Chairman’s statement
A year of substantial progress 2018/19 has been a year of substantial progress for DS Smith. It has been our first full year of ownership of Interstate Resources — the US business we bought in 2017 — and we are really pleased with its progress as it delivers substantially ahead of our expectations. We also took another important step in enhancing our footprint and asset base in Europe with the acquisition of Europac, a large packaging and paper business in Iberia and France. Thirdly, we took the decision to focus solely on corrugated packaging and agreed the disposal of our Plastics business. Overall, we are confident that these steps put us in a strong position both strategically and financially. Performance At the same time as this significant level of corporate activity, our existing business has continued to perform well, despite the macroeconomic conditions we are seeing. Organic corrugated box volume growth of 2.4 per cent is once again in excess of market growth, continuing evidence of our customer-led offering, driving market share gains. The consistency of our volume growth is due to our emphasis on packaging for the resilient sector of fast-moving consumer goods (FMCG) products, i.e. the type of products that are sold in supermarkets, day-in, day-out. The structural growth drivers of the business, including the requirement for more sustainable packaging, e-commerce packaging, and responses to changing retail trends, are expected to continue to drive growth.
“On behalf of the Board, I would like to welcome colleagues who have joined in the year and to thank everyone throughout DS Smith for their commitment.” 6
We have once again delivered a strong set of financial results, as set out in the operating review on pages 38 to 42, with a positive contribution from both organic growth and acquisitions. Our margin is now at the top of the target range, and your Board believes that there is scope for further improvement. As such, we have decided to raise the medium-term target to 10-12 per cent, reflecting our medium-term expectations. Our return on average capital employed (ROACE) this year is 13.6 per cent, around the middle of our range. That result includes the Interstate Resources acquisition in 2017 and Europac since it was acquired in January 2019. This overall result reflects a strong performance from the business, including the expected dilution of ROACE from these acquisitions, which the management team is tasked to improve over time. Alongside our financial performance, we have put further focus on building our culture through the launch of our corporate Purpose, ‘Redefining packaging for a changing world’. Our global partnership with the Ellen MacArthur Foundation is one way we are developing our commitment to the circular economy. Acquisition of Europac In June 2018 we announced the acquisition of Europac, partially funded by a rights issue. The rights issue was overwhelmingly supported by our investors, large and small, and I would like to sincerely thank you for your confidence in,