WE ARE
EFFICIENT
SUSTAINABLE
INNOVATIVE
INTERNATIONAL
E XPERT
Annual Report and Financial Statements 2020
© 2020 Friend Studio Ltd
File name: Cover_v24
Modification Date: 15 March 2021 6:36 pm
VESUVIUS: black 85%
PLC: black 60%
VESUVIUS: white
PLC: black 20%
2019: 6.2p per share
Forward-looking statements
Financial performance
Revenue
Headline earnings
per share3
£1,458.3m 23.2p
2019: £1,710.4m
–14.7% on a reported basis
–12.7% on an underlying
basis1
2019: 45.1p
48.6% decrease
Trading profit2
Recommended
final dividend
£101.4m 14.3p
2019: £181.4m
–44.1% on a reported basis
–43.3% on an underlying
basis1
per share
2019: no final dividend paid
Return on sales2
Group full-year dividend
7.0%
2019: 10.6%
–360 basis points
–370 basis points on
an underlying basis1
17.4p
per share
Profit before tax
Year-end net debt2
£64.5m £175.1m
2019: £118.6m
45.6% decrease
1.2x net debt to
EBITDA ratio
2019: £245.8m – 1.1x
S
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Contents
Our business
1 Our purpose
4
Vesuvius at a glance
6 Divisional overviews
10 Chairman’s statement
12 Chief Executive’s strategic review
14 Our strategy
16 Our external environment
18 Our markets
20 Business model
22 Section 172(1) Statement
– Our stakeholders
30 Risk, viability and going concern
Our performance
40 Key Performance Indicators
42 Financial review
48 Operating reviews
48 Steel Division
48 Steel Flow Control
51 Steel Advanced Refractories
52 Steel Sensors & Probes
54 Foundry Division
Revenue £m
2020
2019
2018
1,458.3
Trading profit2 £m
2020
101.4
1,710.4
1,798.0
2019
2018
Operating profit £m
2020
74.3
Headline earnings2,3 £m
2020
62.7
2019
2018
127.5
164.5
2019
2018
Statutory EPS p
2020
15.3
2019
2018
Free cash flow2 £m
2020
29.8
2019
2018
51.3
181.4
197.2
121.4
133.7
113.5
121.5
102.6
1.
2.
Underlying basis is at constant currency and excludes separately reported items and the
impact of acquisitions and disposals.
For definitions of alternative performance measures, refer to Note 4 of the Group Financial
Statements.
3.
Headline results refer to continuing operations and exclude separately reported items.
This Annual Report contains certain forward-looking statements with respect to the
operations, strategy, performance, financial condition and growth opportunities of the
Vesuvius Group. By their nature, these statements involve uncertainty and are based on
assumptions and involve risks, uncertainties and other factors that could cause actual
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 Annual Report and, other than in accordance with its legal and
regulatory obligations, the Company undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report should be construed as a profit forecast.
Sustainability
58 Non-financial information statement
58
59
Introduction
Our Sustainability strategy
and objectives
60 Our sustainability targets
61
United Nations Global Compact and
Sustainable Development Goals
Our Principles, Approach and
Governance
62
66 Our customers
68 Our planet
74 Our people
84 Our communities
Governance
92 Board of Directors
94 Group Executive Committee
96 Corporate Governance Statement
96 Chairman’s governance letter
97 Board Report
106 Audit Committee
115 Nomination Committee
120 Directors’ Remuneration Report
120 Remuneration overview
123 2020 Remuneration Policy
131
Annual Report on Directors’
Remuneration
144 Directors’ Report
149 Statement of Directors’ Responsibilities
150 Independent Auditors’ Report
Financial Statements
159 Group Income Statement
160
Group Statement of Comprehensive
Income
161 Group Statement of Cash Flows
162 Group Balance Sheet
163 Group Statement of Changes in Equity
164 Notes to the Group Financial Statements
214 Company Balance Sheet
215
Company Statement of Changes
in Equity
Notes to the Company Financial
Statements
216
222 Five-Year Summary: Divisional Results
223 Shareholder Information
225 Glossary
Imagery
Some of the photographs in this Report were
taken before the COVID-19 pandemic began;
other images were taken during the year in
countries where COVID-19 control measures
had been lifted.
1
OUR PURP OSE
VESUVIUS
A global leader in molten metal
flow engineering and technology, serving
process industries operating in challenging
high-temperature conditions.
We develop innovative solutions that enable our
customers to improve their manufacturing costs,
quality and safety performance, and help them
to become more efficient in their processes.
We aim to deliver sustainable, profitable growth to
provide our shareholders with a superior return on their
investment, whilst providing each of our employees
with a safe workplace where he or she is recognised,
developed and properly rewarded.
Find out more about Vesuvius. Visit report2020.vesuvius.com
Vesuvius at a glance
Business model
Where we operate
What we do
See p4
See p20
Our strategy
Our aims
and execution
priorities
Our external
environment
How we are helping to
tackle climate change
See p14
See p16
Our business
2 Vesuvius plc
Annual Report and Financial Statements 2020
3
WE ARE
INNOVATIVE
Our business
4 Vesuvius at a glance
6 Divisional overviews
10 Chairman’s statement
12 Chief Executive’s strategic review
14 Our strategy
16 Our external environment
18 Our markets
20 Business model
22
Section 172(1) Statement
– Our stakeholders
30 Risk, viability and going concern
Find out more at
report2020.vesuvius.com
We are talented people and
specialists working on new technologies
to keep Vesuvius in pole position.
Jurgen Radstake
R&D Manager, Mould & Core, Foundry Technologies
Enschede, Netherlands
Our business 4 Vesuvius plc
Annual Report and Financial Statements 2020
Vesuvius at a glance
5
Overview
Our global presence
Americas
EMEA
Asia-Pacific
We are a global group with a
business model based on offering
customised products, solutions and
services from production facilities
in close proximity to our customers.
Our two divisions – Steel and
Foundry, mainly serve the global
steel and foundry industries.
41
Countries
6
Continents
53
Production sites
10,350
Employees
76
Sales offices
6
R&D centres of excellence
£437.8m
Revenue
(2019: £530.2m)
80% Steel
20% Foundry
1
R&D centre
of excellence
19
Sales offices
16
Production sites
2,870
Employees
£578.5m
Revenue
(2019: £699.8m)
69% Steel
31% Foundry
£442.0m
Revenue
(2019: £480.4m)
66% Steel
34% Foundry
19
Production sites
4,030
Employees
3
R&D centres
of excellence
29
Sales offices
18
Production sites
3,450
Employees
2
R&D centres
of excellence
28
Sales offices
See our Business model on p20
See more about our Steel and Foundry Divisions on p48-55
The map shows our
production, R&D
and commercial
sites worldwide
Steel Sensors & Probes
Operating review
See p52
Steel Flow Control
Operating review
See p48
Foundry
Operating review
See p54
Steel Advanced Refractories
Operating review
See p51
Our business 6 Vesuvius plc
Annual Report and Financial Statements 2020
Divisional overviews
Steel Division
Business units
Business units
Steel Flow Control
Steel Sensors & Probes
Revenue
Return on sales
£1,045.4m
2019: £1,195.3m
7.3%
2019: 10.0%
Trading profit
£76.4m
2019: £120.1m
Overview
Our customers are steel
producers and other high-
temperature industries.
Vesuvius is a world leader
in the supply of refractory
products, systems and
solutions. These help
our customers increase
their efficiency and
productivity, enhance
quality, improve safety and
reduce their costs and their
environmental impact.
See Steel Division Operating review
on p48-52
Blast
furnace
1
Convertor
and refining
ladles
What we do
The Vesuvius Flow Control business unit
supplies the global steel industry with
consumable ceramic products, systems,
robotics, digital services and technical
services. These products are used to
contain, control and monitor the flow
of molten steel in the continuous
casting process.
How the process works
The continuous casting process enables
steel manufactured from a blast furnace
or an electric arc furnace to be cast
without interruption, whilst protecting
it from the atmosphere. Avoiding
atmospheric contact is crucial as it
significantly reduces contamination and
oxidation of the steel being produced.
Our products
The consumable ceramic products that
Vesuvius supplies have a short service
life (often a matter of a few hours) due
to the significant wear caused by the
extremely demanding environment in
which they are used. These products
must withstand extreme temperature
changes, whilst resisting liquid steel and
slag corrosion. In addition, the ceramic
parts in contact with the liquid steel
must not in any way contaminate it.
The quality, reliability and consistency
of these products and the associated
digital services we provide are therefore
critical to the quality of the finished
metal being produced and the
productivity, profitability and safety
of our customers’ processes.
See Steel Flow Control
Operating review on p48
Tap hole
clay
Iron
trough
Continuous
caster
2
3
Steel slab,
billet or
bloom
4
The Sensors and Probes business unit
offers digital measurement solutions to
our customers to enable them to make
their underlying processes more
efficient and reliable. The business unit
focuses on providing a range of sensors
and probes that enhance the control
and monitoring of our customers’
production processes, complementing
Vesuvius’ strong presence and expertise
in molten metal engineering. These
products include temperature sensors,
oxygen, hydrogen and sublance probes,
iron oxide and metal sampling for the
steel, aluminium and foundry industries.
By using these technologies, customers
can focus on critical parameters within
their processes, enabling them to refine
their production methods to improve
quality, lower production costs and
maximise efficiency.
See Steel Sensors & Probes
Operating review on p52
1
Stack linings
repair
Torpedo
ladle
E
C
N A
R
U
B L A S T F
N
O
C
V E R T O R AND R
E
Convertor
linings and
repair
Linings
& bricks
Refining
ladles
F
I
N
I
N
G
L
A
D
L
E
S
2
S T E R
A
Ladle
S C
U
O
U
Purging
plug
Tundish
IN
T
N
O
C
Stopper
and rigging
Temperature
measurement
Flux
Robotic
arm
Mould
Linings,
bottoms
3
Slide-gate,
tube changer
Robotic
arm
Flux
Ladle
shroud
Linings
Tundish
slide-gate
Sub-entry
nozzle
Tundish tube
changer
Impact
pad
Mould level
control
4
7
Steel Advanced Refractories
What we do
Vesuvius’ Advanced Refractories
business unit supplies complete
value-added solutions to its customers,
including specialist refractory materials,
advanced installation technologies
(including robots), computational fluid
dynamics capabilities and lasers.
Our customers and the process
Our main customers are steel producers
and manufacturers of steel production
equipment, where our products
accompany the steel-making process
from its early steps all the way to the
end of production in the rolling mill.
The specialist refractory materials
are subject to extreme temperatures,
corrosion and abrasion, and are in
the form of powder mixes, which are
spray-applied or cast onto the vessel
to be lined (‘monolithics’) and refractory
shapes (e.g. bricks, pads, dams and
other larger precast shapes).
The service life of the products that
Advanced Refractories supplies into
the steel-making process can vary
(some a matter of hours and others for
a period of years) based upon the type
of refractory and the level of wear
caused by the demanding environment
in which they are used. An integral part
of our success depends upon our
best-in-class installation technologies
(including robots) and lasers to track
the performance of installed Vesuvius
refractories as well as the high level
of collaboration with our customers.
Broader offer
In addition, Vesuvius’ Advanced
Refractories business unit supplies other
high-temperature industries such as
primary and secondary aluminium,
copper, cement, petrochemicals and
energy from waste.
See Steel Advanced Refractories
Operating review on p51 and 52
Steel sla
b
, b
i
l
l
e
t
o
r
b
l
o
o
m
Our business
8 Vesuvius plc
Annual Report and Financial Statements 2020
Divisional overviews continued
Foundry Division
Business units
Business units
9
Revenue
Return on sales
£412.9m
2019: £515.1m
6.1%
2019: 11.9%
Trading profit
£25.0m
2019: £61.3m
Overview
We are a world leader in
the supply of consumable
products, technical advice
and application support to
the global foundry industry,
improving casting quality
and foundry efficiency.
Our primary customers are
ferrous and non-ferrous
foundries serving various
end-markets, from large
bespoke castings to high-
volume automotive
pieces. We operate
in the foundry sector
under the Foseco brand.
Foundry
What we do
The casting process is highly sequential
and is critically dependent on consistency
of product quality and productivity
optimisation. Working alongside
customers at their sites, our engineers
provide on-site technical expertise in
addition to advanced computational
fluid dynamics capabilities to develop
the best customised production solutions.
Our products
The conditioning of molten metal, the
nature of the mould used and, especially,
the design of the way in which metal flows
into the mould are key parameters in
a foundry, determining both the quality
of the finished castings and the labour,
energy and metal usage efficiency of the
foundry. Vesuvius’ products and associated
services to foundries improve all of these
parameters. Each of our products typically
represents a small element of the overall
cost of the foundry process but contributes
significantly to product quality and yield,
thus driving efficiency and reducing
environmental impact.
In Foundry, customers are evolving
towards more sophisticated and
increasingly complex castings with
increased requirements for cleaner
and lighter metal, resulting in a greater
need for Vesuvius’ products.
Our customers
We are also focused on expanding the
cross-selling opportunities between the
Advanced Refractories and Foundry
business units. Foundries utilise some
of the refractory products manufactured
by Advanced Refractories, which allows
us to offer a complete product offering
to our customers.
See Foundry Operating review
on p54 and 55
I O N
I O N
T
T
C
C
U
U
D
D
D P R O
D P R O
L
L
U
U
O
O
M
M
Pouring cup
Cope
Cores, coating
Downsprue
Feeder
Filter
Sand
binder
Runner
1
Drag
Mould
coating
Induction
furnace
Mould
production
and pouring
1
Final
casting
3
2
Treatment/
pouring ladle
C A S T ITEM (b
e
f
o
r
e
f
e
t
t
l
i
n
g
)
3
2
Linings
POU
RIN
G
I
N
T
O
M
O
U
L
D
Stopper
rod
Nozzle
Our business
10 Vesuvius plc
Annual Report and Financial Statements 2020
Chairman’s statement
Maintaining a strong position during
an unprecedented market downturn
John McDonough
CBE
Chairman
See our Financial review on p42-47
See more about our Governance in the
Governance section on p90-148
See more about our Sustainability Strategy
in our Sustainability section on p56-89
Revenue £m
£1,458.3m
Revenue £m
2020
2019
2018
1,458.3
1,710.4
1,798.0
2020 was an unprecedented year for the
Group and our stakeholders, as the world
dealt with a time of great personal and
economic hardship. Throughout this period,
and now in 2021 as the COVID-19 pandemic
continues, protecting the health and safety
of our staff and their families, along with our
customers, suppliers and other stakeholders
remains our top priority. I would like to take
this opportunity to reflect, and to thank all
of our dedicated staff across the business,
for their unwavering determination and
support during what has been an extremely
difficult time.
The pandemic has affected our business
in a wide variety of ways and impacted
our employees profoundly. It saddens me
to say that we lost a number of valued
colleagues in 2020, as well as people from
the extended Vesuvius family. My thoughts
and condolences go out to all of those
who have been touched by loss as a result
of the pandemic.
The pandemic has caused widespread
global disruption across all our markets.
Tight restrictions on the movement of
goods and people put pressure on demand
in our end markets, impacting our Foundry
and Steel divisions significantly. Despite
these pressures, we saw demand in our end
markets begin to improve, albeit slowly,
in both our Steel and Foundry divisions
towards the end of Q3 2020. Those trends
continued into Q4.
COVID-19 has been Vesuvius plc’s most
significant test to date and it is a source of
pride that the Group has shown itself well
able to withstand this existential challenge.
Our approach of delegation and regional
empowerment has proven its worth,
allowing us to respond quickly to the crisis
to preserve the fundamentals of the
Vesuvius business, as demonstrated by
our COVID-19-related cost savings and
cash generation this year. At a Group level,
we took early action to ensure we
maintained liquidity, accessing the Bank
of England’s Covid Corporate Financing
Facility (CCFF) scheme in April – repaying
this later in the year – and refinancing
expiring debt in the US private placement
(USPP) market. The Board and the Group
Executive Committee responded to the
crisis by sacrificing 20% of their salary
and fees for six months, and a further
170 managers also agreed a six-month
reduction in salary. We also accessed
government employment assistance
schemes, repaying the UK Government
furlough support received, early in 2021.
The pandemic is not yet behind us and
there will no doubt be more challenges as
we look ahead. Whilst this may mean a
slower start to 2021 versus previous years,
we entered the year with confidence in not
only Vesuvius’ strategy but also the
determination and capability of all our
people to deliver it.
Sustainability
Vesuvius has also been focusing on the
long-term prospects for the business.
In 2020, we enhanced our activities
in sustainability, launching a new
consolidated initiative, more explicitly to
focus and communicate the part Vesuvius
is playing in creating a better tomorrow
for our customers, our planet, our people,
our communities, and all our stakeholders.
We became signatories to the United
Nations (UN) Global Compact committing
to support its Principles on human rights,
labour, environment and anti-corruption,
and to engage in activities which advance
the development of the UN’s Sustainable
Development Goals. We see sustainability
as central to our identity, strategy and the
way we conduct business.
In terms of our environmental initiatives,
as well as setting several new internal
environmental targets, we have set
ourselves the goal of reaching a net zero
carbon footprint at the latest by 2050.
Internally, this will lead to an investment
11
in new equipment to reduce energy
consumption, the replacement of high-CO2
electricity with greener electricity, the
reduction of energy waste through the
recuperation of heat to power and lastly, the
generation of our own clean energy through
the installation of solar panels or rods.
We are a responsible business and want to
be a part of the solution to climate change.
We already take significant action in this
area, and this new initiative has been
established to focus us on doing more.
We want our people to be proud of the
work Vesuvius does, and extending our
global sustainability agenda is a way
of reinforcing this.
Stakeholders
We continue to promote the success of
Vesuvius for the benefit of all stakeholders.
In a year of particular challenges, our
Section 172(1) Statement on pages 22-29
details the variety of ways in which we have
considered the interests of our wider group
of stakeholders and interacted with them
during the year.
In previous years the Board, both
collectively and individually, visited Vesuvius
operations around the world, meeting
colleagues and deepening our knowledge
and understanding of the business. In 2020
the Board’s travel schedule was severely
restricted. We conducted video calls with
management in China and North Asia,
which we considered to be ‘remote’ site
visits. We also carried out in-person site
visits where Board members were
located in the relevant geography.
We are looking forward to recommencing
a comprehensive programme of site visits
to meet with management and employees
in person as soon as possible.
Following the roll-out of our CORE Values
in 2018, we again conducted an employee
engagement survey in 2020 through
our I-Engage programme. We had
a participation rate of 92% of staff
worldwide and almost universally
improved results in terms of engagement.
As in 2020, 2021 will see Board oversight
of the action plans established to respond
to the survey’s findings.
People
Our priority as a business has been the
health and safety of our people and other
stakeholders. At the start of the pandemic,
to protect our employees and prevent the
spread of infection, we adopted specific
site-by-site actions in accordance with
best practices and advice from the
governments and health authorities in the
countries in which we operate. In a year
of such great uncertainty, I have been
extremely impressed by all our
management and employees across
Vesuvius and their commitment to our
business and our customers. My thanks, and
those of the Board, are extended to them all.
Our Sustainability initiative will increase our
people focus, championing diversity and
investing in talent development and safety.
Corporate governance
The pandemic had a significant impact
on Board practices in 2020. As restrictions
began to impact travel, we swiftly switched
to a system of virtual Board meetings,
holding meetings more frequently to
support management in what has been
a constantly changing environment.
Although this format is not without its
challenges, we have reaped the benefits
in terms of shorter, more focused meetings,
and more flexibility in timetabling. In 2021
we expect this hybrid approach to meetings
to continue, with physical meetings held
once Government regulations allow and
we assess it to be safe to do so.
We were pleased to be able to meet
together in October 2020 for our annual
strategy review. Although travel restrictions
prevented the physical attendance of
three Directors, they participated virtually
from their locations around the world.
The remainder of the Board and senior
management attended in person, whilst
observing social distancing procedures.
This review emphasised the focus of the
Group on sustainability, a key theme
in the delivery of our strategy for 2021
and beyond.
During 2020, the Board has continued to
adopt the 2018 UK Corporate Governance
Code. The Board recognises that a sound
governance structure is vital to support the
Group’s long-term sustainable growth.
We were delighted to welcome Kath
Durrant as an Independent Non-executive
Director in December. Kath serves on the
Audit, Remuneration and Nomination
Committees and will succeed Jane Hinkley
as Remuneration Committee Chair at the
close of the 2021 AGM. Holly Koeppel and
Hock Goh will be standing down at the
close of the 2021 AGM, following 4 years
and 6 years of service as Non-executive
Directors, respectively. I would like to thank
Hock and Holly for their outstanding
contributions to the Vesuvius Board, and
I wish them good fortune in their future
endeavours. The Nomination Committee
will continue to address succession issues
in 2021 in line with director rotation
requirements, including the Senior
Independent Director commencing a
process for my succession as Chairman.
The Company is committed to ensuring
that the Board membership continues to
reflect the diversity, breadth of skills and
experience required to drive and support
the business strategy going forward.
Dividend
Our dividend policy aims to deliver
long-term dividend growth, provided this is
supported by cash flow and underlying
earnings, and is justified in the context of our
capital expenditure requirements and the
prevailing market outlook. We recognise
the importance of dividend payments to
our shareholders, but in 2020 had to balance
this with the liquidity and prospects of the
business. In April 2020, as the full effects of
the pandemic were beginning to be felt and
in light of uncertainty about the business
environment, the Board took the difficult
decision to withdraw its recommendation
to pay the final dividend of 14.3 pence per
share for 2019 which had been announced
with the publication of the full-year 2019
results. At the same time the Group
implemented a number of other cost
reduction and cash preservation measures.
As the year progressed, management’s swift
actions in the face of the pandemic coupled
with early signs of marginally improving
levels of business activity, generated a
clearer picture of the security of the Group’s
financial position. Therefore in October,
the Board declared the payment of an
interim dividend of 3.1 pence per share
(2019: 6.2 pence per share), which was paid
in December 2020. Given the continued
improving trend in our end markets and
management’s robust action to control
ongoing costs, which give a more stable
outlook for Group performance, the Board
has recommended a final dividend of
14.3 pence per share (2019: no final dividend
paid). If approved at the Annual General
Meeting, this final dividend will be paid
on 21 May 2021.
Annual General Meeting
The Annual General Meeting will be held
on 12 May 2021. The Notice of Meeting
and explanatory notes containing
details of the resolutions to be put to
the meeting accompany this Annual
Report and are available on our website
(www.vesuvius.com).
John McDonough CBE
Chairman
3 March 2021
The Board remains confident in the execution of the Group’s long-term strategy, despite the challenges faced as a result of the COVID-19 pandemic.Our business
12 Vesuvius plc
Annual Report and Financial Statements 2020
Chief Executive’s strategic review
Vesuvius’ decisive response and strong cash generation
during the COVID-19 crisis demonstrates the resilience
of our flexible, low capital intensive, entrepreneurial and
decentralised business model
Cash conversion rate1 %
173%
Cash conversion rate %
2020
2019
2018
120
91
173
Vesuvius reacted rapidly to the
unprecedented downturn brought
on by the COVID-19 pandemic.
By the end of the first quarter, we had
established and implemented an action
plan, with three key priorities to protect
our staff and the business: preserving the
health and morale of our employees;
maintaining the security of supply for our
customers worldwide; and preserving the
cash and liquidity2 of the Group.
As part of this plan, we rapidly
implemented all the changes to the layouts
of our manufacturing network that were
necessary to protect our staff and, where
permitted, to keep all our manufacturing
sites open, operating and delivering to our
customers safely.
We also swiftly implemented strong,
temporary cost reduction measures that
delivered savings of £39.0m for the full year
2020 (£18.6m in Q2, £20.3m in H2). These
measures included a reduction of £15.9m in
employment costs and £11.8m in
discretionary spend, as well as an £11.3m
reduction in planned employee incentives.
Thanks to changes to working practices
which will be maintained beyond the end of
the pandemic, and together with reductions
in operating expenses in EMEA undertaken
in Q4, we expect more than £8m of these
savings to become permanent.
In parallel, to preserve cash, we reduced
our net capital expenditure by £21m when
compared to 2019, prioritising strategic
growth investments, without taking any
risks in the ongoing overall maintenance
and safety of our operations.
Strong cash generation,
solid financial position
and resilient results
Thanks to this decisive action, Vesuvius
remained free cash flow positive in every
quarter of 2020, even before accounting
for the positive cash flows generated by
reducing working capital. We achieved an
adjusted operating cash flow of £175.2m,
with a cash conversion rate of 173%, up
significantly from 120% in 2019.
Our cash generation enabled us to reduce
net debt to £175.1m at the end of 2020
from £245.8m at the end of 2019. At the
end of 2020, Group liquidity stood at
£437.3m, significantly higher than the
£354.4m at the beginning of the year.
Despite a significant revenue decline
of £252.1m in 2020 to £1,458.3m
(2019: £1,710.4m), on a reported basis,
as a result of the swift actions that we
took, we achieved a trading profit in
2020 of £101.4m (2019: £181.4m).
Our return on sales was 7.0% in 2020,
compared with 10.6% in 2019.
This progress in conserving cash,
adjusting our cost base, focusing on
working capital and implementing
temporary savings positioned the
Group well as our end markets improved
towards the end of Q3 and into Q4. This
performance by our management teams
meant that, by October, the Group’s
liquidity was above where it had been
prior to the COVID-19 crisis impacting our
results. Consequently, having withdrawn
the 2019 final dividend in April 2020, the
Group was able to announce the return to
the payment of dividends in October 2020,
whilst continuing to maintain the financial
flexibility required to fund our growth
opportunities.
Successful completion of our
restructuring programmes
Despite the significant disruption in
activities due to the pandemic, in 2020,
we successfully completed our planned
restructuring programmes and achieved
Patrick André
Chief Executive
See our Financial review on p42-47
See Our strategy on p14 and 15
See more in the Our people
section on p74-83
1. This Review contains alternative performance
measures. For definitions and reconciliations
of alternative performance measures, refer
to Note 4 of the Group Financial Statements.
2. For definition of liquidity see Note 4.20 of the
Group Financial Statements.
13
Adjusted operating cash flow1 £
£175.2m
2020 175.2
2019 217.7
2018 179.4
Return on sales1 %
7.0%
2020 7.0
2019 10.6
2018 11.0
£20.6m of recurring restructuring savings,
ahead of the £19.4m we had targeted for
the year. Further recurring restructuring
savings of £4.3m will be realised in 2021,
as we benefit from the full year impact of
restructuring actions taken during 2020.
At the same time as concentrating our
manufacturing footprint on a reduced
number of manufacturing locations, we
have preserved our production capacity
through targeted investments and
debottlenecking initiatives at our
remaining plants. As a result, we are
confident that our current manufacturing
footprint is more than sufficient for the
economic rebound from the pandemic
and ensuing structural growth we expect
in our end markets over the coming years.
R&D effort preserved to support
future organic growth
Despite the challenging operating
environment, we chose to maintain our
R&D effort in 2020, maintaining our
investment in R&D at c. 2% of revenue, to
reinforce our product pipeline with new
innovative products and solutions which
will support our future organic growth.
The Group launched ten new products
during 2020 and 22 new product launches
are planned for 2021.
As well as continuing to invest in R&D
capability worldwide, we also completed
the expansion and modernisation of our
Centre of Excellence for mechatronics and
commissioned our new VISO research
centre, both in Ghlin, Belgium.
Best safety performance in 2020
I am very proud and would like to thank all
Vesuvius employees for our success in
meeting all the pandemic challenges while
at the same time achieving the best safety
performance of Vesuvius since we became
an independent company in 2012. Despite
the heightened health and safety risks of
the pandemic, we reduced our Lost Time
Injury Frequency Rate (LTIFR) to 1.12 in
2020 versus 1.55 in 2019.
We remain committed to continuing our
journey towards our ultimate goal of zero
accidents and will carry this aspiration into
2021 with the further development of our
safety programmes.
New Vesuvius sustainability
initiative
In 2020, Vesuvius launched a new
Sustainability initiative to accelerate our
efforts in contributing to the fight against
climate change, championing our people,
and contributing to the well-being and
development of our surrounding
communities. Sustainability is central
to our identity, our strategy and the way
we conduct business.
We are embarking on a journey which
will progressively transform many
aspects of the way we run our business,
including investment decisions, product
development priorities, supplier
management, communication, and
our engagement with our people and
communities – thereby incorporating
sustainability more deeply into the
strategy and business model of Vesuvius.
As a company, we do not have a
significant environmental footprint
due to the low energy intensity of our
manufacturing processes and our strategy
of not being integrated upstream in
mining. We, however, have a significant
opportunity to help our steel and foundry
customers drive improvements in their
environmental performance. More
information can be found on page 16.
Our environmental objectives revolve
around fighting climate change by
reducing our own CO2 emissions and
helping our customers reduce their own
CO2 footprints. In particular we have set
ourselves the goal of reaching a net zero
carbon footprint at the latest by 2050.
We will also renew our focus on achieving
best-in-class safety and well-being at
work, both for our employees and for our
customers. We have set a new gender
diversity target, and will invest further in
the development of our employees and
ensuring our ethical business conduct at
all times.
For 2020, we set ourselves eight
intermediate targets across all areas of the
sustainability agenda (with a ninth added
for 2021), against which we will monitor
and report our progress. We are also
measuring a significantly larger number
of sustainability indicators on an ongoing
basis. With the full support of the Board,
we have established a new governance
structure, constituting a Sustainability
Council with membership drawn from
across the business to oversee our
performance and support our efforts.
Furthermore, we have signed up to the
UN Global Compact as a demonstration
of our commitment to support the Ten
Principles on human rights, labour,
environment and anti-corruption, as well as
the UN’s Sustainable Development Goals.
See the Vesuvius Sustainability section on
pages 56-89 for further information.
Further strengthening of the
senior management team
In early 2021 we further strengthened our
senior management team with the addition
of Pascal Genest as President of the Group’s
Steel Flow Control business unit. Pascal’s
experience spans international leadership
roles in different sectors, including 15 years’
experience in the steel industry working for
some of our largest customers.
Outlook
Clear signs of recovery are now apparent
in both our Steel and Foundry end
markets. We believe that this recovery
should accelerate in the second half of
2021, supported by the lifting of most
pandemic-related restrictions by then.
Vesuvius is emerging from this difficult
period stronger than before. We have low
leverage and an optimised manufacturing
footprint as a result of our successfully
completed restructuring programmes.
We also benefit from our flexible and low
capital intensive, entrepreneurial and
decentralised business model, which has
proven its value during 2020.
We are confident that the Group will
deliver a meaningful improvement in
financial performance in 2021.
Patrick André
Chief Executive
3 March 2021
Our 2020 results also reflected the excellent performance of our teams.Our business
14
Our strategy
15
Strategic Objectives
Execution priorities
Vesuvius has articulated a number of key execution priorities. These enable us to
achieve our core Strategic Objectives of delivering long-term sustainable profitability,
creating shareholder value and delivering a better tomorrow for our stakeholders.
We are dedicated to accelerating the delivery of
our Strategic Objectives. In particular, speeding up
growth by focusing our efforts on the high-quality,
high-end segments of the steel and foundry markets,
increasing the automation and efficiency of our
manufacturing base and driving this change with
a team of skilful, motivated and talented people.
Deliver growth
Generate sustainable profitability
and create shareholder value
Reinforce our technology
leadership
Develop our technical
service offering and
increase penetration of
value-creating solutions
Maintain strong cash generation
and an efficient capital structure
Capture growth in
developing markets
Description
Progress in 2020
Vesuvius was built and grew on technology
breakthroughs. These enabled the steel continuous
casting and foundry industries to improve their
efficiency and quality substantially. Focusing on
technology leadership continues to drive our unique
value proposition and underpins our ability to deliver
ongoing value enhancement to our customers.
In 2020, we commissioned our new VISO research centre and completed the expansion of our
mechatronics competence centre, both in Belgium. We maintained our focus on combining
developments in robotics, automation and data analytics capabilities with our well-established
material science research. Increasing our R&D efficiency is an ongoing process, whereby
we intend to focus our efforts on the most high-impact projects. During the year we maintained
our industry-leading level of R&D spend as a percentage of revenue at 1.9%. Going forward
we remain committed to spending c.2% of sales on R&D.
Our technology has been widely adopted by
the most sophisticated producers in the most
developed markets. However, marked differences
remain in the penetration of our solutions within the
industry. Consequently, there is a wider audience
of customers who we believe can benefit from
those solutions. As steel and foundry markets in
developing markets become more quality focused,
we have the opportunity to significantly increase
our penetration of these markets through offering
our value-creating solutions.
We launched ten new products in 2020, despite challenging market conditions, including the
following highlights by business unit:
> Flow Control: launch of Duraflex L*, a breakthrough generation of ladle shroud offering
multiple new value-creating features including increased operator safety and extended
life, reducing waste by a factor of up to 4x
> Advanced Refractories: roll-out of the Next Generation Tundish Spray Robot, a fully
integrated spray application system solution that reduces waste, improves quality and
operator safety
> Foundry: launch of Diamant*, a new suite of degassing consumables with patented rotor
design that increases service life by up to 200%, and reduces cost per treatment
During the year we installed three mechatronics systems at customer locations in Asia and have
five further active projects for customers in the pipeline.
In 2021, we plan to launch 22 new products.
Building on our long-standing presence in all
markets, we can leverage the high growth enjoyed
by our customers’ industries in emerging markets,
which are large consumers of steel goods and
foundry castings.
The sales volume of the Steel division in 2020 outperformed steel production in the world
(excluding China and Iran) by 1.1%, with particularly strong performance in the growing markets
of India, Vietnam, Turkey, Russia, Ukraine and South America. In China, underlying revenue in
our Foundry division grew by 10.5% during the year, continuing our track record of growth in this
important market.
Provide a safe working environment
for our people
Be at the forefront of innovation
Run top-quality, cost-efficient
and sustainable operations
Foster talent, skill and
motivation in our people
Improve cost leadership
and margins
We continuously pursue initiatives throughout the
Group to adapt our business and our cost base to
the changing trading environment. This is central
to our efforts to improve profitability. Furthermore,
we have embedded the principles of lean
manufacturing across all our sites, continuously
focusing on quality and productivity.
Despite the significant disruption in activities, we delivered £20.6m of restructuring savings
ahead of the planned £19.4m we had targeted for the year. In addition, we implemented several
cost-reduction measures to mitigate the impact of the crisis and delivered £39.0m of temporary
COVID-19-related savings from reduced employee costs, discretionary spending and planned
incentives. Further restructuring savings of £4.3m will be realised in 2021, as we benefit from
the full year impact of restructuring actions taken during 2020. We also expect to deliver
additional recurring annual savings of more than £8m in 2021 as we retain some of the
efficiencies from changes to working practices that were achieved during the pandemic,
plus savings from a permanent reduction in operating expenses.
Vesuvius measures and monitors its performance
against these Strategic Objectives through its
Key Performance Indicators (KPIs).
See our Key Performance Indicators on p40 and 41
Drive sustainability
See our Sustainability section
on p56 to 88
Description
Progress in 2020
In line with our updated Sustainability initiative,
we are taking steps within the organisation to create
a better future for our planet, our customers, our
people and our communities. We develop products
that seek to help our customers drive efficiency
and reduce their environmental footprint, and
we are focusing on our own operations to reduce
our environmental impact. We will champion our
employees to ensure that they receive opportunities
for growth and development, and will support wider
and deeper engagement with our communities.
In 2020, we engaged with our key internal and external stakeholders to develop and launch the
Vesuvius Sustainability initiative.
Our sustainability strategy now incorporates all our business’ Environmental, Social and
Governance dimensions and sets a roadmap for the integration of our sustainability objectives
into our strategy and business model, thereby progressively transforming many aspects of the
way we run our business. It is underpinned by a comprehensive set of metrics and nine key
strategic targets.
As part of this commitment, in October 2020, Vesuvius became a signatory to the UN Global
Compact and has committed to base our business approach on its Ten Principles on human
rights, labour, environment and anti-corruption, and to engage in activities which advance the
development of the UN’s Sustainable Development Goals.
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under license.
Vesuvius plcAnnual Report and Financial Statements 2020Our business 16 Vesuvius plc
Annual Report and Financial Statements 2020
Our external environment
Solutions for the changing demands
of business
Climate change and the Vesuvius proposition
Technical upgrade of steel and foundry
Foundry
The remaining one
third of Vesuvius’
revenue is generated
from the provision
of products and
solutions to the
foundry industry.
Foundries consume large amounts of
energy in heating metals, generating
significant amounts of CO2. For the past
80 years, Vesuvius’ feeding systems, filters,
coatings, crucibles and other products
have been helping our Foundry customers
to maximise their energy efficiency and
minimise wastage, increasing the ratio
of metal melted to finished end castings.
We systematically monitor the positive
CO2 impact of our products.
Steel
Two thirds of Vesuvius’
revenue comes from
providing goods and
services to the steel
industry.
Steel production is a highly energy-
intensive process. The World Steel
Association has estimated that the steel
industry generates between 7% and 9%
of global direct emissions from the use of
fossil fuel. However, steel continues to play
an integral part in the modern world and
remains crucial for many end products. It is
infinitely recyclable and the by-products
created during steel-making, along with
the waste energies, are valuable resources.
Vesuvius’ consumables enable our
customers to increase manufacturing
throughput whilst lowering energy
consumption. For several decades,
Vesuvius’ products have been assisting
the steel industry in reducing greenhouse
gas (GHG) emissions by increasing yields
and end-product consistency, therefore
improving the energy efficiency of
production.
The future
How Vesuvius will respond
> The pressure on the steel
and foundry industries to
reduce GHG emissions,
particularly CO2, is increasing
significantly, with energy
price increases used to
compel change.
> The use of hydrogen in steel
production in the EU27+UK
to manufacture ‘Green Steel’
is gaining traction and more
and more steel producers are
exploring this innovative and
sustainable path.
> Failing to introduce a ‘CO2
> As the move to electric
border tax’ in the EU is likely to
accelerate the de-localisation
of steel production.
> Our customers will continue
to focus on reducing absolute
energy consumption and
CO2 emissions (through
the elimination of higher
emission processes)
and reducing normalised
energy consumption
and CO2 emissions (via
increased efficiency).
> A rise in scrap availability
and its recycling will reduce
CO2 emissions. For the steel
industry, this will result in a
shift to electric arc furnaces
away from blast furnaces –
in particular, in the US and
the EU.
vehicles and low-carbon
forms of transport
accelerates, the foundry
industry will shift away from
manufacturing internal
combustion engines. We
expect aluminium foundries
to grow at a higher rate to
support the manufacture of
lighter-weight components
for vehicles. Governmental
funding to support economic
recovery following the
COVID-19 crisis is expected to
accelerate this trend, through
subsidies to stimulate
demand for electric vehicles.
> In construction, we see
a continued trend of using
lighter-weight steel and
glass to replace concrete.
Vesuvius’ application engineers and marketing teams are already
working closely with our customers to develop new products and
technologies to meet the challenges that lie ahead.
Automation – safety and efficiency
Our Foundry Division teams are
developing new filtration, feeding,
mould coating and molten metal
treatment products to support the
manufacture of lighter-weight,
higher-performance metals and
components. As a result of the
accelerating importance of lighter-
weight components in automotive,
Vesuvius is increasing its efforts
to address this growing market.
Our Steel Division is participating
in hydrogen R&D projects with
steel partners in Europe to
develop solutions for the future
of steel-making. Additionally,
we continue to develop product
offerings with superior
sustainability characteristics.
17
Improving quality with our
new products
In Flow Control, we launched the ATOM
(Advanced Tundish Outlet Modifier)* in
2020. ATOM has been designed to satisfy
the need to improve quality and productivity
at our increasingly demanding technical
steel customers. The ATOM is installed inside
the tundish, protecting the casting channel
inlet and consequently improving the quality
of steel reaching the mould.
Our Foundry technology solution for
aluminium melt degassing continues to
develop. We have launched the ‘Diamond
Degasser*’ that allows our customers to
achieve the highest-quality standards in
their metal while at the same time increasing
the durability and flexibility of the process.
Leaving the most hazardous
work to robots
Vesuvius installs fully automated robots
for large steel customers to execute safety-
critical activities, removing operators from
the hazardous production area. Thanks to
Vesuvius’ leading capabilities and our ability
to provide a combination of refractories,
robotics and slide-gates, we see a strong
pipeline for these projects.
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under license.
What’s happeningThe long-term growth forecast for steel and foundry markets remains unchanged and the importance of technology to differentiate steel and foundry producers continues to grow. Steel producers are increasingly focused on higher-quality steel grades where the consistency of the finished steel is fundamental in driving an above-market growth forecast for high technology steel in all regions. The COVID-19 crisis has resulted in higher relative growth in lower-quality steels used in construction, fuelled by government spending programmes and a drop in automotive production. We expect this is to be a temporary phenomenon.Similarly, in foundries, metal quality is paramount as higher strength is demanded from thinner and lighter castings.How we are responding >Vesuvius is strongly positioned to facilitate this upgrade and benefit from its development. We have a wide product and service offering designed to support the production of high-technology steel across our broad, global customer base. >We continue to invest heavily in R&D with dedicated Centres of Excellence to maintain our technology leadership across our products and across all regions in which we operate. >Vesuvius’ innovative portfolio of products and services, together with its global footprint, enable us to provide high-technology solutions to our worldwide customers. +5% Our internal annual growth forecast for aluminium foundriesWhat’s happeningCompanies face ever-increasing regulation and scrutiny to ensure safety and reduce emissions from their operations and products.New technologies, such as advancements in automation, can help transform production, bringing greater flexibility and lower costs, whilst also delivering significantly improved safety performance in a plant.Robotics can support or even substitute operators in hazardous production areas, thus lowering the safety risk and increasing the consistency of the process.Market volatility is increasing, creating more uncertainty and requiring even more flexibility. Automation can create more flexible operations to enable customers to respond more rapidly to changing market conditions.How we are responding >Vesuvius has the global, in-depth capability to combine know-how in steel mills and foundries with robotic capabilities: delivering superior safety performance in hazardous areas of production. >We provide laser technology to assess refractory wear, allowing targeted repair with our broad range of refractory consumables – for efficient and safe operation. >We invest significant resources into the scale-up of our mechatronics capabilities to maintain our leadership in Tundish and Continuous Casting robotics and to expand our automation capabilities in other areas. >We are upgrading our own operations to continuously improve our safety performance and lower our LTIFR.By 2025, the time spent on current tasks at work by humans and machines will be equal(as estimated by the World Economic Forum).Our business 18 Vesuvius plc
Annual Report and Financial Statements 2020
19
Our markets
Steel Division
Business units
Flow Control
Crude steel production is the
primary driver of demand for
Flow Control’s products, whilst
the trend for ‘high-technology
steel’ allows us to leverage our
advanced solutions and achieve
above-market growth rates.
Advanced Refractories
Crude steel production and the
level of activity in other high-
temperature industries, such
as aluminium, copper, cement,
petrochemical and energy from
waste, are the drivers for the
Advanced Refractories business
unit product demand.
Sensors & Probes
Crude steel production and
the need to increase the
quality and consistency of cast
steel drives demand for our
Sensors & Probes business.
Foundry Division
Higher sophistication,
demanding higher-quality
metal and increasingly complex
castings, is the long-term driver
for product demand for the
Foundry Division.
‘High-technology steel’
‘High-technology steel’ is our internal
marketing segmentation that describes
steel which is either high performing
e.g. high-strength steel for wind turbines,
and/or where the production process
to produce the steel is complex, e.g. the
near net shape production process,
which is a continuous casting process
that produces steel in very thin slabs
near to its final required thickness.
Complex production processes and the
need for higher-quality steel grades,
where the consistency of the finished
steel is paramount, are gaining
momentum worldwide because
they provide steel producers with
differentiated products and significant
benefits in terms of cost savings and
a reduced environmental footprint.
Vesuvius’ internal segmentation
of global crude steel production
3 4%
%
3
3
3
3
%
Flow Control business unit
end-markets
3 0 %
Advanced steel cans are produced
from ‘high-technology steel’
because of the need to achieve a
challenging combination of thin
gauge and high rigidity/strength.
1
4
%
56%
High-
technology steel
Medium-
technology steel
> Near net shape
production process
> Construction sheets:
roofing, cladding, etc.
> Stainless steel
> Engineering steel:
bearing, shafts, tools,
etc.
> Automotive steel
> Heavy plates for
ship building, pipe
Commodity steel
> Basic rebar
for concrete
reinforcement
Foundry industry end-markets
The most important end-markets for the
foundry industry are general engineering,
light vehicles, including passenger cars
and light commercial vehicles (LVs),
medium and heavy commercial vehicles
(MHCVs), construction, agriculture and
mining equipment, power-generation
equipment and railroad.
As a result of the COVID-19 crisis, Foundry
end markets declined significantly across
all regions, with the exception of the
general engineering end market in China.
Production output in vehicle (light, medium
and heavy vehicles) and, the mining and
construction equipment sectors, which
together make up 53% of our Foundry
end-market, fell 16.5% and 8.0%,
respectively during 2020. Whilst most
markets saw a strong rebound in the
second half of the year, volumes for the
full year 2020 were well below 2019 levels.
Above-average market growth
for highly sophisticated and
complex castings
The Foundry Division benefits from
its capabilities to improve highly
sophisticated and complex castings,
which are the segments of the foundry
market growing the fastest. Foundry
customers are evolving towards these
types of castings because of increased
requirements for cleaner metal to deliver
complex shapes with thinner sections.
Whilst Foundry Division products typically
represent less than 5% of a foundry’s
production costs, they contribute
Crude steel production is a
structurally growing market
The COVID-19 crisis disrupted the
global demand and supply chains
across all industries, pushing down
crude steel production in the world,
excluding China, by 8.2% in 2020
compared to the previous year.
Including China, which was the only
market where steel production
increased compared to 2019, (+5.2%),
global crude steel production fell 0.9%
in 2020, according to the World Steel
Association (WSA).
Whilst the growth in crude steel
production in the past 20 years has
been mostly driven by China, this trend
is now likely to decelerate, and the WSA
expects Chinese crude steel production
in 2021 to remain stable at the 2020
level. We believe that the majority of
the growth in crude steel production
going forward will come from India
and other emerging markets, mostly
the Middle East, Africa, South East Asia
and Latin America.
Longer term, we expect global crude
steel production to grow at a rate
of 1.3% per annum and the world,
excluding China, at a rate of 2%.
World crude steel production (mt)
2.5
2.0
1.5
0.5
0
‘50
’54
‘58
’62
‘66
’70
‘74
’78
‘82
’86
‘90
’94
‘98
’02
‘06
’10
’14
’18
‘22
’26
‘30
Other emerging
India
markets1
Year
China
Developed markets2
Sources: Historical data from World Steel Association. Forecasts are management estimates.
Challenging environment in the steel markets outside China
10%
5%
0%
-5%
0
2
0
2
h
t
w
o
r
g
n
o
i
t
c
u
d
o
r
p
-10%
l
e
e
t
s
e
d
u
r
C
-15%
-20%
Size of bubble represents relative revenue of Vesuvius’ Steel Division in 2020
China
+5.2%
EEMEA3 excl
Iran -0.5%
Crude steel production volume 2020
South
America
-8.6%
India
-10.6%
NAFTA
-15.5%
EU27 + UK
-11.8%
Crude steel production growth year-on-year
FY 2020 H1 2020 H2 2020
World
China
-0.9%
-6.0%
+5.2%
+1.4%
World excl China and Iran
-8.8%
-15.0%
+3.9%
+9.5%
-3.5%
Notes to the above charts:
1. Eastern Europe, Middle East (incl. Turkey), Africa, Latin America and South East Asia.
2. EU27, UK, USA, Canada and North Asia.
3. Eastern Europe, Middle East (incl. Turkey) and Africa.
significantly to the improvement of product
quality and manufacturing efficiency,
whilst reducing the environmental impact
of the casting process and improving the
ratio of finished castings to the amount
of metal poured, which is a key parameter
for foundry efficiency.
Technology changes and
environmental drivers
New technologies, such as 3D printing,
are expected to continue to influence the
metal casting industry, allowing for faster
prototyping and production of smaller
volume parts. Environmental regulations,
driven by the desire to reduce volatile
organic compound emissions and the
use of silica within the industry, are
also expected to continue to tighten.
This will drive the trend to find processes
and consumable products which support
production efficiency and reduce a
foundry’s impact on the environment.
Iron casting
Iron casting is split between grey and
ductile iron, with grey iron representing
the majority of metal being cast. This is
a cost-efficient and robust process
producing components that do not need
to tolerate extreme mechanical stress.
All iron castings require filters and
coatings, but grey iron is not as reliant on
feeding system utilisation due to its lower
shrinkage on solidification. Conversely,
ductile iron production requires more
sophisticated consumable products to
cope with the high shrinkages of metal
whilst solidifying.
Steel casting
Steel is used in castings for manufacturing
components with very high mechanical
performance. Steel casting is the most
demanding casting process due to higher
melting temperatures and greater
tendency for shrinkage. This drives greater
demand for products and technical
expertise in this segment.
Aluminium/Non-ferrous casting
Aluminium casting is the segment of
the foundry market growing the fastest.
It has captured a significant share of the
LV market. Being molten below 700°C,
aluminium can be cast in iron moulds which
can then be reused. Vesuvius concentrates
on supplying fluxes, filters and machines
that refine the composition and cleanliness
of the metal.
Our business
20 Vesuvius plc
Annual Report and Financial Statements 2020
Business model
21
A profitable, flexible, cash-generative model
focused on sustainable growth
Strategic
alignment
Deliver growth
Generate sustainable
profitability and
create shareholder
value
Maintain strong
cash generation
and an efficient
capital structure
Provide a safe
working environment
for our people
Be at the forefront
of innovation
Run top-quality,
cost-efficient
and sustainable
operations
Foster talent,
skill and motivation
in our people
What we do
Our key resources
How we deliver
The value we create
We develop and manufacture
high-technology products and
solutions predominantly for
supply to the steel and foundry
casting industries, operating
a profitable, flexible, cash-
generative and growth-building
business model. Over many
years, we have built the brand
equity of our Vesuvius and Foseco
products through technology
leadership, reliability and service.
The sustainability of our model
The items we have now formalised in our
Sustainability initiative have long been at
the heart of Vesuvius’ value proposition.
We act as a responsible corporate
citizen, developing products that help
our customers to improve their efficiency
and reduce their environmental impact.
Financial capital
Human capital
We use the cash generated by our
business to invest in innovation,
people, operating assets, technology
and sales to generate further growth.
We invest in developing our skilled
and motivated workforce of more than
10,000 people and provide them with
a safe environment in which to work.
Manufacturing capital
Social capital
We have a global footprint, with
53 production sites on six continents,
giving us proximity to our customers.
Intellectual capital
We have six R&D centres of excellence
with dedicated R&D staff worldwide,
generating innovative products and
solutions for our customers.
We champion our Values and our
ethical conduct. We maintain strong
relationships with customers and our
wider stakeholder groups.
Natural capital
We utilise high-quality raw materials,
secured through reliable and
well-developed and sustainable
supply chains.
6
10,350
53
R&D centres of excellence
Employees
Production sites
Our sustainable competitive advantages
Global presence
Using our global expertise to identify
and create market opportunities
Vesuvius is present on six continents,
supporting the development of global
steel and foundry manufacturing
processes with new technologies.
We have manufacturing capability in
all the main steel and foundry markets
and hire and train local engineers.
Our local manufacturing, local expertise
and global knowledge of customers’
processes give us a special relationship
with our customers.
See more
about Our
global
presence
on p4 and 5
Optimised manufacturing
Low-cost lean manufacturing provides
reliable ‘just-in-time’ products
Our successfully tested products can
be produced at high volumes across
all of our manufacturing footprint,
guaranteeing cost-competitive and
time-efficient delivery. We optimise
our cost-competitiveness by investing
in low-cost production sites and
increasing production automation
– and have established manufacturing
facilities to support our expansion in
emerging markets.
See more
about Our
operations
on p48-55
> Our industry experts are embedded
at many customer locations and are
therefore ideally placed to collaborate
with customers to identify their needs,
and potential service and process
improvements. This also enables us to
grow our solutions and service portfolio.
> We develop high-technology products
that deliver quality enhancement,
efficiency gains and energy savings
to our customers. We focus on
sustainability in our own business
through the efficient use of energy
and natural resources.
> Our model is profitable by allowing
value pricing for bespoke products
and services. It generates growth as
we enlarge our market with additional
innovative products and solutions.
> Our model is resilient to end-market
volatility due to the flexibility of our
diversified manufacturing footprint
and adjustable cost base.
> Our commitment to ethical business
delivers strong, long-term, sustainable
commercial relationships.
Our investors
Strategic
alignment
Our cash generative and low capital
intensity business, provides returns
to our shareholders and underpins
sustainable growth.
Our customers
Strategic
alignment
Our investment in innovation creates
cutting-edge products and solutions,
delivering enhanced value for our customers
and differentiating us from our competitors.
Our technology solutions improve customer
safety and remove operators from the
most dangerous parts of our customers’
processes. We embed technical experts
within our customers, giving us a
fundamental understanding of their needs
and delivering them access to our global
network of highly skilled individuals.
Our suppliers
Strategic
alignment
Maintaining cost-effective access to
high-quality raw materials is vital to our
success. Our suppliers are critical
to our business.
Our people
Strategic
alignment
We focus on the health and safety
of all our staff. We engage with our
people, encouraging and rewarding
high performance to create an
environment where all can realise
their individual potential.
Our communities
Strategic
alignment
We are committed to maintaining positive
relationships with the communities in
which we operate. Our social responsibility
activities complement our Values and we
encourage our employees to engage
with communities and groups local to
our operations.
Students and graduates
Strategic
alignment
Attracting new talent to Vesuvius is
vital for the Group’s continuing success.
Recruiting new students and graduates
feeds the talent pipeline and allows us
to tap into new sources of up-to-date
business ideas and R&D capability.
Advanced technology
Our technology centres develop value-
adding solutions involving engineered
systems and high-value consumables
Our continuing investment in Vesuvius’
R&D centres of excellence is reflected
in all areas of our offering. We have
knowledge of the most advanced
ceramic and metallurgical techniques
using state-of-the-art equipment and
the most advanced technologies of flow
simulation and finite element analysis.
We are therefore able to provide our
customers with sophisticated, innovative,
custom-designed solutions.
Read more
about our
Value-added
solutions on
p14 and 15
Service and consistency
Serving our customers reliably,
competitively and consistently
with consumables critical for their
manufacturing processes
Alongside our global presence, we
ensure a local service to our customers,
from inventory management to
high-quality technical support at their
sites and the ability to swiftly modify
production and supply to reflect changes
in customer requirements. Our
knowledge of end-market processes,
specifications and techniques around the
world gives our experts an unparalleled
ability to support our customers.
Read more
about Our
Operations
on p48-55
Our business
22 Vesuvius plc
Annual Report and Financial Statements 2020
Section 172(1) Statement
23
Effective engagement with stakeholders promotes
the long-term sustainability of the Group
Likely consequences of any
decision in the long term
Throughout the year, the Board
considered the long-term consequences
of the decisions it made, focusing on
the interests of relevant stakeholders
as appropriate.
Examples of how these activities
impacted some of the key decisions
taken by the Board during 2020 are given
in the table below.
Under Section 172 of the Companies
Act 2006, the Directors have a duty to
promote the success of the Company
over the long term for the benefit of
shareholders as a whole, having regard
to a range of other key stakeholders
and interests.
The Directors must have regard (amongst other matters) to the:
Likely consequences of any
decision in the long term
Impact of the Company’s
operations on the community
and the environment
Interests of the Company’s
employees
Desirability of the Company
maintaining a reputation for high
standards of business conduct
Need to foster the Company’s
business relationships with
suppliers, customers and others
Need to act fairly as between
members of the Company
The Board is responsible for the overall
direction of the Group. It focuses primarily
upon strategic and policy issues and is
responsible for the Group’s long-term
success. It sets the Group’s strategy,
oversees the allocation of resources
and monitors the performance of the
Group, to ensure that the Group is
structured appropriately for the
challenges and opportunities of the
future. In performance of these duties,
the Board is focused on the sustainable
success of the Group in the long term,
and the existence of a culture that
supports this success. The Board
recognises the need for the Group to
have effective engagement with, and
encourage participation from, all key
stakeholders to promote these long-term
interests. The Group’s key stakeholder
groups, reflecting those who have the
biggest impact on the business and modes
of engagement, are outlined in the table
on pages 28 and 29. The Board has regard
to the activities undertaken throughout the
Group in considering its own Section 172
responsibilities.
WE ARE
EFFICIENT
Vesuvius is focused on running
an efficient business, which delivers
better results for our customers.
Marie Schmaenk
Apprentice, Foundry Technologies
Borken, Germany
Operational response
to the COVID-19 pandemic
Stakeholder alignment
> Employees
> Customers
> Suppliers
Strategic alignment
Preservation of liquidity and
conservation of cash
Stakeholder alignment
> Shareholders
> Employees
> Lenders
Strategic alignment
Launch of Sustainability initiative
Stakeholder alignment
> Customers
> Communities
> Employees
Strategic alignment
The Board was also committed to
securing continuity of production to meet
the needs of customers and delivering to
them safely. Consequently, throughout
2020 only eight sites were subject to full
temporary closures.
The Board oversaw the Group’s
operational response to the COVID-19
pandemic. Throughout the year the
Group’s primary focus was on protecting
the health and safety of employees and
their families, together with that of our
customers, suppliers and other
stakeholders. Immediately as the threat
from the pandemic became apparent, the
Board ensured that the Group adopted
specific site-by-site actions to protect our
employees and all those entering our sites,
to prevent the spread of infection. The
Group made the necessary changes to
manufacturing layouts, aligning with best
practice and the requirements of local
governments and health authorities.
The Board took difficult decisions to
preserve the Group’s liquidity and conserve
cash in 2020. In April, in light of uncertainty
about the business environment, the Board
withdrew its recommendation to pay the
final dividend for 2019 of 14.3 pence per
share which had been announced with
the publication of the full year 2019 results.
At the same time, the Board oversaw the
implementation of a number of cost
reduction and cash preservation
measures, including employee-related
savings and restricting capital and
operational expenditure wherever
possible, whilst still seeking to execute
the strategy of the Group and without
taking risks on the maintenance and
safety of our operations.
To lead by example and show solidarity
with the Group’s employees, the Board,
in conjunction with the Group Executive
Committee, elected to reduce their fees
and salary by 20% for six months. The
Board also approved the accessing of a
number of government funding facilities,
including the Bank of England’s Covid
Corporate Finance Facility (CCFF),
which was initially used to protect liquidity.
The Board took the decision to repay this
funding in September 2020, as soon as it
became clear that the Group’s financial
position was improving and the funds were
no longer required. The following month,
the Board declared the reinstatement of
dividends with the announcement of an
interim dividend of 3.1 pence per share,
which was paid in December 2020.
The Board launched a new Sustainability
initiative in 2020 to explicitly affirm the part
Vesuvius is playing in creating a better
tomorrow for our planet, our customers,
our people and our communities. Vesuvius
became a signatory to the UN Global
Compact, committing to support its
principles on human rights, labour,
environment and anti-corruption and to
engage in activities which advance the
development of the UN’s Sustainable
Development Goals.
The Board supported the new stretching
targets set by management to focus the
Group’s sustainability efforts, confirming
eight non-financial targets for 2020
(with a ninth added for 2021) and setting
ourselves the goal of reaching a net zero
carbon footprint at the latest by 2050.
More information can be found in the
Sustainability section on pages 56-89.
Our business
24 Vesuvius plc
Annual Report and Financial Statements 2020
Section 172(1) Statement continued
Interests of the Company’s
employees
> Throughout 2020, whilst seeking to keep
the business operational and supporting
customers, the Board carefully
monitored the impact of the COVID-19
pandemic on all employees. It took the
health and safety of our employees as
its primary responsibility. It received
updates at each Board meeting on
the number of people who had tested
positive for COVID-19 and the number
of people quarantining as a result of
contact. It monitored the measures
taken throughout the Group to change
workplace layouts and practices, and
to promote social distancing, the use
of personal protective equipment (PPE)
and other measures aimed at protecting
the health of all employees. It received
details of the action being taken to
facilitate home-working, together with
regular updates on the number of
people working from home, and noted
the imposition of travel restrictions.
> During 2020, as the Group sought to
conserve cash to match the reduced
demand for its products, staff around
the world were furloughed, put on
reduced hours or asked to take annual
leave. The Board was cognisant of
the financial impact of this on the
employees affected and sought to
limit the use of such measures to the
minimum period necessary. By
accessing government support, the
Group was able to manage the impact
of the pandemic on the workforce
seeking wherever possible to reduce
to a minimum the number of
redundancies associated with it.
> At each Board meeting, the Board
received a report on the Group’s
performance against the Health and
Safety KPIs and reviewed, in detail,
the circumstances of any Lost Time
Injuries that had been recorded since
its last meeting.
> The Board approved a new
intermediate Safety target for the
Group to reach a Lost Time Injury
Frequency Rate below 1.0, underpinning
its commitment to ensure the safety
of the Group’s employees and the target
of zero accidents. Further information
on Safety can be found on pages 74-79.
> As part of the regular schedule of
business unit presentations, the Board
reviewed progress against the specific
HR objectives for each business unit and
monitored the initiatives that are being
implemented to enhance the career and
personal development of employees,
and talent development as a whole
within the Group.
> At the end of 2020, the Company
undertook its second global employee
engagement exercise. The Board
oversaw this process, which commenced
with an engagement survey, aimed at
canvassing the opinions of all of our
>10,000 employees worldwide.
The Board received feedback on the
results and considered what this
indicated about the culture of the
Group. It reviewed management’s
response to the outcome of the
survey and the follow-up actions that
would be undertaken throughout the
Group. Further information about the
survey can be found on page 80.
> Further information about the work of
the Board’s Committees in considering
and supporting the interests of the
Company’s employees can be found
in the Nomination and Remuneration
Committee Reports on pages 115-143.
Need to foster the
Company’s business
relationships with suppliers,
customers and others
> During 2020, the Board received regular
updates from the Chief Executive on
the actions being taken throughout
the Group to ensure continuity of supply
for the Group’s customers despite the
impact of the COVID-19 pandemic.
The Board received detailed analysis
of the impact of COVID-19 on the
Group’s significant customers along
with information on the availability
of raw materials, logistics support
and the impact of the pandemic
on the Group’s suppliers.
> The Board received presentations
from the business unit Presidents
and President Operations and
Technology on end markets, the
Group’s relationships with customers
and key matters of concern to them.
They discussed the steps being taken
by the Group to respond to customers’
ongoing requirements, and the product
research and development, marketing
and new product launch strategies
being actioned to respond to these.
The Board reviewed information on
the Group’s performance against key
manufacturing quality targets each
month and was updated at Board
meetings on actions undertaken to
rectify any significant quality issues
or customer complaints. The Board
considered market trends at each
meeting and undertook a more
thorough review of macro-trends
and their likely long-term implications
at the annual Strategy Meeting.
> The usual Directors’ visits to customers
were curtailed during 2020, but the
Chief Executive kept in regular contact
with the Group’s key customers,
primarily through virtual means, to hear
about their immediate challenges and
longer-term expectations.
> In addition to understanding business
unit-specific procurement issues during
the year, the Board also received
an update from the Group’s Chief
Purchasing Officer and discussed the
Group’s procurement organisation
structure, raw material supply,
relationships with its suppliers and
its purchasing practices.
Impact of the Company’s
operations on the
community and the
environment
> In 2020, the Board approved the
Group’s new Sustainability initiative
aimed at ensuring that sustainability is
consistently at the front and centre of
the Group’s strategy. A key tenet of
Vesuvius’ business has always been to
support our customers’ efforts to reduce
their own environmental footprint and
improve safety on the shop floor
(especially exposure to hot metal). The
Sustainability initiative provides further
detail about the Group’s efforts in this
regard and the actions Vesuvius has
committed to take to reduce its own
environmental footprint and create a
better tomorrow for our people and
stakeholders.
> The Board received presentations from
the VP HSE and Quality detailing the
Group’s existing activities with regard to
sustainability, including considering the
actions being taken in the Group to
reduce water and material wastage, to
conserve energy and to utilise recycled
materials. The Board supported the
appointment of a VP Sustainability.
Further details of the Board’s oversight
of the Group’s sustainability activities
can be found in the Sustainability
section on pages 56-89.
> The Board recognises that the success
of the Group’s operations is dependent
on maintaining positive relations with
the communities in which they operate.
The Board encourages Vesuvius’ sites to
support their local communities through
charitable activities and community
events. Throughout the pandemic
Vesuvius’ sites have been supporting
their local communities with donations
and assistance. Examples of the Group’s
activities can be found in the
Community section on page 88.
25
Employee involvement
Vesuvius adopts an open and
honest approach to employee
communications, with regular
updates from senior management
across businesses and operations
within the Group. In 2020 the
majority of these were conducted
on a virtual basis. During the initial
stages of the COVID-19 crisis
the Senior Leadership Group
comprising the 160 most senior
managers in the Group
participated in weekly webcasts
with the Group Executive
Committee, to ensure clear
communication of the actions
being taken across the Group in
the context of the pandemic.
Senior leaders also maintained
regular calls with their teams, as
lockdown and travel restrictions
came into force. These regular
webinars became a feature
of the Group’s approach to
management which will be
continued – albeit less regularly –
on an ongoing basis.
The Board and Group Executive
Committee normally visit
operations throughout the year,
touring the sites, meeting with
employees and conducting ‘town
hall’ meetings when they do.
These activities were curtailed in
2020 by COVID-19-related travel
restrictions. To the extent possible,
these were replaced by online or
virtual interactions. Other regular
employee communications
include direct email updates on
the financial performance of the
Group, the industrial environment
in which Vesuvius operates and
other significant operational
developments. The Company
operates an employee intranet
which distributes Company news
and events, an employee ‘app’ for
information dissemination, as well
as undertaking local initiatives for
employee engagement on a
site-by-site basis.
The HR department is the primary
point of contact for employees
on employment and workplace
matters, operating with an
open-door policy and advising
employees of any local legal, tax,
pension or other employment
changes. There are numerous
employee-sponsored and led
representative bodies within
Vesuvius which differ with respect
to jurisdiction and geography.
During the year the Group’s
agreement constituting its
European Works Council (EWC)
terminated. With the departure
of the United Kingdom from the
European Union, management
nominated Poland as its
representative country under the
relevant legislation. Management
began the process of constituting
a Special Negotiating Body to
engage in discussions on the
formation of a new EWC
Agreement and Council.
Senior management, supported
and facilitated by the HR
department, encourage open
dialogue and consult with all
employee representative bodies,
as appropriate.
All members of the Group
Executive Committee participate
in the Vesuvius Share Plan and
receive awards of Performance
Shares, which vest in accordance
with measures and targets set
against earnings per share (EPS)
and total shareholder return
(TSR). For certain senior
managers, awards are made
under the Vesuvius Medium Term
Plan (MTP). These managers
participate in the MTP at varying
percentage levels, and awards are
made in shares and based on the
same measures and targets as the
Annual Incentive Plan. In this way,
a broad cadre of management
has incentives that are aligned
with shareholders’ interests.
Employee engagement
In accordance with the UK
Corporate Governance Code,
Holly Koeppel is the designated
Non-executive Director
responsible for overseeing
engagement with the workforce.
Vesuvius is a diverse, multi-
national Group, with four business
units, employing more than
10,000 people located in 41
different countries. The Board has
adopted an approach that builds
on existing engagement initiatives
and targets specific issues for
attention when considering
employee engagement. These
processes engage the entire
Board and are overseen by Holly
Koeppel. The primary mode of
engagement for Directors is
through direct interaction with the
workforce during the Directors’
comprehensive range of site visits.
During 2020, these engagement
activities were severely curtailed
by the COVID-19-related travel
restrictions. Whilst the Executive
Directors were, initially, able to
undertake a number of essential
business-related trips to the
Group’s sites, the Non-executive
Directors’ visits were limited to a
trip by Holly Koeppel to Charlotte,
NC. The Non-executive Directors
held video calls with senior
managers in China and Japan in
November, to hear more about
the activities of the Group in China
and North Asia, respectively. It is
hoped that an extensive site visit
schedule will be able to be
followed in 2021, as soon as travel
restrictions allow. Until then,
virtual meetings will continue to be
scheduled. Whilst Non-executive
Director site visits usually present
an opportunity for broad
discussion, the Group does not
operate a central workforce
engagement mechanism. As such,
the Remuneration Committee
did not engage systematically
with the workforce during the
year to explain how executive
remuneration aligns with wider
Company pay policies.
Whilst opportunities for direct
interaction with employees were
limited in 2020, the Board was
able to oversee the launch of
the Group’s second employee
engagement survey. This
provided the Board with valuable
insight into the attitudes,
engagement and concerns of
employees. This data was
analysed in a number of different
ways, identifying the results of
various sub-groups of employees,
providing the Board with a
valuable opportunity to track
areas of organisational strength
and weakness, and ensuring that
appropriate follow-up actions
are put in place. The Board
considered the key workforce-
related issues highlighted in the
survey and other employee
feedback in reviewing
management actions with
regard to employee engagement.
Further information about the
survey can be found on page 80.
Our business 26 Vesuvius plc
Annual Report and Financial Statements 2020
Section 172(1) Statement continued
Desirability of the Company
maintaining a reputation
for high standards of
business conduct
> The Group’s Code of Conduct states
that Vesuvius must maintain an
unquestioned reputation for integrity.
The Board takes seriously the Group’s
obligation to maintain this high
standard of business conduct and
assessed compliance with this
requirement through a variety of
mechanisms during 2020, including
reports from Internal and External
Audit, along with feedback from the
Group’s employee engagement survey.
> Vesuvius agrees terms with its suppliers
and seeks to pay in accordance with
those terms.
> When reviewing the Group’s tax
strategy, the Board ensured that the
Group’s approach to tax management
reinforced the need for the Company
to maintain a reputation for high
standards of business conduct.
> In addition, the Board received formal
reports during 2020 on the Group’s
compliance activities, including the
Group’s risk assessment programme
and training practices, and specific
issues raised through the Group’s
Speak Up helpline and internal
reporting processes. Further details
of the Group’s compliance activities
can be found in the Our communities
section on pages 84-89.
Need to act fairly as
between members
of the Company
> The primary focus of the Board’s
business decisions is on ensuring the
long-term sustainability of the Group.
The Board recognises that, in seeking
to maintain long-term profitability,
the Group is reliant on the support
of all of its stakeholders, including
the Group’s workforce, its customers,
suppliers and the communities in which
its businesses operate.
> In taking capital allocation decisions
during 2020, the Board was cognisant
of the need to balance the interests
of different stakeholders. As the full
extent of the pandemic became clear,
the Board moved quickly to focus on
liquidity and cash preservation, taking
the difficult decision to withdraw its
recommendation to pay the final
dividend for 2019 of 14.3 pence
per share, whilst at the same time
recognising that the Group had
placed staff on furlough, reduced
working hours, curtailed capital
expenditure and reduced operational
expenditure. The Board also
carefully considered its approach
to investment opportunities, capital
expenditure, R&D and investment
in people during the year, given the
need to balance the interests of
all stakeholders.
Relations with shareholders
The Board is committed to
communicating with shareholders and
other stakeholders in a clear and open
manner and seeks to ensure effective
engagement through the Company’s
regular communications, the AGM and
other investor relations activities. During
2020, the Company undertook an
ongoing programme of meetings with
investors, managed by the Investor
Relations team. The majority of these
meetings were led by the Chief Executive
and Chief Financial Officer, and during
2020 a large portion were conducted by
virtual means.
In advance of each AGM, we write to our
largest shareholders inviting discussion
on any questions they might like to raise
and making the Chairmen of the Board,
the Audit Committee and the
Remuneration Committee available to
meet shareholders should they so wish.
In 2020, we engaged with shareholders
on the Group’s remuneration proposals,
further details of which can be found
in the Directors’ Remuneration Report
on page 122.
In 2020 travel restrictions operating in
the UK curtailed attendance at the AGM.
The Group will revert to its more normal
format once COVID-19-related
restrictions are removed.
The Company reports its financial results
to shareholders twice a year, with the
publication of its annual and half-year
financial reports. In addition, to maintain
transparency in performance, we also
issued a number of trading updates
during 2020. Presentations or
teleconference calls were held by the
Chief Executive and Chief Financial
Officer with institutional investors and
analysts on each of these dates.
In a normal year all the Directors
attend the Company’s AGM, providing
shareholders with the opportunity
to question them about issues relating
to the Group, either during the meeting
or informally afterwards.
27
WE ARE
E XPERT
Vesuvius supports my career
ambitions by providing opportunities for
additional experience and growth.
Talicia Temelkovski
Account Manager – Iron and Steel, Advanced Refractories
Port Kembla, Australia
Our business 29
Issues relevant to the
stakeholder group
Financial performance
Group internal control
and audit processes
Strategic planning and
ability to repay debt
Gearing and
monitoring of financial
covenant ratios
Business continuity
planning
Transparency/
ethical behaviour
28 Vesuvius plc
Annual Report and Financial Statements 2020
Section 172(1) Statement continued
Our stakeholders
Why we engage
Types of engagement undertaken
Issues relevant to the
stakeholder group
Why we engage
Types of engagement undertaken
Our people
The dedication and
professionalism of our people,
their capacity for owning their
roles and their drive for results are
the most significant contributors
to Vesuvius’ success. We focus
on the health and safety of
all our staff, and engage with
our people, encouraging and
rewarding high performance to
create an environment where
all can realise their individual
potential.
Fundamental focus on health and safety and the care of all employees
Personal development
Continuing dialogue between employees and their managers, including the
conduct of regular performance reviews
Competitive remuneration and benefits strategy, emphasising talent development
with tailored career-stage programmes. Living the Values and other award
schemes celebrate individual achievements
Global communication mechanisms include an internal intranet, global email
communications and a Vesuvius app, alongside forums such as local ‘town hall’
meetings. The Group is reconstituting its European Works Council, operates local
works councils and recognises trade unions
Wide-ranging internal training is offered on key job-related issues, with
programmes such as the Vesuvius University – HeaTt – and the Foseco University
In a normal year many businesses operate family days, when the facility is open to
friends and family. In 2020 these activities were not possible
Health and safety
Diversity and inclusion
Remuneration evolution
International mobility
Employee engagement
Development and
retention
Career opportunities
Sustainability
performance
Students and graduates
Attracting new talent to Vesuvius
is vital. Recruiting new students
and graduates feeds the talent
pipeline and allows us to tap
into new sources of up-to-
date business ideas and R&D
capability.
Customers
Engaging with our customers
helps us to understand their
needs and identify opportunities
and challenges. Collaborating
with our customers enables us
to use our expertise to improve
the safety and efficiency of
their manufacturing processes,
enhance their end-product
quality and reduce their costs.
Suppliers and contractors
Maintaining a flexible workforce
through the use of contractors
and cost-effective access to
high-quality raw materials is vital
to our success. Our contractors
and suppliers are critical to
our business.
The Group maintains contact with universities and undertakes R&D collaborations
to identify and develop talent, and complement our in-house R&D capability
Our businesses attend careers fairs and provide student work placements
and internships. University visits and student interactions were limited by COVID-19
restrictions in 2020
Vesuvius’ website provides prospective applicants with detailed information about
the Group
Senior-level dialogue is maintained with all key customers. In a normal year the
Directors regularly visit customers’ sites . In 2020 visits were not possible
Our business model focuses on collaboration with customers, to provide customised
solutions, and more than 2,500 Vesuvius representatives are embedded at
customer locations
The Group manages customer relationships on a global basis as required,
complemented by diverse local servicing capability
We engage with customers on safety leadership and support their training
requirements. In 2020 virtual training initiatives were set up
We provide technical customer training, including the Foseco University, and
participate in industry forums and events. In 2020 these interactions had to be
conducted virtually with more focus on e-learning
Career opportunities,
personal development,
engagement and
retention
Research and
innovation
Training and mobility
Business sustainability
Customer satisfaction
Product performance
and efficiency
Innovation and
provision of solutions
Health and safety
Sustainability
performance
In a normal year Vesuvius conducts regular visits to key suppliers. In 2020
opportunities for such visits were more limited
Senior-level relationships are built with large suppliers. In 2020 virtual meetings
were conducted
Operational
performance
Responsible
procurement
All suppliers/brokers have regular interaction with the Global Purchasing Team
Trust and ethics
Dedicated category directors build long-term relationships and product expertise
Payment practices
There is a rigorous and consistent supplier accreditation procedure
Effective working protocols, including work risk assessments, are established with
contractors
Investors
Continued access to funding is
vital to the performance of our
business. We work to ensure
that our investors have a clear
understanding of our strategy,
performance and objectives.
Supportive investors are more
likely to provide the Company
with funds for expansion.
Vesuvius’ Investor Relations Strategy managed by the Group Finance
Director and Chief Executive includes regular meetings with key and
prospective investors
Financial performance
Strong governance
and transparency
The Group’s Annual Report provides an overview of the Group. Regular
announcements and press releases are published to provide updates on the Group’s
performance and progress
Sustainability
performance
The AGM provides all shareholders with an opportunity to directly engage
with the Board
There is ongoing dialogue with the Company’s analysts to address enquiries
and promote the business
Diversity and inclusion
Director remuneration
Board performance
Lenders
(Banks and debt investors)
The Group needs to access
funding to ensure it has sufficient
financing to run the business and
fund future growth. We ensure
that our relationship banks
have a clear understanding of
our strategy, performance and
objectives. We engage with
lenders to fulfil our compliance
obligations and to ensure that
we have clear knowledge and
awareness of market sensitivities
and trends.
Communities
We are committed to maintaining
positive relationships with the
communities in which we operate.
Our social responsibility activities
complement our Values and we
encourage our employees to
engage with communities and
groups local to our operations.
Environmental agencies
and organisations
Good environmental
management is aligned with
our focus on cost optimisation
and operational excellence.
We engage with appropriate
organisations to ensure that we
are complying with regulatory
requirements, and to publicise
our performance.
Governments and
regulatory agencies
National governments set the
regulatory framework within
which we operate. We engage
where appropriate to ensure
that we can help in shaping
new policies, regulations
and standards, and ensure
compliance with existing
requirements.
Pensioners and
deferred pensioners
Providing for and managing
future pension liabilities in our
defined benefit schemes is an
important part of our financial
planning.
Group Treasury maintains an ongoing dialogue with key lenders through
the relationship banks and other local banks in the countries in which
Vesuvius operates. In 2020 this dialogue was maintained by virtual means
The Group Treasurer, Group Head of Corporate Finance and CFO hold
regular meetings with key personnel from banks and other lenders who provide
the Group’s debt funding. In 2020 these meetings were held virtually
Representatives from the banks are invited to the Group’s results presentations
In 2020 almost all dialogue with lenders moved online with extensive use of video-
conferencing
In a normal year the Group provides work experience and internships to local
university and school children. Such activities were curtailed by the impact of
COVID-19 in 2020
Sponsoring of charitable activities
Participation in local volunteering initiatives
In 2020 community outreach was significantly curtailed. Our sites provided
essential PPE and, in many cases, also engaged in other health-related activities
in our communities
Operational
performance
Transparency and
ethical behaviour
Environmental
performance
Signatory to the UN Global Compact
Online Sustainability Report to be published in 2021
Visits and inspection of sites by government agencies
Annual Report and Financial Statements
Response to environmental research as part of customer and supplier
due diligence
Participation in environmental and social responsibility research and
questionnaires
Governance and
transparency
Operational
performance
Reporting on
performance metrics
Transparent communication with government officials as required
Participation in appropriate government and industry working groups
Membership of industry associations and contribution to best practice guidance
Lobbying and direct contact with appropriate bodies on key business issues
Trust and ethics
Governance and
transparency
Ongoing contact with members of the Group’s pension plans, including annual
member updates and contact on specific regulatory developments
Financial performance
Regular contact with the trustees and custodians of the Group’s benefit plans,
as appropriate
Our business 30 Vesuvius plc
Annual Report and Financial Statements 2020
Risk, viability and going concern
The Board continually monitors the internal
and external risks that could significantly impact
the Group’s long-term performance
The Group undertakes
a continuous process
to review and
understand existing
and emerging risks.
Risk management in 2020
The Board’s oversight of principal risks
involves a specific review of the processes
by which the Group manages those risks.
This establishes a clear understanding at
Board level of the individuals and groups
within the business formally responsible
for the management of specific risks and
the mitigation in place to address them.
The Board also establishes the Group’s
risk appetite, considering the nature and
extent of the principal risks that the Group
should take and the associated adequacy
of the steps being taken to mitigate them.
The Board has overall responsibility for
establishing and maintaining a system of
risk management and internal control, and
for reviewing its effectiveness. The Group
undertakes a continuous process of risk
identification and review, which includes
a formal process, conducted annually
for mapping risks from the bottom up,
with each major business unit and key
operational, senior functional and senior
management staff identifying their
principal risks. This assessment undergoes
a formal review at half-year. The results
are compiled centrally to deliver a
coordinated picture of the key operational
risks identified by the business. These are
further reviewed by the Group Executive
Committee. In conjunction with this
process, each Director contributes their
individual view of top-down strategic risks
facing the Group – drawing on their broad
commercial and financial experience
gained both inside and outside the Group.
The results of this assessment are then
overlaid on the internal assessment of risks
to build a comprehensive analysis of
existing and emerging risk. This review
process extends to cover both financial
and non-financial risks, and considers
the risks associated with the impact
of the Group’s activities on employees,
customers, suppliers, the environment,
local communities and society more
generally. As in previous years, in 2020
the Group’s assessment of principal risks
was also reviewed and considered against
any emerging risks and uncertainties
that were identified through our Board
review process.
The Board continues to monitor the
implications of certain other emerging
‘macro’ trends such as automation
in manufacturing and increasing
digitalisation and electrification, which
could act as disruptors to industry.
Commentary on some of these areas is
contained in the Our external environment
section on pages 16 and 17 of this Report.
In addition, the Board monitors the
developing issues posed by cyber threats,
receiving regular reports on relevant
issues in this area, including general
developments and concerns specific to the
Vesuvius business. Work on maintaining
and, where appropriate, improving the
integrity of our system security remains an
area of focus. See page 111 of the Audit
31
Committee Report for further information.
No additional critical macro trends were
identified in 2020.
This Report sets out, on page 25, the
work done in 2020 to engage with the
workforce, and to ensure that Vesuvius
fosters an appropriate culture that embeds
Vesuvius’ Values throughout the Group.
This reflects the Board’s recognition of the
challenges that could arise from a failure by
the Group to support the retention of
appropriate talent and to foster the correct
culture for success. Whilst the travel
restrictions imposed in 2020 curtailed the
Directors’ face-to-face engagement with
staff around the world, they continued
where possible to solicit feedback to ensure
that the Group was taking the necessary
steps to mitigate risk in this area.
The Directors’ views on each of the above
issues, and on emerging risks in general,
were independently gathered and
integrated into the management
discussions and actions taken on risk.
Risk remains an integrated part of all
business unit presentations to the Board,
informing the Board of the operational
approach taken to risk management
on a day-to-day basis.
Changes to risk in 2020
As with most companies, the COVID-19
pandemic impacted the Group’s staff,
customers, shareholders and suppliers as
well as the Group’s financial performance.
With the economic and social pressures
brought about by COVID-19 during 2020,
the Board continued to focus on the
Group’s existing and emerging risks,
and the processes to mitigate and
manage them.
A key mitigant in 2020 was our devolved
decision-making structure and
empowered regional managers, who
responded swiftly to issues as they arose,
relying both on Group processes and
resources, and acting to respond to
specific local circumstances.
Issues identified by certain of the Group’s
Principal Risks materialised during the
year. The Group’s existing measures in
mitigation were initiated and additional
actions taken specific to the challenges
posed by the COVID-19 pandemic.
These were most notably:
> End Market Risk: Vesuvius experienced
a drop in demand for its products, with
an associated impact on revenue, driven
by the impact of COVID-19 on the
Group’s end markets. Our geographic
diversification shielded us from an acute
impact on revenue, and we flexed our
cost base to respond to the drop in
demand. Other mitigating factors came
into play, with our focus on working
capital management and credit control,
and close monitoring of manufacturing
performance. The Group also accessed
government initiatives around the world
to ease the financial impact, taking
advantage of Tax Deferral schemes,
and temporarily seeking additional
government financing, and furlough
financial support.
> People, Culture and Performance:
The Values of Vesuvius have never been
more at the fore. At the start of the crisis,
across the world our staff worked
tirelessly to provide support for travel/
repatriation, changes to office and site
working conditions, the provision of
increased PPE, IT connectivity, and
staying connected with a significantly
increased body of remote workers.
The Group strengthened its internal
communication with weekly interactive
calls from the Chief Executive and
Group Executive Committee, a bi-
weekly newsletter, regular Chief
Executive messages and the sharing of
best practices, successes and news from
around the Group. The focus on Values
was maintained, involving employee
family initiatives, and continuing our
Living the Values Awards competition.
Where physical meetings had been
expected, these were moved online,
including the Group’s annual Senior
Leaders’ conference.
> Business interruption: Whilst the
Group suffered some disruption in
its manufacturing processes, driven
predominantly by government
shutdowns, management responded
swiftly and effectively to reduce this
impact, minimising plant closures
and downtime, and maintaining our
ability to supply customers safely.
Our management’s responsiveness
has also resulted in other risks not
being manifest, with product quality
remaining at its high level, our safety
culture driving key responses to protect
employees and our continued
investment in R&D and market-leading
research. Finally, the Group’s IT function
supported the transition of around
2,000 employees to work from home,
increasing server capacity, rolling
out technology and expanding, as
appropriate, the Group’s programme
of cyber security and controls.
> Health and Safety: Our very strong
focus on health and safety and the
consistency of its application across
the Group placed us extremely well to
respond to the pandemic’s challenges.
We adapted production layouts to allow
for social distancing, implemented
site-by-site safety plans, ensured the
availability of appropriate PPE and
were able to respond to government
requirements on a country-by-country
basis while keeping our sites operating.
We established weekly group-wide
reporting on instances of COVID-19,
supporting our staff who were affected,
or who needed to self-isolate.
The Board also monitored the effect
of the pandemic on other risks, where
it considered it could have a specific or
longer-term effect. Whilst the Group saw
the beginnings of a recovery towards the
end of 2020, there still remains uncertainty
about the longer-term economic effects
of the pandemic. Similarly, further
protectionism remains possible, though
this has not specifically been manifested
in the Group’s business as a result of the
pandemic. Finally, the social impact of the
pandemic remains at the forefront of the
Board’s concerns, both in relation to our
communities and workforce, and in the
individual health – both mental and
physical – of our staff as we continue
to adapt to different ways of working.
Overall, the Board has not identified any
material change to the Group’s principal
risks and uncertainties during the year
and the COVID-19 pandemic did not
give rise to any change in the Principal
Risks previously identified by the Group.
As such, the Group’s statement of Principal
Risk and Uncertainties was unchanged
in 2020 from 2019.
Our business 32 Vesuvius plc
Annual Report and Financial Statements 2020
Risk, viability and going concern continued
Climate Change
Risk mitigation
The Group’s risk management processes
also incorporate consideration of the
potential impact of climate-related risks
on the Group. The Group does not regard
climate change itself to represent a
material stand-alone risk for the Group’s
operations. However, a significant
proportion of the Group’s revenue is
generated from Steel manufacture and
automotive castings, industries that are
under transition as a result of their focus
on improving environmental performance.
As such, the opportunities in the Group’s
business strategy, which is founded on
helping our customers to improve their
manufacturing efficiency and the quality
of their products – and therefore reduce
their climate impact – will play a critical
part in the development of the Group
going forward. The Group recognises
that climate change could present further
uncertainty for the Group in terms of
increasing climate change-related
regulations, evolution of the geographical
distribution of our customer base and the
costs of meeting more onerous disclosure
requirements.
ESG is identified as a separate element
of the Group risk register – recognising
the work Vesuvius can do to mitigate the
environmental impact of our customers’
processes. Other elements of this risk
are incorporated into the appropriate
Principal Risk and Uncertainties that
the Group has identified. The Group
continues to focus internally on the
action we can take to drive our business’
sustainability. In 2020, the Group
adopted a new Sustainability initiative,
which sets out the Group’s approach to
environmental issues, sets targets in
specific areas and, as such, seeks to
mitigate issues such as the increasing costs
of energy, and the potential reduction in
capital accessibility as investor sentiment
focuses on environmentally-conscious
companies.
Brexit
As we have previously noted, for our
customers located in the EU27 countries,
most of our products are manufactured
by Vesuvius outside the UK, so we did not
envisage a material impact from Brexit
after the expiry of the Transition Period.
To date this has been borne out in our
experience. For those customers located in
the UK or located in the EU27 and supplied
from our UK plants, we have contingency
plans and we continue to work with these
customers to meet their needs in a
cost-efficient way.
The Principal Risks identified are actively
managed in order to mitigate exposure.
Senior management ‘owners’ have been
identified for each principal risk, and they
manage the mitigations of that specific
risk and contribute to the analysis of its
likelihood and materiality. This analysis
is reported to the Board. The risks are
analysed in the context of our business
structure which gives protection against
a number of principal risks we face with
diversified currencies, a widespread
customer base, local production matching
the diversity of our markets and intensive
training of our employees. Additionally,
we seek to mitigate risk through
contractual measures. Where cost-
effective, the risk is transferred to insurers.
Business continuity
In partnership with our risk management
advisers and our insurers, we seek to
identify the most effective means of
reducing or eliminating insurable risks,
through a combination of risk management
and the placing of insurance cover.
Our Insurer Property Loss Control
Programme is based upon insurer loss
modelling and focuses on insured losses.
The insurer’s loss control engineers
undertake a series of on-site inspections
focused on machinery breakdown, fire,
natural catastrophe and other property
damage and business interruption risks.
These surveys yield a series of loss-
reduction recommendations. The
execution of these recommendations is
agreed with site management and then
followed through to completion.
In parallel, Vesuvius’ own loss management
programme focuses on strategic sites and
sites not covered by insurers. Assisted by an
independent consultant, we undertake
property loss control and business
continuity surveys using Vesuvius’ bespoke
risk and exposure-based protocol.
These reports yield further risk reduction
recommendations, and improvement
actions and timescales are agreed and
followed through by site management.
To support the Group’s loss control
activities, risk management workshops
are conducted covering loss prevention,
emergency planning, crisis management
and business recovery.
With regard to fire safety, the Group
monitors all fire-related near misses or
minor dangerous occurrences. Any fires,
including overheating, are reported and
analysed locally and by senior HSE
management in order that safety
improvement initiatives can be prioritised.
Underlying causes are established with
detailed analysis undertaken as a means of
proposing improvement priorities in order
that safety and process safety initiatives
can be targeted on a risk-assessed basis.
The Group’s Cyber Security Committee
meets on a regular basis to review and
progress the Group’s plans for tackling
cyber issues, and the Audit Committee
receives regular updates on the Group’s
activities in this area. A comprehensive
plan is in place to strengthen Vesuvius’
overall IT security, and this is continually
adapted as new risks emerge. During
2020 we conducted further work to
strengthen our IT security and focused on
mitigating risks in Operations Technology
in response to the changing dynamics of
external cyber threats. A holistic approach
is taken to addressing cyber challenges,
focusing on the improvement of the
Group’s overall IT infrastructure,
procedures and framework. The Group
continues to run regular training
programmes on cyber/IT security.
Internal control
The Group’s internal control system is
designed to manage, rather than
eliminate, the financial risks facing the
Group and safeguard its assets. No
system of internal control can provide
absolute assurance against material
misstatement or loss. The Group’s system
is designed to provide the Directors with
reasonable assurance that problems are
identified on a timely basis and are dealt
with appropriately.
The Audit Committee assists the Board in
reviewing the effectiveness of the Group’s
system of internal control, including
financial, operational and compliance
controls, and risk management systems. The
key features of the Group’s system of internal
control are set out in the table opposite.
Reviewing the effectiveness
of risk management and
internal control
The internal control system covers the
Group as a whole and is monitored and
supported by the Group’s Internal Audit
function, which conducts reviews of
Vesuvius’ businesses and reports objectively
both on the adequacy and effectiveness of
the system of internal control and on those
businesses’ compliance with Group policies
and procedures. The Audit Committee
receives reports from the Group Head of
Internal Audit and reports to the Board on
the results of its review.
33
Key features of risk management and internal control
Strategy and
financial reporting
> Comprehensive strategic planning and forecasting process
> Annual budget approved by the Board
> Monthly operating financial information reported against budget
> Key trends and variances analysed and action taken as appropriate
Vesuvius GAAP
> Accounting policies and procedures formulated and disseminated to all Group operations
> Covers the application of accounting standards, the maintenance of accounting records and key financial
control procedures
Operational
controls
> Operating companies and corporate offices maintain internal controls and procedures appropriate to
their structure and business environment
> Compliance with Group policies on items such as authorisation of capital expenditure, treasury
transactions, the management of intellectual property and legal/regulatory issues
> Use of common accounting policies and procedures and financial reporting software used in financial
reporting and consolidation
> Significant financing and investment decisions reserved to the Board
> Monitoring of policy and control mechanisms for managing treasury risk by the Board
> Clearly delegated authority for capital expenditure, purchasing, customer contracts and hiring
Risk assessment
and management
> Continuous process for identifying, evaluating and managing any significant risks
> Risk management process designed to identify the key risks facing each business
> Reports made to the Board on how those risks are managed
> Each major Group business unit produces a risk map to identify key risks, assess the likelihood of risks
occurring, as well as their impact and mitigating actions
> Top-down risk identification undertaken at Group Executive Committee and Board meetings
> Board review of insurance and other measures used in managing risks across the Group
> The Board is notified of major issues and makes an annual assessment of how risks have changed
> Ongoing assurance processes by the legal function and Internal Audit including the annual
self-certification process
> Externally supported ‘Speak Up’ whistleblowing line
Internal Audit
> Reviews Vesuvius’ businesses and reports on the adequacy and effectiveness of their systems of internal
control and compliance with Group policies and procedures
> Agrees action plans for the resolution of any improvement actions identified by their audits, and monitors
with local management and the business unit Presidents, progression with their completion
> Reports to the Audit Committee on the results of each audit and provides regular updates on high-priority
action items
> The Audit Committee discusses the key risks identified by Internal Audit
The Group also conducts a self-
certification exercise by which senior
financial, operational and functional
management certify the compliance
throughout the year of the areas under
their responsibility with the Group’s policies
and procedures and highlight any material
issues that have occurred during the year.
As part of the Board’s process for
reviewing the effectiveness of the system
of internal control, it delegates certain
matters to the Audit Committee.
Following the Audit Committee’s review of
internal financial controls and of the
processes covering other controls, the Board
annually evaluates the results of the internal
control and risk management procedures
conducted by senior management.
Since the date of this evaluation, there have
been no significant changes in internal
controls or other matters identified which
could significantly affect them.
In accordance with the provisions of the
UK Corporate Governance Code, the
Directors confirm that they have carried
out a robust assessment of the principal
risks facing the Company, including those
that threaten its business model, future
performance, solvency or liquidity. They
have also reviewed the effectiveness of
the Group’s system of internal control
and confirm that the necessary actions
have been taken to remedy any control
weaknesses identified during the year
and to the date of this report.
Further detail regarding the Audit
Committee’s review of the effectiveness of
the Group’s risk management and internal
control systems is contained in the Audit
Committee report on pages 110 and 111.
Our business 34 Vesuvius plc
Annual Report and Financial Statements 2020
Risk, viability and going concern continued
a potential breach of a covenant would
only occur in the event of an unforeseen
reduction in revenue of greater than
20% from the level achieved in 2020.
Accordingly, the Directors confirm that they
have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due over
the three-year period to 31 December
2023. Furthermore, the Board believes that
the Group continues to be well positioned
for success in the longer term because of:
our exposure to end-markets that are
growing faster through the cycle than
underlying global GDP; our market-leading
position that is supported by ongoing
investment in innovation and R&D; our
strong degree of customer intimacy with
around a third of our employees working
at customer facilities; and the focus we
have on building quality teams with clear
organisational responsibility.
Going Concern Statement
The COVID-19 pandemic has had a
significant impact on business activity in all
of Vesuvius’ end markets. The World Steel
Association reported that, in 2020, steel
production in the world (excluding China)
declined 8.2% year-on-year. The impact
on our Foundry division has been even
greater, primarily as a result of significant
declines in automotive production.
The impacts of COVID-19 on the Group
have included:
> A c.15% decline in revenues in 2020
compared with the same period in 2019
> The temporary and short-lived closure
of our plants in South Africa, Malaysia
and India due to national lockdowns.
As of 1 May 2020, all operations had
been reopened
In response to the sudden and significant
decline in business activity, the Group took
the following actions:
> Significant cost reduction and cash
preservation initiatives, in addition to
the £20.6m of recurring savings from
our restructuring programmes which we
delivered during the year
> Temporary cost reduction measures
delivered savings of £39.0m in 2020
(£15.9m in reduced employment costs,
£11.8m in reduced discretionary spend
Principal risks
The risks identified on pages 36 and 37 are
those the Board considers to be the most
relevant to the Group in relation to their
potential impact on the achievement of its
Strategic Objectives. All of the risks set out
on these pages could materially affect the
Group, its businesses, future operations and
financial condition, and could cause actual
results to differ materially from expected
or historical results. As a result of COVID-19
there is heightened focus on risks and their
mitigation, but the Principal risks remain the
same. These risks are not the only ones that
the Group will face. Some risks are not yet
known and some currently not deemed
to be material could become so.
Viability Statement
In accordance with the UK Corporate
Governance Code, the Directors have
assessed the viability of the Group over a
three-year period to 31 December 2023,
taking into account the Group’s current
position and the potential impact of the
principal risks and uncertainties. The
Directors have determined that three years
is an appropriate period over which to
provide the Viability Statement because
this is the Company’s planning cycle
and it is sufficiently funded by financing
facilities with average maturity terms of
approximately six years. In making this
statement, the Directors have carried out
a robust assessment of the principal risks
that may threaten the business model,
future performance, solvency and liquidity
of the Group. This is embodied in the annual
Viability process
review of a three-year business plan which
includes a review of sensitivity to ‘business
as usual’ risks, such as profit growth and
working capital variances, severe but
plausible events and the impact these could
have on the Group’s debt covenants and
available liquidity. The results take account
of the availability and likely effectiveness of
the mitigating actions that could be taken
to avoid or reduce the impact or occurrence
of the underlying risks. Whilst the review has
considered all the principal risks identified
by the Group, the following were selected
for enhanced stress testing: an unplanned
drop in customer demand; debt recovery
risk due to customer default; business
interruption due to the unplanned closure
of several key plants; and raw material
price inflation. The Group’s prudent
balance sheet management, flexible cost
base able to react quickly to end-market
conditions, access to long-term capital at
acceptable financing costs and well-
diversified international businesses leave it
well placed to manage these principal risks.
In performing the stress testing, certain
assumptions were made, including that:
customer failures result in write-offs of the
full value of the receivables with no lost
revenue replacement; and cash flow is
supported by working capital releases,
restricted capital expenditure and
operating cost reductions.
These sensitivities were applied to our
actual performance in 2020, which has
already been significantly impacted by the
COVID-19 pandemic, with sales declining
c.15% compared to 2019. Under the
enhanced stress testing described above,
Identify
Viability time horizon and
risk analysis framework
Assess
Principal risks
and stress scenarios
Model
Viability against risk
scenarios, examining
probabilities and impacts
Report
See Viability Statement
35
WE ARE
INTERNATIONAL
Working with a truly
international company like
Vesuvius offers our people
incredible opportunities
to expand their experience
and skills.
Roberto L Castro
Marketing & Technology Manager – Binders & Molding Materials
Foundry Technologies, São Paulo, Brazil
and a reduction in planned employee
incentives of £11.3m). The savings
resulted from:
> restricting all discretionary expenses
> a hiring freeze on all non-critical roles
> accessing government programmes
to reduce labour costs, in line with
available local regulatory options,
together with other flexible workforce
solutions
> the Board and the Group Executive
Committee voluntarily reduced their
fees and salary by 20% for six months
> c.£21m (c.34%) reduction in our net capital
expenditures in 2020 compared to 2019
> c.£38m saving from withdrawal of the
final dividend for 2019
> deferral of tax and social security
payments whenever possible in
accordance with local legislation
In April 2020, Vesuvius also took steps to
boost its liquidity, borrowing £200m from
the Bank of England’s Covid Corporate
Financing Facility (CCFF) programme
and raising c.£115m (US$140m) from the
US private placement (USPP) market.
The £200m borrowed from the CCFF
programme was due to mature in March
2021, but was repaid early in September
2020, as a result of our positive free cash
flow generation in the preceding months
and early signs of marginally improving
levels of business activity. The funds had
been drawn down as a liquidity buffer
in case of an extreme and prolonged
downturn.
The USPP fundraising raised an amount
equivalent to the existing US$140m USPP
which was due to mature in December
2020, which we repaid early in August
2020. As a result, our net debt / EBITDA
covenant increased to 3.25x from 3.0x
previously. Excluding IFRS 16 lease
liabilities, which is consistent with the
calculation under our debt covenants,
net debt / LTM EBITDA was 1.0x at
31 December 2020, broadly in-line with
the level at year-end 2019.
The Group’s available committed liquidity
stood at £437m at year-end 2020, up from
£354m at year-end 2019, as a result of the
Group’s cash flow generation, which
benefited from a reduction in working
capital due to the decline in business activity.
The Directors have prepared cash flow
forecasts for the Group for a period in
excess of 12 months from the date of
approval of the Financial Statements.
These forecasts reflect an assessment of
current and future end-market conditions
and their impact on the Group’s future
trading performance. The analysis
undertaken includes a plausible and severe
downside scenario based on an assumed
protracted COVID-19 related demand
impact, despite current markets showing
emerging confidence in relation to vaccine
roll out. This downside case is the ‘low’ case
from a strategic planning exercise which we
undertook in October 2020, which was
approved by the Board, since when the
outlook has improved. In this downside
scenario, average revenue is 6% lower than
the Group’s base case, and the forecasts
show that the Group has significant
headroom in terms of both available
committed liquidity and required
compliance with financial covenants.
On the basis of the exercise described
above and the Group’s available
committed liquidity, the Directors consider
that the Group and the Company have
adequate resources to continue in
operational existence for a period of at
least 12 months from the date of signing
of these Financial Statements and that
there is no material uncertainty in respect
of going concern. Accordingly, they
continue to adopt a going concern basis
in preparing the Financial Statements
of the Group and the Company.
Our business 36 Vesuvius plc
Annual Report and Financial Statements 2020
Principal risks and uncertainties
37
Risk
Potential impact
Mitigation
Risk
Potential impact
Mitigation
End-market risks
Vesuvius suffers an unplanned
drop in demand, revenue and/
or margin because of market
volatility beyond its control
Strategic
alignment
Unplanned drop in demand and/or
revenue due to reduced production by
our customers
Margin reduction
Customer failure leading to increased
bad debts
Loss of market share to competition
Cost pressures at customers leading to
use of cheaper solutions
Geographic diversification of revenues
Product innovation and service offerings securing long-term
revenue streams and maintaining performance differential
Increase in service and product lines by the development of the
Technical Services offering
R&D includes assessment of emerging technologies
Manufacturing capacity rationalisation and flexible cost base
Diversified customer base: no customer is greater than 10% of
revenue
Robust credit and working capital control to mitigate the risk of
default by counterparties
Protectionism
and globalisation
The Vesuvius business model
cannot adapt or respond
quickly enough to threats from
protectionism and globalisation
Strategic
alignment
Product quality failure
Vesuvius staff/contractors are
injured at work or customers,
staff or third parties suffer
physical injury or financial loss
because of failures in Vesuvius
products
Strategic
alignment
Complex and changing
regulatory environment
Vesuvius experiences a
contracting customer base
or increased transaction and
administrative costs due to
compliance with changing
regulatory requirements
Strategic
alignment
Restricted access to market due to
enforced preference of local suppliers
Highly diversified manufacturing footprint with manufacturing
sites located in 26 countries
Increased barriers to entry for new
businesses or expansion
Strong local management with delegated authority to run their
businesses and manage customer relationships
Increased costs from import duties,
taxation or tariffs
Loss of market share
Trade restrictions
Cost flexibility
Tax risk management and control framework together with
a strong control of inter-company trading
Injury to staff and contractors
Product or application failures lead
to adverse financial impact or loss of
reputation as technology leader
Incident at customer plant causes
manufacturing downtime or damage
to infrastructure
Customer claims from product
quality issues
Revenue reduction from reduced end-
market access
Disruption of supply chain and route
to market
Increased internal control processes
Increased frequency of regulatory
investigations
Reputational damage
Quality management programmes including stringent quality
control standards, monitoring and reporting
Experienced technical staff knowledgeable in the application
of our products and technology
Targeted global insurance programme
Experienced internal legal function overseeing third-party
contracting
Compliance programmes and training across the Group
Independent Internal Audit function
Experienced internal legal function including dedicated
compliance specialists
Global procurement category management of strategic
raw materials
Failure to secure
innovation
Vesuvius fails to achieve
continuous improvement in its
products, systems and services
Product substitution by customers
Increased competitive pressure
through lack of differentiation of
Vesuvius offering
Enduring and significant investment in R&D, with market-leading
research
A shared strategy for innovation throughout the Group, deployed
via our R&D centres
Commoditisation of product portfolio
through lack of development
Stage gate process from innovation to commercialisation to foster
innovation and increase alignment with strategy
Strategic
alignment
Lack of response to changing
customer needs
Loss of intellectual property
protection
Programme of manufacturing and process excellence
Quality programme, focused on quality and consistency
Stringent intellectual property registration and defence
Business interruption
Vesuvius loses production
capacity or experiences supply
chain disruption due to physical
site damage (accident, fire,
natural disaster, terrorism),
industrial action, cyber attack
or global health crisis
Strategic
alignment
People, culture and
performance
Vesuvius is unable to attract and
retain the right calibre of staff,
fails to instil an appropriate
culture or fails to embed the
right systems to drive personal
performance in pursuit of the
Group’s long-term growth
Strategic
alignment
Loss/closure of a major plant
temporarily or permanently impairing
our ability to serve our customers
Diversified manufacturing footprint
Disaster recovery planning
Damage to or restriction in ability to
use assets
Denial of access to critical systems or
control processes
Business continuity planning with strategic maintenance of excess
capacity
Physical and IT control systems security, access and training
Cyber risks integrated into wider risk-management structure
Disruption of manufacturing
processes
Inability to source critical raw
materials
Well-established global insurance programme
Group-wide safety management programmes
Dual sourcing strategy and development of substitutes
Organisational culture of high
performance is not achieved
Staff turnover in growing economies
and regions
Internal focus on talent development and training, with tailored
career-stage programmes and clear performance management
strategies
Contacts with universities to identify and develop talent
Stagnation of ideas and development
opportunities
Career path planning and global opportunities for high-potential
staff
Loss of expertise and critical business
knowledge
Internal programmes for the structured transfer of technical and
other knowledge
Reduced management pipeline for
succession to senior positions
Clearly defined Values underpin business culture
Health and safety
Vesuvius staff or contractors
are injured at work because of
failures in Vesuvius’ operations,
equipment or processes
Strategic
alignment
Injury to staff and contractors
Health and safety breaches
Manufacturing downtime or damage
to infrastructure from incident at plant
Inability to attract the necessary
workforce
Reputational damage
Active safety programmes, with ongoing wide-ranging monitoring
and safety training
Independent safety audit team
Quality management programmes including stringent
manufacturing process control standards, monitoring
and reporting
Environmental,
Social and Governance
criteria
Vesuvius fails to capitalise on the
opportunity to help its customers
significantly reduce their carbon
emissions as environmental
pressure grows on the steel
industry or Vesuvius fails to
meet the expectations of its
various stakeholders including
employees and investors
Strategic
alignment
Strategic
alignment
Loss of opportunity to grow sales
Loss of opportunity to increase margin
Loss of stakeholder confidence
including investors
Reputational damage
Development and implementation of a new Sustainability
initiative, which includes stretching targets focused on reducing
the Group’s Energy usage, CO2 emissions, waste and recycled
materials
R&D focus on products that assist customers to reduce carbon
emissions and improve their own sustainability measures
Skilled technical sales force to develop efficient solutions for our
customers
Globally disseminated Code of Conduct sets out standards of
conduct expected and ABC Policy adopted with a zero tolerance
regarding bribery and corruption
Internal Speak Up mechanisms to allow reporting of concerns
Extensive use of due diligence to assess existing and potential
business partners and customers
Deliver growth
Generate sustainable
profitability and
create shareholder
value
Maintain strong
cash generation
and an efficient
capital structure
Provide a safe
working environment
for our people
Be at the forefront
of innovation
Run top-quality,
cost-efficient
and sustainable
operations
Foster talent,
skill and motivation
in our people
See more about Our strategy on p14 and 15
Our business
38 Vesuvius plc
Annual Report and Financial Statements 2020
39
Our performance
40 Key Performance Indicators
42 Financial review
48 Operating reviews
48 Steel Division
48 Steel Flow Control
51 Steel Advanced
Refractories
52 Steel Sensors & Probes
54 Foundry Division
Find out more at
report2020.vesuvius.com
WE ARE
SUSTAINABLE
I work for a company that is
genuinely doing what it can to cut
our impact on the environment
and help our customers
do the same.
Purushottam Bedare
Head, Cement Business
Advanced Refractories
Vizag, India
Our performance
40 Vesuvius plc
Annual Report and Financial Statements 2020
Key Performance Indicators
Financial KPIs*
Strategic alignment
KPI
Deliver growth
Underlying revenue growth %
Generate
sustainable
profitability
and create
shareholder
value
2020 -12.7
2019 -5.7
2018 10.7
Trading profit £m
2020
101.4
2019
181.4
2018
197.2
Return on sales %
2020
7.0
2019
10.6
2018
11.0
Headline profit before tax £m
2020
91.6
2019
171.4
2018
188.9
Headline EPS p
2020
23.2
2019
45.1
2018
49.6
Return on net assets %
2020
16.0
2019
26.4
2018
30.4
Used to assess the financial performance
of the Group as a whole
Used to assess the underlying earnings
performance of the Group as a whole
Annual Incentive
Plan and Vesuvius
Share Plan – Read
more about this
on p135-139
Used to assess the financial performance
and asset management of the Group
Maintain strong
cash generation
and an efficient
capital structure
Free cash flow £m
2020
113.5
2019
121.5
2018
102.6
Used to assess the underlying cash
generation of the Group. One of the factors
driving the generation of free cash flow is the
average working capital to sales ratio, which
indicates the level of working capital used in
the business
Annual Incentive
Plan – Read more
about this on p135
and 136
Average working capital to sales %
2020
23.2
2019
24.0
2018
23.9
Interest cover
2020
14.5x
2019
22.9x
2018
22.8x
Net debt to EBITDA
2020
1.2x
2019
1.1x
2018
1.0x
These two ratios are used to assess the
financial position of the Group and its ability
to fund future growth
* For definitions of alternative performance measures, refer to Note 4 of the Group Financial Statements.
Purpose
Link to remuneration
Non-financial KPIs
Strategic alignment
KPI
Provides an important indicator of organic
(like-for-like) growth of Group businesses
between reporting periods. This measure
eliminates the impact of exchange rates,
acquisitions, disposals and significant
business closures
Used to assess the trading performance
of Group businesses
Vesuvius Share
Plan – Read more
about this on
p138 and 139
Provide a
safe working
environment
for our people
Be at the
forefront of
innovation
Lost time injury frequency rate
2020
1.12
2019
1.55
2018
1.42
Description/target
LTIFR of below 1
Work-related illness or injuries which resulted
in an employee being absent for at least one
day – measured per million hours worked
Total R&D spend £m
At constant 2020 currency
2020
27.9
2019
28.9
2018
33.9
New product sales %
2020 12.4
2019 16.3
2018 15.4
Sales of products launched within the last
five years as a % of total revenue
41
Link to remuneration
Annual Incentive
Plan – Read more
about this on p135
and 136
Annual Incentive
Plan – Read more
about this on p135
and 136
Run top-quality,
cost-efficient
and sustainable
operations
Total energy consumption
kWh per metric tonne of product packed
for shipment
10% reduction of energy consumption per
metric tonne of product packed for shipment
by 2025 (vs 2019)
Annual Incentive
Plan – Read more
about this on p135
and 136
-3.4%
Energy CO2e emissions
-3.9%
Waste water
-7.5%
Solid waste
-16.1%
Recycled material
5.8%
Compliance training
100%
Gender diversity
20%
Foster talent,
motivation
and skill
10% reduction of Scope 1 and Scope 2
Energy CO2e emissions per metric tonne
of product packed for shipment by 2025
(vs 2019)
25% reduction of waste water per metric
tonne of product packed for shipment by
2025 (vs 2019)
25% reduction of solid waste (hazardous and
sent to landfill) per metric tonne of product
packed for shipment by 2025 (vs 2019)
7% of recovered or recycled materials from
external sources to be used by 2025
At least 90% of targeted staff to complete
Anti-Bribery and Corruption training
annually
30% female representation in Top
Management by 2025 (Group Executive
Committee plus key direct reports)
Annual Incentive
Plan – Read more
about this on p135
and 136
Our performance
42 Vesuvius plc
Annual Report and Financial Statements 2020
Financial review
A keen focus on cost savings and cash
management helped preserve our balance
sheet strength
Our 2020 achievements
have proven the resilience
of both our business and
our dedicated teams.
Basis of preparation
All references in this financial review are
to headline performance unless stated
otherwise. See Note 4.1 to the Group
Financial Statements for the definition
of headline performance.
Guy Young
Chief Financial
Officer
£1,458.3m
Revenue
Reported
-14.7%
Underlying1
-12.7%
£101.4m
Trading profit2
Reported
-44.1%
Underlying1
-43.3%
15.3p
Statutory EPS
Reported
-48.7%
7.0%
Return on sales2
Reported
-360bps
Underlying1
-370bps
1. Underlying basis is at constant currency and
excludes separately reported items and the
impact of acquisitions and disposals.
2. For definitions of alternative performance
measures, refer to Note 4 of the Group
Financial Statements.
Introduction
In a period of unprecedented global
disruption, the Group’s overall performance
reflects its resilience, founded on its
market-leading positions, flexible business
model and strong balance sheet. The
Group was able to quickly implement
cost-saving measures, in addition to the
planned savings from our restructuring
programme, ensuring that we were able to
limit the negative impact of the COVID-19
pandemic on our results. At the same time,
strong cash flow generation, a conservative
balance sheet and the various cash
preservation measures taken, enabled us to
maintain high liquidity and significant
covenant headroom. Reflecting the Group’s
performance and strong financial position,
the Board felt comfortable declaring an
interim dividend in October 2020.
2020 performance overview
The Group performance in 2020 was
inevitably affected by the global outbreak
of COVID-19 which has materially
disrupted our key end markets for both
Steel and Foundry Divisions and led to a
12.7% fall in underlying revenue. Reported
revenue decreased by £252.1m over
the prior year and by £208.9m on an
underlying basis. Against this challenging
backdrop, the Group was quick to
implement decisive cash preservation
and cost-saving measures to mitigate the
impact of the disruption caused by the
pandemic. These decisive measures
included, cost savings of £39.0m,
efficient management of inventories and
receivables and reduction of planned
capital expenditure. At the same time,
we continued to deliver on our planned
restructuring programme, with a total of
£20.6m incremental savings reported.
Trading profit for the year was £101.4m,
44.1% lower than the prior year. Return on
sales for 2020 on a reported basis was
7.0%, lower than the prior year by 360bps.
The Group’s improving discipline in
aligning working capital with sales and
managing capital expenditure delivered
a strong 173% cash conversion ratio.
The achievement of our 2020 results
involved an outstanding effort by all
our employees and I want to join our
Chairman and Chief Executive in thanking
them for their hard work, dedication
and professionalism during this
challenging year.
Dividend
The Board considers the dividend to be
an important component of shareholder
returns. However, in April 2020, the Board
took the difficult decision to withdraw its
recommendation to pay the final dividend
of 14.3 pence per share announced with
the publication of the full year 2019 results
due to uncertain trading conditions and
the need to preserve financial flexibility.
Reflecting the Group’s 2020 performance
and strong financial position, the Board
declared in October 2020 an interim
dividend of 3.1 pence per share. The
Board has recommended a final dividend
of 14.3 pence, bringing the total dividend
for the year to 17.4 pence per share (2019:
6.2 pence per share, following the
cancellation of the 14.3p proposed final
2019 dividend). If approved at the Annual
General Meeting on 12 May 2021, the final
dividend will be paid on 21 May 2021 to
shareholders on the register at the close
of business on 16 April 2021.
It remains the Board’s intention to deliver
long-term dividend growth, provided this
is supported by underlying earnings, cash
flows, capital expenditure requirements
and the prevailing market outlook.
Key Performance Indicators
We have identified a number of KPIs
against which we have consistently
reported. As with prior years, we
measure our results on an underlying
basis, where we adjust to ensure
appropriate comparability between
periods, irrespective of currency
fluctuations and any business
acquisitions and disposals.
Underlying revenue growth %
This is done by:
-12.7%
2020 -12.7
2019 -5.7
2018 10.7
Return on sales %
7.0%
7.0
2020
2019
10.6
2018
11.0
> Restating the previous period’s results
at the same foreign exchange (FX) rates
used in the current period
> Removing the results of disposed
businesses in both the current and
prior years
> Removing the results of acquired
businesses in both the current and
prior years
Therefore, for 2020, we have:
> Retranslated 2019 results at the FX rates
used in calculating the 2020 results
> Removed the results of CCPI, which was
acquired during 2019
Objective: Deliver growth
KPI: Underlying revenue growth
Reported revenue for 2020 was
£1,458.3m, which equated to £1,436.2m
on an underlying basis. Reported revenue
for 2019 was £1,710.4m, which equated
to £1,645.1m on an underlying basis. 2020
underlying revenue decreased by 12.7%
year-on-year, almost entirely as a result
of the steep volume of declines due to the
COVID-19 pandemic.
Objective: Generate sustainable
profitability and create
shareholder value
KPI: Trading profit and Return on Sales
We continue to measure underlying trading
profit of the Group as well as trading profit
as a percentage of sales, which we refer
to as our Return on Sales.
Trading profit for 2020 was £101.4m
and Return on Sales was 7.0%. On an
underlying basis, trading profit decreased
by 43.3% and Return on Sales by 370bps.
The significant decline in trading profit was
43
driven by the steep decline in revenues due
to the pandemic, partially mitigated by
cost-saving measures and the ongoing
delivery of benefits from the restructuring
programmes.
The Steel Division recorded Return on
Sales of 7.3%, a 270bps contraction
year-on-year, as underlying trading profit
fell 36.2% to £72.4m during the period.
Return on Sales in the Foundry Division
declined 580bps year-on-year to 6.1%
in 2020 on the back of a 57.1% reduction
in underlying trading profit.
KPI: Headline PBT and Headline EPS
Headline profit before tax (PBT) and
headline earnings per share (EPS) are
used to measure the underlying financial
performance of the Group. The main
difference between trading profit and
PBT is net finance costs which were
£10.9m in 2020, £0.1m lower than 2019.
Our Headline PBT was £91.6m, 46.6%
below last year on a reported basis.
Including amortisation (£9.9m),
restructuring charges (£6.1m), guaranteed
minimum pension equalisation charges
(£0.8m) and vacant site remediation costs
(£10.3m), our PBT of £64.5m was 45.6%
lower than 2019. Headline EPS from
continuing operations at 23.2p was
48.6% lower than 2019.
KPI: Return on net assets (RONA)
RONA is our principal measure of capital
efficiency. We do not exclude the results
of businesses acquired and disposed from
this calculation, as capital efficiency is an
important consideration in our portfolio
decisions. It is calculated as trading profit
plus share of post-tax profit of joint
ventures and associates for the previous
12 months, divided by average net
operating assets, at constant currency
(being the average over the previous
13 months of property, plant and
Revenue
£m
Steel
Foundry
Total Group
Trading profit
£m
Steel
Foundry
Total Group
2020 Revenue
Acquisitions/
(disposals) Underlying
As
reported
2019 Revenue
% change
As
reported
Currency
Acquisitions/
(disposals)
Underlying
Reported
Underlying
1,045.4
(22.1)
1,023.3
1,195.3
412.9
–
412.9
515.1
1,458.3
(22.1)
1,436.2
1,710.4
(29.8)
(11.9)
(41.7)
(23.6)
1,141.9
(12.5%)
(10.4%)
–
503.2
(19.8%)
(17.9%)
(23.6)
1,645.1
(14.7%)
(12.7%)
2020 Trading profit
2019 Trading profit
% change
As
reported
Acquisitions/
(disposals) Underlying
As
reported
Currency
Acquisitions/
(disposals)
Underlying
Reported
Underlying
76.4
25.0
(4.0)
–
101.4
(4.0)
72.4
25.0
97.5
120.1
61.3
181.4
(4.1)
(2.9)
(7.0)
(2.5)
–
(2.5)
113.5
58.4
171.9
(36.4%)
(36.2%)
(59.2%)
(57.1%)
(44.1%)
(43.3%)
Our performance
44 Vesuvius plc
Annual Report and Financial Statements 2020
Financial review continued
Operating profit £m
£74.3m -41.7%
2020
74.3
2019
127.5
2018
164.5
Headline earnings per share* pence
23.2p -48.6%
2020
23.2
2019
45.1
2018
49.6
Statutory earnings per share pence
15.3p -48.7%
2020 15.3
2019 29.8
2018 51.3
RONA moving average* %
16.0%
16.0
2020
2019
26.4
2018
30.4
* For definitions of alternative performance measures,
refer to Note 4 of the Group Financial Statements.
Net debt* £m
£175.1m
175.1
2020
2019
245.8
2018
247.8
* For definitions of alternative performance measures,
refer to Note 4 of the Group Financial Statements.
equipment, trade working capital,
interests in joint ventures and associates,
investments, other operating receivables,
payables and provisions).
As with most of our KPIs, we measure this
on a moving average basis at average
exchange rates for the period to ensure
that we focus on sustainable underlying
improvements. Our RONA for 2020 was
16.0% (2019: 26.4%).
Objective: Maintain strong cash
generation and an efficient
capital structure
KPI: Free cash flow and working capital
Robust cash management was set as one
of the top priorities for the Group, with
comprehensive cash preservation actions
being successfully implemented in each
Division. As a result of these strong cash
management initiatives and a reduction in
capital expenditure versus 2019, the Group
was able to generate adjusted operating
cash flow of £175.2m (2019: £217.7m), and
a cash conversion rate of 173% (2019:
120%) in the period. Free cash flow was
£113.5m in 2020 (2019: £121.5m).
We measure working capital both in terms
of actual cash flow movements, and as
a percentage of sales revenue. Trade
working capital as a percentage of sales in
2020 was 23.2% (2019: 24.0%), measured
on a 12-month moving average basis.
In absolute terms on a constant currency
basis trade working capital decreased by
£37.5m in 2020 following the decline in
sales and an efficient management of
inventories and receivables.
KPI: Net debt and interest cover
During the first half of 2020, the Group
accessed the Bank of England’s Covid
Corporate Financing Facility (CCFF) as
a precautionary measure whilst the full
impact of the pandemic remained
uncertain. We want to thank the Bank of
England for their support during this
challenging year. We also successfully
launched a new US private placement
(USPP) note to cover an older tranche that
was going to mature in December 2020. In
September, we repaid the £200m of debt
issued through the CCFF and in August, we
repaid the US$140m USPP maturing in
December 2020. As at 31 December 2020,
the Group had committed borrowing
facilities of £586.6m (2019: £609.7m),
of which £246.6m was undrawn (2019:
£174.2m).
Net debt at 31 December 2020 was
£175.1m, a £70.7m decrease from
31 December 2019, including the free cash
flow of £113.5m, derivative and foreign
exchange adjustments of £17.5m,
an increase in leases of £15.7m and a
£8.4m dividend paid to shareholders.
At the end of 2020, the net debt to EBITDA
ratio was 1.2x (2019: 1.1x) and EBITDA to
interest was 14.5x (2019: 22.9x). These
ratios are monitored regularly to ensure
that the Group has sufficient financing
available to run the business and fund
future growth.
The Group’s debt facilities have two
financial covenants: the ratios of net debt
to EBITDA and EBITDA to interest
(minimum four times limit). The net debt
to EBITDA covenant has been raised from
3.0x to 3.25x, following redemption of the
USPP Notes in August 2020. The EBITDA
to interest covenant is a minimum of 4x.
Certain adjustments are made to the net
debt calculations for bank covenant
purposes, the most significant of which
is to exclude the impact of IFRS 16.
Objective: Be at the forefront
of innovation
KPI: R&D Spend
We believe that our market-leading
product technology and services deliver
fundamental value to our customers and
that the primary mechanism to deliver that
value is to invest significantly in research
and development. In 2020, while the major
focus was naturally on cost reduction,
we protected our investment in R&D and
continued to develop market-leading
products. In 2020 we spent £27.9m on
R&D activities (2019: £28.9m at constant
2020 currency), which represents 1.9%
of our revenue (2019: 1.7%).
Financial Risk Factors
The Group undertakes regular risk reviews
and, as a minimum, a full risk assessment
process twice a year. As in previous years
this included input from the Board in both
the assessment of risk and the proposed
mitigation. We consider the main financial
risks faced by the Group as being those
posed by a decline in our end-markets,
leading to reduced revenue and profit as
well as potential customer default. We also
monitor carefully the challenges that come
from broader financial uncertainty, which
could bring lack of liquidity and market
volatility. Important but lesser risk exists
in interest rate movements, foreign
exchange rate movements and cost
45
WE ARE
INTERNATIONAL
Vesuvius is truly international
with operations in more than
40 countries, which helps keep
us at the top of our industry.
Hoai Le – Finance Assistant Manager
Ha Pham – HR Assistant
Huyen Nguyen – Purchasing Executive
Hanh Bui – Customer Service Executive
Nguyet Nguyen – Receptionist
Foundry Technologies, Hanoi, Vietnam
Unutilised committed debt facilities £m
£246.6m
2020
246.6
2019
174.2
2018
119.2
Total R&D spend* £m
£27.9m -3.5%
2020
27.9
2019
28.9
2018
33.9
* At constant 2020 currency.
inflation, but these are not expected to
have a material impact on the business
after considering the controls we have in
place. See Note 25 to the Group Financial
Statements.
Our key mitigation of end-market risk is
to manage the Group’s exposure through
balancing our portfolio of business
geographically and to invest in product
innovation. We do so through targeted
capital investment in new and growing
businesses and a combination of capital
and human resource in emerging markets.
When considering other financial risks, we
mitigate liquidity concerns by financing,
using both the bank and private
placement markets. The Group also seeks
to avoid a concentration of debt maturities
in any one period to spread its refinancing
risk. In April 2020, Vesuvius took steps to
boost its liquidity, through borrowing
£200m from the CCFF programme and
raising c.£115m (US$140m) from the
USPP market. In August, we repaid in
advance the US$140m USPP Notes
maturing in December 2020, and in
September we repaid the debt issued
through the CCFF. As at 31 December
2020, our liquidity stood at £437.3m.
See Note 4.20 of the Group Financial
Statements.
Restructuring
Despite the significant disruption
associated with the COVID-19 pandemic,
we successfully progressed with the
finalisation of our previously announced
restructuring programmes, with £20.6m
of recurring savings delivered in 2020
relative to 2019. During the period, we
reported £6.1m of restructuring costs
(2019: £39.8m) within separately reported
items that all related to finalisation of
programmes announced in previous years
and were predominantly made up of
redundancy, plant closure costs and asset
write-offs. We are carrying forward into
2021 a restructuring provision of £9.2m,
which will be utilised by the end of 2022.
Mitigation actions in response to the
COVID-19 pandemic
In response to the pandemic, we
implemented several temporary cost-
reduction measures that delivered savings
of £39.0m for the full year 2020 (£18.6m
in Q2, £20.3m in H2). These measures
included a reduction of £15.9m in
employment costs and £11.8m in
discretionary spend, as well as an £11.3m
reduction in planned employee incentives.
Our performance
46 Vesuvius plc
Annual Report and Financial Statements 2020
Financial review continued
Net defined benefit pension deficit £m
£2.1m
2.1
2020
2019
8.5
2018
15.3
During the year, we also suspended some
of our planned capital expenditures
and we prioritised strategic growth
investments, resulting in capex spend
of £59.0m (including additions of right
of use assets of £15.7m), a reduction of
21% versus 2019.
In the last quarter of 2020, the Group
initiated an opex restructuring
programme in EMEA, to ensure that it is
better positioned for long-term growth
and consistent outperformance. This
programme has impacted all business
units and central functions with a total cost
of £5.1m which was fully incurred during
the months of November and December
in 2020.
Thanks to changes to working practices
which will be maintained beyond the end
of the pandemic, and together with opex
reductions undertaken in Q4 2020, we
expect more than £8m of savings to
become permanent.
Vacant site remediation
The Group owns a number of disused
properties in the US, which do not form
part of our trading operations. Costs are
being incurred at one of these sites to
address the significant increase in the
volume of water run-off occurring from
2019. We have engaged waste
management specialists, who are taking
actions to reduce the level of water
(including hydrological studies), and
improving treatment processes, and are
in contact with the relevant regulatory
authorities. We estimate that it will take a
further 18 months to finalise initial works
and that there will then be a period for
which unavoidable associated and
ongoing running costs will be incurred.
The charges related to remediation
and these unavoidable associated and
ongoing running costs have been recorded
in 2020 and are £10.3m (2019: £4.1m).
Taxation
A key measure of tax performance is
the Effective Tax Rate (ETR), which is
calculated on the income tax associated
with headline performance, divided by the
headline profit before tax and before the
WE ARE
INNOVATIVE
Vesuvius creates an environment
where ideas can connect and
brings innovation for sustainable
business models.
K. Arulraj
Manager, Strategic Initiatives, Foundry Technologies
Pune, India
47
Group’s share of post-tax profit of joint
ventures (2020: £90.5m, 2019: £170.4m).
The Group’s ETR, based on the income
tax costs associated with headline
performance of £24.4m (2019: £43.8m),
was 26.9% (2019: 25.7%).
Our ETR in H1 2020 was 27.2%. The
actual ETR of 26.9% for the year ended
31 December 2020 is slightly lower than
that reported at H1 2020 and is primarily
driven by changes in the geographic mix
of realised profits and the impact of
withholding taxes as a proportion of the
reduced total Group profits. The ETR for
the full year 2020 is in line with the original
guidance issued at the time of the 2019
results for a rate between 26% and 27%.
We expect the Group’s effective tax rate
on headline profit before tax and before
the share of post-tax profits from joint
ventures to be between 26% and 27%
in 2021.
Capital expenditure
Capital expenditure in 2020 was £59.0m
(2019: £74.7m) of which £45.9m was in
the Steel Division (2019: £53.6m) and
£13.1m in the Foundry Division (2019:
£21.1m). Capital expenditure on revenue-
generating customer installation assets,
primarily in Steel, was £8.7m (2019:
£7.8m).
Pensions
The total gross defined benefit obligations
at 31 December 2020 are £610.0m funded
(2019: £590.5m funded) and £88.3m
unfunded (2019: £79.3m unfunded).
After asset funding there is a net deficit
of £2.1m (2019: £8.5m) representing an
improvement of £6.4m.
The Group has a limited number of
historical defined benefit plans located
mainly in the UK, US, Germany and
Belgium. The main plans in the UK and
US are largely closed to further benefits
accrual and 56.4% of the liabilities in the
UK have already been insured.
The improvement is driven by £9.0m
from cash contributions and payments
of unfunded benefits and £7.7m from
changes to actuarial assumptions
(attributable to reducing discount rates;
updated mortality assumptions and
pension membership data). These
were offset by additional accrual and
administrative expenditure paid for the
year of £7.4m and £2.9m from foreign
exchange movements.
The majority of the ongoing pension plans
are defined contribution plans, where our
only obligation is to make contributions,
with no further commitments on the level
of post-retirement benefits. During 2020,
cash contributions of £9.7m (2019: £11.3m)
were made into the defined contribution
plans and charged to trading profit.
Guy Young
Chief Financial Officer
3 March 2021
Our performance
48 Vesuvius plc
Annual Report and Financial Statements 2020
Operating reviews
Steel Division
The Group’s Steel Division reported
revenues of £1,045.4m for 2020, a
12.5% decline from the prior year,
reflecting the negative impact of
COVID-19 on steel production volumes
across the world. However, the sales
volume of the Steel Division in 2020
outperformed steel production in the
world (excluding China and Iran) by
1.1%, with particularly strong relative
performance in the growing markets of
India, Vietnam, Turkey, Russia, Ukraine
and South America. Sales in China
progressed by only 0.4% in volume , as
priority was given to profitability over
volumes in the Advanced Refractory
business unit. No sales were made in
Iran. The Steel Division revenues
incorporate a negative price impact of
1.7 % in 2020, mostly in the Advanced
Refractory Business Unit, as raw
material price decline was passed
through to customers.
Trading profit in the Steel Division
declined 36.4% year-on-year to
£76.4m. Return on Sales contracted
270bps to 7.3% during the year as the
cost savings from the restructuring
programme and from the temporary
measures we put in place during the
pandemic only partially offset the
negative volume impact from the
COVID-19 crisis.
Note: Unless otherwise stated, all references
to revenue and trading profit in the Operating
reviews relate to reported figures.
The COVID-19 crisis led to sharp declines in steel production volumes across the
world in 2020. Steel production in the world, excluding China and Iran, which
accounts for approximately 90% of Vesuvius’ sales, fell 8.8% year-on-year
according to the World Steel Association. Including China and Iran, global
production was down 0.9% during the year. Steel production fell 11.8% in Europe
(EU 27 + UK), 8.6% in South America, and 15.5% in NAFTA. China was one of very
few countries where production grew despite the pandemic.
The table below presents the change in steel production in 2020 vs. 2019 and also
H1 2020 and H2 2020 vs. the equivalent periods of 2019. The bulk of the impact
of COVID-19 is reflected in the steep declines in H1, with world (excluding China)
crude steel production falling 14.3% compared to H1 2019.
The like-for-like decline in steel production volume in the world (excluding China)
slowed to 2.9% in H2 2020 versus H2 2019. Despite the recovery in H2 2020, steel
production in NAFTA and Europe (EU 27 + UK) remained well below 2019 levels.
WSA Steel Production Growth (YoY Change)
China
India
NAFTA
South America
EEMEA excl Iran
Europe (EU 27 + UK)
World
World excl China
World excl China and Iran
H1 2020
1.4%
-24.2%
-17.6%
-19.9%
-7.3%
-18.7%
-6.0%
-14.3%
-15.0%
H2 2020
9.5%
1.9%
-13.7%
3.3%
5.9%
-5.0%
3.9%
-2.9%
-3.5%
FY 2020
5.2%
-10.6%
-15.5%
-8.6%
-0.5%
-11.8%
-0.9%
-8.2%
-8.8%
Steel Flow Control
Pascal Genest
President,
Flow Control
Revenue £m
£561.3m
2020
2019
2018
561.3
626.3
662.6
2020 performance
Steel Flow Control revenues were down
10.4% on a reported basis to £561.3m.
On an underlying basis, Flow Control
revenues were down 8.0% during the year,
with sales volume outperforming total
steel production in the world (excluding
China and Iran).
In EMEA, Steel Flow Control revenues
declined 10.8% to £204.7m in 2020 on
a reported basis, with strong relative
performance against the market in EU 27
+ UK, Russia, Ukraine and Turkey, partially
offsetting the weaker performance in the
rest of the region, and in particular
the absence of sales in Iran in 2020.
Our Flow Control revenues fell 14.9%
to £182.9m in the Americas. In NAFTA,
we outperformed the market, posting
a decline of 14.0% versus the 15.5%
market decline. In South America, we also
significantly outperformed the market,
generating growth of 8.4% versus a
general market decline of 8.6%.
In Asia-Pacific, our Flow Control revenues
declined 4.6% to £173.7m in 2020 versus
a 1.5% growth in steel production. We
recorded a slightly below-market volume
49
WE ARE
EFFICIENT
Working efficiently is a part of life
at Vesuvius. We strive to give the very
best service to our customers, and
being efficient gives us a real edge.
Pham Le Nhu Y
Application Engineer, Flow Control
Hanoi, Vietnam
Our performance 51
Steel Advanced Refractories
Thiago Avelar
President,
Advanced
Refractories
Revenue £m
£458.6m
2020
2019
2018
458.6
539.8
541.1
2020 performance
Our Steel Advanced Refractories business
recorded revenues of £458.6m in 2020,
a decrease of 15.0% compared to 2019 on
a reported basis (-13.6% on an underlying
basis), with performance relative to the
steel markets varying across regions.
In the Americas, Advanced Refractories
revenue declined 15.3% to £153.0m
(-14.6% on an underlying basis). In the
US, our Advanced Refractories revenues
declined by 16.3% against domestic steel
production which declined by 17.2%.
This outperformance was supported by
increased penetration of products into
Electric Arc Furnaces (EAF), in addition
to increased sales to traditional core
integrated mills, which were more
negatively impacted by the pandemic.
In South America, we recorded a limited
revenue decline of 3.1%, versus the 8.6%
decline in steel production in the region.
In EMEA, our Advanced Refractories
revenue declined by 20.5% to £187.8m
during the year (-19.2% on an underlying
basis). Our sales volume outperformed the
underlying market in EU 27 + UK, Turkey,
South Africa, Ukraine and Russia, partially
compensating for weakness in other
areas including the absence of sales
to Iran in 2020.
In Asia-Pacific, revenues from Advanced
Refractories were £117.9m, a decrease
of 4.1% compared to the previous year,
underperforming steel production in
the region, which grew 1.5%. This
underperformance was driven almost
entirely by China, where our sales volume
declined by 11.8% due to our strategy
of prioritising profitability over volumes
in Advanced Refractories. In the rest of
the region, our Advanced Refractories
business outperformed the underlying
steel market, in particular in the key
growth countries of India and Vietnam.
Strategic highlights from the year
In 2020, we completed the relocation of
our European bricks manufacturing hub
from Poland to South Africa as part of our
restructuring programme to streamline
our production footprint and increase
efficiencies. We also successfully
completed the integration of CCPI, the
specialist refractory producer in the US,
focused on tundish (steel continuous
casting) applications and aluminium.
CCPI’s main facility in Blanchester, OH was
closed in 2019, and its production has now
been fully absorbed into the Group’s North
American manufacturing footprint.
Following positive responses from
customers to the new Process Metrix
Anteris 360i* laser scanner for Basic
Oxygen Furnace and Torpedo car
applications, we have launched a solutions
package with these products which
includes refractories as well. During the
year, the Group’s mechatronics centre
also rolled out the next generation of
our Tundish Spray Robot technology,
a CE-certified fully-integrated spray
application system solution.
Looking forward
In 2021, we will continue to invest in
the capabilities of our R&D centres of
excellence to introduce new value-adding
products into the market. In addition,
we are committed to accelerating the
development of a sustainable products
portfolio to help improve our customers’
environmental footprint significantly, as
well as ensure the long-term sustainability
of our business. We will also advance our
strategic growth initiatives in our core
product lines, leveraging our latest robotic
and distinct innovative laser technologies
by combining our high-performance
50 Vesuvius plc
Annual Report and Financial Statements 2020
Operating reviews – Steel Flow Control continued
Duraflex L*: More than
a ladle shroud!
New breakthrough generation
of ladle shroud including multiple
new features, creating value for
our customers and, in particular,
extended life, reducing waste
(by a factor of up to 4) and
increasing operator safety.
Steel Flow Control’s value-
added solutions include:
> Refractories: Consumable
ceramic products to contain the
flow of molten steel, e.g. ladle
shroud and slide-gate refractory
> Systems: Mechanisms using
ceramic products that control
the flow of molten steel,
e.g. slide-gate and stopper
mechanisms
> Robotics: Installing and replacing
Vesuvius’ consumables in very
harsh environments, increasing
the safety and consistency of
our customers’ operations
> Digital services: Control of the
continuous casting process,
including mould level control,
laser measurements of the ladle
and continuous temperature
measurement devices
> Technical support: Teams of
experts available to our
customers, helping them with
the design and modelling of
the molten steel through the
continuous casting process
Despite the difficult market conditions, we
successfully launched several high-value-
added Flow Control products including
Duraflex L*, a breakthrough generation
of ladle shroud, offering multiple value-
creating features, including increased
operator safety and extended life. We also
launched robot-ready ladle gates in the
market, which improve the safety, quality
and consistency of our customers’
operations.
Towards the end of 2020, we launched our
new Advanced Tundish Outlet Modifier
(ATOM)* product, which significantly
improves the quality of our customers’
steel output by reducing mould flow
behaviour changes related to cold steel
influence, and mould level variations
during first heats, limiting surface defects.
ATOM is particularly beneficial in the
high-technology steel production process.
Looking forward
For 2021, we have committed to
performing a portfolio analysis to evaluate
the contribution of our offering to the
reduction in our customers’ CO2 emissions
and define a baseline. This will help us
establish a clear path to accelerate the
development of high-value technological
solutions that will support our customers’
initiatives to reduce their environmental
footprint. Also, as announced at the last
Metallurgical Trade Fair METEC , we
expect to launch additional functionalities
to our mechatronics/robot offering before
the end of 2021, which should expand
customer penetration as well as
demonstrate our customer-centric
innovations. This coming year, we will
continue our investments in automation
and digitalisation to ensure we are always
at the cutting-edge of our industry. We will
also be rolling out a dedicated E-learning
platform to ensure that our technical and
commercial teams maintain their expertise
and reputation for being the industry
reference.
growth in China of 3.2% (versus general
market growth of 5.2%) due largely to
temporary changes in Steel product mix,
where the crisis temporarily drove greater
growth in long steel, which is typically used
in construction and is benefitting from
fiscal stimuli to support the economy. Long
steel typically uses less of our products per
tonne than higher-quality flat steel.
Strategic highlights from the year
In 2020, we commissioned our new
VISO research centre and completed
the expansion of our mechatronics
competence centre in Ghlin, Belgium.
Despite the significant market slowdown
we installed three mechatronics systems
during the year at customer locations in
Asia, and have five active projects for
customers in the pipeline.
We continued to develop our capabilities
in Flow Control’s digital services offering,
focusing on providing our customers with
a complete solution for the collection and
analysis of data to improve the efficiency
of their continuous casting processes. Our
solution includes continuous temperature
measurement sensors for the tundish
and the mould, as well as surface quality
sensors monitoring the quality of the
cast steel slab. Our equipment allows
the customer to monitor and control their
continuous casting process, optimising
productivity and yield, whilst also
improving the quality and consistency
of the steel produced.
During the year, we reinforced our focus
on R&D for casting fluxes to support our
objective of becoming the technological
leaders in certain key markets. During the
year, we developed optimised thin slab flux
offerings to improve steel quality, as well
as extend the life of the VISO refractory.
Our team of experienced engineers
continues to work closely with our
customers on novel mould flux designs
for casting the next generation of
high-strength steels. We also rolled out
our PDM 300 Flux Feeder* offering, one
of the most sophisticated in the market,
in South America following successful
product trials during the year, driving
customer penetration and market
share gains.
* Trademark of the Vesuvius Group of companies,
unregistered or registered in certain countries,
used under license.
Our performance 52 Vesuvius plc
Annual Report and Financial Statements 2020
Operating reviews – Steel Advanced Refractories continued
Steel Sensors & Probes
Davide Guarnieri
Director Sensors
& Probes
refractory products with advanced
application and performance monitoring
solutions. This unique range of products
and services will allow us to accelerate
our penetration in new markets in Steel,
Aluminium and Foundry. Meanwhile,
following the completion of our
restructuring in 2020, we continue
to invest in our well-positioned and
competitive manufacturing footprint
to support the increase in product
volume demand in 2021.
Revenue £m
£25.5m
2020
2019
2018
25.5
29.2
33.0
53
WE ARE
EFFICIENT
2020 performance
Future plans
The slowdown in global steel production
as well as the significant market
uncertainty faced by steel producers
negatively impacted our Sensors and
Probes business unit, where revenues fell
12.9% (-4.2% on an underlying basis),
driven mostly by lower steel production in
the Americas and EMEA. However, sales
evolution in both regions outperformed
the general steel market decline due to
market share gains over competition.
In 2021, we will continue our work to create
longer term value for our stakeholders.
Whilst continuing to supply our core
products, we will focus on service
improvements, research and innovation,
and robotic solutions to bring greater
safety and efficiency to our customers and
add value to their operations. The lean
organisation we have developed over the
past few years is paying dividends, and
with a more focused product portfolio we
will be able to respond more effectively to
our customers’ needs as a trusted partner.
While doing this, we are committed to
design and use an environmentally
responsible approach in our operations
to contribute to Vesuvius’ overall vision
for a sustainable future.
Advanced Refractories’
value-added solutions
include:
> Monolithics and shaped
refractory materials: (In both
magnesia (basic) and alumina
silicate (non-basic) formulations)
supplied by Vesuvius in the form
of powder mixes, which are spray-
applied or cast onto the vessel to
be lined (i.e. monolithics) and in
the form of shapes (e.g. bricks,
pads, dams and other larger
precast shapes)
> Tap hole clay: A refractory mass
used to plug the tapping hole
at the base of a blast furnace.
When molten iron is ready to be
extracted from the blast furnace,
a drilling machine perforates a
hole through the solidified clay
to start the tapping process
> Advance robotic installation
solutions: Offering our customers
tailormade cost-effective
solutions to improve the safety,
quality and efficiency during the
installation of refractory products
in their operations
> Lasers: To help track the
performance of the installed
refractories and instruct the
customer in advance, where
specific wear can be repaired
or where a vessel becomes
unsuitable for further use
> Computational fluid dynamic
capabilities: Used by our
engineers to simulate the flow of
molten metal during the process
of steel-making, aluminium-
making, etc. Our engineers help
our customers optimise their
molten metal flow by designing
customised refractory shapes
to ensure the most efficient
flow dynamics
Efficiency is very important to us –
finding ways to be more productive,
and ensuring that we are not wasteful
of our resources.
Ofelia Vasquez
Credit & Collection Coordinator
Flow Control, Monterrey, Mexico
Our performance 54 Vesuvius plc
Annual Report and Financial Statements 2020
Operating reviews – Foundry Division
Foundry Division
Karena Cancilleri
President, Foundry
Foundry’s value-added
solutions include:
> Feeding systems: Our customised
insulating and exothermic feeding
systems allow for the efficient supply
of molten metal to key areas of
complex and/or large castings, and
prevent liquid shrinkage defects in
the finished casting, improving yields
and productivity by reducing the
amount of molten metal required per
casting. In addition, our exothermic
feeding systems provide a secondary
heat source which can also control
metal cooling, minimising the
adverse effects of shrinkage during
solidification
> Filters: Remove impurities from the
liquid metal and reduce turbulence
during pouring
> Coatings: Protect both sand and
permanent moulds from the effects
of being filled with liquid metal
> Crucibles: Used in a wide range
of melting and holding applications
for non-ferrous alloys, particularly
aluminium, copper and zinc. Each of
these applications requires a crucible
with specific properties to maximise
productivity and minimise energy use
> Other products: These include
binders which are used to prepare
the sand moulds and cores,
inoculants used for ferrous castings,
flux degassing equipment for
removing hydrogen in liquid
aluminium and refractory
materials used in the melting and
transportation of liquid metal
2020 performance
As a result of the COVID-19 crisis, Foundry
end markets declined significantly across
all regions. Production output in vehicle
(light, medium and heavy vehicles) and
mining and construction equipment
sectors, which together make up
approximately 53% of our Foundry
end-markets, fell 16.5% and 8.0%,
respectively during 2020. Although the
auto industry saw a significant rebound
in H2 2020, global light vehicle production
was still down 16.7% from the previous
year, whilst heavy vehicle production was
down 11.2%, according to IHS data. On
the back of these trends, revenues in the
Foundry Division fell 19.8% year-on-year
to £412.9m in 2020, with the rate of decline
broadly consistent across most regions,
except in China and South America,
where we significantly outperformed
key end-markets.
In the Americas, our Foundry revenues
fell 25.9% during the year. Our Foundry
revenues in NAFTA decreased 27.3%,
broadly in line with the declines in
production output in light vehicles and
heavy commercial vehicles of 20.5% and
34.3% respectively. Our Foundry business
in South America remained stable during
the year, as strong market share gains led
to significant outperformance of end
markets in the region, where light vehicle
production output fell 31.3% and heavy
commercial vehicle production fell 22.8%.
Foundry revenues declined 21.1% in
EMEA, in line with the weak trends across
end markets. In Europe (EU27 + UK), our
Foundry revenues fell 22.1% against a light
vehicle production output decline of 23.8%
and heavy commercial vehicle production
decline of 27.2%.
Revenue £m
£412.9m
2020
2019
2018
412.9
515.1
561.3
Likewise in the rest of EMEA, the results
from our Foundry Division were in line to
slightly ahead of vehicle production
declines, with our revenues declining
10.7%, compared to a 15.9% decline in
light vehicle production output and an
8.6% decline in heavy commercial vehicle
production. Overall, results from our
Foundry business in EMEA reflected the
general economic conditions in the region,
where the pandemic significantly curtailed
industrial production, and consumer
demand remained depressed.
Our Foundry revenue in Asia-Pacific
decreased by 14.3%, despite revenue
growth of 10.5% in China, which was
supported by increased market
penetration and higher relative levels
of business activity. In India, our Foundry
business was negatively impacted by plant
shutdowns in H1, posting a 25.1% decline
during the year, whilst production output
in light vehicles and heavy commercial
vehicles was down 24.7% and 57.7%
respectively.
Underlying Foundry trading profit fell
57.1% during the year, implying a 560bps
contraction in Return on Sales. The
contraction reflects the extent, as well as
the speed of volume declines in Foundry
end-markets, and in particular the
automotive market, resulting in reduced
capacity utilisation at our plants.
55
WE ARE
E XPERT
At Vesuvius, we are always learning and
constantly striving to deepen our expertise
to better support our customers and
strengthen our relationships.
Yogesh Patil
Solutions Executive – West, Foundry Technologies
Pune, India
During the year, our Foundry Division
established a dedicated commercial
organisation focusing on the non-ferrous
sector in EMEA, and realigned our
commercial organisation in North
America. We also made progress on
further streamlining our organisational
structure in EMEA and NAFTA, although
due to the COVID-19 crisis, we have
delayed our feeding systems automation
project to 2021.
Looking forward
In 2021, we intend to build on the R&D
optimisation which we started in 2020 to
accelerate our efforts in filling our pipeline
with innovative solutions that create value
for our customers both in terms of process
efficiency and environmental footprint
reduction.
We will start tracking our progress towards
our objective of doubling the proportion
of our product portfolio that positively
impact our customers’ environmental
footprint by 2025. We will also further
reinforce our sales and marketing
resources to maximise commercialisation
of new and existing new products, increase
market share and accelerate penetration
into high-growth markets, and strengthen
our best-in-class customer service.
In particular, we plan to accelerate our
push into the non-ferrous foundry sector
with the launch of several solutions and
technologies. We will also accelerate our
digitalisation and automation projects,
with nearly 30% of 2021 capex earmarked
for this.
Strategic highlights from the year
In 2020, our Foundry Division launched
several products that create value for our
customers through increased efficiencies
in their processes. We rolled out
ENERTEK*, a new family of energy-
efficient crucibles that reduce temperature
loss and improve process consistency,
reducing energy costs and the CO2
footprint of a foundry. We also launched
DIAMANT*, a new suite of degassing
consumables that regulate hydrogen gas
levels in aluminium production that can
increase service life by over 200%
compared to alternative degassers
(mostly graphite) in demanding, high-
production metal treatment applications.
* Trademark of the Vesuvius Group of companies,
unregistered or registered in certain countries,
used under license.
Our performance 56 Vesuvius plc
Annual Report and Financial Statements 2020
57
WE ARE
SUSTAINABLE
Sustainability
58
Introduction: A Better Tomorrow
59 Our Sustainability strategy and objectives
60 Our sustainability targets
61
United Nations Global Compact and
Sustainable Development Goals
62 Our Principles, Approach and Governance
66 Our customers
68 Our planet
74 Our people
84 Our communities
Find out more at
report2020.vesuvius.com
Whether in helping our customers reduce
their environmental footprint or ensuring
we meet our responsibilities to be a good
employer for our people, we are working
towards a better tomorrow.
Queenie Hong
HR Advisor, Flow Control
Suzhou, China
Sustainability 58 Vesuvius plc
Annual Report and Financial Statements 2020
59
Introduction: A Better Tomorrow
Our Sustainability strategy and objectives
2020 was a turning point in
Vesuvius’ sustainability journey
Creating a Better Tomorrow for our planet,
our communities, our people and our customers
In 2020, we launched a new Sustainability initiative
to reinforce the part Vesuvius is playing in creating
a better tomorrow for our planet, our customers,
our people and our communities. Sustainability has
always been at the core of Vesuvius and a key part of
our value proposition. Our new Sustainability initiative
incorporates all of our existing Environmental, Social
and Governance dimensions into our plans.
In addition in 2020, we became signatories to the UN Global Compact, making
a formal public commitment to support its principles on human rights, labour,
environment and anti-corruption, and to engage in activities which advance
the development of the UN’s Sustainable Development Goals.
Our core business is to help our customers improve their operational performance.
This directly translates into a number of environmental benefits, including reduced
consumption of materials, less scrap and waste to landfill and improved metal
yield and energy consumption, which in turn result in lower CO2 emissions. Beyond
improving operational performance, our technologies and services also allow
our customers to manufacture thinner, lighter and higher-performance materials,
thus also reducing the environmental footprint of their customers’ products.
We have set an overarching objective to reach a net zero carbon footprint at the
latest by 2050. This commits us not only to reducing the impact of our operations
on the environment, but also means we will work hard to improve and then quantify
the more significant impact our products can have on our customers’ processes,
and hence their emissions of CO2.
For many years, our sustainability efforts have also been directed towards improving
our own operations through a range of energy conservation programmes, safety
initiatives and human resource plans. Alongside these we have undertaken
charitable and outreach activities in the communities in which we are based.
2020 marked an important inflection and acceleration point for the Group as we
built on this work to launch our new Sustainability initiative. This focuses on ensuring
we continue to affirm our place as a responsible corporate citizen across each
of its four areas. It defines a new governance structure to support both new and
redefined objectives and incorporates a set of new targets to direct our efforts.
Our new initiative supports the Group’s Strategic Objectives and will ensure that
we contribute to a better tomorrow for our planet, our communities, our people,
and our customers.
This section of the Annual Report describes our enhanced approach and outlines
the measures we are taking to move towards achieving our objectives. It not only
explains how we responsibly manage our impacts on society but also the benefits of
our work. We are proud of what has been achieved, but there is much more to come.
Alexander
Laugier-Werth
VP, Sustainability,
HSE & Quality
Non-financial information
statement
This non-financial information
statement provides information
on the Group’s activities and policies
in respect of:
Environmental matters
Our planet p 68-73
The Company’s employees
Our people p74-83
Social matters
Our communities p84-88
Respect for human rights
Our communities p84
Anti-corruption and anti-bribery
matters
Our communities p84-88
The statement also details, where
relevant, the due diligence processes
implemented by the Company
in pursuance of these policies.
Further information, disclosed in
other sections of the Strategic Report,
is incorporated into this statement
by reference, including:
Information on the Group’s
principal risks
Details of the Group’s principal risks
relating to these non-financial matters
are detailed in the Group’s schedule
of Principal risks and uncertainties
on p36 and 37.
Risk, viability and going concern
p30-37
Details of the Group’s business model
p20 and 21
Details of the Group’s non-financial
KPIs
p41
Vesuvius’ purpose is
to develop innovative
solutions which enable
our customers to improve
their manufacturing
costs, product and
service quality, and safety
performance – whilst at the
same time helping them
to become more efficient
in their processes. We aim
to deliver sustainable,
profitable growth to
our shareholders, while
providing each of our
employees with a safe
workplace where their
talents and skills are
recognised, developed
and properly rewarded.
Our Sustainability initiative embodies
this purpose. It sets out the Group’s formal
objectives and targets for supporting
our customers, our employees and our
communities, and for protecting our
planet for future generations. It is
embedded in the Group’s overall
strategy and informs how we deliver
on the Group’s Execution Priorities.
The key objectives and priorities of our Sustainability initiative are outlined below.
They were defined following the identification and analysis of the Group’s most
important and material non-financial risks and opportunities.
Our customers
> To support our customers’ efforts to improve safety on the shop floor
(especially exposure to hot metal).
> To help customers improve their operational performance and thereby
reduce their environmental footprint.
Our planet
> To tackle climate change by reducing our CO2 emissions and helping our
customers reduce theirs with our products and services. Our objective
is to reach a net zero carbon footprint at the latest by 2050.
> To engage in the circular economy by reducing our waste, recovering
more of our products after they have been used and increasing the usage
of recycled materials.
Our people
> To ensure the safety of our people and everyone else who accesses our
sites. This is our first priority. We take safety very seriously and are
constantly striving to improve.
> To offer growth opportunities to all our employees through training and
career progression to develop diverse, engaged and high-performing
teams.
Our communities
> To support the communities in which we operate, with a particular focus
on promoting and supporting women’s education in scientific fields.
> To ensure ethical business conduct both internally and with our trading
partners.
> To extend our sustainability commitment to our suppliers and encourage
them to progress.
Sustainability 60 Vesuvius plc
Annual Report and Financial Statements 2020
Our sustainability targets
We have defined a broad set of Sustainability
Performance Indicators, covering all aspects
of Vesuvius’ Sustainability initiative
The Board has identified ten significant non-financial KPIs for the business. For eight
of these we have set stretching targets for the Group to reach within set timeframes.
An eleventh KPI and target, relating to the conduct of sustainability assessments
for suppliers, has been added for 2021.
The table below illustrates how achieving each target will contribute to achieving our objectives.
Our customers
Our planet
Our people
Our communities
Energy consumption
10% reduction of energy consumption per
metric tonne of product packed for shipment
by 2025 (vs 2019)
Energy CO2e emission
10% reduction of energy CO2e emissions per
metric tonne of product packed for shipment
by 2025 (vs 2019) (Scope 1 and Scope 2)
Waste water
25% reduction of waste water per metric
tonne of product packed for shipment by 2025
(vs 2019)
Solid waste
25% reduction of solid waste (hazardous and
sent to landfill) per metric tonne of product
packed for shipment by 2025 (vs 2019)
Recovered and recycled materials
7% of recovered or recycled materials from
external sources to be used by 2025
Safety
LTIFR of below 1
Gender diversity
30% female representation in Top
Management by 2025 (Group Executive
Committee plus key direct reports)
Compliance training
At least 90% of targeted staff to complete
Anti-Bribery and Corruption training annually
New in 2021: Supply chain
Conduct sustainability assessments of
suppliers covering at least 50% of Group
spend by the end of 2023
Total R&D spend
New product sales
61
United Nations Global Compact and
Sustainable Development Goals
In October 2020, Vesuvius became a signatory to the United Nations Global Compact.
We have committed to base our business approach on its ten Principles on human
rights, labour, environment and anti-corruption, and to engage in activities which
advance the development of the UN Sustainable Development Goals (SDGs)
Human rights
Principle 1 Businesses should
support and respect the protection
of internationally proclaimed human
rights within the scope of their influence
Principle 2 Businesses should make sure
that they are not complicit in human
rights abuse
Labour standards
Principle 3 Businesses should uphold
the freedom of association and the
effective recognition of the right to
collective bargaining
Principle 4 Businesses should uphold
the elimination of all forms of forced
and compulsory labour
Principle 5 Businesses should uphold
the abolition of child labour
Principle 6 Businesses should uphold
the elimination of discrimination in
respect of employment and occupation
Environment
Principle 7 Businesses should
support a precautionary approach
to environmental challenges
Principle 8 Businesses should
undertake initiatives to promote
greater environmental
responsibility
Principle 9 Businesses should
encourage the development
and diffusion of environmentally
friendly technologies
Anti-corruption
Principle 10 Businesses should
work against corruption in all
its forms, including extortion
and bribery
Envir
o
n
m
e
n
t
n
A n t i- c orruptio
s
t
h
m a n ri g
u
H
L
a
b
o
u
r s
t
a
n
dards
Sustainable Development Goals
Vesuvius has identified the practices within its operations that can directly or indirectly contribute to the SDGs. We will focus our
efforts on the following six SDGs – three priority goals and three supporting goals – which are particularly relevant to our business
and where we believe we can make the most meaningful contribution.
Priority SDGs
Supporting SDGs
Goal 8
Promote sustained, inclusive
and sustainable economic growth,
full and productive employment
and decent work for all
Goal 9
Build resilient infrastructure,
promote inclusive and sustainable
industrialisation and foster innovation
Goal 12
Ensure sustainable consumption
and production patterns
Goal 3
Ensure healthy lives and promote
well-being for all at all ages
Goal 5
Achieve gender equality and
empower all women and girls
Goal 6
Ensure availability and
sustainable management of
water and sanitation for all
Sustainability
62 Vesuvius plc
Annual Report and Financial Statements 2020
Our Principles, Approach and Governance
Vesuvius is a geographically and culturally diverse
group, employing more than 10,000 people in
41 countries
Our geographical diversity places us close
to our customers around the globe. It also
highlights the importance of maintaining
and applying strong and consistent values
and ethical principles in our worldwide
approach to business. Our employees’
engagement with our Values and culture is
vital to our success and the sustainable
delivery of the Group’s strategy.
Vesuvius has established a framework for
explaining and embedding the culture and
principles we consider to be fundamental
to our success. To do this we communicate
openly and transparently within the
organisation, through ‘town hall’ meetings,
senior management visits, management
feedback, performance evaluation,
measuring staff engagement and
responding to the feedback we receive.
Critically, there is ongoing and consistent
communication of our CORE Values and
the principles of our Code of Conduct. This
is underpinned by engaging staff across
the Group in both general and targeted
training, to ensure a consistent
understanding of our policies and
procedures.
This transparency of communication also
extends to our stakeholders. We want to
increase the knowledge and understanding
of our stakeholders, through internal and
external reporting and transparent and
meaningful disclosure. Our extended 2020
Sustainability Report, which we will publish
for the first time in 2021, is a key part of this.
In 2021, we will continue to develop our
Sustainability initiative. We plan to
continue building our analyses, focusing
on the evaluation of our Scope 3 emissions
and the emissions avoided by our
customers. We will also further develop
and map our risks and opportunities linked
to climate change. This will allow us to
strengthen our strategy, refine our
longer-term operational plans, reduce
risks, unlock opportunities, and create
more value for all of our stakeholders.
Sustainability initiative development
Vesuvius’ Sustainability initiative was
developed to focus on our most significant
sustainability issues and opportunities.
Vesuvius undertook a materiality
assessment to identify and prioritise these
issues based on two criteria: the impact or
likely impact on the achievement of
Vesuvius’ Strategic Objectives; and the
impact or potential impact on Vesuvius’
stakeholders and their interests.
In undertaking the assessment and
drawing up our new approach, we
engaged with our key stakeholders to
understand their concerns, identifying the
material risks and opportunities for the
Group. We listened to our internal experts,
reviewed external agency ratings, and
benchmarked our current policies, targets
and reporting practices against our peers
and customers.
The Group Executive Committee then
proposed a set of key focus areas for the
Group, defining targets and building the new
Sustainability initiative for Board approval
prior to its launch across the Group.
Material topics
The materiality analysis led to the
confirmation of the following as material
topics for the Group:
> Climate change (energy efficiency,
CO2e emissions, renewable energy,
sustainable products)
> Circular economy (solid waste,
recovered and recycled materials)
> Protection of the environment (waste
water, hazardous waste, environmental
management)
> Human rights (modern slavery, gender
diversity, employee well-being)
> Work relationships and conditions
(health and safety, employee
representation, engagement and
development, values)
> Communities (education, business
practices, supply chain)
> Governance (Code of Conduct,
anti-bribery and corruption, privacy
and data security)
The exclusion of topics from this list does
not mean that they are not considered
important to Vesuvius or are not being
managed, but only that we have chosen
not to address them in detail in this report.
Where appropriate we have incorporated
some commentary on these additional
topics in our report, including water stress
and water consumption, conflict minerals
and environmental compliance.
Step 1
> Survey of key internal and
external stakeholders
> Review of external agency ratings
> Benchmark of current policies,
targets, reporting practices vs
peers and customers
> Interviews with senior managers
and experts
Step 2
> Evaluation of current activities
and reporting
> Selection and definition
of a broad set of metrics
> Assessment of capabilities
> Selection of key KPIs covering
the most important objectives
Step 3
> Identification of metrics and
setting of targets by the Group
Executive Committee
> Approval by the Board
Step 4
> Strategy launch with top
160 managers of the Group
> Constitution of Sustainability
Council
> Deployment throughout
the Group
63
Task Force on Climate-related
Financial Disclosures (TCFD)
Our Sustainability initiative supports our
efforts to align our risk management and
reporting practices to the
recommendations of the TCFD. In this
Report we outline the Group’s governance
practices for Sustainability matters,
describe our views of the actual and
potential impacts of climate-related
risks and opportunities for the Group,
and outline the Group’s processes for
identifying, assessing and managing
climate-related risks. For a number of
years we have disclosed the metrics and
targets we use to assess and manage
relevant climate-related risks and
opportunities, but we acknowledge that
we have more work to do quantifying the
impact on the Group of different climate-
related scenarios. We have only just begun
the journey to assess our Scope 3
emissions. As our Sustainability initiative
states, we are committed to continuing
our progress to create a better tomorrow
for our planet.
Climate-related risks and opportunities
analysis
Each year the Group undertakes a robust
assessment of the principal risks facing
the Group. A number of sustainability risks
are recorded in this analysis (see Risk,
viability and going concern on pages
30-37). As part of this review, and in line
with the recommendations of the Task
Force on Climate-related Disclosures,
Vesuvius continues to identify and
assess the principal climate-related
risks. As more companies place greater
emphasis on their climate-related risks,
and public pressure to tackle climate
change grows, we believe this will present
further opportunities for Vesuvius to grow
its business as we help new customers
to mitigate their climate impact.
(See Our customers on pages 66 and 67).
Climate change related risks
and opportunities
In its broadest context we believe that
climate change, and more particularly the
initiatives being implemented to reduce
society’s impact on the planet, will have
a significant effect on our customers, as
pressure grows on them to improve their
efficiency and reduce their environmental
impact. Vesuvius monitors the impact
of these megatrends on the steel and
foundry industries, and develops products
and services to help our customers meet
these challenges.
Vesuvius operates in 41 countries. From
time to time our operations are subject to
physical damage driven by weather
events, such as severe storms and
flooding, water shortages, or wildfires.
Such events may also impact the
manufacturing capabilities of our
customers , our tier 1 and lower tier
suppliers and our supply chain logistics.
We anticipate the occurrence of such
weather events will continue to increase
and we therefore manage our business to
prepare for them and mitigate their
impact when they do occur. Vesuvius sites
maintain and exercise emergency plans to
deal with such events as part of their
normal risk management and business
continuity processes.
In 2020, Vesuvius manufacturing sites
in India suffered some damage from
Cyclone Amphan. This disrupted normal
operations for a few days but sound
emergency and business recovery
planning meant there was no significant
impact on the Vesuvius business
and assets.
Further details of the risks and
opportunities that climate change present
for Vesuvius can be found in the Our
external environment section on pages 16
and 17 and in our commentary on
Principal risks and uncertainties on pages
36 and 37.
Risk management and business continuity
As the Group has restructured and
concentrated some our manufacturing
footprint on a reduced number of
manufacturing locations, our strategy to
address short-term risks and approach
have transitioned from a focus on
redundant capacity to improved
prevention and risk management. Local
and product line business continuity plans
are maintained by our manufacturing sites
and are regularly reviewed. Sites are
routinely audited by our insurers and
our external risk manager. Exercises and
drills are organised covering IT disaster
recovery, fire, explosion, weather and
geophysical events, and our processes are
improved based on the lessons learned.
Next steps
In 2021, we will conduct a formal update
of our risk analysis of climate-related risks,
in line with the recommendations of the
Task Force on Climate-related Disclosures.
We will place further emphasis on
assessing the long-term climate-related
risks and opportunities and their impact
on the Group’s businesses, strategy,
and financial planning.
Governance structure
Responsibility for the progress of the
Group against its sustainability objectives
lies with the Group Executive Committee
and each business unit President. These
Presidents are also responsible for
incorporating execution plans to address
the climate-related risks and opportunities
into their strategy and action plans.
To ensure its progress, our Sustainability
initiative is underpinned by a newly
created governance structure, comprising
a Sustainability Council and a VP
Sustainability, and a clear set of KPIs
and targets.
The Vesuvius Sustainability Council is
chaired by the Chief Executive. Its role is to
oversee the sustainability activity, monitor
progress against our targets and assist the
Chief Executive and Group Executive
Committee in identifying and assessing
the implications of long-term risks and
opportunities.
The newly created role of VP Sustainability
spearheads our Sustainability activity,
leading Sustainability Council meetings,
developing quarterly performance
reports, providing specific analysis within
business unit teams and managing
Group-wide communications.
The Board receives biannual reports on
the performance of the Group against
sustainability targets and other reporting
metrics. It will review the Group’s approach
to sustainability annually.
Sustainability 64 Vesuvius plc
Annual Report and Financial Statements 2020
65
Our Principles, Approach and Governance continued
Business unit Presidents and regional
business unit Vice Presidents are
responsible for communicating the
sustainability targets inside their
organisations and for implementing the
action plans to achieve these targets.
Escalation mechanisms, routine reviews,
and internal controls such as auditing and
due diligence are in place to ensure
transparency, consistency and
completeness of information.
For certain topics, they are supported and
completed by independent third-party
verification.
Communication of progress
Vesuvius will report annually on its
sustainability activities, commitments
and progress in the Annual Report and
also in a separate Sustainability Report
to be published in each year. This will
cover the environmental, social, and
governance issues defined in the four
dimensions of the Group’s Sustainability
initiative: our planet, our customers, our
people, our communities. In particular,
we will include updates on the
Sustainability Performance Indicators
and progress against the targets.
Our CORE Values
The Group’s CORE Values – Courage,
Ownership, Respect and Energy –
are actively supporting the Group’s
priorities, encouraging consistent
behaviours across the Group to sustain
our business success in the future.
These Values, and the behaviours underpinning them, convey
the mindset and attitudes we expect each employee to show
every day. They are at the heart of the culture of the Group,
promoting our image to external stakeholders, and
underpinning the commercial promise we provide to our
customers. The Values are reinforced through our
performance management systems and are celebrated each
year through our Living the Values Awards (LTVA) which select
regional and global winners for each Value. At each of our sites
we display CORE Values posters in local languages and use
tools such as screen savers as a constant reminder of the
behaviours our people display.
Courage
Ownership
Respect
Energy
> I systematically say, decide
and do what is right for
Vesuvius including when it
is difficult, unpopular, or
not consensual
> I express my opinions
openly during discussions,
but I also defend group
decisions once they’ve
been taken, even if they do
not correspond to my initial
position
> I proactively take
leadership responsibility
on difficult projects and
topics that are important
to the Group’s
performance, motivated
by the perspective of
success rather than
paralysed by the risk of
personal failure
> I am personally
accountable for the
consequences of my
actions and for the
performance of the Group
in my area of responsibility
or oversight, without
blaming external
circumstances or the
actions of others
> I demonstrate an
entrepreneurial spirit,
looking for and seizing
business opportunities and
I immediately address
problems that come up as
soon as I become aware
of them
> I manage the Group’s
money and resources as
though they were my own
> I demonstrate respect for
other people’s ideas and
opinions even if I disagree
with them
> I welcome open debate
> I listen to others, foster
esteem and fairness with
customers, suppliers,
co-workers, shareholders
and the communities
where we operate
> I communicate my
objectives clearly and take
time to explain all
decisions. I behave with the
highest level of integrity
> I promote diversity at all
levels of the Company
> I work hard and
professionally in pursuit
of excellence
> I constantly raise the bar
and challenge the status
quo. For me, the sky is
the limit
> I lead by example, inspiring
and motivating my team
to go the extra mile.
I promote a positive
and energising work
environment. I continuously
deliver outstanding
customer experience and
innovative solutions
> I never underestimate
competitors and
permanently strive to
reinforce the Group’s
leadership position
WE ARE
E XPERT
We are a community of experts
at Vesuvius, and sharing our
knowledge and expertise
is one of the ways we keep
moving forward.
Dale Bower
District Manager, Flow Control
Pittsburgh, US
Code of Conduct
Our Code of Conduct
sets out the standards of
conduct expected, without
exception, of everyone who
works for Vesuvius in any of
our worldwide operations.
The Code of Conduct emphasises our
commitment to ethics and compliance with
the law, and covers every aspect of our
approach to business, from the way that
we engage with customers, employees,
the markets and other stakeholders, to the
safety of our employees and workplaces.
Everyone within Vesuvius is individually
accountable for upholding its
requirements. We recognise that lasting
business success is measured not only in
our financial performance, but in the way
we deal with our customers, business
associates, employees, investors and local
communities. The Code of Conduct is
displayed prominently at all our sites and
is published in our 29 major functional
languages. It is available to view at
www.vesuvius.com.
We continue to enhance the policies that
underpin the principles set out in the Code
of Conduct. These assist employees to
comply with our ethical standards and the
legal requirements of the jurisdictions in
which we conduct our business. They also
give practical guidance on how this can
be achieved.
The Code of Conduct covers:
Health, safety and the
environment
Trading, customers, products
and services
Anti-bribery and corruption
Employees and human rights
Disclosure and investors
Government, society and
local communities
Conflicts of interest
Competitors
The Code of Conduct is available in
29 languages at www.vesuvius.com
Sustainability
66 Vesuvius plc
Annual Report and Financial Statements 2020
67
Our customers
Sustainability has always
been at the heart of
Vesuvius’ business. Our
technology helps our
customers improve their
processes and their
environmental footprint.
Advancements in material science,
pioneered by Vesuvius, have helped to
ensure that the amount of refractory
material required to cast one tonne of steel
has reduced by 80% in the past 60 years.
Our core business is about helping our
customers protect their employees and
improve their operational performance.
Customers rely on the quality and integrity
of our products to safely control the flow
of molten metal in their facilities. Not only
do they rely on the structural integrity of
our products to protect their employees,
but they also rely on our products and
solutions to improve their operational
efficiency.
The reliability and performance of our
products are therefore critical to our
customers, as they directly contribute to
the safety of their employees on the shop
floor, the quality of the products they
manufacture, the efficiency of their
processes (in terms of overall equipment
effectiveness, labour productivity and
metal yield), and their environmental
impact (reducing energy consumption,
CO2 emissions and refractory
material waste).
Environmental footprint
Under the Vesuvius and Foseco brands, we
deliver a wide range of solutions that help
our customers improve the productivity
of their operations. These solutions also
improve the quality of our customers’
products and reduce the environmental
footprint of their processes. Thermal
optimisation and reject reduction are key
factors in the efficiency of the processes
for which we supply solutions. We help
customers use less energy and
consequently cut CO2 emissions through
the provision of insulating materials and
metal flow management, each of which
facilitates extended manufacturing
sequences and improves product
quality, which means less reheating
and reduced downtime.
How does Vesuvius contribute?
We offer energy-efficient solutions in our
portfolio of products and services and
support the deployment of energy-efficient
and sustainable solutions engineered by
our technology departments.
and in-depth investigation. This ensures
we learn from problems and prevent
them recurring, as well as enabling us to
constantly evolve and update our services
in line with changing customer expectations
and technological development.
All issues raised by the Vesuvius field teams
or by customers are reported,
documented and classified. All Customer
Corrective Action Requests (CCARs) are
classified, based on their nature and
severity. They are systematically
investigated, with the following objectives:
> Implementing immediate containment
actions to protect customers
> Identifying the root causes
> Implementing corrective actions
> Learning lessons and providing
feedback for the development
of future products
Regional business unit management
teams are responsible for organising
problem-solving teams to address issues
and lead routine reviews of ongoing
quality performance. Quality
performance, including the number of
customer complaints, the number of
repeat complaints for the same issue and
their severity is reported to the Board on
a regular basis, and reviewed during each
Group Executive Committee meeting.
The most serious issues and those that
affect, or could potentially affect, multiple
customers are described in detail during
these meetings. Adverse trends result in
prompt, clearly defined initiatives by
cross-functional teams, to permanently
solve issues, to prevent repeats.
Along with our focus on the completeness
and quality of reporting, a strong emphasis
is placed on the effectiveness of our
problem-solving.
Vesuvius’ products and services facilitate
environmental benefits by:
> Enabling lighter, thinner and stronger
components, leading to lighter vehicles
and less energy consumption
> Improving customer processes through
the supply of innovative consumables to
reduce energy intensity and the CO2e
intensity ratio
> Reducing customers’ refractory usage
per tonne of steel produced through
higher-quality, longer service-life
products
> Increasing the level of sound castings
produced per tonne of molten metal
through improved mould design and the
application of molten metal filtration
and feeding systems
Our customers are investing significantly
in technology for the long term. As a
responsible business partner, we support
and contribute to their effort through:
> Improving the performance of our
products and especially their lifetime
> Technology to improve their operational
performance
> Developing the recycling of used
products
In 2021 we will focus on the determination
of our Scope 3 emissions and modelling
the emissions avoided by our customers by
using our products. We will embed an
assessment of the environmental benefits
of our products in the evaluation criteria
for new product development projects.
Operational performance
Our products and solutions reduce our
customers’ costs and energy usage, and
reduce waste, by improving their yields,
reducing their scrap rates, and enabling
them to reduce their casting temperatures
and accelerate castings, increasing
throughput.
Customer satisfaction
We have a global commercial network that
constantly monitors the performance of our
products and technologies, developing
deep and lasting relationships with our
customers. Issues are dealt with through
a rigorous problem-solving methodology
Our cross-functional teams involve sales,
Research and Development, and
manufacturing experts, who work
collaboratively to address the most
challenging technical issues. The 8D
practical problem-solving methodology
is used. In 2020, our teams recorded,
reported and investigated 2,427
complaints.
Problem-solving
methodology and
capabilities
The 8D methodology is
implemented as the primary
problem-solving tool across the
Group. It is a consistent approach
designed to identify root causes and
ensure corrective action.
8D – The eight Disciplines of
Practical Problem Solving
D1
D2
D3
D4
D5
D6
D7
Clarify the problem
Grasp the current situation
Contain & set target
Analyse causes
Define countermeasures
Execute & track progress
Check results
D8
Standardise & establish controls
In 2020, we undertook a thorough
assessment of the problem-solving
capabilities and practices in each of our
business units regionally, identifying the
gaps and required actions to reinforce
them where necessary, especially in terms
of staffing and training.
An annual 8D Awards Competition is
organised to recognise the best teams and
projects. This competition is organised
across all business units, in each region,
with a jury composed of senior managers
and sponsored by members of the Group
Executive Committee. More than 125
projects were presented in the last round
of Regional 8D Competitions. In addition
to recognising the best problem-solving
and projects, these events are an
opportunity to recognise talent and
disseminate knowledge.
Certification and recognition
Vesuvius places a high value on ISO
9001:2015 certification and the business
assurance that this quality management
system brings from the global auditors
Lloyd’s Register. We have 67 certified
Vesuvius and customer sites, employing
quality professionals to maintain and
develop quality systems under our
quality policy.
Our products and systems are designed
to comply with the most stringent safety
regulations. We pursue CE marking or
equivalent certification for the equipment
we design and manufacture.
Some examples include:
> The Piedade Sensors & Probes plant
was awarded preferred supplier
status by ArcelorMittal and received
a 1A rating from Höganäs
> Vesuvius Malaysia received an
A certification from Dosh Malaysia
> Vesuvius China was awarded the
Excellent Supplier award by Sinotruk
(Foundry)
> Vesuvius China was recognised as
an “Excellent Cooperative Unit of
Steelmaking Plant” by Shaoguan
> Vesuvius received a 100 grade from
the Fuyao group (glass industry)
Sustainable products
Existing product portfolio
As part of our new Sustainability initiative
we will be assessing the environmental
impact of our existing portfolio over the
full product life cycle. This will take into
account the environmental benefits for
our customers, including the energy
consumption and CO2 emissions required
to prepare and use the product (Scope 3
emissions), the energy consumption and
CO2 emissions avoided by replacing
current practices with the product, product
durability and end-of-life product
management. Comparing all this with the
environmental impact of the resources
required to manufacture it. Undertaking
this analysis will allow us more accurately
to calculate our Scope 3 emissions
and provide us with valuable insight
into the sale and design of new products
which will enable us to reduce our
customers’ emissions.
New product development
Vesuvius invests significantly in new
product development, working closely with
our customers to offer optimised solutions
for their specific needs. We have a unique
combination of expertise coming from a
wide range of fields including metallurgy,
refractory ceramics, robotics and
mechatronics, and IT. This combines with
close contact with customers through our
network of account managers and service
teams, and through regular technical and
R&D meetings with our key customers to
drive our innovation roadmap.
In designing new products, we listen to
our customers, closely observing the
nature of their business to understand
their current and future challenges, needs
and expectations. Combined with the
integration of learning from past issues,
we seek to achieve both incremental
improvements and breakthrough
innovations in safety, robustness,
reliability and performance, and to steer
the development of next-generation
products and services.
Rigorous alpha and beta trial processes
are conducted to confirm that the targeted
performance and robustness objectives
are met, and to allow for fine-tuning
before product launch.
Our broad portfolio of product
development includes many projects
that offer sustainability benefits for
our customers.
We have significantly improved the
focus and accelerated our new product
development process, with ten new
product launches in 2020, and a much-
improved innovation pipeline. In 2021,
we will launch 22 new products, of which
seven will have direct environmental
benefits for our customers.
To further enhance the sustainability
benefits of our products and services to
our customers, we will formally integrate
environmental considerations in product
design and development processes into
the evaluation criteria for new projects.
These will be based on the same criteria as
those used in the assessment of the
existing product portfolio.
Sustainability 68 Vesuvius plc
Annual Report and Financial Statements 2020
69
Our planet
Vesuvius takes seriously
its responsibility for
managing the impact of its
operations and its supply
chain on the environment.
We recognise the finite
nature of the majority of
natural resources and
the obligation we have to
preserve the environment
for future generations.
We are committed to reducing the
environmental footprint of both our own
and our customers’ operations and to
growing our engagement in the circular
economy by reducing the amount of waste
we generate, recovering more of our
products after they have been used and
increasing the usage of recycled materials.
To transition to a low-carbon global
economy, Vesuvius supports the call for
policymakers to:
> Build a global level playing field,
including carbon border adjustments
and robust and predictable carbon
pricing for companies. This will
strengthen incentives to invest in
sustainable technologies and to
change behaviours
> Develop the necessary energy
production and distribution
infrastructure to provide access to
abundant and affordable clean energy
Tackling climate change
Vesuvius actively participates in measures
to tackle climate change by reducing our
CO2 emissions and use of raw materials,
and helping our customers reduce their
own CO2 footprint thanks to the use of our
products and services. We have set
ourselves the goal of reaching a net zero
carbon footprint at the latest by 2050.
Vesuvius embraces society’s expectations
for greater transparency around climate
change, expressed by initiatives such as
the recommendations of the Financial
Stability Board’s Task Force on Climate-
related Financial Disclosures.
According to estimates from Worldsteel
(the World Steel Association), on average
for 2019, 1.83 tonnes of CO2 were emitted
for every tonne of steel produced.
Worldsteel also estimated that the
steel industry generates between 7%
and 9% of global direct emissions from
the use of fossil fuel. With around 10kg
of refractory material required per tonne
of steel produced, the careful selection
and use of energy-saving refractories
can beneficially impact on the net emission
of CO2 in the steel manufacturing process.
In the foundry process, the amount of
metal melted versus the amount sold
as finished castings is the critical factor
impacting a foundry’s environmental
efficiency. Vesuvius continuously works
with its customers to increase this
metal yield.
With respect to our own operations,
the Board recognises that good
environmental management is aligned
with our focus on cost optimisation and
operational excellence. Whilst Vesuvius’
products differ significantly in the
energy intensity of their manufacture,
Measures taken to improve energy efficiency during the year
> Our plants in Suzhou and Weiting,
> The Sao Paulo plant in Brazil has
China, have improved the efficiency
of their kilns by 10% through
improvement of the operating
parameters and refractory
insulation upgrades.
> We closed our energy-intensive
brick plant in Skawina, Poland.
> The Wuhan slide-gate plates JV
plant has shut down its coke oven
gas kiln and replaced it with a
gas-fired tunnel kiln.
upgraded its compressors,
increasing efficiency and reducing
its electricity consumption by 66%.
> The refurbishment of the curing
oven at our Anshan plant in China
has yielded a 26% reduction in gas
consumption.
> Thanks to its new burner system,
energy CO2 emissions per tonne of
product manufactured using the
Rotary kiln in Olifantsfontein, South
Africa, are expected to reduce by
nearly 15%.
most of our manufacturing processes
are not energy intensive nor do they
produce significant quantities of waste
and emissions. Two of our 33 main
manufacturing processes (VISO and
Dolime production) account for 38%
of our energy consumption and 55% of
our CO2e emissions. (We report in kg
of CO2 equivalents (CO2e)). A further
five processes consume 32% of the Group’s
total energy consumption and represent
22% of our CO2e emissions, giving a clear
focus for 70% of the energy and 77% of
our emissions-reduction initiatives. The
Group has clear targets for energy saving,
with ongoing efforts focused on increasing
the efficiency of our production processes.
Dolime production, which uses coal to
calcine dolomite, is a major emitter of CO2
and, building on the successes of previous
years, continues to be a clear focus for
our investment to reduce CO2 emissions.
Vesuvius’ 2020 total energy costs of
£32.6m are circa 2.3% of revenue. Only
1.4% of the total energy requirements
across the Group are consumed in the UK,
producing less than 0.8% of the Group’s
CO2e emissions.
Vesuvius’ energy consumption
and CO2e emissions
In 2020, the Group’s normalised energy
consumption decreased by 3.4% to 1,273
kWh per metric tonne (2019: 1,317), and
the Group’s normalised CO2e emissions
reduced to the lowest level ever recorded,
by 5.0% to 455.5 kg per metric tonne
(2019: 479.4). These reductions and the
12.8% decrease in energy consumed were
primarily driven by changes in product mix
to lower energy intensity products and the
significant decline in production volumes
(9.7%). Natural gas use decreased by
12.9%, electricity consumption by 9.4%
and coal (a CO2 intensive fuel)
consumption by 11%, from 31 thousand
metric tonnes in 2019 to 27.6 thousand
metric tonnes in 2020. During 2020, the
Group also consumed 250 cubic metres of
diesel (-31% versus 2019) in the operation
of forklift trucks on its sites and 195 cubic
metres of fuel oil (-31% versus 2019).
(Total 445 cubic metres of oils as fuel).
The decrease in energy consumption
and improved energy mix not only
resulted in the 5.0% reduction in the
Group’s normalised CO2e emissions
in 2020, but also in a 14.2% reduction
in absolute CO2e emissions.
Greenhouse gas reporting
In reporting GHG emissions, we have used
the GHG Protocol Corporate Accounting
and Reporting Standard (revised edition)
methodology to identify our GHG
inventory of Scope 1 (direct) and Scope 2
(indirect) CO2e. We report in kg of CO2
equivalent (CO2e).
Our energy-related greenhouse gas
(GHG) emissions, reported as Carbon
dioxide equivalents (CO2e), include
emissions of three GHGs (Carbon Dioxide
(CO2), Methane Emissions (CH4 and N2O
Emissions) with process emissions of other
GHGs (Methane Emissions, Direct N2O
Emissions, Direct Sulphur Hexafluoride
Emissions in CO2 equivalent, Direct
Methane Emissions in CO2 equivalent,
Direct N2O Emissions in CO2 equivalent,
Direct HFC Emissions in CO2 equivalent,
Direct PFC Emissions in CO2 Equivalent,
Direct SF6 Emissions in CO2 equivalent)
all not significant.
The Group also meets all its obligations
in relation to the Producer Responsibility
Packaging Waste regulations and the
Energy Saving Opportunity Scheme by
which the UK implemented the EU Energy
Efficiency Directive.
All sites report their energy consumption
and GHG emissions on a quarterly basis.
Figures are verified for consistency and
coherence.
The table below details the fuel consumption (kWh), emissions and normalised emissions for the main fuels consumed across the
Group in 2020.
Category
Coal
Electricity
External Heat
LPG
Natural Gas
Other Fuels
Total Fuels
Energy Used
MWh
2020
Energy Used
MWh
2019
204,693
230,090
194,072
214,287
2,324
61,605
3,382
66,232
559,011
641,688
4,351
20,327
1,026,055 1,176,005
Non-Fuel Emissions
0
0
% change
-11.0%
-9.4%
-31.3%
-7.0%
-12.9%
-78.6%
-12.8%
0.0%
Total
1,026,055 1,176,005
-12.8%
Notes to table and additional information:
1. All fuel consumption is converted to MWh for reporting.
2. In 2020, the Group consumed 50,800 thousand m3 of natural gas.
3. Vesuvius does not use any alternative fuels (% used zero).
4. Heat from Biomass 0.01%.
CO2e m kg
2020
CO2e m kg
2019
65.6
95.4
0.7
13.2
102.8
1.1
278.8
88.4
367.2
76.4
105.4
1.1
14.2
118.0
6.3
321.4
106.6
428.0
% change
-14.1%
-9.5%
-36.6%
-7.0%
-12.9%
-82.8%
-13.2%
-17.1%
-14.2%
CO2e kg per
tonne of
product
2020
CO2e kg per
tonne of
product
2019
81.4
118.4
0.9
16.4
127.5
1.3
345.8
109.7
455.5
85.5
118.1
1.2
15.9
132.1
% change
-4.9%
0.3%
-29.8%
3.0%
-3.5%
7.1
-81.0%
360.0
119.5
479.4
-3.9%
-8.2%
-5.0%
5. Includes all Group operations except for the terminated (March 2019) joint venture Anshan Angang Vesuvius Refractory Company Ltd.
Global GHG emissions (kg of CO2e) and energy consumption (MWh)
Emissions and Energy Sources
Combustion of fuel and operation
of facilities (Scope 1)
Electricity, heat, steam and cooling
purchased for own use (Scope 2)
Total GHG emissions and energy
Change
UK and
Offshore
CO2e m kg
2020
Global
CO2e m kg
2020
Proportion
relating to
the UK and
Offshore
Area
2020
Global
CO2e m kg
2019
UK and
Offshore
Energy
Used MWh
2020
Global
Energy
Used MWh
2020
Proportion
relating to
the UK and
Offshore
Area
2020
Global
MWh
2019
2.206
271
0.8%
322
11,484
829,659
1.4% 958,336
0.611
2.817
96
367
-14.2%
0.6%
0.8%
107
428
2,619
196,396
1.3% 217,669
14,104 1,026,055
1.4% 1,176,005
-12.8%
kg of CO2e per metric tonne
of product packed for shipment
kWh of energy per metric tonne
of product packed for shipment
UK and
Offshore
2020
Global
2020
Global
2019
UK and
Offshore
2020
Global
2020
Vesuvius’ chosen intensity measurement
Emissions and energy reported above,
normalised to per tonne of product output
2,721.7
Change
Methodology:
455.5
-5.0%
479.4
13,627
1,273
-3.4%
Global
2019
1,317
We have reported to the extent reasonably practicable on all the emission sources required under Part 7 of the Accounting Regulations which fall within our Group
Financial Statements. Includes all Group operations except for the terminated (March 2019) joint venture Anshan Angang Vesuvius Refractory Company Ltd.
Scope 1 covers emissions from fuels used in our factories and offices and non-fuel emissions.
Scope 2 relates to the indirect emissions resulting from the generation of electricity, heat, steam and hot water we purchase to supply our offices and factories.
We have used emission factors from the UK Government’s and the IEA GHG Conversion Factors for Company Reporting 2020 in the calculation of our GHG.
Sustainability
70 Vesuvius plc
Annual Report and Financial Statements 2020
71
Our planet continued
Energy conservation plan and CO2e
emissions reduction targets
Our objective is to reach a net zero carbon
footprint at the latest by 2050.
Vesuvius launched its Energy Conservation
Plan in 2011. Between 2015 and 2020, the
Group achieved an overall reduction in
normalised energy consumption of 13.1%
and an 18% reduction in normalised CO2e
emissions, comprising a 16.8% reduction
in normalised energy CO2e usage and
a 22.0% reduction in normalised process
CO2. Our energy conservation plan is now
entering its third cycle of improvement.
In 2020 the Board set a new objective
targeting an additional 10% improvement
in the Group’s normalised energy
consumption, measured per metric tonne
of product packed for shipment by 2025
vs 2019.
The Board also set a related target for the
Group to achieve a 10% reduction in
Energy CO2e emissions per metric tonne of
product packed for shipment (Scope 1 and
Scope 2) vs 2019.
Managing our energy intensity not only
has an environmental benefit but is also
part of our long-term strategy to enhance
our cost-competitiveness.
In seeking to meet these new targets,
the Group will focus on four main areas:
> Invest to upgrade equipment and
reduce our energy consumption
> When possible, replace high CO2e
emission electricity (generated from
coal) with greener electricity or other
sources of energy
> Reduce our energy wastage, recuperate
heat to feed processes and hot water
> Generate clean energy
A number of capital expenditure projects
have already been identified, with some
already approved and programmed.
CO2 free and renewable energy sources
The Group supports the transition towards
renewable energy sources and cleaner
fossil-free technology when possible. In
2020, 37% of the grid electricity consumed
in our sites was generated using processes
that did not emit CO2, of which 26% was
generated from renewable sources . At the
end of 2020, 4 sites were equipped with
renewable energy installations, and 1 had
invested in a combined heat and power
installation.
Energy conservation and CO2e reduction
All manufacturing sites will build action plans to reach this goal, covering both hazardous and non-hazardous waste to eliminate,
reduce and recycle waste.
kWh per metric tonne
kg CO2e per metric tonne
Strong initial progress can be seen in the table below with cost savings already being realised.
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
2015
2016
2017
2018
2019
2020
800
700
600
500
400
300
200
100
0
Energy kWh per metric tonne of product packed for shipment
■ kg Process CO2 per metric tonne of product packed for shipment
■ kg Energy CO2e per metric tonne of product packed for shipment
Scope 3 and avoided emissions
Vesuvius recognises that its Scope 3 CO2
emissions, mainly upstream and
downstream, contribute to a greater part
of its total CO2 emissions than its Scope 1
and 2 emissions. In 2021 we will focus our
efforts to determine the most relevant and
influenceable elements of our Scope 3
emissions, with a goal to set material
science-based targets. We also plan to
develop models and calculate the
emissions avoided by our customers by
using our products, focusing on the
product families having the largest impact.
This will enable us to build quantifiable
targets for our suppliers and inform our
future product development.
Growing our engagement in the
circular economy
Recovered and recycled materials
Vesuvius is determined to increase
the usage of recovered and recycled
materials in its product formulations.
A comprehensive quarterly reporting
system for usage of recovered and
recycled materials by all manufacturing
sites was launched in 2019. It includes the
reporting of recovered and recycled
materials from sources external to
Vesuvius and across Vesuvius facilities.
Following on from this, in 2020 the Board
set a target for the Group to utilise 7% of
recovered and recycled materials from
external sources in its production by 2025.
In 2020, the percentage of recovered or
recycled materials from external sources
used in production was 5.8%.
Increasing the share of recovered and
recycled materials in product formulations
poses multiple challenges, in terms of
availability, consistency of quality,
competitiveness versus virgin material
whose prices fluctuate, regulatory
frameworks for the transportation of
end-of-life waste materials, and
validations to ensure that product
performance and reliability remain
unaffected.
Cross-functional teams incorporating
experts from R&D, Purchasing, and
Manufacturing are working to identify and
analyse opportunities in order to increase
the share of recovered and recycled
materials.
We support initiatives being pursued by
authorities to improve the regulatory
framework for the circulation of waste
materials across borders, making it easier
for them to be recovered and recycled in
different countries.
Material waste
Alongside the monitoring of recovered
and recycled materials, a quarterly
reporting system for material waste from
all manufacturing sites was implemented
in 2019. This was enhanced in 2020, and
now includes the reporting of waste
to landfill, toxic and hazardous waste,
waste for recycling, waste to sewers and
by-products (materials recovered and
recycled outside the site where they were
generated).
Sites were already actively working to
reduce their waste, but a Group-wide
data collection, benchmarking and
improvement programme was initiated in
2019. Following analysis of initial results,
action plans were implemented at ten pilot
sites during 2020 by regional business unit
management, with an increased sharing
of action plans and results. The ultimate
objective is to extend the programme
throughout Vesuvius manufacturing sites
based on lessons learned at these plants.
The Board has set a target of a 25%
reduction of our solid waste (hazardous
and sent to landfill) per metric tonne of
product packed for shipment by 2025
(vs the 2019 baseline).
Manufacturing Site Raw Materials and Waste/(metric tonnes)
2020
2019
variation
Raw materials
Recovered and recycled materials used (from external sources)
Raw materials and intermediates used excluding recycled (from external sources)
Total raw materials and intermediates used (**)
% recovered and recycled materials (from external sources)
Waste
Recycled solid waste
Hazardous solid waste
Solid waste sent to landfill
Solid waste, hazardous and sent to landfill
Total solid waste
Tailings waste
Waste water (**)
Total waste (metric tonnes)
Ratio of solid waste, hazardous and sent to landfill in metric tonnes per tonne of product
packed for shipment
Ratio of total solid waste in metric tonnes per tonne of product packed for shipment
Ratio of waste water in metric tonnes per tonne of product packed for shipment
Ratio of hazardous solid waste to solid waste, hazardous and sent to landfill (**)
55,935
901,137
(*)
(*)
(*)
(*)
957,073 1,075,298
-11.0%
5.8%
31,920
41,496
-23.1%
3,842
22,697
26,539
58,459
0
5,471
-29.8%
29,587
-23.3%
35,058
-24.3%
76,554
-23.6%
0
0
132,498
158,855
-16.6%
190,957
235,409
-18.9%
0.033
0.073
0.165
0.039
0.086
0.178
-16.1%
-15.3%
-7.5%
14.5%
15.6% -110bps
(*) Not available for 2019.
(**) 1 m3 Waste water = 1 Metric tonne.
Hazardous waste
Hazardous waste monitoring and KPIs were introduced in 2019.
In 2020, 14.5% of our solid waste, was classified as hazardous,
a reduction of 110bps on 2019. Whenever relevant, action plans
to reduce hazardous waste are incorporated by manufacturing
sites into their solid waste reduction action plans.
Breakdown of 2020 waste
6%
39%
Recycled waste
(by-products)
Waste sent to landfill
Hazardous waste
55%
Sustainability 72 Vesuvius plc
Annual Report and Financial Statements 2020
73
Our planet continued
Water consumption
and conservation
Water conservation
Vesuvius works to reduce the consumption
of water in its manufacturing operations
by recycling and improving water
management processes. No saltwater
or cooling water is abstracted with no
related outflow. As with energy use,
normalised consumption of water varies
with product mix. In 2020, there was
a slight decrease in absolute water
consumption and an increase in
normalised water consumption – that is,
water use per tonne of product
manufactured – reflecting changes in
quantity and mix of products packed for
shipment. A small number of the areas
in which Vesuvius operates are water-
stressed. In these areas, we make
strenuous efforts to reclaim, recycle
and minimise the overall use of water.
Water consumption and waste water
In 2020, our overall water usage per tonne
of product packed for shipment increased
by 4.0%. This increase was driven by an
evolution in our product mix towards
products that require more water in their
processing. This was partly offset by the
reduction of our waste water per tonne of
product packed for shipment by 7.5%. We
have action plans in place to reduce our
waste water generation globally.
The Board has set a target for the Group
to reduce the amount of waste water
per metric tonne of product packed
for shipment by 25% by 2025 (vs the
2019 baseline).
Water conservation
metric tonnes
metric tonnes per metric tonne
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Water in metric tonnes per metric tonne product packed for shipment
■ Water used in metric tonnes
Water in m3
Water in m3 used per metric tonne of product
packed for shipment
2020
2019
723,355
769,834
change
-6.0%
0.897
0.862
4.0%
Emissions into the air
Environmental policy
Some Vesuvius manufacturing processes
can lead to low levels of emissions into the
air. These include post thermal treatment
residual Volatile Organic Compounds
(from the curing and firing of products
including solvents and resin binders, or
pitch impregnation), residual GHGs from
the combustion of fuels and process
emissions, and residual dusts post capture
and filtration. All manufacturing plants
comply with local regulations and Vesuvius
standards. They monitor their levels of
emissions into the air and actively work to
reduce them. Where local authorities carry
out routine inspections, recommendations
and actions are recorded and acted upon
appropriately.
All employees are expected to adhere to
the Group’s Environmental Policy, which
is translated into local languages and
displayed prominently in all locations.
The Policy is supported with standards
and procedures which are reviewed
and updated on an ongoing basis.
A copy is available to view on our
website at: www.vesuvius.com.
Environmental monitoring and
environmental regulation
Vesuvius operates sites in some developing
markets where environmental concerns
have become politically significant as air
quality deteriorates and residential
expansion takes people closer to areas
historically reserved for manufacturing.
In addition, some of the sites Vesuvius
operates have known ecological
sensitivities, being in the vicinity of
watercourses or environmentally
sensitive areas.
Vesuvius takes seriously its obligations to
its local communities and to ecological
preservation. Environmental compliance
at our sites, reduction in waste, increased
recycling and treatment of emissions are
key to Vesuvius’ operations, and can be a
significant differentiator for our business.
All our factory emissions to air, ground and
water, as well as waste are proactively
managed in accordance with local
regulations. All our manufacturing
operations monitor key environmental
indicators.
WE ARE
INTERNATIONAL
We bring together skills and
experience from all over the world
to offer the very best solutions
to our customers.
Ernesto Cisneros: Ferrous Marketing Manager, Foundry Technologies,
Ramos Arizpe, Mexico
Raphael Vazami: M&T Manager, Iron Filtration & FMT (South America),
Foundry Technologies, São Paulo, Brazil
Regular analysis enables us to act to
reduce our emissions where possible and
to operate more efficiently. Environmental
performance records are kept for the
period of time required to comply with
local regulations.
Manufacturing plants maintain
and test emergency plans to ensure
compliance with local regulations
and Vesuvius standards in the event
of an accidental release.
Reports from external inspections,
including those with findings, are centrally
stored and shared internally with executive
and senior management. Where local
authorities carry out routine inspections,
observations, recommendations and
actions are recorded and acted upon
appropriately.
Vesuvius is committed to addressing
exceedances and complying with local
regulations. All exceedances are reported
in a central database. In 2020, Vesuvius
recorded 20 minor environmental
incidents. Of these, five related to minor
emissions to air, two to emissions to water
and 13 to ground. Total environmental
releases across the Group in 2020 are
estimated to have totalled 1.3 tonnes
(including 1.13 tonnes of water-based
coatings) with 0.14 m3 hydrocarbon resins.
All releases were contained apart from
releases to air. Where incidents occur,
they are managed via Vesuvius’ site
environmental response plans and
reported through the Vesuvius incident
reporting system. We comply with local
reporting requirements in respect of such
incidents.
No action was taken by any authority in
relation to an environmental incident in
2020 which resulted in financial penalties
against Vesuvius. An existing earlier action
in relation to a disused US property for
waste water exceedances remains open.
The Group does not operate any mines
and consequently the Group generates
zero tailings waste.
Internal CO2 pricing
In 2020, Vesuvius took the decision to
include an environmental impact analysis
in the evaluation of all its capital
expenditure projects. An internal CO2
price is incorporated into the financial
evaluation of all significant industrial
projects. Vesuvius views this internal CO2
pricing mechanism as a useful tool to
better appreciate the environmental
impact of long-term investment decisions.
The internal price of CO2 has initially been
set at €30 per tonne of CO2. This price will
be reviewed annually.
Environmental management/
certifications
We have 20 manufacturing sites, one
customer location and one warehouse
certified to ISO 14001:2015, representing
38% of our 53 production sites. Where
previously the decision to pursue ISO
14001 certification was taken at a local
level, Group policy is now to encourage
sites to seek ISO 14001 certification. A list
of certified sites is available to view on the
Vesuvius website: www.vesuvius.com.
Sustainability 74 Vesuvius plc
Annual Report and Financial Statements 2020
Our people
We believe that the safety,
diversity, personal growth
and job satisfaction of
our people are key to the
success and growth of our
business.
Our strategic ambition is to provide a safe
working environment for all our people
and to deliver value to them by providing
development opportunities.
This section details our performance and
initiatives in both Health and Safety and
Human Resources.
Safety and well-being at work
Health and safety is one of Vesuvius’ key
Strategic Objectives, and our overriding
commitment to health and safety is
embedded throughout the organisation.
Our approach is to identify, eliminate,
Safety performance in 2020
Lost Time Injuries per million hours worked
Lost Time Injuries Severity Rate in lost days
per million hours worked
LTIFR 12 months rolling
LTI Severity Rate
12 months rolling
Severity
300
LTIFR
12
10
8
6
4
2
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
250
200
150
100
50
0
reduce or control all workplace risks, and
an ongoing system of training, assessment
and improvement is in place to focus on
achieving this. We remain fundamentally
committed to protecting the health and
safety of employees, contractors, visitors,
customers and any other persons affected
by our activities.
Safety is therefore our top priority.
We want to become a zero-accident
company and are striving to become
a best-in-class organisation for safety
performance and leadership.
COVID-19
In 2020, the COVID-19 pandemic
affected Vesuvius in a wide variety
of ways, impacting our employees
profoundly. We share the grief of the
families and friends of our colleagues
who passed away from COVID-19
in 2020.
Protecting the health and well-being of
our employees, suppliers and all those
entering our sites during the COVID-19
crisis was our priority throughout 2020.
Immediately the threat from the
pandemic became apparent, the Board
ensured that the Group adopted specific
site-by-site actions to protect our
employees. We adhered to World
Health Organization guidelines and
specific government regulations in each
of the countries in which we operate, and
developed global guidelines on a range
of issues for local implementation in line
with local circumstances and
regulations.
We leveraged our global presence
and capabilities, coordinating
logistics to supply face masks and
other personal protective equipment
to all our operating companies, and
sharing resources and best practice
around the world with training and
information campaigns.
We monitored the number of people
who had tested positive, along with
those quarantining, on a weekly basis.
Strict sanitation practices were
implemented at each of our
manufacturing locations with
hand sanitiser distributed and
temperature monitoring put in place.
Social distancing measures were
introduced and workplace layouts
modified to facilitate this.
Colleagues who could work from home
were required to do so, and around the
world our sites quickly coordinated the
delivery of computers, screens and
office furniture to our people to enable
this. We upgraded our network and
security infrastructure for remote
access to company resources, including
online meetings.
The number of colleagues working
remotely varied during the year but
peaked in June with 2,104 people
working from home. At the end of the
year, 1,863 colleagues were still
primarily or wholly working from home.
As the full effects of the pandemic
became apparent, local government
regulations forced the temporary
closure of our sites in several countries
including India, Malaysia and South
Africa. All our facilities experienced
reduced demand, requiring the
implementation of measures to reduce
costs and conserve cash, including
furloughing employees and instigating
mandatory annual leave and part-time
working.
As schools closed around the world,
the Company recognised that many
colleagues needed to adapt their
working hours to care for children,
as well as supporting family members
who became ill, and flexible working
arrangements were adopted at many
sites and offices. Sites in many countries
organised a range of webinars and
training to promote health awareness
and boost mental well-being. Staff in
some regions were also offered
psychological counselling.
We intensified our communication
efforts to keep people up to date with
developments and increase the visibility
of our leadership community. Our Chief
Executive launched a weekly Senior
Leaders Call with top-level managers,
as well as issuing regular newsletters.
More widely, a range of communications
including posters and screen savers,
were developed and delivered to
maintain awareness of safe work
practices around social distancing, the
use of personal protective equipment,
and hygiene.
A great deal of effort was put towards
recognising the incredible commitment
of our people to keeping the Group
operational. This included a global
‘selfie’ campaign, which included the
Group Executive Committee, featuring
photographs of our colleagues thanking
each other for their work.
75
Safety performance in 2020 is detailed below:
Performance Indicators
Work Related Death
Severe Injuries
Lost Time Injuries (LTI)
LTIFR per m hours
Recordable Injuries
RFR per m hours
Medically Treated Injuries (MTI)
MTIFR per m hours
Total Number of Injuries
Injury FR per m hours
LTI Lost Days
LTI Severity Frequency Rate (Lost Days) per m hours
Dangerous Occurrences (DO)
DOFR per m hours
Safety Audits
Safety Audits per 20 Employees per month
Employees Participating in monthly Safety Audits
Employees Participating in monthly Safety Audits %
SIOPA
Other IOPA
IOPA Total
SIOPA per Emp
Other IOPA per Employee
IOPA Total per Employee
Hours Worked (thousands)
Employees and directly
supervised Contractors
2020
Third-party Contractors
and Visitors
2020
All Employees Contractors
and Visitors
2020
0
3
27
1.17
122
5.28
159
6.88
404
17.47
1,957
85
776
33.56
94,324
14
8,420
72%
80,692
29,186
109,878
7
3
9
23,122
0
0
0
0
3
3.29
4
4.38
13
14.24
0
0
0
0.00
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
913
0
3
27
1.12
125
5.20
163
6.78
417
17.35
1,957
81
776
32.29
94,324
14
8,420
72%
80,692
29,186
109,878
7
3
9
24,035
All frequency rates are per million hours worked.
IOPA: Improvement opportunities implemented with a permanent corrective action.
SIOPA: Safety improvement opportunities implemented with a permanent corrective action.
There were no safety incidents involving visitors to Vesuvius’ operations in 2020.
Average Third-party Contractors and Visitors in 2020: 512.
2020 Safety performance
Lost Time and Medically Treated Injuries
With a Lost Time Injury Frequency Rate
(LTIFR) of 1.12 in 2020, we recorded our
lowest frequency rate ever.
Despite the improvement in the number
of incidents in 2020, tragically three of our
colleagues did still suffer severe injuries.
With the aim of becoming ‘best in class’,
the Group has re-energised our safety
agenda to further enhance efforts to
achieve our safety goals.
Severe injuries
Two of the three severe injuries suffered in
2020 occurred in our plants, one resulting
in the loss of sight in one eye and the other
in the amputation of the tip of a finger.
The third happened in a customer
location, resulting in third-degree burns
to an individual. All three injuries were
extensively investigated and changes
made to our HSE standards to try to
prevent any recurrences.
Vesuvius operates a robust and
comprehensive process for the timely
reporting of incidents including all fires,
explosions and any material spill or other
chemical releases. In our internal
standards, we use more stringent
definitions for Lost Time Injuries (LTIs) and
‘severe accidents’ than the definitions used
by many regulatory bodies, and we also
require all sites to report on all Medically
Treated Injuries (MTIs), broader than
recordables, to maintain the focus on
safety, with investigation extended
to all serious Dangerous Occurrences
and all MTIs.
Vesuvius has set an intermediate target to
reach an LTIFR below 1.0, underpinning
the Group’s commitment to ensure the
safety of the Group’s employees and the
objective of zero accidents.
In 2020, 27 LTIs were reported which
resulted in 1,957 lost days giving the
LTI frequency rate for the year of 1.12 per
million hours. This was a significant
decrease versus the 1.55 recorded in 2019.
163 MTIs were reported in 2020 (versus
198 in 2019) out of a total of 417 injuries
reported, resulting in an MTI frequency
rate of 6.78. Whilst 2020 was an unusual
Sustainability 76 Vesuvius plc
Annual Report and Financial Statements 2020
77
Our people continued
year, we believe that these significant
improvements in incident rates reflect a
broader trend of underlying improvement
for the Group and result from a strong
management commitment to change.
The Group has improved staffing in key
places, deployed a set of core safety
rules for the Group, and focused safety
professionals and employees at each
of our sites to improve safety, including
the implementation of Site Safety
Improvement Plans. All of these activities
are supported by Group safety audits and
remote assessments to monitor progress.
Main types of work-related injuries
In 2020, the main causes of work-related
injuries were, in descending order of
frequency: lifting and carrying; striking
against something fixed or stationary;
slips, trips, and falls; and being struck by
moving objects. The main injuries suffered
were contusions, sprains and strains,
lacerations, fractures and abrasions to the
eye. The main body parts affected were
hands and fingers, backs, eyes, knees
and ankles. Based on the incident data,
targeted campaigns are launched by the
business units.
Dangerous occurrences
There was renewed emphasis on the
reporting of dangerous occurrences and
injuries in 2020 so that root cause analysis
could be undertaken, and preventative
action plans implemented to prevent
future occurrences. Consequently,
there was an increase in the number
of dangerous occurrences reported
in 2020 to 776 (2019: 735).
Our principles
1. Good health and safety is
good business
2. Safety is everybody’s
responsibility
3. Working safely is a condition
of employment
4. All work-related injuries and
work-related ill health are
preventable
Safety leadership
Safety performance remains the priority
item on the agenda at all our Group
Executive Committee and management
meetings, and safety performance
is reported to the Board by the Chief
Executive as a matter of priority at
each Board meeting.
The Group Executive Committee reviews
all of the more serious incidents, including
all LTIs, and the responses to these from
local management. The Group remains
fully committed to continuing safety
improvement with a Group Health and
Safety Policy stating a clear goal of:
> No Lost Time Injuries
> No repeat injuries
> No harm to our people or contractors
Health and safety responsibility
and accountability
The business units are directly accountable
for their health and safety performance,
with each business unit determining its own
priorities and resource allocations. Health
and safety performance is included in the
objectives and linked to the remuneration
of all senior managers. It is regarded as
a core management responsibility, with
executives and line managers directly
accountable for health and safety matters
in the operations under their control, and
performance against objectives.
A majority of senior managers have a
portion of their variable compensation
tied to the achievement of safety
performance targets.
This tone from the top is also
demonstrated by the requirement for all
senior managers to perform executive
safety tours, report on their findings to
local operations management and follow
up on improvement requirements. In this
structure, all employees understand that
they have a responsibility to take care
of themselves and others whilst at work.
We expect everyone to participate
positively in the task of preserving
workplace health and safety.
The Group VP Sustainability, HSE and
Quality is responsible for setting the
Group’s policies for health and safety and
controlling their application, with the
business units taking full responsibility for
their implementation and accountability
for performance against them.
Every business facility has an appointed
health and safety manager, who works
with management and all employees to
review site health and safety, assess
training needs and develop and
implement site safety improvement plans.
These local health and safety managers
are assisted by central experts who not
only identify adverse trends and respond
to them, but also enable the sharing
of best practice across Vesuvius.
We continue to work hard to reduce
incident severity and generate actionable
insights from the performance indicators
we capture. The LTI frequency charts
prepared monthly for each business unit
and site, show where injuries have been
reduced and where further effort is
required, through a combination of
behaviour-based approach to safety
and the implementation of physical
safeguards. We focus on the safety of all
personnel, whether they are employees,
third-party contractors or visitors.
Based on the analysis of the kind of
accident, type of injury and parts of the
body affected, the businesses develop
risk-based action plans that consider both
the frequency and severity of incidents
and track progress. Every site
management team receives a monthly
dashboard of health and safety-related
performance indicators, covering both
lagging and leading metrics. As part
of management reporting, the Board
receives a detailed monthly update
on all LTIs.
All site management teams must develop
and implement Site Safety Improvement
Plans, incorporating the identification
and reduction of the site’s main risks,
compliance with the Group safety
standards, deployment of shop floor
safety leadership practices and resolution
of issues highlighted during Group Safety
Audits. Improvement plans are now in
place for all production sites, with
implementation being the direct
responsibility of local managers.
Any site experiencing a severe incident,
an LTI, a medically treated injury, or a
serious dangerous occurrence is required
to investigate the incident. Vesuvius’
investigation procedures are based on the
8D practical problem-solving (‘8D’) tool,
which aims to identify the true root causes
of incidents to prevent a repeat. Results
are formally presented to management,
with details of the 8D-based root causes
and improvement actions cascaded
throughout the organisation. They must
then incorporate findings into their site
safety improvement plans and share their
incident investigation and action plans
across the Group.
Our employees are highly supportive of
the Group’s efforts to improve workplace
safety and acknowledge how seriously
we take this issue. In the 2020 I-Engage
employee engagement survey, 83%
agreed that the Company will address
safety concerns if they are raised, an
increase of 2% on the previous year.
Health and safety auditing
Executive safety tours 2020
Executive safety tours
Our executive safety tours engage senior
management across all disciplines and
functions in the observation of the Group’s
operations, encouraging dialogue with
staff and setting action points for
discussion and implementation. These
tours provide visible safety leadership
on the shop floor in our sites and at our
customer locations. They, along with
our daily safety audits, are a pillar of our
Safety Breakthrough initiative. In 2020,
103 Executive Safety Tours, of which six
were in customer locations, were carried
out by members of the Group Executive
Committee and their direct reports.
This represented a decline from the 135
conducted in 2019, primarily as a result
of travel restrictions imposed by the
COVID-19 pandemic. Nonetheless,
senior management strove to perform
tours in their regions and locations
wherever possible. Many more Safety
Tours are carried out by middle
management, and safety audits are also
carried out by employees, generating
more than 110,000 improvement
opportunities across Vesuvius in 2020.
See the Safety Performance table on
page 75 for further details.
Group safety audits
The Group operates a central safety
auditing team of two auditors, each
with more than 20 years’ experience,
who report to the VP Sustainability, HSE
and Quality. The team’s main purpose
6
7
32
Europe
China
NAFTA
Australia/New Zealand
South America
India
North Asia
10
10
16
22
is to verify the deployment and ongoing
application of the Group’s standards and
policies in our locations, including our
manufacturing sites, R&D facilities and the
customer locations in which a significant
number of our employees operate daily.
Each audit also includes an assessment
of the site’s HSE leadership.
During 2020, the team conducted 29
audits visiting manufacturing locations,
R&D sites and customer locations
with 40 employees or more, as part
of a programme of systematic audits
of all Group locations worldwide.
Travel restrictions due to the COVID-19
crisis prevented the team from completing
the 2020 audit plan. A remote assessment
programme was therefore developed to
reach sites that could not be physically
audited. Remote assessments were
carried out via videoconferences, during
which the site management team
presented the progress made in the
implementation of Group safety
standards, and improvement plans
for the coming months.
Following each audit, action plans are
created by the site management teams
to address any issues identified and work
on completing those assessed on a regular
basis. The observations made during
audits have been used to improve the
Group’s training programmes and the
enhancement of the Group’s health
and safety standards. The Group HSE
audit team reports the results of audits,
as well as the progress of action plans
addressing the most critical issues,
to the Board twice a year.
Sites are encouraged to carry out
self-assessments, based on the Group
safety audit compliance checklist,
to monitor their progress.
Safety audits and improvement
opportunities
In our plants in 2020, more than 70%
of our working population performed
routine safety audits every month.
This generated an average of more
than seven implemented safety
improvement opportunities per person
from more than 8,400 employees,
resulting in an improvement in worker
safety. This audit programme involves
employees at all levels – from the
Group Executive Committee and
safety specialists through to local site
management, employees and directly
supervised contractors.
Sustainability 78 Vesuvius plc
Annual Report and Financial Statements 2020
79
Our people continued
Health and Safety Policy
and standards
All employees are required to adhere to
the Group’s Health and Safety Policy and
Alcohol and Drug Policy. Copies of the
policies signed by all members of the
Group Executive Committee are
translated into local languages and
displayed prominently in all locations.
The Health and Safety Policy is supported
with standards, procedures and ISO
certifications, which are reviewed and
updated on an ongoing basis. The findings
and lessons learned from incident
investigations are incorporated into
updates to prevent any recurrence and
new or improved standards are issued for
implementation across the Group.
In 2020, new standards were created
relating to customer locations and on-site
vehicle operations. In addition, the
standards relating to Risk Assessments,
Ergonomics, Working Safely with Fibres and
Road Safety were reviewed and updated.
Process Safety initiative
In 2020, Vesuvius launched a new Process
Safety initiative, starting with an analysis
of the high-risk processes in the Company,
the elaboration of a global Process Safety
Framework and a first technical standard
covering high-pressure isostatic presses.
The deployment plan includes training, the
development of a centralised database
and the implementation of a routine
reporting process.
Customer Location Standard
The safety of our people is Vesuvius’
number one priority and we have spent
decades improving systems, processes
and technology at our sites to protect our
people at work. We also apply the same
safety standards for our teams working
at customer locations.
In 2020, a new standard was issued to
address the specific risks faced by our
employees whilst operating in customer
locations. This builds on learning from past
issues and best practice, structuring the
cooperation in terms of health and safety
between our customers’ management
teams and our own to ensure issues are
jointly identified and addressed.
For new contracts in customer locations,
we use a formal risk assessment which
aims to identify significant risks to our
employees and contractors. This enables
appropriate control measures to be
agreed and implemented with the support
of our customers in advance of work
commencing.
8 Core Safety Rules
I always wear
mandated
personal
protective
equipment
I only operate
equipment or
vehicles if trained
and authorised
I do not remove,
bypass or tamper
with machine
guarding and
safety devices
I lock, tag
and try before
any intervention
on a machine
I make sure
all high-risk
activities are
covered by a
Daily Permit
to Work
I always
ensure my fall
protection is
secure before
working at height
Before entering
a confined space,
I check I will be
able to breathe
and escape
I only perform
electrical work if
certified and
authorised
Roll-out of Core Safety Rules
In 2019 we launched the Vesuvius 8 Core
Safety Rules that outline our colleagues’
basic safety responsibilities. In 2020, these
were rolled out across the organisation as
the mandated practices for employee and
manager conduct. In conjunction with this,
the Group implemented procedures to
ensure the rules are followed. The rules
were incorporated into the contractual
terms of all employees, and all employees
are expected to report breaches and
violations of the rules, with appropriate
sanctions imposed whenever required.
Health and Safety Awards
The composition of Vesuvius’ safety
regions was reviewed in 2019, increasing
their average size and reducing their
number to 39. In 2020, we distributed
Safety Awards to 12 regions, as
recognition of their outstanding
performance in the previous year. These
regions completed 2019 without recording
a single LTI, recorded a participation of
over 80% of employees in monthly Safety
Audits and implemented more than ten
improvement opportunities per person
per year.
In addition to our efforts to keep our
employees and contractors safe, we take
pride in sharing our safety management
practices with our customers. In 2020, we
received a wide range of customer awards
globally, including a record ten awards for
several of our businesses in India alone.
Pillars of health and safety
Training employees to work safely: TurboS
TurboS training pulls together all of our
safety management practices. Using a
train-the-trainer approach, TurboS training
sessions are tailored to the audience and
their activities. For example, there is a special
training course developed for employees
at customer locations that focuses on the
specific risks faced by these individuals. We
conduct Permit to Work training in all Group
facilities, including customer locations,
which ensures that all non-standard work
conducted in our facilities, whether by our
employees or contractors, is the subject of
a pre-commencement risk assessment and
a formal permission to commence activity,
setting out the safety requirements. We
have developed machinery safety training
with an outside industry leader, Pilz GmbH
& Co, a company specialising in safe
automation technology. Recognised best
practices are extended throughout the
Group through a series of machinery
assessments and training programmes, with
each site identifying and addressing the top
five issues by severity as a matter of priority.
Training activities routinely undertaken
for our employees and contractors include
more than 36 different courses ranging
from managing arc flash hazards to
working at heights.
TurboS is a part of our Safety
Breakthrough initiative and includes a
strong focus on the standardisation of
all our repetitive activities. TurboS also
integrates good management practices
in the workplace, with a strong emphasis
on developing an organisation that
enables everybody to work to the same
high standards in safety performance.
As part of the continuing TurboS initiative:
> Senior executives regularly lead safety
tours at all locations
> Severe accidents are formally reviewed
by the Group Executive Committee
> Employees are routinely engaged in
safety audits
> We invest significantly in safety training
for all employees, irrespective of their
role and function within our business
> All employees are expected to routinely
raise and implement safety
improvement opportunities; we focus on
the number of implemented ideas
> Safety standards are continually
updated, translated and deployed
throughout the Group
> All injuries and dangerous occurrences
are analysed locally, with a formal
presentation of findings, root causes
and improvement actions cascaded
through management
Working in tidy plants – 5S
The continuing use of 5S, the workplace
organisation method, throughout the
Group has driven significant
improvements in our workplace
environment. Employees are encouraged
to develop ownership of their working
areas and take pride in their cleanliness
and organisation. The added support
of our lean specialists has been key to
improving plant safety by removing
hazards for employees and offering
a clean, bright and safe working
environment. Regular 5S audits led
by team leaders ensure continuous
improvement of working conditions
and promote a safer workplace.
Take 2 initiative
Our Take 2 initiative ensures that
employees think again before performing
any unusual or non-standard activity.
Simply stated, the employees take 2
minutes to discuss the task, any hazards
and how to prevent accidents before any
work is started. This process allows the
team to consider and reflect on hazards
and the controls required before work
commences.
Contractor management
Contractor management is a particularly
important area of attention, as it involves
employees of third-party companies
working on our premises to perform various
types of project work. Vesuvius has defined
strict rules which are outlined in the Control
of Contractors standard. These rules
include a pre-screening for safety
performance and risks before a contract
is signed, a commitment to respecting
the same safety standards as Vesuvius
employees, and a safety induction for all
contractor employees on Vesuvius sites.
All activities subject to a Permit to Work
are audited on a daily basis.
Contractor safety management and
performance is monitored. Safety
performance targets for contractors
are set at the same level as for Vesuvius
employees.
Investing in technology for safety
Safety can be improved through the
evolution of procedures and better
behaviours, but technology offers new
opportunities to continue to make our
workplaces safer. Vesuvius is therefore
investing in a range of technologies with
the goal to automate strenuous or
dangerous tasks and improve ergonomics.
We are also exploring a range of new
technologies including exoskeletons,
wearable sensors and autonomous guided
vehicles.
Health and safety certifications
We have six manufacturing sites
(representing 11% of our 53
manufacturing sites), one warehouse and
four Vesuvius operations in customers
certified to ISO 45001:2018/OHSAS
18001:2007. Vesuvius sites choose to
certify based on local regulatory and
customer requirements.
Well-being at work
A critical aspect of our employees’ health
and safety is their physical, emotional and
mental well-being.
In 2020, this saw an increased focus as
the COVID-19 pandemic brought about
many changes to work practices and
unprecedented challenges. Around the
world, our businesses responded with
a range of initiatives including virtual
sporting activities and events, conferences
on health topics, personal support and
coaching and workplace exercise
programmes.
Vesuvius maintains a working hours policy
and monthly reporting of headcount and
hours worked. This allows us to identify if
maximum working hours are being
exceeded which can then be investigated
by management. Other measures in place
include a drive towards automation and
investment in ergonomics, with many sites
offering employee training on ergonomic
practices.
Sustainability 81
Living the Values Awards 2020
Our CORE Values are central to the culture
we are building at Vesuvius. By living
these Values, we will create a truly
entrepreneurial culture that focuses on the
needs of our customers. One of the ways
we encourage and recognise colleagues
who display our Values is our Living the
Values Awards.
In 2020, we saw even greater participation
in our Regional Living the Values Awards.
Winners of each of the categories of these
Awards were nominated for the Global
Living the Values Awards which were
announced at a special online ceremony in
December 2020. Chief Executive Patrick
André paid tribute to all finalists, saying
that they provided a remarkable example
of what can be achieved by being true to
the CORE Values.
Internal Communications
In 2020, we continued to develop our
internal communications programme,
ensuring we have a strong mix of channels
to reach our diverse population. The Chief
Executive regularly addresses the whole
company via the CEO email channel, on
average reaching 75% of the population
with email addresses. Strategic messages
and announcements are regularly shared
on the Group intranet and staff app. 2020
saw an active use of screen savers to
communicate main news, and we
continued to utilise posters as the on-site
communication channel. ‘Town halls’ held
at different levels of the organisation
provided the necessary opportunities for
interactive Q&A sessions with the business
leaders. The Group Executive Committee
held 16 interactive virtual sessions with the
Senior Leadership Group to share regular
business updates and answer questions.
Growth opportunities with
training and career progression
Talent Management
In 2020, we improved the visibility of our
talent pool, launching integrated Talent
and Succession Planning and introducing
a talent mentoring programme piloted
by the Group Executive Committee.
The Group Executive Committee holds
direct responsibility for our senior leaders,
jointly reviewing capability needs and
deciding on development, succession
and cross-organisational moves for the
leadership group. This illustrates the
strong commitment at the highest level
of our organisation towards growing the
Group using its Company-wide resources.
We employ individuals with an
entrepreneurial mindset and an
international outlook. Whether they
are recent graduates or seasoned
professionals, everybody who wants
to leave their mark in a dynamic rapidly
developing business environment has
a chance to succeed. Special attention
is paid to building strong, diverse teams
that bring different backgrounds and
experiences to our daily work.
Strengthening the leadership pipeline
and facilitating people development
throughout the organisation remain key
areas of focus for Vesuvius. In 2020, we
continued to work hard to ensure that we
have the right capability in every part of
the organisation to drive our strategy and
realise market opportunities. As a result,
we have built high-calibre leadership
teams, many of whom are relatively new to
their roles and to Vesuvius. We empower
our people to drive the business with an
entrepreneurial spirit, and to develop a
performance-oriented culture. We align
our senior management in their strategic
business outlook and performance goals
across all operational and functional
business areas.
We encourage and reward high
performance, foster talent and aim to
create an environment where all can
realise their individual potential. To meet
the demands of the business and add
rigour to our employee value proposition,
we have launched training programmes to
assist our employees to develop their skills
and progress their careers.
We aim to balance between external
hires and internal promotion, fuelled by a
strong process of backup and succession
planning, especially for management
positions. In 2020, the percentage of
Top Management (comprising the key
leadership roles reporting directly to
members of the Group Executive
Committee) with more than three years
of service was 45%.
80 Vesuvius plc
Annual Report and Financial Statements 2020
Our people continued
People and Culture Strategy
Employee Engagement
Since 2019, in partnership with Mercer
Sirota, Vesuvius has operated an annual
employee engagement survey to measure
our employees’ attitudes to Vesuvius and
their work. The results are clustered in
eight strategic categories and
benchmarked externally against global
and manufacturing industry results.
In 2020, despite the challenges caused by
the COVID-19 pandemic, and thanks to a
tremendous effort by local management,
supported by an effective communication
campaign, we achieved a record
participation level with 92% of all
employees completing the survey (one
percentage point over the prior year).
The overall engagement score increased
by three percentage points vs 2019, with
an improvement in all categories.
For the second consecutive year, safety
remains our top strength, increasing by
two percentage points vs 2019. Nearly
80% of employees feel positive about
safety, placing us eight percentage points
above the manufacturing industry
average.
The biggest opportunity for improvement,
highlighted by nearly 40% of respondents,
lies in the implementation across the
business of action plans developed from
the survey results.
Our People and Culture Strategy was
launched in 2020 and aims to contribute
to building an outstanding business by
ensuring we have critical people skills and
capabilities. We aim to grow outstanding
people: we ensure our people managers
have what they need to lead their diverse,
engaged and high-performing teams for
business and personal growth. These
goals are then strongly underpinned by
a values-driven, winning culture, that
embraces diversity of thinking and
continuous innovation to achieve high
levels of performance and growth.
We create this culture by building broad
organisational understanding of our
strategy, goals and accountability,
supported by our CORE Values and
positive management behaviours.
We also foster a working environment
that is inclusive and diverse, where people
can be themselves without fear of
harassment, bullying or discrimination.
True to our decentralised business model,
each of our business units has their own
strategic HR agenda supporting delivery
of their unique business strategies. In early
2020, the global COVID-19 pandemic
forced us to shift our attention to the most
urgent business needs and the immediate
aspects of our employees’ safety, health
and well-being. While this was our
absolute priority, much was still achieved
during the year.
People and Strategy
In December 2020, managers received
a report of their team’s responses.
Managers are now sharing these results
with their teams and action plans are
being developed to address the concerns
or issues raised.
We focus action plans not on the pure
statistics, but on bringing about
meaningful change in line with our CORE
Values of Courage, Ownership, Respect
and Energy. For example, much of the
action taken to date has resulted in
improved communications between
managers and their teams and on greater
cross-functional understanding and
collaboration, all of which are key to the
principles of our CORE Values.
Outstanding Business Critical skills and capabilities to win
Outstanding People
Capable managers leading diverse, engaged and high-performing teams
Winning Culture
Embracing diversity of thinking and continuous innovation to
achieve high levels of performance and growth
Sustainability 82 Vesuvius plc
Annual Report and Financial Statements 2020
Our people continued
Training and development
Diversity
Our leaders take responsibility for
managing and developing their teams.
They are provided with access to a central
resource, offering expertise in Global
Rewards and Mobility, Talent and
Performance Management, Culture and
Learning, and supported by Group-wide
processes and information systems.
In 2020, we provided training to managers
in leading quality performance
conversations with their team members.
In addition, our recruitment was further
improved by enhancements to our HR
system, with data accuracy upgraded to
allow better reporting and preparing the
ground for moving into HR analytics.
We also delivered a redesigned core HeaTt
product training programme into a
web-based, online version, as participants
were unable to travel for face-to-face
training. These courses form part of the
Vesuvius Technical University aimed at the
continuous technical development of
Vesuvius employees. Courses range from
entry to expert levels and are continuously
updated to keep pace with developing
technology, thereby guaranteeing that
Vesuvius experts are at the forefront of
technical innovation. They are a great
way for our hugely experienced technical
experts to pass on their knowledge to
the next generation and ensure the
sustainability of our know-how.
Vesuvius operates in 41 countries around
the world, employing people with 70
nationalities, making us a truly diverse
business. We regard this diversity as a
critical aspect of our success and future
growth as it allows us to access the widest
range of skills and experience. At the end
of 2020, the Senior Leadership team
(comprising c.160 senior managers)
consisted of 22 nationalities located
in 21 countries.
At the end of 2020, 14% of our workforce
were women, which was stable versus
2019, and 20% of the Group Executive
Committee and Top Management team
were women, which was an increase of
7.5 percentage points versus 2019. The
Board has set a target of 30% female
representation in this group by 2025
(Group Executive Committee plus key
direct reports).
Workforce by gender
(as at 31 December 2020)
Board
Group Executive Committee
Top Management1
Middle Managers
All other employees
All employees
Copies of the Board Diversity Policy and
Group Policy on Diversity and Equality are
available to view on the Vesuvius website:
www.vesuvius.com.
Employee consultation and industrial
relations
In all of the countries in which we operate,
the Group informs and consults local
works councils and trade unions in
matters concerning the Vesuvius business.
These processes and procedures are
regulated by local law and generate
constructive dialogue between employee
representatives and management, which
provides benefit to our business. In 2020,
70% of employees were represented by
local works councils, trade unions or other
bodies and agreements.
Men Women
Men Women
5
5
39
401
4
2
9
56% 44%
71% 29%
81% 19%
65
86% 14%
8,476 1,357
86% 14%
8,921 1,433
86% 14%
1. Top Management comprises key leadership roles reporting directly to members of the
Group Executive Committee.
83
In addition to local employee
representation, the Group has operated
a European Works Council (EWC)
containing representatives from each of
the EU countries in which Vesuvius has
employees. The existing EWC Agreement
terminated in 2020, following notice by
management. Consequently, the Group
commenced preparations to support
negotiation of a new agreement for the
formation of a new EWC. In this process,
employees will be represented by a Special
Negotiating Body (SNB) made up of
representatives from the 13 European
countries we operate in. The new EWC
Agreement will be registered in and
operated under Polish law, as the
representative country of Vesuvius plc,
following the departure of the United
Kingdom from the European Union. The
negotiations with the SNB are scheduled
to commence in the first half of 2021.
When a new EWC Agreement is signed,
and the Council constituted, European
management will expect to meet the EWC
formally once a year. At this meeting,
management will provide an update on
the performance of the business, with a
focus on the developments likely to impact
European employees.
Global reward
Reward and recognition are integral
components of our employee value
proposition, enabling us to attract, engage
and retain key talent and highly qualified
employees. Our reward systems are
designed to create a market-competitive
and fair pay environment for all our
employees and to reinforce the vision,
strategy and expectations set by
the Board.
We seek to create a culture that
champions performance, building a
strong link between individual
performance and pay. Supported by our
online people management platform,
‘myVesuvius’, performance reviews and
subsequent reward decisions are based
not only on how employees have
performed against their individual
objectives but also on assessments
of behaviour and commitment to our
CORE Values.
Our global job grading framework, based
on a structured assessment methodology,
enables us to compare roles and ensure
internal consistency throughout the
organisation. We are committed to
creating reward and performance
management systems which are
transparent and objective, where
employees receive equal pay for work of
equal value, regardless of their age, race,
disability, sexual orientation, gender,
marital, civil partnership or parental
status, religion or beliefs. Our
management Annual Incentive Plans are
measured against both Vesuvius’ financial
targets and personal performance, an
incentive structure consistent with that of
our Executive Directors. The Vesuvius
Share Plan for Executive Directors and
Group Executive Committee members
encourages decisions based on long-term
goals rather than short-term gains and
works to align the interests of participants
and shareholders.
In 2020, 95% of our salaried permanent
employees undertook a performance
review with their line management.
This compared with 92% in 2019.
Global mobility
Vesuvius operates worldwide. We believe
that our companies should be managed
and staffed by local personnel. However,
we also provide selected groups of
employees with a range of international
assignments. These assignments are
usually for a limited period, most often
three years.
Vesuvius expatriates do not come from
one or two countries alone. We have a truly
international mix of nationalities in our
expatriate population. Individuals move
not only within a region, but also between
regions, with existing assignments
including Malaysia to China, UK to UAE,
France to Japan, UK to US, Japan to
Thailand, Germany to UK and Belgium
to UK. Our mobility programme shows
that our expatriate population is as
diverse as our Group.
Vesuvius operates several international
assignment policies to provide for the
different circumstances of these
assignments – whether they be short-term,
longer-term or require extended
commuting. These policies are
supplemented with clearly identified
benefits, delivering support appropriate to
the nature of the assignment. By accessing
this broad range of policies, we can
manage our international assignments
with greater flexibility, thus catering for
changing expectations and demands
from employees, whilst at the same time
meeting the needs of the business.
Key rationale behind international
assignments
Vesuvius considers individuals for
international assignment for three primary
reasons:
> Providing Vesuvius companies with
skills that are not locally available
and that are required at short notice.
This typically occurs in countries where
we are establishing a new presence.
The number of expatriates working
on this basis diminishes over time as the
organisation matures and we recruit
and train local talent to take over
> Career development. We believe that
the personal development plan of any
employee being developed for a senior
management or senior expert position
should include a posting outside their
home country. This encourages them to
develop the skills necessary to function
successfully in an international
environment. These postings are
tailored to the needs of the organisation
and the needs of the individual
> Enhancing diversity. Management
teams benefit from having a mix of
gender and cultures. In specific cases,
we use international assignments to
achieve this goal
Sustainability 84 Vesuvius plc
Annual Report and Financial Statements 2020
Our communities
Our principles –
A responsible company
Vesuvius is committed
to making a positive
contribution to society.
We want to establish strong
relationships with all our
key stakeholders, founded
on mutual benefit and
respect. We are particularly
conscious of the need to
support the communities
in which we operate.
Our policies
Vesuvius’ operating policies underpin the
principles set out in our Code of Conduct.
They are the practical representation of
our status as a good corporate citizen and
they assist employees to understand and
comply with our ethical standards and the
legal requirements of the jurisdictions in
which we conduct our business. They also
give practical guidance on how this can
be achieved.
Human rights
The Group Human Rights Policy reflects
the principles contained within the UN
Universal Declaration of Human Rights,
the International Labour Organization’s
Fundamental Conventions on Labour
Standards and the UN Global Compact,
to which the Group is a signatory. The
Policy applies to all Group employees. It
sets out the principles for our actions and
behaviour in conducting our business and
provides guidance to those working for us
on how we approach human rights issues.
The Group commits not to discriminate in
any of our employment practices and to
offer equal opportunities to all. The Group
respects the principles of freedom of
association and the effective recognition
of the right to collective bargaining, and
opposes the use of, and will not use, forced,
compulsory or child labour. These
principles have been integrated into the
work of our procurement teams as we
assess our suppliers and their business
practices.
Prevention of slavery and human
trafficking
During 2020, we published our fifth
transparency statement outlining the
Group’s approach to the prevention of
slavery and human trafficking in our
business and supply chain. A copy of our
latest statement is available to view on our
website www.vesuvius.com.
Since the publication of our first statement
we have conducted a risk assessment of
our purchasing activities, seeking to
identify, by location and industry, where
the potential risks of modern slavery are
highest. Our assessment identified the
following four industries that pose a higher
risk of modern slavery for Vesuvius:
1. Mining and extractive industries
(raw materials)
2. Textiles (personal protective equipment
(PPE) and work clothing)
3. Transport and packaging
4. Maintenance, cleaning, agricultural
work and food preparation (contracted
workers)
Following our modern slavery risk
assessment, we provided webinar training
to our key purchasing staff and continue
to use an online e-learning module to
upgrade the training given to all supplier-
facing staff. This provides key guidance
on the red flags associated with modern
slavery to assist them in identifying these
during supplier visits and accreditation.
Since the launch of the Modern Slavery
red flag training we have trained 96%
of the targeted staff.
Conflict minerals
We actively and routinely review our
portfolio of purchasing to check for
conflict minerals. In 2020 we did not use
any conflict minerals in our manufacturing
processes.
Lobbying and political expenses
Around the world, we participate in
government and industry working groups,
are members of industry associations, and
engage in direct contact with independent
bodies on key business issues. This ensures
that we can help in shaping new policies,
regulations and standards, and ensure
compliance with existing requirements.
We do not make any political
contributions.
Business ethics/Anti-bribery
and corruption and working
with third parties
We engage with various third-party
representatives and intermediaries in
our business. We recognise that they
can present an increased anti-bribery
and corruption risk. Our procedure on
working with third parties clearly outlines
our zero-tolerance approach to bribery
and provides practical guidance for our
employees in identifying concerns and
how to report them.
Vesuvius engages with third-party sales
agents, many of whom operate in
countries where we do not have a physical
presence. Our employees’ use of, and
interaction with, sales agents is supported
by an ongoing training programme for
those who have specific responsibility for
these relationships. Training includes an
annual mandatory e-learning course with
specific employees receiving additional
focused training.
As part of communication around
anti-bribery and ethics, employees are
actively encouraged to consult on ethical
issues. They have open access to the
Compliance Director and Legal function
who provide support on a regular basis.
Working with third parties
During 2020, the Group continued the
due diligence review of our third-party
representatives and intermediaries.
Following the previous years’ enhanced
review of sales agents, custom clearance
agents and logistics providers, we
extended our review to distributors. This
included a detailed review of our due
diligence activities on active distributors
across the Group. This process covers
public information searches, regulatory
searches and activity reviews. Our due
diligence processes will continue to be
extended using a risk-based approach
during 2021 and beyond. During the year,
we also continued our ongoing monitoring
of the sales agents used across the Group.
85
WE ARE
SUSTAINABLE
Sustainability is everything
we do as a good corporate citizen.
Mahmoud Showeikh
Engineering and Maintenance Manager, Advanced Refractories
Ras Al Khaimah, UAE
This included a review of the agent
reporting, invoice data and commission
calculation. Such reviews will remain
a continuing part of our compliance
programme.
Extending our Sustainability
drive to our suppliers
Principles
The satisfaction of our customers, the
safety and reliability of Vesuvius products,
and the efficiency of Vesuvius’ internal
processes are dependent on the reliability
of its network of suppliers. Vesuvius is
committed to ensuring that we utilise
high-quality raw materials, secured
through reliable and well-developed and
sustainable supply chains.
Supplier Sustainability Assessments
As part of our sustainability agenda,
Vesuvius has implemented a Supplier
Sustainability Assessment programme to
support decisions on the suitability of the
suppliers we choose to do business with.
Overall, our objectives are to encourage
suppliers to implement a meaningful
sustainability programme, embrace the
UN Global Compact principles, evaluate
and reduce our upstream CO2 emissions
and identify potential risks (and if
necessary, address them) in our
supply chain.
To assist with the implementation of the
programme, Vesuvius has partnered with
an external consultancy who will rate our
raw materials suppliers based on a
detailed set of criteria, covering four
dimensions: Labour and Human Rights;
Ethics; Environment; and Sustainable
Procurement. We aim to enroll suppliers
representing at least 50% of our raw
materials spend into our Sustainability
Assessment programme by 2023.
Supplier Quality Development
Vesuvius is very proud of the close
relationships we have with our suppliers
around the world. We work with them to
ensure that the highest-quality materials
and products enter our supply chain.
Supplier quality audits
The Supplier Quality Audit programme
is led by company experts from the
Purchasing and Quality teams, located in
all regions, under the supervision of Group
Purchasing. Overall, the goal is to reduce
the number of quality issues that may
affect our operations or our customers.
As part of this, we share expectations
with our suppliers, identify risks, and
adapt our internal controls accordingly.
We encourage our suppliers to improve
their own processes and help them
prioritise actions to achieve this.
Areas of focus include:
> Quality management rules: final
inspection, controls at important
process steps, management of
incoming materials, data tracking,
customer feedback and communication
> Management of non-conformities:
reaction to non-conformities, protection
of customer, problem resolution and
application of lessons learned
Vesuvius also conducts an annual Supplier
Audit programme built to cover, in
particular, new suppliers, the re-auditing
of suppliers with low grades and suppliers
with quality issues. In 2020, despite the
impact of COVID-19 travel restrictions,
98 audits were conducted at 95 supplier
facilities, representing 5% of the active
raw materials supplier base. Five suppliers
(5% of suppliers audited) received grades
below threshold. Actions were taken either
to support them or to terminate our
relationship with them.
Sustainability 87
which now includes notification provisions
in relation to monitoring of employees’
use of the Vesuvius systems.
We also set up a stand-alone internal
Data Protection Sharepoint Site, with
full access for all employees. This site
contains information, resources, policies
and procedures and links to training
documents. This site includes the Data
Protection Handbook which was
developed to provide templates and
guidance to HR and other personnel,
for the initial handling of data protection
related matters such as breach reporting
and subject access requests.
Another area of focus in 2020 was our
response to the implementation of data
protection legislation in Turkey and Brazil
where we worked with local teams to
ensure that our approach to data
protection is compliant with these
changes, including local workshops, an
audit of IT in Turkey and the appointment
of local Data Protection Officers in Brazil.
The changes in data protection laws in
China are being monitored and work
has commenced in preparation of
implementation of such legislation
at a local level.
The Data Protection Officer is responsible
for raising awareness of data protection
issues across the Group, supervising
privacy impact assessments (PIAs) and
providing advice and guidance in relation
to data protection issues. Specific data
protection training was extended to global
employees through e-learning at the end
of 2019 and is a mandatory training
course for all employees with email access.
At the end of 2020, the completion rate
was 98%. It is regularly audited for
non-completion. During 2020, we
conducted seven PIAs covering
operational procedures, compliance-
related processes and HR data, and in
particular no update or amendment to
the central HR database is undertaken
without a PIA.
The self-assessment GDPR audit was
initially issued to European entities in
May 2019, on the anniversary of GDPR
implementation, and will continue to be
issued in two-yearly intervals to assess and
ensure continued compliance with data
protection legislation. In 2021, this audit
will become a global data protection audit
across all Vesuvius entities.
Further due diligence was undertaken,
clarifying the data we control and process
both globally and within Europe, the
methods by which we do this, the security
of the systems that hold our data and the
assignment of responsibilities for
managing data processes. In particular,
a review of data protection measures in
relation to Brexit was undertaken – the
technical and security measures relating
to transfer of data to other countries was
reviewed and updated with IT security in
readiness for new Shared Service Centres
to be prepared in the transition period of
2021. Vesuvius Group S.A. (Belgium) was
nominated as the main establishment for
Vesuvius in Europe (along with Vesuvius
Holdings in the UK) for GDPR data
protection matters from 1 January 2021.
Other due diligence
The Group continues to undertake
focused, country- and function-specific
risk assessments, reviewing financial
records and the quality of implementation
of our policies and procedures, often
engaging the assistance of external
advisers. These risk assessments can be
proactive or reactive (e.g. in response to
changing regulation). The outputs of these
assessments are used to identify activities
that require further attention, ensure that
our Group policies and procedures for the
management of anti-bribery and
corruption risk or other regulatory risk
continue to be appropriate for the
business, and ensure that within our
business there is the necessary awareness
and understanding to be able to manage
risks appropriately.
86 Vesuvius plc
Annual Report and Financial Statements 2020
Our communities continued
During 2020, the Board monitored and
oversaw the Group’s procedures for
reporting allegations of improper
behaviour, and throughout the year
received updates on the nature and
volume of reports received from the
confidential Speak Up Helpline, key
themes emerging from these reports
and the results of any investigations
undertaken. In 2020, we received 95
reports (2019: 26) through the Speak Up
facility and 32 walk-in reports. Each one
of these was reviewed and, where
appropriate, investigated. Similar to 2019,
a substantial majority of reports received
in 2020 were human resource issues which
indicated no compliance concerns, nor
serious breaches of the Code of Conduct.
Of the small number of reports received
that contained allegations of a breach
of our Code of Conduct, thorough
investigations were performed and, where
appropriate, disciplinary action was taken,
including individuals leaving the Group
as a result.
Data protection
Our Data Protection Policy requires a
uniform approach in the handling of
personal data to manage the privacy
obligations of the Group. Everyone has
rights in respect of how their personal
data is handled. Our Policy recognises
that the lawful and correct treatment
of personal data is vital to our continued
success in an increasingly regulated
global marketplace. During the course
of our activities, we may collect, store
and process personal data about our
staff, customers, suppliers and other
third parties. We are committed to
treating this data in an appropriate
and compliant manner.
In 2020, we continued to implement our
uniform approach to data protection
across the Vesuvius Group, expanding
the implementation of our policies and
procedures further outside of Europe
(which had previously been updated with
the implementation of the General Data
Protection Regulation (GDPR)) into more
of our jurisdictions. In addition, and
replacing the existing GDPR versions,
we published a Global Privacy Notice for
employees, workers and contractors.
In other developments we implemented
a Vesuvius Candidate Privacy Notice,
relating to the treatment of the personal
data of potential employees, and finalised
an updated IT Acceptable Use policy,
Supplier Corrective Action Requests
To ensure the integrity of our products,
we have a rigorous approach to issues
relating to the quality of raw materials
and other inputs to our processes.
When a supplier does not meet
expectations, we issue a formal Supplier
Corrective Action Request. Our proven 8D
methodology is then used to investigate
the root cause of the issues and define
corrective actions. A web-based portal is
available for suppliers to document the
containment actions implemented and
outcome of the investigation, to enable
review by us.
In the vast majority of cases, issues are
identified and resolved quickly. Suppliers
with repeat issues and poor problem-
solving are required to undergo a Supplier
Quality Audit.
Speak Up: Whistleblowing Policy
Vesuvius employees can speak up without
fear of retaliation, either to Vesuvius
management or via independent
channels. A third-party-operated
confidential Speak Up Helpline (Speak
Up) is available for employees wishing
to raise concerns anonymously or in
situations where they feel unable to report
internally. This independent facility
supports online reporting through a
web portal or reporting by phone or by
voicemail. Ensuring global accessibility,
employees can speak with operators in
any of our 29 functional languages.
All reports received are reviewed and,
where appropriate, investigated and
feedback is provided to the reporter via
the helpline portal. Vesuvius’ Speak Up
helpline is publicised through local
language posters at each of our sites,
our internal website and during internal
compliance training and new joiner
inductions. No Vesuvius employee will
ever be penalised or disadvantaged for
reporting a legitimate concern in good
faith.
Reports received via Speak Up channels
are managed by the General Counsel and
Compliance Director. When received,
reports are assessed for risk and category
of concern. All reports are considered
in line with a protocol for review,
investigation, action, closure and
feedback, independent of management
where necessary, but involving senior
business unit or HR management as
appropriate. For complex issues, formal
investigation plans are drawn up, and
support from external experts is engaged
where necessary. Feedback is recognised
as an important element of the Speak Up
process and we aim to provide an update
on all reports within 28 days of receipt.
In line with good practice, details of the
Group’s Speak Up channels, and the
Group’s approach to addressing such
issues, was recommunicated in 2020.
This relaunch included an updated poster
campaign, local ‘town hall’ meetings and
email communication for those working
remotely. We continue to monitor the
volume, geographic distribution and
range of reports made to the Speak Up
facility to ascertain not only whether
there are significant regional compliance
concerns, but also whether there are
countries where access to this facility
is less well understood or publicised.
Sustainability 88 Vesuvius plc
Annual Report and Financial Statements 2020
Our communities continued
Training
During the year, we continued to develop
our training programme on the principles
contained in the Vesuvius Code of Conduct
and associated anti-bribery, corruption
and other compliance policies and
procedures. Training gives our employees
a clearer understanding of the scope of
risks that exist as we conduct our business
and gives context to how the Group
expects each one of us to respond to those
risks. We operate an integrated learning
management system which allows us to
deliver Vesuvius-specific e-learning
modules to employees on topics relevant
to their role through an online interactive
platform.
Training provided during 2020 included:
> An annual mandatory e-learning
module for Anti-Bribery and Corruption,
available in 22 of our functional
languages
> Webinar and videoconference training
hosted by the Compliance team to staff
at several sites covering Anti-Bribery
and Corruption, Speak Up and trade
sanctions
Our e-learning platform supplements
the face-to-face training provided to
employees by the Legal and Compliance
team, enabling us to reach more
employees, more quickly and in a more
targeted way. In 2021, we will continue to
develop the training processes, modules
and languages available and we will host
additional webinar training to replace
the face-to-face training provided in
previous years.
The Board has set a target of at least 90%
of targeted staff completing the Anti-
Bribery and Corruption training annually.
100% of the targeted staff completed the
2020 Anti-Bribery and Corruption training,
compared with 99.3% in 2019.
Supporting our communities
Vesuvius wants to make a positive
contribution to the communities in which
we work by supporting a wide variety
of fundraising and community-based
programmes around the world. Below
are some details about a selection of the
community programmes our colleagues
were involved in throughout 2020, many
of which sought to support people and
services impacted by the COVID-19
pandemic.
> Piedade (Brazil) provided financial
support to employees, cash donations
to the local hospital and masks for
relatives
> India donated well over 100,000 masks,
hydroalcoholic gel and other medical
supplies. The Company and co-workers
provided support to the family of one
of our contractors who passed away
> Multiple plants made donations in kind
(Brazil, Czech Republic) and of food
(Malaysia, India) or supported local
stores by buying from them (Charleston)
Going forward, we plan to increase the
focus of our community activities on two
areas which we are especially passionate
about:
> Educational opportunities for children
and young people in less developed
countries and from disadvantaged
backgrounds
> Encouraging more girls and women into
scientific and technical fields of
education
In 2021, wherever possible and practical,
we are encouraging our people to
dedicate their efforts to those areas.
The Strategic Report set out on pages
1-88 contains a fair review of our
businesses, strategy and business
model, and the associated principal
risks and uncertainties. We also deliver
a review of our 2020 performance and
set out an overview of our markets and
our stakeholders. Details of our
principles, and our people and
community engagement, together with
our focus on safety, are also contained
in the Strategic Report.
Approved by the Board on 3 March
2021 and signed on its behalf by
Patrick André
Chief Executive
Guy Young
Chief Financial
Officer
89
WE ARE
EFFICIENT
Efficiency at Vesuvius means
always looking for better ways to
do things to create more value for
our customers and our business.
Agnieszka Romek
Production Department Manager, Flow Control
Skawina, Poland
Sustainability 90 Vesuvius plc
Annual Report and Financial Statements 2020
91
Governance
92 Board of Directors
94 Group Executive Committee
96
Corporate Governance Statement
96
Chairman’s governance letter
97
Board Report
106 Audit Committee
115 Nomination Committee
120 Directors’ Remuneration Report
120 Remuneration overview
123 2020 Remuneration Policy
131 Annual Report on
Directors’ Remuneration
144 Directors’ Report
149
Statement of Directors’
Responsibilities
150
Independent Auditors’ Report
Find out more at
report2020.vesuvius.com
WE ARE
INNOVATIVE
Vesuvius is always innovating -
whether it is in safety, reliability,
product performance or any other
area of our business.
Pablo Santucci
Commercial Project Coordinator, Digital Services
Piedade, Brazil
Governance
92 Vesuvius plc
Annual Report and Financial Statements 2020
Board of Directors
93
N
A
N
R
A
N
R
A
N
R
John McDonough CBE
Chairman
Patrick André
Chief Executive
Guy Young
Chief Financial Officer
Douglas Hurt
Kath Durrant
Hock Goh
Senior Independent Director (SID)
Non-executive Independent Director
Non-executive Independent Director
Appointed to the Board 31 October 2012
Appointed to the Board 1 September 2017
Appointed to the Board 1 November 2015
Appointed to the Board 2 April 2015
Appointed to the Board 1 December 2020
Appointed to the Board 2 April 2015 and will
step down from the Board at the 2021 AGM
> Proven strategic and leadership skills gained
> Global career serving the steel industry
> Extensive international experience gained
> Qualified Chartered Accountant, with recent
> 30 years’ experience of people management
> Strong focus on R&D and technology
in a complex multinational business
> Strong background in strategic development
> Strong engineering background and global
and implementation
commercial experience
> Consumer focus and proven record of
> Clear leadership understanding of safety
delivery, with strong commercial acumen
issues
> Drive and energy in promoting his strategic
> Operational and strategic understanding
vision
in the mining and industrial sectors
> Qualified Chartered Accountant,
with significant financial and business
development experience
> Drive and energy in managing people
and teams
of a range of business environments gained
from working in Asia-Pacific, EMEA and
the UK
> Experience as CEO with an international
listed company
Current external appointments
John is Chairman of Sunbird Business Services
Limited and a Non-executive Director of
Cornerstone Property Assets Limited and
Inceptum2 Solutions Limited.
Career experience
John spent 11 years as Group Chief Executive
Officer of Carillion plc until he retired in 2011.
Prior to this, he spent nine years working for
Johnson Controls. He served as Chairman of
The Vitec Group plc for seven years, retiring
from the board in 2019. He has also previously
served as a Non-executive Director and
Chairman of the Remuneration Committee
of Tomkins plc, as a non-executive Director of
Exel plc and as a Trustee of Team Rubicon UK.
John was awarded a CBE in 2011 for services
to industry.
Current external appointments – None
Career experience
Patrick joined the Group as President of the
Vesuvius Flow Control business unit in 2016,
until his appointment as Chief Executive in
September 2017. During 2020, Patrick again
took direct responsibility for the Flow Control
business unit on an interim basis pending
the appointment of a permanent successor
following the departure of Roel van der Sluis
in late 2019.
Before joining the Group, Patrick served as
Executive Vice President Strategic Growth,
CEO Europe and CEO for Asia, CIS and Africa
for Lhoist company, the world leader in lime
production. Prior to this, he was CEO of the
Nickel division, then CEO of the Manganese
division of ERAMET group, a global
manufacturer of nickel and special alloys.
> Focus on strategic execution and business
optimisation
Current external appointments – None
Career experience
Guy was Chief Financial Officer of Tarmac and
latterly Lafarge Tarmac, the British building
materials company, between 2011 and 2015.
Prior to this he spent 13 years working at Anglo
American plc in various senior financial and
business development positions, including as
Chief Financial Officer of Scaw Metals Group,
the South African steel products manufacturer.
Guy is qualified with the South African Institute
of Chartered Accountants.
and relevant financial experience
> Highly knowledgeable in operational and
corporate financial matters, with significant
US and European experience
> Proven management and leadership skills
Current external appointments
SID and Chair of the Audit Committee of
Countryside Properties PLC, and a Non-
executive Director and Chair of the Audit
Committees of Hikma Pharmaceuticals PLC
and the British Standards Institution.
Career experience
Douglas was Finance Director of IMI plc, a UK
listed company, until 2015. He spent 23 years
at GlaxoSmithKline plc where he held senior
finance and general management positions.
Douglas served as SID and Chair of the Audit
Committee of Tate & Lyle plc until 2019.
> Strong operational and strategic track
> Wealth of experience in sustainability
record, gained working at a number of large
global manufacturing companies
and safety matters gained from more than
35 years working in the oil and gas industry
> Experienced UK governance professional
Current external appointments
Non-executive Director and Chair of the
Remuneration Committees of Calisen plc
and SIG plc.
> Strong international commercial experience
and in-depth knowledge of Asian markets
Current external appointments
Non-executive Director of AB SKF, Santos Ltd
and Stora Enso Oyj.
Career experience
Kath held various operational and specialist
HR roles at GlaxoSmithKline plc and
AstraZeneca plc and was Group HR Director
of Rolls-Royce plc. She was most recently
Group HR Director of Ferguson plc and
Chief HR Officer of CRH plc. Kath served
as a Non-executive Director and Chair of the
Remuneration Committee of Renishaw plc
from 2015 to 2018.
Career experience
Hock spent 25 years with Schlumberger,
serving as President of Network and
Infrastructure Solutions in London, President
of Asia-Pacific, and Vice President and
General Manager of China. He spent seven
years as a Partner of Baird Capital Partners
Asia, and was Chairman of Advent Energy Ltd
and MEC Resources Ltd, and a Non-executive
Director of Harbour Energy Ltd.
N
A
N
R
A
N
R
E
Friederike Helfer
Non-executive Director
Jane Hinkley
Holly Koeppel
Non-executive Independent Director
Non-executive Independent Director
Appointed to the Board 4 December 2019
Appointed to the Board 3 December 2012
Appointed to the Board 3 April 2017 and will
step down from the Board at the 2021 AGM
> An experienced strategist, with strong
> Proven track record of managing complex
> A strong track record of growing businesses
analytic capability
global trading business
Key to Board Committee membership
A Audit Committee
N Nomination Committee
R Remuneration Committee
R Committee Chairman
Engagement with the workforce
E Holly Koeppel serves as the designated
Non-executive Director responsible for
overseeing engagement with the workforce.
Changes to the Board during the year
The Directors named were in office during the year
and up to the date of this Annual Report, with the
exception of Kath Durrant who was appointed
to the Board on 1 December 2020.
Kath Durrant will take over as Chair of the
Remuneration Committee when Jane Hinkley steps
down as Chair of the Remuneration Committee at
the close of the 2021 AGM.
* Cevian Capital is a shareholder of Vesuvius plc
and, at 3 March 2021, held 21.11% of Vesuvius’
issued share capital.
> Commercial acumen and a strong track
record of working with a portfolio of
companies to identify scope for operational
and strategic improvement
Current external appointments
Partner of Cevian Capital* and a Non-
executive director of the Supervisory Board
of thyssenkrupp AG.
Career experience
Friederike is a Partner of Cevian Capital.
She joined Cevian in 2008 and from 2013 to
2017, served on the Board of Directors and
the Audit Committee of Valmet, a Finnish
engineering company, in which Cevian
was also invested. Prior to joining Cevian,
Friederike worked at McKinsey & Company.
She is a CFA Charterholder.
> Qualified Chartered Accountant, with
significant financial and operational
experience in large multinational companies
and experience in domestic and international
utility, power and infrastructure
> Financial and operational experience
managing assets on five continents
> Leadership and global management skills
> Global board experience as an independent
Current external appointments – None
Career experience
Jane is a Chartered Accountant and was
Managing Director of Navion Shipping AS for
three years until 2001. Prior to this, she spent
her executive career as Chief Financial Officer
and Managing Director of Gotaas-Larsen
Shipping Corporation. She was previously
Chairman of Teekay GP LLC, a Non-executive
Director and Chairman of the Remuneration
Committee of Premier Oil plc, and a Non-
executive Director of Revus Energy ASA.
non-executive director and an investor
Current external appointments
Non-executive Director and Chair of the
Audit Committee of British American Tobacco
p.l.c., Non-executive Director and Chair of the
Governance Committee of The AES Corp. and
a Non-executive Director of Arch Coal, Inc.
Career experience
Holly was Chief Financial Officer of American
Electric Power Company, Inc. Prior to this, she
held management roles at the Consolidated
Natural Gas Corporation. Holly was Co-Head
of Citi Infrastructure Investors (renamed
Gateway) until 2007. She has also served
as a Director of Integrys Energy Group, Inc.,
and Reynolds American Inc.
Governance 94 Vesuvius plc
Annual Report and Financial Statements 2020
Group Executive Committee
95
Guy Young
Chief Financial Officer
5 years with the Group
Henry Knowles
General Counsel and
Company Secretary
7 years with the Group
Agnieszka Tomczak
Patrick André
Chief HR Officer
Chief Executive
2 years with the Group
5 years with the Group
For biographical details please
see the Board of Directors on
page 92.
For biographical details, please
see the Board of Directors on
page 92.
Appointed as General Counsel
and Company Secretary in
September 2013. Prior to joining
Vesuvius, Henry spent eight
years at Hikma Pharmaceuticals
PLC, a generic pharmaceutical
manufacturer with significant
operations in the Middle East,
North Africa and the US where he
held the roles of General Counsel
and Company Secretary. Henry
is also responsible for the Group’s
Intellectual Property function.
Henry is based in London, UK.
Appointed as Chief HR Officer
in October 2018. Agnieszka has
over 25 years of senior leadership
experience in multinational
companies spanning various
business sectors and industries.
Prior to joining Vesuvius, she
spent 12 years at ICI, which
was subsequently acquired
by AkzoNobel, in regional and
global HR roles.
Agnieszka is based in London, UK.
Pascal Genest
Karena Cancilleri
Thiago Avelar
President, Flow Control
President, Foundry
1 month with the Group
1 year with the Group
Appointed President, Flow
Control, 18 January 2021.
Pascal joined the Group from
GFG Alliance where he held the
position of CEO Liberty Ostrava
in the Czech Republic. Prior
to this he was CEO of SULB in
Bahrain. Pascal has more than
15 years’ experience working in
the steel industry, mainly with
ArcelorMittal. He has also worked
in consulting, in private equity and
in the aluminium industry.
Appointed President, Foundry
in October 2019. Karena joined
the Group from Beaulieu
International Group, where
she served for six years as VP
Engineered Products and latterly
President Engineered Products.
She has a broad breadth of
managerial experience spanning
various international leadership
roles in companies such as
FiberVisions, Kraton Corporation
and Shell.
Pascal is based in London, UK.
Karena is based in London, UK.
President, Advanced
Refractories
2 years with the Group
Appointed President, Advanced
Refractories on 1 January
2020. Thiago joined Vesuvius in
February 2019 as Regional VP
Steel, South America, where he
was responsible for Vesuvius’ Steel
Operations in South America.
Prior to joining the Group, he
worked for RHI Magnesita and
ArcelorMittal in various technical
and marketing roles based in
Europe and Brazil.
Thiago is based in London, UK.
Patrick Bikard
President, Operations
and Technology
13 years with the Group
Appointed President, Operations
in January 2014, with
responsibility for Technology
since 2019. He was previously
Vice President for Manufacturing,
QHSE, Engineering and
Purchasing and, prior to
joining Vesuvius, he held senior
operational roles at Renault,
Alstom and Faurecia.
Patrick is based in Ghlin, Belgium.
Governance 97
Board Report
2018 UK Corporate Governance Code – Information Availability
Board Leadership and
Company Purpose
The Corporate Governance statement (‘CG Statement’) on pages 96-143 gives information on
the Group’s compliance with Principles relating to the Board’s Leadership and Company Purpose.
More detailed information on:
> the Group’s statement of purpose can be found on page 1
> the Group’s strategy, resources and the indicators it uses to measure performance can be found on
pages 14 and 15, 20 and 21, and 40 and 41, respectively
> the Group’s engagement with stakeholders and the Group’s Section 172(1) Statement is contained in
the Section 172(1) Statement and Stakeholder Engagement section on pages 22-29
> the Group’s approach to workforce matters can be found in the Our people section on pages 74-83,
with further details of the Group’s approach to employee involvement and engagement contained in
the Section 172(1) Statement on pages 23-25
Details of the Group’s framework of controls is contained in the Audit Committee report on pages 110
and 111 of the CG Statement and in the Risk, viability and going concern section on pages 32 and 33.
The CG Statement describes the structure and operation of the Board. The Nomination Committee
report, describes on page 118, the process the Company conducts to evaluate the Board, to ensure that
it continues to operate effectively, that individual Directors’ contributions are appropriate and that the
oversight of the Chairman promotes a culture of openness and constructive yet challenging debate.
Details of the skills, experience and knowledge of the existing Board members can be found in the
Board biographies contained on pages 92 and 93. Information on the Board’s appointment process
and approach to succession planning and Board evaluation is contained in the Nomination Committee
report on pages 116 to 119 of the CG Statement.
Information on the policies and procedures the Group has in place to monitor the effectiveness of the
Group’s Internal and External Audit functions, and the integrity of the Group’s financial statements is
contained in the Audit Committee report on pages 110 to 113 of the CG Statement, along with an
overview of the procedures in place to manage risk and oversee the internal control framework. Further
information on the Group’s approach to risk management is contained in the Risk, viability and going
concern section of the Strategic Review on pages 30-35. The Board believes the 2020 Annual Report to
be a fair, balanced and understandable assessment of the Company’s position and prospects. A
description of the Audit Committee’s work in enabling the Board to reach this conclusion is contained in
the Audit Committee report on page 110.
The Directors’ Remuneration Report section of the CG Statement describes the Group’s approach to
Directors’ remuneration, including the procedure for developing policy and the Remuneration
Committee’s discretion for authorising remuneration outcomes. Details of linkage of the Directors’
Remuneration Policy with long-term strategy is contained on page 120 and also highlighted on pages
40 and 41 in the section on Key Performance Indicators.
Division of Responsibilities
Composition, Succession
and Evaluation
Audit, Risk and
Internal Control
Remuneration
96 Vesuvius plc
Annual Report and Financial Statements 2020
Corporate Governance Statement
Chairman’s governance letter
Dear Shareholder,
On behalf of the Board, I am delighted to
present the 2020 Corporate Governance
Statement. As a Board, we remain
committed to applying the highest
standards of corporate governance,
recognising that robust governance and
culture underpin business success. Within
the Corporate Governance Statement we
provide investors and other stakeholders
with an annual insight into the governance
activities of the Board and its Committees.
The COVID-19 pandemic significantly impacted the Board’s
activities in 2020, curtailing the Non-executive Directors’ usual
visits to operations and necessitating the holding of a significant
number of the Group’s Board and Committee meetings online. As
the full effects of the crisis began to be felt, the Board held an
increased number of shorter and more frequent meetings to
oversee the Group’s response. However, the Board and its
Committees still carried out their scheduled timetable of activities,
giving close consideration to the implications of the COVID-19
crisis on the matters that regularly come before the Board.
Opportunities for Board members to engage directly with
stakeholders were significantly limited during the year. However,
the Board was delighted to see the Group’s operations grasp the
challenge to strengthen the links with our customers, through a
range of initiatives aimed at fully utilising the benefits of virtual
communication, and engage with our communities in the supply
of PPE and provision of other solutions aimed at responding
to the threat of COVID-19. The Group was also able to carry out
its second employee engagement survey and was delighted
that, despite the challenges presented by remote working,
participation in the survey increased by 1% to 92%. Work is
currently progressing on communicating the detailed results of
the survey and developing action plans for the forthcoming year.
Once again, this process engaged management directly, with
managers receiving individual reports on their teams, to enable
detailed and directly relevant action planning to increase
engagement and improve employee experience.
In this section:
Also see:
Board leadership and
company purpose on p98
Group’s statement of purpose
on p1
Strategic Report on p1-88
Division of responsibilities
on p100
Audit Committee report
on p106
Nomination Committee
report on p115
Directors’ Remuneration
Report on p120
The Nomination Committee has once again focused on
succession planning, overseeing the appointment of Kath Durrant
to the Board in December 2020 and commencing work on
responding to the planned and announced Board rotations of
Hock Goh and Holly Koeppel who will both retire at the AGM.
In 2021 the Nomination Committee will continue to address
succession issues in line with director rotation requirements,
including the Senior Independent Director commencing a process
for my succession as Chairman. The Committee also continues its
focus on encouraging greater diversity among the Group’s
employees and on supporting the enhancement of the Group’s
talent pool for senior management.
The Remuneration Committee faced the challenge this year of
overseeing the execution of the Group’s remuneration
programme in the face of the unprecedented impact of the
COVID-19 pandemic. In taking decisions throughout the year on
the various incentive elements, the Remuneration Committee
sought to balance the need to retain, motivate and reward staff
with the need to reflect the impact felt across all stakeholders.
In April 2020, the Board oversaw the implementation of a number
of cost reduction and cash preservation measures. To show
solidarity with the Group’s employees the Board, in conjunction
with the Group Executive Committee, elected to reduce their fees
and salary by 20% for six months, and about 170 further senior
managers also agreed a six-month salary sacrifice. The Audit
Committee has been focused on carefully assessing the Group’s
financial situation throughout the year, with a heightened
emphasis on the Group’s liquidity and debt situation. Further
details on the work of each of the Committees can be found in the
Committee Reports on pages 106-143.
The Board’s formal evaluation process for 2020 was externally
facilitated by the corporate advisory firm, Lintstock. The results of
the review indicated an improvement in the Board’s performance
despite the challenges presented by COVID-19, and that the
move to online meetings had not curtailed the quality of
information or debate at Board meetings. The evaluation
concluded that the Board remained strong and effective with a
good level of constructive challenge and informed debate. The
evaluation highlighted a small number of Board priorities,
including the continued need to focus on the Board and senior
management succession pipeline and the drive to integrate the
Group’s new Sustainability initiative into the broader strategy. We
look forward to progressing these in 2021.
Yours sincerely
John McDonough CBE
Chairman
3 March 2021
Governance 98 Vesuvius plc
Annual Report and Financial Statements 2020
Board Report continued
Board leadership and company purpose
The Board is responsible for leading the Group in an efficient and
entrepreneurial manner, for establishing the Group’s purpose,
Values and strategy and satisfying itself that these and the
Group’s culture are aligned. It focuses primarily upon strategic
and policy issues and is responsible for ensuring the long-term
sustainable success of the Group. It sets the Group’s strategy,
oversees the allocation of resources and monitors the
performance of the Group. It is responsible for effective risk
assessment and management. In performance of these duties,
the Board has regard to the interests of the Group’s key
stakeholders and is cognisant of the potential impact of the
decisions it makes on wider society.
Purpose
Vesuvius’ purpose is to be a global leader in molten metal flow
engineering and technology, servicing process industries
operating in challenging high-temperature conditions. In order to
achieve this, the Group develops innovative solutions that enable
our customers to improve their manufacturing costs, quality and
safety performance, whilst helping them to become more
efficient in their processes. The Group aims to deliver sustainable,
profitable growth, providing its shareholders with a superior
return on their investment, whilst providing each of its employees
with a safe workplace where they are recognised, developed and
properly rewarded.
The Board has identified seven Strategic Objectives for achieving
long-term sustainable success. It is currently pursuing four
shorter-term key execution priorities, along with a fifth over-riding
drive for sustainability, which encapsulate the Group’s immediate
aims. Further information on these can be found on pages 14 and
15. The Board regularly reviews the Group’s performance against
a number of Key Performance Indicators (KPIs) which provide
information on key aspects of the Group’s financial and non-
financial performance. This information assists the Board to
assess progress with the execution of the Group’s strategy and to
determine any remedial action that needs to be taken. Detailed
information on the Group’s KPIs can be found on pages 40 and 41.
The Group has established a framework of controls to enable risk
to be assessed and managed, and further information on this can
be found in the Audit, risk and internal control section on page 105
of this Board Report.
Sustainability
Vesuvius recognises that lasting business success is measured
not only in financial performance but in the way in which the
Group deals with its customers, business associates, employees,
investors and local communities. In 2020 the Group launched a
new Sustainability initiative, aimed at supporting the Group’s key
Strategic Objectives to create a better tomorrow in a profitable
and sustainable way. Having set specific targets for the ways
in which the Group can improve its impact on our planet, our
communities, our people and our customers, the Board intends
to drive change throughout the Group. Further information can be
found in the Sustainability Report on pages 56 to 89.
Culture
The Board takes seriously its responsibility for shaping and
monitoring the corporate culture of the Group. The Group’s CORE
Values – Courage, Ownership, Respect and Energy – define our
behaviours across the business and are the practical
representation of the culture we seek to foster, aligning with
the Company’s purpose and strategy, and supporting our
governance and control processes. These Values are prominently
displayed at all sites. Our CORE Values are reinforced in our
performance management systems, which ensures that they
are firmly embedded in our day-to-day conversations and
behaviours. Further detail can be found on page 64.
The CORE Values are supported by the Group’s Code of Conduct
which sets out the standards of conduct expected, without
exception, of everyone who works for Vesuvius in any of its
worldwide operations. The Code of Conduct emphasises the
Group’s commitment to ethics and compliance with the law, and
covers every aspect of Vesuvius’ approach to business, from the
way that the Group engages with customers, employees, its
markets and each of its other stakeholders, to the safety of its
employees and places of work. Everyone within Vesuvius is
individually accountable for upholding these requirements.
The Board seeks to ensure that the Group’s workforce policies and
practices are consistent with the Group’s long-term sustainable
success. Further information about the Group’s remuneration
practices for senior managers can be found in the Directors’
Remuneration Report on pages 120-143, the Group’s approach to
diversity in the Nomination Committee report on page 117, the
Group’s approach to HR matters in the Our people section on
pages 74-83 and the Group’s policies and procedures, including
information on the Speak Up confidential employee concern
helpline in the Our communities section on pages 84-88.
The Board recognises the need to ‘walk the talk’ on our CORE
Values and all the Directors act with integrity and are fully
committed to leading by example to promote the desired culture.
During the year, the Board’s assessment of the Group’s culture
focused on the Group’s:
(1) Adherence to the CORE Values – Throughout the year the
Board received regular feedback on the Group’s response to the
COVID-19 pandemic. The Group’s strong culture and CORE
Values were clearly evident in the many and varied initiatives
established across the Group to ensure that we continued to
provide the same high-quality service to customers. This included
offering online training tutorials and utilising virtual reality to
provide service support. Towards the end of the year, nominations
were once again sought for the Group’s Living the Values Awards.
The Board was delighted that there were more than 1,200
nominations, showcasing examples of individuals and teams
going the ‘extra mile’ to live the CORE Values. The Group
presented both regional and global awards as part of the
process.
(2) Commitment to safety – In response to the COVID-19
pandemic, at each meeting during the year, the Board requested
and received an update on the health and well-being of the
Group’s employees, including receiving information on the
numbers of individuals testing positive for COVID-19 or isolating
as a result of contact. The Board was also apprised of the
COVID-19-safety initiatives undertaken in plants and the IT
practices implemented to enable those employees who could
work from home to do so. The Board received monthly updates on
the Group’s performance against safety targets, and a thorough
analysis of all Lost Time Incidents, all of which were reported in
detail at the next Board meeting. In addition, the Board received
biannual reports on the progress of the Group’s safety
programmes. A core tenet of the Group’s new Sustainability
99
Charter, is a focus on ensuring the Group affords a safe working
environment for its employees. For 2021, a more challenging
Group safety target of an LTIFR below 1 was implemented. In
addition, the Remuneration Committee included specific safety
targets for the Executive Directors as part of their personal
objectives for the Annual Incentive Plan.
(3) Entrepreneurship – As part of the Board’s rolling agenda, the
Board received reports from each of the business unit Presidents
on their business’s strategy, new commercial initiatives and future
technology trends. The Board also received reports on the agility
of management decision making in response to the pandemic,
as travel and face-to-face meetings became impossible, and the
fast-moving nature of the pandemic demanded swift responses
from empowered regional management. The BU presentations
were complemented by a presentation from the President
Operations & Technology on R&D activities throughout the
Group, including the process of new product launches. In
November the Board reviewed the strength and breadth of the
R&D teams throughout the Group and subsequently followed up
on the structure and experience of these teams. The Board also
received reports on the Group’s progress on innovation as part
of the quarterly reporting on strategic progress.
(4) Transparency – The Board was cognisant of the impact that
severely reduced travel had on opportunities in the organisation
for face-to-face interactions during the year, manifesting itself
most clearly by the need to move Board meetings online. As in
previous years, the engagement and openness of the employees
who contributed in person or virtually to Board meetings over the
course of the year was assessed in terms of the Group’s culture.
These first-hand interactions were complemented by the Board’s
review of the output of the Group’s Speak Up processes, which
were updated and recommunicated across the Group during the
year. In addition, the Audit Committee sought qualitative
feedback from External and Internal Audit on how transparent/
engaged managers had been during audit interactions.
(5) Customer focus – The Chief Executive undertook regular
virtual and telephone meetings with customers in 2020, as well
as conducting face-to-face visits wherever this was possible.
A critical focus of the Group’s response to the pandemic was
continuity of supply to customers and the Board received regular
reports on the impact of the pandemic on this and the state of
the Group’s markets. The Board also received regular updates
on quality performance, which were supported by a full annual
presentation on the Group’s ongoing initiatives on quality and
a review at each Board meeting of specific quality issues.
(6) Diversity and respect for local cultures – During 2020, the
Board approved the adoption of a new gender diversity target
seeking 30% female representation in the Group Executive
Committee and Top Management (the Group Executive
Committee plus key direct reports) by 2025. The Board also
reviewed the results of the employee engagement survey and
subsequent management actions to support its diversity
initiatives and support of local cultures.
During 2020, the usually extensive schedule of individual site visits
undertaken by the executive and Non-executive Directors was
severely curtailed by COVID-19-related travel restrictions. Whilst
the Executive Directors undertook a number of essential visits to
the Group’s sites, the Non-executive Directors’ visits were limited
to a trip by Holly Koeppel to Charlotte, NC. To seek to replace this
face-to-face interaction, the Non-executive Directors held video
calls with senior managers in China and Japan in November,
to hear more about the activities of the Group in China and North
Asia respectively, and their responses to the pandemic. A number
of the Directors also had the opportunity to meet in person with
members of the Group Executive Committee at the Board’s
strategy meeting in October.
Section 172 duties
The Directors are cognisant of the duty they have under Section
172 of the Companies Act 2006, to promote the success of the
Company over the long term for the benefit of shareholders
as a whole, having regard to a range of other key stakeholders.
In performance of its duties throughout the year, the Board has
had regard to the interests of the Group’s key stakeholders and
remained cognisant of the potential impact on these stakeholders
of the decisions it has made. The effects of business decisions on
the broader stakeholder group were particularly brought into
sharp focus by the demands of the pandemic. Details of the
Board and the Company’s engagement with stakeholders
during the year can be found in the Section 172(1) Statement
and Our Stakeholders section on pages 22-26.
The Board is committed to communicating with shareholders
and other stakeholders in a clear and open manner and seeks
to ensure effective engagement through the Company’s regular
activities.
The Company undertakes an ongoing programme of meetings
with investors, which is managed by the Investor Relations team.
The majority of meetings with investors are led by the Chief
Executive and the Chief Financial Officer. In advance of tabling
the new Remuneration Policy at the 2020 AGM, the Company
wrote to shareholders inviting engagement, and subsequently
entered into dialogue with a number of the Group’s larger
shareholders to discuss the new Policy. The Group’s largest
shareholders were also contacted in advance of the AGM inviting
discussion on any questions they might like to raise and making
the Chairmen of the Board, the Audit Committee and the
Remuneration Committee available to meet them should they
so wish.
Statement on compliance with the UK Corporate
Governance Code
Save as set out below, the Company was fully compliant with the
Principles and Provisions of the 2018 UK Corporate Governance
Code (the ‘Code’) for the year ended 31 December 2020. A copy
of the Code can be found on the FRC website at: https://www.frc.
org.uk/directors/corporate-governance-and-stewardship/
uk-corporate-governance-code.
Provision 38: The Company is progressing with its plans to align
the level of pension allowance for Executive Directors with that
applicable to the majority of the workforce. Our incumbent
Directors’ pension contributions were frozen at the 1 January
2020 amount and will be reduced to 17% at the end of 2022, being
the level of the majority of the workforce. Further details can be
found on page 122.
Provision 41: During the year, the Remuneration Committee did
not engage systematically with the workforce to explain how
executive remuneration aligns with wider company pay policies.
Further details can again be found on page 122.
Governance 100 Vesuvius plc
Annual Report and Financial Statements 2020
Board Report continued
Division of responsibilities
The Board currently comprises nine Directors – the Non-executive
Chairman, John McDonough CBE; the Chief Executive, Patrick
André; the Chief Financial Officer, Guy Young; and six Non-
executive Directors, Kath Durrant, Hock Goh, Friederike Helfer,
Jane Hinkley, Douglas Hurt and Holly Koeppel. Douglas Hurt is
the Senior Independent Director. Henry Knowles is the Company
Secretary. Kath Durrant joined the Board on 1 December 2020
and will take over from Jane Hinkley as Chair of the Remuneration
Committee at the close of the 2021 AGM. Holly Koeppel and
Hock Goh have signalled their desire to step down from the Board
at the close of the 2021 AGM, following 4 years and 6 years of
service as Non-executive Directors, respectively.
The Board considers that, for the purposes of the UK Corporate
Governance Code, five Non-executive Directors (excluding the
Non-executive Chairman), namely Kath Durrant, Hock Goh,
Jane Hinkley, Douglas Hurt and Holly Koeppel, are independent
of management and free from any business or other relationship
which could affect the exercise of their independent judgement.
Friederike Helfer is a Partner of Cevian Capital, which continues to
hold 21.11% of Vesuvius’ issued ordinary share capital. As a result
Friederike Helfer is not considered to be independent. The
Chairman satisfied the independence criteria on his appointment
to the Board. The Board and its Committees have a wide range of
skills, experience and knowledge, and further details of each
Director’s individual contribution in this regard can be found in
their biographical details on pages 92 and 93.
The Chairman and Chief Executive
The division of responsibilities between the Chairman and the
Chief Executive is set out in writing. These were reviewed during
the year as part of the Company’s annual corporate governance
review. They are available to view on the Company’s website
www.vesuvius.com.
Division of responsibilities
The Board
Responsible for Group strategy, risk
management, succession and policy
issues. Sets the purpose, Values and
culture for the Group. Monitors the
Group’s progress against the targets set
Chairman
Chief Executive
Provides leadership and guidance for the
Board, promoting a high standard of
corporate governance. Sets the Board
agenda and chairs and manages
meetings. Independent on appointment,
he is the link between the Executive and
Non-executive Directors
Develops strategy for review and approval
by the Board. Directs, monitors and
manages the operational performance
of the Company. Responsible for the
application of Group policies,
implementation of Group strategy and the
resources for their delivery. Accountable
to the Board for Group performance
Senior Independent Director
Non-executive Directors
Company Secretary
Acts as a sounding board for the
Chairman, an alternative contact for
shareholders and an intermediary for
other Non-executive Directors. Leads the
annual evaluation of the Chairman and
recruitment process for the Chairman’s
replacement, when required
Exercise a strong, independent voice,
constructively challenging and supporting
the Executive Directors. Scrutinise
performance against objectives and
monitor financial reporting. Monitor and
oversee risks and controls, determine
Executive Director remuneration and
manage Board succession through their
Committee responsibilities
The Non-executive Directors meet at least
twice a year without the Executive
Directors being present
Advises the Chairman on governance,
together with updates on regulatory and
compliance matters. Supports the Board
agenda with clear information flow. Acts
as a link between the Board and its
Committees and between Non-executive
Directors and senior management
101
The Board
Group Executive Committee
The Group also operates a Group Executive Committee (GEC),
which is convened and chaired by the Chief Executive and assists
him in discharging his responsibilities. The GEC comprises the
Chief Executive, Chief Financial Officer, the business unit
Presidents, the Chief HR Officer, the President Operations and
Technology and the General Counsel/Company Secretary.
The GEC continued its formal schedule of six meetings and two
R&D reviews during 2020, and also, in response to the demands of
the pandemic, held weekly virtual meetings to discuss the Group’s
business activities. These weekly meetings will continue in 2021,
alongside the usual schedule of formal meetings.
The Board has a formal schedule of matters reserved to it and
delegates certain matters to its Committees. It is anticipated that
the Board will convene on seven occasions during 2021, holding
ad hoc meetings to consider non-scheduled business if required.
Board Committees
The principal governance Committees of the Board are the Audit,
Nomination and Remuneration Committees. Each Committee
has written terms of reference which were reviewed during the
year. A number of minor amendments were made to update the
terms of reference in accordance with recent governance updates
and to enhance their clarity. These terms of reference are
available to view on the Company’s website www.vesuvius.com.
Committee composition is set out in the relevant Committee
reports. No one, other than the Committee Chairman and
members of the Committee, is entitled to participate in meetings
of the Audit, Nomination and Remuneration Committees.
However, as detailed in the Committee reports, where the agenda
permits, other Directors and senior management regularly attend
by invitation, supporting the operation of each of the Committees
in an open and consensual manner.
The interactions in the governance process are shown in the
schematic below.
Board
Governance Committees
Administrative Committees
In addition, the Board delegates certain responsibilities to a Finance
Committee and Share Scheme Committee, which operate in accordance
with the delegated authority agreed by the Board
Finance Committee
To approve specific funding
and treasury-related matters
in accordance with the Group’s
delegated authorities or as
delegated by the Board
Share Scheme Committee
To facilitate the administration
of the Company’s share
schemes
Chairman
John McDonough, Chairman
Membership
Chairman, Chief Executive,
Chief Financial Officer and
Group Head of Corporate
Finance
Chairman
Any Board member
Membership
Any two Directors or any two
Directors and the
Company Secretary
Audit Committee
To monitor the integrity of
financial reporting and to
assist the Board in its review of
the effectiveness of the Group’s
internal controls and risk
management systems
Chairman
Douglas Hurt
Membership
All independent
Non-executive Directors
Remuneration Committee
To determine the remuneration
policy for the Executive
Directors and set the
appropriate remuneration
for the Chairman, Executive
Directors and senior
management
Chairman
Jane Hinkley
Membership
All independent
Non-executive Directors
Nomination Committee
To advise the Board on
appointments, retirements
and resignations from the
Board and its Committees and
to review succession planning
and talent development for
the Board and senior
management
Chairman
John McDonough, Chairman
(except when considering his
own succession, in which case
the Committee is chaired by an
appropriate Non-executive
Director, usually the Senior
Independent Director)
Membership
Chairman and the
Non-executive Directors
Governance 102 Vesuvius plc
Annual Report and Financial Statements 2020
Board Report continued
2020 Board programme
The Board discharges its responsibilities through an annual
programme of meetings. When the impact of the COVID-19
pandemic became apparent during 2020 the Board began
holding regular monthly meetings to ensure that the Directors
were kept fully apprised of the impact of the pandemic on the
Group and were able to take appropriate mitigating actions in a
timely manner. Communication between the Board and the
Executive Directors between meetings was frequent and covered
operational matters in detail.
At each of the regularly scheduled meetings, the following
standard items were considered:
> Directors’ duties and conflicts of interest
> Minutes of the previous meeting and matters arising
> Reports from the Chief Executive, the Chief Financial Officer
and the Company Secretary on key aspects of the business
> Key Performance Indicators
In 2020, the Board focused on key areas of strategy, performance and governance, including the matters outlined below:
Strategy
> Receiving and reviewing reports on strategy from the Flow Control, Advanced Refractories, Sensors & Probes
and Foundry business units
> Receiving and reviewing regular reports from the Chief Executive on implementation of the Group’s Strategic
Objectives, including M&A opportunities
> Receiving and considering reports on the Group’s quality, health, safety and environmental strategy and
objectives
> Approving the Group’s new Sustainability initiative
> Participation in a two-day off-site review of strategy presented by the three main business unit Presidents
and the Company’s key financial advisers
> Receiving and considering reports on the Group’s HR, Purchasing, IT, tax and treasury strategies, legal and
compliance activities and the management of the Group’s key pension liabilities
> Receiving and considering a report on the Group’s R&D strategy and objectives
> Regularly monitoring the Group’s financing structure, including compliance with the debt covenants, the
Group’s going concern status and approving the withdrawal of the 2019 final dividend and the Group’s
participation in the UK Government’s Covid Corporate Financing Facility
> Approving the issue of a new US private placement (USPP) and the preparation of additional USPP ‘shelf’
documentation
> Reviewing the Group’s internal control and risk management practices
Performance
> Receiving regular reports from the Chief Executive on the impact of COVID-19 on the Group, including:
– the number of people infected and the actions being taken to protect employees,
– the impact on customers and the measures being taken to ensure continued delivery,
– the financial impact, with particular focus on the Group’s cash flow and liquidity, the accessing of
government support schemes and the measures being taken throughout the Group to mitigate costs,
including tracking the number of employees on furlough or similar arrangements
– the operational status of our manufacturing sites and the number of people working remotely
> Receiving regular reports on the Group’s financial performance against key indicators, including each of the
Group’s KPIs
> Receiving regular safety reports setting out performance against key indicators
> Receiving regular reports on performance against manufacturing quality targets
> Receiving regular monthly updates from the Chief Executive on the performance of the Group’s businesses
with a critical focus on safety and quality
> Scrutinising the Group’s financial performance and forecasts
> Reviewing and agreeing the annual budget and financial planning
> Approving trading updates, and preliminary and half-year results
103
Governance
> Receiving regular reports from the Board Committees
> Approving the Annual Report and Notice of AGM, and approving the revised structure for the AGM in the
light of COVID-19 lockdown issues
> Approving the payment of the interim dividend
> Approving the appointment of Kath Durrant as a new Director
> Completing an evaluation of the Board and Committees’ performance and regularly reviewing progress
against the improvement actions identified in the 2019 evaluation
> Reviewing the Group’s internal controls and risk appetite, monitoring the Group’s key risks and approving the
Group’s risk register
> Reviewing and approving the Group’s Modern Slavery Statement
> Receiving regular updates on corporate governance and regulatory developments
> Completing a formal annual review of the Group’s governance arrangements
> Reviewing information received through the Group’s Speak Up reporting processes
> Renewing the Group’s delegated authorities
> Receiving reports from the Company’s brokers on market issues
Information and support
Directors’ conflicts of interest
The Board ensures that it receives, in a timely manner, information
of an appropriate quality to enable it adequately to discharge its
responsibilities. Papers are provided to the Directors in advance
of the relevant Board or Committee meeting to enable them to
make further enquiries about any matters prior to the meeting
should they so wish. This also allows Directors who are unable
to attend to submit views in advance of the meeting.
In addition to the formal Board processes, the Chief Executive
provides written updates on important Company business
issues between meetings, and the Board is provided with a
regular report of key financial and management information,
including information on safety and quality performance.
Regular updates on shareholder matters are provided to the
Directors, who also receive copies of analysts’ notes issued on
the Company. For the distribution of all information, Directors
have access to a secure online portal, which contains a reference
section containing relevant background information.
All Directors have access to the advice and services of the
Company Secretary. There is also an agreed procedure in place
for Non-executive Directors, in the furtherance of their duties,
to take independent legal advice at the Company’s expense.
The procedure was not utilised during the year under review.
The Board has established a formal system to authorise situations
where a Director has an interest that conflicts, or may possibly
conflict, with the interests of the Company (situational conflicts).
Directors declare situational conflicts so that they can be
considered for authorisation by the non-conflicted Directors.
In considering a situational conflict, these Directors act in the way
they consider would be most likely to promote the success of the
Company and may impose limits or conditions when giving
authorisation or subsequently if they think this is appropriate.
The Company Secretary records the consideration of any conflict
and any authorisations granted. The Board believes that the
approach it has in place for reporting situational conflicts
continues to operate effectively. No situational conflicts were
presented to the Board for authorisation during the year under
review.
Governance 104 Vesuvius plc
Annual Report and Financial Statements 2020
Board Report continued
105
Board and Committee attendance
Composition, evaluation and succession
Performance evaluation
The attendance of Directors at the Board meetings and at meetings of the principal Committees of which they are members held during
2020 is shown in the table below. The maximum number of meetings in the period during which the individual was a Board or Committee
member is shown in brackets.
Chairman
John McDonough CBE
Executive Directors
Patrick André
Guy Young
Non-executive Directors
Kath Durrant1
Hock Goh
Friederike Helfer
Jane Hinkley
Douglas Hurt
Holly Koeppel
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
11 (11)
11 (11)
11 (11)
1 (1)
10 (11)
11 (11)
11 (11)
11 (11)
11 (11)
—
—
—
1 (1)
5 (5
—
5 (5)
5 (5)
4 (5)
—
—
—
1 (1)
3 (4)
—
4 (4)
4 (4)
3 (4)
6 (6)
—
—
1 (1)
6 (6)
5 (6)
6 (6)
6 (6)
5 (6)
1. Kath Durrant was appointed to the Board on 1 December 2020 and the table reflects the number of Board and Committee meetings that she could attend
All Non-executive Directors have agreed to commit sufficient
time for the proper performance of their responsibilities,
acknowledging that this will vary from year to year depending
on the Group’s activities, and will involve visiting operational and
customer sites around the Group. The Chairman in particular
dedicates a significant amount of time to Vesuvius in discharging
his duties.
Directors are expected to attend all scheduled Board and
Committee meetings and any additional meetings as required.
Each Director’s other significant commitments are disclosed to
the Board during the process of their appointment and they are
required to notify the Board of any subsequent changes.
The Company has reviewed the availability of the Chairman and
the Non-executive Directors to perform their duties and considers
that each of them can, and in practice does, devote the necessary
amount of time to the Company’s business.
following her appointment.
Hock Goh was unable to attend one set of Board and Committee
meetings, and Holly Koeppel one set of Committee meetings
during the year due to clashes with other professional
responsibilities that had been previously notified to the Chairman.
Hock Goh, Holly Koeppel and Friederike Helfer consistently
attended online meetings, and also attended online at physical
meetings where they were precluded from participating in person
due to travel restrictions, in the case of Mr Goh and Ms Koeppel,
this was despite the challenges posed by time differences to their
countries of residence, being Australia and the US, respectively.
To the extent that Directors were unable to attend scheduled
meetings, they received the papers in advance and relayed their
comments to the Chairman for communication at the meeting.
The Chairman followed up after the meeting in relation to the
decisions taken.
The Chairman and Non-executive Directors each have a letter
of appointment which sets out the terms and conditions of their
directorship. An indication of the anticipated time commitment
is provided in recruitment role specifications, and each Non-
executive Director’s letter of appointment provides details of the
meetings that they are expected to attend, along with the need
to accommodate travelling time. Non-executive Directors are
required to set aside sufficient time to prepare for meetings,
and regularly to refresh and update their skills and knowledge.
Copies of all contracts of service or, where applicable, letters of
appointment of the Directors are available for inspection during
business hours at the registered office of the Company and are
available for inspection at the location of the Annual General
Meeting (AGM) for 15 minutes prior to and during each AGM.
The Board carries out an evaluation of its performance and
that of its Committees and individual Directors, including the
Chairman, every year. Details of the evaluation conducted in
2020 can be found in the Nomination Committee report.
Audit, risk and internal control
The Board is responsible for ensuring that policies and procedures
are in place to ensure the independence and effectiveness of the
Internal and External Audit functions. The Audit Committee
assists the Board in reviewing the effectiveness of the Group’s
Internal and External Audit functions, in addition to monitoring
the integrity of the Group’s financial and narrative statements.
Further information about the work of the Audit Committee can
be found in the Audit Committee report on pages 106-114.
The Board is also responsible for setting the Group’s risk appetite
and ensuring that appropriate risk management systems are in
place. The Audit Committee assists the Board in reviewing the
effectiveness of the system of internal control, including financial,
operational and compliance controls, and risk management
systems. The Group’s approach to risk management and internal
control is discussed in greater detail on pages 30-34 and the
Group’s principal risks and how they are being managed or
mitigated are detailed on pages 36 and 37. The Viability
Statement which considers the Group’s future prospects is
included on page 34. Risk management and internal control are
also discussed in greater detail in the Audit Committee report.
All of the independent Non-executive Directors serve on both the
Audit and Remuneration Committees. They therefore bring their
experience and knowledge of the activities of each Committee to
bear when considering critical areas of judgement. This means
that, for example, the Directors are able to consider carefully the
impact of incentive arrangements on the Group’s risk profile and
to ensure that the Group’s Remuneration Policy and programme
are structured to align with the long-term objectives and risk
appetite of the Company.
Remuneration
The Directors’ Remuneration Report on pages 120-143 describes
the work of the Remuneration Committee in developing the
Group’s policy on executive remuneration, determining Director
and senior management remuneration, reviewing workforce
remuneration and related policies – including ensuring that these
align with the Group’s Strategic Objectives and culture, and
overseeing the operation of the executive share incentive plans.
Appointment and replacement of Directors
The Company’s Articles of Association specify that Board
membership should not be fewer than five nor more than 15
Directors, save that the Company may, by ordinary resolution,
from time to time, vary this minimum and/or maximum number of
Directors. Directors may be appointed by ordinary resolution or
by the Board. The Board may appoint one or more Directors to
any executive office, on such terms and for such period as it thinks
fit, and it can also terminate or vary such an appointment at any
time. The Articles specify that, at every AGM, any Director who
has been appointed by the Vesuvius Board since the last AGM
and any Director who held office at the time of the two preceding
AGMs, and who did not retire at either of them, shall retire from
office. However, in accordance with the requirements of the Code,
all the Directors who wish to continue to serve on the Board, will
offer themselves for election or re-election at the 2021 AGM.
The Board believes that each of the current Directors is effective
and demonstrates commitment to his or her respective role.
Accordingly, the Board recommends that shareholders approve
the resolutions to be proposed at the 2021 AGM relating to the
election and re-election of the Directors. The biographical details
of the Directors offering themselves for election and re-election,
including details of their other directorships and relevant skills
and experience, will be set out in the 2021 Notice of AGM.
The biographical details of the Directors are also set out
on pages 92 and 93.
Recommendations for appointments to the Board and rotation of
the Board are made by the Nomination Committee in accordance
with a rigorous procedure. The Nomination Committee is also
responsible for overseeing the maintenance of an effective
succession plan for the Board and senior management. Further
information on the activities of the Nomination Committee is set
out in the Nomination Committee report on pages 115-119.
A comprehensive induction programme is available to new
Directors. The induction programme is tailored to meet the
requirements of the individual appointee and explains the
dynamics and operations of the Group, and its markets and
technology. In normal times, the induction includes as a minimum
a series of face to face meetings with key Group executives and
advisers, along with site visits to the Group’s key strategic sites.
During the current COVID-19 travel restrictions, Kath Durrant’s
induction has been limited to virtual meetings with the Group’s
executives and senior management. A comprehensive plan of site
visits is planned when circumstances allow.
The Chairman, through the Company Secretary, continues to
ensure that there is an ongoing process to review training and
development needs. Directors are provided with details of
seminars and training courses relevant to their role and are
encouraged and supported by the Company in attending them.
In 2020, regulatory updates were provided as a standing item at
each Board meeting in a Secretary’s Report. External input on
legal and regulatory developments impacting the business was
also given, with specialist advisers invited to the Committees’
meetings to provide briefings on topics such as the changing
landscape of Corporate Governance, particularly the latest
pronouncements from the FRC and material developments
in the legal environment.
Governance 106 Vesuvius plc
Annual Report and Financial Statements 2020
Audit Committee
107
Dear Shareholder,
Committee members
Meetings
Role and responsibilities
Douglas Hurt (Committee Chairman)
Hock Goh
Jane Hinkley
Holly Koeppel
Kath Durrant – joined the Committee on her appointment
to the Board on 1 December 2020
The Company Secretary is Secretary to the Committee.
The Audit Committee
The Audit Committee comprises all the independent Non-
executive Directors of the Company, who bring a wide range
of financial and commercial expertise to the Committee’s
decision-making processes. Douglas Hurt is the Senior
Independent Director and Chairman of the Audit Committee.
He was the Finance Director of IMI plc for nine years prior to
his appointment and has worked in various financial roles
throughout his career. Douglas currently serves as the Chairman
of the Audit Committees of Countryside Properties PLC, Hikma
Pharmaceuticals PLC and the British Standards Institution.
He is a Chartered Accountant. This background provides him
with the ‘recent and relevant financial experience’ required
under the Code.
The Code and Financial Conduct Authority Disclosure Guidance
and Transparency Rules also contain requirements for the Audit
Committee as a whole to have competence relevant to the sector
in which the Company operates. Vesuvius’ Non-executive
Directors have significant breadth of experience and depth of
knowledge on matters related to Vesuvius’ operations, both from
their previous roles and from their induction and other activities
since joining the Vesuvius Board. The Directors’ biographies on
pages 92 and 93 outline their range of multinational business-to-
business experience and expertise in fields such as engineering,
manufacturing, services, logistics and human resources, as well
as financial and commercial acumen. The Board therefore
considers that the Audit Committee as a whole has competence
relevant to Vesuvius’ business sector.
On behalf of the Audit Committee, I am
pleased to present the Audit Committee
Report for 2020. The foundation of
the Committee’s work each year is a
recurring and structured programme of
activities which are defined in an annual
rolling Audit Committee timetable.
The Audit Committee then considers
additional items as matters arise and
priorities change. During 2020, the
Committee closely monitored the
impact of the COVID-19 pandemic
on the Group’s activities, undertaking
particularly detailed analysis of the
Group’s impairment assessments
and the Going concern and Viability
statements. In addition, the Committee
again spent some time focusing on the
Group’s cyber security measures, as well
as receiving updates throughout the year
on the implementation of changes to the
Group’s Finance Operating Model.
As set out in detail in the Audit Committee Report in the 2019
Annual Report, at the start of 2020, the Committee spent a
considerable amount of time reviewing management’s response
to a letter from the Financial Reporting Council (FRC) as part of
the usual cycle of the FRC’s reviews of listed companies accounts.
The Committee approved management’s response after review,
discussion and input from the Group’s External Auditor. The
Group adopted several recommendations in preparing the
2019 Annual Report and Financial Statements and the FRC
subsequently closed their enquiries. There were no further
changes. The FRC’s recommendations have been carried
through to the 2020 Annual Report.
The Audit Committee Report describes the work of the
Committee during the year, including its role in monitoring
the integrity of the Company’s financial statements and the
effectiveness of the internal and external audit processes.
It provides an overview of the significant issues the Committee
has considered during the year and its material judgements.
It also describes how the Committee fulfilled its responsibilities
to assist the Board in reviewing the effectiveness of the Group’s
system of internal financial controls and its internal control
and risk management systems.
Yours sincerely
Douglas Hurt
Chairman, Audit Committee
3 March 2021
The Committee met five times during 2020. The Committee has
also met twice since the end of the financial year and prior to the
signing of this Annual Report. The Board Chairman, the non-
independent Non-executive Director, the Chief Executive, the
Chief Financial Officer, the Head of Finance, the Group Head
of Internal Audit and the External Auditors were all invited
to each meeting. Other management staff were also invited
to attend as appropriate.
Audit Committee meetings are conducted to promote an open
debate, a constructive challenge of significant accounting
judgements, to provide guidance and oversight to management
to ensure that the business maintains an appropriately robust
control environment and to provide informed advice to the Board
on financial matters. Between Audit Committee meetings, the
Chairman of the Audit Committee encourages open dialogue
between the External Auditors, the management team and the
Group Head of Internal Audit to ensure that emerging issues are
addressed in a timely manner.
During the year, as is the Audit Committee’s established practice,
the Committee members met and discussed business and control
matters with senior management during Board presentations.
The Committee also met privately with the Group Head of
Internal Audit and the External Auditors without any executives
present.
The outcomes of Audit Committee meetings were reported to
the Board, and all members of the Board received the agenda,
papers and minutes of the Committee.
During 2020, the main role and responsibilities of the Committee
continued to be to:
> Monitor the integrity of the Financial Statements of the
Company and the Group, and any formal announcements
relating to the Group’s financial performance, reviewing
significant financial reporting judgements contained in them
> Provide advice, as requested by the Board, on whether the
Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for the shareholders to assess the
Group’s position and performance, business model
and strategy
> Review and monitor the effectiveness of the Company’s internal
financial controls and internal control and risk management
systems
> Review procedures for detecting fraud, and systems and
controls for the prevention of bribery and ensure that a
thorough review is carried out of all alleged instances of fraud
notified to the Committee
> Monitor and review the role and effectiveness of the Company’s
Internal Audit function and audit programme, ensuring that the
function is adequately resourced and operates free from
management or other restrictions
> Make recommendations to the Board on the appointment,
reappointment and removal of the External Auditors and
negotiate and agree the fees and terms of engagement of the
External Auditors
> Monitor and review with the External Auditors the findings of
their work, including key accounting and audit judgements,
how any risks to audit quality were addressed and the External
Auditors’ view of its interactions with senior management
> Review and monitor the External Auditors’ independence,
objectivity and effectiveness, taking into consideration relevant
law, regulation, the Ethical Standard, other professional
requirements and any FRC audit inspection findings
> Oversee the operation of the policy on the engagement
of the External Auditors to supply non-audit services
> Report to the Board on how the Committee has discharged
its responsibilities
The Committee operates under formal terms of reference
approved by the Board. These were reviewed during the year
and minor amendments made to enhance their clarity and
alignment with best practice. They are available in the Investors/
Corporate Governance section of the Company’s website,
www.vesuvius.com.
Within these terms, the Committee and its individual members
are empowered to obtain outside legal or other independent
professional advice at the cost of the Company. These powers
were not utilised during the year. The Committee may also
secure the attendance at its meetings of any employee or
other parties with relevant experience and expertise should
it be considered necessary.
Governance 108 Vesuvius plc
Annual Report and Financial Statements 2020
Audit Committee continued
Activities in 2020
1. Much of the Committee’s activities throughout the year were
focused on the potential impact of COVID-19 on the Group:
– the work of Internal Audit was adjusted to recognise the
travel restrictions and reduced availability of operational
staff, as furlough schemes and home-working were
implemented around the world. The focus of their work
was discussed, ensuring that as homeworking was
implemented, the critical controls of the Group were
adjusted or strengthened accordingly
– the Group’s risk profile and appetite was reviewed, noting
the impact of changing customer demand, government
responses to the pandemic and internal working patterns
– the Group’s liquidity and cash generation was placed under
particular scrutiny, with additional treasury matters
reported to the Committee
– the Committee acted to ensure that despite the changes in
working patterns, critical resources in internal control and
compliance functions continued to work effectively
– The work of the External Auditors was carefully considered
given the widespread need for the use of virtual tools, both
at the half year review and in the planning for the year-end
audit. As such, where appropriate and possible, audit work
was accelerated to reflect the potentially longer time
frames for completion
– The half year results review was carried out with due
consideration of the impact of COVID-19 on the Group’s
finances and a particularly rigorous analysis of the Group’s
going concern status was undertaken, covering a range of
worst-case scenarios.
2. Against this background, the Committee’s agenda covered
the usual standing items – the review of financial results, the
effectiveness of the Group’s internal financial controls, and
the review of the internal control and risk management
systems – as well as additional topics, including updates on
cyber security and in-depth reviews of the Group’s foreign
exchange exposures.
3. The Committee received feedback throughout the year on the
progress of plans to change the Finance Operating Model.
This continued the transition of the business unit finance
function from purely accounting to forward-looking business
support, with clearer accountabilities for controlling functions
and a focus on further standardising core processes. Changes
were noted to the structure of finance roles and the planned
roll-out of the new Model was reviewed and approved.
4. As set out overleaf, the FRC wrote to the Company at the end
of 2019 as part of its review of the Group’s 2018 Annual
Report and Financial Statements. The Committee supervised
the Company’s response to the matters raised in their review
letter and enhanced certain disclosures in the 2019 Annual
Report and Financial Statements, revisiting the Company’s
approach to impairments. The FRC have closed their
enquiries.
5. The Audit Committee continued to devote time to ensure that
initiatives to mitigate potential risks and financial exposure
remained robust and appropriate.
6. The Committee challenged the assumed growth rates and
discount rates used for asset impairment assessments.
7. The Committee considered the Company’s going concern
statement and challenged the nature, quantum and
assessment of the significant risks to the business model,
future performance, solvency and liquidity of the Group that
were modelled as part of the scenarios and stress testing
undertaken to support the Viability Statement made by the
Company in the 2019 Annual Report and Financial
Statements. In particular the Committee examined the
potential effect of a combination of risk factors occurring at
the same time. At the half year the Committee undertook
another detailed look at the Company’s going concern
statement. The 2020 going concern and Viability Statements,
which were also critically reviewed, are contained within the
Strategic Report on pages 34 and 35.
8. The Committee monitored the resourcing and delivery
of the 2020 Internal Audit plan, in light the of the changes
necessitated to accommodate COVID-19 travel restrictions
and approved the 2021 Internal Audit plan. The Committee
monitored both the responses from and follow-up by
management to Internal Audit recommendations arising
during the year. The Committee discussed at length the
significant issues raised, the root causes for those issues
and the actions being taken to resolve the issues.
9. The Committee conducted regular, detailed reviews of
provisions, challenging the reasonableness of underlying
assumptions and estimates of costs and the quantum of
any related insurance assets.
10. The Committee reviewed and updated its terms of reference
and approved a revised Non-Audit Services Policy.
11. The Committee reviewed the effectiveness of the External
Auditors.
12. The Committee met with Internal and External Audit without
management and received valuable feedback on a range of
topics including culture, the impact on morale of COVID-19
and the strength of the finance function.
13. The Committee conducted an evaluation of its performance
and effectiveness, concluding that the level of information
provided to the Committee and the quality of debate had
been maintained despite the challenges of COVID-19. As in
previous evaluations the cycle of the Committee’s work and
the outcome of its deliberations were highly regarded.
The Committee members believe that they received sufficient,
relevant and reliable information throughout the year from
management and the Internal and External Auditors to
enable the Committee to fully discharge its responsibilities.
The work of the Audit Committee is further elaborated in the
paragraphs below.
109
Statement of compliance with the Competition
and Markets Authority (CMA) Order
The Committee considers that the Company has complied with
The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Processes and
Audit Committee Responsibilities) Order 2014 (Article 7.1),
published by the CMA on 26 September 2014, including with
respect to the Audit Committee’s responsibilities for agreeing
the audit scope and fees and authorising non-audit services.
Financial reporting
The Committee fulfilled its primary responsibility to review the
integrity of the half year and annual Financial Statements and
recommended their approval to the Board.
In forming its views, the Committee assessed:
> The quality, acceptability and consistency of the accounting
policies and practices
> The clarity and consistency of the disclosures, including
compliance with relevant financial reporting standards and
other reporting requirements
> Significant issues where management judgements and/or
estimates had been made that were material to the reporting
or where discussions had taken place with the External Auditors
in arriving at the judgement or estimate
> In relation to the overall Annual Report, whether the Annual
Report and Financial Statements taken as a whole were fair,
balanced and understandable, taking into consideration all the
information available to the Committee
> The application of the FRC’s guidance on clear and concise
reporting and the FRC guidance notes issued throughout the
year on matters that companies should emphasise in their
financial statements such as the impact of COVID-19 and
enhancements to going concern reporting
> The disclosure and presentation of alternative performance
measures, in view of the guidelines issued by the European
Securities and Markets Association
The Committee actively deliberated and challenged reports
from the Chief Financial Officer and the Head of Finance.
These were well prepared and, for areas of judgement and/or
estimation, set out the rationale for the accounting treatment
and disclosures, and the pertinent assumptions and the
sensitivities of the estimates to changes in the assumptions.
The External Auditors also delivered memoranda for the
half-year and year-end, stating its views on the treatment of
significant issues. The External Auditors provided a summary
for each issue, including its assessment of the appropriateness
of management’s judgements or estimates.
Significant issues and material judgements
The Committee considered the following significant issues in the
context of the 2020 Financial Statements. It identified these areas
to be significant, taking into account the level of materiality and
the degree of judgement exercised by management.
The Committee resolved that the judgements and estimates
made on each of the significant issues detailed below were
appropriate and acceptable.
Impairment of intangible assets
The 2020 year-end carrying value of goodwill of £617.6m was
tested against the current and planned performance of the
Steel Flow Control, Steel Advanced Refractories, Steel Sensors
& Probes and Foundry CGUs. The Committee considered the
Board-approved medium-term business plans, medium term
and terminal growth assumptions, as well as the discount
rates used in the assessments. Relevant sensitivities using
reasonably possible changes to key assumptions were
evaluated. The detailed assumptions are provided in Note 17
to the Group Financial Statements.
Given that the models indicated, even with the application of
reasonable sensitivities to the assumptions, that there remains
significant headroom between the value in use and the carrying
value, the Committee concurred that no goodwill impairment
charges were required.
Other provisions
The Committee continues to monitor the implications of a number
of potential exposures and claims arising from ongoing litigation,
product quality issues, employee disputes, restructuring, vacant
sites, environmental matters, onerous leases, legacy matter
lawsuits, indirect tax disputes and indemnities or warranties
outstanding for disposed businesses. Due to the long gestation
period before settlement for a number of these issues can be
reached, provisioning for these items requires careful judgement
in order to establish a reasonable estimate of future liabilities. The
Committee also assessed the strength of any insurance coverage
for certain of these liabilities and challenged the accounting
treatment for any amounts deemed to be recoverable from
insurers. After due consideration and challenge, and having
considered legal advice obtained by the Company, the
Committee is satisfied that there are appropriate levels of
provisions set aside to settle third-party claims and disputes
(Note 30 to the Group Financial Statements) and that adequate
disclosure has been made. The Committee also agreed with
management’s assessment of the estimated costs to manage
and remediate the waste water at a disused US property and
its disclosure as a separately reported item. Where no reliable
estimate of the potential liability can be made for the outcome
of an existing issue, no provision has been made and appropriate
disclosure is included under contingent liabilities (Note 32 to the
Group Financial Statements).
Governance 110 Vesuvius plc
Annual Report and Financial Statements 2020
Audit Committee continued
Restructuring charges
The Group’s restructuring costs in 2020 principally related
to restructuring programmes which had commenced in prior
years. The Committee critically reviewed the treatment of the
restructuring costs disclosed as separately reported items in
2020 and concluded that these have been treated consistently
with the accounting policy. This ensures that only significant
restructuring programmes that have a defined scope and are
material in nature are reported separately, which enables a
clearer understanding of the underlying results of the Group.
Impairment of investment in subsidiaries
The Committee has also reviewed management’s impairment
analysis of the parent company’s investment in subsidiaries.
Following this review it concurred that no impairment was
required.
Fair, balanced and understandable reporting
The Committee considered all the information available to it in
reviewing the overall content of the Annual Report and Financial
Statements and the process by which it was compiled and
reviewed, to enable it to provide advice to the Board that the
Annual Report and Financial Statements are fair, balanced and
understandable. In doing so, the Committee ensured that time
was again dedicated to the drafting and review process so that
internal linkages were identified and consistency was tested.
Drafts of the Annual Report and Financial Statements were
also reviewed by a senior executive not directly involved in
the year-end process who reported to the Committee on his
impressions of their clarity, comprehensiveness, and the balance
of disclosure in the document. On completion of the process, the
Committee was satisfied that it could recommend to the Board
that the Annual Report and Financial Statements are fair,
balanced and understandable.
Risk management and internal controls
As highlighted in the reviews of strategy and principal risks in the
Strategic Report, risk management is inherent in management’s
thinking and is embedded in the business planning processes of
the Group. The Board has overall responsibility for establishing
and maintaining a system of risk management and internal
control, and for reviewing its effectiveness. The Audit Committee
assists the Board in reviewing the effectiveness of the Group’s
system of internal control, including financial, operational and
compliance controls, and risk management systems. This
framework is consistent with the Code.
In 2020, Committee members fully participated in the Board
review of existing risks and ongoing mitigating actions, further
details of which are given on pages 36 and 37. The Committee
believes that the Group’s process for identifying and
understanding its principal risks and uncertainties remains
robust and appropriate.
The Committee considered the Company’s going concern
statement and challenged the nature, quantum and effects of the
combination of the unlikely but significant risks to the business
model, future performance, solvency and liquidity of the Group.
These were all modelled as part of the scenarios and stress testing
undertaken to support the Viability Statement. As part of this
review, the Committee considered the Group’s forecast funding
requirements over the next three years and analysed the impact
of key risks faced by the Group with reference to the Group’s debt
covenants, these included stress testing for raw material cost
inflation, customer failure, business interruption and a fall in sales.
The scenarios considered the impact of multiple risks occurring
simultaneously and the additional mitigating actions that the
Group could take. The Committee noted that the Group’s debt
headroom was sufficient to accommodate the modelled stress
scenarios. As a result of its review, the Committee was satisfied
that the going concern statement and Viability Statement had
been prepared on an appropriate basis. The 2020 Going Concern
statement and the 2020 Viability Statement are contained within
the Risk, viability and going concern section on pages 34 and 35.
The key features of the Group’s internal control system, which
provides assurance on the accuracy and reliability of the Group’s
financial reporting, are detailed in the Risk, viability and going
concern section on pages 30-37. During 2020, the Committee
considered the process by which management evaluates internal
controls across the Group. The Group Head of Internal Audit
provided the Committee with a summary overview of the
assurance provided by the Group’s control framework and the
testing of these controls. PwC also reviewed controls in the
businesses within the scope of its audit.
The Group is made up of several large operating units, but
also many small units in geographically diverse locations.
Consequently, segregation of duties, overlapping access
controls on systems and remote management oversight can give
rise to control vulnerabilities and fraud opportunities. The Group
has not adopted a common Enterprise Resource Planning system
as a Group-wide standard. Over time, the Group is moving
towards a shared services model, enabled by control, process and
systems standardisation between businesses. This is expected to
enhance the overall internal control environment in the smaller
operating units.
The Group undertakes a range of activities to mitigate the risk of
fraud. This framework is regularly reviewed to determine areas
for improvement. Eliminating the risk of fraud remains one of the
key areas of focus for Internal Audit, forming a fundamental part
of ‘full scope’ and financial audits. These assess the quality of the
balance sheet reconciliations, review key judgement matters,
consider ERP access rights, review tenders and quotations, review
the entity’s controls over master data changes, and review
controls over payments, journals and associated applications,
along with travel and expense reimbursements.
111
Any control issues identified by management locally or as a result
of the work performed by Internal Audit are escalated as
appropriate. Internal Audit rate all control issues they identify in
terms of their significance and agree remediation plans with the
Auditee and an Action Owner, establishing a target date for
remediation. For significant issues, management at all levels
within the business are engaged to agree the actions and
remediation dates. The status of the remediation is monitored
and overdue issues are escalated appropriately with
management, and reported at Audit Committee meetings. The
Audit Committee continues to challenge management on the root
cause where issues arise on the progress of remediation activities.
Cyber risks continue to be a significant area of focus for the
Group. Like most other companies, Vesuvius receives a large
number of ‘phishing’ emails presenting fake credentials. It is
similarly subject to repeated attempts at social engineering fraud.
In 2020, a loss of euro 31k was suffered due to a breach in protocol
stemming from the receipt of an email from an account that had
been hacked. The issue was addressed immediately, and further
enhancements were made to the Group’s control processes.
The Group’s Cyber Security Committee meets on a regular basis
to review and progress the Group’s plans for tackling cyber issues,
and the Audit Committee receives regular updates on the Group’s
activities in this area. During 2020 the Group conducted further
work to strengthen its IT security and focused on mitigating risks
in operations technology in response to the changing dynamics of
external cyber threats. A holistic approach is taken to addressing
cyber challenges, focusing on the improvement of the Group’s
overall IT procedures and framework. The Group continues to run
regular training programmes on cyber/IT security.
During 2020, the Group continued its review of third-party
representatives and intermediaries. This included detailed due
diligence for distributors and ongoing monitoring of our sales
agents. The Committee also continued its assessment of the
Group’s potential exposure to bribery and corruption risks, noting
the ongoing work conducted by the Group in this context. The
face-to-face visits to operations usually conducted to assist with
the work were curtailed by the COVID-19 pandemic. However, in
line with our continued improvement approach, a detailed review
of the existing compliance programme and resources was
undertaken in 2020. The output of this review, combined with
previous risk assessments, continues to be used to develop the
Group’s framework, policies and procedures for the management
of anti-bribery and corruption risk, reflecting an appropriate level
of control for the business.
In line with the requirements of the new Code, responsibility for the
oversight and monitoring of the Group’s Speak Up helpline, which
collates allegations of improper behaviour and employee
concerns, has passed from the Audit Committee to the full Board.
Procedures remain in place for any complaints received by the
Company regarding fraud, accounting, internal accounting
controls and auditing matters, to be passed to the Audit
Committee for review and appropriate follow-up action. Further
details of the operation of the Group’s Speak Up policy and
helpline can be found in the Sustainability section of the Annual
Report on page 86.
Each year, the senior financial, operational and functional
management of the businesses self-certify compliance with
Group policies and procedures for the areas of the business under
their responsibility and confirm the existence of adequate internal
control systems throughout the year. The Committee reviews any
exceptions noted in this bottom-up exercise.
The work undertaken during the year indicated the existence of
an appropriate control environment, albeit with some areas for
improvement, for which clearly defined improvement actions
have been identified, particularly in respect of the Group’s cyber
risks. No significant control issues were raised by our External
Auditors, PwC and Mazars, and no material issues were identified
in 2020. After considering these various inputs, the Committee
was able to provide assurance to the Board on the effectiveness
of internal financial control within the Group, and on the
adequacy of the Group’s broader internal control systems.
Internal Audit
The Group’s Internal Audit function operates on a global basis
through professionally qualified and experienced individual
members located around the world. They report to the Group
Head of Internal Audit, based in London, who in turn reports
directly to the Chairman of the Audit Committee.
Throughout 2020 Internal Audit continued to perform a
programme of Compliance & Control (‘C&C’) audits which focus
on internal financial controls and key Board compliance issues.
Effectiveness & Efficiency (‘E&E’) audits which focus on a broader
range of business performance issues, were only performed in
response to a direct request from Management. This approach
allows the Audit Committee to concentrate on key control issues
for resolution.
The Committee received, considered and approved the 2020
Internal Audit plan which was constructed using a risk-based
approach to cover the Group’s control environment. The plan was
based on the premise that all operating units are audited at least
once every three years, including the smaller operating units.
Internal Audit annually audits each of the large operating entities
located in Germany, the US, China, Mexico and Brazil. Due to the
travel restrictions arising from the COVID-19 pandemic, a
modified plan was subsequently presented to the Committee for
approval. Whilst the scope of the audit work was modified to
facilitate remote testing, the entities tested remained aligned with
the original risk-based plan.
Governance 112 Vesuvius plc
Annual Report and Financial Statements 2020
Audit Committee continued
On site controls-based testing was replaced with remote Financial
Controls Health Check audits supplemented by the continued use
of Trial Balance deep dive testing which involved a detailed review
of the Trial Balance and its underlying transactions. The Health
Check audits required entities to submit evidence of the operation
of key Balance Sheet reconciliations and key financial controls
which were then reviewed remotely. This approach continued to
allow the identification of areas for control improvement. The
actions being taken to address these issues have been discussed
at length at the Audit Committee with regular updates on the
progress made. Internal Audit reported significant progress
made against issues reported in previous years.
In 2020, a total of 28 audit assignments were undertaken (29 in
2019). The Committee received a report from the Group Head of
Internal Audit at each of its meetings detailing progress against
the agreed plan. Key trends and findings and an update on the
progress made towards resolving open issues was also given.
Common themes emerging from Internal Audit reports coupled
with Internal Audit and Management’s assessment of risk have
informed the development of the 2021 Internal Audit plan.
When necessary Internal Audit uses external auditors to
supplement internal resources on an ad hoc basis. This process
provides valuable learning opportunities and we expect to
continue to use external resources in specialist areas and
geographies in the future.
Control issues continue to be recorded in a live web-based
database into which management is required to report progress
towards addressing any open issues. Internal Audit monitors
the progress made and frequent meetings continue to be held
with each business unit President to ensure that engagement
on the resolution of issues is clearly understood at all levels
of the business and responsibility for remediation has been
appropriately assigned. The results are communicated to the
Audit Committee which also involves senior management as
necessary to provide an update against any high-priority actions
and Internal Audit undertakes follow-up reviews as required.
In situations where audit findings required longer-term solutions,
the Committee oversaw the process for ensuring that adequate
mitigating controls were in place.
During the year, an internal review was undertaken of the
effectiveness of the Internal Audit function, canvassing the views
of the divisional finance Vice Presidents, business unit Presidents
and other key stakeholders. This highlighted continued
satisfaction with the relevance and value of issues raised, and the
quality of reporting. It did however highlight the need to continue
to upgrade the skills and capabilities of the Internal Audit team.
Over the course of the second half of 2020, increased focus was
placed on recruitment and a substantially new team of Internal
Auditors based in Krakow, Poland has been recruited to deliver
the 2021 plan. This includes an IT Audit specialist, recruited in
November 2020.
Having considered the work of the Internal Audit function during
2020, including progress against the 2020 Internal Audit plan,
the quality of reports provided to the Committee, and the results
of the review of the function’s effectiveness, the Committee
concluded that the Internal Audit function operated effectively
during 2020.
External audit
Auditors’ appointment
In 2017, the Company appointed PricewaterhouseCoopers LLP
(PwC) as External Auditors to the Company and the Group, and
Mazars LLP to audit the non-material entities within the Group.
PwC nominated Julian Jenkins as the audit partner responsible
for the Group audit. After the completion of the 2020 half year
audit, Julian Jenkins retired from PwC and was therefore
replaced as Vesuvius’ engagement partner by Darryl Phillips.
In line with the regulations on auditor rotation, the external
audit contract will be put out to tender at least every ten years
and the audit partner will be rotated at least every five years.
2020 Audit plan
PwC’s 2020 year-end audit plan was based on agreed objectives.
The audit focused on areas identified as representing significant
risk and requiring significant judgement. PwC maintained an
ongoing dialogue with the Audit Committee throughout the year
providing regular updates, including commentaries on significant
issues and its assessment of consistency and appropriateness
in the judgements and estimates made by management.
Private sessions were held with PwC without management being
present. PwC confirmed that its work had not been constrained
in any way and that it was able to exercise appropriate
professional scepticism and challenge throughout the audit
process. The Chairman of the Audit Committee met on a number
of occasions with PwC to monitor the progress of the audit and
discuss questions as they arose.
The Independent Auditors’ Report provided by PwC on pages
150-157 includes PwC’s assessment of the key audit matters.
These key audit matters are discussed in the significant issues
and material judgements comments above. The report also
summarises the scope, coverage and materiality levels applied
by PwC in its audit. As part of the audit planning process and
based on a detailed risk assessment, the Committee agreed
a materiality figure of £7.0m for Group financial reporting
purposes which is 19% lower than last year (£8.6m). This was set
at 4.6% of the average of headline profit before tax in the three
years to 31 December 2020, so as not to give undue weight to the
47% reduction to headline profit before tax from the impact of
COVID-19 on the Group’s results. It represents 7.6% of the Group’s
2020 headline profit before tax. Importantly, much lower levels
of materiality are used in the audit fieldwork on the individual
businesses across the Group and these lower figures drive the
scope and depth of audit work. Any misstatement at or above
£0.35m was reported to the Committee.
There were no significant changes this year to the coverage of the
audit which stood at 68% of the Group’s revenue, 74% of profit
before tax and 79% of headline profit before tax. This coverage
was considered to be sufficient by the Committee. The audit
coverage is reflective of the long tail of smaller businesses within
the Group that individually are not ‘material’ to the Group result.
The Committee also received a report from Mazars during the
year summarising the findings and recommendations from its
statutory audits for the year ended 31 December 2019 of the
non-material Group subsidiaries and management agreed to
implement certain of these recommendations.
113
The PwC audit fee approved by the Audit Committee was £1.8m.
This was constructed bottom up on a local currency basis and was
assessed in light of the audit work required by the agreed
materiality level and scope. The fee agreed with Mazars for the
audit of the non-material entities was £0.6m, resulting in a
combined audit fee with PwC of £2.4m, compared with £2.3m
in 2019.
Independence and objectivity
The Committee is responsible for safeguarding the independence
and objectivity of the External Auditors in order to ensure the
integrity of the external audit process. In discharging this
responsibility during 2020, the Committee:
> Sought regular confirmation from the incumbent External
Auditors that they considered themselves to be independent of
the Company in their own professional judgement, and within
the context of applicable professional standards
> Assessed the External Auditors’ work and considered whether
they were exercising an appropriate level of professional
scepticism
> Evaluated all the relationships between the External Auditors
and the Group, including compliance with the Group’s policy on
the employment of former employees of the External Auditors,
to determine whether these impaired, or appeared to impair,
the Auditors’ independence
by the External Auditors’ own internal pre-approval process,
to assess the firm’s ethical ability to do the work.
In 2020, the fees for non-audit services payable to PwC amounted
to £0.1m (2019: £0.1m). The 2020 fees represent payment for
assurance services related to the review of the Group’s half-year
financial statements, quarterly reviews and tax form audits in
India (as required by regulation), Indian certification in respect
of deposits along with the auditing of an R&D claim in Italy.
Effectiveness of the External audit process
The Committee and the Board are committed to maintaining
the high quality of the external audit process. Each year the
Committee carries out a formal assessment of the performance
of the External Auditors in carrying out their work and of the audit
process in general. Input into the evaluation in 2020 was obtained
from management and other key Company personnel, members
of the Audit Committee and the External Audit team. The review
focused on the External Auditors’ mindset and culture, skills,
character and knowledge, and the quality of its controls, as set
out in the guidance for audit committees prepared by the FRC.
The evaluation of the External Auditors included the following
steps:
> a survey of key finance and non-finance stakeholders in
Head Office and in-scope countries
> a commentary-based survey of Audit Committee members
> Reviewed compliance against the policy on the provision of
focused on their experience of working with PwC
non-audit services by the External Auditors
> Reviewed details of the non-audit services provided by the
External Auditors and associated fees
> consideration of PwC’s approach to assessing the risks to its
audit quality and an evaluation of the actions it had taken to
mitigate these
As a result of its review, the Committee concluded that PwC
remained appropriately independent.
> a review of other external evidence on PwC audit quality
(e.g. report on PwC by the FRC)
Non-audit services
> an assessment against the objectives outlined in PwC’s Audit
Vesuvius operates a policy for the approval of non-audit services.
A copy of the current policy is available to view on the ‘Investors/
Corporate Governance’ section of the Company’s website, www.
vesuvius.com. The Committee approved a revised Non-audit
Services Policy to comply with the FRC’s revised 2019 Ethical
Standard in 2020.
The use of the External Auditors for the provision of non-audit
services is strictly prohibited except for specific permitted audit
related services. These comprise: Category 1 services which the
External Auditors are obliged to perform due to law or regulation,
such as regulatory and solvency reports; and Category 2 services
which could be provided by others (albeit there are typically
significant efficiencies to be had when done in combination with
the audit such as interim reporting). An annual budget for the
additional Category 2 service fees proposed to be paid to the
External Auditors in the following year is presented for pre-
approval to the Audit Committee each year. Audit Committee
approval is required for expenditure in excess of this approved
budget.
All audit-related and permissible non-audit services proposed to
be carried out for any Group company worldwide by the External
Auditors must be pre-approved before an engagement is agreed.
Pre-approval must be obtained from the Head of Finance or the
Chief Financial Officer, who will confirm that the Audit Committee
has approved the engagement. Any assignment proposed to be
carried out by the External Auditors must also have been cleared
Objectives report
> discussions with PwC and key finance and non-finance
personnel
The evaluation concluded that the audit process had been
suitably rigorous, with PwC providing an effective, objective and
challenging audit process for the 2019 financial year. The
learnings from previous audits and the resultant actions taken
had had a positive impact on the overall efficiency and
effectiveness of the audit. PwC had further improved their audit
approach and communications, challenging the team in the right
areas and providing strong technical expertise. The PwC team
was also seen as independent by the Audit Committee and
management. To further improve the process it was proposed
that more regular update meetings be held in 2020 and that the
focus on earlier communication of audit approach and level of
interim testing in advance of year-end, be maintained. Debrief
meetings were held at a local level to discuss the 2019 audit and
to constructively share feedback that would facilitate further
improvements to the audit planning for the 2020 audit and
an improved understanding of the audit approach and
requirements.
Governance 114 Vesuvius plc
Annual Report and Financial Statements 2020
Audit Committee continued
Nomination Committee
115
Reappointment of PwC for 2021
Audit Committee evaluation
Dear Shareholder,
Committee members
The Audit Committee’s performance was evaluated as part of the
overall externally facilitated Board and Committee performance
evaluation, which is described in depth on pages 118-119. The
management of Audit Committee meetings was rated highly in
terms of the annual cycle of work, the level of input in meetings
and the wide variety of issues covered in a good level of detail.
The quality of the information provided to the Audit Committee
was also rated highly and there was noted to be high-quality,
open and candid engagement, between the Audit Committee
and the Chief Financial Officer and his team, the Head of Internal
Audit and the External Audit Partner, with a good rapport with
the internal team and Audit partners.
The Committee was judged to monitor the work of the Internal
and External Auditors effectively and to provide appropriate
challenge to management’s assessment of significant audit issues
and material accounting judgements. The Committee noted that
there was scope to further improve the Group’s internal control
systems and that action was being taken to strengthen these
through further standardisation of processes.
A number of priorities were identified for the Audit Committee
over the coming year, including review of the implementation of
the new Finance organisation, ensuring there is appropriate and
effective implementation of IT systems and solutions, along with
continued oversight of the Internal Audit function and its findings,
and support for the timely completion of recommendations by
both the Internal and External Auditors.
On behalf of the Audit Committee
Douglas Hurt
Chairman, Audit Committee
3 March 2021
The Committee is responsible for making recommendations to
the Board in relation to the appointment, reappointment and
removal of the External Auditors. In undertaking this duty, the
Committee takes into consideration a number of factors
concerning the External Auditors and the Group’s current activity,
including:
> the results of its most recent review of the effectiveness of the
Auditors
> the results of its review of the independence and objectivity of
the Auditors, particularly in light of the provision of non-audit
services
> its ability to coordinate a global audit, working to tight
deadlines
> the cost-competitiveness of the Auditors in relation to the audit
costs of comparable UK companies
> the tenure of the incumbent Auditors
> the periodic rotation of the senior audit management assigned
to the audit of the Company
> external reviews of the performance and quality of the
Auditors, including:
– the annual report issued by the Audit Inspection Unit of the
Financial Reporting Council on the work of the Auditors
– the Auditors’ own annual Transparency Report
Having considered the aforementioned factors, the Committee
decided to recommend to the Board that PwC be reappointed
for 2021. It confirms that its recommendation is free from the
influence of any third party and that there are no contractual
restrictions on the choice of auditor. A resolution proposing the
reappointment of PwC will be included in the notice of AGM
for 2021.
The Committee has noted the ruling by the Securities Exchange
Board of India (SEBI) regarding the prohibition placed on PwC
network companies performing audits of listed entities in India
for two years from 1 January 2018. PwC subsequently won the
appeal at the Securities Appellate Tribunal (SAT) allowing PwC to
continue with existing audits of listed companies. SEBI appealed
against the SAT order in November 2019 and this was stayed by
the Supreme Court pending final disposal of the appeal. For the
rest of the order, dealing with the ban, there has not been any
hearing and no date has been fixed. The Committee continues to
monitor developments on this matter in the context of the Group’s
two listed Indian subsidiaries, Foseco India Limited and Vesuvius
India Limited. The Group has contingency plans in place should
PwC not be able to continue to audit the Group’s entities in India.
On behalf of the Nomination Committee,
I am pleased to present the Nomination
Committee Report for 2020. The
primary responsibility of the Nomination
Committee is to focus on Board
composition and succession planning,
to ensure that the Board is made up of
individuals with the appropriate drive,
abilities, diversity and experience to lead
the Company in the delivery of its strategy.
As part of this work, the Committee is also responsible for
overseeing the succession plans that are in place for senior
management to ensure that there is a consistent pool of diverse
talent as a pipeline for future progression to the Board.
2020 has been a year of significant activity for the Committee
as it focused on its succession planning obligations. In December
2021, the Group reaches its ninth anniversary of operation as
a stand-alone company. At this point, Jane Hinkley and I, the two
remaining Directors who were appointed when the Company
initially listed as a separate entity, reach our nine-year tenure
thresholds for the purposes of the Code. With this in mind, the
Committee has plans in place to add extra non-executive
expertise to the Board. The first of these new Non-executive
Directors, Kath Durrant, joined the Board on 1 December 2020.
Kath has more than 30 years’ experience in HR Management
and will take over as Chair of the Remuneration Committee from
Jane Hinkley at the close of the 2021 AGM. At the end of 2020
Hock Goh and Holly Koeppel, also signalled their desire to step
down from the Board at the close of the 2021 AGM, following
6 years and 4 years of service, respectively. Consequently, the
Nomination Committee will continue its focus on succession,
with a further new Non-executive Director being actively sought.
In addition, noting that Jane Hinkley and I reach our ninth
anniversaries of appointment in 2021, the Committee will be
undertaking further succession activity later in the year, including
the Senior Independent Director commencing a process for the
appointment of a new Chairman.
Alongside this focus on Board recruitment, the Committee also
spent a considerable amount of time during the year reviewing
senior management succession, including the pipeline for
succession to roles in the divisional executive committees and the
potential for progress to the Group’s Executive Director positions.
Yours sincerely
John McDonough CBE
Chairman, Nomination Committee
3 March 2021
John McDonough CBE (Committee Chairman)
Hock Goh
Friederike Helfer
Jane Hinkley
Douglas Hurt
Holly Koeppel
Kath Durrant – joined the Committee on her appointment
to the Board on 1 December 2020
Meetings
The Committee met six times during the year.
Key activities during the year
> Board composition: The Committee reviewed the structure,
size and composition of the Board, including the skills,
knowledge and experience required for the Board to continue
to function effectively, taking into consideration the need to
ensure an appropriate balance of independence and diversity
amongst Board members. The Committee then evaluated the
current Board composition against an assessment of these
future business needs.
> Board succession: The Committee considered the anticipated
rotation of Directors from the Board and future requirements
for Board composition, with a focus on ensuring that the
Board continues to be resourced by a group of Directors
with the skills and experience necessary to support the future
accomplishment of the Group’s Strategic Objectives. The
Committee engaged recruitment consultants to assist in the
search for new recruits and oversaw the successful recruitment
process to appoint Kath Durrant, as a Non-executive Director
and the next Chairman of the Remuneration Committee.
> Senior management development and succession: The
Committee reviewed the Group’s succession processes for
the Group Executive Committee and the management cadre
below this level, taking a particular interest in the progress of
plans to recruit a new business unit President for Flow Control.
It also examined how the Group’s talent management
processes were developing, how the Senior management
cadre were performing and how the development of individuals
flagged as ‘high potential’ was proceeding – all aimed at
providing a pipeline of experienced and talented managers
to succeed to roles at the highest level of the business.
> Diversity: The Committee reviewed the Group’s progress in
recruiting more women and supported the adoption by the
Group of a new target focused on ensuring that 30% of the top
management are female by 2025.
> Directors’ elections: The Committee considered the Directors’
annual elections and re-elections at the AGM.
> Committee evaluation: The Committee reviewed its
performance and effectiveness during 2020, including
evaluating whether each Non-executive Director was spending
sufficient time fulfilling their duties.
> Committee terms of reference: The Committee reviewed its
terms of reference and recommended some minor updates
to the Board.
Governance 116 Vesuvius plc
Annual Report and Financial Statements 2020
Nomination Committee continued
The Nomination Committee
The Nomination Committee is made up of me, as Chairman of
the Company, and the Non-executive Directors. During the year,
I continued as Chairman of the Committee, though I did not
act as Chairman when the Committee was discussing issues
surrounding my succession, when Douglas Hurt our Senior
Independent Director served as Chairman in my place. The
Company Secretary is Secretary to the Committee. Members’
biographies are set out on pages 92 and 93.
Role and responsibilities
The Nomination Committee’s foremost priorities are to ensure
that the Company has the best possible leadership, to oversee the
process for Board appointments, ensure plans are in place for
orderly succession to both the Board and Senior Management
(being the Group Executive Committee) positions, and oversee
the development of a diverse pipeline for succession. The
Committee ensures that the procedure for the selection of
potential candidates for Board appointments – either as an
Executive Director or independent Non-executive Director – is
formal, rigorous and transparent and undertaken in a manner
consistent with best practice. It also ensures that appointments
to the Board are made on merit, against objective criteria and
with due regard for the benefits of diversity of gender, social
and ethnic backgrounds, and cognitive and personal strengths
on the Board. The Nomination Committee advises the Board
on appointments, retirements and resignations from the Board
and its Committees.
The Committee operates under formal terms of reference. A copy
of these terms of reference, which were updated during the year,
is available on the Group’s website www.vesuvius.com.
The Committee and its members are empowered to obtain
outside legal or other independent professional advice at the cost
of the Company in relation to its deliberations. These rights were
not exercised during the year. The Committee may also secure
the attendance at its meetings of any employee or other parties
it considers necessary.
Process for Board appointments
The Committee follows formal, rigorous and transparent
procedures for the appointment of new Directors. When
considering a Board appointment, the Nomination Committee
draws up a specification for the role, taking into consideration
the balance of skills, knowledge and experience of its existing
members, the diversity of the Board, the independence of
continuing Board members, and the ongoing requirements and
anticipated strategic developments of the Group. The search
process is then able to focus on appointing a candidate with the
necessary attributes to enhance the Board’s performance.
During 2020, the Committee oversaw the selection process to
identify a new Non-executive Director, who would take over the
Chair of the Remuneration Committee. The Committee reviewed
the skills and attributes required for the role and agreed an
individual job specification. The Committee utilised the services of
the specialist recruitment agency, Spencer Stuart, in this search.
Spencer Stuart has adopted the Voluntary Code of Conduct
addressing gender diversity and best practice in search
assignments. It does not have any other connection with the
Group, other than in respect of management recruitment work
undertaken during normal trading activities. It was selected for
this assignment following a review of potential agencies based
on its skills and expertise.
The search for a new Non-executive Director was conducted
globally and a long-list of potential appointees was produced
by Spencer Stuart. The Committee reviewed the long-list and
a short-list of candidates for interview was drawn up, based
upon the objective criteria identified at inception. The Chairman,
the Chief Executive, the Senior Independent Director and the
Remuneration Committee Chair interviewed the short-listed
candidates, and the preferred candidate then met with all other
Board members, either in person or where travel restrictions
prohibited this, virtually by videoconference. Detailed external
references were taken up and, following this, the Committee
made a formal recommendation to the Board for the
appointment of Kath Durrant as a new Non-executive Director.
Kath was required to demonstrate that she had sufficient time
available to devote to the role and to identify any potential
conflicts of interest. No conflicts were identified. Following her
appointment, the Committee asked the Company Secretary
to put in place a comprehensive induction programme for her.
Board composition
On an ongoing basis, the Committee reviews the current and
future needs of the Board and its Committees – reflecting on the
balance of skills, knowledge and experience of the current
Directors and comparing this against the Board’s list of key skills.
The independence and diversity of the Board and the balance of
skills, experience and development needs of Board members are
examined as part of the annual corporate governance review.
The Committee also takes into consideration the results of the
Board evaluation process each year. In 2020, the evaluation rated
highly the skills and experience represented on the Board, along
with the diversity amongst Directors noting particularly the
excellent regional spread of expertise and culture with Directors
from the US, UK, France, Austria, South Africa and Asia. The
importance of the Board possessing knowledge of the Company’s
growth markets was re-emphasised. The Committee’s key skills
matrix was reviewed in light of the outcome of these deliberations.
On an ongoing basis, the Committee considers existing lengths
of tenure and the prospective rotation and retirement of
Board members, so that it can plan succession accordingly.
The Committee has commenced a search for a further new
Non-executive Director and begun preparations for finding a
successor to the Chairman, in line with anticipated requirements.
117
its Committees also have the appropriate range of diversity, skills,
experience, independence and knowledge of the Company and
the markets in which it operates, to discharge their duties and
responsibilities effectively. We continue to look at diversity in its
broadest sense – reflected in the range of backgrounds and
experience of Board members who are drawn from different
nationalities and have managed a variety of complex global
businesses. The Nomination Committee recognises that diversity
is a key ingredient in creating a balanced culture for open
discussions at Board level and in minimising ‘groupthink’.
The Board’s overall skills and experience, as well as Non-
executive Director independence, were reviewed during the
year. The Board’s composition also formed part of the Board
evaluation process. The Board considers its diversity, size and
composition to be appropriate for the requirements of the
business. In 2019 it achieved its target of achieving at least
33% female membership, and at the end of 2020, 44% of the
Directors were women. Four Directors are non-UK citizens and
two of the Directors (22%) identify as having BAME heritage.
The Board Diversity Policy confirms the Group’s commitment to
maintaining a Board comprising at least 33% female
membership, while continuing to appoint candidates based on
merit and recognising that over time the proportion of female
Directors will fluctuate naturally as Board members retire and
new Directors are appointed.
In 2020, 14% of our workforce were women, which was stable
versus 2019. The number of women in the Group Executive
Committee and Top Management team (members of the Group
Executive Committee plus their key direct reports) increased by
7.5 percentage points in 2020 to 20%. The Group has adopted
a new target focused on ensuring that 30% of the Group Executive
Committee and Top Management are female by 2025. The
Committee is committed to continuing to monitor the Group’s
ongoing progress towards achieving this target.
Diversity
The Group Diversity and Equality Policy outlines Vesuvius’
commitment to encouraging a supportive and inclusive culture
amongst its global workforce, promoting diversity and
eliminating any potential discrimination in our work environment.
Vesuvius’ Board Diversity Policy explains how this commitment
manifests in relation to the Board. Vesuvius recognises the value
of a diverse and skilled workforce and is committed to creating
and maintaining an inclusive and collaborative workplace culture
that will provide sustainability for the organisation into the future.
We believe that the dedication and professionalism of our people
is the most significant contributor to our success. Having a
balance of cultures, ethnicities and genders helps to promote
innovation and creativity. The diversity of our employees is one of
the core strengths of the Group. Copies of the Group’s Diversity
policies can be found on the Group’s website: www.vesuvius.com.
As an organisation, Vesuvius has a global, multicultural
operational and customer base, and we wish to reflect that inside
our organisation with a multiculturally diverse community of
excellent professionals of all backgrounds at Vesuvius. This starts
by focusing on broad diversity of gender and nationality, with
an aim to ensure that all employees and job applicants are given
equal opportunity and that our organisation is representative
of all sections of society where we operate. Each employee is
respected and valued and able to give their best as a result.
All employees are given help and encouragement to develop
their full potential and utilise their unique talents.
1
In turn, a more diverse leadership group will result. We expect
that Vesuvius’ leadership population should increase in diversity
significantly over the next two to five years, in terms of age,
gender, ethnicity, length of service and educational background.
Directors’ Tenure
1
1
1
In line with the Group’s global commitment to diversity, the
Nomination Committee focuses on ensuring that the Board and
1
Board nationalities
Directors’ Tenure
1
1
1
1
1
5
Austrian
American
British
French
South African
Singaporean
Board composition
International business
experience
Experience managing
a finance function
Prior experience of serving
as a director of a listed plc
Independent Directors
5
Note: Guy Young has dual British
and South African citizenship
Female Directors
4
4
7
5
Austrian
American
British
French
South African
Singaporean
Further information on the Group’s approach to promoting diversity can be found on page 82.
As at 31 December 2020, the gender balance of the Group’s employees was as follows:
Group Executive Committee member
Top management1
Middle management
All other employees
Grand total
Group Executive Committee members and Top Management
Directors of subsidiaries included in consolidation2
Female
2
9
65
1,357
1,433
11
40
Male
5
39
401
8,476
8,921
44
394
Total
Female
7
48
466
9,833
10,354
55
434
29%
19%
14%
14%
14%
20%
9%
9
Male
71%
81%
86%
86%
86%
80%
91%
Notes:
1. Top Management comprises key leadership roles reporting directly to members of the Group Executive Committee.
2. There are 434 directors of Group subsidiaries, 9% of whom are women. This disclosure is made to comply with regulatory requirements. It includes directors
of dormant companies. Some individuals hold multiple directorships.
Governance 119
118 Vesuvius plc
Annual Report and Financial Statements 2020
Nomination Committee continued
Board evaluation
The Board carries out an evaluation of its performance and that
of its Committees every year. This year’s evaluation was again
externally facilitated by the corporate advisory firm, Lintstock.
The Group uses Lintstock’s Insider List database tool but has no
other connection with the organisation and Lintstock does not
have any connection with any of the Directors.
Each evaluation was conducted via a series of targeted
questionnaires. As with previous years, the evaluation not only
covered the performance of the Board but also that of its
Committees, along with individual reviews of each Director and
analysis of the performance of the Chairman. Narrative reports
were then prepared for the Board, the Audit, Nomination and
Remuneration Committees, and the Chairman.
The Board assessment focused on seven core areas: Board
composition, oversight of stakeholders, Board dynamics,
Board support and focus of meetings, Board oversight, risk
management, and priorities for change. It also covered the
Group’s response to the COVID-19 crisis and the conduct of the
Board’s strategy meetings.
The outcome of the review was positive, with the Board perceived
to have improved its performance despite the challenges of 2020
and the necessity to hold most of its meetings virtually. The
Non-Executives’ support and challenge of management was
rated highly overall and the Directors were particularly supportive
of the more frequent, shorter meetings that had been held to
respond to the challenges of the COVID-19 pandemic. The
Board’s understanding of the views and requirements of investors
and employees was rated highly, and the Board’s understanding
of customers was also rated positively overall, although it was
noted that there continued to be further scope for improvement.
The impact of travel restrictions limiting opportunities for
face-to-face meetings was acknowledged and the benefit of
re-establishing such interactions as soon as possible recognised.
With regard to the particular challenges of the COVID-19
pandemic, it was noted that the Board had been able swiftly
to adjust its focus and priorities, setting clear objectives for the
executive team and monitoring their delivery. A programme
of additional meetings had quickly been put in place to ensure
decisions were taken on a timely basis. A clear imperative for
safety, liquidity, rigorous financial management and customer
supply was placed on the management team, which the business
was able to address clearly and effectively.
In terms of longer-term strategy, Vesuvius’ capacity to deliver on
this was rated highly overall, though there was an emphasis on the
ongoing need to ensure that the Group continued to recruit and
retain sufficient and appropriately skilled people to support such
delivery in the future. This would continue to be an area of focus in
2021, along with the roll-out of the Group’s new sustainability
agenda. In addition, the Board resolved to gain further
understanding of competitor dynamics in 2021. With the
forthcoming changes in Non-executive Directors, succession
planning was once again highlighted as an area of focus.
In addition to the primary focus on safety, the top priorities for
Vesuvius as a business over the coming year were identified by the
Board as being capturing organic and, where possible inorganic
growth; driving innovation and launching new products, to gain
and maintain market share; operational and commercial
performance and cost management.
The individual assessment of Directors concluded that all of the
Directors continued to contribute effectively, providing expert
and strategic advice as appropriate and holding management
to account in an open and constructive manner. They were
considered to devote adequate time to their duties and to be
engaged and proactive in debate at all meetings. The Chairman
was viewed to operate with objective judgement, and his
approach to chairing meetings was deemed to be inclusive and to
facilitate debate. Each of the Committees was also considered to
have operated effectively during the year.
As in previous years, a set of action points was compiled from the
output of the evaluation to ensure that its findings are included in
the Board’s activities. These will be implemented by the Board in
2021, with progress reviewed by the Board throughout the year.
The 2019 evaluation identified the following Board priorities for future Board attention; these were addressed during 2020 as follows:
Area
Strategy
Issue
Action taken in 2020
Review Board requirements for
provision of strategic information
The Board held its annual strategy presentation and review, albeit delayed
because of the COVID-19 pandemic. Non-executive Director input into the
agenda for the day and the presentations was canvassed and reflected in
the schedule to ensure that the meetings’ aims were achieved.
Enhance the Board’s visibility of the
Group’s customers
Greater information on the Group’s customer base, current requirements
and untapped potential was included the Strategy Day presentations.
People and
organisation
Senior management succession
Continued focus on enhancing the
Board’s understanding of senior
management capabilities
Board dynamics Prioritise Board focus on key
strategic and business issues rather
than historical performance
Sharpen focus of Board Strategy
Day presentations to clearly
delineate immediate term delivery
and long-term strategy
The Nomination Committee received more detailed reporting on the
enhancement of processes for talent management and succession in the
Group, and the focus for further developing the talent pipeline for senior
roles in the Group.
The Chief Executive updated the Nomination Committee on senior
management performance, recruitment and talent, giving them increased
visibility on the strengths and weaknesses of the existing senior
management cadre.
Further priority was given to strategic reporting throughout the year,
although the COVID-19 pandemic required key Board input on tactical
issues to provide a response to the challenges it posed.
In appropriate areas, Board strategy presentations were conformed
to give a broader understanding of overall themes.
Senior management succession
The Committee’s succession planning activities do not exclusively
relate to the Board but encompass the senior management levels
immediately below the Board, aiming to support and encourage
the growth of a pool of talent able to step up to the top roles in
future years. The Committee considers succession plans for all
the senior functional and business unit positions, assessing the
availability of candidates who could cover the roles on a short
term contingency basis should the need arise, along with the
pool of medium-term and long-term talent available for future
development into specific roles. The Committee continued
to focus on the Group’s talent development and succession
planning processes in 2020, with a continuing emphasis on the
development of this senior management cadre. Where gaps
arose, the Committee was apprised of the work being undertaken
to develop and recruit new executives for this talent pool.
Committee evaluation
The Committee’s activities were part of the externally facilitated
evaluation of Board effectiveness during the year, with
Committee members completing individual questionnaires.
The results of these written submissions were then collated and
a written report tabled to the Committee. The management
of Nomination Committee meetings was highly rated overall,
with the quality of information provided also rated positively.
The process for the recruitment of a new Non-executive Director
was considered to have been conducted appropriately with all
necessary rigour, despite the challenging circumstances. It was
noted that the Committee needed to continue its focus on
reviewing the development of the pipeline of internal successors
for Senior Management, particularly the GEC roles. Going
forward, it was noted that with the anticipated departures of
Hock Goh and Holly Koeppel at the 2021 AGM, the Nomination
Committee will continue its focus on recruitment, with further
a new Non-executive Director being actively sought. In addition,
noting that Jane Hinkley and I reach our ninth anniversaries
of appointment in 2021, the Committee will be undertaking
further succession activity later in the year, including the
Senior Independent Director commencing a process for
the appointment of a new Chairman.
On behalf of the Nomination Committee
John McDonough CBE
Chairman, Nomination Committee
3 March 2021
Governance 120 Vesuvius plc
Annual Report and Financial Statements 2020
Directors’ Remuneration Report
Remuneration overview
Dear Shareholder,
On behalf of the Remuneration Committee, I am pleased to
present the Directors’ Remuneration Report for the financial year
ended 31 December 2020.
The Annual Report on Directors’ Remuneration sets out details
of the pay received by the Directors in 2020. The report will be
subject to an advisory shareholder vote at the 2021 AGM.
COVID-19
As with many organisations around the world, and for the people
that work in them, 2020 has been an extraordinarily challenging
year with the COVID-19 pandemic impacting our business,
employees and communities. The Committee, together with the
Board, would like to thank our people for their hard work and
dedication during this difficult period, particularly those working
tirelessly to maintain the supply of products and services to our
customers.
Regardless of the challenges faced during the year, the Group’s
priority remained the health and safety of all its employees. We
are proud of the far-reaching efforts of all our employees around
the world to maintain a safe working environment and for their
contributions to local communities during this time of heightened
need, be it donating PPE to local medical facilities and elderly care
homes, donations of essential food and hygiene products to less
fortunate families, or sanitising and reconfiguring workplaces to
ensure the ongoing functioning of the business while ensuring the
well-being of employees.
To protect the Group, management, with the support of the
Board, enacted a series of measures to preserve cash, reduce
costs and protect the business and jobs. Despite the impact of
COVID-19 we have been able to maintain the size of our
workforce at around 10,500.
In recognition of the prevailing challenges and to acknowledge
the impact of the pandemic on all our stakeholders, including our
shareholders, our people, customers and the communities in
which we operate, the Group’s Executive Committee voluntarily
waived 20% of their contractual base salaries, and where legally
permissible, a corresponding reduction of their contractual
employer pension contributions, for six months of the year. The
Chairman and Non-executive Directors also volunteered a 20%
reduction in their fees over the same period. The total savings
generated by the members of the Group Executive Committee
and the Board of Directors amounts to £406,000 inclusive
of £56,000 contributed by the Non-executive Directors in
sacrificed fees.
The voluntary waiver extended further into the senior
management team with the direct reports to the Group Executive
Committee electing to reduce their contractual salary (and where
permissible, also their corresponding employer pension
contributions) by 5-10% over the same period of time. In addition
to the savings contributed by the Group Executive Committee and
the Board of Directors, a further £1.15m was contributed by
approximately 170 managers.
Strategic
alignment
Internal measures adopted very early in the economic downturn
included a restriction on discretionary spending, a hiring freeze on
non-essential roles, a drive to reduce working capital, a significant
reduction in planned capital expenditure, the use of furlough and
other temporary absence programmes, utilising tax deferral
arrangements where available, and encouraging employees to
use up accrued vacation days.
Once the initial impact of the economic downturn on the business
started to turn and signs of a slowly improving business became
evident, several decisions were made to address the assistance
accessed by the organisation.
> While earlier in the year it was deemed appropriate to
withdraw the 2019 final dividend payment, the Board
determined in October that the improved level of business
activity later in the year made the reinstatement of a dividend
an affordable action recognising the importance of these
payments to shareholders.
> In the UK, given the uncertainty at the time, it was deemed
appropriate to use the Government’s furlough programme to
assist those whose employment may otherwise have been
adversely affected by the COVID-19 pandemic. As the Group’s
financial position became more stable, all furlough amounts
received from the UK Government were repaid.
> To reinforce our liquidity position, in April 2020, the Group
secured access to the Covid Corporate Financing Facility
(CCFF) being offered by the Bank of England. By September
2020, as a result of our positive free cash flow generation
and early signs of marginally improving levels of business
activity, the Company repaid the debt earlier than its
March 2021 maturity.
These actions have formed the backdrop for the discussions
and decisions of the Committee during 2020 and early 2021.
Performance in 2020
2020 was a challenging year for the Group, during which we were
inevitably affected by the global outbreak of COVID-19, which
materially disrupted our key end markets for both the Steel and
Foundry Divisions. Despite these challenges, the Group focused
swift action on cost control and cash preservation. Our reported
results declined compared with 2019, registering £1,458.3m
of revenue and £101.4m of trading profit on a reported basis.
Cash flow has remained strong (£113.5m v £121.5m) despite
the reduced profit, demonstrating the underlying strength
and cash-generative nature of our business.
In considering the impact of this difficult year on all our
stakeholders, the Committee also noted that, despite the reduced
profits, the Company’s share price increased from £5.00 as of
31 December 2019 to £5.365 on 31 December 2020, representing
an increase of 7.3% on an absolute basis, and 14.6% relative to the
FTSE 250.
Deliver growth
Generate sustainable
profitability and
create shareholder
value
Maintain strong
cash generation
and an efficient
capital structure
Provide a safe
working environment
for our people
Be at the forefront
of innovation
Run top-quality,
cost-efficient
and sustainable
operations
Foster talent,
skill and motivation
in our people
121
2020 Directors’ Remuneration
As was disclosed in last year’s Directors’ Remuneration Report,
in December 2019, the Committee reviewed Patrick André’s
and Guy Young’s salaries and increased them by 3% and 10%
respectively. During 2020, these were voluntarily reduced by
20% for six months of the year in response to the impact of the
COVID-19 pandemic.
In 2020, Patrick André and Guy Young received allocations of
Performance Shares under the Vesuvius Share Plan (VSP) worth
200% and 150% of their base salaries, respectively. As outlined
in last year’s Remuneration Report, in response to lower share
prices driven by the growing economic uncertainty, the share price
used to determine the number of shares allocated was £4.371
(the average in the five dealing days prior to the February 2020
Remuneration Committee meeting) rather than £3.9248 (the
average in the five dealing days prior to grant). Accordingly, the
effective value of these awards at the date of grant was 180%
and 135% of base salaries for Patrick André and Guy Young,
respectively.
Other than as outlined above, the Remuneration Committee did
not exercise any further discretion in respect of the Executive
Directors’ remuneration in 2020.
Remuneration outcomes for 2020
In 2020, the Annual Incentive awards were based 60% on Group
headline earnings per share (EPS), 20% on the Group’s working
capital to sales ratio (based on the 12-month moving average)
and 20% on specified personal objectives; 33% of any Annual
Incentive earned will be deferred into awards over shares for
three years.
In 2020, our adjusted headline EPS of 27.6 pence was below
the threshold Annual Incentive target of 39.0 pence and the
Group’s working capital to sales ratio of 23.2% was better than
the threshold target of 23.5%. As a result, partial payments of
34.0% of their maximum entitlement of 25% of contractual base
salary (being 20% of their overall Annual Incentive) are due to the
Executive Directors in respect of this financial performance metric
of the 2020 Annual Incentive. Pay-outs are also due in respect of
the personal objectives element of the Annual Incentive, with the
Committee awarding Patrick André and Guy Young 65.3% and
69.0% respectively of their maximum entitlements of 25%
of contractual base salary (being 20% of their overall Annual
Incentive), in respect of the personal objectives they were set
for 2020.
The Committee considered the appropriateness of paying
Directors’ incentives when the EPS target had not been met and
in light of other stakeholders’ experience. In addition to the factors
listed previously, it should be noted that the financial targets were
set in a pre-COVID-19 world and that the personal objectives are
linked to key strategic, organisational and operational projects
designed to strengthen the Company for the long term, and have
measurable targets. One of the key financial objectives once the
pandemic took hold was the preservation of cash and
management of working capital. With the reduced level of
business, we would normally expect an impact on the working
capital to sales ratio, so it is gratifying to see that management
not only reduced this to below last year’s figure of 24%, but
achieved an outcome within the target set prior to COVID-19.
In light of the achievements against targets set pre-COVID-19,
the Committee concluded that such pay-outs were in order.
The performance period for the awards made under the VSP in
2018 matured at the end of December 2020 and potentially vest
in March 2021. Performance was measured equally by reference
to total shareholder return (TSR) relative to the FTSE 250
(excluding investment trusts) and headline EPS growth over the
three-year period (adjusted as above). Relative TSR performance
was below median; as a result no Performance Share awards will
vest under the TSR element (out of a maximum 50%). The annual
compound headline EPS growth for the period was -16%, which is
below the minimum EPS target. As a result no Performance Share
awards will vest under the EPS performance element (out of a
maximum of 50%).
The Committee considered whether to exercise its discretion when
reviewing the nil vesting of the Performance Shares and
considered the underlying financial performance of the Company
to satisfy itself that the outcome was appropriate.
The Committee took into account all factors when considering the
remuneration outcomes for 2020, including the actions and
measures deployed by the management team in response to the
COVID-19 pandemic, and the Committee resolved that the
Group’s Executive Remuneration Policy had operated
appropriately in respect of 2020.
Workforce remuneration
The Remuneration Committee has always had clear oversight of
the level and structure of remuneration for members of the Group
Executive Committee, along with approving the structure and
payment of awards to all executives under the Group’s share
plans. In addition, it has been provided with broad remuneration
information on the top cadre of management.
Following the recent revisions to the Code, the remit of the
Remuneration Committee has been broadened to include the
review of workforce remuneration and related policies and the
more general alignment of incentives and rewards with culture.
Given the diverse nature of the Group’s operations both
geographically and functionally, the Group has a wide variety of
different remuneration and incentive arrangements in operation.
The Committee has continued a programme to review workforce
remuneration, which included the pension arrangements in the
Group’s largest territories and bonus arrangements across the
global workforce. Insights gained from these exercises enabled
the Committee to assess the alignment of these arrangements
within the Group and amongst employees of different seniority
including the Executive Directors, and were taken into account
when considering remuneration for the Executive Directors and
Senior Management.
Environmental, social and governance issues
The Committee recognises the importance of environmental,
social and governance matters in relation to Executive Directors’
remuneration. The Executive Directors’ personal objectives for the
2021 Annual Incentive contain specific targets in relation to such
matters to ensure an increased focus.
In addition, the malus and clawback provisions applicable to
the VSP specifically contemplate the reduction of awards should
an individual’s conduct, a material failure of risk management
or a serious breach of health and safety, result in serious
reputational damage.
Governance 122 Vesuvius plc
Annual Report and Financial Statements 2020
Remuneration overview continued
Implementation of the new Remuneration Policy in 2020
Our new Remuneration Policy came into effect on its approval
at last year’s AGM, resulting in the following changes:
Enhancement of shareholding guidelines
> The shareholding guideline that applies whilst in employment
was increased to 200% of salary for all Executive Directors
from 2020.
> A post-employment shareholding guideline was introduced
under which Executive Directors remain subject to their
shareholding requirement in the first year after their cessation
as an Executive Director and to 50% of the shares retained in
the first year during the second year after such cessation,
recognising that there is no requirement to purchase additional
shares if the shares held when they cease to be an Executive
Director are less than the applicable shareholding guideline.
Aligning pension provisions
> As required by the new UK Corporate Governance Code, the
level of pension allowance for Executive Directors appointed
following the adoption of the 2020 Remuneration Policy will be
aligned with the post-retirement benefits applicable to the
majority of the workforce or, where appropriate, to the majority
of the workforce of the relevant geography.
> Our incumbent Executive Directors currently receive a 25%
pension contribution. This was frozen at the 1 January 2020
amount and we committed to reduce it to that of the majority
of the workforce in line with the Code. The review of workforce
pensions referred to above covered pension plans in ten of the
major countries in which we operate and where approximately
half of our workforce is located. The review highlighted the wide
variation in state, mandatory and customary corporate
pension arrangements around the globe. On the basis of this
review the Committee concluded, and the Executive Directors
have agreed, that the contributions they receive in respect of
pensions will be reduced to 17%, the average of the workforce
as shown by our review, with effect from 1 January 2023.
2021 Remuneration review
Under the terms of the new Directors’ Remuneration Policy,
and in line with the practice for the wider workforce, Patrick André
and Guy Young are entitled to an annual review of their salary.
The approach adopted across the Group for 2021 in response
to the ongoing pandemic was that salary increases should be
the exception other than where required by law. The Committee
applied the same approach for the Executive Directors and their
salaries for 2021 remain unchanged.
The Committee also reviewed the annual bonus opportunity for
the Executive Directors. The year 2020, with all of its inherent
challenges, has demonstrated the impact of the focus that annually
set targets brings, and the Committee concluded that it was
appropriate to increase their maximum bonus opportunity to
150%. In coming to this conclusion, the Committee also took into
account its long track record of setting challenging bonus targets
and is confident that corporate strategic objectives are aligned and
that the performance metrics are incentivising the right behaviours
to achieve the strategy.
Finally, in light of the 2020 EPS outcome, when considering targets
for the 2021 LTIP awards, the Committee resolved that a range
expressed as pence targets rather than a growth target was more
appropriate for the EPS element of the award, whilst maintaining
the split of 50% between relative TSR and EPS. The Committee
retains the discretion to amend the vesting outcome where it
considers that it is not a fair and accurate reflection of overall
business performance, including consideration of any potential
“windfall gains” at the point of vesting.
2021 Chairman and Non-executive Directors’ fees
The Board has resolved to not increase the fees of Non-executive
Directors for 2021 as the Committee did with respect to the
Chairman’s fees.
Employee and shareholder engagement
The Group’s operations are geographically diverse in nature.
The Group does not operate a central workforce engagement
mechanism, and as such the Committee has not engaged
systematically with the workforce during the year to explain how
executive remuneration aligns with wider Company pay policy,
although outside of travel restrictions brought about by COVID-19,
visits to operations by the Non-executive Directors are designed to
provide opportunities for an open forum for discussion with
employees. Copies of the Company’s Annual Report detailing the
Executive Directors’ remuneration are, however, widely
disseminated throughout the Group and available for employees
to view on the Company’s website at: www.vesuvius.com.
I would like to draw attention to the results of the recent all-
employee engagement survey which delivers a very positive
message with its reassuringly high, and increased, participation
rate of 92% and with the overall engagement score, which
measures the way employees think, feel and act towards Vesuvius,
also increased. Whilst the work to respond to employee concerns
continues, this reflects the positive impact of the efforts to date.
I am always keen to hear shareholders’ views on our remuneration
policy and implementation, inviting those shareholders who wish to,
to meet with me. During the year I met with a number of shareholders
to discuss topics such as the Chief Financial Officer’s pay increase,
executive pensions, Annual Incentive targets and Long-Term
Incentive Plan measures. The comments made are shared with the
Committee and taken into account during our deliberations.
At the 2020 AGM, the Remuneration Policy and the Directors’
Remuneration Report were passed with votes in favour of 97.18%
and 96.94% respectively, showing broad-based support for the
developments in the 2020 Remuneration Policy and to the
changes proposed to Executive Directors’ remuneration.
As ever, I remain keen to hear shareholders’ views on
remuneration matters.
Change of Remuneration Committee Chairman
After many years serving as the Chairman to the Remuneration
Committee, I am very pleased to be succeeded by Kath Durrant
who will take over at the close of the 2021 AGM. Kath brings
extensive prior experience to this role. She served as a Non-
executive Director and Chair of the Remuneration Committee
of Renishaw plc from 2015 to 2018 and currently serves as
a Non-executive Director and Chair of the Remuneration
Committees of SIG plc and Calisen plc. I will remain in the service
of Vesuvius as an Independent Non-executive Director.
I would like to express my appreciation to the shareholders,
the Board and the management team for the support and
constructive engagement afforded me during my time as
Remuneration Committee Chairman.
Yours sincerely
Jane Hinkley
Chairman, Remuneration Committee
3 March 2021
123
Directors’ Remuneration Report
2020 Remuneration Policy
At the 2020 AGM, held on 13 May 2020, the Company obtained shareholder support for a new Remuneration Policy which took
effect from the close of that meeting. The previous policy applied in its entirety up until this date. The elements of the previous policy
that relate to remuneration that remained extant on this date (such as outstanding share awards) continue to apply until these
commitments cease. The policy is contained within the 2019 Annual Report and can be viewed in the Investors section (Results, Reports
and Presentations) of the Vesuvius website: www.vesuvius.com. The version of the policy set out below contains minor textual
amendments to reflect 2021 policy implementation.
The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office (including
exercising any discretions available to it in connection with such payments), notwithstanding that they are not in line with the Policy
set out here, where the terms of the payment were agreed: (i) before the date the Company’s first Remuneration Policy approved by
shareholders in accordance with Section 439A of the Companies Act came into effect; (ii) before the Policy set out here came into effect,
provided that the terms of the payment were consistent with the shareholder-approved Remuneration Policy in force at the time they
were agreed; or (iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Remuneration
Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes,
‘payments’ include the Remuneration Committee satisfying awards of variable remuneration and, in relation to an award over shares,
the terms of the payment are ‘agreed’ at the time the award is granted.
Remuneration Policy Table for Executive Directors
Alignment/purpose
Operation
Opportunity
Performance
Base salary
Helps to recruit and
retain key employees.
Reflects the individual’s
experience, role and
contribution within the
Company.
Base salary is normally reviewed
annually, with changes effective from
1 January.
Base salary is positioned to be market
competitive when considered against
other global industrial companies,
and relevant international and FTSE
250 companies (excluding
Investment Trusts).
Salary increases will normally be in
line with the average increase
awarded to other employees in the
Group, although increases may be
made above this level at the
Committee’s discretion in
appropriate circumstances. In
considering any increase in base
salary, the Committee will also take
into account:
Paid in cash, subject to local tax and
social security regulations.
(i) the role and value of the individual
Any increase will take into account the
individual’s performance, contribution
and increasing experience.
(ii) changes in job scope or
responsibility
(iii) progression in the role (e.g. for a
new appointee)
(iv) a significant increase in the scale
of role and/or size, value or
complexity of the Group
(v) the need to maintain market
competitiveness.
No absolute maximum has been set
for Executive Director base salaries.
Current Executive Directors’ salaries
are set out in the Annual Report on
Directors’ Remuneration section of
this Remuneration Report.
There is no formal maximum as
benefit costs can fluctuate
depending on changes in provider,
cost and individual circumstances.
None.
Other benefits
Provides normal market
practice benefits.
A range of benefits including, but not
limited to: car allowance, private
medical care (including spouse and
dependent children), life insurance,
disability and health insurance,
expense reimbursement (including
costs if a spouse accompanies an
Executive Director on Vesuvius
business), together with relocation
allowances and expatriate benefits,
in some instances grossed up for tax,
in accordance with the Group’s
policies, and participation in any
employee share scheme operated by
the Group.
Governance 124 Vesuvius plc
Annual Report and Financial Statements 2020
2020 Remuneration Policy continued
125
Alignment/purpose
Operation
Opportunity
Performance
Pension
Helps to recruit and
retain key employees.
Ensures income in
retirement.
An allowance is given as a
percentage of base salary. This may
be used to participate in Vesuvius’
pension arrangements, invested in
own pension arrangements or taken
as a cash supplement (or any
combination of the above options).
Annual Incentive
Incentivises Executive
Directors to achieve key
short-term financial and
strategic targets of the
Group.
Additional alignment
with shareholders’
interests through the
operation of bonus
deferral.
Normally 33% of any Annual
Incentive earned by Executive
Directors will be deferred into awards
over shares under the Vesuvius
Deferred Share Bonus Plan which
normally vest after at least three
years, other than in specified
circumstances outlined elsewhere
in this Policy. These may be cash
or share settled.
The Committee has the discretion
to determine that actual incentive
payments should be lower than
levels calculated by reference to
achievement against targets if it
considers this to be appropriate.
The Committee has the discretion to
award participants the equivalent
value of dividends accrued during
the vesting period on any shares
that vest.
Subject to malus and clawback.
Vesuvius Share Plan (VSP)
Maximum of 25% of base salary for
incumbent Executive Directors at the
date that this policy is adopted. This
was frozen at the 1 January 2020
amount and will be reduced to 17%
from the end of 2022 in line with the
average of that received by the
majority of the workforce.
The level of allowance for Executive
Directors appointed following the
adoption of this policy will be aligned
with the post-retirement benefits
applicable to the majority of the
workforce or, where appropriate,
to the majority of the workforce of
the relevant geography.
Below threshold: 0%.
On-target: 50% of the applicable
maximum opportunity in any year.
Maximum: Up to 150% of base
salary.
The Remuneration Committee will
set the level of maximum bonus
opportunity for each Executive
Director at the start of each year,
with 50% of the applicable maximum
payable for on-target performance.
Payments start to accrue on meeting
the threshold level of performance,
with payments between threshold
and on-target and between
on-target and maximum made
on a pro rata basis.
Aligns Executive
Directors’ interests with
those of shareholders
through the delivery of
shares. Rewards
Executive Directors for
achieving the strategic
objectives of growth in
shareholder value and
earnings.
Assists retention of
Executive Directors
over a three-year
performance period.
VSP awards to Executive Directors
are granted as Performance Share
awards. These may be cash or share
settled.
Executive Directors are eligible to
receive an annual award with a face
value of up to 200% of base salary in
Performance Share awards.
Vesting at threshold performance is
at 25% of the award, rising to vesting
of the full award at maximum.
Awards vest three years after their
award date, other than in specified
circumstances outlined elsewhere in
this Policy, subject to the achievement
of specified conditions. All vested
shares, net of any tax liabilities, are
then subject to a further two-year
holding period after the vesting date,
which will continue to apply
notwithstanding the termination of
employment of the participants
during this holding period, except
at the Committee’s discretion in
exceptional circumstances, including
a change of control or where the
participant dies or has left
employment due to ill health, injury
or disability.
The Committee has the discretion to
award participants the equivalent
value of dividends accrued during the
vesting period and further two-year
holding period on any shares that
vest.
Subject to malus and clawback.
None.
The Annual Incentive is measured on
targets set at the beginning of each
year. The Committee establishes
threshold and maximum performance
targets for each financial year. The
majority of the Annual Incentive will be
determined by measure(s) of Group
financial performance. The remainder
of the Annual Incentive will be based on
financial, strategic or operational
measures appropriate to the individual
Director. Performance is measured
over a one-year period. Actual
performance targets will be disclosed
after the performance period has
ended. They are not disclosed in
advance due to their commercial
sensitivity.
Vesting will be subject to performance
conditions as determined by the
Remuneration Committee ahead of
each award. Those conditions will be
disclosed in the Annual Report on
Directors’ Remuneration section of the
Remuneration Report. The
performance conditions will initially be
Group EPS and relative TSR, although
the Remuneration Committee will
retain discretion for future awards to
include additional or alternative
performance conditions which are
aligned with the corporate strategy.
At its discretion, the Committee may
elect to add additional underpinning
performance conditions.
The Company reserves the right only to
disclose certain of the performance
targets after the performance period
has ended, due to their commercial
sensitivity.
Prior to any vesting, the Remuneration
Committee reviews the underlying
financial performance of the Group
over the performance period, and the
non-financial performance of the
Group and participants, to ensure that
the vesting is justified. Following this
review, the Committee has the discretion
to amend the final vesting level if it does
not consider that it is justified.
Malus/clawback arrangements
The Executive Directors’ variable remuneration is subject to malus
and clawback provisions. These provide the Committee with the
flexibility, if required, to withhold or recover payments made to
Executive Directors under the Annual Incentive Plan (including
deferred awards) and/or to withhold or recover share awards
granted to Executive Directors under the Vesuvius Share Plan,
including any dividends granted on such awards. The
circumstances in which the Committee could potentially elect
to apply malus and clawback provisions include: a material
misstatement in the Group’s financial results; an error in the
calculation of the extent of payment or vesting of an incentive;
gross misconduct by an individual; or significant financial loss or
serious reputational damage to Vesuvius plc resulting from an
individual’s conduct, a material failure of risk management or a
serious breach of health and safety. These malus and clawback
provisions apply for a period of up to three years after the end
of a performance period (or end of the deferral period in respect
of awards made under the Vesuvius Deferred Share Bonus Plan).
Performance measures
In selecting performance measures for the Annual Incentive,
the Committee seeks to reflect key strategic aims and the
need for a rigorous focus on financial performance. Each year,
the Committee agrees challenging targets to ensure that
underperformance is not rewarded. The Company will not be
disclosing the specific financial or personal objectives set until
after the relevant performance period has ended because of
commercial sensitivities. The personal objectives are all job-
specific in nature and track performance against key strategic,
organisational and operational goals.
In selecting performance measures for the Vesuvius Share Plan,
the Committee seeks to focus Executive Directors on the
execution of long-term strategy and also align their rewards with
value created for shareholders. On this basis, the performance
conditions for the Vesuvius Performance Share awards will initially
include measures based on TSR and EPS performance.
Within the Policy period, the Committee will continually review
the performance measures used to ensure that awards are
made on the basis of challenging targets that clearly support
the achievement of the Group’s strategic aims.
The Committee may vary or waive any performance condition(s)
if circumstances occur which cause it to determine that the original
condition(s) have ceased to be appropriate, provided that any such
variation or waiver is fair, reasonable and not materially less difficult
to satisfy than the original condition (in its opinion). In the event that
the Committee were to make an adjustment of this sort, a full
explanation would be provided in the next Remuneration Report.
The Committee may: (a) in the event of a variation of the
Company’s share capital, demerger, special dividend or any other
corporate event which it reasonably determines justifies such an
adjustment, adjust; and (b) amend the terms of awards granted
under the share schemes referred to above in accordance with the
rules of the relevant plans.
Share awards may be settled by the issue of new shares or by the
transfer of existing shares. In line with prevailing best practice at
the time this Policy was approved, any issuance of new shares is
limited to 5% of share capital over a rolling ten-year period in
relation to discretionary employee share schemes and 10% of
share capital over a rolling ten-year period in relation to all
employee share schemes.
Remuneration Policy Design
The Committee is satisfied that the Remuneration Policy is designed to promote the long-term success of the Company in
accordance with the requirements of the Code with regard to:
Clarity:
Simplicity:
Risk:
There is complete transparency on the executive
remuneration arrangements with full disclosure
in the Annual Report. The Annual Incentive bonus
structure for the Executive Directors is based on
the same structure utilised for annual bonus
arrangements for senior executives throughout
the Group. The focus of incentive arrangements
on long-term sustainable growth clearly aligns
the interests of executives with those of the
Group’s shareholders. The Vesuvius Share Plan,
with its emphasis on the retention of shares for
a period of at least five years, clearly aligns the
long-term objectives of the Directors with that
of its investors.
The new Policy with its focus on three core
elements: fixed pay, Annual Incentive and
Long-Term Incentive is clear, simple and easy
to understand.
The Committee has carefully analysed the
range of possible outcomes of awards and
believes the Policy to be fair and
proportionate, with the clear linkage to
Group profitability mitigating the potential
for excessive rewards and the reliance on
audited profit numbers and externally
verified TSR targets serving to mitigate
behavioural risk. The Committee has
discretion under the Vesuvius Share Plan
to determine the vesting of awards in
accordance with the Code requirement and
malus and clawback provisions also apply.
Predictability:
Proportionality:
Alignment to culture:
The charts on page 126 provide estimates of the
total remuneration for the Executive Directors
for 2021 for minimum, on-target and maximum
performance, showing the split between fixed
and variable remuneration. The charts also
indicate the maximum potential remuneration
assuming 50% share price appreciation. Prior to
any vesting under the Vesuvius Share Plan the
Committee reviews the underlying financial
performance of the Company over the
performance period, and the non-financial
performance of the Group and participants,
to ensure that the vesting is justified. Following
this review, the Committee has the discretion to
amend the final vesting level if it does not
consider that it is justified.
The Committee believes that the performance-
related elements of remuneration have
financial targets which are transparent,
stretching and clearly align the Executive
Directors’ remuneration with the delivery of the
Group’s strategy. The Vesuvius Share Plan
rewards long-term performance directly linked
with the Group’s strategy and results, ensuring
that only strong performance is rewarded.
The Executive Directors’ incentive
arrangements are consistent with the
Group’s core strategic objective of delivering
long-term sustainable and profitable
growth and support our performance-
orientated culture. The inclusion of personal
objectives in the Annual Incentive Plan
affords the opportunity for attention to be
focused on key non-financial strategic
objectives each year.
Governance Service contracts of Executive Directors
Remuneration Policy for Non-executive Directors
127
126 Vesuvius plc
Annual Report and Financial Statements 2020
2020 Remuneration Policy continued
Illustration of the application of the Remuneration
Policy for 2021
The charts below show the total remuneration for Executive
Directors for 2021 for minimum, on-target and maximum
performance. The fixed elements of remuneration comprise
base salary, pension and other benefits, using 2021 salary data.
The assumptions on which they are calculated are as follows:
Minimum: Fixed remuneration only.
On-target: Fixed remuneration plus on-target Annual Incentive
(made at 75% of base salary for Patrick André and Guy Young)
and threshold vesting (i.e. median performance for TSR and
threshold for EPS) for Performance Share awards (made at 200%
of base salary for Patrick André and 150% of base salary for Guy
Young) under the Vesuvius Share Plan. No share price
appreciation is assumed.
Maximum: Fixed remuneration plus maximum Annual Incentive
(being full achievement of financial and personal targets, made
at 150% of base salary for Patrick André and Guy Young) and
100% vesting for Performance Share awards (made at 200%
of base salary for Patrick André and 150% of base salary for
Guy Young) under the Vesuvius Share Plan. No share price
appreciation is assumed.
Maximum including assumed 50% share price appreciation:
This shows the value of the maximum scenario if 50% share price
appreciation is assumed over the three-year performance period
of the Performance Share awards.
Note: In addition, the Committee retains the discretion to award dividends
(either shares or their cash equivalent) on any shares that vest.
The Committee will periodically review the contractual terms for
new Executive Directors to ensure that these reflect best practice.
Service contracts currently operate on a rolling basis and are
limited to a 12-month notice period.
Patrick André is employed as Chief Executive of Vesuvius plc
pursuant to the terms of a service agreement made with the
Company dated 17 July 2017. Guy Young is employed as Chief
Financial Officer pursuant to the terms of a service agreement
with Vesuvius plc dated 16 September 2015. Each Executive
Director’s appointment is terminable by Vesuvius on not less than
12 months’ written notice, and by each Executive Director on not
less than six months’ written notice.
External appointments of Executive Directors
The Executive Directors do not currently serve as Non-executive
Directors of any other quoted company. Subject always to
consent being granted by the Company for them to take up
such an appointment were they to so serve, the Company would
allow them to retain any fees they received for the performance
of their duties.
Remuneration Illustrations £000
Patrick André, Chief Executive
Guy Young, Chief Financial Officer
Minimum
100% £860k
Minimum
100% £499k
On-Target
53%
28% 19% £1,633k
On-Target
15%
54%
31%
£932k
Maximum
Maximum
28%
31%
41%
£3,023k
30%
35%
35% £1,654k
Maximum including share price appreciation
Maximum including share price appreciation
24%
25%
51%
£3,641k
26%
30%
44%
£1,942k
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0
500
1,000
1,500
2,000
2,500
3,000
Fixed Elements
Annual Variable Elements
Long-Term Variable Elements
The Company seeks to appoint Non-executive Directors who have relevant professional knowledge and have gained experience in a
relevant industry and geographical sector, to support diversity of expertise at the Board and match the wide geographical spread of
the Company’s activities.
Non-executive Directors attend Board, Committee and other meetings, held mainly in the UK, together with an annual strategy review
to debate the Company’s strategic direction. All Non-executive Directors are expected to familiarise themselves with the scale and
scope of the Company’s business and to maintain their specific technical skills and knowledge.
The Board sets the level of fees paid to the Non-executive Directors after considering the role and responsibilities of each Director and
the practice of other companies of a similar size and international complexity. The Non-executive Directors do not participate in Board
discussions on their own remuneration.
Alignment/purpose
Operation
Opportunity
Performance
Fees
To attract and retain
Non-executive
Directors of the
necessary skill and
experience by offering
market-competitive
fees.
Fees are usually reviewed every year by
the Board.
Non-executive Directors are paid a base
fee for the performance of their role plus
additional fees for roles that involve
significant additional time commitment
and/or responsibility. Such roles could
include, but are not limited to, Committee
chairmanship (and, where appropriate,
membership) or acting as the Senior
Independent Director. Fees are paid
in cash.
The Chairman is paid a single cash fee
and receives administrative support from
the Company.
Non-executive Directors and the Chairman
will be paid market-appropriate fees, with
any increase reflecting changes in the market
or adjustments to a specific Non-executive
Director’s role.
None.
No eligibility for bonuses, retirement benefits
or to participate in the Group’s employee
share plans.
Base fees paid to Non-executive Directors
will in aggregate remain within the aggregate
limit stated in our Articles, currently being
£500,000.
Benefits and expenses
To facilitate execution
of responsibilities
and duties required
by the role.
All Non-executive Directors are reimbursed
for reasonable expenses incurred in
carrying out their duties (including any
personal tax owing on such expenses).
Non-executive Directors’ expenses are paid
in accordance with Vesuvius’ expense
procedures.
None.
Terms of service of the Chairman and other Non-executive Directors
The terms of service of the Chairman and the Non-executive Directors are contained in letters of appointment. Each Non-executive
Director is appointed subject to their election at the Company’s first Annual General Meeting following their appointment and re-election
at subsequent Annual General Meetings. During the first year of his/her appointment, the Chairman is entitled to 12 months’ notice from
the Company; thereafter, he/she is entitled to six months’ notice from the Company. None of the other Non-executive Directors is entitled
to receive compensation for loss of office at any time. All Non-executive Directors are subject to retirement, and election or re-election,
in accordance with the Company’s Articles of Association. The current policy is for Non-executive Directors to serve on the Board for
a maximum of nine years, with review at the end of three and six years, subject always to mutual agreement and annual performance
evaluation. The Board retains discretion to extend the tenure of Non-executive Directors beyond this time, subject to the requirements
of Board balance and independence being satisfied.
The table below shows the date of appointment for each of the Non-executive Directors:
Non-executive Director
John McDonough CBE
Kath Durrant
Hock Goh
Friederike Helfer
Jane Hinkley
Douglas Hurt
Holly Koeppel
Date of appointment
31 October 2012
1 December 2020
2 April 2015
4 December 2019
3 December 2012
2 April 2015
3 April 2017
Governance 128 Vesuvius plc
Annual Report and Financial Statements 2020
2020 Remuneration Policy continued
Recruitment policy
On appointment or promotion of a new Executive Director, the
Committee will typically use the Remuneration Policy in force at
the time of the Committee’s decision to determine ongoing
remuneration.
Base salary levels will generally be set in accordance with the
Remuneration Policy current at the time of the Committee’s
decision, taking into account the experience and calibre of the
appointee. If it is appropriate to appoint an individual on a base
salary initially below what is adjudged to be market positioning,
contingent on individual performance, the Committee retains the
discretion to realign base salary over the one to three years
following appointment, which may result in a higher rate of
annualised increase than might otherwise be awarded under the
Policy. If the Committee intends to rely on this discretion, it will be
noted in the first Remuneration Report following an individual’s
appointment. Other than in exceptional circumstances, other
elements of annual remuneration will, typically, be set in line with
the Remuneration Policy, including a limit on awards under the
Annual Incentive and Vesuvius Share Plan of 350% of salary in
aggregate. The Committee retains the discretion to make the
following further exceptions:
> In the event that an internal appointment is made, or where a
Director is appointed as a result of transfer into the Group on an
acquisition of another Company, the Committee may continue
with existing remuneration provisions for this individual, where
appropriate
> If necessary and appropriate to secure the appointment
of a candidate who has to move locations as a result of the
appointment, whether internal or external, the Committee
may make additional payments linked to relocation, above
those outlined in the policy table, and would authorise the
payment of a relocation allowance and repatriation, as well
as other associated international mobility terms. Such benefits
would be set at a level which the Committee considers
appropriate for the role and the individual’s circumstances
> If appropriate the Committee may apply different
performance measures and/or targets to a Director’s first
incentive awards in his/her year of appointment
Service contracts will be entered into on terms similar to those
for the existing Executive Directors, summarised in the service
contracts of Executive Directors section above.
In addition to the annual remuneration elements noted above,
the Committee may consider buying out terms, incentives and
any other compensation arrangements forfeited on leaving
a previous employer that an individual forfeits in accepting
an appointment with Vesuvius. The Committee will have the
authority to rely on Listing Rule 9.4.2R(2) or to apply the existing
limits within the Vesuvius Share Plan to make Restricted Share
awards on recruitment. In making any such awards, the
Committee will review the terms of any forfeited awards,
including, but not limited to, vesting periods, the expected value
of such awards on vesting and the likelihood of the performance
targets applicable to such awards being met, while retaining the
discretion to make any buy-out award the Committee determines
is necessary and appropriate. The Committee may also require
the appointee to purchase shares in Vesuvius to a pre-agreed
level prior to vesting of any such awards. The value of any buy-out
award will be capped, to ensure its maximum value is no higher
than the value of the awards that the individual forfeited on
joining Vesuvius. Any such awards will be subject to malus and
clawback.
With respect to the appointment of a new Chairman or Non-
executive Director, appointment terms will be consistent with
those applicable at the time the appointment is agreed. Variable
pay will not be considered. With respect to Non-executive
Directors, fees will be consistent with the Policy at the time the
appointment is agreed. If, in exceptional circumstances, a
Non-executive Director was asked to assume an interim executive
role, the Company retains the discretion to pay them appropriate
executive compensation, in line with the Policy.
Exit payment policy
Vesuvius has the option to make a payment in lieu of part or
all of the required notice period for Executive Directors. Any
such payment in lieu will consist of the base salary, pension
contributions and value of benefits to which the Director would
have been entitled for the duration of the remaining notice period,
net of statutory deductions in each case. Half of any payments in
lieu of notice would be made in a lump sum, the remainder in
equal monthly instalments commencing in the month in which the
midpoint of their foregone notice period falls (and are reduced or
extinguished by salary from any role undertaken by the departing
Executive in this time). Executive Directors are subject to certain
non-compete covenants for a period of nine months, and
non-solicitation covenants for a period of 12 months, following
the termination of their employment. Their service agreements
are governed by English law.
129
Executive Directors’ contracts do not contain any change of
control provisions; they do contain a duty to mitigate should the
Director find an alternative paid occupation in any period during
which the Company must otherwise pay compensation on early
termination.
The table below summarises how the awards under the annual
bonus and Vesuvius Share Plan are typically treated in different
leaver scenarios and on a change of control.
Whilst the Committee retains overall discretion on determining
‘good leaver’ status, it typically defines a ‘good leaver’ in
circumstances such as retirement with agreement of the
Company, ill health, disability, death, redundancy, or part of the
business in which the individual is employed or engaged ceasing
to be part of the Group. Final treatment is subject to the
Committee’s discretion.
Event
Timing
Calculation of vesting/payment
Annual Incentive Plan – during period prior to payment
Good leaver
Paid at the same time as to continuing employees. Annual bonus is paid only to the extent that any
Bad leaver
Change of control
Not applicable.
Paid on the effective date of change of control.
performance conditions have been satisfied and is
prorated for the proportion of the financial year
worked before cessation of employment. In
determining the level of bonus to be paid, the
Committee may, at its discretion, take into account
performance up to the date of cessation or over the
financial year as a whole based on appropriate
performance measures as determined by the
Committee. The bonus may, at the Committee’s
discretion, be paid entirely in cash.
Individuals lose the right to their annual bonus.
Annual bonus is paid only to the extent that any
performance conditions have been satisfied and
is prorated for the proportion of the financial
year worked.
Annual Incentive Plan – in respect of any amount deferred into awards over shares under the Vesuvius Deferred Share Bonus Plan
Good leaver
Bad leaver
Change of control2
Vesuvius Share Plan
Good leaver1
On the date of the event.
On the date of the event.
Deferred awards vest in full.
Other than dismissal for cause, deferred awards will
vest in full.
Within seven days of the event.
Deferred awards vest in full.
On normal release date (or earlier at the
Committee’s discretion).
Bad leaver
Change of control2
Unvested awards lapse.
On the date of the event.
Unvested awards vest to the extent that any
performance conditions have been satisfied and a
pro rata reduction applies to the value of the awards
to take into account the proportion of vesting period
not served, unless the Committee decides that the
reduction in the number of vested shares is
inappropriate.
Unvested awards lapse on cessation of employment.
Unvested awards vest to the extent that any
performance conditions have been satisfied and a
pro rata reduction applies for the proportion of the
vesting period not served, unless the Committee
decides that the reduction in the number of vested
shares is inappropriate.
Notes:
1. Under the rules of the Vesuvius Share Plan, any vested shares, net of any tax liabilities, are subject to a further two-year holding period after the vesting date.
The holding period may be terminated early at the Committee’s discretion in exceptional circumstances, including a change of control or where the award
holder dies or leaves employment due to ill health, injury or disability.
2. In certain circumstances, the Committee may determine that unvested awards under the Vesuvius Deferred Bonus Plan and Vesuvius Share Plan will not vest
on a change of control but will instead be replaced by an equivalent grant of a new award, as determined by the Committee, in the new company.
Benefits normally cease to be provided on the date employment
ends. However, the Committee has the discretion to allow some
minor benefits (such as health insurance, tax advice and
repatriation expenses) to continue to be provided for a period
following cessation where this is considered fair and reasonable,
or appropriate on the basis of local market practice. In addition,
the Committee retains discretion to fund other expenses for the
Executive Director; for example, payments to meet legal fees
incurred in connection with termination of employment, or to meet
the costs of providing outplacement support, and de minimis
termination costs up to £5,000 to cover transfer of mobile phone
or other administrative expenses.
The Committee reserves the right to make any other payments in
connection with a Director’s cessation of office or employment
where the payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such
an obligation) or by way of a compromise or settlement of any
claim arising in connection with the cessation of a Director’s office
or employment.
In certain circumstances, the Committee may approve new
contractual arrangements with departing Executive Directors,
including (but not limited to) settlement, confidentiality, restrictive
covenants and/or consultancy arrangements. These would be
used only where the Committee believed it was in the best
interests of the Company to do so.
Governance 130 Vesuvius plc
Annual Report and Financial Statements 2020
2020 Remuneration Policy continued
Comparison of Remuneration Policy for Executive
Directors with that for other employees
The Remuneration Policy for Executive Directors is designed in
line with the remuneration philosophy set out in this report – which
also underpins remuneration for the wider Group. Remuneration
arrangements for Executive Directors draw on the same elements
as those for other employees – base salary, fixed benefits and
retirement benefits – with performance-related pay extending
to the management cadres and beyond. However, given that
remuneration structures for other employees need to reflect both
seniority and local market practice, they differ from the policy for
Executive Directors. In particular, Executive Directors receive a
higher proportion of their remuneration in performance-related
pay and share-based payments. Individual percentages of
variable versus fixed remuneration and participation in share-
based structures increase as seniority increases.
As for Executive Directors, all employees receive an annual
performance appraisal, and receive salary reviews on an annual
basis. Middle and senior managers participate in the Annual
Incentive Plan. For functional members of the Group Executive
Committee, the award is predominantly based on Group
performance, with the remainder focused upon the achievement
of personal objectives. For business unit Presidents and other
operational business unit employees, any potential award is
based upon four separate measures relating to Group
performance, business unit performance, regional performance,
where relevant, and achievement of personal objectives.
All members of the Group Executive Committee participate in the
Vesuvius Share Plan and receive awards of Performance Shares,
which vest on the basis of the same performance targets set for
the Executive Directors. The level of awards granted to members
of the Group Executive Committee who don’t serve on the Board
are lower than those payable to the Executive Directors.
For certain senior and middle managers, awards are made under
the Vesuvius Medium Term Plan (MTP). These managers
participate in the MTP at varying percentage levels, and awards
are based on the same measures and targets as the Annual
Incentive Plan. The senior management cadre receives MTP
awards made over Vesuvius shares, whilst other managers who
participate in the MTP receive their awards in cash. In each case,
awards are granted following the end of the relevant financial
year. The MTP share awards vest on the second anniversary of
the date of grant, subject to continuing employment.
Consideration of conditions elsewhere in the
Group in developing policy
The Company does not consult directly with employees on
Executive Directors’ remuneration arrangements. However,
the Remuneration Committee will take into account the pay
and employment conditions of other Group employees when
determining Executive Directors’ remuneration, particularly
when determining base salary increases, when the Committee
will consider the salary increases for other Group employees
in the same jurisdiction.
Directors’ Remuneration Report
Annual Report on Directors’ Remuneration
131
Consideration of shareholder views
Directors’ Remuneration at a glance
Vesuvius is committed to open and transparent dialogue with
its shareholders on remuneration as well as other governance
matters. As Chair of the Committee, Jane Hinkley welcomes
shareholder engagement and is available for any discussions
investors wish to have on remuneration matters. In early 2020, the
Committee wrote to its largest shareholders and key governance
agencies outlining its proposals for the 2020 Remuneration Policy
and inviting comments. Vesuvius received responses from each
governance agency contacted and from 53% of the shareholders
and entered into dialogue with a number of shareholders as a
result. The overall shareholder response was supportive both of
the developments in the 2020 Remuneration Policy and of the
changes proposed to executive remuneration. Also, during 2020,
as in previous years, Jane Hinkley directly contacted significant
shareholders to offer discussions on remuneration matters and a
number of meetings were conducted by her accordingly. The
feedback from such meetings is always shared with the
Committee and taken into consideration when decisions are
made about future remuneration strategy and arrangements.
Shareholding guidelines
The Remuneration Committee encourages Executive Directors to
build and hold a shareholding in the Company equivalent in value
to at least 200% of base salary.
Compliance with the shareholding policy is tested at the end of
each year for application in the following year, with the valuation
of any holding being taken at the higher of: (1) the share price on
the date of vesting of any shares derived from a share award, in
respect of those shares only; and (2) the average of the closing
prices of a Vesuvius ordinary share for the trading days in that
December.
Unless exceptionally the Committee determines otherwise, under
the post-employment shareholding guideline the Executive
Directors will remain subject to their shareholding requirement in
the first year after their cessation as an Executive Director and to
50% of the shares retained in the first year during the second year
after such cessation, recognising that there is no requirement to
purchase additional shares if the shares held when they cease to
be an Executive Director are less than the applicable
shareholding guideline.
General
The Committee may make minor amendments to the policy set
out in this Policy Report (for regulatory, exchange control, tax or
administrative purposes or to take account of a change in
legislation) without obtaining shareholder approval for that
amendment.
Our remuneration for Executive Directors
The table below sets out the phasing of receipt of the various elements of Executive Director remuneration for 2021.
2021 2022 2023 2024
2025
2026 Description and link to strategy
Base salary
Benefits
Pension
Annual Incentive
Deferred Annual Incentive
Vesuvius Share Plan (VSP)
Salaries are set at an appropriate level to enable the
Company to recruit and retain key employees, and reflect
the individual’s experience, role and contribution within
the Company.
Provides normal market practice benefits.
The pension benefit helps to recruit and retain key
employees and ensures income in retirement.
The Annual Incentive incentivises the Executive Directors
to achieve key short-term financial and strategic targets
of the Group.
The deferral of a portion of the Annual Incentive increases
alignment with shareholders.
Awards under the VSP align Executive Directors’ interests
with those of shareholders through the delivery of shares
and assist in the retention of the Executive Directors.
The VSP rewards the Executive Directors for achieving
the strategic objectives of growth in shareholder value
and earnings.
Holding
Period
2021 Directors’ Remuneration
The table below sets out how the Remuneration Policy will be applied to the Executive Directors’ remuneration for 2021. Further details
about each of the elements of remuneration are set out in the Remuneration Policy and the Annual Report on Directors’ Remuneration.
Remuneration element
Remuneration structure
Base salary
Current salaries as follows:
> Patrick André – £618,000 (2020: £618,000)
> Guy Young – £ 385,000 (2020: £385,000)
Benefits
Pension
Annual Incentive
Vesuvius Share Plan (VSP)
Values reflect the full year equivalent without the voluntary reduction. There has been no increase in
salaries for 2021.
Benefits for Executive Directors include car allowance, private medical care, relocation expenses,
tax advice and tax reimbursement, commuting costs, school fees, Directors’ spouse’s travel and
administrative expenses.
Pension allowance of 25% of base salary. This allowance can be used to participate in Vesuvius’ pension
arrangements, be invested in their own pension arrangements or be taken as a cash supplement (or any
combination of these alternatives). The pension allowance is frozen at the 1 January 2020 amount and
will be reduced to 17% from the end of 2022 in line with the average of that received by the majority
of the workforce.
For 2021 the maximum Annual Incentive potential for the Executive Directors will be 150% of base salary
with target Annual Incentive potential being 75% of base salary. Their incentives are based 60% on Group
headline earnings per share, 20% on the Group’s working capital to sales ratio (based on the 12-month
moving average) and 20% on specified personal objectives. 33% of any Annual Incentive earned will be
deferred into awards over shares, to be held for a period of three years.
Performance Share awards with a maximum value of 200% of salary will be awarded to Patrick André
and 150% for Guy Young. Vesting of 50% of shares awarded will be based upon the Company’s TSR
performance relative to that of the constituent companies of the FTSE 250 (excluding investment trusts),
and 50% on headline EPS performance. Performance will be measured over three years with awards
vesting after three years. There will then be a further two-year holding period applicable to the awards.
Governance
133
As in previous years, the Committee was the subject of an
externally moderated performance evaluation in 2020. The
management of Remuneration Committee meetings was highly
rated, with the meetings being seen to be well run, and the work
being well prepared and organised. The quality of information
provided to the Remuneration Committee from management
and internal sources was positively rated, as was the quality of
information and advice provided to the Remuneration Committee
by the external remuneration adviser, Deloitte. The Committee
noted that it had a good understanding of senior executive
remuneration, but that there was more work to do for it to gain
a deeper understanding of the remuneration of the workforce
in general, a complex task given the number of countries and
variables involved. The Committee also reflected on the
process that had been undertaken for the revision of the
Group’s Remuneration Policy and concluded that this had
worked effectively.
Regulatory compliance
The Remuneration Policy, which is set out on pages 123-130,
was prepared in accordance with the Companies Act 2006 and
the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (as amended). It also meets the
requirements of the Financial Conduct Authority’s Listing Rules
and the Disclosure Guidance and Transparency Rules.
This Remuneration Report sets out how the principles of the
Code are applied by the Company in relation to matters of
remuneration. Save as set out below, the Company was compliant
with the provisions of the Code for the year under review.
Provision 38: The Company is progressing with its plans to align
the level of pension allowance for Executive Directors with that
applicable to the majority of the workforce. Our incumbent
Directors’ pension contributions were frozen at the 1 January
2020 amount and will be reduced to 17% at the end of 2022,
being the level of the majority of the workforce.
Provision 41: During the year, the Remuneration Committee did
not engage systematically with the workforce to explain how
executive remuneration aligns with wider company pay policies.
Share usage
Under the rules of the VSP, the Company has the discretion to
satisfy awards either by the transfer of Treasury shares or other
existing shares, or by the allotment of newly issued shares. Awards
made under the Deferred Share Bonus Plan to satisfy shares
awarded to Directors in respect of their Annual Incentive, and
awards made to management of the Company over shares
pursuant to the Medium-Term Incentive Plan, must be satisfied
out of Vesuvius shares held for this purpose by the Company’s
ESOP trust.
The decision on how to satisfy awards is taken by the
Remuneration Committee, which considers the most prudent
and appropriate sourcing arrangement for the Company.
At 31 December 2020, the Company held 7,271,174 ordinary
shares in Treasury and the ESOP held 1,093,098 ordinary shares.
The ESOP can be gifted Treasury shares by the Company, can
purchase shares in the open market or can subscribe for newly
issued shares, as required, to meet obligations to satisfy options
and awards that vest.
The VSP complies with the current Investment Association
guidelines on headroom which provide that overall dilution under
all plans over a rolling ten-year period should not exceed 10% of
the Company’s issued share capital, with a further limitation over
a rolling ten-year period of 5% for discretionary share schemes.
More than 9.9% of the 10% limit and more than 4.9% of the 5%
limit remains available as headroom for the issue of new shares
or the transfer of Treasury shares for the Company. No Treasury
shares were transferred, or newly issued shares allotted under
the VSP during the year under review.
Policy implementation
The following section provides details of how the Company’s
current Remuneration Policy was implemented during the
financial year 2020 and how it will be implemented in the
financial year 2021.
132 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
Remuneration Committee structure
Advice provided to the Remuneration Committee
The current members of the Remuneration Committee are all the
independent Non-executive Directors of the Company.
The Committee Chairman is Jane Hinkley. Jane Hinkley, Hock
Goh, Douglas Hurt and Holly Koeppel have all served on the
Committee throughout 2020 and Kath Durrant joined the
Committee in December. All continue in office as at the date of
this report. Jane Hinkley will retire from the role as Committee
Chair at the end of the upcoming AGM, and Kath Durrant will
take over the role of Committee Chair at that date. Kath Durrant
meets the requirements of having previously served on a
Remuneration Committee. The Committee complies with the
requirements of the UK Corporate Governance Code for the
composition of remuneration committees. Each of the members
brings a broad experience of international businesses and an
understanding of their challenges to the work of the Committee.
The Company Secretary is Secretary to the Committee. Members’
biographies are on pages 92 and 93.
Meetings
The Committee met four times during the year. The Group’s
Chairman, Chief Executive and Chief HR Officer were invited
to each meeting, together with Friederike Helfer, Vesuvius’ non-
independent Non-executive Director, though none of them
participated in discussions regarding their own remuneration.
In addition, a representative from Deloitte, the Remuneration
Committee adviser, attended the meetings. The attendees
supported the work of the Committee, giving critical insight into
the operational demands of the business and their application
to the overall remuneration strategy within the Group. In receiving
views on remuneration matters from the Executive Directors and
senior management, the Committee recognised the potential
for conflicts of interest to arise and considered the advice
accordingly. The Chairman of the Committee reported the
outcomes of all meetings to the Board.
The Committee operates under formal terms of reference which
were reviewed during the year. The terms of reference are
available on the Group website www.vesuvius.com. The
Committee members are permitted to obtain outside legal advice
at the Company’s expense in relation to their deliberations. These
powers were not exercised during the year. The Committee may
also secure the attendance at its meetings of any employee or
other parties it considers necessary.
Role and responsibilities
The Committee is responsible for:
> Determining the overall remuneration policy for the Executive
Directors, including the terms of their service agreements,
pension rights and compensation payments
Deloitte is appointed directly by the Remuneration Committee
to provide advice on executive remuneration matters, including
remuneration structure and policy, updates on market practice
and trends, and guidance on the implementation and operation
of share incentive plans. The Committee appointed Deloitte,
a signatory to the Remuneration Consultants Group Code of
Conduct in relation to Executive Remuneration Consulting in the
UK, following a formal tender process in 2014. Deloitte also
provides the Remuneration Committee with ongoing calculations
of total shareholder return (TSR) to enable the Committee to
monitor the performance of long-term share incentive plans.
Deloitte does not have any other connection with any individual
Director.
In addition, in 2020, Deloitte provided the Group with IFRS 2
calculations for the purposes of valuing the share plan grants and,
within the wider Group, was engaged in various jurisdictions to
provide tax and treasury advisory work, and some consultancy
services. During 2020, Deloitte’s fees for advice to the Remuneration
Committee, charged on a time spent basis, amounted to £50,325.
The Committee conducted a review of the performance of Deloitte
as remuneration adviser during the year and concluded that
Deloitte continued to provide effective, objective and independent
advice to the Committee. No conflict of interest arises as a result of
other services provided by Deloitte to the Group.
Activities of the Remuneration Committee
The key matters the Remuneration Committee considered during
its four meetings in 2020 included:
> Considering and approving the 2021 salaries for the Chairman,
Chief Executive, Chief Financial Officer and senior
management
> Reviewing and approving achievement against performance
targets for the 2019 Annual Incentive arrangements
> Setting performance targets and approving the structure
of the 2020 Annual Incentive arrangements
> Reviewing and assessing the Company’s attainment
of performance conditions applicable to the Vesuvius
Performance Share awards made in 2017
> Setting the performance measures and targets, and
authorising the grant of new awards in 2020 under the VSP, the
Deferred Share Bonus Plan and Medium-Term Incentive Plan
> Considering the Company’s ongoing share sourcing
requirements to meet obligations under the Company’s share
plans, and funding of the employee share ownership plan
(ESOP)
> Obtaining shareholder approval for the 2020 Directors’
> Setting the appropriate remuneration for the Chairman, the
Remuneration Policy
Executive Directors and Senior Management (being the Group
Executive Committee)
> Reviewing workforce remuneration and related policies, and
the alignment of incentives and rewards with culture, taking
these into account when setting the policy for Executive
Director remuneration
> Overseeing the operation of the executive share incentive plans
> Reviewing the Annual Incentive Plan structure applicable to the
Group and approving changes to this structure for executives
below the Board to incorporate a regional trading
performance at business unit level into the bonus plan structure
> Approving the 2019 Directors’ Remuneration Report and
reviewing the 2020 Directors’ Remuneration Report
> Reviewing the Committee’s Terms of Reference
> Reviewing Group pension arrangements
Governance 134 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
135
Directors’ Remuneration – audited
Base salary and fees
2020 Annual Incentive – audited
The table below sets out the total remuneration received by Executive Directors in the financial year under review:
Total salary1
Taxable benefits2
Pension3
Total fixed pay4
Annual Incentive5
Long-Term Incentives6,7
Total variable pay8
Total9
Patrick André
Guy Young
2020
(£000)
2019
(£000)
2020
(£000)
2019
(£000)
556
88
139
783
153
0
153
936
600
118
150
868
84
268
352
1,220
347
17
87
451
99
0
99
550
350
20
88
458
64
237
301
759
The table below sets out the fees and taxable benefits received by Non-executive Directors in the financial year under review and the
total remuneration received by both Executive and Non-executive Directors during the year under review:
John McDonough CBE
Kath Durrant10
Christer Gardell11
Hock Goh
Friederike Helfer12
Jane Hinkley
Douglas Hurt
Holly Koeppel
Total 2020 Non-executive Director remuneration
Total 2020 Executive Director remuneration
Total 2020 Director remuneration
2020
Taxable
benefits2
(£000)
6
—
—
2
0
1
1
0
Total fees1
(£000)
185
4
—
45
45
59
63
45
2019
Taxable
benefits2
(£000)
11
—
5
5
—
3
1
8
Total
(£000)
216
—
52
55
4
68
71
58
Total
(£000)
191
Total fees1
(£000)
205
—
47
50
4
65
70
50
4
0
47
45
60
64
45
456
1,486
1,942
Notes:
1. Base salary (or Non-executive Director fees, as appropriate), including 20% voluntarily waived salaries and fees for 6 months, earned in relation to services
as a Director or Non-executive Director during the financial year. The voluntary waiver did not apply to Christer Gardell who did not receive fees in 2020
or Kath Durrant who joined on 1 December 2020.
2. The UK regulations require the inclusion of benefits for Directors where these would be taxable in the UK on the assumption that the Director is tax resident
in the UK. The figures in the table therefore include expense reimbursement and associated tax relating to travel, accommodation and subsistence for the
Director (and, where appropriate, their spouse) in connection with attendance at Board meetings and other corporate business during the year, which are
considered by HMRC to be taxable in the UK. Standard benefits for the Executive Directors include car allowance and private medical care. As an expatriate,
Patrick André also receives relocation benefits under Vesuvius’ applicable expatriate localisation policy, as detailed in the 18 July 2017 RNS announcement
of Mr André’s appointment. Those relocation benefits (totalling£56,325 in 2020) comprise housing costs, tax advice and school fees.
3. Patrick André and Guy Young currently receive a pension allowance of 25% of base salary capped at the January 2020 level. The figures in the table represent
the value of all cash allowances and contributions received in respect of pension benefits, at voluntarily reduced rates.
4. The sum of total salary, taxable benefits and pension.
5. This figure includes the Annual Incentive payments to be made to the Executive Directors in relation to the year under review. 33% of these Annual Incentive
payments will be deferred into awards over shares, to be held for a period of three years. See pages 135, 136 and 137 for more details.
6. The 2019 figures represent the vested value of the Performance Share awards granted to Patrick André and Guy Young in 2017 under the VSP. The figures are
inclusive of the vested value of the additional shares equivalent in value to the dividends that would have been paid on the vested shares (as detailed in Note 2
of the Vesuvius Performance Share award allocations table on page 139). Market prices on the dates of vesting were £3.5059 (16 March 2020) and £3.953
(1 September 2020), which were both lower than the equivalent grant date share prices, so none of the vested value is attributable to share price growth.
These values have been restated from those shown in the 2019 Remuneration Report to reflect the value on the vested shares on the date of vesting.
7. The 2020 figures represent the Performance Share awards granted to Patrick André and Guy Young in 2018 under the VSP that will lapse in 2021.
8. The sum of the value of the Annual Incentive and the Long-Term Incentives where the performance period ended during the financial year.
9. The sum of base salary, benefits, pension, Annual Incentive and Long-Term Incentives where the performance period ended during the financial year.
Additional notes:
10. Kath Durrant joined the Board on 1 December 2020.
11. Christer Gardell retired from the Board on 4 December 2019; amounts have been restated from 2019 report for expenses reimbursed in 2020 related to 2019.
12. Total 2019 Director remuneration for the Directors who served during 2019 was £2.503m.
As outlined in last year’s Remuneration Report, the Chief
Executive’s salary was increased to £618,000 p.a. with effect from
1 January 2020. The Chief Financial Officer’s base salary was
increased on the same date to £385,000. In line with the Group’s
remuneration policy, the base salaries for each of the Executive
Directors was reviewed in 2020. It was resolved that no salary
change would be made for 1 January 2021, thus aligning the
approach for the Executive Directors with that taken for the
majority of the Group’s workforce.
As outlined in last year’s Remuneration Report, the Chairman’s fee
was increased to £205,000 p.a. with effect from 1 January 2020.
The Non-executive Directors’ fees were increased on the same
date to £50,000 p.a. No further changes have been made to the
Chairman or Non-executive Directors’ fees for 2021, or to the
supplementary fees, which remain at £15,000 p.a. for the
Chairmen of the Audit and Remuneration Committees, and
£5,000 for the Senior Independent Director.
Pension arrangements – audited
In accordance with their service agreements, Patrick André and
Guy Young are entitled to pension allowances of 25% of base
salary. This allowance can be used to participate in Vesuvius’
pension arrangements, be invested in their own pension
arrangements or be taken as a cash supplement (or any
combination of these alternatives). The Remuneration Committee
has determined that this level of pension allowance be frozen at
the 1 January 2020 amount and will be reduced to 17% from the
end of 2022 in line with the average of that received by the
majority of the workforce. In 2020 the level of pension allowances
for each of the Executive Directors was 25% including for the
period of their voluntarily reduced salary.
Annual Incentive – audited
The Executive Directors are eligible to receive an Annual Incentive
calculated as a percentage of base salary, based on achievement
against specified financial targets and personal objectives. Each
year, the Remuneration Committee establishes the performance
criteria for the forthcoming year. The financial targets are set by
reference to the Company’s financial budget. The target range
is set to ensure that Annual Incentives are only paid out at
maximum for significantly exceeding performance expectations.
The Remuneration Committee considers that the setting and
attainment of these targets is important in the context of
achievement of the Company’s longer-term strategic goals.
The Annual Incentive has a threshold level of performance
below which no award is paid, a target level at which 50% of the
maximum opportunity is payable, and a maximum performance
level at which 100% of the maximum opportunity is earned, on a
pro rata basis.
For 2020, the maximum Annual Incentive potential for the
Executive Directors was 125% of base salary and their target
Annual Incentive potential was 62.5% of base salary.
For the financial year 2020, the Executive Directors’ Annual
Incentives were based 60% on Group headline EPS, 20% on the
Group’s working capital to sales ratio (based on the 12-month
moving average) and 20% on specified personal objectives.
Financial targets
The 2020 Vesuvius Group headline EPS performance targets
set out below were set at the December 2019 full-year average
foreign exchange rates, being the rates used for the 2020
budget process:
Threshold:
39.0p
On-target:
41.4p
Maximum:
46.1p
The 2020 Group’s working capital to sales ratio targets were set
as follows:
Threshold:
23.5%
On-target:
23.0%
Maximum:
22.5%
In assessing the Group’s performance against these targets, the
Committee uses a constant currency approach. Thus, the 2020
full-year EPS performance was retranslated at December 2019
full-year average foreign exchange rates to establish
performance. This is consistent with practice in previous years.
In 2020, Vesuvius’ retranslated EPS performance at the
December 2019 full-year average foreign exchange rates
was 27.6 pence and working capital to sales ratio was 23.2%.
Consequently, EPS performance was below the required
threshold target, and the Group working capital to sales ratio
was between threshold and target with an outcome of 34%
of the maximum achievable for this target.
As a result, in respect of the financial performance metrics of the
2020 Annual Incentive, no payment is due on the EPS target
(related to a maximum bonus opportunity of 75% of contractual
salary), and a partial pay-out of 8.5% of contractual salary (of the
maximum potential bonus of 25% of contractual salary) is due on
the Working Capital to Sales ratio target.
Personal objectives
In 2020, a proportion (20%) of the Annual Incentive for Executive
Directors (representing 25% of base salary out of the maximum
125% bonus entitlement) was based on the achievement of
personal objectives. The Committee considered the
appropriateness of paying Directors’ incentives under the
personal objectives element of the Annual Incentive for 2020 with
partial achievement of the financial targets. Given that the
personal objectives are linked to key strategic, organisational and
operational projects with measurable targets, the Committee
concluded that such pay-outs are in order. A summary of the
objectives set and performance achieved is set out on the
next page.
Governance
136 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
Patrick André
Summary of objective
Summary outcome
Drive Group performance
> Delivered the best safety results since Vesuvius became an independent company
in 2012
> Very strong cash generation and cash conversion (173%) despite the COVID-19 crisis
> Strong temporary cash savings of £39m to mitigate the crisis
> Strong restructuring recurring cash savings of £20.6m
> Market share gains in the Company’s main markets
Reinforce talent management
> Increase in employee engagement as measured by external survey despite the crisis
Review and Implementation
of Group Strategy
> Strengthening of the management team with a new experienced Flow Control
business unit President
> Elaborate action plan for improved long-term return on sales
> On-target delivery of strategic capex to improve manufacturing efficiency,
increase capacity and accelerate automation
Improve Group ESG performance
> Decreased CO2 emissions per tonne of product manufactured
> Increased female representation in top management
> Launched new Group Sustainability Initiative with net zero carbon footprint objective
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 16.3%
of contractual base salary, out of the maximum potential 25%, in respect of the personal objectives of Patrick André.
Guy Young
Summary of objective
Improve Group financial control
and metrics
Summary outcome
> Improved financial controls environment with satisfactory audit outcomes
> Reduced working capital and increased trade creditor days
> Delivered improved cash management and significant savings
Performance of IT function
> Achieved zero major cyber security incidents
Improve Group ESG performance
> Decreased CO2 emissions per tonne of product manufactured
> Significant progress of major technology project for launch in 2021
> Increased female representation in top management
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 17.3% of
contractual base salary, out of the maximum potential 25%, in respect of the personal objectives of Guy Young.
The total Annual Incentive awards payable to Patrick André and Guy Young in respect of their services as a Director during 2020 are
therefore 24.8% and 25.8% of salary respectively. Of these Annual Incentive payments, 33% will be deferred into awards over shares,
to be held for a period of three years.
The Committee considered the appropriateness of paying Directors’ incentives when the EPS target had not been met with respect
to other stakeholders’ experience. As has been detailed, the financial targets were set in a pre-COVID-19 world and the personal
objectives are linked to key strategic, organisational and operational projects designed to strengthen the Company for the long term
and have measurable targets. One of the key financial objectives during the pandemic was cash preservation and strong working
capital management. The reduced level of business would normally result in an increased working capital to sales ratio, whereas
management succeeded in reducing this to below last year’s 24% and achieved this within the pre-COVID-19 targets. As a result, the
Committee concluded that such pay-outs were in order.
On balance, the Committee feels that the formulaic outcome against the financial performance targets set is a fair reflection of
performance and is satisfied that the resulting compensation for the Group’s leadership team is an appropriate reflection of the
performance delivered.
2021 Annual Incentive
The Annual Incentive opportunity for the Executive Directors in 2021 will be changed to 150 % of salary, with potential pay-outs of
75.0% of base salary for the achievement of target performance in all three elements. Pay-outs will commence and increase
incrementally from 0% once the threshold performance for any of the three elements has been met. The structure of the Annual
Incentive will also remain the same as for 2020: 60% of the Executive Directors’ Annual Incentives will therefore be based on Group
headline EPS, 20% on the Group’s working capital to sales ratio (based on the 12-month moving average) and 20% on the achievement
of personal objectives. The Company will not be disclosing the targets set until after the relevant performance period has ended
because of commercial sensitivities. The personal objectives for 2021 are focused on long-term strategic objectives, or are job-specific
in nature and track performance against the Group’s key strategic, organisational and operational goals with a specific focus on
ESG outcomes. 33% of any Annual Incentive earned will be deferred into awards over shares, to be held for a period of three years.
137
Deferred Share Bonus Plan allocations – audited
33% of the Annual Incentives earned by Patrick André and Guy Young in respect of their periods of service as Directors of Vesuvius plc
during 2017, 2018 and 2019 were deferred into shares under the Company’s Deferred Share Bonus Plan. The following table sets out
details of these awards:
Total share
allocations
as at
1 Jan 2020
Additional
shares allocated
during the year
Allocations
lapsed during
the year
Shares
vested during
the year
Total share
allocations
as at
31 Dec 2020
Market price
of the shares on
the day before
award (p)
Earliest
vesting date
Grant and type of award
Patrick André
15 March 20181
Deferred Bonus Shares
14 March 20192
Deferred Bonus Shares
12 March 20203
Deferred Bonus Shares
Total
Guy Young
15 March 20181
Deferred Bonus Shares
14 March 20192
Deferred Bonus Shares
12 March 20203
Deferred Bonus Shares
10,128
29,646
—
39,774
18,118
19,028
—
—
7,044
7,044
—
—
—
5,345
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,128
605.5
15 Mar 2021
29,646
608
14 Mar 2022
7,044
46,818
391.8
12 Mar 2023
18,118
605.5
15 Mar 2021
19,028
608
14 Mar 2022
5,345
391.8
12 Mar 2023
42,491
Total
37,146
5,345
Notes:
1. In 2018, Patrick André and Guy Young received Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2017 of £185,544 and
£331,906 respectively. 33% of each bonus was awarded in deferred shares (conditional awards) under the Vesuvius Deferred Share Bonus Plan. These shares
will vest on the third anniversary of their award date.
2. In 2019, Patrick André and Guy Young received Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2018 of £546,131 and
£350,525 respectively. 33% of each bonus was awarded in deferred shares (conditional awards) under the Vesuvius Deferred Share Bonus Plan. The allocations
of shares were made on 14 March 2019 and were calculated based upon the average closing mid-market price of Vesuvius’ shares on the five dealing days
before the award was made, being £6.079. The total value of these awards based on this share price was £180,218 and £115,671 respectively. There are no
additional performance conditions applicable to these awards, therefore these shares will vest in full on the third anniversary of their award date.
3. In 2020, Patrick André and Guy Young were awarded Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2019 of £83,775 and
£63,569 respectively. 33% of each bonus was awarded in deferred shares (conditional awards). The allocations of shares were made on 12 March 2020 and
were calculated based upon the average closing mid-market price of Vesuvius’ shares on the five dealing days before the award was made, being £3.9248. The
total value of these awards based on this share price was £27,646 and £20,978 respectively. There are no additional performance conditions applicable
to these awards, therefore these shares will vest in full on the third anniversary of their award date.
Additional note:
4. The mid-market closing price of Vesuvius’ shares during 2020 ranged between 302.2 pence and 541 pence per share, and on 31 December 2020, the last
dealing day of the year, was 536.5 pence per share.
Governance
138 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
139
Longer-term Pay (LTIPs) – audited
2020 Entitlement
Vesuvius Performance Share award allocations – audited
Performance Share awards are allocated to the Executive
Directors under the Vesuvius Share Plan (VSP). In accordance
with the Remuneration Policy and the rules of the VSP, they are
eligible to receive, on an annual basis, a Performance Share
award with a face value of up to 200% of salary. Vesting of 50%
of shares awarded is based upon the Company’s three-year TSR
performance relative to that of the constituent companies of the
FTSE 250 (excluding investment trusts), and 50% on headline EPS
performance. The level of EPS growth specified in the targets is
set by the Remuneration Committee each year, taking into
account the Group’s prospects and the broader global economic
environment. Considering the 2020 EPS outturn, the Committee
have expressed the target range for this award as pence targets
(to be assessed in Financial Year 2023) rather than growth
targets. The target range is deliberately wider than usual in
recognition of the current high level of economic uncertainty. The
schedule of EPS targets is designed at the maximum level to be
highly challenging, whilst remaining an effective incentive for the
management team. The EPS and TSR measures operate
independently. The use of these performance measures is
intended to align executive remuneration with shareholders’
interests. Prior to the vesting of Performance Shares, the
Remuneration Committee reviews the underlying financial
performance of the Company and non- financial performance of
the Company and individuals over the performance period to
ensure that the vesting is justified, and to consider whether to
exercise its discretion including consideration of any potential
windfall gains. UK executives receive awards in the form of
nil-cost options with a flexible exercise date and non-UK
executives receive conditional awards which are exercised on the
date of vesting. Performance Share awards vest after three years
and, commencing with awards made in 2019, are then subject to a
further two-year holding period.
In 2020, Patrick André and Guy Young were entitled to receive
allocations of Performance Shares worth 200% and 150% of their
base salaries, respectively. As outlined in last year’s Remuneration
Report, because of share price volatility as a result of the growing
COVID-19 pandemic, the share price used to determine the
number of allocated shares was capped at £4.371 (the average
in the five dealing days prior to the February Remuneration
Committee meeting) rather than £3.9248 (the average in the five
dealing days prior to grant). Accordingly, the actual value of these
awards at the date of grant was reduced to 180% and 135% of
base salary for Patrick André and Guy Young respectively.
2021 Entitlement
The Remuneration Committee has determined that Patrick André
will again receive a Performance Share award in 2021 equivalent
in value to 200% of his base salary and Guy Young an award
equivalent in value to 150% of his base salary. The Committee
considered the risk of windfall gains in making the award for 2021
but concluded, due to the stability of the share price, this was not
a risk at this time.
2018 Performance Share Award (vesting in 2021)
The performance period applicable to the awards made in
2018 ended on 31 December 2020. These awards lapsed as the
threshold performance level was not met for either the TSR or EPS
performance conditions. (TSR:below median at -14.5%/
EPS:below threshold at-16%)
Targets for the Performance Share awards for the years 2018, 2019 and 2020 – audited
TSR ranking relative to FTSE 250
excluding investment trusts
Vesting percentage
Below median
Median
0%
12.50%
Between median and
upper quintile
Pro rata between 12.50%
and 50%
Annual compound headline
EPS growth
Less than 3%
3%
Between 3% and 6%
Vesting percentage
0%
12.50%
Pro rata between 12.50%
and 25%
Upper quintile and above
50%
6%
25%
Between 6% and 15%
Pro rata between 25% and 50%
15% or more
50%
Targets for the Performance Share awards for the year 2021 – unaudited
TSR ranking relative to FTSE 250
excluding investment trusts
Vesting percentage
Headline EPS as at FY2023
Vesting percentage
Below median
Median
0%
12.50%
Between median and
upper quintile
Pro rata between 12.50%
and 50%
Less than 35p
35p
Between 35p and 47.5p
0%
12.50%
Pro rata between 12.50%
and 25%
Upper quintile and above
50%
47.5p
25%
Between 47.5p and 60p
Pro rata between 25% and 50%
60p or more
50%
The following table sets out the Performance Share awards that were allocated in 2017, 2018, 2019 and 2020 under the VSP:
Total share
allocations
as at
1 Jan 2020
Additional
shares
allocated
during
the year
Allocations
lapsed
during
the year
Shares
vested
during
the year
Total share
allocations
as at
31 Dec 2020
Market price
of the shares
on the day
before
award (p)
Earliest
vesting
date
End of
holding
period1
Performance
period
1 Jan 17 –
31 Dec 19
60,413
— (22,570)
(37,843)
—
524.5
16 Mar 2020
n/a
42,257
—
(15,787)
(26,470)
—
578
1 Sep 2020
n/a
1 Jan 17 –
31 Dec 19
Grant and type of award
Patrick André
16 March 20172
Performance Shares
1 September 20172
Performance Shares
15 March 20183
Performance Shares
14 March 20194
173,697
Performance Shares
12 March 20205
197,400
—
—
Performance Shares
— 282,772
—
—
—
— 173,697
605.5
15 Mar 2021
n/a
1 Jan 18 –
31 Dec 20
1 Jan 19 –
31 Dec 21
— 197,400
608
14 Mar 2022 14 Mar 2024
— 282,772
391.8
12 Mar 2023 12 Mar 2025
1 Jan 20 –
31 Dec 22
Total
Guy Young
16 March 20172
Performance Shares
15 March 20183
473,767
282,772
(38,357)
(64,313)
653,869
93,355
— (34,877)
(58,478)
—
524.5
16 Mar 2020
n/a
1 Jan 17 –
31 Dec 19
Performance Shares
14 March 20194
86,848
Performance Shares
12 March 20205
86,362
—
—
Performance Shares
— 132,120
—
—
—
—
86,848
605.5
15 Mar 2021
n/a
1 Jan 18 –
31 Dec 20
1 Jan 19 –
31 Dec 21
—
86,362
608
14 Mar 2022 14 Mar 2024
— 132,120
391.8
12 Mar 2023 12 Mar 2025
1 Jan 20 –
31 Dec 22
Total
266,565
132,120
(34,877)
(58,478) 305,330
Notes:
1. Performance shares granted from 2019 onwards are subject to a further two-year holding period.
2. In 2017, Patrick André and Guy Young received an allocation of Performance Shares worth 200% of base salary (prorated) and 150% of base salary
respectively. As outlined in last year’s Remuneration Report, 62.64% of the shares vested during 2020. In addition, the Remuneration Committee determined
that Messrs André and Young were entitled to receive 8,558 and 9,241 additional shares respectively, equivalent in value to the dividends that would have been
paid on the number of vested shares in respect of dividend record dates occurring during the period between the award date and the date of vesting.
3. In 2018, Patrick André and Guy Young received allocations of Performance Shares worth 200% and 150% of their base salaries. These allocations were
calculated based upon the average closing mid-market price of Vesuvius’ shares on the five dealing days before the award was made, being £6.045. The total
value of these awards based on this share price on the date of grant was £1,049,998 and £524,996 respectively. Following an assessment of the performance
conditions, these awards will lapse in full during 2021.
4. In 2019, Patrick André and Guy Young received allocations of Performance Shares worth 200% and 150% of their base salaries. These allocations were
calculated based upon the average closing mid-market price of Vesuvius’ shares on the five dealing days before the award was made, being £6.079. The total
value of these awards based on this share price was £1,199,994 and £524,994 respectively.
5. In 2020, Patrick André and Guy Young were entitled to receive allocations of Performance Shares worth 200% and 150% of their base salaries respectively.
In light of the volatile share price, the Committee applied its discretion so that the number of shares in these allocations were capped at a level based upon the
average closing mid-market price of Vesuvius’ shares on the five dealing days before the February 2020 Remuneration Committee meeting of £4.371. As a
result, Patrick André received an award of 282,772 shares which, at grant, was equivalent in value to 180% of his base salary (£1,109,823*) and Guy Young
received an award of 132,120 shares which, at grant, was equivalent in value to 135% of his base salary (£518,544*).
* Grant values are based on the average closing mid-market price of Vesuvius’ shares on the five dealing days prior to grant (£3.9248).
Additional notes:
6. If the respective performance conditions for Patrick André’s and Guy Young’s awards are not met, then the awards will lapse. If the threshold level of either of
the two performance conditions applicable to the awards is met, then 12.50% of the awards will vest.
7. The Remuneration Committee also has the discretion to award cash or shares equivalent in value to the dividend that would have been paid during the vesting
period on the number of shares that vest.
8. The mid-market closing prices of Vesuvius’ shares during 2020 ranged between 302.2 pence and 541 pence per share, and on 31 December 2020, the last
dealing day of the year, was 536.5 pence per share.
Governance
140 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
141
Malus/clawback arrangements in 2021
Executive Directors’ shareholdings – audited
Vesuvius has malus and clawback arrangements in respect of Executive Directors’ variable remuneration. The structure of those
arrangements is outlined in our Remuneration Policy.
Statement of Directors’ shareholding – audited
The interests of Directors and their closely associated persons in ordinary shares as at 31 December 2020, including any interests
in share options and shares provisionally awarded under the VSP, are set out below:
Executive Directors
Patrick André
Guy Young
Non-executive Directors
John McDonough CBE (Chairman)
Kath Durrant
Friederike Helfer3
Hock Goh
Jane Hinkley
Douglas Hurt
Holly Koeppel
Outstanding share
incentive awards
Beneficial
holding in
shares
With
performance
conditions1
Without
performance
conditions2
101,032
653,869
120,658
305,330
46,818
42,491
120,000
—
—
5,000
12,000
18,000
27,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes:
1. These are Performance Shares granted under the VSP. The awards were all granted subject to performance conditions.
2. These are awards granted under the Deferred Share Bonus Plan. These awards are not subject to any additional performance conditions.
3. Friederike Helfer is a Partner of, and has a financial interest in, Cevian Capital which held 21.11% of Vesuvius’ issued share capital as at 31 December 2020
and at the date of this report.
Additional notes:
4. None of the other Directors, nor their spouses, nor their minor children, held non-beneficial interests in the ordinary shares of the Company during the year.
5. There were no changes in the interests of the Directors in the ordinary shares of the Company in the period from 1 January 2021 to the date of this Report.
6. All awards under the VSP are subject to performance conditions and continued employment until the relevant vesting date as set out on page 138.
7. Full details of Directors’ shareholdings and incentive awards are given in the Company’s Register of Directors’ Interests, which is open to inspection at the
Company’s registered office during normal business hours.
Payments to past Directors and loss of office payments – audited
There were no payments made to any Director for loss of office during the year ended 31 December 2020, and no payments were
made to any other past Directors of the Company during the year ended 31 December 2020.
Shareholding guidelines
The Remuneration Committee encourages Executive Directors to build and hold a shareholding in the Company. Under the 2020
Remuneration Policy, the required holding is 200% of salary for all Executive Directors. Executive Directors are required to retain at
least 50% (measured as the value after tax) of any shares received through the operation of share schemes; in addition, permission to
sell shares held – whether acquired through the operation of share schemes or otherwise – will not be given, other than in exceptional
circumstances, if, following the disposal, the shareholding requirement is not achieved or is not maintained.
Compliance with the shareholding policy is tested at the end of each year for application in the following year. Under the 2020
Remuneration Policy, the valuation of any holding is taken at the higher of: (1) the share price on the date of vesting of any shares
derived from a share award, in respect of those shares only; and (2) the average of the closing prices of a Vesuvius ordinary share
for the trading days in that December.
As at 31 December 2020, the Executive Directors’ shareholdings against the shareholding guidelines contained in the Directors’
Remuneration Policy in force on that date (using the Company’s share price averaged over the trading days of the period 1 December
to 31 December 2020, of 512.6 pence per share) were as follows:
Director
Patrick André
Guy Young
Actual share ownership
as a percentage of salary
at 31 Dec 2020
Policy share ownership as a
percentage of salary
Policy met?
84%
161%
200% In the build-up period
200% In the build-up period
Annual changes in Executive Directors pay versus employee pay
Executive Directors pay comparison
The London headquartered salaried employee workforce are presented as a voluntary disclosure of the representative comparator
group for the Vesuvius Group parent company as there are only two non-director employees in the parent company.
2020
Salary
Bonus
Benefits
Executive Directors2
Non-Executive Directors3
Average
employee1
Patrick
André Guy Young
John
McDonough
CBE
Kath
Durrant4
Friederike
Helfer5 Hock Goh
Jane
Hinkley
Douglas
Hurt
Holly
Koeppel
(0%)
(7%)
(1%)
(10%)
165%
18%
183%
155%
—
(25%)
(14%)
(46%)
n/a
—
n/a
(10%)
(10%)
(10%)
(10%)
(10%)
—
—
—
—
—
(60%)
(60%)
(60%)
(63%)
(100%)
Notes:
1. This is the average change calculated by dividing the staff cost related to salaries, median bonus and benefits by the average number of full-time equivalent
employees in the Vesuvius headquarters in London, excluding the Executive Directors. Salaries, bonus and benefits relate to the relevant financial reporting
year. The financial performance in 2019 resulted in a pay-out on only the personal performance element of Executive Directors and the workforce bonus plans,
whereas the financial performance in 2020 resulted in a partial pay-out on financial performance alongside the personal performance for Executive Directors
and the workforce.
2. Calculated using data from the single figure table in the annual report.
3. Calculated using data from the audited Directors Emoluments.
4. Kath Durrant joined on 1 December 2020.
5. Friederike Helfer’s comparison shown against a notional 2019 full year equivalent.
Additional notes:
6. No taxable benefits in 2019.
7. The Non-executive Directors’ fees were reviewed and increased in 2015 and 2019.
CEO pay ratio
The UK salaried employee workforce are the representative comparator group to the Chief Executive, Patrick André, who is based in
the UK (albeit with a global role and responsibilities) and levels of pay vary widely across the Group depending on geography and local
market conditions.
Total remuneration (£)
Salary (£)
Total remuneration (£)
Salary (£)
Year
Method
2019 Option A
2019 Option A
2020 Option A
2020 Option A
25th
percentile
pay ratio
35:1
(37,119)
22:1
(27,338)
32:1
(34,661)
19:1
(29,609)
50th
percentile
(median)
pay ratio
28:1
(45,000)
15:1
(39,890)
24:1
(45,574)
13:1
(43,715)
75th
percentile
pay ratio
17:1
(75,293)
9:1
(66,784)
13:1
(85,888)
8:1
(73,939)
The table above shows the Chief Executive pay ratios versus our UK employees for 2020. The pay ratios compare amounts disclosed in
the single total figure table for the Group Chief Executive to the annual full-time equivalent remuneration of our UK employees for 2020.
The data has been calculated in accordance with ‘Option’ A in The Companies (Miscellaneous Reporting) Regulations 2018, because it
allows the Company to show the total annualised full-time equivalent remuneration (salary, incentives, allowances, fees, taxable
benefits) and percentiles across the financial year as at 31 December 2020.
Amounts have been annualised for those who joined part way through the year or who are on part-time arrangements and exclude
those who left the organisation during the reporting period.
The approach to calculating the pay ratios is consistent with the prior year and there have not been any changes to the compensation
models in the reporting period.
Governance 142 Vesuvius plc
Annual Report and Financial Statements 2020
Annual Report on Directors’ Remuneration continued
The reduction in pay ratios compared with last year can be attributed to a number of factors, including the CEO’s voluntary waiver
of salary and employer pension contributions and the lapsing of the CEO’s long term incentive payable in the reporting period.
The Committee is comfortable that the principles applied and the quantum of compensation are appropriate across the Group’s
employee base. These are regularly benchmarked to ensure market competitiveness. There is a consistent approach of measuring
against both business and personal performance for all those who participate in incentive programmes. The Group continues to
monitor the effectiveness of all compensation practices to identify future opportunities to ensure they remain fair, consistent and in line
with best practice.
Annual spend on employee pay1 versus shareholders’ distributions2
The charts below show the annual spend on all employees (including Executive Directors) compared with distributions made and
proposed to be made to shareholders for 2019 and 2020:
Relative importance of spend on pay (2020) £m
Relative importance of spend on pay (2019) £m
£47.0m
£16.7m
88.6% Remuneration
11.4% Dividends
95.9% Remuneration
4.1% Dividends
£366.0m
£395.0m
Employee pay1
Dividends2 (based on final proposed dividend)
2020
(£m)
366.0
47.0
2019
(£m)
395.0
16.7
Change
(7.3)%
281.4%
Notes:
1. Employee pay includes wages and salaries, social security, share-based payments and pension costs, and other post-retirement benefits. See Note 8 to the
Group Financial Statements.
2. Shareholder distributions/dividends includes interim and final dividends paid in respect of each financial year. See Note 24 of the Group Financial Statements.
143
TSR performance and Chief Executive pay
The TSR performance graph compares Vesuvius TSR performance with that of the same investment in the FTSE 250 Index (excluding
investment trusts). This index has been chosen as the comparator index to reflect the size, international scope and diversity of the
Company. TSR is the measure of the returns that a company has provided for its shareholders, reflecting share price movements and
assuming reinvestment of dividends. The demerger of Vesuvius plc was effective on 19 December 2012 and therefore the graph shows
the period from 19 December 2012 to 31 December 2020.
Vesuvius’ total
shareholder return
compared against
total shareholder return
of the FTSE 250 index
(excluding investment
trusts) since demerger
Vesuvius plc
FTSE 250 Index (excluding Investment Trusts)
250
200
150
100
50
19/12/12
Chief Executive pay –
financial year ended
Total remuneration
(single figure (£000))
Annual variable pay
(% of maximum)
Long-term variable pay
(% of maximum)
François Wanecq1
Patrick André2
31/12/12
31/12/13
31/12/14
31/12/15
31/12/16
31/12/17
31/12/18
31/12/19
31/12/20
£1,227
£2,447
£1,519
£752
£1,173
0%
100%
64%
67%
28%
27%
0%
0%
50%
0%
£1,6751
£4652
81%1
85%2
43.7%1
n/a2
£2,022
£1,220
£936
83%
11%
20%
100%
62.6%
0%
Notes:
1. Amounts shown in respect of François for 2017 reflect payments in respect of his service as Chief Executive from 1 January 2017 to 31 August 2017 and the full
value of his VSP award in relation to the performance period 2015–2017.
2. Amounts shown in respect of Patrick André for 2017 reflect payments in respect of his service as Chief Executive from 1 September 2017 to 31 December 2017.
Shareholder voting on remuneration resolutions
Approval of the Directors’ Remuneration Policy
2020 AGM
Approval of the Annual Report on Remuneration
2020 AGM
Votes for
Votes against
Votes withheld
244,618,671 (97.2%)
7,105,663 (2.8%)
244,015,719 (96.9%)
7,708,484 (3.1%)
3,640
3,771
The Directors’ Remuneration Report has been approved by the Board and is signed on its behalf by
Jane Hinkley
Chairman, Remuneration Committee
3 March 2021
Governance
144 Vesuvius plc
Annual Report and Financial Statements 2020
Directors’ Report
Directors’ Report
Accountability and audit
The Directors submit their Annual Report together with the audited financial statements of the Group and of the Company, Vesuvius plc,
registered in England and Wales No. 8217766, for the year ended 31 December 2020.
The Companies Act 2006 requires the Company to provide a Directors’ Report for Vesuvius plc for the year ended 31 December 2020.
Information incorporated by reference
The information that fulfils this requirement and which is incorporated by reference into, and forms part of, this report is included in the
following sections of the Annual Report:
Auditors’ reappointment
Directors
Directors’ indemnities
Annual General Meeting
Amendments of Articles
of Association
Share capital
> The Section 172(1) statement
> The Non-financial information statement
> The Governance section, including the Corporate Governance Statement
> Financial instruments: the information on financial risk management objectives and policies contained in Note 25 to the Group
Financial Statements
This Directors’ Report and the Strategic Report contained on pages 1 to 88 together represent the management report for the purpose
of compliance with DTR 4.1.8R of the Financial Conduct Authority’s Disclosure and Transparency Rules.
Going concern
Events since the
balance sheet
Future developments
Information on the business environment in which the Group operates, including the factors that are
likely to impact the future prospects of the Group, is included in the Strategic Report. The principal risks
and uncertainties that the Group faces throughout its global operations are shown on pages 36 and 37.
The financial position of the Group, its cash flows, liquidity position and debt facilities are also described
in the Strategic Report. In addition, the Group’s Viability Statement is set out within the Strategic Report
on page 34. Note 25 to the Group Financial Statements sets out the Group’s objectives, policies and
processes for managing its capital; financial risks; financial instruments and hedging activities; and its
exposures to credit, market (both currency and interest rate related) and liquidity risk. Further details of
the Group’s cash balances and borrowings are included in Notes 13, 14 and 25 to the Group Financial
Statements.
The Directors have prepared profit and loss, balance sheet and cash flow forecasts for the Group for a
period in excess of 12 months from the date of approval of the 2020 financial statements. On the basis of
the exercise described above, the Directors have prepared a Going Concern Statement which can be
found on pages 34 and 35.
Since 31 December 2020, there have been no material items to report.
A full description of the activities of the Group, including performance, significant events affecting the
Group in the year and indicative information in respect of the likely future developments in the Group’s
business, can be found in the Strategic Report.
Financial instruments
Information on Vesuvius’ financial risk management objectives and policies can be found in Note 25 to
the Group Financial Statements.
Research and development
Political and charitable
donations
Energy consumption and
efficiency/greenhouse
gas emissions
Branches
Dividends
The Group’s investment in research and development (R&D) during the year under review amounted to
£27.9m (representing approximately 1.9% (2019: 1.7%) of Group revenue). Further details of the Group’s
R&D activities can be found in the Operating Reviews and Sustainability section of the Strategic Report.
In accordance with Vesuvius policy, the Group did not make any political donations or incur any political
expenditure in the UK or the EU during 2020 (2019: nil). The Company made no charitable donations of
more than £2,000 in the UK in 2020.
Information on our reporting of greenhouse gas emissions, and the methodology used to record these,
is set out on page 69 of the Strategic Report. Details of the Group’s energy usage for 2020, and the
efficiency initiatives currently being undertaken, can be found in the Sustainability section on pages
68-73.
A number of the Group’s subsidiary undertakings maintain branches; further details of these can be
found in Note 33.1 to the Group Financial Statements.
In light of the rapidly deteriorating business environment, in April 2020 the Board withdrew its
recommendation to pay the final dividend of 14.30 pence per share announced with the publication of
the full year 2019 results. An interim dividend of 3.10 pence (2019: 6.20 pence) per Vesuvius ordinary
share was paid on 4 December 2020 to Vesuvius shareholders. The Board is recommending a final
dividend in respect of 2020 of 14.30 pence (2019: no dividend paid) per ordinary share which, if
approved, will be paid on 21 May 2021 to shareholders on the register at 16 April 2021.
145
A responsibility statement of the Directors and a statement by the auditor about its reporting
responsibilities can be found on pages 149, and 150-157, respectively. The Directors fulfil the
responsibilities set out in their statement within the context of an overall control environment of central
strategic direction and delegated operating responsibility. As at the date of this report, so far as each
Director of the Company is aware, there is no relevant audit information of which the Company’s auditor
is unaware and each Director hereby confirms that they have taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
PricewaterhouseCoopers LLP (PwC) was reappointed as External Auditor for Vesuvius plc for the year
ended 31 December 2020, at the 2020 AGM. PwC has been Vesuvius’ external Auditor since 2017 and
has expressed its willingness to continue in office as Auditor of the Company for the year ending 31
December 2021. Consequently, resolutions for the reappointment of PwC as auditor of the Company
and to authorise the Directors to determine their remuneration are to be proposed at the 2021 AGM.
The current Directors of the Company are Patrick André, Kath Durrant, Hock Goh, Friederike Helfer,
Jane Hinkley, Douglas Hurt, Holly Koeppel, John McDonough CBE and Guy Young. Kath Durrant was
appointed to the Board on 1 December 2020. All the Directors will retire at the 2021 AGM and offer
themselves for election or re-election at the AGM, other than Hock Goh and Holly Koeppel who intend to
retire from the Board at the close of the 2021 AGM. Biographical information for the Directors is given on
pages 92 and 93. Further information on the remuneration of, and contractual arrangements for, the
Executive and Non-executive Directors is given on pages 131-143 in the Directors’ Remuneration Report.
The Non-executive Directors do not have service agreements.
The Directors have been granted qualifying third-party indemnity provisions by the Company and the
Directors of the Group’s UK Pension Plans Trustee Board (none of whom is a Director of Vesuvius plc)
have been granted qualifying pension scheme indemnity provisions by Vesuvius Pension Plans Trustees
Ltd. The indemnities for Directors of Vesuvius plc have been in force since the date of their appointment.
The Pension Trustee indemnities were in force throughout the last financial year and remain in force.
The Annual General Meeting of the Company will be held at the Company’s head office, 165 Fleet Street,
London EC4A 2AE on Wednesday 12 May 2021 at 11.00 am. The meeting will be conducted in line with
the UK Government guidelines in force at that time with respect to travel and gatherings. The Company
will announce any changes to arrangements for the AGM as required.
The Company may make amendments to the Articles by way of special resolution in accordance with the
Companies Act. It is proposed to adopt amended Articles at the 2021 AGM, primarily to update the
current Articles to reflect changes in the law and developments in market practice and technology since
the current Articles were adopted in November 2012.
As at the date of this report, the Company had an issued share capital of 278,485,071 ordinary shares of
10 pence each; 7,271,174 of these ordinary shares are held in Treasury. Therefore, the total number of
Vesuvius plc shares with voting rights is 271,213,897.
Further information relating to the Company’s issued share capital can be found in Note 9 to the
Company Financial Statements.
The Company’s Articles specify that, subject to the authorisation of an appropriate resolution passed at
a General Meeting of the Company, Directors can allot relevant securities under Section 551 of the
Companies Act up to the aggregate nominal amount specified by the relevant resolution. In addition,
the Articles state that the Directors can seek the authority of shareholders in a General Meeting to allot
equity securities for cash, without first being required to offer such shares to existing ordinary
shareholders in proportion to their existing holdings under Section 561 of the Companies Act, in
connection with a rights issue and in other circumstances up to the aggregate nominal amount specified
by the relevant resolution.
At the AGM on 13 May 2020, the Directors were authorised to issue relevant securities up to an
aggregate nominal amount of £9,040,463, and, in connection with a rights issue, to issue relevant
securities up to a further nominal value of £9,040,463. In addition, the Directors were empowered to allot
equity securities, or sell Treasury Shares, for cash on a non pre-emptive basis up to an aggregate
nominal amount of £1,356,069, and for the purposes of financing (or refinancing, if the authority is to be
used within six months after the original transaction) a transaction which the Board of the Company
determines to be an acquisition or other capital investment, to allot equity securities, or sell Treasury
Shares, for cash on a non pre-emptive basis up to an additional nominal amount of £1,356,069. Each of
the authorities given in these resolutions expires on 30 June 2021 or the date of the AGM to be held in
2021, whichever is the earlier. The resolutions were all tabled in accordance with the terms of the Pre-
Emption Group’s Statement of Principles. The Directors propose to renew these authorities at the 2021
AGM for a further year. In the year ahead, other than potentially in respect of Vesuvius’ ability to satisfy
rights granted to employees under its various share-based incentive arrangements, the Directors have
no present intention of issuing any share capital of Vesuvius plc.
Governance 146 Vesuvius plc
Annual Report and Financial Statements 2020
Directors’ Report continued
Authority for purchase
of own shares
Share plans
Subject to the provisions of company law and any other applicable regulations, the Company may
purchase its own shares. At the AGM on 13 May 2020, Vesuvius shareholders gave authority to the
Company to make market purchases of up to 27,121,389 Vesuvius ordinary shares, representing 10% of
the Company’s issued ordinary share capital as at the latest practicable day prior to the publication of
the Notice of AGM. This authority expires on 30 June 2021 or the date of the AGM to be held in 2021,
whichever is the earlier. The Directors will seek renewal of this authority at the 2021 AGM.
In 2013, the Company acquired 7,271,174 ordinary shares, representing a nominal value of £727,117 and
2.6% of the entire called-up share capital of the Company prior to the purchase. These shares were
purchased pursuant to the Board’s commitment to return the majority of the net proceeds of the disposal
of the Precious Metals Processing division to shareholders. These shares are currently held as Treasury
shares. The Company has not subsequently disposed of any of the repurchased shares. During the year,
the Company did not make any further acquisitions of shares nor did it dispose of any shares previously
acquired. The Company does not have a lien over any of its shares.
Vesuvius operates a number of share-based incentive plans. Under these plans, the Group can satisfy
entitlements by the acquisition of existing shares, the transfer of Treasury shares or by the issue of new
shares. Existing shares are held in an employee share ownership plan trust (ESOP). The Trustee of the
ESOP purchases shares in the open market as required to enable the Group to meet liabilities for the
issue of shares to satisfy awards that vest. The Trustee does not register votes in respect of these shares
at the Company’s Annual General Meetings and has waived the right to receive any dividends.
At 31 December 2019, the ESOP held 1,718,615 ordinary shares in the Company. During the year, the
ESOP sold/transferred 625,517 shares to satisfy the vesting of awards under the Company’s share-
based incentive plans. As at 31 December 2020, the ESOP held 1,093,098 ordinary shares. The trustee
of the ESOP did not purchase any additional shares during the year.
Restrictions on transfer
of shares and voting
The Company’s Articles do not contain any specific restrictions on the size of a holding or on the transfer
of shares. The Directors are not aware of any agreements between holders of the Company’s shares
that may result in restrictions on the transfer of securities or voting rights.
Change of control provisions
No person has any special rights with regard to the control of the Company’s share capital and all issued
shares are fully paid. This is a summary only and the relevant provisions of the Articles should be
consulted if further information is required.
The terms of the Group’s committed bank facility and US Private Placement Loan Notes contain
provisions entitling the counterparties to exercise termination or other rights in the event of a change
of control on takeover of the Company. A number of the arrangements to which the Company and its
subsidiaries are party, such as other debt arrangements and share incentive plans, may also alter or
terminate on a change of control in the event of a takeover. In the context of the Group as a whole,
these other arrangements are not considered to be significant.
Interests in the
Company’s shares
The Company has been notified in accordance with DTR 5 of the Disclosure and Transparency Rules of
the following interests of 3%, or more, of its issued ordinary shares:
Cevian Capital
Standard Life Aberdeen
Aberforth Partners
Phoenix Asset Management
As at
31 Dec 2020
As at
3 Mar 2021
21.11%
10.96%
4.93%
4.05%
21.11%
10.96%
4.93%
4.00%
The interests of Directors and their connected persons in the ordinary shares of the Company as
disclosed in accordance with the Listing Rules of the Financial Conduct Authority are as set out on
page 140 of the Directors’ Remuneration Report and details of the Directors’ Deferred Share Bonus Plan
and Long-Term Incentive awards are set out on pages 137 and 139.
147
Suppliers, customers
and others
Equal opportunities
employment
Information summarising how the Directors have regard to the need to foster the Company’s business
relationships with suppliers, customers and others is included in the Group’s Section 172(1) Statement on
pages 22-27. This also details how that regard impacted the principal decisions taken by the Directors
during the year.
Our approach to business places a significant number of Vesuvius Steel employees at customer sites on
a permanent basis. In the Foundry Division, our success is built on our deep understanding of customer
processes and technical requirements, and our ability to assist them in delivering the greatest efficiency
from their operations.
During the year, our supplier audit programme covered the operations of 95 suppliers. This approach
allows Vesuvius to gain a deep understanding of our suppliers’ operations to ensure sustainability and
quality of supply.
Vesuvius agrees payment terms with its suppliers and seeks to pay in accordance with those terms.
Vesuvius is an equal opportunities employer, and decisions on recruitment, development, training and
promotion, and other employment-related issues are made solely on the grounds of individual ability,
achievement, expertise and conduct. These principles are operated on a non-discriminatory basis,
without regard to race, colour, nationality, culture, ethnic origin, religion, belief, gender, sexual
orientation, age, disability or any other reason not related to job performance or prohibited by
applicable law. In cases where employees are injured or disabled during employment with the Group,
support, including appropriate training, is provided to those employees and workplace adjustments
are made as appropriate in respect of their duties and working environment, supporting recovery
and continued employment.
Employee engagement
Information on the mechanisms through which Vesuvius engages with its workforce is included in the
Section 172(1) Statement on pages 22-29.
Pensions
In each country in which the Group operates, the pension arrangements in place are considered to be
consistent with good employment practice in that particular area. Independent advisers are used to
ensure that the plans are operated in accordance with local legislation and the rules of each plan. Group
policy prohibits direct investment of pension fund assets in the shares of Vesuvius plc. Outside the UK,
the US, Germany and Belgium, the majority of pension plans in the Group are of a defined contribution
nature.
In 2016, the main German defined benefit plan was closed for new entrants and existing members were
offered a buy-out of their benefits under this plan. Those who accepted this buy-out then joined the new
defined contribution plan. The Group’s UK defined benefits plan (the ‘UK Plan’) and the main US
defined benefits plans are closed to new entrants and have ceased providing future benefits accrual,
with all eligible employees instead being provided with benefits through defined contribution
arrangements.
For the Group’s closed UK Plan, a Trustee Board exists comprising employees, former employees and
an independent trustee. The Board currently comprises six trustee Directors, of whom two are member-
nominated. The administration of the UK Plan is outsourced. The Company is mindful of its obligations
under the Pensions Act 2004 and of the need to comply with the guidance issued by the Pensions
Regulator. Regular dialogue is maintained between the Company and the Trustee Board of the UK Plan
to ensure that both the Company and Trustee Board are apprised of the same financial and other
information about the Group and the UK Plan. This is pertinent to each being able to contribute to the
effective functioning of the UK Plan.
Vesuvius continues to seek ways to de-risk its existing pension plans through a combination of asset
matching, buy-in opportunities and, where prudent, voluntary cash contributions.
The total gross defined benefit obligations at 31 December 2020 were £610.0m funded (2019: £590.5m
funded) and £88.3m unfunded (2019: £79.3m unfunded). After asset funding there was a net deficit
of £2.1m (2019: £8.5m) representing an improvement of £6.4m. The improvement is driven by £9.0m
from cash contributions and payments of unfunded benefits and £7.7m from changes to actuarial
assumptions (attributable to lower discount rates; updated mortality assumptions and pension
membership data). These were offset by additional accrual and administrative expenditure paid
for the year of £7.4m and £2.9m from foreign exchange movements.
The majority of the ongoing pension plans are defined contribution plans, where our only obligation is to
make contributions, with no further commitments on the level of post-retirement benefits. During 2020,
cash contributions of £9.7m (2019: £11.3m) were made into the defined contribution plans and charged
to trading profit.
Governance 148 Vesuvius plc
Annual Report and Financial Statements 2020
Directors’ Report continued
Listing Rule 9.8.4C R
Disclosures
The following disclosures are made in compliance with the Financial Conduct Authority’s Listing
Rule 9.8.4C R:
Disclosure requirements under LR 9.8.4R
Reference/Location
(1)
Interest capitalised by the Group during the
year
None
(2)
Publication of unaudited financial information Not applicable
(3) Details of any Long-Term Incentive schemes
Pages 124 and 125
(4) Director waiver of emoluments
The Directors responded to the COVID-19 crisis
by sacrificing 20% of their salary and fees for six
months during 2020. For further details please
see page 120
(5) Director waiver of future emoluments
(6)
(7)
Allotment for cash of equity securities made
during the year
Allotment for cash of equity securities made
by a major unlisted subsidiary during the year
Not applicable
Not applicable
Not applicable
(8) Details of participation of parent undertaking
Not applicable
in any placing made during the year
(9) Details of relevant material contracts in which
a Director or controlling shareholder was
interested during the year
Not applicable
(10) Contracts for the provision of services by a
Not applicable
controlling shareholder during the year
(11) Details of any arrangement under which a
shareholder has waived or agreed to waive
any dividends
Vesuvius plc holds 7,271,174 of its 10 pence
ordinary shares as Treasury shares. No
dividends are payable on these shares. The
Trustee of the Company’s ESOP, has agreed
to waive, on an ongoing basis, any dividends
payable on shares it holds in trust for use under
the Company’s Employee Share Plans, details
of which can be found on pages 133, 137, 138,
139 and 146
(12) Details of where a shareholder has agreed
See above
to waive future dividends
(13) Statements relating to controlling
Not applicable
shareholders and ensuring company
independence
The Directors’ Report has been approved by the Board and is signed, by order of the Board, by the Secretary of the Company.
Henry Knowles
Company Secretary
3 March 2021
149
Statement of Directors’ Responsibilities in respect of the
Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report
and 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. Additionally, the
Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules require the Directors to prepare the group
financial statements in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The company
financial statements have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law).
Under company law, 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 for the Group, international accounting
standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union have been followed for the
Group financial statements and for the Company, United
Kingdom Accounting Standards, comprising FRS 101 have
been followed for the company financial statements, subject to
any material departures disclosed and explained in the
financial statements
> Make judgements and accounting estimates that are
reasonable and prudent
Directors’ confirmations
The Directors consider that the annual report and financial
statements, 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
below, confirm that, to the best of their knowledge:
> The Company Financial Statements, which have been
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 Reduced Disclosure
Framework, and applicable law), give a true and fair view of the
assets, liabilities, financial position and loss 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
and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group
> The Strategic 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 the Group faces
The names and functions of the Directors of Vesuvius plc
are as follows:
John McDonough CBE
Chairman
Patrick André
Chief Executive
Guy Young
Chief Financial Officer
Kath Durrant
Non-executive Director
Hock Goh
Non-executive Director
Friederike Helfer
Non-executive Director
> Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business
Jane Hinkley
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.
Douglas Hurt
Non-executive Director and
Chairman of the Remuneration
Committee
Non-executive Director, Senior
Independent Director and
Chairman of the Audit Committee
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the Group Financial Statements, Article 4
of the IAS Regulation.
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.
Holly Koeppel
Non-executive Director
On behalf of the Board
Guy Young
Chief Financial Officer
3 March 2021
Governance
150 Vesuvius plc
Annual Report and Financial Statements 2020
151
Independent auditors’ report to the members of Vesuvius plc
Report on the audit of
the financial statements
Opinion
In our opinion:
> Vesuvius 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 and Financial Statements (the “Annual Report”),
which comprise: the Group and Company Balance Sheets as at
31 December 2020; the Group Income Statement and Group
Statement of Comprehensive Income, the Group Statement of
Cash Flows and the Group and Company Statements of Changes
in Equity for the year then ended; and the Group and Company
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 6 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
> Our audit included full scope audits of
17 components and specific audit
procedures on certain balances and
transactions for 9 additional
components.
> Taken together, the components at
which either full scope audit work or
specified audit procedures were
performed enabled us to get coverage
on 68% of revenue, 74% of profit before
tax and 79% of profit before tax and
separately reported items (Headline
profit before tax).
Key audit matters
Materiality
> Impairment of goodwill and other
> Overall Group materiality: £7,000,000
non-financial assets (Group)
> Impairment of investment in subsidiaries
(Company)
> Provisions for exposures (Group)
> Impact of COVID-19 (Group and
Company)
(2019: £8,600,000) based on
approximately 4.6% of a 3 year average
profit before tax and separately
reported items (‘Headline profit
before tax’).
> Overall Company materiality:
£7,000,000 (2019: £8,600,000) based
on 1% of total assets, capped at the level
of overall Group materiality.
> Performance materiality: £5,250,000
(Group) and £5,250,000 (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 tax, international trade restrictions, health
and safety and anti-bribery, 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 and Listing
Rules of the Financial Conduct Authority (FCA). 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 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:
> Enquiries of Group and local management, those charged with
governance, internal audit and the Group’s legal counsel
(internal and, where relevant, external), including consideration
of known or suspected instances of non-compliance with laws
and regulations and fraud.
> Understanding and evaluation of the design and
implementation of management’s controls designed to prevent
and detect irregularities, including compliance, whistleblowing
arrangements and the results of management’s investigation
of such matters.
> Inspecting management reports and Board minutes in relation
to health and safety and other compliance matters.
> Reading key correspondence with regulatory authorities,
including in respect of provisions for uncertainty over income
tax treatments.
> Challenging assumptions and judgements made by
management in their critical accounting estimates, in particular
relating to impairment of goodwill and non-financial assets,
impairment of investment in subsidiaries and provisions for
exposures (see related key audit matters below).
> Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations including in
respect of journals posted to revenue, cash and other credits
to non- revenue accounts in the Group Income Statement.
> Obtained an understanding of the nature of any trade
restrictions and our component auditors tested relevant
supporting evidence that exists locally.
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.
The impact of COVID-19 is a new key audit matter this year.
Provisions for uncertainty over income tax treatments, which was
a key audit matter last year, is no longer included because of the
assessed decrease in the estimation uncertainty associated with
this and therefore reduced relative significance in the audit of the
financial statements compared to last year. Otherwise, the key
audit matters below are consistent with last year.
Governance
152 Vesuvius plc
Annual Report and Financial Statements 2020
Independent auditors’ report to the members of Vesuvius plc
continued
153
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and other non-financial
assets (Group)
At 31 December 2020, the carrying value of
goodwill is £617.6 million (2019: £620.2 million).
Goodwill arising from acquisitions has an indefinite
expected useful life and so is not amortised but
rather is tested for impairment at least annually
at the cash-generating unit (“CGU”) level.
Management has determined its CGUs to align
with the operating segments, which are Steel
Advanced Refractories, Steel Flow Control and
Foundry. Steel Sensors and Probes has no goodwill.
The Group also carries Property, Plant and
Equipment assets of £337.5 million (2019: £337.7
million) and other intangible assets of £78.5 million
(2019: £88.3 million). The carrying value of these
assets was assessed for impairment as a part of the
impairment test performed in respect of the CGUs.
Management prepares a Value in Use (VIU) model
(discounted cash flow) to test for impairment of the
above CGUs. This is based on a Board approved
3 year forecast, of which a terminal value is
calculated based on long term growth rates. The
VIU model requires estimation of projected future
cash flows and involves making key assumptions of
revenue growth rates, an appropriate discount rate
and long term growth rates for each of the CGUs. In
making such future assumptions there is an inherent
level of estimation uncertainty to consider. This has
become increasingly challenging in 2020 due to the
COVID-19 pandemic where further consideration
needs to be given to assumptions of recovery and
timeframes to achieve this.
We focused on valuation due to material carrying
value of goodwill and other non-financial assets,
and with regard to the increased uncertainties
arising from the factors set out above. Refer to
Impairment of Tangible and Intangible Assets
(Note 17), Critical Accounting Judgements and
Estimates (Note 3) and Significant issues and
material judgements in the Audit Committee report.
Our audit procedures included:
Impairment of investment in subsidiaries (Company)
Our audit procedures included:
> For each CGU we obtained management’s Value in Use model. We
ensured the calculations were mathematically accurate and that the
valuation methodology conformed with the requirements of IAS 36
‘Impairment of Assets’.
> For key assumptions made by management in respect of forecast
revenue and cash flow growth:
– We obtained management’s supporting evidence such as the Board
approved budget and 3 year strategy plan and agreed the forecast
cash flows and underlying assumptions to these.
– We also obtained evidence through our own independent research.
This included evidence supporting expected periods of recovery to
‘pre-COVID’ production levels for the CGUs end markets, historical
evidence of Vesuvius growth rates and recoveries in cyclical end
markets.
– We further considered market valuation evidence such as current
and target share price and understood any differences.
– Our audit evidence supported the cash flows modelled, although
in year 3 and into perpetuity it is challenging to obtain definitive
evidence, particularly given current uncertainties (see our
sensitivities below).
> We utilised internal valuations experts to support our audit procedures
over the discount rate and long term growth rate assumptions used in
the impairment model and sensitised the impacts of changes in the
discount rate within our view of a reasonable range.
> We remained professionally sceptical of the impacts of forecasting
uncertainty, particularly where evidence in later years is more
judgemental as set out above. We determined alternative sensitivity
scenarios to ascertain the extent of changes in projections that would be
required for the goodwill and other non-financial assets to be impaired.
These included scaling back year 3 forecasts and factoring in historical
levels of forecasting inaccuracy. We did not identify reasonable
sensitivities that would result in impairment of any of the CGUs
being tested.
In addition to the above procedures (which comprised our area of focus),
we instructed our component audit teams to evaluate the appropriateness
of management impairment indicator assessments performed within
territory components. These assessments focused on individual or groups
of assets below the levels of the CGUs. Our component teams, under our
supervision, did not identify any additional impairments required. From
our procedures we concluded that estimates and key assumptions made
by management in performing impairment testing, including reasonably
possible downside sensitivities which showed no scenarios of impairment,
were supported. Appropriate sensitivity disclosures have been included
within the Annual Report. Critical Accounting Judgements and Estimates
(Note 3) accordingly highlights this area as a critical accounting estimate
although it is not expected to materially impact the financial statements in
the next 12 months. Our findings were discussed with the Audit Committee.
The Company holds investments in subsidiaries
with a total carrying amount of £1,778.0m at
31 December 2020 (2019: £1,778.0 million). IAS 36
‘Impairment of assets’ requires management to
consider whether there are any indicators of
impairment in respect of non-financial assets.
Due to the quantum of the carrying amount and
levels of estimation uncertainty that exist similar
to assumptions used in testing for impairment of
goodwill and other non-financial assets (Group) this
was an area of focus for the audit of the Company.
Consistent with the prior year management
performed an impairment test at 31 October 2020.
This utilises cash flow forecasts used for testing for
impairment of the Group’s goodwill together with
additional considerations of cash flows relevant
to the subsidiaries that the Company owns.
The judgements and estimates required to
determine the cash flow forecasts are aligned with
those set out in ‘Impairment of goodwill and other
non-financial assets (Group)’ above.
Refer to Investment (Note 7), Critical Accounting
Judgements and Estimates (Note 3) in the Company
financial statements and Significant issues and
material judgements in the Audit Committee report.
> We assessed the results of the Value in Use model used for the impairment
test for goodwill and other non-financial assets, together with adjustments
made to reflect cash inflows to subsidiaries due from the Company.
> Our testing of the Group Value in Use model, including procedures
performed over management’s model and evidence obtained in respect
of key assumptions made is set out in Key audit matter ‘Impairment of
goodwill and other non-financial assets’. We also compared the carrying
value of the investment in subsidiaries and the Group Value in Use to the
market capitalisation and market valuation expectations.
> We performed sensitivity analyses including consideration of historical
forecasting inaccuracies which showed there was no reasonably possible
scenarios of impairment when taking account of estimation uncertainty
in key assumptions.
> This indicated significant headroom in the determined Value in Use and
that the investment in subsidiaries balance was not impaired.
We reviewed financial statement disclosures and these are consistent with
the results of management’s testing and our audit evidence. Critical
Accounting Judgements and Estimates (Note 3) in the Company financial
statements highlights this area as a critical accounting estimate although
it is not expected to materially impact the financial statements in the next
12 months. Our findings were discussed with the Audit Committee.
Provisions for exposures (Group)
Our audit procedures included:
The Group holds a provision for ‘Disposal, closure
and environmental costs’ (which includes provisions
relating to legacy legal matters for closed businesses)
amounting to £42.2 million (2019: £34.8 million).
Determining the quantum of this provision involves
modelling and estimation of expected future legal
claim volumes and amounts, with the support of an
external expert. It also requires the directors to use
judgement to determine whether associated insurance
recoverable amounts should be recognised
within assets.
We focused on this area due to the material quantum
of the provision and associated insurance asset, and
the judgement and estimates involved in determining
its valuation. Refer to Critical Accounting Judgements
and Estimates (Note 3), Trade and Other Receivables
(Note 18), Provisions (Note 30), Contingent Liabilities
(Note 32) and Significant issues and material
judgements in the Audit Committee report.
> Obtaining management’s model of the estimated legal costs, associated
insurance recoverable and testing the mathematical accuracy and
integrity of this model.
> We discussed claims arising, settlements made and expected trends with
the Group’s in-house and external experts.
> We tested the accuracy of historical source data which is used to determine
estimates of future trends of volumes and amounts of claims, to supporting
claim documentation.
> We utilised our own internal expert to support our audit of the key
assumptions and to provide a view of a range of potential outcomes due
to the estimation uncertainty involved. We independently sensitised the
model for changes in the average cost of claims, increase in the level
of larger value claims and duration over which claims are expected
to be received.
> We inspected evidence of available insurance cover, the routine and
consistent collection of this and considered the financial condition of
insurance providers to gain comfort over the recognition and recoverability
of the insurance asset. We also verified that this was appropriately
presented as gross of the associated provisions (within ‘Other receivables’).
From our procedures, we concluded the amount of the provision held was
within our acceptable range, albeit towards the optimistic end of the range.
We challenged management in respect of the level of disclosure and that
these adequately explain estimation uncertainty of key assumptions
including over the long term. Additional disclosure of the indicative
sensitivities of the provision amount, for changes in key assumptions has
been included. Critical Accounting Judgements and Estimates (Note 3)
highlights this area as a critical accounting estimate although it is not
expected to materially impact the financial statements in the next 12 months.
Our findings were discussed with the Audit Committee.
Governance 154 Vesuvius plc
Annual Report and Financial Statements 2020
Independent auditors’ report to the members of Vesuvius plc
continued
Key audit matter
How our audit addressed the key audit matter
Materiality
155
Impact of COVID-19 (Group and Company)
COVID-19 has had a significant impact on the Group
and Company during 2020 and this continues into
2021.The directors and management have assessed
the impact of the COVID-19 pandemic on the
Company and the Group financial statements.
(Refer to Going concern (Note 2.3) in the Group
financial statements and Going concern (Note 2.2)
in the Company financial statements).
The main impacts considered:
> Potential impairment (see ‘Impairment of goodwill
and other non-financial assets’ above but also
consideration of the recognition of deferred tax
assets, expected credit losses on financial assets
and inventory obsolescence).
> Going concern and viability statement as a result
of reduced profitability and cash flows and the
need to maintain covenants related to debt
instruments held.
> Determining the appropriate accounting for any
government assistance received during the year
to support the business during the course of the
pandemic. This includes accounting for ‘furlough’
type assistance of £3.0 million (Note 8) and also the
COVID Corporate Financing Facility (‘CCFF’) of
£200 million obtained and later repaid during the
year (Note 25).
> Ensuring Annual Report and financial statements
disclosures explain the impacts of the pandemic,
actions taken and ongoing risks arising (including
within the going concern and viability statement
disclosures).
Our procedures in respect of the ‘Impairment of goodwill and other non-
financial assets’ and ‘Impairment of investment in subsidiaries (Company)’
are set out in separate key audit matters above.
Other procedures we performed included:
> Understanding any changes to management assumptions used in making
estimates as a result of COVID-19, including those in respect of level of
recognition of deferred tax assets, expected credit losses on financial
assets and provisions for inventory obsolescence, and that these are
supported by audit evidence obtained from either management or
externally. From our procedures we concluded that the carrying value
of these assets was supportable and management’s estimates
appropriately reflected the uncertainties arising from COVID-19.
> We instructed our component audit teams to ensure this was specifically
addressed in testing accounting estimates and we reviewed the results
of their testing and findings.
> Assessing that disclosures made in the financial statements
provide clear explanation of impacts experienced and mitigating
actions taken by the Group.
> Evaluating management’s accounting for the CCFF and furlough type
assistance, and that the assistance received was disclosed within the
financial statements.
> With respect to management’s going concern assessment, we evaluated
management’s base case and downside case focussing on key
assumptions together with assessing the Group’s available facilities.
Further details of our audit procedures and conclusion in respect
of going concern are set out separately in this report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Vesuvius Group (Vesuvius plc together with its subsidiaries)
has operations in 41 countries and has 53 production sites.
The Group consolidates financial information through reporting
from its components which include divisions and functions at
these sites.
Our audit scope was determined by considering the significance
of the component’s contribution to profit before tax and
separately reported items (Headline profit before tax), revenue
and contribution to individual financial statement line items, with
specific consideration to obtaining sufficient coverage over areas
of heightened risk and locations and entities where we identified
other areas of higher risk.
We identified two financially significant components. These are
located in China and Germany. These comprise 11% of Headline
profit before tax and 18% of the Group’s revenue. The audit
scope, including the financially significant components,
comprised 17 components for which we determined that full
scope audits would need to be performed and 9 components
for which specific audit procedures on certain balances and
transactions were performed. This collectively provided audit
coverage of 68% of the Group’s revenue, 74% of the Group’s profit
before tax and 79% of the Group’s Headline profit before tax.
This, together with the additional procedures performed at the
Group level, including testing the consolidation process, gave
us the evidence we needed for our opinion on the financial
statements as a whole.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed at
the components by us, as the Group engagement team, or by
component auditors of other PwC network firms. Where the work
was performed by component auditors, we determined the level
of involvement and oversight 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 financial statements as a whole. This was achieved
through regular communications with the component auditors,
attendance at audit clearance meetings by senior team members,
meetings with local management, discussion of their audit
approach and audit findings with the component teams via
video conference, including for certain components with the
quality review partner and review of selected component
auditors’ workpapers. The Group audit team also performed
the audit of the Company.
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect
of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality
£7,000,000 (2019: £8,600,000).
£7,000,000 (2019: £8,600,000).
Financial statements – Group
Financial statements – Company
How we determined it
Rationale for benchmark
applied
1% of total assets, capped at the level of
overall Group materiality
We believe that total assets is an
appropriate basis for determining
materiality for the Company, given this
entity is an investment holding company
and this is an accepted auditing
benchmark. The materiality was capped
to the level of Group overall materiality.
The Company is not an in-scope
component for our Group audit. (2019: 1%
of total assets, capped at the level of overall
Group materiality)
Approximately 4.6% of 3 year average profit
before tax and separately reported items
(‘Headline profit before tax’)
We believe that profit before tax and
separately reported items (‘Headline profit
before tax’) provides us with an appropriate
basis for determining our overall Group
materiality given it is a key measure used by
users of the financial statements both
internally and externally. Headline profit
before tax is an Alternative Performance
Measure presented and defined in the
Annual Report and Financial Statements. In
the current year, due to the volatility caused
in the results by COVID-19, a 3 year average
of the Headline profit before tax has been
used as a benchmark as this provides a more
normalised threshold for determining
materiality. (2019: Based on 5% of 2019
profit before tax and separately reported
items)
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
£600,000 and £5,500,000.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to
£5,250,000 for the Group financial statements and £5,250,000
for the Company financial statements.
In determining the performance materiality, we considered a
number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls – and
concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £350,000
(Group audit) (2019: £430,000) and £350,000 (Company audit)
(2019: £430,000) 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:
> Evaluating management’s base case and downside case
for liquidity and available financial resources and obtaining
supporting evidence for key assumptions. This included
agreeing the underlying cash flow projections to a Board
approved forecast, assessing how these forecasts are compiled
and assessing the historical accuracy of the forecasts. We also
take account of performance and actions able to be taken
during the pandemic to date (e.g. cost savings) and assessing
available financing facilities and related liquidity headroom.
> Testing the accuracy of cash flow models used to assess
available liquidity during the going concern periods disclosed.
> Inspected facility agreements to ensure key terms were
considered including covenants.
> Determining alternative sensitivity scenarios to ascertain the
impact of changes in assumptions. These included scaling back
forecasts and increasing working capital as a percentage of
forecast revenue.
> Reading management’s disclosures in the financial statements
and relevant ‘other information’ and assessing consistency with
the financial statements and our knowledge based on our
audit.
Governance 156 Vesuvius plc
Annual Report and Financial Statements 2020
Independent auditors’ report to the members of Vesuvius plc
continued
157
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
> The section of the Annual Report that describes the review of
Use of this report
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities with
respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement, included within the ‘Risk, viability and
going concern’ section is materially consistent with the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
> The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
> The disclosures in the Annual Report and Financial Statements
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;
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 Annual Report and 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.
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
> we have not obtained all the information and explanations we
require for our audit; or
> adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
> certain disclosures of directors’ remuneration specified by law
are not made; or
> the Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
> a corporate governance statement has not been prepared
by the Company.
We have no exceptions to report arising from this responsibility.
Auditors’ responsibilities for the audit of the financial statements
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the members on 10 May 2017 to audit the financial
statements for the year ended 31 December 2017 and
subsequent financial periods. The period of total uninterrupted
engagement is 4 years, covering the years ended 31 December
2017 to 31 December 2020.
Darryl Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 March 2021
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.
Governance 158 Vesuvius plc
Annual Report and Financial Statements 2020
159
Financial Statements
159 Group Income Statement
160
Group Statement of Comprehensive Income
161 Group Statement of Cash Flows
162 Group Balance Sheet
163
Group Statement of Changes in Equity
164
Notes to the Group Financial Statements
214 Company Balance Sheet
215
Company Statement of Changes in Equity
216
Notes to the Company Financial Statements
222 Five-Year Summary: Divisional Results
223 Shareholder Information
225 Glossary
Group Income Statement
For the year ended 31 December 2020
Continuing operations
Revenue
Manufacturing costs
Administration, selling and distribution costs
Trading profit (2)
Amortisation of acquired intangible assets
Restructuring charges
Vacant site remediation costs
GMP equalisation charge
Operating profit/(loss)
Finance expense
Finance income
Net finance costs
Share of post-tax profit of joint ventures and
associates
Profit/(loss) before tax
Income tax (charge)/credits
Profit/(loss)
Profit/(loss) attributable to:
Owners of the parent
Non-controlling interests
Profit/(loss)
2020
(1) Headline
performance
£m
(1) Separately
reported
items
£m
Notes
Total
£m
(1) Headline
performance
£m
2019
(1) Separately
reported
items
£m
Total
£m
4, 5
1,458.3
— 1,458.3
1,710.4
5
16
7
2
26
9
33
10
(1,084.7)
— (1,084.7)
(1,233.5)
(272.2)
101.4
—
—
(272.2)
(295.5)
101.4
181.4
—
—
—
—
101.4
(18.8)
7.9
(10.9)
1.1
91.6
(24.4)
67.2
62.7
4.5
67.2
(9.9)
(6.1)
(10.3)
(0.8)
(27.1)
—
—
—
—
(27.1)
5.7
(21.4)
(21.4)
—
(21.4)
—
—
—
—
181.4
(19.5)
8.5
(11.0)
1.0
171.4
(43.8)
127.6
121.4
6.2
127.6
(9.9)
(6.1)
(10.3)
(0.8)
74.3
(18.8)
7.9
(10.9)
1.1
64.5
(18.7)
45.8
41.3
4.5
45.8
15.3
15.2
— 1,710.4
— (1,233.5)
—
—
(10.0)
(39.8)
(4.1)
—
(53.9)
—
—
—
1.1
(52.8)
11.7
(41.1)
(41.1)
—
(41.1)
(295.5)
181.4
(10.0)
(39.8)
(4.1)
—
127.5
(19.5)
8.5
(11.0)
2.1
118.6
(32.1)
86.5
80.3
6.2
86.5
29.8
29.6
Earnings per share — pence
11
Total operations
— basic
— diluted
(1) Headline performance is a non-GAAP measure which is defined in Note 4.1. Separately reported items is defined in Note 2.5.
(2) Trading profit is defined in Note 4.4.
The above results were derived from continuing operations. The separately reported items would form part of Administration, selling
and distribution costs if classified within headline performance, which including these amounts would total £299.3m (2019: £349.4m).
Financial Statements
160 Vesuvius plc
Annual Report and Financial Statements 2020
161
Group Statement of Comprehensive Income
For the year ended 31 December 2020
Group Statement of Cash Flows
For the year ended 31 December 2020
Profit
Items that will not subsequently be reclassified to Income Statement
Remeasurement of defined benefit liabilities/assets
Income tax relating to items not reclassified
Items that may subsequently be reclassified to Income Statement
Exchange differences on translation of the net assets of foreign operations
Reclassification of foreign currency translation reserve on disposal of share in joint venture
Exchange differences on translation of net investment hedges
Notes
26.6
10.4
23
Net change in costs of hedging
Change in the fair value of the hedging instrument
Amounts reclassified from the income statement
Other comprehensive loss, net of income tax
Total comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income
The above results were derived from continuing operations.
2020
£m
45.8
7.7
(3.2)
(14.9)
—
(9.7)
0.4
(8.1)
6.3
(21.5)
24.3
22.0
2.3
24.3
2019
£m
86.5
(3.6)
1.9
(73.4)
(1.1)
14.1
—
—
(62.1)
24.4
20.6
3.8
24.4
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Net interest paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Capital expenditure
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of assets classified as held for sale
Notes
12
2020
£m
2019
£m
193.7
(18.9)
5.2
(13.7)
(27.5)
152.5
240.7
(17.3)
5.2
(12.1)
(44.5)
184.1
(40.5)
(65.4)
1.1
—
3.7
1.8
Acquisition of subsidiaries and joint ventures, net of cash acquired
20
(1.4)
(32.7)
Disposal of joint ventures, net of cash disposed
Dividends received from joint ventures
Net cash outflow from investing activities
Net cash inflow before financing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Settlement of derivatives
Purchase of ESOP shares
Dividends paid to equity shareholders
Dividends paid to non-controlling shareholders
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at 31 December
Alternative performance measure (non-statutory):
Free cash flow (Note 4.11)
Net cash inflow/(outflow) from operating activities
Capital expenditure
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of assets classified as held for sale
Dividends received from joint ventures
Dividends paid to non-controlling shareholders
Free cash flow (Note 4.11)
14
14
25
22
24
14
14
13
—
2.3
(38.5)
114.0
6.8
0.1
(85.7)
98.4
320.4
(438.6)
154.6
(169.8)
1.4
—
(8.4)
(1.9)
(127.1)
(13.1)
222.1
(2.2)
206.8
(5.1)
—
(53.9)
(2.8)
(77.0)
21.4
213.4
(12.7)
222.1
2020
£m
2019
£m
152.5
(40.5)
1.1
—
2.3
(1.9)
113.5
184.1
(65.4)
3.7
1.8
0.1
(2.8)
121.5
Financial Statements 162 Vesuvius plc
Annual Report and Financial Statements 2020
163
Group Balance Sheet
As at 31 December 2020
Assets
Property, plant and equipment
Intangible assets
Employee benefits – surpluses
Interests in joint ventures and associates
Investments
Income tax receivable
Deferred tax assets
Other receivables
Derivative financial instruments
Total non-current assets
Cash and short-term deposits
Inventories
Trade and other receivables
Income tax receivable
Derivative financial instruments
Assets classified as held for sale
Total current assets
Total assets
Equity
Issued share capital
Retained earnings
Other reserves
Equity attributable to the owners of the parent
Non-controlling interests
Total equity
Liabilities
Interest-bearing borrowings
Employee benefits – liabilities
Other payables
Provisions
Deferred tax liabilities
Derivative financial instruments
Total non-current liabilities
Interest-bearing borrowings
Trade and other payables
Income tax payable
Provisions
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
Company number 8217766
Notes
2020
£m
2019
£m
15
16
26
33
10
18
25
13
19
18
10
25
21
22
23
25
26
28
30
10
25
25
28
10
30
25
337.5
696.1
117.1
12.1
0.7
—
96.1
18.6
—
337.7
708.5
102.6
12.7
0.8
—
94.9
22.1
0.5
1,278.2
1,279.8
209.7
187.3
369.9
3.7
0.2
0.9
229.2
212.9
379.6
2.9
0.1
—
771.7
824.7
2,049.9
2,104.5
27.8
27.8
2,502.9
2,463.1
(1,451.3)
(1,427.5)
1,079.4
1,063.4
51.4
51.0
1,130.8
1,114.4
333.1
119.2
13.2
34.0
43.9
7.0
303.2
111.1
15.1
31.1
43.6
—
550.4
504.1
45.0
288.7
12.2
22.8
—
368.7
919.1
171.7
273.6
14.3
25.7
0.7
486.0
990.1
2,049.9
2,104.5
The Financial Statements on pages 158 to 213 were approved and authorised for issue by the Directors on 3 March 2021 and signed on
their behalf by:
Patrick André
Chief Executive
Guy Young
Chief Financial Officer
Group Statement of Changes in Equity
For the year ended 31 December 2020
As at 1 January 2019
Profit
Remeasurement of defined benefit liabilities/assets
Income tax relating to items not reclassified
Exchange differences on translation of the net assets
of foreign operations
Reclassification of foreign currency translation reserve on
disposal of share in joint venture
Exchange differences on translation of net investment hedges
Income tax relating to items that may be reclassified
Other comprehensive (loss) net of income tax
Total comprehensive income/(loss)
Recognition of share-based payments
Dividends paid (Note 24)
Total transactions with owners
As at 1 January 2020
Profit
Remeasurement of defined benefit liabilities/assets
Income tax relating to items not reclassified
Exchange differences on translation of the net assets
of foreign operations
Exchange differences on translation of net investment hedges
Net change in costs of hedging
Change in the fair value of the hedging instrument
Amounts reclassified from the income statement
Income tax relating to items that may be reclassified
Other comprehensive (loss) net of income tax
Total comprehensive income/(loss)
Recognition of share-based payments
Dividends paid (Note 24)
Total transactions with owners
As at 31 December 2020
Issued
share
capital
£m
Other
reserves
£m
Retained
earnings
£m
Owners of
the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
27.8
(1,369.5)
2,433.9
1,092.2
50.0
1,142.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
80.3
(3.6)
1.9
80.3
(3.6)
1.9
6.2
—
—
86.5
(3.6)
1.9
(71.0)
(1.1)
14.1
—
(58.0)
(58.0)
—
—
—
—
—
—
—
(1.7)
78.6
4.5
(53.9)
(49.4)
(71.0)
(2.4)
(73.4)
(1.1)
14.1
—
—
—
—
(1.1)
14.1
—
(59.7)
(2.4)
(62.1)
20.6
4.5
(53.9)
(49.4)
3.8
—
(2.8)
(2.8)
24.4
4.5
(56.7)
(52.2)
27.8
(1,427.5)
2,463.1
1,063.4
51.0
1,114.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12.7)
(9.7)
0.4
(8.1)
6.3
—
(23.8)
(23.8)
—
—
—
41.3
7.7
(3.2)
41.3
7.7
(3.2)
4.5
—
—
45.8
7.7
(3.2)
—
—
—
—
—
—
4.5
45.8
2.4
(8.4)
(6.0)
(12.7)
(2.2)
(14.9)
(9.7)
0.4
(8.1)
6.3
—
—
—
—
—
—
(9.7)
0.4
(8.1)
6.3
—
(19.3)
(2.2)
(21.5)
22.0
2.4
(8.4)
(6.0)
2.3
—
(1.9)
(1.9)
24.3
2.4
(10.3)
(7.9)
27.8
(1,451.3)
2,502.9
1,079.4
51.4
1,130.8
Financial Statements
164 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements
1. General Information
Vesuvius plc (‘Vesuvius’ or ‘the Company’) is a public company limited by shares. It is incorporated and domiciled in England and
Wales, United Kingdom, and listed on the London Stock Exchange. The nature of the operations and principal activities of the
Company and its subsidiary and joint venture companies (‘the Group’) is set out in the Strategic Report on pages 1 to 88 and its
registered address is shown on page 223.
2. Basis of Preparation
2.1 Basis of accounting
The Group Financial Statements have been prepared in accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006 (IFRS) and the applicable legal requirements of the Companies Act 2006. In
addition to complying with International Accounting Standards in conformity with the requirements of the Companies Act 2006,
the Group Financial Statements also comply with International Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. The Financial Statements have been prepared under the historical cost
convention, with the exception of fair value measurement applied to defined benefit pension plans, certain provisions,
investments and derivative financial instruments.
2.2 Basis of consolidation
The Group Financial Statements incorporate the Financial Statements of the Company and entities controlled directly and
indirectly by the Company (its ‘subsidiaries’). Control exists when the Company has the power to direct the relevant activities of an
entity that significantly affect the entity’s return so as to have rights to the variable return from its activities. In assessing whether
control exists, potential voting rights that are currently exercisable are taken into account. The results of subsidiaries acquired
or disposed of during the year are included in the Group Income Statement from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
The principal accounting policies applied in the preparation of these Group Financial Statements are set out in the Notes. These
policies have been consistently applied to all of the years presented, unless otherwise stated. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line with those detailed herein to ensure that
the Group Financial Statements are prepared on a consistent basis. All intra-Group transactions, balances, income and expenses
are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s interest therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination together with
the non-controlling interests’ share of profit or loss, each component of other comprehensive income, less dividends paid since
the date of the combination. Total comprehensive income is attributed to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
2.3 Going concern
The COVID-19 pandemic has had a significant impact on business activity in all of Vesuvius’ end markets. The World Steel
Association reported that, in 2020, steel production in the world (excluding China) declined 8.2% year-on-year. The impact
on our Foundry Division has been even greater, primarily as a result of significant declines in automotive production.
The impacts of COVID-19 on the Group have included:
> A 15% decline in revenues in 2020 compared with the same period in 2019
> The temporary and short-lived closure of our plants in South Africa, Malaysia, Argentina and India due to national lockdowns.
As of 1 May 2020, all operations had been reopened
In response to the sudden and significant decline in business activity, the Group took the following actions:
> Significant cost reduction and cash preservation initiatives, in addition to the £20.6m of recurring savings from our restructuring
programmes which we delivered during the year
> Cost reduction initiatives mentioned above delivered savings of £39.0m in 2020 (£15.9m in reduced employment costs, £11.8m
in reduced discretionary spend and a reduction in planned employee incentives of £11.3m). The savings include:
– restricting all discretionary expenses
– a hiring freeze on all non-critical roles
– accessing government programmes to reduce labour costs, in line with available local regulatory options, together with other
flexible workforce solutions
– the Board and the Group Executive Committee voluntarily reduced their fees and salary by 20% for six months
> £21m (c.34%) reduction in our net capital expenditures in 2020 compared with 2019
> c.£38m saving from withdrawal of the final dividend for 2019
> Deferral of tax and social security payments whenever possible in accordance with local legislation
165
In April 2020, Vesuvius also took steps to boost its liquidity, through borrowing £200m from the Bank of England’s Covid Corporate
Financing Facility (CCFF) programme and raising c.£115m ($140m) from the US private placement (USPP) market.
The £200m borrowed from the Bank of England was due to mature in March 2021, but was repaid early in September 2020, as a
result of our positive free cash flow generation in the preceding months and early signs of marginally improving levels of business
activity. The funds had been drawn down as a liquidity buffer in case of an extreme and prolonged downturn.
The USPP fundraising raised an equivalent amount to an existing $140m USPP which was due to mature in December 2020, which
we repaid early in August 2020. As a result, our net debt/EBITDA covenant increased to 3.25x from 3.0x previously. Excluding IFRS
16 lease liabilities, which is consistent with the calculation under our debt covenants, net debt/LTM EBITDA was 1.0x at
31 December 2020, broadly in-line with the level at year-end 2019.
The Group’s available committed liquidity stood at £437m at year-end 2020, up from £354m at year-end 2019, as a result of the
Group’s cash flow generation, which benefited from a reduction in working capital due to the decline in business activity.
The Directors have prepared cash flow forecasts for the Group for a period in excess of 12 months from the date of approval of
the Financial Statements. These forecasts reflect an assessment of current and future end-market conditions and their impact on
the Group’s future trading performance. The analysis undertaken includes a plausible and severe downside scenario based on an
assumed protracted COVID-19-related demand impact, despite current markets showing emerging confidence in relation to
vaccine roll-out. This downside case is the ‘low’ case from a strategic planning exercise which we undertook in October 2020,
which was approved by the Board and since then the outlook has improved. In this downside scenario, average revenue is 6%
lower than Group’s base case, and the forecasts show that the Group has significant headroom in terms of both available
committed liquidity and required compliance with financial covenants.
On the basis of the exercise described above and the Group’s available committed debt facilities, the Directors consider that the
Group and Company have adequate resources to continue in operational existence for a period of at least 12 months from the
date of signing of these Financial Statements and that there is no material uncertainty in respect of going concern. Accordingly,
they continue to adopt a going concern basis in preparing the Financial Statements of the Group and the Company.
2.4 Functional and presentation currency
The Financial Statements are presented in millions of pounds sterling, which is the functional currency of the Company, and
rounded to one decimal place. Foreign operations are included in accordance with the policies set out in Note 25.1.
2.5 Disclosure of ‘separately reported items’
Columnar presentation
The Group has adopted a columnar presentation for its Group Income Statement, to separately identify headline performance
results, as the Directors consider that this gives a useful view of the underlying results of the ongoing business. As part of this
presentation format, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement, within
the column entitled ‘Separately reported items’, the effect of any components of financial performance for which the Directors
consider separate disclosure would assist users both in a useful understanding of the financial performance achieved for a given
year and in making projections of future results.
Separately reported items
Both materiality and the nature of the components of income and expense are considered in deciding upon such presentation.
Such items may include, inter alia, the financial effect of exceptional items which occur infrequently, such as major restructuring
activity (which may require more than one year to complete), significant movement in the Group’s deferred tax balances such as
was, for example, caused by the impact of US tax reform in 2017, items reported separately for consistency, such as amortisation
charges relating to acquired intangible assets, profits or losses arising on the disposal of continuing or discontinued operations
and the taxation impact of the aforementioned items reported separately.
The amortisation charge in respect of intangible assets recognised on business combinations is excluded from the trading results
of the Group since they are non-cash charges and are not considered reflective of the core trading performance of the Group.
The Group owns a number of disused properties in the US, which do not form part of our trading operations. Costs are being incurred
at one of these sites to address the significant increase in the volume of water run-off occurring from 2019. We have engaged waste
management specialists, are taking actions to reduce the level of water (including hydrological studies), improving treatment processes
and are in contact with the relevant regulatory authorities. We estimate that it will take a further 18 months to finalise initial works and
that there will then be a period for which unavoidable associated and ongoing running costs will be incurred. The charges related to
remediation and unavoidable associated and ongoing running costs have been recorded in 2020 and are £10.3m (2019: £4.1m).
These non-recurring charges have been treated as a separately reported item. There has been no impact upon performance.
In its adoption of this policy, the Company applies an even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such items.
2.6 Changes in accounting policies
There have been no changes in accounting policies during the year.
Financial Statements
166 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
167
2. Basis of Preparation continued
2.7 New and revised IFRS
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations
is that they are not expected to have a significant impact on the Group’s financial position, performance, cash flows and disclosures.
3. Critical Accounting Judgements and Estimates
Determining the carrying amount of some assets and liabilities and amounts recognised as reported profit requires judgement
and/or estimation of the effect of uncertain future events. The major sources of judgement and estimation uncertainty that have
a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities and amounts recognised as
reported profit are noted below. All other accounting policies are included within the respective Notes to the Financial Statements.
4. Alternative Performance Measures
The Company uses a number of alternative performance measures (APMs) in addition to those reported in accordance with
IFRS. The Directors believe that these APMs, listed below, are important when assessing the underlying financial and operating
performance of the Group and its divisions, providing management with key insights and metrics in support of the ongoing
management of the Group’s performance and cash flow. A number of these align with Key Performance Indicators (KPIs) and
other key metrics used in the business and therefore are considered useful to also disclose to the users of the Financial Statements.
The following APMs do not have standardised meaning prescribed by IFRS and therefore may not be directly comparable with
similar measures presented by other companies.
4.1 Headline performance
Headline performance, reported separately on the face of the Group Income Statement, is from continuing operations and
before items reported separately on the face of the Group Income Statement.
3.1 Separately reported items (Judgement)
4.2 Underlying revenue, underlying trading profit and underlying return on sales
In accordance with IAS 1, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement,
within the column entitled ‘Separately reported items’, the effect of any components of financial performance for which the
Directors consider separate disclosure would assist both in a useful understanding of the financial performance achieved for a
given year and in making projections of future results. Both materiality and the nature of the components of income and expense
are considered in deciding upon such presentation. Such items may include, inter alia, the financial effect of exceptional items
which occur infrequently, such as major restructuring activity, and items reported separately for consistency, such as amortisation
charges relating to acquired intangible assets, profits or losses arising on the disposal of continuing or discontinued operations
and the taxation impact of the aforementioned exceptional items and other items reported separately.
3.2 Deferred tax asset recognition (Judgement)
The Directors apply judgement in determining whether temporary differences, including historical tax losses, should be
recognised as deferred tax assets. The judgement considers the time horizon of expected utilisation and the history of taxable
profits generated. See Note 10.4.
3.3 Employee benefits (Estimate)
The Group’s Financial Statements include the costs and obligations associated with the provision of pension and other post-
retirement benefits to current and former employees. It is the Directors’ responsibility to set the assumptions used in determining
the key elements of the costs of meeting such future obligations. These assumptions are set after consultation with the Group’s
actuaries and include those used to determine regular service costs and the financing elements related to the plans’ assets and
liabilities. Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions could affect the
Group’s profit and financial position. The pension obligations are most sensitive to a change in the discount rate and therefore
could materially change in the next financial year if the discount rate changes significantly. Sensitivity disclosures are included
in Note 26.3.
For the estimates below, the Group does not have any key assumptions concerning the future, or other key sources of estimation
uncertainty in the reporting period that are reasonably expected to have a significant risk of causing a material adjustment to the
carrying amounts of assets/liabilities within the next financial year. Nonetheless, these estimates have the potential to materially
vary over time and are therefore highlighted.
3.4
Impairment testing of intangible assets (Estimate)
Determining whether intangible assets are impaired requires an estimation of the value-in-use of the cash-generating units to
which these assets have been allocated. The value-in-use calculation requires estimation of future cash flows expected to arise
for the cash-generating unit, the selection of suitable discount rates and the estimation of long-term growth rates. As determining
such assumptions is inherently uncertain and subject to future factors, there is the potential these may differ in subsequent periods
and therefore materially change the conclusions reached. In light of this, consideration is made each year as to whether sensitivity
disclosures are required for reasonably possible changes to assumptions. Sensitivity disclosures are included in Note 17.2.
3.5 Provisions (Judgement and Estimate)
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Some of the Group’s subsidiaries are parties to legacy matter and other lawsuits, certain
of which are insured claims, which have arisen in the ordinary course of the operations of the company involved. These provisions
relate to businesses that are closed or have been disposed of. Provisions are made for the expected amounts payable in respect of
known or probable costs resulting both from these third-party lawsuits or other regulatory requirements. To the extent insurance
is in place, an asset is recognised in other receivables in respect of associated insurance reimbursements.
As the resolution of many of the potential obligations for which provision is made is subject to legal or other regulatory process,
it requires estimation of the timing, quantum and amount of associated outflows, which are subject to some uncertainty. The Directors
use their judgement, using historical evidence, current information and expert experience, to determine whether to recognise a
provision, and make appropriate estimates of provisions in the Financial Statements for amounts relating to such matters. Associated
assets for insurance recoverable are recognised which involves assessing the likelihood of insurance being paid, which is a critical
judgement. The Directors have considered the available cover and the historical evidence, to determine that this is virtually certain.
Estimating the amount of provisions and insurance receivable is subject to estimation uncertainty. See Note 30 for further information.
Underlying revenue, underlying trading profit and underlying return on sales are the headline equivalents of these measures
after adjustments to exclude the effects of changes in exchange rates, business acquisitions and disposals. Reconciliations of
underlying revenue and underlying trading profit can be found in the Financial Review. Underlying revenue growth is one of
the Group’s KPIs and provides an important measure of organic growth of Group businesses between reporting periods, by
eliminating the impact of exchange rates, acquisitions, disposals and significant business closures.
4.3 Return on sales (ROS)
ROS is calculated as trading profit divided by revenue. It is one of the Group’s KPIs and is used to assess the trading performance
of Group businesses. A reconciliation of ROS is included in Note 5.3.
4.4 Trading profit/adjusted EBITA
Trading profit/adjusted EBITA is defined as operating profit before separately reported items. It is one of the Group’s KPIs and is
used to assess the trading performance of Group businesses. It is also used as one of the targets against which the annual bonuses
of certain employees are measured.
4.5 Headline profit before tax
Headline profit before tax, reported separately on the face of the Group Income Statement, is calculated as the net total of
trading profit, plus the Group’s share of post-tax profit of joint ventures and total net finance costs associated with headline
performance. It is one of the Group’s KPIs and is used to assess the financial performance of the Group as a whole.
4.6 Effective tax rate (ETR)
The Group’s ETR is calculated on the income tax costs associated with headline performance, divided by headline profit before
tax and before the Group’s share of post-tax profit of joint ventures and associates.
4.7 Headline earnings
Headline earnings is profit after tax before separately reported items attributable to owners of the parent.
4.8 Headline earnings per share
Headline earnings per share is calculated by dividing headline profit before tax less associated income tax costs, attributable
to owners of the parent by the weighted average number of ordinary shares in issue during the year. It is one of the Group’s KPIs
and is used to assess the underlying earnings performance of the Group as a whole. It is also used as one of the targets against
which the annual bonuses of certain employees are measured. Headline earnings per share is disclosed in Note 11.
4.9 Adjusted operating cash flow
Adjusted operating cash flow is cash generated from continuing operations before restructuring and net retirement benefit
obligations but after deducting capital expenditure net of asset disposals. It is used in calculating the Group’s cash conversion.
Cash generated from continuing operations (Note 12)
Add: Outflows relating to restructuring charges
Add: Net retirement benefit obligations
Less: Capital expenditure
Add: Vacant site remediation costs
Add: Proceeds from the sale of property, plant and equipment
Add: Proceeds from the sale of assets classified as held for sale
Adjusted operating cash flow
Trading profit
Cash conversion
2020
£m
193.7
16.7
2.3
(40.5)
1.9
1.1
—
175.2
101.4
173%
2019
£m
240.7
30.0
5.1
(65.4)
1.8
3.7
1.8
217.7
181.4
120%
Financial Statements 168 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
4. Alternative Performance Measures continued
4.10 Cash conversion
Cash conversion is calculated as adjusted operating cash flow from continuing operations divided by trading profit. It is useful for
measuring the rate at which cash is generated from trading profit. It is also used as one of the targets against which the annual
bonuses of certain employees are measured. The calculation of cash conversion is detailed in Note 4.9 above.
4.11 Free cash flow
Free cash flow is defined as net cash flow from operating activities after net outlays for the purchase and sale of property, plant
and equipment, dividends from joint ventures and dividends paid to non-controlling shareholders. It is one of the Group’s KPIs and
is used to assess the underlying cash generation of the Group and is one of the measures used in monitoring the Group’s capital.
A reconciliation of free cash flow is included underneath the Group Statement of Cash Flows.
The definition of free cash flow has been amended such that it includes additional funding contributions to Group pension plans.
The prior year free cash flow has been restated accordingly. The impact of the restatement to the 2019 free cash flow is immaterial.
4.12 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated as the percentage of average trade working capital balances to
the total revenue for the previous 12 months, at constant currency. Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the 13 previous month-end balances. It is one of the Group’s KPIs
and is useful for measuring the level of working capital used in the business and is one of the measures used in monitoring the
Group’s capital.
2020
£m
2019
£m
Average trade working capital
Total revenue
Average trade working capital to sales ratio
337.8
1,458.3
23.2%
410.2
1,710.4
24.0%
4.13 Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA)
Adjusted EBITDA is calculated as the total of trading profit before depreciation and amortisation of non-acquired intangible
assets. It is used in the calculation of the Group’s interest cover and net debt to adjusted EBITDA ratios. A reconciliation of adjusted
EBITDA is included in Note 5.
4.14 Net interest payable on borrowings
Net interest payable on borrowings is calculated as total interest payable on borrowings less finance income, excluding interest on
net retirement benefit obligations, adjustments to discounts and any item separately reported. It is used in the calculation of the
Group’s interest cover ratio.
Total interest payable on borrowings (Note 9)
Finance income (Note 9)
Net interest payable on borrowings
4.15 Interest cover
2020
£m
17.9
(7.4)
10.5
2019
£m
17.9
(7.8)
10.1
Interest cover is the ratio of adjusted EBITDA for the last 12 months to net interest payable on borrowings for the last 12 months.
It is one of the Group’s KPIs and is used to assess the financial position of the Group and its ability to fund future growth.
Adjusted EBITDA (Note 5)
Net interest payable on borrowings
Interest cover
4.16 Net debt
2020
£m
152.0
10.5
14.5x
2019
£m
231.1
10.1
22.9x
Net debt comprises the net total of current and non-current interest-bearing borrowings (including IFRS 16 lease liabilities), cash
and short-term deposits and derivative financial instruments. Net debt is a measure of the Group’s net indebtedness to banks and
other external financial institutions. A reconciliation of the movement in net debt is included in Note 14.
4.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the year-end to adjusted EBITDA for that year. It is one of the Group’s KPIs
and is used to assess the financial position of the Group and its ability to fund future growth and is one of the measures used in
monitoring the Group’s capital.
Net debt (Note 14)
Adjusted EBITDA (Note 5)
Net debt to adjusted EBITDA
2020
£m
175.1
152.0
1.2x
2019
£m
245.8
231.1
1.1x
169
4.18 Return on net assets (RONA)
RONA is calculated as trading profit plus share of post-tax profit of joint ventures and associates for the previous 12 months,
divided by average net operating assets, at constant currency (being the average over the previous 13 months of property,
plant and equipment, trade working capital, interests in joint ventures and associates, investments, other operating receivables,
payables and provisions). It is one of the Group’s KPIs and is used to assess the financial performance and asset management
of the Group and is one of the measures used in monitoring the Group’s capital.
Average net operating assets
Trading profit
Share of post-tax profit from joint ventures and associates
RONA
4.19 Constant currency
2020
£m
642.0
101.4
1.1
102.5
16.0%
2019
£m
690.2
181.4
1.0
182.4
26.4%
Figures presented at constant currency represent 2019 amounts retranslated at average 2020 exchange rates.
4.20 Liquidity
Liquidity is the Group’s cash and short-term deposits plus undrawn committed debt facilities less cash used as collateral on loans.
Cash and short-term deposits
Undrawn committed debt facilities
Cash used as collateral on loans
Liquidity
4.21 Last twelve months (LTM)
2020
£m
209.7
246.6
(19.0)
437.3
2019
£m
229.2
174.2
(49.0)
354.4
Some results are presented or calculated using data from the last 12 months from the reference date.
5. Segment Information
The segment information contained in this Note refers to several alternative performance measures, definitions of which can
be found in Note 4.
5.1 Business segments
Operating segments for continuing operations
The Group’s operating segments are determined taking into consideration how the Group’s components are reported to the
Group’s Chief Executive, who makes the key operating decisions and is responsible for allocating resources and assessing
performance of the component. Taking into account the Group’s management and internal reporting structure, the operating
segments are Steel Flow Control, Steel Advanced Refractories, Steel Sensors and Probes, and the Foundry Division. The principal
activities of each of these segments are described in the Strategic Report.
Steel Flow Control, Steel Advanced Refractories, and Steel Sensors and Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments which include a similar nature of products, customers, production
processes and margins.
Segment revenue represents revenue from external customers (inter-segment revenue is not material). Trading profit includes
items directly attributable to a segment as well as those items that can be allocated on a reasonable basis.
5.2 Accounting policy – revenue recognition
The Group derives all of its revenue from contracts with customers. The Group enters into contracts to provide one or multiple
products to customers in the steel and foundry industries globally.
Revenue recognition at a point in time
Where the Group provides consumable products only, one performance obligation is present. The performance obligation is
to deliver consumables to the customer and is satisfied upon delivery of these items. Similarly, where a contract is for the supply
of standard equipment, there is one performance obligation and revenue is primarily recognised at a point in time being upon
delivery of these items. The form of a contract is typically a purchase order from a customer.
Financial Statements
170 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
5. Segment Information continued
5.2 Accounting policy – revenue recognition continued
The Group also enters into some contracts with customers in the steel industry under which they primarily provide consumable
items, but also supply equipment and/or technical assistance (‘service contracts’) to facilitate these customers’ steel production
processes. The Group applies judgement in assessing whether the performance obligations (i.e. provision of consumables,
equipment and technical assistance) are distinct performance obligations or if these may be bundled when assessing the point at
which the customer obtains control of or consumes the benefit of promised goods or services. The judgement takes into account:
> Equipment provided in these contracts remains the property of Vesuvius and is used by Vesuvius technicians at customer sites
> The customer benefits from the combined output of the contract, being the use of Vesuvius consumables, equipment and
technicians to support the customers’ production of steel
> The value of the equipment and technician services is minimal relative to the total value of the contract to the customer being the
benefit of use of Vesuvius consumables
Based on the above, the individual elements of the contract are not considered distinct and therefore the performance obligations
are deemed to be bundled into a single performance obligation. Revenue is therefore recognised at a point in time, every time
the customers purchase and consume materials as they produce steel. In the event this judgement was not applied and the
performance obligations were not bundled, this would likely result in minor amounts of revenue being recognised earlier primarily
in respect of the technician support.
Approximately 87% (2019: 87%) of the aforementioned revenue relates to the sale of consumables and equipment only.
Approximately 13% (2019: 13%) of revenue relates to contracts which contain multiple performance obligations which in the
majority of cases are deemed to be bundled into a single performance obligation and revenue recognised over the course of the
contract as the customer consumes and benefits from Vesuvius products.
Revenue recognition over time
The Group enters into bespoke equipment design and build (and installation in some cases) contracts with customers.
Performance obligations are usually defined by milestones agreed with the customers in the contract. The customer usually does
not have a right to refund as work progresses towards achieving the milestones in the contract. Revenue is recognised over time
by measuring the progress of completion or achievement of a milestone for each performance obligation identified within the
contract, usually with reference to cost inputs incurred against overall estimated costs for the contract. This does not typically
entail significant estimation or judgements as the contracts are usually not material in isolation and do not span more than
12 months. This approach to revenue recognition is considered to reflect faithfully the value and timing of goods or services
transferred and the rights of Vesuvius to revenue.
Determining and allocating the transaction price to performance obligations
For revenue recognised at a point in time, the transaction price is determined and allocated with reference to the individual prices
of consumables or equipment specified in the contract or customer purchase order. If a standalone selling price is not available,
the Group will estimate the selling price with reference to the price that would be charged for the goods or services if they were sold
separately. This estimate is not considered complex.
For service contracts, where the bundled performance obligation is deemed to be the provision of consumables to facilitate
production of customer steel, the determined transaction price is determined and allocated with reference to either an agreed
price list for each of the consumables input, or for some contracts the transaction price is determined and allocated as an amount
per unit of customer steel output.
For revenue recognised over time, the transaction price is determined with reference to the prices set out in the contract. For
bespoke equipment builds the transaction price is allocated to performance obligations (milestones) within the contract and the
payment schedules agreed with the customer that align to these milestones. For installations, the transaction price is allocated
with reference to the progress of completion. Where payment schedules include customer advance payments (i.e. not aligned
with a milestone/performance obligation), the amounts received are included within contract liabilities until the performance
obligation to which they relate is satisfied.
Contracts are to be settled in cash. They do not typically contain any variable consideration, discounts, refunds, rebates,
warranties or significant financing components.
Duration and costs of obtaining contracts
The duration of the Group’s contracts with customers is typically less than one year and accordingly the Group has taken the
practical expedient within IFRS 15 to not disclose the transaction price allocated to unsatisfied (whole or partially) performance
obligations as of the end of the reporting period. Service contracts may span over more than one year as they remain in effect up
to a specified level of customer production of steel. However, the choice to purchase from Vesuvius under the contract remains
with the customer and therefore there is no commitment for the customer/Vesuvius to purchase/produce up to the specified level.
Costs of obtaining contracts are not considered significant and these are expensed as incurred.
171
Customer credit risk and payment terms
The Group assesses customer credit risk and recognises revenue when such risk is considered low and the consideration cash flows
due are reasonably expected to flow to the Group. Typically the Group will not transact with customers where credit risk concerns
are identified and therefore there is no material unrecognised revenue as a result of credit risk. For trade receivables and contract
assets in respect of revenue recognised, an expected credit loss allowance is determined.
Customer payment terms are set out in revenue contracts and do not exceed one year. Customer payments typically follow the
satisfaction of performance obligations at which point revenue is recognised and invoiced. Accordingly, trade receivables and
contract assets are expected to derive cash inflows for the Group within less than 12 months.
Contract assets and contract liabilities
A contract asset is recorded when revenue is recognised but an invoice has not been raised to the customer. Contract assets are
short term and typically are invoiced in the following month.
Customer advance payments are included in contract liabilities. These are typically not material and relate to over time revenue
projects as set out further above.
Uncertainties
There are no uncertainties involving economic factors, significant estimation or judgements (other than as disclosed above)
in respect of revenue recognition. Credit risk relating to the collection of cash inflows from revenue recognised is addressed
through an allowance for expected credit losses, as set out in the trade and other receivables accounting policy.
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
Receivables, which are included in ‘Trade and other receivables’
Contract assets, which are included in ‘Trade and other receivables’
Contract liabilities, which are included in ‘Trade and other payables’
2020
£m
302.0
1.3
1.5
2019
£m
306.7
1.1
3.3
Contract liabilities of £1.5m (2019: £3.3m) include advances received from a customer that precede the satisfaction of
performance obligations by the Group. £3.3m of the contract liabilities recognised in the prior year was recognised as revenue
in 2020.
5.3 Segmental analysis
The reportable segment results from continuing operations for 2020 and 2019 are presented below.
Segment revenue
at a point in time
over time
Segment adjusted EBITDA
Segment depreciation
Segment trading profit
Return on sales margin
Amortisation of acquired intangible assets
Restructuring charges
Vacant site remediation costs
GMP equalisation charge
Operating profit
Net finance costs
Share of post-tax profit of joint ventures
Profit before tax
Capital expenditure additions
2020
Flow
Control
£m
Advanced
Refractories
£m
Sensors
& Probes
£m
Total Steel
£m
561.3
458.6
25.5
1,045.4
1,035.7
9.7
110.6
(34.2)
76.4
7.3%
Foundry
£m
412.9
412.9
Total
£m
1,458.3
1,448.6
9.7
41.4
(16.4)
25.0
6.1%
152.0
(50.6)
101.4
7.0%
(9.9)
(6.1)
(10.3)
(0.8)
74.3
(10.9)
1.1
64.5
59.0
45.9
13.1
Financial Statements
172 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
5. Segment Information continued
5.3 Segmental analysis continued
Segment revenue
at a point in time
over time
Segment adjusted EBITDA
Segment depreciation
Segment trading profit
Return on sales margin
Amortisation of acquired intangible assets
Restructuring charges
Vacant site remediation costs
Operating profit
Net finance costs
Share of post-tax profit of joint ventures
Profit before tax
Capital expenditure additions
2019
Flow
Control
£m
Advanced
Refractories
£m
Sensors
& Probes
£m
Total Steel
£m
626.3
539.8
29.2
1,195.3
1,188.9
6.4
153.4
(33.3)
120.1
10.0%
Foundry
£m
515.1
515.1
77.7
(16.4)
61.3
11.9%
53.6
21.1
Total
£m
1,710.4
1,704.0
6.4
231.1
(49.7)
181.4
10.6%
(10.0)
(39.8)
(4.1)
127.5
(11.0)
2.1
118.6
74.7
The Chief Operating Decision Maker does not review non-current assets at a segmental level so these disclosures are
not included.
5.4 Geographical analysis
EMEA
Asia
North America
South America
Continuing operations
External revenue
Non-current assets
2020
£m
578.5
442.0
346.8
91.0
2019
£m
699.8
480.4
419.0
111.2
2020
£m
474.2
225.5
328.6
36.7
2019
£m
459.5
227.3
345.8
49.2
1,458.3
1,710.4
1,065.0
1,081.8
External revenue disclosed in the table above is based upon the geographical location of the operation. Non-current assets
exclude employee benefits net surpluses and deferred tax assets. Information relating to the Group’s products and services
is given in the Strategic Report. The Group is not dependent on any single customer for its revenue and no single customer,
for either of the years presented in the table above, accounts for more than 10% of the Group’s total external revenue.
£56.2m (2019: £66.3m) of revenue was generated from the UK, and total non -current assets in the UK amounted to
£97.1m (2019:£99.1m).
6. Operating Profit
6.1 Operating profit is stated after charging
Cost of inventories recognised as an expense (Note 19)
Research and development
Employee expenses (Note 8)
Depreciation (Note 15)
Amortisation (Note 16)
Operating lease charges (Note 29)
6.2 Amounts payable to PricewaterhouseCoopers LLP and their Associates
Fees payable to the Company’s auditors and their associates for the audit of the parent Company
and Consolidated Financial Statements
Fees payable to the Company’s auditors and their associates for other services:
Audit of the Company’s subsidiaries
Audit-related assurance services
Total auditors’ remuneration
173
2020
£m
533.5
27.9
366.0
50.6
9.9
4.2
2019
£m
642.6
29.1
395.0
49.7
10.0
6.0
2020
£m
2019
£m
0.7
1.0
0.1
1.8
0.5
1.2
0.1
1.8
Total auditors’ remuneration of £1.8m in 2020 all related to continuing operations, of which £1.7m related to audit fees and
£0.1m of non-audit fees, in respect of the Group’s half-year financial statements, quarterly reviews and tax form audits in India
(as required by regulation) along with review of an R&D claim in Italy (2019: £1.8m, including £1.7m of audit fees and £0.1m of
non-audit fees, the latter in respect of the Group’s half-year review fee and quarterly reviews and tax form audits in India). It is the
Group’s policy not to use the Group’s auditors for non-audit services other than for audit related services that are required to be
performed by an auditor.
Mazars LLP acts as external auditor of the non-material entities within the Group. Total remuneration for the audit of the
non-material entities was £0.6m (2019: £0.5m). This amount is not included in the table above.
7. Restructuring Charges and Vacant Site Remediation Costs
As explained in the Financial Review on page 45, the 2020 restructuring charges were £6.1m (2019: £39.8m) and relate to
the completion of the programme first announced in March 2018, which was predominantly focused on rationalising our
manufacturing footprint, consolidating production and streamlining various back office functions. The charges reflect
redundancy costs of £2.7m (2019: £24.8m), plant closure costs of £1.8m (2019: £4.4m), asset write-offs of £1.5m (2019: £8.9m)
and consultancy fees and travel of £0.1m (2019: £1.7m).
The net tax credit attributable to the total restructuring charges was £1.1m (2019: £9.2m).
Cash costs of £16.7m (2019: £30.0m) (Note 12) were incurred in the year in respect of the restructuring programme, leaving
provisions made but unspent of £9.2m (Note 30) as at 31 December 2020 (2019: £19.1m).
The Group owns a number of disused properties in the US, which do not form part of our trading operations. Costs are being
incurred at one of these sites to address the significant increase in the volume of water run-off occurring from 2019. We have
engaged waste management specialists, are taking actions to reduce the level of water (including hydrological studies),
improving treatment processes and are in contact with the relevant regulatory authorities. We estimate that it will take a further
18 months to finalise initial works and that there will then be a period for which unavoidable associated and ongoing running costs
will be incurred. The charges related to remediation and unavoidable associated and ongoing running costs have been recorded
in 2020 and are £10.3m (2019: £4.1m). These non-recurring charges have been treated as a separately reported item. There has
been no impact upon performance.
Financial Statements
174 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
8. Employees
8.1 Employee expenses
Wages and salaries
Social security costs
Share-based payments (Note 27)
Pension costs — defined contribution pension plans (Note 26)
— defined benefit pension plans (Note 26)
Other post-retirement benefits (Note 26)
Total employee expenses
2020
£m
302.9
43.5
2.4
9.7
7.1
0.4
2019
£m
323.4
50.6
4.9
11.3
4.3
0.5
366.0
395.0
Included within wages and salaries is income from governments of £3.0m in respect of staff who have been furloughed due to the
COVID-19 pandemic. This income falls within IAS 20 Government grants as the Group receives income in return for meeting the
conditions included within each of the relevant government schemes. The income approach has been applied and therefore the
income is recognised when the salary and wages expense which the schemes are intended to compensate are incurred. There are
no unfulfilled conditions or other contingencies that have been recognised in respect of these schemes. The Group also accessed
the Bank of England’s Covid Corporate Financing Facility (CCFF) (see Note 25.2).
8.2 Monthly average number of employees
Steel
Foundry
Total monthly average number of employees
2020
no.
7,613
2,710
2019
no.
7,731
2,845
10,323
10,576
As at 31 December 2020, the Group had 10,354 employees (2019: 10,496).
8.3 Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is
provided in the audited part of the Directors’ Remuneration Report on pages 131 to 143.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total remuneration of key management personnel
9. Net Finance Costs
Interest payable on borrowings
Loans and overdrafts
Interest on lease liabilities
Amortisation of capitalised arrangement fees
Total interest payable on borrowings
Interest on net retirement benefit obligations
Adjustment to discounts on provisions and other liabilities
Adjustment to discounts on receivables
Finance income
Total net finance costs
2020
£m
1.4
0.2
1.2
2.8
2020
£m
15.6
1.8
0.5
17.9
(0.1)
1.0
(0.5)
(7.4)
10.9
2019
£m
1.2
0.2
1.2
2.6
2019
£m
15.7
1.6
0.6
17.9
0.3
1.3
(0.7)
(7.8)
11.0
Within the table above, total finance costs are £18.8m (2019: £19.5m) and total finance income is £7.9m (2019: £8.5m).
Net finance costs are £10.9m (2019: £11.0m).
175
10. Income Tax
10.1 Accounting policy
Tax expense represents the sum of current tax and deferred tax. Current and deferred tax are recognised in profit or loss except
to the extent that they relate to items charged or credited in the Group Statement of Comprehensive Income or Group Statement
of Changes in Equity, in which case the associated tax is also recognised in those statements.
Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Group 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 and laws that have
been enacted, or substantively enacted, by the balance sheet date.
A provision is recognised when the Group considers it has a present tax obligation as the result of a past event and it is probable
that the Group will be required to settle that obligation. Provisions established for such uncertain tax positions are made using
a best estimate of the tax expected to be paid, based on a qualitative and quantitative assessment of all relevant information.
Such a provision is typically required where the underlying tax issue is subject to interpretation and remains to be agreed,
and therefore is uncertain as to outcome. Principally the uncertain tax positions for which a provision is made relate to the
interpretation of tax legislation and guidance regarding transfer pricing arrangements that have been entered into in the
normal course of business. In accordance with IAS 12, tax provisions are included as income tax payable on the face of the Group
Balance Sheet, and movements in tax provisions are included within income tax charges or credits in the Group Income Statement.
In assessing any appropriate provision requirements for uncertain tax items, the Group considers progress made in discussions
with the tax authorities, expert advice on the likely outcome and any recent developments in case law. Due to the uncertainty
associated with such tax items, it is possible that at a future date, on conclusion of the open matters, the final outcome may
vary materially. Any such variations will affect the financial results in the year in which such a determination is made.
IFRIC 23 Uncertainty over Income Tax Treatments took effect from 1 January 2019. It clarifies how to recognise and measure
deferred and current income tax assets and liabilities where there is uncertainty over tax treatment under IAS 12.
Deferred tax
Deferred tax is recognised 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. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. 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, based on tax rates and laws that have been enacted, or substantively
enacted, by the balance sheet date.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries 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 assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
Financial Statements
176 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
10. Income Tax continued
10.2 Income tax charge
Current tax
Overseas taxation
Adjustments in respect of prior years
Total current tax, continuing operations
Deferred tax
Origination and reversal of temporary taxable differences
Adjustments in respect of prior years
Total deferred tax, continuing operations
Total income tax charge
Total income tax charge attributable to:
Continuing operations — headline performance
— separately reported
Total income tax charge
2020
£m
28.1
(3.0)
25.1
(7.8)
1.4
(6.4)
18.7
24.4
(5.7)
18.7
2019
£m
32.2
(1.1)
31.1
1.7
(0.7)
1.0
32.1
43.8
(11.7)
32.1
Included in the Group’s total income tax charge are charges and credits meeting the criteria set out in Note 2.5 to be treated as
separately reported items, as analysed in the following table:
Separately reported items
Restructuring charges
Amortisation and utilisation of acquired intangibles
Vacant site remediation costs
Total tax charge/(credit) separately reported
2020
£m
(1.1)
(2.3)
(2.3)
(5.7)
2019
£m
(9.2)
(2.5)
—
(11.7)
The net tax debit reflected in the Group Statement of Comprehensive Income in the year amounted to £3.2m (2019: £1.9m credit),
comprising a £2.8m debit (2019: £1.9m credit) related to tax on net actuarial gains and losses on the employee benefits plan
and a debit of £0.4m (2019: £nil) relating to other temporary timing differences.
The Group operates in a number of countries that have differing tax rates, laws and practices. Changes in any of these areas
could, adversely or positively, impact the Group’s tax charge in the future. Continuing losses, or insufficiency of taxable profit
to absorb all expenses, in any subsidiary, could have the effect of increasing tax charges in the future as effective tax relief may
not be available for those losses or expenses. Other significant factors affecting the tax charge are described in Notes 10.1
and 10.6.
10.3 Reconciliation of income tax charge to profit before tax
Profit before tax
Tax at the UK corporation tax rate of 19.0% (2019: 19.0%)
Overseas tax rate differences
Withholding taxes
Amortisation of intangibles
Expenses not deductible for tax purposes
Income taxed in advance
Deferred tax asset not previously recognised – Other
Deferred tax assets not recognised
Utilisation of previously unrecognised tax losses
Adjustments in respect of prior years
Total income tax charge
2020
£m
64.5
12.3
2.7
7.2
(0.4)
2.7
(4.2)
—
1.3
(1.3)
(1.6)
18.7
2019
£m
118.6
22.5
5.1
5.4
(0.8)
2.1
1.2
(0.9)
3.0
(3.7)
(1.8)
32.1
177
Total
£m
55.8
(2.7)
(2.8)
1.9
2.8
(3.7)
51.3
(2.3)
—
20.1
(1.8)
0.6
—
(3.0)
11.6
27.5
—
—
3.1
0.6
30.8
2020
£m
96.1
(43.9)
52.2
(0.4)
(3.2)
3.9
2.5
52.2
2019
£m
94.9
(43.6)
51.3
2019
£m
10.8
(2.5)
10.4 Deferred tax
As at 1 January 2019
Exchange adjustments/other
Acquisition
Other net (charge)/credit to Group Statement of
Comprehensive Income
Other net (charge)/credit to Group Income Statement
Other net (charge)/credit to Group Income Statement US
As at 1 January 2020
Exchange adjustments/other
Acquisition
Other net (charge)/credit to Group Statement of
Comprehensive Income
Other net (charge)/credit to Group Income Statement
Other net (charge)/credit to Group Income Statement US
As at 31 December 2020
Recognised in the Group Balance Sheet as:
Non-current deferred tax assets
Non-current deferred tax liabilities
Net total deferred tax assets
Interest
£m
34.7
(0.3)
—
—
—
(10.5)
23.9
(0.6)
—
—
(0.1)
(1.2)
22.0
Other
operating
losses
£m
Pension
costs
£m
Intangible
assets
£m
Other
temporary
differences
£m
19.5
(0.2)
—
—
4.0
(4.5)
18.8
(2.2)
—
—
(1.6)
3.9
18.9
3.4
(1.2)
—
1.9
(0.7)
0.1
3.5
0.4
—
(2.8)
0.2
(0.5)
0.8
(21.9)
0.8
(3.4)
—
2.5
(0.4)
(22.4)
0.1
—
—
2.3
(0.3)
(20.3)
Included in these deferred tax assets and liabilities are amounts to be expected to be utilised in 2020 as follows:
Deferred tax assets
Deferred tax liabilities
2020
£m
8.4
(2.3)
Included in non-current deferred tax assets is £61.8m (2019: £61.3m) in respect of the partial recognition of temporary differences
arising in the US computed in accordance with the policy set out in Note 10.1 above. The Group remains confident of the recovery
of this asset. £19.3m (2019: £19.5m) remains unrecognised.
Tax loss carry-forwards and other temporary differences with a tax value of £17.7m (2019: £10.4m) were recognised by
subsidiaries reporting a loss. Based on approved business plans of these subsidiaries, the Directors consider it probable that
the tax loss carry-forwards and temporary differences can be offset against future taxable profits of these subsidiaries.
The total deferred tax assets not recognised as at 31 December 2020 were £182.5m (2019: £167.8m), as analysed below.
In accordance with the accounting policy in Note 10.1, these items have not been recognised as deferred tax assets on the
basis that their future economic benefit is not probable. In total, there was an increase of £14.7m (2019: £0.9m increase) in
net unrecognised deferred tax assets during the year, primarily driven by the cancellation of the proposed reduction of UK
corporation tax from 19% to 17%. All UK unrecognised deferred tax assets are now reported at the 19% rate.
Operating losses (further described below)
Unrelieved US interest (may be carried forward indefinitely)
Capital losses available to offset future UK capital gains (may be carried forward indefinitely)
UK ACT credits (may be carried forward indefinitely)
US tax credits
Other temporary differences
Total deferred tax assets not recognised
2020
£m
109.3
17.9
35.1
14.6
1.4
4.2
2019
£m
95.6
19.5
32.1
13.1
—
7.5
182.5
167.8
Financial Statements
178 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
10. Income Tax continued
10.4 Deferred tax continued
The Group has significant net operating losses with a tax value of £128.2m (2019: £114.4m), only £18.9m (2019: £18.8m) of which
meet the criteria set out in Note 10.1 to be recognised on the Group Balance Sheet.
UK (may be carried forward indefinitely)
US (due to expire 2024-2031)
ROW (may be carried forward indefinitely)
ROW (due to expire within 5 years)
Operating
losses
recognised
2020
£m
Operating
losses not
recognised
2020
£m
—
13.1
5.6
0.2
87.9
—
21.4
—
Total
2020
£m
87.9
13.1
27.0
0.2
Operating
losses
recognised
2019
£m
Operating
losses not
recognised
2019
£m
—
9.7
9.1
—
74.6
—
21.0
—
95.6
Total
2019
£m
74.6
9.7
30.1
—
114.4
18.9
109.3
128.2
18.8
The £27.0m (2019: £30.1m) operating losses available to set against future income in the rest of the world arise in a number of
countries, reflecting the spread of the Group’s operations.
An amount of £0.9m (2019: £3.1m) has been recognised in respect of withholding taxes that will be due on a repatriation of funds
from the group’s Chinese subsidiaries.
Deferred tax is not recognised in respect of the value of the Group’s investments in subsidiaries and interests in joint ventures
where we are able to control the timing of the reversal of the temporary differences and it is probable that such differences will
not reverse in the foreseeable future. The amount of these temporary differences for which deferred tax liabilities have not been
recognised was £12.7m (2019: £22.6m).
10.5 Income tax payable and recoverable
Liabilities for income tax payable
Provisions for uncertain tax positions
Income tax recoverable within one year
Net liability
2020
£m
3.7
8.5
12.2
3.7
8.5
2019
£m
2.5
11.8
14.3
2.9
11.4
Provisions for uncertain tax positions are calculated in accordance with the policy outlined in Note 10.1, and are treated as income
tax payable in accordance with IAS 12.
These provisions cover litigated tax matters as well as provisions for other risks where the Group believes it is more likely than not
that there would be a successful challenge by a tax authority to positions it has taken in its tax filings. By its nature, litigation can
result in sharp fluctuations in cash flow, both in and out, relating to taxes. Currently, management do not expect any material
adjustments to these provisions in 2021.
During the year the provisions for uncertain tax positions have reduced to £8.5m (2019: £11.8m). The decrease of £3.3m (2019:
£6.9m) can be explained by the settlement of a tax audit in Switzerland £nil (2019: £4.1m) with a corresponding provision release
£nil (2019: £1.4m) as well as the reassessment of potential uncertain tax positions following a lack of previously expected
challenge by the tax authorities £2.0m (2019: £0.4m), the expiration of the statute of limitations on certain other exposures
£1.6m (2019: £0.4m) and foreign exchange movements on the remaining balances £0.3m charge (2019: £0.6m credit).
179
10.6 Key factors impacting the sustainability of the effective tax rate are as follows:
Material changes in the geographic mix of profits
The Group’s effective tax rate is sensitive to changes in the geographic mix of profits and level of profits and reflects a
combination of higher rates in certain jurisdictions such as Brazil, China, Germany, India, Mexico and the US, a nil effective tax
rate in the UK due to the availability of unutilised tax losses, and rates that lie somewhere in between.
Changes in tax rates, tax reform and its interpretation
Changes in tax rates and laws in the jurisdictions in which the Group operates could have a material effect on the Group’s effective
tax rate.
Availability of tax advantaged rates
Vesuvius in China qualifies for a tax advantaged rate of 15% (rather than the headline rate of 25%), on part of its profits due to the
high technology nature of its business. Eligibility for this rate is reviewed on a regular basis by the Chinese tax authority and was
worth approximately £1.1m in 2020 (2019: £1.5m). Without that benefit, the Group’s effective tax rate on headline performance
would have been 1.2% higher in 2020 (2019: 0.9%).
Resolution of tax judgements
At any one time, the Group can be subject to a number of challenges by tax authorities in the jurisdictions in which it operates.
The outcome of these challenges is inherently uncertain, potentially resulting in a different tax charge from the amounts initially
provided.
Impact of Brexit on Vesuvius’ tax position
Following Brexit, the EU Parent Subsidiary and Interest and Royalty directives no longer apply to dividend, interest and other
payments to Vesuvius in the UK. Additional withholding taxes will therefore become payable subject to reliefs available under
applicable tax treaties. The Group does not expect the impact of the changes to be material to its tax position.
11. Earnings per Share (EPS)
11.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon the profit attributable to owners of the parent, as reported
in the Group Income Statement. The table below reconciles these different profit measures.
Profit attributable to owners of the parent
Adjustments for separately reported items:
Amortisation of acquired intangible assets
Restructuring charges
Gain on disposal of share in joint venture
Vacant site remediation costs
GMP equalisation charge
Income tax (credit)/charge
Headline profit attributable to owners of the parent
11.2 Weighted average number of shares
For calculating basic and headline EPS
Adjustment for potentially dilutive ordinary shares
For calculating diluted and diluted headline EPS
2020
£m
41.3
9.9
6.1
—
10.3
0.8
(5.7)
62.7
2020
millions
269.9
1.7
271.6
2019
£m
80.3
10.0
39.8
(1.1)
4.1
—
(11.7)
121.4
2019
millions
269.1
1.9
271.0
For the purposes of calculating diluted and diluted headline EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company’s share-based payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS or increase loss per share.
Financial Statements
180 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
11. Earnings per Share (EPS) continued
11.3 Per share amounts
Earnings per share — basic
— headline
— diluted
— diluted headline
12. Cash Generated from Operations
Operating profit
Adjustments for:
Amortisation of acquired intangible assets (Note 16)
Restructuring charges
Vacant site remediation costs
GMP equalisation charge
Trading profit
Loss/(profit) on disposal of non-current assets
Depreciation
Defined benefit retirement plans net charge
Net decrease/(increase) in inventories
Net decrease/(increase) in trade receivables
Net increase/(decrease) in trade payables
Net decrease/(increase) in other working capital
Outflow related to restructuring charges
Defined benefit retirement plans cash outflows
Vacant site remediation costs paid
Cash generated from operations
13. Cash and Cash Equivalents
13.1 Accounting policy
2020
pence
15.3
23.2
15.2
23.1
2020
£m
74.3
9.9
6.1
10.3
0.8
2019
pence
29.8
45.1
29.6
44.8
2019
£m
127.5
10.0
39.8
4.1
—
101.4
181.4
1.3
50.6
6.7
21.7
3.4
12.4
23.8
(16.7)
(9.0)
(1.9)
193.7
(0.3)
49.7
4.8
24.9
54.4
(15.2)
(17.3)
(30.0)
(9.9)
(1.8)
240.7
Cash and short-term deposits in the Group balance sheet consist of cash at bank, in hand and short-term deposits with original
maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management are included as a component of cash and cash equivalents for the purpose of the Group Statement of Cash Flows.
Cash at bank and in hand
Short-term deposits
Cash and short-term deposits
Bank overdrafts
Cash and cash equivalents in the Group Statement of Cash Flows
2020
£m
169.7
40.0
209.7
(2.9)
206.8
2019
£m
229.2
—
229.2
(7.1)
222.1
181
14. Reconciliation of Movement in Net Debt
Balance
as at
1 Jan 2020
£m
Foreign
exchange
adjustments
£m
Fair value
gains/
(losses)
Non-cash
movements*
£m
Cash flow
£m
Balance
as at
31 Dec 2020
£m
Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Bank overdrafts
229.2
(2.2)
—
(7.1)
—
—
222.1
(2.2)
Borrowings, excluding bank overdrafts
(469.0)
(10.0)
Capitalised arrangement fees
Derivative financial instruments
Net debt
1.2
(0.1)
—
—
(245.8)
(12.2)
—
—
—
—
—
—
(5.3)
(5.3)
—
—
—
—
(57.3)
169.7
40.0
4.2
40.0
(2.9)
(13.1)
206.8
(15.7)
118.2
(376.5)
0.2
—
—
(1.4)
1.4
(6.8)
(15.5)
103.7
(175.1)
Balance
as at
1 Jan 2019
£m
Transition to
IFRS 16 on
1 Jan 2019*
£m
Foreign
exchange
adjustments
£m
Fair value
gains/
(losses)
Non-cash
movements
£m
Cash flow
£m
Balance
as at
31 Dec 2019
£m
Cash and cash equivalents
Cash at bank and in hand
Bank overdrafts
236.9
(23.5)
213.4
—
—
—
(12.9)
0.2
(12.7)
Borrowings, excluding bank overdrafts
(463.2)
(32.8)
21.0
Capitalised arrangement fees
Derivative financial instruments
Net debt
1.8
0.2
—
—
(247.8)
(32.8)
—
—
8.3
—
—
—
—
—
(5.4)
(5.4)
—
—
—
5.2
16.2
21.4
229.2
(7.1)
222.1
(9.2)
15.2
(469.0)
(0.6)
—
(9.8)
—
5.1
1.2
(0.1)
41.7
(245.8)
* The Group adopted IFRS 16 leases from 1 January 2019 and, in accordance with the simplified approach, did not restate comparatives on transition.
£15.7m (2019: £9.2m) of new leases were entered into during the year.
Net debt is a measure of the Group’s net indebtedness to banks and other external financial institutions and comprises the total
of cash and short-term deposits, current and non-current interest-bearing borrowings and derivative financial instruments.
£320.4m proceeds from borrowings, shown in the Statement of cash flows, includes £67.0m ($86.0m) and £44.4m (€50.0m)
US Private Placement Notes (‘USPP’) refinancing, £9.0m of Sterling drawings under the UK syndicated bank facility and £200.0m
issued through the Bank of England Covid Corporate Financing Facility (‘CCFF’) (see Note 25).
£438.6m repayment of borrowings, shown in the statement of cash flows, includes £109.1m ($140.0m) of USPP repayments,
£87.0m (€98.0m) of Euro drawings repaid under the UK syndicated bank facility, £30.0m repaid under the collateralised bi-lateral
loan facility, £12.5m of lease repayments and the £200.0m CCFF loan repayment.
15. Property, Plant and Equipment
15.1 Accounting policy
Freehold land and construction in progress are carried at cost less accumulated impairment losses. Other items of property, plant
and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Costs are capitalised only
when it is probable that they will result in future economic benefits flowing to the Group and when they can be measured reliably.
Costs are capitalised to construction in progress where an asset is being developed. This is then transferred and depreciated
when the asset is ready for use. All other repairs and maintenance expenditures are charged to the Group Income Statement
in the period in which they are incurred.
On adoption of IFRS 16 Leases, right of use assets were recognised and assets accounted for previously under finance leases were
reclassified into the right of use categories. Newly recognised right of use assets were measured at the amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet
as at 31 December 2018.
Financial Statements
shorter of the asset’s useful life and lease term
16. Intangible Assets
182 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
15. Property, Plant and Equipment continued
15.1 Accounting policy continued
Freehold land is not depreciated, as it has an infinite life. Depreciation on other items of property, plant and equipment begins
when the asset is available for use and is charged to the Group Income Statement on a straight-line basis so as to write off the
cost less residual value of the asset over its estimated useful life as follows:
Asset category
Freehold property
Leasehold property
Right of use assets
Estimated useful life
between 10 and 50 years
the term of the lease
Plant and equipment — motor vehicles and information technology equipment between 1 and 5 years
— other
between 3 and 15 years
The depreciation method used, residual values and estimated useful lives are reviewed annually and changed, if appropriate.
As described in Note 17.1, an asset’s carrying amount is immediately written down to its recoverable amount if its carrying amount
is greater than its estimated recoverable amount. Gains and losses arising on disposals are determined by comparing sales
proceeds with carrying amount and are recognised in the Group Income Statement.
15.2 Movement in net book value
Freehold
property
£m
Leasehold
property
£m
Right of use
assets – land
& buildings
(Note 29.2)
£m
Right of use
assets – plant
& equipment
(Note 29.2)
£m
Plant and
equipment
£m
Construction
in progress
£m
Cost
As at 1 January 2019
Impact of IFRS 16 adoption
Exchange adjustments
Capital expenditure additions
Acquisitions through business combinations
Disposals
Assets classified as held for sale
Reclassifications
As at 31 December 2019 and 1 January 2020
Exchange adjustments
Capital expenditure additions
Disposals
Assets classified as held for sale
Reclassifications
As at 31 December 2020
Accumulated depreciation and impairment
losses
As at 1 January 2019
Exchange adjustments
Depreciation charge
Impairment
Disposals
Reclassifications
As at 31 December 2019 and 1 January 2020
Exchange adjustments
Depreciation charge
Impairment
Disposals
Assets classified as held for sale
As at 31 December 2020
210.4
—
(10.7)
3.9
1.8
(1.1)
—
16.8
221.1
(0.2)
1.9
(0.1)
(1.0)
19.0
240.7
98.8
(4.8)
6.6
1.7
(0.2)
7.4
109.5
0.4
6.8
1.0
—
0.1
117.8
Net book value as at 31 December 2020
122.9
Net book value as at 31 December 2019
111.6
Net book value as at 1 January 2019
111.6
2.3
—
—
—
0.1
—
—
—
2.4
—
—
(1.5)
—
—
0.9
1.7
(0.1)
0.1
—
—
—
1.7
—
0.1
—
(1.0)
—
0.8
0.1
0.7
0.6
—
22.3
(0.7)
1.5
1.5
—
—
—
24.6
(0.3)
8.4
(1.9)
—
—
30.8
—
(0.1)
4.0
—
—
—
3.9
(0.1)
4.0
—
(1.2)
—
6.6
—
11.3
(0.8)
6.2
—
(2.8)
—
8.7
22.6
—
7.3
(3.2)
—
—
26.7
—
(0.3)
6.6
—
(1.7)
4.3
8.9
—
6.8
—
(2.5)
—
13.2
572.1
—
(28.4)
33.7
1.7
(13.3)
—
(11.2)
554.6
(6.3)
19.6
(8.1)
—
26.5
586.3
426.6
(20.8)
32.4
5.8
(11.0)
(11.7)
421.3
(5.2)
32.9
0.5
(6.7)
—
442.8
46.0
—
(2.9)
29.4
0.1
(0.6)
—
(14.3)
57.7
(0.7)
21.8
—
—
(45.5)
33.3
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
£m
830.8
33.6
(43.5)
74.7
5.2
(17.8)
—
—
883.0
(7.5)
59.0
(14.8)
(1.0)
—
918.7
527.1
(26.1)
49.7
7.5
(12.9)
—
545.3
(4.9)
50.6
1.5
(11.4)
0.1
581.2
24.2
13.5
143.5
33.3
337.5
20.7
13.7
133.3
57.7
337.7
—
—
145.5
46.0
303.7
183
Capital expenditure on customer-installation assets was £8.7m (2019: £7.8m). The impairment charge of £1.5m (2019: £7.5m)
is included within restructuring charges for asset write-offs in Note 7.
Capital commitments as at 31 December 2020 were £nil (31 December 2019: £nil).
In 2020 the Group decided the sell a property which is held in the Steel operating segment. There is an interested party and the
sale is expected to be completed by the third quarter of 2021, subject to environmental approval. The asset is classified as held
for sale on the balance sheet and is recorded at a carrying amount of £0.9m with no impact to the Income Statement.
The impact of climate change has been considered in the estimation of useful lives of assets and no impacts were noted.
Intangible assets comprise goodwill and other intangible assets that have been acquired through business combinations.
16.1 Accounting policy
(a) Goodwill
Goodwill arising in a business combination is initially recognised as an asset at cost, measured as the excess of the aggregate
of the acquisition-date fair value of the consideration transferred and the amount of any non-controlling interest acquired over
the net of the acquisition-date fair value amounts of the identifiable assets acquired and liabilities assumed. When the excess
is negative, a bargain purchase gain is recognised immediately in profit or loss. Goodwill is subsequently measured at cost less
accumulated impairment losses, with impairment testing carried out annually, or more frequently when there is an indication
that the cash-generating unit (CGU) to which the goodwill has been allocated may be impaired. On disposal of a business,
the attributable amount of goodwill is included in the calculation of the profit or loss on disposal.
(b) Other intangible assets
Intangible assets other than goodwill are recognised on business combinations if they are separable, or if they arise from
contractual or other legal rights, and their value can be measured reliably. They are initially measured at cost, which is equal to
the acquisition-date fair value, and subsequently measured at cost less accumulated amortisation charges and accumulated
impairment losses. Other intangible assets are subject to impairment testing when there is an indication that an impairment loss
may have been incurred and are amortised over their estimated useful lives.
(c) Research and development costs
The Group’s research activity involves long-range, ‘blue sky’ investigation, the findings from which may be used in the future to
develop new or substantially improved products. Expenditure on research activities is recognised in the Group Income Statement
as an expense in the year in which it is incurred.
Development is the application of research findings for the production of new or substantially improved products, processes
and services before the start of commercial production. Development expenditure is capitalised only if the expenditure can be
measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in
the Group Income Statement as an expense in the year in which it is incurred. Capitalised development expenditure, where there
is any, is stated at cost less accumulated amortisation and impairment losses.
In determining whether development expenditure is capitalised as an intangible asset, management considers whether the strict
intangible asset recognition criteria set out in IAS 38, Intangible Assets, have been met at the time the expenditure is incurred.
In making this determination, management recognises that a significant amount of the development expenditure undertaken
by the Group is focused on dealing with local customer technical support issues and incremental developments to existing
products as opposed to new or substantially improved products, and that at the time the feasibility of the project is determined,
a significant proportion of the development expenditure for that project has already been incurred. In 2020 and 2019 no projects
met the criteria for IAS 38 capitalisation.
Financial Statements
184 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
16. Intangible Assets continued
16.2 Movement in net book value
Cost
As at 1 January
Exchange adjustments
Business combinations (Note 20)
As at 31 December
Accumulated amortisation and impairment losses
As at 1 January
Exchange adjustments
Amortisation charge for the year
As at 31 December
Other
intangible
assets
£m
Goodwill
£m
2020
total
£m
Goodwill
£m
Other
intangible
assets
£m
620.2
279.2
899.4
(2.6)
—
0.2
—
(2.4)
—
617.6
279.4
897.0
637.1
(28.4)
11.5
620.2
271.5
(6.1)
13.8
279.2
2019
total
£m
908.6
(34.5)
25.3
899.4
—
—
—
—
190.9
190.9
0.1
9.9
0.1
9.9
200.9
200.9
—
—
—
—
184.6
184.6
(3.7)
10.0
(3.7)
10.0
190.9
190.9
Net book value as at 31 December
617.6
78.5
696.1
620.2
88.3
708.5
Amortisation charge of £9.9m (2019: £10.0m) in respect of other intangible assets includes £5.6m (2019: £5.7m) recognised
in respect of Foseco customer relationships, £3.6m (2019: £3.6m) in respect of Foseco tradename and £0.7m (2019: £0.7m)
in respect of CCPI customer relationships.
The impact of climate change has been considered in the estimation of useful lives of assets and no impacts were noted.
16.3 Analysis of goodwill by cash-generating unit (CGU)
Goodwill acquired in a business combination is allocated to each of the Group’s CGUs expected to benefit from the synergies of
the combination. For the purposes of impairment testing, the Directors consider that the Group has four CGUs: Steel Advanced
Refractories, Steel Flow Control, Steel Sensors and Probes, and the Foundry Division. These CGUs represent the lowest level within
the Group at which goodwill is monitored (Note 17.2).
Steel Flow Control
Steel Advanced Refractories
Foundry
Total goodwill
16.4 Analysis of other intangible assets
2020
£m
276.5
130.3
210.8
617.6
2019
£m
277.5
131.1
211.6
620.2
Other intangible assets are amortised on a straight-line basis over their estimated useful lives. The assets acquired and their
remaining useful lives are shown below.
Foseco
— customer relationships (useful life: 20 years)
— trade name (useful life: 20 years)
CCPI
— customer relationships (useful life: 20 years)
Total
Remaining
useful life
years
Net book
value as at
31 Dec 2020
£m
Net book
value as at
31 Dec 2019
£m
7.3
7.3
18.2
40.2
26.3
12.0
78.5
45.2
30.0
13.1
88.3
185
17. Impairment of Tangible and Intangible Assets
17.1 Accounting policy
The Directors regularly review the performance of the business and the external business environment to determine whether
there is any indication that the Group’s tangible and intangible assets have suffered an impairment loss. If such indication exists,
the higher of the value in use and the fair value less costs to sell off the asset is estimated and compared with the carrying value
in order to determine the extent, if any, of the impairment loss. Where it is not feasible to estimate the recoverable amount of an
individual asset, the Directors estimate the recoverable amount of the CGU to which the asset belongs. In addition, goodwill is
tested for impairment on an annual basis. Goodwill acquired in a business combination is allocated to each of the Group’s CGUs
expected to benefit from the synergies of the combination and the Directors carry out annual impairment testing of the carrying
value of each CGU, to assess the need for any impairment of the carrying value of the associated goodwill and other intangible
and tangible assets.
For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of (i) its fair value less costs to
sell and (ii) its value in use. If the recoverable amount of a CGU is less than its carrying amount, the resulting impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU pro
rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in
a subsequent period. An impairment loss recognised in a prior year for an asset other than goodwill may be reversed where there
has been a change in the estimates used to measure the asset’s recoverable amount since the impairment loss was recognised.
17.2 Key assumptions and methodology
The key assumptions in determining value in use are projected cash flows, growth rates and discount rates. These are disclosed
as critical accounting estimates in Note 3.4.
Projected cash flows for the next three years have been based on the latest Board-approved budgets and strategic plans.
They reflect management’s expectations of revenue, EBITDA growth, capital expenditure, working capital and adjusted
operating cash flows, based on past experience and future expectations of business performance and take into account the
cyclicality of the business in which the CGU operates. Cash flows beyond the period of the strategic plans have been extrapolated
using a perpetuity growth rate of 2.5% (2019: 2.5%). The growth rate has been calculated using GDP growth forecasts published
by the International Monetary Fund for the Group’s end-markets. These GDP growth forecasts have been weighted to reflect the
Group’s weighted average sales in each end-market during 2020.
The cash flows have been discounted to their current value using pre-tax discount rates, which represent each CGU’s weighted
average cost of capital (WACC). The assumptions used in the calculation of the WACC for each CGU have been benchmarked
to externally available data. These are industry-specific beta coefficients, risk-free rates and equity risk premiums. The pre-tax
discount rate used for the Steel Flow Control, Steel Advanced Refractories and Steel Sensors and Probes CGUs was 13.7% (2019:
13.3%) and for the Foundry CGU was 15.0% (2019: 13.1%). The increase in the pre-tax discount rates has been driven by an
increase in the equity risk premiums partially offset by a reduction in risk free rates – these changes are not specific to Vesuvius.
The Group carried out its annual goodwill impairment test as at 31 October 2020 (2019: 31 October 2019). The recoverable
amount of each CGU significantly exceeded its carrying value, therefore no impairment charges have been recognised.
The recoverable amount of each CGU was also checked against its carrying value as at 31 December 2020 and no impairment
triggers were identified.
Sensitivity of impairment reviews
Steel Flow Control (FC), Steel Advanced Refractories (AR) and the Foundry Division are the key CGUs. There were no intangible
assets in the Steel Sensors and Probes CGU. The recoverable amount of all CGUs exceeded their carrying value on the basis of the
assumptions set out above and any reasonably possible changes thereof. A sensitivity analysis was carried out using reasonably
possible changes to the key assumptions as set out in the table below. The following decreases to the recoverable amount of the
Group’s goodwill and intangible assets were observed:
Key assumption
Relevant CGUs
Assumption
Sensitivity
Free cash flow average annual growth rate FC, AR, Foundry 4.0% – 9.5% Decrease (cash flows) by 20%
Pre-tax discount rate
Pre-tax discount rate
Long-term growth rate
FC, AR
Foundry
13.7%
15.0%
Increase by 1%
Increase by 1%
FC, AR, Foundry 2.5%
Decrease by 1.5%
Decrease in
recoverable
value, £m
Impairment
arising
(399.6)
(111.9)
(48.5)
(198.6)
None
None
None
None
Financial Statements
186 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
18. Trade and Other Receivables
18.1 Accounting policy
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
interest method, less impairment losses. Details on impairment of financial assets are disclosed in Note 25.
18.2 Analysis of trade and other receivables (current)
2020
2019
Trade receivables — current
— 1 to 30 days past due
— 31 to 60 days past due
— 61 to 90 days past due
— over 90 days past due
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
Gross
£m
250.6
35.6
9.1
3.0
27.7
326.0
ECL
provision
£m
(0.5)
(0.3)
(0.1)
(0.2)
(22.9)
(24.0)
Net
£m
250.1
35.3
9.0
2.8
4.8
302.0
49.1
18.8
369.9
ECL
provision
coverage
(1)
0.2%
0.8%
1.1%
6.7%
82.7%
Gross
£m
235.9
44.5
17.1
5.0
30.8
333.3
ECL
provision
£m
(0.6)
(0.4)
(0.1)
(0.7)
(24.8)
(26.6)
ECL
provision
coverage
(1)
Net
£m
0.3%
0.9%
0.6%
14.0%
80.5%
235.3
44.1
17.0
4.3
6.0
306.7
55.4
17.5
379.6
(1) ECL provision coverage is expected credit loss provision divided by gross trade receivables.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufficient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of financial assets that are neither past
due nor impaired as good.
Included within Other receivables are promissory notes of £20.4m (2019: £26.6m). The majority of these notes relate to customers
in China and have typical maturities of six months from issuing date. The full amount of revenue is recognised from the customer
when performance obligations are satisfied in accordance with IFRS 15. Other receivables also include VAT receivables of
£18.6m (2019:£14.3m) and insurance reimbursements (see Note 30.2) of £2.0m.
18.3 Other receivables (non-current)
Non-current other receivables of £18.6m (2019: £22.1m) include insurance reimbursements (see Note 30.2) of £10.4m
(2019: £14.3m) and prepaid taxes of £4.1m (2019: 3.5m).
The Group applies the expected credit loss model under IFRS 9 to these other receivables. The expected credit loss for other
receivables is immaterial.
The maximum exposure to credit risk at the end of the reporting period is the net carrying amount of these trade and other receivables.
18.4 Impairment of trade and other receivables
Details relating to the impairment of trade receivables are disclosed in Note 25, Financial Risk Management.
19. Inventories
19.1 Accounting policy
Inventories are stated at the lower of cost (using the first in, first out method) and net realisable value. Cost comprises expenditure
incurred in purchasing or manufacturing inventories together with all other costs directly incurred in bringing the inventory to its
present location and condition and, where appropriate, attributable production overheads based on normal activity levels.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution. The amount of any write-down of inventories to net realisable value is recognised as an
expense in the year in which the write-down occurs.
187
20. Acquisitions and Divestments
20.1 CCPI
There were no acquisitions or divestments in the year.
On 1 March 2019, Vesuvius plc acquired 100% of the share capital of CCPI Inc (CCPI), a specialty refractory producer focused
on tundish (steel continuous casting) applications (65% of sales) and aluminium (35% of sales). CCPI is based in Ohio, USA, and
has become part of the Group’s Advanced Refractories business unit. The transaction valued CCPI at $43.4m (£33.3m) on a cash
and debt-free basis and was funded from Vesuvius’ internal resources. The acquisition increased Vesuvius’ share of the tundish
market and gives the Group an entry to the aluminium market.
The fair values of the assets and liabilities recognised as a result of the acquisition were as follows:
Cash and cash equivalents
Property, plant and equipment
Intangible asset (customer relationships)
Inventories
Receivables
Payables
Lease liabilities
Deferred tax
Net identifiable assets acquired
Goodwill
Consideration
£m
0.9
5.2
13.8
4.2
5.1
(3.1)
(1.5)
(2.8)
21.8
11.5
33.3
The goodwill is attributable to CCPI’s reputation in the marketplace and the synergies that Vesuvius expects to gain from
integrating its tundish business into the Advanced Refractories business unit and is expected to be tax deductible.
Included within the property, plant and equipment acquired were right-of-use leased assets of £1.5m.
The decision to acquire CCPI was driven by its long-standing customer relationships and these are the identifiable intangible
assets acquired. The fair value of these intangibles is provisional pending final valuations. A deferred tax liability of £3.4m has
been provided in relation to these fair value adjustments.
On acquisition, CCPI was subsumed into Steel Advanced Refractories activities and goodwill is monitored at the level of the
Steel Advanced Refractories operating segment.
The net cash outflow on acquisition was £32.4m, being cash consideration of £33.3m less cash and cash equivalents acquired
of £0.9m. Acquisition-related costs of £0.7m were included in administrative expenses in the Income Statement.
20.2 Joint venture disposal
In June 2019, Vesuvius completed the sale of its 50% interest in Angang Vesuvius Refractory Company Limited. The value of the
investment was £6.9m. The consideration received (in early July 2019) was cash of £6.8m resulting in a profit after foreign
currency adjustments of £1.1m.
20.3 Other acquisitions
The Group did not acquire any material interests in any companies in the year ended 31 December 2020. Contingent
consideration of £1.4m was paid during the year in respect of the previous acquisition of Ecil Met Tec.
The Group did not acquire any material interests in any companies other than CCPI during the year ended 31 December 2019;
however, contingent consideration of £0.3m was paid during 2019 in respect of the previous acquisition of Process Metrix.
21. Issued Share Capital
21.1 Accounting policy
19.2 Analysis of inventories
Raw materials
Work-in-progress
Finished goods
Total inventories
2020
£m
62.3
16.9
108.1
187.3
2019
£m
67.3
18.5
127.1
212.9
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.
21.2 Analysis of issued share capital
The issued and fully paid ordinary share capital of the Company as at 31 December 2020 was 278,485,071 shares of 10 pence
each (2019: 278,485,071 shares of 10 pence each). Further information relating to the Company’s share capital is given in Note 9
to the Company’s Financial Statements.
The cost of inventories recognised as an expense and included in manufacturing costs of continuing operations in the Group
Income Statement during the year was £533.5m (2019: £642.6m).
The net inventories of £187.3m include a provision for obsolete stock of £12.8m (2019: £11.9m). There were inventory write-downs
of £1.5m (2019: write-down reversals of £0.3m).
Financial Statements
188 Vesuvius plc
Annual Report and Financial Statements 2020
189
Notes to the Group Financial Statements continued
22. Retained Earnings
As at 1 January 2019
Profit for the year
Remeasurement of defined benefit liabilities/assets
Recognition of share-based payments
Release of share option reserve on exercised and lapsed options
Income tax on items recognised in other comprehensive income
Dividends paid (Note 24)
As at 31 December 2019 and January 2020
Profit for the year
Remeasurement of defined benefit liabilities/assets
Recognition of share-based payments
Release of share option reserve on exercised and lapsed options
Income tax on items recognised in other comprehensive income
Dividends paid (Note 24)
As at 31 December 2020
23. Other Reserves
Reserve
for own
shares
£m
(46.1)
Share
option
reserve
£m
Other
retained
earnings
£m
Total
retained
earnings
£m
6.8
2,473.2
2,433.9
—
—
—
6.8
—
—
—
—
4.5
(6.8)
—
—
80.3
(3.6)
—
—
1.9
80.3
(3.6)
4.5
—
1.9
(53.9)
(53.9)
(39.3)
4.5
2,497.9
2,463.1
—
—
—
3.4
—
—
—
—
2.4
(3.4)
—
—
41.3
7.7
—
—
(3.2)
(8.4)
41.3
7.7
2.4
—
(3.2)
(8.4)
(35.9)
3.5
2,535.3
2,502.9
As at 1 January 2019
Exchange differences on translation of the net assets of foreign operations
Reclassification of foreign currency translation reserve on disposal of share
in joint venture
Exchange differences on translation of net investment hedges
Other
reserves
£m
(1,499.3)
—
—
—
As at 31 December 2019 and January 2020
(1,499.3)
Exchange differences on translation of the net assets of foreign operations
Exchange differences on translation of net investment hedges
Net change in costs of hedging
Change in the fair value of the hedging instrument
Amounts reclassified from the income statement
As at 31 December 2020
—
—
—
—
—
(1,499.3)
Cash flow
hedge
reserve
£m
—
—
—
—
—
—
—
0.4
(8.1)
6.3
(1.4)
Translation
reserve
£m
Total other
reserves
£m
129.8
(1,369.5)
(71.0)
(71.0)
(1.1)
14.1
71.8
(12.7)
(9.7)
—
—
—
(1.1)
14.1
(1,427.5)
(12.7)
(9.7)
0.4
(8.1)
6.3
49.4
(1,451.3)
Within other reserves as at 31 December 2020 is £1,499.0m (2019: £1,499.0m) arising from the demerger of Cookson Group plc,
being the excess of the Vesuvius plc share capital of £1,777.9m over the total share capital and share premium of Cookson Group
plc as at 14 December 2012 of £278.9m.
The translation reserve in the table above comprises foreign exchange differences attributable to the owners of the parent.
These exchange differences arise from the translation of the financial statements of foreign operations and from the translation
of financial instruments that hedge the Group’s net investment in foreign operations. In addition to foreign exchange differences
attributable to the owners of the parent, the Group Statement of Comprehensive Income includes foreign exchange differences
attributable to non-controlling interests.
24. Dividends
In light of the COVID-19 trading situation, the Directors withdrew their recommendation to pay the final dividend of 14.3 pence
per ordinary share, announced with the publication of the 2019 financial results (2018: £37.2m, equivalent to 13.8 pence per
ordinary share). An interim dividend in respect of the year ended 31 December 2020 of £8.4m (2019: £16.7m), equivalent
to 3.1 pence per ordinary share (2019: 6.2 pence per ordinary share) was paid in December 2020 (September 2019).
A proposed final dividend for the year ended 31 December 2020 of £38.6m, equivalent to 14.3 pence per ordinary share,
is subject to approval by shareholders at the Company’s Annual General Meeting and has not been included as a liability
in these financial statements. If approved by shareholders, the dividend will be paid on 21 May 2021 to ordinary shareholders
on the register at 16 April 2021.
25. Financial Risk Management
25.1 Accounting policy
(a) Valuation of financial assets and liabilities
The Group’s financial assets and liabilities are measured as appropriate either at amortised cost or at fair value through other
comprehensive income or at fair value through profit and loss.
IFRS 13 Fair Value Measurement requires classification of financial instruments within a hierarchy that prioritises the inputs
to fair value measurement. The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly
Level 3 – Inputs that are not based on observable market data
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade
receivables are recognised initially at their fair value, which is the amount of consideration that is unconditional. The Group holds
the trade receivables with the objective of collecting the contractual cash flows (held to collect) and therefore measures them
subsequently at amortised cost using the effective interest method.
Derivatives which do not meet the hedge accounting criteria are classified as fair value through profit and loss (held for trading).
The cross-currency interest rate swaps (see Note 25.2) which meet the hedging criteria are measured at fair value through other
comprehensive income.
Loans and borrowings are initially recognised at fair value net of directly attributable transaction costs. After initial recognition
they are measured at amortised cost, using the effective interest method.
(b) Foreign currencies
The individual financial statements of each Group entity are prepared in their functional currency, which is the currency of the
primary economic environment in which that entity operates. For the purpose of the Group Financial Statements, the results
and financial position of each entity are translated into pounds sterling, which is the presentational currency of the Group.
Reporting foreign currency transactions in functional currency
Transactions in currencies other than the entity’s functional currency are initially recorded at the rates of exchange prevailing
at the end of the preceding month or on the date of the transaction itself. At each subsequent balance sheet date:
(i)
Foreign currency monetary items are retranslated at the rates prevailing at the balance sheet date. Exchange differences
arising on the settlement or retranslation of monetary items are recognised either in the Group Income Statement or the
Group Statement of Comprehensive Income
(ii) Non-monetary items measured at historical cost in a foreign currency are not retranslated
Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group’s presentational currency (pounds sterling), its results
and financial position are translated into the presentational currency as follows:
(i)
Assets and liabilities are translated using exchange rates prevailing at the balance sheet date
(ii)
Income and expense items are translated at average exchange rates for the year, except where the use of such average rates
does not approximate the exchange rate at the date of a specific transaction, in which case the transaction rate is used
(iii)
All resulting exchange differences are recognised in other comprehensive income and presented in the translation reserve
in equity and are reclassified to profit or loss in the period in which the foreign operation is disposed of
Net investment in foreign operations
Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation
are initially recognised in other comprehensive income and presented in the translation reserve in equity and reclassified to
profit or loss on disposal of the net investment.
Financial Statements
190 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
25. Financial Risk Management continued
25.1 Accounting policy continued
Financial reporting in hyperinflationary economies
191
(b) Market risk
Market risk is the risk that either the fair values or the cash flows of the Group’s financial instruments may fluctuate because
of changes in market prices. The Group is principally exposed to market risk through fluctuations in exchange rates and
interest rates.
Entities with a functional currency of the Argentine peso are required to apply IAS 29, Financial Reporting in Hyperinflationary
Economies, in accounting periods ending on or after 1 July 2018.
Currency risk
The results for the year ended 31 December 2020 from Group subsidiaries with a functional currency of the Argentine peso
have therefore been restated to current cost using indices prescribed by the Government Board of the Argentine Federation
of Professional Councils of Economic Sciences (FACPCE). Comparative figures have not been restated.
Transactions in Argentine pesos have been translated using exchange rates prevailing at the balance sheet date.
(c) Derivative financial instruments
The Group uses derivative financial instruments (‘Derivatives’) to manage the financial risks associated with its underlying
activities and the financing of those activities. Derivatives are measured at fair value using market prices at the balance sheet
date. Any Derivatives which form part of a hedge accounting relationship are designated as such on the date on which they are
executed. Any Derivatives which do not form part of a designated hedge accounting relationship are classified as ‘held for
trading’ for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets
or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
(d) Cash flow hedges
Changes in the fair value of Derivatives designated as cash flow hedges are recognised in other comprehensive income to the
extent that the hedges are effective. Any ineffective portion would immediately be recognised in net finance costs in the profit or
loss. If a forecast transaction is no longer expected to occur, the amounts previously recognised in other comprehensive income
would be transferred to net finance costs in the profit or loss.
(e) Net investment hedges
The Group designates certain of its borrowings and Derivatives as net investment hedges of its foreign operations. As with cash
flow hedges, the effective portion of the gain or loss on hedging instruments is recognised in other comprehensive income whilst
any ineffective portion would immediately be recognised in net finance costs in the profit or loss. In the event a foreign operation
is disposed of or liquidated, amounts recognised in other comprehensive income are reclassified from equity to profit or loss.
25.2 Financial risk factors
The Group’s Treasury department, acting in accordance with policies approved by the Board, is principally responsible for
managing the financial risks faced by the Group. The Group’s activities expose it to a variety of financial risks, the most significant
of which are market risk and liquidity risk.
Analysis of financial instruments
The following table summarises Vesuvius’ financial instruments measured at fair value and shows the level within the fair value
hierarchy in which the financial instruments have been classified.
Investments (Level 2)
Derivatives not designated for hedge accounting purposes (Level 2)
Derivatives designated for hedge accounting purposes (Level 2)
(a) Derivative financial instruments
2020
2019
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
0.7
0.2
—
—
—
(7.0)
0.8
0.6
—
—
(0.7)
—
The Group uses Derivatives, in the form of forward foreign currency contracts to manage the effects of its exposure to foreign
exchange risk on trade receivables, trade payables and cash. Derivatives are only used for economic hedging purposes and not
as speculative investments.
In June 2020, the Group executed a US$86m cross-currency interest rate swap (CCIRS) with three of its relationship banks.
The effect of this is to convert the $86m Private Placement Notes issued in June 2020 into €76.6m. The timing and amount of the
US dollar cash flows under the CCIRS exactly mirror those of the Private Placement Notes and the maturity date of the CCIRS
also matches the repayment date of the Notes. The CCIRS would by default be revalued through the Income Statement; however,
as it is in a designated hedging relationship it is instead revalued through other comprehensive income. More specifically, the
US dollar exposure is designated as a cash flow hedge of the underlying Private Placement Notes and the euro exposure is
designated as a net investment hedge of part of the Group’s foreign operations. The CCIRS is presented as a non-current asset
or liability as it is expected to be settled more than 12 months after the end of the reporting period.
With the exception of the CCIRS, the fair value of Derivatives outstanding at the year-end has been booked through the Income
Statement in 2020. All of the fair values shown in the table above are classified under IFRS 13 as Level 2 measurements which have
been calculated using quoted prices from active markets, where similar contracts are traded and the quotes reflect actual
transactions in similar instruments. All of the derivative assets and liabilities not designated for hedge accounting purposes
reported in the table above will mature within a year of the balance sheet date.
The Group Income Statement is exposed to currency risk on monetary items that are denominated in currencies other than the
functional currency of the companies in which they are held. The currency profile of these financial assets and financial liabilities
is shown in the table below.
Trade receivables
Cash at bank
Trade payables
Private Placement Notes
Bank loans and overdrafts
Finance leases
Cross-currency interest rate swaps
Foreign currency forward contracts
— Buy foreign currency (Private Placement)
— Buy foreign currency (Other)
— Sell foreign currency
2020
US dollar
£m
34.8
5.3
Euro
£m
31.3
9.8
Other
£m
30.5
16.1
(18.7)
(21.8)
(27.5)
(160.8)
(106.8)
(29.6)
(0.5)
(68.4)
—
1.1
(17.7)
(253.5)
(0.1)
—
62.9
—
1.2
(23.5)
(48.0)
—
—
(1.1)
—
—
—
—
Euro
£m
29.2
5.2
(15.3)
(109.7)
(113.5)
(0.8)
—
84.5
1.0
2019
US dollar
£m
35.0
9.1
(23.2)
(150.8)
(0.6)
—
—
—
1.5
(18.0)
(15.9)
Other
£m
19.6
12.6
(18.5)
—
(0.4)
(0.7)
—
—
1.2
—
18.0
(137.4)
(144.9)
13.8
The Group previously arranged a rolling short-dated euro/sterling foreign exchange swap in respect of €100m of its Private
Placement fixed rate financial liabilities. This had the effect of reducing the currency exposure of the Group’s net debt by €100m.
Following a review of this exposure, and in combination with issuing the CCIRS referred to in Note 25.2 (a), this arrangement was
stopped on 30 April 2020.
The Group has £(1.3)m (2019: £(1.4)m) of exchange differences recognised in the Income Statement of which £(0.7)m arose on the
revaluation of derivatives (2019: £0.2m).
The tables below show the net unhedged monetary assets and liabilities of Group companies that are not denominated in their
functional currency and which could give rise to exchange gains and losses in the Group Income Statement.
Functional currency
Sterling
Other
As at 31 December 2020
Functional currency
Sterling
Other
As at 31 December 2019
Net unhedged monetary assets/(liabilities)
Euro
£m
US dollar
£m
Other
£m
Total
£m
(253.6)
0.1
(253.5)
(44.1)
(3.9)
(48.0)
—
(297.7)
18.0
18.0
14.2
(283.5)
Net unhedged monetary assets/(liabilities)
Euro
£m
US dollar
£m
Other
£m
Total
£m
(139.7)
(150.6)
2.3
5.7
(137.4)
(144.9)
0.8
13.0
13.8
(289.5)
21.0
(268.5)
The Group finances its operations partly by obtaining funding through external borrowings. Where these borrowings are not in
sterling they may be designated as net investment hedges. This enables gains and losses arising on retranslation to be charged
to other comprehensive income, providing a partial offset in equity against the gains and losses arising on translation of overseas
net assets.
As at 31 December 2020, €213m and $60m of borrowings were designated as hedges of net investments in €213m and $60m
worth of overseas foreign operations. In addition the €76.6m CCIRS liability has been designated as a net investment hedge of
a further €76.6m worth of overseas foreign operations.
As the value of the borrowings and the CCIRS liability exactly matches the designated hedged portion of the net investments, the
relevant hedge ratio is 1:1. The net investment hedges are therefore 100% effective with no ineffectiveness. It is noted that hedge
ineffectiveness would arise in the event there were insufficient euro-denominated overseas foreign operations to be matched
against the €76.6m CCIRS liability.
Financial Statements
192 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
25. Financial Risk Management continued
25.2 Financial risk factors continued
The total retranslation impact of the borrowings and CCIRS designated as net investment hedges was £9.7m (2019: £14.1m).
The $86m CCIRS asset has been designated as a cash flow hedge of the $86m USPP Notes issued in 2020. As all principal and
interest cash flows under the CCIRS exactly mirror those under the USPP Notes, the cash flow hedge is 100% effective with no
ineffectiveness. It is noted that hedge ineffectiveness would arise in the event there was a change in the contractual terms of either
the USPP Notes or the CCIRS.
Hedge effectiveness is determined at inception of the hedge relationship and through periodic effectiveness assessments,
to ensure that an economic relationship exists between the hedged item and hedging instrument.
Interest rate risk
The Group’s interest rate risk principally arises in relation to its borrowings. Where borrowings are held at floating rates of interest,
fluctuations in interest rates expose the Group to variability in the cash flows associated with its interest payments, and where
borrowings are held at fixed rates of interest, fluctuations in interest rates expose the Group to changes in the fair value of its
borrowings. The Group’s policy is to maintain an appropriate mix of fixed and floating rate borrowings based on the Vesuvius
trading environment, market conditions and other economic factors.
As at 31 December 2020, the Group had $146m and €180m (£267.7m in total) of US Private Placement Loan Notes (USPP)
outstanding, which carry a fixed rate of interest, representing 78% of the Group’s total borrowings outstanding at that date.
The interest rate profile of the Group’s borrowings is detailed in the tables below.
Sterling
US dollar
Euro
Other
Capitalised arrangement fees
As at 31 December 2020
Sterling
US dollar
Euro
Other
Capitalised arrangement fees
As at 31 December 2019
Financial liabilities (gross borrowings)
Fixed
rate
£m
—
106.8
160.8
—
(1.3)
266.3
Floating
rate
£m
43.3
0.3
31.5
0.5
(0.1)
75.5
Total
£m
43.3
107.1
192.3
0.5
(1.4)
341.8
Fixed
rate
£m
—
150.8
109.9
—
(1.2)
Floating
rate
£m
66.2
0.9
113.4
1.5
—
Total
£m
66.2
151.7
223.3
1.5
(1.2)
259.5
182.0
441.5
Information in respect of the currency risk management of €100m of euro-denominated fixed rate financial liabilities and $86m
of US dollar-denominated fixed rate financial liabilities is provided above.
The floating rate financial liabilities shown in the tables above typically bear interest at the inter-bank offered rate of the
appropriate currency, plus a margin. The fixed rate financial liabilities of £267.6m (2019: £260.7m) have a weighted average
interest rate of 3.4% (2019: 3.9%) and a weighted average period for which the rate is fixed of 6.2 years (2019: 4.8 years).
The financial assets attract floating rate interest.
Based upon the interest rate profile of the Group’s financial liabilities shown in the tables above, a 1% increase in market interest
rates would increase both the finance costs charged in the Group Income Statement and the interest paid in the Group Statement
of Cash Flows by £0.8m (2019: £1.8m), and a 1% reduction in market interest rates would decrease both the finance costs charged
in the Group Income Statement and the interest paid in the Group Statement of Cash Flows by £0.8m (2019: £1.8m).
193
(c) Credit risk
Credit risk arises from cash and cash equivalents, derivative financial assets and deposits with banks and financial institutions,
as well as credit exposures to customers, including outstanding receivables.
(i) Risk management
For banks and financial institutions, Group policy is that only independently rated entities with a minimum rating of ‘A-’ are
accepted as counterparties. In addition, the Group’s operating companies have policies and procedures in place to assess the
creditworthiness of the customers with whom they do business.
(ii) Impairment of financial assets
The Group subjects trade receivables for sales of inventory and from the provision of services to the expected credit loss model.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was
immaterial.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets. The expected loss rates are based on the payment profiles of sales over
a period of 60 months before 31 December 2020 and the corresponding historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables. The Group has identified the current state of the economy (such as market
interest rates or growth rates) and particular industry issues in the countries in which it sells its goods and services to be the most
relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in
making a contractual payment. Where objective evidence exists that a trade receivable balance may be impaired, provision is
made for the difference between its carrying amount and the present value of the estimated cash that will be recovered.
Evidence of impairment may include such factors as a change in credit risk profile of the customer, the customer being in default
on a contract, or the customer entering bankruptcy or financial reorganisation proceedings. All significant balances are reviewed
individually for evidence of impairment.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there
is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group, and a failure to make contractual payments for a period of greater than 120 days past due. Where loans or receivables
have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
The closing expected credit loss allowance for trade receivables as at 31 December 2020 reconciles to the opening loss
allowances as follows:
As at 1 January
(Decrease)/increase in expected credit loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectable
Exchange adjustments
As at 31 December
2020
£m
26.6
(0.3)
(2.2)
(0.1)
24.0
2019
£m
28.2
2.3
(3.0)
(0.9)
26.6
The credit for the year shown in the table above is recorded within administration, selling and distribution costs in the Group
Income Statement.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufficient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of financial assets that are neither past
due nor impaired as good.
The Group also applies the expected credit loss model under IFRS 9 to other receivables. If, at the reporting date, the credit risk of
the receivables has not increased significantly since initial recognition, the Group measures the loss allowance at an amount equal
to 12-month expected credit losses. If the credit risk on that receivable has increased significantly since initial recognition, the
Group measures the loss allowance at an amount equal to the lifetime expected credit losses. The expected credit loss on other
receivables is not material.
Financial liabilities (gross borrowings)
Where recoveries are made, these are recognised within the Income Statement.
Financial Statements
194 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
25. Financial Risk Management continued
25.2 Financial risk factors continued
(d) Liquidity risk
Liquidity risk is the risk that the Group might have difficulties in meeting its financial obligations. The Group manages this risk by
ensuring that it maintains sufficient levels of committed borrowing facilities and cash and cash equivalents to ensure that it can
meet its operational cash flow requirements and any maturing financial liabilities, whilst at all times operating within its financial
covenants. The level of operational headroom provided by the Group’s committed borrowing facilities is reviewed at least
annually as part of the Group’s three-year planning process. Where this process indicates a need for additional finance, this is
addressed on a timely basis by means of either additional committed bank facilities or raising finance in the capital markets.
During the first half of 2020, the Group accessed the Bank of England’s Covid Corporate Financing Facility (CCFF) as a
precautionary measure whilst the full impact of the pandemic remained uncertain. The £200m issued through the CCFF was
repaid in September 2020.
As at 31 December 2020, the Group had committed borrowing facilities of £586.6m (2019: £609.7m), of which £246.6m (2019:
£174.2m) were undrawn. These undrawn facilities are due to expire in June 2022. The Group’s borrowing requirements are met by
USPP, a multi-currency committed syndicated bank facility of £300m (2019: £300.0m) and a bilateral bank facility of £19m (2019:
£49.0m) which is fully collateralised against £21.1m of the Group’s cash balance in China. USPP Notes issued as at 31 December
2020 amounted to £267.6m ($146.0m and €180.0m) and had a weighted average period to maturity of 6.2 years. €15.0m is
repayable in December 2021, $30.0m in 2023, €15.0m and $60.0m in 2025, €100.0m and $26.0m in 2027, $30.0m in 2028 and
€50.0m in 2029. The maturity analysis of the Group’s gross borrowings (including interest) is shown in the tables below. The cash
flows shown are undiscounted.
As at 31 December 2020
Trade payables
Loans and overdrafts
Lease liabilities
Capitalised arrangement fees
Derivative liability
Total financial liabilities
As at 31 December 2019
Trade payables
Loans and overdrafts
Lease liabilities
Capitalised arrangement fees
Derivative liability
Total financial liabilities
Within
1 year
£m
185.7
44.7
11.2
—
(0.5)
241.1
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
Total
contractual
cash flows
£m
Carrying
amount
£m
—
—
—
185.7
185.7
84.2
9.1
—
(0.4)
92.9
80.5
11.1
—
2.7
187.4
12.9
—
1.4
396.8
44.3
—
3.2
343.2
36.3
(1.4)
7.0
94.3
201.7
630.0
570.8
Within
1 year
£m
Between
1 and 2 years
£m
Between
2 and 5
years
£m
Over
5 years
£m
Total
contractual
cash flows
£m
Carrying
amount
£m
173.8
—
—
—
173.8
173.8
171.8
12.0
—
0.8
17.4
9.9
—
—
157.0
134.9
9.2
—
—
9.3
—
—
481.1
40.4
—
0.8
442.8
33.3
(1.2)
0.7
358.4
27.3
166.2
144.2
696.1
649.4
Capitalised arrangement fees shown in the tables above, which have been recognised as a reduction in borrowings in the
Financial Statements, amounted to £1.4m as at 31 December 2020 (31 December 2019: £1.2m), of which £1.3m (2019: £0.8m)
related to the USPP and £0.1m (2019: £0.4m) related to the syndicated bank facility.
25.3 Capital management
The Company considers its capital to be equal to the sum of its total equity, disclosed on the Group Balance Sheet, and net debt
(Note 14). It monitors its capital using a number of KPIs, including free cash flow, average working capital to sales ratios, net debt
to EBITDA ratios and RONA (Note 4). The Group’s objectives when managing its capital are:
195
The Group operated within the requirements of its debt covenants throughout the year and has sufficient liquidity headroom
within its committed debt facilities. Details of the Group’s covenant compliance and committed debt facilities can be found in the
Strategic Report on page 44.
25.4 Cash pooling arrangements
The Group enters into zero balancing and notional cash pooling arrangements as part of its ongoing Treasury management
activities. Certain notional cash pooling arrangements meet the criteria for offsetting as clarified in amendments to IAS 32
Financial Instruments: Presentation, about a legally enforceable right of set-off both in the ordinary course of business and in the
event of default. The following tables set out the amounts of recognised financial assets and liabilities shown as cash and cash
borrowings and those amounts which are subject to these agreements.
Financial assets/liabilities
Cash deposits
Cash borrowings
As at 31 December 2020
Financial assets/liabilities
Cash deposits
Cash borrowings
As at 31 December 2019
26. Employee Benefits
26.1 Accounting policy
Gross amounts
of recognised
financial assets/
liabilities
£m
Gross amounts
of recognised
financial assets/
liabilities offset in
the statement of
financial position
£m
Net amounts
of financial
assets/liabilities
presented in the
statement of
financial position
£m
209.8
(3.0)
206.8
229.7
(7.6)
222.1
(0.1)
0.1
—
(0.5)
0.5
—
209.7
(2.9)
206.8
229.2
(7.1)
222.1
The net liability or net surplus recognised in the Group Balance Sheet for the Group’s defined benefit plans is the present value of
the defined benefit obligation at the balance sheet date, less the fair value of the plan assets. The defined benefit obligation is
calculated by independent actuaries using the projected unit credit method and by discounting the estimated future cash flows
using interest rates on high-quality corporate bonds that have durations approximating the terms of the related pension liability.
Any asset recognised in respect of a surplus arising from this calculation is limited to the asset ceiling, where this is the present
value of any economic benefits available in the form of refunds or reductions in future contributions in respect of the plans. The
Group has an unconditional right to a refund of surplus, as defined under IFRIC 14, and considers that the possibility that a surplus
could be reduced or extinguished by discretionary actions by the Trustee does not affect the existence of the asset at the end of
the reporting period. The Group therefore recognises a pension asset with respect to the scheme valued on an IAS 19 basis.
No liability is recognised with respect to further funding contributions.
The expense for the Group’s defined benefit plans is recognised in the Group Income Statement as shown in Note 26.8. Actuarial
gains and losses arising on the assets and liabilities of the plans are reported within the Group Statement of Comprehensive
Income; and gains and losses arising on settlements and curtailments are recognised in the Group Income Statement in the
same line as the item that gave rise to the settlement or curtailment or, if material, separately reported as a component of
operating profit.
26.2 Group post-retirement plans
The Group operates a number of pension plans around the world, both defined benefit and defined contribution, and accounts
for them in accordance with IAS 19.
The Group’s principal defined benefit pension plans are in the UK and the US, the benefits of which are based upon the final
pensionable salaries of plan members. The assets of these plans are held separately from the Group in trustee-administered
funds. The trustees are required to act in the best interests of the plans’ beneficiaries. The Group also has defined benefit
pension plans in other territories but, except for those in Germany, these are not individually material in relation to the Group.
> To ensure that the Group and all of its businesses are able to operate as going concerns and ensure that the Group operates
(a) Defined benefit pension plans – UK
within the financial covenants contained within its debt facilities
> To have available the necessary financial resources to allow the Group to invest in areas that may deliver acceptable future
returns to investors
> To maintain sufficient financial resources to mitigate against risks and unforeseen events
> To maximise shareholder value through maintaining an appropriate balance between the Group’s equity and net debt
The Group’s main defined benefit pension plan in the UK (‘the UK Plan’) is closed to new members and to future benefit accrual.
The existing plan was established under a trust deed and is subject to the Pensions Act 2004 and guidance issued by the UK
Pensions Regulator.
A full actuarial valuation of the UK Plan is carried out every three years by an independent actuary for the UK Plan Trustee in line
with the requirements of the Pensions Act 2004, and the last full valuation was carried out as at 31 December 2018. At that date,
the market value of plan assets was £605.1m and this represented a funding level of 110% of the accrued plan benefits at the time
of £552.0m. Calculated on a ‘buy-out’ basis (using an estimation of the cost of buying out the UK Plan benefits with an insurance
company), the liabilities at that date were £626.7m, representing a funding level of 95%.
Financial Statements
196 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
26. Employee Benefits continued
26.2 Group post-retirement plans continued
There is a ‘long-term scheme-specific funding standard’ in Part 3 of the Pensions Act 2004. In terms of Part 3, the UK Plan is
subject to a requirement (‘the statutory funding objective’) that it must have sufficient and appropriate assets to cover its technical
provisions. Such technical provisions are determined as part of the triennial valuation. Under the rules of the UK Plan, the Trustee,
after consultation with the Company, has the power to set the funding contributions taking into account the results of the triennial
valuation, and the Pension Act 2004 legislation.
(b) Defined benefit pension plans – US
The Group has several defined benefit pension plans in the US, providing retirement benefits based on final salary or a fixed
benefit. The Group’s principal US defined benefit pension plans are closed to new members and to future benefit accrual for
existing members. Actuarial valuations of the US defined benefit pension plans are carried out every year and the last full
valuation was carried out as at 31 December 2020. At that date the market value of the plan assets was $66.0m, representing
a funding level of 76.5% of funded accrued plan benefits at that date (using the projected unit method of valuation) of $86.3m.
Funding levels for the Group’s US defined benefit pension plans are based upon annual valuations carried out by independent
qualified actuaries and are governed by US Government regulations.
The Group’s US qualified defined benefit pension plan is subject to the minimum contribution requirements of the Internal
Revenue Code Sections 412 and 430. Contributions are determined by trustees, in consultation with the Company, based on
the annual valuations which are submitted to the Internal Revenue Service. During the fiscal year beginning 1 January 2020,
total minimum required contributions were approximately $2.8m. Under these funding laws and based on the plan deficit, the
required minimum annual contribution for the 2021 fiscal year is expected to be no greater than $3.0m and the required annual
contributions for the period 2022-2023 are expected to be in the $3.0m to $5.0m range. Contributions of $2.8m were made
during 2020.
There is a $0.2m settlement gain reported in the main US defined benefit pension plan in 2020 which relates to annuity purchases
of $7.8m being made in May 2020 (the defined benefit obligation settled was $8.0m). There was a $1.8m settlement gain
reported in the main US defined benefit pension plan in 2019 which relates to lump sum payments of $4.7m being made in
mid-December 2019 to employees who have accepted the offer to receive a lump sum in full settlement of their pension (the
defined benefit obligation settled was $6.5m).
(c) Defined benefit pension plans – Germany
The Group has several defined benefit pension arrangements in Germany which are unfunded, as is common practice in that
country. The main plan was closed to new entrants on 31 December 2016 and replaced by a defined contribution plan for
new joiners. The German Defined Benefit plan contains mainly direct pension promises based on works council agreements as
well as on some individual pension promises. The legal framework is the German Company Pensions Act (“Betriebsrentengesetz”).
The plan is unfunded (book reserved) and the company pays all benefit payments when they fall due.
(d) Defined benefit pension plans – ROW and other post-retirement benefits
The Group has several defined benefit pension arrangements across the rest of the world, the largest of which are in Belgium.
The net liability of the ROW plans at 31 December 2020 was £20.7m (2019: £18.0m). The Group also has liabilities relating to
medical insurance arrangements and termination plans which provide for benefit to be paid to employees on retirement.
The net liability of these other post-retirement benefits at 31 December 2020 was £7.0m (2019: £6.9m).
(e) Defined contribution pension plans
The total expense for the Group’s defined contribution plans in the Group Income Statement amounted to £9.7m (2019: £11.3m)
and represents the contributions payable for the year by the Group to the plans.
(f) Multi-employer plans
Due to collective agreements, Vesuvius in the US participates, together with other enterprises, in union-run multi-employer
pension plans for temporary workers hired on sites. These are accounted for as defined contribution plans. The bulk of the
multi-employer pension plans related to BMI, which was disposed in 2018. The BMI sale transaction was structured to ensure
as best as possible that any pension liability would go to the acquiring company. There is a five-year window where Vesuvius
US could still have some liability for any shortfall in the BMI plans should the buyer cease to exist.
197
26.3 Post-retirement liability valuation
The main assumptions used in calculating the costs and obligations of the Group’s defined benefit pension plans, as detailed
below, are set by the Directors after consultation with independent professionally qualified actuaries and include those used
to determine regular service costs and the financing elements related to the plans’ assets and liabilities. It is the Directors’
responsibility to set the assumptions used in determining the key elements of the costs of meeting such future obligations.
Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions used could affect the
Group’s profit and financial position.
(a) Mortality assumptions
The mortality assumptions used in the actuarial valuations of the Group’s UK, US and German defined benefit pension liabilities
are summarised in the table below and have been selected to reflect the characteristics and experience of the membership of
those plans.
For the UK Plan, the assumptions used have been derived from the Self-Administered Pension Schemes (SAPS) All table,
with future longevity improvements in line with the ‘core’ mortality improvement tables published in 2019 by the Continuous
Mortality Investigation (CMI), with a long-term rate of improvement of 1.25% per year. For the Group’s US plans, the assumptions
used have been based on the Pri-2012 mortality tables and MP-2020 projection scale. The Group’s major plans in Germany
have been valued using the modified Heubeck Richttafeln 2018G mortality tables. In respect of the life expectancy tables below,
current pensioners are assumed to be 65 years old, while future pensioners are assumed to be 45 years old.
Life expectancy of pension plan members
Age to which current pensioners are expected to live — Men
Age to which future pensioners are expected to live — Men
— Women
— Women
(b) Other main actuarial valuation assumptions
Discount rate
Price inflation — using RPI for UK
— using CPI for UK
Rate of increase in pensionable salaries
Rate of increase to pensions in payment
2020
2019
UK
years
US
years
Germany
years
UK
years
US
years
Germany
years
87.1
89.4
87.5
90.8
85.4
87.4
86.9
88.8
85.3
88.8
88.1
91.0
87.0
89.2
87.3
90.1
85.6
87.6
87.2
89.1
85.2
88.7
88.0
90.9
2020
2019
UK
% p.a.
US
% p.a.
Germany
% p.a.
UK
% p.a.
US
% p.a.
Germany
% p.a.
1.40
2.90
2.20
n/a
2.80
2.05
2.00
n/a
n/a
n/a
0.60
1.50
n/a
2.25
1.50
1.95
3.00
1.90
n/a
2.90
2.85
2.25
n/a
n/a
n/a
1.00
1.50
n/a
2.25
1.50
The discount rate used to determine the liabilities of the UK Plan for IAS 19 accounting purposes is required to be determined by
reference to market yields on high-quality corporate bonds. The UK discount rate in the above table is based on analysis using the
expected future cash flows of the Vesuvius Pension Plan and the AON Hewitt AA yield curve; the US discount rate is based on the
Citigroup pension discount curve; and the Germany discount rate is based on AA corporate bond yields included in the iBoxx Euro
AA corporate bond indices.
The assumptions for UK price inflation are set by reference to the difference between yields on longer-term conventional
government bonds and index-linked bonds, except for CPI, for which no appropriate bonds exist, which is assumed to be
0.7 points lower (2019: 1.1 points lower) than RPI-based inflation.
Financial Statements
199
26.5 Fair value of plan assets
As at 1 January
Exchange differences
Interest income
Settlements
Acquisitions
Remeasurement of assets
Contributions from employer
Contributions from members
Administration expenses paid
Benefits paid
As at 31 December
2020
2019
UK
£m
581.6
—
11.0
—
—
49.1
—
—
(1.2)
(24.1)
616.4
US
£m
50.3
(1.5)
1.2
(6.0)
—
6.3
2.2
—
(0.6)
(3.5)
48.4
ROW
£m
29.4
Total
£m
661.3
1.2
0.4
—
—
0.1
2.5
—
—
(2.2)
31.4
(0.3)
12.6
(6.0)
—
55.5
4.7
—
(1.8)
(29.8)
696.2
UK
£m
543.8
—
15.1
—
—
55.4
0.8
—
(0.7)
(32.8)
581.6
US
£m
47.0
(1.8)
1.8
(3.7)
—
9.3
2.0
—
(0.7)
(3.6)
50.3
ROW
£m
29.0
(1.7)
0.6
—
—
0.7
2.4
—
—
(1.6)
29.4
Total
£m
619.8
(3.5)
17.5
(3.7)
—
65.4
5.2
—
(1.4)
(38.0)
661.3
The Group’s pension plans in Germany are unfunded, as is common practice in that country, and accordingly there are no assets
associated with these plans.
26.6 Remeasurement of defined benefit liabilities/assets
Remeasurement of liabilities:
— demographic changes
— financial assumptions
— experience (losses)/gains
Remeasurement of assets
Total movement
2020
total
£m
(1.5)
(51.6)
5.3
55.5
7.7
2019
total
£m
6.1
(73.2)
(1.9)
65.4
(3.6)
The remeasurement of defined benefit liabilities and assets is recognised in the Group Statement of Comprehensive Income.
198 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
26. Employee Benefits continued
26.3 Post-retirement liability valuation continued
(c) Sensitivity analysis of the impact of changes in significant IAS 19 actuarial assumptions
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC).
The US pensions are not inflation linked. The rate of increase in pensionable salaries and of pensions in payment is therefore
not significant to the valuation of the Group’s overall pension liabilities.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Assumption
Change in assumption
UK
US
Germany
Discount rate Increase/decrease by 0.1%
— impact on plan liabilities Decrease/increase by £8.2m Decrease/increase
by £0.8m
Decrease/increase
by £1.4m
— impact on plan assets
Decrease/increase by £3.4m n/a
n/a
Price inflation Increase/decrease by 0.1%
— impact on plan liabilities
Increase/decrease by £5.7m n/a
Increase/decrease
by £0.3m
— impact on plan assets
Increase/decrease by £2.3m n/a
n/a
Mortality
Increase by one year
— impact on plan liabilities
Increase by £27.0m
Increase by £3.1m
Increase by £2.5m
— impact on plan assets
Increase by £19.0m
n/a
n/a
26.4 Defined benefit obligation
The average duration of the obligations to which the liabilities of the Group’s principal pension plans relate is 17 years for the UK,
21 years for Germany and 11 years for the US.
Present value as at 1 January 2020
Exchange differences
Current service cost
Past service cost
Interest cost
Settlements
Remeasurement of liabilities:
— demographic changes
— financial assumptions
— experience losses/(gains)
Benefits paid
Present value as at 31 December 2020
Present value as at 1 January 2019
Exchange differences
Current service cost
Past service cost
Interest cost
Settlements
Remeasurement of liabilities:
— demographic changes
— financial assumptions
— experience losses/(gains)
Benefits paid
Present value as at 31 December 2019
UK
£m
482.0
—
—
0.8
9.0
—
2.2
38.2
(6.2)
(24.2)
501.8
UK
£m
455.9
—
—
—
12.6
—
(5.6)
49.4
2.6
(32.9)
482.0
Defined benefit pension plans
US
£m
Germany
£m
54.5
3.1
1.6
—
0.6
—
—
4.8
—
78.9
(2.2)
0.1
—
2.0
(6.2)
(0.7)
6.4
0.5
(4.5)
74.3
ROW
£m
47.5
1.7
3.1
(0.1)
0.7
—
—
1.9
0.3
(1.5)
63.1
(3.0)
52.1
Defined benefit pension plans
US
£m
Germany
£m
79.5
(3.2)
0.1
—
3.1
(5.1)
(0.5)
9.2
0.4
(4.6)
78.9
47.8
(3.1)
1.2
—
0.9
—
—
9.6
(0.3)
(1.6)
54.5
ROW
£m
44.6
(2.7)
2.8
0.2
1.0
—
—
4.3
(0.3)
(2.4)
47.5
Other post-
retirement
benefit
plans
£m
6.9
—
0.4
—
0.2
—
—
0.3
0.1
(0.9)
7.0
Other post-
retirement
benefit
plans
£m
7.3
(0.2)
0.4
0.1
0.2
—
—
0.7
(0.5)
(1.1)
6.9
Total
£m
662.9
2.6
4.8
0.7
12.3
(6.2)
1.5
51.3
(5.4)
(33.2)
691.3
Total
£m
627.8
(9.0)
4.1
0.2
17.6
(5.1)
(6.1)
72.5
2.4
(41.5)
662.9
Total
£m
669.8
2.6
5.2
0.7
12.5
(6.2)
1.5
51.6
(5.3)
(34.1)
698.3
Total
£m
635.1
(9.2)
4.5
0.3
17.8
(5.1)
(6.1)
73.2
1.9
(42.6)
669.8
Financial Statements
200 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
26. Employee Benefits continued
26.7 Balance sheet recognition
The amount recognised in the Group Balance Sheet in respect of the Group’s defined benefit pension plans and other post-
retirement benefit plans is analysed in the following tables, which all relate to continuing operations. All equity securities and
bonds have quoted prices in active markets.
Defined benefit pension plans
Equities
Bonds
Annuity insurance contracts
Other assets
Fair value of plan assets
Present value of funded obligations
Present value of unfunded obligations
Total net surpluses/(liabilities)
Recognised in the Group Balance Sheet as:
Net surpluses
Net liabilities
Total net surpluses/(liabilities)
UK
£m
US
£m
Germany
£m
29.7
301.3
282.1
3.3
616.4
(500.0)
116.4
(1.8)
114.6
116.4
(1.8)
114.6
4.3
43.2
—
0.9
48.4
(63.2)
(14.8)
(11.1)
(25.9)
—
(25.9)
(25.9)
—
—
—
—
—
—
—
(63.1)
(63.1)
—
(63.1)
(63.1)
ROW
£m
1.7
3.3
22.4
4.0
31.4
(46.8)
(15.4)
(5.3)
(20.7)
Total
£m
35.7
347.8
304.5
8.2
696.2
(610.0)
86.2
(81.3)
4.9
Other post-
retirement
benefit
plans
£m
—
—
—
—
—
—
—
(7.0)
(7.0)
2020
total
£m
35.7
347.8
304.5
8.2
696.2
(610.0)
86.2
(88.3)
(2.1)
0.7
117.1
—
117.1
(21.4)
(20.7)
(112.2)
4.9
(7.0)
(7.0)
(119.2)
(2.1)
Equities
Bonds
Annuity insurance contracts
Other assets
Fair value of plan assets
Present value of funded obligations
Present value of unfunded obligations
Total net surpluses/(liabilities)
Recognised in the Group Balance Sheet as:
Net surpluses
Net liabilities
Total net surpluses/(liabilities)
(a) (i) UK Plan asset allocation
Defined benefit pension plans
UK
£m
US
£m
Germany
£m
44.2
229.3
280.3
27.8
581.6
(480.1)
101.5
(1.9)
99.6
101.5
(1.9)
99.6
3.2
46.3
—
0.8
50.3
(67.6)
(17.3)
(11.3)
(28.6)
—
(28.6)
(28.6)
—
—
—
—
—
—
—
(54.5)
(54.5)
—
(54.5)
(54.5)
ROW
£m
2.1
3.3
20.4
3.6
29.4
(42.8)
(13.4)
(4.7)
(18.1)
1.1
(19.2)
(18.1)
Total
£m
49.5
278.9
300.7
32.2
661.3
(590.5)
70.8
(72.4)
(1.6)
102.6
(104.2)
(1.6)
Other post-
retirement
benefit
plans
£m
—
—
—
—
—
—
—
(6.9)
(6.9)
—
(6.9)
(6.9)
2019
total
£m
49.5
278.9
300.7
32.2
661.3
(590.5)
70.8
(79.3)
(8.5)
102.6
(111.1)
(8.5)
As at 31 December 2020, of the UK Plan’s total assets, 45.8% (2019: 48.2%) were represented by the annuity insurance contracts
covering the UK Plan’s pension liabilities; 4.8% (2019: 7.6%) were allocated to equities; 48.9% (2019: 39.4%) to fixed income
securities; 0.5% (2019: 0.4%) to cash; and nil% (2019: 4.4%) to other assets. The fixed income asset class of the UK Plan includes
a liability-driven investment portfolio of financial derivative contracts which reduces the risk that the UK Plan’s assets would fall
materially, relative to the value of its economic liabilities. Of the UK Plan’s fixed income securities, £190.0m (2019: £150.3m) have
a quoted market price in an active market.
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC),
whereby the UK Plan Trustee has paid insurance premiums to PIC to insure a significant portion of the UK Plan’s liabilities.
Under this arrangement, the value of the PIC insurance contract matches the value of the liabilities because the inflation, interest
rate, investment and longevity risk for Vesuvius in respect of these liabilities are eliminated. As at 31 December 2020, the IAS 19
valuation of the PIC insurance contract value associated with the bought-in liabilities was £282.1m (2019: £280.3m). The buy-in
agreement ensures that the UK pension plan obligations in respect of all its retired members and their approved dependants are
insured. The policy and the associated valuation are updated annually to reflect retirements and mortality. In the current year,
the agreement based on specific membership data covers 56.4% (2019: 58.4%) of UK pension plan obligations, removing
substantially all financial risks associated with this tranche of the liability.
201
(a) (ii) US Plan asset allocation
All of the assets in the main US Plan have a quoted market price in an active market. The Plan mitigates exposure to interest rates
by employing a liability matching investment strategy. All non-derivative assets are invested in liability matching bonds with a
similar average duration to the liabilities of the Plan. Since 2018, the investment allocation has been de-risked from an allocation
of 72% liability matching and 28% return seeking assets, to an allocation of 100% liability matching. The Plan retains equity risk
through use of equity derivative contracts, which provides equity market exposure with some level of equity downside protection.
(b) Defined benefit contributions in 2021
In 2021, the Group is expected to make contributions into its defined benefit pension and other post-retirement benefits
plans of around £4.8m with specific contributions of approximately £2.2m and £1.8m anticipated for the US Plan and Belgian
Plans respectively.
26.8 Income statement recognition
The expense recognised in the Group Income Statement in respect of the Group’s defined benefit retirement plans and other
post-retirement benefit plans is shown below:
Current service cost
Past service cost
Settlements
Administration expenses
Net interest cost/(gain)
Total net charge
2020
Defined
benefit
pension
plans
£m
Other post-
retirement
benefit
plans
£m
4.8
0.7
(0.2)
1.8
(0.3)
6.8
0.4
—
—
—
0.2
0.6
2019
Other post-
retirement
benefit
plans
£m
Defined
benefit
pension plans
£m
4.1
0.2
(1.4)
1.4
0.1
4.4
0.4
0.1
—
—
0.2
0.7
Total
£m
5.2
0.7
(0.2)
1.8
(0.1)
7.4
Total
£m
4.5
0.3
(1.4)
1.4
0.3
5.1
The total net charge of £7.4m (2019: £5.1m) recognised in the Group Income Statement in respect of the Group’s defined benefit
pension plans and other post-retirement benefits plans is recognised in the following table:
In arriving at trading profit — within other manufacturing costs
In arriving at profit before tax — guaranteed minimum pension equalisation charge
— within administration, selling and distribution costs
— within net finance costs
Total net charge
GMP equalisation
2020
£m
1.7
5.0
0.8
(0.1)
7.4
2019
£m
1.7
3.1
—
0.3
5.1
A UK High Court ruling was made on 26 October 2018 in respect of the gender equalisation of guaranteed minimum pensions
(GMPs) for occupational pension schemes. The impact of GMP equalisation as at 31 December 2018 was estimated to be £4.5m.
A second UK High Court GMP equalisation ruling was issued on 20 November 2020. This second ruling considered the treatment
of historic transfers out, i.e. those members who had transferred out before 26 October 2018. The 2020 ruling covers both
individual and bulk transfers out. It does not revisit any of the issues addressed in the 2018 ruling. The impact of GMP equalisation
for the second ruling is estimated to be £0.8m at 31 December 2020.
The increase in pension liabilities resulting from these judgements have been treated for IAS 19 purposes as plan amendments
and resulted in an increase in the pension deficit in the balance sheet and a corresponding past service cost in the Income
Statement. These amendments have been treated as separately reported items so that there has been no impact on headline
performance. We are working with the trustees of our UK pension plan and our actuarial and legal advisers to understand the
extent to which these judgements crystallise additional liabilities for the UK pension plan.
26.9 Risks to which the defined benefit pension plans expose the Group
The principal risks faced by these plans comprise: (i) the risk that the value of the plan assets is not sufficient to meet all plan
liabilities as they fall due; (ii) the risk that plan beneficiaries live longer than envisaged, causing liabilities to exceed the available
plan assets; and (iii) the risk that the market-based factors used to value plan liabilities and assets change materially adversely
to increase plan liabilities over the value of available plan assets. Further details are given below:
Asset volatility
> The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform against
this yield, this will create a deficit. To reduce this risk, the pension plans are largely invested in government and corporate bonds
Financial Statements
202 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
26. Employee Benefits continued
26.9 Risks to which the defined benefit pension plans expose the Group continued
Counterparty risk
> There are a number of other risks of running the UK Pension Fund including counterparty risks from using derivatives. These are
mitigated by using a diversified range of counterparties of high standing and ensuring positions are collateralised as required
Changes in bond yields
> A decrease in corporate bond yields will increase the scheme liabilities, although this will be partially offset by an increase in the
value of the schemes’ bond holdings
Inflation risk
> Much of the UK scheme’s benefit obligations are linked to inflation and higher inflation will lead to higher liabilities (although,
in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The UK scheme also
holds index-linked government bonds to provide protection against this risk
Life expectancy
> The majority of the plans’ obligations are to provide benefits for the life of the member and in some cases their spouse on death
of the member, so increases in life expectancy will result in an increase in the liabilities
> In July 2012 Vesuvius entered into an agreement with the Pension Insurance Corporation (PIC) to insure pensions in payment for
the pensioners in the UK main Plan. These annuities are owned by the UK Pension Plan. Further annuity purchases have taken
place at regular intervals since then and the Plan now holds annuity contracts to cover the majority of pensions in payment
thereby removing substantially all risks in respect of these pensions
203
Outstanding awards
As at
1 Jan 2019
no.
Granted
no.
Exercised
no.
Forfeited/
lapsed
no.
Expired
no.
As at
31 Dec 2019
no.
LTIP
2,360,478
654,534 (1,048,487)
(133,305)
nil 1,833,220
Weighted average exercise price
nil
nil
nil
nil
Other plans
298,890
563,715
(176,183)
(1,323)
Weighted average exercise price
nil
nil
nil
nil
nil
nil
nil
nil
685,099
nil
For the options exercised during 2019, the market value at the date of exercise ranged from 418 pence to 625 pence.
Details of market performance conditions are included in the Directors’ Remuneration Report.
LTIP
Weighted average exercise price
Other plans
Weighted average exercise price
2020
Weighted
average
outstanding
contractual
life of
awards
years
8.4
0.5
Awards
exercisable
as at
31 Dec 2020
no.
—
—
—
—
Range of
exercise
prices
pence
Awards
exercisable
as at
31 Dec 2019
no.
n/a
n/a
—
—
—
—
2019
Weighted
average
outstanding
contractual
life of
awards
years
7.0
1.0
Range of
exercise
prices
pence
n/a
n/a
> In August 2016 the pensions for the majority of current pensioners in the US main plan were bought out with an insurance
27.4 Options granted under the LTIP during the year
company, removing all responsibility and risk related to these pensions from the Group
> In late 2016 and in late 2019 deferred members in the US main plan were offered lump sums in lieu of their deferred pension
benefits, settling the liabilities for those members accepting this offer in full
27. Share-based Payments
27.1 Accounting policy
The Group operates an equity-settled share-based payment arrangement for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as
total shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-
based conditions, such as growth in headline earnings per share, fair value is measured using the Black-Scholes option pricing
model. The fair value is expensed on a straight-line basis over the vesting period with a corresponding increase in equity.
The cumulative expense recognised is adjusted for the best estimate of the shares that will eventually vest.
27.2 Income statement recognition
The total expense recognised in the Group Income Statement is shown below:
Long-Term Incentive Plan
Other plans
Total expense
2020
£m
0.8
1.6
2.4
2019
£m
2.5
2.4
4.9
The Group operates a number of different share-based payment plans, the most significant of which is the Long-Term Incentive
Plan (LTIP), details of which can be found in the Directors’ Remuneration Report.
27.3 Details of outstanding options
LTIP
Outstanding awards
As at
1 Jan 2020
no.
Granted
no.
Exercised
no.
Forfeited/
lapsed
no.
Expired
no.
As at
31 Dec 2020
no.
1,833,220
847,503
(345,500)
(617,998)
nil 1,717,225
Weighted average exercise price
nil
nil
nil
nil
Other plans
685,099
198,891
(207,211)
(41,748)
Weighted average exercise price
nil
nil
nil
nil
nil
nil
nil
nil
635,031
nil
For the options exercised during 2020, the market value at the date of exercise ranged from 351 pence to 540 pence.
Fair value of options granted
Share price on date of grant
Expected volatility
Risk-free interest rate
Exercise price (per share)
Expected term (years)
Expected dividend yield
2020
EPS element TSR element
392p
392p
n/a
n/a
nil
3
nil
242p
392p
30.3%
0.2%
nil
3
nil
Vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return (TSR) performance relative to that
of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the remaining 50% of shares awarded
is based on headline EPS growth.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years (2019:
2.8 years) prior to the grant date for the March 2020 grant. The risk-free rate of return was assumed to be the yield to maturity
on a UK fixed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration
Committee, award holders receive the value of dividends that would have been paid on their vested shares in the period
between grant and vesting. Accordingly, there is no discount to the valuation for dividends foregone during the vesting period.
Financial Statements
204 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
28. Trade and Other Payables
28.1 Accounting policy
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
interest method.
28.2 Analysis of trade and other payables
Non-current
Accruals and other payables
Deferred purchase and contingent consideration
Total non-current other payables
Current
Trade payables
Other taxes and social security
Deferred purchase and contingent consideration
Accruals and other payables
Total current trade and other payables
2020
£m
2019
£m
13.1
0.1
13.2
185.7
31.5
—
71.5
288.7
14.7
0.4
15.1
173.8
29.9
1.5
68.4
273.6
There is no significant difference between the fair value of the Group’s trade and other payables balances and the amount at
which they are reported in the Group Balance Sheet.
Included within trade payables in the table above is £17.5m (2019: £8.0m) subject to a supplier financing agreement entered into
with one of the Group’s core relationship banks. Under the terms of the agreement, the Group’s suppliers in certain countries
can elect to be paid earlier than the terms of their agreement with Vesuvius by requesting discounted early settlement from the
arranging bank. This early settlement is effected between the bank and the supplier; from the perspective of the Group the
terms of each payable remain unchanged. The Group is not charged any interest cost or fee in respect of the agreement.
29. Leases
29.1 Accounting policy
Lease liabilities are recognised at the present value of the remaining lease payments, discounted using the interest rate implicit
in the lease if that rate can be readily determined. If that rate cannot be readily determined the lessee’s incremental borrowing
rate is used, calculated as the local government bond rate plus an interest rate spread. In cases where there was an option to
terminate or extend a lease, the duration of the lease assumed for this purpose reflected the Group’s existing intentions regarding
such options. Lease liabilities include the net present value of the following lease payments:
> Fixed payments (including in-substance fixed payments), less any lease incentives receivable
> Variable lease payments that are based on an index or a rate
> Amounts expected to be payable by the lessee under residual value guarantees
> The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
> Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Leases of low-value assets and short-term leases (shorter than 12 months) are classified as operating leases and neither the asset
nor the corresponding liability to the lessor is recognised in the Group Balance Sheet. Rentals payable under operating leases are
charged to the Group Income Statement on a straight-line basis over the term of the lease. Benefits received and receivable as an
incentive to enter an operating lease are also spread on a straight-line basis over the lease term.
29.2 Lease liabilities
The maturity analysis of the lease liabilities is disclosed in Note 25 (d).
The net book value of the Group’s property, plant and equipment assets held as right-of-use assets under lease contracts at
31 December 2020 was £37.7m (2019: £34.4m), (Note 15). The right-of-use asset is depreciated over the shorter of the asset’s
useful life and the lease term on a straight-line basis. The cash payments of leases during the year were £14.3m (2019: £13.3m).
205
29.3 Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total operating lease commitments
2020
£m
0.9
0.6
0.1
1.6
2019
£m
1.3
0.6
0.1
2.0
The cost incurred by the Group in the year in respect of assets held under operating leases, all of which was charged within trading
profit, amounted to £4.2m (2019: £6.0m), of which £3.7m (2019: £5.3m) related to short-length leases and £0.5m (2019: £0.7m)
related to leases of low-value items.
30. Provisions
30.1 Accounting policy
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to
settle the obligation at the balance sheet date. Where the effect of the time value of money is material, provisions are discounted
using a pre-tax discount rate that reflects both the current market assessment of the time value of money and the specific risks
associated with the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.
30.2 Analysis of provisions
Disposal, closure
and environmental
costs
£m
Restructuring
charges
£m
As at 1 January 2020
Exchange adjustments
Charge to Group Income Statement – separately reported items
Charge to Group Income Statement – trading profit
Unused amounts released to Group Income Statement
Adjustment to discount
Cash spend
Transferred to other balance sheet accounts
As at 31 December 2020
34.8
(1.7)
10.3
4.8
—
1.0
(7.0)
—
42.2
Other
£m
2.9
—
—
11.8
—
—
Total
£m
56.8
(1.0)
16.4
16.6
—
1.0
19.1
0.7
6.1
—
—
—
(16.7)
(9.3)
(33.0)
—
9.2
—
5.4
—
56.8
Of the total provision balance as at 31 December 2020 of £56.8m (2019: £56.8m), £34.0m (2019: £31.1m) is recognised in the
Group Balance Sheet within non-current liabilities and £22.8m (2019: £25.7m) within current liabilities.
Disposal, closure and environmental charges
The provision for disposal, closure and environmental costs includes the Directors’ current best estimate of the amounts to be
payable in respect of known or probable costs resulting from third-party claims, including legacy matter lawsuits.
There remains inherent uncertainty associated with estimating the future costs of legacy matter lawsuits. In assessing the
probable costs and realisation certainty of these provisions, or related assets, management has made reasonable assumptions
including projections of the number of future claims, the approximate average cost of those claims (including legal costs and
infrequent larger value claims) and the length of time taken to resolve such claims. The provision reflects the Directors’ best
estimate of the future liability and the value of the corresponding asset. By nature, these assumptions are uncertain and therefore
changes to the assumptions used could significantly alter the Directors’ assessment of the value, volume of claims, timing or
certainty of the costs or related amounts. Sensitivity analyses have been conducted using variations to the key assumptions listed
above and indicatively show:
> A 10% change in the average cost of claims would impact the gross provision by approximately £1.1m
> A 20% change in the level of larger value claims would impact the gross provision by approximately £0.8m
> An increase in the duration over which claims are received of 10% would increase the gross provision by approximately £1.9m
As assumptions can vary individually or in combination, over the longer term, there can be no guarantee that the assumptions
used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred.
Financial Statements
206 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
30. Provisions continued
30.2 Analysis of provisions continued
As the resolution of many of the obligations for which provision is made is subject to legal or other regulatory process, the timing of
the associated cash outflows is also subject to some uncertainty. However, the majority of the amounts provided are expected to
be utilised over the next ten years. The provision, underlying estimates of costs and associated insurance estimates are regularly
assessed, to reflect any changed circumstances with regard to individual matters. Any movements impacting the Income
Statement are included within headline performance.
As set out above, where insurance cover exists for any of these known or probable costs, a related asset is recognised in the
Group Balance Sheet only when its value can be reliably measured and reimbursement is considered to be virtually certain
by management. As at 31 December 2020, £12.4m (2019: £16.4m) was recorded in other receivables in respect of associated
insurance reimbursements, of which £10.4m (2019: £14.3m) is non-current.
In addition, this provision covers the estimate of costs to be payable both in the fulfilment of obligations incurred in connection
with former Group businesses, resulting from either disposal or closure, together with those related to the demolition and clean-up
of closed sites.
The Group owns a number of disused properties in the US, which do not form part of our trading operations. Costs are being
incurred at one of these sites to address the significant increase in the volume of water run-off occurring from 2019. We have
engaged waste management specialists, are taking actions to reduce the level of water (including hydrological studies),
improving treatment processes and are in contact with the relevant regulatory authorities. We estimate that it will take a further
18 months to finalise initial works and that there will then be a period for which unavoidable associated and ongoing running costs
will be incurred. The charges related to remediation and unavoidable associated and ongoing running costs have been recorded
in 2020 and are £10.3m (2019: £4.1m). These non-recurring charges have been treated as a separately reported item. There has
been no impact upon headline performance.
Restructuring charges provisions
The provision for restructuring charges includes the costs to complete the Group’s major restructuring programmes. The majority
of this balance is expected to be paid out over the next two years. The balance of £9.2m as at 31 December 2020 (2019: £19.1m)
comprises £nil (2019: £4.3m) in relation to onerous lease provisions in respect of leases terminating between one and six years.
Other
Other provisions comprise amounts payable in respect of known or probable costs resulting both from legal or other regulatory
requirements, workers’ compensation and medical claims, and from third-party claims. As the settlement of many of the
obligations for which provision is made is subject to reasonable assumptions, legal or other regulatory process, the timing of the
associated outflows is subject to some uncertainty, but the majority of amounts provided are expected to be utilised over the next
two years and the underlying estimates of costs are regularly updated to reflect changed circumstances with regard to individual
matters. During 2020 the Group recognised net charges of £11.8m (2019: £8.4m) in the Group Income Statement to provide for
various litigation settlements and other claims.
31. Off-Balance Sheet Arrangements
In compliance with current reporting requirements, certain arrangements entered into by the Group in its normal course of
business are not reported in the Group Balance Sheet. Of such arrangements, the largest amounts are future lease payments
in relation to assets used by the Group under non-cancellable operating leases (Note 29).
32. Contingent Liabilities
Guarantees given by the Group under property leases of operations disposed of amounted to £nil (2019: £0.3m). Details of
guarantees given by the Company, on behalf of the Group, are given in Note 11 to the Company Financial Statements.
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius’ subsidiaries are subject to legacy matter lawsuits, predominantly in the US, relating to a small number of
products containing asbestos manufactured prior to the acquisition of those subsidiaries by Vesuvius. These suits usually also
name many other product manufacturers. To date, Vesuvius is not aware of there being any liability verdicts against any of these
subsidiaries. Each year, a number of these lawsuits are withdrawn, dismissed or settled.
As the settlement of many of the obligations for which reserve is made is subject to legal or other regulatory process, the timing
and amount of the associated outflows is subject to some uncertainty (see Note 30 for further information). The amount paid,
including costs in relation to this litigation, has not had a material effect on Vesuvius’ financial position or results of operations in
the current year.
207
33. Investments in Subsidiaries, Joint Ventures and Associates
33.1 Investment in subsidiaries
A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and can affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The subsidiaries, joint ventures and associates of Vesuvius plc and the countries in which they are incorporated are set out below.
With the exception of Vesuvius Holdings Limited, whose ordinary share capital was directly held by Vesuvius plc, the ordinary
capital of the companies listed below was wholly owned by a Vesuvius plc subsidiary as at 31 December 2020.
Company
legal name
Registered office address
A.C.N. 000 227 609
Pty Limited
40-46 Gloucester Boulevarde, Port
Kembla, NSW, 2505, Australia
Jurisdiction
Australia
Advent Process
Engineering Inc.
333 Prince Charles Drive, Welland,
Ontario, L3B 5P4, Canada
Canada
(Ontario)
BMI Refractory
Services Inc.
Brazil 1 Limited
CCPI Inc.
Cookson
Dominicana, SRL
East Moon
Investment (HK
Holding) Company
Limited
Flo-Con Holding,
Inc.
600 N 2nd Street, Suite 401,
Harrisburg, PA 17101-1071,
United States
165 Fleet Street, London,
EC4A 2AE, England
US
(Pennsylvania)
England
Suite 201, 910 Foulk Road,
Wilmington, New Castle, DE 19803,
United States
US
(Delaware)
Km 7 1/2, Autopista San Isidro,
Edificio Modelo A, Zona Franca
San Isidro, Santo Domingo Oeste,
Dominican Republic
Unit 01, 82/F, International
Commerce Centre, 1 Austin Road
West, Kowloon, Hong Kong
Dominican
Republic
Hong Kong
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington, DE 19801,
United States
US (Delaware)
Foseco (FS) Limited 1 Midland Way, Central Park,
England
Barlborough Links, Derbyshire,
S43 4XA, England
Foseco (GB)
Limited
165 Fleet Street, London,
EC4A 2AE, England
Foseco (Jersey)
Limited
44 Esplanade, St Helier,
JE4 9WG, Jersey
Foseco (MRL)
Limited
Foseco (RUL)
Limited
Foseco (UK)
Limited
165 Fleet Street, London,
EC4A 2AE, England
165 Fleet Street, London,
EC4A 2AE, England
165 Fleet Street, London,
EC4A 2AE, England
England
Jersey
England
England
England
Foseco Canada
Limited
181 Bay Street, Suite 1800, Toronto,
Ontario, M5J 2T9, Canada
Canada
(Ontario)
Foseco Espanola
SA
5, Barrio Elizalde, Izurza,
Bizkaia, 48213, Spain
Foseco Foundry
(China) Co Limited
Foseco Fundición
Holding
(Espanola), S.L.
Room 819, Shekou Zhaoshang
Building, Nanshan District,
Shenzhen, Guangdong, 518067,
China
5, Barrio Elizalde, Izurza,
Bizkaia, 48213, Spain
Foseco Holding
(Europe) Limited
165 Fleet Street, London,
EC4A 2AE, England
Foseco Holding
(South Africa) (Pty)
Limited
12 Bosworth Street, Alrode,
Alberton, 1449, South Africa
Spain
China
Spain
England
South Africa
Foseco Holding BV Rivium Boulevard 301, Capelle aan
Netherlands
den Ijssel, Rotterdam 2909LK,
Netherlands
Company
legal name
Foseco Holding
International
Limited
Registered office address
165 Fleet Street, London,
EC4A 2AE, England
Foseco Holding
Limited
165 Fleet Street, London,
EC4A 2AE, England
Foseco Industrial e
Comercial Ltda
Foseco
International
Holding (Thailand)
Limited
Km 15, Rodovia Raposo Tavares,
Butanta Cep, São Paulo,
05577-100, Brazil
170/69, 22nd Floor Ocean Tower 1,
Ratchadapisek Road, Klongtoey,
Bangkok, 10110, Thailand
Jurisdiction
England
England
Brazil
Thailand
England
Foseco
International
Limited
Foseco Japan
Limited
Foseco Korea
Limited
Foseco Limited
Foseco
Metallurgical Inc.
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
9th Floor, Orix Kobe Sannomiya
Building, 6-1-10, Goko dori, Chuo-ku,
Kobe Hyogo, 651-0087, Japan
Japan
74 Jeongju-ro, Wonmi-gu,
Bucheon-si, Gyeonggi-do,
14523, South Korea
165 Fleet Street, London,
EC4A 2AE, England
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
South Korea
England
US (Delaware)
Foseco Nederland
BV
Binnenhavenstraat 20, 7553 GJ
Hengelo (OV), Netherlands
Netherlands
Foseco Overseas
Limited
165 Fleet Street, London,
EC4A 2AE, England
Foseco Pension
Fund Trustee
Limited
Foseco Philippines
Inc.
Foseco Portugal
Produtos Para
Fundiçâo Lda
Foseco SAS
Foseco Steel
(Holdings) China
Limited
Foseco Steel (UK)
Limited
England
England
Philippines
165 Fleet Street, London,
EC4A 2AE, England
Unit 401, 4th Floor 8 Antonio Centre,
Prime St. Madrigal Business Park 2,
Ayala Alabang Muntinlupa City,
1770 Philippines
Rua Manuel Pinto de Azevedo,
No 626 4100-320 Porto, Portugal
Portugal
Le Newton C, 7 Mail Barthélémy
Thimonnier, 77185 Lognes, France
France
165 Fleet Street, London,
EC4A 2AE, England
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
Foseco Technology
Limited
165 Fleet Street, London,
EC4A 2AE, England
Foseco
Transnational
Limited
J.H. France
Refractories
Company
165 Fleet Street, London,
EC4A 2AE, England
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
England
England
England
England
US (Delaware)
Financial Statements
208 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
33. Investments in Subsidiaries, Joint Ventures and Associates continued
33.1 Investment in subsidiaries continued
Company
legal name
John G. Stein &
Company Limited
Registered office address
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
Jurisdiction
England
Company
legal name
Registered office address
Vesuvius
(Thailand) Co.,
Limited
170/69, 22nd Floor Ocean Tower 1,
Ratchadapisek Road, Klongtoey,
Bangkok, 10110, Thailand
Mainsail Insurance
Company Limited
Victoria Place, 5th floor, 31 Victoria
Street, Pembroke, Hamilton, HM 10,
Bermuda
Bermuda
Vesuvius (V.E.A.R.)
S.A.
Street Urquiza, 919,Floor 2,
Rosario, Provincia de Santa Fé,
Argentina
Jurisdiction
Thailand
Argentina
Mascinco
Empreendimentos
e Participações
Ltda
Avenida Brasil, 49550 – parte,
Distrito Industrial de Palmares –
Campo, Grande – Cep: 23065-480,
Rio de Janeiro, RJ, Brazil
Mastercodi
Industrial Ltda
Rodovia Raposo Tavares, KM15,
Butantã, 05577-100, Butantã,
São Paulo, Brazil
Mercajoya, S.A.
Capitán Haya, 56 – 1ºH,
28020 Madrid, Spain
Metal Way
Equipamentos
Metalurgicos Ltda
Estrada Santa Isabel, 7655 KM37,
Bairro Do Una, Itaquaquecetuba,
São Paulo – SP, CEP: 08580 000,
Brazil
Minerals
Separation Limited
165 Fleet Street, London,
EC4A 2AE, England
New Foseco (UK)
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
Brazil
Brazil
Spain
Brazil
England
England
Process Metrix,
LLC
6622 Owens Drive, Pleasanton,
CA 94588, United States
US (California)
Indonesia
Indonesia
England
Canada
Brazil
PT Foseco
Indonesia
PT Foseco Trading
Indonesia
Realisations 789,
LLC
S G Blair &
Company Limited
SIDERMES Inc.
Business name
Vesuvius Sensors
and Probes
SIDERMES Do
Brasil Sensores
Termicos Ltda
SIDERMES
Latinoamericana
CA
Jl Rawa Gelam 2/5, Kawasan
Industri, Pulogadung, Jakarta,
13930, Indonesia
Jl Rawa Gelam 2/5, Kawasan
Industri, Pulogadung, Jakarta,
13930, Indonesia
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
175, Calixa-Lavallée Verchêres,
Québec J0L2R0, Canada
Estrada Municipal PDD 436, S/N,
Prédio ‘C’, Bairro da Boa Vista,
Municipio de Piedade,
Estado de São Paulo, Brazil
Zona Industrial, San Vicente Av.,
Anton Phillips Grupo Industrial,
San Vicente Local 4, Maracay,
Venezuela
SIDERMES S.A.
Urquiza 919 Piso 2 Rosario, Santa Fe,
CP 2000, Argentina
Argentina
Siegener Strasse 152, Kreuztal,
D-57223, Germany
Germany
SIR
Feuerfestprodukte
GmbH
SOLED SAS
Centre d’Activités Economiques
Zone Industrielle de Franchepré
54240 Joeuf, France
Tamworth UK
Limited
165 Fleet Street, London,
EC4A 2AE, England
Unicorn Industries
Limited
165 Fleet Street, London,
EC4A 2AE, England
Veservice Ltda
Av Brasil, 49550, Distrito Industrial
de Palmares, Campo Grande,
Rio de Janeiro, 23065-480, Brazil
France
England
England
Vesuvius Advanced
Ceramics (China)
Co., Limited
221 Xing Ming Street,
China-Singapore Suzhou Ind Park,
Suzhou, Jiangsu Province,
215021, China
China
Vesuvius America,
Inc.
1209 Orange Street, Wilmington,
DE 19801, United States
US (Delaware)
Vesuvius Australia
(Holding) Pty
Limited
40-46 Gloucester Boulevarde,
Port Kembla, NSW, 2505,
Australia
Vesuvius Australia
Pty Limited
40-46 Gloucester Boulevarde,
Port Kembla, NSW, 2505,
Australia
Vesuvius Belgium
N.V.
Zandvoordestraat 366,
Oostende, B-8400, Belgium
Australia
Australia
Belgium
Vesuvius Canada
Inc
181 Bay Street, Suite 1800, Toronto,
Ontario, M5J 2T9, Canada
Canada
Vesuvius Ceramics
Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius China
Holdings Co.
Limited
Vesuvius China
Limited
Unit 01, 82/F International
Commerce Centre, 1 Austin Road
West, Kowloon, Hong Kong
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Colombia
SAS
Street 90, number 13 A – 31,
floor 6, Bogota, Colombia
England
Hong Kong
England
Colombia
Switzerland
Poland
Germany
Germany
Belgium
France
England
Finland
China
China
US (Delaware)
Vesuvius
Corporation S.A.
Via Nassa 17, Lugano,
CH 6900, Switzerland
Vesuvius CSD Sp
z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Vesuvius Emirates
FZE
Warehouse No: 1J-09/3,
P O Box 49261, Hamriyah Free Zone,
Sharjah, United Arab Emirates
United Arab
Emirates
Vesuvius Europe
Beteiligungs
GmbH
Vesuvius Europe
GmbH & Co KG
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Vesuvius Europe
S.A.
17 Rue de Douvrain, Ghlin,
7011, Belgium
Venezuela
Vesuvius Europe
SAS
3, Avenue De L’europe, Parc Les
Pivolles, 69150 Décines-Charpieu,
France
Vesuvius Financial
1 Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Finland
OY
Pajamäentie 8D7, 00360 Helsinki,
Finland
Vesuvius Foundry
Products (Suzhou)
Co. Limited.
12 Wei Wen Road, China-Singapore
Suzhou Ind Park, Suzhou,
Jiangsu Province, 215122, China
Vesuvius Foundry
Technologies
(Jiangsu) Co.
Limited
2 Changchun Road, Economic
Development Area, Changshu,
Jiangsu, 215537, China
Vesuvius France
S.A.
Rue Paul Deudon 68, Boite Postale
19, Feignies 59750, France
France
Brazil
Vesuvius GmbH
Gelsenkirchener Strasse 10,
Borken, D-46325, Germany
Vesuvius Group
Limited
165 Fleet Street, London,
EC4A 2AE, England
Germany
England
209
Company
legal name
Vesuvius Overseas
Investments
Limited
Registered office address
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Overseas
Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Pension
Plans Trustees
Limited
165 Fleet Street, London,
EC4A 2AE, England
Jurisdiction
England
England
England
Vesuvius Peru SAC Jiron Saenz Pena 185, Magdalena
Peru
England
Spain
del Mar, Lima, Peru
Vesuvius Pigments
(Holdings) Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Poland Sp
z.o.o.
Ul Tyniecka 12, Skawina,
32-050, Poland
US (Delaware)
Vesuvius Ras Al
Khaimah FZ-LLC
Street No. F14, RAK Investment
Authority Free Zone, Al Hamra,
Ras Al Khaimah, PO Box 86408,
United Arab Emirates
England
Poland
United Arab
Emirates
Vesuvius
Refractarios de
Chile SA
Street San Martin 870, Room 308,
Tower B, Concepcion, Chile
Chile
Vesuvius
Refractories S.r.l.
Galati, Marea Unire avenue 107,
Galati county, 800329, Romania
Romania
Vesuvius
Refractory India
Private Limited
Vesuvius
Refratários Ltda
Room No. 9, 3rd Floor, 7 Ganesh
Chandra Avenue, Kolkata,
WB 700013, India
Av Brasil, 49550, Distrito Industrial
de Palmares, Campo Grande,
Rio de Janeiro, 23065-480, Brazil
India
Brazil
Vesuvius
Scandinavia AB
4, Forradsgatan, Amal, S-662 34,
Sweden
Sweden
Vesuvius Sensors &
Probes Europe
S.p.A.
Vesuvius-SERT
SAS
Vesuvius Solar
Crucible (Suzhou)
Co., Ltd.
10 Via Mantova, Muggio, Monza e
Brianza, 20835, Italy
Italy
3, Avenue de l’Europe, Parc,
Les Pivolles, Decines-Charpieu
69150, France
58, KuaChun Road, Kua Tang,
China-Singapore Suzou Ind Park,
Suzhou, Jiangsu Province,
215122, China
France
China
Vesuvius South
Africa (Pty) Limited
Pebble Lane, Private Bag X2,
Olifantsfontein, Gauteng Province,
1665, South Africa
South Africa
Vesuvius Sp z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Vesuvius SSC Sp
z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Vesuvius UK
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
Poland
Poland
England
Vesuvius Ukraine
LLC
27, Udarnykiv Street, City of
Dnipropetrovsk, 49000, Ukraine
Ukraine
Vesuvius USA
Corporation
CT Corporation, 208 South LaSalle
Street, Chicago, Cook County, IL
60604, United States
US (Illinois)
Vesuvius VA
Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Vietnam
Limited
7th Floor, Peakview Tower Building,
No.36 Hoang Cau Street, O Cho
Dua Ward, Don Da District, Hanoi
City, Vietnam
England
Vietnam
Vesuvius Zyalons
Holdings Limited
Brown Street, Newmilns, Ayrshire,
KA16 9AG, Scotland
Scotland
Vesuvius Zyarock
Ceramics (Suzhou)
Co., Limited
58, KuaChun Road, Kua Tang,
China-Singapore Suzou Ind Park,
Suzhou, Jiangsu Province,
215122, China
China
Company
legal name
Registered office address
Vesuvius Group
S.A.
17 Rue de Douvrain, Ghlin,
7011, Belgium
Vesuvius Holding
Deutschland
GmbH
Gelsenkirchener Strasse 10,
Borken, D-46325, Germany
Jurisdiction
Belgium
Germany
Vesuvius Holding
France S.A.S
68 Rue Paul Deudon, Boite Postale
19, Feignies 59750, France
France
Via Mantova 10, 20835 Muggio
MB, Italy
Italy
Vesuvius Holding
Italia – Società a
Responsabilità
Limitata
Vesuvius Holdings
Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Ibérica
Refractarios S.A.
Capitán Haya, 56 – 1ºH,
28020 Madrid, Spain
Vesuvius
International
Corporation
Vesuvius
Investments
Limited
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Istanbul
Refrakter Sanayi
ve Ticaret AS
Gebze OSB2 Mh. 1700.,
Sok No:1704/1, Cayirova,
Kocaeli, 41420, Turkey
England
Turkey
England
England
Russia
Malaysia
England
England
Vesuvius Italia SPA Via Mantova 10, 20835 Muggio
Italy
MB, Italy
Vesuvius Japan Inc. Daini-Naruse Akihabara Bldg. 3F,
Japan
Vesuvius K.S.R.
Limited
27-10, 1-chome, Taito, Taito-ku,
Tokyo, 110-0016, Japan
1 Midland Way, Central Park,
Barlborough Links, Derbyshire
S43 4XA, England
Vesuvius Life Plan
Trustee Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius LLC
Vesuvius Malaysia
Sdn Bhd
502, 5th floor, 1 Myasicsheva str.,
Zhukovsky, Moscow region, 140180,
Russian Federation
Unit 30-01, Level 30 Tower A,
Vertical Business Suite Avenue 3,
Bangsar South, No 8 Jalan Kirinchi,
Kuala Lumpur Wilayah Persekutuan,
59200, Malaysia
165 Fleet Street, London,
EC4A 2AE, England
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius
Management
Limited
Vesuvius
Management
Services Limited
Vesuvius Mexico
S.A. de C.V.
Av. Ruiz Cortinez, Num. 140, Colonia
Jardines de San Rafael, Guadalupe,
Nuevo León, CP 67119, Mexico
Mexico
Vesuvius Mid-East
Limited
56, rd 15, Apt 103, Maadi,
Cairo, Egypt
Vesuvius Minerals
Limited
165 Fleet Street, London,
EC4A 2AE, England
Vesuvius Moravia,
s.r.o.
Konska c.p. 740, Trinec,
739 61, Czech Republic
Vesuvius Mulheim
Beteiligungs
GmbH
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Vesuvius Mulheim
GmbH & Co KG
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Vesuvius NC, LLC. Corporation Trust Center, 1209
Orange Street, Wilmington, New
Castle County, DE 19801, United
States
Egypt
England
Czech Republic
Germany
Germany
US
(Delaware)
Vesuvius New
Zealand Limited
Bell Gully, Level 22, Vero Centre,
48 Shortland Street, Auckland, 1010
New Zealand
New Zealand
Financial Statements 210 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
33. Investments in Subsidiaries, Joint Ventures and Associates continued
33.1 Investment in subsidiaries continued
Company
legal name
Registered office address
Vesuvius-Premier
Refractories
(Holdings) Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
Jurisdiction
England
Vesv Distribution
(Private) Limited
R Tech Park, 13th Floor Western
Express Highway, Goregaon (East)
Mumbai, Mumbai City, MH 400063,
India
India
Company
legal name
Registered office address
VSV Advanced
Ceramics (Anshan)
Co., Limited
Xiaotaizi Village, Ningyuan Town,
Qianshan District, Anshan, Liaoning
Province, 114011, China
Wilkes-Lucas
Limited
165 Fleet Street, London,
EC4A 2AE, England
Yingkou Bayuquan
Refractories Co.,
Limited
Cui Tun Village, Hai Dong Office,
Bayuquan District, Liaoning
Province, YingKou, 115007, China
Jurisdiction
China
England
China
The following subsidiary companies have branches registered in the named countries: Foseco (Jersey) Limited in England,
Foseco Holding BV in England, Vesuvius LLC in Kazakhstan, Vesuvius UK Limited in Taiwan and South Korea and Vesuvius
International Corporation in Belgium.
33.2 Investment in joint ventures and associates
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control. An associate is an entity over
which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy
decisions of an entity, but is not control or joint control over those policies.
The Group’s investments in its associates and joint ventures are accounted for using the equity method from the date significant
influence/joint control is deemed to arise until the date on which significant influence/joint control ceases to exist or when the
interest becomes classified as an asset held for sale. The Group Income Statement reflects the Group’s share of profit after tax
of the related associates and joint ventures. Investments in associates and joint ventures are carried in the Group Balance Sheet
at cost adjusted in respect of post-acquisition changes in the Group’s share of net assets, less any impairment in value. None of the
joint ventures or associates are deemed individually to be material to the Group’s results.
In June 2019, Vesuvius completed the sale of its 50% interest in Angang Vesuvius Refractory Company Limited. Further details are
provided in Note 20.
At 1 January
Additions
Disposals
Share of post-tax profit of joint ventures
Dividends received from joint ventures
Foreign exchange
At 31 December
2020
£m
12.7
—
—
1.1
(2.3)
0.6
12.1
2019
£m
19.1
—
(6.9)
1.0
(0.1)
(0.4)
12.7
The investment in joint ventures and associates includes £11.6m (2019: £12.2m) in respect of joint ventures and £0.5m
(2020: £0.5m) in respect of associates. Dividends received from joint ventures consists of £0.2m from Wuhan Wugang-Vesuvius
Advanced CCR Co., Limited and £2.1m from Wuhan Wugang-Vesuvius Advanced Ceramics Co., Limited.
Joint ventures
Set out below is the summarised financial information in respect of joint ventures.
Revenue
Trading profit
Net finance costs
Profit before tax
Income tax expense
Profit after tax
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
2020
£m
39.7
2.9
0.1
3.0
(0.7)
2.3
7.8
19.1
(4.9)
22.0
2019
£m
50.9
2.3
0.2
2.5
(0.7)
1.8
7.7
19.4
(3.6)
23.5
The table above includes the Group’s share of Wuhan Wugang-Vesuvius Advanced Ceramics Co.,
Limited as set out below.
Revenue
Trading profit
Net finance costs
Profit before tax
Income tax expense
Profit after tax
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
211
2020
£m
34.5
2.4
—
2.4
(0.6)
1.8
7.5
11.7
—
(4.2)
15.0
2019
£m
35.3
2.5
—
2.5
(0.6)
1.9
7.3
12.5
—
(3.0)
16.8
The purpose of the Chinese joint venture companies is to research, develop, manufacture and sell refractory products. The role of
Vesuvius is to provide technical personnel, training and access to the Group’s international sales network.
Name of entity
Registered address
Wuhan Wugang-Vesuvius
Advanced CCR Co., Limited
Gongnong Village Qingshan District, Wuhan, Hubei
Province, 430082, China
Wuhan Wugang-Vesuvius
Advanced Ceramics Co.,
Limited
Gongnong Village Qingshan District, Wuhan, Hubei
Province, 430082, China
Jurisdiction
China
China
2020
% ownership
2019
% ownership
50
50
50
50
Associates
Name of entity
Sapotech Oy
Newshelf 480
Proprietary Limited
Registered address
Jurisdiction
% ownership
Paavo Havaksen tie 5 D, 90570 Oulu, Finland
Finland
44 Main Street, Johannesburg, 2001, South Africa
South Africa
14.9
45
The Group is considered to hold significant influence over Sapotech Oy despite holding less than 20% of its shares because the
agreement under which the Group invested in Sapotech Oy provides that the Group holds one of the four seats on the company’s
board. This allows the Group to participate in policy-making processes and have additional controls over Sapotech Oy’s major
decision-making that do not amount to control but give significant influence.
33.3 Non-controlling interests
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the
parent company and are presented separately in the Group Income Statement and within equity in the Group Balance Sheet,
distinguished from parent company shareholders’ equity.
The total profit attributable to non-controlling interests at 31 December 2020 is £4.5m (2019: £6.2m) of which £2.6m relates
to Vesuvius India Limited (2019: £4.1m). The profit attributable to non-controlling interests in respect of the Group’s other
subsidiaries is not considered to be material.
Name of entity
Registered address
Vesuvius India Limited
P-104 Taratala Road, Kolkata, 700 088, India
Foseco India Limited
922/923, Gat, Sanaswadi, Taluka, Shirur, Pune,
412208, India
Foseco Golden Gate
Company Limited
6 Kung Yeh 2nd Road, Ping Tung Dist, Ping Tung,
90049, Taiwan
Foseco (Thailand) Limited
170/69, 22nd Floor Ocean Tower 1,
Ratchadapisek Road, Klongtoey, Bangkok,
10110, Thailand
Vesuvius Ceska Republika, a.s. Prumyslová 726, Konská, Trinec, 739 61,
Czech Republic
Jurisdiction
India
India
Taiwan
Thailand
Czech
Republic
2020
% ownership
2019
% ownership
55.57
74.98
55.57
74.98
51
74
60
51
74
60
Financial Statements
212 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Group Financial Statements continued
213
33. Investments in Subsidiaries, Joint Ventures and Associates continued
34.2 Transactions with key management personnel
There have been no transactions with key management personnel of the Group other than the Directors’ remuneration.
Directors’ remuneration is disclosed in Note 8 of the Group Financial Statements and in the Directors’ Remuneration Report.
34.3 Transactions with other related parties
There are no controlling shareholders of the Group as defined by IFRS. There have been no material transactions with the
shareholders of the Group.
Pension contributions to Group schemes are disclosed in Note 26 of the Group Financial Statements.
Other than the parties disclosed above, the Group has no other material related parties.
33.3 Non-controlling interests continued
As with Vesuvius plc, all of the above companies have a 31 December year-end. The summarised financial information for
Vesuvius India Limited is presented below:
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non -current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI
Summarised statement of comprehensive income
Revenue
Profit after tax
Profit allocated to NCI
Dividends paid to NCI
Summarised cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/decrease in cash and cash equivalents
34. Related Parties
2020
£m
2019
£m
88.6
(17.8)
70.8
15.7
(2.3)
13.4
84.2
85.4
(15.6)
69.8
16.7
(1.9)
14.8
84.6
37.8
37.9
82.8
5.9
2.6
(0.7)
12.7
(1.4)
(1.7)
9.6
98.3
9.4
4.2
(0.7)
10.4
(3.5)
(1.4)
5.5
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
The related parties identified by the Directors include joint ventures, associates and key management personnel.
To enable users of our financial statements to form a view on the effects of related party relationships on the Group,
we disclose the related party relationship irrespective of whether there have been transactions between the related parties.
34.1 Transactions with joint ventures and associates
All transactions with joint ventures and associates are in the normal course of business. Transactions between the Group and its
joint ventures and associates are disclosed below:
Sales to joint ventures
Purchases from joint ventures
Purchases from associates
Dividends received
Injection of equity funding
Trade payables owed to joint ventures
Trade receivables owed by joint ventures
2020
£m
3.8
26.7
0.3
2.3
—
5.5
0.6
2019
£m
3.2
25.4
0.2
0.1
—
5.3
0.2
Trade payables owed to joint ventures are settled net of trade receivables owed by joint ventures 60 days after the delivery
of goods or services. There are no loans to and from joint ventures.
Financial Statements Company Statement of Changes in Equity
As at 31 December 2020
As at 1 January 2019
Comprehensive income/loss recognised for the year
Recognition of share-based payments
Dividend paid
As at 1 January 2020
Comprehensive income/loss recognised for the year
Recognition of share-based payments
Dividend paid
As at 31 December 2020
215
Share
capital
£m
27.8
—
—
—
27.8
—
—
—
Retained
earnings
£m
831.0
37.3
4.5
(53.9)
818.9
(17.0)
2.4
(8.4)
Notes
10
6
10
6
Total
£m
858.8
37.3
4.5
(53.9)
846.7
(17.0)
2.4
(8.4)
27.8
795.9
823.7
214 Vesuvius plc
Annual Report and Financial Statements 2020
Company Balance Sheet
As at 31 December 2020
Fixed assets
Investment
Total fixed assets
Current assets
Debtors – amounts falling due within one year
Cash at bank and in hand
Total current assets
Creditors – amounts falling due within one year
Bank loans and overdraft
Other creditors
Net current liabilities
Total assets less current liabilities
Net assets
Equity capital and reserves
Issued share capital
Retained earnings
Total shareholders’ funds
Company number 8217766
Notes
7
2020
total
£m
2019
total
£m
1,778.0
1,778.0
1,778.0
1,778.0
1.2
—
1.2
3.6
—
3.6
(0.1)
(955.4)
(954.3)
823.7
(0.6)
(934.3)
(931.3)
846.7
823.7
846.7
27.8
795.9
823.7
27.8
818.9
846.7
8
9
9
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own income statement.
During 2020 the Company recognised a loss of £17.0m (2019: £37.3m profit).
The Financial Statements on pages 214 to 221 were approved and authorised for issue by the Directors on 3 March 2021 and
signed on their behalf by:
Patrick André
Chief Executive
Guy Young
Chief Financial Officer
Financial Statements
216 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Company Financial Statements
1. General Information
Vesuvius plc (‘Vesuvius’ or ‘the Company’) is a public company limited by shares. It is incorporated and domiciled in England
and Wales, United Kingdom, and listed on the London Stock Exchange. The nature of the company is a holding company.
The address of its registered office is 165 Fleet Street, London EC4A 2AE.
2. Basis of Preparation
2.1 Basis of accounting
The Financial Statements of the Company have been prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101) and the Companies Act 2006 as applicable to companies using FRS 101. The Financial
Statements have been prepared under the historical cost convention.
The results of the Company are included in the preceding Group Financial Statements.
In these Financial Statements, the Company has applied the exemptions available under FRS 101 in respect of the following
disclosures:
> A cash flow statement and related notes (IAS 1 para 10(d) and IAS 7)
> Disclosures in respect of capital management and financial instruments (IAS 1 para 134-136 and IFRS 7)
> Disclosures in respect of related party transactions with wholly owned members of the Vesuvius plc Group (IAS 24)
> Disclosures in respect of the compensation of key management personnel (IAS 24 para 17)
> Disclosures in respect of fair value measurements (IFRS 13 para 91-99)
> The effects of new but not yet effective IFRSs (IAS 8 para 30-31)
217
3. Critical Accounting Judgements and Estimates
Impairment of investment in subsidiaries and other companies (Estimate and Judgement)
For the below estimate, the Group does not have any key assumptions concerning the future, or other key sources of estimation
uncertainty in the reporting period that are reasonably expected to have a significant risk of causing a material adjustment to the
carrying amounts of assets/liabilities within the next financial year. Nonetheless, this estimate has the potential to materially vary
over time and is therefore highlighted.
The Company assesses its investments in subsidiaries and other companies for impairment shortly before the Company’s
year-end or whenever events or changes in circumstances indicate that the recoverable amount of the investment could be less
than the carrying amount of the investment. If this is the case, the investment is considered to be impaired and is written down to its
recoverable amount. Judgement is required in the determination of the recoverable amount as the Company evaluates various
factors related to the operational and financial position of the relevant investee business, appropriate discounting and long-term
growth rates. The annual investment impairment test is described in Note 7.3 below.
4. Employee Benefits Expense
Wages and salaries
Social security costs
Share-based payments
Compensation for loss of office
Pension costs – defined contribution pension plans
Total employee benefits expense
2020
£m
2019
£m
2.5
0.5
1.3
—
—
4.3
2.4
0.5
1.3
—
—
4.2
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and
loss account.
The total average number of employees for 2020 was 3 (2019: 3). As at 31 December 2020, the Company had 3 (2019: 3)
employees.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
2.2 Going concern
The Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in
operational existence for a period of at least 12 months from the date of approval of these Financial Statements (disclosed in
Note 2.3 of the Group Financial Statements) and that there is no material uncertainty in respect of going concern. The net current
liabilities are due to amounts owed to subsidiary undertakings, therefore the Directors do not believe that they will affect the
Company’s ability to continue in operational existence. Accordingly, they continue to adopt a going concern basis in preparing
the Financial Statements of the Group and the Company.
2.3 Accounting policy
Taxation
Both current and deferred tax are calculated using tax rates and laws that have been enacted, or substantively enacted, by the
balance sheet date.
Current tax payable is based on the taxable result for the year. Deferred taxation is recognised, without discounting, in respect
of all temporary differences that have originated, but not reversed, at the balance sheet date, with the exception that deferred
taxation assets are only recognised if it is considered more likely than not that there will be suitable future profits from which the
reversal of the underlying temporary differences can be deducted. Provision is made for the tax that would arise on remittance
of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued
as receivable. All other accounting policies are set out within the respective notes.
Borrowings
Borrowings are accounted for in accordance with the accounting policy disclosed in Note 25.1 of the preceding Group Financial
Statements. During the year the Company borrowed and then subsequently repaid borrowings under the Bank of England Covid
Corporate Financing Facility (CCFF). See Note 25.2 of the Group Financial Statements. Interest expense for the year in respect
of these borrowings was £0.7m.
Details of the Directors’ remuneration are disclosed in the Directors’ Remuneration Report on page 134.
5. Audit and Non-Audit Fees
Amounts payable to PricewaterhouseCoopers LLP in relation to audit and non-audit fees are disclosed within Note 6 to the Group
Financial Statements.
6. Dividends
In light of the COVID-19 trading situation, the Directors withdrew their recommendation to pay the final dividend of 14.3 pence
per ordinary share, announced with the publication of the 2019 financial results (2018: £37.2m, equivalent to 13.8 pence per
ordinary share). An interim dividend in respect of the year ended 31 December 2020 of £8.4m (2019:£16.7m), equivalent to 3.1
pence per ordinary share (2019: 6.2 pence per ordinary share), was paid in December 2020 (September 2019).
A proposed final dividend for the year ended 31 December 2020 of £38.6m, equivalent to 14.3 pence per ordinary share, is
subject to approval by shareholders at the Company’s Annual General Meeting and has not been included as a liability in these
Financial Statements. If approved by shareholders, the dividend will be paid on 21 May 2021 to ordinary shareholders on the
register at 16 April 2021.
Financial Statements
218 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Company Financial Statements continued
219
7.
Investment
7.1 Accounting policy
Shares in subsidiaries, associates and joint ventures are stated at cost less any impairment in value. Impairment is assessed in
accordance with Note 17.1 to the Group Financial Statements.
7.2 Analysis of investment
As at 1 January 2020 and 31 December 2020
Shares in
subsidiaries
£m
1,778.0
The subsidiaries, joint ventures and associates of Vesuvius plc, their country of incorporation and percentage ownership is set
out in Note 33 to the Group Financial Statements. With the exception of Vesuvius Holdings Ltd, whose ordinary share capital
was directly held by Vesuvius plc, the ordinary share capital of the other companies was owned by a Vesuvius plc subsidiary as
at 31 December 2020.
10. Share-based Payments
10.1 Accounting policy
The Company operates an equity-settled share-based payment arrangements for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as
total shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-
based conditions, such as growth in headline earnings per share, fair value is measured using the Black-Scholes option pricing
model. The fair value is expensed on a straight-line basis over the vesting period with a corresponding increase in equity.
The cumulative expense recognised is adjusted for the best estimate of the shares that will eventually vest.
The Company recharges its subsidiaries for the IFRS 2 expense relating to their employees on an annual basis.
10.2 Profit and loss account recognition
The Company operates a number of different share-based payment schemes, the main features of which are detailed in the
Directors’ Remuneration Report and Note 27 of the preceding Group Financial Statements. A total of £1.3m was charged to the
profit and loss account in the year with regard to share-based payments (2019: £1.3m).
7.3
Impairment of investment in subsidiaries, associates and joint ventures
10.3 Details of outstanding options
The Group carried out its investment impairment test as at 31 October 2020. The recoverable amount of the investment exceeded
its carrying value, therefore no impairment charges have been recognised. No further impairment indicators were identified up to
31 December 2020.
The cash flow predictions are based on financial budgets and strategic plans approved by the Board. These assume a level
of revenue and profits which are based on both past performance and expectations for future market development and take
into account the cyclicality of the business in which the Group operates. In assessing the cash flows of the parent’s investment in its
subsidiaries, the amounts payable by the parent to subsidiaries are also taken into account. A sensitivity analysis was carried out
using reasonably possible changes to the key assumptions set out in Note 17.2 of the Group Financial Statements. No scenarios of
impairment were identified.
8. Other Creditors
Amounts owed to subsidiary undertakings
Accruals and other creditors
Total amounts falling due within one year
2020
£m
953.5
1.9
955.4
2019
£m
933.0
1.3
934.3
Amounts owed to subsidiary undertakings are interest free, have no fixed date of repayment and are repayable on demand.
9.
Issued Share Capital and Retained Earnings
9.1 Accounting policy
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
9.2 Analysis of issued share capital
The issued and fully paid ordinary share capital of the Company as at 31 December 2020 was 278,485,071 shares of £0.10 each
(2019: 278,485,071 shares of £0.10 each). 7,271,174 (2019: 7,271,174) shares of £0.10 each were held in Treasury and 1,093,098
(2019: 1,718,615) shares of £0.10 each were held by the Vesuvius Group employee share ownership plan trust (ESOP). The
Company has one class of shares in issue, ordinary shares. All shareholders enjoy the same rights in relation to these shares,
including rights in relation to voting at General Meetings of the Company, distribution of dividends and repayment of capital.
9.3 Distributable reserves
The Company had distributable reserves of £795.9m as at 31 December 2020 (2019: £818.9m), subject to filing these Financial
Statements with Companies House. When making a distribution to shareholders, the Directors determine profits available for
distribution by reference to guidance on realised and distributable profits under the Companies Act 2006 issued by the Institute
of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The profits
of the Company have been received in the form of dividends from subsidiaries and through Court-approved capital reduction.
The availability of distributable reserves in the Company is dependent on those dividends meeting the definition of qualifying
consideration within the guidance and on available cash resources of the Group and other accessible sources of funds. The
distributable reserves are subject to any future restrictions or limitations at the time such distribution is made.
Outstanding awards
As at
1 Jan 2020
no.
Granted
no.
Exercised
no.
Forfeited/
lapsed
no.
Expired
no.
As at
31 Dec 2020
no.
Awards
exercisable
as at
31 Dec
2020
no.
Weighted
average
outstanding
contractual
life of
awards
years
LTIP
872,737 481,238 (243,276)
Weighted average exercise price
nil
nil
Other plans
76,920
12,389
Weighted average exercise price
nil
nil
nil
—
nil
—
nil
—
nil
nil 1,110,699
nil
nil
nil
nil
89,309
nil
8.4
0.5
—
—
—
—
For options exercised during 2020, the market value at the date of exercise ranged from 351 pence to 395 pence.
Outstanding awards
As at
1 Jan 2019
no.
Granted
no.
Exercised
no.
Forfeited/
lapsed
no.
Expired
no.
As at
31 Dec 2019
no.
Awards
exercisable
as at
31 Dec
2019
no.
Weighted
average
outstanding
contractual
life of
awards
years
LTIP
968,965 327,560 (423,788)
Weighted average exercise price
nil
nil
Other plans
28,246
48,674
Weighted average exercise price
nil
nil
nil
—
nil
—
nil
—
nil
— 872,737
nil
—
nil
nil
76,920
nil
7.4
1.2
—
—
—
—
Range of
exercise
prices
pence
n/a
n/a
n/a
n/a
Range of
exercise
prices
pence
n/a
n/a
n/a
n/a
For options exercised during 2019, the market value at the date of exercise was 613 pence.
Details of market performance conditions are included in the Directors’ Remuneration Report.
As at 31 December 2020, the total options exercisable by all Group employees over the £0.10 ordinary shares and capable of
being satisfied through new allotments of shares or through shares held by the Company’s ESOP were as follows:
Long-Term Incentive Plan
Medium-Term Incentive Plan
Deferred Share Bonus Plan
Years of
award/grant
2018-2020
2019-2020
2018-2020
Option
prices
Latest year
of exercise/
vesting
Number
of options/
allocations
outstanding
nil
nil
nil
2030
1,717,225
2022
2023
545,722
89,309
Financial Statements 221
12. Related Parties
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are wholly owned Company subsidiaries are not disclosed in this Note.
The related parties identified by the Directors include joint ventures, associates and key management personnel. To enable
users of our financial statements to form a view on the effects of related party relationships on the Company, we disclose the
related party relationship when control exists, irrespective of whether there have been transactions between the related parties.
Transactions with joint ventures and associates
All transactions with joint ventures and associates are in the normal course of business. Further details of joint ventures and
associates are included in Note 33 to the Group Financial Statements.
Transactions with key management personnel
There have been no transactions with key management personnel of the Company other than the Directors’ remuneration.
Directors’ remuneration is disclosed in the Annual Report on Directors’ Remuneration.
Transactions with other related parties
There are no controlling shareholders of the Company as defined by IFRS. There have been no material transactions with the
shareholders of the Company.
Pension contributions are disclosed in Note 26 to the Group Financial Statements.
Other than the parties disclosed above, the Company has no other material related parties.
220 Vesuvius plc
Annual Report and Financial Statements 2020
Notes to the Company Financial Statements continued
10. Share-based Payments continued
10.3 Details of outstanding options continued
Fair value of options granted under the LTIP during the year:
Fair value of options granted
Share price on date of grant
Expected volatility
Risk-free interest rate
Exercise price (per share)
Expected term (years)
Expected dividend yield
2020
EPS element
TSR element
392p
392p
n/a
n/a
nil
3
nil
242p
392p
30.3%
0.2%
nil
3
nil
Vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return (TSR) performance relative to that
of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the remaining 50% of shares awarded
is based on headline EPS growth.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years (2019:
2.8 years) prior to the grant date for the March 2020 grant. The risk-free rate of return was assumed to be the yield to maturity on
a UK fixed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration Committee,
award holders receive the value of dividends that would have been paid on their vested shares in the period between grant and
vesting. Accordingly, there is no discount to the valuation for dividends foregone during the vesting period.
11. Contingent Liabilities
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its
Group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company
treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required
to make a payment under the guarantee. Guarantees provided by the Company as at 31 December 2020 in respect of the
liabilities of its subsidiary companies amounted to £354.0m (2019: £419.4m), which includes guarantees of $146.0m and
€180.0m (2019: $200.0m and €130.0m) in respect of US Private Placement Loan Notes and £53.5m (2019: £125.8m) in respect
of drawings under the syndicated bank facility; together with £32.9m (2019: £32.9m) in relation to a guarantee provided to the
Company’s UK subsidiary which acts as Trustee for the Group’s UK pension plan. The guarantee is over all present and future
pension liabilities of the plan and the contingent liability amount represents the net deficit on a buy-out basis as shown in the most
recent triennial valuation.
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Several of the Company’s subsidiaries are parties to legal proceedings, certain of which
are insured claims arising in the ordinary course of the operations of the company involved, and are aware of a number of issues
which are, or may be, the subject of dispute with tax authorities. Whilst the outcome of litigation and other disputes can never
be predicted with certainty, having regard to legal advice received and the insurance arrangements of the Company and its
subsidiaries, the Directors believe that none of these matters will, either individually or in the aggregate, have a materially
adverse effect on the Company’s financial condition or results of operations.
Financial Statements
222 Vesuvius plc
Annual Report and Financial Statements 2020
223
Five-Year Summary: Divisional Results from Continuing Operations
Shareholder Information (unaudited)
2020
2019
2018
2017
2016
Enquiries
Share Dealing Service
Steel Division
Revenue
Trading profit
Return on sales
Employees: year-end
Foundry Division
Revenue
Trading profit
Return on sales
Employees: year-end
£m
£m
%
no.
£m
£m
%
no.
1,045.4
1,195.3
1,236.7
1,148.7
76.4
7.3
7,619
412.9
25.0
6.1
2,735
120.1
10.0
7,677
515.1
61.3
11.9
2,819
128.3
10.4
7,766
561.3
68.9
12.3
3,043
100.4
8.7
7,930
535.2
65.1
12.2
3,080
942.0
79.2
8.4
7,782
459.4
54.1
11.8
3,058
The share register is managed by Equiniti, who can be contacted
if you have any Vesuvius shareholding queries.
Equiniti Limited
Aspect House, Spencer Road
Lancing, West Sussex, BN99 6DA
United Kingdom
Telephone*
0371 384 2335
+44 121 415 7047
(UK only)
(Outside the UK)
Website www.shareview.co.uk
Email customer@equiniti.com
*For the hard of hearing, Equiniti offers a Textel service which
can be accessed by dialling 0371 384 2255 (or +44 121 415 7028
if calling from outside the UK).
Any shareholder enquiries not related to the share register should
be sent by email to shareholder.information@vesuvius.com or by
letter to the Company Secretary at the registered office.
Registered Office and Group Head Office
Vesuvius plc
165 Fleet Street
London EC4A 2AE
United Kingdom
The Company’s shares can be traded through most banks,
building societies or stockbrokers. UK resident shareholders
can also buy and sell shares by telephone or online using
Equiniti’s Shareview dealing service.
Telephone 0345 603 7037 between 8.00 am and 4.30 pm on any
business day (excluding public holidays in England and Wales)
Website www.shareview.co.uk/dealing
Email sharedealing@equiniti.com
The shareholder reference number (at the top of your share
certificate or on your dividend confirmation) is required to use
the dealing service.
ShareGift
ShareGift, the charity share donation scheme, is a free service
for shareholders wishing to give shares to a wide range of UK
charitable causes. It is particularly useful for those shareholders
who may wish to dispose of a small quantity of shares where the
market value makes it uneconomic to sell on a commission basis.
Further information can be obtained from ShareGift.
Telephone +44 (0)20 7930 3737
Website www.sharegift.org
Email help@sharegift.org
Telephone +44 (0)20 7822 0000
Dividend Reinvestment Plan
Registered in England & Wales No. 8217766
LEI: 213800ORZ521W585SY02
Vesuvius Website
Shareholder and other information about the Company, including
details of the current and historic share price, can be accessed on
the Vesuvius website, www.vesuvius.com.
Shareview and Electronic Communication
Equiniti’s website, www.shareview.co.uk, enables shareholders to
access details of their shareholdings online. The Shareview
website provides answers to frequently asked questions and
information useful for the management of investments. To access
online information on your shareholding, you will require your
shareholder reference number, which can be found at the top of
your share certificate or on your dividend confirmation.
Shareholders can register to receive shareholder communications
electronically, including the Company’s Annual Report and
Financial Statements, rather than in paper form, using Shareview.
The registration process requires shareholders to input their
shareholder reference number. To receive shareholder
communications in electronic form, shareholders should select
‘email’ as their mailing preference. Once registered, shareholders
will receive an email notifying them each time a shareholder
communication has been published on the Vesuvius website.
Equiniti offers a dividend reinvestment plan, through which
shareholders can use their Vesuvius cash dividends to buy
additional shares in Vesuvius. Further details, including how to
sign up, and the terms and conditions of the plan, are available
from the Share Dividend Helpline.
Telephone 0371 384 2268 (or +44 121 415 7173 if calling from
outside the UK)
Website www.shareview.co.uk
Overseas Payment Service
Equiniti provides a dividend payment service in over 90 countries
that automatically converts payments into local currency and
pays the funds into a shareholder’s bank account. Further details,
including an application form and the terms and conditions of the
service, are available from Equiniti.
Telephone +44 (0)121 415 7047
Website www.shareview.co.uk
By post Equiniti, Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA, United Kingdom
Please quote Overseas Payment Service, the Company’s name
and your shareholder reference number.
Financial Calendar
2021 Annual General Meeting
12 May 2021
*
Lines are open Monday to Friday 9.00 am to 5.00 pm (excluding public
holidays in England and Wales).
Financial Statements
224 Vesuvius plc
Annual Report and Financial Statements 2020
225
Shareholder Information (unaudited) continued
Glossary
Analysis of ordinary shareholders
Investor type
Shareholdings
As at 31 December 2020
Number of holders
Percentage of holders
Percentage of shares held
Private
2,395
81.94%
0.46%
Institutional
and other
528
18.06%
99.54%
Total
2,923
100%
100%
1–1,000
1,001– 50,000
50,001– 500,000
500,001+
2,300
78.69%
0.12%
423
14.47%
1.29%
131
4.48%
8.76%
69
2.36%
89.83%
Share Fraud – Spot the Warning Signs
Reporting a Scam
Investment scams are designed to look like genuine investments.
Have you been…
> Contacted out of the blue
> Promised tempting returns and told the investment is safe
> Called repeatedly
> Told the offer is only available for a limited time?
If you suspect that you have been approached by fraudsters
please tell the FCA Helpline by contacting them on 0800 111 6768
(or +44 20 7066 1000 from outside the UK) or by using the share
fraud reporting form at www.fca.org.uk/scams, where you can
find out more about investment scams.
If you have lost money to investment fraud, you should
report it to Action Fraud on 0300 123 2040 (or +44 300 123 2040
from outside the UK) or online at www.actionfraud.police.uk.
If so, you might have been contacted by fraudsters.
Find out more at www.fca.org.uk/scamsmart.
How to Avoid Share Fraud
1. Reject cold calls
If you have been contacted by telephone, email or post, or via a
third party or at a seminar or exhibition, with an offer to buy or sell
shares, the chances are that it’s a high-risk investment or a scam.
You should treat any offer with extreme caution. The safest thing
to do is to ignore the approach and if you were contacted by
phone to hang up on the call.
2. Check if the firm is authorised by the Financial Conduct
Authority (FCA) and recorded on the Financial Services register
at https://register.fca.org.uk/
The Financial Services Register is a public record of all the firms
and individuals in the financial services industry that are, or have
been, regulated by the Prudential Regulation Authority and/or
the FCA. If there are no contact details on the Register or if the
firm claims the Register is out of date, call the FCA Helpline on
0800 111 6768.
If you’re dealing with an overseas firm, you should check with the
regulator in that country and also check the scam warnings from
foreign regulators.
3. Get impartial advice
Think about getting impartial financial advice before you hand
over any money. Seek advice from someone unconnected to the
firm that has approached you.
Five Steps to improve housekeeping and therefore
workplace safety and efficiency: separate, sort,
shine, standardise and sustain
FTSE 250
Equity index whose constituents are the
101st to 350th largest companies listed on
the London Stock Exchange in terms of their
market capitalisation
5S
8D
AGM
CO2
CO2e
Code
Eight Disciplines: an eight-step methodology
to resolve customer, supplier and internal
quality issues
Annual General Meeting
Carbon dioxide
Carbon dioxide equivalent
The UK Corporate Governance Code
Company
Vesuvius plc
COVID-19 or
COVID-19
pandemic
Coronavirus disease (COVID-19), the infectious
disease caused by the newly discovered
coronavirus, and the pandemic that has arisen
from this
DSBP
DTR
EBITDA
Deferred Share Bonus Plan
The Disclosure and Transparency Rules of the
UK Financial Conduct Authority
Trading profit before depreciation and
amortisation of non-acquired intangible charges
EMEA
Europe, Middle East and Africa
EPS
EU
FRC
FRS
Earnings per share
European Union
Financial Reporting Council
Financial Reporting Standards
FX
GHG
Foreign exchange
Greenhouse gas
Group
Vesuvius plc and its subsidiary companies
IAS
IFRS
KPI
LTI
LTIFR
International Accounting Standard
International Financial Reporting Standards
Key Performance Indicator
Lost time injury
Lost time injury frequency rate, a KPI which
calculates the number of LTIs per million
hours worked
Median
The middle number in a sorted list of numbers
NAFTA
The area to which the North American Free
Trade Agreement applies
Ordinary
share
An ordinary share of 10 pence in the capital of
the Company
R&D
TSR
Research and development
Total shareholder return
Turbo S
The Vesuvius safety training programme
UK GAAP
UK Generally Accepted Accounting Principles
VSP
Vesuvius Share Plan
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Vesuvius plc
165 Fleet Street
London
EC4A 2AE
T +44 (0)20 7822 0000
www.vesuvius.com
Visit our online annual report at
report2020.vesuvius.com
© 2020 Friend Studio Ltd
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