AR2023
Focusing on technology
Creating value for our customers
Annual Report
2023
Vesuvius plc
Annual Report and Financial Statements 2023
Contents
We think beyond today’s
solutions and shape the
future through innovation.
Strategic Report
IFC
Our purpose
02
At a glance
10
Our market environment
14
Chairman’s statement
16
Chief Executive’s strategic review
19
Our investment proposition
20
Our business model
22
Our drivers for profitable growth
24
Operating review
24
Steel Division
25
Steel Flow Control
26
Steel Advanced Refractories
26
Steel Sensors & Probes
27
Foundry Division
28
Financial Key Performance Indicators
29
Financial review
32
Non-financial and sustainability information
statement (Sustainability Report)
32
Introduction
34
Our sustainability strategy and objectives
35
Non-Financial Key Performance
Indicators – Our sustainability targets
36
TCFD Report
39
Our planet
56
Supporting our customers’ journey to net zero
58
Our people
64
Our communities
68
Our stakeholders and
Section 172(1) Statement
72
Risk, viability and going concern
Governance
80
Board of Directors
82
Group Executive Committee
83
Corporate Governance Statement
83
Chairman’s governance letter
84
Board Report
93
Audit Committee
102
Nomination Committee
108
Directors’ Remuneration Report
108
Remuneration overview
114
2023 Remuneration Policy
122
Annual Report on
Directors’ Remuneration
136
Directors’ Report
143
Statement of Directors’ Responsibilities
144
Independent Auditors’ Report
Financial Statements
153
Group Income Statement
154
Group Statement of
Comprehensive Income
155
Group Statement of Cash Flows
156
Group Balance Sheet
157
Group Statement of Changes in Equity
158
Notes to the Group Financial Statements
211
Company Balance Sheet
212
Company Statement of Changes in Equity
213
Notes to the Company Financial Statements
219
Five-Year Summary: Divisional Results
from Continuing Operations (unaudited)
220
Shareholder Information (unaudited)
222
Glossary
Our purpose
technology, serving process industries operating in challenging
We think beyond today to create the innovative solutions that will shape
the future, delivering products and services that help our customers
make their industrial processes safer, more efficient and more sustainable.
In turn, we provide our employees with a safe workplace where they
are recognised, developed and properly rewarded, and aim to deliver
sustainable, profitable growth to provide our shareholders with
a superior return on their investment.
Strategic report
Governance
Financial statements
01
1.
For definitions of alternative performance measures, refer to Note 35 of the Group Financial Statements.
Financial highlights
Non-financial highlights
21
22
23
Operating profit
£m
£190m
190
217
133
21
22
23
Statutory EPS
p
44.0p
67.2
37.7
44.0
Forward-looking statements
This Annual Report contains certain forward-
looking statements which may include reference
to one or more of the following: with respect to
operations, strategy, performance, financial
condition, financing plans, cash flows,
capital and other expenditures and growth
opportunities of the Vesuvius Group.
Forward-looking statements can be identified
by the use of terminology such as ‘target’
‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’,
‘plan’, ‘believe’, ‘expect’, ‘forecasts’, ‘may’,
‘could’, ‘should’, ‘will’ or similar words.
Although the Company makes such statements
based on assumptions that it believes to be
reasonable, by their nature, these statements
involve uncertainty and are based on
assumptions and involve risks, uncertainties
and other factors that could cause actual results
and developments to differ materially from
those implied by the forward-looking statements
anticipated. Such forward looking statements
should, therefore, be considered in light of
various important factors that could cause
actual results to differ materially from
estimates or projections contained in the
forward looking statements.
The forward-looking statements reflect
knowledge and information available at the
date of preparation of this Annual Report
and, other than in accordance with its legal
and regulatory obligations, the Company
undertakes no obligation to update these
forward-looking statements. Nothing in
this Annual Report should be construed
as a profit forecast or a guarantee of the
Vesuvius Group’s future performance.
21
22
23
Lost Time Injury Frequency Rate
0.6
1.08
0.6
1.06
21
22
23
Total R&D spend¹
£m
£37m
36
31
37
21
22
23
Reduction of Scope 1 and Scope 2 CO
₂
e
emission intensity per metric tonne of product
packed for shipment versus 2019
²
%
-20.2%
-18.5
-16.0
-20.2³
21
22
23
Female representation in the
Senior Leadership Group
%
20%
20
19
20
21
22
23
Return on sales
1
%
10.4%
10.4
11.1
8.7
1.
At constant 2023 currency.
2.
Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc.
(Vesuvius Penn Corporation), and BMC (Yingkou YingWei Magnesium Co., Ltd).
3. Pro forma: performance as if the dolime process had been operating normally in 2023.
21
22
23
Trading profit
¹
£m
£200m
200
227
142
21
22
23
128
123
Free cash flow
1
£m
£128m
-0.3
21
22
23
Revenue
£m
£1,930m
1,930
2,047
1,643
Vesuvius plc
Annual Report and Financial Statements 2023
02
At a glance
Vesuvius is a specialist provider
of high technology products and
solutions to industrial customers
who operate in challenging
high-temperature conditions
Our customers are predominantly in the steel and
foundry industries which we serve from our two Divisions.
Our technology-led products allow our customers to
tackle some of the most complex problems in their
production processes.
Strategic report
Governance
Financial statements
03
Our world-leading R&D
supports the consistent
delivery of our high-tech consumables. Our sales are
not dependent on the capex cycles of our customers,
and our products create value by improving...
Iron
Other (glass, cement...)
Steel
Ferrous foundries
Non-ferrous foundries
Aluminium
Sales by customer activity
Safety
Improved safety
at customer plants
Quality
Better steel,
better castings
Efficiency
Cheaper steel,
cheaper castings
Sustainability
Less energy usage
and fewer CO
2
emissions in steel and
foundry processes
04
Vesuvius plc
Annual Report and Financial Statements 2023
Vesuvius is a world leader in the supply of refractory products,
systems and solutions to steel producers and other high-temperature
industries. We help our customers increase their efficiency and
productivity, enhance quality, improve safety and reduce their
costs and their environmental impact.
Steel
At a glance
continued
OUR DIVISIONS
Strategic report
Governance
Financial statements
05
Flow Control
Revenue:
£793m
Supplies the global steel industry
with consumable ceramic products,
systems, robotics, digital services
and technical products for the
continuous casting process
AdvancedRefractories
Revenue:
£568m
Supplies specialist refractory
products designed to enable
steel-making equipment,
such as Electric Arc Furnaces
and Basic Oxygen Furnaces,
to hold the molten metal
Sensors & Probes
Revenue:
£39m
Provides a range of products
that enhance the control and
monitoring of our customers’
production processes
We supply refractory
products, flow control
systems and process
measurement solutions
to our Steel Division
customers
We combine these with
robotics and mechatronic
installations to increase
their efficiency, lower
their costs and improve
their safety and
consistency
Our solutions address
the key challenges of
our customers in the
steel industry, such as
maintaining steel quality
and reducing energy
usage during the
casting process
Our products and their
applications preserve the
purity of the steel as it
moves through the
production process,
from initial refining
to the cast steel slab,
bar or ingot
What we do for our Steel customers
Revenue
£1,400m
Vesuvius plc
Annual Report and Financial Statements 2023
06
At a glance
continued
Vesuvius, operating under the Foseco brand, is a world leader in the
supply of consumable products, technical advice and application
support to the global foundry industry, improving casting quality and
foundry efficiency. Our primary customers are ferrous and non-ferrous
foundries serving various end-markets, from large bespoke castings
to high-volume automotive pieces.
Foundry
OUR DIVISIONS
07
Strategic report
Governance
Financial statements
Diversified
end-markets
Product demand in the Foundry
Division is driven by higher
sophistication, demanding higher
quality metal and more complex
casting across increasingly
diversified end-markets
We provide customisable
products and process
technology to foundries
that improve the quality
of their castings
We combine this
with technical advice,
application engineering
and computer
modelling to improve
process outcomes
Our solutions address
our foundry customers’
key challenges of casting
quality and production
efficiency
Our products and solutions
clean the molten metal,
improve the solidification
of that metal, and reduce
wastage in the final casting
Revenue
£530m
What we do for our Foundry customers
Light vehicles
Mining and construction equipment
Medium and heavy vehicles
Railway and marine
Power generation
General engineering/other
Vesuvius plc
Annual Report and Financial Statements 2023
08
R&D centres of excellence
Production sites
At a glance
continued
Our global presence positions
us well to take advantage of
developing steel and foundry
market dynamics
6
Continents
40
Countries
68
Sales offices
6
R&D centres
of excellence
55
Production
sites
Our local manufacturing, local expertise and global knowledge
of steel manufacturing processes gives us a special relationship
with our customers.
09
Strategic report
Governance
Financial statements
Breakdown by region
Americas
3,295 employees
EMEA
4,209 employees
Asia-Pacific
3,872 employees
20%
Foundry
80
%
Steel
£695m
R
evenue
32%
Foundry
68
%
Steel
£670m
R
evenue
32%
Foundry
68
%
Steel
£
566m
R
evenue
Vesuvius plc
Annual Report and Financial Statements 2023
10
Our market environment: positive growth trends
Steel manufacturing is our principal market, and demand
for steel is growing due to population expansion in emerging
markets and infrastructure investment globally
Steel is principally used for
construction, infrastructure,
automotive manufacture
and domestic goods.
We have global exposure
with under half our revenue
generated from the mature
markets of North America
and Europe. We have
a strong and growing
position in India and other
emerging markets.
China represents only 9% of our revenue
due to our focus on steel manufactured
using high-tech processes, but we are
well placed to respond to an expected
growth in high-tech steel in China in the
coming years.
Amount of steel used in the world in 2023
52%
12%
10%
16%
5%
3%
2%
1,888
million tonnes
Buildings and
infrastructure
Domestic appliances
Automotive
Mechanical equipmen
t
Other transport
Metal products
Electrical equipment
Our global exposure
21%
11%
9%
28%
12%
8%
11%
US and Canada
Latin America
EU27 and UK
India
China
Other EEMEA
Other Asia-Pacific
Source: World Steel Association.
Source: Company analysis.
Steel is the world’s most important engineering and construction material
11
Strategic report
Governance
Financial statements
Positive growth in steel markets
outside China
We believe steel markets are now at an
inflection point. Over the past ten years most
of the growth of the steel market has been
concentrated in China where Vesuvius
realises only around 10% of its sales.
We believe the market dynamics of the
next ten years will be very different,
due to the fast development of India and,
to a lesser extent, of South East Asia,
Middle East, Africa and Latin America.
The decarbonisation of western economies,
which will require very significant
incremental amounts of steel, will also
support steel consumption in the world
outside China. The Inflation Reduction Act
in the US could increase annual US steel
consumption by close to 5%.
Based on estimates from the World
Steel Association and Laplace Conseil,
we believe that steel production outside
China will increase by at least 200 million
tonnes, or around 25%, over the next ten
years, half of it in India. This estimate
may be conservative with ArcelorMittal
estimating demand for an additional
300 million tonnes of steel (outside China)
over the next ten years.
Vesuvius’ recent production capacity
expansions in India, Eastern Europe
and Mexico will position the Group
well to benefit from these changes
in the steel market.
High-tech steel is expected to
grow faster than the market
Our Flow Control Business Unit will also
benefit from the progressive evolution
of the steel sector, not only in China but
worldwide, towards more technology
intensive types of steel, either because
this steel is being produced through
sophisticated processes like thin slab
casting or because it is destined for highly
demanding end-markets like automotive,
engineering or energy.
It is estimated that the ‘high-technology’
steel sector, representing around 34% of
the steel market today, could represent
around 43% of the global steel market
in ten years’ time. Flow Control already
realises 58% of its sales in this fastest
growing part of the steel market.
2032e
2022
2012
China
RoW
~90%
Vesuvius
sales
~10%
Vesuvius
sales
EU + TK
CIS
USMCA
JKANZ
India
Expected evolution of global steel production
(2012–2032e),
million tonnes
1,563
1,885
1,975
2032e
2022
2012
India
Middle East
South East Asia
LATAM
Africa
Expected growth in steel production in emerging markets
(2012–2032e),
million tonnes
190
306
518
2032
2022
2018
Commodity steel
High-tech steel
High-technology steel production evolution,
million tonnes %
1,828
1,885
1,975
Actuals
Forecast
32%
+2.7%
+0.8%
+0.5%
68%
34%
66%
43%
57%
+2.2%
Source: World Steel Association (Yearbook 2022 published March 2023) and Laplace Conseil
(analysis conducted in October 2023, including inputs from World Bank, IMF, IEA, OECD & other
international associates, company data and announcements).
Source: World Steel Association (Yearbook 2022 published March 2023) and Laplace Conseil (analysis
conducted in October 2023, including inputs from World Bank, IMF, IEA, OECD Global Energy Monitor
(Steel plant tracked March 2023) and other international associates, company data and announcements).
Developments in steel markets
Vesuvius plc
Annual Report and Financial Statements 2023
12
Our market environment: positive growth trends
continued
The Foundry Division serves a wide range of growing
end-markets including, machinery and general engineering,
mining, agriculture and infrastructure
End uses of foundry castings
Foundry sales to end-markets
Products manufactured
by the foundry casting
market – made up of iron
casting, steel casting
and non-ferrous casting –
are used across all
engineering sectors.
Foundry end-markets
are expected to grow
More than three-quarters of the Foundry
Division’s sales are to markets that are
forecast to see c.2% growth in average
volumes per year over the next ten years.
Due to the gradual electrification of
vehicles, the light vehicle market, which
currently represents only 23% of the
Foundry Division’s sales, is expected
to remain stable.
The Foundry Division’s R&D strategy is
focused on developing new technological
products to accelerate its penetration of the
growing aluminium casting sector for the
automotive market, which is positively
impacted by the electrification of vehicles,
which we believe will enable the Division to
continue to grow in the light vehicle sector.
Foundry Sales
(2023)
Example cast parts
Light vehicles
22%
–
Engine components and exhaust systems (ICEs and hybrids)
–
Electric engine components (hybrids and EVs)
Mining and
construction
18%
–
Mining vehicle components and mining machinery
–
Structural support in infrastructure
–
Functional elements in construction , e.g. roofing, stairs,
doors and window frames
Medium and
heavy vehicles
13%
–
Suspension, chassis and brake components
Railways
and Marine
5%
–
Wheels, axles, frames and chassis for trains
–
Hulls, decks, propellers, anchor and chains for ships
–
Engine components
Power
generation
5%
–
Wind turbines – materials in tower structure, gearbox housing
–
Structural and rotating components
General
engineering/
other
37%
–
Agricultural components, including cultivating
and harvesting equipment
–
Structural components for industrial machines
–
Rotating components – gears and shafts used in machinery
77%
23%
Mitigation
Accelerated
penetration of
non-ferrous castings
for automotive with
new technological
products
23% of Vesuvius Foundry
sales are in markets
with flat volume growth
(due to electrification)
77% of Vesuvius Foundry
sales are in markets with
forecast positive volume
growth of 2% CAGR
Growth markets
13
Strategic report
Governance
Financial statements
Foundry’s customers
The Foundry market is highly fragmented
with three main customer segments.
The Foundry Division has more
than 3,000 customers with no one
customer representing more than
3% of Foundry’s revenue.
Vesuvius segmentation and commentary
Typically light vehicle
and truck tier 2 suppliers
who produce a small range of
castings for various end users
Small accounts with
one-off production runs,
active across all sectors
End-markets
Mainly consists of
mining, agriculture and
light vehicle foundries
The captive
–
Controlled by OEMs, who
produce in-house where
there is a technological
edge vs. outsourcing
(20%)
2023 sales
(53%)
2023 sales
(27%)
2023 sales
The specialist
–
Focused on a limited
number of markets
(mining, automotive,
windmill)
The
jobbing
–
Produce a range
of products on request
–
Process and artisanal
capabilities
Large run/series
(>1,000pcs/yr even up to >100kpcs/yr in Automotive)
Small runs/series
(5-100spcs/yr)
Foundry’s Global exposure
Ferrous sales in developed markets
represent the core of the Foundry
Division’s business. We are witnessing
the transition of ferrous casting activity
from Western Europe towards emerging
markets. We expect this strong growth
to continue and we are focused on
expanding our business in these
developing markets. We are well
positioned to respond to this transition
from our network of existing
manufacturing facilities.
Our global exposure
10%
35%
8%
17%
9%
9%
12%
North Asia
India
China
North America
South America
EU & UK
Other
Vesuvius plc
Annual Report and Financial Statements 2023
14
Our value proposition
Having joined the Board over a year ago,
it is clear to me that our performance in
2023 is a direct result of the value that
Vesuvius is able to provide to its customers.
We outlined our strategy for continuing
this partnership in our Capital Markets
Day in November. The foundation of our
business model is our R&D strategy,
generating the new, high-technology
consumables that deliver value to our
Steel and Foundry customers, support
our superior pricing capability and enable
us to achieve market share gains.
Through our solutions-driven offering,
our customers can drive efficiency and
productivity improvements in their
processes, and make their operations
safer and more sustainable. Our
proprietary refractory solutions have
set industry benchmarks, enabling our
customers to produce cleaner, stronger,
and higher quality steel and castings.
Our relentless focus on improving safety
standards is central to Vesuvius, and
we continue to invest in developing
cutting-edge technology to minimise
risks both for our own employees in our
operations as well as our customers’
employees in theirs. Our innovative focus
on using robots to automate elements
of the steel-making process which were
previously done manually, minimises the
need for our customers’ employees to
operate in hazardous environments.
Our commitment to support customers in
their mission to improve product quality is
a fundamental part of our solutions driven
approach. Alongside this, we maintain
a critical focus on the quality of our own
products and our own operations. This
underpins the reliability that our customers
demand of us, as they use our products in
critical and demanding processes, where
quality cannot be compromised. 2023 has
seen a renewed focus within Vesuvius on
continuing to strengthen the quality
of our solutions and consumables.
Chairman’s statement
Our technological leadership
continues to deliver innovative solutions
and underpins our confidence in
the future.”
Dear Shareholders,
2023 was a year of successes for Vesuvius
despite facing a number of global
challenges. Against a backdrop of
continuing macroeconomic uncertainty,
we delivered a strong performance and
emerged from 2023 having reinforced our
technology-based strategy for continued
growth. This performance was in large
part due to the decisive actions of the
Group’s management team and senior
leadership, as well as the hard work
and commitment from our employees
across the globe.
Carl-Peter Forster
Chairman
15
Strategic report
Governance
Financial statements
People
The strategic progress and financial
performance we delivered in 2023
is founded on the dedication and
professionalism of our employees across
the Group. The level of technological
innovation we generate could not happen
without our exceptional teams of R&D
professionals and industry experts,
nor could we maintain the depth of
our customer relationships without the
contribution of our operations, sales
and procurement teams. People
are at the heart of Vesuvius, and we
continue to focus on how we can
invest in our teams to deliver our
commercial ambitions.
Members of the Board had a busy year
in 2023, visiting sites in Brazil, China,
Germany, India, the Netherlands and the
United States. It is during these visits that
the Directors can speak first-hand with
our people, hold ‘town hall’ meetings, listen
to their questions and feedback, and take
the temperature of the organisation.
The optimism I had about the quality of
the staff across Vesuvius has been borne
out in my first year as Chairman, as I have
travelled to sites and had the opportunity
to hear the views and opinions of our
excellent teams around the globe.
Safety
The number one priority at Vesuvius is to
provide our employees with a safe place
to work. Only the highest levels of safety
performance can be accepted, and we
are proud of the steps we have taken
over the years to ensure safety is at the
core of everything we do. Although we
are pleased that the Lost Time Injury
Frequency Rate reduced significantly this
year, we are aware that there is more work
to be done, particularly in relation to the
management of contractors, where we
had two serious injuries on our sites in 2023.
Progress on our
Sustainability objectives
The Group has set clear internal
operational targets around sustainability
performance, particularly in relation to our
CO
2
emissions and energy consumption.
We continue to make good progress in
the reduction of our carbon footprint and
are proud that our latest Sustainalytics
score was upgraded for the third year
in a row, putting the Group in the top
quintile versus our peers.
We have continued to focus on developing
products across our portfolio which deliver
improved environmental performance,
and play a key role in the value that we
create for our customers. In my site visits
around the business I have seen how
our people are engaged in delivering
on our global sustainability objectives,
together with focusing on local initiatives
that benefit the communities in which
they work.
We continue to make steady progress
towards reaching our target of a net zero
carbon footprint by 2050 at the latest.
Achieving this ambition will require capital
investment, and the development and
adoption of new production technologies.
However, we have clear priorities, targets
and milestones identified as we progress
on this journey and are dedicated to
achieving this important goal.
The Board and governance
In 2023, we had a number of changes
to the Board. We welcomed Carla Bailo,
Mark Collis and Robert MacLeod and
saw Jane Hinkley and Guy Young leave
the Board.
Having served nine years on the Board,
Douglas Hurt, Senior Independent
Director, will be stepping down at this
year’s AGM, and we are pleased that
Eva Lindqvist has agreed to join the Board
as our new Senior Independent Director.
She will be standing for election at the
AGM. Eva is an engineer with more than
35 years’ experience in global industrial
and service businesses, and I know she will
be a valuable addition to the Board.
On behalf of the Board, I would like to
thank Douglas Hurt for his dedicated
service, wise counsel and exceptional
support over the years.
As in previous years, the Board conducted
an evaluation of its performance in 2023,
full details of which are set out in the
Nomination Committee report. This
process has again enabled us to reflect
positively on the Board’s role in adding
value to the business as it pursues its
strategic and operational objectives.
Dividend
The Vesuvius dividend policy aims to
deliver long-term dividend growth,
via a progressive dividend, provided this
is supported by cash flow and underlying
earnings, and is justified in the context of
our capital expenditure requirements
and the prevailing market outlook.
The Board has recommended a final
dividend of 16.2 pence, bringing the total
dividend for the year to 23.0 pence per
share, which is a 3.4% year-on-year
increase on the total dividend for 2022
of 22.25 pence per share. This represents
a dividend cover of 2.0x compared
to adjusted EPS for 2023.
If approved at the Annual General
Meeting, this final dividend will be paid
on 31 May 2024 to shareholders on the
register at 19 April 2024.
On 4 December 2023, we launched
a share buyback of up to £50m, which
is expected to take 9–12 months to
complete. This is part of our commitment
to return cash to shareholders where it
is not required for additional investment,
while maintaining a strong and prudent
balance sheet. During 2023, shares with
a value of £3.1m were acquired (at an
average price of 464 pence per share)
and cancelled by the Company.
Annual General Meeting
The Annual General Meeting will
be held on 15 May 2024. The Notice
of Meeting and explanatory notes
containing details of the resolutions to
be put to the meeting accompany this
Annual Report and are available on
our website: www.vesuvius.com.
Looking ahead
Vesuvius has a clear strategy for growth
and is well placed to deliver superior
returns to our shareholders. In the months
and years ahead, we will focus on
delivering our strategic ambitions.
We will continue to prioritise safety, drive
innovation through our dedicated R&D
capabilities, and deliver market-leading,
technologically advanced products and
solutions. We will drive efficiency in our
operations and maintain a robust financial
framework to support investment in
the business, and where appropriate,
acquisitions. The year ahead will no doubt
present challenges, but I am confident we
have the people, products and expertise to
navigate these, and continue on our path
of creating value for shareholders and
delivering long-term sustainable growth.
On behalf of the Board, I would like to
thank our shareholders, employees and
customers for their continued support,
and I look forward to reporting on
further successes in the coming year.
Carl-Peter Forster
Chairman
28 February 2024
Vesuvius plc
Annual Report and Financial Statements 2023
16
Our performance in 2023
In 2023, we delivered very resilient results
and profitability despite a difficult market
environment, and we continued to make
good progress in the implementation
of our strategic top line and profitability
growth initiatives.
Our steel markets, after some limited
improvement during H1 2023
from the very low level of H2 2022,
weakened again during H2 2023.
This was particularly pronounced in
Europe (EU+UK) where steel production
declined 7.3% in 2023 as compared with
the previous year, 5% below the worst year
of the pandemic in 2020. Steel markets
were also particularly difficult in South
America, where production declined 5.8%
as compared with the previous year. India
was, in 2023, for the second year in a row,
the only major region in the world to exhibit
a strong growth of 11.8%. Steel production
in China was stable, but Chinese net steel
exports increased very significantly
during the year, putting pressure on all
steel producers outside China, with the
exception of those in the US who were
insulated by efficient trade protections.
Overall, steel production in the world
excluding China, Russia, Iran and Ukraine
declined by 0.7% in 2023, after a decline
of 3.9% in 2022.
Our foundry markets, with the exception
of India, also remained weak in 2023,
particularly in Europe (specifically in and
around Germany), in China and in South
America. Weakness in non-automotive
sectors more than offset a limited recovery
in the automotive sector. Destocking of the
excess casting inventories accumulated
during the pandemic also had a negative
impact on our end-markets.
Resilient results despite a challenging
trading environment. Top line and
profitability growth initiatives fully on track.”
Chief Executive’s strategic review
Our ambitions
In November 2023, we presented our
strategy and medium-term targets to
investors at our Capital Markets Event.
We highlighted favourable medium-term
trends in our end-markets, and, through
our market-leading investment in research
and development, demonstrated our
ability to gain market share while
pricing for the value we generate for our
customers. We also set out a cost reduction
programme to achieve £30m of annually
recurring cost savings in 2026. This
programme will cover all our activities
worldwide and will focus on operational
improvement, lean initiatives, automation
and digitalisation as well as further
optimisation of our manufacturing
footprint. We remain very optimistic
about the future of Vesuvius, with
ambitious plans for the next three years.
Patrick André
Chief Executive
17
Strategic report
Governance
Financial statements
Our capital allocation priorities
Organic investment
–
Consistent and targeted R&D expenditure
of c.2% of revenue per annum
–
Capex expected to return to sustaining
levels in 2025
Shareholder returns
–
Long-term dividend growth
via a progressive dividend
–
Focus on maintaining a prudent balance
sheet (c.1.0-2.0x net debt/EBITDA)
–
Surplus capital available for
additional shareholder returns
Inorganic investment
–
Highly selective acquisition filter, with
strategic factors focused on geographic
or technology complementarity
–
Very stringent financial hurdles
for investment
Positive medium-term market dynamics
Achieve a Return on Sales of
at least 12.5%, by 2026
Generate strong and recurring
free cash flow of at least
£400m between 2024 and 2026
Achieve £30m of annually
recurring costs savings by
the end of 2026
There are positive growth trends in both the steel and foundry
markets. A positive inflection in the volume growth of the steel market
outside China is widely expected and this will change the trend
seen over the past 10–15 years of market decline outside China.
This change is evidenced by new investment in steel plant capacity
by the world’s major steel makers. While the near-term outlook
can sometimes be uncertain, we expect to have a tailwind of
growing markets in the medium term.
We will focus on leveraging our technological differentiation
to outperform growing end-markets.
The core of our strategy is creating technologically differentiated
products and solutions through market-leading R&D investment,
and then commercialising this benefit.
This is validated by the success we have achieved to date.
Revenue from our Steel business grew 30% in the five years
between 2017 and 2022 despite our addressable market
decreasing by 18% over the same period.
This will be delivered through revenue
growth supported by market share gains
and pricing improvements from our
differentiated products, plus a further
cost saving programme to deliver £30m
of savings in 2026, driven by the benefits
of automation and digitalisation.
This is possible due to our asset-light
business model, our disciplined
approach to capital investment and
a focus on optimising working capital.
The resulting cash generated will be
returned to shareholders unless required
for acquisitions, which we undertake on
a highly selective basis.
This programme will cover all our
activities worldwide and will focus
on operational improvement, lean
initiatives, automation and digitalisation
as well as further optimisation of
our manufacturing footprint.
Background
1
2
3
We aim to:
Our Strategic Targets
Vesuvius plc
Annual Report and Financial Statements 2023
18
Robust results and profitability thanks to
positive pricing performance in all Business
Units and market share gains in Flow Control
and Foundry
Both the Steel and Foundry Divisions
achieved positive pricing performance
in 2023, sharing the value we create for
our customers through our technology
leading products and solutions and
fully compensating for increases in
our cost base from the continuing
inflationary environment.
At the same time, both the Flow Control
and the Foundry Business Units continued
to gain market share in most regions,
with the exception of Europe (EU+UK)
for Flow Control where the Business Unit
was negatively impacted by destocking
at certain key customers and where we
applied strict credit limit rules limiting
our sales to customers at heightened
risk of insolvency.
This ability to simultaneously improve
market share and prices in both
Flow Control and Foundry was again
made possible by the technological
differentiation of our products and
solutions, driven by our market-leading
investment in research and development.
In the Advanced Refractories Business
Unit however, we lost market share in 2023,
particularly in Europe, as we gave priority
to pricing.
Thanks to this overall positive pricing
performance and to our market share
gains in Flow Control and Foundry, we
delivered resilient results in 2023 despite
the very challenging market environment.
Our revenue reached £1,930m (versus
£2,047m in 2022), our trading profit
reached £200m (versus £227m in 2022)
resulting in a return on sales of 10.4%
(versus 11.1% in 2022), demonstrating
again the positive impact of our cost
competitiveness and technology strategy.
Successful implementation of our growth
generating investment programme in
Flow Control and Asia
The growth-generating investment
programme we initiated in 2021 continues
apace and will support the progression
of our results and profitability in the years
to come. The expansion of our VISO,
slide-gate and mould flux production
capacity in Flow Control will be fully
operational by mid-2024 and will support
the Business Unit’s expansion in India,
South East Asia, EEMEA and North
America. In China, our new Foundry flux
production line is now fully operational and
will enable the Business Unit to accelerate its
penetration of the fast-growing aluminium
foundry market in the country. In Advanced
Refractories, the expansion of our basic
monolithics, AlSi monolithics and precast
capacity at our new flagship plant in
Vizag, India will be completed by the end
of 2024 and will support the profitable
growth of the Business Unit in India and
South East Asia.
Strong free cash flow generation
Thanks to our stringent cash management
discipline and positive progress in the
management of our trade working capital,
our cash conversion ratio reached 93%
in 2023. This enabled us to maintain a very
low debt leverage ratio of 0.9x, despite
our capital expenditure being temporarily
higher than the long-term average,
to increase our dividend and to launch
a £50m share buyback programme
at the end of 2023.
Our free cash flow generation is expected
to improve further from 2025, when our
strategic expansion programme will be
complete and capex should return to
a more normalised level.
Continued progress in the productivity of
R&D and new product development
We again increased our investment
in research and development in 2023,
spending £37.4m, an uplift of 3.7% over
2022 (on a constant currency basis).
This was fully expensed in our profit and
loss statement. Our two main focus areas
remain: innovation in materials science,
with an objective to continuously improve
the performance of our consumables;
and, the development of mechatronics
solutions to enable our customers to
substitute the operators who manipulate
our consumables, with robots and by
doing so improve the safety, reliability,
cost and quality performance.
We successfully launched 21 new products
in 2023. Our New Product Sales ratio,
defined as the percentage of our sales
realised with products which didn’t exist
five years ago, reached 17.6%, up from
16.4% in 2022.
Thanks to the continuous efforts we are
putting into R&D, we now have a full
pipeline of products under development
which will be progressively introduced to
the market over the next three years to
support our ambition to grow our top
line and profitability.
Best ever safety performance
We achieved our best ever safety results in
2023 with a Lost Time Incident Frequency
Rate of 0.6 vs 1.08 in 2022, which now
positions us amongst the ‘best in class’
companies worldwide. This is the result of
many years of effort to integrate safety as
the number one priority in our company
culture. Our ultimate goal remains for
us to be a zero-accident company and
we will intensify our efforts to continue
progressing rapidly towards this objective.
Our journey to net zero
In 2023, we continued to implement our
action plan to decarbonise our activities.
In particular, we reinforced our energy
savings initiatives and continued our
programme to switch our electricity
consumption worldwide to non-carbon
emitting sources. Thanks to these efforts,
we reduced our carbon intensity by
20.2% vs our 2019 reference year
(18.5% reduction in 2022), achieving
our 2025 objective two years ahead of
schedule and setting us on track to achieve
our next intermediate target of a 50%
reduction by 2035.
Cyber update
On 6 February 2023, we announced that
we had suffered a major cyber security
incident. Thanks to the protective
measures the Group had implemented in
prior years, there was no disruption of
supply to customers, and the overall cost of
the incident was limited to £3.5m. We have
analysed the event in detail and derived
the necessary learnings. This has enabled
us to improve our protection further to help
minimise both the risk and severity of any
subsequent incidents.
On track to achieve our mid-term
growth and profitability objectives
Despite the short-term uncertainties in our
steel and foundry end-markets, we remain
confident in their mid- to long-term growth
potential, and in particular growth in the
steel market outside China, which should
be a tailwind for Vesuvius.
The strength of our technology-based
business model should also enable us to
continue to simultaneously outperform
our underlying markets in Flow Control
and Foundry and maintain positive pricing
performance for all our Business Units in
the years to come. This, coupled with our
relentless drive to optimise our cost base,
as illustrated by the launch of our new cost
optimisation programme, positions us well
to achieve our objectives of a 12.5% return
on sales by 2026 and cash flow generation
of £400m over the next three years.
Patrick André
Chief Executive
28 February 2024
Chief Executive’s strategic review
continued
19
Strategic report
Governance
Financial statements
Superior technology drives
financial outperformance
We expect to outperform underlying markets by on average 2% per annum,
using our technology leadership to gain market share, optimise pricing, and
share the value we generate for our customers. Refractories only represent
c.3% of the production costs of our customers.
We have a strong sustainability strategy
We aim to help customers reduce their environmental impact in addition
to delivering on our own challenging targets for safety, carbon intensity
reduction, gender diversity and other measures.
Vesuvius has strong and recurring free cash flow
Our business model delivers consistent cash flow due to our low capital intensity,
high level of recurring revenue, and the underpin of working capital discipline.
This cash flow will be available for further investment or return to shareholders.
Investment proposition
Principal
reasons to invest
We offer a compelling
investment proposition
with exciting potential
for profit and
cash generation
Vesuvius operates in growing markets
We believe that the steel market is inflecting to growth in the world outside
China, where we earn more than 90% of our revenue. At the same time,
there is a global move toward technical steel products and consumption,
where our Flow Control sales are strongly weighted. Our Foundry markets
are also expected to grow.
We have a global presence
Our worldwide footprint, particularly in the world’s fastest growing markets,
enables us to deliver on safety, quality, sustainability and value across all of
the world’s steel-making and foundry casting regions.
Vesuvius has a technology-based strategy
We spend c.2% of our annual revenue on R&D, allowing us to maintain strong
technological differentiation in our products. Our investment in R&D is measured
by our percentage of New Product Sales, and we aim to realise 20% of our
sales annually from products which didn’t exist five years ago.
Why invest in Vesuvius?
Strategic framework
How we will achieve this
Vesuvius plc
Annual Report and Financial Statements 2023
20
Our business model
Positive growth trends in
steel and foundry markets
Decentralised, entrepreneurial,
non-matrix organisation
55
55 production sites
on 6 continents
6
R&D centres
of excellence
13,500
people in our skilled and motivated workforce
Financial capital
We use the cash generated by our business to invest
in innovation, people, operating assets, technology
and sales to generate further growth
Global supply network
We work closely with a wide range of suppliers to
establish reliable and well-developed sustainable
supply chains to secure high-quality raw materials
Technological leadership
and product differentiation
through investment in R&D
Our network of talented scientists and technicians
create differentiated products and solutions,
maintaining our technology leadership
Link to page 22
Customer service
Our customer intimacy and deep knowledge of
their processes and requirements give our engineers
an unparalleled ability to deliver on customer needs
Link to page 23
Efficient operations
Our continuous focus on improvements in our
manufacturing base, production processes and
IT and support functions maintains the efficiency
of our operations
Link to page 23
Investment in growth regions
Our global footprint enables us to capitalise
on shifting dynamics in the global steel market
Link to page 23
1
2
3
4
Courage
Ownership
Respect
Energy
Underpinned by
a strong sustainability strategy
Link to page 34
Our markets
What we are doing
Our resources
Our Values
Why invest in Vesuvius?
Strategic framework
How we will achieve this
21
Strategic report
Governance
Financial statements
Outperform our
underlying markets by ~ 2%
>12.5%
Return on sales in 2026
£30m
Recurring annual cost
savings by 2026
£400m
free cash flow between
2024 and 2026
Return for investors
Optimised pricing and
market share gains driving
improved profitability
Quality
Optimised products
driving better steel,
and better castings
Sustainability
Less energy usage and fewer
CO
2
emissions in our processes
and our customers’ processes
Safety
Better environments and
outcomes for Vesuvius
staff and customers
Steel
Foundry
Link to page 6
Flow Control
Sensors & Probes
Advanced Refractories
Link to page 4
Rewarding careers
We encourage and reward
high performance to create
an environment where all can
realise their individual potential
Efficiency
Cheaper casting and
steel through reduction
of input costs
Creating value
To achieve
Vesuvius plc
Annual Report and Financial Statements 2023
22
Our drivers for profitable growth
We have four strategic pillars which will help us achieve
our financial targets. These are underpinned by our
universal focus on safety, our investment in our people
and our long-term sustainability strategy.
Leading R&D will underpin Vesuvius’
growth in the next five years.
We have built up a global network
of expert scientists, engineers and
technicians, based across our six R&D
centres of excellence, who combine
product expertise with the provision
of specialist support to our customers.
Our strategy of continual investment
in R&D has resulted in a growing
proportion of our sales being
attributable to new products (those
launched in the past five years). This
is expected to exceed 20% by 2026.
*
Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under licence.
Technological leadership and product
differentiation through investment in R&D
Optimised pricing and market share gains
1
Our strong technological leadership
enables us to deliver pricing
optimisation through a combination
of (1) passing-through cost fluctuations
and (2) value-sharing with customers.
The pass through of costs lowers
our exposure to fluctuations in
the raw material markets and
reduces earnings volatility.
The trend towards more technically
advanced steel and castings
increases customers’ demands for
our differentiated products, providing
further opportunities for us to share
in the value that our solutions create.
Current product
portfolio and
profit analysis
Audit customer’s process and
product portfolio to estimate
the current cost of ownership
20% longer
product life
Value creation to the
customer of >20%
Agreed pricing on
a value-sharing basis
Example:
Durasleeve
*
product
(new VISO piece)
New product
performance
evaluation
Develop and then trial
a new solution to maximise
value for the customer
Value-based
pricing calculation
Optimise pricing
based on superior
value creation
c.250 scientists and technicians
across 18 nationalities
Pittsburgh (US)
Enschede (NL)
Skawina (Poland)
Suzhou
(China)
Vizag (India)
Ghlin (Belgium)
R&D centres of excellence
14
18
22
23
26
16
14
11
18
>20
New product sales ratio
%
2026 Target: >20%
Definition: new product sales (products
launched in past five years) as a percentage
of total sales. Source: Company analysis.
Why invest in Vesuvius?
Strategic framework
How we will achieve this
23
Strategic report
Governance
Financial statements
Our existing programme of growth
capital expenditure will be completed
in 2024, after which expenditure will
return to more normalised levels.
In 2023, work continued on construction
of our new flux plant in Vizag, India
and on our new basic monolithics,
AISi-monolithics and precast
manufacturing plant on the same
site. These investments, together
with capacity expansions in other
manufacturing sites will serve future
growth in our key markets of India
and South East Asia.
We provide on-site support to
our customers, with Flow Control
maintaining a continuous
presence at our customers’ sites.
This level of intimacy, together with
our materials science, fluid and
computer modelling expertise,
enables us to provide high-quality,
tailored solutions to our customers.
These are supported where appropriate
by industry leading mechatronics,
to secure an ongoing revenue stream
from our consumable products.
We have identified an incremental £30m
of annually recurring savings which we
intend to realise in the next three years.
The majority of these savings will
be achieved through our lean and
continuous improvement programmes,
and through the automation and
digitalisation of our manufacturing
and administrative processes.
Support to above-market growth in Flow Control
–
Expansion of VISO, slide-gate and flux capacity worldwide
Lean and continuous improvement programmes
Automation and digitisation of manufacturing
and administrative processes
Further optimisation of manufacturing footprint
Global expansion in India and South East Asia
–
Investing in state-of-the-art
new capacity in the high-growth
Indian market
–
Expanding capacity at existing Kolkata
site and developing new site in Vizag
–
VISO capacity
–
Flux plant
–
Basic Mono, AISI Mono
and precast lines
–
Foundry filters line
–
Space for further investment
c.25% benefit
Customer service
Efficient operations
Investment in growth regions
2
3
4
c.75% benefit
Vesuvius plc
Annual Report and Financial Statements 2023
24
Vesuvius’ Steel Division reported revenues
of £1,400.0m in 2023, a decrease of 3.7%,
reflecting positive revenue growth of 0.6%
in the Flow Control business despite the
difficult market conditions. This was due
to good pricing performance and market
share gains in most markets. Advanced
Refractories’ revenue declined 9.4% in
2023, due to the prioritisation of pricing
over volume in EMEA and the Americas,
more than offsetting market share gains
in Asia.
Revenue from Sensors & Probes was
broadly flat due to market share gains
offsetting market decline.
Steel Division trading profit reduced by
9.6% to £147.6m, due to the negative drop
through impact of reduced volumes in
the Division, partially compensated by
a positive pricing performance enabling
the Division’s return on sales to contract
only 70bps to 10.5%.
Steel Division
2023 (£m)
2022 (£m)
Change (%)
Underlying
change (%)
Flow Control revenue
793.0
810.9
(2.2%)
0.6%
Advanced Refractories revenue
567.9
645.3
(12.0%)
(9.4%)
Sensors & Probes revenue
39.1
40.2
(2.8%)
(0.6%)
Total Steel Revenue
1,400.0
1,496.4
(6.4%)
(3.7%)
Total Steel Trading Profit
147.6
172.7
(14.6%)
(9.6%)
Total Steel Return on Sales
10.5%
11.5%
-100bps
-70bps
Vesuvius comprises two
Divisions, Steel and Foundry.
The Steel Division operates
as three Business Units,
Flow Control, Advanced
Refractories and Sensors
& Probes.
Changes described are versus 2022 on an
underlying basis, excluding the impact of FX,
unless otherwise noted. There were no acquisitions
or disposals in 2023 and hence no adjustments
were required.
Steel Division
Revenue
£1,400m
Trading profit
£148m
Operating review
25
Strategic report
Governance
Financial statements
21
22
23
Revenue
£m
£793m
649
811
793
In 2023, revenue in the Group’s Flow
Control business increased by 0.6%
year-on-year to £793.0m, driven by
a strong pricing performance and
overall market share gains, offset by
market, destocking and customer-related
volume declines.
In EMEA, revenue declined 6.2%
compared to 2022, broadly in line with
declines in steel production (in EMEA
excluding Russia, Ukraine and Iran)
of 5%. This comprised an out-performance
in EEMEA (excluding Iran, Russia and
Ukraine) where the steel market was
broadly flat and where we gained market
share, offset by volume declines higher
than the steel market evolution in the
EU+UK reflecting a combination of
the weak market, destocking by our
European customers and voluntary
reduction of our sales to some
customers at risk of insolvency.
Flow Control Revenue
2023 (£m)
2022 (£m)
Change (%)
Underlying
change (%)
Americas
317.8
321.4
(1.1%)
1.3%
Europe, Middle East and
Africa (EMEA)
252.7
275.4
(8.2%)
(6.2%)
Asia-Pacific
222.4
214.1
3.9%
8.7%
Total Flow Control Revenue
793.0
810.9
(2.2%)
0.6%
Pascal Genest
President, Flow Control
Flow Control
In the Americas, our underlying revenue
grew 1.3% reflecting out-performance
of the market in the US (volumes +1.1%
against a market +0.2%) and in South
America (stable sales volumes versus
a declining market), and resilient pricing.
This good performance was partly offset
by challenges in Mexico, where a major
customer in which we had a very strong
market share ceased operations at the
end of 2022.
In Asia Pacific, revenue grew 8.7%, driven
by exceptionally strong sales volume
growth in both India and China, materially
exceeding market volume growth in these
two countries. We also outperformed the
market in South East Asia, with modest
volume growth versus market volume
declines of -6.5%.
Vesuvius plc
Annual Report and Financial Statements 2023
26
Advanced Refractories
Steel Sensors & Probes
Steel Sensors & Probes Revenue
2023 (£m)
2022 (£m)
Change (%)
Underlying
change (%)
Americas
28.2
29.1
(2.9%)
0.5%
Europe, Middle East and
Africa (EMEA)
10.2
10.7
(5.0%)
(6.0%)
Asia-Pacific
0.6
0.4
77.8%
85.0%
Total Steel Sensors &
Probes Revenue
39.1
40.2
(2.8%)
(0.6%)
21
22
23
Revenue
£m
£39m
39
40
34
Advanced Refractories Revenue
2023 (£m)
2022 (£m)
Change (%)
Underlying
change (%)
Americas
212.1
244.5
(13.3%)
(11.5%)
Europe, Middle East and
Africa (EMEA)
191.5
230.9
(17.0%)
(15.1%)
Asia-Pacific
164.3
169.9
(3.3%)
1.5%
Total Advanced
Refractories Revenue
567.9
645.3
(12.0%)
(9.4%)
21
22
23
Revenue
£m
£568m
489
645
568
Operating review
continued
Richard Sykes
President, Advanced Refractories
Davide Guarnieri
President, Steel Sensors & Probes
Advanced Refractories reported revenue
of £567.9m in 2023, a decrease of 9.4%,
principally reflecting volume declines, with
overall stable pricing. Volume decline was
higher than the underlying steel market
in both the Americas and EMEA due to
market share losses associated with
priority having been given to pricing, and
destocking in EMEA. Market share started
to recover in EMEA in the second half. In
Asia Pacific however, revenue grew 1.5%
driven by double-digit volume increases in
India and China, materially ahead of the
market, partially offset by more difficult
trading conditions in South East Asia.
Revenue in Steel Sensors & Probes was
£39.1m in 2023, broadly flat year-on-year,
reflecting market share gains offsetting
a declining market. We expect our sales
volume in the coming years to continue
to outperform the underlying steel
market due in particular to an increased
penetration in Asia where we have
been performing several successful
customer trials.
27
Strategic report
Governance
Financial statements
Vesuvius’ Foundry Division reported
revenues of £529.8m in 2023, a decrease
of 1.5%, reflecting revenues contracting in
EMEA and the Americas while expanding
in Asia-Pacific. After a positive start to the
year, trading was difficult in the second
half due to significant market weakness
in the northern part of EMEA (historically
an important market area for our Foundry
Division), in South America and in China.
This market weakness was partially but
not entirely compensated for by market
share gains in all regions and a positive
pricing performance. Foundry revenues in
the Americas fell 5.8% year on year, driven
by contraction in South America partially
offset by modest growth in North America.
Foundry revenue
2023 (£m)
2022 (£m)
Change (%)
Underlying
change (%)
Americas
136.4
145.5
(6.2%)
(5.8%)
Europe, Middle East and
Africa (EMEA)
215.1
224.7
(4.3%)
(3.0%)
Asia-Pacific
178.3
180.8
(1.4%)
4.2%
Total Foundry Revenue
529.8
551.0
(3.8%)
(1.5%)
Total Foundry Trading Profit
52.8
54.5
(3.1%)
2.5%
Total Foundry Return on Sales
10.0%
9.9%
+10bps
+40bps
In EMEA, underlying revenue decreased
by 3.0%, driven by a slowdown in Germany
and more generally Northern Europe,
as well as broader regional destocking.
Performance in Asia was largely positive
with revenue up 4.2%, reflecting very
strong growth in India and market share
gains in China, progressively increasing
the relative importance of this region
in the Foundry Division. This trend should
continue in the coming years.
For the third year in succession, the
Foundry Division delivered an increase
in its return-on-sales. Trading profit
increased 2.5% (on an underlying basis)
to £52.8m and return-on-sales increased
by 40bps to 10%. This improvement trend
should accelerate when end-markets
recover, especially in Northern Europe
and South America.
Karena Cancilleri
President, Foundry
Revenue
£530m
Trading profit
£53m
Foundry Division
Vesuvius plc
Annual Report and Financial Statements 2023
28
Strategic
Value alignment
KPI
Purpose
Link to remuneration
Return for
Investors
p21
21
22
23
Underlying revenue growth
%
18
18
-3
Provides an important indicator of
organic (like-for-like) growth of Group
businesses between reporting periods.
This measure eliminates the impact of
exchange rates, acquisitions, disposals
and significant business closures
21
22
23
Return on sales
%
10.4
11.1
8.7
Reflects the operating profit
margin achieved
21
22
23
Headline EPS
p
46.7
56.5
35.3
Used to assess the underlying earnings
performance of the Group as a whole
Annual
Incentive Plan
and Vesuvius
Share Plan
–
Read more about
these on p123-128
21
22
23
Return on invested capital
%
8.9
10.7
7.5
Used to assess the financial performance
of the Group
Annual
Incentive Plan
and Vesuvius
Share Plan
–
Read more about
these on p123-128
21
22
23
Free cash flow
£m
-0.3
128
123
Used to assess the underlying cash
generation of the Group
21
22
23
Average working capital to sales
%
23.4
23.8
20.9
One of the factors driving the generation
of free cash flow is the average working
capital to sales ratio, which indicates
the level of working capital used in
the business
Annual
Incentive Plan
–
Read more about
this on p123, 126
and 127
Efficiency &
Sustainability
p21
21
22
23
Total R&D spend
£m
37
36
31
At constant 2023 currency
21
22
23
New product sales
%
18
16
15
Sales of products launched within the
last five years as a % of total revenue
1.
For definitions of alternative performance measures, refer to Note 35 of the Group Financial Statements.
Details of the Group’s
Non-financial KPIs
can be found in the
Non-financial and Sustainability Information Statement
on page 35.
Financial KPIs
1
Financial Key Performance Indicators
29
Strategic report
Governance
Financial statements
Basis of preparation
All references in this financial review are to
headline performance unless stated otherwise.
See Note 35.1 to the Group Financial Statements
for the definition of headline performance.
We also report key metrics on an underlying
basis, where we adjust to ensure appropriate
comparability between periods, irrespective
of currency fluctuations and any business
acquisitions and disposals.
This is done by:
–
Restating the previous period’s results
at the same foreign exchange (FX) rates
used in the current period
–
Removing the results of disposed businesses
in both the current and prior years
–
Removing the results of acquired businesses
in both the current and prior years
Therefore, for 2023, we have:
–
Retranslated 2022 results at the FX rates used
in calculating the 2023 results
–
No adjustments have been required
for acquisitions or disposals
Financial review
Strong commercial performance
counteracted challenging markets.”
Mark Collis
Chief Financial Officer
2023 performance overview
2023 was a robust year in terms of trading
profit and return on sales, despite the
depressed underlying markets, and we
have continued to generate significant free
cash flow. This has enabled the Board to
recommend an attractive final dividend
to our shareholders and initiate a share
buy-back, while maintaining investment
in strategic areas.
Revenue for the year decreased by 5.7%,
of which 2.6% related to FX headwinds
and 3.1% underlying performance.
Underlying revenue was driven by
a decline in volume (-5.5% partially
offset by positive pricing of +2.3%). On a
reported basis, the Steel and Foundry
Division revenue decreased by 6.4%
and 3.8% respectively in the year.
We achieved a trading profit of £200.4m,
down 11.8% on a reported basis of which
6.7% was underlying and 5.1% related to
FX headwinds. Within the underlying profit
changes, there was a £48.4m decline due
to the drop-through from volume declines,
partially offset by a positive contribution
of £32.1m from net pricing, with the
remainder due to the impact of the
February 2023 cyber attack (£3.5m cost)
and other non-recurring one-off items
(£5.5m benefit), which largely arose in H2.
Return on sales of 10.4% was down 40bps
on an underlying basis. The reduction in
trading profit and Return on Sales is
primarily due to the drop-through
impact of volume declines.
The pattern of trading in the year was
relatively strong in H1, while trading in
H2 was somewhat weaker, reflecting
both seasonality and weaker market
conditions, notably in Europe.
The net impact of average 2023 exchange
rates compared to 2022 averages has
been a headwind of £12.5m at a trading
profit level, in particular, due to the
depreciation of the Turkish Lira, Indian
Rupee, Chinese Renminbi and the
Argentine Peso versus Sterling. Translated
at FX rates as at 28 February 2024,
FY23 revenue would be c. £1,875m
and trading profit would be c. £191m.
Investment in R&D is central to our strategy
of delivering market-leading product
technology and services to customers.
In 2023 we spent £37.4m on R&D activities
(2022: £35.9m), which represents 1.9% of
our revenue (2022: 1.8%).
Net Interest cost for FY23 was broadly
flat year on year at £11.6m (2022: £11.4m),
reflecting both an increase in net interest
expense and interest income due to the
higher interest rate environment and
some small deposits held in high
inflation-rate countries.
Profit from joint ventures and associates
was broadly flat year on year at £0.9m
(2022: £1.2m).
Headline profit before tax (‘PBT’) was
£189.7m, down 12.6% versus last year on
a reported basis. Including amortisation
(£10.3m), PBT of £179.4m was 13.2%
lower than last year.
Vesuvius plc
Annual Report and Financial Statements 2023
30
A key measure of tax performance is the
Headline Effective Tax Rate (‘ETR’), which
is calculated on the income tax associated
with headline performance, divided by the
headline profit before tax and before the
Group’s share of post-tax profit of joint
ventures. The Group’s headline ETR,
based on the income tax costs associated
with headline performance of £51.9m
(2022: £57.2m), was 27.5% (2022: 26.5%).
The Group’s total income tax costs for the
period include a credit within separately
reported items of £3.1m (2022: £39.1m)
which primarily relates to deferred tax
on intangible assets.
A tax charge reflected in the Group
Statement of Comprehensive Income in
the year amounted to £2.0m (2022: £8.2m
charge) which primarily relates to tax on
net actuarial gains and losses on pensions.
We expect the Group’s effective tax rate
on headline profit before tax and before
the share of post-tax profits from joint
ventures to be around 27.5%, dependent
on profit mix, in 2024.
Non-controlling interests principally
comprise the minority holdings in Indian
subsidiaries for the Steel and Foundry
businesses. This increased to £12.1m in
2023 (2022: £7.4m) reflecting the strong
growth in profit in those subsidiaries.
Headline EPS from continuing operations
at 46.7p was 11.9% lower on an underlying
basis than 2022, reflecting both the
lower profit and the higher level of
non-controlling interests.
Dividend
The Board has recommended a final
dividend of 16.2 pence per share to be
paid, subject to shareholder approval,
on 31 May 2024 to shareholders on the
register at 19 April 2024. When added to
the 2023 interim dividend of 6.8 pence
per share paid on 15 September 2023,
this represents a full-year dividend of
23.0 pence per share. The last date for
receipt of elections from shareholders
for the Vesuvius Dividend Reinvestment
Plan will be 9 May 2024.
Cost-saving programme
We have initiated an efficiency
programme to realise recurring savings
of £30m per annum by 2026, of which
c.£3m is expected to be delivered in 2024.
We expect to achieve a run-rate of
c.£10–15m savings by the end of 2024.
The programme costs are expected to
be c.£40m, estimated to be split
£30m/£10m to capex and operating
expense respectively, of which c.£6m
of operating expense is expected to be
incurred in 2024. Material restructuring
costs will be excluded from underlying
performance, allowing for a clear
measure of our operating performance.
Financial review
continued
Cash flow and balance sheet
Our cash management performance was
robust, achieving an 93% cash conversion
(2022: 82%), thanks to a good operational
performance and an inflow from trade
working capital, partially offset by a
continued investment in strategic capacity
expansion. As a result, we have reduced
our net debt position and maintained our
leverage ratio of net debt to EBITDA at
0.9x at 31 December 2023.
We measure working capital both in terms
of actual cash flow movements, and as
a percentage of sales revenue. Trade
working capital as a percentage of sales
in 2023 improved to 23.4% (2022: 23.8%),
measured on a 12-month moving average
basis. In absolute terms on a constant
currency basis trade working capital
decreased by £20.9m in 2023 to £420.3m.
The reduction was principally due to
a fall in inventory days (from 89.9 to 88.9,
12m average, December 2022 to 2023),
broadly flat debtor days (78.0 to 77.6,
12m average, December 2022 to 2023)
and flat creditor days (64.9 days, 12m
average). The 12-month rolling average
measurement masks the phasing in the
year, with working capital peaking in
H1 and then falling progressively in
Q3 and Q4 as a percentage of revenue.
We intend to continue to reduce our
working capital intensity in 2024.
Free cash flow from continuing operations
was £128.2m in 2023 (2022: £123.1m).
Capital expenditure
Cash capital expenditure in 2023 was
£92.6m (2022: £89.2m) (£125.3m including
capitalised leases) of which £93.2m
was in the Steel Division (2022: £85.2m)
and £32.1m in the Foundry Division
(2022: £18.7m). Capital expenditure
on revenue-generating customer
installation assets, primarily in Steel, was
approximately £9m (2022: £8m) and we
spent c. £30m in 2023 on growth capex,
largely focused on expansion in Flow
Control worldwide and, more specifically,
in Asia for all three Business Units. Total
cash capex in 2024 is expected to be
c.£100m, of which growth capex is
expected to be c.£30–35m. Capital
expenditure will then revert to more
normalised levels from 2025 onwards.
The Group had committed borrowing
facilities of £685.8m as of 31 December
2023 (2022: £721.9m), of which £333.4m
was undrawn (2022: £322.5m).
Revenue
£m
2023
2022
% change
Reported
Reported
Currency
Underlying
Reported
Underlying
Steel
1,400.0
1,496.4
(42.0)
1,454.5
(6.4%)
(3.7%)
Foundry
529.8
551.0
(13.3)
537.7
(3.8%)
(1.5%)
Total Group
1,929.8
2,047.4
(55.3)
1,992.1
(5.7%)
(3.1%)
Trading profit
£m
2023
2022
% change
Reported
Reported
Currency
Underlying
Reported
Underlying
Steel
147.6
172.7
(9.6)
163.2
(14.6%)
(9.6%)
Foundry
52.8
54.5
(3.0)
51.5
(3.1%)
2.5%
Total Group
200.4
227.2
(12.5)
214.7
(11.8%)
(6.7%)
Return on sales
£m
2023
2022
% change
Reported
Reported
Currency
Underlying
Reported
Underlying
Steel
10.5%
11.5%
11.2%
(100bps)
(70bps)
Foundry
10.0%
9.9%
9.6%
+10bps
+40bps
Total Group
10.4%
11.1%
10.8%
(70bps)
(40bps)
31
Strategic report
Governance
Financial statements
Net debt
Net debt on 31 December 2023 was
£237.5m, a £17.5m decrease from
£255.0m on 31 December 2022, due to
significant free cash flow partially offset by
a return to shareholders of £63.8m by way
of dividends and share buyback, by right
of use asset additions of £31.2m and by
a foreign exchange adjustment of £11.3m.
At the end of 2023, the net debt to EBITDA
ratio was 0.9x (2022: 0.9x) and EBITDA to
interest was 31.5x (2022: 29.8x). These
ratios are monitored regularly to ensure
that the Group has sufficient financing
available to run the business and fund
future growth.
The Group’s debt facilities have two
financial covenants: the ratios of net debt
to EBITDA (maximum 3.25x limit) and
EBITDA to interest (minimum 4x limit).
Certain adjustments are made to the net
debt calculations for bank covenant
purposes, the most significant of which
is to exclude the impact of IFRS 16.
Return on invested capital (ROIC)
Our ROIC for 2023 was 8.9% (2022:
10.7%). Excluding goodwill on our balance
sheet from the acquisition of Foseco in
2008, ROIC for 2023 would be 14.3%.
ROIC is our key measure of return from
the Group’s invested capital, calculated
as trading profit less amortisation of
acquired intangibles plus share of post-tax
profit of joint ventures and associates for
the previous 12 months after tax, divided
by the average (being the average of
the opening and closing balance sheet)
invested capital (defined as: total assets
excluding cash plus non-interest-bearing
liabilities), at the average foreign
exchange rate for the year).
Pensions
The Group has a limited number of
historical defined benefit plans located
mainly in the UK, USA, Germany and
Belgium. The main plans in the UK and
USA are closed to further benefits accrual.
All of the liabilities in the UK were insured
following a buy-in agreement with Pension
Insurance Corporation plc (‘PIC’) in 2021.
This buy-in agreement secured an
insurance asset from PIC that matches the
remaining pension liabilities of the UK
Plan, with the result that the Company no
longer bears any investment, longevity,
interest rate or inflation risks in respect
of the UK Plan.
The Group’s net pension liability
at 31 December 2023 was £46.3m
(2022: £56.1m liability).
Financial Risk Factors
The Group’s approach to risk
management, including the mitigations
in place for our principal risks, is detailed
on pages 77 and 78. We consider the main
financial risk faced by the Group to be a
material business interruption incident
leading to reduced revenue and profit.
We also manage broad financial risks
such as cost inflation, bank financing and
capital market activity and to a lesser
extent foreign exchange and interest rate
movements (see Note 24 to the Group
Financial Statements). We mitigate
liquidity risk by financing using both the
bank and private placement debt markets
and we mitigate refinancing risk by
seeking to avoid a concentration of debt
maturities in any one calendar year.
Mark Collis
Chief Financial Officer
28 February 2024
Progress on our Sustainability roadmap
This Non-Financial and Sustainability
Information Statement provides
information on the Group’s activities
and policies in respect of:
Environmental matters
Our planet
p39-55
Climate-related reporting
TCFD
p36-55
The Company’s employees
Our people
p58-63
Social matters
Our communities
p64-67
Respect for human rights
Our communities
p64
Anti-corruption and anti-bribery matters
Our communities
p65
This statement also details, where
relevant, the due diligence processes
implemented by the Company in
pursuance of these policies.
Further information, disclosed in
other sections of the Strategic Report
is incorporated into this statement
by reference including:
Information on the Group’s principal risks
Details of the Group’s principal risks relating
to these non-financial and sustainability
matters are detailed in the Group’s schedule
of principal risks and uncertainties.
p77-78
Risk, viability and
going concern
p72-78
Details of the Group’s
business model
p20-21
Details of the Group’s
non-financial KPIs
p35
Non-Financial and Sustainability
Information Statement
Every day we focus on improving the sustainability
of our operations and help our customers improve the safety,
energy efficiency, yield and reliability of their processes
Vesuvius’ sustainability strategy
brings together all our environmental,
social and governance initiatives
into one coordinated programme.
The strategy is built on four pillars:
our planet, our customers, our people
and our communities.
Our Sustainability key priorities
We have set out four key sustainability
strategic priorities. Targets for three
of these are embedded into our
management incentive arrangements.
1
Become a zero - accident company
The number one priority at Vesuvius is to
provide our employees with a safe place
to work. We were pleased to see continued
progress with the reduction of our Lost
Time Injury Frequency Rate (LTIFR) in
2023, recording a rate of 0.6 per million
hours worked in 2023 which was
significantly lower than 2022 (1.1).
However, there were two serious incidents
involving not directly supervised
contractors in 2023, and the LTIFR for
not directly supervised contractors and
visitors increased to 1.6 in 2023 (versus
1.0 in 2022). The safety of contractors
working on Vesuvius’ sites remains
a key area of focus for the Group.
2
Reach net zero CO
2
e emissions
by 2050 (Scope 1 and Scope 2)
Between 2019 and 2023, our overall CO
2
e
emission intensity metric (CO
2
e emissions
per metric tonne of product packed for
shipment, Scope 1 and Scope 2, market-
based) reduced by 45.5%, vs a target
of 20% by 2025. However, this number
is skewed by the Group’s reduction in
the production of dolime during 2023,
as a result of the temporary closure of
one of our rotary kilns. If the kiln had
been operating normally throughout the
year, the pro forma 2023 CO
2
e emission
intensity would have been 20.2% lower
than in 2019.
We have made considerable progress
in energy conservation, with our
conservation plan now in its third cycle
of improvement. During 2024, we will
continue to focus on further improvements,
including modernising and upgrading
equipment to reduce our energy
consumption, and replacing high
CO
2
e emission electricity (generated
from coal) with greener electricity or
other sources of energy.
3
Help our customers reduce their
CO
2
emissions
We help our customers improve the
performance of their casting operations,
thereby increasing the energy efficiency
of their entire process.
In 2023, 83% of ongoing new product
development projects were dedicated
to market-leading sustainable products.
Vesuvius plc
Annual Report and Financial Statements 2023
32
We are signatories to the UN Global
Compact and report annually on our
sustainability activities, commitments
and progress.
We are very proud of our progress to date,
as exemplified by the external recognition
of the following rating agencies:
We commit to:
–
Minimise direct and indirect CO
2
and other
greenhouse gas emissions, by reducing the
energy intensity of our business and using
cleaner energy sources
–
Minimise the consumption of water
and other resources
–
Reduce waste at source and
during production
–
Increase the usage of recycled materials
and promote the development of the
circular economy
–
Minimise any pollution or releases of
substances which could adversely affect
humans or the environment
–
Avoid negative impacts on biodiversity
See the full policy on www.vesuvius.com
for further details.
External reporting & recognition
Vesuvius’ Environmental Policy
AA
2023
A-
4
Improve gender diversity at every level
of the Company
Women now represent 20% of our
Senior Leadership Group (2022: 20%)
which is a level that we consider is still
too low, but which represents a significant
improvement as compared with the level
of 15% in 2019.
Our ambition remains to reach 25% by
the end of 2025, though we see this as a
challenging target given the relatively low
attractiveness of our industry to female
entrants. To meet this challenge we are
placing greater emphasis on developing
an internal pipeline of female talent.
External reporting
We are signatories to the UN Global
Compact and report annually on our
sustainability activities, commitments
and progress. We are very proud
of our progress to date and of the
recognition we have received from
leading rating agencies.
Future reporting requirements
We are monitoring the introduction of
ISSB standards in the UK and going
forward our reporting will reflect changes
in the regulatory landscape. We have also
started work on ensuring we have systems
in place to comply with the European
Union’s CSRD requirements, which will
be applicable to Vesuvius plc in 2029 and
applicable to a number of our European
subsidiaries in 2026. In 2024, we intend
to carry out a gap assessment between
our 2023 sustainability disclosures and
the CSRD requirements, and build
adequate plans.
2023 Reporting parameters
During 2023, our production of dolime was considerably reduced, following an incident which incapacitated
one of our rotary kilns in January. As dolime production is the largest contributor to the Group’s CO
2
emissions,
the change in product mix skews environmental performance comparisons with prior years and with the 2025
target. In this report, we have therefore reported some pro forma numbers (as if the dolime process had been
operating normally) to preserve meaningful comparability.
33
Strategic report
Governance
Financial statements
Creating a better tomorrow
for our planet, our customers,
our people and our communities
Our sustainability strategy and objectives
Our communities
–
To support the communities
in which we operate, with
a focus on promoting and
supporting women’s education
in scientific fields
–
To ensure ethical business
conduct both internally and
with our trading partners
–
To extend our sustainability
commitment to our suppliers
and encourage them to progress
Our planet
–
To tackle climate change by
reducing our CO
2
e emissions and
helping our customers reduce
theirs with our products and
services. We are committed
to reaching a net zero carbon
footprint at the latest by 2050
–
To engage in the circular economy
by reducing our waste, recovering
more of our products after they
have been used and increasing
the usage of recycled materials
Our people
–
To ensure the safety of our people
and everyone else who accesses
our sites. This is our first priority.
We take safety very seriously and
are constantly striving to improve
–
To offer growth opportunities
to all our employees through
training and career progression
to develop diverse, engaged
and high-performing teams
Our customers
–
To support our customers’
efforts to improve safety on
the shop floor, especially
exposure to hot metal
–
To help customers improve
their operational performance
and thereby reduce their
environmental footprint, and
especially their CO
2
emissions
We create innovative solutions that
help our customers improve their safety
and quality performance, reduce their
environmental footprint, become
more efficient in their processes,
and reduce costs. We work in close
partnership with the most advanced
steel-makers to develop the refractory
products for the green steel-making
and casting processes of the future.
We aim to deliver sustainable, profitable
growth to provide our shareholders with
a superior return on their investment,
whilst providing our employees with a safe
workplace where they are recognised,
developed and properly rewarded.
Our Sustainability initiative sets out the
Group’s formal objectives and targets for
supporting our customers, our employees
and our communities, and for protecting
our planet for future generations. It is
embedded in the Group’s overall strategy
and informs how we deliver on our
strategic priorities.
The Board has identified nine significant
non-financial KPIs for the business,
covering the Group’s main Sustainability
objectives. These KPIs were defined when
the sustainability strategy was launched
in 2020. Most targets associated with the
KPIs have a deadline in 2025. Focus on
these KPIs has been maintained in the
following years. In 2024, we will begin work
on selecting the 2030 targets and KPIs.
p39
p58
p64
p56
Our planet
Our customers
Our people
Our communities
Vesuvius plc
Annual Report and Financial Statements 2023
34
The Group’s non-financial KPIs cover the Group’s main Sustainability objectives. We have set stretching targets for the Group’s
sustainability KPIs to reach within set time frames. These are set out in the table below.
Strategic Value
alignment
KPI
Measure
Target
2023 progress
vs plan
1
2023 progress
Link to remuneration
Safety
p21
Safety
Lost Time Injury
Frequency Rate
<1
0.60
Vesuvius
Share Plan
–
Read more about
this on p123–128
Sustainability
p21
Energy
intensity
By 2025, reduce energy
intensity per metric tonne of
product packed for shipment
(vs 2019)
-10%
-7.2%
1,2,3
CO
2
e
emission
intensity
By 2025, reduce Scope 1
and Scope 2 CO
2
e emission
intensity per metric tonne of
product packed for shipment
(vs 2019)
-20%
-20.2%
1,2,3
Annual
Incentive Plan and
Vesuvius Share
Plan
– Read more
about these
on p123–128
Wastewater
By 2025, reduce wastewater
per metric tonne of product
packed for shipment (vs 2019)
-25%
-11.6%
1,2,3
Solid waste
By 2025, reduce solid waste
(hazardous and sent to
landfill) per metric tonne of
product packed for shipment
(vs 2019)
-25%
-19.7%
1,2,3
Recycled
material
By 2025, increase the
proportion of recycled
materials from external
sources used in production
7%
5.7%
1,2,3
Rewarding
careers
p21
Gender
diversity
By 2025, increase female
representation in the
Senior Leadership Group
(approx. 150 top managers)
25%
20%
Annual
Incentive Plan and
Vesuvius Share
Plan
– Read more
about these
on p123–128
Compliance
training
Increase the percentage of
targeted staff who complete
anti-bribery and corruption
training annually
90%
100%
Quality
p21
Supply
chain
By the end of 2023, conduct
sustainability assessments of
our raw materials suppliers
(as a percentage of Group
raw material spend)
50%
52%
Progress on our Sustainability targets
Behind plan
On plan
Ahead of schedule
Target achieved
Progress key
1.
Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc. (Vesuvius Penn Corporation), and BMC (Yingkou YingWei Magnesium Co., Ltd ).
2. Pro forma: performance as if the dolime process had been operating normally in 2023.
3. Actual Group performance for 2023, with actual dolime production: Energy intensity -14.6%, CO
2
e emission intensity -45.5%, Wastewater -4.0%, Solid waste -13.4%,
Recycled material 6.5%.
Details of the Group’s
Financial KPIs
can be found on page 28.
During 2023, our production of dolime was considerably reduced, following an incident in January which incapacitated one of our rotary kilns. As dolime production is
a major contributor to the Group’s tonnage and CO
2
emissions, the change in product mix skews environmental performance comparisons both with prior years and
with the 2025 target. The table below therefore contains pro forma performance figures as if the dolime process had been operating normally to preserve meaningful
comparability. The actual figures are set out in a footnote to the table.
35
Strategic report
Governance
Financial statements
Task Force on Climate-related Financial Disclosures
The disclosures included in this Annual
Report are consistent with the Task
Force on Climate-related Financial
Disclosures (TCFD) Recommendations
and Recommended Disclosures, and have
been prepared taking into account the
Guidance for all sectors. The disclosure
is also in accordance with FCA Listing
Rule requirements.
This section provides the relevant
disclosures or otherwise provides
cross-references, in the table below,
for where the disclosures are located
elsewhere in the Annual Report.
In preparing this TCFD disclosure we
considered recent developments in
global affairs and macro trends, such as:
–
The acceleration of the growth of the
electric vehicle market (and consequently
the faster peak and decline of the hybrid
vehicle market)
–
The energy crisis and price gaps that
appeared between regions, and at the
same time, the rapid reduction of the
cost per installed kWh of renewable
energy and associated massive
investments plans
–
The development and implementation of
policies in all regions aimed at accelerating
the transition to renewable sources of
energy and the decarbonisation of industry
We concluded that the underlying
assumptions and drivers of our scenario
analysis, and the risks and opportunities
that we have identified, do not require
any significant modification this year.
We are aware of a growing acceptance
that the 1.5°C global warming ambition
will not be met, which supports the
assumption in our scenario plans that
the most optimistic scenario is a 2°C
increase in global warming.
Topic
Disclosure summary
Vesuvius disclosure
Governance
Disclose the
organisation’s
governance
around climate-
related risks and
opportunities.
a
Describe the Board’s oversight of
climate-related risks and opportunities.
Sustainability: TCFD
Risk, viability and going concern
Directors’ Remuneration Report
p37
p72-78
p108-135
b
Describe management’s role in assessing
and managing climate-related risks
and opportunities.
Sustainability: TCFD
Risk, viability and going concern
p37-40
p72-78
Strategy
Disclose the
actual and
potential impacts
of climate-
related risks and
opportunities on
the organisation’s
businesses,
strategy, and
financial planning
where such
information
is material.
a
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long term.
Sustainability: Our planet
p39-43
b
Describe the impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy
and financial planning.
Sustainability: Our planet
Our external environment
Sustainability: Our customers
p39-53
p10-13
p56-57
c
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including
a 2°C or lower scenario.
Sustainability: Our planet
p44-46
Risk
management
Disclose how
the organisation
identifies,
assesses
and manages
climate-
related risks.
a
Describe the organisation’s processes
for identifying and assessing
climate-related risks.
Sustainability: Our planet
Risk, viability and going concern
p39-43
p72-78
b
Describe the organisation’s processes
for managing climate-related risks.
Sustainability: Our planet
Risk, viability and going concern
p39-43
p74
c
Describe how processes for identifying, assessing
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Sustainability: Our planet
Risk, viability and going concern
p39-43
p72-78
Metrics and
targets
Disclose the
metrics and
targets used
to assess and
manage relevant
climate-related
risks and
opportunities
where such
information
is material.
a
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in
line with its strategy and risk management process.
Sustainability
p35 and 41
b
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 GHG emissions, and the related risks.
Sustainability: Our planet
p50-53
c
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Sustainability: Our planet
p35 and
p50-55
Vesuvius plc
Annual Report and Financial Statements 2023
36
Chief Executive
Is ultimately responsible
for the delivery of the
Sustainability initiative
Sustainability governance structure
In 2023, the governance structure for
the oversight of sustainability and climate
change matters, and their associated
areas of focus remained the same as
in previous years.
Board oversight
The Board holds overall accountability
and oversight for all matters related to
sustainability and the management of
all risks and opportunities, including the
impact of climate change on the Group.
In setting the Group’s strategy it ensures
that sustainability is embedded at the
heart of the Group and is reflected in the
operational plans of each Business Unit.
The Board formally reviews all significant
sustainability programmes.
The Board’s oversight of the Group’s
response to climate change is integrated
into both its monitoring of the Group’s
broader sustainability strategy and
initiatives, and its approach to significant
capital and other investments. The
Board formally discusses the Group’s
Sustainability initiative at least twice
per year.
It sets the Group’s priorities and targets,
and reviews the Group’s performance and
progress against them. It also monitors
the Group’s external ESG ratings.
The Board has undertaken a detailed
assessment of the Group’s climate-related
risks and opportunities, including the
Group’s physical and transition risks.
It has also considered the formulation
of the three different climate-related
scenarios constructed to assess the
potential financial implications of climate
change and assessed the impact of
climate-related risks and opportunities
on the Group’s strategy.
The Group’s Audit Committee supports
the Board in ensuring climate-related
issues are integrated into the Group’s risk
management process, and reviewing
the Group’s TCFD reporting and the
assessment of performance against
targets. As the Executive Director with
key responsibility for the delivery of the
Group’s strategy, our Chief Executive,
Patrick André, is ultimately responsible
for the Sustainability initiative.
Our Sustainability governance
Board
–
Holds accountability and oversight for all matters
related to sustainability
–
Oversees the definition of the sustainability strategy
and initiatives
–
Sets the main targets, reviews performance
and progress
Audit Committee
–
Supports the Board in ensuring climate-related
issues are integrated into the Group’s risk
management process
–
Reviews the Group’s TCFD reporting and
assessment of performance against targets
Remuneration Committee
–
Supports the Sustainability objectives through the
alignment of the Group’s remuneration strategy
Group Executive Committee
Chief Executive, Chief Financial Officer, General Counsel and Company Secretary, Chief HR Officer,
Business Unit Presidents
–
Approves Group sustainability-related policies
–
Receives reports from the VP Sustainability on the
Sustainability initiative
–
Is responsible for the progress of the Group against
its sustainability objectives
BU Presidents
–
Incorporate Group sustainability strategy into
their BU strategy
–
Communicate targets inside their organisations
–
Allocate resources, define and implement plans
Sustainability Council
Group Executive Committee, Vice President Sustainability, Head of Communication and Employee Engagement,
Head of Investor Relations, Head of Strategy, Vice Presidents Operations, three Regional Business Unit VPs
–
Oversees the Group’s sustainability activity
–
Monitors progress on metrics and targets
–
Assists the Group in assessing the implications of
long-term climate-related risks and opportunities,
elaborating strategy and setting priorities
VP Sustainability
–
Leads the Group’s sustainability activities,
coordinating the work of the Sustainability Council
–
Ensures the Group has a clear set of KPIs and
collates data
–
Organises Group-wide communication
–
Leads external reporting and disclosures
37
Strategic report
Governance
Financial statements
The Remuneration Committee supports
the Group’s Sustainability initiative and
climate-change-related objectives,
through the alignment of the Group’s
remuneration strategy. All Business Unit
Presidents and each of the regional
Business Unit Vice Presidents have a part
of their annual incentive compensation
tied to performance targets on CO
2
e
emissions reduction. In addition, the
Executive Directors and other members
of the Group Executive Committee
participate in the Group’s Long-Term
Incentive Plan, with the vesting of 20%
of each award based on three ESG
measures, focused on:
–
Reduction of the Lost Time Injury
Frequency Rate;
–
Reduction of the Group’s Scope 1
and 2 CO
2
e emissions; and
–
Improvement in the gender
representation in the Senior
Leadership Group.
Management assessment and oversight
The Vesuvius Sustainability Council
is chaired by the Chief Executive,
and comprises the Group Executive
Committee, VP Sustainability, regional
Vice Presidents from each Business
Unit, Head of Strategy, Head of
Communication and Employee
Engagement, Head of Investor Relations
and Vice Presidents of the Operations.
It meets on a quarterly basis and oversees
the Group’s sustainability activities,
especially related to climate change,
monitors progress against our targets,
and assists the Board with identifying and
assessing the implications of long-term
climate-related risks and opportunities,
elaborating sustainability strategy,
and setting priorities. The Council
reports to the Board twice per year.
The VP Sustainability leads the Group’s
sustainability activities, coordinating the
work of the Sustainability Council including
the Group’s assessment of climate change
risks and opportunities and formulation
of climate-related scenarios. He is also
responsible for the collation of data to
assess the Group’s performance against its
sustainability targets and KPIs, producing
quarterly performance reports, managing
Group-wide communications, and leading
external reporting and disclosures.
Responsibility for the progress of the
Group against its sustainability objectives
lies with the Group Executive Committee
and, operationally, each Business
Unit President. These BU Presidents,
along with the Regional BU VPs, ensure
the Group sustainability strategy is
reflected in each BU’s strategy,
communicating the sustainability
targets inside their organisations and
implementing plans – including overseeing
resources and capital allocation, and
selecting R&D priorities – to achieve these
targets and address the climate-related
risks and opportunities.
Scope 1, 2 and 3 CO
2
and
CO
2
e emissions
Scope 1 covers emissions from fuels
used in our factories and offices,
fugitive emissions and non-fuel
process emissions.
Scope 2 relates to the indirect emissions
resulting from the generation of
electricity, heat, steam and hot water
we purchase to supply our offices
and factories.
Scope 3 includes all other indirect
emissions that occur in the
Company’s value chain.
Task Force on Climate-related Financial Disclosures
continued
The VP Sustainability is responsible for
overseeing reporting on the Group’s
sustainability matters and metrics. Formal
channels for reporting a range of data
points are embedded in the organisation.
Escalation mechanisms, routine reviews,
and internal controls such as auditing
and due diligence are in place to
ensure transparency, consistency
and completeness of information. For
certain topics these are supported by
independent third-party verification.
Our Sustainability Council and VP
Sustainability ensure that we have
a clear set of KPIs and targets to
track the Group’s progress.
Vesuvius plc
Annual Report and Financial Statements 2023
38
Our Sustainability initiative focuses on
our most significant sustainability issues
and opportunities. These are defined
by our ongoing materiality assessment,
which identifies and prioritises issues
based on two dimensions: the impact
or likely impact of Vesuvius on society
and the environment, and the impact
on Vesuvius’ business, creating financial
risks and opportunities for Vesuvius.
Vesuvius materiality assessment
Tackling climate change
Tackling climate change
continued
Tackling climate change
continued
We are committed to reducing our environmental footprint by reaching net zero greenhouse
gas emissions by 2050 at the latest and helping our customers reduce their emissions through
improvements in the efficiency of their operations.
Supporting policy development
Vesuvius supports the Paris Agreement’s
central aim, to strengthen the global
response to the threat of climate change
by keeping a global temperature
rise this century well below 2°C above
pre-industrial levels, and pursuing efforts
to limit the temperature increase even
further to 1.5°C, via the implementation
of its Roadmap to Net Zero.
As the world transitions to a low-carbon
global economy, Vesuvius supports the
call for policymakers to:
–
Build a level global playing field,
including carbon border adjustment
mechanisms, and robust and predictable
carbon pricing for companies.
This will strengthen incentives to
invest in sustainable technologies
and to change behaviours
–
Develop the necessary energy
production and distribution
infrastructure to provide access to
abundant and affordable clean energy
Reducing our impact
Vesuvius actively participates in measures
to tackle climate change by working to
reduce the CO
2
e emissions of all of our
operations and the quantity of raw
materials used, alongside helping
our customers to reduce their own
CO
2
footprint through the use of our
products and services. Vesuvius also
embraces society’s expectations for
greater transparency around
environmental reporting.
Supporting our customers
According to estimates from the World
Steel Association (WSA), the steel industry
generates between 7% and 9% of global
direct emissions from the use of fossil
fuels, and it estimates that on average,
1.91 metric tonnes of CO
2
are emitted
for every tonne of steel produced.
The iron and steel industries are taking
action to address the decarbonisation
challenge, and we are supporting them,
working in partnership with them to
develop more sustainable solutions.
With around 10kg of refractory material
required per tonne of steel produced, the
careful selection and use of energy-saving
refractories can beneficially impact
the net emission of CO
2
in the steel
manufacturing process. In the foundry
process, the amount of metal melted
versus the amount sold as finished castings
is the critical factor impacting a foundry’s
environmental efficiency. Vesuvius
continuously works with its customers
to increase this metal yield.
Climate-change-related risks
and opportunities
The actions being taken by governments
and societies around the world to
mitigate climate change, and the
changes in temperature and weather
patterns resulting from it, present both
opportunities and risks to Vesuvius. In its
broadest context, we believe that the
need for climate change initiatives will
create ever greater opportunities for
the Group to support our customers –
to improve their efficiency and reduce
their environmental impact.
Methodology
Each year the Group undertakes a robust
assessment of the principal and emerging
risks which could have a material impact
on the Group; this assessment covers
all of Vesuvius’ operations. A number of
sustainability risks are recorded in this
analysis (see the Risk, viability and
going concern section on pages 72-78
of our Annual Report).
In line with the recommendations
of TCFD, Vesuvius also undertakes
a review of the key climate-related
opportunities and risks that we foresee
impacting the Group over the short,
medium and long term.
The Board has considered the significance
of climate-related risks in relation to
risks identified in the standard risk
management process. Climate-related
risks are reviewed every six months by
the GEC, and subsequently by the Board,
as part of the Group’s standard risk
management process, to ensure the
register reflects any material changes in
the operating environment and business
strategy, and to ensure that the
management of climate-related risks
is integrated into our overall principal
risk management framework.
The Business Units factor climate-change
risks and opportunities into their business
planning processes, assessing the
long-term impacts on profitability
of both the risks and opportunities.
Our planet
Vesuvius recognises the urgency of tackling climate
change, the finite nature of most natural resources,
and the obligation we have to preserve the
environment for future generations. By their very
nature, refractory products help our customers to
reduce heat loss and the energy consumption of their
processes. We are committed to making a strong
contribution to the reduction of their greenhouse gas
emissions. We also want to grow our engagement in
the circular economy by extending the lifetime of
our products, recovering and recycling more of our
products after they have been used, and increasing
the proportion of recycled materials in our recipes.
Environmental compliance at our sites, reduction in
waste and increased recycling are key to Vesuvius’
operations and can be a significant differentiator
for our business
39
Strategic report
Governance
Financial statements
Tackling climate change
continued
Physical risks and business continuity
Thanks to significant restructuring
carried out over the past six years, Vesuvius
now operates in a resilient and optimised
global footprint. None of our manufacturing
sites contribute directly or indirectly to more
than 10% of our revenue and a significant
amount of redundancy for most product
lines remains, providing backup in case of
local disruption and ensuring continuity
of supply for our customers.
Vesuvius operates in 55 manufacturing
sites and six R&D centres of excellence
located in 26 countries. From time to time
our operations can be subject to physical
damage driven by weather events, such
as severe storms and flooding, water
shortages or wildfires, whose frequency
and intensity may be exacerbated by
climate change. Such events may also
impact the manufacturing capabilities of
our customers and suppliers, and impact
our supply chain logistics.
Sites are routinely audited by our insurers
and our external risk specialist. Their reports
are combined with water stress analyses
(based on the Aqueduct water risk atlas) and
our history of events, to create a physical
and weather event risks map, indicating our
manufacturing and R&D sites’ susceptibility
to physical risks arising from climate change.
In 2023, we continued updating our
risk map based on professional risk
engineering surveys. Thirty sites were
identified as being high risk for at least one
type of weather event (flooding, hailstorm,
lightning, storms, tornadoes and wildfires),
and four are located in areas of very high
water stress. None of our sites were
materially affected by any major weather
event in 2023 (no disruption to customers
and no insurance claims made).
We anticipate that the occurrence of
adverse weather events will continue to
increase, and we therefore manage our
business to prepare for them and mitigate
their impact when they do occur.
Local and product line business
continuity plans are maintained by our
manufacturing sites and are regularly
reviewed. Vesuvius sites maintain and
exercise emergency plans to deal with
such events as part of their normal risk
management and business continuity
processes. Exercises and drills are
organised covering IT disaster recovery,
fire, explosion, weather and geophysical
events, and our processes are improved
based on the lessons learned.
The assessment of physical risks and
business continuity has been focused
primarily on our footprint. In coming years,
we will seek to extend this assessment
to our customer and supplier base.
Sites with the highest exposure to water stress or weather events
Country
Site
Water stress
(very high)
Flood –
water bodies
Flood –
precipitation
Hailstorm
Lightning
Wind –
tropical
storms
Wind –
extra
tropical
storms
Tornado
Wildfire
Australia
Port Kembla
Belgium
Ostend
Brazil
Piedade
Resende
São Paulo
China
Anshan
Changshu
Wuhan
Yingkou BMC
Yingkou BRC
Czech
Trinec
India
Kolkata
Mehsana
Puducherry
Pune
Visag (VP, VS)
Indonesia
Jakarta Timur
Italy
Muggio
Japan
Toyokawa
Malaysia
Pelubhan Klang
Mexico
Monterrey
Ramos Arzipe
Netherlands
Hengelo
Poland
Skawina
South Africa
Johannesburg
Taiwan
Ping Tung
UK
Tamworth
USA
Champaign
Charleston
Chicago Heights
Conneaut
Coraopolis
Wampum
Wurtland
Highest exposure to weather events based on risk evaluations by insurance and Aqueduct water risk atlas.
Vesuvius plc
Annual Report and Financial Statements 2023
40
Climate-related risks and
opportunities analysis
The fight against climate change
continues to require higher-technology
steel and larger, more complex castings.
Wind and solar energy production
capacity are both considerably more
steel-intensive than fossil fuel power
stations, and these are both set to grow
considerably. Allied to this, the steel-
making process is itself decarbonising
thanks to efforts to improve the
performance of existing assets,
and the shift from blast furnaces
to electric arc furnaces.
Our products are useful for low-carbon
applications as well as the more traditional
ones. No alternative to iron and steel,
with the ability to offer the same range
of properties and applications at
comparable scales and costs, is envisaged
in the foreseeable future. The technology
transition required to decarbonise the
iron and steel industry will not render our
products obsolete. More than 70% of our
revenue in steel is generated at the ladle
and caster stages of the steelmaking
process, which will be unaffected by
the changes. Other steps of the iron
and steel-making process will continue
to require refractory materials.
Transition risks
We believe that the main climate change
transition risks facing the Group relate to:
1
The potential for carbon taxing or
emissions rights trading schemes to
be introduced or increased, in Europe and
the US, but not uniformly in other regions,
without effective border adjustment
mechanisms to accompany them; and
2
The rapid transition from iron to aluminium
for light vehicle castings.
An increase in the cost of carbon emissions
would affect our manufacturing costs.
We are addressing this through our energy
efficiency improvement initiatives and
conversion to non-fossil fuels wherever
possible. Long-lasting energy price
increases and significant differences
between Europe and other regions
would further exacerbate this risk,
affecting our customers’ manufacturing
footprint and our own.
A very rapid transition from iron to
aluminium for light vehicle castings would
affect our revenue in the iron castings
market. We expect this to be compensated
for by increased sales for aluminium
castings, growing sales of products for
thin-section automotive component iron
castings and turbo-charger castings for
hybrid vehicles.
Climate-change-related metrics
We routinely monitor a large number of metrics, both internal and external, to assess the ongoing validity of our assumptions and
identified risks and opportunities, and monitor the progress of actions. Some of the main metrics are listed in the table below:
External metrics
–
projected CAGR of the high-technology steel segment
+2.7% between 2022 and 2032
(vs 0.5% for commodity steel)
–
projected CAGR of the wind turbine market
13% ( between 2023 and 2030)
–
projected CAGR of the electric vehicle market
24% (between 2020 and 2030)
–
projected CAGR of the hybrid vehicle market
14% (between 2020 and 2030)
–
projected CAGR of the internal combustion engine vehicle market
-4% (between 2020 and 2030)
–
projected CAGR of the EAF market
3.6% (between 2022 and 2028)
Internal metrics
–
Steel sales into the EAF market
29% in 2023
–
percentage of Flow Control sales from high-technology steel
58% in 2023
–
percentage of Foundry sales into non-ferrous markets
19% in 2023
–
percentage of sales realised with products which didn’t exist five years ago
18% in 2023
–
energy intensity (kWh per kg product packed for shipment)
7.2% reduction in 2023 vs 2019 baseline
–
R&D spend
+8% p.a. from 2020 to 2023
–
number of sites at high risk of water stress or at least one type of weather event
34 in 2023
–
number of sites with negative or poor risk ratings from the insurance
loss prevention risk evaluation
8 in 2023
41
Strategic report
Governance
Financial statements
Tackling climate change
continued
Climate-related risks and
opportunities analysis
Vesuvius considers the key climate-
related opportunities and risks that
we foresee impacting the Group
over the following short-, medium-
and long-term time horizons.
Short term (2025)
Our current strategic plans operate within
this time frame. Most of the intermediate
sustainability targets approved by the
Board were set with 2025 as a deadline.
This horizon encompasses our capital
expenditure cycle, allowing time to
decide, implement and measure the
progress of actions.
Medium term (2035)
This is the most likely horizon for the
regulatory frameworks (such as the
EU Emissions Trading System and Carbon
Border Adjustment Mechanism) currently
being defined in many regions to reach
their full effect. We anticipate that the
major adjustments to customers’ footprints
and technology investments will be in
full swing by then.
Very high (>£25m)
Major (£15–25m)
High (£10–15m)
Long term (2050)
This deadline has been retained by the
UN and many policy-making bodies to set
decarbonisation goals. We are committed
to reaching net zero by 2050 at the latest.
The opportunities we have identified
are integrated into the Group’s business
strategy and are being pursued by the
relevant Business Units. See page 1-23
in our Strategic Report.
Moderate (£5–10m)
Minor (£1–5m)
Insignificant (£0–1m)
Opportunities
Opportunity
Description
Impact
Potential annual impact on trading profit in the short,
medium and long term
Short term
2025
Medium term
2035
Long term
2050
Products and services
Ability to
diversify
business
activities
Commercialise refractory solutions
for low-CO
2
emitting processes in the
production of aluminium to replace
carbon-based products
Increased revenue
and trading profit
Minor
Minor to
moderate
Minor to
major
Commercialise refractory solutions
for hydrogen-based Direct Reduction
Iron production and steel to replace
traditional refractory products
Insignificant
Insignificant
to minor
Insignificant
to high
Markets
Access to
new markets
Accelerated growth of the wind
turbine market leading to increased
sales to foundries serving this market
Increased revenue
and trading profit
Minor
Minor
Minor to
high
Accelerated growth of the aluminium
castings market for electric vehicles
and light-weighting leading to increased
sales to foundries serving this market
Minor
Minor
Moderate
to high
Accelerated growth of ferrous castings
for hybrid vehicles (turbo-chargers)
and thin-section castings for internal
combustion engines leading to increased
sales to foundries serving this market
Insignificant
to minor
Insignificant
to minor
Insignificant
Accelerated growth of the high-technology
steel segment
Minor
Minor to high
High to
very high
Vesuvius plc
Annual Report and Financial Statements 2023
42
Impact categories (trading profit)
We have assessed our risks and sorted them
according to the following classification,
which used the same thresholds as for the
assessment of principal risks:
Very high (>£25m)
Major (£15–25m)
High (£10–15m)
Moderate (£5–10m)
Minor (£1–5m)
Insignificant (£0–1m)
Risks
Description
Impact
Mitigating actions being
undertaken
Potential annual impact on trading profit in the
short, medium and long term
Short term
2025
Medium term
2035
Long term
2050
Physical risks
Increased frequency
and severity of extreme
weather events
(heatwaves, rain
and river flooding,
cyclones, snow)
Physical damage
to Vesuvius
locations
and people
Business
disruption due to
natural disasters
Increased cost
due to physical
damage
Reduced revenue
from business
interruption
Mitigating actions for
severe weather events
and the associated risks
are included in the
business continuity
plans of plants, and
insurance is purchased
Minor
Minor
Minor
Transition risks – Policy and legal
Carbon taxing/
emissions rights
trading/border
adjustment
mechanisms
introduced
or extended
Increase in
manufacturing
costs
Increased
operating costs
(main risk in
Europe)
Capex to improve
energy efficiency and
conversion to non-fossil
fuels to eliminate CO
2
emissions. Relocation
of manufacturing to
reflect movements in
customer base
Minor
Insignificant
to moderate
Insignificant
to high
Transition risks – Market
Rapid growth of
aluminium casting
processes for light
vehicle castings
at the expense of
traditional ferrous
and other
non-ferrous
processes (due
to conversion to
electric vehicles)
Shift from
castings using
a high level of
consumables to
low consumable
processes
creates risk of
revenue loss for
the Foundry
Division
Reduced revenue
from shrinking
market as some
traditional
castings will
disappear or be
converted to
alternative
processes
In ferrous, push to
develop sales of Feedex
and coatings for thin-
section automotive
components, and
products for turbo-
charger casting. Invest
in R&D, marketing
and sales force. In
non-ferrous, develop
products for HPDC and
LPDC processes and
increase penetration
in markets with lower
usage of refractories
Minor
Moderate
to high
Moderate
to major
Transition from internal
combustion engines
to electric vehicles
will lead to the
decline of sand and
gravity castings
Reduced volume
of aluminium
power train
components
Reduced revenue
from shrinking
market of
consumables
for sand and
gravity castings
Adapt product portfolio,
focusing on HPDC
and LPDC
Minor
Minor to
moderate
Moderate
Transition from Blast
Furnaces – Basic Oxygen
Furnaces converted to
Direct Reduction Iron or
Electric Arc Furnaces
(EAF) for iron and
steel making
Share of EAF
in total steel
production
increases
Reduced size
of market
where Vesuvius
is strongest,
leading to weaker
positions in the
steel market
Adjust R&D and product
development priorities.
Redeploy sales force,
focusing on EAF market
Insignificant
Minor to
moderate
Minor to
moderate
Risks
43
Strategic report
Governance
Financial statements
Tackling climate change
continued
4°C warming scenario
‘Good intentions hampered by
fear of economic war’
Incomplete policy and fiscal
packages distort competition,
slowing down technology
development and leading to
geographic shifts in steel supply
3°C warming scenario
‘Closed doors’
Regional/national self-interest
drives economic policy, competition
wins over cooperation, regulatory
framework and technologies
evolve differently
2°C warming scenario
‘
Global accord’
High cooperation and commitment
to limit emissions facilitates
technology development and the
transition to a low-carbon world
Three long-term scenarios
Climate change scenario analysis
Vesuvius has undertaken scenario
analysis to seek to quantify the likely
impact of climate change on the business
and to test the resilience of the Group’s
strategy to the changes that lie ahead.
We considered three scenarios,
modelling the potential financial impact
of 2°C, 3°C and 4°C temperature
increases on our business.
Best case scenario
In formulating our scenarios, we took
as our ‘best case’ a 2°C scenario. This
was based on the premise that despite
the tremendous acceleration of public
awareness, regulation, technology
development and capital allocation in
recent years, we doubt that there is
sufficient time for the 1.5°C target to
be achieved. We therefore identified
our most optimistic scenario as 2°C.
Our assumption is that any further
acceleration which would allow the
planet to get back onto a 1.5°C course
would reinforce the main characteristics
and accelerate the timeline of our
2°C scenario, without fundamentally
changing its features.
From assumptions to strategy
The scenarios take as their starting point
the regulatory and macroeconomic
assumptions underpinned by the
International Energy Agency’s WEO
2020 Stated Policies Scenario and
Sustainable Development Scenario.
Supplementing this we have identified,
for each scenario, the areas of our
business in which changes may occur,
such as:
–
The evolution of end-markets;
–
Our customer footprint;
–
The pace and breadth of technology
transition in iron and steel making;
–
The pace of conversion from fossil fuels
to clean electricity and hydrogen; and
–
The evolution of the aluminium market.
We then evaluated the potential
magnitude of the risks and opportunities
in each scenario, and analysed the
implications for Vesuvius. We considered
our strategic response in terms of:
–
Our manufacturing and commercial
footprint;
–
Our portfolio of products and services;
–
The conversion of our manufacturing
processes to clean energy; and
–
The prospects for our aluminium
casting business.
With this approach, the impacts
on all key areas of the business were
covered (sales, R&D, manufacturing
and procurement).
The outcomes of the scenario analyses
have been taken into account in
formulating plans for achieving
the Group’s strategy.
Vesuvius plc
Annual Report and Financial Statements 2023
44
4°C warming scenario – ‘Good intentions
hampered by fear of economic war’
3°C warming scenario – ‘Closed doors’
2°C warming scenario – ‘Global accord’
1
Regulatory and
macroeconomic
environment
The European Union and United
States implement carbon pricing
mechanisms (taxation or cap
on trade), but no Carbon Border
Adjustment Mechanism or Tariffs
(or insufficient to prevent the
transfer of manufacturing away
from these regions)
The European Union and United
States implement carbon pricing
mechanisms (taxation or cap
on trade), and Carbon Border
Adjustment Mechanisms or
Tariffs to protect their industries
from delocalisation
All major economies implement
carbon pricing mechanisms.
The cost of CO
2
increases in all
regions at a comparable pace
2
Conversion of
power generation
from fossil fuels to
clean electricity
and hydrogen
–
Fast growth of non-CO
2
emitting electricity sources
(nuclear and renewable)
in Europe
–
The cost of fossil fuels increases
significantly in Europe
–
Energy prices differ greatly
between Europe and the
rest of the world over a long
period of time
–
Coal reduces progressively,
but does not disappear.
Natural gas continues to
grow outside Europe
–
Hydrogen does not become
available on a wide scale and
economically competitive
until well after 2040
–
Fast growth of non-CO
2
emitting
energy sources (nuclear and
renewable) in Europe
–
The cost of fossil fuels increases
significantly in Europe. Coal
reduces progressively, but does
not disappear, natural gas
continues to grow outside Europe
–
Energy prices in Europe
and the rest of the world
realign progressively
–
Hydrogen becomes available on a
wide scale in the USA and Europe
and economically competitive
between 2030 and 2040
–
Fast growth of non-CO
2
emitting
energy sources (nuclear and
renewable) in all regions
–
The cost of fossil fuels increases
significantly (taxation), coal as
a source of energy disappears,
natural gas starts to reduce
–
Energy prices in Europe
and the rest of the world
realign progressively
–
Hydrogen becomes available
on a wide scale and economically
competitive between 2030
and 2040
–
Fast electrification of the
automotive industry
–
Fast growth of hydrogen-fuelled
heavy vehicles
3
Technology
transition –
iron and
steel-making
–
The transition in blast
furnaces to clean processes
(e.g. Direct Reduction Iron
(DRI), hydrogen, Carbon
Capture and Storage (CCS),
Carbon Capture, Utilisation
and Storage (CCUS)) does not
happen on a large scale
–
US steel producers convert
blast furnaces to DRI and
Electric Arc Furnaces (EAF) to
benefit from the low cost and
high availability of natural gas
–
European iron-making transitions
to clean processes (e.g. hydrogen,
DRI, CCS, CCUS). The speed of
the transition is dictated by the
availability of green hydrogen in
large quantities
–
Some US blast furnaces are
converted to hydrogen, others
to DRI & EAF
–
Chinese steel plants convert to
clean iron and steel-making
processes, albeit at a slower pace
–
Little or no transition outside
China, the EU and USA
–
Fast transition of iron making to
clean processes in all regions;
blast furnaces are revamped
ahead of their normal schedule
–
European and Chinese integrated
steel-making grows primarily in
hydrogen-based iron production,
implementing CCS and CCUS
technologies as well
–
DRI and EAF grow in the US
(benefiting from the availability
of low-cost shale gas), and Europe
–
Customers also invest to increase
the performance of furnaces,
including downstream of casting
4
High-technology
steel market
High-technology steel market
grows at 0.9% per year
High-technology steel market grows
at 1.2% per year (light-weighting
and material efficiency efforts by
downstream industries accelerate
shift from lower to higher
performance grades)
High-technology steel market
grows at 1.6% per year (light-
weighting and material efficiency
efforts by downstream industries
accelerate shift from lower to
higher performance grades)
5
Aluminium
market
Aluminium market grows
at 3% per year, especially High
Pressure Die Casting (HPDC)
and Low Pressure Die Casting
(LPDC) processes
Aluminium market grows at 5% per
year (driven by the demand for
transportation, construction
and packaging) until 2030.
Growth of HPDC/LPDC at a higher
pace in the US and EU markets.
Moderate development of
secondary aluminium casting
Aluminium market grows at 7%
per year (driven by the demand
for transportation, construction
and packaging) until 2025.
Growth of HPDC/LPDC at a higher
pace in the US and EU markets.
Rapid development of secondary
aluminium casting
Potential financial
impact by 2035
(profit before tax)
-£5m to £0m
£5m to £10m
£15m to £20m
45
Strategic report
Governance
Financial statements
Tackling climate change
continued
1
Regulatory and macroeconomic drivers
differentiate our scenarios
Firstly, effective border adjustment
mechanisms to accompany carbon
taxation, or cap and trade systems in
regions with ambitious emissions reduction
objectives, will greatly support the
implementation of technologies required
to decarbonise steel-making (including the
development of hydrogen as the reducing
agent). Conversely, the absence or
ineffective implementation of border
adjustments would lead to significant
delocalisation of the steel industry and
a displacement of CO
2
emissions to
other countries rather than a significant
reduction on a worldwide scale. The
energy crisis which started in late 2021
and was particularly acute in Europe,
has resulted in additional costs and loss
of competitiveness for the European
steel industry. In the short term, this was
addressed by the temporary stoppage
of steel plants. If the energy cost gap
with other regions remains over several
years, this could result in the permanent
closure of steel plants and delocalisation
of production to other regions. This
shift in our customer footprint would
lead to the need to adapt our own
manufacturing footprint.
Secondly, public policy will significantly
affect the relative cost and availability of
non-CO
2
emitting energy sources vs fossil
fuels and their associated infrastructures.
These will greatly influence the pace
of deployment of selected technologies
and industries (electric vehicles,
carbon-free hydrogen and decarbonised
steel-making). Infrastructure, construction
and other downstream markets will
also be incentivised to reduce steel
consumption, accelerating the shift
towards high-technology steel. Rising
energy costs, as experienced since the
end of 2021, will positively affect the
growth rate of investment in renewable
energies and penetration of electric
vehicles in the automotive markets.
Finally, the level of international
cooperation to encourage and support
less developed economies to engage
in the technology transition will also affect
our customer manufacturing footprint.
Regulatory and macroeconomic drivers
may affect our climate change scenarios
in the short, medium and long term.
2
The future of steel
All three scenarios assume that the strong
connection between world GDP and world
steel output will continue, supported by
urbanisation and rising living standards,
as there is no significant substitute for
steel. The fight against climate change is
expected to have a far-reaching impact
on many different industries translating
into the accelerated growth of the
high-technology steel segment in which
Vesuvius has a key presence. For example,
solar and wind power plants, where
investment is growing fast, are far more
steel intensive per kWh of installed
capacity than their fossil fuel equivalents.
Likewise, hydrogen transportation,
another area of rapid growth, also
requires considerable amounts of special
grades of steel for new pipelines and ships.
With evolutions occurring over many
years, this driver will have a stronger
impact over the medium and long term
than the short term.
3
Technology transition
Our scenarios consider the pace and
extent of the technology transition in iron
and steel-making. The Blast Furnace –
Basic Oxygen Furnace (BF-BOF) route
for steel making is significantly more
CO
2
intensive than the Electric Arc Furnace
(EAF) route. However, EAFs cannot always
be used to produce all higher quality steel
grades and they rely on the availability of
scrap steel (itself a function of the level of
economic development). Going forward,
quality levels produced by EAFs will
continue to improve.
Various technologies to decarbonise
the BF-BOF route are being developed,
including solutions which seek to capture
the carbon as it is emitted and either store
it or use the carbon in other processes.
Alternatively the BF-BOF route may
be replaced by a combination of DRI
and EAF.
Hydrogen-based DRI associated with
EAFs has the potential to be nearly
carbon-free if carbon-free electricity and
hydrogen are available. We anticipate
that there will be a gradual reduction in
steel production via the BF-BOF route
and growth in the EAF route. The extent
and pace of this change will depend
on technologies coming to maturity,
the availability of infrastructure
(carbon-free electricity and hydrogen),
and regulatory frameworks.
These technologies will require many years
to mature and be deployed on a large
scale. This driver is therefore expected not
to have any impact over the short term,
and to reach its maximum impact in the
long term.
Conclusion on strategic resilience
Sustainability has always been at
the heart of Vesuvius’ business and the
Group’s analysis concludes that the
opportunities for the Group manifested
by the global pressure to mitigate
climate change outweigh the risks.
Our technology helps our customers
improve their process efficiency and
their environmental footprint.
We estimate the financial impact of the
opportunities and risks on the Group will
be most adverse under a 4°C scenario
and most positive under a 2°C scenario.
Under all three scenarios, we expect to
benefit from the continuing growth in the
production of steel in line with GDP, along
with the accelerating shift towards higher
performance iron and steel castings,
as we support customers to maximise the
efficiency and quality of their production.
With our technological expertise, strong
customer relationships and broad
manufacturing footprint, we expect
to play a key role in supporting our
customers’ efforts to decarbonise
their operations.
We also believe there is a low downside
for Vesuvius in all three scenarios as more
than 70% of our business in steel is in
the steel casting part of the operation
which, as a stand-alone process, is low
CO
2
emitting (1% to 3% of a steel plant’s
CO
2
emissions), and which we do not
expect to be affected by technology
shifts that the decarbonisation of iron
and steel-making will require.
Whilst the electrification of light vehicles
and ongoing light-weighting efforts are
expected to translate into a shrinking of
the market for certain iron castings, it is
anticipated that this will be more than
compensated for by the growth in other
markets such as wind turbines and
aluminium castings.
We do not anticipate that climate change
will lead to any significant changes in our
access to capital or require the impairment
of assets on a material scale.
Key factors impacting Vesuvius’ three climate change scenarios
Vesuvius plc
Annual Report and Financial Statements 2023
46
Roadmap to Net Zero
We have set intermediate targets in our
journey to reach net zero CO
2
e emissions
by 2050 (Scope 1 and Scope 2), in line
with the Paris Agreement and the UK’s
commitment in the Climate Change
Act 2008 (2050 Target Amendment)
Order 2019. These emissions encompass
the seven GHGs listed by the
Intergovernmental Panel on Climate
Change in the Kyoto Protocol (CO
2
,
CH
4
, N
2
O, HFCs, PFCs, SF
6
and NF
3
).
Our preferred metrics to monitor progress
with our journey to net zero are energy
and CO
2
e emission intensity (energy
consumption and CO
2
e emissions per
tonne of product packed for shipment).
These reflect the progress made in our
operations better than absolute metrics.
Managing this energy intensity not only
has environmental benefits, it is also part
of our long-term strategy to enhance our
cost competitiveness.
Our targets
Our targets cover 100% of Vesuvius’
operations. They are aligned with the
Science Based Targets initiative (SBTi)
requirements for a well below 2°C global
warming scenario and are consistent with
the Paris Agreement.
–
10% improvement in the Group’s
energy intensity between 2019
and 2025
–
20% reduction in CO
2
e emission
intensity normalised per metric
tonne of product packed for
shipment (Scope 1 and Scope 2)
by 2025 (vs 2019 baseline)
–
100% carbon-free electricity by 2030
–
A reduction in total Scope 1 and
Scope 2 CO
2
e emission intensity
of 50% by 2035 (vs 2019 baseline)
–
Zero Scope 1 and Scope 2
emissions by 2050
We aim to achieve our decarbonisation
goals without the use of any carbon offsets
(or only to address residual emissions).
The Group Energy CO
2
e emissions
reduction targets have been cascaded
to all Business Units, which have built
action plans accordingly. Portions of the
Group Executive Committee’s Long-Term
Incentive Plan and senior management
annual variable compensation are linked
to the achievement of CO
2
e emissions
reduction targets.
Our plan
Our roadmap to net zero is based on
five key areas of focus:
1
Modernising and upgrading installed
equipment to reduce our energy
consumption
2
Investing to renew equipment to the best
available technologies and converting
to less CO
2
e intensive energy sources
3
When possible, replacing high CO
2
e
emission electricity (generated from
coal or natural gas) with greener
electricity or other sources of energy
4
Reducing our energy wastage,
recovering heat to feed processes
and hot water
5
Generating clean energy
Assumptions and sensitivities
Some significant assumptions underpin
our net zero plan, including:
–
The availability of the necessary
technologies, at an affordable level and
at a scale appropriate for our industry,
especially for the firing of refractory
ceramics and carbon capture
–
The development of additional
production capacity and distribution
infrastructure for renewable energy and
hydrogen, and their cost competitiveness
–
Adequate policy support to foster
innovation and ensure the cost of CO
2
emissions will increase the attractiveness
of carbon-free processes
–
No significant change to our business
model and product portfolio
The achievement of our CO
2
e emissions
targets will also be sensitive to:
–
The growth of revenue, organically,
and from acquisitions, and divestitures
–
Product mix evolution (especially driven
by dolime volume, which is the most CO
2
intensive product line)
–
Macroeconomic conditions and the
capex cycle impacting plant loading
(and thereby the energy efficiency of
continuous processes)
1.
Re-baselined using pre-acquisition data for the
business acquired from Universal Refractories,
and BMC from 2019 onwards.
Scope 2 electricity
Reach net zero
Scope 1 + Scope 2
CO
2
e emissions
1
Reduce the
intensity by 20%
from the 2019
baseline
Reduce the
intensity by 50%
from the 2019
baseline
Short term
Medium term
Long term
2025
2035
2050
Convert to 100% carbon-free
sources
2019
2030
Our journey to net zero
47
Strategic report
Governance
Financial statements
Tackling climate change
continued
The Group supports the transition towards
renewable energy sources and cleaner
carbon-free technology when possible.
Our energy strategy includes an ongoing effort
to convert to carbon-free electricity contracts
whenever practical and economically
manageable, investment in solar panels, and
the conversion of processes to electricity as
soon as the technology is cost-effective.
In 2023, nine sites converted to carbon-free
electricity contracts, taking the total number
to 45, representing 74% of our manufacturing
sites and R&D centres of excellence.
In 2023, 71% of the grid electricity consumed
in our sites was generated from renewable
sources, and 75% using processes that did
not emit CO
2
e (renewable and nuclear).
In 2023, two of our plants became
carbon-free and capital expenditure projects
for solar panels with a value of £0.9m were
approved. Nine sites are equipped with
photovoltaic solar panels and 20 sites are
investigating solar panel projects.
Our Progress – Key Group initiatives
for energy conservation and for
increasing energy efficiency
Since 2019, we have undertaken a number
of major projects to significantly reduce
the Scope 1 CO
2
e emissions of the Group
by addressing some of its most CO
2
e
intensive installations.
We closed the Skawina brick plant,
eliminated dirty coke oven gas as a fuel
in Wuhan, replacing it with a new natural
gas-fired tunnel kiln, transferred the Tyler
plant activity to Monterrey, and replaced
the burner system of the Olifantsfontein
rotary kiln. We also took advantage of the
closure of our Chinese plant at Kuatang
and the relocation of its activity to replace
all drying ovens and kilns with new ones,
with an energy efficiency improvement
target of 20%.
In 2022, the Board approved major
capacity expansion capital expenditure
projects totalling more than £20m.
Available technologies and their impacts
in terms of energy efficiency and CO
2
e
emissions were systematically considered
for these projects, and the most efficient
technologies for the purpose selected.
We include an environmental impact analysis
in the evaluation of each of our capital
expenditure projects as these are the key
decisions that drive long-term future
sustainability performance, and CO
2
emissions in particular.
An internal price for CO
2
emissions (Scope 1
and Scope 2) is included in the calculation
of payback for all investments reaching the
threshold for approval by the BU Presidents
or Chief Executive.
Vesuvius views this shadow pricing mechanism
as a key tool to ensure that the environmental
impact of long-term investment decisions is
understood. It seeks to ensure that the best
available technology is adopted, even in
locations where no external cost for carbon
is in place or foreseen.
The internal price of CO
2
was introduced
in 2020. It is reviewed annually by the
Sustainability Council and is applicable
across all Business Units in all regions.
The price is adjusted, taking into consideration
both the previous year’s price and the evolution
of the European Union Emissions Trading
System (EU-ETS) carbon pricing. In 2020,
it was initially set at €30 per tonne of CO
2
.
It was raised to €90 per tonne in 2021.
The Sustainability Council decided to
maintain the internal price of CO
2
emissions
at €90 per tonne of CO
2
for 2023.
All Vesuvius plants have targets to reduce
energy intensity. We have implemented
a structured approach across the Company.
We collect and analyse data from the sites,
identify gaps and opportunities and eventually
target our engineering projects. We select the
processes and sites that are the most energy
intensive or have the greatest impact, and
coordinate the projects centrally. We also
share best practices across locations. For
example, in one of the most energy-consuming
sites, we will improve our process by installing
additional nozzles in the spray towers,
building on the experience from another
Vesuvius site. Many additional initiatives
are managed locally.
In 2023, we strengthened the resources
available to oversee our energy efficiency
improvement programmes across all locations.
We rolled out plans to install meters on all
energy-intensive equipment (32 sites are fully
equipped) and undertook comparison studies
across locations.
We are encouraging sites to carry out energy
audits and pursue ISO 50001 certification.
13 sites carried out energy audits in 2023,
and more than 30 have planned audits in
2024 and 2025. One site has already obtained
ISO 50001 certification. This combination of
initiatives allows us to better identify and
analyse opportunities and target investments
on projects with the largest impact.
More than 4,400 employees have received
training on energy conservation and
greenhouse gas emissions reduction.
In 2023, as a result of thermal processes
optimisation and the installation of retrofit
solutions, we have reduced energy
consumption per year by around 11 GWh and
CO
2
e emissions by 2,720 tonnes versus 2022.
New capital expenditure worth c.£6m,
dedicated to 123 projects with energy
efficiency and CO
2
emissions reduction as
one of their prime objectives, were approved
in 2023.
1
Carbon-free energy sources
2
Capital commitments and internal CO
2
pricing
3
Improving our energy efficiency
Progress in 2023
Vesuvius plc
Annual Report and Financial Statements 2023
48
Our plan to reach Net Zero
Our plan to reach Net Zero covers 100% of our operations. We aim to achieve our decarbonisation goals without the use of any
carbon offsets (or only to address residual emissions).
Short term (2025)
A wide variety of projects have been
initiated and more are being considered,
to help us deliver our energy efficiency
and CO
2
e emissions reduction targets,
including:
–
Optimisation of process parameters
–
Introduction of new refractory furniture
–
Retrofitting of ovens and kilns
–
Replacement of older and less
efficient units
–
Upgrades of compressors
–
Replacement of light sources with
LED lights
–
Replacement of diesel-powered forklift
trucks with electric forklift trucks
–
Installation of heat recovery systems
in ovens and kilns
–
Burner setting optimisation and
loading and cycle optimisation
–
Continued conversion of electricity
supplies to carbon-free sources
–
Installation of solar panels
We endeavour to use the best
available technologies to reduce
CO
2
emissions in all our major
capital expenditure projects.
Medium term (2035)
We anticipate that further emissions
reduction will be possible through further
energy efficiency measures (continuation
of the short-term actions).
Technological developments currently in
preparation with our partners will allow
us to reduce GHG emissions even further.
Projects have been launched across
a range of activities including:
–
Electrification of high-temperature
manufacturing processes that currently
rely on natural gas or LPG. The first
investments to replace natural
gas-powered ovens with electric ovens
were in preparation at the end of 2023
–
The use of a combination of natural
gas and renewable energy such as
carbon-free hydrogen to fire refractory
materials. We have already started
R&D trials with a blend of hydrogen
and natural gas
–
The use of bio-fuels instead of natural
gas. The first trials to convert industrial
installations are planned for 2024
We estimate the incremental capital
commitment required by our
decarbonisation roadmap until 2035
will be approximately £70m (approx.
£7m per year). We do not expect the
useful economic lives of our existing
assets to be materially affected by
our plans until 2035. Precise capital
expenditure project lists have been
defined for the 2025 horizon. We will
continue using the internal price of
carbon to assess the relative benefit
and prioritise projects.
We also anticipate that changes in our
product portfolio towards less energy-
intensive products (such as resin-bonded
and unshaped refractories) will continue.
Long term (2050)
Beyond 2035, the short term and
medium term programmes will continue
to deliver opportunities.
We are regularly monitoring the
emergence and readiness of new
technologies, through our network of
suppliers of capital goods, universities
and trade associations. In the longer
term (2050), various technologies are
promising candidates for the near zero
emissions curing and firing of refractory
products (electricity, carbon-free
hydrogen, synthetic gas, biomass).
We currently foresee that carbon
capture solutions will be available for
our industrial application during the
2035-2050 period, though most will
probably not be available sooner.
We are progressively adapting our
product and process R&D programmes
to explore such opportunities.
Capital expenditure requirements and
the useful economic lives of our existing
assets will depend on the evolution of
technologies currently in development.
Next steps to achieve our Net Zero Plan
49
Strategic report
Governance
Financial statements
Tackling climate change
continued
Our energy consumption and Scope 1
and Scope 2 CO
2
e emissions
While Vesuvius’ products differ
significantly in the energy intensity of their
manufacture, most of our manufacturing
processes are not energy intensive nor
do they produce significant quantities of
waste and emissions. Dolime production,
which uses coal to calcine dolomite, is our
major emitter of CO
2
. Dolime and the
next six of our 39 main manufacturing
processes account for 58% of our energy
consumption and 62% of our location-
based CO
2
e emissions. These continue
to be a clear focus for our investment to
reduce CO
2
e emissions.
In January 2023, an incident incapacitated
one of our dolime rotary kilns, which
resulted in it being out of service for the
remainder of the year. As a consequence,
the tonnage of dolime produced by the
Group in 2023 was considerably lower
than in prior years and the Group’s product
mix was very different. The Group’s
absolute energy consumption, CO
2
e
emissions, energy intensity and CO
2
e
emission intensity reduction were therefore
affected by the lower output of dolime
as well as performance improvement.
The Group’s progress in reducing our CO
2
e
emission intensity was adversely affected
in 2023 by lower volumes resulting in lower
fill rates for continuous processes and
lower energy efficiency. Between 2019
and 2023 the Group achieved an overall
reduction in energy intensity (normalised
to per metric tonne of product packed for
shipment) of 14.6%. The pro forma energy
intensity reduction, assuming the Group
had produced dolime at the normal rate,
was 7.2% vs a target of 10% by 2025.
During the same period, our overall CO
2
e
emission intensity metric (CO
2
e emissions
per metric tonne of product packed for
shipment, Scope 1 and Scope 2, market-
based) reduced by 45.5%. This includes
a 38.4% reduction in Energy CO
2
e
intensity, and a 68.1% reduction in Process
CO
2
e intensity, per metric tonne of product
packed for shipment. Excluding dolime,
the CO
2
e emission intensity reduction
between 2019 and 2023 was 33.2%. If the
dolime installation had been operating
normally throughout the year, the pro
forma 2023 CO
2
e emission intensity
would have been 20.2% lower than
in 2019, vs a target of 20% by 2025.
Scope 1
covers emissions from fuels used in
our factories and offices, fugitive emissions
and non-fuel process emissions.
Scope 2
relates to the indirect emissions
resulting from the generation of electricity,
heat, steam and hot water we purchase to
supply our offices and factories.
Scope 3
covers all other direct CO
2
and
CO
2
e emissions that occur in the Company’s
value chain.
The conversion by many of our sites
to carbon-free electricity contracts
has helped our CO
2
e emissions reduce
at a faster pace than our energy
efficiency improvements.
Vesuvius’ total energy costs in
2023 were £48.5m, c.2.5% of revenue
(£54.6m in 2022, c.2.8% of revenue).
South Africa is the only country where
we exceed the threshold to be submitted
to a carbon tax or an emissions trading
scheme. The carbon tax cost in 2023
was c.£0.2m (£0.2m in 2022), based on
emissions in the prior year.
Scope 1, Scope 2 and Scope 3 emissions (market-based)
1,2
In 2023, Vesuvius’ total Scope 1, Scope 2 and Scope 3 CO
2
e emissions were 1,589,332 metric tonnes.
Metric tonnes CO
2
e
2023
2022
2021
2020
2019
Metric
tonnes
1
%
1
Metric
tonnes
1
%
1
Metric
tonnes
%
Metric
tonnes
%
Metric
tonnes
%
Scope 1 Process
CO
2
e emissions
29,637
1.9%
91,276
5.5%
101,121
5.1%
88,516
5.3%
106,737
6.0%
Scope 1 Energy
CO
2
e emissions
139,241
8.8%
191,396
11.5%
208,192
10.4%
182,660
10.9%
214,845
12.1%
Scope 1 Fugitive
emissions
1,037
0.1%
2,207
0.1%
1,398
0.1%
1,080
0.1%
992
0.1%
Scope 1 CO
2
e
emissions
169,914
10.7%
284,879
17.2%
310,710
15.5%
272,257
16.2%
322,573
18.2%
Scope 2 CO
2
e
emissions
(market-based)
37,961
2.4%
55,861
3.4%
83,175
4.2%
92,360
5.5%
108,631
6.1%
Scope 3 CO
2
e
emissions
1,381,457
86.9%
1,318,207
79.5%
1,605,873
80.3%
1,311,807
78.3%
1,341,498
75.7%
Total
1,589,332
100%
1,658,947
100%
1,999,759
100%
1,676,424
100%
1,772,702
100%
1. The business of Universal Refractories Inc (Vesuvius Penn Corporation) which was acquired in 2021, is included in 2022 and onwards. BMC (Yingkou YingWei
Magnesium Co., Ltd), which was acquired in late 2022 is included in 2023 and onwards.
2. The numbers are collated from entities within the Group’s Operational Control Boundary.
Vesuvius plc
Annual Report and Financial Statements 2023
50
Vesuvius plc long-term energy consumption and energy intensity (aggregate of Scope 1 and Scope 2)
1,2,3
2023 Pro forma
v 2019
2
Actual
2023 v 2019
2023
Pro forma
2
2023
1
2022
1
2021
1
2020
1
2019
1
Total energy consumption
(million kWh)
896
1,085
1,189
1,056
1,205
Energy consumption per metric
tonne of product packed for
shipment (kWh/MT)
-7.2%
-14.6%
1,145
1,054
1,161
1,118
1,173
1,234
Notes:
1.
Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc. (Vesuvius Penn Corporation), and BMC (Yingkou YingWei
Magnesium Co., Ltd).
2.
Pro forma: performance as if the dolime process had been operating normally throughout 2023 and re-baselined using pre-acquisition data for the business
acquired from Universal Refractories, Inc. (Vesuvius Penn Corporation) and BMC (Yingkou YingWei Magnesium Co., Ltd) from 2019 onwards.
3.
The numbers are collated from entities within the Group’s Operational Control Boundary.
Greenhouse Gas (GHG) reporting
We have reported to the extent reasonably
practicable on all the emission sources
required under Part 7 of the Accounting
Regulations which fall within our Group
Financial Statements.
Statutory reporting is location-based
according to the GHG Protocol.
All sites report their energy consumption
and GHG emissions on a quarterly basis.
Performance and variation are analysed,
and improvement plans built accordingly.
2019 was selected as the baseline for
all energy and GHG emissions data and
targets, absolute and relative, as this
was the last year of normal trading prior
to the COVID-19 pandemic. Progress is
measured against the 2019 performance.
The Group also meets all its obligations in
relation to the Producer Responsibility
Packaging Waste regulations and the
Energy Saving Opportunity Scheme by
which the UK implemented the EU Energy
Efficiency Directive.
Vesuvius plc statement of verification
Scope 1, Scope 2 and Scope 3 carbon footprint reporting
and supporting evidence contained herein for the period
1 January 2019 to 31 December 2023 covering GHG
emissions as CO
2
e in metric tonnes , CO
2
e intensity in
metric tonnes of CO
2
e per metric tonne of product packed
for shipment, energy consumption in kWh and energy
intensity in kWh of energy per metric tonne of product
packed for shipment, Location based and Market based,
were verified by Carbon Footprint Ltd in accordance
with the ISO 14064 Part 3 (2019): Greenhouse Gases:
Specification with guidance for the verification and
validation of greenhouse gas statements.
A copy of the limited assurance statement can be found
on our website: www.vesuvius.com.
51
Strategic report
Governance
Financial statements
Tackling climate change
continued
Global GHG emissions and energy consumption
Location-based statutory reporting (Operational Control Boundary)
1,2,3,4,5,6
Emissions
and energy
sources
UK and
Offshore
CO
2
e ‘000
metric
tonnes
2023
Global
CO
2
e ‘000
metric
tonnes
2023
2
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
CO
2
e ‘000
metric
tonnes
2022
Global
CO
2
e ‘000
metric
tonnes
2022
2
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
energy
used
‘000 kWh
2023
Global
energy
used
‘000 kWh
2023
2
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
energy
used
‘000 kWh
2022
Global
energy
used
‘000 kWh
2022
2
Proportion
relating to
the UK and
Offshore
Area
Combustion of fuel and operation of facilities including fugitive emissions (Scope 1)
2.150
170
1.3%
2.266
285
0.8%
11,343
699,011
1.6%
11,839
877,757
1.3%
Electricity, heat, steam and cooling purchased for own use (Scope 2)
0.385
93
0.4%
0.554
98
0.6%
1,905
196,612
1.0%
2,740
205,859
1.3%
Total GHG emissions and energy
2.535
263
1.0%
2.819
383
0.7%
13,248
895,622
1.5%
14,578
1,083,616
1.3%
Change
-10.1%
-31.3%
-9.1%
-17.3%
Vesuvius’ chosen intensity measurement
(location-based statutory reporting)
1,2
Metric tonnes CO
2
e per metric tonne of
product packed for shipment
kWh of energy per metric tonne of
product packed for shipment
UK and
Offshore
2023
Global
2023
2
UK and
Offshore
2022
Global
2022
2
UK and
Offshore
2023
Global
2023
2
UK and
Offshore
2022
Global
2022
2
Emissions and energy reported above
normalised to metric tonnes CO
2
e
per metric tonne of product packed
for shipment
3.505
0.310
4.090
0.426
18,315
1,054
21,150
1,207
Change
-14.3%
-27.4%
-13.4%
-12.7%
Metric tonnes of CO
2
e per £m revenue
Total GHG emissions as metric tonnes
CO
2
e per £m revenue (location-based)
20.6
136.3
22.2
192.1
Change
-7.0%
-29.0%
1.
Location-based Statutory Reporting of Global GHG emissions (metric tonnes of CO
2
e) and energy consumption (‘000 kWh). The numbers are collated from
entities within the Group’s Operational Control Boundary.
2. The business of Universal Refractories Inc (Vesuvius Penn Corporation) which was acquired in 2021, is included in 2022 and onwards. BMC (Yingkou YingWei
Magnesium Co., Ltd), which was acquired in late 2022 is included in 2023 and onwards.
3. In reporting GHG emissions, we have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) methodology to identify our
location-based GHG inventory of Scope 1 (direct) and Scope 2 (indirect) CO
2
e. We report in metric tonnes of CO
2
equivalent (CO
2
e). We have used emission
factors from the UK Government’s (Defra) and the IEA GHG Conversion Factors for Company Reporting 2023 in the calculation of our GHG emissions.
4. Our energy-related greenhouse gas (GHG) emissions, reported as carbon dioxide equivalents (CO
2
e), include direct emissions of the three main GHGs
(carbon dioxide (CO
2
), methane (CH
4
) and nitrous oxide N
2
O).
5. Process related emissions of the following in CO
2
equivalent and in metric tonnes are not significant: Direct methane CH
4
emissions and Direct nitrous oxide
N
2
O emissions.
6. Emissions of the following in CO
2
equivalent and in metric tonnes are not significant: Direct sulphur hexafluoride (SF
6
) emissions; Direct HFC emissions;
and Direct PFC emissions.
Fuel consumption, emissions and normalised emissions for the main fuels consumed across the Group
(location-based (Operational Control Boundary) statutory reporting)
In 2023, the Group’s normalised energy
consumption decreased by 12.7% to
1,054 kWh per metric tonne (2022: 1,207).
Location-based emissions decreased by
27.4% to 0.310 metric tonnes of CO
2
e
per metric tonne of product packed
for shipment (2022: 0.426) and market-
based emissions decreased by 35.5%
to 0.245 metric tonnes of CO
2
e per metric
tonne of product packed for shipment
(2022: 0.380).
A significant reduction in CO
2
e resulted
from reductions in the production of
dolime following the incident in January
2023, which incapacitated one of our
rotary kilns. The remaining decreases were
primarily driven by changes in production
volumes and product mix. Natural gas use
decreased by 8%, electricity consumption
by 4% and coal (a CO
2
intensive fuel)
consumption by 67%, to 8,900 metric
tonnes (2022: 27,231 metric tonnes).
During 2023, the Group also consumed
287 cubic metres of diesel (-1.8% on 2022:
292) primarily in the operation of forklift
trucks on its sites, and 165 cubic metres of
fuel oil, an increase of 0.2% (2022: 164.8).
In total, 482 cubic metres of oil was used
as fuel in 2023 (5.5% up on 2022: 457).
Vesuvius plc
Annual Report and Financial Statements 2023
52
Scope 3 emissions
Vesuvius’ Scope 3 CO
2
e emissions, mainly
upstream, contribute to a greater part of our
total CO
2
e emissions than our Scope 1 and
Scope 2 emissions. Our products are used by
customers whose processes emit significant
amounts of CO
2
. They serve to contain and
protect liquid metal and manage its flow, but
do not participate in the heating operations
or chemical reactions that lead to CO
2
emissions. Emissions associated with the
processing or use of our products are hence
very limited. More specifically:
–
Some products require drying or
pre-heating prior to use by our
customers. Emissions generated during
these operations are included in the
Processing of sold products category
–
Refractory materials do not require
energy during their use; having
undergone high temperature processes
during their manufacturing, they are
inert and do not release any greenhouse
gases during their use.
–
Some non-refractory products contain
chemicals, which will be partially burnt
during usage by our customers.
Emissions due to the combustion of
chemicals are included in the Use of
sold products category.
Since 2021, we have undertaken a focused
evaluation of emissions associated with
raw materials, using publicly available
average CO
2
emissions factors. We have
also collected information on energy
source, CO
2
emissions data and reduction
plans from our raw materials suppliers as
part of our Request for Quotation process.
In 2023, we concentrated on the four raw
material categories that account for an
estimated half of our Scope 3 emissions
from acquired products and services.
We provided our suppliers with training
and evaluation tools to help them assess
their Scope 1 and Scope 2 emissions. In
China our workshop on ‘Sustainability
and CO
2
emissions’ had 55 attendees
representing 35 suppliers.
Suppliers representing 54% of our raw
material spend have provided disclosures
to date.
We have also started collecting CO
2
emissions data relating to transportation
from our forwarders in all regions. In 2023,
the CO
2
emissions data that we received
from our forwarders covered 45% of
our transportation spend (upstream
and downstream), and we were able to
evaluate CO
2
emissions covering a further
43% of our transportation spend using
operational data and DEFRA conversion
factors. The remainder of our CO
2
emissions from upstream and downstream
transportation (12%) was estimated based
on spend and DEFRA conversion factors.
Various initiatives have been launched
to reduce our Scope 3 CO
2
emissions,
including returnable packaging, the
electrification of company fleet
vehicles and arrangements for
collective commuting.
Scope 3 emissions
1,2,3,4,5,6
Metric tonnes CO
2
e
2023
2
2022
2
2021
2020
2019
Metric
tonnes
%
Metric
tonnes
%
Metric
tonnes
%
Metric
tonnes
%
Metric
tonnes
%
Purchased goods
and services
1,066,129
77%
1,038,969
79%
1,342,387
84%
1,104,823
84%
1,127,065
84%
Capital goods
39,992
3%
33,369
3%
22,007
1%
19,818
2%
25,087
2%
Fuel- and energy-related
activities (not included in
Scope 1 or 2)
37,088
3%
45,551
3%
50,931
3%
36,845
3%
42,332
3%
Upstream transportation
and distribution
39,086
3%
45,572
3%
39,887
2%
23,946
2%
26,104
2%
Waste generated
in operations
15,228
1%
15,364
1%
14,428
1%
11,961
1%
3,632
0%
Business travel
11,443
1%
9,578
1%
5,128
0%
4,670
0%
10,724
1%
Employee commuting
20,374
1%
21,253
2%
21,653
1%
21,561
2%
22,303
2%
Upstream leased assets
0
0%
0
0%
0
0%
0
0%
0
0%
Downstream
transportation and
distribution
80,896
6%
38,899
3%
34,912
2%
23,529
2%
25,700
2%
Processing of sold products
14,924
1%
15,779
1%
14,078
1%
13,902
1%
14,371
1%
Use of sold products
34,194
2%
32,914
2%
37,460
2%
31,834
2%
39,645
3%
End-of-life treatment
of sold products
22,103
2%
20,959
2%
23,002
1%
18,918
1%
4,535
0%
Downstream
leased assets
0
0%
0
0%
0
0%
0
0%
0
0%
Franchises
0
0%
0
0%
0
0%
0
0%
0
0%
Investments
0
0%
0
0%
0
0%
0
0%
0
0%
Total Scope 3
CO
2
e emissions
1,381,457
100%
1,318,207
100%
1,605,873
100%
1,311,807
100%
1,341,498
100%
1.
In 2023, the GHG Protocol managed Quantis Scope 3 evaluator tool was withdrawn, so Vesuvius now utilises the Sustrax platform, which offers the possibility to
evaluate Scope 3 emissions at a greater level of detail. The Sustrax tool relies on the UK Government DEFRA methodology, categories, and emission conversion
factors. Wherever possible we used activity data which relies on information that is specific to the organisation, and therefore is much more accurate than the
spend base method. Our Scope 3 emissions for the 2019 to 2022 period were re-evaluated using the improved new approach to ensure comparability over time.
2. The business of Universal Refractories Inc (Vesuvius Penn Corporation) which was acquired in 2021, is included in 2022 and onwards. BMC (Yingkou YingWei
Magnesium Co., Ltd), which was acquired late 2022 is included in 2023 and onwards.
3. The numbers are collated from entities within the Group’s Operational Control Boundary.
4. Conversion factors for GHG emissions and energy used the 2023 UK Government GHG Conversion Factors for Company Reporting. Conversion factors for
GHG emissions for electricity globally used the IEA Emission Factors 2023.
5. Calculation of Scope 3 GHG emissions used the Carbon Footprint Limited Sustrax system for years 2019-2023.
6. Scope 3 2023 Upstream subtotal 1,229,340 Metric Tonnes (89%) Downstream subtotal Metric Tonnes 152,117 (11%).
53
Strategic report
Governance
Financial statements
Product responsibility – Growing our engagement in the circular economy
The drive to improve the sustainability
performance of Vesuvius and the
refractory industry’s products was
initiated many decades ago. Continuous
improvements have led to considerable
reductions in both the raw materials used
and the quantity of product shipped to
landfill. As the amount of refractory
material consumed per tonne of steel
cast levels off, the purpose and value of
the use of refractory materials will move
from delivering insulation to an even
greater emphasis on helping to improve
steel quality and process efficiency.
Product durability
Our first, and preferred, strategy to reduce
the depletion of resources is the extension
of product durability.
We are continuously working to extend
the lifetime of our consumable products.
Strategies include the development
of advanced materials, the design of
shapes that allow dual usage of products,
and product repair and remanufacture.
For mechanisms and equipment, we also
offer wear monitoring and maintenance
services to our customers to ensure their
optimum performance and extend
their lifetime.
Product recyclability
At the same time as reducing the quantity
of raw materials required for each
casting, technical solutions have emerged
to enable the recycling of refractory
materials after usage in the production
of iron and steel. Whereas in the early
1970s nearly all refractory materials
were disposed of after use, it is estimated
that more than half are now recycled.
In Europe, as little as 5% of refractory
materials now go to landfill.
As part of our product end-of-life
management programme, we are
developing selected initiatives with
customers, tailored to each product
family, such as:
–
Recovery and remanufacture of
products after usage
–
Recovery and recycling of refractory
materials after usage
–
Recycling of mechanisms as scrap steel
–
Refurbishment of lasers and
redeployment, or disassembly and
recycling of components
Recovered and recycled materials
Vesuvius is determined to increase the
usage of recovered and recycled materials
in its product formulations.
Increasing the share of recovered
and recycled materials in product
formulations poses multiple challenges,
in terms of availability, consistency of
quality, competitiveness versus virgin
materials whose prices fluctuate,
regulatory frameworks for the
transportation of end-of-life waste
materials, and validations to ensure
that product performance and reliability
remain unaffected. 2023 performance
was adversely affected by these factors,
which remain a concern going forwards.
Recycled material usage
1,2
2023
Pro forma
3
2023
2022
2021
2020
2019
Amount of recycled
materials used in
Vesuvius products
(metric tonnes)
65,497
66,137
76,482
57,035
68,373
Amount of recovered
materials that are not
recycled used in Vesuvius
products (metric tonnes)
4
0
0
0
0
0
Percentage of recycled
materials in Vesuvius
products from total
materials
5.7%
6.5%
5.8%
5.9%
5.3%
5.7%
Percentage of revenue
from products including
recycled materials
20.7%
20.4%
21.0%
19.6%
18.7%
1.
Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc.
(Vesuvius Penn Corporation) and BMC (Yingkou YingWei Magnesium Co., Ltd) from 2019 onwards.
2.
The numbers are collated from entities within the Group’s Operational Control Boundary.
3. Pro forma: performance as if the dolime process had been operating normally in 2023 (based on
the average output and performance of 2019 to 2022).
4. All recovered materials undergo some processing before their usage in our products. Therefore, they
are all included in the recycled materials category, and the recovered materials category is empty.
Vesuvius plc
Annual Report and Financial Statements 2023
54
Reducing consumption
Material waste
The Board has set a target of a 25%
reduction of our solid waste (hazardous
and sent to landfill) per metric tonne of
product packed for shipment by 2025
(vs the 2019 baseline).
Manufacturing sites have started building
action plans covering both hazardous and
non-hazardous waste to eliminate, reduce
and recycle. A wide range of actions have
been initiated to reduce the amount of
waste, such as closed conveyor and dust
extraction systems, process improvements
to reduce scrap and process waste
generation, re-engineering of product
recipes to include internally recycled
material, and identification of recycling
opportunities in other industries for
by-products.
In 2023, the ratio of solid waste (hazardous
and sent to landfill) per metric tonne of
product packed for shipment reduced by
13.4% vs 2019, (2022: reduced by 9.1%).
The 2023 performance was notably
affected by the partial interruption to
dolime production in 2023. During the year
a few sites also disposed of waste material
that had been accumulated over a long
period of time. Waste material quantities
were reassigned to the year during which
they were generated, and waste figures
adjusted accordingly.
Water consumption
We aim to reduce both the amount of fresh
water consumed in our manufacturing
process and social water consumption.
The main area of focus is the reduction of
wastewater. Vesuvius works to reduce the
consumption of water in its manufacturing
operations by recycling and improving
water management processes. No salt
water or cooling water is abstracted,
with no related outflow. Various
technological solutions have been
implemented to reduce our water
consumption and wastewater. Most
noteworthy, in the past five years: 30 sites
have implemented measures to minimise
water consumption in grinding, cleaning,
degreasing, and rinsing processes; 18 sites
have upgraded technology or equipment
to significantly reduce water consumption;
and ten sites have implemented rainwater
harvesting systems.
In 2023, our overall fresh water consumption
per tonne of product packed for shipment
decreased by 0.6% vs our baseline of 2019.
As with energy use, normalised consumption
of water varies with product mix.
Five-year evolution of fresh water consumption
% change
2023/2019
2023
1
2022
1
2021
1
2020
1
2019
1
Water in m
3
-13.6%
744,531
683,485
755,366
756,522
861,556
Water in m
3
used per metric tonne of product packed
for shipment
-0.6%
0.876
0.732
0.710
0.840
0.882
Water in m
3
used per £ million revenue
-27.0%
386
343
452
534
529
1. Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc. (Vesuvius Penn Corporation) and BMC (Yingkou YingWei
Magnesium Co., Ltd) from 2019 onwards.
Wastewater
The Board has set a target for the Group to
reduce the amount of wastewater per metric
tonne of product packed for shipment by
25% by 2025 (vs the 2019 baseline).
We are focused on reducing water
consumption and the volume of
wastewater discharged. Thirty-one sites
reclaim and reuse some water after usage
and 30 sites have made investments in
wastewater treatment installations. We
have action plans in place to reduce our
wastewater generation globally, including:
–
Replacing wet scrubbing systems for
particulate removal with dry filter systems
–
Optimising cleaning processes
–
Detecting and addressing water
leakages above and underground,
and implementing preventative
maintenance programmes
–
Optimising production schedules to reduce
the need for cleaning between recipes
Environmental exceedances
Vesuvius is committed to addressing
environmental exceedances and
complying with local regulations. All
exceedances are reported in a central
database. Any significant exceedance
or environmental incident is reported
to the Group Executive Committee.
In 2023, Vesuvius recorded 70 mostly
minor environmental incidents. Of these,
two related to emissions to air, six to
emissions to water and 62 to ground.
Seven manufacturing sites were engaged
in discussions with neighbours over
environmental issues, mostly due to noise
or smell. Five sites were engaged in
discussions over minor environmental
compliance issues with local authorities.
Total environmental releases across the
Group in 2023 are estimated to have
totalled 44.4 metric tonnes (including
30.9 metric tonnes of water-based
materials) and 12.4 m
3
of hydrocarbons,
with the balance being solids and powders
(1.1 metric tonnes).
All 2023 reported releases to water
and all but three to the ground were fully
contained. One release to ground involving
hydrocarbons required remedial work,
the other two were water based and
were also cleaned up.
Where incidents occur, they are managed
via Vesuvius’ site environmental response
plans and reported through the Vesuvius
incident reporting system. We comply
with local reporting requirements in
respect of such incidents. Two regulatory
actions issued in 2021 against Vesuvius
in Belgium remain open; action plans to
address them are being implemented.
No action was taken by any authority in
relation to an environmental incident in
2023 which resulted in financial penalties
against Vesuvius.
(Metric tonnes)
% change
2023/2019
Pro forma
1
% change
2023/2019
2023
Pro forma
1,2
2023
2
2022
2
2021
2
2020
2
2019
2
Ratio of wastewater per tonne
of product packed for shipment
3
-11.6%
-4.0%
0.242
0.263
0.258
0.251
0.273
0.274
1.
Pro forma: performance as if the dolime process had been operating normally in 2023 (based on the average output and performance of 2019 to 2022).
2. Re-baselined using pre-acquisition data for the business acquired from Universal Refractories, Inc. (Vesuvius Penn Corporation) and BMC (Yingkou YingWei
Magnesium Co., Ltd) from 2019 onwards.
3. Some Vesuvius sites include social water in their wastewater reporting.
55
Strategic report
Governance
Financial statements
Our products have the potential to help
customers reduce and avoid greenhouse
gas emissions when compared with their
current practices, by amounts that
far exceed the emissions required to
manufacture and distribute them.
Our customers in the iron, steel and
aluminium industries are embracing
the challenge of dramatically reducing
their CO
2
emissions. Many have pledged
to reach net zero by 2050. They are
investing heavily to transform their
manufacturing technologies for the long
term, working on a range of initiatives
including the direct reduction of iron with
carbon-free hydrogen and the replacement
of carbon anodes in aluminium smelting.
We contribute to their efforts through
technology partnerships and developing
new products for the next generation zero
emissions aluminium, iron and steel-making
processes. We help them to evaluate the
CO
2
emissions reduction our products bring
to their complete value chain.
Product lifecycle assessments/
assessing our portfolio
We have created a Product Sustainability
Benefits Scorecard to evaluate the
sustainability benefit of our products over
their full product life cycle (raw materials,
manufacturing, transportation, use phase
and end of life), rating our products
against standard market products. By the
end of 2023, we had assessed 97% of our
revenue from consumable products using
this internal scorecard. Of our 2023 sales,
18.2% were generated from products with
superior sustainability characteristics
(17.9% in 2022). 15.6% of 2023 sales were
generated from products with superior
performance in terms of customer CO
2
emissions. Our objective is to continue
growing this share of our product
portfolio year after year.
Sustainable solutions
Improves users’
comfort, health
and safety
Safety in manufacturing and transportation
Safety during usage
Exposure to health hazards
Limits our
impact on
natural
resources
Product weight
Product lifetime
Recycled materials
Minimises
energy
consumption
and emissions
Cradle to grave greenhouse gas emissions
Reduced and avoided CO
2
emissions for the customer
Volatile compounds emissions
Reduces waste,
avoids landfill
and increases
recycling
Waste generation during manufacturing and usage
Recyclability after usage
Supporting our customers’ journey to net zero
Vesuvius is committed to growing its contribution to a sustainable world,
through products and services that improve safety, maximise environmental
performance, reduce greenhouse gas emissions and contribute to the
circular economy
Product sustainability benefits scorecard
Sustainable R&D
Vesuvius invests significantly in new
product development, working closely with
customers through our network of account
managers and service teams, and holding
regular technical and R&D meetings, to
offer optimised solutions for their specific
needs. We have a unique combination of
expertise covering a wide range of fields
including metallurgy, refractory ceramics,
robotics and mechatronics, and IT.
When designing new products, we look
at our customers’ current and future
challenges, needs and expectations,
combine this with information we have
collected from our analysis of past issues,
and seek to achieve both incremental
improvements and breakthrough
innovations in safety, robustness,
reliability and performance, to steer
the development of next-generation
products and services.
Using the Product Sustainability
Benefits Scorecard, we have undertaken
a complete assessment of the pipeline
of R&D and new product development
projects, to check from the design stage
that the projects are aligned with our
sustainability ambitions and more
specifically contributing to the fight
against climate change by reducing
CO
2
emissions. We use this information
to adjust priorities and allocate resources.
We consider products that have better
sustainability characteristics than those
already on the market, to be ‘market-
leading sustainable products’.
The challenge of decarbonising
iron-making and aluminium smelting,
requires the development and
industrialisation of radically new
technologies. We complement our internal
efforts with partnerships with over a dozen
research institutions, universities and
strategic customers, working to develop
the refractory solutions that will support
these novel processes.
Vesuvius plc
Annual Report and Financial Statements 2023
56
Product safety and quality
Vesuvius’ investment in sustainability
At the core of our business is the desire
to help our customers improve their
operational performance and efficiency.
Customers rely on the quality of our
products, and their structural integrity,
to ensure the safety of their employees
by controlling the flow of molten metal
in their operations.
The reliability and performance of our
products are critical to our customers
in terms of safety on the shop floor,
overall equipment effectiveness, labour
productivity and metal yield, and their
environmental impact (reducing energy
consumption, CO
2
emissions and
refractory material waste).
Many of our products allow our customers
to achieve improved metallurgical
properties in their products, for example,
allowing the production of better wind
turbine components or the light-weighting
of vehicles.
Product safety and quality
New product development
Product safety is paramount to us.
We have implemented a wide range
of practices to optimise the safety
and quality performance of our
products in use, reduce failures and
increase their lifetime.
We follow a strict stage-gate process
for the development of new products,
ensuring that safety performance
objectives are defined from the initial
stages and progressively completed up
to the product launch. Key deliverables
include risk assessments, preparation of
user and maintenance documentation,
manufacturing control plans, and Vesuvius
and customer operator training. We
undertake extensive testing through
rigorous alpha and beta trials, with
systematic trial reports to confirm that
targeted performance and robustness
objectives are met and to allow for
fine-tuning before product launch.
Safety data sheets are available for
all consumable products.
The development of human-centred
robotic solutions for steel shops reduces
the ergonomic strain on our customers’
operators together with their exposure
to high temperatures.
Safety and quality in use – product feedback
Our constant performance monitoring
develops deep and lasting relationships
with our customers.
After product launch, whenever a
safety-related incident (an injury or
a dangerous occurrence) occurs at one
of our customers that may have involved
a Vesuvius product or service, it is
systematically reported and investigated.
Likewise, all quality and performance
issues raised by the Vesuvius field teams
or by customers are systematically
reported, documented and classified,
based on their nature and severity.
Issues and incidents are dealt with through
a rigorous problem-solving methodology
and in-depth investigation using the 8D
practical problem-solving methodology.
This ensures we identify root causes,
implement corrective actions, and prevent
them recurring. The outcome of the
investigation, including root causes and
corrective actions, is shared with the
customer and lessons learned are
incorporated into the design of following
generations of products.
16.0%
17.5%
17.9%
2020
2021
2022
2019
14.5%
% of sales generated by market-leading sustainable products
*
2023
18.2%
*
Using Vesuvius’ internal scorecard.
83%
of ongoing new product development
projects were dedicated to
market-leading sustainable products
New sustainable products
The scope of work of the
Group’s central functions and
processes R&D teams covers
fundamental research, new
product development projects,
the evaluation of raw materials,
and support to operations.
In 2023, 83% of ongoing new
product development projects
were dedicated to market-leading
sustainable products
57
Strategic report
Governance
Financial statements
We provide our employees with a safe workplace, where they are recognised,
developed and properly rewarded
Safety is our top priority and our
overriding commitment to health
and safety is embedded throughout
the organisation.
Our approach is to identify, eliminate,
reduce or control all workplace risks, and
an ongoing system of training, assessment
and improvement is in place to focus on
achieving this. We remain fundamentally
committed to protecting the health and
safety of employees, contractors, visitors,
customers and any other persons affected
by our activities.
We want to become a zero-accident
company and are striving to become
a best-in-class organisation for safety
performance and leadership.
Our beliefs
1
Good Health and Safety is
Good Business
2
Safety is everybody’s responsibility
3
Working safely is a condition
of employment
4
All work-related injuries and work-
related ill-health are preventable
Health and safety governance
The Board has overall responsibility
for health and safety-related matters
and delegates authority for the
management of the health and safety
performance of the business to the
Chief Executive. The Health and Safety
Policy is signed by all members of the
Group Executive Committee and the
Business Unit Presidents are responsible
for its deployment.
The Board receives regular information
on every Lost Time Injury and key safety
performance indicators. In addition, the
Board carries out a biannual review of
health and safety performance. Annual
presentations of Business Unit strategy
include health and safety.
Group safety audits
The Group operates a central safety
auditing team of three auditors, each
with more than ten years’ experience, who
report to the VP Sustainability. The team’s
main purpose is to verify the deployment
and ongoing application of the Group’s
standards and policies in our locations,
including our manufacturing sites, R&D
facilities and the customer locations
in which a significant number of our
employees operate daily. Each audit
also includes an assessment of the site’s
HSE leadership. During 2023, the team
conducted 66 audits (2022: 65).
Health, safety and well-being at work
Our people
We commit to:
–
Abide by simple and non-negotiable
standards
–
Report transparently and thoroughly
investigate any incident to learn,
share, and avoid repeats
–
Undertake risk assessments to identify
hazards, prioritise any deficiencies
and correct them in an appropriate
way, as well as to develop appropriate
safe work procedures
–
Ensure every business facility follows
the agreed health and safety plans,
committing to: reduce the frequency and
severity of injuries; improve workstation
ergonomics; prevent exposure to hazardous
substances; and minimise the risk of
occupational diseases
–
Increase awareness about health and safety
issues and provide training for all new
employees and contractors
–
Ensure every business facility has an
appointed Health and Safety Manager
See the full policy on www.vesuvius.com
for further details.
Vesuvius’ Health & Safety Policy
Following each audit, action plans are
created by the site management teams to
address any issues identified and work on
completing these is assessed on a regular
basis. The observations made during
audits are used to improve the Group’s
training programmes and to enhance
the Group’s health and safety standards.
The results of the Group HSE audits,
as well as the progress of action plans
addressing the most critical issues, are
reported to the Board twice a year.
Sites are also encouraged to carry out
self-assessments, based on the Group
safety audit compliance checklist,
to monitor their progress.
Safety audits and improvement opportunities
In 2023, 83% (2022: 82%) of our working
population performed routine safety
audits every month. This generated
an average of nine (2022: nine)
implemented safety improvement
opportunities per person, resulting
in an improvement in worker safety.
The audit programme involves employees
at all levels – from the Group Executive
Committee and safety specialists, through
to local site management, employees and
directly supervised contractors.
Vesuvius plc
Annual Report and Financial Statements 2023
58
2023 safety performance
Our Lost Time Injury Frequency Rate
(LTIFR) of 0.6 per million hours worked in
2023 was significantly lower than 2022
(1.08), but we recognise that there is more
work left to do. The LTIFR for not directly
supervised contractors and visitors was
1.6 in 2023 (2022: 1.02), and this remains
an area of focus for our efforts.
Fatalities and severe injuries
There were no work-related fatalities in
2023, but sadly one of our colleagues
was killed in a road traffic accident whilst
commuting. Vesuvius provided support
to his family.
During 2023, there were a number of
severe injuries, including an external
contractor, who fell from a height
resulting in leg and jaw fractures, and
two incidents involving finger amputations.
We are actively taking steps to learn from
these severe injuries and to improve our
systems and procedures to prevent any
similar occurrences.
Lost time and medically treated injuries
Vesuvius operates a robust and
comprehensive process for the timely
reporting of incidents. In our internal
standards, contractors who are not
directly supervised are included, and
we use more stringent definitions for
Lost Time Injuries (LTIs) and ‘severe
accidents’ than the definitions used by
many regulatory bodies. All sites are
required to report on all Recordable
Injuries (aligned with the OSHA definition),
to maintain the focus on safety.
As an illustration of the precautionary
preventative approach taken by Vesuvius
in accident investigation, all LTIs and
Recordables require a full 8D report.
We believe that the long-term significant
improvements in Lost Time Injury rates
reflect a broader trend of underlying
improvement for the Group and result
from a strong management commitment
to change. Shifting the focus to the
globally recognised OSHA Recordables
for medically treated injuries supports
the continued downward pressure on
frequency rates.
2023 Safety performance
Performance indicators
Employees and
directly
supervised
contractors
2023
Not directly
supervised
contractors
and visitors
2023
All employees, not
directly supervised
contractors
and visitors
2023
Work-related Death
0
0
0
Severe Injuries
3
2
5
Lost Time Injuries (LTI)
15
2
17
LTI Frequency Rate (LTIFR) per million hours
0.6
1.6
0.6
Total Recordable Injuries (TRI)
91
4
95
Total Recordable Frequency Rate (TRFR) per million hours
3.4
3.2
3.4
Safety Audits (number)
135,805
0
135,805
Safety Audits per 20 employees per month
17
0
17
Lost Time Injuries
LTIFR 12 months rolling
Lost Time Injuries
per million hours worked
2021
2020
2019
2022
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2023
59
Strategic report
Governance
Financial statements
People and Culture
Our principles and approach
Vesuvius is a geographically and culturally
diverse group, employing more than
11,000 people of more than 70
nationalities in 40 countries.
Our geographical diversity places us close
to our customers around the globe. It also
highlights the importance of maintaining
and applying strong and consistent values
and ethical principles in our worldwide
approach to business.
Our employees’ engagement with our
values and culture is vital to our success
and the sustainable delivery of the Group’s
strategy. We communicate openly and
transparently within the organisation,
through ‘town hall’ meetings, Board and
senior management visits, management
feedback, performance evaluation,
measuring employee engagement and
responding to the feedback we receive.
Critically, there is ongoing and consistent
communication of our CORE Values and
the principles of our Code of Conduct. This is
underpinned by engaging staff across the
Group in both general and targeted training,
to ensure a consistent understanding of our
policies and procedures.
Our CORE Values
The Group’s CORE Values are actively
supporting the Group’s priorities,
encouraging consistent behaviours
across the Group to sustain our business
success in the future.
These Values, and the behaviours
underpinning them, convey the mindset
and attitudes we expect each employee
to show every day. They are at the heart
of the culture of the Group, promoting
our image to external stakeholders, and
underpinning the commercial promise
we provide to our customers.
The Values are reinforced through
our performance management systems
and are celebrated each year through
our Living the Values Awards which
select regional and global winners
for each Value.
Our People and Culture strategy aims
to build an outstanding business by
ensuring we have the individuals, skills
and capabilities critical to the delivery
of our strategy.
It focuses on delivering value for our
businesses, a positive employee
experience and functional excellence,
through our culture of diversity and
innovation. Our long, mid and short-term
plans are organised around two key areas:
–
Building an Outstanding Business – with
the critical skills and capabilities to win
–
Developing Outstanding People –
in diverse, engaged, and high
performing teams
The underlying foundation for our
People and Culture strategy is our
strong culture of delivering results in
a diverse, entrepreneurial, decentralised
organisation, where everyone
is empowered to take action,
working with like-minded people
in a non-matrix environment.
Vesuvius is for ambitious, self-motivated
people who thrive on challenges and
solving problems. It is for people who are
never satisfied, always raise the bar and
dare to make difficult decisions and win.
Our strength comes from our CORE
Values: Courage, Ownership, Respect and
Energy. These Values guide and inspire us,
shaping our behaviours and decisions.
Vesuvius plc
Annual Report and Financial Statements 2023
60
Courage
–
I systematically say, decide and do what
is right for Vesuvius including when it is
difficult, unpopular, or not consensual
–
I express my opinions openly during
discussions, but I also defend Group
decisions once they’ve been taken,
even if they do not correspond to my
initial position
–
I proactively take leadership responsibility
on difficult projects and topics that are
important to the Group’s performance,
motivated by the perspective of success
rather than paralysed by the risk of
personal failure
Respect
–
I demonstrate respect for other people’s
ideas and opinions even if I disagree
with them
–
I welcome open debate. I listen to others, and
foster esteem and fairness with customers,
suppliers, co-workers, shareholders and the
communities where we operate
–
I communicate my objectives clearly and take
time to explain all decisions. I behave with the
highest level of integrity. I promote diversity
at all levels of the Company
Ownership
–
I am personally accountable for the
consequences of my actions and for the
performance of the Group in my area
of responsibility or oversight, without
blaming external circumstances or the
actions of others
–
I demonstrate an entrepreneurial spirit,
looking for and seizing business
opportunities and I immediately address
problems that come up as soon as
I become aware of them
–
I manage the Group’s money and resources
as though they were my own
Energy
–
I work hard and professionally in pursuit
of excellence
–
I constantly raise the bar and challenge the
status quo. For me, the sky is the limit
–
I lead by example, inspiring and motivating
my team to go the extra mile. I promote
a positive and energising work environment
–
I continuously deliver outstanding customer
experience and innovative solutions
–
I never underestimate competitors and
permanently strive to reinforce the
Group’s leadership position
Vesuvius’ CORE Values
Code of Conduct
Our Code of Conduct sets out the
standards of conduct expected,
without exception, of everyone who
works for Vesuvius in any of our
worldwide operations.
The Code of Conduct emphasises our
commitment to ethics and compliance with
the law, and covers every aspect of our
approach to business, from the way that
we engage with customers, employees,
the markets and other stakeholders, to the
safety of our employees and workplaces.
Everyone within Vesuvius is individually
accountable for upholding its
requirements. We recognise that lasting
business success is measured not only
in our financial performance, but in the
way we deal with our customers, business
associates, suppliers, employees,
investors and local communities.
The Code of Conduct is displayed
prominently at all our sites and is published
in our 29 major functional languages. It is
available to view at: www.vesuvius.com.
We continue to enhance the policies that
underpin the principles set out in the Code
of Conduct. These assist employees to
comply with our ethical standards and
the legal requirements of the jurisdictions
in which we conduct our business.
They also give practical guidance on
how this can be achieved.
The Code of Conduct covers eight
key areas:
Diversity and inclusion
As an organisation, Vesuvius has a global,
multicultural operational and customer
base, which we wish to reflect inside our
organisation with a multicultural, diverse
community of excellent professionals from
all backgrounds. This starts by focusing on
broad diversity of gender and nationality,
with an aim to ensure that all employees
and job applicants are given equal
opportunity and that our organisation is
representative of all sections of society
where we operate. Vesuvius operates in
40 countries around the world, employing
people with more than 70 nationalities,
making us a truly diverse business.
We regard this diversity as a critical aspect
of our success and future growth, as it
allows us to access the widest range of
skills and experience. Each employee is
respected and valued, and as a result
they are all able to give their best.
All employees are given help, training and
encouragement to develop their full
potential and utilise their unique talents.
Overall responsibility for implementing
the Group’s Diversity and Equality Policy
rests with the Executive Directors. The
Nomination Committee monitors progress
with meeting its objectives. At the end
of 2023, the Senior Leadership Group
(comprising c.150 senior managers)
consisted of 24 nationalities located in
23 countries. 15% of our overall workforce
were women, which was stable versus 2022.
1.
Health, safety and
the environment
2.
Trading, customers, products
and services
3.
Anti-bribery and corruption
4.
Employees and human rights
5.
Disclosure and investors
6.
Government, society and
local communities
7.
Conflict of interests
8.
Competitors
Diversity – 31 December 2023
Female
Male
Gender not
available
1
Total
Female
Male
Board
3
6
9
33%
67%
Group Executive
Committee members
2
5
7
29%
71%
Leadership roles reporting to
members of the GEC
12
36
48
25%
75%
Directors of subsidiaries included
in consolidation
2
21
76
97
22%
78%
Senior Managers
3
35
117
152
23%
77%
Other employees
1,718
9,506
11,224
15%
85%
Vesuvius employees
1,753
9,623
11,376
15%
85%
Directly supervised contractors
43
165
1,927
2,135
Vesuvius employees and directly
supervised contractors
13,511
1. The Group had 1,927 directly supervised contractors who were contracted through third parties and for
whom the Group does not hold detailed employment records.
2. Of the 97 employees who are directors of Group subsidiaries but not members of the GEC or direct
reports of the GEC, 22% are women. This disclosure is made to comply with regulatory requirements.
It includes directors of dormant companies. Some individuals hold multiple directorships.
3. Senior Managers as defined for the purposes of Section 414C(8)(c) include directors of the
Company’s subsidiaries.
–
We are dedicated to encouraging
a supportive and inclusive culture
amongst our global workforce
–
We aim to ensure that all employees and job
applicants are given equal opportunity and
that our organisation is representative of all
sections of society where we operate. Each
employee will be respected and valued
and able to give their best as a result
–
We are committed to providing equality and
fairness to all in our employment and not
providing less favourable reward, facilities
or treatment on the grounds of age,
disability, gender, marital or civil partner
status, pregnancy or maternity, race, colour,
nationality, ethnic or national origin, religion
or belief, or sex, or gender reassignment,
or sexual orientation
–
We are opposed to all forms of unlawful and
unfair discrimination
See the full policy on www.vesuvius.com for
further details.
Vesuvius’ Diversity and Equality Policy
61
Strategic report
Governance
Financial statements
People and Culture
continued
Over the past three years we have made
visible progress in gender diversity.
Women now represent 20% of our
Senior Leadership Group, a level that
we consider is still too low, but which
represents a significant improvement as
compared with the level of 15% in 2019.
Our ambition remains to reach 25%
women in this tier by the end of 2025.
The Board has noted the recommendation
of the Parker Review that each FTSE 350
company should set a percentage
target, by December 2023, for senior
management positions that will be
occupied by ethnic minority executives in
December 2027. The Company currently
analyses management on the basis of
nationality, which indicates a great deal
of diversity in the senior management
group, but not ethnicity. The Board has
resolved that a survey of ethnicity should
be conducted, but that no ethnicity target
should be set at this time.
Copies of the Board Diversity Policy and
Group Policy on Diversity and Equality are
available to view on the Vesuvius website:
www.vesuvius.com. Further information
on the Group’s approach to promoting
diversity can be found on pages 105
and 106.
Employee engagement
Vesuvius recognises that companies with
highly engaged employees deliver better
business outcomes. They have lower
absenteeism, lower employee turnover,
fewer safety incidents, better product
quality, and higher productivity, sales
and profitability. At Vesuvius, we regard
engagement as critical to our ongoing
success and we work hard to listen to our
people and act when issues impacting
engagement are identified.
Employee engagement action plans
Engagement is a collective responsibility,
particularly among our management
community. We conduct an annual
employee engagement survey, I-Engage,
in partnership with Mercer, to measure our
employees’ attitudes to Vesuvius and their
work. The survey generates reports of
team responses to the survey. Managers
then share the results openly with their
teams and, working together, develop
action plans to address issues.
In 2023, we maintained a very high
participation level with 92% of all
employees responding to 34 questions.
Positive perceptions on safety continue
to be a core strength, together with
our overall employee experience,
and understanding of our Company
purpose and strategy, and of our
approach to sustainability.
Internal communications
We continue to develop our internal
communications programme to ensure we
have a strong mix of channels to reach our
diverse population. The Chief Executive
regularly addresses the whole Group
via Company-wide email and video,
delivering strategic messages, and in
2023 held 13 interactive virtual sessions
with the Senior Leadership Group to share
business updates. Company news and
announcements are regularly shared on
the Group intranet and employee news
app, whilst screen savers are used to
support major communication campaigns.
We also utilise posters and site ‘town hall’
meetings for on-site communications.
The Company Senior Leaders Conference,
Spark, was held in Rome in September,
with 150 delegates discussing Company
strategy, our CORE Values, digital
transformation and sustainability.
Whenever possible, face-to-face
communication is conducted at different
levels of the organisation providing the
necessary opportunities for interactive
Q&A sessions with business leaders.
2023 Distribution of Vesuvius employees – full-time versus part- time
Full-time
employees
Full-time
employees
(%)
Part-time
employees
Part-time
employees
(%)
Vesuvius
employees
total
Vesuvius
employees
total (%)
Permanent salaried
4,642
41%
53
<1%
4,695
41%
Permanent hourly
6,290
55%
16
<1%
6,306
55%
Total Permanent
10,932
96%
69
1%
11,001
97%
Temporary salaried
43
<1%
2
<1%
45
0%
Temporary hourly
327
3%
3
<1%
330
3%
Total Temporary
370
3%
5
0%
375
3%
Vesuvius employees
11,302
99%
74
1%
11,376
100%
Employee consultation and industrial relations
Vesuvius supports freedom of association
and the right to collective bargaining.
In all of the countries in which we operate,
the Group informs and consults local
works councils and trade unions on
matters concerning the Vesuvius business
as required. These processes and
procedures are regulated by local law
and generate constructive dialogue
between employee representatives and
management, which provides benefit to
our business. In 2023, 77% of permanent
employees were represented by Collective
Agreements that include working
conditions such as local works councils,
trade unions or other bodies.
In addition to local employee
representation, the Group operates
a European Works Council (EWC) with
elected representatives from each of
the EU countries in which Vesuvius has
employees. Following the UK’s departure
from the EU, the previous EWC Agreement
was terminated and on completion of the
negotiation of a new EWC Agreement,
the elected representatives met and
constituted the EWC in November 2023.
Vesuvius plc
Annual Report and Financial Statements 2023
62
Talent attraction and development
Talent management
The Group Executive Committee holds
direct responsibility for the roles and
development of our senior leaders, jointly
reviewing capability needs and deciding
on succession and cross-organisational
moves for the leadership group. This
illustrates the strong commitment at
the highest level of our organisation
to growing the Group using its
Company-wide resources.
Leadership pipeline
Strengthening the leadership pipeline
and facilitating people development
throughout the organisation remain key
areas of focus for Vesuvius. We continue to
work hard to ensure that we have the right
capability in every part of the organisation
to drive our strategy and realise market
opportunities. As a result, we have built
high-calibre leadership teams, many of
whom are relatively new to their roles and
to Vesuvius. We empower our people to
drive the business with an entrepreneurial
spirit, and to develop a performance-
oriented culture.
We aim to adopt a balance between
external hires and internal promotions,
fuelled by a strong process of backup
and succession planning, especially
for management positions.
Training and development
Our leaders take responsibility for
managing and developing their teams.
Our Learning Management System (LMS)
provides a global hub for Vesuvius online
training courses. Mandatory training
courses are automatically assigned to new
joiners and completion statistics are easily
reportable. Targeted training courses can
also be allocated to employees in specific
roles, e.g. modern slavery training for
specific people in purchasing.
Technical training
HeaTt training is aimed at the continuous
technical development of Vesuvius
employees. Courses range from entry
to expert levels and are continuously
updated to keep pace with developing
technology and delivery methods,
thereby guaranteeing that Vesuvius
experts are at the forefront of technical
innovation. They are a great way for our
hugely experienced technical experts
to pass on their knowledge to the next
generation and ensure the sustainability
of our know-how.
HeaTt module 2 Iron & Steel was launched
on the LMS in October 2022, comprising
23 chapters of training material. The
course is divided into three sections; the
first explains the process of producing iron
and steel, the second explains the different
refractory products and the third section
details how these products are applied
in the iron and steel manufacturing
processes. Module 2 encompasses
products from Advanced Refractories,
Flow Control, and Sensors & Probes.
This module is open to every employee
and was recommended for employees
from the Iron and Steel division. In 2023,
46 people went through the whole three
sections of this Module 2.
There are several online HeaTt M3
modules for Flow Control. They are
organised by product line and are much
more technical. Customer-facing and
M&T employees are enrolled based on
their technical needs. In 2023, people
who completed the modules that were
assigned to them spent over 3,845 hours
in M3 training.
Compliance training
Compliance training gives our employees
a clearer understanding of the scope of
risks that exist as we conduct our business
and gives context to how the Group
expects each employee to respond to
those risks.
The Board has set a target of at least 90%
of targeted staff completing the annual
Anti-Bribery and Corruption training.
In 2023, 100% of the targeted staff
completed this training.
Global reward
Reward and recognition are integral
components of our employee value
proposition, enabling us to attract,
engage and retain key talent and highly
qualified employees. We are committed
to creating reward and performance
management systems which are
transparent and objective.
Our management Annual Incentive
Plans are measured against both
Vesuvius’ financial targets and personal
performance, an incentive structure
consistent with that of our Executive
Directors. The Vesuvius Share Plan for
Executive Directors and Group Executive
Committee members encourages robust
decision-making based on long-term
goals rather than short-term gains and
works to align the interests of participants
with those of shareholders.
In 2023, 99% of our salaried permanent
employees undertook an annual
performance review with their line
management (2022: 98%).
Global mobility
Vesuvius operates worldwide. We believe
that our companies should be managed
and staffed by local personnel. However,
we also provide selected groups of
employees with a range of international
assignments. These assignments are
usually for a limited period, most often
three years.
International assignees do not come from
one or two countries alone. We have a truly
international mix of nationalities in our
mobile population. Individuals move not
only within a region, but also between
regions. Our mobility programme shows
that our assignee population is as diverse
as our Group.
Mandatory online training courses – 2023 participation
% of targeted
audience
completing course
Anti-Bribery and Corruption (annual)
100%
Gifts, Hospitality and Entertainment (onboarding)
83%
Modern Slavery
83%
Anti-Tax Evasion
79%
Data Protection
81%
Cyber Security Awareness – 7 Basic Modules
88%
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Financial statements
Our communities
We seek to establish strong relationships with key stakeholders and support the
communities in which we operate
Prevention of slavery and human
awareness training on child labour,
slavery and/or human trafficking
During 2023, we published our eighth
transparency statement outlining the
Group’s approach to the prevention of
slavery and human trafficking in our
business and supply chain. A copy of
our latest statement is available to view
on our website: www.vesuvius.com.
Since the publication of our first statement
we have conducted a risk assessment
of our purchasing activities, seeking to
identify, by location and industry, where
the potential risks of modern slavery are
highest. Our assessment identified the
following four industries that pose a higher
risk of modern slavery for Vesuvius:
1
Mining and extractive industries
(raw materials)
2
Textiles (personal protective equipment
(PPE) and work clothing)
3
Transport and packaging
4
Maintenance, cleaning, agricultural
work, and food preparation
(contracted workers)
As our spend with mining and extractive
industry suppliers is far greater than the
other three industries, and the number
and diversity of suppliers is the greatest,
we have been focusing our efforts on
these industries. We have deepened our
investigation of higher-risk raw materials,
based on the studies carried out by
Drive Sustainability and the Responsible
Minerals Initiative on the responsible
sourcing of materials in the automotive
and electronics industries, with which
our portfolio of raw materials shares
many commonalities.
We provided webinar training on modern
slavery to our key purchasing staff and
continued to use an online e-learning
module to upgrade the training given to
all supplier-facing staff. It provides key
guidance on the red flags associated
with modern slavery to assist them in
identifying these during supplier visits
and accreditation. Since the launch of the
modern slavery red flag training we have
trained 100% of the targeted staff.
See the Group’s Statement on the Prevention
of Slavery and Human Trafficking
www.vesuvius.com/en/sustainability/
our-policies/statement-on-modern
-slavery.html
A responsible company
Vesuvius is committed to making a
positive contribution to society. As part
of this, we focus on operating an ethical
business with appropriate policies in
place to ensure compliance with the
regulations and laws in all our markets.
Governance and policies
Vesuvius’ compliance policies underpin the
principles set out in our Code of Conduct.
They are the practical representation of
our status as a good corporate citizen, and
they assist employees to understand and
comply with our ethical standards and the
legal requirements of the jurisdictions in
which we conduct our business. They also
give practical guidance on how this can
be achieved.
Human rights
The Group Human Rights and Labour
Policy reflects the principles contained
within the UN Universal Declaration of
Human Rights, the International Labour
Organization’s Fundamental Conventions
on Labour Standards and the UN
Global Compact, to which the Group is
a signatory. The Policy sets out the
principles for our actions and behaviour
in conducting our business and provides
guidance to those working for us on how
we approach human rights issues. These
principles have been integrated into the
work of our procurement teams as we
assess our suppliers and their business
practices. The policy was reviewed and
updated in 2022.
Our policy expressly prohibits forced,
compulsory or child labour in any form and
applies to both ourselves and those who wish
to work with us.
Our other commitments include:
–
Health and Safety:
to work towards our
goal of zero injuries in the workplace
–
Freedom of Association and right to
collective bargaining:
to respect our
workers’ democratic rights to participate or
not participate in trade unions, or other
collective bargaining organisations, without
fear of intimidation, pressure or reprisal.
–
Unlawful discrimination, harassment and
abusive behaviours:
to ensure that each
employee and potential employee is
treated with fairness and dignity and that
discriminatory practices, or unwelcome
verbal or physical conduct are not tolerated
–
Remuneration:
to ensure that wages and
benefits paid to employees shall meet legal
or industry minimum standards
–
Discipline policies:
ensure proportionality
of sanctions, with a range of potential
disciplinary actions and procedural fairness
See the full policy on www.vesuvius.com
for further details.
Vesuvius’ Human Rights Policy
Vesuvius plc
Annual Report and Financial Statements 2023
64
Business ethics/anti-bribery
and corruption and working
with third parties
Vesuvius’ Code of Conduct affirms our
commitment to competing vigorously,
but honestly, and not seeking competitive
advantage through unlawful means.
We conduct ourselves ethically in all
public affairs activities, in alignment with
local laws and regulations. We do not
engage in unfair competition, exchange
commercially sensitive information with
competitors, or acquire information
regarding a competitor by inappropriate
means. When received for business
purposes, we safeguard third-party
confidential information and use it only
for the purpose for which it was provided.
We engage with selected third-party
representatives and intermediaries in
our business. We recognise that they
can present an increased bribery and
corruption risk. Our procedure on working
with third parties clearly outlines our
zero-tolerance approach to bribery
and provides practical guidance for
our employees in identifying concerns
and how to report them.
Vesuvius engages with third-party
sales agents, many of whom operate in
countries where we do not have a physical
presence. Our employees’ use of, and
interaction with, sales agents is supported
by an ongoing training programme for
those who have specific responsibility
for these relationships.
As part of our communication around
anti-bribery and ethics, employees are
actively encouraged to consult on ethical
issues. They have open access to the
Compliance Director and Legal function
who provide support on a regular basis.
During 2023, the Group continued the
due diligence review of our third-party
representatives and intermediaries.
Following the prior years’ enhanced
reviews of sales agents, custom clearance
agents, distributors and logistics
providers, we conducted repeat due
diligence. We also conducted due
diligence on any new third parties
introduced into the organisation.
Responsible sourcing
Vesuvius recognises the crucial role that
its suppliers play in creating value in the
products and services that Vesuvius
ultimately provides to its customers.
In addition to the consistent and timely
supply of materials, products, and services
which are of the highest quality, we expect
our suppliers to operate in a manner that is
appropriate, in terms of their ethical, legal,
environmental and social responsibilities.
Principles
Overall, our objective is to encourage
suppliers to implement a meaningful
sustainability programme, embrace the
UN Global Compact principles, evaluate
and reduce our upstream CO
2
emissions
and identify potential risks (and if
necessary, address them) in our supply
chain. The satisfaction of our customers’
requirements, the safety and reliability of
Vesuvius’ products, and the efficiency of
Vesuvius’ internal processes are dependent
on the reliability of its network of suppliers.
Vesuvius is committed to ensuring that we
utilise high-quality raw materials, secured
through reliable and well-developed
raw material suppliers. The principles of
sustainable procurement are prescribed
within the Vesuvius Sustainable
Procurement Policy and supported by
supplementary processes.
Sustainable Procurement Policy
We operate a Sustainable Procurement
Policy which outlines key criteria for
suppliers. The policy uses the Group
Procurement’s ‘Request for Quotation’
(RFQ) process to engage a significant
number of Vesuvius suppliers and is
provided in conjunction with the Vesuvius
Terms and Conditions of Purchase.
For suppliers to participate in the RFQ,
they are obliged to accept and agree
to the terms of the Sustainable
Procurement Policy, as it forms an
addendum to Vesuvius’ standard contract
clauses. Once accepted, it is the
responsibility of the supplier to verify
and monitor compliance against the
policy – both for their operations and those
of any sub-contractors. The full policy
is available on the Vesuvius website.
Since its inception in 2021, 167 active
vendors (74% of the targeted group
participating in the RFQ process, 9% of
the total number of active raw material
suppliers), representing almost half of
the raw material spend have formally
pledged to comply with the policy.
The policy covers all suppliers of goods
and/or services either used in our
manufacturing processes and/or sold directly
by us to customers, including Tolling and
Resale suppliers. It applies to suppliers,
their agents and their sub-contractors.
The major elements of the Sustainability
Procurement Policy are:
–
Employees and human rights
–
Conflict minerals
–
Ethical and compliant business practices
–
Environment
–
Quality
–
Business continuity
See the full policy on www.vesuvius.com
for further details.
Vesuvius’ Sustainable Procurement Policy
65
Strategic report
Governance
Financial statements
A responsible company
continued
Supplier sustainability assessment criteria
Environment
Energy consumption and GHGs
Water
Biodiversity
Local and accidental pollution
Materials, chemicals and waste
Product use
Product end-of-life
Customer health and safety
Environmental services
and advocacy
Labour and Human Rights
Employee health & safety
Working conditions
Social dialogue
Career management
and training
Child labour, forced labour
and human trafficking
Diversity, discrimination
and harassment
External stakeholder
human rights
Ethics
Corruption
Anti-competitive practices
Responsible information
management
Sustainable Procurement
Supplier environmental
practices
Supplier social practices
21 criteria based on international standards
Supplier sustainability assessments
As part of our sustainability agenda,
Vesuvius has implemented a Supplier
Sustainability Assessment programme,
covering all suppliers of goods either used
in our manufacturing processes and/or
sold directly by us to customers, including
Resale suppliers.
Vesuvius has partnered with an
independent third-party service provider
– EcoVadis – to rate our raw materials
suppliers using a detailed set of criteria.
These cover four themes and 21 criteria
based on international standards: Labour
and Human Rights; Ethics; Environment;
and Sustainable Procurement.
In 2023, an additional eight (2022: 23)
(Total to date: 126) employees from our
Procurement teams received specific
training on supplier sustainability
assessments (100% of the target group).
The Board set a target to assess at least
50% of our raw material spend by the
end of 2023. As the Group was on track to
reach this target, the Sustainability Council
set a new objective to assess at least
60% of our raw material spend by 2025.
Selected criteria were chosen to select
participating suppliers such as supplier
size and risk metrics, including:
–
Category of raw material
–
Availability of alternative sources
–
Share of supplier revenue with Vesuvius
–
Grades in previous assessments
–
New suppliers
–
Supply chain incidents
Since its launch, 244 suppliers have joined
the programme, representing 52% of the
total raw material spend. Fewer than 1%
of the suppliers assessed in 2023 did not
reach Vesuvius’ minimal EcoVadis score.
We are requiring these suppliers to
implement improvement actions within
a three-year time frame. Progress will be
monitored through routine evaluations
and an annual reassessment. Across the
crucial topics, the average total score of
Vesuvius suppliers was 51.4, compared to
an industry standard of 46.0.
Supplier CSR and Quality audits
Vesuvius conducts an annual Supplier
Audit programme targeting their
Corporate Social Responsibility (CSR)
practices, product quality and security
of supply. The programme is led by the
Group’s Purchasing and Quality teams.
The goal of the audits is to verify that our
suppliers abide by fundamental principles
regarding the environment and social
practices, and reduce the number
of quality issues that may affect
our raw materials.
As part of this, we carry out on-site
inspections, share expectations with
our suppliers, identify risks, and adapt
our internal controls accordingly. We
encourage our suppliers to improve their
own processes and help them prioritise
actions to achieve this. Commencing in
2022, a number of ‘red flag’ items have
been included in our on-site verification
questionnaire, especially addressing
human rights issues, such as child or forced
labour, for which immediate escalation
and investigation is required in case any
breach is detected.
In 2023, 157 (2022: 139) audits were
conducted (100% on-site), 13 follow-ups
and 144 regular audits (2022: 3/136).
100% of the planned audits were carried
out. No cases of human rights breaches
were detected as part of the supplier audit
check. 5.7% of audited suppliers received
grades below threshold (2022: 0.7%).
Whenever suppliers fail to meet the
required standards, either action is taken
to support them to improve or our
relationship with them is terminated.
Vesuvius plc
Annual Report and Financial Statements 2023
66
Community engagement
Below are some examples of the
many community programmes and
activities our colleagues were involved
in throughout 2023.
Supporting women and girls in
STEM (Science, Technology,
Engineering and Mathematics)
Vesuvius is focused on supporting women
and girls to advance in engineering,
technology, and other highly technical
fields. In 2023, we continued the
programmes that were started in 2022
as well as launching new initiatives.
–
Vesuvius India sponsored ten female
students from the College of
Engineering, Pune. It also continued
a three-year scholarship programme
for nine women to pursue a bachelor’s
degree in engineering from the National
Institute of Technology. In addition,
Vesuvius India supported the Women’s
Club at the College of Engineering, which
enabled students to access technical
learning through online courses and
participation in hackathons and
leadership events
–
In the USA, Vesuvius employees
participated in conferences organised
by the Association for Iron and Steel
Technology, and the Society of Woman
Engineers, to understand the challenges
for women better, and to empower
young female professionals to develop
in the steel industry
–
Vesuvius Vietnam partnered with
the Material Technology Faculty of
Ho Chi Minh University of Technology
to host a Technical Day of Refractory
Application in Steelmaking to inspire
students and highlight career
opportunities for women in this field
Charity initiatives
–
Vesuvius sites in Brazil, Mexico, the USA
and Poland organised the collection of
food, Christmas gifts, money and other
donations to support the poorest
members of our communities
–
Vesuvius sites in France, India and
Poland participated in sports
and other types of events to raise
funds for health programmes and
not-for-profit organisations
–
Our colleagues in Germany and
Ukraine collected donations for the
victims of war and natural disasters
–
In India, our colleagues supported the
provision of medical aid for people
infected with HIV and AIDS, those
affected by drug abuse and children
with cerebral palsy
Supporting education
–
Our sites in Mexico and India supported
the development of school infrastructure
with equipment donations
–
In Brazil and India we gave donations
and scholarships to support the
education of underprivileged children
–
In the USA we sponsored the Carnegie
Science Center
Family programmes
–
Our sites in China, India, Poland and
Mexico hosted family days and
end-of-year celebrations, with food
and entertainment for employees
and their families
–
A number of our sites also held
occasional events for employees’
children, including Sinterklaas in
Belgium, activities and entertainment in
our offices in Poland and factory visits
organised on Children’s Day in Brazil
–
Competitions on safety and the
environment were held for employees’
children at our sites in Brazil,
China, Egypt, Poland and the
United Arab Emirates
–
Scholarships are provided for the
children of employees in Mexico
Cooperation with local authorities
to develop Vesuvius employees
–
In the United Arab Emirates,
a Waste Management awareness
session was held with the Waste
Management Authority
–
In the USA, a training session was
held with the State Police Department
on how to react and behave in case
of dangerous situations with an
active shooter
–
At our sites in Germany, India and
the USA, safety training and fire drill
simulations were held with the local
fire brigades
Joint activities with local authorities
undertaken for the benefit of
our communities
–
In India, consultations about
environmental programmes were
held by the government
–
Visits to Vesuvius’ manufacturing sites
were organised for the County Industrial
Association in China and the local
members of parliament in Australia
and the UK
–
In India, we also supported the clean up
of a public beach
67
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Financial statements
Vesuvius plc
Annual Report and Financial Statements 2023
68
Vesuvius recognises that effective
engagement with stakeholders is vital to
the Group’s success. Understanding the
needs and priorities of key stakeholders,
and building strong and positive
relationships with them, lies at the
heart of Vesuvius’ business.
Section 172 of the Companies Act
2006 codifies this engagement, requiring
the Board to promote the success of
the Company over the long term for
the benefit of members as a whole,
whilst having regard to other key
stakeholders’ interests.
In performing its duties, the Board focuses
on the sustainable success of the Group
and the existence of a culture that
supports this success. The Board
recognises that, in seeking to maintain
long-term profitability, the Group is reliant
on the support of all of its stakeholders,
including the Group’s workforce, its
customers, suppliers and the communities
in which its businesses operate.
When taking key decisions the Board
balances the competing interests of
different stakeholders with an overriding
focus on ensuring the long-term success of
the Group. The Board confirms that it has
acted in accordance with the Section 172
requirements throughout the year.
Section 172 requirement
Find out more
Page
Consequences of
any decision in the
long term
Our purpose
Our investment proposition
Business model
Our markets
Our strategy
IFC
19
20–21
10–13
17
Interests of employees
Our purpose
Our stakeholders
Our people
Remuneration Policy
IFC
68–69
58–63
114
Fostering business
relationships with
suppliers, customers
and others
Business model
Our markets
Our strategy
Our customers
Our communities
Our stakeholders
20–21
10–13
17
56–57
64–66
69–71
Section 172 requirement
Find out more
Page
Impact of operations
on the community
and the environment
Our sustainability strategy
and objectives
Our sustainability targets
TCFD
Our planet
Our communities
Our stakeholders
34
35
36–38
39–55
64–67
68 & 71
Maintaining high
standards of
business conduct
Our communities
Our stakeholders
Corporate governance
statement
Directors’ Report
64–66
68–71
85–87
140
Acting fairly
between members
Our investment proposition
Our stakeholders
Corporate governance
statement
19
69
85–87
Examples of how the Board considered stakeholders’ interests in some of the key
decisions it took during 2023 are given below.
Our stakeholders and Section 172(1) Statement
Effective engagement with stakeholders is critical
to the success of the Group
Capital Markets Day
– Strategic Objectives
Share Buyback
In November 2023, the Company held
a Capital Markets Day to update investors
on the Company’s strategic progress and to
outline the Company’s near-term strategic
objectives: to outperform the Group’s
underlying markets; reach a return on
sales margin of at least 12.5% in 2026, with
a further cost improvement target of £30m;
and deliver strong cash generation with
a cumulative free cash flow target of at
least £400m between 2024 and 2026.
The Board considered the strategic
messaging for the Capital Markets Day,
reflecting on investors’ views, and the
catalysts to secure the sustainable success
of the Group. In setting these challenging
targets the Board was cognisant of the
need to focus on the ongoing financial
strength of the Group to the benefit of
all stakeholders. It was recognised that
further cost reductions, and investment in
production automation, would need to
be secured, to sustain this success.
In December 2023, the Board approved a
share buyback programme to purchase up to
£50 million in value of the Company’s shares,
with the shares acquired to be cancelled to
reduce the Company’s share capital.
The decision to launch the share buyback
was taken after a careful analysis of the
strength of the Company’s Balance Sheet,
and the ongoing longer-term financial
requirements of the business.
The Board considered the views of
the Company’s shareholders and
the impact that the purchase would have
on other investors, concluding that it
would send a positive public signal that the
Company was performing well and would
benefit all of the Group’s stakeholders.
A buyback was chosen over, for example,
a tender offer or special dividend, reflecting
the preference of shareholders and advice
from brokers, as a structure that equally
benefits all shareholders over a sustained
period. Over the course of the programme,
the buyback is expected to be modestly
EPS accretive and as such will enhance
TSR in the event that our trading valuation
multiple is maintained. The impact of the
buyback is recognised in the Company’s
budget and as such it is reflected in the
Group’s incentive targets.
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Our stakeholders
Given the diversity of the Group, engagement with most stakeholders takes place locally or is managed by specialist Group functions.
The Board maintains oversight of this engagement through its briefings on the dynamics of key relationships and stakeholder groups,
and also engages directly as appropriate.
The Group’s key stakeholder groups, reflecting those who have the biggest impact on the business, and our modes of engagement are
outlined in the tables below.
Why this stakeholder is important to us
Our response and engagement
How the Board engaged in 2023
Our people
With our decentralised management
model, the dedication and professionalism
of our people, their capacity to own their
roles and their drive for results are the
most significant contributors to Vesuvius’
success. We focus on the health and safety
of all our staff, and operate with a clear
set of CORE Values that are embedded
across the business.
We engage with our people, encouraging
and rewarding high performance to create
an environment where all can realise their
individual potential.
Issues that matter to them
–
Health and safety
–
Diversity and inclusion
–
Remuneration and recognition
–
International mobility
–
Management support
–
Development and retention
–
Career opportunities
–
Sustainability performance
We have a fundamental focus on health and
safety and the care of all employees
There is continuing dialogue between employees
and their managers, including the conduct of
regular performance reviews
We operate a competitive remuneration
and benefits strategy, emphasising
talent development with tailored
career-stage programmes
Living the Values and other award schemes
celebrate individual achievements in the
demonstration of our Values and processes
Our global communication mechanisms include
an intranet, global email communications
and a Vesuvius news app, alongside forums
such as local ‘town hall’ meetings
The Group operates local works councils,
recognises trade unions and has re-established
its European Works Council
Wide-ranging internal training is offered on
key job-related issues, with programmes such
as the Vesuvius University – HeaTt – and the
Foseco University
At every Board meeting the Board received
a report on the Group’s performance
against health and safety KPIs and
reviewed, in detail, the circumstances
of any Lost Time Injuries that had
been reported
The Board reviewed the specific HR
objectives for each Business Unit
and monitored the initiatives being
implemented to develop, retain and
motivate employees, and improve
succession planning
The Remuneration Committee was
informed of global salary budgets
and oversaw the Group’s share
compensation programmes
The Nomination Committee monitored the
Group’s progress on diversity objectives
and reviewed senior management
development and succession planning
Carla Bailo served as the designated
Non-executive Director responsible for
workforce engagement. She oversaw the
Board’s engagement activities, including
the programme of site visits undertaken
by Directors to meet Vesuvius employees
‘on the ground’ and to hear firsthand about
their experiences
The Board reviewed the results of the
I-Engage survey and the follow-up
actions proposed
The Board reviewed the nature and volume
of reports received by the confidential
Speak Up helpline
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Annual Report and Financial Statements 2023
70
Our stakeholders
continued
Why this stakeholder is important to us
Our response and engagement
How the Board engaged in 2023
Customers
Engaging with, and listening to, our
customers helps us to understand their
needs and identify opportunities and
challenges. Collaborating with our
customers enables us to drive value for
them, using our expertise to improve
the safety and efficiency of their
manufacturing processes, enhancing
their end-product quality and reducing
their costs.
Issues that matter to them
–
Health and safety
–
Production efficiency
–
Value generation
–
Product quality and performance
–
Innovation and provision
of solutions
–
Environmental performance
Our business model focuses on collaboration
with customers to provide customised solutions.
We employ highly skilled technical experts
who understand our customers’ needs, and can
identify opportunities and solutions for them
We help our customers improve the safety,
energy efficiency, yield and reliability of
their processes
We engage with customers on safety leadership
and support their training requirements
Our extensive R&D capability, deep product
knowledge and long-standing steel and
foundry process expertise enable us to partner
with customers to innovate and adapt to their
changing needs
We maintain senior-level dialogue with all key
customers, and establish customer relationships
on a global basis as required, complemented
by a broad local servicing capability
We provide technical customer training,
including operating the Foseco University,
and participate in industry forums and events
The Chief Executive maintained a regular
dialogue with a range of the Group’s key
customers, holding face-to-face meetings
with nine of them
The full Board visited a key customer in
Brazil, as part of its off-site Board meeting
The Board received a briefing on
the Group’s end-markets and the
dynamics of the Group’s relationships
with its customers, including information
on pricing discussions
At every Board meeting, the Board
reviewed information on the Group’s
performance against key manufacturing
quality targets and was provided
with updates on actions undertaken
to rectify any significant quality issues
or customer complaints
The Board received updates on the steps
being taken by the Group to respond to
customers’ ongoing requirements, and
the research and development, marketing
and new product launch strategies being
actioned to respond to these
Suppliers and contractors
Maintaining a flexible workforce through
the use of contractors and cost-effective
access to high-quality raw materials is
vital to our success. Our suppliers and
contractors are critical to our business.
Issues that matter to them
–
Operational performance
–
Responsible procurement
–
Trust and ethics
–
Payment practices
Vesuvius conducts regular visits to key suppliers
Senior-level relationships are built with all
large suppliers
All suppliers/brokers for major raw materials
have regular interaction with the Global
Purchasing Team
Our purchasing and supplier-facing staff receive
training on modern slavery to assist them in
identifying any issues
Dedicated category directors build long-term
relationships and product expertise for key
raw materials
Vesuvius operates a Sustainable Procurement
Policy which sets out the standards that suppliers
must adopt in order to supply the Group.
We conduct a rigorous and consistent supplier
accreditation procedure to ensure compliance
with these standards
The Board received a briefing on the
Group’s suppliers
The Board received updates on the
strategy for logistics and the sourcing
of raw materials together with key
concerns and performance issues
The Board monitored the Group’s
compliance activities and approved the
Group’s annual Modern Slavery Statement
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Governance
Financial statements
Why this stakeholder is important to us
Our response and engagement
How the Board engaged in 2023
Investors
The support of our equity and debt
investors, and continued access to funding,
is vital to the performance of our business.
We work to ensure that our investors and
lenders have a clear understanding of our
strategy, performance and objectives,
recognising that supportive investors are
more likely to provide the Company with
funds for expansion. We engage with
lenders to ensure that we have clear
knowledge and awareness of market
sensitivities and trends, and comply
with our contractual obligations.
Issues that matter to them
–
Shareholder value
–
Financial and operational
performance
–
Strategy and business development
–
Dividend and gearing policy
–
Sustainability strategy
and performance
–
Governance
–
Transparency and ethical behaviour
Vesuvius’ Investor Relations strategy is managed
by our Head of Investor Relations. She, along
with the Chief Financial Officer and Chief
Executive, hold regular meetings with key
and prospective investors
The Group Treasurer and CFO hold regular
meetings with key personnel from banks
and other lenders who provide the Group’s
debt funding. The Group Treasury function
also maintains an ongoing dialogue with key
relationship banks and other local banks in
the countries in which Vesuvius operates
The Group’s Annual Report provides an
overview of the Group’s activities. Regular
announcements and press releases are
published to provide updates on the
Group’s performance and progress
There is ongoing dialogue with the Company’s
analysts to address enquiries and promote
the business
In November 2023, the Group undertook
a Capital Markets Day where key strategic
messages were communicated to investors
The Chief Executive and Chief Financial
Officer held meetings with key and
prospective investors
The Board received copies of key analysts’
notes issued on the Company
The Chairman met with shareholders
and potential new investors as required
Ahead of the 2023 AGM, the Chair of the
Remuneration Committee contacted
the Group’s largest shareholders and
governance agencies, to invite their
feedback on proposed amendments
to the Group’s Remuneration Policy.
Extensive dialogue took place and
a number of meetings were held to
discuss the proposals
The Directors attended the AGM to
meet with shareholders
Communities
We are committed to maintaining
positive relationships with the communities
in which we operate. Our social
responsibility activities complement
our Values and we encourage our
employees to engage with communities
and groups local to our operations.
Issues that matter to them
–
Career opportunities
–
Operational performance
–
Transparency and ethical behaviour
–
Environmental performance
We provide work experience and internships
to local university students and school children
We maintain contact with universities to
identify local talent and our businesses
attend careers fairs and provide student
work placements and internships
Many of our sites sponsor local charitable activities
and participate in local volunteering initiatives
We maintain clear oversight and control of the
environmental impact of our production sites
We have a clear strategy for carbon reduction
in our manufacturing processes
The Board received biannual updates
on the Group’s sustainability activities
Environmental agencies
and organisations
Good environmental management is
aligned with our focus on cost optimisation,
operational excellence and long-term
business sustainability. We engage with
appropriate organisations to ensure
that we are complying with regulatory
requirements, and to publicise
our performance.
Issues that matter to them
–
Governance and transparency
–
Operational performance
–
Reporting on performance metrics
–
Environmental performance
Vesuvius is a signatory to the UN Global Compact
We publish a full Sustainability Report online
which can be accessed via Vesuvius’ website
We regularly engage with government agencies
who visit our sites and carry out inspections
We respond to environmental research as
part of our customers’ and suppliers’ due
diligence processes
We engage with rating agencies and respond to
environmental and social responsibility research
and questionnaires
The Board monitored progress on the
Group’s Sustainability KPIs and reviewed
longer-term plans on sustainability
initiatives, including the journey to net zero
The Board received biannual presentations
from the VP Sustainability on the Group’s
progress against its sustainability targets
and updates on its ESG ratings
The Board and Audit Committee
monitored the Group’s progress with
its TCFD compliance
Vesuvius plc
Annual Report and Financial Statements 2023
72
How we manage risk
The Board exercises oversight of the
Group’s principal risks and reviews the
way in which the Group manages those
risks. As part of this process the Board
(i) understands which individuals within the
business are responsible for managing
each principal risk; and (ii) reviews
and, where appropriate, updates,
the Group’s appetite for each principal
risk and assesses the adequacy of the
steps taken to mitigate them.
The Board takes overall responsibility for
establishing and maintaining a system
of risk management and internal control
and for reviewing its effectiveness.
The Group undertakes a continuous
process to identify and review risk and
this assessment undergoes a formal
review at half-year and at year-end.
The risks identified by the business are
compiled centrally to deliver a coordinated
picture of the Group’s key risks. These
risks are then reviewed by the Group
Executive Committee.
An integral part of the Group’s risk
management process is for each
Non-executive Director to contribute
their view on the principal risks facing the
Group, the risk appetite the Group should
have for each of these risks and what
emerging risks the Group might face in the
future. These contributions are overlaid
on the Group’s assessment of risks to build
a comprehensive analysis of existing and
emerging risks. In this way, the Directors’
views on each of the principal risks
and on emerging risks in general, are
independently gathered and integrated
into management discussions and
actions taken on risk.
The Group’s risk process covers both
financial and non-financial risks, and
considers the risks associated with the
impact of the Group’s activities on
employees, customers, suppliers, the
environment, local communities and
wider society.
The Directors undertake regular, individual
site visits and they believe this direct
engagement with employees is an
effective way to hear firsthand about
issues, concerns and potential risks.
More details on the site visits undertaken
in 2023 can be found on page 86.
During 2023, the Group conducted an
externally facilitated review of its current
and emerging risks. In person and remote
interviews were held with a wide range
of senior managers to ensure an
appropriate breadth of response.
A register of all material risks identified
was prepared, alongside detail on
emerging risk trends. This register
was reviewed by the Group Executive
Committee and the Audit Committee.
It provided senior management and the
Board with an additional level of detail
with which to assess the appropriateness
of the Group’s principal risks and
uncertainties, and enabled a more
granular review of the processes and
mitigations in place for these risks.
Changes to risk in 2023
We detail below changes during 2023
to the scale or nature of risks facing the
Group. As in previous years, certain
aspects of the Group’s principal risks
materialised, noting that in each case
the business impact was limited by the
mitigations already in place and by the
Group’s risk management processes.
We also detail the emerging risks facing
the Group to which we remain vigilant.
Geopolitical tension
Increasing geopolitical tensions during
the year adversely impacted two of our
principal risks: business interruption and
the regulatory environment. The war in
Ukraine continued to promote increased
regulatory activity in the UK, EU and
USA, which continued to impact the
business and was closely monitored
to ensure that we reflected these
new developments in our business.
Additionally, the conflict in the Middle East
(including the recent impact on shipping
in the Red Sea) increased the risk of an
interruption to our supply chain. This
impacted the cost and timing of certain
inbound and outbound freight and we
worked closely with our intermediaries
and insurers to understand and minimise
the impact on our business.
During the year we also paid close
attention to wider geopolitical dynamics,
as these could push certain of the countries
in which we operate to adopt a more
protectionist approach. We capture
this in our principal risk of protectionism
and globalisation.
Cyber
Cyber security remains a critical
component of our business interruption
risk. As previously disclosed, in February
2023, the Group was the subject of a cyber
incident involving unauthorised access to
our IT systems. We shut down our systems
on a precautionary basis and our sites
implemented their business continuity
plans; as a result we incurred only a
minimal level of business interruption.
In order to mitigate further the business
interruption risk arising from this
constantly evolving threat we have
accelerated the implementation of our
cyber security strategy and in 2023,
we upgraded our third-party access
solutions, further developed our network
infrastructure and implemented additional
layers of protection for our systems.
During the year we worked with leading
cyber security experts to enhance our
systems and expanded the scale and
scope of our security verifications. We also
conducted a range of additional tests
and simulations to improve the control
environment. We continued to work
on cyber security awareness through
ongoing employee training and conducted
additional training during the year to
ensure that the correct behaviours in terms
of cyber risk are clearly understood.
Recruitment
Post pandemic challenges remain in
many of our labour markets, including the
ability to recruit high calibre individuals in
a competitive environment, particularly
for manufacturing roles. We also continue
to see a reduction in the promotion of
material science teaching within our
developed markets; this may further
reduce the availability of suitably
qualified candidates going forward.
Risk, viability and going concern
The Group undertakes a continuous process to review and
understand existing and emerging risks which might impact
the Group’s long-term performance.
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Governance
Financial statements
End-markets
The underlying strength of Vesuvius’
end-markets was discussed extensively
at our recent Capital Markets Day.
Whilst short-term volatility in our markets
is likely to continue, we believe that
our end-markets of Steel and Foundry
are structurally set to grow in the longer
term. The Group is well placed to manage
short-term impacts with its flexible
manufacturing footprint, geographically
diversified revenue streams and strong
financial position.
Emerging risks
We are focused on the increased use of
artificial intelligence as part of our wider
strategy on digitalisation, to ensure we
leverage the benefits to the fullest extent
whilst minimising any adverse impact.
As detailed at our Capital Markets Day,
we believe that future growth will come
from outside our traditional developed
markets. We will continue to focus on this
emerging trend, investing in markets
with high future growth and ensuring
that we remain sufficiently dynamic and
responsive to take advantage of future
growth opportunities.
Consumers, employees and other
stakeholders in many countries are
increasingly focused on the impact of
businesses on society and the environment.
With this there is a growing regulatory
demand on businesses for transparency
in this area. Vesuvius already has a set
of broad Environmental, Social and
Governance (ESG) commitments and has
long been focused on driving efficiency
in our customers’ processes, with our
products now clearly seen as having
environmental/climate benefits. However,
the reporting obligations in this area and
the increasing pressure on the need for
external assurance in these areas, are
expected to increase in both cost and
complexity in the coming years.
Further information on the Group’s
ESG commitments can be found in
the Non-Financial and Sustainability
Information Statement on pages 32-67.
Finally, we committed at the end of 2023
to make annualised cost savings of £30m
by 2026 and we will remain disciplined to
ensure this saving is achieved. Part of
this efficiency saving is enabled by the
ongoing implementation of a new
Enterprise Resource Planning (ERP) system
in certain countries. The Group is aware
of the challenges associated with an ERP
implementation and will manage these
closely to minimise the risk of business
interruption and cost overruns and to
ensure that the operational efficiencies
envisaged are delivered on a timely basis.
All of these issues could represent
disruptors to our business. We remain
focused on each of them through our risk
identification and management processes
as well as on the management of any other
new risks that emerge during 2024.
Principal risks
In 2023, the Board did not identify any new
principal risks or any material changes to
the Group’s previously identified principal
risks and uncertainties. These principal
risks and uncertainties are set out on
pages 77 and 78 and are those the Board
considers to be most relevant in terms of
their potential impact on the Group
achieving its strategic objectives. Each
principal risk could materially affect the
Group, its businesses, future operations
and financial condition, and could cause
actual results to differ materially from
expected or historical results. Principal
risks are not the only ones that the Group
faces or will face. Some risks are not yet
known and some currently not deemed
to be material could become so.
Cyber security
The processes and controls to manage the
constantly evolving cyber security threat
are a significant area of focus for the
Group. Members of the GEC, Group IT
and senior management meet regularly
to manage operational cyber risks. These
risks were thrown into sharp focus for the
Group in 2023, as a result of the cyber
attack we suffered in February.
The Board oversees the Group’s control
systems for managing cyber risk and
together with the Audit Committee
receives regular updates on the Group’s
activities in this respect.
Cyber risks are integrated within the
Group’s risk management processes and
form part of its Business Continuity Plan
(BCP). The Group also maintains a Disaster
Recovery Plan to address any network,
data centre or IT infrastructure issue. The
Group’s Incident Handling and Response
Policy ensures we maintain appropriate
visibility of all network infrastructure.
The Group takes a holistic approach to
addressing cyber challenges, focusing
on improving our IT infrastructure,
including our OT environments, as well as
our IT procedures and data governance.
We run regular training programmes on
cyber security and conduct regular cyber
security risk assessments, including
scenario analysis to mitigate the business
impact of any downtime, and increase
awareness of social engineering fraud
and system access through poor security
behaviour. We also perform in-house
and externally conducted vulnerability/
penetrative testing, comparing the results
with industry benchmarks to improve our
processes and undertake an ongoing
external assessment of our cyber security
resilience and maturity.
Vesuvius plc
Annual Report and Financial Statements 2023
74
Climate change
The Group’s risk management processes
consider the potential impact of
climate-related risks. The Group does
not regard climate change itself to
represent a material stand-alone risk
to the Group’s operations.
Whilst a significant proportion of the
Group’s revenue is generated from steel
manufacture and automotive castings,
industries that are under transition
as a result of the focus on improving
environmental performance, we believe
these changes will, overall, be positive for
the Group. The Group’s business strategy
is based on helping our customers improve
their manufacturing efficiency and the
quality of their products, thereby reducing
their climate impact. We also envisage
benefits for the Group from the
acceleration of the energy transition,
as this will create continued demand for
the high-quality steel produced using
Vesuvius’ products and solutions.
One of the Group’s principal risks is
Environmental, Social and Governance
criteria. This captures our sustainability
performance and our customers’
sustainability transition and recognises the
impact Vesuvius can have on reducing the
environmental impact of our customers.
The Group recognises that climate change
could present uncertainty for the Group
in terms of increased regulation and the
evolution of the geographical distribution
of our customer base. Further information
about the Group’s consideration of
climate-related risks and opportunities
can be found in the Our planet section
of the Non-Financial and Sustainability
Information Statement on pages 39-55.
Risk mitigation
Each principal risk is owned by specific
members of senior management who
actively manage the risk as well as
contributing to the analysis of its likelihood
and impact, and continually monitoring
the process for mitigation. This analysis is
reported to the Board. Risks are analysed
in the context of our business structure
which protects against certain of our
principal risks with diverse currencies,
a widespread customer base and local
production matching the diversity of
our markets. Additionally, we mitigate
risk through employee training and our
contractual terms. Our processes are not
designed to eliminate risk, but to identify
our principal risks and to reduce them
to a reasonable level in the context of
delivering the Group’s strategy.
Business continuity and insurance
In partnership with risk management
advisers and our insurers, we seek to
identify the most effective means of
reducing or eliminating insurable risks,
through risk management and the
placing of insurance cover.
Our insurer property loss control
programme is based upon insurer loss
modelling and focuses on insured losses.
The insurer’s loss control engineers
undertake a series of on-site inspections
focused on machinery breakdown, fire,
natural catastrophe and other property
damage and business interruption
risks. These surveys yield a series of
loss-reduction recommendations. The
execution of these recommendations
is agreed with site management and
followed through to completion.
In parallel, Vesuvius’ own loss
management programme focuses
on strategic sites and sites that are
not routinely covered by the insurer
programme. Assisted by an independent
consultant, we undertake property loss
control and business continuity surveys
using Vesuvius’ bespoke risk and exposure-
based protocol. These reports yield further
risk reduction recommendations, and
improvement actions are agreed and
completed by site management.
To support the Group’s loss control
activities, risk management workshops
are conducted covering loss prevention,
emergency planning, crisis management
and business recovery. Business continuity
planning is also conducted to ensure there
is sufficient resilience in the Group’s
manufacturing network to address
individual supply interruptions.
Internal control
The Group’s internal control system
is designed to manage, rather than
eliminate, the risks facing the Group and
safeguard its assets. No system of internal
control can provide absolute assurance
against material misstatement or loss.
The Group’s system is designed to provide
the Directors with reasonable assurance
that problems are identified on a timely
basis and are dealt with appropriately.
The Audit Committee assists the Board
in reviewing the effectiveness of the
Group’s system of internal control,
including financial, operational
and compliance controls, and risk
management systems. The key features
of the Group’s system of internal control
are set out in the table opposite.
Reviewing the effectiveness of risk
management and internal control
The internal control system covers the
Group as a whole and is monitored and
supported by the Group’s Internal Audit
function, which conducts reviews of
Vesuvius’ businesses and reports
objectively both on the adequacy and
effectiveness of the system of internal
control and on those businesses’
compliance with Group policies and
procedures. The Audit Committee receives
reports from the Group Head of Internal
Audit and reports to the Board on
the results of its review.
The Group also conducts a self-
certification exercise by which senior
financial, operational and functional
management certify the compliance,
throughout the year, of the areas under
their responsibility with the Group’s policies
and procedures and highlight any material
issues that have occurred during the year.
As part of the Board’s process for
reviewing the effectiveness of the system
of internal control, it delegates certain
matters to the Audit Committee. Following
the Audit Committee’s review of internal
financial controls and of the processes
covering other controls, the Board
annually evaluates the results of the
internal control and risk management
procedures conducted by senior
management. Since the date of this
evaluation, there have been no significant
changes in internal controls or other
matters identified which could
significantly affect them.
In accordance with the provisions of the
UK Corporate Governance Code, the
Directors confirm that they have carried
out a robust assessment of the principal
and emerging risks facing the Company,
including those that threaten its business
model, future performance, solvency or
liquidity. They have also reviewed the
effectiveness of the Group’s system of
internal control and confirm that the
necessary actions have been taken
to remedy any control weaknesses
identified during the year and to the
date of this report.
Further detail regarding the Audit
Committee’s review of the effectiveness of
the Group’s risk management and internal
control systems is contained in the Audit
Committee Report on pages 93-101.
Risk, viability and going concern
continued
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Strategic report
Governance
Financial statements
Key features of risk management and internal control
Strategy and
financial reporting
Comprehensive strategic planning and forecasting process
Annual budget approved by the Board
Monthly operating financial information reported against budget
Key trends and variances analysed and action taken as appropriate
Vesuvius GAAP
Accounting policies and procedures formulated and disseminated to all Group operations
Covers the application of accounting standards, the maintenance of accounting records
and key financial control procedures
Operational controls
Operating companies and corporate offices maintain internal controls and procedures
appropriate to their structure and business environment
Compliance with Group policies on items such as authorisation of capital expenditure,
treasury transactions, the management of intellectual property and legal/regulatory issues
Use of common accounting policies and procedures, and financial reporting software
used in financial reporting and consolidation
Significant financing and investment decisions reserved to the Board
Monitoring by the Board of policy and control mechanisms for managing treasury risk
Clearly delegated authority for capital expenditure, purchasing, customer contracts
and hiring
Health and safety audits
Board review of product quality metrics
Risk assessment
and management
Continuous process for identifying, evaluating and managing any significant risks
Risk management process designed to identify the key risks facing each business
Reports made to the Board on how those risks are managed
Top-down risk identification undertaken at Group Executive Committee and
Board meetings
Board review of insurance and other measures used in managing risks across the Group
The Board is notified of major issues and makes an annual assessment of whether risks
have changed
Ongoing assurance processes by the legal function and Internal Audit including the
annual self-certification process
Externally supported Speak Up whistleblowing line
Internal Audit
Reviews Vesuvius’ businesses and reports on the adequacy and effectiveness of their
systems of internal control and compliance with Group policies and procedures
Agrees action plans for the resolution of any improvement actions identified by their audits,
and monitors with local management and the Business Unit Presidents, progress through
until completion
Reports to the Audit Committee on the results of each audit and provides regular updates
on high-priority action items
The Audit Committee discusses the key risks identified by Internal Audit
Vesuvius plc
Annual Report and Financial Statements 2023
76
Viability Statement
In accordance with the UK Corporate
Governance Code, the Directors have
assessed the viability of the Group over
a three-year period to 31 December 2026,
taking into account the Group’s current
position and the potential impact of the
principal risks and uncertainties. The
Directors have determined that three
years is an appropriate period over which
to provide the Viability Statement because
this is the Company’s planning cycle and
it is sufficiently funded by financing
facilities with average maturity terms
of approximately four years. The projected
cash flows for the next three years have
been based on the latest Board-approved
budgets and Capital Markets Day
financial projections.
In making this statement, the Directors
have carried out a robust assessment
of the principal risks that may threaten
the business model, future performance,
solvency and liquidity of the Group.
This is embodied in the annual review of
a three-year business plan which includes
a review of sensitivity to ‘business as usual’
risks, such as profit growth and working
capital variances, severe but plausible
events and the impact these could have on
the Group’s debt covenants and available
liquidity. The results take account of the
availability and likely effectiveness of the
mitigating actions that could be taken to
avoid or reduce the impact or occurrence
of the underlying risks. Whilst the review
has considered all the principal risks
identified by the Group, the following were
selected for enhanced stress testing: an
unexpected global supply chain disruption
leading to increased lead times and
business interruption due to the unplanned
closure of a key production facility.
The Group’s prudent balance sheet
management, flexible cost base able to
react quickly to end-market conditions,
access to long-term capital at reasonable
cost and geographically diversified
international businesses leave it well
placed to manage these principal risks.
In performing the stress testing, certain
assumptions were made, including that
supply chain disruption would lead to
a need for increased inventory levels over
multiple years; and the loss of a production
facility would, after the recovery of
production capacity, result in certain
sustained customer losses. Any loan facility
requiring refinancing was considered
to be renewed ahead of its maturity date.
The Group’s committed syndicated bank
facility of £385.0m, of which £333.4m was
undrawn at the end of 2023, matures in
August 2026 (see note 24.2(d) to the
Group Financial Statements). Under the
enhanced stress testing, a potential breach
of a covenant would only occur in the event
of an unforeseen reduction in revenue of
greater than 27%, without consideration
of any remedial factors such as capital
expenditure reduction. Accordingly,
the Directors confirm that they have
a reasonable expectation that the Group
will be able to continue in operation and
meet its liabilities as they fall due over the
three-year period to 31 December 2026.
Furthermore, the Board believes that the
Group continues to be well positioned
for success in the longer term because
of our exposure to long-term growing
end-markets; our market-leading position
that is supported by ongoing investment
in innovation and R&D; our strong
degree of customer intimacy with around
a third of our employees working at
customer facilities; and the focus we
have on building quality teams with
clear organisational responsibility.
Going concern statement
The Group’s available committed liquidity
stood at £488m at year-end 2023, down
from £494m at year-end 2022. The
Directors have prepared cash flow
forecasts for the Group for the period
to 30 June 2025. These forecasts reflect
an assessment of current and future
end-market conditions, which are
expected to be challenging in 2024
and to recover thereafter, (as set out in
the ‘outlook’ statement in the Chief
Executive’s Strategic Review in this
document), and their impact on the
Group’s future trading performance.
The Directors have also considered
a severe but plausible downside scenario,
based on an assumed volume decline
and loss of profitability over the period.
This downside scenario assumes:
–
A reduction in trading profit by
35%, equating to £70m in both 2024
and 2025 relative to 2023. This is
through an assumed decline in revenue
of 4% and a reduction in the return on
sales margin by 3.3%, from 10.4% to
7.1%; and
–
Working capital as a percentage
of sales deteriorating by 0.6%
compared to 2023.
The Group has two covenants; net debt/
EBITDA (under 3.25x) and an interest
cover requirement of at least 4.0x. In this
downside scenario, the forecasts show
that the Group’s maximum net debt/
EBITDA (pre-IFRS 16 in line with the
covenant calculation) does not exceed
1.6x, compared to a leverage covenant
of 3.25x, and the minimum interest cover
reached is 18x compared to a covenant
minimum of 4x.
The forecasts show that the Group
will be able to operate within the current
committed debt facilities and show
continued compliance with the Company’s
financial covenants. On the basis of the
exercise described above and the Group’s
available committed debt facilities, the
Directors consider that the Group and the
Company have adequate resources to
continue in operational existence for a
period of at least 12 months from the date
of signing of these financial statements
and that there is no material uncertainty
in respect of going concern. Accordingly,
they continue to adopt a going concern
basis in preparing the financial statements
of the Group and the Company.
Risk, viability and going concern
continued
Viability process
Identify
Viability time horizon and
risk analysis framework
Assess
Principal risks
and stress scenarios
Model
Viability against risk
scenarios, examining
probabilities and impacts
Report
See Viability Statement
77
Strategic report
Governance
Financial statements
Risk
Potential impact
Mitigation
End-market risks
Vesuvius suffers an unplanned
drop in demand, revenue and/or
margin because of market
volatility beyond its control.
Strategic Value
alignment
Unplanned drop in demand and/or
revenue due to reduced production
by our customers
Margin reduction
Customer failure leading to increased
bad debts
Loss of market share to competition
Cost pressures at customers leading
to use of cheaper solutions
Geographic diversification of revenues
Product innovation and service offerings securing long-term
revenue streams and maintaining performance differential
Increase in service and product lines by the development of the
Technical Services offering
R&D includes assessment of emerging technologies
Manufacturing capacity rationalisation and flexible cost base
Diversified customer base: no customer is greater than 10% of revenue
Robust credit and working capital control to mitigate the risk of
default by counterparties
Protectionism and
globalisation
The Vesuvius business model
cannot adapt or respond
quickly enough to threats from
protectionism and globalisation.
Strategic Value
alignment
Restricted access to market due to
enforced preference of local suppliers
Increased barriers to entry for new
businesses or expansion
Increased costs from import duties,
taxation or tariffs
Loss of market share
Highly diversified manufacturing footprint with manufacturing
sites located in 26 countries
Strong local management with delegated authority to run
their businesses and manage customer relationships
Cost flexibility
Tax risk management and control framework together with
a strong control of inter-company trading
Product quality failure
Vesuvius staff/contractors are
injured at work or customers, staff
or third parties suffer physical injury
or financial loss because of failures
in Vesuvius products.
Strategic Value
alignment
Injury to staff and contractors
Product or application failures lead
to adverse financial impact or loss of
reputation as technology leader
Incident at customer plant causes
manufacturing downtime or damage
to infrastructure
Customer claims from product
quality issues
Quality management programmes including stringent
quality control standards, monitoring and reporting
Experienced technical staff knowledgeable in the application
of our products and technology
Targeted global insurance programme
Experienced internal legal function overseeing third-party contracting
Complex and changing
regulatory environment
Vesuvius experiences a
contracting customer base or
increased transaction and
administrative costs due to
compliance with changing
regulatory requirements.
Strategic Value
alignment
Revenue reduction from reduced
end-market access
Disruption of supply chain and
route to market
Increased internal control processes
Increased frequency of
regulatory investigations
Reputational damage
Trade restrictions
Compliance programmes and training across the Group
Independent Internal Audit function
Experienced internal legal function including dedicated
compliance specialists
Global procurement category management of strategic
raw materials
Failure to secure
innovation
Vesuvius fails to achieve
continuous improvement in its
products, systems and services.
Strategic Value
alignment
Product substitution by customers
Increased competitive pressure
through lack of differentiation of
Vesuvius offering
Commoditisation of product portfolio
through lack of development
Lack of response to changing
customer needs
Loss of intellectual property protection
Enduring and significant investment in R&D,
with market-leading research
A shared strategy for innovation throughout the Group,
deployed via our R&D centres
Stage-gate process from innovation to commercialisation to
foster innovation and increase alignment with strategy
Programme of manufacturing and process excellence
Quality programme, focused on quality and consistency
Stringent intellectual property registration and defence
Principal risks and uncertainties
Strategic Value
alignment
Safety
Better environments
and outcomes for
Vesuvius staff
and customers
Quality
Optimised products
driving better steel,
and better castings
Efficiency
Cheaper casting and
steel through reduction
of input costs
Sustainability
Less energy usage and
fewer CO
2
emissions in
our processes and our
customers’ processes
Rewarding careers
We encourage
and reward high
performance to create
an environment where
all can realise their
individual potential
Return for investors
Optimised pricing and
market share gains
driving improved
profitability
See more about
Our business model
on
p20 and 21
Vesuvius plc
Annual Report and Financial Statements 2023
78
Risk
Potential impact
Mitigation
Business interruption
Vesuvius loses production
capacity or experiences supply
chain disruption due to physical
site damage (accident, fire,
natural disaster, terrorism),
or other events such as industrial
action, cyber attack or global
health crises.
Strategic Value
alignment
Loss/closure of a major plant
temporarily or permanently impairing
our ability to serve our customers
Damage to or restriction in our
ability to use assets
Denial of access to critical systems or
control processes
Disruption of manufacturing processes
Inability to source critical
raw materials
Loss of data, leading to confidentiality,
regulatory and reputational issues
Diversified manufacturing footprint
Disaster recovery planning
Business continuity planning with strategic maintenance of
excess capacity
Physical and IT access controls, security systems and training
Cyber risks integrated into wider risk management structure
Well-established global insurance programme
Group-wide safety management programmes
Dual sourcing strategy and development of substitutes
People, culture
and performance
Vesuvius is unable to attract and
retain the right calibre of staff,
fails to instil an appropriate
culture or fails to embed the
right systems to drive personal
performance in pursuit of the
Group’s long-term growth.
Strategic Value
alignment
Organisational culture of high
performance is not achieved
Staff turnover in growing economies
and regions
Stagnation of ideas and
development opportunities
Loss of expertise and critical
business knowledge
Reduced management pipeline for
succession to senior positions
Internal focus on talent development and training,
with tailored career-stage programmes and clear
performance management strategies
Contacts with universities to identify and develop talent
Career path planning and global opportunities for
high-potential staff
Internal programmes for the structured transfer of technical
and other knowledge
Clearly defined Values underpin business culture
Group focus on enhancing gender diversity
Health and safety
Vesuvius staff or contractors are
injured at work or suffer mental
health issues because of failures in
Vesuvius’ operations, equipment,
policies or processes.
Strategic Value
alignment
Injury to staff and contractors
Health and safety breaches
Lack of staff availability and
operational downtime
Inability to attract and retain
the necessary workforce
Reputational damage
Active safety programmes, with ongoing wide-ranging
monitoring and safety training
Independent safety audit team
Quality management programmes including stringent
manufacturing process control standards, monitoring
and reporting
Environmental, Social and
Governance criteria
Vesuvius fails to capitalise on the
opportunity to help its customers
significantly reduce their carbon
emissions as environmental
pressure grows on the steel
industry or Vesuvius fails to meet
the expectations of its various
stakeholders including employees
and investors.
Strategic Value
alignment
Loss of opportunity to grow sales
Loss of opportunity to increase margin
Loss of stakeholder confidence
including investors
Reputational damage
Development and implementation of a new Sustainability
initiative, which includes stretching targets focused on reducing
the Group’s energy usage, CO
2
emissions and waste, and
increasing recycled materials
R&D focus on products that assist customers to reduce carbon
emissions and improve their own sustainability measures
Skilled technical sales force to develop efficient solutions for
our customers
Globally disseminated Code of Conduct sets out standards of
conduct expected and Anti-bribery and Corruption Policy adopted
with zero tolerance regarding bribery and corruption
Internal Speak Up mechanisms to allow reporting of concerns
Extensive use of due diligence to assess existing and potential
business partners and customers
Principal risks and uncertainties
continued
The Strategic Report set out on pages
1-78 contains a fair review of our
businesses, strategy and business
model, and the associated principal
risks and uncertainties. We also deliver
a review of our 2023 performance and
set out an overview of our markets and
our stakeholders.
Details of our principles, and our people
and community engagement, together
with our focus on safety, are also
contained in the Strategic Report.
Approved by the Board on 28 February
2024 and signed on its behalf by
Patrick André
Chief Executive
Governance
80
Board of Directors
82
Group Executive Committee
83
Corporate Governance Statement
83
Chairman’s governance letter
84
Board Report
93
Audit Committee
102
Nomination Committee
108
Directors’ Remuneration Report
108
Remuneration overview
114
2023 Remuneration Policy
122
Annual Report on Directors’ Remuneration
136
Directors’ Report
143
Statement of Directors’ Responsibilities
144
Independent Auditors’ Report
Strategic report
Governance
Financial statements
79
Vesuvius plc
Annual Report and Financial Statements 2023
80
Carl-Peter Forster
Chairman
Appointed to the Board 1 November 2022,
and as Chairman on 1 December 2022
One year on the Board
–
Extensive board experience as Chairman
and Chief Executive within international
listed companies
–
Proven strategic and operational skills
gained in complex multinational industrial
goods and engineering businesses
–
Global commercial and engineering
experience, including expertise in operational
excellence and lean manufacturing
Current external appointments
Carl-Peter is Chairman of Chemring Group plc
and Senior Independent Director at Babcock
International Group plc. He is also Chairman of
StoreDot, Director of The Mobility House AG,
Gordon Murray Group Ltd, Envisics Ltd,
Lead Equities Fund Management GmbH
and associated companies and serves
as a Director on the advisory board of
Kinexon GmbH.
Career experience
Carl-Peter has spent the majority of his career
holding senior leadership positions in some of
the world’s largest automotive manufacturers,
including BMW, General Motors and Tata
Motors (including Jaguar Land Rover). Since
he stepped down from Tata Motors in 2011,
he has served as a director on a wide variety
of public and private company boards, including
IMI plc from 2012–2021, Rexam plc from
2014-2016 and Geely Automotive Holdings,
Hong Kong, as well as Volvo Cars Group from
2013-2019. Until recently he also served on the
board of LeddarTech, Inc.
Patrick André
Chief Executive
Appointed to the Board 1 September 2017
Six years on the Board
–
Global career serving the steel industry
–
Strong background in strategic development
and implementation
–
Customer focus and proven record of
delivery, with strong commercial acumen
–
Drive and energy in promoting his
strategic vision
Current external appointments
None.
Career experience
Patrick joined the Group as President of the
Vesuvius Flow Control Business Unit in 2016,
until his appointment as Chief Executive in
September 2017.
Before joining the Group, Patrick served as
Executive Vice President Strategic Growth,
CEO Europe and CEO for Asia, CIS and Africa
for Lhoist company, the world leader in lime
production. Prior to this, he was CEO of the
Nickel division, then CEO of the Manganese
division of ERAMET group, a global
manufacturer of nickel and special alloys.
N
Key to Board Committee membership
A
Audit Committee
N
Nomination Committee
R
Remuneration Committee
Committee Chair
Engagement with the workforce
E
Carla Bailo serves as the designated
Non-executive Director responsible
for workforce engagement.
*
Cevian Capital is a shareholder of Vesuvius plc
and, at 28 February 2024, held 21.3% of
Vesuvius’ issued share capital.
Changes to the Board during the year
The Directors named were in office during the
year and up to the date of this Annual Report,
with the exception of:
–
Carla Bailo who joined the Board as a
Non-executive Director on 1 February 2023
–
Guy Young who served as Chief Financial
Officer from 1 November 2015 until he
left the Group on 17 February 2023
–
Mark Collis who joined the Board as
Chief Financial Officer on 1 April 2023
–
Jane Hinkley who served as a Non-executive
Director until 18 May 2023
–
Robert MacLeod who joined the Board as a
Non-executive Director on 1 September 2023
Richard Sykes (formerly Group Vice President,
Business Development) served as Interim Chief
Financial Officer from 17 February to 31 March
2023 but was not a Director of Vesuvius plc.
Mark Collis
Chief Financial Officer
Appointed to the Board 1 April 2023
Ten months on the Board
–
Wealth of international operational
experience and leadership skills
–
Complements the strong performance-
oriented culture and the skills of the
management team
–
Respected leader for the finance and
IT functions
Current external appointments
None.
Career experience
Mark was previously Chief Financial Officer of
the Operations business of John Wood Group
PLC. He has over 20 years of senior financial
experience in a number of international
businesses including Amec Foster Wheeler
plc and Expro International Group. Mark is a
Chartered Accountant qualified with the ICAEW.
Board of Directors
Proposed appointment of Eva Lindqvist
It is proposed that Eva Lindqvist be appointed
to the Board as a Non-executive Director with
effect from the close of the 2024 AGM, subject
to her election being approved by shareholders
at the AGM. Subject to her election, Eva will
succeed Douglas Hurt as Senior Independent
Director at the close of the 2024 AGM and she
will also join the Company’s Audit, Remuneration
and Nomination Committees. Eva’s biography
and details of her proposed appointment can
be found in the Notice of AGM.
Current external appointments
Eva currently supports several small companies
and non-profit organisations, and serves as
a Non-executive Director of CLS Holdings plc,
Greencoat Renewables plc and Tele2 AB.
She will step down as a Non-executive Director
and Chair of the Remuneration Committee of
Keller Group plc at their AGM in May 2024.
Career experience
Eva is an engineer with more than 35 years´
experience in global industrial and service
businesses. She spent 20 years with Ericsson,
focusing on strategy, production development
and international sales. In 2000 she joined the
Scandinavian telecommunications company
Telia. She was Senior Vice President of Telia
Equity before becoming Chief Executive of
TeliaSonera International Carrier in 2002.
Eva has served on the board of a range of listed
companies including Acast AB, Bodycote plc,
Mr Green & Co AB, Sweco AB and Tarsier AB.
She is a member of the Royal Swedish Academy
of Engineering Sciences.
81
Strategic report
Governance
Financial statements
A
N
R
Douglas Hurt
Senior Independent Director (SID)
Appointed to the Board 2 April 2015 and will
step down from the Board at the conclusion
of the AGM on 15 May 2024
Eight years on the Board
–
Qualified Chartered Accountant, with
recent and relevant financial experience
–
Highly knowledgeable in operational and
corporate financial matters, with significant
US and European experience
–
Proven management and leadership skills
Current external appointments
Non-executive Director and Chair of the
Audit Committees of Hikma Pharmaceuticals
PLC and the British Standards Institution.
Career experience
Douglas was Finance Director of IMI plc, a UK
listed company, until 2015. He spent 23 years at
GlaxoSmithKline plc where he held senior finance
and general management positions. Douglas
served as SID and Chair of the Audit Committees
of Tate & Lyle plc and Countryside Partnerships
PLC until 2019 and July 2022 respectively,
and he also served as Chairman of Countryside
Partnerships PLC from July to November
2022 when it merged with Vistry Group.
Friederike Helfer
Non-executive Director
Appointed to the Board 4 December 2019
Four years on the Board
–
An experienced strategist, with strong
analytic capability
–
Commercial acumen and a strong track
record of working with a portfolio of
companies to identify scope for operational
and strategic improvement
Current external appointments
Partner of Cevian Capital.
*
Career experience
Friederike is a Partner of Cevian Capital.
She joined Cevian in 2008 and served as
a Non-executive Director on the boards of
thyssenkrupp AG from 2020 to 2023 and
Valmet Oyj from 2013 to 2017. These are both
companies in which Cevian was also invested.
Prior to joining Cevian, Friederike worked at
McKinsey & Company. She is a CFA Charterholder.
N
Kath Durrant
Non-executive Independent Director
Appointed to the Board 1 December 2020
Three years on the Board
–
30 years’ experience of people management
–
Strong operational and strategic track record,
gained working at a number of large global
manufacturing companies
–
Experienced UK governance professional
Current external appointments
Senior Independent Director and Chair of the
Remuneration Committee of SIG plc, and
a Non-executive Director of Essentra plc.
Career experience
Kath held various operational and specialist HR
roles at GlaxoSmithKline plc and AstraZeneca
plc, and was Group HR Director of Rolls-Royce
plc. She was most recently Group HR Director
of Ferguson plc and Chief HR Officer of CRH plc.
Kath served as a Non-executive Director and
Chair of the Remuneration Committee of
Renishaw plc from 2015 to 2018 and as
a Non-executive Director and Chair of the
Remuneration Committee of Calisen plc
from 2020 to 2021.
A
N
R
Dinggui Gao
Non-executive Independent Director
Appointed to the Board 1 April 2021
Two years on the Board
–
Strong operational experience driving
performance in multinational companies
–
Proven track record of leadership and
international commercial experience
–
Strong focus on technology and in-depth
knowledge of Asian markets
Current external appointments
Non-executive Director Intramco Europe
B.V and Operating Partner CITIC Capital
Holdings Ltd.
Career experience
Dinggui has 40 years of operational experience
having worked in multinational companies
including Bosch, Honeywell, Eagle Ottawa and
Sandvik AB. Between 2017 and 2021 he was
Managing Director, China of Formel D Group,
the German global service provider to the
automotive and components industry.
A
N
R
Robert MacLeod
Non-executive Independent Director
Appointed to the Board 1 September 2023 and
as Chair of the Audit Committee from AGM 2024
Five months on the Board
–
Qualified Chartered Accountant, with significant
experience in large multinational companies
–
Knowledgeable corporate and operational
finance professional
–
Wealth of general management and financial
leadership experience
Current external appointments
Non-executive Director and Chair of the
Remuneration Committee of RELX PLC and
Non-executive Member at The Defence
Science and Technology Laboratory.
Career experience
Robert served as CEO of Johnson Matthey PLC
from 2014 to 2022 and Group Finance Director
from 2009 to 2014. Prior to this he worked at WS
Atkins PLC, latterly as Group Finance Director.
A
N
R
Carla Bailo
Non-executive Independent Director
Appointed to the Board 1 February 2023
One year on the Board
–
Strong engineering and product
management experience
–
Research and development background
gained during more than 40 years working
in the automotive industry
–
International experience and extensive
knowledge of US markets
Current external appointments
Non-executive Director of Advance Auto Parts,
Inc. and SM Energy Company.
Career experience
Carla was President and CEO of the Center
for Automotive Research (CAR) in the USA for
five years, until she stepped down in September
2022. Prior to joining CAR, Carla was Assistant
Vice President for Mobility Research and
Business Development at The Ohio State
University. She spent 25 years at the Nissan
Motor Company, culminating as Senior VP,
Research and Development, Americas and
Total Customer Satisfaction. Carla served
as Non-executive director of EVe Mobility
Acquisition Corp. until 21 February 2024.
A
N
R
E
Vesuvius plc
Annual Report and Financial Statements 2023
82
Group Executive Committee
Patrick André
Chief Executive
Eight years with the Group
For biographical details, please
see the Board of Directors on
page 80.
Agnieszka Tomczak
Chief HR Officer
Five years with the Group
Appointed as Chief HR Officer
in October 2018. Agnieszka has
over 25 years of senior leadership
experience in multinational
companies spanning various
business sectors and industries.
Prior to joining Vesuvius, she
spent 12 years at ICI, which
was subsequently acquired
by AkzoNobel, in regional
and global HR roles.
Agnieszka is based in London, UK.
Henry Knowles
General Counsel and
Company Secretary
Ten years with the Group
Appointed as General Counsel and
Company Secretary in September
2013. Prior to joining Vesuvius,
Henry spent eight years at Hikma
Pharmaceuticals PLC, a generic
pharmaceutical manufacturer
with significant operations in the
Middle East, North Africa and the
US where he held the roles of
General Counsel and Company
Secretary. Henry is also responsible
for the Group’s Intellectual
Property function.
Henry is based in London, UK.
Pascal Genest
President, Flow Control
Three years with the Group
Appointed President, Flow Control
in January 2021. Pascal joined the
Group from GFG Alliance where he
held the position of CEO Liberty
Ostrava in the Czech Republic.
Prior to this he was CEO of SULB
in Bahrain. Pascal has more than
15 years’ experience working in
the steel industry, mainly with
ArcelorMittal. He has also worked
in consulting, in private equity
and in the aluminium industry.
Pascal is based in London, UK.
Richard Sykes
President, Advanced Refractories
Twenty-five years with the Group
Joined the GEC on 1 January 2023
prior to his appointment as Interim
Chief Financial Officer in February
2023. He subsequently assumed
the role of President, Advanced
Refractories, in August 2023.
Richard joined Premier Refractories
Limited in May 1991 as Finance
Director. He has since held various
senior managerial roles in Vesuvius’
Steel Division and in the Corporate
centre. Most recently serving as
President, Business Development
and Special Projects, Regional
Vice President Flow Control
EMEA and Vice President
Finance Flow Control.
Richard is based in London, UK.
Mark Collis
Chief Financial Officer
Eleven months with the Group
For biographical details, please
see the Board of Directors on
page 80.
Karena Cancilleri
President, Foundry
Four years with the Group
Appointed President, Foundry in
October 2019. Karena joined the
Group from Beaulieu International
Group, where she served for six
years as VP Engineered Products
and latterly President Engineered
Products. She has a breadth of
managerial experience spanning
various international leadership
roles in companies such as
FiberVisions, Kraton Corporation
and Shell.
Karena is based in London, UK.
Changes to the
Group Executive
Committee (GEC)
–
Richard Sykes joined the
GEC on 1 January 2023
prior to his appointment as
interim Chief Financial
Officer on 17 February 2023.
He remained on the GEC
when he was appointed
as President, Business
Development and Special
Projects on 1 April 2023,
and as President, Advanced
Refractories on 1 August 2023
–
Mark Collis joined the
GEC on his appointment
as Chief Financial Officer
on 1 April 2023
–
Guy Young, Chief Financial
Officer was a member
of the GEC until he resigned
from the Group on
17 February 2023
–
Vincent Dujardin, President,
Advanced Refractories
was a member of the
GEC from 1 April 2023 until
he resigned from the Group
on 30 September 2023
83
Strategic report
Governance
Financial statements
Dear Shareholder,
On behalf of the Board, I am pleased to present Vesuvius’
Corporate Governance Statement. This Statement provides
investors and other stakeholders with an insight into the
governance activities of the Board and its Committees during the
year. It describes how the Group has complied with the Principles
of the UK Corporate Governance Code during 2023, except
where we consider it clearer for us to describe the application
of a Principle elsewhere in this Annual Report. The table on
page 84 signposts where detailed information on each section of
the Code (and associated Principles) can be found. The Board
of Vesuvius plc is committed to maintaining high standards of
governance and to continuous improvement to reflect ongoing
best practice.
The Board’s key focus in 2023 was on continuing to support
management to further develop the Group’s strategy, together
with setting clear objectives to measure business success.
We outlined this strategy and our updated set of key strategic
targets to our investors at the Capital Markets event in November.
In December, we announced the launch of a £50m share buyback
programme, as the first step to delivering this strategy.
Alongside this strategic focus, the Directors also oversaw the
continued refreshment of the Board during 2023. Together
with the recruitment of Carla Bailo and Mark Collis, who we
welcomed to the Board in February and April, respectively,
searches were also undertaken for two further Non-executive
Directors. As a result of this work, Robert MacLeod joined the
Board on 1 September 2023 and the Board recently announced
the proposed appointment of Eva Lindqvist at the forthcoming
AGM. Robert and Eva will assume the roles of Chair of the
Audit Committee and Senior Independent Director, respectively,
when Douglas Hurt retires from the Board at the close of the
AGM, having served as a Director for nine years.
Yours sincerely
Carl-Peter Forster
Chairman
28 February 2024
In this section
Board leadership and Company purpose on
p85
Division of responsibilities on
p88
Audit Committee report on
p93
Nomination Committee report on
p102
Directors’ Remuneration Report on
p108
Also see:
Group’s statement of purpose on
pIFC
Strategic Report on
p1–78
Corporate Governance Statement
Carl-Peter Forster
Chairman
Vesuvius plc
Annual Report and Financial Statements 2023
84
Board Report
2018 UK Corporate Governance Code
The Company applied the Principles of the 2018 UK Corporate Governance Code (the ‘Code’), and was fully compliant
with its Provisions, throughout the year ended 31 December 2023. A copy of the Code can be found on the FRC website at:
https://www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance-code.
Information availability
Board
leadership
and Company
purpose
The Corporate Governance statement (CG Statement) on pages 83-135 gives information on the Group’s
compliance with the Principles relating to the Board’s leadership and Company purpose.
More detailed information on:
–
The Group’s statement of purpose can be found on the IFC
–
The Group’s strategy, resources and the indicators it uses to measure performance can be found on
pages 17, 20 and 21, and 28 and 35, respectively
–
The Group’s engagement with stakeholders and the Group’s Section 172(1) Statement is contained in the
Section 172(1) Statement and stakeholder engagement section on pages 68-71
–
The Group’s approach to workforce matters can be found in the Our people section on pages 58-63,
with further details of the Group’s approach to employee involvement and engagement contained in the
Section 172(1) Statement on pages 68 and 69
–
Details of the Group’s framework of controls is contained in the Audit Committee report on pages 97 and 98
of the CG Statement and in the Risk, viability and going concern section on pages 74 and 75
Division of
responsibilities
The CG Statement describes the structure and operation of the Board. The Nomination Committee report,
on pages 106 and 107, describes the process the Company conducts to evaluate the Board, to ensure
that it continues to operate effectively, that individual Directors’ contributions are appropriate and that
the oversight of the Chairman promotes a culture of openness and constructive yet challenging debate.
Composition,
succession
and evaluation
Details of the skills, experience and knowledge of the existing Board members can be found in the
Board biographies contained on pages 80 and 81. Information on the Board’s appointment process and
approach to succession planning and Board evaluation is contained in the Nomination Committee report
on pages 102-107 of the CG Statement.
Audit, risk
and internal
control
Information on the policies and procedures the Group has in place to monitor the effectiveness of the Group’s
Internal and External Audit functions and the integrity of the Group’s financial statements is contained in the
Audit Committee report on pages 93-101 of the CG Statement, along with an overview of the procedures
in place to manage risk and oversee the internal control framework. Further information on the Group’s
approach to risk management is contained in the Risk, viability and going concern section of the
Strategic Report on pages 72-78. The Board believes the 2023 Annual Report to be a fair, balanced and
understandable assessment of the Company’s position and prospects. A description of the Audit Committee’s
work in enabling the Board to reach this conclusion is contained in the Audit Committee report on page 97.
Remuneration
The Company’s approach to investing in and rewarding its workforce is described in the Our people section
on pages 58-63. The Directors’ Remuneration Report section of the CG Statement describes the Group’s
approach to Directors’ remuneration, including the procedure for developing policy and the Remuneration
Committee’s discretion for authorising remuneration outcomes. It also includes information about the
Remuneration Consultants appointed by the Remuneration Committee. Details of the linkage of the Directors’
Remuneration Policy with long-term strategy is contained on pages 109 and 110 and also highlighted on
pages 28 and 35 in the sections on Key Performance Indicators.
Corporate Governance Statement
continued
The aforementioned sections are incorporated into the Corporate Governance Report by reference.
85
Strategic report
Governance
Financial statements
Board leadership and Company purpose
The Board is responsible for leading the Group in an efficient
and entrepreneurial manner, establishing the Group’s purpose,
values and strategy, and satisfying itself that these and the
Group’s culture are aligned. It focuses primarily on strategic
and policy issues and is responsible for ensuring the long-term
sustainable success of the Group. It also oversees the allocation of
resources and monitors the performance of the Group in pursuit
of this strategy. It is responsible for effective risk assessment
and management of the Group’s risk profile. In performance
of these duties, the Board has regard to the interests of the
Group’s key stakeholders and is cognisant of the potential
impact of the decisions it makes on wider society.
Purpose
Vesuvius’ purpose is to be a global leader in molten metal
flow engineering and technology, servicing process industries
operating in challenging high-temperature conditions. We think
beyond the status quo to create the innovative solutions that
will shape the future for our customers, wider stakeholders and
business. We help our customers make their industrial processes
safer, more efficient and sustainable. The Group aims to deliver
sustainable, profitable growth, providing its shareholders with
a superior return on their investment, whilst providing each of
its employees with a safe workplace where they are recognised,
developed and properly rewarded.
In November 2023, the Company held a Capital Markets Day to
outline the Group’s strategic objectives for the next three years,
and to provide further insight into the positive long-term growth
trends anticipated in the steel and foundry markets. Further
information on the Group’s strategic targets can be found on
page 17. The Board has identified a number of Key Performance
Indicators (KPIs) which provide information on key aspects of the
Group’s financial and non-financial performance. Reviewing
this information assists the Board to assess progress with the
execution of the Group’s strategy and to determine any remedial
action that needs to be taken. Detailed information on the
Group’s financial and non-financial KPIs can be found on
pages 28 and 35, respectively.
The Group has established a framework of controls to enable
risk to be assessed and managed. Further information on
this can be found in the Audit, risk and internal control section
on page 92 of this Board Report.
Sustainability
Vesuvius recognises that lasting business success is measured
not only in financial performance but in the way in which the
Group deals with its customers, suppliers, business associates,
employees, investors and local communities. Our sustainability
strategy supports the Group’s key strategic objectives which
are focused on creating a better tomorrow in a profitable
and sustainable way. To drive change throughout the Group,
the Board has set specific targets focused on ways in which the
Group can improve its impact on our planet, our communities,
our people and our customers. The Board monitors these
targets and oversees the output of the Sustainability Council in
spearheading new activities to enhance Group performance.
Further information can be found in the Non-financial and
sustainability information statement on pages 32–67.
Culture
The Board monitors the corporate culture of the Group. The
Group’s CORE Values – Courage, Ownership, Respect and Energy
– define our behaviours across the business and are the practical
representation of the culture we seek to foster, aligning with
the Company’s purpose and strategy, and supporting our
governance and control processes. These Values are prominently
displayed at all sites. Our CORE Values are reinforced in our
performance management systems, which ensure that they
are firmly embedded in our day-to-day conversations and
behaviours. Further detail can be found on page 60.
The CORE Values are supported by the Group’s Code of
Conduct which sets out the standards of conduct expected,
without exception, of everyone who works for Vesuvius in any
of its worldwide operations. The Code of Conduct emphasises
the Group’s commitment to ethical behaviour and compliance
with the law. It also covers every aspect of Vesuvius’ approach
to business, from the way that the Group engages with customers,
employees, its markets and each of its other stakeholders,
to the safety of its employees and places of work. Everyone
within Vesuvius is individually accountable for upholding
these requirements.
The Board seeks to ensure that the Group’s workforce policies and
practices are consistent with the Group’s long-term sustainable
success. Further information about the Group’s remuneration
practices for senior managers can be found in the Directors’
Remuneration Report on pages 108–135, the Group’s approach to
diversity in the Nomination Committee Report on pages 104–106,
and the Group’s general approach to HR matters in the Our
people section on pages 58–63. Information on the Group’s Speak
Up confidential employee concern helpline is set out overleaf.
Vesuvius plc
Annual Report and Financial Statements 2023
86
Corporate Governance Statement
continued
Board site visits
The Directors undertook an extensive programme of site visits
in 2023. A full off-site Board meeting was held in Brazil, with
Directors visiting Vesuvius’ sites in São Paulo and Rio de Janeiro,
along with a customer site in Rio. In addition, the Non-executive
Directors visited sites in Yingkou and Bayuquan in China, Borken
and Grossalmerode in Germany, Pune and Kolkata in India,
Enschede and Hengelo in the Netherlands, and Cleveland in the
USA. A number of Directors were also able to attend the GIFA and
METEC International Foundry and Metallurgical Trade Fairs that
were held in Germany in June, showcasing recent innovations in
the steel and foundry industries. The visits provided the Board
with the opportunity to meet local management, and hear
firsthand about business performance, and local opportunities
and challenges. During the visits the Directors were also able to
interact with a cross-section of employees, from various functions
and organisational levels, and at some sites ‘town hall’ meetings
were held, providing the Non-executive Directors with the
opportunity to engage with the workforce to hear the views of
employees and answer their questions about the Company.
The Directors engaged in firsthand discussions on culture
and purpose, providing direct feedback to the Board on their
perceptions of each site and potential areas for improvement,
alongside highlighting examples of best practice that could be
shared more widely.
Board assessment of culture
During the year, the Board’s assessment of the Group’s culture considered the Group’s:
(1) Adherence to the CORE Values
– The Board focused on
ensuring that there was a consistent culture across the Group,
underpinned by the CORE Values. During their site visits,
the Directors focused on the extent to which the Values are
published, understood and motivate employee behaviour,
and reported on their individual findings as part of their
feedback. In 2023, nominations were once again sought for the
Group’s peer-nominated Living the Values Awards. The Board
was delighted that there were almost 1,500 nominations,
showcasing examples of individuals and teams going the ‘extra
mile’ to live the CORE Values. Members of the Group Executive
Committee presented both regional and global awards as part
of the process of recognising those individuals who exemplify
our Values. The global awards presentation was held online
to allow all employees to join and celebrate the examples of
Vesuvius’ Values in action.
(2) Commitment to safety
– At each meeting during the year,
the Board received an update on issues affecting the global
health and well-being of the Group’s employees. As a priority
the Board receives regular updates on the Group’s performance
against safety targets, and reviews all Lost Time Incidents
and the follow-up action taken. In addition, the Board receives
biannual reports on the progress of the Group’s safety
programmes. During the year, the Directors used their individual
site visits to assess each site’s commitment to safety, and
the Executive Directors and Group Executive Committee
members’ long-term incentives include a safety target alongside
other sustainability measures. A core tenet of the Group’s
Sustainability initiative is a focus on ensuring the Group affords
a safe working environment for all its employees. The Board has
set a challenging Group safety target of less than one Lost Time
Injury per million hours worked. This equates to an average of
less than two lost time work-related Lost Time Injuries or illnesses
per month. The Board is encouraged to see the excellent
progress in reducing the rate of Lost Time Injuries to date, but
recognises that there is further work still to be done, particularly
in relation to the management of third-party contractors,
two of whom suffered serious injuries on our sites in 2023.
(3) Entrepreneurship
– As part of the Board’s rolling agenda,
the Board received reports from each Business Unit President
on their business strategy, new commercial initiatives and future
technology trends. The Nomination Committee focused on the
development and retention of key talent across the Group to
execute the Group strategy, and the Board also received reports
on the key commercial achievements across the Business Units
as part of regular reporting from the Chief Executive.
(4) Transparency
– The engagement and openness of the senior
managers who presented to the Board and Committees during
the year, along with the employees the Board met during site
tours, ‘town hall’ meetings and formal and social engagements,
was assessed in terms of the Group’s culture. These firsthand
reviews were supported by the Directors’ review of the output
of the Group’s Speak Up processes. In addition, the Audit
Committee sought qualitative feedback from External and
Internal Audit on how transparent/engaged managers had
been during audit interactions.
(5) Customer focus
– In 2023, the Board received detailed
briefings on the Group’s key customers, their concentration,
diversity and core challenges, alongside information on the
state of the Group’s markets. They also reviewed the initiatives
undertaken in the Company to understand value drivers at
our customers, to underpin our solutions-focused business
model, and communicate the value contributed to customers
by our products.
The Chief Executive provided updates on key customer
issues, and undertook a range of customer visits, meeting
face-to-face with customers to discuss business challenges
and future prospects. During the Board site visit to Brazil in
October, the Directors visited a key Steel Division customer.
Throughout the year, the Board also received regular updates
on quality performance, with detailed analysis of any specific
quality issues.
(6) Diversity and respect for local cultures
– In July 2023,
the Directors revised the Board Diversity Policy to include
a target for 40% of the Board to be female by the end of 2024.
The Nomination Committee considered the Board’s diversity
as part of the Director recruitment exercises and monitored
progress with the achievement of the Group’s gender diversity
target which seeks to have 25% female representation in the
Senior Leadership Group, which comprises c.150 individuals,
by 2025. The Board also reviewed the results of the employee
engagement survey.
87
Strategic report
Governance
Financial statements
The Board
Carl-Peter Forster
Non-executive Chairman
Patrick André
Chief Executive
Mark Collis
Chief Financial Officer
Joined 1 April 2023
Carla Bailo
Non-executive Director
Joined 1 February 2023
Kath Durrant
Non-executive Director
and Chair of the
Remuneration Committee
Dinggui Gao
Non-executive Director
Friederike Helfer
Non-executive Director
Douglas Hurt
Senior Independent
Director and Chair of the
Audit Committee
Robert MacLeod
Non-executive Director
Joined 1 September 2023
Leavers during the year:
Guy Young
Chief Financial Officer
Stepped down on
17 February 2023
Jane Hinkley
Non-executive Director
Stepped down on
18 May 2023
On 15 February 2024, the Company announced the proposed
appointment of Eva Lindqvist at the AGM to be held on 15 May
2024. Douglas Hurt will retire from the Board at the close of this
meeting having served on the Board for nine years.
Section 172 duties
The Directors are cognisant of the duty they have under Section
172 of the Companies Act 2006, to promote the success of the
Company over the long term for the benefit of shareholders
as a whole, whilst also having regard to a range of other key
stakeholders. In performance of its duties throughout the year,
the Board had regard to these duties and remained cognisant
of the potential impact on these stakeholders of the Group’s
activities. Details of the Board and the Company’s engagement
with stakeholders during the year can be found in the Section
172(1) Statement on pages 68–71.
Directors’ independence
The Board considers that, for the purposes of the UK Corporate
Governance Code, 62.5% of the Board – five of the current
Non-executive Directors (excluding the Non-executive Chairman),
namely Carla Bailo, Kath Durrant, Dinggui Gao, Douglas Hurt
and Robert MacLeod, are independent of management and free
from any business or other relationship which could affect the
exercise of their independent judgement. Friederike Helfer is
a Partner of Cevian Capital, which continues to hold 21.3% of
Vesuvius’ issued ordinary share capital (excluding Treasury
Shares). As a result, Friederike Helfer is not considered to be
independent. The Chairman satisfied the independence criteria
on his appointment to the Board. The Board and its Committees
have a wide range of skills, experience and knowledge, and
further details of each Director’s individual contribution in this
regard can be found in their biographical details on pages 80
and 81.
Whistleblowing policy
Speak Up
All Vesuvius employees can speak up without fear of retaliation,
either to Vesuvius management or via independent channels.
We have implemented a Speak Up policy, under the responsibility
of our Board, which is included in our Code of Conduct.
Details of it are provided on the internal Vesuvius website, and
communicated by local language posters in all our locations.
A third-party operated confidential Speak Up helpline is
available 365 days per year, 24 hours per day, to anyone wishing
to raise concerns anonymously or in situations where they feel
unable to report directly. Details of the helpline can also be found
on the Vesuvius website. This independent facility supports online
reporting through a web portal and reporting by phone or by
voicemail. Ensuring global accessibility, employees can speak
with operators in any of our 29 functional languages.
All reports received are reviewed and, where appropriate,
investigated and feedback is provided to the reporter via the
helpline portal. Vesuvius’ Speak Up helpline is highlighted during
internal compliance training and new joiner inductions. No
Vesuvius employee will ever be penalised or disadvantaged for
reporting a legitimate concern in good faith. Reports received
via Speak Up channels are managed by the General Counsel
and Compliance Director. When received, reports are assessed
for risk and category of concern. All reports are considered in
line with a protocol for review, investigation, action, closure and
feedback, independent of management lines where necessary,
and involving senior Business Unit or HR management as
appropriate. For complex issues, formal investigation plans
are drawn up, and support from external experts is engaged
where necessary. Feedback is recognised as an important
element of the Speak Up process and we aim to acknowledge
all cases within seven days of receipt. The Group monitors the
volume, geographic distribution and range of reports made to
the Speak Up facility to ascertain whether there are significant
regional compliance concerns, or particular themes that recur,
and whether this indicates that there are countries where
access to this facility is less well understood or publicised.
During 2023, the Board received updates on the nature
and volume of reports received by the confidential Speak Up
helpline, key themes emerging from these reports and the results
of any investigations undertaken. Further details on specific
issues were provided where requested. In 2023, the Group
received 120 reports (2022: 141) through the Speak Up facility
and 16 walk-in reports (2022: 38). Each one of these was
reviewed and, where appropriate, investigated. Similar to 2022,
a majority of these reports related to HR issues which indicated
no compliance concerns, nor serious breaches of the Code
of Conduct. Of the small number of reports received that
contained allegations of a breach of our Code of Conduct,
thorough investigations were performed and, where
appropriate, disciplinary action was taken.
Vesuvius plc
Annual Report and Financial Statements 2023
88
Corporate Governance Statement
continued
The Chairman and Chief Executive
The division of responsibilities between the Chairman and the
Chief Executive is set out in writing. These role descriptions were
reviewed during the year as part of the Company’s annual
corporate governance review. They are available to view on
the Company’s website: www.vesuvius.com.
The Board
The Board has a formal schedule of matters reserved to it and
delegates certain matters to its Committees. It is anticipated that
the Board will convene on seven occasions during 2024, holding
ad hoc meetings to consider non-scheduled business if required.
Company Secretary
Advises the Chairman on governance, together with providing updates on regulatory and compliance matters. Supports the Board
agenda with clear information flow. Acts as a link between the Board and its Committees and between the Non-executive Directors
and senior management
The Board
Responsible for Group strategy, risk
management, succession and policy
issues. Sets the purpose, Values and
culture for the Group. Monitors the
Group’s progress against the targets set
Chairman
Provides leadership and guidance for
the Board, promoting a high standard
of corporate governance. Sets the
Board agenda and chairs and
manages meetings. Independent on
appointment, he is the link between the
Executive and Non-executive Directors
Chief Financial Officer
Supports the Chief Executive in
developing strategic direction and
works with the Board to develop and
implement the Group’s strategy.
Directs, monitors and manages the
finance and IT functions to ensure the
Company’s financial objectives are met,
ensuring sound financial management
and control of the Company’s business
Senior Independent Director
Acts as a sounding board for the
Chairman, an alternative contact
for shareholders and an intermediary
for other Non-executive Directors.
Leads the annual evaluation of the
Chairman and recruitment process
for the Chairman’s replacement,
when required
Non-executive Directors
Exercise a strong, independent voice,
constructively challenging and
supporting the Executive Directors.
Scrutinise performance against
objectives and monitor financial
reporting. Monitor and oversee
risks and controls, determine Executive
Director remuneration and manage
Board succession through their
Committee responsibilities. The
Non-executive Directors meet at least
twice a year without the Executive
Directors being present
Chief Executive
Develops strategy for review and
approval by the Board. Directs,
monitors and manages the operational
performance of the Company.
Responsible for the application of
Group policies, implementation of
Group strategy and the resources
for their delivery. Accountable to the
Board for Group performance
Division of responsibilities
89
Strategic report
Governance
Financial statements
Audit Committee
To monitor the integrity of
financial reporting and to
assist the Board in its review
of the effectiveness of the
Group’s internal controls and
risk management systems
Chair
Douglas Hurt
Membership
All independent
Non-executive Directors
Remuneration Committee
To determine the
remuneration policy for
the Executive Directors
and set the appropriate
remuneration for the
Chairman, Executive
Directors and senior
management
Chair
Kath Durrant
Membership
All independent
Non-executive Directors
Nomination Committee
To advise the Board on
appointments, retirements
and resignations from the
Board and its Committees
and to review succession
planning and talent
development for the Board
and senior management
Chair
Carl-Peter Forster, Chairman
(except when considering
his own succession, in which
case the Committee would
be chaired by the Senior
Independent Director)
Membership
Chairman and the
Non-executive Directors
Governance Committees
Finance Committee
To approve specific funding
and treasury-related
matters in accordance
with the Group’s delegated
authorities or as delegated
by the Board
Chair
Carl-Peter Forster, Chairman
Membership
Chairman, Chief Executive,
Chief Financial Officer and
Group Treasurer
Administrative Committees
In addition, the Board delegates certain responsibilities to a
Finance Committee and Share Scheme Committee, which operate
in accordance with the delegated authority agreed by the Board
Share Scheme Committee
To facilitate the
administration of the
Company’s share schemes
Chair
Any Board member
Membership
Any two Directors or any
two Directors and the
Company Secretary
Board
Board Committees
The principal governance Committees of the Board are the
Audit, Nomination and Remuneration Committees. Each
Committee has written terms of reference which were reviewed
during the year. These terms of reference are available to
view on the Company’s website: www.vesuvius.com.
Committee composition is set out in the relevant Committee
reports. No one, other than the Committee Chairman and
members of the Committee, is entitled to participate in meetings
of the Audit, Nomination and Remuneration Committees.
However, as detailed in the Committee reports, where the
agenda permits, other Directors and senior management
regularly attend by invitation, supporting the operation of
each of the Committees in an open and consensual manner.
The interactions in the governance process are shown in the
schematic below.
Group Executive Committee
The Group also operates a Group Executive Committee
(GEC), which is convened and chaired by the Chief Executive
and assists him in discharging his responsibilities. During 2023,
the GEC comprised the Chief Executive, Chief Financial Officer,
the main Business Unit Presidents, the Chief HR Officer, President
Business Development and Special Projects and the General
Counsel/Company Secretary. The GEC met for six formal
multi-day meetings and two R&D reviews during 2023.
Vesuvius plc
Annual Report and Financial Statements 2023
90
Corporate Governance Statement
continued
2023 Board programme
The Board discharges its responsibilities through an annual
programme of meetings.
At each of the regularly scheduled meetings, a number of
standard items were considered.
These included:
–
Directors’ duties, including those in respect of s172,
and conflicts of interest
–
Minutes of the previous meeting and matters arising
–
Reports from the Chief Executive (CEO) and the Chief Financial
Officer (CFO) on key aspects of the business, and from the
General Counsel and Company Secretary on governance matters
In 2023, the Board focused on key areas of strategy, performance and governance, including the matters outlined below:
Strategy
–
Reviewing M&A opportunities
–
Receiving and reviewing reports on strategy from the Flow Control, Advanced Refractories,
Foundry and Sensors & Probes Business Units
–
Receiving and reviewing regular reports from the CEO on business highlights, changes in the Group’s
markets, procurement practices and the implementation of the Group’s strategic objectives
–
Reviewing the progress of the Group’s Sustainability agenda, including receiving updates
on the Group’s health, safety and environmental objectives, the Group’s TCFD compliance and the
Group’s Roadmap to Net Zero
–
Participation in a two-day off-site review of strategy presented by the CEO, CFO, the three main
Business Unit Presidents and the Company’s key financial advisers
–
Receiving and considering a progress report on the Group’s R&D strategy and objectives
–
Reviewing the Steel Division’s approach to pricing strategy
–
Receiving and considering reports on the Group’s key customers, and its purchasing, HR and digital
strategies, legal and compliance activities and the management of the Group’s key pension liabilities
–
Reviewing the Group’s capital structure, including investors’ views, and receiving reports from the
Company’s brokers on market issues
–
Reviewing the Group’s key messages for the Capital Markets Day
Performance
–
Reviewing the response to the Group’s cyber security attack in February 2023 and the actions taken
to develop the Group’s cyber resilience to mitigate the impact of any future attacks
–
Receiving regular business reports from the CEO
–
Receiving regular reports on the Group’s financial performance against key indicators
–
Receiving biannual reports on progress against the Group’s sustainability targets
–
Receiving regular safety reports and summaries of the investigations conducted after serious safety incidents
–
Receiving regular reports on performance against product quality targets
–
Scrutinising the Group’s financial performance and forecasts
–
Reviewing and agreeing the annual budget and financial plans
–
Approving the Group’s trading updates, and preliminary and half-year results announcements
Governance
–
Receiving regular reports from the Board Committees
–
Approving the launch of the Group’s £50 million share buyback programme
–
Approving the appointment of Mark Collis as the new CFO and overseeing the process to identify
new Non-executive Directors, and then approving their appointments
–
Approving the Annual Report and Notice of AGM
–
Approving the payment of the interim dividend, and approving the recommendation of the payment
of the final dividend subject to shareholder approval
–
Reviewing the Group’s internal controls, risk management practices and risk appetite, monitoring the
Group’s key risks and approving the Group’s risk register
–
Reviewing and approving the Group’s Modern Slavery Statement
–
Reviewing information received through the Group’s Speak Up reporting processes, including
investigation outcomes
–
Approving the Group’s UK and Polish tax strategies
–
Renewing the Group’s delegated authorities
–
Reviewing the level of fees for the Non-executive Directors
–
Completing an evaluation of the Board and Committees’ performance and reviewing progress against the
improvement actions identified in the 2022 Board evaluation
–
Reviewing the Board’s engagement with employees, including the results of the Group engagement survey
–
Receiving regular updates on corporate governance and regulatory developments, and conducting the
formal annual review of the Group’s governance arrangements
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Strategic report
Governance
Financial statements
Information and support
The Board ensures that it receives, in a timely manner, information
of an appropriate quality to enable it adequately to discharge
its responsibilities. Papers are provided to the Directors in
advance of the relevant Board or Committee meeting to enable
them to make further enquiries about any matters prior to the
meeting should they so wish. This also allows Directors who are
unable to attend to submit views to the relevant Chairperson in
advance of the meeting.
In addition to the formal Board processes, the Chief Executive
provides updates on important Company business issues
between meetings, and the Board is provided with regular reports
on key financial and management information. The Directors
also receive regular updates on shareholder matters, along
with copies of analysts’ notes issued on the Company. For the
distribution of all information, Directors have access to a secure
online portal, which includes a reference section containing
relevant background information.
All Directors have access to the advice and services of the
Company Secretary.
There is also an agreed procedure in place for Non-executive
Directors, in the furtherance of their duties, to take independent
legal advice at the Company’s expense.
Directors’ conflicts of interest
The Board has established a formal system to authorise situations
where a Director has an interest that conflicts, or may possibly
conflict, with the interests of the Company (situational conflicts).
Directors declare situational conflicts so that they can be
considered for authorisation by the non-conflicted Directors.
In considering a situational conflict, these Directors act in the way
they consider would be most likely to promote the success of the
Company and may impose limits or conditions when giving
authorisation, or subsequently, if they think this is appropriate.
The Company Secretary records the consideration of any conflict
and any authorisations granted. The Board believes that the
approach it has in place for reporting situational conflicts
continues to operate effectively. The Board has authorised
(subject to certain exceptions) any potential or actual conflicts of
interest that might arise as a result of Ms Helfer’s role as a Partner
of Cevian Capital AG. Prior to her resignation as a director of
thyssenkrupp AG, the Board had also authorised any potential
or actual conflicts of interest that might have arisen from that role.
Board and Committee attendance
The attendance of Directors at the Board meetings held in 2023, and at meetings of the principal Committees of which they are
members, is shown in the table below. The maximum number of meetings in the period during which the individual was a Board or
Committee member is shown in brackets.
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
%
attendance
3
Chairman
Carl-Peter Forster
11 (11)
–
–
6 (6)
100%
Executive Directors
Patrick André
11 (11)
–
–
–
100%
Mark Collis
1
9 (9)
–
–
–
100%
Guy Young
2
0 (1)
–
–
–
0%
Non-executive Directors
Carla Bailo
1
9 (10)
4 (5)
4 (6)
3 (5)
77%
Kath Durrant
10 (11)
5 (5)
7 (7)
6 (6)
97%
Dinggui Gao
9 (11)
5 (5)
7 (7)
6 (6)
93%
Friederike Helfer
11 (11)
–
–
6 (6)
100%
Jane Hinkley
2
3 (3)
2 (2)
4 (4)
3 (3)
100%
Douglas Hurt
11 (11)
5 (5)
7 (7)
6 (6)
100%
Robert MacLeod
1
6 (6)
2 (2)
2 (2)
2 (2)
100%
1.
Carla Bailo, Mark Collis and Robert MacLeod were appointed to the Board on 1 February 2023, 1 April 2023 and 1 September 2023, respectively.
2.
Guy Young stepped down from the Board on 17 February 2023 and Jane Hinkley retired from the Board at the close of the AGM on 18 May 2023.
3. The table reflects the number of Board and Committee meetings that the Directors could have attended during the year.
The outgoing CFO, Guy Young did not attend the Board meeting
held in January to approve the appointment of his successor.
Kath Durrant and Dinggui Gao missed Board meetings arranged
at short notice due to pre-existing commitments. Carla Bailo,
missed one set of Board and Committee meetings, due to
pre-existing commitments known at the time of her appointment,
and missed a further Remuneration and Nomination Committee
meeting due to a flight delay. All Directors received the papers for
meetings that they missed in advance and, where their absence
was anticipated, relayed their comments to the Chairman for
communication at the meeting.
The Chairman and Non-executive Directors have letters of
appointment which set out the terms and conditions of their
directorship. An indication of the anticipated time commitment
is provided in recruitment role specifications, and each
Non-executive Director’s letter of appointment provides details
of the meetings that they are expected to attend, along with the
need to accommodate travelling time. Non-executive Directors
are required to set aside sufficient time to prepare for meetings,
and regularly to refresh and update their skills and knowledge.
Copies of all contracts of service or, where applicable, letters of
appointment of the Directors, are available for inspection during
Vesuvius plc
Annual Report and Financial Statements 2023
92
Corporate Governance Statement
continued
business hours at the registered office of the Company and are
available for inspection at the location of the Annual General
Meeting (AGM) for 15 minutes prior to and during each AGM.
All Non-executive Directors have agreed to commit sufficient
time for the proper performance of their responsibilities,
acknowledging that this will vary from year to year depending
on the Group’s activities, and will involve visiting operational
and customer sites around the Group. The Chairman in particular
dedicates a significant amount of time to Vesuvius in discharging
his duties.
Directors are expected to attend all scheduled Board and
Committee meetings and any additional meetings as required.
Each Director’s other significant commitments are disclosed to
the Board during the process prior to their appointment and they
are required to notify the Board of any subsequent changes.
The Company has reviewed the availability of the Chairman and
the Non-executive Directors to perform their duties and considers
that each of them can, and in practice does, devote the necessary
amount of time to the Company’s business.
Composition, evaluation and succession
Appointment and replacement of Directors
The Company’s Articles of Association specify that Board
membership should not be fewer than five nor more than
15 Directors, save that the Company may, by ordinary resolution,
from time to time, vary this minimum and/or maximum number of
Directors. Directors may be appointed by ordinary resolution or by
the Board. The Board may appoint one or more Directors to any
executive office, on such terms and for such period as it thinks fit,
and it can also terminate or vary such an appointment at any time.
The Articles specify that, at every AGM, any Director who has been
appointed by the Vesuvius Board since the last AGM and any
Director who held office at the time of the two preceding AGMs, and
who did not retire at either of them, shall retire from office. However,
in accordance with the requirements of the Code, all Directors will
offer themselves for election or re-election at the 2024 AGM. The
Board believes that each of the current Directors is effective and
demonstrates commitment to his or her respective role. Accordingly,
the Board recommends that shareholders approve the resolutions to
be proposed at the 2024 AGM relating to the election and re-election
of the Directors. The biographical details of the Directors offering
themselves for election or re-election, including details of their other
directorships and relevant skills and experience, will be set out in the
2024 Notice of AGM. The biographical details of the Directors are
also set out on pages 80 and 81.
Recommendations for appointments to the Board and
rotation of the Directors are made by the Nomination Committee.
The Nomination Committee is also responsible for overseeing the
maintenance of an effective succession plan for the Board and
senior management. Further information on the activities of the
Nomination Committee is set out in the Nomination Committee
report on pages 102–107.
A comprehensive induction programme is available to new
Directors. The induction programme is tailored to meet the
requirements of the individual appointee and explains the
dynamics and operations of the Group, and its markets and
technology. The induction includes, as a minimum, a series of
meetings with key Group executives, along with site visits to
the Group’s key strategic sites. Further details of the induction
provided for Robert MacLeod are set out in the Nomination
Committee report on page 104.
The Chairman, through the Company Secretary, continues to
ensure that there is an ongoing process to review training and
development needs. Directors are provided with details of
seminars and training courses relevant to their role and are
encouraged and supported by the Company to attend them.
In 2023, regulatory updates were provided as a standing item
at each Board meeting in a Secretary’s Report. External input
on legal and regulatory developments impacting the business
was also given, with specialist advisers invited to the Board and
Committee meetings to provide briefings on topics such as the
changing landscape of UK Corporate Governance, and the likely
impact of the forthcoming introduction of ISSB ESG standards
in the UK and the EU CSRD requirements.
Performance evaluation
The Board carries out an evaluation of its performance and
that of its Committees and individual Directors, including the
Chairman, every year. Details of the evaluation conducted in
2023 can be found in the Nomination Committee report.
Audit, risk and internal control
The Audit Committee is responsible for ensuring that policies
and procedures are in place to ensure the independence and
effectiveness of the Internal and External Audit functions. It also
reviews the effectiveness of the Group’s Internal and External
Audit functions, in addition to monitoring the integrity of the
Group’s financial and narrative statements. Further information
about the work of the Audit Committee can be found in the
Audit Committee report on pages 93–101.
The Board is responsible for setting the Group’s risk appetite
and ensuring that appropriate risk management systems are in
place. The Audit Committee assists the Board in reviewing the
effectiveness of the system of internal control, including financial,
operational and compliance controls, and risk management
systems. The Group’s approach to risk management and internal
control is discussed in greater detail on pages 72–76 and the
Group’s principal risks and how they are being managed or
mitigated are detailed on pages 77 and 78. The Viability
Statement which considers the Group’s future prospects is
included on page 76. Risk management and internal control are
also discussed in greater detail in the Audit Committee report.
All of the independent Non-executive Directors serve on both the
Audit and Remuneration Committees. They therefore bring their
experience and knowledge of the activities of each Committee
to bear when considering critical areas of judgement. This means
that, for example, the Directors are able to consider carefully the
impact of incentive arrangements on the Group’s risk profile and
ensure that the Group’s Remuneration Policy and programme are
structured to align with the long-term objectives and risk appetite
of the Company.
Remuneration
The Directors’ Remuneration Report on pages 108–135 is
incorporated into this Corporate Governance Report by reference.
It describes the work of the Remuneration Committee in developing
the Group’s policy on executive remuneration, determining Director
and senior management remuneration, reviewing workforce
remuneration and related policies – including ensuring that these
align with the Group’s strategic objectives and culture, and
overseeing the operation of the executive share incentive plans.
It also includes information on the Group’s remuneration advisers.
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Dear Shareholder,
On behalf of the Audit Committee, I am pleased to present
the Audit Committee report for 2023. The foundation of the
Committee’s work each year is a recurring and structured
programme of activities which are defined in an annual rolling
Audit Committee timetable. The Audit Committee then considers
additional items as matters arise or priorities change.
Following the cyber incident early in 2023, the Committee
spent time reviewing the impact of the incident on the financial
performance of the Group, and satisfying itself that the data
required for the reporting of the Group’s financial results had not
been compromised. Later in the year, once the incident and its
repercussions had been fully investigated, it received a report
from the Group’s cyber consultants with recommendations for
further enhancements to the Group’s cyber security.
In July, the Committee was notified by its External Auditors that
the FRC’s Audit Quality Review (‘AQR’) team, as part of its ordinary
review process, was performing a review of the audit of Vesuvius’
financial statements for the year ended 31 December 2022.
In November, the AQR team notified us that the work within
the scope of their review had not identified any matters which
required significant action and only limited improvements
were required. The Audit Committee discussed the results
of the review with PwC.
Alongside considering these matters and its ordinary items of
business during the year, the Committee also undertook a deep
dive into the Group’s accounting for R&D expenditure and,
responding to an issue that had been identified, reviewed
the Group’s inventory accounting for certain raw material
consignment stocks in the United States.
In May, I will be leaving the Company, having reached nine years’
service on the Board. Robert MacLeod, who joined the Board
on 1 September 2023, will become the new Audit Committee
Chair. As I hand over the Chairmanship, I would like to take this
opportunity to thank my colleagues, past and present, for their
contribution to the work of the Committee during my tenure.
Yours sincerely
Douglas Hurt
Chairman, Audit Committee
28 February 2024
The Audit Committee comprises all the independent
Non-executive Directors of the Company, who bring a wide
range of financial and commercial expertise to the Committee’s
decision-making processes. Douglas Hurt is the current Senior
Independent Director and Chairman of the Audit Committee.
He was the Finance Director of IMI plc for nine years prior to his
appointment and has worked in various financial roles throughout
his career. Douglas currently serves as the Chairman of the
Audit Committees of Hikma Pharmaceuticals PLC and the
British Standards Institution. He is a Chartered Accountant.
This background provides him with the ‘recent and relevant
financial experience’ required under the Code. Robert MacLeod
will succeed Douglas as Chair of the Audit Committee at the close
of the 2024 AGM. Robert is also a Chartered Accountant, with
‘recent and relevant’ financial experience, having served as
Finance Director of W.S.Atkins Plc and Johnson Matthey Plc
for ten years.
The Code and Financial Conduct Authority Disclosure Guidance
and Transparency Rules also contain requirements for the
Audit Committee as a whole to have competence relevant to the
sector in which the Company operates. Vesuvius’ Non-executive
Directors have significant breadth of experience and depth of
knowledge on matters relevant to Vesuvius’ operations, both from
their previous roles and from their induction and other activities
since joining the Vesuvius Board. The Directors’ biographies on
pages 80 and 81 outline their range of multinational business-to-
business experience and expertise in fields such as engineering,
manufacturing, services, human resources and research and
development, as well as their financial and commercial acumen.
The Board considers that the Audit Committee as a whole has
competence relevant to Vesuvius’ business sector.
The Committee met five times during 2023. The Committee
has also met twice since the end of the financial year and prior
to the signing of this Annual Report. The Board Chairman, the
non-independent Non-executive Director, the Chief Executive,
the Chief Financial Officer, the Head of Finance, the Group
Financial Controller, the Group Head of Internal Audit and
the External Auditors were all invited to each meeting. Other
management staff were also invited to attend as appropriate.
Audit Committee meetings are conducted to promote an open
debate, they enable the Committee to provide constructive
challenge of significant accounting judgements, and guidance
and oversight to management, to ensure that the business
maintains an appropriately robust control environment. Between
Audit Committee meetings, the Chairman of the Audit Committee
encourages open dialogue between the External Auditors, the
management team and the Group Head of Internal Audit to
ensure that emerging issues are addressed in a timely manner.
Douglas Hurt
– Committee Chairman
Carla Bailo
(from 1 February 2023)
Kath Durrant
Dinggui Gao
Jane Hinkley
(until 18 May 2023)
Robert MacLeod
(from 1 September 2023)
The Company Secretary is
Secretary to the Committee
Audit Committee
Vesuvius plc
Annual Report and Financial Statements 2023
94
The Committee operates under formal terms of reference,
which were reviewed during the year and no changes made.
They are available to view in the Investors/Corporate
Governance/Board Committees section of the Company’s
website: www.vesuvius.com. Within these terms, the Committee
and its individual members are empowered to obtain outside
legal or other independent professional advice at the cost of
the Company. These powers were not utilised during the year.
The Committee may also secure the attendance at its meetings
of any employee or other parties with relevant experience and
expertise should it be considered necessary.
The Committee members believe that they received sufficient,
relevant and reliable information throughout the year from
management and the Internal and External Auditors to enable
the Committee to fully discharge its responsibilities. The work of
the Audit Committee is further elaborated in the remainder of
this report.
Published Financial Information
To monitor and assess the integrity of the financial statements of the
Company, and review any significant financial reporting issues and
judgements which those statements contain.
–
It reviewed the integrity of the half-year and annual Financial
Statements and recommended their approval to the Board
–
It reviewed the draft Preliminary and Interim Results
announcements
–
It deliberated on, and challenged reports from, the Chief
Financial Officer and the Head of Finance, setting out areas
of judgement and/or estimation, the rationale for the
accounting treatment and disclosures, and the pertinent
assumptions and the sensitivities of the estimates to
changes in the assumptions
–
It reviewed provisions held for disposal, closure and
environmental costs, including the reasonableness
of underlying assumptions and estimates of costs,
and the quantum of any related insurance assets
–
It considered the Group’s outstanding litigation items
and the adequacy of provisions held in regard to these
–
It reviewed the External Auditors’ memoranda for the
half-year and year-end, on the treatment of significant issues,
which provided a summary for each issue, including an
assessment of the appropriateness of management’s
judgements or estimates
–
It challenged the assumed growth rates and discount rates
used for asset impairment assessments
–
It considered the Company’s going concern statements,
reviewing the nature, quantum and assessment of the
significant risks to the business model, future performance,
solvency and liquidity of the Group which were modelled
as part of the scenarios
–
It considered the stress testing that had been undertaken
to support the Viability Statement made by the Company,
examining the criteria selected for enhanced stress testing
–
It advised the Board on whether the Annual Report and
Financial Statements, taken as a whole, are fair, balanced
and understandable and provided the information necessary
for the shareholders to assess the Group’s position and
performance, business model and strategy
–
It reviewed the management representation letters to be
provided to the External Auditors by the Company in respect
of the half-year and annual financial statements and
recommended them to the Board for approval
–
It confirmed that it was content that the External Auditors
had received access to all the information necessary to
conduct their audit
–
It considered the Group’s compliance with the requirements
in respect of TCFD reporting, including the assurance received
regarding the sustainability KPI data. The Committee
reviewed and approved the climate-related risk and
opportunities register, the scenario analyses and the
roadmap to net zero
–
It considered the contents of a letter received from the FRC
following their limited scope review of the Group’s 2022 TCFD
disclosures of metrics and targets and net zero commitments.
The Committee noted that the FRC had not identified any
questions or queries with regard to this disclosure, but had
made a small number of recommendations about areas for
further refinement. The Committee committed to address
these in the 2023 TCFD report
–
It received a regulatory update from the VP Sustainability
and a PwC specialist, on forthcoming changes to European
ESG reporting, and considered the likely impact on the
Group’s future reporting and the work being undertaken
to prepare for this
–
It reviewed the Group’s Tax Strategy, and commended
the Group’s UK and Polish tax strategies to the Board
for approval
–
It received information on the preparations for the filing of
the Group’s annual financial report in the required European
Single Electronic Format (ESEF)
Audit Committee
continued
How the Audit Committee delivered on its responsibilities in 2023
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Financial statements
Risk Management and Internal Control
To review and monitor the Company’s internal financial controls and
internal control and risk management systems, and monitor and review
the role and effectiveness of the Company’s internal audit function and
audit programme.
–
It received reports from the Internal Audit function at each
meeting, summarising activity and outlining progress with
the audit programme
–
It monitored both the responses from and follow-up by
management, to Internal Audit recommendations arising
during the year, in particular making sure that where longer-
term actions were needed to resolve an issue, effective
short-term mitigations were put in place. The Committee
discussed at length any significant issues raised, the root causes
for those issues and the actions being taken to resolve them
–
It reviewed the resourcing and delivery of the 2023 Internal
Audit plan and approved the 2024 Internal Audit plan
–
It considered the effectiveness of the Internal Audit process,
reviewing the results of an external quality review of the Internal
Audit function that was conducted by EY, and the action
being taken to further enhance the work of the function
–
It received feedback from the CFO on the results of an
internal survey of the work of Internal Audit conducted at
the end of the year
–
It met with the Group Head of Internal Audit without
management being present on a regular basis, and discussed
a range of topics, including confirming that the function
operated free from management or other restrictions
–
It monitored and reviewed the role and effectiveness of the
Company’s Internal Audit function and audit programme,
and considered the resourcing of the function
–
The Committee Chairman is involved in the process to recruit
a new Group Head of Internal Audit following the resignation
of the incumbent
–
It considered the impact of the Q1 2023 cyber incident
on the Group’s operations, particularly with regard to the
integrity of its financial reporting, and received a report
from the Group’s cyber consultants on developments in
the Group’s cyber security following the incident
–
Following identification of an issue at one of the Group’s
sites in respect of the accounting treatment for consignment
inventory, the Committee conducted a review of the accounting
treatment for this raw material at other Group sites
–
It undertook a deep dive into the Group’s accounting for
R&D expenditure
–
It reviewed the Group’s risk management processes and internal
controls, including the work undertaken with external consultants
to undertake a comprehensive review of the Group’s risk register
and the results of the Group’s self-certification process
–
It recommended statements to be included in the Annual
Report concerning the effectiveness of the Group’s internal
financial controls and risk management systems
–
It considered the Group’s procedures for detecting fraud,
and carried out a review of all alleged instances of fraud
notified to the Committee
–
Members of the Committee met and discussed business and
control matters with senior management both during Board
presentations and during site visits
External Audit
To oversee the relationship with the external auditors including making
recommendations to the Board in relation to their appointment,
negotiating and agreeing the statutory audit fee and the scope of the
statutory audit, approving any permitted non-audit services, reviewing
the findings of their work, assessing the effectiveness of the external
audit process and monitoring the external auditors’ processes for
maintaining independence.
–
It reviewed the findings of the work of PwC (the External
Auditors) and Mazars (who audit the Group’s non-material
subsidiaries), including their key accounting and audit
judgements, how any risks to audit quality were addressed
and their views on interactions with senior management
–
It monitored the External Auditors’ independence, objectivity
and effectiveness
–
It considered the External Auditors’ 2023 Audit Strategy
and approved the 2023 engagement letter. It also made
recommendations to the Board on the reappointment of
the External Auditors and agreed the annual fees
–
It considered the contents of a letter received from the FRC’s Audit
Quality Review team following a review of PwC’s 2022 audit. The
Committee was satisfied that no matters arose which required
significant action, and with PwC’s response to the inspection
–
It reviewed and approved the non-audit services provided
by the External Auditors
–
It reviewed updates from PwC on material accounting and
governance developments impacting the Group
–
It reviewed the effectiveness of the External Audit process
–
It met with the External Auditors without management being
present on a regular basis and received valuable feedback on
a range of topics
Governance
Report to the Board on how the Committee has discharged its
responsibilities. Arrange for periodic reviews of its own performance
and review its constitution and terms of reference to ensure it is operating
effectively and recommend any changes it considers necessary to the
Board for approval.
–
It reviewed its terms of reference and monitored
developments in corporate governance that were likely
to impact the future work of the Committee, including the
development of the UK Government’s plans to augment
the regime on internal control and assurance
–
It conducted an evaluation of its performance and effectiveness
–
It reported to the Board on the outcomes of Audit Committee
meetings. All members of the Board received the agenda,
papers and minutes of each Committee meeting
How the Audit Committee delivered on its responsibilities in 2023
continued
Vesuvius plc
Annual Report and Financial Statements 2023
96
Audit Committee
continued
Significant issues and material judgements
The Committee considered the following significant issues in
the context of the 2023 Financial Statements. It identified these
areas to be significant, taking into account the level of materiality
and the degree of judgement exercised by management.
The Committee resolved that the judgements and estimates
made on each of the significant issues detailed below were
appropriate and acceptable.
Impairment of goodwill
The 2023 year-end carrying value of goodwill of £631m was
tested against the current and planned performance of the Steel
Flow Control, Steel Advanced Refractories and Foundry CGUs.
The Committee considered the Board-approved medium-term
business plans and terminal growth assumptions, and the
discount rates used in the assessments. Relevant sensitivities
using reasonably possible changes to key assumptions were
evaluated. The detailed assumptions are provided in Note 16
to the Group Financial Statements.
Given that the models indicated, even with the application of
reasonable sensitivities to the assumptions, that there remains
significant headroom between the Value in Use and the carrying
value, the Committee concurred that no goodwill impairment
charges were required.
Other provisions
The Committee continues to monitor the implications of a number
of potential exposures and claims arising from ongoing litigation,
product quality issues, employee disputes, restructuring, vacant
sites, environmental matters, legacy matter lawsuits, indirect tax
disputes and indemnities or warranties outstanding for disposed
businesses. Due to the long gestation period before settlement
for a number of these issues can be reached, provisioning for
these items requires careful judgement in order to establish
a reasonable estimate of future liabilities. The Committee also
assessed the strength of any insurance coverage for certain of
these liabilities and challenged the accounting treatment for
any amounts deemed to be recoverable from insurers. After due
consideration and challenge, and having considered legal advice
obtained by the Company, the Committee is satisfied that there
are appropriate levels of provisions set aside to settle third-party
claims and disputes (Note 29 to the Group Financial Statements)
and that adequate disclosure has been made. Where no reliable
estimate of the potential liability can be made for the outcome of
an existing issue, no provision has been made and appropriate
disclosure is included under contingent liabilities (Note 31 to the
Group Financial Statements).
Operating segments for continuing operations
The Committee considered the aggregation of the Steel Flow
Control, Steel Advanced Refractories, and Steel Sensors & Probes
operating segments into the Steel reportable segment, noting the
economic characteristics of these operating segments which
include a similar nature of products, customers, production
processes and margins. The Committee concluded that this
segmentation remained appropriate.
Impairment of investment in subsidiaries
The Committee has reviewed management’s impairment analysis
of the Parent Company’s investment in subsidiaries. Following this
review it concurred that no impairment was required.
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Fair, balanced and understandable reporting
The Committee considered all the information available to it in
reviewing the overall content of the Annual Report and Financial
Statements and the process by which it was compiled and
reviewed, to enable it to provide advice to the Board that the
Annual Report and Financial Statements are fair, balanced and
understandable. In doing so, the Committee ensured that time
was again dedicated to the drafting and review process so that
internal linkages were identified and consistency was tested.
Drafts of the Annual Report and Financial Statements were
also reviewed by a senior executive not directly involved in
the year-end process who reported to the Committee on his
impressions of their clarity, comprehensiveness and the balance
of disclosure in the document. On completion of the process,
the Committee was satisfied that it could recommend to the
Board that the Annual Report and Financial Statements are
fair, balanced and understandable.
Risk management and internal controls
Risk management is inherent in management’s thinking and is
embedded in the business planning processes of the Group.
The Board has overall responsibility for establishing and
maintaining a system of risk management and internal control,
and for reviewing its effectiveness; the Audit Committee assists
the Board in reviewing the effectiveness of the Group’s system of
internal control, including financial, operational and compliance
controls, and risk management systems.
In 2023, Deloitte facilitated a comprehensive review of the
Group’s risk register. All Committee members participated in
this review of the Group’s existing risks and ongoing mitigating
actions, further details of which are given on page 72. The review
led to a further refinement of the Group’s risk register and a
reassessment and reallocation of responsibilities for managing
mitigation of the Group’s principal risks. The Committee believes
that this process for identifying and understanding its principal
risks and uncertainties, including its emerging risks, was robust
and appropriate.
The Committee considered the Company’s going concern
statement and challenged the nature, quantum and effects of
the combination of the unlikely but significant risks to the business
model, future performance, solvency and liquidity of the Group.
These were all modelled as part of the scenarios and stress testing
undertaken to support the Viability Statement. As part of this
review, the Committee considered the Group’s forecast funding
requirements over the next three years and analysed the impact
of key risks faced by the Group with reference to the Group’s
debt covenants; these included stress testing for a business
interruption due to an unplanned loss of a key plant and the
impact of a significant supply chain disruption. The Committee
noted that the Group’s debt headroom was sufficient to
accommodate the modelled stress scenarios. As a result of
its review, the Committee was satisfied that the going concern
statement and Viability Statement had been prepared on an
appropriate basis. The 2023 going concern statement and
the 2023 Viability Statement are contained within the Risk,
viability and going concern section on page 76.
The key features of the Group’s internal control system, which
provides assurance on the accuracy and reliability of the Group’s
financial reporting, are detailed in the Risk, viability and going
concern section on pages 72–78. During 2023, the Committee
considered the process by which management evaluates internal
controls across the Group. The Group Head of Internal Audit
provided the Committee with a summary overview of the
assurance provided by the Group’s control framework.
PwC reports if there are any significant control deficiencies
identified during the course of their audit, with no such
deficiencies reported in 2023.
The Group is made up of several large operating units, but
also many small units in geographically diverse locations.
Consequently, segregation of duties, overlapping access controls
on systems and remote management oversight can give rise to
control vulnerabilities and fraud opportunities. The Group has
not adopted a common Enterprise Resource Planning system as
a Group-wide standard, though where it becomes necessary to
update the ERP for a particular business, the same supplier is used
for these implementations, on a standardised basis. Over time,
the Group is moving towards more harmonisation of its ERP
landscape and a shared services model for financial transactions,
enabled by this process, systems and controls standardisation
between businesses. This is expected to enhance the overall
internal control environment in the smaller operating units.
In February 2023, the Group was the subject of a cyber incident
involving unauthorised access to our IT systems. The Group
responded swiftly to the incident, instigating the Cyber Incident
Plan and shutting down our IT systems to contain the incident.
The Group’s sites implemented their business continuity plans
to maintain their operations. The Audit Committee considered
the potential impact of the incident on the reporting of the
Group’s financial results and was satisfied that the data required
was not compromised.
Vesuvius plc
Annual Report and Financial Statements 2023
98
Audit Committee
continued
Although cyber security remains a matter for the full Board,
see page 73, the Committee considers the effectiveness of the
Group’s cyber controls at mitigating the risk of further incidents
that might impact the Group’s financial controls in the future.
In July, the Committee received a report from the Group’s
cyber consultants on the Group’s cyber security systems and
preparedness. This provided useful benchmark data on the
Group’s systems and processes, an analysis of the development
of the Group’s cyber security, including its resourcing, emerging
risks and the Group’s future plans for focus and investment.
The Committee believes that an appropriate control environment
exists, but recognises that there remain areas for further upgrade
in respect of the Group’s cyber risks. The Committee recognises
that with an organisation of the size and complexity of Vesuvius it
is virtually impossible to eradicate the risk of cyber attack but is
pleased to note that whilst the Group’s systems were penetrated,
the risk management plans and practices in place, particularly
the business continuity plans, did serve to mitigate the incident.
The Group undertakes a range of activities to mitigate the risk
of fraud. This framework is regularly reviewed to determine
areas for improvement. Eliminating the risk of fraud remains
one of the key areas of focus for Internal Audit, forming
a fundamental part of the Financial Controls and Compliance
audits. These assess the quality of the balance sheet
reconciliations, review key judgement matters, consider ERP
access rights, review tenders and quotations, review the entity’s
controls over the purchase requisition process, review the entity’s
controls over master data changes, and review controls over
payments, journals and associated applications, along with
travel and expense reimbursements.
Any control issues identified by management locally or as
a result of the work performed by Internal Audit are escalated as
appropriate. Internal Audit rates all control issues they identify in
terms of their significance and agrees remediation plans with the
management of the auditee and an action owner, in each case
establishing a target date for remediation. For significant issues,
management at all levels within the Business Unit are engaged
to agree the actions and remediation dates. The status of the
remediation is monitored and overdue issues are escalated
appropriately with management, and reported at Audit
Committee meetings. Where a specific audit identifies multiple
issues, or where issues arise on the progress of remediation
activities, the Audit Committee continues to challenge
management to identify root causes and ensure that the
right organisational structure and people are in place to
address issues effectively.
In line with the requirements of the Code, responsibility for
the oversight and monitoring of the Group’s Speak Up helpline,
which collates allegations of improper behaviour and employee
concerns, has passed from the Audit Committee to the full Board.
Members of the Committee are kept apprised of any complaints
received by the Company regarding fraud, accounting, internal
accounting controls and auditing matters. Further details of the
operation of the Group’s Speak Up policy and helpline can be
found on page 87.
Each year, the senior financial, operational and functional
management of the businesses self-certify compliance with
Group policies and procedures for the areas of the business under
their responsibility and confirm the existence of adequate internal
control systems throughout the year. The Committee reviews any
exceptions noted in this bottom-up exercise.
No significant control issues were raised by our External Auditors,
PwC and Mazars, in 2023, and no material issues were identified.
After considering these various inputs, the Committee was able
to provide assurance to the Board on the effectiveness of internal
financial control within the Group, and on the adequacy of the
Group’s broader internal control systems.
Internal Audit
The Group’s Internal Audit function operates on a global basis
through professionally qualified and experienced individuals
located in Poland, India, Malaysia and the Czech Republic.
The team reports to the Group Head of Internal Audit, who in
turn reports directly to the Chairman of the Audit Committee.
During the year the incumbent Group Head of Internal Audit
resigned. The Company currently has an acting Group Head of
Internal Audit and is focused on progressing the appointment
of a formal successor shortly.
Throughout 2023, Internal Audit continued to perform
a programme of audits focusing on internal financial controls
and key compliance issues. The Committee received, considered
and approved the 2023 Internal Audit plan which was constructed
using a risk-based approach to cover the Group’s control
environment. The plan is based on the premise that all operating
units are audited at least once every three to four years, and
each of the large operating entities located in Germany, the US,
China, Mexico and Brazil are audited on an annual basis.
Six categories of audit were conducted: Financial Controls Audits,
Deep Dive Trial Balance Audits, Compliance Audits, Focused
Audits (covering for example, purchasing, post acquisition and
P-cards), IT Audits and Follow-up Audits, with the majority of the
35 audit assignments undertaken in 2023 (2022: 32) focused on
financial controls. The Committee received a report from the
Group Head of Internal Audit at each of its meetings detailing
progress against the agreed plan and key trends and findings.
An update on the progress made towards resolving open issues
was also given. Common themes emerging from Internal
Audit reports coupled with Internal Audit and management’s
assessment of risk have informed the development of the
2024 Internal Audit plan.
When necessary, Internal Audit contracts auditors from other
audit firms to supplement internal resources on an ad hoc basis.
This process provides valuable learning opportunities and we
expect to continue to use external resources in specialist areas
and geographies in the future.
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Control issues are recorded in a live web-based database into
which management is required to report progress towards
addressing any open issues. Internal Audit monitors the progress
made and frequent meetings continue to be held with each
Business Unit President to ensure that engagement on the
resolution of issues is clearly understood at all levels of
the business and responsibility for remediation has been
appropriately assigned. The results are communicated to
the Audit Committee which also involves senior management
as necessary to provide an update against any high-priority
actions. Internal Audit undertakes follow-up reviews as required.
In situations where audit findings require longer-term solutions,
the Committee oversees the process for ensuring that adequate
mitigating controls are in place.
In 2023, the Audit Committee also commissioned EY to undertake
a formal review of the quality of the Group’s Internal Audit
function. EY assessed the Internal Audit function against
46 Institute of Internal Auditors standards and reported
to the Committee its observations on the function and
recommendations for improvement. In response to EY’s report,
the Group Head of Internal Audit prepared an action plan,
identifying key priorities for the function to address and
a timetable for changes to be made to further enhance the
effectiveness of the function.
At the end of the year the CFO also conducted an internal
review of the effectiveness of the Internal Audit function.
The feedback was positive overall with the function considered
to operate effectively.
Having considered the work of the Internal Audit function during
2023, including progress against the 2023 Internal Audit plan,
the quality of reports provided to the Committee, and the results
of the review of the function’s effectiveness, the Committee
concluded that the Internal Audit function operated effectively
during 2023, exhibiting an appropriate level of independence
and challenge.
External Audit
Auditors’ appointment
In 2017, the Company appointed PricewaterhouseCoopers LLP
(PwC) as External Auditors to the Company and the Group, and
Mazars LLP (Mazars) to audit the non-material entities within the
Group. Darryl Phillips serves as the PwC audit partner responsible
for the Group audit, a role he assumed following the completion
of the 2020 half-year review.
Under the Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order, the Audit
Committee is required to report in which year the Company
proposes to complete a competitive tender process in respect of
the statutory External Auditor, and the reasons why the proposed
year for the competitive tender process is in the best interests
of the shareholders. In compliance with the Order, the Audit
Committee confirms that a competitive tender process for the
appointment of a statutory auditor will, subject to satisfactory
annual reviews of the effectiveness of the External Auditors and
its costs in the intervening period, be conducted during 2025
or 2026 with a view to recommending the appointment of
a new statutory auditor or the reappointment of the incumbent
auditor, for the financial year ending December 2027. The Audit
Committee believes that conducting a competitive tender process
during 2025 or 2026 for the appointment of a new statutory
auditor for the financial year ending December 2027 will allow
enough time to ensure any successor firm would be independent
on appointment, and in the best interests of the shareholders.
2023 Audit plan
During the year the Committee evaluated the PwC Group audit
scope for 2023. The year-end audit plan was based on agreed
objectives, with the audit focused on areas identified as
representing significant risk and requiring judgement. In order
to manage costs, and ensure that the Group maintains audit
relationships outside the ‘Big 4’, Mazars undertakes some of the
Group audit work under the direction of PwC. It is principally
responsible for the statutory audits of the non-material Group
subsidiaries, but also undertook specific audit procedures for
certain component entities that were within PwC’s Group audit
scope in 2023. Mazars reported independently to PwC on this
work and the work was directed, supervised and reviewed by
PwC. Mazars also reported independently to the Committee
on the work it undertook auditing non-material subsidiaries.
PwC maintained an ongoing dialogue with the Audit Committee
throughout the year providing regular updates, including
commentaries on significant issues and its assessment of
consistency and appropriateness in the judgements and
estimates made by management. Private sessions were held
with PwC without management being present. PwC confirmed
that its work had not been constrained in any way and that it
was able to exercise appropriate professional scepticism and
challenge throughout the audit process. The Chairman of the
Audit Committee met on a number of occasions with PwC to
monitor the progress of the audit and discuss questions as they
arose. The Committee also received a report from Mazars
during the year which noted that there were no findings or
recommendations in respect of its statutory audits of the
non-material Group subsidiaries for the year ended 31 December
2022 that Mazars deemed sufficiently material or significant
to bring to the attention of the Audit Committee.
The Independent Auditors’ Report provided by PwC on pages
144–151 includes PwC’s assessment of the key audit matters.
These key audit matters are discussed in the significant issues
and material judgements comments above. The report also
summarises the scope, coverage and materiality levels applied
by PwC in its audit. As part of the audit planning process and
based on a detailed risk assessment, the Committee agreed
a materiality figure of £8.5m for Group financial reporting
purposes which is 17.5% lower than last year (£10.3m) and is
based on 5% of a three-year average of statutory profit before
tax. Importantly, much lower levels of materiality are used in the
audit fieldwork on the individual businesses across the Group and
these lower figures drive the scope and depth of audit work. Any
misstatement at or above £0.42m was reported to the Committee.
There were no significant changes this year to the coverage of
the audit which stood at 72% of the Group’s revenue and 74% of
statutory profit before tax. This coverage was considered to be
sufficient by the Committee. The audit coverage is reflective of the
long tail of smaller businesses within the Group that individually
are not ‘material’ to the Group result.
Vesuvius plc
Annual Report and Financial Statements 2023
100
Audit Committee
continued
The PwC audit fee approved by the Audit Committee was £2.3m.
This was constructed bottom-up on a local currency basis and
was assessed in light of the audit work required by the agreed
materiality level and scope. The fee agreed with Mazars for
the audit of the non-material entities and three material entities
was £1.0m, resulting in a combined audit fee for 2023 of £3.3m,
compared with £3.2m in 2022.
Independence and objectivity
The Committee is responsible for safeguarding the independence
and objectivity of the External Auditors in order to ensure the
integrity of the external audit process. It is responsible for the
implementation and monitoring of the Group’s policies on
external audit, including the policy on the employment of former
employees of the External Auditors, and the policy on the
provision of non-audit services by the External Auditors. To assist
with its assessment of independence, the Committee also sought
regular confirmation from the incumbent External Auditors
during 2023 that they considered themselves to be independent
of the Company in their own professional judgement, and within
the context of applicable professional standards. It assessed the
work of the External Auditors, reviewing compliance against the
non-audit services policy and reviewed the details of the non-
audit services provided by the External Auditors and associated
fees. As a result of its review, the Committee concluded that the
External Auditors remained appropriately independent.
Non-audit services
Vesuvius operates a policy for the approval of non-audit services.
A copy of the current policy is available to view in the Audit
Committee section of the ‘Investors/Corporate Governance’
pages of the Company’s website: www.vesuvius.com.
The use of the External Auditors for the provision of non-audit
services is strictly prohibited except for specific permitted
audit-related services. These comprise: Category 1 services
which the External Auditors are obliged to perform due to
law or regulation, such as regulatory and solvency reports;
and Category 2 services which could be provided by others
(albeit there are typically significant efficiencies to be had when
done in combination with the audit, such as interim reporting).
An annual budget for the additional Category 2 service fees
proposed to be paid to the External Auditors in the following year
is presented for pre-approval to the Audit Committee each year.
Audit Committee approval is required for expenditure in excess
of this approved budget.
All audit-related and permissible non-audit services proposed to
be carried out for any Group company worldwide by the External
Auditors must be pre-approved before an engagement is agreed.
Pre-approval must be obtained from the Head of Finance or the
Chief Financial Officer, who will confirm that the Audit Committee
has approved the engagement. Any assignment proposed to be
carried out by the External Auditors must also have been cleared
by the External Auditors’ own internal pre-approval process,
to assess the firm’s ethical ability to do the work.
In 2023, the fees for non-audit services payable to PwC amounted
to £0.2m (2022: £0.2m). The 2023 fees represent payment for
assurance services related to the review of the Group’s half-year
financial statements, quarterly reviews and tax form audits in
India (as required by regulation) and Mexico. These are services
where it was considered most efficient to use PwC because of their
existing knowledge of the business or because the information
required was a by-product of the audit process. In each of the past
four years the non-audit-related fees have represented <9% of
the statutory audit fees.
Effectiveness of the External Audit process
The Committee and the Board are committed to maintaining
the high quality of the external audit process. Each year the
Committee carries out a formal assessment of the performance
of the External Auditors in carrying out their work and of the audit
process in general. Input into the evaluation in 2023 was obtained
from management and other key Company personnel, members
of the Audit Committee and the External Audit team. The review
focused on the External Auditors’ mindset and culture, skills,
character and knowledge, and the quality of its controls, as set
out in the guidance for audit committees prepared by the FRC.
The evaluation of the External Auditors included the
following steps:
–
A survey of key finance and non-finance stakeholders in
Head Office and in-scope countries
–
A commentary-based survey of Audit Committee members
focused on their experience of working with PwC
–
A review of other external evidence on PwC audit quality
(e.g. report on PwC by the FRC)
–
Discussions with PwC and key finance and non-finance personnel
It was noted that the cyber incident in early February 2023 had
presented additional challenges for the External Auditors in
2023, resulting in the need for additional audit procedures and
delaying group reporting and audit work. Despite this, the
External Auditors had worked diligently to ensure that the audit
was completed for the scheduled signing date. The quality
of the audit team, their audit approach, technical expertise
and independence, were all positively rated along with their
communication of issues and findings. Debrief meetings were
held at a local level to discuss the 2022 audit, and to constructively
share feedback that would facilitate further improvements to
the audit planning for the 2023 audit.
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FRC Audit Quality Review
The Financial Reporting Council’s Audit Quality Review (AQR)
team routinely monitors the quality of the audit work of certain
UK audit firms through inspections of sample audits and related
quality processes. The AQR team selected to review the audit
of Vesuvius plc’s financial statements for the year ended
31 December 2022 as part of its 2023/24 annual inspection.
The AQR has provided us with a copy of their confidential report
which has been reviewed and discussed by the Audit Committee
with PwC. We are satisfied that no matters arose which required
significant action, and with PwC’s response to the inspection.
Reappointment of PwC for 2023
The Committee is responsible for making recommendations to
the Board in relation to the appointment, reappointment and
removal of the External Auditors. In undertaking this duty,
the Committee takes into consideration a number of factors
concerning the External Auditors and the Group’s current
activity, including:
–
The results of its most recent review of the effectiveness of
the Auditors
–
The results of its review of the independence and objectivity
of the Auditors, particularly in light of the provision of
non-audit services
–
Its ability to coordinate a global audit, working to
tight deadlines
–
The cost-competitiveness of the Auditors in relation to the
audit costs of comparable UK companies
–
The tenure of the incumbent Auditors
–
The periodic rotation of the senior audit management assigned
to the audit of the Company
–
External reviews of the performance and quality of the
Auditors, including:
–
The annual report issued by the Audit Quality Review team of
the Financial Reporting Council on the work of the Auditors
–
The Auditors’ own annual Transparency Report
Having considered the aforementioned factors, the Committee
recommended to the Board that PwC be reappointed for 2024.
It confirms that its recommendation is free from the influence of
any third party and that there are no contractual restrictions on
the choice of auditors. A resolution proposing the reappointment
of PwC will be included in the Notice of AGM for 2024.
Statement of compliance with the Competition
and Markets Authority (CMA) Order
The Committee considers that the Company has complied
with the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 (Article 7.1),
published by the CMA on 26 September 2014, including with
respect to the Audit Committee’s responsibilities for agreeing
the audit scope and fees and authorising non-audit services.
Audit Committee evaluation
The Audit Committee’s performance was evaluated as part of
the externally facilitated Board and Committee performance
evaluations, which are further described in-depth on pages 106
and 107. The review concluded that the Committee continued to
function well, with the management of meetings, quality of the
Committee’s relationships and communications with the key
counterparties, and review and oversight of key areas of
responsibility, considered to be effective. It was noted that the
forthcoming changes in European ESG regulations, and the
potential changes to corporate governance reporting would
remain matters of focus for the Committee during 2024, and that
ensuring a successful transition of the Audit Committee Chair
would also be a priority for the Committee over the coming year.
On behalf of the Audit Committee
Douglas Hurt
Chairman, Audit Committee
28 February 2024
Vesuvius plc
Annual Report and Financial Statements 2023
102
Dear Shareholder,
2023 was a year of ongoing change for the Board, and most
of the Committee’s work during the year related to Director
succession. At the beginning of January, after a diligent search
process, the Committee met to recommend the appointment
of Mark Collis as the Group’s new CFO, following Guy Young’s
resignation in September 2022. Mark joined the Group on 1 April
2023. Then, at the end of January, the Committee recommended
the appointment of Carla Bailo, as a new Non-executive Director.
This recommendation was the culmination of the Committee’s
activities at the end of 2022, which focused on identifying an
individual with extensive international industrial experience
to support the work of the Board.
Having filled these two vacancies, the Committee then focused
on future succession requirements. Noting that Douglas Hurt
would complete nine years’ service with the Company in 2024, the
Committee commenced searches in 2023 to identify individuals
to assume the roles of Chair of the Audit Committee and Senior
Independent Director. On 1 September 2023, Robert MacLeod,
a Chartered Accountant with experience serving as CEO and
CFO of UK-listed companies, joined the Board as a new Non-
executive Director. Robert will become the Chair of the Audit
Committee when Douglas retires from the Board at the close
of the 2024 AGM, subject to shareholder approval at that
meeting. On 15 February, we were also pleased to announce
the appointment of Eva Lindqvist as a Non-executive Director
with effect from the close of the 2024 AGM. Eva will take over
as Senior Independent Director from Douglas Hurt at that point.
Alongside this Board recruitment, the Committee also spent time
focusing on senior management development and succession
planning, particularly with respect to the changes to the
membership of the Group Executive Committee. The Committee
discussed the Group’s progress with the development of the senior
management pipeline, reviewing the turnover, sourcing and
diversity of staff in the Senior Leadership Group of c.150
managers. It received regular reports on developments in
senior leadership roles, and the capabilities of individuals in key
roles across the Group. It also considered the Group’s progress
on developing the senior management talent pool to ensure that
the right resources are readily available to fill future vacancies.
This work continues in 2024.
Yours sincerely
Carl-Peter Forster
Chairman, Nomination Committee
28 February 2024
Role and responsibilities
The Nomination Committee’s foremost priorities are to ensure
that the Company has the best possible leadership and that plans
are in place for orderly succession to both the Board and Group
Executive Committee positions. The Committee ensures that the
procedure for the selection of potential candidates for Board
appointments – either as an Executive Director or independent
Non-executive Director – is formal, rigorous and transparent,
and undertaken in a manner consistent with best practice.
It also ensures that the Board is composed of individuals with the
appropriate drive, abilities, diversity and experience to lead the
Company in the delivery of its strategy and that appointments
are made on merit, against objective criteria and with due regard
for the benefits of gender, social, ethnic and cognitive diversity,
and personal strengths.
The Committee is composed solely of Non-executive Directors
and is chaired by the Chair of the Board. The Chief Executive
and Chief HR Officer attend all scheduled meetings of the
Committee. Members’ biographies are set out on pages 80
and 81. The Committee met six times during the year. It operates
under formal terms of reference, a copy of which is available on
the Group’s website at: https://www.vesuvius.com/en/investors/
corporate-governance/committees.html.
The Committee and its members are empowered to obtain
outside legal or other independent professional advice at the
cost of the Company in relation to its deliberations. These rights
were not exercised during the year. The Committee may also
secure the attendance at its meetings of any employee or other
parties it considers necessary.
Board composition
The Committee keeps the current and future membership
needs of the Board and its Committees under continual review.
The independence and diversity of the Board are also examined
as part of the Group’s annual corporate governance review.
Having taken into account the structure, size and composition of
the Board, along with the existing tenure and prospective rotation
and retirement of Board members, the Committee sought to
recruit additional resource for the Board and its Committees
in 2023.
The Committee considered the Company’s ongoing compliance
with the Board Diversity Policy, also noting the update to the
UK Listing Rules effective for financial years starting on or after
1 April 2022, pursuant to which one of the Chair, Chief Executive,
Chief Financial Officer and Senior Independent Director should
be female. The Board recognises that over time the proportion
of female Directors may fluctuate naturally as Board members
retire and new Directors are appointed. The Board always seeks
to review a diverse list of candidates for all Board positions.
Carl-Peter Forster
– Committee Chairman
Carla Bailo
(from 1 February 2023)
Kath Durrant
Dinggui Gao
Friederike Helfer
Jane Hinkley
(until 18 May 2023)
Douglas Hurt
Robert MacLeod
(from 1 September 2023)
The Company Secretary is
Secretary to the Committee
Nomination Committee
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Board composition
–
Reflected on the balance of skills, knowledge and experience
of the current Directors and compared this to the list of
key skills the Board assesses are needed to support the
delivery of the Company’s strategy
–
Reviewed the membership needs of the Board and its
Committees, considering the existing tenure and the
prospective rotation and retirement of Board members
–
Recommended to the Board that Mark Collis be appointed
as the new CFO
–
Recommended to the Board that Carla Bailo be appointed
as a new Non-executive Director
–
Appointed Spencer Stuart to undertake searches for two
new Non-executive Directors, to take over the roles of Chair
of the Audit Committee and Senior Independent Director
from Douglas Hurt who will shortly have completed nine
years’ service on the Board
–
Considered and interviewed potential candidates, including
assessing whether individuals had appropriate time available
to commit to the roles, before making final recommendations
on the appointment of the two preferred candidates,
Robert MacLeod and Eva Lindqvist, to the Board
Succession planning and senior management development
–
Throughout the year, reviewed changes in personnel
in the Senior Leadership Group. Also, considered the
level of turnover in this Group and the activities being
undertaken to retain existing talent, along with the action
being taken to develop and recruit new executives to fill
gaps in this talent pool
–
Reviewed the Board and senior management succession
plans, focusing particularly on any gaps in these and the
action being undertaken to ensure these are filled on
a timely basis
–
Reviewed the Group’s talent management programme,
including the methods used to identify and develop
talent across the Group
Diversity
–
Reviewed the Group’s diversity with a focus on gender
diversity and the range of nationalities represented in the
Senior Leadership Group
–
Reviewed the Group’s progress in achieving its diversity
targets, noting the actions being taken to improve the
Group’s diversity, particularly the number of women
employed throughout the Group
–
Reviewed the Board Diversity Policy and recommended to
the Board that this be revised to include an aim to ensure
that by the end of 2024, at least 40% of the Directors are
women, and at least one of the senior positions (the Chair,
Chief Executive, Senior Independent Director and Chief
Financial Officer) is held by a woman, while continuing to
appoint candidates based on merit
Committee evaluation
–
Participated in the Board’s evaluation of its performance,
reviewing the Committee’s performance and effectiveness
during 2023, including evaluating whether each
Non-executive Director continued to be able to allocate
sufficient time to fulfil their duties
Governance
–
Approved the Nomination Committee report for publication
in the Annual Report
–
Reviewed the Committee’s terms of reference, and
recommended to the Board that no changes be made
to them
How the Nomination Committee delivered on its responsibilities in 2023
Vesuvius plc
Annual Report and Financial Statements 2023
104
Audit Committee Chair appointment process
Requirement
– Recognising that Douglas Hurt was due to
reach the ninth anniversary of his appointment to the Board in
April 2024, the Committee commenced a search for a suitable
successor to take on the role of Audit Committee Chair.
Brief
– The global specialist search consultant, Spencer Stuart,
was retained to assist with the search. Spencer Stuart has
adopted the Voluntary Code of Conduct addressing gender
diversity and best practice in search assignments. It does not
have any other connection with the Group, other than in respect
of management recruitment work undertaken as part of normal
trading activities.
Search considerations
– A candidate specification was
prepared taking into consideration the balance of skills,
knowledge and experience of the existing Directors, the diversity
of the Board, the independence of continuing Board members,
and the ongoing requirements and anticipated strategic
developments of the Group. Along with the focus on proven
financial expertise in a listed UK company, it was agreed that
the search would focus on individuals with recent and relevant
financial experience.
Review
– Spencer Stuart identified potential candidates and
produced a diverse longlist for consideration. A shortlist was
drawn up, based upon the objective criteria identified at the
beginning of the process and these candidates were invited
for interview with members of the Committee.
Selection
– The preferred candidate then met with the
remaining members of the Board. Detailed external references
were taken up and the candidate demonstrated that they
had sufficient time available to devote to the role. It was
confirmed that there were no potential conflicts of interest.
Appointment
– The Committee made a formal
recommendation to the Board for the appointment and the
Board approved the appointment.
Induction
– A comprehensive induction programme was put in
place. Robert was given access to past Board and Committee
papers, and a programme of meetings and site visits was drawn
up to ensure that he was quickly able to assimilate fundamental
information about the business and the Group’s operations.
Robert was invited to attend the Board’s June Strategy
meetings prior to his formal appointment to the Board.
Robert MacLeod induction programme
Areas covered:
Provided by:
Vesuvius’ purpose, strategy, customer and supplier landscape
and strategic priorities
CFO, BU Presidents, Group Head of Strategy,
Chief Digital Officer
Business operations, people and culture
Chief HR Officer, HeaTt Training, site visit to Borken, Germany
Financial position and performance, risk management
and treasury matters
CFO, Group Financial Controller, Group Head Internal Audit,
Group Treasurer
Health and safety and sustainability strategy
VP Sustainability, provision of policies/procedures,
access to past Board sustainability presentations
Corporate governance, Board operations, legal and
regulatory matters
General Counsel/Company Secretary, existing NEDs
Senior management development and succession
The Committee’s succession planning activities also encompass
the senior management levels immediately below the Board,
aiming to support and encourage the growth of a pool of talent
able to step up to the Group’s top roles. As a matter of routine,
the Committee is informed of changes in personnel in the Senior
Leadership Group and the Committee maintained oversight of
the changes to membership of the Group Executive Committee
throughout the year.
The Committee considers succession plans for all the senior
functional and Business Unit positions. It assesses the availability
of candidates who could cover the roles on a short-term
contingency basis should the need arise, along with the pool
of medium-term and long-term talent available for future
development into specific roles. It monitors the level of turnover
and diversity in the broader Senior Leadership Group, along with
the balance of internal promotions and external appointments
into these roles. During 2023, it continued to examine how the
Group’s talent management processes were developing, how
the senior management cadre was performing and how the
mentoring programme established for the development of
individuals flagged as ‘high potential’ was proceeding – all aimed
at developing the pipeline of experienced and talented managers
to succeed to roles at the highest level of the business. In this
process, the Committee focused both on the bench strength in
key skills and expertise, as well as the talent pipeline in critical
geographies. The Committee also considered the level of
turnover in the Senior Leadership Group and the activities being
undertaken to retain existing talent, along with the action being
taken to develop and recruit new executives to fill gaps in this
talent pool.
Diversity
The Group’s policy on Diversity and Equality outlines Vesuvius’
commitment to encouraging a supportive and inclusive culture
among its global workforce, promoting diversity and eliminating
any potential discrimination in our work environment. (See the
Policy summary on page 61.) Vesuvius’ Board Diversity Policy
explains how this commitment manifests in relation to the Board.
Vesuvius recognises the value of a diverse and skilled workforce
and is committed to creating and maintaining an inclusive and
collaborative workplace culture that will provide sustainability
for the organisation into the future. We believe that the dedication
and professionalism of our people is the most significant
contributor to our success. Having a balance of cultures,
ethnicities and genders helps to promote innovation, creativity
Nomination Committee
continued
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and engagement. The diversity of our senior management
cadre and employees is one of the core strengths of the Group.
(See pages 61 and 62 for further information about the Group’s
approach to diversity.)
The Nomination Committee considers the Group’s progress in
implementing the Group’s diversity policy each year and the
achievement of the Group’s diversity targets. Across the Group in
2023, 15% (2022: 15%) of our workforce were women, no change
versus 2022. The Group has set a target of ensuring that 25% of
the Senior Leadership Group of the Company (which comprises
c.150 individuals) are female by 2025. This KPI has been
incorporated into the long-term incentives of our senior
management. The number of women in the Senior Leadership
Group remained stable at 20% in 2023 (2022: 20%). Each of the
Group’s four Business Units has put in place strategies to enhance
gender diversity.
Board diversity
A large part of the work of the Nomination Committee focuses on
ensuring that the Board and its Committees have the appropriate
range of diversity, skills, experience, independence and
knowledge of the Company and the markets in which it operates,
to enable them to discharge their duties and responsibilities
effectively. The Board Diversity Policy confirms the Group’s
commitment to maintaining a diverse Board, while continuing
to appoint candidates based on merit. We continue to look
at diversity in its broadest sense – reflected in the range of
backgrounds and experience of Board members who are
drawn from different nationalities and have managed a variety
of complex global businesses. The Nomination Committee
recognises that diversity is a key ingredient in creating
a balanced culture for open discussions at Board level
and in minimising ‘groupthink’.
All independent Non-executive Directors serve on the Audit
and Remuneration Committees, and the Chairman and all the
Non-executive Directors serve on the Nomination Committee,
so the diversity of the Board’s principal Committees reflects
the diversity of our Non-executive Directors. The Nomination
Committee therefore considers the diversity of the Non-executive
Directors as a stand-alone cadre, as well as the diversity of the
Board as a whole, when considering recruitment to the Board.
In 2017, the Board set a target for at least 33% female Board
membership. This was achieved in 2019. In July 2023, the Board
set a revised target of 40% female Board membership, with at
least one of the senior Board positions (Chair, CEO, SID or CFO) to
be held by a woman by the end of 2024. As at 31 December 2023,
women continued to make up 33% of the Directors, one of the
Directors (11%) identified as having an Asian heritage, and
another Director (11%) identified as having a mixed-race
heritage. This represented a small decrease in the Board’s
gender and ethnic diversity versus 31 December 2022,
as a result of the increase in the Board from eight to nine
members. Currently, five Directors hold citizenship outside the UK.
As at 31 December 2023, the Board had not met the UK Listing
Rule targets for 40% of Directors on the Board to be women
and for a woman to hold at least one of the senior Board positions.
When Eva Lindqvist joins the Board at the close of the 2024 AGM,
the percentage of women on the Board will increase to 44%, and
as she will also take over as Senior Independent Director at the
close of the AGM, at that point a woman will also occupy one
of the senior Board positions.
Women made up 40% of the membership of the Audit and
Remuneration Committees as at 31 December 2023 (60% in
2022), and 43% of the membership of the Nomination Committee
(57% in 2022). There have been no changes in the constitution
of the Board or its Committees between 31 December 2023
and the date of this report.
Vesuvius plc recognises the value of a diverse and skilled workforce and
is committed to creating and maintaining an inclusive and collaborative
workplace culture that will provide sustainability for the organisation into
the future. Vesuvius is committed to ensuring equality of opportunities,
with the aim of promoting diversity and inclusion. In this context, the
promotion of diversity and inclusion relates, but is not limited to, both
protected and non-protected characteristics, including gender, age,
educational and professional background, ethnicity, sexual orientation,
disability and socio-economic background.
Objectives
–
The Nomination Committee will focus on ensuring that it, the Board and
the Board’s Committees, have the appropriate range of diversity, skills,
experience, independence and knowledge of the Company to enable
them to discharge their duties and responsibilities effectively
–
As all independent non-executive Directors serve on the Audit
and Remuneration Committees, and the Chairman and all of the
Non-executive Directors serve on the Nomination Committee, the
diversity of the Board’s principal Committees reflects the diversity of the
Non-executive Directors. For the purposes of considering the diversity
of the Board’s Committees, the Nomination Committee will therefore
consider the diversity of the Non-executive Directors as a stand-alone
cadre, as well as the diversity of the Board as a whole, when considering
recruitment to the Board
–
The Nomination Committee will ensure that all appointments to the
Board and its Committees are aligned with Vesuvius Policy, and are
based on merit with each candidate assessed against objective criteria
focused on the skills, experience and knowledge required of the
position, and with due regard to the benefits of diversity and inclusion
on the Board
–
The Nomination Committee will engage with executive search firms
in a manner which ensures that opportunities are taken for a diverse
range of candidates to be considered for appointment. This will include
ensuring that the Committee only uses search firms that are signed up
to the Voluntary Code of Conduct for Executive Search Firms
–
The Nomination Committee supports senior management efforts
to increase diversity in the senior management pipeline to facilitate
succession planning towards executive Board positions. With respect to
the representation of women on the Board, the Board is supportive of
the initiatives to increase the proportion of women on the boards of
FTSE 350 companies. Vesuvius aims, by the end of 2024, to achieve
a Board with at least 40% of the Directors being women, and at
least one of the senior positions (the Chair, Chief Executive, Senior
Independent Director and Chief Financial Officer) being held by
a woman, while continuing to appoint candidates based on merit
–
With regard to ethnic diversity, the Board is committed to ensure that
at least one Director is from a minority ethnic background
–
The Board recognises that over time the proportion of women Directors
and Directors from a minority ethnic background may fluctuate
naturally as Board members retire and new Directors are appointed
View the Board Diversity Policy on the Vesuvius website at:
https://www.vesuvius.com/content/dam/vesuvius/corporate/
Sustainability/policies/board-diversity-policy-july-2023.pdf
Vesuvius Board Diversity Policy
Vesuvius plc
Annual Report and Financial Statements 2023
106
Nomination Committee
continued
As at 31 December 2023, the gender balance of the Group’s employees was as follows:
Female
Male
Gender not
available
1
Total
Female
Male
Group Executive Committee members
2
5
7
29%
71%
Leadership roles reporting to members of the GEC
12
36
48
25%
75%
Senior Managers
2
14
41
55
25%
75%
All other employees
1,739
9,582
11,321
15%
85%
Vesuvius employees
1,753
9,623
11,376
15%
85%
Directly supervised contractors
43
165
1,927
2,135
Vesuvius employees and directly supervised contractors
1,796
9,788
1,927
13,511
Senior Leadership Group
3
29
116
145
20%
80%
1.
The Group had 1,927 directly supervised contractors who were contracted through third parties and for whom the Group does not hold detailed employment
records.
2.
Senior Managers comprise Group Executive Committee members plus key leadership roles reporting directly to members of the Group Executive Committee.
3. The Senior Leadership Group comprises the 145 most senior managers in the organisation.
As at 31 December 2023, the gender balance of the Directors and members of the Group Executive Committee was as follows:
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID and Chair)
Number in
Group Executive
Committee
Percentage of
Group Executive
Committee
Men
6
67%
4
5
71%
Women
3
33%
–
2
29%
Not specified/prefer not to say
–
–
–
–
–
The data for this table was collected by asking individuals to self-report against the categories displayed.
As at 31 December 2023, the ethnic background of the Directors and members of the Group Executive Committee was as follows:
Number of
Board members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID and Chair)
Number in
Group Executive
Committee
Percentage of
Group Executive
Committee
White British or other White
(including minority-white groups)
7
78%
75%
6
86%
Mixed/Multiple Ethnic Groups
1
11%
25%
1
14%
Asian/Asian British
1
11%
–
–
–
Black/African/Caribbean/Black British
–
–
–
–
–
Other ethnic group, including Arab
–
–
–
–
–
Not specified/prefer not to say
–
–
–
–
–
The data for this table was collected by asking individuals to self report against the categories displayed.
As at 31 December 2023, the gender balance of the Directors serving on the Audit, Remuneration and Nomination Committees was
as follows:
Number of
Audit and
Remuneration
Committee members
Percentage of
the Audit and
Remuneration
Committee
Number of
Nomination
Committee
members
Percentage of
the Nomination
Committee
Men
3
60%
4
57%
Women
2
40%
3
43%
Not specified/prefer not to say
–
–
–
–
The data for this table was collected by asking individuals to self report against the categories displayed.
Board evaluation
The Board carries out an evaluation of its performance in the
last quarter of each year. This year’s evaluation was overseen
by the Chairman, and was again externally facilitated by the
corporate advisory firm, Lintstock, following a review of providers.
The Group uses Lintstock’s Insider List database tool but has no
other connection with the organisation and Lintstock does not
have a connection with any of the Directors.
Each evaluation was conducted via a series of targeted
questionnaires, sent to all the Directors, the Company Secretary
and Chief HR Officer. As with previous years, the evaluation
covered both the performance of the Board and that of its
Committees, along with individual reviews of each Director
and an analysis of the performance of the Chairman. Narrative
reports were prepared for the Board, the Audit, Nomination and
Remuneration Committees, and in respect of the Chairman.
107
Strategic report
Governance
Financial statements
In 2023,
the Board
assessment
focused on
nine core
areas:
Board composition
and dynamics
Oversight of
stakeholders
Board support and
focus of meetings
Board Committees
Board Strategy
Meeting
Strategy oversight
Talent
Risk oversight
Priorities for change
Lintstock compared the Board’s ratings against those of other
organisations, to identify areas of particular strength and to
provide additional context.
Overall, the Board was felt to be well-composed with a good range
of skills and experience, covering a mixture of different industrial
sectors, functional expertise and geographies. The Board’s
dynamics were also rated highly overall, although it was noted that
a number of the topics discussed during the year had heightened
tension in the Boardroom. The Board’s understanding of the views
and requirements of stakeholders was rated highly with regard
to investors, employees and customers, with the Board’s visit to
a customer site in 2023 identified as particularly valuable.
The Chairman conducted one-on-one meetings with each of the
other Directors, to discuss the evaluation process and outcomes
and ensure that the Group was drawing effectively on each of
their skills and experience. He concluded that each Director
continued to contribute effectively to the work of the Board.
From these discussions a number of points for further attention of
the Board were highlighted, including the need to continue the
work of the new Board Chairman ensuring that the Board’s
agenda and discussions were focused on the strategic and
operational priorities for the year that would drive value for the
business. In this regard, the opportunity to hear more regularly
from senior Business Unit management on specific strategic
initiatives in their respective business units was highlighted, as well
as work being needed to balance priorities in the discussions at
the annual strategy meeting. It was noted that there was also
continued scope to improve the Board’s understanding of the
interests of key customers and suppliers.
In terms of the Group’s strategy, Vesuvius’ significant focus on
R&D was highly rated, with each Business Unit’s R&D activities
well understood. It was noted that this needs to remain a focus for
the Board’s attention going forward, together with reporting
on its effectiveness, given the fundamental part that technology
plays in the Vesuvius strategy. The Board considered that
sustainability initiatives were well-embedded throughout the
Group. The effectiveness of the Board’s workforce engagement
and the continued focus on talent retention, development and
succession planning was also highlighted.
An assessment of the Chairman was conducted by the Senior
Independent Director with overall feedback provided to the
Chairman. Each of the Committees was also considered to have
operated effectively during the year.
As in previous years, a set of action points was compiled from the
output of the evaluation to ensure that its findings are integrated
into the Board’s activities. These will be implemented by the Board
in 2024, with progress reviewed by the Board throughout the year.
The 2022 evaluation identified the following Board priorities for future Board attention; these were addressed during 2023 as follows:
Area
Issue
Action taken in 2023
Strategy
Further integrate information on
supplier base and profile into the
Board agenda
–
Group Head of Purchasing provided a detailed update on key Suppliers,
and procurement dynamics to the December Board meeting
–
BU Strategy presentations included improved information on key supplier issues
People and
organisation
Continue to develop a robust process
for succession plans for Executive
Directors and GEC members and talent
development for senior leaders
–
Nomination Committee received regular updates from the Chief Executive on senior
management developments
–
A formal session on the talent and succession pipeline for key roles was held at the
December Nomination Committee meeting
–
The CHRO reported on the talent development strategy and initiatives at the July
Nomination Committee meeting
Extend the geographical diversity/
representation on the Board
–
Carla Bailo was appointed to the Board in February 2023, bringing, in particular,
experience of working in North America and Japan
Improve the effectiveness of the site
visit programme, and improve
workforce engagement
–
A more formalised plan for site visits was introduced in 2023, with each NED committing to
conduct two site visits in addition to the annual offsite Board visits. A standardised agenda for
these visits was developed, together with more rigorous focus on consistent NED feedback
Organisation
Review Board agenda to ensure correct
focus on business, operational and
strategic topics
–
Initial steps were taken to update the content of the Board agenda, which freed more time
for debate on operational and strategic topics. Further work on this will continue in 2024
Committee evaluation
The Committee’s activities were a separate part of the externally
facilitated evaluation of Board effectiveness during the year.
The results of the questionnaires were collated, and a written
report tabled and discussed by the Committee, as well as being
discussed in one-on-one meetings with the Chairman. The
composition, management of Nomination Committee meetings
and quality of information provided, continued to be rated highly,
and the management of director succession was deemed to
operate effectively with the appointment of the CFO and new
Non-executive Directors during the year. Succession plans for the
Chief Executive and other members of the GEC were highlighted
as an area for continued focus. The pipeline of talent for these
roles continued to develop, but it was noted that there had been
some turnover during the year, and some gaps remained.
On behalf of the Nomination Committee
Carl-Peter Forster
Chairman, Nomination Committee
28 February 2024
Vesuvius plc
Annual Report and Financial Statements 2023
108
Kath Durrant
– Committee Chair
Carla Bailo
(from 1 February 2023)
Dinggui Gao
Jane Hinkley
(until 18 May 2023)
Douglas Hurt
Robert MacLeod
(from 1 September 2023)
The Company Secretary
is Secretary to the Committee
Dear Shareholder,
I am pleased to present our Directors’ Remuneration Report
(Remuneration Report) for 2023.
The report outlines how we implemented the Directors’
Remuneration Policy in 2023, following the approval of a new
remuneration policy in May 2023, and how we intend to apply
the Policy in 2024.
We are grateful to shareholders for their support for the revised
Policy in 2023 where 96.7% of voting shareholders voted in favour,
and for their approval of a new set of share plan rules. We also
appreciated the strong support of shareholders for last year’s
Remuneration Report, and welcomed the willingness of many
shareholders to engage, ahead of last year’s AGM, in discussions
on the proposals for changes to CEO remuneration and the
rationale behind them.
–
Reviewing and approving achievement against the
performance targets for the 2022 Annual Incentive
arrangements
–
Setting performance targets and approving the structure
of the 2023 Annual Incentive arrangements
–
Reviewing and assessing the Company’s attainment of
performance conditions applicable to the Vesuvius Share
Plan (VSP) awards made in 2020
–
Setting the performance measures and targets, and
authorising the grant of new awards in 2023 under the
VSP, the Deferred Share Bonus Plan and the Medium
Term Incentive Plan
–
Considering the Company’s ongoing share sourcing
requirements to meet obligations under the Company’s
share plans, and funding of the Employee Benefit
Trust (EBT)
–
Reviewing employee remuneration arrangements around
the Group, with particular reference to the ongoing cost
of living issues facing many of our workforce
–
Considering retention issues and implementing significant
uplifts in base pay for the next levels of management
–
Approving the 2022 Directors’ Remuneration Report
–
Reviewing the Committee’s terms of reference
–
Approving remuneration arrangements for the new CFO
–
Approving the 2024 remuneration for the Chairman,
Chief Executive, CFO and senior management
Key activities in 2023
Overview of executive remuneration
In last year’s report we outlined concerns regarding the stability
and retention of the senior leadership team, and the consequent
proposals for a significant increase in quantum for the CEO. Some
adjustments were also made to the remuneration structure for
members of the Group Executive Committee. I am pleased to
report far greater stability during 2023. The Committee will
continue to keep executive remuneration under review – both in
terms of the structure of incentives and quantum relative to the
global marketplace in which it recruits executives.
This year we have approved more normalised levels of increase
to base pay for our Executive Directors (5% for the CEO and 5%
for the CFO) – just below the global workforce budget of 6.1%.
Note we continue to use the global workforce as our primary
comparator rather than the UK workforce which represents
less than 1% of our total population of employees.
Our new CFO, Mark Collis, joined Vesuvius during the year and
has settled well. The arrangements indicated in last year’s
remuneration report, to compensate for various awards foregone
from his prior employer, have been executed. All payments and
equity awards made have been made on a like-for-like basis in
terms of quantum/value and timing. All share awards are made
in line with the rules of the Vesuvius Share Plan and Remuneration
Policy. Resulting shares, once vested, will be retained and count
towards Mark’s shareholding requirement. The detail of these
compensatory buy-out awards is reported in detail on pages
126 and 129.
2023 Remuneration Policy
As noted above, 96.7% of voting shareholders approved the
Policy in May 2023. The policy reflected the extensive reviews
of remuneration undertaken in the previous two years, and in
particular shareholder consultation on a revised set of KPIs
in line with the Company’s strategy, changes to incentive
opportunity levels for Executive Directors, and a continuation of
a performance share arrangement for long-term incentivisation.
Directors’ Remuneration Report
Remuneration overview
109
Strategic report
Governance
Financial statements
Alignment of our KPIs with Company strategy, purpose and values
The delivery of financial KPIs and the development of an effective organisation sustainable over the long term relies on a clear set
of values. Vesuvius believes that high levels of performance and growth require a diversity of thinking and continuous innovation,
underpinned by the behaviours of courage, ownership, respect and energy. The alignment of our incentives with our strategic objectives
is summarised in the table below. The reward structure operated as intended in 2023 and no changes are proposed in the KPIs used to
assess performance in 2024.
KPI
2023 and 2024
weighting
Strategic
rationale
Annual Incentive Plan: one-year performance
EPS
40%
Consistent with our strategic aim of sustainable, profitable growth
Maintains the primary focus on a profit measure in short-term incentivisation
Working capital/sales
20%
Consistent with our strategic aim of maintaining strong cash generation and an efficient
capital structure
Post-tax ROIC
20%
Consistent with our strategic aim of generating sustainable profitability and creating
shareholder value
Personal measures
20%
Enables a focus on specific personal deliverables, managed through the performance
management system
Vesuvius Share Plan: three-year performance
Relative TSR
40%
Consistent with our strategic aim of delivering shareholders a superior return on
their investment
Post-tax ROIC
40%
Consistent with our strategic aim of generating sustainable profitability and creating
shareholder value
ESG
20%
Provides a specific focus on the three priority long-term ESG measures for the Group:
CO
2
intensity (10%), Safety (5%) and Diversity (5%)
Performance and incentive outcomes in 2023
Health and safety
As the Chairman and Chief Executive outlined in their statements,
Safety continues to be a key priority at Vesuvius, and is part of the
culture in our operations and in the Boardroom. Each CEO Board
report starts with a report on safety performance in the period
and provides extensive detail of any incidents. The Vesuvius team
have been successful in 2023 in achieving their best-ever safety
performance, reflecting a continued focus on improvement,
training and risk management. A Lost Time Injury Frequency
Rate of 0.6 injuries per million hours worked was recorded for
2023 – an improvement on the rate of 1.08 reported for 2022.
This performance is strong not least because a large proportion
of our workforce work on customer sites, and the majority work
in industrial and factory environments. Safety will continue to
be a KPI in the long-term incentive plan where we hope to
consolidate 2023 rates and improve further.
Operational
2023 again witnessed a difficult macro-economic environment
in many of our markets – and in our customers’ end-markets.
Destocking and falling steel production created tough trading
conditions. In Europe, steel production declined 7.3% in 2023
compared with 2022 and in South America it declined 5.8%.
Chinese production remained stable, supported by increases
in exports. India was the only major region in the world to exhibit
strong growth – up 11.8%. In Foundry, a similar backdrop of low
demand and destocking particularly affected markets in Europe,
China and South America.
Vesuvius plc
Annual Report and Financial Statements 2023
110
Remuneration overview
continued
In this context the team has done a good job in executing plans to
grow market share in Flow Control and Foundry in most regions in
spite of lower volumes; tightly managing pricing – where all Business
Units fully recovered cost increases, and partnered with customers
to share the value from our technologically advanced products;
and controlling costs, both at a Group level, and in Business Units.
The team has demonstrated real resilience in managing very difficult
market conditions and focusing on all areas they can control in
order to maximise performance in this part of the cycle.
Revenue for the year decreased 3% on an underlying basis
vs 2022. Trading profit at £200.4m was 6.7% lower than 2022
(on an underlying basis) and return on sales decreased by
40 bps, on an underlying basis, to 10.4%. These results reflect the
challenging year for Vesuvius and many industrial businesses.
Our trade working capital to sales ratio was 23.4%, a modest
improvement on 2022. We continue to work to reduce the ratio,
focusing on driving down overdues, and managing production
to control inventory levels. Product quality metrics have continued
to improve.
Free cash flow from continuing operations remained strong at
£128.2m with a 93% cash conversion rate. Net debt remains firmly
under control. The strong balance sheet enabled the Board to
approve a £50m share buyback which commenced during 2023,
and interim and final 2023 dividends of 23 pence per share.
Strategic
We again increased our investment in research and development
to £37m in 2023 (2022: £36m), fully expensed in our profit and
loss statement. Our main focus areas remain innovation in
materials science, with the objective to continuously improve
the performance of our consumables, and the development of
mechatronics solutions enabling our customers to substitute
operators to manipulate our consumables and, by doing so,
improve their safety, reliability, cost and quality performance.
R&D productivity improvements enabled 21 new products to
be launched in 2023 and improved the proportion of sales from
products launched in the prior five years to 17.6% (16.4% in 2022,
15.3% in 2021).
Capex investment in 2023 was largely directed towards
strategically important capacity expansion in Flow Control –
in India for both VISO and flux; in North America for VISO; and in
EMEA for VISO and slide-gate production. Investments in India for
Advanced Refractories and in India and China for Foundry also
commenced to provide new levels of capacity in important regions.
The Sustainability initiative launched in 2020 has continued to
deliver strong results across the associated KPIs, with Scope 1 and 2
CO
2
e emission intensity continuing to reduce, the 2023 emissions
intensity was 20.2% lower than the 2019 base year (reflecting pro
forma performance as if the dolime process had been operating
normally); sustained focus on diversity with women representing
20% of the Senior Leadership Group; and succession candidates
identified for the majority of critical roles.
The Chief Executive led the Board through extensive strategy
discussions, exploring options for both organic and inorganic
growth. A successful Capital Markets Event during the year
enabled investors to explore the Company’s medium-term strategy
for growth. It examined the strong fundamentals of the business
today, its investment in R&D to provide long-term technological
advantage, and investment in regional capacity to ensure the
penetration of growing markets around the world.
Strategic
Value
alignment
Safety
Better environments
and outcomes for
Vesuvius staff
and customers
Sustainability
Less energy usage
and fewer CO
2
emissions in our
processes and
our customers’
processes
Quality
Optimised products
driving better steel,
and better castings
Rewarding careers
We encourage
and reward high
performance
to create an
environment where
all can realise their
individual potential
Efficiency
Cheaper casting
and steel through
reduction of
input costs
Return for investors
Optimised
pricing and
market share gains
driving improved
profitability
See
Business
Model
on
p20
and 21
In 2023, the Annual Incentive Plan (AIP) was based 40% on Group
headline earnings per share (EPS), 20% on Group post-tax ROIC
(return on invested capital), 20% on the Group’s working capital to
sales ratio (based on the 12-month moving average) and 20% on
specified personal objectives. Performance against these measures
is illustrated below and full details of the targets are given on pages
126 and 127. For consistency with the original targets, financial
performance excludes unbudgeted M&A costs. On this basis:
–
Our headline earnings per share (restated at December 2022
exchange rates and adjusted for unbudgeted M&A costs)
was 51.2 pence, which was above the maximum Annual
Incentive Plan target of 47.9 pence
–
Similarly, the Group’s post-tax ROIC of 9.0% after adjustment
for unbudgeted M&A costs, sat above the Annual Incentive
Plan target of 8.5%, but below the maximum of 10.0%
The Group’s working capital to sales ratio of 23.4% sat between
the threshold Annual Incentive Plan target of 23.8% and the
target of 23.1%.
The Committee agreed personal objectives for the Chief
Executive at the start of 2023, and for the CFO upon his
appointment in April 2023, and assessed their performance
to merit 79.0% and 73.5% of maximum targets respectively.
As a result, the overall outcome for the Chief Executive was
74.8% of maximum opportunity, and for the CFO, was 73.7%
of maximum, noting that the CFO’s opportunity is prorated to
reflect his appointment part way through 2023.
The Committee gave careful consideration to these outcomes and
was satisfied that they were consistent with the resilient financial
and operational performance and strategic progress outlined
above. The Committee noted that similar and complementary
KPIs exist in the incentive programmes for managers and
employees and was mindful of the outturns for the wider
workforce in confirming its decisions for Executive Directors
and the Executive Committee. Consequently, the Committee
concluded that no discretionary adjustment was required to
the formulaic outturns set out above.
The performance period for the awards made under the Vesuvius
Share Plan (VSP) in 2021 was completed at the end of 2023.
Performance was measured equally by reference to total
shareholder return (TSR) relative to the FTSE 250 (excluding
investment trusts) and Group headline earnings per share, and
yielded a vesting outturn of 49.76% of maximum for the Chief
Executive (noting that the CFO was not in receipt of a 2021
award). Again, the Committee gave careful consideration to
the related outcomes, and concluded that no discretionary
adjustment was required.
111
Strategic report
Governance
Financial statements
Chairman and Non-executive Directors’ fees
During the year, the Committee reviewed the Chairman’s annual
fee, and determined that an increase from £250,000 p.a. to
£262,500 p.a. was appropriate. Separately, the Board considered
Non-executive Director fees and made a number of consequent
adjustments to the fee structure that are detailed on page 130.
Employee engagement
During the year the Non-executive Directors visited plants in
Brazil, China, Germany, India, the Netherlands and the United
States. Each of these site visits enabled direct discussions with
local management teams and the workforce on a range of topics.
At larger sites, ‘town hall’ meetings were also held and enabled a
two-way dialogue on a range of issues of interest to the workforce.
In these meetings it was usual for Non-executive Directors to
present on how the Board and its Committees operate, and on
corporate governance, including executive remuneration.
In 2023, the Remuneration Committee received a report from
the Chief HR Officer regarding workforce terms and conditions
across the globe. The subsequent discussion enabled the
Committee to better understand the standards applied across a
highly decentralised group to ensure appropriate and competitive
remuneration arrangements exist in each operating company.
The key issues raised continue to reflect the pressures of the
present inflationary environment in higher inflation countries,
though it is helpful that in much of the world pay settlements have
fallen during the year compared to the peaks experienced in
2022, and early 2023; the impact of low unemployment levels in
many of our main markets, retirement levels and decreasing
workforce availability, are all driving very competitive recruitment
market conditions at all levels of the organisation. The Committee
noted the range of solutions developed as part of the People
Strategy – including improved employer branding and alternative
recruitment market targeting.
Shareholder engagement
At the 2023 AGM, the Annual Report on Remuneration was
supported by 82.2% of voting shareholders and I am very grateful
for this demonstration of broad-based support for the executive
remuneration arrangements proposed last year.
Ahead of the AGM, the Company’s top 22 shareholders were
consulted on the proposed changes to the Remuneration Policy
and discussions regarding changes in the CEO’s remuneration
took place at length either in face-to-face meetings or through
detailed correspondence where this was the shareholder’s
preference. We are grateful for the responses received and
discussions had, and appreciate the support expressed by
many of our shareholders.
The business has delivered a resilient performance in 2023,
in tough market conditions, by operationally focusing on the
areas within its control; it has been steadfast in its determination
to build for the future through investments in R&D and strategic
capacity expansion. We hope to gain your support for the
Remuneration Report at the forthcoming AGM.
Kath Durrant
Chair of the Remuneration Committee
28 February 2024
Weighting
50%
Total shareholder return
50%
Headline EPS
Vesuvius Share Plan 2021 outturn
Performance
51%
48%
Patrick André,
Chief Executive
Threshold
On-target
51%
48%
Mark Collis,
C
hief Financial
Officer
Weighting
Performance
40%
EPS
20%
ROIC
20%
Working capital/sales ratio
20%
Personal objectives
Annual Incentive Plan outturn
100%
79%
Patrick André,
Chief Executive
Mark Collis,
C
hief Financial
Officer
Threshold
On-target
74%
67%
100%
100%
29%
29%
67%
Vesuvius plc
Annual Report and Financial Statements 2023
112
Remuneration Committee structure
The current members of the Remuneration Committee are all
the independent Non-executive Directors of the Company.
The Committee Chair is Kath Durrant. She, Dinggui Gao and
Douglas Hurt have served on the Committee throughout 2023.
Carla Bailo joined the Committee on her appointment to the
Board on 1 February 2023 and Robert MacLeod on his
appointment to the Board on 1 September 2023. Jane Hinkley
retired from the Board at the 2023 AGM having served as
a Director for more than ten years, the majority of which
she also served as Chair of the Committee.
The Committee complies with the requirements of the UK
Corporate Governance Code for the composition of remuneration
committees. Each of the members brings a broad experience
of international businesses and an understanding of their
challenges to the work of the Committee. The Company Secretary
is Secretary to the Committee. Members’ biographies are on
pages 80 and 81.
Meetings
The Committee met seven times during the year. The Group’s
Chairman, Chief Executive, Chief Financial Officer and Chief HR
Officer were invited to each meeting, together with Friederike
Helfer, Vesuvius’ non-independent Non-executive Director,
though none of them participated in discussions regarding their
own remuneration. In addition, a representative from Deloitte,
the Remuneration Committee adviser, attended the meetings.
The attendees supported the work of the Committee, giving
critical insight into the operational demands of the business and
their application to the overall remuneration strategy within the
Group. In receiving views on remuneration matters from the
Executive Directors and senior management, the Committee
recognised the potential for conflicts of interest to arise and
considered the advice accordingly. The Chair of the Committee
reported the outcomes of all meetings to the Board.
The Committee operates under formal terms of reference
which were reviewed during the year. The terms of reference
are available on the Group website: www.vesuvius.com.
The Committee members are permitted to obtain outside legal
advice at the Company’s expense in relation to their deliberations.
The Committee may also secure the attendance at its meetings
of any employee or other parties it considers necessary.
Role and responsibilities
The Committee is responsible for:
–
Determining the overall remuneration policy for the Executive
Directors, including the terms of their service agreements,
pension rights and compensation payments
–
Setting the appropriate remuneration for the Chairman,
the Executive Directors and senior management (being the
Group Executive Committee)
–
Reviewing workforce remuneration and related policies,
and the alignment of incentives and rewards with culture,
taking these into account when setting the policy for
Executive Director remuneration
–
Overseeing the operation of share incentive plans
Advice provided to the Remuneration Committee
Deloitte is appointed directly by the Remuneration Committee
to provide advice on executive remuneration matters, including
remuneration structure and policy, updates on market practice
and trends, and guidance on the implementation and operation
of share incentive plans. The Committee appointed Deloitte,
a signatory to the Remuneration Consultants Group Code of
Conduct in relation to Executive Remuneration Consulting in
the UK, following a formal tender process in 2014. Deloitte
also provides the Remuneration Committee with ongoing
calculations of total shareholder return (TSR) to enable the
Committee to monitor the performance of long-term share
incentive plans. Deloitte does not have any other connection
with any individual Director.
In addition, in 2023, Deloitte provided the Group with IFRS 2
calculations for the purposes of valuing the share plan grants
and, within the wider Group, was engaged in various jurisdictions
to provide tax advisory work, and some consultancy services.
During 2023, Deloitte’s fees for advice to the Remuneration
Committee, charged on a time spent basis, amounted to
£72,370. The Committee conducted a review of the performance
of Deloitte as remuneration adviser during the year and
concluded that Deloitte continued to provide effective, objective
and independent advice to the Committee. No conflict of
interest arises as a result of other services provided by
Deloitte to the Group.
Operation of the Remuneration Committee
Directors’ Remuneration Report
113
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The Committee is satisfied that the Remuneration Policy, approved in 2023, is designed to promote the long-term success of the
Company in accordance with the requirements of the Code with regard to:
The Remuneration Policy was prepared in accordance with the Companies Act 2006 and the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (as amended). It also meets the requirements of the Financial Conduct
Authority’s Listing Rules and the Disclosure Guidance and Transparency Rules.
Executive remuneration arrangements
are transparent with full disclosure in the
Annual Report. The Annual Incentive
structure for the Executive Directors is
based on the same structure utilised for
senior executives throughout the Group.
Long-term sustainable growth is core to
the long-term incentive, and alongside
five-year holding periods clearly aligns
the interests of executives with those of
the Group’s shareholders.
The remuneration illustrations indicate
the minimum and maximum potential
remuneration. The Committee reviews
the underlying financial performance
of the Company over the performance
period, and the non-financial
performance of the Group and
participants, to ensure that pay-out levels
are justified. The Committee has the
discretion to amend the final vesting
level if required.
The Policy, with its focus on three core
elements: fixed pay, Annual Incentive and
Long-Term Incentive, is clear, simple and
easy to understand.
The Committee believes that the
performance-related elements of
remuneration have financial targets
which are transparent, stretching and
clearly align the Executive Directors’
remuneration with the delivery of the
Group’s strategy. The Vesuvius Share
Plan rewards long-term performance
directly linked with the Group’s strategy
and results, ensuring that only strong
performance is rewarded (see page 123).
The Committee has carefully analysed
the range of possible outcomes of
awards and believes the Policy to be fair
and proportionate, with the clear linkage
to Group profitability mitigating the
potential for excessive rewards and the
reliance on audited profit numbers and
externally verified TSR targets serving to
mitigate behavioural risk. The Committee
has discretion under the Vesuvius Share
Plan to determine the vesting of awards
in accordance with the Code requirement
and malus and clawback provisions
also apply.
The Executive Directors’ incentive
arrangements are consistent with the
Group’s core strategic objective of
delivering long-term sustainable and
profitable growth and support our
performance-orientated culture,
Values and purpose (see page 110).
Clarity
Predictability
Simplicity
Proportionality
Risk
Alignment to culture
Remuneration Policy design principles
Directors’ Remuneration Report
Remuneration Policy design
Vesuvius plc
Annual Report and Financial Statements 2023
114
The policy set out below contains minor amendments,
as appropriate, to reflect activities undertaken in 2023.
For reference, the policy, as approved by shareholders at the
AGM on 18 May 2023, can be found on pages 124 to 132 of the
2022 Annual Report, available on the vesuvius.com website.
Comparison of Remuneration Policy for Executive Directors
with that for other employees
The Remuneration Policy for Executive Directors is designed in line
with the remuneration philosophy set out in this report – which also
underpins remuneration for the wider Group. However, given that
remuneration structures for other employees need to reflect both
seniority and local market practice, they differ from the policy
for Executive Directors. In particular, Executive Directors receive
a higher proportion of their remuneration in performance-related
pay and share-based payments.
All members of the Group Executive Committee participate in the
Vesuvius Share Plan and receive awards of Performance Shares,
which vest on the basis of the same performance targets set for
the Executive Directors. The level of awards granted to members
of the Group Executive Committee who don’t serve on the Board
are lower than those granted to the Executive Directors.
Middle and senior managers also participate in the Annual
Incentive Plan and, in certain cases, longer-term share or
cash-based plans, with awards predominantly based on
a blend of Group and regional or Business Unit performance
measures appropriate for the scope of participants’
responsibilities. Individual percentages of variable versus
fixed remuneration and participation in share-based
structures increase as seniority increases.
Consideration of conditions elsewhere in the Group in
developing policy
The Non-executive Directors participated in a number of ‘town
hall’ meetings and site visits during the year which provided the
opportunity to engage with the workforce on a wide range of
issues, including executive remuneration where appropriate.
The Remuneration Committee also commissioned an annual
review of workforce remuneration in 2023, which reported on
general remuneration, incentives and benefits practices around
the Group and, in addition, included insights on the latest trends
in our key markets. The latter was supported by a detailed
compensation competitiveness review commissioned by
management during the year, which highlighted the talent
attraction and retention challenges facing the Group in many
locations. This review reinforced the Committee’s commitment to
ensure that the Group operates a market-competitive approach
to remuneration which fosters the motivation and retention of
key talent, right up to Executive level. The Committee takes into
account all such detail regarding the pay and employment
conditions of other Group employees when determining Executive
Directors’ remuneration, particularly when determining base
salary increases, when the Committee will consider the salary
increases for other Group employees in the same jurisdiction.
Consideration of shareholder views
Vesuvius is committed to open and transparent dialogue with
its shareholders on remuneration as well as other governance
matters. The Chair of the Committee welcomes shareholder
engagement and is available for any discussions investors wish
to have on remuneration matters.
2023 Remuneration Policy
Directors’ Remuneration Report
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Remuneration Policy Table for Executive Directors
1
Alignment/purpose
Operation
Opportunity
Performance
S
Base salary
Helps to recruit and
retain key employees.
Reflects the individual’s
experience, role and
contribution within
the Company
Base salary is normally reviewed annually,
with changes effective from 1 January.
Base salary is positioned to be
market competitive when considered
against other global industrial companies,
and relevant international and FTSE 250
companies (excluding investment trusts).
Paid in cash, subject to local tax
and social security regulations.
Salary increases will normally
not exceed the average increase
awarded to other employees in the
Group, although increases may
be made above this level at the
Committee’s discretion in appropriate
circumstances. In considering any
increase in base salary, the Committee
will also take into account:
(i)
The role and value of the individual
(ii)
Changes in job scope or
responsibility
(iii)
Progression in the role
(e.g. for a new appointee)
(iv)
A significant increase in the scale
of role and/or size, value or
complexity of the Group
(v)
The need to maintain market
competitiveness
No absolute maximum has been set
for Executive Director base salaries.
Current Executive Directors’ salaries
are set out in the Annual Report on
Directors’ Remuneration section of
this Remuneration Report.
Any increase will take into account the
individual’s performance, contribution
and increasing experience.
B
Other benefits
Provides normal,
market-aligned
benefits
A range of benefits including, but not
limited to: car allowance, private medical
care (including spouse and dependent
children), life insurance, disability and
health insurance, expense reimbursement
(including costs if a spouse accompanies
an Executive Director on Vesuvius business),
together with relocation allowances and
expatriate benefits, in some instances
grossed up for tax, in accordance with
the Group’s policies, and participation in
any employee share scheme operated by
the Group.
There is no formal maximum as benefit
costs can fluctuate depending on
changes in provider, cost and
individual circumstances.
1
None.
P
Pension
Helps to recruit and
retain key employees
Ensures income
in retirement
An allowance is given as a percentage of
base salary. This may be used to participate
in Vesuvius’ pension arrangements,
invested in own pension arrangements
or taken as a cash supplement (or any
combination of the above options).
Maximum of 17% of base salary
for incumbent Executive Directors
from the end of 2022, in line with
the average of that received by the
majority of the global workforce.
2
The level of allowance for Executive
Directors appointed following the
adoption of this Policy will be aligned
with the post-retirement benefits
applicable to the majority of the
workforce or, where appropriate,
to the majority of the workforce
of the relevant geography.
None.
1.
The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions
available to it in connection with such payments), notwithstanding that they are not in line with the Policy set out here, where the terms of the payment
were agreed: (i) before the Policy set out here came into effect, provided that the terms of the payment were consistent with the shareholder-approved
Remuneration Policy in force at the time they were agreed; or (ii) at a time when the relevant individual was not a Director of the Company and, in the opinion
of the Remuneration Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes, ‘payments’
include the Remuneration Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are
‘agreed’ at the time the award is granted.
2.
As analysed in the business’s Workforce Retirement Practices review conducted in 2020, as detailed on page 122 of the 2020 Annual Report.
Vesuvius plc
Annual Report and Financial Statements 2023
116
2023 Remuneration Policy
continued
Alignment/purpose
Operation
Opportunity
Performance
AI
Annual Incentive
Incentivises Executive
Directors to achieve
key short-term financial
and strategic targets
of the Group
Additional alignment
with shareholders’
interests through
the operation of
bonus deferral
Normally 33% of any Annual Incentive
earned by Executive Directors will be
deferred into awards over shares under
the Vesuvius Deferred Share Bonus
Plan which normally vest after at least
three years, other than in specified
circumstances, i.e. in cases of dismissal
for cause, as outlined on page 120
in this Policy. These may be cash or
share settled.
The Committee has the discretion to
award participants the equivalent
value of dividends accrued during the
vesting period on any shares that vest.
Subject to malus and clawback.
Below threshold: 0%.
At threshold: Between 0 and 25%
of maximum.
On-target: 50% of the applicable
maximum opportunity in any year.
Maximum: Up to 175% of base salary.
The Remuneration Committee will
normally set the level of maximum
bonus opportunity for each Executive
Director at the start of each year.
Payments start to accrue on meeting
the threshold level of performance,
with payments between threshold and
on-target and between on-target and
maximum made on a pro rata basis.
The Annual Incentive is normally
measured on targets set at the
beginning of each year. In unusual
or exceptional circumstances, for
example where there is exceptional
economic volatility which limits visibility
to set robust 12-month targets, the
Committee may elect to set and
measure targets other than on an
annual basis. The majority of the
Annual Incentive will be determined
by measure(s) of Group financial
performance. The remainder of the
Annual Incentive will be based on
financial, strategic or operational
measures appropriate to the individual
Director. Actual performance targets
will be disclosed after the performance
period has ended. They are not
disclosed in advance due to their
commercial sensitivity.
The Committee may use its discretion to
amend the formulaic outturn upwards
or downwards if it does not consider the
formulaic outcome appropriate.
VSP
Vesuvius Share Plan
(VSP)
Aligns Executive
Directors’ interests with
those of shareholders
through the delivery
of shares. Rewards
Executive Directors for
achieving the strategic
objectives of growth
in shareholder value
and earnings
Assists retention of
Executive Directors
over a three-year
performance period
and the further
two-year holding period
VSP awards to Executive Directors are
granted as Performance Share awards.
These may be cash or share settled.
Awards vest three years after their
award date, other than in specified
circumstances outlined elsewhere in
this Policy, subject to the achievement
of specified conditions. All vested
shares, net of any tax liabilities, are then
subject to a further two-year holding
period after the vesting date, which
will continue to apply notwithstanding
the termination of employment of the
participants during this holding period,
except at the Committee’s discretion in
exceptional circumstances, including
a change of control or where the
participant dies or has left employment
due to ill health, injury or disability.
The Committee has the discretion to
award participants the equivalent value
of dividends accrued during the vesting
period and further two-year holding
period on any shares that vest.
Subject to malus and clawback.
Executive Directors are eligible to
receive an annual award with a face
value of up to 200% of base salary in
Performance Share awards.
Vesting at threshold performance is
between 0 and 25% of the award,
rising to vesting of the full award
at maximum.
Vesting will be subject to performance
conditions as determined by the
Remuneration Committee ahead of
each award. Those conditions will
be disclosed in the Annual Report
on Directors’ Remuneration section
of the Remuneration Report. The
performance conditions for 2024
are relative TSR, post-tax ROIC and
ESG measures, weighted at 40%,
40% and 20% respectively. The
Remuneration Committee will retain
discretion for future awards to include
additional or alternative performance
conditions which are aligned with the
corporate strategy.
At its discretion, the Committee may
elect to add additional underpinning
performance conditions.
The Company reserves the right
only to disclose certain of the
performance targets after the
performance period has ended,
due to their commercial sensitivity.
Prior to any vesting, the Remuneration
Committee reviews the underlying
financial performance of the Group
over the performance period, and
the non-financial performance of the
Group and participants, to ensure
that the vesting is justified. Following
this review, the Committee has the
discretion to amend the final vesting
level if it does not consider that it
is justified.
117
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Patrick André, Chief Executive
Minimum
On-target
Maximum
Maximum, including
share-price appreciation
Fixed elements
Annual variable elements
Long-term variable elements
100%
43%
30%
27%
25%
35%
40%
31%
21%
29%
50%
£946k
£2,212k
£3,781k
£4,537k
Mark Collis, Chief Financial Officer
*
Minimum
On-target
Maximum
Maximum, including
share-price appreciation
100%
48%
29%
23%
30%
35%
35%
25%
30%
45%
£556k
£1,151k
£1,879k
£2,210k
Remuneration illustrations
£000
*
Annualised equivalent shown for illustrative purposes.
Illustration of the application of the Remuneration Policy for 2024
The charts below show the total remuneration for Executive
Directors for 2024 for minimum, on-target and maximum
performance. The fixed elements of remuneration comprise
base salary, pension and other benefits, using 2024 salary data.
The assumptions on which they are calculated are as follows:
Minimum
Fixed remuneration only.
On-target
Fixed remuneration plus on-target Annual Incentive (made at
87.5% of base salary for Patrick André and 75% for Mark Collis);
and for the Performance Share awards under the Vesuvius Share
Plan, median performance for the TSR element and the mid-point
between threshold and maximum performance for the post-tax
ROIC and ESG performance conditions (with overall vesting at
40% of maximum, based on the vesting schedule detailed on
page 124). No share price appreciation is assumed.
Maximum
Fixed remuneration plus maximum Annual Incentive (being full
achievement of financial and personal targets, made at 175%
of base salary for Patrick André and 150% for Mark Collis) and
100% vesting for Performance Share awards (made at 200%
of base salary for Patrick André and 150% of base salary for
Mark Collis) under the Vesuvius Share Plan. No share price
appreciation is assumed.
Maximum including assumed 50% share price appreciation
This shows the value of the maximum scenario if 50% share price
appreciation is assumed over the three-year performance period
of the Performance Share awards.
Note: In addition, the Committee retains the discretion to award dividends
(either shares or their cash equivalent) on any shares that vest.
Vesuvius plc
Annual Report and Financial Statements 2023
118
2023 Remuneration Policy
continued
General operation of the Policy for Executive Directors
Shareholding guidelines
The Remuneration Committee encourages Executive Directors
to build and hold a shareholding in the Company equivalent in
value to at least 200% of base salary.
Compliance with the shareholding policy is tested at the end
of each year for application in the following year, with the
valuation of any holding being taken at the higher of: (1) the share
price on the date of vesting of any shares derived from a share
award, in respect of those shares only; and (2) the average of the
closing prices of a Vesuvius ordinary share for the trading days
in that December.
Unless exceptionally the Committee determines otherwise,
under the post-employment shareholding guideline the Executive
Directors will remain subject to their shareholding requirement in
the first year after their cessation as an Executive Director and
to 50% of the shares retained in the first year during the second
year after such cessation, recognising that there is no requirement
to purchase additional shares if the shares held when they
cease to be an Executive Director are less than the applicable
shareholding guideline. However, in relation to shares acquired
by an Executive Director in their personal capacity, the Committee
may, where appropriate, exempt such shares from the
post-employment guideline.
Malus/clawback arrangements
The Executive Directors’ variable remuneration is subject to malus
and clawback provisions. These provide the Committee with the
flexibility, if required, to withhold or recover payments made to
Executive Directors under the Annual Incentive Plan (including
deferred awards) and/or to withhold or recover share awards
granted to Executive Directors under the Vesuvius Share Plan,
including any dividends granted on such awards. The
circumstances in which the Committee could potentially elect
to apply malus and clawback provisions include: a material
misstatement in the Group’s financial results; an error in the
calculation of the extent of payment or vesting of an incentive;
gross misconduct by an individual; or significant financial loss or
serious reputational damage to Vesuvius plc resulting from an
individual’s conduct, a material failure of risk management or
a serious breach of health and safety. These malus and clawback
provisions apply for a period of up to three years after the end of
a performance period (or end of the deferral period in respect of
awards made under the Vesuvius Deferred Share Bonus Plan).
Performance measures
In selecting performance measures for the Annual Incentive,
the Committee seeks to reflect key strategic aims and the need
for a rigorous focus on financial performance. Each year,
the Committee agrees challenging targets to ensure that
underperformance is not rewarded. The Company will not be
disclosing the specific financial or personal objectives set until
after the relevant performance period has ended because
of commercial sensitivities. The personal objectives are all
job-specific in nature and track performance against key
strategic, organisational and operational goals.
In selecting performance measures for the Vesuvius Share Plan,
the Committee seeks to focus Executive Directors on the execution
of long-term strategy and also align their rewards with value
created for shareholders. In the Policy period, the Committee
will continually review the performance measures used to ensure
that awards are made on the basis of challenging targets that
clearly support the achievement of the Group’s strategic aims.
The Committee may vary or waive any performance condition(s)
if circumstances occur which cause it to determine that the original
condition(s) have ceased to be appropriate, provided that any
such variation or waiver is fair, reasonable and not materially
less difficult to satisfy than the original condition (in its opinion).
In the event that the Committee were to make an adjustment
of this sort, a full explanation would be provided in the next
Remuneration Report.
Service contracts for Executive Directors
The Committee will periodically review the contractual terms for
new Executive Directors to ensure that these reflect best practice.
Service contracts currently operate on a rolling basis and are
limited to a 12-month notice period.
Patrick André is employed as Chief Executive of Vesuvius plc
pursuant to the terms of a service agreement made with the
Company dated 17 July 2017. Mark Collis is employed as
Chief Financial Officer pursuant to the terms of a service
agreement with Vesuvius plc dated 4 January 2023. Patrick
André’s appointment is terminable by Vesuvius on not less than
12 months’ written notice, and by him on not less than six months’
written notice. Mark Collis’s appointment is terminable by him
and Vesuvius on not less than six months’ written notice.
External appointments of Executive Directors
The Executive Directors do not currently serve as non-executive
directors of any other quoted company. Subject always to consent
being granted by the Company for them to take up such an
appointment, were they to so serve, the Company would allow
them to retain any fees they received for the performance
of their duties.
Other
The Committee may: (a) in the event of a variation of the
Company’s share capital, demerger, special dividend or any other
corporate event which it reasonably determines justifies such an
adjustment, adjust; and (b) amend the terms of awards granted
under the share schemes referred to above in accordance with
the rules of the relevant plans.
Share awards may be settled by the issue of new shares or by the
transfer of existing shares. In line with prevailing best practice at
the time this Policy was approved, any issuance of new shares is
limited to 5% of share capital over a rolling ten-year period in
relation to discretionary employee share schemes and 10% of
share capital over a rolling ten-year period in relation to all
employee share schemes.
The Committee may make minor amendments to the Policy
set out in this Policy Report (for regulatory, exchange control,
tax or administrative purposes or to take account of a change
in legislation) without obtaining shareholder approval for
that amendment.
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Policy for joining and leaving:
Recruitment policy
Typical event
Policy
Executive Director
appointed or promoted
On appointment or promotion of a new Executive Director, the Committee will typically use the
Remuneration Policy in force at the time of the Committee’s decision to determine ongoing remuneration.
Base salary levels will generally be set in accordance with the Remuneration Policy current at the time of
the Committee’s decision, taking into account the experience and calibre of the appointee. Other than in
exceptional circumstances, other elements of annual remuneration will, typically, be set in line with the
Remuneration Policy, including a limit on awards under the Annual Incentive and Vesuvius Share Plan
of 375% of salary in aggregate.
First year of appointment
If appropriate the Committee may apply different performance measures and/or targets to a Director’s
first incentive awards in his/her year of appointment.
Service contract agreed
Service contracts will be entered into on terms similar to those for the existing Executive Directors,
summarised in the service contracts of Executive Directors section above.
Appointment
of Chairman or
Non-executive Director
With respect to the appointment of a new Chairman or Non-executive Director, appointment terms will be
consistent with those applicable at the time the appointment is agreed. Variable pay will not be considered.
With respect to Non-executive Directors, fees will be consistent with the Policy at the time the appointment
is agreed. If, in exceptional circumstances, a Non-executive Director was asked to assume an interim
executive role, the Company retains the discretion to pay them appropriate executive compensation,
in line with the Policy.
Individual appointed
on a base salary below
market, contingent
on performance
If it is appropriate to appoint an individual on a base salary initially below what is adjudged to be market
positioning, contingent on individual performance, the Committee retains the discretion to realign base
salary over the one to three years following appointment, which may result in a higher rate of annualised
increase than might otherwise be awarded under the Policy. If the Committee intends to rely on this
discretion, it will be noted in the first Remuneration Report following an individual’s appointment.
Internal appointment
In the event that an internal appointment is made, or where a Director is appointed as a result of transfer
into the Group on an acquisition of another Company, the Committee may continue with existing
remuneration provisions for this individual, where appropriate.
Relocation required
If necessary and appropriate to secure the appointment of a candidate who has to move locations as
a result of the appointment, whether internal or external, the Committee may make additional payments
linked to relocation, above those outlined in the policy table, and would authorise the payment of
a relocation allowance and repatriation, as well as other associated international mobility terms.
Such benefits would be set at a level which the Committee considers appropriate for the role and the
individual’s circumstances.
Buying out compensation
forfeited on leaving
previous employer
In addition to the annual remuneration elements noted above, the Committee may consider buying out
terms, incentives and any other compensation arrangements forfeited on leaving a previous employer that
an individual forfeits in accepting an appointment with Vesuvius. The Committee will have the authority to
rely on Listing Rule 9.4.2 R(2) or to apply the existing limits within the Vesuvius Share Plan to make Restricted
Share awards on recruitment. In making any such awards, the Committee will review the terms of any
forfeited awards, including, but not limited to, vesting periods, the expected value of such awards on
vesting and the likelihood of the performance targets applicable to such awards being met, while retaining
the discretion to make any buy-out award the Committee determines is necessary and appropriate.
The Committee may also require the appointee to purchase shares in Vesuvius to a pre-agreed level
prior to vesting of any such awards. The value of any buy-out award will be capped, to ensure its maximum
value is no higher than the value of the awards that the individual forfeited on joining Vesuvius. Any such
awards will be subject to malus and clawback.
Reimbursement
of other costs
In addition to the elements noted above, the Committee may consider reimbursement of other
demonstrable, specific costs incurred by an individual in relation to their appointment (e.g. legal costs).
Vesuvius plc
Annual Report and Financial Statements 2023
120
2023 Remuneration Policy
continued
Policy for joining and leaving:
Exit payment policy
Vesuvius has the option to make a payment in lieu of part or
all of the required notice period for Executive Directors. Any
such payment in lieu will consist of the base salary, pension
contributions and value of benefits to which the Director would
have been entitled for the duration of the remaining notice period,
net of statutory deductions in each case. Half of any payments
in lieu of notice would be made in a lump sum, the remainder in
equal monthly instalments commencing in the month in which the
midpoint of their foregone notice period falls (and are reduced or
extinguished by salary from any role undertaken by the departing
Executive in this time). Executive Directors are subject to certain
non-compete covenants for a period of nine to 12 months, and
non-solicitation covenants for a period of 12 months, following the
termination of their employment. Their service agreements are
governed by English law.
Executive Directors’ contracts do not contain any change of
control provisions; they do contain a duty to mitigate should
the Director find an alternative paid occupation in any period
during which the Company must otherwise pay compensation
on early termination.
The table below summarises how the awards under the annual
bonus and Vesuvius Share Plan are typically treated in different
leaver scenarios and on a change of control.
Whilst the Committee retains overall discretion on determining
‘good leaver’ status, it typically defines a ‘good leaver’ in
circumstances such as retirement with agreement of the
Company, ill health, disability, death, redundancy, or part of
the business in which the individual is employed or engaged
ceasing to be part of the Group. Final treatment is subject to
the Committee’s discretion.
Event
Timing
Calculation of vesting/payment
Annual Incentive Plan – during period prior to payment
Good leaver
Paid at the same time as to
continuing employees.
Annual bonus is paid only to the extent that any performance
conditions have been satisfied and is pro rated for the proportion
of the financial year worked before cessation of employment.
In determining the level of bonus to be paid, the Committee may,
at its discretion, take into account performance up to the date of
cessation or over the financial year as a whole based on appropriate
performance measures as determined by the Committee. The bonus
may, at the Committee’s discretion, be paid entirely in cash.
Bad leaver
Not applicable.
Individuals lose the right to their annual bonus.
Change of control
Paid on the effective date
of change of control.
Annual bonus is paid only to the extent that any performance
conditions have been satisfied and is prorated for the proportion
of the financial year worked.
Annual Incentive Plan – in respect of any amount deferred into awards over shares under the Vesuvius Deferred Share Bonus Plan
Good leaver
On the date of the event.
Deferred awards vest in full.
Bad leaver
On the date of the event.
Other than dismissal for cause, deferred awards will vest in full.
Change of control
1
Within seven days of the event.
Deferred awards vest in full.
Vesuvius Share Plan
Good leaver
2
On normal release date (or earlier
at the Committee’s discretion).
Unvested awards vest to the extent that any performance conditions
have been satisfied and a pro rata reduction applies to the value
of the awards to take into account the proportion of performance
period not served, unless the Committee decides that the reduction
in the number of vested shares is inappropriate.
Bad leaver
Unvested awards lapse.
Unvested awards lapse on cessation of employment.
Change of control
1
On the date of the event.
Unvested awards vest to the extent that any performance
conditions have been satisfied and a pro rata reduction applies
for the proportion of the vesting period not served, unless the
Committee decides that the reduction in the number of vested
shares is inappropriate.
1.
In certain circumstances, the Committee may determine that unvested awards under the Vesuvius Deferred Bonus Plan and Vesuvius Share Plan will not
vest on a change of control but will instead be replaced by an equivalent grant of a new award, as determined by the Committee, in the new company.
2.
Under the rules of the Vesuvius Share Plan, any vested shares, net of any tax liabilities, are subject to a further two-year holding period after the vesting date.
The holding period may be terminated early at the Committee’s discretion in exceptional circumstances, including a change of control or where the award
holder dies or leaves employment due to ill health, injury or disability.
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Financial statements
Benefits normally cease to be provided on the date employment
ends. However, the Committee has the discretion to allow
some minor benefits (such as health insurance, tax advice and
repatriation expenses) to continue to be provided for a period
following cessation where this is considered fair and reasonable,
or appropriate on the basis of local market practice. In addition,
the Committee retains discretion to fund other expenses for the
Executive Director; for example, payments to meet legal fees
incurred in connection with termination of employment, or to meet
the costs of providing outplacement support, and de minimis
termination costs up to £5,000 to cover the transfer of mobile
phone or other administrative expenses.
The Committee reserves the right to make any other payments in
connection with a Director’s cessation of office or employment
where the payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such
an obligation) or by way of a compromise or settlement of any
claim arising in connection with the cessation of a Director’s office
or employment.
In certain circumstances, the Committee may approve new
contractual arrangements with departing Executive Directors,
including (but not limited to) settlement, confidentiality, restrictive
covenants and/or consultancy arrangements. These would be
used only where the Committee believed it was in the best
interests of the Company to do so.
Remuneration Policy for Non-executive Directors
The Company seeks to appoint Non-executive Directors
who have relevant professional knowledge and have gained
experience in a relevant industry and geographical sector,
to support diversity of expertise on the Board and match
the wide geographical spread of the Company’s activities.
Non-executive Directors attend Board, Committee and other
meetings, held mainly in the UK, together with an annual strategy
review to debate the Company’s strategic direction.
All Non-executive Directors are expected to familiarise
themselves with the scale and scope of the Company’s business
and to maintain their specific technical skills and knowledge.
The Board sets the level of fees paid to the Non-executive
Directors after considering the role and responsibilities of each
Director and the practice of other companies of a similar size and
international complexity. The Non-executive Directors do not
participate in Board discussions on their own remuneration.
Alignment/purpose
Operation
Opportunity
Performance
Fees
To attract and
retain Non-executive
Directors of the
necessary skill and
experience by offering
market-competitive fees
Fees are usually reviewed every year by the Board.
Non-executive Directors are paid a base fee for the
performance of their role plus additional fees for roles
that involve significant additional time commitment
and/or responsibility. Such roles could include, but are
not limited to, Committee chairmanship (and, where
appropriate, membership) or acting as the Senior
Independent Director. Fees are paid in cash.
When travelling internationally on Company business,
all Non-executive Directors may also be provided
with additional travel allowance payments, reflecting
the associated time commitment, paid in cash.
The Chairman is paid a single cash fee and receives
administrative support from the Company.
Non-executive Directors and the Chairman will be paid
market-appropriate fees, with any increase reflecting
changes in the market or adjustments to a specific
Non-executive Director’s role.
Any travel allowances payable will be reflective
of travel time incurred as necessary to fulfil
Company business.
No eligibility for bonuses, retirement benefits or to
participate in the Group’s employee share plans.
Base fees paid to Non-executive Directors excluding
the Chairman will, in aggregate, remain within the
aggregate limit stated in our Articles, currently
being £500,000.
None.
Benefits and expenses
To facilitate execution
of responsibilities
and duties required
by the role
All Non-executive Directors are reimbursed for
reasonable expenses incurred in carrying out
their duties (including any personal tax owing on
such expenses).
Should the Board deem it appropriate, additional
benefits can be provided to Non-executive Directors
as required (e.g. liability insurance).
Non-executive Directors’ expenses are paid in
accordance with Vesuvius’ expense procedures.
Provision of additional benefits will be at the
discretion of the Board and will reflect the reasonable
needs of a Non-executive Director in undertaking
Company business.
None.
Vesuvius plc
Annual Report and Financial Statements 2023
122
2023 Remuneration Policy
continued
Terms of service of the Chairman and other
Non-executive Directors
The terms of service of the Chairman and the Non-executive
Directors are contained in letters of appointment. Each
Non-executive Director is appointed subject to their election
at the Company’s first Annual General Meeting following their
appointment and re-election at subsequent Annual General
Meetings. The Chairman is entitled to six months’ notice from the
Company. None of the other Non-executive Directors is entitled
to receive compensation for loss of office at any time.
All Non-executive Directors are subject to retirement, and election
or re-election, in accordance with the Company’s Articles of
Association. The current policy is for Non-executive Directors
to serve on the Board for a maximum of nine years, with review
at the end of three and six years, subject always to mutual
agreement and annual performance evaluation. The Board
retains discretion to extend the tenure of Non-executive Directors
beyond this time, subject to the requirements of Board balance
and independence being satisfied.
The table below shows the date of appointment for each of the Non-executive Directors:
Non-executive Director
Date of appointment
Carl-Peter Forster
1 November 2022
Carla Bailo
1 February 2023
Kath Durrant
1 December 2020
Dinggui Gao
1 April 2021
Friederike Helfer
4 December 2019
Douglas Hurt
2 April 2015
Robert MacLeod
1 September 2023
Executive Directors’ remuneration in year ahead
The table below sets out the phasing of receipt of the various elements of Executive Director remuneration for 2024.
2024
2025
2026
2027
2028
2029
Description and link to strategy
S
Base salary
Salaries are set at an appropriate level to enable the Company
to recruit and retain key employees, and reflect the individual’s
experience, role and contribution within the Company.
B
Benefits
Provides normal market practice benefits.
P
Pension
The pension benefit helps to recruit and retain key employees
and ensures income in retirement.
AI
Annual
Incentive
The Annual Incentive incentivises the Executive Directors
to achieve key short-term financial and strategic targets
of the Group.
AI
Deferred
Annual
Incentive
The deferral of a portion of the Annual Incentive increases
alignment with shareholders.
VSP
Vesuvius
Share Plan
Awards under the Vesuvius Share Plan align Executive
Directors’ interests with those of shareholders through the
delivery of shares and assist in the retention of the Executive
Directors. The VSP rewards the Executive Directors for
achieving the strategic objectives of growth in shareholder
value and earnings.
Annual Report on Directors’ Remuneration
Directors’ Remuneration Report
Holding
period
123
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Governance
Financial statements
The table below sets out how the Remuneration Policy will be applied to the Executive Directors’ remuneration for 2024. Further details
about each of the elements of remuneration are set out in the Remuneration Policy.
S
Base salary
Patrick André
£756,000
Mark Collis
£441,000
2023:
£720,000
2023:
£420,000
As explained in the Committee
Chair’s letter, the CEO was
awarded a 5% increase,
effective 1 January 2024.
As explained in the Committee
Chair’s letter, the CFO was
awarded a 5% increase,
effective 1 January 2024.
B
Benefits
Benefits for Executive
Directors may include:
–
Car allowance
–
Private medical care
–
Relocation expenses
–
Tax advice and tax
reimbursement
–
Commuting costs
–
School fees
–
Directors’ spouses’ travel
–
Administrative expenses
P
Pension
17% of base salary, in line with the average received by the majority of the global workforce.
AI
Annual Incentive
Annual Incentive potential for
Patrick André, maximum value
175%
of base salary
Annual Incentive potential for
Mark Collis, maximum value
150%
of base salary
For 2024, the maximum Annual Incentive potential for Patrick André will remain at the level previously available, i.e. 175% of base salary
with target Annual Incentive potential being 87.5% of base salary for the achievement of target performance in all elements. For Mark
Collis, potential will also remain at the level previously available, i.e. 75% at target, and 150% at maximum. Pay-outs will commence and
increase incrementally from 0% once the threshold performance for any of the elements has been met. 33% of any Annual Incentive
earned will be deferred into awards over shares, which will vest after a holding period of three years.
These incentives are based 40% on Group headline earnings per share, 20% on the Group’s working capital to sales ratio (based
on the 12-month moving average), 20% on post-tax return on invested capital (ROIC) and 20% on specified personal objectives.
The Company will not be disclosing the targets set until after the relevant performance period has ended because of commercial
sensitivities. Targets will be set and assessed so as to exclude approved restructuring costs and any unbudgeted M&A costs.
The personal objectives for 2024 are focused on long-term strategic objectives or are job-specific in nature and track performance
against the Group’s key strategic, organisational and operational goals with a specific focus on ESG outcomes.
VSP
Vesuvius Share Plan
(VSP)
Patrick André, maximum value
200%
of base salary
Share awards with a maximum value of 200% of salary will be
granted to Patrick André and, for Mark Collis a maximum value
of 150% of salary will be granted.
The strike price for the awards will be determined by reference to
the average share price over the 30 calendar days prior to grant.
Vesting of 40% of shares awarded will be based upon the
Company’s TSR performance relative to that of the constituent
companies of the FTSE 250 (excluding investment trusts),
40% on post-tax return on invested capital (ROIC) and
20% on ESG. Targets are set out overleaf. Performance will be
measured over three years with awards vesting after three years.
There will then be a further two-year holding period applicable
to the awards.
Mark Collis, maximum value
150%
of base salary
Vesuvius plc
Annual Report and Financial Statements 2023
124
Annual Report on Directors’ Remuneration
continued
Targets for the VSP Awards for the year 2024
TSR ranking relative to FTSE 250 excluding
investment trusts
Weighting
40%
Vesting percentage
(of total LTIP)
Below median
0%
Median
10%
Between median and
upper quintile
Pro rata between
10% and 40%
Upper quintile and above
40%
Post-tax ROIC
1
Weighting
40%
Vesting percentage
(of total LTIP)
2
Average ROIC over
three- year
performance period
Threshold and below
0%
8.5%
Maximum
40%
11.5%
1.
ROIC is defined as Net Operating Profit After Tax (NOPAT), divided by
invested capital (IC). NOPAT is defined as Group trading profit, plus post-
tax share of JV results, less amortisation of intangible assets calculated as
an average over the target period. (The inclusion of amortisation charges
serves to reduce the calculation of ROIC returns though we believe this to
be the most appropriate definition.) Invested capital is defined as total
assets excluding cash and non-interest-bearing liabilities, calculated as
the average of IC at the start and the end of the target period at constant
currency. See Note 35.18 of the Group Financial Statements.
2.
Vesting between these points will be on a straight-line basis.
Environment, Social , Governance
Weighting
20%
Safety:
Average Lost Time Injury Frequency Rate (LTIFR)
1
2024–2026
Vesting percentage
(of total LTIP)
2
Range
Threshold and below
0%
0.95
Maximum
5%
0.65
Energy: CO
2
e:
Reduction in Scope 1 and 2 CO
2
e emission intensity
(vs 2019 baseline) in 2026
3
Vesting percentage
(of total LTIP)
2
Range
Threshold and below
0%
-20%
Maximum
10%
-26%
Diversity:
Gender diversity in Senior Leadership Group
4
on 31 Dec 2026
Vesting percentage
(of total LTIP)
2
Range
Threshold and below
0%
20%
Maximum
5%
26%
1.
LTIFR is the Lost Time Injury Frequency Rate, based on the number
of lost time injuries that occur during the performance period per million
hours worked.
2.
Straight-line vesting between threshold and maximum.
3.
Reduction of CO
2
e emissions per metric tonne of product packed
for shipment.
4.
Senior Leadership Group is defined as the Group Executive Committee plus
the most senior Vesuvius managers worldwide, in terms of their contribution
to the Group’s overall results and to the execution of the Group’s strategy.
This group comprises between 140 and 170 members (number may slightly
fluctuate from one year to the next based on organisational changes).
Explaining the ROIC target range
The Committee has considered the Group strategy over the
period, market conditions, and historic and current estimates
of WACC provided by our financial advisers in determining
the target range.
Whilst we expect ROIC to be at the lower end of the range in
Year 1, we believe a range of 8.5–11.5% to be appropriate for
the VSP award 2024–2026. The targets have been set, and
performance will be assessed, excluding approved restructuring
costs. The threshold pay-out level remains at 0% this year,
but may change for future awards.
Adjustments to the ROIC target range may be required
should the Board approve certain mergers, acquisitions or
disposals. For any such event that requires Board approval then
management will assess the potential impact on ROIC as part
of their broader submission, and the Committee will determine
whether any adjustment to targets should be made. In general,
the Committee will have regard to the materiality of the event
and the timing in the life of the award cycle. The intention will
be to maintain fair, stretching but achievable targets, whilst not
providing a disincentive to management to bring forward
proposals for mergers, acquisitions or disposals that are in
the Company’s interest.
Explaining the ESG metrics
The Environment, Social and Governance targets for the 2024
awards represent key strategic priorities for the management
team as well as the Board.
Safety continues to be of paramount cultural importance
to Vesuvius and progressive improvement has been made
in recent years. The targets are considered stretching in the
context of an operationally challenging environment with many
employees working remotely at customer sites. Lost Time Injury
Frequency Rate is a recognised metric, and is measured per
million hours worked.
Energy – the reduction in Scope 1 and 2 emissions is a key feature
of the Company’s sustainability strategy (see pages 32–53) and as
such a measure of CO
2
e emission intensity is used (CO
2
e emissions
per tonne of product packed for shipment). Baseline and current
emissions have been verified by Carbon Footprint Ltd. Vesuvius
has committed to achieve a net zero status by 2050 at the latest
and a roadmap, with clear intermediary targets in 2025 and 2035,
has been established, as detailed in our Non-Financial and
Sustainability Information Statement(see pages 47–49 for further
information). The targets have been set relative to the 2023
outturn of 20.2% (versus the 2019 baseline) which, as outlined
on page 35, reflected pro forma performance as if the dolime
process had been operating normally. This ensures that the results
are not inflated and seek to measure performance consistently
year on year.
Diversity – a focus on gender diversity has seen improvements
in the Senior Leadership Group of c.140–170 individuals in recent
years. Targets are set so as to drive continued progress towards
the targets outlined in our Sustainability initiative. The Committee
notes that the market for female talent in the sector remains
extremely tight, and whilst the target range has remained the
same for the 2024-26 LTIP, it believes such targets to be stretching.
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Governance
Financial statements
Executive Directors’ remuneration in year under review
Single total figure table – audited
The table below sets out the total remuneration received by Executive Directors in the financial year under review:
Patrick André
Mark Collis
1
Guy Young
2
2023
(£000)
2022
(£000)
2023
(£000)
2022
(£000)
2023
(£000)
2022
(£000)
Total salary
720
643
315
–
56
420
Taxable benefits
3
61
83
30
–
14
18
Pension
4
122
155
54
–
10
96
Total fixed pay
5
904
880
399
–
80
535
Annual Incentive
6
942
731
348
–
0
0
Long-Term Incentives
7,8
566
613
–
–
0
0
Buy-out awards
9
–
–
178
–
–
–
Total variable pay
10
1,508
1,344
526
–
0
0
Total
11
2,412
2,225
925
–
80
535
1.
Mark Collis joined Vesuvius as Chief Financial Officer and as an Executive
Director effective 1 April 2023. As such the figures shown for 2023 represent
the actual, pro-rated amounts received during the period served in 2023.
2.
Guy Young stepped down as Chief Financial Officer and as an Executive
Director effective 17 February 2023. As such the figures shown for 2023
represent the actual, pro-rated amounts of Total fixed pay received during
the period served in 2023, noting that no incentives were payable, in line
with Company leaver policies, on account of his resignation.
3.
Standard benefits for the Executive Directors include car allowance and
private medical care. In 2022 and 2023, Patrick André also received external
professional services support, funded by the Company, in relation to EU
Settled Status applications for him and his wife, in line with the approval
for such support granted by the Remuneration Committee in May 2019.
The total cost of this support including gross-up of associated taxes was
£44,811 in 2022, and £3,098 in 2023.
4.
In 2022, Patrick André and Guy Young received a pension allowance of 25%
of base salary capped at the January 2020 level. The figures for 2023 for
Patrick André, Mark Collis and Guy Young represent the value of all cash
allowances and contributions received in respect of pension benefits, at the
reduced rate of 17% base salary, implemented in line with the Remuneration
Policy from 1 January 2023.
5.
The sum of total salary, taxable benefits, pension and other compensation.
6.
This figure includes the Annual Incentive payments to be made to the
Executive Directors in relation to the year under review. Note that
Guy Young received no such payment for the years 2022 or 2023, having
forfeited his entitlement to such payments on account of his resignation
from the Company in September 2022. 33% of any Annual Incentive
payments will be deferred into awards over shares, to be held for a period
of three years, subject to no further performance measures. See page 116
for more details. Leaver and change of control provisions in relation to these
shares are set out in the Policy on page 120.
7.
The 2023 figure represents the Performance Share awards granted to
Patrick André in 2021 under the VSP, which will vest in 2024. Note that
Guy Young’s 2021 award lapsed upon his departure on 17 February 2023.
8.
The value of the 2023 Long-Term Incentives, relating to the Performance
Share awards granted to Patrick André under the VSP in 2021, is reflective
of a share price depreciation of 19.94% between the share price used at
grant (536.9p), versus the Q4 2023 average share price (429.8p), used here
as a proxy for the vesting price. The values also include dividend vesting
at 64.55p per vested share.
9.
As noted on page 118 of the 2022 Annual Report, Mark Collis received
a one-off payment to compensate for the 2022 annual incentive payment
forfeited when leaving his former employer, as well as a combination of
Restricted Share awards and Performance Shares to compensate for
forfeited equity incentives, which the Committee resolved to make in line
with the Remuneration Policy. The figure quoted here comprises the one-off
payment value, equivalent to the 2022 payment he had foregone, equal to
£73,261 as well as Restricted Share awards made during the year with face
value totalling £105,034 (as referenced on page 126 and detailed further on
page 129). Note that the Performance Share awards, also detailed further
on page 129, are not reflected in this table given the associated vesting
performance will be aligned to the equivalent vesting performance of
the awards Mark Collis has forfeited when leaving his former employer.
Such vesting performance will not be known until April 2024, and as such,
further detail related to these awards will be included in next year’s Report.
10. The sum of the value of the Annual Incentive and the Long-Term Incentives
where the performance period ended during the financial year.
11. The sum of base salary, benefits, pension, other compensation, Annual
Incentive and Long-Term Incentives where the performance period ended
during the financial year.
Additional note:
12. Total 2023 Directors’ Remuneration (Executive Directors and Non-executive
Directors) is £4.176m. 2022 Directors’ Remuneration for the Directors who
served during 2022 was £3.396m.
Vesuvius plc
Annual Report and Financial Statements 2023
126
Annual Report on Directors’ Remuneration
continued
Remuneration for the former
Chief Financial Officer – audited
Guy Young stepped down as an Executive Director and Chief
Financial Officer on 17 February 2023. In line with Company
leaver policies, having resigned in September 2022, during the
2022 performance year, he forfeited his entitlement to any annual
incentive related to the Financial Year 2022 and to the period
served during the Financial Year 2023. In addition, Guy Young’s
outstanding 2020, 2021 and 2022 Performance Share awards
lapsed upon his termination, and no further grant was made
in 2023, again in line with Company leaver policies.
In line with the Remuneration Policy, Guy Young’s outstanding
Deferred Share Bonus Plan awards, as detailed in the 2022
Annual Report, vested in full upon his termination.
No further termination payments will be made to Guy Young.
Buy-out awards for the incoming
Chief Financial Officer – audited
As noted on page 118 of the 2022 Annual Report, upon Mark
Collis’ appointment as Chief Financial Officer, the Committee
resolved, in compliance with the Remuneration Policy on
recruitment, that it would compensate him for the annual incentive
and long-term incentives awarded by his previous employer
which he forfeited as a result of joining Vesuvius. The Committee
resolved that Mark Collis would receive a one-off payment
equivalent in value to the 2022 annual incentive payment he
had foregone, as well as seven one-off share awards over
Vesuvius plc shares (comprising a mix of Restricted Share awards
and Performance Share awards) under the Vesuvius Share Plan,
each of them corresponding in value to individual awards granted
by his previous employer, with vesting dates aligned as closely
as possible with the vesting dates of the forfeited awards.
Note that all the awards made as part of this buy-out process
were over Vesuvius plc shares, and as such will count towards
Mark Collis’ shareholding requirement.
The Committee is satisfied that these payments/awards,
summarised below, represent a like-for-like equivalent to the
awards forfeited:
–
A one-off cash payment, made in October 2023, amounting
to £73,261 to compensate for forfeited annual incentive.
This figure is reported in the Single total figure table on
page 125
–
Five Restricted Share awards, granted 20 June 2023
and detailed further on page 129, amounting to a total of
27,120 Vesuvius plc shares, without performance conditions,
representing a like-for-like equivalent to a mix of forfeited
performance share awards where vesting value was already
known, or forfeited awards of restricted stock units. The face
value of these awards is included/reflected in the Single total
figure table on page 125 of this report
–
Two Performance Share awards, granted in 20 June 2023 and
detailed further on page 129, amounting to a total of 29,775
shares, with vesting performance to be directly aligned to
the vesting performance of Mark Collis’ former employer
in relation to two forfeited performance share awards.
The actual number of shares which vest, under these awards,
will depend upon the extent to which the Remuneration
Committee determines that the performance conditions
have been satisfied by Mark Collis’ former employer
Annual Incentive for 2023 performance – audited
The Executive Directors are eligible to receive an Annual Incentive
calculated as a percentage of base salary, based on achievement
against specified financial targets and personal objectives. Each
year, the Remuneration Committee establishes the performance
criteria for the forthcoming year. The financial targets are set by
reference to the Company’s financial budget. The target range is
set to ensure that Annual Incentives are only paid out at maximum
for significantly exceeding performance expectations. The
Remuneration Committee considers that the setting and
attainment of these targets is important in the context of
achievement of the Company’s longer-term strategic goals.
Payouts will commence and increase incrementally from 0% once the
threshold performance for any of the elements has been met. The
Annual Incentive has a target level at which 50% of the maximum
opportunity is payable, and a maximum performance level at which
100% of the maximum opportunity is earned, on a pro rata basis.
For 2023, the maximum Annual Incentive potential for the
Executive Directors was 175% of base salary for Patrick André
and 150% for Mark Collis, with their target Annual Incentive
potential being 87.5% and 75% of base salary respectively. Note
that Guy Young was not entitled to any Annual Incentive relating
to period served in 2023, in line with Company leaver policies.
For the Financial Year 2023, the Executive Directors’ Annual
Incentives were based 40% on Group headline EPS, 20% on the
Group’s return on invested capital (post-tax ROIC), 20% on the
Group’s working capital to sales ratio (based on the 12-month
moving average) and 20% on specified personal objectives.
The Annual Incentive 2023 award for Mark Collis is pro-rated
to reflect his date of joining Vesuvius, 1 April 2023.
Financial targets for the Annual Incentive in 2023
The 2023 Vesuvius Group headline EPS performance targets set
out below were set at the December 2022 full-year average foreign
exchange rates, being the rates used for the 2023 budget process:
Threshold:
37.9p
On-target:
42.9p
Maximum:
47.9p
The 2023 Group’s return on invested capital (post-tax ROIC)
targets were set as follows:
Threshold:
7.5%
On-target:
8.5%
Maximum:
10.0%
The 2023 Group’s working capital to sales ratio targets were set
as follows:
Threshold:
23.8%
On-target:
23.1%
Maximum:
22.4%
In assessing the Group’s performance against these targets,
the Committee uses a constant currency approach. Thus, the
2023 full-year EPS performance was retranslated at December
2022 full-year average foreign exchange rates to establish
performance. This is consistent with practice in previous years.
In 2023, Vesuvius’ EPS performance at the December 2022 full-year
average foreign exchange rates, adjusted for unbudgeted M&A
costs, was 51.2 pence, return on invested capital (post-tax ROIC)
outcome was 9.0% and the working capital to sales ratio was
23.4%. Consequently, EPS performance was above the maximum
target, return on invested capital (post-tax ROIC) performance was
above target-level performance but below maximum, and the
127
Strategic report
Governance
Financial statements
Group working capital to sales ratio was above threshold but below
target-level performance.
As a result, in respect of the financial performance metrics of the
2023 Annual Incentive, 70.0% and 60.0% of salary is due to
the CEO and CFO respectively on the EPS targets, 23.3% and
20.0% respectively on the ROIC targets, and 10.0% and 8.6%
respectively on the working capital targets (related to a maximum
bonus opportunity of 70%, 35% and 35% of salary respectively for
the CEO, and 60%, 30% and 30% of salary respectively for the CFO).
Personal objectives
In 2023, a proportion (20%) of the Annual Incentive for
Executive Directors (representing 35% of salary for the CEO,
and 30% of salary for the CFO) was based on the achievement
of personal objectives.
Patrick André
Summary of objective
Key objective details
Summary outcome
Drive performance
and deliver results
–
Deliver enhanced cash conversion and
optimise gross margin, quality performance
and R&D efficiency
–
Deliver strategic expansion and optimisation
of capex on budget and on time
–
High performance in all areas with, for example, achievement
close to or above maximum target for cash conversion,
gross margin and quality performance optimisation
–
All related projects delivered on time and below budget
in 2023, including the slidegate tunnel kiln at Skawina and
the complex technical transfer between NAFTA sites
Stabilise GEC,
prepare succession
and reinforce talent
management
–
Stabilise GEC and develop internal
GEC succession pipelines
–
Achieve progress in engagement of the
Company’s Senior Leadership Group
–
Successful, effective and efficient integration of Mark Collis
and Richard Sykes into the Group Executive Committee, and
significant development and progression of internal talent
pipeline for a range of GEC positions
–
Further improvement in leadership group’s engagement
scores year-on-year vs 2022
Develop Group
strategy
–
Continue to foster conditions and road map
to facilitate achievement of enhanced return
on sales targets
–
Credible plans presented to the Board during 2023 to
address margin growth. Strategy for each Division presented
to, and well received by, investors at the Company’s Capital
Markets Day event in November 2023
Improve Vesuvius’
sustainability
performance
–
Drive further reduction in CO
2
emission
intensity and reinforce governance
risk management
–
Significant improvements in energy efficiency across the
business and comprehensive roll-out and uptake of
employee risk management training programmes in 2023
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 27.7% of
contractual base salary, out of the maximum potential 35%, in respect of the personal objectives of Patrick André.
Mark Collis
Summary of objective
Key objective details
Summary outcome
Optimise cash
management
and profitability
–
Deliver enhanced cash conversion and
trading profit margin, reduce receivables
and achieve targeted cash tax savings
–
Cash conversion, trading profit margin and cash tax savings
all achieved above maximum target set
Develop investor
relations strategy
–
Review strategy and organise a successful
Capital Markets Day event in 2023
–
Successful CMD organised and delivered in November 2023,
yielding very positive feedback from investors and analysts
Drive IT
performance
–
Enhance cyber resilience, ensure successful
collaboration of IT with a newly created
Digital function
–
Deliver implementation of key IT
enhancement projects
–
In-depth analysis of 2023 cyber security incident conducted,
and associated lessons derived and implemented into
operations. IT and Digital functions operating to
a high degree of collaboration
–
Key enhancement projects delivered successfully and on time
Drive opex
reductions
–
Finalise implementation of new finance
operating model in EMEA and NAFTA and
progress the implementation of structural
simplification in European entities
–
Foundations laid, with operating model implemented as
targeted, and structural simplification also now completed.
Further improvements of operational efficiency and quality
targeted for 2024 to maximise the value of these opex initiatives
Improve Vesuvius’
sustainability
performance
–
Drive further reduction in CO
2
emission
intensity and reinforce governance
risk management
–
Significant improvements in energy efficiency across
the business and comprehensive roll-out and uptake of
employee risk management training programmes in 2023
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 22.1% of
pro-rated 2023 contractual base salary, out of the maximum potential 30%, in respect of the personal objectives of Mark Collis.
The total Annual Incentive awards payable to Patrick André and Mark Collis, in respect of their service as Executive Directors during 2023,
are therefore 130.9% and 110.6% of salary respectively (noting that, for Mark Collis, this reflects a percentage of actual salary received
during 2023, reduced in comparison to his annualised salary on account of having joined Vesuvius in April 2023), of which 33%
will be deferred into awards over shares, to be held for a period of three years, with vesting in accordance with the Remuneration Policy.
Other than in cases of dismissal for cause, deferred awards will vest in full.
The Committee considered the appropriateness of this overall AIP payment in the context of the experience of our various stakeholders
during 2023 and was satisfied that no discretionary adjustments were required.
Vesuvius plc
Annual Report and Financial Statements 2023
128
Annual Report on Directors’ Remuneration
continued
2021 VSP Awards (vesting in 2024) – audited
The performance period applicable to these awards ended on 31 December 2023. Further details on the number of shares awarded
are shown on page 135.
Weighting
0% vesting
25% vesting
50% vesting
100% vesting
Performance achieved
Pay-out level
(% of
maximum)
TSR relative to FTSE 250
excluding investment trusts
1
50%
Below
median
Median
–
Upper
quintile
Between median and
upper quintile (Ranked 64th)
25.6%
Headline EPS for the
Financial Year 2023
1
50%
Less than
35.0p
35.0p
47.5p
60.0p
46.7p
24.2%
1.
Straight-line vesting applies between the vesting points.
Share awards granted during the financial year – audited
VSP award
An award was granted under the VSP to selected senior executives in April 2023. UK executives receive awards in the form of nil-cost
options with a flexible exercise date and non-UK executives receive conditional awards. This award is subject to the performance
conditions described below and will vest in April 2026 (with a subsequent two-year holding period for any vested shares to April 2028).
Type of award
Date of grant
Maximum
number of
shares
1
Face value
(£)
Face value
(% of salary)
Threshold
vesting
End of
performance period
Patrick André
Nil-cost option
6 April 2023
355,599
£1,439,998
200%
25% of award
31 December 2025
Mark Collis
2
6 April 2023
142,799
£578,265
138%
1.
In 2023, Patrick André and Mark Collis were entitled to receive allocations of Performance Shares worth 200% and 138% of their base salaries respectively,
noting that the latter represents a pro-rated award reflecting Mark Collis’s hire date part way through the award performance period. Awards were calculated
based on the average closing mid-market price of Vesuvius’ shares on the 30 dealing days prior to grant, of £4.0495. The maximum number of shares quoted
excludes any additional shares that may be awarded in relation to dividends accruing during the vesting and holding periods.
2.
Award details displayed for Mark Collis relate only to Performance Share awards made under VSP which link to the Vesuvius performance conditions
described in the table below. This excludes those Restricted Share awards made to Mark Collis under the VSP in 2023 (both those made with and those without
performance conditions) which are detailed separately under Buy-out share awards on page 129.
Vesting of the VSP awards is subject to satisfaction of the following performance conditions. Any LTIP vesting is at the discretion of the
Remuneration Committee.
Weighting
Threshold
100% vesting
TSR relative to FTSE 250 excluding investment trusts
1
40%
Median
Upper quintile
Group post-tax ROIC
1
40%
8.5%
11%
ESG: Safety: Average Lost Time Injury Frequency Rate (LTIFR) 2023–2025
1,2
5%
1.05
0.85
ESG: Energy: CO
2
e: Reduction in Scope 1 and 2 energy CO
2
e emissions/
tonne (vs 2019 baseline) in 2025
1,3
10%
-17%
-23%
ESG: Diversity: Gender diversity in Senior Leadership Group on 31 December 2025
1,4
5%
20%
26%
1.
Straight-line vesting applies between the vesting points. Threshold vesting for the TSR element is 25% of maximum, and 0% of maximum for all other elements.
2.
LTIFR is the Lost Time Injury Frequency Rate, based on the number of Lost Time Injuries that occur during the performance period. The calculation rate is LTIFR
per million hours worked.
3. Reduction of energy CO
2
e emissions per metric tonne of product packed for shipment.
4.
Senior Leadership Group is defined as the Group Executive Committee plus the most senior Vesuvius managers worldwide, in terms of their contribution to the
Group’s overall results and to the execution of the Group’s strategy. This group comprises between 150 and 170 members (number may slightly fluctuate from
one year to the next based on organisational changes).
Each of the VSP performance measures operates independently. The use of these measures is intended to align Executive Director
remuneration with shareholders’ interests. Prior to vesting, the Remuneration Committee reviews the underlying financial performance
of the Company and non-financial performance of the Company and individuals over the performance period to ensure that the
vesting is justified, and to consider whether to exercise its discretion including consideration of any potential windfall gains.
Deferred Share Bonus Plan award
33% of the Annual Incentive earned by Patrick André in respect of performance in 2022 was deferred into a share award granted in
April 2023 under the Company’s Deferred Share Bonus Plan. There are no additional performance conditions applicable to these
awards. Leaver and change of control provisions in relation to these shares are set out in the Policy on page 120.
Type of award
Date of grant
Number of
shares
1
Face value
(£)
Vesting date
Patrick André
Conditional award
6 April 2023
60,179
£243,695
6 April 2026
1.
The number of shares has been calculated using the share price of £4.0495 (average closing share price for the 30 dealing days prior to grant) and excludes any
additional shares that may be awarded in relation to dividends accruing during the vesting period.
129
Strategic report
Governance
Financial statements
Buy-out share awards
The buy-out awards granted to Mark Collis during 2023 comprise Restricted Share awards and Performance Share awards, as detailed below.
The basis for calculation of these awards referenced the mid-market closing average share prices, of Vesuvius plc and Mark Collis’s
former employer, over the 30 days (excluding non-trading and closed period days) prior to the Board meeting convened on 4 January
2023 to confirm his appointment.
Type of award
Date of grant
Maximum
number of shares
1
Face value (£)
Vesting conditions
30 day mid-market
average share
price prior to
Board resolution
(pence)
Earliest vesting
date
Mark
Collis
Nil-cost option
20 June 2023
27,120
105,034
None
387.29
Various²
Nil-cost option
20 June 2023
23,820
3
92,252
Subject to John Wood Group
plc vesting performance
as determined by the
Remuneration Committee
387.29
8 April 2024
Nil-cost option
20 June 2023
5,955
3
23,063
387.29
9 March 2026
1.
The number of shares has been calculated using the share price of £3.8729 (average closing share price for the 30 dealing days prior to Board confirmation
of appointment) and excludes any additional shares that may be awarded in relation to dividends accruing during the vesting period.
2.
The Restricted Share awards total quoted here represents five separate awards with the following vesting dates: 1,349 shares vested on 20 June 2023;
835 shares will vest 11 March 2024; 1,662 shares on 8 April 2024; 23,129 shares on 10 March 2025; and 145 shares on 27 April 2025.
3.
Relevant John Wood Group plc award is the 2021 LTIP whose performance period ends on 31 December 2023.
Statement of Executive Directors’ shareholding – audited
The interests of Executive Directors and their closely associated
persons in ordinary shares as at 31 December 2023, including
any interests in share options and shares provisionally awarded
under the VSP, are set out below:
Beneficial
holding in
shares
4
Outstanding share incentive awards
Nil-cost options
Conditional
awards
With
performance
conditions
1
Without
performance
conditions
2
Without
performance
conditions
3
Patrick André
361,193
905,709
0
144,816
Mark Collis
22,344
172,574
25,771
0
Guy Young
5
153,259
0
0
57,673
1.
These are Performance Shares granted under the VSP. In the case of Mark
Collis, these comprise the sum of VSP awards granted in 2023 with Vesuvius
performance conditions, and those granted as buy-out awards and subject
to John Wood Group plc vesting performance, as detailed in the Buy-out
share awards section on page 126. The awards were all granted subject to
performance conditions.
2.
These are buy-out share awards, awarded to Mark Collis, which are not
subject to any additional performance conditions, as detailed on page 129.
3.
These are awards granted under the Deferred Share Bonus Plan in the
cases of Patrick André and Guy Young.
4.
Mark Collis’s beneficial shareholding includes 1,370 shares, awarded as
part of his buy-out shared awards, and comprising 1,349 shares plus 21
dividend-equivalent shares, which vested on 20 June 2023. These were
exercised on 25 August 2023 at a market value of 432.8 pence per share.
5.
The shareholding detail quoted for Guy Young is effective/correct as at
the date of his departure from the Company, 17 February 2023.
Additional notes:
6.
All outstanding share incentive awards are nil-cost options except awards
made under the Deferred Share Bonus Plan which are conditional awards.
7.
No awards vested without being exercised during the year, and indeed
no nil-cost options at all have vested without being exercised. For further
details please see the Appendix: Supplementary share-related information
section on pages 134 and 135.
8.
None of the other Directors, nor their spouses, nor their minor children,
held non-beneficial interests in the ordinary shares of the Company during
the year.
9.
There were no changes in the interests of Patrick André and Mark Collis in
the ordinary shares of the Company in the period from 1 January 2023 to
the date of this Report.
10. For Guy Young, there were no changes in these interests in the period
from 1 January 2023 to his date of leaving, 17 February 2023.
11. All awards under the VSP are subject to performance conditions and
continued employment until the relevant vesting date. Full details of
VSP award allocations are set out on page 135.
12. Full details of Directors’ shareholdings and incentive awards are given in
the Company’s Register of Directors’ Interests, which is open to inspection
at the Company’s registered office during normal business.
Shareholding guidelines – audited
The Remuneration Committee encourages Executive Directors
to build and hold a shareholding in the Company. Under the 2023
Remuneration Policy, the required holding is 200% of salary for all
Executive Directors. Executive Directors are required to retain at
least 50% (measured as the value after tax) of any shares received
through the operation of share schemes; in addition, permission to
sell shares held – whether acquired through the operation of share
schemes or otherwise – will not be given, other than in exceptional
circumstances, if, following the disposal, the shareholding
requirement is not achieved or is not maintained.
Compliance with the shareholding policy is tested at the end of
each year for application in the following year. Under the 2023
Remuneration Policy, the valuation of any holding is taken at the
higher of: (1) the share price on the date of vesting of any shares
derived from a share award, in respect of those shares only;
and (2) the average of the closing prices of a Vesuvius ordinary
share for the trading days in that December.
As at 31 December 2023, the Executive Directors’ shareholdings
against the shareholding guidelines contained in the Directors’
Remuneration Policy in force on that date (using the Company’s
share price averaged over the trading days of the period
1 December to 31 December 2023, of 462.66 pence per share)
were as follows:
Director
Actual share
ownership
as a percentage
of salary at
31 Dec 2023
Policy share
ownership as a
percentage
of salary
Policy met?
Patrick André
246%
200%
Yes
Mark Collis
25%
200%
In the build-up
period
Vesuvius plc
Annual Report and Financial Statements 2023
130
Annual Report on Directors’ Remuneration
continued
Payments to past Directors and
loss of office payments – audited
There were no payments made to any Director for loss of office
during the year ended 31 December 2023. External, professional
services support was provided in 2023 to former Chief Executive,
François Wanecq, in the form of international tax advice relating
to his retirement, in line with the commitment to cover such
reasonable costs, as specified in the Section 430(2B) statement
referenced in the Company’s 2017 Annual Report. Total costs
amounted to £6,745 (exclusive of VAT). No other payments were
made to any other past Directors of the Company during the
year ended 31 December 2023.
Non-executive Directors
Single total figure table – audited
The table below sets out the total remuneration received by
Non-executive Directors in the financial year under review:
(£000)
2023
2022
Total
fees
1
Taxable
benefits
2
Total
Total
fees
Taxable
benefits
2
Total
Carl-Peter
Forster
262
4
266
40
2
42
Carla Bailo
3
84
4
89
–
–
–
Kath Durrant
86
6
92
75
7
82
Dinggui Gao
83
7
90
60
0
60
Friederike
Helfer
67
1
68
60
2
62
Jane Hinkley
4
28
3
31
70
3
73
Douglas Hurt
96
1
97
85
3
88
Robert
MacLeod
5
25
1
26
–
–
–
Total Non-
executive
Director
remuneration
731
27
759
390
17
407
1.
Effective from 2023, total fees for Non-executive Directors now include any
stipend fees paid as a result of intercontinental travel on Vesuvius business.
2.
The UK regulations require the inclusion of benefits for Directors where
these would be taxable in the UK on the assumption that the Director is
tax resident in the UK. The figures in the table therefore include expense
reimbursement and associated tax relating to travel, accommodation
and subsistence for the Director (and, where appropriate, their spouse)
in connection with attendance at Board meetings and other corporate
business during the year, which are considered by HMRC to be taxable
in the UK.
3.
Carla Bailo joined the Board on 1 February 2023.
4.
Jane Hinkley retired from the Board on 18 May 2023.
5.
Robert MacLeod joined the Board on 1 September 2023.
Additional notes:
6.
John McDonough, who retired from the Board in December 2022 and is
thus not shown in the table above, was reported to have a taxable benefits
single figure of £9k in the 2022 Annual Report. This figure included certain
estimated costs at the time of publication of that Annual Report, including
in relation to a leaving gift offered to John. During 2023, the actual costs
were finalised and John’s actual taxable benefits single figure for 2022
was calculated as £10k.
Fee structure in 2024
The fee for the Chairman was also reviewed by the Committee
during the year and the fees for the Non-executive Directors by
the Board. Following an assessment of time commitment, roles
and responsibilities it was decided that the fees would increase
with effect from 1 January 2024. The Chairman’s fee was
increased to £262,500; the Non-executive Directors’ fees were
increased to £66,150. Supplementary fees were also increased,
with the supplementary Senior Independent Director fee
increasing to £11,000; supplementary fee for the Chairs of
the Audit and Remuneration Committees to £16,000; and
supplementary fee for the Non-executive Director responsible
for workforce engagement to £11,000. The stipend of £4,000,
payable to Non-executive Directors in respect of each overseas,
intercontinental trip they undertake on Vesuvius business, remains
in place, with the stipend continuing to be payable for a maximum
of five such trips in any calendar year.
Statement of Non-executive Directors’
shareholding – audited
The interests of Non-executive Directors and their closely
associated persons in ordinary shares as at 31 December 2023
are set out below:
Beneficial
holding in
shares
Carl-Peter Forster
–
Carla Bailo
1
–
Kath Durrant
–
Friederike Helfer
2
–
Dinggui Gao
–
Jane Hinkley
3
12,000
Douglas Hurt
18,000
Robert MacLeod
4
–
1.
Carla Bailo was appointed as a Non-executive Director effective
1 February 2023.
2.
Friederike Helfer is a Partner of, and has a financial interest in, Cevian
Capital which held 57,249,896 ordinary shares (21.16% of Vesuvius’
issued share capital) as at 31 December 2023 and 21.29% as at the date
of this Report.
3. Jane Hinkley’s shareholding is effective as at her retirement date,
18 May 2023.
4. Robert MacLeod was appointed as a Non-executive Director effective
1 September 2023.
Additional notes:
5.
None of the other Directors, nor their spouses, nor their minor children,
held non-beneficial interests in the ordinary shares of the Company during
the year.
6.
There were no changes in the interests of the Non-executive Directors in the
ordinary shares of the Company in the period from 1 January 2023 to the
date of this Report.
7.
Full details of Directors’ shareholdings are given in the Company’s Register
of Directors’ Interests, which is open to inspection at the Company’s
registered office during normal business hours.
131
Strategic report
Governance
Financial statements
Other regulatory disclosure requirements
Annual changes in Executive Directors’ pay versus employee pay
Executive Directors’ pay comparison
The London headquartered salaried employee workforce is presented as a voluntary disclosure of the representative comparator
group for the Vesuvius Group parent company as there is only one non-Director employee in the parent company.
Year-on-year change in pay for Directors compared to the London headquartered employee average
2023
2022
2021
2020
Salary
2
Bonus
3
Benefits
5
Salary
2
Bonus
3
Benefits
5
Salary
2,4
Bonus
3
Benefits
5,6
Salary
2,4
Bonus
3
Benefits
5
London headquartered
employee average
1
13%
14%
33%
(8%)
(12%)
3%
19%
236%
120%
0%
165%
18%
Executive Directors
Patrick André
12%
29%
(22%)
4%
(16%)
11%
11%
469%
(6%)
(7%)
183%
(25%)
Mark Collis
n/a
–
n/a
n/a
–
n/a
n/a
–
n/a
n/a
–
n/a
Guy Young
0%
n/a
(79%)
9%
(100%)
1%
11%
442%
9%
(1%)
155%
(14%)
Non-executive
Directors
11
Carl-Peter Forster
7
0%
–
97%
n/a
–
n/a
n/a
–
n/a
n/a
–
n/a
Kath Durrant
8
15%
–
(14%)
25%
–
117%
19%
–
100%
n/a
–
n/a
Friederike Helfer
12%
–
(36%)
20%
–
(31%)
11%
–
969%
(10%)
–
(60%)
Dinggui Gao
9
38%
–
121%
20%
–
100%
n/a
–
n/a
n/a
–
n/a
Jane Hinkley
10
5%
–
(9%)
26%
–
40%
(5%)
–
63%
(10%)
–
(60%)
Douglas Hurt
13%
–
(52%)
21%
–
275%
11%
–
24%
(10%)
–
–
1.
This is the average percentage change, excluding the Executive Directors. Salaries, bonus and benefits relate to the relevant financial reporting year.
2.
Calculated using annualised salaries/fees. Note that, as of 2023, Non-executive Director fees reflect the inclusion of travel stipends payable for up to five
intercontinental trips on Vesuvius business per year.
3.
Calculated using data from the single figure table in the Annual Report.
4.
During 2020, all Executive and Non-executive Directors took a voluntary 20% pay reduction for six months. Other senior employees in London headquarters
also took a pay reduction between 10% and 20%, depending on their level of seniority. Therefore, the total percentage increase for the Executive Directors
between 2021 and 2022 was higher than their agreed salary increases, as these increases are compared with actual, partly-reduced salary paid during 2020
rather than full, contractual base salary.
5.
Calculated using data from the audited Directors’ Emoluments. Benefits relate to taxable travel benefits, and Company pensions in the case of Executive
Directors. It is calculated as the percentage increase or decrease on the actual figures year-on-year and not annualised or prorated for any new starters.
6.
Calculations of 2021 benefits changes have been restated as compared with the 2021 Annual Report, to ensure correct alignment with single figure
remuneration tables.
7.
Carl-Peter Forster joined the Board on 1 November 2022 and took over as Chairman on 1 December 2022.
8.
Kath Durrant joined on 1 December 2020 and then became the Remuneration Committee Chair following the 2021 AGM, and it is this change that accounts
for the proportionally higher increase in her salary in 2021.
9.
Dinggui Gao joined on 1 April 2021.
10. Jane Hinkley stood down as the Remuneration Committee Chair following the 2021 AGM, which accounts for her net reduction in year-on-year change in 2021.
11. The Non-executive Directors’ fees were reviewed and increased in 2015, 2019, 2022 and 2023.
Vesuvius plc
Annual Report and Financial Statements 2023
132
Annual Report on Directors’ Remuneration
continued
CEO pay ratio
The UK employee workforce is the representative comparator
group to the Chief Executive, Patrick André, who is based in the
UK (albeit with a global role and responsibilities). Levels of pay
vary widely across the Group depending on geography and
local market conditions.
Year
Method
25th
percentile
50th
percentile
(median)
75th
percentile
2019
Option A ratio
35:1
28:1
17:1
2020
Option A ratio
32:1
24:1
13:1
2021
Option A ratio
53:1
41:1
21:1
2022
Option A ratio
60:1
46:1
24:1
2023
Option A ratio
57:1
43:1
22:1
2023
Total pay and
benefits (£)
41,367
53,938
108,893
2023
Salary (£)
31,491
47,956
91,324
The table above shows the Chief Executive pay ratios versus our
UK employees for 2019, 2020, 2021, 2022 and 2023. The pay
ratios compare amounts disclosed in the single total figure table
for the Group Chief Executive to the annual full-time equivalent
remuneration of our UK employees for 2019, 2020, 2021, 2022
and 2023. The Remuneration Committee is comfortable that the
ratios reported reflect the remuneration principles applied and
represent a valid basis for comparison of remuneration.
The ratios for 2022 have been adjusted versus what was reported
in the 2022 Annual Report, after some previous estimates were
updated in the associated calculations. A significant proportion
of the Chief Executive’s remuneration is based on performance-
related pay, which affects said remuneration disproportionately
when compared with others. This is reflected in the variation in
pay ratio shown over the past five years.
The data has been calculated in accordance with ‘Option A’
in the Companies (Miscellaneous Reporting) Regulations 2018,
because it allows the Company to show the total annualised
full-time equivalent remuneration (salary, incentives, allowances,
fees, taxable benefits) and percentiles across the financial
year as at 31 December 2019, 2020, 2021, 2022 and 2023.
Amounts have been annualised for those who joined part
way through the year or who are on part-time arrangements
and exclude those who left the organisation during the
reporting period.
The approach to calculating the pay ratios is consistent
with the prior year and there have not been any changes
to the compensation models in the reporting period.
The Committee is comfortable that the principles applied and the
quantum of compensation are appropriate across the Group’s
employee base. These are regularly benchmarked to ensure
market competitiveness. There is a consistent approach of
measuring against both business and personal performance
for all those who participate in incentive programmes. The Group
continues to monitor the effectiveness of all compensation
practices to identify future opportunities to ensure they remain
fair, consistent and in line with best practice.
Annual spend on employee pay
1
versus shareholder distributions
2
The charts below show the annual spend on all employees (including Executive Directors) compared with distributions made and
proposed to be made to shareholders for 2022 and 2023:
2023
(£m)
2022
(£m)
Change
Employee pay
1
475.1
441.3
7.7%
Dividends
2
(based on final proposed dividend) and share buybacks
63.8
59.9
6.5%
1.
Employee pay includes wages and salaries, social security, share-based payments and pension costs, and other post-retirement benefits. See Note 7 to the
Group Financial Statements.
2.
Shareholder distributions/dividends includes interim and final dividends paid in respect of each financial year. In addition, figure quoted for 2023 also reflects
share buybacks. See Note 23 of the Group Financial Statements.
133
Strategic report
Governance
Financial statements
Vesuvius’s total
shareholder return
compared against
total shareholder
return of the FTSE
250 (excluding
investment trusts)
index over the
past ten years
FTSE 250 Index (excluding investment trusts)
Vesuvius plc
31/12/13
50
100
150
200
250
Chief Executive pay –
financial year ended
François Wanecq
1
Patrick André
2
31/12/14
31/12/15
31/12/16
31/12/17
31/12/18
31/12/19
31/12/20
31/12/21
31/12/22
31/12/23
Total remuneration
(single figure (£000))
£1,519
£752
£1,173
£1,675
1
£465
2
£2,022
£1,220
£936
£1,706
£2,225
£2,412
Annual variable pay
(% of maximum)
64%
0%
50%
81%
1
85%
2
83%
11%
20%
94%
76%
75%
Long-term variable pay
(% of maximum)
27%
0%
0%
43.7%
1
n/a
2
100%
63%
0%
0%
48%
50%
1.
Amounts shown in respect of François Wanecq for 2017 reflect payments in respect of his service as Chief Executive from 1 January 2017 to 31 August 2017 and
the full value of his VSP award in relation to the performance period 2015–2017.
2.
Amounts shown in respect of Patrick André for 2017 reflect payments in respect of his service as Chief Executive from 1 September 2017 to 31 December 2017.
Shareholder voting on remuneration resolutions
The Directors’ Remuneration Policy and Annual Report on Remuneration were approved by Shareholders at the AGM held on
18 May 2023, with the following votes:
Votes for
Votes against
Votes withheld
Approval of the Directors’ Remuneration Policy 2023 AGM
234,279,589 (96.7%)
7,890,060 (3.3%)
8,514
Approval of the Annual Report on Remuneration (excluding
the Directors’ Remuneration Policy) 2023 AGM
196,827,568 (82.2%)
42,633,878 (17.8%)
2,716,717
The Directors’ Remuneration Report has been approved by the Board and is signed on its behalf by:
Kath Durrant
Chair of the Remuneration Committee
28 February 2024
TSR performance and Chief Executive pay
The TSR performance graph compares Vesuvius’ TSR performance with that of the same investment in the FTSE 250 Index (excluding
investment trusts). This index has been chosen as the comparator index to reflect the size, international scope and diversity of the
Company. TSR is the measure of the returns that a company has provided for its shareholders, reflecting share price movements
and assuming reinvestment of dividends.
Vesuvius plc
Annual Report and Financial Statements 2023
134
Appendix: Supplementary share-related information
Directors’ Remuneration Report
Share usage
Under the rules of the VSP, the Company has the discretion to
satisfy awards either by the transfer of Treasury shares or other
existing shares, or by the allotment of newly issued shares. Awards
made under the Deferred Share Bonus Plan to satisfy shares
awarded to Directors in respect of their Annual Incentive, and
awards made to management of the Company over shares
pursuant to the Medium Term Incentive Plan, must be satisfied
out of Vesuvius shares held for this purpose by the Company’s
Employee Benefit Trust (EBT).
The decision on how to satisfy awards is taken by the
Remuneration Committee, which considers the most prudent
and appropriate sourcing arrangement for the Company.
At 31 December 2023, the Company held 7,271,174 ordinary
shares in Treasury and the EBT held 1,956,030 ordinary shares.
No additional shares were purchased between 31 December
2023 and the date of this report.
The EBT can be gifted Treasury shares by the Company, can
purchase shares in the open market or can subscribe for newly
issued shares, as required, to meet obligations to satisfy options
and awards that vest.
The VSP complies with the current Investment Association
guidelines on headroom which provide that overall dilution under
all plans over a rolling ten-year period should not exceed 10% of
the Company’s issued share capital, with a further limitation over
a rolling ten-year period of 5% for discretionary share schemes.
These limits remain available in full as headroom for the issue of
new shares or the transfer of Treasury shares for the Company.
No Treasury shares were transferred, or newly issued shares
allotted under the VSP during the year under review.
Deferred Share Bonus Plan allocations – audited
33% of the Annual Incentives earned by Patrick André and Guy Young in respect of their periods of service as Directors of Vesuvius plc
were deferred into shares under the Company’s Deferred Share Bonus Plan. The following table sets out details of outstanding awards:
Grant and type of award
Total share
allocations as
at 1 Jan 2023
Additional
shares
allocated
during
the year
Allocations
lapsed during
the year
Shares
vested
during
the year
Total share
allocations
as at
31 Dec 2023
Market price
of the
shares on
the day
before
award (p)
Earliest
vesting/
release date
Patrick André
12 March 2020
1
Deferred Bonus Shares
7,044
–
–
(7,044)
0
391.8
12 Mar 2023
18 March 2021
2
Deferred Bonus Shares
9,430
–
–
–
9,430
538
18 Mar 2024
17 March 2022
3
Deferred Bonus Shares
75,207
–
–
–
75,207
385
17 Mar 2025
06 April 2023
4
Deferred Bonus Shares
–
60,179
–
–
60,179
386
06 Apr 2026
Total
91,681
60,179
–
(7,044)
144,816
Guy Young
5
12 March 2020
1
Deferred Bonus Shares
5,345
–
–
(5,345)
0
391.8
12 Mar 2023
5
18 March 2021
2
Deferred Bonus Shares
6,093
–
–
(6,093)
0
538
18 Mar 2024
5
17 March 2022
3
Deferred Bonus Shares
46,235
–
–
(46,235)
0
385
17 Mar 2025
5
Total
57,673
–
–
(57,673)
0
1.
In 2020, Patrick André and Guy Young were awarded Annual Incentive
bonuses in respect of their service as Directors of Vesuvius plc in 2019 of
£83,775 and £63,569 respectively. 33% of each bonus was awarded in
deferred shares (conditional awards). The allocations of shares were made
on 12 March 2020 and were calculated based upon the average closing
mid-market price of Vesuvius’ shares on the five dealing days before the
award was made, being £3.9248. The total value of these awards based
on this share price was £27,646 and £20,978 respectively. There were no
additional performance conditions applicable to these awards, therefore
these shares vested in full on the third anniversary of their award date
for Patrick André.
2.
In 2021, Patrick André and Guy Young were awarded Annual Incentive
bonuses in respect of their service as Directors of Vesuvius plc in 2020 of
£153,419 and £99,138 respectively. 33% of each bonus was awarded in
deferred shares (conditional awards). The allocations of shares were made
on 18 March 2021 and were calculated based upon the average closing
mid-market price of Vesuvius’ shares on the five dealing days before the
award was made, being £5.3690. The total value of these awards based
on this share price was £50,628 and £32,715 respectively. There are no
additional performance conditions applicable to these awards, which
will therefore vest in full for Patrick André on the third anniversary of
their award date.
3.
In 2022, Patrick André and Guy Young were awarded Annual Incentive
bonuses in respect of their service as Directors of Vesuvius plc in 2021 of
£873,604 and £537,075 respectively. 33% of each bonus was awarded in
deferred shares (conditional awards). The allocations of shares were made
on 17 March 2022 and were calculated based upon the average closing
mid-market price of Vesuvius’ shares on the five dealing days before the
award was made, being £3.872. The total value of these awards based
on this share price was £291,202 and £179,022 respectively. There are no
additional performance conditions applicable to these awards, which
will therefore vest in full for Patrick André on the third anniversary of their
award date.
4.
In 2023, Patrick André was awarded an Annual Incentive bonus in respect
of his service as a Director of Vesuvius plc in 2022 of £731,091. 33% of this
bonus was awarded in deferred shares (conditional awards). The allocation
of shares was made on 6 April 2023 and was calculated based upon the
average closing mid-market price of Vesuvius’ shares on the 30 dealing
days before the award was made, being £4.0495. The total value of this
award based on this share price was £243,695. There are no additional
performance conditions applicable to this award, which will therefore
vest in full for Patrick André on the third anniversary of its award date.
5.
Following his departure from the Company on 17 February 2023,
Guy Young’s outstanding awards vested in full.
Additional note:
6. Mark Collis did not receive an Annual Incentive bonus in 2023, therefore
no bonus was awarded in deferred shares during the year.
7.
The mid-market closing price of Vesuvius’ shares during 2023 ranged
between 385.6 pence and 482.6 pence per share, and on 29 December
2023, the last dealing day of the year, was 481.2 pence per share.
135
Strategic report
Governance
Financial statements
Vesuvius Share Plan award allocations – audited
The following table sets out outstanding awards that were allocated to Patrick André, Mark Collis and Guy Young under the VSP.
All Performance Share awards detailed below were granted in the form of nil-cost options. For Mark Collis, this table excludes the
buy-out share awards granted during the year, which are detailed on page 129 of this report:
Grant and type of award
Total share
allocations as
at 1 Jan 2023
Additional
shares
allocated
during
the year
Allocations
lapsed
during
the year
Shares vested
and exercised
during the
year including
dividends
Total
share
allocations
as at
31 Dec 2023
Market price
of the shares
on the day
before award
(p)
Performance
period
Earliest
vesting date
End of
holding
period
1
Patrick André
12 March 2020
2
Performance Shares
282,772
–
(146,844) (151,027)
*
–
391.8
1 Jan 20–
31 Dec 22
12 Mar
2023
12 Mar
2025
18 March 2021
3
Performance Shares
230,210
–
–
–
230,210
538
1 Jan 21–
31 Dec 23
18 Mar
2024
18 Mar
2026
17 March 2022
4
Performance Shares
319,900
–
–
–
319,900
385
1 Jan 22–
31 Dec 24
17 Mar
2025
17 Mar
2027
6 April 2023
5
Performance Shares
–
355,599
–
–
355,599
386
1 Jan 23–
31 Dec 25
6 Apr
2026
6 Apr
2028
Total
832,882
355,599
(146,844) (151,027)
*
905,709
* Total shares exercised included 15,099 dividend-equivalent shares. Shares were exercised at the point of vesting, at a market value of 406.0 pence per share.
Mark Collis
6 April 2023
5
Performance Shares
–
142,799
–
–
142,799
386
1 Jan 23–
31 Dec 25
6 Apr
2026
6 Apr
2028
Total
–
142,799
–
–
142,799
Guy Young
6
12 March 2020
2
Performance Shares
132,120
–
(132,120)
–
–
391.8
1 Jan 20–
31 Dec 22
12 Mar
2023
12 Mar
2025
18 March 2021
3
Performance Shares
107,562
–
(107,562)
–
–
538
1 Jan 21–
31 Dec 23
18 Mar
2024
18 Mar
2026
17 March 2022
4
Performance Shares
156,716
–
(156,716)
–
–
385
1 Jan 22–
31 Dec 24
17 Mar
2025
17 Mar
2027
Total
396,398
–
(396,398)
–
–
1.
Performance Shares granted from 2019 onwards are subject to a further
two-year holding period.
2.
In 2020, Patrick André and Guy Young were entitled to receive allocations
of Performance Shares worth 200% and 150% of their base salaries
respectively. In light of the volatile share price, the Committee applied its
discretion so that the number of shares in these allocations were capped
at a level based upon the average closing mid-market price of Vesuvius’
shares on the five dealing days before the February 2020 Remuneration
Committee meeting of £4.371. As a result, Patrick André received an award
of 282,772 shares which, at grant, was equivalent in value to 180% of his
base salary (£1,109,823*) and Guy Young received an award of 132,120
shares which, at grant, was equivalent in value to 135% of his base salary
(£518,544*). In addition, the Remuneration Committee determined that
Patrick André was entitled to receive 15,099 additional shares, equivalent in
value to the dividends that would have been paid on the number of vested
shares in respect of dividend record dates occurring during the period
between the award date and the date of vesting.
*
Grant values are based on the average closing mid-market price of
Vesuvius’ shares on the five dealing days prior to grant (£3.9248).
3.
In 2021, Patrick André and Guy Young were entitled to receive allocations
of Performance Shares worth 200% and 150% of their base salaries
respectively. These allocations were calculated based upon the average
closing mid-market price of Vesuvius’ shares on the five dealing days
before the award was made, being £5.3690. The total value of these awards
based on this share price was £1,235,997 and £577,500 respectively.
4.
In 2022, Patrick André and Guy Young were entitled to receive allocations
of Performance Shares worth 200% and 150% of their base salaries
respectively. In light of the volatile share price, the Committee applied its
discretion so that the number of shares in these allocations were capped
at a level based upon the average closing mid-market price of Vesuvius’
shares on the five dealing days before the February 2022 Remuneration
Committee meeting of £4.02. As a result, Patrick André received an
award of 319,900 shares which, at grant, was equivalent in value to
193% of his base salary (£1,239,653**) and Guy Young received an
award of 156,716 shares which, at grant, was equivalent in value to
144% of his base salary (£606,804**).
**
Grant values are based on the average closing mid-market price of
Vesuvius’ shares on the five dealing days prior to grant (£3.872).
5.
In 2023, Patrick André and Mark Collis were entitled to receive allocations
of Performance Shares worth 200% and 138% of their base salaries
respectively***. The award was made on 6 April 2023 and was calculated
based upon the average closing mid-market price of Vesuvius’ shares on
the 30 dealing days before the award was made, being £4.0495. As a result,
Patrick André received an award of 355,599 shares which, at grant, was
equivalent in value to 200% of his base salary (£1,439,998) and Mark Collis
received an award of 142,799 shares which, at grant, was equivalent in
value to 138% of his base salary (£578,265).
*** Mark Collis’s entitlement in 2023, of 138%, is reflective of a pro-rated
calculation of the Chief Financial Officer’s normal 150% entitlement,
reflecting his date of joining the Company (1 April 2024), and therefore
reflecting omission of the first three months of the three-year performance
period related to the award.
6.
Guy Young’s outstanding awards lapsed in full on his departure from
the Company on 17 February 2023.
Additional notes:
7.
If the respective performance conditions for Patrick André’s and Mark
Collis’s awards are not met, then the awards will lapse. If the threshold
level of either of the two performance conditions applicable to awards
granted prior to 2022 is met, then 12.50% of the awards will vest. For awards
granted in 2022 and 2023, threshold level performance on TSR would entail
12.5% vesting, while threshold performance on other conditions entails
0% vesting.
8.
The Remuneration Committee also has the discretion to award cash or
shares equivalent in value to the dividend that would have been paid
during the vesting period on the number of shares that vest.
9.
The mid-market closing price of Vesuvius’ shares during 2023 ranged
between 385.6 pence and 482.6 pence per share, and on 29 December
2023, the last dealing day of the year, was 481.2 pence per share.
Vesuvius plc
Annual Report and Financial Statements 2023
136
Directors’ Report
Going concern
Information on the business environment in which the Group operates, including the factors
that are likely to impact the future prospects of the Group, is included in the Strategic Report.
The principal risks and uncertainties that the Group faces throughout its global operations are
shown on pages 77 and 78. The financial position of the Group, its cash flows, liquidity position
and debt facilities are also described in the Strategic Report. In addition, the Group’s Viability
Statement is set out within the Strategic Report on page 76. Note 24 to the Group Financial
Statements sets out the Group’s objectives, policies and processes for managing its capital;
financial risks; financial instruments and hedging activities; and its exposures to credit, market
(both currency and interest rate related) and liquidity risk. Further details of the Group’s cash
balances and borrowings are included in Notes 12, 13 and 24 to the Group Financial Statements.
The Directors have prepared profit and loss, balance sheet and cash flow forecasts for the Group
for a period in excess of 12 months from the date of approval of the 2023 financial statements.
On the basis of the exercise described above, the Directors have prepared a going concern
statement which can be found on page 76.
Events since the
balance sheet date
Since 31 December 2023, there have been no material items to report.
Future developments
A full description of the activities of the Group, including performance, significant events affecting
the Group in the year and indicative information in respect of the likely future developments in the
Group’s business, can be found in the Strategic Report.
Financial instruments
Information on Vesuvius’ financial risk management objectives and policies can be found in
Note 24 to the Group Financial Statements.
Research and development
The Group’s investment in research and development (R&D) during the year under review
amounted to £37m (representing approximately 1.9% (2022: 1.8%) of Group revenue).
Further details of the Group’s R&D activities can be found in the Operating reviews and
Sustainability section of the Strategic Report.
Political and
charitable donations
In accordance with Vesuvius policy, the Group did not make any political donations or incur any
political expenditure in relation to any UK or non-UK political parties during 2023 (2022: nil).
The Company made no charitable donations of more than £2,500 (2022: £0.5m) in the UK in 2023.
Task Force on
Climate-related Financial
Disclosures (TCFD)
The Group has reported its climate-related information in accordance with the TCFD framework.
The majority of this information is included in the Non-financial and Sustainability Information
Statement in the Strategic Report. A schedule of disclosure is included on page 36.
The Directors submit their Annual Report together with the consolidated financial statements of the Group and of the Company,
Vesuvius plc, registered in England and Wales No. 8217766, for the year ended 31 December 2023.
The Companies Act 2006 requires the Company to provide a Directors’ Report for Vesuvius plc for the year ended 31 December 2023.
Information incorporated by reference
The information that fulfils this requirement and which is incorporated by reference into, and forms part of, this report is included in
the following sections of the Annual Report:
–
The Section 172(1) Statement
–
The Non-Financial and Sustainability Information Statement
–
The Governance section, including the Corporate Governance Statement
–
Financial instruments: the information on financial risk management objectives and policies contained in Note 24 to the Group
Financial Statements
This Directors’ Report and the Strategic Report contained on pages 1 to 78 together represent the management report for the
purpose of compliance with DTR 4.1.8 R of the Financial Conduct Authority’s Disclosure and Transparency Rules.
137
Strategic report
Governance
Financial statements
Energy consumption and
efficiency/greenhouse
gas emissions
Information on our reporting of greenhouse gas emissions, and the methodology used to record
these, is set out on pages 51 and 52 of the Strategic Report. Details of the Group’s energy usage for
2023, and the efficiency initiatives currently being undertaken, can be found in the Non-financial
and Sustainability Information Statement in the Strategic Report on pages 39–55.
Branches
A number of the Group’s subsidiary undertakings maintain branches; further details of these
can be found in Note 32.1 to the Group Financial Statements.
Dividends
An interim dividend of 6.8 pence (2022: 6.5 pence) per Vesuvius ordinary share was paid on
15 September 2023 to shareholders on the register at the close of business on 4 August 2023.
The Board is recommending a final dividend in respect of 2023 of 16.2 pence (2022: 15.75 pence)
per ordinary share which, if approved, will be paid on 31 May 2024 to shareholders on the register
at 19 April 2024.
The Trustee of the Group’s employee benefit trust has waived the right to receive any dividends.
Accountability and audit
A responsibility statement of the Directors and a statement by the Auditors about their reporting
responsibilities can be found on pages 143, and 144–151, respectively. The Directors fulfil the
responsibilities set out in their statement within the context of an overall control environment of
central strategic direction and delegated operating responsibility. As at the date of this report,
as far as each Director of the Company is aware, there is no relevant audit information of which the
Company’s Auditors are unaware and each Director hereby confirms that they have taken all the
steps that they ought to have taken as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company’s Auditors are aware of that information.
Auditors’ reappointment
PricewaterhouseCoopers LLP (PwC) were reappointed as External Auditors for Vesuvius plc for
the year ended 31 December 2023, at the 2023 AGM. PwC have been Vesuvius’ External Auditors
since 2017 and have expressed their willingness to continue in office as Auditors of the Company
for the year ending 31 December 2024. Consequently, resolutions for the reappointment of
PwC as External Auditors of the Company and to authorise the Directors to determine their
remuneration are to be proposed at the 2024 AGM.
Directors
The current Directors of the Company are Patrick André, Carla Bailo, Mark Collis, Kath Durrant,
Carl-Peter Forster, Dinggui Gao, Friederike Helfer, Douglas Hurt and Robert MacLeod.
Guy Young resigned from the Board and as Chief Financial Officer on 17 February 2023. Mark Collis
was appointed to the Board on 1 April 2023 and succeeded Guy Young as Chief Financial Officer.
Carla Bailo and Robert MacLeod joined the Board as Non-executive Directors on 1 February 2023
and 1 September 2023 respectively. Jane Hinkley retired from the Board at the close of the 2023
AGM on 18 May 2023.
The proposed appointment of Eva Lindqvist as a Non-executive Director of the Company was
announced on 15 February 2024. Eva Lindqvist will be appointed to the Company´s Board with
effect from the close of the AGM on 15 May 2024, subject to her election being approved by the
Company´s shareholders at the 2024 AGM. Douglas Hurt retires from the Board at the close of
the 2024 AGM and subject to her appointment, Eva Lindqvist will succeed Douglas Hurt as the
Senior Independent Director. Robert MacLeod will succeed Douglas Hurt as Chairman of the
Audit Committee from the close of the 2024 AGM.
All the current Directors, with the exception of Douglas Hurt, will offer themselves for election or
re-election at the 2024 AGM. Biographical information for the Directors is given on pages 80 and 81.
Further information on the remuneration of, and contractual arrangements for, the Executive
and Non-executive Directors is given on pages 108-133 in the Directors’ Remuneration Report.
The Non-executive Directors do not have service agreements.
Directors’ indemnities
The Directors have been granted qualifying third-party indemnity provisions by the Company
and the Directors of the Group’s UK Pension Plans Trustee Board (none of whom is a Director of
Vesuvius plc) have been granted qualifying pension scheme indemnity provisions by Vesuvius
Pension Plans Trustees Limited. The indemnities for Directors of Vesuvius plc have been in force
since the date of their appointments. The Pension Trustee indemnities were in force throughout
the last financial year and remain in force.
Vesuvius plc
Annual Report and Financial Statements 2023
138
Directors’ Report
continued
Annual General Meeting
The Annual General Meeting of the Company will be held at the offices of Linklaters LLP,
One Silk Street, London EC2Y 8HQ on Wednesday 15 May 2024 at 11.00 am.
Amendments of
Articles of Association
The Company may make amendments to the Articles by way of special resolution in accordance
with the Companies Act. The Articles were last amended at the 2021 AGM, to reflect changes in
the law and developments in market practice and technology.
Share capital
As at the date of this report, the Company had an issued share capital of 276,157,367 ordinary
shares of 10 pence each; 7,271,174 of these ordinary shares are held in Treasury. Therefore,
the total number of Vesuvius plc shares with voting rights is 268,886,193.
Further information relating to the Company’s issued share capital can be found in Note 9 to
the Company Financial Statements.
The Company’s Articles specify that, subject to the authorisation of an appropriate resolution
passed at a General Meeting of the Company, Directors can allot relevant securities under
Section 551 of the Companies Act up to the aggregate nominal amount specified by the relevant
resolution. In addition, the Articles state that the Directors can seek the authority of shareholders
in a General Meeting to allot equity securities for cash, without first being required to offer such
shares to existing ordinary shareholders in proportion to their existing holdings under Section
561 of the Companies Act, in connection with a rights issue and in other circumstances up to the
aggregate nominal amount specified by the relevant resolution.
At the AGM on 18 May 2023, the Directors were authorised to issue relevant securities up to an
aggregate nominal amount of £9,040,463, and, in connection with a rights issue, to issue relevant
securities up to a further aggregate nominal amount of £9,040,463.
In addition, the Directors were empowered to allot equity securities, or sell Treasury Shares, for
cash in connection with a rights issue or other pre-emptive offer without first being required to
offer such shares to existing shareholders in proportion to their existing holdings. The Directors
were also empowered to allot equity securities, and/or sell Treasury Shares, for cash in any case
other than in connection with a rights issue or other pre-emptive offer up to an aggregate nominal
value of £2,712,138, or a follow-on offer, without first being required to offer such shares to
existing shareholders in proportion to their existing holdings, and for the purposes of financing
(or refinancing, if the authority is to be used within 12 months after the original transaction)
a transaction which the Board of the Company determines to be an acquisition or other capital
investment, to allot equity securities, or sell Treasury Shares, for cash on a non-pre-emptive basis
up to an additional nominal amount of £2,712,138. Each of the authorities given in these resolutions
expires on 30 June 2024 or the date of the AGM to be held in 2024, whichever is the earlier. The
resolutions were all tabled in accordance with the revised terms of the Pre-Emption Group’s
Statement of Principles. The Directors propose to table updated resolutions at the 2024 AGM.
In the year ahead, other than potentially in respect of Vesuvius’ ability to satisfy rights granted to
employees under its various share-based incentive arrangements, the Directors have no present
intention of issuing any share capital of Vesuvius plc.
139
Strategic report
Governance
Financial statements
Authority for purchase
of own shares
Subject to the provisions of company law and any other applicable regulations, the Company may
purchase its own shares. At the AGM on 18 May 2023, Vesuvius shareholders gave authority to the
Company to make market purchases of up to 27,121,389 Vesuvius ordinary shares, representing
10% of the Company’s issued ordinary share capital as at the latest practicable day prior to the
publication of the Notice of AGM.
On 4 December 2023, the Company announced, consistent with its capital allocation policy to
return surplus cash to shareholders, the commencement of a share buyback programme of up
to £50 million (the ‘Programme’) to end no later than 4 December 2024. The sole purpose of the
Programme is to reduce Vesuvius’ share capital and the ordinary shares purchased pursuant
to the Programme are being cancelled.
The Board considered the views of the Company’s shareholders and the impact that the purchase
would have on other investors, concluding that it would send a positive public signal that the
Company was performing well and would benefit all of the Group’s stakeholders. A buyback
was chosen over, for example, a tender offer or special dividend, reflecting the preference of
shareholders and advice from brokers, as a structure that equally benefits all shareholders over
a sustained period. Over the course of the programme, the buy-back is expected to be modestly
EPS accretive and as such will enhance TSR in the event that our trading valuation multiple is
maintained. The impact of the buyback is recognised in the Company’s budget and as such it is
reflected in the Group’s incentive targets.
From 4 December 2023 to the end of the financial year on 31 December 2023, the Company had
purchased 675,707 ordinary shares of 10 pence, representing a nominal value of £67,571 and
0.24% of the Company’s issued share capital. 630,647 of these ordinary shares were cancelled by
31 December 2023, the 45,060 remaining ordinary shares were cancelled on 2 and 3 January
2024. The cost of the shares purchased was £3.1 million excluding transaction costs. A further
1,734,259 shares, representing a nominal value of £173,426 and 0.6% of the Company’s issued
share capital, have been purchased between 1 January 2024 and the date of this report at
a cost of £8.3 million excluding transaction costs. The average cost of shares purchased to date
is £4.746 per share.
In 2013, the Company acquired 7,271,174 ordinary shares, representing a nominal value of £727,117
and 2.6% of the entire called up share capital of the Company prior to the purchase. These shares
were purchased pursuant to the Board’s commitment to return the majority of the net proceeds of
the disposal of the Precious Metals Processing Division to shareholders. These shares are currently
held as Treasury shares and are not eligible to participate in dividends and do not carry any voting
rights. The Company has not subsequently disposed of any of the repurchased shares designated
as Treasury shares. The Company does not have a lien over any of its shares. Further details of
Treasury Shares and the Programme are set out in Note 9 to the Company Financial Statements.
The Directors’ purchase of own shares authority expires on 30 June 2024 or the date of the AGM to be
held in 2024, whichever is the earlier. The Directors will seek renewal of this authority at the 2024 AGM.
Share plans
Vesuvius operates a number of share-based incentive plans. Under these plans, the Group can satisfy
entitlements by the acquisition of existing shares, the transfer of Treasury shares or by the issue of new
shares. Existing shares are held in an employee benefit trust (EBT). The Trustee of the EBT purchases
shares in the open market as required to enable the Group to meet liabilities for the issue of shares to
satisfy awards that vest. The Trustee does not register votes in respect of these shares at the Company’s
Annual General Meetings and has waived the right to receive any dividends.
At 31 December 2022, the EBT held 2,454,110 ordinary shares of 10p each in the Company. During
2023, the EBT sold/transferred 784,952 ordinary shares to satisfy the vesting of awards under
the Company’s share-based incentive plans. It also purchased 286,872 ordinary shares in Vesuvius
with a nominal value of £28,687 at a total cost, including transaction costs, of approximately
£1.1m, to hold to satisfy the future vesting of awards under the Company’s share incentive plans.
As at 31 December 2023, the EBT held 1,956,030 ordinary shares. The total purchases during the
year represented <1% of the Company’s called up share capital. As at the date of this report the
EBT held 1,945,219 ordinary shares.
Vesuvius plc
Annual Report and Financial Statements 2023
140
Directors’ Report
continued
Restrictions on transfer
of shares and voting
The Company’s Articles do not contain any specific restrictions on the size of a holding or on
the transfer of shares. The Directors are not aware of any agreements between holders of the
Company’s shares that may result in restrictions on the transfer of securities or voting rights.
No person has any special rights with regard to the control of the Company’s share capital and
all issued shares are fully paid. This is a summary only and the relevant provisions of the Articles
should be consulted if further information is required.
Change of
control provisions
The terms of the Group’s committed bank facility and US Private Placement Loan Notes contain
provisions entitling the counterparties to exercise termination or other rights in the event of
a change of control on takeover of the Company. A number of the arrangements to which the
Company and its subsidiaries are party, such as other debt arrangements and share incentive
plans, may also alter or terminate on a change of control in the event of a takeover. In the context
of the Group as a whole, these other arrangements are not considered to be significant.
Interests in the
Company’s shares
The Company has been advised in accordance with DTR 5 of the Disclosure and Transparency
Rules of the following notifiable interests of 3%, or more, of its issued ordinary shares:
As at
date of
notification
As at
31 Dec 2023
1
As at
28 Feb 2024
2
Cevian Capital
21.11%
21.16%
21.29%
GLG Partners LP
6.26%
6.28%
6.32%
Martin Currie
4.83%
4.84%
4.88%
BlackRock Inc
5%
5%
5.1%
Aberforth Partners
4.93%
4.94%
4.97%
1.
The notifiable interests have been restated to reflect the change in issued share capital as at 31 December 2023 resulting
from the Share Buyback Programme.
2.
The notifiable interests have been restated to reflect the change in issued share capital as at 28 February 2024 resulting
from the Share Buyback Programme.
The interests of Directors and their connected persons in the ordinary shares of the Company as
disclosed in accordance with the Listing Rules of the Financial Conduct Authority are as set out on
pages 129 and 130 of the Directors’ Remuneration Report and details of the Directors’ Deferred
Share Bonus Plan and Vesuvius Share Plan are set out on pages 134 and 135.
Suppliers, customers
and others
Information summarising how the Directors have regard to the need to foster the Company’s
business relationships with suppliers, customers and others is included in the Group’s Section 172(1)
Statement on pages 68–71. This also details how that regard impacted the principal decisions
taken by the Directors during the year.
Our approach to business places a significant number of Vesuvius Steel employees at customer
sites on a permanent basis. In the Foundry Division, our success is built on our deep understanding
of customer processes and technical requirements, and our ability to assist them in delivering the
greatest efficiency from their operations.
During the year, our supplier audit programme covered the operations of 157 suppliers.
This approach allows Vesuvius to gain a deep understanding of our suppliers’ operations
to ensure sustainability and quality of supply.
Vesuvius agrees payment terms with its suppliers and seeks to pay in accordance with those terms.
Equal opportunities
employment
Vesuvius is an equal opportunities employer, and decisions on recruitment, development,
training and promotion, and other employment-related issues are made solely on the grounds
of individual ability, achievement, expertise and conduct. These principles are operated on
a non-discriminatory basis, without regard to race, colour, nationality, culture, ethnic origin,
religion, belief, gender, sexual orientation, age, disability or any other reason not related to job
performance or prohibited by applicable law. In cases where employees are injured or disabled
during employment with the Group, support, including appropriate training, is provided to those
employees and workplace adjustments are made as appropriate in respect of their duties and
working environment, supporting recovery and continued employment.
Employee engagement
Information on the mechanisms through which Vesuvius engages with its workforce is included
in the Section 172(1) Statement on pages 68–71 and in the Sustainability section on pages 60–63.
141
Strategic report
Governance
Financial statements
Pensions
In each country in which the Group operates, the pension arrangements in place are considered
to be consistent with good employment practice in that particular area. Independent advisers
are used to ensure that the plans are operated in accordance with local legislation and the
rules of each plan. Group policy prohibits direct investment of pension fund assets in the shares
of Vesuvius plc.
The majority of the ongoing pension plans are defined contribution plans, where our only
obligation is to make contributions, with no further commitments on the level of post-retirement
benefits. During 2023, cash contributions of £12.1m (2022: £10.8m) were made into the defined
contribution plans and charged to trading profit.
The Group’s principal defined benefit pension plans are in the UK and the US, the benefits of
which are based upon the final pensionable salaries of plan members. The assets of these plans
are held separately from the Group in trustee-administered funds. The Trustees are required to
act in the best interests of the plans’ beneficiaries. The Group also has defined benefit pension
plans in other territories but, except for those in Germany, these are not individually material in
relation to the Group.
Vesuvius continues to seek ways to de-risk its existing pension plans through a combination of
asset matching, buy-in opportunities and, where prudent, voluntary cash contributions. The total
gross defined benefit obligations at 31 December 2023 were £416.3m funded (2022: £416.0m
funded) and £62.8m unfunded (2022: £60.2m unfunded). After asset funding there was a net
deficit of £46.3m (2022: £56.1m) representing a decrease of £9.8m. The Group’s UK defined
benefits plan (the ‘UK Plan’) and the main US defined benefits plans are closed to new entrants
and have ceased providing future benefits accrual, with all eligible employees instead being
provided with benefits through defined contribution arrangements. For the Group’s closed UK
Plan, a Trustee Board exists comprising employees, former employees and an independent
trustee. The Board currently comprises six trustee Directors, of whom two are member-nominated.
The administration of the UK Plan is outsourced. The Company is mindful of its obligations
under the Pensions Act 2004 and of the need to comply with the guidance issued by the Pensions
Regulator. Regular dialogue is maintained between the Company and the Trustee Board of the
UK Plan to ensure that both the Company and Trustee Board are apprised of the same financial
and other information about the Group and the UK Plan. This is pertinent to each being able
to contribute to the effective functioning of the UK Plan. In November 2021, the Trustee of the
Vesuvius Pension Plan signed a pension insurance buy-in agreement with Pension Insurance
Corporation plc (PIC). This buy-in secured an insurance asset from PIC that matches the remaining
pension liabilities of the UK Plan, with the result that the Company no longer bears any investment,
longevity, interest rate or inflation risks in respect of the UK Plan. All benefits in the UK Plan
(with the exception of a small amount of benefits expected to arise in future as a result of
guaranteed minimum pensions (GMP) equalisation) are now insured with PIC.
The Group has several defined benefit pension plans in the US, providing retirement benefits
based on final salary or a fixed benefit. The Group’s principal US defined benefit pension plans are
closed to new members and to future benefit accrual for existing members. The Group has several
defined benefit pension arrangements in Germany which are unfunded, as is common practice
in that country. In 2016, the main German defined benefit plan was closed for new entrants and
existing members were offered a buy-out of their benefits under this plan. Those who accepted
this buy-out then joined the new defined contribution plan.
Vesuvius plc
Annual Report and Financial Statements 2023
142
Listing Rule 9.8.4C R
Disclosures
The following disclosures are made in compliance with the Financial Conduct Authority’s Listing
Rule 9.8.4C R:
Disclosure requirement under LR 9.8.4 R
Reference/Location
(1)
Interest capitalised by the Group during the year
None
(2)
Publication of unaudited financial information
Not applicable
(3)
Details of any long-term incentive schemes
Pages 123 and 124
(4)
Director waiver of emoluments
Not applicable
(5)
Director waiver of future emoluments
Not applicable
(6)
Allotment for cash of equity securities made
during the year
Not applicable
(7)
Allotment for cash of equity securities made by
a major unlisted subsidiary during the year
Not applicable
(8)
Details of participation of parent undertaking in
any placing made during the year
Not applicable
(9)
Details of relevant material contracts in which
a Director or controlling shareholder was interested
during the year
Not applicable
(10) Contracts for the provision of services by
a controlling shareholder during the year
Not applicable
(11)
Details of any arrangement under which
a shareholder has waived or agreed to
waive any dividends
Vesuvius plc holds 7,271,174 of its
10 pence ordinary shares as Treasury
shares. No dividends are payable
on these shares. The Trustee of the
Company’s EBT has agreed to waive,
on an ongoing basis, any dividends
payable on shares it holds in trust for
use under the Company’s Employee
Share Plans, details of which can be
found on pages 134, 135 and 139
(12)
Details of where a shareholder has agreed to
waive future dividends
See above
(13)
Statements relating to controlling shareholders
and ensuring company independence
Not applicable
The Directors’ Report has been approved by the Board and is signed, by order of the Board, by the Secretary of the Company.
Henry Knowles
Company Secretary
28 February 2024
143
Strategic report
Governance
Financial statements
Statement of Directors’ Responsibilities in respect of
the Financial Statements
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the Group financial statements in accordance
with UK-adopted international accounting standards and
the Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and applicable law).
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and
of the profit or loss of the Group for that period. In preparing
the financial statements, the Directors are required to:
–
Select suitable accounting policies and then apply
them consistently
–
State whether applicable UK-adopted international
accounting standards have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed for
the Company financial statements, subject to any material
departures disclosed and explained in the financial statements
–
Make judgements and accounting estimates that are
reasonable and prudent
–
Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements and
the Directors’ Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group and Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed
below, confirm that, to the best of their knowledge:
–
The Company financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 Reduced Disclosure Framework, and
applicable law), give a true and fair view of the assets,
liabilities and financial position of the Company
–
The Group financial statements, which have been prepared
in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group
–
The Strategic Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that the Group faces
The names and functions of the Directors of Vesuvius plc as at
the date of signing these financial statements are as follows:
Carl-Peter Forster
Chairman
Patrick André
Chief Executive
Mark Collis
Chief Financial Officer
Douglas Hurt
Non-executive Director,
Senior Independent Director and
Chair of the Audit Committee
Carla Bailo
Non-executive Director
Kath Durrant
Non-executive Director and Chair
of the Remuneration Committee
Dinggui Gao
Non-executive Director
Friederike Helfer
Non-executive Director
Robert MacLeod
Non-executive Director
On behalf of the Board
Mark Collis
Chief Financial Officer
28 February 2024
Vesuvius plc
Annual Report and Financial Statements 2023
144
Report on the audit of the financial statements
Opinion
In our opinion:
–
Vesuvius plc’s Group financial statements and Company
financial statements (the “financial statements”) give a true
and fair view of the state of the Group’s and of the Company’s
affairs as at 31 December 2023 and of the Group’s and
Company’s profit and the Group’s cash flows for the year
then ended;
–
the Group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
–
the Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, including FRS 101 “Reduced Disclosure Framework”,
and applicable law); and
–
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report, which comprise: the Group and Company Balance
Sheets as at 31 December 2023; the Group Income Statement,
the Group Statement of Comprehensive Income, the Group
Statement of Cash Flows and the Group and Company
Statements of Changes in Equity for the year then ended;
and the notes to the financial statements, comprising
material accounting policy information and other
explanatory information.
Our opinion is consistent with our reporting to the
Audit Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in
the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in Note 5.2 of the financial statements,
we have provided no non-audit services to the Company in the
period under audit.
Independent auditors’ report
to the members of Vesuvius plc
145
Strategic report
Governance
Financial statements
Our audit approach
Overview
Audit scope
–
Our audit included full scope audits of 17 components
and specific audit procedures on certain balances and
transactions for 15 additional components.
–
Taken together, the components at which either full scope
audit work or specified audit procedures were performed
enabled us to get coverage on 72% of revenue, and 74% of
profit before tax.
Key audit matters
–
Impairment of goodwill (Group)
–
Provisions for exposures (Legacy matter lawsuits) (Group)
–
Impairment of investment in subsidiaries (Company)
Materiality
–
Overall Group materiality: £8.5 million (2022: £10.3 million)
based on 5% of a 3 year average of profit before tax
(2022: based on approximately 4.7% of profit before tax
and separately reported items (headline profit before tax).
–
Overall Company materiality: £8.5 million (2022: £10.3 million)
based on 1.0% of total assets, capped at the level of overall
Group materiality.
–
Performance materiality: £6.4 million (2022: £7.7 million)
(Group) and £6.4 million (2022: £7.7 million) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including
those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Vesuvius plc
Annual Report and Financial Statements 2023
146
Independent auditors’ report to the members of Vesuvius plc
continued
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill (Group)
At 31 December 2023, the carrying value of goodwill is £630.9 million
(2022: £657.9 million). Goodwill arising from acquisitions has an indefinite
expected useful life and so is not amortised but rather is tested for
impairment at least annually at the cash-generating unit (“CGU”) level.
Management has determined its CGUs to align with the operating segments,
which are Steel Advanced Refractories, Steel Flow Control and Foundry.
Steel Sensors and Probes goodwill was previously impaired and is fully
written down.
Management prepares a Value in Use (VIU) model (discounted cash
flow) to test for impairment of the carrying value of the above CGUs.
This is based on a Board approved budget and 2 year forecast, on which
a terminal value is calculated based on long term growth rates. The VIU
model requires estimation of projected future cash flows and involves
making key assumptions of revenue and trading profit growth rates, an
appropriate discount rate and long term growth rates for each of the CGUs.
In making such future assumptions there is an inherent level of estimation
uncertainty to consider.
The Group also considered a valuation from its market capitalisation and
other market data to determine a Fair Value Less Costs of Disposal (‘FVLCD’)
for the Group.
We focused on the valuation of the goodwill due to its material carrying
value, and with regard to the estimation uncertainties arising from the
factors set out above.
Refer to Intangible Assets (Note 15), Impairment of Tangible and Intangible
Assets (Note 16), Critical Accounting Judgements and Estimates (Note 3) and
Significant issues and material judgements in the Audit Committee report.
Our audit procedures included:
–
We obtained management’s VIU models and FVLCD analysis. We
ensured the calculations were mathematically accurate and that the
valuation methodology conformed with the requirements of IAS 36
‘Impairment of Assets’.
–
For key assumptions made by management in respect of forecast revenue
and trading profit growth:
–
We obtained management’s supporting evidence such as the
approved budgets and 2 year forecasts. We agreed the forecast cash
flows and underlying assumptions to these and assessed historical
evidence of CGU growth rates. We also challenged the extent to which
climate change considerations had been reflected in management’s
forecast cash flows;
–
We obtained evidence through our own independent research.
This included evidence of forecast production and demand levels
for the CGU’s end customer markets, climate change driven trends
and recovery and growth in cyclical end-markets; and
–
We considered market valuation evidence such as current and target
share price, as well as other market data such as valuation multiples.
–
We utilised internal valuations experts to support our audit procedures
over the discount rate and long term growth rate assumptions used in
the VIU model and sensitised the impacts of changes in the discount rate
within our view of a reasonable range.
–
We sensitised key assumptions including, free cash flow average annual
growth rate, discount rate and long term growth rate and established the
impact of reasonably possible changes to these assumptions. We ensured
these sensitivities were appropriately disclosed in accordance with IAS 36,
‘Impairment of assets’.
We also instructed our component audit teams to evaluate the
appropriateness of management impairment indicator assessments
performed within the components and to also assess any material impacts
of climate change. Our component teams, under our supervision, did not
identify any additional impairments required or inconsistent findings to our
Group level assessment in respect of climate change.
Our findings were discussed with the Audit Committee.
Provisions for exposures
(Legacy matter lawsuits) (Group)
The Group holds a provision for ‘Disposal, closure and environmental costs’
(which includes provisions relating to legacy matter lawsuits for closed
businesses) amounting to £51.9 million (2022: £57.7 million).
Determining the quantum of this provision involves modelling and estimation
of expected future legal claim periods, volumes, settlement amounts and
associated legal costs.
We specifically focused on the provision in respect of legacy matter lawsuits
due to the material quantum of the provision and the judgement and
estimates involved in determining its valuation.
Refer to Critical Accounting Judgements and Estimates (Note 3), Provisions
(Note 29), Contingent Liabilities (Note 31) and Significant issues and material
judgements in the Audit Committee report.
Our audit procedures included:
–
Obtained management’s model of the estimated provision and tested
the mathematical accuracy and integrity of this model;
–
We challenged claims arising, settlements made and expected trends
with management’s in-house and external legal experts;
–
We tested the accuracy of historical source data which is used to
determine estimates of future trends of claim volumes, types of future
claims and settlement amounts and legal costs associated with claims,
to supporting claim documentation; and
–
We utilised our internal valuations expert to support our audit of the key
assumptions and to independently determine a reasonable range for the
provision estimate based on reasonably possible changes in significant
assumptions due to the estimation uncertainty involved. We reviewed the
financial statement disclosures for the appropriate disclosure made in
relation to significant assumptions.
Our findings were discussed with the Audit Committee.
147
Strategic report
Governance
Financial statements
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of
the Group and the Company, the accounting processes and
controls, and the industry in which they operate.
The Vesuvius Group (Vesuvius plc (Company) together with its
subsidiaries) has operations in 40 countries, including 68 sales
offices and has 55 production sites. The Group consolidates
financial information through reporting from its components
which include divisions and functions at these sites.
Our audit scope was determined by considering the significance
of the component’s contribution to profit before tax. We also
evaluated contribution to revenue and to other individual financial
statement line items, with specific consideration to obtaining
sufficient coverage over areas of heightened risk and locations.
We identified one component (2022: one) as financially significant
in 2023. The audit scope comprised a further 16 components
for which we determined that full scope audits would need to
be performed and 15 components for which specific audit
procedures on certain balances and transactions were performed
by either component teams or the Group team. This collectively
provided audit coverage of 72% of the Group’s revenue and 74%
of the Group’s profit before tax. This, together with the additional
procedures performed at the Group level, including testing the
consolidation process, gave us the evidence we needed for our
opinion on the financial statements as a whole.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed by us,
as the Group audit team, or by component auditors (involving
experts and specialists where required) in both PwC network
firms and other audit firms. Where the work was performed by
component auditors, we determined the level of involvement
and oversight we needed to have in the audit work at those
components to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis
for our opinion on the financial statements as a whole.
This was achieved through:
–
Issuance of formal instructions and regular communications
with the component auditors throughout the audit, including
visits to 3 components by senior Group team members;
–
Attendance at audit clearance meetings by senior Group
team members;
–
Interactions with local component management;
–
Our direction and supervision of the audit approach and
review of audit findings;
–
Review of selected audit workpapers of certain in-scope
components; and
–
Engagement of experts and specialists where required and
review of their output.
The Group audit team also performed the audit of the Company
and other procedures over those components of the Group not
subject to full scope audits.
The impact of climate risk on our audit
The ‘Sustainability’ section of the Strategic report sets out the
Group’s climate change risk assessment, the climate related
targets set and an evaluation of the potential financial impacts.
In planning and executing our audit we considered management’s
risk assessment and analysis of impacts to the financial
statements. We made enquiries of management to understand
the process adopted by management to assess the extent of the
potential impact of climate related risk and targets established by
management on the Group’s financial statements and support
the disclosures made within the ‘Non-financial and sustainability
information’ section of the Strategic Report and Note 2.6 of the
financial statements. Management has made commitments to
achieve net zero for the Group’s Scope 1 and Scope 2 carbon
emissions by 2050 as disclosed in the ‘Sustainability’ section of the
Strategic report of the Annual Report. Management considers the
impact of climate risk gives rise to a potential material financial
statement impact in the moderate to long term (between 2035
and 2050).
Key audit matter
How our audit addressed the key audit matter
Impairment of investment in subsidiaries (Company)
The Company holds investments in subsidiaries with a total carrying amount
of £1,778.0 million at 31 December 2023 (2022: £1,778.0 million). IAS 36
‘Impairment of assets’ requires management to consider whether there are
any indicators of impairment in respect of non-financial assets. Due to the
quantum of the carrying amount, levels of estimation uncertainty that exist
similar to assumptions used in testing for impairment of goodwill (Group) and
the market capitalisation of the Group this was an area of focus for the audit
of the Company. Consistent with the prior year management performed an
impairment test utilising cash flow forecasts used for testing for impairment
of the Group’s goodwill together with additional considerations of cash flows
relevant to the subsidiaries that the Company owns.
The judgements and estimates required to determine the cash flow forecasts
are aligned with those set out in ‘Impairment of goodwill (Group)’ above.
Refer to Investments (Note 7) and Critical Accounting Judgements and
Estimates (Note 3) in the Company financial statements, and Significant
issues and material judgements in the Audit Committee report.
Our audit procedures included:
–
Assessing the results of the VIU model and FVLCD analysis used for the
impairment test for goodwill, together with adjustments made to reflect
cash inflows to subsidiaries due from the Company.
–
Testing of the Group VIU model, including procedures performed
over management’s model and evidence obtained in respect of key
assumptions made is set out in Key audit matter ‘Impairment of goodwill
(Group)’. We also compared the carrying value of the investment in
subsidiaries and the Group Value in Use to the market capitalisation
and market valuation expectations.
Our findings were discussed with the Audit Committee.
Vesuvius plc
Annual Report and Financial Statements 2023
148
Independent auditors’ report to the members of Vesuvius plc
continued
We understood the key impacts to the Group could include
potential increases in costs from carbon pricing mechanisms,
costs and benefits of technology transition in Iron and
Steelmaking and the conversion of manufacturing processes
to clean energy. This would most likely impact the financial
statement line items and estimates associated with future cash
flows because the impact of climate change for the Vesuvius
Group is expected to become more notable in the medium to
long term. We considered the following areas to potentially be
materially impacted by climate risk and consequently we focused
our audit work in these areas: carrying value and the estimation
of useful lives of property, plant and equipment, and goodwill
and intangibles, with impairment of goodwill (Group) determined
to be a key audit matter for the year ended 31 December 2023.
Additionally, we considered the consistency of the disclosures in
relation to climate change (including the disclosures in the Task
Force on Climate-related Financial Disclosures (TCFD) related
reporting within the ‘Sustainability’ section of the Strategic report,
with the financial statements and our knowledge obtained from
our audit. This included considering whether the assumptions
made by management in the TCFD scenario analysis are
consistent with the assumptions used elsewhere in the
financial statements.
We have not noted any issues as part of this work which contradict
the disclosures in the Annual Report or materially impact the
financial statements, or our key audit matters for the year
ended 31 December 2023.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the
effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Financial statements – Company
Overall
materiality
£8.5 million (2022: £10.3 million).
£8.5 million (2022: £10.3 million).
How we
determined it
5.0% of 3 year average of profit before tax (2022: based
on approximately 4.7% of profit before tax and separately
reported items ‘headline profit before tax’)
1.0% of total assets, capped at the level of overall
Group materiality.
Rationale for
benchmark
applied
We believe that profit before tax provides us with an
appropriate basis for determining our overall Group audit
materiality given it is a key measure for users of the financial
statements. We have applied 5.0% to a 3 year average profit
before tax to take into consideration the fluctuation in results
over the past 3 years.
We believe that total assets is an appropriate basis for
determining materiality for the Company, given this entity is
an investment holding Company and this is an accepted audit
benchmark. The materiality was capped to the level of Group
overall materiality. The Company is not an in-scope component
for our Group audit. (2022: 1.0% of total assets, capped at the
level of overall Group materiality).
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was
£0.7 million and £6.0 million. Certain components were audited
to a local statutory audit materiality that was also less than our
overall Group materiality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75.0% (2022: 75.0%) of overall materiality,
amounting to £6.4 million (2022: £7.7 million) for the Group
financial statements and £6.4 million (2022: £7.7 million)
for the Company financial statements.
In determining the performance materiality, we considered
a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £425,000
(Group audit) (2022: £515,000) and £425,000 (Company audit)
(2022: £515,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
149
Strategic report
Governance
Financial statements
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
–
Evaluating management’s base case and severe but plausible
downside case for liquidity and available financial resources
and obtaining supporting evidence for key assumptions.
This included agreeing the underlying cash flow projections
to the Board approved forecast, assessing how these forecasts
were compiled and assessing the historical accuracy of the
forecasts. We also evaluated current performance and
available financing facilities and related liquidity headroom;
–
Checking management’s covenant calculations to ensure that
the covenant thresholds and definitions were consistent with
the financing agreements;
–
Testing the accuracy of cash flow models used to assess
available liquidity during the going concern period disclosed;
–
Determining alternative sensitivity scenarios to ascertain the
impact of changes in assumptions. These included scaling back
forecasts and increasing working capital as a percentage of
forecast revenue; and
–
Reading management’s disclosures in the financial statements
and relevant ‘other information’ in the Annual Report, and
assessing consistency with the financial statements and our
knowledge based on our audit.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and the Company’s ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in
the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors’ report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
report for the year ended 31 December 2023 is consistent with the
financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Vesuvius plc
Annual Report and Financial Statements 2023
150
Independent auditors’ report to the members of Vesuvius plc
continued
Corporate governance statement
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities
with respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
–
The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
–
The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
–
The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the Group’s
and Company’s ability to continue to do so over a period of
at least twelve months from the date of approval of the
financial statements;
–
The directors’ explanation as to their assessment of the Group’s
and Company’s prospects, the period this assessment covers
and why the period is appropriate; and
–
The directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the Group and Company was substantially less in
scope than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group
and Company and their environment obtained in the course of
the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit:
–
The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the Group’s and Company’s position, performance, business
model and strategy;
–
The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
–
The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the Company’s ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or the Company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to international trade restrictions, health and
safety, environmental, anti-bribery, relevant employment laws
and data protection legislation, and we considered the extent
to which non-compliance might have a material effect on the
financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements
such as Companies Act 2006, tax legislation and Listing Rules
of the Financial Conduct Authority (FCA). We evaluated
management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
151
Strategic report
Governance
Financial statements
override of controls), and determined that the principal risks were
related to posting inappropriate journal entries and management
bias in accounting estimates. The Group engagement team
shared this risk assessment with the component auditors so that
they could include appropriate audit procedures in response to
such risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
–
Inquiries of Group and local management, those charged
with governance, internal audit and the Group’s legal counsel
(internal and, where relevant, external), including consideration
of known or suspected instances of non-compliance with laws
and regulations and fraud;
–
Evaluating items raised through the Group’s whistle-blowing
arrangements and the results of management’s investigation
of such matters;
–
Inspecting management reports and Board minutes in
relation to health and safety and other compliance matters;
–
Reading and assessing key correspondence with
regulatory authorities;
–
Testing assumptions and judgements made by management
in their critical accounting estimates, in particular relating to
impairment of goodwill (Group), provisions for exposures
(Legacy matter lawsuits) (Group) and impairment of
investment in subsidiaries (Company) (see related key
audit matters section of this report); and
–
Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations including in
respect of journals posted to revenue.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit
of the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
–
we have not obtained all the information and explanations we
require for our audit; or
–
adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
–
certain disclosures of directors’ remuneration specified by
law are not made; or
–
the Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
–
a corporate governance statement has not been prepared
by the Company.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee,
we were appointed by the members on 10 May 2017 to audit
the financial statements for the year ended 31 December 2017
and subsequent financial periods. The period of total
uninterrupted engagement is 7 years, covering the years
ended 31 December 2017 to 31 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these financial
statements form part of the ESEF-prepared annual financial
report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory
Technical Standard (‘ESEF RTS’). This auditors’ report provides
no assurance over whether the annual financial report has
been prepared using the single electronic format specified in
the ESEF RTS.
Darryl Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 February 2024
Financial Statements
153
Group Income Statement
154
Group Statement of
Comprehensive Income
155
Group Statement of Cash Flows
156
Group Balance Sheet
157
Group Statement of
Changes in Equity
158
Notes to the Group
Financial Statements
211
Company Balance Sheet
212
Company Statement of Changes in Equity
213
Notes to the Company Financial Statements
219
Five-Year Summary: Divisional Results from
Continuing Operations (unaudited)
220
Shareholder Information (unaudited)
222
Glossary
Vesuvius plc
Annual Report and Financial Statements 2023
152
153
Strategic report
Governance
Financial statements
Group Income Statement
For the year ended 31 December 2023
Note(s)
2023
2022
Headline
performance
1
£m
Separately
reported
items
1
£m
Total
£m
Headline
performance
1
£m
Separately
reported
items
1
£m
Total
£m
Revenue
4, 35
Manufacturing costs
(1,391.9 )
(1,391.9 )
(1,475.9 )
(1,475.9 )
Administration, selling and distribution costs
(337.5 )
(337.5 )
(344.3 )
(344.3 )
Trading profit
2
4
Amortisation of acquired intangible assets
15
(10.3 )
(10.3 )
(10.4 )
(10.4 )
Operating profit
5
(10.3 )
(10.4 )
Finance expense
8
(28.2 )
(28.2 )
(20.8 )
(20.8 )
Finance income
8
Net finance costs
8
(11.6 )
(11.6 )
(11.4 )
(11.4 )
Share of post-tax profit of joint ventures
and associates
32
Profit before tax
(10.3 )
(10.4 )
Income tax charge
9
(51.9 )
(48.8 )
(57.2 )
(18.1 )
Profit after tax
(7.2 )
Profit attributable to:
Owners of the Parent
10
(7.2 )
Non-controlling interests
Profit after tax
(7.2 )
Earnings per share – pence
10
Total operations
– basic
– diluted
1.
Headline performance and Separately reported items are non-GAAP measures. Headline performance is defined in Note 35.1 and separately reported
items is defined in Note 2.5.
2. Trading profit is a non-GAAP measure and is defined in Note 35.4.
The above results were derived from continuing operations. Manufacturing costs are costs of goods sold. The pre-tax separately
reported items would form part of Administration, selling and distribution costs if classified within headline performance,
which including these amounts would total £347.8 m (2022: £354.7 m).
Vesuvius plc
Annual Report and Financial Statements 2023
154
Group Statement of Comprehensive Income
For the year ended 31 December 2023
Note
2023
£m
2022
£m
Profit
Items that will not subsequently be reclassified to Income Statement
Remeasurement of defined benefit liabilities/assets
25.6
Income tax relating to items not reclassified
9.4
(2.0 )
(8.2 )
Items that may subsequently be reclassified to Income Statement
Exchange differences on translation of the net assets of foreign operations
(84.3 )
Exchange differences on translation of net investment hedges
22
(20.7 )
Net change in costs of hedging
Change in the fair value of the hedging instrument
(4.2 )
Amounts reclassified from Net finance costs
(7.5 )
Other comprehensive (loss)/income, net of income tax
(70.3 )
Total comprehensive income
Total comprehensive income attributable to:
Owners of the Parent
Non-controlling interests
Total comprehensive income
The above results were derived from continuing operations.
155
Strategic report
Governance
Financial statements
Group Statement of Cash Flows
For the year ended 31 December 2023
Note(s)
2023
£m
2022
£m
Cash flows from operating activities
Cash generated from operations
11
Interest paid
(16.8 )
(15.6 )
Interest received
Income taxes paid
(52.8 )
(47.9 )
Net cash inflow from operating activities
Cash flows from investing activities
Capital expenditure
(92.6 )
(89.2 )
Proceeds from the sale of property, plant and equipment
Acquisition of subsidiaries and joint ventures, net of cash acquired
19
(3.5 )
Dividends received from joint ventures
Net cash outflow from investing activities
(86.2 )
(88.3 )
Net cash inflow before financing activities
Cash flows from financing activities
Proceeds from borrowings
13
Repayment of borrowings
13
(37.1 )
(41.1 )
Payment of lease liabilities
13, 28
(24.2 )
(14.6 )
Purchase of ESOP shares
21
(1.1 )
(6.9 )
Share buyback
(3.1 )
Dividends paid to equity shareholders
23
(60.7 )
(58.1 )
Dividends paid to non-controlling shareholders
(2.1 )
(3.2 )
Net cash outflow from financing activities
(128.3 )
(105.2 )
Net increase in cash and cash equivalents
13
Cash and cash equivalents at 1 January
Effect of exchange rate fluctuations on cash and cash equivalents
13
(21.0 )
(0.2 )
Cash and cash equivalents at 31 December
12
Alternative performance measure (non-statutory):
Notes
2023
£m
2022
£m
Free cash flow
35.11
Net cash inflow from operating activities
Capital expenditure
(92.6 )
(89.2 )
Proceeds from the sale of property, plant and equipment
Dividends received from joint ventures
Dividends paid to non-controlling shareholders
(2.1 )
(3.2 )
Free cash flow
1
35.11
1.
For definitions of alternative performance measures, refer to Note 35.
Vesuvius plc
Annual Report and Financial Statements 2023
156
Group Balance Sheet
As at 31 December 2023
Note
2023
£m
2022
£m
Assets
Property, plant and equipment
14
Intangible assets
15
Employee benefits – surpluses
25
Interests in joint ventures and associates
32
Investments
24
Deferred tax assets
9
Other receivables
17
Derivative financial instruments
24
Total non-current assets
Cash and short-term deposits
12
Inventories
18
Trade and other receivables
17
Income tax receivable
9
Derivative financial instruments
24
Total current assets
Total assets
Equity
Issued share capital
20
Retained earnings
21
Other reserves
22
(1,464.6 )
(1,391.4 )
Equity attributable to the owners of the Parent
Non-controlling interests
Total equity
Liabilities
Interest-bearing borrowings
24
Employee benefits – liabilities
25
Other payables
27
Provisions
29
Deferred tax liabilities
9
Derivative financial instruments
24
Total non-current liabilities
Interest-bearing borrowings
24
Trade and other payables
27
Income tax payable
9
Provisions
29
Derivative financial instruments
24
Total current liabilities
Total liabilities
Total equity and liabilities
Company number 8217766
on their behalf by:
Patrick André
Mark Collis
Chief Executive
157
Strategic report
Governance
Financial statements
Group Statement of Changes in Equity
For the year ended 31 December 2023
Issued
share
capital
£m
Other
reserves
£m
Retained
earnings
£m
Owners of
the Parent
£m
Non-
controlling
interests
£m
Total
equity
£m
As at 1 January 2022
(1,467.6 )
Profit
Remeasurement of defined benefit liabilities/assets
Income tax relating to items not reclassified
(8.2 )
(8.2 )
(8.2 )
Exchange differences on translation of the
net assets of foreign operations
Exchange differences on translation of
net investment hedges
(20.7 )
(20.7 )
(20.7 )
Net change in costs of hedging
Change in the fair value of the hedging instrument
Amounts reclassified from the Income Statement
(7.5 )
(7.5 )
(7.5 )
Other comprehensive income net of income tax
Total comprehensive income
Recognition of share-based payments
Purchase of ESOP shares
(6.9 )
(6.9 )
(6.9 )
Dividends paid (Note 23)
(58.1 )
(58.1 )
(3.2 )
(61.3 )
Total transactions with owners
(59.9 )
(59.9 )
(3.2 )
(63.1 )
As at 31 December 2022
(1,391.4 )
As at 1 January 2023
(1,391.4 )
Profit
Remeasurement of defined benefit liabilities/assets
Income tax relating to items not reclassified
(2.0 )
(2.0 )
(2.0 )
Exchange differences on translation of the
net assets of foreign operations
(80.8 )
(80.8 )
(3.5 )
(84.3 )
Exchange differences on translation of
net investment hedges
Net change in costs of hedging
Change in the fair value of the hedging instrument
(4.2 )
(4.2 )
(4.2 )
Amounts reclassified from Net finance costs
Other comprehensive income/(loss) net of income tax
(73.2 )
(66.8 )
(3.5 )
(70.3 )
Total comprehensive income/(loss)
(73.2 )
Recognition of share-based payments
Purchase of ESOP shares
(1.1 )
(1.1 )
(1.1 )
Share buyback
(0.1 )
(3.0 )
(3.1 )
(3.1 )
Dividends paid (Note 23)
(60.7 )
(60.7 )
(2.1 )
(62.8 )
Total transactions with owners
(0.1 )
(57.5 )
(57.6 )
(2.1 )
(59.7 )
As at 31 December 2023
(1,464.6 )
158
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
General Information
Company and its subsidiary and joint venture companies (‘the Group’) is set out in the Strategic Report on pages 1 to 78.
Basis of Preparation
Basis of accounting
The Group financial statements have been prepared in accordance with UK-adopted international accounting standards (IFRS)
and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The financial
statements have been prepared under the historical cost convention, with the exception of fair value measurement applied to
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled directly and
indirectly by the Company (its ‘subsidiaries’). Control exists when the Company has the power to direct the relevant activities of
an entity that significantly affect the entity’s return so as to have rights to the variable return from its activities. In assessing
whether control exists, potential voting rights that are currently exercisable are taken into account. The results of subsidiaries
acquired or disposed of during the year are included in the Group Income Statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
The principal accounting policies applied in the preparation of these Group financial statements are set out in the Notes. These
policies have been consistently applied to all of the years presented, unless otherwise stated. Where necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line with those detailed herein to ensure that
the Group financial statements are prepared on a consistent basis. All intra-Group transactions, balances, income and expenses
are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s interest therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination together with
the non-controlling interests’ share of profit or loss, each component of other comprehensive income, less dividends paid since
the date of the combination. Total comprehensive income is attributed to the non-controlling interests, even if this results in the
Going concern
The Group’s available committed liquidity stood at £488m at year-end 2023, down from £494m at year-end 2022. The Directors
have prepared cash flow forecasts for the Group for the period to 30 June 2025. These forecasts reflect an assessment of
current and future end-market conditions, which are expected to be challenging in 2024 and to recover thereafter, (as set
out in the ‘outlook’ statement in the Chief Executive’s Strategic Review in this document), and their impact on the Group’s future
trading performance.
The Directors have also considered a severe but plausible downside scenario, based on an assumed volume decline and loss of
profitability over the period. This downside scenario assumes:
–
a reduction in trading profit by 35%, equating to £70m in both 2024 and 2025 relative to 2023. This is through an assumed
decline in revenue of 4% and a reduction in the Return on Sales margin by 3.3%, from 10.4% to 7.1 %, and;
–
working capital as a percentage of sales deteriorating by 0.6% compared to 2023.
The Group has two covenants; net debt/EBITDA (under 3.25x) and an interest cover requirement of at least 4.0x. In this downside
scenario, the forecasts show that the Group’s maximum net debt/EBITDA (pre-IFRS 16 in-line with the covenant calculation)
does not exceed 1.6x, compared to a leverage covenant of 3.25x, and the minimum interest cover reached is 18x compared to
a covenant minimum of 4x.
The forecasts show that the Group will be able to operate within the current committed debt facilities and show continued
compliance with the Company’s financial covenants. On the basis of the exercise described above and the Group’s available
committed debt facilities, the Directors consider that the Group and the Company have adequate resources to continue in
operational existence for a period of at least 12 months from the date of signing of these financial statements and that there is
no material uncertainty in respect of going concern. Accordingly, they continue to adopt a going concern basis in preparing the
2.4
Functional and presentation currency
The financial statements are presented in millions of pounds sterling, which is the functional currency of the Company,
and rounded to one decimal place. Foreign operations are included in accordance with the policies set out in Note 24.1.
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Financial statements
159
2.5
Disclosure of separately reported items
Columnar presentation
The Group has adopted a columnar presentation for its Group Income Statement, to separately identify headline performance
results, as the Directors consider that this gives a useful view of the core results of the ongoing business. As part of this presentation
format, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement, within the column
entitled ‘Separately reported items’, the effect of any components of financial performance for which the Directors consider
separate disclosure would assist users both in a useful understanding of the financial performance achieved for a given year
and in making projections of future results.
Separately reported items
Both materiality and the nature of the components of income and expense are considered in deciding upon such presentation.
Such items may include, inter alia, the financial effect of exceptional items which occur infrequently, such as major restructuring
activity (which may require more than one year to complete), significant movement in the Group’s deferred tax balances, such as
that caused by the material recognition of previously unrecognised deferred tax assets, items reported separately for consistency,
such as amortisation charges relating to acquired intangible assets, profits or losses arising on the disposal of continuing or
discontinued operations and the taxation impact of the aforementioned items reported separately.
The amortisation charge in respect of intangible assets recognised on business combinations is excluded from the trading results
of the Group since they are non-cash charges and are not considered reflective of the core trading performance of the Group.
In its adoption of this policy, the Company applies an even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such items.
2.6
Consideration of climate change
As well as considering the implications of climate change on the Group’s operations and activities, the Directors have considered
the impact on the financial statements in accordance with the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. In preparing the financial statements, we have considered the impact of climate change, particularly in
the context of the disclosures included in the Sustainability Report this year.
Further detail on our sustainability and climate change-based management incentives is included in the Board oversight section
of our Sustainability Report.
Climate change is not considered to have a material impact on the Group’s financial reporting judgements and estimates, nor is it
expected to have a detrimental impact on the viability of the Group in the medium term.
Specifically, we note that we have considered the impact of climate change on the carrying value and the estimation of useful lives
of property, plant and equipment (see Note 14) and goodwill and intangibles (see Note 15). The impact of climate change on
impairment of goodwill is disclosed in Note 15.2.
Changes in accounting policies
2.8
New and revised IFRS
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is that they are not expected to have a significant impact on the Group’s financial position, performance,
cash flows and disclosures.
IFRS 17 Insurance Contracts
This standard replaces IFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. The Group
has assessed the impact of IFRS 17 Insurance Contracts to ensure compliance. It does not have a material impact on the financial
statements and no additional disclosures are required.
OECD Pillar 2 model
On 19 July 2023, the UK Endorsement Board adopted the Amendments to IAS 12 International Tax Reform: Pillar 2 Model Rules,
issued by the IASB in May 2023. The Amendments introduce a temporary mandatory exception from accounting for deferred
taxes arising from the Pillar 2 model rules and the Group has applied this exception to recognising and disclosing information
160
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Critical Accounting Judgements and Estimates
Determining the carrying amount of some assets and liabilities and amounts recognised as reported profit requires judgement
and/or estimation of the effect of uncertain future events. The major sources of judgement and estimation uncertainty that have
a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities and amounts recognised
as reported profit are noted below. As part of the evaluation of critical accounting judgements and key sources of estimation
uncertainty, the Group has considered the implications of climate change on its operations and activities. All other accounting
policies are included within the respective Notes to the Financial Statements.
3.1
Separately reported items (judgement)
In accordance with IAS 1, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement,
within the column entitled ‘Separately reported items’, the effect of any components of financial performance for which the
Directors consider separate disclosure would assist both in a useful understanding of the financial performance achieved
for a given year and in making projections of future results. The judgement considers both materiality and the nature of the
components of income and expense in deciding upon such presentation. Such items may include, inter alia, the financial effect
of exceptional items which occur infrequently, such as major restructuring activity, and items reported separately for consistency,
such as amortisation charges relating to acquired intangible assets, profits or losses arising on the disposal of continuing or
discontinued operations and the taxation impact of the aforementioned exceptional items and other items reported separately.
3.2
Deferred tax asset recognition (judgement and estimate)
The level of deferred tax recognised is dependent on subjective judgements as to the interpretation of complex international
tax regulations together with the ability of the Group to utilise tax attributes within the time limits imposed by the relevant tax
legislation. The value of deferred tax assets and liabilities is an area involving inherent uncertainty and estimation and balances
are therefore subject to risk of change as a result of underlying assumptions and judgements. In recognising deferred tax assets,
the Group considers the future profitability based upon approved budgets and business plans, and the Group models
proportionate increases and decreases in relation to future income to determine future deferred tax recoverability. It is impractical
to disclose the extent of the possible effects of profitability assumptions on the Group’s deferred tax assets. It is reasonably
possible that to the extent that actual outcomes differ from management’s estimates, material income tax charges or credits,
and changes in current and deferred tax assets or liabilities, may arise within the next financial years and in future periods.
Reportable segments for continuing operations (judgement)
The Group’s operating segments are determined taking into consideration how the Group’s components are reported to the
Group’s Chief Executive, who makes the key operating decisions and is responsible for allocating resources and assessing
performance of the component. Taking into account the Group’s management and internal reporting structure, the operating
segments are Steel Flow Control, Steel Advanced Refractories, Steel Sensors & Probes, and the Foundry Division. The principal
activities of each of these segments are described in the Strategic Report.
The Steel Flow Control, Steel Advanced Refractories, and Steel Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments, which include a similar nature of products, customers, production
Employeebenefits(estimate)
The Group’s financial statements include the costs and obligations associated with the provision of pension and other post-
retirement benefits to current and former employees. It is the Directors’ responsibility to set the assumptions used in determining
the key elements of the costs of meeting such future obligations. These assumptions are set after consultation with the Group’s
actuaries and include those used to determine regular service costs and the financing elements related to the plans’ assets and
liabilities. Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions could affect the
Group’s profit and financial position. The pension obligations are most sensitive to a change in the discount rate and mortality
assumptions and therefore could materially change in the next financial year if the discount rate changes significantly. Sensitivity
disclosures are included in Note 25.3.
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161
3.5
Impairment testing of goodwill (estimate)
Determining whether goodwill is impaired requires an estimation of the recoverable amount, which is the higher of value in use
and fair value less cost to sell, of the cash-generating units to which these assets have been allocated. The value in use calculation
requires estimation of future cash flows expected to arise for the cash-generating unit, the selection of suitable discount rates and
the estimation of long-term growth rates. As determining such assumptions is inherently uncertain and subject to future factors,
there is the potential these may differ in subsequent periods and therefore materially change the conclusions reached. In light of
this, consideration is made each year as to whether sensitivity disclosures are required for reasonably possible changes to
assumptions. Sensitivity disclosures are included in Note 16.2.
3.6
Provisions (judgement and estimate)
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Some of the Group’s subsidiaries are parties to legacy matter and other lawsuits, certain
of which are insured claims, which have arisen in the ordinary course of the operations of the company involved. Some of these
provisions relate to businesses that are closed or have been disposed of. Provisions are made for the expected amounts payable in
respect of known or probable costs resulting both from these third-party lawsuits or other regulatory requirements. To the extent
insurance is in place, an asset is recognised in other receivables in respect of associated insurance reimbursements.
As the resolution of many of the potential obligations for which provision is made is subject to legal or other regulatory process,
it requires estimation of the timing, quantum and amount of associated outflows, which are subject to some uncertainty. The
Directors use their judgement, using historical evidence, current information and expert experience, to determine whether to
recognise a provision, and make appropriate estimates of provisions in the financial statements for amounts relating to such
matters. Assessment of claim costs is considered to be a critical estimate. Associated assets for insurance recoverable are
recognised, which involves assessing the likelihood of insurance being paid, which is a critical judgement. The Directors have
considered the available cover and the historical evidence to determine whether this is virtually certain. Estimating the amount
of provisions and insurance receivable is subject to estimation uncertainty. See Note 29 for further information.
In 2019 there was a significant increase in the volume of water run-off at a disused property in the US. Charges related to
remediation and unavoidable associated and ongoing running costs were recorded as a provision in 2020. The Directors use
their judgement to determine the period for which these unavoidable and ongoing running costs will continue to be incurred.
Segment Information
The segment information contained in this Note refers to several alternative performance measures, definitions of which can
be found in Note 35. The Group has considered climate change in making segmental and revenue disclosures. Opportunities
and risks for the reported segments are further explained in the Sustainability section.
4.1
Business segments
Operating segments for continuing operations
The Group’s operating segments are determined taking into consideration how the Group’s components are reported to the
Group’s Chief Executive, who makes the key operating decisions and is responsible for allocating resources and assessing
performance of the component. Taking into account the Group’s management and internal reporting structure, the operating
segments are Steel Flow Control, Steel Advanced Refractories, Steel Sensors & Probes, and the Foundry Division. The principal
activities of each of these segments are described in the Strategic Report.
The Steel Flow Control, Steel Advanced Refractories, and Steel Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments which include a similar nature of products, customers, production
processes and margins.
Segment revenue represents revenue from external customers (inter-segment revenue is not material). Trading profit includes
items directly attributable to a segment as well as those items that can be allocated on a reasonable basis.
Accounting policy – revenue recognition
The Group derives all of its revenue from contracts with customers. The Group enters into contracts to provide one or multiple
products to customers in the steel, foundry and other industries globally.
Revenue recognition at a point in time
Where the Group provides consumable products only, one performance obligation is present. The performance obligation is
to deliver consumables to the customer and is satisfied upon delivery of these items. Similarly, where a contract is for the supply
of standard equipment, there is one performance obligation and revenue is primarily recognised at a point in time, being upon
delivery of these items. The form of a contract is typically a purchase order from a customer.
162
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Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
The Group also enters into some contracts with customers in the steel industry under which it primarily provides consumable items,
but also equipment and/or technical assistance (‘service contracts’) to facilitate these customers’ steel production processes.
The customer benefits from the combined output of these contracts, being the use of Vesuvius consumables, equipment and
technicians to support the customer’s production of steel. The individual elements of these contracts are not distinct because
Vesuvius is compensated by the efficient use of refractory material, optimised through a combination of the consumable itself
and its application by experienced technicians. The performance obligations are therefore bundled into a single performance
obligation and Revenue is recognised at a point in time, on confirmation of steel production volume by customers.
Approximately 86% (2022: 87%) of the aforementioned revenue relates to the sale of consumables and equipment only.
Approximately 14% (2022: 13%) of revenue relates to contracts that contain multiple performance obligations, which are bundled
into a single performance obligation and revenue is recognised over the course of the contract as the customer consumes and
benefits from Vesuvius products.
Revenue recognition over time
The Group enters into bespoke equipment design and build (and installation in some cases) contracts with customers.
Performance obligations are usually defined by milestones agreed with the customers in the contract. The customer usually does
not have a right to a refund as work progresses towards achieving the milestones in the contract. Revenue is recognised over time
by measuring the progress of completion or achievement of a milestone for each performance obligation identified within the
contract, usually with reference to cost inputs incurred against overall estimated costs for the contract. This does not typically
entail estimation or judgements as the contracts are usually not material in isolation and do not span more than 12 months.
This approach to revenue recognition is considered to reflect faithfully the value and timing of goods or services transferred
and the rights of Vesuvius to revenue.
Determining and allocating the transaction price to performance obligations
For revenue recognised at a point in time, the transaction price is determined and allocated with reference to the individual prices
of consumables or equipment specified in the contract or customer purchase order. If a stand-alone selling price is not available,
the Group will estimate the selling price with reference to the price that would be charged for the goods or services if they were sold
separately. This estimate is not considered complex.
For service contracts the bundled performance obligation is deemed to be the provision of consumables and, in some cases,
labour to facilitate production of customer steel. The transaction price is determined and allocated with reference to either an
agreed price list for each of the consumables input or, for some contracts, the transaction price is determined and allocated as
an amount per unit of customer steel output.
For revenue recognised over time, the transaction price is determined with reference to the prices set out in the contract. For
bespoke equipment builds, the transaction price is allocated to performance obligations (milestones) within the contract and the
payment schedules agreed with the customer that align to these milestones. For installations, the transaction price is allocated
with reference to the progress of completion. Where payment schedules include customer advance payments (i.e. not aligned
with a milestone/performance obligation), the amounts received are included within contract liabilities until the performance
obligation to which they relate is satisfied.
Contracts are to be settled in cash. They do not typically contain any variable consideration, discounts, refunds, rebates,
warranties or significant financing components.
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163
Duration and costs of obtaining contracts
The duration of the Group’s contracts with customers is typically less than one year and accordingly the Group has taken the
practical expedient within IFRS 15 to not disclose the transaction price allocated to unsatisfied (whole or partially) performance
obligations as of the end of the reporting period. Service contracts may span over more than one year as they remain in effect
up to a specified level of customer production of steel. However, the choice to purchase from Vesuvius under the contract remains
with the customer and therefore there is no commitment for the customer/Vesuvius to purchase/produce up to the specified level.
Costs of obtaining contracts are not considered significant and these are expensed as incurred.
Customer credit risk and payment terms
The Group assesses customer credit risk and recognises revenue when such risk is considered low and the consideration cash flows
due are reasonably expected to flow to the Group. Typically, the Group will not transact with customers where credit risk concerns
are identified and therefore there is no material unrecognised revenue as a result of credit risk. For trade receivables and contract
assets in respect of revenue recognised, an expected credit loss allowance is determined.
Customer payment terms are set out in revenue contracts and do not exceed one year. Customer payments typically follow the
satisfaction of performance obligations at which point revenue is recognised and invoiced. Accordingly, trade receivables and
contract assets are expected to derive cash inflows for the Group within less than 12 months.
A contract asset is recorded when revenue is recognised but an invoice has not been raised to the customer. Contract assets are
short-term and typically are invoiced in the following month.
Customer advance payments are included in contract liabilities. These are typically not material and relate to over time revenue
Uncertainties
There are no uncertainties involving economic factors, estimation or judgements (other than as disclosed above) in respect of
revenue recognition. Credit risk relating to the collection of cash inflows from revenue recognised is addressed through an
allowance for expected credit losses, as set out in the trade and other receivables accounting policy.
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
2023 | 2022 | |
£m | £m | |
Receivables, which are included in ‘Trade and other receivables’ | 356.9 | 380.8 |
Contract assets, which are included in ‘Trade and other receivables’ | 1.6 | 1.5 |
Contract liabilities, which are included in ‘Trade and other payables’ | 2.3 | 2.5 |
Contract liabilities of £2.3m (2022: £2.5m) include advances received from customers that precede the satisfaction of
performance obligations by the Group. £2.5m of the contract liabilities recognised in the prior year was recognised as revenue
164
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
4.3
Segmental analysis
The reportable segment results from continuing operations for 2023 and 2022 are presented below.
| 2023 | |||||||
Flow | Advanced | Sensors | |||||
Control | Refractories | & Probes | Total Steel | Foundry | Total | ||
Note | £m | £m | £m | £m | £m | £m | |
Segment revenue | 793.0 | 567.9 | 39.1 | 1,400.0 | 529.8 | 1,929.8 | |
– at a point in time | 1,396.6 | 529.8 | 1,926.4 | ||||
– over time | 3.4 | – | 3.4 | ||||
Segment adjusted EBITDA | 187.9 | 70.3 | 258.2 | ||||
Segment depreciation and amortisation | (40.3) | (17.5) | (57.8) | ||||
Segment trading profit | 147.6 | 52.8 | 200.4 | ||||
Return on sales margin | 10.5% | 10.0% | 10.4% | ||||
Amortisation of acquired | |||||||
intangible assets | (10.3) | ||||||
Operating profit | 190.1 | ||||||
Net finance costs | (11.6) | ||||||
Share of post-tax profit of joint ventures | 0.9 | ||||||
Profit before tax | 179.4 | ||||||
Capital expenditure additions | 93.2 | 32.1 | 125.3 | ||||
Inventory | 18 | 239.5 | 51.5 | 291.0 | |||
Trade debtors | 17 | 267.6 | 89.3 | 356.9 | |||
Trade payables | 27 | (177.7) | (58.7) | (236.4) | |||
| 2022 | |||||||
Flow | Advanced | Sensors | |||||
Control | Refractories | & Probes | Total Steel | Foundry | Total | ||
Note | £m | £m | £m | £m | £m | £m | |
Segment revenue | 810.9 | 645.3 | 40.2 | 1,496.4 | 551.0 | 2,047.4 | |
– at a point in time | 1,493.7 | 551.0 | 2,044.7 | ||||
– over time | 2.7 | – | 2.7 | ||||
Segment adjusted EBITDA | 210.6 | 72.1 | 282.7 | ||||
Segment depreciation and amortisation | (37.9) | (17.6) | (55.5) | ||||
Segment trading profit | 172.7 | 54.5 | 227.2 | ||||
Return on sales margin | 11.5% | 9.9% | 11.1% | ||||
Amortisation of acquired | |||||||
intangible assets | (10.4) | ||||||
Operating profit | 216.8 | ||||||
Net finance costs | (11.4) | ||||||
Share of post-tax profit of joint ventures | 1.2 | ||||||
Profit before tax | 206.6 | ||||||
Capital expenditure additions | 85.2 | 18.7 | 103.9 | ||||
Inventory | 18 | 259.6 | 56.4 | 316.0 | |||
Trade debtors | 17 | 288.0 | 92.8 | 380.8 | |||
Trade payables | 27 | (177.2) | (62.3) | (239.5) | |||
The Chief Operating Decision Maker does not review non-current assets at a segmental level so these disclosures are not included.
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165
4.4
Geographical analysis
External revenue | Non-current assets | |||
2023 | 2022 | 2023 | 2022 | |
£m | £m | £m | £m | |
EMEA | 669.6 | 741.6 | 515.8 | 500.0 |
Asia | 565.6 | 565.2 | 233.0 | 237.2 |
North America | 528.7 | 549.1 | 404.1 | 384.3 |
South America | 165.9 | 191.5 | 52.1 | 44.3 |
Revenue | 1,929.8 | 2,047.4 | 1,205.0 | 1,165.8 |
External revenue disclosed in the table above is based upon the geographical location from which the products and services are
invoiced. Non-current assets exclude employee benefits net surpluses and deferred tax assets. Information relating to the Group’s
products and services is given in the Strategic Report. The Group is not dependent on any single customer for its revenue and no
single customer, for either of the years presented in the table above, accounts for more than 10% of the Group’s total external
revenue. £66.5m (2022: £70.9m) of revenue was generated from the UK, and total non-current assets in the UK amounted to
5.
Operating Profit
Operating profit is stated after charging/(crediting)
2023 | 2022 | ||
Notes(s) | £m | £m | |
Cost of materials recognised as an expense | 18 | 853.5 | 923.1 * |
Research and development | 37.4 | 35.9 | |
Employee expenses | 7 | 475.1 | 441.3 |
Depreciation | 14 | 57.4 | 55.2 |
Amortisation | 15 | 10.7 | 10.7 |
Operating lease charges | 28 | 3.0 | 2.3 |
Expected credit loss allowances (credit)/charge | 17, 24.2 | (2.6) | 9.9 |
Other expenses | 305.1 | 352.2 |
*
2022 comparatives for cost of materials recognised as an expense have been restated following review during 2023 where an arithmetic error was
identified. This restatement did not impact the Income Statement or the balance sheet, it was purely a disclosure item.
Other expenses mainly include energy costs, repairs and maintenance costs, travel costs, external consulting and information
technology costs.
The expected credit loss allowance credit of £2.6m in 2023 (2022: charge of £9.9m) is largely due to increased cash collection
Amounts payable to PricewaterhouseCoopers LLP and their associates
2023 | 2022 | |
£m | £m | |
Fees payable to the Company’s auditors and their associates for the audit | ||
of the Parent Company and Consolidated Financial Statements | 1.0 | 1.1 |
Fees payable to the Company’s auditors and their associates for other services: | ||
Audit of the Company’s subsidiaries | 1.1 | 1.0 |
Audit-related assurance services | 0.2 | 0.2 |
Total auditors’ remuneration | 2.3 | 2.3 |
Total auditors’ remuneration of £2.3m in 2023 all related to continuing operations, of which £2.1m related to audit fees and £0.2m
to non-audit fees, in respect of the Group’s half-year financial statements, quarterly reviews and tax form audits in India and
Mexico (2022: £2.3m, including £2.1m of audit fees and £0.2m of non-audit fees, the latter in respect of the Group’s half-year
review fee and quarterly reviews and tax form audits in India, as required by regulation). In 2023 a total of £0.2m of audit overruns
were incurred in respect of 2022 year-end audit and not included in the total auditors’ remuneration of £2.3m for 2022. It is the
Group’s policy not to use the Group’s auditors for non-audit services other than for audit-related services that are required to be
performed by auditors.
5.3
Amounts payable to Mazars LLP
Mazars LLP acts as external auditors of the non-material entities and three material entities within the Group. Total remuneration
166
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Restructuring Charges
There were no restructuring charges in 2023 (2022: £nil).
Cash costs of £0.8m (2022: £1.5m) (Note 11) were incurred in the year in respect of previously announced restructuring
Employees
7.1
Employee expenses
2023 |
2022 |
||
Note |
£m |
£m |
|
Wages and salaries |
392.2 |
365.8 |
|
Social security costs |
58.3 |
54.0 |
|
Share-based payments |
26 |
7.3 |
5.1 |
Pension costs – defined contribution pension plans |
25 |
12.1 |
10.8 |
– defined benefit pension plans |
25 |
4.7 |
5.2 |
Other post-retirement benefits |
25 |
0.5 |
0.4 |
Total employee expenses |
475.1 |
441.3 |
7.2
Monthly average number of employees
2023 |
2022 |
|
no. |
no. |
|
Steel |
9,057 |
8,720 |
Foundry |
2,455 |
2,470 |
Total monthly average number of employees |
11,512 |
11,190 |
As at 31 December 2023, the Group had 11,376 employees (2022: 11,134).
7.3
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is
provided in the audited part of the Directors’ Remuneration Report on pages 122 to 135.
2023 |
2022 |
|
£m |
£m |
|
Short-term employee benefits |
2.5 |
1.9 |
Post-employment benefits |
0.2 |
0.3 |
Share-based payments |
1.5 |
0.6 |
Total remuneration of key management personnel |
4.2 |
2.8 |
Net Finance Costs
2023 |
2022 |
|
£m |
£m |
|
Interest payable on borrowings |
||
Loans and overdrafts |
20.1 |
15.4 |
Interest on lease liabilities |
2.4 |
1.9 |
Amortisation of capitalised arrangement fees |
1.0 |
1.0 |
Total interest payable on borrowings |
23.5 |
18.3 |
Interest on net retirement benefit obligations |
2.3 |
1.4 |
Adjustment to discounts on provisions and other liabilities |
2.4 |
1.1 |
Adjustment to discounts on receivables |
(1.3) |
(0.6) |
Finance income |
(15.3) |
(8.8) |
Total net finance costs |
11.6 |
11.4 |
Strategic report
Governance
Financial statements
167
Income Tax Charge
Accounting policy
Tax expense represents the sum of current tax and deferred tax. Current and deferred tax are recognised in profit or loss except
to the extent that they relate to items charged or credited in the Group Statement of Comprehensive Income or Group Statement
of Changes in Equity, in which case the associated tax is also recognised in those statements.
Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Group Income
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have
been enacted, or substantively enacted, by the balance sheet date.
A provision is recognised when the Group considers it has a present tax obligation as the result of a past event and it is probable
that the Group will be required to settle that obligation. Provisions established for such uncertain tax positions are made using
a best estimate of the tax expected to be paid, based on a qualitative and quantitative assessment of all relevant information.
Such a provision is typically required where the underlying tax issue is subject to interpretation and remains to be agreed,
and therefore is uncertain as to outcome. Principally, the uncertain tax positions for which a provision is made relate to the
interpretation of tax legislation and guidance regarding transfer pricing arrangements that have been entered into in the normal
course of business. In accordance with IAS 12, tax provisions are included as income tax payable on the face of the Group Balance
Sheet, and movements in tax provisions are included within income tax charges or credits in the Group Income Statement.
In assessing any appropriate provision requirements for uncertain tax items, the Group considers progress made in discussions
with the tax authorities, expert advice on the likely outcome and any recent developments in case law. Due to the uncertainty
associated with such tax items, it is possible that at a future date, on conclusion of the open matters, the final outcome may
vary materially. Any such variations will affect the financial results in the year in which such a determination is made.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. Deferred tax is calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised, based on tax rates and laws that have been enacted, or substantively
enacted, by the balance sheet date.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group
168
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
9.2
Income tax charge
2023 | 2022 | ||
£m | £m | ||
Current tax | |||
Overseas taxation | 38.9 | 43.6 | |
Adjustments in respect of prior years | 6.7 | (1.1) | |
Total current tax, continuing operations | 45.6 | 42.5 | |
Deferred tax | |||
Origination and reversal of temporary taxable differences | 6.2 | (23.6) | |
Adjustments in respect of prior years | (3.0) | (0.8) | |
Total deferred tax, continuing operations | 3.2 | (24.4) | |
Total income tax charge | 48.8 | 18.1 | |
Total income tax charge attributable to: | |||
Continuing operations | – headline performance | 51.9 | 57.2 |
– separately reported | (3.1) | (39.1) | |
Total income tax charge | 48.8 | 18.1 |
Included in the Group’s total income tax charge are charges and credits meeting the criteria set out in Note 2.5 to be treated as
separately reported items, as analysed in the following table:
2023 | 2022 | |
Separately reported items | £m | £m |
Additional recognition of UK deferred tax asset | – | (37.8) |
Amortisation and utilisation of acquired intangibles | (2.7) | (2.7) |
Recognition of deferred tax asset on acquired intangibles | (0.4) | – |
Additional derecognition/(recognition) of US deferred tax asset | – | 1.4 |
Total tax credit separately reported | (3.1) | (39.1) |
As a result of the expected future profitability of the UK business, the Group decided in 2022 to partially recognise UK deferred tax
assets totalling £37.8m that have no expiry date. In recognising these assets, the Group has considered the future profitability of
the UK business from approved budgets and business plans and an extrapolation from them if profits continue to grow at a rate
consistent with those plans. The Group has also carried out an exercise to reflect scenarios where the business plan does not
materialise as expected. The Group has modelled proportionate increases and decreases in relation to the expected taxable
income based on the approved budget and the results do not have a material impact on the deferred tax asset balance.
These assets are available for carry-forward indefinitely and can be offset against taxable income generated in the UK.
The net tax debit reflected in the Group Statement of Comprehensive Income in the year amounted to a £2.0m charge
(2022: £8.2m charge), comprising a £2.0m charge (2022: £6.7m charge) related to tax on net actuarial gains and losses on
the employee benefits plan and a £nil charge (2022: £1.5m charge) relating to deferred tax rate changes.
The Group operates in a number of countries that have differing tax rates, laws and practices. Changes in any of these areas
could, adversely or positively, impact the Group’s tax charge in the future. Continuing losses, or insufficiency of taxable profit
to absorb all expenses, in any subsidiary, could have the effect of increasing tax charges in the future as headline effective tax
relief may not be available for those losses or expenses. Other significant factors affecting the tax charge are described in
Notes 9.1 and 9.6.
9.3
Reconciliation of income tax charge to profit before tax
2023 | 2022 | |
£m | £m | |
Profit before tax | 179.4 | 206.6 |
Tax at the UK corporation tax rate of 23.5% (2022: 19.0%) | 42.1 | 39.2 |
Overseas tax rate differences | 0.6 | 16.5 |
Withholding taxes | 6.4 | 2.8 |
(Income)/expenses not (taxable)/deductible for tax purposes | (4.6) | 0.8 |
Utilisation of previously unrecognised tax losses | – | (0.8) |
US deferred tax asset not previously recognised | – | (5.7) |
UK deferred tax asset not previously recognised | – | (37.8) |
Deferred tax assets not recognised | 0.6 | – |
Deferred tax rate changes | – | 1.1 |
Adjustments in respect of prior years | 3.7 | 2.0 |
Total income tax charge | 48.8 | 18.1 |
Strategic report
Governance
Financial statements
169
Deferred tax
Other | Other | |||||
operating | Pension | Intangible | temporary | |||
Interest | losses | costs | assets | differences | Total | |
£m | £m | £m | £m | £m | £m | |
As at 1 January 2022 | 34.4 | 15.5 | 13.4 | (23.8) | 35.1 | 74.6 |
Exchange adjustments | 4.1 | 1.3 | 1.2 | (0.9) | 2.2 | 7.9 |
Other net charge to Group Statement of | ||||||
Comprehensive Income | – | – | (6.7) | – | (1.5) | (8.2) |
Other net credit/(charge) to Group Income Statement | 0.1 | 37.2 | 0.2 | 2.9 | (1.1) | 39.3 |
Other net credit/(charge) to Group Income Statement US | 2.7 | (7.6) | (1.4) | (0.8) | (7.8) | (14.9) |
As at 31 December 2022 | 41.3 | 46.4 | 6.7 | (22.6) | 26.9 | 98.7 |
Exchange adjustments | (1.8) | 0.6 | (0.2) | 0.8 | (1.8) | (2.4) |
Other net charge to Group Statement of | ||||||
Comprehensive Income | – | – | (2.0) | – | – | (2.0) |
Other net (charge)/credit to Group Income Statement | (5.7) | (4.3) | (1.5) | 3.7 | 4.6 | (3.2) |
As at 31 December 2023 | 33.8 | 42.7 | 3.0 | (18.1) | 29.7 | 91.1 |
2023 | 2022 | |
£m | £m | |
Recognised in the Group Balance Sheet as: | ||
Non-current deferred tax assets | 114.6 | 110.6 |
Non-current deferred tax liabilities | (23.5) | (11.9) |
Net total deferred tax assets | 91.1 | 98.7 |
Included in these deferred tax assets and liabilities are amounts expected to be utilised in 2024 as follows:
2023 | 2022 | |
£m | £m | |
Deferred tax assets | 8.9 | 18.2 |
Deferred tax liabilities | (2.7) | (2.7) |
As a result of the expected future profitability of the UK business, the Group decided in 2022 to recognise certain UK deferred
tax assets that have no expiry date. Included in non-current deferred tax assets is £34.4m (2022: £37.8m) in respect of the partial
recognition of temporary differences arising in the UK computed in accordance with the policy set out in Note 9.1 above. The
Group has also carried out an exercise to reflect scenarios where the business plan does not materialise as expected. The Group
has modelled proportionate increases and decreases in relation to the expected taxable income based on the approved budget
and the results do not have a material impact on the deferred tax asset balance. The Group remains confident of the recovery of
these assets.
Tax loss carry-forwards and other temporary differences with a tax value of £22.0m (2022: £9.5m) were recognised by jurisdictions
reporting a loss. Based on approved business plans of these subsidiaries, the Directors consider it probable that the tax loss
carry-forwards and temporary differences can be offset against future taxable profits of these subsidiaries.
The total deferred tax assets not recognised as at 31 December 2023 were £161.8m (2022: £175.1m), as analysed below.
In accordance with the accounting policy in Note 9.1, these items have not been recognised as deferred tax assets on the basis
that their future economic benefit is not probable. In total, there was a decrease of £13.3m (2022: £34.5m decrease) in net
unrecognised deferred tax assets during the year, primarily driven by the recognition of UK deferred tax assets. All UK
unrecognised deferred tax assets are now reported at the 25% rate.
2023 | 2022 | |
£m | £m | |
Operating losses (further described below) | 91.6 | 100.6 |
Unrelieved US interest (may be carried forward indefinitely) | 0.7 | – |
Capital losses available to offset future UK capital gains (may be carried forward indefinitely) | 45.5 | 46.2 |
UK ACT credits (may be carried forward indefinitely) | 19.3 | 19.3 |
Other temporary differences | 4.7 | 9.0 |
Total deferred tax assets not recognised | 161.8 | 175.1 |
170
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
The Group has significant net operating losses with a tax value of £134.3m (2022: £147.0m), only £42.7m (2022: £46.4m) of which
meet the criteria set out in Note 9.1 to be recognised on the Group Balance Sheet.
Operating | Operating | Operating | Operating | |||
losses | losses not | losses | losses not | |||
recognised | recognised | Total | recognised | recognised | Total | |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
£m | £m | £m | £m | £m | £m | |
UK (may be carried forward indefinitely) | 34.4 | 72.1 | 106.5 | 37.8 | 79.1 | 116.9 |
US (due to expire 2024–2031) | 1.4 | – | 1.4 | 2.6 | – | 2.6 |
ROW (may be carried forward indefinitely) | 6.9 | 19.5 | 26.4 | 6.0 | 21.5 | 27.5 |
42.7 | 91.6 | 134.3 | 46.4 | 100.6 | 147.0 |
The £26.4m (2022: £27.5m) operating losses available to set against future income in the rest of the world arise in a number of
countries, reflecting the spread of the Group’s operations.
A liability of £0.7m (2022: £0.8m) has been recognised in respect of withholding taxes that will be due on a repatriation of funds
from the Group’s Chinese subsidiaries.
Deferred tax is not recognised in respect of the value of the Group’s investments in subsidiaries and interests in joint ventures
where we are able to control the timing of the reversal of the temporary differences and it is probable that such differences will
not reverse in the foreseeable future. The amount of these temporary differences for which deferred tax liabilities have not been
recognised was £16.5m (2022: £11.8m).
Developments in the Group tax position
In December 2021, the Organisation for Economic Co-operation and Development published rules relating to global minimum
taxation called ‘Pillar 2 rules’, currently timetabled to apply in the UK to accounting periods beginning on or after 1 January 2024
(year ended 31 December 2024 for Vesuvius). The Group will continue to monitor the development and future implementation
of these rules globally. Vesuvius is actively working to fully understand the impact of the new rules and developing processes to
enable compliance. Based upon our latest understanding, the current estimate of additional tax payable is not expected to have
Income tax payable and recoverable
2023 | 2022 | |
£m | £m | |
Liabilities for income tax payable | 3.5 | 12.8 |
Provisions for uncertain tax positions | 6.3 | 6.8 |
9.8 | 19.6 | |
Less: Income tax recoverable within one year | 11.5 | 15.3 |
Net (asset)/liability | (1.7) | 4.3 |
Provisions for uncertain tax positions are calculated in accordance with the policy outlined in Note 9.1, and are treated as income
tax payable in accordance with IAS 12.
These provisions cover litigated tax matters as well as provisions for other risks where the Group believes it is more likely than not
that there would be a successful challenge by a tax authority to positions it has taken in its tax filings. By its nature, litigation can
result in sharp fluctuations in cash flow, both in and out, relating to taxes. Currently, management does not expect any material
adjustments to these provisions in 2024.
During the year the provisions for uncertain tax positions have reduced to £6.3m (2022: £6.8m). The decrease of £0.5m
(2022: £0.1m) can be explained by the expiration of the statute of limitations on certain other exposures, £1.3m (2022: £1.3m),
a £0.3m credit (2022: 0.5m charge) in relation to an Indonesian tax audit, £nil (2022: £0.4m) charge on a Spanish tax audit,
a £1.3m charge (2022: £nil) following a Polish tax audit and foreign exchange movements on the remaining balances,
Strategic report
Governance
Financial statements
171
9.6
Key factors impacting the sustainability of the headline effective tax rate are as follows:
Material changes in the geographic mix of profits
The Group’s headline effective tax rate is sensitive to changes in the geographic mix of profits and level of profits and reflects
a combination of higher rates in certain jurisdictions such as Brazil, Germany, India, Mexico and the US and a lower headline
effective tax rate in jurisdictions like China and Poland.
Changes in tax rates, tax reform and its interpretation
Changes in tax rates and laws in the jurisdictions in which the Group operates could have a material effect on the Group’s headline
effective tax rate.
Availability of tax advantaged rates
Vesuvius in China qualifies for a tax advantaged rate of 15% (rather than the headline rate of 25%) on part of its profits due to the
high-technology nature of its business. Eligibility for this rate is reviewed on a regular basis by the Chinese tax authority and was
worth approximately £0.8m in 2023 (2022: £0.4m). Without that benefit, the Group’s headline effective tax rate on headline
performance would have been 0.4% higher in 2023 (2022: 0.2%).
Resolution of tax judgements
At any one time, the Group can be subject to a number of challenges by tax authorities in the jurisdictions in which it operates.
The outcome of these challenges is inherently uncertain, potentially resulting in a different tax charge from the amounts
Earnings per Share (EPS)
10.1
Earnings for EPS
Basic and diluted EPS from continuing operations are based upon the profit attributable to owners of the Parent, as reported
in the Group Income Statement. The table below reconciles these different profit measures.
2023 | 2022 | |
£m | £m | |
Profit attributable to owners of the Parent | 118.5 | 181.1 |
Adjustments for separately reported items: | ||
Amortisation of acquired intangible assets | 10.3 | 10.4 |
Restructuring charges | – | – |
Vacant site remediation costs | – | – |
Guaranteed minimum pensions (GMP) equalisation charge | – | – |
Income tax credit | (3.1) | (39.1) |
Headline profit attributable to owners of the Parent | 125.7 | 152.4 |
10.2
Weighted average number of shares
2023 | 2022 | |
millions | millions | |
For calculating basic and headline EPS | 269.1 | 269.6 |
Adjustment for potentially dilutive ordinary shares | 3.0 | 1.9 |
For calculating diluted and diluted headline EPS | 272.1 | 271.5 |
For the purposes of calculating diluted and diluted headline EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company’s share-based payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS or increase loss per share.
172
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
10.3
Per share amounts
2023 | 2022 | |
pence | pence | |
Earnings per share | ||
– reported basic | 44.0 | 67.2 |
– reported diluted | 43.6 | 66.7 |
– headline basic | 46.7 | 56.5 |
– headline diluted | 46.2 | 56.1 |
Cash Generated from Operations
2023 | 2022 | ||
Notes | £m | £m | |
Operating profit | 190.1 | 216.8 | |
Adjustments for: | |||
Amortisation of acquired intangible assets | 15 | 10.3 | 10.4 |
Restructuring charges | – | – | |
Vacant site remediation costs | – | – | |
Trading profit | 200.4 | 227.2 | |
Gain on disposal of non-current assets | (2.5) | (0.1) | |
Depreciation and amortisation | 14 | 57.8 | 55.5 |
Defined benefit retirement plans net charge | 5.2 | 5.6 | |
Net decrease in inventories | 18 | 9.9 | 2.2 |
Net decrease/(increase) in trade receivables | 17 | 2.6 | (9.2) |
Net increase/(decrease) in trade payables | 27 | 8.3 | (28.0) |
Net (increase)/decrease in other working capital | (0.5) | 24.7 | |
Outflow related to restructuring charges | 6 | (0.8) | (1.5) |
Defined benefit retirement plans cash outflows | 25 | (7.4) | (6.3) |
Vacant site remediation costs paid | (1.0) | (1.8) | |
Cash generated from operations | 272.0 | 268.3 |
Cash and Cash Equivalents
Accounting policy
Cash and short-term deposits in the Group balance sheet consist of cash at bank and in hand, and short-term deposits with
original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the
Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Group Statement
of Cash Flows.
2023 | 2022 | |
£m | £m | |
Cash at bank and in hand | 164.2 | 184.2 |
Bank overdrafts | (3.4) | (4.4) |
Cash and cash equivalents in the Group Statement of Cash Flows | 160.8 | 179.8 |
Cash is held both centrally and in operating territories. There is no restricted cash. For certain territories including Argentina,
Strategic report
Governance
Financial statements
173
Reconciliation of Movement in Net Debt
Balance |
Balance |
|||||
as at |
Foreign |
as at |
||||
1 January |
exchange |
Fair value |
Non-cash |
Cash |
31 December |
|
2023 |
adjustments |
losses |
movements * |
flow |
2023 |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Cash and cash equivalents |
||||||
Cash at bank and in hand |
184.2 |
(21.1) |
– |
– |
1.1 |
164.2 |
Bank overdrafts |
(4.4) |
0.1 |
– |
– |
0.9 |
(3.4) |
179.8 |
(21.0) |
– |
– |
2.0 |
160.8 |
|
Borrowings, excluding bank overdrafts |
(440.2) |
11.9 |
– |
(33.6) |
61.3 |
(400.6) |
Capitalised arrangement fees |
2.7 |
– |
– |
(0.9) |
– |
1.8 |
Derivative financial instruments |
2.7 |
– |
(2.2) |
– |
– |
0.5 |
Net debt |
(255.0) |
(9.1) |
(2.2) |
(34.5) |
63.3 |
(237.5) |
Balance |
Balance |
|||||
as at |
Foreign |
as at |
||||
1 January |
exchange |
Fair value |
Non-cash |
Cash |
31 December |
|
2022 |
adjustments |
gains |
movements * |
flow |
2022 |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Cash and cash equivalents |
||||||
Cash at bank and in hand |
169.1 |
0.1 |
– |
– |
15.0 |
184.2 |
Bank overdrafts |
(6.7) |
(0.3) |
– |
– |
2.6 |
(4.4) |
162.4 |
(0.2) |
– |
– |
17.6 |
179.8 |
|
Borrowings, excluding bank overdrafts |
(440.3) |
(25.4) |
– |
(11.5) |
37.0 |
(440.2) |
Capitalised arrangement fees |
3.3 |
– |
– |
(0.6) |
– |
2.7 |
Derivative financial instruments |
(2.5) |
– |
5.2 |
– |
– |
2.7 |
Net debt |
(277.1) |
(25.6) |
5.2 |
(12.1) |
54.6 |
(255.0) |
*
£31.2m (2022: £11.5m) of new leases were entered into during the year.
Net debt is a measure of the Group’s net indebtedness to banks and other external financial institutions and comprises the
total of cash and short-term deposits, current and non-current interest-bearing borrowings, derivative financial instruments
Property, Plant and Equipment
Accounting policy
Freehold land and construction in progress are carried at cost less accumulated impairment losses. Other items of property,
plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Costs are capitalised
only when it is probable that they will result in future economic benefits flowing to the Group and when they can be measured
reliably. Costs are capitalised to construction in progress where an asset is being developed. This is then transferred to the relevant
asset class and depreciated when the asset is ready for use. All other repairs and maintenance expenditures are charged to the
Group Income Statement in the period in which they are incurred.
Freehold land is not depreciated as it has an infinite life. Depreciation on other items of property, plant and equipment begins
when the asset is available for use and is charged to the Group Income Statement on a straight-line basis so as to write off the
cost less the estimated residual value of the asset over its estimated useful life as follows:
174
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Asset category | Estimated useful life | |
Freehold property | between 10 and 50 years | |
Leasehold property | the term of the lease | |
Right-of-use assets | shorter of the asset’s useful life and lease term | |
Plant and equipment | – motor vehicles and information technology equipment | between 1 and 5 years |
– other | between 3 and 15 years |
The depreciation method used, residual values and estimated useful lives are reviewed annually and changed, if appropriate.
As described in Note 16.1, an asset’s carrying amount is immediately written down to its recoverable amount if its carrying amount
is greater than its estimated recoverable amount. Gains and losses arising on disposals are determined by comparing sales
14.2
Movement in net book value
Right-of-use | Right-of-use | ||||||
assets – land | assets – plant | ||||||
Freehold | Leasehold | & buildings | & equipment | Plant and | Construction | ||
property | property | (Note 28.2) | (Note 28.2) | equipment | in progress | Total | |
£m | £m | £m | £m | £m | £m | £m | |
Cost | |||||||
As at 31 December 2021 and 1 January 2022 | 245.0 | 0.7 | 39.1 | 29.0 | 572.7 | 41.2 | 927.7 |
Exchange adjustments | 16.0 | – | 1.7 | 1.9 | 37.1 | 3.8 | 60.5 |
Capital expenditure additions | 7.3 | – | 3.3 | 8.1 | 20.8 | 59.9 | 99.4 |
Acquisitions through business combinations | 1.1 | – | 2.2 | – | 0.2 | – | 3.5 |
Disposals | (1.6) | – | (1.1) | (3.4) | (14.9) | (0.5) | (21.5) |
Reclassifications | 1.3 | – | – | (0.2) | 27.4 | (28.6) | (0.1) |
As at 31 December 2022 and 1 January 2023 | 269.1 | 0.7 | 45.2 | 35.4 | 643.3 | 75.8 | 1,069.5 |
Exchange adjustments | (8.3) | – | (3.3) | (1.7) | (22.6) | (0.8) | (36.7) |
Capital expenditure additions | 15.8 | – | 15.3 | 16.0 | 45.6 | 24.6 | 117.3 |
Disposals | (3.9) | (0.6) | (3.6) | (6.2) | (18.8) | (0.2) | (33.3) |
Reclassifications | 6.1 | – | – | – | 10.1 | (16.2) | – |
As at 31 December 2023 | 278.8 | 0.1 | 53.6 | 43.5 | 657.6 | 83.2 | 1,116.8 |
Accumulated depreciation and impairment losses | |||||||
As at 31 December 2021 and 1 January 2022 | 117.8 | 0.7 | 10.1 | 16.1 | 430.5 | – | 575.2 |
Exchange adjustments | 8.0 | – | 0.4 | 1.0 | 29.0 | – | 38.4 |
Depreciation charge | 7.3 | – | 5.7 | 6.8 | 35.4 | – | 55.2 |
Impairment | 0.9 | – | 0.5 | – | 0.1 | – | 1.5 |
Disposals | (0.4) | – | (1.1) | (2.9) | (13.9) | – | (18.3) |
Reclassifications | 3.9 | – | – | (0.1) | (3.9) | – | (0.1) |
As at 31 December 2022 and 1 January 2023 | 137.5 | 0.7 | 15.6 | 20.9 | 477.2 | – | 651.9 |
Exchange adjustments | (3.3) | – | (1.5) | (1.0) | (17.1) | – | (22.9) |
Depreciation charge | 7.6 | – | 5.8 | 8.4 | 35.6 | – | 57.4 |
Impairment | – | – | – | – | – | – | – |
Disposals | (2.9) | (0.6) | (3.4) | (5.3) | (18.2) | – | (30.4) |
Reclassifications | 1.7 | – | – | – | (1.7) | – | – |
As at 31 December 2023 | 140.6 | 0.1 | 16.5 | 23.0 | 475.8 | – | 656.0 |
Net book value as at 31 December 2023 | 138.2 | – | 37.1 | 20.5 | 181.8 | 83.2 | 460.8 |
Net book value as at 31 December 2022 | 131.6 | – | 29.6 | 14.5 | 166.1 | 75.8 | 417.6 |
Net book value as at 31 December 2021 | 127.2 | – | 29.0 | 12.9 | 142.2 | 41.2 | 352.5 |
Strategic report
Governance
Financial statements
175
Capital expenditure on customer-installation assets was £8.4m (2022: £7.5m).
Capital commitments as at 31 December 2023 were £25.9m (31 December 2022: £36.8m).
The impact of climate change has been considered in the review of carrying values to consider whether there are indications of
material impairment arising from the potential physical risks arising from climate change. We have not impaired any assets this
year as a result of this exercise. We have also considered the impact of climate change on the estimation of useful lives and no
Intangible Assets
Intangible assets comprise goodwill, other intangible assets that have been acquired through business combinations, and
software costs.
Accounting policy
Goodwill arising in a business combination is initially recognised as an asset at cost, measured as the excess of the aggregate of
the acquisition-date fair value of the consideration transferred and the amount of any non-controlling interest acquired over
the net of the acquisition-date fair value amounts of the identifiable assets acquired and liabilities assumed. When the excess is
negative, a bargain purchase gain is recognised immediately in profit or loss. Goodwill is subsequently measured at cost less
accumulated impairment losses, with impairment testing carried out annually, or more frequently when there is an indication
that the cash-generating unit (CGU) to which the goodwill has been allocated may be impaired. On disposal of a business,
(b) Other intangible assets
Intangible assets other than goodwill are recognised on business combinations if they are separable, or if they arise from
contractual or other legal rights, and their value can be measured reliably. They are initially measured at cost, which is equal
to the acquisition-date fair value, and subsequently measured at cost less accumulated amortisation charges and accumulated
impairment losses. Other intangible assets are subject to impairment testing when there is an indication that an impairment
loss may have been incurred and are amortised over their estimated useful lives.
The Group’s research activity involves long-range, ‘blue sky’ investigation, the findings from which may be used in the future to
develop new or substantially improved products. Expenditure on research activities is recognised in the Group Income Statement
as an expense in the year in which it is incurred.
Development is the application of research findings for the production of new or substantially improved products, processes
and services before the start of commercial production. Development expenditure is capitalised only if the expenditure can be
measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in
the Group Income Statement as an expense in the year in which it is incurred. Capitalised development expenditure, where there
is any, is stated at cost less accumulated amortisation and impairment losses.
In determining whether development expenditure is capitalised as an intangible asset, management considers whether the
strict intangible asset recognition criteria set out in IAS 38 Intangible Assets have been met at the time the expenditure is incurred.
In making this determination, management recognises that a significant amount of the development expenditure undertaken
by the Group is focused on dealing with local customer technical support issues and incremental developments to existing
products as opposed to new or substantially improved products, and that at the time the feasibility of the project is determined,
a significant proportion of the development expenditure for that project has already been incurred. In 2023 and 2022 no projects
(d) Software
The costs of ERP system implementations, including the purchase cost of the software and the time costs of employees directly
176
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Movement in net book value
Other | Other | ||||||||
acquired | acquired | ||||||||
intangible | 2023 | intangible | 2022 | ||||||
Goodwill | assets | Software | total | Goodwill | assets | Software | total | ||
Note | £m | £m | £m | £m | £m | £m | £m | £m | |
Cost | |||||||||
As at 1 January | 657.9 | 292.9 | 10.8 | 961.6 | 614.2 | 285.7 | 6.7 | 906.6 | |
Reclassification of | |||||||||
non-compete agreements | |||||||||
to goodwill * | – | – | – | – | 0.9 | (0.9) | – | – | |
Exchange adjustments | (27.0) | (5.6) | 0.2 | (32.4) | 42.4 | 8.1 | 0.5 | 51.0 | |
Capital expenditure additions | – | – | 8.0 | 8.0 | – | – | 4.5 | 4.5 | |
Disposals | – | – | (0.2) | (0.2) | – | – | (0.9) | (0.9) | |
Business combinations | 19 | – | – | – | – | 0.4 | – | – | 0.4 |
Reclassifications | – | – | – | – | – | – | – | – | |
As at 31 December | 630.9 | 287.3 | 18.8 | 937.0 | 657.9 | 292.9 | 10.8 | 961.6 | |
Accumulated amortisation | |||||||||
and impairment losses | |||||||||
As at 1 January | – | 221.1 | 3.0 | 224.1 | – | 206.7 | 3.1 | 209.8 | |
Exchange adjustments | – | (3.4) | (0.2) | (3.6) | – | 4.0 | 0.2 | 4.2 | |
Amortisation charge | |||||||||
for the year | – | 10.3 | 0.4 | 10.7 | – | 10.4 | 0.3 | 10.7 | |
Impairment | – | – | – | – | – | – | 0.3 | 0.3 | |
Disposals | – | – | (0.2) | (0.2) | – | – | (0.9) | (0.9) | |
Reclassifications | – | – | – | – | – | – | – | – | |
As at 31 December | – | 228.0 | 3.0 | 231.0 | – | 221.1 | 3.0 | 224.1 | |
Net book value as at | |||||||||
31 December | 630.9 | 59.3 | 15.8 | 706.0 | 657.9 | 71.8 | 7.8 | 737.5 |
*
The values and useful lives of URI intangibles in the 2021 Annual Report and Financial Statements were provisional. Further valuation work in 2022
determined that there were no non-compete agreements that could be separately identified from goodwill.
Of the £18.8m (2022: £10.8m) software cost as at 31 December 2023, £14.2m (2022: £6.8m) was in the course of construction.
Amortisation charge of £10.3m (2022: £10.4m) in respect of other acquired intangible assets includes £5.3m (2022: £5.4m)
recognised in respect of Foseco customer relationships, £3.6m (2022: £3.6m) in respect of the Foseco trade name and
£1.4m (2022: £1.4m) in respect of North American Advanced Refractories intangible assets.
The impact of climate change has been considered in the review of carrying values to consider whether there are indications
of material impairment arising from risks of climate change. We have not impaired any intangible assets this year as a result
of this exercise. We have also considered the impact of climate change on the estimation of useful lives and no material impacts
Analysis of goodwill by cash-generating unit (CGU)
Goodwill acquired in a business combination is allocated to each of the Group’s CGUs expected to benefit from the synergies of
the combination. For the purposes of impairment testing, the Directors consider that the Group has four CGUs: Steel Advanced
Refractories, Steel Flow Control, Steel Sensors & Probes, and the Foundry Division. These CGUs represent the lowest level within
the Group at which goodwill is monitored (Note 16.2).
2023 | 2022 | |
£m | £m | |
Steel Flow Control | 275.1 | 286.8 |
Steel Advanced Refractories | 146.1 | 152.5 |
Foundry | 209.7 | 218.6 |
Total goodwill | 630.9 | 657.9 |
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Governance
Financial statements
177
15.4
Analysis of other acquired intangible assets
Other acquired intangible assets are amortised on a straight-line basis over their estimated useful lives. The assets acquired and
their remaining useful lives are shown below.
Net book | Net book | ||
Remaining | value as at | value as at | |
useful life | 31 Dec 2023 | 31 Dec 2022 | |
years | £m | £m | |
Steel Flow Control, Steel Advanced Refractories & Foundry | |||
– Foseco customer relationships (useful life: 20 years) | 4.3 | 22.5 | 28.9 |
– Foseco trade name (useful life: 20 years) | 4.3 | 15.4 | 19.0 |
Steel Advanced Refractories | |||
– URI customer relationships (useful life: 20 years) | 18.0 | 5.9 | 6.6 |
– URI know-how (useful life: 20 years) | 18.0 | 4.7 | 5.2 |
– CCPI customer relationships (useful life: 20 years) | 15.2 | 10.8 | 12.1 |
Total | 59.3 | 71.8 |
15.5
Analysis of software
Software comprises Enterprise Resource Planning tools in use and being developed. The software is installed on Vesuvius’ servers
Impairment of Tangible and Intangible Assets
Accounting policy
The Directors regularly review the performance of the business and the external business environment to determine whether there
is any indication that the Group’s tangible and intangible assets have suffered an impairment loss. If such indication exists, the
higher of the value in use and the fair value less costs to sell off the asset is estimated and compared with the carrying value in
order to determine the extent, if any, of the impairment loss. Where it is not feasible to estimate the recoverable amount of an
individual asset, the Directors estimate the recoverable amount of the CGU to which the asset belongs. In addition, goodwill is
tested for impairment on an annual basis. Goodwill acquired in a business combination is allocated to each of the Group’s CGUs
expected to benefit from the synergies of the combination and the Directors carry out annual impairment testing of the carrying
value of each CGU, to assess the need for any impairment of the carrying value of the associated goodwill and other intangible
and tangible assets.
For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of (i) its fair value less costs
to sell and (ii) its value in use. If the recoverable amount of a CGU is less than its carrying amount, the resulting impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the
CGU pro rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not
reversed in a subsequent period. An impairment loss recognised in a prior year for an asset other than goodwill may be reversed
where there has been a sustained change in the estimates used to measure the asset’s recoverable amount since the impairment
16.2
Key assumptions and methodology
The key assumptions in determining value in use are projected cash flows, growth rates and discount rates. These are disclosed
as critical accounting estimates in Note 3.5.
Projected cash flows for the next three years have been based on the latest Board-approved budgets and strategic plans.
They reflect management’s expectations of revenue, EBITDA growth, capital expenditure, working capital and adjusted
operating cash flows, based on past experience and future expectations of business performance, and take into account the
cyclicality of the business in which the CGU operates. Cash flows beyond the period of the strategic plans have been extrapolated
using a perpetuity growth rate of 2.5% (2022: 2.5%). The growth rate has been calculated using GDP growth forecasts published
by the International Monetary Fund for the Group’s end-markets. These GDP growth forecasts have been weighted to reflect the
Group’s weighted average sales in each end-market during 2023.
The cash flows have been discounted to their current value using pre-tax discount rates, that reflect current market assessments of
the time value of money and the risks specific to the cash-generating unit. The assumptions used in the calculation of the discount
rates for each CGU have been benchmarked to externally available data. These are industry-specific beta coefficients, risk-free
rates and equity risk premiums.
178
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
As a consequence of re-examining the inputs for each component, we have reduced our discount rates for 2023. The pre-tax
discount rates used for the Steel Flow Control and Steel Advanced Refractories were in the range of 12.3%–12.6% (2022: 15.0%)
and for the Foundry CGU was 13.6% (2022: 14.9%). There is no goodwill or intangible assets in the Steel Sensors & Probes CGU.
The Group carried out its annual goodwill impairment test as at 31 October 2023 (2022: 31 October 2022) utilising the discount
rates above and applying them to the latest Board-approved cash flows to calculate a value in use (‘VIU’) . The Group also
considered a valuation from its market capitalisation and other market data to determine a Fair Value Less Costs to Disposal
(‘FVLCD’). The recoverable amount (higher of VIU and FVLCD) of each CGU significantly exceeded its carrying value, therefore
no impairment charges have been recognised. The recoverable amount of each CGU was also checked against its carrying value
as at 31 December 2023 and no impairment triggers were identified.
The Directors have considered the impact of climate change on expected future cash flows, including the modelling of impact of
climate change scenarios set out in the Sustainability section in the Strategic Report and expected capital expenditure required
to achieve the Group’s net zero targets and other assumptions used for goodwill impairment testing. This did not result in an
impairment scenario for goodwill.
Sensitivity of impairment reviews
Steel Flow Control (FC), Steel Advanced Refractories (AR) and the Foundry Division are the key CGUs. There is no goodwill or
intangible assets in the Steel Sensors & Probes CGU. The recoverable amount of all CGUs exceeded their carrying value on the
basis of the assumptions set out above and any reasonably possible changes thereof, with the exception of AR where a reasonably
possible change could lead to an impairment. A sensitivity analysis was carried out using reasonably possible changes to the
key assumptions as set out in the table below. The following decreases to the recoverable amount of the Group’s goodwill and
intangible assets were observed:
Decrease in | |||||
recoverable | Impairment | ||||
Key assumption | Relevant CGU | Assumption | Sensitivity | value, £m | arising, £m |
Free cash flow average annual | AR | 67.0% | Decrease the free cash flows | (113.6) | None |
growth rate (3 year) | by 20% | ||||
Pre-tax discount rate | AR | 12.3% | Increase by 3.4% | (153.1) | None |
Combination of both key | AR | 67.0% and | Combination of both | (236.1) | (62.7) |
assumptions above | 12.3% | sensitivities above |
A 2.7% increase in pre-tax discount rate and a 10% decrease in free cash flows would result in the AR CGU having a recoverable
Trade and Other Receivables
Accounting policy
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
Analysis of trade and other receivables (current)
| 2023 | 2022 | |||||||
ECL | ECL | ECL | ECL | |||||
Gross | provision | Net | provision | Gross | provision | Net | provision | |
£m | £m | £m | coverage 1 | £m | £m | £m | coverage 1 | |
Trade receivables | ||||||||
– current | 308.9 | (0.7) | 308.2 | 0.2% | 305.4 | (2.3) | 303.1 | 0.8% |
– 1 to 30 days past due | 34.7 | (0.3) | 34.4 | 0.9% | 51.4 | (1.6) | 49.8 | 3.1% |
– 31 to 60 days past due | 10.1 | (0.7) | 9.4 | 6.9% | 14.1 | (0.6) | 13.5 | 4.3% |
– 61 to 90 days past due | 2.5 | (0.3) | 2.2 | 12.0% | 7.3 | (0.2) | 7.1 | 2.7% |
– over 90 days past due | 27.3 | (24.6) | 2.7 | 90.1% | 35.4 | (28.1) | 7.3 | 79.4% |
Trade receivables | 383.5 | (26.6) | 356.9 | 413.6 | (32.8) | 380.8 | ||
Other receivables | 78.4 | 65.3 | ||||||
Prepayments | 25.2 | 30.8 | ||||||
Total trade and other receivables | 460.5 | 476.9 | ||||||
1.
ECL (Note 24.2 (c) (ii)) provision coverage is expected credit loss provision divided by gross trade receivables.
Strategic report
Governance
Financial statements
179
There is no significant difference between the fair value of the Group’s trade and other receivables balances and the amount at
which they are reported in the Group Balance Sheet.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufficient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of financial assets that are neither
past due nor impaired as good.
Included within Other receivables are banker’s drafts of £37.6m (2022: £32.5m). The majority of these notes relate to customers
in China and have typical maturities of six months from the issuing date. The full amount of revenue is recognised from the
customer when performance obligations are satisfied in accordance with IFRS 15. Other receivables also include VAT receivables
of £28.0m (2022: £23.3m) and insurance reimbursements (see Note 29.2) of £2.2m (2022: £1.7m).
17.3
Other receivables (non-current)
Non-current other receivables of £26.8m (2022: £33.7m) include insurance reimbursements (see Note 29.2) of £21.4m
(2022: £25.1m) and prepaid taxes of £1.7m (2022: £1.8m).
The Group applies the expected credit loss model under IFRS 9 to these other receivables. The expected credit loss for
other receivables is immaterial.
The maximum exposure to credit risk at the end of the reporting period is the net carrying amount of these trade and
17.4
Impairment of trade and other receivables
Inventories
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in purchasing or
manufacturing inventories together with all other costs directly incurred in bringing the inventory to its present location and
condition and, where appropriate, attributable production overheads based on normal activity levels.
The standard cost method is used for measurement of the cost of inventories in some locations. Standard costs are regularly
reviewed and, if necessary, revised in light of current conditions. Other locations measure the cost of inventories using actual
costs. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution. The amount of any write-down of inventories to net realisable value is recognised as an
expense in the year in which the write-down occurs.
The Group differentiates between work in progress (inventory that will be used in manufacturing processes and is not normally
sold to third parties) and semi-finished goods (inventory that is considered as partially complete in end-to-end manufacturing
18.2
Analysis of inventories
2023 | 2022 | |
£m | £m | |
Raw materials | 96.9 | 104.6 |
Work in progress | 20.6 | 22.0 |
Semi-finished goods | 24.4 | 21.4 |
Finished goods | 149.1 | 168.0 |
Total inventories | 291.0 | 316.0 |
The cost of materials recognised as an expense and included in manufacturing costs of continuing operations in the Group Income
Statement during the year was £853.5m (2022: £923.1m). 2022 comparatives for cost of materials recognised as an expense have
been restated following review during 2023 where an arithmetic error was identified. This restatement did not impact the Income
Statement or the balance sheet, it was purely a disclosure item.
The net inventories of £291.0m include a provision for obsolete stock of £19.7m (2022: £20.5m). There were inventory write-downs
Acquisitions and Divestments
The Group did not acquire any material interests in any companies during the year ended 31 December 2023. There was no
180
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Issued Share Capital
Accounting policy
Where shares are redeemed or purchased as part of a share buyback programme, a sum equal to the amount by which the
Company’s share capital is diminished on cancellation of the shares is transferred to the capital redemption reserve.
20.2
Analysis of issued share capital
2023 |
2022 |
|||
Nominal |
Nominal |
|||
Number |
value |
Number |
value |
|
Allotted, issued and fully paid ordinary shares of 10p each |
m |
£m |
m |
£m |
As at 1 January |
278.5 |
27.8 |
278.5 |
27.8 |
Share buyback |
(0.6) |
(0.1) |
– |
– |
As at 31 December |
277.9 |
27.7 |
278.5 |
27.8 |
Retained Earnings
Reserve |
Share |
Capital |
Other |
Total |
||
for own |
option |
redemption |
retained |
retained |
||
shares |
reserve |
reserve |
earnings |
earnings |
||
Notes |
£m |
£m |
£m |
£m |
£m |
|
As at 31 December 2021 and 1 January 2022 |
(34.5) |
4.1 |
– |
2,513.8 |
2,483.4 |
|
Profit for the year |
– |
– |
– |
181.1 |
181.1 |
|
Remeasurement of defined benefit liabilities/assets |
– |
– |
– |
27.4 |
27.4 |
|
Recognition of share-based payments |
– |
5.1 |
– |
– |
5.1 |
|
Release of share option reserve on exercised |
||||||
and lapsed options |
1.2 |
(1.2) |
– |
– |
– |
|
Income tax on items recognised in other |
||||||
comprehensive income |
– |
– |
– |
(8.2) |
(8.2) |
|
Purchase of ESOP shares |
(6.9) |
– |
– |
– |
(6.9) |
|
Dividends paid |
23 |
– |
– |
– |
(58.1) |
(58.1) |
As at 31 December 2022 and 1 January 2023 |
(40.2) |
8.0 |
– |
2,656.0 |
2,623.8 |
|
Profit for the year |
– |
– |
– |
118.5 |
118.5 |
|
Remeasurement of defined benefit liabilities/assets |
– |
– |
– |
8.4 |
8.4 |
|
Recognition of share-based payments |
– |
7.3 |
– |
– |
7.3 |
|
Release of share option reserve on exercised |
||||||
and lapsed options |
3.2 |
(3.2) |
– |
– |
– |
|
Income tax on items recognised in other |
||||||
comprehensive income |
– |
– |
– |
(2.0) |
(2.0) |
|
Purchase of ESOP shares |
(1.1) |
– |
– |
– |
(1.1) |
|
Share buyback |
– |
– |
(3.0) |
– |
(3.0) |
|
Dividends paid |
23 |
– |
– |
– |
(60.7) |
(60.7) |
As at 31 December 2023 |
(38.1) |
12.1 |
(3.0) |
2,720.2 |
2,691.2 |
Strategic report
Governance
Financial statements
181
Other Reserves
Cash flow |
||||
Other |
hedge |
Translation |
Total other |
|
reserves |
reserve |
reserve |
reserves |
|
£m |
£m |
£m |
£m |
|
As at 31 December 2021 and 1 January 2022 |
(1,499.3) |
(1.1) |
32.8 |
(1,467.6) |
Exchange differences on translation of the net assets of foreign operations |
– |
– |
96.1 |
96.1 |
Exchange differences on translation of net investment hedges |
– |
– |
(20.7) |
(20.7) |
Net change in costs of hedging |
– |
– |
– |
– |
Change in the fair value of the hedging instrument |
– |
8.3 |
– |
8.3 |
Amounts reclassified from the Income Statement |
– |
(7.5) |
– |
(7.5) |
As at 31 December 2022 and 1 January 2023 |
(1,499.3) |
(0.3) |
108.2 |
(1,391.4) |
Exchange differences on translation of the net assets of foreign operations |
– |
– |
(80.8) |
(80.8) |
Exchange differences on translation of net investment hedges |
– |
– |
7.9 |
7.9 |
Net change in costs of hedging |
– |
0.4 |
– |
0.4 |
Change in the fair value of the hedging instrument |
– |
(4.2) |
– |
(4.2) |
Amounts reclassified from Net finance costs |
– |
3.5 |
– |
3.5 |
As at 31 December 2023 |
(1,499.3) |
(0.6) |
35.3 |
(1,464.6) |
Within other reserves as at 31 December 2023 is £1,499.0m (2022: £1,499.0m) arising from the demerger of Cookson Group plc,
being the excess of the Vesuvius plc share capital of £1,777.9m over the total share capital and share premium of Cookson Group
plc as at 14 December 2012 of £278.9m.
The translation reserve in the table above comprises foreign exchange differences attributable to the owners of the Parent.
These exchange differences arise from the translation of the financial statements of foreign operations and from the translation
of financial instruments that hedge the Group’s net investment in foreign operations. In addition to foreign exchange differences
attributable to the owners of the Parent, the Group Statement of Comprehensive Income includes foreign exchange differences
attributable to non-controlling interests.
Of the closing balance in the translation reserve, an £8.5m debit (2022: £7.7m debit) relates to net investment hedging
arrangements put in place on or after 1 January 2018 but discontinued as at the date of the Balance Sheet. The full closing
balance in the cash flow hedge reserve relates to continuing hedges.
182
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Dividends paid to Equity Shareholders
2023 |
2022 |
|
£m |
£m |
|
Amounts recognised as dividends and paid to equity shareholders during the year |
||
Final dividend for the year ended 31 December 2021 of 15.0p per ordinary share |
– |
40.5 |
Interim dividend for the year ended 31 December 2022 of 6.5p per ordinary share |
– |
17.6 |
Final dividend for the year ended 31 December 2022 of 15.75p per ordinary share |
42.4 |
– |
Interim dividend for the year ended 31 December 2023 of 6.8p per ordinary share |
18.3 |
– |
60.7 |
58.1 |
A proposed final dividend for the year ended 31 December 2023 of £43.3m (2022: £42.3m), equivalent to 16.20 pence
(2022: 15.75 pence) per ordinary share (TDIM: VSVS and ISIN: GB00B82YXW83), is subject to approval by shareholders at
the Company’s Annual General Meeting on 15 May 2024 and has not been included as a liability in these financial statements.
If approved by shareholders, the dividend will be paid on 31 May 2024 to holders of ordinary shares on the register on 19 April
2024. The ordinary shares will be quoted ex-dividend on 18 April 2024. Any shareholder wishing to participate in the Vesuvius
Financial Risk Management
Accounting policy
The Group’s financial assets and liabilities are measured as appropriate either at amortised cost or at fair value through other
comprehensive income or at fair value through profit and loss.
IFRS 13 Fair Value Measurement requires classification of financial instruments within a hierarchy that prioritises the inputs
to fair value measurement. The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly
Level 3 – Inputs that are not based on observable market data
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Trade receivables are recognised initially at their fair value, which is the amount of consideration that is unconditional. The Group
holds the trade receivables with the objective of collecting the contractual cash flows (held to collect) and therefore measures
them at amortised cost.
Derivatives which do not meet the hedge accounting criteria are classified as fair value through profit and loss (held for trading).
The cross-currency interest rate swaps (see Note 24.2) which meet the hedging criteria are measured at fair value through other
comprehensive income.
The individual financial statements of each Group entity are prepared in their functional currency, which is the currency of the
primary economic environment in which that entity operates. For the purpose of the Group Financial Statements, the results
Transactions in currencies other than the entity’s functional currency are initially recorded at the rates of exchange prevailing
at the end of the preceding month or on the date of the transaction itself. At each subsequent balance sheet date:
(i)
Foreign currency monetary items are retranslated at the rates prevailing at the balance sheet date. Exchange differences
arising on the settlement or retranslation of monetary items are recognised either in the Group Income Statement or the
Group Statement of Comprehensive Income
(ii)
Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group’s presentational currency, its results and financial
position are translated into the presentational currency as follows:
(i)
Assets and liabilities are translated using exchange rates prevailing at the balance sheet date
(ii)
Income and expense items are translated at average exchange rates for the year, except where the use of such average rates
does not approximate the exchange rate at the date of a specific transaction, in which case the transaction rate is used
Strategic report
Governance
Financial statements
183
(iii)
All resulting exchange differences are recognised in other comprehensive income and presented in the translation reserve
in equity and are reclassified to profit or loss in the period in which the foreign operation is disposed of or liquidated.
Net investment in foreign operations
Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation
are initially recognised in other comprehensive income and presented in the translation reserve in equity and reclassified to
profit or loss on disposal of the net investment.
The Group uses derivative financial instruments (‘derivatives’) to manage the financial risks associated with some of its underlying
activities and the financing of those activities. Derivatives are measured at fair value using market prices at the balance sheet
date. Any derivatives which form part of a hedge accounting relationship are designated as such on the date on which they
are executed. Any derivatives which do not form part of a designated hedge accounting relationship are classified as ‘held for
trading’ for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets
(d)Cash flow hedges
Changes in the fair value of derivatives designated as cash flow hedges are recognised in other comprehensive income to the
extent that the hedges are effective. Any ineffective portion would immediately be recognised in net finance costs in the profit or
loss. If a forecast transaction is no longer expected to occur, the amounts previously recognised in other comprehensive income
would be transferred to net finance costs in the profit or loss.
The Group designates certain of its borrowings and derivatives as net investment hedges of its foreign operations. As with cash
flow hedges, the effective portion of the gain or loss on hedging instruments is recognised in other comprehensive income whilst
any ineffective portion would immediately be recognised in net finance costs in the profit or loss. In the event a foreign operation
24.2
Financial risk factors
The Group’s Treasury department, acting in accordance with policies approved by the Board, is principally responsible for
managing the financial risks faced by the Group. The Group’s activities expose it to a variety of financial risks, the most significant
of which are market risk and liquidity risk.
The following table summarises Vesuvius’ financial instruments measured at fair value and shows the level within the fair value
hierarchy in which the financial instruments have been classified.
2023 | 2022 | |||
Assets | Liabilities | Assets | Liabilities | |
£m | £m | £m | £m | |
Investments (Level 2) | 0.3 | – | 0.5 | – |
Derivatives not designated for hedge accounting purposes (Level 2) | – | (0.1) | 0.1 | (0.1) |
Derivatives designated for hedge accounting purposes (Level 2) | 0.6 | – | 2.7 | – |
(a) Derivative financial instruments
The Group uses derivatives in the form of forward foreign currency contracts to manage the effects of its exposure to foreign
exchange risk on trade receivables, trade payables and cash. Derivatives are only used for economic hedging purposes and not
as speculative investments.
184
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
In 2020, the Group executed a US$86m cross-currency interest rate swap (CCIRS). The effect of this is to convert the $86m Private
Placement Notes issued in 2020 into €76.6m. US dollar cash flows under the CCIRS exactly mirror those of the Private Placement
Notes and the maturity date of the CCIRS matches the repayment date of the Notes. The CCIRS would by default be revalued
through the Income Statement; however, as it is in a designated hedging relationship, it is revalued through other comprehensive
income. The US dollar exposure is designated as a cash flow hedge of the Private Placement Notes and the euro exposure is
designated as a net investment hedge of the Group’s foreign operations. The CCIRS is presented as a non-current asset or liability
as it is expected to be settled more than 12 months after the end of the reporting period.
With the exception of the CCIRS, the fair value of derivatives outstanding at the year-end has been booked through the Income
Statement in 2023. All of the fair values shown in the table above are classified under IFRS 13 as Level 2 measurements which
have been calculated using quoted prices from active markets, where similar contracts are traded and the quotes reflect actual
transactions in similar instruments. All the derivative assets and liabilities not designated for hedge accounting purposes reported
above will mature in 2024.
Derivative financial instruments are subject to International Swaps and Derivatives Association (ISDA) agreements. Derivatives
designated for hedge accounting purposes are presented net £0.6m (2022: £2.7m), of which £0.8m are gross assets and £0.2m
are gross liabilities (2022: gross assets £2.7m and gross liabilities £nil).
Market risk is the risk that either the fair values or the cash flows of the Group’s financial instruments may fluctuate because
of changes in market prices. The Group is principally exposed to market risk through fluctuations in exchange rates and
interest rates.
Currency risk
The Group Income Statement is exposed to currency risk on monetary items that are denominated in currencies other than the
functional currency of the companies in which they are held. The currency profile of these financial assets and financial liabilities
is shown in the table below.
| 2023 | 2022 | |||||
Euro | US dollar | Other | Euro | US dollar | Other | |
£m | £m | £m | £m | £m | £m | |
Trade receivables | 70.3 | 56.9 | 11.6 | 82.0 | 58.7 | 9.3 |
Cash at bank | 6.5 | 12.1 | 2.6 | 10.1 | 9.8 | 0.7 |
Trade payables | (43.0) | (38.6) | (17.8) | (52.6) | (47.4) | (16.2) |
Private Placement Notes | (171.7) | (91.1) | – | (175.2) | (120.7) | – |
Bank loans and overdrafts | (42.7) | – | – | (44.8) | (0.1) | (0.1) |
Lease liabilities | (1.3) | – | (1.8) | (1.5) | (0.3) | (0.8) |
Cross-currency interest rate swaps | (66.4) | 67.6 | – | (67.8) | 71.1 | – |
Foreign currency forward contracts | ||||||
– Buy foreign currency | 0.5 | 2.4 | 0.1 | 0.9 | 4.8 | – |
– Sell foreign currency | (26.5) | (27.6) | – | (16.9) | (22.3) | – |
(274.3) | (18.3) | (5.3) | (265.8) | (46.4) | (7.1) | |
The Group has £(1.3)m (2022: £(1.4)m) of exchange differences recognised in the Income Statement of which £(0.3)m arose on the
revaluation of derivatives (2022: £(1.8)m).
Strategic report
Governance
Financial statements
185
The tables below show the net unhedged monetary assets and liabilities of Group companies that are not denominated in their
functional currency and which could give rise to exchange gains and losses in the Group Income Statement.
| Net unhedged monetary (liabilities)/assets | ||||
Euro | US dollar | Other | Total | |
£m | £m | £m | £m | |
Functional currency | ||||
Sterling | (281.7) | (22.4) | 1.5 | (302.6) |
Other | 7.4 | 4.1 | (6.8) | 4.7 |
As at 31 December 2023 | (274.3) | (18.3) | (5.3) | (297.9) |
| Net unhedged monetary (liabilities)/assets | ||||
Euro | US dollar | Other | Total | |
£m | £m | £m | £m | |
Functional currency | ||||
Sterling | (286.9) | (49.3) | 1.1 | (335.1) |
Other | 21.0 | 2.9 | (8.0) | 15.9 |
As at 31 December 2022 | (265.9) | (46.4) | (6.9) | (319.2) |
As at 31 December 2023, €246.0m and $30.0m (2022: €246.0m and $60.0m) of borrowings were designated hedges of
net investments in €246.0m and $30.0m (2022: €246.0m and $60.0m) worth of foreign operations. In addition, the €76.6m
(2022: €76.6m) CCIRS liability has been designated as a net investment hedge of a further €76.6m (2022: €76.6m) worth of
foreign operations.
As the value of the borrowings and the CCIRS liability exactly matches the designated hedged portion of the net investments, the
relevant hedge ratio is 1:1. The net investment hedges are therefore highly effective. It is noted that hedge ineffectiveness would
arise in the event there were insufficient euro-denominated foreign operations to be matched against the €76.6m CCIRS liability.
The total retranslation impact of the borrowings and CCIRS designated as net investment hedges was a gain of £7.9m
(2022: a loss of £20.7m).
The $86.0m CCIRS asset has been designated as a cash flow hedge of the $86.0m USPP Notes issued in 2020. As all principal and
interest cash flows under the CCIRS exactly mirror those under the USPP Notes, the cash flow hedge is highly effective. It is noted
that hedge ineffectiveness would arise in the event of a change in the contractual terms of either the USPP Notes or the CCIRS.
Hedge effectiveness is determined at inception of the hedge relationship and through periodic effectiveness assessments,
to ensure that an economic relationship exists between the hedged item and hedging instrument.
Interest rate risk
The Group’s interest rate risk principally arises in relation to its borrowings. Where borrowings are held at floating rates of interest,
fluctuations in interest rates expose the Group to variability in the cash flows associated with its interest payments, and where
borrowings are held at fixed rates of interest, fluctuations in interest rates expose the Group to changes in the fair value of its
borrowings. The Group’s policy is to maintain an appropriate mix of fixed and floating rate borrowings based on the Vesuvius
trading environment, market conditions and other economic factors.
186
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
As at 31 December 2023, the Group had $116.0m, €198.0m and £28.0m (£290.8m in total) of US Private Placement (USPP)
Notes outstanding (2022: $146.0m, €198.0m and £28.0m (£323.9m in total)), which carry a fixed rate of interest, representing
82% (2022: 81%) of the Group’s total borrowings outstanding at that date. The interest rate profile of the Group’s borrowings
is detailed in the tables below.
Financial liabilities (gross borrowings) | |||
Fixed | Floating | ||
rate | rate | Total | |
£m | £m | £m | |
Sterling | 28.0 | 21.5 | 49.5 |
US dollar | 91.1 | 0.1 | 91.2 |
Euro | 171.7 | 43.4 | 215.1 |
Capitalised arrangement fees | (0.7) | (1.1) | (1.8) |
As at 31 December 2023 | 290.1 | 63.9 | 354.0 |
Financial liabilities (gross borrowings) | |||
Fixed | Floating | ||
rate | rate | Total | |
£m | £m | £m | |
Sterling | 28.0 | 33.3 | 61.3 |
US dollar | 120.7 | 1.9 | 122.6 |
Euro | 175.2 | 44.8 | 220.0 |
Capitalised arrangement fees | (0.9) | (1.8) | (2.7) |
As at 31 December 2022 | 323.0 | 78.2 | 401.2 |
Information in respect of the currency risk management of $86.0m of US dollar-denominated fixed rate financial liabilities is
provided above in Note 24.2(a).
The floating rate financial liabilities shown in the tables above bear interest at a market convention reference rate appropriate to
each currency plus a margin. The fixed rate financial liabilities of £290.8m (2022: £323.9m) have a weighted average interest rate
of 3.1% (2022: 3.2%) and a weighted average period for which the rate is fixed of 4.5 years (2022: 5.2 years).
The financial assets attract floating rate interest.
Based upon the interest rate profile of the Group’s financial liabilities shown in the tables above, a 1% increase in market interest
rates would increase the finance costs charged in the Group Income Statement and the interest paid in the Group Statement of
Cash Flows by £0.6m (2022: £0.8m), and a 1% reduction in market interest rates would decrease the finance costs charged in
Credit risk arises from cash and cash equivalents, derivative financial assets and deposits with banks and financial institutions,
as well as credit exposures to customers, including outstanding receivables and other receivables.
(i) Risk management
For banks and financial institutions, apart from certain limited circumstances, Group policy is that only independently rated
entities with a minimum rating of ‘A-’ are accepted as counterparties. In addition, the Group’s operating companies have policies
and procedures in place to assess the creditworthiness of the customers with whom they do business.
The Group subjects trade receivables from sales of inventory and from the provision of services to the expected credit loss model.
Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss
was immaterial.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance for all trade receivables and contract assets. The expected loss rates are based on the payment profiles of sales over
a period of 60 months before 31 December 2022 and the corresponding historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables. The Group has identified the current state of the economy (such as market
interest rates or growth rates) and particular industry issues in the countries in which it sells its goods and services to be the
most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
Strategic report
Governance
Financial statements
187
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in
making a contractual payment. Where objective evidence exists that a trade receivable balance may be impaired, provision
is made for the difference between its carrying amount and the present value of the estimated cash that will be recovered.
Evidence of impairment may include such factors as a change in credit risk profile of the customer, the customer being in default
on a contract, or the customer entering bankruptcy or financial reorganisation proceedings. All significant balances are reviewed
individually for evidence of impairment.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there
is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group, and a failure to make contractual payments for a period of greater than 120 days past due. Where loans or receivables
have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
Where recoveries are made, these are recognised within the Income Statement.
The closing expected credit loss allowance for trade receivables as at 31 December 2023 reconciles to the opening loss allowances
as follows:
2023 | 2022 | |
£m | £m | |
As at 1 January | 32.8 | 22.7 |
(Decrease)/increase in expected credit loss allowance recognised in profit or loss during the year | (2.6) | 9.9 |
Receivables written off during the year as uncollectable | (2.6) | (0.7) |
Exchange adjustments | (1.0) | 0.9 |
As at 31 December | 26.6 | 32.8 |
The debit for the year shown in the table above is recorded within administration, selling and distribution costs in the Group
Income Statement.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufficient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of financial assets that are neither
past due nor impaired as good.
The Group also applies the expected credit loss model under IFRS 9 to other receivables. If, at the reporting date, the credit risk
of the receivables has not increased significantly since initial recognition, the Group measures the loss allowance at an amount
equal to 12-month expected credit losses. If the credit risk on that receivable has increased significantly since initial recognition,
the Group measures the loss allowance at an amount equal to the lifetime expected credit losses. The expected credit loss on
Liquidity risk is the risk that the Group might have difficulties in meeting its financial obligations. The Group manages this by
ensuring it maintains sufficient levels of committed borrowing facilities and cash and cash equivalents to meet its operational
cash flow requirements and maturing financial liabilities, whilst at all times operating within its financial covenants. The level of
operational headroom provided by the Group’s committed borrowing facilities is reviewed at least annually as part of the Group’s
three-year planning process. Where this process indicates a need for additional finance, this is addressed on a timely basis by
means of either additional committed bank facilities or raising finance in the capital markets.
In May 2023, the Group exercised its option to request a one-year extension to the maturity of the £38.5m component of its £385m
committed bank facility not previously extended. Following the request 100% of the £385m facility now matures in August 2026.
At the time of the extension the reference to USD LIBOR was replaced with reference to SOFR.
As at 31 December 2023, the Group had committed borrowing facilities of £685.8m (2022: £721.9m), of which £333.4m
(2022: £322.5m) were undrawn. 100% of these undrawn facilities expire in 2026. The Group’s borrowing requirements are met
by USPP, a committed syndicated bank facility of £385.0m (2022: £385.0m) and a bilateral bank facility of £10.0m (2022: £13.0m)
which is collateralised against a portion of the Group’s cash in China.
USPP Notes issued as at 31 December 2023 amounted to £290.8m ($116.0m, €198.0m and £28.0m) and had a weighted average
period to maturity of 4.5 years. $30.0m was repaid in December 2023 from existing cash resources. €15.0m and $60.0m are
repayable in 2025, €100.0m and $26.0m in 2027, $30.0m in 2028, €50.0m in 2029 and €33.0m and £28.0m in 2031. The maturity
analysis of the Group’s gross borrowings (including interest) is shown in the tables below. The cash flows shown are undiscounted.
188
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Between | Between | Total | ||||
Within | 1 and 2 | 2 and 5 | Over | contractual | Carrying | |
1 year | years | years | 5 years | cash flows | amount | |
As at 31 December 2023 | £m | £m | £m | £m | £m | £m |
Trade payables | 236.4 | – | – | – | 236.4 | 236.4 |
Loans and overdrafts | 22.3 | 68.0 | 196.9 | 103.9 | 391.1 | 355.8 |
Lease liabilities | 13.5 | 12.2 | 17.0 | 19.4 | 62.1 | 48.2 |
Capitalised arrangement fees | – | – | – | – | – | (1.8) |
Derivative liability | 0.1 | – | – | – | 0.1 | 0.1 |
Total financial liabilities | 272.3 | 80.2 | 213.9 | 123.3 | 689.7 | 638.7 |
Between | Between | Total | ||||
Within | 1 and 2 | 2 and 5 | Over | contractual | Carrying | |
1 year | years | years | 5 years | cash flows | amount | |
As at 31 December 2022 | £m | £m | £m | £m | £m | £m |
Trade payables | 239.5 | – | – | – | 239.5 | 239.5 |
Loans and overdrafts | 52.6 | 9.2 | 255.3 | 133.4 | 450.5 | 403.8 |
Lease liabilities | 12.3 | 9.2 | 13.2 | 13.5 | 48.2 | 40.8 |
Capitalised arrangement fees | – | – | – | – | – | (2.7) |
Derivative liability | 0.1 | – | – | – | 0.1 | 0.1 |
Total financial liabilities | 304.5 | 18.4 | 268.5 | 146.9 | 738.3 | 681.5 |
Capitalised arrangement fees shown in the tables above, which have been recognised as a reduction in borrowings in the Financial
Statements, amounted to £1.8m as at 31 December 2023 (31 December 2022: £2.7m), of which £0.6m (2022: £0.9m) related to the
USPP and £1.2m (2022: £1.8m) related to the Group’s syndicated bank facility.
The carrying amount of lease liabilities falling due within one year was £13.5m (2022: 12.3m). The carrying amount of lease
24.3
Capital management
The Company considers its capital to be equal to the sum of its total equity, disclosed on the Group Balance Sheet, and net debt
(Note 13). It monitors its capital using a number of KPIs, including free cash flow, average working capital to sales ratios, net debt
to EBITDA ratios and ROIC (Note 35). The Group’s objectives when managing its capital are:
–
To ensure that the Group and all of its businesses are able to operate as going concerns and ensure that the Group operates
within the financial covenants contained within its debt facilities
–
To have available the necessary financial resources to allow the Group to invest in areas that may deliver acceptable future
returns to investors
–
To maintain sufficient financial resources to mitigate against risks and unforeseen events
–
To maximise shareholder value through maintaining an appropriate balance between the Group’s equity and net debt
The Group operated within the requirements of its debt covenants throughout the year and has sufficient liquidity headroom
within its committed debt facilities. Details of the Group’s covenant compliance and committed debt facilities can be found in
Strategic report
Governance
Financial statements
189
Employee Benefits
Accounting policy
The net liability or net surplus recognised in the Group Balance Sheet for the Group’s defined benefit plans is the present value of
the defined benefit obligation at the balance sheet date, less the fair value of the plan assets. The defined benefit obligation is
calculated by independent actuaries using the projected unit credit method and by discounting the estimated future cash flows
using interest rates on high-quality corporate bonds that have durations approximating the terms of the related pension liability.
Any asset recognised in respect of a surplus arising from this calculation is limited to the asset ceiling, where this is the present value
of any economic benefits available in the form of refunds or reductions in future contributions in respect of the plans. The Group
has an unconditional right to a refund of the UK surplus, as defined under IFRIC 14, and considers that the possibility that a surplus
could be reduced or extinguished by discretionary actions by the Trustee does not affect the existence of the asset at the end of the
reporting period. The Group therefore recognises a pension asset with respect to the scheme valued on an IAS 19 basis. No liability
is recognised with respect to further funding contributions.
The expense for the Group’s defined benefit plans is recognised in the Group Income Statement as shown in Note 25.8. Actuarial
gains and losses arising on the assets and liabilities of the plans are reported within the Group Statement of Comprehensive
Income; and gains and losses arising on settlements and curtailments are recognised in the Group Income Statement in the
same line as the item that gave rise to the settlement or curtailment or, if material, separately reported as a component of
25.2
Group post-retirement plans
The Group operates a number of pension plans around the world, both defined benefit and defined contribution, and accounts
for them in accordance with IAS 19. There are also some jubilee arrangements (other long-term benefits plans) which, while they
do not need to be included in the detailed disclosures under IAS 19, have been included in the analysis below.
The Group’s principal defined benefit pension plans are in the UK and the US, the benefits of which are based upon the final
pensionable salaries of plan members. The assets of these plans are held separately from the Group in trustee-administered
funds. The Trustees are required to act in the best interests of the plans’ beneficiaries. The Group also has defined benefit
pension plans in other territories but, except for those in Germany, these are not individually material in relation to the Group.
(a) Defined benefit pension plans – UK
The Group’s main defined benefit pension plan in the UK (‘the UK Plan’) is closed to new members and to future benefit accrual.
The existing plan was established under a trust deed and is subject to the Pensions Act 2004 and guidance issued by the UK
Pensions Regulator.
In November 2021, the Trustee of the Vesuvius Pension Plan signed a pension insurance buy-in agreement with Pension Insurance
Corporation plc (PIC). This buy-in secured an insurance asset from PIC that matches the remaining pension liabilities of the UK
Plan, with the result that the Company no longer bears any investment, longevity, interest rate or inflation risks in respect of the
UK Plan. All benefits in the UK Plan (with the exception of a small amount of benefits expected to arise in future as a result of
guaranteed minimum pensions (GMP) equalisation) are now insured with PIC.
There is a ‘long-term scheme-specific funding standard’ in Part 3 of the Pensions Act 2004. In terms of Part 3, the UK Plan is subject
to a requirement (‘the statutory funding objective’) that it must have sufficient and appropriate assets to cover its technical
provisions. Such technical provisions are determined as part of the triennial valuation. Under the rules of the UK Plan, the Trustee,
after consultation with the Company, has the power to set the funding contributions taking into account the results of the triennial
valuation and the Pension Act 2004 legislation. Following the buy-in referred to above, no further contributions are expected to
be paid to the UK Plan by the Company, and the cost of GMP equalisation will be met out of the surplus UK Plan assets.
(b) Defined benefit pension plans – US
The Group has several defined benefit pension plans in the US, providing retirement benefits based on final salary or a fixed
benefit. The Group’s principal US defined benefit pension plans are closed to new members and to future benefit accrual for
existing members. Actuarial valuations of the US defined benefit pension plans are carried out every year and the last full
valuation was carried out as at 31 December 2023. At that date, the market value of the plan assets was $48.7m, representing
a funding level of 77.8% of funded accrued plan benefits at that date (using the projected unit method of valuation) of $62.6m.
Funding levels for the Group’s US defined benefit pension plans are based upon annual valuations carried out by independent
qualified actuaries and are governed by US Government regulations.
The Group’s US qualified defined benefit pension plan is subject to the minimum contribution requirements of the Internal Revenue
Code Sections 412 and 430. Contributions are determined by trustees, in consultation with the Company, based on the annual
valuations which are submitted to the Internal Revenue Service. During the fiscal year beginning 1 January 2023, total minimum
required contributions were $nil. Under these funding laws and based on the plan deficit, the required minimum annual
contribution for the 2024 fiscal year is expected to be $3.2m and the required annual contributions for the period 2025–2026
are expected to be in the $1.3m to $2.3m range. No contributions were made during 2023.
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Notes to the Group Financial Statements
continued
(c) Defined benefit pension plans – Germany
The Group has several defined benefit pension arrangements in Germany which are unfunded, as is common practice in that
country. The main plan was closed to new entrants on 31 December 2016 and replaced by a defined contribution plan for new
joiners. The German defined benefit plan contains mainly direct pension promises based on works council agreements as well
as on some individual pension promises. The legal framework is the German Company Pensions Act (‘Betriebsrentengesetz’).
The plan is unfunded (book reserved) and the Company pays all benefit payments when they fall due.
(d) Defined benefit pension plans – rest of the world and other post-retirement benefits
The Group has several defined benefit pension arrangements across the rest of the world (ROW), the largest of which are in
Belgium. The net liability of the ROW plans at 31 December 2023 was £8.3m (2022: £9.2m). The Group also has liabilities relating
to medical insurance arrangements and termination plans which provide for benefit to be paid to employees on retirement.
The net liability of these other post-retirement benefits as at 31 December 2023 was £9.9m (2022: £9.4m).
(e) Defined contribution pension plans
The total expense for the Group’s defined contribution plans in the Group Income Statement amounted to £12.1m (2022: £10.8m)
and represents the contributions payable for the year by the Group to the plans.
(f) Multi-employer plans
Due to collective agreements, Vesuvius in the US participates, together with other enterprises, in union-run multi-employer
pension plans for temporary workers hired on sites. These are accounted for as defined contribution plans.
25.3
Post-retirement liability valuation
The main assumptions used in calculating the costs and obligations of the Group’s defined benefit pension plans, as detailed
below, are set by the Directors after consultation with independent professionally qualified actuaries and include those used
to determine regular service costs and the financing elements related to the plans’ assets and liabilities. It is the Directors’
responsibility to set the assumptions used in determining the key elements of the costs of meeting such future obligations.
Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions used could affect the
Group’s profit and financial position.
(a) Mortality assumptions
The mortality assumptions used in the actuarial valuations of the Group’s UK, US and German defined benefit pension liabilities
are summarised in the table below and have been selected to reflect the characteristics and experience of the membership of
those plans.
For the UK Plan, the assumptions used have been derived from the Self-Administered Pension Schemes (‘SAPS S3’) All table, with
future longevity improvements in line with the ‘core’ mortality improvement tables published in 2022 by the Continuous Mortality
Investigation (CMI), with a long-term rate of improvement of 1.25% per year. For the Group’s US plans, the assumptions used have
been based on the Pri-2012 mortality tables and MP-2021 projection scale. The Group’s major plans in Germany have been valued
using the modified Heubeck Richttafeln 2018G mortality tables. In respect of the life expectancy tables below, current pensioners
are assumed to be 65 years old, while future pensioners are assumed to be 45 years old.
| 2023 | 2022 | |||||
UK | US | Germany | UK | US | Germany | |
Life expectancy of pension plan members | years | years | years | years | years | years |
Age to which current pensioners are expected to live: | ||||||
– Men | 86.8 | 85.6 | 85.8 | 87.2 | 85.0 | 85.6 |
– Women | 88.6 | 87.6 | 89.2 | 89.0 | 87.0 | 89.0 |
Age to which future pensioners are expected to live: | ||||||
– Men | 87.0 | 87.1 | 88.5 | 87.5 | 86.5 | 88.4 |
– Women | 90.0 | 89.0 | 91.4 | 90.5 | 88.4 | 91.3 |
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191
(b) Other main actuarial valuation assumptions
| 2023 | 2022 | |||||
UK | US | Germany | UK | US | Germany | |
% p.a. | % p.a. | % p.a. | % p.a. | % p.a. | % p.a. | |
Discount rate | 4.55 | 4.70 | 3.30 | 4.80 | 4.90 | 3.70 |
Price inflation – using RPI for UK | 3.05 | 2.50 | 2.25 | 3.25 | 2.50 | 2.35 |
– using CPI for UK | 2.45 | n/a | n/a | 2.35 | n/a | n/a |
Rate of increase in pensionable salaries | n/a | n/a | 3.00 | n/a | n/a | 3.10 |
Rate of increase to pensions in payment | 2.85 | n/a | 2.25 | 3.00 | n/a | 2.35 |
The discount rate used to determine the liabilities of the UK Plan for IAS 19 accounting purposes is required to be determined by
reference to market yields on high-quality corporate bonds. The UK discount rate in the above table is based on analysis using the
expected future cash flows of the Vesuvius Pension Plan and the AON AA yield curve; the US discount rate is based on the FTSE
pension discount curve; and the Germany discount rate is based on AA corporate bond yields included in the iBoxx Euro AA
corporate bond indices.
The assumptions for UK price inflation are set by reference to the difference between yields on longer-term conventional
government bonds and index-linked bonds, except for CPI, for which no appropriate bonds exist, which is assumed to be
0.6 points lower (2022: 0.9 points lower) than RPI-based inflation.
(c) Sensitivity analysis of the impact of changes in significant IAS 19 actuarial assumptions
The US pensions are not inflation linked. The rate of increase in pensionable salaries and of pensions in payment is therefore not
significant to the valuation of the Group’s overall pension liabilities.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Assumption | Change in assumption | UK 1 | US | Germany |
Discount rate | Increase/decrease by 0.1% | |||
– impact on plan liabilities | Decrease/increase by £3.7m | Decrease/increase | Decrease/increase | |
by £0.5m | by £0.6m | |||
– impact on plan assets | Decrease/increase by £3.7m | n/a | n/a | |
Price inflation | Increase/decrease by 0.1% | |||
– impact on plan liabilities | Increase/decrease by £2.6m | n/a | Increase/decrease | |
by £0.2m | ||||
– impact on plan assets | Increase/decrease by £2.6m | n/a | n/a | |
Mortality | Increase by one year | |||
– impact on plan liabilities | Increase by £15.1m | Increase by £2.0m | Increase by £1.3m | |
– impact on plan assets | Increase by £15.1m | n/a | n/a |
1.
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC). This buy-in secured an
insurance asset from PIC that matches the remaining pension liabilities of the UK Plan, with the result that the Company no longer bears any investment,
longevity, interest rate or inflation risks in respect of the UK Plan.
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Notes to the Group Financial Statements
continued
25.4
Defined benefit obligation
The average duration of the obligations to which the liabilities of the Group’s principal pension plans relate is 12 years for the UK,
15 years for Germany and 9 years for the US.
Other post- | |||||||
retirement & | |||||||
| Defined benefit pension plans | long-term | ||||||
benefit | |||||||
UK | US | Germany | ROW | Total | plans | Total | |
£m | £m | £m | £m | £m | £m | £m | |
Present value as at 1 January 2023 | 325.2 | 59.9 | 38.4 | 43.3 | 466.8 | 9.4 | 476.2 |
Exchange differences | – | (3.0) | (0.8) | (1.5) | (5.3) | 0.3 | (5.0) |
Current service cost | – | – | 0.6 | 3.0 | 3.6 | 0.5 | 4.1 |
Interest cost | 15.1 | 2.7 | 1.2 | 1.7 | 20.7 | 0.6 | 21.3 |
Gains arising over the year that are | |||||||
recognised in P&L | – | – | – | – | – | – | – |
Remeasurement of liabilities: | |||||||
– demographic changes | (5.5) | – | – | 0.1 | (5.4) | – | (5.4) |
– financial assumptions | 5.9 | 0.9 | 3.0 | (0.4) | 9.4 | (0.1) | 9.3 |
– experience losses/(gains) | 8.8 | 0.4 | 0.5 | 0.5 | 10.2 | (0.1) | 10.1 |
Benefits paid | (21.1) | (4.5) | (1.6) | (3.6) | (30.8) | (0.7) | (31.5) |
Present value as at 31 December 2023 | 328.4 | 56.4 | 41.3 | 43.1 | 469.2 | 9.9 | 479.1 |
Other post- | |||||||
retirement & | |||||||
| Defined benefit pension plans | long-term | ||||||
benefit | |||||||
UK | US | Germany | ROW | Total | plans | Total | |
£m | £m | £m | £m | £m | £m | £m | |
Present value as at 1 January 2022 | 464.3 | 70.2 | 53.3 | 48.3 | 636.1 | 7.0 | 643.1 |
Reclassification to other post-retirement | |||||||
& long-term benefit plans | – | – | – | (2.0) | (2.0) | 2.0 | – |
Exchange differences | – | 7.9 | 2.2 | 1.7 | 11.8 | 0.7 | 12.5 |
Current service cost | – | – | 1.0 | 3.0 | 4.0 | 0.8 | 4.8 |
Interest cost | 9.0 | 1.8 | 0.7 | 0.7 | 12.2 | 0.3 | 12.5 |
Gains arising over the year that are | |||||||
recognised in P&L | – | – | – | – | – | (0.4) | (0.4) |
Remeasurement of liabilities: | |||||||
– demographic changes | (6.1) | – | – | (0.1) | (6.2) | – | (6.2) |
– financial assumptions | (148.5) | (15.0) | (18.3) | (6.8) | (188.6) | (0.5) | (189.1) |
– experience losses/(gains) | 28.9 | (0.5) | 1.1 | 0.8 | 30.3 | 0.3 | 30.6 |
Benefits paid | (22.4) | (4.5) | (1.6) | (2.3) | (30.8) | (0.8) | (31.6) |
Present value as at 31 December 2022 | 325.2 | 59.9 | 38.4 | 43.3 | 466.8 | 9.4 | 476.2 |
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193
25.5
Fair value of plan assets
| 2023 | 2022 | |||||||
UK | US | ROW | Total | UK | US | ROW | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
As at 1 January | 348.6 | 37.4 | 34.1 | 420.1 | 486.4 | 48.3 | 31.4 | 566.1 |
Exchange differences | – | (2.0) | (1.5) | (3.5) | – | 5.5 | 1.2 | 6.7 |
Interest income | 16.1 | 1.7 | 1.2 | 19.0 | 9.5 | 1.2 | 0.4 | 11.1 |
Return on plan assets | 16.6 | 5.2 | 0.6 | 22.4 | (124.4) | (13.4) | 0.5 | (137.3) |
Contributions from employer | – | – | 3.8 | 3.8 | – | – | 2.7 | 2.7 |
Administration expenses paid | (0.6) | (0.5) | – | (1.1) | (0.6) | (0.6) | – | (1.2) |
Benefits paid | (20.9) | (3.6) | (3.4) | (27.9) | (22.3) | (3.6) | (2.1) | (28.0) |
As at 31 December | 359.8 | 38.2 | 34.8 | 432.8 | 348.6 | 37.4 | 34.1 | 420.1 |
The Group’s pension plans in Germany are unfunded, as is common practice in that country, and accordingly there are no assets
associated with these plans.
25.6
Remeasurement of defined benefit liabilities/assets
2023 | 2022 | |
total | total | |
£m | £m | |
Remeasurement of liabilities/assets: | ||
– demographic changes | 5.4 | 6.2 |
– financial assumptions | (9.3) | 189.1 |
– experience losses | (10.1) | (30.6) |
Return on plan assets | 22.4 | (137.3) |
Total movement | 8.4 | 27.4 |
The remeasurement of defined benefit liabilities and assets is recognised in the Group Statement of Comprehensive Income.
25.7
Balance sheet recognition
The amount recognised in the Group Balance Sheet in respect of the Group’s defined benefit pension plans and other
post-retirement and long-term benefit plans is analysed in the following tables, which all relate to continuing operations.
All equity securities and bonds have quoted prices in active markets.
Other post- | |||||||
retirement & | |||||||
| Defined benefit pension plans | long-term | ||||||
benefit | 2023 | ||||||
UK | US | Germany | ROW | Total | plans | total | |
£m | £m | £m | £m | £m | £m | £m | |
Equities | 18.5 | 3.9 | – | 2.8 | 25.2 | – | 25.2 |
Bonds | – | 32.8 | – | 2.2 | 35.0 | – | 35.0 |
Annuity insurance contracts | 321.3 | – | – | 27.8 | 349.1 | – | 349.1 |
Other assets | 20.0 | 1.5 | – | 2.0 | 23.5 | – | 23.5 |
Fair value of plan assets | 359.8 | 38.2 | – | 34.8 | 432.8 | – | 432.8 |
Present value of funded obligations | (327.3) | (49.1) | – | (39.9) | (416.3) | – | (416.3) |
32.5 | (10.9) | – | (5.1) | 16.5 | – | 16.5 | |
Present value of unfunded obligations | (1.1) | (7.3) | (41.3) | (3.2) | (52.9) | (9.9) | (62.8) |
Total net surpluses/(liabilities) | 31.4 | (18.2) | (41.3) | (8.3) | (36.4) | (9.9) | (46.3) |
Recognised in the Group Balance Sheet as: | |||||||
Net surpluses | 32.5 | – | – | 2.1 | 34.6 | – | 34.6 |
Net liabilities | (1.1) | (18.2) | (41.3) | (10.4) | (71.0) | (9.9) | (80.9) |
Total net surpluses/(liabilities) | 31.4 | (18.2) | (41.3) | (8.3) | (36.4) | (9.9) | (46.3) |
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Notes to the Group Financial Statements
continued
Other post- | |||||||
retirement & | |||||||
| Defined benefit pension plans | long-term | ||||||
benefit | 2022 | ||||||
UK | US | Germany | ROW | Total | plans | total | |
£m | £m | £m | £m | £m | £m | £m | |
Equities | 12.1 | 0.5 | – | 2.3 | 14.9 | – | 14.9 |
Bonds | – | 35.6 | – | 3.0 | 38.6 | – | 38.6 |
Annuity insurance contracts | 318.1 | – | – | 24.7 | 342.8 | – | 342.8 |
Other assets | 18.4 | 1.3 | – | 4.1 | 23.8 | – | 23.8 |
Fair value of plan assets | 348.6 | 37.4 | – | 34.1 | 420.1 | – | 420.1 |
Present value of funded obligations | (324.1) | (51.7) | – | (40.2) | (416.0) | – | (416.0) |
24.5 | (14.3) | – | (6.1) | 4.1 | – | 4.1 | |
Present value of unfunded obligations | (1.1) | (8.2) | (38.4) | (3.1) | (50.8) | (9.4) | (60.2) |
Total net surpluses/(liabilities) | 23.4 | (22.5) | (38.4) | (9.2) | (46.7) | (9.4) | (56.1) |
Recognised in the Group Balance Sheet as: | |||||||
Net surpluses | 24.5 | – | – | 1.7 | 26.2 | – | 26.2 |
Net liabilities | (1.1) | (22.5) | (38.4) | (10.9) | (72.9) | (9.4) | (82.3) |
Total net surpluses/(liabilities) | 23.4 | (22.5) | (38.4) | (9.2) | (46.7) | (9.4) | (56.1) |
(a) UK Plan asset allocation
As at 31 December 2023, of the UK Plan’s total assets, 89.3% (2022: 91.4%) were represented by the annuity insurance contracts
covering the UK Plan’s pension liabilities; 5.1% (2022: 3.4%) were allocated to equities and 5.6% (2022: 5.2%) to cash.
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC),
whereby the UK Plan Trustee has paid insurance premiums to PIC to insure all of the UK Plan’s liabilities. Under this arrangement,
the value of the PIC insurance contract matches the value of the liabilities for current benefits because the inflation, interest rate,
investment and longevity risks for Vesuvius in respect of these liabilities are eliminated. The buy-in agreement ensures that the
UK pension plan obligations in respect of all its members and their approved dependants are insured.
As at 31 December 2023, the IAS 19 valuation of the PIC insurance contract value associated with the bought-in liabilities was
£321.3m (2022: £318.1m). The policy and the associated valuation are updated annually to reflect retirements and mortality.
(b) US Plan asset allocation
All of the assets in the main US Plan have a quoted market price in an active market. The Plan mitigates exposure to interest rates
by employing a liability matching investment strategy. All non-derivative assets are invested in liability matching bonds with
a similar average duration to the liabilities of the Plan. Since 2018, the investment allocation has been de-risked from an allocation
of 72% liability matching and 28% return seeking assets, to an allocation of 100% liability matching. The Plan retains equity risk
through use of equity derivative contracts, which provide equity market exposure with some level of equity downside protection.
(c) Defined benefit contributions in 2024
In 2024, the Group is expected to make direct benefit payments and contributions into its defined benefit pension and other
post-retirement and long-term benefits plans of around £10.0m. Specific payments and contributions of approximately £3.5m,
£2.0m and £2.2m are anticipated for the US Plans, German Plans and Belgian Plans respectively.
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195
25.8
Income statement recognition
The expense recognised in the Group Income Statement in respect of the Group’s defined benefit retirement plans and other
post-retirement and long-term benefit plans is shown below:
| 2023 | 2022 | |||||
Other post- | Other post- | |||||
Defined | retirement & | Defined | retirement & | |||
benefit | long-term | benefit | long-term | |||
pension | benefit | pension | benefit | |||
plans | plans | Total | plans | plans | Total | |
£m | £m | £m | £m | £m | £m | |
Current service cost | 3.6 | 0.5 | 4.1 | 4.0 | 0.8 | 4.8 |
Gains arising over the year that are recognised in P&L | – | – | – | – | (0.4) | (0.4) |
Administration expenses | 1.1 | – | 1.1 | 1.2 | – | 1.2 |
Net interest cost | 1.7 | 0.6 | 2.3 | 1.1 | 0.3 | 1.4 |
Total net charge | 6.4 | 1.1 | 7.5 | 6.3 | 0.7 | 7.0 |
The total net charge of £7.5m (2022: £7.0m), recognised in the Group Income Statement in respect of the Group’s defined benefit
pension plans and other post-retirement and long-term benefits plans, is analysed in the following table:
2023 | 2022 | ||
£m | £m | ||
In arriving at trading profit | – within other manufacturing costs | 1.3 | 1.7 |
– within administration, selling and distribution costs | 3.9 | 3.9 | |
In arriving at profit before tax | – within net finance costs | 2.3 | 1.4 |
Total net charge | 7.5 | 7.0 |
GMP equalisation
A UK High Court ruling was made on 26 October 2018 in respect of the gender equalisation of guaranteed minimum pensions
(GMPs) for occupational pension schemes. The impact of GMP equalisation as at 31 December 2018 was estimated to be £4.5m.
A second UK High Court GMP equalisation ruling was issued on 20 November 2020. This second ruling considered the treatment
of historical transfers out, i.e. those members who had transferred out before 26 October 2018. The 2020 ruling covers both
individual and bulk transfers out. It does not revisit any of the issues addressed in the 2018 ruling. The impact of GMP equalisation
for the second ruling was estimated to be £0.8m as at 31 December 2020.
The increase in pension liabilities resulting from these judgements have been treated for IAS 19 purposes as plan amendments
and resulted in an increase in the pension deficit in the balance sheet and a corresponding past service cost in the Income
Statement. These amendments have previously been treated as separately reported items so that there has been no impact
on headline performance. We are working with the Trustees of our UK pension plan and our actuarial and legal advisers to
understand the extent to which these judgements crystallise additional liabilities for the UK pension plan.
25.9
Risks to which the defined benefit pension plans expose the Group
The principal risks faced by these plans comprise: (i) the risk that the value of the plan assets is not sufficient to meet all plan
liabilities as they fall due; (ii) the risk that plan beneficiaries live longer than envisaged, causing liabilities to exceed the available
plan assets; and (iii) the risk that the market-based factors used to value plan liabilities and assets change materially adversely
to increase plan liabilities over the value of available plan assets. Further details are given below.
Following the UK Plan pension insurance buy-in agreement, the inflation, interest rate, investment and longevity risks for
Vesuvius in respect of the UK Plan are virtually eliminated. The following risks relate to the other plans operated by the Group:
Counterparty risk
This is mitigated by using a diversified range of counterparties of high standing and ensuring positions are collateralised
as required.
Asset volatility
The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform against
this yield, this will create a deficit. To reduce this risk, the pension plans are largely invested in government and corporate bonds.
Changes in bond yields
A decrease in corporate bond yields will increase the scheme liabilities, although this will be partially offset by an increase in the
value of the schemes’ bond holdings.
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Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Inflation risk
Most of the plans’ benefit obligations outside the US are linked to inflation, and higher inflation will lead to higher liabilities.
Life expectancy
The majority of the plans’ obligations are to provide benefits for the life of the member and in some cases their spouse on death
of the member, so increases in life expectancy will result in an increase in the liabilities.
In August 2016, the pensions for the majority of current pensioners in the US main plan were bought out with an insurance
company, removing all responsibility and risk related to these pensions from the Group. In recent years, a number of further
Share-based Payments
Accounting policy
The Group operates an equity-settled share-based payment arrangement for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as total
shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-based
conditions, such as growth in return on invested capital (ROIC), environmental, social and governance criteria (ESG) and headline
earnings per share (EPS), fair value is measured using the Black-Scholes option pricing model. The fair value is expensed on
a straight-line basis over the vesting period with a corresponding increase in equity. The cumulative expense recognised is
26.2
Income statement recognition
The total expense recognised in the Group Income Statement is shown below:
2023 | 2022 | |
£m | £m | |
Long-Term Incentive Plan | 2.2 | 0.9 |
Other plans | 5.1 | 4.2 |
Total expense | 7.3 | 5.1 |
The Group operates a number of different share-based payment plans, the most significant of which is the Long-Term Incentive
Plan (LTIP), details of which can be found in the Directors’ Remuneration Report.
26.3
Details of outstanding options
| Number of outstanding awards | ||||||
As at | Forfeited/ | As at | ||||
1 Jan 2023 | Granted | Exercised | lapsed | Expired | 31 Dec 2023 | |
LTIP | 2,145,335 | 1,097,274 | (283,402) | (777,326) | nil | 2,181,881 |
Weighted average exercise price | nil | nil | nil | nil | nil | nil |
Other plans | 1,722,689 | 1,486,666 | (439,041) | (203,365) | nil | 2,566,949 |
Weighted average exercise price | nil | nil | nil | nil | nil | nil |
For the awards exercised during 2023, the market value at the date of exercise ranged from 392.4 pence to 432.8 pence per share.
| Number of outstanding awards | ||||||
As at | Forfeited/ | As at | ||||
1 Jan 2022 | Granted | Exercised | lapsed | Expired | 31 Dec 2022 | |
LTIP | 1,939,964 | 981,558 | nil | (776,187) | nil | 2,145,335 |
Weighted average exercise price | nil | nil | nil | nil | nil | nil |
Other plans | 549,033 | 1,513,457 | (228,175) | (111,626) | nil | 1,722,689 |
Weighted average exercise price | nil | nil | nil | nil | nil | nil |
For the options exercised during 2022, the market value at the date of exercise ranged from 293.0 pence to 395.5 pence per share.
Details of market performance conditions are included in the Directors’ Remuneration Report.
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Financial statements
197
2023 | 2022 | |||||
Weighted | Weighted | |||||
average | average | |||||
Awards | outstanding | Awards | outstanding | |||
exercisable | contractual | Range of | exercisable | contractual | Range of | |
as at | life of | exercise | as at | life of | exercise | |
31 Dec 2023 | awards | prices | 31 Dec 2022 | awards | prices | |
no. | years | pence | no. | years | pence | |
LTIP | – | 8.4 | – | 8.3 | ||
Weighted average exercise price | – | n/a | – | n/a | ||
Other plans | – | 0.6 | – | 0.9 | ||
Weighted average exercise price | – | n/a | – | n/a | ||
26.4
Options granted during the year
| 2023 | |||
LTIP ROIC/ | LTIP TSR | ||
ESG element | element | Other plans | |
Fair value of options granted | 386p | 238p | 386p |
Share price on date of grant | 386p | 386p | 386p |
Expected volatility | n/a | 34.6% | n/a |
Risk-free interest rate | n/a | 3.3% | n/a |
Exercise price (per share) | nil | nil | nil |
Expected term (years) | 3 | 3 | 2 |
Expected dividend yield | nil | nil | nil |
| 2022 | |||
LTIP ROIC/ | LTIP TSR | ||
ESG element | element | Other plans | |
Fair value of options granted | 385p | 217p | 385p |
Share price on date of grant | 385p | 385p | 385p |
Expected volatility | n/a | 39.3% | n/a |
Risk-free interest rate | n/a | 1.28% | n/a |
Exercise price (per share) | nil | nil | nil |
Expected term (years) | 3 | 3 | 2 |
Expected dividend yield | nil | nil | nil |
For the LTIP awards issued in 2021, vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return
(TSR) performance relative to that of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the
remaining 50% of shares awarded is based on headline EPS growth.
For the LTIP awards issued in 2022 and 2023, vesting of 40% of shares awarded is based on the Group’s three-year total
shareholder return (TSR) performance relative to that of the constituent companies of the FTSE 250 (excluding investment trusts)
and vesting of the remaining 60% of shares awarded is based on ROIC and ESG targets.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years
(2022: 2.8 years) prior to the grant date for the April 2023 grant. The risk-free rate of return was assumed to be the yield to
maturity on a UK fixed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration
Committee, award holders receive the value of dividends that would have been paid on their vested shares in the period
198
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Trade and Other Payables
Accounting policy
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
Analysis of trade and other payables
2023 | 2022 | |
£m | £m | |
Non-current | ||
Accruals and other payables | 9.1 | 13.8 |
Total non-current other payables | 9.1 | 13.8 |
Current | ||
Trade payables | 236.4 | 239.5 |
Other taxes and social security | 36.5 | 38.1 |
Accruals and other payables | 104.9 | 100.8 |
Total current trade and other payables | 377.8 | 378.4 |
There is no significant difference between the fair value of the Group’s trade and other payables balances and the amount at
which they are reported in the Group Balance Sheet.
Included within trade payables in the table above is £31.9m (2022: £29.7m) subject to supplier financing agreements entered into
with certain of the Group’s banks. Under the terms of the agreements, the Group’s suppliers in certain countries can elect to be
paid earlier than the terms of their agreement with Vesuvius by requesting discounted early settlement from the arranging bank.
This early settlement is effected between the bank and the supplier; from the perspective of the Group, the terms of each payable
Accounting policy
Lease liabilities are recognised at the present value of the remaining lease payments, discounted using the interest rate implicit in
the lease if that rate can be readily determined. If that rate cannot be readily determined, the lessee’s incremental borrowing rate
is used, calculated as the local government bond rate plus an interest rate spread. In cases where there was an option to terminate
or extend a lease, the duration of the lease assumed for this purpose reflected the Group’s existing intentions regarding such
options. Lease liabilities include the net present value of the following lease payments:
–
Fixed payments (including in-substance fixed payments), less any lease incentives receivable
–
Variable lease payments that are based on an index or a rate
–
Amounts expected to be payable by the lessee under residual value guarantees
–
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
–
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option
Cash flows from leases are presented within ‘Repayments of borrowings’ in the Group Statement of Cash Flows.
Leases of low-value assets and short-term leases (shorter than 12 months) are classified as operating leases and neither the asset
nor the corresponding liability to the lessor is recognised in the Group Balance Sheet. Rentals payable under operating leases are
charged to the Group Income Statement on a straight-line basis over the term of the lease. Benefits received and receivable as an
28.2
Lease liabilities
The lease liabilities at 31 December 2023 were £48.2m (2022: £40.8m). The cash payments for leases during the year were
£24.2m (2022: £14.6m). The maturity analysis of the lease liabilities is disclosed in Note 24.2 (d).
The net book value of the Group’s property, plant and equipment assets held as right-of-use assets under lease contracts at
31 December 2023 was £57.6m (2022: £44.1m) (Note 14). The right-of-use asset is depreciated over the shorter of the asset’s
useful life and the lease term on a straight-line basis.
28.3
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
2023 | 2022 | |
£m | £m | |
Not later than one year | 0.6 | 0.5 |
Later than one year and not later than five years | – | 0.2 |
Later than five years | – | – |
Total operating lease commitments | 0.6 | 0.7 |
Strategic report
Governance
Financial statements
199
The cost incurred by the Group in the year in respect of assets held under operating leases, all of which was charged within trading
profit, amounted to £3.0m (2022: £2.3m), of which £2.3m (2022: £1.7m) related to short-length leases and £0.7m (2022: £0.6m)
Provisions
Accounting policy
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to
settle the obligation at the balance sheet date. Where the effect of the time value of money is material, provisions are discounted
using a pre-tax discount rate that reflects both the current market assessment of the time value of money and the specific risks
associated with the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognised
29.2
Analysis of provisions
Disposal, | ||||
closure and | ||||
environmental | Restructuring | |||
costs | charges | Other | Total | |
£m | £m | £m | £m | |
As at 31 December 2021 and 1 January 2022 | 41.7 | 5.0 | 4.0 | 50.7 |
Exchange adjustments | 5.0 | 0.6 | 0.3 | 5.9 |
Charge to Group Income Statement – trading profit | 16.7 | – | 11.4 | 28.1 |
Adjustment to discount | 1.1 | – | – | 1.1 |
Cash spend | (6.8) | (1.5) | (10.3) | (18.6) |
Transferred to other balance sheet accounts | – | (0.5) | – | (0.5) |
As at 31 December 2022 and 1 January 2023 | 57.7 | 3.6 | 5.4 | 66.7 |
Exchange adjustments | (2.6) | (0.1) | (0.1) | (2.8) |
Charge to Group Income Statement – trading profit | 1.5 | (0.3) | 7.3 | 8.5 |
Adjustment to discount | 2.3 | – | – | 2.3 |
Cash spend | (7.0) | (0.8) | (8.3) | (16.1) |
As at 31 December 2023 | 51.9 | 2.4 | 4.3 | 58.6 |
Of the total provision balance as at 31 December 2023 of £58.6m (2022: £66.7m), £47.6m (2022: £49.3m) is recognised in the
Group Balance Sheet within non-current liabilities and £11.0m (2022: £17.4m) within current liabilities.
Disposal, closure and environmental charges
The provision for disposal, closure and environmental costs includes the Directors’ current best estimate of the amounts to be
payable in respect of known or probable costs resulting from third-party claims, including legacy matter lawsuits.
There remains inherent uncertainty associated with estimating the future costs of legacy matter lawsuits. In assessing the
probable costs and realisation certainty of these provisions, or related assets, management has made reasonable assumptions,
including projections of the number of future claims, the approximate average cost of those claims (including legal costs and
infrequent larger value claims) and the length of time taken to resolve such claims. The provision reflects the Directors’ best
estimate of the future liability and the value of the corresponding asset. By nature, these assumptions are uncertain and therefore
changes to the assumptions used could significantly alter the Directors’ assessment of the value, volume of claims, timing or
certainty of the costs or related amounts. Sensitivity analyses have been conducted using variations to the key assumptions listed
above and indicatively show that a 24% increase in the average cost of claims would impact the gross provision by approximately
£9.5m and the corresponding asset for insurance cover by approximately £7.4m.
Changes in discount rates , such as those observed in 2022, may have a significant impact on gross provisions and related assets
for insurance cover.
Assumptions are determined with reference to historical information and trends experienced to date, combined with specialist
views on future outlook. As assumptions can vary individually or in combination, over the longer term there can be no guarantee
that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred.
200
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
As the resolution of many of the obligations for which provision is made is subject to legal or other regulatory process, the timing of
the associated cash outflows is also subject to some uncertainty. However, the majority of the amounts provided are expected to
be utilised over the next ten years. The provision, underlying estimates of costs and associated insurance estimates are regularly
assessed, to reflect any changed circumstances with regard to individual matters. Any movements impacting the Income
Statement are included within headline performance.
As set out above, where insurance cover exists for any of these known or probable costs, a related asset is recognised in the
Group Balance Sheet only when its value can be reliably measured and reimbursement is considered to be virtually certain
by management. As at 31 December 2023, £23.6m (2022: £26.8m) was recorded in other receivables in respect of associated
insurance reimbursements, of which £21.4m (2022: £25.1m) is non-current. A debit of £0.7m was recorded during 2023 (2022:
credit £12.6m) to reflect the decrease (2022: increase) in assets for insurance cover which is included in the ‘Administration, selling
and distribution costs’ line in the Income Statement. This is offset by a credit of £0.7m in 2023 (2022: £12.6m) to reflect a decrease
in provisions for related claims in the same line of the Income Statement.
In addition, this provision covers the estimate of costs to be payable both in the fulfilment of obligations incurred in connection with
former Group businesses, resulting from either disposal or closure, together with those related to the demolition and clean-up of
closed sites.
Restructuring charges provisions
The provision for restructuring charges includes the costs to complete the Group’s major restructuring programmes. The majority
of this balance of £2.4m as at 31 December 2023 (2022: £3.6m) is expected to be paid out over the next year.
Other
Other provisions comprise amounts payable in respect of known or probable costs resulting both from legal or other regulatory
requirements, workers’ compensation and medical claims, and from third-party claims. As the settlement of many of the
obligations for which provision is made is subject to reasonable assumptions, legal or other regulatory process, the timing of
the associated outflows is subject to some uncertainty, but the majority of amounts provided are expected to be utilised over
the next two years and the underlying estimates of costs are regularly updated to reflect changed circumstances with regard to
individual matters. During 2023, the Group recognised net charges of £7.3m (2022: £11.4m) in the Group Income Statement to
provide for various medical benefits and other claims.
The Group has considered the impact of climate change on provisions including decommissioning or environmental rehabilitation
Off-Balance Sheet Arrangements
In compliance with current reporting requirements, certain arrangements entered into by the Group in its normal course of
business are not reported in the Group Balance Sheet. Of such arrangements, the largest amounts are future lease payments
Contingent Liabilities
Details of guarantees given by the Company, on behalf of the Group, are given in Note 12 to the Company Financial Statements.
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius’ subsidiaries are subject to legacy matter lawsuits, predominantly in the US, relating to a small number of
products containing asbestos manufactured prior to the acquisition of those subsidiaries by Vesuvius. These suits usually also
name many other product manufacturers. To date, Vesuvius is not aware of there being any liability verdicts against any of these
subsidiaries. Each year, a number of these lawsuits are withdrawn, dismissed or settled.
As the settlement of many of the obligations for which reserve is made is subject to legal or other regulatory process, the timing
and amount of the associated outflows is subject to some uncertainty (see Note 29 for further information). The amount paid,
including costs in relation to this litigation, has not had a material effect on Vesuvius’ financial position or results of operations in
Strategic report
Governance
Financial statements
201
Investments in Subsidiaries, Joint Ventures and Associates
Investment in subsidiaries
A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and can affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The subsidiaries of Vesuvius plc and the countries in which they are incorporated are set out below. With the exception of
Vesuvius Holdings Limited, whose ordinary share capital was directly held by Vesuvius plc, the ordinary capital of the companies
listed below was wholly owned by a Vesuvius plc subsidiary as at 31 December 2023. Details of the joint ventures and associates
are disclosed in Note 32.2.
Company |
Company |
||||
legal name |
Registered office address |
Jurisdiction |
legal name |
Registered office address |
Jurisdiction |
Advent Process |
333 Prince Charles Drive, |
Canada |
Foseco Holding |
165 Fleet Street, London, |
England |
Engineering Inc. |
Welland, Ontario, |
(Ontario) |
Limited |
EC4A 2AE, England |
|
L3B 5P4, Canada |
Foseco Industrial e |
Km 15, Rodovia Raposo |
Brazil |
||
BMI Refractory |
600 N 2nd Street, Suite 401, |
US |
Comercial Ltda |
Tavares, Butanta Cep, |
|
Services Inc. |
Harrisburg, PA 17101-1071, |
(Pennsylvania) |
São Paulo, 05577-100, Brazil |
||
United States |
Foseco |
170/69, 22nd Floor Ocean |
Thailand |
||
Brazil 1 Limited |
165 Fleet Street, London, |
England |
International |
Tower 1, Ratchadapisek Road, |
|
EC4A 2AE, England |
Holding |
Klongtoey, Bangkok, |
|||
CCPI Inc. |
Suite 201, 910 Foulk Road, |
US |
(Thailand) Limited |
10110, Thailand |
|
Wilmington, New Castle, |
(Delaware) |
Foseco |
1 Midland Way, Central Park, |
England |
|
DE 19803, United States |
International |
Barlborough Links, Derbyshire, |
|||
Cookson |
Km 7 1/2, Autopista San Isidro, |
Dominican |
Limited |
S43 4XA, England |
|
Dominicana, |
Edificio Modelo A, Zona Franca |
Republic |
Foseco Japan |
9th Floor, Orix Kobe Sannomiya |
Japan |
SRL |
San Isidro, Santo Domingo |
Limited |
Building, 6-1-10, Goko dori, Chuo- |
||
Oeste, Dominican Republic |
ku, Kobe Hyogo, 651-0087, Japan |
||||
East Moon |
Unit 01, 86/F International |
Hong Kong |
Foseco Korea |
74 Jeongju-ro, Bucheon-si, |
South Korea |
Investment |
Commerce Centre, |
Limited |
Gyeonggi-do, 14523, South Korea |
||
(HK Holding) |
1 Austin Road West, |
Foseco |
165 Fleet Street, London, |
England |
|
Company Limited |
Kowloon, Hong Kong |
Limited |
EC4A 2AE, England |
||
Flo-Con |
CT Corporation, 1209 Orange |
US |
Foseco |
CT Corporation, 1209 Orange |
US |
Holding, Inc. |
Street, The Corporation Trust |
(Delaware) |
Metallurgical Inc. |
Street, The Corporation Trust |
(Delaware) |
Company, Wilmington, |
Company, Wilmington, |
||||
DE 19801, United States |
DE 19801, United States |
||||
Foseco (FS) |
1 Midland Way, Central Park, |
England |
Foseco |
Binnenhavenstraat 20, 7553 GJ |
Netherlands |
Limited |
Barlborough Links, Derbyshire, |
Nederland BV |
Hengelo (OV), Netherlands |
||
S43 4XA, England |
|||||
Foseco Overseas |
165 Fleet Street, London, |
England |
|||
Foseco (Jersey) |
44 Esplanade, St Helier, |
Jersey |
Limited |
EC4A 2AE, England |
|
Limited |
JE4 9WG, Jersey |
||||
Foseco Portugal |
Rua Manuel Pinto de Azevedo, |
Portugal |
|||
Foseco (UK) |
165 Fleet Street, London, |
England |
Produtos Para |
No 626 4100-320 Porto, |
|
Limited |
EC4A 2AE, England |
Fundiçâo Lda |
Portugal |
||
Foseco Canada |
181 Bay Street, Suite 1800, |
Canada |
Foseco S.A.S. |
Le Newton C, 7 Mail Barthélémy |
France |
Limited |
Toronto, Ontario, M5J 2T9, Canada (Ontario) |
Thimonnier, 77185 Lognes, France |
|||
Foseco Espanola |
5, Barrio Elizalde, Izurza, |
Spain |
Foseco Steel |
1 Midland Way, Central Park, |
England |
S.A. |
Bizkaia, 48213, Spain |
(UK) Limited |
Barlborough Links, Derbyshire, |
||
Foseco Foundry |
Room 819, Shekou Zhaoshang |
China |
S43 4XA, England |
||
(China) |
Building, Nanshan District, |
Foseco |
165 Fleet Street, London, |
England |
|
Co. Limited |
Shenzhen, Guangdong, |
Technology |
EC4A 2AE, England |
||
518067, China |
Limited |
||||
Foseco |
5, Barrio Elizalde, |
Spain |
J.H. France |
CT Corporation, 1209 Orange |
US |
Fundición Holding |
Izurza, Bizkaia, |
Refractories |
Street, The Corporation Trust |
(Delaware) |
|
(Espanola), S.L. |
48213, Spain |
Company |
Company, Wilmington, |
||
Foseco Holding |
165 Fleet Street, London, |
England |
DE 19801, United States |
||
(Europe) Limited |
EC4A 2AE, England |
John G. Stein & |
1 Midland Way, Central Park, |
England |
|
Foseco Holding |
12 Bosworth Street, |
South Africa |
Company Limited |
Barlborough Links, Derbyshire, |
|
(South Africa) |
Alrode, Alberton, 1449, |
S43 4XA, England |
|||
(Pty) Limited |
South Africa |
Mainsail |
Victoria Place, 5th Floor, |
Bermuda |
|
Foseco |
Rivium Boulevard 301, |
Netherlands |
Insurance |
31 Victoria Street, Pembroke, |
|
Holding BV |
Capelle aan den Ijssel, Rotterdam |
Company Limited |
Hamilton, HM 10, Bermuda |
||
2909LK, Netherlands |
Mascinco |
Avenida Brasil, 49550 – parte, |
Brazil |
||
Foseco Holding |
165 Fleet Street, London, |
England |
Empreendimentos |
Distrito Industrial de Palmares – |
|
International |
EC4A 2AE, England |
e Participações |
Campo, Grande – Cep: 23065-480, |
||
Limited |
Ltda |
Rio de Janeiro, RJ, Brazil |
202
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Company | Company | ||||
legal name | Registered office address | Jurisdiction | legal name | Registered office address | Jurisdiction |
Mercajoya, S.A. | Capitán Haya, 56 – 1ºH, | Spain | Vesuvius China | 86/F International Commerce | Hong Kong |
28020 Madrid, Spain | Holdings | Centre, 1 Austin Road West, | |||
Co. Limited | Kowloon, Hong Kong | ||||
Metal Way | Estrada Santa Isabel, 7655 KM37, | Brazil | |||
Equipamentos | Bairro Do Una, Itaquaquecetuba, | Vesuvius | 165 Fleet Street, London, | England | |
Metalurgicos Ltda | São Paulo – SP, CEP: 08580 000, Brazil | China Limited | EC4A 2AE, England | ||
New Foseco | 1 Midland Way, Central Park, | England | Vesuvius Colombia Calle 26 No. 102-20 Floor 3, | Colombia | |
(UK) Limited | Barlborough Links, Derbyshire, | S.A.S. | Bogota, Colombia | ||
S43 4XA, England | Vesuvius | Via Nassa 17, Lugano, | Switzerland | ||
Process Metrix, | 6622 Owens Drive, Pleasanton, | US | Corporation S.A. | CH 6900, Switzerland | |
LLC | CA 94588, United States | (California) | Vesuvius | ul. Jasnogórska 11, | Poland |
PT Foseco | Jl Rawa Gelam 2/5, Kawasan | Indonesia | CSD Sp z.o.o. | Kraków, 31-358, Poland | |
Indonesia | Industri, Pulogadung, Jakarta, | Vesuvius | Warehouse No: 1J-09/3, | United Arab | |
13930, Indonesia | Emirates FZE | P O Box 49261, | Emirates | ||
PT Foseco | Jl Rawa Gelam 2/5, Kawasan | Indonesia | Hamriyah Free Zone, Sharjah, | ||
Trading Indonesia | Industri, Pulogadung, Jakarta, | United Arab Emirates | |||
13930, Indonesia | Vesuvius | Gelsenkirchener Strasse 10, | Germany | ||
Realisations 789, | CT Corporation, | US | Europe GmbH | Borken, D-46325, Germany | |
LLC | 1209 Orange Street, | (Delaware) | Vesuvius | 17 Rue de Douvrain, Ghlin, | Belgium |
The Corporation Trust Company, | Europe S.A. | 7011, Belgium | |||
Wilmington, DE 19801, United States | |||||
Vesuvius | 3, Avenue De L’europe, | France | |||
S G Blair & | 1 Midland Way, Central Park, | England | Europe S.A.S. | Parc Les Pivolles, | |
Company Limited | Barlborough Links, Derbyshire, | 69150 Décines-Charpieu, France | |||
S43 4XA, England | |||||
Vesuvius Financial | 165 Fleet Street, London, | England | |||
SIDERMES Inc. | 175 montée Calixa-Lavallée, | Canada | 1 Limited | EC4A 2AE, England | |
Vesuvius Sensors | Verchêres, Québec J0L2R0, | ||||
and Probes | Canada | Vesuvius | Pajamäentie 8D7, | Finland | |
Finland OY | 00360 Helsinki, Finland | ||||
SIR | Siegener Strasse 152, | Germany | |||
Feuerfestprodukte | Kreuztal, D-57223, | Vesuvius Foundry | 12 Wei Wen Road, | China | |
GmbH | Germany | Products (Suzhou) | China-Singapore Suzhou Ind Park, | ||
Co. Limited | Suzhou, Jiangsu Province, | ||||
SOLED S.A.S. | Centre d’Activités Economiques | France | 215122, China | ||
Vesuvius Sensors | Zone Industrielle de Franchepré | ||||
and Probes France | 54240 Joeuf, France | Vesuvius Foundry | 2 Changchun Road, | China | |
Technologies | Economic Development Area, | ||||
Veservice | Av Brasil, 49550, Distrito Industrial | Brazil | (Jiangsu) Co. | Changshu, Jiangsu, | |
Ltda | de Palmares, Campo Grande, | Limited | 215537, China | ||
Rio de Janeiro, 23065-480, Brazil | |||||
Vesuvius | Rue Paul Deudon 68, Boite Postale 19, | France | |||
Vesuvius | 170/69, 22nd Floor Ocean Tower 1, | Thailand | France S.A. | Feignies 59750, France | |
(Thailand) | Ratchadapisek Road, Klongtoey, | ||||
Co., Limited | Bangkok, 10110, Thailand | Vesuvius | Gelsenkirchener Strasse 10, | Germany | |
GmbH | Borken, D-46325, Germany | ||||
Vesuvius | Street Urquiza, 919, Floor 2, Rosario, | Argentina | |||
(V.E.A.R.) S.A. | Provincia de Santa Fé, Argentina | Vesuvius | 165 Fleet Street, London, | England | |
Group Limited | EC4A 2AE, England | ||||
Vesuvius Advanced Xiaotaizi Village, Ningyuan | China | ||||
Ceramics (Anshan) Town, Qianshan District, Anshan, | Vesuvius | 17 Rue de Douvrain, Ghlin, | Belgium | ||
Co., Limited | Liaoning Province, 114011, China | Group S.A. | 7011, Belgium | ||
Vesuvius | 221 Xing Ming Street, | China | Vesuvius Holding | Gelsenkirchener Strasse 10, | Germany |
Advanced | China-Singapore Suzhou Ind Park, | Deutschland | Borken, D-46325, | ||
Ceramics (China) | Suzhou, Jiangsu Province, | GmbH | Germany | ||
Co., Limited | 215021, China | Vesuvius Holding | 68 Rue Paul Deudon, Boite Postale 19, | France | |
Vesuvius | 1209 Orange Street, Wilmington, | US | France S.A.S. | Feignies 59750, France | |
America, Inc. | DE 19801, United States | (Delaware) | Vesuvius Holding | Via Mantova 10, | Italy |
Vesuvius Australia | 40-46 Gloucester Boulevarde, | Australia | Italia – Società a | 20835 Muggio | |
(Holding) Pty | Port Kembla, NSW, 2505, | Responsabilità | MB, Italy | ||
Limited | Australia | Limitata | |||
Vesuvius Australia | 40-46 Gloucester Boulevarde, | Australia | Vesuvius | 165 Fleet Street, London | England |
Pty Limited | Port Kembla, NSW, 2505, Australia | Holdings Limited | EC4A 2AE, England | ||
Vesuvius | Zandvoordestraat 366, Oostende, | Belgium | Vesuvius Ibérica | Capitán Haya, 56 – 1ºH, | Spain |
Belgium N.V. | B-8400, Belgium | Refractarios S.A. | 28020 Madrid, Spain | ||
Vesuvius | 181 Bay Street, Suite 1800, | Canada | Vesuvius | CT Corporation, 1209 Orange Street, | US |
Canada Inc | Toronto, Ontario, M5J 2T9, Canada | International | The Corporation Trust Company, | (Delaware) | |
Corporation | Wilmington, DE 19801, United States | ||||
Vesuvius Ceramics | 165 Fleet Street, London, | England | |||
Limited | EC4A 2AE, England | Vesuvius | 165 Fleet Street, | England | |
Investments | London, EC4A 2AE, | ||||
Limited | England |
Strategic report
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Financial statements
203
Company | Company | ||||
legal name | Registered office address | Jurisdiction | legal name | Registered office address | Jurisdiction |
Vesuvius Istanbul | Gebze OSB2 Mh. 1700., | Turkey | Vesuvius Poland | Ul Tyniecka 12, Skawina, | Poland |
Refrakter Sanayi | Sok No:1704/1, Cayirova, | Sp z.o.o. | 32-050, Poland | ||
ve Ticaret AS | Kocaeli, 41420, Turkey | Vesuvius Process | 3, Avenue de l’Europe, | France | |
Vesuvius IT and | 10th Floor, Unit No. 2, Fountainhead- | India | Metrix S.A.S. | Parc Les Pivolles, | |
Shared Services | Tower 3, B Wing, Phoenix Market City, | 69150 Décines-Charpieu, France | |||
Private Limited | Viman nagar, Pune, Pune- 411014, | Vesuvius Ras Al | Street No. F14, RAK Investment | United | |
Maharashtra, India | Khaimah FZ-LLC | Authority Free Zone, Al Hamra, | Arab | ||
Vesuvius Italia | Via Mantova 10, | Italy | Ras Al Khaimah, PO Box 86408, | Emirates | |
S.p.A. | 20835 Muggio MB, Italy | United Arab Emirates | |||
Vesuvius | 9th Floor, Orix Kobe Sannomiya | Japan | Vesuvius | Street San Martin 870, | Chile |
Japan Inc. | Building 6-1-10, Goko dori, | Refractarios de | Room 308, Tower B, | ||
Chou-ku,Kobe Hyogo, 651-0087, Japan | Chile S.A. | Concepcion, Chile | |||
Vesuvius K.S.R. | 1 Midland Way, Central Park, | England | Vesuvius | Galati, Marea Unire avenue 107, | Romania |
Limited | Barlborough Links, Derbyshire | Refractories S.r.l. | Galati county, 800329, Romania | ||
S43 4XA, England | Vesuvius | Room No. 9, 3rd Floor, 7 Ganesh | India | ||
Vesuvius Life Plan | 165 Fleet Street, London, | England | Refractory India | Chandra Avenue, Kolkata, | |
Trustee Limited | EC4A 2AE, England | Private Limited | WB 700013, India | ||
Vesuvius LLC | 502, 5th floor, 1 Myasicsheva str., | Russia | Vesuvius | Avenida Brasil 49550, Distrito Industrial | Brazil |
Zhukovsky, Moscow region, | Refratários | de Palmares, Campo Grande, Rio de | |||
140180, Russian Federation | Ltda | Janeiro, 23065-480, Brazil | |||
Vesuvius | Unit 30-01, Level 30 Tower A, | Malaysia | Vesuvius | 4, Forradsgatan, Amal, S-662 34, | Sweden |
Malaysia | Vertical Business Suite Avenue 3, | Scandinavia AB | Sweden | ||
Sdn Bhd | Bangsar South, No 8 Jalan Kerinchi, | Vesuvius Sensors | 10 Via Mantova, Muggio, | Italy | |
Kuala Lumpur Wilayah Persekutuan, | & Probes Europe | Monza e Brianza, | |||
59200, Malaysia | S.p.A. | 20835, Italy | |||
Vesuvius | 165 Fleet Street, London, | England | Vesuvius-SERT | 3, Avenue de l’Europe, | France |
Management | EC4A 2AE, England | S.A.S. | Parc Les Pivolles, | ||
Limited | 69150 Décines-Charpieu, France | ||||
Vesuvius | 165 Fleet Street, London, | England | Vesuvius Services | Calle Dean Valdivia 148, piso 11 – | Peru |
Management | EC4A 2AE, England | Peru S.A.C. | oficina 1134, Edificio Platinum Plaza – | ||
Services Limited | San Isidro, Lima, Peru | ||||
Vesuvius Mexico | Av. Ruiz Cortinez, Num. 140, Colonia | Mexico | Vesuvius Solar | 1/F, building 3, No. 12, Weiwen | China |
S.A. de C.V. | Jardines de San Rafael, Guadalupe, | Crucible (Suzhou) | Road China-Singapore Suzhou | ||
Nuevo León, CP 67119, Mexico | Co., Ltd | Ind Park, Suzhou, Jiangsu Province, | |||
Vesuvius | 56, rd 15, Apt 103, Maadi, | Egypt | 215122, China | ||
Mid-East Limited | Cairo, Egypt | Vesuvius South | Pebble Lane, Private Bag X2, | South | |
Vesuvius Moravia, | Konska c.p. 740, Trinec, | Czech | Africa (Pty) Limited Olifantsfontein, Gauteng | Africa | |
s.r.o. | 739 61, Czech Republic | Republic | Province, 1665, South Africa | ||
Vesuvius Mulheim | Gelsenkirchener Strasse 10, | Germany | Vesuvius | ul. Jasnogórska 11, Kraków, | Poland |
GmbH | Borken, D-46325, Germany | Sp z.o.o. | 31-358, Poland | ||
Vesuvius NC, LLC | Corporation Trust Center, | US | Vesuvius SSC | ul. Jasnogórska 11, Kraków, | Poland |
1209 Orange Street, Wilmington, | (Delaware) | Sp z.o.o. | 31-358, Poland | ||
New Castle County, DE 19801, | Vesuvius UK | 1 Midland Way, Central Park, | England | ||
United States | Limited | Barlborough Links, Derbyshire, | |||
Vesuvius New | Bell Gully, Level 22, Vero Centre, | New | S43 4XA, England | ||
Zealand Limited | 48 Shortland Street, Auckland, | Zealand | Vesuvius Ukraine | 27, Udarnykiv Street, City of | Ukraine |
1010 New Zealand | LLC | Dnipropetrovsk, 49000, Ukraine | |||
Vesuvius Overseas | 165 Fleet Street, London, | England | Vesuvius USA | CT Corporation, 208 South LaSalle | US (Illinois) |
Investments | EC4A 2AE, England | Corporation | Street, Chicago, Cook County, | ||
Limited | IL 60604, United States | ||||
Vesuvius Overseas | 165 Fleet Street, London, | England | Vesuvius VA | 165 Fleet Street, London, | England |
Limited | EC4A 2AE, England | Limited | EC4A 2AE, England | ||
Vesuvius Penn | Corporation Trust Center, | US | Vesuvius Vietnam | 7th Floor, Peakview Tower Building, | Vietnam |
Corporation | 1209 Orange Street, Wilmington, | (Delaware) | Limited | No.36 Hoang Cau Street, O Cho Dua | |
DE 19801, United States | Ward, Don Da District, Hanoi City, | ||||
Vesuvius Pension | 165 Fleet Street, London, | England | Vietnam | ||
Plans Trustees | EC4A 2AE, England | Vesuvius Zyarock | 1/F, building 3, No. 12, Weiwen | China | |
Limited | Ceramics (Suzhou) | Road China-Singapore Suzhou | |||
Vesuvius Peru | Calle Dean Valdivia 148, piso 11 – | Peru | Co., Limited | Ind Park, Suzhou, Jiangsu Province, | |
S.A.C. | oficina 1134, Edificio Platinum Plaza – | 215122, China | |||
San Isidro, Lima, Peru |
204
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Company | Company | ||||
legal name | Registered office address | Jurisdiction | legal name | Registered office address | Jurisdiction |
Vesuvius-Premier | 1 Midland Way, Central Park, | England | Yingkou Bayuquan Cui Tun Village, Hai Dong Office, | China | |
Refractories | Barlborough Links, | Refractories Co., | Bayuquan District, Liaoning Province, | ||
(Holdings) | Derbyshire, S43 4XA, | Limited | YingKou, 115007, China | ||
Limited | England | Yingkou YingWei | 50 Wanghai New District, Bayuquan | China | |
Wilkes-Lucas | 165 Fleet Street, London | England | Magnesium Co., | District, Yinkou City, Liaoning Province, | |
Limited | EC4A 2AE, England | Ltd | 115007, China |
The following subsidiary companies have branches registered in the named countries: Foseco (Jersey) Limited in England,
Foseco Holding BV in England, Vesuvius LLC in Kazakhstan, Vesuvius UK Limited in Taiwan and Republic of Korea, Vesuvius
Investment in joint ventures and associates
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control. An associate is an entity over
which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy
decisions of an entity, but is not control or joint control over those policies.
The Group’s investments in its associates and joint ventures are accounted for using the equity method from the date significant
influence/joint control is deemed to arise until the date on which significant influence/joint control ceases to exist or when the
interest becomes classified as an asset held for sale. The Group Income Statement reflects the Group’s share of profit after tax
of the related associates and joint ventures. Investments in associates and joint ventures are carried in the Group Balance Sheet
at cost adjusted in respect of post-acquisition changes in the Group’s share of net assets, less any impairment in value.
2023 | 2022 | |
£m | £m | |
As at 1 January | 13.0 | 12.8 |
Share of post-tax profit of joint ventures and associates | 0.9 | 1.2 |
Dividends received from joint ventures and associates | (1.0) | (1.3) |
Foreign exchange | (1.6) | 0.3 |
As at 31 December | 11.3 | 13.0 |
The investment in joint ventures and associates includes £10.8m (2022: £12.5m) in respect of joint ventures and £0.5m (2022:
£0.5m) in respect of associates. Dividends received from joint ventures consists of £0.1m (2022: £0.2m) from Wuhan Wugang-
Vesuvius Advanced CCR Co., Limited and £0.9m (2022: £1.1m) from Wuhan Wugang-Vesuvius Advanced Ceramics Co., Limited.
Joint ventures
Set out below is the summarised financial information in respect of joint ventures.
2023 | 2022 | |
£m | £m | |
Revenue | 46.0 | 50.9 |
Trading profit | 2.3 | 3.2 |
Net finance costs | – | – |
Profit before tax | 2.3 | 3.2 |
Income tax expense | (0.6) | (0.8) |
Profit after tax | 1.7 | 2.4 |
Non-current assets | 6.8 | 7.3 |
Current assets | 22.0 | 22.6 |
Non-current liabilities | – | – |
Current liabilities | (7.1) | (6.1) |
Net assets | 21.7 | 23.8 |
Strategic report
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Financial statements
205
Set out below is the summarised financial information for Wuhan Wugang-Vesuvius Advanced Ceramics Co., Limited, a joint
venture that has transactions and balances which are material to the Group.
2023 | 2022 | |
£m | £m | |
Revenue | 40.6 | 44.5 |
Depreciation | 0.7 | 1.0 |
Trading profit | 2.0 | 2.8 |
Net finance costs | – | – |
Profit before tax | 2.0 | 2.8 |
Income tax expense | (0.5) | (0.7) |
Profit after tax | 1.5 | 2.1 |
Non-current assets | 6.5 | 7.0 |
Current assets 1 | 14.3 | 14.5 |
Non-current liabilities | – | – |
Current liabilities | (5.9) | (5.0) |
Net assets | 14.9 | 16.5 |
1.
Included in current assets are cash and cash equivalents of £1.8m (2022: £3.6m).
The purpose of the Chinese joint venture companies is to research, develop, manufacture and sell refractory products. The role of
Vesuvius is to provide technical personnel, training and access to the Group’s international sales network.
2023 | 2022 | |||
Name of entity | Registered address | Jurisdiction | % ownership | % ownership |
Wuhan Wugang-Vesuvius | Gongnong Village Qingshan District, Wuhan, | China | 50 | 50 |
Advanced CCR Co., Limited | Hubei Province, 430082, China | |||
Wuhan Wugang-Vesuvius | Gongnong Village Qingshan District, Wuhan, | China | 50 | 50 |
Advanced Ceramics Co., | Hubei Province, 430082, China | |||
Limited |
Associates
2023 | 2022 | |||
Name of entity | Registered address | Jurisdiction | % ownership | % ownership |
Sapotech Oy | Paavo Havaksen tie 5 D, 90570 Oulu, Finland | Finland | 14.9 | 14.9 |
Newshelf 480 | 144 Oxford Road, Rosebank, Melrose, | South Africa | 45 | 45 |
Proprietary Limited | Johannesburg, 2196, South Africa |
The Group is considered to hold significant influence over Sapotech Oy despite holding less than 20% of its shares because the
agreement under which the Group invested in Sapotech Oy provides that the Group holds one of the four seats on the company’s
board. This allows the Group to participate in policy-making processes and have additional controls over Sapotech Oy’s major
206
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
Non-controlling interests
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the
Parent Company and are presented separately in the Group Income Statement and within equity in the Group Balance Sheet,
distinguished from Parent Company shareholders’ equity.
The total profit attributable to non-controlling interests for the year ended 31 December 2023 is £12.1m (2022: £7.4m) of which
£9.3m relates to Vesuvius India Limited (2022: £5.4m). The profit attributable to non-controlling interests in respect of the Group’s
other subsidiaries is not considered to be material.
2023 | 2022 | |||
Name of entity | Registered address | Jurisdiction | % ownership | % ownership |
Vesuvius India Limited | P-104 Taratala Road, Kolkata, 700 088, India | India | 55.57 | 55.57 |
Foseco India Limited | 922/923, Gat, Sanaswadi, Taluka, Shirur, | India | 74.98 | 74.98 |
Pune, 412208, India | ||||
Foseco Golden Gate | 6 Kung Yeh 2nd Road, Ping Tung Dist, | Taiwan | 51 | 51 |
Company Limited | Ping Tung, 90049, Taiwan | |||
Foseco (Thailand) Limited | 170/69, 22nd Floor Ocean Tower 1, Ratchadapisek | Thailand | 74 | 74 |
Road, Klongtoey, Bangkok, 10110, Thailand | ||||
Vesuvius Ceska | Prumyslová 726, Konská, Trinec, 739 61, | Czech | 60 | 60 |
Republika, a.s. | Czech Republic | Republic |
As with Vesuvius plc, all of the above companies have a 31 December year-end. The summarised financial information for
Vesuvius India Limited is presented below:
2023 | 2022 | |
£m | £m | |
Summarised balance sheet | ||
Current assets | 106.6 | 105.2 |
Current liabilities | (32.0) | (28.8) |
Current net assets | 74.6 | 76.4 |
Non-current assets | 42.3 | 26.1 |
Non-current liabilities | (3.9) | (2.6) |
Non-current net assets | 38.4 | 23.5 |
Net assets | 113.0 | 99.9 |
Accumulated non-controlling interests | (50.5) | (44.7) |
Summarised statement of comprehensive income | ||
Revenue | 155.0 | 137.7 |
Profit after tax | 21.0 | 12.1 |
Profit allocated to non-controlling interests | 9.3 | 5.4 |
Dividends paid to non-controlling interests | (0.7) | (0.7) |
Summarised cash flows | ||
Cash flows from operating activities | 10.9 | 13.8 |
Cash flows from investing activities | (20.8) | (11.6) |
Cash flows from financing activities | (0.1) | (0.7) |
Net (decrease)/increase in cash and cash equivalents | (10.0) | 1.5 |
Strategic report
Governance
Financial statements
207
Related Parties
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
The related parties identified by the Directors include joint ventures, associates and key management personnel.
To enable users of our financial statements to form a view on the effects of related party relationships on the Group,
we disclose the related party relationship irrespective of whether there have been transactions between the related parties.
33.1
Transactions with joint ventures and associates
All transactions with joint ventures and associates are in the normal course of business. Transactions between the Group and
its joint ventures and associates are disclosed below:
2023 |
2022 |
|
£m |
£m |
|
Sales to joint ventures |
4.3 |
5.3 |
Purchases from joint ventures |
30.1 |
32.3 |
Purchases from associates |
– |
– |
Dividends received |
1.0 |
1.3 |
Trade payables owed to joint ventures |
10.3 |
6.7 |
Trade receivables due from joint ventures |
1.0 |
0.7 |
Trade payables owed to joint ventures are settled net of trade receivables due from joint ventures 60 days after the delivery
of goods or services. There are no loans to and from joint ventures.
Transactions with key management personnel
There have been no transactions with key management personnel of the Group other than the Directors’ remuneration.
33.3
Transactions with other related parties
There are no controlling shareholders of the Group as defined by IFRS.
The Company announced the commencement of a share buyback programme of up to £50 million on 4 December 2023.
Disclosure of the transactions during the year are disclosed in Note 9.2 of the Company Financial Statements. There have been
no other material transactions with the shareholders of the Group.
Pension contributions to Group schemes are disclosed in Note 25 to the Group Financial Statements.
Events after the Balance Sheet date
Alternative Performance Measures
The Company uses a number of alternative performance measures (APMs) in addition to those reported in accordance with
IFRS. The Directors believe that these APMs, listed below, are important when assessing the underlying financial and operating
performance of the Group and its divisions, providing management with key insights and metrics in support of the ongoing
management of the Group’s performance and cash flow. A number of these align with Key Performance Indicators (KPIs) and
other key metrics used in the business and therefore are considered useful to also disclose to the users of the financial statements.
The following APMs do not have a standard definition prescribed by IFRS and therefore may not be directly comparable with
similar measures presented by other companies.
35.1
Headline performance
Headline performance, reported separately on the face of the Group Income Statement, is from continuing operations and before
items reported separately on the face of the Group Income Statement.
208
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
35.2
Underlying revenue, underlying trading profit and underlying return on sales
Underlying revenue, underlying trading profit and underlying return on sales are the headline equivalents of these measures after
adjustments to exclude the effects of changes in exchange rates, business acquisitions and disposals. Reconciliations of underlying
revenue and underlying trading profit can be found in the Financial review. Underlying revenue growth is one of the Group’s KPIs
and provides an important measure of organic growth of Group businesses between reporting periods by eliminating the impact
of exchange rates, acquisitions and disposals.
35.3
Return on sales (ROS)
ROS is calculated as trading profit divided by revenue. It is one of the Group’s KPIs and is used to assess the trading performance of
Group businesses. ROS is disclosed in Note 4.3.
35.4
Trading profit/adjusted EBITA
Trading profit/adjusted EBITA is defined as operating profit before separately reported items. It is one of the Group’s KPIs and is
used to assess the trading performance of Group businesses. It is also used as one of the targets against which the annual bonuses
of certain employees are measured.
35.5
Headline profit before tax
Headline profit before tax, reported separately on the face of the Group Income Statement, is calculated as the net total of trading
profit, plus the Group’s share of post-tax profit of joint ventures and total net finance costs associated with headline performance.
It is one of the Group’s KPIs and is used to assess the financial performance of the Group as a whole.
35.6
Headline effective tax rate (ETR)
The Group’s headline ETR is calculated on the income tax costs associated with headline performance, divided by headline profit
before tax and before the Group’s share of post-tax profit of joint ventures and associates.
35.7
Headline earnings
Headline earnings is profit after tax before separately reported items attributable to owners of the Parent.
35.8
Headline earnings per share
Headline earnings per share is calculated by dividing headline profit before tax less associated income tax costs, attributable to
owners of the Parent by the weighted average number of ordinary shares in issue during the year. It is one of the Group’s KPIs and
is used to assess the earnings performance of the Group as a whole. It is also used as one of the targets against which the annual
bonuses of certain employees are measured. Headline earnings per share is disclosed in Note 10.
35.9
Adjusted operating cash flow
Adjusted operating cash flow is cash generated from operations before restructuring and vacant site remediation costs but
after deducting capital expenditure net of asset disposals. It is used in calculating the Group’s cash conversion. In the prior year,
net retirement benefit obligations were added back in this calculation; this has been discontinued as the management believes
that these represent core cash flows of the Group.
2023 | 2022 | ||
Note | £m | £m | |
Cash generated from operations | 11 | 272.0 | 268.3 |
Add: Outflows relating to restructuring charges | 0.8 | 1.5 | |
Less: Capital expenditure | (92.6) | (89.2) | |
Add: Vacant site remediation costs | 1.0 | 1.8 | |
Add: Proceeds from the sale of property, plant and equipment | 5.4 | 3.1 | |
Adjusted operating cash flow | 186.6 | 185.5 | |
Trading profit | 200.4 | 227.2 | |
Cash conversion | 93% | 82% |
35.10 Cash conversion
Cash conversion is calculated as adjusted operating cash flow from continuing operations divided by trading profit. It is useful
for measuring the rate at which cash is generated from trading profit. It is also used as one of the targets against which the
annual bonuses of certain employees are measured. The calculation of cash conversion is detailed in Note 35.9 above.
Strategic report
Governance
Financial statements
209
35.11 Free cash flow
Free cash flow is defined as net cash flow from operating activities after net outlays for the purchase and sale of property, plant
and equipment, dividends from joint ventures and dividends paid to non-controlling shareholders. It is one of the Group’s KPIs and
is used to assess the underlying cash generation of the Group and is one of the measures used in monitoring the Group’s capital.
A reconciliation of free cash flow is included underneath the Group Statement of Cash Flows.
35.12
Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated as the percentage of average trade working capital balances to
the total revenue for the previous 12 months, at constant currency. Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the 13 previous month-end balances. It is one of the Group’s KPIs
and is useful for measuring the level of working capital used in the business and is one of the measures used in monitoring the
Group’s capital.
2023 | 2022 | |
£m | £m | |
Average trade working capital | 451.8 | 487.3 |
Total revenue | 1,929.8 | 2,047.4 |
Average trade working capital to sales ratio | 23.4% | 23.8% |
35.13 Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA)
Adjusted EBITDA is calculated as the total of trading profit before depreciation and amortisation of non-acquired intangible
assets. It is used in the calculation of the Group’s interest cover and net debt to adjusted EBITDA ratios. A reconciliation of adjusted
EBITDA is included in Note 4.
Net interest payable on borrowings is calculated as total interest payable on borrowings less finance income, excluding interest
on net retirement benefit obligations, adjustments to discounts and any item separately reported. It is used in the calculation of
the Group’s interest cover ratio.
2023 | 2022 | ||
Note | £m | £m | |
Total interest payable on borrowings | 8 | 23.5 | 18.3 |
Finance income | 8 | (15.3) | (8.8) |
Net interest payable on borrowings | 8.2 | 9.5 |
35.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12 months to net interest payable on borrowings for the last 12 months.
It is one of the Group’s KPIs and is used to assess the financial position of the Group and its ability to fund future growth.
2023 | 2022 | ||
Note | £m | £m | |
Adjusted EBITDA | 4 | 258.2 | 282.7 |
Net interest payable on borrowings | 8.2 | 9.5 | |
Interest cover | 31.5x | 29.8x |
35.16 Net debt
Net debt comprises the net total of current and non-current interest-bearing borrowings (including IFRS 16 lease liabilities),
cash and short-term deposits and derivative financial instruments. Net debt is a measure of the Group’s net indebtedness
to banks and other external financial institutions. A reconciliation of the movement in net debt is included in Note 13.
210
Vesuvius plc
Annual Report and Financial Statements 2023
Notes to the Group Financial Statements
continued
35.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the year-end to adjusted EBITDA for that year. It is one of the Group’s KPIs
and is used to assess the financial position of the Group and its ability to fund future growth and is one of the measures used in
monitoring the Group’s capital.
2023 | 2022 | ||
Note | £m | £m | |
Net debt | 13 | 237.5 | 255.0 |
Adjusted EBITDA | 4 | 258.2 | 282.7 |
Net debt to adjusted EBITDA | 0.9x | 0.9x |
35.18 Return on invested capital (ROIC)
The Group has adopted ROIC as its key measure of return from the Group’s invested capital. The RONA performance measure
has been replaced with ROIC, which provides a more complete measure of Vesuvius’ returns. ROIC is calculated as trading profit
less amortisation of acquired intangibles plus share of post-tax profit of joint ventures and associates for the previous 12 months
after tax, divided by the average (being the average of the opening and closing balance sheet) invested capital (defined as: total
assets excluding cash plus non-interest-bearing liabilities), at the average foreign exchange rate for the year.
2023 | 2022 | |
£m | £m | |
Average invested capital | 1,558.5 | 1,503.6 |
Trading profit (Note 35.4) | 200.4 | 227.2 |
Amortisation of acquired intangible assets | (10.3) | (10.4) |
Share of post-tax profit from joint ventures and associates | 0.9 | 1.2 |
Tax on trading profit and amortisation of acquired intangible assets | (52.3) | (57.5) |
138.7 | 160.5 | |
ROIC | 8.9% | 10.7% |
35.19 Constant currency
Figures presented at constant currency represent 2022 amounts retranslated at average 2023 exchange rates.
35.20 Liquidity
Liquidity is the Group’s cash and short-term deposits plus undrawn committed debt facilities less cash used as collateral on loans
and any gross up of cash in notional cash pools.
2023 | 2022 | |
£m | £m | |
Cash | 164.2 | 184.2 |
Undrawn committed debt facilities | 333.4 | 322.5 |
Cash used as collateral on loans | (10.0) | (13.0) |
Gross up of cash in notional pools | – | (0.1) |
Liquidity | 487.6 | 493.6 |
35.21 Last twelve months (LTM)
211
Strategic report
Governance
Financial statements
Company Balance Sheet
As at 31 December 2023
Note
2023
total
£m
2022
total
£m
Fixed assets
Investments
7
1,778.0
1,778.0
Deferred tax
4.3
–
Total fixed assets
1,782.3
1,778.0
Current assets
Debtors – amounts falling due within one year
6.0
4.6
Cash at bank and in hand
0.1
–
Total current assets
6.1
4.6
Creditors – amounts falling due within one year
Bank loans and overdrafts
–
(0.2)
Other creditors including taxation and social security
8
(566.9)
(1,012.5)
Net current liabilities
(560.8)
(1,008.1)
Total assets less current liabilities
1,221.5
769.9
Net assets
1,221.5
769.9
Equity capital and reserves
Called up share capital
9
27.7
27.8
Retained earnings
9
1,193.8
742.1
Total shareholders’ funds
1,221.5
769.9
Company number 8217766
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own Income Statement.
During 2023, the Company recognised a profit of £509.2m (2022: £26.9m profit).
The Financial Statements on pages 211 to 218 were approved and authorised for issue by the Directors on 28 February 2024 and
signed on their behalf by:
Patrick André
Mark Collis
Chief Executive
Chief Financial Officer
Vesuvius plc
Annual Report and Financial Statements 2023
212
Note
Called up
share
capital
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
As at 1 January 2022
27.8
775.1
802.9
Comprehensive income recognised for the year
–
26.9
26.9
Recognition of share-based payments
10
–
5.1
5.1
Purchase of ESOP shares
–
(6.9)
(6.9)
Dividend paid
6
–
(58.1)
(58.1)
As at 31 December 2022
27.8
742.1
769.9
As at 1 January 2023
27.8
742.1
769.9
Comprehensive income recognised for the year
–
509.2
509.2
Recognition of share-based payments
10
–
7.3
7.3
Share buyback
(0.1)
(3.0)
(3.1)
Purchase of ESOP shares
–
(1.1)
(1.1)
Dividend paid
6
–
(60.7)
(60.7)
As at 31 December 2023
27.7
1,193.8
1,221.5
Company Statement of Changes in Equity
For the year ended 31 December 2023
213
Strategic report
Governance
Financial statements
1.
General Information
Vesuvius plc (‘Vesuvius’ or ‘the Company’) is a public company limited by shares. It is incorporated and domiciled in England
and Wales, United Kingdom, and listed on the London Stock Exchange. The nature of the company is a holding company.
The address of its registered office is 165 Fleet Street, London EC4A 2AE.
2.
Basis of Preparation
2.1
Basis of accounting
The financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101) and the Companies Act 2006 as applicable to companies using FRS 101. The financial
statements have been prepared under the historical cost convention.
The results of the Company are included in the preceding Group Financial Statements.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the
following disclosures:
–
A cash flow statement and related notes (IAS 1 para 10(d) and IAS 7)
–
Disclosures in respect of capital management and financial instruments (IAS 1 paras 134–136 and IFRS 7)
–
Disclosures in respect of related party transactions with wholly owned members of the Vesuvius plc Group (IAS 24)
–
Disclosures in respect of the compensation of key management personnel (IAS 24 para 17)
–
Disclosures in respect of fair value measurements (IFRS 13 paras 91–99)
–
The effects of new but not yet effective IFRSs (IAS 8 paras 30–31)
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and
loss account.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these financial statements.
2.2
Going concern
The Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in
operational existence for a period of at least 12 months from the date of approval of these financial statements (disclosed in
Note 2.3 to the Group Financial Statements) and that there is no material uncertainty in respect of going concern. The net current
liabilities result from amounts owed to subsidiary undertakings, therefore the Directors do not believe that they will affect the
Company’s ability to continue in operational existence. Accordingly, they continue to adopt a going concern basis in preparing
the financial statements of the Group and the Company.
2.3
Accounting policy
Taxation
Both current and deferred tax are calculated using tax rates and laws that have been enacted, or substantively enacted,
by the balance sheet date.
Deferred taxation is recognised, without discounting, in respect of all temporary differences that have originated, but not
reversed, at the balance sheet date, with the exception that deferred taxation assets are only recognised if it is considered more
likely than not that there will be suitable future profits from which the reversal of the underlying temporary differences can be
deducted. Provision is made for the tax that would arise on remittance of the retained earnings of overseas subsidiaries only to
the extent that, at the balance sheet date, dividends have been accrued as receivable. All other accounting policies are set out
within the respective notes.
Notes to the Company Financial Statements
Vesuvius plc
Annual Report and Financial Statements 2023
214
Notes to the Company Financial Statements
continued
3.
Critical Accounting Judgements and Estimates
Impairment of investment in subsidiaries and other companies (estimate and judgement)
For the below estimate, the Group does not have any key assumptions concerning the future, or other key sources of estimation
uncertainty in the reporting period, that are reasonably expected to have a significant risk of causing a material adjustment to the
carrying amounts of assets/liabilities within the next financial year. Nonetheless, this estimate has the potential to materially vary
over time and is therefore highlighted.
The Company assesses its investments in subsidiaries and other companies for impairment shortly before the Company’s
year-end or whenever events or changes in circumstances indicate that the recoverable amount of the investment could be less
than the carrying amount of the investment. If this is the case, the investment is considered to be impaired and is written down to
its recoverable amount. Judgement is required in the determination of the recoverable amount as the Company evaluates various
factors related to the operational and financial position of the relevant investee business, appropriate discounting and long-term
growth rates. The annual investment impairment test is described in Note 7.3 below.
4.
Employee Benefits Expense
2023
£m
2022
£m
Wages and salaries
3.4
3.3
Social security costs
0.7
0.5
Share-based payments
1.7
0.7
Total employee benefits expense
5.8
4.5
The total average number of employees for 2023 was 3 (2022: 3). As at 31 December 2023, the Company had 3 (2022: 3) employees.
Details of the Directors’ remuneration are disclosed in the Directors’ Remuneration Report on pages 108 to 135.
5.
Audit and Non-Audit Fees
Amounts payable to PricewaterhouseCoopers LLP in relation to audit and non-audit fees are disclosed within Note 5 to the Group
Financial Statements.
6.
Dividend Paid
2023
£m
2022
£m
Amounts recognised as dividends and paid to equity shareholders during the year
Final dividend for the year ended 31 December 2021 of 15.0p per ordinary share
–
40.5
Interim dividend for the year ended 31 December 2022 of 6.5p per ordinary share
–
17.6
Final dividend for the year ended 31 December 2022 of 15.75p per ordinary share
42.4
–
Interim dividend for the year ended 31 December 2023 of 6.8p per ordinary share
18.3
–
60.7
58.1
A proposed final dividend for the year ended 31 December 2023 of £43.3m (2022: £42.3m), equivalent to 16.20 pence
(2022: 15.75 pence) per ordinary share (TDIM: VSVS and ISIN: GB00B82YXW83), is subject to approval by shareholders at
the Company’s Annual General Meeting on 15 May 2024 and has not been included as a liability in these financial statements.
If approved by shareholders, the dividend will be paid on 31 May 2024 to holders of ordinary shares on the register on 19 April
2024. The ordinary shares will be quoted ex-dividend on 18 April 2024. Any shareholder wishing to participate in the Vesuvius
Dividend Reinvestment Plan needs to have submitted their election to do so by 9 May 2024.
7.
Investments
7.1
Accounting policy
Shares in subsidiaries, associates and joint ventures are stated at cost less any impairment in value. Impairment is assessed in
accordance with Note 16.1 to the Group Financial Statements.
7.2
Analysis of investments
Shares in
subsidiaries
£m
As at 1 January 2023 and 31 December 2023
1,778.0
The subsidiaries, joint ventures and associates of Vesuvius plc, their country of incorporation and percentage ownership are set
out in Note 32 to the Group Financial Statements. With the exception of Vesuvius Holdings Limited, whose ordinary share capital
was directly held by Vesuvius plc, the ordinary share capital of the other companies was owned by a Vesuvius plc subsidiary as at
31 December 2023.
215
Strategic report
Governance
Financial statements
7.
Investments
continued
7.3
Impairment of investment in subsidiaries, associates and joint ventures
The Group carried out its investment impairment test as at 31 October 2023. The recoverable amount of the investment exceeded
its carrying value, therefore no impairment charges have been recognised. No further impairment indicators were identified up to
31 December 2023.
The cash flow predictions are based on financial budgets and strategic plans approved by the Board. These assume a level of
revenue and profits which are based on both past performance and expectations for future market development and take into
account the cyclicality of the business in which the Group operates. In assessing the cash flows of the Parent’s investment in its
subsidiaries, the amounts payable by the Parent to subsidiaries are also taken into account. A sensitivity analysis was carried out
using reasonably possible changes to the key assumptions set out in Note 16.2 to the Group Financial Statements. No scenarios
of impairment were identified.
8.
Other Creditors including Taxation and Social Security
2023
£m
2022
£m
Amounts owed to subsidiary undertakings
563.7
1,009.8
Accruals and other creditors
3.2
2.7
Total amounts falling due within one year
566.9
1,012.5
Interest on the loan from another UK company within the Vesuvius Group Vesuvius Holdings Limited, is charged at Bank of
England base rate +2% and the balance is repayable on demand.
9.
Called Up Share Capital and Retained Earnings
9.1
Accounting policy
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Where shares are redeemed or purchased as part of a share buyback programme, a sum equal to the amount by which the
Company’s share capital is diminished on cancellation of the shares is transferred to the capital redemption reserve.
9.2
Analysis of called up share capital
Allotted, issued and fully paid ordinary shares of 10p each
2023
2022
Number
m
Nominal
value
£m
Number
m
Nominal
value
£m
As at 1 January
278.5
27.8
278.5
27.8
Share buyback
(0.6)
(0.1)
–
–
As at 31 December
277.9
27.7
278.5
27.8
The allotted, issued and fully paid ordinary share capital of the Company as at 31 December 2023 was 277,854,424 shares of
£0.10 each (31 December 2022: 278,485,071 shares of £0.10 each). 7,271,174 (2022: 7,271,174) shares of £0.10 each were held in
Treasury and therefore carry no right to receive dividends or other distributions and have no voting rights. The total number of
shares with rights including in relation to voting at General Meetings of the Company, distribution of dividends and repayment of
capital voting and dividend rights is 270,583,250 (2022: 271,213,897) and all shareholders enjoy the same rights in relation to these
shares. Included in this number are 1,956,030 (2022: 2,454,110) shares held by the Vesuvius Group employee share ownership plan
trust (ESOP) and the ESOP elects to waive the right to receive dividends on these shares.
The Company announced the commencement of a share buyback programme of up to £50m on 4 December 2023. The
programme began on that date and will end no later than 4 December 2024. The maximum number of ordinary shares that can
be bought back is 27,121,389 at an aggregate purchase price of £50m (excluding stamp duty and expenses). All ordinary shares
acquired under the programme will be cancelled. There is no minimum committed quantity of shares to be bought back and the
Company is able to terminate the arrangement at its discretion and without any penalty.
9.3
Distributable reserves
The Company had distributable reserves in excess of £1,183m as at 31 December 2023 (2022: in excess of £732m), subject to filing
these financial statements with Companies House. When making a distribution to shareholders, the Directors determine profits
available for distribution by reference to guidance on realised and distributable profits under the Companies Act 2006 issued by
the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017.
The profits of the Company have been received in the form of dividends from subsidiaries and through court-approved capital
reduction. The availability of distributable reserves in the Company is dependent on those dividends meeting the definition of
qualifying consideration within the guidance and on available cash resources of the Group and other accessible sources of
funds. The distributable reserves are subject to any future restrictions or limitations at the time such distribution is made.
Vesuvius plc
Annual Report and Financial Statements 2023
216
Notes to the Company Financial Statements
continued
10.
Recognition of Share-based Payments
10.1
Accounting policy
The Company operates an equity-settled share-based payment arrangement for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as total
shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-based
conditions, such as growth in return on invested capital (ROIC), environmental, social and governance criteria (ESG) and headline
earnings per share (EPS), fair value is measured using the Black-Scholes option pricing model. The fair value is expensed on
a straight-line basis over the vesting period with a corresponding increase in equity. The cumulative expense recognised is
adjusted for the best estimate of the shares that will eventually vest.
The Company recharges its subsidiaries for the IFRS 2 expense relating to their employees on an annual basis.
10.2
Profit and loss account recognition
The Company operates a number of different share-based payment schemes, the main features of which are detailed in the
Directors’ Remuneration Report and Note 26 to the Group Financial Statements. A total of £1.7m was charged to the profit and
loss account in the year with regard to share-based payments (2022: £0.7m).
10.3
Details of outstanding options
Number of outstanding awards
Awards
exercisable
as at
31 Dec
2023
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
As at
1 Jan 2023
Granted
Exercised
Forfeited/
lapsed Expired
As at
31 Dec 2023
LTIP
1,424,266 578,407 (169,944)
(575,572)
nil 1,257,157
–
8.5
n/a
Weighted average exercise price
nil
nil
nil
nil
nil
nil
–
n/a
Other plans
149,354
60,179
(64,717)
nil
nil
144,816
–
1.6
n/a
Weighted average exercise price
nil
nil
nil
nil
nil
nil
–
n/a
For the awards exercised during 2023, the market value at the date of exercise was 406.0 pence per share.
Number of outstanding awards
Awards
exercisable
as at
31 Dec
2022
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
As at
1 Jan 2022
Granted
Exercised
Forfeited/
lapsed Expired
As at
31 Dec 2022
LTIP
1,200,584 551,242
nil
(327,560)
nil
1,424,266
–
8.3
n/a
Weighted average exercise price
nil
nil
nil
nil
nil
nil
–
n/a
Other plans
76,586
121,442
(48,674)
nil
nil
149,354
–
1.9
n/a
Weighted average exercise price
nil
nil
nil
nil
nil
nil
–
n/a
For options exercised during 2022, the market value at the date of exercise was 395.5 pence per share.
Details of market performance conditions are included in the Directors’ Remuneration Report.
As at 31 December 2023, the total options exercisable by all Group employees over the £0.10 ordinary shares and capable of
being satisfied through new allotments of shares or through shares held by the Company’s ESOP were as follows:
2023
Years of
award/grant
Option
prices
Latest year
of exercise/
vesting
Number
of options/
allocations
outstanding
Long-Term Incentive Plan
2021–2023
nil
2033
1,257,157
Deferred Share Bonus Plan
2021–2023
nil
2026
144,816
217
Strategic report
Governance
Financial statements
10.
Recognition of Share-based Payments
continued
10.3
Details of outstanding options
continued
Fair value of options granted under the LTIP during the year:
2023
2022
ROIC/ESG
element
TSR element
ROIC/ESG
element
TSR element
Fair value of options granted
386p
238p
385p
217p
Share price on date of grant
386p
386p
385p
385p
Expected volatility
n/a
34.6%
n/a
39.3%
Risk-free interest rate
n/a
3.3%
n/a
1.3%
Exercise price (per share)
nil
nil
nil
nil
Expected term (years)
3
3
3
3
Expected dividend yield
nil
nil
nil
nil
For the LTIP awards issued in 2021, vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return
(TSR) performance relative to that of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the
remaining 50% of shares awarded is based on headline EPS growth.
For the LTIP awards issued in 2022 and 2023, vesting of 40% of shares awarded is based on the Group’s three-year total
shareholder return (TSR) performance relative to that of the constituent companies of the FTSE 250 (excluding investment trusts)
and vesting of the remaining 60% of shares awarded is based on ROIC and ESG targets.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years
(2022: 2.8 years) prior to the grant date for the March 2023 grant. The risk-free rate of return was assumed to be the yield to
maturity on a UK fixed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration
Committee, award holders receive the value of dividends that would have been paid on their vested shares in the period between
grant and vesting. Accordingly, there is no discount to the valuation for dividends foregone during the vesting period.
11.
Financial Guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group,
the Company applies IFRS9 Financial instruments. At the balance sheet date there is nothing to recognise in the Company’s
Financial Statements. Guarantees provided by the Company as at 31 December 2023 in respect of the liabilities of its subsidiary
companies amounted to £344.7m (2022: £386.5m), which includes guarantees of $116m, €198m and £28m (2022: $146.0m,
€198.0m and £28.0m) in respect of US Private Placement Loan Notes; £51.6m (2022: £62.5m) in respect of drawings under
the syndicated bank facility; £0.1m (2022: £0.1m) in respect of guarantees issued to certain banks covering their exposure on
derivative contracts governed by ISDA agreements; and £2.1m (2022: £nil) in respect of overdraft facilities utilised by certain
of the Company’s subsidiary companies.
12.
Contingent Liabilities
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Several of the Company’s subsidiaries are parties to legal proceedings, certain of which
are insured claims arising in the ordinary course of the operations of the company involved, and are aware of a number of issues
which are, or may be, the subject of dispute with tax authorities. Whilst the outcome of litigation and other disputes can never
be predicted with certainty, having regard to legal advice received and the insurance arrangements of the Company and its
subsidiaries, the Directors believe that none of these matters will, either individually or in the aggregate, have a materially
adverse effect on the Company’s financial condition or results of operations.
Vesuvius plc
Annual Report and Financial Statements 2023
218
Notes to the Company Financial Statements
continued
13.
Related Parties
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are wholly owned Company subsidiaries are not disclosed in this Note.
The related parties identified by the Directors include joint ventures, associates and key management personnel. To enable users
of our financial statements to form a view on the effects of related party relationships on the Company, we disclose the related
party relationship, irrespective of whether there have been transactions between the related parties.
Transactions with joint ventures and associates
All transactions with joint ventures and associates are in the normal course of business. Further details of joint ventures and
associates are included in Note 32 to the Group Financial Statements.
Transactions with key management personnel
There have been no transactions with key management personnel of the Company other than the Directors’ remuneration.
Directors’ remuneration is disclosed in the Annual Report on Directors’ Remuneration.
Transactions with other related parties
There are no controlling shareholders of the Company as defined by IFRS. There have been no material transactions with the
shareholders of the Company.
Pension contributions are disclosed in Note 25 to the Group Financial Statements.
Other than the parties disclosed above, the Company has no other material related parties.
219
Strategic report
Governance
Financial statements
2023
2022
2021
2020
2019
Steel Division
Revenue
£m
1,400.0
1,496.4
1,171.5
1,045.4
1,195.3
Trading profit
£m
147.6
172.7
102.0
76.4
120.1
Return on sales
%
10.5
11.5
8.7
7.3
10.0
Employees: year-end
no.
9,228
8,719
8,323
7,619
7,677
Foundry Division
Revenue
£m
529.8
551.0
471.4
412.9
515.1
Trading profit
£m
52.8
54.5
40.4
25.0
61.3
Return on sales
%
10.0
9.9
8.6
6.1
11.9
Employees: year-end
no.
2,463
2,415
2,881
2,735
2,819
Five-Year Summary: Divisional Results from Continuing Operations (unaudited)
Vesuvius plc
Annual Report and Financial Statements 2023
220
Shareholder Information (unaudited)
Enquiries
The Company’s share registrar is Equiniti who can be contacted
if you have any questions about your Vesuvius shareholding.
Equiniti Limited
Aspect House, Spencer Road
Lancing, West Sussex, BN99 6DA
United Kingdom
Telephone*: +44 (0)371 384 2335
Website: www.shareview.co.uk
For the hard of hearing, Equiniti can also be contacted using
the Relay UK website at www.relayuk.bt.com.
Any shareholder enquiries not related to the share register should
be sent by email to shareholder.information@vesuvius.com or
by letter to the Company Secretary at the registered office.
Registered Office and Group Head Office
Vesuvius plc
165 Fleet Street
London EC4A 2AE
United Kingdom
Telephone: +44 (0)20 7822 0000
Registered in England and Wales No. 8217766
LEI: 213800ORZ521W585SY02
Vesuvius Website
Shareholder and other information about the Company,
including details of the current and historical share price,
can be accessed on the Vesuvius website: www.vesuvius.com.
You can view the online Annual Report 2023 on the website.
Shareview and Electronic Communication
Equiniti’s website, www.shareview.co.uk, enables shareholders
to register online to view details of their shareholdings. To access
online information on your shareholding, you will require your
shareholder reference number, which can be found at the top
of your share certificate or on your dividend confirmation.
The Shareview website provides answers to frequently asked
questions and information useful for the management of
investments, including indicative share valuations and
dividend payment details.
Shareholders can register on Shareview to receive shareholder
communications electronically, including the Company’s Annual
Report and Financial Statements, rather than receiving them in
paper form. The registration process requires shareholders to
input their shareholder reference number. To receive shareholder
communications in electronic form, shareholders should select
‘email’ as their mailing preference. Once registered, shareholders
will receive an email notifying them each time a shareholder
communication has been published on the Vesuvius website.
Share Dealing Service
The Company’s shares can be traded through most banks,
building societies or stockbrokers. UK resident shareholders
can also buy and sell shares by telephone or online using
Equiniti’s Shareview dealing service.
Telephone 0345 603 7037 between 8.00 am and 4.30 pm on any
business day (excluding public holidays in England and Wales).
Website: www.shareview.co.uk/dealing
The shareholder reference number (at the top of your share
certificate or on your dividend confirmation) is required to use
the dealing service.
ShareGift
ShareGift, the charity share donation scheme, is a free service
for shareholders wishing to give shares to a wide range of UK
charitable causes. It is particularly useful for those shareholders
who may wish to dispose of a small quantity of shares in
a charitable way where the market value makes it uneconomic
to sell on a commission basis. Further information can be
obtained from ShareGift.
Telephone: +44 (0)20 7930 3737
Website: www.sharegift.org
Email: help@sharegift.org
Dividend Reinvestment Plan
Equiniti offers a dividend reinvestment plan through which
shareholders can use their Vesuvius cash dividends to buy
additional shares in Vesuvius. Further details, including
how to sign up and the terms and conditions of the plan,
are available from the Share Dividend Helpline.
Telephone*: 0371 384 2335
(or +44 371 384 2335 if calling from outside the UK)
Website: www.shareview.co.uk
Overseas Payment Service
Equiniti provides a dividend payment service in over 90 countries
that automatically converts dividend payments into local currency
and pays the funds into a shareholder’s bank account. Further
details, including an application form and the terms and
conditions of the service, are available from Equiniti.
Telephone*: +44 371 384 2335
Website: www.shareview.co.uk
By post: Equiniti, Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA, United Kingdom
Please quote Overseas Payment Service, the Company’s name
and your shareholder reference number.
Financial Calendar
2024 Annual General Meeting
Wednesday 15 May 2024
*
Lines are open Monday to Friday 8.30 am to 5.30 pm (excluding public holidays in England and Wales).
221
Strategic report
Governance
Financial statements
Analysis of Ordinary Shareholders
As at 31 December 2023
Investor type
Total
Shareholdings
Private
Institutional
and other
1–1,000
1,001–
50,000
50,001–
500,000
500,001+
Number of holders
2,288
465
2,753
2,108
449
125
71
Percentage of holders
83.11%
16.89%
100%
76.57%
16.31%
4.54%
2.58%
Percentage of shares held
0.53%
99.47%
100%
0.10%
1.54%
7.44%
90.92%
Share Fraud – Spot the Warning Signs
Investment scams are designed to look like genuine investments.
Have you been…
–
Contacted out of the blue
–
Promised tempting returns and told the investment is safe
–
Called repeatedly
–
Told the offer is only available for a limited time?
If so, you might have been contacted by fraudsters.
How to Avoid Share Fraud
1. Reject cold calls
If you have been contacted by telephone, email or post, or via
a third party or at a seminar or exhibition, with an offer to buy
or sell shares, the chances are that it’s a high-risk investment or
a scam. You should treat any offer with extreme caution.
The safest thing to do is to ignore the approach and if you
were contacted by phone to hang up on the call.
2. Check if the firm is authorised by the Financial Conduct
Authority (FCA) and recorded on the Financial Services register
at https://register.fca.org.uk/
The Financial Services Register is a public record of all the firms
and individuals in the financial services industry that are, or have
been, regulated by the Prudential Regulation Authority and/or
the FCA. If there are no contact details on the Register or if the firm
claims the Register is out of date, call the FCA Consumer Helpline
on 0800 111 6768.
If you’re dealing with an overseas firm, you should check with the
regulator in that country and also check the scam warnings from
foreign regulators.
3. Get impartial advice
Think about getting impartial financial advice before you hand
over any money. Seek advice from someone unconnected to the
firm that has approached you.
Reporting a Scam
If you suspect that you have been approached by fraudsters,
please tell the FCA Consumer Helpline by contacting them on
0800 111 6768 (or +44 20 7066 1000 from outside the UK) or by
using the share fraud reporting form at www.fca.org.uk/scams,
where you can find out more about investment scams. For calls
using next generation text relay, please call the FCA Consumer
Helpline on (18001) 0207 066 1000.
If you have lost money to investment fraud, you should report it
to Action Fraud on 0300 123 2040 (or +44 300 123 2040 from
outside the UK) or online at www.actionfraud.police.uk.
Find out more at www.fca.org.uk/scamsmart.
Identity Theft
We offer the following advice to shareholders on protecting their
personal information and Vesuvius shares:
–
Keep all Vesuvius correspondence in a safe place, or destroy
correspondence by shredding
–
When changing address, inform the registrar, Equiniti.
If a letter is received from Equiniti regarding a change of
address and there has been no change of address, contact
the registrar immediately using the contact information on
the opposite page
–
Have your dividends paid directly into a bank or building
society account. This will reduce the risk of a cheque being
intercepted or lost in the post
–
On changing a bank or building society account, inform Equiniti
of the details of the new account and respond, as requested,
to any letters Equiniti send regarding this matter
Vesuvius plc
Annual Report and Financial Statements 2023
222
Glossary
8D
Eight Disciplines: an eight-step
methodology to resolve customer,
supplier and internal quality issues
AGM
Annual General Meeting
BMC
Bayuquan Magnesium Co acquired
in October 2022 and now trading
through the legal entity Yingkou
YingWei Magnesium Co., Ltd
Capex
Capital expenditure
CEO
Chief Executive
CFO
Chief Financial Officer
CG Statement
The Corporate Governance Statement
CO
2
Carbon dioxide
CO
2
e
Carbon dioxide equivalent
Code
The UK Corporate Governance Code
Company
Vesuvius plc
CORE Values
or Values
The Group’s key values of Courage,
Ownership, Respect and Energy
COVID-19 or
COVID-19
pandemic
Coronavirus disease (COVID-19), the
infectious disease caused by the newly
discovered coronavirus, and the pandemic
that has arisen from this
DO
Dangerous occurrence
DOFR
Dangerous occurrence frequency rate
DRI
Direct reduced iron (DRI) is produced
from the direct reduction of iron ore (in the
form of lumps, pellets, or fines) into iron
by a reducing gas or elemental carbon
produced from natural gas or coal
DSBP
Deferred Share Bonus Plan
DTR
The Disclosure and Transparency Rules
of the UK Financial Conduct Authority
EAF
Electric Arc Furnace
EBITDA
Trading profit before depreciation
and amortisation of non-acquired
intangible charges
ECL
Expected Credit Loss
EEMEA
Eastern Europe, Middle East and Africa
EMEA
Europe, Middle East and Africa
EPS
Earnings per share
ESOP
Employee Share Ownership Plan
EU
European Union
EU27
The 27 European Union countries
FRC
Financial Reporting Council
FRS
Financial Reporting Standards
FTSE 250
Equity index whose constituents are the
101st to 350th largest companies listed
on the London Stock Exchange in terms
of their market capitalisation
FX
Foreign exchange
GEC
Group Executive Committee
GHG
Greenhouse gas
Group
Vesuvius plc and its subsidiary companies
HeaTt
Vesuvius e-learning programme
HPDC
High Pressure Die Casting
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
KPI
Key Performance Indicator
LMS
Learning Management System
LPDC
Low Pressure Die Casting
LTI
Lost time injury
LTIFR
Lost time injury frequency rate, a KPI
which calculates the number of LTIs
per million hours worked
Median
The middle number in a sorted list
of numbers
MTI
Medically treated injury
MTIFR
Medically treated injury frequency rate
PwC
PricewaterhouseCoopers LLP
NAFTA
Canada, Mexico and USA
Offshore Area
The area around the United Kingdom as
specified in the Accounts Regulations
Schedule 7, paragraph 15
Ordinary share
An ordinary share of 10 pence in the capital
of the Company
R&D
Research and development
Scope 1
emissions
CO
2
and CO
2
e emissions from fuels used in
our factories and offices, fugitive emissions
and non-fuel process emissions.
Scope 2
emissions
CO
2
and CO
2
e from indirect emissions
resulting from the generation of
electricity, heat, steam and hot water
we purchase to supply our offices
and factories
Scope 3
emissions
All other indirect CO
2
and CO
2
e emissions
that occur in the Company’s value chain.
Senior
Leadership
Group
The Group Executive Committee plus
the most senior Vesuvius managers
worldwide, in terms of their contribution
to the Group’s overall results and to
the execution of the Group’s strategy.
This group comprises between 140 and
170 members
TSR
Total shareholder return
UK GAAP
UK Generally Accepted
Accounting Principles
UN
United Nations
UN SDGs
United Nations Sustainable
Development Goals
Universal
Refractories
The trade and assets of Universal
Refractories, Inc. acquired in December
2021 and now trading through the legal
entity Vesuvius Penn Corporation
VISO
Vesuvius Isostatic
VSP
Vesuvius Share Plan
Designed and produced by
Friend
www.friendstudio.com
Print: Pureprint Group
This report has been printed on Image Indigo Offset which
is FSC® certified and made from 100% Elemental Chlorine
Free (ECF) pulp. The mill and the printer are both certified
to ISO 14001 environmental management system.
The report was printed by a CarbonNeutral® printer.
The imagery included in this Annual Report
aims to capture the many different aspects
of Vesuvius and our team around the world.
The photographer Samuel Dhote shot most
of these images. www.samueldhote.com
Our front cover features:
Name:
Ewelina Watychowicz
Role: Operator
Location: Skawina, Poland
Vesuvius plc
165 Fleet Street
London
EC4A 2AE
T
+44 (0)20 7822 0000
www.vesuvius.com
Visit our online Annual Report at
report2023.vesuvius.com