Luxfer Holdings PLC
Annual Report 2021

Plain-text annual report

Registered No. 03690830 LUXFER HOLDINGS PLC Annual Report and Financial Statements 31 December, 2021 LUXFER HOLDINGS PLC ¦ Lumns Lane ¦ Manchester ¦ M27 8LN LUXFER HOLDINGS PLC Contents STRATEGIC REPORT Principal Activities and Review of the Business Strategy and Business Model Key Performance Indicators (“KPIs”) Review of the Year Ended 31 December, 2021 Environment, Social and Governance ("ESG") Matters Principal Risks and Uncertainties GOVERNANCE The Board of Directors Corporate Governance Executive Leadership Team Directors’ Report Directors’ Interests and Related Party Transactions Directors’ Remuneration Report Remuneration Report Statement of Directors' Responsibilities in Respect of the Financial Statements INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF LUXFER HOLDINGS PLC FINANCIAL STATEMENTS Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Company Balance Sheet Company Cash Flow Statement Company Statement of Changes in Equity Notes to the Company Financial Statements 3 3 4 5 6 29 9 14 14 19 26 37 37 41 43 62 63 71 71 72 73 74 75 76 124 125 126 127 1 LUXFER HOLDINGS PLC Glossary of Terms Unless the context in which we use the terms indicates otherwise, the following terms used in this report have the following meanings: AGM Annual General Meeting of the Company. Articles The Articles of Association of Luxfer Holdings PLC adopted by special resolution of the Company on 26 October 2011, effective from the date of the I.P.O. (and subsequently updated). Companies Act U.K. Companies Act 2006. FPI GAAP Group IFRS I.P.O. NYSE Foreign Private Issuer under the SEC registration rules. Generally Accepted Accounting Principles is an accounting standard adopted by the U.S. Securities and Exchange Commission. Luxfer Holdings PLC and its subsidiaries. International Accounting Standards in conformity with the requirements of Companies Act 2006 The Initial Public Offering in the U.S. completed by Luxfer Holdings PLC on 9 October, 2012. New York Stock Exchange. £0.50 Ordinary Shares SEC Year LTIP The Company’s ordinary shares of £0.50 each. Securities and Exchange Commission of the U.S. 1 January, 2021, to 31 December, 2021. Long-Term Umbrella Incentive Plan. 2 LUXFER HOLDINGS PLC STRATEGIC REPORT Principal Activities and Review of the Business Luxfer Holdings PLC ("Luxfer," "the Company," "we," "our") is a global industrial company innovating niche applications in materials engineering. Luxfer focuses on value creation by using its broad array of technical know-how and proprietary technologies. Luxfer's high-performance materials, components and high-pressure gas containment devices are used in defense, first response and healthcare, transportation and general industrial applications. The principal activity of Luxfer Holdings PLC is that of the holding company for the Luxfer Group. We focus primarily on product lines related to magnesium alloys, zirconium chemicals and carbon composites. We have a long history of innovation derived from our strong technical expertise, and we work closely with customers to apply solutions to their most demanding product needs. Our proprietary technologies and technical expertise, coupled with strong customer service and global presence, provide competitive advantages and have established us as leaders in the global markets we serve. We believe that we have leading positions in key product areas, including magnesium aerospace alloys, photo-engraving plates, zirconium chemicals for automotive catalytic converters, and high-pressure composite cylinders for breathing applications and a wide variety of other uses. We have a global presence, operating 13 manufacturing plants in the U.S., the U.K., Canada and China, one of which relates to discontinued operations, and we also have a joint venture in Japan. We employ approximately 1,400 people, including temporary staff, of which fewer than 100 relate to discontinued operations. Luxfer operates in two business segments - Elektron and Gas Cylinders: Our Elektron Segment focuses on specialty materials based primarily on magnesium and zirconium. Our key product lines under the Elektron Segment includes: • Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys for use in aerospace, healthcare and oil and gas applications. • Magnesium powders used in countermeasure flares that protect aircrafts from heat-seeking missiles and also for heating pads for self-heating meals used by the military and emergency-relief agencies. • High-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, pharmaceuticals and many other performance products. • Magnesium, copper, and zinc photoengraving plates for graphic arts and luxury packaging. Our Gas Cylinders Segment manufactures and markets specialized, highly-engineered cylinders using carbon composites and aluminum. Our key product lines under the Gas Cylinders Segment include: • • • Carbon composite cylinders for compressed natural gas (CNG) and hydrogen containment in alternative fuel (AF) vehicles. Carbon composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other emergency-responders. Our products are also used by scuba divers and personnel in potentially hazardous environments, such as mines. Cylinders used for the containment of oxygen and other medical gases used by patients, healthcare facilities and laboratories. 3 LUXFER HOLDINGS PLC Strategy and Business Model Despite the exceptional economic challenges of 2021, we ended the year with a strong balance sheet and returned approximately $20 million to shareholders through dividends and share buybacks throughout the year. Our solid financial performance in 2021 was backed by strong progress on our strategic Transformation Plan, a key driving factor in our overall business strategy. Our Transformation Plan is underpinned by the Luxfer Business Excellence Standard Toolkit ("Luxfer BEST"), which consists of the following themes: • • • • • A common set of values that drive accountability, innovation, customer first, personal development, teamwork and integrity; A lean enterprise philosophy comprised of the five pillars of Luxfer BEST which drive operational excellence in sales, marketing, innovation, human resources, supply, manufacturing, information technology and finance; Disciplined capital allocation with the aim of maximizing organic growth and the product portfolio value through value-enhancing acquisitions and divestitures; Balanced scorecards reviewed by our leadership teams to measure performance and ensure that compensation is commensurate with individual performance; and A published Customer Charter designed to retain and grow our customer base and capture additional market share. Over the past few years, we have worked under the Transformation Plan to generate long-term shareholder value by simplifying the Company's structure, launch growth initiatives, generate significant cost savings, and instill a high-performance growth culture. During Phase I of the Plan, we substantially simplified our operations through divesture of most of our aluminum operations. We also expanded our investor base, streamlined our financial reporting, and enhanced our corporate governance practices. In Phase II of the plan, we focused on driving growth by focusing on our customers, rebuilding our new products pipeline, maintaining commercial excellence, and pursuing value-creating acquisitions. Specifically, we successfully acquired Structural Composites Industries in March 2021 which provided several benefits to our customers including (i) expanded technology capabilities and product offerings; (ii) increased equipment and operational capabilities, providing flexibility and better service to customers; and (iii) further investment in R&D and innovation. Our Elektron segment also launched new UGR-E offerings in our MRE product line and is working to apply our expertise in zirconium technology to new products in the medical and electronics end- market. With our continued focus on innovation, Luxfer will continue maintaining strong relationships with our current customers and establish bonds with new customers under Phase II of the Plan. Going into 2022, we have entered the final Phase of the Transformation Plan with a solid foundation for long- term growth. As such, we announced our decision to raise our earnings per share guidance to $2.00 or more by 2025, demonstrating our confidence in the future earnings power of the Company. Our Transformation Plan, backed by Luxfer BEST, are at the core of our business strategy. We believe that these tools and strategies give us a stronger competitive advantage, allowing us to focus on innovation and new product development, further drive our strong technical expertise and know-how, diversify our customer base, and accelerate shareholder value creation. 4 LUXFER HOLDINGS PLC Key Performance Indicators (“KPIs”) Luxfer used the following performance indicators to assess its development against its strategic and financial objectives in 2021. Since 2018, KPIs were monitored under U.S. GAAP. and these reconciliations to non-GAAP measures can be found in our Form 10-K filed with the SEC on February 24, 2022. Prior to 2018, the primary GAAP was IFRS. All years have been restated for discontinued operations. Operating performance Revenue Adjusted net income1 Basic earnings per share Adjusted diluted earnings per ordinary share Adjusted EBITDA2 Revenue per employee3 Financial performance Net cash flow from operating activities Net debt to adjusted EBITDA4 Non-financial performance Number of work-related accidents causing lost days5 ISO 14001 environmental management system certification6 Economic indicators Average U.S. dollar to GBP sterling exchange rate Average Euro to GBP sterling exchange rate 2021 2020 2019 2018 2017 374.1 324.8 373.4 401.9 348.0 36.2 28.9 40.9 48.0 0.90 0.61 0.15 0.55 1.29 1.03 1.47 1.73 63.4 53.9 67.1 79.6 27.6 0.43 1.03 57.1 247 $'000s 285 256 279 285 $m $m $ $ $m $m times LTAs % $:£ €:£ 30.6 56.9 10.2 57.3 45.2 0.8 1.0 1.2 0.8 1.6 15 8 5 18 12 65.9 69.2 86.4 92.1 90.0 1.38 1.28 1.28 1.33 1.17 1.13 1.12 1.13 1.30 1.14 1. 2. A non-GAAP measure for net income after tax, excluding certain non-trading items. Reconciliation to GAAP measure is disclosed in our Form 10-K, filed with the SEC ('Securities and Exchange Commission of the U.S.') on February 24, 2022. A non-GAAP measure for earnings before interest, tax, depreciation and amortisation and other items. Reconciliation to GAAP measure is disclosed in Form 10-K filed with the SEC on February 24, 2022. 3. Revenue per employee is defined as revenue from continuing operations divided by the average number of monthly 4. 5. 6. employees for the year. Net debt is defined as cash and cash equivalents less non-current bank and other loans. Under regulations issued by the Occupational Safety & Health Administration of the U.S. Department of Labor, Lost Time Accidents ("LTAs") are defined as the number of work-related accidents resulting in an absence from the workplace for a minimum of one full work day. Percentage of revenue originating from ISO14001-certified businesses. 5 LUXFER HOLDINGS PLC Review of the Year Ended 31 December, 2021 Although we faced challenges in 2021 due to the impact of the COVID-19 pandemic and supply-chain constraints, we continued to launch growth and lean manufacturing initiatives, deliver strong productivity, and invest in our culture and talent. This strategic progress reflects our focus on executing our Transformation Plan, which was designed to profitably grow the Luxfer business and increase returns to our shareholders. Further details on our Transformation Plan can be found on page 4 of the Strategic Report. From 2016 to 2019, our top line growth averaged 5%, however due to COVID-19 in 2020, our revenue performance for 2020 showed a decline of 13%. In 2021, our revenue grew 15.2%, aided by the acquisition of Structural Composite Industries LLP ("SCI") as well as the recovery in volumes adversely impacted by COVID-19 in the prior year. Coupled with our cost reductions efforts adjusted EBITDA grew from 2020 by 17.6% to $63.4 million, with an adjusted EBITDA margin 16.9% (2020: 16.6%). We ended 2021 with a strong balance sheet, with a slight decrease in our net debt to $53.4 million, but an improved net debt to adjusted EBITDA ratio of 0.8x compared to 1.0x at the end of 2020. We generated $21.5 million in free cash flow over the year, using approximately $4 million in cash for restructuring activities related to our Transformation Plan. Net income from continuing operations for 2021 was $24.8 million compared to $17.8 million in 2020. We continued to return funds to shareholders in the form of regular dividends each quarter throughout 2020 and $6.4 million in the form of share buybacks. As markets recover we expect to return to growth in 2022 and with a strong balance sheet, Luxfer is well positioned to create additional value for our shareholders. Translation Exchange Rates The consolidated financial statements are presented in U.S. dollars, the reporting currency of the Group. The principal currencies used to translate the results of non-U.S. operations is GBP sterling. In 2021, GBP sterling fluctuations relative to the U.S. dollar resulted in net favourable movements when translating the operating results of U.K. operations into U.S. dollars. Revenue On an IFRS reported basis, revenue from operations was $374.1 million in 2021, an increase from $324.8 million in 2020. The reasons for revenue decline are discussed in detail by segment below. Elektron Segment revenue in 2021 was $195.8 million compared to $182.9 million in 2020, an increase of 7.1% on the prior year, largely as a result of the recovery from COVID-19 related disruption affecting the prior year, especially: • • • • Increased sales of zirconium-based industrial catalysts; Increased sales of magnesium photo-engraving plates; Increased sales of military powders used in countermeasure flares; and Increased sales of wrought magnesium alloys, especially those used in our transportation end markets. This was partially offset by decreased revenues from Luxfer Magtech chemical detection kits and from heater meals. Gas Cylinders Segment revenue was higher at $178.3 million compared to $141.9 million in 2020, a 25.7% increase on the prior year. The result was primarily due to the recovery of our markets following COVID-19 related disruption in the prior year, as well as the acquisition of SCI at the end of the first quarter of the current year, which generated $24.9 million of additional revenues. Revenues increased across all significant product lines except for medical oxygen cylinders, sales of which had held up relatively well in the prior year. Cost of Sales and Gross Profit Gross profit of $107.1m increased 22.4% from $87.5m in 2020. The $19.6m increase in gross profit was primarily the result of production efficiency linked to increased volumes as we recovered from the prior year impact of COVID-19. This was partially offset by the impact of material cost inflation not fully covered by price increases primarily in the fourth quarter. 6 LUXFER HOLDINGS PLC Operating Profit Operating profit of $40.7 million increased 31.3% from $31.0 million in 2020. The $19.6 million increase in gross profit has resulted in increased distribution and administrative costs as the Company continues to recover from the COVID-19 pandemic. Restructuring and other expenses of $5.5 million were down from $7.3 million in 2020. In response to uncertain global economic conditions, we undertook actions to reduce the Company's cost structure and improve operating efficiency in 2020. These actions included a workforce reduction program resulting in $1.4 million of severance-related charges, of which $0.4 million and $0.9 million was incurred in the Gas Cylinders and Elektron segment respectively, and $0.1 million in Other. Taxation In 2021, we reported a tax charge of $8.4 million on profit before tax of $33.2 million, representing an effective tax rate of 25.3%. The charge of $8.4 million was made up of a current income tax charge of $7.2 million and a deferred income tax charge of $1.2 million. The 2021 effective tax rate was impacted due to the effect of non- deductible expenses linked to restructuring projects. In 2020, we reported a tax charge of $6.2 million on profit before tax of $24.0 million, representing an effective tax rate of 25.8%. The tax charge was made up of a current income tax charge of $2.2 million and a deferred tax charge of $4.0 million. The 2020 effective tax rate was significantly impacted due to the effect of large non- deductible expenses linked to restructuring projects. Net Income for the Year Net income for the year from continuing operations was $24.8 million, compared to $17.8 million in 2020. The increase can be attributed to the impact of the prior year cost saving initiatives, coupled with the Company's recovery from the COVID-19 pandemic. Full recovery has been impacted by supply-chain constraints experienced in the fourth quarter of 2021. Cash Flow In 2021, net cash flows from continuing operating activities decreased by $27.1 million to $30.6 million from $56.9 million in 2020. The decrease is predominantly due to an increase in working capital as a result of the recovery from COVID-19. Net cash used in continuing investing activities decreased to $5.0 million compared to $7.1 million in 2020. Capital expenditure in 2021 was $9.1 million, a $0.9 million increase compared with $8.2 million in 2020. In 2021 the Company received net cash proceeds of $20.2 million from the sale of its U.S. aluminum gas cylinder business and $3.0 million for its Superform U.K. business. In addition, $0.2m of deferred consideration was received during the year from the sale of the Company's Indian joint venture in 2020. In 2020, $1.5 of cash was received from the disposal of businesses, due to the sale of its Indian joint venture. In March 2021, the Company completed the acquisition of the SCI business of Worthington Industries, Inc.,based in Pomona, California, for $19.3 million cash consideration. The Company had net cash outflows from financing activities $20.7 million compared to $59.5 million in 2020. The main reason for the decrease was the $25 million early repayment of the loan note due in 2021, coupled with the $13.2 million reduction in the RCF in 2020, compared with a $6.4 million drawdown in 2021. Cash outflows in respect of dividend payments to holders of our ordinary shares were $13.6 million, consistent with 2020. The Company also initiated a share buyback programme in 2021 and repurchased $6.4 million worth of shares in the year. Shareholder Equity and Borrowings Shareholder equity as at December 31, 2021, was $199.0 million, compared to $155.3 million at December 31, 2020, the increase being primarily attributable to the contribution of net income and the favorable movement on the defined benefit pension plans, partially offset by dividend distributions. The Company had gross debt of $59.6 million and net debt of $53.4 million as at December 31, 2021. Invested capital, defined as total shareholder equity plus net debt, was $252.8 million as at December 31, 2021; this compares to an equivalent figure of $207.2 million in 2020. 7 LUXFER HOLDINGS PLC Future Developments Operating objectives and trends that we expect to impact Luxfer in 2022 include the following: • Organic growth initiatives with particular focus on revenue from new products; • • • • • • Continued monitoring and response to macro economic uncertainties, including COVID-19 and global political events; Actions to ensure continuity of supply of critical materials and services while safeguarding margins; Proactive response on health and well-being of employees in response to COVID-19, including continuous improvement on safety; Targeted improvements in ESG standing through investment in new projects; Continued focus on recruiting and developing talent and driving a high-performance culture; and Continued focus on operating cash generation with lower restructuring activity and maintaining strong working capital performance. Essential Contracts or Arrangements Apart from our financing agreements, we do not have any individual contracts or other arrangements that are fundamental to the ability of the business to operate effectively. 8 LUXFER HOLDINGS PLC Principal Risks and Uncertainties Internal Controls and Risk Management Luxfer has a comprehensive, enterprise-wide risk management program designed to assess, monitor, and mitigate risks that arise in the course of business. Consistent with our leadership structure, management has the day-to-day responsibility for assessing and managing the Company’s risk exposure, while the Board of Directors provides oversight in connection with those efforts. In general, the Board oversees the management of risks in the operation of the Company’s business; the implementation of its strategic plan; its acquisitions and divestitures; its capital structure, allocation and liquidity; its risk management controls; and its organizational structure. The Board fulfills its risk oversight function both directly and through delegation to the Board Committees. Each of our Board Committees has historically focused and continues to focus on specific risks within their respective areas of responsibility. The Board performs its risk oversight role in several ways. Board meetings regularly include strategic overviews by the Chief Executive Officer and Chief Financial Officer that describe the most significant issues and risks affecting the Company. Additionally, the Board is regularly provided with business updates from our business unit leaders, General Counsel, and other functional leaders. Reviewing and assessing any identified risks on a regular basis, the Board manages such risks in accordance with Luxfer’s Enterprise Risk Management process. As a global, multi-industrial company, Luxfer faces a range of risks, including general economic, credit and capital market conditions risks, regulatory risks, global climate change risk, and several other risks, which are fully listed and explained in our annual Form 10-K filed with the SEC. Internal Financial Controls During 2021, the internal audit function among other things, continued to work on the internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. As at December 31, 2021, the Executive Director in his capacity as Chief Executive Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and the participation of the Executive Leadership Team, responsible for the management of the internal controls. In accordance with the requirements of Section 404 of the Sarbanes-Oxley Act, and as included in the Form 10-K filed with the SEC, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the Internal Control - Integrated Framework (the 2013 Framework) issued by the Committee of Sponsoring Organisations of the Treadway Commission. Based on this evaluation, management has concluded that internal control over financial reporting was effective as of December 31, 2021. Treasury and Financial Risk The Group operates a central treasury function that controls all borrowing facilities, investment of surplus funds and management of financial risks. The Group also has a number of financial risks. The management of these financial risks and mitigating actions are explained further in Note 28 of the Group consolidated financial statements. We set out in the tables below our principal risks and uncertainties and how we seek to mitigate or eliminate them. Area of Risk Dependency on certain key markets - The Group depends on certain end-markets, including automotive, self-contained breathing apparatus, aerospace and defence, medical and printing and paper. An economic downturn or regulatory changes in any of these end- markets could reduce sales. To the extent that any of these cyclical end markets are in decline, at a low point in their economic cycle, or subject to regulatory change, sales and margins on those sales may be adversely affected. It is possible that all or most of these end markets could be in decline at the same time (e.g., during an economic downturn such as that caused by the current COVID-19 pandemic). Any significant reduction in sales could have a material adverse impact on our results of operations, financial position and cash flows. Mitigating Activity The Group’s diverse product portfolio reduces the risk of any one adverse external economic factor impacting across all of these end-markets; however, a range of external factors could impact across the majority or all of the Group’s end- markets. To further mitigate this risk, the Group continues to invest in research and development and to innovate, working closely with its customers, to develop next generation products in these end markets. 9 Effect of external factors due to the global nature of our business - Our global presence exposes us in the countries in which we operate to economic conditions, geopolitical risks, specific regulations and other external factors, which could affect our operations. Following the U.K.'s exit from the European Union ("EU") on January 31, 2020 a free trade agreement was reached between the U.K, and EU member states in December 2020, with new arrangements taking effect from January 1, 2021. The agreement allows for zero tariffs on goods moving between the UK and EU. However, the rules are complex and it is still possible that tariffs will apply, depending on the origin of components of any goods produced either in the UK or EU. There is also increased regulatory complexity and potential for disruption to the movement of raw materials and finished goods at the border. The impact of these changes will take time to be fully understood and may adversely affect our operations and financial results. Competition - Markets for many of the Group’s products are now increasingly global and highly competitive, especially in terms of quality, price and service. The Group could lose market share as a result of these competitive pressures, which could negatively impact profit margins. More generally, the Group may also face potential competition from manufacturers of products similar to the Group’s aluminum and magnesium-based products using other materials, such as steel, plastics or composite materials. Protection and development of intellectual property rights and changing industry requirements - As a result of the nature of the competition faced by the Group, its ability to remain profitable depends on its ability to protect intellectual property and to invest in research and development, which requires funding. LUXFER HOLDINGS PLC The Group’s diverse product portfolio and geographic spread reduces the risk of any one external factor impacting across all end-markets. The Group also closely monitors geopolitical and global economic developments in its markets and will be closely monitoring the free trade agreement between the UK and EU and will take action in response to future regulations regarding tariffs and the movement of raw materials and finished goods at the border. The Group continues to invest in new and better products and aims to focus its resources in speciality markets that need high-performance products and a reliable partner. The Group seeks to protect its intellectual property through patents and by reducing the disclosure of commercially sensitive information. It also invests long-term in new products and manufacturing processes and maintains this investment through the business cycle. Reliance on major customers - If the Group fails to maintain its relationships with its major customers, or fails to replace customers, or if there were reduced demand from such customers or for the products produced by such customers, it could reduce the Group’s sales and have an adverse effect on the Group’s financial position. The Group’s top 10 customers accounted for, in aggregate, approximately 30% of Group revenue in 2021. Long-term relationships with customers are especially important, and the Group’s operations work closely with customers to ensure customer service is the best in the industry and aim to support our customers in their development of new products through our own product innovations and technical know-how. Risks relating to interruption of operations - The Group’s production facilities are located worldwide. Any of its facilities could suffer an interruption in production, either at separate times or at the same time, because of various unavoidable occurrences including major equipment failure. Although the Group carries insurance, the cover on certain catastrophic events or natural disasters, including earthquakes and certain other events, could be limited. Effect of international currency markets - Changes in foreign currency exchange rates or interest rates could cause sales to drop or costs to rise. The Group conducts a large proportion of its commercial transactions, purchases of raw materials and sales of goods in various countries and regions outside of the U.K., including the U.S., continental Europe and Asia. Changes in the relative values of currencies can decrease the profits of the Group’s operations through both the translation of profits into USD or on import and export transactions. The Group performs routine maintenance on its production equipment on all its manufacturing sites. These maintenance programmes are carefully planned to keep all plants operating at a high level of efficiency, and to reduce the risk of breakdowns and failure of equipment. Health and Safety is also a major consideration in the operation of the Group manufacturing facilities and is carefully monitored. The Group carries comprehensive business interruption insurance. The Group regularly enters into forward foreign currency exchange contracts to manage currency risks and a Treasury Committee, overseen by the Chief Financial Officer / Corporate Controller, monitors the implementation of the Group’s hedging policy. 10 Exposure to fluctuations in raw material - The Group is exposed to fluctuations in costs of the raw materials and utilities that are used to manufacture its products and can incur unexpected cost changes. The primary raw material used in the manufacturing of gas cylinders and superformed panels is aluminum, and though our operations use specialist alloys, their prices are pegged directly or indirectly to the quoted London Metal Exchange prices for primary aluminum. This makes the costs subject to speculative commodity cost changes, as well as fundamental supply and demand cost pressures. We have also experienced significant cost fluctuations in other raw material costs such as primary magnesium, carbon fibre, zircon sand and rare earths. The Group’s operations also buy and sell goods in regional markets that may be protected by tariff barriers. Changes in these tariffs could have an adverse impact on the profitability of the operations. The recovery in demand from the COVID-19 pandemic has had business impacts, including increased material cost inflation on key inputs, (such as magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases. Currently, our expectation is that the impact of material and energy cost inflation and labor and transport constraints will continue well into 2022. While we aim to pass on cost increases to customers through increased price, there is no guarantee that we will be able to do so in all circumstances. Product liability and regulatory risks - The Group is exposed to possible claims for personal injury, fatality or property damage that could result from a failure of a product manufactured by the Group, or of a third party integrating a Group product. Many factors beyond the Group’s control could lead to liability claims, which may in turn lead to product legal claims or disruption in sales to customers. The Group could be required to pay a material amount if a claim is made against it that is not covered by insurance or otherwise subject to indemnification, or that exceeds the insurance coverage that the Group maintains. Moreover, the Group does not routinely carry insurance to cover the expense of product recalls, and litigation involving significant product recalls or product liability could have a materially adverse effect on the Group’s financial position / performance. Environmental costs and liabilities - The Group may be exposed to substantial environmental costs and liabilities, including liabilities associated with divested assets and prior activities performed on sites before we acquired an interest in them. Our operations, including the production and delivery of our products, are subject to a broad range of environmental laws and regulations in each of the jurisdictions in which we operates. An increase in environmental costs and liabilities could have a materially adverse effect on the Group in any given year, which could negatively affect the Group’s cash flows. Risks relating to the Group’s retirement benefit plans - The Group operates defined benefit arrangements in the U.K and the U.S. These are further explained in Note 30 of the Group consolidated financial statements. Their funding requirements are subject to fluctuations in investment markets and changes in the life expectancy of members. Increased regulatory burdens have also proved to be a significant risk, with taxes such as the U.K.’s Pension Protection Fund Levy, which cost £0.4 million in 2021 (£0.4 million in 2020). Regulations in this area can also constrain the level of debt incurred and restrict the Group’s ability to pay dividends. LUXFER HOLDINGS PLC In the long-term the Group has sought to recover the cost of increased commodity and utility costs through price increases and surcharges. Short term fluctuations in the price risk on aluminum are mitigated by agreeing fixed prices with the suppliers, along with the use of LME derivative contracts. Increasingly, in recent years we have included in our sales agreements an ability to share cost increases with our customers. The Group uses its operating and technical expertise to mitigate these risks, with a strong emphasis on high levels of product quality and rigorous testing, and by ensuring that products are designed to meet or exceed the regulatory design standards of the markets they serve. The Group has also obtained insurance coverage for most of these types of liabilities. To mitigate this risk the Group seeks to operate best practice procedures in this area and is in the process of attaining the ISO 14001 qualification at all of its larger manufacturing sites. The bulk of the Group’s known environmental issues are legacy problems that arose many years ago. Management have a programme in place to progressively improve and eliminate these historic issues. The Group and the Trustees of the plans closely monitor the financial performance of the Schemes, taking actuarial and investment advice as appropriate. These are long-term liabilities, and we have a programme in place to contribute cash to our defined benefit plans over a number of years based on affordability and varied according to our net earnings. Plans are funded and assets are invested in a combination of equities and fixed income securities. 11 Exposure to risks related to cybersecurity threats and incidents - In the conduct of its business, the Group collects, uses, transmits and stores data on information technology systems. This data includes confidential information belonging to us, our customers and other business partners, as well as personally identifiable information of individuals. We have experienced, and expect to continue to be subject to, cybersecurity threats and incidents, ranging from employee error or misuse to individual attempts to gain unauthorised access to information systems to sophisticated and targeted measures known as advanced persistent threats, none of which have materially affected the Group to date. We also rely in part on the reliability of certain tested third parties’ cybersecurity measures, including firewalls, virus solutions and backup solutions. Cybersecurity incidents may result in business disruption, the misappropriation, corruption or loss of confidential information and critical data (ours or that of third parties), reputational damage, regulatory fines, litigation with third parties, diminution in the value of our investment in research and development, data privacy issues and increased cybersecurity protection and remediation costs. Future cybersecurity breaches or incidents or further increases in cybersecurity protection costs may have a materially adverse effect on our business, financial condition or results of operations. Our results of operations may continue to be negatively impacted by the coronavirus disease outbreak -The global COVID-19 outbreak, characterized by increased business uncertainty and broad based market weakness, had an adverse impact on our financial results during 2020, impacting demand across most of our end markets. We took a variety of actions during 2020 to help mitigate the financial impact, including executing additional cost savings measures, reducing our capital spending, initiating restructuring actions and proactively managing our working capital. Activity in most of the end markets we serve has improved throughout 2021 following the adverse impact of COVID-19 on prior year volumes, with current year fourth quarter like-for-like sales returning to positive growth versus the pre-pandemic 2019 level for the first time, and with full year 2021 sales only around 7% lower than 2019. The recovery in demand has had business impacts, including increased material cost inflation on key inputs, (such as magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases. Currently, our expectation is that the impact of material and energy cost inflation and labor and transport constraints will continue well into 2022. While we aim to pass on cost increases to customers through increased price, there is no guarantee that we will be able to do so in all circumstances. LUXFER HOLDINGS PLC The Group devotes significant resources to network security, data encryption and other measures to protect our systems and data from unauthorised access or misuse, including to meet certain information security standards that may be required by our customers, all of which increases cybersecurity protection costs. As these threats, and government and regulatory oversight of associated risks, continue to evolve, we may be required to expend additional resources to enhance or expand upon the security measures we currently maintain. The Company continues to monitor the COVID-19 situation closely, while simultaneously executing business continuity plans. These business continuity plans include, but are not limited to, (i) retooling operations to maintain social distance and maximize employee safety; (ii) increasing resources and efforts to satisfy demand from the most impactful parts of our business; (iii) expanding flexible work arrangements and policies, where practical, to maximize employee safety; (iv) increased monitoring of short-term cash flow, including measures to reduce costs and generate cash; and (v) providing regular updates to our shareholders, employees, customers, and suppliers in a transparent and timely manner. Despite the adverse macro trends, the Company has a strong balance sheet and access to an existing $100 million credit facility, of which only $10.8 million was drawn down at the end of the year following continued strong cash generation. Furthermore, as our net debt to adjusted EBITDA ratio has fallen to 0.8x at the end of 2021 (from 1.0x at the end of 2020), we have identified no issues in relation to financial covenants nor availability of funding for continued operations. 12 Approval The Strategic Report is set out on pages 3 to 13 and incorporates the sections titled Environment, Social and Governance ("ESG") Matters and Principal Risks and Uncertainties. Signed on behalf of the Board by: LUXFER HOLDINGS PLC A Maskara CHIEF EXECUTIVE OFFICER April 21, 2022 13 LUXFER HOLDINGS PLC GOVERNANCE The Board of Directors In 2021, Luxfer’s Board of Directors was comprised of six (6) Non-Executive Directors including the Board Chair, and one (1) Executive Director. The maximum number of Directors permitted under the Articles is ten (10). The Directors have an interest in the shares of the Company as set out in the Remuneration Report on pages 40 to 60. The Directors of the Company who were in office during fiscal year 2021 and up to the date of signing the financial statements were: Name Alok Maskara (1) Patrick Mullen (2) Age Position 51 Outgoing Executive Director and Chief Executive Officer 57 Non-Executive Director (Board Chair) David F. Landless (3) 62 Non-Executive Director Clive J. Snowdon 69 Non-Executive Director Richard J. Hipple 69 Non-Executive Director Allisha Elliott (4) 51 Non-Executive Director Lisa G. Trimberger 61 Non-Executive Director Notes: 1. Alok Maskara will step down as Chief Executive Officer of the Company effective May 6, 2022. 2. 3. 4. Patrick Mullen was appointed to the Board on September 1, 2021. Mr. Mullen was appointed Board Chair effective March 11, 2022. David Landless served as Board Chair from 2019 to March 11, 2022. He will continue serving as a Non-Executive Director and member of the Nominating and Governance Committee through June 8, 2022, as he is not seeking re-election at the Company's 2022 Annual General Meeting of Shareholders. Allisha Elliott resigned from the Board effective December 31, 2021. The Company wishes to highlight the following Board transitions: • • • • Alok Maskara, who has served as Chief Executive Officer and a member of Luxfer's Board since May 2017, has elected to leave the Company in pursuit of another opportunity. With unanimous approval from the Board, Andrew "Andy" Butcher was named Chief Executive Officer and a member of Luxfer's Board of Directors effective May 6, 2022. Patrick Mullen was appointed as Non-Executive Director in September 2021. Mr. Mullen was identified as a potential new Director due largely to his executive management and leadership experience and his extensive global industrial and engineering background. As of January 1, 2022, he serves as a member of the Nominating and Governance Committee and the Remuneration Committee. David Landless, who was elected to the Board in 2013 and served as Board Chair since 2019, announced his decision not to stand for re-election at the Company's 2022 Annual General Meeting of Shareholders. Mr. Landless' retirement is in accordance with the Company's Corporate Governance Guidelines, which advises retirement of Directors after nine years' service. Effective March 11, 2022, the Board appointed Mr. Mullen to succeed Mr. Landless as Board Chair. Mr. Mullen will continue to serve as a member of the Nominating and Governance Committee and the Remuneration Committee. Mr. Landless will continue to serve as a Non-Executive Director and a member of the Nominating and Governance Committee until the conclusion of the Company's 2022 Annual General Meeting of Shareholders on June 8, 2022. Allisha Elliott, who was elected to the Board in 2019, resigned from the Board effective December 31, 2021. Ms. Elliott's resignation was not the result of any disagreement with management or the Board, but rather, was driven by personal considerations. In accordance with our Articles of Association, the number of Directors on the Board shall not be less than two and not more than ten. The Board, based on the recommendation of the Nominating and Governance Committee, propose that the following five nominees be elected at the Annual General Meeting ("AGM"), each of whom will hold office until the next AGM or until his or her successor shall have been appointed and qualified: • Andrew "Andy" Butcher 14 LUXFER HOLDINGS PLC • • • • Patrick Mullen Richard Hipple Clive Snowdon Lisa Trimberger All nominees are currently Directors of Luxfer Holdings PLC with the exception of Andy Butcher, who will join the Board upon his appointment as CEO effective May 6, 2022. All nominees were elected by shareholders at the 2021 Annual General Meeting with the exception of Patrick Mullen, who joined the Board on September 1, 2021, and Andy Butcher, both of whom are standing for election for the first time. Biographical information of the current members of our Board of Directors and former members who served on the Board during fiscal year 2021 is set forth below: Patrick Mullen Board Chair Patrick Mullen was appointed a Non-Executive Director in September 2021 and serves as a member of the Nominating and Governance Committee and the Remuneration Committee. He was appointed Board Chair effective March 11, 2022. Mr. Mullen served as the former President and CEO of Chicago Bridge & Iron Company ("CB&I"), an engineering, procurement, and construction company, until 2018. Prior to his 20 years at CB&I, he spent 12 years with Honeywell's UOP division, a supplier of petroleum refining, gas processing, and petrochemical production technology. From 2014 to 2019, Mr. Mullen served as a Director of Vectren Corporation, a domestic energy delivery company, and from 2017 to 2018, he served as a Director of CB&I. He has served on the boards of the National Safety Council and Chevron Lummus Global, a developer and licensor of refining hyrdroprocessing technologies and alternative source fuels. From 2014 to 2020, Mr. Mullen served as a member of the National Association of Corporate Directors and was a Board Leadership Fellow in 2019. Mr. Mullen earned his Bachelor of Science degree in Chemical Engineering from the University of Notre Dame and his Master of Business Administration degree from the Kellogg Graduate School of Management at Northwestern University. Mr. Mullen's qualifications to be a member of our Board include his executive management and leadership experience and his extensive global industrial and engineering background. He also brings experience serving on the boards of other publicly traded companies. David F. Landless Outgoing Non-Executive Director David Landless was appointed a Non-Executive Director in March 2013. Mr. Landless served as Board Chair from May 2019 through March 11, 2022. In August 2021, Mr. Landless announced his decision not to stand re- election at the 2022 Annual General Meeting of Shareholders. He will continue to act as a Non-Executive Director and a member of the Nominating and Governance Committee until the conclusion of the Annual General Meeting of Shareholders on June 8, 2022. Mr. Landless started his career with Bowater Plc, a pulp, paper, and related products manufacturer, and Carrington Viyella Plc, a manufacturer of woven textiles. He joined the fiber and chemical manufacturer, Courtaulds Plc, in 1984. Mr. Landless was appointed Finance Director in several U.K. and U.S. divisions of Courtaulds Plc from 1989 to 1997 and the Finance Director of Courtaulds Coatings (Holdings) Limited from 1997 to 1999. In 1999, Mr. Landless was appointed Group Finance Director of Bodycote plc, the leading provider of heat treatment and specialist thermal processing services worldwide, and he held that position until he retired on January 1, 2017. He is a Non-Executive Director of Innospec, Inc., as well as Renold plc and European Metal Recycling Limited. He chairs the Audit Committees at Innospec and Renold. Mr. Landless is a Chartered Management Accountant. He graduated from the University of Manchester Institute of Science and Technology. Mr. Landless’ qualifications to be a member of our Board throughout 2021 include his extensive experience in manufacturing and engineering businesses, particularly as Group Finance Director of a global industrial business that operates in similar markets as Luxfer. In addition, he has a strong understanding of financial controls and audit requirements. He also brings significant experience from serving on the boards of other publicly-traded companies in both the U.S. and the U.K. 15 LUXFER HOLDINGS PLC Alok Maskara Outgoing Chief Executive Officer and Executive Director Alok Maskara was named Chief Executive Officer designate of Luxfer and appointed to the Board of Directors on May 23, 2017. He became Luxfer’s Chief Executive Officer on July 1, 2017. In March 2022, Mr. Maskara announced his decision to leave the Company in pursuit of another opportunity effective May 6, 2022. During his tenure, Mr. Maskara led significant growth and transformation initiatives at the Company. He has significantly reshaped Luxfer’s Board of Directors by adding more U.S. public company experience and increased the Board’s diversity. Additionally, Mr. Maskara changed the structure of the public listing and instituted new corporate governance policies, which enabled the Company to join the Russell 2000 index in 2019. Mr. Maskara has over twenty-five years of leadership experience in multiple manufacturing and technology industries, including advanced materials, water and flow technologies, and electrical protection. Before joining Luxfer, he was a business segment President at Pentair Plc, a water solutions company, for eight years, where he led businesses of progressively larger sizes. During his time at Pentair, he delivered organic growth in mature industries, while also successfully completing multiple global acquisitions, divestitures, and joint ventures. Prior to Pentair, Mr. Maskara was with General Electric Corporation, an industrial manufacturing company, where he gained significant experience in Lean Manufacturing through his leadership of an executive corporate initiative group focused on Lean. He subsequently led a stand-alone business unit in the water industry, which was later sold to Pentair. Mr. Maskara also worked at McKinsey & Company, a management consultant firm, in both their Chicago and Amsterdam offices. While at McKinsey, he advised businesses on industrial turnarounds and driving growth through customer insights and segmentation. Mr. Maskara is a co-author of nine patents in advanced materials. He holds an M.B.A. from the J.L. Kellogg Graduate School of Management at Northwestern University, an M.S. in Chemical Engineering from the University of New Mexico, and a Bachelor of Technology degree in Chemical Engineering from the Indian Institute of Technology, Mumbai. Mr. Maskara’s qualifications to be a member of our Board throughout 2021 include his extensive leadership experience in global industrial manufacturing businesses, his value-enhancing growth and acquisition experience, his educational background, and his knowledge of advanced materials. Andy Butcher Chief Executive Officer and Executive Director Designate Andy Butcher has been named and will serve as Chief Executive Officer effective May 6, 2022, at which time he will also be appointed as an Executive Director. Mr. Butcher has served as President of Luxfer Gas Cylinders, Luxfer's largest business unit, since 2014. Mr. Butcher joined Luxfer in 1991 and has held positions of increasing responsibility throughout his career with the Company. In 2002, he led the development of Luxfer's composite gas cylinders business, first as General Manager and then as Executive Vice President. Mr. Butcher currently serves as a Director and Executive Officer of various affiliates and subsidiaries of the Company. Mr. Butcher holds an M.A. degree in Engineering from Cambridge University and an M.B.A. from Keele University, both located in England. Mr. Butcher's qualifications to be a member of our Board include his more than 30 years of experience with Luxfer, his value-enhancing growth and acquisition experience, his deducational background, and his knowledge of advanced materials. Clive J. Snowdon Non-Executive Director Clive Snowdon was appointed a Non-Executive Director in July 2016 and has served as Chair of the Nominating and Governance Committee since April 2020. He acts as a financial expert, as defined by NYSE listing rules, on the Audit Committee, which he joined in August 2016. Mr. Snowdon served as Chairman of the Midlands Aerospace Alliance, an association supporting the aerospace industry across the Midlands region of England, from 2007 through 2016. He currently serves as a Trustee of the Stratford Town Trust and is also the Aerospace Industry Advisor to Cooper Parry Corporate Finance, a corporate finance advisory. In May 2016, Mr. Snowdon stepped down from the Board of Hill & Smith Holdings PLC, an international group of companies operating within the infrastructure and galvanizing markets, where he had been a Senior Non-Executive Director since May 2007, Chair of the Remuneration Committee, and a member of the Audit and Nominating and Governance Committees. 16 LUXFER HOLDINGS PLC In June 2011, Mr. Snowdon retired from Umeco PLC, a provider of advanced composite materials, after serving as Chief Executive since April 1997. Mr. Snowdon was also the Executive Chairman of Shimtech Industries Group Limited until the sale of the business in May 2015. From 1992 to 1997, Mr. Snowdon served as Managing Director of Burnfield PLC, after being promoted to that position from Finance Director. He has also held senior positions with Vickers plc, BTR plc, and Hawker Siddeley Group. Mr. Snowdon is a Chartered Accountant. He received his Bachelor of Arts degree in Economics from the University of Leeds. Mr. Snowdon’s qualification to be a member of our Board include his experience as a former Chief Executive of a U.K. public company, his strong understanding of U.K. PLC requirements, his significant experience in mergers and acquisitions, and his skill in interacting with investors. Richard J. Hipple Non-Executive Director Richard Hipple was appointed a Non-Executive Director in November 2018, at which time he was also appointed the Chair of the Remuneration Committee and a member of the Audit Committee. Mr. Hipple served as the Chairman and Chief Executive Officer of Materion Corporation, a producer of high- performance advanced engineered materials, from 2006 until his retirement in 2017, as well as President and Chief Operating Officer from 2005 to 2006. Prior to that, Mr. Hipple worked in the steel industry for twenty-six years in numerous capacities, including project engineering, strategic planning, supply chain management, operations, sales and marketing, and executive management. Mr. Hipple has served as a Director of KeyCorp (NYSE: KEY), a bank-based financial services company, since 2012 and is Chair of the Audit Committee and member of the Nominating and Corporate Governance Committee. Since 2017, he has also served as a Director of the Barnes Group (NYSE: B), a global industrial manufacturing company, and is a member of the Compensation and Management Development and Corporate Governance Committees. From 2007 through 2018, Mr. Hipple served on the Board of Ferro Corporation, a leading supplier of technology-based functional coatings and color solutions. Mr. Hipple is Chair Emeritus and a Trustee of the Cleveland Institute of Music and has served as a Director of the Greater Cleveland Partnership, as well as the Manufacturers Alliance for Productivity and Innovation. Mr. Hipple received his Bachelor of Engineering degree from Drexel University. Mr. Hipple’s qualifications to be a member of our Board include his extensive executive management and leadership experience with a global manufacturer of high-performance engineered materials, his experience in business development and strategic transformation, and his broad involvement in both domestic and international acquisitions. He also brings experience serving on the boards of other publicly traded companies. Allisha Elliott Former Non-Executive Director Allisha Elliott served as a Non-Executive Director and a member of the Remuneration Committee and the Nominating and Governance Committee from March 2019 through December 31, 2021, the date of her resignation from the Board. Ms. Elliott previously served as Chair of the Nominating and Governance Committee from May 2019 through April 2020. Ms. Elliott served as Chief Human Resources Officer at Bose Corporation, a global consumer electronics company. Prior to Bose, Ms. Elliott was the Chief Human Resources Officer and Senior Vice President for Human Resources and Communications at Sensata Technologies, Inc., a global leader in providing sensor-rich solutions. Prior to joining Sensata Technologies, Ms. Elliott served in several human resource leadership roles in the global manufacturing industry, culminating as Vice President of Human Resources and Communications for Transportation Systems at Honeywell International Inc. Ms. Elliott received her Master of Labor and Human Resources degree from the University of Illinois Urbana- Champaign and her Bachelor of Arts degree in Sociology from Purdue University. Ms. Elliott’s qualifications to be a member of our Board in 2021 include her significant experience in Human Resources, particularly in relation to public and industrial companies, including her extensive knowledge in talent development, succession planning, and executive compensation. 17 LUXFER HOLDINGS PLC Lisa G. Trimberger Non-Executive Director Lisa Trimberger has served as a Non-Executive Director since September 2019. Since April 2020, she has served as Chair of the Audit Committee, upon which she acts as a financial expert, as defined by NYSE listing rules. Ms. Trimberger has also served as a member of the Remuneration Committee since September 2019. Ms. Trimberger retired as an Audit Partner of Deloitte & Touche LLP, in 2014 after spending thirty-one years with the firm. As a lead Client Service Partner, Ms. Trimberger audited and interacted with the management and boards of publicly-traded companies. She worked on significant transactions, as well as control and risk- assessment issues. Additionally, she was actively involved in the firm’s quality review practice, serving as a Deputy Professional Practice Partner and Engagement Quality Control Review Partner. During her tenure with Deloitte, Ms. Trimberger also served as Co-Chair of the firm’s Nominating and Governance Committee and was leader of the firm’s National Women’s Initiative for the development and retention of women professionals. Currently, Ms. Trimberger is a principal and owner of a private investment company, Mack Capital Investments LLC. She also serves as Trustee of the Board, Chair of the Audit Committee, and member of the Nominating and Governance Committee of Corporate Office Properties Trust (NYSE:OFC), a real estate investment trust. Ms. Trimberger also serves as a Trustee on the Board of Trustees for EPR Properties (NYSE: EPR), a diversified experiential net lease real estate investment trust, where she is also a member of the Audit and Finance Committees. Ms. Trimberger is a Certified Public Accountant and holds a Bachelor of Science degree in Accounting from St. Cloud State University. Ms. Trimberger is a member of the National Association of Corporate Directors (“NACD”), as well as the National Association of Real Estate Investment Trusts. She is a NACD Board Leadership Fellow and earned the CERT Certificate in Cybersecurity Oversight, as developed by NACD, Ridge Global, and Carnegie Mellon University’s CERT division. Ms. Trimberger also completed the Women’s Director Development Executive Program at J.L. Kellogg School of Management at Northwestern University. Ms. Trimberger’s qualifications to be a member of our Board include her experience as an Audit Partner in a big four accounting firm, as well as her significant experience as a financial expert in areas including financial and audit oversight, public board experience, corporate governance, and risk management. 18 LUXFER HOLDINGS PLC Corporate Governance Strong corporate governance practices serve the long-term interest of our stakeholders, strengthen the Board and management, and further enhance the public trust Luxfer has earned from operating with uncompromising ethics and integrity. Luxfer is fully committed to operating in a legal, ethical, and sustainable manner in all that we do. Overview Luxfer’s corporate governance principles govern how we do business daily, enabling us to outperform and provide sustainable growth. They provide a framework that defines the roles, rights and responsibilities of various groups withing the Company. The Board has adopted a set of Corporate Governance Guidelines which provide the framework for the effective and ethical governance of the Company. These guidelines address matters such as the respective roles and responsibilities of the Board and Committees, director independence, conflicts of interest and membership criteria. The Corporate Governance Guidelines, the Company’s Articles of Association (the “Articles”), Charters of the Board Committees, Reservation of Powers, and the Code of Ethics and Business Conduct, as well as national regulations such as the Companies Act of 2006 (“Companies Act”) provide the structure for the governance of the Company. The Company is incorporated in England and Wales and has a single listing of ordinary shares on the New York Stock Exchange (“NYSE”). Accordingly, our corporate governance is also informed by the relevant aspects of two regulatory regimes, the U.K. and the U.S. For example, as a company listed on the NYSE we are considered a “quoted company” for the purposes of the Companies Act. Therefore, we are required to comply with quoted companies’ requirements such as the way we report on remuneration, which includes an annual advisory shareholder vote on director remuneration and a binding shareholder vote every three years. Luxfer is not listed on the London Stock Exchange. As such, we are not required to comply with the U.K. Corporate Governance Code. Nonetheless, we embrace aspects of this Code insofar as appropriate, relevant and practical to a company the size and status as Luxfer. In July 2018, the Company informed the NYSE of its loss of Foreign Private Issuer (FPI) status and our intention to transition to a domestic issuer effective January 1, 2019. From this date, the Company has operated in full compliance with the requirements for domestic issuer pursuant to the Exchange Act of 1934, as amended and the NYSE’s Manual. Through the increased transparency of financial information and higher corporate governance standards associated with domestic issuer status, we made it possible for Luxfer shares to be included in the Russell 3000 index. Inclusion in the index has attracted new, high-quality shareholders, while also allowing the orderly exit of some legacy debt holders. Additionally, we enhanced our Board of Directors which is now comprised of a greater range of tenure, diversity and public company experience, thus facilitating effective oversight and a better balance between historical experience and fresh perspectives. We are also required to comply with certain provisions under the Sarbanes-Oxley Act, including Section 404(a), which requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting. Such evaluation must be based on a suitable, recognized control framework such as that which was established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organisations of the Treadway Commission (the “COSO Framework”). We have updated our framework for the evaluation of the effectiveness of our internal controls over financial reporting in accordance with the COSO Framework of 2013. In developing corporate governance practices for the Group, the Directors have taken note of all the aforementioned regulatory requirements, including those required under the Companies Act, as well as reflecting best practice as the Directors consider appropriate. Board Responsibilities and Leadership Structure The Board has responsibility for the overall leadership of the Company, its long-term success and helping to develop and approve its strategic aims. The Directors have determined a schedule of matters reserved to the Board. Reserved matters are comprehensive and reviewed as the Board considers appropriate, normally once annually. A review was undertaken during the year, following a comprehensive review taking into consideration the transition to a domestic issuer. Matters reserved to the Board are set out in the Governance section of the Company’s website. The Board believes it is important to maintain the flexibility to choose the leadership structure that is best able to meet the needs of Luxfer and its shareholders, based on the circumstances that exist at the time and the qualifications of the available individuals. Due to the relatively small size of the Board, the Directors have determined it to be unnecessary to appoint a Senior Independent Director. Further, we currently do not have a policy requiring the positions of Board Chair and Chief Executive Officer to be held by different persons. However, these two positions have historically been separate, and are expected to remain separate. The Board believes this structure is advantageous. Specifically, separating the positions provides the appropriate balance 19 LUXFER HOLDINGS PLC between strategy and development and oversight of management, while also allowing the CEO to focus attention on driving business performance rather than Board governance. Additionally, this structure is consistent with corporate best practices, the Institutional Shareholder Services’ recommendation, the views of Luxfer’s shareholders, and the U.K. Corporate Governance Code. In August 2021, David Landless, who has served as Board Chair since 2019, announced his decision not to stand for re-election at the 2022 Annual General Meeting of Shareholders. Mr. Landless' decision was made in accordance with the Company's Corporate Governance Guidelines, which recommends retirement of Directors after nine years' service. Following this announcement, the Board appointed Patrick Mullen to succeed Mr. Landless as Board Chair, effective March 11, 2022. Mr. Mullen is a Non-Executive Director and is considered independent under NYSE listing standards. Luxfer believes that Patrick Mullen's service as Board Chair is appropriate because of his extensive global industrial experience, history of serving on the boards of other public companies, and knowledge of the manufacturing and engineering industries in general. The responsibilities of the independent Board Chair include, among other things: • • • • • • • • Leading the Board, including the oversight and coordination of the Board’s and its Committees’ work; Serving as a liaison between the CEO, other members of senior management, the Non-Executive Directors, and the Committee Chairs; Presiding at all meetings of the Board, including executive sessions of the independent, Non-Executive Directors; Presiding at all meetings of the shareholders; Setting the Board’s meeting agendas and ensuring there is sufficient time for discussion of all agenda items; Recommending to the Board agendas for shareholder meetings and providing guidance to the Board on positions the Board should take on issues to come before shareholder meetings; Participating in discussions with the Nominating and Governance Committee on matters related to Board and Committee organization, composition, membership terms, and meeting structure; Participating in discussions with the Nominating and Governance Committee and Remuneration Committee on matters related to the hiring, evaluation, and compensation of, and the succession planning for, the CEO, the Executive Officers, and Directors; and, • Maintaining dialogue and canvassing opinions of the Non-Executive Directors in absence of the Executive Director. Board and Committee Self-Assessments Annual self-assessments and evaluation of Board performance helps ensure that the Board and its Committees function effectively and in the best interest of our shareholders. The Nominating and Governance Committee is Responsible for Directors and each Committee. The assessment process consists of a written evaluation comprising both quantitative scoring and narrative comments on a range of topics, including the composition and structure of the Board of Directors, the type and frequency of communications and the information provided to the Board and its Committees, the Board’s effectiveness in carrying out its functions and responsibilities, the effectiveness of the Committee structure, Director’s preparation and participation in the meetings, and the values and culture displayed by the Directors. With the assistance of the Company Secretary, the evaluation responses are compiled by the Chair of the Nominating and Governance Committee. The Nominating and Governance Committee Chair leads a discussion of the assessment results at the following Board meeting. In addition to this annual self-assessment, verbal assessments are conducted in independent executive sessions at the end of every Board and Committee meeting. Board Education, Information and Support Board education is an ongoing, year-round process, which begins a Director joins our Board. Within one (1) year of joining our Board, new Directors are provided with an orientation to our Company, including our business, strategy and governance. On an ongoing basis, Directors receive educational presentations on a variety of topics related to their responsibilities as Directors and the industries in which Luxfer operates. These presentations are provided by our senior management team and/or external advisors. In 2021, topics for Board education included Luxfer values and culture; anti-corruption and anti-bribery; anti-trust compliance; global insider dealing; pension regulation and strategy; share repurchase programs and trends; capital markets update; cybersecurity and privacy matters; ESG matters; and diversity and unconscious biases. The Company Secretary and General Counsel as well as external counsel when appropriate and necessary, provide updates to the Board on legal and regulatory issues nature of which it and the individual Directors should be aware to refresh their skills and knowledge. There is a culture of information exchange on various matters of interest to the Group and its operations between Directors and senior managers to keep Directors abreast of relevant developments. 20 LUXFER HOLDINGS PLC The Board receives both financial and operational information to assist it in carrying out its duties. The Chief Executive Officer and the Chief Financial Officer provide regular reports to the Board regarding relevant aspects of the business. These reports are further detailed at scheduled Board meetings as appropriate. Additional topics for review and discussion are added to these reports from time to time at the request of the Directors. In addition, specific items are scheduled into the Board agenda for report and review on a regular basis, such as health and safety and environmental matters and current topical issues. The Board evaluates this information and support procedures periodically to ensure that topics remain appropriate. Board Meetings and Committees The Board meets regularly during the year, holds special meetings, and acts by unanimous written consent, wherever circumstances require. In each regularly scheduled Board and committee meeting, the independent Directors also meet in executive session, without the Chief Executive Officer or other members of management present. Directors are expected to attend all scheduled meetings of the Board of Directors, all meetings of the Committee(s) on which they serve, and all shareholder meetings. The Board has three standing committees comprised solely of Independent Directors: the Nominating and Governance Committee, the Remuneration Committee, and the Audit Committee. The Company Secretary distributes Board and Committee agendas and materials to the Board and Committees seven days before a scheduled meeting. 7 MEETINGS OF THE BOARD OF DIRECTORS IN 2021 (1 physical meeting; 6 video teleconference meetings) 5 - Meetings of the Nominating and Governance Committee 2 - Meetings of the Remuneration Committee 6 - Meetings of the Audit Committee The Board held seven (7) meetings in 2021, six of which occurred virtually via videoconference. One hybrid meeting occurred in September, at which three Directors attended virtually via videoconference. All incumbent Directors attended 100% of the meetings of the Board and Committees on which they served during 2021, and all Directors who served during fiscal year 2021 attended at least 75% of the meetings of the Board and Committees on which they served. All directors then serving attended the 2021 Annual General Meeting of Shareholders. As the pandemic continued to evolve throughout 2021, the Board continued to host a majority of their meetings virtually via videoconference. Prior to the pandemic, the Board held a majority of their physical meetings at the Group's operational plants as part of their monitoring role and to ensure a better understanding of the Group’s operations. At these meetings, the Board tours the plant and has an opportunity to meet local and divisional management on both a formal and informal basis and discuss the progress of their operations with them. In addition to meetings held at Luxfer’s sites, the Non-Executive Directors may independently visit operational sites to enhance their knowledge of the individual businesses that make up the Group. The Executive Director has regular business reviews at operational sites throughout the year, and any appropriate information gathered on those visits will be reported to the Board. The Board plans to return to physical meetings in 2022, depending on location and any pandemic-related travel restrictions. 21 LUXFER HOLDINGS PLC Nominating and Governance Committee Role: The Nominating and Governance Committee advises the Board on matters relating to Board governance, structure, and composition. Responsibilities of the Nominating and Governance Committee include, among other things, establishing criteria for Director candidates and identifying individuals for nomination to become Directors, including engaging advisors to assist in the search process where appropriate, and considering potential candidates recommended by shareholders; developing plans and making recommendations in relation to the organization, composition, membership terms, and meeting structure of the Board and its Committees; recommending a succession plan to the Board and review management’s succession plan; administering the self-assessment of the Board and its Committees; overseeing Luxfer’s corporate governance structure and practices; and overseeing and recommending to the Board of Directors changes to our Corporate Governance Guidelines, Committee Charters, and other governing instruments. A full description of the Committee’s roles is set forth in the Nominating and Governance Committee Charter, available at https://www.luxfer.com/ under the “Investors” tab. Members: Clive Snowdon (Chair as of April 2020), Patrick Mullen (beginning January 2022), David Landless (through June 8, 2022) and Allisha Elliott (through December 31, 2021). All members of the Nominating and Governance Committee have been determined to be independent under SEC and NYSE rules. Remuneration Committee Role: The Remuneration Committee sets and administers the policies that govern executive and senior management compensation. Responsibilities of the Remuneration Committee include, among other things, evaluating Executive Officer and senior management performance; establishing and administering executive compensation; reviewing and approving the Executive Compensation Discussion and Analysis including in our annual Proxy Statement; Recommending actions regarding the Chief Executive Officer’s compensation for approval by the Non-Executive Directors of our Board; and approving the individual compensation actions for all Executive Officers other than the CEO. To assist the Remuneration Committee in its review of executive and director compensation programs, Meridian Compensation Partners LLC (“Meridian”), a human resource consulting firm, provides advice, data, and insight. Meridian was retained by the Remuneration Committee in 2020 and provides advice at times the Remuneration Committee deems appropriate. Any other work undertaken by Meridian for the Company must be approved by the Remuneration Committee. The Remuneration Committee has conducted an assessment of the independence of Meridian and has determined that Meridian does not have any conflict of interest. Aside from the data provided by Meridian, the Committee also considers other sources to evaluate external market, industry and peer company practices in its review of our compensation programs. A full description of the Committee’s roles is set forth in the Remuneration Committee Charter, available at https://www.luxfer.com/ under the “Investors” tab. Members: Richard Hipple (Chair as of November 2018), Patrick Mullen (beginning January 2022), Lisa Trimberger (beginning September 2019 upon appointment to the Board), and Allisha Elliott (through December 31, 2021). All members of the Remuneration Committee have been determined to be independent under SEC and NYSE rules. Report: The Director’s Remuneration Report appears in the Remuneration Report on pages 40 to 59. Audit Committee Role: The Audit Committee advises the Board on financial matters and oversees the Company’s accounting, financial reporting, and internal control policies and procedures. Responsibilities of the Audit Committee include, among other things, overseeing financial reporting, controls, and audit quality and performance; monitoring and overseeing the independence and performance of our Independent Auditors, with responsibility for the selection, evaluation, remuneration, and, if applicable, discharge of such Independent Auditors; approving, in advance, all of the audit and non-audit services provided to the Company by the Independent Auditors; facilitating open communication among our Board, senior management, internal audit, and the Independent Auditors; reviewing internal audit work, the system of internal controls and monitoring implementation of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and the progress of the update to the internal controls over financial reporting framework to reflect the 2013 COSO framework throughout the Group; overseeing our enterprise risk management and compliance programs; overseeing financial strategy, investment policies, and financial performance of invested assets; reviewing the Company’s annual SEC filing, statutory report and consolidated financial statements and the quarterly financial releases made by the Company; 22 LUXFER HOLDINGS PLC A further description of the Committee’s roles is set forth in the Audit Committee Charter, available at https:// www.luxfer.com/ under the “Investors” tab. The Audit Committee Charter were reviewed and approved by the Committee in 2021. Members: Lisa Trimberger (Chair), Clive Snowdon, and Richard Hipple. All members of the Audit Committee have been determined to be independent under Section 303A.02 of NYSE Rules and Rules 10A-3 under the Exchange Act. Financial Experts: The Board considers that each member of the Audit Committee have appropriate financial experience to enable them to contribute to the Audit Committee’s work. The Board has determined that Lisa Trimberger, Clive Snowdon and Richard Hipple are all financially literate under NYSE Rules and qualify as “audit committee financial experts” under SEC standards. Report: The Directors are responsible for preparing the financial statements to satisfy U.K. law. This responsibility is explained further in the Statement of Directors’ Responsibilities on page 61 and the Independent Auditors’ Report on pages 62 to 69. Meetings: Prior to the commencement of the financial year, the Committee establishes a schedule of meetings to coincide with key events in the Company’s financial reporting and audit cycle to ensure that it has sufficient time to fulfil its responsibilities. Agendas and appropriate documentation are provided to the Committee by the Company Secretary. The Chief Financial Officer and the Chief Executive Officer may attend Committee meetings as required. The Chair of the Audit Committee consults with external auditors as necessary in preparation for Committee meetings and may invite the external auditor to attend a meeting of the Audit Committee if required. The Audit Committee has adopted and implemented a ‘Policy on the Provision of Audit and Non-Audit Services by Auditors’ (the “Pre-approval Policy”) to comply with auditor independence requirements contained in Rule 2-01 of Regulation S-X under the Exchange Act. The policy requires the Audit Committee to pre-approve all matters upon which the Company’s external auditors are requested to advise (audit and non-audit work), including fees, subject to certain pre-approvals made annually by the Audit Committee. A pre-approved sum to be spent on audit and tax matters is delegated to the Chief Financial Officer and there is a procedure for approval of urgent items by the Chair between meetings. The policy also affirmatively prescribes the Company’s external auditors from advising on certain matters. Conflicts of Interest Luxfer’s Code of Ethics and Business Conduct and Corporate Governance Guidelines address conflicts of interest. As provided in the Code of Ethics and Business Conduct, a “conflict of interest” occurs when an individual’s private interest (or the interest of a member of their family) interferes, or even appears to interfere, with the interests of Luxfer. A conflict of interest can arise when an employee, Officer, or Director (or a member of their family) takes actions or has interests that may make it difficult to perform their work for Luxfer objectively and effectively. Conflicts of interest also arise when an employee, Officer, or Director (or a member of their family) receives improper personal benefits as a result of his or her position in Luxfer. The Company periodically, but no less frequently than annually, solicits information from Directors and Executive Officers in order to monitor potential conflicts of interest. Directors and Executive Officers are expected to always be mindful of their fiduciary obligations to the Company, and they must seek determinations and prior authorizations or approval of potential conflicts of interest exclusively from (i) the Board Chair or Nominating and Governance Committee, as appropriate, in the case of Directors or (ii) Luxfer's General Counsel, or where a conflict arises, the Nominating and Governance Committee, in the case of Executive Officers. In 2021, there were no conflicts of interest. 23 LUXFER HOLDINGS PLC Related-Party Transactions In addition to the standards set forth in our Corporate Governance Guidelines, Luxfer has established a Related- Party Transactions Policy. As defined in the Policy, a “Related Person” is any (i) person who is or was (since the beginning of the last fiscal year for which Luxfer has filed a Form 10-K and Proxy Statement, even if they do not presently serve in that role) an Executive Officer, Director, or nominee for election as a Director of Luxfer, (ii) person who is the beneficial owner of greater than 5% of Luxfer’s outstanding ordinary shares, or (iii) Immediate Family Member of any of the foregoing. “Immediate Family Member” is defined as “any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, or any person (other than a tenant or employee) sharing the household of a person.” In accordance with the Related-Party Transactions Policy and consistent with Section 314.00 of the NYSE Listed Company Manual amended on April 2 and August 26, 2021, the Audit Committee must conduct a reasonable prior review of all “Related Party Transactions." A “Related Party Transaction" is any transaction, arrangement, or relationship, or any series of similar transactions, arrangements, or relationships (including any indebtedness or guarantee of indebtedness), in which (i) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, (ii) Luxfer is a participant, and (iii) any Related Person has or will have a direct or indirect material interest [other than solely as a result of being a Director or trustee (or any similar position) or a less than 10% beneficial owner of another entity]. In considering whether to approve an Interested Transaction, the Audit Committee takes into account, among other factors it deems appropriate, whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the Related Person’s interest in the arrangement. In 2021, there were no related party transactions. Security Ownership Various Luxfer policies address security ownership, including the Insider Trading and Dealing Policy and the Stock Ownership Guidelines. Particularly, Luxfer's Insider Trading and Dealing Policy prohibits a number of transactions by “Covered Persons.” “Covered Persons” include Directors, Executive Officers, and various Luxfer employees and consultants in corporate, finance, IT, and investor relations roles. Specifically, the Policy prohibits the following in relation to Company securities: short-term trading, short sales, options trading, trading on margin, and hedging. All Covered Persons – including family members of Covered Persons, members of a Covered Person's household, and entities controlled by Covered Persons – are expected to comply with the Insider Trading and Dealing Policy, as well as applicable securities laws and regulations. Further, Luxfer has established Stock Ownership Guidelines, which apply to all Non-Executive Directors, Named Executive Officers, and any other key employees that the Remuneration Committee may identify from time to time in consultation with management. The Company’s Articles of Association do not currently require Directors to hold a minimum number of shares in the Company in order to qualify for appointment to the Board of Directors; however, the Stock Ownership Guidelines provide the Company's expectations as to the minimum amount of share such persons should own in the Company. These minimum amounts are based on the total value of the shares owned by a person being equal to a certain multiple of such person's annual base salary or retainer fee. Additionally, the Stock Ownership Guidelines include share retention ratios to assist in a person's continuous progress toward their respective ownership guideline. Directors and Executive Officers are expected to achieve the minimum ownership guidelines within five years of the effective date of the Stock Ownership Guidelines or their appointment or election, whichever occurs later. 24 LUXFER HOLDINGS PLC Anti-Bribery and Anti-Corruption The Code of Ethics and Business Conduct requires compliance with all applicable anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and local laws where Luxfer conducts business. This requirement applies to Luxfer’s Directors, Executive Officers, employees and those with whom Luxfer conducts its business. Luxfer has an established Anti-Corruption Policy, which sets for the Company’s policies, principles, and procedures in relation to situations presenting corruption or bribery issues. Annual training is required for all members of our Board of Directors, senior management, and any non-production employees, and more thorough trainings are provided to employees in high-risk roles, including those in audit, sales, finance, marketing, legal, and export and import. Luxfer’s General Counsel provides quarterly updates on all activities to the Audit Committee and Board as a whole. Whistleblowing We highly encourage reporting of any wrongdoing regarding corporate governance, financial reporting, human rights, or any concerns about business conduct brought forth in good faith. Luxfer operates an independent, anonymous whistleblowing hotline that is available 24/7 to our employees or anyone working in our supply chain. Luxfer’s longstanding Whistleblowing Policy describes the procedures in place to ensure our due diligence in thoroughly investigating and remedying any reports through this avenue. The policy provides strong protections against retaliation for whistleblowers and anyone who cooperates in a Company investigation. The Audit Committee oversees the operation of the Whistleblowing Policy and receives a report from the Company Secretary at each meeting of the Audit Committee. Relations With Shareholders We believe that effective corporate governance includes year-round engagement with our shareholders, stakeholders, and any interested party. We regularly meet with our shareholders via telephone calls and virtual videoconference meetings, including both large and small investors, to discuss business strategy, performance, compensation philosophy, corporate governance, and environmental and social topics. In a typical year, Luxfer engages dozens of shareholders, including our largest shareholders two to three times per year. In 2021, we had more than 100 calls and meetings throughout the year through investor conferences, non-deal roadshows, and scheduled post-earnings follow up calls. To continuously improve our shareholder communication and outreach, we review the feedback we receive during these meetings with our Board of Directors. Our Directors, along with management, carefully consider and evaluate this information and modify the Company's approach to advance our shareholder engagement efforts. 25 LUXFER HOLDINGS PLC Executive Leadership Team The members of the Executive Leadership Team of Luxfer are responsible for the day-to-day management of the Company. The Executive Leadership Team meets regularly and at least once a month. These meetings are chaired by the Chief Executive Officer and consists of the Chief Financial Officer and senior management at group and segment levels. The Executive Leadership Team acts in an advisory capacity to the Chief Executive Officer and provides a forum where matters of interest or concern to the Group can be reviewed and discussed, strategy debated, policies developed and agreed, best practice discussed, and appropriate measures implemented. Said meetings also provide an opportunity for senior management to receive updates on progress in other areas of the Group outside their remit. The following table lists the names and positions of the current members of the Executive Leadership Team as well as former members who served during fiscal year 2021. Name Age Position Alok Maskara (1) Andy Butcher (2) Heather C. Harding (3) Stephen M.D. Webster (4) Graham D. Wardlow James G. Gardella (5) Jeff C. Moorefield (6) Mark A. Chivers (7) Peter N. Gibbons Megan E. Glise 51 53 53 50 54 65 58 52 51 29 Outgoing Chief Executive Officer Chief Executive Officer Designate Former Chief Financial Officer Chief Financial Officer Managing Director, Luxfer MEL Technologies Former President, Luxfer Magtech Vice President and General Manager, Luxfer Magtech Managing Director, Luxfer Superform Vice President and General Manager, Luxfer Graphic Arts General Counsel and Company Secretary Notes: 1. Alok Maskara elected to leave the Company effective May 6, 2022. 2. 3. 4. 5. 6. 7. Andy Butcher was appointed Chief Executive Officer and Executive Director effective May 6, 2022. Heather Harding retired from employment with the Company effective March 1, 2022. Stephen Webster was appointed Chief Financial Officer of the Company effective March 1, 2022. James Gardella retired from employment with the Company effective May 1, 2021. Jeff Moorefield was appointed Vice President and General Manager of Luxfer Magtech Solutions effective April 1, 2022. Mark Chivers continues to serve as a member of the ELT and Managing Director of Luxfer Superform. However, Luxfer Superform is considered as a discontinued operation as of December 31, 2020. Biographies of the current members of the Executive Leadership Team and those former members who served during fiscal year 2021 are set forth below: Alok Maskara Outgoing Chief Executive Officer Andy Butcher Chief Executive Officer Designate Please refer to the main Board biographies on pages 23 to 26. Heather C. Harding Former Chief Financial Officer Heather Harding served as Chief Financial Officer from January 2018 to March 1, 2022. From 2012 to 2017, Ms. Harding was Vice President of Finance for Eaton Lighting, a business unit of Eaton Corporation, a power management company. Prior to that, she was Vice President of Finance for various operating units within Cooper Industries and Emerson Electric. Ms. Harding is a Certified Public Accountant and received a Bachelor of Science degree in Accounting from Southern Illinois University at Carbondale. 26 LUXFER HOLDINGS PLC Stephen Webster Chief Financial Officer Stephen Webster was appointed Chief Financial Officer effective March 1, 2022. From September 2016 to March 2022, Mr. Webster served as Luxfer's Corporate Controller. Prior to joining Luxfer, Mr. Webster held various finance leadership roles at global businesses, serving as Head of Global Accounting at Seadrill Limited, an OSE-listed offshore drilling company, and ERP Business Integration Lead, IFRS Project Lead, and Financial Accounting Director at JT International, a global tobacco company. He has extensive experience in corporate financial management and external reporting under both U.S. GAAP and IFRS. Mr. Webster is a Chartered Accountant and holds a degree in International Management and Modern Languages from the University of Bath. Graham D. Wardlow Managing Director of Luxfer MEL Technologies Graham Wardlow was appointed Managing Director of Luxfer MEL Technologies (LMT) in October 2017, following the merger of our MEL Chemicals and Magnesium Elektron Alloys businesses.The Magnesium Powder's business was subsequently incorporated into LMT in early 2022. Mr. Wardlow joined Magnesium Elektron in 1984 and undertook several technical and commercial roles before becoming Managing Director of the Alloys business in 2008 and Divisional Managing Director of MEL Chemicals in May 2017. Mr. Wardlow holds a degree in Materials Engineering from Imperial College, University of London, as well as an M.B.A. from Keele University. James G. Gardella Former President of Luxfer Magtech James Gardella served as President of Luxfer Magtech from July 2017 until his retirement in May 2021. Prior to serving as President of Luxfer Magtech, he was appointed President of the Company’s Magnesium Elektron Powders business in 2007, which he joined in 1990 as Financial Controller. Mr. Gardella holds a Bachelor of Science degree in Accounting from Villanova University and an M.B.A. in Finance. He is also a Certified Public Accountant. Jeff C. Moorefield Vice President and General Manager of Luxfer Magtech Jeff Moorefield was appointed Vice President and General Manager of Luxfer Magtech on April 1, 2022, at which time he also became an Executive Officer of the Company. Mr. Moorefield previously served as Luxfer's Vice President of Operations from March 2019 to March 2022. Before joining Luxfer. Mr. Moorefield served as Senior Vice President of Global Operations at Tennant Company, a provider of floor cleaning machines, products, and services. Prior to that, he served as Global Vice President of Operations for various operating units within Pentair plc, a provider of water treatment solutions and sustainable applications. Mr. Moorefield holds a Bachelor of Science degree in Industrial Technology from Western Kentucky University. Mark A. Chivers Managing Director of Luxfer Superform Mark Chivers has served as Managing Director of Luxfer Superform since April 2018. Mr. Chivers joined Luxfer in 2009 as Operations Director of Superform U.K., before moving to California in 2014 to become Vice President and General Manager of the U.S. facility. Before joining Luxfer, Mr. Chivers held Production and Operations Management and Vice President roles in the castings and tool making industry, particularly servicing the automotive sector. Mr. Chivers holds a Bachelor of Arts degree in Business Studies from Wolverhampton University. Peter N. Gibbons Vice President and General Manager of Luxfer Graphic Arts Peter Gibbons was appointed Vice President and General Manager of Luxfer Graphic Arts in July 2019. From July 2017 to July 2019, Mr. Gibbons served as Director of IT and Sourcing. Upon his appointment as Director of IT and Sourcing, Mr. Gibbons became a member of the Executive Leadership Team. Mr. Gibbons joined Luxfer in 2004 as European Financial Controller of the Magnesium Elektron Alloys business. From 2013 to 2014, he served as Luxfer's Group Financial Controller, and from 2014 to 2017, Mr. Gibbons was the Divisional Finance Director of Luxfer's Magnesium Elektron Alloys business. Megan E. Glise General Counsel and Company Secretary Megan Glise was appointed General Counsel and Company Secretary in September 2020. Ms. Glise joined Luxfer as U.S. Legal Counsel in July 2018 and was appointed Associate General Counsel in February 2019. In January 2020, she became a member of the Executive Leadership Team and an Executive Officer of the Company. Before joining Luxfer, Ms. Glise was an Associate Attorney at a Wisconsin-based law firm, where she 27 focused her practice on corporate and transactional law. Ms. Glise received her Juris Doctorate from Marquette University Law School and holds a Bachelor of Arts degree in English and Criminology and Law Studies from Marquette University. LUXFER HOLDINGS PLC 28 LUXFER HOLDINGS PLC Environment, Social and Governance ("ESG") Matters The publication of our first-ever ESG Report in 2020 set the stage for integration of sustainable practices and resource management throughout the Company. The Report also set out our 2025 Environmental Goals, which address emissions, water, and waste-to-landfill reduction targets which we seek to achieve by 2025. Throughout fiscal year 2021, we continued to hold ourselves accountable to our ESG initiatives and took deliberate steps to fully integrate ESG into our strategy and daily actions. As a key priority for the Board and our management teams, our ESG initiatives will continue serving as a catalyst for value creation, stakeholder trust, risk management, and employee engagement. Key features of our 2021 ESG efforts include: • • • • • • • • • • Board's oversight of ESG matters including strategic planning, risks, and opportunities with regular updates from the CEO and senior management; Targeted investments in new projects to reduce our carbon footprint and increase operational efficiencies; Implementation of our Company-wide ESG balanced scorecard to collect detailed data and track progress on our CO2e, waste, water, social, and governance KPI's; Biannual ESG scorecard reviews with the CEO, senior management, and EHS team members; Carbon Life Cycle Analyses on key products to improve product sustainability; New requirements for suppliers and distributors to attest compliance with our Third Party Code of Conduct; Increased talent, investment, and resources for IT security; Expanded DEI recruitment practices and increased diversity training; Demonstrated track record of safety performance; and Fostering a performance culture with high ethical standards that values integrity, accountability, and innovation designed to encourage individual growth and operational effectiveness. We look forward to providing further details on our progress towards our 2025 Environmental Goals in our upcoming ESG report to be published in late 2022. Our Products Many of our products already serve the growing need to safeguard the environment in the transportation sector. Our hydrogen fuel systems have been applied to a variety of vehicles in a series of world firsts including the first commercially produced hydrogen powered trucks, refuse trucks, boats and tractors. Luxfer also played a vital role in developing the U.K.'s first hydrogen-powered train. Beginning operation in 2020, the electric train was retrofitted to run using our G-Stor® H2 hydrogen fuel system. We will continue developing partnerships in the transportation sector to make hydrogen-powered transportation a reality. Similarly, our zirconium-based autocatalyst products help reduce automotive emissions. Driven by increasing legislation, we work with our customers to offer tailor-made solutions based on our Gasoline Particulate Filtration systems, Diesel Oxidation Catalysts, Diesel Particulate Filters, passive NOx Absorbers and selective catalytic reduction systems. These systems reduce the amount of toxic gasses and pollutants contained in exhaust from traditional diesel and gasoline engines. Further, our unique magnesium alloys used in aerospace and automotive designs enable lighter and stronger models, which help maximize fuel efficiency, lower emissions, and increase performance through lightweight materials. Our Facilities and Operations As part of our 2025 Environmental Goals, we have committed to reducing our CO2e emissions by 20%, reducing waste-to-landfill by 20%, and reducing freshwater consumption by 10% from our baseline of 2019. Through financially sound projects, we have started delivering on through improvements to the efficiency of our operations. Our goal in 2021 was to identify priority energy-efficiency projects, and we carried out several hands-on events to identify no- or low-cost projects to save energy, water, and improve our waste management. Below is a snapshot of the projects we focused on in 2021: these sustainability commitments • Luxfer MEL Technologies in Manchester, U.K. recently installed new technology to significantly reduce the use of SF6 in their magnesium operations, which is projected to result in a net savings of over 36,000 metric tons of CO2e annually once fully operational. 29 LUXFER HOLDINGS PLC • • • Luxfer Gas Cylinders in Riverside, CA, U.S. modified the method by which its alternative fuel cylinders are tested for leaks by switching from nitrogen to compressed air, saving 26 metric tons of CO2e annually. Luxfer Gas Cylinders in Nottingham, U.K., operates a site-wide zero waste initiative, which has decreased the amount of waste sent to landfill from 45% in 2007 to 0.02% in 2021. In recognition of their waste reduction efforts, the site was awarded the Sustainability Award from The Business Desk in 2021. Luxfer Graphic Arts in Madison, IL, U.S., completed an upgrade of approximately 7,500 old lighting fixtures in April 2021, saving approximately 1,490 metric tons of CO2e annually. The site also installed a swarf briquetter machine which is used to separate magnesium fines from oil and recovers approximately 100 gallons of oil per week to be recycled and reused. ESG Controls and Oversight While Luxfer's management team is responsible for developing the Company's strategy and managing day-to- day operations, the Board of Directors oversees the Company's direction, including governance-related policies and practices; our system of risk oversight and management; how we advance environmental sustainability and climate related challenges; health and safety; human rights; human capital management and corporate culture; and the manner in which we serve our customers and support our communities. We recognize that the long-term success of our Company requires continued focus on these evolving topics and a commitment to regularly evaluate and improve our performance in relation to them. Our Environmental, Health, and Safety ("EHS") Management System is a crucial mechanism through which our ESG initiatives are put into action. Based on ISO 14001 standards, our EHS Management System is comprised of policies, procedures, and objectives focused on compliance, footprint reduction, and management of EHS performance. Luxfer's businesses track progress and perform self-audits in accordance with the EHS Management System with the goal of continually improving the safety of our products, enhancing environmental protection initiatives and preventing occupational illnesses and injuries. In addition to internal controls, certain Luxfer businesses participate in compliance and knowledge-sharing forums with other companies in our industry. For example, our U.K. MEL Technologies business is subject to the European Union Regulation, Evaluation, Authorization and Restriction of Chemicals ("REACH") controls (incorporated into U.K. legislation following the U.K.'s exit from the European Union.), which aims to hold manufacturers and importers responsible for understanding and managing the environmental and health risks associated with the use of certain chemicals. Our MEL Technologies business participates as a member or lead member in REACH consortia, during which manufacturers and importers of like substances cooperate with one another and collect information, gather data, and register certain chemicals in fulfillment of REACH requirements. Participants work together to assess potential hazards and risks posed by these chemicals and how those risks can best be controlled. Managing Energy Use Energy is a major requirement for Luxfer's operations which involve melting and forming metals, changing the state of chemicals, and running heavy machinery. We are subject to a wide variety of regulations regarding energy usage in the U.K. and take every step necessary to ensure our compliance with those regulations. Our U.K. plants have signed up for the European-wide Energy Saving Opportunity Scheme, which mandates that all large organizations calculate the total energy use and perform energy audits across their businesses once every four years. Our U.K. operations are also registered with and regulated under the Carbon Reduction Commitment Energy Efficiency Scheme ("CRC"), designed to further mobilize companies to reduce CO2 emissions by incentivizing energy efficiency. Further, all Luxfer U.K. operations participate in Climate Change Agreements, with the exception of our Gas Cylinders plant due to the nature of its cold-extrusion process. In addition to regulatory requirements, Luxfer also operates several internal programs that will help us increase our energy efficiency. For example, Luxfer's Reduced Energy Demand ("RED") Program identifies initiatives that will reduce energy consumption and provide more efficient operation. Our RED projects coordinate with our energy partner to asses each Luxfer site for opportunities to reduce energy consumption, create less waste, and educate our employees on the value of environmental protection. Any RED proposals include a detailed analysis measuring the financial, environmental and safety impact of each project, and will include a renewable energy alternative that will be implemented if financially and practically feasible. 30 LUXFER HOLDINGS PLC Greenhouse Gas Emissions Each Luxfer business unit monitors its usage of the following: • • • • • Electricity (from utility bills); Natural gas (from utility bills); Propane (for fork-lift trucks from number of bottles used multiplied by capacity); Cover gases (to prevent molten metal from oxidizing from number of cylinders used multiplied by capacity); Any other greenhouse gases used in the manufacturing process (from amount invoiced). Other than for electricity, the conversion into equivalent CO2 tonnes is done using standard conversion factors readily available from websites of, for example, DEFRA in the U.K. Broadly speaking, natural gas and other pure gases have a very similar CO2 equivalency no matter where it is sourced. For electricity, the CO2 equivalency is dependent on the power stations that generate it. Accordingly, each Luxfer business uses the ‘local’ equivalency factor published on official sites. For our U.S. businesses, this is published on the U.S. Environmental Protection Agency website and is updated each year according to the mix of power- generation facilities in use. Historically, the U.K. has been a heavy user of electricity generation but it has transitioned away from using coal-fired power and is increasingly adopting zero-emissions technologies, especially off-shore wind power. Each Luxfer business unit has a manager responsible for data collection, which is subsequently collated centrally at year end, along with other accounting information. Natural gas and all other gasses are classified as 'Scope 1' and electricity usage is classified as 'Scope 2'. Year-on-year figures are used to identify any anomalies, and similar business units are compared to one another to ensure consistency and understanding of the information. At present, we do not collect details of Scope 3 emissions. The Greenhouse Gas (“GHG”) emissions statement below provides a summary of the Group GHG (Carbon) emissions for the year ended December 31, 2021 compared to 2020. We report on both Scope 1 and Scope 2 emission sources: Scope 1 emissions: Direct emissions from sources owned or operated by the Group such as natural gas usage and other CO2 equivalent emissions such as SF6; Scope 2 emissions: Indirect emissions attributable to the Group due to its consumption of electricity. Greenhouse Gas Emission Statement Baseline year Full year 2021 Consolidation Approach Operational control. Boundary Consolidated factories operated by us to manufacture Group products. Emission factor data source U.K. sites: Conversion factors published by the Carbon Trust. U.S. sites: Conversion factors published by the U.S. Environmental Protection Agency for the state in which the site is located. Sites in other countries have used their relevant countries conversion factor. Intensity ratio Group Metric - Sales value CO2 equivalent tonnes per $1 million of sales value ($1mSV). $374.1 million in 2021 (2020: $324.8 million) 31 Greenhouse Gas Emission Source LUXFER HOLDINGS PLC 2021 (tCO2e)1 (tCO2e/$1mSV) (tCO2e) 1 2020 (tCO2e/$1mSV) Scope 1 Fuel combustion (natural gas and other CO2 emissions) and operation of facilities Scope 2 Purchased electricity Statutory total (Scope 1 & 2) 2 72,222 31,431 103,653 178.1 77.6 255.7 54,124 40,218 94,342 166.6 123.8 290.4 Notes: 1. 2. Tonnes of CO2 equivalent. Statutory carbon reporting disclosure required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. Our total CO2e emissions per $million in sales decreased 12% compared to 2020 as a result of site shutdowns in 2020 due to the COVID-19 pandemic. Scope 1 emissions increased by 33% in 2021 as we returned to normal production levels following the pandemic, and in some cases, worked to push volume to satisfy higher demand levels. Scope 2 emissions decreased 22% year-over-year. Additional investments made in 2021 on electricity- saving projects and technology are expected to further decrease our total CO2e totals in 2022. Industry Engagement Our Segments are active members of relevant industry associations and standards bodies, both in Europe and North America, where they have a positive influence as members, officers, and technical advisors. They often participate in, and chair committees within, those associations on technical and other matters of interest or concern to their relevant industry, including standards, specifications and safety. These organizations include the International Magnesium Association, the Chemical Industry Association, the Zircon Industry Association, the Compressed Gas Association, the Metal Powder Producers Association, the British Standards Institute, the Canadian Standards Association, the American Society of Testing and Materials, and many others. Our People A large and important part of our lives is spent on the job. We recognize that our employees are the basis of our success and the foundation of our future. As such, we are committed to fostering an inclusive, honest, healthy and diverse work environment. Entrenched in longstanding policies of Luxfer, we promote workforce diversity, employee education and development, and community involvement. Through these policies and practices, we continue to develop a world-class team. We constantly strive to create an environment where differences are valued, supported and encouraged. Responsible Business Ethics Luxfer is committed to the highest standards of corporate governance and business ethics. Our Company’s ongoing success stems from our deeply engrained culture of ethics and integrity. Acting with integrity allows us to meet the high expectations of our customers, business partners, and the communities in which we operate, thus giving Luxfer a competitive advantage. Luxfer’s Board of Directors has adopted a Code of Ethics and Business Conduct, which is the designated code of ethics applicable to our Board, Executive Officers, employees and everyone conducting business on Luxfer’s behalf. The Code of Ethics and Business Conduct provides a guide to appropriate business conduct and acceptable behavior for persons associated with Luxfer. It applies to financial conduct, and relationships amongst employees and our relationships with our customers and suppliers. Compliance with the Code is a condition of employment and doing business with Luxfer. Additionally, we have a comprehensive Whistleblowing Policy in place which prohibits retaliation against anyone who raises a business conduct concern in good faith or cooperates in a Company investigation. Employees are encouraged to report any suspected wrongdoing via our anonymous whistleblowing hotline which is available 24/7 and offers multi-lingual support for reporters in more than 170 languages. Luxfer has a comprehensive compliance program in place to ensure our compliance with all laws and regulations in various jurisdictions in which we operate. We have Company-wide policies which are reviewed regularly by senior management as well as policies that are specific to business unit. Further, Luxfer offers a comprehensive 32 LUXFER HOLDINGS PLC online compliance training platform to employees. The training platform assigns tailored training modules to employees based on their role and area of responsibility within the Company. A number of these courses are considered mandatory compliance trainings for all employees. Each mandatory compliance training is configured to include the corresponding Company policy on the topic and require written attestation by each employee that they have read, understand, and agree to comply with each policy. Examples of recent training modules in 2021 include ethics and integrity in the workplace, anti-bribery and anti-corruption, insider trading and dealing, global anti-trust and competition, recognizing conflicts of interest, privacy and information security, cybersecurity, and workplace harassment prevention. Human Rights and Labor Practices We are committed to respecting and safeguarding internationally recognized human rights standards set forth in the UN Universal Declaration of Human Rights and the UN Guiding Principles on Business and Human Rights, and any laws at the national, regional and local levels. As such, our Code of Ethics and Business Conduct and our recently updated Human Rights and Labor Practices Policy makes clear the principles, requirements and expectations of Luxfer and its employees to protect fundamental human rights in all areas of our business. These protections include fair and humane treatment, protections against forced labor and child labor, and fair wages, benefits and working hours. To ensure compliance with our standards and policies, our employees undergo annual training on how to identify human rights violations and how to combat and prevent them. Through adherence to these policies and application of learned skills, we have adopted sound human rights practices to ensure that our employees are treated with the dignity and respect they deserve. Equal Opportunity, Non-Discrimination & Anti-Harassment Luxfer is an equal opportunity employer. We take every precaution to ensure that no applicant or employee receives less favorable treatment on the grounds of any characteristic protected by law. We have a zero- tolerance approach to discrimination during any stages of employment including recruitment, job assignment, promotion, remuneration, training and benefits as set forth in our Equal Opportunity, Non-Discrimination & Anti- Harassment policy. In line with this Policy, we are committed to providing a work environment free of harassment, abusive behavior and unprofessional conduct based on any protected characteristics. Our policy applies to all persons involved in the operation of the Company and any employee including supervisors, managers, and any third-parties such as vendors, customers, independent contractors, unpaid interns and volunteers. Training is key to promote equal opportunities and diversity. Our talent acquisition team and hiring managers undergo regular training to ensure that a diverse slate of candidates is considered for all job openings. We have developed recruitment practices to target diverse candidates including minorities, veterans and women. We also monitor our current workforce for diversity, age and gender demographics and use this information to further develop our employment and recruitment practices and enhance our inclusive work environment. All new and existing employees are required to undergo anti-harassment, non-discrimination and unconscious bias trainings on an annual basis. Occupational Health and Safety The occupational health and safety of employees is fundamental to delivering sustained economic performance. Luxfer has established well-defined health and safety policies and procedures, as well as ongoing employee training, as part of the Company's commitment to being an industry leader in safety. Gap analyses are regularly conducted and safety goals and objectives for all functional business units are developed. As part of the Company's enterprise-wide risk management system, these objectives are monitored, and performance related to them is regularly reviewed and discussed. Employees are encouraged to submit suggestions, ideas, and observations about safety hazards which are incorporated into a "safety moment" at the beginning of each meeting to increase awareness and reinforce positive safety behavior. Additional efforts include monthly safety meetings with employees, safety audits by management, safety audits by certain employees, and the inclusion of safety initiatives as a part of select employees' incentive plans. The Company utilizes a mixture of leading and lagging indicators to assess the health and safety performance of its operations. Leading indicators include reporting and closure of all near miss events and safety concerns identified. Lagging indicators include the recordable Incident Frequency Rate ("IFR") and Lost Time Accidents ("LTAs") defined by the U.S. Occupational Safety and Health Administration ("OSHA"). IFR is the number of work-related injuries per 100 full-time workers during a one-year period. LTA is defined as the number of work- 33 related accidents resulting in an absence from the workplace for a minimum of one full work day. Across all our facilities, Luxfer's IFR in 2021 was 2.62 (2020: 1.85). We had 15 LTA's in 2021 (2020: 8). These safety measures are integrated into the performance evaluations of our Executives to further incentivize improvement going into 2022. These metrics are also reported to the full Board on a quarterly basis. LUXFER HOLDINGS PLC Employee Well-Being Luxfer's workforce is one of our greatest sources of sustainable value. Our ability to deliver on our objectives and build lasting relationships with our customers depends on the capabilities, attraction, and retention of the talented individuals who come to work every day. As such, we continuously strive to offer competitive pay and benefits and maintain a work-life balance for our employees in order to foster job satisfaction and increase retention. The Company's compensation philosophy aims to attract, retain, and motivate employees through its incentive and benefit programs. Luxfer offers competitive base pay and, depending on position, variable incentive pay associated with individual performance and the performance of the Company as a whole, including both short- term incentive pay and long-term equity awards. Full-time employees are offered paid time off, opportunity to participate in the Company's various pension and retirement savings plans, and, for those located in the U.S., a 401(k) retirement savings contribution match. In addition, employees may participate in the Company's U.S. Employee Stock Purchase Plan ("ESPP") and U.K. Share Incentive Plan ("SIP"), which provides employees an opportunity to become Luxfer shareholders at a reduced price. Through convenient payroll deductions, U.S. employees can purchase Company stock at a 15% discount under the ESPP. Similarly, under the SIP, U.K. employees can purchase Company stock through payroll deductions and, in turn, the Company grants participating employees one free share per every two shares purchased. Luxfer also provides health benefit coverage, fitness and wellness programs, and healthy living incentives to our employees. We offer group medical, dental, and vision plans, along with life, disability, and paid family leave offerings which vary by jurisdiction. Luxfer is proud to offer several optional fitness and wellness programs, such as our Employee Healthy Lifestyle Program. Available to our U.S. employees, the program offers partial reimbursement for certain gym and fitness center memberships, weight loss programs, and group exercise classes. U.S. employees are also eligible to participate in a smoking cessation program through which employees who complete a 90-day program are rewarded with lower insurance rates. In addition to financial and physical well-being, employees' social and emotional health is supported through access to wellness clinics and funded mental health counseling services. As a part of Luxfer's group medical insurance plan, U.S. employees have convenient access to mental health services through live video visits with a board-certified doctor or licensed therapist. Luxfer also provides access to the Employee Assistance Program, which is designed to support employees and their families with a variety of work-life services and resources for family matters, including legal assistance, financial budgeting, and more. Through the Employee Assistance Program, employees are connected to a credentialed counselor, free of charge, to provide professional, confidential services to help them and their loved ones improve their quality of life. Growth and Talent Development One of Luxfer's core values is 'Personal Development' because we are only as strong as our employees who achieve, lead, and revolutionize our business. We believe in each employee's ability to bring their unique skills and passions into the challenging and constantly evolving industries we serve by providing an environment to grow and take advantage of career opportunities. Employees are provided training, learning, and development opportunities at all levels of the Company. At the management level, the Management and Executive Development program focuses on individual strengths and fosters technical skills and knowledge to create the next generation of well-rounded Luxfer leaders. With a multi- faceted curriculum, the program provides critical problem-solving, business management, and leadership skills. At the workforce level, management teams work closely with employees to ensure that they have the skills, knowledge, experience, and support necessary to accomplish their goals. Management utilizes a variety of tools to evaluate employee performance, including skills assessments, self-evaluations, and the achievement of personal objectives. Personal objectives (a list of goals the employee will strive to achieve) are set at the beginning of each year in the form of a balanced scorecard. Managers approve the personal objective scorecard and review the employee's performance in relation to their scorecard throughout the year. For eligible employees, annual bonuses are tied to the achievement of personal objectives. Moreover, setting personal objectives gets employees involved with the Company's overall strategy and improves engagement, thereby supporting Luxfer's growth and profitability. 34 LUXFER HOLDINGS PLC To further support employees' personal development, Luxfer offers a company-wide online training and development platform designed to increase access to critical business, leadership, management, productivity, collaboration, and computer software skills. Available to all Luxfer employees, the platform provides access to over 180,000 courses, books, and audio books on a variety of topics from world-class experts. The content is made to suit different learning styles; all one click away in the same user interface. Employees can access the content 24/7 on any desktop or mobile device, providing them with the opportunity to improve their performance anytime, anywhere. Diverse and Supportive Workplace The professional conduct of our employees furthers the Company's mission, promotes productivity, minimizes disputes, and enhances our reputation. As such, Luxfer strives to create and maintain a work environment in which people are treated with dignity, decency, and respect. Pursuant to the Company's Equal Opportunity, Non- Discrimination, and Anti-Harassment Policy and the Human Rights and Labor Practices Policy, the work environment at Luxfer is characterized by mutual trust and the absence of intimidation, oppression, and exploitation and operates free of discrimination or harassment. Luxfer's diversity initiatives are applicable, but not limited, to practices on recruitment and selection, including targeted sourcing of personnel from diverse backgrounds; compensation and benefits; professional development and training; advancement opportunities; and the ongoing development of a diverse and inclusive work environment. To ensure effective teamwork and the achievement of common business goals, all Luxfer personnel are required to complete a variety of anti-harassment, non-discrimination, diversity, and unconscious bias trainings annually. Luxfer's talent acquisition teams and hiring managers undergo additional training to ensure that a diverse slate of candidates is considered for all job openings. Further, Luxfer monitors the composition of its current workforce for diversity, age, and gender demographics. The quality of this data is continually improved to ensure that a diverse and talent workforce is maintained. This data is used to enhance employment and recruitment practices to provide the most inclusive work environment possible. Further information on employee policies, communication and engagement can be found in the Directors’ Report on pages 36 to 39. At December 31, 2021, the number of employees was as follows: Employees * Directors of Luxfer Holdings PLC Senior Managers Employees 2021 Male** 5 34 926 2020 Male** 4 39 1,011 2021 Female** 2020 Female** 2 10 404 2 12 376 *The Directors of Luxfer Holdings PLC include 6 independent Non-Executive Directors who are not employees of the Company. ** Includes numbers in relation to discontinued operations. Customers and Suppliers Recognizing our customers as a crucial source of our success, a core value of Luxfer is always putting the customer first. Our products are customizable and are tailored to suit the highly specific needs of each individual customer. We always strive to build and maintain long-term relationships with our customers based on mutual cooperation and the highest standards of quality and service. Working in close collaboration with one another, we work hard to find innovative solutions to suit their needs for advanced materials and products. Our focus is on demanding applications where our technical know-how and manufacturing expertise combine to deliver a superior product. Luxfer has a complex global supply chain. We understand that such complexity comes with certain risks, which demands that we maintain a high level of due diligence and vigilance of the third parties and suppliers with whom we do business. To ensure that our suppliers conduct business with a high degree of integrity and in a socially and environmentally responsible manner, all third parties (including suppliers, distributors, contractors, agents, service providers, and customers) are expected to adhere to our Third Party Code of Conduct. Based on our own Code of Ethics and Business Conduct, the Third Party Code of Conduct applies to all third parties worldwide. Under the Code, third parties are expected to respect, acknowledge, uphold, and comply with the following key themes and extend these standards to their supply chains: • Working conditions • Employee health and safety 35 LUXFER HOLDINGS PLC • • • • • • Child labor, forced labor, and human trafficking Business ethics, anti-corruption and anti-bribery Data privacy Environmental responsibility Conflict-free mineral sourcing Product and service quality Beginning in 2021, the establishment of new commercial contracts and the continuation of existing commercial arrangements with Luxfer require that third parties complete and return an acknowledgement form as a means to verify compliance with the Third Party Code of Conduct. To ensure ongoing compliance, Luxfer requests that third parties renew their signature on the form once every three years. To ensure our compliance with applicable laws, we conduct thorough examinations, supplier risk assessments, and both on- and off- site audits. We also require that third parties allow representatives from Luxfer and, if requested, Luxfer’s customers, full access to their production facilities, worker records and employees for confidential interviews. We consistently ensure that we are using appropriate due diligence procedures to vet our suppliers prior to and during any engagements and we reject suppliers who do not fulfill our requirements. While we have multiple sourcing options in almost every area of the Group, our key suppliers are important to us, and we have chosen them for their combination of quality, delivery performance and value for money. Section 172 statement Luxfer’s Board of Directors is responsible for overseeing the Company’s long-term business strategy. Each year, management presents to the Board, and the Board discusses and approves detailed long-term strategic plans for the Company. In addition to the overall strategic plan for Luxfer, these discussions also include sessions on each business unit, portfolio management, growth and innovation, legal and compliance strategy and operations and supply chain transformation. The Board also oversees the Company’s approach to ESG matters and the Company’s governance related policies and practices; our system of risk oversight and management; and how we advance environmental sustainability, health and safety in our business and operations. The Directors take their responsibilities under Companies Act 2006 seriously and consider their responsibilities to stakeholders when making decisions for the Group. The responsibilities under Section 172 are underpinned by our values of customer first, innovation, accountability, personal development and teamwork. Shareholder and public engagement are essential to maintaining our strong corporate governance practices. We value feedback and input from all our shareholders and respond to concerns identified during the engagement process. Engaging regularly with our global shareholders helps us gain valuable insights into the governance issues about which they care most. We seek a collaborative and mutually beneficial approach to issues of importance to shareholders that affect our business and to assure that our corporate governance practices remain industry-leading from their perspectives. Further information regarding the role of the Board and how they have complied with the requirements of section 172 are included in the Corporate Governance statement on pages 22 to 35. 36 LUXFER HOLDINGS PLC Directors’ Report The Directors of Luxfer Holdings PLC (the “Company”) present their annual report together with the audited financial statements of the Group and the Company for the year ended December 31, 2021. This Directors’ Report should be read together with, and incorporates, the Governance section on pages 19 to 35. Results The profit for the year, after taxation from continuing operations, amounted to $24.8 million (2020: $17.8 million); please see the Strategic report on pages 3 to 13 for more detail. Dividends per Share Quarterly interim dividends of $0.125 each £0.50 ordinary share, equating to $13.6 million for the year and $3.4 million per quarter, were paid in 2021 (2020: $13.6 million). A further interim dividend was paid in February 2022 of $0.125 each £0.50 ordinary share totalling $3.4 million and a further dividend declared in March to be paid in May 2022 of $0.13 each £0.50 ordinary share totaling $3.6 million. Directors The Directors of the Company who were in office during the year and up to the date of signing the financial statements, and their brief biographical details are set out in the Governance section on pages 26 to 27. Capital Structure In June 2021, the Board announced a share buy-back program. As a result, in 2021, the Company purchased 297,678 total shares for $6.4 million. Of the 297,678 shares repurchased in the year, 56,000 at $0.7 million have been cancelled. 16,395 shares were utilized at $0.1 million, with the remaining 225,283 retained within Treasury shares. As at December 31, 2021, the Company’s issued share capital comprised of 28,944,000 ordinary shares of £0.50 each and 765,835,318,444 deferred shares of £0.0001 each as set out in Note 20 to the financial statements. Substantial shareholdings The Company had been notified of the following interests amounting to 3% or more of its issued share capital as at the end of the financial year1: Shareholder FMR LLC Wellington Management Group, LLP Paradice Investment Management, LLC Nantahala Capital Management, LLC William Blair Investment Management LLC Kempen Capital Management N.V BlackRock Institutional Trust Company, N.A. Royce & Associates, LP American Century Investment Management, Inc. Granahan Investment Management, Inc AltraVue Capital, LLC Number of shares 3,493,532 2,699,248 2,234,032 2,118,233 2,082,207 1,999,576 1,576,832 1,013,679 969,514 928,790 829,290 Percent2 12.7% 9.8% 8.1% 7.7% 7.6% 7.3% 5.7% 3.7% 3.5% 3.4% 3.0% 1 Shareholdings are based on the latest available information as at the approval date of these financial statements. 2 Percentage based on number of shares listed on the New York Stock Exchange. 37 LUXFER HOLDINGS PLC Directors’ Interests and Related Party Transactions No Director had a material interest in, nor was any Director party to, any contract or arrangement to which the Company or any subsidiary is or was party to either during the year or at the end of the year, with the following exceptions: in the case of the Executive Director, his individual service contract and in the case of the Non- Executive Directors, their engagement letters, see Note 33 of the financial statements. The interests of the Directors who held office at December 31, 2021, and those of their families, in the share capital of the Company, including share options are set out in the Remuneration Report on pages 40 to 60. All of the interests were beneficial. There has been no change in the interests of the directors between the balance sheet date and the date of approval of the financial statements. Going Concern The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of the approval of these financial statements which indicate that, taking account of reasonably possible downsides, the Company will have sufficient funds, generated from operations and committed banking facilities, to meet its liabilities as they fall due for that period. The Directors continue to monitor the impact of COVID-19 on the Company and wider markets in which the Company operates. Whilst COVID-19 has given rise to inflationary cost pressures and supply chain issues, the business continues to recover well from the pandemic, as demonstrated by the significant improvement in year on year results. The impact of COVID-19 is further discussed below. Subsequent to the year end, the global political environment has become increasingly uncertain. This could potentially give rise to additional inflationary cost pressures and supply chain issues to those arising as a result of COVID-19. In response to these events, the Company continues to execute business continuity plans in line with those used to mitigate the impact of COVID-19 (see below for further details). Furthermore, the Directors have assessed that revenue generated from affected areas is less than one percent of the Company's total revenue, and as such the Group has minimal exposure to these events. Whilst the Company purchases raw materials from affected areas, alternative supply chains are available and have been executed since these events began. Despite the uncertainties discussed above, the Company is expected to generate positive cash from operations for a period of at least 12 months from the date of approval of these financial statements. In addition, there is sufficient headroom in our covenant compliance which would enable the Group to drawdown on the revolving credit facility and not impact the Group's ability to continue as a going concern, at the date of these financial statements there is in excess of $50m undrawn on the revolving credit facility. Accordingly, the financial statements have been prepared on a going concern basis. Impact of COVID-19 on the Financial Statements Demand from most end-markets we serve has improved throughout 2021 following the adverse impact of COVID-19 on prior year volumes. Sharp recovery in demand, combined with supply chain challenges, has resulted in some adverse business impacts, including increased material cost inflation on key inputs (including magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases. Currently, our expectation is that the impact of material and energy cost inflation and labor and transport constraints will continue into 2022, but it is our intention to pass through inflation to our customers. The Company continues to monitor the COVID-19 situation closely, including subsequent constraints on supply, while simultaneously executing business continuity plans. These business continuity plans include, but are not limited to, (i) retooling operations to maintain social distance and maximize employee safety; (ii) increasing resources to manage supply constraints and recruit employees in order to satisfy demand; (iii) expanding flexible work arrangements and policies, where practical, to maximize employee safety; and (iv) providing regular updates to our shareholders, employees, customers, and suppliers in a transparent and timely manner. In relation to liquidity, the Company has access to a revolving credit facility (see Note 11) and has performed stress testing on financial covenants using current forecast information. Consequently, the Company has not identified any liquidity concerns. Research and Development During the year, the Company incurred $3.9 million (2020: $3.3 million) in research and development costs on new and improved products and processes. Once a project is reasonably certain to deliver a commercial product, certain of the development costs are capitalised. The Company continues to maintain links in fields of research with both leading universities in various countries and outside agencies to support and supplement its own in-house expertise. The Company also continues to gain significant tax benefit from the U.K. Patent Box regime. 38 LUXFER HOLDINGS PLC Future Developments An indication of the future developments of the business of the Company can be found in the Strategic Report on page 8. Disabled Employees Where an employee has developed a disability whilst employed in his or her business that impacts on his or her ability to carry out a certain job effectively, the relevant business unit will make arrangements where possible to retrain that employee and continue his or her employment. Applicants for job vacancies who are disabled are given full and fair consideration, bearing in mind requirements of the particular job and the particular aptitude and abilities of the candidate. Employee Involvement Many employees are directly involved in the performance of the Group and segments through the use of various incentive schemes. These include bonus schemes and various share-related schemes, details of which can be found in the Environment, Social and Governance ("ESG") section of the Governance Report on page 30. A combination of newsletters, regular line manager and team briefings, exchanges and consultations, at both Group and site level (as appropriate) are used to systematically communicate with employees and develop their awareness of matters that concern them, their business unit, segment, and the Group. As required, employees are consulted on matters that concern them in an appropriate manner and through appropriate channels. The Group continues to offer training and development opportunities to employees at all levels and to all abilities, providing benefit to both the Group and the individual employee. Further details can be found in the ESG section of the Governance Report on pages 28 to 31. We undertake a succession planning review periodically to ensure that we develop suitable candidates for critical leadership roles within the Group. For senior management, we hold an annual management conference at the beginning of each year where strategy for each business segment and at the Group level is presented and discussed for the year. Workshops on subjects that will promote Group strategy will be held throughout the year. Meetings of employees who have the same or similar functions within the Group also meet periodically for training, to exchange best practices and convey Group policy. Our Equal Opportunity, Non-Discrimnation and Anti-Harassment Policy sets forth our employment practices throughout the Group in the treatment of applicants and Luxfer employees at all stages of employment. Political Donations The Company and its subsidiaries made no political donations in either 2021 or 2020. Directors’ Liabilities The Company maintains liability insurance for Directors and Officers which provides appropriate coverage for any legal action brought against Directors. Throughout the year and at the date of approval of the financial statements, the Articles provides indemnification for the Directors against liability incurred in the proper conduct of the Company's business subject to the conditions set out in the Companies Act 2006. Greenhouse Gas Emissions A statement regarding the greenhouse gas emissions resulting from the Company’s operations can be found on pages 28 to 31 of the Governance Report. The Company is continuing to develop its management information in respect of greenhouse gas emissions and other environmental factors, such that it is not currently possible to accurately report all required information. However, the Company discloses a significant amount of environmental information in its Governance Report as referenced above. Further information can also be found in the Company's annual ESG report, available on the Company website. The next report will be available towards the end of 2022. Treasury and the Use of Financial Derivatives Details of our financing and treasury policies, along with the management of treasury risks and use of financial derivatives can be found in Notes 28 and 29 to the consolidated financial statements. Purchase of own shares In June 2021, the Board announced a share buy-back program. As a result, in 2021, the Company purchased 297,678 total shares for $6.4 million. Of the 297,678 shares repurchased in the year, 56,000 at $0.7 million have been cancelled. 16,395 shares were utilized at $0.1 million, with the remaining 225,283 retained within Treasury shares. 39 LUXFER HOLDINGS PLC Financial Risks Details of our principal risks and uncertainties can be found on pages 9 to 12 of the strategic report. The management of these financial risks and mitigating actions are explained further in Note 28 of the Group consolidated financial statements. Directors’ Statement as to Disclosure of Information to the Auditors The Directors, who served as members of the Board at the time of approving this Directors’ Report are listed on page 26. Having made inquiries of fellow Directors and of the Company’s auditors, each of those Directors confirms that: • • To the best of their knowledge and belief there is no information relevant to the preparation of their report of which the Company’s auditors are unaware; and All reasonably expected steps were taken to be aware of relevant audit information and to establish that the Company’s auditors are aware of that information. Statement of Directors' Responsibilities in respect of the Financial Statements The Statement of Directors' Responsibilities in respect of the Financial Statements can be found on page 61 and forms part of this Report. Independent Auditors A written Resolution will be put PricewaterhouseCoopers LLP as the Company's Independent Auditors. the Annual General Meeting of to the Company to re-appoint The financial statements on pages 70 to 134 were approved by the Board of Directors on April 21, 2022 and signed on their behalf by: Alok Maskara CHIEF EXECUTIVE OFFICER April 21, 2022 40 LUXFER HOLDINGS PLC DIRECTORS' REMUNERATION REPORT Chair's Letter Dear Shareholder, As Chair of the Remuneration Committee, I present Luxfer's Directors' Remuneration Report for the year ended 31st December 2021. The Remuneration Report, starting on page 43, (i) contains the current Directors' Remuneration Policy, which was last approved at the 2021 Annual General Meeting of Shareholders on 9th June 2021 and (ii) sets out details of the remuneration paid to Luxfer's Directors in 2021 and decisions affecting Director remuneration in 2022. 2021 Performance Fiscal year 2021 was a year of uncertainty, as the COVID-19 pandemic continued to impact businesses and people around the world. Despite these challenges, Luxfer remained focused on our people; supporting our customers; and contributing to our communities through the supply of sustainable transportation solutions, life- saving medical and emergency response equipment, and advanced materials for use in general industrial applications. While Luxfer was not immune to supply chain and logistics challenges, we entered the pandemic with a strong balance sheet and good momentum. Exceptional market conditions and continued progress on our transformation plan led to solid sales growth, profitability, and operating cash flow, as Luxfer delivered financial performance ahead of budget in 2021. These results demonstrate that 2021 was another year of solid balance sheet strength, and this strong financial performance is reflected in the Company's 2021 remuneration outcomes. 2021 Remuneration Changes and Outcomes Director remuneration is an important matter to Luxfer's Board of Directors, the Remuneration Committee, and our shareholders. Recognizing this importance, Luxfer's remuneration programs account for both short-term financial performance and long-term value creation. Specifically, the remuneration of Luxfer's Directors includes (i) fixed remuneration to compensate Directors appropriately in accordance with their responsibilities and dedication to the Company and (ii) long-term equity compensation to strengthen the alignment between Director and shareholder interests through share ownership. As set forth in the Directors' Remuneration Policy, Luxfer's Director remuneration programs aim to: • • • • • attract, retain, and motivate high-quality talent; align the achievement of strategic objectives with shareholders' interests and long-term value creation; appropriately and transparently compensate Directors for professional accountability; offer competitive and fair remuneration; and establish remuneration packages that provide an appropriate balance between short-term and long-term reward. Executive Director Remuneration Alok Maskara, Luxfer's former Chief Executive Officer, was the Company's only Executive Director in 2021. During the year, Director remuneration was comprised of the same elements as those in previous years, including base salary, benefits in kind, pension or 401(k) contribution, annual cash bonus incentive, and long- term equity awards. While the majority of these elements did not change from year-to-year, total Executive Director remuneration is dependent on the achievement of certain financial goals, which impact the cash bonus incentive and long-term equity awards. Additionally, there were no increases to Alok Maskara's base salary between 2019 and 2020. While his base salary remained the same, total salary payout in 2020 was less than 2019 due to the impact of COVID-related furloughs and voluntary pay reductions. For fiscal 2021, the Remuneration Committee determined that annual merit increases were warranted based on performance, market comparisons, and changes in level of responsibility. As such, the Committee approved a 5.9% annual merit increase to Alok Maskara's 2021 base salary from his 2019 base salary. Consistent with the "pay for performance" principle, Mr. Maskara's 2021 remuneration was comprised of 72% variable remuneration, while only 28% of his remuneration was fixed, including base salary and benefits in kind. Mr. Maskara's variable remuneration includes an annual cash bonus incentive and long-term equity awards. In 2021, the annual cash bonus incentive was dependent on two financial performance goals: Management EBITA and cash conversion. The financial performance goals are measured against predetermined criteria, and the 41 LUXFER HOLDINGS PLC annual cash bonus paid on a sliding scale basis, based on achievement of threshold, target, and maximum levels. As a result of the Company's solid financial performance in 2021, including strong end market demand and operating cash flow, the annual cash bonus awarded to Alok Maskara was 186% of his base salary, out of a maximum potential of 200%. The achievement of Management EBITA metric was at maximum level, whereas the cash conversion metric was above target and slightly below maximum level. Further details on the bonus arrangements and the bonus paid can be found in the Single Figure, Executive Directors' Remuneration section of the Remuneration Report on page 44. Following shareholder approval of the Directors' Remuneration Policy on 9th June 2021, the maximum long-term equity award available to the Chief Executive Officer under the Company's Long-Term Umbrella Incentive Plan increased from 220% to 300% of base salary. With respect to 2021 long-term equity awards, 60% of Mr. Maskara's targeted share award was in the form of performance-based share units and 40% was in the form of time-based restricted stock units ("RSUs"). The performance-based share units are awarded based on the achievement of two financial performance goals: diluted earnings per share ("EPS") and relative total shareholder return ("TSR"). In 2021, the Remuneration Committee set these EPS and TSR performance goals at challenging levels to motivate the Executive and further align the Executive's interests with those of shareholders. The EPS award, which makes up 24% of the Executive Director's total targeted share award, was achieved at maximum level, or 200%, in 2021. While the TSR measurement period runs through 31st December 2021, the Company's TSR was in the 2nd quartile of its peer group as of 31st December 2021. As set forth in the Company's 2020 Remuneration Report, the EPS performance goals set for fiscal year 2020 were not achieved. Accordingly, no EPS awards were made in 2021. As to the 2020 TSR awards, the measurement period runs through 31st December 2022; however, the Company's TSR was in the 3rd quartile of its peer group as of 31st December 2021. As the 2019 TSR measurement period ended 31st December 2021 and the Company was in the 3rd quartile of its peer group, the Executive Director's 2021 remuneration includes a 50% payout in relation to the 2019 TSR award. Further details on long-term equity awards are set out in the Single Figure, Executive Director's Remuneration and the Awards Granted During the Year sections of the Remuneration Report, as well as the associated Notes. Non-Executive Director Remuneration Non-Executive Director remuneration is comprised of an annual retainer fee and long-term equity awards. In 2021, the Remuneration Committee evaluated the Company's Non-Executive Director remuneration program and concluded that the structure was comparable to that of other similar companies and competitive in the marketplace. Based on recommendation by its independent compensation consultant and following shareholder approval of the Directors' Remuneration Policy on 9th June 2021, the long-term equity awards available to Non- Executive Directors were increased from 55% to 100% of the Non-Executive Directors' annual retainer fee. In 2021, Non-Executive Directors were awarded RSUs in an amount equal to 100% of the annual retainer fee. As in previous years, these RSUs vest immediately prior to the following year's AGM. Non-Executive Director retainer fees remained unchanged in 2021, being $115,000 for the Board Chair and $82,000 for all other Non-Executive Directors. Further details on Non-Executive Director remuneration can be found under the section headed Non- Executive Directors' Remuneration of the Remuneration Report. Areas of Focus and Decisions Affecting 2022 Remuneration As Director remuneration continues to be an important matter to our shareholders and the Company as a whole, it is anticipated that the Remuneration Committee will focus on the following areas in 2022: • • • • designing and, following shareholder approval, implementing an Amended and Restated Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Equity Incentive Plan; examining opportunities to improve the long-term incentive framework, including changes to financial performance goals relative to performance-based share awards; determining appropriate performance measures for the annual cash bonus incentive, including the introduction of ESG measures to reflect the Company's commitment to sustainability; and reviewing the peer group used by the Company for benchmarking performance goals and Executive remuneration as a whole. A summary of the Chief Executive Officer's salary and incentive arrangements for the financial year 2022 can be found under the section headed Implementation of the Remuneration Policy for the Year Ending 31 December 2022. 42 LUXFER HOLDINGS PLC Shareholder Engagement As required by Sections 439 and 440 of the Companies Act 2006, Luxfer seeks shareholder approval of its annual Directors' Remuneration Report. Shareholder votes provide the Board with invaluable public accountability and shareholder feedback regarding the appropriateness of the Company's Remuneration Policy. The Directors' Remuneration Policy was last approved by our shareholders at the 2021 Annual General Meeting, where 99.76% of the votes cast were in favor of approving the Directors' Remuneration Policy. The Committee currently has no proposal to amend the Policy. The Company's Directors' Remuneration Policy can be found in the Governance section of our website at https:// www.luxfer.com/investors/governance/board-committees/. Approval of the Directors' Remuneration Report will be proposed as an ordinary resolution, subject to a non- biding advisory vote by shareholders, at the Company's 2022 Annual General Meeting on 8th June 2022. I and the Remuneration Committee are always pleased to discuss our remuneration approach with Luxfer shareholders, and we welcome your feedback throughout the year. We look forward to receiving your support for the arrangements described in this Report at the upcoming AGM. Richard J. Hipple CHAIR OF THE REMUNERATION COMMITTEE April 21, 2022 Directors' Remuneration Report 43 LUXFER HOLDINGS PLC Remuneration Report 2021 Remuneration Report (subject to advisory vote by the shareholders at the 2022 AGM) This report has been compiled in accordance with the U.K. ‘The Large and Medium‑sized Companies and Groups (Accounts and Reports) (Amendments) Regulations 2013’. As required by the Regulations, the report will be proposed for an advisory vote at the 2022 AGM. The approved Remuneration Policy can be found in the Governance section of the Company’s website at www.luxfer.com/governance/. The Remuneration Committee, its Activities and Responsibilities The members of the Committee during the year are set out below. Members of Committee during 2021 Richard Hipple Allisha Elliott Lisa Trimberger Member and Chair Member Member Meetings held during membership Meetings attended 2 2 2 2i 1i 2i i Both of the Committee meetings were held via videoconference due to COVID-19. The Company Secretary acts as secretary to the Committee. The Chief Executive Officer normally attends all the meetings, at least in part. The Committee is responsible for determining and agreeing with the Board the framework on executive remuneration and its costs. The Committee’s written Terms of Reference can be accessed in the Governance section of the Company’s website www.luxfer.com/governance/. During 2021, the Committee discussed the following matters: March 2021 December 2021 • • • • • • • • • • • • Consideration as to whether, and to what extent, the Executive Directors' bonus targets for 2020 had been met; Determination of the Executive Director’s annual bonus targets for 2021; Annual review of the Executive Director's and Company Secretary salaries; Setting of goals to be met by the Executive Directors and Senior Managers which if met would lead to the awarding of time‑based share awards; Delegation of authority to Chief Executive Officer to make awards under the LTIP over a defined number of shares to junior and middle management in his sole discretion; and Review of of Executive and Non-Executive officer stock ownership guidelines. Annual review of the Committee's Terms of Reference; Annual review of stock ownership guidelines; Remuneration committee annual agenda and calendar; 2021 Executive compensation forecast; Review of proposed 2022 Executive and Non-Executive Officer compensation; and Review of committee self-evaluation exercise. Advisors to the Committee The Committee has access to independent advice when it considers it requires such advice. The Company engaged with Meridian Compensation Partners, LLC ("Meridian") to provide advisory and benchmarking surveys with regards to Director and Executive Officer remuneration and benchmarking peer companies. The cost of advice provided by Meridian during 2021 was $2,835 (2020: $12,216). 44 LUXFER HOLDINGS PLC REMUNERATION RECEIVED BY THE DIRECTOR FOR THE YEAR ENDED DECEMBER 31, 2021 (Information within pages 44 to 51 have been audited. Information within pages 52 to 60 not subject to audit unless stated otherwise.) Single Figure The tables below set out an analysis of the Director’s total remuneration for 2021. Total remuneration reflects both the performance of the Company and the contribution made by the Director to the continued success of the Company during their period of tenure. Executive Director’s Remuneration Single Total Figure Table U.S.$ Year Salary(1) Alok Maskara 2021 2020 715,000 657,000 Taxable Benefits (2) Annual Bonus(3) Long-Term Incentive Awards(4) 52,198 1,330,615 1,234,404 Other Share Awards(5) 4,042 Pensions Contributions (6) Total 178,750 3,515,009 60,197 337,500 831,890 11,613 165,480 2,063,680 U.S.$ Alok Maskara Year 2021 2020 Fixed pay 945,948 882,677 Variable pay 2,569,061 1,181,003 Total 3,515,009 2,063,680 Table compiled in accordance with the U.K. 'The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008', as amended by 'The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013'. (1)Salary. Single Total Figure remuneration reflects the period from January 1, 2021 to December 31, 2021. (2)Taxable Benefits. During the year an amount was paid to the director in respect of expenses relating to car allowance, and medical and dental insurance. All payments made to Alok Maskara in respect of these allowances were determined and paid in U.S. dollars. (3)Annual Bonus. For the 2021 financial year, the annual bonus plan was based on the achievement of two financial performance goals, management EBITA (adjusted earnings before interest, taxation and amortisation) performance and the ratio of management EBITA to adjusted operating cash flow “Cash Conversion” (two of the key strategic performance indicators used by the Company to assess its development against its financial objectives during the year), measured against the annual budget and an element was based on the achievement of certain predetermined balanced scorecard objectives. 45 LUXFER HOLDINGS PLC Summary of the annual bonus potential as a percentage of base salary for the Executive Director for 2021: Maximum Annual bonus (number of points available and % of salary)(1) Sliding scale between threshold, target and stretch Management EBITA(2) Cash Conversion(3) Bonus outcome 2021 Alok Maskara 200% 0.0% - 100.0% 0.0% - 100.0% 186% (1)In 2021, Luxfer achieved levels of EBITA and cash conversion that resulted in a bonus opportunity of 186% out of 200% being assessed for Alok Maskara. (2)Management EBITA (earnings before interest, taxation and amortisation) is defined as operating income (as reported under U.S. GAAP) adjusted for equity income /(loss) of unconsolidated affiliates, qualifying restructuring charges, impairment charges, acquisition-related charges / credits, amortisation of finance costs, the unwind of deferred consideration, amortisation of acquired intangibles and share based compensation charges. (3)Cash conversion is defined as the ratio of management EBITA to adjusted operating cash flow. Adjusted operating cash flow is reconciled from management EBITA by adding back depreciation, loss / (gain) on disposal of property, plant and equipment, changes in assets and liabilities, net of effects of business acquisitions, non-restructuring capital expenditures, equity income of unconsolidated affiliates and U.K. pension deficit funding contributions. In 2021, the Company generated a management EBITA of $48.7 million being greater than the stretch level level and a cash conversion ratio of approximately 97%, being in the range of between agreed target and stretch levels. The Board has considered whether to include in this report the targets which applied to the bonus arrangements for the Executive Director in 2021 but has determined that these amounts are commercially sensitive. (4)The Long-Term Incentive Awards. The 2021 Single Figure: In 2021, 40% of the total target award communicated by the Remuneration Committee was in the form of time-based restricted stock units granted on March 15, 2021. The value of these awards was $505,440 based on the closing share price on the day of grant of $22.06 per share and deducting the nominal cost value of $1.00 each share. The awards will vest in one-quarter increments on each of the first four annual anniversaries following grant. In addition, the Remuneration Committee's performance targets for the year were based upon EPS targets and total shareholder return, as described in Executive Director Awards Under the LTIP on page 48. The total shareholder return performance measurement period remains open until the year ending December 31, 2022. The EPS maximum level was achieved in 2021 resulting in the granting of time- based awards in 2022 as follows: Number of Awards Possible Awards Awards to be made in 2022 Alok Maskara 28,800 28,800 % of possible awards made in 2022 100.0% Value of Awards $ (1) 525,024 (1) These awards were granted on March 15, 2022. The value of the awards in the above table has been calculated by using the closing share price of the Company at the date of grant ($19.23) and deducting the nominal cost value of $1.00 each share. The awards will vest in one-third increments on each of the three anniversaries following grant. The LTIP share award disclosure in the Proxy Statement filed with the SEC (Form DEF 14A) for Alok Maskara as part of his executive compensation for the year ended December 31, 2021 differs to the amount included in the Single Total Figure Table, as it is based upon the achievement of targeted Company performance for all performance-based awards communicated in the year. The value of the awards included in the Proxy Statement is in accordance with U.S. GAAP. 46 LUXFER HOLDINGS PLC In 2020, the Remuneration Committee targets were based upon certain EPS and TSR targets, consistent with the methodology applied for the year ended December 31, 2021. The total shareholder return performance measurement period remains open until the year ending December 31, 2022. The EPS target was missed in 2020 resulting in no time-based awards being granted in 2021. In 2019, the TSR targets set by the Remuneration Committee closed at December 31, 2021. The share award opportunity showed the Company in the third quartile when compared to its peer group. This led to an award of 9,540 share awards made to the Executive Director and will vest in one-half increments on each of the two annual anniversaries following grant. The value of these awards was $170,766 based on the closing share price on the day of grant of $18.90 and deducting the nominal cost of $1.00. (5)Other Share Awards. In May 2017 Alok Maskara was granted share options in respect of his appointment to the role of Chief Executive Officer. These time-based awards and performance-based awards were outside the terms of reference of the LTIP but granted in accordance with the provisions of the Remuneration Policy. The number, and details of the terms, of the grants are set out in the table in Outstanding Share Awards During 2021 and the accompanying notes, on pages 50 to 51. As shown in the Outstanding Share Awards During 2021 table on page 50, a total of 15,000 share awards made to the Executive Director on his appointment vested and were released during the year. The value of these awards was included in the Other Share Awards remuneration figure of the Single Total Figure table for 2017. These awards carry with them the right to receive accumulated dividends during the period of the award, in shares. The dividends are not credited until the award vests. The value of the dividends vested and paid in shares was $4,042 resulting from the vesting of 214 dividend shares. The dividend shares were valued at the closing share price on the NYSE on the date of vesting, less the issue price of £0.50 translated into U.S. dollars at the date of vesting. For the year ended December 31, 2020, a total of 15,000 share awards made to the Executive Director on his appointment vested and were released during the year. The value of these awards was included in the Other Share Awards remuneration figure of the Single Total Figure table for 2017. These awards carry with them the right to receive accumulated dividends during the period of the award, in shares. The dividends are not credited until the award vests. The value of the dividends vested and paid in shares was $11,613 resulting from the vesting of 877 dividend shares. The dividend shares were valued at the closing share price on the NYSE on the date of vesting, less the issue price of £0.50 translated into U.S. dollars at the date of vesting. (6)For details of pension arrangements see page 52. Payments to Past Directors There were no payments made to past Directors during the year. Payments for Loss of Office There were no payments made to Directors for loss of office during the year. Non-Executive Directors' Remuneration None of the Non-Executive Directors (including the Chair) received taxable benefits, annual bonus, long-term incentive awards (exceeding one year) or pension-related benefits during the year. 47 LUXFER HOLDINGS PLC Single Total Figure Table U.S.$(1) Year Base Fee(1) Other Fees (Fees in the form of share awards)(2) David Landless Clive Snowdon Richard Hipple Allisha Elliott Lisa Trimberger Patrick Mullen 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 115,000 115,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 27,333 — 111,693 60,462 79,643 43,152 80,794 108,563 80,572 96,158 80,200 75,063 — — Total 226,693 175,462 161,643 125,152 162,794 190,563 162,572 178,158 162,200 157,063 27,333 — Table compiled in accordance with the U.K. 'The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008', as amended by 'The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013'. (1) Patrick Mullen was appointed to the Board as a Non-Executive Director from September 1, 2021. His base fee in 2021 reflects the period of service from this date to December 31, 2021. The Non-Executive Directors' fees of Clive Snowdon, Richard Hipple, Lisa Trimberger, Allisha Elliott and Patrick Mullen are all determined in U.S. dollars. The Non-Executive Director’s fee of David Landless although determined in U.S. dollars, is paid in GBP sterling translated at the closing month-end exchange rate of each month prior to payment. Actual payments received by David Landless aggregated to £83,470 (2020: £90,104). The base fee for 2021 and 2020 includes the supplementary fee for being Chair of the Board. (2) 2021 Single figure: The value of the Other Fees in the Single Figure table is calculated as follows: • • An element of the fees received by the Chair and the other Non‑Executive Directors are delivered as time‑based restricted stock units (“RSUs”). The award value is a percentage of their Base Fee as provided in the Director Equity Incentive Plan (“EIP”) less the issue price per share of $1.00. The value of the award is capped at up to 100% of base fees at the date of the award. Awards were made immediately after the 2021 AGM and vest immediately before the 2022 AGM. The number of RSUs was calculated using the closing share price on the NYSE ($22.99) the day before the award was made. The number of awards received by each Non‑Executive Director is set out in Awards Granted During the Year - Non‑Executive Directors Under the Director Equity Incentive Plan (EIP) on page 49. The RSU awards carry with them the right to receive accumulated dividends during the period of the award, in shares. The Other Fees amount includes the value of the dividends awarded in 2021 and vested immediately before the 2021 AGM or will vest immediately before the 2022 AGM. The value of the awards themselves were included in the Single Figure for 2021 as they were time‑based awards (see below). The dividend shares were valued at the closing share price on the NYSE on the date of the dividends being awarded, being $17.25, $22.56, $19.87 and $20.88 respectively, less the issue price of $1.00. The number of dividend shares allocated, and their value were: 48 Non-Executive Director David Landless Clive Snowdon Richard Hipple Allisha Elliott Lisa Trimberger Patrick Mullen LUXFER HOLDINGS PLC Dividend shares allocated 115 82 144 132 112 — Value of dividend less nominal cost of share $ 2,183 1,557 2,708 2,486 2,113 — LUXFER SHARE INCENTIVE PROGRAMS Luxfer has a number of share incentive plans designed to align the interests of its Directors, managers and employees with the interests of its shareholders. These plans help us remain competitive and act as retention tools. The plan under which awards are granted to the Executive Directors on an ongoing basis is the Luxfer Holdings PLC Long‑Term Umbrella Incentive Plan (“LTIP”). Awards, which are considered part of their fees, are made to the Non‑Executive Directors under the Non‑Executive Directors Equity Incentive Plan (“EIP”). The U.K. Executive Directors also participate in the Company’s All Employee Share Plan (“SIP”) open to all U.K. employees. In the U.S. the Company has established an Employee Share Purchase Plan (“ESPP”) which is open to all U.S. employees and U.S. based Executive Directors. LTIP: The LTIP was adopted for the I.P.O. in 2012. It is used to grant awards not only to the Executive Directors but also senior and junior managers in the Company. A variety of different awards can be granted under the LTIP. To date, it has been used to grant time‑based nominal cost options to U.K. employees including the Executive Directors, performance‑based nominal cost options and market value options to the Executive Directors and other senior U.K. employees and time‑based and performance restricted stock units to U.S. managers and managers from other countries in which the Company operate. The maximum value of awards under the rules of the LTIP that can be granted to the Chief Executive Officer and Other Executive Directors are defined in the Remuneration Policy. EIP: Annual awards are made under the EIP to Non‑Executive Directors as part of their fees. The value of the award is up to 100% of the base fee of a Non‑Executive Director. These awards are made the day after the AGM of the Company in each year and vest the day before the following AGM. Annual awards are usually made as restricted stock units. They are paid out immediately on vesting, together with dividends which have been accumulated during the vesting period. New Non‑Executive Directors cannot participate in the annual awards until they have served six months, however, the awards they would have earned from the date of appointment are added to the next annual award provided they are re-elected at the AGM. Copies of the LTIP and EIP plans mentioned above are filed on the Company’s file at the SEC. AWARDS GRANTED DURING THE YEAR Executive Directors' Awards Under the LTIP In 2021, the Remuneration Committee awarded long-term incentive compensation under the LTIP. As it does each year, the Remuneration Committee referenced benchmark data (including compensation surveys, Comparator Group information and other data provided by Meridian Compensation Partners LLC) in setting target U.S. dollar award levels for the Executive Director. In accordance with the Remuneration Policy the maximum share award opportunity available to the Executive Director (in any one year) at the time of communicating their award during 2021 was capped at 250% of their base salary, on achievement of stretch performance. Achievement of target performance would result in a share award opportunity capped equivalent to 180% of base salary being available and threshold performance at 125% of base salary. Based on the target level of the Executive Director’s share awards available (capped at 180% of base salary), 40% of this award was granted in March 2021 in the form of time-based restricted stock units, vesting evenly on the first four anniversaries of the award from grant date. This amounted to 24,000 time-based restricted stock units. The remaining 60% of the target award allocation was split 40% available based on the delivery of a certain adjusted diluted EPS target for the year ending December 31, 2021 and 60% available on the delivery of 49 LUXFER HOLDINGS PLC certain total shareholder return targets. The total shareholder return target consists of a ranking of Company performance against a peer group of twenty companies for the last ninety days of the year ended December 31, 2020 against the last ninety days of the year ending December 31, 2023. Based on the relative level of shareholder return achieved, awards in relation total shareholder return would vest evenly in March 2024 and March 2025. For each of the adjusted diluted EPS and total shareholder return performance metrics, it is possible to achieve a threshold, target and stretch level of award grants, based on result delivery. The adjusted diluted EPS for 2021 resulted in the stretch level of awards being achieved which will result in Alok Maskara earning the maximum number of these available awards and being granted 28,800 time-based restricted stock units. Estimates of the value of these grants to be made on 2021 performance are included in the Single Figure table for 2021. Relative total shareholder return performance will be subject to remeasurement up to and including the year ending December 31, 2022. For 2020, the Remuneration Committee set performance targets consistent with that used in 2021 based upon the achievement of adjusted diluted EPS to be measured at threshold, target and stretch levels and the achievement of relative total shareholder return to be measured at threshold, target and stretch levels. The relative total shareholder return performance will be subject to remeasurement up to and including the year ending December 31, 2022. The reported EPS for 2020 was not achieved which resulted no awards being granted. For 2019, the Remuneration Committee set performance targets consistent with that used in 2021 based upon the achievement of relative total shareholder return to be measured at threshold, target and stretch levels. The performance of the Company meant threshold level being achieved which resulted in Alok Maskara earning 50% of the available awards. The number, and details of the terms, of the grants are set out in the table in Outstanding Share Awards During 2021 and the accompanying notes, on pages 50 to 51. The Committee believe they set challenging targets to motivate the executive director and align the interests of the executive with those of shareholders. Achievement of stretch targets requires exceptional performance. Non-Executive Directors under the Director EIP The table below sets out the share award grants made to the Non-Executive Directors during the year in accordance with the Remuneration Policy. Chair or Non- Executive Director David Landless Date of Grant June 9, 2021 Clive Snowdon June 9, 2021 Richard Hipple June 9, 2021 Allisha Elliott June 9, 2021 Lisa Trimberger June 9, 2021 Basis of Aggregate Awards Granted 100% of annual fee for 2021 100% of annual fee for 2021 100% of annual fee for 2021 100% of annual fee for 2021 100% of annual fee for 2021 Share Price at Date of Grant $ 22.99 Type of Award Restricted Stock Unit No. of Shares Granted (1) Face Value of Award $ Issue Price per share & in Aggregate $ 4,980 114,490 $1.00 each share 22.99 Restricted Stock Unit 3,551 81,637 $1.00 each share 22.99 Restricted Stock Unit 3,551 81,637 $1.00 each share 22.99 Restricted Stock Unit 3,551 81,637 $1.00 each share 22.99 Restricted Stock Unit 3,551 81,637 $1.00 each share Patrick Mullen(1) n/a n/a n/a n/a — — n/a Vesting Date Day before 2022 AGM % of Face Value That Vest On vesting date 100% Day before 2022 AGM Day before 2022 AGM Day before 2022 AGM Day before 2022 AGM n/a On vesting date 100% On vesting date 100% On vesting date 100% On vesting date 100% n/a (1) New Non-Executive Directors cannot participate in the annual EIP awards until they have served six months; however, the awards they would have earned from the date of appointment are added to the next annual award. 50 LUXFER HOLDINGS PLC OUTSTANDING SHARE AWARDS DURING 2021 Executive and Non-Executive Directors Awards will be granted in 2022 in respect of 2021 Company financial performance to the Executive Director. Awards granted in 2021 in respect to 2020 Company financial performance to the Executive Director have been included in the table below. Awards Options/Restricted Stock Units Awards Alok Maskara Upon Appointment(1) LTIP 2017(2) LTIP 2018(3)(4) LTIP 2019(5) LTIP 2020(6) LTIP 2021(7)(8) Totals David Landless EIP 2020(9) EIP 2021(10) Totals Clive Snowdon EIP 2020(9) EIP 2021(10) Totals Richard Hipple EIP 2020(9) EIP 2021(10) Totals Allisha Elliott EIP 2020(9) EIP 2021(10) Totals Lisa Trimberger EIP 2020(9) EIP 2021(10) Totals Available Jan 1, 2021 Granted During Year Settled During Year Available Dec 31, 2021 Vested Awards Jan 1, 2021 Vested Awards During Year Settled During Year Vested Awards Dec 31, 2021 Available Unvested Awards 15,000 16,184 24,640 15,900 33,400 — — — — — — 47,760 105,124 47,760 (15,000) (16,184) (24,640) — — — (5,300) 10,600 (8,350) 25,050 (23,760) 24,000 (93,234) 59,650 — 15,000 (15,000) — 16,183 (16,183) — 24,640 (24,640) (5,300) — 5,300 — 8,350 (8,350) — 23,760 (23,760) — 93,233 (93,233) 4,276 — — 4,980 4,276 4,980 (4,276) — (4,276) — 4,980 4,980 — 4,276 — — — 4,276 (4,276) — (4,276) 3,049 — — 3,551 3,049 3,551 (3,049) — (3,049) — 3,551 3,551 — 3,049 — — — 3,049 (3,049) — (3,049) 7,743 — — 3,551 7,743 3,551 (7,743) — (7,743) — 3,551 3,551 — 7,743 — — — 7,743 (7,743) — (7,743) 6,858 — — 3,551 6,858 3,551 (6,858) — (6,858) — 3,551 3,551 — 6,858 — — — 6,858 (6,858) — (6,858) 5,354 — — 3,551 5,354 3,551 (5,354) — (5,354) — 3,551 3,551 — 5,354 — — — 5,354 (5,354) — (5,354) — — — — — — — — — — — — — — — — — — — — — — — — — 10,600 25,050 24,000 59,650 — 4,980 4,980 — 3,551 3,551 — 3,551 3,551 — 3,551 3,551 — 3,551 3,551 51 LUXFER HOLDINGS PLC Key to table: Award (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Award Scheme, Type & Grant Upon appointment – Time-Based Restricted Stock Units (i) LTIP 2017-Performance-Based- EPS targets (iii) LTIP 2018—Time-Based Restricted Stock Units (iv) LTIP 2018-Performance-Based- EPS targets (v) LTIP 2019 – Time-Based Restricted Stock Units (vi) LTIP 2020 – Time-Based Restricted Stock Units (vii) LTIP 2021 - Performance-Based - TSR targets (viii) LTIP 2021 – Time-Based Restricted Stock Units (ix) EIP 2020—Time-Based Restricted Stock Units (x) EIP 2021—Time-Based Restricted Stock Units (x) Exercise Price / Nominal Cost Each Award £0.50(ii) Remaining Vesting/ Settlement Dates All vested £0.50(ii) £0.50(ii) £0.50(ii) All vested All vested All vested Grant Date Aug 23, '17 Mar 23, '18 Mar 26, '18 Mar 26, '19 Mar 14, ‘19 $1.00 Mar 14, 2022, 2023 Mar 13, ‘20 $1.00 Mar 26, '21 Mar 15, '21 June 4, ‘20 $1.00 $1.00 $1.00 June 9, ‘21 $1.00 Mar 13, 2022, 2023, 2024 All vested Mar 15, 2022, 2023, 2024, 2025 All vested Day before 2022 AGM Vesting Period No longer applicable No longer applicable No longer applicable No longer applicable To Mar 14, 2023 To Mar 13, 2024 No longer applicable To Mar 15, 2025 No longer applicable Day before 2022 AGM (i) Upon Appointment - The Remuneration Committee determined to make a one-off share award to the new CEO, outside the terms of the LTIP, over 60,000 time-based nominal cost RSUs, to vest over four years. (ii) Where the exercise price / nominal cost is indicated in GBP sterling, in so far as it is required to be translated into U.S. dollars for the purpose of the exercise / settlement, it is translated at the $:£ exchange rate reported in the Financial Times for the date of exercise / settlement. (iii) LTIP 2017: Awards made on attainment of 2017 EPS performance goals and include “holding period” and “claw back” provisions, to vest evenly over three years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (iv) LTIP 2018: Time based awards granted on March 26, 2018 and include “holding period” and “claw back” provisions, to vest evenly over three years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (v) LTIP 2018: Awards made on attainment of 2018 EPS performance goals and include “holding period” and “claw back” provisions, to vest evenly over two years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (vi) LTIP 2019: Time based awards granted on March 14, 2019 and include “holding period” and “claw back” provisions, to vest evenly over four years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (vii) LTIP 2020: Time based awards granted on March 13, 2020 and include “holding period” and “claw back” provisions, to vest evenly over four years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (viii) LTIP 2021: Awards made on attainment of 2020 TSR performance goals and include “holding period” and “claw back” provisions, to vest immediately upon grant. (ix) LTIP 2021: Time based awards granted on March 15, 2021 and include “holding period” and “claw back” provisions, to vest evenly over four years. Time-based restricted stock units accumulate additional restricted stock units when the Company pays a dividend. Shares underlying the total amount of restricted stock units are then issued when the restricted stock unit vests. (x) EIP 2020 and EIP 2021 annual awards are settled immediately on vesting, together with dividends which have been accumulated during the vesting period. The 2020 awards were settled in 2021 net of payroll taxes. 52 LUXFER HOLDINGS PLC PENSION ARRANGEMENTS In lieu of contributions into Company pension plans, the Company offers a salary supplement, which ultimately reflect the cost of previous defined benefit arrangements, now withdrawn. The Executive Director is paid the equivalent of 25% of base salary, with an element of this funding being paid into the U.S. funded defined contribution scheme for Alok Maskara. Details of the payments made to the defined contribution arrangement and salary supplement during years 2021 and 2020 for the Executive Director are set forth in the tables below. Director’s Remuneration and Benefits for the Year Ended December 31, 2021 and 2020 Executive Director Year Alok Maskara 2021 2020 Defined Benefit Funded Defined Contribution(1) Unfunded Defined Contribution Cash Supplement — — 21,000 16,500 — — 157,750 148,980 Total 178,750 165,480 (1) The Funded Defined Contribution for Alok Maskara relates to amounts paid in respect of a 401(k) matching program. Implementation of the Remuneration Policy for the Year Ending December 31, 2022 (Information from this section of page 52 through to page 60 is not subject to audit unless otherwise stated) Set out below is a summary of how the Directors Remuneration Policy will be applied during the year ending December 31, 2022. Base Salary Alok Maskara Pension Arrangements 2022 2021 736,000 715,000 % increase(1) 2.9 % The Executive Director will receive a cash supplement calculated at a flat rate of 25% of base salary. Annual Bonus In accordance with the Remuneration Policy, the maximum annual bonus for Alok Maskara, as Chief Executive Officer, is capped at 200% of base salary. Included within this is the Additional Percentage Bonus to be awarded on achievement of specific targets set by the Remuneration Committee. At the start of each year, the Remuneration Committee reserve the discretion to set the Additional Percentage Bonus and related specific targets that are aligned with the strategic goals of the Company. As in previous years, the financial performance target element of the annual bonus will be based on a combination of two financial performance metrics, management EBITA and Cash Conversion. It will be on a sliding scale that commences only once threshold has been achieved and rises through the target performance up to a stretch target. The financial performance award element of the annual bonus opportunity will be split evenly between the above two financial metrics: Financial metric annual bonus opportunity Alok Maskara Management EBITA 0% - 50% Cash Conversion 0% - 50% Split; sliding scale between threshold, target and stretch 53 LUXFER HOLDINGS PLC Long Term Incentives The Remuneration Committee has then set targets for 2022 which, if attained, would lead to the granting of time- based restricted stock units for Alok Maskara. The Committee has set a scorecard of metrics to assess the performance of the Company based upon Total Shareholder Return (“TSR”) and adjusted diluted EPS. A greater weighting has been assigned to the attainment of the TSR target which earns 60% of the performance awards available, compared to the EPS target which has a 40% weighting. The total shareholder return target will consist of a ranking of Company performance against a peer group of twenty companies for the last ninety days of the year ended December 31, 2021 against the last ninety days of the year ending December 31, 2023. Based on the relative level of shareholder return achieved, awards in relation total shareholder return would be granted in March 2024 and vest in equal tranches in 2025 and 2026. The Remuneration Committee is also proposing that Alok Maskara be granted time-based restricted stock units, which vest in equal tranches commencing on the first anniversary of the grant date at the value of 40% of the total target share award available. If, during the preparation of the current year’s financial results, a material misstatement of the previous year’s results is discovered, a clawback of the long-term incentive awards granted with respect to the misstated element of the previous financial results applies to all employees, including our Executive Director. The Remuneration Committee has discretion to apply the policy to recover and recoup incentive compensation in such situations involving a material misstatement of financial results. In accordance with the Remuneration Policy, the maximum value of awards that can be made to the Chief Executive Officer Director in any one year is capped at up to 300% of base salary. Non-Executive Directors Summary of how the Directors' Remuneration Policy for the Non-Executive Directors will be applied during the year ending December 31, 2022. The Board decides the approach to compensating the Non-Executive Directors. The Board agreed to freeze the base fees of the Non-Executive Directors for 2022, as shown below. The value of share awards as a percentage of base fee is to remain fixed at up to 100% of base fee under the EIP. 2022 $ 2021 $ % Value of Share Value of Share Increase Awards % of Base David Landless Clive Snowdon Richard Hipple Allisha Elliott Lisa Trimberger Patrick Mullen(1) Base Fee Base Fee Base Fee 115,000 82,000 82,000 82,000 82,000 82,000 115,000 82,000 82,000 82,000 82,000 82,000 —% —% —% —% —% —% Fee 2022 Up to 100% Up to 100% Up to 100% Up to 100% Up to 100% Up to 100% Awards % of Base Fee 2021 Up to 100% Up to 100% Up to 100% Up to 100% Up to 100% Up to 100% (1)Patrick Mullen did not receive his total base fee in 2021 as he only served as Director from September 1, 2021. 54 LUXFER HOLDINGS PLC Directors' Interests in Shares in the Company (audited) David Landless (1) Alok Maskara (2) Clive Snowdon (3) Richard Hipple (4) Allisha Elliott(5) Lisa Trimberger (6) Patrick Mullen Number of Ordinary Shares Held at Dec 31, 2021 Number of Ordinary Shares Held at Jan 1, 2021 6,585 237,980 7,459 10,894 4,140 16,806 — 11,160 195,950 7,459 6,044 — 5,000 — (1) David Landless acquired 2,825 shares throughout 2021 as a result of the vesting of 4,414 time-based Restricted Stock Units. 4,276 Restricted Stock Units were awarded in 2020 under the EIP and, together with an accrued dividend of 138 shares, fully vested on June 4, 2021. Of those 4,414 shares, 1,951 shares were used as payment of exercise price or tax liability. Of the 2,825 shares acquired by David Landless during 2021, 362 of those shares were acquired through the operation of the Dividend Reinvestment Plan (DRIP), which allows for the purchase of additional shares through the reinvestment of cash dividends. Further details on these awards can be found in the notes to Single Figure-Non-Executive Directors' Remuneration on pages 47 to 48. Additionally, David Landless sold 7,400 shares throughout 2021. (2) Alok Maskara acquired 50,743 shares throughout 2021 as a result of the vesting of 99,242 time-based Restricted Stock Units, as detailed in the table titled Outstanding Share Awards During 2021 on pages 50 and 51. Of those 99,242 shares, 48,499 shares were used as payment of exercise price or tax liability. (3) Clive Snowdon acquired 1,877 shares throughout 2021 as a result of the vesting of 3,147 time-based Restricted Stock Units. 3,049 Restricted Stock Units were awarded in 2020 under the EIP and, together with an accrued dividend of 98 shares, fully vested on June 4, 2021. Of those 3,147 shares, 1,270 shares were used as payment of exercise price or tax liability. The shares identified as held by Clive Snowdon are held by a connected person. Further details on these awards can be found in the notes to Single Figure-Non-Executive Director's Remuneration on pages 47 to 48. (4) Richard Hipple acquired 4,850 shares throughout 2021 as a result of the vesting of 7,995 time-based Restricted Stock Units. 7,743 Restricted Stock Units were awarded in 2020 under the EIP and, together with an accrued dividend of 252 shares, fully vested on June 4, 2021. Of those 7,995 shares, 3,335 shares were used as payment of exercise price or tax liability. Of the 4,850 shares acquired by Richard Hipple during 2021, 190 of those shares were acquired through the operation of the Dividend Reinvestment Plan (DRIP), which allows for the purchase of additional shares through the reinvestment of cash dividends. Further details on these awards can be found in the notes to Single Figure-Non-Executive Directors' Remuneration on pages 47 to 48. (5) Allisha Elliott acquired 4,140 shares throughout 2021 as a result of the vesting of 7,081 time-based Restricted Stock Units. 6,858 Restricted Stock Units were awarded in 2020 under the EIP and, together with an accrued dividend of 223 shares, fully vested on June 4, 2021. Of those 7,081 shares, 2,941 shares were used as payment of exercise price or tax liability. Further details on these awards can be found in the notes to Single Figure-Non-Executive Director's Remuneration on pages 47 to 48. (6) Lisa Trimberger acquired 3,255 shares throughout 2021 as a result of the vesting of 5,527 time-based Restricted Stock Units. 5,354 Restricted Stock Units were awarded in 2020 under the EIP and, together with an accrued dividend of 173 shares, fully vested on June 4, 2021. Of those 5,527 shares, 2,272 shares were used as payment of exercise price or tax liability. In November 2021. Lisa Trimberger purchased an additional 5,000 shares on market. All of these shares are owned by a trust of which Lisa Trimberger is the sole beneficiary and her spouse is the trustee. Further details on these awards can be found in the notes to Single Figure-Non-Executive Director's Remuneration on pages 47 to 48. Executive Director Shareholding Requirements The Executive Director is required to hold and maintain ordinary shares equal in value to 150% of base salary. The Director is allowed a period of three years from date of appointment to acquire the holding. Executive Directors are required to obtain the Chair’s permission before they or their connected persons can deal in the Company’s shares providing an effective way of ensuring their shareholding requirements are maintained. 55 Total Directors' Shareholdings and Interests at 31 December 2021 Shares Owned Beneficially Options Vested but not Exercised(1) Restricted Stock Units Not Yet Vested (assuming will be settled in Shares not Cash)(1) LUXFER HOLDINGS PLC Alok Maskara Non-Executive David Landless Clive Snowdon Richard Hipple Allisha Elliott Lisa Trimberger Patrick Mullen 237,980 6,585 7,459 10,894 4,140 16,806 — — — — — — — — 59,650 4,980 3,551 3,551 3,551 3,551 — (1) A breakdown of the vested and unvested awards and brief details of the plans under which the awards were made can be found in the Outstanding Share Awards During 2021 table on page 50 of this report. Performance Graph U.K. legislation requires the Annual Remuneration Report to contain a line graph that shows the TSR over a ten- year period for both a holding of the Company’s listed shares and a hypothetical comparator holding of shares representing a specified broad equity market index. As the Company was only listed on the NYSE at the beginning of October 2012, we are only able to provide TSR for the Company’s shares in a listed environment for a period 3 October 2012 to 31 December 2021. We have used the Russell 2000 index as the most appropriate published index for comparison purposes. The graph shows the value of $100 vested in Luxfer in October 2012 at the I.P.O., and the reinvestment of dividends since that date, compared to $100 invested in the Russell 2000 on the same date, assuming the same reinvestment of dividends. The Russell 2000 was chosen as the index as it comprises companies that closely resemble Luxfer. The TSR is calculated in U.S. dollars. 56 History of Total Remuneration Figure for Chief Executive Officer We have included the total remuneration figure for the Chief Executive Officer for a seven-year period as required by legislation. LUXFER HOLDINGS PLC U.S.$ Year ended December 31 Total remuneration Annual bonus % (1) Share awards vesting % (1) % change in total remuneration 2015 2016 2017 (2) 2018 2019 (3) 2020 2021 1,021,357 836,317 3,396,615 5,971,101 1,834,401 2,063,680 3,515,009 39 % — % 124 % 200% 60% 51 % 186 % 21 % — % 37 % 84% 584% 146 % 264 % 20 % (18) % 306 % 76 % (69) % 12 % 70 % The average increase in the CEO's total remuneration over the past seven years is a 56% increase, although this is heavily impacted by the 306% increase in 2017. The CAGR over the same period was a 23% increase. (1) Percentage of salary. (2) The 2017 figures include Brian Purves’ remuneration for the first six months of 2017 and Alok Maskara’s remuneration for the second six months of 2017. (3) The 2019 share awards vesting figure of 584% (as a percentage of salary) includes the vesting of 120,000 performance-based EPS awards granted on hire. Excluding these awards, the adjusted share awards vesting figure would be 183%. Relative Importance of Spend on Pay The following chart sets out the Group's actual spend on pay (for all employees) relative to dividends paid in the current and prior year. (To assist with conformity and transparency we have used staff costs as set out in Note 7 to the Consolidated Financial Statements.) 57 Percentage Change in Chief Executive Officer's Remuneration For 2021, we have selected U.S. employees as the most appropriate comparator as the Chief Executive Officer is based in the U.S. and the benefits structure is similar, consistent with the approach taken for 2020. LUXFER HOLDINGS PLC U.S.$ Salary Chief Executive Officer Employee average Benefits Chief Executive Officer Employee average Annual Bonus Chief Executive Officer Employee average Pay Ratio 2021 2020 % change 715,000 51,231 52,198 10,589 1,330,615 6,589 657,000 56,826 60,197 11,341 337,500 2,785 8.8 % (9.8) % (13.3) % (6.6) % 294.3 % 136.6 % For 2021, we have selected U.S. employees as the most appropriate comparator as the Chief Executive Officer is based in the U.S. and the benefits structure is similar. Year 2021 2020 Method 25th percentile pay / ratio 50th percentile pay / ratio 75th percentile pay / ratio A A 55,318 37.9 : 1 43,945 24.0 : 1 68,409 30.7 : 1 70,952 14.9 : 1 108,425 19.3 : 1 103,402 10.2 : 1 The Company has selected method A for calculating the pay ratio, as the company has selected to use U.S. employees as the most appropriate comparator and gender pay gap reporting (used in method B and C) is not required in the U.S., method A was deemed the most appropriate, this is consistent with the approach taken for 2020. When calculating the percentiles, the average U.S. person's salary was used throughout the year. When calculating the pay ratios, share-based compensation has been omitted as only senior managers are part of the LTIP scheme. The individuals who represent the three quartiles are all full-time employees and are considered to be representative of the 25th, median and 75th percentile pay levels in the Group. The pay ratios have increased year on year, with the increase predominantly a result of the increase in the annual bonus awarded. The median pay for the U.S. employee has remained relatively flat. 58 Statement of voting at AGM The Annual Remuneration Implementation Report and Remuneration Policy was put to an advisory vote at the 2021 AGM. LUXFER HOLDINGS PLC Votes for (and percentage of votes cast) Votes against (and percentage of votes cast) Proportion of share capital voting Annual Remuneration Implementation Report 23,581,800 797,014 93.44 % Adoption of Revised Remuneration Policy 24,325,589 96.73 % 99.77 % 3.27 % 55,998 0.23 % 93.45 % The vote received in favour of the Remuneration Report was 96.73%, and the larger shareholders with whom the Directors liaise with from time to time did not make any negative comments in those conversations concerning Directors’ pay and incentives. Differences in Remuneration For Directors and Employees The difference in remuneration for the Executive Director and other employees reflects differing levels of responsibility, seniority, and market norms in the jurisdictions in which they are employed. The key differences in remuneration are as follows: • • • • Bonus arrangements for senior, middle, and lower management are set at a lower percentage than the Executive Director but are broadly structured on the same basis to ensure commonality of objectives. There is greater emphasis on performance-related pay for management, and bonus opportunity for other employees may be lowered or not available, depending on jurisdiction. Benefits for employees take into account their position and the market norms of the jurisdiction in which they operate. Pension arrangements are offered where it is the norm in the jurisdiction of the employee. Where local regulation permits and where it is the market norm, higher contributions may be available for more senior management. The Company’s primary pension plans are described in the Company’s financial statements. Participation in the LTIP is limited to the Executive Director and a select number of senior officers and senior managers. At the discretion of the Committee, market value share awards or time-based share awards may be awarded to employees in recognition of outstanding performance and to encourage share ownership and retention. UK employees, if eligible, can participate in the UK Share Incentive Plan, as described above. The Committee commissions benchmarking studies of comparable companies and the pay of other senior executives when setting the Executive Director’s pay. Consideration is also given to the pay and benefits that are available throughout Luxfer, such as cost-of-living increases. Such consideration defines a clear structure of pay and benefits layer-by-layer. The Committee does not consult with employees nor does it use internal comparison metrics when drafting the Remuneration Policy. However, the Committee is aware of average pay and benefit packages available within the Company. When setting the terms of awards for the Executive Director, The Committee also considers views expressed by institutional shareholder bodies. 59 LUXFER HOLDINGS PLC Approach to Recruitment Remuneration Executive Director. When setting a remuneration package for a new Executive Director, including internal promotions, the Committee will apply similar principles to those set out in the most recent approved Remuneration Policy for both short- and long-term incentives. Non-Executive Directors. New Non-Executive Directors will be paid fees on the same basis as existing Non- Executive Directors. They will also participate in the Non-Executive Directors Incentive Plan under which the annual awards are non-discretionary. Awards can be made in the form of Options, Restricted Stock, or Restricted Stock Units at the discretion of the Board and based on the value of each type of award and the number of shares left in the Plan. The vesting period is determined at the discretion of the Committee. Severance and Change-in-Control Benefits Executive Director. The Company may terminate the Executive Director’s contract without notice on the occurrence of certain events identified in their contract. Such termination would normally consist of conduct justifying dismissal such as gross misconduct. The Executive Director has the same employment rights as any other employee in the case of redundancy or if a relevant tribunal determines that their termination was unfair under UK law. Ordinary notice period is 12 months. the remuneration entitlement is payment in lieu of notice in the event of early termination. This may include base salary benefits and pension payable for the notice period. A bonus may be paid if the period for which pay in lieu of notice is made extends past the year-end, subject to targets being met. Non-Executive Directors. Letters of Appointment for Non-Executive Directors and the Chair are not for a fixed term. The Chair and Non-Executive Directors do not have any employment rights. New appointees to the Board will generally be appointed on the same basis as the current Non-Executive Directors. Non-Executive Directors’ Letters of Appointment are available for inspection at the registered office of the Company. Ordinary notice period is 3 months, except if the Director fails to be re-elected at an AGM, then the contract terminates immediately without notice or compensation. Policy on payment for Loss of Office Contractual entitlements through the date of termination will be honored, and the Company will (i) pay any amounts it is required to pay in accordance with the Director’s statutory employment or contractual rights and (ii) settle those rights. The Company will seek to apply the principles of mitigation to ensure that it is not paying more than is required. In the event of a compromise or severance agreement, the Committee may make payments it considers reasonable in settlement of potential legal claims, such as incidental and professional fees paid by a Director. a. Bonus Payment. Generally, there is no entitlement to an annual bonus upon cessation of employment within the first half of the calendar year. The Committee may, at its discretion, make a retroactive payment on a pro-rated basis during the second half of the calendar year. After year-end but before completion of an audit, departing employees will be paid the actual bonus earned on the normal bonus payment date. Departing employees are not eligible for bonus payments if they breach any obligations in their employment contract, including the period of notice. b. LTIP Provisions. For employees departing for any reason other than termination for cause , all unvested time-based awards will immediately lapse or be forfeited. All vested unexercised options and stock appreciation rights will lapse on the first anniversary date of departure. Performance based awards will vest on a pro-rated basis based on the performance results to the date of termination. The Committee has the discretion to accelerate vesting and exercise dates, waive conditions to vesting or exercise, or extend exercise periods after termination of employment. Discretion is typically used in such circumstances where Directors are retiring before the last vesting date or leaving employment through ill health or redundancy. In the case of termination for cause, all time-based awards, unvested performance-based awards, and unexercised options will immediately lapse or be forfeited on the date of termination. 60 LUXFER HOLDINGS PLC Approval of Report Richard Hipple, the Chair of the Committee, will attend the forthcoming AGM and will be available to answer any questions shareholders may have concerning the Directors' remuneration. This Remuneration Report will be submitted for approval by an advisory vote at the forthcoming AGM. Signed on behalf of the Board by: R J Hipple CHAIR OF THE REMUNERATION COMMITTEE April 21, 2022 For and on behalf of the Board 61 LUXFER HOLDINGS PLC 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 an Company financial statements in accordance with International accounting standards in conformity with the requirements of the Companies Act 2006. Under Company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company for the 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 Companies Act 2006 have been followed, 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 and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors' Confirmations The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company’s position and performance, business model and strategy. Each of the Directors, whose names and functions are listed in Directors' Report confirm that, to the best of their knowledge: • • Company financial statements, which have been prepared in accordance with International accounting standards in conformity with the requirements of Companies Act 2006, 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. 62 Independent auditors’ report to the members of Luxfer Holdings PLC Report on the audit of the financial statements Opinion In our opinion, Luxfer Holdings PLC’s group financial statements and company financial statements (the “financial statements”): • • • give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2021 and of the group’s profit and the group’s and company’s cash flows for the year then ended; have been properly prepared in accordance with UK-adopted international accounting standards; and 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 Financial Statements (the “Annual Report”), which comprise: the consolidated and company balance sheets as at 31 December 2021; the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company cash flow statements, and the consolidated and company statements 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. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Our audit approach Overview Audit scope • We performed a full scope audit of three significant reporting units within the group, and additional procedures over selected financial statement line items in certain smaller reporting units. • We also performed audit procedures over the corporate reporting units and relevant consolidation adjustments for • selected financial statement line items. The audit work performed over these reporting units represented 76% of consolidated revenue from continuing operations and 70% of consolidated profit before tax adjusted for restructuring and other expenses from continuing operations. 63 Key audit matters • Valuation of pension benefit obligations (group and parent) Materiality • Overall group materiality: US$2,000,000 based on 5% of three year average profit on continuing operations before taxation, adjusted for restructuring and other expenses. • Overall company materiality: US$1,800,000 based on 1% of total assets restricted to 90% of group materiality. • Performance materiality: US$1,500,000 (group) and US$1,350,000 (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. 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. Valuation of retirement benefits in relation to defined benefit schemes is a new key audit matter this year. Goodwill impairment assessment and the impact of COVID-19, which were key audit matters last year, are no longer included because of the reduction in judgement related to the goodwill impairment assessment and the associated reduction in audit work performed, and because of the reduced impact of COVID-19 on the group's operations and results in the current year. Otherwise, the key audit matters below are consistent with last year. Key audit matter Valuation of pension benefit obligations (group and parent) As described in Notes 1 and 30 to the consolidated financial statements, and Note 46 of the Company financial statements, the Group had pension benefit obligations of $408.9 million as of 31 December 2021. The pension benefit obligations principally relate to schemes operated in the United Kingdom and United States. The amounts in the consolidated financial statements related to the pension benefit obligations are determined from actuarial valuations. The valuation of the pension benefit obligations requires estimation in determining appropriate assumptions including: (i) discount rates; (ii) inflation rates; (iii) pension increases; and (iv) life expectancy. Differences in actual experience or changes in these assumptions can have a material impact on the determination of the liabilities in the Group’s pension schemes. The pension benefit obligations, and the associated changes compared to the prior year balances, are significant in the context of the balance sheet and the results of the Group. The significant judgments and assumptions made by management when determining the pension benefit obligations, resulted in a high degree of auditor judgment, subjectivity and effort to evaluate them, including the use of professionals with specialized skill and knowledge. How our audit addressed the key audit matter We tested the effectiveness of controls relating to the assumptions used to determine the pension benefit obligations. We checked the completeness, accuracy and relevance of the underlying data used in the valuation of the pension benefit obligations. For the schemes operated in the United Kingdom and United States, and with the assistance of professionals with specialized skill and knowledge, we evaluated the reasonableness of the assumptions used in calculating the pension benefit obligations, by (i) evaluating that the discount rates, inflation rates, pension increases and life expectancy assumptions used were consistent with independently developed ranges; and (ii) assessing whether management’s methodology used to determine the discount rates, inflation rates, pension increases and life expectancy assumptions was in line with the requirements of IAS 19 - Employee Benefits. 64  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. The group is split into two main reporting segments being Gas Cylinders and Elektron. These are further split into four operating segments as Luxfer Gas Cylinders, Luxfer MEL Technologies, Luxfer Graphic Arts and Luxfer Magtech. Discontinued operations are also presented, including the Luxfer Superform business unit only. Each operating segment has multiple management reporting units in a range of different geographies and is structured mainly across Europe and North America. The financial statements are a consolidation of the group's management reporting units and its the centralized functions. The management reporting units vary in size and we identified three reporting units from across two countries which required an audit of their full financial information due to their individual size or risk characteristics. Additionally, we identified seven reporting units from across two countries which required an audit of specific balances to be performed. In total, these 10 reporting units accounted for 76% of the group’s consolidated revenue from continuing operations and 70% of the group’s profit before taxation, adjusted for restructuring and other expenses from continuing operations. Two component audit teams performed the required audit and specified procedures over seven of the ten reporting units, with the procedures over the remaining three performed by the group engagement team. The group engagement team attended the audit clearance meetings both in person and via conference call and had regular communication with the component teams during their audits. Such involvement with the component audit teams, together with the work performed at a group level, gave us the evidence we needed for our opinion on the consolidated financial statements as a whole. 65 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 How we determined it Rationale for benchmark applied Financial statements - group US$2,000,000. 5% of three year average profit on continuing operations before taxation, adjusted for restructuring and other expenses Based on the benchmarks used in the Annual Report, profit on continuing operations before taxation is the primary measure used by the shareholders in assessing the performance of the group, and is a generally accepted auditing benchmark. Restructuring and other expenses were adjusted for as this provides us with a consistent year on year basis for determining materiality. We consider using an average of three years to better reflect what a reader of the financial statements would consider material. Financial statements - company US$1,800,000. 1% of total assets restricted to 90% of group materiality Total assets is appropriate as the entity is not profit oriented. The company holds investments in subsidiaries and therefore total assets is considered 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 from $409,000 to $1,800,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to US$1,500,000 for the group financial statements and US$1,350,000 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 those charged with governance that we would report to them misstatements identified during our audit above $200,000 (group audit) and $180,000 (company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. 66 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: • • • • • • • • obtaining the directors' forecasts and going concern assessment for the period to June 2023, which included the expected continuing impact of Covid-19 evaluating and assessing the process by which the directors' future cash flow forecasts were prepared agreeing the opening gross debt and cash position of the directors' cash flow forecasts to the March 2022 management accounts reviewing the arithmetical accuracy of the directors' forecasts evaluating and assessing the directors' key assumptions in the going concern assessment, including the forecast revenues and anticipated operating margins over the period to June 2023, which included consideration of the likelihood of a change in the attached cash flows that would be considered significant for the purposes of the directors' going concern assessment obtaining the terms of the group’s financing facility and the covenants in place in relation to this facility, and determining that the directors' forecasts demonstrated compliance with all covenant conditions for at least 12 months from the date of the approval of the financial statements gaining an understanding of the potential mitigating actions that the directors could implement to meet the requirements of the covenants reviewing the directors' disclosures in the financial statements Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and 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. 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. 67 Strategic report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the year ended 31 December 2021 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ Report. Directors’ Remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. 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. 68 Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to health and safety regulations, ISO standards and environmental legislation in the countries where the group has more significant operations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as local and international tax legislation and the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial results, including relating to revenue recognition and adjusted earnings before interest, tax and amortisation, and management bias in accounting estimates. Audit procedures performed by the engagement team included: • • • • • • • obtaining an understanding of the legal and regulatory framework applicable to the group and how the group is complying with that framework discussions with management, the Audit Committee, general counsel and internal audit, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud reviewing minutes of meetings of those charged with governance challenging assumptions and judgements made by management in their significant accounting estimates, including but not limited to the impairment of non-financial assets and assessment of pension obligations reviewing internal audit reports incorporating an element of unpredictability into our audit procedures identifying and testing journal entries, in particular any journal entries posted with unusual account combinations impacting financial results, revenue recognition and adjusted earnings before interest, tax and amortisation There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 69 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. Gregory Briggs (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester April 21, 2022 70 LUXFER HOLDINGS PLC CONSOLIDATED INCOME STATEMENT All amounts in millions, except share and per share data REVENUE Cost of sales Gross profit Distribution costs Administrative expenses Share of results of joint ventures and associates Restructuring and other expense OPERATING PROFIT Other expenses: Net loss on acquisitions and disposals Finance costs: Interest costs IAS 19R retirement benefits finance charge Total finance costs PROFIT ON OPERATIONS BEFORE TAXATION Income tax expense NET INCOME FROM CONTINUING OPERATIONS Net gain on disposition of discontinued operations Net loss from discontinued operations NET INCOME FOR THE YEAR Attributable to: Equity shareholders Earnings per share1: Basic from continuing operations Basic from discontinued operations Basic Diluted from continuing operations Diluted from discontinued operations Diluted LUXFER HOLDINGS PLC Note 2 15 6 4 6 8 8 9 11 11 2021 $M 2020 $M 374.1 (267.0) 107.1 (10.7) (50.2) — (5.5) 40.7 324.8 (237.3) 87.5 (6.5) (42.6) (0.1) (7.3) 31.0 (1.5) — (4.1) (1.9) (6.0) 33.2 (8.4) 24.8 6.6 (6.6) 24.8 (6.0) (1.0) (7.0) 24.0 (6.2) 17.8 — (0.9) 16.9 24.8 16.9 $ $ 0.90 — 0.90 0.88 — 0.88 0.65 (0.03) 0.61 0.64 (0.03) 0.60 Weighted average ordinary shares outstanding: Basic Diluted 27,698,691 28,032,506 27,557,219 27,971,382 (1) The calculation of earnings per share is performed separately for continuing and discontinued operations. As a result, the sum of the two in any particular period may not equal the earnings-per-share amount in total. In 2021, the basic average shares outstanding and diluted average shares outstanding were the same for discontinued operations because the effect of potential shares of common stock was anti-dilutive since the Company generated a net loss from discontinued operations. As a result, 333,815 shares combined were not included in the computation of diluted EPS for discontinued operations in 2021. 71 LUXFER HOLDINGS PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Net income for the year Other comprehensive (loss) / income movements Items that may be reclassified to the consolidated income statement: Exchange differences on translation of foreign operations Total translation of foreign operations movements Items that will not be reclassified to the consolidated income statement: Remeasurement of defined benefit retirement plans Deferred income taxes on retirement benefits remeasurements Retirement benefits changes Total other comprehensive loss movements for the year Total comprehensive income for the year Attributed to: Equity shareholders LUXFER HOLDINGS PLC Note 2021 $M 2020 $M 24.8 16.9 30 24 (0.9) (0.9) 2.9 2.9 48.8 (9.8) 39.0 38.1 62.9 (19.0) 3.7 (15.3) (12.4) 4.5 62.9 4.5 72 LUXFER HOLDINGS PLC CONSOLIDATED BALANCE SHEET LUXFER HOLDINGS PLC December 31, 2021 December 31, 2020 Note $M $M ASSETS Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Investments Deferred income tax assets Retirement benefits Current assets Inventories Trade and other receivables Income tax receivable Cash and cash equivalents Total current assets Held-for-sale assets TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Ordinary share capital Deferred share capital Share premium account Treasury shares Retained earnings Own shares held by ESOP Share based compensation reserve Translation reserve Merger reserve Non-current liabilities Bank and other loans Retirement benefits Lease liability Deferred income tax liabilities Provisions Trade and other payables Current liabilities Trade and other payables Current income tax liabilities Lease liability Provisions Held-for-sale liabilities Total liabilities TOTAL EQUITY AND LIABILITIES 12 26 13 15 24 30 16 17 19 18 20 20 20 20 20 22 30 26 24 23 25 25 26 23 18 87.3 12.6 72.5 0.4 7.1 14.5 194.4 90.4 57.6 — 6.4 154.4 8.6 357.4 26.5 149.9 79.7 (9.6) 347.3 (1.1) (10.1) (49.8) (333.8) 199.0 59.6 — 10.5 2.7 1.6 1.3 75.7 63.8 2.8 2.3 12.3 1.5 82.7 158.4 357.4 85.5 9.2 72.4 0.5 19.2 — 186.8 68.8 43.1 1.5 1.5 114.9 36.2 337.9 26.6 149.9 77.1 (4.0) 297.1 (1.4) (7.3) (48.9) (333.8) 155.3 53.1 50.8 7.6 2.8 1.0 0.1 115.4 41.7 0.4 2.1 12.0 11.0 67.2 182.6 337.9 THE FINANCIAL STATEMENTS ON PAGES 70 TO 134 WERE APPROVED BY THE BOARD ON APRIL 21, 2022 AND SIGNED ON ITS BEHALF: Alok Maskara, April 21, 2022 Company Registration no. 03690830 73 LUXFER HOLDINGS PLC CONSOLIDATED CASH FLOW STATEMENT The amounts below include both continuing and discontinued operations. LUXFER HOLDINGS PLC Note 2021 $M 2020 $M 24.8 8.4 15.7 0.8 2.8 — 0.8 4.1 1.9 — (14.8) (15.3) 23.7 (18.2) 1.2 (5.3) 30.6 0.1 30.7 (9.1) 23.4 — (19.3) (5.0) (0.1) (5.1) 25.6 (0.7) (2.5) 6.4 (1.0) (2.9) (13.6) — (6.4) (20.7) 4.9 — 1.5 6.4 16.9 6.2 14.7 — 3.3 0.1 1.4 6.0 1.0 0.1 16.0 13.7 (17.1) (5.2) 1.9 (2.1) 56.9 0.3 57.2 (8.2) 1.5 (0.4) — (7.1) (0.3) (7.4) 49.8 (1.2) (3.9) (38.2) — (3.7) (13.6) 1.1 — (59.5) (9.7) 0.9 10.3 1.5 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year Adjustments to reconcile net income for the year to net cash flows from continuing operating activities: 9 4 26 4 8 8 15 10 26 21 Income taxes Depreciation and amortization Amortization of debt issue costs Lease right-of-use asset depreciation Loss on disposal of property, plant and equipment Share based compensation charges net of cash settlement Net interest costs IAS 19R retirement benefits finance charge Share of results of joint ventures and associates Changes in operating assets and liabilities: (Increase) / decrease in receivables (Increase) / (decrease) in inventories Increase / (decrease) in payables Movement in retirement benefits obligations Movement in provisions Income taxes paid NET CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING Net cash flows from operating activities - discontinued NET CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment Proceeds from sale of business Cash flows on purchase of businesses Acquisition costs, net of cash acquired NET CASH FLOWS USED IN INVESTING ACTIVITIES - CONTINUING Net cash flows from investing activities - discontinued NET CASH FLOWS USED IN INVESTING ACTIVITIES NET CASH FLOWS BEFORE FINANCING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Interest and similar finance costs paid on banking facilities Interest paid on Loan Notes (Repayment) / draw down on banking facilities Debt issue costs Payments in respect of leases Dividends paid Proceeds from issue of shares Share buyback NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Net foreign exchange differences Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 74 LUXFER HOLDINGS PLC LUXFER HOLDINGS PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to the equity shareholders of the parent Ordinary share capital Deferred share capital Share premium account Treasury shares Retained earnings Own shares held by ESOP Other Reserves (1) Note $M $M $M $M $M $M $M Total equity $M At At January 1, 2020 Net income for the year Currency translation differences Remeasurement of defined benefit retirement plans Deferred income taxes on items taken to other comprehensive income Total comprehensive income for the year Shares sold from ESOP Equity dividends Equity settled share based compensation charges Utilization of treasury shares Utilization of shares from ESOP Other changes in equity in the year At December 31, 2020 Net income for the year Currency translation differences Remeasurement of defined benefit retirement plans Deferred income taxes on items taken to other comprehensive income Total comprehensive income for the year Shares sold from ESOP Equity dividends Equity settled share based compensation charges Utilization of treasury shares Utilization of shares from ESOP Repurchase of own shares Cancellation of ordinary shares Other changes in equity in the year At December 31, 2021 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 24 21 20 20 24 21 20 20 20 20 26.6 149.9 74.5 (4.0) 309.1 (1.7) (392.5) 161.9 — $ — $ — $ — $ — $ — $ 16.9 $ — $ — $ 16.9 — $ — $ — $ — $ — $ 2.9 $ 2.9 — $ — $ — $ (19.0) $ — $ — $ (19.0) — $ — $ — $ — $ 3.7 $ — $ — $ — — $ — $ — $ — $ — $ — — — 1.6 — 2.9 — $ 0.8 $ — $ — $ 0.3 $ — $ — $ — $ — $ (13.6) $ — $ — $ (13.6) — $ — $ — $ — $ — $ 2.8 $ 2.8 — $ 0.1 $ — $ — $ — $ (0.2) $ (0.1) — $ 1.7 $ — $ — $ — $ (3.0) $ (1.3) 3.7 4.5 1.1 — 26.6 — 149.9 2.6 77.1 — (13.6) 0.3 (0.4) (11.1) (4.0) 297.1 (1.4) (390.0) 155.3 — $ — $ — $ — $ — $ — $ 24.8 $ — $ — $ 24.8 — $ — $ — $ — $ — $ (0.9) $ (0.9) — $ — $ — $ 48.8 $ — $ — $ 48.8 — $ — $ — $ — $ (9.8) $ — $ — $ (9.8) — — $ — $ — $ — $ — $ — $ — — — 63.8 — (0.9) 62.9 — $ — $ — $ — $ — $ — $ — — $ — $ — $ (13.6) $ — $ — $ (13.6) — $ — $ — $ — $ — $ 2.8 $ — $ (0.1) $ 0.1 $ — $ — $ — $ 2.8 — — $ 3.3 $ — $ — $ 0.3 $ (5.6) $ (2.0) — $ — $ (6.4) $ — $ — $ — $ (6.4) (0.1) $ — $ (0.6) $ 0.7 $ — $ — $ — $ — (0.1) 26.5 — 149.9 2.6 79.7 (5.6) (9.6) (13.6) 347.3 0.3 (2.8) (19.2) (1.1) (393.7) 199.0 (1) Other reserves include, a translation reserve of $49.8 million deficit (2020: deficit of $48.9 million), a merger reserve of $333.8 million deficit (2020: $333.8 million deficit) and a share based compensation reserve of $10.1 million deficit (2020: $7.3 million deficit). 75 LUXFER HOLDINGS PLC LUXFER HOLDINGS PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS All amounts in millions, except share and per share data 1. Accounting policies Basis of preparation and statement of compliance with IFRS The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 as they apply to the consolidated financial statements of the Group for the year ended December 31, 2021. The consolidated financial statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Luxfer Holdings PLC transitioned to UK-adopted International Accounting Standards in its company financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The financial statements of Luxfer Holdings PLC have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. In assessing the appropriateness of adopting the going concern basis in the preparation of these financial statements, cash forecasts and projections have been prepared to June 2022. There is sufficient headroom in our covenant compliance which would enable the Group to drawdown on the RCF and not impact the Group's ability to continue as a going concern. Therefore the directors continue to apply the going concern basis for accounting in the preparation of the consolidated financial statements. For the purpose of the accompanying consolidated financial statements, subsequent events have been evaluated through to April 21, 2022, which is the date the consolidated financial statements were authorized by the Board. The consolidated financial statements were issued on April 21, 2022. Basis of consolidation The consolidated financial statements comprise the financial statements of Luxfer Holdings PLC and its subsidiaries (the "Group") at December 31 each year. These financial statements present the Consolidated Income Statement, Consolidated Statement of Other Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and Consolidated Statement of Changes in Equity, for the year ending December 31, 2021, along with prior year comparatives for the year ending December 31, 2020. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealized profits arising from intra- group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The accounting policies which follow, set out those polices which apply in preparing the consolidated financial statements for the years ended December 31, 2020 and December 31, 2021. Parent Company Guarantee In accordance with S479A of the Companies Act 2006, Luxfer Holdings PLC has provided a parent company guarantee for the below listed subsidiaries, meaning that for the year ended December 31, 2021, they are exempt from audit. 76 Name of Company Lumina Trustee Limited Luxfer Gas Cylinders China Holdings Limited Luxfer Group Limited Luxfer Group 2000 Limited Luxfer Group Services Limited Luxfer Magtech International Limited Luxfer Overseas Holdings Limited LUXFER HOLDINGS PLC Company registered number 6055812 5165622 3944037 4027006 3981395 2891444 3081726 77 LUXFER HOLDINGS PLC Presentational and functional currency The consolidated financial statements are presented in U.S. dollars and all values are rounded to the nearest $0.1 million except when otherwise indicated. The books of the Group's non-U.S. entities are converted to U.S. dollars at each reporting period date in accordance with the accounting policy below. The functional currency of the holding company Luxfer Holdings PLC is USD for the year-ended 2021. The functional currency of UK subsidiaries is GBP. Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree's identifiable net assets, is determined on a transaction by transaction basis. Acquisition costs are expensed as incurred. Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognized for the non-controlling interest over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group's cash generating units that are expected to benefit from the combination. Goodwill is tested at least annually for impairment, or more frequently if events or changes in circumstances indicate that the asset is impaired. Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous U.K. GAAP amounts subject to being tested for impairment at that date and in subsequent years. A bargain purchase is measured at cost being the excess of the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination over the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognized for the non-controlling interest. Any amount of a bargain purchase is recognized immediately as income. Contingent consideration arising as a result of a business combination is recognized at fair value at the acquisition date. Subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with the relevant IFRS standards. Other intangible assets Other intangible assets excluding development costs, are measured initially at purchase cost, or where acquired in a business combination at fair value, and are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Research expenditure is expensed as incurred. Internal development expenditure is charged as administrative costs to the consolidated income statement in the year it is incurred unless it meets the recognition criteria of IAS 38 "Intangible Assets". Where the recognition criteria are met, intangible assets are capitalized and amortized over their estimated useful economic lives from product launch, as shown in the table below. Intangible assets relating to products in development are subject to impairment testing at each balance sheet date or earlier upon indication of impairment. Trading and technology related Customer related Development costs Software 14 – 25 years 15 - 25 years 5 – 10 years 4 – 7 years Amortization expense is recognised within administrative expenses in the income statement. The carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Reviews are made annually of the estimated remaining lives and residual values of the patents and trademarks. 78 LUXFER HOLDINGS PLC Revenue A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the Company’s contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. There is no variable consideration or obligations for returns, refunds, or other related obligations in the Company’s contracts. Payment terms and conditions vary by contract type and may include a requirement of payment in advance. In general, our payment terms are 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component. The Company’s revenue is primarily derived from the following sources and are recognized when or as the Company satisfies a performance obligation by transferring a good or service to a customer: Product revenues We recognize revenue when it is realized or realizable and has been earned. Revenue is recognized when the following are met: (i) persuasive evidence of an arrangement exists; (ii) shipment or delivery has occurred (depending on the terms of the sale), which is when the transfer of product or control occurs; (iii) our price to the buyer is fixed or determinable; and (iv) the ability to collect is reasonably assured. Transaction prices are determined depending on terms agreed with customers, revenue is recognized in line with the amount invoiced to customers. Royalties Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreements, provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. 79 LUXFER HOLDINGS PLC Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is initially calculated on a straight-line basis over the estimated useful life of the particular asset. As a result of the complexity of our manufacturing process, there is a wide range of plant and equipment in operation. The rate of annual charge is summarized as follows: Freehold buildings Leasehold land and buildings Plant and equipment Including: Heavy production equipment (including casting, rolling, extrusion and press equipment) Chemical production plant and robotics Other production machinery Furniture, fittings, storage and equipment Freehold land is not depreciated. 3% – 10% The lesser of life of lease or freehold rate 4% – 30% 4% – 6% 10% – 15% 10% – 20% 10% – 30% Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear. For any individual asset the carrying value is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written-down to its recoverable amount. The recoverable amount of property, plant and equipment is the greater of the fair value less costs of disposal and the value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the consolidated income statement as part of the profit or loss on operations before taxation. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the item) is included in the consolidated income statement in the year the item is derecognized. Maintenance costs in relation to an item of property, plant and equipment are expensed as incurred. Inventories Inventories are stated at the lower of cost and net realizable value. Raw materials are valued on a first-in, first- out basis. Strategic purchases of inventories in order to secure supply and reduce the impact of price volatility on the cost of inventories are valued on an average cost basis. Work in progress and finished goods costs comprise direct materials and, where applicable, direct labor costs, an apportionment of production overheads and any other costs that have been incurred in bringing the inventories to their present location and condition. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution. Inventories are reviewed on a regular basis, and we will make allowance for excess or obsolete inventories and write-down to net realizable value based primarily on committed sales prices and our estimates of expected and future product demand and related pricing. Held-for-sale assets / liabilities In accordance with IFRS 5, assets and liabilities held-for-sale are written down to their fair value less costs to sell and classified as held-for-sale on the face of the consolidated balance sheet. Impairments recognized on the assets and liabilities will be taken to the income statement and presented within restructuring and other expense. If an asset or liability is no longer available for sale, then they will be reclassified within their relevant asset or liability financial statement line and held at amortized cost. 80 LUXFER HOLDINGS PLC Foreign currencies Transactions in currencies other than an operation's functional currency are initially recorded in the functional currency at the rate of exchange prevailing on the dates of transactions. At each balance sheet date, the foreign currency monetary assets and liabilities are translated into the functional currency at the rates prevailing on the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognized in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in equity. On consolidation, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences that arise, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognized in the consolidated income statement in the period in which the operation is disposed or partially disposed. Income taxes Current income taxes Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. Current income taxes relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred income taxes Deferred income taxes are the future income taxes expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred income tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred income tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, investments in associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying value of a deferred income tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred income taxes are calculated at the tax rate that is expected to apply in the period when the liability is settled or the asset is realized based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred income taxes are charged or credited to the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred income taxes are also dealt with in equity. 81 LUXFER HOLDINGS PLC Leases The Group leases various buildings, equipment and vehicles. Rental contracts are typically made for fixed periods of 12 months to 10 years, but may have extension options. Contracts may contain both lease and non- lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • • • • • fixed payments (including in-substance fixed payments), less any lease incentives receivable variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date amounts expected to be payable by the group under residual value guarantees the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. Right-of-use assets are measured at cost comprising the following: • • • • the amount of the initial measurement of lease liability any lease payments made at or before the commencement date less any lease incentives received any initial direct costs, and restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. Retirement benefits costs In respect of defined benefit plans, obligations are measured at the present value whilst plan assets are recorded at fair value. The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. The charge to the consolidated income statement is based on an actuarial calculation of the Group's portion of the annual expected costs of the benefit plans and the net interest cost, which is calculated by applying the discount rate to the net defined benefit obligation, taking into account contributions and benefits paid. Re- measurements are recognized in the statement of comprehensive income. 82 LUXFER HOLDINGS PLC Retirement benefits costs (continued) When a settlement or curtailment occurs the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain or loss recognized in the consolidated income statement in the period in which the settlement or curtailment occurs. At December 31, 2021 both the U.S. and UK pension plans were in a surplus position. Management have assessed that it is appropriate to recognize this surplus in line the requirements of IFRIC 14 and IAS 19. Payments to defined contribution plans are charged as an expense as they fall due. Provisions Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that a transfer of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Earnings per share Basic earnings per share are computed by dividing net income for the period by the weighted-average number of ordinary shares outstanding, net of Treasury shares and shares held in ESOP. Diluted earnings per share are computed by dividing net income for the period by the weighted average number of ordinary shares outstanding and the dilutive ordinary share equivalents. Share based compensation The cost of equity settled transactions is recognized, based upon the fair value at grant date, together with a corresponding increase in the share based compensation reserve in equity, over the period in which the performance or service conditions are fulfilled. The cumulative expense recognized for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The consolidated income statement expense or credit for a period represents the movement in cumulative expense recognized at the beginning and end of that period. Separate disclosure of expenses or income Certain items of expense or income are presented separately within restructuring and other expenses, on the face of the Consolidated Income Statement, based on management's judgment that they need to be disclosed by virtue of their size, nature or incidence in order to provide a proper understanding of our results of operations and financial condition. Such items of expense or income incurred during a period are disclosed under identifiable headings in the Consolidated Income Statement and further explained in Note 6 to the consolidated financial statements. Examples of such items include but are not limited to: • • • • • • • Restructuring of the activities of the Group and reversals of any provisions for the costs of restructuring; write-downs to net realizable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs; disposals of items of property, plant and equipment; disposals of investments and subsidiaries; discontinued operations; litigation settlements; and other material reversals of provisions. The nature of the items of expense or income is considered to determine whether the item should be presented as part of operating profit or loss or as other expenses or income. The adjusted earnings per share calculations, presented by the Group exclude the impact of these items. Management believes that the use of adjusted measures such as this provides additional useful information on underlying trends to shareholders. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, but net of bank overdrafts. 83 LUXFER HOLDINGS PLC Trade and other receivables Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components, in which case they are recognized at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortized cost using the effective interest method. Trade and other receivables (continued) The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. The expected loss rates are based on the payment profiles of sales over a period of 36 months before December 31, 2021 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. The maximum exposure at the end of the reporting period is the carrying amount of these receivables. Bank and other loans Bank and other loans are recorded at the fair value of the proceeds received net of directly attributable transaction costs. Issue costs relating to revolving credit facilities are charged to the consolidated income statement over the estimated life of the facility on a periodic basis and are added to the carrying value of the facility. Issue costs relating to fixed term loans are charged to the consolidated income statement using the effective interest method and are added to the carrying value of the fixed term loan. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Derivative financial instruments The Group uses derivative financial instruments such as foreign currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are stated at fair value. Gains and losses arising from derivative financial instruments are recognized directly in the consolidated income statement. Financial liabilities and equity instruments Financial liabilities and equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities and equity instruments are all instruments that are issued by the Group as a means of raising finance, including shares, loan notes, debentures, debt instruments and options and warrants that give the holder the right to subscribe for or obtain financial liabilities and equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. All equity instruments are included in shareholders' funds. The finance costs incurred in respect of an equity instrument are charged directly to the consolidated income statement. Other instruments are classified as financial liabilities if they contain a contractual obligation to transfer economic benefits. 84 LUXFER HOLDINGS PLC Critical accounting judgments and key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year, are discussed below. The judgments used by management in the application of the Group's accounting policies in respect of these key areas of estimation are considered to be the most significant. The below policies include both elements of judgments and estimates. Pensions The present value of future obligations of pensions are determined from actuarial valuations. Inherent in these valuations are assumptions, including: (i) discount rates; (ii) inflation rates; (iii) pension increases; and (iv) life expectancy. These assumptions are determined in association with qualified actuaries. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. The pension assets / liabilities at December 31, 2021 are $14.5 million (2020: ($50.8) million). Further details are given in Note 30. Loss contingencies Accruals are recorded for various contingencies, including legal proceedings, self-insurance and other claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel and actuarial determined estimates. Additionally, we record receivables from third party insurers when recovery has been determined to be probable. Our critical judgment revolves around the recognition of litigation and environmental liabilities in relation to the closure of our French site. We have recognized a loss contingency of $11.2 million, for which we have engaged with external experts to assist with the valuation of these liabilities. Goodwill and other identifiable intangible assets Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. The measurement of non-controlling interest is at fair value and is determined on a transaction by transaction basis. Acquisition costs are expensed as incurred. Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets, identifiable intangible assets purchased, and liabilities assumed. In accordance with IAS 36, Goodwill is tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect not to perform the qualitative assessment for some or all reporting units and only perform a quantitative impairment test. At the end of the third quarter of 2021, management carried out its qualitative review, which showed no indicators of impairment, as a result, the Company concluded its review at this point and was not required to perform a quantitative review. We completed a quantitative goodwill impairment evaluation as of the last day of the third quarter of 2020 and 2019 with each of our reporting units' fair value being substantially in excess of their carrying value. Going concern The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of the approval of these financial statements which indicate that, taking account of reasonably possible downsides, the Company will have sufficient funds, generated from operations and committed banking facilities, to meet its liabilities as they fall due for that period. The Directors continue to monitor the impact of COVID-19 on the Company and wider markets in which the Company operates. Whilst COVID-19 has given rise to inflationary cost pressures and supply chain issues, the business continues to recover well from the pandemic, as demonstrated by the significant improvement in year on year results. The impact of COVID-19 is further discussed below. Subsequent to the year end, the global political environment has become increasingly uncertain. This could potentially give rise to additional inflationary cost pressures and supply chain issues to those arising as a result of COVID-19. In response to these events, the Company continues to execute business continuity plans in line with those used to mitigate the impact of COVID-19 (see below for further details). Furthermore, the Directors have assessed the direct impact on the business, and identified that revenue generated from affected areas is less than one percent of the Company's total revenue, and as such the Group has minimal exposure to these 85 LUXFER HOLDINGS PLC events. Whilst the Company purchases raw materials from affected areas, alternative supply chains are available and have been executed since these events began. Despite the uncertainties discussed above, the Company is expected to generate positive cash from operations for a period of at least 12 months from the date of approval of these financial statements. In addition, there is sufficient headroom in our covenant compliance which would enable the Group to drawdown on the revolving credit facility and not impact the Group's ability to continue as a going concern. At the date of these financial statements there is in excess of $50m undrawn on the revolving credit facility. Accordingly, the financial statements have been prepared on a going concern basis. Impact of COVID-19 on the Financial Statements Demand from most end-markets we serve has improved throughout 2021 following the adverse impact of COVID-19 on prior year volumes. Sharp recovery in demand, combined with supply chain challenges, has resulted in some adverse business impacts, including increased material cost inflation on key inputs (including magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases. Currently, our expectation is that the impact of material and energy cost inflation and labor and transport constraints will continue into 2022, but it is our intention to pass through inflation to our customers. The Company continues to monitor the COVID-19 situation closely, including subsequent constraints on supply, while simultaneously executing business continuity plans. These business continuity plans include, but are not limited to, (i) retooling operations to maintain social distance and maximize employee safety; (ii) increasing resources to manage supply constraints and recruit employees in order to satisfy demand; (iii) expanding flexible work arrangements and policies, where practical, to maximize employee safety; and (iv) providing regular updates to our shareholders, employees, customers, and suppliers in a transparent and timely manner. In relation to liquidity, the Company has access to a revolving credit facility (see Note 22) and has performed stress testing on financial covenants using current forecast information. Consequently, the Company has not identified any liquidity concerns. Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year. New standards and amendments to standards not applied The IASB has issued the following significant amendments to standards with a mandatory effective date on or after January 1, 2021: International Financial Reporting Standards IAS 1 Presentation of financial statements (amendments) Mandatory effective date No earlier than January 1, 2023 IAS 8 IAS 12 IAS 16 IFRS 3 IAS 37 Accounting Estimates and Errors Income Taxes Property, Plant and Equipment (amendments) Business combination (amendments) Onerous Contracts (amendments) No earlier than January 1, 2023 No earlier than January 1, 2023 No earlier than January 1, 2022 No earlier than January 1, 2022 No earlier than January 1, 2022 The directors do not expect that the adoption of the standards listed above will have a material impact on the consolidated financial statements of the Group in future periods. 2. Revenue Disaggregated revenue disclosures for the fiscal years ended December 31, 2021 and December 31, 2020 are presented below. 86 LUXFER HOLDINGS PLC Net sales by end-market 2021 $M $M Gas $M $M Gas 2020 $M $M Cylinders Elektron Total 95.8 129.2 45.8 117.0 54.2 127.9 195.8 374.1 Cylinders Elektron Total 87.7 111.9 92.1 42.3 52.9 120.8 141.9 182.9 324.8 24.2 49.8 67.9 Net sales by geographic destination 2021 2020 $M Percent $M Percent 207.8 55.6 % 173.0 53.3 % 24.4 17.7 11.0 12.5 6.6 % 4.7 % 2.9 % 3.3 % 18.7 15.7 10.5 20.2 5.8 % 4.8 % 3.2 % 6.2 % 273.4 73.1 % 238.1 73.3 % 25.8 53.7 21.2 374.1 6.9 % 14.3 % 5.7 % 25.4 45.2 16.1 324.8 7.8 % 13.9 % 5.0 % General industrial Transportation Defense, First Response & Healthcare 33.4 71.2 73.7 178.3 United States U.K. Germany Italy France Top five countries Rest of Europe Asia Pacific Other (1) (1) Other includes Canada, South America and Africa. The Company’s performance obligations are satisfied at a point in time. With the reclassification of our Superform business as discontinued operations, none of the Company's continuing revenue is satisfied over time. As a result, the Company's contract receivables, contract assets and contract liabilities at December 31, 2021 are disclosed within current assets and liabilities held-for-sale. Segmental Information 3. We classify our operations into two core business segments, Gas Cylinders and Elektron, based primarily on shared economic characteristics for the nature of the products and services; the nature of the production processes; the type or class of customer for their products and services; the methods used to distribute their products or provide their services; and the nature of the regulatory environment. The Group has four identified business units, which aggregate into the two reportable segments. Luxfer Gas Cylinders forms the Gas Cylinders segment, and Luxfer MEL Technologies, Luxfer Magtech and Luxfer Graphic Arts aggregate into the Elektron segment. The Superform business unit used to aggregate into the Gas Cylinders segment, but is now recognized within discontinued operations. Gas Cylinders segment Our Gas Cylinders segment manufactures and markets specialized products using carbon composites and aluminum, including pressurized cylinders for use in various applications including self-contained breathing apparatus (SCBA) for firefighters, containment of oxygen and other medical gases for healthcare, alternative fuel vehicles, and general industrial. Elektron segment Our Elektron segment focuses on specialty materials based primarily on magnesium and zirconium, with key product lines including advanced lightweight magnesium alloys with a variety of uses across a variety of industries; magnesium powders for use in countermeasure flares, as well as heater meals; photoengraving plates for graphic arts; and high-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, and many other performance products. Other Other primarily represents unallocated corporate expense and includes non-service related defined benefit pension cost / credit. 87 LUXFER HOLDINGS PLC Management monitors the operating results of its reportable segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated by the chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments and has been identified as the CEO, using adjusted EBITA(1) and adjusted EBITDA, which is defined as segment income and is based on operating income adjusted for share based compensation charges; loss on disposal of property, plant and equipment, restructuring charges; impairment charges; acquisition and disposal related gains and costs; other charges; depreciation and amortization; and unwind of discount on deferred consideration. Unallocated assets and liabilities include those which are held on behalf of the Group and cannot be allocated to a segment, such as taxation, investments, cash, retirement benefits obligations, bank and other loans and holding company assets and liabilities. Financial information by reportable segment for the years ended December 31, is included in the following summary: In millions Gas Cylinders segment Elektron segment Consolidated In millions Gas Cylinders segment Elektron segment Consolidated 3. Segmental Information (continued) In millions Gas Cylinders segment Elektron segment Unallocated Discontinued operations Consolidated In millions Gas Cylinders segment Elektron segment Unallocated Discontinued operations Consolidated Net Sales Adjusted EBITDA(2) 2021 2020 2021 2020 $ 178.3 $ 141.9 $ 22.7 $ 195.8 182.9 40.7 $ 374.1 $ 324.8 $ 63.4 $ 21.3 32.6 53.9 Depreciation and amortization 2021 2020 Restructuring and other expense 2020 2021 $ $ 5.7 $ 10.0 3.9 9.7 $ 4.2 $ 1.3 15.7 $ 13.6 $ 5.5 $ 5.9 1.3 7.2 Capital expenditure 2021 2020 $ 0.9 $ 7.9 — 0.1 $ 8.9 $ $ $ 2.0 5.1 — 0.3 7.4 Total assets 2021 2020 Total liabilities 2020 2021 $ 114.6 $ 90.8 $ 51.6 $ 203.4 34.5 4.9 186.7 26.6 33.8 36.0 69.2 1.6 357.4 $ 337.9 $ 158.4 $ 182.6 36.4 28.6 106.6 11.0 $ $ 88 In millions United States United Kingdom Rest of Europe Canada Asia Pacific LUXFER HOLDINGS PLC Non-current assets 2021 2020 105.6 107.7 77.8 1.0 10.0 — 68.5 1.1 9.4 0.1 194.4 186.8 (1) Adjusted EBITA is adjusted EBITDA less depreciation and loss on disposal of property, plant and equipment. (2) 2021 and 2020 adjusted EBITDA is calculated on a US GAAP basis, our primary GAAP. A reconciliation can be found in our FORM 10-K filed with the SEC on February 24, 2022. 4. Operating profit Operating profit for continuing activities is stated after charging: Research and development expenditure charged to the consolidated income statement Depreciation of property, plant and equipment (Note 12) Right-of-use asset depreciation (Note 26) Amortization of intangible assets (Note 13) Loss on disposal of property, plant and equipment Restructuring and other expense (Note 6) Net foreign exchange gains Staff costs (Note 7) Cost of inventories recognized as expense (Note 16) 2021 $M 2020 $M 3.9 14.3 2.8 1.4 — 5.5 3.3 13.4 3.3 1.3 0.1 7.3 0.5 — 105.3 159.1 (0.5) 89.1 132.0 5. Fees payable to auditors The total remuneration of the Group's auditors, PricewaterhouseCoopers LLP and other member firms of PricewaterhouseCoopers International Limited, for services provided to the Group during the years ended December 31, 2021 and December 31, 2020 is analyzed below. Fees payable to auditors for the audit of the consolidated financial statements and its subsidiaries 1.6 1.7 Fees paid for non-audit services were less than $0.1 million in both 2021 and 2020. The audit fee for the company financial statements of Luxfer Holdings PLC was $0.1 million (2020: $0.1 million). 2021 $M 2020 $M 89 6. Other (expense) / income items (a) Restructuring and other expense Charged to operating profit: Rationalization of operations Environmental remediation costs (b) Net loss on acquisitions and disposals (Charged)/credited to non-operating profit: Merger and acquisition costs Gain on previously written down inventory Remeasurement of deferred contingent consideration LUXFER HOLDINGS PLC 2021 $M 2020 $M (5.1) (0.4) (5.5) (6.9) (0.4) (7.3) (1.5) (0.4) — — (1.5) 0.3 0.1 — Rationalization of operations During 2021, 2020 and 2019, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. In 2021, there was $3.4 million of costs in relation to the closure of Luxfer Gas Cylinders' French site, which includes an additional $1.0 million charge for environmental remediation and $2.4 million employee litigation claims, with the remaining largely legal and professional fees. It is expected that we will incur further costs in 2022. A further $0.3 million of miscellaneous project costs were incurred in the Gas Cylinders Segment during 2021. There was also $0.9 million of one-time employee termination costs in the Elektron division, largely in relation to the divestiture of our small Luxfer Magtech production facility in Ontario, Canada. In 2020, there was $5.4 million of costs in relation to the closure of Luxfer Gas Cylinders' French site. In response to uncertain global economic conditions, we undertook actions to reduce the Company's cost structure and improve operating efficiency. These actions included a workforce reduction program resulting in $1.5 million of severance-related charges, of which $0.4 million and $1.0 million were incurred in the Gas Cylinders and Elektron Segments respectively, and $0.1 million which is unallocated. 6. Other (expense) / income items (continued) Environmental remediation costs In 2021 and 2020, the Company recognised $0.4 million and $0.4 million respectively, in other charges on the consolidated income statement relating to historical environmental clean-up costs. Net loss on acquisitions and disposals Acquisition-related costs of $1.5 million in 2021 represent professional fees incurred in relation to the SCI acquisition. Acquisition-related costs which were net nil in 2020 relate to $0.4 million costs incurred in relation to merger and acquisition ("M&A") exploration activities offset by deferred consideration adjustments and profit on previously written-down inventory. In July 2020 we sold our 51% investment in Luxfer Uttam India Private Limited to the joint venture ("JV") partner. Allowing for legal costs, we generated a profit on disposal of less than $0.1 million. 90 7. Staff Costs Staff costs from continuing operations were as follows: Wages and salaries Social security costs Retirement benefits costs IAS 19 Retirement benefits finance charge Redundancy costs: Continuing activities Share based compensation charges (Note 32) LUXFER HOLDINGS PLC 2021 $M 2020 $M 90.3 75.6 6.7 3.6 1.9 — 2.8 5.1 3.2 1.0 1.4 2.8 105.3 89.1 The average monthly number of employees from continuing operations during the year was made up as follows: Production and distribution Sales and administration Research and development The compensation of the members of our Board of Directors (each, a "director") was: Remuneration (short-term benefits) Social security costs Post-retirement benefits Total short-term and post-retirement benefits 2021 No. 2020 No. 1,106 1,070 174 31 168 29 1,311 1,267 2021 $M 2020 $M 2.6 0.2 0.2 3.0 1.5 0.1 0.2 1.8 In 2021, compensation of key management personnel for the period they served on the Executive Leadership Team, (including directors) was $7.7 million (2020: $4.8 million) in total which includes; $5.0 million (2020: $3.2 million) for short-term employee benefits, $2.2 million (2020: $1.2 million) for long-term incentive plans and $0.3 million (2020: $0.3 million) for post-employment benefits. Social security costs were incurred of $0.2 million (2020: $0.1 million). Details of the share awards granted are included in the Remuneration Report in Outstanding Share Awards During 2021, are on pages 50 to 51 of the Remuneration Report. Further details of directors' remuneration are included in the Remuneration Report on pages 43 to 60. The Remuneration Report includes information in relation to the highest paid Director. During 2021 and 2020, one director was a member of the Group's U.S. registered defined contribution plan. Directors' interests and related party transactions No directors had a material interest in, nor were they a party to, any contract or arrangement to which the parent company, Luxfer Holdings PLC (the "Company") or any of its subsidiaries is or was party to either during the year or at the end of the year, with the following exceptions: in the case of the executive director his individual service contract and the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan; in the case of the non-executive directors their engagement letters or the contract for services under which their services as a director of the Company are provided; in the case of the executive director and the chairman, the Luxfer Holdings PLC Non- Executive Directors Equity Incentive Plan. Information regarding the share options exercised during the year is included within the Remuneration Report. See Note 33 for related party transactions. 91 8. Finance costs Finance costs from continuing operations was as follows: Bank and other loan interest payable Amortization of issue costs Lease interest payable IAS 19R retirement benefits finance charge Total finance costs 9. Income tax expense (a) Analysis of taxation charge for the year Current income taxes: U.K. corporation tax Adjustments in respect of previous years Non-U.K. tax Adjustments in respect of previous years Total current tax charge Deferred income taxes: Origination and reversal of temporary differences Adjustments in respect of previous years Total deferred income taxes charge Tax charge on profit on operations The income tax charges relate to continuing activities. (b) Factors affecting the taxation charge for the year LUXFER HOLDINGS PLC 2021 $M 2020 $M 3.2 0.5 0.4 1.9 6.0 5.1 0.5 0.4 1.0 7.0 2021 $M 2020 $M 2.4 (0.4) 2.0 4.7 0.5 7.2 1.5 (0.3) 1.2 8.4 0.1 (0.3) (0.2) 2.1 0.3 2.2 4.7 (0.7) 4.0 6.2 The tax assessed for the year differs (2020: differs) from the standard rate of 19% (2020: 19%) for corporation tax in the U.K. The differences are explained below: Profit on operations before taxation Profit on operations at 2020 standard rate of corporation tax in the U.K. of 19% (2020: 19%) Effects of: Non-deductible expenses / (income not taxable) Movement in unprovided deferred income taxes Foreign tax rate differences Effect of changes in tax rates Adjustment in respect of previous years Other Tax expense 2021 $M 2020 $M 33.2 24.0 6.3 1.9 (0.6) 0.5 (0.1) (0.2) 0.6 8.4 4.6 1.5 0.8 — — (0.7) — 6.2 92 LUXFER HOLDINGS PLC In March 2021 an increase in the U.K. corporation tax rate from 19% to 25% was announced, effective from April 1, 2023. Deferred tax liabilities and assets which are expected to unwind after April 1, 2023 have been revalued at 25%. This resulted in an additional tax charge of $0.8m on deferred tax liabilities in relation to pension surplus, and an additional tax credit of $0.9m on deferred tax assets in relation to tax losses, overall a $0.1m reduction to the income tax expense. The 2020 deferred tax charge includes a non-cash accounting adjustment in respect of previous years of $0.8 million, which predominantly results from a re-evaluation of the availability of historic tax losses to offset future taxable profits. (c) Factors that may affect future taxation charge At December 31, 2021, the Company had carried forward tax losses and tax credits of $106.3 million (U.K.: $43.0 million, non-U.K.: $63.3 million). Carried forward tax losses and tax credits for 2020 were $104.2 million (U.K.: $30.0 million, non-U.K.: $74.2 million) and for 2019 were $94.9 million (U.K.: $32.8 million, non-U.K.: $62.1 million). To the extent that these losses are not already recognized as deferred income taxes assets and are available to offset against future taxable profits, it is expected that the future effective tax rate would be below the standard rate in the country where the profits are offset. A valuation allowance of $18.0 million (2020: $19.3 million, 2019: $14.9 million) exists for deferred tax benefits related to the tax loss and tax credit carry forwards and other benefits that may not be realized. The apportionment of the valuation allowance between the U.K. and non-U.K. jurisdictions is U.K.: $4.1 million, non-U.K.: $13.9 million (2020: U.K.: $3.2 million, non-U.K.: $16.1 million; 2019: U.K.: $2.8 million, non-U.K.: $12.1 million). The non-U.K. valuation allowances relates to tax losses in France and Germany. Of the carried forward tax losses and tax credits as at December 31, 2021, $13.4 million expire between 2023 and 2034, and $99.2 million are available for indefinite carry-forward. In March 2021 an increase in the U.K. corporation tax rate from 19% to 25% was announced, effective from April 1, 2023. Deferred tax liabilities and assets which are expected to unwind after April 1, 2023 have been revalued at 25%. Gains and losses arising from revaluation have been recognized in the consolidated income statement. 10. Acquisitions On March 15, 2021 the Company completed the acquisition of the Structural Composites Industries LLC ('SCI') business of Worthington Industries, Inc., based in Pomona, California, for $19.3 million cash consideration. The Company acquired 100% of the share capital and voting rights. The acquisition of SCI strengthens Luxfer's composite cylinder offering and aligns with recent investments to enhance its alternative fuel capabilities to capitalize on the growing compressed natural gas and hydrogen opportunities. The fair value of assets and liabilities acquired are as follows: In millions Accounts and other receivables Inventories Property, plant and equipment Customer relationships Less: Accounts payable Net assets acquired $ 4.7 6.7 7.8 1.8 (1.7) 19.3 Cash consideration paid $ 19.3 In the nine months to December 31, 2021 SCI contributed revenue of $25.3 million and a loss before tax of $5.3 million to the Group's results. If SCI had been in the group for a full twelve months it would have contributed approximately an additional $8.5m to revenue and a further $0.2m loss to the Group's results. Acquisition-related costs of $1.5 million in 2021 represent professional fees incurred in relation to the SCI acquisition. 93 LUXFER HOLDINGS PLC 11. Discontinued Operations Our Superform aluminum superplastic forming business which operated from sites in the U.S. and the U.K, and our U.S. aluminum gas cylinder business were historically included in the Gas Cylinders segment. As a result of our decision to exit non-strategic aluminum product lines, we have reflected the results of operations of these businesses as discontinued operations in the Consolidated Statements of Income for all periods presented. Our U.S. aluminum gas cylinder business was sold in March 2021 for $20.2 million, net of working capital adjustments. The Group recognised a gain on disposition, net of tax, of $7.1 million. The table below outlines the gain on disposition. In millions Net proceeds Less Net assets sold Gross gain on disposition Tax expense Net gain on disposition 2021 $ 20.2 (11.5) 8.7 (1.6) 7.1 $ In September 2021, our Superform U.K. business was sold for $4.0 million, net of working capital adjustments. The Group recognised a loss on disposition, net of tax, of $0.5 million. The table below outlines the loss on disposition. In millions Net proceeds Deferred consideration receivable Less Net assets sold Loss on disposition 2021 3.0 1.0 (4.5) (0.5) $ $ We expect our Superform U.S. business to be sold within the next twelve months. The assets and liabilities of the above businesses have been presented within Current assets held-for-sale and Current liabilities held-for-sale in the consolidated balance sheets. As the businesses met the criteria for held-for- sale and discontinued operations, the balance sheet at December 31, 2021 and December 31, 2020. The Group recognised a $1.5 million impairment charge relating to plant and equipment held in our Superform U.S. business reflecting updated expectations of fair market value. Results of discontinued operations were as follows: 2021 $M 2020 $M 20.9 (21.8) (0.9) (0.5) (2.5) (2.5) (6.4) (0.1) (6.5) (0.1) (6.6) 53.2 (50.4) 2.8 (1.1) (2.3) (0.1) (0.7) (0.2) (0.9) — (0.9) REVENUE Cost of Sales Gross profit Distribution costs Administrative expenses Restructuring and other expense OPERATING PROFIT Net finance costs LOSS ON DISCONTINUED OPERATIONS BEFORE TAX Income tax NET LOSS FROM DISCONTINUED OPERATIONS 94 The discontinued cash flow statement is presented below: Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash and cash equivalents LUXFER HOLDINGS PLC 2021 $M 2020 $M $ $ 0.1 $ (0.1) — — $ 0.3 (0.3) — — Depreciation of $0.7m (2020: $1.1m) and impairments of $1.5m (2020: $nil) were incurred in respect of discontinued operations. There were no other significant non-cash items relating to discontinued operations. 12. Property, plant and equipment Freehold $M Long leasehold $M Short leasehold $M Plant and equipment $M Capital Work in Progress $M Total $M Cost: At January 1, 2020 Additions Disposals Transfers - Held for sale Transfers Exchange difference At December 31, 2020 Additions Business combinations Disposals Transfers Exchange difference At December 31, 2021 47.8 0.2 — (5.8) 2.0 0.8 45.0 — — — 0.2 (0.4) 44.8 Accumulated depreciation and impairment: At January 1, 2020 Provided during the year Disposals Transfers - Held for sale Exchange difference At December 31, 2020 Provided during the year Disposals Exchange difference At December 31, 2021 Net book values: At December 31, 2021 At December 31, 2020 At January 1, 2020 31.2 1.5 — (3.4) 0.5 29.8 1.3 — (0.3) 30.8 14.0 15.2 16.6 11.5 0.1 — (1.2) 0.3 0.1 10.8 — — (0.7) 0.4 — 10.5 7.5 0.6 — (1.2) 0.1 7.0 0.5 — — 7.5 3.0 3.8 4.0 285.2 2.0 (2.9) (41.5) 3.7 6.7 253.2 0.6 7.8 (1.3) 7.0 (3.0) 264.3 219.9 10.8 (2.8) (36.0) 5.8 197.7 12.0 (1.9) (2.7) 205.1 59.2 55.5 65.3 8.9 4.8 — — (6.1) 0.1 7.7 8.3 — — (7.7) (0.1) 8.2 — — — — — — — — — — 8.2 7.7 8.9 362.2 7.3 (2.9) (48.5) — 8.0 326.1 8.9 7.8 (2.0) — (3.6) 337.2 264.0 13.4 (2.8) (40.6) 6.6 240.6 14.3 (1.9) (3.1) 249.9 87.3 85.5 98.2 8.8 0.2 — — 0.1 0.3 9.4 — — — 0.1 (0.1) 9.4 5.4 0.5 — — 0.2 6.1 0.5 — (0.1) 6.5 2.9 3.3 3.4 95 LUXFER HOLDINGS PLC 13. Intangible assets Cost: At January 1, 2020 Transfer to held-for-sale Exchange difference At December 31, 2020 Additions Disposals Exchange difference At December 31, 2021 Accumulated amortization and impairment: At January 1, 2020 Provided during the year Transfer to held-for-sale Exchange difference At December 31, 2020 Provided during the year Disposals Exchange difference At December 31, 2021 Net book values: At December 31, 2021 At December 31, 2020 At January 1, 2020 Goodwill Customer related Technology and trading related Development costs Software Total $M $M $M $M $M $M 78.4 — 1.5 79.9 — — (0.5) 79.4 20.5 — — 0.5 21.0 — — (0.1) 20.9 58.5 58.9 57.9 13.4 — — 13.4 1.8 — — 15.2 4.7 0.4 — — 5.1 0.5 — — 5.6 9.6 8.3 8.7 8.5 — 0.3 8.8 — — (0.1) 8.7 3.7 0.4 — 0.1 4.2 0.4 — (0.1) 4.5 4.2 4.6 4.8 5.4 2.5 108.2 (1.5) (0.5) (2.0) 0.1 4.0 — — — 4.0 4.6 0.2 0.1 2.0 2.1 108.2 — (0.3) — 1.8 (0.3) (0.6) 1.8 109.1 1.8 0.3 35.3 1.3 (1.2) (0.5) (1.7) 0.2 3.8 0.2 — — 4.0 — 0.2 0.8 0.1 1.7 0.3 (0.3) (0.1) 1.6 0.2 0.4 0.7 0.9 35.8 1.4 (0.3) (0.3) 36.6 72.5 72.4 72.9 Customer related intangibles include customer relationships, order backlogs and non-compete agreements. Technology and trading related intangibles include technology, patents, trade names and trademarks. Development costs include $nil (2020: $0.2 million) relating to internally generated intangible assets, all other intangible assets are externally generated. On March 15, 2021 the Company completed the acquisition of the Structural Composites Industries LLC ('SCI') business of Worthington Industries, Inc., based in Pomona, California. As part of the acquisition $1.8m of customer relationships were acquired. We have assessed the customer relationships to have a useful economic life of 15 years, amortization is charged on a straight line basis. 96 LUXFER HOLDINGS PLC 14. Impairment of goodwill Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The five identified CGUs (Luxfer Gas Cylinders, Luxfer Superform, Luxfer MEL Technologies, Luxfer Magtech and Luxfer Graphic Arts) represent the lowest level within the Group at which goodwill is monitored for internal management reporting purposes. The five CGUs are aggregated to form the Group's two defined reportable segments: Gas Cylinders Segment and Elektron Segment. Luxfer Superform forms part of the discontinued operations disclosure. The table below summarizes the carrying value of goodwill by segment: At January 1, 2020 Exchange difference At December 31, 2020 Exchange difference At December 31, 2021 Gas Cylinders Segment Elektron Segment $M $M Total $M 19.2 0.6 19.8 (0.2) 19.6 38.7 0.4 39.1 (0.2) 38.9 57.9 1.0 58.9 (0.4) 58.5 The Gas Cylinders Segment goodwill of $19.6 million (2020: $19.8 million) relates wholly to the goodwill attributable to our Luxfer Gas Cylinders operations. The Elektron Segment goodwill of $38.9 million (2020: $39.1 million) included goodwill attributable to our Luxfer MEL Technologies operations of $5.4 million (2020: $5.4 million) and goodwill attributable to our Luxfer Magtech operations of $33.6 million (2020: $33.7 million); no goodwill is allocated to Luxfer Graphic Arts. The goodwill figure was allocated based on which operating segments historical acquisitions were allocated to and the value of the acquired goodwill on those historical acquisitions. Goodwill is tested at least annually for impairment and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment by measuring the recoverable amount. Consistent with previous periods, we have identified value in use to be significantly in excess of the carrying amount of goodwill and therefore fair value has not been measured. In 2021, we have assessed for indicators of impairment and we have identified that no significant events have occurred since the value in use model prepared for the purpose of the 31 December 2020 annual report. As a result, the conclusions reached in the prior year, whereby significant headroom above carrying amount was identified, remain appropriate. In line with IAS 36, paragraph 99, the impairment model has not been re- performed in 2021. 97 15. Investments Shares in joint ventures At January 1, 2020 Loan repayment Loan forgiveness Share of results Disposal Exchange difference At December 31, 2020 Exchange difference At December 31, 2021 LUXFER HOLDINGS PLC $M 2.3 — — (0.1) (1.7) — 0.5 (0.1) 0.4 Investment in joint ventures and associates At December 31, 2021, the Group had the following joint venture which affect the profit of the Group. The Group's joint venture has share capital which consists solely of ordinary shares and are indirectly held, and the country of incorporation or registration is also their principal place of operation. Name of company Nikkei-MEL Co. Limited Country of incorporation Holding Proportion of voting rights and shares held Classification Nature of business Japan Ordinary shares 50.0 % Joint venture Distribution The above ownership percentage remains consistent with 2020. In 2020, the Company sold its 51% investment in Luxfer Uttam India Private Limited to our joint venture partner for INR 137.4 million ($1.8 million) cash. Allowing for legal costs, we generated a profit on disposal of less than $0.1 million. Sub161 Pty Limited, our Australian associate in which we held a 26% interest, was liquidated and deregistered as a legal entity in 2020. The share of results of all joint ventures and associates was a result of $— million (2020: loss of $0.1 million), with no items recognized in other comprehensive income in 2021 or 2020. The Group has looked in detail at the ownership agreements of its joint ventures and associates in order to determine the level of control that it has. The Group has determined that it has joint control of its joint ventures mainly based upon the number of members on each company board of directors and their associated voting rights. In relation to the associate undertaking, the Group has significant influence but not joint control based on the proportion of directors on the company board and associated voting rights. The Group therefore accounts for all material joint ventures and associates on an equity basis. Related party transactions with joint ventures and associates have been disclosed in Note 33 to the Group's consolidated financial statements. 98 16. Inventories Raw materials and consumables Work in progress Finished goods and goods for resale LUXFER HOLDINGS PLC December 31, 2021 December 31, 2020 $M $M 39.2 26.7 24.5 90.4 26.2 19.7 22.9 68.8 Inventories above are disclosed net of any provisions for obsolete and excess inventories. The provision against obsolete and excess inventories at December 31, 2021 was $8.5 million (2020: $7.3 million). The cost of inventories recognized as an expense in continuing operations during the year was $159.1 million (2020: $132.0 million). The cost of inventories written-off during 2021 was $0.6 million (2020: $0.6 million). 17. Trade and other receivables Current Assets Trade receivables Amounts owed by joint ventures and associates Other receivables Prepayments and accrued income Derivative financial instruments Deferred consideration December 31, 2021 December 31, 2020 $M $M 45.8 — 2.3 8.4 0.1 1.0 57.6 33.6 0.2 3.4 5.5 0.2 0.2 43.1 Trade receivables are non-interest bearing and are generally on 30-90 day terms. Trade receivables above are disclosed net of any provisions for doubtful receivables of $0.7 million due to credit risk. The following table provides information about the exposure to credit risk and expected credit losses for trade receivables (including amounts owed by joint ventures and associates) as at December 31, 2021 based on aging profile: Trade receivables and amounts owed by joint ventures and associates % $M $M Default rate (1) Gross carrying amount Lifetime expected credit loss Current (not past due) 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due > 120 days past due — % — % — % 1.5 % 15.0 % 100.0 % 34.3 9.1 2.0 0.3 0.2 0.6 46.5 — — — — 0.1 0.6 0.7 (1) Default rate is applied to uninsured trade receivables and amounts owed by joint ventures and associates. 99 At December 31, 2021, trade receivables with a nominal value of $0.7 million (2020: $0.5 million) were impaired and fully provided for. Movements in the provision for impairment of trade receivables and amounts owed by joint ventures and associates were as follows: LUXFER HOLDINGS PLC At January 1 Charge in the year Recoveries for expected credit losses Exchange difference At December 31 18 Held-for-sale assets and liabilities 2021 $M 2020 $M 0.5 0.4 (0.1) (0.1) 0.7 1.3 — (0.7) (0.1) 0.5 In 2020, the Group classified its Superform aluminum superplastic forming business operating from sites in the U.S. and the U.K, and its U.S. aluminum gas cylinder business as assets and liabilities held-for-sale in accordance with IFRS 5 - Discontinued Operations. The criteria required by IFRS 5 continues to be met and therefore the Superform business continues to be classified as held-for-sale. There was also one building valued at $3.7 million, within our Elektron Segment classified as held-for-sale assets, previously included within current assets. The building was also classified as held-for-sale in 2020, as the expectation was that the building would be sold within 12 months. There are conditions attached to the sale which the Company expects to be met in 2022 and as such the building continues to be classified as held-for- sale. The respective assets and liabilities of the above disposal groups have been reclassified as held-for-sale within other current assets and other current liabilities per the table below. Reclassified to held-for-sale assets and liabilities $M $M December 31, 2021 December 31, 2020 Property, plant and equipment Intangible assets Right-of-use assets Inventories Trade and other receivables Held-for-sale assets Reclassified to held-for-sale liabilities Trade and other payables Lease liability Other liabilities Held-for-sale liabilities 3.7 — — 2.8 2.1 8.6 0.8 0.3 0.4 1.5 11.6 0.3 3.0 12.6 8.7 36.2 6.9 3.1 1.0 11.0 As a result of items reclassified to held-for-sale, there has been no reclassification of items from other comprehensive income to the consolidated income statement. During the year, our U.S. aluminum gas cylinder business and our Superform U.K. business were sold, resulting in decreases in held for sale assets and liabilities of $24.6m and $8.3m respectively. Please see note 11 for further details. 100 19. Cash and cash equivalents Cash at bank and in hand LUXFER HOLDINGS PLC December 31, 2021 December 31, 2020 $M $M 6.4 6.4 1.5 1.5 Included within the cash at bank and in hand balance is $0.2 million (2020: less than $0.1 million) cash held in escrow, as restricted cash. 20. Share capital (a) Ordinary share capital December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 No. No. $M $M Authorized: Ordinary shares of £0.50 each 40,000,000 40,000,000 35.7 (1) 35.7 (1) Deferred ordinary shares of £0.0001 each Allotted, called up and fully paid: 761,835,318,444 761,835,338,444 761,875,318,444 761,875,338,444 149.9 (1) 185.6 (1) 149.9 (1) 185.6 (1) Ordinary shares of £0.50 each 28,944,000 29,000,000 26.5 (1) 26.6 (1) Deferred ordinary shares of £0.0001 each 765,835,318,444 761,835,338,444 765,864,262,444 761,864,338,444 149.9 (1) 176.4 (1) 149.9 (1) 176.5 (1) (1) The Group's ordinary and deferred share capital are shown in U.S. dollars at the exchange rate prevailing at the month end spot rate at the time of the share capital being issued. The rights of the shares are as follows: Ordinary shares of £0.50 each The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared and paid. The ordinary shares were allotted and issued to satisfy share awards which vested under the Group's share award and share incentive plans. At December 31, 2021, there were 27,529,824 (2020: 27,636,153) ordinary shares of Luxfer Holdings PLC listed on the New York Stock Exchange (NYSE). Deferred ordinary shares of £0.0001 each The deferred shares have no entitlement to dividends or to vote. On a winding up (but not otherwise) the holders of the deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares. 101 (b) Share premium account At January 1, 2020 Shares sold from ESOP Utilization of shares At December 31, 2020 Utilization of shares Cancellation of shares At December 31, 2021 LUXFER HOLDINGS PLC $M 74.5 0.8 1.8 77.1 3.2 (0.6) 79.7 The share premium account is used to record the excess of proceeds over nominal value on the issue of shares. Share issue costs directly related to the issue of shares are deducted from share premium. (c) Treasury shares January 1, 2020 and December 31, 2020 Utilisation of treasury shares Repurchase of own shares Cancellation of ordinary shares At December 31, 2021 $M (4.0) 0.1 (6.4) 0.7 (9.6) In June 2021, the Board announced a share buy-back program. As a result, in 2021, the Company purchased 297,678 total shares for $6.4 million. Of the 297,678 shares repurchased in the year, 56,000 at $0.7 million have been cancelled. 16,395 shares were utilized at $0.1 million, with the remaining 225,283 retained within Treasury shares. At December 31, 2021, there were 575,618 (2020: 350,335) treasury shares held at a cost of $9.6 million (2020: $4.0 million). (d) Own shares held by ESOP At January 1, 2020 Shares sold from ESOP At December 31, 2020 Utilisation of ESOP shares At December 31, 2021 $M (1.7) 0.3 (1.4) 0.3 (1.1) At December 31, 2021, there were 838,558 ordinary shares of £0.50 each (2020: 1,013,512 ordinary shares of £0.50 each) held by The Luxfer Group Employee Share Ownership Plan (the "ESOP"). 102 LUXFER HOLDINGS PLC 21. Dividends paid and proposed Dividends declared and paid during the year: Interim dividend paid February 5, 2020 ( $0.125 per ordinary share) Interim dividend paid May 6, 2020 ($0.125 per ordinary share) Interim dividend paid August 5, 2020 ($0.125 per ordinary share) Interim dividend paid November 4, 2020 ($0.125 per ordinary share) Interim dividend paid February 4, 2021 ( $0.125 per ordinary share) Interim dividend paid May 5, 2021 ($0.125 per ordinary share) Interim dividend paid August 4, 2021 ($0.125 per ordinary share) Interim dividend paid November 2, 2021 ($0.125 per ordinary share) Dividends declared and paid after December 31 (not recognized as a liability at December 31): Interim dividend paid February 4, 2021: ($0.125 per ordinary share) Interim dividend paid May 5, 2021: ($0.125 per ordinary share) Interim dividend paid February 2, 2022: ($0.125 per ordinary share) Interim dividend to be paid May 4, 2022: ($0.13 per ordinary share) 2021 $M 2020 $M — — — — 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 — — — — 13.6 13.6 2021 $M 2020 $M — — 3.4 3.6 7.0 3.4 3.4 — — 6.8 22. Bank and other loans Loan Notes due 2023—gross Unamortized finance costs Loan Notes due 2023—net Loan Notes due 2026—gross Unamortized finance costs Loan Notes due 2026—net Revolving credit facility—gross Unamortized finance costs Revolving credit facility—net Included in non-current liabilities December 31, 2021 December 31, 2020 $M $M 25.0 — 25.0 25.0 (0.3) 24.7 10.8 (0.9) 9.9 59.6 59.6 59.6 25.0 — 25.0 25.0 (0.3) 24.7 4.1 (0.7) 3.4 53.1 53.1 53.1 In May 2021, we reduced our revolving credit facility ("RCF") from $150 million to $100 million to reflect the Company's scaled back funding requirements. In October 2021, a new Senior Facilities Agreement ("SFA") was agreed which provides $100 million in committed debt facilities, taking the form of a multi-currency RCF, with an additional $50 million of uncommitted facilities through an accordion provision, a provision that allows the Company to expand the maximum amount allowed on the line of credit. The previous SFA was due to mature in July 2022, but has been replaced by the new agreement which will mature in October 2026. 103 LUXFER HOLDINGS PLC The SFA bears interest equal to an applicable margin, based upon the Company's leverage, plus either EURIBOR, in the case of amounts drawn in euros, or SONIA (Sterling Overnight Index Average), in the case of amounts drawn in GBP sterling or U.S. dollars. The weighted-average interest rate on the RCF was 1.70% and 2.19% in 2021 and 2020, respectively. 23. Provisions Rationalization and redundancy Employee benefits Environmental provisions $M $M $M Total $M At January 1, 2020 Charged to consolidated income statement Translation Cash payments At December 31, 2020 Charged to consolidated income statement Cash payments Translation At December 31, 2021 At December 31, 2021 Included in current liabilities Included in non-current liabilities At December 31, 2020 Included in current liabilities Included in non-current liabilities 8.2 6.9 0.7 (4.9) 10.9 5.1 (3.5) (1.0) 11.5 11.5 — 11.5 10.9 — 10.9 0.9 0.1 — — 1.0 0.6 — — 1.6 — 1.6 1.6 — 1.0 1.0 2.2 11.3 0.4 — 7.4 0.7 (1.5) (6.4) 1.1 13.0 0.4 6.1 (0.7) (4.2) — (1.0) 0.8 13.9 0.8 12.3 — 1.6 0.8 13.9 1.1 12.0 — 1.0 1.1 13.0 Rationalization and redundancy At December 31, 2021, the Group had $11.5 million of provisions relating to redundancy and the rationalization of its operations (2020: $10.9 million). Employee benefits At December 31, 2021, the Group had $1.6 million of employee benefit liabilities (in addition to retirement benefits), as calculated on an actuarial basis, relating to a provision for workers' compensation in the U.S. (2020: $1.0 million). Environmental provisions At December 31, 2021, the Group had environmental provisions totaling $0.8 million relating to environmental clean-up costs (2020: $1.1 million). 104 LUXFER HOLDINGS PLC 24. Deferred income taxes Accelerated tax depreciation Other temporary differences $M $M Tax losses $M Retirement benefit obligations $M Total $M At January 1, 2020 (3.1) 3.9 8.9 5.8 15.5 (Charged) / credited to consolidated income statement (Charged) / credited to other comprehensive income Transfer to assets held for sale Exchange difference At December 31, 2020 (Charged) / credited to consolidated income statement 0.7 — 0.6 — (1.8) (2.2) (2.6) 0.1 (4.0) — — 0.1 1.8 — — 0.2 6.5 3.7 — 0.3 3.7 0.6 0.6 9.9 16.4 (1.0) (0.3) 3.9 (3.8) (1.2) Charged to other comprehensive income Transfer from liabilities held for sale — (0.9) Exchange difference At December 31, 2021 — — — — (0.1) (0.1) (9.8) (9.8) — 0.1 (0.9) (0.1) (3.6) 4.4 (3.7) 1.4 10.3 The amount of deferred income taxes accounted for in the Group balance sheet, after the offset of balances within countries for financial reporting purposes, comprised the following deferred income tax assets and liabilities: Deferred income tax liabilities Deferred income tax assets Net deferred income tax assets December 31, 2021 December 31, 2020 $M $M (2.7) 7.1 4.4 (2.8) 19.2 16.4 In March 2021 an increase in the U.K. corporation tax rate from 19% to 25% was announced, effective from April 1, 2023. Deferred tax liabilities and assets which are expected to unwind after April 1, 2023 have been revalued at 25%. Gains and losses arising from revaluation have been recognized in the consolidated income statement. The 2020 deferred tax charge includes a non-cash accounting adjustment in respect of previous years of $0.8 million, which predominantly results from a re-evaluation of the availability of historic tax losses to offset future taxable profits. 105 25. Trade and other payables Non-current Liabilities Accruals and deferred income Current Liabilities Trade payables Other taxation and social security Accruals and deferred income Interest payable LUXFER HOLDINGS PLC December 31, 2021 December 31, 2020 $M $M 1.3 1.3 30.8 1.1 32.4 0.3 64.6 0.1 0.1 18.1 0.5 22.8 0.3 41.7 The directors consider that the carrying value of trade payables approximates to their fair value. 106 LUXFER HOLDINGS PLC Land and buildings $M Motor vehicles Equipment $M $M Total $M 16.4 — — (4.8) 0.3 11.9 4.0 2.6 18.5 3.0 2.9 — (2.0) 0.2 4.1 2.5 0.5 7.1 11.4 7.8 0.2 — — (0.1) — 0.1 — — 0.1 0.1 — — — — 0.1 — — 0.1 — — 1.6 0.8 (0.1) (0.2) 0.1 2.2 0.1 — 2.3 0.6 0.4 (0.1) (0.1) — 0.8 0.3 — 1.1 1.2 1.4 18.2 0.8 (0.1) (5.1) 0.4 14.2 4.1 2.6 20.9 3.7 3.3 (0.1) (2.1) 0.2 5.0 2.8 0.5 8.3 12.6 9.2 26. Leases Right-of-use assets Cost: At January 1, 2020 Additions Disposals Transfer to held-for-sale Exchange difference At December 31, 2020 Additions Transfer from held-for-sale At December 31, 2021 Accumulated depreciation: At January 1, 2020 Charge for the year Disposals Transfer to held-for-sale Exchange difference At December 31, 2020 Charge for the year Transfer from held-for-sale At December 31, 2021 Net book values: At December 31, 2021 At December 31, 2020 Lease liability The present value of lease liabilities is as follows: Within 12 months 1 - 5 years > 5 years Total December 31, 2021 December 31, 2020 $M $M $ $ 2.3 6.5 4.0 12.8 2.1 4.1 3.5 9.7 The total cash outflow for leases in 2021 was $2.9 million (2020: $3.7 million) and total expense was $3.4 million (2020: $4.2 million). Supplemental balance sheet information Weighted average remaining lease terms (years) Weighted average discount rate December 31, 2021 December 31, 2020 17.2 4.38 % 21.9 4.43 % 107 LUXFER HOLDINGS PLC 27. Commitments and contingencies Capital commitments At December 31, 2021, the Group had capital expenditure commitments of $1.5 million (2020: $1.1 million) for the acquisition of new plant and equipment. Committed banking facilities The Company refinanced in October 2021, see Note 22 for details of the refinance. At December 31, 2021 the Company had committed banking facilities of $100.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of these committed facilities, $10.8 million was drawn at December 31, 2021. At December 31, 2020, the Company had committed banking facilities of $150.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of the committed facilities, $4.1 million was drawn at December 31, 2020. Contingencies During February 2014, a cylinder was sold to a long-term customer and ruptured at one of their gas facilities. As a result of this rupture, three people were noted to have injuries, such as loss of hearing. There was no major damage to assets of the customer. A claim has been launched by the three people who were injured in the incident. We have reviewed our quality control checks from around the time which the cylinder was produced and no instances of failures have been noted. It has also been noted by the investigator that the customer has poor quality and safety checks. In November 2021, during the final hearing, the Court found the representative of Luxfer Gas Cylinders Limited, not guilty and thus the Company was found not liable. The Civil case is still ongoing but as a result of the above, we do not believe that we are liable for the incident, and therefore, do not currently expect this case to have a material impact on the Company's financial position or results of operations. In November 2018, an alleged explosion occurred at a third-party waste disposal and treatment site in Boise, Idaho, reportedly causing property damage, personal injury, and one fatality. We had contracted with a service company for removal and disposal of certain waste resulting from the magnesium powder manufacturing operations at the Reade facility in Manchester, New Jersey. We believe this service company, in turn, apparently contracted with the third-party disposal company, at whose facility the explosion occurred, for treatment and disposal of the waste. In November 2020, we were named as a defendant in three lawsuits in relation to the incident – one by the third-party disposal company, one by the estate of the decedent, and one by an injured employee of the third-party disposal company. At present, we have received insufficient information on the cause of the explosion. We do not believe that we are liable for the incident, have asserted such, and, therefore, do not currently expect this matter to have a material impact on the Company’s financial position or results of operations. 28. Financial risk management objectives and policies The Group's financial instruments comprise bank and other loans, senior loan notes, derivatives and trade payables. Other than derivatives, the main purpose of these financial instruments is to raise finance for the Group's operations. The Group also has various financial assets such as trade receivables and cash and cash equivalents, which arise directly from its operations. A Treasury Committee, chaired by the Chief Financial Officer, oversees the implementation of the Group's hedging policies, including the risk management of currency and aluminum risks and the use of derivative financial instruments. It is not the Group's policy or business activity to trade in derivatives. They are only used to hedge underlying risks occurring as part of the Group's normal operating activities. The main risks arising from the Group's financial instruments are cash flow interest rate risk, liquidity risk, foreign currency translation and transaction risk, aluminum price risk and credit risk on trade receivables. The Group regularly enters into forward currency contracts to manage currency risks and when considered suitable will use other financial derivatives to manage commodity and interest rate risks. 108 LUXFER HOLDINGS PLC Interest rate risk The Group has exposure to variable interest rates when it draws down on the revolving credit facilities. As a result of this exposure, the Group may decide to hedge interest payable based on a combination of forward rate agreements, interest rate caps and swaps. It has also used fixed rate debt within its financing structure to mitigate volatility in interest rate movements. Liquidity risk To understand and monitor cash flows, the Group uses a combination of a short-term rolling six week cash forecast, based on expected daily liquidity requirements and longer term monthly rolling forecasts, covering forecast periods of between 6 and 18 months forward. The Group also prepares, at least annually, a longer-term strategic cash forecast. Together this system of control is used to ensure the Group can fund its ongoing operations, including working capital, capital expenditure and interest payments and to ensure that bank covenant targets will be met. Short and medium term changes in liquidity needs are funded from the Group's revolving bank facility, as disclosed in Note 22, which provides the ability to draw down and repay funds on a daily basis. In monitoring liquidity requirements and planning its working capital and capital expenditure programs, the Group aims to maintain a sufficiently prudent level of headroom against its banking facilities and forecast covenant position as protection against any unexpected or sudden market shocks. The Group also uses forecasts to manage the compliance with any associated covenant tests in relation to the Group's financing arrangements. The Group is subject to maintaining net debt to adjusted EBITDA levels of below three times, adjusted EBITDA to net interest above four times, and a number of other debt service tests which include adjusted EBITDA, taxation, capital expenditure and pension payments. The Group has been in compliance with the covenants under the Loan Notes due 2023 and 2026 and the banking facilities throughout all of the quarterly measurement dates. The maturity of the Group's liabilities is also monitored to ensure sufficient funds remain available to meet liabilities as they fall due. The table below summarizes the maturity profile of the Group's financial liabilities at December 31, based on contractual payments. December 31, 2021 December 31, 2020 Within 12 months $M 1-5 years $M > 5 years $M Total $M Within 12 months $M — — — 2.4 30.8 32.4 0.3 2.8 25.0 25.0 10.8 6.4 — 1.3 — — — — — 4.0 — — — — 25.0 25.0 10.8 12.8 30.8 33.7 0.3 2.8 — — — 2.1 18.1 22.8 0.3 0.5 1-5 years $M 25.0 — 4.1 4.1 — 0.1 — — > 5 years $M Total $M — 25.0 — 3.5 — — — — 25.0 25.0 4.1 9.7 18.1 22.9 0.3 0.5 68.7 68.5 4.0 141.2 43.8 33.3 28.5 105.6 Loan Notes due 2023 Loan Notes due 2026 Revolving credit facility Lease liability Trade payables Accruals and deferred income Interest payable Current income tax 109 The table below summarizes the maturity profile of the Group's financial liabilities at December 31 based on contractual undiscounted payments. Interest rates on the Group's variable rate debt have been based on a forward curve. LUXFER HOLDINGS PLC Undiscounted contractual maturity of financial liabilities: Amounts payable: Within 12 months 1-5 years > 5 years Less: future finance charges Capital risk management December 31, 2021 December 31, 2020 $M $M 71.7 50.7 35.3 157.7 (16.5) 141.2 46.6 41.1 34.1 121.8 (16.2) 105.6 The capital structure of the Group consists of shareholders' equity, debt and cash and cash equivalents. For the foreseeable future, the Board will maintain a capital structure that supports the Group's strategic objectives through: • Managing funding and liquidity; • Optimizing shareholder return; and • Maintaining a strong, investment-grade credit rating The Group monitors its adjusted EBITDA, for continuing activities to net debt ratio, adjusted net income and adjusted diluted earnings per share in its primary GAAP, that being US GAAP. These KPIs and reconciliations to GAAP measures can be found in our Form 10-K, filed with the SEC on February 24, 2022. Credit risk The Group only provides trade credit to creditworthy third parties. Credit checks are performed on new and existing customers along with monitoring payment histories of customers. Outstanding receivables from customers are closely monitored to ensure they are paid when due, with both outstanding overdue days and total days of sales outstanding reported as a business unit key performance measure. Where possible sales are also protected through the use of credit insurance. At December 31, 2021, the Group has a provision for bad and doubtful debtors of $0.7 million (2020: $0.5 million) and $0.4 million (2020: nil) has been charged to the consolidated income statement in relation to bad debts recognised in 2021. The analysis of trade receivables that were past due but not impaired is as follows: Neither past due nor impaired $M < 31 days $M Total $M Past due but not impaired 61-90 31-60 days days $M $M 91-120 days $M > 120 days $M At December 31, 2021 At December 31, 2020 45.8 33.6 34.3 29.0 9.1 3.7 2.0 0.7 0.3 0.1 0.1 0.1 — — The Group also monitors the spread of its customer base with the objective of trying to minimize exposure at a Group and segment level to any one customer. The top 10 customers in 2021 represented 32% (2020: 35%) of total revenue. There were no customers in 2021 or 2020 that represented over 10% of total revenue. 110 LUXFER HOLDINGS PLC Exchange rate risks The largest risk is from our operations in the U.K., which in 2021 generated sales revenue of $161.3 million (2020: $153.5m). Fluctuations in exchange rates, particularly between the U.S. dollar and GBP sterling (which has been subject to significant fluctuations), can have a material effect on our consolidated income statement and consolidated balance sheet. In 2021, movements in the average U.S. dollar exchange rate had a positive impact on revenue of $9.5 million; in 2020, movements in the average U.S. dollar exchange rate had a positive impact on revenue of $0.3 million. Changes in translation exchange rates decreased net assets by $0.8 million in 2021, compared to an increase of $2.9 million in 2020. Commodity price risks The Group is exposed to a number of commodity price risks, including primary aluminum, magnesium, rare earth chemicals, zircon sand and other zirconium basic compounds. All have been subject to substantial increases in recent years. Historically the two largest exposures to the Group have been the prices of aluminum and magnesium. In the long-term, the Group has sought to recover the cost of increased commodity costs through price increases and surcharges. The Group purchases various rare earth chemicals which it uses in the production of various materials produced by its Elektron Segment and when these chemicals became subject to significant price volatility it used surcharges on its products to maintain its product margins. 29. Financial instruments The following disclosures relating to financial instruments have been prepared on a basis which excludes short- term debtors and creditors which have resulted from the Group's operating activities. (a) Financial instruments of the Group The financial instruments of the Group other than short-term debtors and creditors and non-current derivative financial instruments were as follows: Financial instruments - measured at amortized cost Financial assets: Cash at bank and in hand Financial liabilities(1): Loan Notes due 2023(2) Loan Notes due 2026(2) Revolving credit facility Book value December 31, 2021 $M Fair value December 31, 2021 $M Book value December 31, 2020 $M Fair value December 31, 2020 $M 6.4 25.0 25.0 10.8 6.4 25.0 25.0 10.8 1.5 25.0 25.0 4.1 1.5 25.3 26.0 4.1 (1) (2) The financial instruments included in financial liabilities are shown gross of unamortised finance costs. The fair value of these financial instruments is calculated by discounting the future cash flows, including interest payments due. All financial assets mature within one year. The maturity of the financial liabilities is disclosed in Note 28. At December 31, 2021, the amount drawn in bank and other loans was $60.8 million (2020: $54.1 million), of which $50.0 million was denominated in U.S. dollars (2020: $50.0 million) with the remainder being denominated in GBP sterling. Derivative financial instruments - measured at fair value through profit or loss Held to hedge purchases and sales by trading businesses: Book value December 31, 2021 Fair value Book value December December 31, 2020 31, 2021 Fair value December 31, 2020 $M $M $M $M Forward foreign currency exchange rate contracts 0.1 0.1 (0.2) (0.2) 111 LUXFER HOLDINGS PLC 29. Financial instruments (continued) The fair value calculations were performed on the following basis: Cash at bank and in hand / overdrafts The carrying value approximates to the fair value as a result of the short-term maturity of the instruments. Bank loans At December 31, 2021, bank and other loans of $60.8 million (2020: $54.1 million) were outstanding. At December 31, 2021, bank and other loans are shown net of issue costs of $1.2 million (2020: $1 million) and these issue costs are to be amortised to the expected maturity of the facilities. At December 31, 2021, $10.8 million (2020: $4.1 million) of the total $60.8 million (2020: $54.1 million) bank and other loans was variable interest rate debt and subject to floating interest rate risk, with the remainder being fixed rate debt. Forward foreign currency exchange rate contracts The fair value of these contracts was calculated by determining what the Group would be expected to receive or pay on termination of each individual contract by comparison to present market prices. Fair value hierarchy At December 31, 2021 and December 31, 2020, the Group used the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. December 31, 2021 Level 1 Level 2 Level 3 $M $M $M $M Net derivative financial (assets) / liabilities at fair value through profit or loss: Forward foreign currency exchange rate contracts Interest bearing loans and borrowings: Loan Notes due 2023 Loan Notes due 2026 Revolving credit facility 0.1 25.0 25.0 10.8 — — — — 0.1 25.0 25.0 10.8 — — — — December 31, 2020 Level 1 Level 2 Level 3 $M $M $M $M Net derivative financial (assets) / liabilities at fair value through profit or loss: Forward foreign currency exchange rate contracts Interest bearing loans and borrowings: 0 Loan Notes due 2023 Loan Notes due 2026 Revolving credit facility 0 0.2 — 25.0 25.0 0 — — — — 0 0.2 — 25.0 25.0 — — — — 112 LUXFER HOLDINGS PLC During the year ended December 31, 2021, there were no transfers between Level 1, Level 2 and Level 3 fair value measurements. The following table presents the changes in Level 3 instruments for the year ended December 31, 2020. Balance at January 1 Payments made during year Remeasurement of deferred consideration Balance at December 31 Total (gains) / losses for the year included in profit and loss 2020 $M 0.5 (0.4) (0.1) — (0.1) The deferred contingent consideration related to estimations of amounts payable in the future regarding acquisitions made in prior years. This was based upon an estimate of the future profitability of the businesses versus targets agreed upon as part of the acquisitions. (b) Financial instruments of the Group Interest rate risk profile on financial assets This table shows the Group's financial assets at December 31, which are cash and cash equivalents. These assets are all subject to floating interest rate risk. Cash by currency: U.S. dollar GBP sterling Euro Chinese renminbi Canadian dollar December 31, 2021 December 31, 2020 $M $M (1.6) (1.6) 5.3 0.1 1.2 1.4 6.4 1.0 0.2 1.7 0.2 1.5 The Group earns interest on cash balances through either deposit accounts or placing funds on money markets at short-term fixed rates. In all cases, with the exception of the restricted cash, interest earned is at approximately ICELIBOR rates during the year. Interest rate risk profile on financial liabilities The following table sets out the carrying value, by original maturity, of the Group's financial instruments that were exposed to both fixed and variable interest rate risk. The carrying values include interest payments to be made forward curve. and rate debt have been based on a the Group's variable rates on interest 113 LUXFER HOLDINGS PLC December 31, 2021 December 31, 2020 Within 12 months $M 1-5 years $M > 5 years $M Total $M Within 12 months $M 1-5 years $M > 5 years $M Total $M Floating interest rate risk: Revolving credit facility (including interest payments) Fixed interest rate risk: Loan Notes due 2023 (including interest payments) Loan Notes due 2026 (including interest payments) — 10.9 — 10.9 — 4.2 — 4.2 1.2 26.8 — 28.0 1.2 26.8 — 28.0 1.3 2.5 5.0 42.7 25.6 25.6 31.9 70.8 1.2 2.4 4.9 35.9 25.6 25.6 31.7 63.9 Hedging activities Forward foreign currency exchange contracts The Group utilizes forward foreign currency exchange contracts to hedge significant future transactions and cash flows to manage its exchange rate exposures. The contracts purchased are primarily denominated in GBP sterling, U.S. dollars, Euros and Australian dollars. The Group is also exposed to a number of other currencies like Japanese yen and Canadian dollars with hedges against these on a more ad hoc basis, when exposures are more significant. At December 31, 2021 and 2020, the Group held various forward foreign currency exchange contracts designated as hedges in respect of forward sales for U.S. dollars, euros, Canadian dollars and Japanese yen for the receipt of GBP sterling or euros. The Company also held forward foreign currency exchange contracts designated as hedges in respect of forward purchases for U.S. dollars, euros, Canadian dollars, Australian dollars and Chinese yuan by the sale of GBP sterling. The contract totals in GBP sterling and euros, range of maturity dates and range of exchange rates are disclosed below, with the value denominated in GBP sterling, given that it is the currency the majority of the contracts are held in. Sales hedges Contract totals/£m Maturity dates Exchange rates Purchase hedges Contract totals/£m Maturity dates Exchange rates Sales hedges Contract totals/£m Maturity dates Exchange rates U.S. dollars 5.0 01/22 to 03/22 December 31, 2021 Euros 9.8 01/22 to 03/22 $1.3455 to $1.3788 €1.1697 to €1.1906 Japanese Yen 0.1 01/22 to 03/22 ¥155.2443 to ¥156.6793 U.S. dollars Euros Canadian dollars Australian dollars Chinese yuan 4.5 3.5 01/22 to 04/22 01/22 to 02/22 €1.1812 to €1.1662 $1.3451 to $1.3781 7.5 01/22 $1.7172 to $1.6762 0.9 01/22 1.5 03/22 $1.8598 ¥8.6126 December 31, 2020 U.S. dollars Euros 11.1 01/21 to 03/21 01/21 to 04/21 3.0 $1.3045 to $1.3667 €1.0917 to €1.1181 Japanese Yen Canadian dollars 0.1 01/21 0.1 01/21 ¥136.8910 $1.7409 114 LUXFER HOLDINGS PLC Purchase hedges Contract totals/£m Maturity dates U.S. dollars Euros 1.7 01/21 to 04/21 01/21 to 02/21 4.8 Canadian dollars Australian dollars Chinese yuan 9.4 01/21 0.9 01/21 0.9 03/21 Exchange rates $1.3046 to $1.3667 €1.1065 to €1.0944 $1.7409 to $1.7201 $1.7729 ¥8.9184 Foreign currency translation risk disclosures Exchange gains and losses arising on the translation of the Group's non-U.S. assets and liabilities are classified as equity and transferred to the Group's translation reserve. In 2021, a loss of $0.9 million (2020: gain of $2.9 million) was recognized in translation reserves. (c) Undrawn committed facilities The Company refinanced in October 2021, see Note 22 for details of the refinance. At December 31, 2021 the Company had committed banking facilities of $100.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of these committed facilities, $10.8 million was drawn at December 31, 2021. At December 31, 2020, the Company had committed banking facilities of $150.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of the committed facilities, $4.1 million was drawn at December 31, 2020. 115 LUXFER HOLDINGS PLC 30. Retirement Benefits The Group has defined benefit pension plans in the U.K., the U.S. and France. The levels of funding are determined by periodic actuarial valuations. The assets of the plans are generally held in separate trustee- administered funds. The Group also operates defined contribution plans in the U.K., the U.S., Australia and Canada. Remeasurements are recognized in full in the period in which they occur. The liability recognized in the consolidated balance sheet represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets. The cost of providing benefits is determined using the Projected Unit Credit Method. The principal defined benefit pension plan in the Group is the U.K. Luxfer Group Pension Plan ("the Plan"), which closed to new members in 1998, new employees then being eligible for a defined contribution plan. With effect from April 2004, the Plan changed from a final salary to a career average revalued earnings benefit scale. In August 2005, a plan specific earnings cap of £60,000 per annum subject to inflation increases was introduced, the figure had risen to £76,000 in 2015. In October 2007, the rate of the future accrual for pension was reduced and a longevity adjustment was introduced to mitigate against the risk of further unexpected increases in life expectancies. In 2015, following a consultation with the Trustees and members, it was agreed the Plan would close to future accrual of benefits effective from April 5, 2016 and for the purpose of increasing pensions in payment, to use the Consumer Prices Index ("CPI") as the reference index in place of the Retail Prices Index ("RPI") where applicable. The remaining active members, numbering approximately 160, were transferred into a defined contribution plan. The weighted average duration of the expected benefit payments from the Plan is around 16 years. The pension cost of the Plan is assessed in accordance with the advice of an independent firm of professionally qualified actuaries, Lane Clark & Peacock LLP. The Plan is registered with HMRC for tax purposes, operates separately from the Group and is managed by an independent set of Trustees. The Plan operates under U.K. trust law and the trust is a separate legal entity from the Group. The Plan is governed by an independent board of Trustees, composed of two member nominated Trustees and four company appointed Trustees. The Trustees are required by law to act in the best interests of scheme members and are responsible for setting certain policies (e.g. investment funding) together with the Company. A one-off cash contribution was paid in December 2021 of £9.6 million in addition to the £4.1 million annual payment. While there is an expectation that no further contributions will be required until at least after the next valuation in 2024, there is no guarantee that this will be the case. The Trustees can request additional contributions, and the U.K. Pensions Regulator (TPR) has the power to order further funding in the current three-year window should increasingly stringent regulation require it The Group's other arrangements are less significant than the Luxfer Group Pension Plan, the largest being the BA Holdings, Inc. Pension Plan in the U.S. In December 2005, this plan was closed to further benefit accrual with members being offered contributions to that Company's 401(k) plan. At January 1, 2016, the U.S. pension plans (BA Holdings, Inc. Pension Plan and Luxfer Hourly Pension Plan) merged into one plan. The total charge to the Group's consolidated income statement for 2021 for retirement benefits was a cost of $5.4 million (2020: cost of $5.4 million). The movement in the pension (surplus) / obligation is shown below: Net retirement benefit obligation at January 1 Charged / (credited) to the consolidated income statement: Past service cost Net interest on net liability Administrative costs Cash contributions (Credited) / charged to the consolidated statement of comprehensive income Exchange difference Net retirement benefit (surplus) / obligation at December 31 2021 $M 2020 $M 50.8 35.2 — 0.6 1.2 (18.2) (48.8) (0.1) (14.5) 0.1 1.0 0.9 (5.8) 19.0 0.4 50.8 116 The financial assumptions used in the calculations were: Discount rate Inflation related assumptions: Pre-2030 Retail Price Inflation Consumer Price Inflation Pension increases—pre 6 April 1997 —1997 - 2005 —post 5 April 2005 Post-2030 Retail Price Inflation Consumer Price Inflation Pension increases—pre 6 April 1997 —1997 - 2005 —post 5 April 2005 Other principal actuarial assumptions: LUXFER HOLDINGS PLC Projected Unit Credit Valuation U.K. Non-U.K. 2021 % 2020 % 2021 % 2020 % 1.90 1.40 2.70 2.30 3.30 2.20 2.00 2.20 1.80 3.30 3.20 2.50 3.10 2.20 2.90 1.80 1.70 1.90 1.60 2.70 2.60 2.20 2.60 2.00 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 Years 2020 Years Life expectancy of male / female in the U.K. aged 65 at accounting date 21.1 / 22.9 21.5 / 24.3 Life expectancy of male / female in the U.K. aged 65 at 20 years after accounting date 22.4 / 24.4 22.9 / 25.8 Investment strategies For the principal defined benefit plan in the Group and the U.K., the Luxfer Group Pension Plan, the assets are invested in a diversified range of asset classes and include matching assets (comprising fixed interest and index linked bonds and swaps) and growth assets (comprising all other assets). The Trustees have formulated a de- risking strategy to help control the short term risks of volatility associated with holding growth assets. The Trustees also monitor the cost of a buy-in to secure pensioner liabilities with an insurance company to ensure they and the Company are able to act if such an opportunity arises. Other options to progressively reduce the scale of the liabilities are discussed between the Trustees and the Company. Risk exposures The Group is at risk of adverse experience relating to the defined benefit plans. The plans hold a high proportion of assets in equity and other growth investments, with the intention of growing the value of assets relative to liabilities. The Group is at risk if the value of liabilities grows at a faster rate than the plans assets, or if there is a significant fall in the value of these assets not matched by a fall in the value of liabilities. If these events occurred, this would be expected to lead to an increase in the Group's future cash contributions. Special events In 2021, the Company decided to terminate its U.S. Pension Plan. The process is expected to complete within 12 to 18 months, including final funding requirements and administrative cost payments. In accordance with IAS19, the proposed buy-out has no impact on the valuation of the liability at the 2021 year-end. 117 LUXFER HOLDINGS PLC The amounts recognized in the consolidated income statement in respect of the pension plans were as follows: In respect of defined benefit plans: Current service cost Net interest on net liability Administrative expenses Past service cost Total charge for defined benefit plans In respect of defined contribution plans: Total charge for defined contribution plans Total charge for pension plans 2021 U.K. $M 2021 Non- U.K. $M 2021 2020 Total $M U.K. $M 2020 Non- U.K. $M 2020 Total $M — 0.5 0.8 — 1.3 2.1 3.4 — 0.1 0.4 — 0.5 1.5 2.0 — 0.6 1.2 — 1.8 3.6 5.4 — 0.9 0.6 0.1 1.6 1.5 3.1 — 0.1 0.3 — 0.4 1.9 2.3 — 1.0 0.9 0.1 2.0 3.4 5.4 Of the total charge for the year, charges of $3.6 million and $1.2 million (2020: $3.4 million and $0.9 million) have been included in cost of sales and administrative costs, respectively and a charge of $0.6 million. (2020: $1.0 million) has been included in finance costs. For the year, the amount of gain/(loss) recognized in the Consolidated Statement of Other Comprehensive Income is $48.8m (2020: ($19m). The actual return of the plans assets was a gain of $22.0 million (2020: gain of $51.7 million). The value of the plans assets and liabilities were: Assets in active markets: Equities and growth funds Government bonds Corporate bonds Cash Total market value of assets 2021 U.K. $M 2021 Non-U.K. $M 2021 Total $M 2020 U.K. $M 2020 Non-U.K. $M 2020 Total $M 149.9 64.6 147.5 14.6 376.6 — — 46.6 0.2 46.8 149.9 64.6 194.1 14.8 423.4 152.3 63.1 141.6 1.9 358.9 26.9 — 18.1 — 45.0 179.2 63.1 159.7 1.9 403.9 Present value of plan liabilities (363.0) (45.9) (408.9) (404.0) (50.7) (454.7) Surplus / (deficit) in the plans Related deferred income tax (liability) / asset 13.6 0.9 14.5 (45.1) (5.7) (50.8) (3.4) (0.2) (3.6) 8.9 1.0 9.9 Net pension asset / (liability) 10.2 0.7 10.9 (36.2) (4.7) (40.9) The plans do not invest directly in property occupied by the Group or in financial securities issued by the Group. 118 LUXFER HOLDINGS PLC Analysis of movement in the present value of the defined benefit obligations: At January 1 Interest on obligation Actuarial (gains) / losses on financial assumptions Actuarial gains on demographic assumptions Actuarial gains on plan experience Exchange difference Benefits paid Past service cost At December 31 2021 U.K. $M 2021 Non-U.K. $M 2021 Total $M 2020 U.K. $M 2020 Non-U.K. $M 2020 Total $M 404.0 5.6 50.7 1.1 454.7 359.2 6.7 7.0 47.1 1.4 406.3 8.4 (12.4) (2.5) (14.9) 45.8 5.1 50.9 (14.3) (0.2) (14.5) — (0.4) (2.6) (3.9) (0.9) — (3.5) (3.9) (6.1) 12.7 — — (0.4) (6.1) 12.7 (13.4) (2.3) (15.7) (14.7) (2.5) (17.2) — 363.0 — 45.9 — 0.1 408.9 404.0 — 50.7 0.1 454.7 The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit obligations are set out below: Assumption Discount rate CPI inflation (and related increases) Post retirement mortality Change in assumption Increase/decrease by 0.1% Impact on total defined benefit obligations Decrease/increase by 10% Increase/decrease by 0.1% Increase by 1 year Increase/decrease by 8% Increase by 3% The sensitivities have been calculated to show the movement in the total defined benefit obligation in isolation, assuming no other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is likely to be associated with a movement in the value of the invested assets held by the plans. 119 LUXFER HOLDINGS PLC Analysis of movement in the present value of the fair value of plan assets: 2021 U.K. $M 2021 Non-U.K. $M 2021 Total $M 2020 U.K. $M 2020 Non-U.K. $M 2020 Total $M At January 1 Interest on plan assets Actuarial gains Exchange difference Contributions from employer Administrative expenses Benefits paid At December 31 358.9 5.1 12.4 (3.8) 18.2 (0.8) (13.4) 45.0 403.9 328.7 42.4 371.1 1.0 3.5 — — 6.1 15.9 (3.8) 18.2 6.1 21.3 12.3 5.8 1.3 4.1 — — (0.4) (2.3) (1.2) (0.6) (15.7) (14.7) (0.3) (2.5) 7.4 25.4 12.3 5.8 (0.9) (17.2) 403.9 376.6 46.8 423.4 358.9 45.0 The estimated amount of employer contributions expected to be paid to the defined benefit pension plans for the year ending December 31, 2022 is nil (2021: $18.2 million actual employer contributions). 31. The Luxfer Group Employee Share Ownership Plan The trust In 1997, the Group established an employee benefit trust ("the ESOP") with independent Trustees, to purchase and hold shares in the Group in trust to be used to satisfy options granted to eligible senior employees under the Group's share plans established from time to time. The ESOP was established with the benefit of a gift equivalent to the set up and running costs. Purchase monies and costs required by the ESOP Trustees to purchase shares for and under the provisions of the trust are provided by way of an interest free loan from a Group subsidiary. The loan is repayable, in normal circumstances, out of monies received from senior employees when they exercise options granted to them over shares. Surplus shares are held by the ESOP Trustees to satisfy future option awards. The ESOP Trustees have waived their right to receive dividends on shares held in trust. The Remuneration Committee is charged with determining which senior employees are to be granted options and in what number subject to the relevant plan rules. The current plan The current share option plan, implemented by the Group in February 2007 is The Luxfer Holdings Executive Share Option Plan ("the Plan"), which consists of two parts. Part A of the Plan is approved by HM Revenue & Customs and Part B is unapproved. Options can be exercised at any time up to the tenth anniversary of their grant subject to the rules of the relevant part of the Plan. As a result of the I.P.O. all leaver restrictions over the shares were released. There are no other performance criteria attached to the options. Movements in the year The movement in the number of shares held by the Trustees of the ESOP and the number of share options held over those shares are shown below: Number of shares held by ESOP Trustees £0.0001 deferred shares £0.50 ordinary shares At January 1, 2021 15,977,968,688 Shares transferred into ESOP during the year Shares transferred from ESOP during the year — — At December 31, 2021 15,977,968,688 1,013,512 67,625 (242,579) 838,558 At December 31, 2021, the loan outstanding from the ESOP was $0.5 million (2020: $0.6 million). The market value of each £0.50 ordinary share held by the ESOP at December 31, 2021 was $19.31 (2020: $16.42). 120 LUXFER HOLDINGS PLC 32. Share based compensation Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan As an important retention tool and to align the long-term financial interests of our management with those of our shareholders, the Company adopted the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the "LTIP") for the Company's senior employees and the Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan (the "Director EIP") for the Non-Executive Directors. The equity or equity-related awards under the LTIP and the Director EIP are based on the ordinary shares of the Company. The Remuneration Committee administers the LTIP and has the power to determine to whom the awards will be granted, the amount, type and other terms. Awards granted under the LTIP generally vest one- quarter each year over a four-year period, subject to continuous employment and certain other conditions, with the exercise period expiring six years after grant date. Awards granted under the Director EIP are non- discretionary, are purely time-based and vest over one year, with settlement occurring immediately on vesting. Share option and restricted stock awards In March 2021, a combined 110,000 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. Also, in March 2021, a combined 45,000 awards were granted based on the achievement of total shareholder return targets from the period January 1, 2018, to December 31, 2020. The awards vest over two years. In June 2021, a combined 19,000 Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards that would fully vest one year later. In March 2020, a combined 132,900 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. In May 2020, a combined 2,000 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. In June 2020, a combined 27,280 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards that would fully vest one year later. In September 2020, a combined 3,892 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. Total share-based compensation expense for 2021 and 2020 was as follows: Share based compensation charges There were no cancellations or modifications to the awards in 2021 or 2020. 2021 $M 2020 $M 2.8 2.8 The actual tax benefit realized for the tax deductions from option exercises totaled $1.1 million and $0.6 million in 2021 and 2020 respectively. The following table illustrates the number of, and movements in, share options during the year, with each option relating to 1 ordinary share: 2021 2021 2020 2020 At January 1 Granted during the year Exercised during the year Accrued dividend awards Lapsed during the year At December 31 Options exercisable at December 31, Options expected to vest as of December 31, Weighted average exercise price Number Weighted average exercise price Number 412,804 174,264 $0.87 467,362 $1.00 166,072 (271,851) $0.77 (222,375) 7,898 (25,628) 297,487 13,874 269,432 $0.95 14,727 $0.92 (12,982) $0.99 412,804 $0.84 11,495 $1.00 401,309 121 $0.75 $1 $0.71 $0.84 $0.9 $0.87 $0.66 $0.88 LUXFER HOLDINGS PLC The weighted average fair value of options granted in 2021 and 2020 was estimated to be $20.56 and $9.41, respectively. The total intrinsic value of options that were exercised during 2021 and 2020 was $5.8 million and $3.0 million, respectively. At December 31, 2021, the total unrecognized compensation cost related to share options was $2.8 million (2020: $2.2 million). This cost is expected to be recognized over a weighted average period of 1.9 years (2020: 1.3 years ). The following table illustrates the assumptions used in deriving the fair value of share options during the year: Dividend yield (%) Expected volatility range (%) Risk-free interest rate (%) Expected life of share options range (years) Forfeiture rate (%) Weighted average exercise price ($) Model used 2021 2020 2.27 3.39 - 4.09 42.80 - 59.03 36.48 - 56.28 0.04 - 0.24 0.50 - 4.00 5.00 0.18 - 0.49 0.50 - 4.00 5.00 $1.00 Black-Scholes & Monte-Carlo $1.00 Black-Scholes & Monte-Carlo The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome. Employee share incentive plans The Group operates an all-employee share incentive plan in its U.K. and U.S. operations and will look to implement plans in other geographic regions. 33. Related party transactions Joint venture in which the Company is a venturer During 2021, the Group maintained its 50% investment in the equity of the joint venture, Nikkei-MEL Company Limited. During 2021, the Elektron segment made $0.8 million of sales to the joint venture (2020: $0.6 million). At December 31, 2021, the gross and net amounts receivable from the joint venture amounted to $0.1 million (2020: $0.2 million). In July 2020, the Company sold its 51% investment in the equity of its previous joint venture, Luxfer Uttam India Private Limited. During 2020, prior to the sale, the Gas Cylinders segment made $1.5 million of sales to the joint venture. At December 31, 2020, the entity was no longer a related-party. Associates in which the Company holds an interest During 2020, SUB161 Pty Limited, in which the Company held 26.4% equity, was liquidated as it no longer traded. Transactions with other related parties At December 31, 2021, the directors and key management comprising the members of the Executive Leadership Team, owned 500,237 £0.50 ordinary shares (2020: 425,413 £0.50 ordinary shares) and held awards over a further 299,021 £0.50 ordinary shares (2020: 248,522 £0.50 ordinary shares). During the years ended December 31, 2021 and 2020, share options held by members of the Executive Leadership Team were exercised; information relating to these exercises is disclosed in the Remuneration Report on pages 43 to 60. Other than the transactions with the joint ventures, associates and key management personnel disclosed above, no other related party transactions have been identified. 122 34. Post Balance Sheet Events No material subsequent events. LUXFER HOLDINGS PLC 123 COMPANY BALANCE SHEET All amounts in millions ASSETS Non‑current assets Investments Deferred income taxes Retirement benefits Current assets Trade and other receivables Total assets EQUITY AND LIABILITIES Capital and reserves Ordinary share capital Deferred share capital Share premium account Treasury shares Retained earnings Translation reserve Own shares held by ESOP Share based compensation reserve Capital and reserves attributable to the Company’s equity shareholders Total equity Non‑current liabilities Retirement benefits Bank and other loans Total non-current liabilities Current liabilities Trade and other payables Total liabilities TOTAL EQUITY AND LIABILITIES LUXFER HOLDINGS PLC At December 31, 2021 At December 31, 2020 At December 31, 2019 Restated Restated Note $M $M $M 37 38 45 39 41 41 41 41 41 41 45 42 368.7 — 13.7 382.4 17.5 17.5 365.9 12.7 — 378.6 35.6 35.6 437.9 9.9 — 447.8 3.4 3.4 399.9 414.2 451.2 26.5 149.9 79.7 (9.6) 168.1 (23.1) (1.1) (8.8) 381.6 381.6 — — — 26.6 149.9 77.1 (4.0) 150.0 (23.1) (1.4) (6.0) 369.1 369.1 45.1 — 45.1 18.3 — 18.3 399.9 45.1 414.2 26.6 149.9 74.7 (4.0) 151.7 (33.9) (1.7) (5.8) 357.5 357.5 30.5 25.0 55.5 38.2 93.7 451.2 The Group has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to present Luxfer Holding PLC’s Company income statement. Net (loss) / profit for the year was $2.4 million (2020: $25.3 million) THE FINANCIAL STATEMENTS ON PAGES 120 TO 134 WERE APPROVED BY THE BOARD ON APRIL 21, 2022 AND SIGNED ON ITS BEHALF: Alok Maskara April 21, 2022 Company Registration no. 03690830 124 COMPANY CASH FLOW STATEMENT All amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) / income for the year Adjustments to reconcile net income for the year to net cash flows from continuing operating activities: Deferred income taxes Net interest Dividends received Exchange difference charged to other comprehensive income Changes in operating assets and liabilities: Increase / (decrease) in receivables Decrease / (increase) in payables Movement in retirement benefits obligations NET CASH FLOWS GENERATED / (USED) IN OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Dividends received Intercompany loans: debt funding Intercompany loans: interest received NET CASH FLOWS FROM INVESTING ACTIVITIES NET CASH FLOWS BEFORE FINANCING FINANCING ACTIVITIES Interest paid on Loan Notes Share based compensation cash outflow Repayment on Loan Notes Dividends paid Shares sold from ESOP Repurchase of ordinary shares NET CASH FLOWS USED IN FINANCING ACTIVITIES NET MOVEMENT IN CASH AND CASH EQUIVALENTS Net foreign exchange differences Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 LUXFER HOLDINGS PLC Note 2021 $M 2020 $M (2.4) 23.6 4.8 (4.1) — — 18.1 18.3 (16.9) 17.8 — — 4.5 4.5 22.3 — (2.0) — (13.6) — (6.4) (22.0) 0.3 (0.3) — — 2.5 (3.6) (18.5) 10.8 (29.8) (38.7) (2.9) (56.6) 18.5 72.4 6.1 97.0 40.4 (1.5) (1.4) (25.0) (13.6) 1.1 — (40.4) — — — — 40 40 125 LUXFER HOLDINGS PLC COMPANY STATEMENT OF CHANGES IN EQUITY All amounts in millions Equity attributable to the equity shareholders of the parent Note Ordinary share capital $M 26.6 — Deferred share capital $M 149.9 Share premium account $M 74.7 Treasury shares $M Retained earnings $M Translation reserve $M Own shares held by ESOP $M Share based compensation reserve $M Total equity $M — — — 23.6 — (4.0) 151.7 (33.9) (1.7) — (5.8) 357.5 — 23.6 At January 1, 2020 Net income for the year Remeasurement of defined benefit retirement plan Deferred income taxes on items taken to other comprehensive income Translation reserve Total comprehensive income for the year Equity dividends Equity settled share based compensation charges 41 Shares sold from ESOP 41 Utilization of ESOP shares 41 Other changes in equity in the year At December 31, 2020 Net profit for the year Remeasurement of defined benefit retirement plan Deferred income taxes on items taken to other comprehensive income Total comprehensive loss for the year Equity dividends paid Equity settled share based compensation charges Utilization of treasury shares Utilization of ESOP shares 41 Repurchase of ordinary shares Cancellation of ordinary shares Other changes in equity in the year At December 31, 2021 — — — — (17.0) — — — (17.0) — — — — — — — — — — — — — — — — — — — 0.8 1.7 — — — — — — — 5.3 — 11.9 (13.6) — — — — 10.8 10.8 — — — — — 2.4 — (13.6) — 26.6 149.9 77.1 (4.0) 150.0 (23.1) — — — — (2.4) — — — — — — 0.3 — 0.3 (1.4) — — — 5.3 10.8 — 22.7 — (13.6) 2.8 — 2.8 1.1 (3.0) (1.3) (0.2) (11.1) (6.0) 369.1 — (2.4) — — — — 42.0 — — — 42.0 — — — — (7.9) — — — — — — — — 31.7 (13.6) 41 — — — — — — — — — (0.1) 3.3 0.1 — — — — — — (6.4) — (0.1) — (0.6) 0.7 — — — — — — — — — — — — — — 0.3 — — — (7.9) — 31.7 — (13.6) 2.8 2.8 — — (5.6) (2.0) — (6.4) — — (0.1) — 2.6 26.5 149.9 79.7 (5.6) (9.6) (13.6) 168.1 — (23.1) 0.3 (1.1) (2.8) (19.2) (8.8) 381.6 126 LUXFER HOLDINGS PLC 35. Significant accounting policies Authorization of financial statements The Company financial statements for the year ended December 31, 2021 were authorized for issue by the Board of Directors on April 21, 2022 and the balance sheet was signed on the Board’s behalf by A. Maskara. Luxfer Holdings PLC is a company incorporated and domiciled in England and Wales. Basis of preparation The Company financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 as they apply to companies reporting under IFRS. The accounting policies set out in this note to the financial statements have been applied in preparing these financial statements and comparative information. The Company financial statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement. From January 1, 2021, the Company changed its functional currency from GBP to USD to give a more accurate representation of the Company's financial performance. The financial statements for the year ending 31 December 2021 are presented in USD, however financial statements for preceding periods are presented in GBP. The Balance Sheet, Cash Flow Statement, Statement of Changes in Equity and supporting notes have been restated from GBP to USD at the year end exchange rate, or average exchange rate where appropriate, to allow comparison between periods. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In assessing the appropriateness of adopting the going concern basis in the preparation of these financial statements, cash forecasts and projections have been prepared to June 2022. Throughout the forecasted period, there is sufficient headroom in our covenant compliance which would enable the Group to drawdown on the RCF and therefore not impact the Company's ability to continue as a going concern. Therefore the directors continue to apply the going concern basis for accounting in the preparation of the Company financial statements. Investments Investments in subsidiary undertakings are stated at cost less, where appropriate, provisions for impairment. Loans to subsidiary undertakings and joint ventures are initially recorded at fair value; they are then subsequently carried at amortised cost. The loans are interest bearing. The Company grants share-based payments to the employees of subsidiary companies. Each period, the fair value of the employee services received by the subsidiary as a capital contribution from the Company is reflected as an addition to investments. The Company has applied IFRS 9 and the expected credit loss model when valuing its loans to investments. Functional and presentational currency On January 1, 2021 the functional currency of Luxfer Holdings PLC was changed from the local currency, GBP to the reporting currency, USD reflecting that the majority of the company's cash flows are now denominated in USD, including intercompany loans and interest payments as well as dividends paid to its shareholders. The change was triggered by a revision to our intercompany financing model which now aims to manage foreign exchange risk through Luxfer Group Limited, a subsidiary undertaking, whose functional currency remains GBP (the same as its local currency). Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”), which is USD. In 2020 the functional currency was GBP sterling, although all balances have now been translated to USD. The presentational currency of the Company is USD. Other accounting policies As applicable, the accounting policies of the Company follow those of the Group set out in Note 1 to the consolidated financial statements. The critical accounting judgments and key sources of estimation uncertainty applicable for the Company financial statements are impairment of non-financial assets and pensions. 127 LUXFER HOLDINGS PLC 36. Directors’ interests Disclosure of individual directors’ remuneration, share interests, share options, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 2006 are shown within the Remuneration Report on pages 40 to 60 and form part of these financial statements. 37. Investments Cost and net book value: At January 1, 2020 Additions Repayment of loans to subs Exchange difference At December 31, 2020 Additions At December 31, 2021 Investments in subsidiary undertakings $M Loans to subsidiary undertakings $M Capital contributions $M 297.7 — — — 297.7 — 297.7 140.5 — (90.9) 1.8 51.4 — 51.4 11.6 5.2 — — 16.8 2.8 19.6 Total $M 449.8 5.2 (90.9) 1.8 365.9 2.8 368.7 Details of the investments in which the Group or the Company holds share capital at December 31, 2021, are as follows: Luxfer, Inc.* BA Holdings, Inc.* Luxfer Group Limited Name of company Luxfer Group 2000 Limited Luxfer Australia Pty Limited * Luxfer Group UK Pension Trustee Limited* Luxfer Gas Cylinders (Shanghai) Co., Limited * Luxfer Group Services Limited * Lumina Trustee Limited 1 Country of incorporation U.S. 3 England and Wales2 England and Wales2 Australia6 England and Wales2 Luxfer Gas Cylinders Limited * Luxfer Gas Cylinders China Holdings Limited * England and Wales2 Republic of China7 England and Wales2 England and Wales2 England and Wales2 U.S. 3 England and Wales2 England and Wales2 U.S.8 U.S.14 U.S.5 Canada9 U.S.5 France4 Canada10 Germany11 U.S.5 U.S.12 Luxfer Magtech Inc.* GTM Technologies, LLC * Magnesium Elektron North America, Inc. * Niagara Metallurgical Products Limited * Structural Composites Industries *# Luxfer Overseas Holdings Limited * Magnesium Elektron Limited * Luxfer Gas Cylinders S.A.S. * Reade Manufacturing, Inc.* Luxfer Germany GmbH * Luxfer Canada Limited * MEL Chemicals, Inc.* Holding Proportion of voting rights and shares held Nature of business Common stock Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Common stock Ordinary shares Ordinary shares Common stock Common stock Common stock Common stock Common stock Ordinary shares Common stock Ordinary shares Common stock Capital Interest 100% Holding company 100% Property Services 100% Trustee company 100% 100% Distribution Engineering 100% Holding company 100% Manufacturing 100% Holding company 100% Holding company 100% 100% Non trading Engineering 100% Holding company 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Engineering Engineering Engineering Manufacturing Engineering Name of company Other Investments Nikkei-MEL Co Limited * Country of incorporation Holding Proportion of voting rights and shares held Nature of business Japan13 Ordinary shares 50 % Distribution All shareholdings stated are valid for both 2021 and 2020 except where indicated 128 LUXFER HOLDINGS PLC 37. Investments (continued) Subsidiary undertakings are all held directly by the Company unless indicated. * Held by a subsidiary undertaking. # Registered in 2021 1 Acts as bare trustee in connection with the 2007 share capital reorganisation. 2 Registered address: Lumns Lane, Manchester, M27 8LN, England. 3 Registered address: 1679 S. Dupont Hwy, Ste 100, Dover, DE 199091, U.S. 4 Registered address: 7 Rue de l’Industrie, 63360 Gerzat, France. 5 Registered address: The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street, Wilmington, DE 19801, U.S. 6 Registered address: Unit 4, 171-175 Newton Road, Wetherill Park, NSW 2164, Australia. 7 Registered address: No. 123, Lane 150, Pingbei Road, Minghang District, Shanghai, PRC 201109, China. 8 Registered address: c/o CT Corporation, 830 Bear Tavern Road, Trenton, NJ 08628, U.S. 9 Registered address: David Toswell of Blake, Cassels & Graydon LLP, 1114 Harvest Drive, Pickering, ON, L1X 1B6, Canada. 10 Registered address: (Torys) 525-8th Avenue S.W, 46th Floor, Eighth Avenue Place East, Calgary, Alberta, T2P 1G1, Canada. 11 Registered address: Am Alten Stadtpark 37, 44791 Bochum, Germany. 12 Registered address: Corporation Service Comp., 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, DE 19808, USA 13 Registered address: NYK Tennoz Building, 2-20 Higashi-Shinagawa 2-chome, Shinagawa-ku, Tokyo, 140-8628, Japan 14 Registered address: 336 Enterprise Pl, Pomona, CA 91768, United States During 2021 the Group acquired Structural Composites Industries, this was directly acquired by Luxfer, Inc, acquiring 100% of the common stock. During 2020 the Group disposed of one of its joint ventures, Luxfer Uttam India Private Limited and liquidated its associate, Sub 161 Pty Limited. 38. Deferred income taxes At January 1, 2020 Credited/(charged) to income statement Credited to other comprehensive income At December 31, 2020 Charged to income statement Charged to other comprehensive income At December 31, 2021 Tax losses and other timing differences $M 4.8 (1.0) — 3.8 (0.4) — 3.4 Retirement benefit obligations $M 5.5 (0.3) 3.7 8.9 (4.4) (7.9) (3.4) Total $M 10.3 (1.3) 3.7 12.7 (4.8) (7.9) 0.0 At the balance sheet date, the Company has no unrecognised deferred income tax assets relating to losses (2020: nil). A deferred tax asset of $3.4 million (2020: $3.8 million) has been recognised in relation to timing differences and losses, to the extent that it is deemed probable that sufficient taxable profit will be available against which the losses may be utilized. A deferred tax liability of $3.4m has been recognised in respect of the pension plan surplus. 39. Trade and other receivables Amounts owed by Group undertakings Other debtors December 31, 2021 December 31, 2020 $M 17.5 — 17.5 $M 34.9 0.7 35.6 The amounts owed by Group undertakings are unsecured and repayable on demand. The prior year other debtors balance relates to unamortised finance costs attributed to the revolving credit facility. These finance costs were reclassified from bank and other loans into other debtors. 129 LUXFER HOLDINGS PLC 40. Cash and cash equivalents Cash is swept into a concentration account held within a subsidiary undertaking. Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The directors consider that the carrying value of cash and cash equivalents approximates to their fair value. 41. Share capital and Reserves (a) Ordinary share capital December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 No. No. Authorized: Ordinary shares of £0.50 each 40,000,000 Deferred ordinary shares of £0.0001 each 761,835,318,444 761,875,318,444 Allotted, called up and fully paid: Ordinary shares of £0.50 each 28,944,000 Deferred ordinary shares of £0.0001 each 761,835,318,444 761,864,262,444 40,000,000 761,835,338,444 761,875,338,444 29,000,000 761,835,338,444 761,864,338,444 $M 35.7 149.9 185.6 26.5 149.9 176.4 $M 35.7 149.9 185.6 26.6 149.9 176.5 The rights of the shares are as follows: Ordinary shares of £0.50 each The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared and paid. The ordinary shares were allotted and issued to satisfy share awards which vested under the Company's share award and share incentive plans. Deferred ordinary shares of £0.0001 each The deferred shares have no entitlement to dividends or to vote. On a winding up (but not otherwise) the holders of the deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares. (b) Share premium account At January 1, 2020 Shares sold from ESOP Utilisation of treasury shares Utilisation of ESOP shares At December 31, 2020 Utilisation of treasury shares Utilisation of ESOP shares Cancellation of ordinary shares At December 31, 2021 $M 74.7 0.8 (0.1) 1.7 77.1 (0.1) 3.3 (0.6) 79.7 The share premium account is used to record the excess of proceeds over nominal value on the issue of shares. Share issue costs directly related to the issue of shares are deducted from share premium. 130 41. Share capital and Reserves (continued) (c) Treasury shares January 1, 2020 and December 31, 2020 Purchase of treasury shares Cancellation of treasury shares Utilisation of treasury shares At December 31, 2021 LUXFER HOLDINGS PLC $M (4.0) (6.4) 0.7 0.1 (9.6) In June 2021, the Board announced a share buy-back program. As a result, in 2021 the Company purchased 297,678 total shares for $6.4 million. Of the 297,678 shares repurchased in the year, 56,000 at $0.7 million have been cancelled. 16,395 shares were utilised at $0.1 million, with the remaining 225,283 retained within Treasury shares. At December 31, 2021, there were 575,618 (2020: 350,335) treasury shares held at a cost of $9.6 million (2020: $4.0 million). (d) Own shares held by ESOP At January 1, 2020 Shares sold from ESOP At December 31, 2020 Utilisation of ESOP shares At December 31, 2021 $M (1.7) 0.3 (1.4) 0.3 (1.1) At December 31, 2021, there were 838,558 ordinary shares of £0.50 each (2020: 1,013,512 ordinary shares of £0.50 each) held by The Luxfer Group Employee Share Ownership Plan. 42. Trade and other payables Amounts owed to Group undertakings December 31, 2021 $M December 31, 2020 $M 18.3 — The amounts owed to Group undertakings were unsecured, repayable on demand and no interest was charged. 43. Financial instruments The following disclosures relating to financial instruments have been prepared on a basis which excludes short‑term debtors and creditors which have resulted from the Company’s operating activities. (a) Financial instruments of the Company The financial instruments of the Company other than short‑term debtors and creditors were as follows: Financial instruments: Financial assets: Loans to subsidiary undertakings Book value December 31, 2021 $M Fair value December 31, 2021 $M Book value December 31, 2020 $M Fair value December 31, 2020 $M 51.4 51.4 51.4 51.4 (1) The financial instruments included in financial liabilities are shown gross of unamortized finance costs. The fair value of these financial instruments is calculated by discounting the future cash flows, including interest payments due. 131 LUXFER HOLDINGS PLC 43. Financial instruments (continued) Loans to subsidiary undertakings bear interest of between 7.5% and 8%, payable on a quarterly basis. Loans are repayable on demand, however there is currently no intention to seek repayment of these loan The maturity of the financial liabilities is disclosed in Note 29 in the consolidated financial statements. The fair value calculations were performed on the following basis: Loans to subsidiary undertakings The carrying value approximates to the fair value. Fair value hierarchy At December 31, 2021, the Company used the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. (b) Interest rate risks Interest rate risk profile on financial assets As the Company holds no cash or external loans at December 31, 2021, the interest rate risk is negligible. (c) Undrawn committed facilities At December 31, 2021, the Group had committed banking facilities of $100.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of these committed facilities, $10.8 million was drawn at December 31, 2021. At December 31, 2020, the Group had committed banking facilities of $150.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of the committed facilities, $4.1 million was drawn at December 31, 2020. 44. Financial risk management objectives and policies The Company’s financial instruments comprise other loans and cash and cash equivalents. The main risks arising from the Company’s financial instruments are cash flow interest rate risk, foreign currency translation risk, credit risk and capital risk management. Foreign currency translation risk The Company is exposed to translation risk only on the defined benefit pension plan, which is measured in GBP and translated to USD. As the functional currency of the Company changed to USD from January 1, 2021, there is minimal translation risk on other transactions. Credit risk The Company is exposed to credit risk on the loans which have been provided to subsidiary undertakings. The total exposure regarding these loans is $51.4 million. None of the loans are past due or are been deemed impaired. Capital risk management The capital structure of the Company consists of shareholders' equity, debt and cash and cash equivalents. For the foreseeable future, the Board will maintain a capital structure for the Company that supports the Group's strategic objectives through: • Managing funding and liquidity; and • Maintaining a strong, investment-grade credit rating. 132 LUXFER HOLDINGS PLC 44. Financial risk management objectives and policies (continued) External net debt reconciliation Cash at bank and in hand Bank and other loans Finance costs in other debtors $M $M $M Total $M Net debt at January 1, 2020 Cash flows Other non-cash movements Net debt at December 31, 2020 Other non-cash movements Net debt at December 31, 2021 — — — — — — 24.0 (24.0) — — — — (1.0) — 0.3 (0.7) 0.7 — 23.0 (24.0) 0.3 (0.7) 0.7 — 45. Retirement benefits The Company is a member of the Luxfer Group Pension Plan (“the Plan”), a defined benefit scheme in the U.K. The levels of funding are determined by periodic actuarial valuations. The assets of the Plan are generally held in separate trustee administered funds. Remeasurements are recognised in full in the period in which they occur. The amount recognised in the balance sheet represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets. The cost of providing benefits is determined using the Projected Unit Credit Method. In the year an asset ceiling was applied to limit the impact of the surplus on the scheme. The full amounts relating to the Plan have been included in the Company statement of financial position. This is because there is no allocation of the values between the various subsidiary companies. The Directors consider the sponsor to be the ultimate parent company in the Group. The Plan closed to new members in 1998, new employees then being eligible for a defined contribution plan. With effect from April 2004, the Plan changed from a final salary to a career average revalued earnings benefit scale. In August 2005, a plan specific earnings cap of £60,000 per annum subject to inflation increases was introduced, the figure has risen to £76,000 in 2015. In October 2007, the rate of the future accrual for pension was reduced and a longevity adjustment was introduced to mitigate against the risk of further unexpected increases in life expectancies. In 2015, following a consultation with the trustees and members, it was agreed the Plan would close to future accrual of benefits effective from April 5, 2016 and for the purpose of increasing pensions in payment, to use the Consumer Prices Index (“CPI”) as the reference index in place of the Retail Prices Index (“RPI”) where applicable. The weighted average duration of the expected benefit payments from the plan is around 18 years. The pension cost of the Plan is assessed in accordance with the advice of an independent firm of professionally qualified actuaries, Lane Clark & Peacock LLP. The Plan is registered with HMRC for tax purposes, operates separately from the Company and is managed by an independent set of trustees. The Plan operates under UK trust law and the trust is a separate legal entity from the Company. The Plan is governed by a Board of Trustees, composed of two member nominated Trustees and four company appointed Trustees. The total charge to the Company’s income statement for 2021 for retirement benefits was $1.4 million (2020: charge of $1.3 million). 133 45. Retirement benefits (continued) The movement in the pension liabilities is shown below: Net retirement benefit obligation at January 1 (Credited) / charged to the income statement Net interest on net liability Administrative costs Past service cost Cash contributions (Credited) / charged to the consolidated statement of comprehensive income Exchange difference Net retirement benefit (surplus) / obligation at December 31 The financial assumptions used in the calculations were: Discount rate Inflation related assumptions: Pre-2030 Retail Price Inflation Consumer Price Inflation Pension increases—pre 6 April 1997 —1997 ‑ 2005 —post 5 April 2005 Post-2030 Retail Price Inflation Consumer Price Inflation Pension increases—pre 6 April 1997 —1997 ‑ 2005 —post 5 April 2005 Other principal actuarial assumptions: Life expectancy of male in the U.K. aged 65 at accounting date Life expectancy of male in the U.K. aged 65 at 20 years after accounting date Investment strategies LUXFER HOLDINGS PLC 2021 $M 2020 $M 45.1 31.5 0.6 0.8 — (18.2) (41.7) (0.3) (13.7) 0.5 0.7 0.1 (5.9) 18.2 — 45.1 2021 % 2020 % 1.90 1.40 3.30 2.20 2.00 2.20 1.80 3.30 3.20 2.50 3.10 2.20 2.90 1.80 1.70 1.90 1.60 2.70 2.60 2.20 2.60 2.00 2021 Years 2020 Years 21.1 22.4 21.5 22.9 For the Plan, the assets are invested in a diversified range of asset classes and include matching assets (comprising fixed interest and index linked bonds and swaps) and growth assets (comprising all other assets). The Trustees have formulated a de-risking strategy to help control the short term risks of volatility associated with holding growth assets. The Trustees also monitor the cost of a buy-in to secure pensioner liabilities with an insurance company to ensure they are able to act if such an opportunity arises. Other options to progressively reduce the scale of the liabilities are discussed between the Trustees and the Company. Risk exposures The Company is at risk of adverse experience relating to the defined benefit plan. The Plan holds a high proportion of assets in equity and other growth investments, with the intention of growing the value of assets relative to liabilities. The Company is at risk if the value of liabilities grows at a faster rate than the plan assets, or if there is a significant fall in the value of these assets not matched by a fall in the value of liabilities. If these events occurred, this would be expected to lead to an increase in the Company’s future cash contributions. 134 45. Retirement benefits (continued) The amounts recognised in the income statement in respect of the pension plan were as follows: LUXFER HOLDINGS PLC In respect of defined benefit plan: Net interest on net liability Administrative expenses Past service cost Total charge for defined benefit plan 2021 $M 2020 $M 0.6 0.8 — 1.4 0.5 0.7 0.1 1.3 For the year, the amount recognised in the Statement of Comprehensive Income is $42 million (2020: 17 million). The actual return on the plan assets was a gain of $17.5 million (2020: gain of $28.6 million). The value of the plan assets and liabilities were: Assets in active markets: Equities and growth funds Government bonds Corporate bonds Cash Total market value of assets Present value of plan liabilities Surplus/(deficit) in the scheme Related deferred income tax assets Net pension asset/(liability) 2021 $M 2020 $M 149.9 152.3 64.6 63.1 147.5 141.6 14.6 376.6 (362.9) 13.7 (3.4) 10.3 1.9 358.9 (404.0) (45.1) 8.9 (36.2) The Plan does not invest directly in property occupied by the Company or in financial securities issued by the Company. Analysis of movement in the present value of the defined benefit obligations: At January 1 Service cost Interest on obligation Actuarial (gains)/losses Exchange difference Benefits paid At December 31 2021 $M 2020 $M 404.0 359.2 — 5.6 (29.3) (4.0) (13.4) 362.9 0.1 7.5 39.8 12.1 (14.7) 404.0 135 LUXFER HOLDINGS PLC The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit obligations are set out below: Assumption Discount rate CPI inflation (and related increases) Post retirement mortality Change in assumption Impact on total defined benefit obligations Increase/decrease by 0.1% Decrease/increase by 1% Increase/decrease by 0.1% Increase/decrease by 1% Increase by 1 year Increase by 4% The sensitivities have been calculated to show the movement in the total defined benefit obligation in isolation, assuming no other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is likely to be associated with a movement in the value of the invested assets held by the Plan. Analysis of movement in the present value of the fair value of plan assets: At January 1 Interest on plan assets Actual return on plan assets Contributions from employers Administrative expenses Exchange differences Benefits paid At December 31 2021 $M 2020 $M 358.9 5.1 12.4 18.2 (0.8) (3.8) (13.4) 376.6 328.7 7.0 21.6 5.9 (0.7) 11.1 (14.7) 358.9 The estimated amount of employer contributions expected to be paid to the defined benefit pension plan for the year ending December 31, 2022 is nil (2021: $18.2 million actual employer contributions). 136 LUXFER HOLDINGS PLC 46. Related party transactions During 2021, the Company has made the following transactions and has the following outstanding balances at December 31, 2021 with related parties: Name of related party Luxfer Group Limited BA Holdings, Inc. Luxfer Magtech Inc. Income Expenditure Balances outstanding Interest $M 0.4 0.8 3.3 Management recharges $M (0.7) — — Investments $M — 10.0 41.4 Trade and other receivables $M 17.2 0.1 0.2 Trade and other payables $M — — — Of the balances outstanding held within investments, these balances are all interest bearing and are based on market rates of interest. During 2020, the Company has made the following transactions and has the following outstanding balances at December 31, 2020 with related parties: Name of related party Luxfer Group Limited MEL Chemicals, Inc. Luxfer Overseas Holdings Limited BA Holdings, Inc. Magnesium Elektron North America, Inc. Luxfer Group 2000 Limited Luxfer Magtech Inc. Luxfer Gas Cylinders Limited Income Expenditure Balances outstanding Interest $M 0.3 0.3 0.3 1.4 0.4 0.4 3.4 0.1 Management recharges $M (0.7) — — — — — — — Investments $M — — — 10.0 — — 41.4 — Trade and other receivables $M 32.6 — 2.2 — — — 0.1 — Trade and other payables $M — — — — — — — — Included within trade and other receivables is a loan to Luxfer Group Limited for $32.4 million. This loan is interest bearing, unsecured and is repayable on demand. In addition to the transactions above, share based compensation recharges have been made to Luxfer, Inc., Luxfer Gas Cylinders Limited, Luxfer Group Limited, BA Holdings, Inc., Magnesium Elektron Limited, Magnesium Elektron North America Inc, MEL Chemicals Inc, and Luxfer Magtech Inc for $0.4 million, $0.2 million, $0.6 million, $0.8 million, $0.5 million, $0.1 million, $0.1 million and $0.1 million respectively (2020: Luxfer, Inc., Luxfer Gas Cylinders Limited, Luxfer Group Limited, BA Holdings, Inc., Magnesium Elektron Limited, Magnesium Elektron North America Inc, MEL Chemicals Inc, Luxfer Magtech Inc, and Luxfer Canada Limited for $2.0 million, $0.3 million, $0.5 million, $0.9 million, $0.3 million, $0.1million, $0.5 million, $0.1 million and $0.5 million respectively). These amounts are recognised as capital contributions in the year. Other than the transactions mentioned above, no other related party transactions have been identified. 47. Post balance sheet events No post balance sheet events were identified which impact the financial statements. 137 

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