at 31 December 2023 an asset has been recorded
within non-current assets in the expectation that the charge will
be repaid in due course.
In August 2022 the Brazilian tax authorities opened a tax audit into
the Group’s Brazilian entity. The audit is focused on the customs
classification code used since 2017 for one of the entity’s imported
raw materials. The potential exposure is $7.6m. Management have
appealed the decision of the tax authorities and based on legal
advice obtained have concluded that as at 31 December 2023
it is not probable that an outflow of economic resources will be
required to settle the matter.
During 2022 the Group terminated a distribution agreement
with one of its distributors. The distributor has brought a claim
for compensation as a result of the termination. This matter
has now proceeded to arbitration and management have
concluded at this stage that the obligation cannot be measured
with sufficient reliability.
31. Events after the balance sheet date
On 6 March 2024, Elementis entered into an agreement to sell
its former Chromium manufacturing site at Eaglescliffe to Flacks
Group for negative purchase consideration of £11.5m ($14.5m).
Completion of the transaction is conditional on regulatory approval.
There were no other significant events after the balance sheet date.
29. Dividends
No interim dividend was paid in 2023 (2022: nil cents per share).
The Group is proposing a final dividend for the year ended
31 December 2023 of 2.1 cents per share (2022: nil cents
per share). The total dividend for the year is 2.1 cents per share
(2022: nil cents per share).
The amount payable for the final dividend, based on the
anticipated number of qualifying ordinary shares registered on
the record date is $12m.
The payment of this dividend will not have any tax consequences
for the Group.
30. Contingent liabilities
As is the case with other chemical companies, the Group
occasionally receives notice of litigation relating to regulatory
and legal matters. A provision is recognised when the Group
believes it has a present legal or constructive obligation as
a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Where it is deemed that an obligation is merely possible
and that the probability of a material outflow is not remote,
the Group would disclose a contingent liability.
The Group has not received any notice of litigation relating to
events arising prior to the balance sheet date that is expected
to lead to a material exposure.
In 2013 the UK Government (through HMRC) introduced the UK
Finance Company Exemption (“FCE”) regime. Elementis entered
into the FCE regime during 2014. In October 2017 the European
Commission opened a State Aid investigation into the regime.
In April 2019 the European Commission concluded that the FCE
regime constituted State Aid in circumstances where Groups
had accessed the regime using a financing company with UK
significant people functions; the European Commission therefore
instructed the UK Government to collect any relevant State Aid
amounts. The UK government and other UK based international
companies, including Elementis, appealed to the General Court
of the European Union against the decision in 2019.
In Spring 2020 HMRC requested that affected Groups submit
their UK significant people function analysis. The deadline for
submission of these analyses was delayed due to the impact
of COVID-19 and Elementis submitted its analysis to HMRC in
July 2020. In December 2020 the UK government introduced
legislation to commence collection proceedings.
Elementis received a charging notice from HMRC on 5 February
2021 which assessed for the maximum exposure of $19m
(excluding interest). This was paid to HMRC on 5 March 2021.
A charging notice for associated interest of $1m was received
on 24 June 2021 and paid on 7 July 2021. Whilst Elementis
lodged an appeal against the charging notices that did not
defer the payment of the tax assessed.
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
181
Notes to the consolidated financial statements
continued
32. Business exits
2023 business exits
On 29 November 2022 the Group entered into a share purchase
agreement to sell the Chromium business to Yildirim Group for an
enterprise value of $170m. At 30 November 2022 the completion
of the sale within the next 12 months was deemed to be highly
probable and as such the Chromium business met the criteria to
be classified as a held for sale asset and a discontinued operation.
The sale completed on 31 January 2023, and Elementis received
gross cash proceeds of $139.2m ($127.2m net of total disposal
transaction costs).
The results of the discontinued operation, which have been
included in the consolidated income statement within ‘Profit
from discontinued operations’, were as follows:
Revenue
Expenses
Calculated gain on sale of
Chromium business
Disposal transaction costs
Recycling of deferred foreign
exchange losses
Profit before income tax
Tax
(Loss)/profit from
discontinued operations
2023
$m
14.4
2022
$m
185.0
(14.2)
(165.0)
26.6
(6.4)
(9.3)
11.1
(12.8)
–
(5.6)
–
14.4
(2.9)
(1.7)
11.5
A reconciliation of the reported operating profit/loss from
discontinued operations to adjusted operating profit/loss from
discontinued operations is provided below:
Operating profit
Adjusting items:
Calculated gain on sale of
Chromium business
Disposal transaction costs
Recycling of deferred foreign
exchange losses on sale of business
Increase in environmental
provisions due to additional
remediation work identified
Decrease in environmental provisions
due to change in discount rate
Amortisation of intangibles arising
on acquisition
Adjusted operating profit
2023
$m
11.1
(26.6)
6.4
9.3
–
–
–
0.2
2022
$m
15.2
–
5.6
–
5.3
(3.1)
0.2
23.2
Details of assets and liabilities at the date of disposal are provided
in the following table:
Goodwill
Intangible assets
Property, plant and equipment
Revenue includes $nil (2022: $nil) related to inter-segment sales.
Inventories
Trade and other receivables
Total assets
Trade and other payables
Provisions
Pensions
Tax liabilities
Lease liabilities
Total liabilities
Net assets disposed
Gross cash proceeds
Calculated gain on sale of Chromium business
182 Elementis plc
Annual Report and Accounts 2023
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2023
$m
–
1.0
70.2
69.1
20.7
161.0
(23.2)
(19.7)
(2.2)
(3.2)
(0.1)
(48.4)
112.6
139.2
26.6
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Company balance sheet
At 31 December 2023
Non-current assets
Investments
Debtors
Total non-current assets
Debtors
Creditors: amounts falling due within one year
Creditors
Net current liabilities
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
Amounts due to subsidiary undertakings
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Other reserves
Share option reserve
Profit and loss account
Equity shareholders’ funds
Note
2023
£m
2022
£m
6
7
7
8
9
9
9
786.0
12.7
798.7
–
–
–
782.7
12.7
795.4
–
(0.6)
(0.6)
798.7
794.8
(191.3)
607.4
(190.9)
603.9
29.4
177.7
83.3
250.5
28.9
37.6
607.4
29.2
177.3
83.3
250.5
25.6
38.0
603.9
The Company recognised a loss for the financial year ended 31 December 2023 of £0.4m (2022: £1.4m).
The financial statements of Elementis plc, registered number 3299608, on pages 183 to 189 were approved by the Board on
6 March 2024 and signed on its behalf by:
Paul Waterman Ralph Hewins
CEO
CFO
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Elementis plc
Annual Report and Accounts 2023
183
Company statement of changes in equity
for the year ended 31 December 2023
Share
capital
£m
29.1
Share
premium
£m
176.6
Capital
redemption
reserve
£m
83.3
Other
reserves
£m
250.5
Share
options
reserve
£m
20.7
Retained
earnings
£m
41.7
Issue of shares by the Company
0.1
0.7
Balance at 1 January 2022
Comprehensive income
Loss for the year
Total other comprehensive loss
Total comprehensive loss
Transactions with owners
Share based payments
Dividends received
Dividends paid
Transfer
Total transactions with owners
Balance at 31 December 2022
Balance at 1 January 2023
Comprehensive income
Loss for the year
Total other comprehensive loss
Total comprehensive loss
Transactions with owners
–
–
–
–
–
–
–
–
–
–
0.1
29.2
–
–
–
–
0.7
177.3
–
–
–
–
–
–
Issue of shares by the Company
0.2
0.4
Share based payments
Dividends received
Dividends paid
Transfer
–
–
–
–
–
–
–
–
Total transactions with owners
Balance at 31 December 2023
0.2
29.4
0.4
177.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
83.3
250.5
–
–
–
–
2.6
–
–
2.3
4.9
25.6
(1.4)
–
(1.4)
–
–
–
–
(2.3)
(2.3)
38.0
Total
£m
601.9
(1.4)
–
(1.4)
0.8
2.6
–
–
–
3.4
603.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
83.3
250.5
–
–
–
–
3.3
–
–
–
3.3
28.9
(0.4)
–
(0.4)
–
–
–
–
–
(0.4)
–
(0.4)
0.6
3.3
–
–
–
(0.4)
37.6
3.5
607.4
29.2
177.3
83.3
250.5
25.6
38.0
603.9
The Company’s distributable reserves amount to £37.6m (2022: £38.0m) at the end of the period. The Company regularly reviews
its distributable reserves and makes dividend recapitalisations as and when necessary to ensure it can make all expected dividend
payments. The Company has sufficient subsidiary reserves to enable such recapitalisations in 2024 and beyond.
For more information on the dividend declared and the dividend per share please see Note 29 of the Group financial statements.
184 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Notes to the company financial statements of Elementis plc
for the year ended 31 December 2023
1. General information
Elementis plc is a public company limited by shares and is
incorporated and domiciled in England. The address of its
registered office is The Bindery, 5th Floor, 51-53 Hatton Garden,
London, EC1N 8HN. The principal activity of the Company is
to act as the ultimate holding company of the Elementis Group
of companies.
2. Basis of preparation
The Company’s financial statements have been prepared under
the historical cost convention, in compliance with applicable
United Kingdom accounting standards, including Financial
Reporting Standard 101 – ‘Reduced Disclosure Framework –
Disclosure exemptions from EU adopted IFRS for qualifying
entities’ (FRS 101), and with the Companies Act 2006. The
Company has presented its results under FRS 101.
As a qualifying entity whose results are consolidated in the
Elementis plc consolidated financial statements on pages 152 to
214, the Company has taken advantage of the exemption under
FRS 101 from preparing a statement of cash flows and associated
notes, the effects of new but not yet effective IFRSs, disclosures
in respect of transactions and the capital management of
wholly owned subsidiaries and key management personnel
compensation disclosures.
As the consolidated financial statements include equivalent
disclosures, the Company has also taken the disclosure
exemptions under FRS 101 in respect of certain requirements of
IAS 1, IAS 7 statement of cash flows, IAS 8 accounting policies,
IAS 24 related party disclosures, IAS 36 impairment of assets,
group settled share-based payments under IFRS 2 share based
payment, IFRS 3 business combinations, IFRS 5 non-current
assets held for sale and discontinued operations, disclosures
required by IFRS 7 financial instruments disclosures and by
IFRS 13 fair value measurement, IFRS 15 revenue from contracts
with customers and IFRS 16 leases.
By virtue of section 408 of the Companies Act 2006 the company
is exempt from presenting an income statement and disclosing
employee numbers and staff costs.
As a consequence of the majority of the Company’s assets,
liabilities and expenses originating in pounds sterling, the
Company has chosen pounds sterling as its reporting currency.
3. Summary of significant
accounting policies
The principal accounting policies applied in the preparation
of these financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated. The Company has adopted FRS 101
in these financial statements.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of
exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the contracted rate or the rate of exchange ruling at the
balance sheet date and the gains and losses on translation
are included in the profit and loss account.
Investments
Investments in subsidiaries are included in the balance sheet
at cost less accumulated impairment losses.
Potential indicators of impairment, including the market
capitalisation of the group dropping below the net assets of
Elementis plc, have been considered. The recoverable amounts
of cash generating units as determined for the impairment testing
of goodwill also support the recoverable amounts of the parent
Company’s investments.
Dividends on shares presented within shareholders’ funds
Dividends unpaid at the balance sheet date are only recognised
as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company.
Pensions and other post-retirement benefits
The Company participates in the Elementis Group defined benefit
pension scheme. The assets of the scheme are held separately
from those of the Company. Details of the latest valuation carried
out in September 2020 can be found in the 2020 Elementis plc
Annual Report and Accounts. An updated triennial valuation
was performed in September 2023, however the results of this
valuation will not be finalised until 2024. Following the introduction
of the revised reporting standard, any surplus or deficit in the
Elementis Group defined benefit pension scheme is to be reported
in the financial statements of Elementis UK Limited, which employs
the majority of active members of the scheme and is responsible
for making deficit contributions under the current funding plan.
Taxation
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. There
were no significant judgements or estimates necessary in 2023.
Changes in accounting policies
The accounting policies adopted are consistent with those of the
previous financial year.
Share based payments
The fair value of share options granted to employees is recognised
as an expense with a corresponding increase in equity. Where the
Company grants options over its own shares to the employees of
its subsidiaries it recognises in its individual financial statements an
increase in the cost of investment in its subsidiaries equivalent to
the equity settled share based payment charge recognised in its
subsidiaries’ financial statements, with the corresponding credit
being recognised directly in equity. The fair value is measured
at the grant date and spread over the period during which the
employees become unconditionally entitled to the options. The fair
value of the options granted is measured using a binomial model,
taking into account the terms and conditions upon which the
options were granted. The amount recognised as an expense is
adjusted to reflect the actual number of share options that vest
except where forfeiture is only due to share prices not achieving
the threshold for vesting.
© 2020 Friend Studio Ltd
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Elementis plc
Annual Report and Accounts 2023
185
Notes to the company financial statements of Elementis plc
continued
3. Summary of significant accounting
policies continued
Classification of financial instruments issued by
the company
Financial instruments issued by the Company are treated as equity
only to the extent that they meet the following two conditions:
a. They include no contractual obligations upon the Company
to deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Company.
b. Where the instrument will or may be settled in the Company’s
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company’s own
equity instruments or is a derivative that will be settled by the
Company’s exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that the definition is not met, the proceeds of issue
are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares,
the amounts presented in these financial statements for called
up share capital and share premium account exclude amounts
in relation to those shares.
6. Investments
Cost at 1 January 2023
Additions
Net book value at 31 December 2023
Net book value at 31 December 2022
Finance payments associated with financial liabilities are dealt
with as part of interest payable and similar charges. Finance
payments associated with financial instruments that are classified
as part of shareholders’ funds are dealt with as appropriations
in the reconciliation of movements in shareholders’ funds.
4. Profit for the financial year attributable
to shareholders
As permitted by Section 408 of the Companies Act 2006,
the Company has not presented its own profit and loss account.
A loss of £0.4m (2022: £1.4m loss) is dealt with in the financial
statements of the Company.
5. Directors’ remuneration
Details of Directors’ remuneration for the Company are included
in the Directors’ Remuneration report within the Elementis plc
Annual Report and Accounts on pages 96 to 122.
Unlisted
shares at cost
£m
0.1
–
0.1
0.1
Unlisted
loans
£m
759.0
–
759.0
759.0
Capital
contributions
£m
23.6
3.3
26.9
23.6
Total
£m
782.7
3.3
786.0
782.7
186 Elementis plc
Annual Report and Accounts 2023
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
6. Investments continued
The investment in unlisted loans is with Elementis Holdings Limited, an indirect wholly owned subsidiary. The investments in unlisted
shares are in Elementis Group BV, Elementis Export Sales Inc, and Elementis Overseas Investments Limited, all wholly owned
subsidiaries. Capital contributions relate to share-based payment awards made to employees of subsidiary companies.
The trading subsidiaries and associates of Elementis plc, all of which are wholly owned, excluding Alembic Manufacturing Limited,
in which the Group holds a 25% interest, are as follows:
Subsidiary undertakings
Alembic Manufacturing Limited
Personal Care products
Deuchem Co., Limited
Additives and resins
Deuchem (Shanghai) Chemical Co. Limited
Additives and resins
Elementis (Shanghai) New Material
Co. Limited
Elementis Minerals BV
Elementis Specialties (Anji) Limited
Additives and resins
Talc products
Organoclays
Country of incorporation and operation
United Kingdom1
Taiwan2
People’s Republic of China3
People’s Republic of China3
Netherlands5
People’s Republic of China6
Elementis Specialties do Brasil Quimica Ltda Coatings additives
Brazil7
Elementis Specialties Inc
Rheological additives, colourants, waxes,
other specialty additives
United States of America4
Elementis SRL Inc
Personal Care products
Elementis UK Limited trading as:
Elementis Specialties
Rheological additives, colourants, waxes,
other specialty additives
United States of America4
United Kingdom8
Elementis Pharma GmbH
Personal Care products
Mondo Minerals Deutschland GmbH
Elementis Minerals Nickel Oy
Talc products
Talc products
Mondo Trading (Beijing) Company Limited
Talc products
Germany9
Germany10
Finland11
People’s Republic of China12
1 Registered office: Unit 6 Wimbourne Buildings, Atlantic Way, Barry Docks, Barry, South Glamorgan CF63 3RA, UK.
2 Registered office: 92, Kuang-Fu North Road, Hsinchu Industrial Park, Hukou, Hsinchu Taiwan, ROC.
3 Registered office: 99 Lianyang Road, Songjiang Industrial Zone, Shanghai, China.
4 Registered office: 1209 Orange Street, Wilmington, Delaware, 19801, US.
5 Registered office: Kajuitweg 8, 1041 AR, Amsterdam, Netherlands.
6 Registered office: Huibutai, Majiadu Village, Dipu Town, Anji County, Huzhou City, Zhejiang Province, China.
7 Registered office: Rodovia Nelson Leopoldino, SP 375, Km 13,8, s/n, Bairro Rural, Palmital, São Paulo, Brazil.
8 Registered office: The Bindery, 5th Floor, 51-53 Hatton Garden, London EC1N 8HN, UK.
9 Registered office: Giulinistr. 2, 67065 Ludwigshafen, Germany.
10 Registered office: Friedrichsallee 14, 42117, Wuppertal, Germany.
11 Registered office: Talkkitie 7, 83500, Outokumpu, Finland.
12 Registered office: Nan Zhugan Hutong no.6, floor 9, 01-007, Dongcheng District, 100010, Beijing, China.
Non-trading and dormant subsidiaries of Elementis plc, all of which are wholly owned within the Group, are as follows:
Subsidiary undertakings
Agrichrome Limited
Elementis America Shared Services Inc
Elementis Australia Limited*
Elementis Catalysts Inc
Elementis Chemicals Inc
Elementis Eaglescliffe Limited
Elementis Export Sales Inc
Elementis Finance (Australia) Limited*
Elementis Finance (Europe) Limited
Elementis Finance (Germany) Limited
Elementis Finance (Ireland) Limited
Elementis Finance (Jersey) Limited
Elementis Finance (US) Limited
Elementis Germany GmbH
Non-trading
Dormant
Dormant
Dormant
Dormant
Non-Trading
Non-trading
Dormant
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Country of incorporation and operation
United Kingdom1
United States of America2
United Kingdom1
United States of America2
United States of America2
United Kingdom1
United States of America2
United Kingdom1
United Kingdom1
United Kingdom1
Ireland3
Jersey4
United Kingdom1
Germany5
Elementis plc
Annual Report and Accounts 2023
187
© 2020 Friend Studio Ltd
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Notes to the company financial statements of Elementis plc
continued
6. Investments continued
Subsidiary undertakings
Elementis Germany Limited
Elementis Global LLC
Elementis GmbH
Elementis Group (Finance) Limited
Elementis Group BV
Elementis Group Limited
Elementis Holdings Limited
Elementis London Limited
Elementis Minerals Holding BV
Elementis Nederlands BV
Elementis New Zealand Limited*
Elementis NZ Limited
Elementis Overseas Investments Limited
Elementis Pigments Inc
Elementis Portugal, Unipessoal Lda
Elementis S.E.A. (Malaysia) Sdn Bhd
Elementis Securities Limited
Elementis Services GmbH
Dormant
Non-trading
Non-trading
Non-trading
Non-trading
Dormant
Non-trading
Dormant
Non-trading
Non-trading
Dormant
Non-trading
Non-trading
Dormant
Non-trading
Non-trading
Non-trading
Non-trading
Elementis Specialties (India) Private Limited
Non-trading
Elementis US Holdings Inc
Elementis US Limited
H & C Acquisitions Limited*
H & C Lumber Inc
Harcros Chemicals Canada Inc
Iron Oxides S.A. de CV
Mondo Minerals International BV
NB Chrome Limited*
Reheis Inc
SRL Coöperatief U.A.
SRLH Holdings Inc
SRL International Holdings LLC
Talc Holding Finance Oy
Talc Holding Oy
WBS Carbons Acquisitions Corp
Non-trading
Non-trading
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Country of incorporation and operation
United Kingdom1
United States of America2
Germany5
United Kingdom1
Netherlands6
United Kingdom1
United Kingdom1
United Kingdom1
Netherlands6
Netherlands6
United Kingdom1
New Zealand7
United Kingdom1
United States of America2
Portugal8
Malaysia9
United Kingdom1
Germany5
India10
United States of America2
United Kingdom1
United Kingdom1
United States of America2
Canada11
Mexico12
Netherlands6
United Kingdom1
United States of America2
Netherlands6
United States of America2
United States of America2
Finland13
Finland13
United States of America2
1 Registered office: The Bindery, 5th Floor, 51-53 Hatton Garden, London EC1N 8HN, UK.
2 Registered office: 1209 Orange Street, Wilmington, Delaware, 19801, US.
3 Registered office: 8th Floor, Block E, Iveagh Court, Harcourt Road, Dublin 2, Ireland.
4 Registered office: 3rd Floor, 44 Esplanade, St Helier, Jersey, JE4 9WG.
5 Registered office: Stolberger Str.370, 50933, Köln, Germany.
6 Registered office: Kajuitweg 8, 1041 AR, Amsterdam, Netherlands.
7 Registered office: KPMG, P O Box 1584, 18 Viaduct Harbour Avenue, Maritime Square, Auckland, New Zealand.
8 Registered office: c/o Avenida da Boavista, Numbero 3265 – 2.8 Porto, 4100-137 Porto, Portugal.
9 Registered office: 10th Floor, Menara Hap Seng, No. 1 & 3 Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia.
10 Registered office: Unit-B, Ground Floor, Jaswanti Landmark, Mehra Industrial Estate, L.B.S. Marg, Vikhroli (W), Mumbai 400079, India.
11 Registered office: C/o Stewart McKelvey Stirling Scales,44 Chipman Hill, Suite 1000 ON E2L 4S6, Canada.
12 Registered office: Calle San Ignacio N 105, 22106 Tijuana, Baja California Mexico.
13 Registered office: Kajaanintie 54, 88620, Korholanmaki, Finland.
* Five entities were applied for strike off in November 2023.
188 Elementis plc
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Shareholder Information
6. Investments continued
Notes:
Other than Elementis Export Sales Inc, Elementis Group BV and
Elementis Overseas Investments Ltd, none of the undertakings
is held directly by the Company. Equity capital is in ordinary
shares and voting rights equate to equity ownership.
All undertakings listed above have accounting periods ending
31 December, with the exception of Elementis Specialties
(India) Private Limited, for which the relevant date is 31 March,
and Elementis Eaglescliffe Limited, for which the relevant date
is 31 July.
Undertakings operating in the United Kingdom are incorporated
in England and Wales. In the case of corporate undertakings
not in the United Kingdom, their country of operation is also
their country of incorporation.
All undertakings listed above have been included in the
consolidated financial statements of the Group for the year.
7. Debtors
2023
£m
2022
£m
Debtors: Amount falling due
after more than one year
Group relief receivable
12.7
12.7
Debtors: Amount falling due
within one year
Group relief receivable
–
–
8. Creditors: Amount falling due within
one year
Accruals
9. Share capital and reserves
2023
£m
–
2022
£m
0.6
2023
Number
’000
2023
£m
2022
Number
’000
2022
£m
Called-up allotted
and fully paid:
Ordinary shares of
5 pence each
At 1 January
Issue of shares
584,017
29.2 581,858
3,807
0.2
2,159
At 31 December
587,824
29.4 584,017
29.1
0.1
29.2
During the year a total of 3,807,146 ordinary shares with an
aggregate nominal value of £190,357 were allotted and issued
in accordance with the Group’s share options and award plans
and schemes to various employees, as well as shares that were
redeemed for cash at subscription prices between 58 pence and
93 pence on the exercise of options under the Group’s share
option schemes. The total subscription monies received by
the Company for these shares was £0.5m.
The Company can redeem shares by repaying the market value to
the shareholder, whereupon the shares are cancelled. Redemption
must be from distributable profits. The capital redemption reserve
represents the nominal value of the shares redeemed.
The share options reserve comprises amounts accumulated
in equity in respect of share options and awards granted
to employees.
Details of the shared based payments in the year are set out in
Note 26 to the Elementis plc consolidated financial statements.
10. Related party transactions
The Company, which is the ultimate parent company of the
Elementis Group, is a guarantor to the Elementis Group defined
benefit pension scheme under which it guarantees all current
and future obligations of UK subsidiaries currently participating in
the pension scheme to make payments to the scheme, up to
a specified maximum amount. The maximum amount of the
guarantee is that which is needed (at the time the guarantee is
called on) to bring the scheme’s funding level up to 105% of
its liabilities, calculated in accordance with section 179 of the
Pensions Act 2004. This is also sometimes known as a PPF
guarantee, as having such a guarantee in place reduces the
annual PPF levy on the scheme. Details of the UK pension
schemes in the year are set out in Note 25 to the Elementis plc
consolidated financial statements.
11. UK registered subsidiaries exempt
from audit
The following UK subsidiaries will take advantage of the audit
exemption set out within section 479A of the Companies Act 2006
for the year ended 31 December 2023. Unless otherwise stated,
the undertakings listed below are all 100% owned, either directly
or indirectly, by Elementis plc. The Company will guarantee the
debts and liabilities of the UK subsidiaries listed below at the
balance sheet date in accordance with section 479C of the
Companies Act 2006. The Company has assessed the probability
of loss under the guarantee as remote.
Name
Agrichrome Limited
Elementis Finance
(Germany) Limited
Elementis Finance
(US) Limited
Elementis Germany
Limited
Elementis Group
(Finance) Limited
Elementis Group Limited
Elementis Overseas
Investments Limited
Elementis
Securities Limited
Elementis US Limited
Elementis Finance
(Europe) Limited
Proportion of
shares held
by the
Company (%)
Proportion of
shares held
by subsidiary
(%)
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
Company
Number
2228826
5531634
9303101
48664
9303017
4048541
8008981
597303
8005226
11717371
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189
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Alternative performance measures
and unaudited information
Alternative performance measures
A reconciliation from reported profit for the year to adjusted
earnings before interest, tax, depreciation and amortisation
(Adjusted EBITDA) is provided to support understanding of the
summarised cash flow included within the Finance Report on
pages 55 to 59.
Profit/(loss) for the year
Adjustments for:
Loss/(profit) from
discontinued operations
Finance income
Finance costs and other expenses
Tax charge
Depreciation and amortisation
Excluding intangibles arising
on acquisition
Adjusting items before finance
costs and depreciation
Adjusted EBITDA
2023
$m
26.5
1.7
(4.4)
23.5
11.5
54.7
2022
$m
(51.1)
(11.5)
(9.9)
22.9
7.8
56.6
(12.7)
(14.9)
45.0
145.8
141.9
141.8
There are also a number of key performance indicators (“KPIs”)
on pages 24 to 25, the reconciliations to these are given below.
Adjusted operating cash flow
Adjusted operating cash flow is defined as the net cash flow from
operating activities less net capital expenditure but excluding
income taxes paid or received, interest paid or received, pension
contributions net of current service cost and adjusting items.
Net cash flow from operating activities
Less:
Net cash flow used in operating
activities from discontinued operations
Capital expenditure
Add:
Income tax paid or received
Interest paid or received
Pension contributions net of
current service cost
Adjusting items – non cash
Adjusting items – cash
Adjusted operating cash flow
2023
$m
76.8
2022
$m
77.0
12.4
(38.2)
(5.6)
(33.7)
27.3
18.1
3.1
0.2
5.6
105.3
13.3
14.6
0.7
(2.6)
2.0
65.7
Adjusted operating cash conversion
Adjusted operating cash conversion is defined as adjusted
operating profit divided by adjusted operating cash flow plus
provisions and share based payments.
Adjusted operating profit
2023
$m
103.9
20221
$m
123.7
Adjusted operating cash flow
105.3
64.2
Add:
Provisions and share
based payments
4.4
109.7
3.6
67.8
Adjusted operating cash conversion
106%
55%
1 2022 includes discontinued operations.
Contribution margin
The Group’s contribution margin is defined as sales less all
variable costs, divided by sales, and expressed as a percentage.
Revenue
Variable costs
Non variable costs
Cost of sales
2023
$m
713.4
(361.2)
(67.9)
(429.1)
2022
$m
736.4
(388.3)
(49.2)
(437.5)
Adjusted group profit before tax
Adjusted group profit before tax is defined as the adjusted profit
for the year plus the tax on adjusting items.
Adjusted return on operating capital employed
ROCE is defined as adjusted operating profit from total
operations divided by operating capital employed, expressed as
a percentage. Operating capital employed comprises fixed assets
(excluding goodwill), working capital and operating provisions.
Operating provisions include self insurance and environmental
provisions but exclude retirement benefit obligations.
Adjusted operating profit
Fixed assets excluding goodwill
Working capital
Operating provisions
Operating capital employed
2023
$m
103.9
612.0
147.2
(81.9)
677.3
2022
$m
100.5
583.2
141.5
(28.6)
696.1
Return on capital employed %
15%
14%
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Average trade working capital to sales ratio
The trade working capital to sales ratio is defined as the 12 month
average trade working capital divided by sales, expressed as a
percentage. Trade working capital comprises inventories, trade
receivables (net of provisions) and trade payables. It specifically
excludes repayments, capital or interest related receivables
or payables, changes due to currency movements and items
classified as other receivables and other payables.
Adjusted operating profit/Operating margin
Adjusted operating profit is the profit derived from the normal
operations of the business. Adjusted operating margin is the
ratio of adjusted operating profit to sales.
Unaudited information
To support a full understanding of the performance of the
Group, the information below provides the calculations of
net debt/EBITDA.
Revenue from total operations
Adjusted operating profit from
total operations
Adjusted operating margin from
total operations
Net Debt/EBITDA pre-IFRS 16
2023
$m
727.8
2022
$m
921.4
104.1
123.7
14.3%
13.4%
Adjusted EBITDA from total operations
146.8
173.1
IFRS 16 adjustment from
total operations
Adjusted EBITDA pre-IFRS 16
from total operations
(6.5)
(7.1)
140.3
166.0
Net Debt1
202.0
366.8
Net Debt/EBITDA pre-IFRS 16
1.4
2.2
Net Debt/EBITDA post-IFRS 16
Adjusted EBITDA from total operations
146.8
173.1
Net Debt1
IFRS 16 lease liabilities
Net Debt including lease liabilities
202.0
35.6
237.6
366.8
36.7
403.5
Net Debt/EBITDA post-IFRS 16
1.6
2.3
1 See Note 28. Net debt excludes lease liabilities.
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191
Five year record
Turnover:
Continuing operations
Discontinued operations
Total operations
Adjusted operating profit:
Total operations
Discontinued operations
Continuing operations
Adjusting items before interest
Operating profit/(loss)
Other expenses
Net interest payable
Profit/(loss) before tax
Tax
Profit/(loss) from continuing operations
(Loss)/profit from discontinued operations
Profit/(loss) attributable to equity holders of the parent
Continuing operations:
Basic earnings/(loss) per ordinary share (cents)
Basic earnings per ordinary share after adjusting items (cents)
Diluted earnings/(loss) per ordinary share (cents)
Diluted earnings per ordinary share after adjusting items (cents)
Continuing and discontinued operations:
Basic earnings/(loss) per ordinary share (cents)
Basic earnings per ordinary share after adjusting items (cents)
Diluted earnings/(loss) per ordinary share (cents)
Diluted earnings per ordinary share after adjusting items (cents)
Dividend per ordinary share (cents)
Interest cover1 (times)
2023
$m
2022
$m
2021
$m
2020
$m
2019
$m
713.4
14.4
727.8
104.1
0.2
103.9
45.0
58.9
(2.3)
(16.9)
39.7
(11.5)
28.2
(1.7)
26.5
2023
$m
4.8
11.0
4.7
10.8
4.5
11.0
4.4
10.8
2.1
6.2
736.4
185.0
921.4
123.7
23.2
100.5
709.4
170.7
880.1
106.6
18.6
88.0
612.4
146.9
759.3
81.6
10.4
71.2
712.4
171.0
883.4
123.0
22.3
100.7
(142.3)
(76.1)
(106.5)
(22.0)
(41.8)
(1.3)
(11.7)
(54.8)
(7.8)
(62.6)
11.5
(51.1)
2022
$m
(10.7)
11.1
(10.7)
10.9
(8.8)
14.2
(8.8)
13.9
–
6.6
11.9
(3.7)
(15.7)
(7.5)
(0.4)
(7.9)
10.4
2.5
2021
$m
(1.4)
8.4
(1.4)
7.3
0.4
10.7
0.4
10.6
–
4.8
(35.3)
(1.2)
(37.6)
(74.1)
3.1
(71.0)
4.0
(67.0)
2020
$m
(12.2)
5.5
(12.2)
5.4
(11.5)
6.6
(11.3)
6.5
–
3.7
78.7
(10.4)
(28.0)
40.3
(10.2)
30.1
16.3
46.4
2019
$m
5.2
9.7
5.1
9.6
8.0
12.6
7.9
12.4
8.6
5.5
Equity attributable to holders of the parent
Net debt
847.3
(202.0)
783.9
901.0
860.4
906.2
(366.8)
(401.0)
(408.1)
(454.2)
Weighted average number of ordinary shares in issue during
the year (million)
Weighted average number of ordinary and potential ordinary
shares in issue during the year (million)
1 Ratio of operating profit after adjusting items to interest on net borrowings.
585.7
582.6
581.0
580.1
579.6
596.9
592.3
588.8
593.7
588.5
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
Duplicate documents
If you have more than one account on the Share Register and
receive duplicate documentation from us as a result, please
contact Equiniti to request that your accounts be combined.
Share fraud
Share or investment scams are often run from ‘boiler rooms’
where fraudsters cold call investors offering them worthless,
overpriced or even non-existent shares, or offer to buy their
shares in a company at a higher price than the market value.
Shareholders are advised to be very wary of any unsolicited
advice, offers to buy shares at a discount, or offers of free reports
about the company. Even seasoned investors have been caught
out by such fraudsters. The FCA has some helpful information:
www.fca.org.uk/scamsmart
Report a scam
If you are contacted by a cold caller, you should inform
the Secretariat (company.secretariat@elementis.com)
and also the FCA by using its share fraud reporting form at
www.fca.org.uk/scams or by calling its Consumer Helpline
on +44 (0) 800 111 6768.
If you have already paid money to a share fraudster,
please contact Action Fraud on +44 (0) 300 123 2040
or www.actionfraud.police.uk
Shareholder services
Registrars
Enquiries concerning shares or shareholdings, such as the
loss of a share certificate, consolidation of share certificates,
amalgamation of holdings or dividend payments, should be
addressed to the Company’s registrars:
Equiniti Group Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
Tel: +44 (0) 371 384 2379
For deaf or speech impaired customers, Equiniti welcome calls via
Relay UK. Please see www.relayuk.bt.com for more information.
Please use the country code when calling from outside the UK.
Lines are open between 8.30am and 5.30pm Monday to Friday
(excluding public holidays in England and Wales).
In any correspondence with the registrars, please refer to
Elementis plc and state clearly the registered name and address
of the shareholder. Please notify the registrars promptly of any
change of address.
Website
Our website (www.elementis.com) provides the following information:
Company news and information
Details of our strategy
The Company’s approach to sustainability and innovation
A dedicated Investors section which contains up to date
information for shareholders including:
Share price and index chart information
Financial results
History of dividend payment dates and amounts
Access to current and historical shareholder documents
such as the Annual Report and Accounts
Share dealing services
Equiniti provides a share dealing service that enables shares
to be bought or sold by UK shareholders by telephone
or over the internet. For telephone share dealing, please
call +44 (0) 345 603 7037 between 8.30am and 4.30pm
(lines are open until 6.00pm for enquiries). For internet share
dealing, please visit: www.shareview.co.uk/dealing
Electronic communications
Shareholders can elect to receive shareholder
documents electronically by registering with Shareview at
www.shareview.co.uk. This will save on printing and distribution
costs, creating environmental benefits. When you register,
you will be sent an email notification to say when shareholder
documents are available on our website and you will be provided
with a link to that information. When registering, you will need
your shareholder reference number, which can be found on your
share certificate or proxy form. Please contact Equiniti if you
require any assistance or further information.
© 2020 Friend Studio Ltd
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193
Corporate information
Financial calendar (provisional)
30 April 2024
30 April 2024
1 August 2024
October 2024
Annual General Meeting
Q1 Trading Update
Interim Results 2024
Q3 Trading Update
31 December 2024
Financial Year End
January 2025
Q4 Trading Update
The financial calendar is updated on a regular basis throughout the year.
Please refer to our website www.elementis.com for up-to-date details.
Annual General Meeting
The Annual General Meeting of Elementis plc will be held on
30 April 2024 at 10.00am at the offices of Allen & Overy LLP,
One Bishops Square, London, E1 6AD. Shareholders will also
be able to attend the meeting online.
The Notice of Meeting is included in a separate document.
Company Secretary
Anna Lawrence
Registered number
03299608
Registered office
The Bindery
5th Floor
51-53 Hatton Garden
London
EC1N 8HN
UK
Principal offices
Elementis plc
The Bindery
5th Floor
51-53 Hatton Garden
London
EC1N 8HN
UK
Tel: +44 208 148 5966
Elementis Global
469 Old Trenton Road
East Windsor
NJ 08512
US
Tel: +1 609 443 2000
Independent Auditors
Deloitte LLP
1 Little New Street
London
EC4A 3TR
Joint Corporate Broker
JP Morgan Cazenove
60 Victoria Embankment
London
EC4Y 0JP
Joint Corporate Broker
Numis
Cheapside House
138 Cheapside
London
EC2V 6LH
Public Relations
Teneo
2nd Floor
85 Fleet Street
London
EC4Y 1AE
Solicitors
Allen & Overy LLP
One Bishops Square
London
E1 6AD
Email
company.secretariat@elementis.com
Website
www.elementis.com
194 Elementis plc
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
GRI index
Statement of use
Elementis plc has reported the information cited in this GRI content index for the period 1 January 2023 to
31 December 2023 with reference to the GRI standards.
GRI used
GRI standard
GRI 2: General
disclosures 2021
GRI 3: Material
Topics 2021
GRI 201: Economic
performance 2016
GRI 205:
Anti-corruption 2016
GRI 206: Anti-competitive
Behaviour 2016
GRI 1: Foundation 2021
Specific GRI Disclosure
2-1 Organisational details
2-2 Entities included in the organisation’s sustainability reporting
2-3 Reporting period, frequency and contact point
2-4 Restatements of information
2-5 External assurance
2-6 Activities, value chain and other business relationships
2-7 Employees
2-8 Workers who are not employees
2-9 Governance structure and composition
2-10 Nomination and selection of the highest governance body
2-11 Chair of the highest governance body
2-12 Role of the highest governance body in overseeing the management of impacts
2-13 Delegation of responsibility for managing impacts
2-14 Role of the highest governance body in sustainability reporting
2-15 Conflicts of interest
2-16 Communication of critical concerns
2-17 Collective knowledge of the highest governance body
2-18 Evaluation of the performance of the highest governance body
2-19 Remuneration policies
2-20 Process to determine remuneration
2-21 Annual total compensation ratio
2-22 Statement on sustainable development strategy
2-23 Policy commitments
2-24 Embedding policy commitments
2-25 Processes to remediate negative impacts
2-26 Mechanisms for seeking advice and raising concerns
2-27 Compliance with laws and regulations
2-28 Membership associations
2-29 Approach to stakeholder engagement
2-30 Collective bargaining agreements
3-1 Process to determine material topics
3-2 List of material topics
3-3 Management of material topics
Pages
1-2
41, 187-188
Inside front
cover, 194
29, 42, 43
40
3, 7, 53, 61-63
47
Not disclosed
74-77, 86-87
84-87
74
78-82
32
32
84-85, 94
79-81
87
83, 85
97-122
99-102
119
4-5, 11
54
54
52, 79, 91
52, 80-81
27, 46, 52, 88-92
27, 52
26-28
47
33
33
32-54
201-2 Financial implications and other risks and opportunities due to climate change
36-40, 132, 141
201-3 Defined benefit plan obligations and other retirement plans
201-4 Financial assistance received from government
205-2 Communication and training about anti-corruption policies and procedures
205-3 Confirmed incidents of corruption and actions taken
48, 58-59
145
51-52
Zero incidents,
52
206-1 Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices
54
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Annual Report and Accounts 2023
195
GRI index
continued
GRI standard
Specific GRI Disclosure
GRI 207: Tax 2019
207-1 Approach to tax
207-2 Tax governance, control, and risk management
207-3 Stakeholder engagement and management of concerns related to tax
207-4 Country-by-country reporting
GRI 302: Energy 2016
302-1 Energy consumption within the organisation
GRI 303: Water and
Effluents 2018
GRI 304:
Biodiversity 2016
302-3 Energy intensity
302-4 Reduction of energy consumption
303-3 Water withdrawal
303-4 Water discharge
303-5 Water consumption
304-4 IUCN Red List species and national conservation list species with habitats in
areas affected by operations
GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions
305-2 Energy indirect (Scope 2) GHG emissions
305-3 Other indirect (Scope 3) GHG emissions
305-4 GHG emissions intensity
305-5 Reduction of GHG emissions
305-7 Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air emissions
GRI 306: Waste 2020
306-3 Waste generated
GRI 401:
Employment 2016
401-1 New employee hires and employee turnover
401-2 Benefits provided to full-time employees that are not provided to temporary or
part-time employees
401-3 Parental leave
GRI 403: Occupational
Health and Safety 2018
403-1 Occupational health and safety management system
403-2 Hazard identification, risk assessment, and incident investigation
403-4 Worker participation, consultation, and communication on occupational
health and safety
403-5 Worker training on occupational health and safety
403-6 Promotion of worker health
403-8 Workers covered by an occupational health and safety management system
403-9 Work-related injuries
403-10 Work-related ill health
GRI 404: Training and
Education 2016
404-1 Average hours of training per year per employee
404-2 Programme for upgrading employee skills and transition assistance programme
404-3 Percentage of employees receiving regular performance and career
development reviews
GRI 405: Diversity and
Equal Opportunity 2016
GRI 406: Non-
discrimination 2016
GRI 417: Marketing
and Labeling 2016
GRI 418: Customer
Privacy 2016
405-1 Diversity of governance bodies and employees
405-2 Ratio of basic salary and remuneration of women to men
406-1 Incidents of discrimination and corrective actions taken
417-1 Requirements for product and service information and labelling
418-1 Substantiated complaints concerning breaches of customer privacy and
losses of customer data
Pages
53, 57, 145, 161,
181
145
57, 145
154
40
40
40
42-43
42-43
42-43
44
39-41
39-41
39-41
39-41
39
42-43
42-43
47
47
47
45-46
45-46
45-46
45-46
46, 48
45-46
25, 46, 47
25, 46, 47
49, 50, 52
49
49
48, 87
47
52
52-53
52
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Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
SASB index
Topic
Accounting Metric
Greenhouse
Gas Emissions
Gross global Scope 1 emissions, percentage covered under
emissions-limiting regulations
Air Quality
Discussion of long-term and short-term strategy or plan to manage
Scope 1 emissions, emissions reduction targets, and an analysis of
performance against those targets
Air emissions of the following pollutants: (1) nitrogen oxides
(excluding N2O), (2) sulfur oxides, (3) volatile organic compounds,
and (4) hazardous air pollutants
SASB code
RT-CH-110a.1
RT-CH-110a.2
Page
39-41
34-40
RT-CH-120a.1
42-43
Energy Management
(1) Total energy consumed, (2) percentage grid electricity,
(3) percentage renewable, (4) total self-generated energy
RT-CH-130a.1
Water Management
(1) Total water withdrawn, (2) total water consumed, percentage of
each in regions with high or extremely high baseline water stress
RT-CH-140a.1
Number of incidents of non-compliance associated with water
quality permits, standards, and regulations
RT-CH-140a.2
40-41
42-43
46
Description of water management risks and discussion of
strategies and practices to mitigate those risks
RT-CH-140a.3
38, 42, 44
Hazardous Waste
Management
Community Relations
Amount of hazardous waste generated, percentage recycled
RT-CH-150a.1
Discussion of engagement processes to manage risks and
opportunities associated with community interests
RT-CH-210a.1
42-43
27
Workforce Health
& Safety
(1) Total recordable incident rate and (2) fatality rate for
(a) direct employees and (b) contract employees
RT-CH-320a.1
25, 45-46
Product Design for
Use-phase Efficiency
Safety & Environmental
Stewardship of
Chemicals
Description of efforts to assess, monitor, and reduce exposure of
employees and contract workers to long-term (chronic) health risks
RT-CH-320a.2
Revenue from products designed for use phase resource efficiency RT-CH-410a.1
(1) Percentage of products that contain Globally Harmonized
System of Classification and Labelling of Chemicals, Category 1
and 2 Health and Environmental Hazardous Substances,
(2) percentage of such products that have undergone
a hazard assessment
Discussion of strategy to (1) manage chemicals of concern
and (2) develop alternatives with reduced human and/or
environmental impact
RT-CH-410b.1
45-46
63
52-53
RT-CH-410b.2
52-53
Genetically Modified
Organisms
Percentage of products by revenue that contain genetically
modified organisms
RT-CH-410c.1
Not disclosed
Management of the
Legal & Regulatory
Environment
Operational Safety,
Emergency
Preparedness
& Response
Discussion of corporate positions related to government
regulations and/or policy proposals that address environmental
and social factors affecting the industry
Process Safety Incidents Count, Process Safety Total Incident
Rate, and Process Safety Incident Severity Rate
RT-CH-530a.1
Not disclosed
RT-CH-540a.1
45-46
Number of transport incidents
RT-CH-540a.2
Not disclosed
Activity metric
Production by reportable segment
RT-CH-000.A
43, 61-63
© 2020 Friend Studio Ltd
File name: GRI_SASBXIndex_v21
Modification Date: 12 March 2024 5:22 pm
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Annual Report and Accounts 2023
197
Glossary
ACT
AGM
AI
AOP
AP
APM
AWC
B2B
Advance corporation tax
Annual General Meeting
Artificial Intelligence
Adjusted operating profit
Antiperspirant
Alternative performance measures
Average working capital
Business-to-business
Board
Board of Directors of Elementis plc
FAQs
Frequently asked questions
FBI
FCA
FCE
Federal Bureau of Investigation
Financial Conduct Authority
Finance Company Exemption
FLAG
Forest, Land and Agriculture
FRC
FRS
FRV
FTE
Financial Reporting Council
Financial Reporting Standards
Federal Regulatory Violation
Full time equivalent
CAPEX
Capital expenditure
FTSE
Financial Times Stock Exchange
CDP
CEO
CFO
CFD
CGU
Carbon Disclosure Project
Chief Executive Officer
Chief Financial Officer
Climate related Financial Disclosures
Cash generating unit
CHRO
Chief Human Resources Officer
CMD
Capital Markets Day
Carbon dioxide
CO2
CO2e
COVID-19 Coronavirus pandemic
Carbon dioxide equivalent
CP
CSA
Current policies
Climate scenario analysis
CSRD
Corporate Sustainability Reporting Directive
DE&I
Diversity, Equity and Inclusion
DNED
Designated Non-Executive Director
DNR
Department of Natural Resources
DSBP
Deferred Share Bonus Plan
DT
DTR
E&C
EA
Delayed Transition
Disclosure Guidance and Transparency Rules
Ethics and Compliance
Environmental Agency
EBITDA
Earnings before interest, tax, depreciation
and amortisation
GBP
GDP
GHG
GJ
GKA
GRI
GWh
HAP
Great British Pound
Gross domestic product
Greenhouse gases
Gigajoule
Global key accounts
Global Reporting Initiative
Gigawatt-hour
Hazardous air pollutants
HMRC
HM Revenue and Customs
HR
HSE
Human resources
Health, Safety and Environment
HRP+
Promotion of hazard recognition
IAS
IASB
IFRIC
IFRS
IMA
IP
IPCC
ISO
ISSB
IT
International Accounting Standards
International Accounting Standards Board
International Financial Reporting Standards
Interpretations Committee
International Financial Reporting Standards
Industrial Minerals Association
Intellectual Property
Intergovernmental Panel on Climate Change
International Organisation for Standardisation
International Sustainability Standards Board
Information technology
Ethics and Compliance Council
IUCN
International Union for Conservation of Nature
Expected credit losses
Executive Leadership team
EMEA
Europe, Middle East and Africa
Earnings per share
Enterprise resource planning
Elementis Sustainability Council
Environmental, Social and Governance
KPI
LCA
LDI
LPG
LTA
LTIP
M3
Key performance indicator
Life-cycle analysis
Liability driven investment
Liquefied petroleum gas
Lost time accidents
Long term incentive plan
Cubic metres
Executive Share Option Scheme
M&A
Merger and acquisitions
Employee Share Ownership Trust
MO DNR Missouri Department of Natural Resources
European Union
Mondo
Mondo Minerals Holdings B.V. and its subsidiaries
ECC
ECL
ELT
EPS
ERP
ESC
ESG
ESOS
ESOT
EU
EUBA
European Bentonite Association
MT
Metric ton
198 Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
File name: Glossary_v35
Modification Date: 15 March 2024 2:05 pm
Strategic Report
Corporate Governance
Financial Statements
Shareholder Information
MWh
NBO
NED
Megawatt per hour
New business opportunities
Non-Executive Director
NGFS
Network for Greening the Financial Systems
NiSATs
Non-ionic synthetic associative thickeners
NOx
NZ
OCI
Nitrogen oxides
Net Zero 2050
Other comprehensive income
OPEX
Operating expenditure
OSHA
Occupational Safety and Health Administration
UN SDGs
United Nations Sustainable
Development Goals
US
USD
VOC
United States
United States Dollar
Volatile organic compound
WBCSD
World Business Council for
Sustainable Development
WRI
World Resources Institute
WWTP
Waste water treatment plant
PAM
PBT
PHA
PM
PPF
Privileged Access Management
Profit before tax
Process hazard analysis
Particulate matter
Pension Protection Fund
PRMB
Post retirement medical benefit
PSE
PwC
Q&A
R&D
RA
RCF
Process safety event
PricewaterhouseCoopers LLP
Questions and answers
Research and development
Replacement Awards
Revolving credit facility
REACH
Registration, Evaluation, Authorisation and Restriction
of Chemicals
ROCE
Return on capital employed
s.172
SASB
SAYE
SBT
SBTi
SDS
SID
SME
SOx
Section 172 of the Companies Act 2006
Sustainability Accounting Standards Board
Save As You Earn
Science-based target
Science-based targets initiative
Safety data sheets
Senior Independent Director
Small to medium sized enterprises
Sulfur oxides
SRSOS
Savings Related Share Option Scheme
SVHC
Substances of Very High Concern
SVP
SWA
Senior Vice President
Stop Work Authority
TCFD
Task Force on Climate-related Financial Disclosures
TMC
TRIR
TSR
UK
UN
Trademark Committee
Total recordable injury rate
Total shareholder return
United Kingdom
United Nations
UN GC
United Nations Global Compact
© 2020 Friend Studio Ltd
File name: Glossary_v35
Modification Date: 15 March 2024 2:05 pm
Elementis plc
Annual Report and Accounts 2023
199
Notes
200 Elementis plc
Annual Report and Accounts 2023
© 2020 Friend Studio Ltd
File name: Glossary_v35
Modification Date: 15 March 2024 2:05 pm
Designed and produced by Friend
www.friendstudio.com
This report has been printed on Indigo
Arena Extra White Smooth which is
FSC® certified and made from 100%
Elemental Chlorine Free (ECF) pulp.
The mill and printer are both certified to
ISO 14001 environmental management
system. The report was printed
by a CarbonNeutral® printer.
© 2020 Friend Studio Ltd
File name: Glossary_v35
Modification Date: 15 March 2024 2:05 pm
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Elementis plc
The Bindery
5th Floor
51-53 Hatton Garden
London EC1N 8HN
www.elementis.com
© 2020 Friend Studio Ltd
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Modification Date: 12 March 2024 5:44 pm