Annual Report and Accounts and Notice of 2016 AGM

The Group has extensive SHE policies and procedures in place, which are in line with best practice. In the UK the Company is certified to accredited standards OHSAS 18001 on Health and Safety and ISO 14001, the International Standard for Environment Management Systems.

Regular training is provided on SHE matters to the staff.

Pressure equipment used is operated under the Pressure Systems Safety Regulations 2000 and is subject to systematic internal and frequent external inspections in accordance with the Safety Assessment Federation.

The Group has extensive fire prevention systems in place and also has appropriate contingency plans in place in the event of the failure of certain major pieces of equipment.

Reporting of incidents, including 'near misses' and damage to plant or equipment not resulting in personal injury, is mandatory in order to track issues and to prevent reoccurrences.

Insurance is in place to cover capital restatement and loss of profits in the event of operational disruption caused by certain events.

The Group is investing in its Kentucky, USA, site which, when completed, will give multi-site capability, subject to capacity, on many polyolefin products.

The extension of our facilities in Kentucky will replicate, where appropriate, machinery and processes already in operation in the UK. Existing managerial and engineering support in North America will be supplemented by external project expertise and resource from the Group's Croydon operations. Alternative suppliers were considered. Raw materials will be trialled in the UK first to reduce the commissioning risk.

Wherever possible, supplies are sourced from more than one supplier or location. However, this is not always possible, due to the special nature of the raw materials and machines used.

There are high barriers of entry to the market. Significant capital investment is required for the autoclaves and related infrastructure.

The Group actively maintains its intellectual property. It patents its technology wherever it believes it is appropriate to do so. Where technology is not subject to patent, patents are no longer applicable or the technology is incapable of being patented, the Group guards its know-how.

The Group reduces its technology risk by entering into new markets. For example, the development of High-Performance Products ('HPP') and MEL, where the product offerings are unique and protected by patents and/or process know-how and capability, opens up new markets for the Group with potential significant and lasting differential advantages.

MEL actively maintains and updates its intellectual property portfolio. This is done by undertaking research and development to add new patents to the portfolio, further developing its know-how and obtaining licences of key third-party patents, which are complementary to the existing portfolio.

MEL licences typically include a bundle of patents and know-how and therefore are not completely dependent on any particular patent.

To minimise the risk to the Company of meeting the obligations under the Scheme, the Company closed the Scheme to new members in 2001 and closed it to future accrual of benefits in 2005. The Company is currently working together with the Trustees to undertake de-risking activities to the Scheme.

The Company has concluded discussions with the Trustees of the Scheme on the triennial actuarial valuation of the Scheme as at 5 April 2014, and the associated recovery plan for the Scheme. The Company has agreed to make a contribution to the Scheme of £41k per month until April 2020 to reduce the deficit.

The Group reduces its foreign exposure for transactional items by making purchases either in euros or US dollars where possible. For example, there are US dollar costs associated with the Group's operations in Kentucky, USA and with MEL. In addition, the majority of the Group's raw materials are purchased in euros.

The Group is currently undertaking a circa $22m capital investment in North America which will reduce exposure for transactional items on the US dollar significantly.

The Group has a hedging policy, which is approved by the Board. The Group hedges a proportion of its exposure for transactional items to foreign exchange by using forward exchange contracts. The Company, like most public companies, does not hedge for the translation of its foreign subsidiaries' assets or liabilities in the consolidation of its Group accounts.

Some of the Group's markets can be cyclical. However, this risk is spread geographically and across a number of segments which are expected to diversify further with the growth of HPP, MEL and the joint ventures. The Group's experience is that in these circumstances operational labour costs can be reduced, polymer prices generally fall with reduced economic demand giving a cost benefit and cash can be generated from reducing working capital and slowing capital expenditure projects to help offset the effects of a downturn. The Group targets a low financial gearing to give it operational flexibility in a downturn.

The Group has strong cash generation from its operations.

The Group:

• has at 31.12.15 a $8m loan and £1.5m of a £3.5m loan outstanding; and

• from 1 March 2016 a £8m multi-currency revolving credit facility ('RCF') and a £2m overdraft facility.

The loans and RCF facility are secured against certain Group assets and are subject to covenants as described in note 21 and 27 of the Annual Report.

When considering investment projects the Group has regard to its ability to raise finance for the project and will not commit to a project until acceptable and appropriate finance is in place, or believed to be available.

The Group's largest customers are distributors and converters of foam. The Group has good knowledge of the end-customers of its major customers and, with some additional short-term work, would be able to bring or identify additional converter capacity to service these markets.

The risks associated with implementation of joint ventures in Asia have been mitigated by partnering with the JVs' major customers.

The joint venture agreements contain clauses to address performance and insolvency issues.

The Group keeps under review its skill needs and labour requirements. The Group aims to provide its employees with varied and interesting work and to incentivise them appropriately.

The Group has appointed a Global Talent Manager, whose remit is to ensure senior and emerging talent is appropriate for the Group's current and future needs.