DS Smith : Annual financial and audit reports - Annual Financial Report and Notice of AGM - EN

DS Smith Plc

(the "Company")

Publication of 2020/21 Annual Report and

Notice of Annual General Meeting 2021

The Company's Annual Report for the year ended 30 April 2021 and the Notice of the 2021 Annual General Meeting (to be held at 12 noon on Tuesday, 7 September 2021 at No.4 Hamilton Place London W1J 7BQ) are today published and are available on the Company's website www.dssmith.com. Hard copy documents have been posted to shareholders who have elected to receive them and the documents can also be downloaded in pdf format from the Company's website www.dssmith.com/investors/annual-reports

In compliance with Listing Rule 9.6.1, copies of the following documents will be submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism website at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

• 2020/21 Annual Report
• Notice of Annual General Meeting 2021
• Form of Proxy for the Annual General Meeting 2021

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the 2020/21 full year results announcement released on 22 June 2021. That information, together with the information set out in the Appendix below, which is extracted from the Company's 2020/21 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5R. This announcement is not a substitute for reading the Company's 2020/21 Annual Report.

Iain Simm

Group General Counsel and Company Secretary

15 July 2021

APPENDIX

The primary purpose of this announcement is to inform the market about the publication of the Company's 2020/21 Annual Report and Notice of Annual General Meeting 2021.

The information below, which is extracted from the Company's 2020/21 Annual Report, is included solely for the purpose of complying with DTR 6.3.5R. It should be read in conjunction with the full year results announcement released on 22 June 2021. That information, together with the information set out below, which is extracted from the Company's 2020/21 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5R. This announcement is not a substitute for reading the Company's 2020/21 Annual Report. Page and note references in the extracted information below refer to, respectively, page numbers and notes in the Company's 2020/21 Annual Report.

Principal risks (pages 47 to 48 and 52 to 55)

Our Group risk policy

Our Group risk policy provides the framework to ensure there is a common understanding of risk management practices across all parts of the Group and is fully integrated with our annual corporate planning process. We use these practices to evaluate and accept those risks that we believe we have the capacity, know-how and experience to manage, or to understand and tolerate those risks that we cannot influence, in order to realise the potential opportunities for growth and development.

Changes in 2020/21

We recognise that risks are evolving rapidly in our changing world and that requires new ways of thinking and working to identify, assess and manage risks effectively. We continue to build on the solid foundation that we have already established. Our preparedness for events such as the Covid-19 pandemic and the resulting consequences enabled the Group to take a more detailed review and further improve the risk process to obtain better quality output from the corporate planning process and year-end risk assessments. Changes included:

• Simplified assessments to clearly make the link between key risks and our Corporate Plan priorities/opportunities
• In-depthreviews of principal and emerging risks with our Group Strategy Committee (GSC), Group Operating Committee (GOC) and Audit Committee
• Surveyed a wide internal audience to rate the severity, likelihood and speed of a large range of relevant risks
• Implemented regular and focused risk reviews within existing management team meetings to assess mitigations
• Stress tested our business continuity strategies in preparation for subsequent waves of Covid-19 following the first wave
• Launched our refreshed 'Management Standards' where governance, risk management and compliance are at the core.

Risk governance

Our governance framework remains robust and largely unchanged in the past year, and has also proven pivotal in managing the business impacts of Covid-19. In summary:

• The Board sets out the Group's risk appetite annually, based on the level of risk it is willing to accept in pursuit of corporate targets
• The risk strategy and setting of objectives is executed by the GOC with oversight from the Audit Committee and Board
• Our GOC, management committees and specialist Group functions provide guidance to the businesses on how to better integrate risk management processes into day-to-day activities.

The Group's risk policy sets out how this governance framework translates into the annual risk reporting cycle, which links with our internal audit cycle (see page 77) and informs our management and governance processes specifically for climate related risks (see pages 56 to 58).

Report on our principal risks

Like many other businesses we are subject to general risks such as changes in social, political, financial, regulatory and legislative changes. Our principal risks and uncertainties are those that may have the greatest impact on our key priorities when assessed by considering our controls and other mitigating factors on a net risk basis. These risks have been discussed at Audit Committee meetings during 2020/21. They are summarised with details of our key mitigating activities on pages 52 to 55.

Risks identified

Our key risks continue to follow similar themes to those in previous years but they evolved over the past year, mainly due to the impacts and learnings from the Covid-19 pandemic. 12 principal risks have been identified in our latest assessment across strategic, market, operational, financial, geopolitical and technological risk categories. The changes compared to 2019/20 include:

• The risk of fibre packaging being substituted by non-fibre based materials has returned to the top 12
• A new demand-led principal risk reflects the need to satisfy significant packaging volume growth with limited production capacity
• The recognition of increasing digitalisation risk, or missed digital opportunities, within our operations and supply chain
• Cyber risk was previously split between a) ransomware and b) phishing, but they are now treated on a combined basis
• Two talent-related risks have been combined and redefined to focus on the organisation capability of our people and assets
• Sustainability risk has been redefined to be more specific about our carbon and circular economy commitments (i.e. climate- related 'transition' risks)
• Disruptive markets risk has been redefined to focus on specific and potentially highly damaging strategies of major players, compared to a general view of market-place activity
• Recent and projected changes in shopping habits are now more likely to present opportunities for our business than risks
• Increased confidence of liquidity risk mitigation has regraded the risk to outside of the principal risk level.

Risks assessed

There are four risks that are considered to be the most disruptive to our plans. These have been placed in the highest priority category. These four risks are:

• Macro-economicand political environments in Europe, the US and broader world economies, given the international nature of our supply chain, the competitive nature of the markets within which we operate, and weakening major economies impacting the level of consumer spend and demand for our packaging products
• Volatile paper/fibre price cycles continue to put pressure on our integrated paper and packaging business model and our ability to capture appropriate margins
• Cyber attacks targeting business' informational or operational technologies are becoming more frequent and increasingly sophisticated and, despite our defences, we and our suppliers and customers cannot be complacent
• Sustainability has remained at the forefront throughout the pandemic and expectations on large organisations to transition to a low-carbon circular economy have continued to accelerate, and present our manufacturing operations with a variety of challenges as well as significant opportunities.

Emerging risks

Our risk management programme includes a formal review of emerging risks. We define emerging risks as those which take the form of a systemic issue or business practice that has either not previously been identified, has been identified but has remained dormant, or has yet to rise to an area of significant concern. The impacts of the pandemic and 'what if' scenario discussions over the past year have created a heightened awareness of new and emerging risks that could impact the Group, our suppliers and customers; for example, post- pandemic ways of working and longer-term skill requirements may emerge as workforce planning risks. Furthermore, scenario work to follow the TCFD guidelines has also focused the identification and assessment of potential short to longer-term emerging risks linked with climate change. The Group continues to develop a more detailed understanding of this specific area of risk management.

Prioritising our risk management effort

Mitigating and/or preventing the effect of risk on our Corporate Plan remains a cornerstone of our Executive and operational management team efforts. Our risk heat map provides a summary of how we assess and evaluate the relationship between the likelihood and severity of our principal risks and uncertainties, taking into account the effectiveness of current mitigations, and informs where the Group should prioritise investments to manage them.

Principal risks

Risk	Risk Priority	Key Mitigating Actions	Perceived	Key Risk	Opportunity Examples
	Classification		Covid-19	Indicator
			Impact
1. Eurozone and	1	Focus remains on	Prolonged	Eurozone GDP	Ability to reposition our business
macro-economic		supplying packaging to	challenging	growth rate	model outside of our traditional
impacts		fast moving consumer	economic		geographic markets and sources
Multiple		goods (FMCG) customers	conditions		of supply.
political/economic		with a constant focus on
factors from Brexit,		quality, service and
foreign		volume growth, as these
exchange/interest		customers tend to show

rates, to weakening		greatest resilience
major economies		against GDP volatility
significantly impact
the level of		Investments in cost base
consumer spend and		and production
customer demand		efficiencies and working
for our packaging		capital initiatives to
products.		balance macro-economic
		trends with sustainable
		growth priorities
		Procurement
		transformations and new
		supply chain flows due to
		Brexit are helping to
		evolve our operating
		model.
2. Paper / fibre	1	Our focus is to provide	Supply /	Paper /	Accelerate improvements in
price volatility		sufficient paper from	demand	recovered fibre	commercial awareness and
Volatile commodity		internal paper	dynamics	market price	expertise of pricing fluctuations
pricing for recovered		manufacturing operations	affected by	and box selling	and strengthen the effectiveness
paper (including old		to support our Packaging	changes in	price	of fibre and efficiency
corrugated cases		division, whilst	FMCG and		programmes.
(OCC)) and		determining the optimal	industrial
containerboard		integration level, to	markets
grades can create		ensure that we can
significant short-		balance the external
term challenges to		effects of paper price
capture appropriate		volatility over the long
margins by aligning		term
raw material costs to
packaging sales		Initiatives to implement
revenues.		productivity
		improvements, demand
		forecasting
		improvements and the
		development of skills and
		tools in our sales and
		paper sourcing teams
		Continual focus on