Synthomer Annual Report 2020

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FY2020 Annual Report · Synthomer

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Synthomer plc
Annual Report 2020

RESILIENT
SUSTAINABLE
GROWTH

OUR PURPOSE,
VALUES & CULTURE

Values: Underpinned by our values
Synthomer has five core values.

At the heart of our business is SHE
(Safety, Health and Environment)
We always have time to work safely.

We are accountable
We deliver on our promises.

On innovation
We welcome change and new ideas.

For teamwork
We recognise that we are stronger
as one team.

For integrity
We act with integrity and show respect.

Culture: And shaping our culture
Synthomer is fully committed to building
a business where the people, purpose,
culture and values of the Group are fully
aligned. Synthomer is a diverse global
Company with an inclusive culture which
embodies meritocracy, openness, fairness
and transparency.

Who we are
Synthomer is a global differentiated
chemicals company and one of the
world’s leading suppliers of sustainable
water‑based polymer solutions.
With strong geographic and end
market diversity combined with
increasing product differentiation,
Synthomer holds leadership positions
in a wide range of markets including
coatings, construction, textiles, paper,
adhesives, healthcare and oil & gas.

Purpose: Everything is driven
by our purpose
Our purpose is: Creating innovative
and sustainable polymer solutions for
the benefit of customers and society.

Strategy: Our purpose shapes
our strategy
Our strategy is focused on driving
long‑term sustainable growth
organically and through acquisitions.

Effective execution builds resilience
Effective execution has helped build
resilience and sustainable growth, seen
in four key areas in this Annual Report:

• Global approach to customers & markets.
• How we are responding to megatrends.
• Global reach.
• Sustainability in products and processes.

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Our purpose is to create
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Synthomer plc Annual Report 2020

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Financial highlights

See page 172 for definitions

EBITDA

Underlying PBT

£259.4m

2019: £177.9m

£160.0m

2019: £116.2m

Underlying EPS

Free Cash Flow

28.9p

2019: 25.3p

£167.6m

2019: £92.8m

IFRS Profit before tax

£20.3m

2019: £100.5m

IFRS basic earnings
per share

0.7p

2019: 21.5p

Non-financial highlights

Volume

Sales volume from
new products

1,638.2ktes

2019: 1,465.7ktes

22%

2019: 22%

Recordable accident
frequency rate

0.20

2019: 0.20

Energy consumption
per tonne

3.71GJ/t

2019: 3.63GJ/t

Underlying performance statement
The Group’s performance management uses Underlying performance to plan for,
control and assess the performance of the Group. Underlying performance differs
from the statutory IFRS performance as it excludes the effect of Special Items, which
are detailed in note 4. The Board’s view is that Underlying performance provides
additional clarity for the Group’s investors and stakeholders and so it is the primary
focus of the Group’s narrative reporting. Where appropriate, IFRS performance inclusive
of Special Items is also described. References to ‘unit margin’ and ‘margin’ are used in
the commentary on Underlying performance. Unit margin (or margin) is calculated on
selling price less variable raw material and logistics costs.

EBITDA is calculated as operating profit before depreciation, amortisation and Special Items.

Free Cash Flow is the movement in net debt before financing activities, foreign exchange
and the cash impact of Special Items, asset disposals and business combinations.

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Highlights
Synthomer at a glance
Global reach
Our investment case
OMNOVA integration

Strategic Report
IFC Our purpose, values & culture
1
2
4
8
9
10 Chair’s statement
14 Chief Executive Officer’s review
17 Our COVID‑19 timeline
18 Strategy at a glance
20 Key performance indicators
22 Our business model
24 Resilient and sustainable growth
26 Market overview
28 Divisional review
28
31
33
35
36 Stakeholder engagement
38 Section 172 statement
42 Managing risk
45 Principal risks and uncertainties
49 Viability statement
50 Chief Financial Officer’s review
56 Environmental, Social and Governance (ESG)

Performance Elastomers
Functional Solutions
Industrial Specialities

Acrylate Monomers

Introduction to corporate governance

Governance
80 Board of Directors
82
83 Corporate governance
90 Audit Committee report
100 Nomination Committee report
102 Directors’ Remuneration report
119 Directors’ Report
121 Statement of Directors’ responsibilities

Independent auditors’ report

Group financial statements
122
129 Consolidated income statement
130 Consolidated statement of comprehensive income
130 Consolidated statement of changes in equity
131 Consolidated balance sheet
132 Consolidated cash flow statement
133 Notes to the consolidated financial statements

Company financial statements
166 Company balance sheet
167 Company statement of changes in equity
168 Notes to the Company financial statements

Other information
172 Glossary of terms
173 Five‑year financial summary
174 Advisers

Further information on
the Group is available
through our website at
www.synthomer.com

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic Report

Synthomer at a glance

Synthomer is a global differentiated chemicals company and one of the world’s
leading suppliers of sustainable water‑based polymer solutions. With strong
geographic and end market diversity combined with increasing product
differentiation, Synthomer holds leadership positions in a wide range of markets
including coatings, construction, textiles, paper, adhesives, healthcare and oil & gas.

What we produce (% of Group revenue)

Performance Elastomers (41.4%)

Functional Solutions (39.3%)

Industrial Specialities (16.1%)

Performance Elastomers is focused on
healthcare, carpet and paper markets
through our water‑based Nitrile Butadiene
Rubber latex (NBR) and Styrene Butadiene
Rubber latex (SBR) products. In addition to its
existing portfolio, the acquisition of OMNOVA
has expanded the Division’s scope to include
the Performance Materials and Elastomeric
Modifiers product lines.

Functional Solutions is focused on coatings,
construction, adhesives and technical
textiles markets through our acrylic and
vinylic water‑based dispersions. Following the
acquisition, the OMNOVA CAST (Coatings,
Adhesives and Surface Treatment) and
Oil & Gas businesses have been fully
integrated into Functional Solutions.

Industrial Specialities is focused on
speciality chemical additives and
non‑water‑based chemistry for a broad
range of applications from polymer additives
and polymer manufacture to emerging
materials. Following the acquisition,
the OMNOVA Laminates & Films and
Coated Fabrics businesses have been
integrated into the Division.

Volume

896.0ktes

2019: 849.1ktes

Revenue

£680.3m

2019: £623.7m

EBITDA

£142.5m

2019: £96.3m

Underlying operating profit

£116.8m

2019: £71.5m

IFRS operating profit

£80.8m

2019: £71.2m

Volume

591.2ktes

2019: 487.4ktes

Revenue

£646.7m

2019: £612.8m

EBITDA

£95.6m

2019: £69.9m

Volume

91.1ktes

2019: 67.3ktes

Revenue

£264.9m

2019: £157.9m

EBITDA

£41.2m

2019: £23.8m

Underlying operating profit

£69.1m

2019: £52.3m

IFRS operating profit

£31.1m

2019: £48.0m

£29.0m

2019: £18.4m

IFRS operating profit

£18.8m

2019: 14.3m

Market position
No 2 producer globally in NBR latex.
No 1 producer in European SBR latex.
No 1 producer globally of High Solids SBR.

Market position
Top five global water‑based polymer
producer, with leadership positions in
dispersions in Europe, Middle East and Asia.

Market position
Leading positions in selected niche
speciality chemical markets globally.

Acrylate Monomers (3.2%)
Acrylic Monomers was separated out of
Industrial Specialities in 2020 to allow greater
management focus to be applied to this
business. Based on a single site in Sokolov

(Czech Republic) the Division is focused
on the supply of acrylic monomers to our
European Functional Solutions Division
and to third‑party customers. The Division
produced 59.9ktes (2019: 61.9ktes) of

monomers, generated revenue and
Underlying EBITDA of £52.3 million
(2019: £64.7 million) and £2.4 million
(2019: £1.0 million profit) respectively.

Synthomer plc Annual Report 2020Strategic ReportStrong geographic and end market
diversity underpins our business
model and resilient performance:

Geography

1. 56.0% EMEA
2. 27.5% Asia
3. 16.5% North America

Volume

1. 54.7% Performance Elastomers
2. 36.1% Functional Solutions
3. 5.5%
Industrial Specialities
4. 3.7% Acrylate Monomers

End market

41.8% Performance Elastomers

1. 22.8% Health & Protection
2. 7.1%
Paper
3. 11.9% Carpet, Compounds & Foam

38.8% Functional Solutions

Construction

4. 8.5%
5. 14.8% Coatings
Textiles
6. 7.5%
Adhesives
7. 6.6%
Oil & Gas
8. 1.4%

16.2% Industrial Specialities
Polymer Additives
Laminates & Films
Coated Fabrics

9. 9.1%
10. 5.7%
11. 1.4%

12. 3.2% Acrylate Monomers

Our Environmental, Social and Governance (ESG) approach

Our purpose is to create innovative
and sustainable polymer solutions for
the benefit of customers and society.

As ESG becomes increasingly important
for our Company and stakeholders we
provide greater clarity on our ESG priorities,
the foundations for our strong ESG platform
and our goals to improve our performance
in this area.

Our ESG priorities:

• To report to Global Reporting Initiative

(GRI) standards focusing on the following:
– Consistent delivery of world class

levels of Safety, Health and
Environmental (SHE) performance.
– The reduction of our carbon footprint

and climate change impact.

– The increasing use of renewable

raw materials and assurance of our
supply chains to allow continuous
improvement in the sustainability
of our products to meet the needs
of customers.

– Progressing our diversity and inclusion
agenda at all levels of our organisation.

Our ESG platform:

• Our progress to world class levels of
SHE performance has been a feature
of the last six years in Synthomer
– we seek to deliver this performance
consistently in all parts of our global
operations with the aim to have
zero incidents.

• As a global leader in sustainable

water-based polymer solutions our
products eliminate the use of over
500ktes of solvents which contain
volatile organic compounds (VOCs)
with our investment in innovation
introducing new state‑of‑the‑art
products with regulatory and
environmental compliance.

• The global move to more sustainable

water-based polymer solutions
underpins our GDP+ growth
as customers use our products
to meet increasingly stringent
environmental regulations.

• Actions taken in 2020 will see large
parts of our network (including the
recently acquired OMNOVA business)
move to green renewable sourced
electricity, an end to the use of coal
derived energy across our network
and the introduction of management
incentives to deliver reductions to our
carbon and climate change impact.

• Our new Sustainable Procurement
Strategy will see a drive towards
supply chain assurance verification
and increased use of sustainable
products and services through
partnerships with suppliers.

• Our diversity and inclusion agenda
is strong at multiple levels (our global
employee base, Hampton‑Alexander
and Parker compliant Board, and
graduate and young talent recruitment)
but whilst our Executive Committee and
direct reports gender mix has improved
from 8% to 16% there remains more to
be done to meet our targets of 20% in
2021, 25% by 2025 and 33% by 2025.

Our plan for improvement:

• To ensure a foundation for improvement

we have reported our 2020 global
performance to one GRI standard for
the enlarged Synthomer Group, including
the OMNOVA acquired business.
• New long‑term 2030 ESG targets

will be introduced in 2021.

• Our ESG priorities in 2021 will be carbon

and climate change, diversity and
inclusion, and supply chain assurance.

• We will disclose Scope 1, 2 and 3
greenhouse gas emissions based
on verified data.

• We are committed to Task Force on

Climate‑related Financial Disclosures
(TCFD) reporting for 2021.

• We will evaluate during 2021 the move

to science‑based targets.

• New gender and inclusion targets have
been introduced to target higher levels
of diversity across our global business.

• Through our new Sustainable

Procurement Strategy we will provide
higher levels of supply chain assurance
and increase the sustainability of our
complete supply chain.

We are resolutely focused on
sustainability and Environmental,
Social and Governance (ESG)
improvements, and measuring our
progress against internationally
recognised standards. We pride
ourselves on the progress that has
been made and are determined to
deliver on our targets and objectives,
recognising that there is more to be
done in this important area.

Read more in our ESG section on
page 56.

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic Report

Global reach

The way we do business has become increasingly global
as we follow our customer requirements, extend our global
operating network and leverage our focus on research,
development and innovation.

Key

Headquarters
Sales
Performance Elastomers (PE)
Functional Solutions (FS)
Industrial Specialities (IS)
Acrylate Monomers (AM)

* Synthomer legacy

“GLOBAL YET LOCAL...”

Synthomer’s completion of the acquisition of OMNOVA
creates a significantly stronger enterprise

• Expanded global platform and portfolio to serve customers.
• Greater scale for more efficient production and distribution.
• Increased innovation pipeline to accelerate future growth.
• Opportunity to drive organic growth from ‘best in class’ product range.

North America

Employees

1,022

Production sites

Production

Revenue

9.0%

16.5%

Synthomer acquired its first production site in North America in
2016 as part of its acquisition of the Performance Adhesives &
Coatings business – with the enlarged network in place after
the OMNOVA acquisition Synthomer now has a strengthened
presence in the region which provides an excellent opportunity
for further growth.

Read more on page 78

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic Report

Environmental, Social and Governance (ESG) continued

Managing sustainability

Sustainability Committee
The Sustainability Committee is responsible for the development of
the Group’s sustainability strategy and coordination of sustainability-
related activities across the organisation. Formed in 2018, it is a
cross-functional group comprising representatives from all key
functions and businesses including Corporate Development,
Human Resources, Procurement, Technology & Innovation and SHE,
alongside the Divisional Presidents. In order to manage the increasing
interest and opportunity in sustainability the Group added additional
resource in 2020. The network to drive sustainability will be expanded
to include greater representation of people and functions from across
the global organisation. This will ensure that the Group captures every
opportunity to improve, as well as addressing the needs of
stakeholders. The Sustainability Committee meets quarterly, is
chaired by the Group Sustainability Director and reports directly
into the Executive Committee, assuring alignment of the ESG agenda
with the Group’s strategy and ensuring this agenda is embedded
into the business strategy for each of our global businesses.

ESG topics are reviewed routinely with the Board with increasing
focus on carbon and climate change, diversity and inclusion and
supply chain assurance as ESG priority areas for 2021 (see page 11).

Stakeholder engagement and materiality assessment
Completing a materiality assessment is in line with the requirements
of GRI reporting. With ESG covering a broad range of topics the
materiality assessment allows the Group to respond to the material
items that matter most to our stakeholders.

The last extensive materiality assessment was carried out in 2018
and included input from a significant number of the Company’s
stakeholders: customers, employees, suppliers, shareholders,
legislators, authorities and local communities. The impact of the
acquisition of OMNOVA on the business and geographic landscape
of Synthomer, coupled with the increasing priority of ESG, have
been the catalysts for an update of the materiality assessment.
A comprehensive internal update has been performed with the
external stakeholder input to be completed in 2021.

The six pillars of the Synthomer ESG strategy have been endorsed.
In the latest materiality assessment 21 of the previous 22 topics
remained unchanged or were slightly modified. Quality was
incorporated into Customer satisfaction and engagement, and
three new topics were added. Following the acquisition of OMNOVA
and the stronger presence in North America, focus was placed
on Communication and training to ensure clear communication
of procedures, targets and achievements. Digitalisation was
introduced as it becomes an increasing opportunity to reduce
our carbon footprint as we learn lessons from managing during
COVID-19 and take advantage of the transformation Pathway
programme. Synthomer’s activity relating to product life cycle is
now incorporated within Circular economy.

To make changes in our internal materiality assessments transparent
they are represented by arrows on the graph.

Materiality assessment chart

Important

Very important

Importance to Company

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Materiality assessment
(GRI 102‑44, GRI 102‑46, GRI 102‑47)

Strategy and Business

1 Sustainable growth
2 Risk management
3 Ethics and integrity
4 Digitalisation (new)

Governance and Compliance

5 Responsible and involved management
6 Stakeholder involvement and engagement
7 Compliance
8 Communication and training (new)

People

9 Employment conditions
10 Diversity and inclusion
11 Talent development
12 Community engagement

Health and Safety

13 Occupational health and safety
14 Process safety

Environment

15 Energy management and reduction
16 Water stewardship
17 Greenhouse gases reduction
18 Waste generation and minimisation

Sustainable Value Chain

19 Product safety
20 Technology and innovation
21 Manufacturing Excellence
22 Responsible procurement
23 Customer satisfaction and engagement
24 Circular economy (new)

Synthomer plc Annual Report 2020Strategic Report

Progress against 2020 targets and objectives

Good progress was made against 2020 targets set for
the legacy Synthomer Group. The acquisition of OMNOVA
will require the Group’s targets to be redefined in 2021
to reflect the newly formed enlarged Group.

Target year

Progress

1. Strategy
and Business

Consider the alignment of the sustainability aspects, pillars and
targets and objectives with the UN Sustainable Development Goals

Integrate OMNOVA into the sustainability reporting of Synthomer
and consider the impact on targets for the enlarged Group

Improve EcoVadis rating

2. Governance
and Compliance

Introduce Code of Conduct e-learning module

GDPR – complete initial data security audit and begin
implementing resulting improvements

3. People

Communicate the 2019 ‘Your Voice’ Employee Engagement
Survey results and build and deliver an improvement action plan

Review and expand the Board Employee Voice Strategy

Communicate and embed the new Synthomer values

Implement the Synthomer Diversity and Inclusion Plans

Conduct a comprehensive review on Organisational Effectiveness
as part of Manufacturing Excellence Framework deployment

4. Health and Safety 0.21 Recordable case rate (incidents per 100,000 working hours)

0.16 Process Safety Event rate (incidents per 100,000 working hours)

5. Environment
– Targets carried forward,
based on 2017 revised baseline

6% reduction in specific energy consumption (GJ/t production)

9% reduction in GHG emissions (tCO2e/t production)

6% reduction in water withdrawal (m3/t production)

7.5% reduction in waste to land (metric ton/metric ton production)

Scope 3 emissions calculation

Scope 1 and 2 emissions verification

6. Sustainable
Value Chain

Complete five key supplier audits for each procurement function (at least one
per region)

Complete desktop sustainability assessment of top 10 key suppliers (in each region)

Develop and implement a Group Policy on Conflict Minerals

Develop and implement a Group Policy on Sustainable Procurement

Complete the EPDLA life cycle assessment for major product lines

Launch at least three new products with improved sustainability impact

2020

end 2021

2020

2021

2022

2020

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic ReportEnvironmental, Social and Governance (ESG) – review of our six pillars

1. Strategy and Business

Growing in a sustainable way
We have recognised the impact that the acquisition of OMNOVA had
on the Company’s overall sustainability profile and have integrated
effectively the two legacy companies in which ESG topics are
concerned. Synthomer’s sustainability agenda takes 2019 as the
baseline year to define targets for the next two years. During the
first half of 2021 we will set the 2025/2030 Goals in accordance with
the 2030 UN Agenda and the Net Zero 2050 roadmap, followed by
the evaluation of the alignment of this programme to the Science-
Based Targets Initiative (SBTi) during 2022.

Addressing sustainability risks and opportunities
Climate change is our top priority; therefore, our aim is to
strengthen the climate-related financial risks and opportunities
assessment, already started in 2013 when we first reported
through the Carbon Disclosure Project (CDP). In 2021, Synthomer
will also report against the Task Force on Climate-related Financial
Disclosures (TCFD) framework.

We have already integrated the potential impact of corporate
responsibility issues in the Group’s risk management processes
pages 42 to 44 of our Annual Report and our investment decisions
take into account potential consequences for employees, customers
and suppliers as well as all stakeholders and the environment.

Meeting our customer needs in a sustainable way
Our product portfolio is centred in water-based products avoiding
the use of hundreds of thousands of tonnes of VOC containing
solvents and we worked closely with our customers and suppliers
in more sustainable solutions, reducing the environmental impact of
our raw materials, processes and products on the overall product life
cycle, including the end of life management. Our global technology
and innovation team is focused on projects around alternative raw
materials and lower energy intensive products and technologies to
minimise the use of resources.

Gaining knowledge to improve performance
We record, monitor and make publicly available the potential impact
of our activities through our Annual Report and Sustainability Report
and continuously improve processes to ensure we are best in class in
SHE and Manufacturing Excellence (ManEx).

Strong partnerships will lead to an important reduction on Scope 1
and 2 emissions by investing in renewable electricity sourcing and
understanding the impact of Scope 3 emissions in the fulfilment
of the targets set by the Paris Climate Agreement.

Synthomer works closely with the main sector groups, namely the
Chemical Industries Association (CIA) in the UK, European Polymer
Dispersion and Latex Association (EPDLA) in EU and American
Chemistry Council (ACC) in the USA, amongst others, and has
a seat on their sustainability committees.

Our ESG priorities
Safety, Health and Environment (SHE) are at the heart of Synthomer‘s
core values. Our ultimate goal is to have zero accidents or incidents
and to have no adverse impact on the health of those who work in
or live near our operations, nor on the health of those who use
our products. We care about the environment as we care about
our peoples’ health, whilst minimising any environmental burden
created by our activities.

As a chemical company that uses natural resources in its production,
mainly energy and water, climate change is our first priority. We are
aiming to respond to the climate emergency by reducing significantly
Scope 1 and 2 greenhouse gas emissions by no less than 20% in
the short term and defining the Net Zero 2050 roadmap in alignment
with the Paris Climate Agreement.

Employing 4,500 people across the globe, Synthomer contributes
to improved social conditions in all geographies. Synthomer’s diversity
and inclusion plan expresses our commitment to further expand
ethnic, gender, age and cultural diversity and to work hard to welcome
diversity in an inclusive way, believing that is the path to build a
socially sustainable development.

Launched in 2020, Synthomer’s Sustainable Procurement Policy and
Strategy clearly sets our ambition to work together with our partners
upstream, ultimately ensuring that there are no supply outages due
to environmental or social aspects covered by this policy. We are
working continuously to minimise risks and catch opportunities
while contributing to a more sustainable and secure supply chain.

More and more society is driving towards zero waste, reducing,
re-using and recycling as much as possible. Synthomer operates
in a variety of markets with a diversity of water-based chemistries,
exhibiting a wide spectrum of requirements. Our goal is to move
towards a circular economy, reducing the impact of our activities
and working together with our customers to offer sustainable
solutions with increased performance and manage the end of life
of our products.

Integrating Sustainability across the enlarged Group
The significant inorganic growth in 2020 from the OMNOVA
acquisition led naturally to a deep process of re-shaping the
Company’s structure and operating models. The Group’s culture
promotes a diverse and inclusive environment, ensuring training
and improving communication.

Synthomer took this opportunity to consider sustainability as a
business imperative and a decision factor in all processes and
projects. Having a more diverse environment will allow Synthomer to
enlarge the Sustainability Committee, which is the main governance
group that coordinates our ESG agenda across our Company and
businesses. We aim to expand the ‘We Care’ initiative, a community
engagement programme, of which the Synthomer Foundation is
an important piece. The first step towards supply chain assurance
is already completed within the procurement team, through the
awareness of our Sustainable Procurement Policy and Strategy.
And all our ESG activities are aligned with the UN SDGs considered
material for Synthomer.

Synthomer plc Annual Report 2020Strategic ReportDemonstrating sustainability performance
Our work in this area has been recognised through the Group’s
inclusion in the FTSE4Good Index since 2004. The FTSE4Good
Index is operated by FTSE and highlights the performance of
stock market listed companies against a range of ESG criteria.
To be eligible for inclusion in the index, companies must
demonstrate a high level of commitment in areas such as
climate change, environmental management and human rights.

Our work on sustainability is also reported through EcoVadis,
CDP, ISS, Sustainalytics and MSCI amongst others. Through our
extensive reporting and granular data, we continue to support open
reporting, aligned with the internationally recognised GRI standards.

FTSE4Good Index
FTSE Russell’s ESG Index
Score 3.6/5.0

EcoVadis
Silver Score

CDP – Carbon
Disclosure Project
Rating B-

Non‑financial information statement
The table below summarises where key elements of our governance reporting (including non-financial matters as required by
the Non-Financial Reporting Directive) can be found, some of which are integrated into other sections of our Annual Report.

Reporting requirement
Environmental matters

Employees

Social Matters

Respect for Human Rights

Anti‑Corruption and Anti‑Bribery

Our business model

Principal risks and uncertainties
Non‑financial KPIs

Relevant policies and standards that govern our approach
• Code of Conduct
• Group SHE Policy
• Sustainable Procurement Policy and Strategy
• Taskforce on Climate-related Financial Disclosures

Where to read more in this report
• Risk assessment 42 to 44
• ESG page 70
• Risk Report page 44, ESG page 62

(TCFD)
• Our values
• Code of Conduct
• Group SHE Policy

• Responsible Care Principles
• We Care Initiative
• Code of Conduct
• Modern Slavery Act Statement
• Conflict Minerals Policy Statement
• Sustainable Procurement Policy and Strategy
• Code of Conduct
• Ethics Helpline
• Core values
• and how it links to strategy and delivers value to

stakeholders
• Risk assessment
• Relevant key performance indicators

• Whistleblowing line/reports
• Gender pay gap 103
• Section 172 38
• ESG page 70
• Section 172 38
• ESG page 62
• ESG page 64

• ESG page 64 and 67

• Our business model page 22

• Managing risk page 42 to 48
• Key performance indicators page 20

2. Governance and Compliance

Ensuring and demonstrating a high standard of effective and
compliant corporate governance is a key priority of the Group
and expectation of our stakeholders. Our governance structures
are covered in more detail in later sections of this Annual Report.

Code of Conduct and Ethics Helpline
Our current Code of Conduct was published in 2018 in 13 languages
in interactive online and hard copy formats and was delivered to all of
the Group’s employees by e-mail and/or hard copy.

The underlying ethos of the Code of Conduct in terms of openness
and transparency is supported by an externally hosted Ethics Helpline,
which provides employees and stakeholders with an anonymous
platform (where legally able to do so) available at all times to report
unlawful or unethical behaviour, workplace incidents or concerns and
to raise any queries regarding the application of the Code of Conduct.

In 2020, the Group relaunched its core values highlighting, amongst
other things, Integrity and Accountability as foundations of the
Synthomer way of working, and the importance of the Code of
Conduct in guiding employees in ensuring they always act in
accordance with these values.

Compliance training
During 2020, face-to-face/online scenario-based workshops
continued to be held across the Group to reinforce the importance
of applying the highest ethical standards as set out in the Code of
Conduct. This included the legacy OMNOVA management team
following the acquisition.

The workshops have continued to receive very positive feedback.
A recent survey undertaken across the enlarged Group in connection
with the Compliance Programme Review (see section below)
reinforced the outcome of the 2019 ‘Your Voice’ employee survey
which demonstrated, amongst other things, that most employees
understand the Code of Conduct and how it applies to their role,
and that they know how to report suspected unethical and/or
unlawful behaviour.

2020 also saw significant developments in the Group’s e-learning
capabilities, with the launch of an improved in-house Learning
Management System (LMS), as a platform for hosting e-learning
content. Consequently, in 2020, we saw the launch of a new
e-learning module relating to facilitation of tax evasion under the
UK Criminal Finances Act, together with the finalising of two new
e-learning modules on Bribery & Corruption and Anti-Competitive
Practices, which were launched at the start of 2021. The LMS also
enhances the Group’s ability to record training (e-learning and
face-to-face/online), to track completion, and to escalate incidences
of required training not being completed in a timely manner.

The development of e-learning modules for Code of Conduct and
GDPR/data protection was purposefully delayed in 2020 as a
consequence of the OMNOVA acquisition, mainly due to the positive
feedback received about the training and the opportunity it provided
to interact with legacy OMNOVA colleagues. E-learning modules on
these topics are currently being developed for roll-out during 2022.

Bribery, corruption and anti‑competitive behaviour
The Group’s bribery, corruption and competition law policies
are key aspects of the Group’s Code of Conduct. As such, these
topics have featured heavily in the scenario-based workshops
held across the Group as part of the Code of Conduct training.

In addition, during 2020, enhanced competition law training continued
to be given to employees more highly exposed to competition law
risk, and we have continued to improve our online ‘toolboxes’ for
Competition Law and Bribery & Corruption. Due diligence processes
also continue to be in place to manage risks related to bribery and
corruption, for example in connection with the appointment of agents
and/or distributors, to ensure we are partnering with third parties who
share in Synthomer’s commitment to do business legally and ethically.

As mentioned above, 2020 also saw the development of new
e-learning content covering bribery, corruption and anti-competitive
behaviour, which was launched at the start of 2021.

In 2021, the Group will be launching new internal guidance on how
to respond to, and manage, unannounced inspections from regulators
(so-called ‘dawn raids’), which will be supported by a phased roll-out
of training.

Compliance Programme Review
In 2020, the Group’s legal team launched a new project aimed at
understanding what opportunities there are to further improve the
Group’s Compliance Programme. The project comprises three
phases: Assess, Design, Implement.

The Group’s internal audit function completed the ‘Assess’ phase
during late 2020, which involved a combination of desktop reviews,
surveys and interviews, and an assessment against best practice and
external guidance. The findings of the assessment are currently being
finalised and will provide the basis for designing an improvement plan,
for implementation over the course of 2021 and the coming years.

Human rights
The Group is committed to promoting a culture that values diversity,
meritocracy, openness, fairness and transparency, and which
encourages a safe and trusting working environment. These are
reinforced through the Group’s Code of Conduct, and through
the work undertaken in 2020 and being undertaken in 2021 in
the context of diversity and inclusion. A particularly significant
step in 2020 was the establishment of a Diversity and Inclusion
Leadership Team, to help drive the Diversity and Inclusion agenda
within Synthomer.

The Group is committed to ensuring that slavery and human
trafficking is not taking place in any of its supply chains, as set
out in our most recent Modern Slavery Statement available here:
www.synthomer.com/company/corporateresponsibility/group-
policies/. The Group has also published a Conflict Minerals Policy
in relation to its use of tin within the business operated by
William Blythe Limited.

In 2020, a Procurement Excellence team was established alongside
the publishing of a new Sustainable Procurement Policy and Strategy.
The team conducted specific assessments to identify the Group’s
sustainability impact areas, one being Human Rights. The team is
committed to further Synthomer’s understanding of its risks within
the Human Rights area and to driving the development of appropriate
measures and controls to ensure Synthomer’s compliance with
Human Rights.

Synthomer plc Annual Report 2020Strategic Report3. People

Synthomer is committed to supporting and
developing its people and to ensure they
can contribute positively to society.

Our commitment to science and education
Chemistry Council: Calum MacLean, Chief Executive Officer,
is on the main council and leads industry activities on Brexit.
Robin Harrison, VP Technology Platforms and External Innovation,
sits on the Innovation Group and has supported activities on the
UK Industrial Strategy and sector deal, mainly around battery
technology and sustainable materials for consumer products.

Society of Chemical Industry: Robin Harrison continues in his role
as a member of the Board of Trustees and also on the Mid-Careers
Committee supporting the development of future leaders for the
chemistry related-industries.

Synthomer has once again sponsored the Society of Chemical
Industry’s SCIdea competition. We have already committed to
the 2021 competition as sponsor. SCI’s Bright SCIdea challenge
is an annual entrepreneurship competition that allows UK and
ROI students to develop and showcase their business skills.
Teams are asked to develop a plausible scientific concept that
could be commercialised for the benefit of society and receive free,
accredited business planning training throughout the competition.
They submit a full business plan, detailing how their idea can be
taken to market, and shortlisted teams are then invited to pitch their
idea to a panel of experts at the final to win a significant cash prize.

Despite the cancellation of many physical conferences and
educational events in 2020 many of our employees continued to
participate in events as they switched to virtual formats and we have
continued to work with local schools and educational establishments.

One example of how our employees work with local schools is
the Synthomer plant in Sokolov (Czech Republic) where staff have
continued to work with local schools and develop relationships
built up over several years. This year several of our health and safety
specialists have worked with three local schools teaching pupils
how to handle chemicals that can be found in the home safely and
donating samples of work safety equipment. The Sokolov team has
also been working closely both with both elementary and secondary
schools in the region as part of an ‘Applied chemistry’ initiative
providing practical training at our site. Launched in cooperation
with the Secondary Technical School of Ceramics and Glassmaking,
Karlovy Vary, this initiative gives students an opportunity to learn
directly from Synthomer specialists, gaining insights in technology,
safety and business.

Our commitment to our people
Attraction and retention
External recognition
Our OMNOVA colleagues celebrated their second year as a
Northcoast 99 winner in 2020. Northcoast 99 is an annual
recognition programme and event in its 22nd year that honours
99 great Northeast Ohio workplaces for top talent. The recognition
project to compete for this award was managed – and led – by
a group of our employees. As well as recognising our business
as a great place to work, the process of competing for this award
has provided invaluable learning in support of the continuous
improvement that we strive for.

Values
The introduction of global businesses and the acquisition of OMNOVA
created an opportunity to reflect on our core values and therefore
this year we launched our new values, which are a blend of legacy
business values, with updated language for a global organisation, and
some new priorities that reflect our growth and our changing market.
Our values are fully aligned with our purpose and strategy and describe
the culture and behaviours we want to build and sustain within our
business. On the inside front cover the relationship between our values
and our purpose is illustrated.

Employee engagement was at the heart of developing our new values;
over 200 of our employees from across our organisation contributed
to the redesign by completing surveys or attending a focus group.
Surveys produced a large volume of input in the form of numerical data,
written feedback and suggestions. Focus groups enabled us to gain
additional insights from employees and develop ideas. This process,
in addition to other feedback received in our 2019 Your Voice Employee
Engagement Survey, helped us to define our new values.

Three Executive Committee members were part of the Steering
Group for the initiative with the whole Executive Committee closely
involved to ensure that our values were fully integrated and aligned
to our business strategy and that they received very clear and visible
senior leadership sponsorship.

Our core values are intended to become our guiding compass
describing what we aspire to as a company. At the same time
they outline clearly what is expected of each of us individually.
It is important to recognise it not only matters what we do, but
also how we do it. We see this as even more important as delivery
of our business strategy is creating a larger and more geographically
and culturally diverse organisation.

SHE (Safety, Health and Environment) is our central value and is
aligned to the significant importance we place on SHE, evidenced by
an established track record over the last six years of investment and
improved performance. Our objective is consistent delivery of world
class levels of SHE performance and our aim is zero SHE incidents.

Our strong SHE performance has in part been delivered by behavioural
initiatives and we have created a close alignment between our values
and SHE performance with initiatives like our ‘10 Golden Rules’.

The inclusion of Integrity in our values reflects and links to other
key strategic priorities including our increased focus in recent years
on compliance and our Code of Conduct, and our commitment to
increase diversity and inclusion in our business.

3. People continued

Innovation as a value is aligned to our purpose which is to continually
innovate to meet the needs of our customers and society, and the
execution of our strategic objective to grow in part via differentiation
and innovation. Synthomer is a differentiated business that invests
significantly in innovation, allowing us to keep ahead of competition
and anticipate future needs. Emerging sustainability issues and the
opportunity they provide will also require innovation to be central to
how we operate.

Supporting our employees during the pandemic crisis
Like many organisations COVID-19 created a challenging environment
for us this year. Some of our employees continued to perform
essential work at sites that remained in operation throughout the
crisis. Other employees were requited to work from home for long
periods of time. To support the physical and mental well-being of our
employees as well as continuing to operate as a business we
deployed a range of support measures.

Accountability and Teamwork both appeared high in the suggestions
that our employees advocated when asked what values they felt were
most important. Our organisation has changed significantly over
recent years and evolved into a larger and more matrixed organisation
where these attributes become even more critical than they were
previously. We also know from talking to those joining Synthomer at
an earlier stage of their career that these features of our culture are
particularly important in attracting and retaining talent.

In launching our new values we used multiple communication
channels and varied techniques to engage employees. During
2020 more than 600 employees attended virtual workshops and
we ran additional local face-to-face workshop sessions wherever
possible. These sessions included input from senior leaders who
shared personal stories, case studies and insights to bring sessions
to life. The sessions all included opportunities to ask questions and
give feedback.

Our Value of the Month poster and intranet video campaign,
with sponsorship from our Executive Committee, used personal
examples and cases studies from across our global business to
engage employees. Additional activities undertaken by our core
values ambassadors, a Team Leader Toolkit and Workshop
Train-the-Trainer sessions have all contributed to a highly
integrated and effective deployment process.

Our new values will be increasingly integrated into the employee life
cycle and our people processes; they have, for example, been
incorporated into our recruitment and performance management
processes. Our values have been designed to sit alongside our
Leadership Attributes which, launched in 2019, underpin our
leadership development model and are also included in our
performance management process and in development tools
such as our global 360 feedback tool. The alignment of these
separate areas over two years is part of a strategic plan designed
to maximise organisational benefit through single, simple global
models that reflect the modern Synthomer business.

In 2021 we intend to run a second Your Voice Employee Engagement
Survey following the survey we ran in 2019 and we will again include
questions that closely align to our values.

This is in addition to regular monitoring of other potential sources
of data related to values including pulse surveys, feedback and
discussions in training workshops, exit interview feedback,
grievances and Ethics Helpline calls.

Some examples of how we supported our employees include:

• In Malaysia, employees received frequent newsletters throughout
lockdown and periods of working from home that have included
regular business updates and tips on how to work from home
effectively. Virtual exercise classes have helped employees socially
interact, catch up, and exercise at the same time. The ‘Grab Some
Help!’ programme run in partnership with external expert healthcare
partners provided virtual workshops and remote psychological
support for employees.

• In Germany, employees have been able to participate in virtual

coffee breaks and virtual social events designed to keep people
connected whilst working remotely.

• In the UK our ‘Be Supported: Virtual Working’ initiative provided
training and support for team managers and employees working
from home for extended periods.

• Our global Learning & Development team has developed a series of
packages with internal and external learning options addressing
challenges of the pandemic crisis, like ‘Working from home’,
‘Embracing new ways of working’ or ‘Working or Leading Virtually’.

Listening to our employees
It is now two years since the UK’s Financial Reporting Council updated its
Corporate Governance Code to encourage activity in the area commonly
referred to as ‘Employee Voice’. Alex Catto remains the Non-Executive
Director with responsibility for ‘Employee Voice’ on the Board.

During 2020, Alex visited our UK sites in Harlow and Stallingborough,
spending time with managers, union representatives and a range of
different employees. When visiting sites, Alex meets with members of
the site leadership team but to encourage openness and transparency
he also meets employees and employee representative groups
without managers being present. When forming employee groups,
care is taken to include employees from different business areas and
with different service profiles. Discussions are flexible with employees
invited to talk openly about a wide range of issues linked to our
Company strategy, culture and values.

Synthomer plc Annual Report 2020Strategic ReportIn addition Alex held virtual calls with managers to review employee-
related issues – including the impact of COVID-19 – in the USA and Italy.
Managers provided employee data, including turnover data and detailed
overviews of key projects and initiatives impacting employees.

The Board receives regular feedback on the employee discussions
with Alex and reflects on this when making key decisions. During the
pandemic, the Board has had positive feedback from employees,
for example on aspects of our handling of the pandemic, but has
also identified room for improvement in areas such as communication
and employee recognition.

The Board has also received updates on various elements of our
people strategy and has had a detailed report on the results of the
2019 Your Voice Employee Engagement Survey and an update on
the communication process and progress against actions defined
following the survey.

Leadership Development
Talent Programmes and Leadership Development:
Having established the programme in 2018, we welcomed our
third European and Asian Graduate Programme cohorts in 2020 with
seven new programme participants in Europe and four in Asia. In total,
this adds up to more than 30 Graduates across the different cohorts.
Despite the pandemic, we have run more than 60 learning modules
and virtual learning sessions in total for our Graduates in 2020,
covering topics like Leading Self, Leading Others, Business Acumen,
Negotiation and Change Management. Members of our first cohorts
are about to graduate from the 24-month programme and over 90% of
candidates in Asia and Europe have moved into post-programme roles.

We also continued our High Potential Programmes across all regions
of the organisation.

Our early talents have continued to represent Synthomer externally
by publishing articles and giving speeches at conferences.

In order to further strengthen our talent pipeline, we developed
a new global Talent Toolkit in 2020 and established a harmonised
framework for our annual talent reviews. This was supported by
a series of global briefing calls for leaders.

Manufacturing Excellence Academy:
This year saw Synthomer extend our existing Talent Programme
with discipline specific elements. Our Excellence Academy
saw 12 individuals participate in a new programme to provide
fundamental skills and knowledge in how to improve safety
and productivity on our manufacturing facilities.

The programme is modelled around the key pillars of the
Synthomer Manufacturing Excellence Framework, including
Occupational Safety, Process Safety, Manufacturing Execution,
Organisational Capability, Project Excellence, Integrated Business
Planning, Reliability & Asset Integrity and Process Technology &
Engineering Best Practice. Delivered in a format that blended various
learning techniques, the programme included practical project-based
learning and modules delivered by senior manufacturing leaders and
subject matter experts. The programme delivered almost 50 hours
of learning over a five month period.

Compliance Initiative:
Linking to our core value of Integrity, and building on strong results
in our 2019 Employee Survey, we have continued our investment
in building capability in compliance with a refreshed compliance
related e-learning curriculum partly launched in 2020.

Our Compliance e-learning offer consists of three key modules,
covering Facilitation of Tax Evasion under the UK Criminal Finances
Act, Anti-Bribery & Anti-Corruption, Code of Conduct and Competition
Law. The roll-out has been supported by the legacy OMNOVA Learning
Management System and an improved legacy Synthomer in-house
Learning Management System and the modules will each reach people
across the Group who have been identified by applying a risk matrix.
The roll out, which will continue into 2021, spans across 16 countries.

Diversity and inclusion
The acquisition of OMNOVA has increased the number of people
we employ outside of Europe, with significantly more employees in
the USA, China, and Thailand. We have also added a site in Portugal
to our European footprint and increased our presence in France.
We now have sites in 24 countries across the USA, Europe and Asia.
As we grow, we continue to be a truly global business with a culturally
diverse employee base from across the world.

We recognise that increased diversity and inclusion links to business
performance. To achieve our strategic objectives we need to attract
and retain diverse talent and through an inclusive culture enable all
our employees to perform to their full potential.

This has been a significant year for diversity, with Caroline Johnstone
appointed Chair of the Company on 16 December 2020, our first
female Chair and an important milestone. Cynthia Dubin also joined
the Board in 2020 and we now have three women on our Board.
We now meet the target set by the Hampton-Alexander Review of
33% female representation on FTSE 350 boards by the end of 2020.

Board

Senior management

Other employees

Total

Female

948

959

Male

3,603

3,649

Total

4,551

4,608

Further diversity progress made during the course of the year included
the following:

• Throughout the acquisition and integration of OMNOVA, we

focused on diversity in all of our appointment decisions and the
resulting reorganisation.

• We attracted more women than men to our graduate programmes
and in total 60% of the 30 Graduates across the different cohorts
currently operating in Asia and Europe are female.

• Across our whole organisation women account for 21% of our

workforce, with greater representation at more senior leadership.

We have also made progress in diversity, with women representing
17% of our Executive Committee and direct reports (a significant
increase from 8% over the last 12 months).

However, we have not yet reached the Hampton-Alexander Review target
of 33% of our Executive Committee and direct reports and, in particular,
recognise that there are no women on our Executive Committee.
We have more to do and we have set tough but achievable goals.

3. People continued

We have set a target of 33% of Executive Committee and direct
reports being women by the end of 2025 at the latest. We recognise
that this will fall short of the original Hampton-Alexander target date
but feel that this time frame is more realistic to achieve a genuinely
sustained change. We intend to increase this target to 20% by the
end of 2021, 25% by the end of 2022 and 33% by the end of 2025.

One member of our Board is from an ethnically diverse background and
therefore we are pleased to meet the target for Board representation
set by the Parker report. In total, 14% of our Executive Committee and
direct reports population represent colleagues from a diverse ethnic
background, with representation across all functions and business
areas. To support our continued efforts to increase ethnic diversity
in our senior leadership population we have set a target of 20%
by the end of 2025.

This year we have created a new Diversity and Inclusion Steering
Group and Leadership Team that includes representatives from the
Board and the Executive Committee and leaders from across our
business. This leadership team has a defined programme of activities
including awareness building, training, communication and process
reviews designed to increase both diversity and inclusiveness across
our business. We have made the following commitments:

• We will increase diversity and inclusion in our organisation

by focusing on all aspects of the employee life cycle.
• We will measure and report on a wide range of diversity

characteristics including but not restricted to gender, ethnicity
and age (where it is culturally and legally appropriate to do so).
• Our Diversity and Inclusion Leadership Team will develop and

maintain our global diversity and inclusion action plan; this plan
will be shared with key stakeholders including our Board and
our employees annually.

• Our Board and our Executive Committee will regularly review

diversity and inclusion.

• We will measure and report on a range of inclusion indicators,

including but not restricted to employee surveys.

Given the geographical and cultural diversity within our business
our Diversity and Inclusion actions will address a broad range of
Diverse characteristics and will be tailored to address regional
priorities and cultures.

We have launched ‘Engender’, a new networking and resource
group for women in Synthomer with virtual events commencing
in Quarter 4 2020 and a full programme planned for 2021.

A review of ‘family friendly’ policies in 2020 across our major
employee locations – the UK, Germany, Malaysia and the USA – has
resulted in a number of improvements that create a suite of policies
that are all in line with regional best practices. We are pleased to be
supporting prospective and new parents – including those who are
adopting – with progressive policies that reflect the changing nature
of family life.

We have continued to improve our recruitment processes and
develop recruitment skills across our organisation to ensure that
we recruit the best talent.

Across our business we celebrated a wide variety of local holidays,
festivals and culturally significant dates.

Our commitment to corporate social responsibility
Supporting communities during the pandemic crisis:
In what was an unprecedented year we were very pleased to be able
to provide specific support to local communities in the fight against
COVID-19 in a number of ways:

• In Malaysia Synthomer donated a consignment of protective gowns
and N95 face masks to the Kluang General Hospital. In addition to
the Company donation, a group of Kluang employees
independently gathered donations in the form of personal protective
equipment (PPE) and food supplies for the hospital. With the
support of the Kluang site procurement team, they were able to
donate other materials required by the hospital.

• Synthomer donated 450,000 medical gloves to the municipal
hospital Papa Giovanni XXIII in Bergamo, Italy. The hospital is
situated in the heart of the Lombardy region of Italy which has
been severely affected by the COVID-19 pandemic. Our Filago
plant, which produces Nitrile latex for the medical glove industry,
is situated just 17km from the hospital.

• In Germany we donated used but functional laptops to the Aloysius
elementary school in Marl. The set of laptops were prepared with
updated software by the Synthomer IT team and then donated to
the school, which passed the devices to pupils who used them for
their home schooling.

Synthomer employees supporting local community initiatives:
Synthomer employees around the world continue to support a wide
variety of events and projects. Examples in 2020 have included
the following:

• Our Global Technology Centre in Akron (USA) donated laboratory-

grade glassware to Kent State University. We were delighted
to support the local community and help the next generation
of STEM students in their academic journey.

• Our Monroe, USA plant held a food drive to benefit the Union County

Community Shelter. In total, they donated $760 and over 400lbs of food.

Synthomer plc Annual Report 2020Strategic Report• This year, colleagues from Roebuck (USA) participated in the

‘Bags of Love’ charity project and donated gift bags to home bound
seniors in their community for Valentine’s Day. The bags included
Valentine’s cards, books as well as pharmacy items and were given
to elderly community members who are home bound due to
mobility limitations. Synthomer has been taking part in this annual
project for several years and cooperates with ‘United Way of
the Piedmont’ and ‘Meals on Wheels’ to provide the bags to
their recipients.

• Colleagues in Malaysia have supported a rural hospital in

Tanzania with a medical glove donation. This initiative was started
by a medical student at Glasgow University, who volunteered at the
Kilimatinde hospital in Tanzania during her final year project in 2019.
Seeing the serious shortage of essential medical supplies she
approached a family member who works for Synthomer with a
request for help. We were able to source a supply of gloves and
also help with the significant challenge of getting the consignment
from Malaysia to an extremely remote location in rural Tanzania.
• On the environmental side, several colleagues volunteered to take
part in the ‘Broom Day’ in Marl, an annual event with the goal to
clean up the neighbourhood. The volunteers from the Marl office
split into three groups and cleaned the surrounding pavements and
green spaces on planned routes. Broom Day in Marl has seen its
21st anniversary this year. In total 1,884 volunteers helped to clean
up the community and collected 9.8 tonnes of litter. The day is part
of the ‘Let’s Clean Up Europe’ campaign, an initiative active
throughout all European countries.

Synthomer Foundation
• Whether providing grants to non-profit organisations or volunteering
with employees through our We Care initiative, we are dedicated to
making a positive impact in the communities where we operate
throughout the USA. In 2020, the Foundation awarded nearly
$1.2 million to non-profit organisations in the USA who provide
services that improve the quality of life through education, health
and human service, civic initiatives and the arts (note this was a
Synthomer Foundation donation and not a Company donation).

Sintra site celebrates 10 years of corporate volunteering
• Active in a broad range of activities such as painting, cleaning

fields in the woods, performing sessions on chemistry, waste and
safety in elementary schools, supporting activities with the elderly
population, making donations of food or gathering and donating
clothes to homeless people, the volunteers’ group in Portugal
is active in three areas: social, environment and education.
The figures below illustrate some of the work that has been done.

4. Health and Safety

Management of Safety and Health together with Environment (SHE)
is the most mature aspect of the Group’s sustainability activities
and remains a critical material aspect for both internal and external
stakeholders. Having safe plants is a basic expectation of sites’
license to operate, in line with the Synthomer philosophy that
‘we always have time to work safely’.

In line with our SHE Policy, the Board, Chief Executive and Executive
Committee are fully committed to improving SHE performance
and engaging and involving employees at all levels in all locations
in our SHE programmes. Effective SHE Leadership to deliver SHE
performance is a primary duty and expectation of management
at all levels in the Group, aligned to our three long-term goals:

1. to have no accidents or incidents;
2. to have no adverse impact on the health of those who work in
or live near, our operations, nor on the health of those who use
our products; and

3. to minimise any environmental burden created by our activities.

Key practices and programmes
The table below highlights some of the Health and Safety
management practices and activities undertaken in 2020 and
planned for 2021. Because of its relevance during 2020, one new
practice related to COVID-19 management has been included.

Alongside the items noted below, a significant focus in 2020
was the integration of the new OMNOVA sites, undertaking
assessments of current performance and alignment to critical
Synthomer standards, and the subsequent development and
successful implementation – through the efforts and full
engagement of our new colleagues – of intensive 90 day
action plans to address the main areas for improvement.

Key measures, SHE performance indicators and SHE audit
results are reported to the Board, the Executive Committee
and to the regional management meetings on a monthly basis.

2020 was a year of change. The acquisition of OMNOVA has
had a noticeable impact on our Health and Safety performance
and our 2021 targets have been set taking into consideration
the performance of the enlarged Group.

Key SHE programmes

2020 SHE key actions

2021 SHE key focus

Group’s Safety, Health
and Environment
Management System
(SHEMS) standards
and policies

Group SHE audits

Following the extensive Management System review in 2019,
the sites have started to review standards and policies to align
with the new requirements.

Continue the review of standards and policies to align with
the new requirements.

Due to the COVID-19, the audit programme has been redefined:
2020 planned on-site audits have been replaced by online audits.

Continue online audit activities until situation allows site visits.

COVID‑19
management

Practices have been developed to prevent COVID-19 outbreaks
at working places.

COVID-19 measures have been tested regularly and indicators
have been defined.

Continue testing COVID-19 measures.

Review and confirm adequacy of cleaning/
disinfection arrangements.

Accident and incident
management
and sharing

SHE training,
communication
and support

Process Safety –
strengthening
our barriers

Introduce the ‘Yellow Book’, a collection of lessons learnt for the
most frequent types of occupational injury across the Company.

Continue sharing lessons learnt with increased focus
on high potential incidents.

Continue lessons learnt: reviews undertaken on anniversaries
of most significant internal/external Process Safety incidents.

Sites to start using the ‘Yellow Book’ as a tool to share
learnings from site of most frequent injuries.

Start cascading Process Safety training through
organisational levels.

Special support provided to sites having worse performance:
‘Assisted sites’.

Support provided to recently acquired OMNOVA sites
for the implementation of Synthomer practices.

Completion of High Priority Process Hazard Analysis (PHA) actions.

Identify common themes behind the Process Safety incidents.

Publication and sharing of ‘Behind the Black Book’ guidance
setting out the background to significant Process Safety Events
and the controls that can be implemented to minimise the
potential for such events in the future.

Complete the cascade of Process Safety training to all
legacy Synthomer Operations personnel, and through
the OMNOVA legacy site leadership teams.

Continue supporting sites to improve performance until
‘graduation’ and to align practices.

Review data regarding flammable Losses of Containment and
Process Safety Events with high potential. Establish regular
routines to identify common causes/themes and define
actions to improve.

Build up a dedicated Process Safety network to support
the implementation of actions at site level.

Good practice sharing

Good Practices library built and shared.

Continue building and sharing the Good Practices library.

SHE routines

Continue the focus on tracking and learning from ‘Fundamental
Issues’ identified during Permit to Work monitoring.

Focus on tracking and learning from ‘Fundamental Issues’
identified during Process Confirmation routines.

Other Process Confirmation routines rolled out to improve
monitoring and reviewing of other critical activities such as
monomer offloading, shift handover and batch monitoring.

New indicators defined to increase focus in additional
critical activities.

Synthomer plc Annual Report 2020Strategic ReportExcept where stated the performance figures quoted in this report
will show both legacy Synthomer and the enlarged Group with full
year 2020 data.

There were no reported cases of disease attributed to occupational
factors during the year in legacy Synthomer. There was one hearing
loss in legacy OMNOVA where work conditions could have contributed.

There were no fatalities across the Company.

Process Safety

Recordable Process Safety Event rate
Events per 100,000 hours

2020
Enlarged Group

2020

2019

2018

2017

2016

0.10

0.11

0.14

0.19

0.17

Legacy Synthomer
• Best ICCA Process Safety Event rate since tracking started

of 0.11 per 100,000 hours.

• No incidents resulting in serious injury or damage.

Legacy OMNOVA
• Process Safety Event rate (PSER) of 0.07 per 100,000 hours worked

since acquisition – different reporting protocols in Q1 2020.

Ensuring the safety of our operations is of paramount importance to the
Group. Since 2015 we have recorded, rated and tracked Process
Safety Events (PSE) using a four-tier scoring system where tier 1 and 2
incidents (tier 1 being more severe) meet the definition for a ‘Reportable
PSE’ from the International Council of Chemical Associations (ICCA).

Legacy Synthomer reported seven incidents in 2020, the same figure
as in 2019. The Process Safety Event rate achieved in 2020 was equal
to the best ever rate.

Legacy OMNOVA Process Safety Event rate since acquisition was
0.07. Before the acquisition, OMNOVA Process Safety reporting
was aligned with different reporting criteria from the API (American
Petrol Institute) in Quarter 1, whereas the ICCA reporting criteria were
implemented from April.

To help drive further improvement toward world class performance,
2021 will see the introduction of regional Process Safety Networks,
supported by Group experts, focused on working together to reduce
losses of containment and identifying and responding to Process
Safety ‘weak signals’.

Significant action was taken to prevent possible introduction and
transmission of COVID-19 cases at our factories and offices. A lot
of precautions were put in place to prevent COVID-19 cases at our
factories and offices. All non-essential employees worked from home
whenever possible. Strict practices and controls were implemented
to continue our operations in a safe way and to limit contacts between
employees at work. The success of the measures was confirmed by
the yearly injury and Process Safety rates that were similar to previous
years. Of the COVID-19 cases that were reported, only a few were
identified as potentially work-related transmissions. None of the
production sites had to stop work-related activity due to high
levels of employee COVID-19 cases during 2020.

Occupational Safety

Frequency rate – all recordable accidents
Injuries per 100,000 hours

2020
Enlarged Group
2020
Legacy Synthomer

2019

2018

2017

2016

0.36

0.20

0.23

0.13

0.30

Legacy Synthomer
• Recordable injury case rate (RCR) of 0.20 per 100,000 hours worked.
• No accidents resulting in fatality or permanent disabling, limited

number with potential for disabling injury.

Legacy OMNOVA
• Recordable injury case rate (RCR) of 0.51 per 100,000 hours
worked since acquisition (1 April) and 0.58 per 100,000 hours
for the full year.

The Group’s main lagging indicator of SHE injury performance is
the recordable injury rate for injuries requiring more than first aid
treatment involving employees and contractors that operate on
Synthomer’s premises, as well as short stay visitors, such as truck
drivers or cleaners. Even in a complicated working environment,
due to COVID-19, 2020 saw the same number of recordable injuries
reported as in 2019 in legacy Synthomer: 13. The associated
frequency rate of 0.20 per 100,000 hours worked was equal to
the second best rate in the Company’s history.

Legacy OMNOVA injury rate, even being 2.5 times higher and over
the line than Synthomer since acquisition, was 12% better than
the 2019 OMNOVA rate, reflecting the extensive work that has
been carried out by the SHE teams to harmonise Health and Safety
procedures. The 2020 full year recordable injury rate resulting from
the combination of both companies was 0.36. In 2021 efforts will
be focused on reducing the enlarged Group number of injuries,
providing special support to the sites showing higher rates and
implementing different key practices and programmes.

5. Environment

COVID-19 driven changes and the acquisition of OMNOVA had a
noticeable impact on our environmental performance. Except where
stated, performance figures quoted in this report will show both
legacy Synthomer and the enlarged Group with full year 2020 data.

• Specific Energy Consumption decreased 9.1% to 5.28GJ per tonne

sales production (5.81GJ per tonne sales production in 2019).
Measured in GWh, Specific Energy Consumption was 1,467kWh
per tonne sales production (1,614 in 2019).

Environmental improvement efforts continue to be focused in areas
most impacted by the Group: energy consumption, air emissions,
waste generation and water consumption.

2019 energy consumption values have been amended to reflect
improved accuracy in data collection. The amended consumption
values have resulted in an increase of 0.02%.

Environmental work programmes are focused on ensuring both
legal compliance and driving continual improvement as part of
our commitment to our matrix ISO 14001 certification (all legacy
Synthomer and OMNOVA non-US operating sites are certified)
and ISO 50001 certification in the UK, Germany, the Czech Republic
and one site in France.

Regarding legacy Synthomer, the increase in both absolute and
specific energy consumption is related mainly to changes in the
production mix coming from an increased production of high
energy demand products. The higher demand by the city of Sokolov
(Czech Republic) in relation to steam produced from coal at the
Sokolov site also contributed to the energy consumption increase.

The reduction of absolute consumption by the enlarged Group is
mainly due to a reduction in the production of legacy OMNOVA sites.

In the UK, although the situation differs from site to site, overall the
three UK sites increased production by 10% whilst maintaining the
energy consumption at previous year levels. This resulted in a
significant reduction of specific energy consumption driven mainly by
a change in production mix and an improved efficiency of the
processes.

Several projects that have both energy and emissions improvement
benefits are in the pipeline and will deliver results in the next few
years. These projects are targeted around the sites with the largest
energy and carbon footprint. The 2020 implementation plan was
impacted by the COVID-19 pandemic, with restrictions imposed
to limit non-essential contractor time on site, as well as short-term
restrictions on capital availability. The most important involves the
replacement of our coal burning power station on the Sokolov site
in the Czech Republic. A project is underway to install a new, more
efficient Combined Heat and Power (CHP) system utilising natural
gas as the fuel.

Total primary energy use
GJ per sales production tonne

2020
Enlarged Group
2019
Enlarged Group

2020

2019

2018

2017

2016

4.36

4.30

3.71

3.63

3.50

3.54

3.45

Following the acquisition of OMNOVA in 2020, the Company’s
baseline for target setting and approach to delivering Group level
improvements has been revised. 2019 has been considered the
new baseline of the enlarged Group. The targets that were initially
defined for 2021 will be extended to 2022.

2020 was a challenging year with regard to meeting some of our
environmental performance targets. Achieving the targets set last
year remains our objective, with continued focus on the sites
contributing most to the overall figures.

The Environmental information provided in this section complies
with the UK’s new environmental Streamlined Energy and Carbon
Reporting (SECR) regulation requirements.

Energy
Numbers below are aligned with GRI definitions and include any fuel
consumed and any imported electricity, steam, heating and cooling.
Consumption is either metered or based on received invoices.

Legacy Synthomer
• Overall primary energy consumption increased 1.6% to 5,690,496GJ
Specific Energy Consumption increased 2.1% to 3.71 GJ per tonne
sales production.

Enlarged Group
• Overall primary energy consumption decreased 1.4% to

7,802,418GJ compared with the 2019 baseline of 7,913,813.

• Specific Energy Consumption increased 1.4% to 4.36GJ per tonne

sales production compared with 2019 baseline of 4.30.

UK only
• Overall primary energy consumption increased 0.1% to 455,056GJ
(454,390GJ in 2019). Measured in GWh overall primary energy
consumption was 126.4GWh (126.2GWh in 2019).

Performance in 2020
(enlarged Group, baseline 2019)

• Total CO2 equivalent emissions decreased 8.5% to 382,379 tonnes
• Emissions per sales production tonne decreased 5.9% to 0.214

per tonne

• VOC emissions dropped 26.4% to 379 tonnes
• Reduction of 33.5% in reported refrigerant losses to 1,719 tonnes/

equivalent CO2, associated losses reduced to 4,936 tonnes

Synthomer plc Annual Report 2020Strategic ReportWater withdrawal and water consumption
Water withdrawal and water consumption definitions are aligned
with GRI 2020. Water withdrawal includes any raw water and
water from the public supply. Water consumption is estimated
as water withdrawal – water release unless it can be better
calculated by other means.

Legacy Synthomer
• Water withdrawal increased 3.8% to 6,137,967m3.
• Specific water withdrawal rose 4.4% to 4.00m3 per tonne.

Enlarged Group
• Water withdrawal increased 0.6% to 7,314,142m3 compared with the

Waste
Waste definitions are aligned with GRI 2020. Total waste includes
hazardous and non-hazardous waste. Waste is categorised by
disposal operation: recycled, incinerated (with or without energy
recovery) or disposed to landfill.

Legacy Synthomer
• Total waste generated fell 16% to 28,298 tonnes and waste

to landfill decreased 7% to 5,749 tonnes.

• Specific waste generation decreased 16% to 0.018 tonnes

per tonne sales production.

• Specific waste to landfill decreased 6% to 0.0037 tonnes per tonne.

2019 baseline of 7,273,959.

• Specific water withdrawal rose 3.4% to 4.09m3 per tonne compared

Enlarged Group
• Total waste generated fell 19% to 40,291 tonnes compared

with the 2019 baseline of 3.95.

with 2019 baseline of 49,609.

• Waste to landfill decreased 22% to 10,721 tonnes compared

with 2019 baseline of 13,785.

• Specific waste generation decreased 16% to 0.023 tonnes per
tonne sales production compared with 2019 baseline of 0.027.
• Specific waste to landfill decreased 20% to 0.0060 tonnes per

tonne compared with 2019 baseline of 0.0075.

Some projects for waste reduction were implemented but the
reduction in waste and waste to landfill was mainly influenced by
lower production levels of specific products that typically yield
higher amounts of waste. 2020 also included significantly less
one-off waste quantities than 2018 and 2019.

Waste disposal to landﬁll
Kg waste per sales production tonne

2020
Enlarged Group
2019
Enlarged Group

2020

2019

2018

2017

2016

Since 2019 we are collecting information to enable more
accurate reporting of Company ‘water consumption’
aligned with the GRI definitions.

Legacy Synthomer
• Water consumption increased 4.4% to 1,801,614m3.
• Specific water consumption rose 5.0% to 1.17m3 per tonne.

Enlarged Group
• Water consumption increased 2.8% to 2,000,059m3 compared with

the 2019 baseline of 1,945,754.

• Specific water consumption rose 5.7% to 1.12m3 per tonne

compared with the 2019 baseline of 1.06.

2019 water withdrawal and water consumption values have been
amended to reflect improved accuracy data collection. The amended
withdrawal and consumption values resulted in a reduction of 3% in
water withdrawal and in a reduction of 0.5% in water consumption.

The increases in 2020 water withdrawal and consumption were driven
mainly by changes in production mix and higher cleaning requirements.

Variance is expected year-on-year since the majority of our products
are water-based dispersions with some changes down to product mix
and volumes. As with energy, opportunities to improve water efficiency
will be built in to sites’ manufacturing strategies and environmental
targets on a prioritised basis in order to return the enlarged Group to a
trajectory consistent with the reduction in longer-term targets.

Total water withdrawal
m3 per sales production tonne

2020
Enlarged Group
2019
Enlarged Group

2020

2019

2018

2017

2016

4.09

3.95

4.00

3.83

3.90

3.79

3.96

5.99

7.49

3.74

3.99

5.08

3.57

3.67

5. Environment continued

Calculation methods
All direct energy production from fossil fuels has been aggregated on
a Group-wide basis and converted to CO2e by using the appropriate
emissions factors. No allowance has been made for possible country
to country variation in calorific value or CO2 emission factors for
primary fuels.

Electricity has been converted to CO2e on a country by country
basis. Scope 2 emissions have been calculated using three
different approaches:

• Market Base: using market-based emissions factors for electricity
from suppliers of standard grid fuel mix tariffs. In case of suppliers
emissions factors not available, the residual mix was used for
the EU sites and Location Base approach for non-EU sites.
• Location Base: using emissions factors from DEFRA (dataset
published in June 2019) were used for UK grid electricity and
for overseas grid electricity from the relevant IEA (International
Energy Authority) ‘World CO2 Emissions from Fuel Combustion’
databases. In accordance with UK Government guidance, factors
used for 2020 reporting are based on 2018 validated data.

• Hybrid Approach: using Location Base info except for sites within
the Group that purchase certified ‘Green’ electricity. Electricity for
these locations has been given a CO2e emissions factor of zero in
calculating energy-related emissions totals. These include the sites
in the Netherlands, Spain, Marl (Germany) and all sites in the UK.

The hybrid approach is the approach that has been used by the
Group in previous years to establish the baseline and the targets.
In order to be able to compare historical performance year to year,
the total emissions (Scope 1 and 2) have been calculated using
the hybrid approach.

Synthomer’s site in Stallingborough (UK) takes most of its electricity
from an exclusive contract with an adjacent waste incinerator
operated by Newlincs. This electricity is certified as ‘Green’ by the
UK Government. As a mixture of waste is deemed both renewable
and non-renewable, it does not have a zero emission factor. For 2020
the applied emission factor for electricity from Newlincs is based
around that determined for the site’s Climate Change Agreement
(CCA) reporting of around 0.404 kg CO2e per kWh. The site is also
provided with indirect heating in the form of hot water from Newlincs.

Although no longer included in the greenhouse gases emissions
calculations, VOC emissions are continuously monitored and have
been aggregated on a Group basis and converted to CO2e using
a factor of 11. This figure has been used by UK CIA member
companies since 2005 and is at the upper end of the range for VOCs.
Information on the release of refrigerant gases has been collected for
the past years. Releases of each individual gas have been aggregated
each year to give a Group release total and then converted to CO2e
using the equivalence factors given by DEFRA for each gas.
The emissions factors applicable to refrigerant release in 2020 are as
per those in the previous two years, as no changes were reported by
DEFRA–Global Warming Potential (GWP) factors from the IPCC fourth
assessment report.

Greenhouse gas emissions
The Group reports environmental KPIs in the format recommended
by the Department of Environment, Food and Rural Affairs (DEFRA),
with Annual Reports containing data for each year since 2005 on
a three-year rolling basis.

Reporting parameters
The 2020 financial year reporting includes all manufacturing
operations, all office locations co-located with manufacturing
and those listed as contact locations in the Annual Report or
on the Company’s website. It does not include some very small
locations such as home offices. These locations will have no
material effect on the Group’s overall GHG emissions, being
estimated at considerably less than 0.1% of the Group total.

All known emissions from manufacturing processes have been
included. Specifically, this covers direct energy usage and the
indirect energy costs of heating, cooling and other site services
where these are provided by a third party. They include estimates
for the effects of the release of refrigerant gases. The release of
volatile organic compounds (VOCs) that was included previously, is
no longer included and has been also removed from previous years’
calculations. The only known emissions which have not been included
are direct emissions of CO2 from on-site waste treatment facilities
that have not currently been quantified, but which are not believed
to have significant material impact on the overall figures reported.

The Group has no known uses or releases of perfluorocarbons or
sulphur hexafluoride. All releases of nitrous oxide or methane are
associated with energy production and are not separately quantified.
The Group continues to report Scope 1 and 2 emissions. The Group
continues to use emissions per production tonne as its intensity ratio.

Synthomer plc Annual Report 2020Strategic ReportGlobal warming burden
Scope 1 and 2 emissions
Tonnes CO2 equivalent released per sales production tonne
(includes CO2 from energy generation/use from energy generation use)

2020
Enlarged Group
2019
Enlarged Group

2020

2019

2018

2017

2016

0.214

0.227

0.187

0.201

0.195

0.201

0.199

Scope 3 emissions
An initial estimation has been made of Scope 3 emissions of legacy
Synthomer sites. Legacy OMNOVA Scope 3 emissions estimation is
ongoing and was not completed in time for inclusion in this report.

Downstream processing emissions were not included in the initial
assessment given the limited data available in this area.

• Total estimated Scope 3 emissions raised to 2.1 million of CO2e

tonnes with purchased goods and services accounting for 97% of
the total Scope 3 emissions.

Moving forward a data collection improvement plan will be developed
to ensure estimations accuracy and adequate targets for Scope 3
emissions reduction will be defined.

Performance in 2020
Scope 1 and 2 emissions
Legacy Synthomer
• Total CO2 equivalent emissions decreased 7.6% to 286,717 tonnes.
• Emissions per tonne sales production decreased 7.1% to

0.187 tonnes per tonne.

• Reduction of 14% in reported refrigerant losses to 1,640kg/
equivalent CO2 associated losses reduced to 4,785 tonnes.

Enlarged Group
• Total CO2 equivalent emissions decreased 8.5% to 382,379 tonnes

compared with 2019 baseline of 417,898.

• Emissions per tonne sales production decreased 5.9% to

0.214 tonnes per tonne compared with 2019 baseline of 0.227.

• Reduction of 33.5% in reported refrigerant losses to 1,719 kg/
equivalent CO2 associated losses reduced to 4,936 tonnes
compared with 2019 baseline of 2,586 tonnes/8,483 equivalent CO2
associated losses.

UK only
• Total CO2 equivalent emissions increased 5.6% to 18,731 tonnes.

(17,737 tonnes in 2019).

• Emissions per tonne sales production decreased 5.5% to
0.213 tonnes per tonne (0.226 tonnes per tonne in 2019).

• Reduction of 100% in reported refrigerant losses to 0 (46 kg of
refrigerant/97 tonnes of equivalent CO2 associated in 2019).

2018 and 2019 emissions were modified to exclude VOCs, which
resulted in around 1% reduction of total emissions. 2019 emissions
were modified also taking into consideration the mentioned changes in
energy consumption. However, the changes were limited and not
regarded as having relevant influence on overall reported performance.

The reduction in absolute and specific emissions both in legacy Synthomer
and the enlarged Group was largely due to the reduction of Scope 2
emissions due to the increasing purchase of renewable electricity.

In the UK, although the situation differs from site to site, overall the
increase in absolute emissions was due to an increase in production.
UK sites have already been using certified renewable electricity for
several years.

Moving forward the Group will continue to invest in moving to
renewable electricity supplies, increasing the number of countries
purchasing renewable electricity. Following significant progress in
Europe, the next areas of focus are USA and Asia. This ongoing
work will significantly drive down the Company’s Scope 2 emissions
and be an important factor in meeting our proposed 2022 greenhouse
gases targets.

The biggest contributor to Scope 1 emissions is the Sokolov plant
in the Czech Republic that uses brown coal. A project to move from
coal to natural gas has been approved and should deliver significant
Scope 1 emissions reductions over the next few years.

Scope 1 and 2 – location based and market based 2020 – emissions
have been verified by a third party.

5. Environment continued

Energy and GHG KPIs
This table presents environmental KPIs for 2019–20, with a coverage and format in line with UK Government guidance, to comply with
the reporting required under the Companies Act 2006 (Strategic Report and Report of the Directors’ Report) Regulations 2013 and
the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

Units

2020

20197

20187

% change
2018-208

% change
2019-208

Energy consumption1
Gas

Light oil

Heavy oil

Steam (metered)

Electricity (primary basis)

Total energy consumption

Greenhouse gas emissions2
Energy consumption
Energy consumption (CO2 equivalent)3, 8

Refrigerant releases (HCFC and others)
Refrigerant releases

Refrigerant emissions (CO2 equivalent)

Total emissions6
Total greenhouse gas emissions –
hybrid approach5

Comprising:
Total Scope 1 emissions

Total Scope 2 emissions – hybrid approach

Total Scope 2 emissions – Market Base

Total Scope 2 emissions – Location Base

Legacy Synthomer
Enlarged Group
UK

Legacy Synthomer

Enlarged Group
UK

Legacy Synthomer
Enlarged Group
UK

-12.7%
0.0%
2.3%
-0.3%
-1.8%
1.6%
-1.4%
0.1%

-6.9%
-7.8%
4.1%

GJ 1,550,872
GJ 2,414,002
GJ
241,620
GJ
18,607
GJ
19,141
GJ
1,540
GJ
4,666
GJ
4,731
GJ
184
GJ
675,293

GJ
863,414
GJ
0
GJ 2,726,231
GJ 3,782,087
GJ
198,992
GJ 5,690,639
GJ 7,802,418
GJ
455,056

1,525,851
2,479,253
240,497
21,599
21,898
498
6,657
6,701
184
763,100

988,627
0
2,664,649
3,791,693
202,549
5,602,704
7,913,813
454,390

1,519,649

22,625

5,533

751,545

2.1%

1.6%
-2.6%
0.5%
-17.8% -13.9%
-12.6%
209.2%
-15.7% -29.9%
-29.4%
0.0%
-10.1% -11.5%

2,634,611

3.5%

5,520,570

3.1%

tCO2e
tCO2e
tCO2e

kg
kg
kg
tCO2e
tCO2e
tCO2e

tCO2e
tCO2e
tCO2e

tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e

281,932
377,443
18,364

302,963
409,416
17,639

299,693

-5.9%

1,640
1,719
0
4,785
4,936
0

286,717
382,379
18,731

156,484
201,017
12,464
130,233
181,362
6,266
136,347
187,205
6,266
174,079
225,662
8,785

1,918
2,586
46
7,324
8,483
97

310,287
417,898
17,737

149,382
199,561
12,429
160,906
218,338
5,308
177,023
234,022
5,308
173,189
230,621
8,367

2,355

7,627

-30.4% -14.5%
-33.5%
-100.0%
-37.3% -34.7%
-41.8%
-100.0%

307,320

-6.7%

-7.6%
-8.5%
5.6%

143,863

163,457

8.8%

4.8%
0.7%
0.3%
-20.3% -19.1%
-16.9%
18.0%
-23.0%
-20.0%
18.0%
0.5%
-2.2%
5.0%

Synthomer plc Annual Report 2020Strategic Report

Units

2020

20197

20187

% change
2018-208

% change
2019-208

Other emissions to air2
Volatile Organic Compounds (VOC)
VOC emissions

VOC emissions (CO2 equivalent)

Sulphur Dioxide (SO2)

Nitrous Oxides4 (NOx)

Emissions per sales production tonne
Total production sales tonnes

Energy consumption

Emissions to air
Energy consumption3

Refrigerant Releases (HCFC and others)

Total greenhouse gas emissions

Volatile Organic Compounds (VOC)

Sulphur Dioxide (SO2)

Nitrous Oxides4 (NOx)

Legacy Synthomer
Enlarged Group
UK

tonnes
tonnes
tonnes
tCO2e
tCO2e
tCO2e
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes

ktes
ktes
ktes
GJ/t
GJ/t
GJ/t

tCO2e/t
tCO2e/t
tCO2e/t
kg/ktes
kg/ktes
kg/ktes
tCO2e/t
tCO2e/t
tCO2e/t
kg/t
kg/t
kg/t
kg/t
kg/t
kg/t
kg/t
kg/t
kg/t

214
379
163
2,358
4,171
1,796
133
134
0
206
240
5

1,536
1,789
86
3.705
4.360
5.281

0.184
0.211
0.213
1.068
0.961
0.000
0.187
0.214
0.217
0.139
0.212
1.892
0.087
0.075
0.000
0.134
0.134
0.058

184
515
141
2,024
5,667
1,551
125
126
0
171
208
5

1,545
1,840
78
3.628
4.301
5.811

0.196
0.223
0.226
1.242
1.406
0.588
0.201
0.227
0.227
0.119
0.280
1.803
0.081
0.068
0.000
0.111
0.113
0.064

303

-29.3%

3,330

-29.2%

143

-6.7%

130

58.5%

1,578

-2.6%

3.499

5.9%

16.3%
-26.4%
15.6%
16.5%
-26.4%
15.8%
6.4%
6.3%
0.0%
20.5%
15.4%
0.0%

-0.5%
-2.7%
10.2%
2.1%
1.4%
-9.1%

0.190

1.493

0.195

0.192

0.090

0.082

-4.2%

-3.4%

-6.4%
-5.2%
-5.5%
-28.5% -14.0%
-31.7%
-100.0%
-7.1%
-5.9%
-4.2%
16.9%
-24.3%
4.9%
7.0%
9.3%
0.0%
21.1%
18.6%
-9.3%

-27.4%

62.8%

-4.2%

Notes
1. Data relates to site usage of all fuels, excluding transport of goods to and from site and the movement of these vehicles on site. Internal transport on site is included.
2. Emissions to air have been calculated from the usage of all fuels, excluding transport fuel. They therefore include both direct emissions and indirect emissions related to bought-in electricity,

steam, compressed air, cooling water etc., with the exception of transmission and distribution losses for electricity (these losses are in Scope 3, this report is for Scope 1 and 2).

3. CO2 equivalent emissions include contributions from CH4 and N2O associated with combustion.
4. NOx emissions are predominantly those from combustion processes. The CO2 equivalent Global Warming Potential contribution from these releases is already included in the CO2 from the

energy figure above.

5. Hybrid approach takes into consideration Location Base emissions for all sites except for the ones consuming green energy that are accounted as Market Base
6. The total CO2e figure is the total of the CO2 equivalent from energy and the refrigerant contribution.
7. 2019 data has been modified according to the details provided in the Environment section.
8. Percentage changes are calculated from the base data and may differ slightly from changes calculated from the data in the tables because of rounding.

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic Report

Environmental, Social and Governance (ESG) – review of our six pillars continued

6. Sustainable Value Chain

Technology & Innovation
Innovation is a core value of Synthomer and providing value
to our customers through innovative new products is a pillar of
our strategy. 2020 was an exciting year with the advancement
of ongoing programmes and strengthening of our product
and process innovation capacity through integration of the
OMNOVA R&D resources. The integration of these organisations
has resulted in 50% higher capacity to design new products
to meet new market and customer needs.

A universal trend across all market segments is a demand for new
products with improved sustainability including the avoidance of
an adverse environmental impact, and characteristics to support
a circular economy. Making water-based polymers and speciality
chemicals from renewable raw material sources which require less
energy to produce, do not contain hazardous substances, and are
recyclable or biodegradable are objectives of our innovation pipeline.

To more effectively tackle this complex challenge our new Technology
& Innovation organisation includes a dedicated, centralised team
of scientists to work on new chemistry platforms for the future.
This team will work closely with divisional R&D teams to accelerate
the exploration, development and commercialisation of more
sustainable solutions that achieve even higher levels of performance.

Sustainability improvements in new products continue to fall into
five categories, namely: air quality, energy or material efficiency,
elimination of materials of concern, recyclability and biodegradability,
and renewable or lower impact raw materials, with greater emphasis
on circular economy and use of renewable resources.

The products below are examples of recent innovations and
platforms for growth that are aligned with one or more criteria
for sustainable innovation:

Less materials of concern and energy efficiency
As reported in our 2019 Annual Report, Synthomer’s SyNovus®
technology for medical gloves is an innovative, proprietary way
of making Nitrile latex in a way that significantly reduces energy
usage and the use of hazardous materials. SyNovus® products
are used to produce gloves on state-of-the-art dipping lines that
meet all stringent European and North American performance and
regulatory requirements. The novel curing system eliminates the
need to use accelerators known to be allergens. The technology
also allows glove producers to significantly reduce the line curing
temperature, decreasing overall energy usage by up to 20%.
A third-party specialist prepared a full Life Cycle Analysis which
indicated that SyNovus® has a 15–20% lower CO2 impact than
conventional Nitrile latex technology and has an impact of up to
30% lower compared to other non-NBR latex technologies.

Litex QuickShield™ and Litex SkyShield™ are formaldehyde-free
binders for the impregnation of textiles that cure at lower temperature
and quicker than the standard products, thus reducing energy and
contributing to better air quality.

Strategy and progress in 2020
Synthomer requires any individual or entity acting on its behalf,
whether as a consultant, representative, agent or distributor, to
know, understand and abide by the laws and regulations applicable
in the country or countries in which they act for Synthomer. These
requirements are covered in detail within the business policies in
our Code of Conduct.

During 2020 the procurement team was reorganised, as part
of the integration of the OMNOVA business, and a Procurement
Excellence team was created. This team has, as part of its mission,
global responsibility and increased resources to build on and
strengthen our supplier management processes. The team has
brought together our management controls for suppliers under a
new Sustainable Procurement Policy and Strategy. This commits
us to a deeper understanding of our sustainability risks and
opportunities. During the latter part of the year, this Policy has
been communicated across the global procurement team to ensure
awareness and specific assessments have been conducted to identify
our impact areas. We are also looking to adopt new and enhanced
supplier assessment tools that cover wider sustainability aspects.

The procurement team needed to respond quickly and effectively
to supply chain disruptions following COVID-19. This started early
in the year with China and then following through to Europe and
the rest of the world. The team successfully managed the inventory
levels, alternative supplies and extended lead times to keep the
assets supplied. One of the biggest issues was to manage the
extensive and global logistics disruptions, limiting the movement of
raw materials and finished products at a global, regional and local
level. The response to the pandemic and supply chain disruption
was managed without compromising our business policies or
Code of Conduct, which are fundamental to our values and ways
of working.

Synthomer plc Annual Report 2020Strategic ReportAir quality, renewable raw materials and recyclability
Suncryl® HP 114 is one of a family of new products produced with
a new class of polymers made via a proprietary monomer system
with over 65% bio-content. This technology offers a water-based
alternative to solvent-based release coatings for packaging tape,
thus reducing the amount of solvents released to the environment.
The outstanding release performance allows for replacement of
silicone containing coatings in many applications which improves
the recyclability and repulpability of paper tapes and release liners.
This excellent balance of performance and sustainability has led
to ongoing programmes to expand its use into coating applications.

While our commitment to ongoing programmes continued in 2020,
the ability to commercialise these products was delayed due to
resource limitation and priority changes related to the COVID-19
pandemic. We continue to reassess ongoing programmes as well as
new market needs that have surfaced as a result of the pandemic.

Synthomer has participated in the European Polymer Dispersion
and Latex Association (EPDLA) cradle-to-grave life cycle inventories
of our key emulsion polymer families, namely: Styrene-Butadiene,
Lipaton, Styrene-Acrylics, Revacryl, Pure Acrylics, Plextol and VACO,
Emultex. Results show that Synthomer performs better than the
benchmark in all the categories.

Product safety
The majority of Group products are water-based emulsions that are
not deemed to be hazardous chemicals.

However, for those that are hazardous, Synthomer is committed to
providing its customers with comprehensive and legally compliant
safety data sheets in all the markets we serve.

Our central Regulatory Affairs Department also manages our ongoing
REACH compliance activities through our supply chain and has been
active in preparing for the impact of Brexit on chemicals registered
within and transported to the UK, as well as managing REACH-like
schemes being introduced globally.

As part of the sustainability assessment of our new product
developments, we are committed to avoid the use of substances
of very high concern and a project is in place to phase out the
products that still contain these raw materials.

The Strategic Report was approved by order of the Board.

R Atkinson
Company Secretary
4 March 2021

GovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Strategic ReportBoard of Directors

C A Johnstone
Chair

Nationality: British

C G MacLean
Chief Executive Officer

Nationality: British

S G Bennett
Chief Financial Officer

Nationality: British

Position and date of appointment: Chair of the
Board and the Nomination and Disclosure
Committees. Caroline joined the Board in March
2015 and was appointed Chair in December 2020
having been Chair of the Audit Committee and a
member of the Nomination and Remuneration
Committees prior to appointment as Board Chair.

Key appointments: Caroline is a Non-Executive
Director and Chair of the Employee Engagement
Committee of Spirax-Sarco Engineering plc, and
is a Non-Executive Director and Chair of the Audit
Committee of Shepherd Building Group Limited,
a private company which owns Portakabin Limited.
Caroline also has an honorary role on the board
of the University of Manchester.

Skills and experience: Caroline has nearly
40 years’ experience of working with large
global organisations in the chemicals and other
industries. Her experience includes delivering value
from merger and acquisitions, turnaround, culture
change and cost optimisation. She was a partner
in and sat on the board of the Assurance practice
of PricewaterhouseCoopers (PwC) with responsibility
for all people matters. Caroline is a chartered
accountant and a member of the Institute of
Chartered Accountants of Scotland.

Position and date of appointment: Chief Executive
Officer since January 2015; member of the
Disclosure Committee.

Position and date of appointment: Chief Financial
Officer since May 2015; member of the
Disclosure Committee.

Key appointments: Calum was appointed as
a Non-Executive Director of Saudi Basic Industries
(SABIC) headquartered in Riyadh in October 2017
and of Clariant Limited, an associated company
of SABIC, in October 2018.

Skills and experience: Calum was a founder
member of the INEOS Group which was
established in 1998. Between establishment
and his departure at the end of 2014 he held
senior board executive roles in the group including
Executive Chairman of Styrolution and Petroineos,
two joint ventures established between INEOS
and BASF and Petrochina. He was also Chief
Executive of a number of principal INEOS
divisions including Olefins & Polymers,
ChlorVinyls and Phenol whilst being intimately
involved in merger and acquisitions, strategy
and integration projects. Prior to INEOS he
spent six years in various commercial and
technical roles at INSPEC, BP Chemicals
and Water Services. Calum is a Chemist
and studied at Aberdeen University.

Key appointments: No external appointments.

Skills and experience: Stephen was previously
at INEOS where he had been Chief Financial
Officer at Petroineos Refining since 2006.
In addition to this role, Stephen had acted as
Chief Financial Officer of INEOS Upstream Limited,
a start-up oil and gas exploration business,
and of INEOS Olefins and Polymers South and
INEOS Phenol. He joined Coopers & Lybrand in
1986 and is a qualified chartered accountant.
He was at Full Circle Industries plc as company
secretary and group controller before moving to
PricewaterhouseCoopers LLP (PwC) in 1997 as
a Director in transaction services. At PwC, he
specialised in public and private equity transactions
across a variety of sectors including chemicals.

Experience and skills

Independence
Finance and audit
Operational management
M&A
Chemicals/Broader industrial
Sustainability
Innovation
People and culture
International experience

Non-Executive Directors

Executive Directors

The Hon. A G Catto
Non-Executive Director

Nationality: British

Position and date of appointment: Non-Executive
Director since 1981. Designated Non-Executive
Director to lead workforce engagement.

Key appointments: Alex is managing director of
CairnSea Investments Limited, a private investment
company, and a Non-Executive Director of several
early stage companies that have been backed
by CairnSea.

Skills and experience: Prior to the establishment
of CairnSea, Alex was a Director of Morgan Grenfell
& Co and then Lazard Brothers & Co Ltd.

Synthomer plc Annual Report 2020Governance

B W D Connolly
Senior Independent Director

Nationality: British

Position and date of appointment: Independent
Non-Executive Director since January 2014; Chair
of the Remuneration Committee; member of the
Audit, Disclosure and Nomination Committees.
Senior Independent Director since April 2015.

Key appointments: Brendan is a Non-Executive
Director of Victrex PLC and two private equity
backed companies, one of which he chairs.

Skills and experience: Brendan has over 30 years’
experience in the oil and gas industry. Until June
2013 Brendan was a senior executive at Intertek
Group plc and had previously been Chief Executive
Officer of Moody International (which was acquired
by Intertek in 2011). Prior to Moody, he was
managing director of Atos Origin UK, and spent
more than 25 years of his career with Schlumberger
in senior international roles over three continents.
Brendan has previous experience as chairman of
the remuneration committee of a UK listed company.

Dr J J C Jansz
Independent Non-Executive Director

Nationality: Dutch

Dato’ Lee Hau Hian
Non-Executive Director

Nationality: Malaysian

Position and date of appointment: Independent
Non-Executive Director since April 2012; member
of the Audit and Remuneration Committees.

Key appointments: Just is founder and Managing
Director of Expertise Beyond Borders BV,
an independent business and technology
management consultancy providing services
to the global chemical industry. He is a senior
advisor at Natrium Capital Limited.

Skills and experience: Just has over 30 years
chemical industry experience at Shell, Basell
and LyondellBasell. Until July 2010 Just was
President, Technology Business, and a member
of the management team of LyondellBasell,
overseeing process technology licensing,
polyolefin catalysts and new ventures. Just has
extensive experience in the polyolefin industry
and related value chains, in commercialising
innovation and in monetising IP. Just has
previous experience as a Non-Executive Director
in the USA and as an advisor in Saudi Arabia.

Position and date of appointment: Non-Executive
Director since 2002; first joined the Board in
1993 and stood down in 2000 to become an
Alternate Director.

Key appointments: Hau Hian is a Director of
Kuala Lumpur Kepong Bhd and is the President
of the Perak Chinese Maternity Association.
He also serves as a Director of Yayasan De La
Salle and Chemical Company of Malaysia Berhad.

Skills and experience: Hau Hian is the
Managing Director of Batu Kawan Bhd,
a listed Malaysian investments holding
company, with interests in plantations and
chemicals manufacturing. He has experience
in organisational transformations, acquisitions,
chemical and manufacturing operations and
sustainability issues.

H A Van Deursen
Independent Non-Executive Director

C S Dubin
Independent Non-Executive Director

R Atkinson
Chief Counsel and Company Secretary

Nationality: American

Nationality: American and British

Nationality: British

Position and date of appointment:
Independent Non-Executive Director since
September 2018; member of the Audit and
Remuneration Committees.

Key appointments: Holly is a Non-Executive
Director of Kimball Electronics Inc,
Albermarle Corporation and Capstone
Turbine Corporation.

Skills and experience: Until 2005, Holly was
Group Vice President, Petrochemicals, at BP.
She has worked in the global chemical industry
for over 25 years and held senior positions
across North America, Europe and Asia.
In addition, Holly has since 2006 held Non-
Executive Director roles in the USA and
spent 12 years on the board of a Norwegian
listed company.

Position and date of appointment: Independent
Non-Executive Director since July 2020; Chair
of the Audit Committee and a member of the
Nomination and Remuneration Committees.

Key appointments: Cynthia is a Non-Executive
Director of the Competition and Markets Authority,
where she is a member of and currently acts as
Chair of the Audit and Risk Assurance and
Nomination Committees, an independent
Non-Executive Director and member of the
Audit Committee of Hurco Companies Inc and
an independent Non-Executive Director and member
of the Audit and Risk Committee of ICE Futures
Europe, a subsidiary of Intercontinental Exchange.

Skills and experience: Cynthia has served in senior
finance and business roles in the power, oil, gas
and broader clean energy technology sector having
started her career in the banking industry in New
York specialising in advising and lending to large
energy projects before relocating to London in 1992.

Position and date of appointment: Company
Secretary since 1998; Group Chief Counsel.

Key appointments: No external appointments.

Skills and experience: Richard qualified as
a solicitor in 1988 practising as a corporate
lawyer before moving into industry.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceIntroduction to corporate governance

Refreshing our
governance

Caroline Johnstone

Chair

Chair’s introduction
Our governance and Company purpose have been crucial to
managing through the pandemic, supporting us in making what
were sometimes difficult decisions and choices throughout the
last year. They also help us to act with integrity, ensure shareholders
have a good return and treat our employees, customers, suppliers,
our communities and our environment appropriately and with respect.
I am pleased to present my first report to you on the functioning of
our governance.

In the following pages, we set out the approach to governance
and the activities of the Board in 2020. We also set out our
statement on pages 38 to 41 describing how we had regard to
matters set out in Section 172(1) of the Companies Act 2006.

2018 Code compliance
I am pleased to report that, in all material respects, we were in
compliance with the 2018 UK Corporate Governance Code (the
‘Code’) and we have made significant progress this year, particularly
in terms of diversity in our Board. We have also carefully considered
and reflected on the FRC review of corporate governance reporting
published in November 2020 and we report for completeness
two areas of the Code where we explain our approach page 83.

We are in compliance with the Hampton-Alexander recommendations
and the Parker Review as regards our Board composition and we
have made progress but recognise that we have more to do on the
diversity and ethnic balance of our executive team and their direct
reports page 101.

2021 focus
2021 will be a year of transition for the Board as we build on the
changes that have already taken place and prepare to welcome
further appointments as a result of the processes in hand to recruit
a new Chief Executive Officer to succeed Calum MacLean and
an additional independent Non-Executive Director to replace Just
Jansz during the course of 2021. I do consider, however, that the
governance framework set out in the following pages of this report will
support the Board well in serving the interests of all our stakeholders.

In the brief period since my becoming Chair, succession planning
activity has been a key area for the Board and the work done in
December 2020 to review the skills set of the Board has already
proved to be of great value. The externally facilitated Board evaluation
process commenced toward the end of 2020 (we set out the process
for the review on page 100) has been finalised, with the independent
reviewer concluding that the Board and its Committees are run in an
effective and collaborative manner and suit the current governance
needs and Company obligations. Some areas of development were
identified for Board operations and logistics which will be addressed
in the short term and specific areas of focus for 2021 were identified:

• Succession planning
• Diversity and inclusion
• The increasing ESG agenda and climate change in particular

The conclusions of the evaluation are in line with the Board’s
established priorities for 2021 and will be key areas for ongoing
Board focus. With a number of changes, and the opportunity to
reflect on learnings from operating with COVID-19 restrictions,
we are also looking forward to visiting Company locations and
developing the Board agenda and culture for the future.

AGM
The restrictions on gatherings imposed by the pandemic meant
that, like many companies, we were forced by circumstance to
resort at short notice to holding a closed meeting at the end of
April 2020 and were unable to put any shareholder participation
facilities in place. As there is uncertainty over both the gathering
restrictions that will be in force at the time of the 2021 AGM and
any extension of current temporary legislative provisions allowing
virtual meetings, we are reviewing what arrangements can be
put in place to best serve the interests of our shareholders.
We will communicate further on this nearer the time of issuing
the AGM notice.

We welcome questions from any shareholder at any time, ahead
of the AGM, and I am happy to meet with shareholders at any time.

Caroline Johnstone
Chair
4 March 2021

Synthomer plc Annual Report 2020GovernanceCorporate governance

Compliance with the UK Corporate Governance Code
The Board considers that it has complied throughout the financial
year ended 31 December 2020 with the provisions set out in the
Code* except in respect of the following matter:

Governance snapshot

Board diversity – gender

• Provision 38 – Alignment of pension contributions. The payments
in lieu of pension contribution rates for Executive Directors were
not aligned with those available to the workforce, however as
set out on page 105 a plan is now in place to achieve this for
the Chief Executive Officer and Chief Financial Officer by 2021
and 2022 respectively.

• Provision 41 – Engagement with workforce on Executive remuneration.
The Remuneration Committee (page 102) has a rigorous process for
setting and evaluating executive remuneration and performance.
Our employee engagement processes (page 65) also provide us an
opportunity to hear from employees around all aspects of the
business, including any feedback on executive remuneration, although
there was no direct engagement on the alignment of Executive
remuneration with the wider Company pay policy. We will continue
to keep the deployment of such engagement under review.

Female 3

Male

one third

Representation of women
on Synthomer Board

Application of the Code – our approach to governance
The Chair
Caroline Johnstone joined the Board in March 2015 and was
considered independent upon appointment as Chair. Her external
appointments are set out on page 80 and these are approved by
the Board and are aligned with the time commitment required for
her role as Chair of the Board. The rigorous process of evaluating
and appointing Caroline to the role of Chair is set out on page 101.

Independence and balance
As at 31 December 2020, our Board comprised two Executive
Directors, two non-independent Non-Executive Directors and four
independent Non-Executive Directors. We had five independent
Non-Executive Directors from 15 July until 16 December, when
Neil Johnson resigned from the Board. Accordingly, we have
ensured that no one person or group of interests can dominate
Board decision making and debates.

Non-Executive Directors
Brendan Connolly was appointed Senior Independent Director
in April 2015. He has extensive experience as a Chief Executive
Officer and as a member of other FTSE boards and the Board
is satisfied that he has the necessary skills, experience and
attributes for the role.

During the year, Brendan led the process for appointing a new
Chair of the Board (page 101).

The Non-Executive Directors regularly hold meetings without
management present, with the internal and external auditors and
also with Deloitte, independent remuneration consultants. The Chair
and the non-executive director responsible for employee engagement
also meet with a range of employees without management present.

* A full version of the Code can be found on the Financial
Reporting Council’s website: www.frc.org.uk

Board diversity – ethnicity

White

Asian

Board diversity – nationality

British

Dutch

Malaysian

American

American/
British*

* Cynthia Dubin holds dual British and American citizenship.

Board tenure

0-5 years

5-10 years

>10 years

A balanced Board during 2020

Chair

Independent Non-Executive Directors

Executive and non-independent Non-Executive Directors

Caroline Johnstone (appointed Chair 16 December 2020)

Just Jansz

Holly A Van Deursen

Brendan Connolly

Cynthia Dubin

Calum MacLean

Stephen Bennett

Alex Catto

Lee Hau Hian

Non-Executive Directors are appointed for one-year terms. All Directors submit themselves for annual election at each AGM.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Governance

Corporate governance continued

Division of responsibilities
The Board has delegated to the Chief Executive Officer responsibility for the development and preparation of the Group’s strategy, business
plan and the annual budget for recommendation to the Board. As the Senior Executive Director, the Chief Executive Officer is responsible for
all aspects of day-to-day operational control of the Group and execution of the Group strategy. The Chief Executive Officer has established
and chairs an Executive Committee (whose other members are the Chief Financial Officer, the Chief Counsel and Company Secretary, and
the operational and functional presidents for the Group) to assist him in the performance of his duties and which meets once a month.

All Directors receive a monthly management report comprising business, financial and safety, health and environmental reviews from the
Chief Financial Officer.

Chair

• Responsible for leading and overall effectiveness of the Board
• Promotes a Board culture of openness and debate, and effective contribution of all Non-Executive Directors
• Coordinates the performance evaluation of the Chief Executive Officer and of individual Non-Executive

Chief Executive Officer

Senior Independent Director

Directors

• Holds meetings with and without Executive Directors present as appropriate
• Leads on all aspects of corporate governance

• Senior executive responsible for operational management of the Group
• Development, preparation and implementation of the Group’s strategy as approved by the Board
• Communication of the Group’s culture and values
• Communicating the Group’s financial performance to investors in conjunction with the Chief

Financial Officer

• Keeping the Board fully informed of all material issues

• Provides a sounding board to the Chair
• An alternative contact for the other Directors and shareholders
• Leads an annual meeting process to evaluate and feedback on the Chair’s performance
• Provides constructive challenge, strategic guidance and offers specialist advice

Non-Executive Directors

• Challenge constructively and scrutinise, hold to account the performance of management and individual

Key Board reserved activities • Approval of corporate and strategic business plans

Executive Directors against agreed performance objectives

• Responsible for employee engagement

• Approval of annual and interim results, trading updates
• Oversight of the business risk management framework
• Decisions on major acquisitions and disposals as well as major capital expenditure
• Director appointments
• Material litigation
• Approach to governance, processes and procedures
• Other matters reserved to the Board under the Group Delegated Authorities policy

Company Secretary and
Chief Legal Counsel

• Advises the Board on all governance matters
• Supports the Board to ensure that it has the policies, processes, information, time and resources required

to function effectively and efficiently

• Advises the Board on important legal and regulatory matters

Board structure

Audit Committee

Disclosure Committee

Remuneration Committee

Nomination Committee

Board

Company Secretary
• provides advice and services to the Board and its Committees
• supports the Chair in all governance matters

Chief Executive Officer
Executive Committee

Chief Financial
Officer

Company
Secretary &
Chief Counsel

President,
Performance
Elastomers and
President Asia

President,
Functional
Solutions and
President Europe

President,
Industrial
Specialities, M&A
and Global HR

President,
Corporate
Development

President,
Operations

President, Chief
Technology Officer
and President
Americas

Synthomer plc Annual Report 2020GovernanceDuring 2020 the Board held 19 meetings (2019: 13 meetings) with a full meeting dedicated to a review of the five-year strategic plan and
key strategic initiatives. Despite the significant increase in the number of Board meetings held in 2020, some at relatively short notice due
to the monitoring of the COVID-19 pandemic and other strategic issues, attendance was close to 100%. The Directors receive in advance
full information on all matters to be discussed at Board meetings as well as a detailed review of performance. The Non-Executive Directors
ordinarily meet once without the Chair to appraise his or her performance but did not do so in 2020 in view of the impending retirement of
Neil Johnson. The Board met once without the Executive Directors to appraise their performance.

In addition, arrangements are made each year for the Board to visit up to two of the Group’s operational sites and meet local management.
Ad hoc site visits are facilitated for individual Non-Executive Directors on request. In view of the COVID-19 pandemic no site visits were made
by the Board in 2020.

The table below sets out the number of meetings of the Board, Audit, Remuneration, Nomination and Disclosure Committees held during
the year and the number of meetings attended by each Director. Where a Director is unable to attend a Board or Committee meeting, his
or her views on agenda items are canvassed in advance of the meeting and incorporated into the discussions. The Non-Executive Directors
disclose to the Board their other significant commitments prior to appointment and any proposed new significant commitments require prior
Board approval.

Board attendance throughout the year
Attendance during the year for all Board and Board Committee meetings is set out in the table below:

Stephen Bennett
Alex Catto
Brendan Connolly
Holly A Van Deursen
Cynthia Dubin1
Just Jansz
Neil Johnson2
Caroline Johnstone2
Lee Hau Hian
Calum MacLean

Board
of 19
19
19
18
19
10
19
18
19
18
19

Audit
of 5
–
–
5
5
2
5
–
5
–
–

Remuneration
of 4
–
–
4
4
2
4
–
4
–
–

Nomination
of 4
–
–
4
–
–
–
2
2
–
–

Disclosure
of 5
5

5
–
–
–
5
–
–
5

1. Cynthia Dubin was appointed to the Board on 15 July 2020 and attended all meetings for which she was eligible to do so.
2. Due to the subject matter of the meetings concerning the Board Chair succession Neil Johnson and Caroline Johnstone did not attend two of the four meetings of the Nomination Committee

and other Non-Executive Directors were co-opted to attend.

Board composition, succession and evaluation
The Chair, Chief Executive Officer, Chief Financial Officer and Senior Independent Director together with Chairs and members of the Audit,
Nomination, Remuneration and Disclosure Committees are identified on pages 80 and 81. The Board considers that Holly A Van Deursen,
Cynthia Dubin, Just Jansz and Brendan Connolly are independent in accordance with Provision 10 of the Code. The Board composition was
balanced between the number of independent and non-independent Directors throughout 2020 and comprised one third women with effect
from 16 December 2020.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceCorporate governance continued

Board activity in 2020
Framework focused on delivering sustainable growth

Steering and setting the tone through COVID-19

Safety, Health and Environment

Investing in organic growth

OMNOVA integration and synergy delivery

Financial and commercial performance

Monitoring financial strength

Leadership and people

ESG and stakeholder relations

Internal control and risk management

Strategy & Innovation

Employee Voice

Steering and setting the tone through COVID-19
The impact of the pandemic on the Company, performance,
operations and its employees became a standing agenda item
at all meetings from February 2020 and the Board processes
were quickly adapted to accommodate virtual meetings.

Safety, Health and Environment (SHE)
SHE performance and initiatives are reviewed at every meeting
supported by a written report and presentation by the President
for Operations.

Investing in organic growth
Material capital expenditure projects are subject to Board review and
approval. During the year, investments in the sites at Stallingborough
(UK) and Langelsheim (Germany) were approved. Investment in the
Pathway programme was approved and progress monitored with
the help of a third-party review of the programme delivery approach.
The progress of the Nitrile latex capacity expansion project at
Pasir Gudang (Malaysia) was also monitored. Regular reports were
received on operational optimisation and transformation projects.

OMNOVA integration and synergy delivery
Regular reports were received on integration, implementation
and synergy delivery with an external firm providing oversight
of synergy reporting.

Financial and commercial performance
Financial and commercial performance and strategic initiatives are
reviewed at every meeting, supported by reports and presentations
from the Executive Directors and Presidents. Detailed reviews of
specific business areas were provided by the responsible President
or functional head in conjunction with budget and strategy discussions.

Monitoring financial strength
Financing, cash flow and liquidity were an area of particular focus
and the Company’s debut bond issue was approved in June 2020.

Leadership and people
Succession planning processes and progress were reviewed with
support from the Global HR Director. The Nomination Committee
completed the search process and recruitment for an additional
female Non-Executive Director and initiated a search process for
a replacement Non-Executive Director in anticipation of the retirement
of Dr J Jansz during 2021 following completion of his nine year tenure.

ESG and stakeholder relations
Routine reports on governance, investor relations and Employee
Voice matters were given at each meeting. An external evaluation
of the Board and its Committees was carried out. A number of
significant decisions relating to sustainability were taken and
targets set for diversity for the first time.

Internal control and risk management
As well as receiving regular reports from the Audit Committee
on the Company’s internal control and risk management
processes, particular attention was paid to risks related to
the pandemic and Brexit.

Strategy & Innovation
The Board dedicated a full meeting to a review of the five-year
strategic plan and key strategic initiatives with a particular focus
on innovation and future investment opportunities in Nitrile latex.

Employee Voice
In view of the onset of the COVID-19 pandemic early in the year
no site visits were made other than by Alex Catto in his capacity
of Non-Executive Director responsible for representing the ‘Employee
Voice’ on the Board. Mr Catto made visits to our UK sites in Harlow,
Accrington and Stallingborough, spending time with managers,
union representatives and a range of different employee groups.

Synthomer plc Annual Report 2020GovernancePromoting
integrity and
openness

Cultural
priorities

Valuing
diversity and
inclusion

Being
responsive to
the views of
stakeholders

Culture
aligned to
purpose and
values

Culture
alighted to
strategy

How the Board assesses and monitors culture

Cultural identifier
Employee survey data
Code of Conduct compliance
Compliance training data
Use of Ethics Helpline
Site visits and workforce engagement
Risk and risk assessment reports
Reports on the promotion of diversity and inclusion
Whistleblowing reports
Gender pay gap progress
Payment practice reports
Health and safety performance
Environmental targets

Purpose, values and strategy
The Board endorsed the Company’s revised ‘purpose’ which is
set out on the inside front cover in November 2020 with the review
process described on page 11. Details of the launch of our new values
during 2020 are set out on page 65. We describe the linkage between
our purpose, values and strategy on the inside front cover.

Culture
The Board is conscious of its responsibility for setting the cultural
tone and deploys a number of monitoring and assessment tools.

During 2020 significant effort was devoted to extending and
embedding our culture within OMNOVA through the roll-out of the
following:

• Safety, Health and Environmental practices
• Training workshops on our Code of Conduct
• Town hall meetings and other employee communications

including Chief Executive Officer videos

• New values

The work on our diversity and inclusion policies and practices during
the year, as described on pages 67 and 68, is fundamental to
ensuring our culture respects and values differences which supports
business performance and innovation.

Stakeholder engagement
Our key stakeholder groups and the topics that are materially
significant are set out on pages 36 and 37. Based on our engagement
with and feedback from stakeholders, we include consideration
of their views in the decision making of the Board. Our statement
describing how the Board has had regard to the matters set out in
Section 172 (1) (a) to (f) of the Companies Act 2006 when performing
its duty under Section 172 is set out on pages 38 to 41.
The information below supplements the details on stakeholder
engagement on pages 36 and 37.

Relations with shareholders
Dialogue with institutional investors is conducted on a regular
basis by the Chief Executive Officer, Chief Financial Officer and the
President, Corporate Development and meetings take place following
the announcement of half and full year results and at other times
according to circumstances. In addition to half and full year reporting,
the Board has decided to continue with the practice of providing
interim management statements notwithstanding that it is no longer
a regulatory requirement to do so.

The Board has adopted a set of shareholder communication
principles in order to ensure that Board members develop an
understanding of the views of the Group’s major shareholders.
These principles require the Chair to be present with the Chief
Executive Officer and the Chief Financial Officer at sufficient
shareholder presentations and meetings to provide assurance
that she fully understands the issues and concerns of major
shareholders. Alternatively, the Chair is also available for
meetings with major shareholders at their request.

The Chief Executive Officer reports on shareholder relations at
each Board meeting. Communications with shareholders relating
to corporate governance matters are conducted by the Chair
with the assistance of the Chairs of the Audit and Remuneration
Committees. Reports on all meetings between Non-Executive
Directors and institutional shareholders and their representative
bodies are given to the Board at the first opportunity following
such meetings, as is all correspondence with them.

The Senior Independent Director is available to shareholders
if they have concerns and where contact through the normal
channels of the Chair or the Chief Executive Officer has failed
to resolve or for which such contact is inappropriate.

All resolutions proposed at the 2020 AGM were very
well supported including the approval of a new Directors’
Remuneration Policy which has been implemented as is
reported in the Directors’ Remuneration report on pages 102 to 118.

The Board seeks to encourage participation of all shareholders,
and in particular private investors, at the Company’s AGM and
endeavours to ensure all Board members are in attendance.
In particular, the Chairs of the Audit, Nomination and
Remuneration Committees are available to answer questions.

The Company makes use of its website www.synthomer.com to
communicate with its shareholders and also publishes half and full
year results, Company announcements, share price and corporate
governance and other investor information can be found there.

Information on the Company’s major shareholdings and share
capital is included in the Directors’ Report on pages 119 and 120.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceCorporate governance continued

Engagement with employees
The engagement with our employees is detailed on pages 65 to 67
and includes: the appointment of Alex Catto as the designated
Non-Executive Director for gathering the views of the workforce; social
media and the Company intranet; the use of surveys; town hall meetings
at sites and with specific groups such as members of the graduate
development programme hosted by the Chief Executive Officer and
other members of the Executive Committee; the externally hosted
Ethics Helpline which provides a way of raising concerns in
confidence; appraisal processes and structured career and
competency reviews. During 2020 these processes have been
adapted to take account of the COVID-19 pandemic.

In addition the Board and its Committees routinely invite members
of management to attend meetings to present on the matters being
discussed. Board members take the opportunity to engage more
widely with employees during site visits.

Induction and training
Induction arrangements are in place in order to ensure new
Directors receive a full formal and tailored induction on appointment.
Induction arrangements conducted during the year for Cynthia
Dubin, who was appointed in July 2020, are set out on page 101.
The Chair reviews and agrees the training and development needs
of the Directors, and the skills and knowledge of the Board as
a whole are updated by briefings provided by the Company’s
internal resources and materials, workshops and seminars offered
by external advisers. During 2020 briefings were delivered to the
Board on developments in corporate governance reporting and
to the Remuneration Committee on governance and best practice
in remuneration. The Audit Committee was provided with updates
on governance and corporate reporting by PwC and in addition
considered a presentation on ongoing reviews and potential reforms
of the audit profession and practices, and the future of internal audit.

Board Performance evaluation
The performance evaluation process in 2020 involved the following:

• the performance of the Executive Directors was reviewed against
their personal objectives for 2020 by the Non-Executive Directors
and the Chair;

• the effectiveness of the Board and its Committees (Audit,

Nomination, Remuneration) was evaluated by way of an externally
facilitated evaluation, details of which are set out below; and
• an assessment of the performance of individual Non-Executive
Directors was carried out by the Chair through a programme
of one-to-one discussions.

The performance of the out-going Chairman was not evaluated
during 2020 in view of his retirement at the end of the year.

Board and Committee evaluation process
In accordance with Provision 21 of the Code the evaluation of the
Board and its Committees in 2020 was externally facilitated using
Egon Zehnder, the previous externally facilitated evaluation having
been carried out in 2017. The evaluation was commissioned by
the Board and overseen by Caroline Johnstone, in her capacity
of Deputy Chair at the time, with input from the Chairman and
the Senior Independent Director and the process was supported
by the Company Secretary.

Proposals were obtained from three board evaluation specialists
and Egon Zehnder (which had on appointment no other connection
with the Company, other than having been engaged to conduct a
search exercise for an additional Non-Executive Director as described
on page 100, and has no connection with individual directors)
was selected. Egon Zehnder has subsequently been appointed
to lead the search exercise for a new Chief Executive Officer as
also described on page 101.

The approach taken to the evaluation process was to include
not only Board members and the Company Secretary but also
members of the Executive Committee who had regularly attended
Board meetings over the previous two to three years so as to gain a
wider management perspective of the Board. Questionnaires were
issued and completed before one-to-one interviews with all 15
participants were held lasting some 90 minutes in order to bring
increased rigour and elicit greater candour through the process.
Details of the output from the evaluation are set out in the Chair’s
governance letter and below.

Scope of evaluation review

Board Committee
• Delegated authority
• Committee composition

and dynamics
• Team process/

information flows

Key governance topics
• People succession
& people progress
• Company strategy

& performance
• Capital & Risk
• Stakeholder relationships

Board processes
• Number of meetings
• Agenda setting
• Annual cycle
• Information flows
• Reports/minutes
• Crisis management

s B
e
e
s
h
s
a
e
v
c
o
o
u
r
r
P
s

Board engagement
and relationships
• Quality of discussions
• Engagement
• Leader feedback
• Energy

Board balance
• Composition
• Diversity
• Structure

Board alignment
• Stakeholders
• Executives
• Other stakeholders

Board evaluation timeline

End November & Early December 2020

Kick off meeting with the
Deputy Chair, Company
Secretary and Group
HR Director

Finalisation of questionnaire

December 2020 – Mid January 2021

Questionnaires issued to and
completed by the Company
Secretary and four Executive
Committee members followed
by one-to-one interviews

21 January 2021

Board update and
status report

Early February 2021

Draft report issued for
Chair’s review with
Company Secretary

1 March 2021

Report presented to
the Board, facilitated by
Egon Zehnder and action
plan agreed

Synthomer plc Annual Report 2020GovernanceThe processes which are used by the Board either directly or, where
appropriate, through the Audit Committee to review the effectiveness
of the internal control and risk management systems in relation to the
financial reporting process and the process for preparing consolidated
accounts include the following:

• a review of the external and internal audit work plans;
• consideration of reports from management and external parties,
including the internal and external auditors, on the system of
internal financial control and any material control weaknesses; and
• discussion with management of the actions taken on any possible

problem areas for the business that are identified.

In addition, the Board:

• receives copies of minutes from all Audit Committee meetings; and
• receives regular written and oral reports from management on

all aspects of production, operations, financial and risk
management matters.

Safety, Health and Environmental matters
The maintenance of high standards of environmental (together
with health and safety) protection is central to the Group’s business.
A separate statement on Safety, Health and Environmental (SHE)
matters has been a feature of the Annual Report for a number of
years and is contained in the ESG section of the Strategic Report
on pages 70 to 71.

Board Committees
The Board has formally established Audit, Nomination,
Remuneration and Disclosure Committees, each with their own
terms of reference which set out their respective roles and the
authority delegated to them by the Board. Copies of the terms of
reference are available upon request from the Company Secretary
and can also be downloaded from the Company’s website. All
Non-Executive Directors have a standing invitation to attend
Committee meetings unless they are notified otherwise.

The Audit, Nomination and Remuneration Committees’ reports
are set out at the end of this Governance report.

Succession
All matters relating to succession are dealt with in the Nomination
Committee report on pages 100 and 101.

Risk and internal control
Accountability
An explanation of the Directors’ responsibilities for preparing the
financial statements, their report that the business is a going concern,
a viability statement, a responsibility statement and their statement as
to disclosure of information to the auditor are set out on pages 119 to
121. Statements by the auditors about their reporting responsibilities
are set out on pages 122 to 128.

A report on the approach to internal control is set out below.

The Directors endeavour to make the Annual Report and financial
statements as informative and understandable as possible.

Risk management and internal control
The Board of Directors has ultimate responsibility for the Group’s
systems of risk management and internal control and for reviewing
their effectiveness and sets appropriate policies to ensure that the
Code requirements are met. The systems of risk management and
internal control deployed within the Group are designed to reduce
the risks of failure to meet business objectives, but these risks
cannot be eliminated. The risk management and internal control
systems adopted can therefore only provide reasonable, not absolute,
assurance about meeting such business objectives or against material
misstatement or loss. The Group risk management framework is set
out on pages 42 to 44. Risks associated with safety, health and the
environment are, by the nature of the Group’s business, always of the
utmost concern and the ESG report on pages 56 to 79 reviews the
Group’s performance in this regard in 2020. The Board confirms that
a robust assessment of the emerging and principal risks facing the
Group has been carried out and that it has monitored and reviewed
the effectiveness of the Group’s risk management and internal control
systems in 2020.

The Group’s internal controls over the financial reporting and
consolidation processes are designed under the supervision of the
Chief Financial Officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation and fair
presentation of the Group’s published financial statements for
external reporting purposes in accordance with IFRS.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceAudit Committee report

Cynthia Dubin

Audit Committee Chair

“THE IMPACT OF COVID-19 FROM
LATE IN Q1 2020 RESULTED IN
SOME REALIGNMENT OF PRIORITIES
BUT WE CONTINUED TO FOCUS ON
MONITORING THE INTEGRATION OF
OMNOVA AND PROGRESSED WORK
TO DEFINE AND AUGMENT OUR
INTERNAL AUDIT AND RISK
MANAGEMENT ARRANGEMENTS
FOR THE ENLARGED GROUP”

This is my first report as Chair of the Audit
Committee having joined the Group during
2020. I would like to thank my predecessor,
Caroline, for welcoming me to the Committee
and for the extensive handover of the
responsibilities of Committee Chair.

Audit Committee membership

Since 1 January 2020
Cynthia Dubin
Caroline Johnstone
Just Jansz
Brendan Connolly
Holly A Van Deursen
Other attendees:
Chief Executive Officer
Chief Financial Officer
VP Group Finance

1. Based on number of meetings eligible to attend.

Position
Chair from 16 December 2020
Chair to 15 December 2020
Independent Non-Executive Director
Senior Independent Non-Executive Director
Independent Non-Executive Director

Appointment
date
August 2020
April 2015
May 2012
March 2014
March 2019

Number of
meetings
attended
2/2
5/5
5/5
5/5
5/5

Attendance1
100%
100%
100%
100%
100%

Company Secretary (secretary to the Committee)
Group Internal Audit and Risk Director
External auditors

Synthomer plc Annual Report 2020GovernanceKey areas of focus in 2020

Key areas of focus in 2021

As the significance of COVID-19 became clear, we reassessed
priorities for internal audit and we increased our focus on financial
resilience, liquidity, integrity of internal controls and the resilience
of our cyber security and business continuity plans.

Designing and developing our Audit and Risk Assurance Policy.
Oversight of and embedding the internal audit and risk management
function for the enlarged Group.

Alongside the Board, we had a clear focus on the integration
of OMNOVA, with our particular focus around the integrity
of the control environment.

Formalisation and alignment of internal control reporting across
the Group to reflect the recommendations of Bryden, Kingman
and the Competition and Markets Authority.

We have undertaken a review of our internal audit and risk function
in light of the acquisition of OMNOVA, established a new Group
Internal Audit and Risk Director role commensurate with the
increased size and scale of the enlarged Group and overseen
the integration of the internal audit arrangements of OMNOVA.

We assessed the impact of COVID-19 on the timing of the
deployment of our Pathway programme and in particular maintaining
the control environment as a result of any delays.

Continuation of our programme of deep dives into key risk
areas including the following:
• Climate change – review of the processes for collating the

required data and the preparation of disclosures required under
the Task Force on Climate-related Financial Disclosures (TCFD)
as the Board agrees targets for the business.

• Fraud risk – we will have an in-depth review of fraud risk across
the business and the appropriateness of the control framework
in place to mitigate against fraud.

Continue to assess the impact of COVID-19 and apply the lessons
learnt to our internal controls and risk management approach.

Areas of focus in 2020
COVID-19
The impact of COVID-19 and the business response is set out on
page 17. I would like to highlight the huge effort and professionalism of
all colleagues throughout an extraordinary year and in completing the
year end processes and audit in good time. I would like to thank all
members of our finance, internal audit and external audit teams for
all their hard work. It was always going to be a significant year for
Synthomer, completing the largest acquisition in our history, and
with the finance team supporting the integration of OMNOVA, the
reporting of synergies and in completing a successful refinancing
of acquisition bridging facilities in June 2020.

During the year, we had regular discussions with the Chief Executive
Officer, Chief Financial Officer and Group Internal Audit and Risk
Director as well as our external auditors. As the COVID-19 pandemic
started to impact the business, the Committee approved all changes
to the internal audit plan and received reports to assure it on the
increased focus on financial processes and controls as well as on
tight cost and working capital management. Updated forecasts were
prepared and downside sensitivity analyses developed to enable the
Board to assess liquidity and covenant headroom. We challenged
underlying assumptions and scenarios developed to evaluate whether
sufficiently severe scenarios were considered. This work fed into the
Board’s proactive decisions to reduce capital expenditure, suspend
and subsequently cancel the final dividend for 2019 and freeze all
senior employees’ salaries. It also provided assurance in relation
to the significant liquidity and covenant headroom available to the
Group and assured the Board that no revision to the financing
covenant was required.

The Committee reviewed the financial information and sensitivity
analyses again prior to issuing the €520 million 3.875% Senior
Unsecured Notes due 2025, in June 2020, and again before the interim
results. As the outlook for the business improved, we had a watching
brief as the business revisited and updated this work. We completed
our final formal review of this work in conjunction with our going
concern and viability assessments at year end (see page 96).

Internal audit and risk management
As indicated in last year’s Committee report, we undertook a process
to assess the internal audit and risk function required for the enlarged
Group. Whilst the internal audit function was fit for purpose before
the acquisition of OMNOVA, the acquisition provided an appropriate
opportunity to clarify the remit and scope of the function as well
as improve the depth and formality of our audit programme and
risk processes. At the conclusion of this process the decision was
taken to combine the internal audit and risk management functions
of the Synthomer and OMNOVA businesses and to establish a
new Director role to lead the combined function. The Committee
conducted a rigorous internal and external search process, using a
leading specialist in senior level internal audit and risk management
recruitment, which led to the appointment of Ginette Grant to the
newly created role of Group Internal Audit and Risk Director in
September 2020. Ginette brings over 20 years of internal audit and
risk management experience and knowledge to the Group which
will prove invaluable to develop our approach to internal audit and
risk management for the combined entity. Ginette undertook a
thorough induction and review of the business, taking time to meet
with multiple stakeholders across divisions and functions, including
all of the members of this Committee as well as other Non-Executive
Directors. During Q4 2020 and Q1 2021, we reviewed detailed internal
audit plans for changes within the function, and approved the internal
audit and risk management plans, including new proposals for
identification, classification and evaluation of risk. Additionally,
we reviewed and approved changes to the function’s human
capital resources to deliver these plans.

We engaged with large external audit service providers who also offer
outsourced internal audit services to benchmark the performance of
our internal function against similar-sized organisations, for the period
from the breakout of COVID-19 to the end of 2020. We concluded that
our internal audit function continued to operate broadly in line with our
peers providing assurance throughout that period. At the Committee’s
request, additional work was undertaken to assess the risks (and
mitigations) of remote working, well-being and the operation of key
financial controls. The internal audit team will complete a lessons

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceAudit Committee report continued

learnt exercise, as part of a wider Group exercise, on how best
to provide assurance on controls as elements of our business
continue working remotely in 2021.

During 2020, we also spent time considering reports and best
practice recommendations on the quality and effectiveness
of audits from the Institute of Internal Auditors and the Brydon
Report. The recommendations will feed into future development
of our internal audit and risk function.

In light of the COVID-19 travel restrictions in place during the year,
and given the significance of the OMNOVA acquisition to the Group,
we approved the appointment of EY to undertake a formal review
of internal controls over financial reporting at OMNOVA during 2020.
The continuation of this service will be reviewed as we implement
changes to our internal audit function.

Risk reviews
As part of my induction I met with all members of the Executive
Committee, senior members of the finance team and other senior
commercial and operational executives and discussed the key
risks in each of their areas of responsibility with them to ensure
that these are included in our risk matrix.

Site visits within the business were necessarily reduced this year.
However, we had a number of employees present to the Committee,
in person and virtually, during the year as part of the Committee’s
programme of deep dive risk reviews (set out below). This included
presentations from teams on cyber security, procurement, OMNOVA
and Brexit.

Set out below are further details on our activities, including the
Committee evaluation and priorities for 2021. I, along with my
fellow Board colleagues, am happy to meet with any shareholder
and answer any questions at any time.

Cynthia Dubin
Audit Committee Chair
4 March 2021

Audit Committee role
Our role is to assist the Board’s oversight of our financial systems
and reporting, and the adequacy and effectiveness of our internal
controls and risk management. We also lead the oversight of both
external and internal audit. The full terms of reference, reviewed and
updated during the year, are available on the Company’s website
www.synthomer.com.

Committee members
The Committee comprised four members until August of 2020;
Caroline Johnstone, as Chair, and all of the other independent
Non-Executive Directors. Cynthia Dubin joined the Committee in
August 2020 and assumed the Chair role from 16 December 2020,
when Caroline Johnstone resigned from the Committee to take
up her role as Chair of the Board. The experience of Committee
members is set out on pages 80 to 81. The Board considers that each
member is independent within the definition of the Code. Both Cynthia
and Caroline have recent and relevant financial experience for the
purposes of Provision 24 of the Code. In Cynthia’s case, her long
career in finance, including being Chief Financial Officer at a premium-
listed London Stock Exchange company alongside being a member of
and chairing audit committees at both Nasdaq and NYSE-listed
companies, respectively, demonstrates her relevant experience
and qualifications. Caroline is a Chartered Accountant and her
relevant experience includes roles chairing and as a member
of other audit committees and her previous position as a partner
at PwC. Together, the Committee members have a wide range
of financial, operational and commercial experience across the
chemicals and engineering sectors and the Board has agreed that
the Committee as a whole has competence relevant to our sector.

Committee meetings and operation
Other members of the Board have a standing invitation to attend
meetings unless notified otherwise and we regularly have the full
Board in attendance. In order to address our remit effectively, we
believe it is important to have those working in the business attend
our meetings and we are pleased that the Chief Executive Officer
and the Chief Financial Officer attend our Committee meetings and
other senior managers, at our request, have regularly attended
Committee meetings in 2020. Our programme of risk reviews and
updates has allowed us to invite high potential and diverse members
of the management team to attend the Committee. Senior members
of the Group finance team and the Group Internal Audit and Risk
Director attend our meetings as well as PwC, led by audit partner
Matthew Mullins.

The Committee meets on a regular basis with PwC and with the
Group Internal Audit and Risk Director without management present.
The Chair also liaises with Brendan Connolly, the Senior Independent
Non-Executive Director and Chair of the Remuneration Committee,
to discuss matters such as setting compensation targets for the
Executive Directors.

Outside of the formal meetings, the Chair meets regularly on
a one-to-one basis with the Chief Executive Officer, the Chief
Financial Officer, other senior members of the Group finance
team and PwC to develop the Committee’s programme of work
as well as to review progress in addressing actions agreed by
the Committee. This interaction also enables us to explore and
understand key issues as they arise and focus on ensuring that
we have appropriate information prepared for and sufficient time
to address key issues in Committee meetings.

Synthomer plc Annual Report 2020GovernanceHow we addressed our core remit in 2020
Integrity of corporate and
financial reporting, significant
judgements and estimates

results announcement.

• Reviewed and approved the Group’s annual and interim financial statements, including preliminary

• Reviewed and approved significant accounting policies, estimates and judgements and Alternative
Performance Measures reported. This included management’s assertions regarding taxation and
pensions provisions, accounting for the acquisition of OMNOVA and the impact of COVID-19.
• Reviewed and challenged the assumptions and sensitivities in the scenarios modelled to support

preparing the accounts on a going concern basis and in assessing the longer-term viability of the Group.

• Reviewed the FRC guidance for 2020 annual accounts and corporate governance reporting along
with a summary of the management’s approach to implementation, paying particular attention to
the reporting and disclosures around the impact of COVID-19, going concern and cash flows.

• Assessed the processes for assuring the Board that the 2020 Annual Report and Accounts, when

taken together, is fair, balanced and understandable.

• Undertook regular reviews of the Group’s material litigation and concluded, in March 2021, that the

Group’s provisions are appropriate.

• Reviewed the UK payment practices report, discussed the underlying data and challenged management

on aspects of the report.

External audit

• Approved, after discussion and challenge, the external audit plan for 2020, including assessment

of significant audit risks, business risk profile, scope of the audit, materiality level and the de minimis
reporting threshold. We also discussed the experience and expertise of the key members of the
engagement team, in the light of a mainly remote audit. The audit fee was approved, again after
some challenge and discussion.

• Detailed review of auditor’s reports, including PwC views on significant accounting judgements and

estimates and their assessment of the internal control environment.

• Reviewed compliance with the FRC’s Ethical Standard for auditors and the restrictions on auditors to
provide non-audit services. Approved the provision of certain permissible non-audit services by PwC
(see the detailed information on page 99).

• Considered and confirmed the independence of PwC (pages 98 to 99). Monitored the plans for and

execution of the cessation of PwC’s internal control review engagement with OMNOVA Solutions Inc to
ensure that there was no impact on the independence of PwC as a result of the acquisition.

• Reviewed and assessed the performance of PwC and our lead audit partner. The Chair oversaw and
was actively involved in the process for recruiting his replacement as he rotates off the engagement
after five years.

• Considered the need to put the external audit out to tender. With PwC re-engaged five years ago, and
after discussion and challenge, agreed to recommend the re-appointment of PwC for the coming year.

• We also reflected on the Future of Audit debate and discussed the various reviews of the profession

with PwC, their peers and the Chief Financial Officer.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceAudit Committee report continued

How we addressed our core remit in 2020
Internal audit, risk management
and internal controls

• Oversaw and approved the review of the internal audit and risk function of the Group as part of the

integration of OMNOVA and participated in the recruitment of the Group Internal Audit and Risk Director.

• Reviewed the risk processes in place across the business to identify and mitigate risks.
• Regularly reviewed and challenged the risk framework and risk matrix – reviewed management’s

assessment of the impact of COVID-19 on key risks and mitigations in place.

• Continued our programme of deep dive reviews on the approach to risk management of our global
businesses and functions. This allowed us to meet staff and managers from across the business.
The Functional Solutions business leaders reported their key risks and approach to risk management
and, in addition to our regular deep dive reviews of pensions and tax, we also held reviews of
the following:
– The identification of risks and mitigation actions undertaken by the Group for Brexit.
– The OMNOVA control environment – we met with the Chief Accounting Officer of OMNOVA, who
provided a report on the OMNOVA control environment, finance team, technology and reporting
resilience during COVID-19. OMNOVA as a former SEC registrant was required to be compliant with
Sarbanes-Oxley and other than some realignment with policies in the Synthomer control environment
no changes have been made to the control environment since acquisition.

– Group-wide cyber security, addressed in three sessions during the year, including arrangements for

the integration of the OMNOVA.

– Security and reliability of our industrial automation and control systems, and initial assessment as part

of the integration of OMNOVA.

– Strategic sourcing operations, including operational, market and credit risk management.
– Capital project reviews of recent major investments, including our expansion projects at Pasir Gudang,

Worms and Sant’Albano.

• Received a report at each meeting on the status of ongoing and completed internal audits and

actions arising.

• Considered the results of the 2020 controls assurance internal audits and the IT audits, the
self-assessment process, the adequacy of management’s response to matters raised and
the time taken to resolve such matters. Where appropriate, we invited management to the
Committee to discuss its response and action plan to address findings of the internal audit review.

• Reviewed and approved the 2021 internal audit plan and ensured there is sufficient resource to deliver

the plans.

Governance

• Reviewed the corporate governance reporting and whether, as part of the Annual Report, it was fair,

balanced and understandable.

• Reviewed the effectiveness of the Group’s anti-bribery and anti-fraud procedures.

– Discussed the effectiveness of the Group’s Code of Conduct and Ethics Helpline across the Group

including the roll-out to OMNOVA shortly after acquisition.

– Received reports on the independent investigations that had been conducted in response to concerns

raised under the whistleblowing policy and reported to the Board that we were satisfied with the
outcome and follow-up actions.

– Met with internal audit and external auditor without management on a number of occasions.
– Undertook an effectiveness review of the Committee, reviewed the results and concluded that the

Committee was operating effectively.

– Reviewed our terms of reference to ensure the role and responsibilities of the Committee are aligned

with the Code.

Synthomer plc Annual Report 2020GovernanceSignificant areas of judgement and estimate
As part of our monitoring of the integrity of the financial statements, the
Committee assesses whether suitable accounting policies have been
adopted and considers particular areas where management has to
exercise significant judgement or make significant estimates. The main
areas which we reviewed during the year ended 31 December 2020,
together with a summary of our work, are set out below:

Taxation
The Group holds total tax provisions amounting to £45.9 million
relating to matters raised by tax authorities in several jurisdictions;
significant judgement has to be exercised by management, with
advice from appropriate tax advisers, to arrive at tax provisions,
given that the final tax outcome is uncertain and may not be known
for several years.

During the year, the Group Tax Director presented to both
the Board and to the Committee. In assessing the year end
judgements for 2020, she reported on the basis for calculating
the effective tax rate of 23.4% and the reconciliation to the
statutory tax rates of the Group. She provided regular updates
on interactions with tax authorities who regulate the jurisdictions
in which our business operates setting out the detailed rationale
and judgement made by management for each of the current tax
liabilities. The Committee challenged management’s judgements
to ensure that they were aligned with our Group tax strategy.
PwC presented their findings on the management’s judgements,
using tax specialists as required, and provided the Committee
with its assessment of their appropriateness. The Committee
concluded that the estimates and disclosures were appropriate.

Pensions
The Group operates a number of defined benefit schemes
(predominantly in the UK, the USA and Germany) which have
significant liabilities, as outlined in note 26 to the Group financial
statements. Although the UK and US schemes are closed to future
accrual, the assessment of liabilities of each of the schemes is
sensitive to changes in actuarial assumptions.

Our Group Pensions and Benefits Director regularly attended the
Committee in 2020 to provide updates on each of our pension
arrangements. The Committee was pleased with progress in the UK
scheme, where the lower risk liability driven investment approach has
proved effective through 2020; the trustees have also implemented
recommendations from a further strategic investment review to ensure
best value. We reviewed the annual financial statements of the UK
scheme and had sight of the management letter points of the auditor
which were not significant and are being addressed.

A particular focus this year were the plans we acquired with
OMNOVA with the largest being in the USA. The liabilities exceed
assets by £62 million at 31 December 2020. The Group Pensions &
Benefits Director and the Company Secretary have been appointed
to the governance board of the US pension plan. A review of the
investment advisers and investment strategy is in progress, with a
view to implementing a lower risk liability driven investment approach
in line with the UK defined benefit pension scheme.

We received a report from management setting out the key
assumptions and the rationale for their use in valuing the liabilities of
the main plans in the UK, the USA and Germany. The Group uses
appropriately qualified external actuarial advisers to help establish the
actuarial assumptions used in the valuation of the Group’s pension
liabilities. PwC evaluated the assumptions and methodologies used by
the Group’s actuarial advisers and management and assessed
whether the assumptions made were appropriate and not materially
different from external benchmarks for similar types of schemes.
PwC reported to us that it was satisfied with the assumptions used
and with the way that the schemes had been accounted for.

The Committee reviewed the assumptions and methodology used by
management, including comparisons to those used by other
companies, and concurred with the conclusions.

Accounting for the acquisition of OMNOVA
and the associated acquisition costs
The accounting for the acquisition OMNOVA is shown in note 29
to the accounts. The assets and liabilities of OMNOVA have been
included at fair value, with the balance of consideration shown as
goodwill. KPMG LLP was engaged to advise on the fair value of
the property, plant and equipment (PPE), intangible assets and
inventory and Mercer (US) Inc was appointed to provide a valuation
of OMNOVA’s pension scheme assets and liabilities. The deferred
tax assets and liabilities were assessed by our in-house tax team.

• Overall, KPMG concluded that the total fair value of the property,

plant and equipment was marginally higher than the carrying value,
mainly in relation to land and buildings.

• KPMG also concluded that the only significant intangible asset

(customer relationships) should be valued at $394 million and this
asset will be amortised over 9-11 years, depending on underlying
characteristics of various customer groups.

• As required by IFRS 3 Business Combinations the acquired

inventory was valued at fair value. This adjustment results in a
distributors profit accruing to the Group for this inventory when it is
sold. Management deemed that excluding the manufacturing profit
from Underlying performance is a technical adjustment to ensure
that the financial statements are in compliance with IFRS and would
lead to a distortion of trends. As this meets the definition of Special
Items the manufacturing profit of £3.3 million realised on the sale of
this inventory was included in Underlying performance and adjusted
to exclude it from our IFRS results in Special Items.

PwC, as external auditors, reviewed the work undertaken by
KPMG LLP, Mercer (US) Inc and our tax team. The Committee
reviewed the methodologies, along with their conclusions and
discussed them with the external auditor. In particular, we challenged
the valuation of customer relationships and the appropriateness
of the periods of amortisation. The Committee also focused on
the profit in inventory, ensuring that the accounting treatment and
disclosures were appropriate. Overall, the Committee concurred
with management’s view on the fair value of the acquired business.

Other items monitored by the Committee
Alternative Performance Measures – Special Items
The Committee regularly challenges management in relation
to what is included in Special Items and reviews in detail every
such item which is excluded/separated from reported Underlying
profit. The Committee is satisfied that it is helpful to a reader of the
financial statements to report Underlying profit without Special Items.
Special Items are either irregular, and therefore including them in the
assessment of the Group or a segment’s performance would lead to
a distortion of trends, or are technical adjustments which ensure the
Group’s financial statements are in compliance with IFRS but do not
reflect the operating performance in the year, or both. The Committee
was satisfied that all items reported as Special Items met with the
Group’s definition of such items.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceAudit Committee report continued

COVID-19 impact
Alongside the people and operational considerations set out
on pages 66 to 71 and the work undertaken to ensure liquidity and
covenant management (set out in our introductory comments above)
the Committee received reports from management on the financial
management, accounting and disclosure implications of COVID-19.

Areas of focus for the Committee included the following:

• Asking management to assess and provide assurance on the
resilience of the finance function and continuity arrangements.
• Receiving confirmation from management that no costs relating to
operating through COVID-19 had been included in Special Items
and accordingly all were recorded in Underlying performance.

• Confirming that any furlough monies received from the UK

Government were repaid in the year.

Overall, we were satisfied with the accounting and disclosures
relating to COVID-19.

Brexit
Our Brexit working group reported to the Committee and presented
on how the business was preparing for the end of the transition
period. The Committee reviewed the detailed plans for a no-deal
Brexit which addressed the key risks to our supply chain and the
associated potential costs and tariffs.

Going concern and viability statements
For the Board and Committee’s assessment of both going concern
and viability, management sets out its assumptions, the potential
risks to the business and potential mitigations, together with various
economic and business scenarios. This year particular attention was
paid to the impact of the acquisition of OMNOVA, COVID-19 and
Brexit. The process conducted by management, and reviewed by the
Committee to support the Board’s statement, included the following:

• Reviewing the Group’s available sources of funding and,

in particular, testing the leverage covenant in our financing
arrangements and assessing the available headroom using
a range of sensitivities.

• Reviewing the short-, medium- and long-term cash flow forecasts

in various severe but plausible scenarios as well as reverse
stress testing forecasts. Details of the assumptions in these
scenarios are set out for going concern on page 133 and viability on
page 49.

• Assessing the Group’s current and forecast activities and those
factors considered likely to affect its future performance and
financial position.

The Committee discussed the going concern statement at
a meeting in March 2021 and recommended that the Board
provide the statement in the form set out on page 120.

Fair, balanced and understandable
The work undertaken by management (and reviewed by the Committee) to support the Board’s statement on the ‘fair, balanced and
understandable’ statement included the following:

6
7
8

Establishing a working group of key individuals, who are appropriately qualified, within the Group to oversee the drafting of the
Annual Report and Accounts. A detailed timetable was agreed by the Committee and the Board, and the working group met
regularly to ensure good progress and to consider the appropriateness of disclosures for the benefit of all stakeholders.
Ensuring that the guidance letter and reports issued by the FRC in November 2020, along with other relevant guidance on corporate
financial and governance reporting, were taken into account in the drafting of the Annual Report and Accounts.
The Chief Executive Officer and Chief Financial Officer confirming that, in their opinion, the drafting of the Annual Report was ‘fair,
balanced and understandable’.
Requesting that certain key contributors to sections of the Annual Report (for example, Presidents and Finance Directors of our
global divisions) sign a declaration confirming the accuracy of the information provided.
Arranging for Deloitte LLP, the Company’s remuneration consultants, to review the Directors’ Remuneration report and having our
design agency, Luminous, proofread drafts of the Annual Report.
An audit trail being completed by the VP, Group Finance for material data underpinning non-financial information in the Annual Report.
Circulating drafts of the Annual Report to PwC, the Committee and the Board for review.
Discussing material disclosure items at a meeting of the Committee held in March 2021.

The Committee discussed the ‘fair, balanced and understandable’ statement at a meeting in March 2021 in the light of the above and,
having done so, recommended that the Board provide the statement in the form set out on page 121.

Synthomer plc Annual Report 2020GovernanceBusiness continuity planning (BCP)
In 2019, using the business Project Excellence methodology, a
dedicated team at Pasir Gudang, with involvement across the site,
identified seven predefined scenarios and developed business impact
analyses and recovery strategies for each. At the beginning of 2020,
the team had developed a comprehensive plan for each scenario and,
before the onset of the pandemic, the BCP team started to develop a
template to roll out across the Group.

The pandemic provided an immediate and ultimate stress test of the
work done and the Committee was satisfied that the work done in
2019 had been robust as the team implemented plans in responding
to the challenges the site faced through 2020. In 2021, we will ask the
team to reflect on lessons learned and to share this and the approach
to developing a BCP across the enlarged Group.

Internal audit and risk management assurance
Developments in our internal audit arrangements are set out in my
introduction on pages 90 to 92. We have a dedicated in-house internal
audit function, which draws on specialist resources as required.
At each meeting, the Committee reviewed progress against the
internal audit annual plan and explored areas identified for action.
The Committee also reviewed completed audit reports, focusing on
recurring themes, which might require Group actions, and areas
where there was divergence from self-assessments prepared.

Given our Group Internal Audit and Risk Director joined us in
September 2020, it was appropriate that she spent time understanding
the business and forming her own views of priorities. She gave the
Committee initial views and we discussed in outline the internal audit
plan for 2021 at our meeting in November 2020 and the Committee
reviewed and approved the final 2021 plan at our meeting in March
2021. We mapped the 2021 plan to our key risks and it includes
auditing areas which account for more than 60% of Group EBITDA as
well as certain thematic audits e.g. IT user management, procurement
and change programmes.

The Committee discussed the viability statement at a meeting in
March 2021, debated and challenged the scenarios modelled and,
having done so, recommended that the Board confirm the statement
in the form set out on page 49.

Risk management and internal controls
Each year, the Board is required to conduct a review of the
effectiveness of the Group’s systems of risk management and
internal control. The Board’s statement relating to this review is
set out on page 89. At a meeting in March 2021, the Committee
reviewed management’s assessment of the key elements of these
systems and confirmed their overall effectiveness. In forming its
conclusion, the Committee reflected on matters including the following:

• The internal audit programme completed during 2020 (including
in the OMNOVA entities acquired in the year) and the progress
in implementing actions arising therefrom.

• Our own programme of risk reviews and discussions with senior
managers and other staff across the Group throughout the year.

• Assurance (via Committee papers, Board and Committee

presentations and discussions) that management continued
to review the Group’s key financial controls to ensure that they
supported the Group’s continued growth.

• The key controls questionnaire, which is completed and signed
by each operating unit across the Group on a quarterly basis.
• Representations from financial and commercial management
in the divisions to the Chief Financial Officer, that the financial
information reported to Group has been prepared in accordance
with the Group’s accounting policies and all relevant information
has been provided for the Group’s Annual Report and Accounts
to be prepared. These representations are made twice each year
in line with our external reporting timetable.

The recently appointed Group Internal Audit and Risk Director
has a direct reporting line to the Audit Committee Chair and
provides an independent assessment of our internal control and
risk management processes’ effectiveness, highlights key issues,
makes recommendations and monitors implementation of
mitigations and recommendations.

Code of Conduct, Ethics (whistleblowing) and GDPR
The updated Code of Conduct and external Ethics Helpline was
implemented in December 2018 and the Committee has overseen
the roll-out, communication and embedding of this. This has been
very positively received across the Group with high awareness of the
helpline being reported in the Employee Voice Engagement Survey.
In 2020, this helpline was further refined and rolled out to OMNOVA
as part of the integration.

The Committee received an update on the development of an
e-Learning and Learning Management System which will be rolled
out across the Group in 2021. This will provide a common platform
for all our employees and enable us to monitor more effectively
training needs and completion of mandatory training.

At each Committee meeting during the year, the Committee was
provided with details of the issues reported to the external Ethics
Helpline during the period and had a detailed report on how
management had investigated them, together with any update on
ongoing investigations. All issues and their resolution were reported
to the Board as a matter of course.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceAudit Committee report continued

External audit
PwC was re-appointed external auditor in 2016, following a full
re-tender process, having been the Group’s auditor since 2012.
This is the last year that Matthew Mullins will be our lead partner
as he comes to the end of his five year tenure.

The Chair of the Committee was in regular discussion with PwC’s
lead audit partner to discuss the progress of the audit. Ahead of
and following the conclusion of the March 2021 meeting, the
Committee met PwC without management being present and
no significant issues were raised.

At its meetings in November 2020 and March 2021, the Committee
discussed the 2020 audit process:

Auditor independence and objectivity and non-audit
services provided by the auditor
PwC provided us with a report setting out how they assessed the firm
to be independent. This referred to the tax compliance and internal
audit services that were provided to OMNOVA but which ceased on
the acquisition of OMNOVA in April 2020. No member of any PwC
team providing services to OMNOVA prior to acquisition has been
part of the external audit team for 2020. PwC confirmed that they
remained independent in respect of the 2020 audit.

November 2020

Outcome/action taken by the Committee

PwC’s audit risk assessment
– set out on pages 122 to 123

PwC undertook a detailed risk assessment and set out their view of the significance of such risks and
the potential risk of material mis-statement. The Committee discussed this and challenged PwC on
whether goodwill impairment should be a key area of risk. Management demonstrated significant levels
of headroom available in its preliminary review which PwC had reflected in their risk assessment and, after
further debate and acknowledging that we would review management’s impairment evaluations further at
the year end, we concurred with PwC’s view.

Materiality level for the audit
(pages 125 to 126)

PwC proposed materiality set at £7.9 million, 5% of Underlying profit before tax and the Committee felt,
after discussion, that it was appropriate for 2020.

PwC’s audit plan

We reviewed in detail the audit coverage and agreed scope (set out on page 125) and agreed this was
appropriate. In coming to that conclusion we considered the increased scope and scale of the business,
including OMNOVA, the legal entity structure, location of significant global operations and our forecast and
actual financial results. The continued high level of coverage was noted and approved by the Committee.

We discussed, in particular, the areas of significant judgements and estimates, the approach to the
OMNOVA business and sites, the remote deployment approach during COVID-19 restrictions and the
ability of the PwC teams for our major locations to effectively carry out their work remotely.

The Committee recognised that planning would be key to a well-executed year end and audit process
and spent some time reviewing the proposed timetable and the areas which PwC would progress ahead
of the year end, including areas such as goodwill impairment assessment.

We also asked PwC to provide the Committee with feedback on any learnings or particular areas where
remote working had impacted the year end processes around the business and any insights around the
culture they experienced.

PwC’s resources

Audit fee and terms
of engagement

Reviewed and discussed with PwC, in particular, the experience and tenure of PwC audit partners in our
key territories.

Having discussed the impact of COVID-19, increased audit requirements and the enlarged scope of the
audit following the acquisition of OMNOVA, we concluded that the proposed plan was appropriately
comprehensive and we approved the proposed fee of £1.8 million, compared to £0.9 million in 2019.

March 2021

Outcome/action taken by the Committee

Confirmation of
PwC’s audit plan

PwC confirmed no material changes made to agreed plan. It was noted that the Synthomer and PwC
teams worked effectively despite working remotely.

Discussed these with PwC and management – the work of the Committee is set out below.

The Committee reviewed and approved this.

The Committee evaluated and confirmed PwC’s independence, objectivity and quality control procedures.

Audit findings, significant
issues and other accounting
judgements (pages 123 to 125)

Management
representation letter

PwC’s independence
and objectivity and quality
control procedures

Synthomer plc Annual Report 2020GovernanceThis is the last year that Matthew Mullins will be the lead audit partner
for Synthomer as he comes to the end of his five year tenure. We have
regularly reviewed the rotation and experience of PwC lead partners
in each of our key territories to ensure that we have the right mix of
continuing and new partners. A number of candidates to replace
Matthew were presented to the Chair of the Committee and Chief
Financial Officer and it was agreed that David Beer would become
the new lead audit partner after the 2020 AGM.

The Committee has a clear policy on the provision of non–audit
services by the external auditor. We have defined the very limited
non-audit services which can be provided by the external auditors.
Services can only be provided if approved by the Committee and
subject to a cap of 70% of the average of audit fees for the preceding
three years. All engagements for non-audit services with any external
audit firm must be pre-approved by the Committee to ensure that
as many firms as possible would be independent for the purpose
of any audit tender.

in June 2020 required substantive reporting accountant services.
Whilst the use of the statutory auditor as reporting accountant is
not strictly required by law it is customary and more efficient for
them to be engaged for such work. The Committee challenged
management on the need to use PwC, our external auditors, for
this work as reporting accountants. We explored other options but
concluded that as the evidence of market standard arrangements
was strong that, particularly in a period of huge market uncertainty
and the need for efficiency, it was the right thing to do. As is required,
PwC requested the Financial Reporting Council (FRC), as the
Competent Authority, to authorise an exemption from the 70%
cap on fees for non-audit services for 2020 only and this was
granted ahead of the work being undertaken.

The Committee concluded that PwC’s independence and objectivity
were not compromised by providing these services and that, as
a result of its knowledge of the Group and its financial statements,
it was in the Group’s interests to engage PwC to do so.

Details of audit and non-audit fees paid to the auditor in 2020 are
set out in note 7 on page 141.

Both the proposed acquisition of OMNOVA Solutions Inc with the
rights issue in 2019 and the subsequent issuance of debt securities

Having considered the steps taken by PwC to preserve its
independence and the approach to non-audit services set
out above, the Committee concluded that PwC continues
to demonstrate appropriate independence and objectivity.

Audit quality – how we reviewed PwC’s performance

During the year, the Committee evaluated the performance and effectiveness of the external auditor, PwC and our audit partner, Matthew
Mullins in the following ways:

External evidence

Management evidence

Auditor evidence

Audit Committee evidence

The Committee reviewed the FRC’s 2019 Audit Quality Inspection Report covering its conclusions
from a review of a selection of PwC audits. Matthew Mullins was asked to share actions taken by
PwC in response to this and, in particular, to focus on areas particular to Synthomer, including the
auditing of impairment reviews.
At our request, management sought feedback from people across the business who were involved in working
on the year end with PwC teams. The feedback was positive to all questions asked and indicated that PwC
had performed their audit well. The highest ratings were for exhibiting professional scepticism in their work
and providing constructive challenge to management. We concluded that slightly lower ratings around
communication of recommendations reflected remote working as a result of COVID-19.
Matthew Mullins attended all Committee meetings during the year and was involved as the Group
undertook the issuance of the €520 million 3.875% Senior Unsecured Notes due 2025 in June 2020.
He has developed clear and focused reporting for the Committee, highlighting the key matters
arising and where the PwC team has challenged management.

In discussing the audit plan for 2020, for instance, he set out clearly the initial judgement on materiality
but recognised that this was impacted by the results of the first half of the year which had been impacted
more by COVID-19 and this was revisited and discussed prior to finalising the Annual Report.

We assessed the input from Matthew Mullins and his team as we considered the FRC guidance during
the year and he clearly articulated where PwC required additional or enhanced disclosures and this
was communicated early and regularly through the year.
In each of the Committee meetings and in meetings with the Chair throughout the year, the Committee
reflected on the performance of PwC. Committee meetings are very open and constructive and the
Committee hears from management and PwC, with any areas of challenge set out and the final
conclusions highlighted.

We met as a committee with PwC without management on two occasions during the year, in addition
to regular discussions between the Chair and PwC.

Having considered all of the above inputs, the Committee concluded
that the external auditors were effective.

Although there is no immediate intention to tender the audit contract,
the Company will re-tender at the latest by the 2025 year end.

Re-appointment of the auditor
Having assessed the effectiveness of the external audit referred to
above and the independence of PwC, the Committee recommends
the re-appointment of PwC at the 2021 AGM.

The Committee considered the Group’s position on its audit services
contract in the context of the regulations concerning the audit market.

Committee evaluation
Feedback from the externally facilitated evaluation of the Board and
its Committees (undertaken in December 2020 and January 2021)
confirms that the Committee is working well and we regularly have
all members of the Board in attendance. Following feedback, our
training plan in 2021 will include corporate reporting on climate
change and sustainability.

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceNomination Committee report

Activities in 2020
The Nomination Committee held four formal meetings during 2020
as well as meetings in combination with other formal meetings of
the Board, where it was appropriate to do so. In addition, a number
of informal meetings and telephone calls have taken place in
connection with succession planning and recruitment processes.

Chair appointment
The Committee had a very active year which began with succession
planning for the role of Board Chair. For the purposes of leading this
process Brendan Connolly, Senior Independent Director, assumed
the Chair of the Committee. The rigorous process followed is set out
on page 101.

Non-Executive Director appointment
The Board gave a commitment to recruit an additional female
Non-Executive Director in 2020 and the Committee, under the
Chairmanship of Neil Johnson, led the process which culminated
in the nomination and appointment of Cynthia Dubin, who brings
a wealth of experience to the Board. Russell Reynolds Associates
(with which neither the Company nor the Directors had any other
connection other than in relation to the Board Chair appointment
process described below) was appointed by the Committee as
independent consultant to conduct an extensive search exercise.
A thorough review of a range of candidates that were put forward
was carried out and Cynthia joined the Board in July 2020.
A tailored induction process was arranged for Cynthia and as
this was necessarily limited by the COVID-19 pandemic it will
be continued in 2021 with site visits when circumstances permit.

This appointment also allowed us to fulfil a commitment made
following the significant minority vote against the re-election of
Neil Johnson as a Director of the Company at the 2019 AGM.

Board skills review and future Non-Executive Director recruitment
Toward the end of 2020, and following my appointment as Chair of
the company and the Committee, I initiated a full succession planning
process for the independent Non-Executive Directors. The first step
was to undertake an externally led independent skills review, in order
to assess our skills, experience and knowledge against the needs of
the business in the future and to compare our Board with the relevant
external market. The skills review considered a number of parameters,
together with a peer review and was supported by Egon Zehnder.
The overall conclusions were that we will continue to develop diversity
in future Board appointments as well as seek further expertise in
innovation, sustainability and digitisation.

The skills review also fed into developing a candidate profile
and search strategy, supported by Egon Zehnder, to conduct
a search exercise for a Non-Executive Director to replace
Just Jansz, who will retire from the Board during 2021 after nine
years’ service. The Committee specified that long and short
lists of candidates should seek to continue to add to the Board’s
diversity in its widest sense.

Caroline Johnstone

Nomination Committee Chair

Role
The Committee’s overall purpose is to ensure the Board has
the appropriate skills, knowledge, experience and diversity to lead
the business now and in the future. The Committee takes the lead
on the process of all Board appointments and ensures succession
planning for all Board and Executive management roles. Our key
responsibilities include the following:

• The regular review of the structure, size and composition
(including the skills, knowledge, experience and diversity)
of the Board and recommending any changes for the future
requirements of the Group.

• Leading the process and making recommendations for
appointments, re-appointments or replacement of all
Board members.

• Considering succession planning for Directors, the Executive
Committee and other key management roles, reviewing and
challenging the succession plans put forward.

Nomination Committee membership

Since 1 January 2020
Caroline Johnstone
Brendan Connolly
Cynthia Dubin

Terms of reference

Position
Chair (from December 2020)
Senior Independent Non-Executive Director
Independent Non-Executive Director

Appointment
date
April 2015
March 2014
December 2020

Number of
meetings
attended
2/2
4/4
n/a

Attendance
100%
100%
n/a

www.synthomer.com/investor-relations/shareholder-documents/corporate-governance

100

Synthomer plc Annual Report 2020GovernanceExternally led evaluation of the Board and its Committees
Egon Zehnder was appointed to carry out an effectiveness
review of the Board as described on page 88. Egon Zehnder is
an independent company and, other than the activities noted here,
has no other connection with the Company or any of its Directors.
The Committee was satisfied that, as Egon Zehnder’s effectiveness
review focused on Board processes and behaviours and not
behaviours of individual Board members, together with their policies
and procedures, no potential conflicts of interests arose from its
provision of recruitment consultancy services.

Details of individual Director contribution to the long-term success of
the Company will be contained in the 2021 Notice of Annual General
Meeting in support of the resolutions for Director re-appointment.

Diversity
The Board believes that diversity and inclusion drives innovation and
improved business performance. As a growing, global business we
recognise the importance of reflecting the diversity of our customers
and markets in our workforce. Equally, we encourage equality,
diversity and inclusion in our business because we seek to recruit,
retain and develop the best talent which in turn drives business
success. It is also aligned to our values and it is the right thing to do.

We encourage differences in skills, knowledge, ethnicity, gender,
language, age, sexual orientation, religion, socio-economic status,
physical and mental ability, thinking styles, experience and education.
Diverse perspectives are valued at Synthomer. Every employee should
be treated fairly regardless of their differences and everyone should
be treated with respect at work.

We have made significant progress in embedding diversity into all
of our decisions as a board and we approved an updated Board
diversity and inclusion policy (available at www.synthomer.com) in
February 2021. The purpose of this policy is to ensure an inclusive
and diverse membership of the Board of Directors of Synthomer plc
and to create a framework to align Board activity to support diversity
and inclusion in Synthomer.

Progress and plans for our diversity and inclusion agenda is set out
on pages 67 and 68 and I am pleased to report that we have now
included approved measurable objectives. We remain mindful of the
need to make further progress on gender diversity at a senior
management – with focus on this, we have increased the proportion
of women across our Executive Committee and its direct reports from
8% in 2019 to 16% in 2020 but we acknowledge that this is below the
target of 33% set by the Hampton-Alexander Review. We have now
set a formal target to get to 20% in 2021, 25% in 2022 and 33%
by 2025 and have a plan in place to achieve this.

To support our continued efforts to increase ethnic diversity in
our senior leadership population we have set a target of 20% by
the end of 2025.

Tailored induction for Cynthia Dubin
• Discussions with Chairman, Deputy Chair and Company Secretary

to tailor and agree induction programme.

• Structured introduction to Group strategy with the Chief Executive

Officer.

• Access to Board portal providing previous Board and Committee

meeting papers, minutes, and strategy and business presentations;
provision of policies and procedures.

• Guidance on corporate governance arrangements provided by the

Company Secretary.

• One-to-one meetings with each of the Executive Directors

and other Executive Committee members, Director of Group
Finance, Internal Audit team and the Group CIO.

• Meeting with Chair of Audit Committee and external auditor.

Succession planning
The Committee, in combination with the Board, reviewed progress
against the 2020 management succession action plan presented
to the Board at the start of 2020, reviewed the 2021 management
succession action plan and had regular updates on actions
throughout the year.

Chief Executive Officer recruitment
Following Calum MacLean’s notification to the Board in January 2021
of his intention to stand down by January 2022, I initiated a recruitment
process. This started with a competitive selection exercise which
resulted in Egon Zehnder being appointed to assist with the search
process, which will include both internal and external candidates.
Egon Zehnder’s other engagements with the Company are noted
above. A formal recruitment process has been discussed with the
Board and we have developed a clear role and person specification,
around which there is alignment around the Board. The process
will be managed by a committee comprising myself, the Senior
Independent Director, as well as our HR President and Group
HR Director. The Nomination Committee and the Board will be
involved at key points of the process.

Caroline Johnstone
Chair
4 March 2021

Appointment of Caroline Johnstone as Chair
Caroline Johnstone was appointed to succeed Neil Johnson as
Chair of the Board following a process that complied with Principle J
of the Code. Brendan Connolly, Senior Independent Director, was
appointed by the Board to chair the Nomination Committee for the
purposes of preparing the Board Chair succession plan in view of
Neil Johnson reaching the ninth anniversary of his joining the Board
in September 2020.

Neither Neil nor Caroline participated in the process in order to ensure
the independence of the Committee. Russell Reynolds Associates
(with which neither the Company nor the Directors had any other
connection other than in relation to the search exercise which led to
the appointment of Cynthia Dubin described above) were appointed
to assist the Committee in the preparation of a role specification
which was approved by the Board. As a key factor in the succession
plan was to build on the Company’s purpose, culture and values,
consideration was given to the identification of an internal candidate.
Following identification of Caroline as a potential candidate and her
confirmation that she wished to be considered for the position, Russell
Reynolds Associates was requested to assist the Committee with the
evaluation of Caroline against the role specification and separately
interviewed her and produced a candidate report. References were
taken and Russell Reynolds Associates took feedback from all Directors
who had also interviewed Caroline and carried out a benchmarking
exercise against a number of potential external candidates.

Following the presentation of these materials to the Committee it was
determined that Caroline was well qualified to perform the role and
she was formally nominated to succeed Neil Johnson as Board Chair
and that recommendation was unanimously approved by the Board.
In approving Caroline’s appointment the Board took into account that:

• she would be independent on appointment in accordance

with Provision 10 of the Code; and

• she would have sufficient time to meet her responsibilities to

the Company, taking into account her other commitments, as
shown on page 80, in accordance with Provision 15 of the Code.

Caroline became Deputy Chair on announcement of her intended
appointment and shadowed Neil ahead of her taking up the Chair
role in December 2020.

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Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report

Brendan Connolly

Remuneration Committee Chair

Dear Shareholders,
I would like to thank our shareholders for their support for the new
Directors’ Remuneration Policy which received a 92% vote in favour
at the 2020 AGM, and the Directors’ Remuneration report (vote
in favour of 90%) in what was a very complex and uncertain year.

Despite an initial impact in the second quarter of 2020 from
COVID-19 related market constraints, performance was strong,
predominantly driven by the Performance Elastomers Nitriles
market (latex gloves), the OMNOVA contribution including integration
synergies, and the strengthening of selective end markets for
Functional Solutions and Industrial Specialities. This has resulted
in an over performance against both budget and previous year.

Management has also continued to focus on the strategic initiatives
despite the demanding conditions and has moved forward on the site
transformation and rationalisation programmes, maintaining planned
investments and improving SHE performance. ESG has also received
more prominence with an additional ‘CO2 reduction’ goal added to
the 2020 PSP awards.

Following the decision to cancel the 2019 final dividend, salaries
for the Executive Directors, the Executive Committee, senior
executives and the Board were frozen in April 2020 at 2019
levels. The 2020 salary review was subsequently applied on the
1 October 2020 based on the performance of the Company and
the reinstatement of the 2020 interim dividend. All other workforce
increases were awarded as normal during the year. It should be
noted that during this period, the minor amount of furlough funding
received from the UK Government was subsequently repaid in full.

Implementation of Policy for 2021
Base salaries
For 2021, base salaries for the Executive Directors and the Chair
have been increased in line with the 2021 inflationary pay increase
for the wider UK workforce of 2.5%. The Chief Executive Officer’s
salary will therefore be £594,752 and the Chief Financial Officer’s
salary will be £378,052. The Executive Committee annual salary
review takes effect on 1 April and will be carried out at that time.

Performance measures
The 2021 annual bonus performance measures will remain the
same with 80% based on Underlying profit before tax, 10% on
SHE targets (in both cases for the Group as enlarged by the
acquisition of OMNOVA), and 10% on strategic/personal targets.

For PSP awards granted in 2021, the measures will be EPS growth
(40%), relative TSR (40%) and strategic targets (20%) which will include
New Product Development and an ESG measure.

Position
Chair
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director

Appointment
date
March 2014
May 2012
April 2015
March 2019
July 2020

Number of
meetings
attended
4/4
4/4
4/4
4/4
2/2

Attendance1
100%
100%
100%
100%
100%

Remuneration Committee membership

Since 1 January 2020
Brendan Connolly
Just Jansz
Caroline Johnstone
Holly A Van Deursen
Cynthia Dubin
Other attendees:
Chief Executive Officer
Group HR Director
Company Secretary
Deloitte LLP

1. Based on number of meetings eligible to attend.

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Synthomer plc Annual Report 2020GovernanceAs communicated to shareholders last year and in line with the
Policy, the second stage of the phased increase in maximum
PSP awards will apply to 2021 awards with an additional 25%
and 15% of salary being added to the PSP awards granted to
the Chief Executive Officer and Chief Financial Officer respectively.
The maximum PSP award for 2021 will therefore be 200% of
salary for the Chief Executive Officer and 150% of salary for the
Chief Financial Officer.

The maximum annual bonus will continue to be 150% of base
salary for the Executive Directors. The one third bonus deferral
into shares will be applied to the 2021 bonus payments and the
additional clawback & malus conditions (corporate failure and
serious misconduct) have been incorporated into the plan
documents. New shareholding guidelines will come into effect
in April 2021.

Chief Executive Officer departure
On the 14 January 2021 we announced that, after 6 years in role
during which time Synthomer has transformed as a business, our
Chief Executive Officer, Calum MacLean, had informed the Board
that he wished to step down. Calum will leave the business by
January 2022.

Calum will remain entitled to an annual bonus for 2021 and will
be treated as a good leaver for the purpose of his outstanding
share awards. Given Calum will be in role for the whole of 2021 the
Committee determined that it was appropriate for him to continue
to receive a 2021 PSP award to reward him for his contribution
during the year and to ensure that he continues to drive long-term
sustainable performance. This award will be pro-rated for time on
his departure and remain subject to performance conditions being
achieved at the end of the performance period.

Remuneration outcomes in 2020
Performance has been strong and progress against strategic
objectives was also meaningful resulting in 100% bonus achievement.
The bonus plan consisted of financial (80% on Underlying profit before
tax), SHE (10% on personal safety and process safety targets) and
strategic/personal goals (10%). Details of our year of record financial
performance can be found on page 110. Performance against
strategic/personal goals is set out on page 111. It should be noted
that both the SHE and strategic/personal goals are not subject to
an affordability measure but are subject to Committee discretion.
The SHE targets are applied Company-wide and 2020 saw a year
of world class SHE performance. The Committee felt that the
shareholder experience was well aligned to the outcomes and
as such no discretion was applied.

Bonus plan: 100% of maximum opportunity achieved

As in the previous years the Bonus Plan consisted of three parts:

• Financial: 80% of award. This target was adjusted upwards

to include the OMNOVA budget for 9 months.
Maximum achievement implies at least 10% above the
budgeted number.

• SHE: 10% of award. For 2020 only legacy Synthomer was

considered. The recordable injury rate target was 0.21 or less
and the process safety event rate target was 0.16 or less. 2021
will see a combined target for legacy Synthomer and OMNOVA.

• Strategic/personal objectives: 10% of award. For the Chief

Executive Officer and the Chief Financial Officer, integration
effectiveness with synergies delivered, business transformation
and restructuring, the Pathway programme deliverables and
executive succession planning. Additionally, and specifically for
the Chief Financial Officer the issuance of the Bond, which was
oversubscribed and successfully completed in May. The above

were all delivered as planned except for the Pathway programme
timetable which was impacted by the pandemic.

Two thirds of the bonus will be paid in cash with one third deferred
into shares which are held for two years.

PSP: 31.8% achieved: The 2018 award consists of EPS growth (40%),
relative TSR (40%) and strategic targets (20%).

• EPS growth: 0% achieved. Adjusted for OMNOVA the threshold

was 32.8p with a result of 28.9p.

• Relative TSR: 21.8% achieved. This measures the Group
performance against the FTSE 250 (excluding investment
trusts and financial services) was at the 60th percentile.

• Strategic targets: 10.0% achieved. (6.67% each)

− New Product Development between 15 and 20%. Fully achieved

at over 20%.

− Cumulative PBT from acquisitions: threshold is £30 million.

Despite the OMNOVA acquisition, the threshold was not met.
− ROIC on major capital expenditure projects. Threshold average

was 18.3% and half of the maximum target was achieved.

Activities during the year
All the required topics, as set out in the Committee’s terms of
reference (www.synthomer.com), have been covered to ensure
best practice. Additionally, training was given to the Committee
which included the updated Investment Association guidance,
any changes in Regulations, a review of voting outcomes for the
FTSE 250 and remuneration trends. A review of alternative remuneration
structures was also commissioned and carried out by our advisors.
The output was discussed with the Committee and the Executive
Directors with the conclusion that the current remuneration structure
was best aligned to our strategic goals, industry and outlook.

We agreed to fully align the Executive Committee bonus plan to that
of the Executive Directors. We also had sight and input into a Group
wide project to look at remuneration levels across all geographies and
levels which has now been implemented and is broadly aligned with
the Executive Directors and Executive Committee.

In line with our normal practice our LTIP awards for 2020 were granted
on 12 March 2020. Due to the speed of the COVID-19 outbreak and
the impact on share prices throughout the market in early March
2020, the share price used to determine awards was circa 32% lower
than the share price used to determine awards in 2019.
The Committee is aware of shareholder guidance that the face
value of awards should be reduced where share prices have fallen
significantly. Awards were not reduced; however, the Committee has
committed to reviewing awards on vesting in March 2023 considering
whether there has been a windfall gain for management.

UK Corporate Governance and other regulations and guidance
Our most recent gender pay gap report was published in April 2020
and though some progress had been made this remains an area of
focus. The Chief Executive Officer to all employee pay ratio shows at
28:1 at the 50th percentile using Option B, an increase compared with
2019 (23:1) primarily because the bonus payment for 2020 was larger
than in 2019 when there was a minimal bonus payment for all
employees including the Executive Directors.

The remuneration package of the Executive Directors remains
structurally the same, easily understandable and in line with the
majority of FTSE 250 companies. We believe that this aligns well to the
strategy and is aligned to the performance of the Company. We note
the need to have a viable plan to align the pensions to general
workforce levels and we have previously committed to align the
pensions of the Executive Directors at the start of the next policy
period. We now intend to align the pensions of both Chief Executive
Officer and Chief Financial Officer to the workforce average by the
end of 2021 and 2022 respectively. The Policy already contemplates

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Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

this alignment for new Executive Directors and therefore the incoming
Chief Executive Officer will receive the workforce average as per
the policy.

Summary
We believe that the outcomes reflect the shareholder experience
in a challenging year.

We have a structured process in place for post-employment
shareholdings which comes into force from April 2021, bonus
deferral and 5 year holding periods for PSP awards from the
date of grant which are enforceable and transparent.

Engagement took place and feedback was received on various aspects
of the employee experience at Synthomer (see page 66) and pay in the
boardroom was not raised by employees although there was no direct
engagement to explain how executive remuneration aligns with the
wider Company pay policy. We will continue to keep the deployment of
such engagement under review.

Remuneration report
The Policy remains the same as that approved at the 2020 AGM,
but the Director’s Remuneration report is subject to an advisory
vote at the 2021 AGM.

In 2021 we will continue to work towards our pension alignment
target, improve our engagement with the workforce to further
explain and ensure that executive remuneration aligns with the
broader Group’s pay policies, and obtain feedback from the
Employee Voice on the Board representative to get a broader
input. We will also look at continuing to bring our ESG strategy
and targets into our variable pay measures.

I would like to thank all our stakeholders and shareholders and the
Remuneration Committee for their time, input, guidance and support.

Brendan Connolly
Remuneration Committee
Chair
4 March 2021

Key elements of reward

Base
salary

Pension
& benefits

Annual
bonus

Performance Share
Plan

At least 70%
Profit before tax

Up to 30%

Strategic and operational

measures, including
personal objectives

2021 awards:

80% Profit before tax
10% SHE
10% Individual strategic
and operational goals

At least 80%

Based on

financial measures

Up to 20%

Strategic

measures

2021 awards:

40% relative TSR
40% EPS growth
20% Strategic measures

104

Synthomer plc Annual Report 2020GovernancePolicy table
Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

Base salary

Supports the
recruitment and retention
of Executive Directors.

Reflects the individual’s
skills, experience,
performance and role
within the Company.

Salary levels are generally reviewed
annually by the Committee.

When reviewing salary levels the
Committee takes into account:

• the individual’s skills, experience

and performance;

• the size and scope of the

individual’s responsibilities;
• pay and conditions elsewhere

in the Group;

• pay at companies of similar size; and
• the complexity and international

scope of the Group.

Benefits

Provided to support the
retention and recruitment
of Executive Directors.

Pension

Provide a competitive level
of retirement benefits to
support both retention
and recruitment of
Executive Directors.

Benefits to Executive Directors may include
private health insurance, life insurance and
a car allowance. From time to time the
Committee may review the benefits provided.
The Committee may remove benefits that
Executive Directors receive or introduce other
benefits if it considers it is appropriate to do
so. Any other benefits will be proportionate
with the current benefits provided and will be
set taking into account the benefits provided
to other employees in the Group.

Where Executive Directors are required
to relocate or complete an international
assignment, the Committee may offer
additional benefits (either on a one-off or
ongoing basis) or vary benefits according
to local practice.

Executive Directors may participate in
any all-employee share schemes or other
benefit arrangements on the same basis
as other employees.

Executive Directors are eligible to participate
in the Group personal pension plan.

Executive Directors may receive
payments as a cash allowance which
they may use either in conjunction with
that plan and/or to enable them to make
their own arrangements.

None, although
individual and Company
performance are factors
taken into account
when considering
salary increases.

There is no overall maximum for
salary opportunity or increases.
Salary increases will normally be in line
with the increases awarded to other
employees within the Group.

Larger increases may be made under
certain circumstances, including but
not limited to:

• an increase in the scope and/or

responsibility of the individual’s role;

• the development of the individual

within the role;

• alignment to market levels; and
• corporate events such as a

significant acquisition or Group
restructuring which impacts the
scope of the role.

For 2021, Executive Director salaries
are as follows:

• C G MacLean: £594,752 (increase

of 2.5% on 2020 salary of £580,246)

• S G Bennett: £378,052 (increase

of 2.5% on 2020 salary of £368,831)

None.

There is no overall maximum for
benefits, as the cost of insurance
benefits may vary from year-to-year
depending on the individual
circumstance and the level of any
relocation benefits, allowances
and expenses will depend on the
specific circumstances.

For new Executive Director hires,
a maximum percentage of base salary
aligned to the pension contribution rate
available for the majority of the workforce.

None.

Allowances for current Executive
Directors are:

• C G MacLean: frozen at its 2019
cost value of £137,891 (or 20%
of salary if higher)

• S G Bennett: 20% of salary

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Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Purpose and link to strategy

Operation

Maximum opportunity

Performance measures

At least 70% of awards
are subject to Underlying
profit before tax (or
other relevant financial
measure) targets.

Up to 30% of awards
are subject to strategic
and operational
measures, including
personal objectives.

For 2021 awards,
performance measures
will be 80% Underlying
profit before tax, 10%
SHE objectives, and 10%
personal strategic and
operational objectives.

The award for threshold
performance in relation
to financial measures
is normally 0%
of maximum.

The award for target
performance in relation
to financial measures
is normally 50%
of maximum.

Annual bonus

Incentivises the delivery
of financial, strategic and
operational objectives
selected to support our
business strategy within
the year.

Performance targets will be determined
by the Committee at the beginning of
the annual performance period.

The Committee will assess performance
against these targets following the end
of the performance period.

The maximum opportunity is up
to 150% of salary.

Opportunities for current Executive
Directors are as follows:

• C G MacLean: 150% of salary
• S G Bennett: 150% of salary

The Committee may in its discretion, adjust
annual bonus payments, if it considers that
the outcome does not reflect the underlying
financial or non-financial performance of
the participant or the Group over the relevant
period or that such payout level is not
appropriate in the context of circumstances
that were unexpected or unforeseen when
the targets were set. When making this
judgement the Committee may take into
account such factors as the Committee
considers relevant.

The Committee may reduce or defer the level
of payment of an award to take into account
exceptional business circumstances, if there
are circumstances giving rise to material
reputational damage to the Group, if an
Executive Director has committed an act
of serious misconduct or in the event of
corporate failure.

A proportion of any bonus earned is
deferred for two years. For current
Executive Directors this is as follows:

• C G MacLean: one third of any bonus
• S G Bennett: one third of any bonus

The Committee may claw back awards up
to three years after payment if the Group’s
accounts have been materially misstated,
there has been an error in the calculation
of any performance conditions which results
in overpayment, if there are circumstances
giving rise to material reputational damage
to the Group, if an Executive Director has
committed an act of serious misconduct
or in the event of corporate failure.

106

Synthomer plc Annual Report 2020GovernancePurpose and link to strategy

Operation

Performance Share Plan (PSP)

Approved by shareholders at the 2020 AGM

Maximum opportunity

Performance measures

Incentivises Executive
Directors to deliver
sustained performance
and sustainable returns
for shareholders over
the longer term.

Under the plan rules approved by
shareholders, the value of shares
awarded to an individual in respect
of any one year may not normally
exceed 200% of salary.

For 2021 annual awards to current
Executive Directors are:

• C G MacLean: 200% of salary
• S G Bennett: 150% of salary

• At least 80% based

on financial measures.
This may include
TSR, EPS, Return on
Invested Capital (ROIC)
or any other measure
considered appropriate
by the Committee.
Any change to the
financial measures
used would be subject
to prior shareholder
consultation.

• Up to 20% based on

performance measures
linked to the delivery of
the business strategy.

• No single measure
will constitute more
than 50% of an
annual award.

For 2021 awards,
performance measures
will be 40% relative TSR,
40% EPS and 20%
strategic measures.

A maximum of 25% of
each element will vest for
threshold performance.

The vesting of awards is conditional
on the Group’s performance against
long-term targets over a performance
period of at least three years.

The Committee may in its discretion,
adjust the level of vesting of an award,
if it considers that the outcome does
not reflect the underlying financial or
non-financial performance of the participant
or the Group over the relevant period or
that such payout level is not appropriate
in the context of circumstances that were
unexpected or unforeseen when the targets
were set. When making this judgement
the Committee may take into account such
factors as the Committee considers relevant.

The Committee may reduce or defer the
level of vesting of an award where an event
has occurred, such as a material SHE
incident or which otherwise gives rise to
material reputational damage to the Group
(for awards from 2020 onwards) or if an
Executive Director has committed an act
of serious misconduct or in the event of
corporate failure.

The Committee may claw back awards
up to three years after vesting if the Group’s
accounts have been materially misstated,
there has been an error in the calculation
of any performance conditions which results
in overpayment, if there are circumstances
giving rise to material reputational damage
to the Group, or (for awards from 2020
onwards) if an Executive Director has
committed an act of serious misconduct
or in the event of corporate failure.

Vested awards relating to grants made from
2017 onwards are subject to a holding period
post vesting of an additional two years.

Shareholding guidelines during and post employment

The Company operates shareholding guidelines for Executive Directors to strengthen the alignment between the interests of the Executive
Directors and the shareholders. The Chief Executive Officer and the Chief Financial Officer will be expected to build interests in shares of
at least 220% and 175% of salary respectively within five years of appointment.

Executive Directors that step down from their role from April 2021, will normally be expected to maintain their minimum shareholding
(or actual shareholding if lower) for the first 12 months following departure from the Board and 50% of their minimum shareholding
(or actual shareholding if lower) for the subsequent 12 months. The Committee retains discretion to waive this guideline if it is not
considered to be appropriate in the specific circumstances.

Provisions to withhold or recover sums paid under incentives are as detailed in the table above. No other elements of remuneration are subject
to recovery provisions.

107

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Illustrations of application of Remuneration Policy
The following charts illustrate the different elements of the Executive Directors’ remuneration under three different performance scenarios:
‘Minimum, ‘Target’ and ‘Maximum’. The assumptions used are provided below the charts. The illustrations are based on annual bonus awards
for 2021 and PSP awards to be made in 2021.

C G MacLean (Chief Executive Officer)

S G Bennett (Chief Financial Officer)

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

£3.4m

17%

35%

£2.8m

42%

32%

26%

2,000,000

1,600,000

1,200,000

800,000

£0.9m
16%
32%

£0.5m

£1.9m

15%

30%

£1.6m

35%

30%

26%

22%

400,000

100%

52%

30%

25%

£1.5m

20%

30%

50%

£0.7m

100%

Minimum

Target

Maximum

Max +50%
share price growth

Minimum

Target

Maximum

Max +50%
share price growth

Fixed pay

Annual Bonus

Fixed Pay

LTIP

50% share price growth

Annual Bonus

Performance Share Plan

50% share price growth

Fixed Pay Annual Bonus
Performance Share Plan

50% share price growth

Minimum

Target

Maximum

Maximum + 50%
share price growth

Consists of base salary, benefits and pension.
• Base salary is the salary to be paid in 2021.
• Pension is measured as the value of cash supplement for 2021.
• Benefits are based on the 2020 taxable value.

C G MacLean
S G Bennett

Base salary
£594,752
£378,052

Pension
£137,891
£75,610

Benefits
£13,200
£13,530

Total fixed
£745,843
£467,192

Based on a portion of maximum:
• Annual Bonus: 50% of maximum.
• PSP: 25% of maximum.

Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• Annual bonus: consists of maximum bonus of 150% of base salary for both C G MacLean and S G Bennett.
• PSP: based on the face value of annual awards under the Policy at 200% and 150% of 2021 base salaries

for C G MacLean and S G Bennett respectively.

As the maximum scenario plus the value resulting from share price growth of 50% from the PSP award.

108

Synthomer plc Annual Report 2020GovernanceAnnual Report on Remuneration for the year ended 31 December 2020
Operation of the Executive Director Remuneration Policy for 2021
The current Policy has been in force since 29 April 2020. The specific remuneration arrangements for 2021 are described below.

Base salary

Salary increases were awarded with effect from 1 January 2021 of 2.5% for the Chief Executive Officer and the
Chief Financial Officer in line with that for the average of the UK workforce, giving 2021 salaries as follows:

• C G MacLean: £594,752
• S G Bennett: £378,052

Pension and
benefits

No changes. Executives receive a cash allowance in lieu of pension contributions, car allowance and private
health insurance.

The Chief Executive Officer’s pension allowance has been frozen at its 2019 value (or 20% of salary if higher).

2021 cash allowances in lieu of pension contributions are:

• C G MacLean: £137,891
• S G Bennett: 20% of salary

Annual bonus

For 2021, performance under the annual bonus will be measured on the following basis:

• 80% subject to performance against Underlying profit before tax targets.
• 10% subject to performance measures against key SHE targets.
• 10% subject to performance against individual strategic and operational goals.
• Targets and objectives for 2021 are, by their financial and commercial nature, considered by the Board
to be unsuitable for disclosure in advance. However, the Committee will provide information on targets
and objectives retrospectively.

2021 maximum award opportunity:

• C G MacLean: 150% of salary
• S G Bennett: 150% of salary

Performance
Share Plan

For awards to be made in 2021, performance will be measured as follows:

• 40% based on relative TSR performance versus FTSE 250 (excluding investment trusts and financial services

companies):
− 25% of this element will vest for median performance.
− 100% vesting for upper-quartile performance.
− Vesting on a straight-line basis between these points.

• 40% based on Underlying EPS growth:

− 25% of this element will vest for EPS growth of 4.5% per annum.
− 100% vesting for EPS growth of 10% per annum.
− Vesting on a straight-line basis between these points.
− This target range was set following consideration of the long-term strategy and the outlook for the markets

in which we operate.

• 10% based on sales derived from new products launched in the last five years and patented products1

• 10% based on an absolute reduction of carbon dioxide equivalent emissions1

2021 maximum award opportunity:

• C G MacLean: 200% of salary
• S G Bennett: 150% of salary

Shareholding
guidelines during
employment

The Chief Executive Officer and the Chief Financial Officer are expected to build interests in shares of at least 220%
and 175% of salary respectively.

Chair and Non-
Executive Directors

The fees to be paid in 2021 to the Chair and the Non-Executive Directors were reviewed in November 2020
and as a result:

• the Chair’s fee was increased by 2.5% from £184,860 p.a. to £189,500 p.a. with effect from 1 January 2021;
• the fees for Non-Executive Directors were increased in line with the average pay increase for the Group’s UK

workforce with effect from 1 January 2021.

Note:

1. The targets for these measures, and the level achieved, will be disclosed following the end of the performance period.

109

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Single figure of remuneration for Executive Directors (audited)

Executive Directors

C G MacLean

S G Bennett

Notes:

Base
salary
£

558,735
551,565
355,158

350,600

Year

2020
2019
2020

2019

Benefits1
£

13,200
13,200
13,530

17,820

Pension
£

Total Fixed
Remuneration
£

Annual
bonus
£

Long-term
incentives2,3
£

Total Variable
Remuneration
£

Total
£

137,891
137,891
71,032

709,826
702,656
439,720

838,103
137,891
532,737

241,326 1,079,429 1,789,255
190,225
892,881
653,354 1,093,074

52,334
120,617

70,120

438,540

80,638

26,155

106,793

545,333

1. This is the total taxable value of benefits received by each Executive Director during the year. The table below provides details of the main component of the relevant benefits paid

to Executive Directors.

2. For 2020 the values relate to awards granted under the 2011 PSP and made in 2018 and which vest on 8 March 2021. Further information about the level of vesting is provided in this
report. As these awards have not yet vested they have been valued based on the average share price for the period 1 October 2020 to 31 December 2020 of 403.8 pence, along with
accrued dividends from the date of grant. There was no share price appreciation that impacted the value of the award and the Remuneration Committee did not exercise discretion in
respect of the share price changes.

3. 2017 PSP awards vested on 4 May 2020. For the purpose of the 2019 single figure these awards were valued based on the average share price for the period 1 October 2019

to 31 December 2019 of 306 pence. These awards have been revalued based on the share price on the date of vesting of 267.6 pence. The values disclosed in the 2019 single figure
were: C G MacLean, £58,998 and S G Bennett, £29,485. The share price used to value the awards on the date of grant of 4 May 2017 was 496.9 pence. The share price used to value
the PSP for single figure purpose of 267.6 pence represents a decrease of 229.3 pence per share. The Remuneration Committee did not exercise discretion in respect of the share
price changes.

Additional information for single figure remuneration
Benefits

C G MacLean

S G Bennett

Car
expenses/benefit
£
13,200

12,500

Others
£
–

1,030

Total
£
13,200

13,530

Annual bonus
2020 award
For 2020 the Company operated a cash bonus plan for the Executive Directors related to the achievement of Underlying profit before tax
targets, SHE targets and individual strategic and operational goals.

The achievement of the Underlying profit before tax target represented up to 80% of the maximum bonus opportunity achievable of 150%
of annual basic salary for C G MacLean and S G Bennett.

The SHE targets were given a 10% weighting of the maximum achievable, with the balance of 10% relating to individual strategic and
operational goals.

Overall bonuses for the year ended 31 December 2020.

Executive Directors
C G MacLean
S G Bennett

Maximum bonus
as a % of salary
150
150

Total bonus as a
% of maximum
100
100

Total bonus
£
838,103
532,737

2020 saw performance that was ahead of financial and SHE targets and meaningful progress and achievements against individual strategic and
operational goals.

Further information on the three elements of the bonus is as follows:

1. Underlying profit before tax (80%)
The Underlying profit before tax targets set and achievement are set out below:

Level of award (% of element)
Underlying profit before tax1

Notes:

Threshold
0%
£118.3m

Target
50%
£124.5m

Maximum
100%
£137.0m

Achieved2
131%
£163.5m

1. Targets are set by reference to the Board approved internal budget for the Group and measured on a constant currency basis.

2. For the purposes of calculating achieved Underlying profit before tax, adjustments were made for currency.

110

Synthomer plc Annual Report 2020Governance2. SHE (10%)
Targets with an aggregate weighting of 10% related to improvements in recordable injury and process safety.

Target
Level of award

Rate achieved
Award outcome

Recordable injury
(measured as
injury rate)
0.21 or less

0% for a rate greater than 0.21;
5% for a rate less than 0.21
0.20
5%

Process safety
(measured as process
safety event rate)
0.16 or less
0% for a rate greater than 0.16;
5% for a rate less than 0.16
0.11
5%

Further details of the definition and measurement of the recordable injury rate and the process safety event rate are given on page 71.

3. Individual strategic and operational goals (10%)
Individual goals and achievements against them considered by the Remuneration Committee with an aggregate weighting of 10% included:

Chief Executive Officer

Chief Financial Officer

Target

1. Integration of OMNOVA and synergy delivered

Level of award
Performance
against targets

2. Management of the Pathway programme

3. Resourcing and delivery of restructuring

and investment plans

4. Support succession planning
Up to 10%
Integration of OMNOVA and synergy delivered
• Integration plans established and implemented from
completion on 1 April 2020. Largely completed on a
remote basis but this was successfully delivered through a
rigorous process of business and functional teams and a
detailed integration plan, effected by remote meetings and
integration team meetings. Synergies delivered ahead of
schedule (verified by external, independent firm KPMG)
and additional synergy opportunities identified for 2021.

Management of Pathway programme
• Leadership of the project, providing vision and

guidance at key stages and regular attendance at
project leadership meetings. Reviewed and re-assessed
progress and need for internal and external resource
balance. As pandemic impacted in 2020, led a
reassessment and phasing of the programme to ensure
momentum maintained in line with the focus on safety
and continued operation through the pandemic.

Resourcing and delivery of restructuring and
investment plans
• The Group continued with a number of key investments in

2020. The investment in and opening of the Asia Innovation
Centre in Q4 was completed on time and to budget.
The ongoing investment into Nitriles capacity at our Pasir
Gudang site has continued through the pandemic and
is on track for commissioning in Q2 2021. The Group
undertook a review of site and product footprint which
led to the announcement of certain restructuring which
is currently being implemented on time and to budget.

Support succession planning
• Supported the transition in Chair of the Board in the
latter part of 2020 and supported the other Board
changes and succession planning. Undertook detailed
succession planning for each of the executive team
roles, focusing on diversity, and developed a roadmap
for further work in 2021.

1. Integration of OMNOVA and synergy delivered
and maintenance of reporting and controls

2. Refinancing of acquisition bridge facilities through

bond issuance

3. Effective sponsorship of the Pathway programme

Up to 10%
Integration of OMNOVA and synergy delivered
• Integration plans established and implemented from
completion on 1 April 2020. Largely completed on
a remote basis but this was successfully delivered
through a rigorous process of business and
functional teams and a detailed integration plan,
effected by remote meetings and integration team
meetings. Synergies delivered ahead of schedule
(verified by external, independent firm KPMG) and
additional synergy opportunities identified for 2021.

• Ensured that internal audit arrangements were

replaced and oversaw a detailed review of existing
reporting and controls across legacy OMNOVA
business units.

Refinancing of acquisition bridge facilities
through bond issuance
• Leadership and management of overall process of
refinancing for the Group following completion
of the acquisition of OMNOVA. Reviewed and
ensured the financial stability of the Group as the
pandemic rolled across the geographies in which
the Group operates, led the process of planning,
engaging with stakeholders and successfully
secured bond facilities for the Group.

Effective sponsorship of Pathway programme
• A key leader in the project and provided challenge
and insight at key stages and regular attendance
at project leadership meetings. Reviewed and
reassessed progress and need for internal and
external resource balance. As pandemic impacted
in 2020, led a reassessment and phasing of the
programme to ensure momentum maintained
in line with the focus on safety and continued
operation through the pandemic. Ensured that
all plans were aligned with future reporting and
control environment for the enlarged group.

Award outcome

10%

111

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Additional information for single figure remuneration (audited)
Long-term incentives
2011 Performance Share Plan
The awards made on 8 March 2018 for C G MacLean and for S G Bennett under the 2011 PSP were subject to a relative total shareholder return
performance condition, an absolute Underlying earnings per share performance condition and a strategic measures condition as follows:

Relative TSR condition

EPS condition1

Company relative TSR performance
against the FTSE 250 Index (excluding
investment trusts and financial services
companies) over three-year period ended
31 December 2020
Upper quartile
Between median and upper quartile

Median

Below median

Note:

EPS for the 2020 financial year

Percentage of
award that vests

Performance achieved

38.3 pence or more
Between 32.8 pence
and 38.3 pence
32.8 pence

40%
On a straight-line basis
between 10% and 40%
10%

Less than 32.8 pence

EPS of 28.9 pence gives nil
vesting for that condition.

TSR performance at
the 60th percentile gives
vesting of 21.8% of award.

1. The targets have been adjusted to take account of the bonus factor of 1.0713 for the rights issue in 2019 and additional OMNOVA earnings from 1 April 2020.

A further 20% of the award was subject to three equally weighted strategic measures:

• Percentage of Group sales (by volume) in the 2020 financial year derived from new products launched in the last five years and patented products.

New product percentage1

Percentage of award that vests

Percentage achieved

< 15%

15% – 20%

> 20%

Note:

1.65% – 6.6%

6.6%

22% gives vesting of 6.6% of award.

1. Excluding volume attributable to Monomers, where there is no scope for new product development.

• Cumulative Underlying profit before tax (PBT) added through acquisitions for the three years ended 31 December 2020.

Cumulative PBT added through acquisitions
< £30.0m
£30.0m – £60.0m
> £86.5m

Percentage of award that vests
0%
1.65% – 6.6%
6.6%

Percentage achieved

<£30.0m gives vesting of 0% of award.

• Return on Invested Capital (ROIC) target tracks four growth projects commissioned in 2018 that were expected to impact the Group in
the 2020 financial year. The four projects selected were JOB5 in Malaysia, Worms in Germany, Oulu in Finland and Sant’Albano in Italy.

• An overall ROIC threshold was set at 18.3%, based on the weighted average of the four individual project targets. Given the greater
importance of the larger projects, the ROIC part of the award was weighted at 50% for JOB5, 25% for Worms and 12.5% for each
of Oulu and Sant’Albano. The award started to vest for each individual project at 80% of the anticipated ROIC, based on the original
investment cases that were brought before the Board at the time the projects were approved. The overall ROIC on these projects
was 38.0% which exceed the threshold of 18.3%. Of the individual projects, only JOB5 reached the vesting threshold and exceeded
100% of its target ROIC. This led to 50% vesting of the ROIC portion and therefore 3.3% of the overall award.

In aggregate, 31.8% of the 2018 award vested and the Committee did not exercise any discretion with the level of vesting.

The 2018 award will vest for C G MacLean and S G Bennett in March 2021 as follows:

C G MacLean

S G Bennett

Note:

No. of shares
in original
award1
176,206

No. of shares
that lapse
120,173

No. of shares
that vest
56,034

88,069

60,063

28,006

1. Number of shares in original award were adjusted to take account of the bonus factor of 1.0713 for the rights issue in July 2019.

Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2020 and that the pay outcomes are aligned
with the experience of shareholders and other stakeholders.

Pension entitlements (audited)
Both Executive Directors receive a cash allowance in lieu of pension contributions as outlined above. No additional benefit is receivable in the
event of a Director retiring early.

112

Synthomer plc Annual Report 2020GovernanceSingle figure of remuneration for Non-Executive Directors (audited)

Non-Executive Directors
N A Johnson

The Hon. A G Catto

B W D Connolly1

Cynthia Dubin2

Dr J J C Jansz

C A Johnstone3

Dato’ Lee Hau Hian

H A Van Deursen

Notes:

Base fee
182,430
180,000
41,571
41,200
45,731
45,000
18,965
–
40,742
40,000
46,367
40,000
41,849
41,200
40,742
40,000

Committee
membership
fee
–
–
–
–
15,000
15,000
6,935
–
15,000
15,000
15,000
15,000
–
–
15,000
15,000

2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019

Committee
Chair fee
–
–
–
–
5,000
5,000
217
–
–
–
4,783
5,000
–
–
–
–

Total
182,430
180,000
41,571
41,200
65,731
65,000
26,117
–
55,742
55,000
66,150
60,000
41,849
41,200
55,742
55,000

1. Base fee includes an amount of £5,000 per annum for role as Senior Independent Director.

2. Appointed to the Board on 15 July 2020 and to Audit Committee Chair on 16 December 2020.

3. Appointed Chair of the Company on 16 December 2020.

Directors’ shareholding and share interests (audited)

Vested
unexercised
performance
related options
31 December
2020
–
4,587

Total
unfettered
interests in
shares and
vested
options
31 December
2020
954,941
160,647

Unvested
performance
related options
31 December
20201
782,572
390,087

Share
options
exercised
during
2020
17,316
–

Share
ownership
requirements
(% of salary)2
200%
150%

Interests
in shares at
31 December
2020
(% of salary)
740%
196%

Interests in
Company
shares
31 December
2020
954,941
156,060
1,614,239
7,072,441*
4,000
–
99,953
12,500
11,136
6,250

Directors
C G MacLean
S G Bennett
The Hon. A G Catto

B W D Connolly
C S Dubin
Dato’ Lee Hau Hian
Dr J J C Jansz
C A Johnstone
H A Van Deursen

Notes:

* Non-beneficial interest.

1. Unvested performance related options comprise: (i) the awards made under the 2011 PSP in 2018 and 2019 and which have been adjusted to take account of the bonus factor of 1.0713
for the rights issue in 2019 and (ii) the awards made under the PSP in 2020. Details of the performance conditions attaching to the 2018 awards are set out on page 112; 2019 and 2020
awards are set out below.

2. Until this requirement is met, no sales of shares that vest under long-term incentive plans are permitted other than to satisfy tax liabilities that arise on the exercise of share awards under
such plans. The Committee considers that unfettered unexercised vested nil-cost awards are economically equivalent to shares and as such that they should count (on a net of tax basis)
toward compliance with the share ownership guidelines.

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Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

2019 award (audited)
The awards made on 11 March 2019 to C G MacLean and S G Bennett were as follows:

Scheme
2011 PSP – nil-cost options 150% of salary
2011 PSP – nil-cost options 120% of salary

Basis of award

Number of
shares1
235,069
119,536

Face value
£886,304
£450,699

Percentage
vesting at
threshold
performance

Performance
period end date
25% 31/12/2021
25% 31/12/2021

C G MacLean
S G Bennett

Note:

1. Number of shares in original award were adjusted to take account of the bonus factor of 1.0713 for the rights issue in 2019.

The face value of the awards was calculated using a share price of 377.04 pence per share, the average share price on the five dealing days
prior to the date of grant.

The awards made on 11 March 2019 under the PSP are subject to the following performance conditions:

Relative TSR condition
Company relative TSR performance against the FTSE
250 Index (excluding investment trusts and financial
services companies) over three-year period ending
31 December 2021
Upper quartile
Between median and upper quartile

Median
Below median

Note:

EPS condition1
EPS for the 2021 financial year

Percentage of award that will vest

41.0 pence or more
Between 35.2 pence and 41.0 pence

35.2 pence
Less than 35.2 pence

40%
On a straight-line basis
between 10% and 40%
10%
0%

1. The targets have been adjusted to take account of the rights issue in 2019 and additional OMNOVA earnings from 1 April 2020.

A further 20% of the award is subject to strategic measures including ROIC, the targets for which will be disclosed following the end of the
performance period.

2020 award (audited)
The awards made on 12 March 2020 to C G MacLean and S G Bennett were as follows:

C G MacLean
S G Bennett

Scheme
PSP – nil-cost options
PSP – nil-cost options

Basis of award
150% of salary
120% of salary

Number of
shares1
321,524
163,500

Face value
£827,346
£420,718

Percentage
vesting at
threshold
performance

Performance
period end date
25% 31/12/2022
25% 31/12/2022

The face value of the awards was calculated using a share price of 257.32 pence per share, the average share price on the five dealing days
prior to the date of grant.

Further awards were made on 6 May 2020 to C G MacLean and S G Bennett following the approval of the Directors Remuneration Policy at the
AGM held on 29 April 2020, were as follows:

C G MacLean
S G Bennett

Scheme
PSP – nil-cost options
PSP – nil-cost options

Basis of award
25% of salary
15% of salary

Number of
shares1
49,780
18,985

Face value
£137,891
£52,588

Percentage
vesting at
threshold
performance

Performance
period end date
25% 31/12/2022
25% 31/12/2022

The face value of the awards was calculated using a share price of 277.00 pence per share, the average share price on the five dealing days
prior to the date of grant.

Therefore, the total award for C G MacLean and S G Bennett were as follows:

C G MacLean
S G Bennett

Scheme
PSP – nil-cost options
PSP – nil-cost options

Basis of award
175% of salary
135% of salary

Number of
shares1
371,304
182,485

Face value
£965,237
£473,306

Percentage
vesting at
threshold
performance

Performance
period end date
25% 31/12/2022
25% 31/12/2022

114

Synthomer plc Annual Report 2020GovernanceThe 2020 awards under the PSP are subject to the following performance conditions:

EPS condition1
EPS for the 2022 financial year

Relative TSR condition
Company relative TSR performance
against the FTSE 250 Index
(excluding investment trusts
and financial services companies)
over three-year period ending
31 December 2021
Upper quartile
Between median and upper quartile Between 29.0 pence and 33.8

33.8 pence or more

Median
Below median

pence
29.0 pence
Less than 29.0 pence

Synergies delivered from
the OMNOVA acquisition
Percentage of award
that will vest

Percentage of award
that will vest

US$29.6m or more
Between US$25.0m
and US$29.6m
US$25.0m
Less than US$25m

30%
On a straight-line basis between
7.5% and 30%
7.5%
0%

A further 10% of the award is subject to a strategic measure relating to a reduction of carbon dioxide equivalent, the targets for which will be
disclosed following the end of the performance period:

Payments to past directors (audited)
No payments were made to past directors.

Payments for loss of office (audited)
No payments for loss of office were made during the year.

Performance graph and table
The graph and the table below allow comparison of the TSR of the Company and the Chief Executive Officer remuneration outcomes over
the last ten years.

TSR chart

350

300

250

200

150

100

December
2010

December
2011

December
2012

December
013

December
2014

December
2015

December
2016

December
2017

December
2018

December
2019

December
2020

Synthomer plc

FTSE 250 (excluding investment trusts)

The graph above compares the TSR performance of the Company with that of the FTSE 250 (excluding investment trusts) which is considered
to be the most appropriate index against which to make a comparison and was chosen because it represents a broad equity market index of
which the Company is a constituent.

Chief Executive Officer total single figure of
remuneration (£’000)
Bonus (% of maximum awarded)
PSP (% of maximum vesting)

3,934
100
100

1,487
27
100

923
0
50

967
57.3
0

1,246
96.7
n/a

1,218
100
n/a

2,516
100
96.3

1,807
76.5
86.2

893
20.0
10.0

1,789
100
31.8

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

The Chief Executive Officer total single figure of remuneration includes salary, benefits and pension contributions paid in the year together with
bonuses and long-term incentive awards which vested based on performance in the year.

115

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Chief Executive Officer to all employee pay ratio
The following table provides pay ratio data in respect of the Chief Executive Officer’s total remuneration compared to the 25th, median and 75th
percentile employee.

Financial year
2020

Method
Option B

25th percentile pay ratio
37:1

Median pay ratio
28:1

75th percentile pay ratio
22:1

The employees used for the purposes of compiling the table above were identified on a full-time equivalent basis as at the pay period during
which 5 April 2020 fell. Option B, which involves identifying the employees at the 25th, 50th and 75th percentile from our gender pay gap report,
was chosen as the calculation methodology.

Option B was considered to be the most simple and accurate way of identifying the relevant employees. Using this methodology we were able
to identify specific employees to make the required comparisons.

The definition of pay used included the following:

• Annual salary
• Car allowances
• All other cash allowances
• All bonuses and incentive scheme payments for services delivered in the year
• Private medical insurance value

The value of company cars has been excluded from the data. The UK car scheme is closed to new entrants and very few employees are
now provided with a car, the scheme will close completely within the next 12 months as remaining leases expire. The Chief Executive Officer is
not provided with a company funded car.

The following table provides salary and total remuneration information in respect of the employees at each quartile.

Financial year

2020

Element of pay

Salary
Total remuneration

25th percentile employee

Median employee

75th percentile employee

35,472.42
42,029.54

46,979.90
55,854.15

55,501.43
70,400.75

Our Chief Executive Officer pay is made up of a higher proportion of incentive pay than that of the majority of our employees. This is likely to
introduce more variability in the Chief Executive Officer total compensation.

The Board have confirmed that the ratios is consistent with the Company’s wider policies on employee pay, reward and progression.

116

Synthomer plc Annual Report 2020GovernancePercentage change in remuneration of the Directors
The table below sets out the increase in salary, benefits and annual bonus of the Directors compared with a selected group of employees.
The parent company, Synthomer plc does not have any direct employees so a comparator group of employees of the Group’s main UK trading
subsidiary has been used, comprising 423 employees. The Directors consider that this employee population is the most relevant for comparison
purposes, taking into account geographical location and remuneration structure.

C G MacLean
S G Bennett
N A Johnson
The Hon. A G Catto
B W D Connolly
Cynthia Dubin
Dr J J C Jansz
C A Johnstone1
Dato’ Lee Hau Hian
H A Van Deursen
Average change for employees

Note:

Salary %
increase
1.3
1.3
1.4
0.9
1.1
–
1.3
10.3
1.6
1.3
1.4

Taxable benefits
% increase/
(decrease)
–
(24.1)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(4.4)

Annual bonus
% increase
507.8
560.7
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
622.7

1. The increase relates to Caroline Johnstone being appointed Chair on 16 December 2020.

Relative importance of spend on pay
The table below shows the relative importance of the Group’s all employee remuneration expense compared with returns to shareholders by
way of dividends.

Dividends
Total employee remuneration

2020
£m
12.8
211.3

2019
£m
47.9
115.5

%
change
(73.3)%
83.5%

Dividends are the dividends paid in the year. The proposed final 2019 dividend was suspended and subsequently cancelled to preserve cash,
liquidity and balance sheet strength at the onset of COVID-19 in March 2020.

Total employment remuneration is the consolidated salary and bonus cost for all Group employees.

External appointments
Executive Directors are permitted to accept external appointments with the prior approval of the Board, provided that there is no adverse
impact to their role and duties to the Company. Any fees arising from such appointments may be retained by the Executive Directors where
the appointment is unrelated to the Group’s business. S G Bennett does not currently hold any external appointments. C G MacLean was
appointed as a Non-Executive Director of Saudi Basic Industries (SABIC), headquartered in Riyadh, in October 2017 and receives a board
membership fee of $157,500 per annum and a committee fee of SAR 259,000 per annum. Mr MacLean was appointed as a Non-Executive
Director of Clariant Ltd on 16 October 2018 following his nomination by SABIC under the terms of the governance agreement between
Clariant and SABIC, and receives a fee of CHF 280,000 per annum in aggregate for board and committee roles in relation to Clariant Limited.

Remuneration Committee
Remuneration Committee membership since 1 January 2020:

Brendan Connolly (Chair)
Cynthia Dubin (from 15 July 2020)
Just Jansz
Caroline Johnstone (to 15 December 2020)
Holly A Van Deursen

Attendance at Committee meetings is set out on page 102.

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Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceDirectors’ Remuneration report continued

Key duties of the Committee
During 2020 the Committee was responsible for determining, in agreement with the Board, the Company’s policy on executive remuneration
and the specific remuneration for the Chairman and each of the Executive Directors, including pension rights, within the terms of the agreed
policy. The Committee was also responsible for the specific remuneration of the Executive Committee and reviewing remuneration elsewhere
in the Group.

Advisers
The Chief Executive Officer, Company Secretary, Group HR Director are invited to attend Committee meetings to contribute to the Committee
in its deliberations. However, no individual is involved in discussions, or is part of any decisions, relating to their own remuneration.

The Committee received independent advice from Deloitte LLP (Deloitte) which was appointed as the Committee’s independent remuneration
adviser in April 2013.

During the year, Deloitte provided advice on governance and market trends and other remuneration matters that materially assisted the
Committee. The fees paid to Deloitte in respect of this work were charged on a time and expenses basis and totalled £22,250 for advice in
2020. The Committee is comfortable that the Deloitte engagement team that provides remuneration advice to the Committee do not have
connections with the Company or its Directors that may impair their independence. The Committee reviewed the potential for conflicts of
interest and judged that there were appropriate safeguards against such conflicts. Deloitte also provided tax services to part of the Group
in the year. The Committee was satisfied that this did not compromise the independence of the advice received.

Deloitte is a founding member of the Remuneration Consultants Group and adheres to its Code of Conduct. Deloitte was appointed directly
by the Committee, and the Committee is satisfied that the advice received was objective and independent.

Statement of voting at the AGM
The table below sets out the results of the votes on the Directors’ remuneration at the 2020 AGM (Annual Report and Directors’
Remuneration Policy).

Votes for

Votes against

Number
304,084,940
322,152,827

% of vote
89.94
91.98

Number
34,028,369
28,090,122

% of vote
10.06
8.02

Votes withheld

Number
12,158,141
28,501

2020 Annual Report on Remuneration
2020 Directors’ Remuneration Policy

By order of the Board

R Atkinson
Company Secretary
4 March 2021

118

Synthomer plc Annual Report 2020GovernanceDirectors’ Report

The Directors submit their Annual Report and the audited consolidated
financial statements for the year ended 31 December 2020. None of
the matters required to be disclosed by Listing Rule 9.8.4R apply
to the Company other than the amount of capitalised interest (see
financial statements note 2), details of long-term incentive schemes
(see Directors’ Remuneration report (pages 102 to 118) and
shareholder waiver of dividends (see financial statements note 32).
The Directors’ Report comprises pages 119 to 120 and the following
sections of the Annual Report which are incorporated by reference:

Item

Statement of Directors’ responsibilities
Financial risk management

Present membership of the Board
Corporate Governance report
Strategic Report (including principal activities)
Management of risk and viability statement
Employee engagement
Directors’ Remuneration report
Share capital

Greenhouse gas emissions
ESG report

Location in Annual Report

Page 121
Financial statements
– note 22
Pages 80 to 81
Pages 82 to 89
IFC to 79
Pages 42 to 49
Pages 65 to 69
Pages 102 to 118
Financial statements
– note 27
Pages 74 to 77
Pages 56 to 79

Results and dividends
The profit attributable to shareholders for the year was £3.1 million.
An interim dividend of 3.0 pence per share was paid on 10 November
2020. The total dividend paid for the year was £15.9 million.
The Directors recommend a final ordinary dividend of 8.6 pence per
share payable on 5 July 2021 to those shareholders registered at the
close of business on 4 June 2021. A dividend reinvestment plan
is available to shareholders and this alternative will continue to be
offered until further notice.

Acquisitions and disposals
On 1 April 2020 the Company completed the recommended
acquisition of the entire issued share capital of OMNOVA Solutions Inc
at a price of $10.15 per OMNOVA share.

On 1 May 2020 Synthomer Deutschland GmbH completed the sale
of its Pyratex VP Latex business to Trinseo.

Further details of these transactions are contained in notes 29 and 4
respectively to the consolidated financial statements.

Directors
All the Directors will retire and will be seeking election or re-election
at the forthcoming AGM.

None of the Directors seeking re-election has a service contract
other than C G MacLean and S G Bennett, who each have a service
contract which contains a 12 month notice period.

Director indemnity provisions
Under the Company’s Articles of Association, the Directors of the
Company have the benefit of a qualifying third-party indemnity
provision which provides that they shall be indemnified by the
Company against certain liabilities as permitted by Sections 232
and 234 of the Companies Act 2006 and against costs incurred
by them in relation to any liability for which they are indemnified.
The Company has purchased and maintains insurance against
Directors’ and officers’ liabilities in relation to the Company.

Share capital and control
During 2020 no shares were issued or repurchased. A total of 22,185
shares were purchased on the open market on behalf of the shareholders
who elected to participate in the dividend reinvestment plan.

The rights and obligations attaching to the Company’s ordinary
shares, being the only class of issued share capital, as well as the
powers of the Company’s Directors, are set out in the Company’s
Articles of Association, copies of which can be obtained from
Companies House or can be downloaded from the Company’s
website www.synthomer.com. There are no restrictions on the
voting rights attaching to the Company’s ordinary shares or on the
transfer of securities in the Company. No person holds securities
in the Company carrying special rights with regard to the control
of the Company. The Company is not aware of any agreements
between holders of securities that may result in restrictions on the
transfer of securities or on voting rights. Unless expressly specified
to the contrary in the Articles of Association of the Company, the
Company’s Articles of Association may be amended by special
resolution of the Company’s shareholders.

Other than in relation to its borrowings which, unless certain
conditions are satisfied, become repayable on a takeover, the
Company is not party to any significant agreements that would
take effect, alter or terminate upon a change of control following
a takeover bid. The Company does not have agreements with any
Director or employee that would provide compensation for loss of
office or employment resulting from a takeover.

All of the Company’s share schemes contain provisions relating to
a change of control. Outstanding options and awards would normally
vest and become exercisable on a change of control, subject to the
satisfaction of any performance conditions at that time.

Major shareholdings
Other than the shareholdings disclosed as Directors’ interests in the
Directors’ Remuneration report as at 19 February 2021, the Company
had been notified under Section 5 of the Disclosure and Transparency
Rules of the UK Listing Authority of the following significant holdings of
voting rights in its ordinary shares:

Ordinary
shares (number)

Percentage
of ordinary
shares in issue

Nature of holding

Kuala Lumpur
Kepong Berhad Group
Jupiter Fund
Management plc
Ameriprise
Financial Inc
Kames
Capital Plc

89,145,981

20.98

Direct interest

24,965,862

22,063,086

14,117,612

5.87

5.19

3.32

Indirect interest
Direct and
Indirect interest
Direct and
indirect interest

119

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020GovernanceGoing concern
The Directors have acknowledged the latest guidance on going
concern and in reaching their conclusions have taken into account
factors which include (i) the putting in place of new financing facilities
on the completion of the acquisition of OMNOVA comprising
a $260 million term loan and a €460 million RCF with five year terms
ending on 3 July 2024 and (ii) the issue of a €520 million bond due
2025 which replaced a €520 million acquisition financing bridging
facility. After making enquiries and taking account of reasonably
possible changes in trading performance, the Directors are satisfied
that, at the time of approving the financial statements, it is appropriate
to adopt the going concern basis in preparing the financial statements
of both the Group and the Company.

Cautionary statement
The purpose of this report is to provide information to the members
of the Company. It contains certain forward-looking statements with
respect to the operations, performance and financial condition of the
Group. By their nature, these statements involve uncertainty since
future events and circumstances can cause results and developments
to differ materially from those anticipated. The forward-looking
statements reflect knowledge and information available at the date of
preparation of this report and the Company undertakes no obligation
to update these forward-looking statements. Nothing in this report
should be construed as a profit forecast.

Independent auditors
A resolution to appoint PricewaterhouseCoopers LLP as the
Company’s auditor will be proposed at the AGM.

Annual General Meeting
The AGM will be held at the offices of the Company at 45 Pall Mall,
London SW1Y 5JG on 29 April 2021 at 12.00 noon.

By order of the Board

R Atkinson
Company Secretary
4 March 2021

Directors’ Report continued

Employment policies and employee involvement
The Group gives every consideration to applications for employment
from disabled persons. Employees who become disabled are given
every opportunity to continue employment under normal terms and
conditions with appropriate training, career development and
promotion wherever possible. The Group seeks to achieve equal
opportunities in employment through recruitment and training policies.

The Group encourages employee involvement in its affairs.
Dialogue takes place regularly with employees to make them aware
of the financial and economic factors affecting the performance of
the Group. Performance related bonus schemes are in operation
throughout the Group. Alex Catto has been designated as the
Non-Executive Director responsible for gathering the views of
the workforce and further information on the Board’s workforce
engagement methods are on page 36. The Group’s approach
to diversity and inclusion is on pages 67 and 68.

Authority to purchase own shares
The Company has a general authority, which expires at the conclusion
of the 2021 AGM, to make market purchases of not more than
42,485,096 of the Company’s ordinary shares in accordance with the
terms of the special resolution passed at the 2020 AGM. A resolution
will be tabled at the 2021 AGM to renew this authority for an amount
representing approximately 10% of the Company’s issued share
capital as at 3 March 2021.

Political donations
No political donations were made in the year.

UK pension funds
The trustees have reviewed the independent investment management
of the assets of the Company pension schemes in the UK and
assured themselves of the security and controls in place. In particular,
it is the trustees’ policy not to invest in Synthomer plc shares nor lend
money to the Company.

Subsidiaries
All the Group’s subsidiaries, joint ventures and related undertakings
are listed on pages 170 to 171.

Statement as to disclosure of information to auditor
Each Director of the Company confirms that, so far as he or she is
aware, there is no relevant audit information of which the Company’s
auditor is unaware and that he or she has taken all the steps that
he or she ought to have taken as a Director in order to make himself
or herself aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information. For these
purposes, relevant audit information means information needed by
the Company’s auditor in connection with preparing its report on
pages 122 to 128.

This confirmation is given and should be interpreted in accordance
with Section 418 of the Companies Act 2006.

120

Synthomer plc Annual Report 2020GovernanceStatement of Directors’ responsibilities in respect of the financial statements

Directors’ confirmations
The Directors consider that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the
Directors’ Report confirm that, to the best of their knowledge:

• the Company financial statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101 give a true and fair view of the assets,
liabilities, financial position and profit of the Company;

• the Group financial statements, which have been prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006,
give a true and fair view of the assets, liabilities, financial position
and profit of the Group; and

• the Directors’ Report includes a fair review of the development and

performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that it faces.

By order of the Board

C G MacLean
Chief Executive Officer

S G Bennett
Chief Financial Officer

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group financial statements in accordance with international
accounting standards in conformity with the requirements of
the Companies Act 2006 and Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
Reduced Disclosure Framework, and applicable law). Additionally, the
Financial Conduct Authority’s Disclosure Guidance and Transparency
Rules require the Directors to prepare the Group financial statements
in accordance with IFRSs adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.

Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and
of the profit or loss of the Group and Company for that period.
In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• state whether applicable, for the Group, international accounting
standards in conformity with the requirements of the Companies
Act 2006 and IFRSs adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union have been followed
and, for the Company, United Kingdom Accounting Standards,
comprising FRS 101 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.

121

Strategic ReportGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Governance
Independent auditors’ report
to the members of Synthomer plc

Report on the audit of the
financial statements
Opinion
In our opinion:

• Synthomer plc’s group financial statements
and company financial statements (the
“financial statements”) give a true and fair
view of the state of the group’s and of the
company’s affairs as at 31 December 2020
and of the group’s profit and the group’s
cash flows for the year then ended;

• the group financial statements have been
properly prepared in accordance with
International Accounting Standards in
conformity with the requirements of the
Companies Act 2006;

• the company financial statements have
been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”,
and applicable law); and

• the financial statements have been
prepared in accordance with the
requirements of the Companies Act 2006.

We have audited the financial statements,
included within the Annual Report, which
comprise: the Consolidated and Company
balance sheets as at 31 December 2020;
the Consolidated income statement and
Consolidated statement of comprehensive
income, the Consolidated cash flow statement,
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.

Our opinion is consistent with our reporting
to the Audit Committee.

Separate opinion in relation to international
financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union
As explained in note 2 to the group
financial statements, the group, in addition
to applying international accounting standards
in conformity with the requirements of the
Companies Act 2006, has also applied
international financial reporting standards
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.

In our opinion, the group financial statements
have been properly prepared in accordance
with international financial reporting
standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the
European Union.

Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for
the audit of the financial statements section of
our report. We believe that the audit evidence
we have obtained is sufficient and appropriate
to provide a basis for our opinion.

Independence
We remained independent of the group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements.

To the best of our knowledge and belief, we
declare that non-audit services prohibited by
the FRC’s Ethical Standard were not provided
to the group.

Other than those disclosed in note 7 to the
financial statements, we have provided no
non-audit services to the group in the period
under audit.

Our audit approach
Overview
Audit scope
• Audit procedures provide coverage of 85%
of revenue, 91% of operating profit, and
91% of underlying profit before tax.

• Audit scope covers 10 countries,

performing procedures over 17 entities.
• Financially significant components in the

UK, Germany and Malaysia.

Key audit matters
• Valuation of Defined Benefit Pension

Liabilities (group)

• Provisions for Uncertain Tax Positions (group)
• OMNOVA acquisition accounting (group)
• Impact of the Covid-19 pandemic (group

and parent)

Materiality
• Overall group materiality: £7,900,000

(2019: £5,810,000) based on approximately
5% of underlying profit before taxation.
• Overall company materiality: £18,660,000

(2019: £11,739,000) based on
approximately 1% of total assets.
• Performance materiality: £5,925,000
(group) and £2,250,000 (company).

The scope of our audit
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements.

Capability of the audit in detecting
irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined in the Auditors’
responsibilities for the audit of the financial
statements section, to detect material
misstatements in respect of irregularities,
including fraud. The extent to which our
procedures are capable of detecting
irregularities, including fraud, is detailed below.

Based on our understanding of the group and
industry, we identified that the principal risks
of non-compliance with laws and regulations
related to breaches of environmental, health
and safety and competition regulations,
tax legislation and equivalent local laws
and regulations applicable to significant
component teams, and we considered the
extent to which non-compliance might have
a material effect on the financial statements.
We also considered those laws and
regulations that have a direct impact on the
preparation of the financial statements such
as the Companies Act 2006. We evaluated
management’s incentives and opportunities
for fraudulent manipulation of the financial
statements (including the risk of override of
controls), and determined that the principal
risks were related to posting inappropriate
journal entries to increase revenue and
management bias in accounting estimates.
The group engagement team shared this risk
assessment with the component auditors so
that they could include appropriate audit
procedures in response to such risks in their
work. Audit procedures performed by the
group engagement team and/or component
auditors included:

122

Synthomer plc Annual Report 2020Group financial statements• Discussions with management and internal
audit, including consideration of known or
suspected instances of non-compliance
with laws and regulations and fraud;
• Evaluation of management’s controls

designed to prevent and detect irregularities;

• Challenging assumptions and judgements
made by management in their significant
accounting estimates, in particular in relation
to provisions for uncertain tax positions, the
valuation of defined benefit scheme liabilities
and OMNOVA acquisition accounting (see
related key audit matters below);

• Identifying and testing journal entries,
in particular any journal entries posted
with unusual account combinations (for
example credit to revenue with a debit
entry to an unexpected account) or
journals posted by senior management.

There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances of
non-compliance with laws and regulations
that are not closely related to events and
transactions reflected in the financial
statements. Also, the risk of not detecting
a material misstatement due to fraud is
higher than the risk of not detecting one
resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery or intentional misrepresentations,
or through collusion.

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.

OMNOVA acquisition accounting, Carrying
value of the company’s investment in
subsidiaries and Impact of Covid-19 are
new key audit matters this year. Otherwise,
the key audit matters below are consistent
with last year.

Key audit matter

How our audit addressed the key audit matter

We obtained external actuarial reports of the UK and German schemes which set out
the calculations and assumptions underpinning the year end pension scheme liabilities
valuation and our US component team obtained an external actuarial report for the US
scheme. We read these reports and held discussions with the external actuaries and
were satisfied that the scope of their work was such that we could use this work to
provide evidence for the purpose of our audit. We assessed the competency and
objectivity of the external actuaries commissioned by the Group to perform the year
end calculations by considering their technical expertise and independence from the
Group. We identified no concerns over their competency or objectivity. We used our own
specialist actuarial knowledge to evaluate all the key assumptions used in each of the two
schemes by comparing these assumptions to our expectations for similar schemes as at
the year end. We found management’s assumptions to be within an acceptable range.
We also considered the appropriateness of the disclosures within the financial statements
and considered these to be acceptable.

Valuation of Defined Benefit Pension
Liabilities (group)
As set out in Note 26, the Group has significant
defined benefit pension schemes. These
primarily represent the Yule Catto Group
retirement benefits scheme in the UK, the
OMNOVA Solutions Consolidated Pension
Plan in the US and an unfunded scheme in
Germany, which account for £52.3 million,
£61.8 million and £87.8 million respectively
(91% in aggregate), of the net pension deficit
of £221.4 million recorded on the Group
balance sheet at the year end. We focused on
the pension liabilities as the amounts reflected
in the financial statements for defined benefits
scheme liabilities are sensitive to relatively
small changes in a few key assumptions such
as the inflation rate, mortality tables and the
discount rate applied. The Group uses third
party actuaries to calculate the amounts to
reflect in the financial statements in respect
of these schemes’ liabilities and accordingly
it is important for us to assess the work they
perform and their competency to undertake
the work in order to conclude on the results
of their work.

123

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Independent auditors’ report continued
to the members of Synthomer plc

Key audit matter

How our audit addressed the key audit matter

Provisions for Uncertain Tax Positions (group)
The Group has a wide geographic footprint and
is subject to a range of tax laws in a number of
different tax jurisdictions. In determining the
amount to record at the year-end for tax
liabilities there is an element of judgement as
to what amounts will ultimately be payable for
assessed tax exposures. As set out in Note 10
at 31 December 2020, the Group has recorded
current tax liabilities totalling £58.5 million.
A significant element of this tax liability relates
to uncertain tax positions. We focused on this
area due to the size of the amounts involved
and level of judgement needed to determine
the estimated provisions.

OMNOVA acquisition accounting (group)
On 1 April 2020, the Group completed the
acquisition of OMNOVA Solutions Group
(“OMNOVA”). Management engaged KPMG to
perform a purchase price allocation (“PPA”)
exercise in relation to intangibles, plant and
machinery, real estate and inventory.
Management also engaged Mercer to consider
the pension scheme valuation in the opening
balance sheet. In determining the
appropriateness of the PPA exercise and the
resultant goodwill of £180.2 million (as per note
14), there is an element of judgement and
significant estimates were involved.

We used our tax specialists to assess the level of provisions held against various tax
exposures and to consider the appropriateness of any provisions and their disclosure
in the annual report. In our assessment we had regard to the nature of the individual
exposures, including their origin, and any developments in the year to assess the
rationale for their continued validity at the current year end. As part of this work
we inspected correspondence with tax authorities and the Group’s tax advisors.
We challenged the judgements made by assessing individual provisions against our
expectations of potential exposures, having regard to the facts of each case. No significant
issues arose from this work to suggest that the judgements made and amounts recorded
were inappropriate. We also considered the appropriateness of the disclosures within the
financial statements and considered these to be acceptable.

We used our valuation specialists to review the purchase price allocation (“PPA”) and
consider the appropriateness of the valuation methodologies, key assumptions and the
useful lives assigned to the assets and we consider the overall approach to be reasonable.
The tangible and intangible fair values have been determined by KPMG as part of the PPA
exercise, and are considered to be reasonable. The intangible assets are customer
relationships and trademarks and patents within the Functional Solutions and Industrial
Specialities divisions, which were valued with reference to royalty revenue forecasts and
cash flows projections. We challenged the appropriateness of the forecasts by comparing
to actual outturns of the divisions post-acquisition. As a result, further challenge was made
regarding the valuation of Functional Solutions intangible assets due to the impact of
Covid-19 on the oil and gas industry, however evidence regarding the return of this industry
was found to support the assessment that no impairment was required.

Tangible assets of primarily land, real estate, building improvements and plant and
equipment were acquired. We have tested the key assumptions made by management in
KPMG’s valuation exercise, namely the land value per acre, building base cost per square
foot, building soft costs and entrepreneurial incentive, plant and machinery replacement
costs, obsolescence factors, residual values, discount rate, terminal growth rate and cash
flow growth assumptions, with no findings to report. We have considered the useful
economic lives applied to the tangible and intangible assets and we consider these to be
reasonable. We also reviewed the reconciliation of the accounting policies/GAAP alignment
for completeness and have no findings to report. The component teams in the US and
France performed audit procedures over the significant adjustments, in addition to
attending the stockcounts at the point of acquisition to confirm opening inventory balances
and assisting with the audit of the acquisition accounting and acquired asset valuations.
No exceptions were noted from our work. We also considered the appropriateness of the
disclosures within the financial statements and considered these to be acceptable.

124

Synthomer plc Annual Report 2020Group financial statementsKey audit matter

How our audit addressed the key audit matter

Impact of Covid-19 (group and parent)
Since the outbreak of Covid-19, the Group and
Company have continued to operate and trade,
albeit there was a period when trade slowed
during April 2020 and May 2020, with the
pandemic therefore impacting the financial results
of the Group for the year. Management has
considered the impact of Covid-19 on the financial
statements, with these considerations principally
relating to the ability of the Group and Company
to continue as a going concern and the potential
impairment of intangible assets, including
goodwill. Disclosure of the risk to the Group and
Company of the impact of Covid-19, and
management’s conclusions on going concern
and viability, have been included within the
relevant sections of the financial statements.

In advance of the year end, and throughout the course of our audit procedures, we assessed
the risks arising from Covid-19. We focused on areas that we considered might be susceptible
to a material financial impact on the performance and position of the Group and Company for
the year ended 31 December 2020. We assessed the base case going concern model
prepared by management which includes the anticipated future impacts of Covid-19, as well as
the downside scenarios - including management’s severe but plausible scenario – which have
been used to sensitise the base case model. We have obtained management’s forecasts and
assessed the underlying assumptions, which principally focused on the expected growth rates
for the business. We performed sensitivity analysis to consider the impact of changes in the
assumptions on the forecasts. In conjunction with the above, we have reviewed management’s
analysis of both liquidity and covenant.

We similarly considered the cash flow projections used within the goodwill impairment model,
in the context of the potential impact of Covid-19 and analysis of management’s historic
forecasting accuracy, ensuring the consistency of these projections to those reviewed through
the procedures performed over going concern. Management recognised a goodwill
impairment charge in the Acrylate Monomers Cash Generating Unit (“CGU”) due to factors not
considered to be related to Covid-19. No exceptions were noted from our work. We also
considered the appropriateness of any relevant disclosures within the financial statements and
considered these to be acceptable.

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.

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.

We tailored the scope of our audit to ensure
that we performed enough work to be able to
give an opinion on the financial statements as
a whole, taking into account the structure of
the group and the company, the accounting
processes and controls, and the industry in
which they operate.

As set out in note 5 ‘Segmental analysis’, the
Group reports its results as four segments:
‘Performance Elastomers’, ‘Functional
Solutions’, ‘Industrial Specialities’ and
‘Acrylate Monomers’. The Group financial
statements are a consolidation of reporting
units, being holding companies, intermediate
holding companies and operating companies,
across 24 countries.

Three countries, being the UK, Germany and
Malaysia, account for the majority for the
Group’s results. We accordingly focused our
work on three of the reporting units in these
countries, which were subject to audits
of their complete financial information.
In addition, to increase our coverage of the
Group’s revenue and underlying profit before
tax we performed audit procedures at an
additional thirteen reporting units located in
the UK, Italy, Germany, Malaysia, Finland, the
Netherlands, the Czech Republic, Austria,
France, and the USA. These components
accounted for 85% of the Group’s revenue,
91% of the Group’s operating profit and 91%
of the Group’s underlying profit before tax.

Where work was performed by component
auditors, we determined the level of
involvement we needed to have in the audit
work at those reporting units to be able to
conclude whether sufficient appropriate audit
evidence had been obtained as a basis for
our opinion on the Group financial statements
as a whole. During the audit, senior members
of the Group team held a number of meetings
with the audit teams from the Key reporting
units in the UK, Germany and Malaysia,
and also the USA, and reviewed the work
performed by these teams over those areas
of higher audit risk.

125

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Independent auditors’ report continued
to the members of Synthomer plc

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Financial statements – group
£7,900,000 (2019: £5,810,000).

Overall materiality
How we determined it approximately 5% of underlying profit before taxation
Rationale for
benchmark applied

We believe that underlying profit before taxation, being
profit before tax adjusted for special items, is a key metric
against which the Group’s financial performance is
measured in the Chairman’s and CEO’s statements within
the Annual Report. It is also a key metric for investors.

Financial statements – company
£18,660,000 (2019: £11,739,000).
approximately 1% of total assets, restricted for group reporting
We believe that total assets is the primary measure used by
the shareholders in assessing the performance of the
company, and is a generally accepted benchmark. This has
been capped at a level below that of the group materiality
for group reporting (capped at £3,000,000).

For each component in the scope of our group
audit, we allocated a materiality that is less
than our overall group materiality. The range
of materiality allocated across components
was between £300,000 and £7,000,000.
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
£5,925,000 for the group financial statements
and £15,700,000 for the company financial
statements, restricted for group reporting.

In determining the performance materiality,
we considered a number of factors – the
history of misstatements, risk assessment
and aggregation risk and the effectiveness
of controls – and concluded that an amount
at the upper end of our normal range
was appropriate.

We agreed with the Audit Committee that
we would report to them misstatements
identified during our audit above £395,000
(group audit) (2019: £290,000) and £395,000
(company audit) (2019: £290,000) as well
as misstatements below those amounts
that, in our view, warranted reporting for
qualitative reasons.

Conclusions relating to going concern
Our evaluation of the directors’ assessment
of the group’s and the company’s ability to
continue to adopt the going concern basis
of accounting included:

• We reviewed the Directors’ model

supporting their going concern assumption,
tested its mathematical accuracy and
considered the reasonableness of the
revenue and cost assumptions made
and the available headroom throughout a
period of at least twelve months from the
date of approval of the financial statements.
Our procedures included: understanding

126

and evaluating the drivers for the revenue
and level of costs included in the model,
considering whether judgements/estimates
are appropriately disclosed within the
financial statements, applying sensitivities
to the model, including timing and quantum
of revenue forecast in the period.

Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that, individually
or collectively, may cast significant doubt on the
group’s and the company’s ability to continue
as a going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.

In auditing the financial statements,
we have concluded that the directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.

However, because not all future events
or conditions can be predicted, this
conclusion is not a guarantee as to
the group’s and the company’s ability
to continue as a going concern.

In relation to the company’s reporting on
how they have applied the UK Corporate
Governance Code, we have nothing
material to add or draw attention to in
relation to the directors’ statement in the
financial statements about whether the
directors considered it appropriate to adopt
the going concern basis of accounting.

Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.

Reporting on other information
The other information comprises all of the
information in the Annual Report other than
the financial statements and our auditors’
report thereon. The directors are responsible
for the other information. Our opinion on
the financial statements does not cover the
other information and, accordingly, we do
not express an audit opinion or, except to
the extent otherwise explicitly stated in this
report, any form of assurance thereon.

In connection with our audit of the financial
statements, our responsibility is to read the
other information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements
or our knowledge obtained in the audit,
or otherwise appears to be materially
misstated. If we identify an apparent material
inconsistency or material misstatement,
we are required to perform procedures
to conclude whether there is a material
misstatement of the financial statements or a
material misstatement of the other information.
If, based on the work we have performed, we
conclude that there is a material misstatement
of this other information, we are required to
report that fact. We have nothing to report
based on these responsibilities.

With respect to the Strategic report and
Directors’ Report, we also considered
whether the disclosures required by the UK
Companies Act 2006 have been included.

Based on our work undertaken in the course
of the audit, the Companies Act 2006
requires us also to report certain opinions
and matters as described below.

Strategic report and Directors’ Report
In our opinion, based on the work undertaken
in the course of the audit, the information
given in the Strategic report and Directors’
Report for the year ended 31 December 2020
is consistent with the financial statements
and has been prepared in accordance with
applicable legal requirements.

In light of the knowledge and understanding of
the group and company and their environment
obtained in the course of the audit, we did not
identify any material misstatements in the
Strategic report and Directors’ Report.

Directors’ Remuneration
In our opinion, the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006.

Synthomer plc Annual Report 2020Group financial statementsCorporate governance statement
The Listing Rules require us to review the
directors’ statements in relation to going
concern, longer-term viability and that part of
the corporate governance statement relating
to the company’s compliance with the
provisions of the UK Corporate Governance
Code specified for our review. Our additional
responsibilities with respect to the corporate
governance statement as other information
are described in the Reporting on other
information section of this report.

Based on the work undertaken as part
of our audit, we have concluded that each
of the following elements of the corporate
governance statement is materially consistent
with the financial statements and our
knowledge obtained during the audit, and
we have nothing material to add or draw
attention to in relation to:

• The directors’ confirmation that they

have carried out a robust assessment
of the emerging and principal risks;
• The disclosures in the Annual Report

that describe those principal risks, what
procedures are in place to identify
emerging risks and an explanation of how
these are being managed or mitigated;
• The directors’ statement in the financial

statements about whether they considered
it appropriate to adopt the going concern
basis of accounting in preparing them,
and their identification of any material
uncertainties to the group’s and company’s
ability to continue to do so over a period
of at least twelve months from the date
of approval of the financial statements;

• The directors’ explanation as to their

assessment of the group’s and company’s
prospects, the period this assessment
covers and why the period is appropriate;
and

• The directors’ statement as to whether

they have a reasonable expectation that
the company will be able to continue
in operation and meet its liabilities as
they fall due over the period of its
assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.

Our review of the directors’ statement
regarding the longer-term viability of the group
was substantially less in scope than an audit
and only consisted of making inquiries and
considering the directors’ process supporting
their statement; checking that the statement
is in alignment with the relevant provisions
of the UK Corporate Governance Code;
and considering whether the statement is
consistent with the financial statements and
our knowledge and understanding of the
group and company and their environment
obtained in the course of the audit.

In addition, based on the work undertaken
as part of our audit, we have concluded
that each of the following elements of the
corporate governance statement is materially
consistent with the financial statements and
our knowledge obtained during the audit:

• The directors’ statement that they consider
the Annual Report, taken as a whole, is
fair, balanced and understandable, and
provides the information necessary for
the members to assess the group’s
and company’s position, performance,
business model and strategy;

• The section of the Annual Report that

describes the review of effectiveness of risk
management and internal control systems;
and

• The section of the Annual Report describing

the work of the Audit Committee.

We have nothing to report in respect of our
responsibility to report when the directors’
statement relating to the company’s
compliance with the Code does not properly
disclose a departure from a relevant provision
of the Code specified under the Listing Rules
for review by the auditors.

Responsibilities for the financial
statements and the audit
Responsibilities of the directors
for the financial statements
As explained more fully in the Statement
of Directors’ Responsibilities in respect of
the financial statements, the directors are
responsible for the preparation of the financial
statements in accordance with the applicable
framework and for being satisfied that they
give a true and fair view. The directors are
also responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the
directors are responsible for assessing the
group’s and the company’s ability to continue
as a going concern, disclosing, as applicable,
matters related to going concern and using
the going concern basis of accounting unless
the directors either intend to liquidate the
group or the company or to cease operations,
or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.

Our audit testing might include testing
complete populations of certain transactions
and balances, possibly using data auditing
techniques. However, it typically involves
selecting a limited number of items for
testing, rather than testing complete
populations. We will often seek to target
particular items for testing based on their
size or risk characteristics. In other cases,
we will use audit sampling to enable us to
draw a conclusion about the population
from which the sample is selected.

A further description of our responsibilities for
the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been
prepared for and only for the company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose or to any
other person to whom this report is shown or
into whose hands it may come save where
expressly agreed by our prior consent in writing.

127

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Independent auditors’ report continued
to the members of Synthomer plc

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.; or

We have no exceptions to report arising from
this responsibility.

Appointment
Following the recommendation of the Audit
Committee, we were appointed by the
members on 12 July 2012 to audit the financial
statements for the year ended 31 December
2012 and subsequent financial periods.
The period of total uninterrupted engagement
is 9 years, covering the years ended
31 December 2012 to 31 December 2020.

Matthew Mullins (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 March 2021

128

Synthomer plc Annual Report 2020Group financial statements
Consolidated income statement
for the year ended 31 December 2020

Underlying
performance
£m

Note

2020

Special
Items
£m

IFRS
£m

Underlying
performance
£m

2019

Special
Items
£m

Revenue
Company and subsidiaries before Special Items
Amortisation of acquired intangibles
Restructuring and site closure costs
Acquisition costs and related gains
Impairment charge
Sale of business
Foreign exchange gain on rights issue
Company and subsidiaries
Share of joint ventures
Operating profit/(loss)
Interest payable
Interest receivable
Fair value loss on unhedged interest derivatives
Loss on extinguishment of financing facilities

Net interest expense on defined benefit obligations
Interest element of lease payments
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
(Loss)/profit attributable to non-controlling interests
Profit/(loss) attributable to equity holders of the parent

4
4
4
4
4
4

18
6
9
9
4
4

9
9

1,644.2
188.4
–
–
–
–
–
–
188.4
1.2
189.6
(25.5)
1.2
–
–

(24.3)
(3.7)
(1.6)
(29.6)
160.0
(37.4)
122.6
(0.3)
122.9

122.6

–
–
(30.9)
(42.5)
(14.6)
(36.6)
(6.6)
–
(131.2)
–
(131.2)
–
–
(3.6)
(4.9)

(8.5)
–
–
(8.5)
(139.7)
15.6
(124.1)
(4.3)
(119.8)

(124.1)

Earnings/(loss) per share
– Basic
– Diluted

13
13

28.9p
28.8p

(28.2)p
(28.1)p

1,644.2
188.4
(30.9)
(42.5)
(14.6)
(36.6)
(6.6)
–
57.2
1.2
58.4
(25.5)
1.2
(3.6)
(4.9)

(32.8)
(3.7)
(1.6)
(38.1)
20.3
(21.8)
(1.5)
(4.6)
3.1

(1.5)

0.7p
0.7p

1,459.1
124.9
–
–
–
–
–
–
124.9
0.9
125.8
(6.7)
0.9
–
–

(5.8)
(2.7)
(1.1)
(9.6)
116.2
(16.3)
99.9
0.4
99.5

99.9

25.3p
25.2p

–
–
(8.7)
(0.8)
(9.2)
–
–
3.5
(15.2)
–
(15.2)
–
–
(0.5)
–

(0.5)
–
–
(0.5)
(15.7)
1.4
(14.3)
0.6
(14.9)

(14.3)

(3.8)p
(3.8)p

IFRS
£m

1,459.1
124.9
(8.7)
(0.8)
(9.2)
–
–
3.5
109.7
0.9
110.6
(6.7)
0.9
(0.5)
–

(6.3)
(2.7)
(1.1)
(10.1)
100.5
(14.9)
85.6
1.0
84.6

85.6

21.5p
21.4p

129

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020

Consolidated statement of comprehensive income
for the year ended 31 December 2020

Profit/(loss) for the year
Actuarial losses
Tax relating to components of other comprehensive income
Total items that will not be reclassified to the income
statement
Exchange differences on translation of foreign operations
Fair value loss on hedged interest derivatives
Gains/(losses) on net investment hedges taken to equity
Total items that may be reclassified subsequently to the
income statement
Other comprehensive expense for the year
Total comprehensive (expense)/income for the year

Note

26
10

27
27

Equity
holders of the
parent
£m
3.1
(7.6)
3.5

2020

Non-
controlling
interests
£m
(4.6)
–
–

(4.1)
(37.5)
(0.8)
15.9

(22.4)
(26.5)
(23.4)

–
(0.3)
–
–

(0.3)
(0.3)
(4.9)

Equity
holders of
the parent
£m
84.6
(27.2)
4.7

2019

Non-
controlling
interests
£m
1.0
–
–

(22.5)
(15.3)
(8.7)
(1.9)

(25.9)
(48.4)
36.2

–
(0.4)
–
–

(0.4)
(0.4)
0.6

Total
£m
(1.5)
(7.6)
3.5

(4.1)
(37.8)
(0.8)
15.9

(22.7)
(26.8)
(28.3)

Total
£m
85.6
(27.2)
4.7

(22.5)
(15.7)
(8.7)
(1.9)

(26.3)
(48.8)
36.8

Consolidated statement of changes in equity
for the year ended 31 December 2020

Note

At 1 January 2020
Profit/(loss) for the year
Other comprehensive expense for the year
Total comprehensive expense for the year
Dividends
12
Share-based payments
At 31 December 2020

Note

At 1 January 2019
Profit for the year

Other comprehensive expense for the year
Total comprehensive (expense)/income for the
year
Dividends
Issue of shares
Share-based payments
At 31 December 2019

12
27

Capital
redemption
reserve
£m
0.9
–
–
–
–
–
0.9

Capital
redemption
reserve
£m
0.9
–

Hedging
and
translation
reserve
£m
(19.5)
–
(22.4)
(22.4)
–
–
(41.9)

Hedging
and
translation
reserve
£m
6.4
–

Retained
earnings
£m
204.4
3.1
(4.1)
(1.0)
(12.8)
1.8
192.4

Total equity
holdings of
the parent
£m
649.4
3.1
(26.5)
(23.4)
(12.8)
1.8
615.0

Retained
earnings
£m
192.1
84.6

Total equity
holdings of the
parent
£m
463.9
84.6

Non-
controlling
interests
£m
21.1
(4.6)
(0.3)
(4.9)
(3.1)
–
13.1

Non-
controlling
interests
£m
21.1
1.0

Total
equity
£m
670.5
(1.5)
(26.8)
(28.3)
(15.9)
1.8
628.1

Total
equity
£m
485.0
85.6

–

(25.9)

(22.5)

(48.4)

(0.4)

(48.8)

–
–
–
–
0.9

(25.9)
–
–
–
(19.5)

62.1
(47.9)
–
(1.9)
204.4

36.2
(47.9)
199.1
(1.9)
649.4

0.6
(0.6)
–
–
21.1

36.8
(48.5)
199.1
(1.9)
670.5

Share
premium
£m
421.1
–
–
–
–
–
421.1

Share
premium
£m
230.5
–

–

–
–
190.6
–
421.1

Share
capital
£m
42.5
–
–
–
–
–
42.5

Share
capital
£m
34.0
–

–

–
–
8.5
–
42.5

130

Synthomer plc Annual Report 2020Group financial statements

Consolidated balance sheet
as at 31 December 2020

Non-current assets
Goodwill
Acquired intangible assets
Other intangible assets
Property, plant and equipment
Deferred tax assets
Investment in joint ventures
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets
Total assets
Current liabilities
Borrowings
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions for other liabilities and charges
Derivative financial instruments
Total current liabilities
Non-current liabilities
Borrowings
Trade and other payables
Lease liabilities
Deferred tax liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Hedging and translation reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity

Note

2020
£m

14
15
16
17
11
18

19
20
21
22

21
24
23
10
25
22

21
24
23
11
26
25

27
27

493.4
341.0
36.6
521.8
23.8
6.6
1,423.2

170.3
262.4
201.8
1.4
635.9
2,059.1

(20.1)
(334.1)
(10.6)
(58.5)
(25.7)
(19.4)
(468.4)

(643.9)
(3.7)
(44.4)
(43.3)
(221.4)
(5.9)
(962.6)
(1,431.0)
628.1

42.5
421.1
0.9
(41.9)
192.4
615.0
13.1
628.1

2019
£m

324.4
56.8
22.0
404.9
22.8
7.5
838.4

121.9
190.6
103.6
4.9
421.0
1,259.4

–
(232.9)
(7.5)
(38.7)
(4.9)
(14.3)
(298.3)

(82.9)
(0.5)
(34.4)
(30.8)
(140.0)
(2.0)
(290.6)
(588.9)
670.5

42.5
421.1
0.9
(19.5)
204.4
649.4
21.1
670.5

The financial statements on pages 129 to 163 were approved by the Board of Directors and authorised for issue on 4 March 2021. They are
signed on its behalf by:

C G MacLean
Director

S G Bennett
Director

131

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020

Consolidated cash flow statement
for the year ended 31 December 2020

Operating
Cash generated from operations

Interest received
Interest paid
Interest element of lease payments

Net interest paid

UK corporation tax paid
Overseas corporate tax paid

Total tax paid
Net cash inflow from operating activities
Investing
Dividends received from joint ventures

Purchase of property, plant and equipment and intangible assets
Sale of property, plant and equipment

Net capital expenditure
Purchase of business
Proceeds from sale of business
Net cash outflow from investing activities
Financing
Dividends paid
Dividends paid to non-controlling interests
Proceeds on issue of shares
Settlement of equity-settled share-based payments
Repayment of principal portion of lease liabilities
Repayment of borrowings
Repayment of borrowings on acquisition
Proceeds of borrowings
Net cash inflow/(outflow) from financing activities
Increase in cash, cash equivalents and bank overdrafts during the year

Cash, cash equivalents and bank overdrafts at 1 January
Foreign exchange and other movements
Cash, cash equivalents and bank overdrafts at 31 December

Note

21
29
21

21
21

2020

£m

1.2
(13.6)
(1.6)

–
(31.4)

(53.8)
–

£m

232.2

(14.0)

(31.4)
186.8

1.9

(53.8)
(314.0)
0.1
(365.8)

(12.8)
(3.1)
–
(0.2)
(9.7)
(718.3)
(273.6)
1,290.9
273.2
94.2

103.6
(6.5)
191.3

2019

£m

0.9
(7.0)
(1.1)

–
(11.1)

(69.1)
0.3

£m

170.2

(7.2)

(11.1)
151.9

1.6

(68.8)
–
–
(67.2)

(47.9)
(0.6)
199.1
(2.5)
(6.8)
(216.3)
–
15.0
(60.0)
24.7

76.2
2.7
103.6

Reconciliation of net cash flow from operating activities to movement in net debt
for the year ended 31 December 2020

Net cash inflow from operating activities
Add back: dividends received from joint ventures
Less: net capital expenditure
Less: purchase of business
Add back: proceeds from sale of business

Ordinary dividends paid
Dividends paid to non-controlling interests
Proceeds on issue of shares
Settlement of equity-settled share-based payments
Repayment for principal portion of lease liabilities
Foreign exchange and other movements
(Increase)/decrease in net debt

132

Note

2020
£m

186.8
1.9
(53.8)
(587.6)
0.1

(452.6)
(12.8)
(3.1)
–
(0.2)
(9.7)
(4.5)
(482.9)

2019
£m

151.9
1.6
(68.8)
–
–

84.7
(47.9)
(0.6)
199.1
(2.5)
(6.8)
8.7
234.7

Synthomer plc Annual Report 2020Group financial statementsNotes to the consolidated financial statements
31 December 2020

1 General information
Synthomer plc (the ‘Company’) is a public limited company
incorporated and domiciled in the United Kingdom under the
Companies Act. The address of the registered office is given on
page 172. The Company is listed on the London Stock Exchange.

The principal activities of the Company and its subsidiaries (the
‘Group’) and the nature of the Group’s operations are set out in the
Strategic Report.

The consolidated financial statements are prepared in pounds
sterling, the functional currency of the Company. Foreign operations
are included in accordance with the policies set out in note 2.

New and amended standards adopted by the Group
There are no standards or interpretations that are not yet effective and
that would be expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions.

2 Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006, and International Financial
Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.

The financial statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments that
are measured at fair value at the end of each reporting period,
as explained in the accounting policies below.

The principal accounting policies adopted are set out below.

Going concern
The potential financial impact of the COVID-19 pandemic within the next
18 month period has been modelled in our cash flow projections and
stress tested by including several severe but plausible downside
scenarios which are linked to our principal risks. In our downside
COVID-19 scenario, we have considered the key impacts of the
pandemic on trading volatility, the expected duration of restrictions, as
well as the length of time to recovery. These impacts took account of
the Group’s experience gained from the COVID-19 pandemic in 2020.
The most severe scenario assumes a recurrence of the trading
conditions experienced during Q2 of 2020 for a prolonged four month
period along with the unavailability of one of our largest facilities for a
period of two months. We believe that the risk of enforced plant closure
is low and have implemented additional health and safety measures in
each of our sites to reduce the risk of a major supply disruption.

No mitigating actions have been included for any of the scenarios.
Mitigations, should they be required, are all within management’s
control and include reduction of capital spend and dividend payments
as well as other reductions to costs and cash outflows as
demonstrated during the course of the 2020.

Having considered the outcome of these assessments, the Directors
have, at the time of approving the financial statements, a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing the financial statements.

Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved when the Company:

• has the power over the investee;
• is exposed, or has rights, to variable returns from its involvement

with the investee; and

• has the ability to use its power to affect its returns.

Consolidation of a subsidiary begins from the date the Company
obtains control and ceases from the date the Company loses control.
Where necessary on obtaining control, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies
into line with those used by the Group.

The results of joint ventures are accounted for using equity accounting.

Non-controlling interests in subsidiaries are identified separately
from the Group’s equity therein. Subsequent to the date on which
the Company obtains control, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus the
non-controlling interests’ share of subsequent changes in equity.

All intra-group assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group
are eliminated on consolidation.

Business combinations
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum
of the acquisition date fair values of assets transferred by the Group,
liabilities incurred by the Group to former owners of the acquiree and the
equity interest issued by the Group in exchange for control of the acquiree.
Acquisition related costs are recognised in profit or loss as incurred.

At acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities are recognised and measured

in accordance with IAS 12 Income Taxes;

• liabilities or assets related to employee benefit arrangements are
recognised and measured in accordance with IAS 19 Employee
Benefits; and

• assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5 Non-Current Assets Held for Sale
and Discontinued Operations are measured in accordance with
that standard.

If the initial accounting for a business combination is incomplete
by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted
during a measurement period (see below), or additional assets or
liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognised as of that date.

A measurement period is the period from the date of acquisition to
the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject
to a maximum of one year.

If a business combination is achieved in stages, the Group’s
previously held interest in the acquired entity is remeasured to its
acquisition date fair value and the resulting gain or loss, if any, is
recognised in profit or loss.

133

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Notes to the consolidated financial statements continued
31 December 2020

2 Significant accounting policies continued
Goodwill
Goodwill is measured as the excess of the consideration transferred
over the Group’s interest in acquisition-date identifiable assets
acquired less liabilities assumed.

Goodwill is not amortised but is reviewed for impairment at least
annually. For the purpose of impairment testing, goodwill is allocated
to each of the Group’s cash generating units expected to benefit from
the synergies of the combination. Cash generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash generating unit is less
than the carrying amount of the unit, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of
the carrying amount of each asset in the unit. An impairment loss for
goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or joint venture, the attributable
amount of goodwill is included in the determination of the profit or loss
on disposal.

Goodwill arising on acquisitions before the date of transition to IFRS
has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves
under UK GAAP prior to 1998 has not been reinstated and is not
included in determining any subsequent profit or loss on disposal.

Joint ventures
Joint ventures are accounted for using the equity method of
accounting. Under the equity method, interests in joint ventures
are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses and
movements in other comprehensive income.

Revenue
General
Synthomer manufactures and sells mainly water-based polymers
across a diverse range of end use applications. Our products
are predominantly sold in liquid form, in bulk containers.

Revenue is measured based on the consideration to which the
Group expects to be entitled in a contract with a customer when
performance obligations are satisfied. Revenue is recognised at
the point in time when control of the product is transferred from
Synthomer to the customer.

The customer is deemed to obtain control of the resultant asset in
line with the Incoterms under which it is sold. The significant majority
of Synthomer’s products are sold under Carriage Paid To (CPT) and
Carriage and Insurance Paid (CIP) International Commercial Terms.
Under these terms, control of the product is transferred when the
goods reach their destination. At this point the risks of obsolescence
and loss have been transferred and there is no unfulfilled obligation
that could affect the customer’s acceptance of the product.
A receivable is recognised at this point in time as consideration
is unconditional and only the passage of time is required before
payment is due.

Rebates
Synthomer may grant customers rebates if the goods purchased
by the customer exceed a contractually defined threshold within the
specified period. Rebates are usually deducted from the amounts
payable by the customer. Depending on the terms of the underlying
contract, Synthomer uses either the expected value or the most likely
amount to estimate the variable consideration for expected future
rebates. Historical, current and forecast information is considered
when calculating rebates.

The majority of rebate programmes are aligned with the Group’s
financial year end, providing certainty around how much should be
recognised in the financial statements.

Other
The Group does not have any contracts where the period between
the transfer of promised goods to the customer and payment by the
customer exceeds one year. As a consequence, the Group applies
the practical expedient in IFRS 15 and does not adjust any of the
transaction prices for the time value of money.

Foreign currencies
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity’s functional currency
are recognised at the rates of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date. Non-monetary assets
and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period
in which they arise except for:

• exchange differences on transactions entered into to hedge certain
foreign currency risks (see below under ‘hedge accounting’); and
• exchange differences on monetary items receivable or payable to a
foreign operation for which settlement is neither planned nor likely
to occur in the foreseeable future (therefore forming part of the net
investment in the foreign operation), which are recognised initially in
other comprehensive income and reclassified from equity to profit
or loss on disposal of the net investment.

On consolidation, the assets and liabilities of the Group’s non-Sterling
operations are translated at exchange rates prevailing on the balance
sheet date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if any,
are recognised in other comprehensive income and accumulated
in a separate component of equity.

Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. The Group elected to treat goodwill
and fair value adjustments arising on acquisitions before the date of
transition to IFRS as sterling-denominated assets and liabilities.

Operating profit
Operating profit represents profit from continuing activities before
financing costs and taxation.

Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.

Current tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit before tax as reported in the income
statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.

A provision is recognised for those matters for which the tax
determination is uncertain but it is considered probable that there
will be a future outflow of funds to a tax authority. The provisions
are measured at best estimate of the amount expected to
become payable. The assessment is based on the judgement

134

Synthomer plc Annual Report 2020Group financial statementsof tax professionals within the Company supported by previous
experience in respect of such activities and in certain cases
based on specialist independent tax advice.

Short-term leases and low value leases are not recognised as lease
liabilities and right of use assets, but are recognised as an expense
straight-line over the lease term.

Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised.

Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and 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 amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement,
except when it relates to items charged or credited directly to
other comprehensive income, in which case the deferred tax is
also dealt with in other comprehensive income.

The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.

Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate
to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis.

Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The lease term is determined from the
commencement date of the contract and covers the non-cancellable
term. If considered reasonably certain, extension or termination
options are included in the lease term.

At the commencement date, a lease liability is recognised, measured
at the present value of the future lease payments and discounted
using the Group’s incremental borrowing rate. Subsequently, the lease
liability is adjusted by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to reflect any
reassessment or lease modifications.

At the commencement date, a right of use asset is recognised,
measured at an amount equal to the lease liability plus any lease
payments made before the commencement date and any initial direct
costs, less any lease incentive payments. An estimate of costs to be
incurred in restoring an asset, in accordance with the terms of the
lease, is also included in the right of use asset at initial recognition.
Subsequently, right of use assets are measured in accordance with
the accounting policy for property, plant and equipment and are
depreciated over the shorter period of lease term and the useful life
of the underlying asset. Any adjustments to the corresponding lease
liability are reflected in the corresponding right of use asset.

Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation and any recognised impairment loss. Cost comprises
original purchase price and the costs attributable to bringing the
asset to its working condition for its intended use, including, where
appropriate, capitalised finance costs.

Freehold land is not depreciated.

Depreciation is recognised so as to write-off the cost of assets less
their residual values over their useful lives, using the straight-line
method, on the following bases:

Freehold buildings

– 50 years

Leasehold land and buildings

– the lesser of 50 years and

the period of the lease

Plant and equipment

– between 3 and 15 years

Assets in the course of construction are carried at cost, less any
recognised impairment loss. Finance costs directly attributable to
the acquisition or construction of qualifying assets are capitalised
as part of the cost of those assets. Depreciation of these assets
commences when the assets are ready for their intended use.

The estimated useful lives, residual values and depreciation method
are reviewed at the end of each reporting period, with the effect of
any changes in estimate accounted for on a prospective basis.

Acquired intangible assets
Intangible assets acquired in a business combination are initially
recognised at their fair value at the acquisition date, which is
regarded as their cost. Where necessary the fair value of assets
at acquisition and their estimated useful lives are based on
independent valuation reports.

Acquired intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
recognised on a straight-line basis over estimated useful lives, on
the following bases:

Customer relationships

– between 5 and 15 years

Other intangibles

– up to 10 years

Assets with an indefinite life are not subject to amortisation.

Acquired intangible assets are derecognised upon reaching the end
of their useful lives.

Other intangible assets
Other intangible assets that are not acquired through a business
combination are initially measured at cost and amortised on a
straight-line basis over their estimated useful lives of up to ten years.

An internally generated intangible asset arising from development
(or from the development phase of an internal project) is recognised
only if all of the following conditions have been demonstrated:

• the technical feasibility of completing the asset;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the asset once development has

been completed;

• the probability that the asset created will generate future

economic benefits;

• the availability of adequate technical, financial and other

resources to complete the development; and

• the asset created can be separately identified and the

development cost can be measured reliably.

135

2 Significant accounting policies continued
Impairment of property, plant and equipment and intangible
assets excluding goodwill
The amount initially recognised for internally generated intangible
assets is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above.
Where no internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period
in which it is incurred.

At each balance sheet date, the Group reviews the carrying
amounts of its plant, property and equipment and intangible
assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of
the cash generating unit to which the asset belongs.

The recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash generating unit) is
estimated to be less than its carrying amount, the carrying amount
of the asset (or cash generating unit) is reduced to its recoverable
amount. An impairment loss is recognised in the income statement.

When an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit) is increased to the
revised estimate of its recoverable amount to the extent that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been
recognised in prior years. A reversal of an impairment loss is
recognised immediately in the income statement.

Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is calculated
using the weighted average method. Net realisable value represents
the estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution. Provision is
made for obsolete, slow-moving or defective items where appropriate.

Financial instruments
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the instrument.

The Group classifies its financial instruments in the following categories:

• financial assets and liabilities at amortised cost (AC);
• financial assets and liabilities at fair value through profit and loss

(FVTPL); and

• financial assets and liabilities at fair value through other

comprehensive income (FVTOCI).

Financial assets and liabilities are initially measured at fair value
including, where permitted, any directly attributable transaction costs.

All recognised financial assets are subsequently measured in their entirety
at either amortised cost or fair value, depending on their classification.

Financial assets and liabilities measured at amortised cost
Financial assets measured at amortised cost include cash and
cash equivalents and trade and other receivables. Cash and cash

136

equivalents comprise cash held in bank accounts with no access
restrictions, bank term deposits repayable on demand or maturing
within three months of inception.

At each reporting date the Group recognises a loss allowance for
expected credit losses on financial assets measured at amortised
cost. In establishing the appropriate amount of loss allowance to
be recognised, the Group applies either the general approach or
the simplified approach, depending on the nature of the underlying
class of financial assets:

• Under the general approach, the Group recognises a loss

allowance for a financial asset at an amount equal to the 12 month
expected credit losses, unless the credit risk on the financial asset
has increased significantly since initial recognition, in which case
a loss allowance is recognised at an amount equal to the lifetime
expected credit losses.

• The simplified approach is applied to the impairment assessment
of trade and other receivables. Under this approach, the Group
recognises expected lifetime losses upon initial recognition.

Financial liabilities measured at amortised cost include trade and other
payables, lease liabilities and borrowings. Borrowings are measured at
amortised cost unless they form part of a fair value hedge relationship.
The difference between the initial carrying amount of borrowings and
the redemption value is recognised in the income statement over the
contractual terms using the effective interest rate method.

Financial assets and liabilities held at fair value
Financial assets and liabilities are measured at fair value through
profit or loss when they do not meet the criteria to be measured at
amortised cost or at fair value through other comprehensive income.

Financial assets and liabilities at FVTPL are measured at fair value
at the end of each reporting period with fair value gains or losses
recognised in profit or loss to the extent they are not part of a
designated hedging relationship (see below).

Derivative financial instruments
The Group enters into a variety of derivative financial instruments to
manage its exposure to interest rate and foreign exchange rate risk,
including foreign exchange forward contracts, interest rate swaps
and foreign currency options. Further details of derivative financial
instruments are set out in note 22.

Derivatives are initially recognised at fair value at the date the
derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The resulting gain or loss is recognised in the income statement
immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in the
income statement depends on the nature of the hedge relationship.

Hedge accounting
To mitigate foreign currency and interest rate risk, the Group
designates certain derivatives as hedging instruments in fair value
hedges, cash flow hedges, or hedges of net investments in foreign
operations as appropriate.

At the inception of the hedge relationship, the Group documents the
relationship between the hedging instrument and the hedged item,
along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception
of the hedge and on an ongoing basis, the Group documents whether
the hedging instrument is effective in offsetting changes in fair value
or cash flows of the hedged item attributable to the hedged risk.

On adoption of IFRS 9, the Group elected to continue to apply the
hedge accounting requirements of IAS 39 as permitted by the standard.

Synthomer plc Annual Report 2020Group financial statementsFair value hedges
The Group only applies fair value hedge accounting for foreign
currency risk.

The fair value change on qualifying hedging instruments is
recognised in the income statement and is recognised in the
same line as the hedged item.

Cash flow hedges
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated under the heading
of cash flow hedging reserve, limited to the cumulative change in
fair value of the hedged item from inception of the hedge.

Gains or losses relating to an ineffective portion are recognised
immediately in the income statement.

Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified in the income statement in the
periods when the hedged item affects profit or loss, in the same line
as the recognised hedged item. However, when the hedged forecast
transaction results in the recognition of a non-financial asset or a
non-financial liability, the gains and losses previously recognised in
other comprehensive income and accumulated in equity are removed
from equity and included in the initial measurement of the cost of the
non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge accounting.
Any gain or loss accumulated at that time in equity is recognised
when the forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss in equity is recognised immediately in
profit or loss.

Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted
for similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognised
in other comprehensive income in the foreign currency translation
reserve. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.

Gains and losses on the hedging instrument relating to the
effective portion of the hedge accumulated in the foreign currency
translation reserve are reclassified to profit or loss on the disposal
of the foreign operation.

Retirement benefit costs
Payments to defined contribution retirement benefit schemes
are recognised as an expense when employees have rendered
service entitling them to the contributions. Payments made to
state-managed retirement benefit schemes are treated as
payments to defined contribution schemes where the Group’s
obligations under the schemes are equivalent to those arising
in a defined contribution scheme.

For defined benefit schemes, the cost of providing benefits is
calculated using the projected unit credit method, with actuarial
valuations carried out at the end of each reporting period.

Defined benefit costs are split into three categories, namely:

• service costs, which includes current service cost, past service
cost and gains and losses on curtailments and settlements;

• net interest expense; and
• remeasurements.

The Group presents service costs within cost of sales and
administrative expenses in its consolidated income statement.
Past service cost is recognised when the plan amendment or
curtailment occurs.

Net interest expense is recognised within finance costs and
is calculated by applying a discount rate to the net defined
benefit liability.

Remeasurement comprising actuarial gains and losses and the return
on scheme assets (excluding interest) are recognised immediately in
the balance sheet with a charge or credit to the statement of other
comprehensive income in the period in which they occur and are not
subsequently reclassified to profit and loss.

Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable
estimate can be made of the amount of the obligation. Provisions are
measured as the best estimate of the expenditure required to settle
the obligation at the balance sheet date and are discounted to present
value where the effect is material.

Provisions for restructuring costs are recognised when the Group
has a detailed formal plan for the restructuring that has been
communicated to affected parties.

Share-based payments
The Group issues equity-settled share-based payments to certain
employees. These are measured at the fair value of the equity
instruments at grant date. The fair value excludes the effect of
non-market-based vesting conditions. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group’s estimate of equity instruments that will eventually vest.
At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the
effect of non-market-based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to equity reserves. The Group will on
occasion, at its own discretion, settle these share-based payments
in cash rather than equity.

For cash-settled share-based payments, a liability is recognised for
the goods or services acquired, measured initially at the fair value of
the liability. At each balance sheet date until the liability is settled, and
at the date of settlement, the fair value of the liability is remeasured,
with any changes in fair value recognised in profit or loss for the year.

Alternative Performance Measures
The Group has consistently used two significant Alternative
Performance Measures (APMs) since its adoption of IFRS in 2005:

• Underlying performance, which excludes Special Items from IFRS

profit measures.

• EBITDA, which excludes Special Items, amortisation and

depreciation from IFRS operating profit.

The Board’s view is that Underlying performance provides additional
clarity for the Group’s investors and so it is the primary focus of the
Group’s narrative reporting. Further information and the reconciliation
to the IFRS measures are included in notes 4 and 5.

137

2 Significant accounting policies continued
Critical accounting judgements and estimates
In the application of the Group’s accounting policies, the Directors
are required to make judgements (other than those involving
estimations) that have a significant impact on the amounts
recognised and to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.

Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting date that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
discussed below. The assumptions for each estimate are set out
in the relevant note referenced below.

• Defined benefit obligation (note 26):

Calculation of the Group’s defined benefit obligation includes
a number of assumptions which impact the carrying value
of the obligation.

• Valuation of goodwill and intangible assets on acquisition:

In a business combination, intangible assets are identified and
recognised at fair value. The assumptions involved in valuing
these intangible assets require the use of estimates that may
differ from the actual outcome. These estimates cover future
growth rates, expected inflation rates and the discount rate
used. Changing the assumptions selected by management
could significantly affect the allocation of the purchase price
paid between goodwill and other acquired intangibles.
• Current tax liability and deferred tax (notes 10 and 11):

The Group annually incurs significant amounts of income
taxes payable to various jurisdictions around the world and
it also recognises significant changes in deferred tax assets
and deferred tax liabilities, all of which are based on
management’s interpretations of applicable laws,
regulations and relevant court decisions.

Critical judgements in applying the Group’s accounting policies
There are no critical judgements, apart from those involving
estimations (which are discussed above), that the Directors have
made in the process of applying the Group’s accounting policies.

3 Adoption of new and revised standards
The following amendments to the accounting standards, issued by
the IASB which have been endorsed by the EU, have been adopted
by the Group from 1 January 2020 with no impact on the Group’s
consolidated results, financial position or disclosures:

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark
Reform (Phase 1). These amendments provide temporary relief from
specific hedge accounting requirements to hedging relationships
directly affected by inter-bank offered rate (IBOR) reform. The reliefs
have the effect that IBOR reform should not generally cause hedge
accounting to terminate.

The Group has one designated hedge relationship that is potentially
impacted by IBOR reform. The potential impact and implications on
the wider business of IBOR reform will be assessed during the year.

There are a number of other amendments and clarifications to IFRS,
effective in future years, which are not expected to significantly impact
the Group’s consolidated results or financial position.

4 Special Items
IFRS and Underlying performance
The IFRS profit measures show the performance of the Group as
a whole and as such include all sources of income and expense,
including both one-off items and those that do not relate to the
Group’s ongoing businesses. To provide additional clarity on
the ongoing trading performance of the Group’s businesses,
management uses ‘Underlying’ performance as an Alternative
Performance Measure to plan for, control and assess the
performance of the segments. Underlying performance differs
from the IFRS measures as it excludes Special Items.

Special Items
Special Items are disclosed separately in order to provide a clearer
indication of the Group’s Underlying performance.

Special Items are either irregular, and therefore including them
in the assessment of a segment’s performance would lead to a
distortion of trends, or are technical adjustments which ensure
the Group’s financial statements are in compliance with IFRS but
do not reflect the operating performance of a segment in the
year, or both. An example of the latter is the amortisation of
acquired intangibles, which principally relates to acquired customer
relationships. The Group incurs costs, which are recognised as an
expense in the income statement, in maintaining these customer
relationships. The Group considers that the exclusion of the
amortisation charge on acquired intangibles from Underlying
performance avoids the potential double counting of such costs and
therefore excludes it as a Special Item from Underlying performance.

The following are consistently disclosed separately as Special
Items in order to provide a clearer indication of the Group’s
Underlying performance:

• Restructuring and site closure costs;
• Sale of a business or significant asset;
• Acquisition costs;
• Amortisation of acquired intangible assets;
• Impairment of non-current assets;
• Fair value adjustments in respect of derivative financial
instruments where hedge accounting is not applied;

• Items of income and expense that are considered material,

either by their size and/or nature;
• Tax impact of above items; and
• Settlement of prior period tax issues.

138

Synthomer plc Annual Report 2020Group financial statementsSpecial Items comprise:

Amortisation of acquired intangibles
Restructuring and site closure costs
Acquisition costs and related gains
Impairment charge
Sale of business
Foreign exchange gain on rights issue
Total impact on operating loss
Finance costs
Fair value loss on unhedged interest derivatives
Loss on extinguishment of financing facilities
Total impact on profit before taxation
Tax Special Items
Taxation on Special Items
Total impact on profit/(loss) for the year

Note
15

9
9

10
10

2020
£m
(30.9)
(42.5)
(14.6)
(36.6)
(6.6)
–
(131.2)

(3.6)
(4.9)
(139.7)
4.9
10.7
(124.1)

2019
£m
(8.7)
(0.8)
(9.2)
–
–
3.5
(15.2)

(0.5)
–
(15.7)
–
1.4
(14.3)

Amortisation of acquired intangibles increased during the year reflecting the acquisition of OMNOVA Solutions Inc which resulted in an
amortisation charge of £22.6 million for the nine month period since acquisition on 1 April 2020. The fair value of the intangible assets arising on
the acquisition of OMNOVA amounting to £330.1 million are being amortised over a period of 9-11 years mainly dependent on the characteristics
of the customer relationships.

Restructuring and site closure costs in 2020 comprise £19.5 million for the integration of OMNOVA, £20.9 million for the rationalisation of the
Group’s European SBR network and £2.1 million to rationalise the Acrylate Monomers site. OMNOVA integration costs were required to deliver
the acquisition synergies and mainly relate to employee severance costs. Restructuring costs in the legacy Synthomer business again mainly
relate to employee severance costs. In 2019 the costs related to the reorganisation of the Group into global business segments.

Acquisition costs and related gains relate to the acquisition of OMNOVA and comprise £20.0 million of costs, mainly professional adviser fees,
and the £3.3 million impact of unwinding the fair value adjustment on acquisition of inventory. This was offset by a gain of £8.7 million on a foreign
exchange derivative entered into in July 2019 to hedge the acquisition price. Acquisition costs in 2019 also relate to the acquisition of OMNOVA.

A £36.6 million impairment charge was taken in the year, relating to four sites. Following the strategic review of our European SBR network we
have impaired fixed assets by £9.2 million in our Oulu site and £5.5 million in Marl. Unfavourable feedstock prices and continued oversupply in
Europe, partly reflecting the impact of COVID-19, led to a £18.6 million impairment charge in relation to the Acrylate Monomers site in Sokolov.
Reduction in demand for solvent-based products manufactured in our Chonburi site led to a £3.3 million impairment charge.

Sale of business related to the disposal of Synthomer’s European Tyre Cord business, which was a requirement of the European Commission
Competition Authority in order to obtain clearance for the acquisition of OMNOVA. The disposal was completed on 1 May 2020 and the terms of
the disposal agreement resulted in a loss on disposal of £6.6 million.

Foreign exchange gain on rights issue represents a gain made on a forward contract which was entered into to swap the proceeds of the
Sterling rights issue into Euros in order to pay down part of the Group’s Euro borrowings in July 2019.

In July 2018 the Group entered into swap arrangements to fix Euro interest rates on the full value of the then €440 million committed unsecured
revolving credit facility. The fair value of the unhedged interest rate derivatives relates to the mark-to-market of the swap at 31 December 2020 in
excess of the Group’s current borrowings.

Following the Group’s successful refinancing in April 2020, capitalised debt costs relating to the 2018 refinancing and the 2019 bridge to bond
were written off, leading to a loss on extinguishment of £4.9 million.

A current tax charge arose in Malaysia from a disputed assessment from the Malaysian Tax Authorities regarding the tax treatment of the sale of
plantation land from 2007 to 2017. This is offset by a current tax credit in relation to the closure of 2001 to 2003 open tax years in the UK by HMRC.

139

5 Segmental analysis
The Group’s Executive Committee, chaired by the Chief Executive Officer, examines the Group’s performance.

With the acquisition of OMNOVA the Group has reassessed how the business will be managed going forwards. The Group’s Acrylate
Monomers Division, which was previously managed and reported within the Industrial Specialities Division, has been identified as a separate
segment by the Group’s Executive Committee. A new management structure has been implemented and management information for Acrylate
Monomers is now reported separately to the Executive Committee. The Group’s reportable segments are as follows:

Performance Elastomers
Performance Elastomers is focused on healthcare, paper, carpet and foam markets through our water-based Nitrile Butadiene Rubber latex
(NBR) and Styrene Butadiene Rubber latex (SBR) products and also includes the Performance Materials and Elastomeric Modifiers businesses.

Functional Solutions
Functional Solutions is focused on coatings, construction, adhesives and technical textiles markets through our water-based acrylic and vinylic
based dispersions products.

Industrial Specialities
Industrial Specialities is focused on speciality chemical additives and non-water-based chemistry for a broad range of applications from polymer
additives and laminates and films to emerging materials and technologies, and also includes Laminates & Films and Coated Fabrics businesses.

Acrylate Monomers
Acrylate Monomers is focused on the production of acrylate monomers which are sold to external customers in European markets as well as
our European Functional Solutions dispersions business.

The Group’s Executive Committee is the chief operating decision maker and primarily uses a measure of earnings before interest, tax,
depreciation and amortisation (EBITDA) to assess the performance of the operating segments. No information is provided to the Group’s
Executive Committee at the segment level concerning interest income, interest expense, income tax or other material non-cash items.

No single customer accounts for more than 10% of the Group’s revenue.

A segmental analysis of Underlying performance and Special Items is shown below.

Revenue

Total revenue

Inter-segmental revenue

EBITDA

Depreciation and amortisation – Underlying performance
Operating profit/(loss) – Underlying performance

Special Items
Operating profit/(loss) – IFRS

Finance costs
Profit before taxation

Revenue

Total revenue

Inter-segmental revenue

EBITDA

Depreciation and amortisation – Underlying performance
Operating profit/(loss) – Underlying performance

Special Items
Operating profit/(loss) – IFRS

Finance costs
Profit before taxation

Performance
Elastomers
£m

Functional
Solutions
£m

Industrial
Specialities
£m

Acrylate
Monomers
£m

Corporate
£m

Total
£m

2020

680.3

646.7

264.9

–

680.3
142.5

(25.7)
116.8

(36.0)
80.8

–

646.7
95.6

(26.5)
69.1

(38.0)
31.1

–

264.9
41.2

(12.2)
29.0

(10.2)
18.8

64.4

(12.1)

52.3
(2.4)

(3.2)
(5.6)

(20.7)
(26.3)

–

–
(17.5)

(2.2)
(19.7)

(26.3)
(46.0)

1,656.3

(12.1)

1,644.2
259.4

(69.8)
189.6

(131.2)
58.4

(38.1)
20.3

Performance
Elastomers
£m

Functional
Solutions
£m

2019

Industrial
Specialities
(restated)
£m

Acrylate
Monomers
(restated)
£m

Corporate
£m

Total
£m

623.7

612.8

157.9

–

623.7
96.3

(24.8)
71.5

(0.3)
71.2

–

612.8
69.9

(17.6)
52.3

(4.3)
48.0

–

157.9
23.8

(5.4)
18.4

(4.1)
14.3

70.9

(6.2)

64.7
1.0

(3.4)
(2.4)

(0.6)
(3.0)

–

–
(13.1)

(0.9)
(14.0)

(5.9)
(19.9)

1,465.3

(6.2)

1,459.1
177.9

(52.1)
125.8

(15.2)
110.6

(10.1)
100.5

Finance costs for the period include £8.5 million of Special Items (2019: £0.5 million) as set out in note 4.

140

Synthomer plc Annual Report 2020Group financial statementsGeographical information
The Group’s revenue from external customers and its non-current assets (excluding deferred tax) by geographical location are detailed below:

Revenue by destination

Non-current assets

UK
Germany
Italy
Netherlands
France
Belgium
Other Europe
Malaysia
China
Other Asia
USA
Rest of World

6 Operating profit

Revenue
Cost of sales
Gross profit
Sales and marketing costs
Administrative expenses
Share of joint ventures
EBITDA
Depreciation and amortisation – Underlying performance
Operating profit – Underlying performance
Special Items
Operating profit – IFRS

Operating profit is stated after charging the following:
Amortisation of acquired intangibles
Amortisation of other intangibles
Depreciation of property, plant and equipment
Depreciation of right of use assets
Research and development expenditure
Net (gain)/loss on foreign exchange

7 Auditors’ remuneration

Fees payable to the Company’s auditors for:

2020
£m
75.6
183.2
63.2
57.5
64.6
36.0
293.4
304.5
93.3
144.2
254.6
74.1

2019
£m
80.0
201.3
78.3
76.3
64.5
52.8
309.0
250.6
82.4
125.9
90.2
47.8

2020
£m
140.6
194.6
52.7
15.1
111.4
70.2
78.8
162.7
22.3
30.3
514.1
6.6

1,644.2

1,459.1

1,399.4

Note

15
16
17
17

2020
£m
1,644.2
(1,206.8)
437.4
(53.9)
(125.3)
1.2
259.4
(69.8)
189.6
(131.2)
58.4

2020
£m

30.9
4.9
54.0
10.9
25.8
(1.0)

2020
£’000

2019
£m
134.6
198.5
52.1
15.9
17.3
71.7
62.4
166.1
0.6
9.7
79.1
7.6

815.6

2019
£m
1,459.1
(1,185.3)
273.8
(43.8)
(53.0)
0.9
177.9
(52.1)
125.8
(15.2)
110.6

2019
£m

8.7
1.4
43.4
7.3
16.6
1.2

2019
£’000

audit of the Company’s annual financial statements and the consolidated annual financial statements

222

215

Fees payable to the Company’s auditors and their associates for other services to the Group:

audit of the Company’s subsidiaries’ annual financial statements

Total audit fees
Audit related assurance services
Other assurance services
Total non-audit fees

1,594
1,816
40
567
607

661
876
23
1,010
1,033

Details of the Company’s policy on the use of auditors for non-audit services, the reasons why the auditors were used rather than another
supplier and how the auditors’ independence and objectivity was safeguarded are set out in the Audit Committee section of the Corporate
Governance report on pages 98 to 99. No services were provided pursuant to contingent fee arrangements.

141

8 Staff costs

The average monthly number of employees during the year by segment was:

2020

2019

Performance Elastomers
Functional Solutions
Industrial Specialities
Acrylate Monomers
Corporate

The aggregate remuneration of all Group employees comprised:
Wages and salaries
Social security costs
Other pension costs
Share-based payments

Directors’ emoluments are disclosed in the Directors’ Remuneration report on pages 102 to 118.

9 Finance costs

Interest payable on bank loans and overdrafts

Less: interest receivable

Net interest expense on defined benefit obligations

Interest element of lease payments

Underlying finance costs

Fair value loss on unhedged interest derivatives

Loss on extinguishment of financing facilities
Finance costs

10 Taxation

Current tax

UK corporation tax

Overseas tax

Deferred tax

Origination and reversal of temporary differences

Special Items
Current tax:

Historical issues

Purchase and sale of business

Restructuring and site closure costs
Deferred tax:

Restructuring and site closure costs

Amortisation of acquired intangibles

Other Deferred tax on acquisition of business

Total tax on profit before taxation

142

893
1,656
963
351
321

4,184

2020
£m

211.3
25.6
14.0
2.0

252.9

2020
£m

25.5

(1.2)

24.3

3.7

1.6

29.6

3.6

4.9
38.1

2020
£m

–

39.9

(2.5)

37.4

4.9

(0.2)

(10.5)

(10.7)

1.1

(15.6)
21.8

877
1,203
275
383
201

2,939

2019
£m

115.5
20.5
8.7
0.6

145.3

2019
£m

6.7

(0.9)

5.8

2.7

1.1

9.6

0.5

–
10.1

2019
£m

–

15.5

0.8

16.3

–

(0.3)

–

(0.8)

–

(1.4)
14.9

Synthomer plc Annual Report 2020Group financial statementsUK corporation tax is calculated at 19.0% (2019: 19.0%) of the estimated assessable profit for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.

Reconciliation of tax expense to profit before taxation
The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax
to the profit before tax is as follows.

Profit before taxation

Tax on profit before taxation at standard UK corporation tax rate of 19.0% (2019: 19.0%)
Effects of:
Expenses not deductible for tax purposes
Tax incentives and items not subject to tax
Higher tax rates on overseas earnings
Other deferred tax asset not recognised less amounts now recognised
Adjustments to tax charge in respect of prior periods
Effect of change of rate on deferred tax
Tax charge for year

Tax relating to components of other comprehensive income

Current tax credit in respect of actuarial losses
Deferred tax credit in respect of actuarial losses
Total tax credit in respect of actuarial losses

Current tax liabilities

2020
£m
20.3

2019
£m
100.5

3.9

19.1

5.8
(3.6)
6.0
7.2
3.3
(0.8)
21.8

2020
£m
1.3
2.2
3.5

2020
£m
(58.5)

9.9
(15.5)
4.5
(0.7)
(2.1)
(0.3)
14.9

2019
£m
2.6
2.1
4.7

2019
£m
(38.7)

The tax incentives and items not subject to tax primarily comprise of profits from the Nitrile latex business in Malaysia which had benefitted from
pioneer status until 28 February 2020.

The Special Items current tax charge relating to historical issues arises from a disputed assessment from the Malaysian Tax Authorities
regarding the tax treatment of the sale of plantation land from 2007 to 2017, net of a current tax credit in relation to the closure of 2001
to 2003 open tax years in the UK by HMRC.

143

11 Deferred taxation
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets to the
extent that it is probable that these assets will be recovered.

The movements in deferred tax assets and liabilities are shown below.

Deferred tax liabilities
2020

At 1 January
Purchase of business
Credited/(charged) to income statement
Exchange adjustment

Tax offset
At 31 December

Deferred tax assets
2020

At 1 January
Purchase of business
Credited to income statement
Credited to statement of other comprehensive income
Exchange adjustment

Tax offset
At 31 December

Deferred tax assets not recognised
The amounts of deferred tax not recognised at the balance sheet dates are as follows:

UK pension liability
Tax losses
Accelerated capital allowances
Other timing differences

Accelerated
tax
depreciation
£m
(17.9)
(10.0)
(5.2)
0.3
(32.8)

Acquired
intangibles
£m
(11.8)
(76.0)
10.7
(4.5)
(81.6)

Pension
£m
18.7
18.9
(1.9)
2.2
(0.7)
37.2

Restructuring
£m
–
–
10.5
–
–
10.5

Tax losses
£m
2.2
26.5
2.9
–
(2.6)
29.0

Other
£m
(1.1)
–
1.1
–
–

Other
£m
1.9
10.1
4.5
–
1.7
18.2

2020
£m
5.4
21.9
0.1
1.2

28.6

Total
£m
(30.8)
(86.0)
6.6
(4.2)
(114.4)
71.1
(43.3)

Total
£m
22.8
55.5
16.0
2.2
(1.6)
94.9
(71.1)
23.8

2019
£m
3.5
14.9
2.7
0.2

21.3

Of the unrecognised tax losses set out above, £0.6 million expire at the end of 2021, £0.5 million expire at the end of 2022 and £0.1 million
expire at the end of 2025. Other losses of £20.7 million can be carried forward indefinitely.

12 Dividends

Interim dividend
Proposed final dividend

2020
Pence
per share
3.0p
8.6p

11.6p

2020
£m
12.8
36.6

49.4

2019
Pence
per share
4.0p
–

4.0p

The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial
statements. The proposed final 2019 dividend was suspended and subsequently cancelled to preserve cash, liquidity and balance sheet
strength at the onset of COVID-19 in March 2020.

Dividends paid

Interim dividend
Prior year final dividend

144

2020
£m
12.8
–

12.8

2019
£m
17.0
–

17.0

2019
£m
17.0
30.9

47.9

Synthomer plc Annual Report 2020Group financial statements13 Earnings per share

2020

2019

’000
’000
’000

pence
pence

Earnings
Profit/(loss) attributable to equity holders of the parent
Number of shares
Weighted average number of ordinary shares — basic
Effect of dilutive potential ordinary shares
Weighted average number of ordinary shares — diluted
Earnings per share
Basic earnings per share
Diluted earnings per share

14 Goodwill

Cost
At 1 January
Exchange adjustments
Purchase of business
At 31 December

Accumulated impairment losses
At 1 January
Impairment charge
At 31 December

Net book value
At 31 December

Underlying
performance

Special
Items

£m

122.9

(119.8)

Underlying
performance

Special
Items

IFRS

99.5

(14.9)

84.6

IFRS

3.1

424,843
2,505
427,348

28.9
28.8

(28.2)
(28.1)

0.7
0.7

25.3
25.2

(3.8)
(3.8)

2020
£m

338.5
(9.9)
180.2
508.8

14.1
1.3
15.4

393,349
2,109
395,458

21.5
21.4

2019
£m

350.6
(12.1)
–
338.5

14.1
–
14.1

493.4

324.4

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from
that business combination.

Following a change in management structure in early 2020, a new Acrylate Monomers CGU was established in order to separate the internal
supply and external sales of manufactured monomers. This was previously reported within the Industrial Specialities CGU and goodwill in this
CGU was reassessed and allocated into the new Acrylate Monomers CGU. In December 2020 this goodwill was impaired, as discussed more
fully in note 4.

Accumulated impairment losses at 31 December 2019 arose prior to the Group’s adoption of IFRS and are denominated in pounds sterling.

The allocation of the carrying value of goodwill is represented below:

Performance Elastomers
Functional Solutions
Industrial Specialities
Acrylate Monomers
Total

Net book
value at
1 January
2019
£m
124.8
184.7
27.0
–
336.5

Net book
value at
31 December
2019
£m
119.0
180.0
25.4
–
324.4

Exchange
adjustments
£m
(5.8)
(4.7)
(1.6)
–
(12.1)

Reallocation
into new
divisions on
1 January
2020
£m
–
–
(1.3)
1.3
–

Purchase of
business
£m
–
138.0
42.2
–
180.2

Impairment
£m
–
–
–
(1.3)
(1.3)

Exchange
adjustments
£m
4.2
(11.6)
(2.5)
–
(9.9)

Net book
value at
31 December
2020
£m
123.2
306.4
63.8
–
493.4

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts for CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are
the discount rate, profitability and growth rate. These assumptions have been revised in the year in light of the current economic environment.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks
specific to the Group. The discount rate is based on the Group’s weighted average cost of capital adjusted, where appropriate, for the risk
premium attributable to a particular CGU’s activities and geography of operation. A pre-tax discount rate of 9.7% has been used in the above
calculations for each CGU (2019: 8.4%).

145

14 Goodwill continued
The Group prepares cash flow forecasts derived from the most recent five-year business plans approved by the Executive Committee and
extrapolates cash flows for the following five years based on estimated growth rates of 1.7%, 1.6%, 1.6% and 2.0% for Performance Elastomers,
Functional Solutions, Industrial Specialities and Acrylate Monomers respectively (2019: 3.5%, 2.6% and 2.6% for Performance Elastomers,
Functional Solutions and Industrial Specialities respectively). These rates do not exceed average long-term growth rates for relevant markets.
The cash flow for year ten is then assumed to apply without further growth into perpetuity.

The Group has conducted a sensitivity analysis on the impairment tests. For each CGU, the Directors believe that there is no reasonably
possible change in the key assumptions on which the recoverable amount is based that would cause the aggregate carrying amount
to exceed the aggregate recoverable amount of the CGU.

15 Acquired intangible assets

Cost

At 1 January 2020

Purchase of business

Derecognition of fully amortised assets

Exchange adjustments

At 31 December 2020

Accumulated amortisation and impairment

At 1 January 2020

Amortisation charge for the year

Impairment charge

Derecognition of fully amortised assets

Exchange adjustments

At 31 December 2020

Net book value

At 31 December 2020

Cost
At 1 January 2019
Derecognition of fully amortised assets
Exchange adjustments
At 31 December 2019

Accumulated amortisation and impairment
At 1 January 2019
Amortisation charge for the year
Derecognition of fully amortised assets
Exchange adjustments
At 31 December 2019

Net book value
At 31 December 2019

146

Customer
relationships
£m

Other
acquired
intangibles
£m

71.3

316.9

(0.9)

(14.1)

373.2

20.8

29.0

0.1

(0.9)

(0.2)

48.8

9.1

13.2

–

(0.7)

21.6

2.8

1.9

–

0.3

5.0

Total
£m

80.4

330.1

(0.9)

(14.8)

394.8

23.6

30.9

0.1

(0.9)

0.1

53.8

324.4

16.6

341.0

Customer
relationships
£m

Other
acquired
intangibles
£m

111.6
(26.3)
(14.0)
71.3

50.6
7.4
(26.3)
(10.9)
20.8

12.8
(3.1)
(0.6)
9.1

4.7
1.3
(3.1)
(0.1)
2.8

Total
£m

124.4
(29.4)
(14.6)
80.4

55.3
8.7
(29.4)
(11.0)
23.6

50.5

6.3

56.8

Synthomer plc Annual Report 2020Group financial statements16 Other intangible assets

Cost

At 1 January 2020

Additions

Purchase of business

Transfer

Disposals

Exchange adjustments

At 31 December 2020

Accumulated amortisation and impairment

At 1 January 2020

Amortisation charge for the year

Impairment

Disposals

Exchange adjustments

At 31 December 2020

Net book value

At 31 December 2020

Cost

At 1 January 2019

Additions

Exchange adjustments
At 31 December 2019

Accumulated amortisation and impairment

At 1 January 2019

Amortisation charge for the year

Exchange adjustments
At 31 December 2019

Net book value
At 31 December 2019

Other
intangible
assets
£m

Assets under
construction
£m

8.2

1.4

5.7

0.2

(0.8)

0.1

14.8

4.1

4.9

0.1

(0.8)

(0.2)

8.1

17.9

12.4

–

(0.2)

–

(0.2)

29.9

–

Total
£m

26.1

13.8

5.7

–

(0.8)

(0.1)

44.7

4.1

4.9

0.1

(0.8)

(0.2)

8.1

6.7

29.9

36.6

Other
intangible
assets
£m

Assets under
construction
£m

4.6

3.8

(0.2)
8.2

2.7

1.4

–
4.1

3.2

14.7

–
17.9

–

–
–

Total
£m

7.8

18.5

(0.2)
26.1

2.7

1.4

–
4.1

4.1

17.9

22.0

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

As disclosed in note 2, there are various conditions required by IAS 38 for an internally generated intangible asset to be recognised.

During the year the Group invested a further £12.2 million in its Pathway programme (2019: £14.7 million). This programme is designed to deliver
a unified operating model on a single set of integrated systems to improve the efficiency and effectiveness of the Group. The investment in
this programme is shown as an asset under construction until the deployment phase begins.

147

17 Property, plant and equipment

Cost
At 1 January 2020
Additions
Purchase of business
Disposals
Transfer from assets under construction
Exchange adjustments
At 31 December 2020

Accumulated depreciation and impairment
At 1 January 2020
Depreciation charge for the year
Impairment
Disposals
Exchange adjustments
At 31 December 2020

Net book value
At 31 December 2020

Cost
At 1 January 2019
Recognised on adoption of IFRS 16
Additions
Disposals
Transfer from assets under construction
Exchange adjustments
At 31 December 2019

Accumulated depreciation and impairment
At 1 January 2019
Depreciation charge for the year
Impairment
Disposals
Exchange adjustments
At 31 December 2019

Net book value
At 31 December 2019

Owned assets

Right of use assets

Freehold land
and buildings
£m

Leasehold
land and
buildings
£m

Plant and
equipment
£m

Assets under
construction
£m

Land and
buildings
£m

Plant and
equipment
£m

106.1
7.9
68.2
(0.1)
1.5
(2.2)
181.4

40.5
7.7
9.7
(0.1)
1.2
59.0

8.7
–
–
–
–
–
8.7

4.9
0.2
–
–
–
5.1

636.7
9.0
87.2
(10.3)
14.1
2.7
739.4

353.5
46.1
23.1
(9.1)
4.2
417.8

13.4
19.8
8.2
–
(15.6)
(0.7)
25.1

–
–
–
–
–
–

21.5
1.6
15.0
(0.9)
–
(0.3)
36.9

2.4
4.5
–
(0.9)
–
6.0

24.4
2.9
5.9
(4.5)
–
0.7
29.4

4.6
6.4
0.7
(0.8)
0.3
11.2

Total
£m

810.8
41.2
184.5
(15.8)
–
0.2
1,020.9

405.9
64.9
33.5
(10.9)
5.7
499.1

122.4

3.6

321.6

25.1

30.9

18.2

521.8

Owned assets

Right of use assets

Freehold land
and buildings
£m

Leasehold
land and
buildings
£m

Plant and
equipment
£m

Assets under
construction
£m

Land and
buildings
£m

Plant and
equipment
£m

108.9
–
1.3
–
–
(4.1)
106.1

37.0
5.0
–
–
(1.5)
40.5

8.6
–
–
–
–
0.1
8.7

4.6
0.3
–
–
–
4.9

590.2
–
33.0
(0.4)
33.6
(19.7)
636.7

325.4
38.1
(0.1)
(0.1)
(9.8)
353.5

29.3
–
18.8
–
(33.6)
(1.1)
13.4

–
–
–
–
–
–

–
18.2
4.2
–
–
(0.9)
21.5

–
2.5
–
–
(0.1)
2.4

–
24.6
1.0
–
–
(1.2)
24.4

–
4.8
–
–
(0.2)
4.6

Total
£m

737.0
42.8
58.3
(0.4)
–
(26.9)
810.8

367.0
50.7
(0.1)
(0.1)
(11.6)
405.9

65.6

3.8

283.2

13.4

19.1

19.8

404.9

Freehold land is not depreciated and is held at historical cost. At 31 December 2020, the Group’s freehold land was recognised at £54.3 million
(31 December 2019: £17.6 million).

At 31 December 2020 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting
to £18.9 million (2019: £11.7 million).

148

Synthomer plc Annual Report 2020Group financial statements18 Investment in joint ventures
Details of the Group’s joint ventures are as follows:

Name of entity
Synthomer Middle East
Synthomer Functional Solutions FZCO UAE
UAE
Synthomer FZCO
UK
Super Sky Ltd

Place of
incorporation
Saudi Arabia

Ownership Principal activity

49% Manufacture and sale of acrylic and vinyl resin emulsions
49% Trading in adhesives and oilfield chemicals
49% Sales and marketing support for Synthomer companies
50% Non-trading

Segment
Functional Solutions
Functional Solutions
Functional Solutions
Corporate

Joint ventures are accounted for using the equity method in these financial statements. The ownership of entities has not changed since the prior year.

Summarised financial information in respect of the joint ventures is set out below. This information represents amounts in the joint ventures’
financial statements prepared in accordance with IFRS.

Summarised balance sheet (100%)

Non-current assets

Cash and cash equivalents
Other current assets
Total current assets

Other current liabilities
Total current liabilities

Net assets

Group share:
Total assets
Total liabilities
Net assets

Summarised statement of comprehensive income (100%)

Revenue

Operating profit
Interest
Taxation
Profit for the year
Exchange differences on translation
Total comprehensive income
Dividends paid
Movement in retained earnings

Group share:
Profit for the year
Exchange differences on translation
Dividends paid

2020
£m
4.6

4.2
14.6
18.8

(9.9)
(9.9)

13.5

2020
£m
11.5
(4.9)
6.6

2020
£m
39.4

2.7
–
(0.2)
2.5
(0.4)
2.1
(3.8)
(1.7)

1.2
(0.2)
(1.9)

2019
£m
6.6

3.8
17.1
20.9

(12.3)
(12.3)

15.2

2019
£m
13.5
(6.0)
7.5

2019
£m
48.2

2.0
–
(0.1)
1.9
(0.9)
1.0
(3.3)
(2.3)

0.9
(0.4)
(1.6)

149

18 Investment in joint ventures continued
The following table reconciles the summary information above to the carrying amount of the Group’s interest in the joint ventures:

Investment in joint ventures

At 1 January
Profit from continuing operations
Exchange differences on translation
Dividend paid
At 31 December

19 Inventories

Raw materials and consumables
Finished goods

Stock written off during the year

Cost of inventory recognised as an expense and included in cost of sales

2020
£m
7.5
1.2
(0.2)
(1.9)
6.6

2020
£m
78.9
91.4

2019
£m
8.6
0.9
(0.4)
(1.6)
7.5

2019
£m
55.5
66.4

170.3

121.9

0.5

1.5

926.2

985.5

The nature of the chemical reaction necessary to produce finished goods from raw materials is such that ‘work in progress’ is not a material
part of the Group’s inventory at any given point of time.

20 Trade and other receivables

Trade receivables
Other receivables
Prepayments

2020
£m
229.3
23.6
9.5
262.4

2019
£m
162.7
22.3
5.6
190.6

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Before accepting a new customer, the Group uses appropriate procedures to assess the potential customer’s credit quality in order to set
a credit limit. Other receivables mostly relate to indirect taxes.

The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the lifetime
expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to past default
experience and credit rating, adjusted as appropriate for current observable data. The Group has no significant concentration of credit risk,
with exposure spread over a large number of customers. The following table details the risk profile of trade receivables based on the Group’s
provision matrix.

Trade receivables – days past due

Not yet due
£m

214.1

< 60
£m

15.1

61–120
£m

0.3

> 120
£m

1.7

Trade receivables – days past due

Not yet due
£m
145.9

< 60
£m
16.9

61–120
£m
0.1

> 120
£m
0.7

Total
£m

231.2

0.12%

(1.9)

229.3

Total
£m
163.6
0.06%
(0.9)
162.7

2020

Gross carrying amount

Expected credit loss rate

Lifetime expected credit loss

Total

2019
Gross carrying amount
Expected credit loss rate
Lifetime expected credit loss
Total

150

Synthomer plc Annual Report 2020Group financial statementsThe following table shows the movement in the lifetime expected credit loss that has been recognised for trade receivables in accordance
with the simplified approach set out in IFRS 9:

At 1 January

Exchange adjustments

Acquisition of business

Transfer to/(from) credit impaired

Uncollectable amounts written off or recovered

At 31 December

21 Cash and borrowings

Bank overdrafts
Current borrowings
Current liabilities
Bank loans
€520m 3.875% senior unsecured loan notes due 2025
Non-current liabilities
Total borrowings
Cash and cash equivalents
Net cash/(debt)

2020
£m

0.9

(0.1)

1.4

0.1

(0.4)

1.9

2019
£m

0.8

(0.1)

–

0.7

(0.5)

0.9

1 January
2020
£m
–
–
–
(82.9)
–
(82.9)
(82.9)
103.6
20.7

Cash inflows/
(outflows)
£m
(10.4)
–
(10.4)
(109.6)
(463.0)
(572.6)
(583.0)
104.6
(478.4)

Exchange
and other
movements
£m
(0.1)
(9.6)
(9.7)
6.3
5.3
11.6
1.9
(6.4)
(4.5)

31 December
2020
£m
(10.5)
(9.6)
(20.1)
(186.2)
(457.7)
(643.9)
(664.0)
201.8
(462.2)

Capitalised debt costs shown in the tables above, which have been recognised as a reduction in borrowings in the financial statements,
amounted to £11.2 million at 31 December 2020 (31 December 2019: £1.7 million). Current borrowings relate to accrued interest.

Analysis of net debt by currency:

Sterling

Euro

US dollar

Malaysian ringgit

Other

Total

2020
Cash and
cash
equivalents
£m

2020
Total
borrowings
£m

2019
Cash and
cash
equivalents
£m

2019
Total
borrowings
£m

12.5

38.8

54.1

61.0

35.4

–

484.7

190.5

–

3.1

13.4

28.0

49.0

10.1

–

84.6

–

201.8

675.2

103.6

84.6

The principal features of the Group’s borrowings are as follows:

The Group has committed unsecured borrowing facilities comprising a $260 million term loan, a €460 million revolving credit facility both
of which have terms ending July 2024. The Group also has €520 million 3.875% unsecured senior loan notes due in June 2025.

Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows are classified in the Group’s consolidated cash flow statement as cash
flows from financing activities.

Borrowings

Lease liabilities

Total

Non cash changes

Financing
cash
(inflows)/
outflows
£m

Acquisitions
£m

Exchange
and other
movements
£m

31 December
2020
£m

1 January
2020
£m

(82.9)

(41.9)

(299.0)

(273.6)

9.7

(21.7)

(124.8)

(289.3)

(295.3)

2.0

(1.1)

0.9

(653.5)

(55.0)

(708.5)

151

22 Financial instruments
The table below sets out the Group’s accounting classification of each class of financial assets and liabilities:

Financial instruments

Carrying
amount
within scope
of IFRS 7
£m

Valuation
category in
accordance
with IFRS 91

Carrying
amount
£m

Trade receivables

Other receivables

Cash and cash equivalents

Derivatives – no hedge accounting

Total assets

Borrowings

Trade and other payables

Derivatives – no hedge accounting

Total liabilities

Note:

Fair value
hierarchy
level

Level 2

Fair value
£m

229.3

13.9

201.8

1.4

446.4

229.3

23.6

201.8

1.4

456.1

(664.0)

(337.8)

(19.4)

229.3

13.9

201.8

1.4

FVTPL

446.4

(664.0)

(324.9)

(675.2)

Level 2

(324.9)

Level 2

(19.4)

FVTPL

(19.4)

Level 2

(1,021.2)

(1,008.3)

(1,019.5)

1. AC: amortised cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in note 2.

The fair value of the Group’s borrowings at 31 December 2020 was £675.2 million.

Financial risk management
The Group’s policies, approved by the Board, provide written principles on financial risk management and the use of financial derivatives.
These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

The Group has a policy of hedging significant foreign exchange transactional exposure at operating company level. The Group regularly reviews
its net assets and borrowing currency exposures, borrowing in overseas currencies in order to hedge the net assets held in those currencies as
appropriate. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Currency risk
The Group presents its consolidated financial statements in sterling and conducts business in many currencies. As a result, it is subject to
foreign currency risk due to exchange rate movements, which will affect the Group’s transactions and the translation of the results and
underlying net assets of its operations.

To manage the currency risk the Group uses foreign currency borrowings, forward contracts and currency swaps to hedge overseas net assets,
which are predominantly denominated in Euros, US dollars and Malaysian ringgits. Profit translation exposures are not hedged.

The Group hedges currency transaction exposures at the point of confirmed order, using forward foreign exchange contracts. The Group’s
policy is, where practicable, to hedge all exposures on monetary assets and liabilities. Consequently, there are no material currency exposures
to disclose (2019: none).

Interest rate risk
The Group has an exposure to interest rate risk, arising principally on changes in US dollar and Euro interest rates. To manage interest rate risk,
the Group manages its proportion of fixed to floating rate borrowings, and utilises interest rate swaps. These practices aim to minimise
the Group’s net finance charges with acceptable year-on-year volatility.

At 31 December 2020 the Group had in place swap arrangements to fix interest rates on €440 million of borrowings.

The Group’s interest rate derivatives are designated as fair value hedges with fair value movement on the hedged portion recognised in equity.
Interest paid on these derivatives is recognised in the income statement, within Underlying interest costs. Fair value movement in the unhedged
portion is also recognised in profit and loss, as a Special Item.

After taking account of interest rate swaps, the Group’s currency and interest rate exposure as at 31 December 2020 was:

2020

2019

Floating rate
borrowings
£m

Fixed rate
borrowings
£m

Total
borrowings
£m

Floating rate
borrowings
£m

Fixed rate
borrowings
£m

Total
borrowings
£m

–

10.3

190.5

200.8

–

474.4

–

474.4

–

484.7

190.5

675.2

–

84.6

–

84.6

–

84.6

–

84.6

Sterling

Euro

US dollar

Total

152

Synthomer plc Annual Report 2020Group financial statementsMarket risk sensitivity analysis
The Group’s main exposure to market risk is in the form of interest rate risk and foreign currency risk. The Group uses a sensitivity analysis
that estimates the impacts on the consolidated income statement and other comprehensive income of either an instantaneous increase
or decrease of 1.0% in market interest rates or a 10% strengthening or weakening in sterling against all other currencies, from the rates
applicable at 31 December 2020 and 31 December 2019 with all other variables remaining constant. The sensitivity analysis excludes the
impact of market risks on the net post employment benefit liabilities and assets, and corporate tax payable. This analysis is for illustrative
purposes only, as interest and foreign exchange rates rarely change in isolation.

There has been no change to the Group’s exposure to market risks or the manner in which these risks are managed and measured.

Interest rate sensitivity analysis

UK interest rate +/- 1.0%

Euro interest rate +/- 1.0%

US interest rate +/- 1.0%

Foreign currency sensitivity analysis

Sterling -/+ 10%

Malaysian ringgit exchange rate -/+ 10%

Euro exchange rate -/+ 10%

US dollar exchange rate -/+ 10%

2020

2019

Income statement

Underlying
-/+ £m

IFRS
-/+ £m

Equity

IFRS
-/+ £m

Income statement

Underlying
-/+ £m

IFRS
-/+ £m

–

0.4

1.4

(3.4)

–

2.8

(1.0)

–

4.4

–

(3.4)

–

2.8

(1.0)

–

(31.3)

–

7.6

21.5

–

0.1

0.3

(1.7)

–

1.4

0.4

–

3.0

–

(1.7)

–

1.4

0.4

Equity

IFRS
-/+ £m

–

0.8

–

The interest rate sensitivity analysis has been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming that the amount of liability outstanding
at the balance sheet date was outstanding for the whole year.

For interest rate derivatives the mark-to-market adjustment, and amount recognised in equity as part of a hedging arrangement, is estimated
using the interest rate sensitivity against the nominal amount.

The foreign currency sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at
the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations
within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or borrower.

Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises
on cash balances, derivative financial instruments and credit exposures to customers.

The carrying amount of financial assets represents the Group’s exposure to credit risk at the balance sheet date as disclosed at the start of this
note. A financial asset is in default when the counterparty fails to pay its contractual obligations. Financial assets are written-off when there is no
reasonable expectation of recovery. Credit risk is managed separately for financial and business-related credit exposures.

Financial credit risk
Synthomer aims to minimise its financial credit risk through the application of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to major banks and financial institutions with a credit rating of investment grade and the policy restricts
the exposure to any one counterparty by setting credit limits. The Group’s policy is designed to ensure that individual counterparty limits are
adhered to and that there are no significant concentrations of credit risk. The Board also defines the types of financial instruments which may
be transacted. Synthomer annually reviews the credit limits applied and regularly monitors the counterparties’ credit quality, reflecting market
credit conditions.

Business related credit risk
Trade and other receivables exposures are managed locally in the operating units where they arise and active risk management is applied,
focusing on country risk, credit limits, ongoing credit evaluation and monitoring procedures. There is no significant concentration of credit risk
with respect to receivables as the Group has a large number of customers which are internationally dispersed. See note 20 for information on
credit risk with respect to trade and other receivables.

Liquidity risk
Liquidity risk is the risk that Synthomer is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow
funds at an acceptable price to fund actual or proposed commitments. The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity
profiles of assets and liabilities.

153

22 Financial instruments continued
The following tables provide an analysis of the anticipated undiscounted contractual cash flows including interest payable for the Group’s
financial liabilities and derivative instruments. The liquidity analysis for lease liabilities is included in note 23. Where interest payments are
calculated at a floating rate, rates of each cash flow until maturity of the instruments are calculated based on the forward yield curve
prevailing at the respective year ends. Derivative contracts are presented on a net basis.

Overdrafts

within
1 year
£m

(10.5)

Financial liabilities in trade and other payables

(321.2)

(2.0)

(1.7)

Bank loans – principal

€520m 3.875% senior unsecured loan notes due 2025

Interest payments on borrowings

Total non-derivative financial liabilities

–

(190.2)

(464.9)

(22.1)

(22.0)

(60.0)

(353.8)

(24.0)

(716.8)

2020

Amount due

between
1 and
2 years
£m

between
2 and
5 years
£m

after
5 years
£m

–

2019

Amount due

between
1 and
2 years
£m

between
2 and
5 years
£m

after
5 years
£m

within
1 year
£m

–

(225.3)

(0.2)

–

(0.9)

(226.2)

–

(0.9)

(1.1)

–

(0.3)

(84.6)

–

(0.5)

(85.4)

–

Deal contingent currency fix

Currency forwards

Total derivative financial assets

Interest rate swaps

Currency forwards

Total derivative financial liabilities

2020

Amount due

2019

Amount due

within
1 year
£m

between
1 and
2 years
£m

between
2 and
5 years
£m

after
5 years
£m

–

1.4

(4.2)

(0.8)

(5.0)

–

(4.3)

(11.5)

–

(4.3)

(11.5)

–

within
1 year
£m

4.0

0.9

4.9

between
1 and
2 years
£m

between
2 and
5 years
£m

after
5 years
£m

–

(3.6)

(10.9)

(2.7)

–

(3.6)

(10.9)

(2.7)

The financial covenant at 31 December 2020 for the RCF is that net debt must be less than 4.25 times EBITDA. At 31 December 2020 the
actual covenant for the net debt was 1.8 times EBITDA.

Any non-compliance with covenants underlying Synthomer’s financing arrangements could, if not waived, constitute an event of default
with respect to any such arrangements, and any non-compliance with covenants may, in particular circumstances, lead to an acceleration
of maturity on certain borrowings and the inability to access committed facilities. Synthomer was in full compliance with its financial
covenants in respect of its borrowings throughout each of the years presented.

At the year end, Synthomer had available undrawn committed bank facilities as follows:

Unsecured €440m multi-currency RCF expiring 23 July 2022

Unsecured €460m multi-currency RCF expiring 3 July 2024

Expiring
between
2 and
5 years
£m

–

397.0

2020

Expiring
after
5 years
£m

Expiring
between
2 and
5 years
£m

2019

Expiring
after
5 years
£m

Total
£m

–

287.4

397.0

–

287.4

–

Total
£m

287.4

–

287.4

Fair value measurement
Certain of the Group’s financial instruments are held at fair value. The fair value of a financial instrument is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the balance sheet date.

As prescribed by IFRS 13 Fair Value Measurement, fair values are measured using a hierarchy where the inputs are as follows:

• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – not level 1 but are observable for that asset or liability either directly or indirectly.
• Level 3 – not based on observable market data.

Interest rate swaps and foreign currency forwards and swaps are valued using discounted cash flow techniques. These techniques incorporate
inputs such as foreign exchange rates and interest rates, which are used in a discounted cash flow calculation incorporating the instrument’s
term, notional amount and discount rate, and taking credit risk into account. As significant inputs to the valuation are observable in active
markets, all of the Group’s financial instruments are classified as level 2 financial instruments.

154

Synthomer plc Annual Report 2020Group financial statementsThe fair value of forward foreign exchange contracts, interest rate swaps and currency swaps is estimated by discounting the future contractual
cash flows using forward exchange rates, interest rates and prices at the balance sheet date.

There were no transfers of any financial instrument between the levels of the fair value hierarchy during the current or prior year.

Hedge relationships
The Group targets a one-to-one hedge ratio. Strengths of the economic relationship between the hedged item and the hedging instrument is
analysed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of timing, cash flows
or value except when the critical terms of the hedging instrument and hedged item are closely aligned. The change in the credit risk of the
hedging instruments or the hedged items is not expected to be the primary factor in the economic relationship.

The notional amounts, contractual maturities and rates of the hedging instruments designated in hedging relationships as of 31 December 2020
by the main risk categories are as follows:

Hedged risk

Notional amount

Maturity

Range of hedged rates

2020

Cash flow hedges

Interest rate swap

Net investment hedges

Net investment

2019

Cash flow hedges

Interest rate swap

Interest rate Up to €440m

28/08/2018 – 28/08/2025

0.517% to 0.535% fixed

Currency Up to €560m

Currency Up to $370m

from 01/04/2020

1.08 – 1.15

1.23 – 1.37

Interest rate Up to €440m

28/08/2018 – 28/08/2025

0.517% to 0.535% fixed

Where hedge accounting is applied, hedges are documented and tested for effectiveness on an ongoing basis.

The ratio for hedging instruments designated in both net investment and cash flow hedge relationships was 1:1. Ineffectiveness could occur
on either hedging relationship due to significant changes in counterparty credit risk or a reduction in the notional amount of the hedged item
during the designated hedging period.

Cash flow hedges
The Group designated as a cash flow hedge the interest rate swaps used to manage interest rate risk on its Euro borrowings.

In 2020 a loss of £0.8 million (2019: £8.7 million loss) was recognised in the cash flow hedge reserve in respect of these derivatives.
At 31 December 2020 the cash flow hedge reserve includes a loss of £13.4 million (2019: £12.6 million), all of which relates to continuing
cash flow hedges. The cash flows are expected to occur between 2021 and 2025.

In the year, the Group’s borrowings fell below the total of the interest rate derivative contracts, leading to a reduction in the balance designated
as a cash flow hedge. The change in fair value relating to the unhedged portion of the interest rate swaps was £3.6 million (2019: £0.5 million)
which was recognised in the income statement within finance costs as a Special Item.

Capital management
The Board is committed to enhancing shareholder value in the long term, both by investing in the business so as to deliver continued
improvement in the return from those investments and by managing the capital structure.

Synthomer manages its capital structure to achieve capital efficiency and to provide flexibility to invest through the economic cycle and
give efficient access to debt markets at attractive cost levels. This is achieved by targeting a net debt to EBITDA ratio between 1.0 and 2.0.
In order to finance acquisitions, the Group may increase the ratio to 3.0, with deleveraging within 12-24 months.

As at 31 December 2020 the net debt to EBITDA ratio was 1.8 times (2019: -0.1 times).

The Board maintains a dividend policy to 2.5 times earnings cover. Should excess capital not be deployed for acquisitions or capital
expenditure, the Board will periodically consider one-off capital returns to shareholders in order to maintain an efficient balance sheet.

155

23 Lease liabilities
The Group has a portfolio of leases mainly comprising land and buildings, chemical storage tanks and vehicles. Further details are given
in note 2.

Information in respect of right of use assets, including the carrying amount, additions and depreciation, are set out in note 17 to these financial
statements. Information in respect of the carrying value is set out below and information in respect of interest arising on lease liabilities is set out
in note 9.

Synthomer also enters into short-term leases and low value leases which are not recognised as right of use assets and lease liabilities.
The expense recognised in the year in relation to these leases is not material. Synthomer has no material exposure to variable lease payments,
extension options or committed leases not yet commenced.

The total cash outflow for leases in the year was as follows:

Payments for the principal portion of lease liabilities

Payments for the interest portion of lease liabilities

Lease liabilities included in the balance sheet are as follows:

Current

Non-current

The following table details the maturity of contractual undiscounted cash flows for lease liabilities:

Less than one year

Between one and two years

Between two and five years

More than five years

24 Trade and other payables

Amount due within one year
Trade payables
Other payables
Accruals

Amount due after one year
Trade payables
Other payables
Accruals

2020
£m

9.7

1.6

2019
£m

6.8

1.1

31 December
2020
£m

10.6

44.4

55.0

2020
£m

11.2

10.5

17.1

19.0

2020
£m

204.6
40.5
89.0
334.1

–
–
3.7
3.7

7.5

34.4

41.9

2019
£m

7.6

7.3

17.7

17.5

2019
£m

186.8
15.4
30.7
232.9

–
–
0.5
0.5

Average trade payable days in 2020 was 64 (2019: 58). This figure represents trade payable days for all trading operations within the Group,
calculated as a weighted average based on cost of sales.

The Directors consider that the carrying amount of trade payables, other payables and accruals approximates to their fair value.

156

Synthomer plc Annual Report 2020Group financial statements25 Provisions for other liabilities and charges

At 1 January 2020
Charged to the income statement
Utilised during the year
Exchange adjustments
At 31 December 2020

Analysis of provisions

Non-current
Current

Analysis of (credit)/charge to the income statement

Underlying performance

Special Items

Restructuring
£m
6.9
27.0
(2.6)
0.3
31.6

Total
£m
6.9
25.0
(2.6)
0.3
29.6

31 December
2020
£m
5.9
25.7
31.6

31 December
2019
£m
2.0
4.9
6.9

2020
£m

–

27.0
27.0

2019
£m

(0.2)

(1.1)
(1.3)

Restructuring
As a result of the restructuring and site closure costs in the year, the restructuring provision has increased to £31.6 million (2019: £6.9 million).

The closing balance includes £5.9 million and £13.4 million in relation to the rationalisation of the Group’s European SBR network in Oulu and
Marl and £5.7 million in relation to the onerous contract arising on the disposal of the European Tyre Cord business, required by the European
Commission Competition Authority in order to obtain clearance for the acquisition of OMNOVA. The provisions relating to Oulu and Marl are
expected to be fully utilised over the next 12 months and the onerous contract arising on the disposal of the European Tyre Cord basis will be
utilised over the five year term of the contract.

26 Retirement benefit obligations
The Group operates a variety of retirement benefit arrangements, covering both defined contribution and defined benefit schemes.

Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees. Costs recognised in respect of defined contribution pension
plans across the Group for the year ended 31 December 2020 were £9.2 million (2019: £7.1 million).

The risk relating to benefits to be paid to the dependants of scheme members (widow and orphan benefits) is re-insured with an external
insurance company.

Multi-employer schemes
The Group participates in several tariffs of the Pensionskasse Degussa in Germany, which is a multi-employer pension scheme.
Regular contributions are payable to the scheme by each participating employer for new benefits accruing. The assets of all participating
employers are pooled, and contributions are calculated based on aggregated demographic experience. Therefore sufficient information is not
available to identify the Group’s share of the assets on a consistent and reliable basis and the Group accounts for the scheme on a defined
contribution basis. The Group expects to make a regular contribution of £2.3 million to the scheme in 2021.

To the extent that there is underfunding in the scheme, deficit contributions are payable based on an actuarial assessment of each participating
employer’s share of the future benefit accrual. At 31 December 2020 there is no indication of any commitment for additional deficit contributions
in excess of regular contributions.

157

26 Retirement benefit obligations continued
Defined benefit schemes
UK
The Group’s UK defined benefit scheme is administered by a fund that is legally separate from the Company. The trustees of the pension fund
are required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees of the pension scheme are
responsible for the investment policy with regard to the assets of the fund.

The scheme was closed to future accrual in 2009 and all retirement benefits since that time are provided by way of a defined contribution
scheme. The assets of the scheme are held separately from those of the companies concerned. A triennial actuarial valuation of the scheme
was undertaken in 2018 and completed in 2019. The next triennial valuation is due in 2021.

USA
The Group’s US defined benefit scheme was acquired as part of the OMNOVA acquisition and is administered by a fund which is legally
separate from OMNOVA Solutions Inc. The fiduciary committee is required by law to act in the interest of the fund and is responsible for the
investment policy with regard to the assets of the fund.

The scheme was closed to future accrual in 2011 and all retirement benefits since that time are provided by way of a defined contribution
scheme. The assets of the scheme are held separately from those of the companies concerned and a formal valuation is undertaken on an
annual basis.

Germany
The Group operates a number of defined benefit schemes in Germany. These schemes are closed to new members. In line with common
practice, these schemes are unfunded and liabilities are settled on a cash basis as they fall due. At each balance sheet date, obligations are
calculated by external actuaries.

Other schemes
The Group operates a number of smaller overseas pension and retirement benefit schemes. For the funded schemes, assets are held
separately from those of the Group. The aggregated pension disclosures for the other defined benefit schemes have been compiled from
a number of actuarial valuations at 31 December 2020.

Retirement benefit risks
Defined benefit schemes expose the Group to a number of risks, the most significant of which are detailed below:

Asset return risk

Interest rate risk

Longevity risk

The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will increase the deficit. The scheme holds a significant proportion of equities which are
expected to outperform corporate bonds in the long term while providing volatility and risk in the short term.
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the
value of the plan assets in bond holdings.
The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will
result in an increase in the plans’ liabilities.

Charges to the income statement in respect of the Group’s defined benefit pension schemes are as follows:

Service cost
Net interest expense

UK
£m
1.6
1.0
2.6

2020

Germany
£m
0.6
1.0
1.6

USA
£m
1.6
1.4
3.0

Other
£m
1.0
0.3
1.3

Total
£m
4.8
3.7
8.5

2019

UK
£m
0.7
1.3
2.0

Germany
£m
0.4
1.3
1.7

Other
£m
0.5
0.1
0.6

Total
£m
1.6
2.7
4.3

Amounts recognised in the statement of comprehensive income are set out below:

Return on plan assets excluding amounts
included in interest expense
Losses from changes in assumptions
Actuarial (losses)/gains

2020

2019

UK
£m

USA
£m

Germany
£m

Other
£m

Total
£m

UK
£m

Germany
£m

Other
£m

Total
£m

32.0
(43.3)
(11.3)

33.1
(20.8)
12.3

–
(7.6)
(7.6)

0.6
(1.6)
(1.0)

65.7
(73.3)
(7.6)

33.5
(50.9)
(17.4)

–
(9.0)
(9.0)

1.1
(1.9)
(0.8)

34.6
(61.8)
(27.2)

Amounts included in the Group’s consolidated balance sheet arising from the Group’s defined benefit scheme obligations are:

2020

2019

UK
£m

USA
£m

Germany
£m

Other
£m

Total
£m

UK
£m

Germany
£m

Other
£m

Total
£m

Present value of defined benefit obligations

(456.4)

(220.3)

(91.0)

(30.0)

(797.7)

Fair value of schemes’ assets

404.1

158.5

3.2

10.5

576.3

(422.2)

366.5

(79.3)

(17.1)

(518.6)

3.1

9.0

378.6

Net liability arising from defined benefit
obligations

(52.3)

(61.8)

(87.8)

(19.5)

(221.4)

(55.7)

(76.2)

(8.1)

(140.0)

158

Synthomer plc Annual Report 2020Group financial statementsFair value of the schemes’ assets are set out below:

At 1 January

Interest income
Amounts recognised in income in respect
of defined benefit schemes
Remeasurement:

Return on plan assets excluding amounts
included in interest income

Amounts recognised in the statement of
comprehensive income
Contributions:
Employers

Payments from plans:
Benefit payments

Plan assets from acquired entities
Disclosure of annuity asset on a gross basis
Exchange adjustments
At 31 December

Plan assets for the principal schemes comprised:

UK
£m
366.5

7.2

USA
£m
–

2.8

32.0

33.1

32.0

33.1

16.5

0.4

(18.1)
(1.6)
–
–
–
404.1

(11.5)
(11.1)
148.6
–
(14.9)
158.5

2020

Germany
£m
3.1

Other
£m
9.0

Total
£m
378.6

UK
£m
319.1

Germany
£m
3.3

Other
£m
8.2

Total
£m
330.6

2019

–

–
–
–
–
0.1
3.2

–

0.6

0.7

10.0

65.7

8.9

33.5

17.6

16.2

(0.8)
(0.1)
0.5
–
0.5
10.5

(30.4)
(12.8)
149.1
–
(14.3)
576.3

(16.8)
(0.6)
–
5.6
–
366.5

0.2

0.1

9.2

–

(0.2)
(0.2)
–
–
(0.2)
3.1

1.1

34.6

1.1

34.6

0.3

16.5

(0.2)
0.1
–
–
(0.5)
9.0

(17.2)
(0.7)
–
5.6
(0.7)
378.6

Hedge funds

Equities

Debt instruments

Property

Annuity assets

Cash
Fair value of schemes’ assets

All investments in equities, bonds and property are quoted.

UK
£m

20.8

107.2

258.3

8.8

5.2

3.8
404.1

2020

USA
£m

–

88.8

49.1

20.6

–

–
158.5

Germany
£m

2019

UK
£m

Germany
£m

–

1.6

–

–
3.2

45.7

71.5

229.5

12.2

5.6

2.0
366.5

–

1.5

1.6

–

–
3.1

159

26 Retirement benefit obligations continued
Present value of defined benefit obligations comprised:

At 1 January

Current service cost
Past service cost
Interest expense
Amounts recognised in income in respect
of defined benefit schemes
Remeasurement gains/(losses) from:
changes in financial assumptions
changes in demographic assumptions
experience adjustments

Amounts recognised in the statement of
comprehensive income
Contributions:
Employers

Payments from plans:
Benefit payments

Scheme liabilities from acquired entities
Other: Disclosure of annuity asset on a
gross basis
Exchange adjustments
At 31 December

UK
£m
(422.2)

(0.8)
(0.8)
(8.2)

USA
£m
–

(1.6)
–
(4.2)

2020

Germany
£m
(79.3)

Other
£m
(17.1)

Total
£m
(518.6)

UK
£m
(372.3)

Germany
£m
(75.0)

Other
£m
(15.8)

Total
£m
(463.1)

2019

(0.5)
(0.1)
(1.0)

(1.0)
–
(0.3)

(3.9)
(0.9)
(13.7)

(0.7)
–
(10.2)

(0.4)
–
(1.5)

(0.5)
–
(0.2)

(1.6)
–
(11.9)

(9.8)

(5.8)

(1.6)

(1.3)

(18.5)

(10.9)

(1.9)

(0.7)

(13.5)

(43.3)
–
–

(19.6)
–
(1.2)

(7.6)
–
–

(1.8)
0.3
(0.1)

(72.3)
0.3
(1.3)

(48.0)
(2.9)
–

(10.2)
–
1.2

(1.8)
–
(0.1)

(60.0)
(2.9)
1.1

(43.3)

(20.8)

(7.6)

(1.6)

(73.3)

(50.9)

(9.0)

(1.9)

(61.8)

0.8

2.0

18.1
18.9
–

–
–
(456.4)

11.5
13.5
(228.7)

–
21.5
(220.3)

2.1

–
2.1
–

–
(4.6)
(91.0)

0.3

5.2

0.7

1.7

0.2

2.6

0.8
1.1
(10.2)

–
(0.9)
(30.0)

30.4
35.6
(238.9)

–
16.0
(797.7)

16.8
17.5
–

(5.6)
–
(422.2)

0.2
1.9
–

–
4.7
(79.3)

0.2
0.4
–

17.2
19.8
–

–
0.9
(17.1)

(5.6)
5.6
(518.6)

The Group remains committed to funding the deficits for the UK and US defined benefit schemes.

The 2018 triennial valuation of the UK scheme, which completed in 2019, indicated a shortfall of £77.0 million when measured against the
scheme’s technical provisions. The Group remains committed to paying contributions for the period to 5 April 2023, increasing
from £16.4 million in the year commencing 6 April 2019 to £18.2 million for the year commencing 6 April 2022. Contributions from the
sponsoring companies are expected to be £16.5 million in 2021.

The defined benefit obligation of the US scheme was £73.4 million on acquisition. The funding policy prior to acquisition was the greater
of $6.0 million per annum or the Minimum Required Contribution (MRC). This funding policy is being considered as part of a wider
review of the scheme and the expected contribution in 2021 is $13.0 million.

The Group’s other defined benefit schemes are largely unfunded, with minimal plan assets. Liabilities from these schemes are settled
on a cash basis as they fall due.

Actuarial assumptions
The major assumptions used for the purposes of the actuarial valuations were as follows:

Rate of increase in pensions in payment
Rate of increase in pensions in deferment
Discount rate
Inflation assumption

UK
%
2.80
2.20
1.40
2.90

2020

USA
%
0.00
0.00
2.19
0.00

Germany
%

Overseas
%
1.00 1.90-2.75
2.50 1.50-2.75
0.70 -0.80-1.94
1.75 1.00-2.00

UK
%
2.80
2.10
2.00
2.90

2019

Germany
%

Overseas
%
1.00 2.00-2.25
2.50 1.50-2.25
1.20 0.30-0.90
1.75 1.00-2.00

160

Synthomer plc Annual Report 2020Group financial statementsAssumptions regarding future mortality are based on actuarial advice in accordance with published statistics. Mortality assumptions are based
on country-specific mortality tables and, where appropriate, include an allowance for future improvements in life expectancy. In addition, where
credible data exists, actual plan experience is taken into account. The Group’s most substantial pension liabilities are in the UK, the US and
Germany where, using the mortality tables adopted, the expected lifetime of average members currently at age 65 and average members at age
65 in 20 years’ time is as follows:

Retiring today

Retiring in 20 years

Retiring today

Retiring in 20 years

2020

2019

Male
Female

UK
87.3
89.5

USA
86.4
87.4

Germany
85.3
88.8

UK
88.9
91.4

USA
87.3
88.4

Germany
88.1
91.0

UK
87.2
89.5

Germany
85.2
88.7

UK
88.8
91.3

Germany
88.0
90.9

The weighted average duration of the benefit obligation at the end of the reporting period is 16.2 years for the UK scheme (2019: 15.7 years),
11.3 years for the US scheme and 18.4 years for the German schemes (2019: 18.2 years).

Sensitivity analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and mortality. The sensitivity analysis
below has been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, assuming
that all other assumptions are held constant:

Discount rate (decrease of 1%)
Future mortality rate (one year increase in expectancy)

Increase in scheme liabilities

UK
£m
87
22

USA
£m
26
8

Germany
£m
18
4

The above sensitivities are based on a change of assumption while holding all other assumptions constant. In practice this is unlikely to occur
and changes in some of the assumptions may have some correlation. When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit
method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the balance sheet.

27 Share capital and reserves
Share capital

Ordinary shares of 10 pence
Shares in issue at 1 January
Issued in year
Shares in issue at 31 December

Ordinary shares carry no right to fixed income.

2020
Number

2019
Number

424,850,961
–
424,850,961

339,880,769
84,970,192
424,850,961

2020
£m

42.5
–
42.5

2019
£m

34.0
8.5
42.5

On 29 July 2019 the Group completed a rights issue on the basis of one share for every four fully paid ordinary shares held, resulting in the issue
of 84,970,192 ordinary shares at 240 pence per share.

Share premium

Balance at 1 January
Premium arising on issue of shares
Expenses of issue of shares
Balance at 31 December

The share premium account represents the difference between the issue price and the nominal value of shares issued.

Retained earnings

Balance at 1 January
Dividends paid
Net profit for the year
Actuarial losses recognised in other comprehensive income
Tax arising from other comprehensive income
Charge to equity for equity-settled share-based payments
Balance at 31 December

2020
£m
421.1
–
–
421.1

2020
£m
204.4
(12.8)
3.1
(7.6)
3.5
1.8
192.4

2019
£m
230.5
195.4
(4.8)
421.1

2019
£m
192.1
(47.9)
84.6
(27.2)
4.7
(1.9)
204.4

161

27 Share capital and reserves continued
Hedging and translation reserve

Balance at 1 January 2020
Exchange differences on translation of foreign operations
Gains on net investment hedges taken to equity
Gain/(loss) recognised on cash flow hedges:

Interest rate swaps

Balance at 31 December 2020

Balance at 1 January 2019
Exchange differences on translation of foreign operations
Loss on net investment hedges taken to equity
Gain/(loss) recognised on cash flow hedges:

Interest rate swaps

Balance at 31 December 2019

Cash flow
hedging
reserve
£m
(12.6)
–
–

Translation
reserve
£m
(6.9)
(37.5)
15.9

(0.8)
(13.4)

(3.9)
–
–

(8.7)
(12.6)

–
(28.5)

10.3
(15.3)
(1.9)

–
(6.9)

Total
£m
(19.5)
(37.5)
15.9

(0.8)
(41.9)

6.4
(15.3)
(1.9)

(8.7)
(19.5)

Hedging reserve
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges.
The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the
profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.

Translation reserve
Exchange differences relating to the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only, from their
functional currency into the parent’s functional currency, being sterling, are recognised directly in the translation reserve. Gains and losses on
hedging instruments that are designated as hedges of net investments in foreign operations are included in the translation reserve.

28 Reconciliation of operating profit to cash generated from operations

Operating profit – continuing operations
Less: share of profits of joint ventures

Adjustments for:

Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of other intangibles
Share-based payments
Special Items

Cash impact of restructuring and site closure costs
Cash impact of acquisition costs and related gains
Cash impact of foreign exchange gain on rights issue
Pension funding in excess of service cost
Movement in working capital
Cash generated from operations

Reconciliation of movement in working capital
Decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Movement in working capital

162

2020
£m
58.4
(1.2)
57.2

54.0
10.9
4.9
2.0
131.2
(25.3)
(7.4)
–
(18.8)
23.5
232.2

17.1
19.1
(12.7)
23.5

2019
£m
110.6
(0.9)
109.7

43.4
7.3
1.4
0.6
15.2
(4.4)
(7.5)
3.5
(17.5)
18.5
170.2

15.0
34.3
(30.8)
18.5

Synthomer plc Annual Report 2020Group financial statements29 Acquisition of OMNOVA Solutions Inc
On 1 April 2020, the Group completed its acquisition of 100% of the issued share capital of OMNOVA Solutions Inc at a price of $10.15 per
share for a total consideration of £382.3 million.

The asset identification and fair value allocation processes remain under review and will be finalised by 31 March 2021.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below.

Identifiable intangible assets
Property, plant and equipment
Other non-current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Borrowings
Trade and other payables
Lease liabilities
Retirement benefit obligations
Other non-current liabilities
Provisional fair value of net assets acquired

Goodwill
Total consideration

Satisfied by:
Cash
Total consideration transferred

Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
Cash flow from investing activities
Settlement of external financing of OMNOVA Solutions Inc

£m
330.1
190.2
48.9
70.3
81.1
68.3
(273.6)
(119.3)
(21.7)
(89.8)
(82.4)
202.1

180.2
382.3

382.3
382.3

382.3
(68.3)
314.0
273.6
587.6

The goodwill arising on the acquisition of the business represents the premium the Group paid to acquire OMNOVA Solutions Inc which
complements the existing business, strengthening Synthomer’s presence in North America and increasing its presence in Europe and Asia.

In the period from acquisition to 31 December 2020 the business contributed £343.0 million to the Group’s revenue, £33.0 million of the
Group’s EBITDA, £17.6 million to the Group’s Underlying operating profit and a loss of £7.7 million to the Group’s IFRS operating profit.

If the acquisition had been completed on the first day of the financial year the business would have contributed £475.2 million to the Group’s
revenue, £46.1 million of the Group’s EBITDA, £25.2 million to the Group’s Underlying operating profit and a loss of £0.1 million to the Group’s
IFRS operating profit.

30 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not included
in this note. Transactions between the Company and its subsidiaries are disclosed in the Company’s financial statements where appropriate.

The UK defined benefit scheme is a related party; see note 26.

A summary of the key management compensation relates to the Directors and members of the Executive Committee, is set out below:

Key management compensation
Short-term employee benefits
Pension costs
Share-based payments

2020
£m
9.1
0.4
2.0
11.5

2019
£m
4.3
0.5
0.6
5.4

163

31 Contingent assets, contingent liabilities and guarantees
During 2018, the European Commission (the Commission) initiated an investigation into practices relating to the purchase of Styrene monomer by
companies, including Synthomer, operating in the European Economic Area. The Company has and will continue to fully cooperate with the
Commission during its investigation.

Given the ongoing investigation and the inherent uncertainties associated with it, it is not possible to determine whether or not a liability exists.
Similarly, given the many variables in the Commission’s fining framework and accordingly the range of possible outcomes, the Directors are not
able to reliably estimate any potential possible liability at this time. In the event the Commission does find against the Company, then any fine could
be material to the results, cash flows and balance sheet for the period in which the matter becomes resolved or it becomes probable and a reliable
estimate can be made.

Other guarantees and contingent liabilities of the Group amount to £2.7 million (2019: £2.6 million) and relate to an environmental liability in France.

The Company and its subsidiaries have, in the normal course of business, entered into guarantees and counter-indemnities in respect of
performance bonds, relating to the Group’s own contracts.

32 Share-based payments
Performance Share Plan
The Group’s Performance Share Plan is described in the Directors’ Remuneration report on pages 102 to 118. In addition to the two Executive
Directors, it is available to other senior management. Movement in the options held under the scheme are defined as follows:

Outstanding at 1 January
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 31 December
Exercisable at 31 December

Options
2020
number
1,936,998
1,134,333
(40,146)
(479,563)
2,551,622
49,554

Weighted av.
exercise
price (£)
2020
number
–
–
–
–
–
–

Options
2019
number
1,807,963
914,184
(697,627)
(87,522)
1,936,998
36,414

Weighted av.
exercise
price (£)
2019
number
–
–
–
–
–
–

Grants in 2019 included 143,146 options arising to counter the dilutive effect of the rights issue.

The outstanding share options were all issued under the Performance Share Plan. As at 31 December 2020 the following options were
outstanding:

Exercisable between 2016 and 2023
Exercisable between 2017 and 2024
Exercisable between 2018 and 2025
Exercisable between 2019 and 2026
Exercisable between 2020 and 2027
Exercisable between 2021 and 2028
Exercisable between 2022 and 2029
Exercisable between 2023 and 2030

Number
12,725
13,473
10,216
–
13,140
588,689
779,046
1,134,333
2,551,622

The total exercise price for all the above grants is £nil.

For options outstanding as at 31 December 2020, the exercise price was £nil and the weighted average remaining contractual life was
5.16 years (2019: 5.07 years).

The Group also operates a cash-settled share-based payment scheme for which there was an expense in the year of £2.4 million
(2019: £0.1 million) and for which there was a liability at the year end of £2.9 million (2019: £0.7 million).

The weighted average share price at the date of exercise was £2.83 (2019: £3.61).

The weighted average fair value of the options at the measurement date granted during the year was £1.94 (2019: £1.81). The valuation was
based on the following inputs and assumptions, using a Monte Carlo simulation model:

Weighted average share price (£)
Option price (£)
Value of optionality
Vesting assumption

2020
2.59
–
nil
75%

2019
3.77
–
nil
48%

The vesting assumption is the estimate at the measurement date of the percentage of the options that will ultimately vest and is based on
market conditions and management’s assessment of the likelihood of achievement of the performance criteria.

164

Synthomer plc Annual Report 2020Group financial statementsThe Synthomer Employee Benefit Trust
The Company established a trust, formerly the Yule Catto Employee Benefit Trust, on 17 July 1996 to distribute shares to employees enabling
the obligations under the Yule Catto Longer-Term Performance Share Plan and the Yule Catto Longer-Term Deferred Bonus Plan to be met.
The Trust is managed by the RBC Trustees (Guernsey) Limited, an independent company located in Guernsey.

At 31 December 2020, the Trust held 8,939 (2019: 1,880) ordinary shares in the Company with a market value of £0.0 million (2019: £0.0 million).

The dividends on these shares have been waived. All of the shares are under option. Costs are amortised over the life of the plans.

33 Share price information
The middle market value of the listed ordinary shares at 31 December 2020 was 449.6 pence (31 December 2019: 353.8 pence). During the
year, the market price ranged between 193.0 pence and 453.2 pence. The latest ordinary share price is available on the Group’s website,
www.synthomer.com

34 Audit exemptions
The following subsidiaries have taken advantage of the exemption from an audit for the year ended 31 December 2020 available under S479a
of the Companies Act 2006, as the Company has given a statutory guarantee of all of the outstanding liabilities of these subsidiaries as at
31 December 2020.

Company
Dimex Limited
Ecatto Limited
Harlow Chemical Company Limited
OMNOVA Performance Chemicals Limited
OMNOVA UK Holding Limited
PolymerLatex Limited
Revertex Limited
S.A. (300) Limited
Star Pharma Limited
Super Sky Limited
Synthomer Overseas Limited
Temple Fields 510
Temple Fields 514 Limited
Temple Fields 515 Limited
Temple Fields 522 Limited
Temple Fields 523 Limited
Temple Fields 530 Limited

Company
registration
01763129
00978441
00778831
03734749
07682224
03439041
00873653
00236227
03192713
02021871
06349474
01415496
04541637
00692510
05516912
05516913
00831113

165

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Company balance sheet
as at 31 December 2020

Non-current assets
Investment in subsidiaries and joint ventures
Property, plant and equipment
Total non-current assets
Current assets
Other receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets

Current liabilities
Borrowings
Other payables
Derivative financial instruments
Lease liabilities
Total current liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Total non-current liabilities
Net assets

Equity
Share capital
Share premium
Revaluation reserve
Capital redemption reserve
Retained earnings
Total equity

Note

3
4

8
6
9

10
10

2020
£m

370.8
5.6
376.4

1,445.6
42.6
1.4
1,489.6

(44.0)
(164.8)
(18.8)
(0.7)
(228.3)
1,261.3
1,637.7

(643.9)
(2.3)
(646.2)
991.5

42.5
421.1
0.8
0.9
526.2
991.5

2019
£m

264.6
5.6
270.2

877.0
21.8
4.9
903.7

(11.5)
(251.9)
(14.3)
(0.4)
(278.1)
625.6
895.8

(82.9)
(3.0)
(85.9)
809.9

42.5
421.1
0.8
0.9
344.6
809.9

As disclosed in note 2, the Company’s profit for the year was £193.5 million (2019: £25.2 million).

The notes on pages 168 to 171 are an integral part of these financial statements.

The financial statements of Synthomer plc (registered number 98381) on pages 166 to 171 were approved by the Board of Directors and
authorised for issue on 4 March 2021. They are signed on its behalf by:

C G MacLean
Director

S G Bennett
Director

166

Synthomer plc Annual Report 2020Company financial statements

Company statement of changes in equity
for the year ended 31 December 2020

At 1 January 2020
Profit for the year
Total comprehensive income for the year
Dividends
Share-based payments
Fair value loss on hedged interest derivatives
At 31 December 2020

At 1 January 2019
Profit for the year
Total comprehensive income for the year
Issue of shares
Dividends
Share-based payments
Fair value loss on hedged interest derivatives
At 31 December 2019

Share
capital
£m
42.5
–
–
–
–
–
42.5

Share
capital
£m
34.0
–
–
8.5
–
–
–
42.5

Share
premium
£m
421.1
–
–
–
–
–
421.1

Revaluation
reserve
£m
0.8
–
–
–
–
–
0.8

Share
premium
£m
230.5
–
–
190.6
–
–
–
421.1

Revaluation
reserve
£m
0.8
–
–
–
–
–
–
0.8

Capital
redemption
reserve
£m
0.9
–
–
–
–
–
0.9

Capital
redemption
reserve
£m
0.9
–
–
–
–
–
–
0.9

Retained
earnings
£m
344.6
193.5
193.5
(12.8)
1.8
(0.9)
526.2

Retained
earnings
£m
377.8
25.2
25.2
–
(47.9)
(1.9)
(8.6)
344.6

Total
equity
£m
809.9
193.5
193.5
(12.8)
1.8
(0.9)
991.5

Total
equity
£m
644.0
25.2
25.2
199.1
(47.9)
(1.9)
(8.6)
809.9

167

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Notes to the Company financial statements
31 December 2020

1 Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of
a qualifying entity under FRS 100 ‘Application of Financial Reporting Requirements’ issued by the FRC. Accordingly, these financial statements
were prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of a cash flow statement, standards not yet effective and
certain related party transactions.

Where required, equivalent disclosures are given in the consolidated financial statements.

The financial statements have been prepared on the historic cost basis except for the remeasurement of certain financial instruments that are
measured at fair values at the end of each reporting period.

The basis of accounting and the principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial
statements except as noted below.

Investments in subsidiaries and joint ventures are stated at cost less, where appropriate, provisions for impairment. The carrying amounts of the
Company’s investments are reviewed at each reporting date to determine whether there is an indication of impairment. If such an indication
exists, then the asset’s recoverable amount is estimated. Losses are recognised in the income statement and reflected in an allowance against
the carrying value. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed
through the income statement.

Intercompany balances are shown gross unless a right of set-off exists. Balances are valued at fair value at inception and are repayable on
demand. All intercompany loans are repayable on demand and the Company has the ability to refinance any of its subsidiaries using equity
allowing the subsidiary to repay any receivables owed to Synthomer plc.

Dividend distributions to the Company’s shareholders are recognised as a liability in the Company’s financial statements in the period in which
the dividends are approved by the Company’s shareholders.

There are no significant accounting judgements and estimates applied in preparing the Company’s account except for the impairment testing of
amounts owed by subsidiary undertakings. When measuring the potential impairment of receivables from subsidiaries, forward-looking
information based on assumptions for the future movement of different economic drivers are considered.

2 Profit for the year
As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account or statement of comprehensive income is
presented for Synthomer plc. The Company reported a profit of £193.5 million for the year ended 31 December 2020 (2019: profit of
£25.2 million).

Auditor remuneration for audit and other services is disclosed in note 7 to the consolidated financial statements.

The Company had no employees during the current or prior year.

3 Investment in subsidiaries and joint ventures

Cost
At 1 January 2020
Additions
At 31 December 2020

Provisions
At 1 January and 31 December 2020

Net book value
At 31 December 2020

Subsidiaries
£m

Joint
ventures
£m

264.3
106.2
370.5

0.5
–
0.5

Total
£m

264.8
106.2
371.0

–

0.2

370.5

0.3

370.8

Details of the Group’s subsidiaries and joint ventures are included in note 11 on pages 170 to 171.

As part of the financing of the acquisition of OMNOVA Solutions Inc, the Company increased its investment in Temple Fields 514 Limited by
£106.2 million.

The Directors consider the value of investments to be supported by underlying assets.

168

Synthomer plc Annual Report 2020Company financial statements4 Property, plant and equipment

Cost
At 1 January
Additions
Recognised on adoption of IFRS 16
At 31 December

Accumulated depreciation
At 1 January
Charge for the year
At 31 December

Net book value
At 31 December

2020

Right of use
buildings
£m

Freehold
£m

Plant and
equipment
£m

Total
£m

Right of use
buildings
£m

4.1
–
–
4.1

0.6
0.6
1.2

3.0
–
–
3.0

0.9
–
0.9

–
0.6
–
0.6

–
–
–

7.1
0.6
–
7.7

1.5
0.6
2.1

–
3.2
0.9
4.1

–
0.6
0.6

2019

Freehold
£m

3.0
–
–
3.0

0.7
0.2
0.9

Total
£m

3.0
3.2
0.9
7.1

0.7
0.8
1.5

2.9

2.1

0.6

5.6

3.5

2.1

5.6

Freehold land amounting to £1.8 million (2019: £1.8 million) has not been depreciated.

5 Other receivables

Amounts owed by Group undertakings
Other receivables
Prepayments and accrued income

2020
£m
1,443.4
1.1
1.1
1,445.6

2019
£m
875.6
0.3
1.1
877.0

Amounts owed by Group undertakings are valued at fair value at inception and are repayable on demand.

Of the Company’s amounts owed by subsidiaries, £149.0 million is impaired (2019: £149.0 million). Future expected credit losses on amounts
receivable from subsidiaries are immaterial.

6 Other payables

Amounts owed to Group undertakings
Other creditors
Accruals and deferred income

2020
£m
148.2
4.2
12.4
164.8

2019
£m
244.5
4.1
3.3
251.9

Amounts owed to Group undertakings are valued at fair value at inception and are repayable on demand.

7 Guarantees
The Company has provided financial guarantees amounting to £31.9 million (2019: £19.1 million) in respect of bank and other facilities of
subsidiaries and joint ventures.

8 Borrowings

Current borrowings
Overdrafts
Current borrowings

Non-current borrowings
Bank loans
€520m 3.875% senior unsecured loan notes due 2025

Details of borrowings are provided in note 21 to the consolidated financial statements.

2020
£m

34.4
9.6
44.0

186.2
457.7
643.9

2019
£m

11.5
–
11.5

82.9
–
82.9

169

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Notes to the Company financial statements continued
31 December 2020

9 Financial instruments
The fair value of the financial instruments disclosed in the Company’s statement of financial position are as follows:

Other receivables
Cash and cash equivalents
Derivatives – no hedge accounting
Total assets

Borrowings
Trade and other payables
Derivatives – no hedge accounting
Total liabilities

Financial instruments

Carrying
amount
within scope
of IFRS 7
£m
1,445.6
42.6
1.4
1,489.6

Valuation
category in
accordance
with IFRS 91
AC
AC
FVTPL

(687.9)
(164.0)
(18.8)
(870.7)

AC
AC
FVTPL

Carrying
amount
£m
1,445.6
42.6
1.4
1,489.6

(687.9)
(164.8)
(18.8)
(871.5)

Fair value
hierarchy
level
Level 2
Level 2
Level 2

Level 2
Level 2
Level 2

Fair value
£m
1,445.6
42.6
1.4
1,489.6

(699.1)
(164.0)
(18.8)
(881.9)

1. AC: amortised cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss.

Further disclosures on financial instruments are included in note 22 of the consolidated financial statements.

10 Share capital and share premium
Details of the Company’s share capital and share premium are shown in note 27 of the consolidated financial statements.

11 Subsidiaries and joint ventures

Country of incorporation and registered address

United Kingdom

Principal
activity

Ownership
%

Country of incorporation and registered address

Principal
activity

Ownership
%

Australia

Central Road, Harlow, Essex, CM20 2BH

58 Gipps Street, Collingwood, Victoria, 3066

Dimex Limited

Ecatto Limited

Harlow Chemical Company Limited

OMNOVA Performance Chemicals Limited

OMNOVA UK Holding Limited

PolymerLatex Limited

Revertex Limited

S.A. (300) Limited

Star Pharma Limited

Super Sky Limited

Synthomer (UK) Limited

Synthomer Holdings Limited

Synthomer Overseas Limited

Temple Fields 510

Temple Fields 512 Limited

Temple Fields 514 Limited

Temple Fields 515 Limited

Temple Fields 522 Limited

Temple Fields 523 Limited

Temple Fields 530 Limited

Temple Fields 534 Limited

William Blythe Limited

Yule Catto Overseas

Holding Company

Dormant

Holding Company

Dormant

Holding Company

Dormant

Holding Company

Trading

Holding Company

Dormant

Holding Company

Dormant

Trading

Dormant

100

1003

1002

100

1003

100

501,3

100

1003

100

1003

100

1003

100

1003

45 Pall Mall, London, SW1Y 5JG

Synthomer Trading Limited

44 Esplanade, St Helier, Jersey, JE4 9WG

Trading

100

Synthomer Jersey Limited

Dormant

1003

Synthomer Australia Pty Limited

Trading

100

Austria

Industriepark, Pischelsdorf, 3435

Synthomer Austria GmbH

Trading

100

Brazil

Av. Casa Verde, 3100, Sala 1, Casa Verde, São Paulo, 02520-300

Synthomer Participacoes Ltda

Trading

100

China

Building 53-55, 1000 Zhangheng Road, Zhangjiang Hi-Tech Park, Pudong,
Shanghai, 201203

Shanghai Synthomer Chemicals Co Ltd

Trading

100

8 Hua Jing Road, China (Shanghai) Pilot Free Trade Zone, Shanghai,
200131

OMNOVA Performance Chemicals Trading
(Shanghai) Co Ltd

Trading

100

210 Zhou Gong Road, Shanghai Chemical Industry Park, Shanghai 201507

OMNOVA Shanghai Co Ltd

Trading

100

308 Jiangbin Road, Xiaogang United Development Zone, Ningbo
Economic & Technical Development Zone, Ningbo, 315803

OMNOVA Ningbo Co Ltd

Trading

100

55 Xi Li Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, 200131

Eliokem Trading (Shanghai) Co Ltd

Trading

100

Czech Republic

Tovární 2093, Sokolov, 356 01

Synthomer AS

V Celnici 1031/4, Prague, 110 00

Trading

100

Synthomer Holdings (CZE) SRO

Non-Trading

100

170

Synthomer plc Annual Report 2020Company financial statementsCountry of incorporation and registered address

Egypt

Industriel Zone 1-B, 10th of Ramadam City, Sharkiya

Principal
activity

Ownership
%

Country of incorporation and registered address

Principal
activity

Ownership
%

Speltdijk 15704Rj Helmond

Xyntra Investments BV

Non-Trading

331

Synthomer SAE

Finland

PO Box 175, Oulu, FI 90101

Synthomer Finland Oy

France

Trading

Portugal

Rua Francisco Lyon de Castro, 28, 2725-397 Mem Martins

OMNOVA Solutions Portugal SA

Trading

100

Lyon28 - Imobiliario SA

Saudi Arabia

Trading

Non-Trading

100

14 avenue des Tropiques, Z.A. de Courtaboeuf 2, Villejust, 91955

27 Street, 2nd Industrial City, Dammam, 31472

OMNOVA Solutions France Holding SAS

Holding Company

OMNOVA Solutions International SAS

Holding Company

OMNOVA Solutions SAS

Trading

100

704 rue Pierre et Marie Curie, Ribécourt-Dreslincourt, 60170

Synthomer France SAS

Trading

100

Synthomer Middle East Company Ltd

Trading

491

Singapore

Ocean Financial Centre, 10 Collyer Quay, 049315

OMNOVA Performance Chemicals Singapore
Pte Ltd

Trading

100

6 Place de la Madelaine, Paris, 75008

Spain

Yule Catto France SA

Yule Catto International SA

Germany

Werrastrasse 10, Marl, 45768

Synthomer Deutschland GmbH

Temple Fields GmbH

Non-Trading

Trading

Non-Trading

Yule Catto Holdings GmbH

Holding Company

India

100

Camino de Sangroniz 8, Sondika, 48150

Synthomer Asua SL

Trading

100

Paseo de la Castellana 177, Madrid, 28046

OMNOVA Solutions (Espana) SL

Non-Trading

100

Rambla de Catalunya 53, Barcelona, 08007

Yule Catto Spain SL

Sweden

Tostarpsvagen 11, Kavlinge, 244 32

Non-Trading

100

1001, Meadows, Sahar Plaza, Andheri-Kurla Road, Andheri East, Mumbai
400059

Synthomer Speciality Additives AB

Trading

100

Thailand

OMNOVA India Trading LLP

Trading

100

111/7 Moo 2, Nikompattana District, Rayong, 21180

Italy

Via delle Industrie 9, Filago, BG, 24040

Synthomer S.r.l.

Via Morozzo 27, Sant’Albano Stura, CN, 12040

Synthomer Specialty Resins S.r.l.

Piazza Cavour 3, Milano, MI, 20121

UQUIFA Italia S.r.l.

Malaysia

OMNOVA Engineered Surfaces (Thailand) Co
Ltd

Non-Trading

100

Trading

100

219/16 Moo 6, Bowin, Si Racha, Chonburi, 20230

Synthomer (Thailand) Limited

Trading

100

Trading

100

UAE

Building 2101, Office S10122A2, Jabel Ali Free Zone, Dubai

Non-Trading

100

Synthomer Functional Solutions FZCO

Trading

491

East Wing 2, Office 201, Po Box 54645, Dubai Airport Free Zone, Dubai

Unit 16-2, Wisma Uoa Damansara II, 6 Changkat Semantan, Damansara
Heights, Kuala Lumpur, 50490

Synthomer FZCO

USA

Trading

491

Desa Baiduri Sdn Bhd

Kind Action (M) Sdn Bhd

PolymerLatex Sdn Bhd

Quality Polymer Sdn Bhd

Revertex (Malaysia) Sdn Bhd

Rexplas Sdn Bhd

Synthomer Sdn Bhd

Terra Simfoni Sdn Bhd

Mauritius

Property Letting

Trading

Dormant

Trading

Holding Company

1201 Peachtree Street NE, Atlanta, GA, 30361

Synthomer LLC

100

Yule Catto Inc

Trading

Non-Trading

100

160 Greentree Drive, Suite 101, Dover, DE, 19904

Synthomer USA LLC

Trading

100

25435 Harvard Road, Beachwood, Ohio 44122-6201

Decorative Products Thailand Inc

Holding Company

100

OMNOVA Overseas Inc

OMNOVA Solutions Inc

Trading

Holding Company

100

c/o Citco (Mauritius) Limited, Tower A, 1 Cybercity, Ebene

OMNOVA Wallcovering (USA) Inc

OMNOVA Asia Pacific Corp

Holding Company

100

Vietnam

Standard Charted Tower, 19 Cybercity, Ebene

8, 6th Street, Song Than Industrial Park, Di An

OMNOVA Holding Limited

Holding Company

100

Synthomer Vietnam Co Ltd

Trading

Netherlands

Ijsselstraat 41, Oss, 5347 KG

Synthomer BV

Yule Catto BV

Yule Catto Nederland BV

Trading

Non-Trading

100

Notes
1. Joint ventures.
2. Harlow Chemical Company Limited is incorporated in UK but is resident in Netherlands.
3. Shares directly held by Synthomer plc.

171

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Glossary of terms

Amortised Cost
American Chemical Council
Annual General Meeting
Accident and Incident Management System
Acrylate Monomers
Alternative Performance Measures
Black, Asian and Minority Ethnic
Construction and Coatings
Carpet and Foam
Net assets excluding third party net debt

Coatings, Adhesives and Surface Treatments
Carbon Disclosure Project
Cash Generating Unit
Methane
Combined Heat and Power
Chemical Industries Association
Carbon Dioxide
Carbon Dioxide equivalent
Reflects current year results for existing business
translated at the prior year’s average exchange
rates, and includes the impact of acquisitions
Customer Relationship Management system
Corporate Social Responsibility
Department for Environment, Food and Rural Affairs
EBITDA is calculated as operating profit before
depreciation, amortisation and Special Items
Extraordinary General Meeting
European Polymer Dispersion and Latex Association
Earnings Per Share
Enterprise Resource Planning
Environmental, Social and Governance
Europe, Middle East, Africa and Americas
Front End Engineering Design
Functional Polymers
Financial Reporting Council
The movement in net debt before financing
activities, foreign exchange and the cash impact of
Special Items, asset disposals and business
combinations
Financial Reporting Standard
Functional Solutions
Fair Value Through Other Comprehensive Income
Fair Value Through Profit or Loss
Gross Domestic Product
General Data Protection Regulation
Greenhouse Gases
Gigajoule
Global Reporting Initiative
Global Technology and Innovation
Global Warming Potential
Health & Protection
Human Resources
High Solids Styrene Butadiene Rubber
International Accounting Standard
Inter-Bank Offered Rates

ICCA
IFRS
IS
ISA
KPIs
ktes
LIBOR
LMS
LTA
LTIP
M&A
ManEx
MCO
MOC
MYR
N2O
NBR
NED
Net debt

NOx
OEM
Operating
profit
PBT
PE
PHA
PPE
PSA
PSE
PSP
PTW
PVC
R&D
RC
ROIC

SBR
SD
SDG
SEC
SHE
SHEMS

SOFR
SONIA
STEM
TCFD
The Code
TSR
UK GAAP
Underlying
performance

VOCs

International Council of Chemical Associations
International Financial Reporting Standards
Industrial Specialities
International Standards of Auditing
Key Performance Indicators
Kilotonne or 1,000 tonnes (metric)
London Inter-Bank Offer Rates
Learning Management System
Lost Time Accident
Long-Term Incentive Plan
Mergers and Acquisitions
Manufacturing Excellence
Movement Control Order
Management of Change
Malaysian Ringgits
Nitrous Oxide
Nitrile Butadiene Rubber
Non-Executive Director
Cash and cash equivalents together with short- and
long-term borrowings
Nitrogen Oxides
Original Equipment Manufacturer
Operating profit represents profit from continuing
activities before finance costs and taxation
Profit Before Tax
Performance Elastomers
Process Hazard Assessment
Property, Plant and Equipment
Pressure Sensitive Adhesive
Process Safety Events
Performance Share Plan
Permit to Work
Polyvinyl Chloride
Research and Development
Responsible Care
Return on Invested Capital is calculated as Group
Underlying operating profit as a percentage of
Group capital employed
Styrene Butadiene Rubber
Sustainable Development
Sustainable Development Goals
Specific Energy Consumption
Safety, Health and Environment
Safety, Health and Environment Management
System
Secured Overnight Financing Rate
Sterling Overnight Index Average
Science, Technology, Engineering and Mathematics
Taskforce on Climate-related Financial Disclosures
The UK Corporate Governance Code
Total Shareholder Return
UK Generally Accepted Accounting Practice
Underlying performance represents the statutory
performance of the Group under IFRS, excluding
Special Items
Volatile Organic Compounds

AC
ACC
AGM
AIMS
AM
APMs
BAME
C&C
C&F
Capital
employed
CAST
CDP
CGU
CH4
CHP
CIA
CO2
CO2e
Constant
currency

CRM
CSR
DEFRA
EBITDA

EGM
EPDLA
EPS
ERP
ESG
EUUS
FEED
FP
FRC
Free Cash
Flow

FRS
FS
FVTOCI
FVTPL
GDP
GDPR
GHGs
GJ
GRI
GTI
GWP
H&P
HR
HSSBR
IAS
IBORS

172

Synthomer plc Annual Report 2020Other informationFive-year financial summary

Revenue
Underlying performance
EBITDA
Operating profit
Finance costs
Profit before taxation
Basic earnings per share
Dividends per share
Dividend cover

IFRS
Operating profit
Finance costs
Profit before taxation
Basic earnings per share
Dividends per share
Dividend cover

Net debt

Capital expenditure

(a)
(b)
(c)

(f)
(f)

(c)

(f)
(f)

(d)

(e)

2020
£m
1,644.2

2019
£m
1,459.1

2018
£m
1,618.9

2017
£m
1,480.2

2016
£m
1,045.7

259.4
189.6
(29.6)
160.0
28.9p
11.6p
2.5

58.4
(38.1)
20.3
0.7p
11.6p
0.1

(462.2)

53.8

177.9
125.8
(9.6)
116.2
25.3p
4.0p (g)
6.3

110.6
(10.1)
100.5
21.5p
4.0p (g)
5.4

20.7

69.1

181.0
142.1
(7.0)
135.1
30.7p
12.2p
2.5

128.7
(8.4)
120.3
27.4p
12.2p
2.2

(214.0)

75.7

176.2
139.0
(9.0)
130.0
28.7p
11.4p
2.5

95.4
(9.0)
86.4
20.3p
11.4p
1.8

(180.5)

60.3

160.1
130.2
(8.0)
122.2
26.4p
10.5p
2.5

144.7
(8.0)
136.7
30.3p
10.5p
2.9

(150.3)

45.6

Notes:
(a) As presented in the consolidated income statement on page 129.
(b) As defined in the accounting policies note and reconciled in note 5.
(c) As defined in the accounting policies note on page 134.
(d) As reconciled in note 21.
(e) As presented on the consolidated cash flow statement.
(f) Dividends and earnings per share figures for 2018 and prior have been restated to reflect the bonus factor of 1.0713 arising from the rights issue which completed on 29 July 2019.
(g) The proposed final 2019 dividend was cancelled to preserve cash, liquidity and balance sheet strength at the onset of COVID-19 in March 2020.

173

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Advisers

Registered office
Synthomer plc
Temple Fields
Harlow
Essex
CM20 2BH
Registered number 98381

Company Secretary
Richard Atkinson

Bankers
Barclays Bank plc
Citibank
HSBC Bank plc
Santander
Goldman Sachs
SEB

Joint stockbrokers
Barclays Bank plc and Numis Securities Ltd

Registrars
Computershare Investor Services plc
Lochside House
7 Lochside Avenue
Edinburgh Park
Edinburgh
EH12 9DJ

Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London

Solicitors
Herbert Smith Freehills LLP

174

Synthomer plc Annual Report 2020Other informationNotes

175

Strategic ReportGovernanceGroup financial statementsCompany financial statementsOther informationSynthomer plc Annual Report 2020Notes continued

176

Synthomer plc Annual Report 2020Other informationConsultancy, design and production
www.luminous.co.uk

Design and production

www.luminous.co.uk

Synthomer plc
45 Pall Mall
London
SW1Y 5JG
United Kingdom