Strategy Delivers

Transcription

Strategy Delivers

Strategy
Delivers
British Polythene Industries PLC
Annual Report and Accounts 2015
BPI, a leading global producer of
polythene films, supplies over 270,000
tonnes each year for a diverse range of
everyday applications. In addition to the
manufacture and development of high
performance films, BPI is also Europe’s
largest recycler of polythene waste
recycling around 65,000 tonnes annually.
Financial Highlights
Operating profit per tonne
Profit before tax
Adjusted diluted earnings per share
£105
£23.1m
76.58p
2015
105
2014
97
2013
89
2012
2010
23.1
2014
22.2
2013
83
2011
2015
18.5
2012
79
2011
64
2010
2015
76.58
2014
66.21
2013
17.0
59.09
2012
16.1
2011
15.4
2010
51.55
47.83
44.21
Profit after interest before net pension financing
Dividend per share
Diluted earnings per share
£26.3m
18.0p
63.82p
2015
26.3
2014
25.1
2013
2012
2011
2010
21.1
19.7
18.9
18.4
2015
18.0
2014
16.0
2013
14.5
2012
2011
2010
13.2
12.5
11.5
Front cover: State-of-the-art coextrusion line installed at Ardeer in 2015 as part of the Group’s ongoing investment programme.
2015
63.82
2014
2013
2012
2011
2010
57.53
43.23
38.93
43.39
47.51
Strategic Report
Directors’ Report and Corporate Governance
Our Markets
Financial Statements
Strategic Report
Agriculture and Horticulture
Farmers and agricultural contractors all around the world
turn to BPI’s agricultural film range to enhance crop yield
and quality.
Find out more on page 12 Healthcare and Waste Services
Tried and tested, BPI is recognised as an established and
trusted supplier with a track record of meeting the
specialist needs of these sectors.
Find out more on page 14 Construction
BPI’s specialist knowledge has led to the widespread
adoption of its high performance building films within
the construction industry.
Find out more on page 16 Industrial
BPI industrial films are employed by some of Europe’s
biggest names in petrochemicals, minerals and speciality
chemicals to secure high value goods.
Find out more on page 18 04
07
08
09
10
12
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27
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Directors’ Report and
Corporate Governance
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132
From busy shop floors to the rapid pace of the online
supply chain, BPI provides robust packaging solutions for
goods of all shapes and sizes.
Board of Directors and Advisers
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
103
Non-Food Retail
Chairman’s Statement
Our Business Model
Our Strategy and Business Objectives
Overview of Operations
The Manufacturing Process
Our Markets
Market Overview
Statement of Risk Factors
Key Performance Indicators
Chief Executive’s Review
Financial Review
Corporate Social Responsibility Review
134
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Five Year Record
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Company Balance Sheet
Company Cash Flow Statement
of Changes in Equity
Company Statement
Notes to the Consolidated
and Company Financial Statements
Appendix 1: List of Subsidiary Companies
and Related Undertakings
Information for Shareholders
Cautionary statements
Find out more on page 20 Retail Food Chain
Trusted to protect the products of established household
names, BPI’s retail food range offers a host of benefits
that don’t cost the earth.
Find out more on page 22 This document is addressed to shareholders of British Polythene
Industries PLC and has been prepared solely to provide information
to assist them in assessing the Company’s strategies and their
potential for success, and to inform them of the Company’s
performance during the year ended 31 December 2015.
This document contains the Strategic Report, the Directors’
Report, the Financial Statements and the Independent Auditor’s
Report. This document contains forward-looking statements
based on knowledge and information available to the Directors
at the date the document was prepared. Although the Directors’
expectations are based on reasonable assumptions, these
statements should be treated with caution due to the inherent
uncertainties underlying such forward-looking information and
any statements about the future outlook may be influenced by
factors that could cause actual outcomes and results to be
materially different.
01
Hardenberg Investment
Programme
The site at Hardenberg in the Netherlands is the
subject of significant investment in state-of-the-art
extrusion and printing equipment.
The site specialises in a range of high quality
printed packaging for Industrial and Consumer
markets and has benefitted from the recent
installation of two replacement eight-colour
printing presses (pictured). In 2015, we approved
an upgrade of the extrusion equipment in our
heavy duty factory and the building work was
completed and the first extruder installed.
02
We have also authorised the installation of
an additional extruder for form fill and seal
films (‘FFS’) to meet growing demand in
the petrochemical sector as we secured
additional business.
British Polythene Industries PLC Annual Report and Accounts 2015
Strategic Report
Strategic
Report
Introduction from
Cameron McLatchie,
Chairman
I am pleased to present the Group’s
Strategic Report for the year ended
31 December 2015, set out on pages 03
to 53, which provides a comprehensive
review of the Group’s business model,
operations, strategy and performance.
The Strategic Report incorporates
the Chairman’s Statement, the Chief
Executive’s Review, the Financial Review,
the Corporate Social Responsibility Review
and the Statement of Risk Factors.
The Strategic Report has been approved
by the Board of Directors on 26 February
2016 and signed on its behalf by:
Cameron
McLatchie
Chairman
In this section:
Arthur van der Graaf, First Printing Operator,
bpi.indupac, Hardenberg.
04
07
08
09
10
12
24
27
30
32
40
46
Our Business Model
Our Markets
Market Overview
Financial Review
03
Our results have shown an increase for the seventh
consecutive year, and operating profits, before
restructuring costs, are over 7% ahead of 2014.
This outcome is extremely encouraging given turbulent
polymer costs during the first half, the adverse impact of
currency on our European profits and a year which delivered
a marginal overall reduction in volumes. The Board is
recommending the previously indicated increased final
dividend of 12.0p per share (2014: 11.0p), making a total
dividend for the year of 18.0p, an increase of 12.5%.
Results
Total volumes reduced by less than 1% to
272,000 tonnes, reflecting reduced demand from
certain sectors in the UK, including the loss of an
unprofitable contract to supply refuse sacks to a
major retailer. Within these numbers, we saw an
increase in demand for silage stretchwrap of just
over 2%.
On sales of £468 million (2014: £499 million),
reflecting lower average polymer costs for the
year and the impact of currency translation
on our European sales, operating profit, before
restructuring costs, increased to £28.6 million
(2014: £26.7 million). This improvement can be
attributed to the return to profit of our North
American operation, as previously reported
difficulties with plant installation were rectified.
UK and European returns were impacted by
the turbulent raw material costs in the first half.
However, UK returns still increased year on year
as a result of a strong performance from our
recycling operations. European returns increased
by 7% on a local currency basis but exchange
translation negated these improved returns.
During the year we closed a stretchfilm plant
in Widnes and made redundancies at plants
in Worcester and Sevenoaks, resulting in a
restructuring charge of £1.1 million (2014: nil).
Finance charges reduced to £1.2 million
(2014: £1.6 million), as average borrowings were
slightly lower during the year, and we had the first
full year of the more favourable terms negotiated
in the first half of 2014. The calculated charge
for net retirement benefit financing rose to
£3.2 million (2014: £2.9 million).
04
After the above charges, profit before taxation
rose to £23.1 million (2014: £22.2 million).
Statutory diluted earnings per share rose by
11% to 63.82p (2014: 57.53p) and adjusted
earnings per share increased by 16% to 76.58p
(2014: 66.21p) both assisted by lower tax charges.
Dividend
As indicated at the time of the interim accounts
in September, in an attempt to rebalance the
dividend payments, there was an increase in the
interim dividend to 6.0p (2014: 5.0p). We further
indicated at that time that it was the Board’s
intention to recommend an increase in the final
dividend to 12.0p (2014: 11.0p), making a total
of 18.0p per share for the year (2014: 16.0p).
We can confirm that this is now the Board’s
recommendation, and that, if approved at the
AGM on 10 May, this final dividend of 12.0p
per share will be payable on 13 May 2016 to
shareholders on the register at the close of
business on 11 March 2016.
Cash Flow and Borrowings
Operating cash flow, before adjustments for
payments to the Pension Scheme and changes
in working capital, increased to £43.6 million
(2014: £42.7 million).
As previously reported, and noted in more detail
below, we made a significant additional payment
of £11.2 million into the UK Defined Benefit
Pension Scheme. This significantly reduced the free
operating cash flow in 2015, but has had a positive
transformational impact on the consolidated
balance sheet, at the same time improving the
security of the Pension Scheme. Total equity has
increased to £74.9 million (2014: £38.9 million).
As a consequence of the above payment,
borrowings increased to £32.1 million
(2014: £24.1 million).
As matters currently stand, and absent acquisitions,
the free cash flow from 2016 and the proceeds of
the sale of our Chinese operation, details of which
are given below, should result in a significant
reduction in borrowings by the end of 2016.
Group Pension Scheme
The IAS 19 deficit in the UK Defined Benefit
Pension Scheme reduced to £53.2 million
(£47.0 million net of tax) at 31 December 2015.
The significant reduction from £99.1 million
(£83.1 million net of tax) at the beginning of
the year is due primarily to the change in inflation
index for pensions in payment from the Retail
Prices Index to the Consumer Prices Index (‘CPI’).
This change reflects the Government’s view that
CPI is the most appropriate measure of inflation
for pensions in payment due to the adoption of
CPI for state, public sector and statutory minimum
pension increases and had the impact of reducing
the reported IAS 19 deficit by £27.6 million. To
increase the security of pensions for Scheme
members, the Company also made a one-off
payment of £11.2 million to the Scheme.
Group Development
Capital expenditure increased to £17.6 million
(2014: £16.6 million), compared to depreciation
of £15.0 million. We anticipate spending at least
that amount in 2016. Our capital programme
is producing considerable gains in output,
quality and energy efficiency, particularly
from extrusion equipment.
During the year, we took a number of actions to
improve the performance of our UK business.
In October, we announced the sale of our
Promopack reprographic business at Heanor to
Reprographic Systems Limited for £0.2 million.
Despite providing an excellent service, this business
had failed to make a return for a number of years.
In November, we announced the closure of a
stretchfilm plant at Widnes, with the transfer
of production to a larger plant in Leominster.
Strategic Report
“Our capital programme is producing considerable
gains in output, quality and energy efficiency,
particularly from extrusion equipment.”
We also reduced numbers employed at VMB, our
Consumer facility at Worcester and in our Films
business at Sevenoaks, in order to align staffing
levels against current demand at these locations.
The above actions resulted in a restructuring
charge of £1.1 million in this year’s accounts and
should enhance future reported results by around
£0.5 million.
Post Balance Sheet Events
We announced on 27 January that we have signed
an agreement to sell our PRC subsidiary, BPI China,
to a subsidiary of Amcor, the Australian based
packaging company. The disposal is subject to the
approval of the PRC authorities, and is expected to
complete in the first half of 2016.
Cameron McLatchie,
Chairman
£17.6m
Invested in plant and equipment
in 2015. We anticipate spending
at least that amount in 2016.
The consideration, payable in US dollars, including
an amount for working capital, is estimated to
be approximately £9.4 million with an estimated
£6.4 million upon completion. The balance will
be payable in cash in instalments, following the
agreement of working capital and satisfaction
of certain post-completion arrangements, all of
which are expected to take place within the next
12 months. The proceeds will be used to reduce
borrowings. Our PRC subsidiary was established
in 1993 to produce low cost carrier bags for the
UK retail market. After selling the retail carrier bag
business in 2002, BPI China diversified into other
products for the UK market. Latterly the Group
invested in high quality printing and conversion
equipment to supply the Australasian market but
progress has been slower than expected, despite an
excellent record with product quality and service.
Total sales of the business, including sales to BPI in
the UK of £6.1 million, were £9.6 million in the year
to 31 December 2015 with a very small operating
loss. Approximately 80% of sales to BPI in the UK
are expected to continue after completion. The
estimated gain on disposal which will be included in
the accounts for year ended 31 December 2016 will
be approximately £4 million comprising property
and foreign exchange gains.
This disposal will remove uncertainty over future
results from China, where, despite having an
excellent workforce and a business well-equipped
for expansion, we had a very small footprint and
sales presence.
05
Chairman’s Statement continued
Jim Murray, Print Foreman, bpi.visqueen, Ardeer.
Raw Material
At the time of writing the annual statement
for 2014, we indicated that polymer costs had
eased and that, based on our supplier’s falling
feedstock costs, it was generally envisaged that
polymer costs would continue to ease during
2015. As subsequently reported during the year,
this assessment proved spectacularly wrong, with
polymer costs increasing by some 50% between
early March and the end of June, the greatest
short-term increase that our industry has ever
experienced. We have already reported the
challenges this presented to our industry, and the
short-term impact on our margins last summer.
Although polymer prices have subsequently eased
back, they are still some 20% above last February,
despite the continued fall in the oil price, with
producers’ margins over oil at very high levels.
Middle East polymer producers continue to favour
the Far East market, due to logistics costs and duty
when importing product into Europe, and we still
await new North American capacity, based on
shale gas, coming on-stream.
It remains our view that polymer in Europe is
overpriced and that we will see reductions in the
medium to longer term. However, until we can
see a few more shipments of polymer heading
towards Europe, we feel that European polymer
producers may be able to take advantage of the
current market position, particularly if there are
any further plant outages.
Your Board
Despite the Board’s unanimous view that, after
eleven years of service, Hamish Grossart remains
as independent as ever, continuing to challenge
executives and fellow Board members alike,
in accordance with corporate governance
guidelines, we have agreed with Hamish
that he will step down from the Audit and
Remuneration Committees as from this year’s
AGM. He will also demit office as chair of
the Nomination Committee and as Senior
Independent Director. He will remain as
Deputy Chairman and as a member of
the Nomination Committee.
Prospects
2016 has started well. Our continuing investment
programme in new plant, and action taken to bring
facilities into line with demand are both designed
to assist improved operating performance. We also
expect continued success in supplying agricultural
film markets. In addition the continued weakness
of sterling should enhance our results, firstly
through translation of our significant overseas
earnings and secondly by improving the
competitiveness of our UK business.
We continue to review a number of acquisition
opportunities, both in the UK and on mainland
Europe. It remains to be seen whether we can
bring any of these to conclusion, but opportunities
appear greater than they have been for some time.
Your Board is therefore confident that 2016 will
deliver further progress.
David Warnock has agreed to chair the
Remuneration Committee, Ron Marsh has
agreed to chair the Nomination Committee
and Ian Russell has agreed to take the position
of Senior Independent Director.
Cameron McLatchie
Chairman
26 February 2016
06
Strategic Report
Our Business Model
British Polythene Industries is a leading global manufacturer of polythene
films. Every day businesses around the world choose BPI products to grow,
package or protect their products.
With an established international reputation for providing high quality products and services,
our products are in use across a range of market sectors. Excellent customer service is at the
heart of our business as testified by many long-standing customer relationships.
British Polythene Industries is
a major purchaser of polythene
resin, the raw material used
to manufacture our wide
range of films.
We use our combined Group volumes to ensure
we source and purchase the most technically
advanced raw materials, at the most competitive
prices, whilst maintaining positive trading
partnerships with our suppliers ensuring
reliable long-term supply.
We have long-term business relationships with
many of the world’s largest polymer suppliers.
We extrude, print and convert
polythene into a diverse range
of products using state-of-theart processing equipment.
equipment uses the latest technologies to
achieve maximum manufacturing outputs,
maximising energy and material efficiency.
Our workforce is highly skilled and receives
ongoing training in the latest technology.
Our strategy of continual long-term capital
investment means we maintain competitive
advantage by ensuring our production
BPI operates in a large
number of markets.
Our wide ranging and comprehensive product
range meets the demanding needs of many
thousands of customers across the world, with
46% of our total Group sales to destinations
outside the UK.
We are one of the largest
recyclers of waste polythene
film in Europe.
Our ongoing investment policy, linked
to our experience of how to operate and
manage successful polythene recycling and
remanufacturing businesses, means we have
Innovation and new product
development has always been
one of BPI’s strengths.
Indeed, today many of our successful
products are based on our own new product
development over the last thirty years. We
work in partnership with leading universities,
BPI has a flexible and responsive logistical
infrastructure designed to deliver first class
quality and service to our customers around
the world.
been able target our investments into areas
which help us access more heavily contaminated
waste plastic films. Many of these materials
had previously been exported for recycling
overseas. Retaining this waste for reprocessing
in one of our UK recycling factories is not
only good business sense, but also makes
environmental sense.
machinery manufacturers, raw material suppliers
and customers. Our investments and research
into the development of new materials and
processes aim to ensure we maintain our
position as a leading innovator in our field.
Second from top: William McGill,
Extrusion Manager, bpi.visqueen, Ardeer.
07
Our strategy remains broadly unchanged in that we
are a focused polythene film business and intend to
develop our market leading positions as:
A leading global supplier of agricultural film products.
The largest recycler of waste polythene film in Europe.
A leading European supplier of packaging for the protection of food and other goods.
The key elements
of our strategy
are to:
•
Our primary
financial
objectives
are to:
•
Our business
objectives are:
•
•
•
•
•
•
•
Our strategy and
business objectives
will take account
of our belief that:
•
•
Develop the growth opportunities available in
agricultural markets, recycling, packaging for
printed consumer and industrial products and
food-related packaging.
Further develop our mainland European and
North American operations.
•
Grow operating profits.
Grow earnings per share.
At least maintain our Return on Capital Employed.
•
To provide first class customer service by delivering
high quality products at competitive prices.
To be number 1 or number 2 in the major markets
in which we operate.
To achieve organic growth in product areas and
market sectors that continue to develop.
To invest in modern manufacturing equipment
to enable us to develop new products, expand
capacity in growing markets and improve added
value and production efficiencies.
•
The health and safety of our employees is paramount
and the prevention of accidents involving personal
injury is essential to the successful operation of
our business.
As a leading manufacturer and supplier of polythene,
we have a responsibility to operate with due concern
for the environment and communities in which we
live and work, to minimise any adverse impact of our
activities on that environment and to make a positive
contribution to those communities.
•
•
•
•
Continue the development of new added
value products.
Consider acquisition opportunities.
Maintain a strong financial position.
Grow dividend per share.
To aim for continuing product development
to ensure we remain at the leading edge of
technical advances.
To seek continual improvement in our operational
performance and reduction in our cost base to
ensure we remain competitive.
The development and retention of our people
is vital to the future success of our business.
Further information on the implementation of strategy and performance against strategic objectives is given in the Chief Executive’s Review on pages 32 to 39.
08
Strategic Report
Our business is resilient thanks to a wide geographic
customer base supporting diverse end user markets.
End Use Markets
Turnover by Sector
We sell our products to a large number of customers in a wide variety
of market sectors in more than 50 countries worldwide.
Turnover by Destination
BPI supplies customers in more than 50 countries
with 45% of sales outside the UK.
32%
Agriculture and
Horticulture
55%
UK
5%
Germany
27%
Retail Food Chain
7%
Belgium
4
%
Republic
of Ireland
13%
Industrial
6%
Netherlands
3%
USA
14%
Construction
6%
France
2%
Canada
8%
Healthcare and
Waste Services
4%
Scandinavia
8%
Others
6%
Non-Food Retail
Geography
The Group operates in three geographic regions,
UK & Ireland, Mainland Europe and North America.
Employees by Region
During 2015, the Group employed
on average 2,207 people.
1. Turnover
65% 29% 6%
1 ,561
UK & Ireland
2. Operating profit
134
China
(before net restructuring)
415
Mainland Europe
41% 55% 4%
97
North America
3. Operating assets*
66% 28% 6%
UK &
Ireland
*
Mainland
Europe
North
America
Operating assets comprise non-current assets (excluding deferred tax and
retirement benefit assets), inventory, trade and other receivables.
The Impact of Thinner and Stronger Films
Sales Volume
KTonnes
Square Metres (‘000’s)
Historically the Group’s volumes have been
expressed in tonnage terms. For a number of
years the average thickness of products has been
reducing due to a combination of the development
of thinner and stronger films (downgauging)
and customers moving into lighter products.
2015
2014
2013
2012
272
274
271
262
8,408,122
8,479,826
8,430,558
8,113,204
This change has been driven by the desire
to reduce the weight of packaging, to take
advantage of cost benefits and advances in
packing and extrusion technology.
In the table opposite, the Group’s volumes for
the last four years are also expressed in terms of
square metres. As the products become thinner,
the surface area remains unchanged enabling a
comparison of the quantity of product sold which
is unaffected by the impact of downgauging.
The production of thinner and stronger films
requires the use of more advanced equipment
and polymers. The advantage of this change for
customers is measured in both environmental and
cost-benefit terms. The Group’s ongoing capital
expenditure programme supports this by investing
in state of the art extrusion and MachineDirection-Orientation equipment.
09
The main manufacture process of the
Group is blown film extrusion. This can
be followed by the printing of the film
and also conversion into bags.
7
Nip Rollers
The film is pulled
upwards at a controlled
speed determining the
final thickness of the
film. The round bubble
has been formed by nip
rollers to a flat web,
ready for winding.
6
Flattening/Gusset
As the bubble
approaches the nip rolls,
it is gradually formed by
rollers or slatted boards
into a flat web. During the
flattening process, gusset
boards may be inserted
to form side folds.
5
Bubble
The molten tube is
cooled rapidly with
air, at the same time
inflated and blown into
a round bubble which is
drawn upwards by the
nip rollers.
1
Resin
Various Polyethylene
resins in the form of
granules of virgin and
recycled polymer,
colour masterbatches
and additives are our
raw materials. The
granules are similar in
size and shape to grains
of rice and are delivered
by bulk tanker and
stored in silos. Smaller
quantities are supplied
in 25kg sacks.
2
Blending
Selected materials are
accurately pre-blended
in specific amounts
prior to extrusion.
Up to 6 materials
can be blended into
a single layer.
3
Extruder
The granules are
processed under heat
and pressure by an
extruder screw to
provide a homogeneous
melt. One coextrusion
line may have up to
9 extruders.
10
4
Die
The melt is forced
evenly through complex
channels within the die
to form a round tube
consisting of up to 9
individual layers.
Strategic Report
Products
The finished product can be in the form of reels of flat film or tubing,
plain or printed and bags and sacks, both plain and printed.
8
9
Winding
The flat web is wound
up on reels as a tube.
Alternatively, the web
can be slit in various
ways to make multiple
sheet rolls.
10
Printing
The rolls of film are
printed and rewound
using the Flexographic
printing process in up
to 10 colours.
Bag Making
The rolls of printed film
are cut and welded into
polythene sacks by a
bag making machine.
Marlies HorstmannWubkes, Inspection
and Packaging Operator,
bpi.indupac, Hardenberg.
11
Our Markets
Agriculture and
Horticulture
Farmers and agricultural contractors all around the world
turn to BPI’s agricultural film range to enhance crop yield
and quality.
Benefiting from decades of manufacturing
expertise in addition to ongoing research with
leading universities, BPI’s agricultural portfolio
includes films for all climates and for a host of
crop varieties.
Our Products
• Silage products
• Greenhouse films
• Polytunnel covers
• Consumer packaging for retail horticulture
• Animal feed packaging
• Fertiliser packaging
Our Brands
Our Major Customers
• Agravis
• Alberta Ag-Bag Sealed Storage
• BFG Supply
• BWI Companies Inc.
• CT & T Enterprises Inc.
• DLA International Holding
• DLG
• Donaghys Industries
• European Agri Trading
• Goodman & UHR
• Green-Tek Inc.
• Griffin Greenhouse Supplies Inc.
• Groupe B.M.R. Inc.
• Haygrove Inc.
• Jostein Skei A/S
• Mole Valley Farmers
• Thunder Ridge Farms
• United Farmers Limited
• United Farmers of Alberta
• Western Ag Enterprises Inc.
• Westland Horticulture Limited
12
Strategic Report
13
Our Markets
Healthcare and
Waste Services
Tried and tested, BPI is recognised as an established
and trusted supplier with a track record of meeting
the specialist needs of these sectors.
Unrivalled technical support, excellent
customer service levels and novel
product formats have secured BPI’s
leading position as a supplier of high
quality, added value products.
Our Products
Refuse sacks, clinical waste sacks, recycling bags,
caddy liners and aprons for:
• Health authorities
• Waste contractors
• Catering contractors
• Janitorial wholesalers and contractors
• Local government
Our Brands
Our Major Customers
• Arco
• Bidvest
• Bunzl PLC
• National Health Service
• Veolia Environnement SA
14
Strategic Report
15
Our Markets
Construction
BPI’s specialist knowledge has led to the widespread
adoption of its high performance building films within
the construction industry.
As a market leader in the supply of damp
proof membranes, gas barriers and vapour
control layers we work closely with specifiers
and builders merchants to provide effective
solutions for all types of construction projects.
Our Products
• Gas protection systems
• Structural waterproofing
• Protection films
• Ventilated cement sacks
• Overwrap films for insulation
• Packaging for aggregate, bricks and blocks
Our Brands
Our Major Customers
• HeidelbergCement
• Howden Joinery
• Kingspan
• Knauf
• Marshalls plc
• Saint-Gobain SA
• SIG plc
• Tarmac
• Travis Perkins plc
• United Merchants
16
Strategic Report
17
Our Markets
Industrial
BPI industrial films are employed by some of Europe’s
biggest names in petrochemicals, minerals and speciality
chemicals to secure high value goods.
In addition to high quality flexographic
printing and advanced conversion facilities,
BPI’s flexible production processes enables it
to develop tailor-made packaging for bespoke
customer applications.
Our Products
Container liners, heavy duty sacks and pallet
protection for:
• Polymer producers
• Additives manufacturers
• Specialist chemical companies
• Salt producers
• Fuel producers
Our Brands
Our Major Customers
• Borealis AG
• Dow
• Greif Inc.
• Ineos
• Knauf
• Mayr Melnhot
• Moneir Redland
• Sabic
• Salins Du Midi
• SCA
• Smurfit Kappa
• Total
18
Strategic Report
19
Our Markets
Non-Food
Retail
From busy shop floors to the rapid pace of the online
supply chain, BPI provides robust packaging solutions
for goods of all shapes and sizes.
BPI packaging films have been getting
products from A to B safely for many decades.
From primary to secondary and tertiary
packaging BPI can provide optimised film
solutions that minimise waste whilst
maximising strength and functionality.
Our Products
• Mailing bags and garment film for
online retailers
• Mailing film
• Transit packaging
• Protective films for furniture and carpets
• Visqueen Ultimate heavy duty refuse sacks
Our Brands
Our Major Customers
• Ambassador Antalis
• Bulteau Systems
• Hellermann Tyton
• Intertissue
• Macfarlane Group Plc
• News International
• Next Plc
• Poundland
• SCA
• Silentnight
• Unilever Plc
20
Strategic Report
21
Our Markets
Retail
Food Chain
Trusted to protect the products of established household
names, BPI’s retail food range offers a host of benefits that
don’t cost the earth.
From protection during storage and
transit to longer shelf life, enhanced
product presentation and greener pack
options, BPI’s food packaging products
combine quality and innovation with
manufacturing expertise and experience.
Our Products
• Bakery packaging
• Frozen food packaging
• Collation shrink film for cans and bottles
• Fresh produce packaging
• Refuse sacks
• Transit packaging
Our Brands
Our Major Customers
• AG Barr
• Asda
• Britvic
• Camvac
• Coca-Cola
• Highland Spring
• McCain Foods
• Nestle
• Princes-Foods
• Sainsbury’s
• Tesco
• Tulip
• Warburtons
• Wm Morrison
22
Strategic Report
23
Market Overview
The European polythene film extrusion market was
estimated at around 7.5 million tonnes in 2015 and
is highly fragmented with no individual business
having more than 5% of the market. The market
is characterised by strong regional players and
a number of product specialists.
24
2012
2013
2014
1,078
2011
1,172
2010
1,233
1,144
Average Polymer Prices
Five Year Comparison (£/tonne)
1,140
Major end use applications include the protection
of goods in transit using stretchfilm, collation
shrinkwrap and pallet shrinkwrap. Stretchfilm
has enjoyed good growth rates, as in most cases,
it is the most cost-effective solution. The main
process for the production of stretchfilm is cast
technology although the blown film process has
greater flexibility to tailor films to particular needs
and is mainly used for silage films and stretch
hoods for pallet protection which have shown
growth over recent years.
Bags and sacks are a major market sector with
a wide variety of uses from small retail bags and
carrier bags, to heavy duty sacks for chemicals
and animal feed. Carrier bag production in Europe
has declined because of increasing volumes of
imported bags and environmental pressures to
reduce their usage. The heavy duty sack market is
moving to continuous form, fill and seal processes
which are replacing individual open mouth and
valve sacks. There are still a large number of paper
sacks in use and market sectors such as animal
feed, pet food and cement are increasingly under
pressure to move to polythene sacks. The refuse
sack market continues to be resilient despite
downgauging and movements to wheelie bins
and communal containers. A high proportion
of refuse sacks are made with recycled materials.
1,113
Total market volumes are reported to have shown
modest growth since falling in 2008 and 2009.
This recovery in demand was concentrated in
packaging for food with construction markets
remaining subdued although there has been some
recent recovery in construction. Market volume has
been impacted by the continuing trend towards
stronger and thinner films (downgauging).
2015
Strategic Report
The growth in flexible films for food packaging
has been driven by changing consumer demands
with the requirement for extended shelf life
for fresh food and less spoilage leading to the
development of more sophisticated products.
Lamination and technical films, which are both
used in food packaging applications, continue
to grow.
Non-packaging uses for polythene films are
primarily in building, agricultural and horticultural
applications, including damp proofing and film
used for silage, mulch wrap and greenhouse
covers. Greenhouse film has been growing due
to increasing demand to extend the growing
season of many varieties of fruit and vegetables.
Construction film volumes declined due to
previous falls in construction markets, although
some recovery has been seen more recently.
The nature of the polythene film industry is such
that a significant proportion is manufactured as
film on the reel which is then sold to converters
for a wide variety of other applications.
The implementation of the EU Packaging Directive
has also influenced the development of the industry
with companies required to recover packaging
waste and, therefore, encourage the demand
for reduced weight of packaging.
Polymer, the main raw material, is produced as
a downstream product from the oil industry with
the main suppliers being the large multinational
oil and petrochemical companies. There are only
12 producers of such polymers remaining in
Europe and the top six account for over 80% of
European capacity. Raw material prices have always
been volatile due to supply and demand and the
influence of oil on ethylene prices. Increases in
oil and ethylene prices, combined with increasing
demand from the emerging economies, particularly
China, contributed to the average polymer price per
annum increasing every year from 2002 to a peak
in August 2008. A combination of the fall in oil
prices, economic downturn and new capacity from
the Middle East led to a collapse in polymer prices
in the final quarter of 2008. However, average
polymer (Low Density Polyethylene) prices
increased again with record high prices being
recorded in each year from 2010 to 2013.
Wide agricultural film production at bpi.visqueen, Ardeer.
25
Market Overview continued
William McGill, Extrusion Manager, bpi.visqueen, Ardeer.
26
1,800
1,700
1,600
1,500
1,400
1,300
Dec 15
June 15
Dec 14
June 14
Dec 13
June 13
Dec 12
1,100
June 12
1,200
Dec 11
A significant new factor in global polymer supply
is the investment in North America in shale gas
extraction. This will result in the availability of
large quantities of lower cost feedstock in that
area and significant investment is being made in
polymer production capacity in North America.
It is anticipated that this will make North America
a major exporter of polymer to world markets.
A number of European plants are being converted
to use gas feedstocks including shale gas imported
from North America.
Polythene film has been highly successful in
substituting other materials within the packaging
industry such as paper and aluminium, due to its
superior characteristic of lightweight strength. The
industry is now reaching a degree of maturity and
recent years have been challenging with growth
rates now averaging less than 2% per annum,
caused by slower underlying economic growth,
continuing downgauging of films and increased
import penetration of converted bags from Asia.
Rising raw material and other input costs, increased
imports and price pressure from customers have all
conspired to put pressure on margins.
Monthly Polymer Prices
Five Year Comparison (€/tonne)
June 11
The period of high oil and naphtha costs resulted
in the closure of smaller inefficient plants in
Europe. These closures have contributed to some
grades no longer being manufactured in Europe
in large volumes and the subsequent dependence
on imports mainly from the Middle East.
The recycling industry has developed with over
800,000 tonnes of process and post-consumer
waste recycled for use by the film extrusion
industry in a variety of products.
Dec 10
Prices remained volatile in 2015, falling at the
beginning of the year before rising sharply in the
second quarter to reach a record high in euros.
Prices softened in the late summer and there were
further increases as the year ended but more
softening at the start of 2016.
Strategic Report
The Company may be affected by
a number of risks, not all of which
are within our control.
Outlined below is a description of some of the most significant factors that may affect our
business and the steps which are taken to manage and mitigate these risks. There may be
additional factors, in addition to those listed below, that are not currently known to the Group,
or that we currently deem immaterial, which may also have an adverse effect on our business.
The 2014 Corporate Governance Code requires the Directors to undertake an assessment of
the Group’s prospects and viability; this is described in the Financial Review on page 42
and specifically considered the risks set out below. The processes that BPI has in place for
managing these risks are described in the Corporate Governance Report on pages 61 and 62.
Poor
Economic
Conditions
Risk Description
Mitigation
The Group is exposed to a variety of market sectors which
may be affected, to a greater or lesser extent, by adverse
economic conditions.
•
The Group has a diverse business portfolio with a large
number of customers operating in a range of market
sectors and geographical locations with the Group’s
largest customer representing just over 3% of turnover.
•
Our European operations are located in Belgium and
Holland with more than 40% of sales into the agricultural
and food sectors. The main European markets are France,
Benelux, Germany and Scandinavia with minimal sales into
countries such as Greece, Italy and Spain.
•
Outwith mainland Europe our major geographical markets
are the UK, Ireland and North America.
•
In the event of adverse trading conditions steps can
be taken to restructure the business and reduce costs.
Further such steps were taken at the end of 2015 in the
UK Stretchfilms, Consumer and Films operations.
•
The cost base of all operations is continually reviewed
and significant capital expenditure targets cost savings in
combination with efficiency and productivity improvements.
As the Group provides payment terms to its customers, there is
always a risk of bad debts due to customer insolvency.
•
The Group’s largest customer accounts for just over 3%
of Group turnover.
Further details of the Group’s evaluation and management of
this risk are contained in the Financial Review on page 41 and
in Note 16 to the Financial Statements.
•
Rigorous credit assessment procedures.
•
Efficient and effective credit control function ensures low
level of late payments.
•
Some accounts are credit insured, particularly in Europe
and in the agricultural sector.
Whilst the broader economic situation continues to improve,
conditions remain challenging and there remains a risk of
conditions deteriorating in specific geographical or product
markets. There is also the risk of geopolitical events potentially
impacting market conditions.
More than two-thirds of the business is in the retail food chain,
agriculture and horticulture, healthcare and waste services
sectors which, so far, have proven more resilient to the
economic cycle. The remainder of the business is in the
construction, industrial and non-food retail sectors.
Reduced demand leads to lost contribution, but can also put
pressure on margins as competitors fight for remaining volumes.
For analysis of sales by market and geographical sector,
see Note 3 to the Financial Statements.
Credit
Risk
27
Statement of Risk Factors continued
Raw
Material
Prices
Risk Description
Mitigation
The Group’s main raw material, polymer, is subject to volatility
on a month by month basis due to fluctuating prices for ethylene
and, to a lesser extent, naphtha and oil. Supplier actions can also
influence prices due to maintenance periods and breakdowns at
their production plants. This creates a risk of erosion in margins
if price increases cannot be passed through immediately to
customers. Recent years have seen exceptional levels of volatility
and unprecedented price levels.
•
Centralised Group purchasing arrangements to ensure the
best purchase price.
•
Coordinated instructions to sales teams on forward pricing.
•
Highly experienced sales teams manage the prompt
recovery of increased raw material prices.
•
Some linkage of customer pricing to polymer price indices.
•
Management of stock levels depending on anticipated
price movements.
•
Monitor energy prices and buy forward when
advantageous.
•
Group energy saving programme implemented on each
manufacturing site.
•
Ongoing engagement with Government and user groups
to ensure policy makers understand the impact of high
energy costs on manufacturing industry.
•
Geographical spread of markets with sales into more than
50 countries on 5 continents.
•
Diversification of product portfolio.
•
Controlled stock build for seasonal products.
There can also be risks due to the impact of falling raw material
prices on the realisable value of finished goods stocks.
Further information on the polymer market can be found in the
Market Overview on pages 24 to 26.
Energy
Costs
As a process business and a significant user of energy,
our results can be affected by major price movements
and increasing environmental taxes and levies.
Further information on the Group’s energy efficiency
programme can be found in the Corporate Social
Responsibility Review on pages 48 to 50.
Weather
Conditions
A number of our products are dependent on seasonal
weather conditions and certain weather conditions
could lead to reduced volumes.
Foreign
Exchange
Risk
As we operate in several non-UK countries, have considerable
exports from the UK and our main competitors are based in
Europe, we are exposed to medium-term movements in
exchange rates, particularly the euro and the US dollar.
•
Hedging of known currency exposures.
•
Transfer production among Group sites in UK, Europe and
North America, where possible.
Perceived
Environmental
Issues
While polythene film is the most lightweight and durable
packaging medium, perceptions continue to exist that it is
environmentally unfriendly which, together with adverse
comments on plastic and packaging, could lead to changes
in customer preference.
•
In 2015 less than 55% of Group sales were packaging and,
with continued investment in agricultural films and recycling,
this may reduce in future years. Further explanation of the
Group’s environmental policy and procedures is contained
in the Corporate Social Responsibility Review on pages
48 to 51.
•
Communication and education efforts with staff, customers
and regulators to dispel some of the myths.
28
Strategic Report
Legal and
Regulatory
Risk
Pension
Risk
Risk Description
Mitigation
The Group’s operations expose it to different legal and
regulatory requirements and standards in each of the countries
in which it operates. The Group is also exposed to the risk of
litigation from third parties which may arise. Serious breaches
of health and safety regulations can also lead to prosecutions,
penalties and civil damages claims.
•
The Directors take any and all claims and litigation seriously
and, where appropriate, take independent legal advice to
help protect the Group against material financial loss.
•
New and existing legislation is monitored and policies and
staff training are implemented as necessary.
•
The Group’s resources dedicated to legal and regulatory
compliance benefit from an in-house legal counsel.
•
The Group Ethical Policy sets out the required standards
of conduct for all employees and business partners and
key employees are given training on the Policy.
•
The Group has extensive policies and systems in place
designed to ensure the safety and wellbeing of employees.
These are explained in detail on pages 47 and 48.
•
A number of measures have been taken to manage the
risks relating to the UK Defined Benefit Pension Scheme.
The Scheme was closed to new members in 2000; steps
were taken in subsequent years to restrict the benefits
accrued by Scheme members and the Scheme closed to
future accrual in September 2010.
•
In February 2015 the Company and the Scheme trustee
agreed to change the inflation index used to adjust
pensions in payment from the Retail Prices Index to
the Consumer Prices Index.
•
The Scheme trustee, in conjunction with its investment
advisers and the Company, regularly reviews the
investment strategy.
•
The Company will continue to review options to manage
the Scheme’s liabilities and implement those which are
considered appropriate.
The Group is exposed to a number of financial and
demographic risks arising from the Defined Benefit Pension
Scheme. These risks include financial markets risk relating
to the value of the Scheme’s assets, demographic risk relating
to the life expectancy of the Scheme’s members and inflation
and interest rate risk relating to the valuation of the Scheme’s
liabilities. The impact of these risks on the Group relates to
the future contributions it is required to make to the Scheme
to repair any funding deficit.
A triennial actuarial review of the UK Defined Benefit Scheme
was carried out at 6 April 2014 and the actuary certified a
deficit at that date of £78 million. A funding plan designed to
address this deficit was agreed with the Scheme trustee at that
time. Further details of the funding plan can be found in the
Financial Review on pages 40 to 45 and in Note 31 to the
Financial Statements. The next triennial actuarial review is
due to be carried out at 6 April 2017.
Subsequent to the actuarial valuation the inflation index used
for future changes to pensions in payment was changed from
the Retail Prices Index to the Consumer Prices Index. This
would have reduced the actuarial deficit by £28 million had
it been in place at that time.
Further analysis of the risks and the sensitivity of the fund
to changes in circumstances are provided in Note 31 to the
Financial Statements.
There is further analysis of the Group’s exposure to liquidity risk, market risk and currency risk in the Financial Review on pages 41 and 42 and Note 18 to the
29
The Group utilises the following indicators of
performance to assess its development against
its strategic, financial and operational objectives.
Financial Key Performance Indicators
Operating profit per tonne (£/tonne)
Diluted earnings per share (pence)
105
63.82
2015
105
2014
97
2013
2015
63.82
57.53
2014
89
2013
43.23
Statutory
76.58
66.21
59.09
Adjusted
Rationale
Operating profit per tonne is the most significant measure of operating
performance for the Group. We relate performance to the volume of
sales rather than the value of sales because the latter can be volatile
due to fluctuating raw material prices.
Rationale
Earnings per share is important to our shareholders because it is one of the
major factors which determines shareholder value. It is one of the primary
measures currently used for the Share Matching Plan and Company Share
Option Plan.
Definition and calculation
The definition of operating profit is profit before net restructuring
as shown on the face of the Income Statement. Sales volumes were
272 ktonnes in 2015 (2014: 274 ktonnes).
Diluted earnings per share is profit after tax divided by the diluted average
number of ordinary shares and is calculated on the same basis as Note 8 to
the Accounts. Adjusted earnings per share is stated before net restructuring,
net pension financing and prior year tax items.
ROCE (%)
Dividend cover (times)
19.0
3.6
2015
18.3 19.0
2014
18.0
2013
16.0
Before restructuring
18.0
16.8
3.6
2014
3.6
2013
3.0
After restructuring
Rationale
Return on Capital Employed is one of our key financial benchmarks used
when evaluating capital investments. It is one of the primary measures
currently used for executive bonus targets and the Share Matching Plan.
Return on Capital Employed is operating profit (both before and after
net restructuring) expressed as a percentage of average monthly capital
employed. Capital employed is property, plant and equipment plus other
intangible assets, investments, inventories, trade and other receivables,
less trade and other payables and deferred Government grants.
30
2015
Rationale
Dividend cover is important to many of our shareholders as a measure of our
ability to maintain the payment of a dividend.
Dividend cover is diluted earnings per share divided by the proposed annual
dividend per share.
Strategic Report
Operational Key Performance Indicators
Electricity usage (kWh/tonne)
Electricity usage (kWh/’000 square metres)
659
27.7
2015
659
2014
663
2013
675
Rationale
We monitor electricity usage per tonne and square metres as part of our
overall environmental policy of minimising our use of resources and also
as a means of controlling a significant input cost for the business.
2015
27.7
2014
28.0
2013
28.9
Electricity usage is consumption in kilowatt hours per tonne or square metre
of production output.
We measure energy usage per square metre to highlight the continuing
trend to produce thinner and stronger films.
Absenteeism (%)
Lost time accidents (accidents/100k hours)
2.9
0.6
2015
2014
2013
2.9
2.5
2015
2014
2.7
Rationale
As a relatively labour intensive business, absenteeism can be a significant cost
and lost opportunity for the Group. We monitor absenteeism by site and for
the Group as a whole.
Absenteeism is expressed as the number of hours of absence as a
percentage of annual contractual hours. Absence is defined as time off
through illness or authorised at the discretion of management along with
any unauthorised non-attendance. It does not include any legal or contractual
absence from work.
2013
0.6
0.3
0.4
Rationale
As a manufacturing business with a very rigorous focus on Health and Safety,
we measure lost time accidents for each site and benchmark against the rest
of the Group and other manufacturing businesses. Although the number and
rate of lost time accidents increased, there were no major injuries reported as
defined by the Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations.
Lost time accidents are accidents that cause employees to be unavailable for
normal duties for more than three consecutive days. The rate is expressed as
the number of accidents per 100,000 hours worked.
31
Operating profits, before restructuring costs, have
now increased every year for the last five years.
The Group operating profit, before restructuring costs,
increased by 7% from £26.7 million to £28.6 million, despite
unprecedented polymer price increases in quarter two and
adverse currency movement in converting the profits of our
European business. This improvement reflected the strong
recovery in our North American business which moved from
a loss to a profit of £1.3 million.
32
2013
2015
2011
2012
2014
2015
2009
2010
2011
2012
2013
2014
18.0
16.0
14.5
76.6
66.2
59.1
2013
13.2
2010
51.6
2009
47.8
28.6
26.7
2014
11.5
2012
Dividend per share (p)
11.5
2011
44.2
2010
24.0
Adjusted EPS (p)
21.8
Operating Profit (£’m)
20.8
Sales and Margins
Total sales reduced by 6% to £468 million with
nearly half of that fall arising due to the strength
of sterling reducing reported sales in sterling by
some £15 million from our mainland European
business. The remaining reduction mainly arose
from the average polymer price for the year being
lower than 2014 despite the extreme volatility.
Sales to destinations outside the UK remained at
46% of total sales due to the adverse currency
impact on sales in our European business. Sales to
the more resilient sectors of the retail food chain,
agriculture and horticulture, healthcare and waste
services fell marginally to 67% of total sales as
sales through the retail food chain fell to 27%
reflecting lower sales to the food and drink sector.
42.3
2009
We have calculated the square metres of film sold
which, at 8.4 million square metres for 2015, was
marginally down on 2014, reflecting a change in
sales mix due to lower volumes of thin refuse
sacks and overwintering film. Our average film
thickness in 2015 was 34.4 micron compared
to 34.2 micron in 2014 but 39.2 micron in 2008.
Sales Volumes
Sales volumes, as defined by manufactured
tonnage, fell by 1% to 272,100 tonnes, mainly
reflecting our exit from some low margin retail
refuse sack business in the UK and overwintering
film in North America. Europe moved ahead
reflecting increased silage capacity. Sales of our
main agricultural film products comprising silage
sheet, silage stretch, silage and grain bags and
horticultural films increased by 2% to 65,000
tonnes. Sales of industrial products were up 2%
but retail food packaging, recycled products and
stretchfilm for transit packaging were all lower.
17.7
19
Operating profits, before restructuring costs, have
now increased every year for the last five years.
While we continue to see downgauging as the
combination of environmental pressures and high
polymer prices make customers demand thinner
films, the impact was less in 2015.
12.5
Despite extremely challenging conditions, due
to raw material price increases, both the UK and
Europe, in local currency, reported improvements.
The UK profit increased by 4% to £11.6 million
and Europe by 6% to €21.6 million but the
reported sterling profit from Europe was
down reflecting currency movements. Group
EBITDA, before restructuring costs, increased
to £43.6 million from £41.4 million in 2014.
2015
Strategic Report
“Margins have continued to improve reflecting an improved
sales mix as we exited lower margin business and benefitted
from our capital expenditure programme and achieved
further operational improvements.”
Margins have continued to improve reflecting
an improved sales mix as we exited lower
margin business and benefitted from our capital
expenditure programme and achieved further
operational improvements.
Raw Material Prices
In Europe, raw material prices continued to reduce
in January and February but increased every month
thereafter to peak at an all-time euro high in June.
These price increases were unprecedented and,
based on ICIS LDPE, increased by 560 euros a tonne
between February and June, an increase of nearly
50% and all against a background of significantly
lower oil prices. The reasons for these unexpected
increases included increased duties on the import
of polymer from the Middle East, exchange rate
movements between the US dollar and the euro
encouraging exports from Europe and restricting
imports, and an unusually large number of forces
majeures declared at European polymer plants.
All of these combined to ensure that demand
exceeded supply, prices increased accordingly
and obtaining product became very difficult. From
April onwards, the industry suppliers appeared to
place customers on allocation but, with all sites
cooperating, we were able to maintain all of our
lines running and ensure continued supply to our
customers. Passing through the price increases
was exceedingly challenging and our margins
were squeezed, particularly as all grades of
polymer did not move together. Prices then eased
between August and October before rising again
in November and December. The extremely tight
supply position in Europe, combined with limited
imports from the Middle East, has allowed the
polymer producers to achieve excessive margins
at almost double the norm.
John Langlands,
Chief Executive
2015
2009
2014
2010
2011
2012
Significant capacity additions have been approved
in North America on the back of a plentiful supply
of shale gas. This capacity is unlikely to arrive
before 2017 and will result in North America
becoming a significant exporter of polymer.
Energy Costs
Lower oil and gas prices resulted in reduced
energy costs in Belgium, Holland and Canada.
Unfortunately, while the UK wholesale electricity
costs reduced reflecting the lower oil and gas
prices, we saw minimal benefit due to increasing
energy taxes and environmental levies. The plastic
processing industry needs to obtain assistance
provided to energy intensive industries to ensure
it remains competitive.
2013
32.1
24.1
30.1
23.2
31.0
2011
Euro prices reduced in January and February 2016
in Europe and, while the outlook for prices in 2016
should be downward, the supply position remains
very tight. The same level of reduction has not
been seen in the UK due to the recent weakness
in sterling. North America also saw reductions in
January and February 2016 but prices still remain
too high in relation to feedstock costs and Far
Eastern prices.
45.6
52
2013
19.0
2012
18.0
16.8
2010
Prices in both Europe and North America have
remained significantly higher than the Far East
despite extremely low feedstock costs.
Borrowings (£’m)
16.2
12.9
2009
14.8
13
ROCE (%)
In North America polymer prices reduced in January
and February before increasing in May and falling
again in August and September. North American
prices still remain extremely high despite very low
feedstock costs with the rail car distribution system
making the import of product difficult.
2014
2015
33
Chief Executive’s Review continued
products. Around 50 employees were made
redundant but a small number did transfer to our
plain film sites at Bromborough and Winsford.
A number of redundancies were also made
at our Consumer site at Worcester and Films
site at Sevenoaks to align staffing levels with
current demand.
UK Recycling
Availability of good quality scrap remained
difficult, with over 60% of plastic packaging
waste being exported for reprocessing overseas.
Due to the lack of availability of clean plastic
waste, we continue to focus our recycling activities
on the more difficult and heavily contaminated
waste streams, including agricultural film waste.
We are, however, seeing more demand for this
contaminated agricultural waste from recycling
plants on mainland Europe.
Bert Stoeten, Operator, bpi.indupac, Hardenberg.
Energy Costs continued
Our cost per manufactured tonne in the UK
remains significantly higher than in our European
and Canadian operations and it is therefore not
surprising that priority is given to investments
outside the UK. When investments are made in
the UK, the saving in energy costs is an important
contribution to the returns required to justify the
investment. Energy policy in Europe, especially in
the UK, continues to place intensive energy users
at a competitive disadvantage in global terms.
In January 2016 we signed an agreement to sell
our Chinese business to Amcor for an expected
consideration of £9.4 million. This business had
been loss-making as securing business for our
recent investment in high quality printing had
been slower than expected despite our excellent
product quality and service. The disposal is subject
to the approval of the PRC authorities and should
complete in quarter two of 2016. An estimated
gain on disposal of £4 million due to property
and currency gains should be included in 2016.
Acquisitions
No acquisitions were made in the year but will
be a higher priority in 2016 as we look to grow
the business.
Legal and other professional costs incurred
on the disposals offset the small gain on the
sale of Promopack.
Disposals
In October we disposed of our loss-making
Promopack Digital Studios business for a
consideration of £0.2 million. The business
had been loss-making for a number of years
and required considerable new investment.
Restructuring
In November we announced the closure of
our small Stretchfilm facility at Widnes which
manufactured mainly blown hand reels for
wrapping pallets. Production has been transferred
to our larger production site at Leominster and will
reduce costs and offer customers higher quality
“No acquisitions were made in the year but will be a
higher priority in 2016 as we look to grow the business.”
34
We continue to invest in our recycling operations
and our latest investment became fully operational
at the beginning of 2015. This recycling line is
one of the largest ever built and is capable of
reprocessing in excess of 15,000 tonnes per
annum of plastic waste film.
As a leading manufacturer of agricultural and
horticultural plastic products, we continue to help
establish and build national recovery schemes to
enable collection and recycling and are hopeful
that a new scheme will start in the UK in 2016.
Capital Expenditure
Total capital expenditure at £17.6 million was
greater than depreciation as we remain committed
to a higher level of capital expenditure to increase
capacity in growing markets and improve efficiency
and reduce scrap, labour and energy costs.
Strategic Report
Major investments included:
• completion of installation of coextrusion line
at Bromborough in the UK to produce thinner
films for food packaging;
• installation of a replacement eight-colour
printing press for form fill and seal films (‘FFS’)
film at Hardenberg in Holland to improve
quality and increase capacity;
• commencement of a programme to upgrade
extrusion lines at Hardenberg in Holland;
• replacement of eight-colour printing press
at Ardeer in the UK to reduce costs, improve
quality and increase capacity;
• two coextrusion lines at Ardeer in the UK
to improve film quality and reduce scrap
and energy costs;
• replacement of eight-colour printing press
at Zele in Belgium to replace two older
presses and increase capacity;
• increased rewinding capacity in Edmonton,
Canada to support our new extrusion line; and
• completion of building work and delivery of
parts for the installation of seven-layer extrusion
line at Leominster in the UK for silage stretch.
Planned expenditure for 2016 includes the
following which have already been authorised:
• completion of the installation of a seven-layer
line for silage stretch at Leominster in the UK;
• delivery and installation of a five-layer
coextrusion line at Bromborough in the UK
to enable the production of high quality films
for food packaging;
• continuation of the upgrade of extrusion
lines at Hardenberg in Holland;
• installation of a further coextrusion line for
FFS at Hardenberg in Holland to provide
additional capacity;
• installation of a fast changeover eight-colour
printing press at Worcester in the UK to
improve efficiencies; and
• installation of a seven-layer wide film line
at Ardeer to increase capacity and develop
more advanced products.
Strategy
Our strategy is set out on page 08.
During 2015, we have improved performance,
before restructuring costs, in all of our key financial
objectives and have made significant progress over
the last five years.
Operating Profits
2015
2010 to 2015
Up 7% to £28.6m
Up 61% to £28.6m
Adjusted Earnings per Share
Up 16% to 76.6p
Up 73% to 76.6p
Return on Capital Employed
Up to 19% from 18%
Increased by over 47%
from 12.9% to 19%
Dividend per Share
Up 12.5% to 18p
Up 57% to 18p
Borrowings
Increased by £8m to £32m due
to special one-off payment of
£11m to the Pension Scheme
Reduced by £13m after:
£37m to the Pension Scheme
£17m on capital expenditure
in excess of depreciation
£18m on dividends
Our strategy has been supported by:
In the agricultural markets:
• authorising an additional multi-layer
stretchwrap line at Leominster in the UK
to meet the growing demand for our
silage products;
• installing rewinding equipment to support
our replacement wide line in Canada;
• increasing sales of our advanced silage
products; and
• authorising a wide film line at Ardeer in
the UK to increase capacity and develop
advanced products.
In recycling:
installing replacement recycling equipment
at Heanor; and
• installing coextrusion equipment at Heanor
to develop improved products.
•
In food-related packaging markets:
authorising more coextrusion capacity at
Bromborough to produce thinner films; and
• authorising a fast changeover printing press
at Worcester.
•
In industrial and consumer products:
upgrading extrusion at Hardenberg;
• authorising an additional coextrusion line
for FFS at Hardenberg;
• installing two replacement extrusion lines
at Ardeer; and
• installing a replacement eight-colour printing
press at Ardeer.
Key Relationships
The Group has only one customer with sales just
above 3% of the Group turnover.
The Group purchases its main raw materials
from a number of key suppliers including Dow,
ExxonMobil, Sabic, Total, Versalis, Ineos and
Lyondell Basell and has supply arrangements in
place. Most of these suppliers have a number of
plants in Europe, North America and the Middle
East and alternative sources are available, except
for some very specialised grades.
Return on Capital Employed
The Group Return On Capital Employed (‘ROCE’),
before restructuring costs, for 2015 was 19.0%
compared to 18.0% in 2014. The average return
for the three years ended 31 December 2015 was
17.8%, before restructuring costs, compared to
15.1% for the three years to 31 December 2012.
As the business makes significant investment in
new equipment over the next few years there
will be pressure on maintaining the current levels
of ROCE.
ROCE, before restructuring costs, has increased
every year from 2010 from 12.9% in 2010 to
19.0% in 2015.
•
Outlook
The current economic outlook remains uncertain
following the collapse in the oil price and outlook
for the global economy. The recent weakness
of sterling, particularly against the euro, will be
helpful. We have taken decisive action to eliminate
loss-making units, reduce our cost base and move
the business towards more resilient and growing
markets. Having improved the position of our
business, we are now well placed to invest to both
increase capacity in growing markets, improve
productivity and reduce costs. We look forward
to 2016 with confidence.
35
Operating Review
Mainland Europe
Operating Profit
Tonnes Sold
2015
2014
£’m
15.7
16.3
€’m
21.6
20.2
75,400
72,500
Our European business comprises two
manufacturing sites in Belgium, one manufacturing
site in the Netherlands and a sales operation in
France. The business specialises in the manufacture
and sale of high quality printed film for the food
industry, FFS and heavy duty sacks, including valve
bags and Waviblok for the chemical, construction,
horticulture and fertiliser industries, pallet
protection films including stretch hoods, insulation
film, general industrial films and silage and
packaging stretchwrap. Main markets are Belgium,
the Netherlands, northern France and Germany,
except for silage stretch which is sold throughout
mainland Europe and increasingly worldwide.
The operating profits in euro terms increased
by €1.4 million to €21.6 million on volumes that
were 4% ahead at 75,400 tonnes. The sales mix
continued to improve and we benefitted from
investment in new equipment and product
development. The results, in sterling, reduced by
£0.6 million as they were adversely impacted by
£1.7 million due to exchange rates on translation.
Sales volumes saw growth in both silage and
industrial products but margins were squeezed
by the exceptional raw material price increases
in quarter two.
Total sales of silage products increased by 4.5%
with reasonable growing conditions and low
levels of carry-over stock in most markets. This
increase arose against a background of cold but
wet weather in Northern Europe and consistent
hot and dry weather in Central Europe from
April onwards resulting in lower volumes in the
second half. Sales of our advanced silage products
SilotitePro® and Baletite® increased by 14% with
market feedback continuing to be positive. Sales
of these products now account for over 22% of
our total silage volumes and we would expect
this proportion to increase each year. Baletite®
is a replacement for traditional round bale netting
and SilotitePro® is a new generation of silage film
36
with improved economic and environmental
properties and both will reinforce our market
leading position in the silage wrap business.
The significant polymer price increases in quarter
two resulted in a very difficult pricing environment
with margins suffering and falling below 2014. The
reduction in polymer prices in early 2016 may delay
the start to the new season and result in another
difficult year with further pressure on margins.
Volume sales of printed film for the food industry
increased by 9% over 2014 with growth in both
french fries and vegetable markets. A new
replacement printing press to replace two older
units and enable greater production efficiencies
and a small increase in capacity was installed in
the second half and is running well.
Demand in pallet protection film and general
purpose film remained reasonable despite some
competitive pricing but sales of our strategic
product, stretch hoods, increased. Sales of Bontite®,
our high quality industrial stretch product, again
showed an increase as new legislation on load
stability offered additional opportunities.
At Roeselare total extrusion production was
20,000 tonnes with growth in all three of our
strategic products; stretch hoods, feedstock
for printing and thinner insulation films. These
three strategic products now account for 67%
of production. Sales volumes of our new thinner
products for the insulation industry increased by
24% over 2014 while stretch hoods were up 35%.
Sales from our industrial film plant in Hardenberg
in Holland increased by over 7% to a record high.
Sales of other FFS products grew 16% as we
benefitted from the installation in late 2014
of a replacement eight-colour printing press
for FFS. Growth was achieved from the building,
chemical and fertiliser sectors. Volumes of bags
were maintained but customers do continue to
move to FFS products.
We approved an upgrade of the extrusion
equipment in our heavy duty factory at Hardenberg
and the building work was completed and the first
extruder installed. We have also authorised the
installation of an additional extruder for FFS to
meet growing demand in the petrochemical
sector as we secured additional business.
Production fixed costs and labour costs per
tonne improved over 2014 with lower scrap
and quality complaints.
Our strategy of investment in the business
continued with the authorisation of a major
extrusion upgrade at Hardenberg. New and
improved products continued to be developed
in all areas of the business.
Our European business remains well invested with
clear strategic plans for each site which will enable
further growth. Zele in Belgium will continue to
focus on silage stretch products and printed film
for the food industry. Roeselare in Belgium will
focus on a reduced number of products, including
stretch hoods, feedstock for printing and a range
of pre-stretched thinner products for the insulation
industry. Hardenberg in Holland is focused on
industrial products and is a leading supplier of
FFS to the petrochemical and other industries.
The business has achieved strong results for the
last few years and with further investment in new
capacity, combined with the development of new
and improved products, should deliver similar or
better returns in future years.
UK & Ireland
Operating Profit
Tonnes Sold
2015
£’m
2014
11.6
11.2
188,700
193,800
Our UK & Ireland business consists of 15 UK
manufacturing sites and three sales/service offices
in the UK & Ireland. It also included during 2015
our manufacturing plant in China as the majority
of its production is currently sold in the UK.
Strategic Report
“During 2015, we have improved performance, before
restructuring costs, in all of our key financial objectives and
have made significant progress over the last five years.”
Operating profits increased by 4% from £11.2
million to £11.6 million despite the very challenging
conditions due to the extreme volatility in polymer
prices particularly in quarter two and the impact
of sterling strengthening against the euro. We
saw no relief from the very high energy costs
despite lower oil and gas costs as taxes
continued to increase.
Sales volumes reduced to 188,700 tonnes as we
exited some low margin retail refuse sack business
and saw reduced demand in a number of sectors.
Total sales to the more resilient sectors reduced
slightly to 67% of sales due to lower demand
arising from the competitive pressures in the
retail food sector.
Our UK plain film products produced at
Bromborough and Sevenoaks include a range
of film on the reel for a variety of different
markets but mainly food and drink. Products
include collation shrink films, produce films,
bread films, liquid packaging films, surface
protection films, lamination films, security films,
deep freeze films, mailing films, label films and
coating films. Flexfilm, based at Winsford, is an
extruder of high quality film for the converter
sector mainly for food markets.
Sales of collation shrinkwrap, which are mainly
to the food and drink industries, reduced
marginally in 2015, despite volume from some
new customers, as demand remained flat and the
soft drink sector faced difficult trading conditions.
Converter volumes improved despite demand
being patchy as we were successful in winning
new customers but downgauging continued
restricting growth in volumes. Intra-Group sales
were down reflecting lower demand from some of
the food retailers and their suppliers. Our margins
suffered from the steep polymer price increases
in quarter two. We have strengthened our sales
teams to focus on delivering volume growth.
Our sites continued to operate efficiently with
a focus on reducing scrap and operating costs.
Our plan to upgrade new extrusion lines at
Bromborough has continued with three coextrusion
lines now fully operational and performing well
with extremely good outputs and gauge profiles.
A five-layer coextrusion line has been ordered for
delivery in early 2016. These new lines will increase
coextrusion capacity, produce thinner films and
offer our customers even tighter tolerances with
improved performance. At Sevenoaks we began
the process of transferring mono work to the lower
cost site at Bromborough in order that Sevenoaks
could focus on the high quality coextrusion market.
This resulted in a number of redundancies as we
aligned staffing levels with demand. Our site at
Winsford continues to perform well, although
volumes were slightly behind 2014.
Our three stretchwrap plants in the UK at
Leominster, Bridgwater and Widnes produce
a range of industrial stretchwrap products
including blown and cast films for machine
and hand reel pallet stretchwrap applications
for transit packaging and blown stretchwrap
films for agricultural silage stretchwrap markets.
External volume sales of silage stretchwrap were
just below 2014 despite good growth in the UK
and Norwegian markets. In the UK, we continue
to position ourselves as suppliers to the leading
co-operatives and agricultural merchants who
wish to sell our well marketed and branded higher
quality product. Quality, service and good logistics
all help to maintain and grow our market position.
The Irish market remains the lowest priced in
Europe and, while we focus on a restricted
range of customers, our market share reduced
on pricing pressure. Margins were lower due
to the combination of resin price increases
and adverse exchange rates.
scrap was in line with 2014. All conversion for
Wrapsmart®, including the machines acquired in
2014 from STC, were moved to a new hall at the
end of 2014 and resulted in increased efficiency
and lower scrap in 2015. A new multi-layer
extrusion line was authorised for installation in the
first quarter of 2016. The building work has been
completed and all equipment delivered with a
target start date for production of April 2016.
Labour and production costs remained well
controlled on all sites.
We are the leading recycler of waste polythene
films in the UK with an annual recycling capacity
in excess of 70,000 tonnes. We recycle scrap from
our own operations, used products taken back from
our customers and scrap purchased in the open
market. As significant volumes of clean plastic waste
continue to be exported, we have had to focus on
the more difficult and heavily contaminated waste
streams, including agricultural film waste.
The Bridgwater site is fully focused on cast
stretchwrap and operates as a low cost
manufacturer of industrial cast stretchwrap. Sales
of cast industrial stretchwrap were lower than
2014 as cast stretchwrap continues to be imported
from both the Middle East and the Far East.
Recycling remained a challenge with the continued
lack of availability of clean waste scrap. Total
recycling volumes were down on 2014 with
washed volumes and dry recycling both reduced.
We have begun a reinvestment programme based
on a new generation of recycling equipment. The
first new machine was delivered and installed in
December 2014 and this has enabled us to increase
efficiencies and reduce maintenance, labour and
energy costs. The machine is performing well and
allowing us to access waste which we previously
would have considered wash grade. The washing
plant installed at Heanor in 2013, to remove paper
contamination from distribution transit waste
plastic, most of which was exported to the Far East
for recycling continues to perform extremely well.
Widnes produced a range of blown machine
reels and hand rolls for the packaging industry
and, despite strong competition in the conversion
sector and a continuing move to prestretch
products, volumes increased by 16% as we
benefitted from the rationalisation of the product
range, delivered good quality and excellent service
and secured additional customers. In November,
we announced the closure of our Widnes facility
with production being transferred to Leominster.
This will reduce our cost base and offer customers
higher quality products.
Availability of scrap continues to be a key issue
and we are now bringing in packaging scrap
from Europe. Scrap prices reduced during the
year as demand from the Far East lessened.
Our agricultural recycling volumes reduced due
to the poor availability of scrap in the UK and
Ireland. We continue to target alternative supplies
in mainland Europe as the UK is becoming an
increasingly difficult market. A number of
new start-up recycling facilities in the UK have
now ceased trading but there remains strong
competition for scrap from mainland Europe.
At Leominster, the programme of investment
to upgrade older extrusion equipment and
improve output and quality continued. Output
at Leominster showed a small improvement and
Our recycled material is used in the manufacture
of construction films including damp proof course,
refuse sacks, rigid products and a range of
other products.
Sales of our prestretched WrapsmartUltra®
continue to grow and were 13% ahead of
last year.
37
Construction volumes were down, reflecting low
demand in the construction market at the start
of the year and in the summer with a number of
customers experiencing reduction in activity levels
and then reducing stock levels. Volumes of the
more complex printed cement sacks saw further
growth in 2015 due to additional customer wins,
including some export business and we anticipate
further growth as more packing lines are installed.
Sales volumes of peat/compost sacks for
consumer packaging for retail horticulture
increased as we secured more business from
our existing customers. Volumes to the animal
feed sector were down due to unseasonably
mild winters at both ends of the year.
Scott Havlin, Print Operator, bpi.visqueen, Ardeer.
Operating Review continued
Our construction activities continue to trade under
the Visqueen Building Products brand and supply
construction films, including temporary protective
sheeting, damp proof membrane, damp proof
course and a number of specialist products to
the major builders’ merchants in the UK.
the second half of the year. At the beginning
of 2015, we were successful in securing refuse
and clinical waste sacks from the Scottish
Health Service replacing an overseas supplier.
Volumes to the local authority sector continue
to reduce as councils move to wheelie bins or
stop providing sacks.
Our construction films experienced a slow start to
the year and, as we required to manage volumes
in line with scrap availability, volumes were lower
in 2015. Downgauging in a major product line
also contributed to the lower volumes. More
significantly, and in line with our longer term
strategy, we continued to target strong growth in
our structural water proofing and gas protection
range of specification products. We were again
able to achieve excellent growth in market share
and, against a relatively flat market, increased
sales by 7%.
Volumes reduced in the retail sector as we
exited a number of underperforming lines.
Margin pressure remains intense but we continue
to supply a number of the larger national food
retailers and develop downgauged products.
We intend to launch our own-branded Visqueen
Ultimate™ product through both retailers and
online platforms.
Our refuse sacks are sold into a number of
markets, including healthcare, local authorities,
retailers and distributors to the food services and
facilities management sectors. Total tonnage fell
by 7% over 2014 as we exited some low margin
business in the retail sector. Pressure on margins
in all sectors remained intense and we require to
continually develop new and improved products
to remain competitive.
We supply both the local authority and NHS
markets and continue to offer downgauged
and lower cost products, as the public sector
continues to look for savings to meet their
reduced expenditure targets. In the healthcare
sector, we continued to supply a range of
downgauged waste sacks to the National Health
Service and secured additional apron business in
38
The supply chain sector continues to perform
well with good growth at some customers but
the sector is highly competitive with intense
margin pressure.
There was considerable focus at Heanor on
operational improvements in production which
resulted in lower scrap and manning levels.
A first coextrusion line was installed in December
2014 and has enabled us to offer an improved
range of products. A second line has now been
ordered for delivery in June. A new three-lane
bag machine has also been ordered to uprate
our capacity on standard sizes and replace an
old conversion machine.
Our industrial activities, which trade under the
bpi.visqueen brand and manufacture heavy
gauge polythene packaging products at Ardeer
and Greenock for a range of markets, saw
volumes reduce due to lower demand from
the construction and animal feed sectors.
Packaging volumes for furniture and carpets,
industrial packaging and garment film for online
retailers were broadly maintained. Pallet stretch
hooding volumes were in line with 2014 but, as
we secure new customers, volumes should grow
in 2016.
Margins suffered from the polymer price increases
in quarter two while the weak euro placed pressure
on both volumes and margins but its reversal may
offer some relief in 2016.
Our major site at Ardeer continues to improve its
operational performance and benefit from the
new extrusion investment for heavy duty sacks.
These new lines have delivered higher outputs,
improved film quality and reduced scrap and
energy costs. The year further benefitted from
a third line which was installed during the final
quarter of 2014. Two further extrusion lines for
other products were installed towards the end of
the year and are running successfully at anticipated
outputs and will benefit 2016. A replacement
eight-colour printing press was installed in the
second half of 2015 and is performing well.
Greenock continues to perform extremely well
with lower scrap rates and reduced costs.
Our small site at Flint is focused on products
requiring hygiene accreditation and continues
to perform well with steady volumes and
improved efficiencies.
Our small trading operation at Norwich continues
to perform well despite lower sales.
Strategic Report
“Having improved the position of our business, we are now
well placed to invest to both increase capacity in growing
markets, improve productivity and reduce costs.”
The operational performance of our wide line
at Ardeer continues to progress with improved
utilisation. This line manufactures a range of
agricultural and horticultural film products that
are sold in the UK and certain European markets.
Total volume sales showed a small increase over
2014 with growth in silage sheet in both the UK
and Europe replacing reduced volumes to North
America following the installation of the new line
in Canada. A new seven-layer wide line has been
authorised to increase capacity and develop more
advanced products.
Horticultural sales improved with some growth
in the UK and exports despite pressure from the
weaker euro.
Our Consumer sector has its main plants at
Worcester in the UK and, for 2015, Xinhui in
the Guangdong province of China. The plant at
Worcester is involved in printing and converting
plain films into packaging for the fresh food, bread
and other food and beverage markets. The plant
has two ten-colour printing presses, four eightcolour printing presses and a laminator. Jordan
Plastics in Northern Ireland joined this sector in
2013 as it supplies a range of printed film and
bags to the food sector in Ireland.
At Worcester, sales volumes reduced as the sector
remained under pressure throughout the year
due to the difficult trading conditions at the major
supermarkets. Margin pressure remained intense
as supermarkets and their suppliers attempted
to continue to reduce costs. All this against a
background of increasing raw material prices
resulted in lower margins. A number of
redundancies were made in December to align
staff levels with demand. The business strategy
remains to broaden the customer and product base
and an experienced sales director was appointed to
develop new markets and products. While success
will not be immediate, we are quoting at a number
of new customers and are confident on securing
additional volume. A new fast changeover printing
press has been ordered for delivery in March.
Our plant in China, BPI China, manufactures
aprons on the roll, flat aprons and a range of
bags including refuse, swing and pedal, food and
freezer. We installed in 2014 further extrusion
equipment and an additional eight-colour printing
press to increase capacity for the production of
packaging for bread and fresh produce.
Total volumes increased over 2014 with some
growth in Wrapsmart®, our stretchfilm product,
bread bags and healthcare products. Margins
showed some recovery as raw material prices
fell in the Far East. Progress on our strategy to
increase our sales in Australasia by supplying the
New Zealand, Australian and Asian bread and
produce markets was slower than expected and
led to the decision to sell the business following
an approach.
A difficult year for Jordan Plastics as sales volumes
reduced and margins were impacted by the
strength of sterling against the euro for our
sales in the Republic of Ireland.
Our pre-press and plate making business provided
artwork, origination and printing plates to Group
businesses and to external customers. The
business continued to suffer from flat demand
both within BPI and externally and, due to the
need for reinvestment, the business was sold
in the final quarter.
Our total capital expenditure in the UK business
was more than £12 million as we invested to
replace older equipment, increase efficiencies and
reduce scrap and maintenance, energy and labour.
New extrusion lines were installed at Bromborough,
Ardeer and Heanor and a printing press at Ardeer.
Planned expenditure for 2016 includes extrusion
equipment for Bromborough, Ardeer and Heanor
and a fast changeover printing press for Worcester.
The UK business is now well positioned and will
continue to see further operational improvements
and will benefit from capital expenditure projects
and the current weakening of sterling against
the euro.
North America
Operating
Profit/(Loss)
Tonnes Sold
£’m
2015
2014
1.3
(0.8)
8,000
8,100
Our North American business comprises AT
Films Inc. based at Edmonton, Alberta in Canada.
The plant at Edmonton manufactures polythene
film for the North American agricultural and
horticultural markets and a conversion facility
nearby at Westlock, Alberta, folds and packs
bags used for the storage of silage and grain.
North America returned to profit as expected
with the new extrusion line in full production and
running well. The business produced a profit of
£1.3 million compared to the loss of £0.8 million
in 2014 which arose due to delays and problems
with the installation of a new large extrusion line.
Total product sold, including product sourced from
the UK, fell from 26.2 million lbs to 23.2 million lbs
as we withdrew from the manufacture of low
margin overwintering film in the horticulture sector.
Sales in agricultural products were disappointingly
nearly 2% below 2014 as we experienced offshore
low cost competition at the start of the year, some
drought conditions in certain areas and crop yields
that were below average.
Sales of horticultural products fell by 2.5 million
lbs as we discontinued the manufacture of low
margin overwintering film and focused on
greenhouse films.
Polymer prices continued at high levels in North
America despite low feedstock costs and this,
combined with a strong US dollar, encouraged
the import of lower priced material impacting
on sales volumes and margins.
The new extrusion line performed as expected
with good running speeds and operating at lower
scrap and cost levels. Unfortunately a number of
power outages adversely impacted the running
of the line resulting in higher than expected scrap
and maintenance costs. The line is now running
well again at the beginning of 2016.
We installed a new rewinding line late in the year
and it will be operational for 2016.
The business was successfully restored to profit in
2015 and we are now developing new agricultural
and horticultural products on the new seven-layer
extrusion line which will bring benefits in
future years.
With supportive weather conditions, further
progress should be made in 2016.
39
Financial Review
Operating profit, before restructuring, increased
by 7% improving operating profit per tonne from
£97 to £105.
The consolidated Financial Statements for the Group and the
individual Financial Statements of the holding company, British
Polythene Industries PLC, which are prepared in accordance
with International Financial Reporting Standards, as adopted
by the EU, are included on pages 96 to 131.
Sales
Total sales reduced to £468.3 million (2014:
£499 million), underlying volumes reduced by
less than 1% to 272k tonnes (2014: 274k tonnes).
The reduction in turnover reflects lower average
raw material costs and the impact of exchange
rates when translating the sales of our
European business.
Net Retirement Benefit Financing
The non-cash charge for net retirement benefit
financing was £3.2 million (2014: £2.9 million).
Operating Profit
Operating profit, before restructuring, increased
by 7% from £26.7 million to £28.6 million. This
represents an 8% improvement in operating profit
per tonne from £97 to £105.
Taxation
The Group’s profits are taxed in a number
of locations. The corporation tax rates of the
main locations for the year ended 31 December
2015 were:
Return on Capital Employed (before restructuring)
improved to 19% compared to 18% in 2014.
United Kingdom
Belgium
34.0%
The sterling/euro exchange rate moved adversely
during 2015 having a negative impact on the
translation rate used to restate the profits of the
mainland European business. The negative impact
on profit before tax of this was £1.7 million.
Netherlands
25.0%
Canada
25.0%
The restructuring charge of £1.1 million in 2015
(2014: nil) related to redundancy and associated
machinery write-down/relocation and site costs,
following the closure of the UK Stretchfilms site at
Widnes and further restructuring in the UK Films
and UK Consumer operations.
Interest
Net borrowing costs reduced from £1.6 million
to £1.2 million. This improvement reflects lower
borrowings and improved terms following the
refinancing of our long-term borrowing facilities
in May 2014.
Interest cover improved to 23.9 times (2014: 16.7)
before restructuring, or 22.9 times after
restructuring costs.
40
The charge for net retirement benefit financing
in 2016 (under IAS 19 (Revised)) is anticipated to
be in the region of £1.9 million. The lower charge
reflects the reduced deficit at 31 December 2015.
20.25%
The effective rate of 24.1% (2014: 26.1%) reflects
the reducing corporation tax rate in the UK and
the granting of some additional relief for patented
products in Belgium. There was a non-cash charge
due to the reducing corporation tax rate in the UK
of £0.3 million.
Earnings Per Share
Diluted earnings per share increased by 11%
to 63.8p from 57.5p. Basic earnings per share
increased to 66.2p from 61.5p.
Adjusted earnings per share has increased by 16%
to 76.6p from 66.2p. Adjusted earnings per share
is stated before restructuring, net retirement
benefit financing and prior year tax items.
The calculation of basic, diluted and adjusted
earnings per share is set out in Note 8 to the
David Harris,
Group Finance Director
Strategic Report
“Return on Capital Employed (before restructuring)
improved to 19% compared to 18% in 2014.”
Dividend
The proposed final ordinary dividend of 12.0p per
share (2014: 11.0p) is to be paid on 13 May 2016
to shareholders on the register at the close of
business on 11 March 2016 making, with the
interim ordinary dividend of 6.0p per share
(2014: 5.0p) paid on 13 November 2015, a total
of 18.0p (2014: 16.0p) per share for the year.
Dividend cover on diluted earnings per share
is 3.6 times (2014: 3.6).
Liquidity Risk
As highlighted in the section on Risk Factors on
pages 27 to 29, whilst general market conditions are
continuing to improve, the economic environment
remains uncertain and there is always a risk that
market demand could deteriorate. The Directors
are satisfied with the Group’s performance, to date,
in these conditions with further improvements to
profitability and borrowings being maintained at
an appropriate level.
Cash Flow and Borrowings
Operating cash flow before movements in
working capital was £26.4 million (2014: £37.3
million) reflecting additional cash payments to the
Pension Scheme. Net working capital increased
by £5.0 million (2014: £1.8 million increase). This
movement in working capital principally reflects
increased stock of agricultural films.
More than two-thirds of the Group’s business is
in sectors such as agriculture, retail food chain,
healthcare and waste services which, so far,
have been shown to be relatively resilient to
the economic cycle. Additionally certain markets,
such as construction, have shown some recovery.
The main European markets are the UK & Ireland,
Benelux, Scandinavia, Germany and France with
limited sales to the southern European nations.
Capital expenditure, including computer software,
was £17.6 million. Annual depreciation and
amortisation was £15 million.
Net borrowings increased by £8.0 million to £32.1
million. The increase was due to the additional
one-off payments to the Pension Scheme totalling
£11.7 million. A large proportion of Group debt is
denominated in euros and lesser amounts in other
foreign currencies. Exchange rate movements
offset the increase in borrowings by £0.4 million.
These borrowings are maintained to hedge the
net investment in overseas subsidiaries.
Earnings before interest, tax, depreciation and
amortisation (EBITDA) increased from £41.4
million to £43.6 million before restructuring. The
net debt to EBITDA ratio (before restructuring)
was 0.7 times (2014: 0.6).
During the year 418,030 of the Company’s shares
were purchased, at an average cost of £7.06 per
share, to be held in the Employee Share Ownership
Trust. These shares are held for use in the Share
Matching Plan.
As the Company provides payment terms to its
customers, the risk of bad debts due to customer
insolvency remains. However, customers are
spread across a wide range of market sectors
and geographical regions and the Group’s
largest customer represents just over 3% of
Group turnover. We continue to carry credit
insurance in Europe and in the agricultural sector.
Banking facilities are in place which provide
sufficient headroom to support the Group’s
trading and development plans. The revolving
credit elements of these facilities are repayable
in 2019. Short-term overdraft facilities are
renewable on an annual basis. Where this
renewal period falls within 12 months, no
matters have been drawn to the attention
of the Directors to suggest that renewal may
not be forthcoming on acceptable terms.
Further disclosures in respect of credit and liquidity
risk management are included in Notes 16 and 18
to the Financial Statements.
Borrowing Facilities
The Company has total banking facilities of £91
million. The facilities comprise five-year revolving
multi-currency credit facilities, of which £70 million
will expire in 2019, and short-term facilities of £21
million, principally overdrafts, renewable annually.
41
Financial Review continued
Viability Statement
The UK Corporate Governance Code 2014 requires
the Directors to undertake an assessment of the
Group’s prospects and viability. The Directors
have concluded that a three year period is the
most appropriate for this assessment to cover,
reflecting the existing strategic planning period
of the business.
The Board’s strategic planning process covers a
three year period, on a rolling basis, and is reviewed
annually. Three year strategic plans are prepared by
each business unit and are presented to the Board
on a periodic basis by the management of the
business unit to enable the Board to discuss
and challenge the plans with management.
The summary of these plans is reviewed and
challenged by the Board on an annual basis.
Kirk Agnew, Extrusion Operator, bpi.visqueen, Ardeer.
Exchange Risk
Movements in exchange rates can also be a risk.
An increase in the strength of sterling can have
a negative impact on Group performance as UK
exports become less competitive and UK domestic
sales are more vulnerable to mainland European
competition. Also profits from the mainland
European operations are worth less in sterling
terms. However, where sterling weakens against
the euro, this provides correspondingly more
favourable conditions for the UK business
and is also beneficial to the translation of
euro-denominated profits. The value of eurodenominated borrowings is sensitive to the
exchange rate when translated into sterling.
Treasury Policy
Borrowings are held in currencies other than
sterling to provide a hedge against the net asset
position in overseas subsidiaries and short-term
trading assets and liabilities in subsidiary entities.
All borrowings are on floating rates although
interest rate swaps are in place to fix forward
rates on €25 million of borrowings which expire
in 2019. Derivative instruments are only used
to facilitate these hedging policies and, where
significant, are approved at Board level.
Going Concern
The Group’s projections, taking account of the
factors outlined above, show that the Group
should be able to operate comfortably within its
current banking facilities. As a result, the Directors
have a reasonable expectation that the Group has
adequate resources to continue in operational
existence for the foreseeable future. For this
reason, they continue to adopt the going concern
basis in preparing the Financial Statements.
“Earnings before interest, tax, depreciation and
amortisation (EBITDA) increased from £41.4 million
to £43.6 million before restructuring.”
42
In order to make this statement the Board
undertook a robust assessment of the principal
risks facing the Group, in line with the existing risk
management procedures, with particular attention
to those which potentially threaten its business
model, future performance, solvency or liquidity.
The review also considered actions which could
be taken to mitigate the impact of these events,
and actions which have already been taken to
manage certain of the risks.
The stress-testing undertaken was focused on
three of the Group’s principal risks the result of
which, if adverse scenarios occur, would be a
negative impact on the Group’s sales volumes.
In considering the viability statement, additional
factors were considered such as the diversified
markets served by the Group, its large and
diversified customer base and its track record in
dealing with extreme volatility in raw material
prices. The Group has proven resilient in difficult
market conditions and, when necessary, effective
steps have been taken to align capacity and the
cost base to reduced market demand.
While this review does not consider all of the risks
that the Group may face, the Directors consider
that this stress-testing based assessment of the
Group’s prospects is reasonable. Based on this
assessment the Directors confirm that they have
reasonable expectation that the Group will be
able to continue in operation and be able to
meet its liabilities as they fall due over the
period to 31 December 2018.
Strategic Report
Pension Fund
The deficit in the UK Defined Benefit Pension Scheme, when calculated on an IAS 19 (Revised) basis,
reduced from £99.1 million at 31 December 2014 to £53.2 million at 31 December 2015. The movement
in the deficit is analysed below.
£’m
Deficit at 31 December 2014
£’m
99.1
Contributions: Normal
Contributions: One-off: profit target
Contributions: Non-recurring
(5.5)
(0.5)
(11.2)
(17.2)
Net pension financing
Changes to assumptions:
Lower than assumed return from investments
Decrease in liabilities due to increased corporate bond yield
Change of inflation rate for pension indexation
3.2
5.0
(9.3)
(27.6)
(31.9)
Deficit at 31 December 2015
The Scheme’s assets delivered returns below the
previous accounting assumptions reflecting a
reasonable investment performance in difficult
market conditions. The discount rate applied to
the Scheme liabilities increased from 3.55% to
3.75% reflecting an increase in the high quality
corporate bond yields used to derive the rate.
The assumed long-term rate of Retail Prices Index
(‘RPI’) inflation remained unchanged at 2.9% and
the assumed long-term rate of Consumer Prices
Index (‘CPI’) inflation was also unchanged at 1.9%.
A triennial actuarial review of the fund was carried
out at 6 April 2014 by the Scheme’s Actuary,
Hymans Robertson. The Actuary certified a deficit
of £78 million, at that time, using the projected
unit credit method. The Company and the trustee
agreed a future funding rate of £3.6 million per
annum from 2015; rising in line with the CPI
subject to a cap of 5%. There is also provision
for three additional one-off payments in 2016
to 2018, subject to the Group’s profit before
tax achieving agreed targets in 2015 to 2017.
The one-off payments would be £0.25 million,
£0.5 million, £1.0 million or £1.5 million subject
to profit before tax exceeding £22.5 million, £25
million, £27.5 million or £30 million respectively.
A payment of £0.25 million will be made in July
2016, as the Group profit before tax of £23.1
million exceeds the lower target of £22.5 million.
53.2
In February 2015 the Scheme changed the
inflation index for pensions in payment from
RPI to CPI. This change reflects the Government’s
view that CPI is the most appropriate measure
of inflation for pensions in payment due to the
adoption of CPI for state, public sector and
statutory minimum pension increases. This change
has reduced the deficit on an IAS 19 (Revised)
basis by £28 million in 2015. This change will also
impact future actuarial valuation and would have
reduced the deficit at 6 April 2014 by £28 million.
To increase the security of pensions for Scheme
members, the Company made a one-off payment
of £11.2 million to the Scheme in June 2015.
Alex van der Pijl, Trainee Operator, bpi.indupac,
Hardenberg.
During the year the investment strategy of the
UK Defined Benefit Pension Scheme remained
broadly unchanged, following changes in 2013
to increase the level of actively managed holdings
of global equities, diversified growth funds
and loan funds. Additional inflation hedging
is obtained by holdings in secured lease and
liability driven investment funds. There is also an
additional equity exposure obtained by holding
equity index futures. Further details of the
investment holdings is given in Note 31 to the
Financial Statements. The investment strategy
is regularly reviewed by the trustee with input
from the Board and professional advisers.
43
Financial Review continued
Harald Schippers, Extrusion Operator, bpi.indupac,
Hardenberg.
Pension Fund continued
The Scheme was closed to new entrants in
2000 and closed to future accrual in 2010.
Steps were taken between those dates to
restrict the rate at which benefits were accrued
and to cap pensionable pay. A scheme has been
introduced which allows members to exchange,
on retirement, their right to inflationary pension
increases for a higher initial pension. The
Company, in cooperation with the trustee,
continues to review options to manage the
liabilities of the Pension Scheme.
Issue and Buy-Back of Shares
The Directors have broad powers to act to
promote the success of the Company for the
benefit of its shareholders; however, there are
specific powers in relation to the issue and
buy-back of its own shares.
In 2016, total payments to the Scheme will
comprise of deficit repair contributions of £3.6
million, an additional payment of £0.25 million
due to the Company achieving a previously agreed
profit target in 2015 and a payment of £1.9 million
in relation to the Pension Funding Partnership.
2. to allot shares for cash provided that this
power is limited to:
Share Capital
The Company has only one class of share capital,
ordinary shares of 25p each. The ordinary shares
carry no right to fixed income, but holders are
entitled to receive dividends as declared from
time-to-time and are entitled to one vote per
share at meetings of the Company. All shares
rank equally with regard to the Company’s
residual assets and there are no restrictions on
the transfer of the Company’s shares. During
the period, the Company complied fully with the
requirements that apply to the Company’s shares
as a consequence of these shares being listed on
the London Stock Exchange. The Company’s aim
is to maintain a balance between issued share
capital and other forms of long-term finance.
Details of the shares in issue and shares issued in
relation to the Save As You Earn (‘SAYE’) scheme
and Company Share Option Scheme (‘CSOP’)
during the year are set out in Note 30 to the
Almost all UK employees are entitled to
acquire shares in the Company through the
SAYE scheme referred to in Notes 23 and 30
to the Financial Statements.
44
At the 2015 AGM the Directors were authorised:
1. to exercise all the powers of the Company to
allot shares up to approximately 30% of the
issued ordinary share capital;
− the allotment of equity securities where
such securities have been offered (whether
by way of a rights issue, open offer or
otherwise) to the holders of ordinary shares
in proportion generally to their respective
shareholdings but with such exclusions,
limits and restrictions as the Directors
consider appropriate, for example to
deal with fractional entitlements or
legal, regulatory or practical problems
in overseas jurisdictions; and
− otherwise, the allotment of equity securities
up to approximately 5% of the issued
ordinary share capital; and
3. to make market purchases up to approximately
10% of the issued ordinary share capital. This
is subject to a minimum price of 25p and a
maximum price determined by reference to the
Company’s recent share price reflecting the
requirements of the Listing Rules of the UK
Listing Authority.
Each of the above authorities will expire at the
Annual General Meeting in May 2016 when
resolutions for new authorities in relation to the
issue and buy-back of shares will be proposed.
Full details are contained in the explanatory
notes accompanying the Notice of Annual
General Meeting.
Strategic Report
Auditor
Separate resolutions are to be proposed at the
Annual General Meeting in May 2016 for the
re-appointment of KPMG LLP as auditor of the
Company and for their remuneration to be
determined by the Directors.
Nina Virdi, Marketing
Communications Manager
and Jagan Mohanraj,
Innovation Manager,
bpi.recycled products,
Heanor.
Statement as to Disclosure
of Information to Auditor
The Directors who held office at the date of
approval of this Report confirm that, so far as
they are each aware, there is no relevant audit
information of which the Company’s auditor is
unaware, and each Director has taken all the steps
that he ought to have taken as a Director to make
himself aware of any audit information and to
establish that the Company’s auditor is aware
of that information.
Substantial Interests
The Company has been notified of the following
interests representing 3% or more of the total
voting rights in the share capital of the Company
as at 31 December 2015:
No. of
voting rights
% of total
voting rights
Schroders PLC
4,188,105
15.30%
Henderson Global
Investors
2,504,669
9.15%
C McLatchie has interests amounting to more
than 3% of the share capital as disclosed on
page 78.
The Company has been notified of the following
changes in the period 1 January 2016 until 7 March
2016 (one month before the Notice of AGM) in the
interests disclosed above as representing 3% or
more of the total voting rights in the Company’s
share capital as at that first date:
Schroders PLC
Henderson Global
Investors
No. of
voting rights
% of total
voting rights
2,900,747
10.59%
Below 5%* Below 5%*
Discretionary clients of
Hargreave Hale Limited** 1,678,350
*
6.13%
As an investment manager, Henderson has an FCA exception
from disclosing at 3% and 4%.
** 1,422,450 of these shares are held for unit trusts operated
by Malborough Fund Managers Ltd, for whom Hargreave
Hale Limited manages the portfolio of investments on
a discretionary basis. The remaining balance is held on
behalf of other discretionary clients.
Visqueen Ultimate™
Innovation and new product development is
central to the ongoing success of our business.
Many of our successful products reflect the
ongoing development which has taken place
over many decades. We work in partnership
with leading universities, equipment
manufacturers, raw material suppliers and
customers. A recent development from this
continual innovation is the Visqueen Ultimate™
range of refuse sacks.
Through market insight studies we identified
an opportunity to launch a premium and
tougher range of refuse sacks into the
UK market. Our innovation teams developed
a highly technical superior performance
film from which we created the Visqueen
Ultimate Heavy Duty Refuse Sack brand.
Our Visqueen heritage stretches back to
the 1960s and is well recognised for high
performance technical capabilities across
a range of market sectors, including
Construction, Agriculture and Industrial.
The launch of the new Visqueen Ultimate™
range builds upon these values and offers
consumers a distinct alternative.
45
The Group is proud to maintain the highest
standards of conduct in all aspects of our business.
The Group has a very strong focus on the safety
and welfare of our employees, on ensuring that
we minimise our impact on the environment,
making a positive contribution to the communities
in which we operate and on maintaining the
highest standards of conduct in all aspects of
our business. This reflects our view that being
a socially responsible company, that adheres
to these core values, enhances the Company’s
value and will continue to do so.
Our responsibility and commitment to our
employees for their safety and welfare whilst at
work, and to all others whose health and safety
may be affected by our operations, is paramount.
We strive to improve our performance in this
area and to build on our strong health and safety
culture. We invest in comprehensive training and
development to promote our culture of excellence
in health and safety. Significant and ongoing
investment in state of the art plant and equipment
delivers positive safety benefits.
The Group seeks to maintain the highest standards
of business conduct. We have detailed policies and
guidelines in place which set standards concerning
ethical business practices, compliance with all legal
requirements and wider ethical business issues.
This includes training for our employees on ethical
business issues, including anti-bribery laws and
competition laws, and procedures designed to
ensure that our business partners apply similarly
high standards. We comply with all applicable
trade laws, including import and export regulations
and relevant international sanctions. We will not
comply with illegal trade restrictions or take part
in unlawful anti-competitive trade practices.
Recognising that our people are central to the
development and success of our business, we
strive to reach the highest standards in all aspects
of employment policy and practice in all of our
operations. We promote a business environment
where our employees feel valued and respected.
bpi.recycled products sponsored two young people’s
categories in the annual schools and students
Starpack awards which celebrate innovative ideas
in packaging design.
This includes:
The Group was promoting the environmental
benefits of recycling long before such activities
became fashionable. BPI incorporates sustainable
practices into all aspects of our operations, from
training programmes to product development
initiatives and capital investments. Our work with
customers and suppliers enables us to implement
sustainable practices across the supply chain.
We are proud of our long record of leadership
in addressing our sector’s environmental
responsibilities by ensuring that our products and
processes deliver environmentally responsible
solutions whilst meeting the practical needs of
customers, consumers and the wider community.
We continue to invest heavily in state-of-the-art
plastic reprocessing equipment at our Environment
Agency and Scottish Environment Protection
Agency accredited sites. We are committed to
working with other manufacturers of agricultural
and horticultural plastics to establish and build
national recovery schemes which allow for these
products to be collected and recycled once they
have done their job. We are now hopeful that a
voluntary scheme to increase collection of used
farm plastics in the UK will start in early 2016.
46
•
•
•
our commitment to equal opportunities for all
in recruitment, development and promotion
opportunities;
Group-wide communication initiatives to help
ensure that we employ and retain only people,
and work only with suppliers and business
partners, who share our commitment to these
ethical values; and
our investment in training and development
at all levels to encourage and support our
employees to achieve their full potential.
We promote and support initiatives for
engagement with the wider community including
community education initiatives and support
to charities.
We are included in the FTSE4Good index for
environmentally and socially responsible companies.
Members of staff from across the bpi.visqueen business
and other areas of the Group took part in last year’s
Great Scottish Run in October to raise funds for Maggie’s
Glasgow, a charity, which provides practical, emotional and
social support to people with cancer and their family and
friends. Not only did our men’s team come second in the
Bank of Scotland Business Challenge but we also raised
£3,402.75 which was matched by BPI – taking our total
donation to £6,805.50.
Strategic Report
Health and Safety
Policy
The Group’s commitment to the highest possible
standards on Health and Safety is reflected in our
policy which states:
“We firmly believe that the prevention of accidents
involving personal injury or damage to property
is essential to the successful operation of our
business and we regard the health and safety
of our employees as paramount.
We, therefore, through this statement of intent,
affirm our commitment to achieving the highest
possible standards of health and safety for all of
our employees and any others whose health and
safety may be affected by our operations.
The Board of Directors:
•
•
•
•
accept their individual and collective
responsibility in providing health and safety
leadership;
will ensure that all business decisions reflect
its health and safety intentions as set out in
this statement;
will provide a working environment that is
both safe and which has the lowest possible
risk to health; and
will provide sufficient information, instruction,
training and supervision to enable all
employees to contribute to their own
health and safety at work.
The Managing Director and Business Director
of each business is responsible for ensuring
that suitable and sufficient organisation and
arrangements are employed for achieving the
defined objectives.
Health and Safety is as important an issue as any
other commercial consideration. No task is so
important that a person’s health or safety is put
at risk. The Board of Directors will, therefore,
pursue this policy with the utmost diligence.
We do stress, however, the need for all of our
employees to co-operate in our aim to provide
a working environment that is safe and which
has the lowest possible risk to health. This is
not simply because of our legal obligations,
but because it is in all of our interests that we
should work together to achieve this end.”
Management at all levels are actively involved
in monitoring and promoting safety. The Group
Health and Safety Manager is independent of
the Business Managing Directors and reports
directly to the Chief Executive with recourse to the
Board of Directors. He presents to, and answers
questions from, the Board of Directors and Group
Management Board on Health and Safety at
least once a year. His reports are reviewed and
discussed quarterly by the Board of Directors and
Group Management Board as well as at Business
Board and Site Management meetings. The Chief
Executive is ultimately responsible to the Board
of Directors for health and safety matters.
•
Robust Auditing of Safety
Management Systems
All our manufacturing sites are audited on a
rolling programme by the Group Health and
Safety Manager and areas of improvement
are identified. These audit reports are issued
to, and reviewed by, the Business Managing
Directors and the Chief Executive and any
recommended improvements form part
of the site action plan. Over 40% of sites
were audited in 2015, with the focus being
on higher risk areas including workplace
transport, machinery safety, electrical safety
and contractor and maintenance safety.
Health and Safety Resource
Following a strategic review of health and safety
structure and resource, 2015 saw an increase in the
number of health and safety professionals within
the Group providing additional competent health
and safety advice and support across the business.
Performance
Proactive Commitment
to Improve Safety Performance
The Group strives continually to improve its safety
performance. Over the last three years, all new
starters in relevant roles and more than 80% of
the workforce has received training or refresher
training in health and safety. All new starters
received a minimum of 5 hours health and safety
training, which includes a general site safety
induction, followed by specific safety training
including safe manual handling, fire safety, safe
use of chemicals, use of personal protective
equipment, machinery safety, risk assessments
and safe working procedures. The production
workforce received no less than 8 hours training
or refresher training.
•
Our Proactive Safety Programme
The Group’s ongoing proactive behavioural
safety programme aims to reduce ‘human
factor’ accidents by developing and maintaining
a strong safety culture at all our locations and
promoting greater employee involvement and
ownership of health and safety issues.
•
Minimising Fire and Natural Hazard
The prestigious Highly Protected Risk (‘HPR’)
Award from FM Global (the Group’s property
risk insurers) is given in recognition of the very
high standards of fire risk management at a
particular site. HPR status has been awarded
to the sites at Ardeer (Scotland), Leominster
(England), Roeselare and Zele (Belgium),
Hardenberg (Netherlands) and AT Films
(Canada). Over 50% of the Group is protected
from fire/natural hazards to this high level.
Property risk protection will remain a focus for
2016 and we expect continued improvement
across the Group in this area.
•
Senior Management Health
and Safety Briefings
All senior management are kept regularly
briefed on health and safety issues. In addition
to the updates given to the Board of Directors
and Group Management Board already referred
to, the Group Health and Safety Manager
presents annually to senior management to
ensure that all key persons were aware of
their responsibilities for the management of
health and safety across the BPI business. This
year’s briefings have included the potential
implications of the new sentencing guidelines
for health and safety offences that came into
force in England and Wales in February 2016.
Additional steps taken include:
Sharing Best Practice
throughout the Group
We identify the root causes of all accidents,
dangerous incidents and near-miss situations,
and use a range of investigation procedures
to help avoid repetition. Conclusions about
underlying causes are used to improve our
health and safety management systems, with
relevant information being shared across the
Group. Meetings are also held three times
a year with Health and Safety Managers across
the Group and advisers to share best practice.
•
47
Corporate Social Responsibility Review continued
Performance continued
• Risk Assessments
Across the Group, our operating sites continued
to review and update their workplace risk
assessments. These risk assessments and safe
operating procedures are the foundation of a
good safety management system.
•
•
•
•
48
Asbestos and Legionella Management
Good control of both asbestos and legionella
remain a high priority for the Group. All BPI
sites have asbestos assessment surveys carried
out with a detailed asbestos register and a
management plan in place. All BPI sites follow
the BPI Water Management Standard for
controlling the risks associated with legionella
bacteria in water systems. These are audited
and monitored by the Group Health and Safety
Manager and an external specialist asbestos
consultant. In 2015, site responsible persons
attended refresher training courses in both
asbestos and legionella management.
There have been no asbestos-related incidents
in the last ten years.
Contractor Safety
The Group provided training to key persons
following the introduction of the Construction
Design and Management Regulations 2015.
Machinery and Electrical Safety
A new BPI Electrical Safety Standard was
developed in 2015 and issued throughout
the Group. In addition to this, all sites have
implemented a thorough review of machinery
safety and have specific action plans in place.
These Machinery Safety and Electrical Safety
action plans will help prevent any future
accidents in these two higher risk areas.
Regular progress reviews of these will take
place in 2016.
HSE Involvement
The Group sits on the steering group of the
Health and Safety Executive’s Plastics Industry,
Safety Initiative Safety In Manufacturing Plastics,
(‘SIMPL’). In addition to this, BPI has also been
actively involved in the development of plastics
industry specific HSE guidance information
sheets. In particular, BPI played a key role in
the development of the new HSE Guidance
on winder safety.
Recorded Accidents
The Group is disappointed to report that following
an excellent reduction in Lost Time Accidents
(‘LTAs’) in 2014, the number of LTAs increased
in 2015, although there was an overall reduction
in minor accidents reported.
Of the 24 LTAs reported, 8 were related to manual
handling activities and 11 related to cuts to the
hand. The Group has put arrangements in place
to focus on these two specific areas in 2016,
which will include a detailed review of manual
handling activities and the use of safety knives
and protective gloves across the business.
Although the number and rate of LTAs increased,
there were no major injuries reported as defined
by the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations.
The numbers of accidents recorded throughout
the Group were:
2015
2014
2013
2012
2011
0
0
0
0
0
24
16
21
23
24
Minor Accidents 164
171
204
228
241
Fatalities
LTAs
2015
LTA Rate = 0.6
Minor Rate = 4.1
Severity = 0.007
Environment
Policy
As a leading manufacturer and recycler of
polythene film and other products, we recognise
our responsibility to operate with due concern for
the environment in which we live and work and
to minimise the impact of our activities on that
environment. Through close contact with national
governments and industry regulators, we are at the
forefront of legislative developments. We continue
to develop our processes and working practices to
meet, as a minimum standard, both our legal and
social obligations. Recognising the potential impact
of climate change, we seek continually to improve
our environmental performance by setting
objectives and targets combined with clear
management programmes and initiatives to
minimise our impact on the environment.
Specifically, our Environmental Policy sets out our
commitment to:
• comply with all relevant legislative standards
and best practice in the countries and regions
in which we operate;
• minimise the use of resources and work
with our customers to minimise their use of
resources through environmentally responsible
packaging systems;
• promote the re-use, recycling and recovery
of our materials and assist in this recovery
wherever it is practical and environmentally
beneficial to do so;
• collect, analyse, report and assess data to
ensure that we understand the environmental
issues and risks affecting our business;
• manage these issues and risks proactively;
• improve the environmental performance of our
processes by reducing emissions and energy
use, minimising waste and controlling noise;
• be a responsible employer and a good
neighbour;
• provide suitable and unambiguous
environmental information for our employees,
customers and the local community; and
• maintain leadership in the development of
new products and processes using recycled
materials and support initiatives which benefit
the environment.
The Group Environmental Director, Andrew
Green, is a member of the Group Management
Board and reports to the Chief Executive, who has
ultimate responsibility to the Board of Directors for
environmental matters.
Greenhouse Gas Emissions
and Energy Consumption
This section includes our mandatory reporting
of Greenhouse Gas emissions required under
the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013. We have
reported all material emission sources which fall
within our operational and financial control. We
have reported using a methodology based on the
‘Environmental Reporting Guidelines: Including
Mandatory Greenhouse Gas Emissions Reporting
Guidance’ (June 2013) issued by Department
for Environment, Food & Rural Affairs (‘DEFRA’).
We have used DEFRA’s conversion factors for
the relevant year for which data is reported.
The data is gathered using the systems in place to
meet the reporting requirements of our Climate
Change Agreements (‘CCA’). Materiality is set to
ensure that more than 99% of relevant emissions
are reported.
Strategic Report
Global Greenhouse Gas Emissions Data
For the period 1 January 2013 to 31 December 2015
LTA frequency rate
Accidents/100,000 hours worked
2015
0.6
2014
0.3
2013
2012
0.5
2011
0.5
Minor accident frequency rate
Minor accidents/100,000 hours worked
4.1
3.7
2013
4.3
2012
4.9
2011
5.0
Minor accidents – All reported minor injuries.
0.007
2014 0.005
2013
2012
2011
2013
Combustion of fuel and operation of facilities (tonnes of CO2e)
Electricity and cooling purchased for own use (tonnes of CO2e)
3,772
96,084
3,987
104,879
4,617
98,692
Total tonnes of CO2e
99,857
108,866
103,310
283.2
11.9
659
27.7
302.5
12.8
663
28.0
289.7
12.4
675
28.9
1.31
1.06
2.06
51
52
58
Gas (kwh/tonne)
To enable the presentation of a complete
picture we also report our energy consumption
in this section.
We have included measures of greenhouse
gas emissions and energy usage per tonne and
per square metre to reflect the continuing trend
to provide thinner and stronger films. For a
number of years we have been reporting good
improvements in energy efficiency with reduced
kWh per tonne and square metre produced,
reflecting our focus on energy efficiency and
significant investment in more efficient equipment.
We are pleased to note the measured greenhouse
gas emissions have reduced in line with the greater
energy efficiency reported.
The Energy Savings Opportunity Scheme (‘ESOS’)
Regulations 2014 brought into force Article 8 of
the EU Energy Efficiency Directive and mandate
that all large businesses in the UK undertake
comprehensive assessments of energy use and
energy efficiency opportunities at least once every
four years.
Severity rate
Number of days
2015
2014
Oil (kwh/tonne)
Lost Time Accidents (‘LTA’) – Accidents that cause employees
to be unavailable for normal duties for more than three
consecutive days.
2015
2015
CO2e output (kg/tonne)
CO2e output (tonne/1,000 square metres)
Electricity (kwh/tonne)
Electricity (kwh/1,000 square metres)
0.4
2014
0.006
0.007
0.017
Severity rate – number of days lost as a result of accidents/number
of hours worked.
We have a long-standing programme to install
more energy efficient equipment and install energy
saving devices, especially motors, compressors
and lighting schemes. There is also an established
and ongoing programme of energy audits and
efficiency programmes all designed to reduce
power and water usage and the effect we have on
the environment. There are a number of initiatives
to re-use exhaust heat from the production
process and thermal oxidisers for space heating.
Fourteen of our UK sites, representing more
than 99% of our UK energy usage, are in climate
change agreements with DEFRA to reduce our
CO2 emissions. These agreements set challenging
targets for us to achieve emissions reduction
ranging from 5% to 17% at those sites, with
periodic auditing by the Environment Agency.
To comply with the regulations, BPI trained an
internal ‘Lead Energy Assessor’ to conduct the
ESOS Assessments, which we carried out at four
sites and involved:
• measurement of our total energy consumption
for industrial processes, buildings and
transport; and
• identification of cost-effective energy efficiency
recommendations for areas of significant
energy consumption.
The Group Management Board, including the
Chief Executive and Group Finance Director, were
briefed on the findings from these assessments
and the Group was fully compliant with the
requirements of ESOS.
Jos Muis, Pre-Print Plate Coordinator and Melvin
Spijkerman, Plate Preparer, bpi.indupac, Hardenberg.
49
Greenhouse Gas Emissions
and Energy Consumption continued
Although no targets as yet have been set beyond
2020, it is our intention to continue to invest
in energy efficient equipment to enable us to
continually improve our environmental performance
and competitiveness as technology improves.
The Group is a member of the Major Energy Users’
Council and actively consults with the relevant
Government departments on energy, environmental
and climate change issues affecting our industry.
Only two sites use heating oil for space heating,
one of our large European sites and our plant
in China.
Gas is used for drying in our printing presses,
burning VOC emissions at our large printing
sites and space heating. Gas consumption has
improved, reflecting the ongoing focus on energy
efficiency due to the installation of a thermal
oxidiser at Ardeer to burn VOC emissions,
replacing bio-filtration equipment.
Water
Process water is used predominantly within our
Recycled Products division. Water usage remains
an area of focus and action plans are in place to
reduce further our usage of water and ensure we
manage all potential risks of contamination from
our sites as a result of our trade effluent. 2015
saw a drop in water consumption of 13.4%
due primarily to better re-circulation and re-use
of water at our recycled products division.
Total
water use
2015
2014
2013
77,358m3
89,247m3
92,472m3
Volatile Organic Compound (‘VOC’) Emissions
Sites which have printing activities require to be
compliant with the Integrated Pollution Prevention
and Control of Emissions Directive in the handling
and use of solvents, which is a major factor in VOC
emissions. At the end of 2015 nine of our sites had
solvent-based printing processes and a further two
used exclusively water-based printing processes. Of
those sites using solvent-based inks, four are able
to demonstrate the abatement of VOC emissions
with the use of processes that change these
potentially environmentally unfriendly substances
before controlled emission into the atmosphere. At
four sites VOC emissions are below the level above
which abatement is required and at the two sites
which only use water-based inks there are no VOC
50
emissions. Jordan Plastics, which was acquired
in 2013, uses solvent-based inks and the level of
VOC emissions is being reviewed in order that an
appropriate solution can be identified. Emission
monitoring, which is carried out on a yearly basis
by an independent specialist company, established
that the emissions from the abatement plants were
well within permitted levels.
Whilst we remain dependent on solvent-based inks
for many of our customers’ print requirements,
we will use water-based ink where the application
allows and seek to further develop emerging
technologies where appropriate.
VOC solvent purchases for our print sites were:
2015
Tonnes
2014
Tonnes
2013
Tonnes
Non-abated
Abated
145
1,579
135
1,492
135
1,678
Total
1,724
1,627
1,813
No environmental fines or penalties were incurred
by the Group during 2015 and none have been
incurred in the last 5 years.
Carbon Footprinting
The Group has previously commissioned Valpak
to carry out an organisational carbon footprint
analysis for its food packaging production sites
at Bromborough and Worcester. The study
was carried out to ISO 14064.1 methods and
standards and in line with the Greenhouse Gas
Protocol. It covered Scope 1 and 2 emissions as
well as the following emissions under Scope 3:
waste disposal, water use, transport of incoming
and outgoing goods and staff commuting. The
Group is developing a format to enable regular
monitoring of carbon footprint on a site basis and
this will enable future progress on reducing the
Group’s organisational footprint to be measured.
Packaging and the Environment
The Group supports packaging minimisation
where it does not result in increased product
damage or spoilage, thereby creating a more
significant environmental problem. We have
reduced the weight of the packaging products
that we supply on like-for-like volumes by more
than 15,000 tonnes in the last five years and
will continue to work with our customers to
take further weight out of these products.
Furthermore, continually updated scrap targets
within our production facilities have resulted in
an ongoing reduction in process scrap levels.
Biodegradable Plastics
The Group welcomes the ongoing advances made
in the technical characteristics of biopolymers
manufactured from renewable resources. However,
we caution that the most important and valuable
environmental credential of plastic films is their
ability to perform a packaging, industrial or
agricultural requirement using the most lightweight
materials available for the task. The integrity and
resource efficiency of this primary purpose of
protection is of far greater environmental impact
than the speed at which the plastic will eventually
biodegrade. Our overriding commitment is to offer
biodegradable products to our customers only
where we can guarantee the integrity of our
product and where their compostability or
biodegradability offers an alternative disposal
solution from landfill.
The Government introduced new regulations
regarding Single-Use Carrier Bag Charges
(England) with effect from October 2015.
The Group welcomes the fact that no exemption
from these regulations has been granted for
biodegradable materials.
Recycling and Packaging Waste Legislation
BPI is the UK’s largest recycler of polythene films,
reprocessing over 65,000 tonnes in the year. Since
the Packaging Waste Regulations were introduced
in the UK, we have invested more than £25 million
in state-of-the-art plastic reprocessing equipment
at our Environment Agency and Scottish
Environment Protection Agency accredited sites.
As a leading manufacturer of agricultural
and horticultural plastics, we promote good
environmental stewardship and control of our
products at the end of their lives. We have
therefore worked tirelessly to establish and build
national recovery schemes which allow for these
products’ collection and recycling once they have
fulfilled their purpose on the farm. Since we were
instrumental in establishing the first ever voluntary
waste farm plastic collection scheme in 1995,
we have continued to be at the forefront of
efforts to develop a national scheme throughout
the UK, as well as participating as key members of
similar schemes elsewhere within the EU. Whilst
the original UK collection scheme collapsed in
1996, we are now hopeful that a new scheme will
start in 2016. This scheme, financed by farm film
producers, will initially aim to generate significant
growth in the volumes of farm films currently
collected for reprocessing from UK farms. The
objective is that this will develop over time to
become a nationwide scheme recovering
substantial volumes of UK farm plastics.
Strategic Report
The price of Packaging Waste Recovery Notes
(‘PRN’) increased from an average of £31/tonne in
2014 to an average of £40/tonne in 2015. PRNs/
PERNs (Packaging Waste Export Recovery Notes)
traded at around £24/tonne for the first half of
2015 but increased sharply to between £55 and
£60/tonne in the second half when it became
clear that recycling activity levels would be
insufficient to achieve the Government’s national
target of 34.8% (equivalent to some 950 ktonnes
of recycling). By the final quarter, following a
significant increase in export activity, it became
clear that the targets would be achieved and
PRN prices eased back. There were a considerable
number of business failures and distress sales in
the UK plastics recycling sector during 2015, a
number of which businesses had been financially
supported by Government funds in the form of
investment by WRAP. It is for this reason that the
Group has argued in the Government’s recent
consultation for more realistic recycling targets,
rising by 1% per annum to a total rate of 44%
in 2020, compared with the current target of
48% by 2020.
The Group’s Packaging Waste recovery and
recycling obligation for 2015 was 8,654 tonnes,
which was an increase of 7% on the previous year
(8,094 tonnes). This was due predominantly to the
increase in the obligated business recycling rate
for plastics from 42% to 47% (required to deliver
a national recycling rate of 34.8%). We continue
to discharge our obligations through membership
of the national compliance scheme, Valpak, and
satisfied our plastic recycling obligation through
our own recycling plants. Our cost of compliance
was around 30% higher than in 2014 due to a
combination of this higher obligation level and
the 29% increase in the cost of plastic PRNs.
Waste to Landfill
The Group limits the amount of material which
goes to landfill by ensuring that virtually all scrap
arising from polymer used in the manufacturing
process is reprocessed or recycled within
the Group.
Agricultural scrap is heavily contaminated with
soil, water and other agricultural by-products
and is extensively washed prior to recycling at
the Group’s operations at Dumfries and Rhymney.
Bio Soil (soil to landfill) is charged at a significantly
reduced fee and is used by the landfill operator as
a covering for other waste. Other brought-in scrap
is less contaminated, but still contains an element
of non-polythene which has to be separated out
before recycling.
Waste to Landfill
Manufacturing waste
Non-agricultural recycled waste
Agricultural recycled waste
Bio Soil
Throughout the Group there is a programme
which is targeted with reducing the amount of
waste which goes to landfill. This will be achieved
by reducing waste arising from operations and
ensuring that as much as possible is separated and
sent for recycling. Our manufacturing sites in the
Netherlands, Belgium and at Ardeer, Worcester,
Stroud and Heanor in the UK, operate a ‘zero to
landfill’ policy for all production and office waste.
This has enabled an impressive 86% reduction in
Waste to Landfill in 2015.
Business Accreditations
Quality Assurance
Until the acquisition of the Flexfilm Group in 2013,
all manufacturing sites in the UK, Europe and North
America had achieved ISO 9001 accreditation,
covering quality management systems. Flexfilm
and Jordan Plastics are not presently accredited.
British Retail Consortium (‘BRC’)
All sites in the UK, Europe and China which supply
the retail food market have achieved the highly
regarded BRC certification. BRC is the lead UK
trade association representing the whole range of
retailers, from the large multiples and department
stores through to the independents.
Environment
Eleven sites in the Group have achieved
accreditation under ISO 14001 which is the
International Environmental Management
System standard.
Occupational Health and Safety Assessment
Series (OHSAS 18001)
Three sites in Europe and four of the UK sites
have achieved OHSAS 18001 certification which
requires robust management systems to control
occupational health and safety risks and improve
performance.
2015
Tonnes
2014
Tonnes
2013
Tonnes
2012
Tonnes
255
0
25
356
715
962
250
462
1,024
275
293
1,063
280
2,033
1,736
1,631
2015
Tonnes
2014
Tonnes
2013
Tonnes
2012
Tonnes
4,462
6,316
7,634
4,393
Our People
Our people are central to the development and
success of our business. We strive to reach the
highest standards in all aspects of employment
policy and practice in all of our UK, European,
Chinese and North American operations.
The Group benefits from a strong people culture;
our employees take pride in their jobs and strive to
deliver their best performance in everything they
do, including in their commitment to BPI’s safety,
ethical, equal opportunities and environmental
values. The skill, knowledge and experience of
our workforce compares favourably with anyone
in our industry. We operate very flat management
structures which allow immediate communication
and feedback on daily issues and more formal
structures (for example, the Group’s Employee and
Information Communication Body (‘EICB’) and our
European Communication Forum (‘ECF’)) promote
effective communication about the values and
direction of the business.
We support employees at all levels in their
development, including through our training
programmes and appraisals. Many opportunities
exist to build careers within the business and we
operate a strong meritocracy. Many supervisors and
managers began in junior roles on the shop floor
and have learned the business from the grass roots.
We always attempt to fill vacancies by promoting
internally. This is supplemented with external
recruitment where necessary. We strengthened our
senior sales, marketing and technical teams in 2015.
51
Equal Opportunities,
Recruitment and Retention
The Group operates an Equal Opportunity Policy
(available on our website at www.bpipoly.com) and
is committed to ensuring that it fulfils its obligations
to operate fairly, justly and in accordance with
all applicable laws. In particular, no employee or
potential employee shall be discriminated against
on grounds of gender, race, age, disability, religion,
political beliefs or sexual orientation. This is
reflected in the Diversity Policy set out on page 60.
We oppose any form of discrimination which
would interfere with the recruitment, treatment
or promotion of the best candidate for the job.
We employ a large number of older workers and
operate without a retirement age in the UK where
40% of our employees are over the age of 50.
Applications for employment by disabled persons
are always fully considered, bearing in mind the
aptitudes of the applicant concerned and the
implications of the UK Equality Act 2010. In the
event of members of staff becoming disabled,
every effort is made to ensure that their
employment with the Group continues, that
reasonable adjustments are made to the job
or working environment and that appropriate
training is arranged.
We recruit graduates from universities and young
workers as apprentices. In 2015 we recruited four
engineering and polymer science graduates onto
our Graduate Programme. We currently employ
59 apprentices in our UK sites across extrusion,
print, engineering, IT and customer services, with
plans to increase this further in 2016. BPI holds a
category A rated licence to sponsor Tier 2 migrant
workers from non-EU countries to work in the UK.
We currently employ and sponsor three graduates
under these Tier 2 arrangements. In 2015 we
reviewed and audited our Right To Work
assessment procedures for all employees across
UK and Europe.
Our retention rates have stabilised and voluntary
employee turnover (excluding redundancies and
disposals) in 2015 is 12.5% (and has been at
or below this level for the previous four years).
We consistently retain longer serving, higher
skilled employees and employee turnover tends
to occur with shorter serving employees in lower
skilled jobs. Our average length of service is over
10 years with the business and our 50 most senior
managers have over 1,000 years of combined
service with BPI. We pride ourselves in employing
our own workforce, having only small numbers of
52
contractors (less than 1%) and of temporary staff
(less than 2%) who are hired for their specialist
skills or for set periods of time to cover periods
of absence.
A gender analysis of our UK, European and North
American employees as at 31 December 2015
appears below:
Male
Female
Total
Non-Executive Directors
4
Executive Directors &
Company Secretary
3
Senior managers
99
Other
1,675
0
4
1
20
288
4
119
1,963
Total with NonExecutive Directors
309
2,090
1,781
Training and Development
Our employees are amongst the most skilled in
the industry. We invest in a range of development
activities from NVQs to MBAs and support other
professional and technical training.
In 2015, 21 employees, all aged under 35, were
invited to attend the BPI Young Talent Development
Programme after being identified as having
potential to develop their careers to manager/
director level in the next five years. The programme
concentrated on developing project management,
problem solving, team management, leadership
and communication skills and will be repeated
with another group of 20 employees at a similar
stage in their careers in 2016.
In 2014 our Visqueen and Recycled Products
Business management teams worked with
Ashridge Business School on high level business
strategy initiatives and this continued in 2015
when both our Films and Consumer Business
management teams completed this programme.
Our capital investment programme is supported
by training in the use of new machinery. Training
in health and safety is a particular Group strength
as already featured in the Health and Safety
section of this Review. Members of the Group
HR Department regularly train our managers and
supervisors in a variety of employment matters,
including equality and diversity and handling of
issues raised under our whistleblowing procedures,
to ensure best practice people management
is carried out across discipline, grievance,
attendance management, performance
management and appraisals.
All relevant employees receive training in
competition law compliance and the Group
Ethical Policy.
Attendance
The absenteeism rate for all Group sites in 2015
was 2.9% (2.5% in 2014) and in the UK was 2.6%
(2.3% in 2014). We continue to train managers
in absenteeism management techniques and
operate attendance bonus schemes across many
sites. As a direct comparison, the manufacturing
and production sector in the UK has an annual
absence rate of 2.6% (Chartered Institute of
Personnel and Development 2015, 3.2% in 2014).
Communication
We recognise trade unions across nine sites in the
Group for separate collective bargaining purposes,
including two sites in North America. We provide
information and consult and negotiate with the
trade unions on a range of subjects including pay,
hours and holidays. We have Works Councils in
mainland Europe and at a number of our
non-unionised sites in the UK. Our Managing
Directors and senior site directors also deliver
regular business updates direct to the workforce.
The Group’s Employee Information and
Communication Body (‘EICB’) meets twice
per year. The EICB brings together employee
representatives from across our UK business to
discuss business issues with senior directors within
the Group including the Chief Executive and
Group Finance Director. This involves the provision
of information, consultation and discussions with
a view to reaching agreement regarding decisions
Apprentices at bpi.films, Bromborough
Top row (L to R) – Jake Cooke, Neil Rosbotham and
Jordan Atkinson. Bottom row (L to R) – Jacob Myers-Shone,
Andrew Kelly, Callum Hayes and Cameron Leighton.
Strategic Report
that are likely to lead to substantial changes in
organisation or in contractual relations prior to any
action being taken. In 2015, the EICB discussed
absenteeism performance, Drug and Alcohol
Policy, the promotion and extension of our
Whistleblowing Policy, pensions, charitable
donations and received information on the
Group’s financial performance.
Our long-standing annual European Communication
Forum (‘ECF’) discusses transnational issues that may
affect our employees in the UK, the Netherlands,
Belgium and Ireland. Employees regularly receive
written communications translated into relevant
languages explaining issues discussed at these
meetings.
In 2015, five UK sites participated in Employee
Surveys to establish employees’ opinions regarding
their jobs, workplace, health and safety, training
and development, communications and other
aspects of their employment. Appropriate action
plans are being implemented accordingly.
Pay and Benefits
Terms and conditions (including pay) are set
at local site level. We have a range of benefits
including competitive pay rates, a number of
bonus schemes for employees at all levels which
reflect business performance and improvements
in attendance and production, and a range of
health care benefits. We provide holidays in
excess of statutory requirements.
We do not pay below the National Minimum
Wage and are currently assessing the impact of
the requirements of the National Living Wage
which will be effective from 1 April 2016.
Following the introduction of Automatic Enrolment
for 1,200 affected UK employees at the end of
2013, a Governance Committee consisting of
senior directors, payroll and HR managers and
employee representatives continues to monitor
the performance of the BPI Worksave Pension
Plan (‘WPP’). All new eligible employees continue
to be automatically enrolled into the WPP after
three months of employment. Senior employees
are invited to join the WPP at enhanced employer
contribution rates.
Senior employees’ pay and rewards are formally
benchmarked against independent market data.
We voluntarily operate enhanced maternity and
paternity pay schemes and regularly consider and
agree requests for flexible working. In the UK we
operate a childcare voucher scheme to support
employees who are working parents, a ‘Bike to
Work’ scheme and regularly offer all employees
the chance to participate in a Save As You Earn
(‘SAYE’) share option scheme. All employees have
Life Assurance cover whether they are pension
scheme members or not. We operate an
Employee Assistance Programme which is a
free and confidential telephone, online and
face to face counselling service. We also offer
a free and immediate osteopathic service to
all UK employees, free VDU eye tests and free
flu vaccines.
Community Investment
We give back to the communities in which
we operate through donating employee time,
providing financial support to charities and
organisations that seek to improve quality of life
and supporting community education. Charitable
donations made during the year amounted to
£67k (2014: £66k). No donations were given
for political purposes.
The Group supports a range of local, national and
international charities. We also support a number
of ecological projects and other good causes.
This support is in both products donated and
financial contributions:
• The Board increased the allocation to the
Group’s EICB from £10,000 to £15,000.
The EICB nominated charities for cancer
relief, children, the elderly, the blind, disabled
and wounded to support.
• Unclaimed dividends after a period of twelve
years (c.£6,000 in 2015) are donated to charity.
• The Group also encourages each site to donate
a percentage of its turnover to local charities
and many of our sites are regularly involved
in fundraising for local charities.
• Most of our businesses sent out electronic
Christmas cards, rather than traditional cards,
and donated the money saved to local charities.
We are active in many areas of education, working
with schools, universities and other institutions.
We support a range of activities, from providing
advice and resources for teaching to hosting
school visits and sponsoring educational projects,
aimed at increasing the awareness of plastics,
packaging, recycling and the environment. Each
year BPI participates in and supports a variety of
local community projects and initiatives in line
with its commitment to contributing to the
communities within which we operate.
For example:
bpi.recycled products sponsored two young
people’s categories in the annual schools and
students Starpack awards which celebrate
innovative ideas in packaging design.
• bpi.visqueen continues to support the
children’s charity Second Chance with the
donation of materials for the young people’s
development centre in Fareham.
• The Group continues to sponsor two teachers
at the Polymer Study Tours which assists
science, design and technology teachers to
understand the applications of polymers in
the industrial environment.
• We are also continuing to provide on-site
supervision of, and funding for, one PhD
studentship at the University of Lancaster
focused on the development of ‘disruptive
technologies’ intended to reduce significantly
global horticulture’s reliance on traditional
chemical pesticides and improve yields, crop
quality and food security.
• Additionally, we are providing supervision and
funding for, a PhD student at Loughborough
University in the chemistry department. She is
synthesising novel UV absorbers that we can
incorporate into our films in order to manipulate
the light transmission characteristics of the film
to achieve enhanced plant growth response and
improved pest resistance. This compliments the
research at Lancaster into the effects of growing
under different light environments.
•
Supply Chain
We expect our suppliers to operate with values
and standards equivalent to those of BPI. We
maintain high standards of integrity in our
business relationships with our suppliers, who
are predominantly world class petrochemical
and energy companies.
We review the codes of practice and policies
of our major suppliers to verify that their ethical
values are as high as ours. These policies address
the approach taken by those suppliers to key
issues such as health and safety, environment,
prevention of child labour, forced labour, equal
opportunities, harassment in all forms, human
rights and freedom of association of their
employees. We carry out ethical risk assessments
and where a supplier is found to be of high risk,
they are audited by a BPI senior staff member.
We are undertaking a review to determine what
further action is appropriate to seek to ensure
compliance with the objectives of the UK Modern
Slavery Act 2015.
53
Recycling
BPI has been leading the way in recycling for more than
three decades, long before environmental awareness
rose to the top of the agenda.
We are the leading recycler of waste polythene films
in the UK with an annual recycling capacity in excess
of 70,000 tonnes. We recycle scrap from our own
operations, used products taken back from our
customers and scrap purchased in the open market.
We have begun a re-investment programme based
on a new generation of recycling equipment.
54
The first new machine (pictured) was delivered and
installed in December 2014 and this has enabled us to
increase efficiencies and reduce maintenance, labour
and energy costs. The machine is performing well and
allowing us to access waste which we previously would
have considered wash grade.
Strategic Report
Directors’ Report and
Corporate Governance
The following pages set out our Corporate
Governance Report, which includes reports
from the Chairmen of the Remuneration
and Audit Committees and on the work
of our Nomination Committee.
Our Board remains committed to high
standards of corporate governance and
continues to comply voluntarily with
numerous provisions in the UK Corporate
Governance Code which are not required
of a company of our size. The Report
details our approach to complying with
the principles and provisions of the Code.
The Board is collectively responsible for the
long-term success of the Company, creating
and preserving value for our shareholders
and benefits for our other stakeholders. The
Board provides effective and constructive
challenge to management necessary to
create accountability and drive performance.
I regard our current Board as extremely
competent, with the necessary breadth
and balance of skills and experience to fulfil
its responsibilities, and those of the Board
Committees, while maintaining a strong
level of independence and objectivity.
In the Board’s view, Hamish Grossart
continues to provide robust and effective
independent challenge to whether
proposals from the Executive Directors are
in the Company’s best interests. Despite
this, we recognise that as Hamish Grossart
will have served on our Board for 11 years
when he stands for re-election at the May
2016 AGM, proxy advisers and some
institutions will, on principle, not consider
him to be unquestionably independent.
Therefore, if re-elected, Hamish Grossart
will step down from his current role as
Senior Independent Director and Chairman
of the Nomination and Remuneration
Committees immediately after the AGM
and will cease to be a member of the
Audit and Remuneration Committees.
The Board continues to have complete
confidence in Hamish’s independence,
objectivity and value as a Non-Executive
Director and intends that he should
continue, following the AGM, in his
current role as Deputy Chairman and a
member of the Nomination Committee.
In line with current recommendations, all
Directors will seek re-election at this year’s
Annual General Meeting of the Company.
Cameron McLatchie
Chairman
In this section:
56
58
64
68
89
Directors’ Report
55
1. Cameron McLatchie CBE**
Chairman
Cameron joined the Board in 1983 on the
acquisition of Anaplast where he had been
Chairman and Managing Director since 1975.
Cameron became Group Chairman and Chief
Executive in 1988, relinquishing the role of Chief
Executive in May 2003. He is a member of the
Advisory Board of Scottish Equity Partners LLP.
2. John Langlands CA
Chief Executive
John has held the position of Chief Executive since
May 2003. He joined the Board in 1994 as Group
Finance Director from Eclipse Blinds plc, where he
was also Finance Director, before being appointed
as Chief Operating Officer in May 2002. He was
previously Finance Director at Scottish Enterprise
and United Wire Limited.
3. David Harris FCCA
David joined the Board as Group Finance Director
in 2009. His responsibilities include information
technology and energy purchasing. Since joining
BPI in 1996, David has held a number of senior
financial and general management positions,
including Managing Director of BPI Industrial
and Business Director of BPI Consumer. He was
previously with Grant Thornton and is a former
Chairman of the Scottish Finance Directors’ Group.
4. Hamish Grossart*
Non-Executive Deputy Chairman
Hamish joined the Board in May 2005. He is
currently Chairman of Indigovision Group plc and
a Director of Artemis Investment Management,
of which he was Chairman from 2010 to 2015.
After a career in investment banking, he has,
over more than 30 years, held a range of executive
and non-executive positions in listed and unlisted
companies covering a wide range of industries.
He was Deputy Chairman and Senior Independent
Director of Cairn Energy PLC from 1996 to 2010,
and Deputy Chairman and Senior Independent
Director of Scottish Radio Holdings plc from
1993 until 2005. Past Chairmanships include
Royal Doulton PLC, Eclipse Blinds PLC, Scottish
Highland Hotels Ltd, Hicking Pentecost Plc and
EFT Group PLC.
6
7
1
2
3
56
Strategic Report
Advisers
Auditors
KPMG LLP
191 West George Street
Glasgow G2 2LJ
Solicitors
Maclay Murray & Spens LLP
1 George Square
Glasgow G2 1AL
5. Ron Marsh*
Non-Executive Director
Ron joined the Board in March 2011. From 1989
to 2013 he was Chief Executive of RPC Group PLC.
He is Chairman of Polypipe Group plc and also
Chairman of the Packaging Federation (a company
limited by guarantee) and a Non-Executive
Director of Faerch Plast, an unquoted company
supplying packaging to the food industry. Ron
chairs the Alliance for European Polymers recently
established by EuPC (European Plastic Converters).
Brokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
6. Ian Russell CA CBE*
Ian joined the Board in July 2011. He is a Chartered
Accountant and Chairman of the Audit Committee.
He is Chairman of Johnston Press PLC, and
on 1 March 2016 became Chairman of HICL
Infrastructure Company Limited. He is also
a Non-Executive Director of The Mercantile
Investment Trust plc, BlackRock Income Strategies
Trust Plc and an adviser to Clyde Bergemann
Power Group. Ian was previously Chief Executive
of Scottish Power plc following a career in finance
with HSBC, Mars Limited and KPMG and was
formerly Chairman of Advanced Power AG.
Main Bankers
Lloyds Banking Group plc
Royal Bank of Scotland plc
HSBC Bank PLC
Santander UK PLC
7. David Warnock*
David joined the Board in August 2009.
He co-founded the investment firm of Aberforth
Partners and was a partner for 19 years until his
retirement in 2008 prior to which he was with
Ivory & Sime plc and before that, 3i Group plc.
David is currently Chairman of Troy Income &
Growth Trust plc and a Non-Executive Director
of Standard Life European Private Equity Trust PLC.
8. Hilary Kane LLB (Hons)
Company Secretary
Hilary was appointed as Company Secretary
and Legal Counsel in September 2012. Prior
to that she was a partner with law firm Maclay
Murray & Spens for 21 years specialising in
corporate law. During this time she was lead
partner advising BPI, including advising the
Company on some 50 acquisitions.
*Member of the Remuneration, Audit and
Nomination Committees.
** Member of the Nomination Committee.
5
4
8
57
The Board remains committed to high standards of corporate governance. Throughout the year to 31 December 2015, the Group complied with the provisions
of the UK Corporate Governance Code September 2014 edition (‘Code’) issued by the Financial Reporting Council (www.frc.org.uk) applicable to it except as
noted below. This Report describes how the main principles of the Code (which contains the principal corporate governance rules applicable to UK companies
listed on the London Stock Exchange) are applied and reports on any non-compliance with the provisions of the Code applicable to it, namely partial
non-compliance with Code provision E.1.1 as explained in ‘Relations with Shareholders’ on page 61.
The Group also complies with the corporate governance rules contained in the Financial Conduct Authority’s Disclosure and Transparency Rules and Listing
Rules as well as certain related provisions in the Companies Act 2006.
The Role of the Board
The Group is controlled through its Board of Directors which normally meets six times each year. The Board is responsible for the long-term success of the
Group and for the overall management of the Group. Its main roles are:
• to create shareholder value;
• to provide leadership to the Group, including setting the Group’s standards and values and ensuring that its obligations to its shareholders and others
are understood and met;
• to set the Group’s strategic objectives;
• to ensure that the necessary financial and other resources are made available to allow the Group to meet those objectives; and
• to ensure that the Group operates within a framework of prudent and effective controls which enable risk to be assessed and managed.
The Board has adopted a formal schedule of matters reserved for its decision:
these include the setting of long-term objectives and strategy; approval of annual budgets; review of performance in light of the Group’s strategy,
objectives, business plans and budgets; and risk management strategy;
• major capital expenditure, major acquisitions and major disposals are authorised by the Board; capital expenditure and acquisitions are then subsequently
monitored by the Board after implementation; and
• the Board also oversees compliance with statutory and regulatory obligations, setting the Group’s policies in areas such as health and safety, environment,
ethics and competition law compliance, and reviewing the Group’s overall corporate governance arrangements.
•
All Directors are equally accountable for the proper stewardship of the Group’s business.
The Non-Executive Directors have a particular responsibility for ensuring that proposed business strategies are fully discussed and critically reviewed. This
enables the Board to promote the success of the Company for the benefit of its shareholders as a whole, having regard to, among other matters, the interests’
of employees, the fostering of business relationships with customers, suppliers and others and the impact of the Group’s operations on the communities in
which our business operates and the environment. To assist the Non-Executive Directors in fulfilling this responsibility, members of the Group Management
Board and other key senior executives including the Health and Safety Manager are invited to make presentations on their areas of responsibility and on
proposed strategy for those areas at meetings of the Board and to answer questions on these from the Non-Executive Directors.
Group Management Board
The Board has delegated the following responsibilities to the Group Management Board, which normally meets four times a year:
• the development and recommendation for consideration by the Board of strategic plans that reflect the longer term objectives and priorities established
by the Board;
• implementation of the strategies and policies as determined by the Board;
• monitoring operational and financial results against budgets; prioritising the allocation of capital, technical and human resources;
• ensuring that appropriate management development and succession plans are in place; and
• developing, implementing and monitoring risk management systems and controls.
The Group has in place appropriate insurance cover for the Board members in respect of legal action which might be taken against them.
The Responsibilities of the Chairman and the Chief Executive
The division of responsibilities between the Chairman of the Board, Cameron McLatchie, and the Chief Executive, John Langlands, is clearly defined and has
been approved by the Board.
The Chairman is responsible for:
leading the Board of Directors in the determination of its strategy and in the achievement of its objectives and provides guidance to the Group
Management Board in matters of strategy;
• assessing individual Board members’ effectiveness and performance and agreeing any training Directors may require;
• organising the business of the Board, ensuring its effectiveness, setting its agenda and encouraging a culture of openness and debate;
• facilitating the effective contribution of Non-Executive Directors and managing the relationship between Executive and Non-Executive Directors ensuring
constructive relations; and
• ensuring that Directors receive sufficient accurate, timely and clear information to make informed judgements and that there is effective communication
with shareholders.
•
The Chairman also continues to have an executive role in the strategy for polymer purchasing and evaluation of capital expenditure proposals.
58
Strategic Report
The Chief Executive is responsible for:
• day-to-day running of the Group;
• implementing the strategy agreed by the Board;
• chairing the Group Management Board; and
• environmental matters, health and safety and human resources.
He is accountable to the Board for the Group’s financial and operational performance. The senior management team (including the Heads of Environment,
Health and Safety and Human Resources) look after the day to day activities and report directly to him.
The roles of Non-Executive Deputy Chairman and Senior Independent Director are currently carried out by Hamish Grossart.
Directors, Directors’ Independence and Senior Independent Director
The Board currently comprises the Chairman, the Chief Executive, the Group Finance Director and four Non-Executive Directors. Information about each
Director is set out on pages 56 and 57 including the significant other commitments of the Directors (if any) and whether there have been any changes to
them during the year. Each Director allocates sufficient time to the Company’s business to discharge his responsibilities effectively.
The Board has evaluated and reviewed the independence of each of the Non-Executive Directors taking into account their integrity, objectivity and contribution
to the Board and its Committees. The Board believes that in order for a Non-Executive Director to be considered independent, the Director must:
• provide an objective, robust and consistent challenge to the assumptions, beliefs and views of the senior management and the other Directors;
• question intelligently, debate constructively and challenge rigorously and dispassionately;
• act at all times in the interests of the Company and its shareholders;
• have knowledge of the Group’s business, the industry in which it operates and the markets as a whole and the ability to help the Executive Directors
develop proposals on strategy; and
• not have relationships or circumstances which are likely to affect, or could appear to affect, the Director’s judgement unless these are addressed by the
procedures on Conflicts of Interest described on pages 60 and 61 in a way which makes it appropriate to consider the Non-Executive Director as independent.
The Non-Executive Directors are experienced and influential individuals from a range of industries and backgrounds. Their diverse mix of skills and business
experience brings a major contribution to the proper functioning of the Board and its Committees. They constructively challenge and help develop strategy.
They bring strong, independent judgement, knowledge and experience to the Board’s deliberations ensuring that matters are fully debated and that no
individual or group dominates the Board’s decision making process.
The Board is satisfied on the above criteria and with regard to the requirements of the Code that each of the Non-Executive Directors continues to be
independent. However, the Board recognises the comments made by certain proxy advisers in their voting recommendations prior to the 2015 AGM that,
having served on the Board for more than nine years, Hamish Grossart is not unquestionably independent for the purposes of best corporate governance
practice. The Board has therefore decided that if Hamish Grossart is re-elected to the Board by shareholders at the next AGM, his role will change as follows:
• he will step down as Senior Independent Director and as Chairman of the Nomination Committee and Remuneration Committee immediately after the
2016 AGM;
• Ian Russell will succeed Hamish Grossart as Senior Independent Director;
• David Warnock will succeed Hamish Grossart as Chairman of the Remuneration Committee;
• Ron Marsh will succeed him as Chairman of the Nomination Committee;
• Hamish Grossart will continue as a member of the Nomination Committee but will cease to be a member of the Audit Committee and Remuneration
Committee; and
• he will also continue in his current role as Non-Executive Deputy Chairman.
The independent Directors are of sufficient calibre and number that their views carry significant weight in the Board’s decision making.
The main responsibilities of the Senior Independent Director are as follows:
to provide a sounding board for the Chairman and to serve as an intermediary with other Directors where necessary;
• to be available to shareholders if they have concerns which contact through the normal channels of Chairman, Chief Executive or other Executive Directors
has failed to resolve or for which such contact is inappropriate; and
• to meet with other Non-Executive Directors without the Chairman present at least annually in order to appraise the Chairman’s performance.
•
At the AGM in May 2016 the Directors, with the recommendation of the Nomination Committee, are recommending to shareholders that all the current
Directors be re-elected to serve on the Board until the May 2017 AGM. In making this recommendation, both the Nomination Committee and the Board
have had due regard to the requirements of the Code for rigorous review of extended terms of office.
Professional Development, Information and Updates
On joining the Board, Directors are provided with documentation on the Group and its activities. New Directors undergo an induction programme including site
visits to major business units and meetings with members of the Group Management Board and other key senior executives. The Directors are regularly updated
on the Group’s business, the competitive and regulatory environment and the industry in which it operates. Board meetings are regularly held at operational
sites. Strategy presentations from business directors and guided site tours assist the Board in keeping up to date with the latest operational developments.
Directors are advised, on appointment, of their legal and other duties and obligations as a director of a listed company, both in writing and in face-to-face
meetings with the Company Secretary. External training courses are provided where necessary. They are also updated regularly by the Company Secretary
and professional advisers regarding changes to the legal and governance requirements of the Group and of them as Directors.
59
Corporate Governance Report continued
Performance Evaluation
This year the Board reviewed its process for conducting an annual evaluation of the Board’s and each Committee’s performance and effectiveness designed
to identify ways in which their performance could be enhanced, and decided to continue with its previously established evaluation process. A new form of
assessment questionnaire was however prepared by the Company Secretary this year and reviewed by the Board before the process began. All Directors
complete the questionnaire which provides feedback from each Director on:
• Board effectiveness, including the level of challenge and oversight it exercises, its focus on key strategic issues and how to use the Board’s time more effectively;
• people, including the effectiveness of the Board and its Committees in working well together to fulfil their roles/terms of reference, and whether the Board
or any Committee would benefit from any additional skill sets or diversity of knowledge or experience; and
• priorities for 2016.
The results from the assessment questionnaires are presented by the Company Secretary to the Chairman or Chair of the relevant Committee and are then
reported to and discussed by the Board and each Committee as appropriate. The results also provide a background for interviews between the Chairman and
individual Directors as part of an annual appraisal. The Chairman’s performance is evaluated by the Directors as part of their assessment questionnaires and the
Senior Independent Director discusses the feedback from those questionnaires presented by the Company Secretary with the other Directors and then privately
with the Chairman.
The 2015 evaluation review reinforced the Board’s previous decisions to prioritise the time spent on development and testing of strategy, its intention to grow
the business through acquisitions if suitable opportunities can be identified, and its commitment to succession planning.
It is the Board’s intention to continue to review annually its performance and that of its Committees and individual Directors. As the Company is not within the
FTSE 350, it is not required to conduct an externally facilitated evaluation process at least every three years, but will consider in future if it would be beneficial
for it to do so.
Following the performance evaluation of individual Directors, the Chairman has confirmed that the Non-Executive Directors standing for re-election at the
2016 Annual General Meeting continue to perform effectively and demonstrate commitment to their roles.
Appointment and Re-election of Directors
Directors appointed by the Board other than at an Annual General Meeting are required to retire at the following Annual General Meeting when (if so
recommended by the Board following advice from the Nomination Committee) they may offer themselves for re-election. Although the Code requirement
for the directors of all FTSE 350 companies to seek annual re-election does not apply to the Company, the Nomination Committee decided in 2011 that it
would voluntarily comply and all Directors will continue to seek annual re-election at the Annual General Meeting. The Chairman, who was previously Chief
Executive, has voluntarily sought annual re-election since 2004 and will continue to do so.
Each year, the Nomination Committee considers the composition of the Board and whether to recommend that each of the current Directors should be put
forward for re-election at the next AGM.
The service contracts for the Executive Directors (including the Executive Chairman) are rolling contracts terminable on one year’s notice by the Company
or Director. Each Non-Executive Director is appointed for a one year term until the AGM in 2016 under letters of appointment setting out the terms and
conditions of their appointment. The service contracts and letters of appointment are made available for inspection at the Annual General Meeting and
the Company’s registered office or on request from the Company Secretary.
Diversity
On the recommendation of the Nomination Committee, the Board has approved the following as its Policy on Diversity:
“The Board believes in creating throughout the Group a culture free from discrimination in any form and fully supports management in their commitment
to provide equality of opportunity in all employment policies and practices including recruitment and promotion.
Consistent with this, the Board and the Nomination Committee are against discrimination, negative or positive, on any grounds and without prioritising gender
discrimination over any other forms of discrimination, with the overriding objective of ensuring that the best candidate is selected for any particular position.
Accordingly no specific targets for female representation on the Board or in management positions in the wider Group are set.
The Nomination Committee’s first priority is to ensure that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity.
Board appointments are, and will continue to be, made on merit to achieve that balance.”
Conflicts of Interest
The Companies Act 2006 set out Directors’ general duties as regards conflicts of interest and related matters. The Board has procedures for dealing with
conflicts of interest and for exercising the Board’s power to authorise potential conflict situations, this power having been previously approved by shareholders.
The procedures that have been adopted by the Board require prompt notification by Directors of any possible conflict situation and the scrutiny of the Board
before any decision to authorise or not is taken. The Board may approve a conflict situation unconditionally, give approval subject to conditions or decide not
to approve and require that the Director concerned resolves the circumstances giving rise to the conflict. Any approval will be reviewed regularly and may be
amended or withdrawn by the Board at any time. Only Directors who have no interest in the matter being considered are able to take part in the relevant
decisions and at all times the Directors making such decisions must act in a way they consider, in good faith, will be most likely to promote the Company’s success.
60
Strategic Report
The Company and its Directors have complied with these procedures during the year and the Board is satisfied that these procedures are operating effectively.
The Company Secretary
The Board has access to the advice and services of the Company Secretary who is responsible for advising the Board, through the Chairman and its
Committees, on governance matters and ensuring that Board procedures are complied with. She ensures that the Directors are kept up-to-date on changes
to their responsibilities, for example briefing the Board on the changes introduced by the 2014 edition of the UK Corporate Governance Code which applied
to the Company for the first time in 2015. The Company Secretary acts as Secretary to the Remuneration, Nomination and Audit Committees of the Board.
She works with the Chair of the Board and its Committees to ensure good information flows within the Board and its Committees and between senior
management and the Non-Executive Directors. The Company’s Articles of Association and the schedule of matters reserved to the Board for decision
provide that the appointment and removal of the Company Secretary is a matter for the full Board.
Directors and the Committees are also given access to independent professional advice, at the Company’s expense, when the Directors deem it necessary
in order for them to carry out their responsibilities.
Articles of Association
Any proposed amendment to the Articles of Association is subject to approval by the shareholders at a General Meeting.
Availability of Information
Members of the Executive management of the Company are responsible to the Chairman for providing the Board with all the information of which they are
aware that is relevant to the discharge of the Board’s responsibilities. The Board therefore expects to receive, and has received, timely advice on all material
information about the Group, its operating units, its activities, its performance and its investment projects. The Chairman, together with the Company Secretary,
establishes the agenda for each Board meeting and the necessary papers are distributed to Board members in advance of the meeting so that Board meeting
time is used for focused discussion.
Relations with Shareholders
The Company values its dialogue with both institutional and private shareholders. Each year a programme of meetings with major institutional investors
takes place covering the principal issues affecting the Group, its trading and its results. The Board believes that for a company of its size it is appropriate for
its primary contact with institutional shareholders to be through the Chairman, the Chief Executive and the Group Finance Director. The Senior Independent
Director does not usually attend these meetings (notwithstanding that attendance at at least some of these meetings is required under Code provision E.1.1).
No investor has ever requested that they would prefer for the Senior Independent Director to also attend. He is, however, available to meet with major
institutional shareholders if requested, as is any other Non-Executive Director.
The Chairman gives feedback to the Board on any issues raised by major shareholders. External analysts’ and brokers’ reports are circulated to all Board
members and, where appropriate, formally discussed at Board meetings. Reports issued by analysts on the Company are available on the Company’s website
at www.bpipoly.com.
The Board seeks to encourage shareholders to attend its Annual General Meeting. The Company uses the Annual General Meeting to communicate with private
investors and to encourage their participation. They have the opportunity to put questions to members of the Board on matters relating to the Group’s operation
and performance. All Directors are expected to be present at the AGM and those who chair Committees of the Board will be available to answer any relevant
questions. The level of proxy votes lodged on each resolution is indicated at the meeting and also shown on the Group’s website at www.bpipoly.com.
The Company proposes a separate resolution on each substantially separate issue, including for re-election of each individual Director, and does not bundle
resolutions together inappropriately.
Shareholder approval of the Directors’ Remuneration Policy was obtained at the 2014 Annual General Meeting and no approval for any changes to that Policy
will be sought at the 2016 AGM. Non-binding resolutions on the receipt of the Annual Report and Accounts and the approval of the remainder of the Directors’
Remuneration Report will be put to shareholders at the 2016 AGM.
The Company’s Annual Report is available to all shareholders on its website or in hard copy by request or by election.
Internal Control
The Board of Directors is responsible for the Group’s systems of internal control and sets appropriate policies on internal control. The Board seeks regular
assurances that enable it to satisfy itself that the systems are functioning effectively, and ensures that the systems of internal control are effective in managing
risks in the manner which it has approved. The risk management process and systems of internal control are designed to manage rather than eliminate the
risk of the Group failing to achieve its business objectives. It should be recognised that such systems can only provide reasonable, and not absolute assurance,
against material misstatement or loss. Throughout the year the Audit Committee has monitored the effectiveness of, the Group’s system of financial and
non-financial controls, reporting to the Board. Key internal controls are assessed by the internal audit function, including through control reviews which they
perform at sites across the Group during the course of the year. A key part of the system of controls is a twice yearly risk assessment process where responsible
managers confirm the adequacy of their systems of internal financial and non-financial controls and their compliance with Group policies (including those on
health, safety and the environment), local laws and industry regulations. This formal risk assessment process also identifies, evaluates and confirms what
actions are being taken to mitigate any material identified risks. All these risk assessments are reviewed by the Audit Committee which reviews risk
management and internal control systems as a standing agenda item at each meeting. Its deliberations are then reported to the Board.
61
Corporate Governance Report continued
Internal Control continued
Although the external auditor only considers internal controls to the extent necessary to form an opinion on the truth and fairness of the Group’s audited
accounts, any comments which the external auditor has identified on internal control in the course of the statutory audit are taken account of in the Audit
Committee’s review process. Further detail on the Audit Committee’s responsibilities and role in reviewing the Group’s internal financial control and risk
management systems is set out in the Audit Committee Report on pages 64 to 67.
All operating units prepare forecasts which are reviewed in detail by senior management and consolidated for review by the Board. Performance against
forecast is monitored on an ongoing basis by senior management and on a quarterly basis by the Board. Minimum standards for accounting systems and
controls, which are documented and monitored, are circulated throughout the Group. Certified half yearly reports are required from senior management
of operating units, confirming compliance with Group financial reporting requirements.
Directors’ Attendance
The number of Board meetings attended by each Director and attendance at the Annual General Meeting during the year was as follows:
Board
Meetings
Number of meetings in year
C McLatchie
J T Langlands
D W Harris
H M Grossart
Lord Lindsay
R J E Marsh
I S M Russell
D Warnock
*
AGM
6
6
6
6
6
2*
6
6
6
1
1
1
1
1
1
1
1
1
Lord Lindsay retired from the Board at conclusion of the AGM on 12 May 2015.
Details of attendance at Committee meetings are set out below (as regards the Nomination Committee’s meetings), on page 64 in the Audit Committee
Report and on page 81 in the Directors’ Remuneration Report.
A copy of the full terms of reference for each of the Audit, Nomination and Remuneration Committees is available on the Group’s website at:
www.bpipoly.com.
Audit Committee
Details of membership of the Audit Committee, its Chair, the meetings held in 2015, its principal responsibilities and its main activities throughout that year
in discharge of those responsibilities are set out in the Audit Committee Report on pages 64 to 67. That Report includes detail on the steps taken by the Audit
Committee, on behalf of the Board, to ensure that the independence and objectivity of the external auditor is not compromised.
Nomination Committee
The Board as a whole is responsible for the procedure of agreeing the appointment of its own members and for nominating them for election by the
shareholders on first appointment and thereafter annually. The Nomination Committee, comprising the Non-Executive Directors and the Chairman, has the
responsibility for making recommendations to the Board for new Director appointments. Hamish Grossart, Non-Executive Deputy Chairman and Senior
Independent Director, currently chairs the Committee but, as explained above in the section on Directors, Directors’ Independence and Senior Independent
Director, he will step down as Chairman of the Nomination Committee immediately after the 2016 AGM. Ron Marsh will succeed him as Chairman of this
Committee. The discussions in relation to Hamish Grossart’s potential re-election to the Board were chaired (without him being present) by Ron Marsh.
The procedure required to be used by the Board and Nomination Committee for new appointments to the Board is rigorous and transparent.
Details of the Committee members and their attendance at the meetings in May, July, August and December 2015 is set out below:
Committee member
Member since
Number of meetings in year
H M Grossart (Chairman)
Lord Lindsay
R J E Marsh
C McLatchie
I S M Russell
D Warnock
06/04/2005
20/03/2006
07/03/2011
01/01/2013
01/07/2011
18/08/2009
*
62
Lord Lindsay retired from the Committee after the meeting on 12 May 2015.
Nomination Committee
Meetings attended in 2015
4
4
1*
4
4
4
4
Strategic Report
The Nomination Committee reviews the composition of the Board and succession to it on an annual basis and reports its conclusions and recommendations
to the Board for further action. In so doing, the Committee has regard to the balance and structure of the Board and the required blend of skills, knowledge,
experience, independence and diversity for the Board and its Committees to perform effectively.
The principal activities of the Nomination Committee were:
• succession planning for senior roles;
• review of Hamish Grossart’s position as Senior Independent Director having regard to the presumption that he would cease to be independent having
served an 11-year term of office if re-elected at the May 2016 AGM; recommendation to the Board that Hamish be put forward for re-election as a
non-independent Non-Executive Director at the next AGM but that he should step down from his role as Senior Independent Director if re-elected;
• review of David Warnock’s position having regard to the fact that he will have served as a Non-Executive Director of the Company for seven years if
re-elected at the May 2016 AGM; recommendation to the Board that David Warnock be put forward for re-election at the next AGM; and
• review of the Committee’s terms of reference confirming their compliance with the 2014 Code’s requirements.
Remuneration Committee
The Remuneration Committee’s members are the Non-Executive Directors and it is currently chaired by Hamish Grossart. As explained above in the section on
Directors, Directors’ Independence and Senior Independent Director, Hamish Grossart will step down as Chairman of the Remuneration Committee immediately
after the 2016 AGM. David Warnock will succeed him as Chairman of this Committee.
The Remuneration Committee is responsible for advising the Board on the remuneration of Executive Directors. It normally meets twice a year in February and
December. There is an additional meeting of an authorised sub-committee held in March each year solely for the purpose of confirming awards under the
Share Matching Plan approved in principle at the February meeting. The Committee has written terms of reference, which are reviewed regularly, that outline
its authority and duties. The Chairman is generally invited to attend meetings and the Chief Executive was also invited to attend part of one of this year’s
meetings, but neither were present when their own remuneration was discussed nor at the meeting held in May. No Director is involved in determining their
own remuneration.
The Committee’s principal responsibilities are:
determining and agreeing with the Board the Group’s overall remuneration policy for the Chairman and Executive Directors (subject to shareholder
approval) and for other members of the Group Management Board;
• determining total individual remuneration packages for such people including, where appropriate, bonuses, incentive payments, share options, share
matching plans and pension arrangements;
• approving the introduction of, and rules for, any Group share option or share or cash based incentive scheme;
• determining transparent and stretching performance targets, performance periods and vesting conditions under any such scheme and whether they have
been met;
• approving the grant, award, allocation or issue of share options, shares, or payments under any such scheme;
• ensuring that contractual terms on termination, and any payments made, are fair to the individual and the Company, that failure is not rewarded and that
the duty to mitigate loss is fully recognised; and
• determining the policy for performance adjustment (malus) and/or clawback in relation to performance related pay and long-term incentives.
•
In carrying out its responsibilities, the Committee takes into account all factors which the Committee deems appropriate or necessary, including relevant legal
and regulatory requirements and the provisions and recommendations of the Code and associated guidance, as well as the interests of shareholders. The
objective of the current remuneration policy, approved by shareholders at the May 2014 AGM and described in more detail in the Directors’ Remuneration
Report, is to promote the longer term success of the Company and to ensure that members of the executive management of the Company are provided with
appropriate incentives to encourage enhanced performance, having regard to the Company’s long-term strategic goals, and are, in a fair and responsible
manner, rewarded for their individual contributions to the success of the Company.
The principal activities of the Remuneration Committee during the year were:
fulfilling its responsibilities detailed above (further information on this can be found in the Directors’ Remuneration Report which appears on pages 68 to 89);
• reviewing and approving the Directors’ Remuneration Report for 2014;
• determining that the Remuneration Policy for Directors (both existing and future Directors and including the policy on payments for loss of office) which
shareholders approved at the 2014 AGM, remains fit for purpose, and accordingly determining not to seek shareholder approval for any amendment to
the Policy at the 2016 AGM (this Remuneration Policy is set out on pages 82 to 89 of the Directors’ Remuneration Report);
• reviewing the Committee’s terms of reference, confirming their compliance with the 2014 Code; and
• conducting a review of the effectiveness of the Committee’s performance.
•
63
The Committee’s primary areas of focus this year remained:
• the integrity of the Group’s financial reporting;
• the appropriateness and effectiveness of the Group’s internal control and risk management systems; and
• overseeing the external and internal audit functions.
Meetings and Membership
The Committee meets not less than three times a year. The Group Finance Director is usually invited to attend all the meetings. The Chairman, Chief Executive
and Group Financial Controller also attend if invited to do so by the Committee. A senior representative from each of the internal and external auditors also
usually attends each meeting. The external and internal auditors as well as management are given the opportunity at least once each year to speak confidentially
to the Non-Executive Directors in the absence of other attendees at the Audit Committee meeting. The external auditor or internal auditor may also request a
meeting if they consider that one is necessary. The minutes of the Committee’s meetings are normally circulated to all members of the Board.
Details of the Committee members, all of whom are Non-Executive Directors of the Company considered by the Board to be independent, and their
attendance at the three meetings held in 2015 (in February, May and August) are set out below:
Committee member
Member since
Meetings attended in 2015
I S M Russell (Chairman)
H M Grossart
Lord Lindsay*
R J E Marsh
D Warnock
01/07/2011
06/04/2005
20/03/2006
07/03/2011
18/08/2009
3
3
2
3
3
*
Lord Lindsay retired from the Committee after the meeting on 12 May 2015.
The Committee members have been selected with the aim of providing the wide range of financial and commercial expertise necessary to fulfil the
Committee’s duties. Details of this expertise and experience is set out on pages 56 and 57.
The Board selected Ian Russell to chair the Committee based on his recent and relevant financial experience and remains satisfied that he continues to have
strong relevant experience and skills to fulfil this role. As Chairman of the Audit Committee, throughout the year Ian Russell has had regular dialogue with key
individuals involved in the Company’s governance including the Chairman of the Board of Directors, the Chief Executive, the Group Finance Director, the audit
partner and manager of the external auditor, and the partner of the internal auditor.
As explained on page 59, if re-elected as a Director at the AGM in May 2016, Hamish Grossart will retire as a member of the Audit Committee.
Responsibilities
The Committee has fulfilled its responsibilities throughout the year in compliance with the applicable provisions of the UK Corporate Governance Code
September 2014 edition (‘2014 Code’) issued by the Financial Reporting Council (‘FRC’) and the Committee’s terms of reference.
These terms of reference, setting out the Committee’s authority and responsibilities, are available on the Company’s website (www.bpipoly.com). They comply
with the provisions of the 2014 Code and are reviewed annually by both the Committee and the Board of Directors in accordance with FRC guidance.
The Committee’s principal responsibilities are to:
• monitor the integrity of the Financial Statements of the Group, including reviewing significant financial reporting judgements contained in them and
clarity and completeness of disclosures;
• advise the Board of Directors on whether it considers that the Annual Report and Accounts taken as a whole is fair, balanced and understandable and
provides the information necessary to assess the Company’s performance, business model and strategy;
• ensure that a robust assessment of the principal risks facing the Group has been undertaken (including those risks that would threaten the business model,
future performance or solvency);
• report to the Board if it is not satisfied with any aspect of the proposed financial reporting by the Company;
• review the Group’s internal financial controls and its internal control and risk management systems;
• advise the Board of Directors in relation to the viability statement, including advice on how, taking into account the Company’s position and principal risks,
the Company’s prospects have been assessed, over what period and why the period is regarded as appropriate;
• review and approve the statements to be included in the Annual Report concerning risk management and internal control;
• monitor and review the effectiveness of the Group’s internal audit function;
• oversee the Group’s relationship with the external auditor, including the development and implementation of the policy on the engagement of the external
auditor and the supply of non-audit services by the auditor;
• assess the qualifications, expertise, resources, effectiveness, independence and objectivity of the external auditor;
• make recommendations to the Board on the appointment, re-appointment and removal of the external auditor;
• determine if and when the external audit services contract is put out to tender and oversee any such tender process;
• approve the remuneration and terms of engagement of the external auditor;
• consider management’s response to any significant external audit recommendations;
64
Strategic Report
•
•
•
monitor the Group’s policies and practices concerning business conduct and ethics including whistleblowing procedures, ensuring that appropriate
procedures are in place to allow employees to raise matters of possible impropriety in confidence;
review the Group’s procedures for detecting fraud; and
review the appropriateness of accounting policies.
Should the Committee’s monitoring and review activities reveal any material cause for concern or scope for improvement, it will make recommendations
to the Board on action needed to address the issue or make improvements.
Main Activities of the Committee During the Year
During the year, the Committee discharged its responsibilities by:
• reviewing in February the internal audit strategy for 2015;
• confirming at its February meeting that its existing procedures to review risk management and internal control systems comply with the 2014 Code
requirements for monitoring of these systems on a continuing basis;
• reviewing in May the external audit strategy for 2015;
• approving the terms of engagement of the external auditor and internal auditor;
• receiving and reviewing risk management reports and risk tables at each meeting. Management at business and Group level operate a risk management
process which identifies the key risks facing each business and the Group and reports to the Committee as to how those risks are being managed. These
reports identify the key risks, the probability of those risks occurring, the estimated potential impact if they do materialise, and the actions being taken to
manage those risks;
• receiving and considering at each meeting reports from management and the internal auditor on the system of internal control and any significant control
weaknesses. The Committee also received a report on the annual audit from the external auditor, who considers controls only to the extent necessary for
the auditor to form an opinion as to the truth and fairness of the Financial Statements;
• discussing with management the actions taken on control weaknesses identified in internal and external audit reports;
• receiving and reviewing the 2014 Code internal controls report twice yearly, in February and in August. This report is based on a combination of risk
management reporting and the key control questionnaires which confirm the extent to which the business complies with the Group control procedures.
Each Managing/Business Director and Finance Director is required to sign a declaration confirming that they have reviewed the business risk table and
control questionnaires and confirming compliance with statutory obligations;
• considering update reports from the internal auditor at each of its meetings;
• reviewing at its February meeting the processes to be undertaken to enable the Committee to provide advice to the Board in connection with the new
2014 Code requirement for a viability statement, including agreeing over what period it would be appropriate to assess the Company’s prospects for the
purposes of the inclusion of such a statement in the 2015 Annual Report;
• reviewing the Group’s draft interim, preliminary and annual Financial Statements prior to Board approval and considering any significant financial reporting
judgements contained in the Financial Statements to ensure that the integrity of these statements is maintained. The review of the 2014 Annual Accounts
included the provision of advice to the Board in connection with the requirement to state that the Directors consider that the Annual Report and Financial
Statements, taken as a whole, provides the information necessary to assess the Company’s performance, business model and strategy and is fair, balanced
and understandable;
• reviewing the external auditor’s report on the 2014 Annual Financial Statements at the meeting in February 2015 and conducting a general review of the
effectiveness of the 2014 audit process;
• considering the appropriateness of the Group’s accounting policies;
• reviewing representation letters requested by the external auditor before they were signed by management;
• reviewing the performance of the Group’s internal and external auditor and making appropriate recommendations to the Board relating to their
re-appointment and remuneration. On the recommendation of the Committee, the Board has agreed to recommend to shareholders at the Annual
General Meeting in 2016 the re-appointment of the external auditor for a period of one year;
• reviewing the proposal to instruct certain non-audit services to be carried out by the auditor having regard to the importance of ensuring that this will not
impair the auditor’s independence or objectivity and approving the fees for such services;
• reviewing a report on the operation of the Group’s systems for the prevention of bribery. Such report would have highlighted for the Committee had there
been any identified non-compliance with the anti-bribery procedures required by the Group’s Ethical Policy;
• reviewing and approving an updated Whistleblowing Policy in light of new UK Government guidance and code of practice on whistleblowing;
• receiving reports at each meeting on any material issues which have arisen through whistleblowing disclosures;
• reviewing the Committee’s terms of reference and making recommendations to the Board on minor updates; and
• reporting to the Board on how the Committee has discharged its functions and on the Committee’s evaluation of its own effectiveness.
The Chairman of the Committee attended the Annual General Meeting, as he will do each year, to answer shareholder questions on the activities of the Audit
Committee and its responsibilities.
Significant Areas
Valuation of inventories: During the year the Committee considered key accounting issues, matters and judgements in relation to the Group’s Financial
Statements and disclosures relating to valuation of inventories. Inventory is a significant asset for the Group. The valuation of inventory contains significant
judgement, in particular due to the impact of potentially volatile raw material prices. The Committee discussed the inventory valuation and provisioning with
management. Having challenged these judgements, the Committee was satisfied that inventory valuations were reasonable.
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Audit Committee Report continued
Significant Areas continued
In addition to that significant area, the Audit Committee also considered the following:
• valuation of trade receivables: The recoverability and age profile of trade receivables and the level of provisioning was considered and challenged by the
Committee during discussions with management before it was concluded that the treatment was appropriate;
• accounting for pensions: This is an area of significant judgement where the assumptions, accounting treatment and disclosures used were discussed and
challenged by the Committee before it concluded that these were appropriate. Specific and detailed consideration was given to the accounting treatment
of the change to pension index from the Retail Price Index to the Consumer Price Index, the Committee concluded the most appropriate treatment had
been adopted; and
• the new requirement to make a viability statement was considered in detail. Information was provided by management including financial projections,
consideration of key risks, sensitivity analysis and stress-testing. Following discussion and challenge of this information, the Committee concluded that it
could advise the Board that the appropriate statement could be made.
Internal Audit
Deloitte LLP have acted as internal auditor since 2009 reporting directly to the Committee. The Committee has received reports on its findings and programme
of reviews at its meetings during the course of the year. Internal audit have performed a number of controls reviews at sites across the Group and considered the
key controls in place across the Group as part of the Group’s overall risk management systems.
The Committee approves the proposed internal audit plan for each year and ensures appropriate coordination between the activities of the internal auditor
and the external auditor. It is the opinion of the Committee that the internal auditor is also independent.
External Audit
The Group’s external auditor is KPMG LLP. Before making its recommendation to the Board on whether or not to re-appoint KPMG as the external auditor,
the Committee conducted a review into both its independence and objectivity and the effectiveness of the audit process, taking into consideration relevant
UK professional and regulatory requirements.
The Board recognises the importance of safeguarding auditor objectivity and, through the Committee, has taken the following steps to ensure that auditor
independence and objectivity is not compromised:
• each year, the Committee carries out a full evaluation of the external auditor to confirm that it is independent in all material respects from the Group and
relevant officers of the Group and that it is adequately resourced and technically capable to deliver an objective audit to shareholders. Based on this review,
the Committee recommends to the Board each year the continuation, or removal and replacement, of the external auditor;
• the external auditor reports to the Board and the Committee confirming its independence in accordance with Auditing Standards;
• the Committee recommends and applies a policy on the use of the external auditor for non-audit services. There are services which the external auditor is
precluded from undertaking, including the provision of internal audit services, as well as services it is permitted to provide, but which require the specific
prior approval of the Committee to ensure that the provision of non-audit services does not impair the external auditor’s independence or objectivity.
Pre-approval is required where non-audit work per project is in excess of £50,000 or £100,000 in aggregate in any one year and within these parameters
certain services are delegated to the Executive Directors to approve. Any activities that may be perceived to be in conflict with the role of external auditor
must be submitted to the Committee for approval prior to engagement. The external auditor provides audit related services such as regulatory and
statutory reporting;
• the Committee reviews on a regular basis all fees paid for audit, and all non-audit fees, with a view to assessing reasonableness of fees, value of delivery,
and any independence issues that may have arisen or may potentially arise in the future. Details of the amount paid to the external auditor during the year
for audit and other services are set out in Note 2 to the Financial Statements. The non-audit related services provided by the auditor during the year were
in relation to tax compliance and advice, and the audit of the Pension Scheme and advice in relation to the Pension Protection Fund levy. The auditor was
considered best placed to provide these services and was the provider that offered best value; and
• the Committee determines the policy on employment of former partners or employees of the external auditor.
Following these reviews, the Committee was satisfied that KPMG continues to have the necessary independence and objectivity to be able to conduct an
effective external audit.
As part of its assessment of the effectiveness of the external audit process, the Committee reviewed the auditor’s report on the 2014 Annual Financial
Statements with particular regard to:
• the major issues, matters, judgements and disclosures (see Significant Areas above);
• levels of errors identified during the audit; and
• management’s response to the auditor’s findings and recommendations.
The Committee also met separately with both the external auditor and the management to identify any areas of concern which arose in the 2014 external
audit process.
This assessment informed the Committee’s review of the audit strategy proposed by KPMG for 2015, including the Committee’s review of the proposed levels
of materiality and the level above which all connected and unconnected misstatements are reported to the Committee.
66
Strategic Report
KPMG has been the Group’s auditor for more than 20 years. The audit services have not been tendered in this time. The Committee continues to give
consideration to the Code provision which requires FTSE 350 companies (which BPI is not) to put the external audit contract out to tender at least every 10
years. However, as the auditor’s independence and effectiveness are reviewed annually, and the detailed audit strategy is also subject to an annual review,
the Committee has decided that a tender is not necessary at this time. At its February and May meetings, the Committee discussed the timing of the next
audit tender, having regard to statutory requirements. The Committee agreed to keep this under review. The next statutory rotation of the audit partner
occurs in 2019.
Committee Evaluation
The members of the Committee conducted a review of its effectiveness (which included consideration of feedback from the other members of the Board of
Directors). The Board also conducted a review of the Committee’s effectiveness. These reviews concluded that the Committee was working effectively and
had discharged all applicable responsibilities delegated to it by the Board of Directors under the Committee’s terms of reference.
Ian Russell
Chairman, Audit Committee
67
Report of the Remuneration Committee to Shareholders
Dear shareholder,
During 2015, the trading background for BPI continued to present challenges for the management of the Group, particularly in relation to fluctuations
in raw material prices. Notwithstanding that, profits, return on capital, earnings and dividends again increased.
BPI plans ahead with a view to continuing the consistent growth record of recent years. Executing these plans involves regular and material levels of capital
expenditure on additional and replacement machinery; and periodic and well controlled reorganisation, acquisition and disposal – both designed to direct
activities towards markets where opportunities for good returns and growth are perceived. Performance related remuneration for executive directors and
senior management is set and measured against business and financial objectives derived from annual budgets and three year plans which are reviewed
by the Board annually.
In the most recent five financial years, return on capital employed has been improved from 13% to 19%; adjusted earnings per share grown by 73%; and
dividends to shareholders increased by 57%. In 2015, return on capital employed grew from 18% to 19%; adjusted earnings per share rose 16% to 76.6p;
and total paid and recommended dividends in respect of that year are up 12.5% to 18p per share.
During 2015, the Remuneration Committee continued to review the operation of BPI’s incentive schemes. We remain of the view that these both align
management interests with shareholders’ interests, and contain targets which are challenging in the context of the business and circumstances of BPI.
We have a preference for pay at a senior level to be related to improved business performance and a distaste for escalating base salaries, and therefore
remuneration policy and practice – and the operation of BPI’s incentive schemes – reflect that broad principle.
The base salaries of the CEO, Group Finance Director and Chairman for 2016 are either unchanged or have increased in line with increases awarded to the
wider workforce. Overall pay of Executive Directors was materially lower in 2015 compared with 2014, the main factor being lower amounts of performance
related pay under the Share Matching Plan reflecting the stretching nature of the targets set in previous years. Targets for awards under the Group’s Share
Matching Plan for 2016 will be set at the same levels as for 2015 awards, namely a three year average return on capital employed of 18% to 22%, and
compound growth in earnings per share of 5% to 15%.
In view of the length of time which I have served both on the Board of BPI and as Chairman of the Remuneration Committee, this year’s AGM would be an
appropriate juncture to retire from the Committee. David Warnock has been appointed by the Board to chair the Remuneration Committee going forward.
Hamish Grossart
Chairman, Remuneration Committee
68
Strategic Report
Annual Report on Remuneration
This part of the Report has been prepared in accordance with Part 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 and relevant sections of the Listing Rules. The Annual Remuneration Report will be put to an advisory shareholder vote
at the 2016 AGM. The information in this part of the Report which has been audited is identified as such.
Implementation of Remuneration Policy in 2015
This section is not subject to audit.
This section reports on how the Remuneration Policy which shareholders approved at the May 2014 AGM has been implemented in 2015 and will be
implemented in 2016. To assist shareholders who wish to refer to the Remuneration Policy when reading this Report, the Remuneration Policy Report
from the 2013 Annual Report and Accounts has been set out in full after this Annual Report on Remuneration on pages 82 to 89.
Executive Directors’ Base Salaries
After taking into consideration the levels of anticipated increases across the Group as a whole, the Committee decided to increase Group Finance Director
David Harris’ salary by 2%. The increase takes effect from 1 January 2016. The Committee decided that Chief Executive John Langlands’ and Chairman
Cameron McLatchie’s salaries should remain the same as in 2015.
The salaries as at 1 January 2016 are:
Role
Incumbent
Executive Chairman
Chief Executive
C McLatchie
J T Langlands
D W Harris
2016
2015
Increase
£300,000
£365,000
£224,400
£300,000
£365,000
£220,000
0%
0%
2%
Non-Executive Directors’ Remuneration
As set out in the Remuneration Policy Report, Non-Executive Directors’ remuneration is reviewed by the Board taking into account individual responsibilities,
factors such as Committee Chairmanships, time commitment, other pay increases being made to employees of the Company and fees payable for the
equivalent role in comparable companies. Following review by the Executive Directors and Chairman, it was decided that basic Non-Executive Directors’ fees
should be increased by £1,000 and that the fee for chairing the Audit or Remuneration Committees should increase by £1,500. Hamish Grossart’s fee for 2016
will reduce after the 2016 AGM to reflect the change in his responsibilities described on page 59 following the 2016 AGM. With effect from the AGM, the fees
payable to Ian Russell, David Warnock and Ron Marsh will increase to reflect their additional responsibilities as described on page 59.
Details of these fees are set out below:
H M Grossart
R J E Marsh
I S M Russell
D Warnock
2016
pre-AGM
2016
post-AGM
20151
Increase2
£90,000
£46,000
£55,000
£46,000
£75,000
£51,000
£60,000
£55,000
£90,000
£45,000
£52,500
£45,000
(17%)
13%
14%
22%
1. Lord Lindsay, whose annual fee for 2015 was £65,000, retired from the Board following the AGM on 12 May 2015. His fee was pro-rated accordingly.
2. The % increase (decrease) compares the post-2016 AGM fee with the 2015 fee.
Pension and Benefits
No changes are anticipated to pension or benefits provision in 2016.
Employee Profit Sharing Scheme (‘EPSS’)
The terms of the Employee Profit Sharing Scheme are unchanged for 2016 and the Executive Directors will participate under the same terms as other employees.
Annual Incentive Plan (‘AIP’)
The annual executive bonus payable under the AIP will operate in 2016 on the same basis as for 2015. In particular:
• malus and clawback will apply to the bonus paid with respect to 2015 performance, as it will for future years’ bonuses;
• operation of the AIP in 2015 was consistent with the policy detailed in the Remuneration Policy Report in terms of the maximum bonus opportunity and
this will continue to be the case in 2016;
• the bonus is based 50% on Return on Capital Employed (‘ROCE’) targets and 50% on Pre-Tax Profit before pension financing targets; and
• no bonus is payable below threshold performance with bonuses being earned on a sliding scale between the threshold and maximum targets.
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Directors’ Remuneration Report continued
Implementation of Remuneration Policy in 2015 continued
Annual Incentive Plan (‘AIP’) continued
The Executive Chairman, Cameron McLatchie, does not participate in the AIP.
The targets for the AIP with respect to 2016 performance are deemed to be commercially sensitive and have not been disclosed prospectively. However,
full retrospective disclosure of the targets and performance against them will be provided in next year’s Remuneration Report.
The targets set by the Committee for the Executive Directors to earn bonus under the AIP with respect to performance in the year to 31 December 2015 were
not disclosed in last year’s Remuneration Report due to commercial sensitivity but are now set out on page 72 (see Annual Incentive Plan).
Share Matching Plan (‘SMP’)
This section explains how the annual cash bonus, payable to the Executive Directors (but not the Executive Chairman) with respect to performance in 2015,
will be invested compulsorily as to 25% in shares in the Company under the 2016 SMP and may be invested in additional SMP shares voluntarily up to, in total,
the lower of 50% of salary and that bonus award for 2015. Depending on performance over 2016 to 2018, the Executive Directors may be awarded free
shares in the Company which match their investment of their bonus, up to a maximum of three matching BPI shares. The voluntary investment is based on
bonus net of tax and the matching shares are based on the gross equivalent.
The performance conditions to achieve any matching award set by the Remuneration Committee when the 2016 SMP awards are made (investing the bonus
paid with respect to 2015 performance) will be as follows:
3-year cumulative
EPS growth1
Start of performance period
End of performance period
Weighting
Threshold vesting
Threshold performance target
Maximum performance target
01/01/2016
31/12/2018
50%
25%
5% p.a.
15% p.a.
3-year average
ROCE
01/01/2016
31/12/2018
50%
25%
18%
22%
1. The calculation of future EPS growth will be derived from the adjusted diluted EPS number as disclosed in the Annual Report and Accounts. At 76.6p this gives a cumulative threshold target of 253.5p
over the three years and a cumulative maximum target of 305.8p over the same period.
Awards will vest on a straight line basis between threshold and maximum targets. In addition, the Committee will have a residual discretion to adjust the
calculation of EPS growth for exceptional events such as acquisitions and disposals. This means that if the performance on EPS growth over the period is an
increase of 5% per annum then a matching level of 0.375 shares for each share will be awarded. An increase of 15% per annum in the EPS will generate
a matching level of 1.5 shares for each share invested. Performance between these levels will generate a matching level between these two amounts on a
straight line basis, for example a 10% per annum increase in EPS would give a matching level of 0.9375 shares for each share invested. A similar approach
applies on the ROCE measure.
The Committee believes the targets are sufficiently challenging in light of internal and external forecasts.
The 2016 SMP awards will be subject to the malus and clawback provisions described in the Remuneration Policy Report and below.
Malus and Clawback
In 2014 the Committee introduced provisions which give the Committee discretion to clawback sums paid with respect to bonus paid under the AIP in respect
of 2014 at any time in the period of three years after payment of the bonus in cases of material misstatement, calculation error or gross misconduct.
The Committee also applied malus and clawback provisions to the compulsorily invested shares, matching shares and dividend shares under the SMP awards
for the first time in 2014 (with respect to performance period 2014 to 2016), and again for the 2015 awards (with respect of performance period 2015 to
2017). Cross clawback operates across both the AIP and SMP to address circumstances where the bonus related to an investment in compulsory shares under
the SMP which was higher than it should have been due to a material misstatement of results or calculation of the invested bonus or gross misconduct. As a
result of these cross clawback provisions, in such circumstances the Committee has the discretion to recover overpaid bonus amounts by:
• reducing the number of matching shares that would otherwise vest in respect of SMP awards from 2014 onwards;
• reducing the number of compulsorily invested shares before vesting; and/or
• reducing the number of compulsorily invested shares within three years after vesting.
Such rights are in addition to the right to reduce the payment of future bonus or clawback previously paid bonus within three years of payment.
Since voluntarily invested shares in the SMP (from the 2014 awards onwards) are owned by the employee from the outset without a service condition or vesting
period, any recovery of value in respect of them will be achieved through the rights to clawback or withhold the cash bonus used to fund the investment.
The Committee considered there were no events or circumstances that would have made it appropriate to withhold or clawback remuneration in 2015.
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Strategic Report
Company Share Option Plan (‘CSOP’)
The Committee intends that awards of options to senior managers across the Group generally, including the Group Finance Director, will be made in 2016
up to the HMRC limit. Further details on this are set out in the Remuneration Policy Report on pages 82 to 89. The Executive Chairman does not participate
in the CSOP.
The following sections are subject to audit.
Single Total Figure of Remuneration
The detailed emoluments received by the Executive and Non-Executive Directors for the year ended 31 December 2015 are detailed below:
Bonus
Base
salary/Fees
Director £’000
C McLatchie
J T Langlands
D W Harris
H M Grossart
Lord Lindsay
R J E Marsh
I S M Russell
D Warnock
Total
9
Benefits1
Pension
related
benefits2
Annual
Incentive
Plan3
Long-term incentives
Employee
Profit
Sharing
Scheme4
Total5
Share
Matching
Plan6
Company
Share
Option Plan7
Total8
Total
2015
300
3
10
10
313
2014
300
3
10
10
313
2015
365
65
73
137
17
154
359
2014
360
66
72
242
16
258
902
2015
220
12
28
83
9
92
135
2014
214
12
28
144
9
153
465
359
1,016
6
908
1,664
135
487
6
471
878
2015
90
90
2014
90
90
2015
24
24
2014
65
65
2015
45
45
2014
45
45
2015
53
53
2014
53
53
45
2015
45
2014
45
2015
1,142
80
101
220
36
256
494
–
494
2,073
2014
1,172
81
100
386
35
421
1,367
12
1379
3,153
45
1. Benefits included car allowance and private medical insurance and life assurance. C McLatchie does not receive a car or car allowance.
2. Calculation for 2015 amount is set out on page 79.
3. Annual Incentive Plan payments for performance in the 2015 financial year. Note that this includes the element deferred compulsorily and any element deferred voluntarily under the Share Matching Plan.
The calculation for the 2015 amount is based on the 37.5% outcome set out on page 72.
4. Further detail on the EPSS payment is set out on page 72.
5. Sum of amounts under the Annual Incentive Plan and EPSS.
6. For 2015, this shows Share Matching Plan awards which were granted on 10 April 2013. The performance period for all of these awards was 1 January 2013 to 31 December 2015 but the vesting periods
differ depending on whether they relate to compulsorily invested shares, which have a four year vesting period, or relate to voluntarily invested shares, which have a three year vesting period. As shown
on pages 72 and 73, 47.5% of the matching awards are eligible to vest at the appropriate vesting date based on performance up to 31 December 2015 and have been valued in this Report using the
closing share price on 31 December 2015. The value is split between the amount based on the share price at the date of grant of £373,000 (J T Langlands £271,000, D W Harris £102,000) and the amount
due to the subsequent appreciation in the share price (J T Langlands £88,000, D W Harris £33,000).
7. For 2014, this shows awards of options under the CSOP for which the three year performance period ended on 31 December 2014 and which vested on 20 March 2015 as the performance condition had
been met. No CSOP options were awarded in 2013 and accordingly there were no CSOP options with a three year performance period ended on 31 December 2015.
8. Sum of amounts under the Share Matching Plan and CSOP.
9. Lord Lindsay retired from the Board following the AGM on 12 May 2015.
71
Additional Information in Respect of the Single Figure Table
Annual Incentive Plan
The targets for the 2015 Annual Incentive Plan were based on the achievement of the following Pre-Tax Profit before pension financing and ROCE targets.
Performance against these measures is set out in the table below:
Measure
Pre-Tax Profit1
Return on Capital Employed2
Total
Weighting
Threshold target
Payment
for threshold
Maximum target
Payment
for maximum
50%
50%
£18.0m
12.04%
3.1% of salary
3.9% of salary
£29.1m
22.0%
50% of salary
50% of salary
100%
7% of salary
100% of salary
Outcome
£26.3m3
18.25%
Payment
15% of salary
22.5% of salary
37.5% of salary
1. Excludes the net pension financing charge.
2. Group operating profit before interest divided by the average Group capital employed (including buildings).
3. Profit before tax £23.1 million plus net pension financing £3.2 million.
Note that 25% of any bonus payable under the Annual Incentive Plan must be deferred and invested in shares under the Share Matching Plan which are not
subject to further performance conditions. Matching share awards granted to Directors with respect to investment of their annual bonus payable with respect
to performance in 2015 will be disclosed in next year’s Annual Report on Remuneration.
Details of the matching share awards granted to Directors with regard to the investment of their annual bonus payable with respect to performance in 2014
are set out on page 74.
Employee Profit Sharing Scheme
The Employee Profit Sharing Scheme, which is available to most of the employees in the Group, rewards performance based on improvements in profits compared
with an average of the previous three years’ results. It is calculated at individual business unit level, with employees (including Executive Directors and the Executive
Chairman) who are not aligned to a particular business or unit receiving the average of awards earned at business level. Participants receive awards based on their
P60 earnings from the previous year. For performance over 2015 and 2014 respectively, the payments to Executive Directors were as follows:
Director
2015 EPSS
payment
2014 EPSS
payment
C McLatchie
J T Langlands
D W Harris
£10,000
£17.000
£9,000
£10,000
£16,000
£9,000
Note that these payments to the Executive Directors and the Executive Chairman were calculated by multiplying their relevant earnings by a set percentage.
This percentage is calculated as the weighted average award at the business unit level.
Share Matching Plan, Company Share Option Plan and SAYE Scheme Vesting
Share Matching Plan
The performance period for the Share Matching Plan awards which were granted on 10 April 2013 ended on 31 December 2015. The Committee has determined
that 47.5% of these awards will vest based on BPI’s Return on Capital Employed performance over the three year performance period. In so far as these awards
were in respect of voluntarily invested shares, they will vest after three years on 4 March 2016. In so far as these awards were in respect of compulsorily invested
shares, they have a four year vesting period. The calculation used to determine the vesting outcome is set out below:
3-year average
ROCE
Weighting
Threshold vesting
Actual performance
Vesting outcome
72
01/01/2013
31/12/2015
100%
33% of award
16%
20%
17.4%
57%
Strategic Report
The performance criteria for this scheme included a restriction on the payment percentage where operations profits before restructuring costs improved by less
than 12.5% per annum over the performance period. As this figure had only improved by 10.6%, the payment percentage was restricted to 47.5%. Based on
this vesting percentage, the amount in the single figure table for each Executive Director in 2015 was determined as follows:
J T Langlands
D W Harris
Date of grant
Number of
matching shares
awarded
% vesting
Number of
matching shares
vesting
10/04/2013
10/04/2013
98,076
36,825
47.5%
47.5%
46,510
17,463
Number of
dividend shares1
5,601
2,103
Total number of
shares vesting
Share price as at
31/12/2015
52,111
19,566
689p
689p
Value as shown
in single
figure table2
£’000
359
135
1. Dividend shares represent the number of shares which could have been bought with dividends over the performance period.
2. The value is split between the amount based on the share price at the date of grant of £373,000 (J T Langlands £271,000, D W Harris £102,000) and the amount due to the subsequent appreciation in the
share price of £121,000 (J T Langlands £88,000, D W Harris £33,000).
Company Share Option Plan
There were no options granted under the Company Share Option Plan in 2013.
Share Matching Plan, CSOP and SAYE Awards Granted in the Year
As set out on pages 74 to 76, Executive Directors received awards under the SMP in 2015 in exchange for the mandatory investment of one quarter of their
Annual Incentive Plan payment with respect to performance in 2014 (‘2014 bonus’) and any additional voluntary investment of their 2014 bonus.
Note that the value of the total number of invested shares cannot exceed the lower of 50% of an Executive Director’s annual base salary and the Director’s
actual annual bonus award. Compulsorily invested shares are deferred for four years. Voluntarily invested shares are beneficially owned by the employee with
the legal title for those shares being held by the trustees of the Company’s Employee Share Ownership Trust. Compulsorily invested shares under these 2015
awards are subject to forfeiture within the Rules of the SMP. The table below sets out the number of compulsorily invested shares awarded in 2015:
Number of SMP
invested shares
J T Langlands
8,702
Basis
Face value*
% of award vesting
for threshold
performance
Performance period
J T Langlands received invested shares in exchange for the mandatory
investment of 25% of his 2014 bonus payment.
£60,464
n/a
n/a
Awards only
subject to
a service
condition.
D W Harris
5,178
D W Harris received invested shares in exchange for the mandatory
investment of 25% of his 2014 bonus payment.
£35,978
n/a
n/a
Awards only
subject to
a service
condition.
*
Based on a share price of 694.83p which was the average share price for the three days prior to the award.
In addition, J T Langlands invested £63,352 of his 2014 bonus in voluntary shares, while D W Harris invested £19,080 of his 2014 bonus in voluntary shares,
in the SMP in 2015.
73
Share Matching Plan, CSOP and SAYE Awards Granted in the Year continued
Under the rules of the Share Matching Plan, participants are granted three matching awards for the gross equivalent of every invested share. The vesting of
these matching awards is subject to the satisfaction of performance conditions. Details of these matching awards granted in 2015 are set out below:
Number of
SMP awards
Basis
Face value*
% of award
vesting for
threshold
performance
Performance
period
J T Langlands
76,563 3x the number
of invested
shares
£531,961
25%
01/01/2015 –
31/12/2017
D W Harris
30,726 3x the number
of invested
shares
£213,493
25%
01/01/2015 –
31/12/2017
*
Based on a share price of 694.83p which was the average share price for the three days prior to the award.
The matching awards will vest as to 50% depending on BPI average Return on Capital Employed over 2015, 2016 and 2017 and as to 50% depending on the
increase in BPI’s aggregate Earnings Per Share over that three year period. The performance targets are set out below:
3-year cumulative
EPS growth1
Weighting
Threshold vesting
01/01/2015
31/12/2017
50%
25%
5% p.a.
15% p.a.
3-year
average ROCE
01/01/2015
31/12/2017
50%
25%
18%
22%
1. The calculation of future EPS growth will be derived from the adjusted diluted EPS number as disclosed in the Annual Report and Accounts. At 66.21p this gives a cumulative threshold target of 219p over
the three years and a cumulative maximum target of 264.2p over the same period.
D W Harris was awarded CSOP options over 1,450 shares, at an option price of 681p per share, on 2 April 2015.
3,157 SAYE options were granted to D W Harris during 2015 at a price of 570p per share.
Payments for Loss of Office
Lord Lindsay was the only Director to leave office in the year. No compensation for loss of office was paid.
Payments to Past Directors
No payments were made to past Directors during the year other than payments to Lord Lindsay in his role as Chairman of BPI Pension Trustees Limited and for
other contractual services.
Directors’ Interests in Shares
The tables below set out details of Executive Directors outstanding share awards (which will vest in future years subject to performance and/or continued
service). All share awards, except under the SAYE scheme, will lapse if the participant ceases to be an employee prior to the vesting date other than as a good
leaver, as explained in the Remuneration Policy Report on pages 86 and 87. Please note that following a change to the SMP Rules approved by shareholders at
the 2014 AGM, investments of additional voluntary amounts in shares under the SMP from 2014 onwards are no longer subject to the risk of forfeiture. The
employee beneficially owns the voluntary invested shares, the legal title to which is held by the trustees of the Company’s Employee Share Ownership Trust on
the employee’s behalf, normally until the vesting of any related matching award.
There are no such outstanding share awards for C McLatchie.
74
Strategic Report
J T Langlands
Scheme
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
invested shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
invested shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
matching shares)
CSOP
CSOP
Total
Date of grant
Market
value on
grant date
(pence)
21/03/2011
253p
n/a 06/03/2015
26,790
–
(29,365)
–
2,575
–
n/a
21/03/2011
253p
n/a 06/03/2015
77,355
–
(84,793)
–
7,438
–
n/a
20/03/2012
345p
n/a 04/03/2016
19,633
–
–
–
–
19,633
n/a
20/03/2012
345p
n/a 04/03/2016
45,374
–
–
–
–
45,374
20/03/2012
345p
n/a 06/03/2015
29,642
–
(32,052)
–
2,410
–
20/03/2012
345p
n/a 06/03/2015
68,506
–
(74,076)
–
5,570
–
08/04/2013
520p
n/a 10/03/2017
10,983
–
–
–
–
10,983
08/04/2013
520p
n/a 10/03/2017
32,949
–
–
(17,324)
–
15,625
08/04/2013
520p
n/a 04/03/2016
21,709
–
–
–
–
21,709
08/04/2013
520p
n/a 04/03/2016
65,127
–
–
(34,242)
–
30,885
29/05/2014
660p
n/a 09/03/2018
4,898
–
–
–
–
4,898
29/05/2014
660p
n/a 09/03/2018
14,694
–
–
–
–
14,694
3
n/a
29/05/2014
660p
n/a 10/03/2017
44,706
–
–
–
–
44,706
3
n/a
17/03/2015
695p
n/a 08/03/2019
–
8,702
–
–
–
8,702
17/03/2015
695p
n/a 08/03/2019
–
26,106
–
–
–
26,106
4
17/03/2015
20/03/2012
14/04/2014
695p
358p
620p
n/a 09/03/2018
345p 20/03/2015
650p 14/04/2017
–
2,000
1,600
50,457
–
–
–
(2,000)
–
–
–
–
–
n/a
n/a
50,457
–
1,600
4
n/a
5 20/03/2022
5 14/04/2024
465,966
85,265
(222,286) (51,566)
17,993
295,372
Exercise
price
(pence)
Vesting date
Shares
under
award at
01/01/2015
Granted
during
year
Vested
during
year
Lapsed
during
year
Shares
under
award at
Dividend
6
shares 31/12/2015
Note
1
Lapse date
n/a
n/a
1
n/a
n/a
2
n/a
n/a
2
n/a
n/a
n/a
n/a
1. Performance condition was based on BPI average ROCE over 2012, 2013 and 2014. The remainder of this award will vest on 07/03/2016.
2. Performance condition based on BPI average ROCE over 2013, 2014 and 2015. As shown on page 77, 47.5% of this award will vest on 04/03/2016 and 10/03/2017 as noted in the table.
3. Performance condition based as to 50% on BPI average ROCE over 2014, 2015 and 2016 and as to 50% on aggregate EPS growth over that period. The performance conditions for these awards are set
out on page 77.
4. Performance condition based as to 50% on BPI average ROCE over 2015, 2016 and 2017 and as to 50% on cumulative EPS growth over that period. The performance conditions for these awards are set
out on page 77.
5. The performance conditions for these awards are set out on page 77.
6. Dividend shares represent the number of shares which could have been bought with dividends paid during the performance period.
75
Directors’ Interests in Shares continued
D W Harris
Scheme
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
invested shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
invested shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
matching shares)
SMP (mandatory
invested shares)
SMP (mandatory
matching shares)
SMP (voluntary
matching shares)
CSOP
CSOP
CSOP
SAYE
SAYE
Total
Date of grant
Market
value on
grant date
(pence)
21/03/2011
253p
n/a 06/03/2015
13,001
–
(14,251)
–
1,250
–
n/a
21/03/2011
253p
n/a 06/03/2015
37,540
–
(41,148)
–
3,608
–
n/a
20/03/2012
345p
n/a 04/03/2016
10,105
–
–
–
–
10,105
n/a
20/03/2012
345p
n/a 04/03/2016
23,354
–
–
–
–
23,354
20/03/2012
345p
n/a 06/03/2015
15,257
–
(16,498)
–
1,241
–
20/03/2012
345p
n/a 06/03/2015
35,261
–
(38,128)
–
2,867
–
08/04/2013
520p
n/a 10/03/2017
6,138
–
–
–
–
6,138
08/04/2013
520p
n/a 10/03/2017
18,414
–
–
(9,682)
–
8,732
08/04/2013
520p
n/a 04/03/2016
6,137
–
–
–
–
6,137
08/04/2013
520p
n/a 04/03/2016
18,411
–
–
(9,680)
–
8,731
29/05/2014
660p
n/a 09/03/2018
2,857
–
–
–
–
2,857
29/05/2014
660p
n/a 09/03/2018
8,571
–
–
–
–
8,571
3
n/a
29/05/2014
660p
n/a 10/03/2017
25,715
–
–
–
–
25,715
3
n/a
17/03/2015
695p
n/a 08/03/2019
–
5,178
–
–
–
5,178
17/03/2015
695p
n/a 08/03/2019
–
15,534
–
–
–
15,534
4
17/03/2015
20/03/2012
14/04/2014
02/04/2015
07/10/2010
01/10/2015
695p
358p
620p
620p
231p
736p
–
2,000
1,600
–
6,546
–
15,192
–
–
1,450
–
3,157
–
(2,000)
–
–
–
–
–
–
–
–
–
–
–
n/a
n/a
n/a
n/a
n/a
15,192
–
1,600
1,450
6,546
3,157
4
n/a
5 20/03/2022
5 14/04/2024
5 21/03/2025
31/05/2016
31/05/2016
40,511 (112,025) (19,362)
8,966
148,997
Exercise
price
(pence)
n/a
345p
650p
681p
236p
570p
Vesting date
Shares
under
award at
01/01/2015
Granted
during
year
Vested
during
year
Lapsed
during
year
09/03/2018
20/03/2015
14/04/2017
02/04/2018
01/12/2015
01/12/2015
230,907
Dividend
shares6
Shares
under
award at
31/12/2015
Note
1
Lapse date
n/a
n/a
1
n/a
n/a
2
n/a
n/a
2
n/a
n/a
n/a
n/a
1. Performance condition was based on BPI average ROCE over 2012, 2013 and 2014. The remainder of this award will vest on 07/03/2016.
2. Performance condition based on BPI average ROCE over 2013, 2014 and 2015. As shown on page 77, 47.5% of this award will vest on 04/03/2016 and 10/03/2017 as noted in the table.
3. Performance condition based as to 50% on BPI average ROCE over 2014, 2015 and 2016 and as to 50% on aggregate EPS growth over that period. The performance conditions for these awards are set
out on page 77.
4. Performance condition based as to 50% on BPI average ROCE over 2015, 2016 and 2017 and as to 50% on cumulative EPS growth over that period. The performance conditions for these awards are set
out on page 77.
5. The performance conditions for these awards are set out on page 77.
6. Dividend shares represent the number of shares which could have been bought with dividends paid during the performance period.
76
Strategic Report
The performance conditions for each SMP listed in the above tables are set out below:
Granted on 20/03/2012
Start of performance period 01/01/2012
01/01/2013
01/01/2014
01/01/2014
01/01/2015
01/01/2015
31/12/2014
31/12/2015
31/12/2016
31/12/2016
31/12/2017
31/12/2017
Performance measure
3-year average
ROCE
3-year average
ROCE1
3-year average
ROCE
3-year cumulative
EPS growth2
3-year average
ROCE
3-year cumulative
EPS growth2
Weighting
100%
100%
50%
50%
50%
50%
Threshold vesting
33% of award
33% of award
25% of award
25% of award
25% of award
25% of award
Threshold performance
target
13%
16%
16%
8% p.a.
18%
5% p.a.
Maximum performance
target
19%
20%
20%
18% p.a.
22%
15% p.a.
Actual performance
16.93%
17.41%
Performance
period not
completed
Performance
period not
completed
Performance
period not
completed
Performance
period not
completed
Vesting outcome
77%
47.5%
Performance
period not
completed
Performance
period not
completed
Performance
period not
completed
Performance
period not
completed
1. Note that the vesting outcome could have reduced by up to 50% depending on the operating profit less interest and restructuring costs divided by the diluted weighted average number of shares in issue.
As the performance against this measure has improved by 10.64% per annum, the vesting outcome will be reduced by 17%.
2. The calculation of future EPS growth will be derived from the adjusted diluted EPS number as disclosed in the Annual Report and Accounts.
The performance conditions for each CSOP award are set out below:
Base period for award
2013
2014
Performance period
2016
2017
Performance measure
3-year EPS growth
3-year EPS growth
Weighting
100%
100%
Threshold vesting
100% of award
100% of award
Performance target
RPI + 3% p.a.
RPI + 3% p.a.
Actual performance
Performance period not completed
Vesting outcome
No CSOP awards were granted in 2013.
77
Directors’ Interests in Shares continued
The tables below set out details of vested but unexercised share options for each Executive Director.
Exercise price
(pence)
Director
J T Langlands1
345p
D W Harris
253p
D W Harris
345p
1
Total for D W Harris
Shares under
option at
01/01/2015
Vested
during year
Shares under
option at
31/12/2015
Market price at
date of exercise
(pence)
Lapse date
2,000
727p
20/03/2022
(3,000)
–
688p
n/a
–
2,000
727p
20/03/2022
Exercised
during year
2,000
3,000
–
–
2,000
3,000
2,000
(3,000)
2,000
1. These awards relate to CSOP options which vested in 2015 based on performance over the three year period ending 31 December 2014. Their value has been included in the 2014 single total figure
for remuneration.
Share Ownership
To further align the interests of senior management with those of shareholders, Executive Directors are subject to share ownership guidelines. Executive
Directors are required to accumulate a beneficial holding of ordinary shares in the Company to the value of 100% of their salary. Until this minimum is met
the Executive is expected to retain a proportion of shares acquired under the Company’s share plans (after allowing for tax and national insurance liabilities)
and to reach the minimum holding within five years. Irrespective of whether this minimum is already held, 50% of shares vested under the SMP with respect
to performance periods commencing in 2014 or thereafter (after any sales to meet the associated tax liability) must be retained after vesting for three years.
For the purpose of this calculation, shares are valued at the higher of their acquisition price and current market price. As at 31 December 2015, all Executive
Directors met the guideline.
The beneficial and non-beneficial interests of the Directors in the share capital of BPI at 31 December 2015 are set out below:
Beneficial
C McLatchie
J T Langlands
D W Harris
H M Grossart
R J E Marsh
I S M Russell
D Warnock
Non-beneficial
Share awards subject to
service conditions1
Share awards subject to
performance conditions2
Vested but unexercised
share options3
31/12/2014
31/12/2015
31/12/2014
31/12/2015
31/12/2014
31/12/2015
31/12/2014
31/12/2015
31/12/2014
31/12/2015
838,786
283,683
84,918
–
35,000
15,000
25,000
838,786
392,740
140,614
–
35,000
15,000
25,000
83,150
–
–
–
–
–
–
83,150
–
–
–
–
–
–
–
191,010
97,581
–
–
–
–
–
142,184
65,657
–
–
–
–
–
274,956
133,326
–
–
–
–
–
153,187
83,341
–
–
–
–
–
3,000
–
–
–
–
–
2,000
2,000
–
–
–
–
1. These awards include the following: (i) unvested SMP compulsorily invested shares which will vest if the Director continues to be an employee at the date of vesting; (ii) unvested SMP voluntarily invested
shares invested in 2014 which will vest if the Director continues to be an employee at the date of vesting; and (iii) unvested SMP matching awards on compulsorily and voluntarily invested shares where the
performance period is complete. Voluntarily invested shares in 2015 are included in beneficial interests.
2. These awards include the following: (i) unvested SMP matching awards on compulsorily and voluntarily invested shares where the performance period is incomplete; (ii) unvested CSOP awards; and (iii)
unvested SAYE awards. Note that the numbers in this column are the same as those set out in the tables on pages 75 and 76.
3. These include any vested but unexercised CSOP and SAYE awards as set out in the table on pages 75 and 76.
78
Strategic Report
Directors’ Total Pension Entitlements
The details regarding the interests of Directors in the Company’s Defined Benefit Pension Scheme, the British Polythene Pension Scheme, as provided by our
consulting actuaries, were as follows:
J T Langlands
D W Harris
Age at
31/12/2015
Accrued
pension
31/12/2014
Accrued
pension
31/12/2015
Increase in
accrued
pension (net
of inflation
and late
retirement
factor)
during the
year
63
43
63,930
11,640
55,000
11,790
–
–
Transfer value of
increase (net of
inflation and
employee
contributions and
late retirement
factor)
–
–
Payment in Capital value
lieu of
increase at
retirement
20 times
benefits i.e.
pension
pension
increase
supplement
over year
73,000
28,000
–
–
Total
pension
benefits
Normal
retirement
date
Value x 20 at
start of year
Value x 20 at
end of year
73,000 22/04/2012 1,278,600
28,000 11/01/2032
232,800
1,100,000
235,800
J T Langlands left the British Polythene Pension Scheme on 31 December 2006 and is a retired member. D W Harris ceased active membership on 30 September
2010, when the Scheme closed to the future accrual of benefits, and is also a deferred member. Their dependants are eligible for benefits in the event of death
in service.
J T Langlands
J T Langlands retired from the Scheme on 22 March 2015 and started to draw benefits. He opted for a cash payment of c.£140,190 and annual pension of £55,000.
As he left the Scheme on 31 December 2006 there was no further benefit accrued over the year. However, as he is past normal retirement age a late retirement
adjustment is applied to his benefits in excess of inflationary increases. Consistent with the Company’s published 2014 disclosures, we have shown the increase
net of this late retirement adjustment.
D W Harris
As noted above D W Harris left the Scheme on 30 September 2010 and therefore has no pension accrual during the year.
The pension entitlement shown is the amount which would be paid annually from retirement age based on service to the date of the Scheme closure,
30 September 2010, revalued to 31 December 2015.
There are no additional benefits that will become receivable to D W Harris in the event that he retires early.
The following sections are not subject to audit.
Relative Importance of the Spend on Pay
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs.
Employee remuneration costs (£’m)*
Distributions to shareholders (£’m)
*
2015
2014
2010
65.8
4.5
68.5
4.0
68.4
2.9
% Change
(4%)
12%
Annualised
% change
over 5 years
(1%)
11%
This reflects the reduction in average numbers employed as well as changes in levels of pay.
79
Percentage Increase in the Remuneration of the Chief Executive
The table below shows the movement in the salary, benefits and annual bonus for the Chief Executive between the current and previous financial year:
Element of remuneration
Salary
Chief Executive (£’000)
All employees basic pay (£’000)*
Chief Executive (% of salary)
All employees receiving taxable benefits (% of salary)
Chief Executive (% of salary)
All employees receiving annual incentive plan (% of salary)
Taxable benefits
Annual bonus
*
2015
2014
365.0
25.4
4%
5%
37.5%
24%
360.0
25.0
4%
5%
67%
34%
% Change
1.4%
1.5%
0%
0%
(44%)
(30%)
This is the average basic pay for all employees on a constant currency basis. It does not necessarily reflect the average increase in basic pay due to change in the mix and pay levels of the individuals
employed over the period concerned and pay levels.
Comparisons are shown against all employees receiving the relevant benefit.
Performance Graph and Single Figure Table
The following graph shows the Company’s TSR performance over the last five years against the FTSE All Share index. The FTSE All Share index was chosen because
BPI is a constituent of this index and it is considered the most appropriate index. The table following the chart sets out the CEO single figure over this period.
Company’s total shareholders return performance over the last five years against
the FTSE All Share Index
400
350
300
250
200
150
100
50
0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
BPI FTSE All Share
The table below shows the total remuneration for the Chief Executive over the same five year period.
Year Ending
CEO
31/12/2015
31/12/2014
31/12/2013
31/12/2012
31/12/2011
J T Langlands
J T Langlands
J T Langlands
J T Langlands
J T Langlands
Total
remuneration
(£’000)
1,012
1,664
2,089
1,213
827
Annual
bonus
(% of max)1
37%
67%
36%
67%
80%
Share
Matching
Plan (shares
vesting as
% of max)2
47%
77%
96%
97%
–
Long Term
Incentive
Plan (shares
vesting as
% of max)2
–
–
–
–
78%
CSOP
(options
vesting as
% of max)2
–
100%
100%
100%
n/a
Long-term
incentives
(% of max)2
47%
77%
96%
98%
78%
Employee
Profit Share
Scheme
3%
3%
4%
2%
3%
1. Note that this only shows the payments under the Annual Incentive Plan as a percentage of the maximum opportunity. The Employee Profit Sharing Scheme has been excluded because it does not have
a maximum.
2. Calculated as the aggregate value realised under the SMP, LTIP and CSOP as would have been shown in the single figure table, divided by the aggregate maximum value which could have been realised
under the SMP and CSOP.
80
Strategic Report
Membership and Attendance
The members of the Remuneration Committee during the year ended 31 December 2015, together with details of their individual attendance at the two
Committee meetings held during the year, are set out below:
Committee member
Attendance
H M Grossart, Committee Chairman
Lord Lindsay
R J E Marsh
I S M Russell
D Warnock
*
2
1*
2
2
2
Lord Lindsay attended the meeting held before he retired from the Board following the 2015 AGM.
As already noted, Hamish Grossart will cease to be a member of the Committee following the 2016 AGM. He will be succeeded as Chairman of the
Remuneration Committee by David Warnock.
Further information on the Remuneration Committee’s role is set out in the Corporate Governance Report on page 63.
Adviser to the Committee
No external adviser provided advice to the Remuneration Committee during 2015.
Statement of Shareholder Voting
At the May 2015 AGM, the resolution to approve Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy which had been approved at
the 2014 AGM) received the following votes from shareholders:
Votes cast in favour
Votes cast against
Abstentions
2015 AGM
% of votes cast
16,180,511
25,416
9,388
99.84
0.16
–
At the May 2014 AGM, the resolution to approve Directors’ Remuneration Policy received the following votes from shareholders:
Votes cast in favour
Votes cast against
Abstentions
2014 AGM
% of votes cast
15,062,713
45,885
4,874
99.70
0.30
–
Hamish Grossart
Chairman, Remuneration Committee
26 February 2016
Changes to Directors’ interests in shares after year end
In the period after 31 December 2015 until 7 March 2016 (one month before the Notice of AGM), the beneficial interests of the Directors in the share capital
of BPI altered as follows:
Beneficial
Net increase/
(decrease)
C McLatchie
836,306
(2,480)
J T Langlands
456,022
63,282
D W Harris
168,658
28,044
The transactions which resulted in these changes have all been disclosed in DTR3 announcements.
81
Remuneration Policy Report for information only
The following sets out the Remuneration Policy approved by a binding vote of shareholders at the AGM held on 8 May 2014, with 99.7% of
votes cast being in support of the resolution. This is included for information only to assist shareholders who wish to refer to it when reading
the Annual Report on Remuneration.
No issues were raised by shareholders or proxy advisers which required the Company to publish any assurances or statements of clarification
with respect to the Remuneration Policy.
This Remuneration Policy is valid for up to three financial years without shareholder approval. Should the Company wish to change any
aspect of this Policy in that three year period, it will need to obtain prior shareholder approval before it can implement the change. On advice
from the Remuneration Committee, no changes are proposed to the Remuneration Policy for 2016 and accordingly no resolution in relation to
the Remuneration Policy will be put to shareholders at the 2016 AGM.
Future Policy Table for Executive Directors
Element
Purpose and link to strategy
Operation (including framework to assess performance)
Maximum opportunity
Salary
Attract, retain and
fairly reward high
calibre individuals.
Salary levels (and subsequent increases) are set after taking
into account various factors including: individual and company
performance; role and responsibility; internal relativities such
as the increases awarded to other employees; pay levels at
other companies operating in our sector and companies
of a similar size and characteristics.
Annual increases are normally guided
by the increases awarded to other
employees though increases above
this may be awarded in circumstances
such as a substantial change in role,
additional responsibilities or a salary
that is significantly below the
appropriate market.
Salary is paid fortnightly and increases are generally effective
from 1 January.
Details of current salaries are
set out in the Annual Report
on Remuneration.
Benefits
Attract, retain and
fairly reward high
Benefits can consist of car allowance or company car, life
assurance, private medical insurance, permanent health
insurance and health assessments.
Opportunity to participate in the Savings Related (‘SAYE’)
share scheme on the same terms as other employees.
The cost of benefits is set out in the Annual Report
on Remuneration.
Provision of relocation assistance for a period if/
when applicable.
82
Market competitive benefit level.
SAYE scheme subject to HMRC
individual limit.
Strategic Report
Element
Annual Incentive Plan
(‘AIP’)
Incentivise the delivery of
Cash bonus based on audited financial measures, such
annual financial targets and as Pre-Tax Profit and Return on Capital Employed, in the
individual performance.
financial year.
Maximum opportunity
100% of salary.
Up to 10% of the bonus opportunity can be paid based
on individual performance.
Performance in the financial year below the threshold
performance target results in zero payment. Payments
rise from no more than 10% to 100% of the maximum
opportunity for levels of performance between the
threshold and maximum targets.
Provisions are in place which would give the Remuneration
Committee discretion to operate clawback in relation to the
cash bonus at any time in the period of three years after
payment of the bonus in cases of material misstatement,
calculation error and gross misconduct.
Employee Profit Sharing Incentivise sustainable
Scheme (‘EPSS’)
profit growth.
Executive Directors also participate in the Employee Profit
Sharing Scheme, which is available to most of the employees in
the Group and rewards performance based on improvements
in profits compared with an average of the previous three
years’ results. It is calculated at individual business unit level,
with employees (including Executive Directors) not aligned to
a particular business or unit receiving the average of awards
earned at business level.
The profit pool available to
employees under the EPSS
is not capped.
Historical payouts under the
EPSS are set out in the Annual
Report on Remuneration.
83
Remuneration Policy Report continued
Future Policy Table for Executive Directors continued
Element
Share Matching Plan
(‘SMP’)
Incentivise share ownership Compulsory investment of 25% of bonus under the Annual
and long term performance Incentive Plan in shares which is subject to forfeiture. Further
in line with Group strategy. details on forfeiture are set out in the policy on payment for
loss of office.
Executives may increase this percentage voluntarily up to
the lower of 50% of salary or the actual bonus awarded.
Any shares acquired through voluntarily invested bonus are
not subject to forfeiture.
Matching awards are made depending on the level of
investment and have a performance period of at least three
years. The level of vesting is determined by a mixture of
appropriate audited financial measures, currently growth
in EPS and ROCE.
The vesting period of matching awards depends on the
nature of the related investment: matching awards relating to
a voluntary investment vest three years after the grant date;
matching awards relating to a compulsory investment vest
four years after the grant date.
In respect of any performance condition, performance below
the threshold target results in no vesting. For performance
between the threshold target and maximum target, vesting
starts at 25% and rises to 100% of the shares.
From 2014, there will be a requirement that one half of
any vesting shares (on a net of tax basis) will be retained by
participants at Executive Director and Group Management
Board level for a period of three years after the date of vesting.
There is no opportunity to re-test a performance condition.
There is dividend accrual on vested shares.
Vesting of compulsorily invested shares and matching shares
is generally dependent on continued employment.
Clawback provisions are in place in relation to compulsorily
acquired shares, matching shares and dividend shares which
would give the Committee discretion to operate malus
and clawback at any time before vesting or up to the
third anniversary of the vesting date in cases of material
misstatement, calculation error and gross misconduct.
84
Maximum opportunity
Maximum match 3:1 of shares
invested plus shares equivalent
to the dividend roll-up.
Strategic Report
Element
Company Share Option Incentivise senior
Plan (‘CSOP’)
management to drive
earnings and share
price growth.
Maximum opportunity
Annual awards of market value options made to
senior managers.
Options worth up to the HMRC
limit may be held at any time in
accordance with HMRC rules,
currently £30,000.
Awards have a performance period of at least three years
and the level of vesting is determined by an appropriate
audited financial measure, such as earnings per share.
In respect of any performance condition, performance
below target results in no vesting. For performance at
or above target, 100% of the options will vest.
There is no opportunity to re-test a performance condition.
Pension
Attract, retain and
fairly reward high
Executive Directors may receive a defined contribution
pension benefit, payment to a self invested personal
pension, or cash in lieu.
20% of salary for Executive Directors.
There is the option to make further pension contribution
through salary sacrifice.
However, existing Directors are members of a Defined Benefit
Pension Scheme with no further accrual and may receive a
higher pension benefit. Details of these arrangements are
set out in the Annual Report on Remuneration.
It should be noted that the current Executive Chairman, Cameron McLatchie, does not receive a car/car allowance or any pension contributions, nor does he
participate in the Annual Incentive Plan, Share Matching Plan or Company Share Option Plan.
Choice of Performance Measures and Target Setting
For the variable components of remuneration, our policy is to choose performance measures which help drive and reward the achievement of BPI strategy,
and also provide alignment between employees and shareholders. In recent years BPI has focused on measures of profit, EPS and ROCE, and this has been
reflected in the choice of performance measures in the Annual Incentive Plan, Share Matching Plan and CSOP. The Committee reviews metrics each year and
may vary these metrics to reflect future business priorities.
Targets for each performance measure are designed to be stretching yet achievable, and are approved by the Committee with reference to internal plans and
external expectations. Performance is generally measured on a sliding scale so that incentive payouts increase pro-rata for levels of performance in between
the threshold and maximum performance targets.
Performance measures and targets are disclosed in the Annual Report on Remuneration. In cases where targets are commercially sensitive, for example annual
profit targets for the annual bonus, they will only be disclosed retrospectively.
Differences in Pay Policy for Employees and Executive Directors
The Remuneration Committee reviews and has regard to remuneration trends across the Group when setting Executive Director remuneration policy. No
element of Executive Director remuneration policy is unique to Executive Directors and each element is operated for other groups of BPI employees. However,
differences in policy do exist in order to reflect the increased scope of the role and increased responsibility. Every employee has some element of variable pay.
In general, the higher the level of responsibility the greater the amounts receivable and the greater the proportion based on variable pay.
Executive Shareholding Guidelines
The Remuneration Committee operates formal executive shareholding guidelines which require Executive Directors to acquire over a five year period and retain
shares with a value equal to 100% of one year’s basic current annual salary. For the purposes of this calculation, shares held are valued at the higher of their
acquisition price and current market price.
85
NED Policy Table
Element
Operation
Maximum opportunity
Fees
Attract, retain and
fairly reward high
Reviewed by the Board taking into account individual
responsibilities, factors such as Committee Chairmanships,
time commitment, other pay increases being made to
employees in the Company and fees payable for the
equivalent role in comparable companies.
Current fee levels are set out in the
Annual Report on Remuneration.
Overall fee limit will be within the
limit set out in the Company’s
Articles of Association.
Normally fees are reviewed annually and fee increases
are generally effective from 1 January.
Approach to Recruitment
The remuneration package for a new Director would be set in accordance with the terms of the approved remuneration policy for existing directors in force
at the time of appointment. In addition, the Committee may offer additional cash and/or share-based elements when it considers these to be in the best
interests of the Company and, therefore, shareholders, including awards made under Listing Rule 9.4.2 R. Any such ‘buy out’ payments would be based solely
on remuneration lost when leaving the former employer and would reflect the delivery mechanism (i.e. cash, shares, options), time horizons and performance
requirements attaching to that remuneration. Shareholders will be informed of any such payments at the time of appointment.
In the case of an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms on
grant, adjusted as relevant to take into account the appointment. In addition, any other ongoing remuneration obligations existing prior to appointment may
continue, provided that they are put to shareholders for approval at the first AGM following their appointment.
Other aspects of our recruitment policy include:
where it is appropriate to offer a below median salary initially, a series of increases to the desired salary positioning may be given over the proceeding
few years subject to individual performance and experience in role;
• different performance measures may be set initially for the annual bonus, taking into account the responsibilities of the individual, and the point in the
financial year that they joined; and
• a new Director may receive fees for professional advice as appropriate.
•
Policy on Payment for Loss of Office
Should notice be served by either party, a Director can continue to receive basic salary, benefits and pension for the duration of his notice period during which
time the Company may require the individual to continue to fulfil his current duties. In addition, the Company can make a payment in lieu of notice either as
a lump sum or in fortnightly instalments of base salary which would reduce (in the latter case) to the extent that income from an alternative employment was
received but disregarding for this purpose any income from existing external positions which the Board had previously approved. In addition, any statutory
entitlements or sums to settle or compromise claims in connection with the termination would be paid as necessary.
Under the Annual Incentive Plan, an employee who ceases employment or is under notice prior to the payment of bonus typically will not receive any payment.
However, if the individual is considered by the Committee in its discretion to be a good leaver, he may receive a payment, payable in cash, on a pro-rata basis,
but pro-rated for the period of time served from the start of the financial year to the date of termination and not for any period in lieu of notice or garden
leave. Any bonus typically would be subject to the normal bonus targets, tested at the end of the year.
Under the Employee Profit Sharing Scheme, participants are normally entitled to bonus payments unless determined otherwise by the Remuneration Committee.
The policy for the treatment of awards under the Company Share Option Plan and Share Matching Plan is set out below.
86
Strategic Report
Share Matching Plan
The treatment of invested shares and matching awards differs as set out below:
Circumstances
Invested shares
Matching awards
Death
Vest on cessation of employment.
Vest on cessation of employment.
Awards are pro-rated for time served and based
on performance up to the date of cessation.
Good leaver*
Vest on cessation of employment unless
determined otherwise by the Committee.
Vest following cessation of employment or
at a later date subject to the discretion of the
Remuneration Committee.
Awards are pro-rated for time served and based
on an assessment of performance.
Other
Lapse unless the Committee determines otherwise. Lapse unless the Committee determines otherwise.
(However awards granted before 26 February 2012
vest on cessation of employment).
*
Ill-health, disability, injury, retirement, redundancy, sale of business.
The treatment of vested and unvested awards made under the Company Share Option Plan is set out below:
Circumstances
Unvested awards
Vested awards
Misconduct, impropriety or inefficiency or if
voluntary resignation.
Lapse.
Lapse.
Good leaver*
Vest at the end of the performance period
or earlier subject to the discretion of the
Remuneration Committee.
Can exercise awards.
Awards are pro-rated for time served and
based on an assessment of performance.
*
Ill-health, disability, injury, retirement, redundancy, sale of business.
With regard to the SAYE scheme, the Executive Directors participate on the same basis as for other employees.
Approach to Service Contracts and Letters of Appointment
The Company’s policy on the duration of Directors’ contracts and letters of appointment is that:
• Executive Directors should have rolling service contracts terminable on no more than one year’s notice served by the Company or the Director;
• Non-Executive Directors are appointed for fixed terms of no more than one year, renewable on the agreement of both the Company and the Director
following election at the Annual General Meeting; and
• No specific provisions on a change of control.
87
Illustration of Remuneration Scenarios
The charts below show remuneration scenarios for the three Executive Directors:
Note that the charts are indicative as share price movement and dividend accrual have been excluded. In addition, note that in each scenario the aggregate
value of benefits, CSOP, and Employee Profit Sharing Plan awards is less than 5% of the total package
Executive Chairman
Chief Executive
Finance Director
1,500
1,500
1,500
CSOP
1,250
1,250
1,000
1,000
1,250
PSP
CSOP
CSOP
PSP
PSP
SMP
SMP
40%
750
1,000
SMP
750 AIP
750 AIP
10%
500
500
Pension
16%
250
250
0
Minimum
98%
Target
98%
Maximum
Salary SMP
Benefits
Employee Profit Sharing Scheme
Pension
CSOP
500
51%
Minimum
10%
27%
26%
8%
4%
84%
52%
27%
Minimum
Target
Maximum
Bene
26%
Salary
Target
Pens
Benefits
250
13%
Salary
0
Pension
5%
Benefits
81%
100%
40%
26%
25%
10%
AIP
Maximum
0
AIP
Assumptions made for each scenario are as follows:
• minimum: fixed remuneration only (i.e. salary, benefits and pension). Benefits based on 2012 disclosed benefit amounts.
• target: fixed remuneration plus half of maximum annual bonus opportunity plus 25% vesting of awards under the Share Matching Plan (assuming that half
of the annual bonus paid is invested under the Share Matching Plan). Employee Profit Sharing Scheme amount based on historical amounts. CSOP award
of £10,000 vesting in full and valued at 30% of face value of the shares under option.
• maximum: fixed remuneration plus maximum annual bonus opportunity plus 100% vesting of Share Matching Plan (assuming that the maximum
investment is made into the Share Matching Plan). Employee Profit Sharing Scheme amount based on historical amounts. CSOP award of £10,000 vesting
in full and valued at 50% of face value of the shares under option.
Statement of Consideration of Employment Conditions Elsewhere in the Group
The BPI Remuneration Committee does not consult directly with employees when determining remuneration policy for Executive Directors. However, increases
in pay across the Group’s senior management population and the wider workforce are taken into account when setting pay levels for Directors.
Statement of Consideration of Shareholder Views
The Remuneration Committee considers shareholder feedback received in relation to the AGM each year at its first meeting following the AGM. When any
material changes are proposed to the remuneration policy, the Remuneration Committee Chairman will inform major shareholders in advance, and will generally
offer a meeting to discuss these. In addition, when forming the policy for the Share Matching Plan, we consulted with our major shareholders to obtain their
views. In these consultations a number of comments were made which were discussed by the Committee and the conclusions of this process were reflected in
this Policy Report. In addition, the Committee will keep the SMP under review.
88
Salar
Strategic Report
Key Areas of Discretion
Finally, we have chosen to highlight key areas of discretion in the application of our remuneration policy. These discretions are implicit in the policy stated above,
but we have listed them for clarity. Key areas of discretion include, but are not limited to:
• the choice of financial performance measures in variable remuneration and the choice of performance targets for those measures;
• whether annual bonus is paid to Executives once notice has been served;
• discretion in exceptional circumstances to amend previously set incentive targets or to adjust the proposed payout to ensure a fair and appropriate outcome;
• discretion to pay a proportion of bonus not exceeding 10% of the bonus opportunity based on non-financial measures;
• certain decisions relating to the Company Share Option Plan options and Share Matching Plan awards for which the Committee has discretion as set out in the
rules of the relevant share plans which have been approved by shareholders. Copies of these rules are available upon request from the Company Secretary; and
• the decisions on exercise of malus and/or clawback rights under the Annual Incentive Plan and Share Matching Plan.
Legacy Arrangements
For the avoidance of doubt, in approving this Policy Report, authority is given to the Company to honour any commitments entered into with current or former
Directors before the current legislation on remuneration policies came into force or before an individual became a director (such as the payment outstanding
incentive awards or life assurance benefits) even where it is not consistent with the policy prevailing at the time such commitment is fulfilled. Details of any
payments to former Directors will be set out in the Annual Report on Remuneration as they arise.
External Non-Executive Director Positions
Executive Directors are required to obtain Board approval before taking on Non-Executive positions with other companies. Executive Directors are permitted
to retain their fees in respect of such positions. No outside Directorships are currently held by Executive Directors.
Directors’ Report
The Corporate Governance Report on pages 58 to 63 and the Audit Committee Report on pages 64 to 67 are deemed to form part of this
Directors’ Report for the purposes of section 463 of the Companies Act 2006.
The Directors have made the disclosures required by Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 (‘Schedule 7’), which also includes additional disclosures made in accordance with the Listing, Disclosure and Transparency Rules of the Financial Conduct
Authority. These disclosures are contained within the Strategic Report and the Corporate Governance Report and therefore have not been separately disclosed
within this section. All of the information presented in these sections is deemed to form part of this Directors’ Report.
89
Bromborough Investment
Programme
The site at Bromborough in the UK extrudes high quality
films for the packaging industry and a market leading
range of high performance collation shrink films.
Our programme of installing new extrusion lines at
Bromborough has continued with three coextrusion
lines now fully operational and performing well with
extremely good outputs and gauge profiles.
90
A five-layer coextrusion line has been ordered for
delivery in early 2016. These new lines will increase
coextrusion capacity, produce thinner films and
offer our customers even tighter tolerances with
improved performance.
Strategic Report
Financial
Statements
In this section:
92
93
95
96
96
97
98
99
100
101
102
103
132
134
Statement of Directors’ Responsibilities
Five Year Record
of Comprehensive Income
Company Statement
Notes to the Consolidated
and Company Financial Statements
Appendix 1: List of Subsidiary Companies
Anthony Cavanagh, Process Operator, bpi.films,
Bromborough.
91
Statement of Directors’ Responsibilities in Respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and parent company Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group and parent company Financial Statements for each financial year. Under that law they are required to
prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company
Financial Statements on the same basis.
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 parent company and of their profit or loss for that period. In preparing each of the Group and parent company Financial Statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose
with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its Financial Statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in
the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in Respect of the Annual Financial Report
We confirm that to the best of our knowledge:
• the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders
to assess the Group’s position and performance, business model and strategy.
By Order of the Board
John Langlands
Chief Executive
92
David Harris
Strategic Report
to the Members of British Polythene Industries PLC only
Opinions and Conclusions Arising from Our Audit
1. Our opinion on the Financial Statements is unmodified
We have audited the Financial Statements of British Polythene Industries PLC for the year ended 31 December 2015 set out on pages 96 to 131. In our opinion:
• the Financial Statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2015 and of the
Group’s profit for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU);
• the parent company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with
the provisions of the Companies Act 2006; and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial
Statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the Financial Statements the risk of material misstatement that had the greatest effect on our audit was as follows:
Accounting for carrying value of inventories (£81.7 million)
Refer to page 65 (Audit Committee Report), page 106 (accounting policy) and page 115 (financial disclosures).
• The risk: This is a key judgemental area on which our audit concentrates. Inventories are a significant balance and the Group’s main raw material
ingredient, polymer, a key component of finished goods inventories valuation, is subject to price volatility which in turn can impact what sales prices that
can be achieved. This can lead to potential issues over the full recoverability of all inventory balances. This is particularly relevant for the inventory produced
in the latter part of the financial year, elements of which will not be sold until later in 2016 by which time downward pressure on sales prices is possible.
• Our response: In this area, our audit procedures included testing the Group’s controls in relation to the valuation of inventories, agreeing the cost of
inventories on a sample basis to supporting documentation such as purchase invoices; considering and testing the calculation of overheads absorbed into
inventory; considering the relationship between the carrying value of inventory and the cost of production during the period the inventory was produced;
and considering intragroup profit on stock and whether this has been eliminated appropriately. We also considered the provisioning levels recorded in light
of sales values actually achieved after the year end and those that will likely be achieved in relation to inventory not expected to be sold until later in 2016
(by reference to historical trends and current polymer price movements). We also considered the adequacy of disclosures in relation to inventory in the
In our audit report for the year ended 31 December 2014 we included valuation of the Group’s trade receivables and accounting for litigation and claims as two
of the risks of material misstatement that had the greatest effect on our audit. We continue to perform audit procedures over both of these areas. However,
the Group has in relation to the valuation of trade receivables reducing exposure to aged debt and processes in place to manage this exposure and in relation
to accounting for litigation and claims has at the year end no material claims outstanding. As a result, we have not assessed these as risks that had the greatest
effect on our audit and, therefore, these are not separately identified in our report this year.
3. Our application of materiality and an overview of the scope of our audit
The materiality for the Group Financial Statements as a whole was set at £1.2 million. This has been determined with reference to a benchmark of Group profit
before taxation (of which it represents 5%).
We agreed with the Audit Committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of
£250,000, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds. This level was selected
and agreed with the Audit Committee as, given the nature and scale of operations, adjustments under this level were not deemed to be of specific interest
to them.
Audits were performed by KPMG at the key reporting components in the following countries: the UK, Belgium, Canada and the Netherlands. These audits
covered 99% of total Group revenue; 100% of Group profit from operations; and 99% of total Group assets. Of this, audits covering 66% of total Group
revenue; 38% of Group profit from operations; and 66% of total Group assets were performed by the Group auditor, KPMG in the UK. The segment
disclosures in Note 3 set out the individual significance of a specific country to the Group Financial Statements.
The audits undertaken for Group reporting purposes at the key reporting components of the Group were all performed to materiality levels set by, or agreed
with, the Group audit team. These materiality levels ranged from £10,000 (for some of the Group’s smaller statutory entities) to £1.1 million; in the majority of
components £1.1 million is used.
Detailed audit instructions were sent to the component auditors in Belgium, France and the Netherlands. These instructions covered the significant audit areas
that should be covered by these audits and set out the information required to be reported back to the Group audit team. The Group audit team visited the
Netherlands this year as part of the audit planning process and met with the team from the Netherlands. The Group team reviewed the files of the Belgian
team subsequent to the completion of their audit fieldwork and also discussed the procedures and findings in relation to inventory in particular with the
team in the Netherlands subsequent to their audit fieldwork. The Group team reviewed all tests completed by the Canadian team.
93
Independent Auditor’s Report continued
to the Members of British Polythene Industries PLC only
4. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are prepared is consistent
with the Financial Statements.
5. We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:
• the Directors’ Statement of Risk Factors on pages 27 to 29, concerning the principal risks, their management, and, based on that, the Directors’ assessment
and expectations of the Group’s continuing in operation over the three years to 31 December 2018; or
• the disclosures in Note 1 of the Financial Statements and in the Finance Review concerning the use of the going concern basis of accounting.
6. We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information
in the Annual Report that contains a material inconsistency with either that knowledge or the Financial Statements, a material misstatement of fact, or that is
otherwise misleading.
In particular, we are required to report to you if:
we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement that they 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’s position and performance, business model and strategy; or
• the Audit Committee Report does not appropriately address matters communicated by us to the Audit Committee.
•
Under the Companies Act 2006 we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not
visited by us; or
• the parent 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
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
•
Under the Listing Rules we are required to review:
the Directors’ statements, set out on page 42, in relation to going concern and longer-term viability; and
• the part of the Corporate Governance Report on pages 58 to 63 relating to the Company’s compliance with the eleven provisions of the 2014 UK
Corporate Governance Code specified for our review.
•
We have nothing to report in respect of the above responsibilities.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 92, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of Financial Statements is provided on the
Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company’s members as a body and is subject
to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are
incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken
and the basis of our opinions.
Alex Sanderson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
191 West George Street
Glasgow
G2 2LJ
26 February 2016
94
Strategic Report
Five Year Record
2015
£’m
2014
£’m
2013
£’m
2012
£’m
Restated
2011
£’m
Restated
468.3
499.0
507.5
478.7
507.7
Operating profit before net restructuring
28.6
26.7
24.0
21.8
20.8
Profit before tax
23.1
22.2
18.5
17.0
16.1
Income Statement extracts
Turnover
Diluted earnings per ordinary share
63.82
57.53
43.23
38.93
43.39
Adjusted earnings per ordinary share
76.58
66.21
59.09
51.55
47.83
Dividend per ordinary share
18.00
16.00
14.50
13.20
12.50
Balance Sheet extracts
Non-current assets
Inventories
Trade and other receivables
Trade and other payables (including deferred Government grants)
Assets held for sale
99.8
81.7
48.8
(81.7)
6.6
103.8
76.3
50.6
(82.0)
–
103.2
77.3
52.3
(86.9)
–
91.9
72.5
45.1
(76.3)
–
87.5
67.3
50.4
(73.4)
–
Capital employed
155.2
148.7
145.9
133.2
131.8
38.5
0.4
24.1
0.5
99.9
(14.7)
48.5
19.7
30.1
0.4
58.1
(10.9)
35.7
22.2
23.2
0.9
64.6
(13.4)
33.6
21.0
31.0
1.0
60.9
(15.7)
148.7
145.9
133.2
131.8
Total equity attributable to equity holders of the parent
Non-controlling interests
Net debt
Derivative financial liabilities
Retirement and other employee benefits
Taxation
74.7
0.4
32.1
0.5
53.8
(6.3)
155.2
95
For the year ended 31 December 2015
Turnover
Profit from operations before restructuring
Restructuring costs
Profit from operations
Borrowing costs
Net retirement benefit financing
Notes
2015
£’m
2014
£’m
2, 3
468.3
499.0
2
28.6
(1.1)
26.7
–
26.7
(1.6)
(2.9)
5
27.5
(1.2)
(3.2)
Net financing costs
(4.4)
(4.5)
Profit before tax
Tax
6
23.1
(5.6)
22.2
(5.8)
Profit for the year
17.5
16.4
Attributable to:
Equity holders of the parent
17.5
15.9
2, 3
5
27
–
0.5
17.5
16.4
Basic
8
66.16p
61.47p
Diluted
8
63.82p
57.53p
Notes
2015
£’m
2014
£’m
16.4
(0.4)
(24.1)
(19.1)
0.2
0.1
4.3
Earnings per share
Consolidated Statement of Comprehensive Income
Profit for the year
Cash flow hedges: effective portion of net changes in fair value
Actuarial gain/(loss) on Defined Benefit Pension Scheme
Adjustment in respect of Pension Funding Partnership
Movement on translation of overseas undertakings and related borrowings
Movement on translation of non-controlling interests
Tax on components of other comprehensive income
17.5
–
31.9
–
(0.3)
–
(7.8)
Other comprehensive income for the year
23.8
(39.0)
Total comprehensive income for the year
41.3
(22.6)
27
41.3
–
(23.3)
0.7
41.3
(22.6)
Attributable to:
Equity holders of the parent
96
Strategic Report
At 31 December 2015
2015
£’m
2014
£’m
21
2.5
0.4
96.9
11.4
2.5
0.6
100.7
19.2
111.2
123.0
15
14
81.7
48.8
0.5
7.3
76.3
50.6
0.5
–
138.3
127.4
17
14
–
0.2
81.2
1.2
0.7
2.6
0.1
81.8
0.8
–
83.3
85.3
Net current assets
55.0
42.1
Total assets less current liabilities
166.2
165.1
17
22
32.6
0.3
53.8
3.9
0.5
22.0
0.4
99.9
3.7
0.2
91.1
126.2
Net assets
75.1
38.9
23
6.8
27.1
8.7
32.1
6.8
26.5
9.0
(3.8)
Notes
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Cash at bank
Current liabilities
Bank overdraft
Derivative financial instruments
Trade and other payables
Current tax liabilities
Liabilities held for sale
Non-current liabilities
Other loans and borrowings
Retirement and employee benefit obligations
Deferred tax liabilities
Deferred Government grants
Equity
Issued share capital
Share premium account
Other reserves
Retained earnings
9
10
11
16
17
18
19
20
18
31
21
24
25
Total equity attributable to equity holders of the parent
Total equity
74.7
38.5
27
0.4
0.4
75.1
38.9
British Polythene Industries PLC, Registration Number 108191.
The Financial Statements were approved by the Board of Directors on 26 February 2016 and signed on its behalf by:
C McLatchie
Chairman
D W Harris
97
2015
£’m
2014
£’m
27.5
0.2
14.8
1.2
(0.1)
(17.2)
26.7
0.3
14.4
1.6
(0.3)
(5.4)
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
26.4
(7.8)
0.4
2.4
37.3
0.1
0.4
(2.3)
Movements in working capital
(5.0)
(1.8)
Cash generated from operations
Interest paid
Income taxes paid
21.4
(1.2)
(4.2)
35.5
(1.6)
(4.9)
Net cash from operating activities
16.0
29.0
Investing activities
Purchase of property, plant and equipment
Purchase of business
Proceeds from sale of property, plant and equipment
(17.6)
–
0.1
(16.6)
(0.3)
0.8
Net cash used in investing activities
(17.5)
(16.1)
Net cash flows before financing
(1.5)
12.9
7
(4.5)
10.7
–
(3.0)
0.6
(4.0)
(1.3)
(0.4)
(4.7)
0.7
Notes
Amortisation of intangible assets
Depreciation and impairment of property, plant and equipment
IFRS 2 charge in relation to equity-settled transactions
Gain on disposal of property, plant and equipment
Adjustment relating to pensions
Financing activities
Dividends paid
Net increase/(decrease) in bank loans
Repayment of obligations under hire purchase
Repurchase of ordinary shares
Proceeds from the issue of share capital
10
11
Net cash used in financing activities
3.8
(9.7)
Net increase in cash and cash equivalents
2.3
3.2
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
(2.1)
0.3
(5.7)
0.4
Cash and cash equivalents at end of year
0.5
(2.1)
98
Strategic Report
At 31 December 2015
2015
£’m
2014
£’m
Restated
see Note 31
21
136.6
0.7
0.3
136.0
0.7
0.6
137.6
137.3
16
54.4
43.0
54.4
43.0
17
19
2.3
0.2
37.9
2.2
0.1
40.3
40.4
42.6
Net current assets
14.0
0.4
151.6
137.7
17
32.6
0.3
2.4
29.5
22.0
0.4
4.3
29.5
Notes
Non-current assets
Investments in subsidiary undertakings
Pension prepayments
Deferred tax assets
Current assets
Current liabilities
Bank overdraft
Amounts due to subsidiary undertakings
12
14
18
18
31
64.8
56.2
Net assets
86.8
81.5
23
6.8
27.1
13.3
39.6
6.8
26.5
13.3
34.9
86.8
81.5
Equity
Other reserves
Retained earnings
Total equity
24
25
The Financial Statements were approved by the Board of Directors on 26 February 2016 and signed on its behalf by:
C McLatchie
Chairman
D W Harris
99
2015
£’m
2014
£’m
(2.5)
0.4
(0.6)
(3.1)
0.4
(0.2)
Operating cash flows before movements in working capital
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
(2.7)
(11.4)
(1.9)
(2.9)
(1.5)
6.5
Movements in working capital
(13.3)
5.0
(16.0)
0.3
2.1
(0.4)
(15.7)
1.7
12
(0.6)
(0.4)
Net cash used in investing activities
(0.6)
(0.4)
Net cash flows before financing
(16.3)
1.3
7
(4.0)
(1.3)
8.0
(4.7)
0.7
(1.3)
Notes
Adjustment relating to pensions
Cash generated from operations
Interest received/(paid)
Net cash from operating activities
Investing activities
Increase in investment in subsidiary
Financing activities
Dividends paid
Net increase/(decrease) in bank loans
Dividends received from subsidiaries
Repurchase of ordinary shares
Proceeds from the issue of share capital
(4.5)
10.8
12.3
(3.0)
0.6
Net cash used in financing activities
16.2
Net increase in cash and cash equivalents
(0.1)
–
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
(2.2)
–
(2.3)
0.1
Cash and cash equivalents at end of year
(2.3)
(2.2)
100
Strategic Report
Consolidated Statement of Changes in Equity
Share
Capital
£’m
Share
Premium
£’m
6.8
–
–
26.5
–
–
–
–
Other
Reserves1
£’m
Retained
Earnings
£’m
Attributable
to Owners
of the
Parent
£’m
Noncontrolling
Interest2
£’m
9.0
–
–
(3.8)
17.5
31.9
38.5
17.5
31.9
–
–
(0.3)
–
–
(7.8)
(0.3)
(7.8)
–
–
(0.3)
(7.8)
–
–
(0.3)
41.6
41.3
–
41.3
–
–
–
–
–
–
–
–
0.6
–
–
–
–
–
–
0.6
1.2
(3.0)
–
(4.5)
0.6
1.2
(3.0)
0.6
(4.5)
–
–
–
–
–
0.6
1.2
(3.0)
0.6
(4.5)
6.8
27.1
8.7
32.1
74.7
Share
Capital
£’m
Share
Premium
£’m
Other
Reserves1
£’m
Retained
Earnings
£’m
Attributable
to Owners
of the
Parent
£’m
Balance at 1 January 2014
Profit for the year
Cash flow hedges: effective portion of net changes in fair value
Actuarial loss on Defined Benefit Pension Scheme
Adjustment in respect of Pension Funding Partnership
Movement on translation of overseas undertakings and
related borrowings
Movement on translation of minority interests
6.7
–
–
–
–
25.9
–
–
–
–
9.2
–
(0.4)
–
–
6.7
15.9
–
(24.2)
–
48.5
15.9
(0.4)
(24.2)
–
19.7
0.5
–
0.1
(19.1)
68.2
16.4
(0.4)
(24.1)
(19.1)
–
–
–
–
–
–
0.2
–
–
–
–
4.3
0.2
–
4.3
–
0.1
–
0.2
0.1
4.3
Tax charge in relation to equity-settled transactions
Payment to Pension Scheme by Pension Funding Partnership
Increase in own shares held
Issue of shares
Dividends
–
–
–
–
–
0.1
–
–
–
–
–
–
0.6
–
(0.2)
–
–
–
–
–
–
(4.0)
0.6
1.6
–
(4.7)
–
(4.0)
(4.2)
0.6
1.6
–
(4.7)
0.7
(4.0)
(18.4)
–
–
(0.9)
–
–
–
(22.6)
0.6
1.6
(0.9)
(4.7)
0.7
(4.0)
Balance at 31 December 2014
6.8
26.5
9.0
(3.8)
38.5
0.4
38.9
Profit for the year
Actuarial gain on Defined Benefit Pension Scheme
Movement on translation of overseas undertakings
and related borrowings
Tax charge in relation to equity-settled transactions and
cash flow hedges
Issue of shares
Dividends
0.4
–
–
Total
£’m
0.4
Noncontrolling
Interest2
£’m
38.9
17.5
31.9
75.1
Total
£’m
1. Refer to Note 25 for breakdown of other reserves.
2. Refer to Note 27 for breakdown of non-controlling interest.
101
Company Statement of Changes in Equity
Profit for the year
Actuarial gain on Defined Benefit Pension Scheme
Issue of shares
Dividends
Share
Capital
£’m
Share
Premium
£’m
6.8
–
–
–
26.5
–
–
–
13.3
–
–
–
34.9
10.4
1.2
(0.2)
81.5
10.4
1.2
(0.2)
–
–
–
–
–
–
–
–
–
–
0.6
–
–
–
–
–
–
–
11.4
0.4
0.4
(3.0)
–
(4.5)
11.4
0.4
0.4
(3.0)
0.6
(4.5)
6.8
27.1
13.3
39.6
86.8
Retained
Earnings
Restated
see Note 31
£’m
Total
Restated
see Note 31
£’m
Other
Reserves1
£’m
Retained
Earnings
£’m
Total
£’m
Share
Capital
£’m
Share
Premium
£’m
Other
Reserves1
£’m
Restated balance at 1 January 2014
Profit for the year
Actuarial loss on Defined Benefit Pension Scheme
Movement on translation of overseas undertakings and related borrowings
6.7
–
–
–
–
25.9
–
–
–
–
13.4
–
–
(0.1)
–
37.8
5.6
(0.8)
–
0.2
83.8
5.6
(0.8)
(0.1)
0.2
Issue of shares
Dividends
–
–
–
–
0.1
–
–
–
–
–
0.6
–
(0.1)
–
–
–
–
–
5.0
0.4
0.4
(4.7)
–
(4.0)
4.9
0.4
0.4
(4.7)
0.7
(4.0)
6.8
26.5
13.3
34.9
81.5
1. Refer to Note 25 for breakdown of other reserves.
102
Strategic Report
Notes to the Consolidated and Company Financial Statements
1. Basis of Preparation and Significant Accounting Policies
British Polythene Industries PLC (the ‘Company’) is a company domiciled and incorporated in the United Kingdom. The consolidated annual financial
statements (the ‘Financial Statements’) of the Company for the year ended 31 December 2015 incorporate the financial statements of the Company
and its subsidiaries (together referred to as the ‘Group’).
Statement of compliance
Both the Group and Company Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by
the EU (‘adopted IFRSs’).
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the Group and Company
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 which allows it not to present its individual income statement.
Basis of preparation
The Financial Statements are prepared on the historical cost basis except for derivative financial instruments and the assets of the Defined Benefit Pension
Scheme which are stated at their fair value and the liabilities of the Defined Benefit Pension Scheme which are measured by the projected unit credit method.
The Financial Statements have been prepared on a going concern basis. The reasons for this are outlined in the Finance Review on page 42.
Basis of consolidation
Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the
acquisition is generally measured at fair value, as are the identifiable net assets acquired. The results of any subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the Financial Statements of subsidiaries acquired to bring the accounting policies used into line with those used
by the Group. Any goodwill that arises on acquisition is tested annually for impairment (see Note 9).
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to the parent company and the British Polythene Industries
pension fund interest in the British Polythene Industries Pension Funding Limited Partnership (‘the Partnership’). Non-controlling interests are presented within
equity in the consolidated balance sheet, separately from the equity attributable to the owners of the parent. Losses within a subsidiary are attributed to the
non-controlling interest even if that results in a deficit balance.
Changes in accounting policy
The following amendments to standards are applicable for the year beginning 1 January 2016 and are not expected to have a material impact on the
Financial Statements:
Amendments to IAS 27: Equity Method in Separate Financial Statements;
Amendments to IAS 1: Disclosure Initiative;
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation;
Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations;
Amendments to IAS 19: Defined Benefit Plans: Employee Contributions;
Annual Improvements to IFRSs 2012–2014 Cycle; and
Annual Improvements to IFRSs 2010–2012 Cycle.
Turnover recognition
Turnover from the sale of goods and services is measured at the fair value of the consideration, net of rebates, trade discounts, VAT and other sales-related taxes.
Turnover from the sale of goods and services is recognised when the Group has transferred the significant risks and rewards of ownership of the goods and services
to the buyer, the amount of turnover can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group.
Leasing and hire purchase
Leases are classified as finance leases when, on inception of the lease, the terms of the lease transfer substantially all the risks and rewards of ownership to the
Group. All other leases are classified as operating leases.
Assets held under finance leases (including hire purchase contracts) are initially recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet
as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are charged directly through the income statement as borrowing costs.
Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.
103
For the year ended 31 December 2015 continued
1. Basis of Preparation and Significant Accounting Policies continued
Foreign currencies
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and
losses arising on retranslation are included in income and expense for the period. Non-monetary assets and liabilities carried at historical cost that are
denominated in foreign currencies are translated at the rates prevailing at the date when the historical cost was determined.
On consolidation, the assets and liabilities of the Group’s overseas operations, including goodwill and fair value adjustments arising on the acquisition of a
foreign entity, are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates
for the month in which they occur. Exchange differences arising are recognised directly in the Group’s foreign currency translation reserve. Such translation
differences are recognised as income or as expenses in the period in which the operation is disposed of.
Government grants
Government grants in relation to capital expenditure are released through cost of sales over the expected useful lives of the relevant assets or the qualifying
period if shorter. Grants of a revenue nature are credited to the consolidated income statement in the period in which the related costs are incurred.
Retirement benefit obligations
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme.
For defined benefit retirement benefit schemes, the cost of providing benefits in respect of each plan is determined in an annual actuarial report using the
projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest
rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related pension liability. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the
income statement and presented in the consolidated statement of comprehensive income in accordance with IAS 19. Changes in the value of liabilities arising
from changes in estimates during the year are recognised in reserves.
The retirement benefit obligation recognised in the balance sheet represents an actuarial assessment of the present value of the defined benefit obligation as
reduced by the fair value of scheme assets before taxation which is recognised separately. The Group determines the net interest on the net defined benefit
liability/asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net
defined benefit liability/(asset).
From 1 January 2014 the Company transitioned from UK GAAP to full IFRS. As a result, the Company will now account for a proportion of the Group’s retirement
benefit obligations. This has been calculated based on the number of members within the Defined Benefit Scheme which were employed by the Company as this
is the stated policy for charging the costs of the pension scheme. This equates to 4% of the overall Group deficit. Refer to Note 31 for details of the Company
retirement benefit obligations for 2015 and 2014 and a reconciliation of the adjustments in the Company accounts between IFRS and UK GAAP.
Taxation
The tax expense represents the sum of the current taxes payable and deferred tax.
The current tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date and any adjustment to tax
payable in respect of prior years.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements
and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised using tax rates that have been
enacted or substantively enacted by the balance sheet date. Tax is charged or credited in the income statement, except when it relates to items charged or credited
through the statement of other comprehensive income, in which case the deferred tax is also dealt with through the statement of other comprehensive income.
104
Strategic Report
Goodwill
Goodwill has been recognised on acquisitions of subsidiaries and represents the difference between the cost of acquisition and the Group’s interest in the fair
value of the identifiable assets and liabilities and contingent liabilities at the date of acquisition. Goodwill is stated at cost less any accumulated impairment
losses. The carrying amount is allocated to cash-generating units and is tested annually for impairment. Any impairment is recognised immediately in income
or expense and is not subsequently reversed.
In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the amount recorded under UK
GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 was not reconsidered in preparing the
Group’s opening IFRS balance sheet at 1 January 2004.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal, except for goodwill written
off to reserves under UK GAAP prior to 1998 which is not reinstated and is not included in determining any subsequent profit or loss on disposal.
Negative goodwill arising on an acquisition is recognised immediately in the consolidated income statement as a credit to profit from operations.
Other intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation begins when an asset is
available for use and is calculated on a straight line basis to allocate the cost of assets over their estimated useful lives as follows:
Computer software
Customer lists
4 – 5 years
3 – 10 years
5 years
The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The cost of separately acquired intangible assets, including
computer software, comprises the purchase cost and any directly attributable costs of preparing the asset for use. Computer software costs that are directly
associated with the implementation of major business systems are capitalised as intangible assets.
Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment.
Land is not depreciated. Depreciation begins when the asset is available for use. The estimated useful lives are as follows:
Freehold buildings
20 – 50 years
Leasehold buildings and related improvements
10 – 40 years
Plant and equipment
4 – 10 years
Residual values and useful lives are reassessed annually.
Assets held under finance leases/hire purchase are capitalised and depreciated over their expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets and intangible assets with finite useful lives to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash generating unit to which the asset belongs. Intangible assets with indefinite useful lives and goodwill arising
subsequent to 1 January 2004 are tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately in the income statement.
Where an impairment loss subsequently reverses in respect of assets other than goodwill, the carrying amount of the asset is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in the income statement immediately.
Investments
Investments are stated at cost less provisions for impairment in the Company accounts.
105
Business combinations
The acquisition of subsidiaries is accounted for under the purchase method. The acquired business is measured at the date of acquisition as the aggregate fair
value of assets, liabilities and contingent liabilities as required under IFRS 3 Business Combinations. The excess of the cost of acquisition over the fair value of
the acquired business is represented as goodwill. For combinations taking place from 1 April 2010, all acquisition-related costs are expensed.
Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather than through continuing use. The condition is regarded as met only when the sale is highly probable
and the asset is available for immediate sale in its present condition. When the Group is committed to a sale a plan involving loss of control of a subsidiary, all of
the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Trade and other receivables are stated at their amortised cost less an allowance for irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement
of cash flows.
Trade and other payables are stated at amortised cost.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that
an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Non-recurring items
Non-recurring items are disclosed separately where either the quantum, the one-off nature or volatility of these items would otherwise distort the underlying
trade performance.
Interest
Interest is recognised in income or expense using the effective rate of interest method. Financing fees are amortised over the expected life of the related facility.
Earnings per share
The Group presents basic and diluted earnings per share (‘EPS’) data for ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by
dividing the profit or loss attributable to ordinary shareholders by the weighted average number of shares outstanding adjusted for own shares held and the
effects of all dilutive potential ordinary shares.
Financial instruments
The Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital address the exposure to credit risk, liquidity
risk and market risk from the use of financial instruments. Further qualitative and quantitative disclosures are included throughout these Financial Statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy
of the risk management framework in relation to the risks faced by the Group.
Certain derivative financial instruments are designated as hedges in line with the Group’s treasury policy. Hedges are classified as follows:
• Fair value hedges that hedge the exposure to changes in the fair value of a recognised asset or liability.
• Cash flow hedges that hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability
or a forecast transaction.
• Net investment hedges that hedge exposure to changes in the value of the Group’s interests in the net assets of foreign operations.
106
Strategic Report
For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. Any gain or
loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the consolidated
income statement.
For cash flow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge, as
defined by IAS 39 ‘Financial Instruments: Recognition and Measurement’, is recognised in equity, with any ineffective portion recognised in the consolidated
income statement. When hedged cash flows result in the recognition of a non-financial asset or liability, the associated gains or losses previously recognised
in equity are included in the initial measurement of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are
transferred to the consolidated income statement in the same period in which the hedged cash flows affect the consolidated income statement.
Any gains or losses arising from changes in fair value of derivative financial instruments not designated as hedges are recognised in the consolidated
income statement.
When a hedging instrument is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is
still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction
occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in
the consolidated income statement.
Share-based payments
The fair value of equity-settled employee share options granted is calculated at grant date and the resulting cost is charged to the income statement over the
performance period of the options with a corresponding increase in equity. The value of the charge is adjusted to reflect expected and actual levels of options
vesting. Failures to vest as a result of market and non-vesting conditions are not reversed. The fair value of the options granted is measured using an option
valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met.
Treasury shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change
in equity. Repurchased shares are classified as treasury shares and presented as a deduction from revenue reserves.
Dividends
Dividends payable to the Company’s shareholders are recorded as a liability in the period in which the dividends are approved.
Related party transactions
The Company has taken advantage of the exemption contained with FRS101 and has therefore not disclosed transactions or balances with entities which are
wholly-owned subsidiaries of the Group.
Key accounting estimates and judgements
The preparation of the consolidated Financial Statements requires the Directors to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Areas requiring the Directors to
make judgements, estimates and assumptions are highlighted in these accounting policies and throughout the notes to the consolidated Financial Statements.
Key estimation and judgement areas are as follows:
• Inventories
The recoverability and value of inventories are kept under constant review and provision is made where appropriate in line with disclosures in Note 15.
• Trade and other receivables
The recoverability of trade and other receivables are kept under constant review and provision is made where appropriate in line with disclosures in Note 16.
• Legal and other claims
The Group is subject to different legal and regulatory requirements and standards in each of the countries in which it operates. Claims and litigation are
kept under constant review and provision is made where appropriate.
• Retirement benefit obligations
During the year the Company agreed with the trustee of the British Polythene Pension Scheme to change the index used to revalue pensions in payment from
RPI to CPI. This change reflects the Government’s view that CPI is the most appropriate measure of inflation for pensions in payment due to the adoption of
CPI for state, public sector and statutory minimum pension increases. The accounting for and presentation of this change was a key accounting judgement in
preparing the Financial Statements for the year ended 31 December 2015. Refer to Note 31 for further disclosures of retirement benefit obligations.
107
Standards and interpretations not yet applied
The most significant standards and interpretations which have been issued, although not yet endorsed by the EU, with an effective date after the date of these
Financial Statements are as follows:
IFRS 15 Revenue from Contracts with Customers
The standard specifies how and when revenue is recognised, using a principles based five-step model. This will be effective for the Group in 2018 if adopted
by the European Union.
IFRS 9 Financial Instruments
The standard simplifies the classification, recognition and measurement requirements for financial assets, financial liabilities and some contracts to buy or sell
non-financial items. This will be effective for the Group in 2018, if adopted by the European Union.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the Financial Statements of the Group in future
periods. Beyond this, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.
2. Turnover and Profit from Operations
An analysis of the Group’s turnover and profit from operations is as follows:
Total
2015
£’m
Total
2014
£’m
Turnover by destination – UK
– Other EC
– Non-EC
256.1
160.6
51.6
270.9
174.2
53.9
Cost of sales
468.3
(393.7)
499.0
(423.0)
Gross profit
Distribution costs
Selling and administration expenses
74.6
(15.7)
(28.3)
76.0
(16.2)
(31.0)
Profit from operations before employee profit sharing scheme
Amount applied to employee profit sharing scheme
30.6
(2.0) 28.8
(2.1)
Profit from operations before restructuring costs
28.6
26.7
Restructuring costs*
(1.1)
27.5
26.7
2015
£’m
2014
£’m
14.8
0.9
0.6
14.4
0.9
0.6
0.2
(0.1)
0.6
0.3
(0.3)
0.7
0.1
0.1
0.1
0.1
0.1
0.1
*Analysis of restructuring
Redundancy costs
Other site-related costs
0.7
0.4
–
–
1.1
–
Profit from operations is stated after charging/(crediting):
Cost of sales
Depreciation of property, plant and equipment
Operating lease charges – plant
– buildings
Selling and administration expenses
Amortisation of intangible assets
Gain on disposal of property, plant and equipment
Operating lease charges – plant
Auditor’s remuneration:
– audit of these Financial Statements
– audit of Financial Statements of subsidiaries pursuant to legislation
– taxation compliance services
108
–
Strategic Report
3. Segmental Reporting
The Group has three reportable segments: UK and Ireland, Mainland Europe and North America. The segments were established by reviewing the management
information regularly presented to the entity’s chief operating decision maker (‘CODM’), which has been identified as the Board of Directors. The information
presented to the Board is consistent with the three reportable segments identified above, with the UK and Ireland business further segregated by business
activity. As all of the UK and Ireland segments meet the aggregation criteria set out in IFRS 8, they have been aggregated to form one reportable segment as
permitted by the standard.
UK and Ireland includes all of the UK manufacturing and merchanting activities along with the Irish sales operation which distributes predominately UK
manufactured products. It also includes the manufacturing operation in China from which most of the output is exported for sale by the Group in the UK.
Mainland Europe comprises the manufacturing and merchanting activities located in Belgium, the Netherlands and France. North America comprises the
manufacturing business in Canada with sales throughout North America and Canada.
The accounting policies of the reporting segments are the same as those described in Note 1. Inter-segment pricing is determined on an arm’s-length basis.
Segment profit
An analysis of the Group’s revenue and results by operating segment for the year is presented below. The measure of segment profit provided to the CODM
is profit from operations.
UK & Ireland
2015
£’m
Mainland Europe
2014
£’m
2015
£’m
North America
2014
£’m
Total
2015
£’m
2014
£’m
2015
£’m
2014
£’m
Turnover
Total sales
Inter-segment sales
315.1
(8.7)
336.3
(9.0)
140.8
(3.7)
148.7
(3.6)
24.8
–
26.6
–
480.7
(12.4)
511.6
(12.6)
External sales
306.4
468.3
499.0
327.3
137.1
145.1
24.8
26.6
Profit from operations before restructuring
Restructuring costs
11.6
(1.1)
11.2
–
15.7
–
16.3
–
1.3
–
(0.8)
–
28.6
(1.1)
26.7
–
Net financing costs
10.5
11.2
15.7
16.3
1.3
(0.8)
27.5
(4.4)
26.7
(4.5)
Profit before tax
Tax
23.1
(5.6)
22.2
(5.8)
Profit for the year
17.5
16.4
0.3
1.0
15.0
17.0
14.7
17.1
Depreciation, amortisation and impairment
Capital expenditure
10.5
12.4
10.3
11.5
3.9
4.4
4.1
4.6
0.6
0.2
Segment assets
The Group’s assets are analysed by operating segment as follows:
UK & Ireland
Mainland Europe
North America
Total
2015
£’m
2014
£’m
2015
£’m
2014
£’m
2015
£’m
2014
£’m
2015
£’m
2014
£’m
67.4
91.8
70.3
88.4
27.3
40.8
28.3
35.7
5.1
10.4
5.2
9.1
99.8
143.0
103.8
133.2
159.2
158.7
68.1
64.0
15.5
14.3
Elimination of intercompany debtors
Deferred tax assets
Cash at bank
242.8
(5.2)
11.4
0.5
237.0
(6.3)
19.2
0.5
Total assets
249.5
250.4
Non-current assets*
Inventories and trade and other receivables
*
The measure of non-current asset used for segmental reporting comprises goodwill, other intangible assets, investments and property, plant and equipment. It excludes deferred tax.
Information about products and services
The Group’s products can be categorised as follows:
Films
– Plain film on the reel products.
Converted – Printed and/or converted products.
Recycled – Products manufactured from recycled polythene scrap.
109
3. Segmental Reporting continued
Information about products and services continued
The revenues from external customers for each category of product are:
Films
Converted
Recycled
2015
£’m
2014
£’m
211.9
180.7
75.7
237.0
183.0
79.0
468.3
499.0
Information about geographical areas
Revenues are attributed to countries on the basis of the customer’s location. Revenues from external customers in the UK and from foreign countries are
as follows:
UK
Belgium
France
Netherlands
Germany
Republic of Ireland
Scandinavia
USA
Canada
All other countries
Non-current assets, excluding deferred tax assets, located in the UK and in foreign countries are as follows:
UK
Netherlands
Belgium
China
Canada
4. Staff Costs
The average number of employees (including Executive Directors) was:
Production
Administration
Selling
Staff costs
Wages and salaries
Redundancy costs
Employee profit sharing scheme
Social security costs
Defined Benefit Pension Scheme costs
Defined contribution pension scheme costs
Details of Directors’ remuneration and shareholdings are shown on pages 68 to 81.
110
2015
£’m
2014
£’m
256.1
31.1
27.5
29.1
23.4
16.7
23.7
13.5
10.1
37.1
270.9
31.8
31.1
30.9
24.9
18.7
22.7
15.6
10.6
41.8
468.3
499.0
2015
£’m
2014
£’m
68.0
8.7
18.1
–
5.0
65.0
8.0
19.9
5.7
5.2
99.8
103.8
2015
Number
2014
Number
1,837
191
179
1,846
196
180
2,207
2,222
2015
£’m
2014
£’m
62.6
0.7
2.0
7.5
1.2
0.7
2.3
64.8
–
2.1
8.0
1.6
0.7
2.3
77.0
79.5
Strategic Report
5. Financing Costs
2015
£’m
2014
£’m
1.2
1.6
1.2
(8.4)
11.6
1.6
(9.7)
12.6
Net retirement benefit financing
3.2
2.9
Net financing costs
4.4
4.5
Recognised in the income statement
2015
£’m
2014
£’m
Current tax expense
UK current tax at 20.25% on the profits of the year (2014: 21.5%)
Current year
Adjustments for prior years
1.6
(0.2)
0.2
(0.3)
1.4
(0.1)
3.5
–
4.8
(0.3)
3.5
4.5
4.9
4.4
0.5
0.2
1.1
0.3
0.7
1.4
5.6
5.8
2014
%
2014
£’m
Interest on bank loans and overdrafts
Borrowing costs
Expected return on Pension Scheme assets
Interest on pension liabilities
6. Tax on Profit on Ordinary Activities
Overseas current tax
Current year
Deferred tax expense
Origination of temporary differences
Adjustments for prior years including the impact of the change in substantively enacted tax rates in 2014
Total tax expense in income statement
Factors affecting the income tax expense
The difference between the income tax expense for the period and the standard rate of corporation tax in the UK is explained below:
2015
%
Reconciliation of effective tax rate
Profit before tax
Current tax at 20.25% (2014: 21.5%)
Non-deductible expenses
Overseas tax rates net of incentives and unutilised losses
Other items
Non-controlling interest
Total tax expense in income statement
Tax charge/(credit) recognised directly in equity
Relating to retirement and employee benefits
– on current year actuarial movements
– tax charge in relation to equity-settled transactions
– change in UK tax rate
2015
£’m
23.1
22.2
20.25%
0.9%
3.9%
(0.9%)
–
–
4.7
0.2
0.9
(0.2)
–
–
21.5%
0.9%
3.6%
1.8%
(0.4%)
(1.3%)
4.8
0.2
0.8
0.4
(0.1)
(0.3)
24.1%
5.6
26.1%
5.8
5.7
0.5
1.6
(4.5)
(0.4)
–
7.8
(4.9)
The Budget on 8 July 2015 announced that UK corporation tax will reduce to 18% by 2020. Substantive enactment of a rate of 19% with effect from 1 April 2017
and 18% with effect 1 April 2020 took place on 26 October 2015. The impact of this (£0.3 million) has been reflected in the deferred tax charge in prior years.
111
7. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2014 of 11.0p per share (2013: final dividend of 10.0p)
Interim dividend for the year ended 31 December 2015 of 6.0p per share (2014: 5.0p)
Proposed final dividend for the year ended 31 December 2015 of 12.0p per share (2014: final dividend of 11.0p)
2015
£’m
2014
£’m
3.0
1.5
2.7
1.3
4.5
4.0
3.3
3.0
The proposed final dividend was recommended by the Board on 26 February 2016 and is subject to shareholder approval at the 2016 Annual General Meeting
and so has not been included as a liability as at 31 December 2015.
8. Earnings Per Ordinary Share
2015
’000
2014
’000
Weighted average number of ordinary shares
Issued ordinary shares at 1 January
Effect of own shares held
27,219
(768)
27,056
(1,191)
Weighted average number of ordinary shares
Effect of share options and long term incentive plan shares
26,451
971
25,865
1,774
Diluted weighted average number of ordinary shares
27,422
27,639
Profit attributable to ordinary shareholders
£17.5m
£15.9m
Excluding:
Net restructuring
Net pension financing
Minority interest on net pension financing
Taxation on net restructuring and net pension financing
Prior year tax credits
£1.1m
£3.2m
–
(£0.8)m
–
–
£2.9m
£0.5m
(£0.7)m
(£0.3)m
Adjusted profit attributable to ordinary shareholders
£21.0m
£18.3m
Basic earnings per ordinary share
66.16p
61.47p
Diluted earnings per ordinary share
63.82p
57.53p
Adjusted earnings per share
76.58p
66.21p
2015
£’m
2014
£’m
2.5
2.5
9. Goodwill
Balance at 1 January and 31 December
In mid-July 2014 we purchased the prestretch business of STC (Converters). No goodwill arose on this acquisition and any intangible assets acquired were
immaterial. The fair value of machinery acquired as part of this business combination was £0.3 million.
Goodwill has been tested for impairment in accordance with IAS 36 ‘Impairment of Assets’ at 31 December 2015 and 31 December 2014. While cash flow
projections are subject to inherent uncertainty, reasonably possible changes in key assumptions applied in assessing the value in use would not cause a change
to the conclusion reached. The key assumptions underlying the cash flow projections within the impairment review are revenue growth, margins, the level of
operating expenditure and the amount of capital expenditure. The cash flow projections are based on formally approved management cash flow projections
for a three-year period.
112
Strategic Report
10. Other Intangible Assets
Customer
lists
2015
£’m
Computer
software
2015
£’m
Other
intangible
assets
2015
£’m
Total
2015
£’m
Customer
lists
2014
£’m
Cost
Balance at 1 January
Exchange adjustments
0.7
–
7.0
–
0.7
–
8.4
–
0.7
–
7.1
(0.1)
0.7
–
8.5
(0.1)
Balance at 31 December
0.7
7.0
0.7
8.4
0.7
7.0
0.7
8.4
Amortisation
Amortisation charge in the year
0.4
0.1
6.7
0.1
0.7
–
7.8
0.2
0.3
0.1
6.5
0.2
0.7
–
7.5
0.3
Computer
software
2014
£’m
Other
intangible
assets
2014
£’m
Total
2014
£’m
0.5
6.8
0.7
8.0
0.4
6.7
0.7
7.8
Carrying amount at 31 December
0.2
0.2
–
0.4
0.3
0.3
–
0.6
Carrying amount at 1 January
0.3
0.3
–
0.6
0.4
0.6
–
1.0
Land and
buildings
2015
£’m
Plant and
equipment
2015
£’m
Total
2015
£’m
Land and
buildings
2014
£’m
Plant and
equipment
2014
£’m
Total
2014
£’m
11. Property, Plant and Equipment
Cost
Effect of movements in foreign exchange
Additions
Disposals
Transfer to assets held for sale
57.5
(0.6)
0.4
–
(5.0)
296.1
(3.5)
16.6
(4.4)
(15.9)
353.6
(4.1)
17.0
(4.4)
(20.9)
57.9
(0.7)
0.3
–
–
294.1
(4.7)
17.1
(10.4)
–
352.0
(5.4)
17.4
(10.4)
–
52.3
288.9
341.2
57.5
296.1
353.6
Depreciation and Impairment
Effect of movements in foreign exchange
Depreciation charge for the year
Disposals
Transfer to assets held for sale
26.5
(0.3)
1.5
–
(3.6)
226.4
(2.6)
13.3
(4.4)
(12.5)
252.9
(2.9)
14.8
(4.4)
(16.1)
25.4
(0.4)
1.5
–
–
226.9
(3.5)
12.9
(9.9)
–
252.3
(3.9)
14.4
(9.9)
–
24.1
220.2
244.3
26.5
226.4
252.9
Carrying amount at 31 December
28.2
68.7
96.9
31.0
69.7
100.7
Carrying amount at 1 January
31.0
69.7
100.7
32.5
67.2
99.7
2015
£’m
2014
£’m
9.1
5.8
Capital commitments at 31 December were as follows:
Contracts placed for future capital expenditure relating to property, plant and equipment
not provided in the Financial Statements
12. Investments in Subsidiaries
Subsidiary Undertakings
Company
Equity
£’m
Non-equity
£’m
Total
£’m
Shares at cost less provisions
At 1 January 2015
Movement during year
121.3
0.7
14.7
(0.1)
136.0
0.6
At 31 December 2015
122.0
14.6
136.6
113
12. Investments in Subsidiaries continued
Subsidiary undertakings
Except as indicated below, the Company owns the whole issued share capital of all subsidiary undertakings. The principal subsidiary undertakings are as
follows. A complete list of all subsidiaries has been included within Appendix 1:
Company
British Polythene Limited
AT Films Inc*
BPI plc
BPI Europe BV*
Combipac BV*
Flexfilm Limited
Formipac France SARL*
Irish Polythene Industries Limited
Jordan Plastics Limited*
Venture Hong Kong Limited (75% owned)*
BPI China +
International Limited
International (No 2) Limited
BPI 2010 Limited
*
+
Country of incorporation
Trade
England
Canada
England
Netherlands
Netherlands
England
France
Republic of Ireland
Northern Ireland
Hong Kong
China
England
England
England
Polythene Film Manufacturer
Property Company
Holding Company
Distribution Company
Polythene Printer
Holding Company
Holding Company
Holding Company
Holding Company
Shares held through an intermediate holding company.
20% owned through a subsidiary undertaking.
The Group also has an interest in the British Polythene Industries Pension Funding Limited Partnership the results of which are consolidated into these Financial
Statements. The Group has taken advantage of the exemption available under regulation 7 of the Partnership (Accounts) Regulations 2008 and has therefore
not appended the accounts of the qualifying partnership (which do not need to be filed at Companies House) to these Financial Statements.
As noted in 2011, certain freehold properties were transferred to a limited partnership (a structured entity) established by the Group the main purpose of which
is to lease these properties to a Group company and, as a result, to provide the Group’s Pension Scheme with a distribution of the profits of the partnership.
The distribution is subject to discretion exercisable by the Group in certain circumstances however, given that the Group has the ability to control the limited
partnership by making an additional contribution into the Scheme, it is the view of the Directors that the Group controls the limited partnership and therefore it is
treated as a consolidated entity. A ‘structured entity’ is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity, such as when any voting rights relate only to administrative tasks and the relevant activities are directed by means of contractual arrangements.
Refer to Note 14 and Note 33 for details of the contract to sell BPI China subsequent to the balance sheet date.
13. Pension Prepayment
In 2011 the Group agreed with the trustee of the UK Defined Benefit Pension Scheme a property-backed cash payment plan (‘The Pension Funding Partnership’)
to help address the Scheme’s funding deficit. Certain freehold properties were transferred to a limited partnership established by the Group. The fair value of the
assets transferred was £21.9 million. The Group made a special contribution of £19.6 million to the Pension Scheme and on the same date the Pension Scheme
obtained a nominal limited interest in the partnership for the same amount. This provides the Scheme with a distribution of the profits of the partnership of £1.8
million per annum, increasing in line with CPI, for a period of 20 years starting in January 2012. The distribution is subject to discretion exercisable by the Group
in certain circumstances. Should the Scheme have a funding surplus in the future, there is a mechanism for the payments to cease.
As part of the funding arrangement the Company made a one-off payment to the Pension Scheme of £19.6 million to allow it to invest in The Pension Funding
Partnership and this is treated as a prepayment of pension contributions. As The Pension Funding Partnership results are consolidated within the Group results
no prepayment is recognised in the consolidated balance sheet.
2015
£’m
2014
£’m
Non-current
0.7
0.7
Prepayment of pension contributions
0.7
0.7
The element of the prepayment classified as current is included within prepayments within Note 16.
114
Strategic Report
14. Assets Held for Sale
The assets and liabilities of BPI China have been reclassified as assets and liabilities held for sale and are stated at the lower of cost and fair value less costs to
sell. The sale of BPI China was announced on 27 January 2016. Refer to Note 33 for further details of the transaction:
2015
£’m
4.8
1.7
0.8
Inventories
7.3
2015
£’m
Liabilities held for sale
0.7
0.7
For the purposes of the segmental analysis within Note 3, BPI China is included within the UK & Ireland segment.
15. Inventories
Raw materials
Work in progress
Finished goods
2015
£’m
2014
£’m
22.2
2.9
56.6
21.5
3.2
51.6
81.7
76.3
Cost of sales includes a charge reflecting the effect of movements in stock provisions totalling £0.3 million (2014: £0.3 million).
16. Trade and Other Receivables
Group
Trade receivables
Amounts due by subsidiary undertakings
Prepayments and accrued income
Group relief receivable
Other receivables
Company
2015
£’m
2014
£’m
2015
£’m
2014
£’m
45.6
–
2.3
–
0.9
47.1
–
2.2
–
1.3
0.1
51.1
0.4
0.9
1.9
0.1
39.9
0.4
1.0
1.6
48.8
50.6
54.4
43.0
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations and arises principally from amounts
receivable from customers.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and before accepting any new customer, the Group
uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to
customers are reviewed on a regular basis. In addition, the Group has a policy of insuring certain debtors.
The geographical profile of credit risk over the year is broadly in line with that of turnover by geographical area as disclosed in Note 3.
Exposure to credit risk
The carrying amount of financial assets, which includes trade receivables net of impairment losses as stated below and cash of £0.5 million (2014: £0.5 million),
represents the Group’s maximum exposure to credit risk at each year end.
115
16. Trade and Other Receivables continued
Impairment losses
The ageing of trade receivables at the reporting date was as follows:
Not past due
0 – 30 days overdue
Over 30 days overdue
2015
£’m
Gross
2015
£’m
Impairment
2014
£’m
Gross
2014
£’m
Impairment
38.9
6.5
1.1
–
0.2
0.7
39.5
7.8
1.1
–
0.4
0.9
46.5
0.9
48.4
1.3
An impairment allowance has been made for estimated irrecoverable amounts from the sale of goods.
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was
initially granted up to the reporting date. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties
and customers in many different markets and sectors. This is discussed further within the Finance Review, on page 41. Accordingly, the Directors believe that
there is no further provision required in excess of the allowance for doubtful debts.
17. Bank and Other Borrowings
Group
Bank overdrafts
Bank loans
Group
Represented by:
Amounts falling due within one year
Amounts falling due after more than one year
Company
2015
£’m
2014
£’m
2015
£’m
2014
£’m
–
32.6
2.6
22.0
2.3
32.6
2.2
22.0
32.6
24.6
34.9
24.2
Bank
overdraft
2015
£’m
Other
loans and
borrowings
2015
£’m
Total
2015
£’m
Bank
overdraft
2014
£’m
Other
loans and
borrowings
2014
£’m
Total
2014
£’m
–
–
–
32.6
–
32.6
2.6
–
–
22.0
2.6
22.0
–
32.6
32.6
2.6
22.0
24.6
The following analysis details outstanding borrowings, the facilities available to the Group and the undrawn amounts at the balance sheet date:
Less than
1 year
2015
£’m
Group
Between
1 – 2 years
2015
£’m
Between
2 – 5 years
2015
£’m
Total
2015
£’m
Less than
1 year
2014
£’m
Between
1 – 2 years
2014
£’m
Between
2 – 5 years
2014
£’m
Total
2014
£’m
Maturity
Cash at bank
Bank overdrafts
(0.5)
–
–
–
–
–
(0.5)
–
(0.5)
2.6
–
–
–
–
(0.5)
2.6
Cash and cash equivalents in the
cash flow statement
Bank loans
(0.5)
–
–
–
–
32.6
(0.5)
32.6
2.1
–
–
–
–
22.0
2.1
22.0
(0.5)
–
32.6
32.1
2.1
–
22.0
24.1
Undrawn facilities
Bank overdrafts
Bank loans
21.0
–
–
–
–
37.4
21.0
37.4
18.4
–
–
–
–
48.0
18.4
48.0
Total facilities
21.0
–
70.0
91.0
21.0
–
70.0
91.0
116
Strategic Report
Group
Effective currency and interest rate profile
Currency
Sterling1,3
Euro1
Euro interest rate swap2
US dollar
Canadian dollar
Other 2
Fixed rate
2015
£’m
Floating rate
2015
£’m
Cash at bank
2015
£’m
Total
2015
£’m
Fixed rate
2014
£’m
Floating rate
2014
£’m
Cash at bank
2014
£’m
Total
2014
£’m
–
–
18.4
–
–
–
(6.6)
27.3
(18.4)
10.1
0.8
1.0
–
–
–
–
–
(0.5)
(6.6)
27.3
–
10.1
0.8
0.5
–
–
19.4
–
–
–
(5.4)
17.4
(19.4)
7.7
3.7
1.2
(0.2)
–
–
–
–
(0.3)
(5.6)
17.4
–
7.7
3.7
0.9
18.4
14.2
(0.5)
32.1
19.4
5.2
(0.5)
24.1
Bank
overdraft
2015
£’m
Other
loans and
borrowings
2015
£’m
Total
2015
£’m
Bank
overdraft
2014
£’m
Other
loans and
borrowings
2014
£’m
Total
2014
£’m
2.3
–
–
32.6
2.3
32.6
2.2
–
–
22.0
2.2
22.0
2.3
32.6
34.9
2.2
22.0
24.2
1. The floating rate borrowings are all rolled over on periods of 3 months or less based on the appropriate LIBOR or base rates.
2. The euro interest rate swap expires in July 2019 at a fixed rate of 0.8% per annum.
3. Exposure to movements in euro exchange rate is hedged by using euro borrowings and short-term currency swaps.
Company
Represented by:
Amounts falling due within one year
Amounts falling due after more than one year
The following analysis details outstanding borrowings, the facilities available to the Company and the undrawn amounts at the balance sheet date.
Less than
1 year
2015
£’m
Between
1 – 2 years
2015
£’m
Between
2 – 5 years
2015
£’m
Total
2015
£’m
Less than
1 year
2014
£’m
Between
1 – 2 years
2014
£’m
Between
2 – 5 years
2014
£’m
Total
2014
£’m
Maturity
Bank overdrafts
2.3
–
–
2.3
2.2
–
–
2.2
Cash and cash equivalents in the cash flow
statement
Bank loans
2.3
–
–
–
–
32.6
2.3
32.6
2.2
–
–
–
–
22.0
2.2
22.0
2.3
–
32.6
34.9
2.2
–
22.0
24.2
Undrawn facilities
Bank overdrafts
Bank loans
18.7
–
–
–
–
37.4
18.7
37.4
18.8
–
–
–
–
48.0
18.8
48.0
Total facilities
21.0
–
70.0
91.0
21.0
–
70.0
91.0
Fixed rate
2015
£’m
Floating rate
2015
£’m
Cash at bank
2015
£’m
Total
2015
£’m
Fixed rate
2014
£’m
Floating rate
2014
£’m
Cash at bank
2014
£’m
Total
2014
£’m
Company
Company
Effective currency and interest rate profile
Currency
Sterling1,3
Euro1
Euro interest rate swaps2
US dollar
Canadian dollar
Other2
–
–
18.4
–
–
–
(3.2)
26.8
(18.4)
9.9
0.6
0.8
–
–
–
–
–
–
(3.2)
26.8
–
9.9
0.6
0.8
–
–
19.4
–
–
–
0.7
11.0
(19.4)
8.2
3.5
0.8
–
–
–
–
–
–
0.7
11.0
–
8.2
3.5
0.8
18.4
16.5
–
34.9
19.4
4.8
–
24.2
1. The floating rate borrowings are all rolled over on periods of 3 months or less based on the appropriate LIBOR or base rates.
2. The euro interest rate swap expires in July 2019 at a fixed rate of 0.8% per annum.
3. Exposure to movements in euro exchange rate is hedged by using euro borrowings and short-term currency swaps.
117
18. Other Financial Instruments
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by maintaining adequate
banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group has at
its disposal undrawn facilities as noted above, which further reduces liquidity risk. Refer to the Finance Review on page 41 for further discussion of liquidity risk.
The following analysis details the contractual maturities of financial liabilities at the balance sheet date including interest and principal cash flows, using
undiscounted cash flows:
Group
Contractual cash flows analysed by maturity date
Non-derivative financial liabilities
Bank overdrafts
Bank loans
Euro interest rate swap
Company
Contractual cash flows analysed by maturity date
Non-derivative financial liabilities
Bank overdrafts
Bank loans
Less than
1 year
2015
£’m
Between
1 – 2 years
2015
£’m
Between
2 – 5 years
2015
£’m
Total
2015
£’m
Less than
1 year
2014
£’m
Between
1 – 2 years
2014
£’m
Between
2 – 5 years
2014
£’m
Total
2014
£’m
79.7
–
0.8
–
–
0.8
–
–
33.8
79.7
–
35.4
80.9
2.6
0.5
–
–
0.5
–
–
23.3
80.9
2.6
24.3
0.2
0.2
0.1
0.5
0.1
0.1
0.3
0.5
80.7
1.0
33.9
115.6
84.1
0.6
23.6
108.3
Less than
1 year
2015
£’m
Between
1 – 2 years
2015
£’m
Between
2 – 5 years
2015
£’m
Total
2015
£’m
Less than
1 year
2014
£’m
Between
1 – 2 years
2014
£’m
Between
2 – 5 years
2014
£’m
Total
2014
£’m
37.1
2.3
0.8
–
–
0.8
–
–
33.8
37.1
2.3
35.4
39.1
2.2
0.5
–
–
0.5
–
–
23.3
39.1
2.2
24.3
0.2
0.2
0.1
0.5
0.1
0.1
0.3
0.5
40.4
1.0
33.9
75.3
41.9
0.6
23.6
66.1
Fair value
Group and Company
Fair values
Carrying
amount
2015
£’m
Fair
value
2015
£’m
Carrying
amount
2014
£’m
Fair
value
2014
£’m
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
Financial assets
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying
amount of these assets approximates to their fair value.
The fair value is based on observable values for underlying interest rates.
Cash at bank, borrowings due within 1 year, floating rate borrowings due after more than 1 year, trade payables, trade receivables and other current liabilities.
The carrying value approximates to fair value either because of the short maturity of the instruments or because the interest rates are reset after periods of not
greater than six months.
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Strategic Report
Fair value hierarchy
The only category of financial instrument carried at fair value is derivative financial liabilities. This has been defined as a Level 2 instrument in line with the
following definitions.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
There have been no transfers between levels in 2015 or 2014.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign currency exchange rates, will affect the Group’s income or the value of
its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return. Generally the Group seeks to minimise this risk through hedge arrangements designed to manage a proportion of the Group’s
overall exposure.
Hedging
Net investment in overseas operations
The Group has a policy of maintaining borrowings in the currency of most of its overseas operations to cover the net asset position in those companies.
Where there are not sufficient borrowings to achieve a complete hedge this is topped up with inter currency swaps to maintain an effective hedge.
Cash flow hedge – foreign currency
Sales orders in currency are either covered at the time of receipt by the creation of a currency overdraft or with forward contracts covering a proportion
of expected orders for a period of up to one year. Purchases are covered with forward contracts or reduction in borrowings in the relevant currency where
appropriate. Any significant exception to this is approved at Board level. Any cash flow and profit effect would crystallise within twelve months of the year
end when the forecast transactions being hedged crystallise. The gross value of these hedges at 31 December 2015 was £2.3 million (2014: £1.9 million).
No ineffectiveness was recognised in the income statement in relation to cash flow hedges.
Interest rate management
Exposure to fluctuating interest rates is managed by using derivative financial instruments to maintain the desired fixed/variable mix. Due to the seasonal
nature of working capital requirements funded by borrowings this is done by fixing a value rather than a percentage.
Capital management
The Group’s policy is to maintain a strong balance sheet so as to maintain investor, customer, creditor and market confidence and to sustain the future
development of the business. Return on Capital Employed is one of the key financial benchmarks used when evaluating capital investment and is a primary
measure for executive bonus targets and for the Share Matching Plan. In order to achieve a strong Return on Capital Employed the Board maintains a balance
between debt and equity. Return on Capital Employed (before restructuring) improved to 19% in 2015 compared to 18% in 2014.
Currency risk
The Group’s significant exposure to foreign currency risk at 31 December 2015 is as follows:
2015
EUR
€’m
2015
USD
$’m
2014
EUR
€’m
2014
USD
$’m
Trade receivables
Trade payables
15.4
(36.2)
0.8
(0.5)
14.5
(31.8)
1.9
(0.8)
Gross balance sheet exposure
(20.8)
0.3
(17.3)
1.1
2015
2014
2015
2014
EUR
1.3753
1.2430
1.3589
1.2870
USD
1.5280
1.6453
1.4747
1.5573
The following significant exchange rates applied during the year:
Average rate
Closing rate
119
18. Other Financial Instruments continued
Sensitivity analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer term,
however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings.
At 31 December 2015, it is estimated that a change of 100 basis points in interest rates would result in a change of £0.1 million in annual profit before tax. This
has been calculated by taking 1% of the Group’s floating rate borrowings as at 31 December 2015. It assumes that all other variables, including foreign currency,
remain constant. At 31 December 2014, the estimated change in profit before tax was calculated as £0.1 million, using the same method and assumptions.
It is estimated that a change of 10 euro cents against the value of sterling over the period would result in an increase or decrease in profit or loss by £1.1 million.
This has been determined by calculating the effect of such a change on the translation of our European results. In 2014, the impact was estimated at £1.2 million,
using the same method.
19. Trade and Other Payables
Group
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
Company
2015
£’m
2014
£’m
2015
£’m
2014
£’m
66.4
4.7
1.5
8.6
–
64.7
5.4
0.9
10.8
–
0.2
1.2
0.8
3.0
32.7
0.6
0.9
1.2
2.2
35.4
81.2
81.8
37.9
40.3
2015
£’m
2014
£’m
1.2
0.8
1.2
0.8
Other
timing
differences
2014
£’m
Total
2014
£’m
The Directors consider that the carrying amount of trade payables approximates to their fair value.
20. Current Tax Liabilities
Current tax payable
The net current tax liability represents the estimated amount of income taxes payable in respect of current and prior periods.
21. Deferred Tax
Accelerated
capital
allowances
2015
£’m
Group
Employee
benefits
2015
£’m
Other
timing
differences
2015
£’m
Total
2015
£’m
Accelerated
capital
allowances
2014
£’m
Employee
benefits
2014
£’m
At 1 January
(Credit)/charge to income
Charge/(credit) to equity
Change in tax rate
Exchange differences
3.5
(0.8)
–
0.1
–
(16.0)
2.5
5.7
1.6
–
(3.0)
(1.4)
–
0.3
–
(15.5)
0.3
5.7
2.0
–
4.1
(0.4)
–
–
(0.2)
(11.5)
–
(4.5)
–
–
(4.4)
1.8
(0.4)
–
–
(11.8)
1.4
(4.9)
–
(0.2)
At 31 December
2.8
(6.2)
(4.1)
(7.5)
3.5
(16.0)
(3.0)
(15.5)
Net deferred tax liabilities
Net deferred tax assets
3.5
(0.7)
–
(6.2)
0.4
(4.5)
3.9
(11.4)
3.5
–
–
(16.0)
0.2
(3.2)
3.7
(19.2)
2.8
(6.2)
(4.1)
(7.5)
3.5
(16.0)
(3.0)
(15.5)
Accelerated capital allowances relate to property, plant and equipment and computer software.
120
Strategic Report
Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to set off current tax assets against current tax
liabilities and where the deferred tax assets and liabilities relate to income taxes levied by the same tax jurisdictions.
Company
Employee
benefits
2015
£’m
Total
2015
£’m
Employee
benefits
2014
£’m
Total
2014
£’m
At 1 January
Charge to income
Charge/(credit) to equity
(0.6)
0.1
0.2
(0.6)
0.1
0.2
(0.4)
–
(0.2)
(0.4)
–
(0.2)
At 31 December
(0.3)
(0.3)
(0.6)
(0.6)
Net deferred tax assets
(0.3)
(0.3)
(0.6)
(0.6)
(0.3)
(0.3)
(0.6)
(0.6)
22. Government Grants
Government grants relate primarily to regional selective assistance received on the achievement of certain job creation and job protection targets as well as
related capital expenditure. The grants could be repayable in the event that numbers employed at the relevant sites drop below these target levels during a
specified monitoring period.
23. Share Capital
Group and Company
Allotted called up and fully paid
Equity
27,380,790 (2014:27,172,576) ordinary shares of 25p each
2015
£’m
2014
£’m
6.8
6.8
The Company has one class of ordinary shares which carries no right to fixed income. The holders of ordinary shares are entitled to receive dividends as declared
from time-to-time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regards to the Company’s residual assets.
The Company has granted options over its ordinary shares (see Note 30).
24. Share Premium Account
Group and Company
2015
£’m
2014
£’m
At 1 January
On shares issued
26.5
0.6
25.9
0.6
At 31 December
27.1
26.5
121
25. Other Reserves
Foreign
currency
translation
reserve
£’m
Capital
redemption
reserve
£’m
Capital
reserve
£’m
At 1 January 2015
Movement on retranslation of overseas operations
7.2
–
0.5
–
(0.7)
–
2.0
(0.3)
9.0
(0.3)
At 31 December 2015
7.2
0.5
(0.7)
1.7
8.7
Capital
redemption
reserve
£’m
Capital
reserve
£’m
Foreign
currency
translation
reserve
£’m
Total
other
reserves
£’m
At 1 January 2014
Movement during the year
Movement on retranslation of overseas operations
7.2
–
–
0.5
–
–
(0.3)
(0.4)
–
1.8
–
0.2
9.2
(0.4)
0.2
At 31 December 2014
7.2
0.5
(0.7)
2.0
9.0
Group
Hedging
reserve
£’m
Hedging
reserve
£’m
Total
other
reserves
£’m
Capital redemption reserve was created on the repurchase and cancellation of ordinary and preference shares in previous years.
Capital reserve was created on the acquisition of a subsidiary.
Hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to forecast hedging
transactions that have not yet occurred.
Foreign currency translation reserve compromises all foreign exchange differences arising from the retranslation of Financial Statements of foreign
operations as well as the translation of liabilities that hedge the Company’s net investment in foreign operations.
Merger
reserve
£’m
Capital
redemption
reserve
£’m
Capital
reserve
£’m
6.5
7.2
0.1
Merger
reserve
£’m
Capital
redemption
reserve
£’m
Capital
reserve
£’m
At 1 January 2014
Movement during the year
6.5
–
7.2
–
0.1
–
(0.4)
(0.1)
13.4
(0.1)
At 31 December 2014
6.5
7.2
0.1
(0.5)
13.3
Group and Company
2015
£’m
2014
£’m
Cost of own shares held
At 1 January
Shares purchased
Movement relative to shares vested under the long term incentive plan
6.2
3.0
(4.7)
5.3
4.7
(3.8)
At 31 December
4.5
6.2
Company
At 1 January 2015 and 31 December 2015
Hedging
reserve
£’m
(0.5)
Hedging
reserve
£’m
Total
other
reserves
£’m
13.3
Total
other
reserves
£’m
26. Own Shares Held
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Strategic Report
The cost of own shares held represents shares held as beneficial owner by the British Polythene Industries Employee Share Ownership Trust to satisfy the
Company’s liabilities under share-based payment schemes. The market value of the shares is £4.7 million (2014: £7.3 million).
Date of
purchase/
allocation
2015
Group and Company
Movements in the numbers of shares held
At 1 January
No. of shares vested in employees
Shares purchased
06/03/2015
06/03/2015
At 31 December
Number of
shares
2015
1,112,114
(841,640)
418,030
Date of
purchase/
allocation
2014
Number of
shares
2014
1,426,371
03/03/14 (1,037,048)
Various
722,791
688,504
1,112,114
27. Non-controlling Interest
2015
£’m
2014
£’m
At 1 January
Foreign exchange
Unwinding of the discount/interest – The Pension Funding Partnership
Payment to Pension Scheme by The Pension Funding Partnership
Changes in assumptions
Adjustment in respect of The Pension Funding Partnership
0.4
–
–
–
–
–
19.7
0.1
0.5
(0.9)
0.1
(19.1)
At 31 December
0.4
0.4
Non-controlling interests comprise a 25% holding in the ordinary share capital of Venture Hong Kong Limited, along with the related share in the results of the
company up to 31 December 2015 as adjusted to reflect Group accounting policies. Venture Hong Kong Limited holds a 20% minority interest in BPI China.
28. Operating Lease Arrangements
At 31 December, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Less than one year
Between one and five years
More than five years
Plant and
equipment
2015
£’m
Buildings
2015
£’m
Total
2015
£’m
Plant and
equipment
2014
£’m
Buildings
2014
£’m
Total
2014
£’m
1.3
1.8
–
0.2
0.2
–
1.5
2.0
–
1.4
1.6
–
0.2
0.9
0.1
1.6
2.5
0.1
3.1
0.4
3.5
3.0
1.2
4.2
Buildings
2015
£’m
Buildings
2014
£’m
–
–
0.1
0.2
–
0.3
None of the operating leases include contingent rentals.
At 31 December, the Group expects to receive future sublease rentals which fall due as follows:
Less than one year
Between one and five years
During the period ended 31 December 2015, £2.1 million (2014: £2.2 million) was recognised as an expense in the consolidated income statement in respect
of operating leases, comprising £2.1 million (2014: £2.3 million) operating lease rentals less £0.1 million (2014: £0.1 million) sublease rentals.
The Group has also entered into a contract to guarantee the indebtedness of a third party in relation to a lease contract. In the event of default, the Group
could be held liable for future contracted lease payments for up to five years from 29 July 2010. This represents a contingent liability to the Group of the
present value of these payments. This amounted to nil at 31 December 2015 (2014: £0.1 million).
123
29. Contingent Liabilities
Contingent liabilities of the Group in respect of VAT indemnities amount to £0.8 million (2014: £0.8 million).
Consistent with the risk factor identified on page 29, the Group is involved from time-to-time in certain claims and litigation. In the opinion of the Directors,
as at 31 December 2015 liabilities, if any, arising from claims and litigation against the Group as at that date will not have a material adverse effect on the
Group’s reported consolidated financial position or results.
30. Share-based Payments
Share Matching Plan
2015
SMP
No. of shares
2014
SMP
No. of shares
Outstanding at beginning of year
Granted during the year
Vested during the year
Forfeited/lapsed during the year
1,860,465 2,647,390
321,566
314,734
(773,169) (938,768)
(219,540) (162,891)
Outstanding at the end of the year
1,189,322
1,860,465
The implementation of a long term incentive plan was approved at the 2010 Annual General Meeting with amendments to the Plan Rules being approved at
the 2014 Annual General Meeting. The plan provides for executives to invest part of their annual bonus in Company shares and to receive a matching award
of shares based on business performance in the following three years. Executives are required to invest a minimum of 25% of their bonus in the acquisition
of ‘Mandatorily Acquired Shares’ under the Share Matching Plan and may increase this percentage voluntarily up to the lower of 50% of salary or the actual
bonus awarded to invest in additional ‘Voluntarily Acquired Shares‘. A matching award of up to three times the gross equivalent of every share invested may
be earned if the maximum performance target is achieved, with 0.75 times the number of shares invested being earned if the threshold performance target
is achieved. The performance measure to determine the level of match is set by the Remuneration Committee in accordance with the Remuneration Policy
approved by shareholders. Shares will be released after the announcement of the Company’s preliminary results for the last year in the three year performance
period in respect of any part of the award voluntarily deferred prior to 2015 (including any matching award on such part). Shares will be released a year later in
respect of any part of the award mandatorily deferred (including any matching award on such part). In respect of investment of bonus in Voluntarily Acquired
Shares in 2014, 2015 or later years, these shares are beneficially owned by the employee from the outset, following amendments to the Plan Rules in 2014;
the matching award in relation to such voluntary investment is not released until the end of the three year period referred to above. During the period awards
were made amounting to 321,566 Company shares (2014: 314,734).
Savings related share option scheme
The employee savings related share option scheme, known as the SAYE scheme, is open to almost all UK employees. Employees save over three or five years
at the end of which shares can be purchased during the following six month period. During the period the Group issued 162,859 shares (2014: 92,900) under
this scheme at prices of 236p, 242p, 302p and 333p per share. Grants of options were made on 13 October 2009, 07 October 2010 and 10 October 2011 at
market price on the date of offer; and on 19 October 2012, 25 October 2013, 10 October 2014 and 1 October 2015 at a price 20% below the market price on
the date of offer.
A Company Share Option Plan was approved at the 2010 Annual General Meeting. Awards of options have been made to senior managers across the Group
on an annual basis other than in 2013 when no options were granted. Options, which are granted at fair market value, will vest after three years on fulfilment
of a performance condition. During the period the Company issued 45,355 shares (2014: 157,945) under this scheme at prices of 253p and 345p per share.
124
Strategic Report
At 31 December 2015 the individual options, not yet exercised or lapsed, of Directors and other employees under the savings related share option scheme and
the Company Share Option Plan are as follows:
Savings Related Scheme
Date of grant
Date from which
exercisable
Expiry date
13/10/2009
07/10/2010
10/10/2011
10/10/2011
19/10/2012
19/10/2012
25/10/2013
25/10/2013
10/10/2014
10/10/2014
01/10/2015
01/10/2015
02/06/2010
07/03/2011
20/03/2012
03/09/2012
14/04/2014
02/04/2015
01/12/2014
01/12/2015
01/12/2014
01/12/2016
01/12/2015
01/12/2017
01/12/2016
01/12/2018
01/12/2017
01/12/2019
01/12/2018
01/12/2020
02/06/2014
05/03/2014
20/03/2015
03/09/2015
14/04/2017
02/04/2018
31/05/2015
31/05/2016
31/05/2015
31/05/2017
31/05/2016
31/05/2018
31/05/2017
31/05/2019
31/05/2018
31/05/2020
01/06/2019
01/06/2021
01/06/2020
04/03/2021
19/03/2022
03/09/2022
13/04/2024
01/04/2025
Option price
Directors
2015
Other
employees
2015
Total
2015
Total
2014
242.00p
236.00p
333.00p
333.00p
302.27p
302.27p
505.07p
505.07p
491.27p
491.27p
570.00p
570.00p
217.00p
252.83p
345.00p
374.00p
620.00p
681.00p
–
6,546
–
–
–
–
–
–
–
–
–
3,157
–
–
4,000
–
3,200
1,450
–
2,879
–
39,374
3,987
46,365
55,164
15,875
62,581
25,016
114,819
36,022
1,200
3,750
44,000
3,000
76,600
75,130
–
9,425
–
39,374
3,987
46,365
55,164
15,875
62,581
25,016
114,819
39,179
1,200
3,750
48,000
3,000
79,800
76,580
5,140
60,337
548
39,374
114,103
46,484
60,611
18,723
71,343
27,848
–
–
1,200
15,105
82,000
3,000
79,800
–
18,353
605,762
624,115
625,616
At 31 December
A charge to the income statement for all of these schemes has been based on the Binomial model and the inputs into the model are as follows:
Year of grant
Share price
Exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividends
Fair value
SAYE
2015
SAYE
2014
SAYE
2013
CSOP
2015
CSOP
2014
£7.36
£5.70
20.78%
3/5 years
1.30%
2.31%
£1.32
£6.07
£4.91
26.03%
3/5 years
1.21%
2.47%
£1.13
£6.70
£5.05
25.20%
3/5 years
1.73%
1.93%
£1.63
£6.91
£6.81
20.21%
3 years
0.86%
2.86%
£0.41
£6.57
£6.20
19.36%
3 years
1.50%
2.28%
£0.72
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the three years immediately preceding grant.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions
and behavioural considerations.
The Group recognised total expenses of £1.2 million relating to equity-settled share-based payment transactions in 2015 (2014: £1.6 million).
125
31. Retirement and Employee Benefit Obligations
Noncurrent
assets
£’m
Group
Deficit in British Polythene Defined Benefit Pension Scheme
Other employee benefit obligations (see below)
Related deferred tax asset (see Note 21)
Deficit in British Polythene Defined Benefit Pension Scheme
Other employee benefit obligations (see below)
Related deferred tax asset (see Note 21)
2015
Total
£’m
Noncurrent
assets
£’m
Noncurrent
liabilities
£’m
2014
Total
£’m
–
–
(53.2)
(0.6)
(53.2)
(0.6)
–
–
(99.1)
(0.8)
(99.1)
(0.8)
–
6.2
(53.8)
–
(53.8)
6.2
–
16.0
(99.9)
–
(99.9)
16.0
6.2
(53.8)
(47.6)
16.0
(99.9)
(83.9)
2015
Total
£’m
Noncurrent
assets
£’m
Noncurrent
assets
£’m
Company
Noncurrent
liabilities
£’m
Noncurrent
liabilities
£’m
Noncurrent
liabilities
£’m
2014
Total
£’m
–
–
(2.1)
(0.3)
(2.1)
(0.3)
–
–
(3.8)
(0.5)
(3.8)
(0.5)
–
0.3
(2.4)
–
(2.4)
0.3
–
0.6
(4.3)
–
(4.3)
0.6
0.3
(2.4)
(2.1)
0.6
(4.3)
(3.7)
Defined Benefit Scheme
British Polythene Defined Benefit Scheme
The assets of the defined benefit British Polythene Pension Scheme are invested in a self-administered trust fund and are separated from the Group’s business
assets. The Scheme was closed to new entrants in June 2000. On 30 September 2010 the Scheme ceased future accruals and all active members’ past service
benefits were preserved on this date.
During the year the Company agreed with the trustee of the British Polythene Pension Scheme to change the index used to revalue pensions in payment from RPI
to CPI. This change reflects the Government’s view that CPI is the most appropriate measure of inflation for pensions in payment due to the adoption of CPI for
state, public sector and statutory minimum pension increases. The Group has therefore changed the index used to determine minimum pension increases from RPI
to CPI. The resulting reduction in the present value of Scheme liabilities of £27.6 million is included as a change in assumptions within other comprehensive income.
To increase the security of pensions for Scheme members, the Company also made a one-off payment of £11.2 million which is reflected in the table above.
Actuarial valuation
A full actuarial valuation in relation to the Scheme was carried out on 5 April 2014. The present value of the defined benefit obligation, the related current
service cost and past service cost were measured using the projected unit credit method. The results of the actuarial valuation and the key assumptions used
by the actuary are set out below:
Results of Actuarial Valuation
Male
Number
Female
Number
Total
Number
Male
£’m
Female
£’m
Total
£’m
Deferred member liabilities
Pensioner liabilities
1,248
1,164
276
389
1,524
1,553
109.2
166.0
12.9
29.1
122.1
195.1
Total liabilities
2,412
665
3,077
275.2
42.0
317.2
Asset value
Net liability as at 6 April 2014
239.6
77.6
The weighted average age of pensioner members at the date of the valuation was 68.2 years and the weighted average age of deferred members is 51.5 years.
126
Strategic Report
The actuarial valuations for the British Polythene Industries Pension Scheme was updated on an IAS 19 basis as at 31 December 2015 and disclosures are set
out below:
Key assumptions
The major assumptions used by the actuary in the valuations were:
Rate of increase in pensions in payment:
– service up to 31 December 2006
– service from 1 January 2007
Rate of increase in deferred pensions
Discount rate applied to Scheme liabilities in period before retirement
Discount rate applied to Scheme liabilities in period after retirement
Inflation assumption – RPI
Inflation assumption – CPI
Life expectancy:
– Male aged 60 (current life expectancy)
– Female aged 60 (current life expectancy)
– Male aged 45 (life expectancy at age 60)
– Female aged 45 (life expectancy at age 60)
Actuarial
valuation at
6 April 2014
2015
2014
3.30%
2.20%
2.40%
6.20%
3.90%
3.30%
–
1.95%
1.55%
1.90%
3.75%
3.75%
2.90%
1.90%
2.85%
2.10%
1.90%
3.55%
3.55%
2.90%
1.90%
27.1
28.1
28.8
29.6
26.4
27.3
28.0
28.8
26.1
27.1
27.8
28.6
The assumptions used by the actuary for IAS 19 purposes are the best estimates chosen from a range of possible actuarial assumptions which, due to the
timescale covered, may not necessarily be borne out in practice.
Net pension liability
The amount included in the consolidated balance sheet at 31 December 2015 is as follows:
British Polythene Industries
Value
2015
£’m
Value
2014
£’m
57.4
–
44.4
28.5
11.0
20.0
15.1
24.0
41.5
53.6
1.2
40.7
26.5
10.0
29.8
–
21.3
49.1
241.9
(295.1)
232.2
(331.3)
Deficit in the Scheme
Related deferred tax asset
(53.2)
6.2
(99.1)
16.0
Net pension liability
(47.0)
(83.1)
Equity Securities
Equity Futures*
Diversified Growth Funds
Secured Lease Fund
Property Fund
LDI Assets
Hedge Fund
Loan Funds
Cash
Fair value of Scheme assets
Present value of Scheme liabilities
*
Equity futures are held with a nominal value of £42.5 million (2014: £40.3 million). This allows the Scheme to maintain exposure to the higher expected returns from equity while investing in a higher level
of physical assets that more closely reflect the liability profile. This is an efficient way of managing the portfolio and balancing the risk and return objectives in the Scheme.
127
31. Retirement and Employee Benefit Obligations continued
The fair values of the Scheme assets are not intended to be realised in the short term and may be subject to significant change before they are realised.
The present value of the Scheme liabilities is derived from cash flow projections over a long period and is thus inherently uncertain.
Net (liability)
/asset
Year ended 31 December 2015
Assets
Obligations
Opening position
232.2
331.3
(99.1)
Current service cost
–
0.7
(0.7)
Total service cost
Net interest:
Interest income on plan assets
Interest cost on defined benefit obligation
–
0.7
(0.7)
8.4
–
–
11.6
8.4
(11.6)
Total net interest
8.4
11.6
(3.2)
Total defined benefit cost recognised in Profit
Cash flows:
Employer contributions
Contributions received from The Pension Funding Partnership
Benefits paid
Expenses
8.4
12.3
(3.9)
15.3
1.9
(10.9)
–
–
–
(10.9)
(0.7)
15.3
1.9
–
0.7
246.9
332.0
(85.1)
(27.6)
(9.3)
–
27.6
9.3
(5.0)
Expected closing position
Remeasurements:
Change to CPI pension increase indexation
Changes in financial assumptions
Return on assets excluding amounts included in net interest
Total remeasurements recognised in OCI
–
–
(5.0)
(36.9)
31.9
241.9
295.1
(53.2)
Assets
Obligations
Opening position
234.0
291.3
(57.3)
Current service cost
–
0.7
(0.7)
Total service cost
Net interest:
Interest income on plan assets
Deduction on interest income on plan assets for exclusion of The Pension Funding Partnership at June 2014
Interest cost on defined benefit obligation
–
0.7
(0.7)
10.1
(0.4)
–
–
–
12.6
10.1
(0.4)
(12.6)
Total net interest
9.7
12.6
(2.9)
Total defined benefit cost recognised in profit
Cash flows:
Employer contributions
Contributions received from The Pension Funding Partnership
Benefits paid
Expenses
9.7
13.3
(3.6)
3.4
1.0
(9.8)
–
–
–
(9.8)
(0.7)
3.4
1.0
–
0.7
238.3
294.1
(55.8)
–
–
–
(19.1)
13.0
2.2
9.8
25.2
–
–
(2.2)
(9.8)
(25.2)
(19.1)
13.0
(6.1)
37.2
(43.3)
232.2
331.3
(99.1)
Closing position
Year ended 31 December 2014
Expected closing position
Remeasurements:
Changes in demographic assumptions
Experience
Changes in financial assumptions
Deduction to plan assets for exclusion of The Pension Funding Partnership as at 30 June 2014
Return on assets excluding amounts included in net interest
Total remeasurements recognised in OCI
Closing position
(5.0)
Net (liability)
/asset
The cumulative actuarial losses recognised in equity from the date of transition to IFRS on 1 January 2004 total £57.6 million (December 2014: £94.5 million).
Contributions in 2016 will consist of an annual contribution of £3.6 million and an additional payment of £0.3 million in June 2016 reflecting the Company having
achieved an agreed profit target. This is in addition to contributions of £1.9 million per annum paid quarterly in relation to The Pension Funding Partnership.
128
Strategic Report
These contributions are subject to review at formal actuarial valuations.
Information about the defined benefit obligation
Number of
members
Liability
split
Duration
(years)
Deferred members
Pensioners
1,478
1,563
44.8%
55.2%
21
13
Total
3,041
100%
16
2015
£’m
2014
£’m
21
9
27
10
*
Membership numbers are taken from the British Polythene Pension Scheme annual report for the year ended 5 April 2014.
Sensitivity analysis
The table below illustrates the impact that changes in major assumptions would have on the Scheme deficit:
Increase in deficit caused by:
Decrease in discount rate by 0.5%
Increase in life expectancy of one year
Risks to which the Scheme exposes the Company
The nature of the Scheme exposes the Group and Company to the risk of paying unanticipated additional contributions to the Scheme in times of adverse
experience. The most financially significant risks are likely to be:
Asset volatility
The Scheme’s liabilities are calculated using a discount rate set with reference to corporate bond yields in line with the requirements of IAS 19 (Revised). If the
Scheme assets underperform this yield, this will create a deficit. The plan holds investments in a portfolio of equity and bonds which are expected to outperform
corporate bonds in the long term but provide volatility and risk in the short term. The trustee has taken a number of steps to control the level of investment risk
within the Scheme over the last 12 months including continuing to reduce the overall exposure to equities and diversifying the growth asset mix. As disclosed in
Note 13, the Group entered into an asset backed funding arrangement during 2011, helping to manage the risk of asset returns through a secure income stream.
The trustee will continue to review the risk exposures in light of the longer term objectives of the Scheme.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities. In the event of a reduction in the corporate bond yields there will be an increase in the value
of the Scheme’s bond holdings.
Inflation risk
Pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the Scheme’s assets are either unaffected by inflation
(fixed interest bonds) or loosely correlated with inflation equities) meaning that an increase in inflation will also increase the deficit.
Life expectancy
The Scheme’s obligation is to provide benefits for the life of the members. An increase in life expectancy will result in an increase in the Scheme’s liabilities.
Other retirement benefit schemes
The Company’s overseas subsidiary in the Netherlands operated a defined benefit scheme in conjunction with a number of other employers. During the year
this was changed to a defined contribution scheme.
Defined contribution schemes
The assets of the defined contribution British Polythene Pension Scheme, other defined contribution schemes and defined benefit schemes treated as defined
contribution schemes as detailed above are held separately from those of the Group, being invested in funds under the control of a number of insurance
companies. The pension charge includes contributions payable by the Group to the various insurance companies.
The total cost charged to income in 2015 of £2.5 million (2014: £2.3 million) represents contributions payable to these schemes by the Group at rates specified
in the rules of the plans.
Other employee benefits
The Group has two other arrangements classified as other long-term benefits. In the UK there is a self-insured Permanent Health Scheme with recognised
liabilities of £0.3 million (2014: £0.5 million) and in the Netherlands there is a ‘’Jubilee’’ provision of £0.3 million (2014: £0.3 million) which provides for
additional payments to employees with long service.
129
31. Retirement and Employee Benefit Obligations continued
Company
IFRS has been implemented within the Company from 1 January 2015. The 2014 numbers have been restated in line with this change and the requirement
of IAS 19 (Revised) to include the Pension Scheme within the Company. The Group Scheme has been split in line with the number of employees within the
Defined Benefit Scheme which were employed by British Polythene Industries PLC. This accounts for 4% of the Scheme. A reconciliation has been provided
below between the balance sheet published within the 2014 Annual Report and Accounts and the restated value included within these accounts:
Non-current assets
Investments in subsidiary undertakings
Pension prepayments
Deferred tax assets
Current assets
Current liabilities
Bank overdraft
Net current assets
2014
£’m
Adjustments
£’m
2014
£’m
Restated
136.0
–
–
–
0.7
0.6
136.0
0.7
0.6
136.0
1.3
137.3
43.0
–
43.0
43.0
–
43.0
2.2
0.1
40.7
–
–
(0.4)
2.2
0.1
40.3
43.0
(0.4)
42.6
–
0.4
0.4
136.0
1.7
137.7
22.0
0.4
–
29.5
–
–
4.3
–
22.0
0.4
4.3
29.5
51.9
4.3
56.2
Net assets
84.1
(2.6)
81.5
Equity
Other reserves
Retained earnings
6.8
26.5
13.3
37.5
–
–
–
(2.6)
6.8
26.5
13.3
34.9
Total equity
84.1
(2.6)
81.5
32. Related Party Transactions
The Group and Company has a related party relationship with its subsidiaries (see Note 12 and Appendix 1), with its Directors and executive officers, including
key management personnel, and with the British Polythene Pension Scheme. Disclosures relating to Directors are shown on pages 68 to 81.
Transactions with wholly-owned subsidiaries of British Polythene Industries PLC Group are not disclosed on the basis of the exemption contained in IAS 24. At
31 December 2015, the Company has intercompany debtor balances with two non-wholly-owned subsidiaries; £1.1 million with BPI China (2014: £0.8 million)
and £0.9 million with Venture Hong Kong Limited (2014: £0.9 million). The balances relate to inter-company loans.
There were no trading transactions with related parties who are not members of the Group in the year ended 31 December 2015. Transactions with the
Group’s Pension Schemes, which are related parties, are disclosed in Note 31.
130
Strategic Report
Remuneration of key management personnel
The remuneration of the key management personnel of the Group and Company is set out below in aggregate for each of the categories specified in IAS 24
‘Related Party Disclosures’:
Group
Short-term employee benefits
Share-based payments including related social security costs
Post-employment benefits
Company
Short-term employee benefits
Share-based payments including related social security costs
Post-employment benefits
2015
£’m
2014
£’m
2.6
1.0
0.2
2.7
1.4
0.2
3.8
4.3
2015
£’m
2014
£’m
1.7
0.7
0.2
1.9
0.8
0.2
2.6
2.9
33. Post-balance Sheet Event
On 27 January 2016 British Polythene Industries PLC signed an agreement to sell its PRC subsidiary BPI China (formally Xinhui Alida) to Amcor (China) Investment
Co.,Ltd, a subsidiary of Amcor, the Australian based packaging group (the ‘Disposal’). The Disposal is subject to the approval of the PRC authorities and is expected
to complete in the second quarter of 2016.
The consideration, payable in US dollars, including an amount of working capital, is estimated to be approximately £9.4 million with an estimated £6.4 million
upon completion. The balance will be payable in cash in instalments, following the agreement of working capital and satisfaction of certain post-completion
arrangements, all of which are expected to take place within the next 12 months. The proceeds will be used to reduce borrowings.
The estimated gain on disposal which will be included in the accounts for year ended 31 December 2016 will be approximately £4 million, reflecting property
and foreign exchange gains.
131
Appendix 1 – List of Subsidiary Companies
Companies
Trade
British Polythene Limited
AT Films Inc1
AT Films US.,Inc
BPI 2010 Limited
BPI China2
BPI Europe BV1
BPI International Limited
BPI International (No 2) Limited
BPI PLC
BPI Limited Partner Limited
Combipac BV1
Flexfilm Limited
Formipac France SARL1
Irish Polythene Industries Limited
Jordan Plastics Limited1
Venture Hong Kong Limited (75% owned)1
Advanced Films Limited
Agripac (Dundee) Limited1
Anaplast Limited
Bibby & Baron Group Limited
BPI 2002 Limited
BPI 2007 Limited
BPI 2012 Limited
BPI Employees Trust Limited
BPI General Partner Limited
BPI Pension Trustees Limited
Brampton Films Limited
Brithene Films Limited
Calnay Limited
Clingtech Films Limited
Clingtech Packaging Limited
CVP Limited
Delta Polythene Limited
Dumfries Plastics Recycling Limited
Edinburgh Plastics Limited
Excelsior Packaging Limited
Flexer Sacks Limited
Flexoset Limited
High Performance Films Limited
Irish Ropes Limited
James Scott & Sons Limited
Kardon Limited
Megafilm Limited
Minster Polythene Films Limited
Moore & Company (Nottingham) Limited
Novathene Films Limited
Pavelodge Packaging Limited
PCL Recycling Limited
PC Polythene Limited
Plasti-Covers Limited
Polycon Limited
Polycrop Limited
Polythene Films Limited
Promopack Limited
Riverside Trading Limited
Roll-A-Rap Limited
Scott & Robertson Limited
Singleton Flint Limited
Sussex Polythene Limited
Tay Flexible Packaging Limited1
Trevor Jones Limited
England
Canada
USA
England
China
Netherlands
England
England
England
Scotland
Netherlands
England
France
Republic of Ireland
Northern Ireland
Hong Kong
England
Scotland
England
England
England
England
Scotland
England
Scotland
England
England
England
England
England
England
England
England
Scotland
Scotland
England
England
England
England
England
Scotland
England
England
England
England
England
England
Scotland
England
Scotland
Scotland
England
England
Scotland
England
England
Scotland
England
England
Scotland
Scotland
Polythene Film Manufacture
Holding Company
Holding Company
Holding Company
Holding Company
Property Company
Holding Company
Polythene Printer
Holding Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
132
Strategic Report
Companies
Trade
UK Polyfilm Limited
UK Polythene Limited
Valentine Mann & Brown Limited
Visqueen Aprons Limited
VMB Limited
Widnes Films Limited
Zedcor Limited
England
England
England
England
England
England
England
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Partnerships
Trade
BPI Pension Funding Limited Partnership
Scotland
Property Holding
1. Shares held through an intermediate holding company.
2. 20% owned through a subsidiary undertaking.
133
Financial Calendar
2016
6 April 2016
10 May 2016
13 May 2016
November 2016
Issue of 2015 Annual Report and Accounts
Annual General Meeting
Payment of 2015 Final Dividend
Payment of 2016 Interim Dividend
2017
6 March 2017
April 2017
May 2017
May 2017
Announcement of 2016 Annual Results
Issue of 2016 Annual Report and Accounts
Annual General Meeting
Payment of 2016 Final Dividend
Registrars
Enquiries concerning the holding of ordinary shares in the Company should
be addressed to the Registrars who should also be notified of any changes
in a holder’s address.
The Registrars are:
Computershare Investor Services PLC,
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ.
Telephone: 0370 889 3238
Your Shareholding
You may check your shareholding at any time by visiting the Registrars’
website (www.investorcentre.co.uk).
Tax on Dividends
From April 2016 dividend tax credits will be replaced by an annual £5,000
tax-free allowance on dividend income across an individual’s entire share
portfolio. Above this amount, individuals will pay tax on their dividend
income at a rate dependent on their income tax bracket and personal
circumstances. The Company will continue to provide registered shareholders
with a confirmation of dividends paid by BPI and this should be included
with any other dividend income received when calculating and reporting
total dividend income received. It is the shareholder’s responsibility to
include all dividend income when calculating any tax liability.
This change was announced by the Chancellor, as part of the UK
Government Budget, in July 2015. If you have any tax queries,
please contact a financial adviser.
134
Website
The Company’s website (www.bpipoly.com) provides details of all major
stock exchange announcements, the current share price, broker research,
the Board of Directors and the terms of reference of committees of the
Board as well as information on the Group’s businesses and products.
Share Price Information
The latest information on the Company’s share price is published on the
Company’s website (www.bpipoly.com), the Financial Times Cityline services,
telephone number 09058 171690 and a number of websites including the
London Stock Exchange (www.londonstockexchange.com).
ShareGift
Small parcels of shares, which may be uneconomic to sell on their own, can be
donated to ShareGift – the share donation charity (Registered Charity number
1052686). ShareGift transfers these holdings into their name, aggregates them,
and uses the proceeds to support a wide range of UK registered charities based
on donor suggestion. They can also accept larger donations of shares.
If you would like further details about ShareGift, please visit www.sharegift.org,
email [email protected] or telephone them on 020 7930 3737.
FTSE4Good Index
Following the annual review by the FTSE4Good Policy Committee, the
Company continues to be a member of this Index, which is designed to
measure the performance of companies that meet globally recognised
corporate responsibility standards and to provide information on their
environmental, social and governance practices for investors.
Registered Office
One London Wall, London, EC2Y 5AB
Head Office
96 Port Glasgow Road, Greenock, PA15 2UL
Telephone: 01475 501000
Fax: 01475 743143
Registration Number
00108191
CBP0002522303160613
Our choice of paper
Choosing a paper that sits well with our environmental vision
is important to us. That’s why this report is printed on 100%
recycled FSC-approved paper produced from well-managed
forests. The entire publication has been printed using vegetable
oil-based inks by a FSC-recognised printer that holds an ISO
14001 certification. The carbon impact of this paper has also
been measured and balanced through the World Land Trust,
an ecological charity.
British Polythene Industries PLC
96 Port Glasgow Road
Greenock
PA15 2UL
T:+44 (0)1475 501 000
F:+44 (0)1475 743 143
www.bpipoly.com

Strategy Delivers

Transcription

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