TIDMSMDS
RNS Number : 8344E
Smith (DS) PLC
08 July 2019
DS Smith Plc
(the "Company")
Publication of 2018/19 Annual Report and Accounts and
Notice of Annual General Meeting 2019
The Company's Annual Report and Accounts for the year ended 30
April 2019 and the Notice of the 2019 Annual General Meeting are
today published and are available on the Company's website
www.dssmith.com. Hard copy documents have been posted to
shareholders who have elected to receive them.
The Company's 2019 Annual General Meeting will be held at 12
noon on Tuesday, 3 September 2019 at The Lincoln Centre, 18
Lincoln's Inn Fields, London WC2A 3ED.
In compliance with Listing Rule 9.6.1, copies of the following
documents will be submitted to the UK Listing Authority and will
shortly be available for inspection on the National Storage
Mechanism website at www.morningstar.co.uk/uk/NSM:
-- 2018/19 Annual Report
-- Notice of Annual General Meeting 2019
-- Form of Proxy for the Annual General Meeting 2019
In compliance with rule 6.3.5 of the Disclosure Guidance and
Transparency Rules the documents can also be downloaded in pdf
format from the Company's website
www.dssmith.com/investors/annual-reports
A condensed set of the Company's financial statements and
information on important events that have occurred during the
financial year and their impact on the financial statements were
included in the 2018/2019 full year results announcement released
on 13 June 2019. That information, together with the information
set out in the Appendix below, which is extracted from the
Company's 2018/19 Annual Report, constitutes the material required
for the purposes of compliance with DTR 6.3.5R. This announcement
is not a substitute for reading the Company's 2018/19 Annual
Report.
Iain Simm
Group General Counsel and Company Secretary
8 July 2019
APPIX
The primary purpose of this announcement is to inform the market
about the publication of the Company's 2018/19 Annual Report and
Notice of Annual General Meeting 2019.
The information below, which is extracted from the Company's
2018/19 Annual Report and Accounts, is included solely for the
purpose of complying with DTR 6.3.5R. It should be read in
conjunction with the full year results announcement released on 13
June 2019. That information, together with the information set out
below, which is extracted from the Company's 2018/19 Annual Report,
constitutes the material required for the purposes of compliance
with DTR 6.3.5R. This announcement is not a substitute for reading
the Company's 2018/19 Annual Report. Page and note references in
the extracted information below refer to, respectively, page
numbers and notes in the Company's 2018/19 Annual Report.
Principal risks (pages 49 to 50 and 52 to 55)
Making risk management work
Our priority is to ensure that DS Smith has a common
understanding of risk management practices across all its
businesses so as to inform strategic decision making and realise
the potential opportunities for growth and development.
Members of the Board, Audit Committee and Group Operating
Committee (GOC) maintain a high level of engagement on all aspects
of the Group's approach to risk management. This positive 'tone
from the top' is reflected well across the Group functions and
divisions. There is a continuing emphasis on strengthening the
relationship between our strategic priorities set out in the
corporate plan and day-to-day risk management activities, whether
this is by tracking risks in monthly divisional trading reports or
through robust due diligence on acquisitions and new commercial
ventures.
2018/19 was a year where our disciplined approach to balancing
risks against identified opportunities resulted in changes to our
business and risk profile, as shown by our purchase of Europac and
the agreement to dispose of our Plastics division. Both these
transactions enable us to remain on our strategic path despite the
growth of external risks and changing geographical spread of our
internal risks. We continue to make sure our internal risks are
supported with appropriate levels of investment and we have added
to our risk management system of governance with two management
committees.
Our framework for managing risks
Risk management is undertaken at all levels within the Group to
support its growth and performance aspirations. One of our key
principles is the effective management of those risks that give the
Group a competitive advantage, where the Group has the scale, scope
and capability to help realise benefits related to its value
proposition to its customers and stakeholders. This risk strategy
and the setting of objectives is executed by the GOC with assurance
and oversight from the Audit Committee and Board.
The Board sets out the Group's risk appetite annually, based on
the level of risk it is willing to accept in pursuit of corporate
targets. The Group's defined risk appetite is the translation of
its corporate plan strategies into explicit statements on the level
of risk it is willing to take.
Our GOC, management committees and specialist Group functions
provide guidance to the businesses on how to better integrate risk
management processes into day-to-day activities. We do this through
the use and effective communication of relevant information,
reporting and embedding them throughout our organisation's culture,
capabilities and practices to foster better decision-making.
Report on our principal risks
The details of our principal risks and uncertainties and the key
mitigating activities put in place to address them can be found on
pages 52 to 55 and a summary is shown in the table overleaf. The
principal risks are the ones that may have the greatest impact on
our Corporate Plan and they have been discussed at Audit Committee
meetings during 2018/19.
Our Group continues to be exposed to a wide range of political,
market, cyber and macro-economic risks in addition to the principal
risks listed in this report. These other risks are monitored as
part of our standard operating processes to ensure that appropriate
mitigations are in place as part of regular management reviews.
When considered appropriate these reviews are supplemented by 'deep
dives' in targeted risk areas. This year the Group focused on its
cyber exposures across its network and industrial control systems,
assessed cyber mitigation plans against current investments and
priorities set out in its cyber security strategy and plans. Whilst
our capacity to influence many of these external risks is often
limited, our reviews and 'deep dives' on specific external risks
enable us to maintain effective mitigation strategies within our
business model that can quickly flex and adapt to a changing
world.
Emerging risks reporting
In addition to considering current principal risks, our
established risk reporting process was adapted in 2018 with the
development of an emerging risk report to supplement existing
reviews. One area of focus, highlighted by this first report, is
where our plans and business model design might not support a wider
societal purpose. This was reflected by the emerging risk of water
imbalances (demand with availability) in some areas of our
operations due to changing weather patterns and a project to build
water stress plans at relevant paper and packaging sites is
underway. Whilst none of the reported emerging risks were promoted
to our principal risk list, we remain mindful of the pace and
potential impact that such risks might have on our Group strategy
in the future. We will continue to embed this reporting process
into our standard risk reporting procedures.
Our principal risks
Risk assessment summary
The principal risks have been updated to reflect our strategic
priorities as well as the level of progress in managing them.
Risks redefined
-- Process change risk has been changed to a risk of failing to capture our margin targets.
-- Digital technology risk has been changed to a risk that we
fail to drive packaging transformations through technology
advances.
-- Consolidation risk has been amended to reflect the
unpredictable nature of disruptive and emerging markets.
Key influences
-- Macro-economic and political environments in Europe and the
broader world economies continue to be uppermost in our minds given
the international nature of our supply chain and the competitive
nature of the markets within which we operate. Despite the natural
hedges we have built through acquisitions and investments, these
risks will continue to evolve given future scenarios with the US
and China, Brexit and other developments in international trading
rules.
Increasing areas of focus
-- Whilst there are disruptive threats from competitor
behaviours, including investments they may make in containerboard
capacity, our plans take into account these potential impacts
through asset management and footprint realignment, including our
acquisition strategy.
-- Our ability to secure the right level of integrated paper
supply remains a priority and effective management of this risk is
a key part of our planning, which will be further enhanced by
extending our network following the full integration of our Europac
assets.
Alert to signs of change
-- Whilst we continue to see many opportunities to adapt to
changing consumer behaviours and the growth in multi-channel
distribution, we remain alert to the risk that consumer shopping
habits may differ from our expectations.
-- We continue to see the risk that new fibre technology adopted
by others could have a material effect on our key production
processes and costs and our investments in paper innovation aim to
utilise the positive effects of identifying and adopting new fibre
technologies.
Principal risks
Principal Gross Link to Risk Threats Opportunities Management Board reviews
risks impact/ strategy tolerance controls
Net impact
1. Acquisition Increased/ To double Acceptable -- Our -- We could -- We -- Updates
strategy Stable our size acquisition succeed have a from the
Our growth and growth in entering diverse Group Chief
strategy profitability does not new key acquisition Executive
is designed support markets strategy on progress
to create our and targeting which on the
better pan-European growth includes acquisition
value and FMCG areas. bolt-on strategy
through customers -- We continue transactions. were reported
economies as they to maintain -- Through at each
of scale seek to a positive the Group Board meeting.
and by develop track record Strategy -- Specific
adding a more across Committee, M&A activity
new global small and our divisions reviews
products supply large have clear were held
and services chain. transactions. targeted at least
to our -- Acquisitions investments quarterly.
supply fail to in key -- The
cycle address markets Board received
network. key areas and detailed
of geographies updates
vulnerability (including on the
in our the US). Europac
integrated transaction
business and
model and integration
in particular process.
do not
address
security
of supply
through
adequate
integration.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
2. Increased/ To double Re-assess -- Weak -- -- Management -- At each
Eurozone Increased our size consumer Opportunities teams Board meeting
and macro- and demand to reposition continue the Group
economic profitability may slow our business to lead Chief
markets down growth model outside projects Executive
Exposure in the of our based and Group
to multiple Eurozone traditional on cost Finance
political (France, markets. optimisation Director
and economic Germany -- and presented
factors and Italy). Opportunities operational reviews
could -- Adverse to re-adjust efficiency. and forecasts
impact exchange sources -- We on the
consumer rate positions of supply. continue impact
disposable may create -- to invest of the
income unpredictable Opportunities and actively macro-economic
and/or pressures to prioritise manage environment.
the level on pricing cost in a strategy -- Regular
of industrial for our optimisation to address discussion
activity. key and efficiency any long-term in Group
commodities. improvements Eurozone Chief
-- The across currency Executive
UK's exit all divisions imbalances reports
from the and Group by managing on Brexit
EU might functions. impacts and
require of short-term implications.
unprecedented slower-growth
adjustments markets
to our in
business higher-growth
model that geographies.
we may
not have
foreseen.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
3. Stable/ To double Acceptable -- Our -- Improving -- Effective -- The
Paper Decreased our size short paper supply integration Board
supply and supply chain and review regularly
Large profitability strategy performance of all discussed
fluctuations may leave by challenging recycled M&A
in the the Group our paper/kraft opportunities
demand over-exposed closed-loop paper with specific
and supply to the and across focus on
dynamics threat paper all security
of fibre of significant strategy. geographies of supply.
and the commodity -- Accessing managed
economic price additional by our
consequences volatility. recycled Paper
of this --Unanticipated paper material division.
can affect and prolonged outside -- Management
our long-term price increases of the oversight
position of specific UK. on the
as a net paper grades -- development
purchaser sourced Improvements of supply
of paper externally in our chain
from third which are internal optimisations.
party required supply -- Progress
suppliers. to meet of kraft reporting
the demands paper from of innovation
of the the Europac activities
Packaging acquisition. including
division's the use
Performance of mixed
Assurance paper
Consistency in our
Environmental mills,
project. fibre
mining
technologies
and extraction
of clean
fibre.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
4. Increased/Stable To double Acceptable -- Continued -- Securing -- The -- The
Capital our size uncertainty access Group Audit
markets and about how to suitable has access Committee
and liquidity profitability the UK's sources to bank regularly
Political, exit from of debt funding reviewed
economic the EU capital from its liquidity
and credit might be through revolving schedules,
impacts implemented. effective credit exchange
may have -- Failure active facility, rates,
an adverse to meet management maturing cash flows
effect funding of our in 2023. and covenant
on our needs on core banking -- Additional headroom.
growth favourable partners. funding -- The
financing. debt terms. is available Group Finance
-- Unplanned from other Director
decreases three-year regularly
and/or facilities. updated
changes -- We the Board
in sources have extended on finance
of finance. maturities options,
on our including
debt by Euro-financing
raising and debt
longer financing
dated arrangements.
debt in
the bond
markets.
-- History
of successful
equity
issuance.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
5. Increased/ To double Re-assess -- Our -- Exploring -- Maintaining -- The
Disruptive Increased our size weaker a broader strategic Group Finance
markets and competitive footprint project Director
Market profitability position for our management provided
consolidation in some packaging to respond the Board
and disruptive markets business. to new with regular
behaviours may decrease -- Assessing containerboard updates
in our sales volumes attractiveness capacities on market
markets and margins. of emerging and a and competitor
weakens -- Competitors markets, changing activity.
our position may succeed given their geography
and bargaining in imitating growing of packaging
power. our integration populations, customers.
model and economies -- Regular
challenge and increased reviews
our supply demand and updates
cycle business for branded to evaluate
model. consumer the scope
-- We may goods. and scale
face a of our
'perfect recycling
storm' footprint.
scenario -- Active
where project
customers, management
suppliers focused
and competitors on cost
dominate. optimisation
and footprint
improvements.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
6. Stable/ To delight Acceptable -- Direct -- An -- Creation -- The
Governance Stable our customers intervention opportunity of the Audit
Non-compliance due to to demonstrate Group Committee
with local anti-trust a standard Compliance regularly
laws or laws. of ethics Committee reviewed
regulations -- Cultural and behaviour to oversee results
may damage differences well above a broad of the
our corporate in newly expectations range internal
reputation acquired of all of compliance control
and subject businesses stakeholders. subjects. reports.
the Group may challenge -- Enhanced -- Regular -- The
to significant the Group's collaboration assessment Board received
financial business with of compliance an internal
penalties. ethics. stakeholders risks corporate
-- Greater to monitor between governance
constraints the sustainability update
on handling implications and government at almost
food due of change and community every meeting.
to in the affairs -- The
contamination regulatory team. Audit
risk may landscape. -- Manage Committee
require oversight received
significant of our regular
changes Vision reports
to product Zero linking on ethics
design health and
and and safety compliance.
manufacturing. to all
business
activities.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
7. Stable/ To double Acceptable -- Our -- Identifying -- Fully -- Board
Changes Stable our size customers early signs resourcing updates
in shopping and may reject of growth an internal with
habits profitability our e-commerce opportunities organisation innovation
Our investments proposition. by actively to grow presentations.
in innovative -- We may engaging and develop -- Board
packaging not be with our the e-commerce considered
fail to quick enough customers segment. customer
match to adapt and -- Managing shopping
expected to changes stakeholders. 'front habits
growth in use -- Exploring end' supply as part
in consumer of substitute new chain of Group
spending. products. opportunities services strategy
-- Innovation in the with fast review.
may not packaging moving
be a sufficient business consumer
driver by active goods,
of change engagement industrial,
for traditional with customers heavy-duty
single-use on alternative and display
and recyclable paper markets.
packaging packaging -- Evaluations
so as to solutions. of our
broaden business
our offering model
in existing focused
markets. on strategic
segments
including
end-to-end
services.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
8. Stable/ To realise Acceptable -- Weaknesses -- Developing -- Succession -- The
Talent Stable the potential in our employee planning, Nomination
barriers of our organisation centred international Committee
Despite people fail to mobile job rotation regularly
our commitment drive processes and talent reviewed
we may innovation, by using pipeline. Board
fail to manage global -- Managing succession
retain, change IT systems our critical planning
engage and engage to ensure talent and talent
and develop our workforce. effective recruitment management.
a productive -- We do use of programme -- The
workforce not harness skills across Group Chief
and to agile working and resources. our packaging Executive
develop practices academies. and the
key talent. across -- senior
our internal Implementation human
talent of DS resources
pool. Smith team updated
Management the Board
Standards and the
enhancing Nomination
how people Committee
are managed on senior
and developed. management
and talent
management
programmes.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
9. Increased/ To delight Acceptable -- Our -- Enhancing -- Sales -- The
Packaging Stable our customers inability our e-commerce and marketing Board reviewed
transformations to anticipate and digital organisation packaging
Inability the shift technology operates transformation
to integrate in consumer competencies. alongside risks as
our digital buying -- Adding 'material part of
printing habits value by related' the Corporate
technology influenced focusing innovation Plan process.
and to by digital on IT teams. -- Cyber
integrate technologies. eco-systems -- Continued security
our innovations -- Our and a digital investments assessment
to drive inability strategy in digital report
further to adopt to support printers, (based
integration technology long-term automation on
between quickly customer (including international
customer enough partnerships. robotics) standards).
products to maintain and machine -- IT network
and the innovative innovations. management
'Internet growth and security
of Things'. for our review.
packaging -- External
business. advisory
-- Cyber-risk guidance
hinders on key
the integrity cyber risks.
of our
business
systems.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
10. Stable/ To double Acceptable -- Our -- Exploring -- Additional -- The
Changes Stable our size inability the use investments Board
in fibre and to adapt of virgin in research regularly
technology profitability to rapid fibre in and discussed
We may technological a sustainable development the security
fail to changes manner, of fibre of supply
exploit in new including recovery, of existing
major fibre recovery, production pulping, materials
developments fibre/paper of kraft paper as part
in fibre technology substitute making of M&A
usage or packaging and kraft and updates.
or material top products. performance
substitution. technology. -- Continuing packaging.
-- Our opportunity -- Improving
failure to develop the management
to manage our integrated of
a material innovation maximisation
decline strategy. of fibre
in fibre efficiency.
quality, -- Regular
and leakage business
of fibre assessments
to other of investments
applications. in fibre
recovery
and stock
preparations.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
11. Increased/ To lead Acceptable -- Inability -- New -- Continued -- The
Sustainability Stable the way to manage insights disclosure Board received
We may in energy by creating of our updates
under sustainability demand a capex sustainability on Group
deliver needs within programme data to sustainability
the required our designed provide performance.
level sustainability to enable visibility -- The
of targets. continued and assurance Board received
transparency, -- Shift progress to our updates
clarity in recycling on key stakeholders. on the
and commitment behaviour sustainability -- Further Kemsley
to and consumer targets. investment power project.
sustainability. demand -- Listening to improve
may hinder to our management
our competitive stakeholders capabilities
edge. and in
-- Inability encouraging sustainability
to reach wider operations.
and adequately engagement. -- Internal
disclose -- sustainability
a higher KPIs to
standard/target track
as part measures
of a DS important
Smith promise to our
or as required key
by customers stakeholders
or regulators. were set.
--
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
12. Increased/ To double Re-assess/ -- Inability -- Ability -- Management -- The
Margin Increased our size acceptable to create to enhance and Group Chief
capture and added value the investments Executive
We may profitability by mismanaging effectiveness in commercial and Group
fail to input costs of fibre functions Finance
develop with over and other designed Director
a comprehensive commitments efficiency to improve presented
and sustainable and an programmes. value the Board
approach under-priced -- Ability growth. with regular
to manage ceiling to build -- Improved updates.
our net on products a distinct project
profit and services. discipline management
margins -- Failure around approach
driven of strategic the themes to process
by the process of materials, change
variability change machines, initiatives.
of input or critical digital -- Specific
costs system and supply management
with output implementation chain. reviews
prices. failure. of product
and account
management.
----------------- --------------- ----------- ---------------- --------------- --------------- ---------------
Related Party Transactions (page 154)
Note 32 Related parties
Identity of related parties
In the normal course of business, the Group undertakes a wide
variety of transactions between its subsidiaries and equity
accounted investments.
The key management personnel of the Company comprise the
Chairman, Executive Directors and non-Executive Directors. The
compensation of key management personnel can be found in the single
total figure remuneration table in the Remuneration Committee
report. Certain key management personnel also participate in the
Group's share-based incentive programme (note 25). Included within
the share-based payment expense, and detailed in the Remuneration
Committee report, is a charge of GBP2m (2017/18: GBP3m) relating to
key management personnel.
Transactions with pension trustees are disclosed in note 24.
Other related party transactions
2019 2018
GBPm GBPm
Sales to equity accounted investees 8 3
------ ------
Sales to other investees 4 -
------ ------
Purchases from equity accounted investees 3 9
------ ------
Purchases from other investees 8 4
------ ------
Directors' Responsibilities (page 97)
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare such financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation and have also chosen to prepare the parent Company
financial statements in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework. 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 Company and of the profit or loss of the Company for
that period.
In preparing the parent Company financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether Financial Reporting Standard 101 Reduced
Disclosure Framework has been followed, subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
relevant financial reporting framework, 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;
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position,
performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 12 June 2019 and is signed on its behalf by Miles
Roberts, Group Chief Executive and Adrian Marsh, Group Finance
Director.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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