Henry Boot PLC
Annual Report and Financial Statements
for the year ended 31 December 2013
Creating value by...
...Planning
...Constructing
...Developing
Henry Boot PLC, established over
125 years ago, is one of the UK’s
leading and long-standing property
investment and development, land
development and construction companies.
Overview
01 Key financial highlights
02 Chairman’s statement
04 A diverse portfolio
Strategic report
06 Strategy and business model
08 Board of Directors
09 Senior Management
10 Performance review
18 Case study: Bifrangi UK Ltd
22 Financial review
24 Key performance indicators
26 Risks and risk management
30 Corporate responsibility
Governance
38 Chairman’s introduction
39 Corporate governance statement
43 Nomination Committee report
44 Audit Committee report
47 Remuneration Committee report
60 Directors’ report
66 Statement of Directors’ responsibilities
Financial statements
68
72
Independent auditors’ report
Consolidated statement
of comprehensive income
73 Statements of financial position
74 Statements of changes in equity
75 Statements of cash flows
76 Principal accounting policies
82 Notes to the financial statements
Stay informed and up-to-date
For the very latest news, financial results and
investor relations, visit www.henryboot.co.uk
Read our report online
Read our interactive online report
alongside the printed copy to
download pages and learn more
about our Company visit
annualreports.henryboot.co.uk/2013
Shareholder information
107 Property valuers’ report
108 Notice of annual general meeting
112 Financial calendar
112 Advisers
IBC Group contact information and glossary
You can find a
glossary of key terms
at the back of the report
Henry Boot PLC Annual Report and Financial Statements 2013
At a glance
Henry Boot PLC has subsidiary companies operating in the property investment
and development, land development, and construction sectors.
Group operations
Property Investment and Development
Henry Boot Developments Limited
A major force in the UK property development market. With its
considerable experience and impressive reputation in all sectors
of property development, the Company has built up a substantial
investment portfolio in recent years.
Stonebridge Projects Limited
A jointly owned company in the north of England which develops
family homes that combine care, consideration and attention to detail
to create a place where luxury living comes to life. Also a recently
refurbished building in Leeds, Park House, offers high specification
serviced office space to the market.
Land Development
Hallam Land Management Limited
The strategic land and planning promotion arm of the Henry Boot
Group. Our experienced land and planning teams promote and deliver
land opportunities through the complexities of the UK planning system.
Hallam has been acquiring, promoting, developing and trading in land
since 1990. We have established an outstanding record in resolving
planning and associated technical problems in order to secure
planning permission for a whole range of different land uses.
Construction
Henry Boot Construction Limited
We specialise in serving both public and private clients in all construction
sectors, including civil engineering. Our jobs are delivered to the highest
quality, safely, on time, within agreed costs and to the maximum benefit
to all parties.
Banner Plant Limited
We offer a wide range of products and services for sale and hire. Continuing
investment is made to develop and meet the increasing needs of its many
varied customers in commerce, industry and the general public.
Road Link (A69) Limited
Road Link has a 30 year contract with the Highways Agency
to operate and maintain the A69 trunk road between Carlisle
and Newcastle upon Tyne. This long-term contract was one of
the first awarded via the Government’s Private Finance Initiative.
A computer generated image of the 200 acre scheme at Markham Vale, Derbyshire
Land at Warton, Lancashire, where a planning application has been submitted for 360 new homes
A night shot of the refurbished Worsley Court Manchester tower block for Eastlands Homes
The head office of the Henry Boot Group is located in Sheffield but we operate throughout
the country and have eight regional offices and six plant hire centres.
See more
page 11
Group locations
A computer generated image of the proposed new Aberdeen Exhibition and Conference Centre
See more
page 13
3
Head office
1 Sheffield
8
6
5
4
6
1
2
1
3
7
1
5
Ongoing development works at our successful site at St Albans in Hertfordshire
See more
page 17
Recently completed exterior of Acre Mills in Huddersfield. The interior works commenced in 2014
Hire centres
1 Chesterfield
2 Dronfield
3 Derby
4 Leeds
5 Rotherham
6 Wakefield
Offices
1 Bristol
2 Dronfield
3 Glasgow
4 Leeds
5 London
6 Manchester
7 Northampton
8 Stocksfield
Key financial highlights
Profit before tax increased 37%
to £18.4m (2012 restated*: £13.4m)
Property revaluation deficit
of £1.6m (2012: surplus £1.4m)
Investment property disposal profits
of £0.3m (2012: £1.0m)
Trading profits# increased 72%
to £20.3m (2012 restated*: £11.8m)
Earnings per share increased 23%
to 8.6p (2012 restated*: 7.0p)
Proposed final dividend of 3.15p
(2012: 2.90p), giving a total for the year
of 5.10p (2012: 4.70p), an 8.5% increase
Total shareholder return of 52% in 2013
and 140% over the last three years
Net asset value per share
of 148p (2012: 139p)
Investment in strategic land inventories
of £9.1m saw a planned net debt rise
to £36.1m (2012: £21.9m) and gearing
to 19% (2012: 12%)
Strategic land acreage now 9,723 acres
(2012: 9,011 acres)
# Trading profits comprise operating profit of £19.0m (2012: £14.2m), adjusted for
the decrease in fair value of investment property of £1.6m (2012: increase £1.4m)
and profit on sale of investment properties of £0.3m (2012: £1.0m).
* 2012 comparatives have been restated for the adoption of IAS 19 (amended 2011).
Profit before tax (£m)
13
12*
11
10
09
(11.9)
18.4
13.4
16.1
18.9
Dividends per ordinary share (p)
13
12
11
10
09
5.10
4.70
4.25
3.50
2.50
Net asset value
per ordinary share (p)
£18.4m
5.10p
13
12
11
10
09
148p
148
139
142
145
135
Earnings per ordinary share (p)
8.6
7.0
6.9
9.1
8.6p
13
12*
11
10
09
(5.7)
Operating profit (£m)
13
12*
11
10
09
(10.0)
Net debt (£m)
13
12
11
10
09
2.3
11.4
19.0
14.2
16.9
20.9
£19.0m
36.1
21.9
£36.1m
32.1
www.henryboot.co.uk
01
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Overview
Chairman’s statement
Henry Boot PLC has performed very well in 2013 and I am
really pleased to report on another year of strong progress
across the businesses within the Group.
including encouraging levels of activity in our
nascent house building venture. Our construction
division has a good order base for 2014 and
into 2015 and, after its best year since 2005,
we are confident that our plant hire business
will have another good year in 2014.
In terms of risks to the continued recovery,
I believe these remain the same as highlighted
last year: debt availability and funder appetite
to lend into the property sector, cutbacks in
centrally funded capital expenditure and
planning policy upheavals. To these I would
add the probable rise in debt funding costs
over the next two to three years as recovery
takes hold and, it is assumed, the latest Bank
of England targets, which would trigger a rise
in interest rates, are met.
Over the last year, we continued to invest in
opportunities at an early stage in the recovery,
adding further to the investments already
made in the last five years. Shareholders and
markets have strongly supported this strategy,
delivering a total shareholder return of 140%
over the last three years. The potential returns
from the opportunities acquired far outweigh
the risks noted above and I confidently look
forward to reporting growing shareholder returns
in future years. The new financial year has
started well and house builders reporting so far
in 2014 are painting an encouraging picture of
increasing activity, good land availability and
slowly rising prices. Add to that a stronger
market for new property development and
improving construction and plant activity
levels and, provided that these trends
continue, we remain confident that we
can perform well in 2014 and beyond.
John Brown
Chairman
17 April 2014
to bring forward a major 4,250 unit residential
scheme; and Cranbrook, Exeter, where we
are delivering in consortium, the only ‘new
town’ to actually be built which will grow to
3,500 house units over the next ten years.
Our strategic capital allocation decision-making
process must be flexible enough to maximise
returns through economic cycles. The
process recognises that downside protection
is important as is maintaining prudent levels
of borrowing and therefore the security of
our long-term asset base, whilst, if possible,
providing a growing income return. We are
very mindful of our Company’s long heritage
and firmly believe that the strategy outlined
above will nurture growing long-term shareholder
value without taking unrewarded risk.
At 31 December 2013 total net assets had
increased to £193.5m (2012: £181.9m), helped
by a reduction in the IAS 19 pension deficit of
£10.5m. As we continue to invest in our asset
portfolios, debt as planned increased to £36.1m
(2012: £21.9m), though we now have our
largest ever number of sites with planning
permission to market in 2014. NAV per share
increased 6% to 148p (2012: 139p).
Subject to shareholder approval, the Board
recommends an increased final dividend of
3.15p (2012: 2.90p), giving a total for the year
of 5.10p (2012: 4.70p), an 8.5% increase.
The 2013 yearly dividend is a record payment
for the Group and we remain committed to
growing dividends as results, market conditions
and retained earnings allow.
I recognise that the financial results presented
here are achieved by the skill, hard work and
determination of the teams who work so
diligently towards success in each of our
businesses. On behalf of the Board I thank all
staff for 2013’s achievements and look forward
confidently to further success in the future.
Henry Boot’s recovery from the recessionary
period of 2008–2011 began in the second
half of 2012 and continued more strongly
through 2013. As we begin 2014 we have
more sites with planning permission,
to market into a strongly recovering housing
market, than ever before. We have more
profitable development schemes to begin
than at any stage over the last five years,
John Brown
Chairman
Henry Boot has performed very well in 2013
and I am really pleased to report on another
year of strong progress across the businesses
within the Group.
Operating profit increased 34% to £19.0m
(2012 restated: £14.2m) and I am very pleased
to report an increase in profit before tax of
37% to £18.4m (2012 restated: £13.4m). EPS
increased 23% to 8.6p (2012 restated: 7.0p).
At Henry Boot we take a long-term view
of opportunities in the strategic land, property
development and construction sectors and,
therefore, our core strategic aims are very much
the same as those last year. Our business model
looks to parts of our business to generate
relatively stable, recurring income flows (property
investment and construction segment) and parts
(land promotion and property development)
that are cyclical, deal-driven businesses which
potentially offer increased returns for higher
risk. We have invested more heavily in these
higher risk businesses over the last three years
with the result that, as we move into 2014, we
have an unprecedented number of profitable
land and property development sites to work
on. Examples of these investment linkages to
our long-term strategy are the speculative
commitment to the 27 acre ex-Terry’s Chocolate
Factory site in York; the Hallam Land schemes
at Blaby, where we are working in consortium
02
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Creating value
– together
Visit our website
Read more about our Company
and view our investor information
at www.henryboot.co.uk
Working together creating value – A mixed-use scheme at Mansfield, Nottinghamshire, with contributions from four Henry Boot subsidiary companies
www.henryboot.co.uk
03
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Overview
A diverse portfolio
It is its diversity, flexibility and strength of performance that have kept Henry Boot
at the forefront of its markets. This is a selection of schemes undertaken recently.
Property Investment and Development
Land Development
York
Henry Boot Developments Limited
Richmond upon Thames
Henry Boot Developments Limited
Dunbar
Hallam Land Management Limited
Location Bishopthorpe Road, North Yorkshire
Location Paradise Road, London borough
Location Edinburgh Road, East Lothian
Type Mixed-use development
Type Town Centre Leisure
Size 14 acres
Size 20,000 sq ft
The site includes the distinctive and iconic landmark
buildings plus cleared development land. Plans
for the former Terry’s Chocolate Factory include
230,000 sq ft of business offices, conversion to
residential townhouse and apartments, a hotel
with associated leisure facilities, senior living,
children’s nursery, convenience retail and
restaurant/café/bar facilities.
Planning has been approved for a 78 bed hotel.
Construction of the 20,000 sq ft building
commenced in March this year and will take
nine months to complete. The hotel has already
been pre-let to Travelodge on a 35 year lease.
Type Land promotion
Size Planning for 70 new homes
Dunbar is a quiet dormitory town popular with
workers in nearby Edinburgh, who find it an affordable
alternative to the capital itself. An optioned site that
has taken some years to bring through the system,
Hallam now has a planning permission for 70 new
homes. The land is currently being marketed and
interest has been shown by a number of developers
in the region. A sale is anticipated during 2014.
Thorne
Henry Boot Developments Limited
Leeds
Stonebridge Projects Limited
Marston Moretaine
Hallam Land Management Limited
Location M18 J6, South Yorkshire
Location Park Square West, West Yorkshire
Location Woburn Road, Bedfordshire
Type Development partnership
Size 23 acres
Type Serviced offices
Size 22,963 sq ft
This is a joint development with the Royal Bank
of Scotland where planning consent has been
secured for 45,000 sq ft of open A1 retail, two
restaurants, a hotel, a nursery and business park.
A pre-sale to Tesco has been completed for
a 37,000 sq ft foodstore. An ERDF grant of
£6.45 million has been secured which brings
forward the industrial land for development.
The infrastructure works contract has been
awarded to Henry Boot Construction and
will commence on site in spring 2014.
A flagship building in the centre of Leeds at
the heart of the business district, Park House
was built in the 1890s and was originally used
as a warehouse for local wool merchants.
The building was acquired by Stonebridge in
August 2011. During 2012 two of the floors were
converted to high quality serviced office space.
In January 2013 they were opened and by the
year end they were 63% occupied so works to
convert the remaining floors were commissioned.
The remaining floors will open in April 2014.
Type Land promotion
Size Planning for 125 new homes
In total this is a 64 acre owned site which
now has planning permission for an initial
125 residential units and 17 acres of industrial
development. Phase one is being sold to a
national developer, while Phase two is being
actively promoted through the planning system.
04
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Performance Review
Read more about our current schemes
and Company performance in 2013
View the Performance
Review on page 10 to 21
Construction
Leeds
Hallam Land Management Limited
Sheffield Hallam University
Henry Boot Construction Limited
Road Maintenance
Road Link (A69) Limited
Location Royds Lane, Rothwell
Type Land promotion
Size Planning for 45 new homes
The site is six miles to the south east of Leeds and
offers an excellent location. A part owned site with
a planning permission secured for 90 new homes,
of which our share is 45 properties, with an
affordable housing element of 15%. The site was
sold to a national developer in December 2013.
Location Sheffield, South Yorkshire
Type Sports development centre
Size Two storey sports pavilion
and two synthetic 4G pitches
Demolition of existing facilities including safe
removal of asbestos, and erection of new sports
pavilion comprising twelve main changing rooms, bar,
kitchen, viewing balcony, ancillary accommodation
and two full size sports pitches, with associated
civil engineering and landscaping works.
Location Cumbria and Northumberland
Type Road operation and maintenance
Size 52 miles of trunk road
from Carlisle to Newcastle
A 30 year contract with the Highways Agency to
operate and maintain the A69, which is the major
east–west all-weather route in the north of England.
Works include road resurfacing, bridge repairs,
winter preparation and routine maintenance.
Leicester
Hallam Land Management Limited
Sheffield Interchange
Henry Boot Construction Limited
Plant Hire
Banner Plant Limited
Location Blaby, Leicestershire
Type Land promotion
Location Sheffield, South Yorkshire
Type Solar photovoltaic panels scheme
Size Planning for 1,593 new homes
Size 22kWh system
A consortium site which saw a planning permission
secured in 2012 for 4,250 new homes of which
our share is 1,593 residential units. The complex
Section 106 agreement has now been signed
which now confirms Hallam’s largest single ever
permission, although this permission is being judicially
reviewed. The scheme also includes two primary
schools, a secondary school, shops, workspaces,
community hall, employment, cafés, bars and a
pub, health centre, leisure uses, and parks and
open spaces.
A contract to deliver the first part of South
Yorkshire Passenger Transport Executive’s
(SYPTE) programme to significantly reduce
carbon emissions and invest in renewable
energy. Henry Boot Construction installed
a solar PV system at the busy Sheffield city
centre interchange.
Location Chesterfield, Dronfield, Derby, Leeds,
Rotherham and Wakefield
Type Plant, temporary accommodation, power
tools, powered access, big air compressors
and serviced toilets
Size Over 2,800 products
The range of products has constantly evolved to
meet customer needs and to fulfil the requirements
of modern health and safety legislation. The
primary supply area stretches from Yorkshire in
the north to the East Midlands and Birmingham
in the south whilst more specialist divisions
have national coverage.
www.henryboot.co.uk
05
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Strategy and business model
Strategy – Our key objective is to maximise long-term shareholder value through the development of
and investment in high quality property assets, the promotion of new land opportunities, construction
and plant hire activities.
Strategic Report
Introduction from
Group Managing Director
I have pleasure on behalf of my fellow Directors
to present this Strategic Report for the Group
for the year ended 31 December 2013.
This report will set out to show how Henry Boot
creates value through the development of and
investment in high quality property assets, the
promotion of new land opportunities, and
construction activities.
The review of the development and
performance of the business of the Group
during the year and the future outlook of the
Group is set out in the Chairman’s Statement
on page 2 and the Performance Review on
pages 10 to 21.
We are delivering our key objective to
shareholders by adopting a working strategy
and business model that encapsulates our
long-standing principle to prudently invest for
the long-term. Henry Boot has been in operation
since 1886, has seen many economic cycles
come and go and has continued to provide an
income return to its shareholders. Our strategic
decision making has to be flexible enough to
deal with the vagaries of the economic cycle,
maximising opportunities arising throughout the
cycle and successfully achieving our business
objectives set out opposite.
It is through a balance of risk weighted
rewards, security of the long-term asset base
and relatively prudent gearing levels that we
aim to create and sustain shareholder value
into the future.
Jamie Boot
Group Managing Director
17 April 2014
Strategic Report
06 Strategy and business model
08 Board of Directors
09 Senior Management
10 Performance review
18 Case study: Bifrangi UK Ltd
22 Financial review
24 Key performance indicators
26 Risks and risk management
30 Corporate responsibility
06
www.henryboot.co.uk
Our business model illustrates how we set out to achieve our key
objective and create value.
Our trading activities, financial capabilities and core skills are organised so property investments
and construction activities generate recurring revenue streams which allow us to maintain long-term
funding relationships at prudent gearing levels, which in turn enable land development and property
development activities to create cyclical long-term revenue potential and realisation.
Recurring
revenue
stream
Land and
development
profits
Financial
capabilities
Long‑term
commitment
to high levels
of dividend
cover
Long‑term
funding
relationships
Prudent
gearing
levels
Land
development
£
Construction
Trading
activities
Property
investment and
development
£
Property
investment
Property
development
Maximise long‑term
shareholder value
Health and safety
Governance
Operational
capabilities
Diversity
Sustainability
To support our key objective we have
set the following business objectives:
Environment
Provide growing long-term
shareholder returns
Key resources: 06
Performance measures:
Shareholder value and shareholders’ funds
Create regular revenue streams through
retained property assets, rental income
and construction activities
Key resources: 02 03
Performance measures:
Revenue, return on capital employed
and investment property
Achieve long-term funding relationships
with financial partners and maintain
prudent levels of gearing at less than
50% of net assets
Key resources: 06
Performance measures:
Gearing levels and revenue
Create long-term cyclical revenue
potential and realisation through land
development and property development
Key resources: 04 05
Performance measures:
Long-term revenue and asset value created
Henry Boot PLC Annual Report and Financial Statements 2013 How we measure
our performance
We track a series of financial and
non-financial metrics that demonstrate
the progress we are making
View our KPIs on pages 24, 25,
36 and 37
Key
Our key resources
£
£
Sources of year on year
recurring revenue
01
Our people
04
Land development strategic
land bank
Sources of cyclical revenue providing
higher returns over longer-term investment
Commitment
Skills
The Group’s employees are its foremost asset. Their
skill, commitment, drive and enthusiasm are vitally
important to the long-term success of our business.
We succeed in the delivery of shareholder value
because our people, individually, achieve the targets
set for them. They source and acquire land, promote
planning consents, acquire, develop, manage or sell
investment properties and service constructors with
plant, run our PFI project and refurbish and
construct buildings.
At 31 December 2013 we owned 1,791 acres and
had interests in a further 7,932 acres through option
or agency agreements which give us the right to
promote that land for a planning consent and share in
the benefit created on ultimate disposal. We anticipate
that this land bank will grow in future years and
represents a significant future profit opportunity to
the Group. Within that acreage, at 31 December 2013
we had planning permission for over 10,000 house
units on some 39 sites.
Corporate responsibility
on page 30
Read more about our strategic
land bank on page 13
Our people
Long‑term
experience
02
Construction
05
Property development
Knowledge
Resources
The construction business works on an order book
of between one and two years, though several of the
framework contracts it has are spread over several years.
We have many years’ experience working in our
chosen markets and have delivered many successful
projects and developed strong relationships with our
key customers. Our plant hire business operates from
six locations and has a modern, well maintained fleet
of assets servicing the construction sector. Furthermore
we operate our own delivery fleet to ensure that our
customers’ requirements are satisfied quickly. Our
PFI asset is well established, cash generative and
efficiently maintained and has twelve years remaining
on the concession; furthermore, the market for PFI
assets remains strong even in the event of disposal.
We identify and secure development opportunities and
then we add value by securing planning permissions.
We have an extensive geographical spread of
commercial development opportunities within the
UK on sites across the retail, leisure, office and
industrial sectors. The current portfolio should allow
us to maintain current levels of activity for several
years and in particular food stores currently
offer very strong returns. We have a small but
growing house building interest that we hope
to develop into a more meaningful profit centre.
Read more about our property
development on pages 11 and 12
Read more about our construction
activities on page 17
06
Robust financial position
Provide a long-term commitment
to high levels of dividend cover
Key resources: 06
Performance measures:
Earnings per share and dividend cover
Achieve a return on capital in excess of 10%
Key resources: 02 03 05
Performance measures:
Profit, net assets and return on capital employed
Recruit and retain the highest calibre
of people to meet our key objective
Key resources: 01
Performance measures: Long-term success
of business and targets met
03
Property investment
asset portfolio
We have a substantial investment portfolio built
up over many years which we actively manage to
drive year on year recurring revenue and cash flows,
and maximise investment values. The investment
portfolio is primarily composed of retail and office
investments which make up 45% and 38%
respectively of the rental income generated.
Read more about our asset portfolio
activities on page 11
We have long-established relationships with our three
key funding partners, Barclays Bank, Lloyds Banking
Group and Royal Bank of Scotland. We maintain
significant headroom within our three year banking
facilities, renewed from May 2012, and consider our
property investment portfolio as a ‘store of value’
to be realised to augment these facilities if required.
The land bank and development opportunities,
together with the investment portfolio, have been
acquired largely from retained resources, ensuring
our gearing levels are prudent. In the longer term we
aim to achieve a high return on capital employed
and a healthy dividend cover level allowing for
reinvestment in our core activities which, in turn,
improves longer-term shareholder returns.
Read more about our financial position
on page 22
www.henryboot.co.uk
07
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Board of Directors
John Brown
Chairman
John Brown, FCCA, CTA, 69, was appointed
to the Board in 2006 as a Non-executive
Director and became Chairman in May 2011.
He was formerly the Chief Executive of
Speedy Hire plc which he founded in 1977.
He is also a Non-executive Director of
Lookers plc, a London Stock Exchange
listed company, and he holds a number of
other directorships. He is Chairman of the
Nomination Committee and a member of
both the Audit and the Remuneration
Committees of the Board.
Jamie Boot
Group Managing Director
Jamie Boot, 62, joined the Company
in 1979 and was appointed to the Board
in 1985. He became Group Managing
Director in 1986. He is also the Chairman
of the Company’s four principal operating
subsidiaries – Henry Boot Construction
Limited, Hallam Land Management Limited,
Henry Boot Developments Limited and
Banner Plant Limited – and reports to
the Board on these businesses. He is
the Board member responsible for
health and safety matters.
John Sutcliffe
Group Finance Director
John Sutcliffe, BA, ACA, 54, joined the
Company and the Board in 2006 as Group
Finance Director and Company Secretary.
He previously held a similar role with Town
Centre Securities PLC and prior to that
was Finance Director of Abbeycrest plc.
John is a member of the CBI Yorkshire
and the Humber Regional Council. He
relinquished the role of Company Secretary
in August 2013 and continues as the
Board member responsible for finance,
risk and pensions.
Company Secretary
Michael Gunston
Non-Executive Director
Michael Gunston, FRICS, 70, was
appointed to the Board in 2006 having
retired as the Chief Surveyor of The British
Land Company PLC where he worked for
nearly 32 years. He is the Senior Independent
Director, Chairman of the Remuneration
Committee and a member of the Audit
and Nomination Committees.
James Sykes
Non-Executive Director
James Sykes, BA, ACA, 49, was appointed
to the Board in March 2011 as a Non-executive
Director. He is a Partner in the London office
of Saffery Champness, Chartered Accountants,
which he joined from university in 1987. He is a
Non-Executive Director of Saffery Champness’
businesses in both Guernsey and Switzerland.
He is the Chairman of the Audit Committee
and a member of the Remuneration
and Nomination Committees.
Russell Deards
Company Secretary
Russell Deards, LLB, 47, joined the
Company in April 2013 as Head of Legal.
He qualified as a solicitor in 1991 and after
13 years in private practice took up his
first role in industry with David Wilson
Homes in 2004. After the takeover of that
business by Barratt Developments Russell
became Head of Legal Services until
leaving to take up a partnership at Flint
Bishop Solicitors in 2011, from where he
joined the Company. He was appointed
Company Secretary and Head of Insurance
in September 2013.
08
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Senior Management
David Anderson
Henry Boot Developments Limited
David Anderson, BSc (Hons), MRICS, 47, started his career
in town planning consultancy and then joined Henry Boot
Developments Limited in 1990 as an Assistant Development
Surveyor, rapidly rising to the position of Senior Development
Surveyor. He was appointed a Director in 1996 and became
Managing Director of the Company in 2005.
Giles Boot
Banner Plant Limited
Giles Boot, BA (Hons), 54, joined the Henry Boot Group in
1982 and had a variety of management roles in Rothervale Trading
Limited, the retail side of the then Group’s door manufacturing
business. Moving to Banner Plant Limited in 1988, he held a
number of positions, including Depot Manager and Business
Development Manager, before being appointed to its Board
in 1995, becoming Managing Director in 2000.
Simon Carr
Henry Boot Construction Limited
Simon Carr, BSc (Hons), FRICS, 55, has been with Henry Boot
for over 26 years. He has held a number of positions on the
construction side of the business, including Partnering Manager and
Operations Director. He took over as Managing Director in 2009.
Simon is a member of the Board of the Sheffield City Region Local
Enterprise Partnership and the Sheffield City Region Joint Housing
and Regeneration Board. He also sits on the South Yorkshire Freight
and Transport Partnership, is a past president of the Yorkshire
Builders Federation, is chair of the regional executive board of the
National Federation of Builders and is a Director of NFB Limited.
Keran Power
Hallam Land Management Limited
Keran Power, MRTPI, 63, began his career in Local Government
as a Planning Officer. He joined the then newly created Hallam
Land Management Limited in 1990 and was appointed a Director in
1993. He became Managing Director in 2010. Keran is a Chartered
Town Planner and for a number of years was a member of the
National Council of The Royal Town Planning Institute.
Read the Q&A with
Simon Carr on page 21
Read the Q&A with
Keran Power on page 16
www.henryboot.co.uk
09
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Performance review
Our key strategy remains the creation of long-term shareholder value.
Introduction
Group structure
Property Investment
and Development
Land Development
Construction
Henry Boot
Developments Limited
Hallam Land
Management Limited
Henry Boot
Construction Limited
Stonebridge
Projects Limited
See note 34 on page 106 for a list of principal
active subsidiaries and joint venture partners
Banner Plant Limited
Road Link (A69) Limited
As indicated in last year’s Operational Review,
activity levels improved through 2013 and
continue to look encouraging for 2014 and
beyond. Our key strategy remains the creation
of long-term shareholder value. The ‘long-term’
is crucial to evaluating our process of value
creation which, in essence, is about improving
the worth of speculatively acquired assets
by changing the asset’s planning position or
development use. Interaction with the UK
planning process is a slow, expensive, uncertain
and very inconsistent process. Therefore,
navigating a successful business through
these processes needs skill, dedication and
long-term financial support. 2013 saw us
continue to invest in the strategic land bank,
with an unprecedented level of planning success,
and in property development activities, which
saw us successfully complete the schemes in
progress and bring forward others to commence
in 2014. Our small house building operation
completed 26 sales in the year and is operating
from five sites moving into 2014. We expect
to increase sales towards 40 units in 2014
and are in detailed negotiations to acquire
sites for up to 250 units in total.
Our construction and plant businesses performed
very solidly in 2013, particularly plant where
utilisation rates rose as activity, in the construction
sector generally, recovered. Construction activity
was stable and, although pricing remains
extremely competitive, our continual focus
on quality, safety and efficiency in construction
means we are happy with our contract success
rates. We have a strong order book going into
2014, ahead of this time last year, and remain
confident of a decent year to come. Road
Link (A69) continues to perform in line with
expectations and underpins the profits and
cash flows of the construction segment. We
have twelve years left on this franchise and,
whilst we expect to incur slightly higher road
lighting costs in 2014 under our planned
maintenance programme, we are confident
that the franchise will continue to perform well.
The market conditions in which we are now
operating are firmly on an improving trend.
House builders are beginning to perform strongly
and mortgage availability is improving. There is
a good supply of land with planning permission
and the house builders have replenished their
land banks. The demand for good quality sites
is still strong but house builders are becoming
more selective when acquiring new sites. There
are further signs of improvement in the property
development market with location, as ever,
still crucially important to achieving high values.
2014 will see development schemes
commence in Malvern, Richmond upon Thames,
Stoke-on-Trent, Nottingham and, later in the
year, a large retail scheme at Daventry.
December 2013 saw the completion of several
transactions we had expected to conclude
in early 2014, which moved our financial
performance ahead of forecast for the year.
In a flat market, this may have resulted in a
knock-on impact on the 2014 results; however,
our long-term investment programme and
improving market conditions mean we should
be able to recover this timing difference during
2014. Therefore, we are optimistic that 2014
can be a further year of progress for all sections
of our business.
Jamie Boot (Top)
Group Managing Director
John Sutcliffe (Bottom)
Group Finance Director
In summary
2013 saw us continue to invest
in the strategic land bank, with
an unprecedented level of
planning success.
Further signs of improvement
in the property development
market with location, as ever,
still crucially important to
achieving high values.
Our continual focus on
quality, safety and efficiency in
construction means that we are
happy with our contract success.
10
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Property investment and development
Property
2013 saw a general improvement in property
markets, although the recovery in values and
occupier demand was unevenly spread across
sectors and regions, with a lack of transactional
evidence supporting significant uplifts in property
valuations. Occupier confidence, whilst improving
during the year, was slow to translate into
contracted transactions until the second half
of the year when things started to improve.
We have continued to build on the previous
year’s progress, letting most of the remaining
vacant space within the investment portfolio
and, at 31 December 2013, we had no large
voids and rental income receivable increased
over the year.
We completed the second phase lorry park
extension at our multi-let motorway service area
in Kent, which immediately traded at capacity
and helped the scheme achieve a significant
year on year increase in footfall which, aided
by further active asset management, increased
the number of tenants trading and rental income.
At the very end of the year we took back
11,000 sq ft of office space within our mixed-use
town centre retail and office scheme in Bromley
and relocated that tenant to 25,000 sq ft
of office space within the town which we
purchased specifically for that purpose. The
resulting investment was immediately sold
generating a rapid and very satisfactory return.
We also expect to see the return of 24,000 sq ft
of office space currently let to RSM Tenon
Group PLC (in administration) at some stage
in 2014. However, given the quality of the space,
which is in Nottingham city centre, we hope
to re-let the space in the near future.
We saw marginal improvements in some
property investment values during the year
but these were offset by the valuation impact
of the tenancy changes noted above, resulting
in an overall external valuation of the investment
portfolio, undertaken by Jones Lang LaSalle,
of £95.1m at the year end. Of this £6.8m
related to Group occupied properties. The
investment portfolio continues to be relatively
diverse with retail and office uses accounting
for 67% and 17% respectively, and industrial
and leisure uses accounting for 9% and 7%
of rental income. There has been little change
in the portfolio’s composition over the year but
2014 is expected to see the sale of a number
of investment properties in exchange for the
completion and retention of a number of new
developments which will increase the portfolio’s
exposure to the industrial and leisure sectors.
Developments in progress
Property development activity has again seen
a year on year increase, despite a number of
project delays due to planning issues or because
prospective occupiers delayed contractual
commitments until the second half of the year.
The majority of the projects affected have now
reached an unconditional stage and work has
either already commenced on site or will do
so in the next few weeks enabling scheme
completions to be achieved late in 2014 or
early 2015. At Markham Vale, the 200 acre
business park developed in partnership with
Derbyshire County Council, work commenced
on three projects comprising over 50,000 sq
ft of industrial and office space, a petrol filling
station and a drive-thru Starbucks, all of
which will be completed in 2014. Terms have
now been agreed for a further 50,000 sq ft of
industrial space at Markham and other food
outlet uses which are also targeted for completion
in 2014. The provisional route for the HS2
high speed rail link runs close to the site and
approximately ten acres of serviced land has
been temporarily safeguarded for the project.
As a result, this land has been leased to
contractors upgrading the adjoining M1
motorway for two years. In Stoke-on-Trent
terms were agreed with an existing tenant to
extend their factory warehouse and re-gear
the lease. Detailed planning permission has
been secured and work is expected to commence
early in 2014 and be completed within the year.
The completion of our mixed-use leisure and
office scheme on Deansgate, Manchester, was
achieved in December 2013. Despite protracted
delays to the construction programme, the
scheme remained on budget, and handover
to The Oddfellows Society, who had forward
purchased the office space, occurred in
December 2013. The balance of the scheme,
comprising restaurant space, is now 60% let
on long leases and these units are expected
Percentage of 720,750 sq ft of
14 investment properties occupied
92%
Annual rent roll of
14 investment properties
£7.3m
End value of 16 schemes
going through planning
£137.8m
End value of seven schemes
being developed out
£29.8m
to start trading before the middle of 2014.
Terms have been agreed for the letting of the
remaining unit and we expect to conclude this
final letting in 2014.
Planning permission has been secured for two
budget hotels, one in Richmond upon Thames,
for 78 rooms, and the other in Malvern, for 67
rooms, pre-let to Travelodge and Premier Inn
respectively. Work on both is expected to
commence in spring 2014 and will be completed
by early 2015. Having secured a number
of pre-let agreements and detailed planning
permission for the redevelopment of our retail
investment in Beeston, work has commenced
and will be completed by the 2014 year end.
www.henryboot.co.uk
11
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Property investment and development continued
Q&A
Darren Stubbs
Darren is the Managing
Director of Stonebridge
Projects, which is a jointly
owned house builder
and provider of premium
serviced office space.
Q: What growth are you looking
for in the short and long term?
Our aim in the near future is to build the
business to 100 houses per year and
beyond. Our growth will be underpinned
with a focus on building high quality
homes and continuing to listen
to our buyers.
Q: Where does the serviced office
business fit?
Park House is selling substantially ahead
of schedule; we attribute this to a
fantastic location coupled with premium
surroundings and service. We will take
this concept to new cities.
Our ability to attract tenants from a wide
range of industry sectors provides us
with a robust business model.
Q: How is your management
team performing?
We have an experienced team in the
business who understand our brand
and culture. We will continue to invest
in talent as we grow.
12
www.henryboot.co.uk
Developments in progress continued
As previously reported work commenced on
the conversion of a listed, former wire mill to
create a 56,000 sq ft outpatients centre and
clinical offices, pre-let to the Calderdale &
Huddersfield NHS Foundation Trust. The
development is part of an innovative joint
venture with the Trust which aims to release
development value from surplus property
assets and deliver new accommodation for
the Trust’s use. The initial phase of work on
the listed mill was successfully completed
within the year and the final phase of fit-out
works is expected to be completed early in
2015 when the facility will open to the public.
Future development opportunities
Following the purchase of the 56 acre site on
the edge of Skipton in 2012, a comprehensive
pre-planning consultation exercise was undertaken
during 2013, culminating in the submission of a
planning application for the site by the year
end seeking consent for a mixed scheme of
employment, foodstore and ancillary uses. The
consultation process indicated good support for
the project from the local community due to
its economic benefits and it is hoped that
planning permission will be obtained by the
middle of 2014. J Sainsbury plc is already
under contract for the foodstore and contracts
have also been exchanged for some of the
new industrial space within the scheme.
We operate two joint developments with UK
banks and both have seen significant progress
during the year. At Thorne, where we are
working with The Royal Bank of Scotland in
the development of a 23 acre former vehicle
storage site, the contract for a Tesco foodstore
is now unconditional and work will shortly
commence on the initial phase of enabling and
infrastructure works to be completed in the
second half of 2014. Terms have also been
agreed with other occupiers on part of the
remaining space on the scheme. On the edge
of Chesterfield town centre we are promoting
a six acre site working with Lloyds Bank
where terms have been agreed for the sale of
serviced plots; these sales are expected to
conclude in 2014 following the grant of
planning permission.
The Group undertook a particularly notable
purchase in the first half of 2013, the former
Terry’s Chocolate Factory in York. The purchase
was immediately followed by a sale to house
builder Barratt Developments PLC which acquired
approximately half the site which had the benefit
of a residential planning consent. The balance
of the property comprising 230,000 sq ft of
listed factory buildings, 4.5 acres of cleared
development land and 23 acres of greenbelt
was retained by Henry Boot. After purchase
completion, planning permission was then
secured for a mixed-use scheme including
residential, office and leisure uses. We then
targeted interest from a range of hotel operators
and potential residential development partners
and are now expecting to finalise terms for the
majority of the residential scheme in the early
part of 2014, enabling that part of the development
to proceed to site in the second half of the year.
Towards the end of 2013 we were selected as
the preferred development partner by Aberdeen
City Council to undertake the development of a
new exhibition and conference centre together
with a business park and hotel on a 130 acre
site we have under contract, adjacent to
Aberdeen Airport. The proposed scheme also
includes the mixed-use redevelopment of the
existing 45 acre exhibition and conference
centre site, after relocation to the proposed
new facility. Initial agreements for this very
significant and exciting development are now
in place and work will proceed rapidly to
obtain planning consent, subsequently
targeting scheme completion in 2017/18.
We made good progress with planning,
scheme design and pre-let discussions on our
town centre retail, leisure and foodstore scheme
in Daventry with the agreement of terms for
an 80,000 sq ft foodstore and the receipt of
planning permission for the residual 87,000 sq ft
scheme, which now also benefits from agreed
terms with a number of retail and leisure operators.
We hope to conclude these agreements during
the course of 2014 to enable the site
development to begin early in 2015.
We continue to focus on the release of capital
tied up in other development sites we own as
well as securing new opportunities which will
generate value in future years. Taking such
development projects through the planning
and development process can often be a
protracted exercise but it is pleasing to note
good progress was made during the year and
we confidently expect to be able to report on
a number of further transactions and new
development projects in the coming year.
Our 50% owned house building business
completed 26 units in the year and, as we
move into 2014, is looking to grow activity
towards 40 units. The business is now
profitable and with a recovering market we
are confident of building on the success
achieved so far. The management team is
largely in place and capable of achieving the
growth targets set. We have the required land
bank for 2014 and are currently in discussions
about longer-term sites which would provide
250 units into the future.
We expect to conclude the refurbishment
of Park House, our serviced office in Leeds,
soon. From early 2014 we will be marketing
the completed scheme to small businesses
who are looking to work from high specification,
technologically advanced office space for a
fixed cost with flexible lease arrangements.
Interest and letting success so far has been
very positive and 2014 should see us decide
whether this proposition is as successful
as we hope it to be.
Henry Boot PLC Annual Report and Financial Statements 2013 We achieved a higher number of land disposals this year and prices
have moved up steadily across the board.
Strategic land sites in portfolio
139 sites +11%
Total interests of land sites
held at December 2013
9,723 acres +8%
Inventory value of assets
£83.9m +10%
Percentage of land bank with planning
consent or a local plan allocation
27% +28%
A planning in principle application was approved on appeal
for 113 units at Haddington, East Lothian
Land development
Hallam Land Management Limited, our strategic
land business, had another very active year in
2013. Whereas 2012 was very productive in
terms of obtaining planning permissions but
quiet in terms of sales trading, 2013 has seen
an upturn in the number of site disposals and
continued further success securing planning
consents. The strategic land market has shown
a steady improvement throughout the year and
those areas of the country where land sales
proved difficult in the recession have reduced
in number and in size. As a consequence, we
achieved a higher number of land disposals
this year. Prices have moved up steadily across
the board, although deals still remain very
difficult to complete as a result of the complexity
of due diligence undertaken.
The main disposals achieved in the year were
at Banbury, Evesham, Long Buckby, Mansfield,
Nuneaton, Burdiehouse, Rolleston-on-Dove,
Rothwell, and Desborough, which contributed
to an excellent segment profit before tax of
£11.1m (2012: £2.0m).
In the year, we secured planning permission
(or minded to grant planning, subject to signing
a planning agreement) on sites at Abingdon,
Burton upon Trent, Chatteris, Coventry, Derby,
Dunbar, East Leake, Haddington, Hailsham,
Leeds (Oulton and Rothwell), Marston Moretaine,
Nuneaton, Pontefract, Ripley and Southbourne.
We have continued to add land into our land
portfolio with new sites being acquired in 2013
at Grazeley, Beverley, Coxhoe, Alton, Mortimer,
Thame, Burton Latimer, Bradford, Doncaster,
Frome and Swadlincote. At December 2013
we held interests in 9,723 acres (2012: 9,011
acres), with 1,791 acres being owned (2012:
1,765 acres), 3,184 acres held under option
(2012: 3,466 acres) and 4,748 acres held under
planning promotion agreement (2012: 3,780 acres).
The continued investment in new sites and
planning costs resulted in an inventory value
of the assets of £83.9m (2012: £75.9m) across
the 139 sites within the portfolio. At the end of
2013 we were in discussions on a number of
new sites which have been identified as possible
additions to the portfolio and expect to conclude
on the majority of these in 2014, pushing our
land interests towards 10,000 acres. We also
continue to uncover good opportunities to
acquire further land into our portfolio at
competitive pricing levels and are actively
looking to do so.
Last year, we reported that we had achieved
a minded to grant planning permission on our
shared site at Blaby, for 4,250 houses. During
the year we have made steady progress in
negotiating a highly complex Section 106
agreement, which we are pleased to report
has recently been signed, confirming our
largest ever single permission, although this
permission has now been judicially reviewed.
There is still a good deal of preparatory work
to be done but we still expect the first land
sales to come forward in 2015/16. In addition,
at Cranbrook, Exeter, over 600 houses have
now been built or are under construction on
one of our other major shared sites. This scheme,
which is proving to be very popular, already has
permission for 3,500 homes which will probably
expand to over 5,000 homes. Over the coming
years, given their size, we expect to make
profitable land sales on these and other large
long-term sites held in the portfolio.
In last year’s report we indicated that the
Government’s reforms to the planning system
were creating an opportunity to secure more
planning permissions than for many years.
This trend continued into and through 2013
and is likely to persist into 2014 and beyond.
We must all recognise that the planning process
is affected by the political process and is
therefore inherently unstable. At present,
the planning system is much improved and
generally responsive to the need for housing
where there is a demonstrable shortfall in the
five year local housing supply. This has helped
bring forward sites and made the process much
more predictable and efficient. For the first
time ever the Group has accumulated a small
stock of consented sites which will help us
provide a little more certainty in forecasting
forward-looking activity levels particularly if,
once again, new planning permissions
become harder to obtain.
Within many Planning Authorities, these changes
have taken time to be adopted in full but they
are now generally more understanding of the
Government’s new rules and are much more
likely to grant permission than was previously
www.henryboot.co.uk
13
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Sites with residential
planning permission
39 +56%
Land bank (acres)
9,723 +8%
13
1,791
12
1,765
11
1,432
10
1,409
09
1,679
7,932 9,723
7,246
9,011
6,619
8,051
6,643
8,052
6,254
7,933
Owned
Agency and Optioned
Total
Rebecca Wasse
is a Regional Manager
for Hallam Land
Management Limited
and joined the Company
in October 2013.
“ I am enjoying the variety of projects
that I am involved in and, being based
in Leeds, I am able to spend quality
time with the various consultants,
agents and solicitors. I enjoy the
challenges that each project brings
and am happy to be working for a
professional and friendly company.”
14
www.henryboot.co.uk
Land development continued
the case where a land supply shortfall exists.
There are still a number of Local Authorities
that stubbornly refuse to accept the land supply
arguments, even where there are no reasonable
grounds for doing so. However, as a direct
consequence of the revised appeal process
within the planning system, where initial
applications are lost on spurious grounds,
we are consistently winning appeals; indeed
in 2013 our success rate was around 90%.
Undoubtedly, Government measures to stimulate
the housing sector have assisted and schemes
such as ‘Help to Buy’ and ‘Funding for Lending’
have increased house builders’ confidence levels
and created a catalyst for new house buyers
to visit sites. The overall number of new home
transactions has increased steadily throughout
the year and, likewise, house prices have started
to recoup pricing levels lost in the recession.
The Government, rightly, remains nervous of
creating a house price bubble, as evidenced
by its shift of emphasis for the ‘Funding for
Lending’ scheme. We recognise that the
Government has to tread a very fine line
between keeping the house building sector
vibrant and avoiding a new price spiral,
which benefits no one in the longer term.
Despite the substantial improvements in the
planning system, Community Infrastructure Levy,
Section 106 agreements, and the high levels
of affordable housing are continuing difficulties
which have to be dealt with. These issues have
been largely unaffected by the planning reforms,
indeed, as Local Authorities’ own financial
position has worsened it has become even
more important for them to secure financial
contributions from the land developments
which they approve. Those contributions affect
the cost of new homes, add directly to planning
costs and other agreements and increase the
time taken to actually receive a Notice of
Decision once a Local Planning Authority has
been minded to grant a planning permission.
Streamlining these procedures and contributions
would significantly speed up the planning process
and deliver the affordable new homes the
Government aspires to achieve.
Overall, the progress in 2013 has been very
satisfactory and the outlook for 2014 and
beyond remains positive. We continue to
anticipate steady growth and further expansion
within our business in support of the recovering
house builders. In November 2013 we opened
a new office, our seventh, in Leeds. We now
feel we have full coverage of the UK and with
this structure in place we can achieve the
growth identified in our plans.
An option agreement for 80 acres of land in Edenthorpe near Doncaster
Henry Boot PLC Annual Report and Financial Statements 2013 We have secured planning permission or minded to grant permission subject to the signing of a planning agreement on the following sites during
2013 and post year end:
Site
Abingdon
Burton upon Trent
Chatteris
Coventry
Derby, Chellaston
Derby, Wragley Way
Dunbar
East Leake
Frome
Haddington
Hailsham
Leeds, Oulton
Leeds, Rothwell
Marston Moretaine
Nuneaton Lower Farm
Pontefract
Ripley
Stone
Southbourne
Winsick, Chesterfield
Status
Planning Promotion Agreement
Planning Promotion Agreement
Planning Promotion Agreement
Option
Owned
Planning Promotion Agreement
Option
Planning Promotion Agreement
Option
Option
Planning Promotion Agreement
Owned
Owned
Owned
Planning Promotion Agreement
Owned
Owned
Planning Promotion Agreement
Planning Promotion Agreement
Owned
No. of
residential
units
160
950
1,000
98
54
130
70
170
450
113
240
40
45
125
400
40
180
250
130
160
In addition, on the following sites we have already achieved a planning permission and are still working towards a sale:
Site
Biddenham
Blaby, Leicester
Bolsover
Bradford
Bridgwater
Cam, Nr Stroud
Cleek Hall, Selby
Cranbrook, Exeter
Highbridge
Kegworth
Kettering
Kilmarnock
Mansfield Penniment Farm
Peterborough
Retford
Rugby
Stratford-upon-Avon
Tillicoultry
Winsford
We have also made applications, which at this stage remain undetermined, at the following sites:
Site
Aldingbourne
Aslockton
Barnsley
Buxton
Fareham
Faversham
Hamble
Harrogate
Irthlingborough
Longbar
Market Harborough
Moodiesburn
Repton
Sheffield
Stafford
Swindon
Warton
Worcester, Earl’s Court Farm
Worksop
Wymondham
Finally, the following sites are at appeal:
Site
Aylesbury
Aylesbury
Banbury
Bathgate
Eckington
Handcross
Launceston
No. of
residential
units
Status
495
Owned/Planning Promotion Agreement
1,593
Planning Promotion Agreement
250
Owned
292
Planning Promotion Agreement
420
Owned
Owned
71
Option Wind farm
500
Owned
130
Planning Promotion Agreement
110
Owned
325
Owned
500
Owned
215
Owned
25
Owned
8
Owned
180
Owned
250
Planning Promotion Agreement
74
Owned
180
Option
Status
Owned
Planning Promotion Agreement
Owned
Planning Promotion Agreement
Planning Promotion Agreement
Planning Promotion Agreement
Planning Promotion Agreement
Option
Planning Promotion Agreement
Owned
Owned
Owned
Owned
Owned
Owned
Option
Planning Promotion Agreement
Planning Promotion Agreement
Planning Promotion Agreement
Option
Status
Planning Promotion Agreement
Planning Promotion Agreement
Option
Owned
Planning Promotion Agreement
Planning Promotion Agreement
Owned
No. of
residential
units
79
75
75
375
1,550
315
225
200
700
50
500
50
40
200
14
1,000
360
450
175
390
No. of
residential
units
200
1,560
500
140
70
90
100
www.henryboot.co.uk
15
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Q&A
Keran Power is the Managing Director of Hallam Land
Management Limited and has worked for Henry Boot for 24 years.
Q: Looking at performance for 2013,
what have been the main highlights?
Hallam has performed strongly in terms of
the number of land disposals completed in a
challenging market situation. It is pleasing to
note that these disposals were across the
whole country and have resulted in a profit
before tax of £11.1m. Also pleasing is the
continuing success of our planning strategy
with over 25 sites having been granted
planning permission or a ‘minded to grant
planning permission’ in 2013. Of particular
note is the grant of planning permission
including the signing of the Section 106
Agreement (in January 2014) of the 4,250
house site at Blaby in Leicestershire which is
the Company’s single largest permission ever.
Q: What are your key market drivers
of your growth?
The key market driver without question for
us is the resurgence of the house building
sector. The importance of house building
in the national economic picture has meant
that since the 2008/09 credit crunch the
national economy and thus the house building
sector have been on the back foot. This in
turn has affected our ability to dispose of
sites. However, 2013 has seen a distinct
upturn in the national economy in general
and house building in particular, which has
been largely responsible for our increased
number of land sales. In this context, the
Government Funding for Lending and Help
to Buy (and other similar) schemes designed
to free up the mortgage market have been
instrumental in doing just that, which in turn
has given renewed confidence to the house
builders to increase production and to start
restocking their land supply.
The second important driver has been the
recognition by the Government of the
shortage of the supply of new consented
greenfield sites for house building. This has
resulted in the Government reforming the
planning system through the NPPF and the
adoption of the presumption in favour of
new development where a five year land
16
www.henryboot.co.uk
supply cannot be demonstrated. This more
liberal attitude to new development is making
a significant difference, in terms of our ability
to obtain planning permission. Not only are
we able to obtain planning permission but
we can do so in a shorter timescale and
in a more predictable fashion.
advanced stage in the planning process to
do that. We are therefore concentrating our
efforts on bringing to the market those sites
where we already have obtained planning
permission whilst at the same time looking
to increase the number of consented sites
and to replenish our portfolio of raw sites.
Q: What are the main risks affecting
your business?
Q: What is the long-term strategy
of the business?
Our long-term strategy remains unaltered in
that we will continue to identify long-term
development opportunities and promote
those through the planning process. We are
of the view that the country remains chronically
undersupplied with land for new housing which
cannot be redressed without a sustained
programme of land release on a scale that
no Government has contemplated since the
development of the post war new towns.
Such undersupply of housing has enabled
Hallam to find its place in the market over
the last 25 years and we see very little
change in that. We have expanded at a
steady rate since our inception in 1990 and
we intend to continue that expansion at a
sustainable rate across the whole country.
We see opportunities in every part of the
country although clearly the more dynamic
southern half is likely to see more long-term
growth than elsewhere.
The main risks are those threats to the general
economic position and to the reformed
planning regime. Our view is that the economy
looks to be once again on a much sounder
footing which hopefully will bring stability and
growth to the house building sector, but clearly
anything which in any way undermines the
recovery will be a threat to our business.
Perversely, the successful turnaround of the
economy is in itself a threat to the planning
side of the business. Once the economy is
again able to stand on its own two feet the
Government of the day may decide to
reverse the liberalisation of the planning
system which has undoubtedly been largely
unpopular with the general public and with
many Local Planning Authorities.
A lesser risk is the introduction of new players
into the strategic land business attracted by
the ‘softer’ planning regime. We have already
seen some new entrants into the market,
some of whom are taking a very competitive
approach to land trading and indeed to
planning promotion strategy. We do not see
this particular threat as anything other than
good for the business and will ensure that
we keep our own approach fully under
review at all times, to ensure that we
remain competitive.
Q: In the short term, what are your
priorities for 2014?
So long as the planning system remains in a
relatively benign state we will continue to
submit new applications where we are
confident of our position. We will look to
improve our profitability in 2014 and believe
that we have enough sites at a sufficiently
Henry Boot PLC Annual Report and Financial Statements 2013 We are confident that our budgeted profit and turnover levels will be maintained after carrying a
substantial order book into 2014.
Forward order book in construction
business for 2014
£52m
Forward order book in construction
business for 2015
£19m
Construction
Whilst the marketplace has remained
challenging during 2013, Henry Boot
Construction Limited has achieved both
targeted activity and profit margins. We are
also confident that our budgeted profit
and turnover levels will be maintained after
carrying a substantial order book into 2014.
Pleasingly, after many months of contraction
in general construction output we are starting
to see increases in activity and consequently
expect a small increase in general tender
price levels during the coming year. Growth in
opportunities across a wide range of sectors,
coupled with our reputation for the delivery of
high quality projects, has enabled us to maintain
both activity and margin levels in the public
sector with partnering and framework agreements
in the social housing, health, education and
custodial sectors. At the same time we are
also seeing greater opportunities in the retail,
industrial, commercial and leisure sectors. We
have recently been awarded a major contract
to redevelop Stocksbridge town centre for
the Stocksbridge Regeneration Company.
This contract comprises retail, commercial
and associated civil engineering works and
commences in 2014 for completion in 2016.
We continue to maintain a strong presence in
both the Decent Homes market and external
wall insulation works. We are continuing to work
on long-term frameworks and partnership
arrangements for St Leger Homes, North
Lincolnshire Homes, Eastlands Homes, Sheffield
City Council, EN Procure, Fusion 21, Hull City
Council, Yorkshire Housing and ASRA Housing
Group. This market continues to offer good
opportunities in the short to medium term.
The Ministry of Justice framework is continuing
to provide new build and refurbishment
opportunities for HM Prison Service and HM
Court and Tribunals Service in the north of
England. After a slow start we are starting to
see an encouraging number of opportunities
and anticipate that this will continue over the
remaining five years of the framework.
The level of work available from the industrial
sector has also shown signs of growth; we
are delivering a major design and build contract
for Bifrangi, in Lincoln, to provide Screw Press
House and research facilities. We have also
completed works for Tata Steel in Sheffield and
Rotherham during the year and are currently
delivering a major laboratory refurbishment
for Smithers Viscient in Harrogate.
The education and commercial sectors
continue to provide a steady stream of work
with contracts carried out for Sheffield Hallam
University including the refurbishment and
remodelling works on their Collegiate Campus
together with the Sheffield Sports Park and
Graham Solley Pavilion Development. Work
will also commence shortly on the Joseph
Banks laboratory fit-out contract for the
University of Lincoln.
Projects, in conjunction with the Football
Association, to provide changing facilities and
sports pavilions for Barwell District Council
and Codnor Sports Charitable Trust have also
been completed in the year and discussions
are ongoing with other potential end users.
“ I enjoy my role and the variety of work I am involved
in; I am developing in my job role with the help of
my colleagues who are fantastic mentors. It is a
great company to work for!”
Recently completed refurbishment of eleven floors of office
space at Moorfoot for Sheffield City Council
Sophie Pickering is an Apprentice Administrator working for Henry Boot Construction Limited
and has been with the Company for one year.
www.henryboot.co.uk
17
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Case study: Bifrangi UK Ltd
New Screw Press House
Henry Boot
Construction Limited
Bifrangi UK Ltd
Location: Tower Works, Lincoln
Project value in excess of
£8.0 million
Project period
18 months
See more about our latest
projects on page 17
Bifrangi UK is a specialist hot steel forging company that
manufactures and supplies parts to the UK and worldwide
power generation industry including engine crankshafts
for several recognised manufacturers.
The award of the contract to Henry Boot Construction was part of Bifrangi’s
major investment in its UK facilities and was secured following lengthy
negotiations with the company which is based in Italy.
The works to the new 8,000m2 Screw Press House included 12,000m3
of bulk excavation, 1,100 Continuous Flight Auger (CFA) piles, a basement
area to house the press and equipment and a heated ground floor slab
capable of taking high loadings. 800 tonnes of steelwork for the frame were
imported from Italy along with 14,000m2 of roof sheeting and wall cladding.
In February 2014 a 36 hour continuous concrete pour saw completion of the press block foundation
800 tonnes of steelwork used to form the new press house
18
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Case study: Bifrangi UK Ltd
New Screw Press House
“ Staff at all levels of our organisation found the Henry Boot Construction site-based
project management team knowledgeable, approachable and responsive. They
dealt very efficiently with the inevitable challenges that accompany a project
of this complexity. We have found Henry Boot Construction to be customer
focused and very professional, with a very positive and welcome ‘can do’
attitude ingrained throughout the company”
Mr B Jackson General Manager, Bifrangi UK Ltd
Two 315 tonne parts of the press were
made at Forgemasters in Sheffield
and transported by road and river over
a number of weeks, arriving in Lincoln
very early one Sunday morning.
During the early part of 2014 the
construction of the impressive 16 metre
across by 5 metre deep reinforced
concrete well was completed to
house the 32,000 tonne Schuler
Press from Weingarten in Germany.
This press is unique in the UK and is
one of only two of its kind in
the world.
The construction of the press
foundation block was the most
technically demanding element of
the entire project. Following months
of complex design work between
several companies across Europe,
500 tonnes of reinforcement was
fixed over six weeks followed by the
placement of 1,200m3 of concrete
which was poured continuously over
a 36 hour period. This was considered
to be one of the largest continuous
pours in the UK this year.
It is anticipated that the project will
be completed by early summer 2014
and that the press will be operational
by the end of the year.
Added value and quality control
I Our team has maintained a flexible
working relationship and approach
for this complex scheme
I Additional extensive detailing
works completed when Bifrangi’s
Italian designer needed guidance
on UK specification and building
control requirements
I Reprogramming of work sequencing
to suit Bifrangi supplied materials whilst
maintaining the master programme
I Continual monitoring of subcontractors
and testing at every stage of the work to
ensure that fine tolerances were achieved
I Achieved Considerate Constructors
Scheme score of 37
Two 315 tonne parts of the press being transported to Lincoln via the River Humber
14,000m2 of roof sheeting and wall cladding used to complete
the press house
www.henryboot.co.uk
19
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Live plant contracts per week
(average)
c.2,750
Gross value of plant assets
available to rent
£26.8m
A space age look to the 1,560m2 office and workspace
project for Manor Development Company in Sheffield
20
www.henryboot.co.uk
Construction continued
We have recently successfully completed the
refurbishment of the Moorfoot Office Complex
for Sheffield City Council and the Managed
Workspace Development in Sheffield for the
Manor Development Company. Construction has
also recently commenced on two major projects
for Henry Boot Developments Limited at
Markham Vale with a cold storage unit for
Holdsworth Food and a food production
unit for Ready Egg.
In the health sector, we continue to undertake
schemes under a long-term strategic framework
for the Sheffield Teaching Hospitals at both the
Northern General and Royal Hallamshire Hospitals.
December also saw the completion of the
refurbishment of a Grade II listed five storey mill
to provide offices and clinical areas for the
Pennine Property Partnership LLP in Huddersfield.
Our Civil Engineering division has seen steady
growth following the targeted expansion of
our client base. We have completed contracts
for a new Lytag Process Plant at Drax Power
Station for Fairport Engineering Limited, and
a new rail unloading and asphalt production
plant for Aggregate Industries UK Limited, in
Sheffield. We have also commenced works at
the Queen’s Medical Centre in Nottingham to
provide a new compound for BOC to increase
the hospital’s oxygen supply. Works have also
commenced on the refurbishment of Lindholme
water treatment works for Byzak on the AMP
(Asset Management Plan) framework for Yorkshire
Water. The YORcivils framework is also continuing
to provide good opportunities as is the North
Yorkshire Bridge framework. A steady workflow
is also arising from our supply chain partner
agreement with Amey on the 25 year PFI
Sheffield Streets Ahead programme. We have
successfully delivered 35 schemes in the year
and have now commenced the second year
of the programme where we continue to deliver
a large number of relatively low value schemes.
We anticipate this partnership will provide good
growth opportunities over the coming years.
We have maintained our presence in the
renewable sector delivering both ground and
air source heat pump schemes for Berneslai
Homes, Ampleforth College and the Castle
Howard Estate. We have completed further
photovoltaic projects for North Lincolnshire
Council, North Lincolnshire Homes, South
Yorkshire Passenger Transport Executive and
Eastlands Homes. However, moving forward,
we are cautious regarding the number of
opportunities in this area, following the
reduction in feed-in tariffs, the slow take up of
the Green Deal and the proposed extension of
the Energy Company Obligation until 2017.
Road Link A69
The 30 year PFI contract to maintain the A69
Trunk Road has now been in operation for
18 years and continues to perform well. Traffic
volumes during the year increased by over
2%; however, the price adjustment indices
were slightly lower than expected. Despite
this, planned and proactive maintenance of
the A69 road and bridges, including innovative
maintenance techniques, continues to provide
savings against the original long-term cost
plan. Various road resurfacing and bridge
maintenance works were completed during
2013, all in accordance with our long-term
programme. The financial forecasts for next
year and to the end of the contract in 2026
remain favourable and we are confident that
expected levels of profitability will continue.
Plant hire
The year saw activity levels back to pre-recession
levels with turnover increasing 12% over 2012.
This increase was achieved through a combination
of firmer hire rates and higher utilisation as a
recovering construction industry, particularly
house builders, sought plant in relatively
tight supply.
Plant capital expenditure equated to 12% of
original cost, exceeding our aim of 10% on a
replacement basis. Over 30% of this was on
access equipment as we introduced this line
to our Derby depot. It is probable that capital
expenditure will continue at this slightly elevated
level as we grow our powered access fleet
and replace older plant with more expensive
Tier 4 environmentally efficient engines
on large items of equipment.
All indications suggest that construction activity
in 2014 will continue in line with last year and
therefore the improvements in utilisation and
efficiency achieved in 2013 should be
consolidated moving forward.
“ I enjoy my role at Banner Plant and the variety of
work which I am involved in. There is never a slack
moment and I always seem to be busy so the days
seem to fly by. I especially like the fact that my
colleagues are always willing to give advice and
it is easy to get help from any of them.”
Lewis Taylor is a Multi-skilled Apprentice and works for Banner Plant Limited, currently on the
Accommodation side of the business. He has been with the Company for nearly two years.
Henry Boot PLC Annual Report and Financial Statements 2013 Q&A
Simon Carr has worked with Henry Boot
for over 25 years and he heads up subsidiary
company Henry Boot Construction Limited.
Q: Looking at performance for 2013,
what have been the main highlights?
Q: What are the main risks affecting
your business?
Q: What is the long-term strategy
of the business?
Currently it is the continued reduction in
public spending on construction projects.
However, at the moment this is being more
than offset by an increase in private spending
particularly in industrial and retail developments.
This in turn brings its own challenges with
possible overheating in the supply chain
and pressure on labour costs.
Q: In the short term, what are your
priorities for 2014?
To ensure the business continues to be both
profitable and competitive, not only financially
but also in terms of the quality of delivery.
Fundamental to this is the investment we make
in training and the continuing hard work of our
employees and their ability to deliver excellence
in all aspects of construction, which is crucial
in securing new work in a competitive
marketplace. We believe that a healthy level
of opportunities will be available in retail,
leisure, industrial, social housing, custodial
and education and as a consequence will
be prioritising these sectors.
To continue to align the business to the
Government’s Industrial Strategy, Construction
2025, the low carbon agenda and the
emerging private sector opportunities enabling
moderate growth. This will be supported by
investment in both our people and new
technology to ensure that we are the forefront
of the construction industry. We recognise
that Building Information Modelling (BIM),
a key part of the Government’s construction
strategy, will play an increasing role in
construction projects and as a consequence
will refine our already advanced approach
and execution strategy to BIM. We also
expect, despite a poor take up of the Green
Deal in 2013 and the recent reduction in the
ECO targets announced in the Chancellor’s
Autumn Statement, that renewable technology
together with energy/carbon saving measures
will be an important market for the business
in the medium to long term. We will also
build on our Sustainable Business Strategy
to align us with the requirements of public
sector procurement and to support our
talented and diverse workforce.
Pleasingly we have increased both turnover
and profitability during the year. This has been
achieved through maintaining and establishing
new partnering and framework arrangements
coupled with maximising repeat business.
One particular highlight immediately prior to
Christmas, and a good way to finish 2013,
was our success in securing the £30 million
two year contract to redevelop Stocksbridge
town centre. Notably we were one of the first
construction companies to achieve Investors
in Diversity Stage 2, have sent less than 10%
of our waste to landfill, and have reduced
our carbon footprint by 37%. We have also for
the fifth consecutive year seen improvements
in our health and safety performance and are
now performing at the highest level scoring
100% on the Constructing Excellence
Health and Safety KPI.
Q: What are your key market drivers
of your growth?
The key market driver last year was the increase
in market confidence that lead to an upturn
in private sector investment in construction
projects as a result of growth within the
economy. Another key market, despite
continuing cutbacks in overall public spending,
is the investment made by Government,
Local Authorities and universities in construction
and infrastructure. We will continue to target
suitable regional opportunities to build on
an already considerable body of public
sector frameworks.
www.henryboot.co.uk
21
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Financial review
The benefits of our clear and consistent long-term strategy have really shone through in 2013.
The benefits of our clear and consistent
long-term strategy have really shone through
in 2013. Economic recovery, particularly for the
housing sector, is now well established, the
debt and funding shackles have been relaxed,
stronger economic recovery is supporting
property development activity once again and
these changes have a positive knock-on effect
in our construction and plant businesses.
The key highlights of our financial
performance in 2013 are:
I revenue increased by 49% to £153.8m;
I profit before tax increased by 37% to £18.4m;
I earnings per share increased by 23% to 8.6p;
I NAV per share increased by 6% to 148p
per share;
I ROCE increased 213bps to 8.28%;
I dividends for the year increased 8.5%
to a record 5.1p; and
I total shareholder return was 70p, a 52%
return on the 135p opening share price.
Consolidated statement
of comprehensive income
Revenue increased 49% to £153.8m (2012:
£103.1m) primarily due to higher land sales
and development segment sales at York
and Bromley. Gross profit increased to £37.8m
(2012: £27.5m); however increased pension
costs (revised IAS 19 non-cash costs) of £1.1m,
overheads of £0.7m and a net comparative
property revaluation and sale profits reduction
of £3.6m resulted in an operating profit increase
of 34% to £19.0m (2012 restated: £14.2m).
The revaluation loss was largely as a result of
a lower valuation of our mixed-use property
in Nottingham where a tenant, RSM Tenon
Group PLC, entered administration, and we
generated lower development profits than in
2012. Administrative cost increases of 4.9% to
£13.9m were largely employment cost related.
The increase in pension costs reflects the
adoption of the revision to IAS 19 and is
non-cash in nature.
The segmental result analysis shows that land
development produced a significantly improved
operating profit of £11.9m (2012: £2.3m).
Property investment and development activities
operating profit was reduced to £3.1m
(2012: £7.4m), arising from the revaluation
22
www.henryboot.co.uk
deficit at Nottingham and lower disposal
profits. Construction division operating profits
improved marginally to £8.2m (2012: £7.9m)
helped by improved results in the plant hire
business. These results show the benefits of
a broadly based operating model where the
deal-driven results in the strategic land and
commercial development segments can vary
from year to year but are supplemented
by the relatively stable returns from the
construction division.
Tax
The tax charge for the year was £5.1m
(effective rate of tax: 28.0%) (2012 restated:
£2.3m and effective rate: 17.4%). Current
taxation on profit for the year was £4.0m
(2012: £1.9m); the charge for the year does
not benefit from the revaluation deficit or prior
year adjustments as last year. The decrease in
fair value of investment properties currently
generates no tax credit, but means that any
future revaluation gains will also not be taxable
until the unrecognised losses have been
utilised. The unrecorded deferred tax asset
is approximately £1.4m (2012: £1.4m). The
increased deferred tax charge arises from the
reduction in the future reversal rate applied
to the deferred tax asset brought forward to
20% (2012: 23%), resulting in the deferred tax
charge for the year increasing by £0.4m to £1.1m.
The lower deferred tax rate is that expected
to be applicable when the actual tax asset
is utilised.
Earnings per share and dividends
Basic earnings per share were 23% higher at
8.6p (2012 restated: 7.0p). The total dividend
payable for the year has been increased by
8.5% to 5.10p (2012: 4.70p), with the final
proposed dividend also increasing by 8.6% to
3.15p (2012: 2.90p) payable on 30 May 2014
to shareholders on the register as at 2 May 2014.
The ex-dividend date is 30 April 2014.
Return on capital employed
Higher pre-tax profitability in the year resulted
in improved return on capital employed from
6.2% in 2012 to 8.3% in 2013. We aim to grow
this return over time to between 10% and 13%
as we believe, in the longer term, this is the
level of return achievable by a successful
business in the property sector.
Financing and gearing
Although debt has increased after further
investment in our strategic land portfolio,
net finance costs remained stable at £0.8m
(2012: £0.8m). Average borrowing rates were
slightly lower than the previous year and any
increase in borrowing cost continues to be
offset by a reduction in the non-utilisation fee.
It is anticipated that interest costs will remain
similar in 2014, subject to a possible change
in interest rates later in the year. We expect to
see further investment in both our land and
development assets partly offset by investment
sales as we recycle capital into the next phase
of anticipated development activity. Interest
cover, expressed as the ratio of operating profit
(excluding the valuation movement on investment
properties and disposal profits) to net interest,
was 24 times (2012: 15 times). No interest
incurred in either year has been capitalised
into the costs of assets.
Our continued extensive interaction with the
planning system saw further investment in our
strategic land holdings and to a lesser extent in
the property development portfolio. As a planned
consequence of these commitments, total year
end net debt rose to £36.1m (2012: £21.9m).
Gearing on net assets of £193.5m increased
modestly to 19% (2012: net assets £181.9m;
gearing 12%). Total year end net debt includes
£3.0m (2012: £2.8m) of grant funding which
is repayable from the future sale of residential
units. All bank borrowings continue to be from
facilities linked to floating rates or short-term
fixed commitments. During the year, we
maintained three year committed bank facilities
totalling £50m renewable in May 2015 and
throughout the year we operated comfortably
within the facility covenants and continue to
do so. It is our intention to renew this facility
during 2014 in advance of the 2015 renewal
date. Due to the uncertain timing of our forecast
land and property sales during December the
Group deemed it appropriate to apply for a
short-term increase in our borrowing facility.
On 25 November 2013 the Group’s overdraft
facility was increased by £5.0m for a period of
three months. The eventual timing of the Group’s
land and property transactions during December
resulted in no utilisation of this additional facility.
Henry Boot PLC Annual Report and Financial Statements 2013 Statement of cash flows
We continue to believe it is vital that we retain
the flexibility to undertake developments and
land deals without reference to specific funding
from the lending institutions, which remain very
cautious when lending against assets representing
the speculative phase of the property cycle.
We must therefore retain the ability to fund these
from our own resources, reserving the property
investment assets as the covenant support for
our £50.0m of banking facilities. Forecast bank
debt levels at the end of 2014 are expected to
be slightly lower than 2013 as we start to realise
some of our land investment through sales.
During 2013, we increased operating cash flows
before movements in working capital by 75%
to £20.0m (2012: £11.4m) and, despite further
investments in working capital of £18.5m
(2012: £14.8m), we still achieved a positive
change in cash generated from operations of
£5.0m with an inflow in 2013 of £1.5m (2012:
outflow £3.4m). Cash outflows from investing
activities were slightly higher at £4.3m (2012:
£4.1m) as we recycled £2.8m of investment
property and property, plant and equipment
sales into £7.2m of new property development
and plant purchases. Dividends paid, including
those to non-controlling interests, totalled £8.4m
(2012: £7.6m), an 11% increase on the previous
year as we achieved our aim to pay a
pre-recession dividend level.
Statement of financial position
Investment property and assets classified as held
for sale were valued at £142.9m (2012: £142.3m).
The fair value of completed investment property
including assets held for sale was £101.0m
(2012: £98.0m) and the value of investment
property under construction within investment
property is £41.9m (2012: £44.2m) as we
develop these assets into investment properties.
Intangible assets reflect the Group’s investment
in Road Link (A69) of £8.0m (2012: £9.2m).
The treatment of this asset as an intangible
asset is a requirement of IFRIC 12 and arises
because the underlying road asset reverts to the
Highways Agency at the end of the concession
period. Property, plant and equipment comprises
Group occupied buildings valued at £6.8m
(2012: £6.8m) and plant, equipment and vehicles
with a net book value of £10.6m (2012: £9.8m);
this increase arose from further investment in
new plant. Non-current trade and other receivables
have increased to £12.7m (2012: £11.5m)
due to long-term payment plans on completed
land sales. Given the potential land sales
predicted for 2014 we anticipate that this
debtor caption will increase next year. Non-current
deferred tax assets reduced because of the
lower IAS 19 pension deficit. In total, non-current
assets have decreased slightly to £176.0m
(2012: £186.6m).
Within current assets, inventories of £91.0m
(2012: £81.6m) increased due to further
investment in the land portfolio and our
regeneration site in York. Trade and other
receivables also increased to £43.1m (2012:
£37.3m) from higher construction and land
sales. Included within current assets held for
sale is our property in Rotherham, let to B&Q.
This sale is expected to complete in the first
half of 2014. The increase in cash and cash
equivalents arose because several transactions
were concluded very close to our year end
and the payments received could not be offset
against short-term rollover loans which typify
our facility drawdowns. In total, current assets
increased to £160.2m (2012: £124.1m).
Current liabilities increased by £25.5m to £106.3m
(2012: £80.8m) as the current portion of debt
increased to £46.5m (2012: £19.2m). However,
if we were to offset the cash current asset and
the receipt of disposal proceeds on the asset
held for sale, our current portion of debt would
be broadly in line with the previous year.
Trade payables reduced slightly to £50.2m
(2012: £51.8m). Provisions reduced to £7.1m
(2012: £9.4m) as amounts provided for the
infrastructure obligations at Bridgwater and
Cranbrook, Exeter, were utilised, as we satisfied
the retained Section 106 planning obligations
which were not passed onto the house builders
when those sites were sold. Net current
assets increased to £53.9m (2012: £43.3m).
Distilled down, this increase is due to a further
investment of £8.1m in land inventories.
Non-current liabilities reduced to £36.4m
(2012: £48.0m) after IAS 19 pension liabilities
decreased to £20.1m (2012: £30.5m) after
another reasonably strong performance from
the scheme’s assets and the introduction
of RPIJ as the measure of inflation
moving forward.
Financial Statements
Read our Financial Statements in detail
View our Financial Statements
from page 67
Net assets increased by 6.4% to £193.5m
(2012: £181.9m) as the decrease in the pension
deficit and retained profits exceeded the value
of dividends paid out. Net asset value per share
increased 6% to 148p (2012: 139p).
Pension scheme
The annual IAS 19 valuation of the defined
benefit pension scheme showed the deficit
reducing to £20.1m (2012: £30.5m) at the
year end. The scheme assets performed well
in the year with an overall return of 9% and for
the sixth year in succession achieved a better
return than expected on scheme assets. The
£9.5m gain on scheme assets goes a long way
to explaining the decrease in the deficit since
liabilities were relatively stable across both years
under review. The discount rate used in 2013
was very slightly higher at 4.5% (2012: 4.45%)
and RPI inflation increased to 3.0% from 2.75%.
The deferred tax asset related to the deficit was
£4.0m (2012: £7.0m). Adding back this net
deficit of £16.1m (2012: £23.5m) to net assets,
the 2013 deficit equates to 8% of equity
shareholders’ funds (2012: 11%). The triennial
valuation at 1 January 2013 has concluded and
the recovery plan contributions remain as agreed
at the previous triennial valuation date, and
will continue at £3.8m for the latest recovery
period. The defined benefit scheme is closed
to new entrants; active member contribution
increases are capped at 1% per annum and
new employees are offered entry to a defined
contribution scheme. We continue to evaluate
cost-effective ways of reducing risk within the
scheme, and will undertake liability management
exercises as appropriate. Our Auto-enrolment
staging date is in the first half of 2014 and
because many employees are already within
an approved scheme we do not envisage that
the additional Auto-enrolment pension costs
in 2014 will be material to the Group results.
In the current year the Group has adopted
IAS 19 (amended 2011) which has resulted
in the prior year restatement.
Jamie Boot
Group Managing Director
17 April 2014
John Sutcliffe
Group Finance Director
17 April 2014
www.henryboot.co.uk
23
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Key performance indicators
Each business unit within the Group is required to establish targets at the beginning of each
financial year against a broad range of financial and non-financial indicators. The Managing
Director of each subsidiary reports on progress at Board meetings every two months. The two
main Board Executive Directors attend these meetings and are able to assess whether each
unit is performing in accordance with its plan throughout the year.
The key performance indicators used by the Board are as follows:
The KPIs differ in each subsidiary with the
exception of financial targets which focus on
profitability growth, cash generation and levels
of debt, forecast cash requirements, return on
capital employed, shareholder return and asset
value created. We also review health and safety
matters and how economic conditions and
changes in legislation may affect individual
business units. The Board has decided that the
following KPIs, which are included within the
papers for each Board meeting, are indicators
measuring our success towards achieving
long-term, sustainable growth for all
stakeholders in our business.
Profit before tax (£m)
Cash generation (£m)
£18.4m +37%
£(14.2)m -27.5%
13
12*
11
13.4
16.1
18.4
13
12
11
(14.2)
(19.6)
9.1
Objective To increase profit levels over time.
Performance 37% increase.
Comments Higher land sales and profits
in 2013. 2014 looks positive in terms
of land and property development.
Objective To monitor cash generated over time.
Performance Cash outflow £14.2m.
Comments Higher debt as we continue
to reinvest in the portfolio of land and property
development assets.
Dividends per ordinary share (p)
Shareholder return (%)
5.10p +8.5%
52% +39ppt
13
12
11
5.10
4.70
4.25
13
12
11
13
52
36
Objective To generate growing shareholder
returns over time.
Performance Profit, cash flow and pipeline
of opportunities give confidence to increase
the dividend back to above pre-recession
levels of 5.00p.
Comments 8.5% increase to 5.10p as
we move dividends ahead of previous
record of 5.00p.
Objective To generate growing shareholder
returns over time.
Performance 2013 was a return level we
are unlikely to exceed in all years. 2012 return
was achieved based on the share price at
31 December 2012 of £1.35 and 2013 of £2.00.
Comments Re-rating in share price in the year
was the reason for growth. Market continues
to re-evaluate the strength of house building
sector, we followed positive trends in UK
housing equities.
See more about our
strategy on page 6
See more about our risks
and risk management
on page 26
24
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Gearing levels (%)
Net assets (£m)
19% +58%
£193.5m +6.4%
13
12
11
1
12
19
13
12
11
193.5
181.9
184.8
Objective To monitor levels of cash required
over time.
Performance 58% increase.
Comments This still prudent gearing level
gives us flexibility to reinvest in land sites
and property development. 2014 should
see levels fall slightly.
Objective To grow the asset base over time.
Performance 6.4% increase.
Comments Increased due to retained profits
and fall in pension deficit which was affected
by the rise in bond yields and use of RPIJ.
Debt levels (£m)
NAV per share (p)
£36.1m +65%
148p +6.5%
13
12
11
2.3
21.9
36.1
13
12
11
148
139
142
Objective To monitor levels of debt over time.
Performance Cash reinvested.
Comments Prudent debt levels allow
for reinvestment as markets improve
or opportunities arise.
Objective To increase shareholder value
over time.
Performance 6.5% increase.
Comments No change to share capital,
therefore, benefits from asset gain.
Return on capital employed (%)
Pension scheme deficit (£m)
8.3% +34%
£(20.1)m +34%
13
12*
11
8.3
13
12
11
6.2
7.3
(20.1)
(30.5)
(22.6)
Objective To increase returns on capital
employed over time.
Performance Return better and sufficient
to pay tax and dividends and contribute
to retained earnings.
Comments 2014 targets a higher level of
return as land sales increase. Long term we
view 10–13% as average return.
* Restated.
Objective To reduce the pension scheme
deficit over time.
Performance After attributable deferred tax
the deficit represents circa 8% of net assets,
a level we are comfortable with. We aim to
manage the position to keep a low level of
deficit rather than create a scheme surplus.
Comments Increased bond yields and the
use of RPIJ in future had an impact on the
Scheme of circa £8.1m. Yet again, our assets
performed well during the year, returning 9%
against a long-term requirement of 5%.
In addition to this, we review a range
of specific indicators within each
business unit.
The main ones are as follows:
Land
the size of the strategic land bank, the split
between owned and optioned land, the
number of allocated sites and changes to
those allocations, the extent to which we
have full or outline planning consent and the
number of residential units or commercial
space contained in those consents.
Developments
the expected investment in developments,
expected completed values and anticipated
yields, rents and rental growth, levels of tenant
demand and unlet space, new commercial
property investment and development
opportunities and potential asset sales.
Construction
workload forecasts and capacity utilisation in
relation to plan, general activity levels, tender
opportunities, contract costing workload and
wins, health and safety and environmental
matters and contract completion, sign off
and financial closure.
Plant hire
activity levels by depot and class of asset, health
and safety matters, levels of cash generated and
returns on plant asset capital employed, which
in turn drive asset investment decisions.
Group
at Group level the business units’ financial
performance against expectations forms an
integral part of the reporting criteria. In addition
Group performance indicators of cash and
facilities, pension scheme performance,
shareholder return and return on capital
employed along with health and safety
matters are reported on at each meeting.
See more about our
key resources on page 7
See more about our financial
review on page 22
www.henryboot.co.uk
25
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC
Strategic report
Risks and risk management
In common with all organisations, the Group faces risks that may affect its performance.
The Group operates a system of internal
control and risk management in order to
provide assurance that it is managing risk
whilst achieving its business objectives. No
system can fully eliminate risk and therefore
the understanding of operational risk is central
to the management process within Henry Boot.
The long-term success of the Group depends
on the continual review, assessment and
control of the key business risks it faces. To
enable shareholders to appreciate what the
business considers are the main operational
risks, they are briefly outlined below.
See more about our
strategy on page 6
Read more about our
Governance on page 38
See our KPIs on
pages 24, 25, 36 and 37
Our governance framework
Risk assessment
Review, risk assessment
and reporting
Independent review
Business units
Managing Directors
Audit Committee
Group Board
Day-to-day operations
Centralised operations
Internal framework
Reporting framework
Policy and procedure manuals cover major areas of
their operations, including safety, purchasing, estimating,
marketing, production and quality.
Business procurement
Development appraisals, land purchases, options,
planning promotion agreements and construction
contracts above a certain value require the authority
of the Executive Directors to proceed.
Specific risks and compliance issues
associated with health and safety,
treasury and banking operations,
company secretarial, pensions, legal,
human resources and training, public
and investor relations, information
communication technology and
insurance.
The financial reporting controls
are monitored and maintained
through the use of internal
control frameworks which
address key financial reporting
risks, including risks arising
from changes in the business
or accounting standards.
The Board monitors the
risk and associated controls
over financial reporting
processes, including the
consolidation process.
See our key resources on page 7
Risk and description
Mitigation
Development
Not developing marketable assets for both
tenants and the investment market on
time and cost effectively.
Rising market yields on completion making
development uneconomic.
I Monthly performance meetings.
I Defined appraisal process.
I Monitoring of property market trends.
I Highly experienced development team.
I Sites for foodstores and distribution units preferred.
I Diverse range of sites within the portfolio.
I Active asset management.
I Monitoring property market trends.
I Only develop when yields are stable.
I Development subject to a ‘hurdle’ profit rate.
Construction and tenant risk which is not
matched by commensurate returns on
development projects.
I Construction projects, including returns and cash flows, are monitored monthly by subsidiary
company management teams.
I Seek high level of pre-lets prior to authorising development.
I Development subject to a ‘hurdle’ profit rate.
I Shared risk with landowners where applicable.
26
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Risk and description
Mitigation
Land
The inability to source, acquire and
promote land would have a detrimental
effect on the Group’s strategic land bank
and income stream.
Prices may be affected by changes in
Government policy, legislation, planning
environment and taxation.
A dramatic change in house builder funding
sentiment and demand for housing can have
a marked change on the demand and pricing
profile for land.
Investments
I Monthly operational meetings detail land owned or under control, new opportunities
and status of planning.
I Each land acquisition is subject to a formal appraisal process which must exceed the Group
defined rate of return and is subject to approval by the Group’s Executive Directors.
I Land bank of over 9,700 acres with aspiration to grow in excess of 10,000 acres.
Over time the land bank acreage has shown steady growth.
I Finance available to support speculative land purchases.
I Well respected name within the industry that demonstrates success.
I Long-established contact base.
I The Group has extensive in-house technical and planning expertise devoted to monitoring
and complying with regulations and achieving implementable planning consents.
I The Group has adopted a low risk strategy to tax planning. Potential and actual changes
are monitored by both experienced in-house finance staff and external advisers.
I Healthy profit margin over the long term.
I Demand for housing land is strong in the long term, aided by population growth.
I The Group’s policy is to only progress land which is deemed to be of high quality
and in prime locations.
I The business is long term and is not seriously affected by short-term events.
I We recognise cyclicality in our long-term plans and operate with a relatively low level of debt.
I Greenfield land is probably the most sought after land to build upon.
I Long-term demographics show growing trend; therefore demand for land will follow.
I House builders have recovered well from the last recession.
Identifying and retaining assets which
have the best opportunity for long-term
rental and capital growth, or conversely
selling those assets where capital values
have been maximised.
I This is an ongoing process with regular reviews of the assets and market conditions
and is undertaken dispassionately to achieve best value.
I Broad range of development opportunities to choose from.
I Investment assets are seen as tradable if required.
I We have a record of recycling assets into funding for new developments.
Interest rates
Significant upward changes in interest rates
affect interest costs, yields and asset prices
and reduce demand for commercial and
residential property.
Treasury
The lack of readily available funding to
either the Group or third parties to undertake
property transactions can have a significant
impact on the marketplace in which the
Group operates.
I The Group uses a mixture of fixed and floating rate loans in order to minimise interest rate costs.
I Statement of Financial Position strength allows the Group to warehouse sites in tough markets.
I Tough markets often create opportunities to acquire new sites.
I Long-term nature of land business helps smooth short-term interest rate impacts.
I Interest cover over 20 times, gearing relatively low and therefore significant scope to deal with
interest rate rises.
I The Group has agreed three year facilities with its banking partners.
I Detailed cash requirements are forecast up to 15 months in advance and reviewed and revised monthly.
I Financial instruments are considered where applicable and any short-term positive cash balances
are placed on deposit.
I Facilities backed by investment property assets.
I Development funding not utilised.
I Group funding levels are prudent in relation to the Statement of Financial Position.
I Our lending banks’ financial positions are recovering and the appetite to lend is improving.
I Group and Executive are very mindful of overtrading into the recovery.
I As a PLC access to equity funding is available.
www.henryboot.co.uk
27
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Risks and risk management
continued
Risk and description
Commentary and mitigation
Planning
Increased complexity, cost and delay
in the planning process may slow down
the project pipeline.
I The Group’s highly skilled in-house technical and planning teams monitor changes in the
market and in the planning process and react accordingly to ensure that planning consents
are achieved in the most cost-effective and timely manner, whilst ensuring a broad spread
of developments remain in the planning system at any one time.
I Good local knowledge assists in bringing forward land and contractual agreements ensure
land can be brought to market at an appropriate time.
I Long-established successful operator.
I Inventory of over 130 sites in progress throughout the UK.
I Sites are typically greenfield and of a high quality.
Significant changes in demand for housing
and the attendant decline in land prices may
have a detrimental effect on the supply of
land being brought to market by landowners.
I Pricing and demand have stabilised we are now seeing strong markets in the south of
England, these trends are now showing signs of moving to other areas of the country.
I Mortgage availability slowly improving.
I Continue to work to acquire land for the longer term.
I Large land bank can help smooth short-term fluctuations.
Changes in Government or Government
policy, as happened in 2010, towards
planning policies could impact on the speed
of the planning consent process or the value
of sites.
I Large land bank can help smooth short-term fluctuations.
I A high profit margin can be achieved when successful.
I No revaluations are taken on land through the planning process; therefore though profits may
be smaller if site values fall the Group should still achieve a good profit margin on sale.
I This risk is reduced as unemployment rises and recessionary conditions prevail.
I Good long-term employment record indicates that good people stay within the Group. The Group
encourages equity ownership.
I Decent record of sharing profits with key individuals and staff.
I Operation of Trustee approved Recovery Plan.
I Whilst pension schemes are a long-term commitment, regulations require the Group
to respond to deficits in the short term.
I Move out of gilts will provide a cushion should rates rise.
I Risk mitigated by move to diversified growth funds on around 20% of assets, along with 9%
of assets into an index linked property fund.
I Treat pension scheme as any other business segment to be managed.
I Strong working relationship maintained between Company sponsor and pension Trustees.
I Use good quality external firms for actuarial and investment advice.
Personnel
Attraction and retention of the highest
calibre people with the appropriate
experience is crucial to our long-term
growth in the highly competitive labour
markets in which the Group works.
Pension
The Group operates a defined benefit
pension scheme which has been closed
to new members for some time. Whilst the
Trustees have a prudent approach to the
mix of both return seeking and fixed interest
assets, times of economic instability can
have an impact on those asset values with
the result that the reported pension deficit
increases. Furthermore, the relationship
between implied inflation and long-term gilt
yields has a major impact on the pension
deficit and the business has little control
over those variables.
28
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Risk and description
Commentary and mitigation
Environmental
The Group is inextricably linked to the property
sector and environmental considerations are
paramount to our success.
Stricter environmental legislation will increase
development and house building costs and
therefore could impact on profitability if
capital and land values do not increase to
reflect more efficient energy performance.
Economic
The Group operates solely in the UK and
is closely allied to the real estate, house
building and construction sectors. A strong
economy with strong tenant demand is vital
to create long-term growth in rental and
asset values, whilst at the same time creating
a healthy market for the construction and
plant hire divisions. The much published
reductions in public spending, the more
difficult planning regime and comparatively
low levels of property lending could have an
impact on the Group’s business.
I Our interaction with the environment and the agencies that have an overarching responsibility
has to be positive at all times in order to achieve best value.
I Through the National Federation of Builders the Group attempts to reduce the impact
on our business.
I Internal design helps mitigate environmental planning issues.
I Record of awards given in respect of good safety and environmental performance.
I Environmental impacts addressed at each subsidiary company board meeting.
I Construction division has a Renewable Energy Unit to progress Group aims in this area.
I Strong Statement of Financial Position with low gearing and long-term shareholder base
means that we can ride out short-term economic fluctuations.
I Different business streams increase the probability that not all of them are in recession
at the same time.
I The City recognises the Group is a cyclical business and understands performance
will be affected by economic cycles.
I Directors and shareholders share common goal of less aggressive leveraging than
some competitors.
The referendum on Scottish independence
gives rise to uncertainty over the economic,
taxation and legislative impact of a vote for
independence. We have £16m of assets
in Scotland which could be affected
by this change.
I Planning system in Scotland is already different and we are experienced operating
in this environment.
I We have offices and staffing in Scotland and therefore are not required to ‘set up’ if the
change takes place.
I We see the potential change as evolutionary rather than revolutionary and will adapt
to any change positively.
Counterparty
Depends on the stability of customers,
suppliers, funders and development
partners to achieve success.
I In recessionary periods the Group pays particular attention to the financial strength
of counterparties before contracting with them in order to mitigate financial exposure.
See more about our
strategy on page 6
See more about our KPIs
on pages 24, 25, 36 and 37
www.henryboot.co.uk
29
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Corporate responsibility
Our aims
Our health and safety
01
To ensure that all our
stakeholders have a
safe and healthy
work environment.
02
To support our people
in realising their full potential.
03
To support the
development in the
local communities
in which we operate.
04
To take responsibility and
reduce our impact upon
our environment.
See our key sustainability
performance indicators
on pages 36 and 37
30
www.henryboot.co.uk
Health and safety continues to be given
the highest priority within Henry Boot PLC
from Executive Board level down; we have
developed practical and safe systems of
work which is borne out by the Company’s
exemplary safety statistics. Health and safety
is of paramount importance to us: everything
we do is designed to drive best practice and
provide a healthy, safe working environment
for everyone involved with our businesses;
we are fully committed to ensuring health
and safety is the number one priority.
Our performance
During 2013 we have continued to focus
on making health and safety the top of the
agenda within all our subsidiary businesses,
our continued growth saw an increase
in internal audits to 238 (2012: 219).
We continued to benchmark our health and
safety performance against Constructing
Excellence Health and Safety Key Performance
Indicators (KPIs); we have succeeded in a
further reduction in our accident frequency
rate (AFR) to 0.06 per 100,000 hours worked
including our subcontractors (2012: 0.20).
For the third successive year our construction
related AFR for our directly employed staff
is zero.
We have continued to ensure compliance
to our internal management systems and
external benchmarks by a series of internal
audits from our Group Safety, Health and
Environmental Manager and continue to
demonstrate Board commitment to this key
area through regular Director safety visits in
which in-depth testing of our commitment
is made.
We have continued to ensure that all
employees take part in regular, comprehensive
training, tailored to their specific job and
meeting all industry requirements. Our focus
in 2013 was on Hallam Land Management
Limited and Henry Boot Developments
Limited and in particular the issues and
risks associated with their businesses; this
was once again facilitated and presented by
a partner of Nabarro LLP’s Health, Safety
and Environment team.
We maintained accreditations to BS OHSAS
18001 (occupational health and safety),
ISO9001 (quality management) and ISO14001
(environmental management) for our
construction activities by the implementation
of our integrated management system.
Our commitment to the education of our own
employees through direct training and tool
box talks and to the communities in which
we work have continued throughout 2013.
We have again spent time in numerous schools
and local groups spreading the message of
safety within our businesses; by engaging
with our communities we have seen a
greater understanding of our work.
Our achievements
For the fourth consecutive year we have
celebrated the achievement of a RoSPA
Gold Award for Health and Safety; this
continued achievement celebrates our
commitment to achieving the highest
standards of health and safety within
our business operations.
We also celebrated the Commitment to
Health and Safety Award at the National
Federation of Builders (NFB) Annual Awards
for the second year, this award recognises
best practice in the industry and a commitment
to achieving the highest possible standards
of health and safety.
Henry Boot Construction Limited came out
on top in the Health and Safety category at
the Celebrating in Construction in South
Yorkshire Awards (CCISY) in 2013, underlining
the company’s commitment and focus to
delivering the very highest levels of health
and safety in every project it undertakes.
We continue to be part of the CITB
ConstructionSkills Health Safety and
Environment Product Review Working Group,
representing in our own right and also on
behalf of the NFB. The purpose of the
Working Group is to advise on the content
and format of CITB ConstructionSkills
products and to influence the content
of publications which are used UK wide.
Henry Boot PLC Annual Report and Financial Statements 2013 Our people
Our employees are highly talented, successful
and motivated individuals and are essential to
the success of the Company. Everything that
we do, how we act, and how our stakeholders
perceive us is crucial to our ongoing success;
we are committed to ensuring that we have
the right people working for us and manage
this process through a robust people strategy.
As we begin to experience a recovery in
our markets, we are investing to equip our
businesses to meet the challenges of the
future; the skills of our employees and wider
supply chain underpin our ability to deliver
successfully time after time.
During 2013 we directly employed an average of
450 people (2012: 438); we value the experiences
our employees bring and over 15% of our
workforce have over 20 years’ service.
Gender diversity
As at 31 December 2013, we employed 448
people comprising of 345 males and 103 females.
We have 22 Directors (20 male and 2 female)
and 26 Senior Managers (23 male and 5 female).
We want to give all our employees the
opportunity to progress with Henry Boot.
We take great pride that a significant number
of our employees started their careers with
Henry Boot and have progressed through
our business.
Human rights
We are supportive of all fundamental human
rights however the Group does not have a specific
human rights policy at present. We do apply
human rights considerations to the way we do
business, for example, through our practices
to equal pay, health and safety, supplier and
anti-bribery and corruption policies. The Group
will continue to review whether a specific
human rights policy is required in the future
over and above our existing policies.
Our performance
In order to support the growth of our people
and their ability to make a contribution to our
businesses, we delivered a total of 1,306 days
of training in 2013 (2012: 1,085 days)
the equivalent of 2.90 days per employee
(2012: 2.55 days); we provide training in
leadership, people management, health and
safety and a whole variety of subsidiary specific
training. Through the use of funding we have
seen reduction in the cost per capita spent
to £102 (2012: £131).
During 2013 our apprentice, trainee, graduate
and internship numbers increased by three; we
currently have 24 apprentice, trainee, graduate
and internship across all of our businesses. Our
retention rate is currently around 95% which
is well ahead of the industry norms. Henry Boot
has historically utilised the apprenticeship/
traineeship as a mechanism of identifying
future leaders within our businesses.
We continued through our network of
Construction Ambassadors to share our
experiences of working within the built
environment, through school visits, roadshows
and work shadowing. We again participated
in TeenTech which is a platform to inspire
youngsters to consider careers in construction
and also the importance of STEM (science,
technology, engineering and maths). Our
employees assisted Futureworks create and
deliver a ‘Crystal Maze’ style challenge
aimed at inspiring young people in Manchester.
The TeenTech event at Manchester University
saw teenagers collecting pieces of jigsaw from
five different zones, all linked to different areas
of the curriculum, to complete a puzzle
in the fastest time to win a prize.
Our achievements
We were successful in achieving the Leadership
& People Award at the Constructing Excellence
in Yorkshire and Humber Awards 2013. These
awards highlight best practice in the construction
industry across the region; it was felt through
the commitment we have made to a clear and
concise framework of job roles and training that
we had delivered a number of improvements
and enhancements through clear leadership
in addition to our continued focus on achieving
excellence in health and safety.
Ben Pearson, Assistant QS at Henry Boot
Construction Limited, won a coveted Chartered
Institute of Building (CIOB) Queen Elizabeth II
Jubilee Fund Scholarship. Granted for academic
excellence and leadership skills to bright,
motivated and ambitious individuals who
show potential to succeed in the construction
industry, scholarships are awarded to one
student from each CIOB accredited university.
The award is intended to provide financial study
support during the student’s final year of study.
Ben, who was on sandwich placement in 2012,
is currently finishing his final year at Sheffield
Hallam University and hopes to join the
Company on a full-time basis upon graduation.
During 2013, Henry Boot Construction Limited
was awarded recognition by Investors in
Diversity (Level 2); having achieved Level 1 in
2011 the Company worked hard to facilitate a
cultural change within the business to focus on
equality, diversity and inclusion and underlines
the commitment of the Group to be a modern
and inclusive business to work for and with.
www.henryboot.co.uk
31
Thanks from Reclaim
Health and safety engagement with local schools
Painting and decorating at Tickhill Community Centre
Gender diversity
448
103
345
22
20/2
28
23/5
Directors
Senior
Managers
Total
employees
Female
Male
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Corporate responsibility
continued
Case study: Sheffield Children’s
Hospital – Ryegate Children’s Centre
Paralympic swimmer Oliver Hynd opens the Ryegate Children’s Centre with representatives of Henry Boot Construction Limited and Dransfield Properties
NFB Corporate Social Responsibility
Project of the Year – Sheffield Children’s
Hospital – Ryegate Children’s Centre
2013 saw the culmination of months of hard
work by our employees and employees of local
developer, Dransfield Properties.
Part of the Sheffield Children’s Hospital, the
Ryegate Children’s Centre was originally opened
in 1963; the Centre is used for over 3,000
occupational therapy and hydrotherapy
sessions per year.
The old hydrotherapy pool which served
children with special needs had not been
refurbished in over 50 years and was inefficient
and no longer fit for purpose. There were
privacy issues for families with regard to
changing facilities as this was done behind
a plastic curtain. The pool itself was a raised
pool which meant that patients, carers,
siblings had to walk up and down steps to
gain access to the pool. This could be very
problematic. Heating the room was an issue
as there was no central heating and the lighting
was inadequate. The pool leaked and there
were issues with the boiler which all meant
that the centre had to close on occasions for
extended periods of maintenance.
The Centre was completely redesigned and
a brand new hydrotherapy pool was installed,
along with a changing area for both staff and
patients. The new pool and equipment has
made a dramatic difference to the lives of the
families who use the pool; accessibility is
improved because the pool is sunken, the
room is bright and in keeping with the rest of
the Centre. The new changing rooms and
shower facilities now give privacy and the
improved lighting is designed to help the
children relax and stay calm.
Henry Boot Construction Limited donated
free management and labour costs and utilised
its extensive local supply chain who have all
contributed by providing time and materials for
the project. The Sheffield Children’s Hospital
was the Company’s chosen charity for 2012
when we raised £3,800 at our 125th
anniversary dinner and was supplemented
by £2,300 raised by employees who took
part in the Three Peaks Challenge.
A volunteer weekend in October 2012 got
the works off to a great start. We were joined
by our own employees and Dransfield
Properties along with other local businesses,
staff and members from The Children’s
Hospital Charity including parents and staff
at the Ryegate Children’s Centre to help
demolish the existing facilities and to make
way for the new sunken pool. Following on
from this initial volunteer weekend a further
42 volunteer days took place.
Artfelt, part of The Children’s Hospital
Charity, created art pieces to make everyone
in the hospital, including staff, feel as good as
possible; they made sure that the space was
a holistic and calming environment for all
of the young people.
The pool was officially opened in March 2013
by Paralympic swimmer Oliver Hynd; the
feedback from the staff and families using the
pool since it opened has been fantastic. We
are very proud to have been involved in such
a worthwhile project.
32
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 I Continued support of the redevelopment
of the Ryegate Children’s Centre where
we have been working in partnership with
Dransfield Properties to redevelop the
hydrotherapy pool for Sheffield Children’s
Hospital (see case study).
We have donated £13,581 to charities
nominated by our employees through our
Give As You Earn Scheme (2012: £15,344),
in 2013 we donated in excess of £30,902
to a varied range of causes both locally and
nationally (2012: >£15,000). Charities supported
in 2013 included Cutlers Hall Preservation
Trust, The Princes Trust, Sheffield Autistic
Society, Derbyshire Wildlife Trust, Yorkshire
Wildlife Trust, Helen’s Trust, Variety Club
and Museum Sheffield.
Our achievements
We were delighted to win the National NFB
Award for Corporate Social Responsibility
Project of the Year in recognition of our
contribution to the redevelopment of the
Ryegate Children’s Centre. An integral part of
the Sheffield Children’s Hospital, the Centre
opened in 1963 and offers a range of vital
occupational therapy and hydrotherapy
services for disabled children.
We continued our Associate membership of
Considerate Constructors and saw a continued
upward trend in or scoring. Our highest scores
in 2013 were recorded at Acre Mill, Huddersfield
and Northern General Hospital CSSD Unit where
a score of 40 out of a possible 50 was achieved.1
We celebrated another successful year at the
National Considerate Constructors Scheme
Awards picking up a further six national awards
– two Silver Awards and four Bronze Awards.
¹ The Considerate Constructor Scheme restated
its scoring mechanism in 2013 and increased the
maximum achievable score from 40 marks to
50 marks.
Our community
We have continued our efforts to ensure
that our activities bring benefits to the local
communities and the people within them,
supporting employment and regenerating
local areas. We have also continued to
support charities and local groups through
company donations of time, expertise and
financial donations.
As a leading contractor it is important for us
to demonstrate that we are committed to the
communities in which we are working, by
being a good neighbour and accountable
for our actions.
Our performance
We have continued to establish links with
local education establishments and were
pleased become a Trust Partner of the
Meadowhead Community Learning Trust
based at a comprehensive school local to
our Dronfield office. Through this we hope to
establish links with the school to encourage
pupils to consider future career paths
in the built environment.
We have continued to work alongside
Sheffield Hallam University and have hosted
two placement students in 2013 in our Finance
and IT Departments, this is an ongoing
partnership which will continue year on year.
We have also hosted a group of Civil
Engineering students from the University
of Sheffield at our Bifrangi site in Lincoln.
In 2013, we continued to be active in the
communities in which we operate; some of
the projects and fundraising we have been
involved in over the last twelve months are:
I Established the third Henry Boot Endowment
Fund with South Yorkshire Community
Foundation with a donation of £17,600;
through matched funding this will increase
to £25,000.
I Redecorating a community centre kitchen
and main hall, as part of our commitment to
sustainability and improving local facilities for
residents. The rooms in Tickhill Community
Centre, near Doncaster, were brightened up
by our decorators with help from St Leger
Homes of Doncaster staff and local residents,
who also took part in a DIY skills workshop
delivered by Henry Boot Construction Limited.
Cheryl Ingham
is an Accountant at
Banner Cross Hall,
Sheffield working for
Henry Boot PLC and has
been with the Company
for seven years.
“ When I had my interview for the role
of trainee accountant in 2007, I left
feeling like this was the only place I
wanted to work. I remember receiving
the phone call from HR offering me
the job. I had never been so happy!
Needless to say I accepted.
Over the years Henry Boot has
invested a lot of time and money in
supporting me not only through my
accountancy qualification but also
through my recent maternity leave.
Having recently returned from my
maternity leave, I have come back
not only to my own job, but have
been given more responsibility within
the accounts department and have
been given the brilliant opportunity
of producing the greenhouse gas
section of the Strategic Report.
I really enjoy my job; every day
is different and presents
a new challenge.
Before I worked for Henry Boot I
never knew what it is like to wake
up and actually be happy about
going to work. Henry Boot is a
brilliant company to work for; they
really invest in their staff and provide
a relaxed, friendly atmosphere
to work in that has a real family feel
to it. I honestly couldn’t imagine
working anywhere else.”
www.henryboot.co.uk
33
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Strategic report
Corporate responsibility
continued
Case study: Henry Boot
Endowment Funds, South Yorkshire
Community Foundation
ill health is still a generally taboo subject in
society, so sufferers tend to hide their problems
from others to avoid stigmatisation. It can cause
relationship breakup, loss of employment and
lack of acceptance from others. This can lead to
lack of opportunities, poverty and homelessness.
The grant helped to support the weekly sessions
to ensure the well-being of people with mental
health issues – a tortoise called Hope was created
to represent the slow journey to recovery.
Barnsley Churches Drug Project: the
project provides a drop-in service three times
a week for homeless people and substances
users in Barnsley. It is a small local charity with
one part-time co-ordinator and 36 volunteers,
who provide much needed nourishment and
a listening ear and advice to those in need
of more help. It aims to promote well-being
and self-worth and to signpost to additional
support when required. The grant helped
to pay the rental costs of the Church Hall
to keep the project running.
Oughtibridge Brass Band: a community
band offering musical tuition and opportunities
for all ages, who wish to maintain the tradition
and heritage of brass band music by public
performance. The grant helped to upgrade an
existing band room which will be mainly used
by the young people.
Re-Read: a new social enterprise that buys
books at a low cost and sells through online
sales platforms. Its aim is to make quality
books available to disadvantaged children
and communities free of charge. It works
with other agencies, schools, children’s centres
to enhance the literacy and educational
achievements of young people.
In 2013 The Henry Boot Endowment Funds assisted FareShare Yorkshire (left) and Re-Read (right)
The Group has been working with the
South Yorkshire Community Foundation
(SYCF) for over 20 years to provide support
for the local communities across South
Yorkshire. In 2013, as part of our CR strategy
we set up our third Henry Boot Endowment
Fund, which is managed on our behalf by
SYCF; our investment in 2013 of £17,600
plus matched funding, which increased this
to £25,000, takes our total investments across
our three funds to in excess of £130,000.
SYCF was established in 1986 as a grant
making trust and is committed to positive
social change through community giving; it
provides a service to those who are interested
in making a difference locally, helping companies
and individuals to achieve their charitable
wishes and building stronger communities
for the benefit of South Yorkshire.
Henry Boot PLC has established Henry
Boot Charitable Endowment Funds at the
SYCF to create a lasting legacy for South
Yorkshire’s community organisations; the
capital is invested and by using income
earned the fund will continue to provide
grants to many organisations year after year.
The Henry Boot Charitable Endowment
Funds has made 16 grants to help local
organisations since 2010; some of the
organisations benefiting from donations are:
FareShare Yorkshire: this charity re-distributes
quality surplus food donated by the food
industry that would otherwise go to landfill,
to a network of community food members
who provide meals and food to vulnerable
people. They take deliveries of food supplies
every day, store them in their depot and deliver
once a week to the member organisations
which include homeless drop in centres,
women’s refuges, food banks and school
breakfast clubs. Over 100 community projects
are currently being supported with this service.
The grant helped FareShare to continue its
service in South Yorkshire, which is experiencing
a large increase in demand.
Creative Potters: this volunteer led group
runs weekly pottery sessions for adults who
experience mental health problems. Mental
34
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Our environment
Greenhouse Gas Reporting
We continue to be committed to the highest
levels of sustainability and we are committed
to reducing our environmental impact by
a variety of measures.
Our performance
2013 has again seen us make improvements
in our desire to achieve a sustainable and
green business model.
We have again been recognised by Business in
the Community (BITC) Yorkshire and the Humber
as achieving platinum status, achieving a rating
of 97% when measured against its environmental
index, an increase on last year’s assessment
(2012: >95%); we continue to be listed as one of
the top companies in the region on the Business in
the Community Environmental Index. In addition
we were recognised for the second consecutive
year as a Climate Change Champion thanks
to our robust environmental management
credentials and efforts to reduce carbon.
While waste cannot be eliminated, its
environmental impacts can be reduced by
preventing waste wherever possible. 2013 saw
a further years progress in reducing waste, with our
recycling rate increasing again to 94% (2012: 93%).
Our renewables division has continued to
work collaboratively with community groups
to provide sustainable energy, energy efficiency
and carbon reduction. In 2013 we donated and
installed a solar PV system for Sheffield-based
charity, Reclaim. Reclaim provides support for
adults with learning disabilities to help them
achieve their potential in all aspects of life
including work, leisure and social activity within
the community. It is anticipated that the system
will enable Reclaim to save both money and
energy as the system has the potential to produce
1771 kWh of free electricity per annum and
offset 915kg of CO² per annum.
Through our social housing contracts we have
delivered advice and guidance to tenants as
part of our drive to reduce the environmental
impacts of our construction activities.
We have continued in our drive to reduce our
carbon footprint; our employees are working
hard to reduce the Group’s carbon footprint and
reduce our energy levels to a more sustainable
level of consumption. We have a duty to ensure
that we are as efficient as possible to provide
the best possible service to our customers
while reducing unnecessary negative
environmental impacts.
Our achievements
We were successful again in the CIOB
(East Midlands) Awards where we won the
Environment Award; in addition we were highly
commended at the Greenbuild Awards for our
domestic retrofit of ground source heat pumps
for Yorkshire Housing.
Our carbon footprint
Henry Boot Group CO2e footprint
by source 2013
Our greenhouse gas emissions for
the year ended 31 December 2013 were
calculated in accordance with the GHG Protocol
Corporate Accounting and Reporting Standard
(revised edition) and emission factors from
UK Government GHG Conversion Factors
for Company Reporting 2013. The calculation
incorporates the six Kyoto gases, including
carbon dioxide, methane, nitrous oxide and
hydrofluorocarbons (HFCs), and reports them
in tonnes of carbon dioxide equivalents (CO2e).
33%
Electricity
Natural gas
7%
Refrigerant gas <1%
8%
Gas oil
Business mileage 5%
Company owned 47%
vehicles
Henry Boot Group CO2e emissions
Scope 1: Combustion of fuel and operation of facilities
Scope 2: Electricity, heat, steam and cooling purchased for own use
Total direct emissions
Total direct emissions per employee*
Scope 3: Upstream and downstream indirect emissions
Total emissions
Total emissions per employee*
* Employee numbers are based on the monthly average for the year.
Carbon emissions by segment
2013
Tonnes
2,370
1,215
3,585
8.0 tonnes CO2e
1,016
4,601
10.2 tonnes CO2e
Henry Boot Group CO2e emissions
Property investment and
development
Land development
Construction
Group overheads
Total gross controlled emissions
2013
Intensity
ratio
Tonnes
of CO2e
2.04
4.21
41.44
3.98
2013
Tonnes
of CO2e
1,022
122
3,254
203
4,601
Intensity
basis
per 1,000 sq ft of investment
property with communal areas
per employee
per £1m of turnover
per employee
Methodology
Using the operational control consolidation
method we have reported on all scope 1 (direct)
and scope 2 (indirect) emissions required under
the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 and have
voluntarily included some of our scope 3
emissions. These sources fall within our
Consolidated Financial Statements. We do not
have responsibility for any emission sources
that are not included in our Financial Statements.
Emissions relating to subsidiaries for which we
have operational control have been included at
100% and emissions relating to joint ventures
for which we have 50% operational control have
been included at 50%. This is consistent with the
treatment of subsidiaries and joint ventures within
our Financial Statements.
Natural gas use
Electricity use
Potential boundary
for Group emissions
Scope 1
emissions
Assessment
boundary
Scope 2
emissions
Scope 3
emissions
Refrigerant gas loss
Company owned
vehicles
Gas oil use
Business mileage
Fuel, well to tank and
electricity transmission
and distribution
Waste disposal
Water consumption
Biogenic CO2
www.henryboot.co.uk
35
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC
Strategic report
Corporate responsibility
continued
Key performance indicators
We have identified a number of key performance indicators (KPIs) against which we measure
our corporate responsibility. These are monitored during the year and action taken if necessary.
Accident frequency rate (AFR)
(per 100,000 hours worked)
0 -0%
0
0
0
13
12
11
10
Accident frequency rate (AFR)
(per 10,000 hours worked
inclusive of sub-contractors)
0.06 -70%
Personal development (days)
1,306 +20%
13
0.06
12
11
10
0.28
0.20
0.31
13
12
11
10
0.46
1,306
1,085
927
649
Commitment: Our Health and Safety
Commitment: Our Health and Safety
Commitment: Our People
Objective: To ensure a reducing number of
health and safety incidents when measured
against the Constructing Excellence Health
and Safety KPIs.
Objective: To ensure a reducing number of
health and safety incidents when measured
against the Constructing Excellence Health
and Safety KPIs.
Comments: Another successful year of zero
incidents affecting our directly employed staff.
Comments: Our ongoing education of our
subcontractors and the closer monitoring of
their working practices has resulted in a year
on year reduction of 70%.
Objective: To ensure that our employees are
trained to the appropriate level and are given
adequate opportunity to develop their careers.
Comments: A 20% increase in the number
of training days delivered over the period.
Reportable accidents
Employee profile
BITC Environmental Index
1 -66%
1
13
12
11
10
3
5
450 +2%
97% +2%
13
12
11
10
12
450 (347 males/103 females)
438 (338 males/100 females)
439 (347 males/92 females)
496 (387 males/109 females)
13
12
11
10
97%
>95%
91%
77%
Commitment: Our Health and Safety
Commitment: Our People
Commitment: Our Environment
Objective: To ensure a reducing number
of health and safety incidents when measured
against the Constructing Excellence Health
and Safety KPIs.
Comments: It is an ongoing priority and focus
of the Group to commit to ensuring health and
safety is paramount. 2013 saw a further 66%
reduction in the number of reportable accidents.
Objective: To ensure a diverse spread
of genders within all job roles in the Group.
Comments: We currently have a gender split
of 77% male to 23% female. In order to address
this we are working closely with external
partners to encourage underrepresented
groups into the industry.
Objective: To be recognised by a recognised
body as being a leader in environmental
management in our region.
Comments: A 2% increase on the 2012
score. Due to our consistent achievement and
improvement in rating, we are now classed as
platinum status which puts amongst the top
rated companies in Yorkshire & the Humber.
36
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Considerate Constructor Scheme
36.1 +4%
13
12
11
10
36.11
34.7
34.3
33.3
Commitment: Our Community
Objective: To be classified as a
‘good neighbour’ when scored against
the Considerate Constructor Scheme.
Comments: Another solid year of
performance which saw achievement
of several Scheme awards.
¹ The Considerate Constructor Scheme restated its
scoring mechanism in 2013 and increased the maximum
achievable score from 40 marks to 50 marks.
Recycling (diverted from landfill)
94% +1%
13
12
11
10
94%
93%
93%
92%
Commitment: Our Environment
Objective: To reduce the amount of
spoil going to landfill by recycling, reusing
or upcycling.
Comments: A further increase on the previous
year’s achievement. We continue to improve
our methods of work to try to reduce this
number further.
www.henryboot.co.uk
37
OverviewStrategic reportGovernanceFinancial statementsShareholder informationAnnual Report and Financial Statements 2013 Henry Boot PLC Governance
Chairman’s introduction
I am very pleased to once again introduce
the reporting of our corporate governance
arrangements for this year and to be able
to explain their importance and how these
arrangements work for the benefit of the
Company and its shareholders.
Henry Boot PLC, a premium listed company
on the London Stock Exchange, is subject
to the UK Corporate Governance Code
(the Code). The Code encourages me,
as Chairman, to report personally on how
its principles relating to the role and its
effectiveness of the Board have been applied.
The Board is committed to ensuring that it
provides effective leadership and demonstrates
high ethical standards as one demonstration
of it adding value to the Company. One of
the ways in which the Board achieves this is
by maintaining high standards of corporate
governance principles and practices in order
to facilitate the future success of the Company
and sustain this over time.
As Chairman, I am responsible for the
leadership of the Board and ensuring that
it operates effectively. The Board has agreed
clearly defined roles for myself and the Group
Managing Director. The Non-executive Directors
challenge management and contribute to
strategy. Board composition is extremely
important and there are three main requirements:
the balance of skills and experience, maintaining
a strong level of independence and objectivity,
and ensuring that all members have sufficient
knowledge of the Company and the context
in which we operate. Appointments to the
Board will always be made on merit against
objective criteria and the Board strongly
supports the principle of boardroom diversity.
The Board, its Committees and individual
Directors are subject to annual performance
evaluation and, as we act in shareholders’
interests, all Directors are subject to re-election
by shareholders at intervals of no more than
three years.
The Board considers that this Annual Report
is fair, balanced and understandable.
The remainder of this report contains the
narrative reporting variously required by the
Code, the Listing Rules and the Disclosure
Rules and Transparency Rules which I hope
you will find of interest.
Yours faithfully
J E Brown
Chairman
17 April 2014
John Brown
Chairman
38
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Corporate governance
statement
The Board
The Company is led and controlled by a Board
of Directors which is collectively responsible
for the continued success of the Company
and our key objective is to maximise
long-term shareholder value.
The Board consists of five Directors and their
biographical summaries appear in the Strategic
Report on page 8. Two of the Directors are
executive and the remaining three, including
the Chairman, are Non-executive. All Directors
served throughout 2013.
The Board’s role is to provide entrepreneurial
leadership of the Company within a framework
of prudent and effective controls that enables
risk to be assessed and appropriately managed.
It sets the Company’s strategic aims, reviews
management performance and ensures that
the necessary financial and human resources
are in place, and will continue to be in place for
the Company to meet its objectives, recognising
the importance of safety, environmental and
social factors. The Board also sets the Company’s
aims and values and ensures that its obligations
to its shareholders and others are understood
and met. Day-to-day management of the
Company’s subsidiaries sits with their
respective Board of Directors, each
led by a Managing Director.
Board composition
Non-executive Chairman
Executive Directors
Non-executive Directors
Understand
the key
business risks
and monitor
them
Report
to and obtain
shareholders
views on business
performance
Board
Provide
leadership on
the Company’s
strategy
Monitor
strategy
delivery, oversee
governance
and internal
controls
The Board continues to support and remains
committed to achieving and maintaining a
high standard of corporate governance. It
believes that such governance must reflect
the unique standing of the Company and the
composition of its shareholders, many of
whom have strong family ties to the Company,
as well as other stakeholders’ interests and,
above all, that governance must assist in the
effective attainment of corporate objectives.
During the accounting period under review,
the Company, as a premium listed company,
was subject to the September 2012 edition of
the UK Corporate Governance Code issued
by the Financial Reporting Council (FRC). The
UK Corporate Governance Code is publicly
available free of charge on the FRC website
at www.frcpublications.com.
The Code recognises that not all of its
provisions are necessarily relevant to smaller
listed companies and the Code states that
departures from its provisions should not
be automatically treated as breaches of the
Code. The Directors believe that the Code is
correctly applied as and where relevant to the
Company and are satisfied that in areas of
departure from the Code the departure is
for good reason.
In applying the principles of good governance,
including both the main principles and the
supporting principles, the policies adopted by
the Board therefore follow the Code’s guidelines
insofar that they assist the overall well-being of
the Company and its shareholders’ interests.
The Board’s approach is pragmatic where
adoption of all the supporting principles of the
Code is not an objective as such. Compliance
with good reason and departure with good
reason are discussed and agreed. Further
explanations of how the main principles and
the supporting principles have been applied
are set out on pages 40 to 42.
www.henryboot.co.uk
39
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Corporate governance statement continued
The Board continued
The Board retains a Schedule of Reserved
Matters which is reviewed annually to ensure
that strategy and key elements that might
affect the implementation of corporate goals
are adhered to. The Board is responsible for:
The Chairman is in regular contact with the
Group Managing Director to discuss current
matters and has visited Group operations
outside the scheduled Board meeting
calendar, to meet subsidiary company
Directors, managers and stakeholders.
The Board believes that setting specific
targets for the proportion of women on the
Board may lead to recruitment decisions
being made which are not aligned with this
key principle.
The Nomination Committee will ensure that it
only uses executive search firms which have
signed up to the voluntary Code of Conduct
addressing gender diversity and best practice,
that females are given the same consideration
and opportunity as male applicants and that
gender diversity is considered specifically when
drawing up a list of potential candidates.
Conflicts of interest
Under the Companies Act 2006 a director
must avoid a situation where they have, or
could have, a direct or indirect interest that
conflicts, or possibly may conflict with the
Company’s interests. The Act allows directors
of public companies to authorise conflicts and
potential conflicts, where appropriate, where
the articles of association contain a provision
to this effect. The Company’s Articles of
Association enable the Board to authorise
Directors’ conflicts of interest. In order to
address this issue, conflicts of interest are
reported by Directors to the Company
Secretary and in turn through the Board
meeting processes. The Board considers a
register of interests and potential conflicts of
Directors and gives, when appropriate, any
necessary approvals.
There have been no conflicts of interest
reported to the Board during the year.
Board balance and independence
For the purposes of the accounting period
under review, J E Brown and M I Gunston are
the independent Non-executive Directors and,
with the Company being a ‘smaller company’
as defined by the Code, they fulfil the requirement
for having two such Directors. M I Gunston is
the senior independent Director of the Company.
J J Sykes was appointed to represent the
substantial shareholdings of the Reis family
interests (see page 62) and is not regarded as
an independent Non-executive Director.
A key principle of the Group’s Equality and
Diversity Policy is that the Nomination Committee
of the Board will always appoint on merit.
The Board recognises the benefits of diversity
and we consider that diversity includes (but
is not limited to) personal attributes, gender,
ethnicity, age, disability and religious beliefs.
Our aim is to promote equality, respect and
understanding and to avoid discrimination.
Whilst we value the recommendations of the
Davies Report, we do not have a specific
objective for the number of female Directors.
We do not currently have a female main Board
Director and we are committed to ensuring
that appointments made to the Board, and at
senior management level, are made on merit.
The roles of the Non-executive Chairman and the Group Managing Director
Chairman:
John Brown
Group Managing Director:
Jamie Boot
Runs the Henry Boot PLC Board and has
overall responsibility for the management
of the Committees (Audit, Remuneration
and Nomination) of the Board
Has an oversight role and is available
to all shareholders
Runs the Company and its subsidiaries
Acts as Chairman of the subsidiaries and
attends all the subsidiary Board meetings
Has overall responsibility for strategy,
annual budgets, interaction with the City
and market forecasts
Allocates responsibilities for the running of
subsidiary companies, finance, company
secretarial, legal, insurance, HR and IT to the
department heads or subsidiary Managing
Directors as applicable
Day-to-day operational management is
devolved to management within each
subsidiary business
I strategy and objective setting;
I capital structure and ensuring
funding adequacy; and
I effective internal controls.
At its regular Board meetings there is a series
of matters that are dealt with, including a
health and safety review, a finance review,
including pensions, operational reviews on all
the main trading subsidiaries and a secretarial
review encompassing corporate governance,
risk, shareholder matters, legal and insurance.
The Board also reviews strategy, budgets and
matters relating to internal controls as appropriate.
The subsidiary Board meetings are attended
by the two main Board Executives, accompanied
by the Company Secretary. Operational
decisions affecting each subsidiary are taken
by the individual subsidiary Boards at
their meetings.
All Directors have access to the Company
Secretary and there is in place a written
procedure for all Directors to take
independent professional advice.
The Company Secretary is responsible for
information flows between the Board, its
Committees and the Boards of subsidiary
companies. Formal inductions for new
Directors are being developed, along with
continued professional development training.
The Company Secretary also ensures
procedures, regulations and law are followed
and advises the Board on governance issues.
Board effectiveness
The roles of the Non-executive Chairman,
J E Brown, and the Group Managing Director,
E J Boot, are clearly defined and they act
in accordance with the main and supporting
principles of the Code.
The split of responsibilities between the
Chairman and the Group Managing Director
are summarised opposite.
The Chairman is responsible for leadership of
the Board and ensuring it operates effectively.
The Directors possess an appropriate balance
of skills, experience, independence and
knowledge of the Company to enable them
to discharge their respective duties and
responsibilities effectively.
The Chairman resigned as a Non-executive
Director of Norcros plc on 24 July 2013 and
his other significant commitments can be
found in his biography on page 8.
40
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 “ The Executive
Directors’ performance
is reviewed annually
by the Remuneration
Committee to ensure
that they continue to
contribute effectively
to the Group’s
overall objectives.
The Non‑executive
Directors’ performance
and commitment is
kept under review
throughout the year
by the Executive
Directors.”
How we assess and refresh the Board
and its Committees
There are three ways in which we ensure that
Directors continue to provide suitable leadership
and direction to the Company: performance
evaluation, succession planning, and annual
re-election by shareholders.
Performance evaluation
The Executive Directors’ performance is
reviewed annually by the Remuneration
Committee to ensure that they continue to
contribute effectively to the Group’s overall
objectives. The Non-executive Directors’
performance and commitment is kept under
review throughout the year by the Executive
Directors. The Non-executive Directors meet
without the Chairman to discuss the performance
of the Chairman at least twice a year.
A performance evaluation of individual Directors
was carried out and there was a formal
evaluation of the Board and its Committees
in 2013.
Succession planning
The Nomination Committee is responsible for
reviewing the structure, size and composition
of the Board and ensuring that the balance of
knowledge, skills and experience are right for
the Group. The Committee is also responsible
for long-term succession planning at both
Board and key senior management level.
The Board also recognises the importance
of diversity and is comprised of members
with a wide range of experience from
a variety of business backgrounds.
Annual re-election by shareholders
All Directors are required to be re-elected at
intervals of no more than three years and newly
appointed Directors are subject to election at
the Annual General Meeting (AGM) following
their appointment. The Nomination Committee
has conducted a formal performance evaluation
of the Non-executive Director seeking re-election
and has concluded that his performance
continues to be effective and that he continues
to demonstrate commitment to the role. The
Committee is also satisfied that the backgrounds,
skills, experience and knowledge of the Company
of the continuing Directors collectively enables
the Board and its Committees to discharge their
respective duties and responsibilities effectively.
Director
J E Brown
E J Boot
J T Sutcliffe
M I Gunston
J J Sykes
Board
7/7
7/7
7/7
7/7
7/7
Training and development
The Board received appropriate training and
updates on various matters as part of the
regular Board meetings. All Directors are
offered the opportunity and are encouraged
to continue their professional development
and update their commercial and Company
knowledge as required.
Board and committee meetings
Throughout the year, there were seven Board
meetings attended by all Directors. In addition,
the Board must also delegate some of its
duties and powers to committees to deal
with specific business needs. The Board has
formally constituted Audit, Remuneration and
Nomination Committees. Each committee
and its members are provided with accurate,
timely and clear information and sufficient
resources to enable them to undertake their
duties. Two Audit Committee meetings,
one Nomination Committee meeting, one
Remuneration Committee meeting and the
AGM were held in 2013. Attendance at the
Board meetings and committee meetings held
during 2013 is set out in the table below. The
Non-executive Directors meet without the
Executive Directors being present usually just
prior to Board meetings. The Board considers
that the Non-executive Directors constructively
challenge both the Executive Directors and
subsidiary Company management at Board
meetings and through ad hoc discussions.
subsidiary Company Managing Directors
attend Board meetings on a rotational basis to
present their operational business plans and
strategy to the Board. Further details of each
of the above committees can be found on
pages 43 to 59.
Risk management and internal control
The Board is responsible for the Company’s
internal controls and operates and maintains
a system of internal controls which is reviewed
regularly for its effectiveness and which broadly
accords with the Turnbull Committee guidance
thereon. Whilst the system of internal control is
designed to manage, rather than eliminate, the
risk of failure to achieve the Company’s business
objectives, it can only provide reasonable, not
absolute, assurance against material misstatement
or loss. The system is, and has been, an ongoing
process for identifying, evaluating and managing
the significant risks faced by the Company. It
has been in place for the period under review
and up to the date of the approval of the Annual
Report and Financial Statements. No material
weaknesses have been identified by the
system in the year.
Audit
2/2
—
—
2/2
2/2
Remuneration
1/1
—
—
1/1
1/1
Nomination
1/1
—
—
1/1
1/1
www.henryboot.co.uk
41
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Corporate governance statement continued
Risk management and internal
control continued
The following key processes are considered
by the Board to provide effective management
of significant risks to the business:
Directors review and report to the Audit
Committee on the effectiveness of the
systems of internal controls in place and
any matters of concern are raised at
Board meetings.
I the business organisation and structured
reporting framework – each of the Company’s
activities is monitored through bi-monthly
management meetings and formal bi-monthly
subsidiary company Board meetings. The
latter are attended by the Board’s Executive
Directors and chaired by E J Boot. Formal
lines of responsibility and levels of authority
are in place within each subsidiary company.
Annual plans, budgets (with two out-post
years) and performance criteria for each
business are set by the Executive Directors
and performance against these targets is
reviewed monthly by the Board. Annual profit
forecasts and 15 month cash flow forecasts
are produced on a monthly basis. The Board
monitors the risks and associated controls over
financial reporting processes, including the
consolidation process. The financial reporting
controls are monitored and maintained through
the use of internal control frameworks which
address key financial reporting risks, including
risks arising from changes in the business
or accounting standards. Operations on the
ground are also monitored frequently by way
of visits to sites, depots, properties and regional
offices by the Executive Directors; and
I centralised operations – specific risks and
compliance issues associated with health
and safety, treasury and banking operations,
company secretarial, pensions, legal, human
resources and training, public and investor
relations, information communication
technology and insurance are managed
centrally and report functionally to the
appropriate Executive Director responsible
for that particular operation.
Each operation reviews its own system of
internal controls and reports twice a year
to the Audit Committee:
I business procurement – development
appraisals, land purchases, options and
construction contracts above a certain value
require the authority of the Executive Directors
to proceed. A strict routine covering the
authorisation of capital expenditure is in place
and Board approval is required for any
corporate acquisition or disposal; and
I day-to-day operations – responsibility for
running the day-to-day operations and for
reviewing the associated systems of control
is devolved to each subsidiary company
Managing Director. Policy and procedure
manuals cover major areas of their operations,
including safety, purchasing, estimating,
marketing, production and quality. The
subsidiary company Managing
42
www.henryboot.co.uk
Whistleblowing arrangements
The Company has operated a ‘whistleblowing’
arrangement throughout the year whereby
all employees of the Group are able, via an
independent external third party, to confidentially
report any malpractice or matters of concern
they have regarding the actions of employees,
management and Directors and any breaches
of the Company’s Anti-Bribery and
Corruption Policy.
Anti-Bribery and Corruption Policy
The Company values its long-standing
reputation for ethical behaviour and integrity.
Conducting its business with a zero tolerance
approach to all forms of corruption is central
to these values, the Group’s image and
reputation. The Company policy sets out the
standards expected of all Group employees in
relation to anti-bribery and corruption and the
Board has overall responsibility for ensuring
this policy complies with the Group’s legal and
ethical obligations and that everyone in our
organisation complies with it.
This policy is also relevant for third parties
who perform services for or on behalf of the
Group. The Group expects those persons
to adhere to this policy or have in place
equivalent policies and procedures to
combat bribery and corruption.
A review of the current policy was
commenced in autumn 2013.
Accountability and audit
Details of the Directors’ responsibilities and
the Directors’ Responsibility Statement are
contained on page 66. The Independent
Auditors’ Report is given on pages 68 to 71.
The Directors’ statement in respect of the
business as a ‘going concern’ is provided
in the Directors’ Report on page 60.
Shareholder accountability
The Company actively communicates with
its institutional and private shareholders and
likewise receives feedback from them. It is this
close relationship with shareholders that is
seen as one of the particular strengths and
characteristics of the Company.
During the year a number of formal
presentations were made by members of the
Board to institutional shareholders; feedback
from visits to institutional shareholders is
provided to the Board by our stockbrokers.
The Company uses the Investor Relations
section of its website, www.henryboot.co.uk,
to publish statutory documents and
communications to shareholders, such as
the Annual Report and Financial Statements,
and Half-yearly Report, as its default method
of publication. The website is designed to be
a two-way communication process with both
present and potential investors and includes
all London Stock Exchange announcements,
presentations to analysts and press releases
over the last twelve months and also links
to the websites of our four principal
operating subsidiaries.
Shareholders may choose to receive the
Annual Report and Financial Statements
and Half-yearly Report in paper form but
the Board believes that by utilising electronic
communication, it delivers savings to the
Company and has environmental benefits
through reduced consumption of paper and
inks, as well as speeding up the provision
of information to shareholders in the future.
The attendance and participation of all
shareholders at the AGM is much encouraged.
At the AGM held in May 2013 proxies were
received representing 75.35% of the number
of shares in issue and is a demonstration of
shareholders’ active involvement in the affairs
of the Company.
Further information for shareholders can
be found in the Directors’ Report under
Shareholder information on pages 63 to 65.
Compliance statement
The Company has complied with the vast
majority of the provisions of the September 2012
edition of the UK Corporate Governance Code,
applicable to all premium listed companies.
The following provisions are those where the
Company is not strictly in compliance with the
Code. For the reasons stated the Directors
believe that the Company’s stance is justified
in this respect.
A.4.2, B.6.3
The performance of the Chairman is
appraised by the Executive Directors as is
the performance of the other Non-executive
Directors. As Henry Boot PLC is a smaller
listed company, it is felt that this is the most
appropriate approach.
D.2.2, D.2.3
The Chairman and the two Non-executive
Directors are members of the Remuneration
Committee; their remuneration is set by the
Executive Directors. As Henry Boot PLC is
a smaller listed company, it is felt that this
is the most appropriate approach.
R A Deards
Company Secretary
17 April 2014
Henry Boot PLC Annual Report and Financial Statements 2013
Nomination Committee report
Those serving as members of the
Nomination Committee (the Committee) in
2013 were J E Brown, Non-executive Chairman,
M I Gunston, Non-executive Senior Independent
Director, and J J Sykes, Non-independent
Non-executive Director. Biographies of the
members of the Committee are shown on
page 8.
Terms of reference
The terms of reference for this Committee fully
incorporate the Code’s provisions in relation
to its roles and responsibilities and are
available for inspection at the Company’s
registered office.
Role of the Committee
The principal responsibility of the Committee is
to consider succession planning and appropriate
appointments to the Board and to senior
management, so as to maintain an appropriate
balance of skills, knowledge and experience
within the Company, and its duties include:
I overseeing the identification, selection
and appointment of Directors;
I reviewing the structure, size, composition
and leadership needs of the Board;
I considering other commitments of Directors
relative to the time required for them to fulfil
their duties; and
I periodically evaluating the effectiveness
of the Board.
The Committee has access to external
professional advisers where required to fulfil
its responsibilities.
Meetings during the year
The Committee met once during the year.
Attendance at this meeting by the Committee
members is shown in the table on page 41.
Nomination Committee matters are also
discussed at each Board Meeting.
J E Brown
Chairman of the Nomination Committee
17 April 2014
John Brown
Committee Chairman
www.henryboot.co.uk
43
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Audit Committee report
Those serving as members of the Audit
Committee (the Committee) in 2013 were
J J Sykes (Committee Chairman), J E Brown
and M I Gunston. Biographies of the members
of the Committee are shown on page 8.
We all have many years of financial and
business experience and both John Brown
and I have relevant accounting qualifications
and experience.
Terms of reference
The terms of reference for this Committee fully
incorporate the Code’s provisions in relation
to its roles and responsibilities and are
available for inspection at the Company’s
registered office.
Role of the Committee
The Committee’s responsibilities include,
amongst other matters, the following:
taken into account, together with consideration
of all relationships between the Company
and the external auditors and their staff.
Relations with the external auditors are
managed through a series of meetings
and regular discussions and we ensure a
high quality audit by challenging the key
areas of the external auditors’ work;
I to review and make recommendations
to the Board in relation to the Half-yearly
and Annual Reports;
I to oversee the selection process with
regard to external auditors, to consider
the appointment/re-appointment of
external auditors and make appropriate
recommendations through the Board
to the shareholders to consider at the
Annual General Meeting (AGM);
I to review the Company’s procedures for
handling reports by ‘whistleblowers’;
I to review and consider the scope and
I to consider annually whether there is a
effectiveness of the Company’s financial
controls, Company internal control and risk
management systems;
I to review the annual management report
of the auditors, the level of fees charged
by the auditors for non-audit services, the
independence and objectivity of the auditors
and the proposed nature and scope of their
work before the audit commences. Details
of fees paid for non-audit services are set
out in note 3 to the Financial Statements.
The level of these fees and the services
provided are reviewed by the Committee
to ensure that they do not threaten auditor
objectivity and independence. During the year,
the Committee reviewed the independence
and objectivity of the external auditors,
which was confirmed in an independence
letter containing information on procedures
providing safeguards established by the
external auditors. Regulation, professional
requirements and ethical standards are
need for an internal audit function and make
recommendations to the Board. However,
from past experience, the use of this function
has not resulted in added value to the
business and this continues to be the view of
the Committee in its deliberations this year;
I to monitor the integrity of the Financial
Statements of the Company and any formal
announcements relating to the Company’s
financial performance; and
I to review annually the Company’s
anti-bribery policy.
Meetings during the year
The Committee met twice during the year,
with the Company’s auditors in attendance
for part of each meeting. Attendance at these
meetings by the Committee members is
shown in the table on page 41.
Audit Committee matters are also discussed
at each Board meeting.
James Sykes
Committee Chairman
44
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 In accordance with best practice, the Company
also requires its external auditor to rotate every
five years. The statutory auditor signing the
Audit Report is Mr Andy Ward who was
appointed as the lead partner this year. He
replaces by rotation Mr Ian Morrison who has
been the statutory auditor since 2010.
The external auditors are also required to
assess whether, in their professional opinion,
they are independent on an annual basis, and
those views are shared with the Committee.
The Committee is satisfied that the
independence of the external auditors is not
impaired, in particular, due to the fact that the
senior statutory auditor has rotated this year,
and that the amount of non-audit fees are at
a level which does not impact on the statutory
auditors’ independence and objectivity.
Committee activities during the year
In 2013 the principal activities of the Committee
and the way in which it discharged its
responsibilities were as follows.
Financial Statements
The Committee reviewed the Group’s draft
Financial Statements, interim Financial
Statements, Preliminary Statements and
reports from the external auditors on the
outcome of its reviews and audits in 2013.
Significant accounting matters
The Committee considered the following key
accounting issues and matters of judgement
in relation to the Group’s Financial Statements
and disclosures relating to:
Going concern
The Committee reviewed and considered in
depth papers relating to the going concern
disclosure in the Financial Statements. The
Financial Statements disclose the conclusion
of these reviews on page 60.
Construction accounting judgements
As more fully explained in our accounting policy
on construction contracts, a significant element
of turnover is undertaken via construction
contracts accounted for in accordance
with those accounting policies.
Contract costs and revenues may be affected
by a number of uncertainties that are dependent
on the outcome of future events and therefore
estimates may need to be revised as events
unfold and uncertainties are resolved.
During the year, the Committee examined
the judgements and methodologies applied
to uncertainties and were in agreement
with the position adopted.
Valuation of investment property
Investment property is valued at fair value
and, other than houses, is valued externally
by independent valuers twice each year.
Investment property in the course of
construction is also valued at fair value. The
Committee critically reviewed the valuations
for the assets described above and was
content with the values adopted.
Valuation of inventory
Our inventory, the vast majority of which is held
within our strategic land business, is stated
at the lower of cost or net realisable value.
The disposal of this inventory is inherently
difficult to quantify due to the uncertainty of
timing of transactions and the vagaries of the
UK planning system. Therefore the portfolio
of inventory is subject to regular review by the
Board and senior management by reference
to development appraisals, planning agreements
and market demand.
Independence of the external auditors
In order to ensure the independence of
the external auditors, the Committee monitors
the non-audit services provided by them to
the Group and has adopted a policy on the
provision of non-audit services by the external
auditors with the objective that such services
do not impair the independence or objectivity
of the external auditors.
The Committee is required to approve services
provided by the external auditors in excess
of £25,000 and reviews generally all services
provided by them to assess their independence
and objectivity in the light of that work. These
reviews are undertaken to ensure that the
performance of regulatory requirements is
not impaired by the provision of permissible
non-audit services.
In 2013 the external auditors performed services
in respect of a covenant review for the Pension
Trustees in respect of the Triennial Valuation
and assistance in securing an amendment
to the Pension Protection Fund Levy. In both
cases the appointment of PwC was considered
to be the most efficient and therefore cost
effective solution.
The external auditors also perform taxation
services for the Group. It is the Committee’s
opinion that having the same firm perform
both services is the most efficient method.
www.henryboot.co.uk
45
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Audit Committee report continued
“ Discussions took place
between the Audit
Committee, the Henry
Boot PLC finance
function and the
subsidiary company
management teams
in order to gauge the
efficiency of the audit
approach undertaken.”
Committee activities during the year
continued
Audit quality and approach to audit tender
The Henry Boot PLC Audit was put out to tender
four years ago and PricewaterhouseCoopers LLP
were awarded the work from a short list of
four firms who tendered.
Discussions took place between the Audit
Committee, the Henry Boot PLC finance function
and the subsidiary Company management
teams in order to gauge the efficiency of the
audit approach undertaken. Furthermore, the
Committee Chairman and Committee conduct
their own ongoing assessment through the
quality of the external auditors’ reports and the
statutory auditor’s interaction with the Committee.
The Committee remains satisfied with the
efficiency and effectiveness of the audit and
therefore does not consider it necessary for
the audit to be re-tendered at this stage. The
Committee continues to be satisfied with the
work of the external auditors and its
objectivity and independence.
Details of all amounts paid to the auditors
for audit services are set out in note 3 to
the Financial statements.
The Committee recommends to the Board
that PricewaterhouseCoopers LLP be re-
appointed at the AGM and that the Directors
are authorised to fix their remuneration.
The Committee recognises the new code
requirement that the external audit contract
should be put out to tender every ten years,
notwithstanding that this requirement is
waived in respect of smaller companies
such as Henry Boot PLC.
Risk management and controls
Details of the key risks which face the Group,
the key controls in place to control those risks
and the system of risk management adopted by
Henry Boot PLC are set out on pages 26 to 29.
The Committee has evaluated the
effectiveness of the internal controls and
the risk management system operated.
The evaluation covered all controls including
financial, operation, risk management
and compliance.
Internal Audit
Henry Boot PLC does not have a specific
internal audit department. The need for an
internal audit department is considered from
time to time and currently it is not felt that the
benefits would outweigh the costs. If required,
external specialists are brought in to perform
specific reviews of areas considered a risk.
Accountability
The Committee, in having reviewed this
Annual Report, considers that the report
is fair, balanced and understandable. The
report is clear and concise in its summary of
performance in the financial year. All material
matters of interest to shareholders and external
stakeholders have been reported to provide
the information required to assess the Group’s
performance, business model and strategy.
J J Sykes
Chairman of the Audit Committee
17 April 2014
46
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Remuneration
Committee report
Michael Gunston
Committee Chairman
On behalf of the Board and the Remuneration
Committee (the Committee), I am pleased to
present the Henry Boot PLC (the Company)
Remuneration Report for the year ended
31 December 2013.
Role of the Committee
The members of the Committee during the
year were myself (Chairman), J E Brown and
J J Sykes. J E Brown and I are independent
Non-executive Directors of the Board.
It has been prepared in accordance with the
requirements of the Companies Act 2006 and
the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment)
Regulations 2013 and is split into two sections:
1. The Annual Report on Remuneration sets
out payments and awards made to the
Directors and details the link between
performance and remuneration for 2013.
This is subject to an advisory shareholder
vote at this year’s Annual General Meeting
(AGM) (please see Resolution 9).
2. The Directors’ Remuneration Policy on
pages 48 to 53 sets out the Company’s
intended policy on Directors’
remuneration to be effective from the
AGM on 22 May 2014 and is subject to a
binding vote at this year’s AGM and at least
every third year thereafter (please see
Resolution 10).
With the exception of:
a. the total shareholder return graph;
b. the Executive Directors’ remuneration history
and remuneration change tables;
c. the relative importance of spend on pay
tables; and
d. the consideration by the Directors of matters
relating to remuneration and the statement
of shareholder voting,
the information set out on pages 54 to 59 of
the Annual Report on Remuneration is subject
to audit.
Terms of reference
The terms of reference for this Committee
fully incorporate the codes provisions in
relation to its roles and responsibilities and
are available for inspection at the Company’s
registered office.
The primary role of the Committee is to:
1. review, recommend and monitor the level and
structure of the remuneration packages of the
Executive Directors and senior management;
2. set and approve the remuneration package
for the Executive Directors; and
3. determine a balance between base pay
and performance related elements of the
remuneration package in an effort to align
the interests of shareholders with those of
the Executive Directors.
Meetings during the year
The Committee met once during the year.
Attendance at this meeting by the Committee
members is shown in the table on page 41
and further details can be found on page 59
of this report.
Summary of the Committee’s
activity during 2013
1. Reviewed the Executive Directors’ base pay
and benefits for 2013 and 2014. Annual
inflationary salary rises for the Executive
Directors at 1 January 2013 were 2% and
from 1 January 2014 have been set at 3%.
There were no changes to benefits. Below
Board level, the average pay increase across
the Group was 3.23% in 2013 and 3.65%
in 2014.
2. Reviewed the Long-Term Share Incentive
Plan (LTIP) performance metrics and level
of reward for the year under review.
3. Debated and then devised a revised
Remuneration Policy for approval by the
shareholders at the forthcoming AGM.
4. Reviewed the performance of the Executive
Directors for 2013 and against that
background, set performance targets
for 2014.
www.henryboot.co.uk
47
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Summary of the Committee’s activity
during 2013 continued
The Committee considered the results
achieved for the year ended 31 December
2013 against the targets set for that year in
terms of the discretionary bonus scheme in
operation for 2013. The performance factors
the Committee took into consideration when
determining the bonus were:
1. budget profit before tax was exceeded
by 9%;
2. consensus market expectations were
exceeded by 15%;
3. the restated prior year’s profit before tax
was exceeded by 37%;
4. year end debt forecast was achieved;
5. NAV, earnings and dividends per share
all exceeded budget; and
6. total shareholder return in the year was 52%.
On the basis of these measures, the Committee
awarded a bonus of 100% of salary to the
Executive Directors.
The Committee has reviewed the discretionary
bonus scheme previously available to Executive
Directors and has amended it as disclosed
in the Remuneration Policy on page 49.
the criteria, as reported in the Remuneration
Policy on page 50, to align them more closely
to the key underlying drivers of long-term
shareholder value.
This states that, with effect from 1 January 2014,
the annual bonus scheme will have a more
explicit link to target profit (before tax) and a
small percentage (10%) for individual targets.
Therefore, in future, the performance measures
will be split equally between growth in earnings
per share, return on capital employed and total
shareholder return.
A stringent threshold has been set at 90% of
target profit at which a bonus of 10% of salary
would be payable. Furthermore, a maximum
level of 120% of salary has been set for
exceeding target by more than 50%. REMCOM
considers that the performance required to
trigger this maximum level is very stretching.
The Committee also reviewed the current LTIP
scheme performance metrics in connection with
the Group’s performance for the three years
ended 31 December 2013 with the result that
50% of the shares initially granted will vest.
Grants of 100% of salary will be awarded for the
period 2014–16. The Committee, as mentioned
above, reviewed the performance measures in
respect of this and future grants and has revised
Should you have any queries or comments, then
please do not hesitate to contact me or the
Company Secretary as we most certainly value
dialogue with our shareholders.
We strongly believe that our Directors’
Remuneration Policy is closely aligned to
the achievement of the Company’s business
objectives and therefore to our shareholders’
interests. I therefore hope that you will be
able to support the Committee’s Policy and
Remuneration Report at this year’s AGM.
M I Gunston
Chairman of the Remuneration Committee
17 April 2014
Remuneration policy
Linking remuneration with strategy
In order to align the remuneration of our Executive Directors with the Group’s key strategic objective of maximising long-term shareholder value,
we reflect the following priorities within our remuneration principles.
Alignment with strategy
I Stretching profit and therefore earnings per share performance targets are key drivers to long-term shareholder value
growth. These are important performance elements of the annual bonus and long-term share incentive plans.
Alignment with
shareholders
I A significant part of the potential remuneration package is delivered in shares and the performance measures to
achieve that element of remuneration incorporate growth in earnings, company capital and shareholder returns,
aligning shareholder interests to remuneration.
I There are minimum shareholding criteria for Directors, which are currently significantly exceeded by the Executive Directors.
Attracting and retaining
the right people
I Our remuneration policy is designed to attract, motivate and retain a high quality group of talented individuals
over the long term who are incentivised to deliver the strategy through a clear link between reward and
performance without taking excessive risks.
I We seek to ensure that Director and senior management salaries are set in relation to their peers and other
available opportunities and by reference to the wider workforce. At the same time we ensure that we do
not pay more than is necessary or reward failure.
The Company policy on remuneration is designed to ensure that Executive Directors earn sufficient remuneration to be motivated to achieve our
strategy with the addition of appropriate incentives, once again aligned to strategy, that encourage enhanced performance without excessive risk.
The Committee annually reviews market practices and levels of remuneration for directors in similar roles within companies of comparable sizes and
complexity. This review takes into account remuneration within our wider workforce, pay increases awarded and bonus levels generally in the Group
with the aim that we reward all employees fairly according to their role, performance, the economic environment and the Group’s financial performance.
48
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Remuneration policy continued
Policy table
Element
Salary
Purpose and
link to strategy
Core element
of the Executives’
fixed remuneration
reflecting the role,
experience and
comparable
companies
in the FTSE.
The Committee
also gives
consideration
to whether the
basic salary is
a competitive
benchmark to
recruit and retain
executive talent.
Benefits
These are provided
on a market
competitive basis.
Operation
Opportunity
Performance measures and changes
None. However, individual
performance is one of the
considerations in setting
salary levels.
None.
Salary increases will
normally be in line with
the wider Group. The
Committee will consider
any increase out of line
with this very carefully.
Higher increases may be
awarded in exceptional
circumstances. These
could include:
(i) relevant commercial
factors;
(ii) increasing scope
and responsibility;
(iii) promotional increases;
and
(iv) falling below market
positioning.
The Committee considers
that the level of benefits
provided is market
consistent.
The cost of providing
benefits is borne by the
Company and varies
from time to time.
The Committee reviews base
salaries annually, taking into
consideration:
(i) the value of the individual to the
Group, their skills, experience
and performance;
(ii) pay increase levels in the
Group and more generally
in the marketplace; and
(iii) the Group organisation
profitability and prevailing
market conditions.
Executive Directors
currently receive:
(i) a car allowance;
(ii) private health insurance;
(iii) permanent health insurance;
(iv) death in service cover; and
(v) participation in the SAYE Scheme.
The Committee reviews the level
of benefit provision from time
to time and has the flexibility to
add or remove benefits to reflect
changes in market practice or the
operational needs of the Group.
Pensions
Annual bonus
Help retain and
recruit Directors,
ensuring an adequate
retirement income.
E J Boot has had his pension
in payment since late 2012 on
actuarial advice. J T Sutcliffe
is a member of the defined
contribution scheme.
20% of basic salary. Paid
either as salary in lieu or
pension contributions.
None.
Challenging but achievable
operational and individual targets
are determined at the beginning
of the financial year.
To incentivise the
delivery of financial
performance,
operational targets
and individual
objectives.
Targets are reviewed annually
and any payment is determined
by the Committee after the year
end based on targets set for the
financial period. Bonus is paid
in cash. There is no deferral of
bonus and there are no malus
or clawback provisions in the
bonus scheme.
The Committee has the discretion
in exceptional circumstances to
change performance measures
and targets part-way through
a performance year if there
is a significant event which
causes the Committee to
believe the original measures
and targets are no longer a
fair and accurate measure
of business performance.
Normal bonus
opportunity 100%
of salary, of which
90% on financial
performance, 10%
on other individual
measures.
Financial measure
90%–120% of target
profit. Bonus at 90%
equates to 10% of salary,
at 120% of target bonus
equates to 90%.
For exceptional
performance over 120%
and up to 150% of target,
a pro rata 20% of salary
may be payable, capping
total bonus at 120%
of salary.
www.henryboot.co.uk
49
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Remuneration policy continued
Policy table continued
Element
Long-term
incentive plan
Purpose and
link to strategy
The intention of
the Henry Boot
Long-Term Incentive
Plan is to provide a
clear and strong
link between the
remuneration of
Executive Directors
and the creation of
value for shareholders
by rewarding the
Executive Directors for
achieving longer-term
objectives aligned
closely to
shareholders’
interests.
Operation
Opportunity
Performance measures and changes
Current scheme rules
permit grants of up to
a maximum of 120%
of salary to be made
on an annual basis.
The Committee typically awards
LTIP shares annually to Executive
Directors equal to 100% of basic
salary. Awards vest after the third
anniversary of grant subject to
performance conditions.
The Committee has the discretion
in exceptional circumstances to
change performance measures
and targets part-way through
a performance year if there is a
significant event which causes
the Committee to believe the
original measures and targets
are no longer a fair and accurate
measure of business performance.
Vesting of the awards will
normally occur provided that
the participant is still employed
by the Group at the end of the
vesting period (subject to good
leaver provisions) and that the
performance targets for the
three year performance period
have been satisfied.1
The performance criteria for
awards granted in 2014 and
beyond will attach equal weight
to three stretching performance
measures which the Committee
believes align the interests of
Executives and shareholders.
1. One-third of the award
will depend on earnings per
share growth in excess
of inflation.
2. One-third of the award
will depend on return
on capital employed.
3. One-third will depend on
total shareholder return
calculations.
If these LTIP performance
conditions are achieved.
The Committee has to be
satisfied that, in its opinion,
the underlying financial
performance of the Group
over the measurement period
has been satisfactory.
Shareholder
guidelines
Non-executive
Director fees
The Committee
believes that
Executive Directors’
share ownership
aligns their interests
to those of
shareholders
generally.
The Board aims to
recruit and retain high
calibre Non-executive
Directors with the
relevant experience
required to achieve
success for the
Company and
its shareholders.
Executive Directors are required
to have acquired and retained a
shareholding of Henry Boot PLC
shares to the value of 100% of
their base salary. Executive
Directors are expected to retain
50% of any LTIP awards until
holdings reach the required level.
The fees of the Chairman
are determined by the Committee
and the fees of the Non-executive
Directors are determined by the
Board following a recommendation
from both the Group Managing
Director and the Chairman.
Non-executive Directors are not
eligible to participate in any of
the Company’s share schemes,
incentive arrangements or
pension schemes.
Notes to the policy table
1 Performance targets for shares vesting 2014, 2015 and 2016:
(i)
up to 50% of the award is dependent on earnings per share in excess of inflation;
Not applicable.
Both Executive Directors satisfy
the shareholding criteria.
None. However, individual
performance is considered on an
annual basis by the Chairman and
Group Managing Director.
Non-executive Directors
are paid a basic fee with
additional fees for chairing
Committees.
By the third anniversary
of their appointment to
the Board, Non-executive
Directors are required
to have acquired and
retained a holding of
Henry Boot shares
equivalent to the value of
50% of their base fee.
(ii) up to 50% of the award is dependent on adjusted net asset value growth compared to an industry standard investment property annual index; and
(iii) amounts derived in (i) and (ii) above are subject to an underpin based on Henry Boot’s total shareholder return in comparison to a comparator group of
companies. If Henry Boot is above the median when comparing TSR to the comparator group, the awards in (i) and (ii) are confirmed. If below the median,
the awards are reduced by 50%.
50
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Remuneration policy continued
Recruitment remuneration policy
This table sets out the Company’s policy on recruitment of new Executive Directors for each element of the remuneration package. Non-executive
Directors are recruited on an initial three year term and receive a salary but no other benefits.
Remuneration element
Policy on recruitment
Base salary
Benefits
Pension
Bonus
LTIPs
Buyouts
The Committee will typically offer a salary in line with the policy on page 49 whilst also considering the experience, ability to
implement Group strategy and the wider economic climate and pay and conditions throughout the Group, in order to facilitate
the hiring of candidates of the appropriate calibre required to implement the Group’s strategy.
The Committee will offer benefits in line with the policy for existing Executive Directors; however, the Committee
has the flexibility to consider other benefits from time to time including relocation expenses.
Contribution levels will be set in line with the Company policy for existing Executive Directors.
The Committee will offer the ability to earn a bonus in line with the policy on page 49 in line with other Executive
Directors.
The Committee will offer LTIPs in line with the policy on page 50 in line with other Executive Directors.
The Committee’s policy on ‘buying out’ existing incentives granted by the Executive’s previous employer will depend on
the process of recruitment and be negotiated on a case by case basis. The Committee may make an award in order to
‘buy out’ previous incentives but it will only be made if it is considered necessary to attract the right candidate and there
will not be a presumption in favour of doing so.
Internal appointees
Any remuneration awards previously granted to an internal appointee to the Board will continue on their original terms.
In the same way, if that appointee is accruing benefits in the Henry Boot Defined Benefit Pension Scheme, these will
continue as before on membership to the Board and will be reported on in future Remuneration Policy documents.
Payment for the loss of office policy
The table below sets out the policy on exit payments.
The Committee will ensure that a consistent approach to exit payments is adopted and there is no reward for poor performance and any liability to
the Group is minimised/mitigated in all areas. Where a compromise agreement is required the Committee would consider contributing to the reasonable
costs of legal and other expenses in connection with the termination of employment and pay reasonable amounts to settle potential claims.
Remuneration element
Base salary/fees
and benefits
Base salary/fees and benefits will be paid over the notice period subject to mitigation. However, the Company
has the discretion to make a lump sum payment on termination of the base salary/fees and benefits payable during
the notice period.
Pension/salary in lieu
of pension
Pension contributions and any salary payments in lieu of pension will be provided over the notice period. The Company
has the discretion to make a lump sum payment on termination equal to the value of the pension benefit.
Bonus
LTIPs
Any bonus payment would be at the discretion of the Committee and would be pro-rated to the time employed in the
year that employment ceases and would be subject to ‘good leaver’ status. Any payment would be subject to the
same performance criteria and paid at the same time as other Directors.
It is normal for awards to lapse on cessation of employment unless the Company and Committee agree that the
Executive is a good leaver. Good leaver status is defined in the LTIP rules and is usually conferred in the following situations:
death, disability, redundancy, retirement or at the discretion of the Remuneration Committee. Good leavers will be treated
in accordance with the rules of the LTIP scheme which has been approved by shareholders. Their awards are pro-rated
for the proportion of the performance period that has elapsed. Any pro-rated shares vest at the normal vesting date and
are subject to the same performance conditions as other LTIP holders. In the event of a change of control, Directors
affected will be treated in accordance with the rules of the LTIP Scheme. If the Committee are satisfied the performance
targets have been achieved, subject to early vesting because of the change of control, the awards would vest in
proportion. There is also provision within the rules to exchange LTIP shares for awards in the acquiring company,
if that is applicable.
www.henryboot.co.uk
51
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Remuneration policy continued
Service contracts
E J Boot and J T Sutcliffe each have a one year
rolling service agreement in accordance with
our policy on Directors’ contracts. Termination
of these arrangements would therefore be
subject to their contractual terms and conditions
which require a notice period of one year to
the Director. Contractual compensation in
the event of early termination provides for
compensation at basic salary for the
notice period.
Non-executive Directors, including the
Chairman, do not have service contracts.
All Non-executive Directors have letters of
appointment and their appointment and
subsequent re-appointment is subject to
approval by shareholders. Non-executive
Director appointments are typically for three
years; however, they may be terminated
without compensation at any time.
Explanation of the performance
measures chosen
The Committee selects performance
measures that are aligned to the strategy of
the Group. The Committee sets stretching
performance targets each year for the annual
bonus and long-term incentive awards.
These stretching performance targets take
into account a number of financial and
personal measures which may, from time to
time, include business plans, strategy, past
performance and market conditions. Where
the measure used is relative shareholder return
there will be no payment for performance
that is below the median in comparison
to the comparator group.
The performance targets used to determine
annual bonus reflect the key financial objectives
of the Company and any award is for delivery
against these measures in line with the policy
on page 49.
The LTIP performance targets reflect the
long-term strategic objective to maximise
shareholder value and therefore align the
interests of the shareholders with the
Executives. The LTIP measures are both
financial and shareholder return based
and are:
I growth in earnings per share above inflation
– a key driver in creating shareholder value
is to provide a dividend which grows faster
than the rate of inflation;
I ROCE greater than 10% – a key driver to
long-term growth in shareholder value is the
ability to retain funds to invest in our business;
I relative total shareholder return – this aligns
the interests of management and shareholders
and measures the extent to which shareholders
and the market consider that the Company
strategy is appropriate and is being
implemented and articulated well
by the Executives; and
I The Committee retains the discretion
to adjust the performance targets and
measures where it considers that it is
appropriate to do so, for example, in the
case of a major change in the structure of
the business and to assess performance on
a fair and consistent basis from year to year.
Illustration of the application
of the remuneration policy
The graphs below show the split of remuneration
between fixed pay (base salary, pension and
benefits) and variable pay (bonus and LTIPs),
assuming the following bases: minimum
remuneration (basic package), remuneration
receivable for in line with target performance
expectations and the maximum remuneration
possible (though not allowing for any share
price appreciation).
E J Boot
J T Sutcliffe
Total remuneration (£’000)
Total remuneration (£’000)
0
0
0
2
0
0
4
0
0
6
0
0
8
0
0
0
,
1
0
0
2
,
1
0
0
4
,
1
0
0
0
2
0
0
4
0
0
6
0
0
8
0
0
0
,
1
Minimum
In line
*Maximum
100%
455
66%
21%
13%
686
Minimum
In line
100%
313
66%
21%
13%
471
37%
34%
29%
1,236
*Maximum
37%
34%
29%
845
Basic salary, benefits and pension
Bonus
LTIPs
Basic salary, benefits and pension
Bonus
LTIPs
* Assumes personal targets and full bonus for exceptional performance at 150% of target, i.e. 120% bonus.
Minimum remuneration
Remuneration for performance
in line with expectations
Remuneration for
maximum performance
Fixed pay
Fixed pay consists of basic salary
with effect from 1 January 2014.
Pension at 20% of basic salary
either as a pension contribution
or payment in lieu.
Benefits as disclosed in the single
figure calculation on page 54.
Bonus
Nil
LTIP
Nil
Assumes all personal targets
are achieved (10% of salary)
and profit before tax is on
target (30% of salary) giving
total of 40% of salary.
Assumes all personal targets are
met and profit before tax is equal
to or greater than 150% of target
which will give rise to a bonus
of 120% of salary.
Achieving the base targets
for the LTIP measures of EPS,
ROCE and total shareholder
return equates to a 25%
award under the LTIP
Scheme (25% of salary).
Achieving the most stretching
measures under the three LTIP
performance measures of EPS,
ROCE and total shareholder
return equates to a 100%
award under the LTIP Scheme
(100% of salary).
52
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
Remuneration policy continued
Policy on external appointments
The Company recognises that Executive
Directors may be invited to become
Non-executive Directors of other companies
and that this can help broaden the skills and
experience of a Director. Executive Directors
are only permitted to accept external
appointments with the approval of the Board.
Any remuneration earned from such
appointments is retained by the Executive.
Currently no Executive Director holds
a remunerated external appointment.
Differences in policy from the wider
employee group
Henry Boot PLC aims to provide a remuneration
package that is market competitive, complies
with statutory requirements and is applied
fairly and equitably across employees of the
Group. In all cases, with the exception of
remuneration determined by statutory regulation,
the Group operates the same core remuneration
principles for employees as it does for
Executive Directors.
These are:
I We remunerate fairly for each role with
regard to the marketplace, consistency
across comparable roles and consistency
across each company within the Group.
I We remunerate people at a level that the
Group has the ability to meet which is
sufficient to retain and motivate our people
to achieve our shared long-term goals.
Bonus arrangements across the Group
normally have a similar structure to the
Executive Directors in that the main target
measure is Group profitability. The level
of bonus potential varies across all
Group companies.
Participation in the LTIP Scheme is extended
to the senior management at the discretion
of the Board. In line with Executive Directors,
share ownership is encouraged but there
is no formal requirement to hold shares.
Furthermore, we also encourage long-term
employee engagement through the offer of
a SAYE share scheme to all employees and
a CSOP Scheme to middle management.
Statement of consideration of
employment conditions elsewhere
in the Group
In December each year the Group Human
Resources Manager presents a report to
the Board summarising matters relating to
the wider workforce, relative levels of pay
between companies in the Group, changes
to other working conditions and changes
within the make up of the workforce.
The Committee takes this into consideration
when setting policy for the Executive Directors.
Although employees are not actively consulted
on Executive remuneration, the Company,
through the Human Resources department,
is in continual two-way discussion on
remuneration issues and this body of
information informs the annual remuneration
discussions for both Executives and staff.
Consultation with shareholders
Whilst there has been no formal contact with
shareholders regarding the Remuneration
Policy, it is broadly in line with that which
operated up to the end of 2013. The
Committee has made some changes to give
more clarity to the performance criteria for
both LTIPs and annual bonus and reduced
the LTIP vesting at threshold to 25% from
30%. Furthermore, the annual bonus scheme
now has specific performance criteria applied
to future awards rather than the discretionary
criteria used up to 31 December 2013.
These changes are intended to bring our
policy more in line with best practice.
www.henryboot.co.uk
53
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Annual report on remuneration
The following parts of the Remuneration Report are subject to audit except for those elements explaining the application of the Remuneration
Policy for 2014, as disclosed on page 47.
Single total figure of remuneration
The table below reports the total remuneration receivable by Directors in respect of qualifying services during the period.
Period ended
31 December 2013
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
Period ended
31 December 2012
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
Total salary
and fees
£’000
344
235
50
35
35
699
Total salary
and fees
£’000
338
230
50
35
35
688
Taxable
benefits
£’000
29
23
—
—
—
52
Taxable
benefits
£’000
29
23
—
—
—
52
Annual
bonus
£’000
344
235
—
—
—
579
Annual
bonus
£’000
241
165
—
—
—
406
Long-term
incentives
£’000
264
180
—
—
—
444
Long-term
incentives
£’000
288
196
—
—
—
484
Pension
related
benefits
£’000
69
47
—
—
—
116
Pension
related
benefits
£’000
66
46
—
—
—
112
Total
£’000
1,050
720
50
35
35
1,890
Total
£’000
962
660
50
35
35
1,742
Taxable benefits include the provision of a company car or a cash allowance alternative, permanent health insurance and private medical
insurance. The value of benefits is not pensionable. In both years the benefit related to company cars are cash allowances.
The information in the single total figure of remuneration table is derived from the following:
Total salary and fees
The amount of salary or fees received in the period.
Benefits
Annual bonus
Long-term incentives
The taxable benefits received in the period by Executive Directors.
The value of bonus payable and the calculations underlying this are disclosed on page 55.
The value of LTIPs are those related to shares that vested as a result of the performance over the three year
period ended 31 December 2013 valued at the average share price over the last three months of 2013 and
any SAYE scheme grants in the period.
The LTIPs which vested in the period and the statement explaining the performance criteria which
were satisfied for the LTIPs to vest are disclosed on page 56.
There were no SAYE scheme shares granted in the period.
Pension related benefits
The pension figure represents the cash value of contributions received by Directors including contributions
to the defined contribution scheme and any salary in lieu of pension contribution at a rate of 20% of salary.
54
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Annual report on remuneration continued
Individual elements of remuneration
Base salary and fees
Executive Directors
Salary effective from
E J Boot
J T Sutcliffe
1 January
2014
£
354,638
242,050
1 January
2013
£
344,309
235,000
In the last five years basic salary increases for the Executive Directors have been 2% until 1 January 2014 when the increase was 3%.
Average salary increases for the wider employee population were 3.23% from 1 January 2013 and 3.65% from 1 January 2014.
The Company’s policy on base salary continues to be to provide a fixed remuneration component which is comparable with similar companies,
taking into account the need to attract, motivate and retain Directors of an appropriate calibre to achieve the Company’s objectives without
making excessive payments. When setting the pay of Directors, the pay and employment conditions of employees across the Group are taken
into account by the Committee. As with employees, Directors’ rewards are based on their role, their performance and the market rate for the job.
Directors’ basic salaries and benefits, where applicable, are reviewed annually, taking into account individual performance, the recommendations
of the Group Managing Director and published remuneration information. Benefits include the provision of a company car or a cash allowance
alternative, permanent health insurance and private medical insurance. The value of benefits is not pensionable and is set out for each Director
in the table of Directors’ remuneration.
Non-executive Directors
Salary effective from
J E Brown
M I Gunston
J J Sykes
1 January
2014
£
60,000
40,000
40,000
1 January
2013
£
50,000
35,000
35,000
Non-executive Directors are remunerated on the basis of their anticipated time commitment and the responsibilities entailed in their role. There
are no service agreements in place for the Non-executive Directors and they do not participate in any of the Company’s incentive arrangements
or the Company pension scheme. The salaries above are inclusive of the responsibilities for Nomination, Audit and Remuneration Committees
and Senior Non-executive Director. Any newly appointed Non-executive Director is expected to serve for an initial period of at least three years.
Terms and conditions of appointment relating to Non-executive Directors are available for inspection at the registered office of the Company.
Bonus
The Executive Directors participate in an annual bonus scheme. This is calculated by reference to pre-tax profits achieved in the year compared
to a target profit which takes into consideration the year’s financial budget, City expectations and previous years’ profits.
Any bonus amounts are paid in cash and there are no malus or deferral provisions within the scheme.
31 December 2013
The bonus scheme in operation in 2013, as in previous years, was discretionary with the Committee considering levels of payment on conclusion
of the year’s results. The Committee has considered the results achieved for the year ended 31 December 2013 against the targets set for that
year. In terms of the methodology applied in the year, budget profit before tax was exceeded by over 9%, consensus market expectations were
exceeded by 15% and the restated prior year’s profit before tax was exceeded by over 37%; year end debt forecast was achieved and NAV per share
and dividends per share exceeded budget. On this basis, the Committee awarded a bonus of 100% of salary to the Executive Directors.
Details of the policy for future annual bonus awards can be found in the Policy table on page 49.
31 December 2014 bonus targets
Profit before tax performance: 10% of salary payable on 90%
of Group profit target, rising to 90% of salary payable upon the
achievement of 120% of Group profit target. If, in exceptional
circumstances, profit targets are exceeded by more than 20%,
a further bonus of 20% of salary may become payable up to 150%
of target.
Personal objectives: up to an additional 10% of salary may
become payable to Executive Directors upon the achievement
of personal objectives.
The profit before tax target is deemed to be commercially sensitive
and therefore will be disclosed retrospectively in the 2014
Remuneration Report.
The objectives measured will be based on key elements of the delivery
of Group strategy.
www.henryboot.co.uk
55
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Annual report on remuneration continued
Individual elements of remuneration continued
Long-Term Incentive Plan (LTIP)
The Committee has reviewed the performance criteria for the LTIPs awarded on 21 April 2011, based on performance for 2011, 2012 and 2013,
awarded after the year ended 31 December 2013 which are expected to vest in June 2014. The LTIP shares in this award are subject to the
following performance criteria:
1) Profit growth was 27.5% which exceeded RPI growth by more than 16.5%. This was greater than the requirement to exceed RPI growth
by 12% and therefore this 50% of the award became eligible.
2) Adjusted NAV growth did not exceed the industry standard investment property annual index and therefore no part of this 50% of the
award became eligible.
3) Total shareholder return (TSR) compared to the comparator group showed that Henry Boot PLC TSR for the three year period was 139.7%,
putting it in the top quartile within the comparator group. This therefore confirms the 50% award above which gave rise to the award values
in the single total figure of remuneration at 31 December 2013 on page 54.
Awards granted in the year
The performance criteria for the LTIPs awarded on 18 April 2013 for the performance period 2013–2015 are as above and the numbers granted
were as follows:
E J Boot
J T Sutcliffe
Type
of award
LTIP – nil cost option
LTIP – nil cost option
Number
Percentage
of salary
of shares
100% 201,350
100% 137,429
Face value
to grant at
£1.71
per share
344,309
235,004
% of
award
vesting at
threshold
30%
30%
The performance conditions which must be satisfied to enable the receipt of these grant awards are disclosed below.
Awards expected to be granted for the financial years 2014–2016 in 2014.
E J Boot
J T Sutcliffe
Type
of award
LTIP – nil cost option
LTIP – nil cost option
Percentage
of salary
100%
100%
% of
award at
threshold
25%
25%
The performance criteria for these awards are laid out in the Remuneration Policy table on page 50. These are different from the performance
criteria for previous awards as follows:
EPS growth
We strive to grow earnings per share faster than inflation. This should give rise to an ability to grow dividends
faster than inflation, a key driver to long-term growth in shareholder value.
Return of capital
employed
We strive to achieve a 10% profit before tax return on balance sheet net assets. This should give rise
to at least two times dividend cover thereby generating growth in the Group’s retained capital to reinvest
and grow. This is a further driver to growing long-term shareholder value.
Total shareholder return
(TSR) relative to our
comparator group
We strive to achieve high shareholder returns. TSR reflects the extent to which shareholders and the
market consider that the Company strategy is appropriate and is being implemented and articulated well
by the Executives.
The detailed performance metrics for awards granted in 2014 are:
EPS growth
Return on capital employed
TSR
% linked
to award
33.3
33.3
33.4
Threshold vesting of 25%
of maximum award
RPIJ + 3%
Average three year
ROCE of 10%
TSR at median or above our
comparator group
Threshold for 100%
of maximum award
RPIJ + 7%
Average three year
ROCE of 13% or more
TSR at or within
the upper quartile
Vesting between the 25% threshold and the maximum award will be on a pro-rata basis. The weightings for each measure have been chosen because
the Committee believes that they each have equal importance in aligning the interests of shareholders and the Executive Directors. In addition to
the amended performance criteria calculation, the Committee has reduced the amount of the award vesting at threshold from 30% to 25%.
56
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Annual report on remuneration continued
Pension entitlement
E J Boot began drawing his pension benefits from 19 November 2012 and therefore no pension contributions are made on his behalf. Instead,
a salary in lieu of pension contributions at a rate of 20% of salary is paid; in 2013 this payment amounted to £68,862.
J T Sutcliffe is a member of the Henry Boot PLC Defined Contribution Scheme. Contributions are made at 20% of basic salary and contributions
to the Scheme in the year were £45,834 (2012: £46,097). From November 2013, the annual allowance for tax relief on pension savings applicable
to J T Sutcliffe reduced to £40,000 per annum. Since that date J T Sutcliffe has elected to receive a salary supplement in lieu of the employer
contributions over and above the £40,000 limit noted above; in 2013 this payment amounted to £1,167.
The Stakeholder Scheme provides a lump sum death in service benefit, a refund of contributions on death in service and, on death after
retirement, a pension for dependants subject to what the policyholder decides. The notional leaving work age is currently 65.
Payments to past Directors
There were no payments made to past Directors during the period in respect of services provided to the Company as a Director.
Payments made for loss of office
There were no payments made during the period in respect of loss of office to a Director.
Statement of Directors’ shareholdings and share interests
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
At 31 December 2013
At
31 December
2012
Legally owned
5,359,662
327,561
25,000
23,000
10,000
Legally owned
5,528,054
430,001
25,000
23,000
10,000
SAYE
(not subject to
performance)
8,490
8,490
—
—
—
LTIPs
subject to
performance
measures
720,582
491,509
—
—
—
Total
6,257,126
930,000
25,000
23,000
10,000
Shareholding
as a %
of salary at
31 December
1
2013a
3,529
768
83
115
50
The share price at 31 December 2013 was 200p. The salary used for this calculation is that which commences on 1 January 2014.
1 As laid out in the Remuneration Policy table on page 50, Executive Directors are required to acquire shares outright to the value of 100% of basic salary. The shareholding
requirement for Non-executive Directors that has been proposed in the Remuneration Policy table is that over three years they should build up to a holding which is 50%
of basic remuneration.
Directors’ shareholdings
The beneficial interest of the Directors in the share capital of the Company at 31 December 2013 was as follows:
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
Long-term incentive plan awards
Performance shares
E J Boot
J T Sutcliffe
Plan
2006
2006
2006
2006
2006
2006
2006
2006
Date of award
04/05/2010
21/04/2011
01/05/2012
18/04/2013
04/05/2010
21/04/2011
01/05/2012
18/04/2013
Market price
at date of
award
96.5p
121.5p
137.0p
171.0p
96.5p
121.5p
137.0p
171.0p
At
1 January
2013
336,785
272,840
246,392
—
856,017
229,480
185,908
168,172
—
583,560
Awarded
during
the year
—
—
—
201,350
201,350
—
—
—
137,429
137,429
2013
Number of shares
2012
Number of shares
Ordinary
5,528,054
430,001
25,000
23,000
10,000
Preference
14,753
—
—
—
—
Ordinary
5,359,662
327,561
25,000
23,000
10,000
Preference
14,753
—
—
—
—
—
—
—
Vested
during the
year
Lapsed
during
the year
168,392 168,393
—
—
—
168,392 168,393
114,740 114,740
—
—
—
114,740 114,740
—
—
—
At
31 December
2013
272,840
246,392
201,350
720,582
Earliest/
actual
vesting date
— 03/06/2013
21/05/2014
31/05/2015
18/05/2016
— 03/06/2013
21/05/2014
31/05/2015
18/05/2016
185,908
168,172
137,429
491,509
Market
valuation
on vesting £
288,186
—
—
—
288,186
196,366
—
—
—
196,366
www.henryboot.co.uk
57
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Remuneration Committee report continued
Annual report on remuneration continued
Long-term incentive plan awards continued
Savings related share options
Scheme/
plan
2010
2010
At
1 January
2013
8,490
8,490
E J Boot
J T Sutcliffe
Number of options
Exercised
during
year
—
—
Granted
during
year
—
—
Lapsed
during
year
—
—
At
31 December
2013
8,490
8,490
Exercise
price
106.0p
106.0p
Date from
which
exercisable
01/12/2014
01/12/2014
Expiry
date
31/05/2015
31/05/2015
Statement of voting at the last Annual General Meeting (AGM)
The Company remains committed to shareholder dialogue and takes an active interest in voting outcomes. At the AGM on 23 May 2013 the
advisory vote by shareholders to receive and approve the 2012 Directors’ Remuneration Report was approved. The number of votes in favour
of that resolution was 74,842,654 (75.8% of votes cast), against 23,854,173 (24.1% of votes cast) and abstentions 91,088 (0.1% of votes cast).
The total number of votes cast in respect of this resolution represented 75.35% of the issued share capital. The vote against the Remuneration
Report was because the Committee exercised its discretion to award 40% of the LTIP award. For awards in 2014 and beyond the performance
measures have been amended to provide clarity in the future.
Share price
The middle market price for the Company’s shares at 31 December 2013 was 200.00p and the range of prices during the year was
135.25p to 213.00p.
Five year TSR performance graph
Henry Boot PLC
FTSE Small Cap Index
350)
300)
250)
200)
150)
100)
50)
0)
(50)
Dec 08
Jun 09
Dec 09
Jun 10 Dec 10
Jun 11 Dec 11
Jun 12
Dec 12
Jun 13 Dec 13
Group Managing Director’s remuneration for the previous five years
2013
2012
2011
2010
2009
Total remuneration
£’000
1,050
962
842
764
575
Annual bonus
as a %
of maximum
83.3
58.3
66.7
58.3
33.3
LTIP vesting
as a % of
maximum
50
40
50
64
50
Percentage change in Group Managing Director’s remuneration
The table below sets out in relation to salary, taxable benefits and annual bonus the percentage increase in remuneration for E J Boot compared
to the wider workforce. For these purposes:
Percentage change
Salary
Taxable benefits
Annual bonus 2012
Annual bonus 2013
Note
1
2
2
Group
Managing
Director
3.0%
—
-10.7%
42.9%
Workforce sample
3.65%
—
6.23%
Not yet available
Note 1
The car allowance remained the same in both years and private medical insurance costs were also broadly the same in both years (£300) for all
members of the private medical scheme. Therefore the average percentage change in taxable benefits does not provide a meaningful comparison.
Henry Boot PLC
FTSE Small Cap Index
58
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Annual report on remuneration continued
Note 2
The workforce bonuses are calculated and agreed in May 2014 for the year ended 31 December 2013 and is therefore not available. Therefore
the information produced is for the bonus comparisons paid in May 2013 for the year ended 31 December 2012. The workforce comparison
is every member of staff who received a bonus excluding the Group Managing Director.
Relative importance of spend on pay
The following table sets out the percentage change in dividends, profit attributable to owners of the business and the overall spend on pay across
our whole organisation:
Ordinary dividends
Profit attributable to owners of the business
Overall expenditure on pay
2013
£6.69m
£11.3m
£22.6m
2012
£6.16m
£9.1m
£21.0m
% change
8.5
24.2
7.6
Membership of the Committee
The Committee consists of the three Non-executive Directors of the Board and during the financial year comprised as follows:
M I Gunston*
J J Sykes
J E Brown
* Committee Chairman.
Independent
Yes
No
Yes
E J Boot, Group Managing Director, attends meetings with the Committee, as requested, in order to assist on matters concerning other senior
executives within the Group. E J Boot is not present during any part of the meetings where his own remuneration is discussed.
Consideration by the Directors of matters relating to Directors’ remuneration
The Committee has its own terms of reference which have been approved by the Board. These are reviewed annually to ensure they adhere to
best practice. Copies can be obtained from the Company Secretary and the Committee Chairman is available to shareholders to discuss the
Remuneration Policy if required.
In accordance with the terms of reference, the Committee is responsible for:
I determining and agreeing the Remuneration Policy for the Executive Directors and their contractual conditions of employment;
I having regard for remuneration trends across all employees in the Group and other companies when setting Remuneration Policy;
I selecting, appointing and agreeing the remuneration for any remuneration consultants who advise the Committee;
I determining targets for any annual bonus and long-term incentive schemes operated by the Company and approving any payments made
under such schemes;
I reviewing the design of all share incentive schemes for approval by the Board;
I determining the policy for and scope of any pension arrangements for Executive Directors; and
I ensuring that contractual terms on termination and any payments made are fair to the individual and the Group, that failure is not rewarded
and the duty to mitigate loss is fully recognised.
Advisers
The Committee’s main advisers are set out below:
Adviser
Group Managing Director and Group HR Manager
DLA Piper UK LLP
Area of advice
Remuneration of staff, senior executives and management
Share scheme matters
By order of the Board
M I Gunston
Chairman of the Remuneration Committee
17 April 2014
www.henryboot.co.uk
59
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Directors’ report
The Directors have pleasure in presenting the Annual Report and the audited Financial Statements for the year ended 31 December 2013.
Strategic Report
In accordance with the requirements of the Companies Act 2006, we present a fair review of the business during the year to 31 December 2013
and of the position of the Group at the end of the financial year along with a description of the principal risks and uncertainties faced in the
Strategic Report on pages 6 to 37.
Corporate governance statement
The Disclosure and Transparency Rules require certain information to be included in a corporate governance statement in the Directors’ Report.
Information that fulfils the requirements of the corporate governance statement can be found in Governance on pages 39 to 42.
Results for the year and dividends
The results are set out in the Consolidated Statement of Comprehensive Income on page 72. The principal active subsidiary companies affecting
the profit or net assets of the Group in the year are listed in note 34 to the Financial Statements.
The Directors recommend that a final dividend of 3.15p per ordinary share be paid on 30 May 2014 to ordinary shareholders on the register at
the close of business on 2 May 2014. This, together with the interim dividend of 1.95p per ordinary share paid on 25 October 2013, will make
a total dividend of 5.10p per ordinary share for the year ended 31 December 2013. Further details are disclosed in note 10 of the Notes to the
Financial Statements on page 86.
Business review
The review of the development and performance of the business of the Group during the year and the future outlook of the Group is set out in the
Chairman’s Statement on page 2 and the Strategic Report (Performance Review) on pages 6 to 21. Details of the principal risks and uncertainties
that the Company faces are set out in the Strategic Report on pages 26 to 29. The key performance indicators are set out in the Strategic Report
on pages 24, 25, 36 and 37.
The Group’s policy in respect of financial instruments is set out within the Accounting Policies on page 79 and details of credit risk, capital risk
management, liquidity risk and interest rate risk are given respectively in note 16, 23, 24 and 25 to the Financial Statements.
Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the
Strategic Report (Performance Review) on pages 10 to 21. The financial position of the Company, its cash flows, liquidity position and borrowing
facilities are described in the Strategic Report (Financial Review) on pages 22 and 23.
As highlighted in note 23 to the Financial Statements, the Company meets its day-to-day working capital requirements through a secured loan
facility, which includes an overdraft facility, which was renewed with effect from 7 May 2012, with a renewal date of 7 May 2015. The current
economic conditions create uncertainty for all businesses over a number of risk areas. As part of their regular going concern review the Directors
specifically address all the risk areas that they consider material to the assessment of going concern. The report arising from these discussions is
made available to the auditors and the conclusion is that the Directors have a reasonable expectation that the Company has adequate resources
to continue in operational existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing
the annual Financial Statements.
Political donations
The Company made no political donations in the year or in the previous year.
60
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Strategic report approval statement
The Strategic Report, outlined on pages 6 to 37, gives a fair and balanced review on the state of the business and incorporates our strategy,
business model, Board of Directors and Senior Management, Performance Review, Financial Review, Key Performance Indicators, Risks and
Risk Management and the Corporate Responsibility Report.
By order of the Board
R A Deards
Company Secretary
17 April 2014
Directors and their interests
J E Brown, E J Boot, J T Sutcliffe, M I Gunston and J J Sykes held office as Directors throughout 2013 and up to the date of signing the Financial
Statements. Their biographical details are shown within the Strategic Report on page 8.
In accordance with the Articles of Association of the Company, J J Sykes will retire by rotation at the forthcoming Annual General Meeting (AGM)
and offer himself for re-appointment. In accordance with the September 2012 edition of the UK Corporate Governance Code, the Chairman
confirms that the performance of J J Sykes continues to be effective and demonstrates commitment to his role.
At no time during the year has any Director had any interest in any significant contract with the Company.
The interests of Directors in the share capital of the Company, other than with respect to options to acquire ordinary shares, are disclosed
in the Directors’ Remuneration Report on page 57.
Between 31 December 2013 and 20 March 2014, being a date not more than one month prior to the date of the Notice of the AGM, there have
been no changes in the beneficial and non-beneficial interests of any Director.
Details of Directors’ long-term incentive awards and share options are provided in the Directors’ Remuneration Report on page 57.
Company Secretary appointment
J T Sutcliffe relinquished his position as Company Secretary on 31 August 2013 and R A Deards was subsequently appointed to the role
with effect from 1 September 2013.
Directors’ indemnity
Directors risk personal liability under civil and criminal law for many aspects of the Company’s main business decisions. As a consequence the
Directors could face a range of penalties including fines and/or imprisonment. In keeping with normal market practice, the Company believes that
it is prudent and in the best interests of the Company and their best interests to protect the individuals concerned from the consequences of
innocent error or omission.
As a result, the Company operates a Directors’ and officers’ liability insurance policy in order to indemnify Directors and other senior officers
of the Company and its subsidiaries, as recommended by the Corporate Governance Code. This insurance policy does not provide cover where
the Director or officer has acted fraudulently or dishonestly.
In addition, subject to the provisions of and to the extent permitted by relevant statutes, under the Articles of Association of the Company, the
Directors and other officers throughout the year, and at the date of approval of these Financial Statements, were indemnified out of the assets
of the Company against liabilities incurred by them in the course of carrying out their duties or the exercise of their powers.
Pension fund trustees
Legislation can lead to pension fund trustees being held personally liable. Pension trustee liability insurance protects pension funds and their
trustees against claims for matters including breach of trust, maladministration and wrongful acts.
When trustees act for pension funds they become liable for any action undertaken or, possibly, actions not undertaken. In keeping with normal
market practice, the Company believes that it is in its best interests to protect the Group’s pension fund and the trustees concerned from the
consequences of innocent error or omission. It is therefore considered prudent to take out an annual insurance policy to protect the pension
fund and its trustees from potential liabilities.
www.henryboot.co.uk
61
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Directors’ report continued
Employees
Employees are at the heart of all that we do. We are committed to ensuring that all employees, potential recruits and other stakeholders are
treated fairly and equitably. The principles of equality and diversity are important, advancement is based upon individual skills and aptitude
irrespective of sex, sexual orientation, race, colour, age, disability, nationality or marital/civil partnership status. Full consideration is given to the
diverse needs of our employees and potential recruits and we are fully compliant with all current legislation. Our culture is aimed at ensuring that
employees can grow, thrive and succeed to their full potential. Succession planning is important and our offering to employees to seek to further
improve employee retention includes the Group stakeholder pension (including life assurance arrangements), private medical insurance, childcare
vouchers and income replacement (PHI) arrangements. Employee share ownership continues to be encouraged through participation in various
share option plans.
We are fully committed to developing our employees to maximise their career potential and to achieve their aspirations and our aim is to provide
rewarding career opportunities in an environment where equality of opportunity is paramount. Our policy for selection and promotion is based on
an assessment of an individual’s ability and experiences; we take full consideration of all applicants on their merits and have processes and
procedures in place to ensure that individuals with disabilities are given fair consideration.
Every possible effort is made by the Group to retain and support employees who become disabled whilst in the employment of the Group.
Employee engagement
The Group regularly provides its employees with information on matters of concern to them; we consult with our employees and/or their
representatives in order to ensure that their views can be taken into account when making decisions. We utilise our intranet site to disseminate
information and engage with our employees via manager briefings.
The involvement of our employees in our business is key to our ongoing success; the common goals and objectives are shared from the Executive
Board downwards and all employees are aware of the crucial role each individually play in our ongoing financial and operational success.
Health and safety
The health and safety of our employees and others is paramount. Further information on our approach to health and safety is provided
in the Corporate Responsibility Report on page 30.
Greenhouse gas emissions
All disclosures concerning the Group’s greenhouse gas emissions, as required to be disclosed under regulations introduced by the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 are contained in the Corporate Responsibility Report forming part of the
Strategic Report on page 35.
Substantial interests in voting rights
Excluding Directors, at the end of the financial year and a date not more than one month prior to the date of the Notice of the AGM, the information
in the table below had been disclosed to the Company in accordance with the requirements in the Listing Rules and the Disclosure Rules
and Transparency Rules of the Financial Conduct Authority.
Rysaffe Nominees and J J Sykes (joint holding)
FMR Corp*
Schroders plc*
The Fulmer Charitable Trust
Standard Life Investments Limited**
Voting rights over ordinary shares
Number
21,557,155
6,550,000
6,452,536
5,739,580
6,692,481
% of issued
16.444
4.996
4.922
4.378
5.105
* Notified as indirect voting rights.
** Notified as 4,603,609 (3.512% of issued) direct voting rights and 2,088,872 (1.593% of issued) indirect voting rights.
Rysaffe Nominees and J J Sykes are joint registered holders on behalf of various Reis family trusts and are therefore not included under the
beneficial interests of J J Sykes.
Shares held by the Henry Boot PLC Employee Trust
The Company has an established Employee Trust (the Trust) for the benefit of Group employees to satisfy existing grants by the Company under
various share-based payment arrangements. The Trustee of the Trust, a subsidiary of the Company of which the Directors are J E Brown, J T Sutcliffe
and R A Deards, exercises the voting rights in relation to shares held as it, in its absolute discretion, thinks fit, but having regard to the interests
of the beneficiaries. Further details are provided in note 32 to the Financial Statements.
Future developments
Important events since the financial year end and future developments are described in the Performance Review of the Strategic Report
on pages 10 to 21.
62
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Share capital
The Company’s issued share capital comprises two classes of shares being, respectively, ordinary shares of 10p each (ordinary shares) and
cumulative preference shares of £1 each (preference shares). Further details of the share capital of the Company are set out in note 30 to the
Financial Statements. As at 20 March 2014, the ordinary shares represent 97.04% of the total issued share capital of the Company by nominal
value and the preference shares represent 2.96% of such total issued share capital. The ordinary shares and the preference shares are in registered
form. Both classes of share are admitted to the Official List of the UK Financial Conduct Authority. The Company’s ordinary shares are categorised
as ‘Premium Listed’ and its preference shares as ‘Standard Listed’. A Standard Listing is based on EU minimum standards for floating a company
on a public market whereas a Premium Listing requires compliance with additional requirements set out in the Listing Rules of the UK Financial
Conduct Authority.
The Notice of the AGM on pages 108 to 111 includes the following resolutions:
I an ordinary resolution (Resolution 6) to renew the authority of the Directors to allot shares up to a maximum nominal amount of £4,369,870
being 33.33% of the Company’s issued ordinary share capital at 20 March 2014. The authority will expire on 21 August 2015 or at the
conclusion of the next AGM, whichever is the earlier, but it is the present intention of the Directors to seek annual renewal of this authority.
The Directors do not have any present intention of exercising the authority;
I a special resolution (Resolution 7) to enable the Directors to continue to allot equity securities for cash in connection with a rights or other issue
pro rata to the rights of the existing shareholders, but subject to certain exceptions, and for any other purpose provided that the aggregate
value of such allotments does not exceed £655,000 (5% of the Company’s issued ordinary share capital at 20 March 2014). The authority will
expire on 21 August 2015 or at the conclusion of the next AGM, whichever is the earlier, but it is the present intention of the Directors to seek
annual renewal of this authority; and
I a special resolution (Resolution 8) to renew the authority of the Company to make market purchases of up to 11,055,000 of its own issued
ordinary shares (8.43% of the Company’s issued ordinary share capital at 20 March 2014). The minimum price that may be paid under the
authority for an ordinary share is 10p and the maximum price is limited to not more than 5% above the average of the middle market quotations
for an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days before the purchase is made. The
Directors will exercise the authority only if they are satisfied that it would be likely to result in an increase in expected earnings per share of the
ordinary share capital in issue and that any purchase will be in the best interests of shareholders generally. If the Directors do decide to exercise
the authority, ordinary shares so acquired will either be cancelled or held as treasury shares, depending upon the circumstances prevailing
at the time.
Annual General Meeting (AGM)
The AGM of the Company will be held at Baldwins Omega, Brincliffe Hill, Off Psalter Lane, Sheffield S11 9DF on Thursday 22 May 2014 at 12.30pm.
The notice convening the meeting can be found on pages 108 to 111. It is also available at www.henryboot.co.uk, where a copy can be viewed
and downloaded.
Shareholder additional information
Following the implementation of the EU Takeover Directive in the UK, the following provides the required relevant information for shareholders
where not already provided elsewhere in these Financial Statements. The information below summarises certain provisions of the current Articles
of Association of the Company (as adopted by special resolution on 27 May 2011) (the Articles) and applicable English law concerning companies
(the Companies Act 2006). This is a summary only and the relevant provisions of the Companies Act 2006 or the Articles should be consulted
if further information is required.
Rights and obligations attaching to shares
Subject to the Companies Act 2006 and other shareholders’ rights, any share may be issued with such rights and restrictions as the Company
may by ordinary resolution decide or, if no such resolution has been passed or so far as the resolution does not make specific provision, as the
Board of Directors for the time being of the Company (the Board) may decide. Subject to the Companies Act 2006, the Articles and any resolution
of the Company, the Board may deal with any unissued shares as it may decide.
Rights of preference shares
The preference shares carry the following rights in priority to the ordinary shares but carry no further right to participate in profits or assets:
I the right to receive out of the profits of the Company a fixed cumulative preferential dividend at the rate of 5.25% per annum on the capital
paid up thereon;
I the right on a return of assets on a winding up to payment of the capital paid up thereon together with a sum calculated at the rate of 6.00%
per annum in respect of any period up to the commencement of the winding up for which such preferential dividend as referred to above has
not been paid; and
I the right on a return of assets in a reduction of capital to repayment of the capital paid up thereon together with a sum equal to all arrears
(if any) of such preferential dividend as referred to above.
The preference shares shall not confer on the holders of them any right to receive notice of or to be present or to vote at any general meeting
unless either:
I a resolution is proposed directly affecting the rights or privileges of the holders of the preference shares as a separate class; or
I at the date of the notice convening the general meeting, the fixed cumulative preferential dividend provided in the Articles shall be in arrears
for more than six months.
www.henryboot.co.uk
63
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Directors’ report continued
Shareholder additional information continued
Voting
Under and subject to the provisions of the Articles and subject to any special rights or restrictions as to voting attached to any shares, on a show
of hands, every shareholder present in person shall have one vote and on a poll every shareholder who was present in person or by proxy shall
have one vote for every share of which he is the holder. Under the Companies Act 2006, shareholders are entitled to appoint a proxy to exercise
all or any of their rights to attend and to speak and vote on their behalf at a general meeting or class meeting.
Restrictions on voting
A shareholder shall not be entitled to vote at any general meeting or class meeting in respect of any shares held by him unless all calls and other
sums presently payable by him in respect of that share have been paid. In addition, holders of default shares (as defined in the Articles) shall not
be entitled to vote during the continuance of a default in providing the Company with information concerning interests in those shares required
to be provided (following relevant notification) under the Companies Act 2006.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights in respect of the resolutions to be considered at the AGM to be held on 22 May 2014
are set out in the Notice of AGM on pages 108 to 111.
Dividends and distributions
The Company may, by ordinary resolution, declare a dividend to be paid to the shareholders but no dividend shall exceed the amount
recommended by the Board. The Board may pay interim dividends and also any fixed rate dividend whenever the financial position of the
Company justifies its payment in the opinion of the Board. If the Board acts in good faith, none of the Directors shall incur any liability to the
holders of shares with preferred rights for any loss they may suffer in consequence of the payment of an interim dividend on other shares.
Winding up
Under the Articles, if the Company is in liquidation, the liquidator may, with the sanction of a special resolution of the Company and any other
authority required by law:
I divide among the shareholders in specie the whole or any part of the assets of the Company and, for that purpose, value any assets
and determine how the division shall be carried out as between the shareholders or different classes of shareholders; or
I vest the whole or any part of the assets in trustees upon such trusts for the benefit of shareholders as the liquidator with the like sanction
shall think fit.
Variation of rights
The Articles specify that the special rights attached to any class of shares may, either with the consent in writing of holders of three-fourths
of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of such holders (but not otherwise),
be modified or abrogated.
Transfer of shares
Under and subject to the restrictions in the Articles, any shareholder may transfer all or any of his shares in certificated form by transfer in writing
in any usual form or in any other form which the Board may approve. The Board may, save in certain circumstances, refuse to register any transfer
of a certificated share not fully paid up. The Board may also refuse to register any transfer of certificated shares unless it is:
I in respect of only one class of shares;
I in favour of no more than four transferees;
I duly stamped or exempt from stamp duty;
I delivered to the office or at such other place as the Board may decide for registration; and
I accompanied by the certificate for the shares to be transferred and such other evidence (if any) as the Board may reasonably require to show
the right of the intending transferor to transfer the shares.
Repurchase of shares
Subject to the provisions of the Companies Acts and to any rights conferred on the holders of any class of shares, the Company may purchase
all or any of its shares of any class, including any redeemable shares.
Amendment to the Articles of Association
Any amendments to the Articles may be made in accordance with the provisions of the Companies Act 2006 by way of special resolution.
64
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Shareholder additional information continued
Appointment and replacement of Directors
The Directors shall not, unless otherwise determined by an ordinary resolution of the Company, be less than three nor more than 15 in number.
Directors may be appointed by the Company by ordinary resolution or by the Board. A Director appointed by the Board shall retire from office at
the next AGM of the Company but shall then be eligible for re-appointment. The Board may appoint one or more Directors to hold any office or
employment under the Company for such period (subject to the Companies Acts) and on such terms as it may decide and may revoke or
terminate any such appointment. At each AGM any Director who has been appointed by the Board since the previous AGM and any Director
selected to retire by rotation shall retire from office. At each AGM, one-third of the Directors who are subject to retirement by rotation or, if the
number is not an integral multiple of three, the number nearest to one-third but not exceeding one-third shall retire from office. In addition, there
shall also be required to retire by rotation any Director who at any AGM of the Company shall have been a Director at each of the preceding two
AGMs of the Company, provided that he was not appointed or re-appointed at either such AGM and he has not otherwise ceased to be a
Director and been re-appointed by general meeting of the Company at or since either such AGM.
The Company may, by ordinary resolution of which special notice has been given in accordance with the Companies Acts, remove any Director
before his period of office has expired notwithstanding anything in the Articles or in any agreement between him and the Company. A Director
may also be removed from office by the service on him of a notice to that effect signed by or on behalf of all the other Directors, being not less
than three in number. The office of a Director shall be vacated if:
(i) he is prohibited by law from being a Director;
(ii) he becomes bankrupt or makes any arrangement or composition with his creditors generally;
(iii) he is or may be suffering from a mental disorder as referred to in the Articles;
(iv) for more than six months he is absent, without special leave of absence from the Board, from meetings of the Board held during that period
and the Board resolves that his office be vacated; or
(v) he serves on the Company notice of his wish to resign.
Powers of the Directors
The business of the Company shall be managed by the Board which may exercise all the powers of the Company, subject to the provisions of the
Articles and any ordinary resolution of the Company. The Articles specify that the Board may exercise all the powers of the Company to borrow
money and to mortgage or charge all or any part of its undertaking, property and assets and uncalled capital and to issue debentures and other
securities, subject to the provisions of the Articles.
Takeovers and significant agreements
The Company is a party to the following significant agreements that take effect, alter or terminate on a change of control of the Company
following a takeover bid:
I the Company’s share schemes and plans; and
I bank facilities whereby upon a ‘change of control’ the Lenders shall consult with Henry Boot PLC for a period not greater than 30 days
(commencing on the date of the change of control) to determine whether and on what basis the lenders are prepared to continue the facility.
Information rights
Beneficial owners of shares who have been nominated by the registered holder of those shares to enjoy information rights under Section 146
of the Companies Act 2006 are required to direct all communications to the registered holder of their shares, rather than to the Company’s
registrars Capita Asset Services, or to the Company directly.
Statement of disclosure of information to auditors
The Directors of the Company who held office at the date of approval of this Annual Report each confirm that:
I so far as they are aware, there is no relevant audit information (information needed by the Company’s auditors in connection with preparing
their report) of which the Company’s auditors are unaware; and
I they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information
and to establish that the Company’s auditors are aware of that information.
Independent auditors
The auditors, PricewaterhouseCoopers LLP, have signified their willingness to remain in office and resolutions re-appointing them as auditors
(Resolution 4) and authorising the Directors to fix their remuneration (Resolution 5) will be proposed at the AGM.
Accountability and audit
Details of the Directors’ responsibilities and the Directors’ Responsibility Statement are contained on page 66. The Independent Auditors’ Report
is given on page 68 to 71.
The Directors’ statement in respect of the business as a ‘going concern’ is provided in the Directors’ Report on page 60.
R A Deards
Company Secretary
17 April 2014
www.henryboot.co.uk
65
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Governance
Statement of Directors’
responsibilities
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Group
and Parent Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union (EU). 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 the Company and of the profit or loss of the Group for that period. In preparing these Financial
Statements, the Directors are required to:
I select suitable accounting policies and then apply them consistently;
I make judgements and accounting estimates that are reasonable and prudent;
I state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the
Financial Statements; and
I prepare the Financial Statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Financial
Statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group Financial Statements,
Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
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’ statement pursuant to the Disclosure and Transparency Rules
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 a Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed on page 8 confirm that, to the best of their knowledge:
I the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit of the Group; and
I the Strategic Report and Directors’ Report contained in the Annual Report includes a fair review of the development and performance
of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
E J Boot
Director
17 April 2014
J T Sutcliffe
Director
17 April 2014
66
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Annual Report and Financial Statements 2013 Henry Boot PLC
Financial statements
Financial statements
68
72
Independent auditors’ report
Consolidated statement
of comprehensive income
73 Statements of financial position
74 Statements of changes in equity
75 Statements of cash flows
76 Principal accounting policies
82 Notes to the financial statements
Shareholder information
107 Property valuers’ report
108 Notice of annual general meeting
112 Financial calendar
112 Advisers
IBC Group contact information
O
v
e
r
v
e
w
i
i
S
t
r
a
t
e
g
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
i
n
f
o
r
m
a
t
i
o
n
www.henryboot.co.uk
67
Independent auditors’ report
to the members of Henry Boot PLC
Report on the Financial Statements
Our opinion
In our opinion:
I the Financial Statements, defined below, give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2013 and of the Group’s profit and of the Group’s and Parent Company’s cash flows for the year then ended;
I the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
I the Parent Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
I the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group Financial Statements, Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
The Group Financial Statements and Parent Company Financial Statements (the ‘Financial Statements’), which are prepared by Henry Boot PLC, comprise:
I the Group and Parent Company statements of financial position as at 31 December 2013;
I the Consolidated statement of comprehensive income for the year then ended;
I the Group and Parent Company statements of changes in equity and statements of cash flows for the year then ended; and
I the summary of principal accounting policies and the notes to the Financial Statements, which include other explanatory information.
The financial reporting framework that has been applied in their preparation comprises applicable law and IFRSs as adopted by the European
Union and, as regards the Parent Company, as applied in accordance with the provisions of the Companies Act 2006.
Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual Report and Financial Statements
(the ‘Annual Report’), rather than in the notes to the Financial Statements. These are cross-referenced from the Financial Statements and are
identified as audited.
What an audit of Financial Statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). An audit involves obtaining
evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are
free from material misstatement, whether caused by fraud or error. This includes an assessment of:
I whether the accounting policies are appropriate to the Group’s and Parent Company’s circumstances and have been consistently applied
and adequately disclosed;
I the reasonableness of significant accounting estimates made by the Directors; and
I the overall presentation of the Financial Statements.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited
Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to evaluate
the effect of misstatements, both individually and on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Group Financial Statements as a whole to be £1.5 million. In arriving
at this judgement we have had regard to total assets, of which this is 0.45%, because the stated aim of the business is to maximise long-term
shareholder value.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £75,000 as well
as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Overview of the scope of our audit
The Group is structured along three business lines being Property Investment and Development, Land Development and Construction. The Group
Financial Statements are a consolidation of the 41 reporting units within these three business lines and the Group’s centralised functions.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by analysing the financial
statement line items and disclosures at the reporting unit level and tailoring our testing to be able to conclude that sufficient appropriate evidence
had been obtained as a basis for our opinion on the Group Financial Statements as a whole.
Accordingly, of the Group’s 41 reporting units, we identified eleven which, in our view, required an audit of their complete financial information,
either due to their size or their risk characteristics. Specific audit procedures were performed at a further six reporting units. This, together with
additional procedures performed on the Group’s centralised functions, gave us the evidence we needed for our opinion on the Group Financial
Statements as a whole.
68
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Report on the Financial Statements continued
Overview of our audit approach continued
Areas of particular audit focus
In preparing the Financial Statements, the Directors made a number of subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily focused our work in these
areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the
Financial Statements.
In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to
provide a reasonable basis for us to draw conclusions. We obtained audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
We considered the following areas to be those that required particular focus in the current year. This is not a complete list of all risks or areas
of focus identified by our audit. We discussed these areas of focus with the Audit Committee. Their report on those matters that they considered
to be significant issues in relation to the Financial Statements is set out on pages 44 to 46.
Area of focus
Valuation of investment properties
We focused on this area because the Group’s investment property
assets represent a significant proportion of the assets in the Group
statement of financial position.
Property valuations are subject to a high degree of judgement
as they are calculated from a number of different assumptions
specific to each individual property or development site.
A relatively small percentage change in valuations of individual properties,
in aggregate, could result in a material impact to the Financial
Statements. (Refer to note 13 to the Financial Statements.)
Accuracy and valuation of construction contract balances
We focused on this area because of the judgements involved
in estimating the stage of completion of contract activity,
assessing costs to complete contracts and the recoverability
of contract balances.
The Group undertakes a number of construction contracts and a
relatively small change in the judgements applied by management
could result in a material misstatement to the Financial Statements.
Valuation of inventory
We focused on this area because inventory represents a significant
proportion of the assets in the statement of financial position.
The valuation of inventory is subject to a degree of judgement
and is dependent on the status of current planning applications.
The Group carries a number of sites within inventory and a change
in the judgements applied by the Directors could result in a material
misstatement to the Financial Statements.
Fraud in revenue recognition
ISAs (UK & Ireland) presume there is a risk of fraud in revenue
recognition because of the pressure management may feel
to achieve the planned results.
We focused on this area because typical property, land and
construction transactions are of a high value and low volume,
with each being agreed on individual terms.
The judgement involved in interpreting these terms, including
the timing of revenue recognition, gives rise to a risk that revenue
may not be accurately recorded.
How the scope of our audit addressed the area of focus
We agreed the property information supplied to the Directors’ external
valuer including details of rental agreements to the underlying records
that we tested.
Our assessment of the Directors’ calculation of the fair value of
investment properties focused on the significant valuation assumptions
disclosed in note 13 to the Financial Statements, being rental values,
yields and costs to complete.
We challenged these assumptions, which had the greatest impact
on property valuations, by benchmarking against industry trends and
reperformed calculations made by the Directors and their external
valuers in arriving at the year end valuations recorded in the
Financial Statements.
We also performed sensitivity analysis to determine the extent of
change in the significant valuation assumptions that, either individually
or collectively, would be required for the valuations to be materially
misstated. Having done so we considered the likelihood of such
a movement in the assumptions arising.
We evaluated the Directors’ revenue and profit recognition on construction
contracts, including holding discussions with the Directors’ in-house
quantity surveyors, reviewing legal documentation and substantively
tested balances back to supporting invoices.
We tested accruals for contract work undertaken by checking it to
supporting documentation, including subcontractor applications for
payment, to confirm balances.
We also challenged the Directors’ overall profit recognition methodology,
including an assessment of the accuracy of revenue and profit forecasts
from prior years.
We tested the Directors’ assessment that the carrying value of inventory
is stated at the lower of cost and net realisable value by agreeing to
supporting documentation, for example development appraisals,
title deeds and the status of planning agreements.
We evaluated management’s historic forecasting accuracy by reviewing
sales made during the current year and previous years, confirming whether
these were sold at values in excess of their carrying value at that time.
In respect of land and property transactions, we reviewed legal
completion documents in order to determine the point at which legal
title to property should pass to the purchaser and checked that
revenue had been accurately recorded.
In respect of construction transactions, we tested the accounting
for contractual milestones by agreeing them to the analysis of the
position of each contract that management maintains and the relevant
terms within the customer agreements. Our work included checking
customer acceptance of the work done, considering the possible
implications of any ongoing disputes, and testing the Directors’
estimates of costs to complete the contract.
We also tested manual journal entries posted to revenue accounts to
identify and challenge unusual or irregular items by agreeing to source
documentation to confirm their appropriateness.
www.henryboot.co.uk
69
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Independent auditors’ report continued
to the members of Henry Boot PLC
Report on the Financial Statements continued
Overview of our audit approach continued
Areas of particular audit focus continued
Area of focus
Risk of management override of internal controls
ISAs (UK & Ireland) require that we consider this.
How the scope of our audit addressed the area of focus
We assessed the overall control environment of the Group, including
the arrangements for staff to ‘whistle-blow’ inappropriate actions,
and interviewed senior management.
We examined the significant accounting estimates and judgements
relevant to the Financial Statements for evidence of bias by the Directors
that may represent a risk of material misstatement due to fraud.
We also tested journal entries to determine the rationale
for manual adjustments.
Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page 60, in relation to going concern. We have nothing
to report having performed our review.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate to prepare the Group’s and Parent Company’s Financial
Statements using the going concern basis of accounting. The going concern basis presumes that the Group and Parent Company have adequate
resources to remain in operation, and that the Directors intend them to do so, for at least one year from the date the Financial Statements were
signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and the Parent
Company’s ability to continue as a going concern.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion:
I the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are prepared
is consistent with the Financial Statements; and
I the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
I we have not received all the information and explanations we require for our audit; or
I adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
I the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law
have not been made. We have no exceptions to report arising from this responsibility.
Corporate Governance Statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company’s compliance
with nine provisions of the UK Corporate Governance Code (the ‘Code’). We have nothing to report having performed our review.
On page 38 of the Annual Report, as required by the Code Provision C.1.1, the Directors state that they consider the Annual Report taken
as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group’s performance,
business model and strategy. On page 45, as required by C.3.8 of the Code, the Audit Committee has set out the significant issues that it
considered in relation to the Financial Statements, and how they were addressed. Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
I the statement given by the Directors is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit; or
I the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us
to the Audit Committee.
We have no exceptions to report arising from this responsibility.
70
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Other matters on which we are required to report by exception continued
Other information in the Annual Report
Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
I materially inconsistent with the information in the audited Financial Statements; or
I apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Parent Company acquired in the course
of performing our audit; or
I is otherwise misleading.
We have no exceptions to report arising from this responsibility.
Responsibilities for the Financial Statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’ responsibilities set out on page 66, the Directors are responsible for the preparation of the Group
and Parent Company Financial Statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Group and Parent Company Financial Statements in accordance with applicable law
and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
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.
Andy Ward (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Sheffield
17 April 2014
www.henryboot.co.uk
71
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2013
Revenue
Cost of sales
Gross profit
Other income
Administrative expenses
Pension expenses
(Decrease)/increase in fair value of investment properties
Profit on sale of investment properties
Loss on sale of assets held for sale
Operating profit
Finance income
Finance costs
Share of profit/(loss) of joint ventures
Profit before tax
Tax
Profit for the year from continuing operations
Other comprehensive income/(expense) not being reclassified to profit or loss in subsequent years:
Revaluation of Group occupied property
Deferred tax on property revaluations
Actuarial gain/(loss) on defined benefit pension scheme
Deferred tax on actuarial (gain)/loss
Movement in fair value of cash flow hedge
Deferred tax on cash flow hedge
Total other comprehensive income/(expense) not being reclassified to profit or loss in subsequent years
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the Parent Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Parent Company
Non-controlling interests
Basic earnings per ordinary share for the profit attributable
to owners of the Parent Company during the year
Diluted earnings per ordinary share for the profit attributable
to owners of the Parent Company during the year
* See page 81.
Note
1
1
4
13
3
5
6
15
7
17
27
17
25
17
9
9
2013
£’000
153,794
(115,971)
37,823
30
(13,936)
(3,632)
20,285
(1,563)
304
—
19,026
694
(1,526)
183
18,377
(5,143)
13,234
—
84
8,537
(2,447)
151
(38)
6,287
19,521
11,315
1,919
13,234
17,558
1,963
19,521
8.6p
8.5p
2012
£’000
(restated*)
103,147
(75,607)
27,540
28
(13,286)
(2,501)
11,781
1,346
1,032
(11)
14,148
633
(1,415)
(8)
13,358
(2,326)
11,032
(35)
102
(10,142)
1,953
169
(51)
(8,004)
3,028
9,114
1,918
11,032
1,064
1,964
3,028
7.0p
6.9p
72
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
Statements of financial position
for the year ended 31 December 2013
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Investments
Investment in joint ventures
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Assets classified as held for sale
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Provisions
NET CURRENT ASSETS
Non-current liabilities
Trade and other payables
Borrowings
Retirement benefit obligations
Provisions
NET ASSETS
EQUITY
Share capital
Property revaluation reserve
Retained earnings
Other reserves
Cost of shares held by ESOP trust
Equity attributable to owners of the Parent Company
Non-controlling interests
TOTAL EQUITY
Group
Parent Company
Note
2013
£’000
2012
£’000
2013
£’000
2012
£’000
11
12
13
14
15
16
17
18
16
20
21
24
26
21
24
27
26
30
31
31
31
32
7,994
17,354
132,394
—
180
12,686
5,411
176,019
91,013
43,103
—
15,587
10,511
160,214
50,171
2,505
46,492
7,147
106,315
53,899
4,840
5,207
20,075
6,312
36,434
193,484
13,510
3,355
171,938
3,566
(188)
192,181
1,303
193,484
9,152
16,562
140,375
—
22
11,538
8,904
186,553
81,560
37,268
—
3,418
1,900
124,146
—
94
—
3,369
—
—
4,445
7,908
—
81
—
3,021
—
—
7,519
10,621
—
189,413
—
12,619
—
202,032
—
179,290
745
351
—
180,386
51,786
438
19,223
9,384
80,831
43,315
72,173
1,581
45,739
—
119,493
82,539
82,562
—
18,942
—
101,504
78,882
2,244
6,137
30,533
9,051
47,965
181,903
13,510
3,271
160,692
3,497
(444)
180,526
1,377
181,903
—
—
20,075
—
20,075
70,372
13,510
—
52,299
4,751
(188)
70,372
—
70,372
—
—
30,533
—
30,533
58,970
13,510
—
41,153
4,751
(444)
58,970
—
58,970
The Financial Statements on pages 72 to 106 of Henry Boot PLC, registered number 160996, were approved by the Board of Directors
and authorised for issue on 17 April 2014.
On behalf of the Board
E J Boot
Director
J T Sutcliffe
Director
www.henryboot.co.uk
73
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Statements of changes in equity
at 31 December 2013
Attributable to owners of the Parent Company
Cost of
shares held
by ESOP
trust
£’000
(601)
—
Other
reserves
£’000
3,425
—
72
72
—
—
—
—
—
—
3,497
—
69
69
—
—
—
—
3,566
Share
capital
£’000
13,510
—
—
—
—
—
—
—
—
13,510
—
—
—
—
—
—
—
13,510
—
—
—
16
(79)
—
220
157
(444)
—
—
—
—
26
230
256
(188)
Retained
earnings
£’000
51,731
3,223
(8,189)
(4,966)
(5,760)
—
—
148
(5,612)
41,153
11,342
6,090
17,432
(6,358)
—
72
(6,286)
52,299
Total
£’000
184,781
9,114
(8,050)
1,064
(5,760)
16
(79)
—
504
(5,319)
180,526
11,315
6,243
17,558
(6,358)
26
429
(5,903)
192,181
Other
reserves
£’000
4,751
—
—
—
—
—
—
—
—
4,751
—
—
—
—
—
—
—
4,751
Non-
controlling
interests
£’000
1,256
1,918
46
1,964
(1,843)
—
—
—
—
(1,843)
1,377
1,919
44
1,963
(2,037)
—
—
(2,037)
1,303
Cost of
shares held
by ESOP
trust
£’000
(601)
—
—
—
—
16
(79)
220
157
(444)
—
—
—
—
26
230
256
(188)
Total
equity
£’000
186,037
11,032
(8,004)
3,028
(7,603)
16
(79)
—
504
(7,162)
181,903
13,234
6,287
19,521
(8,395)
26
429
(7,940)
193,484
Total
equity
£’000
69,391
3,223
(8,189)
(4,966)
(5,760)
16
(79)
368
(5,455)
58,970
11,342
6,090
17,432
(6,358)
26
302
(6,030)
70,372
Group
At 1 January 2012
Profit for the year (restated*)
Other comprehensive income/
(expense) (restated*)
Total comprehensive income
Equity dividends
Proceeds on disposal
of treasury shares
Purchase of treasury shares
Transfer to retained earnings
Share-based payments
At 31 December 2012
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds on disposal
of treasury shares
Share-based payments
At 31 December 2013
Note
31
10
32
32
31
31, 32
31
10
32
31, 32
Share
capital
£’000
13,510
—
—
—
—
—
—
—
—
—
13,510
—
—
—
—
—
—
—
13,510
Property
revaluation
reserve
£’000
3,354
—
67
67
—
—
—
(150)
—
(150)
3,271
—
84
84
—
—
—
—
3,355
Retained
earnings
£’000
165,093
9,114
(8,189)
925
(5,760)
—
—
150
284
(5,326)
160,692
11,315
6,090
17,405
(6,358)
—
199
(6,159)
171,938
Note
8
10
30, 31
31
8
10
32
31
Parent Company
At 1 January 2012
Profit for the year (restated*)
Other comprehensive expense (restated*)
Total comprehensive expense
Equity dividends
Proceeds on disposal of treasury shares
Purchase of treasury shares
Share-based payments
At 31 December 2012
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds on disposal of treasury shares
Share-based payments
At 31 December 2013
* See page 81.
74
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Statements of cash flows
for the year ended 31 December 2013
Cash flows from operating activities
Operating profit/(loss)
Adjustments for non-cash items:
Amortisation of PFI asset
Goodwill impairment
Depreciation of property, plant and equipment
Impairment losses on land and buildings
Revaluation decrease/(increase) in investment properties
Amortisation of capitalised letting fees
Share-based payment expense
Pension scheme credit
Provision against investments in subsidiaries
Movements on provision against loans to subsidiaries
Loss on disposal of assets held for sale
Gain on disposal of property, plant and equipment
Gain on disposal of investment properties
Operating cash flows before movements in equipment held for hire
Purchase of equipment held for hire
Proceeds on disposal of equipment held for hire
Operating cash flows before movements in working capital
Increase in inventories
(Increase)/decrease in receivables
(Decrease)/increase in payables
Cash generated from/(used by) operations
Interest paid
Tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Purchase of investment property
Purchase of investments in subsidiaries
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of investment properties
Proceeds on disposal of assets held for sale
Dividends received from joint ventures
Interest received
Dividends received from subsidiaries
Net cash flows from investing activities
Cash flows from financing activities
Purchase of treasury shares
Proceeds on disposal of treasury shares
Decrease in borrowings
Increase in borrowings
Dividends paid – ordinary shares
– non-controlling interests
– preference shares
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at beginning of year
Net cash and cash equivalents at end of year
Analysis of net debt:
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Bank loans
Related party loans
Government loans
Net debt
* See page 81.
Group
Parent Company
Note
2013
£’000
2012
£’000
(restated*)
2013
£’000
2012
£’000
(restated*)
19,026
14,148
(9,994)
(1,921)
11
11
12
12
13
3
4
14
3
3
12
11
12
13
14
15
32
10
10
24
24
24
1,140
204
3,086
—
1,563
88
429
(1,921)
—
—
—
(406)
(304)
22,905
(3,303)
471
20,073
(9,106)
(5,129)
(4,294)
1,544
(1,152)
(1,984)
(1,592)
(186)
(793)
(6,417)
—
153
2,219
450
25
290
—
(4,259)
—
26
(12,937)
39,326
(6,337)
(2,037)
(21)
18,020
12,169
3,418
15,587
15,587
—
15,587
(48,746)
—
(2,953)
(36,112)
1,131
203
2,996
75
(1,346)
37
504
(2,258)
—
—
11
(333)
(1,032)
14,136
(3,013)
272
11,395
(19,376)
7,520
(2,973)
(3,434)
(1,135)
(3,381)
(7,950)
(69)
(1,493)
(10,429)
—
348
6,579
964
—
33
—
(4,067)
(79)
16
(11,222)
30,077
(5,739)
(1,843)
(21)
11,189
(828)
4,246
3,418
3,418
—
3,418
(22,331)
(200)
(2,829)
(21,942)
—
—
44
—
—
—
302
(1,921)
9,652
(3,854)
—
(10)
—
(5,781)
—
—
(5,781)
—
(2,189)
(11,291)
(19,261)
(3,695)
(495)
(23,451)
—
(58)
—
(10,000)
11
—
—
—
8,457
16,844
15,254
—
26
(10,000)
37,000
(6,337)
—
(21)
20,668
12,471
(591)
11,880
12,619
(739)
11,880
(45,000)
—
—
(33,120)
—
—
70
—
—
—
368
(2,258)
—
(1,622)
—
(10)
—
(5,373)
—
—
(5,373)
—
(13,744)
708
(18,409)
(3,474)
(1,601)
(23,484)
—
(28)
—
—
20
—
—
—
7,803
2,755
10,550
(79)
16
(10,000)
28,000
(5,739)
—
(21)
12,177
(757)
166
(591)
351
(942)
(591)
(18,000)
—
—
(18,591)
www.henryboot.co.uk
75
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information
Financial statements
Principal accounting policies
for the year ended 31 December 2013
The principal Accounting Policies adopted in the preparation of the Group’s IFRS Financial Statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise stated.
The Company is a public limited company, listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom.
The address of its registered office is Banner Cross Hall, Ecclesall Road South, Sheffield, United Kingdom S11 9PD.
Basis of preparation and statement of compliance
The Consolidated Financial Statements have been prepared in accordance with IFRS adopted by the EU, IFRIC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS and therefore complies with Article 4 of the EU IAS regulations. They have
been prepared on the historical cost basis, except for financial instruments, investment properties and Group occupied land and buildings, which
are measured at fair value.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented a statement
of comprehensive income for the Parent Company alone. See note 8.
Consolidation
The Consolidated Financial Statements are a consolidation of the Financial Statements of the Parent Company and all entities controlled by the
Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the Accounting Policies used in line with those used
by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The results of subsidiaries acquired or
disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or disposal.
Non-controlling interests in the fair value of the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling
interests’ share of changes in equity since the date of the combination.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent
consideration amendments. Cost also includes direct attributable costs of investment.
Going concern
The Directors have, at the time of approving the Financial Statements, a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in
preparing the Financial Statements. Further detail is contained in the Directors’ Report on page 60.
Joint ventures
Joint ventures are all entities in which the Group has shared control with another entity, established by contractual agreement. Jointly controlled
entities are accounted for using the equity method from the date that the jointly controlled entity commences until the date that the joint control of
the entity ceases. The Group’s share of profits or losses is recognised in the Consolidated Statement of Comprehensive Income. If the share
of losses equals its investment, the Group does not recognise further losses, except to the extent that there are amounts receivable that may not
be recoverable or there are further commitments to provide funding. Unrealised gains on transactions between the group and its joint ventures
are eliminated to the extent of the group’s interest in joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. The accounting policies of the joint ventures are consistent with those of the Group.
Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured
as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the
Group in exchange for control of the acquiree.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Subsequent
changes in fair value of contingent consideration classified as an asset or liability are accounted for in accordance with IAS 39.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values
at the acquisition date.
Acquisition related costs are recognised in the Consolidated Statement of Comprehensive Income as incurred.
Goodwill arising on consolidation of subsidiary undertakings is recognised as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
Goodwill is subsequently measured at cost less any accumulated impairment losses. Goodwill is subjected to an impairment test at the reporting
date or when there has been an indication that the goodwill should be impaired, any loss is recognised immediately through the Statement of
Comprehensive Income and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to cash-generating units.
The allocation is made to those cash-generating units that are expected to benefit from the business combination in which goodwill arose.
Assets classified as held for sale
Non-current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale
is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be
recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
76
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course
of business, net of discounts, VAT and other sales related taxes.
Revenue from construction contracts is recognised in accordance with the Group’s accounting policy on construction contracts (see below).
Revenue from the sale of land and properties is recognised at the point of legal completion and where title has passed.
Revenue from the Group’s PFI concession is recognised by the calculation of ‘shadow tolls’ which are based on vehicle usage of the A69
for the period of account.
Revenue from operating leases is recognised on a straight line basis over the lease term, except for contingent rental income which is recognised
when it arises. When the Group provides incentives to its tenants, the cost of incentives is recognised over the lease term, on a straight line basis,
as a reduction to revenue.
Revenue from the hire of plant and equipment is measured as the fair value of sales proceeds from such which relate to the period of account.
Construction contracts
Where the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised by reference
to the stage of completion of the contract activity at the reporting date and profit is that estimated to fairly reflect the profit arising up to that date.
Contract revenue is recognised in accordance with the stage of completion of the contract where the contract’s outcome can be estimated reliably.
The principal method used to recognise the stage of completion of a contract is an in-house survey of the work performed.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Contract revenue includes an assessment of the amounts agreed in the contract, plus or less any variations in contract work and claims to the
extent that they are approved and can be measured reliably. The Group therefore assesses the revenue recognised on a contract by contract basis.
Variations and claims are changes to the original contractual obligations, which may be valued by contractual rates or agreed rates, or changes
to contract conditions, loss and expense, prolongation, disruption or additional prelims. They are included to the extent that it is probable that
they will result in revenue and they are capable of being reliably measured. Our judgement on these matters is based on past experience, external
valuers, external influences (weather, for example), trends, risk profile and nature of the contract, competency of consultants and legal constraints.
Operating segments
The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments
of an entity. The Group has determined that its chief operating decision maker is the Board of Henry Boot PLC (the Board).
Management has determined the operating segments based on the reports reviewed by the Board in making strategic decisions.
The Board considers the business based on the following operating segments:
I Property Investment and Development, inclusive of property investment and development and trading activities;
I Land Development, inclusive of land management, development and trading activities; and
I Construction, inclusive of its PFI company, plant hire and regeneration activities.
Whilst the following is not a reportable segment, information about it is considered by the Board in conjunction with the reportable segments:
I Group overheads, comprising central services, pensions, head office administration, in-house leasing and other mainly ‘not for profit’ activities.
Investment property
Investment properties are those properties which are not occupied by the Group and which are held for long-term rental yields, capital
appreciation or both. Investment property also includes property that is being constructed or developed for future use as investment property.
Investment properties are initially measured at cost, including related transaction costs.
At each subsequent reporting date, investment properties are re-measured to their fair value; further information regarding the valuation methodologies
applied can be found in note 13 to the Financial Statements. Movements in fair value are included in the Statement of Comprehensive Income.
Where the Group employs professional valuers the valuations provided are subject to a comprehensive review to ensure they are based on accurate
and up to date tenancy information. Discussions are also held with the valuers to test the valuation assumptions applied and comparable
evidence utilised to ensure they are appropriate in the circumstances.
Subsequent expenditure is capitalised to the asset’s carrying value only where it is probable that the future economic benefits associated with the
expenditure will flow to the Group. All other expenditure is expensed to the Statement of Comprehensive Income in the period in which it arises.
Investment property is de-recognised when they are disposed at their carrying value.
Where specific investment properties have been identified as being for sale within the next twelve months, a sale is considered highly probable
and the property is immediately available for sale, their fair value is shown under assets classified as held-for-sale within current assets, measured
in accordance with the provisions of IAS 40 ‘Investment Property’.
www.henryboot.co.uk
77
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Principal accounting policies continued
for the year ended 31 December 2013
Property, plant and equipment
Group occupied properties are stated in the Statement of Financial Position at their revalued amounts, being the fair value, based on market values,
less any subsequent accumulated depreciation or subsequent accumulated impairment loss. Fair value is determined annually by independent valuers.
Surpluses on revaluations are transferred to the revaluation reserve. Deficits on revaluations are charged against the revaluation reserve to the extent
that there are available surpluses relating to the same asset and are otherwise charged to the Statement of Comprehensive Income.
In respect of land and buildings, depreciation is provided where it is considered significant having regard to the estimated remaining useful lives
and residual values of individual properties.
Equipment held for hire, vehicles and office equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Cost includes the original purchase price of the asset plus any costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight line method, mainly
at the following annual rates:
I equipment held for hire
– between 25% and 50%
I vehicles
– between 20% and 25%
I office equipment
– 25%
Intangible assets excluding goodwill
Intangible assets are stated at cost less accumulated amortisation and impairment. The PFI asset represents the capitalised cost of the initial
project, together with the capitalised cost of any additional major works to the road and structures, which are then amortised, on a straight line
basis, over 20 years or the remaining life of the concession. The concession lasts a period of 30 years and has a further twelve years to run.
Leasing
Where the Group acts as a lessee in the case of operating leases, rentals payable are recognised on a straight line basis over the term of the relevant lease.
Inventories
Inventories are stated at the lower of cost and estimated net realisable value and are subject to regular impairment reviews.
Inventories comprise all the direct costs incurred in bringing the individual inventories to their present state at the reporting date less the value
of any impairment losses.
Impairment reviews are considered on a site-by-site or individual development basis by management at each reporting date, write-downs or
reversals are made to ensure that inventory is then stated at the lower of cost or net realisable value.
Net realisable value is considered in the light of progress made in the planning process, feedback from local planning officers, development
appraisals and other external factors that might be considered likely to influence the eventual outcome. Where it is considered that no future
economic benefit will arise, costs are written off to the Statement of Comprehensive Income.
Where individual parcels of land held for development are disposed of out of a larger overall development site, costs are apportioned based on
an acreage allocation after taking into account the cost or net realisable value of any remaining residual land which may not form part of the overall
development site or which may not be available for development. Where the Group retains obligations attached to the development site as
a whole, provisions are made relating to these disposals on the same acreage allocation basis.
Retirement benefit costs
Payments to the defined contribution retirement benefit scheme are charged as an expense as they fall due.
The cost of providing benefits under the defined benefit retirement scheme is determined using the Projected Unit Credit Method, with actuarial
calculations being carried out at each reporting date. Actuarial gains and losses are recognised in full in the period in which they occur. They are
recognised within ‘Other comprehensive income’ within the Consolidated Statement of Comprehensive Income. The net periodic benefit cost,
comprising the employer’s share of the service cost and the net interest cost is charged to the Consolidated Statement of Comprehensive
Income. The Group’s net obligations in respect of the scheme are calculated by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods. This is then discounted to present value and the fair value of the scheme’s
assets is then deducted.
Share-based payments
Equity-settled share-based payments to employees of the Company and its subsidiary undertakings are measured at fair value of the equity
instruments at the date of grant and are expensed on a straight line basis over the vesting period. Fair value is measured by a Monte Carlo
pricing model taking in to account any market performance conditions and excludes the effect of non market-based vesting conditions. Details
regarding the determination of the fair value of equity-settled share-based transactions are set out in note 30. At each reporting period date, the
Group estimates the number of equity instruments expected to vest as a result of the effect of non market-based vesting conditions. The impact
of the revision, if any, is recognised in the Consolidated Statement of Comprehensive Income with a corresponding adjustment to equity reserves.
SAYE share options are treated as cancelled when employees cease to contribute to the scheme. This results in accelerated recognition
of the expenses that would have arisen over the remainder of the original vesting period.
Details regarding the determination of the fair value of share-based transactions are set out in note 30.
78
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
Tax
The tax charge on the profit or loss for the year comprises the sum of tax currently payable and any deferred tax movements in the year.
Tax currently payable is based on taxable profit for the year adjusted for any tax payable or repayable in respect of earlier years. Taxable profit
differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable
or deductible in other years and items that may never be taxable or deductible.
The Group’s liability for current taxation is calculated using tax rates that have been enacted or substantially enacted by the reporting date.
Corporation tax liabilities of wholly owned subsidiary companies are transferred to and paid by the Parent Company and credit is given
by the Parent Company for loss relief surrendered.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial
Statements and the corresponding tax bases used in computing taxable profits.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profits or gains will be available to allow all or part of the assets to be recovered.
Deferred tax is calculated at tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax assets and deferred tax liabilities are offset where the Group has a legally enforceable right to do so and when the deferred tax
assets and liabilities relate to tax levied by the same tax authority where there is an intention to settle the balances on a net basis.
Dividends
Dividends are only recognised as a liability in the actual period in which they are declared.
Share capital
Ordinary share capital is classified as equity. Preference share capital is classified as equity as it is non-redeemable or is redeemable only at the
Company’s option and any dividends are discretionary. Dividends on preference share capital classified as equity are recognised as distributions
within equity.
Financial instruments
The Group retains such financial instruments as are required, together with retained earnings, in order to finance the Group’s operations.
Financial assets or financial liabilities are recognised by the Group in the Statement of Financial Position only when the Group becomes a party
to the contractual provisions of the instrument.
The principal financial instruments are:
I trade and other receivables which are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the
time value of money is material, receivables are carried at amortised cost using the effective interest rate method (see Interest income and
expense on page 80). Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances
are written off when the probability of recovery is assessed as being remote. Should an amount previously written off prove recoverable the
amount written off is reversed through the Statement of Comprehensive Income to the extent that the amount written back does not exceed
the amortised cost had the write off not been recognised;
I cash and cash equivalents, which comprise cash in hand, demand deposits and other short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk of changes in value with an original maturity of three months or less;
I trade and other payables which are on normal credit terms, are not interest bearing and are stated at their nominal values. Where the time value
of money is material, payables are carried at amortised cost using the effective interest rate method (see Interest income and expense on page 80);
I borrowings: see below; and
I derivatives: see below.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income
over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all
of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period
of the facility to which it relates.
Derivatives and hedging
Derivative financial instruments such as interest rate swaps are occasionally entered into in order to manage interest rate risks arising from long-term
debt. Such derivative instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
www.henryboot.co.uk
79
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Principal accounting policies continued
for the year ended 31 December 2013
Derivatives and hedging continued
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the
hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s
effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are
expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that
they actually have been highly effective throughout the financial reporting periods for which they were designated.
For the purpose of cash flow hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is
attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.
The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while any ineffective portion is recognised
immediately in profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where
such derivative transactions are executed, gains and losses on the fair value of such arrangements are taken either to reserves or to the Statement
of Comprehensive Income dependent upon the nature of the instrument.
If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to profit or
loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs.
When a derivative is held as an economic hedge for a period beyond twelve months after the end of the reporting period, the derivative is classified
as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item. A derivative instrument
that is a designated and effective hedging instrument is classified consistent with the classification of the underlying hedged item. The derivative
instrument is separated into a current portion and non-current portion only if: 1) a reliable allocation can be made; and 2) it is applied to all
designated and effective hedging instruments.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group
will be required to settle that obligation with an outflow of economic benefits and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date,
taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is
recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
The land development provision represents management’s best estimate of the Group’s liability to provide infrastructure and services as a result
of obligations which remain with the Group following the disposal of land. Where the infrastructure and services obligations relate to developments
on which land is being disposed of over a number of phases, provisions are calculated based on an acreage allocation methodology taking into
account the expected timing of cash outflows to settle the obligations.
The road maintenance provision represents management’s best estimate of the Group’s liability under a five-year rolling programme for the
maintenance of the Group’s PFI asset.
Other provisions include any liabilities where the Directors anticipate that a present obligation would result in a future outflow of resources,
including legal and regulatory penalties or claims, are taken into account in the Financial Statements.
Specific details of the Group’s provisions relating to land development and road maintenance can be found in note 26 on page 98.
Interest income and expense
Interest income and expense are recognised within ‘Finance income’ and ‘Finance costs’ in the Statement of Comprehensive Income using
the effective interest rate method, except for borrowing costs relating to qualifying assets, which are capitalised as part of the cost of that asset.
The Group has chosen not to capitalise borrowing costs on all qualifying assets which are measured at fair value.
The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout
the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability.
Government grants
Government grants are recognised at their fair value in the Statement of Financial Position, within deferred income, where there is reasonable
assurance that the grant will be received and all attached conditions will be complied with.
Government grants are then released to the Statement of Comprehensive Income and recognised within cost of sales over the period necessary
to match the grant on a systematic basis to the costs that they are intended to compensate.
Judgements and key assumptions
The critical judgements in applying the Group’s Accounting Policies and that have the most significant effect on the amounts recognised in the Financial
Statements, apart from those involving estimations (see below), relate to revenue recognition, construction contracts and inventories. All of these are referred
to on pages 77 and 78 and each is interpreted by management in the light of IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and IAS 2 ‘Inventories’.
80
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Judgements and key assumptions continued
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, and that could have a material
adjustment to the carrying amounts of assets and liabilities over the ensuing year, are:
I retirement benefit costs – the estimates used in retirement benefit costs are arrived at in conjunction with the scheme’s actuary and advisers,
those having the most significant impact being the liabilities discount rate, RPI and mortality rates. Note 27 to the Financial Statements gives
details of the sensitivity surrounding these estimates;
I fair value of investment properties and of Group occupied properties – the fair value of completed investment property and of Group occupied
property is determined by independent valuation experts using the yield method valuation technique. The fair value of investment property
under construction has been determined using the residual method by the Directors of the Company. The most significant estimates used
in these valuations are rental values, yields and costs to complete. Notes 12 and 13 to the Financial Statements give details of the valuation
methods used and the sensitivity surrounding these estimates; and
I provisions – amounts recognised in relation to provisions are based on assumptions in respect of cost estimates, the timing of cash flows
and discount rates used. Note 26 to the Financial Statements gives details of the sensitivity surrounding these estimates.
Impact of accounting standards and interpretations
At the date of authorisation of these Financial Statements, the following standards, amendments and interpretations to existing standards
are effective or mandatory for the first time for the accounting period ended 31 December 2013:
Annual improvements (issued 2012)
IFRIC 20 (issued 2011)
IAS 12 (amended 2010)
IAS 19 (amended 2011)
IAS 27 (issued 2011)
IAS 28 (issued 2011)
IFRS 1 (amended 2010)
IFRS 1 (amended 2012)
IFRS 7 (amended 2011)
IFRS 10 (issued 2011)
IFRS 10 (issued 2012)
IFRS 11 (issued 2011)
IFRS 11 (issued 2012)
IFRS 12 (issued 2011)
IFRS 12 (issued 2012)
IFRS 13 (issued 2011)
# Mandatory from 1 January 2014.
‘Improvements to IFRSs 2009–2011’
‘Stripping Costs in the Production Phase of a Surface Mine’
‘Deferred Tax: Recovery of Underlying Assets’
‘Employee Benefits’
‘Separate Financial Statements’
‘Investments in Associates and Joint Ventures’
‘Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters’
‘Government Loans’
‘Disclosures – Offsetting Financial Assets and Financial Liabilities’
‘Consolidated Financial Statements’
‘Transition Guidance’
‘Joint Arrangements’
‘Transition Guidance’
‘Disclosures of Interests in Other Entities’
‘Transition Guidance’
‘Fair Value Measurement’
Effective from
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013#
1 January 2013#
1 January 2013
1 January 2013
1 January 2013
1 January 2013#
1 January 2013#
1 January 2013#
1 January 2013#
1 January 2013#
1 January 2013#
1 January 2013
With the exception of IAS 19 (amended 2011) and IFRS 13 (issued 2011), the adoption of these standards and interpretations has not had
a significant impact on the Group. The Group did not early adopt any standard or interpretation not yet mandatory.
The adoption of IAS 19 (amended 2011) has resulted in an increase in the pension expense of approximately £1,563,000 in the year and
£545,000 in the year ended 31 December 2012. The year ended 31 December 2012 has been restated to reflect these changes. The changes
have had no impact on the overall reserves or the Consolidated Statement of Financial Position for these periods.
The Group has applied IFRS 13 (issued 2011) for the first time in the current year. IFRS 13 provides a precise definition of fair value and a single
source of fair value measurement and disclosure requirements. The adoption of IFRS 13 has had no impact on the overall reserves or the
Consolidated Statement of Financial Position.
At the date of the authorisation of these Financial Statements, the following standards, amendments and interpretations were in issue but not yet effective:
Annual improvements (issued 2013)
Annual improvements (issued 2013)
IFRIC 21 (issued 2013)
IAS 19 (amended 2013)
IAS 27 (issued 2012)
IAS 32 (amended 2011)
IAS 36 (amended 2013)
IAS 39 (amended 2013)
IFRS 10 (issued 2012)
IFRS 12 (issued 2012)
IFRS 14 (issued 2014)
* Not yet endorsed by the EU.
‘Annual Improvements to IFRSs 2010–2012 Cycle’
‘Annual Improvements to IFRSs 2011–2013 Cycle’
‘Levies’
‘Defined Benefit Plans: Employee Contributions’
‘Investment Entities’
‘Offsetting Financial Assets and Financial Liabilities’
‘Recoverable Amount Disclosures for Non-Financial Assets’
‘Novation of Derivatives and Continuation of Hedge Accounting’
‘Investment Entities’
‘Investment Entities’
‘Regulatory Deferral Accounts’
Effective from
1 July 2014*
1 July 2014*
1 January 2014*
1 July 2014*
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2016*
A review of the impact of these standards, amendments and interpretations continues. The Directors do not believe that they will give rise
to any significant financial impact.
In 2013, the Group did not early adopt any new or amended standards and does not plan to early adopt any of the standards issued but not yet effective.
www.henryboot.co.uk
81
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements
for the year ended 31 December 2013
1. Revenue
Analysis of the Group’s revenue is as follows:
Activity in the United Kingdom
Revenue from construction contracts
Property development
Land development
PFI concession income
Plant and equipment hire
Investment property rental income
Other rental income
Other income
2013
£’000
60,217
26,911
37,525
11,125
10,233
7,653
130
153,794
30
153,824
2012
£’000
63,489
2,649
9,061
11,144
9,203
7,461
140
103,147
28
103,175
Contingent rents recognised as income during the year amount to £294,000 (2012: £226,000).
Other income relates to payments received under a debt agreement with the Export Credit Guarantee Department arising from a long-completed
contract that was not paid for at the time.
2. Segment information
For the purpose of the Board making strategic decisions, the Group is currently organised into three operating segments: Property Investment
and Development; Land Development; and Construction. Group overheads are not a reportable segment; however, information about them is
considered by the Board in conjunction with the reportable segments.
Operations are carried out entirely within the United Kingdom.
Inter-segment sales are charged at prevailing market prices.
During the year the Group made land disposals to a single customer amounting to 17% of the Group’s total revenue. Land transactions are often
high value, low volume transactions and as the Group received offers from multiple customers for its sales it is not reliant on any major customer
individually. The remaining revenue for the year and all of those during the prior year were derived from a large number of customers and no single
customer or group under common control contributed more than 10% of the Group’s revenues.
The accounting policies of the reportable segments are the same as the Group’s Accounting Policies. The Group’s Principal Accounting Policies
are described on pages 76 to 81.
Segment profit represents the profit earned by each segment before tax and is consistent with the measure reported to the Group’s Board
for the purpose of resource allocation and assessment of segment performance.
Revenues from external sales are detailed in note 1.
2013
Property
investment
and
Land
development development Construction
£’000
78,516
3,726
82,242
8,180
1,398
(580)
—
8,998
(2,228)
6,770
£’000
37,623
296
37,919
3,056
1,629
(7,202)
183
(2,334)
(173)
(2,507)
£’000
37,655
8
37,663
11,896
750
(1,506)
—
11,140
(2,587)
8,553
Group
overheads Eliminations
£’000
—
(4,686)
(4,686)
6
(28,328)
11,488
—
(16,834)
(5)
(16,839)
£’000
—
656
656
(4,112)
25,245
(3,726)
—
17,407
(150)
17,257
6,723
80
—
88
1,563
(1)
—
17
14
—
—
—
157
—
3,645
2,451
204
1,140
—
1,116
—
314
541
—
—
—
—
(1,921)
—
—
—
—
—
—
—
Total
£’000
153,794
—
153,794
19,026
694
(1,526)
183
18,377
(5,143)
13,234
10,699
3,086
204
1,228
1,563
1,272
(1,921)
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit/(loss)
Finance income
Finance costs
Share of profit of joint ventures
Profit/(loss) before tax
Tax
Profit/(loss) for the year
Other information
Capital additions
Depreciation
Impairment
Amortisation
Decrease in fair value of investment properties
Provisions
Pension scheme credit
82
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
2012
Property
investment
and
development
£’000
15,361
299
15,660
7,355
1,334
(6,769)
(8)
1,912
2,284
4,196
10,535
35
75
37
(1,346)
(6)
—
Land
development
£’000
8,750
—
8,750
2,329
742
(1,080)
—
1,991
(466)
1,525
Construction
£’000
79,036
951
79,987
7,888
1,355
(634)
—
8,609
(2,102)
6,507
9
22
—
—
—
727
—
3,454
2,406
203
1,131
—
701
—
Group
overheads
£’000
(restated)
—
552
552
(3,437)
10,558
(3,533)
—
3,588
(1,934)
1,654
1,006
533
—
—
—
—
(2,258)
2. Segment information continued
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit
Finance income
Finance costs
Share of loss of joint ventures
Profit/(loss) before tax
Tax
Profit/(loss) for the year
Other information
Capital additions
Depreciation
Impairment
Amortisation
Increase in fair value of investment properties
Provisions
Pension scheme credit
Segment assets
Property Investment and Development
Land Development
Construction
Group overheads and other
Unallocated assets
Deferred tax assets
Cash and cash equivalents
Total assets
Segment liabilities
Property Investment and Development
Land Development
Construction
Group overheads and other
Unallocated liabilities
Current tax liabilities
Current borrowings
Non-current borrowings
Retirement benefit obligations
Total liabilities
Total net assets
Eliminations
£’000
Total
£’000
— 103,147
—
103,147
14,148
633
(1,415)
(8)
13,358
(2,326)
11,032
(1,802)
(1,802)
13
(13,356)
10,601
—
(2,742)
(108)
(2,850)
—
—
—
—
—
—
—
15,004
2,996
278
1,168
(1,346)
1,422
(2,258)
2013
£’000
2012
£’000
172,749
113,251
27,117
2,118
315,235
5,411
15,587
336,233
4,280
22,976
39,248
1,966
68,470
2,505
46,492
5,207
20,075
142,749
193,484
167,760
101,445
26,497
2,675
298,377
8,904
3,418
310,699
4,331
23,808
42,354
1,972
72,465
438
19,223
6,137
30,533
128,796
181,903
www.henryboot.co.uk
83
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information
Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
3. Operating profit
Operating profit has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Impairment of goodwill included in administrative expenses
Amortisation of PFI asset included in cost of sales
Amortisation of capitalised letting fees
Impairment losses on land and buildings included in administrative expenses
Loss on sale of assets held for sale
Impairment losses recognised on trade receivables included in cost of sales
Impairment losses recognised on trade receivables included in administrative expenses
Property rentals under operating leases
Decrease/(increase) in fair value of investment property
Cost of inventories recognised as expense
Employee costs
Amounts payable to Deloitte LLP by Road Link (A69) Limited in respect of audit services
Profit on sale of property, plant and equipment
The remuneration paid to PricewaterhouseCoopers LLP, the Company’s external auditors, was as follows:
Fees payable for the audit of the Company’s annual accounts and Consolidated Financial Statements
Fees payable to the auditors and their associates for other services:
– audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Tax services
Other services
Total non-audit fees
Total fees
2013
£’000
3,086
204
1,140
88
—
—
30
255
181
1,563
47,370
22,797
8
(406)
2013
£’000
72
88
160
83
59
142
302
In addition, fees of £7,800 (2012 Hawsons: £12,975) were paid to BDO LLP in their capacity as auditors of The Henry Boot Staff Pension
and Life Assurance Scheme. Hawsons resigned as auditors on 14 December 2012 and BDO LLP were appointed on 13 May 2013.
4. Employee costs
Wages and salaries
Share-based payment expense
Social security costs
Defined benefit pension costs (see note 27)
Defined contribution pension costs (see note 27)
Other pension costs
The average monthly number of employees during the year, including Executive Directors, was:
Property Investment and Development
Land Development
Construction
Plant hire
Group overheads
84
www.henryboot.co.uk
2013
£’000
16,604
429
1,975
3,034
501
97
22,640
2013
Number
37
29
225
108
51
450
2012
£’000
(restated)
2,996
203
1,131
37
75
11
40
81
176
(1,346)
4,657
21,211
8
(333)
2012
£’000
50
114
164
87
111
198
362
2012
£’000
(restated)
16,205
504
1,842
2,194
236
71
21,052
2012
Number
30
29
219
110
50
438
Henry Boot PLC Annual Report and Financial Statements 2013 5. Finance income
Interest on bank deposits
Interest on other loans and receivables
Fair value adjustments on trade receivables
6. Finance costs
Interest on bank loans and overdrafts
Interest on other loans and payables
Fair value adjustments on trade payables
Fair value adjustments on borrowings
Provisions: unwinding of discount (note 26)
7. Tax
Current tax:
UK corporation tax on profits for the year
Adjustment in respect of earlier years
Total current tax
Deferred tax (note 17):
Origination and reversal of temporary differences
Adjustment in respect of earlier years
Total deferred tax
Total tax
2013
£’000
10
262
422
694
2013
£’000
1,168
11
244
82
21
1,526
2013
£’000
4,064
(13)
4,051
1,092
—
1,092
5,143
2012
£’000
17
34
582
633
2012
£’000
1,126
15
226
33
15
1,415
2012
£’000
(restated)
2,079
(217)
1,862
700
(236)
464
2,326
Corporation tax is calculated at 23.25% (2012: 24.5%) of the estimated assessable profit for the year.
During the year, as a result of the change in the UK corporation tax rate from 23% to 21% effective from 1 April 2014 and from 21% to 20%
effective from 1 April 2015, both of which were substantively enacted on 2 July 2013, the relevant deferred tax balances have been re-measured.
Deferred tax balances at the year end have been measured at 23%, 21% and 20% being the rates at which timing differences are expected to reverse.
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Profit before tax
Tax at the UK corporation tax rate
Effects of:
Permanent differences
Short-term timing differences
Adjustment in respect of earlier years
Joint venture results reported net of tax
Deferred tax adjustment in respect of earlier years
Effective tax rate
2013
£’000
18,377
2013
%
23.25
5.22
(0.17)
(0.07)
(0.23)
—
28.00
2012
£’000
(restated)
13,358
2012
%
(restated)
24.50
(1.80)
(1.90)
(1.62)
—
(1.77)
17.41
In addition to the amount charged to profit for the year, the following amounts relating to tax have been recognised in other comprehensive income:
Deferred tax:
– property revaluations
– actuarial (gain)/loss
– cash flow hedge
Total tax recognised in other comprehensive income
2013
£’000
84
(2,447)
(38)
(2,401)
2012
£’000
(restated)
102
1,953
(51)
2,004
www.henryboot.co.uk
85
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
8. Results of Parent Company
As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the Parent Company is not presented
as part of these Financial Statements. The profit dealt with in the Financial Statements of the Parent Company and approved by the Board on
17 April 2014 is £11,342,000 (2012: restated £3,223,000) and includes dividends received from subsidiaries of £16,844,000 (2012: £2,755,000).
9. Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following information:
Earnings
Profit for the year
Non-controlling interests
Preference dividend
Number of shares
Weighted average number of shares in issue
Less shares held by the ESOP on which dividends have been waived
Weighted average number for basic earnings per share
Adjustment for the effects of dilutive potential ordinary shares
Weighted average number for diluted earnings per share
2013
£’000
13,234
(1,919)
(21)
11,294
2012
£’000
(restated)
11,032
(1,918)
(21)
9,093
2013
131,096,122
(239,832)
130,856,290
1,972,866
132,829,156
2012
131,096,122
(546,364)
130,549,758
1,978,945
132,528,703
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion
of these Financial Statements.
10. Dividends
Amounts recognised as distributions to equity holders in year:
Preference dividend on cumulative preference shares
Final dividend for the year ended 31 December 2012 of 2.90p per share (2011: 2.60p)
Interim dividend for the year ended 31 December 2013 of 1.95p per share (2012: 1.80p)
2013
£’000
21
3,786
2,551
6,358
2012
£’000
21
3,388
2,351
5,760
The proposed final dividend for the year ended 31 December 2013 of 3.15p per share (2012: 2.90p) makes a total dividend for the year of 5.10p
(2012: 4.70p).
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these Financial Statements.
The total estimated dividend to be paid is £4,122,000.
Notice has been received from Moore Street Securities Limited waiving its right as corporate trustee for the Employee Share Ownership Plan
(ESOP) to receive all dividends in respect of this and the previous financial year except for a nominal amount.
11. Intangible assets
Cost
At 1 January 2012
Additions at cost
At 31 December 2012
Additions at cost
At 31 December 2013
Accumulated impairment losses and amortisation
At 1 January 2012
Amortisation
Impairment losses for the year
At 31 December 2012
Amortisation
Impairment losses for the year
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
At 1 January 2012
86
www.henryboot.co.uk
Goodwill
£’000
4,070
—
4,070
—
4,070
1,493
—
203
1,696
—
204
1,900
2,170
2,374
2,577
PFI
asset
£’000
15,792
69
15,861
186
16,047
7,952
1,131
—
9,083
1,140
—
10,223
5,824
6,778
7,840
Total
£’000
19,862
69
19,931
186
20,117
9,445
1,131
203
10,779
1,140
204
12,123
7,994
9,152
10,417
Henry Boot PLC Annual Report and Financial Statements 2013 11. Intangible assets continued
The Group’s investment in Road Link (A69) Holdings Limited is 61.2%. The goodwill arising on the acquisition represents the excess of consideration
over net assets acquired and is subject to an impairment test at the reporting date. This company’s subsidiary, Road Link (A69) Limited, operates
a PFI concession which comprises managing and maintaining the A69 Carlisle to Newcastle trunk road. The company receives payment from the
Highways Agency based on the number and type of vehicles using the road. The concession lasts for a period of 30 years and has a further twelve
years to run, at the end of which the road reverts to the Highways Agency. Whilst the impairment test demonstrates significant headroom, an
impairment charge of £203,000 has been recognised during the year to reflect the fact that the PFI concession will revert to the Highways Agency
at the end of the 30 year period, at which point no goodwill should remain. There were no significant changes to these arrangements during the year.
Amortisation of the PFI asset is recognised within cost of sales in the Statement of Comprehensive Income.
Although the Companies Act 2006 Section 390(5) requires a coterminous year end, the subsidiary company’s accounting reference date
is 31 March in order to align with the Highways Agency’s financial year end and hence interim Financial Statements are prepared for incorporation
into these Consolidated Financial Statements.
Bank borrowings are secured on the PFI asset for the value of £1,744,000 (2012: £2,906,000); see note 24.
12. Property, plant and equipment
Group
Cost or fair value
At 1 January 2012
Additions at cost
Disposals
Transfers to investment properties
Decrease in fair value in year
At 31 December 2012
Additions at cost
Disposals
At 31 December 2013
Being:
Cost
Fair value at 31 December 2013
Accumulated depreciation and impairment
At 1 January 2012
Charge for year
Impairment loss
Eliminated on disposals
At 31 December 2012
Charge for year
Eliminated on disposals
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
At 1 January 2012
Land and
buildings
£’000
Equipment
held
for hire
£’000
7,287
85
—
(150)
(35)
7,187
—
—
7,187
—
7,187
7,187
337
—
75
—
412
—
—
412
6,775
6,775
6,950
22,097
3,013
(917)
—
—
24,193
3,303
(1,578)
25,918
25,918
—
25,918
15,903
2,121
—
(844)
17,180
2,228
(1,463)
17,945
7,973
7,013
6,194
Vehicles
£’000
4,626
1,313
(1,107)
(23)
—
4,809
373
(581)
4,601
4,601
—
4,601
2,467
728
—
(895)
2,300
674
(479)
2,495
2,106
2,509
2,159
Office
equipment
£’000
1,743
95
(36)
—
—
1,802
420
(30)
2,192
2,192
—
2,192
1,424
147
—
(34)
1,537
184
(29)
1,692
500
265
319
Total
£’000
35,753
4,506
(2,060)
(173)
(35)
37,991
4,096
(2,189)
39,898
32,711
7,187
39,898
20,131
2,996
75
(1,773)
21,429
3,086
(1,971)
22,544
17,354
16,562
15,622
At 31 December 2013, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting
to £1,240,000 (2012: £517,000).
Fair value measurements of the Group’s land and buildings
Land and buildings have been revalued at 31 December 2013 by Jones Lang LaSalle Limited in accordance with the Practice Statements
contained in the RICS Appraisal and Valuation Standards on the basis of market value at £6,775,000 (2012: £6,775,000). Jones Lang LaSalle
Limited is a professional valuer who holds recognised and professional qualifications and has recent experience in the location and category
of the land and buildings being valued.
The valuation conforms to International Valuation Standards and was based on recent market transactions with similar characteristics and
location using the yield method valuation technique. The yield method of valuation involves applying market-derived capitalisation yields, and the
actual or market-derived future income streams where appropriate, with adjustments for letting voids or rent-free periods as applicable to each
item of land and buildings.
On the historical cost basis, the land and buildings would have been included at a carrying amount of £2,859,000 (2012: £2,859,000).
www.henryboot.co.uk
87
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
12. Property, plant and equipment continued
Fair value measurements of the Group’s land and buildings continued
The following table provides an analysis of the fair values of land and buildings by the degree to which the fair value is observable:
31 December 2013
Freehold land
Buildings
Total fair value
Level 1
£’000
—
—
—
Level 2
£’000
—
—
—
Level 3
£’000
60
6,715
6,775
Total
£’000
60
6,715
6,775
Increase/
(decrease)
in fair
value in
year
—
—
—
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that
cause the transfer. The Directors determine the applicable hierarchy that land and buildings fall into by assessing the level of comparable evidence
in the market which that asset falls into and the inherent level of activity. As at the reporting date and throughout the year, all land and buildings
were determined to fall into Level 3 and so there were no transfers between hierarchies.
Explanation of the fair value hierarchy:
I Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
I Level 2 – fair value measurements are those derived from the use of a model with inputs (other than quoted prices included in Level 1)
that are observable from directly or indirectly observable market data; and
I Level 3 – fair value measurements are those derived from use of a model with inputs that are not based on observable market data.
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Rental value per sq ft (£)
Yield %
– weighted average
– low
– high
– weighted average
– low
– high
Buildings
Yield
5.98
2.01
12.51
8.23
7.02
9.80
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) are set out below:
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Impact on valuation £’000
Buildings
404
983
The sensitivities have been selected by management on the basis that they consider these measures to be a reasonable expectation of likely
changes to the significant unobservable inputs in the next twelve months.
Parent Company
Cost
At 1 January 2012
Additions
Disposals
At 31 December 2012
Additions
Disposals
At 31 December 2013
Depreciation
At 1 January 2012
Charge for year
Disposals
At 31 December 2012
Charge for year
Disposals
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
At 1 January 2012
88
www.henryboot.co.uk
Vehicles
£’000
Office
equipment
£’000
Total
£’000
93
—
(46)
47
—
(23)
24
64
17
(36)
45
2
(23)
24
—
2
29
690
28
(24)
694
58
(27)
725
586
53
(24)
615
42
(26)
631
94
79
104
783
28
(70)
741
58
(50)
749
650
70
(60)
660
44
(49)
655
94
81
133
Henry Boot PLC Annual Report and Financial Statements 2013 13. Investment properties
Fair value measurements recognised in the Statement of Financial Position
The following table provides an analysis of the fair values of investment properties recognised in the Statement of Financial Position by the degree
to which the fair value is observable:
31 December 2013
Completed investment property
Industrial
Leisure
Mixed-use
Residential
Retail
Investment property under construction
Industrial
Land
Leisure
Office
Retail
Total fair value
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,435
6,408
54,375
4,379
15,930
6,830
—
7,596
—
3,709
—
600
—
23,132
—
— 132,394
9,435
6,408
54,375
4,379
15,930
6,830
7,596
3,709
600
23,132
132,394
Increase/
(decrease)
in fair value
in year
22
183
(1,118)
494
(682)
—
(661)
199
—
—
(1,563)
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that
cause the transfer. The Directors determine the applicable hierarchy that a property falls into by assessing the level of comparable evidence in the
market which that asset falls into and the inherent level of activity. As at the reporting date and throughout the year, all property was determined
to fall into Level 3 and so there were no transfers between hierarchies.
Explanation of the fair value hierarchy:
I Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
I Level 2 – fair value measurements are those derived from the use of a model with inputs (other than quoted prices included in Level 1)
that are observable from directly or indirectly observable market data; and
I Level 3 – fair value measurements are those derived from use of a model with inputs that are not based on observable market data.
Investment properties have been split into different classes to show the composition of the investment property portfolio of the Group as at the
reporting date. Management has determined that aggregation of the results would be most appropriate based on the type of use that each
property falls into, which is described below:
Class
Industrial
Leisure
Mixed-use
Includes manufacturing and warehousing, which are usually similar in dimensions and construction method
Includes restaurants and gymnasiums or properties in which the main activity is the provision of entertainment and leisure
facilities to the public
Includes schemes where there are different types of uses contained within one physical asset, the most usual combination
being office and leisure
Residential
Includes dwellings under assured tenancies
Retail
Land
Office
Includes any property involved in the sale of goods
Includes land held for future capital appreciation as an investment
Includes buildings occupied for business activities not involving storage or processing of physical goods
Investment properties under construction are categorised based on the future anticipated highest and best use of the property.
www.henryboot.co.uk
89
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information
Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
13. Investment properties continued
Completed investment property
Class
Fair value hierarchy
Fair value
At 1 January
Subsequent expenditure on investment property
Capitalised letting fees
Amortisation of capitalised letting fees
Disposals
Transfers to assets held for sale
Transfer to inventories
Transfers from property, plant and equipment
Transfers from investment property under construction
(Decrease)/increase in fair value in year
At 31 December
Adjustment in respect of tenant incentives
Adjustment in respect of tax benefits
Market value at 31 December
Industrial
Level 3
£’000
10,978
137
37
(35)
—
(1,704)
—
—
—
22
9,435
44
(49)
9,430
Leisure
Level 3
£’000
Mixed-use
Level 3
£’000
Residential
Level 3
£’000
1,187
(9)
9
(2)
—
—
—
—
5,040
183
6,408
42
—
6,450
54,377
1,076
68
(28)
—
—
—
—
—
(1,118)
54,375
2,382
(422)
56,335
4,314
—
—
—
(361)
—
(68)
—
—
494
4,379
—
—
4,379
Retail
Level 3
£’000
25,293
93
55
(22)
—
(8,807)
—
—
—
(682)
15,930
220
—
16,150
2013
£’000
2012
£’000
96,149
1,297
169
(87)
(361)
(10,511)
(68)
—
5,040
(1,101)
90,527
2,688
(471)
92,744
86,018
888
92
(34)
(514)
(1,900)
(69)
173
10,576
919
96,149
4,685
(724)
100,110
There is no actively traded market for the Group’s commercial property and as such the adopted valuation is completed using the professional
judgement of the Group’s professional valuers, who use the yield method to determine fair value. The calculation of the capital value of a property
under this method uses a yield to multiple against the rental income stream with due allowance for a fixed assumed purchasers cost. The primary
variables of the yield method are thus: the yield, which is based on historic yields for properties that are similar but to which there may be
adjustment to take into account factors such as geographical location and lease terms; and the contracted rent, which is based on contracted
rents that exist at the balance sheet date, but may also include a provision for rents that may be achieved in the future after account for a period
of vacancy, such rents being based on rental income terms that exist in similar properties, adjusted for geographic location and lease terms.
With the exception of the residential class, completed investment property has been revalued at 31 December 2013 by Jones Lang LaSalle
Limited in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards on the basis of market value at
£88,365,000 (2012: £95,795,000). Jones Lang LaSalle Limited is a professional valuer who holds recognised and professional qualifications and
has recent experience in the location and category of the investment property being valued. The valuation conforms to International Valuation
Standards and was based on recent market transactions with similar characteristics and location using the yield method valuation technique.
The yield method of valuation involves applying market-derived capitalisation yields, and the actual or market-derived future income streams
where appropriate, with adjustments for letting voids or rent-free periods as applicable to each property. For all investment properties, their
current use equates to the highest and best use.
Residential properties are valued using recent comparable sales transactions with a significant unobservable input being the discount used, to
reflect the lower value achieved where properties are held under an assured tenancy, that typically earn a low market level of rent. The discount
applied recognises that the value is higher where the house is offered with the benefit of vacant possession at the end of the assured tenancy.
The fair value of the residential class at 31 December 2013 has been determined by the Directors of the Company at £4,379,000 (2012: £4,315,000).
The fair value takes into account market evidence based on recent comparable sale transactions adjusted to take into account the tenanted nature
of the properties.
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Rental value per sq ft (£)
Yield %
– weighted average
– low
– high
– weighted average
– low
– high
% discount applied to houses held under assured tenancies
Industrial
Yield
Leisure
Yield
Mixed-use
Yield
4.89
4.24
6.00
7.49
7.15
9.54
—
28.00
22.64
40.86
7.30
6.08
7.25
—
11.65
2.50
58.39
9.10
6.00
15.56
—
Residential
Sales
comparison
—
—
—
—
25.00
There is considered to be no inter-relationship between observable and unobservable inputs.
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) are set out below:
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
Industrial
603
1,925
—
Impact on valuation £’000
Mixed-use
3,043
5,084
—
Leisure
438
242
—
Residential
—
—
50
Retail
Yield
9.00
2.36
26.78
8.19
4.40
15.00
—
Retail
1,155
1,457
—
The sensitivities have been selected by management on the basis that they consider these measures to be a reasonable expectation of likely
changes to the significant unobservable inputs in the next twelve months.
90
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 13. Investment properties continued
Completed investment property continued
The property rental income earned by the Group from its occupied investment property, all of which is leased out under operating leases,
amounted to £7,653,000 (2012: £7,461,000). Direct operating expenses arising on investment property generating rental income in the year
amounted to £672,000 (2012: £1,048,000). Direct operating expenses arising on the investment property which did not generate rental income
during the year amounted to £349,000 (2012: £426,000).
At 31 December 2013, the Group had entered into contractual commitments for the acquisition and repair of investment property amounting
to £321,000 (2012: £3,472,000).
Investment property under construction
Class
Fair value hierarchy
Fair value
At 1 January
Subsequent expenditure on investment property
Capitalised letting fees
Amortisation of capitalised letting fees
Disposals
Transfer (to)/from inventories
Transfers to completed investment property
Transfers to construction contracts
(Decrease)/increase in fair value in year
At 31 December
Adjustment in respect of tenant incentives
Adjustment in respect of tax benefits
Market value at 31 December
Industrial
Level 3
£’000
7,563
905
—
—
(1,353)
(285)
—
—
—
6,830
—
—
6,830
Land
Level 3
£’000
8,090
342
—
—
(175)
—
—
—
(661)
7,596
—
—
7,596
Leisure
Level 3
£’000
6,669
1,859
22
—
—
—
(5,040)
—
199
3,709
—
—
3,709
Office
Level 3
£’000
599
1
—
—
—
—
—
—
—
600
—
—
600
Retail
Level 3
£’000
21,305
1,796
26
(1)
—
6
—
—
—
23,132
—
—
23,132
2013
£’000
2012
£’000
44,226
4,903
48
(1)
(1,528)
(279)
(5,040)
—
(462)
41,867
—
—
41,867
52,180
9,358
91
(3)
(4,980)
—
(10,576)
(2,271)
427
44,226
4
—
44,230
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Rental value per sq ft (£)
Yield %
Costs to complete per sq ft (£)
Land value per acre (£’000)
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
Industrial
Residual
4.35
4.25
5.50
7.25
6.75
7.50
41.16
41.16
41.16
—
—
—
Land
Sales
comparison
—
—
—
—
—
—
3.48
0.78
5.81
106
22
1,550
Leisure
Residual
Office
Residual
Retail
Residual
17.98
10.76
25.20
5.50
5.00
6.00
192.44
147.80
244.41
—
—
—
15.00
14.00
16.00
8.50
7.75
9.00
116.73
116.73
116.73
—
—
—
16.02
4.75
32.50
6.77
4.75
8.00
151.25
44.93
246.19
—
—
—
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) are set out below:
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Costs to complete – increase by 1%
Land value per acre – increase by 5%
Industrial
2,864
8,891
682
—
Impact on valuation £’000
Land
—
—
11
493
Leisure
1,245
715
42
—
Office
5
22
16
—
Retail
9,601
6,489
470
—
Investment properties under construction are developments which have been valued at 31 December 2013 at fair value by the Directors of the
Company using the residual method at £41,867,000 (2012: £44,226,000). The residual method of valuation involves estimating the gross development
value of the property using market-derived capitalisation yields and market-derived future income streams. From this gross development value
the remaining gross development costs to be incurred are deducted, using market-derived data cost estimates or the actual known costs and
including cost contingencies for construction risk as appropriate. In addition a deduction for the anticipated development profits yet to be earned
is made, taking into account the progress of the development to date in line with key milestones.
www.henryboot.co.uk
91
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
14. Investments
Parent Company – shares in Group undertakings
Cost
At 1 January 2012 and 2013
Additions
At 31 December 2013
Fair value adjustments
At 1 January 2012 and 2013
Provisions for losses
At 31 December 2013
Carrying amount
At 31 December 2013
At 1 January 2012 and 2013
Total
£’000
25,772
10,000
35,772
(22,751)
(9,652)
32,403
3,369
3,021
The original cost of shares has been reduced by provisions for losses where necessary and enhanced where the Directors have considered
it appropriate to reflect in the valuation increases of a permanent nature in the underlying net asset values of subsidiary companies.
Such enhancements were £1,115,000 in 1975 and £1,135,000 in 1989.
On 19 December 2013 Henry Boot PLC subscribed for additional equity capital of £10,000,000 in Henry Boot Developments Limited. Both
parties agreed that this equity injection was in their best interests and ensured that Henry Boot Developments Limited would have positive net
assets at 31 December 2013 despite the fall in property values expected at that year end.
Amounts due from and to subsidiary companies are listed in notes 16 and 21. The principal active subsidiary companies are listed in note 34.
All trading subsidiaries operate in the United Kingdom and are wholly owned, with the exception of:
I Road Link (A69) Holdings Limited which is 61.2% owned by Henry Boot Construction Limited;
I Stonebridge Projects Limited which is 50% owned by, and under board control of, Henry Boot Land Holdings Limited; and
I Stonebridge Offices Limited which is indirectly 50% owned by, and under board control of, Henry Boot Land Holdings Limited.
They are all incorporated in the United Kingdom.
All subsidiary companies have only one class of ordinary issued share capital.
15. Investment in joint ventures
Group
Cost
At 1 January
Share of profit/(loss) for the year
Dividends received
At 31 December
The Group’s share of its joint ventures’ aggregated assets, liabilities and results are as follows:
Investment property
Current assets
Total assets
Current liabilities
Non-current liabilities
Net investment in joint ventures
Revenue
Administration and other expenses
Increase in fair value of investment properties
Operating profit/(loss)
Finance costs
Profit/(loss) before tax
Tax
Share of profits/(losses) from joint ventures after tax
Details of the Group’s significant investments in joint ventures are listed in note 34.
92
www.henryboot.co.uk
2013
£’000
2012
£’000
22
183
(25)
180
2013
£’000
2,004
59
2,063
(143)
(1,740)
180
2013
£’000
—
(21)
225
204
(33)
171
12
183
30
(8)
—
22
2012
£’000
291
64
355
(26)
(307)
22
2012
£’000
—
(10)
—
(10)
—
(10)
2
(8)
Henry Boot PLC Annual Report and Financial Statements 2013 16. Trade and other receivables
Trade receivables
Prepayments
Amounts owed by related companies
Amounts owed by Group undertakings
Due within one year
Due after more than one year
Group
Parent Company
2013
£’000
49,893
2,318
3,578
—
55,789
43,103
12,686
55,789
2012
£’000
45,579
2,611
616
48,806
37,268
11,538
48,806
2013
£’000
158
414
—
— 188,841
189,413
189,413
—
189,413
2012
£’000
196
586
—
178,508
179,290
179,290
—
179,290
Included in the Group’s trade receivable balance are receivables with a carrying amount of £3.0m (2012: £2.7m) which are past due at the
reporting date and for which the Group has not provided, as there has not been a significant change in credit quality and the amounts are still
considered recoverable. The Group does not hold any collateral over these balances.
Ageing of past due but not impaired trade receivables
30–60 days
60–90 days
90–120 days
120+ days
Movement in the allowance for doubtful receivables
At 1 January
Impairment losses recognised
Amounts written off as uncollectable
Amounts recovered during the year
At 31 December
2013
£’000
1,709
1,061
69
138
2,977
2013
£’000
190
285
(137)
(39)
299
2012
£’000
2,236
279
98
57
2,670
2012
£’000
179
121
(59)
(51)
190
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date
credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated.
Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
Ageing of impaired trade receivables
0–30 days
30–60 days
60–90 days
90–120 days
120+ days
2013
£’000
16
6
4
32
241
299
2012
£’000
3
18
12
25
132
190
The Directors consider that the carrying amount of trade and other receivables of the Group and Parent Company approximates to their fair value.
Parent Company
Amounts owed by Group undertakings are unsecured and are stated net of provisions for irrecoverable amounts of £2,560,000 (2012:
£6,414,000), of which £Nil (2012: £Nil) has been provided in the year and £3,854,000 (2012: £1,622,000) has been recovered in the year.
The Parent Company has no impaired trade receivables.
Credit risk
The Group’s principal financial assets are bank balances and cash, and trade and other receivables, which represent the Group’s maximum
exposure to credit risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Statement of Financial Position are net
of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current
economic environment.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
www.henryboot.co.uk
93
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
17. Deferred tax
Deferred tax assets and deferred tax liabilities are offset where the Group has a legally enforceable right to do so and when the deferred tax
assets and liabilities relate to tax levied by the same tax authority where there is an intention to settle the balances on a net basis. The amounts
after offsetting are as follows:
Deferred tax asset
Group
At 1 January 2012
Recognised in income
Recognised in other comprehensive income
At 31 December 2012
Recognised in income
Recognised in other comprehensive income
At 31 December 2013
Parent Company
At 1 January 2012
Recognised in income
Recognised in other comprehensive income
At 31 December 2012
Recognised in income
Recognised in other comprehensive income
At 31 December 2013
Accelerated
capital
allowances
£’000
19
129
—
148
(6)
—
142
Property
revaluations
£’000
1,265
(229)
102
1,138
(382)
84
840
34
(1)
—
33
(4)
—
29
—
—
—
—
—
—
—
Retirement
benefit
obligations
£’000
(restated)
5,662
(592)
1,953
7,023
(561)
(2,447)
4,015
5,662
(718)
2,079
7,023
(561)
(2,447)
4,015
Other
timing
differences
£’000
418
228
(51)
595
(143)
(38)
414
312
151
—
463
(62)
—
401
Total
£’000
(restated)
7,364
(464)
2,004
8,904
(1,092)
(2,401)
5,411
6,008
(568)
2,079
7,519
(627)
(2,447)
4,445
Deferred tax assets relating to unused tax losses carried forward and deductible temporary differences are recognised if it is probable that they
can be offset against future taxable profits or existing temporary differences.
Unrecognised deferred tax assets relating to property revaluations amounted to £1,399,000 (2012: £1,444,000). These assets have not been
recognised as it is probable that in future periods there will be no suitable profits or gains available to the Group against which they may be
relieved. There are no other significant unrecognised deferred tax assets and liabilities.
During the year, as a result of the change in the UK corporation tax rate from 23% to 21% effective from 1 April 2014 and from 21% to 20% effective
from 1 April 2015, both of which were substantively enacted on 2 July 2013, the relevant deferred tax balances have been re-measured. Deferred
tax balances at the year end have been measured at 23%, 21% and 20% being the rates at which timing differences are expected to reverse.
18. Inventories
Developments in progress
Land, options and agency agreements held for development
2013
£’000
7,110
83,903
91,013
2012
£’000
5,708
75,852
81,560
Within developments in progress £94,000 (2012: £39,000) has been written down and recognised as an expense in the year. These costs relate
to development projects no longer likely to proceed. Within land, options and agency agreements held for development £2,008,000 (2012: £198,000)
has been written down and recognised as an expense in the year. These costs relate to land, options and agency agreements where planning
permission for development has been refused or is deemed to be doubtful.
94
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
19. Construction contracts
Contracts in progress at 31 December:
Amounts due from contract customers included in trade receivables
Amounts due to contract customers included in trade payables
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
2013
£’000
2012
£’000
1,089
(4,435)
(3,346)
333,304
(336,650)
(3,346)
1,745
(7,519)
(5,774)
283,536
(289,310)
(5,774)
At 31 December 2013, retentions held by customers for contract work amounted to £1,458,000 (2012: £1,040,000). Advances received from
customers for contract work amounted to £4,435,000 (2012: £7,186,000).
20. Assets classified as held for sale
Assets classified as held for sale are investment properties, within the Property Investment and Development segment, which are individually being
actively marketed for sale with expected completion dates within one year. At the reporting date assets classified as held for sale represent
industrial units at our Rotherham and Clifton Moor, York, developments.
Assets classified as held for sale comprise the following:
Fair value
At 1 January 2012
Transfer from investment property
Disposals
At 31 December 2012
Transfers from investment property
Disposals
At 31 December 2013
Adjustment in respect of tenant incentives
Adjustment in respect of tax benefits
Market value at 31 December 2013
Investment
property
£’000
909
1,900
(909)
1,900
10,511
(1,900)
10,511
1,356
—
11,867
Assets classified as held for sale have been valued at 31 December 2013 at fair value by the Directors of the Company at £11,867,000
(2012: £1,900,000). The fair value is based on management’s estimate of the likely outcomes of the offers received or expected to be received
as at 31 December 2013.
21. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Deferred income
Interest rate swap liability
Amounts owed to related parties
Amounts owed to Group undertakings
Due within one year
Due after more than one year
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Group
Parent Company
2013
£’000
46,829
2,935
939
4,206
102
—
—
55,011
50,171
4,840
55,011
2012
£’000
47,829
2,138
874
2,930
253
6
—
54,030
51,786
2,244
54,030
2013
£’000
958
364
598
—
—
—
70,253
72,173
72,173
—
72,173
2012
£’000
1,169
318
476
—
—
—
80,599
82,562
82,562
—
82,562
www.henryboot.co.uk
95
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
22. Government grants
Government grants have been received in relation to the infrastructure of one of the Company’s developments. Grant income received is included
within deferred income and released to the Statement of Comprehensive Income on a systematic basis to match the costs it is intended to
compensate. There are no unfulfilled conditions or contingencies attached to the grants that have been recognised.
Amounts credited to the Statement of Comprehensive Income during the year were £98,000 (2012: £80,000).
23. Capital risk management
The Company’s objectives when managing capital are:
I to safeguard the Group’s ability to continue as a going concern and have the resources to provide returns for shareholders and benefits
for other stakeholders; and
I to maximise returns to shareholders by allocating capital across our businesses based on the level of expected return and risk.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of net debt to equity. Net debt is total debt less cash and cash equivalents and at 31 December 2013
this was £36.1m (2012: £21.9m). Equity comprises all components of equity and at 31 December 2013 this was £193.5m (2012: £181.9m).
During 2013 the Group’s strategy, which was unchanged from previous years, was to maintain the debt to equity ratio below 50%. This level was
chosen to ensure that we can access debt relatively easily and inexpensively if required.
The Group has in place three year committed facilities totalling £50m with our three banking partners. In February 2012, the Group concluded
negotiations with the three banking partners to renew the existing £50m facility we had in place at 31 December 2011. The renewed facilities
commenced on 7 May 2012, with a renewal date of 7 May 2015. The renewed facilities, on improved terms, maintain covenants on the same
basis as the previous facilities.
Due to the uncertain timing of our forecast land and property sales during December the Group deemed it appropriate to apply for a short term
increase in our borrowing facility. On 25 November 2013 the Group’s overdraft facility was increased by £5m for a period of three months. The eventual
timing of the Group’s land and property transactions during December resulted in no utilisation of this additional facility.
The Group’s secured bank facilities are subject to covenants over loan to market value of investment properties, interest cover, gearings and minimum
consolidated tangible assets value.
The Group has other bank debt on which there are also covenant requirements. The Group operated comfortably within all of its requirements
throughout the year.
24. Borrowings
Bank overdrafts
Bank loans
Government loans
Loans from related parties
The borrowings are repayable, including future interest, as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
After five years
Due within one year
Due after one year
The weighted average interest rates paid were as follows:
Bank overdrafts
Bank loans – floating rate
Bank loans – floating rate (relating to Road Link (A69) Limited)
Bank loans – floating rate (relating to Stonebridge Projects (Park House) Limited)
Government loans
Related party loans – floating rate (relating to Stonebridge Projects Limited)
Bank overdrafts are repayable on demand.
96
www.henryboot.co.uk
Group
Parent Company
2013
£’000
—
48,746
2,953
—
51,699
47,095
1,033
2,574
2,078
52,780
47,095
5,685
52,780
2012
£’000
—
22,331
2,829
200
25,360
19,965
2,933
3,331
1,818
28,047
19,965
8,082
28,047
2013
£’000
739
45,000
—
—
45,739
46,155
—
—
—
46,155
46,155
—
46,155
2013
%
3.32
2.52
1.47
2.78
—
5.00
2012
£’000
942
18,000
—
—
18,942
19,119
—
—
—
19,119
19,119
—
19,119
2012
%
3.26
2.86
2.00
3.01
—
5.00
Henry Boot PLC Annual Report and Financial Statements 2013 24. Borrowings continued
Liquidity risk
The Company’s objectives when managing liquidity are:
I to safeguard the Group’s ability to meet expected and unexpected payment obligations at all times; and
I maximise the Group’s profitability.
Interest on floating rate borrowings is arranged for periods from three to six months. These borrowings are secured by a fixed and floating charge
over the assets of the Group excluding those of Road Link (A69) Limited, Stonebridge Projects Limited and Stonebridge Offices Limited.
The Road Link (A69) Limited bank loan is secured by a specific charge over the freehold and leasehold properties of that Company and fixed
and floating charges over the assets of that Company and is without recourse to the rest of the Group. It is repayable in six-monthly instalments
that commenced in the year ended 31 March 1999 and is repayable by 31 March 2015.
The Stonebridge Offices Limited bank loan is secured by a specific charge over the freehold property of that company and is without recourse to
the rest of the Group. The loan was renewed on 11 December 2013 for a period of 5 years and is repayable in quarterly instalments of £25,000
that will commence on 11 March 2014 with full and final settlement becoming due on 10 December 2018.
Government loans were issued at a borrowing rate of nil%; as a result the Company has no exposure to interest rate changes in relation to these
loans. These borrowings are therefore recognised at fair value, where the fair values are based on cash flows discounted using variable market
rates. The Government loans were received to fund specific residential construction expenditure. Repayment of the loan commences three years
after the quarter date of the construction completion of the first residential unit. Subsequent repayments will follow each quarter until the principle
is repaid in full. The repayments are calculated at £8,000 per residential unit and are linked to the Land Registry House Price Index.
A related party loan from Stonebridge Homes Limited of £200,000 was repaid on 19 December 2013.
The bank loan of £1,744,000, relating to Road Link (A69) Limited, is arranged at an effective floating interest rate of LIBOR plus 0.8%. The loan is
fully hedged (see note 25), giving rise to an effective fixed interest rate of 7.37%. Other borrowings are arranged at floating rates, thus exposing
the Group to cash flow interest rate risk.
Based on approximate average borrowings during 2013, a 1.0% (2012: 1.0%) change in interest rates, which the Directors consider to be
a reasonable possible change, would affect profitability before tax by £290,000.
The fair value of the Group’s borrowings is not considered to be materially different from the carrying amounts, other than as disclosed in note 25.
At 31 December 2013, the Group had available £22,455,000 (2012: £31,425,000) undrawn committed borrowing facilities.
25. Derivative financial instruments
Interest rate swap – cash flow hedge
At 31 December 2013, an interest rate swap transaction was in place covering a bank loan of £1,744,000 (2012: £2,906,000) whereby the
Group’s subsidiary, Road Link (A69) Limited, pays a fixed rate of interest of 6.57% and receives a variable rate based on LIBOR. Interest is
payable or receivable, as appropriate, semi-annually. The swap is used to hedge the exposure to the variable interest rate payments on the
variable rate secured loan of the subsidiary (note 24).
The loan and interest rate swap have the same critical terms, are fully effective and have a termination date of 31 March 2015.
The fair value of the interest rate swap arrangement at 31 December 2013 was a liability of £102,000 (2012: £253,000), included in ‘Trade and
other payables’, giving rise to a hedge reserve deducted from other reserves.
Fair value measurements recognised in the Statement of Financial Position
The following table provides an analysis of the fair values of financial instruments recognised in the Statement of Financial Position by the degree
to which the fair value is observable:
Derivative financial liabilities:
Level 1
Level 2
Level 3
Total fair value
Explanation of the fair value hierarchy:
2013
£’000
—
102
—
102
2012
£’000
—
253
—
253
I Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;
I Level 2 – fair value measurements are those derived from the use of a model with inputs (other than quoted prices included in Level 1) that are
observable from directly or indirectly observable market data; and
I Level 3 – fair value measurements are those derived from use of a model with inputs that are not based on observable market data.
www.henryboot.co.uk
97
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
26. Provisions
At 1 January 2013
Included in current liabilities
Included in non-current liabilities
Additional provisions in year
Unwinding of discount
Utilisation of provisions
Non-utilisation of provisions
At 31 December 2013
Included in current liabilities
Included in non-current liabilities
Land
Road
development maintenance
£’000
£’000
8,241
9,026
17,267
136
21
(5,533)
—
11,891
5,579
6,312
11,891
1,129
—
1,129
1,116
—
(702)
—
1,543
1,543
—
1,543
Other
£’000
Total
£’000
14
25
39
—
—
(13)
(1)
25
25
—
25
9,384
9,051
18,435
1,252
21
(6,248)
(1)
13,459
7,147
6,312
13,459
The land development provision represents management’s best estimate of the Group’s liability to provide infrastructure and service obligations,
which remain with the Group following the disposal of land. The provision is calculated using the present value of the estimated cash flows
required to settle the present obligations and pro-rated on an acreage allocation basis where disposals occur over a number of phases such that
provisions are only made in relation to the land which has been disposed. Based on 1.0% change in the discount rate and a 5.0% change in the
estimated cash outflows, both of which the Directors consider to be a reasonable possible change, land development provisions would change
and affect profitability before tax by £207,000 and £583,000 respectively.
The road maintenance provision represents management’s best estimate of the Group’s liability under a five-year rolling programme for the
maintenance of the Group’s PFI asset. Based on a 5.0% change in the estimated cash outflows, which the Directors consider to be a reasonable
possible change, the road maintenance provision would change and affect profitability before tax by £78,000.
Other provisions include any liabilities where the Directors anticipate that a present obligation would result in a future outflow of resources,
including legal and regulatory penalties or claims, are taken into account in the Financial Statements.
27. Retirement benefit obligations
Defined contribution pension scheme
The Group operates a defined contribution pension scheme for all qualifying employees. The scheme is administered and managed by Aviva
and the Group matches member contributions, providing a minimum of 3% of salary is paid by the employee, on a pound for pound basis up
to a maximum of 8%.
The total cost charged to income of £501,000 (2012: £236,000) represents contributions payable to the scheme by the Group. The increase
in scheme contributions arises from a salary sacrifice scheme introduced on 1 January 2013.
Defined benefit pension scheme
The Group sponsors a funded defined benefit pension scheme in the UK. The scheme is administered within a trust which is legally separate from
the Group. Trustees are appointed by both the Group and the scheme’s membership and act in the interest of the scheme and all relevant stakeholders,
including the members and the Group employers. The trustees are also responsible for the investment policy for the scheme’s assets.
Existing scheme members continue to accrue benefits, but the scheme is closed to new entrants. Members accrue an annual pension of either
1/45th or 1/60th of final pensionable salary for each year of pensionable service. Increases in pensionable salary are limited to 1% per annum.
Once in payment, pensions increase in line with inflation. The scheme also provides a two-thirds spouse’s pension on the death of a member.
Active members of the scheme pay contributions at the rate of either 5% or 7% of pensionable salary and the Group employers pay the balance
of the cost as determined by regular actuarial valuations. The trustees are required to use prudent assumptions to value the liabilities and costs
of the scheme whereas the accounting assumptions must be best estimates.
The scheme poses a number of risks to the Group. These include;
Investment risk
The present value of obligations is calculated using a discount rate determined by reference to high quality corporate bond yields. If the return
on the scheme’s assets is below this rate the scheme deficit will increase.
Interest rate risk
A decrease in the yield on high quality corporate bonds will reduce the discount rate and thus increase the value placed on the scheme’s
liabilities. However, this would be partially offset by an increase in the value of the scheme’s bond investments.
Inflation risk
The present value of the liabilities is calculated by reference to a best estimate of future inflation. If inflation turns out to be higher than this
estimate then the deficit will increase.
Longevity risk
The present value of the liabilities is calculated using a best estimate of the life expectancy of scheme members. An increase in life expectancies
will increase the scheme’s liabilities.
98
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 27. Retirement benefit obligations continued
Defined benefit pension scheme continued
A formal actuarial valuation is being carried out as at 31 December 2012. The results of that valuation have been projected to 31 December 2013
by a qualified independent actuary. The figures in the following disclosure were measured using the projected unit method.
Retail Prices Index (RPI)
Retail Prices Index ‘Jevons’ (RPIJ)
Consumer Prices Index (CPI)
Pensionable salary increases
Rate in increase to pensions in payment liable for Limited Price Indexation (LPI)
Revaluation of deferred pensions
Liabilities discount rate
Mortality assumptions
Retiring today (aged 65)
Male
Female
Retiring in 20 years (currently aged 45)
Male
Female
2013
%
3.00
2.40
2.00
1.00
2.40
2.00
4.50
2013
Years
22.3
24.6
23.6
26.2
2012
%
2.75
—
2.00
1.00
2.75
2.00
4.45
2012
Years
21.5
24.3
23.4
26.1
The mortality assumptions are consistent with the assumptions used in the most recent triennial valuation. These are the Self Administered
Pension Schemes (SAPS) tables with allowance for future improvements in line with Continuous Mortality Investigation (CMI) 2012 with an annual
improvement of 1% per annum.
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Retail Prices Index (RPI)
Rate of general increases in salaries
Liabilities discount rate
Rate of mortality
Change in assumption
0.25%
0.25%
0.25%
1 year
Impact on scheme liabilities
Increase in assumption
Increase by 3.3%
Nil*
Decrease by 3.7%
Increase by 2.8%
Decrease in assumption
Decrease by 3.3%
Nil*
Increase by 3.9%
Decrease by 2.6%
* Increases in salaries above the 1% assumed would not affect the scheme liabilities as future increases in pensionable salaries are to be capped at a maximum of 1%
per annum.
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of the scheme are as follows:
Service cost:
Current service cost
Ongoing scheme expenses
Net interest expense
Pension Protection Fund
Pension expenses recognised in profit or loss
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding amounts included in net interest expense)
Actuarial gains arising from changes in demographic assumptions
Actuarial (gains)/losses arising from changes in financial assumptions
Actuarial losses/(gains) arising from experience adjustments
Actuarial (gains)/losses recognised in other comprehensive income
Total
2013
£’000
(1,200)
(340)
(1,288)
(206)
(3,034)
(5,825)
(2,191)
(5,937)
5,416
(8,537)
(11,571)
2012
£’000
(restated)
(784)
(273)
(1,051)
(86)
(2,194)
(3,632)
—
14,532
(758)
10,142
7,948
www.henryboot.co.uk
99
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
27. Retirement benefit obligations continued
Defined benefit pension scheme continued
The amount included in the Statement of Financial Position arising from the Group’s obligations in respect of the scheme is as follows:
Present value of scheme obligations
Fair value of scheme assets
This amount is presented in the Statement of Financial Position as follows:
Non-current liabilities
Movements in the present value of scheme obligations in the year were as follows:
At 1 January
Current service cost
Interest on obligation
Contributions from scheme members
Actuarial (gain)/loss
Benefits paid
At 31 December
Movements in the fair value of scheme assets in the year were as follows:
At 1 January
Interest income
Actuarial gain on scheme assets
Employer contributions
Contributions from scheme members
Benefits paid
Ongoing scheme expenses
At 31 December
2013
£’000
156,254
(136,179)
20,075
2012
£’000
157,233
(126,700)
30,533
2013
£’000
20,075
2012
£’000
30,533
2013
£’000
157,233
1,200
6,883
6
(2,712)
(6,356)
156,254
2013
£’000
126,700
5,595
5,825
4,749
6
(6,356)
(340)
136,179
2012
£’000
(restated)
142,322
784
6,972
301
13,774
(6,920)
157,233
2012
£’000
(restated)
119,673
5,921
3,632
4,366
301
(6,920)
(273)
126,700
Included in equities are 2,250,000 (2012: 2,250,000) ordinary 10p shares in Henry Boot PLC with a value at the year end of £4,500,000
(2012: £3,037,500).
The current estimated amount of total contributions expected to be paid to the scheme during the 2014 financial year is £4,736,000, being
£4,731,000 payable by the Group and £5,000 payable by scheme members. The reduction in scheme member contributions arises from a salary
sacrifice scheme introduced on 1 January 2013 and results in an equal increase in contributions payable by the Group.
The Company’s level of recovery plan funding to the scheme is £3,600,000 per annum which will be reviewed at the next triennial valuation.
In addition to this, and as part of the recovery plan for the scheme as a result of the 31 December 2009 triennial valuation, the Company agreed
to contribute a further £175,200 per annum for a period of ten years beginning in 2011.
100
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 28. Operating leases
The Group as lessee
Minimum lease payments under operating leases recognised in the Statement of Comprehensive Income for the year
2013
£’000
181
2012
£’000
176
At 31 December 2013, the Group had outstanding commitments for future aggregate minimum lease payments under non-cancellable operating
leases which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
2013
£’000
63
32
—
95
2012
£’000
80
89
—
169
Operating lease payments represent rentals payable by the Group for certain of its office properties. The rents payable are subject to
renegotiation at various intervals specified in the leases.
The Group as lessor
The Group has entered into commercial leases on its investment property portfolio which typically have lease terms between one and 25 years
and include clauses to enable periodic upward revision of the rental charge according to prevailing market conditions. Ordinarily the lessee does
not have an option to purchase the property at the expiry of the lease period and some leases contain options to break before the end of the
lease term.
Future aggregate minimum rentals receivable under non-cancellable operating leases at 31 December are as follows:
Within one year
In the second to fifth years inclusive
After five years
2013
£’000
7,094
27,596
59,822
94,512
2012
£’000
7,015
26,342
63,188
96,545
29. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are disclosed below:
Parent Company
Management charges receivable
Interest receivable
Interest payable
Rents payable
Recharge of expenses
Transactions between the Company and its remaining related parties are as follows:
Purchases of goods and services
Close family members of key management personnel (amounts paid for IT services)
Related companies of key management personnel (amounts paid for Non-executive Director services)
2013
£’000
1,140
8,451
(2,770)
(151)
104
2013
£’000
37
35
2012
£’000
1,140
7,799
(2,653)
(150)
158
2012
£’000
37
35
Amounts owing by related parties (note 16) or to related parties (notes 21 and 24) are unsecured, repayable on demand and will be settled in cash.
No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.
A related party loan from Stonebridge Homes Limited of £200,000 was repaid on 19 December 2013.
Remuneration of key management personnel
The remuneration of the Directors, who are 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 54 to 59.
Short-term employee benefits
Post-employment benefits
Share-based payments
2013
£’000
1,399
47
385
1,831
2012
£’000
1,468
46
286
1,800
www.henryboot.co.uk
101
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
30. Share capital
400,000 5.25% cumulative preference shares of £1 each
131,096,122 ordinary shares of 10p each (2012: 131,096,122)
Allotted, issued
and fully paid
2013
£’000
400
13,110
13,510
2012
£’000
400
13,110
13,510
The Company has one class of ordinary share which carries no rights to fixed income but which entitles the holder thereof to receive notice
and attend and vote at general meetings or appoint a proxy to attend on their behalf.
Subject to Board approval, the preference shares carry the right to a cumulative preferential dividend payable half yearly at the rate of 5.25% per annum.
They also carry a right, in priority to the ordinary equity, on a return of assets on a winding up or reduction of capital, to repayment of capital,
together with the arrears of any preferential dividend. With the exception of any resolution proposed to directly affect the rights or privileges of the
holders of the preference shares, the holders thereof are not entitled to receive notice, be present or vote at any general meeting of the Company.
Share-based payments
The Company operates the following share-based payment arrangements:
(A) The Henry Boot PLC 2010 Sharesave Plan
This savings related share option plan was approved by shareholders in 2010 and is HMRC approved. A grant of options to participating
employees was made on 26 October 2011 at a price of 106.0p at a discount of just over 10% of the prevailing market price. These become
exercisable for a six month period from 1 December 2014. There are no performance criteria attached to the exercise of these options which are
normally capable of exercise up to six months after the third anniversary of the Sharesave contract commencement date. The right to exercise
options terminates if a participating employee leaves the Group, subject to certain exceptions.
October 2011 grant
Options
outstanding
at
31 December
2012
840,023
Options
outstanding
at
Options 31 December
2013
804,365
exercised
(12,734)
Options
lapsed
(22,924)
The weighted average share price at the date of exercise for share options exercised during the period was 184.28p.
(B) The Henry Boot 2006 Long-Term Incentive Plan
This plan was approved by shareholders at an EGM held on 20 July 2006. Details of the Plan and the vesting requirements are also set out in the
Directors’ Remuneration Report on page 50.
The aggregate total of movements in share options granted and awards of shares is as follows:
Share options granted at 1 January
Lapses of share options in year
Awards of shares in year
Share options granted in year
Share options granted at 31 December
2013
Number
2012
Number
1,755,068 2,003,285
(370,083)
(292,698)
414,564
1,559,582 1,755,068
(251,133)
(283,132)
338,779
The weighted average share price at the date of exercise for share options exercised during the period was 171.41p (2012: 130.55p).
102
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 30. Share capital continued
Share-based payments continued
(C) The Henry Boot PLC 2010 Approved Company Share Option Plan
This plan, more commonly known as a CSOP, was approved by shareholders in 2010 and is HMRC approved. Any full-time Director or employee
(full-time or part-time) is eligible to participate at the discretion of the Remuneration Committee of the Board. Options are granted by deed with no
consideration payable by the participant. The aggregate subscription price at the date of grant of all outstanding options granted to any one participant
under the plan and any other HMRC approved plan operated by the Company (but excluding options granted under any savings related share
option plan) must not exceed £30,000. The aggregate market value at the date of grant of ordinary share options which may be granted to any
one participant in any one financial year of the company shall not normally exceed two times the amount of a participant’s remuneration for that
financial year. The Remuneration Committee may impose objective conditions as to the performance of the Group which must normally be satisfied
before options can be exercised. Options are normally exercisable only within the period of three to ten years after the date of grant. The right to
exercise options generally terminates if a participant leaves the Group, subject to certain exceptions. The first grant of options under the plan was
made to certain senior employees (none of whom at the time were Directors of Group companies) on 17 May 2011 at an option price of 121.5p.
There were no performance conditions imposed on this particular grant.
May 2011 grant
Options
outstanding
at
31 December
2012
240,000
Options
outstanding
at
Options 31 December
2013
222,478
exercised
(10,666)
Options
lapsed
(6,856)
The weighted average share price at the date of exercise for share options exercised during the period was 191.25p.
Fair value
Fair value is measured by a Monte Carlo pricing model using the following assumptions:
Weighted average exercise price
Weighted average share price
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
LTIP
Nil
137.6p
31.73% to 42.72%
3 years
0.31% to 1.67%
3.30% to 5.02%
CSOP
121.5p
121.5p
41.47%
3 years
1.67%
5.02%
Sharesave
2011
106.0p
115.5p
37.14%
3 years
0.86%
5.02%
The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices
over the last three years.
The weighted average fair value of share options granted during the year was 79.14p (2012: 61.4p).
Expense recognised in the Statement of Comprehensive Income
The total expense recognised in the Statement of Comprehensive Income arising from share-based payment transactions
2013
£’000
429
2012
£’000
504
The total expense recognised in the Statement of Comprehensive Income arose solely from equity-settled share-based payment transactions.
www.henryboot.co.uk
103
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
31. Reserves
Group
At 1 January 2012
Profit for the year (restated)
Dividends paid
Movements in fair value of cash flow hedge
Deferred tax on fair value movements of cash flow hedge
Decrease in fair value in year
Deferred tax on revaluation surplus
Transfer to retained earnings
Arising on employee share schemes
Unrecognised actuarial loss (restated)
Deferred tax on actuarial loss (restated)
At 31 December 2012
Profit for the year
Dividends paid
Movements in fair value of cash flow hedge
Deferred tax on fair value movements of cash flow hedge
Deferred tax on revaluation surplus
Arising on employee share schemes
Unrecognised actuarial gain
Deferred tax on actuarial gain
At 31 December 2013
Property
revaluation
£’000
3,354
—
—
—
—
(35)
102
(150)
—
—
—
3,271
—
—
—
—
84
—
—
—
3,355
Parent Company
At 1 January 2012
Profit for the year (restated)
Dividends paid
Unrecognised actuarial loss (restated)
Deferred tax on actuarial loss (restated)
Arising on employee share schemes
At 31 December 2012
Profit for the year
Dividends paid
Unrecognised actuarial gain
Deferred tax on actuarial gain
Arising on employee share schemes
At 31 December 2013
Retained
earnings
£’000
165,093
9,114
(5,760)
—
—
—
—
150
284
(10,142)
1,953
160,692
11,315
(6,358)
—
—
—
199
8,537
(2,447)
171,938
Retained
earnings
£’000
51,731
3,223
(5,760)
(10,142)
1,953
148
41,153
11,342
(6,358)
8,537
(2,447)
72
52,299
Capital
redemption
£’000
271
—
—
—
—
—
—
—
—
—
—
271
—
—
—
—
—
—
—
—
271
Capital
redemption
£’000
271
—
—
—
—
—
271
—
—
—
—
—
271
Share
premium
£’000
3,134
—
—
—
—
—
—
—
—
—
—
3,134
—
—
—
—
—
—
—
—
3,134
Share
premium
£’000
3,134
—
—
—
—
—
3,134
—
—
—
—
—
3,134
Other
Capital
£’000
209
—
—
—
—
—
—
—
—
—
—
209
—
—
—
—
—
—
—
—
209
Other
Capital
£’000
211
—
—
—
—
—
211
—
—
—
—
—
211
Hedging
£’000
(189)
—
—
103
(31)
—
—
—
—
—
—
(117)
—
—
92
(23)
—
—
—
—
(48)
Investment
revaluation
£’000
1,135
—
—
—
—
—
1,135
—
—
—
—
—
1,135
Total
other
£’000
3,425
—
—
103
(31)
—
—
—
—
—
—
3,497
—
—
92
(23)
—
—
—
—
3,566
Total
other
£’000
4,751
—
—
—
—
—
4,751
—
—
—
—
—
4,751
Property revaluation reserve
The property revaluation reserve represents the unrealised surpluses arising on revaluation of the Group occupied land and buildings
and is not available for distribution until realised on disposal.
Retained earnings
Retained earnings represent the accumulated profits and losses of the Group.
Capital redemption reserve
The capital redemption reserve represents the purchase and cancellation by the Company of its own shares and comprises the aggregate
nominal value of all the ordinary shares repurchased and cancelled.
104
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 31. Reserves continued
Share premium reserve
The share premium reserve represents the difference between the sums received from the issue of shares and their nominal value net
of share issue expenses. This reserve is not distributable.
Capital reserve
The capital reserve represents realised profits arising on the disposal of investments and is available for distribution.
Hedging reserve
The hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instrument
entered by the Group for the purposes of cash flow hedging. The hedge is 100% effective and as such cumulative gains or losses arising
on changes in the fair value of the hedging instrument that are recognised and accumulated in the hedging reserve will not subsequently
be reclassified to profit or loss.
Investment revaluation reserve
The investment revaluation reserve represents enhancements to the original cost of shares in subsidiary companies where the Directors have
considered it appropriate to reflect in the valuation increases of a permanent nature in the underlying net asset values of subsidiary companies.
Such enhancements were £1,135,000 in 1989 and are not distributable.
32. Cost of shares held by the ESOP trust
Group
At 1 January
Additions
Disposals
At 31 December
2013
£’000
444
—
(256)
188
2012
£’000
601
79
(236)
444
Quoted investments represent own shares held by the Henry Boot PLC Employee Trust as an ESOP to provide an incentive to greater ownership
of shares in the Company by its employees.
At 31 December 2013, the Trustee held 239,832 shares (2012: 546,364 shares) with a cost of £188,116 (2012: £444,397) and a market value
of £479,664 (2012: £737,537). All of these shares were committed to satisfy existing grants by the Company under the 2006 Henry Boot PLC
Long-Term Share Incentive Plan, the Henry Boot PLC 2010 Sharesave Scheme and the Henry Boot PLC 2010 Company Share Option Plan.
In accordance with IAS 32, these shares are deducted from shareholders’ funds. Under the terms of the Trust, the Trustee has waived all but
a nominal dividend on the shares it holds.
33. Guarantees and contingencies
The Parent Company has guaranteed the performance of certain contracts entered into by Group undertakings in the ordinary course of business.
The Parent Company has given cross guarantees to certain of the Group’s bankers and bondsmen in respect of facilities available to Group
undertakings in the normal course of business. Guarantees relating to bonds are impracticable to quantify. In the opinion of the Directors, no loss
is expected to arise in connection with these matters.
www.henryboot.co.uk
105
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Financial statements
Notes to the financial statements continued
for the year ended 31 December 2013
34. Additional information – principal active subsidiaries and joint venture partners
Details of the Company’s principal active subsidiaries and joint ventures, all of which are incorporated in England and are consolidated in the Group
Financial Statements at 31 December 2013, are as follows:
Subsidiary name
Banner Plant Limited
First National Housing Trust Limited
Hallam Land Management Limited
Henry Boot Construction Limited
Henry Boot Developments Limited
Henry Boot Estates Limited
Henry Boot ‘K’ Limited
Henry Boot Projects Limited
Henry Boot Tamworth Limited
Henry Boot Whittington Limited
Road Link (A69) Limited
Stonebridge Projects Limited
Stonebridge Offices Limited
(formerly Stonebridge Projects (Park House) Limited)
Winter Ground Limited
Proportion of
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
61.2%
50%
50%
100%
Activity
Plant hire
Property investment
Land development
Construction
Property investment and development
Property investment
Property investment and development
Property investment and development
Property investment and development
Property investment
PFI road maintenance
Property development
Property investment and development
Property investment and development
During the year the Group acquired 100% of the ordinary share capital of Henry Boot Construction (Harrogate) Limited for £1.5m on 19 March 2013.
On 19 March Henry Boot Construction (Harrogate) Limited purchased land and buildings at Skipton Road, Harrogate for £1.5m and at the same
time entered in to a lease to let the property for a period of six years. On 19 March 2013 Henry Boot Construction Limited entered in to a contract
for the redevelopment of said property with the lessee whilst at the same time entering in to a sale and purchase agreement with the lessee for
the full ordinary share capital of Henry Boot Construction (Harrogate) Limited. The group deem that although it owns 100% of the ordinary share
capital of Henry Boot Construction (Harrogate) Limited it does not have control of the company and accordingly has not consolidated the
company within these Financial Statements.
Joint venture partner
Pennine Property Partnership LLP
I-Prop Developments Limited
Proportion of
ownership
50%
50%
Activity
Property investment and development
Property development
Details of all of the Company’s subsidiaries and joint ventures can be obtained from the Company Secretary at the registered office address
which can be found on the inside back cover.
106
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013 Shareholder information
Property valuers’ report
THE DIRECTORS
Henry Boot PLC
Banner Cross Hall
Ecclesall Road South
Sheffield
S11 9PD
31 December 2013
Dear Sirs,
City Point
29 King Street
Leeds LS1 2HL
tel +44 (0) 113 244 6440
fax +44 (0) 113 245 4664
www.joneslanglasalle.co.uk
HENRY BOOT PLC
Group property portfolio valuation – 31 December 2013
In accordance with your written instructions, we have valued the various freehold and leasehold properties held by Henry Boot PLC and its subsidiary
companies, for accounts purposes, as at 31 December 2013. The valuations have been made in accordance with RICS Valuation – Professional
Standards (March 2012) issued by the Royal Institution of Chartered Surveyors, in our capacity as External Valuers, on the basis of Market Value.
No allowances have been made for expenses of realisation or for taxation that might arise in the event of a disposal and our valuations are expressed
as exclusive of any Value Added Tax that may become chargeable. Each property has been considered as if free and clear of all mortgages or other
charges which may have been secured thereon. Where appropriate, the properties have been valued subject to and with the benefit of any lettings
which have been disclosed.
Having regarding the foregoing we are of the opinion that the aggregate market value of the freehold and leasehold interests owned by
Henry Boot PLC and its subsidiaries, as at 31 December 2013, is:
Freehold properties
Leasehold properties
Mixed tenure properties
Total
£91,015,000
£3,900,000
£225,000
£95,140,000
In accordance with our normal practice, we confirm that our valuations have been prepared for the Directors of Henry Boot PLC and for the
purpose to which this certificate refers.
No responsibility is accepted to any third party in respect of the information or advice contained herein, except in circumstances where our prior
written approval has been granted.
Yours faithfully
SIMON CULLIMORE MRICS
DIRECTOR
FOR AND ON BEHALF OF JONES LANG LASALLE LIMITED
Jones Lang LaSalle Limited
Registered in England and Wales Number 1188567
Registered Office 22 Hanover Square London W1A 2NB
www.henryboot.co.uk
107
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information Shareholder information
Notice of annual general meeting
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting (AGM) of Henry Boot PLC will be held at Baldwins Omega, Brincliffe Hill, Off Psalter Lane,
Sheffield S11 9DF on Thursday 22 May 2014 at 12.30pm for the following purposes:
To consider and, if thought fit, pass the following resolutions, which will be proposed as to Resolutions 1, 2, 3, 4, 5, 6, 9 and 10 as ordinary
resolutions of the Company and as to Resolutions 7 and 8 as special resolutions of the Company.
Resolution 1
To receive the Directors’ and Auditors’ Reports, Strategic Report and the Financial Statements for the year ended 31 December 2013.
Resolution 2
To declare a final dividend of 3.15p per ordinary share.
Resolution 3
To re-appoint J J Sykes as a Director, who retires by rotation.
Resolution 4
To re-appoint PricewaterhouseCoopers LLP as auditors of the Company.
Resolution 5
To authorise the Directors to fix the auditors’ remuneration.
Resolution 6
THAT pursuant to Section 551 of the Companies Act 2006, the Directors be and are generally and unconditionally authorised to exercise all powers
of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to an
aggregate nominal amount of £4,369,870, provided that (unless previously revoked, varied or renewed) this authority shall expire on 21 August 2015
or at the conclusion of the next AGM of the Company, whichever is the earlier, save that the Company may make an offer or agreement before this
authority expires which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted
after this authority expires and the Directors may allot shares or grant such rights pursuant to any such offer or agreement as if this authority had
not expired. This authority is in substitution for all existing authorities under Section 551 of the Companies Act 2006 (which, to the extent unused
at the date of this resolution, are revoked with immediate effect).
Resolution 7
THAT subject to the passing of Resolution 6 and pursuant to Section 570 of the Companies Act 2006, the Directors be and are generally
empowered to allot equity securities (within the meaning of Section 560 of the Companies Act 2006) for cash pursuant to the authority granted
by Resolution 6 as if Section 561(1) of the Companies Act 2006 did not apply to any such allotment, provided that this power shall be limited
to the allotment of equity securities:
(a) in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise):
(i)
to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of ordinary
shares held by them; and
(ii) to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to such rights,
as the Directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury shares,
fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory
body or stock exchange; and
(b) otherwise than pursuant to paragraph (a) of this resolution, up to an aggregate nominal amount of £655,000,
and (unless previously revoked, varied or renewed) this power shall expire on 21 August 2015 or at the conclusion of the next AGM of the Company,
whichever is the earlier, save that the Company may make an offer or agreement before this power expires which would or might require equity
securities to be allotted for cash after this power expires and the Directors may allot equity securities for cash pursuant to any such offer or agreement
as if this power had not expired. This power is in substitution for all existing powers under Section 570 of the Companies Act 2006
(which, to the extent unused at the date of this resolution, are revoked with immediate effect).
108
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
Notice of Annual General Meeting continued
Resolution 8
THAT pursuant to Section 701 of the Companies Act 2006, the Company be and it is hereby generally and unconditionally authorised to make
market purchases (within the meaning of Section 693(4) of the Companies Act 2006) of ordinary shares of 10p each in the capital of the Company
(ordinary shares) provided that:
(a) the maximum aggregate number of ordinary shares hereby authorised to be purchased is 11,055,000;
(b) the minimum price (excluding expenses) which may be paid for an ordinary share is 10p;
(c) the maximum price (excluding expenses) which may be paid for an ordinary share is not more than the higher of:
(i)
an amount equal to 105% of the average of the middle market quotations for an ordinary share as derived from the London Stock Exchange
Daily Official List for the five business days immediately preceding the day on which the purchase is made; and
(ii) an amount equal to the higher of the price of the last independent trade of an ordinary share and the highest current independent bid
for an ordinary share on the trading venue where the purchase is carried out;
(d) the authority hereby conferred shall expire at the conclusion of the next AGM of the Company after the passing of this resolution or, if earlier,
on 21 August 2015; and
(e) the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority
which will or may be completed or executed wholly or partly after the expiry of such authority.
Resolution 9
To approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration Policy) for the year ended 31 December 2013.
Resolution 10
To approve the Directors’ Remuneration Policy contained in the Directors’ Remuneration Report for the year ended 31 December 2013.
By order of the Board
R A Deards
Company Secretary
17 April 2014
Henry Boot PLC
Registered Office:
Banner Cross Hall
Ecclesall Road South
Sheffield
United Kingdom
S11 9PD
Registered in England and Wales No. 160996
www.henryboot.co.uk
109
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information
Shareholder information
Notice of annual general meeting continued
Notes
1. Only holders of ordinary shares in the Company are entitled to attend and vote at the AGM.
2. The holders of preference shares in the Company are not entitled to attend and vote at the AGM.
3. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register
of members of the Company as at 6.00pm on 20 May 2014 (or, if the meeting is adjourned, 6.00pm on the date which is two working days
before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of shares registered
in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights
of any person to attend or vote (and the number of votes they may cast) at the meeting.
4. A shareholder is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak
and vote at the meeting. A proxy need not be a shareholder of the Company.
A shareholder may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights
attached to a different share or shares held by that shareholder. Failure to specify the number of shares each proxy appointment relates
to or specifying a number which when taken together with the numbers of shares set out in the other proxy appointments is in excess
of the number of shares held by the shareholder may result in the proxy appointment being invalid.
A proxy may only be appointed in accordance with the procedures set out in notes 5 to 7 below and the notes to the form of proxy.
The appointment of a proxy will not preclude a shareholder from attending and voting in person at the meeting.
5. A form of proxy is enclosed with the notice issued to holders of ordinary shares. When appointing more than one proxy, complete a separate
form of proxy in relation to each appointment. Additional forms of proxy may be obtained by photocopying the form of proxy. State clearly
on each form of proxy the number of shares in relation to which the proxy is appointed.
To be valid, a form of proxy must be received by post or (during normal business hours only) by hand at the offices of the Company’s
registrars, Capita Asset Services, 34 Beckenham Road, Beckenham BR3 4TU, no later than 12.30pm on 20 May 2014 (or, if the meeting
is adjourned, 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting).
6. As an alternative to completing the hard copy form of proxy, a shareholder may appoint a proxy or proxies electronically using the Share
Portal service at www.capitashareportal.com. For an electronic proxy appointment to be valid, the appointment must be received by Capita
Asset Services no later than 12.30pm on 20 May 2014 (or, if the meeting is adjourned, no later than 48 hours (excluding any part of a day
that is not a working day) before the time of any adjourned meeting).
7. CREST members who wish to appoint a proxy or proxies for the AGM (or any adjournment of it) through the CREST electronic proxy
appointment service may do so by using the procedures described in the CREST Manual, which is available at www.euroclear.com.
CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information
required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received
by Capita Asset Services (ID:RA10) no later than 12.30pm on 20 May 2014 (or, if the meeting is adjourned, 48 hours (excluding any part of
a day that is not a working day) before the time of any adjourned meeting). For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by the CREST Applications Host) from which Capita Asset Services is able to retrieve
the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed
through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply
in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor
or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers
are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
8. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such representative
may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual shareholder, provided
that (where there is more than one representative and the vote is otherwise than on a show of hands) they do not do so in relation to the
same shares.
110
www.henryboot.co.uk
Henry Boot PLC Annual Report and Financial Statements 2013
Notes continued
9. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under Section 146
of the Companies Act 2006 (Nominated Person):
(a) the Nominated Person may have a right under an agreement between him/her and the shareholder by whom he/she was nominated,
to be appointed, or to have someone else appointed, as a proxy for the meeting; or
(b) if the Nominated Person has no such right or does not wish to exercise such right, he/she may have a right under such an agreement
to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in notes 4 to 7 above does not apply to a Nominated
Person. The rights described in such notes can only be exercised by shareholders of the Company.
10. A shareholder or shareholders having a right to vote at the meeting and holding at least 5% of the total voting rights of the Company
(see note 15 below), or at least 100 shareholders having a right to vote at the meeting and holding, on average, at least £100 of paid up share
capital, may require the Company to publish on its website a statement setting out any matter that such shareholders propose to raise at the
meeting relating to either the audit of the Company’s accounts (including the Auditors’ Report and the conduct of the audit) that are to be laid
before the meeting or any circumstances connected with auditors of the Company ceasing to hold office since the last AGM of the Company
in accordance with Section 527 of the Companies Act 2006.
Any such request must:
(a) identify the statement to which it relates, by either setting out the statement in full or, if supporting a statement requested by another
shareholder, clearly identifying the statement that is being supported;
(b) comply with the requirements set out in note 11 below; and
(c) be received by the Company at least one week before the meeting.
Where the Company is required to publish such a statement on its website:
(i) it may not require the shareholders making the request to pay any expenses incurred by the Company in complying with the request;
(ii) it must forward the statement to the Company’s auditors no later than the time when it makes the statement available on the website; and
(iii) the statement may be dealt with as part of the business of the meeting.
11. Any request by a shareholder or shareholders to require the Company to publish audit concerns as set out in note 10:
(a) may be made either:
(i) in hard copy, by sending it to the Company Secretary, Henry Boot PLC, Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD; or
(ii) in electronic form, by sending it by email to cosec@henryboot.co.uk. Please state ‘Henry Boot PLC: AGM’ in the subject line of the email;
(b) must state the full name(s) and address(es) of the shareholder(s); and
(c) where the request is made in hard copy form, it must be signed by the shareholder(s).
12. Shareholders have the right to ask questions at the meeting relating to the business being dealt with at the meeting in accordance
with Section 319A of the Companies Act 2006. The Company must answer any such question unless:
(a) to do so would interfere unduly with the preparation for the meeting or would involve the disclosure of confidential information;
(b) the answer has already been given on a website in the form of an answer to a question; or
(c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
13. The information required by Section 311A of the Companies Act 2006 to be published in advance of the meeting, which includes the matters
set out in this notice and information relating to the voting rights of shareholders, is available at www.henryboot.co.uk.
14. Except as expressly provided above, shareholders who wish to communicate with the Company in relation to the meeting should do so using
the following means:
(a) telephone 0114 255 5444; or
(b) email to cosec@henryboot.co.uk.
No other methods of communication will be accepted.
15. The issued ordinary share capital of the Company as at 17 April 2014 was 131,096,122 ordinary shares, carrying one vote each
and representing the total number of voting rights in the Company.
www.henryboot.co.uk
111
OverviewStrategic reportGovernanceFinancial statementsAnnual Report and Financial Statements 2013 Henry Boot PLCShareholder information
Shareholder information
Financial calendar
London Stock Exchange announcements
Preliminary Statement of Results 2013:
27 March 2014
First 2014 Interim Management Statement:
early May 2014
Half-yearly Results 2014:
22 August 2014
Second 2014 Interim Management Statement:
mid November 2014
Trading Update 2014:
end January 2015
Advisers
Annual Report and Financial Statements 2013 and Half-yearly
Report 2014
Annual Report and Financial Statements 2013:
by 17 April 2014
Half-yearly Report 2014:
early September 2014
Annual General Meeting
22 May 2014
Dividends paid on ordinary shares
2013 Final:
30 May 2014
2014 Interim:
end October 2014
Chartered Accountants and Statutory Auditors
PricewaterhouseCoopers LLP
1 East Parade
Sheffield S1 2ET
Financial PR
Tooleystreet Communications Limited
Regency Court
68 Caroline Street
Birmingham B3 1UG
Bankers
Barclays Bank PLC
1 St Paul’s Place
121 Norfolk Street
Sheffield S1 2JW
Lloyds Bank plc
14 Church Street
Sheffield S1 1HP
The Royal Bank of Scotland plc
2 Whitehall Quay
Leeds LS1 4HR
Corporate Finance
KPMG Corporate Finance
1 The Embankment
Neville Street
Leeds LS1 4DW
112
www.henryboot.co.uk
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Solicitors
DLA Piper UK LLP
1 St Paul’s Place
Sheffield S1 2JX
Stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Henry Boot PLC Annual Report and Financial Statements 2013 Group contact
information
Registered office
Henry Boot PLC
Banner Cross Hall
Ecclesall Road South
Sheffield S11 9PD
t: 0114 255 5444
f: 0114 258 5548
e: plc@henryboot.co.uk
w: www.henryboot.co.uk
Property Investment and Development
Henry Boot Developments Limited
Head office
Banner Cross Hall
Ecclesall Road South
Sheffield S11 9PD
t: 0114 255 5444
e: hbdl@henryboot.co.uk
w: www.henrybootdevelopments.co.uk
Regional offices: Bristol, Glasgow,
London and Manchester
Stonebridge Projects Limited
Head office
Park House
Park Square West
Leeds LS1 2PW
t: 0113 357 1100
e: sales@stonebridgehomes.co.uk
or info@stonebridgeoffices.co.uk
w: www.stonebridgehomes.co.uk
or www.stonebridgeoffices.co.uk
Land Development
Hallam Land Management Limited
Head office
Banner Cross Hall
Ecclesall Road South
Sheffield S11 9PD
t: 0114 255 5444
e: hallamland@henryboot.co.uk
w: www.hallamland.co.uk
Regional offices: Bristol, Glasgow, Leeds,
London, Manchester and Northampton
Front cover
Top (left to right)
Victoria Payne, Assistant Planner, Hallam Land Management Limited (3 months’ service)
Katie Dean, Area Manager, Hallam Land Management Limited (2 years’ service)
Mick Baxter, Agent, Henry Boot Construction Limited (39 years’ service, retired in August 2013)
Dave Totty, Production Manager, Henry Boot Construction Limited (33 years’ service)
Ben Ward (far left), Regional Manager, Henry Boot Developments Limited (7 years’ service)
Bottom (left to right)
Planning – Northcraigs, Kilmarnock
Constructing – Bifrangi UK Ltd, Lincoln
Developing – The Chocolate Works, York
Construction
Henry Boot Construction Limited
Head office
Callywhite Lane
Dronfield
Derbyshire S18 2XN
t: 01246 410111
e: hbc@henryboot.co.uk
w: www.henrybootconstruction.co.uk
Regional office: Manchester
Banner Plant Limited
Head office
Callywhite Lane
Dronfield
Derbyshire S18 2XS
t: 01246 299400
e: dronfield@bannerplant.co.uk
w: www.bannerplant.co.uk
Hire centres: Chesterfield, Derby, Dronfield,
Leeds, Rotherham and Wakefield
Road Link (A69) Limited
Stocksfield Hall
Stocksfield
Northumberland NE43 7TN
t: 01661 842842
e: enquiries@roadlink69.co.uk
The Group’s commitment to environmental
issues is reflected in this Annual Report which
has been printed on Heaven 42 and UPM Fine,
which are made from FSC® certified materials.
The report was printed in the UK using an
environmental printing
and
vegetable inks were used throughout.
technology
Glossary of terms
We have used some terms in this report
to explain how we run our business but
which might be unfamiliar to you. The
following list gives a definition for some
of the more frequently used terms:
Commercial property
This refers to buildings or land intended to
generate a profit, either from capital gain
or rental income, such as office buildings,
industrial property, retail stores, etc.
Disclosure and Transparency
Rules (DTR)
Issued by the United Kingdom
Listing Authority.
Dividend
A distribution of a portion of a company’s
earnings, decided by the board of directors,
to a class of its shareholders.
Gearing
Net debt expressed as a percentage
of equity shareholders’ funds.
Earnings per share (EPS)
Profit for the period attributable to equity
shareholders divided by the average number
of shares in issue during the period.
IAS
International Accounting Standard.
IASB
International Accounting Standards Board.
IFRS
International Financial Reporting Standard.
LIBOR
The London Interbank Offered Rate is a daily
reference rate based on the interest rates
at which banks borrow unsecured funds
from other banks in the London wholesale
money market (or interbank market).
Net asset value per share (NAV)
Equity shareholders’ funds divided by the
number of shares in issue at the balance
sheet date.
Pre-let
A lease signed with a tenant prior
to completion of a development.
PFI contract
A Private Finance Initiative contract is a
contract between a public body and a
private company and involves the private
sector making capital investment in the
assets required to deliver improved services.
They are typified by long contract lengths,
often 30 years or more.
Renewable energy
Energy which comes from natural
resources such as sunlight, wind, rain,
tides, waves and geothermal heat,
which are naturally replenished.
Retail Price Index (RPI)/Retail Price
Index ‘Jevons’ (RPIJ)/Consumer
Price Index (CPI)
Monthly inflation indicators based
on different ‘basket’ of products issued
by the Office of National Statistics.
Return on capital employed (ROCE)
A financial ratio that measures a company’s
profitability and the efficiency with which its
capital is employed.
Total shareholder return (TSR)
Dividends and capital growth in the share
price, expressed as a percentage of the
share price at the beginning of the year.
Turn over to see
the glossary of terms
used in the report
Construction
Henry Boot Construction Limited
Head office
Callywhite Lane
Dronfield
Derbyshire S18 2XN
t: 01246 410111
e: hbc@henryboot.co.uk
w: www.henrybootconstruction.co.uk
Regional office: Manchester
Banner Plant Limited
Head office
Callywhite Lane
Dronfield
Derbyshire S18 2XS
t: 01246 299400
e: dronfield@bannerplant.co.uk
w: www.bannerplant.co.uk
Hire centres: Chesterfield, Derby, Dronfield,
Leeds, Rotherham and Wakefield
Road Link (A69) Limited
Stocksfield Hall
Stocksfield
Northumberland NE43 7TN
t: 01661 842842
e: enquiries@roadlink69.co.uk
The Group’s commitment to environmental
issues is reflected in this Annual Report which
has been printed on Heaven 42 and UPM Fine,
which are made from FSC® certified materials.
The report was printed in the UK using an
environmental printing
and
vegetable inks were used throughout.
technology
Henry Boot PLC
Further copies of the 2013 Annual Report
and Financial Statements may be obtained
from the Company Secretary.
Henry Boot PLC
Registered office:
Banner Cross Hall
Ecclesall Road South
Sheffield S11 9PD
United Kingdom
Registered in England and Wales
No. 160996
t: 0114 255 5444
f: 0114 258 5548
e: cosec@henryboot.co.uk
www.henryboot.co.uk