Annual Report & Accounts 2017

Transcription

1 1Financial StatementsStrategic Report IPL Plastics plc Annual Report & Accounts 2017 IPL Plastics plc (formerly One Fifty One plc) Annual Report & Accounts 2017 Information Directors Report

2 Contents IPL Plastics at a Glance Who we are IPL Plastics plc History Geographic Footprint Key Financial Performance Strategic Report Chairman s Statement Chief Executive s Review Financial Review Risk Management Responsible Business Directors Report Board of Directors Directors Report Directors Statement on Corporate Governance Report of the Nominations Committee Report of the Audit Committee Report of the Remuneration Committee on Directors Remuneration Financial Statements Statement of Directors Responsibilities in respect of the Directors Report and the Financial Statements Independent Auditor s Report Group Income Statement Group Statement of Other Comprehensive Income Consolidated Statement of Financial Position Group Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows Notes to the Company Financial Statements Directors and Other Information Information for Shareholders

3 IPL Plastics plc Annual Report & Accounts 2017 IPL Plastics at a Glance Who we are IPL Plastics plc ( the Company ), formerly One Fifty One plc, and its subsidiaries (together, IPL Plastics or the Group ) is a leading rigid plastics manufacturer for the packaging, environmental containers, industrial products and returnable packaging sectors. The Group s strategic vision is to become a leading global player in the rigid plastics market. IPL Plastics employs circa 1,900 people across Ireland, the United Kingdom ( UK ), Canada, the United States of America ( USA ), Mexico and China. The Group is headquartered in Dublin, Ireland. 1Financial StatementsStrategic Report OUR BUSINESS IPL Plastics is a focused plastics business consisting of two divisions, one being OnePlastics Group ( OPG ) and the other being IPL Inc. ( IPL ), the North American based business acquired in July IPL has two separately managed business units following the expansion of its North American footprint through the acquisition of Macro Plastics Inc. ( Macro ) in the United States in June The Group supplies products to a broad range of customers across end markets primarily in Ireland, the UK, USA, Canada, Mexico, Chile and China from fourteen production facilities (three in the UK; one in Ireland; one in China; and nine in North America). IPL Plastics organises its operations across three primary lines of market facing activities: Large Format Packaging and Environmental Solutions production of bulk rigid plastic packaging containers for a wide variety of end markets together with wheeled bins, containers, caddies, etc. for the waste management and recycling industries. In addition, we act as a manufacturing partner for a wide diversified customer base in the construction, furniture and material handling industry sectors; Consumer Packaging manufacture of high quality rigid plastic packaging products for a large bluechip customer base, consisting of containers, caps and closures primarily for the dairy, food service and food to go markets; and Returnable Packaging Solutions manufacture of rigid plastic bins, pallet boxes and totes primarily for the agricultural and automotive industries. Information Directors Report The Group continues to own a Metals recycling business based in the UK. The results of this business are presented within continuing operations under Other reconciling items.

4 IPL Plastics plc History Investment Company One Fifty One plc was created. Capital was raised and a wide portfolio of controlling and non-controlling interests accumulated in multiple sectors. Trading on the unlisted grey market commences Restructuring & Transformation A period of restructuring sees the wide portfolio rationalised. Operating divisions are restructured which alongside a rationalisation of Group costs, results in a reduction of net debt. The balance sheet is restructured and a long-term strategy is formulated for the Group Return to Growth & Transformational Acquisition With more focused operating divisions and investment portfolio, the Group returns to growth. The key acquisition of 66.67% of IPL transforms the Group into a leading global player in the plastics market New HQ and further additions to the Plastics Division After many years at Thomas Street, the Company moved head office to St. Stephen s Green. Encore Industries Inc. ( Encore ) in North America was acquired through our subsidiary IPL in November Further growth Marked a key year in the evolution of the Group with the disposal of the Specialist Environmental Services ( SES ) division and the acquisition of Macro, which increased the Group s global presence and scale. The Group s shareholders gave the Board the authority to enable the Company to proceed with an IPO and Listing in Shareholders also approved a reorganisation of the existing IPL Inc. shareholding structure by agreeing to an exchange of the current minority shareholders equity interests in IPL Inc. for shares in the Company. Authority was also received from shareholders to change the name of the Company to IPL Plastics plc The present, the future and beyond The minority shareholders equity interests in IPL Inc. were exchanged for shares in IPL Plastics plc, under the authority given by the shareholders. Now operating manufacturing plants at 14 different locations across three continents and with a clear long term strategy developed, IPL Plastics plc is a transformed Group with the structure and appetite for further growth and development.

5 3Financial StatementsStrategic Report IPL Plastics plc Annual Report & Accounts 2017 Geographic Footprint 14 Manufacturing Facilities Returnable Packaging Solutions Large Format Packaging and Environmental Solutions Consumer Packaging 2 R&D Facilities in Ireland and Canada R&D Centre c.2.2 Million Square Feet of Manufacturing and Storage Space 9 Warehousing Units Warehousing units 6 Offices Worldwide Office 270+ Machines Information Directors Report

6 Key Financial Performance Three Year Summary Financial Information 4 The Group uses a number of key performance metrics to assess its financial performance for the year ended 31 December m m m Group revenue (1) EBITDA (1,2) EBIT (1,3) Profit for the year before exceptional and non-recurring items and share of equity-accounted investees profits (1) Profit for the year (4) Adjusted diluted Earnings per Share (cent) (5) EBITDA interest cover (times) (6) Total assets Shareholders equity (excluding IPL Put Liability) (7) Shareholders equity Net debt (excluding convertible loan notes) (1) The results for the year ended 31 December 2017 and prior years exclude amounts related to discontinued operations, which comprise the ClearCircle Specialist Environmental Services ( SES ) businesses (disposed of in April 2017 with an effective date of 1 January 2017). The results for the year ended 31 December 2017 exclude the effect of discontinued operations, which in 2016 and 2015 also comprised the Metals Ireland recycling businesses (disposed of in September and October 2016). A full reconciliation of continuing operations is presented in note 3 while discontinued operations results are reconciled in note 11. Assets and liabilities held-for-sale (including those relating to the SES businesses) are set out in note 21. (2) EBITDA represents earnings before interest, taxation, depreciation, amortisation, exceptional items, non-recurring items and the Group s share of profits from its equity-accounted investees. Management believes that EBITDA, while not defined under IFRSs, provides a fair reflection of the underlying trading performance of the Group. EBITDA is reconciled to the Income Statement in note 3 to the financial statements. (3) EBIT is EBITDA less depreciation and amortisation. EBIT is reconciled to the Income Statement in note 3 to the financial statements. (4) Profit for the year includes 1.8 million (2016: 3.9 million), being the Group s share of profits from its equityaccounted investees. Charges in respect of exceptional items net of tax included in the profit for the year amounted to 8.5 million (2016: 7.1 million). Further detail in relation to exceptional and non-recurring items is contained in note 7 and note 4 respectively. (5) Adjusted diluted Earnings per Share is calculated by dividing the adjusted profit attributable to ordinary shareholders (which excludes exceptional and non-recurring items and the Group s share of after tax profits of its equity-accounted investees) by the weighted average number of Ordinary Shares outstanding, as adjusted for the effects of all Ordinary Shares and options with a dilutive effect (see reconciliation to IAS 33 Earnings per share calculation in note 12). (6) EBITDA interest cover based on the full year results (see reconciliation to Income Statement in note 3). (7) Shareholders equity is stated prior to deduction being made for the IPL Put Liability. The Put Liability amounted to million at year end (2016: 72.2 million; 2015: 32.4 million), is measured at fair value and represents the anticipated consideration required to acquire the IPL minority interests shareholdings in July 2021 (date from when the Put becomes exercisable), discounted to present value.

7 IPL Plastics plc Annual Report & Accounts 2017 Revenue m EBITDA m +36.2% from % from Financial StatementsStrategic Report Adjusted diluted EPS cents % from 2016 * Total equity excludes the Put Liability relating to the 33.33% of IPL not owned by the Group, which amounted to million at year end (2016: 72.2 million; 2015: 32.4 million). All amounts are accounted for under IFRS Total Equity* m +6.1% from m 474.4m 70.9m Information Directors Report 2017 Revenue by Geography 2017 Revenue by Business Unit 2017 EBITDA by Business Unit North America 72% IPL 62% IPL 65% UK 21% OnePlastics Group 24% OnePlastics Group 18% Ireland 6% Macro 10% Macro 18% Rest of World 1% Other 4% Other (1%)

8 6 Strategic Report Chairman s Statement Chief Executive s Review Financial Review Risk Management Responsible Business

9 IPL Plastics plc Annual Report & Accounts 2017 Chairman s Statement I am pleased to report that 2017 was another year of significant progress for IPL Plastics in achieving its strategic goals for the Group, which culminated in delivering a strong set of results for the year ended 31 December The Group s IPL business, which accounts for over 70% of the Group s revenues, had another positive year driven by continued organic growth and demand for its products in the US and Canadian markets. In June 2017, the Group acquired Macro Plastics Inc., which produces rigid plastic bulk bins and bulk packaging solutions primarily for the North American agricultural and automotive sectors. 7Financial StatementsStrategic Report Information Directors Report Hugh McCutcheon Interim Chairman

10 Chairman s Statement (continued) 8 FINANCIAL PERFORMANCE The financial performance of the Group was ahead of expectations during Group revenue for the year was million (2016: million), with our IPL division (inclusive of Macro) accounting for million (2016: million), 71.9% (2016: 58.7%) of the Group s total, positively impacted by a full year s contribution from Encore, acquired in November 2016, and contribution from Macro since its acquisition on 9 June EBITDA (excluding discontinued operations) for the year was 70.9 million (2016: 48.5 million), representing a 46.0% increase year on year. Adjusted diluted Earnings per Share was cents for the year (2016: cents), which represents a 8.8% increase year on year. Net debt (excluding Convertible Loan Notes) was million at 31 December 2017 (2016: million). The increase was primarily driven by the drawdown of borrowings to fund the acquisition of Macro and significant development capital expenditure programmes. A detailed review of the Group s performance in the year is provided in the Chief Executive s and Financial Review Reports. DIVIDENDS The Board is not currently contemplating the payment of a dividend to shareholders in respect of the 2017 financial year but continues to keep this matter under review in line with our strategic goals. BOARD AND GOVERNANCE IPL Plastics remains committed to high standards in corporate governance. The Board has undertaken to continue to comply with appropriate corporate governance arrangements having regard to best practice and taking into account the size of the Group and the nature of its activities. The Directors Statement on Corporate Governance describes the corporate governance arrangements in place. Following the acquisition by CDP Investissements Inc. ( CDPQ ) of IIU Nominees Limited s ( IIU ) shareholding in the Group on 18 May 2017, Mr. Pat Gilroy resigned as a Non-Independent Non- Executive Director. Mr. Gilroy was a nominee of IIU on the Board. On 5 July 2017, Mr. Denis Cregan informed the Board of his retirement as Chairman and Non-Executive Director. Mr. Cregan held the position of Chairman since 31 December Mr. Dalton Philips also resigned as Non-Executive Director on 29 September 2017 following his appointment as Chief Executive Officer of Dublin Airport Authority. The contribution of our former Chairman Denis and Non-Executive Directors Pat and Dalton during their tenures has been much appreciated by myself and all the Board. On 2 January 2018, Mr. Alain Tremblay was appointed to the Board. Alain joins as a Non- Independent Non-Executive Director representing CDPQ, the Group s largest shareholder. Alain is an Investment Director in the Private Equity Division of CDPQ. OUR PEOPLE IPL Plastics has circa 1,900 employees in its global operations and I want to thank them for their continued support, loyalty, hard work and commitment to the development of the Group. On behalf of the Board and all shareholders, I would like to take this opportunity to note their significant contribution to IPL Plastics performance.

11 IPL Plastics plc Annual Report & Accounts 2017 STRATEGY The Group s strategic vision is to become a leading global player in the rigid plastics market. The disposal of the non-core UK and Irish SES businesses in April 2017 has ensured clarity of purpose and enables the Company to focus on its strategic vision. Rigid plastic packaging is the largest component of the global plastic packaging market. The rigid plastic packaging market is driven by innovation, the substitution effect versus traditional forms of packaging (e.g. glass, paper, metals), population growth and urbanisation. Growth in these factors leads to growth opportunities for rigid plastic packaging manufacturers, including IPL Plastics. It is a consolidating marketplace as evidenced by a number of significant recent merger and acquisition transactions. The Group s strategy is focused on the development and growth of the plastics business, through both organic and acquisition-led initiatives. The acquisition of Encore and Macro, along with the Group s development capital expenditure programmes in North America, in particular, and the disposal of the non-core SES UK and Irish businesses, support this strategic objective. In August 2017, the Board announced that it had agreed to recommence exploring a possible IPO and stock-market listing for the Group in the next 12 to 18 months, subject to market conditions. This strategy has the full support of the Group s largest shareholder, CDPQ. A stock-market listing would provide shareholders with a liquid market for their shares and would facilitate raising further equity, if necessary to support future growth. The Board continues to explore all options, including a possible IPO, with the objective of maximising shareholder value and delivering a liquidity event for our shareholders. In December 2017, the Board took initial steps to facilitate a possible liquidity event for our shareholders by convening an Extraordinary General Meeting ( EGM ) at which shareholders gave the Board the authority to enable the Company to proceed with an IPO and Listing in 2018 should market and other conditions permit. Shareholders also approved a reorganisation of the existing IPL Inc. shareholding structure by agreeing to an exchange of the current minority shareholders equity interests in IPL Inc. for shares in the Company. Authority was also received from shareholders to change the name of the Company from One Fifty One plc to IPL Plastics plc, which became effective on 7 December On 28 February 2018, the minority shareholders equity interests in IPL Inc. were exchanged for 47,238,242 shares in IPL Plastics plc, under the authority given by the shareholders at the EGM on 6 December Financial StatementsStrategic Report Information Directors Report

12 Chairman s Statement (continued) 10 OUTLOOK The Group continues to experience strong demand for its products and its operations are underpinned by favourable market dynamics, particularly in North America. US-based customers account for more than 50% of the Group s end market plastic sales. Given the strong growth experienced by IPL and the Group s recently acquired businesses, we continue to invest heavily in development capital expenditure projects both to respond to customer demand, including through broadening the product range, and to drive improvements in operating margins. We are focused on maximising synergies and leveraging our expertise across our international locations. In tandem with these organic initiatives, we will continue to consider complementary acquisitions that make sound strategic sense. As we move forward into 2018, the Group is cognisant of elevated levels of global risk, including stock market, currency and interest rate volatility, an uncertain global economic climate, the outlook for the UK economy depending on the final agreed terms of Britain s proposed exit from the EU. Despite these challenges, we are confident in the robustness of the business strategy and the ability of the Group to develop profitably and increase shareholder value into the future. The results in the second half of 2017 were adversely impacted by increased resin prices and transportation costs together with the decline in the value of the Canadian and US Dollars against the euro. These trends have continued into IPL Plastics now has a global platform comprising rigid plastic packaging products, a segment of the overall plastics marketplace generally characterised by attractive margins and significant barriers to entry. The business is subject to low demand volatility, due to the globalised defensive end-markets served, providing stability to the business and greater visibility on future revenue flows, as well as the potential for continued market expansion. Given the many options available to us to grow and develop the business, both organically and through acquisition, we are confident in the ability of the business to continue to grow profitability in the future and to create shareholder value. In line with the authority given by our shareholders at the 6 December 2017 EGM, we continue to progress planning for a possible IPO and stock market listing, subject to market conditions, which would allow us to access further equity capital to finance these exciting growth opportunities and provide our shareholders with a liquid market for their shares. Hugh McCutcheon Interim Chairman 8 March 2018

13 IPL Plastics plc Annual Report & Accounts 2017 Chief Executive s Review The year to 31 December 2017 was another year of further significant progress, continued growth, capital investment and refined strategic focus for IPL Plastics. This was evidenced in particular by strong organic growth, primarily in our IPL business in Canada and the United States, the acquisition of Macro, and the disposal of the Group s non-core SES businesses. 11 Information Financial Statements Directors Report Strategic Report Alan Walsh Chief Executive Officer

14 Chief Executive s Review (continued) 12 BUSINESS AND OPERATIONAL HIGHLIGHTS: Earnings in 2017 (EBITDA, excluding discontinued operations) increased by 46.0% to 70.9 million on revenue which increased by 36.2% to million; IPL successfully completed the integration of Encore into its North America business; The Group acquired 100% of the share capital of Macro on 9 June 2017 through IPL. Macro offers a significant footprint for IPL s expansion in the strategically important US market and the growing South American market; Macro delivered results for 2017 which were ahead of our expectations announced at the time of acquisition. The integration of Macro has been completed successfully with growth anticipated for 2018 driven by a significant new contract with a global automotive customer; In April 2017, the Group disposed of a 75% interest in ClearCircle Environmental s Island of Ireland SES businesses ( ClearCircle Ireland ) for an upfront cash consideration of million and retained a minority shareholding under a put and call option agreement; In April 2017, the Group disposed of ClearCircle Environmental s SES businesses in the United Kingdom ( ClearCircle UK ) for a cash consideration of STG 16.0 million; The North America market has contributed strong organic growth driven by continued increased demand in both the Consumer Packaging and Large Format Packaging and Environmental Solutions sub-divisions; Significant development capital investment programmes continue in our North American operations providing the Group with an enhanced ability and capacity to serve an expanding business. A number of these projects began to contribute to EBITDA in 2017; Following the successful reconfiguration of the operations at one of the UK sites, OPG now has an improved and broader product offering to a wider range of customers in the UK rigid plastic packaging market; OPG s Ireland and China business has been negatively impacted by reduced demand from its largest customer, following the merger of that customer with another industry participant in the second half of 2016; Working capital increased by 22.2 million since December 2016 driven by the acquisitions of Macro and Encore, increased levels of inventory as a result of two large contracts with customers in North America and the significant organic growth in the business; Renegotiated and extended (in June 2017) the IPL syndicated loan facility to finance the acquisition of Macro and to provide further bank facilities to the IPL group with a revised expiry date of July 2021; Continuing to position IPL Plastics for future growth by identifying appropriate organic and acquisition opportunities which can drive growth in shareholder value; The hurricanes in the US in Quarter 3, 2017 drove reduced capacity in both the resin and freight markets resulting in significant cost increases in Quarter 4, 2017, trends which have continued into Quarter 1, 2018; In December 2017, the shareholders approved a reorganisation of the existing IPL Inc. shareholding structure by agreeing to an exchange of the current minority shareholders equity interests in IPL Inc. for shares in the Company; and On 28 February 2018, the minority shareholders equity interests in IPL Inc. were exchanged for 47,238,242 shares in IPL Plastics plc, under the authority given by shareholders at the EGM on 6 December 2017.

15 IPL Plastics plc Annual Report & Accounts 2017 Throughout 2017, the management team has continued to build on the positive momentum of recent years. Our strategy is clear and focused which is to grow our core plastics business both organically and through acquisition where appropriate, and to increase shareholder value. 13 TRADING RESULTS The 2017 trading performance was ahead of management expectations, largely driven by another year of strong growth from our IPL division, including a full year contribution from Encore (acquired in November 2016) and Macro results that exceeded expectations. The IPL growth was partially offset by a decrease in the year on year OPG performance, due to a number of factors, but primarily due to reduced demand from its largest customer. The Metals South recycling business (our only remaining non-plastics trading operation) in the UK performed ahead of expectations driven by increased commodity prices. Revenue (excluding discontinued operations) for the year was million (2016: million). EBITDA (excluding discontinued operations) was 70.9 million (2016: 48.5 million). The profit for the year before exceptional and non-recurring items and the Group s share of equity-accounted investees profits amounted to 19.6 million (2016: 17.9 million). The profit for the year for 2017 amounted to 17.6 million (2016: 16.1 million). Net debt (excluding Convertible Loan Notes) was million at 31 December 2017 (2016: million). We made further strides towards achieving our strategic goal to grow our rigid plastics packaging business, both organically and through acquisition, with the acquisition of Macro and continued growth in the US and Canadian markets. Information Financial Statements Directors Report Strategic Report

16 Chief Executive s Review (continued) 14 GROUP OVERVIEW AND STRUCTURE In July 2015, IPL Plastics acquired a majority shareholding of 66.67% in IPL Inc. with the minority shareholding of 33.33% acquired by CDPQ and Fonds de Solidarité des Travailleurs du Québec ( FSTQ ). In December 2017, the Board took initial steps to facilitate a possible liquidity event for our shareholders by convening an EGM at which shareholders gave the Board the authority to enable the Company to proceed with an IPO and Listing in 2018, should market and other conditions permit. Shareholders also approved a reorganisation of the existing IPL Inc. shareholding structure by agreeing to an exchange of the current minority shareholders equity interests in IPL Inc. for shares in the Company. Authority was also received from shareholders to change the name of the Company from One Fifty One plc to IPL Plastics plc, which became effective on 7 December On 28 February 2018, the minority shareholders equity interests in IPL Inc. were exchanged for 47,238,242 shares in IPL Plastics plc, under the authority given by shareholders at the EGM on 6 December 2017, which results in the cancellation of the associated Put Liability as is outlined in the Financial Review on pages 32 and 33. This post reorganisation structure will enable the full integration of IPL Inc. into the IPL Plastics Group and the refinancing of IPL acquisition debt and working capital financing into more appropriate group-wide facilities. An illustration of the 2017 and the post corporate reorganisation group structure is included overleaf. In 2017, IPL Plastics consisted of two divisions, one being IPL and the other being OPG, and three distinct business units; IPL, Macro and OPG. The Group supplies products to a broad range of customers across end markets primarily in Ireland, the UK, USA, Canada, Mexico, Chile and China from fourteen production facilities (three in the UK; one in Ireland; one in China; and nine in North America). IPL Plastics organises its operations across three primary lines of market facing activities: Large Format Packaging and Environmental Solutions production of bulk rigid plastic packaging containers for a wide variety of end markets together with wheeled bins, containers, caddies, etc. for the waste management and recycling industries. In addition, we act as a manufacturing partner for a wide diversified customer base in the construction, furniture and material handling industry sectors; Consumer Packaging manufacture of high quality rigid plastic packaging products for a large blue-chip customer base, consisting of containers, caps and closures primarily for the dairy, food service and food to go markets; and Returnable Packaging Solutions manufacture of rigid plastic bins, pallet boxes and totes primarily for the agricultural and automotive industries.

17 IPL Plastics plc Annual Report & Accounts GROUP STRUCTURE IPL Plastics plc 26.43%* CDPQ % 66.67% OnePlastics Group CURRENT GROUP STRUCTURE (POST CORPORATE REORGANISATION) 100% IPL Inc. 100% Encore Industries Macro Plastics Ring-fenced Structure IPL Plastics plc 22.22% 11.11% 33.86%** 7.46%** CDPQ FSTQ CDPQ FSTQ Information Financial Statements Directors Report Strategic Report OnePlastics Group IPL Inc. Swap-up of IPL Inc. Shareholding to IPL Plastics equity Encore Industries Macro Plastics CDPQ FSTQ * Percentage calculated based on the number of IPL Plastics shares in issue at 31 December 2017 (158.6 million shares). ** Percentage calculated based on total fully diluted number of shares of million at 31 December 2017 (inclusive of 47,238,242 shares issued as part of reorganisation).

18 Chief Executive s Review (continued) 16 IPL Plastics Group Divisions IPL OPG Business Units / Segments Macro IPL OPG Sub Divisions / Market Facing Activities Returnable Packaging Solutions Consumer Packaging Large Format Packaging and Environmental Solutions Consumer Packaging Large Format Packaging and Environmental Solutions IPL Plastics has a portfolio of injection moulding businesses which, as well as developing and designing its own products, offers a full contract manufacturing service. The strategy is to strengthen the position of the Company as a leading provider of quality plastics products to a variety of end users across a global market while enhancing margins through innovation and operational excellence. Overall, the Group continued on its growth trajectory in 2017 which was boosted significantly by the full year impact of Encore and the acquisition of Macro. The Group has a strong and profitable product portfolio across consumer packaging, industrial products, bulk packaging, environmental containers and material handling for the agriculture and automotive industries. The products range from food containers, bowls, lids and tubs, to wheeled bins and other waste disposal containers, to crates, trays and paint containers, amongst others. Customers, many of whom are blue-chip organisations, are loyal, diversified and profitable. The current footprint of operations and customers presents an opportunity to expand into new markets to both sell to new and cross sell to existing customers, many of whom have global operations.

19 IPL Plastics plc Annual Report & Accounts 2017 The key strategic objective is to continue to grow the business globally, expanding the range of customers and end markets served, through: Organic growth including investing in enhanced operational capabilities, expanded geographic coverage and new technologies and product ranges; Optimising synergies arising from the further integration of IPL, Macro and OPG including sales, operations, R&D, finance, IT and procurement; and Acquiring companies in complementary market sectors with a European and North American presence. IPL and OPG both have dedicated product focused Innovation Centres of Excellence to foster innovation, new product development and provide customers with an opportunity to review the technologies the Group are offering. The acquisition of IPL brought with it advanced Returnable Packaging Solutions Consumer Packaging IPL Plastics Group product research and development capabilities. The Group operates in a growing and consolidating rigid plastic packaging marketplace and works closely with customers in designing, prototyping and testing a number of exciting new products. During the year, the Group launched a range of new products and these, together with ongoing research and development activities and close interaction with customers, provide the Group with considerable competitive advantage in its key markets. Management have made a number of organisational changes effective 1 January 2018 which underpin the Group s strategy of focused growth and development through organic and acquisition led initiatives, and to support the efforts to achieve synergies and leverage expertise across our business, by structuring the Group across our three primary market facing activities; Large Format Packaging and Environmental Solutions, Consumer Packaging and Returnable Packaging Solutions. Large Format Packaging and Environmental Solutions 17 Information Financial Statements Directors Report Strategic Report North America North America Europe North America Europe Fairfield, CA Edmundston, NB Cork St Damien, QC Hull Plants Shelbyville, KY Union Gap, WA Lee s Summit, MO China Cambridge, OH Forsyth, GA Rotherham Tamworth Remer, MN

20 Chief Executive s Review (continued) IPL 18 BUSINESS UNITS During 2017, the Group was Revenue 293.7m (2016*: 204.3m) organised into three strategic business units; IPL, Macro and OnePlastics Group. EBITDA 45.9m (2016*: 31.6m) EBTIDA Margin** 15.6% (2016*: 15.5%) * Encore was acquired in November 2016 and the 2016 results represent the period from acquisition to 31 December ** EBITDA Margin is before the allocation of any IPL Plastics central overhead costs. 70.9m IPL is a leading North American manufacturer of injected moulded plastic products. IPL occupies approximately 1,300,000 square feet of manufacturing and warehousing space and employs approximately 1,100 people across six operating sites. IPL operates a modern and extensive suite of approximately 140 moulding machines across its sites EBITDA by Business Unit IPL 65% Macro 18% OnePlastics Group 18% Other (1%) The underlying business is well diversified from a geographical, product offering and customer base perspective and in addition has a high-quality asset base. These factors taken together have contributed to the continued strong performance in the period. The original acquisition of IPL by the Group in July 2015, followed by the acquisition of Encore in 2016, have provided IPL Plastics plc with a strong platform for future growth across North America thereby providing the Group with access to significant new markets for existing products. The acquisitions also enable the Group to bring a wide range of exciting new products, especially in food packaging and bulk containers, to existing OPG customers. The financial and operational performance of IPL has been a key driver of the success and transformation of the Group in recent years.

21 IPL Plastics plc Annual Report & Accounts 2017 The company originally comprised three manufacturing plants in Saint Damien (Canada), Edmundston (Canada) and Lee s Summit (US). Following the Encore acquisition in November 2016, the company added three manufacturing plants in Cambridge (Ohio), Forsyth (Georgia) and Remer (Minnesota) has seen continued strong performance from IPL where the Large Format Packaging and Environmental Solutions sub-division performed ahead of expectations. Large Format Packaging and Environmental Solutions has also successfully integrated Encore into its business. Revenue for the year was million (2016: million) and EBITDA was 45.9 million (2016: 31.6 million). EBITDA includes 5.0 million from the acquired Encore business with the remaining 40.9 million being generated from the original IPL business and organic growth facilitated in part by a capital investment programme, reflective of a strong underlying performance during the year. The acquisition of Encore and the capital investment plan being undertaken will enable IPL to expand its geographic footprint and broaden its product offering further across the growing North American rigid plastic packaging market, a key growth area for the Group. IPL comprised two sub-divisions, namely Consumer Packaging ( IPL Consumer Packaging ) and Large Format Packaging and Environmental Solutions ( IPL Large Format Packaging and Environmental Solutions ). IPL CONSUMER PACKAGING Consumer Packaging has two production facilities, Edmundston in New Brunswick, Canada which manufactures thin-wall containers primarily for the US market and regional Canadian market; and Lee s Summit, Missouri, which services a national market primarily for retail lids and overcaps. These sites occupy c.300,000 square feet of manufacturing and warehousing space and the sub-division employs c.400 people in the US and Canada. In November 2016, IPL announced a significant expansion ( Phase 1 ) of the Edmundston plant operations. The project was completed during the year and provides that plant with the operating infrastructure to service some significant new business wins during the period. The Edmundston facility has expanded its operations from a niche product producer into the strategically important Canadian dairy market with success achieved in penetrating global customers in this market sector during A further expansion of the Edmundston facility was approved ( Phase 2 ) in the second half of 2017 to support the growing business wins in the Canadian dairy market. In total CAD$15.2million of capital spend was committed in respect of the Phase 1 and Phase 2 expansions of the Edmundston facility. Lee s Summit is geographically well positioned to service the US market and optimise logistical efficiencies. The site has traditionally been a large volume producer of overcaps with Management now focusing on diversifying the plant s product capabilities and offerings into other technologies and sectors such as In Mould Labelling ( IML ) rigid containers for the U.S. dairy market. The Consumer Packaging business is underpinned by a solid customer base of blue chip companies and strong brands as the division continues to embed our product offerings in sustainable market sectors including the food and dairy sector in Canada and the United States. The business also has a strong asset base with 38 presses at our Edmundston facility and 27 presses in Lee s Summit. In addition, the IML printing investment in Edmundston provides Consumer Packaging with a market offering that none of our competitors can currently provide. We also have further printing capability across the business with seven presses at our Edmundston facility and nine presses at our Lee s Summit facility. 19 Information Financial Statements Directors Report Strategic Report

22 Chief Executive s Review (continued) 20 Consumer Packaging is at a point in its evolution as a business where 2018 will primarily be a year where the key focus is delivering on the significant capital spend invested in the business in the past year, while concurrently identifying further growth opportunities to maintain the positive momentum. Part of delivering on this capital expenditure will be through providing a market leading IML offering in the Canadian marketplace by the delivery of a value add IML solution in place of the traditional offset print solution. IPL LARGE FORMAT PACKAGING AND ENVIRONMENTAL SOLUTIONS IPL Large Format Packaging and Environmental Solutions is engaged in the production and supply of rigid plastic bulk packaging containers, environmental carts and material handling crates from four manufacturing and warehousing facilities across the US and Canada. These sites occupy c.750,000 square feet of manufacturing space and the sub-division employs c.730 people across the region. The Large Format Packaging and Environmental Solutions sub-division has its largest production facility in Saint Damien, Canada, which produces waste carts, bulk packaging and material handling containers. The acquisition of Encore provided IPL Large Format Packaging and Environmental Solutions with a manufacturing presence in the United States with its three facilities. In November 2016, the Group approved a capital expenditure expansion project for the IPL South facility amounting to CAD$23.3 million. That project is well advanced with the majority of new machines being commissioned in the second half of Management s objective during 2018 with regards to IPL South is to improve the utilisation and efficiency of the newly installed injection moulding machines. IPL Large Format Packaging and Environmental Solutions continues to experience growing demand for its products in Canada and the United States. The capacity challenge facing the business around continually satisfying customer demand requirements is being addressed on an ongoing basis by subcontracting and by capital expenditure projects. The IPL Large Format Packaging and Environmental Solutions management team are focused on core strategic pillars to drive their business namely: Expand the business geographically by leveraging the Encore acquisition and capital investment in Forsyth, Georgia the IPL South platform in the US; Focus on organic growth through the continued leveraging of the operational management teams, products and processes and the development of operational efficiencies; and Emphasis on innovation to advance products that differentiate Large Format Packaging and Environmental Solutions with a capability to standardise and produce to a global scale.

23 IPL Plastics plc Annual Report & Accounts 2017 MACRO Revenue EBITDA 47.5m 12.6m EBTIDA Margin** 26.5% * The results represent the period from acquisition on 9 June 2017 to 31 December ** EBITDA Margin is before the allocation of any IPL Plastics central overhead costs. On 9 June 2017, the Group acquired the entire share capital of Macro Plastics Inc., through IPL, for a total enterprise value of USD$150.0 million. Macro is one of the largest manufacturers of rigid plastic bulk bins worldwide and is a market leader in providing value added rigid plastic bulk packaging solutions to the agricultural and automotive sectors, and operates some of the largest bulk machines in North America. Headquartered in Fairfield, California, Macro operates three manufacturing facilities in California, Washington and Kentucky with dedicated design and testing capabilities together with an established international sales network. Macro offers a significant footprint for the Group s expansion in the strategically important US market and the growing South and Central American markets. Macro s product portfolio is complementary to IPL s existing business and is a significant step in IPL Plastics strategy to become a leading global player in the rigid plastics market. In particular, Macro provides the Group with a significant presence on the US West Coast, a key growth target of the Group. Management together with the core Macro team has been focused on the integration of the business into the IPL Group during the second half of The integration is complete with a clear strategic focus outlined in the business unit s newly developed five-year plan. Trading since the acquisition of Macro has been solid and the business has delivered full year results for 2017 ahead of our expectations announced at the time of acquisition. Macro also received the first tranche of orders from a very significant automotive related contract at the end of 2017 which was anticipated at the time of acquisition. The three Macro manufacturing plants in Shelbyville (Kentucky), Union Gap (Washington) and Fairfield (California) occupy approximately 800,000 square feet of manufacturing and storage space and employs approximately 135 people. Macro operates 18 moulding machines across its 3 sites. It has performed ahead of expectations since acquisition delivering 47.5 million in revenue and 12.6 million in EBITDA in the period since acquisition to 31 December Macro s traditional and largest revenue generating sector is its core agricultural business where it sells bulk bins directly to large farms and food producers. Macro has diversified into other sectors including into the automotive market with industrial bins for supply chain logistics, and also into the temporary flooring market. These new product lines, while accounting for a smaller proportion of revenue presently, are expected to be a significant driver of Macro s future revenue growth. Macro s key strategic priority is to grow the business organically through the introduction of innovative products and by expanding into new markets within North America, South America and Europe. Management is cognisant of the opportunities and potential efficiencies that can be achieved by leveraging synergies around innovation, customer relationships and procurement activities. 21 Information Financial Statements Directors Report Strategic Report

24 Chief Executive s Review (continued) OPG 22 Revenue 114.1m (2016: 126.9m) and China sites, focused on electromechanical assemblies, food packaging and agri-retail products. EBITDA 13.1m EBTIDA Margin* 11.5% (2016: 17.2m) (2016: 13.5%) * The EBITDA Margin is before the allocation of any IPL Plastics central overhead costs. OPG operates from five sites across Ireland, the UK and China occupying approximately 400,000 square feet of manufacturing and warehousing space and employing over 500 people. OPG operates a modern and extensive suite of approximately 135 moulding machines across its sites. Revenue for the year in OPG was million (2016: million) and EBITDA was 13.1 million (2016: 17.2 million). The reduction in OPG revenue and EBITDA was driven by reduced demand from its largest customer, following the merger of that customer with another industry participant in the second half of 2016, and adverse currency movements from a weakening Pound Sterling. OPG comprised of two sub-divisions in 2017; Consumer Packaging ( Consumer Packaging Europe & China ) and Large Format Packaging and Environmental Solutions ( Large Format Packaging and Environmental Solutions Europe ). These subdivisions are explained below. CONSUMER PACKAGING EUROPE & CHINA Consumer Packaging Europe & China operates from two manufacturing sites in Ireland and China occupying c. 150,000 square feet of manufacturing and warehousing space and employing c.190 people. It operates a modern and extensive suite of 56 injection moulding machines across its Cork Consumer Packaging Europe & China maintains leading market positions in the following market sectors: Packaging rigid plastic packaging, including IML offerings, for the retail food, food service, adhesive coating, agricultural, pharmaceutical, material handling and other industrial markets in the UK and Ireland; and Electromechanical Assemblies manufacturing and supply chain partner to blue chip customers in the electronics industry. Consumer Packaging Europe & China financial performance in 2017 was impacted by reduced demand from its largest customer, following the merger of that customer with another industry participant in the second half of 2016 and the slower than anticipated ramp up in the food grade plastics packaging offering. Consumer Packaging Europe & China has continued to develop its product offering in the food grade packaging sector targeting the large retail food packaging market in the UK and Ireland. While the pipeline of potential contracts in the market is healthy, traction following the commissioning of the new food grade plastics packaging manufacturing facility has been slower than expected. There continues to be significant capacity for growth and the expected improvement in volumes and product mix through 2018 will help boost margins. The key strategic and tactical actions identified by Management which will underpin the current business and drive growth are aligned with the overall Group objectives and include: The delivery of organic growth through increased focus on opportunities within existing key customer relationships and utilising and building the pipeline to fill the existing capacity in the state of the art food packaging facility; The optimisation of synergies through leveraging the IPL Consumer Packaging brand, contacts and processes with existing blue chip global companies; and

25 IPL Plastics plc Annual Report & Accounts 2017 The Identification of acquisition opportunities to grow the Group s European presence. Consumer Packaging Europe & China opened their Innovation Centre of Excellence ( ICE ) in Cork in April ICE has strong links with the already established North American innovation centre and together they will focus on bringing cutting edge products to market. These dedicated innovation centres will provide the basis upon which Consumer Packaging Europe & China will bring products from their initial concept phase, through design, stress testing and simulation to full production. In Ireland, the Cork site supplies a range of containers to the agricultural and decorative coatings industries, and also manufactures bespoke products for multinational companies serving the food packaging, nutrition, pharmaceutical and computer storage sectors. The manufacturing plant in China supports the Irish operation by producing bespoke electromechanical assemblies for the computer storage sector which allows it to support the global supply chain of its customers. LARGE FORMAT PACKAGING AND ENVIRONMENTAL SOLUTIONS EUROPE Large Format Packaging and Environmental Solutions Europe operates from three manufacturing sites across the UK occupying c. 290,000 square feet of manufacturing and warehousing space and employing c.290 people. Large Format Packaging and Environmental Solutions Europe operates a modern and extensive suite of over 81 machines across its sites. Large Format Packaging and Environmental Solutions Europe has enjoyed growth driven by an increased market share in its Environmental Containers business and the acquisition of Straight plc in Large Format Packaging and Environmental Solutions Europe maintains leading market positions in the following market sectors: Environmental Containers wheeled bins, boxes and caddies for the waste management and recycling industries; Packaging rigid plastic packaging, including IML offerings, for the industrial and food market sectors; and Industrial Products manufacturing partner to blue chip customers in the construction, furniture and material handling sectors in the UK. Financial performance in 2017 was significantly improved on 2016 with EBITDA growth of 9% (prior to the allocation of OPG central overheads) even though revenue only increased by 1%. Performance in 2017 was driven by growth in the packaging and industrial products business combined with management s successful implementation of cost saving initiatives including process automation and tighter material margin management at the sites throughout the year. Overall sales growth has been tempered by an increasingly competitive market, reduced public tenders and a general slowdown of the UK economy. The results of the Large Format Packaging and Environmental Solutions Europe sub-division when translated into euro have been impacted by the weakening Pound Sterling. Large Format Packaging and Environmental Solutions Europe will now look to expand its presence in the industrial and packaging sectors of the UK, building on the capital investment in the packaging business carried out in 2016 and an expansion into the material handling sector has seen positive developments on the back of the investment in 2016 with the return of a significant customer to the business under a medium-term supply agreement. The year also saw the successful launch of new proprietary product offerings in the packaging and material handling sector and continued strong market penetration of our innovative recycling solutions. Large Format Packaging and Environmental Solutions Europe s organic growth strategy is to strengthen its market position in the three sectors in which it operates and focus on operational efficiencies through innovation and operational excellence. This strategy can be further developed through appropriate and timely acquisitions, which will grow Large Format Packaging and Environmental Solutions Europe s market presence, product offering and earnings profile. 23 Information Financial Statements Directors Report Strategic Report

26 Chief Executive s Review (continued) 24 GROUP STRATEGY The Group s strategy is focused on the development and growth of our core operations, through both organic and acquisition led initiatives. The rationale for pursuing this strategy is clear. The rigid plastic packaging market is the largest component of the plastics packaging market. The rigid plastic packaging segment is driven by innovation, the substitution effect (from traditional forms of packaging), increasing population growth and urbanisation. This growth has primarily come as a result of growing demand in emerging markets, but also at the expense of traditional pack types such as glass bottles and jars, liquid cartons and metal cans. Plastic is commonly preferable due to its lightweight construction, shatter resistance and the flexibility to mould into various shapes. Demographic trends including aging populations, urbanisation and emergence of smaller households have all altered the market. We believe that IPL Plastics is well positioned in terms of scale, size, technological capabilities, geographic footprint and management expertise to exploit these market opportunities. The acquisition of Macro during the year, along with the development capital expenditure programmes in North America, Ireland and the UK, and the disposal of the SES UK and Irish businesses supports the strategic objectives of the IPL Plastics Group. Development and growth of our plastics business will be achieved through focusing on higher margin opportunities with good growth characteristics and clear competitive advantages and by implementing our lean operating processes and financial management experience, leveraging cross-selling opportunities and exploiting cost synergies from acquired businesses. The operating model for the coming years is focused on: Fully realising the synergy potential across our business units, including sharing of technical expertise, leveraging collective intellectual property and customer relationships, and procurement efficiencies; The pursuit and realisation of higher margin sales opportunities, focusing on customers with valueadd requirements; A more systematic targeting of the European and US markets (from an IPL Plastics perspective) for consumer packaging, waste carts and bulk packaging through a stronger and more coordinated sales effort and through acquisition; and The realisation of cost efficiencies in production including, but not limited to, a more stringent commercial evaluation of capital investments and the increased automation of production. Given the strong organic growth experienced by the IPL division, including the recent acquisitions, we are investing heavily in development capital investment projects to facilitate an expansion of the product range and to drive continued improvements in operating margins. MANAGEMENT AND EMPLOYEES I would like to thank management and employees, both long serving and more recent members of the Group, for their continued hard work, support, commitment and dedication. All that has been achieved in recent years would not have been possible without the significant efforts of all our people.

27 IPL Plastics plc Annual Report & Accounts 2017 The acquisitions of IPL, Encore and Macro together with a number of significant development capital expenditure programmes across the business, has greatly increased the geographic footprint, market offering and product range and puts the business on a strong footing for future growth. CONCLUSION As we move forward into 2018, the Group is cognisant of elevated levels of global risk factors, including stock market, currency and interest rate volatility, an uncertain global economic climate and the outlook for the UK economy depending on the final agreed terms of Britain s proposed exit from the EU. Despite these challenges, we are confident in the robustness of the business strategy and the ability of the Group to develop profitably and increase shareholder value into the future was a year characterised by a strong performance for the Group, with our businesses delivering overall growth in key performance metrics despite facing and overcoming various challenges in their end markets. In addition, the acquisitions of Encore and Macro, together with a number of significant development capital expenditure programmes across the business, have significantly increased the Group s geographic footprint, market offering and product range and puts the business on a strong footing for future growth. The Group has now reached considerable scale on an international level in the rigid plastics packaging sector with growth platforms in place providing income streams in multiple geographies and end markets. Having the appropriate capital structure, having access to alternative forms of capital and enhancing liquidity in the Company s shares are continuing key areas of focus for the Group. I am excited about the future growth prospects for the business as we continue to identify and explore a number of significant development opportunities, both organic and acquisition led. With the authorities provided by our shareholders at the 6 December 2017 EGM, together with the recent reorganisation of the IPL Inc. structure, our plans, including identifying the optimal listing structure, are now advanced for an IPO and stock market listing during 2018, subject to market conditions. A stock market listing would provide, in due course, our shareholders with a liquid market for their shares. Having access to an equity market would provide the Group with access to equity capital to finance the available development and growth opportunities to continue to strengthen the position of the business and drive future increases in shareholder value. Alan Walsh Chief Executive Officer 8 March Information Financial Statements Directors Report Strategic Report The results in the second half of 2017 were adversely impacted by increased resin prices and transportation costs, together with the decline in the value of the Canadian and US Dollars. These trends have continued into The Group s overall 2018 results should start to see the full year earnings impact of some of the capital expenditure programmes commissioned in the latter half of 2017, coupled with a full year s contribution from Macro, which was acquired in June 2017.

28 Financial Review 26 The trading performance of the Group in 2017 was ahead of expectations and the Group ended the year in a solid financial position. Overall EBITDA Margins (12.7% in 2016 to 14.9% in 2017) and the Adjusted Earnings per Share metrics improved as a consequence of the strong performance of IPL driven by the organic growth in North America (both Canada and the United States) and the contribution in the period from the acquisition of Macro in June We invested heavily in development capital expenditure projects in 2016 and 2017, the benefit of which should flow to earnings in future years. Pat Dalton Chief Financial Officer

29 IPL Plastics plc Annual Report & Accounts 2017 HIGHLIGHTS The operating financial highlights for 2017 were as follows: Revenue (excluding discontinued operations) increased by 36.2% year on year to million (2016: million), due primarily to a strong performance from IPL, the full year contribution of Encore and results from Macro since its acquisition; Group EBITDA (excluding discontinued operations before exceptional items, nonrecurring items and the Group s share of equityaccounted investees profits) showed an increase from 48.5 million in 2016 to 70.9 million in 2017; Group profit for the year from continuing operations before tax and before exceptional items amounted to 26.3 million (2016: 25.4 million). Included in this number is a credit of 1.8 million (2016: 3.9 million), being the Group s share of Altas Investments plc s ( Altas ) profit for the year; Group profit for the year before exceptional and non-recurring items and the Group s share of equity-accounted investee profits amounted to 19.6 million (2016: 17.9 million); Group profit for the year was 17.6 million compared with 16.1 million in 2016; Total equity at 31 December 2017 amounted to 82.7 million compared with million at 31 December 2016, the 47.5 million increase in the fair value of the Put Liability (as described on pages 32 and 33) relating to the IPL 33.3% shareholding not owned by the Group, being the key driver. Total equity was also negatively impacted by unfavourable foreign currency translation movements of 16.4 million. Excluding the effect of the Put Liability, there was a 6.1% increase in total equity year on year, from million to million at 31 December 2017; and Net debt (excluding Convertible Loan Notes) increased during the year by 80.5 million to million at year end (2016: million), the increase caused primarily by the drawdown of bank borrowings to fund the Macro acquisition and capital expenditure projects. Group profit was impacted favourably by 1.8 million (2016: 3.9 million), being the Group s share of after tax profits of its equity-accounted investee, Altas. It was impacted unfavourably by a net 3.8 million charge (post-tax) relating to exceptional and non-recurring items (2016: 5.8 million). These items are summarised below in this review, and in notes 4 and 7 to the financial statements. Amounts included in the Group Income Statement relating to discontinued operations in the current and prior year, include those of the Metals Ireland recycling businesses and the Irish and UK SES businesses. A full segmental analysis including continuing and discontinued operations results is set out in note Information Financial Statements Directors Report Strategic Report

30 Financial Review (continued) 28 KEY PERFORMANCE METRICS The Group uses a number of key performance metrics to assess its financial performance Revenue growth (continuing operations) 36.2% 18.6% 32.4% EBITDA growth (continuing operations) 46.0% 53.1% 67.1% EBITDA margin 1 overall 14.9% 12.7% 9.9% Adjusted diluted EPS growth 8.8% 58.2% 30.5% Total equity growth (excluding Put Liability) 6.1% 3.2% 37.8% Operating cash flow m 55.5m 33.7m Free cash flow m 36.9m 18.4m Net debt increase ( 80.5m) ( 32.2m) ( 112.9m) EBITDA Interest cover (times) 5.2x 6.2x 6.3x Net Debt: EBITDA (times) 3.3x 2.8x 3.3x 1. EBITDA margin represents EBITDA as a percentage of revenue. 2. Operating cash flow reflects the cash generated by operations excluding the impact of investing and financing activities. Further detail on the calculation is included in Note 32 to the financial statements. 3. Free cash flow represents the net cash inflow from operating activities adjusted to include finance costs, income tax and maintenance capital expenditure amounts paid. ACCOUNTING POLICIES AND BASIS OF PREPARATION OF THE 2017 FINANCIAL STATEMENTS The Group s financial statements are prepared in accordance with International Financial Reporting Standards ( IFRSs ) and their interpretations issued by the International Accounting Standards Board ( IASB ) as adopted by the EU and in accordance with IFRSs as issued by the IASB. Details of the basis of preparation and the significant accounting policies of the Group are included in note 1 on page 91. REVENUE Group revenue (excluding discontinued operations) increased in 2017 to million from million in Revenue can be analysed as follows: m m IPL OnePlastics Group Macro Other reconciling items* Discontinued operations * Other reconciling items represents the Revenue from the Metals South UK business Revenue grew significantly in the year, primarily due to the impact of continued organic growth in the US and Canadian markets, the full year s revenue from Encore acquired in November 2016 and the impact of Macro acquired in June A detailed commentary on the trading performance for the year is included in the Chief Executive s review on pages 11 to 25.

31 IPL Plastics plc Annual Report & Accounts 2017 EBITDA Management believes that EBITDA, while not defined under IFRSs, provides a fair reflection of the underlying trading performance of the Group. The Group believes that this measure provides useful historical financial information to help investors evaluate the performance of the underlying business and is a measure commonly used by certain investors and securities analysts for evaluating the performance of the Group. EBITDA represents earnings before interest, tax, depreciation, amortisation, exceptional items, non-recurring items and the Group s share of profit from its equity-accounted investees. EBITDA is reconciled to the income statement in note 3 to the financial statements. Total EBITDA (excluding discontinued operations) increased by 46.0% to 70.9 million in 2017 (2016: 48.5 million). This is analysed as follows: m m IPL OnePlastics Group Macro Other reconciling items* (0.7) (0.3) Discontinued operations * Other reconciling items represents the Group s central costs and the contribution from the Metals South UK business The overall EBITDA result was positively impacted by the inclusion of Encore s results for the full year 2017 and the contribution of 12.6 million from Macro since its acquisition in June IPL contributed 45.9 million (2016: 31.6 million) to EBITDA in the year. The performance of the OnePlastics business was mixed with an overall decrease in OPG s EBITDA to 13.1 million (2016: 17.2 million). The UK business continues to perform solidly delivering improved results when compared to 2016, despite ongoing political and economic uncertainties in the UK. OPG EBITDA was negatively impacted in the amount of 0.8 million year on year due to a weakening Pound Sterling. The Irish business has been negatively affected by reduced demand from the Group s largest customer and delays in embedding new customers into the new food grade facility in Cork which was commissioned for full production in Information Financial Statements Directors Report Strategic Report

32 Financial Review (continued) 30 EXCEPTIONAL & NON-RECURRING ITEMS CONTINUING AND DISCONTINUED OPERATIONS The table below summarises the exceptional and non-recurring items which have impacted on the 2017 financial results m m Non-recurring items expense/(credit) 3.3 (1.3) Non-recurring income tax credit (8.0) - Total non-recurring items (4.7) (1.3) Gain on settlement of loan with third party (0.1) (4.0) Transaction related costs Acquisition, aborted acquisition and post acquisition integration costs Restructuring costs Other items (0.6) 1.2 Loss on disposal of subsidiary/discontinuation of operations Exceptional income tax credit (1.1) (0.3) Total exceptional items Total net charge to income statement Of the net charge of 3.8 million (2016: 5.8 million), a net charge of 0.6 million (2016: net credit of 0.6 million) relates to continuing operations and a net charge of 3.2 million (2016: 6.8 million) relates to discontinued operations. Non-recurring items in the current year include income of 1.4 million (2016: 3.0 million) relating to the Group s investment in Pioneer Green Energy LLC offset by a related tax charge of 0.2 million. This has been included in other operating income. A once off non-cash income tax credit of 8.2 million has been recognised arising from the recently enacted Tax Cuts and Jobs Act in the US, which will reduce the federal corporate income tax rate from 35% to 21% from 1 January Non-recurring items for 2017 also include charges related to redundancy payments and significant startup costs on expansion projects in the USA and Canada. The prior year non-recurring credit is made up of an amount related to continuing operations of 2.1 million offset by a charge related to discontinued operations of 0.9 million. Note 4 to the financial statements outlines the non-recurring items in further detail. Exceptional items incurred include costs in respect of the acquisition of Macro, disposal of the SES businesses, significant management restructuring and fees in relation to corporate transactions in the year. Further details on the nature and background of these exceptional costs are set out in note 7 to the financial statements.

33 IPL Plastics plc Annual Report & Accounts 2017 NET FINANCE COSTS Net interest payable increased by 4.9 million to 13.8 million in 2017 (2016: 8.9 million) due primarily to the full year effect of the drawdown of bank borrowings for the purposes of acquiring Encore in November 2016, and the drawdown of funds in respect of the acquisition of Macro in June The average interest rate paid by the Group in 2017 was 4.73% (2016: 4.29%). Included in the 2017 charge is an amount of 0.1 million for convertible loan note interest (2016: 0.1 million). The EBITDA to interest cover ratio at 31 December 2017 was 5.2 times (2016: 6.2 times). TAXATION The tax credit for the year was 0.9 million (2016: 3.5 million charge). The income tax expense (excluding exceptional and non-recurring amounts) increased by 4.4 million which is primarily due to continued growth in the IPL business in 2017 and the acquisition of Macro. The 2017 charge is offset by a once off non-cash tax credit of 8.2 million arising from the recently enacted Tax Cuts and Jobs Act in the US, which will reduce the federal corporate income tax rate from 35% to 21%, from 1 January PROFIT FOR THE YEAR Profit for the year was 17.6 million compared to 16.1 million for the prior year. ADJUSTED EARNINGS PER SHARE Management believe that Adjusted Earnings per Share provides a fair reflection of the underlying trading performance of the Group before taking into account the impact of exceptional and non-recurring items and the Group s share of after tax equity-accounted investees profits. Adjusted Earnings per Share and adjusted fully diluted Earnings per Share is calculated by dividing the adjusted profit attributable to ordinary shareholders (which excludes exceptional and non-recurring items and the Group s share of after tax equity-accounted investees profits) by the weighted average number of Ordinary Shares outstanding. In the case of adjusted fully diluted Earnings per Share, the number of outstanding Ordinary Shares is adjusted for the effects of all Ordinary Shares and options with a dilutive effect. In the current year, the adjusted basic Earnings per Share is cent (2016: cent). The adjusted diluted Earnings per Share is cent (2016: cent). 31 Information Financial Statements Directors Report Strategic Report Further details on earnings per share are included in note 12.

34 Financial Review (continued) 32 GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME The table below summarises the movements in the Group s Statement of Other Comprehensive Income (excluding the profit for the year) m m Foreign currency translation differences1 (16.4) (10.2) Share of Altas Investments plc s other comprehensive income (0.3) (1.2) Available-for-sale financial assets net change in fair value2 (2.1) 0.8 Tax impact on foreign currency translation differences Translation reserve on disposal of subsidiary Total other comprehensive income (15.9) (10.6) 1. The statement of other comprehensive income on page 86 contains a 16.4 million net accounting loss on the retranslation of the net investment in foreign operations (2016: net loss of 10.2 million). This is a non-cash adjustment in the Group financial statements and represents an accounting adjustment for the impact of translating non-euro assets and liabilities into euro from the end of the previous financial year to the end of the current financial year for assets/ liabilities held throughout the year, and for the impact of the movement in exchange rates from the date of acquisition to the end of the current financial year for those assets/liabilities acquired during the year. The most significant exchange rate movements which impacted on the Group were the euro/us Dollar rate which moved from USD$ at 31 December 2016 to USD$ at 31 December 2017 and the euro/canadian dollar rate which moved from CAD$ at 31 December 2016 to CAD$ at 31 December Euro to Sterling rate strengthened by 3.62% from 31 December 2016 to 31 December Included in the statement of other comprehensive income are the fair value movements on the Group s available-for-sale financial assets. In the current year, the Group recognised a loss of 2.1 million (2016: gain of 0.8 million) in the statement of other comprehensive income, arising on a decrease in the fair value of the shares held by the Group in Aryzta AG and a reduction of the fair value of the investment in Pioneer Green Energy LLC to Nil. PUT LIABILITY IN RESPECT OF IPL 33.33% MINORITY SHAREHOLDING The Group s liability in respect of the 33.33% shareholding in IPL that it did not own at 31 December 2017 amounted to million at year end (2016: 72.2 million). When the Group acquired its 66.67% controlling interest in IPL in July 2015, it applied a basis of accounting called the anticipated-acquisition methodology on the basis of there being a Put and Call option in the Shareholders Agreement. This effectively meant that the Group anticipated acquiring the remaining 33.33% in July 2021, the date from which the Put and Call option becomes exercisable. The effect of this is that instead of attributing a share of profit or loss, other comprehensive income and net assets to the minority shareholders, the Group carries a Put Liability, measured at fair value, representing the anticipated consideration required to acquire the minority interests shareholdings in July 2021, discounted to present value. An anomaly from an accounting perspective is that the Group carries its 66.67% shareholding in IPL on a historic cost book value basis whereas the Put Liability is carried at fair value, taking into account future profitability, growth and indebtedness.

35 IPL Plastics plc Annual Report & Accounts 2017 The net asset value of IPL in the Group s financial statements on a historic cost book value basis is million at 31 December 2017, which would imply the minority shareholders share of these being 45.0 million. Due to the fair value accounting methodology being applied, the Put Liability in respect of the minority shareholdings is carried at million at year end. 33 The reason for the significant increase in the Put Liability from 31 December 2016 is primarily due to increases in IPL s actual trading performance, change in capital structure, budgeted future earnings performance due to growth in its existing business and also the effect of the Macro acquisition in June These projections are based on the Board approved IPL Budget for 2018 and the plan for 2019 and 2020, applying a steady growth rate to earnings after that period and then discounting these to present value. On 6 December 2017, shareholders approved a reorganisation of the existing IPL Inc. shareholding structure by agreeing to an exchange of the minority shareholders equity interests in IPL Inc. for shares in the Company. On 28 February 2018, the minority shareholders equity interests in IPL Inc. were exchanged for 47,238,242 shares in IPL Plastics plc, under the authority given by shareholders at the EGM on 6 December The completion of this transaction has the effect of settling the Put Liability from 28 February There was no significant difference between the fair value of the Put Liability at the exchange date and as at 31 December Note 28 to the financial statements outlines in more detail the assumptions and judgements used in the Put Liability calculation and also the effect of the key sensitivities on the calculation. TOTAL EQUITY Total equity, excluding the IPL Put Liability, has increased from million in the prior year to million at the end of Including the Put Liability, total equity has decreased from million to 82.7 million. The table below explains the main drivers of the increase in the total equity of the Group: m m Total equity at the beginning of the year Profit for year Movement in Put Liability relating to IPL (including translation movement) (38.6) (39.9) Foreign currency translation differences (16.4) (10.2) Tax impact on foreign currency translation movements Other amounts included in other comprehensive income Total equity at the end of the year Put Liability at 31 December relating to IPL Total equity at year end (excluding Put Liability) Information Financial Statements Directors Report Strategic Report

36 Financial Review (continued) 34 NET DEBT m m Cash Bank loans relating to IPL (202.3) (104.6) Bank loans non-ipl (39.6) (55.3) Other loans relating to IPL (includes subordinated term borrowings) (30.5) (32.5) Finance leases (0.3) - Net debt (233.0) (152.5) million of the cash balances are held by IPL (2016: 23.3 million). The definition of net debt is defined by the Group as cash at hand and in bank less bank overdrafts and loans, less finance lease obligations. The definition of net debt excludes Convertible Loan Notes (see note 25). Bank and subordinated term loans included above are different by 4.4 million (2016: 4.5 million) from those amounts included in the statement of financial position as the above amounts reflect the actual balances due to the lenders at the year end. The amounts included within the statement of financial position are calculated under the effective interest rate method as prescribed by IAS 39. CAPITAL STRUCTURE The Group is financed principally through a combination of equity, bank borrowings, subordinated debt and free cash flow generated from operations. At 31 December 2017, the Group had net debt of million (2016: million). Bank facilities are provided by separate Irish and Canadian banking syndicates. The Irish banking syndicate has provided 92.0 million of committed funding facilities which is due to mature in December On the acquisition of IPL in July 2015, the Group entered into a credit agreement with a syndicate of Canadian banks. During 2016, prior to the acquisition of Encore and again in May 2017 as part of the acquisition of Macro, this facility was further renegotiated and increased. The amended credit agreement provides for committed facilities of CAD$344.1 million ( million), with CAD$289.1 million ( million) provided by way of term loan (including two USD denominated term loans of USD$125.0 million and USD$32.9 million each) and CAD$55.0 million ( 36.6 million) provided under a revolving facility. This credit agreement expires in July 2021, with an extension negotiated during the year from the original maturity date of July The Canadian facility is separate to the Group s other facility and is ringfenced to the IPL business. The subordinated loans, which amounted to 29.9 million at 31 December 2017 (2016: 31.7 million) are provided by the Canadian minority shareholders in IPL and Investissement Quebec. The Group s bank debt facilities provide the Group with the flexibility to take advantage of opportunities to develop the business, focusing on organic growth and strategic acquisitions which enhance shareholder value.

37 IPL Plastics plc Annual Report & Accounts 2017 TRANSLATION OF FOREIGN CURRENCIES The presentation currency of the Group is euro which is the functional currency of the parent. IPL Plastics has significant investments in non-euro denominated operations. The Group seeks to manage the resultant foreign currency translation risk through borrowings, where possible, denominated in the relevant currency. To the extent that such borrowings are not sufficient to fully hedge the investment in non-euro denominated operations, the Group has a net foreign exchange exposure to non-euro net assets. Adjustments arising on the translation of the results of the foreign currency denominated operations at the average rates, and on the restatement of the opening net assets at closing rates, are accounted for within a separate translation reserve within equity (i.e. within the statement of other comprehensive income), net of differences on related foreign currency borrowings to the extent they are effective. The total movement in the year through other comprehensive income was a charge of 14.8 million (excluding movements relating to the Put liability), which includes 1.6 million of a credit being the reclassification of existing translation reserve to the income statement on disposal of the SES businesses. Results and cash flows of the foreign currency denominated operations have been translated into euro at the average monthly exchange rates for the year and the related statements of financial position have been translated at the rates of exchange prevailing at the statement of financial position date. The reported revenues in 2017 were adversely impacted by foreign currency exchange rate movements, primarily Pound Sterling in the amount of 6.9 million, when compared with All other translation differences are recorded in the income statement. The principal rates used in the translation of the results and statements of financial position into euro were as follows: Average rate Closing rate % Change % Change Canadian Dollar (0.15) Chinese Renminbi Pound Sterling US Dollar Greater than 95% of the Group s EBITDA for the year ended 31 December 2017 was denominated in currencies other than euro, primarily Canadian Dollar, US Dollar and Pound Sterling. IPL Plastics hedged a significant amount of its translation exposure on the profits of these non-euro subsidiaries during the year. This was done in accordance with the Group s internal Treasury Management policy, overseen by the Group s Treasury function, which reports regularly to Group management and the Group s Audit Committee. 35 Information Financial Statements Directors Report Strategic Report The Group has ongoing operational trading exposures to multiple currencies, principally euro, Pound Sterling, Canadian Dollar and US Dollar. Management requires all Group operations to manage their foreign exchange risk against their functional currency. There are also non-trading exposures related to intra-group relationships. The translation gain on these foreign exchange exposures throughout the Group are included in other operating income (note 4) and amounted to 0.1 million (2016: 1.9 million) in respect of continuing operations.

38 Financial Review (continued) 36 The Group also manages the foreign exchange risk (through the utilisation of forward foreign currency contracts) as it pertains to foreign currency exchange rate movements versus the euro budget for the year and in addition, the Group manages the foreign currency exchange rate movements where there are significant amounts of sales or purchases invoiced in currencies other than the local operating business unit currency. The Group had a gain of 2.0 million (2016: 0.7 million) in 2017 related to the settlement and mark to market adjustments of forward foreign currency contracts. FREE CASH FLOW Free cash flow represents cash generated by Group activities and available for reinvestment elsewhere, including the early repayment of debt. Free cash flow for 2017 was an inflow of 28.8 million (2016: 36.9 million) analysed as follows: m m EBITDA before exceptional and non-recurring items and Group s share of equity-accounted investee after tax profits Foreign exchange gains (0.1) (1.9) Exceptional and non-recurring items with a cash effect (excluding acquisition and disposal related exceptional costs) (6.7) (2.0) Working capital movements 1 (13.7) 9.9 Other (1.0) (0.5) Net cash inflow from operating activities (before tax) Maintenance capital expenditure 2 (5.6) (10.2) Finance costs paid (net) (13.4) (9.2) Income tax paid (1.6) (4.4) Free cash flow Development capital expenditure (37.9) (21.5) Acquisitions (including related costs) (124.2) (22.2) Disposal of subsidiary undertakings and other property, plant and equipment (including disposal costs) Distributions received Net debt acquired on purchase of subsidiary (10.4) (21.1) Other including effect of movements in exchange rates (10.9) Movement in net debt in the year (80.5) (32.2) 1. Excludes Nil (2016: 0.9 million) of working capital funding post acquisitions. 2. Maintenance capital expenditure is the minimum capital expenditure that a business must spend to maintain current output and continue to exist in its current state. Maintenance capital expenditure in respect of continuing operations amounted to 5.6 million in the year (2016: 7.7 million). 3. The most significant amount included in this balance is foreign exchange movement arising on foreign currency borrowings.

39 IPL Plastics plc Annual Report & Accounts 2017 CAPITAL EXPENDITURE Cash outflows in respect of capital expenditure amounts to 43.5 million in 2017 (2016: 31.7 million) inclusive of development capital expenditure of 37.9 million (2016: 21.5 million) Development Maintenance Total Development Maintenance Total m m m m m m IPL Macro OPG Other Discontinued Operations Total The Group invested heavily in capital expenditure in 2016 and 2017 as new customer led organic growth opportunities were identified. These investments will enable the Group to accelerate its geographic expansion and customer reach to meet significant and growing market demand for its products. The intensive capital investment in the Group has contributed to a significant increase in our overall carrying amount of property, plant and equipment, which has increased from million at 31 December 2016 to million at 31 December Capital additions during the year amounted to 50.0 million, an increase of 16.4 million on the prior year. The acquisition of Macro in June 2017 increased the carrying value of fixed assets by a further 42.0 million. The carrying amount of property, plant and equipment that relate to assets under construction was 25.8 million at 31 December 2017 (2016: 9.8 million). 37 Information Financial Statements Directors Report Strategic Report

40 Financial Review (continued) 38 INVESTMENTS IPL Plastics continues to hold a 23.6% interest in Altas Investments plc ( Altas ) and a 13.7% stake in Pioneer Green Energy LLC ( Pioneer) and also holds a 25% stake in Rilta Environmental Limited ( Rilta ). Rilta is part of the ClearCircle Ireland SES business that was disposed of in April 2017 (with an effective date of 1 January 2017). The Group s share of Altas profits in the year amounted to 1.8 million (2016: 3.9 million). The Group s interest in Altas is carried at 0.2 million at 31 December 2017 (31 December 2016: 4.0 million). During 2017, the Group received 1.4 million of dividend income (2016: 3.0 million) from Pioneer. The carrying value of our investment as at 31 December 2017 is Nil (2016: 1.2 million). The Group s 25% shareholding interest in Rilta is carried at 2.7 million as at 31 December The Group has also provided Rilta with a 5 million secured loan note with a coupon of 6%, which is included as a non-current receivable on the statement of financial position. CONCLUSION The results for 2017 were ahead of the expectations set at the start of the year. The strong organic growth experienced by the business in North America in particular in recent years led to a requirement for significant development capital expenditure investment, the scale of which very much depends on the utilisation levels and the structure of existing production facilities. The servicing of existing and new customer requirements has also required IPL Large Format Packaging and Environmental Solutions to engage in substantial subcontract arrangements during the year. The scale of the organic growth opportunities has placed increased operational and cost pressures on the business as new capital programmes are progressed and as the existing operations absorb and transition these projects. We will continue to add new capacity to existing production plants where the investment is underpinned by customer contracts and where we believe the increased organic growth opportunities are sustainable into the future. Following the impact of the hurricanes in the US, the Group s results for the second half of 2017 were adversely impacted by increasing resin and transportation costs. The results were also negatively impacted by a decline in the value of the US and Canadian Dollars against the euro. While the business does have substantial pass through arrangements in place with customers, there are in many cases contractual lags between the dates when resin prices actually increase and when such increases get passed on to customers. In a time of constant rising resin prices (which has been the situation since the start of the second half of 2017), that lag can continue for a number of months. The trading performance at the start of 2018 continues to be impacted by the adverse resin pricing, transport costs and foreign exchange rate movements. Our overall 2018 results should start to see the full year earnings impact of some of the new capital expenditure programmes commissioned in the latter half of 2017, coupled with a full year s contribution from Macro, which was acquired in June Pat Dalton Chief Financial Officer 8 March 2018

41 IPL Plastics plc Annual Report & Accounts 2017 Risk Management Risk Management Framework The Board is responsible for the overall risk management of the Company and recognises that managing risk through an effective Risk Management Cycle ( RMC ) is critical to the success of the business. Risk management is integral to the strategy of the Group and to ensuring the success of the business. The Group s risk management framework is designed to ensure that a robust process exists to assist management with risk identification, assessment, reporting and management. The Audit Committee supports the Board through the ongoing monitoring and review of the risk identification and assessment. The Chairman of the Audit Committee reports to the Board after each meeting on its activities in terms of risk management. 1 st Line of Defence Management Controls Internal Control Measures Senior / Executive Risk Committee The Executive Risk Committee is mandated by the Board and is responsible for developing the organisational risk structure for maintaining effective risk management systems throughout the Group. The Executive Risk Committee reviews and assesses on a continuous basis the principal risks faced by the Group, the controls in place to manage those risks and the related monitoring procedures. The risk management framework and system of internal controls are designed to provide reasonable, but not absolute assurance, that the key risks facing the business have been identified and mitigated, thereby safeguarding the assets of the Group. This approved framework consists of: The Group s Risk Policy Statement which outlines the Group s guiding principles in relation to risk management; The Group s Risk Management Strategy which outlines the roles and responsibilities in relation to Risk Management; and Board of Directors / Audit Committee 2 nd Line of Defence Financial Control Compliance Monitoring Functions 3 rd Line of Defence Internal Audit The Group s policies and procedures for risk management which are based on the Three Lines of Defence model: First line functions that own and manage risk; Second line functions that oversee and monitor risk; and Third line function that provides independent assurance. As mentioned above, the Group has a suite of Board approved policies and an internal control framework that are applicable across the Group. Compliance with the Company s risk management and internal controls framework is monitored through various means such as periodic divisional certifications of compliance and the work undertaken by the Group s internal audit function. The Group s internal audit function provides an independent and objective assessment of the effectiveness of the risk management and internal control process. 39 Information Financial Statements Directors Report Strategic Report

42 Risk Management (continued) Risk Management Cycle 40 Identify External events New products Acquisitions Changes to business Monitor & Report Key Reporting Indicators Loss data Issue Management Risk Appetite Assess Likelihood Impact Inherent Residual Mitigate Avoid Transfer Mitigate by controls Accept residual risk The objectives of the Group s RMC are to: Ensure risk management is a mandated and an integral part of all the Group s systems and decisionmaking processes; Create a robust control environment that reduces negative impacts to our business performance; Ensure a systematic, structured and timely approach to risk through continuous and consistent processes of risk identification, assessment, mitigation, monitoring and reporting, that are linked to the achievement and safeguarding of the Company s objectives; Support informed risk-taking that promotes business growth and success while recognising the risks associated with key decisions; Manage risk in accordance with best practice and legislative requirements; Prevent possible injury, damage or losses and reduce the cost of risk; and Raise awareness of the need for risk management with all employees across the Group. The objectives of the RMC are delivered through the Group s Risk Management Framework, which outlines the roles and responsibilities for managing risk and defines how risk management will be applied across the organisation.

43 IPL Plastics plc Annual Report & Accounts 2017 Roles and responsibilities in relation to Risk Management (I) THE BOARD OF DIRECTORS The Board of the Company is responsible for the overall risk management policy of the Group. The Board has delegated responsibility for the monitoring of the effectiveness of the Group s risk management system to the Audit Committee of the Group. Furthermore, the Board has delegated the day to day operational management of risk to the Executive Risk Committee who analyse the principal risks facing the Group. The Board receives an update at each board meeting on the principal risks facing the Group and on the risk mitigation activities in place, along with any planned actions. The Board also receives a briefing from the Chairman of the Audit Committee on the effectiveness of the risk management and internal control systems. The duties of the Board under the risk management framework include: Define the Group s Code of Conduct and Culture; Set the risk appetite and tolerance of the Group in achieving its strategic objectives based on the recommendations of the Board Committees; Monitor the nature and extent of the Group s principal risk exposures versus the defined risk appetite and tolerance; and Required annually to report to shareholders on their review of the effectiveness of the risk management and internal control systems in operation throughout the Group. (II) THE AUDIT COMMITTEE Under delegation from the Board, the Audit Committee is responsible for assessing and evaluating the overall effectiveness of the Risk Management Cycle of the Group. This cycle involves a continuous review of the process in place to identify, evaluate and mitigate the principal risks facing the Group. The Audit Committee receives risk management updates from the Head of Risk and Assurance on a regular basis, along with internal audit reports from the Group Internal Audit function on the effectiveness of risk management activities and internal controls. A detailed description of the activities of the Audit Committee is set out on pages 70 to 73. The duties of the Audit Committee under the risk management framework include: Delegated responsibility from the Board for reviewing the adequacy and effectiveness of the Group s system of internal controls and risk management activities; Advises the Board on current risk exposure versus risk appetite and future risk strategy; Keep under review the Company s overall risk assessment processes that inform the Board s decision making, ensuring both qualitative and quantitative metrics are used; Review regularly and approve the parameters used in these measures and the methodology adopted; The preparation of reports concerning internal controls and risk management activities; and Review and approve the statements to be included in the Annual Report of the Company. (III) THE EXECUTIVE RISK COMMITTEE The Executive Risk Committee is chaired by the Chief Executive Officer and includes the Chief Financial Officer, Company Secretary, Head of Risk and Assurance and the Group Financial Controller. Under delegation from the Board, the Executive Risk Committee meets at a minimum on a quarterly basis and in 2017 met four times. The Executive Risk Committee is responsible for the implementation of the risk management cycle and for maintaining the Group Risk Register. The Executive Risk Committee supports the Audit Committee under the risk management framework through continuous monitoring and assessment of the principal risks facing the Group and reviewing the adequacy of risk mitigation activities. The duties of the Executive Risk Committee under the risk management framework include: Developing the organisational structure and maintaining effective risk management systems including risk management policy and frameworks; Assist management in developing processes and controls to manage risk and provides guidance and training on risk management processes; 41 Information Financial Statements Directors Report Strategic Report

44 Risk Management (continued) 42 Facilitate and monitor implementation of effective risk management practices by Operational Management; Analyse on a continual basis the principal risks faced by the Group, the controls in place to manage those risks and the related monitoring procedures; Maintain the Group risk register of principal risks facing the Group; Support divisional and business management in identifying, assessing and monitoring their respective risks and controls; Monitor business performance, risk exposure, mitigation and internal controls; Consider any changes to business strategy which impact on the Group s risk environment and material risks and controls; Give due consideration to laws and regulations, the provisions of the Code and the requirements of any relevant listing authority and associated guidance; and At least annually, review its terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval. The Group s Risk Management Cycle facilitates the identification, evaluation and assessment of risks, as well as a process for continuously monitoring the effectiveness of the mitigation activities. The RMC involves a bottom-up and top-down approach to ensure a comprehensive evaluation of risk is performed which is continuously monitored and reviewed. In assessing the potential impact and likelihood of each risk identified, management assess the controls in place and in turn evaluate the residual risk. A standard scoring matrix is applied across the Group to ensure consistency in scoring. The divisional and corporate risk registers are consolidated into a Group risk register. These principal risks of the Group are set out on pages 44 to 51. (IV) DIVISIONAL MANAGEMENT (OPERATIONAL MANAGEMENT) Divisional management are responsible for ensuring that risk management is embedded in their day to day operations, for continuously monitoring the risks facing their division and for updating their risk register monthly. The divisional management teams work closely with the Head of Risk and Assurance and the Head of Environmental, Health, Safety & Sustainability ( EHS&S ) to ensure a robust risk management process is in place throughout their division, which ensures that new risks are identified early, comprehensively assessed, escalated and mitigated appropriately. The duties of Divisional Management under the risk management framework include: Responsible for risk identification, measurement, mitigation and assignment of risk management responsibilities at operational level (ownership and management of risk); Ensure risk management processes and internal controls are embedded throughout the divisions and that such processes and controls are consistent with risk management goals and objectives; Maintain and update the divisional risk registers; Implement corrective actions to address process and/or control deficiencies; Monitor business performance and uses risk management to support decision making; and Encourage open communication on risk matters.

45 IPL Plastics plc Annual Report & Accounts 2017 (V) GROUP INTERNAL AUDIT Group Internal Audit is responsible for reviewing the risk management activities and internal control processes of the Group. The internal audit function of the Group was outsourced to Deloitte in Deloitte report to the Chairman of the Audit Committee and work closely with the Head of Risk and Assurance on a regular basis in the performance of their duties. The Group Internal Auditor prepares an annual risk based internal audit plan which is agreed with the Audit Committee. The duties of Group Internal Audit under the risk management framework include: Responsible for reviewing the risk management and internal control processes throughout the Group; Identifying areas of improvement and providing independent and objective assurance and reporting on risk matters to the Audit Committee; and Develop a risk based internal audit programme, which is approved by the Audit Committee. (VI) ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY The Head of EHS&S is responsible for the overall Environment, Health, Safety & Sustainability framework across the Group. The Group is committed to conducting business in a safe and environmentally sustainable manner that promotes the health of our employees, customers, community and the environment. Safety is a key focus for the Board and management of the Company, considering there are circa 1,900 employees at all production facilities, warehouses and administrative offices. To maintain a safe workplace, we are focused on: eliminating serious injuries by managing critical risk areas; determining which operating sites may require specific attention to improve safety; strengthening processes and knowledge sharing about all aspects of safety; adopting best practices across all business groups; and Prevent and minimise adverse environmental impacts, including waste, emissions and discharges from our operations. Co-ordinated by the Head of EHS&S, our Health & Safety committees monitor safety performance and actively responds to safety trends in our business. We conduct internal audits and facilitate external customer audits at all our plants on an ongoing basis. Using findings from these audits, our professional safety leaders plan and carry out actions for continuous improvement. All divisions provide monthly reports to the Head of EHS&S on safety performance and compliance with Company policies and local legislation. 43 Information Financial Statements Directors Report Strategic Report

46 Risk Management (continued) Principal risks and uncertainties 44 Risk management is the responsibility of the Board and is under continuous review and assessment given its significance to the Group s ongoing performance and the achievement of the Group s overall strategic objectives. The Board is responsible for establishing and ensuring that appropriate systems and controls are in place and maintained throughout the Group to ensure that compliance is maintained. Under delegation from the Board, the Audit Committee is responsible for assessing and evaluating the overall effectiveness of the risk management cycle of the Group. The risk management framework in place is designed to ensure that a robust process exists to assist management with risk identification, assessment, reporting and management throughout the Group. The Board acknowledges that there are a variety of risks facing the Group, and set out below the principal risks identified through the process described above. The principal risks and uncertainties are set out below, including risk description and what mitigating actions the Group has in place in respect of these risks: Risk area Risk description Mitigating actions Other comments/changes ECONOMIC, STRATEGIC AND OPERATIONAL Customer demand and end market geopolitical environment Demand for goods and services in the Group s businesses is influenced by global and national economic circumstances. The geopolitical environment in those markets can be an influencer of customer demand. The Group maintains ongoing communication with customers to understand key market impacting factors and to gauge the future impact of key events that have taken place or other events foreseen. The Group also aims to ensure that it can maintain a flexibility to an ever evolving geopolitical marketplace. To a large extent, this is outside of the Group s control, but the Group s aim is to be in a position whereby it can react in a fast and an efficient manner to market changes caused by key geopolitical events. Key customer relationships and competitor activity The Group operates in a competitive marketplace and has a number of key customer relationships. There is a risk that customers may be lost or move to a competitor. Part of the Group s ongoing communication channels with its customers is to understand customer requirements, expectations, key performance indicators and other operational and customer service requirements. The Group has two product focused Innovation Centres of Excellence and works continually with a significant number of customers in designing, prototyping and testing of new products. On that basis, there is a mutual dependency in terms of delivering a high quality product offering. The trend towards partnering with customers in terms of product design and testing is a key strengthening factor in the ongoing relationship with those customers and in increasing the Group s competitive advantage.

47 IPL Plastics plc Annual Report & Accounts 2017 Risk area Risk description Mitigating actions Other comments/changes ECONOMIC, STRATEGIC AND OPERATIONAL 45 Environmental or health and safety incident Significant product failure due to a failure in the Group s quality assurance processes The Group operates in production and processing environments where there is a risk of an environmental or other health and safety incident occurring. A failure of a quality assurance system in any of the Group s manufacturing operations which results in a sub-standard product being released into the marketplace could expose the Group to legal liability and negatively impact the Group s financial performance and reputation. The Group Head of EHS&S is responsible for the overall EHS&S framework across the Group and reports to Executive Management on a monthly basis. Co-ordinated by the Head of EHS&S, our Health & Safety committees monitor safety performance and actively respond to safety trends in our business. We conduct internal audits and facilitate external customer audits at all our plants on an ongoing basis. Using findings from these audits, our professional safety leaders plan and carry out actions for continuous improvement. Incident logs are maintained by the Group s operations and maintained as a key performance indicator. The Group s acquisition due diligence processes involve a detailed environmental due diligence programme. The Group has in place quality assurance processes across each of its operations including having the appropriate quality accreditations in place. Monitoring and testing of product quality and specification is an ongoing process in the Group s operations and forms part of individual plant key performance indicators. Where issues are encountered, swift responsive action is taken to understand the issue and to ensure that customer satisfaction is maintained. Notwithstanding the Group s divestment of the majority of its Environmental Services businesses, Environmental, Health & Safety is at the forefront of the Group s risk assessment across each of its operations. Consistent approach with prior year. Information Financial Statements Directors Report Strategic Report

48 Risk Management (continued) Risk area Risk description Mitigating actions Other comments/changes ECONOMIC, STRATEGIC AND OPERATIONAL 46 Inability to complete acquisitions, identification of a poor acquisition target and failure to successfully integrate recently acquired businesses Should the funding not be available to the Group, it would be unable to complete target acquisitions. Should an inappropriate acquisition be completed, this could negatively impact the Group s financial performance. On the basis that acquisitions are completed, there is a risk that these are not successfully integrated into the Group s existing operations. Prior to pursuing a potential acquisition, the Group engages with its funders to ensure that funding will be in place. Prior to any acquisition being made, the Group undertakes detailed due diligence procedures including financial, taxation, commercial, legal and environmental. Formal Board approval is required for all acquisitions and the Board is regularly updated on due diligence projects in progress. For each significant acquisition made, the Group implements an integration plan, a 100 day plan so as to ensure the integration process is monitored, measurable and delivered within a reasonable timeframe. To date, the 100 day plan mechanism has been successful in respect of the acquisitions of IPL, Encore and Macro. Maintaining the Group s strategic growth plan As the Group continues to grow rapidly in relatively new marketplaces (e.g. North America and South America), there is a risk that the appropriate infrastructure will not be in place to support the expanding business. The Group has in place experienced management teams across its businesses, in particular, in new market environments. Three year plans are in place for each division and this includes an assessment of capital expenditure and funding requirements. Consistent approach with prior year. Furthermore, there is ongoing communication between Executive and Divisional/Operations management teams to understand local requirements from both a financing and resource perspective.

49 IPL Plastics plc Annual Report & Accounts 2017 Risk area Risk description Mitigating actions Other comments/changes ECONOMIC, STRATEGIC AND OPERATIONAL Input cost inflation Recruitment and retention of key personnel The Group s businesses are dependent on commodity inputs (e.g. resin). There is a risk that fluctuating raw material costs, fluctuating selling prices, unusual competitor actions and the resultant difficulties in adjusting prices appropriately, could have a negative impact on operating margins and overall financial performance. As the Group continues to evolve and expand into new marketplaces, it becomes of increasing importance that the Group is able to attract and retain high quality management and employees across its operations. If the Group is unable to achieve this, the achievement of the Group s strategic objectives could become jeopardised. The Group maintains ongoing communication with customers and suppliers with regard to planning its production requirements. The Group aims to maintain a number of suppliers of key materials and equipment so as not to become overly dependent on any one supplier. During the year, the Group appointed a Group Head of Procurement who reports to executive management. Through the combined efforts of the central and divisional procurement teams, the Group aims to achieve security of supply, minimise price risk, optimise supplier discounts/rebates, deliver improved purchasing terms and conditions, and facilitate operational and purchasing efficiencies. The Group also endeavours to maintain flexibility in its relationships with its key plastics customers whereby material price input changes can be passed through to the customer on an agreed, no surprises basis. The Group maintains an ongoing assessment of its succession planning and resource requirements, including consideration by the Nominations Committee. It maintains competitive remuneration incentives by reference to the external market environment. The geopolitical uncertainties currently being experienced, result in the management of this process being more challenging. During the second half of 2017, resin prices increased significantly and price increases continued during the first two months of 2018 putting pressure on the margins of the Group. Management continue to monitor this risk closely and work with customers and suppliers to mitigate the exposure of price fluctuations. Consistent approach with prior year. 47 Information Financial Statements Directors Report Strategic Report

50 Risk Management (continued) Risk area Risk description Mitigating actions Other comments/changes ECONOMIC, STRATEGIC AND OPERATIONAL 48 IT related Disaster Recovery and Cyber Security The Group operates across a multijurisdictional operational platform. Were there to be a significant disaster recovery issue from an IT perspective or a breach of the Group s IT security systems from a cyber-crime perspective, this could significantly impact the Group s operational and financial performance. The Group has an IT disaster recovery plan in place across its operations and this is monitored by Group IT management, who report to the Group CFO. The Group has cyber security controls in place and these are monitored by Group IT management. The Group circulates awareness updates to employees periodically on cyber security risks. The Group has data protection controls in place and monitors emerging regulatory requirements in this area to ensure compliance with current data protection legislation. The Group has experienced an increased level of cyber security fraud attempts during the year. This has led to the requirement for more frequent alerts to employees to remain cognisant and vigilant in this regard and to ensure that the Group s internal controls are complied with in respect of payments. COMPLIANCE AND REGULATORY Compliance with laws and regulations The Group operates in jurisdictions where there are stringent legal and compliance obligations including statutory, taxation, financial, employment, health and safety and environmental regulation. Noncompliance could lead to reputational damage to the Group along with a potential significant impact on financial performance. The Group has experienced management teams across its operations who understand the requirements in this regard. There is also a support mechanism in place from the Group s central management function. The Group engages with external advisers in relation to matters whereby the technical expertise is not available internally. In addition, the Group s Risk Management Framework is in place to identify any potential shortfalls in relation to any of these matters. Consistent approach with prior year. FINANCIAL AND REPORTING Financial and reporting, including foreign exchange rates The principal foreign exchange risk to which the consolidated financial statements are exposed to is the risk of adverse movements in reported results from Pound Sterling, Canadian Dollar, US Dollar and Chinese Renminbi when translated into euro, the Group s reporting currency. This risk is actively managed by the Group s Treasury management team. The Group Treasury Policy is Board approved and provides the Treasury management team with a framework which it can operate within. Where appropriate and possible, the Group enters into hedging arrangements to manage these risks. The impact of the Brexit decision continues to have a significant negative impact on the translation of the Group s Pound Sterling denominated operations. In addition, the Canadian Dollar and US Dollar both weakened against the euro towards the end of 2017 and into the start of This uncertainty is ongoing and is likely to continue throughout 2018.

51 IPL Plastics plc Annual Report & Accounts 2017 Risk area Risk description Mitigating actions Other comments/changes FINANCIAL AND REPORTING Financial risk management Significant underperformance of any of the Group s cash generating units The Group s operations expose it to different financial risks that include currency risk, credit risk, liquidity risk, interest rate risk and market risk. This could give rise to a material impairment of goodwill, intangible assets and property, plant and equipment which would have a negative impact on the Group s financial performance, net assets and banking covenants. FUNDING AND VALUATION OF IPL PUT LIABILITY Ability to obtain appropriate funding The Group may not be able to achieve its strategic growth objectives were the required capital resources not available to fund the Group s organic and inorganic growth strategy. These risks are actively managed by the Group s Treasury management team. The Group Treasury Policy is Board approved and provides the Treasury management team with a framework which it can operate within. The Group utilises appropriate hedging arrangements with commercial banks such as forward currency purchase and sales contracts. A difficult risk to mitigate apart from ongoing assessment of the performance of the Group s cash generating units and appropriate challenge of the financial information by reference to the future/forecasted operating targets. The Irish banking syndicate has provided 92 million of committed funding, which is due to mature in December On the acquisition of IPL in July 2015, the Group entered into a credit agreement with a syndicate of Canadian banks. During 2016, following the acquisition of Encore, and again in May 2017 as part of the acquisition of Macro, this facility was further renegotiated and increased. The credit agreement provides for committed facilities at year end 2017 of CAD$344.1 million ( million), with CAD$289.1 million ( million) provided by way of term loan (including two USD denominated term loans of USD$125.0m and USD$32.9m each) and CAD$55 million ( 36.6 million) provided under a revolving facility. This credit agreement expires in July If impairment is indicated, it is assessed in line with the Group s accounting policies and the relevant asset written down accordingly. During the year, the Group extended its Canadian banking facility from an expiry date of July 2020 to July Information Financial Statements Directors Report Strategic Report

52 Risk area Risk description Mitigating actions Other comments/changes FUNDING AND VALUATION OF IPL PUT LIABILITY 50 Inability to fund IPL minority shareholding buy-out in July 2021 when the Put Option becomes exercisable. This liability has grown significantly since July 2015 in line with IPL s trading performance and was measured at million at 31 December This liability will increase if IPL continues to trade in accordance with expectations. On 23 July 2015, the Group acquired its 66.67% controlling interest in IPL Inc. The Group acquired the shareholding on the basis of there being a Put Option in the Shareholders Agreement which gives the minority shareholders the option to Put their shares on the Group for acquisition commencing six years after the date of acquisition i.e. the Put Option is exercisable from 23 July There are other events in which the Group has a Call right which becomes exercisable prior to that date and these events include, inter alia, an initial public offering resulting in a recognised stock exchange listing of the equity of the Company. The Group anticipates that it will acquire the 33.33% of IPL that it does not own before the Group s Put Option becomes exercisable in July On 6 December 2017, the Company held an Extraordinary General Meeting ( EGM ) of the Company, at which the shareholders approved a number of resolutions. Shareholder approval was received for a reorganisation of the capital structure of the Company s majority owned subsidiary IPL Inc., whereby CDPQ and FSTQ would exchange their equity investments in IPL Inc. for shares in IPL Plastics plc. Shareholder approval was also received to enable the Company to proceed with an IPO and Listing in 2018 and for a change of the Company s name to IPL Plastics plc. On 28 February 2018, the minority shareholders equity interests in IPL Inc. were exchanged for 47,238,242 shares in IPL Plastics plc, under the authority given by shareholders at the EGM on 6 December Completion of the reorganisation on 28 February 2018 removes the need for IPL Plastics to recognise this Put Liability in its financial statements in the future.

53 IPL Plastics plc Annual Report & Accounts 2017 Risk area Risk description Mitigating actions Other comments/changes SHAREHOLDER RELATED The shares are traded on the grey market The Group may not be able to manage shareholder expectations in terms of share price performance due to a lack of liquidity. The Group maintains an active Investor Relations calendar including investor and broker engagement. On 6 December 2017 the Company held an EGM, at which the shareholders approved a number of resolutions, including resolutions approving the Company proceeding with an IPO and Listing in A stock-market listing would provide shareholders with a liquid market for their shares and would facilitate raising further equity if necessary to support future growth. 51 Information Financial Statements Directors Report Strategic Report

54 Responsible Business 52 BEING RESPONSIBLE IN A GLOBAL MARKET Plastics form an integral part of our everyday lives. It has become the material of choice for products ranging from simple food packaging to collapsible plastic containers for worldwide transport logistics. The business case for sustainability in the rigid plastics sector is increasingly accepted, as evidenced by consumers wishing to buy more responsible products. At IPL Plastics, we believe in responsible products that are better both for our people and the world around us. Sustainability and innovation are key principles which influence how we do business in a responsible manner. Working with colleagues, customers, suppliers, industry groups, investors and non-governmental organisations, the Group identifies, assesses, prioritises, and manages emerging sustainability risks and opportunities under four pillars: Marketplace innovation and collaboration advancing the sustainability of our products by ensuring that we continue to meet the evolving needs of the marketplace in a sustainable and responsible way; Workplace attraction, retention and development of our people in a safe workplace; Environment protecting the environment and reducing the impact of our operations on the world around us; and Community Actively engaging with and making positive contributions to the communities we belong to. MARKETPLACE INNOVATION AND COLLABORATION Innovation At our dedicated centres for innovation and excellence in Europe and Canada, we are advancing our commitment to deliver sustainable product solutions for our customers by integrating environmental aspects into product designs (shorter cycle times, reduced energy and raw material inputs). Using this approach, our business continues to make progress in the development of more responsible products for our customers. The Group s efforts to innovate and reduce the environmental impact of our products are further demonstrated by: The installation of a digital printer system for IML printing, which reduced our shipping footprint between Europe and North America, and increased productivity and efficiency for the Group. This project was supported by Opportunities New Brunswick and the Canadian Government; and The acquisition of additional robots and moulds to manufacture thin-wall containers for the dairy food market, delivering a more responsible container by significantly reducing energy and raw materials used in the manufacturing process, as supported by the Atlantic Canada Opportunities Agency ( ACOA ). Recyclable and reusable products MacroBin products are designed to reduce any negative impacts on the environment as they are reusable, returnable, and made of plastic that is fully recyclable. This dramatically decreases supply chain waste by reducing, or eliminating, the use of single-use packaging materials by our customers. Our products are also optimised for space efficiency and are designed to work with the most progressive transport solutions available. Using MacroBins contributes to the reduction of our customers carbon footprint and greatly improves customer sustainability practices.

55 IPL Plastics plc Annual Report & Accounts 2017 EuroBin MacroBin 53 In addition, to meet the principles of the circular economy, we incentivise our customers to return used MacroBin products, which are then upcycled into new product. IPL Inc. has also developed a wide range of reusable plastic containers for industrial conditions, which are designed to perform well in harsh conditions, and are also made from 100% recyclable plastic. Products in this range include the EuroBin and MacroBin. Supply chain collaboration We encourage more responsible products throughout our industry, and work closely with our customers to create a supply chain that is responsible, transparent and sustainable. We regularly contribute to supply chain assessments on behalf of our customers, where questionnaire platforms evaluate our social and environmental performance in an independent manner. Recycled polymers Our OPG business processed over 50% recycled polymers in 2017, making the business a net user of recycled plastics. Other achievements with recycled polymers include the reclaim and re-use project with a multinational technology firm, which achieved over 25% reduction of virgin polycarbonate resin in their product line. We will continue to work with this technology partner and others in 2018 to increase the amount of recycled polycarbonate resin in their products. Our sustainability partnerships Through our various collaborative partnerships with non-governmental organisations and industry associations, we aim to influence the worldwide rigid plastics industry. Examples of what we achieved through these sustainability partnerships include: Participation with the Rigid Plastic Packaging Group (RPPG) Executive Committee, which is part of the Plastics Industry Association in the USA. Group employees sit at committee level and address key challenges facing the plastics industry; The Group is a significant contributor to the efforts of the Canadian Plastics Industry Association ( CPIA ), with a presence on the CPIA Board of Directors and Chair of the Sustainability Committee. The CPIA provides leadership on pivotal issues and policies throughout the plastics lifecycle, promoting and defending the sustainable use of plastic products; Colleagues from our Centre for Innovation and Excellence in Canada are active contributors to the Institut de Développement De Produits; and Continued involvement with the Recycling Partnership, an industry-funded public/private programme in the U.S. to improve residential recycling rates. Information Financial Statements Directors Report Strategic Report

56 Responsible Business (continued) 54 Summary of achievements Across the Company, there has been recognition of our innovation and collaboration through the following achievements: Diamond Award winner (programme s highest honour) from the DuPont Awards for Packaging Innovation for SkinnyPack technology; Silver Award winner from the In-Mould Decorating Association ( IMDA ) for a new high clarity frozen food container the SealPack Pint, which is 100% recyclable; Silver recognition in the Corporate Social Responsibility assessment conducted by EcoVadis, a global platform for evaluating corporate social and environmental practices; Placed in the top 30% of best companies evaluated by EcoVadis, a supply chain environmental audit tool; Development of EcoSmartTM product range, made from 100% recycled plastic; Increased use of recycled polymers for the production of our products in 2017; Development of returnable trip packaging ( RTP ) to optimise shipping efficiency and product reuse; and Achieved zero to landfill status at our Rotherham, UK facility, as certified by The Carbon Trust. These sustainability milestones have benefited our stakeholders and the overall rigid plastics sector, while at the same time strengthening our business and creating competitive advantage for IPL Plastics. Recent developments in plastics industry EU plastics strategy The Group recognises the importance of recent announcements to reduce plastic waste and promote the recycling of plastics across Europe. The development of recyclable and reusable products, and the increase of recycled polymers across the Group clearly demonstrates our strong commitment to meeting EU Circular Economy Policies and the recent Plastics Strategy. The Group will continue to work with our customers in product innovation and design to meet the principles of the Plastics Strategy. Through our numerous innovation centres we are strategically placed to design and develop products that are more easily recyclable and reusable in the future. Bioplastics The Group will endeavour to remain up to date on emerging bioplastics and work in collaboration with customers and suppliers where such materials are deemed suitable for a product. Consideration will be given to how products, made from or containing bioplastics, will be disposed of at end-of-life in order to remain compatible with current recycling systems, or to take into account the specific conditions that may be required for disposal. WORKPLACE Safety A key priority is the safety of our employees, contractors, customers and other persons who may be affected by our business activities. Safety is a key focus for Board and management, and in particular with regard to our 1,900 employees at all production facilities, warehouses and administrative offices. To maintain a safe workplace, we are focused on: eliminating serious injuries by managing critical risk areas; determining which operating sites may require specific attention to improve safety; strengthening processes and knowledge sharing about all aspects of safety; and adopting best practices across all business groups. Management, in conjunction with our Health and Safety committees, monitor safety performance and actively responds to safety trends in our business. We conduct internal audits and facilitate external customer audits at all our plants on an

57 IPL Plastics plc Annual Report & Accounts 2017 ongoing basis. Using findings from these audits, our professional safety leaders plan and carry out actions for continuous improvement. All our businesses provide monthly reports on safety performance, and compliance with Group standards and local legislation. In 2017, we commenced a project to develop a Group-wide safety management intelligence system, which will facilitate the recording of all safety related events that occur within the Group, including incidents, injuries and near misses. Marshalling the data for the whole Group into one system will ensure that the data is consistent and can be shared. We can then use the information to analyse risk, predict trends and focus activities on major areas of safety concern. Safety performance The Company monitor and track safety performance using two industry-standard indicator criteria (as recommended by the Occupation Safety Health Administration in the USA): Total Recordable Injury and Illness cases, and Days Away Rate. Trends in the last financial year have shown significant improvements in both indicators across all divisions. Talent and succession planning We are proud of our investment in people, we bring talent to work. Our businesses are run by dedicated management teams that deliver quick, flexible and high-quality customer service. The Group actively supports its employees in their training and development needs and has an ongoing apprenticeship programme. Code of Conduct The conduct of our people is crucially important for the Group. Our reputation depends upon it. The Group wants employees to be proud of where they work, for suppliers to be happy to partner with us, for customers to know that they are in safe hands and for our communities and society as a whole to trust our business and the products we make. The Group has in place clear guidelines on business conduct and appropriate behaviour. Our corporate culture is firmly based on the belief that local management, with a real understanding of their business and culture, can best serve the needs of all our stakeholders. This creates the commitment to a dual citizenship concept of both IPL Plastics and the local business unit. This philosophy requires employees to operate to the highest levels of integrity, honesty, legality, and responsible behaviour. Anti-bribery and corruption The Group has a detailed Anti-Bribery and Corruption Policy (the Policy ) in place, which states that no employee or representative of any Group business is to offer or accept any bribe, including small facilitation payments, or engage in any other form of corrupt practice. The Policy is provided to employees in the Group and training on the key provisions of the Policy is also provided to relevant employees. In addition to prohibiting involvement in bribery or other forms of corruption, the Policy requires that every business in the Group maintains suitable procedures and records in relation to the provision and acceptance of gifts, hospitality and sponsorship. 55 Information Financial Statements Directors Report Strategic Report By way of example, we currently have 17 apprentices in training across our UK sites, with recruitment of 5+ in We have an overall training co-ordinator, and mentors on every site alongside a formal training and development programme for each apprenticeship. The programme has been very successful, as demonstrated by one of our apprentices, who was awarded 2017 UK Apprentice Of The Year by the British Plastics Federation ( BPF ).

58 Responsible Business (continued) 56 ENVIRONMENT Greenhouse gas ( GHG ) emissions The Group tracks energy inputs on a monthly basis at a business unit level. In 2018, the Group will track carbon emissions data following the GHG Protocol, and use the reporting process to identify opportunities for improvement and best practice. Energy data will be collated and reported by all businesses into a central IT platform which will calculate carbon emissions using nationally published conversion factors. The Group plans to use our energy and carbon data to identify energy savings, respond to customer requests for information and to enhance carbon emissions reporting in line with the GHG Protocol. Waste Waste reduction is significantly beneficial as it reduces environmental impacts and cost implications. The Group is continuously looking at new and innovative ways to reduce the generation of waste. During the year, the OPG business at Rotherham was awarded zero to landfill certification from the Carbon Trust. The OPG business at Tamworth is also awaiting zero to landfill status from the Carbon Trust. Increasingly the business offers life-cycle solutions under which products such as bins and containers that have reached their end-of-life, are reclaimed, ground and replenished as part of our service, both in Europe and North America. COMMUNITY Group businesses support local communities and non-profit organisations across our Global Operations, both financially and practically with volunteer days, sponsorship, fund raising and hands-on food and water donation programmes. LOOKING AHEAD All businesses have a responsibility to conduct their operations in a manner which meets societal expectations and industry best practice. The Company believes that by continuously improving our non-financial performance, this will support our strategic objective of becoming a leading and responsible global player in the rigid plastics market. IPL Plastics is committed to providing industry leading solutions as well as driving technological advances for the plastics industry, through innovative and exciting product design and development. The Group aims to be the leading provider in each segment of our business offerings. Building on our sustainability achievements, we believe one of the biggest impacts we can have on our industry is leading the way with product reusability, and recycling of products that have reached end-of life. This will continue to be a key focus in By building a responsible and sustainable business, we can deliver long term value to all our stakeholders.

59 IPL Plastics plc Annual Report & Accounts 2017 Directors Report Board of Directors Directors Report Directors Statement on Corporate Governance Report of the Nominations Committee Report of the Audit Committee Report of the Remuneration Committee on Directors Remuneration Information Financial Statements Directors Report Strategic Report

60 Board of Directors 58 Hugh McCutcheon* Interim Group Chairman Hugh McCutcheon (64) was co-opted to the Board on 19 January He has extensive capital markets experience and M&A advisory experience for public and private companies across a broad range of industries including manufacturing, financial services, construction, pharma, food, oil and gas mining and government. He has a degree in Economics from Trinity College, Dublin. He is Chairman of the Remuneration Committee and Nominations Committee and a member of the Audit Committee. Hugh is a Chartered Accountant and was formerly head of corporate finance at Davy. He joined Davy in 1989 from PwC, where he qualified as a Chartered Accountant in Hugh is the Senior Independent Director of Origin Enterprises plc. Hugh is also an Alternate Director at the Irish Takeover Panel. Alan Walsh Chief Executive Officer Alan Walsh (41) (FCA, AITI) was appointed to the Board on 16 September In November 2011, Alan was appointed as Chief Executive Officer, having served since 1 July 2011 as interim Chief Executive Officer. Prior to that he was the Chief Financial Officer of the IPL Plastics Group from July Alan qualified as a Chartered Accountant with KPMG and subsequently worked with Matheson and AXIS Capital. He graduated from University College Dublin with a degree in International Commerce. Alan is a member of the Nominations Committee and is also a Non-Executive Director of Altas Investments plc and Pioneer Green Energy LLC. Pat Dalton Chief Financial Officer Pat Dalton (52) (FCA, AITI) joined the Group in 2012 as Chief Financial Officer, and was appointed as an Executive Director to the Board on 31 December Pat worked for GPA Group plc from 1992 and was appointed CFO of debis AirFinance B.V, which acquired GPA Group plc in He was then CFO of Bord Gáis Éireann from 2002, before joining Menolly Property as CFO in Pat is a graduate of University College Dublin.

61 IPL Plastics plc Annual Report & Accounts 2017 Rose Hynes* Rose Hynes (60) was appointed Senior Independent Director of IPL Plastics with effect from 31 December Rose was co-opted to the Board on 26 April 2012 and is a member of the Audit Committee, Nominations Committee and Remuneration Committee. She is currently Chairman of Origin Enterprises plc and also chairs Shannon Group plc and is the Senior Independent Director of Total Produce plc. Rose previously held a number of senior management positions with GPA Group plc and is a former Board member of a number of companies including Fyffes plc, Aer Lingus Group plc, Bank of Ireland and a former Chairman of Ervia. Rose is a lawyer and is also an Associate of the Irish Institute of Taxation and the Chartered Institute of Arbitrators. Geoff Meagher* Geoff Meagher (68) was co-opted to the Board on 20 February He is Chairman of the Audit Committee and is a member of the Remuneration Committee. He is a Certified Public Accountant. Geoff worked with PwC and Kilkenny Engineering Products, and served with Glanbia plc from 1992 to 2009, where he was Group Finance Director, and latterly Deputy Group Managing Director. Since 2009, Geoff has operated his own consultancy business. He is currently Chair of Bórd na Mona and also serves on the Board of Enterprise Ireland and Bon Secours Health System Limited. Alain Tremblay* Alain Tremblay (55) was co-opted to the Board on 2 January 2018 and is a Non-Independent Non-Executive Director representing La Casse de dépôt et placement du Québec ( CDPQ ), the Group s largest shareholder. Alain is currently Investment Manager, Private Equity at CDPQ since 1998, specialising in distribution, manufacturing and services. He manages a portfolio of over CAD$5Bn and is a seasoned investor who has realised many investments in equity and mezzanine debt in mid to large cap companies across North America and Europe. Alain has previously served on several Boards, including Groupe Canam, Camso, Laureate Education, Rexel and St-Georges University. Alain brings over 30 years of experience in financial institutions such as the Bank of Montreal, Toronto Dominion Bank, Fonds de solidarité FTQ and Crédit industriel Desjardins. He has completed a Bachelor s and Master s degree in Business Administration at HEC Montreal and is a member de l orde des Comptables Professionnels Agréés du Québec (CPA, CGA). 59 Information Financial Statements Directors Report Strategic Report * Non-Executive