Eurocell plc Annual Report 2020

FY2020 Annual Report · Eurocell plc

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Moving forward
together

EUROCELL PLC
Annual Report and Accounts 2020

2020 OVERVIEW

Mark Kelly
Chief Executive Officer

We took decisive action in response to COVID-19
to protect the business and our stakeholders.
As a result, we are well-placed to capitalise
on future opportunities.

Our colleagues throughout the business have
been integral to our response, and I would like
to thank them all for their continued commitment
and support.

Our COVID-19 response

See page 16

Investing in sustainable
growth and efficiency
See page 28

Responsible Business

See page 36

HIGHLIGHTS
Revenue

Gross Margin

Adjusted EBITDA1

CONTENT

STRATEGIC REPORT

£257.9m

49.4%

(8)%
2019: £279.1m

(1.8)%
2019: 51.2%

£29.8m

(30)%
2019: £42.4m

Adjusted Profit Before Tax1

(Loss)/Profit Before Tax

Adjusted EPS1

£8.5m

£(14.2)m

2019: £22.7m

EPS

(2.0)p

(21.3)p

2019: 19.3p

£(1.5)m

£(24.2)m

2019: £22.7m

6.5p

(12.8)p

2019: 19.3p

Net Debt

Pre-IFRS 16 Net Debt

£58.3m

£(10.4)m

2019: £68.7m

£9.9m

£(24.7)m

2019: £34.6m

1 Adjusted measures are before non-underlying income and costs, and the related tax effect
(see page 54). We use adjusted performance measures to assess business performance
and they are provided here in addition to statutory measures to help describe the underlying
results of the Group.

Highlights

Chair’s Report
Our Operation
Market Overview

1
2 What We Do
4
6
8
10 Chief Executive Officer’s Report
16 Our COVID-19 Response
22 Our Business Model
24 Our Strategy
26 Our Strategy in Action
32 Divisional Review
36 Responsible Business
52 Chief Financial Officer's Report
56 Principal Risks and Uncertainties
63

Viability Statement

CORPORATE GOVERNANCE

64 Board of Directors
66 Chair’s Introduction
67 Corporate Governance Statement
77 Nomination Committee Report
80 Audit and Risk Committee Report
85 Directors’ Remuneration Report
101 Directors’ Report
104 Statement of Directors’ Responsibilities

FINANCIAL STATEMENTS

Independent Auditors’ Report

106
116 Consolidated Statement of
Comprehensive Income
117 Consolidated Statement of

Financial Position

118 Consolidated Cash Flow Statement
119 Consolidated Statement of

Changes in Equity

120 Notes to the Consolidated
Financial Statements

149 Company Statement of
Financial Position
150 Company Statement of
Changes in Equity
151 Notes to the Company

Financial Statements
158 Company Information

View the latest results online at
www.investors.eurocell.co.uk

What We Do

The UK’s leading
MANUFACTURER, DISTRIBUTOR
AND RECYCLER OF PVC
BUILDING PRODUCTS

We manufacture

We distribute

We recycle

Manufacturing expertise

We manufacture both PVC rigid and
foam products in our centrally located
extrusion facilities.

Sustainable sourcing

Distribution network

We have two recycling facilities which puts
recycling at the heart of our operation.

We distribute through our nationwide
network.

Total amount of profile produced

Recycled product used in our rigid PVC profile

Number of branches

45.5k tonnes

12.4k tonnes

208

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

We operate our business through two divisions that
reflect the principal routes to market for our products:

PROFILES DIVISION
The Profiles division manufactures extruded rigid PVC profiles and
foam PVC products. We make rigid and foam products using
virgin PVC compound, the largest component of which is resin.
Our rigid products also include recycled PVC compound,
produced at our market-leading recycling facilities.

BUILDING PLASTICS DIVISION
The Building Plastics division distributes a range of Eurocell
manufactured and branded foam PVC roofline products and Vista
doors, as well as third-party manufactured ancillary products.
These include sealants, tools and rainwater products, as well as
windows fabricated by third parties using products manufactured
by the Profiles division.

Rigid PVC profiles are sold to third-party fabricators, who
produce windows, trims, cavity closer systems, patio doors and
conservatories for their customers.

There are broadly four types of fabricator:
• Trade frame - supply finished products to tradesmen or small

Distribution is through our national network of over 200 branches
to installers, small and independent builders, house builders and
nationwide maintenance companies. The branches also sell
roofline products to independent wholesalers.

retail outlets.

The Building Plastics division also includes:

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

house builders.

• Commercial - supply and install products used in applications

such as office space and education facilities.

• Retail - make products for sale via their own retail operation,
which may be a large national business, or a small company
servicing the local community. We are not particularly exposed
to retail fabricators.

Fabricators have production facilities which are customised to the
window or door system they make. As a result, fabricators
predominately buy profiles from a single supplier, which in turn
creates a stable and loyal customer base.

Foam PVC products are used for roofline and are supplied to
customers through our nationwide branch network in the Building
Plastics division (see opposite).

All of our manufacturing margin is recorded within the Profiles
division, which therefore also benefits from expansion of the
branch network.

The Profiles division also includes:

Supplier of locks
and hardware

Ranges of window and door profile

Skypod pitched skylights

Manufacturer of
composite and
PVC entrance
doors

Manufacturer of
plastic injection
moulded products/
services

(North and Midlands)

Recycler of PVC
windows

Conservatories and Equinox tiled roofs

Fascias, soffits and guttering

Aspect bi folding doors

Traded goods

SEE OUR DIVISIONAL REVIEWS ON PAGES 32 TO 35

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Chair’s Report

Well positioned
FOR 2021

The business responded well to
the unique challenges posed by
COVID-19 and we continue to see
good potential to outperform our
markets and deliver sustainable
growth in shareholder value.”

Bob Lawson
Chair

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Introduction
The business responded remarkably well to the unique challenges
posed by COVID-19. So I start this year’s report by offering, on
behalf of shareholders and of the Board, my sincere thanks to our
teams in every part of the Group. The progress we made during
2020 is testament to their commitment, hard work and dedication
during a period of unprecedented uncertainty.

Our priority was to protect the business and ensure the safety of
all our people, customers and suppliers by mandating COVID-safe
working practices as detailed in the Chief Executive’s Report. We
also secured our financial position and substantially completed
major investments in new operating capacity. This good work
leaves the business well-placed for the future.

Financial and operating performance
The first half of the year was dominated by the impact of the
first lockdown on our operational and financial performance, with
the business closed from late March until mid-May. As a result,
sales fell 31% in H1, and we reported an adjusted loss before tax.

However, we prepared well during this period for reopening,
designing, testing and implementing a range of COVID-safe
working practices, to protect our employees, suppliers and
customers. We also took the opportunity to review and revise
our operating, support and management structures, to ensure
that the business is as efficient as possible.

We were therefore ready to capitalise on a strong repair,
maintenance and improvement (RMI) market in the second half.
We reported sales growth of 15%, and, thanks also to a good
operational performance, delivered adjusted profit before tax up
well up on H2 2019, signalling that the inefficiencies experienced
in 2018 and 2019 are now behind us.

Sales for the full year were £258 million, or 8% below 2019
and adjusted profit before tax was £8.5 million (2019: profit of
£22.7 million).

The measures we took in the first half to conserve cash were
effective and we were grateful to receive support from investors
with a share placing in April. Thereafter, cash conversion in H2
was good. As a result, net debt at 31 December 2020 on a
pre-IFRS 16 basis reduced to £9.9 million (31 December 2019:
£34.6 million), demonstrating significant headroom on our bank
facility. We also have a strong balance sheet, which provides
flexibility and options for the future.

Dividends
Due to the impact of COVID-19, the dividend declared in March
2020 was subsequently cancelled and no dividends will be paid
in respect of 2020. However, it remains our intention to return to
paying dividends in 2021.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Governance
As a Board, we are committed to the highest standards of
corporate governance and ensuring effective communication
with shareholders. We continue to comply with the UK Corporate
Governance Code.

Strategy
Our overall strategic objective remains to deliver sustainable
growth in shareholder value by increasing sales and profits above
our market growth rates. Over the last five years, we have targeted
five strategic priorities to deliver this objective. We have made
good progress against each of them, with the key aspects of our
performance described in the Chief Executive Officer’s Report.

Early in 2021 we conducted a review of the Group’s strategy, our
markets and activities. We decided that, whilst the five existing
priorities remain relevant, we would refine one of them and
introduce two new priorities, making seven in all.

It is therefore our intention in 2021 to develop our existing
strategic priority to increase the use of recycled material, into a
‘sustainability strategy’ for the whole business, thereby linking
our own objectives to the relevant UN Sustainable Development
Goals and the UK Government’s transition towards a net zero
carbon economy. We will communicate further on sustainability
later in 2021.

We will also introduce a new strategic priority to ‘deliver sustained
operational excellence’. The project to fit-out our new warehouse
progressed well throughout 2020 and I was delighted to see we
reached a major milestone in January 2021, with commercial
operations beginning from the new site. With recent operational
constraints now substantially resolved through major investments
in new manufacturing and warehousing capacity, we expect
sustained operational excellence to result in the benefit of our
sales growth flowing through to improved profits and margins.

Finally, we intend to introduce a new strategic priority to ‘develop a
sector-leading digital proposition’. Offering an end-to-end digital
solution is becoming increasingly important to our stakeholders
and will act as an enabler to our other priorities. Our objective is to
improve the supplier, customer and employee experience, making
Eurocell an even better business partner all round.

Overall, we are confident that, through the successful progression
of our strategic priorities, we will outperform our markets and deliver
sustainable growth in shareholder value.

Bob Lawson
Chair

INVESTMENT CASE

CLEAR STRATEGY

Increase the use of recycled materials.

Clear strategic priorities
• Grow market share in profiles.
• Expand the brand network.
•
• Develop innovative new products.
• Deliver sustained operational excellence.
• Develop a sector-leading digital proposition.
• Explore potential bolt-on acquisition opportunities.

SEE PAGE 24

STRONG ON
SUSTAINABILITY

In-house, closed-loop recycling facility
We are the leading UK-based recycler of PVC
windows. We recycle both customer factory offcuts
(‘post-industrial’ waste) and old windows (‘post-
consumer’ waste). The recycled material is used to
generate brand new extruded plastic products.
Recycling helps to lower material costs and improve
product and business sustainability.

SEE PAGE 28

COMPELLING
BUSINESS MODEL

Recycling, manufacturing and
own distribution network

We are a leading manufacturer of rigid and foam
PVC profiles. Our branches are conveniently
located, offering a wide range of products and
providing excellent service to local customers and
nationwide groups alike.

SEE PAGE 22

EXPERIENCED
LEADERSHIP

Strong and experienced team

We have an effective Board and a strong senior
management team with the requisite and
complementary skills, knowledge and experience to
secure the future success of the business.

SEE PAGE 64

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Operation

A vertically integrated model
TO MAXIMISE EFFICIENCY

The coordination of our manufacturing, distribution
processes and recycling activities, help us to be
efficient throughout all stages of our value chain.

DISTRIBUTION

Third-party product
suppliers
e.g. Rainwater products,
Sealants, Tools

Branch customers
Owner managed businesses
and contractors

Revenue by division

■ Profiles
£99.7m
■ Building Plastics £158.2m

Adjusted operating
profit by division

■ Profiles
■ Building Plastics

£7.9m
£4.0m

Profile customers
c.400 fabricators

31.1k tonnes3

of rigid profile

Eurocell Profiles
45.5k tonnes3

of profile produced

Eurocell Building
Plastics
14.4k tonnes3

of foam profile

Facilitating future growth

Key to increasing capacity and
delivering further
• 260k square feet, state of the art site
Modernise storage
• Cantilever racking permits storage up

to 12 stillages high - currently 7

• capacity increased by > 60%
Modernise picking
• Single person on mobile platform
• Safer and more productive

SEE PAGES 32 tO 35 FOR MORE INFORMAtION

SEE PAGE 26 FOR MORE INFORMAtION

MANUFACTURING

Third-party material suppliers
31.0k tonnes of virgin compound
consumed1 plus 5.6k tonnes3 of other
raw materials2

1 Virgin resin: stabiliser, titanium oxide, impact modifier, filler.
2 Other raw materials: e.g. skin and rubber flex.
3 Tonnages shown are approximate based on 2020 volumes.
4 Repair, Maintenance and Improvement.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

OUR MARKETS

RMI4
Proportion of revenue
in RMI market

c.85%

New Build
Proportion of revenue in
new build housing market

c.10%

Public Sector
Proportion of revenue in public
new build housing market

c.5%

Eurocell Recycle
12.4k tonnes3

of recycled compound consumed
(23% of profile raw material consumed)

Where we operate

■ Eurocell locations
■ New Head office, Alfreton
■ New branch locations in 2020

Closed branches in 2020

Number of branches

208

RECYCLING

OUR ROUTE TO MARKET
Our sales and distribution strategy
is implemented through our cross
functional sales and business
development teams, which target
the key decision makers in the supply
chain. The key decision makers
include fabricators, installers,
developers, architects, local authorities
and planning departments. By
influencing the influencers we earn the
loyalty of our customers by helping
them grow their businesses.

SEE PAGE 8 FOR MORE INFORMAtION

TWO RECYCLING SITES
Our recycling operations are based at
two sites located in Selby and Ilkeston
which recycle post-consumer and
post-industrial PVC-U waste into
re-usable raw materials for our
manufacturing process.

SEE PAGE 40 FOR MORE INFORMAtION

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Market Overview

Mixed market drivers
STRONGER EUROCELL DRIVERS

The level of UK economic activity, in particular the state of the repair, maintenance and improvement (‘RMI’)
and new-build housing markets, are important drivers of our performance.

EUROCELL MARKETS AND DRIVERS

Private RMI (c.85% Eurocell revenue)

New build (c.10% Eurocell revenue)

Commercial (c.5% Eurocell revenue)

Generally mixed market drivers:

Slow to return post COVID in
H2 2020
Continued hesitancy caused by
delays to funding release from
government

Generally stronger Eurocell drivers:

Only brand maintaining a sizable
salesforce displacing aluminium
with PVC

Better U-values and 30% cheaper

More fabricators working in
commercial

Renovation activity, stimulated
by:
– In H2 2020 – impact of COVID and
desire to improve / extend homes
drove a strong RMI market

– More generally – pension draw
down and consumer desire for
maintenance free property

– Or change of family circumstances

Consumer confidence /
uncertainty
– Unclear how COVID impact will

develop in 2021

– Potential for significant level of

redundancies

– Brexit risk and other macro

factors

Generally stronger Eurocell drivers:

Increase propositions in EBP
– New larger format stores
– Maturing branches
– Conservatory roof development
– Outdoor living products
– Retail proposition

Sales of windows through
branches

Strong market and competitive
position with trade fabricators
serving the RMI market in Profiles

In H2 2020 – high levels of
mortgage approvals
Help to Buy continues to support
demand, but restricted to first time
buyers from 2021
Large builders maintaining
conversions
Long term shortage of housing may
attract government intervention to
boost volumes
Public sector: Right to Buy enables
housing tenants to buy their homes
at a discount
COVID stamp duty holiday ends
March 2021
Macro – affordability remains a
key issue

Generally stronger Eurocell drivers:

Continue to benefit from
differentiated specifications
Strong market and competitive
position with new build fabricators
Low cost fabricators leaving market
and work being taken by Eurocell
fabricators
Growth of Cavalok cavity closer
product (65% share) driving contact
with house builders
Vista increasing market share
of doors

Despite generally mixed signals and a significant level of uncertainty over how markets will develop in 2021, we have good potential to
outperform – capitalising on our strong market positions and clear strategy.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

EXTERNAL MARKET DATA

GDP

After an estimated fall of 10% in 2020, real UK
GDP is forecast to grow by 5% in 2021.

Interest rates

UK interest rates remain at all time low of 0.1%.

Construction

CPA Construction Industry
Forecasts (2020-2022)

Total construction output growth

16%

14%

12%

5%
4%

Total construction activity was down 14% in 2020,
but is forecast to recover and grow by 14% in
2021 and 5% in 2022 (i.e. 2021 is forecast to be
2% down on 2019).

(15)%

(14)%

2016 2017 2018 2019 2020F 2021F 2022F

Housing market

Total activity housing was down 20% in 2020, but
is forecast to recover and grow by 15% in 2021
and 7% in 2022 (i.e. 2021 is forecast to be 7%
down on 2019).

The private housing RMI1 market was down 12%
in 2020, but is forecast to recover and grow by
10% in 2021 and 3% in 2022 (i.e. 2021 is forecast
to be 3% down on 2019).

Total housing growth

10%

12%

15%

13%

17%

8%
6%

Sources: Bank of England forecasts for the UK economy
(published February 2021), Construction Industry Forecasts 2020-22
(published January 2021).

(20)%

(19)%

(20)%

2016 2017 2018 2019 2020F 2021F 2022F

Key to potential impact on demand for Eurocell products:

Private housing RMI growth

Positive

Neutral

Negative

Eurocell Revenue by Market (%)
Private home improvement and, increasingly,
new build housing are currently the most important
market segments for Eurocell.

RMI
New Build
Public Sector

c.85%
c.10%
c.5%

(New Build & RMI)

10%

11%

4%
2%

(0)%

(12)%
(14)%

(11)%

2016 2017 2018 2019 2020F 2021F 2022F

Central scenario
Upper scenario
Lower scenario

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Chief Executive Officer’s Report

Well positioned
FOR 2021

We took decisive action in
response to COVID-19 to protect
the business and our stakeholders.
After a strong second half
operating and financial
performance, we are well-placed
to capitalise on opportunities as
markets develop.”

Mark Kelly
Chief Executive Officer

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Introduction
We started 2020 in a good position. With manufacturing
constraints resolved through investment in 2019, our intended
focus for the year was the delivery of operating efficiencies and
the successful transition to our new warehouse. However, 2020
was shaped by the challenges posed by COVID-19.

The initial measures implemented by the UK Government to control
the pandemic had a major impact on our operations and financial
performance in the first half. However, we took decisive action to
protect our employees, the business and our other stakeholders,
leaving the Group well-placed to capitalise on opportunities as we
emerged from the first lockdown towards the end of Q2. Since
then, our operating performance has been strong.

The repair, maintenance and improvement (RMI) market was
stronger than we anticipated throughout the second half. House
building activity has also been increasing, supported by high levels
of mortgage approvals. Our products have resonated well with
customers seeking, possibly as a result of the pandemic, to
improve their homes and create more usable space, both inside
and outside of their properties. Products such as conservatories,
warm roofs and garden rooms have been particularly strong.

With H2 sales exceeding expectations and good operating
efficiencies delivered throughout this period, we were very
pleased to report good financial performance and strong profit
growth for the second half.

Actions in response to COVID-19
Operational actions
In line with UK Government guidance issued towards the end of
March 2020, we closed our manufacturing plants, branch
network, distribution and recycling operations. The shut-down
was carefully controlled, in order to leave the business ready to
recommence operations and trading when appropriate to do so.

Following updated guidance from the Government in mid-May,
which permits tradesmen to work in domestic dwellings so long
as appropriate precautions are taken, we commenced a phased
reopening. This process was successful, with COVID protection
measures working effectively. All sites have been open since July
and operating efficiencies since then have been good.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Health and safety actions
Prior to reopening, we conducted a thorough review of work
practices and implemented a range of COVID protection
measures. Extensive work was undertaken to examine how
COVID risks would impact operational activities; to define more
extensive standards for protection (referencing UK Government
and HSE guidance); and to develop programmes for effective
implementation. Our employees were very actively engaged in
supporting this process. The approach addressed various
aspects, including: social distancing, physical barriers, screen
and other protections, workplace hygiene and cleaning, personal
hygiene and handwashing, personal protective equipment and
swift case/symptom reporting, response and post-case
sanitisation.

The restart was carefully phased and controlled to ensure that our
COVID protection measures were effective with rising employee
numbers. Employees returning to work were provided with
relevant training, and personal protective equipment where
necessary, before re-entering their workplace.

Thereafter, we have continued to review and develop our
protection measures in accordance with official guidance and
emerging best practice. We continually monitor the effectiveness
of and compliance with these measures.

Financial actions
We increased our bank facility from £60 million to £75 million in
March 2020.

At the outset of the pandemic, we took several actions to
conserve cash, including the deferral of non-essential capex and
other discretionary expenditure and cancellation of the proposed
final dividend for 2019. In April we raised £17.1 million (net) by way
of a share placing, with the proceeds to be used to ensure we
retain headroom on our bank facility, even under an extended
shut-down, and to provide sufficient liquidity to continue
investment in the new warehouse. We also utilised Government
support measures, including the Job Retention Scheme, through
which we received payments of £6.5 million.

Cash flow management has continued to be a key priority for the
business and the measures taken in 2020 to improve our cash
position have been effective, with net debt at 31 December 2020
on a pre-IFRS 16 basis reduced to £9.9 million (31 December
2019: £34.6 million), demonstrating significant headroom on our
bank facility.

Cost savings and operating efficiency
improvements
During the year, we performed a full review of our operating,
support and management structures to ensure that the business
is as efficient as possible. We identified several opportunities to
streamline the organisation, which resulted in a small reduction
in headcount. Approximately 50 positions (representing c.3% of
our workforce) were impacted, although a significant proportion
relate to vacancies that were not filled. As a result, non-underlying
restructuring costs of £0.6 million were incurred in H2 (primarily
redundancy). These changes result in a more efficient structure
and deliver fixed cost savings, but have no impact on production
capacity or our ability to satisfy customer demand.

We were concerned that COVID-safe working methods might
impact on our operating efficiencies, but through careful
management and with the full cooperation of our employees,
we have seen no negative impact.

Our COO, Mark Hemming, is leading the work to continually
improve operational efficiencies, which will be further enhanced as
anticipated when the new warehouse is fully operational, expected
to be in Q2 2021.

Financial results
Sales for the year were £258 million, or 8% below 2019.
We reported an adjusted profit before tax of £8.5 million
(2019: £22.7 million).

As described above, the first lockdown had a major impact
on our H1 performance. Sales for the first six months of 2020,
which includes the period from late-March to mid-May when the
business was closed, were 31% below H1 2019, and we reported
an adjusted loss before tax, driven by significantly lower sales
volumes and the impact of operational gearing.

However, throughout the second half our markets were stronger
than we had anticipated, we continued to gain share and our
operational performance was good. Sales for the six months
ended 31 December 2020 grew by 15% on H2 2019, and we
reported an adjusted profit before tax for the period well up on
H2 2019.

The statutory loss before tax for the year was £1.5 million, which
includes a non-cash goodwill impairment charge of £5.8 million
and dual running costs of the new warehouse of £2.7 million.
Further information on our financial performance is included in
the Chief Financial Officer's Report and Divisional Reviews.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Chief Executive Officer’s Report continued

Operational performance
Health and safety
The safety and well-being of our employees and contractors is
always our first operational priority and we continue to maintain
good health and safety performance. Our Lost Time Injury
Frequency Rate (‘LTIR’) was 0.7 in 2020, compared to 0.9 in 2019.
There were no major injuries and 19 minor accidents (2019: no
major injuries, 17 minor injuries) recorded under the Reporting of
Injuries, Diseases and Dangerous Occurrences Regulations 2013
(‘RIDDOR’).

Production
In 2020 we manufactured 45.5k tonnes of rigid and foam
PVC profiles at our primary extrusion facilities, down from 54.6k
tonnes in 2019, a decrease of 17%. This reflects lower sales in
H1 2020 as a result of the first COVID lockdown. In addition,
2019 production included a stock build programme to increase
availability at our branches and mitigate the risk of raw material
supply interruption due to Brexit.

Also in 2019, we completed a substantial capex programme,
at a cost of c.£5 million, to improve manufacturing efficiency
and increase co-extrusion and foam capacity by 30% and 15%
respectively. In extrusion, Overall Equipment Effectiveness (‘OEE’),
a measure which takes into account machine availability,
performance and yield, improved to 75% in 2020 (2019: 73%).

Recycling
We used 12.4k tonnes of recycled PVC compound alongside
virgin resin in the manufacture of co-extruded rigid profiles,
representing 25% of overall material consumption, up from 23%
(13.4k tonnes) in 2019, driving a substantial saving compared to
the cost of using virgin material.

Brexit and supply chain
We took several steps to protect the business from the potential
negative effects of Brexit. In this context, it is worth noting that
over 95% of our sales are to UK-based customers and that the
vast majority of our workforce has the right to work in the UK.

Some of our key raw materials do originate from Europe, so any
disruption in supplies could impact our manufacturing operations.
With that in mind, whilst we have only limited capacity to hold
additional raw materials at our own sites, we completed a
significant investment in additional stocks in 2019, adding c.£5
million to finished goods for key product lines, most of which
remained in place throughout 2020.

Now that the nature of the future trading relationship between the
UK and the EU has been substantially defined, the risks relating to
the imposition of import tariffs are largely behind us.

More generally, whilst the impact of increased demand, supplier
production outages and new administrative requirements for EU
imports have together put sector supply chains under pressure,
we have continued to secure the raw materials we require. So far,
we have not experienced any significant adverse effects from the
delays at UK ports.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

However, PVC resin prices began to increase towards the end of
2020 and this trend has continued into the new year. We are
therefore implementing selling price increases, starting in February
2021, to recover this and other cost inflation.

Warehousing
capacity expansion
Towards the end of 2019 we concluded that our existing
main warehouse was a major constraint to future growth and
operating efficiency. Early in 2020 we secured a new facility,
located within three miles of our primary manufacturing site,
existing main warehouse and head office. The new site has
260,000 square feet of high bay, state-of-the-art warehouse
accommodation, dedicated office space and car parking.

In designing the new facility, we have taken the opportunity
to modernise our storage solutions, using cantilever racking
to store up to 12 stillages high (our existing warehouse is
restricted to seven); and mobile racking to allow high density
storage, which has increased capacity by more than 60%.
Similarly, we have modernised picking processes, with the
use of mobile platforms to replace manual techniques,
thereby providing a safer and more productive solution.

The project to fit-out the new warehouse has progressed
well and remains on track. We achieved a major milestone
in January 2021, with commercial operations beginning
successfully from the new site. In line with our plans,
transition will continue over the coming weeks, with the final
stages expected to complete in Q2 2021.

We will convert our existing warehouse to a specialist
manufacturing site, relocating, beginning later in 2021,
secondary operations including foiling and conservatory
roofs. This will free up space to future-proof extrusion
capacity.

We are excited about the opportunities for growth opened
up by this investment. As well as being central to increasing
capacity, the new warehouse is key to delivering anticipated
improvements in operating efficiencies.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Strategy
Strategic priorities overview
Our overall strategic objective is to deliver sustainable growth in
shareholder value by increasing sales and profits at or above
market growth rates. Over the last five years we have targeted
five strategic priorities to help us achieve this objective and have
delivered significant progress in each of them as follows:

• Grow market share in Profiles – now the largest supplier

of rigid PVC profile to the UK market (c.17% share)

• Expand the branch network – 208 sites in 2020 compared to

141 in 2015

•

Increase the use of recycled materials – 25% of material
consumption in 2020 compared to 9% in 2015

• Develop innovative new products – sales from products

introduced since 2017 were c.£24 million of 2020 revenue

• Explore potential bolt-on acquisition opportunities

– six acquisitions completed since 2015

Further information in relation to these priorities is set out in the
following paragraphs. More recently, we have assessed whether
they remain relevant for the next five years and our conclusions
are also described below.

Grow market share in Profiles
In 2018 we became the leading supplier of rigid PVC profile to
the UK market, with a share of c.15%1. We continue to consolidate
our position and believe we now have a share of around 17%1.
Our objective is to increase this to at least 20%.

In the Profiles division, trade fabrication currently represents
c.60% of sales. There is a compelling case for larger trade
fabricators to switch to Eurocell. This includes: a strong product
range, continued product development, the benefits of pull-
through profile and hardware specifications and the opportunity
to supply our branches, all delivered via best-in-class service.

New build represents c.30% of Profiles sales. Expanding our
share of the new build market has been a key driver of recent
growth and we believe favourable market dynamics and low
interest rates are set to continue. We have strong relationships
with large and medium-sized housebuilders, maintained by our
specification and technical teams. In addition, with a focus on
sustainability, we believe our use of recycled material is becoming
increasingly attractive to housebuilders.

In the commercial sector (c.10% of profiles sales), energy
efficiency and lower cost underpin a strong case for the benefits
of using PVC profile over aluminium, particularly in sub-sectors
such as private rentals, build-to-rent, purpose-built student
accommodation, education and local authority refurbishment
– all habitual users of aluminium.

Expand the branch network
Our strategic objective for Building Plastics is to achieve sector-
leading operations from 270 - 300 sites. The growth will come
mostly at the expense of independent operators, who currently
have more than 60% market share.

In the existing estate (208 branches at 31 December 2020),
we are implementing plans to improve up-selling and cross-selling
opportunities, to target lapsed customers, and to tighten margin
controls. We also intend to enhance promotional activities with
support from key suppliers. In terms of products, we are focusing
on improving conversion rates for high value made-to-order items
and extending our range, including the introduction of a new suite
of outdoor living products.

With additional warehousing capacity now coming on line, we plan
to open up to 12 new sites in 2021, with the final number to be
determined based on the economic environment and business
performance. Up to six of these will be in a new, larger format
store, with expanded trade counter and showroom-style displays
designed to engage customers and drive big-ticket purchases
such as windows and doors. This follows successful trials of this
format in 2019/20.

We continue to robustly test an opportunity to develop and
implement a sector-leading consumer online windows and doors
proposition, using our branch network to provide infrastructure where
needed (e.g. delivery point for installers). We began a trial in the North
West in Q3 2020 and will provide an update on our progress later in
2021. This proposition directly aligns with our commercial strategy
of continuing to create pull-through demand for our products.

Increase the use of recycled material
Expanding the use of recycled material increases our profits,
because the cost of recycled compound is typically lower through
the cycle than the price of virgin material, and it reduces our
exposure to volatile commodity prices. It also improves product
and business sustainability, with less plastic going to landfill.
Closed-loop recycling (where windows being replaced are
recycled into the new product) is attractive to decision makers
such as local authorities and architects, which helps us develop
tight specifications for our products.

We have been investing to increase our recycling capability
through the expansion of Eurocell Recycle Midlands, the
acquisition of Eurocell Recycle North and by investment in new
co-extrusion tooling, which allows a greater proportion of recycled
material to be used in our products.

We have become the leading UK-based recycler of PVC windows.
Our use of recycled material increased from 4.1k tonnes (or 9%
of materials consumed) in 2015 to 13.4k tonnes (or 23% of
consumption) in 2019 and 12.4k tonnes (or 25% of consumption)
in 2020, with volumes in the latter reduced by the impact of
COVID. In doing so, in both 2019 and 2020 we saved the
equivalent of c.3 million window frames from landfill.

We expect internal demand for recycled material to increase.
This can be satisfied largely through the expansion of Eurocell
Recycle North.

1 Eurocell estimates.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Chief Executive Officer’s Report continued

Develop innovative new products
We are committed to maintaining market leadership by offering
the very latest in product improvement, both through development
of existing products and the introduction of new ones. We work
closely with our customers and technical advisors on development
and to help maintain our product pipeline. Recent highlights for
Profiles include the introduction of a flush window sash for the
popular Logik range, a new sliding patio door system (Syncro) and
development of a through-colour grey substrate profile. In Building
Plastics, the Equinox conservatory roof system has been
developed to include a skylight (Vega) and our new suite of
outdoor living products, including the Kyube garden room, has
been very well received.

Finally, we will introduce a new strategic priority to ‘develop
a sector-leading digital proposition’. Stakeholders in most
organisations increasingly require full end-to-end digital solutions;
a trend exacerbated by the COVID pandemic. We now intend to
make the continued development of our digital proposition a
strategic priority. We expect a sector-leading digital proposition to
act as an enabler to our other priorities and improve the supplier,
customer and employee experience, making Eurocell an even
better business partner all round.

Overall, we are confident that, through the successful progression
of our strategic priorities, we will outperform our markets and
deliver sustainable growth in shareholder value.

Explore potential bolt-on acquisitions
We have completed six acquisitions since our IPO in 2015. We will
continue to assess and consider bolt-on acquisition opportunities
in the markets in which we operate over the medium term.
However, our focus for 2021 will be delivering operating
efficiencies from recent investments in manufacturing and
warehousing capacity.

Outlook
COVID-19 has created unprecedented challenges. Our first
priority continues to be the health, safety and well-being of our
employees. Through their hard work and dedication, we have
implemented safe working practices in line with recommended
guidelines, and I would like to thank them all again for their
continued commitment and support.

2021 strategy update
Early in 2021 we conducted a review of the Group’s strategy,
our markets and activities. We reaffirmed our overall strategic
objective of sustainable growth in shareholder value. We also
decided that, whilst the five priorities described above remain
relevant, we would refine one of them and introduce two new
priorities, making seven in all.

It is therefore our intention in 2021 to develop the existing recycling
priority into a ‘sustainability strategy’ for the whole business.
We are working now to define long-term sustainability objectives,
linked to the relevant UN Sustainable Development Goals and the
UK Government’s transition towards a net zero carbon economy,
along with an implementation plan and appropriate KPIs against
which to measure progress. We will communicate further on
sustainability later in 2021.

We will also introduce a new strategic priority to ‘deliver sustained
operational excellence’. Through 2016-19, the success of our
commercial strategies resulted in a strong compound annual
growth rate in sales of 12%. However, profits for that period were
impacted by sales running substantially ahead of our expectations,
thereby exceeding the available operating capacity thus leading to
inefficiencies and extra costs. Manufacturing and warehousing
constraints have now been resolved through major investments in
new capacity. Looking ahead, we expect sustained operational
excellence to result in the benefit of our sales growth flowing
through to improved profits and margins.

In response to the pandemic, we took a number of decisive
actions to safeguard our future and ensure the business was
well-placed to capitalise on opportunities as markets developed.

The RMI market was stronger than we anticipated throughout
the second half. Sales exceeded our expectations, particularly in
the branch network, operating efficiencies were good and gross
margins improved as volumes increased. As a result, we were very
pleased to report strong profit growth for H2.

Our focus now includes completing the warehouse transition
successfully, thereby facilitating future growth and the delivery
of anticipated operating efficiencies. Whilst the current levels of
uncertainty mean it is difficult to predict the outcome for the year,
2021 has started well with sales to the end of February up 8% on
2020 and it remains our intention to return to paying dividends this
year. We continue to see good potential to outperform our
markets, take share and deliver further progress.

Mark Kelly
Chief Executive Officer

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our COVID-19 Response

Well positioned
FOR 2021

In response to the pandemic, we took a
number of decisive actions to safeguard our
future, ensuring the business was well-placed
to capitalise on opportunities as markets
developed.

Q1
Controlled closure
• All operations closed in late

March, in line with
Government guidance

• Bank facility increased from

£60m to £75m

• Final dividend for 2019

cancelled

Q2
Securing the future
• £17m raised via share placing
• Deferral of non essential and
discretionary expenditure
• Q2 VAT payments deferred

and rental payments
switched to monthly in
advance (from quarterly)
• Utilisation of Government

support measures, including
Job Retention Scheme and
business rates relief
• Frequency of Board/

Executive Committee
meetings increased

• Salaries for Board and senior

Executive committee
members temporarily
reduced

COVID RESPONSE TIMELINE

Open

Closed

April

Like-for-like2 sales growth
(vs 2019)

+3%

Net debt3 – pre IFRS 16 (at quarter-end)

£39m

£24m

Notes:
1 RMI is Repair, Maintenance and Improvement.
2 Like-for-like sales growth excludes acquisitions and new branches opened in 2019/20, and is calculated by comparing average sales per trading day.
3 Group net debt – pre IFRS 16 is cash and cash equivalents less bank overdrafts and borrowings.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Managed return
• Phased re-opening from
mid-May 2020, following
government guidance and
introduction of COVID-safe
working practices

• Organisational structures and

operating processes
streamlined

• Working from home wherever

possible

• Credit terms temporarily
extended for selected
customers

Q3
Strong recovery
• All sites open by July and all
colleagues returned to work
by early October

• Stronger RMI1 market than
anticipated post lockdown
• Products resonating with
customers seeking to
improve / extend their homes
Improved operating
efficiencies

•

Q4
Continued growth
•

•

In Building Plastics – strong
sales across our range of
own-manufactured products
and traded goods, and
excellent start for our new
outdoor living range
In Profiles – increasing
demand from trade
fabricators, who are
substantially focused on the
RMI market and increasing
house building activity,
supported by high levels of
mortgage approvals

• Continued gains in market

• Deferred VAT payments

repaid and rental payments
switched back to quarterly in
advance (from monthly)
• All suppliers and landlords

paid to terms

+18%

+13%

May

June

Open

-6%

-21%

£7m

£10m

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our COVID-19 Response continued

Decisive actions
TO SAFEGUARD THE BUSINESS
AND OUR PEOPLE

As the coronavirus spread to the UK and
case numbers began rising, we took decisive
operational, health and safety and financial
actions to safeguard the business and
our stakeholders.

In this section, we have focused on the operational impact on our
workforce and the controls and management systems we
introduced to minimise the risk of infection and protect our
colleagues, customers and suppliers.

Financial actions are described in more detail in the Chief
Executive Officer's Report and Chief Financial Officer's Report.

Workforce impacts
In line with UK Government guidance issued towards the end of
March, we closed our manufacturing plants, branch network,
distribution and recycling operations.

During the early phase of the shutdown, the majority of our
c.2,000 employees were furloughed, using the Government’s Job
Retention Scheme. A skeleton staff of around 100 employees was
retained, to provide essential services and administration, perform
important maintenance work and, importantly, to ready the sites
and branch locations for re-opening.

Screens introduced in welfare facilities, office and
toolroom areas maintain protection where social
distancing is difficult

This included the design and testing of a range of COVID
protection measures. We assessed how COVID risks would
impact operational activities in order to define standards for
protection in line with UK Government and HSE guidance and
developed plans for implementation. The approach adopted
includes the measures shown here, as well as swift case/
symptom reporting, response and post-case sanitisation.

In addition, working with our third party project partners, the
fit-out of our new warehouse and head office continued through
this period, whilst at all times ensuring the safety of the teams
involved. A certain amount of planned recruitment also took place,
with a number of new colleagues joining Eurocell during the
shutdown period and shortly afterwards.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Manager checklist
Returning an employee to work from Furlough

this document should be used when contacting employees returning to work from Furlough.
Managers should allow a minimum period of 3 days notification when planning a return to work.

Section One

Name of Employee:

Name of Manager:

Department:

Date:

Date that the employee is expected to RtW:

Are they fit to RtW? (if NO follow guidance in
section 2)

Are they required to work from home?

Has the employee had or had symptoms of
COVID-19 during the period of closedown which
has been confirmed?

Yes

If yes
When did you have the symptoms or, had COVID?
Are you fully recovered?

Date
Yes

Do you have any condition that would make you
more vulnerable to return to work?

Yes
(record in box below)

Advise employee that a letter will be sent to them confirming their return to work (tick)

Record employees personal email address:

Confirm the employee agrees to return to
work:

Yes

No
(record in box below)

Record reasons for none return to work:

A controlled re-start
Following updated guidance from the Government in mid-May,
which allowed tradesmen to work in domestic dwellings so long
as appropriate precautions are taken, we commenced a phased
re-opening.

A phased approach allowed us to test the new controls with low
numbers of employees on site. Pre-return protocols ensured we
brought back our colleagues safely into the business. Employees
returning were provided with video inductions, sharing key
information before they set foot on the premises, followed by relevant
training and personal protective equipment (PPE) where necessary.

This process was successful, bringing confidence that our
upgraded COVID safety measures provide good protection and
allow for the effective management of risks and suspected cases,
as employee numbers increased through the return.

Simple screening aids separation from customers

Walkways form part of one-ways systems to reduce
interaction and proximity

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our COVID-19 Response continued

Protecting our colleagues
Creating COVID-safe conditions across the business involved
defining standards for control and converting those standards into
practical workplace measures and systems.

Every one of our locations and facilities implemented a
combination of physical, procedural and PPE controls, backed-up
by extensive information and communication programmes to
ensure that our employees can work safely.

Reverse parking
Reverse parking ensures maximum distancing as employees exit
their vehicles.

Temperature checks and health Q&A

Employees are temperature checked and answer health
questions before entering our premises.

Protection screening

Facial and body temperature recognition

Facial and body temperature
recognition clocking-in
systems eliminate multiple
touch points and measure
temperature, with all
records retained.

Hand-washing and sanitising stations

Hand-washing and sanitising
stations have been installed
throughout the business.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Screens introduced in welfare facilities, office and toolroom
areas maintain protection where social distancing is difficult.

/One-way systems and walkways

Walkways form part of one-ways systems to reduce interaction
and proximity.

Signs and posters

Signs and posters form a key part of our communications and
message reinforcement programmes.

Protecting our customers
Maintaining a COVID-safe environment in our branch network
posed different challenges. In addition to physical changes, such
as one-way systems and screening, we pioneered a ‘virtual
queuing’ system to manage customer flow, minimise physical
interaction and reduce inconvenience for our customers.

Virtual queuing, one-ways systems and
screen protection for branches
Virtual queuing allows customers to reserve a place in the
‘queue’ and only enter the branch when it is safe to do so.
One-way systems and screening provide further protection.

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Benefits from our COVID response
All our sites have been open since July. We continually
monitor the effectiveness of and compliance with our COVID
protection measures. Whenever necessary, they are
updated in accordance with official guidance and emerging
best practice.

We also recognise that our COVID-19 response has
delivered several small, yet valuable benefits:
• Reverse parking offers safety benefits that will continue

beyond the pandemic

• Focus on walkways, one-way systems and other

workplace process streamlining has supported improved
operational efficiencies

• The pandemic has driven customer traffic to our website,

helping us to kickstart our digital journey

• Virtual queuing at branches offers benefits at busy times

of the day

• The increased use of video conferencing has freed-up
travel time that would be lost through a reliance on
in-person meetings

STOP AND WAIT

To protect everyones safety, we have a
limited number of customers allowed in
our branch at any one time

SAVE YOUR PLACE

Scan the QR code or text ‘BISL’ to
+44 (0)7418 312000 and we’ll save your
space in the queue while you wait in
your car or grab a coffee

ENTER WHEN SAFE

We’ll send you a text to let you
know your space is next and
it’s safe to pop into your branch

THANK YOU FOR YOUR SUPPORT FROM EVERYONE AT

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Business Model

WHAT WE DO

HOW WE CREATE VALUE

WE MANUFACTURE

We are a leading manufacturer of rigid and
foam PVC profiles, composite and PVC
entrance doors for the window and building
home improvement sectors. Our manufacturing
process uses raw materials including PVC resin
and our own produced recycled material.

46k tonnes

produced in 2020

WE DISTRIBUTE

the Profiles division supplies our manufactured
profile to a network of fabricators, who in turn
supply end products to installers, retail outlets
and house builders.

the Building Plastics division sells, through its
network of branches, our manufactured foam
products and entrance doors, along with a
range of third-party related products, as well as
windows fabricated by third parties using
products manufactured by the Profiles division.
Customers are mainly installers, small builders,
roofing contractors and independent stockists.

>3 million
products
delivered in 2020

WE RECYCLE

We recycle both customer factory offcuts
(‘post-industrial’ waste) and old windows that
have been replaced with new (‘post-consumer’
waste). the recycled material is used to
generate brand new extruded plastic products.

c.3 million windows

recycled in 2020

Vertically
integrated
model

The coordination of our procurement,
manufacturing and distribution processes
enables us to capture margin throughout all
stages of our value chain.

Our recycling activities help lower material
costs and improve product stability.

Scale

We operate well-invested and modern
extrusion facilities.

We are the UK’s largest window recycler.

Our extensive branch network is a driver of sales
growth and market share. It also helps improve
manufacturing efficiency, with pull-through
demand driving higher factory utilisation.

Innovative
products

We are committed to a strategy of continually
developing new and existing products.

Brand
strength

People
and
culture

We support the use of Building Information
Modelling (‘BIM’) software, giving architects
and contractors access to a library of Eurocell
products, making it easier to specify them.

We have a strong brand image and our
marketing activities seek to maximise our
brand awareness.

Our experienced management team have a
proven track record of achieving growth.

Our corporate culture is one of openness,
trust, encouragement and clarity of purpose.
We train and empower our people to help our
customers grow their businesses.

Local
footprint

Our branches are conveniently located and
have readily available inventory, thereby
providing excellent service to local customers
and national groups alike.

We also strive to help our customers through
the provision of technical, business
development and marketing support services.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

KEY BENEFICIARIES

Our initiatives to support sales
and deliver high levels of
customer service differentiate
Eurocell from our competitors.
We expect this to drive good
sales growth.

Like-for-like1 sales growth

Reported sales down 8%

Shareholders

Our overall strategic objective is to
deliver sustainable growth in
shareholder value.

Adjusted Profit Before Tax2

£8.5m

Employees

We work hard to train and develop
our people, and provide rewards
commensurate with our goal to be
an employer of choice.

OUTPUTS

Sales
growth

Solid
profitability

Good cash
generation

We have a track record of solid
profitability. We experienced
some challenges with
incremental volume in 2018/19,
but our continued investment
in expanding capacity and
improving operational efficiency,
coupled with strong sales
growth, should drive increased
returns.

Expanding the branch network
(including larger format
branches), whilst dilutive until
new branches become
established, should deliver
healthy medium-term results
as new branches mature.

Increased use of recycled
materials can help mitigate raw
material pricing pressure.

Our operating cash flow
conversion is good, particularly
in Building Plastics, where a high
proportion of customers pay at
point of sale or shortly thereafter.
This has allowed us to invest in
working capital to support sales
growth and protect the business
from any raw material supply
interruption that may take place.

Net cash generated from
operating activities

£32.9m

Fabricators

Through high-quality products and a
strong focus on customer service,
we have developed a very loyal
customer base.

Small builders &
installers

The independent sole traders that
visit our branches benefit from the
one-stop shop offering we provide.

House builders

House builders appreciate the
quality of our products and benefit
from Eurocell coordinating our
fabricators’ offering to meet their
requirements.

Installers

We aim to make our products as
easy as possible to work with, which
is very attractive to our direct or
indirect installer base.

Good
return
on sales

Our strong brand, well-invested
facilities and capital-light branch
expansion programme deliver a
good return on sales.

Return on sales3

12%

Progressive
returns to
shareholders

Our dividend policy, supported
by sales growth and cash
generation, deliver progressive
dividend returns to shareholders.

Total dividends returned
to shareholders since
the IPO in 2015

£38m

1 Like-for-like excludes acquisitions and new branches opened in 2019/20, and is calculated by comparing
average sales per trading day in 2020 (i.e. 212 days, excluding days closed) with average sales per trading
day in 2019 (249 days).

2 Adjusted Profit Before Tax is stated before non-underlying items.
3 Return on sales is Adjusted EBITDA (including impact of IFRS 16) divided by revenue.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Strategy

We have seven key
STRATEGIC
PRIORITIES

Our overall objective is to deliver
sustainable growth in shareholder
value by increasing sales and profits
at above market growth rates through
leadership in products, operations,
sales, marketing and distribution.

Strategic priority

2020 progress

KPIs

2021 focus

Target growth
in market share
Increase market share of rigid PVC profiles to
drive sales and profit growth in Profiles.

• Profiles like-for-like sales growth of 11% in H2.
• H2 growth driven by existing and new accounts and strong contribution from Vista Panels.
• 14 new accounts (following 60 in 3 years 2017-19.
• H2 growth includes good contributions from trade fabricators.
• New build and commercial markets began H2 slowly, but run rates started to improve from

September.

Estimated market share in Profiles:

• Exploit compelling case for trade fabricators to switch to Eurocell, with clear points of differentiation through

c.17% (2015: c.12%)

specification, service, opportunities to supply branch network and product range / development.

• Extend market share gains in new build through continued development of technical specifications with

housebuilders, and a focus on sustainability with our use of recycled material.

• Continue to target commercial sector projects, where energy efficiency and lower cost underpin a strong

case for using PVC over aluminium in sub-sectors such as build-to-rent, and education.

Expand our branch
network
Investment in existing estate and new
branches to increase market share of foam
PVC profiles, and drive sales and profit
growth in Building Plastics.

Increase the use of
recycled materials
Increased use of recycled material to help
mitigate raw material pricing pressure,
as well as enhance the stability and reduce
the carbon footprint of our manufactured
products.

Develop innovative new
products
Maintain market leadership by offering the
latest in product innovation.

Explore potential bolt-on
acquisitions
Consider acquisition opportunities when they
arise.

Deliver sustained
operational excellence
Optimise returns on recent investment in
manufacturing and warehousing capacity to
enhance profits and return on sales.

Develop a sector-leading
digital proposition
Develop end-to-end digital solutions to
enable our strategic priorities and improve
the supplier, customer and employee
experience.

• Building Plastics like-for-like sales growth of 19% in H2.
• H2 growth driven by strong performance in manufactured and traded goods and an excellent

start for new outdoor living range.

• 4 new sites opened, including 3 larger format branches.
• Total estate at 208 branches at 31 December 2020, with 67 (net) new branches opened from

2015.

Estimated market share in Building

• Continuous improvement in existing estate focused on:

Plastics (foam PVC profiles):

c.24% (2015: c.20%)

– Customers: up-selling, cross-selling, target lapsed accounts, margin control.

–

Trading: promotional activities, focus on bottom 20 performing branches.

– Products: improving conversion rates for high value items, and range extension, particularly conservatory

roof development and outdoor living products.

• Up to 12 new sites, of which up to 6 will be larger format.

• Continue to reduce time to break-even for new branches.

• Continue trial for sector-leading consumer on-line window and door proposition.

• Continued investment to expand capacity and improve reliability in both recycling plants,

•

with capex of £1.5 million (2019: c.£5.7 million).
Increased use of recycled material for primary extrusion in 2020 to 25% of consumption
12.4k tonnes (2019: 23% or 13.4k tonnes).

• Further 8.7k tonnes produced for use in extrusion of products with 100% recycled content,

or sold to trade extruders (2019: 11.5k tonnes).

total tonnes of waste processed

• Maximise throughput and operational efficiency / reliability at both recycling sites to support business

in the recycling plants:

33.7k (2019: 41.3k)

sustainability and growth.

• Develop the recycling priority into a sustainability strategy for the whole business.

– Define long-term sustainability objectives, linked to the relevant UN Sustainable Development Goals and

the UK Government’s transition towards a net zero carbon economy, along with an implementation plan

and appropriate KPIs against which to measure progress.

• Development and introduction of:

Flush sash for Logik range.
–
–
Through-colour grey substrate profile.
– New sliding patio door system (Synco).
– New tiled roofing products (“Envirotile”).
–
– Outdoor living range extension, including Kyube garden room.
– Aluminium powder-coated rafter top caps (“Skypod Plus”).
– Aspect flush French and residential doors.

Full height glazing panels for Equinox Roof Systems (“Equinox Vega”).

Product ranges launched:

• Development and introduction of (amongst others):

– Vertical slider enhancements.

– Stronger window profile to facilitate extended thresholds.

– New composite door system.

–

Further extension to outdoor living range (e.g. pergolas, gazebos and fencing).

• Other enhancements to existing products (e.g. Skypod and Envirotile) and complementary new

product offerings.

• We have completed 6 acquisitions in the period since our IPO in 2015
• However, our principal focus for 2020 was on progressing the project to expand our

warehousing capacity.

• We also made good progress with the integration and expansion of Eurocell Recycle North.

No acquisitions completed in 2020

• Our principal focus for 2021 will be delivering operating efficiencies from recent investments in manufacturing

• However, we will continue to assess and consider bolt-on acquisition opportunities in the markets in which

and warehousing capacity.

we operate over the medium-term.

• Began to optimise operational footprint and supply chain to support growth:

– Project to fit our new warehouse remains on track, with major milestone reached in

January 2021, as commercial operations began from the new site.

• Began improving operational capability:

Implemented standard operating system across all operational sites.

– Developed KPI suite aligned to strategy and objectives.
–
– Visual factory enhancements to empower employees.
–

Improved factory OEE1 and customer OTIF2 levels through H2 peak period.

OEE 1:

75% (2019: 73%)

OtIF 2:

88% (2019: 89%)

• Operational footprint:

– Complete transition to new warehouse in Q2.

conservatory roofs.

• Continued improvement in operational capability.

– Begin conversion of the existing warehouse to a specialist manufacturing site for foiling and

• Recruitment of new Director of IT.
• Developed IT road map.
• Approved investment in people and technology to progress road map.

KPIs to be developed in 2021

• Progress prioritised road map projects:

– Data: improve Product Information Management (PIM).

– Digital: consolidate and develop website and ecommerce platforms.

– Customer Relationship Management (CRM): consolidate to one view of the customer.

– Enterprise Resource Planning (ERP): leverage new and improved functionality to provide access to real

time analytics, support process improvement and operational efficiency.

– HR: investment in employee management systems and improved employee communication platform.

1 OEE is overall equipment effectiveness, a KPI measuring our manufacturing efficiency which takes into account machine availability, performance and yield.
2 OTIF is on time in full, a KPI measuring the efficiency and accuracy of our logistics and delivery operation. Estimate 2020 OTIF at > 90% excluding the impact of COVID.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Over the last 5 years, we have targeted five strategic
priorities to deliver this objective and we have made good
progress against each of them. Early in 2021 we conducted
a review of the Group’s strategy, our markets and activities.
We decided that, whilst the five existing priorities remain
relevant, we would refine one of them and introduce two
new priorities, making seven in all.

It is therefore our intention in 2021 to develop our existing
strategic priority to increase the use of recycled material,
into a ‘sustainability strategy’ for the whole business.
We will also introduce new strategic priorities to ‘deliver
sustained operational excellence’ and ‘develop a sector-
leading digital proposition’. The seven priorities are
summarised below:

Strategic priority

2020 progress

KPIs

2021 focus

Target growth

in market share

Increase market share of rigid PVC profiles to

drive sales and profit growth in Profiles.

September.

• Profiles like-for-like sales growth of 11% in H2.

• H2 growth driven by existing and new accounts and strong contribution from Vista Panels.

• 14 new accounts (following 60 in 3 years 2017-19.

• H2 growth includes good contributions from trade fabricators.

• New build and commercial markets began H2 slowly, but run rates started to improve from

Estimated market share in Profiles:

• Exploit compelling case for trade fabricators to switch to Eurocell, with clear points of differentiation through

c.17% (2015: c.12%)

specification, service, opportunities to supply branch network and product range / development.

• Extend market share gains in new build through continued development of technical specifications with

housebuilders, and a focus on sustainability with our use of recycled material.

• Continue to target commercial sector projects, where energy efficiency and lower cost underpin a strong

case for using PVC over aluminium in sub-sectors such as build-to-rent, and education.

Expand our branch

network

Investment in existing estate and new

branches to increase market share of foam

PVC profiles, and drive sales and profit

growth in Building Plastics.

Increase the use of

recycled materials

Increased use of recycled material to help

mitigate raw material pricing pressure,

as well as enhance the stability and reduce

the carbon footprint of our manufactured

products.

• Building Plastics like-for-like sales growth of 19% in H2.

• H2 growth driven by strong performance in manufactured and traded goods and an excellent

start for new outdoor living range.

• 4 new sites opened, including 3 larger format branches.

• Total estate at 208 branches at 31 December 2020, with 67 (net) new branches opened from

2015.

Estimated market share in Building
Plastics (foam PVC profiles):

c.24% (2015: c.20%)

• Continuous improvement in existing estate focused on:

– Customers: up-selling, cross-selling, target lapsed accounts, margin control.
–
Trading: promotional activities, focus on bottom 20 performing branches.
– Products: improving conversion rates for high value items, and range extension, particularly conservatory

roof development and outdoor living products.
• Up to 12 new sites, of which up to 6 will be larger format.
• Continue to reduce time to break-even for new branches.
• Continue trial for sector-leading consumer on-line window and door proposition.

• Continued investment to expand capacity and improve reliability in both recycling plants,

with capex of £1.5 million (2019: c.£5.7 million).

•

Increased use of recycled material for primary extrusion in 2020 to 25% of consumption

12.4k tonnes (2019: 23% or 13.4k tonnes).

• Further 8.7k tonnes produced for use in extrusion of products with 100% recycled content,

or sold to trade extruders (2019: 11.5k tonnes).

total tonnes of waste processed
in the recycling plants:

33.7k (2019: 41.3k)

• Maximise throughput and operational efficiency / reliability at both recycling sites to support business

sustainability and growth.

• Develop the recycling priority into a sustainability strategy for the whole business.

– Define long-term sustainability objectives, linked to the relevant UN Sustainable Development Goals and
the UK Government’s transition towards a net zero carbon economy, along with an implementation plan
and appropriate KPIs against which to measure progress.

Develop innovative new

products

Maintain market leadership by offering the

latest in product innovation.

• Development and introduction of:

Flush sash for Logik range.

–

Through-colour grey substrate profile.

– New sliding patio door system (Synco).

– New tiled roofing products (“Envirotile”).

–

Full height glazing panels for Equinox Roof Systems (“Equinox Vega”).

– Outdoor living range extension, including Kyube garden room.

– Aluminium powder-coated rafter top caps (“Skypod Plus”).

– Aspect flush French and residential doors.

Product ranges launched:

• Development and introduction of (amongst others):

– Vertical slider enhancements.
– Stronger window profile to facilitate extended thresholds.
– New composite door system.
–

Further extension to outdoor living range (e.g. pergolas, gazebos and fencing).

• Other enhancements to existing products (e.g. Skypod and Envirotile) and complementary new

product offerings.

Explore potential bolt-on

• We have completed 6 acquisitions in the period since our IPO in 2015

• However, our principal focus for 2020 was on progressing the project to expand our

warehousing capacity.

No acquisitions completed in 2020

• Our principal focus for 2021 will be delivering operating efficiencies from recent investments in manufacturing

and warehousing capacity.

• However, we will continue to assess and consider bolt-on acquisition opportunities in the markets in which

• We also made good progress with the integration and expansion of Eurocell Recycle North.

we operate over the medium-term.

• Began to optimise operational footprint and supply chain to support growth:

– Project to fit our new warehouse remains on track, with major milestone reached in

January 2021, as commercial operations began from the new site.

• Began improving operational capability:

– Developed KPI suite aligned to strategy and objectives.

–

Implemented standard operating system across all operational sites.

– Visual factory enhancements to empower employees.

–

Improved factory OEE1 and customer OTIF2 levels through H2 peak period.

OEE 1:

OtIF 2:

75% (2019: 73%)
88% (2019: 89%)

• Operational footprint:

– Complete transition to new warehouse in Q2.
– Begin conversion of the existing warehouse to a specialist manufacturing site for foiling and

conservatory roofs.

• Continued improvement in operational capability.

Develop a sector-leading

• Recruitment of new Director of IT.

• Developed IT road map.

• Approved investment in people and technology to progress road map.

KPIs to be developed in 2021

• Progress prioritised road map projects:

– Data: improve Product Information Management (PIM).
– Digital: consolidate and develop website and ecommerce platforms.
– Customer Relationship Management (CRM): consolidate to one view of the customer.
– Enterprise Resource Planning (ERP): leverage new and improved functionality to provide access to real

time analytics, support process improvement and operational efficiency.

– HR: investment in employee management systems and improved employee communication platform.

acquisitions

Consider acquisition opportunities when they

arise.

Deliver sustained

operational excellence

Optimise returns on recent investment in

manufacturing and warehousing capacity to

enhance profits and return on sales.

digital proposition

Develop end-to-end digital solutions to

enable our strategic priorities and improve

the supplier, customer and employee

experience.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Strategy in Action

Delivering
OPERATIONAL
EXCELLENCE

Through 2016-19, the success of our commercial
strategies resulted in a strong compound annual
growth rate in sales of 12%. However, profits for that
period were impacted by sales running substantially
ahead of our expectations, thereby exceeding
the available operating capacity and leading to
inefficiencies and extra costs.

However, manufacturing and warehousing constraints have
now been resolved through major investments in new capacity.
We have therefore introduced a new strategic priority to ‘deliver
sustained operational excellence’, which, looking ahead, we
expect to result in the benefit of our sales growth flowing through
to improved profits and margins.

Focus in 2020
Throughout 2020, our operational teams have been engaged in
responding to the challenges posed by COVID-19. As described in
Our COVID Response on pages 16 to 21, this included the design
and on-going implementation of COVID protection measures and
streamlining operational processes.

Alongside the COVID work, in Operations we have been focused
on improving our execution in terms of efficiency and accuracy
and on preparing the business for growth. This work has been
concentrated in two key areas: (i) optimising the operational
footprint and supply chain to support efficient growth; and
(ii) developing our operational capability.

Optimising the operational footprint
At the centre of this aspect has been the project to fit-out our
new warehouse, which unlocks the operational footprint of
the business to support growth and deliver improvements in
operating efficiencies.

2020 Capital
Expenditure allocation

New warehouse

£8.0m

Manufacturing maintenance

£2.5m

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Towards the end of 2019 we concluded that our existing main
warehouse was a major constraint to future growth and operating
efficiency. Early in 2020 we secured the new facility, located
within 3 miles of our primary manufacturing site, existing main
warehouse and head office. The new site has 260,000 square
feet of high bay, state-of-the-art warehouse accommodation,
dedicated office space and car parking.

The fit-out delivers high density storage using state of the art
mobile cantilever racking, and efficient processing through GPS
guided picking equipment with proximity and obstacle awareness
sensors. With this racking we can store up to twelve stillages
high (our existing warehouse is restricted to seven) and increase
capacity by more than 60%. The mobile platforms replace manual
techniques, thereby providing a safer and more productive
solution. The warehouse management systems behind the
physical attributes allow us to store product in the areas of the
racking for optimal efficiency based on shipping velocity.

The fit-out project reached a major milestone in January 2021,
with commercial operations beginning successfully from the new
site. We have now proved the ability pick at 3x the efficiency of our
traditional methods, with significantly more output capacity. Our
intention is to ‘turn’ the operation fast, making it the cornerstone
of our supply chain for many years of future growth.

In line with our plans, transition will continue over the coming
weeks, with the final stages expected to complete in Q2 2021.
The site has also become our new HQ, with the office fit-out
described on page 49.

The new warehouse also unlocks the operational footprint for
the whole group. We will convert our existing warehouse to a
specialist manufacturing site, relocating, beginning later in 2021,
secondary operations including foiling and conservatory roofs.
This will free up space to future-proof extrusion capacity.

Developing our operational capability
In developing our operational capability in 2020, we have worked
with our teams to ensure all colleagues are engaged in the overall
business strategy deployment and understand what is important
to our customers and other stakeholders.

We have developed our operational key performance indicators
(KPI’s) to be better aligned with our strategy and objectives and
implemented a standard operating system across all operational
sites.

/This work has been supported with investment in areas such as
automated data gathering to support our KPI’s for key processes
and visual factory enhancements to empower employees.

We were very pleased to see this work begin to pay off in the
second half of 2020, when operating efficiencies across the
business were good at a time of very high demand. Most of our
operational sites delivered record monthly and weekly output
levels and efficiencies H2, demonstrating the strong foundation
we have built.

In summary, we are developing a footprint, operational controls
and a continual improvement culture which will support our
growth and performance for years to come.

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

In Operations, we have been focused on
improving our execution and on
preparing the business for growth.”

Mark Hemming
Chief Operating Officer

260,000
square feet

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Strategy in Action continued

Developing our
APPROACH TO
SUSTAINABILITY

As described in the Chief Executive Officer’s Report,
our intention in 2021 is to develop our existing
strategic priority to increase the use of recycled
material into a sustainability strategy for the whole
business.

Developing our approach
We recognise increasingly the importance of a strategic,
coordinated approach to the many elements and aspects that
feed into the broader concepts of sustainability, corporate social
responsibility (CSR) and environmental, social and corporate
governance (ESG).

The Responsible business section on pages 36 to 51 describes
the key aspects of our work on CSR and ESG.

We are working now to define long-term sustainability objectives,
linked to the relevant UN Sustainable Development Goals and the
UK Government’s transition towards a net zero carbon economy,
along with an implementation plan and appropriate KPIs against

which to measure progress. Our strategic intent and actions under
consideration are set out below. We will communicate further on
sustainability later in 2021.

Leading UK-based recycler of PVC windows
Expanding our recycling operation will be at the heart of our
sustainability strategy. Increasing the use of recycled material
increases our profits, because the cost of recycled compound is
typically lower through the cycle than the price of virgin material,
and it reduces our exposure to volatile commodity prices. It also
improves product and business sustainability, with less plastic
going to landfill.

Closed-loop recycling (where windows being replaced are
recycled into the new product) is attractive to decision makers
such as local authorities and architects, which helps us develop
tight specifications for our products.

We have been investing to increase capacity at our two our
recycling plants and have become the leading UK-based recycler
of PVC windows. Use of recycled material in our primary extrusion
operations increased from 4.1k tonnes (or 9% of materials

RELEVANT U.N.
SUSTAINABLE
DEVELOPMENT
GOALS

• Progressive pay
•
Incentive schemes
• Pension and benefits

OUR STRATEGIC INTENT

• Health & safety

• Learning

• Equal opportunities

priority

• Healthy work
environment
• COVID-safe
operations

opportunities for all
colleagues

employer

• Promote female and
minority applicants

ACTIONS

• Health & safety

•

training
In-work health check,
and support
• Virtual queuing

• Training and
development
programme
• Apprentice and

• Close gender pay

gap

• First-class facilities
• Flexible and home

Kickstart schemes

working

• Living wage
• Good pay awards
Incentives shared
•
widely

• Benefits scorecard

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

consumed) in 2015 to 13.4k tonnes (or 23% of consumption) in
2019 and 12.4k tonnes (or 25% of consumption) in 2020,
with volumes in the latter reduced by the impact of COVID.
In addition, in 2020 we produced a further 8.7k tonnes of recycled
material (2019: 11.5k tonnes), which is used either for our products
made from 100% recycled material, such as window cavity
closers, or sold to a variety of trade extruders.

What does 36k tonnes of CO2 look like?
• Driving an average car 300 million kilometres2 (to the moon and

back 380 times).

• The CO2 output of over 6,000 UK homes3.
• The carbon sequestered by 600,000 tree seedlings grown for

10 years4.

Our total output for recycled material in 2020 was 21.1k tonnes
(2019: 24.9k tonnes) and as a result we saved the equivalent
of c.3 million window frames (2019: c.3.2 million) from landfill.

Carbon savings
• An independent study by the University of Manchester1 found
that displacing 1 tonne of virgin PVC with 1 tonne of recycled
window PVC results in a reduction of approximately 1.7 tonnes
of CO2 emissions. This calculation compares the full lifecycle
carbon emissions associated with the production of virgin PVC
with emissions from the window recycling process. As a result,
we estimate that our recycling operation saved approximately
36k tonnes of carbon in 2020 (2019: 42k tonnes), compared to
the use of virgin PVC.

What does this mean for house builders and
home owners?
A house builder constructing 2500 semi-detached houses will
save around 500 tonnes of CO2 equivalent per year by using
Eurocell windows and cavity closures, compared to a competitor
using full virgin PVC windows.

Home owners can rest safe in the knowledge that, as well
benefiting from the thermally efficient properties of PVC
compared to other materials, by using Eurocell windows they
are helping to reduce carbon emissions.

OUR STRATEGIC INTENT

• Sustainable water
management

•

Increase use of
clean energy
Improve operational
efficiency

• Sales and profit
growth strategy
Invest in local
employees and
communities

•

Increase use of
recycled material

• Reduce scrap

materials

• Reduce carbon

footprint reduction
plan for all sites

• Closed-loop cooling
to recycle water at
production sites

• Power sourcing
• Single-minute

exchange of dies
• Scrap reduction
• LED lighting

ACTIONS

•
Invest in expansion
• Employer of choice
• Reduce reliance on

agency staff

• Expand recycling

• Reduction plans
• Lower site waste
• Electric vehicles

“Life Cycle Assessment of Re-cycling PVC Window Frames”, Heinz Sticchnothe, School of Chemical.
Engineering and Analytical Science, University of Manchester.

2 Assumes vehicle emissions of 122gCO2/km.
3 Based on 2017 UK national figures.
4 Source: US Environmental Protection Agency.
5 Based on typical semi-detached home with 7 windows and french doors.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Our Strategy in Action continued

New products
RESONATED WELL
WITH CUSTOMERS

Coastline Cladding
Our Coastline cladding product continues to grow
in the new build and RMI markets. It can transform
existing low-rise housing stock, giving it a modern,
contemporary feel, or provide new properties with
kerb appeal. It is versatile and can be installed on
buildings up to three storeys high and benefits from
BBA certification fire testing (conforming with BS EN
13501, Fire Classification for Construction Products).

Coastline is made from an innovative composite material, which
guarantees up to 10 years of weatherproof performance, and
offers minimal contraction and expansion whatever the weather
conditions. Compared to cement boards, it is lightweight,
easy-to-handle, fade-resistant, 100% recyclable and does not
release harmful silica dust when cut to length.

Garden rooms
We expanded our range of outdoor living products
in 2020, with the introduction of Kyube garden
rooms. This product captured the imagination
of customers and installers alike and meets the
growing demand for affordable extra work and
leisure spaces at home.

Kyube is a modular, bespoke building design that can be used
as a summer house, playroom, fitness room or – as more and
more people adjust to working from home – a dedicated office
space. It comes in a variety of configurations and are finished
off with our own Coastline cladding.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Our products have resonated well with
customers seeking, possibly as a result of
the pandemic, to improve their homes and
create more usable space, both inside and
outside of their properties.”

Envirotile
Envirotile expands our growing range of roof
products. This innovative roofing system utilises
polymer materials to create a tile that is just one-fifth
of the weight of a traditional concrete tile, whilst
providing improved foot grip for installers. These
features mean it is one of the safest roofing tiles to
work with, reducing carrying loads and slip risk. With
no dust during cutting, this system can also help to
eliminate the risk of lung-related health problems.

Envirotile also provides excellent green credentials; attractive
to homeowners and housing providers. The unique polymer
design is made from over 75% recycled materials.

Other outdoor living products
In 2020 we also introduced a new range of stylish and
contemporary composite hollow decking products.

Hollow decking is perfect for gardens and patios. Its recycled
wood / polymer construction makes it more durable than
timber, with added resistance to damage from the common
threats to decking appearance, such as colour degradation.
Concealed fixings give the product a neat, flawless finish,
which can be quickly and easily installed.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Divisional Review

Profiles

The Profiles division manufactures
extruded rigid and foam PVC profiles.

PROFILES HIGHLIGHTS

Market share

c.17%

(2015: c.12%)

Like-for-like2 sales

Flat

New accounts

14 (2017-2020: 74)

Total accounts

c.400 fabricators

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Strategic report

cORPORate GOveRnance

Financial StatementS

Following the introduction of c.60 new accounts over
the last three years, in 2020 we have selectively added a
further 14 accounts (most in H2) and our prospect pipeline
remains strong.

Operating profit
Adjusted operating profit for 2020 was £7.9 million
(2019: £17.9 million), comprised of a loss in H1 and good profit
growth in H2. The H1 loss reflects reduced sales volumes and
the impact of operational gearing, and is stated net of support
received under the Coronavirus Job Retention Scheme
(c.£3.5 million), offset by an increase to the IFRS 9 impairment
charge (bad debts) in respect of certain fabricator customers
(£0.7 million). The profit in H2 represents good growth on H2 2019
and is driven by strong sales and good operating efficiencies.

The overall operating loss of £1.0 million (2019: profit of £17.9 million)
is stated after non-underlying charges of £8.9 million, comprising
the impairment of goodwill (£5.8 million), the impairment of
right-of-use assets (£0.6 million), warehouse dual running costs
(£2.3 million) and restructuring costs (£0.2 million). Further
information on non-underlying charges is included in the Chief
Financial Officer's Report.

Use of recycled material
attractive to house builders:
• 12.4k tonnes of recycled material used to

extrude our rigid profiles.

• 36.0k tonnes of carbon saved compared

to the use of virgin PVC.

• A house builder constructing 2,500 semi-detached

houses will save around 500 tonnes of CO2
equivalent per year by using Eurocell windows
and cavity closures, compared to a competitor using
full virgin PVC windows.

eUroceLL pLc ANNUAL REPORT AND ACCOUNTS 2020

We make rigid and foam products using virgin
pVc compound, the largest component of which
is resin. our rigid products also include recycled
pVc compound, produced at our market-leading
recycling facilities.

Rigid PVC profiles are sold to third-party fabricators, who
produce windows, trims, cavity closer systems, patio doors and
conservatories for installers, retail outlets and house builders.
Foam products are used for roofline, cladding and window fitting
and are supplied to customers through our nationwide branch
network in the Building Plastics division.

All of our manufacturing margin is recorded within the Profiles
division, which therefore also benefits from expansion of the
branch network.

The Profiles division also includes Vista Panels, S&S Plastics and
Eurocell Recycle North (formerly ‘Ecoplas’).

Profiles

Third-party Revenue

Inter-segmental Revenue

Total Revenue

Adjusted operating profit1

Operating (loss)/profit

1 Before non-underlying items.

2020
£m

99.7

56.4

156.1

7.9

(1.0)

2019
£m

115.7

59.5

175.2

17.9

Change
%

(14)

(5)

(11)

(56)

n/a

Revenue
Profiles third-party revenue for the year was down 14% to
£99.7 million (2019: £115.7 million). This is equivalent to a flat
like-for-like sales performance as follows:

Profiles division like-for-like2

sales growth

Full Year

(14)%

11%

Flat

2 Like-for-like excludes acquisitions (none in either period) and is calculated by

comparing average sales per trading day in 2020 (i.e. 212 days, excluding days
closed) with average sales per trading day in 2019 (249 days).

H1 like-for-like sales down 14% reflects the impact of the first
COVID-19 lockdown. However, sales increased progressively from
re-opening, and like-for-like growth of 11% in H2 includes good
contributions from trade fabricators, who are substantially focused
on the RMI market. New build and commercial markets began
the second half slowly, but run rates started to improve from
September. Sales also include a very strong performance from
Vista Panels, which finished the year 4% ahead of 2019 on a
reported basis, driven by higher sales of composite doors to new
build. Across the Profiles division, new build represents
approximately 30% of sales.

Eurocell_AR20_35518_Front_2.indd 33

22/03/2021 10:16

/Divisional Review continued

Building Plastics

Building Plastics distributes a range of Eurocell manufactured
and branded PVC foam roofline products and Vista doors,
as well as third-party manufactured ancillary products.

BUILDING PLASTICS
HIGHLIGHTS

Market share

24% (2015: 20%)

Like-for-like3 sales

14%

New branches

4 (2017-2020: 51)

Total estate

208 branches

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

These include windows made by our fabricator
customers using products manufactured by Profiles,
sealants, tools and rainwater products.

Distribution is through our national network of 208 branches to
window and roofline installers, small and independent builders,
house builders and nationwide maintenance companies. The
business also sells roofline products to independent wholesalers.

The Building Plastics division includes Security Hardware, Kent
Building Plastics and Trimseal. Security Hardware is a supplier
of locks and hardware, primarily to the RMI market, and Kent
Building Plastics and Trimseal are both suppliers of building plastic
materials.

Building Plastics

Third-party Revenue

Organic
Trimseal1

Inter-segmental Revenue

2020
£m

158.2

157.5
0.7

1.3

2019
£m

163.4

162.9
0.5

1.3

Total Revenue

159.5

164.7

Adjusted operating profit2

Operating Profit

4.0

3.4

8.6

Change
%

(3)

(3)
40

–

(3)

(53)

(60)

1 Acquired March 2019.
2 Before non-underlying items.

Operating profit
Adjusted operating profit for 2020 was £4.0 million (2019: £8.6
million), comprised of a loss in H1 and strong profit growth in H2.
The H1 loss reflects reduced sales volumes and the impact of
operational gearing, and is stated net of support received, including
the Coronavirus Job Retention Scheme (£3.0 million) and retail
grants / business rates relief (£1.8 million), offset by an increase to
the IFRS 9 impairment charge (bad debts) to reflect higher risk in
the Building Plastics receivables book (£1.5 million). The profit in H2
represents excellent growth on H2 2019 and is driven by strong
sales and good cost control.

Overall operating profit of £3.4 million (2019: £8.6 million) is stated
after non-underlying costs of £0.6 million, comprising right-of-use
asset impairment charges (£0.3 million) and restructuring costs
(£0.3 million). Further information on non-underlying charges is
included in the Chief Financial Officer's Report.

We plan to open up to 12 new sites in 2021, with the final number to
be determined based on the economic environment and business
performance, with up to six of these in the larger format. New
branches are a driver of sales and profit growth in the medium term,
but they can create downward pressure on profitability in the short
term due to the investment in our teams at new sites and in
supporting central infrastructure. However, our initiatives to reduce
time to break-even have now driven this point below 24 months.
We do not expect the branches to be opened in 2021 to have a
meaningful impact on profit for the year.

Revenue
Building Plastics third-party revenue for the year was down 3% to
£158.2 million (2019: £163.4 million). This is equivalent to like-for-
like sales growth of 14% as follows:

Branch network

No. of branches (at the end of the year)

Building Plastics division

like-for-like3 sales growth

Full Year

19%

14%

2020

2019

2018

3 Like-for-like excludes acquisitions and new branches opened in 2019/20, and is
calculated by comparing average sales per trading day in 2020 (i.e. 212 days,
excluding days closed) with average sales per trading day in 2019 (249 days).

Like-for-like sales in H1 reflect the impact of the first COVID-19
lockdown. However, like-for-like growth of 19% for H2 includes a
strong performance across our full range of own-manufactured
products and traded goods, as well as a good start for the new
outdoor living range.

In terms of new branches, we opened four sites in 2020
(2019: also four), of which three were the new large format store.
Sales from this format (now five branches in total), continue to
be encouraging. Branches opened in 2019/20 added £2.0 million
to sales in 2020.

Two loss-making branches were closed during the year under the
restructuring programme announced with our half-year results, with
customers transferred to neighbouring locations. We now have a
total of 208 branches providing national coverage across the UK.

Average revenue per branch (£000)

2020

2019

2018

208

206

202

701

718

679

Indicative branch economics (rounded)

Branch open

< 2 years

2–4 years

> 4 years

No. of Branches

143

Average Sales per
Branch (£000)

380

480

Return on Sales
per Branch (%)1

Small
loss

Up to
10%

700

Mid-
teen
%

1 EBITDA as % of revenue, before regional infrastructure

and central costs, and IFRS 16 adjustments.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business

One team operating
A RESPONSIBLE
BUSINESS

In operating a responsible business,
our main areas of focus are
governance, including ethics
and business conduct, our people,
their wellbeing and the environment
in which they live and work, and
finally working with others, both
stakeholders and the community.

This section of the Strategic Report constitutes
our Non-financial Information Statement, produced
to comply with sections 414CA and 414CB of
the Companies Act. The information listed is
incorporated by cross-reference.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Minimising our
environmental impact

Valuing our people

Working responsibly

Reporting Requirement

Policies and standards which

Information necessary to understand

govern our approach1

our business and its impact, policy,

due diligence and outcomes.

Environmental matters

• Corporate Vision and

• Environment pp.38

• Investing in recycling pp.40

Employees

• Corporate Vision

• People pp.44

Respect for

human rights

• Equality and diversity pp.46

• Modern slavery pp.51

Values

• Corporate Social

Responsibility Policy

and Values

• Corporate Social

Responsibility Policy

• Employee Handbook

• Corporate Vision

and Values

• Corporate Social

Responsibility Policy

• Privacy Policy

• Recruitment Policy

• Anti-Slavery and Human

Trafficking Policy

• Anti-Bullying and

Harassment Policy

• Various information Security

Policies

• Whistleblowing Policy

Social matters

Anti-corruption

and anti-bribery

Description of principal

risks and impact of

business activity

Description of the

business model

Non-financial key

performance indicators

• Corporate Social

Responsibility Policy

• Customers pp.51

• Community pp.50

• Corporate Social

Responsibility Policy

• Anti-bribery policy

• Whistleblowing and

bribery pp.84

• Risk Management pp.56

• Principal risks and

uncertainties pp.57

• Overview pp.6

• Our business model pp.22

• Operational Performance

pp.12

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Reporting Requirement

Policies and standards which
govern our approach1

Environmental matters

• Corporate Vision and

Values

• Corporate Social

Responsibility Policy

Information necessary to understand
our business and its impact, policy,
due diligence and outcomes.

• Environment pp.38
•

Investing in recycling pp.40

Employees

• Corporate Vision

• People pp.44

• Equality and diversity pp.46
• Modern slavery pp.51

and Values

• Corporate Social

Responsibility Policy
• Employee Handbook

• Corporate Vision

and Values

• Corporate Social

Responsibility Policy

• Privacy Policy
• Recruitment Policy
• Anti-Slavery and Human

Trafficking Policy
• Anti-Bullying and
Harassment Policy

• Various information Security

Policies

• Whistleblowing Policy

• Corporate Social

Responsibility Policy

• Customers pp.51
• Community pp.50

• Corporate Social

Responsibility Policy

• Anti-bribery policy

• Whistleblowing and

bribery pp.84

• Risk Management pp.56
• Principal risks and
uncertainties pp.57

• Overview pp.6
• Our business model pp.22

• Operational Performance

pp.12

Respect for
human rights

Social matters

Anti-corruption
and anti-bribery

Description of principal
risks and impact of
business activity

Description of the
business model

Non-financial key
performance indicators

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

The policies noted above form part of our policy framework which is founded on our risk management
principles. The policies which underpin these principles define mandatory requirements in respect of
risk management. Controls and processes are in place to ensure compliance.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

Minimising our
ENVIRONMENTAL IMPACT

UK leader

Eurocell Recycle, is the largest UK-
based recycler of PVC-U window and
door profiles (by tonnes processed).

Accreditation

We are a member of VinylPlus,
Recovinyl, British Plastics Federation
(BPF) and Operation Clean Sweep - an
industry-wide voluntary commitment to
develop more ecologically responsible
ways to produce, use and recycle PVC.

Our footprint

Since 2014, we have reduced total
emissions by c.38%, along with a steady
downward trend in emission intensity,
as consumption has dropped through
energy efficiency programmes whilst
revenues have generally been increasing
(source: Eurocell Greenhouse Gas
Report, Inenco Group, February 2021).

Recognition

We have been proud winners of:
• the Future Manufacturing Awards -

Sustainability 2018;

• the MRW Recycling Awards -

Manufacturer of the Year 2018 and,
more recently; and

• the National Fenestration Awards
2020 — Recycling Company of
the Year.

We are committed to protecting and minimising our impact on the
environment. Our policy is as follows:

• We recognise that our operations result in emissions and waste and we are
committed to control, recover and reuse PVC waste wherever possible. We
operate in compliance with all relevant environmental legislation and we strive
to use pollution prevention and environmental best practice in all that we do.
The company experienced no reportable environmental incidents during
2020.

• We promote the efficient use of all materials and resources throughout our

facilities, particularly non-renewable resources, and continue our
development of sustainably sourced products using recycled materials
wherever possible.

• Environmental concerns and impacts are a consideration in all of our decision
making and activities. We promote environmental awareness amongst our
employees and encourage them to work in an environmentally responsible
manner. This is achieved through training and education, informing
our employees about environmental issues that may affect their work.

• Emergency response procedures are maintained where required by

legislation or where significant health, safety or environmental hazards exist.
• Our general environmental objectives are set in alignment with legislation and
are continually reviewed to ensure they are being met. Our environmental
policies apply to all our operations and we make sure sufficient resources are
made available to ensure that they are implemented. We strive to continually
improve our environmental performance and review our policies regularly in
the light of planned future activities.

In the following paragraphs we have described the key aspects of our
environmental performance, including the recycling operation and greenhouse
gas emission reduction.

Greenhouse Gas Emissions
We report our greenhouse gas (‘GHG’) emissions as part of our Strategic
Report and our GHG reporting period is 1 October 2019 to 30 September 2020,
with comparatives for the corresponding period in the previous year. Reliable
reporting of GHG emissions on a calendar year basis is not possible due to
difficulties in collating actual data for the final months of the year due to timing
lags on supplier invoicing.

GHG emissions for the Group for the period ending 30 September 2020 in
tonnes of carbon dioxide equivalent (tCO2e) is as follows:

Source

Fuel Combustion (stationary)

Fuel Combustion (mobile)

Facility operation

Purchased electricity

Total

2020

274

2019

335

6,325

7,910

104

11,441

16,061

18,144

24,397

Change

(18)%

(20)%

14%

(29)%

(26)%

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Total emissions decreased by 26% compared to
the corresponding 2019 period. Although sales for
the 2020 calendar year were down 8%, primarily
as a result of impact of the first COVID-19-related
lockdown, emissions from purchased electricity fell
by 29%. This includes the impact of a significant
reduction in emission intensity of 20% from UK grid
electricity (see table below). Although there was a
14% increase in the emissions from the operation of
facilities, in our case the fugitive emissions from the
operation of refrigeration equipment, these accounted
for less than 1% of the Group’s total emissions.

Annual comparison and emissions intensity:

tCO2e

2020

2019

Change

Total emissions

18,144

24,397

Emission intensity1

(26)%

(20)%

1 Expressed in tCO2e per £m revenue.

This information was collected, calculated and
reported in line with the methodology set out in
the UK Government’s Environmental Reporting
Guidelines, 2019 (PB 13944). Emissions have
been calculated using the 2020 conversion factors
provided by Department of Business, Energy and
Industrial Strategy.

Electricity consumption
(66% of 2020 emissions)
We continue to encourage behavioural changes to
reduce consumption levels, to be less wasteful and
drive operational efficiencies, including reducing idle
time and optimising temperatures on extrusion lines
and chillers. We will also investigate LED lighting
in 2021.

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Operation Clean Sweep®

From 2018, we have been part of a campaign called ‘Operation Clean
Sweep’, a global initiative to reduce plastic pellet loss to the environment.
This is led by the British Plastics Federation in the UK with the aim of
ensuring that the plastic pellets, flakes and powders that pass through
UK manufacturing facilities do not end up in our rivers or seas.

By signing up to Operation Clean Sweep, Eurocell has committed to best
practice and to implement systems that prevent plastic pellet loss — and
that we will play our part in protecting the aquatic environment.

Pollution prevention and waste management

In 2020 we took our first steps towards increasing recycling rates for
operational waste streams and move towards a ‘zero to landfill’ approach.
This will be a key area of focus for 2021.

We continue to encourage the use of electric/hybrid vehicles by our
colleagues when the lease term on current vehicles expire. In 2020 we
installed 6 vehicle charging points across the Group.

An extended trial was conducted in 12 Eurocell branches during the year to
encourage recycling of PVC-U waste products by our branch customers.
Waste bins sited at the branch allow customers to deposit PVC-u waste
for return to our recycling plants. In addition to the environmental benefits and
increase in recycling rates, the scheme reduces the burden on our customers
and provides them with a simple, easily-accessible disposal route.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

INVESTING IN RECYCLING

Recycling sits at the very heart of our
operations and we are proud to be the
leading recycler of PVC windows in the UK.

Our well-developed channels
for recovery and recycling
allow old frames to be
recycled and reprocessed
into new products up to
ten times without any loss
of quality.”

What we do
We recycle both customer factory offcuts
(‘post-industrial’ waste) and old windows that have
been replaced with new (‘post-consumer’ waste)
to produce recycled material in the form of pellets,
micronised and granulate material which are then
used to generate brand new extruded products.

We have two recycling plants, which are located
in Ilkeston (Eurocell Recycle Midlands) and Selby
(Eurocell Recycle North).

Both sites operate under IPPC permit conditions
and both successfully retained their permitted
status. The environmental management systems
and manuals forming the basis of our ISO14001
accreditations continue to evolve, with particular
progress being made at Eurocell Recycle North.
All accreditations were successfully maintained
in 2020.

How much we recycle
The first half of 2020 was dominated by the
impact of the first lockdown, with both recycling
sites temporarily closed from late March until early
June (Eurocell Recycling Midlands) and early July
(Eurocell Recycling North).

Nevertheless, during the year our two sites
recycled 27.0k tonnes (equivalent to c.3 million
frames) of post-consumer waste, which would
have otherwise been sent to landfill, and
6.7k tonnes of post-industrial waste. Together the
two sites used this waste to produce 21.1k tonnes
of recycled material.

Of the recycled material produced, 12.4k tonnes (generated predominately
from post-consumer waste) was used alongside virgin resin in the
manufacture of many of our PVC rigid profiles, representing c.25% of total
raw material consumption.

The remaining 8.7k tonnes of recycled material produced is used either in
products which are manufactured from 100% recycled material, including
thermal inserts and cavity closer systems (which are almost exclusively
derived from post-industrial waste), or sold to a range of trade extruders.

We were pleased to see that the average yield in our recycling plants improved
from 60% in 2019 to 63% in 2020, reflecting the benefit of our recent
investments. In addition, we have learned to use more of the coloured products
and smaller particle sizes, resulting in a reduction in waste sent to landfill.

k tonnes

2020

2019

Change

Change %

Inputs – waste recycled
Post-consumer
Post-industrial

Output – recycled material
produced

Yield %

Usage
Primary extrusion
Products made from 100%
recycled material
Sales to trade extruders

27.0
6.7

33.7

21.1

63%

31.4
9.9

41.3

24.9

60%

(4.4)
(3.2)

(7.6)

(3.8)

(14)%
(32)%

(18)%

(15)%

12.4

13.4

(1.0)

(7)%

4.3
3.4

20.1

6.7
5.1

25.2

(2.4)
(1.7)

(5.1)

(36)%
(34)%

(20)%

Primary extrusion usage as
% of total consumption

25%

23%

Strong on sustainability

Eurocell continues to consume a significant proportion
of recycled plastic in its windows and doors

Use of recycled PVC in Eurocell manufacturing

13.4k t

12.4k t

LESS IS MORE

9.5k t

8.3k t

6.0k t

2016

2017

2018

2019

2020

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

25%

75%

Recycled

Proportion of recycled
plastic consumption

Virgin
Proportion of virgin
compound consumption

/Recycled
33.7k
tonnes in
2020

How much we invest
Between 2016 and 2020, we invested c.£6 million
to expand our Eurocell Recycle Midlands site, to
increase output and improve reliability, including
new co-extrusion and other tooling to support the
increased usage of recyclate on key product lines.

We acquired Eurocell Recycle North in August
2018 for a consideration of £6 million (including
debt assumed). As expected, investment was
required to improve the operating environment
and reliability of the plant, to eliminate bottlenecks
from production processes and to expand
capacity. Total investment post-acquisition is
c.£4 million.

As a result of these investments, our use of
recycled material in primary extrusion increased
from 4.1k tonnes in 2015 (or 9% of materials
consumed) to 13.4k tonnes in 2019 (23% of
consumption) and 12.4k tonnes in 2020 (or 25% of
consumption), with volumes in the latter reduced
by the impact of COVID. Our total output of
recycled material, including that used in products
made from 100% recycled material or sold to
trade extruders, increased from 11.6k tonnes in
2016 to 21.1k tonnes in 2020.

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

As well as driving a substantial cost saving,
as described in Strategy in Action on pages 28
and 29, we estimate that our recycling operation
saved approximately 36k tonnes of carbon in
2020 (2019: 42k tonnes), compared to the use of
virgin PVC.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

HOW WE RECYCLE

Our Eurocell Recycle 9-step factory process:

Bulk transportation
A proportion of the recycled
material is used onsite,
whilst the rest is
transported in tankers to
our main extrusion facility,
minimising our carbon
footprint.

Washing
Using a series of water
tanks, contaminants are
‘floated’ out.

Extrude
finished products
The loop is closed as we
manufacture the PVC-U into
new products, frequently to
higher specification than
those being recycled. Such
‘upcycling’ is key to being a
sustainable part of the
Circular Economy.

Pelletisation /
Pulverisation
The PVC-U granules are
processed into finished
material ready for
extrusion.

Colour sorting
An advanced process
utilising high speed
cameras, ultra-violet light
and jets of air filters out the
granules of rubber leaving
only clean, colour sorted
PVC-U.

c.3 million

end-of-first life frames recycled
in 2020

Manufactured product ranges
from recycled PVC-U

82%

Increase in recycled material
produced since 2016

c.150

recycling jobs provided
to people in the local area

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Granulation
The waste is granulated
into uniform size. At this
stage rubber gaskets are
still present.

Shredding
Waste is shredded into
processable pieces.

Waste collection
Waste is taken from
3 sources:
• Post-consumer

windows

• Fabricator off-cuts
• Bar length

c.58k

Windows recycled per week,
on average, during 2020

Separation
Using magnetic processes,
metals are separated from
the rest of the waste and
recycled separately.

BENEFITS OF EUROCELL RECYCLING

Sustainability
• The use of recycled material enhances product
stability and lowers significantly the carbon
footprint of our manufactured products.

Reducing waste to landfill
• By recycling old windows (‘post-consumer’) we
reduce the amount of waste sent to landfill.

Protecting our margin
• The use of recycled material in the manufacture
of PVC rigid products provides a substantial
saving in cost compared to virgin resin
compound. We also aim to increase our use of
recycled material in order to maintain gross
margin as our sales grow.

Mitigating pricing pressures
• Increasing the use of recycled material in our
manufactured products helps to mitigate raw
material price increases and to reduce our
exposure to volatile commodity prices.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/
Responsible Business continued

Valuing
OUR PEOPLE

Our people are at the heart of our success. We believe
that engaging all employees and galvanising their
efforts in line with the Company’s Vision and Values
will set us on a successful path to achieving all our
business objectives.

Our people and their response to COVID-19
Our response to COVID-19 is set out in full on pages 16 and 21.
The Eurocell team rose to the challenges posed by the pandemic,
with our teams across Group working together to keep each other,
our customers and suppliers safe during this challenging period.

For our operational and branch teams, where jobs require
colleagues to be on-site, we implemented a comprehensive range
of COVID safety measures to support our continued production
and trading. We also provided the required equipment and
support for our back office colleagues to work from home
wherever possible.

Our Safety, Health, Environment and Quality (SHEQ) and
Human Resources teams have worked hard on employee
communications, ensuring we reach out regularly to our c.2,000
colleagues, to keep them informed and up to date with the ongoing
changes to safety measures and on our business performance.

Communications included the introduction of short awareness
videos delivered on-line, and regular updates from our
Chief Executive Officer.

We also increased in our communications on health and
wellbeing. For example, in May we ran a successful campaign
during Mental Health awareness week and promoted our
Employee Assistance Programme (EAP) for those who need more
specialised help beyond that provided in-house through our
management teams and Human Resources business partners.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

EXECUTE

CUSTOMER
FIRST

One team

INCLUSIVE

INTEGRITY

Resourcing and recruitment
Despite the challenges of 2020, we have continued to develop our
resourcing systems to ensure that we attract the best people into
our business as vacancies arise and provide a better candidate
experience. Our commitment to internal development also continues
to be a vital component of our people plan, as we work to ensure
people are in the right jobs at the right time with the right training.

During the second half of the year, we successfully transferred
c.140 agency workers into fixed term or permanent contracted
positions, giving those individuals stability in a time of great
upheaval and ensuring the business had the capacity to fulfil
orders during a very busy period.

Eurocell’s recruitment policy ensures that full and fair
consideration is given to all applicants based purely on their
aptitude and ability and irrespective of any declared disability.
For employees who become disabled and declare this to us, we
have mechanisms in place through occupational health providers
to support new ways of working where this is desirable by the
individual and possible with reasonable adjustment and training in
the workplace.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Talent pipelines through the Apprenticeships and
Kickstart schemes
We were pleased that we were able to support our Apprentices
throughout the upheaval and uncertainty of 2020. Our ‘Trade
Supplier’ apprentice programme continued throughout lockdown,
with virtual meetings and online support from the tutors. We
expect this group of apprentices to complete their qualification on
time in 2021.

Following the launch of the new PDR process and tools in 2019,
we made steady progress in 2020 and began to embed this new
approach to performance management. We have focused
particularly on our branch network, where the large number of
small sites presents a unique challenge in this area, The senior
management team are working hard at ensuring our people are
clear about the expectations of their role, their behavioural
competencies in line with company values and in identifying
development needs.

We have continued to support the recruitment of new apprentices
and the transition of existing employees into apprenticeship
programmes in 2020, with c.12 appointments spanning finance,
procurement, administration and manufacturing roles.

Plans are in place to introduce this new approach and PDR process
across the rest of the business in 2021 to help engage all colleagues
in their work and the part they play in Eurocell’s overall success.

Eurocell is also delighted to be part of the Government’s new
Kickstart scheme and we were granted funding for 69 new roles
which we will recruit in Q1 2021.

These initiatives are vital to our philosophy of talent development
and internal growth and we look forward to supporting all of our
young apprentices in 2021.

Incentives and rewards
We want to ensure that we attract the best people, either internally
through our talent pipeline or from outside the business, that
provide the right skills and knowledge that support the continued
growth of our Company. It is therefore important that we continue
to benchmark our remuneration packages to ensure that they
remain competitive.

Performance and Development Review (‘PDR’)
We recognise that employee engagement (the energy and
purpose our staff get from being immersed in their jobs), is key to
the achievement of overall business targets. In 2019 we therefore
designed a new performance management cycle and associated
processes. This provides a forum for employees to discuss and
agree their business aligned objectives and development needs
with their manager.

Every employee has access to a range of benefits that will support
them both inside and outside of work. Our total reward strategy
ensures that all employees are eligible for a range of incentives
that include a defined contribution pension scheme, life insurance,
Save as You Earn (‘Sharesave’) schemes and access to a range of
savings and special offers through our Eurxtras platform. This
platform also facilitates user-friendly communication with all
employees, allowing the business to provide the latest news from
across the organisation.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

The incentive and reward framework for our sales force in our
branches was revised in 2020, enabling a clearer line of sight
between company targets and individual reward.

Also during the year, the Group’s inaugural Save As You Earn (SAYE)
scheme , launched in 2017, reached its maturity with gains made by
all participants and increased share-ownership by our colleagues.
We intend to continue to launch SAYE schemes on an annual basis.

The Eurxtras platform continues to operate as a communication
tool and provide a range of savings and special offers to
employees. Through the pandemic, and particularly whilst the
business was closed during the UK’s first lockdown, when a high
number of our colleagues were furloughed, we took particular
care to ensure employees were made well aware of everything
they were entitled to.

Learning and development
We are committed to continuously improving the availability and
quality of training and development for employees at all levels
across the Group.

During 2020, in light of the COVID restrictions, we stepped up the
use of video and online training to ensure our compliance and
induction training continued.

During the latter months of the year, our programme focused on
training our warehouse colleagues in new manual handling
equipment and new ways of working at the new site. Our external
partners have been pivotal to this hands-on training rollout and we
are very grateful for their support.

We continue to embed the use of our Learning Management
System, particularly within the branches, using on-line tools to
continue with compliance and product training at pace across the
whole of the network, without the need for physical meetings.

Diverse and inclusive culture
In line with our Company Values, we continue to enhance our
policies, procedures and associated management training to
further develop a culture of diversity and inclusiveness at Eurocell.

The recruitment platform and processes we introduced in 2020
ensure that our equality and diversity standards are transparent and
this enables us to make decisions without bias or discrimination.

We provide specific support for specific groups and individuals
throughout our business, including the provision of free English
and Maths tuition for non-English speakers, access to improved
Occupational Health support, mental wellbeing support and a free
Employee Assistance Programme. We have stepped up our
communication in a variety of methods this year to enable our
people to access what they need in order to feel supported and
included, whatever their background or needs.

Our objective is to make Eurocell an employer of choice across
the UK. We have actively embedded our values and behavioural
standards into the new PDR process described above. We are
now planning the rollout of a new and complementary talent
development review process, a new leadership development

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

programme and a consistent corporate induction programme for
2021. We aim to ensure that all our employees feel included in our
successes and reach their potential, whatever their current
capabilities or background.

We recognise the benefits of encouraging diversity across the
business and believe that this will contribute to our continued
success. All appointments are made based on merit and are
measured against specific objective criteria, including the skills
and experience needed for the position. We remain committed to
increasing the participation of women throughout the Group while
recognising we operate in a historically male-dominated industry.

Male
no.

Female
no.

Gender analysis

Directors

Executive Committee

Other senior management

Senior management

Other employees

Total

83%

5 100%

1,657

1,697

71%

75%

88%

87%

total
average
no.

17%

–

29%

25%

–

235

248

12% 1,892

13% 1,945

New policies and procedures
The health and wellbeing of our colleagues is of the upmost
importance to us. We have continued to review and develop our
company policies and procedures in this area to reflect our
evolving business and the environment in which we operate.
These revised policies provide our people with the help, support
and guidance on all employee related issues. For example, during
2020 we have significantly increased our occupational health
provision. We also introduced an improved ‘Managing Absence’
policy to support our health and wellbeing plans.

Health and safety
We employ over 2,000 people and the safety and the well-being of
these employees and our contractors is our first operational priority.

Injury frequency rate1
lost time injury frequency rate2

Injuries per 100,000 hours worked.

1
2 Lost time accidents per 100,000 hours worked.

2020

3.6
0.7

2019

4.8
0.9

Our health and safety performance continues to benchmark well
with industry standards.

The generally positive trend in incident-related performance,
established through 2018 and 2019, continued through 2020
with significant reductions in both of our two primary incident
rate measures.

Lost Time Injury Frequency Rate (LTIFR) decreased by 22% to
0.7 lost time incidents per 100,000 hours worked, while Injury
Frequency Rate for all incidents fell by 25% to 3.6 injuries per
100,000 hours worked although the number of RIDDOR-
reportable injuries rose slightly to a total of 19 across the Group
(2019: 17), all of which were classified as minor.

/As a result, further accident reduction targets have been set, as
part of a suite of linked KPIs for 2021, supported by a new, more
robust, incident investigation process which is currently being
trialled for full introduction across the Group. This will provide a
greater degree of structure and guidance to lead operational
management teams towards more thorough investigation and the
identification of more effective countermeasures.

Recent changes to the structure and approach of the Health and
Safety team will allow closer and more collaborative working
relationships with operational management teams. This change,
along with the scheduled improvement programmes, should see
an acceleration in the rate of improvement and bring further
confidence in our ability to effectively control our risks.

During the year, our two profile manufacturing sites achieved
successful transition from OHSAS18001 to the new ISO45001
health and safety management standard, thereby demonstrating
the Company’s commitment to the protection of our employees,
partners and customers.

Our ability to monitor performance and identify potential areas of
weakness continues to evolve. Using smart phone technology,
audit records are stored online and can be used to generate
analysis which can be used to quickly and easily identify trends
and areas of strength or weakness.

Programmes for improving workplace standards and reducing
injury potential have also continued across our businesses.

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

For example, Vista Panels invested further in the provision of
bespoke racks and trolleys to ensure that large, bulky and heavy
composite doors and other products can be stored and
transported safely, significantly reducing manual handling risks.

A major yard clean-up operation carried out at our two recycling
plants to remove unusable waste, reduce the number of waste
skips, clean up spillages and dig out overgrown vegetation has
resulted in a reduction in injury risk, the generation of more
useable operational space and the creation of a significantly-
improved visual impression of the sites.

Finally, good progress has been made with regard to the sharing
of safety performance information with the introduction of the
Eurocell Safety Wall at our extrusion facility. The wall draws
together various information sources and creates a focal point
around which powerful safety conversations can be held.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

WORKING TOGETHER
THROUGH HARD TIMES

Despite the challenges posed
by COVID-19, our colleagues
achieved some great
successes in 2020.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Award winners
Eurocell won two awards at the National
Fenestration Awards 2020:

• Recycling Company of the Year; and
• Trade Counter of the Year.

We were also awarded second place in the Conservatory
Roof Manufacturer category.

These independent awards, which recognise the best in our
sector, highlight our strong sustainability credentials as well
as the commitment and dedication of our teams.

“We are extremely honoured that the hard work of our
teams has been recognised by the industry. After such a
difficult year, we are delighted to have received two
awards at the National Fenestration Awards 2020.”

Andy McDonnell
Managing Director, Eurocell Building Plastics

/Strategic report

cORPORate GOveRnance

Financial StatementS

Apprenticeship schemes
early in 2020, working in collaboration with
interserve, we launched a new and exciting
apprenticeship scheme: the ‘trade Supplier
Development programme’. the scheme provides
our branch colleagues with the opportunity to
achieve a Level 2 trade Supplier qualification.
26 of our trade counter colleagues successfully
passed the selection process and were enrolled
in the scheme.

New Head Office fit-out
the project to fit out our new 260,000 square feet
warehouse is described in full on pages 26 and 27.

The major components of this project have been the
installation of mobile cantilever racking, the use of mobile
platforms for put-away and picking processes and the
implementation of IT systems to facilitate efficient operations.
However, the project also included the fit-out of our new
Head Office and welfare facilities, covering four floors and
over 25,000sq.ft. of office and work space.

The programme continued on track throughout the year,
despite the disruption caused by COVID, with the branch
network temporarily closed for a period in Q2, and the very
strong demand experienced in the business during H2.
Training was delivered on-line and using virtual meetings.
We expect a good proportion of the group to complete their
apprenticeship and graduate in 2021 as planned.

The office fit-out work, which began at the height of the first
COVID lockdown, was completed by our own in-house
property team. This group is responsible for our branch
development work, including the fit-out of new branches and
the refurbishment of older sites. This year they also installed
the infrastructure for COVID-safe branch operations, including
safety screens for our trade counters.

“We prioritised working with Interserve to deliver the
Trade Supplier Development Programme in 2020,
demonstrating our on-going commitment to invest in our
people at all levels right across the business.”

Bruce Stephen
Group Human Resources Director

The Head Office work was completed successfully on time
and within budget, despite the very challenging conditions.
In order to comply with the new COVID-19 guidelines and
legislation, the team lived on site, staying away from their
homes and family for several weeks at a time.

“The in-house team did a fantastic job on the new Head
Office – we now have modern, flexible workspace for our
teams to enjoy. I would like to thank them for the
sacrifices they made in order to get the job done during
such a challenging period.”

Mark Hemming
chief Operating Officer

eUroceLL pLc ANNUAL REPORT AND ACCOUNTS 2020

/Responsible Business continued

Working
RESPONSIBLY

Community and charity
Our manufacturing and recycling centres, our warehouses and our branches, can have a
significant impact on, and benefit from, the communities in which we operate. It is
important that we provide support to communities local to our sites so we can enhance
the quality of life in these communities.

Children
in hospital

Our staff donated Christmas
presents to children
spending the festive period
in 2 local hospitals.

Physical and
mental health

We sponsored the team
strips at a local basketball
club, run by a long-serving
Eurocell colleague,
providing opportunities for
both adults and children to
improve both their physical
and mental health.

Childhood literacy

We donated to Stoneydelf
Primary School, Tamworth to
purchase books as part of
the restoration of their school
library, to help the children
improve literacy and support
staff and parents in a
challenging environment.

Local community

We donated external cladding to
Easthouses Lily Miners Welfare
Football Club to help them
renovate their facilities which
form an important part of the
local community.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

National
Health Service

S&S Plastics recommenced
operations in April (while the rest
of the Eurocell Group still
remained closed) to specifically
produce components urgently
needed by the NHS for:
• Critical power supply and

distribution – used in the NHS
Nightingale hospitals; and
• Oxygenators – used in some

circumstances for the
treatment of COVID-19
patients.

Living with cancer

We donated to Macmillan Nurses
to support the invaluable work they
do with people living with cancer,
especially where treatment has not
been able to progress due to the
impact of COVID-19.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Customers
Service levels
In terms of quality, our focus has been on implementing key
principles of quality management and measuring systems. These
are captured in our customer-focused Quality Policy Statement
(see below), which captures the way we aspire to work at Eurocell.

Quality Policy Statement
Customers
To be trusted by our customers in everything we do.
Working in partnership with them to ensure that they are
able to differentiate their service and product offerings from
their competitors. Easy to do business with and always
responsive to their needs, in a consistent, timely, courteous
and flexible manner.

Quality
Adherence to industry-leading specifications and ISO-based
standards for Quality & Environmental Management and British
Standards for Health and Safety. Ensuring that suppliers
understand and work with us to meet our aspirations.

Constant improvement
Uniform standards across our business benchmarked
against industry best practice, constantly reviewing and
improving processes. Benchmarked leading industry best
practice transferred across businesses and customers with
a view to reducing waste and improving consistency. Always
tracking and measuring through business and departmental
KPIs reflecting the business objectives.

Everyone’s responsibility
All departments are responsible for constantly reviewing,
measuring, checking and improving the quality of their work
and ensuring that the necessary training, facilities and tools are
available to get the job done right first time through a culture of
continuous improvement. All departments working together
and supporting each other with no barriers and no silos.

We have a loyal supplier base, of which a significant majority have
been suppliers to Eurocell for several years. All supply and tender
agreements include the following statement:

“The supplier advocates the principles of Corporate Social
Responsibility and requires a serious approach to social-
economic issues from its supply chain.”

In addition, all of our suppliers are required to confirm their
commitment to the following principles:
• The obligation to the global and local environment;
• Respect for fundamental human entitlements;
•

In purchasing activities, a commitment to improving the
organisation’s performance in relation to fairness to all;
• A system of internal and external reporting which matches

espoused values;

• A proactive promotion of sustainable practices and products;
• Recognition that there is responsibility to add value to

communities and societies upon which the organisation has
influence; and

• An ethical approach to purchasing activities.

Modern slavery
We are absolutely committed to preventing slavery and human
trafficking in our business activities, and to ensuring that our
supply chains are free from these practices.

We aim to identify modern slavery risks and prevent slavery and
human trafficking in all our operations. We continue to identify any
potential risks in the top 80% of our suppliers and, in cases where
medium or high risk is identified, further assessments are carried
out which may result in the supplier not being used.

Our full Anti-Slavery and Human Trafficking Statement is
published on our website at investors.eurocell.co.uk.

Government
Taxation

Sustainable and quality products
We adhere to industry-leading specifications and ISO-based
standards for Quality & Environmental Management and British
Standards for health and safety.

Suppliers
Ethical and sustainable sourcing
We strive to develop and maintain supplier relationships which
are ethical, sustainable and responsible, forming the basis of
our commitment to responsible sourcing. In addition, we have
established supplier pre-appointment checks to evaluate the
environmental and humanitarian impact of our products and
supply chain.

In particular, we ensure that all relevant raw material suppliers are
compliant with the current Registration, Evaluation, Authorisation
and Restriction of Chemicals Regulation (REACH) and continually
monitor all of our supplier’s quality management processes and
controls as part of the set-up and approval process.

The Fair Tax Mark is an independent certification scheme, which
recognises organisations that demonstrate they are paying the
right amount of corporation tax in the right place, at the right time.

Since August 2019, we have been certified as an accredited Fair
Tax Mark business, following successful assessments against the
Fair Tax Mark criteria.

We recognise the responsibility we have to our stakeholders and
communities to set the highest standards of corporate conduct
and paying the right amount of tax in the right place is
fundamental to this. The ability to be able to measure ourselves
against an independent benchmark, like the Fair Tax Mark, allows
us to continually improve the quality of information that we provide
to our investors, employees, suppliers and customers, and assists
us in creating a fair and successful business environment.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Chief Financial Officer's Report

Well positioned
FOR 2021

The actions we took at the outset
of the pandemic secured our
financial position. We have a
strong balance sheet and
significant headroom on our bank
facility, providing flexibility and
options for the future.

Michael Scott
Chief Financial Officer

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

COVID-19
Our financial performance in 2020 reflects the major impact of
COVID-19 on the business in the first half, followed by a strong
recovery in H2, when the RMI market was better than we had
anticipated. The decisive actions we took at the outset of the
pandemic and subsequently to control costs, preserve cash and
improve liquidity, secured our financial position. This continued
focus, combined with an excellent operational and financial
performance in H2, ensured the business is now ready to
capitalise on opportunities as markets develop.

Revenue
Revenue for 2020 was down 8% to £257.9 million
(2019: £279.1 million), comprised of H1 sales down 31%,
reflecting the temporary closure from late March to mid-May,
and a strong second half, with sales up 15% compared to
H2 2019. This is equivalent to like-for-like sales growth of 6%
for the year as follows:

Group like-for-like1 sales growth

(4)%

Full Year

16%

1 Like-for-like excludes acquisitions and new branches opened in 2019/20, and is
calculated by comparing average sales per trading day in 2020 (i.e. 212 days,
excluding days closed) with average sales per trading day in 2019 (249 days).

Gross margin
Overall, our gross margin for the year was down 180 basis points
to 49.4%. The margin was lower in H1 at 46.8%, reflecting
reduced production volumes and therefore a lower recovery
of direct costs. It improved to 50.9% in H2, as volumes and
operating efficiencies increased. Gross margin for the year also
includes an increase to the stock provision, following a range
rationalisation to eliminate some of the least profitable and least
popular products.

PVC resin prices began to increase towards the end of 2020
and this trend has continued into the new year. We are therefore
implementing selling price increases, starting in February 2021,
to recover this and other cost inflation.

Distribution costs and administrative expenses
(overheads)
Underlying overheads were £93.9 million compared to
£99.0 million in 2019, a decrease of £5.1 million. The decrease
includes COVID-related UK Government support of £8.3 million,
comprising receipts under the Job Retention Scheme of
£6.5 million (substantially H1), retail grants of £0.7 million (all H1)
and retail rates relief of £1.1 million.

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Group

Revenue
Gross profit
Gross margin %
Overheads
IFRS 9 impairments and bad debt charges

Adjusted1 EBITDA
Depreciation and amortisation

Adjusted1 operating profit
Finance costs

Adjusted1 profit before tax
Tax

Adjusted1 profit after tax

Adjusted1 basic EPS (pence per share)

Non-underlying items
Tax on non-underlying items

Reported operating profit

Reported (loss)/profit before tax

Reported basic (loss)/profit after tax

Reported basic (losses)/earnings per share (pence)

1 See adjusted performance measures.

2020
£m

257.9
127.4
49.4%
(93.9)
(3.7)

29.8
(19.5)

10.3
(1.8)

8.5
(1.5)

7.0

6.5

(10.0)
0.8

0.7

(1.5)

(2.2)

(2.0)

2019
£m

279.1
142.9
51.2%
(99.0)
(1.5)

42.4
(17.8)

24.6
(1.9)

22.7
(3.4)

19.3

—
—

24.6

22.7

19.3

Revenue (£m)

Gross profit (£m)

279.1

(0.1)

17.9

296.9

(41.1)

2.0

0.1

257.9

142.9

(15.2)

0.4

(2.8)

1.5

(0.2)

0.8

127.4

2019

Profiles
LFL

Building
Plastics
LFL

Group LFL

COVID
impact /
trading day

2018/2019
branches

Acquisitions

2020

2019

Underlying
volume

Mix

Increase
in stock
provision

Material
costs

Increased
recycling

2019/20
branches

2020

1 Like-for-like sales up 6%.

Overheads2 (£m)

99.0

2.7

(6.5)

(1.1)

(1.8)

0.8

93.9

Cashflow (£m)

4.7

(1.6)

32.9

(14.0)

29.8

18.7

(26.3)

(0.9)

10.4

2019

Volume /
COVID

Job
Retention
Scheme

Furlough
cost saving
(20% of salary)

Building
Plastics
Government
support

2019/20
branches

Warranties

2020

Adjusted
EBITDA

Working
capital

Tax and
other

Net cash
from
operating
activities

Capex

Financing

Shares
issued

Leases
(non-cash)

Change in
net debt

2 Distribution costs and administration expenses.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Chief Financial Officer's Report continued

IFRS 9 impairments and bad debt charges
Our sector closed down abruptly in March, and consequently
receipts from customers fell sharply in Q2. At the half year end, the
sales ledger ageing profile for several accounts had deteriorated
significantly compared to the pre-COVID period, and a number
of customers were finding it difficult to bring their accounts into
terms. We therefore assessed the level of credit risk to have
increased materially as a direct impact of COVID and, as a result,
IFRS 9 impairment charges of c.£3.5 million were reflected in the
income statement for H1.

short-term, as well as lower selling prices for recycled material
at the time of the impairment test. However, the business is now
running much closer to its capacity, and we expect to make
further progress in 2021.

We have been investing heavily to increase our recycling
capability, in order to capture financial and sustainability benefits
and to keep pace with sales growth. As a result, we have become
the leading UK-based recycler of PVC windows. Recycling and
sustainability sit right at the heart of our business and we are
totally committed to this critical strategic priority for the Group.

Whilst cash receipts from customers improved in H2, given
current levels of uncertainty, we do not believe credit risk has
changed materially, particularly given the prevailing uncertainty
surrounding the timing and extent of the easing of COVID
restrictions, and therefore the bad debt provision at 31 December
2020 remains at a similar level to the half year end.

Finance costs and taxation
Finance costs for 2020 are £1.8m on an underlying basis, and
£2.2 million in total (2019: £1.9 million), with £0.4 million of IFRS
16 lease interest classified as non-underlying as it relates to
warehouse dual-running costs (see Non-underlying items).

Depreciation and amortisation
Depreciation and amortisation was £19.5 million on an underlying
basis, and £20.8 million in total (2019: £17.8 million).

Adjusted performance measures
Alternative performance measures are used alongside statutory
measures to facilitate a better understanding of financial
performance and comparison with prior periods, and in order to
provide audited financial information against which the Group’s
bank covenants, which are all measured on a pre-IFRS 16 basis,
can be assessed.

The tax charge for 2020 was £1.5 million on an underlying basis
and £0.7 million in total (2019: £3.4 million). The effective tax rate
on underlying profit before tax for 2020 of 17.6% is lower than the
standard corporation tax rate due to the benefit of Patent Box
relief, partially offset by the impact of a change in the deferred tax
rate from 17% to 19% (which follows cancellation of a reduction in
the standard corporation tax rate, which had been due to come
into effect during the year).

The effective tax rate on non-underlying items is 7.0% due to the
£5.8 million goodwill impairment charge being non-deductible for
tax purposes.

Adjusted EBITDA, adjusted operating profit and adjusted profit
before tax all exclude non-underlying items. Adjusted profit after
tax and adjusted earnings per share exclude non-underlying items
and the related tax effect.

We were pleased to retain the Fair Tax Mark accreditation in 2020,
reflecting our commitment to paying the right amount of tax at the
right time.

(Loss)/profit before tax and (losses)/earnings
per share
The adjusted profit before tax for the year was £8.5 million
(2019: £22.7 million), comprised of a loss in H1, reflecting lower
sales volumes and the impact of operational gearing, and a profit
in the second half well up on H2 2019, driven by strong sales and
good operating efficiencies.

The reported loss before tax for the year was £1.5 million (2019:
profit of £22.7 million).

Adjusted basic earnings per share for the year were 6.5 pence
(2019: 19.3 pence). Reported basic losses per share for the year
were 2.0 pence (2019: earnings per share of 19.3 pence).
As a loss was recorded for the period, share options are not
considered to have a dilutive effect.

Pre-IFRS 16 EBITDA is stated inclusive of operating lease rentals
under IAS 17 Leases. Pre-IFRS 16 net debt is defined as total
borrowings and lease liabilities less cash and cash equivalents,
excluding the impact of IFRS 16 Leases.

We classify some material items of income and expense as
non-underlying when the nature and infrequency merit separate
presentation. Alongside statutory measures, this facilitates a
better understanding of financial performance and comparison
with prior periods.

Non-underlying items
Non-underlying items for 2020 of £10.0 million includes a
non-cash goodwill impairment charge of £5.8 million, right-of use
asset impairment charges of £0.9 million, restructuring costs of
£0.6 million and warehouse dual-running costs of £2.7 million.
The warehouse dual-running costs include £1.3 million right-of-
use asset depreciation charges and £0.4 million of lease finance
costs. No non-underlying items were recognised in 2019.

The non-cash goodwill impairment charge of £5.8 million relates
to Eurocell Recycle North. This arises because, as a result of the
pandemic, the increase in production volumes (and therefore
profitability) of the site is now expected to occur later than
previously planned and because of reduced demand in the

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Dividends
Due to the impact of COVID-19, the dividend declared in March
2020 was subsequently cancelled and no dividends will be paid
in respect of 2020. However, it remains our intention to return to
paying dividends in 2021.

Retained earnings as at 31 December 2020 were £65.5 million
(2019: £67.1 million). The Company takes steps to ensure
distributable reserves are maintained at an appropriate level
through intra-Group dividend flows.

Capital expenditure
Capital expenditure for 2020 was £13.7 million
(2019: £15.2 million). 2020 investment in the new warehouse
was £8.0 million, which includes some extra costs incurred to
implement COVID-19 protection measures and support social
distancing. We expect further capital expenditure of c.£1 million
in 2021 to complete the project. Other capital expenditure
in 2020 of £5.7 million includes new / refurbished branches,
IT and maintenance capex.

Cash flow
Cash flow and working capital management has continued to be
a key priority for the business. The measures taken in 2020 to
improve our cash position have been effective and we now have
significant headroom on our bank facility. Notwithstanding the
current level of uncertainty and credit risk, cash receipts from
customers were good throughout the second half and, as at
31 December 2020, substantially all our suppliers and landlords
had been paid in accordance with terms. We are also up to date
with all VAT, corporation tax and other tax payments.

Net cash generated from operating activities was £32.9 million
(2019: £26.4 million).

Effective cash flow management resulted in a net inflow from
working capital for 2020 of £4.7 million, comprising an increase
in stocks of £0.8 million, a decrease in trade and other receivables
of £2.4 million and an increase in trade and other payables of
£3.1 million. This compares to a net outflow from working
capital of £13.0 million in 2019.

Other items include payments for capital investments of
£14.0 million, including a December 2019 capital creditor of
£0.3 million (2019: £16.3 million) and financing costs paid
of £0.7 million (2019: £0.9 million). Tax paid in the year was
£1.0 million (2019: £2.6 million). No dividends were paid in 2020.

In April we completed a share placing, with the net proceeds of
£17.1 million to be used to ensure we retain headroom on our
bank facility, even under an extended shut-down, and to provide
sufficient liquidity to continue investment in the new warehouse.
A further £1.6 million of cash proceeds were received during the
year from employees in respect of vested Save As You Earn share
options, which were settled via the issue of new shares.

The principal elements of lease payments of £10.7 million
(2019: £9.8 million) are presented within cash flows arising from
financing activities. The finance elements of lease payments
were £1.3 million (2019: £0.9 million).

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Net debt
Net debt on a pre-IFRS 16 basis at 31 December 2020 was
£9.9 million (31 December 2019: £34.6 million).

Lease liabilities increased by £14.3 million, which includes
£17.2 million for the new warehouse, offset by payments and other
items of £2.9 million. Reported net debt at 31 December 2020
was £58.3 million (31 December 2019: £68.7 million).

Cash
Borrowings

Net debt (pre-IFRS 16)

Lease liabilities

Net debt (reported)

2020
£m

2.6
(12.5)

(9.9)

(48.4)

(58.3)

2019
£m

4.9
(39.5)

(34.6)

(34.1)

(68.7)

Change
£m

(2.3)
27.0

(24.7)

(14.3)

10.4

Bank facility
We have an unsecured revolving credit facility which matures in
2023. The facility was increased by £15 million up to £75 million
in March 2020, in order to provide additional flexibility and options
for the future. There were no changes to pricing or key terms as a
result of the uplift. However, we were very pleased to convert the
facility into a Sustainable RCF, where modest adjustments to the
margin will be applied based on our achievement against annual
recycling targets. We operate comfortably within the terms of the
facility and in compliance with our financial covenants, which are
measured on a pre-IFRS 16 basis.

Michael Scott
Chief Financial Officer

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Principal Risks and Uncertainties

Risk
MANAGEMENT
Risk management is the responsibility of the Board and is
a key factor in delivering the Group’s strategic objectives.

Approach to Risk Management
The Board is responsible for setting the risk appetite, establishing a culture
of effective risk management and for ensuring that effective systems and
controls are in place and maintained.

Senior managers take ownership of specific risks and implement policies
and procedures to mitigate exposure to those risks.

Risk Management Process
The risk management process sits alongside our strong governance culture
and effective internal controls to provide assurance to the Board that risks
are being appropriately identified and managed.

IDENTIFY RISKS

ASSESS GROSS RISK

QUANTIFY NET RISK

IDENTIFY EXISTING
MITIGATION

IDENTIFY ANY FURTHER
ACTION REQUIRED

MONITOR AND CONTROL

How we manage risk
Risk is managed across the Group in the
following ways:
• The Board meets annually to review strategy

and set the risk appetite.

• Risks faced by the Group are identified

during the formulation of the annual business
plan and budget process, which sets
objectives and agrees initiatives to achieve
the Group’s goals, taking account of the risk
appetite set by the Board.

• Senior management and risk owners

consider the root cause of each risk and
assess the impact and likelihood of it
materialising. The analysis is documented in
a risk register, which identifies the level of
severity and probability, ownership and
mitigation measures, as well as any
proposed further actions (and timescale for
completion) for each significant risk.

• The Group has an executive Risk

Management Committee, chaired by the
Chief Financial Officer. This Committee
meets on a regular basis. The status of the
most significant risks and mitigations are
reviewed at each meeting, with other risks
reviewed on a cyclical basis.

• The Executive Directors also meet with
senior managers on a regular basis
throughout the year. This allows the
Executive Directors to ensure that they
maintain visibility over the material aspects of
strategic, financial and other risks.
• The Group’s Audit and Risk Committee
assists the Board in assessing and
monitoring risk management across the
Group. The role of the Committee includes
ensuring the timely identification and robust
management of inherent and emerging risks,
by reviewing the suitability and effectiveness
of risk management processes and controls.
The Committee also reviews the risk register
to ensure net risk and proposed further
actions are together consistent with the risk
appetite set by the Board.

• See also Impact of COVID-19 on page 58.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Internal control
The Group has well-defined systems of
internal control.

The Group has a robust process of financial
planning and monitoring, which incorporates
Board approval of operating and capital
expenditure budgets. Performance against
the budget is subsequently monitored and
reported to the Board on a monthly basis.
The Board also monitors overall performance
against operating, safety and other targets
set at the start of the year.

Performance is reported formally to
shareholders through the publication of
results both annually and half-yearly.
Operational management regularly reports
on performance to the Executive Directors.

Day-to-day operations are supported by a
clear schedule of authority limits that define
processes and procedures for approving
material decisions. This ensures that projects
and transactions are approved at the
appropriate level of management, with the
largest and most complex projects being
approved by the Board. The schedule of
authority limits is reviewed on a regular basis
so that it matches the needs of the business.

The Group also has processes in place for
ensuring business continuity and emergency
planning.

In order to further enhance the internal control
and risk management processes, KPMG
provides an outsourced internal audit service
to the Group. KPMG work closely with the
Risk Management Committee in delivering
the Group’s internal audit programme.

h
g
H

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t
i
l
i

b
a
b
o
r
P

m
u

d
e
M

w
o
L

Low

Medium

Impact

High

Principal risks
Each of the principal risks set out below includes an assessment of the impact
of COVID-19 where appropriate (and therefore COVID is not included as a
separate risk).

01 Macroeconomic conditions

Warehousing and distribution
capacity constraints

02 Cyber security

10 Unplanned plant downtime

Regulatory risks, including
health & safety

04 Raw material supply

Raw material and traded
goods pricing

Ability to attract and retain key
personnel and highly skilled individuals

Shortages or increased costs of
appropriately skilled labour

13 Failure to develop new products

06 Customer credit risk

14 Competitor activity

07 Sustainability

Manufacturing capacity
constraints

Failure to identify, complete and
integrate bolt-on acquisitions

16 Digital and IT system development

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/
Principal Risks and Uncertainties continued

Impact of COVID-19
As described in the Corporate Governance Statement on
page 66, in response to the COVID-19 pandemic, the Board
increased its activity with respect to the Company, in order
to support the Executive team and properly discharge its
governance responsibilities. Since the onset of the first
lockdown, more regular and frequent virtual Board update
meetings have been held, on a weekly basis at certain times,
to consider emerging risks, discuss financial and operational
matters and monitor performance against revised targets.

In addition, with the Group’s finance and administrative teams
working substantially from home during the period, controls

related to the processing of cash payments and receipts were
enhanced during lockdown periods (e.g. higher levels of
approval required for transactions over certain limits). More
generally, the Group’s IT team have remained particularly
vigilant and alive to cyber risks during this period and we
continue to invest in our cyber security.

In conclusion, with the assistance of the Audit and Risk
Committee, the Board has reviewed the effectiveness of the
system of internal control, taking into account the impact of
COVID-19. Following its review, the Board determined that it
was not aware of any significant deficiency or material
weakness in the system of internal control.

Risk profile
The principal risks monitored by the Board are as follows:

Principal Risk and Impact

MACROECONOMIC CONDITIONS
Our products are used in the residential and
commercial building and construction markets,
both within the RMI sector, for new residential
housing developments and for new construction
projects.

Our private RMI business is strongly correlated to
the level of household disposable incomes. Our
new-build business is particularly influenced by the
level of activity in the house-building industry.

As such, our business and ability to fund ongoing
operations is dependent on the level of activity
and market demand in these sectors, itself often a
function of general economic conditions (including
interest rates and inflation) in the UK.

Government economic and social policy can also
have a significant impact on our business.

CYBER SECURITY
A breach of IT security (externally or internally)
could result in an inability to operate systems
effectively (e.g. viruses) or the release of
inappropriate information (e.g. hackers).

Strategic
Priorities

Mitigation

Risk Change in
Reporting Period

Movement

• Notwithstanding macro

• The UK economy is

conditions, we expect our
strategic priorities and self-help
initiatives to support sales and
profit growth and drive good
cash conversion.

experiencing a severe
downturn due to the ongoing
impact of the COVID-19
pandemic.

• Now that key aspects of the

UK’s trading relationship with
the EU have been defined,
and the first two months of
2021 have passed without
significant interruption to raw
material imports for our
business, Brexit related
uncertainty has reduced.
The medium-term impact of
Brexit on the UK economy
remains unclear.

• CPA now forecast the private
housing RMI market to grow
14% in 2021 (after a 14%
decline in 2020).

• The UK is also experiencing
high levels of mortgage
approvals.

• UK base rate is at its lowest

ever level.

• Increased home working in
response to the COVID-19
pandemic has elevated
cyber risk.

• This remains a high-profile
area and continues to
receive considerable
management attention.

• Initiatives include: growing

market share, expanding the
branch network, delivering
sustained operational excellence
and increasing recycling.

• Actions taken in response to the

COVID-19 pandemic have
secured our financial position.
• We operate comfortably within

the terms of our bank facility and
related financial covenants.

• Ongoing investment in cyber risk
detection and prevention tools.
• Physical security of servers at
third-party off-site data centre,
with full disaster recovery
capability.

• Password and safe-use policies

in place, internet usage
monitored and anti-malware
used.

• External cyber review and

internal audit reviews conducted
periodically, resulting in
significant enhancements in
defence.

• Cyber awareness/IT security

campaign active for all
employees.

• Enhanced monitoring and
vigilance in response to
increased remote working in
2020.

• Financial crime protection and

cyber liability insurance in place.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Movement key:

Increase

No change

Decrease

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Strategic Priorities key:

Target growth in
market share

Expand our
branch network

Develop innovative
new products

Explore potential bolt-on
acquisition opportunities

Deliver sustained
operational excellence

Develop the sustainability of our
business, products and operations

Develop a market-leading digital
proposition

Principal Risk and Impact

REGULATORY RISKS, INCLUDING
HEALTH & SAFETY
We may be adversely affected by the crystallisation
of unexpected corporate or regulatory risks.

These include health & safety, data, reputational
and environmental risks (including regulations
related to our recycling operations), or other legal,
taxation and compliance matters.

RAW MATERIAL SUPPLY
There are only a limited number of PVC resin
and certain other raw material suppliers and we
operate with limited raw material storage capacity.

The recycling feedstock supply market is
fragmented and can be unpredictable.

Failure to receive raw materials on a timely
basis could impact on our ability to manufacture
products and meet customer demand.

RAW MATERIAL AND TRADED GOODS
PRICES
Our manufacturing operations depend on the
supply of PVC resin, a material derivative of
ethylene which in turn is a derivative of crude oil.

The price of PVC resin can therefore be subject to
fluctuations based on the markets for crude oil and
ethylene, as well as the market for resin itself.

In addition, although we pay for resin in sterling,
crude oil and ethylene are priced in US dollars and
euros respectively. As such, the price of resin in
sterling is also impacted by international currency
markets.

Our ability to pass on resin and other raw material
or traded goods price increases to our customers
will depend on market conditions at the time.

Strategic
Priorities

Mitigation

Risk Change in
Reporting Period

Movement

• Procedures and policies in place
to support compliance with all
relevant regulations.

• COVID-19 has significantly
increased health & safety
risks.

• Regular communication and

• More generally, recent

training on policy compliance.
• Monitoring procedures in place,
including near miss and potential
hazard reporting for health &
safety matters.

• Introduction of a range of
COVID-safe protection
measures, in line with
recommended guidance and
designed and implemented
collaboratively with input from
the workforce.

• Employees returning to work
post H1 2020 shut-down
provided with training and
personal protective equipment
where necessary.

• Internal and third-party site

audits to test compliance with
our policies.

• We generally operate with at

least two suppliers for all critical
raw materials, including PVC
resin, to support security of
supply.

• On-going raw material tests to
identify potential alternative
suppliers.

• A spot market exists for resin,
that we are able to access at
certain times.

• Contractual arrangements for
certain key suppliers include
liquidated damages for failure to
supply.

• Regular reviews to test financial

stability of key suppliers.

• Potential remains for increased

resin supply originating from the
US to come on line and deliver
into Europe.

developments widen the
scope and increase the
penalty regime for breaches
in these areas. For example:
Corporate Criminal Offence
of Failure to Prevent the
Facilitation of Tax Evasion
(‘CCO’) legislation came into
force on 30 September 2017,
and General Data Protection
Regulations (‘GDPR’) came
into effect in May 2018.

• A number of European PVC
resin suppliers issued force
majeure notices on material
supply in H2 2020, following
plant outages and other
operational issues.

• Strong demand for PVC resin

exacerbated supply
constraints in H2 2020.

• Knock-on effect into

recycling feedstock supply
market also tightening in
2020.

• The PVC resin supply market

remains tight at the
beginning of 2021, which is
also impacting pricing (see
below).

• We generally operate with at

• Raw material prices

least two suppliers for all critical
raw materials and traded goods,
including PVC resin, to provide
competitive pricing.

fluctuated throughout 2020,
primarily due to the impact of
COVID-19 on the relevant
markets.

• Where possible we pass through
raw material or traded goods
price increases to our
customers.

• Increasing the use of recycled
material in our manufacturing
partially mitigates exposure to
resin prices, although prices for
recycling feedstock can also be
volatile.

• We consider fixed price supply
arrangements with suppliers
where it is economic to do so.

• Supply-side constraints

resulted in increasing prices
for PVC resin and recycling
feedstock in H2 2020,
continuing on into 2021.

• We have elected not to enter
into a fixed price contract for
PVC resin so far in 2021, as
the premium currently
required by suppliers is
prohibitive.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Principal Risks and Uncertainties continued

Principal Risk and Impact

CUSTOMER CREDIT RISK
Default by a large customer or multiple smaller
customers could result in a material bad debt(s).

The loss of a major customer(s) could limit our
ability to continue to grow the business.

SUSTAINABILITY
Demonstrating improving business sustainability
is becoming increasingly important to all
stakeholders.

We have a strong underlying position, driven by
our expanding window recycling operation. We
intend to widen this narrative into a Group-wide
sustainability strategy, which will encompass all
aspects of business sustainability.

Failure to do so could lead to regulatory challenges
(e.g. if sustainability regulation is tightened)
and potentially reduced access to capital and
difficulties with recruitment and retention.

MANUFACTURING CAPACITY
CONSTRAINTS
Demand running above our manufacturing
capacity may result in production related
inefficiencies, as well as customer service issues if
a backlog of customer orders develops.

A shortage of capacity may also prevent the
acquisition of new customers, thereby limiting our
ability to continue to grow the business.

WAREHOUSING AND DISTRIBUTION
CAPACITY CONSTRAINTS
We exceeded the capacity of our existing
warehouse in 2018/19, resulting in significant
inefficiencies and additional labour and
distribution costs.

A new central warehouse and distribution centre
was approved early in 2020, which will deliver
> 50% increase in capacity, improved efficiency
and a safer operation.

On-time execution of the fit-out project and
successful operation from the new site are
critical to unlocking future growth potential and
the delivery of anticipated improvements in
operating efficiencies.

Strategic
Priorities

Mitigation

Risk Change in
Reporting Period

Movement

• Increased bad debt risk due

to the impact of COVID-19 on
our customer base, with
some business failures and a
deterioration in the age
profile of receivables during
the first lockdown in H1.
• Some improvement in bad
debt experience and age
profile of receivables in H2,
although significant
uncertainty remains.

• Continued rise in importance

of sustainability for all
stakeholders.

• Regular process for in-depth
credit reviews for existing and
new customer accounts.
• Following onset of COVID-19
pandemic and first lockdown,
increased frequency of credit
reviews and greater involvement
of relevant Executive Committee
members in managing position
on key accounts.

• Significant increase in bad debt
provisions recorded in H1. Year
end provisions remain at a similar
level, reflecting continued prudent
assessment of bad debt risk.
• Credit insurance in place to the
extent available for selected
large accounts.

• Strong underlying position driven
by window recycling operation,
which drives significant carbon
savings compared to the use of
virgin PVC resin.

• Publication of verified carbon

savings data in the 2020 annual
report.

• Work in progress to define and

implement a Group-wide
sustainability strategy, with
long-term goals linked to
relevant UN Sustainable
Development Goals and the UK
Government’s transition towards
a net zero carbon economy.

• Investment in 2019 to increase

• Customer demand in H2

co-extrusion and foam capacity
by 30% and 15% respectively.

• Strengthened management

team in critical areas, including
Chief Operating Officer (joined
Q3 2019). Team ensured peak
periods in H2 2020 were
navigated successfully.

• COO has an improvement plan
with c.100 actions targeting
productivity gains in extrusion,
foiling, warehousing and
distribution.

• New warehouse facility (see

below) is a catalyst to free up
space in the existing footprint to
future-proof extrusion capacity.

• Strengthened management

team in critical areas, including
Chief Operating Officer and
Head of Supply Chain (joined Q3
2019). Team ensured peak
periods in H2 2020 were
navigated successfully from
existing facilities.

• COO has an improvement plan
with c.100 actions targeting
productivity gains in extrusion,
foiling, warehousing and
distribution.

• Fully resourced team hired to
deliver new warehouse fit-out,
including project management
and technical expertise,
supported by third party subject
matter specialists.

2020 increased to such an
extent that the business was
running close to existing
manufacturing capacity.
• Competitor weakness has

resulted in a clear
opportunity to acquire new
customers.

• Investment in new extrusion
capacity planned for 2021.

• Despite strong customer
demand in H2 2020, and
existing capacity constraints,
measures taken (including
extra labour and temporary
overflow site) to ensure safe
and successful operation
from the existing warehouse.
• Fit-out of the new warehouse
continued safely throughout
2020, despite COVID-related
constraints, with the new site
becoming operational early
in 2021.

• Transition to continue in

2021, with the final stages
expected to complete in Q2.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Movement key:

Increase

No change

Decrease

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

Strategic Priorities key:

Target growth in
market share

Expand our
branch network

Develop innovative
new products

Explore potential bolt-on
acquisition opportunities

Deliver sustained
operational excellence

Develop the sustainability of our
business, products and operations

Develop a market-leading digital
proposition

Principal Risk and Impact

UNPLANNED PLANT DOWNTIME
The business is dependent on the continued and
uninterrupted performance of our production
facilities.

Each of the facilities is subject to operating risks,
such as: industrial accidents (including fire);
extended power outages; withdrawal of permits
and licences (e.g. the regulated operation of
the recycling facility); breakdowns in machinery;
equipment or information systems; prolonged
maintenance activity; strikes or other extended
workforce absences; natural disasters; and other
unforeseen events.

ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL AND HIGHLY SKILLED
INDIVIDUALS
Our success depends inter alia, on the efforts
and abilities of certain key personnel and our
ability to attract and retain such people, with the
appropriate skills and experience.

SHORTAGES OR INCREASED COSTS
OF APPROPRIATELY SKILLED LABOUR
We are subject to supply risks related to the
availability and cost of labour, both in our
manufacturing operations and in our branch
business. Our headquarters and several
manufacturing and operational sites are located in
areas of generally full employment.

We may also experience labour cost increases
(including those related to the Minimum Wage) or
disruptions in circumstances where we have to
compete for employees with the necessary skills
and experience in tight labour markets.

FAILURE TO DEVELOP NEW
PRODUCTS
Failure to innovate could reduce our growth
potential or render existing products obsolete.

The launch of new products and new variants
of existing products is an inherently uncertain
process. We cannot guarantee that we will
continuously develop successful new products or
new variants of existing products.

Nor can we predict how customers and end-users
will react to new products or how successful our
competitors will be in developing products which
are more attractive than ours.

Strategic
Priorities

Mitigation

Risk Change in
Reporting Period

Movement

• Potential for COVID-19 to
spread amongst the
workforce and result in
significant and extended
absence.

• Guaranteed long-term

incentive plan awards issued
to senior team in 2020
(excluding Executive
Directors) to help mitigate
impact of COVID-19 on
existing in-flight schemes.
• Progressive implementation

of people plan.

• Sufficient labour secured in
H2 2020 via fixed-term
contract initiative.

• Fifth SAYE scheme planned

for 2021.

• Progressive implementation

of people plan.

• Regular planned maintenance to
reduce the risk of plant failure,
including maintenance capital
investment of >£5 million per
annum across the Group.
• Extrusion facilities spread over

three manufacturing sites.

• Recycling facilities spread over

two sites.

• Group-wide disaster recovery

plans in place.

• Introduction of a range of
COVID-safe protection
measures, in line with
recommended guidance and
designed and implemented
collaboratively with input from
the workforce.

• Employees returning to work
post H1 2021 shut-down
provided with training and
personal protective equipment
where necessary.

• Developing successful track
record and clear strategic
direction provides an attractive
backdrop to joining the senior
team at Eurocell.

• Market rate compensation for all
personnel, including leadership
team.

• Equity-based long-term incentive
plans in place for senior team.
• People plan includes focus on

improving employee
engagement and
communication.

• Market level or better salaries
and good benefits package.

• Induction and training

programme.

• Annual SAYE share-save
scheme available to all
personnel.

• Use of fixed-term contracts to

secure sufficient labour through
H2 2020 without longer-term
commitment, due to inherent
levels of uncertainty.

• People plan includes focus on

improving employee
engagement and
communication.

• We invest continuously in

• Recent successes for

research and development
through our in-house team.
• The team is highly focused on
new ways to develop existing
products and to be innovative
with new ones.

• We work closely with customers

Profiles include: introduction
of a flush window sash for
the Logik product range, a
new sliding patio door
system (Syncro) and
development of a through-
colour grey substrate profile.

and technical advisers on
product development.
• We have a strong product
pipeline with more than 25
projects in development.

• In Building Plastics, the

Equinox conservatory roof
system has been developed
to include a skylight (Vega)
and our new suite of outdoor
living products, including the
Kyube garden room, has
been very well received.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Principal Risks and Uncertainties continued

Principal Risk and Impact

COMPETITOR ACTIVITY
We have a number of existing competitors who
compete on range, price, quality and service.
Increased competition could reduce volumes and
margins on manufactured and traded products.

FAILURE TO IDENTIFY, COMPLETE
AND INTEGRATE ACQUISITIONS
We may not be able to identify and complete
appropriate bolt-on acquisitions (one of our
strategic priorities).

Any future acquisition we do make poses
integration risks which may affect our results or
operations.

The acquisition and integration of companies is
a complex, costly and time-consuming process
involving a number of possible risks. These include
diversion of management attention, failure to retain
personnel, failure to maintain customer service
levels, disruption to relationships with various third
parties, system risks and unanticipated liabilities.

DIGITAL AND IT SYSTEMS
DEVELOPMENT
We have introduced a new strategic priority to
develop a sector-leading digital proposition.

Stakeholders in most organisations increasingly
require full end-to-end digital solutions; a trend
exacerbated by the COVID pandemic.

Failure to develop a leading digital proposition
could lead to a competitive disadvantage, hinder
progression of our other priorities and detract from
the supplier, customer and employee experience
of working with Eurocell.

Strategic
Priorities

Mitigation

Risk Change in
Reporting Period

Movement

• During the first lockdown
period in H1 2020, the
business prepared well for
re-opening, from both an
operational and commercial
perspective. These activities
supported further gains in
market share delivered in H2
2020.

• The more uncertain market
environment may have
weakened some of our
competitors.

• Whilst we continue to assess
and consider acquisition
opportunities, our focus in
2020 and 2021 is delivering
operational efficiencies from
recent investments in
manufacturing and
warehousing capacity.
• Previously reported delays
with the project to expand
Eurocell Recycle North
(acquired in 2018) further
impacted by H1 2020
shut-down. Performance is
now improving towards
delivering acceptable
operational and financial
performance.

• Increasing importance of
digital for stakeholders.

• Strong market and customer

awareness, with good
intelligence around competitor
activity.

• Absolute focus on customer
proposition and points of
differentiation in product and
service offering.

• We have developed a strong

new customer pipeline.

• Public communication of bolt-on
acquisitions being a strategic
priority.

• Good knowledge of companies
operating in our sector and
related sectors.

• Six acquisitions completed since

our IPO in 2015.

• Tried and tested procedure for

the integration of new
acquisitions and a good track
record of recent success.

• Strengthened IT function with

recruitment of New Director of IT
with strong sector and digital
experience (joined March 2020).

• Developed three-year IT road
map, including significant
investment in additional
resources and application
landscape to support
development of business
efficiency and digital proposition.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Viability Statement

STRATEGIC REPORT

CORPORAtE GOVERNANCE

FINANCIAl StAtEMENtS

As required by section 4 of the Code, the Directors have
taken into account forecasts to assess the future funding
requirements of the Group, and compared them with the
level of committed available borrowing facilities.

A period of three years has been adopted
as this is the timeframe used by the Board
as our strategic and planning horizon. The
assessment of viability has been made with
reference to the Group’s current position and
future prospects, our strategy, management
of risk, and also the Board’s assessment of
the outlook in the marketplace.

The plan is stress tested by applying the
following scenarios:

Scenario 1
Macroeconomic conditions lead to
a decline in sales
Decreases in revenues have been
applied over the three-year plan period.

The Board considers its strategy and risks
on strategy away-days, and revisits these
annually when considering the next year’s
budget. The three-year plan considers
revenue and earnings growth and how
this impacts on cash flows and key ratios.
Operational plans and financing options are
considered as part of this process.

In preparing the plan, we adopt a prudent
forecast in respect of like-for-like sales
growth, but assume other initiatives, in line
with the published strategy. We have also
taken into account the current and potential
range of future impacts of COVID-19 and
related economic uncertainty.

Scenario 2
Commodity prices and/or exchange
rates or raw material shortages
lead to a sustained increase in
resin prices
Increases in resin costs have been
applied over the three-year plan period.

Scenario 3
Scenario 1 and 2 combined
There is a possibility that both of the
above scenarios could materialise at the
same time, therefore we have assessed
the combined impact through the
three-year plan period.

The Board considers these tests to be
sufficient to test the viability of the
Group given our size and the markets
we operate within. As described in
Principal Risks and Uncertainties above,
we have measures in place to help
mitigate the impact of these events
should they occur.

The Group has a £75 million Revolving
Credit Facility. Monthly cash flow
projections show significant headroom
throughout the period to December 2023.
The facility includes standard covenants
for leverage and interest cover, which are
measured twice per annum at June and
December. The projections also show
good headroom on the covenants at each
measurement date to December 2023.

The Directors confirm that we have a
reasonable expectation that the Company
and the Group will continue in operation
and meet our liabilities as they fall due in
the next three years.

Going Concern
The Directors have reviewed the
Company’s and the Group’s forecast and
projections, which demonstrate that the
Company and the Group will have sufficient
headroom on our bank facilities for the
foreseeable future and that the likelihood of
breaching the related covenants in this
period is remote.

Accordingly the Directors continue to adopt
the going concern basis in preparing the
Annual Financial Statements.

This Strategic Report was approved by the Board on 11 March 2021.

Mark Kelly
Chief Executive Officer

Michael Scott
Chief Financial Officer

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Board of Directors

One teamALL TOGETHER BETTER

Bob Lawson
Non-executive Chair

Mark Kelly
Chief Executive Officer

Michael Scott
Chief Financial Officer

Date of appointment:
4 February 2015

Date of appointment:
29 March 2016

Date of appointment:
1 September 2016

Experience:
Bob was previously the Chair for Genus
plc (until November 2020), Barratt
Developments plc, Hays plc and the
Federation of Groundwork Trust. Prior
to this, he was Managing Director for
the Vitec Group for 4 years, Chief
Executive Officer of Electrocomponents
plc for 11 years and subsequently Chair
for a further 6 years.

Experience:
Mark joined the Group in March 2016
and was appointed Chief Executive
Officer in May 2016. He was formerly
Chief Executive for Grafton Merchanting
GB and previously worked for BDR
Thermea Group BV, IMI and Novar.
Mark has previous experience of the
PVC windows and doors industry
having worked for Duraflex and
Celuform.

Experience:
Michael joined the Group as Chief
Financial Officer in September 2016. He
previously worked for Drax Group plc,
where he held senior financial positions
including Group Financial Controller and
Head of Corporate Finance & Investor
Relations. Prior to Drax, Michael worked
for MT International and Arthur
Andersen. He is a member of the
Institute of Chartered Accountants in
England and Wales.

External appointments:
• None

Committee membership:

Committee membership:
• None

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

Frank Nelson
Senior Independent
Non-executive Director

Date of appointment:
4 February 2015

Martyn Coffey
Independent
Non-executive Director

Date of appointment:
4 February 2015

Sucheta Govil
Independent
Non-executive Director

Date of appointment:
1 October 2018

Experience:
Frank is a qualified accountant with over
30 years’ experience in the housebuilding,
infrastructure and energy sectors. He was
previously a Non-Executive Director for
McCarthy & Stone plc and Telford Homes
Plc. Prior to this, Frank was Finance
Director for Galliford Try plc for 12 years
and Finance Director for Try Group plc.
He is a fellow of the Chartered Institute
of Management Accountants.

Experience:
Martyn, prior to his current role at
Marshalls plc (see below), was
Divisional Chief Executive Officer for
BDR Thermea Group BV and Chief
Executive for the private equity-owned
Baxi Group. He also held the position of
Managing Director for Pirelli Cable.
Martyn has a BSc in Mathematics.

Experience:
Sucheta, prior to her current role at
Covestro AG (see below), was
previously the Chief Marketing Officer
for Royal DSM and also held various
management positions in marketing,
innovation, strategy and general
management worldwide, among others,
for GlaxoSmithKline, PepsiCo and
AkzoNobel. Sucheta has a BA Honours
degree in Economics and a Masters
degree in Business Administration.

External appointments:
• Chair of Van Elle Holdings plc (AIM)
• Senior Independent Non-executive
Director of HICL Infrastructure plc
(FTSE 250)

• Chair of Nobel Topco Ltd (Private

Equity)

External appointments:
• Chief Executive Officer of Marshalls

plc (FTSE 250)

• Director of Mineral Products
Association Ltd (Private)

External appointments:
• Chief Commercial Officer of Covestro
AG and member of the Managing
Board (German listed)

• Director of Liveorg Ltd (Private)

Committee membership:

Committee key:

Member of the Audit and Risk Committee
Member of the Remuneration Committee
Member of the Nomination Committee
Denotes Committee Chair

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Chair’s Introduction
letter from the Chair

Bob Lawson
Chair

Dear Shareholder,

I am pleased to introduce Eurocell plc’s Corporate Governance
Report for the year.

Inevitably, the activities and focus of the Board, and its Committees, during
the year were heavily influenced by the impact of the COVID-19 pandemic.
The temporary shut-down of our operations from late March to mid-May, and
the inherent uncertainty that has existed since, led to the Board to increase its
activity with respect to the Company, in order to support the Executive team
and properly discharge its governance responsibilities.

Since the onset of the first lockdown, regular and frequent virtual Board
update meetings have been held, on a weekly basis at certain times, to
discuss financial and operational matters. I would like to thank my Board
colleagues and the Executive team for their commitment and tenacity
throughout this challenging period, and for their voluntary agreement to take
a temporary reduction in salary during the early months of the pandemic.

Once again, I am very grateful for the continued strong shareholder support that
we receive. In particular, the successful share placing in April helped secure our
financial position, even in the event of an extended lockdown, and allowed us to
continue investment in our state-of-the-art new warehouse facility, as planned.

I continue to believe that the composition of the Board, supported by the
strengthened Executive Committee, provides an appropriate balance of skills,
experience, independence and knowledge to take the business forward. The culture
of open communication, mutual trust and honest assessment of our strengths and
areas for development continues to underpin the effectiveness of our governance.
This view is also supported by the conclusions of the externally facilitated review of the
Board, and its Committees, which was conducted this year (see page 69).

Throughout the year, we have continued to apply the principles and provisions
of the UK Corporate Governance Code (the ‘Code’), under which this report
has been prepared, and the following reports provide details of the Board’s
activities during the year, including how it, and its Committees, have
discharged their governance duties.

Finally, I look forward to welcoming, hopefully in-person (subject to COVID-19
guidelines), our shareholders to the AGM, to be held on 13 May 2021, and to
receiving and answering your questions.

Bob Lawson
Chair
11 March 2021

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Role of the Board
The Board comprises a Non-executive Chair, three
Non-executive Directors and two Executive Directors,
who are equally and collectively responsible for the
proper stewardship and leadership of the Company.
Their biographical details are set out on pages 64
and 65.

In accordance with the Code, at least half the Board,
excluding the Chair, should be Non-executive
Directors, who are determined by the Board to be
independent in character and judgement and free
from relationships or circumstances which may
affect, or could appear to affect, this judgement.
The Company regards Sucheta Govil, Martyn Coffey
and Frank Nelson as ‘independent Non-executive
Directors’ within the meaning of the Code and
therefore is considered to be compliant in this area.

The formal schedule of matters reserved for the
Board’s consideration includes the following:
• Approval of the Group’s strategy, long-term

objectives, annual operating budgets and capital
expenditure plans.

• Approving transactions of significant value or major

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

• Monitoring and assessing the overall effectiveness
of the Group’s risk management processes and
internal control systems, including those related to
health and safety, financial controls and anti-bribery
policies and procedures.

• Approving the Annual and Half-Year Reports,

including Financial Statements.

• Approving other corporate communications related

to matters decided by the Board.

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

• Remuneration matters, including the general

framework for remuneration and share and incentive
schemes.

Subject to those matters reserved for its decision, the
Board has delegated to its Audit and Risk, Nomination
and Remuneration Committees certain authorities.

/Corporate Governance Statement

StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

GOVERNANCE FRAMEWORK

Eurocell plc Board
Members:
Independent Non-executive Chair
3 Independent Non-executive Directors
2 Executive Directors

Audit and
Risk Committee
Members:
3 Independent Non-executive Directors

Remuneration Committee
Members:
Independent Non-executive Chair
3 Independent Non-executive Directors

The Audit and Risk Committee’s role is to
assist the Board with the discharge of its
responsibilities in relation to financial
reporting, internal controls, risk
management, compliance and audit.

The Remuneration Committee recommends
the Group’s policy on executive
remuneration and determines the levels of
remuneration for Executive Directors, the
Chair of the Board and senior management.

Nomination Committee
Members:
Independent Non-executive Chair
3 Independent Non-executive Directors
1 Executive Director

The Nomination Committee assists the
Board in reviewing the structure, size and
composition of the Board and succession
planning for senior management.

SEE COMMIttEE REPORt ON PAGES 80 tO 84

SEE COMMIttEE REPORt ON PAGES 85 tO 100

SEE COMMIttEE REPORt ON PAGES 77 tO 79

Executive Committee
The Executive Committee comprises senior managers, including the 2 Executive Directors who act as a bridge
between the Board and this Committee. Management teams report to members of the Executive Committee.
The Board receives regular updates from the Executive Committee in relation to business issues
and developments.

SEE SENIOR lEADERSHIP tEAM ON PAGE 79

There are written terms of reference for each of these Committees
which are available on the Group’s corporate website,
www.investors.eurocell.co.uk. Separate reports for each Committee
are included in this Annual Report from pages 77 to 100.

All the Directors have the right to have their opposition to,
or concerns over, the operations of the Board and/or the
management of the company, noted in the minutes.

Day-to-day management and the implementation of strategies
agreed by the Board are delegated to the Executive Directors.
Key to this delegation is the Executive Committee, which meets
each month.

The Board meets regularly to discuss key business issues and
prescribe actions as appropriate. The Group’s reporting structure
below Board level is designed so that all decisions are made by
those most qualified to do so in a timely manner.

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

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

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

Role of the Chair
The Board has concluded that the Chair has met the
independence criteria of the Code on appointment.

There is a clear division of responsibilities between the Chair and
the Chief Executive Officer.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/The Non-executive Directors’ appointment letters anticipate a
minimum time commitment of 20 days per annum, recognising
that there is always the possibility of an additional time
commitment and ad hoc matters arising from time to time,
particularly when the Company is undergoing a period of increased
activity. The average time commitment inevitably increases where
a Non-executive Director assumes additional responsibilities such
as being appointed to a Board Committee.

All new Non-executive Directors undergo an induction programme
and as such spend considerably more than the minimum
commitment during the course of a year. All Non-executive
Directors’ are required to inform the Chair before accepting
another position in order to ensure the Director has sufficient time
to fulfil their duties.

The current Board commitments of all Directors are shown on
pages 64 and 65. Their terms of appointment are reported on
pages 91 and 92 and length of service on the Board is set out in
the chart below:

Michael Scott

Mark Kelly

Sucheta Govil

Martyn Coffey

Frank Nelson

Bob Lawson (Chair)

3
Years

The Company’s Articles of Association contain powers of removal,
appointment, election and re-election of Directors and provide that
all of the Directors must retire and may offer themselves for
re-election at each Annual General Meeting (‘AGM’).

At the upcoming AGM, all the Directors intend to offer themselves
for re-election. Following the conclusion of the Board evaluation
process, the Board considers all the Directors to be effective,
committed to their roles and to have sufficient time available to
perform their duties.

Corporate Governance Statement continued

The Chair is responsible for ensuring that the Board functions
effectively. He sets the agenda for Board meetings and ensures
that adequate time is devoted to discussion of all agenda items,
particularly strategic issues, facilitating the effective contribution of
all Directors and ensuring that the Board as a whole is involved in
the decision-making process.

Role of the Chief Executive Officer
The Chief Executive Officer has principal responsibility for all
operational activities and the day-to-day management of the
business, in accordance with the strategies and policies approved
by the Board. The Chief Executive Officer also has responsibility
for communicating to the Group’s employees the expectations of
the Board in relation to culture, values and behaviours.

Role of the Senior Independent Director and
Non-executive Directors
The Senior Independent Director has an important role on the
Board, providing a sounding board for the Chair, leading on
corporate governance issues and serving as an intermediary for
the other Directors. He is available to shareholders if they have
concerns which contact through the normal channels of the Chair,
Chief Executive Officer or other Executive Directors has failed to
resolve, or for which such contact is not appropriate.

Frank Nelson has served as Senior Independent Non-executive
Director throughout the year.

All Non-executive Directors are required to allocate sufficient time
to the Company to discharge their responsibilities effectively. The
Non-executive Directors act in a way they consider will promote
the long-term sustainable success of the Group for the benefit of,
and with regard to the interests of, its stakeholders.

Board composition, commitment and election
of Directors
The Nomination Committee leads the process for Board
appointments and makes recommendations to the Board.

Prior to appointment, Board members, in particular the Chair and
the Non-executive Directors, disclose their other commitments and
agree to allocate sufficient time to the Company to discharge their
duties effectively and ensure that these other commitments do not
affect their contribution.

The Executive Directors may accept an outside appointment
provided that such appointment does not in any way prejudice
their ability to perform their duties as Executive Directors of the
Company. Mark Kelly and Michael Scott do not currently hold any
outside appointments.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

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

Construction
industry

Manufacturing

Multi-site
operations

Industrial
plastics

Finance

Marketing

Principal skills and experience

Bob Lawson (Chair)
Mark Kelly (Chief Executive Officer)
Michael Scott (Chief Financial Officer)
Frank Nelson (Senior Independent Non-executive Director)
Martyn Coffey (Independent Non-executive Director)
Sucheta Govil (Independent Non-executive Director)

Board evaluation and effectiveness
In accordance with the Code, a formal evaluation of the performance of the Board, its Committees, the Chair and individual directors
was conducted during the year, with the results presented and discussed at the March 2021 Board meeting.

In line with best practice, this evaluation was externally facilitated by Deloitte LLP, who have no connection with the Company or any
individual director, using a framework based on the Board’s three core roles being:
• gaining insight and foresight;
• clarifying priorities and defining expectations; and
• holding to account and seeking assurance.

Under this process, the Senior Independent Director separately reviewed the Chair’s performance with the other Non-executive
Directors.

An online survey tool covering each area in the framework was distributed to all Board members, all of whom fully engaged with the
process resulting in a response rate of 100%, with all Board members completing the survey and providing valuable qualitative
comments. The anonymity of respondents was ensured in order to promote an open and frank exchange of views.

The survey identified a number of perceived areas of strength in the way that the Board currently operates, and also identified some
areas for enhancement which are set out below.

Key strengths of the Board:
1. Chair’s leadership style – Chair’s leadership of meetings and the Board agenda.
2. Governance structure – role and responsibilities of the Board are clearly defined and the nature and composition of Board

sub-committees serves the Company well.

3. Clarity of goals and objectives – good understanding of strategic goals and objectives.
4. Insight into industry and market developments, opportunities and threats – good level of awareness of the likely developments

in the industry, the market opportunities and threats facing the organisation.

5. Tone from the top – Board and senior managers act as role models through their personal compliance with regulation and

internal policies.

6. Review of performance – good procedures in place to review performance in line with strategic objectives.

Key areas for improvement:

Area

Detail

Board engagement

Stakeholder engagement activities for the Board
have been disrupted by COVID-19

Proposed actions

Activities to be resumed wherever possible,
including using alternatives mechanisms, to
understand the views and interests of key
stakeholders

Board composition

Diversity of the Board’s composition, including
length of tenure on the board

Succession planning work by the Nomination
Committee to continue to address such issues

Board dynamics

Board’s ability to interact has been disrupted by the
restrictions imposed as a result of COVID-19

Professional
development

Provision of relevant opportunities for Board
members

Mechanisms previously used to maintain
connections to be reinstated at the earliest
permissible opportunity

Attendance of external professional advisers at
Board meetings to be reviewed and developed as
appropriate

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Corporate Governance Statement continued

Overall, the results of the survey indicated that the Board
members are satisfied that the Board is operating at an
acceptable level in a constructive and collaborative way.

The Board believes that the evaluation process described above is
thorough, robust and works well. All Directors engage fully, with a
genuine desire to enhance overall Board performance. The
process includes sufficient objectivity and confidentiality to ensure
that challenge is acknowledged and acted upon. Taking all of the
above into account, the Board is satisfied that the current
composition of the Board, and its Committees, provides an
appropriate balance of skills, experience, independence and
knowledge to allow the Board and its Committees to discharge
their duties and responsibilities effectively and in line with the
Code.

Conflicts of interest
The duties to avoid potential conflicts and to disclose such
situations for authorisation by the Board are the personal
responsibility of each Director. All Directors are required to ensure
that they keep these duties under review and to inform the Group
Company Secretary of any change in their respective positions.

The Company’s conflict of interest procedures are reflected in its
Articles of Association (‘Articles’). In line with the Companies Act
2006, the Articles allow the Directors to authorise conflicts and
potential conflicts of interest, where appropriate. The decision to
authorise a conflict can only be made by non-conflicted Directors.

The Board, and its Committees, considers conflicts or potential
conflicts at each meeting and, where such instances are
identified, takes appropriate action, usually by excluding the
conflicted party from any related discussions/decisions.

The Articles require the Company to indemnify its officers,
including officers of wholly-owned subsidiaries, against liabilities
arising from the conduct of the Group’s business, to the extent
permitted by law.

For a number of years, the Group has purchased Directors’ and
Officers’ liability insurance and this is anticipated to continue.

Board meetings and attendance
There were six regular Board meetings scheduled during 2020,
four meetings of the Audit and Risk Committee, three meetings of
the Remuneration Committee and two meetings of the Nomination
Committee. Due to COVID-19, all of the meetings since 23 March
2020 were held virtually and therefore planned site visits by
Non-executive Directors were postponed accordingly.

In addition, as a result of the unique challenges posed by the
COVID-19 pandemic, a further 13 virtual Board update meetings
were held, to ensure the highest possible standards of
governance during this demanding period and to keep the Board
fully updated on all financial and operational matters. Attendance
at these additional meetings was c.95%, with any non-attendance
due to unavoidable clashes with existing commitments as a result
of the relatively short-notice given on certain occasions.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

The Chair of the Board, Chief Executive Officer and Chief Financial
Officer are usually invited to attend Audit and Risk Committee
meetings, although the Audit and Risk Committee also meets with
the external auditor without any Executive Directors being present.

The Chief Executive Officer and Chief Financial Officer are invited
to attend Remuneration Committee meetings when appropriate,
but are never involved in discussions and decisions regarding their
own remuneration.

The Group Company Secretary is also Secretary to the Audit and
Risk, Remuneration and Nomination Committees, and attends
meetings for this purpose.

Number of
meetings attended

Bob Lawson
Frank Nelson
Martyn Coffey
Mark Kelly
Michael Scott
Sucheta Govil

Audit
and Risk
Committee

Remuneration
Committee

Nomination
Committee

—
4/4
4/4
—
—
* 3/4

3/3
3/3
3/3
—
—
3/3

2/2
2/2
2/2
2/2
—
2/2

Board

6/6
6/6
6/6
6/6
6/6
* 5/6

* Absence due to a re-arranged engagement at Covestro AG where attendance

was required by statute.

Board packs are distributed in the week prior to each meeting to
provide sufficient time for Directors to review their papers in
advance. If Directors are unable to attend a Board meeting for any
reason, they nonetheless receive the relevant papers and are
consulted prior to the meeting and their views are made known to
the other Directors.

The Group Company Secretary
All the Directors have access to the advice and services of the
Group Company Secretary. The Group Company Secretary has
responsibility for ensuring that all Board procedures are followed
and for advising the Board, through the Chair, on all governance
matters. The Group Company Secretary provides updates to the
Board on regulatory and corporate governance issues, new
legislation, and Directors’ duties and obligations. The appointment
and removal of the Group Company Secretary is one of the
matters reserved for the Board.

Paul Walker has served as Group Company Secretary throughout
the year.

Whenever necessary, Directors may take independent
professional advice at the Company’s expense. Board
Committees are provided with sufficient resources to undertake
their duties, including the option to appoint external advisers when
they deem it appropriate.

/Board induction, development and support
New Directors receive a formal induction on joining the Board,
which covers Group policies and other key information. Tailored
training may be arranged to meet individual needs, for example to
refresh knowledge of the Listing Rules and regulatory compliance.
Typically, a new Director will meet the Chair and other Non-
executive Directors in one-on-one sessions; he or she will have
meetings with key management, briefings with external advisers
and shareholders, and a programme of site visits will be arranged
at which the Director meets site-based staff to gain a full
understanding of the business.

Looking forward, it is the Company’s expectation that training will
be built in to the annual Board programme, designed to
incorporate a range of in-depth topics of particular relevance to
the business. Training needs will be identified through the Board
evaluation process and through individual reviews between the
Directors and the Chair. Directors are expected to attend external
courses and seminars as appropriate to maintain and develop
their Board competencies.

Risk management and internal control
The Board acknowledges its responsibility for determining the
nature and extent of the significant risks it is willing to take in
achieving its strategic objectives, and for the Group’s system of
internal control.

The Board has carried out a review of the effectiveness of the
Group’s risk management and internal control systems, including
financial, operational and compliance controls, for the period
covered by this Annual Report.

The Strategic Report comments in detail (pages 56 to 62) on the
nature of the principal risks and uncertainties facing the Group; in
particular those that would threaten our business model, future
performance, solvency or liquidity and the measures in place to
mitigate them. In conducting its review, the Board has included a
robust assessment of these risks and the effectiveness of
mitigating controls.

The Audit and Risk Committee Report on pages 80 to 84
describes the internal control system and how it is managed and
monitored.

The Board confirms that no significant failings or weaknesses
were identified in relation to the review. The Board also
acknowledges that such systems are designed to manage, rather
than eliminate, the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance
against material misstatement or loss.

Stakeholder engagement
Engagement with our shareholders and wider stakeholder groups
plays a vital role across the Group, including at Board level. One of
the primary areas of focus for the Board at any time is the impact
its decisions or actions may have on key stakeholder groups
represented within the Board’s duty under s172 of the Companies
Act 2006.

StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

The Board is mindful of the levels of engagement with key
stakeholder groups and how their respective views may be
incorporated into relevant decision-making. Board discussions
therefore seek to appropriately consider the impact of its
decisions and views of key stakeholder groups thereon, whilst
always ensuring the need to promote the success of the Company
for the benefit of its members as a whole.

In doing so s172 requires the Directors to have regard (amongst
other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships with

suppliers, customers and others;

(d) the impact of the Company’s operations on the community and

the environment;

(e) the desirability of the Company maintaining a reputation for

high standards of business conduct; and

(f) the need to act fairly as between members of the Company.

The Board considers information from across the organisation to
help understand the impact of its operations and decisions, and
the interests and views of our key stakeholders. This includes
reviews of strategy, financial and operational performance, as well
as information covering areas such as key risks, and legal and
regulatory compliance.

This information is provided to the Board, and its Committees,
through reports sent in advance of each meeting, and through
in-person presentations, where appropriate. As a result of these
activities, the Board has developed a good understanding of the
interests and views of all stakeholders, and other relevant factors,
which enables the Directors to comply with the requirements of
section 172 of the Companies Act 2006.

The Board will sometimes engage directly with certain
stakeholders on certain issues, but the size and distribution of our
stakeholders and of the Eurocell group dictate that stakeholder
engagement often takes place at an operational level.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Corporate Governance Statement continued

The following table summarises the key matters considered by the Board during the year and notes the consideration given to the
various stakeholder groups during its deliberations:

Matters considered by the Board in the year

Consideration given to stakeholders

Business Review, Operational Performance and Strategy

• Approval of the Group’s strategy at the
annual strategy day and regular review
of progress against that strategy during the
year

• Regular business updates and reviews of
operational performance from the Chief
Executive Officer

Shareholders – responsibility for shareholder relations rests with the Chief Financial
Officer, who, in conjunction with the Chief Executive Officer, ensures that there is
effective communication with shareholders on matters such as strategy and
operational performance. An active dialogue is maintained through a planned
programme of investor relations activities.*

The Chairman, the Senior Independent Director and the other Directors are available to
engage in dialogue with major shareholders as appropriate. Shareholders have the
opportunity to meet members of the Board and the senior management team at the
Annual General Meeting and to ask any questions they may have.

The Group’s strategy and operational performance were key topics of discussion
during meetings held with shareholders during the year including, in particular,
shareholders’ views on the impact of COVID-19, progression of our five strategic
priorities and the significant investment in the new warehousing facility. Stakeholder
feedback was considered and noted by the Board. Discussions also took place
regarding the Group’s preparations for Brexit, including the potential effect on raw
material supplies, and the preparatory work being undertaken.

Employees – the Executive Committee strives to ensure the right level of support and
engagement with employees throughout the Group, which includes briefings on
operational and financial performance (see ‘Engagement with the workforce’ on page
75). Matters raised by employees through this engagement are fed back and
considered at Executive Committee meetings.

The Board regularly reviews Health & Safety KPIs and HSE communications, to ensure
colleague safety remains our first operational priority and a paramount feature of all
Board decisions.

The Group also works hard to ensure we continue to offer market level compensation
and benefits.

Customers – regular contact takes place by senior management with key customers
to discuss our operational performance, including service levels and other relevant
matters. In addition, customer insight surveys take place on a regular basis to assess
satisfaction and ‘Net Promoter Score’ along with quarterly forums held with customers,
to discuss product design and innovation.

Regular monitoring of social media platforms for relevant comments/issues, coupled
with Trustpilot customer reviews/ratings of service and products and direct comments
received from customers visiting our branches provide further customer insight.

Feedback from these sources is considered by the Executive Committee in order to
understand customers’ views and how our operational performance is impacting
them.

Suppliers – regular review meetings are held between senior management and key
suppliers to discuss relevant topics, such as pricing, supply continuity and service
levels, in order to build and maintain a robust working relationship with our supply base
and understand the key features of the Group’s operations that impact upon them.

Community – our major operations engage with and supports their local communities
on an ongoing basis. We seek to recruit locally, retain a skilled local workforce, build
relationships with local community organisations and to support charitable initiatives
where we can. We work to ensure that any change in our operations which may have
an impact on the local community is fully considered and assessed.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

Matters considered by the Board in the year

Consideration given to stakeholders

Industry-specific engagement – employees from the Company attend quarterly
meetings of the British Plastics Federation (BPF), where we are members of both the
Windows and Recycling groups, to discuss upcoming legislation and standard
changes. In addition, we are a member of The British Fenestration Rating Council
(BFRC), which verifies the energy performance of windows and doors, and we attend
their meetings on a regular basis.

These meetings are also attended by other manufacturers, as well as house builders
and fabricators, all of which gives the Group the opportunity to engage with and obtain
up-to-date information, views, priorities and concerns within the industry. This
knowledge supports the debates held by the Board in relation to matters such as
capital expenditure projects, new product development initiatives, technical initiatives,
market opportunities and new business proposals.

Financial performance and investor relations

• Regular updates from the Chief Financial
Officer on financial performance, share
price performance, investor relations and
movements in the share register
• Approval of the Group’s budget and

business plan

• Approval of the half year and full year
reports, including going concern and
viability statements

• Approval of the trading updates during the

year

• Approval of Group-wide policies and terms

of reference

Legal and Governance

• Regular updates on legal, governance and

regulatory matters

Shareholders – following the announcement of the Group’s half year and full year
results, formal presentations are made to institutional shareholders and analysts by the
Chief Executive Officer and Chief Financial Officer, covering a range of key topics
affecting the Group’s financial performance. Ad hoc meetings are also held following
trading updates and otherwise throughout the year. This ensures continued engagement
with current and potential investors and, via feedback collected both directly and
independently by the Group’s brokers, a good understanding of their views.

Meetings held during the first half of 2020 included discussions on the financial impact
of COVID-19 and the Group’s share placing in April. In the second half, discussion
turned back to sales growth, operating margins, cash flow delivery and understanding
investors’ current views on dividends and leverage. Shareholders have the opportunity
to ask questions about the financial results at the Company’s AGM.

Board members develop an understanding of the views of major shareholders through
analysts’ and brokers’ briefings.

Finance providers – regular meetings take place with our funding banks to discuss
business and financial performance, including debt levels and headroom. Much of the
discussion in 2020 related to the financial impact of COVID-19. The Chief Financial
Officer provides regular updates to the Board on the views of our funding banks, which
helps to shape Board discussions on investments and cashflow.

Employees – engagement with employees, including briefing on operational and financial
performance and consideration of feedback received is noted above. The cascade and
dissemination of such information is also shared with the wider workforce through, inter
alia, team briefings, internal newsletters and the Annual Leadership Conference.**

Government – regular meetings are held with tax advisers to discuss tax compliance,
HMRC correspondence and other relevant issues pertinent to Group’s finances and
tax position.

Other stakeholders – financial information is also shared with customers, suppliers
and other stakeholders by means of the Annual Report and Accounts and the Group’s
corporate website.

All stakeholders – regular updates to the Board on legal, governance, regulatory,
financial and HR matters ensure the Board is aware of current requirements and
market practice and can therefore ensure its activities and decisions take account of
these requirements and the potential impact on all its stakeholders.

* During 2020, a total of approximately 86 investor meetings were held, at which at least 47 institutions were represented, including those relating to the share placing which
completed on 1 April 2020. In addition, a conference meeting was held in December specifically for retail investors at which there were c.30 attendees. Feedback from
these meetings and other shareholder communications are provided to the Board. The Board also receives copies of analysts’ and brokers’ briefings.

** The Annual Leadership Conference, due to take place in March 2020, was cancelled due to COVID-19. In order to keep colleagues informed, especially during the

suspension of all operations, a regular “Email from the CEO” was sent to all colleagues providing updates and reassurance.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Corporate Governance Statement continued

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

One teamALL TOGETHER BETTER

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

ONE TEAM

CUSTOMER FIRST

INTEGRITY

INCLUSIVE

EXECUTE

We are one team,
committed to
working together
to deliver our
goals.

Customers are
always our priority,
we keep our
promises.

We conduct
ourselves in a
professional
manner and we
value honesty
and trust.

We support,
value and respect
each other.

Together we will
go the extra mile
to achieve our
targets.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

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Engagement with the workforce
The main methods and mechanisms by which the Board and
management source the views of its colleagues include:
• Annual Leadership Conference (see footnote ** on page 73) –
all Executive Committee members attend in order to meet and
interact with the wider management teams and feedback to the
Board.
‘Meet Mark’ focus group sessions – regular interactive meetings
held by the CEO with various staff groups across the Group to
share views.

•

• Site visits by senior management – regular visits made by
Executive Committee members to branches, subsidiaries,
warehouses and factories.

• Walking the shopfloor – factory/warehouse shifts worked by the

COO to share the experiences, first-hand, of shopfloor colleagues.

• Whistleblowing and grievances – all reports are investigated and
appropriate changes implemented to help prevent re-occurrence.

In addition, as reported last year, Sucheta Govil, the designated
Non-executive Director, has the specific Board responsibility in this
area and it was intended that she attend colleague focus groups
during 2020. However, this was not possible due to the COVID-19
restrictions.

Nevertheless, subject to the relaxation of restrictions, it is intended
that this will commence in 2021, along with the introduction of an
employee-wide engagement survey, in order to compliment the
health and safety forums, team briefings, continuous improvement
workshops and newsletters currently in place.

The Board assesses and monitors culture through:
• reviews of staff turnover rates;
• reviews of Health and Safety data, including near misses;
• reviews of employee whistleblowing cases;
•
• observation of attitudes towards regulators such as HMRC and

interaction with senior management and workforce; and

HSE, as well as internal and external auditors.

The Board is satisfied the policies, practices and behaviours
throughout the Group are aligned with the Vision and Values noted
above and no corrective action is currently required. Nevertheless,
this will continue to be reviewed on an on-going basis to ensure a
positive culture endures.

Some examples of the Eurocell culture, illustrating our colleagues
going “above and beyond” are included on pages 48 to 49.

Statement of compliance with the Code
This Corporate Governance Statement, together with the
Nomination Committee Report, the Audit and Risk Committee
Report and the Remuneration Committee Report, provide a
description of how the principles and provisions of the Code have
been applied within Eurocell plc during 2020.

It is the Board’s view that Eurocell plc was in compliance with the
relevant provisions set out in the Code in all material respects.
This statement complies with sub sections 2.1, 2.2(1), 2.3(1), 2.5,
2.7 and 2.10 of Rule 7 of the Disclosure Rules and Transparency
Rules of the Financial Conduct Authority. The information required
to be disclosed by sub-section 2.60 of Rule 7 is shown on pages
101 to 103.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Our Values:

We are one team, committed to working
together to deliver our goals
We will: Empower, Be Collaborative, Be Committed,
Deliver on Time

Customers are always our priority,
we keep our promises
We will: Listen, Be Passionate about Quality &
Services, Innovate, Drive Consistency

We conduct ourselves in
a professional manner and
we value honesty and trust
We will be: Honest, Trustworthy, Ethical, Accountable

We support, value &
respect each other
We will be: Engaged, Supportive, Respectful, Fair

Together we will go the extra mile
to achieve our targets
We will be: Entrepreneurial, Creative & Flexible,
Tenacious, Resilient

/Corporate Governance Statement continued

Annual General Meeting
Our AGM will be held at our new Head Office (see Company
Information on page 158 for details) on 13 May 2021. However,
in-line with the 2020 AGM held in May, shareholder attendance
in-person may be restricted in accordance with COVID-19
guidance for the safety for all concerned.

The notice of our AGM (including any related COVID-19 guidance),
together with the Directors’ voting recommendations on the
resolutions to be proposed, is included on a separate circular to
shareholders and will be dispatched at least 20 working days
before the meeting. The notice will be available to view at investors.
eurocell.co.uk.

Subject to COVID-19 restrictions, all Directors intend to attend the
AGM, including the Chairs of the Audit and Risk, Remuneration
and Nomination Committees, who are available to answer
questions. The Board welcomes questions from shareholders who
have an opportunity to raise issues informally or formally before or
during the meeting.

For each proposed resolution, the proxy appointment forms
provide shareholders with the option to direct their proxy vote
either for or against the resolution or to withhold their vote. The
proxy form and any announcement of the results of a vote make it
clear that a ‘vote withheld’ is not a vote in law and will not be
counted in the calculation of the proportion of the votes for and
against the resolution.

All valid proxy appointments are properly recorded and counted by
Equiniti, the Company Registrars. Information on the number of
shares represented by proxy, the proxy votes for and against each
resolution, and the number of shares in respect of which the vote
was withheld for each resolution, together with the proxy voting
result, are given at the AGM. The total votes cast, including those
at the AGM are published on our website (investors.eurocell.co.uk)
immediately after the meeting.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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Nomination Committee Report

Chair

Members

Bob Lawson

Frank Nelson

Martyn Coffey

Dear Shareholder,

I am pleased to report to you on the
main activities of the Committee
and how it has performed its duties
during 2020.

This year, the Committee’s main focus
has been on succession planning for the
Board, given the length and concurrency
of service of the Chair and the majority of
the Non-Executive Directors.

In addition, the Committee has continued
to oversee the development of the
Executive Committee, and its members,
which has been in its current form since
Autumn 2019 (see page 79 for further
details of the members).

Finally, I would like to thank my fellow
Committee members, all of whom have
served throughout the year, for their
valuable contribution and support, and
I welcome any comments or questions
from shareholders.

Bob Lawson
Chair of the Nomination Committee
11 March 2021

Mark Kelly

Sucheta Govil

Role and responsibilities:
The principal duties of the Nomination Committee are to:
• regularly review the structure, size and composition of the Board (including its skills,
knowledge, experience, length of service and diversity) and make recommendations
to the Board with regard to any changes;
identify and nominate, for the approval by the Board, candidates to fill Board
vacancies;

•

• review the time commitments required from Non-executive Directors; and
• maintain an effective succession plan for the Board and senior management taking
into account the challenges and opportunities facing the Company, along with the
skills and expertise needed in the future, while promoting diversity of gender,
background and skills.

Summary of activities during the year
The Nomination Committee met formally twice during the year and attendance
at the meetings is shown on page 70.

The main activities of the Committee included:
• succession planning for the Board, given the length and concurrency of
service of the Chair and the majority of the Non-executive Directors;
• overseeing the development of the Executive Committee to support the

strategy and governance of the wider Group;

• the ongoing review of talent for the Board and senior management including

an assessment of their training and development needs;

• considering the results of the externally-facilitated review of the Committee’s

effectiveness (see page 69 for further details);

• a review of Directors’ time commitments and independence;
• consideration of the re-election of Directors at the Annual General

Meeting; and

• approving updates to the Committee’s Terms of Reference.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Nomination Committee Report continued

Composition
The Nomination Committee is chaired by Bob Lawson, except
where it is dealing with matters relating to his re-appointment or
replacement, and comprises all three of the Non-executive
Directors along with the Chief Executive Officer, all of whom have
served on the Committee throughout the whole year.

The Board recognises the Group operates in a historically
male-dominated industry. At present, 17% (1 out of 6) of the Board
is female, along with 26% (12 out of 47) of the senior management.
We have an ongoing commitment to consider diversity as a key
factor in future senior appointments. However, the overriding
policy in any new appointment is to select candidates based on
merit to ensure the continued success of the business.

Gender balance
The gender balance of those in the senior management and their
direct reports is included within the Responsible Business section
on page 46.

Succession planning
In 2020, the Committee increased its focus on succession
planning for the Board, given the length and concurrency of
service of the Chair (c.6 years) and the Non-executive Directors
(c.6 years for two Non-executive Directors). It concluded that, in
light of the requirements of the Code and best practice, whilst
there is no immediate need for action, this matter should continue
to be monitored to ensure any potential periods of transition are
appropriately managed.

As part of the development of the Executive Committee, the
Nomination Committee has also considered succession planning
for appointments to the Board and to senior management, in
order to maintain an appropriate balance of skills and experience
within the Company and on the Board.

This planning process includes an analysis of any succession
gaps or risks identified and includes contingency plans for the
sudden or unexpected departure of Executive Directors and other
senior managers.

As a result, the Board has a good understanding of succession
planning across the Group and the range of measures being used
to continue to develop and recruit talented senior employees.

The Code recommends that a majority of the Nomination
Committee be Non-executive Directors, independent in character
and judgement and free from any relationship or circumstance
which may, could or would be likely to, or appear to, affect their
judgement. The Board considers that the Company complies with
the Code in this respect.

Only members of the Committee have the right to attend
Committee meetings, but the Committee may invite others,
including the Human Resources Director and external advisers, to
attend all or part of any meeting if it thinks it is appropriate,
necessary or pursuant to the terms of any agreement with
shareholders.

The Nomination Committee will meet as often as it deems
necessary but, in accordance with its terms of reference, at least
twice a year.

Diversity and inclusion
All Board and senior management appointments are made on
merit, in-line with the policy adopted throughout the Group’s
workforce. The Board recognises and embraces the benefits of
diversity and, in particular, the value that different perspectives
and experience bring to the quality of debate and decision-
making.

There are several considerations which are taken into account
when considering appointments at all levels such as background,
experience, and skill set, as well as shareholder perspectives.
However, the Board believes that setting targets for the number of
people from a particular background or gender is not the most
effective approach to take. The Board will therefore look to follow
the principles of this policy rather than specified quotas or targets.

In-line with this approach, the Group has maintained the
procedure to ensure female applicants for all supervisory,
managerial and senior managerial vacancies are given an
automatic right to interview, to ensure greater opportunity
and encouragement of internal promotion and cross
departmental shift.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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Executive Committee
(in addition to Mark Kelly and Michael Scott)

Paul Walker
Group Company Secretary

Mark Hemming
Chief Operating Officer

Bruce Stephen
Group Human Resources Director

Paul joined Eurocell in August 2019 and
was appointed Group Company Secretary
in September 2019. He previously worked
for DFS Furniture plc where he was
Financial Controller and, most recently,
Director of Central Finance and Group
Company Secretary. He is a member of the
Institute of Chartered Accountants in
England and Wales.

Mark joined Eurocell in August 2019 having
previously worked for Amazon UK, most
recently as Regional Director for Customer
Fulfilment. Prior to that, Mark has
experience of leading manufacturing plants
in the automotive sector for Stadco Limited
and Textron Automotive.

Bruce joined Eurocell in July 2019. He
previously worked for Greencore holding
various roles including, most recently,
Corporate Services Human Resources
Director. Prior to Greencore, Bruce worked
for Danone (Dairy) and Walkers Snacks
(PepsiCo).

Ian Kemp
Sales Director – Profiles division

Ian joined Eurocell in 2012. Prior to that, he
worked in the offsite construction industry
for 12 years including Business
Development Director for Caledonian
Modular and UK Sales Manager for
Portakabin.

Andy McDonnell
Managing Director – Building Plastics
division

Andy joined Eurocell in May 2018, having
previously held senior leadership positions
in retail and trade at B&Q, TradePoint and
Oak Furniture Land.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Audit and Risk Committee Report

Chair

Members

Frank Nelson

Martyn Coffey

Sucheta Govil

Dear Shareholder,

I am pleased to report to you on the Audit
and Risk Committee’s objectives and
activities during 2020.

This report, which is part of the Directors’ Report,
explains how the Audit and Risk Committee has
discharged its responsibilities during 2020.

During the year, the Committee’s work has been
dominated by the impact of COVID-19 on the
Company’s financial position, reporting and
risk management.

In considering the Company’s financial position
and risk management processes, the Committee
has considered short and medium-term profit
and cash flow projections, in order to understand
the range of potential outcomes and support the
Executive in proactively managing the emerging
effects of the pandemic on the Company’s
financing and cashflows.

In terms of financial reporting, the Committee has
focused on the potential for the unique challenges
posed by the pandemic to result in the impairment
of assets, including stock, receivables, contract
assets and goodwill. Our work, including a
summary of the key accounting estimates and
judgements made, is set out later in this report.

Further to last year’s Audit and Risk Committee
report, I can confirm that, following the completion
of the 2019 audit, the transition to a new audit
engagement partner concluded during the year
and I am pleased to welcome Christopher Hibbs
to the team.

Finally, I would like to thank my fellow Committee
members, all of whom have served throughout the
year, and both the internal and external auditors,
for their valuable contribution and support during
what has been a challenging period..

Frank Nelson
Chair of the Audit and Risk Committee
11 March 2021

Role and responsibilities:
The key responsibilities of the Committee are to:
• review the Annual Report, half-year report and any other
formal announcements relating to the Group’s financial
performance, giving due consideration to significant
accounting issues and judgements contained therein,
as well as compliance with accounting standards and other
legal and regulatory requirements;

• review the Annual Report and Financial Statements to advise

the Board on whether they give a fair, balanced and
understandable explanation of the Group’s business and
performance over the relevant period;

• review the Group’s financial reporting systems and

procedures;

• review the Group’s internal controls and risk management

systems and advise the Board whether they are adequate,
by considering reports on their effectiveness from the Chief
Financial Officer and Chief Executive Officer, together with
reports from the Group’s outsourced internal auditor and from
the external auditor;

• review and update the Group’s risk register, as part of the

assessment of emerging and principal risks;

• review the Group’s procedures to ensure compliance with
the provisions of the Bribery Act 2010 and the Group’s
whistleblowing policy;

• review the external auditor’s independence and objectivity,
audit and non-audit fees and make recommendations
regarding audit tender and the appointment and remuneration
of the auditor, together with the terms of their engagement;
• review the annual audit plan and monitor the effectiveness of

the external audit process;

• monitor and review the effectiveness of the outsourced

internal audit function, including a review of the internal audit
plan, all internal audit reports, and management’s responses
to the findings and recommendations of the internal audit
function;

• consider the adequacy of the Group’s finance function;
• review the Group’s Tax Strategy; and
• review the Committee Terms of Reference

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Summary of activities during the year
The Audit and Risk Committee met formally four times during
the year and attendance at the meetings is shown on page 70.

The areas of particular focus for the Committee in 2020,
and up to the date of this Annual Report, were as follows:
• Reviewed the 2019 and 2020 Annual Reports, as well as the

2020 Half-Year Report, including preliminary announcements.

• Considered information presented by management on

significant accounting estimates and judgements adopted in
respect of the Group’s 2019 and 2020 Financial Statements
and the 2020 Half-Year Report.

• Specifically in relation to 2020 Financial Statements and the

2020 Half-Year Report, considered the impact of COVID-19 on
the Company’s financial position and reporting, including
potential asset impairments and related disclosures.

• Reviewed documentation prepared to support the viability

statement and going concern assumption set out on page 63.
• Reviewed the external auditors’ plan for their audit for the year

ended 31 December 2020.

• Reviewed reports from the external auditor setting out their

findings as a result of their audits for the years ended
31 December 2019 and 2020, as well as their review of the
2020 Half-Year Report.

• Considered the impact of any new accounting standards and
financial reporting requirements, including guidance issued by
the Financial Reporting Council (‘FRC’).

• Considered reports by management related to the

effectiveness of the Group’s systems of risk management and
internal control.

• Reviewed the Group’s risk register, including principal and

emerging risks.

• Considered reports prepared by the Group’s outsourced

internal audit function.

• Considered the results of the externally-facilitated assessment

of the Committee’s effectiveness.

• Approved updates to the Committee’s Terms of Reference.
• Reviewed, and approved updates where applicable, to Group
policies for anti-bribery, whistleblowing, capital expenditure
and treasury, along with the Group tax strategy.

The Committee was also kept up to date with changes to
accounting standards and developments in financial reporting,
company law and other regulatory matters through
presentations from the external auditor, Chief Financial Officer
and the Company’s finance function.

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The role of the Audit and Risk Committee is to oversee financial
reporting. The Committee reviews the ongoing effectiveness of
the Group’s internal controls and provides assurance on the
Group’s risk management processes. The Committee also
assesses information received from the external and internal audit
functions.

Following the 2019 year-end, at the March 2020 meeting, the
Committee reviewed and recommended for approval by the
Board, the financial results for the year ended 31 December 2019,
including a review of the full-year external audit.

As part of that review process, the members of the Committee
reviewed the Annual Report, including the adequacy of the
disclosure with respect to going concern and viability reporting.
The Committee considered the appropriateness of preparing the
accounts on a going concern basis, including consideration of
forecast plans, and supporting assumptions, as well as sensitivity
analysis and concluded that the Company’s financial position was
such that it continued to be appropriate for accounts to be
prepared on a going concern basis.

This additional review by the Audit and Risk Committee,
supplemented by advice received from external advisers during
the drafting process, assisted the Board in determining that the
report was fair, balanced and understandable at the time that it
was approved.

Composition
The Audit and Risk Committee is chaired by Frank Nelson and
comprises all three of the Non-executive Directors, but not the
Chair of the Board, all of whom have served on the Committee
throughout the whole year.

The Governance Code recommends that all members of the Audit
and Risk Committee are Non-executive Directors, independent in
character and judgement and free from any relationship or
circumstance which may, could or would be likely to, or appear to,
affect their judgement and that one such member has recent and
relevant financial experience.

The Board considers that, by virtue of his extensive experience,
details of which are set out on page 65, Frank Nelson, a Fellow of
the Chartered Institute of Management Accountants, has recent
and relevant financial experience and the Company complies with
the requirements of the Governance Code in this respect.
Furthermore, all Committee members have extensive relevant
commercial and operational experience, particularly in building/
construction and industrial organisations, which both benefit the
Committee and collectively illustrate its competence relevant to
the sector in which the Group operates.

Only members of the Committee have the right to attend
Committee meetings, but both the internal and external auditors
were invited to attend all meetings during the year, as a matter
of course. Other individuals, such as the Chief Executive Officer,
the Chief Financial Officer and other members of the Board were
invited to attend the Committee meetings as and when appropriate.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Audit and Risk Committee Report continued

Key accounting estimates and judgements
As described above, the Committee reviewed the key estimates and judgements used in the preparation of the Group’s 2020
Financial Statements (including a review of PricewaterhouseCoopers LLP’s report and a discussion of their observations and
findings in this area) as follows:

Area

Estimate/Judgement

Management’s approach

Committee’s review

Inventory valuation

Provisions for slow-
moving items and
discontinued product
lines

Assessment of the appropriate level of
provisioning against obsolescence, undertaken
in the context of current trading and the
forecast for the next financial year and beyond

Critically reviewed the carrying value of the Group’s
inventory, the approach taken by management and
assessed the reasonableness of the underlying
assumptions and financial forecasts used

Accounts receivable
recoverability

Provisions for bad and
doubtful debts

Contract asset valuation Carrying value/

Going concern

impairment of contract
payments made to
customers

Application of the going
concern basis in
preparing the accounts

Application of IFRS 9’s expected credit loss
approach to the impairment of receivables
(which requires the use of forward-looking
statistical modelling to determine the appropriate
level of provision), plus overlays to take into
account the potential impact of COVID-19 and
credit insurance on recoverability

Critically evaluated the methodology with respect
to setting provisions for potential bad and doubtful
debts, including management’s assessment of the
impact of COVID-19 and macro uncertainty, as well
as the absolute level of provisions held1

Assessment of contract profitability and
potential impairment, undertaken in the context
of current and forecast trading levels and the
potential impact of COVID-19 on contract
performance

Considered the reasonableness of the key
estimates and underlying assumptions and
forecasts, including management’s assessment of
the impact of COVID-19 and macro uncertainty, as
well the absolute asset value

Forecasting of profitability and cashflows to
December 2023, in conjunction with the
commercial and operational teams, to consider
various scenarios and the wide range of
possible impacts from COVID-19, along with
other factors such as Brexit

Considered the reasonableness of the key
estimates and underlying assumptions used in the
forecasting process, including management’s
assessment of the impact of COVID-19 and macro
uncertainty, the headroom on the RCF facility and
the associated covenant compliance

Asset impairment

Carrying value/
impairment of non-
current assets

Assessment of supportable carrying values,
calculated based on current trading and
medium-term cash flow forecasts, which
include the estimated impact of COVID-19

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

In addition, the external auditor met regularly with the Committee
without executive management being present and met separately
with each of the Audit and Risk Committee Chair and the Chief
Financial Officer.

The Audit and Risk Committee will meet as often as it deems
necessary but, in accordance with its terms of reference, at least
three times a year.

Risk management
The Group’s risk management processes are set out in detail on
pages 56 to 57.

The Group maintains a risk register that identifies key and
emerging risks, the probability of those risks occurring and the
impact they would have on the Group if unmitigated. Against each
gross risk, the controls that exist to manage and, where possible,
minimise or eliminate those risks are also listed, and an
assessment of net risk is provided. The risk register also identifies
any further actions required such that net residual risk is
consistent with the risk appetite set by the Board. The register is
regularly updated to reflect changes in circumstances.

The Group’s Risk Management Committee is chaired by the Chief
Financial Officer. This Committee reviews significant risks and the
status of related mitigating actions each quarter.

The Audit and Risk Committee reviews the risk register twice per
year to ensure the timely identification and robust management of
inherent and emerging risks is taking place. To the extent that any
failings or weaknesses are identified during the review process,
appropriate measures are taken to remedy these.

Information relating to the management of risks and any changes
to the assessment of key risks is reported by the Audit and Risk
Committee to the Board.

Internal controls
The Board is responsible for the overall system of internal controls
for the Group and for reviewing its effectiveness. In accordance
with FRC guidance, it carries out such a review at least annually,
covering all material controls including financial, operational and
compliance controls and risk management systems.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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FINANCIAl StAtEMENtS

In particular, the Board discharges its duties in this area by:
• holding regular Board meetings to consider the matters reserved

for its consideration;

• receiving regular management reports which provide an

assessment of key risks and controls;

• scheduling annual Board reviews of strategy including reviews
of the material risks and uncertainties facing the business;
• ensuring there is a clear organisational structure with defined
responsibilities and levels of authority which are regularly
reviewed;

• ensuring there are documented policies and procedures in

place; and

• scheduling regular Board reviews of performance against

financial budgets and forecasts.

In reviewing the effectiveness of the system of internal controls,
the Audit and Risk Committee:
• reviews the risk register compiled and maintained by senior

managers within the Group at least bi-annually and question and
challenge where necessary;

• regularly reviews the systems of financial and accounting

controls; and

• reports to the Board on the risk and control culture within

the Group.

The Group has several operating policies and controls in place
covering a range of issues including financial reporting, capital
expenditure, business continuity and information technology,
including cyber security, and appropriate employee policies. These
policies are designed to ensure the accuracy and reliability of financial
reporting and govern the preparation of financial statements.

In respect of the Group’s financial reporting, the Finance
Department is responsible for preparing the Group financial
statements using a well-established process and ensuring that
accounting policies are in accordance with International Financial
Reporting Standards. All financial information published by the
Group is subject to the approval of the Audit Committee.

The internal control environment was strengthened in 2020 in
response the impact of the COVID-19 pandemic. For example,
as described in the Corporate Governance Statement on page 70,
the Board increased the regularity and frequency of its business
review meetings.

In addition, with the Group’s finance and administrative teams
working substantially from home during the period, controls
related to the processing of cash payments and receipts were
enhanced during lockdown periods (e.g. higher levels of approval
required for transactions over certain limits). More generally, the
Group’s IT team have remained particularly vigilant and alive to
cyber risks during this period and we continue to invest in our
cyber security.

Other than as described above, there have been no changes in
the Company’s internal control systems during the financial year
under review that have materially affected, or are reasonably likely
to materially affect, the Company’s control over financial reporting.

The Board, with advice from the Audit and Risk Committee,
is satisfied that an effective system of internal controls and risk
management is in place which enables the Company to identify,
evaluate and manage key and emerging risks and which accords
with the guidance published by the FRC.

These processes have been in place since the start of the financial
year and up to the date of approval of the accounts. Further details
of specific material risks and uncertainties facing the business can
be found on pages 58 to 62.

Internal audit
KPMG LLP provide an outsourced Internal Audit function which
complements the internal finance-based checks performed on
the branch network operations.

During early 2020, the Committee worked with KPMG LLP to
agree the programme for the year, which included reviews of
business continuity planning, tax risk, treasury management,
expenses and whistleblowing/Code of Conduct.

However, as a result of the impact of COVID-19 on the availability
of key staff, with the Committee’s approval, the Internal Audit
program was temporarily suspended during Q2 and Q3. However,
it resumed in Q4 with a Brexit readiness review and a full
programme, approved by the Committee, is planned for 2021.

The Committee also formally reviews the Group’s progress in
implementing the improvement recommendations raised through
the internal audit process in conjunction with the Executive
Committee members, who monitor a report on the status of the
outstanding actions on a monthly basis. Whilst COVID-19 has
caused some delays to implementation, overall progress remains
satisfactory.

External audit and auditors’ independence
The Audit and Risk Committee has primary responsibility for
making a recommendation to the Board on the appointment,
reappointment, removal and remuneration of the external auditors.
It keeps under review the scope and results of the audit, its
cost-effectiveness and the independence and objectivity of the
auditors.

The external auditor is required periodically to assess whether,
in its professional opinion, it is independent and those views are
shared with the Audit and Risk Committee. The Committee has
authority to take independent advice as it deems appropriate in
order to resolve issues on auditor independence. No such advice
has been required to date. There are no contractual obligations in
place that restrict the choice of statutory auditor.

The Group’s current auditors, PricewaterhouseCoopers LLP
were appointed at the Audit and Risk Committee meeting on
29 April 2015, following the Company’s IPO in March 2015.
As a result, PricewaterhouseCoopers LLP may remain as external
auditor without re-tender for ten years from that date, until the
completion of the 2025 annual audit. The Committee considers
the need to tender the audit on an annual basis and there are no
current plans to perform such a tender.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Whistleblowing and bribery
The Audit and Risk Committee monitors any reported incidents
under our whistleblowing policy, which is available to all employees.
This policy sets out the procedure for employees to raise legitimate
concerns about any wrongdoing without fear of criticism,
discrimination or reprisal.

During the year, there were no reports received through the
whistleblowing process.

The Audit and Risk Committee also takes responsibility for reviewing
the policies and procedures adopted by the Group to prevent
bribery. The Group is committed to a zero-tolerance position with
regard to bribery. The Committee is satisfied that the Group’s
procedures with respect to these matters are adequate.

Audit and Risk Committee Report continued

In accordance with best ethical standards,
PricewaterhouseCoopers LLP has processes in place designed
to maintain independence, including the rotation of the audit
engagement partner at least every five years. As a result of these
processes, the previous audit engagement partner stepped-down
following the conclusion of the 2019 audit and, following a
handover period, the current audit engagement partner,
Christopher Hibbs, assumed full responsibility.

The Committee has also adopted policies to safeguard the
independence of its external auditors. Any work awarded to the
external auditors with a value of more than £5,000 in aggregate in
any financial year, other than an audit, requires the specific
approval of the Committee. Where the Committee perceives that
the independence of the auditors could be compromised, the
work will not be awarded to the auditors. Details of amounts paid
to PricewaterhouseCoopers LLP for audit and audit related
assurance services in 2020 are set out on page 133. The audit
related assurance services provided during the year were in
relation to the half-year report (£35,000) and the sustainability
measure which was introduced into the Company’s banking
facility (£25,000).

Prior to recommending the appointment of PricewaterhouseCoopers
LLP at the forthcoming AGM to the Board, the Committee
reviewed the audit process, the performance of the auditor and its
ongoing independence, taking into consideration:
• an assessment of the lead audit partner and the audit team,
including their responses to questions from the Committee;

• a review of the audit approach, scope, determination of

significant risk areas and materiality;

• the execution of the audit and the audit findings reported;
•

input from, and interaction with, management and
communication with, and support to, the Committee;

• the quality of any recommendation points; and
• a review of independence, objectivity and scepticism.

Based on this review, the Committee concluded that
the external audit process had been run efficiently and that
PricewaterhouseCoopers LLP has been effective in its role
as external auditor.

The Committee is satisfied that the independence of the external
auditor is not impaired and the level of fees paid for non-audit
services, details of which are set out in Note 5 to the Financial
Statements, does not jeopardise its independence. In conclusion,
the Committee has assessed the performance and independence
of the external auditor and recommended to the Board the
re-appointment of PricewaterhouseCoopers LLP as auditor
until the AGM in 2022.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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Directors’ Remuneration Report

Chair

Members

Martyn Coffey

Bob Lawson

Frank Nelson

Dear Shareholder,

I am pleased to report to you on the main activities of the
Committee and how it has performed its duties during 2020.

As described elsewhere in this annual report, the business
responded well to the unique challenges posed by COVID-19 and
is now well-placed for the future.

The first half of the year was dominated by the impact of the first
lockdown, with the business temporarily closed from late March
until mid-May. However, we prepared well for re-opening, and
benefited from good market conditions to deliver an excellent
second half performance.

Actions taken at the outset of the pandemic to help secure our
financial position included the decision to cancel all pay awards
which were due to come into effect in April 2020, as well as a
voluntary agreement by the Board and other members of the senior
management team to a temporary 20% reduction in remuneration.
I would like to thank our colleagues throughout the business
affected by these decisions for their understanding and support.

Despite the strong H2 recovery, sales and profits for the full year
were below 2019 levels. In delivering these results for 2020, the
Committee has also been particularly conscious of the financial
support the Group received in response to the pandemic, from
both shareholders and Government.

It is in this context that the Committee has assessed 2020
outcomes, and approved new basic salary levels, awards and
targets. These reflect performance in a challenging economic
and political environment and provide stretching targets for
future growth.

We were very appreciative of the strong level of support received
from shareholders at the 2020 AGM, where the Annual Report on
Remuneration was approved with 100% of votes in favour. As no
changes are proposed to the existing policy, there will again only
be one remuneration resolution tabled at the 2021 AGM i.e. the
advisory shareholder vote on the Annual Report on Remuneration.

Elsewhere, I am pleased to report that the Group’s inaugural
SAYE scheme, launched in 2017, reached maturity in 2020,
resulting in gains for participants and increased share-ownership
by our colleagues.

Finally, I would like to thank my fellow Committee members,
all of whom have served throughout the year, for their valuable
contribution and support during such a challenging period.

Martyn Coffey
Chair of the Remuneration Committee
11 March 2021

Sucheta Govil

Role and responsibilities:
The Committee’s principal responsibilities are to:
•

recommend to the Board the remuneration strategy and
framework for the Chair, Executive Directors and senior managers;

• determine, within that framework, the individual remuneration

arrangements for the Executive Directors and senior managers;
and

• oversee any major changes in employee benefit structures

throughout the Group.

Summary of activities during the year

The Committee met three times during 2020. The main
Committee activities during the year (full details of which
are set out in the relevant sections of this report)
included:
• agreeing the performance against the targets and pay-out

for the 2019 annual bonus awards;

• agreeing Executive Director and senior management base

salaries from 1 April 2020;

• setting the performance targets for the 2020 annual

bonus;

• agreeing the award levels and appropriate targets for the

2020 Performance Share Plan (‘PSP’) awards;

• agreeing the launch of the Group’s 2020 Save as You

Earn scheme;

• reviewing the Committee Terms of Reference;
• agreeing, in response to the COVID-19 pandemic, to the
cancellation of all pay awards that were due to come into
effect in April 2020; and

• agreeing to a voluntary temporary 20% reduction in

remuneration by the Board and other members of the
senior management team.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Impact of COVID-19
H1 was dominated by the impact of the first lockdown, with the
business temporarily closed from late March until mid-May.
However, we prepared well for re-opening, and benefited from
a strong repair, maintenance and improvement (RMI) market,
to deliver excellent sales and profit growth and good cash
conversion in the second half. Also, good progress was made
throughout the year with the project to fit-out our new warehouse,
which remains on track.

Actions taken at the outset of the pandemic secured our financial
position. These included self-help measures, such as the deferral
of non-essential capital and other discretionary expenditure and
cancellation of the final dividend payment for 2019. On
remuneration, actions also included the decision to cancel all pay
awards which were due to come into effect in April 2020, as well
as a voluntary agreement by the Board and other members of the
senior management team to a temporary 20% reduction in pay.

We are also grateful for the financial support we received in
response to the pandemic from shareholders and the
Government. In April we raised £17.1m (net) by way of a share
placing, in order to retain good headroom on our bank facility,
even under an extended shut-down, and to continue investment in
the new warehouse. In addition, we have used various
Government support measures, including the Coronavirus Job
Retention Scheme, through which we recorded income of
c.£6.5 million.

Outcome for 2020
Despite the strong H2 recovery, sales for the full year were 8%
below 2019 and adjusted profit before tax was £8.5 million,
compared to a profit in 2019 of £22.7 million. Following the
success of the measures we took to conserve cash in H1, cash
conversion was strong in the second half. Adjusted operating
cash flow was £32.9 million, compared to £18.7 million in 2019.

Implementation of the Remuneration Policy
for 2021
The Remuneration Committee intends to operate the
Remuneration Policy for 2021 as follows:

Base salaries
Salary levels are positioned to reflect experience and
responsibility. Following cancellation of the salary increases that
were due to come into effect in April 2020, Mark Kelly’s and
Michael Scott’s current base salaries are £393,271 and £251,257
respectively. With effect from 1 April 2021, these salaries will be
increased by 2.5% to £403,103 and £257,538 respectively.

Pensions/benefits
A defined contribution/salary supplement of 15% of salary
will continue to be offered, together with a standard suite of
other benefits.

Annual bonus
The maximum annual bonus remains at 100% of salary. For 2021,
70% of the bonus will be based on adjusted profit before tax and
30% will be based on cash flow targets. The targets will be
subject to a health and safety underpin. Any bonus in excess of
75% of salary will be deferred into shares for 3 years.

Long-term incentives
PSP awards are expected to be made in April 2021. Award levels
will be set at 150% of salary for Mark Kelly and Michael Scott.
Performance targets will be based on earnings per share (two-
thirds of the award) and return on capital employed improvement
(one-third) in the third year of the performance period.

The Committee believes that the above approach takes due
account of market and best practice and, importantly, also reflects
and supports Eurocell’s strategy and promotes the Company’s
long-term success.

Against stretching targets set before the onset of the pandemic,
the outturn for both adjusted profit before tax and adjusted
operating cash flow is below the threshold level of performance
required under the Annual Bonus Plan and therefore no bonus is
being awarded to the Executive Directors in respect of 2020.
Further details of performance against the relevant targets can be
found on page 95 of this report.

Format of this Report and matters to be approved at our AGM
Notwithstanding the fact that:
(i) we will not be seeking shareholder approval for any changes to

our Remuneration Policy at the 2021 AGM; and

(ii) the relevant Regulations do not require us to reproduce our

Remuneration Policy in this report;

As a result of the pandemic, the grant of awards to Executive
Directors under the PSP was delayed from the normal grant
window until later in the 2020, so that the Committee could
consider the appropriate level of grant and the most suitable
performance conditions. PSP awards were therefore made in
November 2020, with targets based on earnings per share and
return on capital employed. Details can be found on page 96.

we have included, for ease of reference, a summary of our
Policy (see Part A below) in addition to the Annual Report on
Remuneration section of the report (see Part B below),
in respect of which we will be holding an advisory vote at the
forthcoming AGM.

The full Directors’ Remuneration Policy was disclosed in the 2018
Annual Report and is available on the Company’s website.

PSP awards originally granted in 2018 are expected to lapse in
2021 as a result of earnings per share and cash flow performance
in the three years to 31 December 2020 being below threshold.

No changes have been made to the policy since its disclosure
in 2018 and therefore no further shareholder approval has
been required.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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Explanatory foreword
This report contains the material required to be set out as the Directors’ Remuneration Report for the purposes of Part 4 of The Large
and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and is split into two parts,
as follows:
• Part A: The Directors’ Remuneration Policy – which sets out a summary of the Remuneration Policy for which shareholder approval

was obtained at the 2019 AGM and which will continue to apply without amendment for the forthcoming year.

• Part B: The Annual Report on Remuneration – which sets out payments and awards made to the Directors and details the link

between Company performance and remuneration for 2020 and how the policy will be operated for 2021.

The auditors have reported on certain parts of the Annual Report on Remuneration and stated whether, in their opinion, those parts
have been properly prepared in accordance with the Companies Act 2006. Those parts which have been subject to audit are
clearly indicated.

PART A: DIRECTORS’ REMUNERATION POLICY

The following table summarises the key aspects of the Directors’ Remuneration Policy:

Executive Directors

Element and purpose

Policy and operation

Maximum

Performance measures

Base salary
This is the core element of pay
and reflects the individual’s role
and position within the Group
with some adjustment to reflect
their capability and contribution.

Benefits
To provide benefits valued by
recipients.

Base salaries will be reviewed
each year by the Committee.

The Committee does not strictly
follow data, but uses the
median position (as against
appropriate size and/or sector
peers) as a reference point in
considering, in its judgement,
the appropriate level of salary
having regard to other relevant
factors including corporate and
individual performance and any
changes in an individual’s role
and responsibilities.

Base salary is normally paid
monthly in cash.

The Executive Directors can
receive a car allowance or
Company car, private family
medical cover, permanent
health insurance and life
assurance.

The Committee reserves
discretion to introduce new
benefits where it concludes that
it is appropriate to do so, having
regard to the particular
circumstances and to market
practice.

Where appropriate, the
Company will meet certain
costs relating to Executive
Director relocations.

n/a

It is anticipated that salary
increases will generally be in
line with those awarded to
salaried employees. However, in
certain circumstances
(including, but not limited to,
changes in role and
responsibilities, market levels,
individual and Company
performance), the Committee
may make larger salary
increases to ensure they are
market competitive. The
rationale for any such increase
will be disclosed in the relevant
Annual Report on
Remuneration.

n/a

It is not possible to prescribe
the likely change in the cost of
insured benefits or the cost of
some of the other reported
benefits year-to-year, but the
provision of benefits will operate
within an annual limit of
£100,000 (plus a further 100%
of base salary in the case of
relocations).

The Committee will monitor the
costs of benefits in practice and
will ensure that the overall costs
do not increase by more than
the Committee considers
appropriate in the
circumstances.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/
Directors’ Remuneration Report continued

Element and purpose

Policy and operation

Maximum

Performance measures

n/a

The performance measures
applied may be financial or
non-financial and corporate,
divisional or individual and in
such proportions as the
Committee considers
appropriate.

Attaining the threshold level of
performance for any measure
will not produce a pay-out of
more than 20% of the maximum
portion of overall annual bonus
attributable to that measure.

However, the Annual Bonus
Plan remains a discretionary
arrangement and the
Committee retains a standard
power to apply its judgement to
adjust the outcome of the
Annual Bonus Plan for any
performance measure (from
zero to any cap) should it
consider that to be appropriate.

Pension
To provide retirement benefits.

Executive Directors can receive
pension contributions to
personal pension arrangements
or, if a Director is impacted by
annual or lifetime limits on
contribution levels to qualifying
pension plans, the balance can
be paid as a cash supplement.

Annual Bonus Plan
To motivate executives and
incentivise delivery of
performance over a one-year
operating cycle, focusing on the
short-to- medium-term
elements of our strategic aims.

Annual Bonus Plan levels and
the appropriateness of
measures are reviewed annually
at the commencement of each
financial year to ensure they
continue to support our
strategy.

The maximum employer’s
contribution is limited to up to
15% of base salary, although
future Executive Director
appointments will be offered a
lower pension, to the extent this
is possible, so as to align senior
executive pension provision
closer to workforce norms over
time.

The maximum level of Annual
Bonus Plan outcomes is 100%
of base salary per annum for
the duration of this policy.

Once set, performance
measures and targets will
generally remain unchanged for
the year, except to reflect events
such as corporate acquisitions
or other significant events
where the Committee considers
it to be necessary in its opinion
to make appropriate
adjustments.

Any annual bonus award above
75% of salary will be
compulsorily deferred into
Eurocell shares, under the
Company’s Deferred Share Plan
(‘DSP’), for 3 years from grant.

The number of shares subject
to vested DSP awards may be
increased to reflect the value of
dividends that would have been
paid in respect of any ex-
dividend dates falling between
the grant of awards and the
expiry of the vesting period.

Malus and clawback provisions
apply to the Annual Bonus Plan
and DSP.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

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Element and purpose

Policy and operation

Maximum

Performance measures

Long-term incentives
To motivate and incentivise
delivery of sustained
performance over the long term,
and to promote alignment with
shareholders’ interests, the
Company operates PSP.

Share ownership
guidelines
To further align the interests of
Executive Directors with those
of shareholders.

All-employee share plans
To encourage share ownership
by employees, thereby allowing
them to share in the long-term
success of the Group and align
their interests with those of the
shareholders.

Awards under the PSP take the
form of nil-cost options which
vest to the extent performance
conditions are satisfied over a
period of at least 3 years.

The number of shares subject
to vested PSP awards may be
increased to reflect the value of
dividends that would have been
paid in respect of any ex-
dividend dates falling between
the grant of awards and the
expiry of the vesting period (or
at the end of any holding period
in respect of unexercised
awards).

A two-year post-vesting holding
period applies to PSP awards
granted to Executive Directors
after the 2019 AGM.

Malus and clawback provisions
apply to PSP awards.

Executive Directors are required
to retain 50% of the net of tax
shares which vest under the
PSP and DSP awards until the
guideline is met.

The PSP allows for awards over
shares with a maximum value of
150% of base salary per
financial year.

The Committee expressly
reserves discretion to make
such awards as it considers
appropriate within these limits.

The Committee may set such
performance conditions on PSP
awards as it considers
appropriate (whether financial or
non-financial and whether
corporate, divisional or
individual).

Performance periods may be
over such periods as the
Committee selects at grant,
which will not normally be less
than (but may be longer than) 3
years.

No more than 25% of awards
vest for attaining the threshold
level of performance conditions.

No maximum limit (Guideline
minimum target of 200% of
base salary for all Executive
Directors).

n/a

These are all-employee share
plans established under HMRC
tax-advantaged regimes and
follow the usual form for such
plans.

The maximum participation
levels for all-employee share
plans will be the limits for such
plans set by HMRC from time to
time.

Consistent with normal practice,
such awards will not be subject
to performance conditions.

Executive Directors will be able
to participate in all-employee
share plans on the same terms
as other Group employees.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Chair and Non-executive Directors

Element and Purpose

Policy and Operation

Maximum

Performance Measures

Chair/Non-executive
Director fees
To enable the Company to
recruit and retain Chairs and
Non-executive Directors of the
highest calibre, at the
appropriate cost.

The fees paid to the Chair and
Non-executive Directors aim to
be competitive with other fully
listed companies of equivalent
size and complexity.

The fees payable to the
Non-executive Directors are
determined by the Board, with
the Chair’s fees determined by
the Remuneration Committee.
Fees are paid monthly in cash.

The Chair and Non-executive
Directors will not participate in
any cash or share incentive
arrangements.

The Company reserves the right
to provide benefits (including
travel and office support) to the
Chair and Non-executive
Directors where appropriate.

n/a

The aggregate fees (and any
benefits) of the Chair and
Non-executive Directors will not
exceed the limit from time to
time prescribed within the
Company’s Articles of
Association.

If the Chair and/or Non-
executive Directors devote
special attention to the business
of the Company, or otherwise
perform services which in the
opinion of the Directors are
outside the scope of the
ordinary duties of a Director,
they may be paid such
additional remuneration as the
Directors or any Committee
authorised by the Directors may
determine.

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Other elements of our policy include:

Recruitment remuneration policy
The Company’s recruitment remuneration policy aims to give the Committee sufficient flexibility to secure the appointment and
promotion of high-calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.

In terms of the principles for setting a package for a new
Executive Director, the starting point for the Committee will be to
apply the general Policy for Executive Directors as set out above
and structure a package in accordance with that policy. Any caps
contained within the policy for fixed pay do not apply to new
recruits, although the Committee would not envisage exceeding
these caps in practice.

The Annual Bonus Plan, DSP and PSP will operate (including the
maximum award levels) as detailed in the general Policy in relation
to any newly appointed Executive Director. For an internal
appointment, any variable pay element awarded in respect of the
prior role may either continue on its original terms or be adjusted
to reflect the new appointment as appropriate.

For external and internal appointments, the Committee may agree
that the Company will meet certain relocation expenses as it
considers appropriate.

For external candidates, it may be necessary to make additional
awards in connection with the recruitment to buy-out awards
forfeited by the individual on leaving a previous employer.

For the avoidance of doubt, buy-out awards are not subject to a
formal cap. Any recruitment-related awards which are not
buy-outs will be subject to the limits for Annual Bonus Plan and
PSP as stated in the general policy. Details of any recruitment-
related awards will be appropriately disclosed.

For any buy-outs the Company will not pay more than is, in the
view of the Committee, necessary and will in all cases seek, in the
first instance, to deliver any such awards under the terms of the
existing Annual Bonus Plan, DSP or PSP. It may, however, be
necessary in some cases to make buy-out awards on terms that
are more bespoke than the existing Annual Bonus Plan, DSP
or PSP.

All buy-outs, whether under the Annual Bonus Plan, DSP, PSP or
otherwise, will take due account of the service obligations and
performance requirements for any remuneration relinquished by
the individual when leaving a previous employer. The Committee
will seek (where it is practicable to do so) to make buy-outs
subject to what are, in its opinion, comparable requirements in
respect of service and performance. However, the Committee
may choose to relax this requirement in certain cases (such as
where the service and/or performance requirements are materially
completed, or where such factors are, in the view of the
Committee, reflected in some other way, such as a significant
discount to the face value of the awards forfeited) and where the
Committee considers it to be in the interests of shareholders.

A new Chair/Non-executive Director would be recruited on the terms explained above in respect of the main policy for such Directors.

Service contracts
Executive Directors
The Committee’s policy is that each Executive Director’s service agreement should be of indefinite duration, subject to termination
upon no more than twelve months’ notice by either party. The service agreements of both Executive Directors comply with that policy.
Contracts contain provisions allowing the Company to make payments in lieu of notice (albeit not including bonus or benefits) but do
not contain change of control provisions.

The Committee reserves flexibility to alter these principles, if necessary, to secure the recruitment of an appropriate candidate and, if
appropriate, introduce a longer initial notice period (of up to two years) reducing over time.

The date of each Executive Director’s contract is:

Mark Kelly
Michael Scott

29 March 2016
1 September 2016

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Chair/Non-executive Directors
The Chair and each Non-executive Director is engaged for an initial period of three years. These appointments can be renewed
following the initial three-year term. These engagements can be terminated by either party on twelve months’ notice.

Neither the Chair nor any Non-executive Directors can participate in the Company’s incentive plans, are not entitled to any pension
benefits and are not entitled to any payment in compensation for early termination of their appointment beyond the twelve months’
notice referred to above.

Name

Bob Lawson
Frank Nelson
Martyn Coffey
Sucheta Govil

Date of original appointment

Date of latest appointment

4 February 2015
4 February 2015
4 February 2015
1 October 2018

2 February 2021
2 February 2021
2 February 2021
1 October 2018

Term

3 years
3 years
3 years
3 years

The Directors’ service agreements and letters of appointment are available for shareholders to view from the Group Company
Secretary on request.

Termination/change of control policy summary
It is appropriate for the Committee to consider treatments on a termination having regard to all of the relevant facts and circumstances
available at that time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that the
Committee may choose to apply under the discretions available to it under the terms of the Annual Bonus Plan, DSP and PSP. The
potential treatments on termination under these plans are summarised in the table below:

If a leaver is deemed to be a ‘good leaver’; for example, leaving
through injury, ill-health, disability, retirement, redundancy, sale of
business or otherwise at the discretion of the Committee

Committee has discretion to determine an annual
bonus which may be limited to the period actually
worked.

Awards normally vest either on cessation or the
normal vesting date. The Committee can pro-rate
awards if considered appropriate.

Incentives

Annual bonus

DSP

PSP

If a leaver is not a ‘good leaver’

Change in control

Annual bonus generally paid. Committee has discretion to

determine annual bonus.

All awards will normally
lapse.

Awards vest on a pro rata
basis, unless the Committee
determines not to pro-rate.

Will receive a pro-rated
award subject to the
application of the
performance conditions at
the date of the event, unless
the Committee determines
not to pro-rate.

Will receive a pro-rated award subject to the
application of the performance conditions at the end
of the normal performance period.

All awards will normally
lapse.

Committee retains standard discretions to either
vary/disapply time pro-rating or to accelerate vesting
to the earlier date of cessation (determining the
performance conditions at that time).

On death, the Annual Bonus Plan, DSP and PSP awards typically vest in full (with pro-rating also potentially applying).

The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal
claims. In addition, and consistent with market practice, in the event of the termination of an Executive Director, the Company may
make a contribution towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any
such fees will be disclosed as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not include an
explicit cap on the cost of termination payments.

Other policy matters
The 2018 Annual Report also set out formal details of our approach to:
• travel and hospitality;
• differences between the policy on remuneration for Directors from the policy on remuneration for other employees;
• Committee discretions;
• external appointments;
• considerations of employment conditions elsewhere in the Group;
• the operation of malus and clawback in relation to the PSP and annual bonus; and
• how the views of shareholders are taken into account.

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Illustrations of application of remuneration policy

0
0
0
£

1800

1600

1400

1200

1000

800

600

400

200

CEO

£1,787k

17%

£1,485k

41%

34%

27%

23%

£779k

13%

26%

£477k

100%

61%

32%

27%

£313k

CFO

Share price growth
PSP
Annual bonus
Fixed pay

£1,150k

17%

£956k

40%

34%

£506k
13%

25%

27%

22%

100%

62%

33%

27%

Minimum

Target

Maximum

Maximum
with share
price growth

Minimum

Target

Maximum

Maximum
with share
price growth

The charts above aim to show how the remuneration policy for Executive Directors will be applied in 2021 using the assumptions in the
table below.

Minimum

Target

Maximum

Maximum with Share
Price Growth

• Consists of base salary, benefits and pension.
• Base salary is the salary to be paid with effect from 1 April 2021.
• Estimated value of a full year’s benefits, including car (and fuel) or car allowance, private family medical cover,

permanent health insurance and travel insurance.

• Pension measured as the cash allowance in lieu of Company contributions at 15% of salary.

Mark Kelly
Michael Scott

Base salary

Benefits

Pension

Total fixed

£403,103
£257,538

£13,560
£16,453

£60,465
£38,631

£477,128
£312,622

• Annual bonus: consists of an assumed payment of 50% of maximum opportunity.
• Long-term incentives: consists of the threshold level of vesting (25% vesting) under the PSP.

Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• Annual bonus: consists of maximum bonus of 100% of base salary.
• Long-term incentives: consists of the maximum level of vesting under the PSP.

As per the maximum but with a 50% share price growth assumption for the PSP awards.

PART B: THE ANNUAL REPORT ON REMUNERATION

The Committee (unaudited information)

The members of the Remuneration Committee are: Martyn Coffey (Chair), Bob Lawson, Frank Nelson and Sucheta Govil.

The Committee’s principal responsibilities are to:
• recommend to the Board the remuneration strategy and framework for the Chair, Executive Directors and senior managers;
• determine, within that framework, the individual remuneration arrangements for the Executive Directors and senior managers; and
• oversee any major changes in employee benefit structures throughout the Group.

The Chief Executive Officer is invited to attend meetings of the Committee, except when his own remuneration is being discussed, and
the Chief Financial Officer and other Executive and Non-executive Directors attend meetings as required. Bob Lawson takes no part in
any discussions relating to his own remuneration.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Directors’ Remuneration Report continued

The Committee met three times during the year, with all members of the Committee present at these meetings.

The Committee has formal terms of reference which can be viewed on the Company’s website (www.investors.eurocell.co.uk).

During the year, the Committee considered its obligations under the Code and concluded that:
• the Directors’ Remuneration Policy supports the Company’s strategy (including in the performance measures chosen); and
• remuneration for our Directors remains appropriate.

In addition, the Committee has ensured that the Directors’ Remuneration Policy and practices are consistent with
the six factors set out in Provision 40 of the Corporate Governance Code:
Clarity – Our Directors’ Remuneration Policy is well understood by our senior executive team and has been clearly articulated to our
shareholders and representative bodies (both on an ongoing basis and during a consultation when changes are being proposed).

Simplicity – The Committee is mindful of the need to avoid overly complex remuneration structures which can be
misunderstood and deliver unintended outcomes. Therefore, a key objective of the Committee is to ensure that our Directors’
Remuneration Policy and practices are straightforward to communicate and operate.

Risk – Our Directors’ Remuneration Policy has been designed to ensure that inappropriate risk-taking is discouraged and will
not be rewarded via (i) the balanced use of both annual incentives and long-term incentives which employ a blend of targets,
(ii) the significant role played by shares in our incentive plans (together with bonus deferral and shareholding guidelines) and
(iii) malus/ clawback provisions within all our incentive plans.

Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to standard dilution limits.
The use of shares within our incentive plans results in that actual pay received being highly aligned to the experience of our
shareholders.

Proportionality – There is a clear link between individual awards, delivery of strategy and our long-term performance. In addition,
the significant role played by variable pay, together with the composition of the Executive Directors’ service contracts, ensures
that poor performance is not rewarded.

Alignment to culture – Our executive pay policies are fully aligned to the Company’s culture through the use of metrics in both
the annual bonus and PSP that measure how we perform against key aspects of our strategy, which has the objective of
delivering sustainable growth in revenue, profit and cash flow.

FIT Remuneration Consultants LLP (‘FIT’), signatories to the Remuneration Consultants Group’s Code of Conduct, are appointed by the
Committee and provide advice to the Committee on all matters relating to remuneration, including best practice. FIT provided no other
services to the Group and, accordingly, the Committee was satisfied that the advice provided by FIT was objective and independent.
FIT’s fees in respect of 2020 were £9,272 (excluding VAT). FIT’s fees were charged on the basis of the firm’s standard terms of business
for advice provided.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

Audited information
Single total figure table (audited)
The remuneration for the Chair, Executive and Non-executive Directors of the Company who performed qualifying services during the
relevant financial year is detailed below. The Chair and Non-executive Directors received no remuneration other than their annual fee.

For the year ended 31 December 2020:

Director

Mark Kelly
Michael Scott
Robert Lawson
Frank Nelson
Martyn Coffey
Sucheta Govil

For the year ended 31 December 2019:

Director

Mark Kelly
Michael Scott
Robert Lawson
Frank Nelson
Martyn Coffey
Sucheta Govil
Patrick Kalverboer4

Salary/fees1
£000

Taxable
benefits2
£000

Pension
£000

Total fixed
remuneration
£000

Bonus
£000

Long-term
incentives
£000

Total variable
remuneration
£000

Total
remuneration
£000

380
243
116
46
44
39

29
16
—
—
—
—

57
36
—
—
—
—

466
295
116
46
44
39

—
—
—
—
—
—

466
295
116
46
44
39

Salary/fees
£000

Taxable
benefits2
£000

Pension
£000

Total fixed
remuneration
£000

Bonus
£000

Long-term
incentives
£000

Total variable
remuneration
£000

Total
remuneration
£000

389
248
120
48
45
40
17

33
213
—
—
—
—
—

58
37
—
—
—
—
—

480
306
120
48
45
40
17

193
124
—
—
—
—
—

—
—
—
—
—
—
—

193
124
—
—
—
—
—

673
430
120
48
45
40
17

Notes:
1 The Directors took a 20% reduction in salary/fees, for 2 months, during the first lockdown period in 2020.
2 Taxable benefits comprise Company car (and fuel) or car allowance, private family medical cover, permanent health insurance and travel insurance.
3
4 Patrick Kalverboer stepped-down from the Board on 10 May 2019.

Includes £5k relating to prior years.

The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2020 was £1,006,000
(2019: £1,373,000).

Further information on the 2020 annual bonus (audited)
In 2020, the annual bonus metrics were a blend of targets set before the onset of the COVID-19 pandemic, relating to adjusted profit
before tax (70% of the bonus opportunity) and cash flow (30% of the bonus opportunity). In addition, a health and safety adjustment
underpin applied which, if not achieved, could reduce the bonus pay-out (including to zero).

More particularly, the adjusted profit before tax and cash flow bonus targets were as follows:

£m

Adjusted Profit before Tax (post IFRS 16)
Adjusted cash flow (post IFRS 16)

Threshold

Target

Maximum

22.0
39.0

23.2
41.0

24.9
44.1

Actual

8.5
32.9

Pay-out
(% of max)

0%
0%

Performance below the threshold for both the adjusted profit before tax and the cash flow elements of the Annual Bonus Plan resulted
in no bonus being awarded to the Executive Directors in respect of 2020.

PSP awards vesting in respect of 2020
The PSP values included under long-term incentives in the single figure table above (£nil) relate to awards granted in 2018 which vest
in 2021, dependent on EPS and cash flow performance measured over the 3-year period ended 31 December 2020. As noted below,
these share awards are not expected to vest, primarily reflecting the impact of COVID-19 on the financial results for 2020.

Under the EPS performance target (two-thirds of awards) which uses a sliding scale, 25% of this part of an award vests where the
mean average annual growth of adjusted earnings per share of 4% p.a. is achieved over the three-year performance period, increasing
pro-rata to full vesting where mean average annual growth of 10% p.a. is achieved.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Performance target

Adjusted EPS (pre IFRS 16)

EPS at
31 December
2020

Average
annual EPS
growth

Threshold
4% p.a.

Maximum
10% p.a.

6.7p

(22.4)%

22.8p

26.5p

Base EPS

20.4p

Vesting
%

Under the cash-flow target (defined as aggregate of EBITDA less working capital and excluding capital expenditure over the 3-year period)
(one-third of awards), 25% of this part of an award vests for cash flow of £79.4m, increasing pro-rata to full vesting for cash flow of £97.0m.

Performance target

Cash flow

Threshold

Maximum

AActual

£79.4m

£97.0m £63.3m

Vesting
%

As a result of EPS and cash flow performance, no PSP share awards are expected to vest in 2021.

Statement of Directors’ shareholding and share interests (audited)
The table below details for each Director, the total number of Directors’ interests in shares at 31 December 2020:

Director

Mark Kelly
Michael Scott
Robert Lawson
Frank Nelson
Martyn Coffey
Sucheta Govil

Beneficially
owned
31 December
20191

Beneficially
owned
31 December
20201

Vested but
unexercised
awards

Unvested
DSP

Unvested
PSP2

109,469
14,215
87,026
43,376
10,714
—

161,717
38,488
101,311
49,090
16,428
5,714

—
60,571
— 38,697
—
—
—
—
—
—
—
—

652,378
416,796
—
—
—
—

Unvested
SAYE

10,465
10,465
—
—
—
—

Shareholding
Guideline
(% of salary)3

Shareholding
Guideline
met?3

200
200
—
—
—
—

No
No
n/a
n/a
n/a
n/a

Notes:
1 The beneficial shareholdings set out above include those held by Directors and their respective connected persons.
2 Performance-based share awards.
3 Shareholding guidelines for Executive Directors are 200% of salary. Executive Directors will be required to retain at least 50% of the net of tax shares which vest under the

PSP and DSP until the guideline is met.

PSP awards granted in 2020
The following awards were made under the PSP in 2020:

Director

Mark Kelly
Michael Scott

Basis of award

Date of grant

(% salary)

Share price1

Number of
shares

Face value
of award

Exercise period

17 November 2020
17 November 2020

150%
150%

191.0p
191.0p

308,582
197,149

589,392 November 2023 to November 2024
376,555 November 2023 to November 2024

Notes:
1 Rounded to one decimal place for the purposes of presentation in this report.

The performance conditions, applying to the awards made in November 2020 relate to: (i) adjusted Earnings per Share for two-thirds of
the award; and (ii) Group Return on Capital Employed for one-third of the award.

More specifically:

Adjusted EPS1 for the year ended 31 December 2022

Portion of award vesting

Above 20.9p
Between 19.3p and 20.9p
19.3p
Below 19.3p

100%
Pro rata on straight-line between 25% and 100%
25%
0%

Group ROCE2 for the year ended 31 December 2022

Portion of award vesting

Above 25%
Between 20% million and 25%
20%
Below 20%

100%
Pro rata on straight-line between 25% and 100%
25%
0%

1 Defined as adjusted earnings per share as shown in the consolidated audited accounts of the Company excluding non-underlying items for the third financial year of the

performance period.

2 Defined as Group adjusted operating profit divided by average totals of opening and closing assets less trade and other payables for the third financial year of the

performance period.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

DSP awards granted in 2020
The following awards were made under the DSP in 2020 in respect to the 2019 annual bonus. Whilst not required under our Director’s
Remuneration Policy (which only requires annual bonus awards above 75% of salary to be deferred), 25% of the annual bonus paid to
Mark Kelly and Michael Scott was deferred into shares to the one-year anniversary of the normal bonus payment date under the DSP.

Director

Mark Kelly
Michael Scott

2019

Bonus Award
(£)

Date of grant

9 September 2020 £193,415
9 September 2020 £123,570

Basis of
deferred
award
(% bonus)

25%
25%

Share price1

180.0p
180.0p

Number of
shares

Face value
of award

Exercise period

26,863
17,162

£48,353
£30,892

April 2021 to April 2022
April 2021 to April 2022

1 Rounded to one decimal place for the purposes of presentation in this report.

Outstanding share plan awards
Details of all outstanding share awards made to Executive Directors are set out below:

Executive

Award type

Exercise
price
(p)

Grant date

Interest at
1 January
2020

Awards
granted
in the year

Awards
lapsed
in the year

Awards
exercised
in the year

Interest at
31 December
2020

Exercise period

Notes

Mark Kelly

Michael Scott

PSP
PSP
PSP
PSP
DSP
DSP
DSP
SAYE
SAYE

0 04/04/17
18/04/18
0
24/04/19
0
0
17/11/20
0 04/04/17
0
18/04/18
0 09/09/20
163.2
07/04/17
172.0 09/04/20

148,148
173,549
170,247

— (148,148)
—
—
—
—
—
— 308,582
— (45,502)
—
—
—
—
— 26,863
— (11,029)
—
—
—
10,465

— Apr 20 – Apr 21
—
Apr 21 – Apr 22
— 173,549
— 170,247
Apr 22 – Apr 23
— 308,582 Nov 23 – Nov 24
— Apr 20 – Apr 21
Apr 21 – Apr 22
Apr 21 – Apr 22
— Jun 20 – Nov 20
Jun 23 – Nov 23

— 33,708
— 26,863

10,465

45,502
33,708

11,029
—

94,650
110,879
108,768

— (94,650)
—
—
—
—
—
— 197,149
— (12,724)
—
—
—
—
—
17,162
—
— (11,029)
—
—
—
10,465

— Apr 20 – Apr 21
—
Apr 21 – Apr 22
— 110,879
— 108,768
Apr 22 – Apr 23
— 197,149 Nov 23 – Nov 24
— Apr 20 – Apr 21
Apr 21 – Apr 22
Apr 21 – Apr 22
— Jun 20 – Nov 20
Jun 23 – Nov 23

21,535
17,162

10,465

12,724
21,535
—
11,029
—

1
2
3
4
5
7
8
9
11

1
2
3
4
6
7
8
10
11

All figures above exclude dividend equivalent shares, where applicable.

Notes:
1 See ‘PSP Awards Vesting in Respect of 2019’ section in the 2019 Directors’ Remuneration Report.
2 See ‘PSP Awards Vesting in Respect of 2020’ section above.
3 As disclosed in the 2019 Directors’ Remuneration Report.
4 See ‘PSP Awards Granted in 2020’ section above.
5 DSP awards in respect of the deferred element of the 2016 annual bonus award. On 25 November 2020, an option was exercised by Mark Kelly when the share price was
212.5p. In accordance with the rules of the DSP, a further 5,547 shares were added to the original share award and therefore 51,049 shares were acquired under the
option. 24,115 shares were sold immediately to cover the associated tax liabilities of the share vesting. The gain made by Mark Kelly was £108,479.

6 DSP awards in respect of the deferred element of the 2016 annual bonus award. On 25 November 2020, an option was exercised by Michael Scott when the share price
was 212.5p. In accordance with the rules of the DSP, a further 1,549 shares were added to the original share award and therefore 14,273 shares were acquired under the
option. 6,743 shares were sold immediately to cover the associated tax liabilities of the share vesting. The gain made by Michael Scott was £30,330.

7 DSP awards in respect of the deferred element of the 2017 annual bonus award
8 See ‘DSP awards granted in 2020’ section above.
9 On 9 September 2020, an option granted under the Eurocell plc Save as You Earn Scheme was exercised by a Mark Kelly when the share price was 180.0p. The gain

made by Mark Kelly was £1,853.

10 On 14 October 2020, an option granted under the Eurocell plc Save as You Earn Scheme was exercised by a Michael Scott when the share price was 182.5p. The gain

made by Michael Scott was £2,129.

11 Awards granted under the Eurocell plc Save As You Earn Scheme. Awards are based on a 3-year savings contract with an exercise price of 172.0p.

During the year ended 31 December 2020, the highest mid-market price of the Company’s shares was 275p and the lowest mid-
market price was 165p. At 31 December 2020 the share price was 208p.

The aggregate gains by all Directors during 2020 was £142,791 (2019: £nil).

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Payments to past directors (audited)
No payments to past directors were made during the year.

Payments for loss of office (audited)
No payments for loss of office were made during the year.

Performance graph and CEO remuneration table (unaudited)
The following graph shows the Total Shareholder Return (‘TSR’) performance of an investment of £100 in Eurocell plc’s shares from its
listing in March 2015 to 31 December 2020, compared with a £100 investment in the FTSE SmallCap Index over the same period. The
FTSE SmallCap Index was chosen as a comparator because it represents a broad equity market index of similar-sized companies.

Total Shareholder Return Index

200

150

100

3 Mar
2015

31 Dec
2015

31 Dec
2016

31 Dec
2017

31 Dec
2018

31 Dec
2019

31 Dec
2020

Eurocell

FTSE SmallCap

Source: Thomson Reuters

The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR Index graph:

Year

CEO

Single figure of total
remuneration

Annual Bonus pay-out
against maximum %

Long-term incentive vesting rates
against maximum opportunity %

Year-on-year change in
CEO remuneration %

Year-on-year change in
employee remuneration %

2020

2019

2018

2017

2016

Mark Kelly

Mark Kelly
Patrick Bateman

£465,945

£673,262

£459,294

£916,442

£560,558
£284,457

2015

Patrick Bateman

£637,098

49%

40%

80%
33%

87%

n/a

n/a
n/a

n/a

(31)%

47%

(50)%

33%

n/a

As the Company listed in March 2015, part of the 2015 remuneration relates to when Eurocell was a privately owned Company.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

Annual change in remuneration of each director compared to employees (unaudited)
The table below presents the year-on-year percentage change in remuneration for each director and for all Group employees:

Mark Kelly

Michael Scott

Robert Lawson

Frank Nelson

Martyn Coffey

Sucheta Govil

All employees

Salary/fee increase/decrease1
%

Annual bonus increase/decrease
%

Taxable benefits increase/decrease
%

(2)%

(3)%

(100)%

n/a

(50)%

(12)%2

(24)%3

n/a

Notes:
1 All the Directors took a 20% reduction in salary/fees during the first lockdown period in 2020.
2 Mark Kelly changed to a more tax-efficient car during 2020.
3 2019 taxable benefits for Michael Scott included c.£5,000 relating to prior years. Without this adjustment, his taxable benefits increase/decrease would be nil%.

CEO to employee pay ratio
The table below shows the CEO to employee pay ratio.

Year

2020

2019

Method

Option B

25th percentile pay ratio

Median pay ratio

75th percentile pay ratio

23 : 1

34 : 1

19 : 1

27 : 1

15 : 1

21 : 1

Notes to the CEO to employee pay ratio:
1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.
2

In-line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5 April for each
financial year.

3 The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date.
3 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
4 The Chief Executive’s salary, benefits, pension, bonus and long-term incentives from the single total figure have been used.

The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile, the
median and the 75th percentile are shown below:

Year

2020

Salary £’000

Total pay and benefits £’000

25th percentile

Median

75th percentile

25th percentile

Median

75th percentile

Based on the salary profile of the Group’s UK employees, the median pay ratio is consistent with the pay, reward and progression
policies of the Group as a whole.

Relative importance of spend on pay (unaudited)
The table below details the change in total employee pay between 2019 and 2020 as detailed in Note 8 of the Financial Statements,
compared with distributions to shareholders by way of dividend, share buybacks or any other significant distributions or payments.

Total gross employee pay
Dividends/share buybacks

The average number of employees during the year was 1,945 (2019: 1,855).

% change

(7)%
(100)%

2020
£m

60.7
nil

2019
£m

65.5
9.6

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Remuneration Report continued

Statement of voting at General Meeting
The following table shows the results of the binding Remuneration Policy vote at the 10 May 2019 AGM and the advisory Directors’
Remuneration Report vote at the 14 May 2020 AGM.

For (including discretionary)
Against
Votes withheld

(Binding Vote)

(Advisory Vote)

Approval of the Directors’ Remuneration Policy

Annual Report on Remuneration

Total number of votes

% of votes cast

Total number of votes

% of votes cast

87,361,882
518,633
1,737,500

99.41%
0.59%
—

96,515,670
0
600

100%
0%
—

Implementation of policy for 2021 (unaudited information)
Base salary
• Following cancellation of the salary increases that were due to come into effect in April 2020, Mark Kelly’s and Michael Scott’s current

base salaries are £393,271 and £251,257 respectively. With effect from 1 April 2021, these salaries will be increased by 2.5% to
£403,103 and £257,538 respectively.

Pension
• Contribution rates for Executive Directors will be 15% of salary in 2021.

Benefits
• Details of the benefits received by Executive Directors are set out in Note 2 to the Single Total Figure Table on page 95. There is no

intention to introduce additional benefits in 2021.

Annual bonus
• The annual bonus opportunity for 2021 will be structured in a similar manner to 2020. The maximum bonus will be 100% of salary and
will be payable based on performance against a blend of adjusted profit before tax (70% of the bonus opportunity) and operating cash
flow (30% of the bonus opportunity) targets.

• These targets will be set in light of internal and external forecasts and will require significant outperformance to generate higher levels
of pay-out. In addition, a health and safety adjustment underpin will apply which, if not achieved, could reduce the bonus pay-out.
Any bonus earned above 75% of salary will be deferred into shares for three years.

• Given the competitive nature of the Company’s sector, the specific performance targets for 2021 are considered to be commercially
sensitive and, accordingly, are not disclosed at this time, although the targets will be disclosed in next year’s report in relation to the
2021 bonus outturn.

Long-term incentives
• Awards will be made under the PSP in 2021 to the Executive Directors structured in a similar manner to the awards made in 2020,
in that awards will be made which will vest subject to three-year earnings per share (two-thirds of the award) and return on capital
employed (one-third) targets.

• Full details of these targets will be disclosed in next year’s report, with these targets no less challenging in relative terms than the

targets applied to the 2020 PSP awards.

Chair and Non-executive Directors’ fees
• The fees of the Chair and Non-executive Directors will remain unchanged from 2020 levels.
• Robert Lawson receives a fee of £120,000 p.a. as Chair.
• The Non-executive Directors each receive a fee of £40,000 p.a., with an additional fee of £5,000 p.a. for each of the Chair of the Audit

Committee and Chair of the Remuneration Committee and an additional fee of £3,000 p.a. for the Senior Independent Director.

100

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Directors’ Report

StRAtEGIC REPORt

CORPORATE GOVERNANCE

FINANCIAl StAtEMENtS

The Directors present their audited consolidated financial
statements for the year ended 31 December 2020. Eurocell plc
(the “Company”) is a company incorporated and domiciled in
the UK, with registration number 08654028, and is the holding
company of the Eurocell Group of companies (the “Group”).
All of the Group’s activities are within the United Kingdom, with
the exception of two overseas branches in the Republic of Ireland.

The shares of the Company have been traded on the main market
of the London Stock Exchange throughout the year ended
31 December 2020.

The Directors’ Report includes the Corporate Governance
Statement set out on pages 67 to 76.

The Directors’ Report and Strategic Report comprise the
‘Management Report’ for the purpose of the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules (DTR
4.1.8R).

The Directors of the Company are listed on pages 64 and 65 and
were in place on the date this Directors’ Report was approved,
all of whom served throughout the year, with no changes in the
intervening period.

Strategic Report
As permitted by section 414C of the Companies Act 2006, certain
information required to be included in the Directors’ Report has
been included in the Strategic Report, which is set out on pages
1 to 63. Specifically, this relates to information on the Group’s
strategy, business model, likely future developments and risk
management.

UK Corporate Governance Code
Matters related to corporate governance and our compliance with
the Code are set out in the Corporate Governance Statement on
pages 67 to 76, which is incorporated herein by reference.

Results
Our Financial Statements for year ended 31 December 2020 are
set out on pages 116 to 157. The Financial Statements should be
read in conjunction with the Chief Executive Officer’s Report,
Divisional Reviews and the Chief Financial Officer’s Report.

Dividends
Due to the impact of COVID-19, the final dividend for the year
ended 31 December 2019, declared in March 2020, was
subsequently cancelled.

Tax governance
Our tax policy is set out below. It is determined by the Board and
overseen by the Audit and Risk Committee. The Board reviews
the policy, and our compliance with it, on an annual basis.
Operational responsibility for the execution of the Group’s tax
policy rests with the Chief Financial Officer, who reports the
Group’s tax position to the Audit and Risk Committee on a regular
basis.

Tax Policy
We are committed to compliance with tax law and practice in the
UK. Compliance for us means paying the amount of tax we are
legally obliged to pay and doing so in the right place, at the right
time. It involves disclosing all relevant facts and circumstances to
the UK tax authorities in ways that reflect the economic reality of
the transactions we undertake, and claiming appropriate reliefs
and incentives where available.

Risk management of tax affairs
The level of risk that we accept in relation to UK tax is consistent
with our overall objective of achieving certainty in the Group’s tax
affairs. At all times, we seek to comply fully with our regulatory
and other obligations, and to act in a way that upholds our core
values and reputation as a responsible corporate citizen. We see
compliance with tax legislation as key to managing tax risk, and
understand the importance of tax in the wider context of business
decisions.

Processes have been put in place to ensure tax is considered
as part of our overall decision-making processes, with tax risks
managed by local finance teams and escalated through to
appropriate levels of management and, ultimately, to the Board
when necessary.

Tax planning
In structuring our commercial activities, we will always consider –
among other factors – the relevant tax laws. We believe that it is
fair to mitigate tax using generally available reliefs in the spirit in
which they are intended. However, any tax planning that we
undertake will have commercial and economic substance and we
will not use aggressive tax planning or enter into complicated tax
avoidance schemes.

Although for commercial reasons we may trade with customers
and suppliers genuinely located in countries considered to be
tax havens, we will not use such jurisdictions for the purpose of
avoiding tax, nor will we seek to take advantage of the secrecy
afforded to transactions recorded in these jurisdictions.

Total dividends in respect of 2019 were therefore the interim
dividend of 3.2 pence per share, paid in October 2019.
No dividends were paid in the year to 31 December 2020
(2019: £9.4 million), as disclosed in the Consolidated Cash
Flow Statement.

Engaging with HMRC
We aim to have a good working relationship with HMRC. We will
engage with honesty and integrity, and in a spirit of cooperative
compliance. We will make all returns and pay tax on a timely
basis, across all types of tax.

Also as a result of the COVID-19 impact, no dividends will be
declared or paid in respect of 2020. It remains the Company’s
intention to return to paying dividends in 2021.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

101

/Substantial shareholders
As at 31 December 2020, the Company’s major shareholders
were as follows:

Shareholder

No. of Shares

% of voting rights

Soros Fund Management

Aberforth Partners

Alantra Asset Management

18,894,866

15,088,326

14,419,476

JO Hambro Capital Management

10,513,838

AXA Framlington Investment
Managers

9,370,821

Schroder Investment Management

6,865,368

Chelverton Asset Management

5,744,411

Columbia Threadneedle
Investments

Janus Henderson Investors

4,380,121

3,807,347

17.0

13.5

12.9

9.4

8.4

6.2

5.2

3.9

3.4

The Takeover Directive
The rights and obligations attached to the issued share capital are
set out in the Articles of Association (see below).

There are no agreements in place between the Company, its
employees or Directors for compensation for loss of office or
employment that trigger as a result of a takeover bid.

Articles of Association
The Company’s Articles of Association can only be amended by
special resolution of the shareholders. Our current articles are
available on our website at www.investors.eurocell.co.uk.

The Company’s Articles of Association give powers to the Board
to appoint Directors. All Board members are required to retire and
submit themselves for re-election by Shareholders at each Annual
General Meeting.

The Board of Directors may exercise all the powers of the
Company, subject to the provisions of relevant legislation, the
Company’s Articles of Association and any directions given by the
Company in general meetings. The powers of the Directors
include those in relation to the issue and buyback of shares.

Directors’ Report continued

Share Capital
Details of our issued share capital, including movements during
the year, are shown in Note 25 to the Financial Statements. We
have one class of ordinary shares, which carries no fixed income.
Each share carries the right to one vote at our general meetings.
The ordinary shares are listed on the Official List and traded on
the London Stock Exchange.

As at 31 December 2020, we had 111,486,709 (2019:
100,335,353) ordinary shares of 0.1 pence each in nominal value
in issue (the ‘issued share capital’). Details of the shares issued in
the year are shown in Note 25 to the Consolidated financial
statements.

Holders of ordinary shares are entitled to receive dividends when
declared, to receive the Company’s Annual Report, to attend and
speak at general meetings of the Company, to appoint proxies
and to exercise voting rights.

Whilst the Board has the power under the Articles of Association
to refuse to register a transfer of shares, there are no such
restrictions on the transfer of shares in place.

Under the Company’s Articles of Association, the Directors have
the power to suspend voting rights and the right to receive
dividends in respect of shares in circumstances where the holder
of those shares fails to comply with a notice issued under section
793 of the Companies Act 2006. The Company is not aware of
any agreements between shareholders that may result in
restrictions on the transfer of securities or voting rights.

Share schemes
The Company operates a number of Share schemes.

Long-Term Incentive Plans payable to executives and senior
managers are operated under our Performance Share Plan
(‘PSP’). Executive Directors and some members of senior
management may have a proportion of their annual bonus
deferred for up to three years under our Deferred Share Plan
(‘DSP’). The Company also operates Save As You Earn (or
“Sharesave”) schemes, which are available to all employees.

All shares issued under these plans carry the same rights as those
already in issue.

Related party transactions
Other than in respect of arrangements set out in Note 30 to
the Financial Statements and in relation to the employment of
Directors, details of which are provided in the Remuneration
Committee Report on pages 85 to 100, there is no material
indebtedness owed to or by us to any employee or any other
person or entity considered to be a related party.

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Directors’ retirement by rotation
In accordance with above and in line with the Code, all Directors
in office will retire and offer themselves for re-election at the
2021 AGM.

and communication of policies and the delivery of training where
appropriate, or are approached by way of a revision to key
contractual terms. The Board receives regular reports on material
litigation and the legal action taken to support our strategy.

The Articles of Association provide that a Director may be
appointed by an ordinary resolution of shareholders or by existing
Directors, either to fill a vacancy or as an additional Director.

The Executive Directors serve under contracts that are terminable
with twelve months’ notice from the Company and twelve months’
notice from the Executive Director. The Non-executive Directors
serve under letters of appointment and do not have service
contracts with the Company

Health and Safety
We are committed to providing a safe place for employees to
work. Our policies are reviewed on an ongoing basis to ensure
that the approach to training, risk assessment, safe systems of
working and accident management are appropriate. As part of
this process, a rolling audit programme is in place to ensure that
health, safety, environmental and security risks are assessed
stringently and that robust control measures are in place to limit
or mitigate risk as appropriate.

Copies of the service contracts of the Executive Directors and
the letters of appointment of the Non-executive Directors are
available for inspection at the Company’s registered office during
normal business hours and will be available for inspection at the
Company’s AGM.

Other matters
Employee disclosure (including Equality, Diversity
and Disabled employees)
See Responsible Business section on pages 44 to 49.

Directors’ interests
Details of Directors’ remuneration, interests in the share capital (or
derivatives or other financial instruments relating to those shares)
of the Company and of their share-based payment awards are
contained in the Remuneration Committee Report on pages 85 to
100. No change in the interests of the Directors has been notified
between 31 December 2020 and the date of this report.

Directors’ indemnities
Pursuant to the Articles of Association, the Company has
executed a deed poll of indemnity for the benefit of the Directors
of the Company, and persons who were Directors of the
Company, in respect of costs of defending claims against them
and third-party liabilities. These provisions, deemed to be
qualifying third-party indemnity provisions pursuant to section 234
of the Companies Act 2006, were in force during the year ended
31 December 2020 and remain in force. The indemnity provision
in the Company’s Articles of Association also extends to provide
a limited indemnity in respect of liabilities incurred as a director,
secretary or officer of an associated company of the Company.

Financial risk management
Please refer to Note 3 of the Financial Statements.

Research and development
The Group undertakes research and development work in support
of it objectives. Further details of our research and development
activities can be found in the Strategic Report on pages 1 to 63.

Payments to suppliers
It is Group policy to abide by the payment terms agreed with
suppliers, provided that the supplier has performed its obligations
under the contract.

Donations
In accordance with the Group’s policy, no political donations were
made and no political expenditure was incurred during 2020
(2019: £nil).

Greenhouse gas emissions
See Responsible Business section on page 38.

A copy of the deed poll of indemnity is available for inspection at
the Company’s registered office during normal business hours
and will be available for inspection at the Company’s AGM.

Disclosures required by Listing Rule 9.8.4R
There were no waivers of dividends during the year. There are no
other disclosures to be made under the above listing rule.

Conflicts of interest
Under the Companies Act 2006, Directors must avoid situations
where they have, or could have, a direct or indirect interest that
conflicts or possibly may conflict with the Company’s interests.
As permitted by the Act, the Company’s Articles of Association
enable Directors to authorise actual or potential conflicts of interest.

By Order of the Board

Paul Walker
Group Company Secretary
11 March 2021

Legal and regulatory compliance
The executive team is responsible for identifying and carrying out
assessments of those areas of the business where material legal
and regulatory risks may be present. Where issues are identified,
mitigating actions are built into an action plan involving the drafting

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

103

/Directors’ confirmations
The directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the group’s and company’s position and performance, business
model and strategy.

Each of the directors, whose names and functions are listed in the
corporate governance section on pages 64 and 65 confirm that,
to the best of their knowledge:
• the group financial statements, which have been prepared in

accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in
the European Union , give a true and fair view of the assets,
liabilities, financial position and loss of the group;

• the company financial statements, which have been prepared in

accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities, financial position and loss of the company; and

• the Directors’ Report includes a fair review of the development
and performance of the business and the position of the group
and company, together with a description of the principal risks
and uncertainties that it faces.

In the case of each director in office at the date the directors’
report is approved:
• so far as the director is aware, there is no relevant audit

information of which the group’s and company’s auditors are
unaware; and

• they have taken all the steps that they ought to have taken as
a director in order to make themselves aware of any relevant
audit information and to establish that the group’s and
company’s auditors are aware of that information.

The Directors’ Responsibility Statement was approved by
the Board on 11 March 2021.

Mark Kelly
Chief Executive Officer

Michael Scott
Chief Financial Officer

Statement of Directors’ Responsibilities
in respect of the Financial Statements

The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.

Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the group financial statements in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and
company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).

Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the
profit or loss of the group for that period. In preparing the financial
statements, the directors are required to:
• select suitable accounting policies and then apply them

consistently;

• state whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union have been followed for the group financial statements and
United Kingdom Accounting Standards, comprising FRS 101
have been followed for the company financial statements,
subject to any material departures disclosed and explained in
the financial statements;

• make judgements and accounting estimates that are reasonable

and prudent; and

• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and
company will continue in business.

The directors are also responsible for safeguarding the assets of
the group and company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group’s and
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the group and company
and enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006.

The directors are responsible for the maintenance and integrity
of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

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105

/Independent auditors’ report to the members of Eurocell plc

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion
In our opinion:
• Eurocell plc’s group financial statements and company financial

statements (the “financial statements”) give a true and fair view of
the state of the group’s and of the company’s affairs as at
31 December 2020 and of the group’s loss and the group’s cash
flows for the year then ended;

Independence
We remained independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements.

• the group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
• the company financial statements have been properly prepared

in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and

• the financial statements have been prepared in accordance with

the requirements of the Companies Act 2006.

We have audited the financial statements, included within the
Annual Report and Accounts 2020 (the “Annual Report”), which
comprise: the Consolidated Statement of Financial Position and
the Company Statement of Financial Position as at 31 December
2020; the Consolidated Statement of Comprehensive Income,
Consolidated Cash Flow Statement, Consolidated Statement of
Changes in Equity and the Company Statement of Changes in
Equity for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.

Our opinion is consistent with our reporting to the Audit and
Risk Committee.

Separate opinion in relation to international
financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies
in the European Union
As explained in Note 1 to the group financial statements, the
group, in addition to applying international accounting standards
in conformity with the requirements of the Companies Act 2006,
has also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.

In our opinion, the group financial statements have been properly
prepared in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.

Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.

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EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not
provided to the group.

Other than those disclosed in Note 5 to the financial statements,
we have provided no non-audit services to the group in the period
under audit.

Our audit approach
Overview

Audit scope
• A component was considered to be a company or division
where discrete financial data was prepared. Financially
significant components were determined to be those which
contributed more than 15% of the underlying profit before tax
(measured on an absolute basis).

• For components that were not financially significant audit work
was performed over specific Financial Statement Line Items
(“FSLI’s”) if they contributed more than 5% of the consolidated
FSLI and were above group performance materiality. For all other
balances/components disaggregated analytical review
procedures were performed to group materiality.

• Work on the consolidation was considered separately to the

component scoping exercise and performed to group
materiality.

• All work was performed by the group audit team.

Key audit matters
• COVID-19 (group and company).
• Assessment of the valuation of inventory (group).
• Trade receivables provisions (group).
•

Impairment of assets at a Cash Generating Unit (“CGU”) level
(group)
Impairment to intercompany investments and intercompany
receivables (company).

•

Materiality
• Overall group materiality: £891,000 (2019: £1,130,000) based on
5% of the average underlying profit before taxation for the past
three years (2019: 5% of underlying profit before taxation for
2019).

• Overall company materiality: £647,000 (2019: £730,000) based

on 1% of total assets.

• Performance materiality: £668,000 (group) and £485,000

(company).

/The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.

Capability of the audit in 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 in the Auditors’ responsibilities for the
audit of the financial statements section, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.

Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with laws
and regulations related to fraud, and we considered the extent to
which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that
have a direct impact on the preparation of the financial statements
such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls), and
determined that the principal risks were related to management
overstating the financial position and/or performance of the group
as a result of pressure to meet expectations/objectives (for example
loan covenants or analyst expectations). Audit procedures
performed by the engagement team included:
• enquiry of management and those charged with governance

around actual and potential frauds, litigations or claims against
or by the group/company;

• reviewing financial statement disclosures and testing supporting
documentation to assess compliance with applicable laws and
regulations;

• auditing the risk of management override of controls, through
testing journal entries (using our data analysis tools to confirm
completeness of data) by adopting a risk based approach for
appropriateness, testing significant accounting estimates (as
defined in the notes to the financial statements) because of the
risk of potential management bias, and evaluating the business
rationale and accounting for significant or unusual transactions
outside the normal course of business (for example claims under
the Job Retention Scheme and the non-underlying items
detailed in Note 7);

• auditing the risk of fraud in revenue recognition by using our data
analysis tools to identify unusual credits to revenue for further
investigation and through testing any material judgements within
revenue recognition (such as customer incentives) and the year
end accrued and deferred income balances; and.

• performing unpredictable audit procedures, which are

changed year on year.

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There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to
events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion.

Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on
these matters.

This is not a complete list of all risks identified by our audit.

COVID-19, Impairment to intercompany investments and
intercompany receivables (company) and Impairment of assets
at a Cash Generating Unit (“CGU”) level (group) are new key audit
matters this year. IFRS 16, which was a key audit matter last year,
is no longer included because of the risk in the prior year related
to the adoption of this new complex standard. With only one
material new lease entered into in 2020, the impact and risk
assessment for this year’s audit has been reduced. Otherwise,
the key audit matters below are consistent with last year.

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/Independent auditors’ report to the members of Eurocell plc continued

Key audit matter

How our audit addressed the key audit matter

COVID-19 (group and company)
Refer to pages 56 to 62 (Risk management and Principal
risks and uncertainties) and pages 80 to 84 (Audit and Risk
Committee report).

The impact of the first lockdown and the subsequent uncertainty
caused by the global economic environment since this period
has had an impact on the Group. This has specifically impacted
forward looking key estimates (inventory provisions, trade
receivable provisions, asset impairments and going concern).
It has also resulted in material non-underlying charges in the year
of £10million (2019: £nil) as detailed in Note 7. Due to the equity
raised and extension of the financing facilities, both agreed in
2020, and the performance of the business in the second half
of 2020 going concern was not considered a Key audit matter.
The key estimates are linked to the below Key audit matters and
therefore only the work performed in relation to non-underlying
costs are detailed in this Key audit matter.

For work performed in relation to asset impairments please refer
to the other key audit matters below. In relation to the
classification of certain costs as non-underlying our audit work
consisted of:
• We obtained from management their analysis of items to be
included as non-underlying and considered if these agreed
with the requirements of IAS 1 and the group accounting
policies;

• We discussed with the Audit and Risk Committee the basis

•

of management’s assessment of these costs;
In relation to the impairment of goodwill and the costs
associated with the dual running of the warehouse we noted
that no such costs had been incurred in the prior five years;

• We obtained an analysis of the non-underlying items and

performed audit procedures to validate accuracy of
management’s analysis; and

• We challenged management on the disclosure of these costs as
non-underlying and the disclosures made of this key judgement
within the Annual Report.

Based upon the above audit procedures we concluded that these
costs met the group accounting policy requirements to be treated
as non-underlying. The disclosures and narrative in relation to
these is appropriate and in line with the requirements of accounting
standards, notably IAS1.

Assessment of the valuation of inventory (group)
Refer to pages 56 to 62 (Risk management and Principal risks
and uncertainties), pages 80 to 84 (Audit and Risk Committee
report), Note 1 (Accounting Policies), Note 2 (Critical Accounting
Estimates and Judgements) and Note 18 (Inventories).

Our audit procedures over the initial valuation of inventory consisted of:
• We understood the nature of the costs that the Directors

absorbed into inventory and determined their appropriateness in
line with IAS 2 ‘Inventories’ (“IAS 2”);

• We tested, on a non-statistical sampling basis, the valuation and

Inventory totalled £38.1 million as at 31 December 2020 (2018:
£37.3million) after provisions of £4.2 million (2019: £1.4 million).

We focused on this area because the Directors’ assessment of
the absorption of labour and overhead costs into inventory and
the assessment of the recoverability of inventory involved complex
and subjective judgements.

Specifically, the determination of inventory provisions for slow
moving, obsolete and discontinued line items, reflecting the level
of inventory held across the branch network and manufactured
goods at the year end, requires the exercise of judgement.

calculation of costs absorbed into inventory;

• We re-performed the valuations of inventory on a non-statistical

sampling basis; and

• We challenged management over the costs included within

inventory, the setting of the standard costs and the accounting
for variances.

Our audit procedures over the impairment of inventory consisted of:
• Our attendance at the physical inventory counts, conducted by

management, highlighted no increased areas of concern,
regarding excess / unused stock held at either the branches we
visited or the manufacturing sites;

• We understood the Directors’ methodology for calculating

inventory provisions. We evaluated the Directors’ assumptions
over future forecast usage and validated historic usage and
compared this to forecasted future sales;

• Where inventory provisions were based upon expected future

demand or historical sales data, we tested the underlying report
to validate the data on which management’s calculations were
based;

• We selected an audit sample of inventory held as at

31 December 2020 and verified that sales recorded in 2021
were made above cost; and

• Where specific impairments were made, outside of the standard

impairment reviews, we challenged management of the
completeness and appropriateness of these additional amounts.

Based on the results of our audit work, we concluded that the
inventory recognised by the Directors was at an appropriate and was
consistent with the requirements of IAS 2. Appropriate disclosures
regarding the above had also been made.

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Key audit matter

How our audit addressed the key audit matter

Trade receivables provisions (group)
Refer to pages 56 to 62 (Risk management and Principal risks and
uncertainties), pages 80 to 84 (Audit and Risk Committee report),
Note 1 (Accounting Policies), Note 2 (Critical Accounting Estimates
and Judgements) and Note 19 (Trade and other receivables).

The Group had gross trade receivables of £38.6 million at
31 December 2020 (2019: £36.9million) against which provisions of
£4.4 million (2019: £1.6 million) were held in accordance with IFRS 9.

We focused on this area because the Directors’ assessment of
the provisions required in respect of trade receivables included
complex and subjective judgements. These increased in
complexity this year due to the uncertain economic environment
at 31 December 2020.

We understood the Directors’ methodology for calculating trade
receivables provisions across the Group and considered if these
complied with IFRS 9. Audit procedures performed were:
• We confirmed that the amounts included in the IFRS 9
model agreed back to the audited sales ledgers as at
31 December 2020;

• We tested the ageing of amounts due at the balance sheet

date to validate management had analysed the data correctly;

• We tested the accuracy of the calculations in the model;
• We reviewed the accuracy of past management estimates;
• We considered the results of our other audit procedures over

trade receivables (for example review of post year end
payments made by customers) for inconsistencies with the
IFRS 9 models; and

• We challenged management over the increase in the expected

credit loss percentage applied to each category.

We identified no material exceptions from the procedures noted
above. Based on the results of our audit work we concluded that the
provisions recorded were materially accurate, calculated in line with the
requirements of IFRS 9 and appropriate disclosures have been made.

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/Independent auditors’ report to the members of Eurocell plc continued

Key audit matter

How our audit addressed the key audit matter

Impairment of assets at a Cash Generating Unit (“CGU”)
level (group)
Refer to pages 56 to 62 (Risk management and Principal risks
and uncertainties), pages 80 to 84 (Audit and Risk Committee
report), Note 1 (Accounting Policies), Note 2 (Critical Accounting
Estimates and Judgements) and Note 17 (Impairment).

The group has intangible assets of £19.9million (2019:
£27.0million) and total assets of £201.4million (2019: £189.6m).

Management must perform an annual impairment assessment for
Goodwill and for other assets where impairment triggers are
noted. Management have therefore performed an impairment
assessment at a CGU level for the group’s assets.

The recoverability of these assets, and in particular intangibles not
subject to amortisation (for example Goodwill) require the use of
significant judgement and estimates by management, which are
further complicated by the impact of COVID-19.

Management have prepared an analysis, as detailed in Note 17,
regarding the recoverability of the assets within each CGU. During
the year an impairment of £5.8million has been recognised in
relation to the full impairment of the Goodwill relating to the
acquisition of Eurocell Recycle North (“Ecoplas”).

No other impairments have been noted as a result of
management’s CGU impairment review.

As the CGU’s were defined to be in line with the legal structure of the
group, with the exception of the S&S division of Eurocell Profiles
Limited, we concurred that management had appropriately defined
CGU’s (these were also in line with the prior year).

Audit procedures over the validity of management’s impairment
models and key estimates/data were:
• We tested the integrity of the models (i.e calculations were being

performed as expected);

• We confirmed that the assets being considered for impairment

were appropriately split by CGU and agreed back to the audited
consolidated statement of financial position;

• We tested the calculations for the Weighted Average Cost of

Capital (“WACC”) by reperforming management’s calculations;
• We agreed the cashflows for each CGU for 2021 to the latest
board approved budgets. For the 2022 & 2023 periods we
discussed with management the basis of any improvements in
the underlying performance of each CGU and other key
assumptions such as capital expenditure. We understood the
basis for these key assumptions and considered them against
of our experience from prior years (for example comparing
forecasted gross margins and capital expenditure to historical
levels);

• We considered the prior accuracy of management’s budgets

and the impact this might have on management’s assessment;
• We challenged management on the key assumptions within the
model being, 1) The WACC, 2) the terminal growth rate of 2%
and 3) the underlying cash flow projections for the next three
years (with the third year being utilised in the terminal value
calculations); and

• We audited the impairment assessment performed as at

30 June 2020 which resulted in the £5.8million impairment to
Goodwill relating to Ecoplas.

As noted in managements sensitivity disclosures, a significant change
to WACC or the terminal growth rate would be required prior to further
impairments being noted.

In addition to the above procedures, we performed our own analysis
to consider what level of underperformance would be required prior
to further impairments being recorded. All CGU’s apart from Ecoplas
highlighted that underperformance against budgets, outside that
experienced in recent history, would be required prior to further
impairments being noted. We also compared the total of all the CGU’s
valuation to the market capitalisation of the group.

We specifically challenged management on the latest projections for
Ecoplas, given the impairment made in the year with headroom noted
at the year end.

No exceptions were noted during our audit testing. In line with the
detailed requirements of IAS 36, the impairment made at 30 June
2020 regarding the goodwill of Ecoplas has not been reversed as at
31 December 2020. We therefore concluded that sufficient audit
evidence has been obtained regarding management’s impairment
assessment. These have been performed in line with the requirements
of IAS 36 with appropriate disclosures being made.

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Key audit matter

How our audit addressed the key audit matter

Impairment to intercompany investments and intercompany
receivables (company))
Refer to Note 34 (Accounting Policies), Note 35 (Critical
Accounting Estimates and Judgements), Note 37 (Investments)
and Note 38 (Trade and other receivables).

The company has investments in subsidiary companies of
£17.8million (2019: £17.8million) and intercompany receivables of
£46.2million (2019: £55.2m).

Material impairment to these could result in implications for future
dividends.

We obtained managements impairment assessment regarding the
investments carrying value and management’s IFRS 9 expected
credit loss model in respect of the intercompany receivables.

The recoverability of the investments carrying value was based upon
the same underlying data noted in the group impairment of non-
current assets key audit matter above.

We also noted that the market capitalisation of the group was circa
£240million as at 31 December 2020 which is significantly in excess
of the company’s total assets.

We considered the IFRS 9 model and noted that a significant change
in the key assumption (being the expected loss of 0.1%) would be
required prior to a material impairment being noted. The amounts
owed to the company were due from profitable subsidiaries, with net
assets and no history of losses being recognised.

We tested the integrity of the models and the validity of the key
data inputs.

No exceptions were noted in the performance of the above
procedures. We therefore concluded that the investments and
intercompany receivables were accounted for in line with IFRS 9 and
IAS 36, with appropriate disclosures being made.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry
in which they operate.

Eurocell operates in the market of the extrusion of UPVC (unplasticised polyvinyl chloride) window and building products to the new and
replacement window market and the sale of building plastics materials. The Group has sites throughout the UK with its headquarters in Alfreton.

The business is managed as two primary divisions:
• Eurocell Building Plastics, focusing on sales and distribution across just over 200 branches within the UK and two in Ireland to generally

smaller scale customers. This segment includes the trading subsidiary companies Eurocell Building Plastics Limited and Security
Hardware Limited; and

• Eurocell Profiles, focusing on manufacture and distribution to large-scale customers. This division includes the trading subsidiaries

Eurocell Profiles Limited, Vista Panels Limited, and Ecoplas Limited.

Other than Vista Panels Limited, which has its own finance team, all finance and operational management functions are located at the
Alfreton headquarters. Therefore, all audit work, including work on components, was completed by a single group audit team.

For the purposes of our audit of the group we considered components to be operations where there was discrete financial data
maintained by management, including a separate trial balance. For the consolidated audit of Eurocell plc this related to the individual
subsidiary companies, with Eurocell Profiles Limited being seen as two components (as S&S Plastics is now a division within Eurocell
Profiles Limited).

A component was included within our full scope audit procedures, and considered to be a financially significant component, if it
represented 15% or more of the reported underlying profit before taxation, measured on an absolute basis (as some entities act as cost
centres then all results of components were added together and then if a component represented 15% or more of this total it was included
as a financially significant component). In line with prior years, there were two financially significant components (Eurocell Profile Limited,
excluding the S&S plastics division, and Eurocell Building Plastics Limited). These alone represented 86% of the reported consolidated
revenues and 61% of the reported consolidated underlying profit before taxation on an absolute basis.

We then considered the remaining components to ascertain if further procedures would be required. Where these had an Individual
Financial Statement Line Item (“FSLI”) that represented more than 5% of the Consolidated FSLI and was individually above group
planning materiality we included that specific FSLI within our scope of testing and performed audit procedures over this FSLI to group
materiality. Due to the relative size of the acquisitions between 2015 and 2019 a number of additional FSLI’s were included as a result of
the above assessment, which increased the coverage over reported revenues to 93%. For all other balances not considered for
detailed testing, analytical review procedures were performed, to group materiality.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

111

/Independent auditors’ report to the members of Eurocell plc continued

There were no specific components or areas included within our group audit scope due to specific risk factors.

Work was performed over the consolidation adjustments separately to the above scoping of components, due to the relative simplicity
of the group and the nature of the consolidation (performed by the head office finance function with mainly UK operations). This was
performed using group materiality.

For the Eurocell plc company audit the only material transactions and balances related to the intercompany investments (including
amounts owed by subsidiary companies) and the debt held by the Company. These were all included in the scope of our audit and
tested using the company materiality by the group audit team.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality

£891,000 (2019: £1,130,000).

Financial statements – group

How we determined it

Rationale for
benchmark applied

5% of the average underlying profit before taxation for the
past three years (2019: 5% of underlying profit before
taxation for 2019).

We believe that underlying profit before tax is the key
measure used by the shareholders in assessing the
performance of the group. This benchmark, which
excludes the non-underlying items described in Note 7 to
the financial statements, provides a consistent year on
year basis for determining materiality by eliminating the
non-recurring impact of these items.

Due to the significant impact of the closure of business in
the late March to early May 2020 first lockdown period,
for this year we have applied an average, based upon the
last three years of underlying financial results.

Financial statements – company

£647,000 (2019: £730,000).

1% of total assets

We believe that total assets is the primary
measure used by the shareholders in
assessing the financial position of the
entity, and is a generally accepted
auditing benchmark

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range
of materiality allocated across components was between £630,000 and £815,000.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall materiality, amounting to £668,000 for the group financial statements
and £485,000 for the company financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £44,500
(group audit) (2019: £60,000) and £30,000 (company audit) (2019: £35,000) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.

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FINANCIAL STATEMENTS

Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and
the company’s ability to continue to adopt the going concern
basis of accounting included:
• Discussions with management and those charged with

governance regarding the future plans and cash flow projections
for the group. This included discussions around
the forecast cash requirements and sufficiency of available
facilities to deal with a severe but plausible downside to
these projections;

• We obtained managements analysis and cash flow model.

We checked this for consistency (i.e the integrity of the model)
and that the base projections agreed to the approved budgets
and were consistent with our work in other areas, for example
the projections were consistent with those used for the
impairment reviews;

• We considered the accuracy of managements forecasting in

prior years by comparing actual to forecasted cash flows in the
past three years (i.e the period for which the senior management
team has remained materially unchanged);

• We discussed with management the basis of the “base case”
and what factors had been considered in their downside
“sensitised case”. We recalculated management’s assessment
of the impact of these scenarios on the forecasted compliance
with financial covenants and sufficiency of facilities/available
cash;

• We considered the reported headroom on facilities at each

month end for the review period (i.e until 31 December 2023);
• We challenged management around which scenarios would be

required prior to the covenant facilities being breached or
available facilities being breached and considered if these were
plausible or possible. This included performing our own
sensitivities to ascertain the levels of underperformance required
to a breach;

• We reviewed the debt facilities to ascertain if management
had correctly factored in financial covenants to their model,
including that covenants were appropriately calculated at each
measurement point;

• We audited management’s compliance with the covenants

during 2020; and

• We critically assessed the disclosures in relation to going
concern compared to the evidence obtained above, our
understanding of the group and the various requirements
detailed within Company Law, the Listing Rules and
accounting standards.

Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group’s and the company’s ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.

In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.

However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.

In relation to the company’s reporting on how they have applied
the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement
in the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.

Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report
based on these responsibilities.

With respect to the Strategic report and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.

Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

113

/Independent auditors’ report to the members of Eurocell plc continued

Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 31 December 2020 is consistent with
the financial statements and has been prepared in accordance
with applicable legal requirements.

In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Directors’ Report.

Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.

Corporate governance statement
The Listing Rules require us to review the directors’ statements
in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.

Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust

assessment of the emerging and principal risks;

• The disclosures in the Annual Report and Accounts 2020 that
describe those principal risks, what procedures are in place
to identify emerging risks and an explanation of how these
are being managed or mitigated;

• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s and
company’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial
statements;

• The directors’ explanation as to their assessment of the group’s
and company’s prospects, the period this assessment covers
and why the period is appropriate; and

• The directors’ statement as to whether they have a reasonable

expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.

Our review of the directors’ statement regarding the longer-term
viability of the group was substantially less in scope than an
audit and only consisted of making inquiries and considering
the directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of
the UK Corporate Governance Code; and considering whether
the statement is consistent with the financial statements and
our knowledge and understanding of the group and company
and their environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the group’s and company’s position, performance, business
model and strategy;

• The section of the Annual Report that describes the review of

effectiveness of risk management and internal control systems;
and

• The section of the Annual Report describing the work of the

Audit and Risk Committee.

We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.

Responsibilities for the financial statements
and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors’ Responsibilities
in respect of the Financial Statements, the directors are responsible
for the preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true
and fair view. The directors are also responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the financial statements, the directors are responsible
for assessing the group’s and the company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the
company or to cease operations, or have no realistic alternative
but to do so.

114

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/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.

Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.

A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• we have not obtained all the information and explanations

we require for our audit; or

• adequate accounting records have not been kept by the

company, or returns adequate for our audit have not been
received from branches not visited by us; or

• certain disclosures of directors’ remuneration specified

by law are not made; or

• the company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with
the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment
Following the recommendation of the Audit and Risk Committee,
we were appointed by the directors on 29 April 2015 to audit the
financial statements for the year ended 31 December 2015 and
subsequent financial periods. The period of total uninterrupted
engagement is six years, covering the years ended 31 December
2015 to 31 December 2020.

Christopher Hibbs
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
11 March 2021

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

115

/Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020

Revenue
Cost of sales

Gross profit
Distribution costs
Administrative expenses
Impairment of goodwill2
IFRS 9 impairments and

bad debt charges2

Operating profit
Finance expense

Profit/(loss) before tax
Taxation

Profit/(loss) for the year

and total comprehensive
(expense)/income

Basic earnings/(losses)

per share

Diluted earnings/(losses)

per share

Note

4,9

9
10

9
11

Year ended
31 December
2020
Underlying
£m

Year ended
31 December
2020
Non-underlying1
£m

Year ended
31 December
2020
Total
£m

Year ended
31 December
2019
Underlying
£m

Year ended
31 December
2019
Non-underlying(1)
£m

Year ended
31 December
2019
Total
£m

257.9
(130.5)

127.4
(15.8)
(97.6)
—

(3.7)

10.3
(1.8)

8.5
(1.5)

7.0

6.5p

–
–

–
–
(3.8)
(5.8)

—

(9.6)
(0.4)

(10.0)
0.8

257.9
(130.5)

127.4
(15.8)
(101.4)
(5.8)

(3.7)

0.7
(2.2)

(1.5)
(0.7)

279.1
(136.2)

142.9
(18.7)
(98.1)
–

(1.5)

24.6
(1.9)

22.7
(3.4)

(9.2)

(2.2)

19.3

(2.0)p

19.3p

19.2p

–
–

–
–
–
–

–

–
–

–

279.1
(136.2)

142.9
(18.7)
(98.1)
–

(1.5)

24.6
(1.9)

22.7
(3.4)

19.3

19.3p

19.2p

1 Non-underlying items are detailed in Note 7. The Group’s policy regarding the recognition of non-underlying items is outlined on page 122.
2

The impairment of goodwill and IFRS 9 impairments have been disclosed on the face of the Consolidated Statement of Comprehensive Income due to the material nature
of the charges in 2020.

The Notes on pages 116 to 148 are an integral part of these Consolidated Financial Statements.

116

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Consolidated Statement of Financial Position
As at 31 December 2020

StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets

Total non-current assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Bank overdrafts
Provisions
Corporation tax

Total current liabilities

Non-current liabilities
Borrowings
Trade and other payables
Lease liabilities
Provisions
Deferred tax

Total non-current liabilities

Total liabilities

Net assets

Equity attributable to equity holders of the parent
Share capital
Share premium account
Share-based payment reserve
Retained earnings

Total equity

Note

14
15
16

18
19

21
22

20
21
22
23
24

25
25
26

2020
£m

50.8
47.0
19.9

117.7

38.1
38.5
7.1

83.7

2019
£m

44.2
35.3
27.0

106.5

37.3
40.9
4.9

83.1

201.4

189.6

(42.8)
(8.9)
(4.5)
(0.8)
(0.7)

(57.7)

(12.5)
(0.3)
(39.5)
(0.7)
(3.5)

(56.5)

(114.2)

87.2

0.1
21.1
0.5
65.5

87.2

(39.8)
(8.3)
–
(0.2)
(1.8)

(50.1)

(39.5)
(0.5)
(25.8)
(0.6)
(2.6)

(69.0)

(119.1)

70.5

0.1
2.4
0.9
67.1

70.5

The Financial Statements on pages 116 to 148 were approved and authorised for issue by the Board of Directors on 11 March 2021
and were signed on its behalf by:

Mark Kelly
Director

Michael Scott
Director

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

117

/
Consolidated Cash Flow Statement
For the year ended 31 December 2020

Cash generated from operations
Income taxes paid

Net cash generated from operating activities
Investing activities
Acquisition of subsidiaries and payment of deferred consideration
Purchase of property, plant and equipment
Purchase of intangible assets

Net cash used in investing activities
Financing activities
Proceeds from new share capital issued
Costs relating to issuance of new share capital
Proceeds from bank borrowings
Repayment of bank and other borrowings
Principal elements of lease payments
Finance elements of lease payments
Finance expense paid
Dividends paid to equity Shareholders

Net cash used in financing activities
Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Year ended
31 December
2020
£m

Year ended
31 December
2019
£m

33.9
(1.0)

32.9

—
(13.8)
(0.2)

(14.0)

19.2
(0.5)
—
(27.2)
(10.7)
(1.3)
(0.7)
—

(21.2)
(2.3)

4.9

2.6

29.0
(2.6)

26.4

(1.1)
(15.1)
(0.1)

(16.3)

—
—
10.0
(0.1)
(9.8)
(0.9)
(0.9)
(9.4)

(11.1)
(1.0)

5.9

4.9

Note

25
25

118

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Consolidated Statement of Changes in Equity
For the year ended 31 December 2020

StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Balance at 1 January 2020
Comprehensive expense for the year
Loss for the year

Total comprehensive expense for the

year

Contributions by and distributions to

owners

Issue of new share capital
Exercise of share options
Share-based payments
Deferred tax on share-based payments

Total transactions with owners
recognised directly in equity

Balance at 31 December 2020

Balance at 1 January 2019
Comprehensive income for the year
Profit for the year

Total comprehensive income for the

year

Contributions by and distributions to

owners

Exercise of share options
Share-based payments
Deferred tax on share-based payments
Dividends paid

Total transactions with owners
recognised directly in equity

Balance at 31 December 2019

Note

25
26
26
24

Note

26
26
24
13

Share
capital
£m

0.1

–

–
–
–
–

–

0.1

Share
capital
£m

0.1

–

–
–
–
–

–

Share
premium
account
£m

2.4

–

17.1
1.6
–
–

18.7

21.1

Share
premium
account
£m

2.4

–

–
–
–
–

–

0.1

2.4

Share-based
payment
reserve
£m

Retained
earnings
£m

0.9

–

–
(0.6)
0.3
(0.1)

(0.4)

0.5

Share-based
payment
reserve
£m

0.4

–

–
0.4
0.1
–

0.5

0.9

67.1

(2.2)

–
0.6
–
–

0.6

65.5

Retained
earnings
£m

57.2

19.3

–
–
–
(9.4)

(9.4)

67.1

Total
equity
£m

70.5

(2.2)

17.1
1.6
0.3
(0.1)

18.9

87.2

Total
equity
£m

60.1

19.3

–
0.4
0.1
(9.4)

(8.9)

70.5

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

119

/Notes to the Consolidated Financial Statements
For the year ended 31 December 2020

1 ACCOUNTING POLICIES (GROUP)
Corporate information
Eurocell plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a publicly listed company incorporated and domiciled in the
United Kingdom. The registered office is Eurocell Head Office and Distribution Centre, High View Road, South Normanton, Alfreton,
Derbyshire, DE55 2DT.

The Group is principally engaged in the extrusion of PVC window and building products to the new and replacement window market
and the sale of building materials across the UK.

Basis of preparation
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been
consistently applied to all years presented, unless otherwise stated.

The Group has adequate resources to continue in operational existence for the foreseeable future and, as a result of this, the going
concern basis has been adopted in preparing the Financial Statements (see below).

The Group Financial Statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 (‘IFRS’) and the applicable legal requirements of the Companies Act 2006. In addition to
complying with international accounting standards in conformity with the requirements of the Companies Act 2006, the Consolidated
Financial Statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.

The Financial Statements have been prepared under the historical cost convention, as modified by fair values in respect of acquisition
accounting. The functional currency is Sterling, and the Financial Statements are presented in millions, unless otherwise stated.

The preparation of the Group Financial Statements requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 2.

Basis of consolidation
The Consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries at 31 December 2020
and present the results as if they formed a single entity. Where the Company has power, either directly or indirectly, to govern the
financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be
consolidated until the date when such control ceases. Intercompany transactions and balances, unrealised gains and losses resulting
from intra-Group transactions and dividends are eliminated in full.

The Group’s functional currency is Sterling. The vast majority of the Group’s revenues are denominated in British Pounds, and as a
result the consolidation of non-UK revenues has minimal foreign exchange impact.

The Consolidated Financial Statements incorporate the results of business combinations using the purchase method. In the
Consolidated Statement of Financial Position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date.

All dormant subsidiaries prepare and file financial statements in accordance with Section 394A of the Companies Act 2006, which
are filed with the registrar at Companies House.

Going concern
The Group funds its activities through a £75 million Revolving Credit Facility, provided by Barclays and HSBC, which matures in
December 2023. The facility includes two key financial covenants, which are tested at 30 June and 31 December on a pre-IFRS 16
basis. These are that net debt should not exceed 3 times adjusted EBITDA (Leverage), and that adjusted EBITDA should be at least
4 times the interest charge on the debt (Interest Cover). Adjusted EBITDA is defined as operating profit before depreciation,
amortisation and non-underlying items. See alternative performance measures (below).

In advance of the 30 June 2020 reporting period, given the significant uncertainty related to the impact of COVID-19, the Group agreed
a revised covenant with its banking partners, replacing Leverage and Interest Cover with a single undertaking that net debt should not
exceed a maximum of £40.0 million at 30 June 2020. This covenant was comfortably met, with reported net debt at £23.5 million.

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Had the original covenants been in place at 30 June, the Group would have complied with the relevant terms, with significant
headroom. For the next measurement period, being 31 December 2020, and going forward, the Group has reverted to and expects
to comply with the original covenants.

In assessing going concern, the Directors have considered financial projections for the period to December 2023, which is consistent with the
Board’s strategic planning horizons. These forecasts have been compiled based on the best estimates of our commercial and operational teams.
This includes a ’Downside’ scenario, which reflects demand for our products being severely weakened, either by the impact of further COVID-19
disruption on consumer confidence, or by widened consumer choices when restrictions are lifted.

However, the business has remained open and trading as normal throughout 2021 to date, following guidance issued by the Department for
Business, Energy & Industrial Strategy that the construction sector and its manufacturing supply chain should continue to operate, provided that
safe working practices are maintained.

In all scenarios tested, including sensitivities reducing sales forecasts to 5% below 2019 for the period 2021-23, the Group operates with
significant headroom on its RCF facility and remains compliant with its original covenants.

After reviewing the Group’s projected financial performance and financing arrangements, the Directors consider that the Group has
adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in preparing
these Financial Statements.

Significant changes in the current period – including the impact of COVID-19
In line with official guidance from the UK Government on 23 March, the business temporarily closed. Following updated guidance,
the business reopened progressively from 11 May, with COVID protection measures operating throughout the Group. The closure
had a significant impact on sales and profitability in the period to 30 June 2020, with only 88 days of trading in H1 2020, compared to
124 in H1 2019. However, although various Government restrictions were in effect between 1 July and 31 December 2020, there was
no further significant disruption to our activities in H2.

In partial mitigation of the impact of COVID, the Group has taken advantage of several Government support schemes.

Job Retention Scheme
The Job Retention Scheme (‘JRS’) is a Government grant scheme that provides financial support for the wages of individuals who were
furloughed. The Group received cash contributions under the JRS of £6.5 million in relation to the period to 31 December 2020 (mostly in
H1). This contribution has been matched to the payroll cost incurred, and presented net within operating costs.

Business Rates Retail Discount
Business rates relief at 100% is available for certain retail properties for the 2020/21 tax year. The Group has successfully applied for
this relief in respect of the majority of the branches within its estate. Where relief has been obtained, no rates have been charged to the
Consolidated Statement of Comprehensive Income. The saving arising from this relief in 2020 is £1.1 million.

Retail, Hospitality and Leisure Grant Fund
Businesses with retail property that were eligible for the Rates Retail Discount are also eligible for grants of either £10,000 or £25,000
(depending on the rateable value of the property), up to an EU-mandated maximum total benefit of €0.8 million (£0.7 million) over a
three-year period.

The Group has claimed and received grants up to the maximum amount of £0.7 million. This grant income has been recognised in full
within operating expenses (all in H1).

VAT deferral
In April, the Government announced that all VAT payments between 20 March and 30 June 2020 could be deferred, with payment due
on or before 31 March 2021.

The Group initially deferred VAT payments due during this period, but subsequently settled the outstanding amounts in December
2020. The Group continued to submit VAT returns as normal throughout the year.

Changes in accounting policies and disclosures applicable to the Company and the Group
The Company has applied the following new standards and guidance for the financial reporting period commencing 1 January 2020,
with no material impact:
•
•
•
• Revised Conceptual Framework; and
• Amendments to References to the Conceptual Framework in IFRS Standards.

IFRS 3, Definition of a Business;
IAS 1 and IAS 8, Definition of Material;
IFRS 9, IAS 39 and IFRS 7, Interest Rate Benchmark Reform (Phase 1);

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

121

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

1 ACCOUNTING POLICIES (GROUP) continued
The following standards, which are not expected to have a material impact on the Group’s future Financial Statements, were in issue
but not yet effective (and not yet adopted by the EU):
•
•
•
•
•
•

IAS 1 Presentation of Financial Statements (effective from 1 January 2022);
IAS 16 Property, Plant and Equipment (effective from 1 January 2022);
IAS 37 Provisions, Contingent Liabilities and Contingent Assets (effective from 1 January 2022);
IFRS 3 Business Combinations (effective from 1 January 2022);
IFRS 9 Financial Instruments (effective from 1 January 2022); and
IFRS 17 Insurance Contracts (effective from 1 January 2022).

The Group does not intend to adopt any standard, revision or amendment before the required implementation date.

Revenue
The Group manufactures and distributes a range of building plastic materials, along with associated ancillary products, via direct sales
to its fabricator customers and through its branch network. Revenue is recognised when control of the products has transferred.
Control is considered to have transferred once the customer has taken delivery of the products, or has collected them from the branch,
has full discretion over the future use of those products, and where there is no unfulfilled obligation that could affect the customer’s
acceptance of the products.

Revenue is recognised based upon the price specified on the customer’s invoice. A receivable is recognised on the transfer of the
products, as this is the point at which consideration is deemed to be unconditional. There are no variable elements to the consideration
received that require estimation. No significant element of financing is present as sales are made with a credit term of 30 days end of
month, which is consistent with market practice.

Where costs are incurred by the Group in securing a contract to supply products, those costs are recognised as customer contract
assets (within trade and other receivables) in the Consolidated Statement of Financial Position, and amortised over the period in which
revenue pertaining to those costs is recognised, which in the vast majority of cases is three years.

Due to the fact that the Group’s customers typically collect or take delivery of products for immediate use in their intended purpose,
the likelihood of items being returned is small. Therefore it is highly probable that a significant reversal of revenue will not occur.
The Group’s obligations to repair or replace faulty manufactured products under the standard warranty terms is recognised as a
provision, see Note 23.

Non-underlying items
The Group presents some material items of income and expense as non-underlying items. This is done when, in the opinion of
the Directors, the nature and expected infrequency of the circumstances merit separate presentation in the Financial Statements.
This includes, but is not limited to, acquisition-related expenditure, costs incurred in the act of securing debt or equity funding, the
financial impact of events that impact upon our ability to trade for an extended period of time and non-trading impairment losses.

This treatment allows users of the Financial Statements to better understand the elements of financial performance in the year,
it facilitates comparison with prior periods and it helps in understanding trends in financial performance. Further details as to why
certain items have been classified as non-underlying are provided in Note 7.

Government grants
The Group has taken advantage of government support made available to businesses to help mitigate the impact of COVID-19 (see
above). In recognising this support in the financial statements, the Group has applied IAS 20 Government Grants. Grant income is
recognised only when it is reasonably certain that the cash will be received, and that all eligibility criteria have been met. Grant income
is recognised within administration expenses. To the extent that there are ongoing eligibility or performance criteria, grant income is
spread over the relevant period of measurement.

Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer,
in exchange for control of the acquiree. Direct costs of acquisition are recognised immediately as an expense.

Goodwill is initially measured at cost, being the excess of the cost of a business combination over the fair value of the identifiable
assets, liabilities and contingent liabilities acquired at the acquisition date. Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the Consolidated Statement of Comprehensive Income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to
the Consolidated Statement of Comprehensive Income on the acquisition date.

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Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their
useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see Note 2
relating to critical estimates and judgements below).

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of
intangibles acquired in a business combination are as follows:

Intangible asset

Software
Technology-based
Customer-related
Marketing-related

Useful economic life

5 to 10 years
10 to 17 years
5 to 10 years
10 to 15 years

Valuation method

Cost to acquire
Cost to acquire
Cost to acquire
Cost to acquire

The amortisation charge for the year is included within administration costs within the Consolidated Statement of Comprehensive Income.

Impairment of tangible assets, intangible assets, right-of-use assets and investments
Impairment tests on non-current assets are undertaken annually at the financial year end or at any other time when an indication of
impairment arises. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest
group of assets to which it belongs for which there are separately identifiable cash flows – its cash-generating unit (‘CGU’). Goodwill is
allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving
rise to the goodwill.

Individual right-of-use lease property assets relating to the Group’s branch network are also tested for impairment when an indication
of impairment arises, such as a branch becoming loss-making. In considering individual branch performance, central overheads are
allocated to each branch in proportion to sales.

Impairment charges are included in the Consolidated Statement of Comprehensive Income, except to the extent they reverse gains
previously recognised in Other Comprehensive Income. An impairment loss recognised for goodwill is not reversed.

Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable
costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is
recognised within provisions.

Freehold land is not depreciated. Assets in the course of construction are not depreciated until they are in a condition that would allow
them to be deployed in their intended use without further changes to their condition. Depreciation is provided on all other items of
property, plant and equipment so as to write off their cost less residual value over their expected useful economic lives. It is provided at
the following rates:

Asset class

Freehold property
Leasehold improvements
Plant and machinery
Mixing plant
Extruders
Stillages and tooling
Other
Motor vehicles
Office equipment and fixtures

Depreciation policy

2.5% per annum straight-line
Equal instalments over the period of the lease

Between 20% and 25% per annum on cost
13 years based on production usage
5 to 10 years based on production usage
Between 10% and 25% per annum on cost
Between 20% and 25% per annum on cost
Between 20% and 25% per annum on cost

Right-of-use lease assets
Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

123

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

1 ACCOUNTING POLICIES (GROUP) continued
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers
ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option,
the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date
of the lease.

Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of
purchase and conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the
cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used. For work in
progress and finished goods, cost is taken as production cost, which includes a proportion of attributable overheads.

Net realisable value is based on estimated normal selling price, less further costs expected to be incurred up to completion and
disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.

Financial assets
The Group records all of its financial assets at amortised cost and has not classified any of its financial assets at fair value through profit
and loss or other comprehensive income. The Group’s financial assets comprise trade and other receivables and cash and cash
equivalents in the balance sheet. These are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They arise principally through the provision of goods and services to customers, but also incorporate other types of
contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision
for impairment.

The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables. The Group has two types of financial asset that are subject to the expected credit loss model: trade receivables and
contract assets.

Expected loss rates are derived based upon the payment profile of sales over the three-year period up to the reporting date, and the
corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate of unemployment, new housing
starts, interest rates and household disposable income. Insured balances are excluded to the extent that no loss would arise in the
event of default by the customer.

Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and
the amount credited or charged on a net basis to operating expenses within the Consolidated Statement of Comprehensive Income.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less from inception, and – for the purpose of the statement of cash flows – bank overdrafts.
Bank overdrafts are shown within current liabilities in the balance sheet.

Financial liabilities
The Group classifies its financial liabilities as financial liabilities measured at amortised cost which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the

instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,
which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the balance sheet.

• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at

amortised cost using the effective interest method.

Taxation
Tax on the (loss)/profit for both the current and prior periods comprises both current and deferred tax and is recognised in the
Consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised directly in equity.

Current tax is the expected tax payable on taxable income for the year, using tax rates that have been enacted at the balance sheet
date, and any adjustment to tax payable in respect of prior years.

The Group recognises a current tax asset in respect of relief claimed under the Patent Box when the inflow of economic benefits
arising from that asset is virtually certain, deemed to be the submission of a claim to HM Revenue and Customs.

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Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its
tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction

•

affects neither accounting nor taxable profit; and
investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profits will arise against which
the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the deferred tax liabilities/assets are settled/recovered.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be
settled or recovered.

Lease liabilities
The Group leases certain properties, vehicles and material handling equipment. The Group has no leases previously classified as
finance leases. From 1 January 2019 liabilities for leases previously classified as operating leases have been measured in accordance
with IFRS 16 using the modified retrospective approach.

In applying IFRS 16, the Group has taken advantage of a number of practical expedients permitted by the standard:
• the application of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• reliance on previous assessments as to whether leases are onerous;
• accounting for leases with a remaining term of less than 12 months as short-term leases; and
• the exclusion of initial direct costs in measuring the right-of-use asset at the date of initial application.

Leases with a remaining term of less than 12 months have been accounted for as short-term leases. Leased assets with a value of less
than £5,000 are omitted on the basis of materiality.

The Group assesses whether a contract is or contains a lease, at inception of a contract. The Group recognises a right-of-use asset
and a corresponding lease liability with respect to all lease agreements in which it is the lessee except for short-term leases (defined as
leases with a lease term of 12 months or less) and leases of low-value assets (defined as leases with a value of less than £5,000). For
these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease
unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing
rate. The incremental borrowing rate is calculated based upon a combination of the risk-free rate, financing and asset-specific credit
spreads, adjusted for the term of each lease.

Lease payments included in the measurement of the lease liability comprise fixed lease payments, less any lease incentives. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments made.

The principal and finance elements of lease payments are presented separately on the face of the Consolidated Cash Flow Statement
within financing activities.

Prior to the adoption of IFRS 16, operating leases were contractual arrangements conferring the right of use of an asset but where
substantially all of the risks and rewards incidental to ownership were not transferred to the Group, and the total rentals payable under
the lease were charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. The
aggregate benefit of lease incentives was recognised as a reduction of the rental expense over the lease term on a straight-line basis.
Operating lease payments were included within cash generated from operations in the Consolidated Cash Flow Statement.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

125

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

1 ACCOUNTING POLICIES (GROUP) continued
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, when appropriate, the risks specific to the liability.

The Group has recognised provisions for liabilities of uncertain timing or amount in respect of leasehold dilapidations and warranty
claims. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date,
discounted at a pre-tax rate as described above.

Dilapidations provisions are recognised in two ways. Firstly, known specific obligations relating to repairs required or structural changes
made to a building are recognised as soon as the timing and amount of the liability can be reliably estimated. Secondly, wear and tear
provisions relating to the Group’s branches are accrued at a standard rate over the life of each lease, reflecting the cost of returning
each branch to its prior condition at the end of the lease.

Share capital
The Group’s ordinary shares are classified as equity instruments.

Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when paid.
In the case of final dividends, this is when approved by the Shareholders at the Annual General Meeting.

Retirement benefits: defined contribution scheme
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in
an independently administered fund. The amount charged to the Consolidated Statement of Comprehensive Income represents the
contributions payable to the scheme in respect of the accounting period. The Group has no obligation to pay future pension benefits.

Foreign currency
The Group’s Financial Statements are presented in British pounds sterling. For each entity, the Group determines the functional
currency, and items included in the Financial Statements of each entity are measured using that functional currency.

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they
operate (their ‘functional currency’) are recorded at the prevailing rate when the transactions occur. Foreign currency monetary assets
and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are recognised immediately in the Consolidated Statement of Comprehensive Income.

Share-based payment transactions
The Group has applied the requirements of IFRS 2 Share-based Payment.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined at the grant date
using the Black-Scholes valuation model and equity-settled share-based payments are expensed on a straight-line basis over the
vesting period, based upon the Company’s estimate of the shares that will eventually vest and adjusted for the effect of non-market-
based vesting conditions.

Fair value is measured based on the value of options over shares on the date of grant and the likelihood of all or part of the
option vesting.

Alternative performance measures
The Group uses alternative performance measures alongside statutory measures to facilitate a better understanding of financial
performance and comparison with prior periods, and in order to provide audited financial information against which the Group’s bank
covenants, which are all measured on a pre-IFRS 16 basis, can be assessed.

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EBITDA is defined as operating profit before depreciation and amortisation charges. Pre-IFRS 16 EBITDA is stated inclusive of
operating lease rentals under IAS 17 Leases.

Operating profit
Depreciation and amortisation

EBITDA

Non-underlying items

Adjusted EBITDA

Operating lease rentals under IAS 17

Pre-IFRS 16 adjusted EBITDA

2020
£m

0.7
20.8

21.5

8.3

29.8

(11.8)

18.0

2019
£m

24.6
17.8

42.4

—

42.4

(11.1)

31.3

Pre-IFRS 16 total net debt is defined as total borrowings and lease liabilities less cash and cash equivalents, excluding the impact of
leases recognised under IFRS 16 Leases.

Total net debt
Lease liabilities

Pre-IFRS 16 net debt

2020
£m

58.3
(48.4)

9.9

2019
£m

68.7
(34.1)

34.6

Covenants are assessed on an adjusted EBITDA basis. Adjusted EBITDA, adjusted operating profit and adjusted profit before tax all
exclude non-underlying items. Adjusted profit after tax and adjusted earnings per share exclude non-underlying items and the related
tax effect.

Adjusted profit measures allow users of the Financial Statements to better understand financial performance in the year by removing
certain material items of income and expense that are unusual due to their nature or infrequency, thus facilitating better comparison
with prior periods.

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based
on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and judgements.

Critical estimates and judgements
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.

a) Carrying value of inventories
The Group reviews the market value of, and demand for, its inventories on a periodic basis to ensure inventory is recorded in the
financial statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value
of inventories.

The key estimate is the extent to which items of inventory remain saleable as they age. Management use their knowledge of market
conditions to assess future demand for the Group’s products and achievable selling prices. During the current period there has been
an increase in uncertainty over these estimates, due to the fast-changing circumstances arising from the impact of COVID-19.
Following a rationalisation of the product range in the year, an increase to the provision for slow-moving inventory of £2.8 million
was recorded.

Further disclosures relating to inventories are provided in Note 18.

b) Recoverability of trade receivables and contract assets
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
trade receivables and contract assets. Expected loss rates are derived based upon the payment profile of sales over the three-year
period up to the reporting date, and the corresponding credit losses experienced. These rates are then adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of customers to settle receivables, including GDP, the rate
of unemployment, new housing starts, interest rates and household disposable income.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

127

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS continued
Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of trade receivables and
contract assets and the amount credited or charged on a net basis to operating expenses (trade receivables) and sales (contract
assets) within the Consolidated Statement of Comprehensive Income. The key judgement is the extent to which macroeconomic
factors impact upon the recoverability of trade receivables and contract assets. The key estimate is the adjusted loss rate applied to
each age category.

During the year there has been an increase in uncertainty over these estimates, in particular through the impact of COVID-19 on
customer payment behaviour, with many customers struggling to make payments that fell due during the initial lockdown period.
The resulting temporary deterioration in the ageing of balances, along with a weaker outlook for the UK economy, resulted in a higher
provision being implied by the IFRS 9 expected credit loss model. IFRS 9 impairments and bad debt charges of £3.7 million were
recognised in the year. This is consistent with the credit losses incurred in the year, compared to the historically low level of credit
losses prior to the end of March 2020.

If loss rates were, on average, 500 basis points higher than current estimates, the provision for impairment would increase by
£100,000. Further disclosures relating to trade receivables are provided in Note 19.

c) Use of the going concern basis in preparing the accounts
The Group has applied the going concern basis in preparing the accounts. In assessing going concern, the Directors have considered
financial projections for the period to December 2023, which is consistent with the Board’s strategic planning horizons. These forecasts
have been compiled based on the best estimates of our commercial and operational teams.

The various scenarios take into consideration a wide range of possible impacts from COVID-19, along with other factors such as Brexit.
This includes a ‘Downside’ scenario, which considers the impact of further COVID-19 infections, leading to a series of enhanced
localised lockdown measures over the course of 2021.

In all scenarios tested, the Group operates with significant headroom on its RCF facility and remains compliant with its original
covenants.

The key estimate is the level of sales over the forecast period.

d) Carrying value of goodwill and intangible assets
The Group assesses the carrying value of its goodwill and intangible assets at least annually, or when an indication of impairment
arises. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly. Recoverable amounts are determined from value-in-use calculations applied to each Cash
Generating Unit (‘CGU’), which have been predicated on discounted cash flow projections from approved budgets and forecasts
covering a three-year period.

CGUs are determined with reference to the smallest identifiable groups of assets that generate cash flows independently of other
groups of assets.

With the exception of Eurocell Recycle North (‘ERN’, formerly Ecoplas), the Group assessed the recoverable amount in respect of
goodwill for each CGU to be greater than the carrying amount and therefore no impairment arises. For ERN, the carrying value of
goodwill has been written down to nil, with a non-underlying charge of £5.8 million, as described in Note 7. The intangible and other
assets at ERN remain supported.

The key estimates are the discount rate and the level of profit growth assumed in perpetuity. If the discount rate increased by 100 basis
points, or if the level of profit growth in perpetuity was zero, none of the Group’s CGUs would be at risk of material impairment, and
therefore no further sensitivity disclosures have been provided.

Other estimates and judgements
The following estimates and judgements are important, but are not considered to have a significant risk of leading to a material
misstatement.

e) Determining the term of right-of-use lease assets
In determining the term of a lease, management considers all facts and circumstances that create an economic incentive to exercise or
not exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain to be extended
(or not terminated). The assessment is reviewed if a significant event or change in circumstances brings into question management’s
earlier judgement (see Note 15).

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f) Determining the incremental borrowing rate applied to lease liabilities
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing
rate. The incremental borrowing rate is calculated based upon a combination of the risk-free rate, financing and asset-specific credit
spreads, adjusted for the term of each lease. The weighted average borrowing rate applied to lease liabilities is 2% – 2.5% for
properties and 2.5% – 3% for other leases. If the borrowing rate were to increase or decrease by 0.5% the impact upon the
Consolidated Income Statement would be to decrease/increase profit by £0.1 million (see Note 22).

g) Dilapidation provisions
The Group recognises dilapidation provisions on the leasehold properties it occupies. The key estimate is the level of provision required
for each property, which management assesses based on past experience within the property portfolio. If the actual cost of
dilapidations in respect of the Group’s branch network was on average 10% greater or less than expected, the provision would change
by less than £50,000. These provisions are reviewed semi-annually to ensure that they reflect the current best estimate of the provision
required. Further disclosures relating to dilapidation provisions are provided in Note 23.

h) Classification of non-underlying costs
The Group presents some material items of income and expense as non-underlying items. This is done when, in the opinion of the
Directors, the nature and expected infrequency of the circumstances merit separate presentation in the Financial Statements. This
treatment allows users of the Financial Statements to better understand the elements of financial performance in the year; it facilitates
comparison with prior periods and it helps in understanding trends in financial performance.

The key judgement is whether or not a certain type of income or cost should be considered to be non-underlying. Full disclosure is
provided of each item, along with the rationale for the classification as non-underlying.

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks:
• credit risk;
• market risk;
•
•

foreign exchange risk; and
liquidity risk.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes
the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout these Financial Statements. There have been no substantive changes in
the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks, or the methods
used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• trade and other receivables;
• cash and cash equivalents;
• trade and other payables;
• bank overdrafts;
•
•

floating-rate bank loans; and
lease liabilities.

The Group finances its activities using cash generated from operations and its Revolving Credit Facility. It does not use invoice
discounting or any other financing facilities.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

129

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT continued
A summary of the financial instruments held by category is provided below:

Financial assets

Cash and cash equivalents
Trade and other receivables

Total financial assets

Financial liabilities

Trade and other payables
Lease liabilities
Bank overdrafts
Borrowings

Total financial liabilities

2020
£m

7.1
33.4

40.5

2020
£m

42.8
48.4
4.5
13.0

2019
£m

4.9
34.5

39.4

2019
£m

40.1
34.1
–
40.0

108.7

114.2

The analysis above does not correspond to the values reported in the Consolidated Statement of Financial Position as excluded from
the analysis above are assets and liabilities from which no future cash flows are expected to arise, including rent-free periods on leased
properties, and unamortised arrangement costs relating to the Group’s borrowings.

Impairment of financial assets
Impairments of trade receivables are outlined in Note 19. No further impairments to financial assets are considered necessary. The Group
applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for trade receivables.

General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining
ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group’s finance function.

The Board receives monthly reports from the Chief Financial Officer through which it reviews the effectiveness of the processes put in
place and the appropriateness of the objectives and policies it sets. These are then discussed at regular Board meetings.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:

Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk through its trade receivables arising from its normal commercial activities. It is
Group policy, implemented locally, to assess the credit risk of new customers before entering into contracts.

Existing credit risks associated with trade receivables are managed in line with Group policies as discussed in the financial assets
section of accounting policies.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. This risk is mitigated by
ensuring that deposits are only made with banks and financial institutions with a good rating issued by an industry-recognised
independent third party (e.g. Standard and Poor’s).

Further disclosures regarding financial assets are provided in Note 19.

Market risk
The Group is exposed to market risk from bank borrowings which incur variable interest rate charges linked to base rate plus a margin.
The Group’s policy aims to manage the interest cost of the Group within the constraints of its financial covenants and forecasts.

If variable interest rates were 50 basis points higher/lower, the Group’s finance expense would increase/decrease by £150,000.

During 2020 and 2019 the Group’s borrowings at variable rate were denominated in sterling. Further disclosures relating to bank
borrowings are provided in Note 20.

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Foreign exchange risk
Foreign exchange risk is the risk that the fair value of a financial instrument or future cash flow will fluctuate because of changes in
foreign exchange rates. The Group’s exposure to foreign exchange risk arises when individual Group entities enter into transactions
denominated in a currency other than their functional currency. The Group manages its exposure to fluctuations in currency rates by
wherever possible negotiating both purchases and sales to be denominated in sterling. The profit or loss arising from likely changes in
foreign exchange is not significant.

Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve
this aim, cash flow forecasts are prepared and updated on a regular basis to ensure that the Group has adequate headroom in its facilities.

The Board receives monthly updates on the Group’s liquidity position and any issues are reported by exception.

At the end of the financial year, the most recent cash flow projections indicated that the Group expected to have sufficient liquid
resources to meet its obligations under all reasonably foreseeable circumstances.

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

At 31 December 2020

Trade and other payables
Lease liabilities
Bank overdrafts
Borrowings

Total

At 31 December 2019

Trade and other payables
Lease liabilities
Borrowings

Total

Total
£m

(42.8)
(53.4)
(4.5)
(13.0)

(113.7)

Total
£m

(40.1)
(36.1)
(40.0)

(116.2)

Up to 3
months
£m

(42.6)
(1.6)
(4.5)
—

(48.7)

Up to 3
months
£m

(39.6)
(2.2)
–

(41.8)

Between
3 and 12
months
£m

–
(8.4)
–
–

(8.4)

Between
3 and 12
months
£m

–
(6.8)
–

(6.8)

Between
1 and 2
years
£m

–
(9.4)
–
–

(9.4)

Between
1 and 2
years
£m

–
(8.6)
–

(8.6)

Between
2 and 5
years
£m

(0.2)
(17.3)
–
(13.0)

(30.5)

Between
2 and 5
years
£m

(0.5)
(14.9)
(40.0)

(55.4)

Over
5 years
£m

–
(16.7)
–
–

(16.7)

Over
5 years
£m

–
(3.6)
–

(3.6)

Excluded from the analysis above are assets and liabilities from which no future cash flows are expected to arise.

Capital management
The Group’s objective when managing capital, which is deemed to be total equity plus total debt and which totalled £148.1 million
(2019: £144.1 million) at the balance sheet date, is to safeguard the Group’s ability to continue as a going concern, through the
optimisation of the debt and equity balance, and to maintain good headroom on its debt facilities and financial covenants. The Group
manages its capital structure and makes appropriate decisions in the light of current economic conditions and its strategic objectives.

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and sustain the future
development of the business.

The funding requirements of the Group are met by the utilisation of external borrowings together with available cash.

A key objective of the Group’s capital management is to maintain comfortable headroom over the covenants set out in its existing
facility agreements.

The financial covenants which are in place, all measured on a pre-IFRS 16 basis, are as follows:
• Leverage: the ratio of total net debt to consolidated EBITDA of any relevant period of not more than 3:1.
•

Interest cover: the ratio of EBITDA to net interest payable in respect of any relevant period of not less than 4:1.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

131

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

3 FINANCIAL INSTRUMENTS – RISK MANAGEMENT continued
Covenants are measured semi-annually on a rolling 12-month basis. In advance of the 30 June 2020 reporting period, given the
significant uncertainty related to the impact of COVID-19, the Group agreed a revised covenant with its banking partners, replacing
Leverage and Interest Cover with a single undertaking that net debt should not exceed a maximum of £40.0 million at 30 June 2020.
This covenant was comfortably met, with reported net debt at the half year of £23.5 million.

As at 31 December 2020 Leverage and Interest Cover were 0.6:1 and 20:1 respectively (2019: 1.1:1 and 30:1). The Group operated well
within the terms of its covenants throughout the current and prior periods. The Group anticipates that it will comfortably meet all future
covenant obligations.

The following table sets out the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date:

Trade and other receivables
Cash and cash equivalents
Bank overdrafts
Lease liabilities
Other interest-bearing borrowings
Trade and other payables

Trade and other receivables
Cash and cash equivalents
Lease liabilities
Other interest-bearing borrowings
Trade and other payables

4 REVENUE
Revenue arises from:

Sale of goods

External revenue by destination:

United Kingdom
European Union
Rest of World

GBP
£m

33.1
6.5
(4.5)
(48.4)
(13.0)
(42.1)

(68.4)

GBP
£m

34.3
4.3
(34.1)
(40.0)
(39.9)

(75.4)

As at 31 December 2020

EUR
£m

0.3
0.5
—
—
—
(0.4)

0.4

As at 31 December 2019

EUR
£m

0.2
0.6
–
–
(0.2)

0.6

USD
£m

—
0.1
—
—
—
(0.3)

(0.2)

USD
£m

–
–
–
–
–

–

2020
£m

257.9

2020
£m

255.5
1.9
0.5

257.9

Total
£m

33.4
7.1
(4.5)
(48.4)
(13.0)
(42.8)

(68.2)

Total
£m

34.5
4.9
(34.1)
(40.0)
(40.1)

(74.8)

2019
£m

279.1

2019
£m

275.8
3.1
0.2

279.1

There are no customers with sales in excess of 10% of total Group revenues.

The Group has recognised contract assets with a gross value of £1.5 million (2019: £3.1 million) and a value net of provisions for
impairment of £1.4 million (2019: £3.1 million) within Trade and Other Receivables. All contract assets are derived from the sale of
goods. Further details are provided in Note 19.

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FINANCIAL STATEMENTS

5 AUDITORS’ REMUNERATION
Total amounts payable to the Group’s auditors were as follows:

Audit of these Financial Statements
Amounts receivable by auditors and their associates in respect of:
Audit of Financial Statements of subsidiaries pursuant to legislation
Audit-related assurance services

6 EXPENSES BY NATURE

Depreciation of property, plant and equipment (Note 14)
Depreciation of right-of-use assets (Note 15)
Amortisation of intangible assets (Note 16)
Impairment of goodwill (Note 17)
Impairment of right-of-use assets (Note 15)
Other non-underlying operating expenses (Note 7)
Cost of inventories
Other variable costs
Employee benefits expense (Note 8)
Rentals under operating leases
Other expenses

Total cost of sales, distribution costs and administration expenses

7 NON-UNDERLYING ITEMS
Amounts included in the Consolidated Statement of Comprehensive Income are as follows:

Impairment of goodwill
Impairment of right-of-use assets
Warehouse dual-running costs
Restructuring costs

Non-underlying operating expenses

Finance expense

Total non-underlying expenses

Tax on non-underlying expenses

Impact on profit after tax

There were no non-underlying items in the prior year.

2020
£000

151
60

271

2020
£m

6.8
12.4
1.6
5.8
0.9
2.9
120.0
10.5
60.7
0.3
35.3

257.2

2020
£m

5.8
0.9
2.3
0.6

9.6

0.4

10.0

(0.8)

9.2

2019
£000

136
25

216

2019
£m

5.8
10.2
1.8
–
–
–
124.5
10.0
65.5
3.5
33.2

254.5

2019
£m

–
–
–
–

–

Impairment charges
The temporary closure of the business in the first half of 2020, alongside the on-going and potential medium- to long-term impact of
COVID-19 on the Group and its markets, were considered to be possible indicators of impairment for some of the Group’s assets.

Following a review of projected discounted future cash flows for the Group’s Cash Generating Units (‘CGUs’), impairments to the
carrying value of goodwill and right-of-use assets were recognised. In determining the carrying value of these various assets, estimates
and judgements have been made as to expected future cash flows.

In the future, actual experience may deviate from these estimates and judgements, the modification of which might have a material
impact on the Financial Statements. Any modifications will be made in the period in which the circumstances change, with the
exception of the impairment of goodwill, which cannot be reversed.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

133

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

7 NON-UNDERLYING ITEMS continued
Goodwill
The goodwill in respect of Eurocell Recycle North (‘ERN’, formerly Ecoplas) has been impaired in full, leading to a non-underlying
charge of £5.8 million (see Note 17). This charge arises as a result of lower projected short-term cash flows than previously expected,
reflecting the impact of COVID-19 on selling prices, customer demand and production volumes (and therefore profitability) of the ERN
CGU. The carrying value of all other intangible assets and property, plant and equipment in the Group remains supported.

Right-of-use assets
Right-of-use assets relating to property leases are subject to impairment testing, both within their respective CGUs, but also individually
(see Note 1). The Group’s branch network operates entirely from leased properties. The expected future profitability of each of the
branches was considered in the light of the potential impact of COVID-19 on future sales. The projections identified a small number of
potentially loss-making branches in the medium term, against which an impairment charge of £0.3 million has been recognised to
reduce the carrying value of the associated right-of-use assets to their value in use.

Additionally, a number of leased assets are no longer required following transition to the new warehouse (see below), and will be
decommissioned. Impairment charges of £0.6 million have been recognised to reduce the value of these right-of-use assets to nil.

In total, right-of-use asset impairment charges amount to £0.9 million.

Warehouse dual-running costs and finance expense
In January 2020 the Group entered into a lease arrangement for a new warehouse and head office facility close to its primary
manufacturing operations. The warehouse was fitted out during the year, and was brought into active service in early 2021. Certain
costs incurred during the fit-out process, such as IFRS 16 lease charges (including the related IFRS 16 finance expense), rates and
other property-related costs, have been classified as non-underlying as the warehouse was not yet operational in 2020, and therefore
not contributing to the underlying performance of the business in that period.

Restructuring costs
During the year the Group took the opportunity to review existing operating structures to ensure that they remained appropriate for the
business in its current form. Following this review, a number of roles were identified as being potentially redundant. A restructuring was
announced with the half year results, and a period of consultation followed. At the end of the consultation period 35 roles were made
redundant, at a one-off cost of £0.6 million. These costs have been classified as non-underlying as they relate to roles that no longer
exist within the organisation and therefore will not reoccur in future reporting periods.

8 EMPLOYEE BENEFITS EXPENSE

Staff costs (including Directors) comprise:
Wages and salaries
Share-based payments
Social security costs
Other pension costs

In 2020 staff costs are stated net of Job Retention Scheme income amounting to £6.5 million.

The average monthly number of employees, including Directors, during the year was as follows:
Production
Office and administration
Distribution

2020
£m

53.2
0.3
5.3
1.9

60.7

2020
No.

669
405
871

2019
£m

57.7
0.4
5.6
1.8

65.5

2019
No.

584
415
856

1,945

1,855

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FINANCIAL STATEMENTS

Key management personnel compensation and Directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the Group, which is considered to be the Directors of the Company and the Directors of the Group’s subsidiary companies.

Emoluments
Share-based payments
Pension and other post-employment benefit costs

2020
£m

1.1
0.1
0.1

1.3

2019
£m

1.3
0.1
0.1

1.5

Directors’ remuneration is set out in the Remuneration Report on pages 85 to 100. The highest paid Director received remuneration of
£466,000 (2019: £673,000).

During the year, retirement benefits were accruing to two Directors in respect of defined contribution pension schemes (2019: two).
The value of contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £57,000
(2019: £58,000).

63,322 share options were exercised by Directors of the Group during the current year (2019: nil), of which 51,049 were exercised by
the highest paid director.

The Group’s policy for consulting with, sharing information with, and encouraging the involvement of employees is discussed on pages
71 to 76.

9 SEGMENTAL INFORMATION
The Group organises itself into a number of operating segments that offer different products and services. They are managed
separately because each business requires different technology and marketing strategies. Internal reporting provided to the chief
operating decision-maker, which has been identified as the executive management team including the Chief Executive Officer and the
Chief Financial Officer, reflects this structure.

The Group has aggregated its operating segments into three reported segments, as these business units have similar products,
production processes, types of customer, methods of distribution, regulatory environments and economic characteristics:
• Profiles – extrusion and sale of PVC window and building products to the new and replacement window market across the UK. This

segment includes Vista Panels, S&S Plastics and Eurocell Recycle North.

• Building Plastics – sale of building plastic materials across the UK. This segment includes Security Hardware, Kent Building Plastics

and Trimseal.

• Corporate – represents costs relating to the ultimate parent company and includes amortisation in respect of acquired intangible assets.

Inter-segmental sales relate to manufactured products distributed by the Building Plastics division.

Revenue
Total revenue
Inter-segmental revenue

Total revenue from external customers

Adjusted EBITDA1
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets

Adjusted operating profit
Impairment of goodwill
Other non-underlying operating expenses

Operating (loss)/profit

Finance expense

Loss before tax

Profiles
2020
£m

156.1
(56.4)

99.7

16.5
—
(5.1)
(3.5)

7.9
(5.8)
(3.1)

(1.0)

Building
Plastics
2020
£m

159.5
(1.3)

158.2

12.7
—
(1.1)
(7.6)

4.0
—
(0.6)

3.4

Corporate
2020
£m

—
—

—

0.6
(1.6)
(0.6)
—

(1.6)
—
(0.1)

(1.7)

Total
2020
£m

315.6
(57.7)

257.9

29.8
(1.6)
(6.8)
(11.1)

10.3
(5.8)
(3.8)

0.7

(2.2)

(1.5)

Included within adjusted EBITDA are IFRS 9 impairment and bad debt charges of £3.7 million (Profiles: £1.7 million; Building Plastics: £2.0 million).

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

135

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

9 SEGMENTAL INFORMATION continued

Revenue
Total revenue
Inter-segmental revenue

Total revenue from external customers

Adjusted EBITDA2
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets

Operating profit

Finance expense

Profit before tax

Profiles
2019
£m

175.2
(59.5)

115.7

24.7
(0.1)
(4.2)
(2.5)

17.9

Building
Plastics
2019
£m

164.7
(1.3)

163.4

15.2
–
(1.0)
(5.6)

8.6

Corporate
2019
£m

–
–

–

2.5
(1.7)
(0.6)
(2.1)

(1.9)

Included within adjusted EBITDA are IFRS 9 impairment and bad debt charges of £1.5 million (Profiles: £1.0 million; Building Plastics: £0.5 million).

Total
2019
£m

339.9
(60.8)

279.1

42.4
(1.8)
(5.8)
(10.2)

24.6

(1.9)

22.7

Total
2020
£m

13.7

201.4

(97.5)

(12.5)
(0.7)
(3.5)

(114.2)

87.2

Total
2019
£m

15.5

189.6

(75.2)

(39.5)
(1.8)
(2.6)

(119.1)

70.5

Profiles
2020
£m

12.3

110.9

(57.6)

Profiles
2019
£m

13.0

96.8

(36.2)

Building
Plastics
2020
£m

0.9

59.6

(32.9)

Corporate
2020
£m

0.5

30.9

(7.0)

Building
Plastics
2019
£m

1.5

69.8

(31.3)

Corporate
2019
£m

1.0

23.0

(7.7)

Revenue
2020
£m

256.3
1.6

257.9

Non-current
assets
2020
£m

117.7
–

117.7

Revenue
2019
£m

277.7
1.4

279.1

Non-current
assets
2019
£m

106.5
–

106.5

Additions to plant, property, equipment and intangible assets

Segment assets

Segment liabilities

Borrowings
Corporation tax payable
Deferred tax liability

Total liabilities

Total net assets

Additions to plant, property, equipment and intangible assets

Segment assets

Segment liabilities

Borrowings
Corporation tax payable
Deferred tax liability

Total liabilities

Total net assets

Geographical information

United Kingdom
Republic of Ireland

Total

136

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

10 FINANCE EXPENSE

Finance expense
Bank borrowings
Interest on lease liabilities

Underlying finance expense

Non-underlying finance expense (Note 7)

Total finance expense

11 TAXATION

Current tax (credit)/expense
Current tax on (losses)/profits for the year
Adjustment in respect of prior years

Total current tax

Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of change in rates
Adjustment in respect of prior years

Total deferred tax

Total tax expense

2020
£m

0.9
0.9

1.8

0.4

2.2

2020
£m

(0.1)
–

(0.1)

0.5
0.1
0.2

0.8

0.7

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:

(Loss)/profit before tax

Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.0%

(2019: 19.0%)
Taxation effect of:
Expenses not deductible for tax purposes
Impairment of goodwill not deductible for tax purposes
Patent Box claims
Adjustments to tax charge in respect of prior years
Tax on share-based payments recognised in equity
Adjustment in respect of change in rates

Total tax expense

2020
£m

(1.5)

(0.3)

0.4
1.1
(0.7)
0.2
(0.1)
0.1

0.7

2019
£m

1.0
0.9

1.9

–

1.9

2019
£m

3.4
(0.2)

3.2

0.2
–
–

0.2

3.4

2019
£m

22.7

4.3

–
–
(0.8)
(0.2)
0.1
–

3.4

Changes in tax rates and factors affecting the future tax charge
A reduction in the mainstream rate of UK corporation tax from 19% to 17% from April 2020 was enacted during 2016. This reduction
was cancelled in January 2020, and deferred taxes at the period end have been re-measured using the mainstream rate of 19%.

On 3 March 2021 an increase in the mainstream rate of UK corporation tax from 19% to 25% was announced, effective from April
2023. The Group estimates that the impact of the resulting remeasurement of deferred taxes in 2021 will be approximately £1 million.

There are no material uncertain tax provisions.

Tax included in Other Comprehensive Income
The tax credit arising on share-based payments within Other Comprehensive Income is £110,000 (2019: charge of £88,000).

Based on the current investment plans of the Group, and assuming the rates of capital allowances on capital expenditure continue into
the future, there is little prospect of any significant part of the deferred tax liability becoming payable over the next three years.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

137

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

11 TAXATION continued
Tax residency
Eurocell plc and its subsidiaries are all registered in the United Kingdom, and are resident in the UK for tax purposes.

The Group has two branches in the Republic of Ireland, with combined annual revenues of £1.6 million, total assets of less than
£50,000 and eight full time employees. For tax purposes these two trading locations form a single branch within Eurocell Building
Plastics Limited, and therefore any profits generated are subject to tax in the Republic of Ireland. The tax charge in relation to the
Group’s Republic of Ireland operations in 2020 is €1,000, and tax payments of €1,000 were made during the year.

12 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year. Adjusted earnings per share excludes the impact of non-underlying items.

Diluted earnings per share is calculated by adjusting the earnings and number of shares for the effects of dilutive options. In the event
that a loss is recorded for the period, share options are not considered to have a dilutive effect.

(Loss)/profit attributable to ordinary Shareholders

Profit attributable to ordinary Shareholders excluding non-underlying items

Weighted average number of shares – basic
Weighted average number of shares – diluted

Basic (losses)/earnings per share
Adjusted basic earnings per share
Diluted (losses)/earnings per share
Adjusted diluted earnings per share

13 DIVIDENDS

2020
£m

(2.2)

7.0

2019
£m

19.3

Number

108,218,827
108,218,827

100,316,692
100,720,559

Pence

(2.0)
6.5
(2.0)
6.5

Pence

19.3
19.3
19.2
19.2

Due to the impact of COVID-19, the final dividend for 2019 declared in March 2020 of 6.4p per share was subsequently cancelled, and
no dividends will be paid in respect of 2020. It remains the Group’s intention to return to paying dividends in 2021.

Dividends paid during the year
Final dividend for 2018 of 6.2p per share
Interim dividend for 2019 of 3.2p per share

2020
£m

–
–

–

2019
£m

6.2
3.2

9.4

138

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

14 PROPERTY, PLANT AND EQUIPMENT

Freehold
property
£m

Leasehold
improvements
£m

Plant and
machinery
£m

Motor
vehicles
£m

Office
equipment
and fixtures
£m

Assets under
construction
£m

Cost
Balance at 1 January 2019
Additions
Disposals
Transfers

Balance at 31 December

2019
Additions
Disposals
Transfers

Balance at 31 December

2020

Accumulated
depreciation

Balance at 1 January 2019
Charge for the year
Disposals

Balance at 31 December

2019

Charge for the year
Disposals

Balance at 31 December

2020

Net book value
At 31 December 2020

At 31 December 2019

9.0
–
–
–

9.0

1.1
0.2
–

1.3
0.2
–

1.5

7.5

7.7

0.2
–
–
–

0.2

0.1
–
–

0.1

46.4
6.3
(0.6)
8.7

60.8
3.1
(1.5)
3.2

65.6

22.3
5.4
(0.6)

27.1
6.6
(1.5)

32.2

33.4

33.7

0.3
0.1
(0.1)
–

0.3
–
–
–

0.3

0.1
0.1
(0.1)

0.1
–
–

0.1

0.2

–
0.1
–
–

0.1
–
–
–

0.1

–
0.1
–

0.1
–
–

0.1

–

Included within freehold property is non-depreciable land of £2.3 million (31 December 2019: £2.3 million).

During the year £0.1 million of assets under construction were transferred to Intangible Assets.

Total
£m

58.6
15.4
(0.7)
(0.4)

72.9
13.5
(1.5)
(0.1)

2.7
8.9
–
(9.1)

2.5
10.4
–
(3.3)

9.6

84.8

–
–
–

–

9.6

2.5

23.6
5.8
(0.7)

28.7
6.8
(1.5)

34.0

50.8

44.2

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

139

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

15 RIGHT-OF-USE ASSETS

Balance at 1 January 2019 on adoption of IFRS 16
Additions
Disposals

Balance at 31 December 2019
Additions
Disposals

Balance at 31 December 2020

Accumulated amortisation
Balance at 1 January 2019 on adoption of IFRS 16
Charge for the year
Disposals

Balance at 31 December 2019
Charge for the year
Impairment charges
Disposals

Balance at 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

Leasehold
improvements
£m

Motor
vehicles
£m

Office
equipment
and fixtures
£m

26.0
2.9
(0.5)

28.4
24.0
(0.6)

51.8

–
6.4
(0.4)

6.0
7.9
0.3
(0.6)

13.6

38.2

22.4

9.1
7.5
(0.3)

16.3
1.0
(0.9)

16.4

–
3.8
(0.3)

3.5
4.5
0.6
(0.9)

7.7

8.7

12.8

0.1
–
–

0.1

–
–
–

–
–
–
–

–

0.1

The Group adopted IFRS 16 Leases on 1 January 2019, recognising right-of-use assets of £35.2 million.

16 INTANGIBLE ASSETS

Cost
Balance at 1 January 2019
Additions
Added on acquisition
Adjustments in respect of prior periods
Transfers

Balance at 31 December 2019
Additions
Transfers

Balance at 31 December 2020

Accumulated amortisation
Balance at 1 January 2019
Charge for the year

Balance at 31 December 2019
Charge for the year
Impairment charge

Balance at 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

Software
£m

Technology
-based
£m

Customer
-related
£m

Marketing
-related
£m

Goodwill
£m

2.1
0.1
–
–
0.4

2.6
0.2
0.1

2.9

0.7
0.3

1.0
0.3
–

1.3

1.6

1.6
–
–
–
–

1.6
–
–

1.6

0.5
0.1

0.6
0.1
–

0.7

0.9

1.0

7.3
–
0.2
–
–

7.5
–
–

7.5

2.9
1.1

4.0
0.9
–

4.9

2.6

3.5

6.3
–
–
–
–

6.3
–
–

6.3

1.9
0.3

2.2
0.3
–

2.5

3.8

4.1

16.5
–
0.2
0.1
–

16.8
–
–

16.8

–
–

–
–
5.8

5.8

11.0

16.8

Total
£m

35.2
10.4
(0.8)

44.8
25.0
(1.5)

68.3

–
10.2
(0.7)

9.5
12.4
0.9
(1.5)

21.3

47.0

35.3

Total
£m

33.8
0.1
0.4
0.1
0.4

34.8
0.2
0.1

35.1

6.0
1.8

7.8
1.6
5.8

15.2

19.9

27.0

The goodwill in respect of Eurocell Recycle North (formerly Ecoplas) has been impaired in full, leading to a non-underlying charge of
£5.8 million (see Note 17).

140

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Included within customer-related and marketing-related intangible assets are the acquired intangibles in relation to the acquisition of
Vista Panels in 2016, which have a combined carrying value of £1.5 million and a remaining amortisation period of four years.

17 IMPAIRMENT
For the purpose of impairment testing, goodwill is allocated to Cash Generating Units (‘CGUs’) as follows:

Eurocell Recycle North (formerly Ecoplas)
Eurocell Building Plastics
Eurocell Profiles
Vista Panels
S&S Plastics
Security Hardware

2020
£m

–
5.1
3.3
2.2
0.2
0.2

11.0

2019
£m

5.8
5.1
3.3
2.2
0.2
0.2

16.8

CGUs are determined with reference to the smallest identifiable groups of assets that generate cash flows independently of other
groups of assets, with reference to the business or product sectors in which they operate.

The recoverable amounts of the CGUs have been determined from ‘value-in-use’ calculations which have been predicated on
discounted pre-tax cash flow projections based on a three-year business plan approved by the Board. These projections are based on
all available information and growth rates do not exceed growth rates achieved in prior periods.

The key assumptions in preparing these forecasts are in line with the Group’s published strategy, which includes continuing to open
new branches, developing new products and increasing the use of recycled materials.

All of the Group’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a
combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making timeframe is also consistent
across all CGUs. Consequently, the key assumptions detailed below are applied consistently across each CGU:

Period on which management-approved forecasts are based (years)
Discount rate (pre-tax)
Profit growth rate in perpetuity

2020

3
11%
2%

2019

3
10%
2%

The period on which management-approved forecasts are based is consistent with the Board’s strategic planning timeframe. The
discount rate reflects an estimate of the Group’s pre-tax Weighted Average Cost of Capital, based on past experience and sector-
weighted assumptions. The profit growth rate in perpetuity is consistent with the average annual growth in UK Gross Domestic Product
between 1990 and 2019 (source: Office for National Statistics). For CGUs with a higher risk profile due to their size or historical
performance, management forecasts are risk-adjusted by applying a sales sensitivity of 5%. This adjustment has been made for all
CGUs with the exception of Eurocell Building Plastics and Eurocell Profiles.

Goodwill is considered to have an indefinite useful life.

As described in Note 7, with the exception of Eurocell Recycle North (‘ERN’, formerly Ecoplas), the Group assessed the recoverable
amount in respect of goodwill for each GCU to be greater than the carrying amount and therefore no impairment arises. No reasonably
possible change in assumptions would result in an impairment for these CGUs.

Eurocell Recycle North (formerly Ecoplas)
In the case of ERN, the carrying value of goodwill was written down to nil at the Half Year, with a non-underlying charge of £5.8 million
recorded within administrative expenses. The impairment reflected the temporary closure of the business at that time, and the resulting
uncertainty surrounding short term future cash flows. The remaining non-current assets associated with the ERN CGU comprise
intangible assets of £0.5 million and property, plant and equipment of £4.5 million.

At 31 December 2020 production run rates were ahead of prior year, and future cash flows less uncertain. As a result, the latest
financial projections imply headroom over the carrying value of the remaining assets. However, should revenues be 6% lower than
currently forecast, further impairments may arise in the future.

A 1% increase/decrease in the perpetuity growth rate would lead to a £0.9 million increase/decrease in value-in-use. A 100 basis points
increase/decrease in discount rate would lead to a decrease/increase in value-of-use of £0.8 million. No further impairments would
arise in either scenario.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

141

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

17 IMPAIRMENT continued
Sensitivities
The following sales and discount rate sensitivities would reduce headroom on each CGU to nil:

Eurocell Recycle North (formerly Ecoplas)
Eurocell Building Plastics
Eurocell Profiles
Vista Panels
S & S Plastics
Security Hardware

18 INVENTORIES

Raw materials
Work in progress
Finished goods and goods for resale

Sales

6%
76%
70%
72%
74%
38%

2020
£m

3.9
2.6
31.6

38.1

All inventories are carried at cost less a provision to take account of slow-moving and obsolete items. At 31 December 2020 the
inventory provision amounted to £4.2 million (2019: £1.4 million).

19 TRADE AND OTHER RECEIVABLES

Trade receivables
Less: provision for impairment of trade receivables
Less: provision for rebates payable

Net trade receivables

Contract assets

Total financial assets other than cash and cash equivalents classified as financial assets

Prepayments
Other receivables

Total trade and other receivables

2020
£m

38.6
(4.4)
(0.8)

33.4

1.4

34.8

3.7
—

38.5

Trade receivables are non-interest-bearing and are generally on 30 days credit. The fair values of trade and other receivables classified
as financial assets are not materially different to their carrying values.

Contract assets are amortised over the period in which revenue pertaining to those costs is recognised, which in the vast majority of
cases is three years. They are presented net of a provision for impairment of £0.1 million (2019: £nil). Additions of £0.7 million were
recognised during the year (2019: £1.6 million), and amounts amortised against revenue were £1.8 million (2019: £1.6 million).
Impairment charges of £0.6 million were recorded in the year (2019: £nil).

The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all
financial assets. In measuring expected credit losses for trade receivables, receivables have been grouped based on shared
characteristics and days past due. Insured balances are excluded to the extent that no loss would arise in the event of default by
the customer.

Expected loss rates are derived based upon the payment profile of sales over a three-year period before 31 December 2020, and the
corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of customers to settle receivables, GDP, the rate of unemployment, new housing starts,
interest rates and household disposable income. In assessing these factors we considered the potential impact of COVID-19 and the
UK’s exit from the European Union.

142

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

Discount Rate

16%
48%
52%
41%
45%
18%

2019
£m

2.2
2.0
33.1

37.3

2019
£m

36.9
(1.6)
(0.9)

34.4

3.1

37.5

3.3
0.1

40.9

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

The closing loss allowances for trade receivables and contract assets as at 31 December 2020 reconcile to the opening loss
allowances as follows:

At 1 January
Charged during the year
Released or utilised during the year
Receivables written off during the year as uncollectible

At 31 December

Trade receivables

Contract assets

2020
£m

1.6
3.7
(0.3)
(0.6)

4.4

2019
£m

0.8
1.5
(0.5)
(0.2)

1.6

2020
£m

–
0.6
(0.1)
(0.4)

0.1

2019
£m

–
–
–
–

–

Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and
a failure to make contractual payments for a period of greater than 120 days past due.

Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line item.

The rate of expected loss has increased in 2020 due to the impact of COVID-19 on the macroeconomic outlook for the UK. The
uncertainty of the timing and extent of Government restrictions, and the potential for disruption to construction activities, mean that the
risk that customers cannot pay balances owed at 31 December 2020 has increased substantially.

At 31 December 2020

Expected loss rate

Gross carrying amount – trade receivables
Gross carrying amount – contract assets

Loss allowance

At 31 December 2019

Expected loss rate

Gross carrying amount – trade receivables
Gross carrying amount – contract assets

Loss allowance

Current
£m

31.5
1.4

1.2

Current
£m

0.2%

18.4
3.1

–

More than 30
days past due
£m

More than 60
days past due
£m

More than 90
days past due
£m

More than 120
days past due
£m

20%

3.3
—

0.7

65%

0.8
—

0.6

65%

0.5
—

0.3

65%

2.5
—

1.6

More than 30
days past due
£m

More than 60
days past due
£m

More than 90
days past due
£m

More than 120
days past due
£m

0.2%

10.8
–

–

0.5%

5.3
–

0.1

75%

0.7
–

0.6

50%

1.7
–

0.9

20 BORROWINGS
The book value and fair value of borrowings are as follows:

Non-current
Bank borrowings unsecured

Total borrowings

Book value
2020
£m

Fair value
2020
£m

Book value
2019
£m

12.5

39.5

Total
£m

11%

38.6
1.4

4.4

Total
£m

36.9
3.1

1.6

Fair value
2019
£m

39.5

The bank borrowings outstanding at 31 December 2020 are classified as non-current liabilities as they relate to committed facilities
available to the Group until 2023. The book value and fair value are not considered to be materially different.

Borrowings
In March 2020 the Group amended its multi-currency revolving unsecured credit facility held with Barclays Bank plc and HSBC UK
Bank plc, increasing the facility from £60 million to £75 million, but with all other key terms remaining unchanged. Costs amounting to
£0.2 million were incurred in amending the facility. These costs have been capitalised within borrowings and are being released to the
Consolidated Statement of Comprehensive Income within finance expense over the period of the facility, which expires in
December 2023.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

143

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

20 BORROWINGS continued
Borrowings of £13.0 million were drawn down at 31 December 2020 (2019: £40.0 million). Total unamortised costs, which are
presented as a deduction to borrowings, were £0.5 million as at 31 December 2020 (2019: £0.5 million).

Interest is charged at an excess over base rate of between 1.25% and 2.25% per annum and is dependent upon the ratio of total net
debt to consolidated EBITDA (on a pre-IFRS 16 basis).

Based upon current economic and market trends, management consider that the sterling LIBOR rate (or SONIA, which is due to
replace LIBOR in 2021) will remain relatively stable during the next year, and any changes, when applied to the Group’s current bank
borrowings of £13.0 million would not lead to a significant change in finance expense.

All of the Group’s borrowings are denominated in sterling.

The analysis of repayments on the combined borrowings is as follows:

Within 1 year or repayable on demand
Between 1 and 2 years
Between 2 and 5 years

21 TRADE AND OTHER PAYABLES

Current liabilities
Trade payables
Other tax and social security
Other payables
Accruals

Total current trade and other payables

Non-current liabilities
Other payables

Book values approximate to fair value at 31 December 2020 and 2019.

22 LEASE LIABILITIES

Lease liabilities
Current
Non-current

Total discounted lease liabilities at 31 December

Maturity analysis
– Less than one year
– One to five years
– More than five years

Total undiscounted lease liabilities at 31 December

2020
£m

–
–
13.0

13.0

2020
£m

28.5
4.8
0.7
8.8

42.8

0.3

2020
£m

8.9
39.5

48.4

2020
£m

10.0
26.7
16.7

53.4

2019
£m

–
–
40.0

40.0

2019
£m

28.6
4.2
1.0
6.0

39.8

0.5

2019
£m

8.3
25.8

34.1

2019
£m

9.0
23.5
3.6

36.1

The Group adopted IFRS 16 Leases on 1 January 2019. The Group has no leases previously classified as finance leases. From
1 January 2019 liabilities for leases previously classified as operating leases have been measured at the present value of the remaining
lease payments, discounted using the incremental borrowing rate.

144

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/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

On adoption of IFRS 16 the Group recognised lease liabilities of £34.6 million (inclusive of prepaid rent). The lease liabilities reconcile to
the operating lease commitments disclosed as at 31 December 2018 as follows:

Operating lease commitments as at 31 December 2018
Leases omitted from disclosure at 31 December 2018
Prepaid rent
Short-term and low-value leases
Impact of discounting of lease liabilities

Lease liabilities recognised as at 1 January 2019

Current lease liabilities
Non-current lease liabilities

Total lease liabilities

23 PROVISIONS

At 1 January 2019
Released to Statement of Comprehensive Income
Discounting of provisions
Utilised

At 31 December 2019
Charged to Statement of Comprehensive Income
Discounting of provisions
Utilised

At 31 December 2020

Current
Non-current

At 31 December 2020

£m

38.1
2.2
(0.4)
(2.7)
(2.6)

34.6

9.4
25.2

34.6

Total
£m

1.6
(0.4)
–
(0.4)

0.8
0.9
–
(0.2)

1.5

0.8
0.7

1.5

Dilapidations
and
environmental
provisions
£m

Warranty
provisions
£m

1.6
(0.4)
–
(0.4)

0.8
0.1
–
–

0.9

0.2
0.7

0.9

–
–
–
–

–
0.8
–
(0.2)

0.6

0.6
–

0.6

Dilapidations and environmental provisions
Under property lease agreements, the Group has obligations to maintain all properties to the standard that prevailed at the inception of
the respective leases. The provision represents the Directors’ best estimate of the costs associated with this obligation.

The timing of the utilisation of the provision is variable dependent on the lease expiry dates of the properties concerned, which vary
between one and ten years.

Warranty provisions
The Group makes provision to cover known potential warranty issues. The provision represents the Directors’ best estimate of the
costs associated with this obligation. The timing of the utilisation is variable depending on the circumstances of each individual claim
under warranty.

24 DEFERRED TAX
The movement in the net deferred tax liability is as follows:

At 1 January
Charged to Statement of Comprehensive Income
(Charged)/credited to equity
Added on acquisition

At 31 December

2020
£m

(2.6)
(0.8)
(0.1)
–

(3.5)

2019
£m

(2.5)
(0.2)
0.1
–

(2.6)

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

145

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

24 DEFERRED TAX continued
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered.

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS
12) during the year, together with amounts recognised in the Consolidated Statement of Comprehensive Income and amounts
recognised in Other Comprehensive Income are as follows:

Accelerated capital allowances/intangible fixed assets
Other temporary differences

Net tax assets/(liabilities)

Accelerated capital allowances/intangible fixed assets
Other temporary differences

Net tax assets/(liabilities)

Asset
2020
£m

–
0.3

0.3

Asset
2019
£m

–
0.4

0.4

Liability
2020
£m

(3.8)
–

(3.8)

Liability
2019
£m

(3.0)
–

(3.0)

Statement of
Comprehensive
Income
2020
£m

(0.8)
–

(0.8)

Statement of
Comprehensive
Income
2019
£m

(0.4)
0.2

(0.2)

Net
2020
£m

(3.8)
0.3

(3.5)

Net*
2019
£m

(3.0)
0.4

(2.6)

Equity
2020
£m

–
(0.1)

(0.1)

Equity
2019
£m

–
0.1

0.1

Included in the net liability is a deferred tax liability of £35,000 relating to the acquisition of Trimseal Limited.

Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further
disclosure has been provided.

25 SHARE CAPITAL

Ordinary shares of £0.001 each

Share premium account

Allotted, called up and
fully paid

2020
Number

2019
Number

111,486,709

100,335,353

2020
£m

0.1

21.1

2019
£m

0.1

2.4

The ordinary shares carry the rights to attend and vote at general meetings, the right to receive payment in respect of dividends
declared and the right to participate in the distribution of capital. The ordinary shares are not redeemable.

On 1 April the Group issued 10,031,040 new shares via a placing, for a gross consideration of £17.6 million. The amount raised above
the nominal value of the shares issued, less costs associated with the placing of £0.5 million, has been recorded as share premium.

The Group also issued 1,030,189 new shares in respect of its Save As You Earn sharesave scheme, in the process receiving
consideration from employees of £1.6 million. The consideration received above the nominal value of the shares issued has been
recorded as share premium.

During the year no shares were issued in respect of share-based payment transactions for Directors and 90,127 shares vested and
were issued in respect of share-based payment transactions for other key management personnel.

146

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

26 SHARE-BASED PAYMENTS
The Group enters into equity-settled payment transactions with its employees. For the year ended 31 December 2020, the charge was
£0.3 million (2019: £0.4 million). The overall Consolidated Statement of Financial Position is unchanged as a result of this.

The Group operates an annual Save As You Earn scheme, allowing employees to make monthly contributions over a three-year period
which are then used to purchase Company shares at a fixed price. This price is agreed at the inception of the scheme, and carried a
discount on the market value at that date of 20%.

For details of share-based payment schemes see pages 95 to 97 of the Directors’ Remuneration Report.

No further disclosure has been provided on the grounds of materiality.

27 CONTINGENT ASSETS AND LIABILITIES
The Group has entered into a cross-guarantee arrangement to cover the bank borrowings of all other Group companies in the event of
default. As at 31 December 2020 the bank borrowings were £13.0 million (2019: £40.0 million).

The Group had no other material contingent assets or liabilities (31 December 2019: £nil).

28 CAPITAL COMMITMENTS
The Group had capital commitments of £1.0 million at the balance sheet date (2019: £nil).

29 RETIREMENT BENEFITS
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in
an independently administered fund. The pension cost represents contributions payable by the Group to the fund and amounted to
£1.9 million (2019: £1.8 million).

30 RELATED PARTY TRANSACTIONS
The Group’s subsidiary undertakings are detailed in Note 37.

Transactions with key management personnel
The remuneration of Executive and Non-executive Directors is disclosed on pages 85 to 100.

Other related party transactions
Kalverboer Management UK LLP is controlled by P H L Kalverboer, who until May 2019 was a Director of Eurocell plc. Kellmann
Recruitment Limited is controlled by T Kelly, a close family member of M Kelly who is a Director of Eurocell plc.

Kellmann Recruitment Limited – recruitment services
Kalverboer Management UK LLP – director remuneration

The following balances are outstanding at the balance sheet date:

Kellmann Recruitment Limited
Kalverboer Management UK LLP

2020
£000

48
–

2020
£000

3
–

2019
£000

22
17

2019
£000

–
–

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

147

/Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2020

31 RECONCILIATION OF (LOSS)/PROFIT AFTER TAX TO CASH GENERATED FROM OPERATIONS

(Loss)/profit after tax
Taxation
Finance expense

Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Impairment of goodwill
Impairment of right-of-use assets
Share-based payments
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions

Cash generated from operations

32 RECONCILIATION OF NET DEBT

Cash and cash equivalents
Bank overdrafts
Lease liabilities
Borrowings

Total

Cash and cash equivalents
Lease liabilities
Borrowings

Total

1 January
2020
£m

4.9
—
(34.1)
(39.5)

(68.7)

Added on
acquisition
£m

–
–
(0.1)

(0.1)

1 January
2019
£m

5.9
(34.6)
(29.4)

(58.1)

2020
£m

(2.2)
0.7
2.2

0.7

6.8
12.4
1.6
5.8
0.9
0.3
(0.8)
2.4
3.1
0.7

33.9

2019
£m

19.3
3.4
1.9

24.6

5.8
10.2
1.8
—
—
0.4
(9.0)
(1.7)
(2.3)
(0.8)

29.0

Cash flows
£m

New leases
£m

Non-cash
movements*
£m

31 December
2020
£m

2.2
(4.5)
12.0
27.2

36.9

—
—
(26.3)
—

(26.3)

—
—
—
(0.2)

(0.2)

7.1
(4.5)
(48.4)
(12.5)

(58.3)

Cash flows
£m

New leases
£m

Non-cash
movements*
£m

31 December
2019
£m

(1.0)
10.7
(9.9)

(0.2)

–
(10.2)
–

(10.2)

–
–
(0.1)

(0.1)

* Non-cash movements relate to the amortisation of arrangement fees in respect of the Group’s borrowings.

31 December 2020

Cash and cash equivalents
Bank overdrafts
Lease liabilities
Borrowings

Total

31 December 2019

Cash and cash equivalents
Lease liabilities
Borrowings

Total

Current
assets
£m

Current
liabilities
£m

Non-current
liabilities
£m

7.1
—
—
—

7.1

Current
assets
£m

4.9
–
–

4.9

—
(4.5)
(8.9)
—

(13.4)

Current
liabilities
£m

–
(8.3)
–

(8.3)

—
—
(39.5)
(12.5)

(52.0)

Non-current
liabilities
£m

–
(25.8)
(39.5)

(65.3)

4.9
(34.1)
(39.5)

(68.7)

Total
£m

7.1
(4.5)
(48.4)
(12.5)

(58.3)

Total
£m

4.9
(34.1)
(39.5)

(68.7)

33 EVENTS AFTER THE BALANCE SHEET DATE
The Directors are not aware of any material events that have occurred after 31 December 2020 which would require disclosure under IAS 10.

148

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Company Statement of Financial Position
As at 31 December 2020

StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Assets
Non-current assets
Investments

Total non-current assets

Current assets
Trade and other receivables
Deferred tax
Cash and cash equivalents

Total current assets

Total assets

Liabilities
Current liabilities
Trade and other payables

Total current liabilities

Non-current liabilities
Borrowings

Total non-current liabilities

Total liabilities

Net assets

Issued capital and reserves attributable to owners of the Company
Share capital
Share premium account
Share-based payment reserve
Retained earnings

Total equity

Note

38
39

25
25
26

2020
£m

17.8

46.7
0.1
0.1

46.9

64.7

–

(12.5)

52.2

0.1
21.1
0.5
30.5

52.2

2019
£m

17.8

55.6
0.3
–

55.9

73.7

(0.1)

(39.5)

(39.6)

34.1

0.1
2.4
0.9
30.7

34.1

A separate Statement of Comprehensive Income for the Company is not presented, in accordance with Section 408 of the Companies
Act 2006. The Company recognised a loss of £0.8 million in the year (2019: profit of £13.8 million). Dividend income from subsidiary
undertakings included in the results was £nil (2019: £15.0 million).

The Financial Statements on pages 149 to 157 were approved and authorised for issue by the Board of Directors on 11 March 2021
and were signed on its behalf by:

Mark Kelly
Director

Michael Scott
Director

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

149

/
Company Statement of Changes in Equity
For the year ended 31 December 2020

Balance at 1 January 2020
Comprehensive expense for the year
Loss for the year

Total comprehensive expense for the year
Contributions by and distributions to owners
Share capital issued
Exercise of share options
Share-based payments
Deferred tax on share-based payments

Total transactions with owners recognised directly

in equity

Balance at 31 December 2020

Balance at 1 January 2019
Comprehensive income for the year
Profit for the year

Total comprehensive income for the year
Contributions by and distributions to owners
Exercise of share options
Share-based payments
Deferred tax on share-based payments
Dividends paid

Total transactions with owners recognised directly

in equity

Share
capital
£m

0.1

–

–
–
–
–

–

0.1

Share
capital
£m

0.1

–

–
–
–
–

–

Share
premium
account
£m

2.4

–

17.1
1.6
–
–

18.7

21.1

Share
premium
account
£m

2.4

–

–
–
–
–

–

Balance at 31 December 2019

0.1

2.4

Share-based
payment
reserve
£m

0.9

–

–
(0.6)
0.3
(0.1)

(0.4)

0.5

Share-based
payment
reserve
£m

0.4

–

–
0.4
0.1
–

0.5

0.9

Retained
earnings
£m

30.7

(0.8)

–
0.6
–
–

0.6

30.5

Retained
earnings
£m

26.3

13.8

–
–
–
(9.4)

(9.4)

30.7

Total
equity
£m

34.1

(0.8)

17.1
1.6
0.3
(0.1)

18.9

52.2

Total
equity
£m

29.2

13.8

–
0.4
0.1
(9.4)

(8.9)

34.1

150

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/Notes to the Company Financial Statements
For the year ended 31 December 2020

StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

34 ACCOUNTING POLICIES (COMPANY)
Corporate information
Eurocell plc (the ‘Company’) is a publicly listed company incorporated and domiciled in the United Kingdom. The registered office is
located in England, at the following address: Eurocell Head Office and Distribution Centre, High View Road, South Normanton, Alfreton,
DE55 2DT.

The Company is principally engaged as a holding company for its subsidiaries which are engaged in the extrusion of PVC window and
building products to the new and replacement window market and the sale of building materials across the UK.

The Company has adequate resources to continue in operational existence for the foreseeable future and, as a result of this, the going
concern basis has been adopted in preparing the Financial Statements (see below).

These financial statements have been prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework
in conformity with the requirements of the Companies Act 2006 (‘FRS 101’) and the applicable legal requirements of the Companies
Act 2006.

These Financial Statements have been prepared under the historical cost convention in accordance with UK GAAP and the Companies
Act 2006.

Going concern
The position of the Company mirrors that of the Eurocell Group. The Eurocell Group funds its activities through a £75 million Revolving
Credit Facility, provided by Barclays and HSBC, which matures in December 2023. The facility includes two key financial covenants,
which are tested at 30 June and 31 December on a pre-IFRS 16 basis. These are that net debt should not exceed 3 times adjusted
EBITDA (Leverage), and that adjusted EBITDA should be at least 4 times the interest charge on the debt (Interest Cover).

In assessing going concern, the Directors have considered financial projections for the period to December 2023, which is consistent
with the Board’s strategic planning horizons. These forecasts have been compiled based on the best estimates of our commercial and
operational teams. This includes a ‘Downside’ scenario, which reflects demand for our products being severely weakened, either by
the impact of further COVID-19 disruption on consumer confidence, or by widened consumer choices when restrictions are lifted.

However, the business has remained open and trading as normal throughout 2021 to date, following guidance issued by the
Department for Business, Energy & Industrial Strategy that the construction sector and its manufacturing supply chain should continue
to operate, provided that safe working practices are maintained.

In all scenarios tested, the Group operates with significant headroom on its RCF facility and remains compliant with its original
covenants.

After reviewing the Group’s projected financial performance and financing arrangements, the Directors consider that the Company has
adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in preparing
these Financial Statements.

Changes in accounting policies and disclosures applicable to the Company
The Company adopted no new accounting standards in the year.

Investments in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for impairment.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

151

/Notes to the Company Financial Statements continued
For the year ended 31 December 2020

34 ACCOUNTING POLICIES (COMPANY) continued
Financial assets
The Company’s financial assets comprise trade and other receivables and cash and cash equivalents in the balance sheet. The
Company records all of its financial assets at amortised cost and has not classified any of its financial assets as fair value through profit
and loss or other comprehensive income.

Financial assets are non-derivative assets with fixed or determinable payments that are not quoted in an active market. They arise
principally through the provision of funding to Group companies, but also incorporate other types of contractual monetary asset. They
are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method, less provision for impairment.

The Company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
intra-group receivables.

Expected loss rates are derived based upon the payment profile of Group companies over a three-year period up to the reporting date,
and the corresponding credit losses experienced. These rates are then adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of Group companies to settle receivables, including GDP, the rate of unemployment, new
housing starts, interest rates and household disposable income. Where the adjusted loss rates are different from the original estimate,
there is an impact on the carrying value of amounts owed by Group undertakings and the amount credited or charged on a net basis to
operating expenses within the Statement of Comprehensive Income.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was
immaterial.

Financial liabilities
The Company classifies its financial liabilities as other financial liabilities which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the

• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at

amortised cost using the effective interest method.

Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its
tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction

•

affects neither accounting nor taxable profit; and
investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which
the difference can be utilised.

Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be
settled or recovered.

Share capital
The Company’s ordinary shares are classified as equity instruments.

152

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

Further information regarding dividends is provided in Note 13.

FRS 101 exemptions
The following exemptions from the requirements of IFRS have been applied in the preparation of the Company Financial Statements, in
accordance with FRS 101:

Paragraphs 45(b) and 46 to 52 of IFRS 2, Share-based Payment (details of the number and weighted-average exercise prices of share
options, and how the fair value of goods or services received was determined).

Paragraph 38 of IAS 1, Presentation of Financial Statements, comparative information requirements in respect of:
i. paragraph 79(a)(iv) of IAS 1;
ii. paragraph 73(e) of IAS 16 Property, Plant and Equipment; and
iii. paragraph 118(e) of IAS 38 Intangible Assets (reconciliations between the carrying amount at the beginning and end of the period).

The following paragraphs of IAS 1, Presentation of Financial Statements:
• 10(d), (statement of cash flows);
• 10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy

retrospectively or makes a retrospective restatement of items in its Financial Statements, or when it reclassifies items in its Financial
Statements);

• 16 (statement of compliance with all IFRS);
• 38A (requirement for minimum of two primary statements, including cash flow statements);
• 38B-D (additional comparative information);
• 40A-D (requirements for a third statement of financial position);
• 111 (cash flow statement information); and
• 134-136 (capital management disclosures).

Paragraph 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (requirement for the disclosure of
information when an entity has not applied a new IFRS that has been issued but is not yet effective).

Paragraph 17 and 18A of IAS 24, Related Party Disclosures (key management compensation).

The requirements in IFRS 7 Financial Instruments: Disclosures.

The requirements in IAS 24, Related Party Disclosures to disclose related party transactions entered into between two or more
members of a group.

35 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events, that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and judgements.

a) Carrying value of investments
The Company assesses the carrying value of its investments at least annually, or when an indication of impairment arises. Where the
carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is
written down accordingly. Recoverable amounts are determined from value-in-use calculations applied to each investment, which have
been predicated on discounted cash flow projections from approved budgets and forecasts covering a three-year period.

The Company assessed the recoverable amount in respect of each of its investments to be greater than the carrying amount and
therefore no impairment arises.

The key estimates are the discount rate and the level of profit growth assumed in perpetuity. If the discount rate increased by 100 basis
points, or if the level of profit growth in perpetuity was zero, none of the Company’s investments would be at risk of material
impairment, and therefore no further sensitivity disclosures have been provided.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

153

/Notes to the Company Financial Statements continued
For the year ended 31 December 2020

35 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS continued
b) Recoverability of amounts owed by Group undertakings
The Company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
amounts owed by Group undertakings. Expected loss rates are derived based upon the payment profile of Group companies over a
three-year period up to the reporting date, and the corresponding credit losses experienced. These rates are then adjusted to reflect
current and forward-looking information on macroeconomic factors affecting the ability of Group companies to settle receivables,
including GDP, the rate of unemployment, new housing starts, interest rates and household disposable income.

Where the adjusted loss rates are different from the original estimate, there is an impact on the carrying value of amounts receivable
from Group undertakings and this amount is credited or charged on a net basis to operating expenses within the Statement of
Comprehensive Income. The key judgement is the extent to which macroeconomic factors impact upon the recoverability of amounts
owed by Group companies.

If loss rates were, on average, 100 basis points higher than current estimates, the provision for impairment would increase by less
than £500,000.

c) Use of the going concern basis in preparing the accounts
The Company has applied the going concern basis in preparing the accounts. In assessing going concern, the Directors have
considered the Group’s financial projections for the period to December 2023, which is consistent with the Board’s strategic planning
horizons. These forecasts have been compiled based on the best estimates of our commercial and operational teams.

In all scenarios tested, including sensitivities reducing sales forecasts to 5% below 2019 for the period 2021-23, the Company operates
with significant headroom on its RCF facility and remains compliant with its original covenants.

36 EMPLOYEE BENEFITS EXPENSE

Staff costs (including Directors) comprise:
Wages and salaries
Social security costs

2020
£m

0.3
–

0.3

2019
£m

0.3
–

0.3

The average number of monthly employees was three (2019: three), all of whom are Directors of the Company.

Key management personnel compensation and Directors’ remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the Company, which is considered to be the Directors of the Company.

Emoluments
Share-based payments
Pension and other post-employment benefit costs

2020
£m

0.9
0.1
0.1

1.1

2019
£m

1.0
0.1
0.1

1.2

The emoluments are paid by Eurocell Group Limited. Directors’ remuneration is set out in the Remuneration Report on pages 85 to 100.

During the year, retirement benefits were accruing to two Directors in respect of defined contribution pension schemes (2019: two).

The highest paid Director received remuneration of £466,000 (2019: £673,000). 63,322 share options were exercised by Directors of
the Company during the current year (2019: nil), of which 51,049 were exercised by the highest paid Director.

The value of contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £57,000
(2019: £58,000).

154

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

37 INVESTMENTS

Cost

At 31 December 2020 and at 31 December 2019

Investments in
subsidiary
undertakings
£m

17.8

The subsidiaries of Eurocell plc, all of which have been incorporated in the United Kingdom, are included in these Consolidated
Financial Statements, as follows:

Name

Principal activity

Eurocell Holdings Limited*
Eurocell Group Limited
Eurocell Building Plastics Limited
Eurocell Profiles Limited
Vista Panels Limited
Security Hardware Limited
Ecoplas Limited**
Kent Building Plastics Limited
Trimseal Limited
S&S Plastics Limited
Fairbrook Group Limited
Fairbrook Limited
Fairbrook Holdings Limited
Eurocell Window Systems Limited
Eurocell Plastics Limited
Cavalok Building Products Limited
Merritt Plastics Limited
Merritt Engineering Limited
Deeplas Limited
Deeplas Building Plastics Limited
Ampco 113 Limited

Holding company
Holding company
Sale of building plastic materials
Manufacture and sale of building plastic materials
Manufacture and sale of doors
Sale of locks and security hardware products
Recycler of PVC windows
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant

Holding

2020

100%
100%
100%
100%
100%
100%
95%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

2019

100%
100%
100%
100%
100%
100%
95%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

* Directly held by Eurocell plc.
** Ecoplas Limited is treated as a wholly-owned subsidiary for the purposes of consolidating the financial statements due to the fact that the remaining 5% shareholding is

held under a put and call option.

All of the above have a registered address of Eurocell Head Office and Distribution Centre, High View Road, South Normanton,
Alfreton, Derbyshire, DE55 2DT.

The Company assesses that the recoverable amounts of these investments are supportable. Recoverable amounts have been
determined from ‘value-in-use’ calculations which have been predicated on discounted pre-tax cash flow projections based on a
three-year business plan approved by the Board. These projections are based on all available information and growth rates do not
exceed growth rates achieved in prior periods.

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

155

/Notes to the Company Financial Statements continued
For the year ended 31 December 2020

37 INVESTMENTS continued
All of the Company’s CGUs operate principally in the UK Repair, Maintenance and Improvements market, and all are funded through a
combination of retained earnings and the Group’s Revolving Credit Facility. The strategic decision-making timeframe is also consistent
across all CGUs. Consequently, the key assumptions detailed below are applied consistently across the Group’s entities:

Period on which management-approved forecasts are based (years)
Discount rate (pre-tax)
Profit growth rate in perpetuity

38 TRADE AND OTHER RECEIVABLES

Prepayments and other debtors
Amounts owed by Group undertakings

Total trade and other receivables

2020

3
11%
2%

2020
£m

0.5
46.2

46.7

2019

3
10%
2%

2019
£m

0.4
55.2

55.6

Amounts owed by Group undertakings attract interest of 2% and are repayable on demand.

The Company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for
all financial assets. In measuring expected credit losses, receivables have been grouped based on shared characteristics and days
past due.

The Directors have assessed the risk of impairment of its amounts owed by Group undertakings as at 31 December 2020. After
considering the projected future cash flows expected to arise in its subsidiary entities, the Directors believe that the amounts owed by
Group undertakings are recoverable.

39 DEFERRED TAX

At 1 January
(Charged)/credited to equity
(Charged)/credited to the Statement of Comprehensive Income

At 31 December

2020
£m

0.3
(0.1)
(0.1)

0.1

2019
£m

0.1
0.1
0.1

0.3

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered.

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by
IAS 12) during the year, together with amounts recognised in the Statement of Comprehensive Income and amounts recognised in
Other Comprehensive Income are as follows:

Other temporary differences

Net tax assets

Other temporary differences

Net tax assets

Asset
2020
£m

0.1

Asset
2019
£m

0.3

Liability
2020
£m

–

Liability
2019
£m

–

Statement of
Comprehensive
Income
2020
£m

(0.1)

Statement of
Comprehensive
Income
2019
£m

0.1

Net
2020
£m

0.1

Net
2019
£m

0.3

Equity
2020
£m

(0.1)

Equity
2019
£m

0.1

Amounts within other comprehensive income due to be settled in greater than one year are not material and therefore no further
disclosure has been provided.

156

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

/StRAtEGIC REPORt

CORPORAtE GOVERNANCE

FINANCIAL STATEMENTS

40 TRADE AND OTHER PAYABLES

Trade and other payables

Total current liabilities

Book values approximate to fair value at 31 December 2020 and 2019.

Trade payables are non-interest-bearing and are generally settled on 30-60 day terms.

41 BORROWINGS
The book value and fair value of borrowings are as follows:

2020
£m

–

2019
£m

0.1

Non-current
Bank borrowings unsecured

Total borrowings

Book value
2020
£m

Fair value
2020
£m

Book value
2019
£m

12.5

39.5

Fair value
2019
£m

39.5

Borrowings
In March 2020 the Company amended its multi-currency revolving unsecured credit facility held with Barclays Bank plc and HSBC UK
Bank plc, increasing the facility from £60 million to £75 million, but with all other key terms remaining unchanged. Costs amounting to
£0.2 million were incurred in amending the facility. These costs have been capitalised, and are being released to the Statement of
Comprehensive Income over the period of the facility, which expires in December 2023.

Borrowings of £13.0 million were drawn down at 31 December 2020 (2019: £40.0 million). Total unamortised costs, which are
presented as a deduction to borrowings, were £0.5 million as at 31 December 2020 (2019: £0.5 million).

Interest is charged at an excess over base rate of between 1.25% and 2.25% per annum and is dependent upon the ratio of total net
debt to consolidated EBITDA (on a pre-IFRS 16 basis).

Based upon current economic and market trends, management consider that the sterling LIBOR rate (or SONIA, which is due to
replace LIBOR in 2021) will remain relatively stable during the next year, and any changes, when applied to the current bank borrowings
of £13.0 million would not lead to a significant change in finance expense.

All borrowings are denominated in Sterling.

42 RELATED PARTY TRANSACTIONS
Transactions with key management personnel
The remuneration of Executive and Non-executive Directors is disclosed on pages 85 to 100.

Kellmann Recruitment Limited – recruitment services

Kalverboer Management UK LLP – director remuneration

The following balances are outstanding at the balance sheet date:

Kellmann Recruitment Limited

Kalverboer Management UK LLP

2020
£000

–

2020
£000

–

2019
£000

–

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

157

/Company Information
For the year ended 31 December 2020

Directors

Bob Lawson
Frank Nelson
Martyn Coffey
Sucheta Govil
Mark Kelly
Michael Scott

Registered Number

08654028

Registered Office

Independent Auditors

Bankers

Eurocell Head Office and Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT

PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
One Chamberlain Square
Birmingham
B3 3AX

Barclays Bank plc
1 Churchill Place
London
E14 5HP

HSBC UK Bank plc
1 Centenary Square
Birmingham
B1 1HQ

158

EUROCELL PLC ANNUAL REPORT AND ACCOUNTS 2020

For more investor information,
visit www.investors.eurocell.co.uk

Eurocell Head Office And Distribution Centre
High View Road
South Normanton
Alfreton
DE55 2DT