henry boot pLc
annuaL report anD financiaL statements
FoR THE YEAR ENDED 31 DECEMBER 2014
www.henryboot.co.uk
Stock code: BHY
creating VaLue...
23804.04 13 April 2015 8:14 AM Proof 8
oVERVIEW
chairman’s statement
I am delighted to report another year of strong returns
for our Group with profit before tax of £28.3m, a 54%
increase on £18.4m achieved in 2013.
strategic progress
I am delighted to report another year of
strong returns for our Group with profit
before tax of £28.3m, a 54% increase
on £18.4m achieved in 2013. It is also
pleasing to report that all of the businesses
within the Group performed well in their
market segment, supported by a generally
improving UK economy.
In our view, 2014 was the second full year
of our recovery from the bottom of the
property cycle. The UK house building
industry performed well, in what have been
described as balanced market conditions,
and this allowed us to sell sites with
planning permission at competitive prices.
Further investment in the planning process
added over 2,100 plots to our portfolio
of permissioned sites, an impressive
replenishment rate, given that we sold
approximately 1,100 plots in the year.
2014 saw the UK commercial property
development market improve significantly,
with Henry Boot activity high throughout
the year and we were able to complete
several schemes. In addition, we have a
number of projects in progress for 2015
and opportunities beyond that are even
more encouraging. It is pleasing to report
that the cyclical upswing is once again
helping the development business steadily
improve both activity and profitability levels
compared to the last few years’ subdued
trading performance. In addition, our
jointly owned house builder, Stonebridge
Projects Limited, had a good year and is
now becoming a contributor to profits with
good, long-term growth prospects. Finally,
our Construction division traded well in
2014 and our Plant business had one of
its best ever years which, combined with
the stable income from the Road Link PFI,
resulted in this segment of the business
achieving a 12% increase in profit before
tax over 2013.
Dividend
I am pleased to report that, following on
from the very good result for the year, the
Board will recommend an increased final
dividend of 3.50p giving a total for the
year of 5.60p (2013: 5.10p), an increase
of approximately 10% over 2013 and a
record for the Company.
Payment of the final dividend is subject to
approval by shareholders at the Annual
General Meeting and will be paid on 29
May 2015 to shareholders on the register
as at 1 May 2015.
talented people
A key element of our strategy is to
commercially empower our incredibly
talented people to identify and obtain
land, development and construction
opportunities, achieve success in planning,
and deliver a profitable finished product.
on behalf of my fellow Directors and our
shareholders, thank you all for your efforts
in 2014 and achieving such a great result.
I look forward to seeing our teams achieve
further success in 2015 and beyond.
outlook
Henry Boot enters 2015 in great shape,
with a portfolio of high quality opportunities
to deliver growing shareholder returns. The
2015 financial year has started positively.
We have already concluded two land
sales and agreed terms on several others
for completion later in the year and we
recently announced encouraging news
with regard to a major development in
Aberdeen. We have a comparatively larger
number of developments compared to
prior years which are progressing well
to deliver anticipated financial returns
on completion. our strategic direction
remains the delivery of long-term growth in
shareholder value through investing capital
in the early stages of a land or commercial
development’s lifespan. In the shorter
term, we remain confident that prevailing
economic and market conditions will allow
us to deliver growing returns through
2015. In the longer term we continue to
identify and acquire numerous valuable
opportunities to enable us to deliver this
strategic goal, well into the future.
J e brown
Chairman
17 April 2015
23804.04 13 April 2015 8:14 AM Proof 8
John brown Chairman
company facts
• Profit before tax of
£28.3m
• Proposed final
dividend of 3.50p per
share
• 2,100 plots added to
land portfolio
Read our Financial
Statements in detail on
page 82
View more content online at:
www.henryboot.co.uk
contents
00 oVeRVieW
IFC our Group operations
IFC our Group Locations
IFC Chairman’s Statement
01 our Performance in 2014
oVERVIEW
our group operations
Henry Boot PLC, established over 125 years ago, is one of the
UK’s leading and long-standing land development, property
investment and development, and construction companies.
01 stRategiC RePoRt
Land Development
04 our Business Model
06 our Strategy
08 Creating Value... through Land
Development
12 Creating Value... through Property
Investment and Development
16 Creating Value... through
Construction
20 Corporate Responsibility
28 Financial Review
34 Key Performance Indicators-
Financial
36 Key Performance Indicators-
Non-Financial
38 Managing Risk
02 goVeRnanCe
46 Board of Directors
48 Senior Management
50 Chairman’s Introduction
51 Corporate Governance Statement
56 Nomination Committee Report
57 Audit Committee Report
60 Directors’ Remuneration Report
78 Directors’ Report
81 Statement of Directors’
Responsibilities
03 FinanCial stateMents
84 Independent Auditors’ Report
92 Consolidated Statement of
Comprehensive Income
93 Statements of Financial Position
94 Statements of Changes in Equity
95 Statements of Cash Flows
96 Principal Accounting Policies
104 Notes to the Financial Statements
04 sHaReHolDeR inFoRMation
140 Property Valuers’ Report
141 Additional Shareholder Information
144 Notice of Annual General Meeting
155 Financial Calendar
155 Advisers
IBC Group Contact Information
IBC Glossary
revenue
£39.0m
2013: £37.7m
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. The company 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.
Find out more about Land Development on pages 8–11
Property Investment and Development
revenue
£25.8m
2013: £37.6m
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. The company
also provides high specification fully serviced office space to the market.
Find out more about Property Investment and Development on pages 12–15
Construction
revenue
£82.4m
2013: £78.5m
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.
Find out more about Construction on pages 16–19
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oVERVIEW
our group Locations
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.
National coverage
with over
200 projects
ongoing high quality
opportunities
heaD office
01 Sheffield
offices
02 Bristol
03 Dronfield
04 Glasgow
05 Leeds
06 London
07 Manchester
08 Northampton
09 Stocksfield
hire centres
10 Chesterfield
11 Dronfield
12 Derby
13 Leeds
14 Rotherham
15 Wakefield
04
09
13
05
15
14
07
01
11
10
03
12
02
08
06
Find out more about our Group Contact
Information on the inner back cover
23804.04 13 April 2015 8:14 AM Proof 8
oVERVIEW
our performance in 2014
profit before taX (£m)
54%
(2013: 37%)
£28.3m
net Debt (£m)
1%
(2013: 65%)
£18.9m
£18.4m
£16.1m
£13.4m
01
£36.1m
£36.4m
o
V
e
R
V
e
W
i
£21.9m
£11.4m
£2.3m
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
net asset VaLue per
orDinary share (p)
145p
142p
139p
148p
152p
3%
(2013: 6%)
DiViDenDs per
orDinary share (p)
10%
(2013: 9%)
4.25p
3.50p
5.60p
5.10p
4.70p
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
earnings per
orDinary share (p)
88%
(2013: 23%)
operating profit (£m)
16.2p
47%
(2013: 35%)
£28.0m
£20.9m
£19.0m
£16.9m
£14.2m
9.1p
8.6p
6.9p
7.0p
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Financial and
operational Highlights
• Trading environment across all business streams
improved further during 2014.
• Best financial result since 2007.
• Value creation achieved by improving the planning
position or development use of speculatively acquired
assets.
• Construction segment, including Road Link (A69)
performed well. Plant business had a record year.
• Recommended final dividend of 3.50p giving a total of
5.60p for the year, a record for the Company.
• The 2015 financial year has started positively.
Visit us online
For more information on Henry Boot PLC please visit our website at
www.henryboot.co.uk
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY creating VaLue...
FoR oUR STAKEHoLDERS
weLcome to our strategic report
We have pleasure on behalf of the Directors
to present this Strategic Report for the
Group for the year ended 31 December
2014.
This report will set out to show how Henry
Boot creates value through the promotion
of new land opportunities, the development
of and investment in high quality property
assets, and construction activities.
The Strategic Report on pages 2 to 43 has
been approved by the Board and signed on
its behalf by
Jamie boot — Group Managing Director
John sutcliffe — Group Finance Director
17 April 2015
what are the benefits of recurring
anD cycLicaL reVenues?
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 and benefit from 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.
See our Business Model
on pages 4 and 5
John sutcliffe
Group Finance Director
Jamie boot
Group Managing Director
period events
Henry Boot PLC:
• Best financial result since
2007
• Higher land sale profits for
land development
• Further investment in
development and property
assets
• Construction division
operating profits improved
by 13%
Read more about land
Development on pages 8 -11
Find out more about Property
investment and Development
on pages 12-15
Find out more about
Construction on pages 16-19
Read about our Corporate
Responsibility on pages 20-27
23804.04 13 April 2015 8:14 AM Proof 8
stRategiC RePoRt
04 our Business Model
06 our Strategy
08 Creating Value... through Land
Development
12 Creating Value... through
Property Investment and
Development
16 Creating Value... through
Construction
20 Corporate Responsibility
28 Financial Review
34 Key Performance Indicators-
Financial
36 Key Performance Indicators-
Non-Financial
38 Managing Risk
our Key obJectiVe
To MAXIMISE LoNG-TERM
SHAREHoLDER VALUE
Find out more about our
Strategy on pages 6 and 7
23804.04 13 April 2015 8:14 AM Proof 8
04
our business moDeL
The creation of value and achieving our key objective of maximising
long-term shareholder value is underpinned by our business model.
Property
Development
Property
Investment
and Development
Property
Investment
Construction
Our Activities
and Resources
Land
Development
Long-term
commitment to
high levels of
dividend cover
Land and
Development
Profits
Long-term Funding
Relationships
Prudent Gearing
Levels
Financial Strength
and Long-Term
Revenues
Maximise long-term
shareholder value
Recurring Revenue
Stream
Skills
Our People
Commitment
Knowledge
Long-term
Experience
Relationships
Health & Safety
Governance
Environment
Our Capabilities
Sustainability
Diversity
KEY:
Recurring Revenue
Cyclical Revenue
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 05
Recurring revenue streams are generated by property investments and
construction activities 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.
our actiVities anD resources
Land Development
property investment
property
Development
construction
At 31 December 2014 we owned
1,819 acres and had interests
in a further 8,166 acres through
option or planning promotion
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 2014 we had planning
permission for over 11,500 house
units on some 40 sites.
Find out more about Land
Development on page 8
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.
Find out more about Property
Investment on page 12
We identify and secure
development opportunities
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. We
have a small but growing house
building interest that we hope to
develop into a more substantial
profit centre.
Find out more Property
Development on page 12
The construction business works
on an order book of between one
and two years, though a number
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 developing
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 11 years
remaining on the concession;
furthermore, the market for PFI
assets remains strong even in the
event of disposal.
Find out more about
Construction on page 16
our people
our capabilities
financial strength and Long-term revenues
The Group’s employees are at
the heart of all that we achieve.
our people are highly talented,
successful and motivated
individuals and are essential
to the success of the Group.
We are committed to ensuring
that we have the right people
working for us and manage this
process through a robust people
strategy. Their skill, commitment,
drive and enthusiasm are vitally
important to the long-term
success of our business.
Find out more about our
People on page 23
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.
Find out more about our
Capabilities on page 20
We have long-established
relationships with our key funding
partners, Barclays Bank PLC,
The Royal Bank of Scotland plc
and, more recently, Santander
UK plc. We maintain headroom
within our three year banking
facilities, renewed from February
2015, 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 healthy
return on capital employed and
dividend cover for reinvestment in
our core activities which, in turn,
creates improving longer-term
shareholder returns.
our
Find out more about Financial
Strength on page 28
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT 06
Henry Boot PlC
Annual Report and Financial Statements for the year ended 31 December 2014
our strategy
our key objective
We define our key objective as follows:
To maximise long-term shareholder
value through the promotion of land
development, the development of and
investment in high quality property assets
and construction activities.
This overarching objective is at the core
of all our decisions to allocate capital
to the projects we undertake. Further
considerations which help achieve the
key objective are paying dividends to
our equity shareholders, funding our
defined benefit pension scheme, investing
in existing and new opportunities in
our asset portfolio and managing the
utilisation of our debt facilities.
our vision
A consideration that goes to the heart
of our strategic discussions is a rather
under-utilised concept today – prudently
investing for the long-term. Henry Boot
has been in operation since 1886, has
seen many economic cycles come and
go but has continued to provide an
income return to shareholders over many
years, in fact the dividend has trebled
over the last 18 years. 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 main business initiatives
noted on page 7. These goals have to be
achieved whilst at all times maintaining
prudent borrowing levels to ensure that
the long-term security of our asset base
and our ability to pay dividends is not
compromised.
It is through this balance of risk-weighted
rewards that we aim to create shareholder
value in the long-term.
what we are seeing as
market trends
The trading environment across all our
business streams improved further during
2014. The UK economy has recovered
well and is showing signs of resilience
compared to other global economies.
It is expected that UK growth will continue
and with a combination of low interest
rates and previous quantitative easing,
there is a strong basis for continued
recovery in our market segment. There
are risk factors of course, with it being
an election year, the continued Eurozone
financial fragility, and when interest rates
rise there will be a heavier burden on
spending growth.
our progress in 2014
As anticipated in last year’s performance
review, trading throughout 2014
across all parts of our business was
very encouraging; the UK economy is
recovering steadily and our marketplaces
improved throughout the year. The Group
achieved its best financial result since
2007 as we benefited from the land and
development site investments, made
through the nadir of the last economic
cycle, and subsequent success within the
UK planning process. These schemes are
increasingly becoming available for sale
into the stronger conditions prevailing in
today’s marketplace.
This opportunity portfolio is now larger
and more valuable than we have seen
for many years and results from the
commitment to our key strategy: the
creation of long-term shareholder value.
Value creation is primarily achieved
by improving the planning position
or development use of speculatively
acquired assets. As always, the
interaction with the UK planning process
is uncertain, expensive, highly political,
and very inconsistent over time. We
successfully achieve results through the
skill, determination and drive of our teams,
coupled with long-term financial support
required to successfully achieve these
aims.
The segmental business review highlights
the success achieved in 2014 and the
pipeline of opportunities we expect to
bring forward in 2015, and beyond.
In particular, we saw commercial
development risk reduce through 2014
as tenant demand, investor appetite
and yields on completed schemes all
improve the risk-weighted return from a
development opportunity. Strategic land
markets also remained very buoyant in
2014 as UK house builders continued
to restock their land banks. We sense
that the planning system is beginning
to tighten as we approach the General
Election in May 2015, and the major
house builders are moving to replenish,
rather than rebuild, their land portfolios.
The construction segment, including
Road Link (A69), once again performed
well; our plant business had a record year
for profit and construction workloads are
on an improving trend supported by the
general economic recovery, although
contract margins remain tight.
our focus for 2015
Looking forward into 2015, we are
confident of delivering a number of
commercial development schemes
and selling through at least the same
amount of strategic land as achieved in
2014. Therefore, we see another year of
progress across each business segment.
The UK election process may prove to
slightly dampen that enthusiasm early
in the year but by the second half, we
expect our business to get back to what it
does best – creating shareholder value.
the group structure
Land Development
property investment
and Development
construction
Hallam land Management limited
Henry Boot Developments limited
Henry Boot Construction limited
stonebridge Projects limited
Banner Plant limited
Road link (a69) limited
23804.04 13 April 2015 8:14 AM Proof 8
www.henryboot.co.ukStock Code: BHY 07
In order to achieve our strategic objective of maximising long-term
shareholder value, we have set the following initiatives:
business
initiatiVe
how we’LL measure
progress
supporteD by our
resources
1. Provide growing long-term
shareholder returns
• Shareholder value
• Shareholders’ funds
2. Create regular revenue streams
through retained property assets,
rental income and construction
activities
• Revenue
• Return on capital employed
• Investment property
3. achieve long-term funding
relationships with financial partners
and maintain prudent levels of gearing
at less than 50% of net assets
• Gearing levels
• Revenue
• Net assets
4. Create long-term cyclical revenue
potential and realisation through land
development and property
development
• Long-term revenue
• Asset value creation
5. Provide a long-term commitment to
high levels of dividend cover
• Earnings per share
• Dividend cover
6. achieve a return on capital in excess
of 10%
• Profit
• Net assets
• Return on capital employed
7. Recruit and retain the highest calibre
of people to meet our key objective
• Long-term success of business
• Individual performance targets
met
More about our Key Performance Indicators
Read on pages 34-37
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT creating VaLue...
THRoUGH THE PRoMoTIoN oF LAND
Our business strategy is to create new land development
opportunities and to maximise the value of land.
CASE STUDY
Biddenham,
Bedfordshire
a long standing jointly
owned site of which Hallam
land Management limited
still control 180 acres. We
have been involved with
this land holding since the
early 1990s.
a complete bypass for
Bedford has been sought
by Bedford Council for over
50 years, the anticipation
being that once built the
road will remove significant
amounts of traffic from
the town centre. in 1994
Hallam identified that the
land required to deliver the
New image to be supplied
Key highlights
• Profit before tax of
£13.1m
• Planning permission
secured on 15 sites
• 12 site sales achieved
in 2014
23804.04 13 April 2015 8:14 AM Proof 8
final (a6-a428) element of
the link was not controlled
by developers, and
accordingly we engaged
with the private landowners
concerned, as well as the
Bedford charity, the Harpur
trust, who owned land
used for private playing
fields within the proposed
scheme.
“missing link” of the a6/
a428 bypass (including
a road bridge over the
london/leicester main line
railway) was commenced
by the Borough Council
in october 2014, and a
re-location scheme for the
private playing pitches
was also granted planning
consent.
after many twists and turns,
in March 2014 we secured
outline planning consent
for 1,300 dwellings (700
dwellings on land controlled
by Hallam) and associated
uses. Construction of the
the residential development
site was put to the market
in June 2014 and it is hoped
that a conclusion to a sale
to a national developer will
take place in the summer
of 2015.
Strategic land portfolio
under control of
9,985 acres
with 1,819 acres in direct
ownership
25 sites being worked
upon to add a further
12,000 plots
to the ‘For Sale’ portfolio
of permissioned land
23804.04 13 April 2015 8:14 AM Proof 8
10
Henry Boot PlC
Annual Report and Financial Statements for the year ended 31 December 2014
www.henryboot.co.uk
Stock Code: BHY
LanD DeVeLopment reView
During the year, we made site
disposals at Peterborough,
Torrance, East Leake,
Abingdon, Cam, Marston
Moretaine, Winsford, oulton,
Bridgwater, Hailsham and
Repton. In total, over 1,100
plots (2013: 1,177 plots)
were disposed of within the
schemes sold, contributing to
a segment profit before tax of
£13.1m (2013: £11.1m), an
increase of 18%.
The run of planning
successes we saw over
2012/13 continued through
2014. During the course
of the year, we achieved
planning permissions on sites
at Stone, Barnsley, Frome,
Southbourne, Winsick,
Worcester, Eckington,
Cranbrook, Handcross,
Longbar, Moodiesburn,
Repton, Stafford, Worksop
and Irthlingborough which,
in total, added over 2,000
additional housing units to
our “for sale” portfolio, which
now stands at approximately
11,500 units. In addition, we
have a further 25 sites which
are working through the
planning system, either prior
to an officer determination or
moving towards an appeal.
These sites have the potential
to add a further 12,000 units
to our portfolio. While, at
this stage, this represents
an opportunity to add
permissioned units, there is
no certainty that we will be
successful in all cases.
We continue to actively
pursue and acquire new
long-term strategic land and
added 16 new sites into the
portfolio in 2014. In total,
at 31 December 2014, we
held interests in 9,985 acres
(2013: 9,723) with 1,819
acres owned (2013: 1,791),
2,800 acres held under option
(2013: 3,184) and 5,366
acres held under planning
promotion agreements (2013:
4,748). The year saw further
financial investment in new
sites and planning promotion
costs which resulted in an
inventory value of the assets
of £99.6m (2013: £83.9m),
across 140 sites.
We have continued to acquire
both large and small strategic
land schemes. Larger sites
generally take longer to
promote, obtain planning
permission and bring to the
market and consequently
are more expensive to fund.
on the other hand, these
large sites deliver sales and
profits over a much longer
time frame, once planning
permission has been
obtained. This year we made
a further small disposal from
our large site at Bridgwater
with the majority of sales
coming from smaller sites.
At this early stage in 2015
we are working on seven
land scheme disposals,
two of which have already
completed and we currently
believe that the remaining five
should conclude in the year.
Land values, in certain parts
of the country, have steadily
recovered to where they
were in 2007, however,
elsewhere, particularly in the
north, activity and pricing
have remained benign.
Consequently, we are
focusing our site acquisition
and investment efforts into
the more dynamic parts of
the country where planning
success and sales are
more rewarding.
over the last three years,
the Coalition Government’s
planning system reforms
have been beneficial to our
business, house builders and
home buyers by ensuring that
more land is made available
for new build residential
development. The National
Keran power Hallam Land Management Limited
Key highlights
• Disposals of 1,100
plots in 2014
• 11,500 units with
planning permission
• 16 new sites added to
the portfolio
LanD (acres)
9,985
2013: (9,723) +3%
8,052
6,643
8,051
6,619
9,011
7,246
9,723
7,932
9,985
8,166
1,409
1,432
1,765
1,791
1,819
2010
2011
2012
2013
2014
Owned
Option and Planning Promotion Agreements
During the course of 2014
Hallam Land, our strategic
land business, was able
to reap the rewards of the
considerable investment
made in the planning
promotion of sites over the
course of the previous three
or four years. The increased
number of land transactions/
deals initially experienced
in 2013 continued through
2014 resulting in a further
increase in the profitability
and number of site disposals
in the year.
We experienced strong UK
house builder land acquisition
activity at the beginning of
2014 as our major customers
sought to fully rebuild their
land banks. However, as
the year progressed, activity
returned to a more steady
level of transactions as they
moved to replenish sales
of sites from their holdings.
We found that the land
prices achieved on sale
were healthy, realistic and
sustainable. As always,
negotiating land sale deals
is never easy, the timing
of completions within a
specified financial period
is uncertain but, in overall
terms, the market performed
solidly throughout the year.
23804.04 13 April 2015 8:14 AM Proof 8
www.henryboot.co.ukStock Code: BHY 11
Planning Policy Framework,
the precedence of a five year
land supply and the “Help
to Buy” mortgage scheme
all assisted in stimulating
the slowly recovering
housing market. We still
believe that the recovery is
relatively fragile and have
seen that the Government’s
more recent support of the
Neighbourhood Plan process
has had an adverse impact
on planning decision-making
as we approach the election.
We firmly believe that
Neighbourhood Plans, like
Local Plans, should first and
foremost seek to maintain a
five year land supply as this
also supports house builders’
delivery processes. However,
many communities are using
Neighbourhood Plans to
rein back new development
and we are beginning to
see planning decisions at
appeal and in the High Court
give greater weight to these
emerging Neighbourhood
Plans rather than to the five
year land supply. We believe
that this change in emphasis
will reduce the amount of land
available to supply housing to
a chronically undersupplied
population, thereby slowing
the long-term recovery in
housing provision.
However, the planning system
is in more robust shape
than it has been for several
decades primarily due to the
current Government tackling
the five year land supply that
had been previously largely
ignored. The 2015 General
Election brings uncertainty
despite all parties stating that
a more responsive planning
system will be a priority. For
any strategic land business,
a key concern is the degree
to which the Government
extracts value from the grant
of planning permission. Whilst
we do not disagree with this
in principle, the Government
needs to ensure that they do
not make schemes unviable
through unrealistic financial
demands. We saw clarity of
purpose in the first few years
of the Coalition Government;
but, more recently, the
planning gain contribution
system has become even
more complex with different
Local Authorities applying
different rates of Community
Infrastructure Levies,
Affordable Housing and
Section106 requirements. In
our view, these issues are not
helpful and further serve to
hold back the creation of the
new homes all political parties
aspire to.
An inventory value of
£99.6m
for strategic land assets
The number of sites
140 sites
in strategic land portfolio
View more content online at:
www.hallamland.co.uk
hailsham
Location: East Sussex
type: Land Promotion
size: Planning for 240 new homes
A planning promotion agreement for 43 acres of land was signed up in 2007 and an outline
planning application was submitted for 240 new homes, a network of green infrastructure
and open space, in 2013. The planning permission was secured in late 2013 and the land
was sold to a national developer in october 2014.
repton
Location: Derbyshire
type: Land Promotion
size: Planning for 40 new homes
A site of 14 acres in total, where a planning application was submitted in 2013 for 40 new
homes and permission for development was received in March 2014. This parcel of land
was sold to a national developer in late 2014. A further application for 75 properties on the
remaining land was submitted in December 2014, and gained planning approval in
March 2015.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT CASE STUDY
creating VaLue...
THRoUGH SPECIALIST PRoPERTY
DEVELoPMENT AND NEW HoMES
Markham Vale,
Derbyshire
Henry Boot Developments
limited was appointed
development partner to
Derbyshire County Council
in 2005 following a national
development competition.
the objective of the
development partnership
between Henry Boot
and Derbyshire County
Council is to create a
new sustainable strategic
employment zone and to
regenerate the former coal
mining area which has
Key highlights
• Profit before tax of
£4.6m
• Two business park
projects secured
for over 90 acres of
allocated land
23804.04 13 April 2015 8:14 AM Proof 8
suffered from high levels
of unemployment and
stagnant economic activity
following the closure of the
mining industry. Following
the appointment of Henry
Boot the Company worked
closely with the County
Council to complete
the assembly of the site
and secure planning
permission for 200 acres of
employment uses. Henry
Boot commenced the first
development of 50,000
sq ft of speculatively built
industrial space in 2007
and this was completed to
coincide with the opening
of a new junction onto the
M1 motorway to serve the
business park in 2008.
since the opening of the
new motorway junction the
business park has seen
continuous development
activity on the site with
Henry Boot developing a
wide range of industrial
and warehouse units for
both local and national
companies who were either
expanding their existing
operations in the region
or newly investing in the
area. to date over £50m of
new investment has been
secured with Markham
Vale now sustaining 732
new jobs and attracting
33 new companies to
the business park. Henry
Boot has developed
over 450,000 sq ft of
industrial and warehouse
accommodation so far with
a further 520,000 sq ft of
committed development
due to commence on the
site in 2015. the servicing
of the second 100 acre
phase of the business park
is due to be completed in
2016 enabling a further one
million sq ft of development
to be undertaken.
Sale of investment
property valued at
£14.5m
completed in the year
Acquisition of property
by Stonebridge of
7,066 sq ft
for refurbishment to
serviced office space
23804.04 13 April 2015 8:14 AM Proof 8
14
property inVestment anD
DeVeLopment reView
A second significant industrial
development undertaken
and completed during the
year was the 69,000 sq ft
extension of the existing
123,000 sq ft Recticel factory
investment in Stoke which
also allowed us to re-gear the
existing lease arrangement
on more favourable terms.
Active management of the
retained investment portfolio
included the agreement for
an extension to the highly
successful lorry park at Stop
24, our motorway services
investment in Kent.
We also began two budget
hotel developments during
the year, one in Malvern,
pre-let to Premier Inn, and
the other in Richmond
upon Thames, pre-let to
Travelodge. Contracts
for the forward sale of
the Travelodge were also
exchanged with Aberdeen
Asset Management shortly
before the 2014 year end,
and both of these projects will
be completed in 2015. our
jointly held developments in
Thorne, near Doncaster, and
Chesterfield, in partnership
with Royal Bank of Scotland
and Lloyds Bank respectively,
progressed well with the
Thorne site sale to Tesco
completing and contracts for
the sale of the majority of the
Chesterfield site to a Ford
dealership exchanged for
completion in 2015.
Selectively, as confidence
within the sector
returned, a number of
retail developments also
commenced. In Bodmin
we exchanged pre-let
agreements with Home
Bargains to take the first retail
unit of 18,000 sq ft, which
represents about half the
scheme and construction
is now in progress. In
Livingston, Scotland, terms
have been agreed with a
range of retailers and leisure
operators to take almost
the entire six acre scheme;
we expect the construction
phase to commence late
in 2015.
Despite these successes
we experienced delays in
obtaining planning permission
on a number of projects, in
particular at the former Terry’s
Chocolate Factory in York,
where heads of terms are
agreed for the sale of one
of the listed buildings to a
care home operator and with
a residential developer for
the conversion of the main
listed factory building into
apartments. It is anticipated
that the outstanding planning
issues will be resolved in the
first half of 2015. We also
suffered a setback on our 56
acre mixed-use development
in Skipton, North Yorkshire,
with the refusal of planning
permission for a foodstore
and employment scheme.
However, negotiations with
planners are continuing
to agree an acceptable
development plan which we
expect to be residential and
employment based. Finally,
in the light of the widely
reported food retail sector
difficulties, where applicable,
we reassessed the values of
our prospective foodstore
related development
sites with any valuation
adjustments taken through
the Comprehensive Income
Statement in 2014.
As part of the continuing
active management of the
Company’s retained property
investment portfolio, three
investment sales took place
during the year, including
our 50,000 sq ft B&Q unit
in Rotherham which was
sold to F&C Investment
Management. These sales
David anderson Henry Boot Developments Limited
Darren stubbs Stonebridge Projects Limited
Key highlight
• 2015 Update -
Aberdeen Project
masterplan and
business case
approved by Aberdeen
City Council
11 projects commenced
representing
£44.0m
new investment and
460,000 sq ft of space
As the economy recovered
through 2013/14, tenant
demand, investor appetite
and completed development
yields improved, which
allowed us to progress or
commence 15 projects,
spread throughout the
country, comfortably
exceeding pre-recession
activity levels. of these
schemes, eight completed
during the year. This
significant increase in
development activity also
reflects the improvement
in occupier confidence
and their ability to progress
initial interest through to
fully financed contractual
commitments, particularly
in the industrial and
leisure sectors.
At our 200 acre business
park, Markham Vale in
Derbyshire, we undertook or
are in the construction phase
of a number of industrial
projects amounting to over
200,000 sq ft; much of this
was contracted for and
completed during 2014.
In addition, new facilities
including a petrol station, a
Starbucks, a convenience
store and a pub restaurant
were completed in the year,
servicing the expanding
business park.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY property inVestment anD
DeVeLopment reView
15
Average rent roll during
2014 of
£6.5m
for 15 investment
properties
View more content online at:
www.henrybootdevelopments.co.uk
www.stonebridgehomes.co.uk
www.stonebridgeoffices.co.uk
will make way for a number
of new investments currently
being developed, to be
retained.
The introduction of new,
future development
opportunities is key to long-
term value creation. During
the year we were selected
as preferred development
partner on two business
parks, one outside Luton
and the second at Southend
Airport. We also purchased
a vacant 22,000 sq ft office
building in Uxbridge which we
intend to immediately extend
by a further 10,000 sq ft and
fully refit to meet the strong
occupier demand in that
quadrant of the M25.
Stonebridge, our jointly
owned housebuilding
business, increased its
turnover to over £10m in
the year and continues to
grow its activity, completing
32 units in the year. We
successfully acquired two
100+ unit opportunities during
the year and have submitted
planning applications for
both schemes. These larger
schemes will help underpin
future growth, though we
continue to actively acquire
smaller sites for between
10 and 20 units where the
house builder competition
has difficulty obtaining site
acquisition finance. Whilst
the challenges with planning
and mortgage administration
remain, we are confident of
achieving another year of
growth in 2015.
The refurbishment of Park
House, our serviced office
in Leeds, is complete and
the building continues to
attract new tenants. We were
delighted to be nominated as
a finalist in the 2014 National
Serviced office Centre of
the Year, just missing out on
the top award. Building on
our success in Leeds, we
acquired a property in central
Manchester which is currently
being refurbished into our
second serviced office outlet.
This project will be completed
in the first half of 2015 and
we are encouraged by
indicated tenant interest.
beeston
Location: Nottinghamshire
type: Mixed-use development
size: 90,000 sq ft
The Square Shopping Centre has been in ownership since 2003. In 2013 planning
permission was received to re-model 25,000 sq ft of leisure and retail space. The works
commenced in 2014 to coincide with development of the adjoining Nottingham tram stop.
PureGym, Costa Coffee and Wilkinsons are amongst the new tenants.
whitehaven
Location: Cumbria
type: Bespoke offices
size: 22,000 sq ft
A development for Atkins Ltd at the Westlakes Science Park, the centre of the UK nuclear
industry. The £3.5m scheme began in September 2014 and will be completed by mid 2015.
A Regional Growth Fund grant was secured to assist the commercial viability of the project.
stonebridge projects Limited - guiseley
Location: West Yorkshire
type: Residential development
size: 14 new homes
‘Meadow View’ is a cul-de-sac development of 14 quality homes built to the north west of
Leeds. The site consists of 4 and 5 bedroomed homes and building commenced in July
2014. By the end of 2014 five houses had been completed and occupied. The remaining
plots are scheduled for completion in 2015.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT CASE STUDY
creating VaLue...
THRoUGH SUSTAINABLE oPERATIoNS
Contracting, plant hire and road maintenance companies
generate recurring revenue streams.
Stocksbridge,
South Yorkshire
Fox Valley, stocksbridge is
the £42.0m redevelopment
of a 28 acre former
steelworks site delivered
by Dransfield Properties
ltd, which will bring a
new town centre to this
community located to the
north of sheffield. the
overall scheme will deliver
much needed retail, leisure
and office spaces to create
a new commercial heart for
the town, as well as new
infrastructure works and a
7 acre residential housing
development of 114 three
Key highlights
• Profit before tax of
£10.1m
• Large increase in private
sector workloads
• 94% of waste diverted
from landfill sites
23804.04 13 April 2015 8:14 AM Proof 8
and four bedroomed
executive riverside
homes. it is anticipated
that when complete this
redevelopment should
create 900 new jobs for the
community.
Henry Boot Construction
limited was appointed by
stocksbridge Regeneration
Company limited for
the £30.0m construction
works of the project which
commenced in February
2014. the first phase of
the development involved
extensive reclamation and
decontamination works
of the former steelworks
site, followed by the
building of a new steel
stock warehouse for tata
speciality steel which
enables them to relocate
their storage facilities away
from the project land itself.
Dr Vince Cable MP, the
secretary of state for
Business, innovation
and skills performed the
‘topping out’ ceremony on
the tata warehouse in June
of 2014. Dr Cable marked
the milestone by dropping
a 6m x 4m flag down the
completed steelwork
and then welcomed the
investment in this part of
south Yorkshire.
the next phase of the
development commenced
in February this year. this
part of the project includes
the main retail and leisure
elements as the new heart
of the community begins
to take shape. the overall
development is due to
be completed in the early
months of 2016.
Substantial forward order
book of
£55.0m
in construction business
for 2015
Gross value of plant
assets
£27.5m
available to rent at year
end
23804.04 13 April 2015 8:14 AM Proof 8
18
construction reView
We are carrying a strong
order book into 2015 and
expect that this solid trading
performance will continue.
our reputation for delivering
high quality projects, safely,
on time and within budget,
has enabled us to maintain
workloads in the social
housing, health, education
and custodial sectors.
Long-term framework and
partnership arrangements
with St Leger Homes
(which ends in 2015),
North Lincolnshire Homes,
Eastland Homes, and ASRA
Housing together with
individual schemes through
EN Procure and YoRbuild,
give us a strong presence
in the social housing sector.
Within the education
sector we completed the
refurbishment and fit-out of
the Joseph Banks laboratory
for the University of Lincoln
and were awarded: the MERI
Building Phases 2 & 3 for
Sheffield Hallam University,
Chesterfield College East
Block Construction Centre,
and contracts at Blue
Coats School, oldham
and Ampleforth College in
North Yorkshire. We are also
delivering a number of court
and prison refurbishment
schemes through the
Ministry of Justice framework
simon carr Henry Boot Construction Limited
trevor walker Road Link (A69) Limited
giles boot Banner Plant Limited
Key highlights
• Launch of sustainability
strategy
• Awarded Investors in
Diversity Stage 2
• Nominated for 12
CIoB awards
Successful handover of
£8m
Screw Press House for
Bifrangi UK Ltd
After carrying forward
a healthy order book
into 2014, Henry Boot
Construction exceeded
both budgeted turnover and
profit for the year. With the
growing confidence in the
general economy we began
to see sustained growth in
activity and some positive
trends in tender prices;
although we remain vigilant
regarding material and
labour price increases. our
wide-ranging capabilities,
depth of experience and
understanding of clients’
requirements has helped
produce these excellent
results.
New image to be supplied
Preparing for concrete pour at Bifrangi UK Ltd Lincoln in February 2014.
23804.04 13 April 2015 8:14 AM Proof 8
and expect similar
opportunities to these to
continue into the future.
We have continued to
develop our Building
Information Modelling
strategy, including
engagement with our supply
chain, and will be level 2
compliant ahead of the
Government target of 2016.
We have also seen a large
increase in private sector
workloads with a number
of opportunities arising in
the industrial, commercial
and retail sectors. 2014
saw us commence a major
contract for Stocksbridge
Regeneration Company to
redevelop the town centre,
for completion in 2016.
We also successfully
completed a large office
refurbishment for Sheffield
City Council, a laboratory
refurbishment scheme in
Harrogate for Smithers
Viscient and the RIBA Award
winning Manor Works for
the Manor Development
Company in Sheffield. We
constructed production
facilities for Ready Egg
and Holdsworth Food at
Markham Vale where we
were recently awarded
further contracts for industrial
facilities and new and
refurbished industrial units
at Thorne. Work is also
progressing on an eco-
office scheme at Doncaster
International Business
Park and a visitor centre
for Games Workshop in
Nottingham. our major
2013/14 project for a Screw
Press House for Bifrangi
completed earlier this year
and led to the successful
negotiation of a new
Research and Development
facility at their Lincoln site.
We have seen a growth
in civil engineering work
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 19
Live plant contracts
per week
c.3,200
average weekly during
2014
View more content online at:
www.henrybootconstruction.co.uk
www.bannerplant.co.uk
through involvement as a
major supply chain partner
on the 25 year Amey PFI
Sheffield Highways scheme
where we have continued to
deliver a significant number
of projects. We have also
just been awarded the
YoRcivils Don Valley
Remediation Scheme for
Sheffield City Council.
plant hire
The optimism we felt
moving into 2014 was well
founded. Turnover for the
year increased by over 9% to
£12.1m; an average weekly
turnover of over £233k and
a hire contract count that
averaged around 3,200,
both levels not seen since
early 2008. Year end profit
before tax was £1.3m, with
the net margin up 1.9% to
10.8%, the Company’s best
result since the top of the last
cycle. Capital expenditure
during the year totalled £4.1m
and focused on access
equipment and general
plant. With the introduction
of clean air technology
engines in larger, new pieces
of equipment, their capital
cost pushes ever higher. The
recovery of the higher capital
costs is a major challenge,
therefore, the aim for 2015
is to ensure that the ratio of
hire rate to cost is increased
successfully.
road Link a69
our PFI contract to maintain
the A69 between Newcastle
and Carlisle has 11 years
left to run and continues to
perform very well and in line
with expectations. Traffic
volumes were broadly in line
with previous years as were
the price adjustment indices.
We continue to adopt
innovative maintenance
techniques which helped
us achieve savings against
the budget costs of the
maintenance programme
undertaken in the year.
henry boot construction Limited - smithers Viscient
Location: Harrogate, North Yorkshire
type: New laboratory and office facilities
size: 15,715 sq ft
A full refurbishment and fit-out was undertaken to create a state of the art facility for
Smithers Viscient, a specialist environmental testing company. The project value was £4.3m
and works commenced in December 2013 with full occupation completed by June 2014.
banner plant Limited - plant hire
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.
road Link (a69) Limited - road maintenance
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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT creating VaLue...
BY BEING RESPoNSIBLE AND REDUCING
oUR IMPACTS oN THE ENVIRoNMENT
rachel white Group HR Manager
The percentage of
employees
95%
engaged in a Company
pension arrangement
WHY is Being ResPonsiBle one oF
YouR keY PRioRities?
Corporate responsibility means addressing our key
business related social, ethical and environmental impacts
in such a way that it brings value to all our stakeholders.
Continuous improvement lies at the heart of our business
and our corporate responsibility programme supports
our business approach to acting responsibly whilst we
continue to grow and evolve our business operations.
ouR aiMs
1
2
3
4
to ensure that all our stakeholders have a safe and
healthy work environment
to support our people in realising their full potential
to support the development of the local communities in
which we operate
to take responsibility and reduce our impact on the
environment
23804.04 13 April 2015 8:14 AM Proof 8
our VaLues
our reputation is a key
asset which is fundamental
to the success of Henry
Boot PlC; our values are
what ensures that our
employees, suppliers,
investors and other
stakeholders have the
confidence in us to trust
that we will carry out our
business ethically. By
embedding our values in
our actions we strengthen
our ability to deliver long-
term shareholder value and
competitive advantage.
our values are fundamental
in creating an environment
of trust where all can thrive
and in doing so securing
our business for the future
by creating long-term,
sustainable relationships.
all our stakeholders should
believe in and uphold our
core values:
Respect for the individual
it is critical that we
show respect for the
individual, their differences
and the diversity this
brings, and treat others
as we would like to be
treated. Henry Boot PlC
encourages a culture in
which communication is
two-way, open, clear and
constructive, we actively
support continuous
learning and improvement.
Integrity
our integrity is crucial to
maintain and protect our
long-standing reputation.
We have ethical business
practices in place as
a framework for our
employees to follow; we
demonstrate ourselves to
be reliable, trustworthy
and honest.
Excellence
We deliver what we
promise and add value
that goes beyond what
is expected. through
continuous improvement
we aim to exceed our
stakeholder expectations
by encouraging teamwork
and delivery to the best of
our abilities.
Innovation
We continually improve,
embrace change and
provide our employees with
the opportunity to learn
and develop. We create
an environment where
people are encouraged to
demonstrate innovation by
successfully implementing
new ideas.
Commitment to personal
development
1,164 days
of training delivered to
employees during 2014
The equivalent days of
training
2.55 days
per Company employee
per year
23804.04 13 April 2015 8:14 AM Proof 8
22
corporate responsibiLity —
HealTH aND SafeTY
our commitment to the
education of our own
employees through direct
training and safety briefings
and to the communities
in which we work have
continued throughout 2014;
we have again spent time
within the communities
spreading the message of
safety within our businesses.
our achievements
For the fifth consecutive
year we have celebrated the
achievement of a RoSPA
award for Health and Safety;
due to our continued success
with RoSPA this is now a Gold
Medal award. our 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,
Safety and Welfare Award
at the National Federation
of Builders (NFB) Annual
Awards for the third
consecutive year, this award
recognises best practice
in the industry and a
commitment to achieving the
highest possible standards
of health and safety.
We came out on top in the
Health & Safety category at
the CIoB (East Midlands)
Awards, underlining the
Company’s commitment
and focus to delivering the
very highest levels of health
and safety in every project
they undertake.
management systems
and external benchmarks.
The Board remains fully
committed to health and
safety and conduct regular
Director Safety Visits across
all subsidiaries.
We continued to benchmark
our health and safety
performance against
Constructing Excellence
Health and Safety Key
Performance Indicators
(KPIs). our 2014 accident
incidence rate (AIR)
performance equated to
a score of 91%. We have
seen a slight increase in
our accident frequency
rate (AFR) to 0.12 per
100,000 hours worked
including our subcontractors
(2013: 0.06); however we
are delighted that for the
fourth consecutive year our
construction related AFR for
our directly employed staff
is zero.
We have continued to ensure
that all employees take part
in regular, comprehensive
training, tailored to their
specific job and meeting all
industry requirements.
We again undertook a
mock incident on one of our
construction sites to test our
internal systems, our focus
in 2014 was on scaffold
risk. 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.
Meg Munn MP visiting the Fox Valley development
in Stocksbridge
Key awards
• RoSPA Gold
Medal award
• Commitment to
Health, Safety and
Welfare Award for third
year in succession
Gender Diversity at the
Henry Boot Group
111
348
average employed
during 2014
View more content online at:
www.henryboot.co.uk
Find out more about our
Key Performance Indicators
on pages 36 and 37
our health and safety
Health and safety continues
to be given the highest
priority within Henry Boot
from Executive Board level
down; we have developed
practical and safe systems
of work which are borne out
by the Company’s exemplary
safety statistics.
Health and safety is extremely
important to us, and
everything we do is to ensure
best practice and to 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
Health and safety remains
our organisational priority;
during 2014 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 264 during 2014 (2013:
238). Conducted by our
Group Safety, Health and
Environmental Manager our
system of audits ensures
compliance of our internal
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 23
corporate responsibiLity —
peOple
our people
To encourage success across
all of our core businesses, it is
important that we are able to
create a working environment
that enables us to attract,
inspire and retain the right
people to work at every
level, who are committed to
working together and who
will support our key corporate
values of respecting
individuality, innovation,
excellence and integrity. We
are committed to providing a
working environment in which
our employees can develop
to achieve their full potential
and enjoy opportunities
for both professional and
personal development.
Henry Boot PLC has
established policies for
recruitment, training
and development of our
employees. We remain fully
committed to investing both
the time and resources to
motivate our employees to
develop rewarding careers
and to encourage them
to remain working for the
business; where possible we
recruit and promote
from within.
As our businesses continue
to grow and evolve, a key
driver for ongoing success
will be our ability to retain
and continually motivate
our employees to deliver
the excellence on which
our businesses have been
developed and which our
customers have come
to expect.
During 2014 we directly
employed an average of
459 people (2013: 450); we
value the experiences our
employees bring and over
18% of our workforce have
over 20 years’ service.
equal opportunities and
diversity
Henry Boot PLC is an equal
opportunities employer
and will continue to ensure
that we offer career and
development opportunities
without discrimination. Full
consideration is given to
applications for employment
from disabled persons,
having due regard for their
individual abilities. Where
possible Henry Boot PLC has
continued the employment
of individuals who have
become disabled during their
employment with us.
At 31 December 2014, we
employed 434 people (2013:
448) comprising 325 males
and 109 females (2013: 345
males and 103 females); we
have 20 Directors (18 male
and 2 female) and 33 Senior
Managers (26 male and 7
female) (2013: 22 Directors
(20 male and 2 female) and
28 Senior Managers
(23 male and 5 female)).
human rights
We apply human rights
considerations to all our
business practices,
including (but not limited to)
business ethics, equal pay,
health and safety, suppliers
and anti-bribery and
corruption policies.
We do not have a specific
human rights policy, however
this will remain under review
as to whether a policy
document is required in the
future over and above our
existing policies. We have
a Whistleblowing policy in
place and also a confidential
externally managed
telephone line.
pension arrangements
In 2014 Henry Boot PLC
implemented the UK’s
auto-enrolment pension
requirements; we utilised our
current pension providers,
AVIVA and The Peoples’
Pension/B&CE, to deliver
this. As at 31 December
2014 we had over 95% of
our employees engaged in
a pension arrangement to
which both the employee
and the Company makes
a contribution.
our performance
We remain committed to
personal and professional
development in order to
support the growth of our
people and their ability to
make a contribution to our
businesses; we delivered
a total of 1,164 days of
training in 2014 (2013: 1,306
days) the equivalent of 2.55
days per employee (2013:
2.92 days). We provide
training in leadership, people
management, health and
safety and a wide variety of
subsidiary specific training.
We have seen an increase in
the cost per capita spent to
£117 (2013: £102).
During 2014 we continued
with our programme of
supporting internships and
year out placement students
within all of our businesses
and have seen great success
in utilising these programmes
to identify both potential
employees and future leaders.
We continued through our
network of CITB Construction
Ambassadors to share our
experiences of working within
the built environment, through
school visits, roadshows and
work shadowing.
our achievements
In 2014, two of our Senior
Managers in Henry Boot
Construction Limited were
nominated for the CIoB’s
Construction Manager of
the Year Awards; both were
subjected to a rigorous and
intensive interview process to
progress to the final Awards.
Steve Green was responsible
for our site for Bifrangi
UK Ltd in Lincoln which
involved the construction
of a press house for hot
steel forging, and Mathew
Clarke managed our
site for Sheffield Hallam
University which involved
the development of the
Graham Solley Sports
Pavilion and associated
sports facilities. Mathew
was fortunate to make the
top 5 shortlist for his £2m
to £7m category; although
others were successful in
achieving the final Awards at
the presentation in London
in october, we are incredibly
proud of the success of
our employees.
During 2014, Henry Boot
Construction Limited
successfully achieved
Investors in People status;
over 50% of our employees
are employed by businesses
who have been assessed
and are recognised by this
national accreditation. We
continue to work with our
remaining core businesses
to achieve this accolade
which recognises that high
performance is achieved
through our people, and that
by championing best practice
in people management our
businesses will achieve
continued success.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT 24
corporate responsibiLity — COMMuNiTY
our community
our community involvement
continues 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.
our performance
We continued to be active
in the communities in which
we operate; we supported
projects through the Henry
Boot Endowment Funds
managed on our behalf by
South Yorkshire Community
Foundation (SYCF) and
through direct donations.
Some of the projects and
fundraising we have been
involved in over the last 12
months are:
• oughtibridge Brass
Band – through SYCF we
supported the upgrading
of the band room to
include disabled access
and kitchen facilities;
• old School Charity,
Grenoside – through
SYCF we supported
a grant to support the
purchase of equipment
in order for the project
to continue as a wider
community facility;
• Barnsley Samaritans –
supported with a grant
to contribute towards the
refurbishment of toilet
facilities.
We have donated £18,072
to charities nominated by
our employees through our
Give As You Earn Scheme
(2013: £13,581), and in 2014
we donated in excess of
£38,540 to a varied range
of causes, both locally and
nationally (2013: £30,902).
During 2014 we introduced
Dress Down Fridays at our
Sheffield headquarters. This
has resulted in £3,000 being
raised by colleagues for a
variety of local employee
nominated charities; through
this we have also supported
national charity days for Sport
Relief and Children In Need.
We have continued to work
alongside local colleges
and universities and have
hosted year out placement
students in our Finance and
IT Departments. This is an
ongoing partnership which
will continue year on year.
In 2014 we supported
the BiG Challenge in
Sheffield, this scheme has
been developed to teach
children the importance of
entrepreneurial skills. Teams
were awarded £25.00 from
which to start and grow a
business of their choice.
For the seventh successive
year, we attended and
supported Tech Tech; held
in Doncaster and hosted
by BBC presenter Maggie
Philbin, this event helps to
promote science, technology,
engineering and maths
(STEM) to Year 9 students.
our achievements
our people take great pride
in the work they do in our
communities; they are all
advocates for Henry Boot
and are a credit to our
businesses. We make a
significant investment in our
community programmes
and support colleagues’
fundraising and volunteering
for all charities and registered
good causes.
In 2014, several of our
employees undertook
personal challenges for
charity; we would like to
recognise the efforts of
Mick Wake who ran his first
marathon at Loch Ness in
September, raising £1,000
for The Willow Foundation;
Ryan Spencer and Tom
Gibbons who completed
The Cumbrian Cross Lake
Challenge raising £1,250 for
St Luke’s Hospice and Paul
Muncey who completed
a sponsored walk around
Derwent Dam raising over
£1,000 for MND (Motor
Neurone Disease).
We continued our Associate
membership of Considerate
Constructors and saw a
continued upward trend in
our scoring. our highest
score in 2014, 43 out of a
possible 50, was achieved
at ASRA Bilsthorpe, a social
housing project in Leicester
and Nottinghamshire where
the improvements included
installation of new windows,
doors and rainwater goods,
roofing repairs/replacement,
replacement of soffits and
fascias and other repair
works as required.
Sport Relief in
March 2014
Children in Need in
November 2014
Mick Wake completing the
Loch Ness marathon for
The Willow Foundation
Tom Gibbons and Ryan
Spencer taking part in
The Cumbrian Cross
Lake Challenge
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 25
case study
cathedral archer project, sheffield
several visits to the project
to deliver the donations;
in addition to this several
of our employees also
donated warm clothing and
bedding to the project.
A number of our
employees volunteered
during this period to
assist in organising the
goods received into the
stores of the charity from
other donation points; a
worthwhile and enjoyable
day was spent by our
employees in the cellars
near Sheffield Cathedral
where the popularity of the
project was realised by
the continued stream of
deliveries being made by
other volunteers who were
travelling around Sheffield
collecting donations.
our final involvement
with CAP in 2014 was at
Christmas when employees
of Henry Boot Construction
Limited held a bake sale
which raised over £90.00;
following which a number
of employees volunteered
to help out with the serving
of Christmas dinner to the
clients at CAP and which
allowed our employees
to spend time with some
of the people the charity
helps. Together with
sub-contractors, Henry
Boot Construction Limited
donated over £1,000 to
purchase food and other
items to support those
visiting CAP over the
festive period.
During 2014, our
employees supported the
Cathedral Archer Project
(CAP) based at Sheffield
Cathedral. Established 25
years ago to support the
homeless and vulnerable,
CAP believes life should
be fulfilling and enjoyable
and homelessness isn’t.
CAP supports people to
achieve through helping
them to develop their
independence, improve
their ability to tackle
setbacks, improve their
ability to identify and
change negative behaviour
and improve their wellbeing.
on a practical level this
includes offering cooked
breakfasts, lunches, food
parcels, showers and
medical support as well
as access to a variety of
activities and learning. CAP
has a team of dedicated
support workers to help
people make their
individual journeys away
from homelessness.
In the summer of
2014, Henry Boot PLC
encouraged employees
to donate to a harvest
event in which employees
donated food stuffs and
toiletries which would be
used to make up food
parcels for the clients;
we were delighted that
our employees donated
in substantial amounts
which resulted in our
representatives making
Henry Boot Construction Limited donated £1,000 for the
Christmas Lunch
Henry Boot PLC volunteers helping out in the food
bank stores
Henry Boot Construction Limited festive volunteers
preparing for the Christmas Lunch
Find out more about the
cathedral archer project
online at:
www.archerproject.org.uk
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT 26
corporate responsibiLity — eNViRONMeNT
our environment
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
We have again been
recognised by Business
in the Community (BITC)
Yorkshire and the Humber
and have achieved Gold
status, attaining a rating of
94% when measured against
its Environmental Index, a
slight decrease on last year’s
assessment (2013: 97%);
we continue to be listed as
one of the top companies
in the region on the
Business in the Community
Environmental Index.
While waste cannot be
eliminated, its environmental
impacts can be reduced by
preventing waste wherever
possible. 2014 saw a static
result in reducing waste with
our recycling rate remaining
at 94% (2013: 94%).
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
more sustainable levels of
consumption. We have a
duty to ensure that we are
as efficient as possible to
provide the best service to
our customers while reducing
unnecessary negative
environmental impacts.
greenhouse gas reporting
Our carbon footprint
our greenhouse gas
emissions for the year ended
31 December 2014 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 2014.
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).
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)
assessment boundary
our carbon footprint
natural gas use
refrigerant gas loss
company owned vehicles
other fuels / gas use
fire extinguishers
electricity use
business mileage
fuel, well to tank and
electricity transmission
and distribution
waste disposal
water consumption
biogenic co2
Potential boundary
for Group emissions
Scope 1
emissions
Scope 3
emissions
Assessment
boundary
Scope 2
emissions
Company owned
vehicles
Electricity
46%
36%
Natural gas
Business mileage
Other Fuel / Gas
6%
Refrigerant gas
6%
5%
1%
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.
overall, the Group’s
greenhouse gas emissions
have risen by 3% when
compared with those of the
previous year; this equates
to an increase of 0.11 tonnes
per employee. The increase
predominantly relates to scope
2 emissions, which have risen
as a result of the increase
in the emission factors (UK
Government GHG Conversion
Factors for Company
Reporting 2014) used in
calculating the tonnes of Co2.
carbon emissions by source
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 employee1
Scope 3: Upstream and downstream indirect emissions
Total emissions
Total emissions per employee1
2014
tonnes
2,288
1,337
3,625
Trend
20132
Tonnes
2,286
1,216
3,502
7.90 tonnes co2e
1,017
7.78 tonnes Co2e
1,000
4,642
4,502
10.11 tonnes co2e
10.00 tonnes Co2e
1 Employee numbers are based on the monthly average for the year
2 2013 emission figures have been restated due to omitted electricity data and an amended unit conversion for gas
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 27
carbon emissions by segment
Henry Boot Group Co2e emissions
Property investment
and development
Land development
Construction
Group overheads
Total gross controlled emissions
property investment and
development
Expansion of our
housebuilding arm has
resulted in an increase in
the number of staff, the level
of emissions relating to our
offices, and onsite fuel and
gas use during the year.
As a result we have seen
an increase of 0.54 tonnes
of Co2 per 1,000 sq ft of
investment property (with
communal areas).
Land development
There has been minimal
movement in the level of
emissions relating to our
land development segment.
However, the emission
tonnes of Co2 per employee
have fallen by 0.25 due to
an increase in the number of
staff during the year.
2014
intensity
ratio
tonnes of
co2e
2014
tonnes of
co2e
20132
Tonnes of
Co2e
20132
Intensity
Ratio
Tonnes of
Co2e
1,234
2.58
1,023
2.04
123
3,108
177
4,642
3.96
37.73
3.41
122
3,154
203
4,502
4.21
40.16
3.98
Intensity
Basis
Trend
per 1,000 sq ft of investment
property with communal areas
per employee
per £1m of turnover
per employee
construction
The level of fuel and gas
used on construction sites
has fallen during the year,
despite an increase in the
level of turnover, which has
resulted in a reduction in
carbon emissions of 2.43
tonnes per £1m of turnover.
group overheads
Emissions in relation to
Group overheads have fallen
by 13%, irrespective of a
slight increase in the number
of staff. The reduction
predominantly relates to a
lower usage of electricity and
natural gas.
our achievements
We were successful again
in winning two CIoB
Environment Awards for
South Yorkshire and the East
Midlands.
Henry Boot Construction
Limited has signed up to
participate in WRAP Built
Environment Commitment
which provides a framework
in which the Company can
continue to lower carbon and
improve resource efficiency
in their everyday work
activities.
In order to ensure we
are effective in achieving
reductions in our
environmental impact and
carbon footprint, we have
formed a Carbon Reduction
Committee consisting
of several individuals
from within the business
who are responsible for
identifying and implementing
improvements that will
inevitably reduce our carbon
emissions.
During the year several
measures were trialled and
implemented, including:
• A Safe and Fuel Efficient
Driving course was trialled
on 36 members of staff
and will be rolled out to
the rest of the Group;
• HGVs fitted with data
recorders monitoring
driving styles, efficiency
and fuel economy;
• Replacement vans fitted
with speed limiters;
• More efficient replacement
vehicles;
• Appointment of energy
consultant to carry out
assessments of two office
buildings.
The Committee will continue
to pursue improvement
measures and continuous
reduction in the level of our
carbon emissions.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT creating VaLue...
THRoUGH STRoNG PERFoRMANCE
AND RISK MANAGEMENT
John sutcliffe
Group Finance Director
Jamie boot
Group Managing Director
Key highlights
• Best financial result
since 2007
• Profit before tax of
£28.3m
• Record dividend
recommended
HoW is tHe gRouP BeneFitting
FRoM its long-teRM stRategY?
the Henry Boot group of Companies has long benefitted
from a consideration that goes to the heart of our
strategic decision making; the under-utilised concept
of prudently investing for the long-term. We have seen
many economic cycles since our formation in 1886 but
we have always demonstrated our commitment to our
shareholders with growing income returns and long-term
stability. the cyclical nature of what we do has seen
our share price vary significantly over the years but we
have continued to make trading profits and continued to
pay dividends. our long-term strategy has to be flexible
enough to deal with the vagaries of the economic cycle,
maximising opportunities arising throughout the cycle
and successfully achieving our main business aims,
whilst maintaining prudent borrowing levels and ensuring
the security of our asset base.
23804.04 13 April 2015 8:14 AM Proof 8
Gross profit rose by
£5.9m to
£43.7m
an increase of 16% over
our 2013 result
operating profits rose
by £9m to
£28.0m
an increase of 47% over
our 2013 result
23804.04 13 April 2015 8:14 AM Proof 8
30
financiaL reView
John sutcliffe
Group Finance Director
Jamie boot
Group Managing Director
Key highlights of our
financial performance
in 2014
• Profit before tax
increased by 54% to
£28.3m
• Basic earnings per
share increased by
88% to 16.2p
• NAV per share
increased by 3% to
152p per share
• RoCE increased
310bps to 11.4%
• Total dividends for
the year increased
9.8% to a record 5.6p,
covered 2.9 times
• Net assets now
exceed £200m
our clear and consistent
long-term strategy helped
produce our best result
since 2007. The house
building sector recovery
is now well-established
with the major UK house
builders currently reporting
significantly improved
financial performance.
Real estate debt markets
are performing well and
increasing confidence across
all sectors is supporting
property development activity
which has a positive knock-
on effect in the construction
and plant hire businesses.
consolidated statement of
comprehensive income
Revenue reduced slightly to
£147.2m (2013: £153.8m)
although, 2013 included
some £20m of one-off
revenue transactions at York
and Bromley which were
matched by cost of sales.
Gross profit increased 16%
to £43.7m (2013: £37.8m)
helped by higher land sale
profits. Selective reinvestment
in staffing and into the
business infrastructure at
Stonebridge saw overheads
rise £1.2m, offset by lower
pension related costs of
£0.4m. Property revaluation
gains were £1.9m (2013: loss
£1.6m) and asset disposal
profits were £0.4m (2013:
£0.3m) as the improving
property market allowed
us to generate higher
returns. The revaluation
gains arose primarily from
the development activity
completed in the year, offset
by a write down, where
proposed foodstore-led
developments are unlikely
to proceed as previously
envisaged. Resulting
operating profits increased
47% to £28.0m
(2013: £19.0m).
The segmental result analysis
shows that land development
produced a significantly
improved operating profit
of £14.1m (2013: £11.9m).
Property investment and
development activities
operating profit increased to
£8.7m (2013: £3.1m), arising
from the revaluation surplus
and higher trading profits. In
addition, the share of profit of
joint ventures is a revaluation
gain within Pennine Property
Partnership. Construction
division operating profits
improved to £9.2m (2013:
£8.2m) helped by better
results in both construction
and plant hire. These results
continue to show the
benefits of a broad-based
operating model in which
all our business segments
faced improving markets
during the year. We recognise
that the deal-driven results
within the strategic land and
commercial development
segments can vary from year
to year but these fluctuations
are mitigated by the relatively
stable returns from the
construction segment.
tax
The tax charge for the year
was £4.8m (effective rate of
tax: 17.0%) (2013: £5.1m
and effective rate: 28.0%).
Current taxation on profit for
the year was £4.4m
(2013: £4.1m); with the
charge for the year benefitting
from higher joint venture
profits which are included
net of tax and changes in the
carrying value of investment
property not fully reflected in
the tax charge. In 2014 we
saw net revaluation gains
which are not taxable until
capital losses giving rise to
an unrecognised deferred tax
asset have been utilised. The
unrecognised deferred tax
asset has therefore fallen to
approximately £0.8m (2013:
£1.4m). The deferred tax
charge fell to £0.4m (2013:
£1.1m) resulting from the
tax charge in 2013 including
the reduction in the future
reversal rate applied to the
deferred tax asset brought
forward to 20% from 23% in
2012, no further change in
this measure was required
in 2014. The deferred tax
charge largely represents
pension contributions being
higher than the IAS 19
defined benefit charge.
earnings per share
and dividends
Basic earnings per share
were 88% higher at 16.2p
(2013: 8.6p). The total
dividend payable for the year
has been increased by 9.8%
to a record 5.60p (2013:
5.10p), with the proposed
final dividend also increasing
by 11.1% to 3.50p (2013:
3.15p) payable on 29 May
2015 to shareholders on the
register as at 1 May 2015.
The ex-dividend date is 30
April 2015.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 31
Before and after refurbishment at the former Courthouse, Deansgate, Manchester
(2013: £3.0m) of funding
which is repayable from
the future sale of residential
units on certain sites. 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. In February 2015
we agreed a new three year
£60m facility with covenants
on a similar basis but on more
competitive margin terms.
The agreed terms also allow
for the possible extension
of the facilities for a further
two more years on the same
terms, subject to agreement
between the banks and the
Company. Throughout the
year we operated comfortably
within the facility covenants
and continue to do so.
Proposed final
dividend of
3.50p
an increase of 11.1%
over 2013 payment
our gearing level has
reduced to
18%
a reduction of 5% over
the year of 2014
Read our financial statements
in detail on pages 82 to 137
View more content online at:
www.henryboot.co.uk
return on capital
employed (roce)
Higher pre-tax profitability in
the year resulted in improved
return on capital employed
from 8.3% in 2013 to 11.4%
in 2014. our aim is to
achieve and maintain a rate
of return of 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.
finance and gearing
Although debt has increased
marginally after further
investment in our strategic
land portfolio, net finance
costs remained stable
at £0.8m (2013: £0.8m).
Average borrowing rate
costs were slightly lower
than the previous year and
any increase in volume
borrowing cost is offset by
a corresponding reduction
in the non-utilisation fee. It
is anticipated that interest
costs will remain similar in
2015 as the first upward
change in interest rates
seems more likely to occur
in 2016. 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 31 times
(2013: 24 times). No interest
incurred in either year has
been capitalised into the cost
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. This
was achieved by using
internally generated cash
flows so that total year end
net debt only rose marginally
to £36.4m (2013: £36.1m).
Gearing on net assets of
£200.5m was 18% (2013:
net assets £193.5m; gearing
19%). Total year end net
debt includes £7.7m
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT 32
financiaL reView continued
Revenue slightly
reduced to
£147.2m
during the year of 2014
Current assets
inventory of
£117.5m
including £99.6m of
strategic land assets
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
banks. Therefore, we retain
the ability to fund such
transactions from our own
resources, reserving the
property investment assets
as the covenant support
for the new £60m banking
facilities. Forecast bank
debt levels at the end of
2015 are anticipated to be
slightly lower than 2014 as
we continue to realise land
investment through sales.
During 2014, we further
increased operating cash
flows before movements in
working capital by £4.8m to
£24.9m (2013: £20.1m) and,
despite further investments
in working capital of £10.0m
(2013: £18.5m) we still
achieved a positive change
in cash generated from
operations of £13.3m. Cash
outflows from investing
activities reduced to £0.3m
(2013: £4.3m) as we recycled
£16.8m of investment
property and plant and
equipment sales into £17.4m
of new property development
and plant purchases.
Dividends paid, including
those to non-controlling
interests, totalled £8.6m
(2013: £8.4m), with dividends
paid to equity shareholders
now exceeding the pre-
recession level.
statement of financial
position
Investment property and
assets classified as held
for sale were valued at
£141.8m (2013: £142.9m).
The fair value of completed
investment property including
assets held for sale was
£99.4m (2013: £101.0m)
and the value of investment
property under construction
within investment property is
£42.4m (2013: £41.9m) as
we develop these assets into
investment properties.
Intangible assets reflect the
Group’s investment in Road
Link (A69) of £6.7m (2013:
£8.0m). 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 £7.0m (2013: £6.8m) and
plant, equipment and vehicles
with a net book value of
£12.1m (2013: £10.6m); this
increase arose from further
investment in new plant
and plant delivery vehicles.
Non-current trade and other
receivables have reduced to
£4.8m (2013: £12.7m) due to
net collections on long-term
payment plans associated
with completed land sales.
Given the potential land
sales predicted for 2015 we
anticipate that this debtor
caption will increase once
again in 2015. The non-
current deferred tax asset
increased in response to the
higher IAS 19 pension deficit.
In total, non-current assets
increased slightly to £180.7m
(2013: £176.0m).
A mixed-use development at Halfway, Sheffield. A further planning application has been registered for 200 new homes.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 33
Banking facilities
agreed of
£60m
for a three year period
from February 2015
should expect our assets to
achieve, current application
under the standard equates
to 41% of the average asset
return actually achieved since
2010 and 44% of the asset
managers’ benchmark. As a
comparison, a discount rate
of 4.75% would result in a
negligible deficit.
The deficit result produced
has a significant impact on
our net assets (circa 15p per
share) and does so using
a discount rate which is
materially below the longer
term returns our Scheme
assets have achieved by
investing globally, in a
range of return-seeking
assets rather than nationally
in bonds and gilts. The
Company agrees with the
Pension Trustees’ asset
allocation and actively
reviews the return achieved
from the asset portfolio
against its benchmark on a
regular basis.
Jamie boot
Group Managing Director
John sutcliffe
Group Finance Director
17 April 2015
Within current assets,
inventories of £117.5m
(2013: £91.0m) increased
due to further investment in
the land portfolio to £99.6m
(2013: £83.9m) and assets
in the course of construction
to £17.8m (2013: £7.1m).
Trade and other receivables
also increased to £50.1m
(2013: £43.1m) from higher
construction and land sales.
The decrease in cash and
cash equivalents arose
because several transactions
were concluded very close to
the 2013 year end and cash
could not be offset against
loan drawdowns at that time;
no such issue arose at the
end of 2014. In total, current
assets increased to £172.1m
(2013: £160.2m).
Current liabilities remained
very similar to the previous
year at £107.1m (2013:
£106.3m) as the current
portion of debt reduced to
£32.0m (2013: £46.5m).
However, if we were to offset
the cash current asset last
year, debt would be broadly
in line. Trade payables
increased to £68.8m (2013:
£50.2m) as a result of various
amounts related to higher
levels of activity across all
segments of the business.
Provisions reduced to £4.3m
(2013: £7.1m) as amounts
provided for the infrastructure
obligations at Bridgwater
and Cranbrook, Exeter, were
utilised, satisfying planning
obligations. Net current
assets increased to £65.0m
(2013: £53.9m). This increase
is due to further investment in
land inventories, development
contracts in progress and
debtors, offset by increased
trade creditors as we operate
at a higher general level
of activity throughout the
Group. Non-current liabilities
increased to £45.3m (2013:
£36.4m) after IAS 19 pension
liabilities increased once
again to £28.2m (2013:
£20.1m) with yet another
strong performance from
the Scheme’s assets and
the introduction of RPIJ as
the inflation measure which
was more than offset by the
ongoing reductions in gilt and
bond yields applicable to the
present value of liabilities,
as real interest rates turn
negative in many economies.
Net assets increased by
3.6% to £200.5m (2013:
£193.5m) as retained profits
were offset by the increase in
the pension deficit, dividends
paid and treasury share
purchases. Net asset value
per share increased 3% to
152p (2013: 148p).
pension scheme
The fluctuating profile of the
IAS 19 deficit continued in
2014. At 31 December 2014
the deficit was £28.2m, in
2013 it was £20.1m and in
2012 it was £30.5m. once
again, the Scheme assets
performed well, achieving
an overall return in excess of
10% (2013: 9% and 2012:
8%). This is expected as
the Scheme’s assets are
invested with high quality
asset managers on a global
basis, utilising a broad range
of assets and diversification,
and since the second quarter
of 2010, these assets have
achieved an annualised
return of 8.7% against a
benchmark return of 8.2%.
However, this impressive
return has been more than
offset by application of a
reduced discount rate of
3.6% from 4.5% in 2013 to
determine the present value
of the Scheme liabilities
prescribed under the
rules of IAS 19. Whilst the
standards intention is that
the discount rate reflects the
best long-term return, we
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT 34
our Key performance inDicators —
fiNaNCial
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:
profit before taX (£m)
cash generation (£m)
DiViDenDs per orDinary share (p)
28.3
9.1
(0.3)
18.4
16.1
13.4
(14.2)
(19.6)
5.60
5.10
4.70
4.25
2011
2012
2013
2014
2011
2012
2013
2014
2011
2012
2013
2014
obJectiVe
To increase profit levels over time
obJectiVe
To monitor cash generated over time
performance
54% increase
performance
Cash outflow £0.3m
comments
Higher land sales and profits in 2014.
2015 looks positive in terms of land and
property development
comments
We continue to reinvest retained
earnings in the portfolio of land and
property development assets
obJectiVe
To generate growing shareholder returns
over time
performance
10% increase
comments
10% increase to 5.60p as we move
dividends ahead of previous record of 5.10p
on target
on target
on target
net assets (£m)
earnings per orDinary share (p)
naV per share (p)
200.5
193.5
184.8
181.9
6.9
7.0
8.6
16.2
148
152
142
139
2011
2012
2013
2014
2011
2012
2013
2014
2011
2012
2013
2014
obJectiVe
To grow the asset base over time
obJectiVe
To increase returns over time
obJectiVe
To increase shareholder value over time
performance
4% increase
performance
88% increase
performance
3% increase
comments
Increased due to retained profits offset
by rise in pension deficit which was
affected by the fall in bond yields
comments
Increased due to higher retained profits
helped by a reduction in deferred tax
charged in the year
comments
Little change to share capital, therefore,
benefits from retained earnings
on target
on target
on target
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35
LinKing performance to rewarD
Read more in our Directors’ Remuneration
Report on pages 60-77
sharehoLDer return (%)
gearing LeVeLs (%)
52
36
13
19
18
12
2011
2012
2013
0
2014
1
2011
2012
2013
2014
obJectiVe
To generate growing shareholder
returns over time
obJectiVe
To monitor levels of cash required over
time
performance
No increase in year
performance
5% decrease
comments
Share price actually fell over the year
despite earnings per share doubling.
Return over the last 3 years is 73.6%
comfortably above the median of the All
Share and Small Cap indices
comments
This still prudent gearing level gives
us flexibility to reinvest in land sites
and property development. 2015
should see levels fall slightly once again
on target
on target
return on capitaL empLoyeD (%)
pension scheme Deficit (£m)
8.3
7.3
6.2
11.4
(30.5)
(22.6)
(20.1)
(28.2)
2011
2012
2013
2014
2011
2012
2013
2014
obJectiVe
To increase returns on capital employed
over time
obJectiVe
To reduce the pension scheme deficit
over time
performance
37% increase
performance
40% increase
comments
Healthy improvement in returns over
the last three years. Now generating the
kind of returns to meet our aspirations
comments
Discount rate used by IAS19 has
reduced to 3.6% from 4.5%. Yet again
the pension scheme assets achieved a
return substantially ahead of this (10%).
A discount rate of 4.75% would result in
a negligible deficit
on target
on target
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.
In addition to this, we review a range of specific
indicators within each business unit, the main
ones being as follows:
land Development
(see pages 8 to 11)
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
property investment and
Development (see pages 12 to 15)
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
(see pages 16 to 19)
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. 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
(see pages 30 to 33)
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.
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36
our Key performance inDicators —
NON-fiNaNCial
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)
acciDent frequency rate (afr)
(per 100,000 hours worked inclusive of
sub-contractors)
personaL DeVeLopment (Days)
0.31
0.20
0.12
0.06
1,306
1,164
1,085
927
2011
2012
2013
2014
2011
2012
2013
2014
0
0
0
0
2011
2012
2013
2014
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.
obJectiVe
To ensure that our employees are
trained to the appropriate level and are
given adequate opportunity to develop
their careers.
comments
Another successful year of zero
incidents affecting our directly employed
staff.
comments
our ongoing education of our sub-
contractors and the closer monitoring of
their working practices continues.
comments
A slight decrease in training days
delivered. Reflective of large increase in
2013, where skill gaps were addressed.
reportabLe acciDents
empLoyee profiLe
bitc enVironmentaL inDeX
5
3
2
2014
1
2013
2011
2012
439
92
438
100
450
103
459
111
347
338
347
348
>95
91
97
942
2011
2012
2013
2014
2011
2012
2013
2014
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, however 2014 saw
a slight increase in reportable accidents.
obJectiVe
To ensure a diverse spread of genders
within all job roles in the Group.
obJectiVe
To be recognised by a recognised body
as being a leader in environmental
management in our region.
comments
We currently have a gender split of 76%
male to 24% female. In order to address
this we are working closely with external
partners to encourage underrepresented
groups into the industry.
comments
A decrease in our scoring due to
realignment of the process means that
we are now classed as Gold status;
the Company will endeavour to regain
Platinum status in the future.
Males
Females
2 The BITC altered its scoring matrix in 2014
which resulted in reductions across the board
of approximately 5%).
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consiDerate constructor
scheme
36.11
37.11
34.3
34.7
our awarDs
Henry Boot PLC is one of the UK’s leading and long-standing land development,
property investment and development, and contruction companies; renowned
for quality and a diverse portfolio, we pride ourselves on maximising long-term
shareholder value. We have a reputation for providing a quality product, delivered
in a safe way which will continue to provide revenue growth in our chosen markets.
our success can be measured in many ways; and this is apparent by the number of
awards and accreditations we continue to receive.
2011
2012
2013
2014
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 high scores
across our sites.
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)
93
93
94
94
2011
2012
2013
2014
commitment
our environment
obJectiVe
To reduce the amount of spoil going to
landfill by recycling, reusing or upcycling.
comments
We continue to improve our methods
of work to try to reduce this number
further.
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managing risK
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.
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
group board
Reporting framework
The Board monitors the risk and associated controls over
financial reporting processes, including the consolidation
process
audit committee
internal framework
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
top down
Bottom up
managing Directors
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
business units
Day-to-day operations
Policy and procedure manuals cover major areas of their
operations, including safety, purchasing, estimating,
marketing, production and quality
independent
review
Review, risk
assessment and
reporting
Risk assessment
Read more about our
Strategy on page 6
Read more about our KPIs
on pages 34, 35, 36 & 37
Read more about our
Governance on page 44
Read more about our activites and
resources on page 5
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change in risk
environment
during 2014
risk and description
mitigation
DEVELoPMENT
Not developing marketable assets for
both tenants and the investment market
on time and cost effectively.
• Monthly performance meetings.
• Defined appraisal process.
• Monitoring of property market trends.
Reduced
• Highly experienced development team.
• Flexible to market trends in development requirements.
• Diverse range of sites within the portfolio.
Rising market yields on completion
making development uneconomic.
• Active asset management.
• Monitoring property market trends.
Reduced
• only develop when yields are stable.
• Development subject to a ‘hurdle’ profit rate.
Construction and tenant risk which is not
matched by commensurate returns on
development projects.
• Construction projects, including returns and cash flows, are
monitored monthly by subsidiary company management
teams.
Reduced
• Seek high level of pre-lets prior to authorising development.
• Development subject to a ‘hurdle’ profit rate.
• Shared risk with landowners where applicable.
LAND
The inability to source, acquire and
promote land would have a detrimental
effect on the Group’s strategic land bank
and income stream.
• Monthly operational meetings detail land owned or under
control, new opportunities and status of planning.
• 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.
• Land bank of over 9,900 acres with aspiration to grow further.
over time the land bank acreage has shown steady growth.
• Finance available to support speculative land purchases.
• Well respected name within the industry that demonstrates
success.
• Long-established contact base.
Same
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managing risK continued
risk and description
mitigation
LAND
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.
• The Group’s policy is to only progress land which is deemed to
be of high quality and in prime locations.
• The business is long term and is not seriously affected by
short-term events, or economic cycles.
change in risk
environment
during 2014
• We recognise cyclicality in our long-term plans and operate
with a relatively low level of debt.
Same
• Greenfield land is probably the most sought after land to build
upon.
• Long-term demographics show growing trend; therefore
demand for land will follow.
• House builders have recovered well from the last recession.
INVESTMENTS
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.
• This is an ongoing process with regular reviews of the assets
and market conditions and is undertaken dispassionately to
achieve best value.
• Broad range of development opportunities to choose from.
Same
• Investment assets are seen as tradable if required.
• 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.
• The Group uses a mixture of fixed and floating rate loans in
order to minimise interest rate costs.
• Statement of Financial Position strength allows the Group to
warehouse sites in tough markets.
• Tough markets often create opportunities to acquire new sites.
• Long-term nature of land business helps smooth short-term
interest rate impacts.
• Interest cover over 20 times, gearing relatively low and
therefore significant scope to deal with interest rate rises.
Same
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change in risk
environment
during 2014
risk and description
mitigation
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.
PLANNING
Increased complexity, cost and delay
in the planning process may slow down
the project pipeline.
• The Group has agreed three year facilities with its banking
partners which were renewed in February 2015.
• Detailed cash requirements are forecast up to 15 months in
advance and reviewed and revised monthly.
• Financial instruments are considered where applicable and any
short-term positive cash balances are placed on deposit.
• Facilities backed by investment property assets.
• Development funding not utilised.
Reduced
• Group funding levels are prudent in relation to the Statement
of Financial Position.
• our lending banks’ financial positions are recovering and the
appetite to lend is improving.
• Group and Executive are very mindful of overtrading into the
recovery.
• As a PLC access to equity funding is available should this be
required.
• 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.
• Good local knowledge assists in bringing forward land and
contractual agreements ensure land can be brought to market
at an appropriate time.
Increased
• Long-established successful operator.
• Inventory of approximately 140 sites in progress throughout
the UK.
• 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.
• 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.
• House builders do have very good land banks and can be
choosy regarding what they buy.
Same
• Mortgage availability slowly improving.
• Continue to work to acquire land for the longer term.
• Large land bank can help smooth short-term fluctuations.
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managing risK continued
risk and description
mitigation
change in risk
environment
during 2014
PLANNING
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.
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 11 years. 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.
ENVIRoNMENTAL
The Group is inextricably linked to the
property sector and environmental
considerations are paramount to our
success.
• Large land bank can help smooth short-term fluctuations.
• A high profit margin can be achieved when successful.
Same
• 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.
• This risk is reduced as unemployment rises and recessionary
conditions prevail.
• Good long-term employment record indicates that good
people stay within the Group. The Group encourages equity
ownership.
Same
• Decent record of sharing profits with key individuals and staff.
• Succession planning is an inherent part of management
process.
• operation of Trustee approved Recovery Plan.
• Whilst pension schemes are a long-term commitment,
regulations require the Group to respond to deficits in the
short term.
• Move out of gilts will provide a cushion should rates rise.
• Risk mitigated by move to diversified growth funds on around
20% of assets, along with 9% of assets into an index linked
property fund.
• Treat pension scheme as any other business segment to be
managed.
• Strong working relationship maintained between Company
sponsor and pension Trustees.
• Use good quality external firms for actuarial and investment
advice.
Increased
Discount
rate fallen
90bps
• 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.
Same
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 43
change in risk
environment
during 2014
risk and description
mitigation
ENVIRoNMENTAL
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.
CoUNTERPARTY
• Through the National Federation of Builders the Group
attempts to reduce the impact on our business.
• Internal design helps mitigate environmental planning issues.
• Record of awards given in respect of good safety and
environmental performance.
Same
• Environmental impacts addressed at main Board and each
subsidiary company board meeting.
• Construction division has a Renewable Energy Unit to
progress Group aims in this area.
• Strong Statement of Financial Position with low gearing and
long-term shareholder base means that we can ride out short-
term economic fluctuations.
• Different business streams increase the probability that not all
of them are in recession at the same time.
• The City recognises the Group is a cyclical business and
understands performance will be affected by economic cycles.
Reduced
• Directors and shareholders share common goal of less
aggressive leveraging than some competitors.
• Current market conditions are supportive.
Depends on the stability of customers,
suppliers, funders and development
partners to achieve success.
• In recessionary periods the Group pays particular attention to
the financial strength of counterparties before contracting with
them in order to mitigate financial exposure.
Reduced
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSTRATEGIC REPORT creating VaLue...
THRoUGH STRoNG STEWARDSHIP &
ENTREPRENEURIAL LEADERSHIP
WHY is Maintaining stRong
goVeRnanCe iMPoRtant to
tHe BoaRD?
it is felt that strong governance within Henry Boot keeps
the Company true to its historic identity, safeguards and
promotes the values of today, and identifies our vision for
the future. By exhibiting leadership the Board will motivate
employees to achieve personal as well as team and
Company goals. the Board also reassures stakeholders
about how the Company is being managed in an effective
and organised manner. We feel that our Board of Directors
demonstrate the right blend of skills, experiences and
perspectives to lead the Company forward. We also feel it
is of particular importance that the senior management of
our subsidiary companies report fully on a personal level to
the main Board at least once a year.
strong governance is about people and how those people
work together towards a shared vision.
John brown Chairman
High level of ‘take up’ for
2014 Sharesave Plan
52%
of employees buying
shares in Henry Boot
PLC
company facts
• Reaccredited with
Investors in People
standard after rigorous
review process
• Premium Listed
Company on LSE
23804.04 13 April 2015 8:14 AM Proof 8
goVeRnanCe
46 Board of Directors
48 Senior Management
50 Chairman’s Introduction
51 Corporate Governance
Statement
56 Nomination Committee Report
57 Audit Committee Report
60 Directors’ Remuneration Report
78 Directors’ Report
81 Statement of Directors’
Responsibilities
23804.04 13 April 2015 8:14 AM Proof 8
46
board of directors
John brown
Chairman
Jamie boot
Group Managing Director
John sutcliffe
Group Finance Director
current role
Chairman since May 2011. Appointed a
Non-executive Director in March 2006.
committees
Nomination (Chairman), Audit and
Remuneration.
additional roles held
Non-executive Chairman of Scott Harris
UK Limited and Non-executive Director
of Lookers plc (retired in December
2014).
Past roles
Chief Executive of Speedy Hire plc
which he founded in 1977. His former
appointments include Non-executive
Director of Norcros plc and
Non-executive Director of Oriel
Securities Ltd.
brings to the board
John has many years’ experience of
managing public limited companies in
similar fields to Henry Boot PLC and his
close interaction with the City assists
strategic decision making.
current role
Group Managing Director since July
1986. Appointed an Executive Director in
June 1985.
additional roles held
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. Director responsible for health
and safety matters.
Past roles
Managing Director at Henry Boot
Developments Limited and Director at
Henry Boot Homes Limited.
brings to the board
Jamie has 30 years’ experience as a
director of Henry Boot PLC. He has
the responsibility for the subsidiary
company boards, Group profitability and
continues to guide in the achievement
of the highest level of return for a given
level of risk. Along with John Sutcliffe,
Jamie is responsible for communicating
strategy and results to both private and
institutional investors.
current role
Group Finance Director since October
2006.
additional roles held
Director of the Company’s four principal
operating subsidiaries – Henry Boot
Construction Limited, Hallam Land
Management Limited, Henry Boot
Developments Limited and Banner
Plant Limited. Director responsible for
finance, risk and pensions. Member
of the CBI Yorkshire and the Humber
Regional Council. Lay member of the
Sheffield University Finance Committee.
Past roles
Group Finance Director and Company
Secretary at Town Centre Securities PLC
and Finance Director of Abbeycrest plc.
brings to the board
John is responsible to the Board for all
financial matters relating to the Henry
Boot Group of Companies. He is also
a Trustee of The Henry Boot Staff
Pension and Life Assurance Scheme
and is heavily involved in investor
communications. Along with Jamie
Boot, he sits on all subsidiary boards
of directors and helps relay subsidiary
strategy back to the main Board.
23804.04 14 April 2015 3:01 PM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 47
michael gunston
Non-Executive Director
James sykes
Non-Executive Director
russell Deards
Company Secretary
current role
Group General Counsel since
September 2014 and Company
Secretary since September 2013.
additional roles held
Responsible for Legal, Insurance and
IT matters.
past roles
Head of Legal Services for Barratt
Developments and Partner at Flint
Bishop Barnett Solicitors.
current role
Non-executive Senior Independent
Director since May 2011. Appointed a
Non-executive Director in December
2006.
committees
Nomination, Audit and Remuneration
(Chairman)
past roles
Chief Surveyor of The British Land
Company PLC where he worked for
32 years.
brings to the board
Michael is Chairman of the Remuneration
Committee. His extensive real estate
and varied general experience gained
as Chief Surveyor at British Land is
extremely valuable in guiding the Group’s
development and asset management
opportunities to profitable outcomes.
current role
Non-executive non-independent Director
since March 2011.
committees
Nomination, Audit (Chairman) and
Remuneration
additional roles held
Partner in the London office of Saffery
Champness, Chartered Accountants
which he joined in 1987. He is a
Non-executive Director of Saffrey
Champness’ businesses in both
Guernsey and Switzerland.
brings to the board
James’ experience as an audit partner
is very important in his role as Chairman
of the Audit Committee. As Head of
Private Wealth at Saffrey Champness he
has many years’ experience in the UK
strategic land market and brings that
experience to board decision making
generally but more especially to Hallam
Land Management Limited.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 48
senior management
David anderson
Henry Boot Developments Limited
giles boot
Banner Plant Limited
simon carr
Henry Boot Construction Limited
appointment date
Managing Director in 2005
brings to the role
David Anderson, BSc (Hons), MRICS, 48, 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.
appointment date
Managing Director in 2000
brings to the role
Giles Boot, BA (Hons), 55, 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.
appointment date
Managing Director in 2009
brings to the role
Simon Carr, BSc (Hons), FRICS, 56, 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. Simon is a member of the Board of
the Sheffield City Region Local Enterprise Partnership, the
Sheffield City Region Joint Housing and Regeneration Board,
and the SCR Infrastructure Advisory Board. He also sits on the
South Yorkshire Freight and Transport Partnership, is an HS2
Ambassador and chair of the regional executive board of the
National Federation of Builders.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 49
appointment date
Managing Director in 2010
brings to the role
Keran Power, MRTPI, 64, began his career in Local
Government as a Planning officer. He joined the then newly
created Hallam Land Management Limited in 1990 as a
Regional Manager and was appointed a Director in 1993.
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.
appointment date
Managing Director (start of joint venture) in 2010
brings to the role
Darren Stubbs, 47, started work at Tay Homes plc at the
age of 16 and by the age of 25 he was Managing Director of
his own small housebuilding company based in Leeds. over
the next 15 years he grew the business to achieve an annual
turnover of £25 million. In 2010 he formed a new house
builder and property company, Stonebridge Projects Limited,
in a joint venture partnership with Henry Boot PLC.
appointment date
General Manager in 2005
brings to the role
Trevor Walker, IEng AMICE, 49, joined Road Link (A69) Limited
in 1996 at the start of the 30-year Private Finance Project to
operate and maintain the A69 trunk road. He was previously
involved in trunk road maintenance in the south of Scotland.
He undertook various road and bridge maintenance roles,
helping to establish the company before his appointment as
General Manager in 2005.
23804.04 13 April 2015 8:14 AM Proof 8
Keran power
Hallam Land Management Limited
Darren stubbs
Stonebridge Projects Limited
trevor walker
Road Link (A69) Limited
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 50
chairman’s introDuction
John brown
Chairman
View more content online at:
www.henryboot.co.uk
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 remains committed to ensuring that it provides effective leadership
and demonstrates high ethical standards. This is one demonstration of my and its
determination to add value to the Company. one of the ways in which we achieve
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 now subject to re-election by
shareholders annually.
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 2015
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 51
corporate goVernance statement
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 adopts a pragmatic
approach 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 50 to 55.
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 on pages 46 and 47. Two of the Directors
are Executive and the remaining three, including the
Chairman, are Non-executive. All Directors served
throughout 2014.
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 each respective board of
directors, led by a Managing Director. The Executive Directors
of the Company are also directors of each subsidiary.
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:
• strategy and objective setting;
• capital structure and ensuring funding adequacy; and
• effective internal controls.
Non-executive Chairman
Executive Directors
Non-executive Directors
Understand the key
business risks and
monitor them
BOARD
Monitor strategy
delivery, oversee
governance and
internal controls
Provide
leadership on
the Company’s
strategy
Report to
and obtain
shareholders’
views on business
performance
The Board reaffirms its commitment to achieving and
maintaining a high standard of corporate governance. To
be effective, it is felt that such governance must reflect the
unique standing of the Company and the composition of both
its institutional and individual 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 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 available free of charge on the FRC
website at www.frcpublications.com. In September 2014, a
revised version of the Code was published by the FRC and
the new Code will apply to the Company in respect of the
financial year ending 31 December 2015.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 52
corporate goVernance statement continued
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, insurance and IT. HR reports are also provided
to the Board for review and comment. 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, as Directors of
those subsidiaries, 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. In the last year, information on
directors’ duties and conflicts has been reviewed and reissued
as part of the ongoing issue of ‘Company Secretarial Alerts’.
The question of conflicts of interest is raised at every Board
meeting of the Company and its subsidiaries.
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 on page 53.
The Chairman is responsible for leadership of the Board
and ensuring it operates effectively. It is considered that 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’s other significant commitments can be found
in his biography on page 46.
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.
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. Although J E Brown has served for
more than nine years, he has continued to demonstrate his
independence from the Company and objective approach in
the way he challenges the Executive Directors and accordingly,
notwithstanding the length of his service, J E Brown has been
determined by the Board to remain independent. 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 79) 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 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 53
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
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 2014.
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.
Leadership training for the leaders of today and tomorrow is
being developed and will be launched in 2015 as part of the
process of succession planning.
annual re-election by shareholders
The Company’s Articles of Association (Articles) require
Directors 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. In addition, the UK Corporate Governance
Code includes a proposal that all directors of FTSE 350
companies should be subject to annual re-election. Following
communication with certain shareholders, the Board has
decided that all of the Directors will retire from the Board
and offer themselves for re-election at the forthcoming
AGM. The Nomination Committee has conducted formal
performance evaluations of all the Directors seeking re-
election and has concluded that their performance continues
to be effective and that they demonstrate commitment to the
role. The Committee is also satisfied that the backgrounds,
skills, experience and knowledge of the Company of the
Directors collectively enables the Board and its Committees
to discharge their respective duties and responsibilities
effectively. The Directors’ biographies are shown on pages
46 and 47. None of the Executive Directors holds external
directorships.
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 and also holds a meeting
at least once a year dedicated almost entirely to strategy.
The Board has formally constituted Audit, Remuneration and
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 54
corporate goVernance statement continued
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.
Three Audit Committee meetings, two Nomination Committee
meetings, four Remuneration Committee meetings and the
AGM were held in 2014. A Board Strategy Day also took
place away from the office. Attendance at the Board meetings
and Committee meetings held during 2014 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 including the Strategy
Day. 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 56
and 77.
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
audit remuneration nomination
2/2
—
—
2/2
2/2
4/4
—
—
4/4
4/4
3/3
—
—
3/3
3/3
risk management and internal controls
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 Board is satisfied with the system
in place but will keep it under review. 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.
The following key processes are considered by the Board to
provide effective management of significant risks to the business:
• 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
• 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 Company officer (either an Executive
Director or the Company Secretary) responsible for that
particular operation.
Each operation reviews its own system of internal controls and
reports twice a year to the Audit Committee:
• business procurement — development appraisals, land
purchases, options and construction contracts above a
set 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
• 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 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 and the Board is
satisfied with current arrangements, which will, however, be
kept under review.
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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 55
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 2014
proxies were received representing 71.75% 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
Shareholder Information on page 140 to the inside back cover.
compliance statement
The Company has complied with the vast majority of the
provisions of the September 2012 edition of the UK Corporate
Governance Code that are applicable to it for the year ended
31 December 2014. 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.
Approved by the Board and signed on its behalf by
r a Deards
Company Secretary
17 April 2015
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.
The Company’s policy was updated and reissued in 2014.
on-site and internet based training for all staff is arranged. In
addition, new or updated policies have been issued covering
competition law, gifts and hospitality and staff purchases and
an overarching Ethics Policy put in place. All policies reflect
and refer to the Group’s values.
accountability and audit
Details of the Directors’ responsibilities and the Statement
of Directors’ Responsibilities are contained on page 81. The
Independent Auditors’ Report is given on pages 84 to 91.
The Directors’ statement in respect of the business as a “going
concern” is provided in the Directors’ Report on page 78.
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 12 months and also links to the
websites of our four principal operating subsidiaries.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 56
nomination committee report
John brown
Chairman
View more content online at:
www.henryboot.co.uk
Those serving as members of the Nomination
Committee (the Committee) in 2014 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 pages 46 and 47.
terms of reference
The terms of reference for this Committee were reviewed and updated in 2014.
They fully incorporate the UK Corporate Governance 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:
• overseeing the identification, selection and appointment of Directors;
• reviewing the structure, size, composition and leadership needs of the Board;
• considering other commitments of Directors relative to the time required for them
to fulfil their duties; and
• 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 twice during the year, once to discuss the appointment of
new directors to a subsidiary company and once to approve the revised terms
of reference for the Committee. Attendance at these meetings by the Committee
members is shown in the table on page 54.
Nomination Committee matters are also discussed at each Board Meeting.
Approved by the Board and signed on its behalf by
J e brown
Chairman of the Nomination Committee
17 April 2015
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 57
auDit committee report
James sykes
Committee Chairman
View more content online at:
www.henryboot.co.uk
Those serving as members of the Audit
Committee (the Committee) in 2014 were
J J Sykes (Committee Chairman), J E Brown and
M I Gunston. Biographies of the members of the
Committee are shown on pages 46 and 47.
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 were reviewed and updated in 2014.
They fully incorporate the UK Corporate Governance 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:
• to review and consider the scope and effectiveness of the Company’s financial
controls, Company internal control and risk management systems;
• to review the annual 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 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;
• to review and make recommendations to the Board in relation to the Half-yearly
and Annual Reports;
• to oversee the selection process with regard to external auditors, to consider
the appointment/reappointment of external auditors and make appropriate
recommendations through the Board to the shareholders to consider at the
Annual General Meeting (AGM);
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 58
auDit committee report continued
• to review the Company’s procedures for handling reports
by “whistleblowers”;
• to consider annually whether there is a 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;
• to monitor the integrity of the Financial Statements of the
Company and any formal announcements relating to the
Company’s financial performance; and
• to review annually the Company’s Anti-Bribery and
Corruption Policy.
meetings during the year
The Committee met twice during the year, with the Company’s
auditors in attendance for part of each meeting. A third
meeting was held without the Company’s auditors in order
to approve the revised terms of reference for the Committee.
Attendance at these meetings by the Committee members is
shown in the table on page 54.
Audit Committee matters are also discussed at each
Board meeting.
committee activities during the year
In 2014 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 2014.
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 96.
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.
provision accounting judgements
As more fully detailed in our accounting policy for provisions,
the Group retains significant liabilities for the infrastructure and
services which remain with the Group following the disposal
of land and which are accounted for in accordance with those
accounting policies.
Provisions are subject to quarterly reconciliation carried out
by external cost consultants and are reviewed by senior
management, the Board and the Committee in order to
reassess the adequacy of the remaining provisions and the
effectiveness of costs incurred to date against the original
forecast.
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 senior management, the Board and the Committee by
reference to development appraisals, planning agreements
and market demand.
Valuation of pension Scheme liability
The Group sponsors a funded defined benefit pension
scheme in the UK which is valued under the provisions
of IAS 19. The pension scheme is valued by a qualified
independent actuary, using the projected unit method, at each
accounting period end. The Committee critically reviewed
the assumptions used by the actuary in performing these
valuations and was satisfied with the appropriateness of the
assumptions within the requirements of the IAS 19 standard.
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
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 59
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 38 to 43.
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, 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.
Approved by the Board and signed on its behalf by
J J sykes
Chairman of the Audit Committee
17 April 2015
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 2014 the external auditors performed services in respect
of the annual covenant review for the Pension Trustees with
a view to securing an amendment to the Pension Protection
Fund Levy. 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.
In accordance with best practice, the Company also requires
its external auditor partner to rotate every five years. The
statutory auditor signing the Audit Report is Mr Andy Ward
who was appointed as the lead partner in 2013.
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 audit partners is not impaired and that the amount
of non-audit fees are at a level which does not impact on the
statutory auditors’ independence and objectivity.
audit quality and approach to audit tender
The Henry Boot PLC Audit was put out to tender five years
ago and PricewaterhouseCoopers LLP was awarded the work
from a shortlist 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 reappointed 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 60
Directors’ remuneration report
michael gunston
Committee Chairman
View more content online at:
www.henryboot.co.uk
on behalf of the Board and the Remuneration
Committee (the Committee), I am pleased to
present the Henry Boot PLC (the Company)
Directors’ Remuneration Report for the year
ended 31 December 2014.
The clear and consistent strategy aimed at creating long-term shareholder value
produced a very strong result in 2014. The markets in which our various businesses
trade were all on an improving trend; however, these markets can still catch out the
imprudent or unwary operator and have to be managed with skill and care.
2014 proved to be the best result for the Group since 2007 with:
• Profit before tax increasing 54% to £28.3m;
• Basic earnings per share increasing 88% to 16.2p;
• Return on Capital Employed increasing 310 bps to 11.4%;
• Dividends for the year increasing 9.8% to 5.6p;
• Dividend cover is approaching our long-term goal of three times;
• our strategic land portfolio increased in size again to almost 10,000 acres with
planning permission on over 11,000 units;
• We have more active commercial developments in progress than at any stage
since 2007;
• our Construction business has a strong order book for 2015 and the Plant Hire
business is operating at its highest level of utilisation than for many years;
• All operating segments improved profitability over the previous year.
executive remuneration outcomes for 2014
In the current market conditions the aforementioned results were nothing short of
excellent. Against this backdrop, the combined overall remuneration of the Executive
Directors fell by approximately 7.6%, after the stable share price in 2014 reduced
Total Shareholder Return against the comparator group. This then impacted the
number of Long Term Incentive Plan Shares (LTIPS) that will be received.
Basic salaries were increased by 3% both at 1 January 2014 and 1 January 2015
compared to an increase across the Company in total of 3.82%.
Bonuses were paid in line with the Remuneration Policy approved at the Annual
General Meeting (AGM) in May 2014. Target profit was set at £20m, 9% ahead of
that achieved in 2013 and 5% ahead of the consensus analysts’ forecasts at that
time. The profit before tax of £28.3m exceeds the target by 41.6% and this gives
rise to a bonus of 104.4% of salary for the year ended 31 December 2014.
In addition, the Remuneration Committee set 18 individual targets, which were the
same for E J Boot and J T Sutcliffe. These covered financial measures such as
the achievement of individual subsidiary budgets, cash flow generation and health
and safety, environmental and Investors in People measures, a measure related
to positive investor feedback, and litigation risk. The Remuneration Committee
consider that the Directors achieved 90% of these targets resulting in a bonus of 9%
of salary.
Therefore, the total bonus for both Executive Directors is 113.4%. Although rules
relating to clawback or malus do not apply to the 2014 bonus, the Remuneration
Committee will introduce these measures into the 2015 bonus process.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 61
LTIPS vesting, based on performance for the three years to 31 December 2014, were granted prior to the Remuneration Policy
adoption at the AGM in 2014. The performance criteria for these awards are:
i. up to 50% of the award is dependent on profit before tax ahead of inflation;
ii. up to 50% of the award is dependent on the adjusted net asset value growth compared to an industry standard investment
property annual index;
iii. any amounts derived from the above are then subject to an underpin based on Total Shareholder Return compared to a
comparator group of companies. If Henry Boot is above the median, any awards derived in (i) and (ii) are confirmed, below the
median these derived awards are reduced by 50%.
For these awards the actual performance against the targets to 31 December 2014 was:
i. profit before tax increased by 75.7% against the inflation measure, including the 4% excess applied each year of 20% and
therefore, this part of the award vests in full;
ii. the increase in the property index was 35%. The Balance Sheet adjusted NAV growth did not reach this level and therefore
no award is applicable;
iii. total shareholder return of 73.6% was below the median when set against the comparator group and therefore the 50%
award in (i) is reduced to 25%.
Therefore, the award of LTIP shares to E J Boot is 61,598 shares, and J T Sutcliffe 42,043 shares.
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 2014. 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. The introduction of a new revised LTIP scheme at the 2015 AGM incorporates, for the first time, a holding
period and malus and clawback conditions. These malus and clawback conditions will also apply to the operation of the annual
bonus scheme for the financial year commencing on 1 January 2015.
These changes are intended to ensure our policy operates in line with best practice.
the application of Directors’ remuneration policy for 2015
• The Executives and Non-executive Directors were awarded a 3% uplift in basic salary for the year ending 31 December 2015.
The average across the workforce as a whole was 3.82%.
• The bonus opportunity for the Executives is detailed in the Remuneration Policy and will apply as laid out in the policy.
• The profit before tax target is considered commercially sensitive and will therefore be disclosed retrospectively, as we have
done in respect of 2014.
• LTIPS will be awarded under the new 2015 scheme rules which are to be put to the AGM in May. The new rules will
include clauses in respect of clawback and malus in line with generally accepted guidelines and the updated UK Corporate
Governance Code. The performance targets will be as approved in the Remuneration Policy. It is expected that the award will
be at a level equal to 100% of salary.
Clawback and malus conditions will be applied to both the bonus and Long Term Incentive Plan (LTIP) elements of remuneration
in 2015. Specifically, this will arise if the Remuneration Committee consider that there has been a material misstatement within
the subsidiary or Group accounts; or a material error in the calculation of any performance condition; or materially inaccurate or
misleading information, or in the case of action or conduct of the participant which amounts to fraud or gross misconduct or has
a material detrimental effect on the reputation of the Group. Any future awards will also be subject to clawback of all or part of
the award during a two year period in the above circumstances. It is not expected that there will be any material amendments to
the value of other benefits, including pensions, during 2015.
The report 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 Directors’ Remuneration Report sets out payments and awards made to the Directors and details the link between
performance and remuneration for 2014. This, and this Chairman’s letter, is subject to an advisory shareholder vote at this
year’s AGM (please see Resolution 3);
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 62
Directors’ remuneration report continued
2. the Directors’ Remuneration policy on pages 71 to 77 sets out the Company’s policy on Directors’ remuneration which was
approved at the AGM on 22 May 2014. Due to the change to the LTIP scheme and the introduction of malus and clawback,
the policy will be put before shareholders once again at the AGM (see Resolution 4).
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 63 to 71 of the Directors’ Report on Remuneration is subject to audit.
summary of the committee’s activity during 2014
During 2014 the Committee:
1. considered Directors’ base pay and benefits for 2014 and 2015. Salary rises for the Executive Directors at 1 January 2014
were 3% and from 1 January 2015 have been set at 3%;
2. a review of the LTIP performance metrics and level of reward for the year under review;
3. a review of the performance of the Executive Directors for 2014 and against that background, set performance targets for
2015;
4. the bringing forward of a new LTIP scheme to be voted upon at the AGM in May 2015;
5. considered the drive by investors to include clawback and malus clauses in the areas of bonus and LTIPS and have resolved
to introduce these measures in 2015 for both bonus and LTIP sections of Executives’ remuneration.
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 Directors’
Remuneration Report at this year’s AGM.
m i gunston
Chairman of the Remuneration Committee
17 April 2015
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY annuaL report on remuneration
The following parts of the Directors’ Remuneration Report are subject to audit except for those elements explaining the
application of the Directors’ Remuneration policy for 2015, as disclosed on page 71.
single total figure of remuneration
The table below reports the total remuneration receivable by Directors in respect of qualifying services during the period.
Year ended 31 December 2014
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
Year ended 31 December 2013
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
total salary
and fees
£’000
355
242
60
40
40
737
Total salary
and fees
£’000
344
235
50
35
35
699
taxable
benefits
£’000
30
24
—
—
—
54
Taxable
benefits
£’000
29
23
—
—
—
52
annual
bonus
£’000
402
275
—
—
—
677
Annual
bonus
£’000
344
235
—
—
—
579
Long-term
incentives
£’000
116
79
—
—
—
195
Long-term
incentives1
£’000
268
183
—
—
—
451
pension
related
benefits
£’000
71
48
—
—
—
119
Pension
related
benefits
£’000
69
47
—
—
—
116
63
total
£’000
974
668
60
40
40
1,782
Total
£’000
1,054
723
50
35
35
1,897
1. The value of long-term incentives has been adjusted from the average share price for the period 1 october 2013 to
31 December 2013 of £1.938 to the price on the day the shares were issued of £1.964.
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 is 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
The taxable benefits received in the period by Executive Directors.
annual bonus
The value of bonus payable and the calculations underlying this are disclosed on page 65.
Long-term incentives
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 2014 valued at the average share price over the last three
months of 2014 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 pages 65 and 66.
There were no SAYE scheme shares granted in the period. The existing awards became eligible
for exercise in the year and both E J Boot and J T Sutcliffe exercised and retained 8,490 shares.
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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 64
Directors’ remuneration report continued
individual elements of remuneration
Base salary and fees
executive Directors
Salary effective from
E J Boot
J T Sutcliffe
1 January
1 January
2015
£
365,277
249,311
2014
£
354,638
242,050
over the years 2009 – 2013 basic salary increases for the Executive Directors were 2%, on 1 January 2014 the increase was
3%. At 1 January 2015 the increase was 3%. Average salary increases for the wider employee population were 3.23% from
1 January 2013, 3.65% from 1 January 2014 and 3.82% on 1 January 2015.
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 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
1 January
2015
£
61,800
41,200
41,200
2014
£
60,000
40,000
40,000
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 the Senior Non-executive Director. Any newly appointed Non-executive
Independent 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 for the year ended
31 December 2014.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 65
summary of bonuses earned for 2014
measure
maximum
award as %
of salary
profit before tax
110%
targets and bonus potential for 2014
actual
performance
actual bonus value
achieved (% of salary)
% of target
90%
100%
120%
150%
2014 target
range
£18m
£20m
£24m
£30m
Bonus
payable as
% salary
10%
50%
90%
110%
e J boot J t sutcliffe
£28.3m
104.4%
104.4%
personal objectives
bonus amount
achieved as % salary
bonus amount earned
maximum bonus as %
salary
bonus amount
achieved as %
maximum
10%
See commentary below
9%
9%
113.4%
£402,159
113.4%
£274,485
120%
120%
94.5%
94.5%
Bonuses were paid in line with the Directors’ Remuneration Policy approved at the AGM in May 2014. Target profit was set at
£20m, 9% ahead of that achieved in 2013 and 5% ahead of the consensus analysts’ forecasts at that time. The Remuneration
Committee also set 18 individual targets, which were the same for E J Boot and J T Sutcliffe. These covered financial measures
such as the achievement of individual subsidiary budgets, cash flow generation and health and safety, environmental and
Investors in People measures, a measure related to positive investor feedback, and litigation risk. The Remuneration Committee
consider that the Directors achieved 90% of these targets resulting in a bonus of 9% of salary. The profit before tax of £28.3m
exceeds the target by 41.5% and this, combined with the personal targets, gives rise to a bonus of 113.4% of salary for the
year ended 31 December 2014. Though rules relating to clawback or malus do not apply to the 2014 bonus, the Remuneration
Committee will introduce this into the 2015 bonus process.
Details of the policy for future annual bonus awards can be found in the policy table on page 73.
31 December 2015 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.
The profit before tax target is deemed to be commercially sensitive and therefore will be disclosed retrospectively in the 2015
Directors’ Remuneration Report.
personal objectives: up to an additional 10% of salary may become payable to Executive Directors upon the achievement of
personal objectives.
The objectives measured will be based on key elements of the delivery of Group strategy.
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Directors’ remuneration report continued
long Term incentive plan (lTip)
The Committee has reviewed the performance criteria for the LTIP shares awarded in 2012, based on performance for years
2012, 2013 and 2014, which are expected to vest in June 2015. The LTIP shares in this award are subject to the following
performance criteria:
1. profit growth was 76%, which exceeded RPI growth by more than 68%. 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 73.6%, putting it below the median within the comparator group. Therefore, the 50% award above is reduced by
50% which gave rise to the award values in the single total figure of remuneration at 31 December 2014 on page 63.
This gave rise to LTIP awards of: E J Boot 61,598 shares; and J T Sutcliffe 42,043 shares.
lTip awards granted in the year
E J Boot
J T Sutcliffe
Type
of award
LTIP – nil cost option
LTIP – nil cost option
Percentage
of salary
100%
100%
Number
of shares
168,074
114,715
Face value
to grant at
£2.11
per share
354,636
242,049
% of
award
vesting at
threshold
25%
25%
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 2015–2017 in 2015
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 73. These are different from the
performance criteria for previous awards made in 2013 as follows:
eps growth
return of capital employed
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.
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 long-term shareholder value growth.
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 and to be awarded in 2015 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% per annum
Average three year
RoCE of 10%
TSR at median or above our
comparator group
Threshold for 100%
of maximum award
RPIJ + 7% per annum
Average three year
RoCE of 13% or more
TSR at or within the
upper quartile
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 67
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 reduced the amount of
the award vesting at threshold from 30% to 25% from awards in 2014 onwards.
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 2014 this payment amounted to
£70,928.
J T Sutcliffe is a member of the Henry Boot PLC Group Stakeholder Pension Plan. Contributions are made at 20% of basic
salary and contributions to the Scheme in the year were £40,000 (2013: £45,834). 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
2014 this payment amounted to £8,411 (2013: £1,167).
The Henry Boot PLC Group Stakeholder Pension Plan 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
at 31 December 2014
At
31 December
2013
Legally owned
5,528,054
430,001
25,000
23,000
10,000
SAYE
(not subject
to
performance)
—
—
—
—
—
LTIPS
subject to
performance
measures
615,816
420,316
—
—
—
Legally
owned
5,672,964
511,445
35,000
23,000
20,000
shareholding
as a %
of salary at
31 December
20141
3,362
730
111
109
95
Total
6,288,780
931,761
35,000
23,000
20,000
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
The share price at 31 December 2014 was 195.25p. The salary used for this calculation is that which commences on
1 January 2015.
1 As laid out in the Remuneration Policy table on page 73, Executive Directors are required to acquire shares outright to the value of 100% of basic salary. We note
the NAPF recommend that a holding of 200% is more appropriate. Both Executive Directors comfortably exceed this level, however, the Remuneration Committee
believe that setting this level as a policy for a new director is too onerous over a period of three years. 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.
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Directors’ remuneration report continued
Directors’ shareholdings
The beneficial interest of the Directors in the share capital of the Company at 31 December 2014 was as follows:
E J Boot
J T Sutcliffe
J E Brown
M I Gunston
J J Sykes
2014
number of shares
ordinary
5,672,964
511,445
35,000
23,000
20,000
preference
14,753
—
—
—
—
2013
Number of shares
ordinary
5,528,054
430,001
25,000
23,000
10,000
Preference
14,753
—
—
—
—
Between 31 December 2014 and 20 March 2015, 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.
Long term incentive plan awards
performance shares
E J Boot
Market
price
at date of
award
Plan
Date of
award
At
1 January
2014
2006 21/04/2011 121.5p 272,840
2006 01/05/2012 137.0p 246,392
2006 18/04/2013 171.0p 201,350
2006 07/05/2014 211.0p
J T Sutcliffe 2006 21/04/2011 121.5p 185,908
2006 01/05/2012 137.0p 168,172
2006 18/04/2013 171.0p 137,429
2006 07/05/2014 211.0p
Awarded
during
the year
Lapsed
Vested
during
during the
the year
year
— 136,420 136,420
—
—
—
—
—
—
—
—
— 168,074
136,420 136,420
720,582 168,074
92,954
—
—
—
—
—
— 114,715
—
92,954
491,509 114,715
92,954
—
—
—
92,954
at
31 December
2014
Earliest/
actual
vesting date
— 21/05/2014
31/05/2015
18/05/2016
07/06/2017
246,392
201,350
168,074
615,816
— 21/05/2014
31/05/2015
18/05/2016
07/06/2017
168,172
137,429
114,715
420,316
Market
valuation
on vesting £
267,895
—
—
—
267,895
182,538
—
—
—
182,538
Savings related share options
Number of options
Scheme/
plan
2010
2010
At
1 January
2014
8,490
8,490
Granted
during
year
—
—
Exercised
during
year
8,490
8,490
Lapsed
at
during 31 December
2014
—
—
year
—
—
Exercise
price
106.0p
106.0p
Date from
which
exercisable
01/12/2014
01/12/2014
E J Boot
J T Sutcliffe
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
22 May 2014 the advisory vote by shareholders to receive and approve the 2013 Directors’ Remuneration Report was
approved. The number of votes in favour of that resolution was 93,053,905 (98.9% of votes cast), against 942,872 (1% of votes
cast) and abstentions 64,965 (0.1% of votes cast). The total number of votes cast in respect of this resolution represented
71.75% of the issued share capital. At the same AGM the Directors’ Remuneration Policy was approved. The number of votes
in favour of that resolution was 89,252,927 (94.89% of votes cast) against 4,729,450 (5.03% of votes cast) and abstentions
79,365 (0.08% of votes cast).
share price
The middle market price for the Company’s shares at 31 December 2014 was 195.25p and the range of prices during the year
was 173.00p to 234.00p.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 69
six year tsr performance graph
Henry Boot PLC
FTSE Small Cap Index
400
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 Jun 14 Dec 14
group managing Director’s remuneration for the previous six years
2014
2013
2012
2011
2010
2009
Total remuneration
£’000
974
1,054
962
842
764
575
Annual bonus
as a %
of maximum
94.5
83.3
58.3
66.7
58.3
33.3
LTIP vesting
as a % of
maximum
25
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 2013
Annual bonus 2014
Note
1
2
2
Group
Managing
Director
3.0%
—
42.9%
36.1%
Workforce sample
3.82%
—
35.1%
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 (£350) for all members of the private medical scheme. Therefore, the average percentage change in taxable benefits does
not provide a meaningful comparison.
note 2
The workforce bonuses are calculated and agreed in May 2015 for the year ended 31 December 2014 and the figure is therefore
not available. Therefore, the information produced is for the bonus comparisons paid in May 2014 for the year ended 31 December
2013. The workforce comparison is every member of staff who received a bonus excluding the Group Managing Director.
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Directors’ remuneration report continued
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
2014
£’000
7,367
21,169
24,627
2013
£’000
6,666
11,315
22,640
% change
10.5
87.1
8.8
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 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.
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 four times during the year. The fourth meeting was held in order to approve the revised terms of reference
for the Committee. Attendance at these meetings by the Committee members is shown in the table on page 54 and further
details can be found below.
membership of the committee
The Committee consists of the three Non-executive Directors of the Board and during the financial year was 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:
• determining and agreeing the Remuneration Policy for the Executive Directors and their contractual conditions of
employment;
• having regard for remuneration trends across all employees in the Group and other companies when setting Remuneration
Policy;
• selecting, appointing and agreeing the remuneration for any remuneration consultants who advise the Committee;
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 71
• determining targets for any annual bonus and long-term incentive schemes operated by the Company and approving any
payments made under such schemes;
• reviewing the design of all share incentive schemes for approval by the Board;
• determining the policy for and scope of any pension arrangements for Executive Directors; and
• ensuring that contractual terms on appointment and 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, the rules for the 2015 LTIP Scheme. The
Remuneration Committee consider that the advice DLA have given
throughout the year is legal advice in compliance with relevant legislation.
Directors’ remuneration policy
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 2014. 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. The introduction of a new revised LTIP scheme at the 2015 AGM incorporates, for the first time, a holding
period and malus and clawback conditions. These malus and clawback conditions will also apply to the operation of the annual
bonus scheme for the financial year commencing on 1 January 2015.
These changes are intended to ensure our policy operates in line with best practice.
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
alignment with shareholders
attracting and retaining the
right people
• 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.
• 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.
• There are minimum shareholding criteria for Directors, which are currently significantly
exceeded by the Executive and Non-executive Directors.
• 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.
• 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 size 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.
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Directors’ remuneration report continued
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)
(ii)
relevant commercial
factors;
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.
operation
opportunity
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.
The Committee reviews
base salaries annually,
taking into consideration:
(i)
(ii)
(iii)
the value of the
individual to the
Group, their skills,
experience and
performance;
pay increase levels
in the Group and
more generally in the
marketplace; and
the Group
organisation
profitability and
prevailing market
conditions.
Benefits
These are provided
on a market
competitive basis.
Executive Directors
currently receive:
(i) a car allowance;
(ii)
(iii)
private health
insurance;
permanent health
insurance;
(iv) death in service
cover; and
(v)
the offer of
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.
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.
pensions
Help retain and
recruit Directors,
ensuring an
adequate retirement
income.
20% of basic salary. Paid
either as salary in lieu or
pension contributions.
None.
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performance measures and
changes
Challenging but achievable
operational and individual targets
are determined at the beginning
of the financial year.
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.
element
annual bonus
purpose and
link to strategy
To incentivise the
delivery of financial
performance,
operational targets
and individual
objectives.
long Term
incentive plan
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.
opportunity
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% of target
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.
The new scheme
rules which will be
put to the 2015
AGM permit grants
of up to a maximum
of 200% of salary
to be made on
an annual basis.
The Remuneration
Committee has no
current intention
of increasing the
annual grant of
100%.
operation
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; however, 2015
will see the introduction
of malus and clawback
provisions in line with
those which apply to
the LTIP 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.
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. For awards
in 2015 awarded under
the proposed new
LTIP scheme, the rules
introduce a holding
period of two years post
vesting, and malus and
clawback 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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 74
Directors’ remuneration report continued
element
Shareholder
guidelines
Non-executive
Director fees
purpose and
link to strategy
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.
operation
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.
opportunity
Not applicable.
performance measures and
changes
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.
notes to the policy table
1Performance targets for shares vesting in 2016:
(i)
up to 50% of the award is dependent on profit growth in excess of inflation;
(ii)
(iii)
up to 50% of the award is dependent on adjusted net asset value growth compared to an industry standard investment
property annual index; and
amounts derived in (i) and (ii) above are subject to an underpin based on Henry Boot PLC Total Shareholder Return in
comparison to a comparator group of companies. If Henry Boot PLC 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%.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 75
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
Base salary
Benefits
Pension
Bonus
LTIPS
Buyouts
Internal appointees
policy on recruitment
The Committee will typically offer a salary in line with the policy on page 72 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 73 in line with
other Executive Directors.
The Committee will offer LTIPS in line with the policy on page 73 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. The award will in any event be no larger than the award forfeited.
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
Pension/salary in lieu of
pension
Bonus
LTIPS
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 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.
Any bonus payment would be at the discretion of the Committee and would be prorated 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, including those related to malus
and clawback, 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 prorated
for the proportion of the performance period that has elapsed. Any prorated shares vest at the
normal vesting date and are subject to the same performance conditions as other LTIP holders.
The Committee retains discretion to allow vesting at the time of cessation of employment on a
pro-rated basis. Good leavers will be subject to the clauses in the LTIP Scheme related to holding
periods, malus and clawback. 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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 76
Directors’ remuneration report 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 reappointment 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 76.
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:
• 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;
• 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;
• 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
• 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 in line with target, or
threshold in the case of LTIPS; 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%
468
66%
21%
13%
707
Minimum
In line
100%
323
66%
21%
13%
486
37%
34%
29%
1,272
*Maximum
37%
34%
29%
872
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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 77
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 2015. 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 63.
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).
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:
• We remunerate fairly for each role with regard to the marketplace, consistency across comparable roles and consistency
across each company within the Group.
• 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.
Approved by the Board and signed on its behalf by
m i gunston
Chairman of the Remuneration Committee
17 April 2015
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 78
Directors’ report
The Directors have pleasure in presenting the Annual Report
and the audited Financial Statements of the Group for the year
ended 31 December 2014.
strategic report
In accordance with the Companies Act 2006, we are required
to present a fair review of the Company’s business along with
a description of the principal risks and uncertainties faced.
The Strategic Report for the year ended 31 December 2014 is
set out on pages 2 to 43.
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 51 to 55 and is incorporated
into this Directors’ Report by reference.
results for the year and dividends
The results are set out in the Consolidated Statement of
Comprehensive Income on page 92. The principal active
subsidiary companies affecting the profit or net assets of
the Group in the year are listed in note 35 to the Financial
Statements.
The Directors recommend that a final dividend of 3.50p
per ordinary share be paid on 29 May 2015 to ordinary
shareholders on the register at the close of business on 1
May 2015. This, together with the interim dividend of 2.10p
per ordinary share paid on 24 october 2014, will make a total
dividend of 5.60p per ordinary share for the year ended 31
December 2014. Further details are disclosed in note 10 to
the Financial Statements on page 109.
financial instruments
The Group’s policy in respect of financial instruments is set
out within the Accounting Policies on pages 100 to 101 and
details of credit risk, capital risk management, liquidity risk and
interest rate risk are given respectively in note 16, 23, 24 and
27 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 on pages 2 to 43.
The financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in the Strategic
Report on pages 30 and 37.
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 17 February
2015, with a renewal date of 17 February 2018. The facility
was increased from £50m to £60m at renewal. 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.
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 2014 and up to the date of
signing the Financial Statements. Their biographical details are
shown on page 46 and 47.
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 pages
67 and 68.
Between 31 December 2014 and 20 March 2015, 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 66.
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.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 79
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.
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.
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.
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. We were
proud for the Company and our employees that our Investors
in People accreditation was reconfirmed in January 2015.
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 22.
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 26 and 27.
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.
Voting
rights over
ordinary shares
% of issued
16.219
4.962
4.889
4.348
number
21,407,155
6,550,000
6,452,536
5,739,580
6,692,481
5.070
Rysaffe Nominees and
J J Sykes (joint holding)
FMR Corp*
Schroders plc*
The Fulmer Charitable Trust
Standard Life Investments
Limited**
*
Notified as indirect voting rights.
** Last notified as 4,603,609 (3.488% of issued) direct voting rights and
2,088,872 (1.582% 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 set out in
the Directors’ Remuneration Report.
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. Details of the Company’s share-based
payment arrangements are provided in note 30 to the
Financial Statements. 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 33 to the Financial Statements.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE 80
Directors’ report continued
future developments
Important events since the financial year end and future
developments are described in the Strategic Report on pages
2 to 43.
accountability and audit
Details of the Directors’ responsibilities and the Statement
of Directors’ Responsibilities are contained on page 81. The
Independent Auditors’ Report is given on page 84 to 91.
additional shareholder information
The additional information for shareholders required pursuant
to the relevant legislation which implemented the Takeovers
Directive, together with certain other statutory information,
is disclosed in this report and in the Shareholder Information
section on pages 140 to the inside back cover.
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
21 May 2015 at 12.30pm. The notice convening the meeting
can be found on pages 144 to 154. It is also available at www.
henryboot.co.uk, where a copy can be viewed and downloaded.
Amongst other matters, shareholder approval is sought in
respect of Resolutions 12 and 13 relating to the adoption of
the Henry Boot PLC Long Term Incentive Plan 2015 (LTIP)
and the amendment of the Henry Boot PLC 2010 Schedule 4
Company Share option Plan (CSoP).
Approved by the Board and signed on its behalf by
r a Deards
Company Secretary
17 April 2015
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:
• 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
• 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
reappointing them as auditors (Resolution 10) and authorising
the Directors to fix their remuneration (Resolution 11) will be
proposed at the AGM.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 81
statement of Directors’ responsibiLities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulations.
Each of the Directors, whose names and functions are
listed on pages 46 and 47 confirm that, to the best of their
knowledge:
• the Group Financial Statements, 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
• 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.
Approved by the Board and signed on its behalf by
e J boot
Director
17 April 2015
J t sutcliffe
Director
17 April 2015
Company law re quires the Directors to prepare Financial
Statements for each financial year. Under that law, they
are required to prepare the Group Financial Statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU)
and applicable law and have elected to prepare the Parent
Company Financial Statements on the same basis. 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 financial year.
In preparing these Financial Statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• 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
• 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 the Company’s performance, business
model and strategy.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYGOVERNANCE creating VaLue...
THRoUGH STRoNG FINANCIAL
MANAGEMENT
23804.04 13 April 2015 8:14 AM Proof 8
FinanCial stateMents
84 Independent Auditors’ Report
92 Consolidated Statement of
Comprehensive Income
93 Statements of Financial
Position
94 Statements of Changes in
Equity
95 Statements of Cash Flows
96 Principal Accounting Policies
104 Notes to the Financial
Statements
23804.04 13 April 2015 8:14 AM Proof 8
84
inDepenDent auDitors’ report
to the members of Henry Boot PLC
report on the financial statements
Our opinion
In our opinion:
• Henry Boot PLC’s Group Financial Statements and Parent Company Financial Statements (the “Financial Statements”) give a
true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2014 and of the Group’s
profit and the Group’s and the Parent Company’s cash flows for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union;
• 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
• 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.
What we have audited
Henry Boot PLC’s Financial Statements comprise:
• the Statements of financial position as at 31 December 2014;
• the Consolidated statement of comprehensive income for the year then ended;
• the Statements of cash flows for the year then ended;
• the Statements of changes in equity for the year then ended;
• the Principal accounting policies; and
• the notes to the Financial Statements, which include other explanatory information.
Certain required disclosures 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.
The financial reporting framework that has been applied in the preparation of the Financial Statements is applicable law and
IFRSs as adopted by the European Union and, as regards the Parent Company Financial Statements, as applied in accordance
with the provisions of the Companies Act 2006.
Our audit approach
Overview
Materiality
• overall Group materiality: £2,000,000 which represents 0.6% of total assets.
• 38 reporting units are consolidated in the Group Financial Statements.
• 5 reporting units were subject to a full scope audit.
• 7 further reporting units were subject to targeted procedures over their investment property
Audit scope
portfolios.
• 1 reporting unit was subject to targeted procedures over its property, plant and equipment.
• The reporting units where we performed audit work accounted for 85% of total assets.
Areas
of focus
• Valuation of investment properties.
• Accuracy and valuation of construction contract balances.
• Valuation of land and planning costs held within inventory.
• Fraud in revenue recognition.
• Completeness and accuracy of provisions on significant land transactions.
• Valuation of pension scheme liability.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY
85
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the Financial Statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias
by the Directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,
are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific
areas in order to provide an opinion on the Financial Statements as a whole, and any comments we make on the results of our
procedures should be read in this context. This is not a complete list of all risks identified by our audit.
area of focus
how our audit addressed the area of focus
Valuation of investment properties (£141.6m)
(refer to note 13 of the financial statements)
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.
The Group’s portfolio includes properties at varying stages
of completion across various sectors, including mixed-use,
industrial and retail. 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. These include actual and estimated rental
values, yields, costs to complete and land values per acre.
The Group engages Jones Lang LaSalle to value its
completed investment properties in all but the residential
sector. The properties valued by Jones Lang LaSalle are
valued by applying market-derived capitalisation yields to
actual or market-derived rental income specific to each
property. Residential properties are valued by management
using publicly available data on recent comparable property
sales, where necessary after applying a discount to reflect
the lower than market rent receivable on some of the Group’s
properties.
Investment properties in the course of construction are valued
by management using the residual method of valuation.
This involves estimating the gross development value of the
property and deducting from this the gross development
costs to be incurred and an allowance for anticipated
development profits yet to be earned.
For all classes of investment property, a relatively small
percentage change in valuations of individual properties, in
aggregate, could result in a material impact to the Financial
Statements.
Regarding the completed investment properties valued by the
external valuer:
We tested the information regarding existing lettings that was
supplied to the external valuer by agreeing a sample of this
data to the underlying records that we tested as part of our
audit of rental revenue. This included agreeing rents and other
significant contract terms to legal agreements.
For each property, we compared the changes in the yields
and capital values since the prior year to an expectation
based upon industry-specific indices. We also considered
the movements in the assumptions in the light of our existing
understanding of the Group’s portfolio and activities in the
year. As a result we identified certain properties where we felt
the movements in the yields or capital values warranted further
discussion.
We held a meeting with management and their external
valuers at which we challenged the assumptions used in these
valuations by reference to externally published benchmarks.
We corroborated the explanations received by reference to the
results of our audit procedures in other areas such as rental
revenue testing, and by further review of legal documentation
and correspondence where necessary.
Regarding the remaining properties valued by management:
We selected a sample of valuations for testing based on value.
We reperformed the calculations provided by management, for
which the significant assumptions were expected rental values,
forecast yields and costs to complete. We corroborated these
assumptions by reference to legal agreements, published
indices, subcontractor quotes and completion statements.
No material adjustments were identified as a result of our
testing over the valuations of both completed investment
properties and those under construction.
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inDepenDent auDitors’ report continued
to the members of Henry Boot PLC
area of focus
how our audit addressed the area of focus
accuracy and valuation of construction contract
balances (refer to note 19 of the financial statements)
We focused on this area because of the judgements involved
in estimating the stage of completion of construction contract
activity and assessing costs to complete. This in turn means
the assessment of anticipated profits or losses on individual
contracts is judgemental.
We evaluated management’s revenue and profit recognition on
a sample of contracts that we selected based on factors such
as risk and magnitude and concluded that it was reasonable.
our work included holding discussions with in-house quantity
surveyors, agreeing to legal documentation and reviewing
cost to complete schedules for reasonableness, primarily by
looking at the track record in previous years.
The Group undertakes a number of significant construction
contracts and a relatively small change in the judgements
applied, such as whether a provision for remedial works is
required based on an assessment of risk and magnitude
relating to the identified issue, could result in a material
misstatement to the Financial Statements.
We tested a sample of accruals for contract work undertaken
by agreeing them to supporting documentation, including
subcontractor applications for payment and invoices.
We tested a sample of provisions for contract work not yet
undertaken to reports prepared by appropriately qualified
individuals, correspondence with any claimants and testing the
outturn on similar amounts previously provided for, and found
no material issues.
We also challenged management’s overall profit recognition
methodology, including a sample assessment of the
accuracy of revenue and profit forecasts from prior years.
This highlighted that management’s forecasting ability was
reasonable.
Valuation of land and planning costs held within
inventory (£99.6m) (refer to note 18 of the financial
statements)
We focused on this area because these elements of
inventory represent a significant proportion of the assets
in the statement of financial position, and determining the
appropriate carrying value of individual sites is subject to a
degree of judgement. This applies to owned land, options to
purchase land and planning promotion agreements.
We tested management’s assessment that the carrying value
of inventories stated at the lower of cost and net realisable
value by selecting a cross-section of sites for detailed testing.
our sample included sites with a high carrying value and
sites perceived to be at increased risk of impairment due to
impairments in previous years. our sample incorporated land
for which the Group holds legal title and sites at which costs
had been capitalised under option and agency agreements, as
the risk of impairment is similar across all three categories.
Inventory is held at the lower of cost and net realisable
value. “Cost” includes all the direct costs incurred in bringing
the individual sites to their present condition; it therefore
encompasses planning and feasibility costs in addition to
initial acquisition costs.
We discussed with management the valuation of each site
selected for testing and corroborated the explanations
received by agreeing to supporting documentation, for
example development appraisals, title deeds and the status of
planning applications.
An assessment of the carrying value of individual sites is
determined by their viability for development by a third party.
The extent of any impairment depends upon a number of
factors such as the current status of any planning application
or appeal, the estimated costs to complete and the estimated
resale value of each particular site.
The Group carries a high volume of such sites within inventory
and a change in the judgements applied by management
could result in a material misstatement to the Financial
Statements.
We also evaluated management’s historic forecasting
accuracy by reviewing land sales made during the current year
and previous years, confirming whether these were sold at
values in excess of their carrying value at the point of sale.
our testing did not identify any material misstatements.
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area of focus
how our audit addressed the area of focus
fraud in revenue recognition
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 gives rise to a risk that
revenue may not be accurately recorded.
completeness and accuracy of land development
provision (£8.3m) (refer to note 26 of the financial
statements)
In certain limited circumstances, the Group retains obligations
to provide infrastructure and service works in relation to land
that it has previously sold.
The estimation of the cost of meeting these obligations and
of the likely timing of the works is subject to some uncertainty
as the sites affected are very large and the associated works
take place over a number of years.
In respect of land and property sales recorded in the period,
we selected samples across the Group and agreed details
such as the sales price and key terms and conditions to legal
completion documents. This enabled us to verify the point at
which legal title to property should pass to the purchaser and
check that revenue had been accurately recorded. No material
adjustments were identified as a result of this work.
In respect of construction contracts, we used computer
assisted audit techniques to verify the occurrence of all
revenue billed during the year. We then tested a sample of
revenue that had been recognised against the analysis of the
position of each contract that management maintains and any
relevant terms within customer agreements. We also checked
customer acceptance of the work undertaken, considering
the implications of any ongoing disputes, and tested
management’s estimates of costs to complete contracts.
Across the Group 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. our testing focused upon high
value journals and journals with no obvious business rationale.
our testing did not identify any evidence of potentially
fraudulent journal activity.
We considered the historic accuracy of the Group’s forecast
costs to complete by comparing these forecasts with
actual costs incurred to date. In addition, we reconciled the
movement in the provision between December 2013 and
December 2014 and discussed the largest movements by
value with management to ensure we understood the rationale
for them. We corroborated the explanations received by
reference to external correspondence.
We selected a sample of actual infrastructure costs incurred
in the year and agreed them to supplier invoice or completion
certificate. We considered the narrative on the supporting
documentation reviewed in each case to establish whether
the cost had been allocated against the correct element of
the brought forward provision (and therefore whether it was
correct that the provision had reduced).
We tested the costs to complete included in the provision
by agreeing to projections from management’s external cost
consultants. This also included agreeing the estimated timing
of cash flows to these same projections.
No material adjustments were identified as a result of the
procedures we performed in this area.
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inDepenDent auDitors’ report continued
to the members of Henry Boot PLC
area of focus
how our audit addressed the area of focus
Valuation of pension scheme liability (£28.2m) (refer to
note 27 of the financial statements)
The Group has a defined benefit pension scheme net liability
which is significant in the context of both the overall balance
sheet and the results of the Group. The Group uses an
independent actuary to value the pension scheme under IAS
19.
We obtained the actuary’s report and agreed the discount and
inflation rates used in the valuation of the pension liability to our
internally developed benchmarks, which are based on externally
available data. We confirmed that these assumptions were
within our expected range. We compared the demographic
assumptions to national and industry averages and were
satisfied that these were reasonable.
The valuation of the pension liability requires significant levels
of judgement and technical expertise in choosing appropriate
assumptions. Unfavourable changes in a number of the key
assumptions (including salaries increase, inflation, discount
rates and mortality) can have a material impact on the
calculation of the liability.
The values of the pension scheme’s investments at
31 December 2014 are provided by the scheme’s investment
managers.
We also compared the assumptions with those used in previous
years, and found that the methodology used in arriving at the
assumptions year on year was consistent.
We obtained direct confirmation of the year end asset valuations
from the scheme’s investment managers, and verified that the
correct valuation had been used by management.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial
Statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls and
the industry in which the Group operates.
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 38 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 38 reporting units, we identified five 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 seven
reporting units in respect of their investment property portfolios, and at one reporting unit in respect of its property plant and
equipment. 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. All work was performed by the Group audit team, no
component auditors were involved. The reporting units where we performed audit work accounted for 85% of total assets.
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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our
audit procedures 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 Financial Statements as a whole as follows:
overall group materiality
how we determined it
rationale for benchmark applied
£2,000,000 (2013: £1,500,000).
0.6% of total assets.
The key objective of the Group is to increase long-term
shareholder value by maximising the value of assets such
as inventory and investment properties. In determining the
benchmark we also had regard to the profitability of the Group
to ensure that sufficient consideration was given to trading
activities. This methodology is consistent with that applied in the
prior year.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £100,000
(2013: £75,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page 78, 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 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 Parent Company’s ability to continue as a going concern.
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inDepenDent auDitors’ report continued
to the members of Henry Boot PLC
other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, 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.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• Information in the Annual Report is:
— materially inconsistent with the information in the audited Financial Statements; or
— 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
— otherwise misleading.
We have no exceptions
to report arising from
this responsibility.
• the statement given by the Directors on page 81, in accordance with provision C.1.1 of the UK
Corporate Governance Code (“the Code”), 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 and Parent Company’s performance, business model and strategy is materially
inconsistent with our knowledge of the Group and Parent Company acquired in the course of
performing our audit.
We have no exceptions
to report arising from
this responsibility.
• the section of the Annual Report on page 58, as required by provision C.3.8 of the Code,
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.
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:
• we have not received all the information and explanations we require for our audit; or
• 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
• 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
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration
specified by law are not 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 Parent
Company’s compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report having performed
our review.
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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 81, the Directors are responsible for the
preparation of the 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 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.
What an audit of financial Statements involves
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:
• whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the Financial Statements.
We primarily focus 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.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls,
substantive procedures or a combination of both.
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.
andy ward (senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Sheffield
17 April 2015
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 92
consoLiDateD statement of
comprehensiVe income
for the year ended 31 December 2014
Revenue
Cost of sales
gross profit
other income
Administrative expenses
Pension expenses
Increase/(decrease) in fair value of investment properties
Profit on sale of investment properties
Profit on sale of assets held for sale
operating profit
Finance income
Finance costs
Share of profit 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:
Deferred tax on property revaluations
Actuarial (loss)/gain on defined benefit pension scheme
Deferred tax on actuarial loss/(gain)
Movement in fair value of cash flow hedge
Deferred tax on cash flow hedge
total other comprehensive (expense)/income 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
Note
1
1
4
13
3
5
6
15
7
17
27
17
25
17
9
9
2014
£’000
147,200
(103,512)
43,688
283
(15,153)
(3,213)
25,605
1,950
284
122
27,961
714
(1,550)
1,187
28,312
(4,810)
23,502
—
(10,458)
2,092
85
(17)
(8,298)
15,204
21,169
2,333
23,502
12,845
2,359
15,204
16.2p
15.9p
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
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 93
statements of financiaL position
as at 31 December 2014
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
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
2014
£’000
2013
£’000
Parent Company
2014
£’000
2013
£’000
Note
11
12
13
14
15
16
17
18
16
20
21
24
26
21
24
27
26
30
31
31
31
32
6,733
19,086
141,560
—
1,367
4,837
7,123
180,706
117,457
50,065
4,347
171,869
260
172,129
68,833
1,976
31,969
4,322
107,100
65,029
3,139
8,779
28,158
5,185
45,261
200,474
13,592
3,355
177,664
4,425
(550)
198,486
1,988
200,474
7,994
17,354
132,394
—
180
12,686
5,411
176,019
91,013
43,103
15,587
149,703
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
—
137
—
3,809
—
—
5,919
9,865
—
194,202
1,917
196,119
—
196,119
82,218
1,100
30,642
—
113,960
82,159
—
—
28,158
—
28,158
63,866
13,592
—
45,256
5,568
(550)
63,866
—
63,866
—
94
—
3,369
—
—
4,445
7,908
—
189,413
12,619
202,032
—
202,032
72,173
1,581
45,739
—
119,493
82,539
—
—
20,075
—
20,075
70,372
13,510
—
52,299
4,751
(188)
70,372
—
70,372
The Financial Statements on pages 92 to 137 of Henry Boot PLC, registered number 160996, were approved by the Board of
Directors and authorised for issue on 17 April 2015.
on behalf of the Board
e J boot
Director
J t sutcliffe
Director
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 94
statements of changes in equity
for the year ended 31 December 2014
group
At 1 January 2013
Profit for the year
other comprehensive income
Total comprehensive income
Equity dividends
Proceeds on disposal of
treasury shares
Share-based payments
Note
31
10
32
31, 32
At 31 December 2013
Profit for the year
other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Proceeds on disposal of
treasury shares
Purchase of treasury shares
Share-based payments
31
10
32
32
31, 32
at 31 December 201 4
Share
capital
£’000
13,510
—
—
—
—
—
—
—
13,510
—
—
—
—
82
—
—
—
82
13,592
parent company
At 1 January 2013
Profit for the year
other comprehensive expense
Total comprehensive expense
Equity dividends
Proceeds on disposal of treasury shares
Share-based payments
At 31 December 2013
Profit for the year
other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Proceeds on disposal of treasury shares
Purchase of treasury shares
Share-based payments
at 31 December 2014
Attributable to owners of the Parent Company
Cost of
shares
held
by ESoP
Total
trust
£’000
£’000
(444) 180,526
— 11,315
—
6,243
— 17,558
— (6,358)
Property
Retained
revaluation
earnings
reserve
£’000
£’000
3,271 160,692
— 11,315
84
6,090
17,405
84
— (6,358)
other
reserves
£’000
3,497
—
69
69
—
Non-
Total
controlling
equity
interests
£’000
£’000
1,377 181,903
13,234
1,919
6,287
44
19,521
1,963
(8,395)
(2,037)
—
—
199
—
— (6,159)
3,355 171,938
—
21,169
— (8,366)
— 12,803
(6,886)
—
—
—
—
—
—
—
—
(191)
— (7,077)
3,355 177,664
—
—
—
3,566
—
42
42
—
817
26
26
429
230
256
(5,903)
(188) 192,181
—
21,169
— (8,324)
12,845
—
(6,886)
—
899
—
26
—
429
—
(2,037)
(7,940)
1,303 193,484
23,502
2,333
(8,298)
26
15,204
2,359
(8,560)
(1,674)
899
—
34
—
34
(1,010)
— (1,010)
423
614
—
(6,540)
(362)
817
(550) 198,486
4,425
—
34
— (1,010)
423
—
(8,214)
(1,674)
1,988 200,474
Note
8
10
32
31
8
10
32
32
31
Share
capital
£’000
13,510
Retained
earnings
£’000
41,153
— 11,342
—
6,090
— 17,432
— (6,358)
—
—
—
72
— (6,286)
52,299
13,510
8,541
—
— (8,366)
—
175
— (6,886)
—
82
—
—
—
—
(332)
—
(7,218)
82
45,256
13,592
Cost of
shares
held
by ESoP
trust
£’000
(444)
Total
other
equity
reserves
£’000
£’000
58,970
4,751
— 11,342
—
—
6,090
—
— 17,432
—
— (6,358)
—
26
26
—
302
230
—
(6,030)
256
—
70,372
(188)
4,751
8,541
—
—
— (8,366)
—
—
175
—
— (6,886)
—
899
—
817
34
—
34
(1,010)
— (1,010)
282
614
—
(6,681)
(362)
817
63,866
(550)
5,568
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 95
statements of cash fLows
for the year ended 31 December 2014
cash flows from operating activities
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
Proceeds from shares issued
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 (decrease)/increase 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
Government loans
net debt
Note
33
11
12
13
14
15
32
10
10
24
24
Group
2014
£’000
14,857
(1,172)
(4,975)
8,710
(97)
(1,704)
(15,649)
—
222
4,362
12,233
—
336
—
(297)
899
(1,010)
34
(40,564)
29,548
(6,865)
(1,674)
(21)
(19,653)
(11,240)
15,587
4,347
4,347
—
4,347
(33,096)
(7,652)
(36,401)
2013
£’000
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)
Parent Company
2014
£’000
2,527
(3,437)
(3,502)
(4,412)
—
(96)
—
—
11
—
—
—
8,055
7,800
15,770
899
(1,010)
34
(39,000)
24,000
(6,865)
—
(21)
(21,963)
(10,605)
11,880
1,275
1,917
(642)
1,275
(30,000)
—
(28,725)
2013
£’000
(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)
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS
96
principaL accounting poLicies
for the year ended 31 December 2014
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. Subsidiaries are all entities (including
structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
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 78.
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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 97
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.
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.
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principaL accounting poLicies continued
for the year ended 31 December 2014
The Board considers the business based on the following operating segments:
• Property Investment and Development, inclusive of property investment and development and trading activities;
• Land Development, inclusive of land management, development and trading activities; and
• 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:
• 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 remeasured 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 of 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’.
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:
• equipment held for hire
• vehicles
• office equipment
– between 12.5% and 50%
– between 10% and 25%
– between 25% and 33%
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 eleven years to run.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 99
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 developments in progress, land held for development or sale, options to purchase land and planning
promotion agreements.
• Developments in progress includes properties being developed for onward sale.
• Land held for development or sale is land owned by the Group that is promoted through the planning process in
order to gain planning permission, adding value to the land.
• options to purchase land are agreements that the Group has entered into with the landowners whereby the
Group has the option to purchase the land within a limited time frame. The land owners are not generally permitted
to sell to any other party during this period, unless agreed to by the Group. Within the time frame the Group
promotes the land through the planning process at its expense in order to gain planning permission.
Should the Group be successful in obtaining planning permission it would trigger the option to
purchase and subsequently sell on the land.
• Planning promotion agreements are agreements that the Group has entered into with the landowners whereby
the Group acts as an agent to the land owners in exchange for a fee of a set percentage of the proceeds or profit
of the eventual sale. The Group promotes the land through the planning process at its own expense. If the land is
sold the Group will receive a fee for its services.
• The Group incurs various costs in promoting land held under planning promotion agreements, in some instances
the agreements allow for the Group to be reimbursed certain expenditure following the conclusion of a successful
sale. These costs are held in inventory at the lower of cost and estimated net realisable value. Upon reimbursement,
inventory is reduced by the value of the reimbursed cost.
Inventories comprise all the direct costs incurred in bringing the individual inventories to their present state at the reporting date,
including any reimbursable promotion costs, 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
23804.04 13 April 2015 8:14 AM Proof 8
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100
principaL accounting poLicies continued
for the year ended 31 December 2014
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.
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:
• 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 102). 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;
• 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;
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• 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 102);
• borrowings: see below; and
• 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 remeasured at fair value. Derivatives are carried as assets when the fair value is
positive and as liabilities when the fair value is negative.
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.
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principaL accounting poLicies continued
for the year ended 31 December 2014
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 Group regularly reviews its contract obligations and whether they are considered to be onerous. In the event that the
costs of meeting the obligations exceed the economic benefits expected to be received through the life of the development, a
provision would be recognised based on discounted cash flows to the end of the contract, to the extent of the costs exceeding
the economic benefits.
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 127.
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 relating to revenue items are 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.
Government grants relating to capital items are released against the carrying value of the grant supported assets when the
completion conditions of those assets are met.
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 97 and 99 and each is interpreted by management
in the light of IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and IAS 2 ‘Inventories’.
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:
• 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;
• 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
• 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 103
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 year ended 31 December 2014:
IAS 27 (issued 2011)
IAS 28 (issued 2011)
IAS 32 (amended 2011)
IAS 36 (amended 2013)
IAS 39 (amended 2013)
IFRS 10 (issued 2011)
IFRS 10, IFRS 11 and IFRS 12
(amended 2012)
IFRS 10, IFRS 12 and IAS 27
(amended 2012)
IFRS 11 (issued 2011)
IFRS 12 (issued 2011)
IFRIC 21 (interpretation 2013)
# Mandatory from 1 January 2014.
‘Separate Financial Statements’
‘Investments in Associates and Joint Ventures’
‘offsetting Financial Assets and Financial Liabilities’
‘Recoverable Amount Disclosures for Non-Financial Assets’
‘Novation of Derivatives and Continuation of Hedge Accounting’
‘Consolidated Financial Statements’
‘Transition Guidance’
‘Investment Entities’
‘Joint Arrangements’
‘Disclosures of Interests in other Entities’
‘Levies’
Effective from
1 January 2013#
1 January 2013#
1 January 2014
1 January 2014
1 January 2014
1 January 2013#
1 January 2013#
1 January 2014
1 January 2013#
1 January 2013#
1 January 2014
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.
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)
Annual improvements (issued 2014)
IAS 1 (amended 2014)
IAS 16 and IAS 38 (amended 2014)
IAS 16 and IAS 41 (amended 2014)
IAS 19 (amended 2013)
IAS 27 (amended 2014)
IFRS 9 (issued 2014)
IFRS 10, IFRS 12 and IAS 28
(amended 2014)
IFRS 10 and IAS 28 (amended 2014)
IFRS 11 (amended 2014)
IFRS 14 (issued 2014)
IFRS 15 (issued 2014)
* Not yet endorsed by the EU.
‘Annual Improvements to IFRSs 2010–2012 Cycle’
‘Annual Improvements to IFRSs 2011–2013 Cycle’
‘Annual Improvements to IFRSs 2012–2014 Cycle’
‘Disclosure Initiative’
‘Clarification of Acceptable Methods of Depreciation and Amortisation’
‘Bearer Plants’
‘Defined Benefit Plans: Employee Contributions’
‘Equity Method in Separate Financial Statements’
‘Financial Instruments’
‘Investment Entities: Applying the Consolidation Exception’
‘Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture’
‘Accounting for Acquisitions of Interests in Joint operations’
‘Regulatory Deferral Accounts’
‘Revenue from Contracts with Customers’
Effective from
1 July 2014
1 July 2014
1 January 2016*
1 January 2016*
1 January 2016*
1 January 2016*
1 July 2014
1 January 2016*
1 January 2018*
1 January 2016*
1 January 2016*
1 January 2016*
1 January 2016*
1 January 2017*
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 2014, 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 104
notes to the financiaL statements
for the year ended 31 December 2014
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
2014
£’000
65,819
11,736
38,894
11,306
11,281
8,026
138
147,200
283
147,483
2013
£’000
60,217
26,911
37,525
11,125
10,233
7,653
130
153,794
30
153,824
Contingent rents recognised as income during the year amount to £498,000 (2013: £294,000).
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 and payments received for land transferred under a compulsory
purchase order.
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.
Revenue for the year was 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. During the prior 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 receives offers from multiple customers for its sales it is not reliant on any major customer individually.
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 96 to 103.
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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 105
total
£’000
147,200
—
147,200
27,961
714
(1,550)
1,187
28,312
(4,810)
23,502
21,120
3,299
203
1,249
(1,950)
1,611
(2,375)
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)
2. segment information continued
2014
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
Increase in fair value of investment
properties
Provisions
Pension scheme credit
revenue
External sales
Inter-segment sales
Total revenue
operating profit
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
property
investment
and
development
£’000
25,807
306
26,113
8,740
1,487
(6,800)
1,187
4,614
254
4,868
16,083
129
—
94
(1,950)
—
—
Property
investment
and
development
£’000
37,623
296
37,919
3,056
1,629
(7,202)
183
(2,334)
(173)
(2,507)
6,723
80
—
88
1,563
(1)
—
Land
development
£’000
39,032
—
39,032
14,100
511
(1,518)
—
13,093
(2,784)
10,309
construction
£’000
82,361
5,966
88,327
9,232
1,419
(536)
—
10,115
(2,122)
7,993
group
overheads
£’000
—
681
681
(4,111)
15,808
(3,382)
—
8,315
(158)
8,157
eliminations
£’000
—
(6,953)
(6,953)
—
(18,511)
10,686
—
(7,825)
—
(7,825)
18
16
—
—
—
729
—
4,274
2,583
203
1,155
—
882
—
2013
745
571
—
—
—
—
(2,375)
—
—
—
—
—
—
—
Land
development
£’000
37,655
8
37,663
11,896
750
(1,506)
—
11,140
(2,587)
8,553
Construction
£’000
78,516
3,726
82,242
8,180
1,398
(580)
—
8,998
(2,228)
6,770
17
14
—
—
—
157
—
3,645
2,451
204
1,140
—
1,116
—
Group
overheads
£’000
—
656
656
(4,112)
25,245
(3,726)
—
17,407
(150)
17,257
314
541
—
—
—
—
(1,921)
Eliminations
£’000
—
(4,686)
(4,686)
6
(28,328)
11,488
—
(16,834)
(5)
(16,839)
—
—
—
—
—
—
—
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS
106
notes to the financiaL statements continued
for the year ended 31 December 2014
2014
£’000
2013
£’000
190,921
117,599
30,918
1,926
341,364
7,123
4,347
352,834
14,526
18,955
45,487
2,510
81,478
1,976
31,969
8,779
28,158
152,360
200,474
2014
£’000
3,299
203
1,155
94
(122)
33
30
239
(1,950)
27,366
24,959
9
(459)
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
2013
£’000
3,086
204
1,140
88
—
30
255
181
1,563
47,370
22,797
8
(406)
2. segment information continued
segment assets
Property Investment and Development
Land Development
Construction
Group overheads
unallocated assets
Deferred tax assets
Cash and cash equivalents
total assets
segment liabilities
Property Investment and Development
Land Development
Construction
Group overheads
unallocated liabilities
Current tax liabilities
Current borrowings
Non-current borrowings
Retirement benefit obligations
total liabilities
total net assets
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
Gain 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
(Increase)/decrease 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
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 107
2014
£’000
2013
£’000
86
88
174
43
21
37
101
275
72
88
160
41
42
59
142
302
3. operating profit continued
The remuneration paid to PricewaterhouseCoopers LLP, the Company’s external auditors, was as follows:
Fees payable for the audit of the Company’s annual Financial Statements 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 compliance services
Tax advisory services
other services
Total non-audit fees
Total fees
In addition, fees of £8,800 (2013: £7,800) were paid to BDo LLP in their capacity as auditors of The Henry Boot Staff Pension
and Life Assurance Scheme.
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
5. finance income
Interest on bank deposits
Interest on other loans and receivables
Fair value adjustments on trade receivables
2014
£’000
18,855
423
2,136
2,433
694
86
24,627
2014
number
49
31
214
113
52
459
2014
£’000
21
499
194
714
2013
£’000
16,604
429
1,975
3,034
501
97
22,640
2013
Number
37
29
225
108
51
450
2013
£’000
10
262
422
694
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 108
notes to the financiaL statements continued
for the year ended 31 December 2014
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
2014
£’000
1,127
65
288
64
6
1,550
2014
£’000
4,607
(160)
4,447
623
(260)
363
4,810
2013
£’000
1,168
11
244
82
21
1,526
2013
£’000
4,064
(13)
4,051
1,092
—
1,092
5,143
Corporation tax is calculated at 21.49% (2013: 23.25%) of the estimated assessable profit for 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, deferred tax balances at the year end have
been measured at 20% being the rate 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
Effective tax rate
2014
£’000
28,312
2014
%
21.49
(2.42)
(0.61)
(0.57)
(0.90)
16.99
2013
£’000
18,377
2013
%
23.25
5.22
(0.17)
(0.07)
(0.23)
28.00
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 loss/(gain)
– cash flow hedge
Total tax recognised in other comprehensive income
2014
£’000
—
2,092
(17)
2,075
2013
£’000
84
(2,447)
(38)
(2,401)
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 109
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 2015 is £8,541,000 (2013: £11,342,000) and includes dividends received from
subsidiaries of £7,800,000 (2013: £16,844,000).
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
10. Dividends
2014
£’000
23,502
(2,333)
(21)
21,148
2013
£’000
13,234
(1,919)
(21)
11,294
2014
(283,175)
2013
131,225,343 131,096,122
(239,832)
130,942,168 130,856,290
1,972,866
132,665,661 132,829,156
1,723,493
Amounts recognised as distributions to equity holders in year:
Preference dividend on cumulative preference shares
Final dividend for the year ended 31 December 2013 of 3.15p per share (2012: 2.90p)
Interim dividend for the year ended 31 December 2014 of 2.10p per share (2013: 1.95p)
2014
£’000
21
4,115
2,750
6,886
2013
£’000
21
3,786
2,551
6,358
The proposed final dividend for the year ended 31 December 2014 of 3.50p per share (2013: 3.15p) makes a total dividend for
the year of 5.60p (2013: 5.10p).
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 £4,617,000.
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.
Dividends paid to non-controlling interests during the year amounted to £1,674,000 (2013: £2,037,000).
23804.04 13 April 2015 8:14 AM Proof 8
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notes to the financiaL statements continued
for the year ended 31 December 2014
11. intangible assets
cost
At 1 January 2013
Additions at cost
At 31 December 2013
Additions at cost
Disposals
at 31 December 2014
accumulated impairment losses and amortisation
At 1 January 2013
Amortisation
Impairment losses for the year
At 31 December 2013
Amortisation
Impairment losses for the year
Eliminated on disposals
at 31 December 2014
carrying amount
at 31 December 2014
At 31 December 2013
At 1 January 2013
Goodwill
£’000
4,070
—
4,070
—
—
4,070
1,696
—
204
1,900
—
203
—
2,103
1,967
2,170
2,374
PFI
asset
£’000
15,861
186
16,047
97
(10)
16,134
9,083
1,140
—
10,223
1,155
—
(10)
11,368
4,766
5,824
6,778
Total
£’000
19,931
186
20,117
97
(10)
20,204
10,779
1,140
204
12,123
1,155
203
(10)
13,471
6,733
7,994
9,152
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 eleven 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 (2013: £204,000) 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 £581,000 (2013: £1,744,000); see note 24.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 12. property, plant and equipment
group
cost or fair value
At 1 January 2013
Additions at cost
Disposals
At 31 December 2013
Additions at cost
Disposals
at 31 December 2014
Being:
Cost
Fair value at 31 December 2014
accumulated depreciation and impairment
At 1 January 2013
Charge for year
Eliminated on disposals
At 31 December 2013
Charge for year
Eliminated on disposals
at 31 December 2014
carrying amount
at 31 December 2014
At 31 December 2013
At 1 January 2013
Land and
buildings
£’000
Equipment
held
for hire
£’000
Vehicles
£’000
office
equipment
£’000
7,187
—
—
7,187
—
—
7,187
—
7,187
7,187
412
—
—
412
—
—
412
6,775
6,775
6,775
24,193
3,303
(1,578)
25,918
3,670
(2,098)
27,490
27,490
—
27,490
17,180
2,228
(1,463)
17,945
2,360
(1,882)
18,423
9,067
7,973
7,013
4,809
373
(581)
4,601
1,018
(725)
4,894
4,894
—
4,894
2,300
674
(479)
2,495
691
(607)
2,579
2,315
2,106
2,509
1,802
420
(30)
2,192
686
(328)
2,550
2,550
—
2,550
1,537
184
(29)
1,692
248
(319)
1,621
929
500
265
111
Total
£’000
37,991
4,096
(2,189)
39,898
5,374
(3,151)
42,121
34,696
7,425
42,121
21,429
3,086
(1,971)
22,544
3,299
(2,808)
23,035
19,086
17,354
16,562
At 31 December 2014, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment amounting to £2,713,000 (2013: £1,240,000).
Fair value measurements of the Group’s land and buildings
Land and buildings have been revalued at 31 December 2014 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 (2013:
£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 (2013:
£2,859,000).
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 112
notes to the financiaL statements continued
for the year ended 31 December 2014
12. property, plant and equipment 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:
Freehold land
Buildings
total fair value
Level 1
£’000
—
—
—
Level 2
£’000
—
—
—
Level 3
£’000
60
6,715
6,775
2014
£’000
60
6,715
6,775
2013
£’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 causes 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:
• 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;
• 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
• 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 113
Total
£’000
741
58
(50)
749
96
(163)
682
660
44
(49)
655
50
(160)
545
137
94
81
Vehicles
£’000
office
equipment
£’000
47
—
(23)
24
—
(24)
—
45
2
(23)
24
—
(24)
—
—
—
2
694
58
(27)
725
96
(139)
682
615
42
(26)
631
50
(136)
545
137
94
79
12. property, plant and equipment continued
parent company
cost
At 1 January 2013
Additions
Disposals
At 31 December 2013
Additions
Disposals
at 31 December 2014
Depreciation
At 1 January 2013
Charge for year
Disposals
At 31 December 2013
Charge for year
Disposals
at 31 December 2014
carrying amount
at 31 December 2014
At 31 December 2013
At 1 January 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:
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
14,013
7,276
56,877
3,891
17,060
99,117
9,344
6,248
1,833
4,283
20,735
42,443
141,560
2014
£’000
14,013
7,276
56,877
3,891
17,060
99,117
9,344
6,248
1,833
4,283
20,735
42,443
141,560
Increase/
(decrease)
in fair value
in year
4,578
868
2,502
(488)
1,130
8,590
2,514
(1,348)
(1,876)
3,683
(2,397)
576
9,166
2013
£’000
9,435
6,408
54,375
4,379
15,930
90,527
6,830
7,596
3,709
600
23,132
41,867
132,394
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 causes 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 114
notes to the financiaL statements continued
for the year ended 31 December 2014
13. investment properties continued
Explanation of the fair value hierarchy:
• 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;
• 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
• 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
Residential
Retail
Land
office
Industrial 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.
Includes dwellings under assured tenancies.
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.
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 investment property under
construction
Increase/(decrease) 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
Leisure
Level 3
£’000
Mixed-use
Level 3
£’000
Residential
Level 3
£’000
Retail
Level 3
£’000
2014
£’000
2013
£’000
9,435
6,408
54,375
4,379
15,930
90,527
96,149
2,586
10
—
—
(260)
—
—
2,242
14,013
17
(40)
13,990
121
54
(3)
—
—
(335)
—
1,031
7,276
237
(83)
7,430
462
40
(54)
—
—
—
—
2,054
56,877
1,918
(485)
58,310
—
—
—
(408)
—
(663)
—
583
3,891
—
—
3,891
1,938
14
(19)
(1,099)
—
—
1,404
(1,108)
17,060
324
(34)
17,350
5,107
118
(76)
(1,507)
(260)
(998)
1,404
4,802
99,117
2,496
(642)
100,971
1,297
169
(87)
(361)
(10,511)
(68)
5,040
(1,101)
90,527
2,688
(471)
92,744
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY
115
13. investment properties continued
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 2014 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 £97,080,000 (2013: £88,365,000). 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 2014 has been determined by the Directors of the Company at
£3,891,000 (2013: £4,379,000). 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
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
Leisure
mixed-use
2014
residential
Sales
comparison
—
—
—
—
Yield
21.42
4.04
40.86
6.81
5.67
15.70
Yield
13.49
1.50
53.05
8.23
5.04
15.00
—
—
25.00
Yield
4.58
4.24
5.25
6.73
6.60
9.00
—
Industrial
Leisure
2013
Mixed-use
Yield
4.89
4.24
6.00
7.49
7.15
9.54
—
Yield
28.00
22.64
40.86
7.30
6.08
7.25
—
Residential
Sales
comparison
—
—
—
—
Yield
11.65
2.50
58.39
9.10
6.00
15.56
—
25.00
retail
Yield
11.13
2.47
26.78
8.21
4.40
24.25
—
Retail
Yield
9.00
2.36
26.78
8.19
4.40
15.00
—
There is considered to be no inter-relationship between observable and unobservable inputs.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 116
notes to the financiaL statements continued
for the year ended 31 December 2014
13. investment properties continued
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%
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
industrial
1,125
3,059
—
Industrial
603
1,925
—
impact on valuation 2014 £’000
Leisure
608
309
—
mixed-use
3,483
3,982
—
residential
—
—
44
Impact on valuation 2013 £’000
Leisure
438
242
—
Mixed-use
3,043
5,084
—
Residential
—
—
50
retail
1,520
1,476
—
Retail
1,155
1,457
—
The sensitivities have been selected by management on the basis that it considers these measures to be a reasonable
expectation of likely changes to the significant unobservable inputs in the next twelve months.
The property rental income earned by the Group from its occupied investment property, all of which is leased out under
operating leases, amounted to £8,026,000 (2013: £7,653,000). Direct operating expenses arising on investment property
generating rental income in the year amounted to £327,000 (2013: £672,000). Direct operating expenses arising on the
investment property which did not generate rental income during the year amounted to £1,101,000 (2013: £349,000).
At 31 December 2014, the Group had entered into contractual commitments for the acquisition and repair of investment
property amounting to £11,167,000 (2013: £321,000).
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 inventories
Transfers to completed
investment property
(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
6,830
2,762
18
(13)
(415)
(149)
—
311
9,344
—
—
Land
Level 3
£’000
7,596
305
—
—
(1,653)
—
—
—
6,248
—
—
Leisure
Level 3
£’000
3,709
1,737
—
—
—
(2,932)
office
Level 3
£’000
Retail
Level 3
£’000
2014
£’000
2013
£’000
600
23,132
41,867
44,226
4,286
—
—
(425)
—
1,261
55
(5)
—
—
10,351
73
(18)
(2,493)
(3,081)
4,903
48
(1)
(1,528)
(279)
—
—
(1,405)
(1,405)
(5,040)
(681)
1,833
(178)
4,283
(2,303)
20,735
(2,851)
42,443
(462)
41,867
—
—
—
—
—
—
—
—
—
—
9,344
6,248
1,833
4,283
20,735
42,443
41,867
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 117
13. investment properties continued
Information about fair value measurements using significant unobservable inputs (Level 3):
class
Valuation technique
Rental value per sq ft (£) – weighted average
Yield %
Costs to complete per sq
ft (£)
Land value per acre
(£’000)
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
Class
Valuation technique
Rental value per sq ft (£) – weighted average
Yield %
Costs to complete per sq
ft (£)
Land value per acre
(£’000)
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
industrial
Residual
4.54
4.25
6.30
7.17
6.60
7.50
Land
Sales
comparison
—
—
—
—
—
—
41.76
34.24
70.99
—
—
—
3.17
0.78
5.23
117
24
971
Industrial
Residual
4.35
4.25
5.50
7.25
6.75
7.50
Land
Sales
comparison
—
—
—
—
—
—
41.16
41.16
41.16
—
—
—
3.48
0.78
5.81
106
22
1,550
2014
Leisure
office
retail
Residual
25.00
25.00
25.00
6.25
6.00
6.50
216.15
216.15
216.15
—
—
—
Residual
15.79
9.09
33.65
5.99
4.65
7.00
161.98
83.97
225.76
—
—
—
Residual
8.47
8.47
8.47
5.50
5.25
5.75
70.57
70.57
70.57
—
—
—
2013
Leisure
office
Retail
Residual
17.98
10.76
25.20
5.50
5.00
6.00
192.44
147.80
244.41
—
—
—
Residual
15.00
14.00
16.00
8.50
7.75
9.00
116.73
116.73
116.73
—
—
—
Residual
16.02
4.75
32.50
6.77
4.75
8.00
151.25
44.93
246.19
—
—
—
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 118
notes to the financiaL statements continued
for the year ended 31 December 2014
13. investment properties continued
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%
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
2,385
9,959
872
—
Industrial
2,864
8,891
682
—
impact on valuation 2014 £’000
Land
—
—
10
424
Leisure
265
339
28
—
Impact on valuation 2013 £’000
Land
—
—
11
493
Leisure
1,245
715
42
—
office
1,041
479
32
—
office
5
22
16
—
retail
5,573
2,912
371
—
Retail
9,601
6,489
470
—
Investment properties under construction are developments which have been valued at 31 December 2014 at fair value by the
Directors of the Company using the residual method at £42,443,000 (2013: £41,867,000). 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.
14. investments
parent company – shares in group undertakings
cost
At 1 January 2013
Additions
at 31 December 2013 and 2014
fair value adjustments
At 1 January 2013
Provisions for losses
At 31 December 2013
Reversal of provisions for losses
at 31 December 2014
carrying amount
at 31 December 2014
At 1 January 2014
At 1 January 2013
Total
£’000
25,772
10,000
35,772
(22,751)
(9,652)
(32,403)
440
(31,963)
3,809
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 35. All trading subsidiaries operate in the United Kingdom and are wholly owned, with the exception of:
• Road Link (A69) Holdings Limited which is 61.2% owned by Henry Boot Construction Limited;
• Stonebridge Projects Limited which is 50% owned by, and under board control of, Henry Boot Land Holdings Limited; and
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14. investments continued
• 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 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
Finance income/(costs)
Profit before tax
Tax
share of profits from joint ventures after tax
2014
£’000
180
1,187
—
1,367
2014
£’000
5,348
348
5,696
(249)
(4,080)
1,367
2014
£’000
485
(320)
1,002
1,167
35
1,202
(15)
1,187
2013
£’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
Details of the Group’s significant investments in joint ventures are listed in note 35.
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
2014
£’000
42,135
4,606
8,161
—
54,902
50,065
4,837
54,902
2013
£’000
49,893
2,318
3,578
—
55,789
43,103
12,686
55,789
2014
£’000
177
159
—
193,866
194,202
194,202
—
194,202
2013
£’000
158
414
—
188,841
189,413
189,413
—
189,413
Included in the Group’s trade receivable balance are receivables with a carrying amount of £4.0m (2013: £3.0m) 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.
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notes to the financiaL statements continued
for the year ended 31 December 2014
16. trade and other receivables continued
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
2014
£’000
2,889
576
257
253
3,975
2014
£’000
299
63
(94)
(33)
235
2013
£’000
1,709
1,061
69
138
2,977
2013
£’000
190
285
(137)
(39)
299
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
2014
£’000
4
8
23
6
194
235
2013
£’000
16
6
4
32
241
299
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
(2013: £2,560,000), of which £Nil (2013: £Nil) has been provided in the year and £Nil (2013: £3,854,000) 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 its
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.
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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 2013
Recognised in income
Recognised in other comprehensive income
At 31 December 2013
Recognised in income
Recognised in other comprehensive income
at 31 December 2014
parent company
At 1 January 2013
Recognised in income
Recognised in other comprehensive income
At 31 December 2013
Recognised in income
Recognised in other comprehensive income
at 31 December 2014
Accelerated
capital
allowances
£’000
148
(6)
—
142
161
—
303
Property
revaluations
£’000
1,138
(382)
84
840
99
—
939
33
(4)
—
29
1
—
30
—
—
—
—
—
—
—
Retirement
benefit
obligations
£’000
7,023
(561)
(2,447)
4,015
(475)
2,092
5,632
7,023
(561)
(2,447)
4,015
(475)
2,092
5,632
other
timing
differences
£’000
595
(143)
(38)
414
(148)
(17)
249
463
(62)
—
401
(144)
—
257
Total
£’000
8,904
(1,092)
(2,401)
5,411
(363)
2,075
7,123
7,519
(627)
(2,447)
4,445
(618)
2,092
5,919
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 £837,000 (2013: £1,399,000). 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.
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, deferred tax balances at the year end have
been measured at 20% being the rate at which timing differences are expected to reverse.
18. inventories
Developments in progress
Land held for development or sale
options to purchase land
Planning promotion agreements
2014
£’000
17,830
72,920
8,127
18,580
117,457
2013
£’000
7,110
63,354
8,155
12,394
91,013
Within developments in progress £101,000 (2013: £94,000) 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 held for development, options to purchase
land and planning promotion agreements £1,991,000 (2013: £2,008,000) has been written down and recognised as an expense
in the year. These costs relate to land, options and planning promotion agreements where planning permission for development
has been refused or is deemed to be doubtful.
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122
notes to the financiaL statements continued
for the year ended 31 December 2014
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
2014
£’000
2013
£’000
573
(10,096)
(9,523)
305,843
(315,366)
(9,523)
1,089
(4,435)
(3,346)
333,304
(336,650)
(3,346)
At 31 December 2014, retentions held by customers for contract work amounted to £1,547,000 (2013: £1,458,000). Advances
received from customers for contract work amounted to £10,096,000 (2013: £4,435,000).
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 an industrial unit at our Markham Vale development.
Assets classified as held for sale comprise the following:
fair value
At 1 January
Transfer from investment property
Disposals
at 31 December
Adjustment in respect of tenant incentives
Adjustment in respect of tax benefits
market value at 31 December
Investment property
2014
£’000
10,511
260
(10,511)
260
—
—
260
2013
£’000
1,900
10,511
(1,900)
10,511
1,356
—
11,867
Assets classified as held for sale have been valued at 31 December 2014 at fair value by the Directors of the Company at
£260,000 (2013: £10,511,000). 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 2014.
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
Group
Parent Company
2014
£’000
55,675
4,842
2,305
9,083
17
50
—
71,972
68,833
3,139
71,972
2013
£’000
46,829
2,935
939
4,206
102
—
—
55,011
50,171
4,840
55,011
2014
£’000
1,662
472
347
—
—
—
79,737
82,218
82,218
—
82,218
2013
£’000
958
364
598
—
—
—
70,253
72,173
72,173
—
72,173
The Directors consider that the carrying amount of trade payables approximates to their fair value.
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22. government grants
Government grants have been received in relation to the infrastructure of one of the Company’s land developments and three of
the Group’s property developments.
Grant income received relating to revenue grants are 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 £nil (2013: £98,000).
Grant income relating to capital grants are included within deferred income until the completion conditions are met, at this point
the grant is transferred to offset the cost of the asset.
23. capital risk management
The Company’s objectives when managing capital are:
• 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
• 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 2014 this was £36.4m (2013: £36.1m). Equity comprises all components of equity and at 31 December 2014 this
was £200.5m (2013: £193.5m).
During 2014 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 2015, the
Group concluded negotiations with three banking partners to put in place a £60m facility to replace the £50m facility we had in
place at 31 December 2014. The renewed facilities commenced on 17 February 2015, with a renewal date of 17 February 2018
and an option to extend the facility by one year, each year, for the next two years occurring on the anniversary of the facility. The
renewed facilities, on improved terms, maintain covenants on the same basis as the previous facilities.
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.
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notes to the financiaL statements continued
for the year ended 31 December 2014
24. borrowings
Bank overdrafts
Bank loans
Government loans
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 offices Limited)
Government loans
Bank overdrafts are repayable on demand.
Group
Parent Company
2014
£’000
—
33,096
7,652
40,748
32,322
2,297
6,909
—
41,528
32,322
9,206
41,528
2013
£’000
—
48,746
2,953
51,699
47,095
1,033
2,574
2,078
52,780
47,095
5,685
52,780
2014
£’000
642
30,000
—
30,642
30,834
—
—
—
30,834
30,834
—
30,834
2014
%
3.25
2.55
1.42
3.03
—
2013
£’000
739
45,000
—
45,739
46,155
—
—
—
46,155
46,155
—
46,155
2013
%
3.32
2.52
1.47
2.78
—
Borrowings are recognised at fair value, where the fair values are based on cash flows discounted using variable market rates.
liquidity risk
The Company’s objectives when managing liquidity are:
• to safeguard the Group’s ability to meet expected and unexpected payment obligations at all times; and
• to 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 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 29 october 2014 and is repayable in quarterly instalments
of £31,250 that commenced on 11 December 2014 with full and final settlement becoming due on 11 December 2018.
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24. borrowings continued
Government loans from the South West of England Regional Development Agency (SWE) and Sedgemoor District Council
(SDC) were issued at a borrowing rate of nil%, their fair values are £2,718,000 (2013: £2,953,000) and £319,000 (2013: £nil)
respectively.
Government loans from the Homes and Communities Agency (HCA) were issued with a fixed level of interest of £301,000, their
fair values are £2,815,000 (2013: £nil) (Education Campus) and £1,800,000 (2013: £nil) (Phase II Road Infrastructure).
As a result the Company has no exposure to interest rate changes in relation to these borrowings. The Company’s exposure to
indexation risk may result in an increase in the value of repayments, causing the loans to be settled at an earlier date.
The Government loans were received to fund specific residential construction expenditure.
Repayment of the SWE loan commenced last year being three years after the quarter date of the construction completion of the
first residential unit. A Further repayment was made during the year and 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.
Repayment of the SDC loan is to be made in full upon the occupation of the 550th dwelling.
Repayment of the Education Campus HCA loan is to commence upon the occupation of the 1st dwelling and will follow for each
occupation thereafter until the total contribution sum is repaid in full. The repayments are calculated at £8,587 per residential
unit, based on 1,750 units, and are increased in relation to the Land Registry House Price Index (Devon). The base figure of
£8,587 is reviewed following the occupation of the first 300 dwellings and every 300 dwellings thereafter in addition to every
second anniversary of the loan agreement date and any date after 2022 following notice served from the HCA. If the HCA is not
satisfied that the base rate will guarantee repayment of the total contribution sum before the completion of the last residential
unit it has the right to increase the base figure accordingly. If the number of residential units with detailed planning permission or
reserved matters increases, the base figure is revised to reflect the increased number of plots.
Repayment of the Phase II Road Infrastructure HCA loan is to commence upon the occupation of the 1,151st dwelling;
subsequent repayments will follow each quarter until the total contribution sum is repaid in full. The repayments are calculated at
£3,675 per residential unit, based on 1,750 units, and are increased in relation to the Land Registry House Price Index (Devon).
If the relevant number of dwellings is not met by 31 December 2015 and each year thereafter until 2019, advance payments will
be required. If the number of residential units with detailed planning permission or reserved matters increases, the base figure is
revised to reflect the increased number of plots.
The bank loan of £581,000, 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 2014, a 1.0% (2013: 1.0%) change in interest rates, which the Directors
consider to be a reasonable possible change, would affect profitability before tax by £306,000 (2013: £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 2014, the Group had available £21,800,000 (2013: £22,455,000) undrawn committed borrowing facilities.
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notes to the financiaL statements continued
for the year ended 31 December 2014
25. Derivative financial instruments
interest rate swap – cash flow hedge
At 31 December 2014, an interest rate swap transaction was in place covering a bank loan of £581,000 (2013: £1,744,000)
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 2014 was a liability of £17,000 (2013: £102,000), 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:
2014
£’000
—
17
—
17
2013
£’000
—
102
—
102
• 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;
• 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
• Level 3 – fair value measurements are those derived from use of a model with inputs that are not based on observable market
data.
26. provisions
At 1 January 2014
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 2014
Included in current liabilities
Included in non-current liabilities
Land
development
£’000
Road
maintenance
£’000
other
£’000
5,579
6,312
11,891
729
6
(4,349)
—
8,277
3,092
5,185
8,277
1,543
—
1,543
882
—
(1,204)
(16)
1,205
1,205
—
1,205
25
—
25
—
—
—
—
25
25
—
25
Total
£’000
7,147
6,312
13,459
1,611
6
(5,553)
(16)
9,507
4,322
5,185
9,507
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26. provisions continued
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, pro rata 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 a 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
£161,000 and £420,000 respectively (2013: £207,000 and £583,000).
The Group maintains rigorous forecasting and budgeting for the infrastructure and services contracts to which our provisions
relate. The Group’s outstanding obligations are not considered to be “onerous” contracts, as the costs of meeting the obligations
are not anticipated to exceed the economic benefits expected to be received throughout the life of the developments.
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 £60,000 (2013: £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.
Off Balance Sheet arrangements
The Group is currently undertaking the infrastructure of its land developments at Bridgwater and Cranbrook, spanning 122
and 53 acres respectively. The Group is liable for various planning and infrastructure obligations required to be met under
section agreements imposed by the local Councils. The Group shares its planning and infrastructure obligations relating to the
Cranbrook site with two other parties, the Group’s share being 30%. These shared obligations are secured by performance
bonds and legal charges. The Group deems the possibility of default by the other parties as highly remote. The infrastructure
of these developments is anticipated to continue until 2020 and 2025 respectively with cost being incurred throughout these
periods.
The Group has historically disposed of 86 and 16 acres respectively and has subsequently recognised provisions to the value
of £8,277,000 being the Group’s best estimate of the consideration required to settle the present obligations at the reporting
date. Subsequent disposals are expected to occur over a number of phases, provisions are made in relation to the land which
has been disposed. The present value of the estimated cash flows relating to future disposals, amounting to £11,454,000, has
therefore not been recognised in these 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 £694,000 (2013: £501,000) represents contributions payable to the scheme by the Group.
The increase in scheme contributions arises from the Government’s automatic enrolment scheme introduced on 1 May 2014.
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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 128
notes to the financiaL statements continued
for the year ended 31 December 2014
27. retirement benefit obligations continued
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.
A formal actuarial valuation was carried out as at 31 December 2012. The results of that valuation have been projected to
31 December 2014 by a qualified independent actuary. The figures in the following disclosure were measured using the
projected unit method.
The main financial assumptions used in the valuation of the liabilities of the scheme under IAS 19 are:
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
2014
%
2.30
2.00
1.00
2.30
2.00
3.60
2014
years
22.1
24.4
23.3
26.0
2013
%
2.40
2.00
1.00
2.40
2.00
4.50
2013
Years
22.3
24.6
23.6
26.2
The mortality assumptions adopted are the Self Administered Pension Schemes (SAPS) tables with allowance for future
improvements in line with Continuous Mortality Investigation (CMI) 2014 with an annual improvement of 1% per annum.
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Impact on scheme liabilities
Rate of inflation
Rate of general increases in salaries
Liabilities discount rate
Rate of mortality
Increase in
assumption
Change in
assumption
0.25%
0.25%
Nil*
0.25% Decrease by 3.9%
1 year
Decrease in
assumption
Increase by 3.6% Decrease by 3.4%
Nil*
Increase by 4.1%
Increase by 3.2% Decrease by 3.1%
* 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 129
27. retirement benefit obligations continued
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 losses/(gains) arising from changes in financial assumptions
Actuarial losses arising from experience adjustments
Actuarial losses/(gains) recognised in other comprehensive income
Total
2014
£’000
1,129
425
832
47
2,433
(8,029)
(2,862)
21,349
—
10,458
12,891
2013
£’000
1,200
340
1,288
206
3,034
(5,825)
(2,191)
(5,937)
5,416
(8,537)
(5,503)
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 loss/(gain)
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
23804.04 13 April 2015 8:14 AM Proof 8
2014
£’000
176,641
(148,483)
28,158
2013
£’000
156,254
(136,179)
20,075
2014
£’000
28,158
2013
£’000
20,075
2014
£’000
156,254
1,129
6,920
5
18,487
(6,154)
176,641
2014
£’000
136,179
6,088
8,029
4,761
5
(6,154)
(425)
148,483
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
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 130
notes to the financiaL statements continued
for the year ended 31 December 2014
27. retirement benefit obligations continued
Included in equities are 2,000,000 (2013: 2,250,000) ordinary 10p shares in Henry Boot PLC with a value at the year end of
£3,905,000 (2013: £4,500,000).
The current estimated amount of total contributions expected to be paid to the scheme during the 2015 financial year is
£4,739,000, being £4,734,000 payable by the Group and £5,000 payable by scheme members.
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.
28. operating leases
The Group as lessee
Minimum lease payments under operating leases recognised in the Statement of Comprehensive
Income for the year
2014
£’000
239
2013
£’000
181
At 31 December 2014, 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
2014
£’000
150
508
550
1,208
2013
£’000
63
32
—
95
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
2014
£’000
7,095
28,712
79,907
115,714
2013
£’000
7,094
27,596
59,822
94,512
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 131
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)
2014
£’000
1,420
8,042
(2,413)
(151)
159
2014
£’000
36
40
2013
£’000
1,140
8,451
(2,770)
(151)
104
2013
£’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.
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 63 to 71.
Short-term employee benefits
Post-employment benefits
Share-based payments
30. share capital
400,000 5.25% cumulative preference shares of £1 each
131,923,592 ordinary shares of 10p each (2013: 131,096,122)
2014
£’000
1,547
40
451
2,038
2013
£’000
1,399
47
485
1,931
Allotted, issued
and fully paid
2014
£’000
400
13,192
13,592
2013
£’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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 132
notes to the financiaL statements continued
for the year ended 31 December 2014
30. share capital continued
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. Grants of options to
participating employees were made on 26 october 2011 at a price of 106.0p at a discount of just over 10% of the prevailing
market price and 23 october 2014 at a price of 172.0p at a discount of just over 9.5%. These become exercisable for a six
month period from 1 December 2014 and 1 December 2017 respectively. 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
october 2014 grant
options
outstanding
at
31 December
2013
804,365
options
granted
—
— 1,155,814
options
outstanding
at
31 December
2014
97,124
— 1,147,862
options
exercised
698,799
options
lapsed
8,442
7,952
The weighted average share price at the date of exercise for share options exercised during the period was 185.31p (2013:
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 73.
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
2014
number
1,559,582
(419,389)
(386,850)
539,935
1,293,278
2013
Number
1,755,068
(251,133)
(283,132)
338,779
1,559,582
The weighted average share price at the date of exercise for share options exercised during the period was 196.50p (2013:
171.41p).
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 133
30. share capital 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. The second grant of options under the plan
was made to certain senior employees (none of whom at the time were Directors of Group companies) on 1 october 2014 at an
option price of 191.0p. There were no performance conditions imposed on either of these grants.
May 2011 grant
october 2014 grant
options
outstanding
at
31 December
2013
222,478
—
options
granted
—
165,000
options
lapsed
—
—
options
exercised
158,478
—
options
outstanding
at
31 December
2014
64,000
165,000
The weighted average share price at the date of exercise for share options exercised during the period was 200.57p (2013:
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
178.4p
31.73% to 32.35%
3 years
0.31% to 1.26%
3.16% to 3.56%
CSoP
2011 grant
121.5p
121.5p
41.47%
3 years
1.67%
5.02%
CSoP
2014 grant
191.0p
191.0p
31.17%
3 years
1.23%
3.16%
Sharesave
2011
106.0p
115.5p
37.14%
3 years
0.86%
5.02%
Sharesave
2014
172.0p
181.0p
31.45%
3 years
0.82%
3.16%
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 51.60p (2013: 79.14p).
expense recognised in the Statement of Comprehensive income
The total expense recognised in the Statement of Comprehensive Income arising from
share-based payment transactions
2014
£’000
423
2013
£’000
429
The total expense recognised in the Statement of Comprehensive Income arose solely from equity-settled share-based payment
transactions.
23804.04 13 April 2015 8:14 AM Proof 8
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notes to the financiaL statements continued
for the year ended 31 December 2014
31. reserves
group
At 1 January 2013
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
Profit for the year
Dividends paid
Premium arising from shares issued
Movements in fair value of cash flow
hedge
Deferred tax on fair value movements of
cash flow hedge
Arising on employee share schemes
Unrecognised actuarial loss
Deferred tax on actuarial loss
at 31 December 2014
parent company
At 1 January 2013
Profit for the year
Dividends paid
Unrecognised actuarial gain
Deferred tax on actuarial gain
Arising on employee share schemes
At 31 December 2013
Profit for the year
Dividends paid
Premium arising from shares issued
Unrecognised actuarial loss
Deferred tax on actuarial loss
Arising on employee share schemes
at 31 December 2014
Property
revaluation
£’000
3,271
Retained
earnings
£’000
160,692
— 11,315
(6,358)
—
Capital
redemption
£’000
271
—
—
Share
premium
£’000
3,134
—
—
other
Capital
£’000
209
—
—
Hedging
£’000
(117)
—
—
—
—
—
84
—
—
—
3,355
—
—
199
8,537
(2,447)
171,938
— 21,169
(6,886)
—
—
—
—
—
—
—
—
(191)
— (10,458)
2,092
—
177,664
3,355
Retained
earnings
£’000
41,153
11,342
(6,358)
8,537
(2,447)
72
52,299
8,541
(6,886)
—
(10,458)
2,092
(332)
45,256
Capital
redemption
£’000
271
—
—
—
—
—
271
—
—
—
—
—
—
271
—
—
—
—
—
—
271
—
—
—
—
—
—
—
—
271
Share
premium
£’000
3,134
—
—
—
—
—
3,134
—
—
817
—
—
—
3,951
—
—
—
—
—
—
3,134
—
—
817
—
—
—
—
—
3,951
other
—
—
—
—
—
—
209
—
—
—
—
—
—
—
—
209
92
(23)
—
—
—
—
(48)
—
—
—
52
(10)
—
—
—
(6)
Capital
£’000
211
—
—
—
—
—
211
—
—
—
—
—
—
211
Investment
revaluation
£’000
1,135
—
—
—
—
—
1,135
—
—
—
—
—
—
1,135
Total
other
£’000
3,497
—
—
92
(23)
—
—
—
—
3,566
—
—
817
52
(10)
—
—
—
4,425
Total
other
£’000
4,751
—
—
—
—
—
4,751
—
—
817
—
—
—
5,568
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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 135
31. reserves continued
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.
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
2014
£’000
188
1,010
(648)
550
2013
£’000
444
—
(256)
188
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 2014, the Trustee held 283,175 shares (2013: 239,832 shares) with a cost of £549,831 (2013: £188,116) and
a market value of £552,899 (2013: £479,664). 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.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYFINANCIAL STATEMENTS 136
notes to the financiaL statements continued
for the year ended 31 December 2014
33. cash generated from operations
Group
Parent Company
Profit before tax
Adjustments for:
Amortisation of PFI asset
Goodwill impairment
Depreciation of property, plant and equipment
Revaluation (increase)/decrease in investment
properties
Amortisation of capitalised letting fees
Share-based payment expense
Pension scheme credit
Movements on provision against investments in
subsidiaries
Movements on provision against loans to subsidiaries
Profit on disposal of assets held for sale
Gain on disposal of property, plant and equipment
Gain on disposal of investment properties
Finance income
Finance costs
Share of profit of joint ventures
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 in receivables
Increase/(decrease) in payables
cash generated from/(used by) operations
Note
2014
£’000
28,312
2013
£’000
18,377
11
11
12
13
3
4
14
3
3
5
6
15
12
1,155
203
3,299
(1,950)
94
423
(2,375)
—
—
(122)
(459)
(284)
(714)
1,550
(1,187)
1,140
204
3,086
1,563
88
429
(1,921)
—
—
—
(406)
(304)
(694)
1,526
(183)
27,945
22,905
(3,670)
580
24,855
(22,366)
(157)
12,525
14,857
(3,303)
471
20,073
(9,106)
(5,129)
(4,294)
1,544
2014
£’000
8,681
—
—
50
—
—
282
(2,375)
(440)
—
—
(8)
—
(15,855)
3,383
—
(6,282)
—
—
(6,282)
—
(488)
9,297
2,527
2013
£’000
11,580
—
—
44
—
—
302
(1,921)
9,652
(3,854)
—
(10)
—
(25,300)
3,726
—
(5,781)
—
—
(5,781)
—
(2,189)
(11,291)
(19,261)
34. 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.
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35. 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 2014, 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
Investments (North West) Limited
Road Link (A69) Limited
Stonebridge Projects Limited
Stonebridge offices Limited
Winter Ground Limited
Proportion of ownership
100%
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
Property development
PFI road maintenance
Property development
Property investment and development
Property investment and development
During the previous 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 2013 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 deems 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.
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THRoUGH A STRoNG
SHAREHoLDER BASE
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sHaReHolDeR inFoRMation
140 Property Valuers’ Report
141 Additional Shareholder
Information
144 Notice of Annual General
Meeting
155 Financial Calendar
155 Advisers
IBC Group Contact Information
IBC Glossary
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140
property VaLuers’ report
City Point
29 King Street
Leeds LS1 2HL
tel +44 (0) 113 244 6440
fax +44 (0) 113 245 4664
www.jll.co.uk
the Directors
Henry Boot PLC
Banner Cross Hall
Ecclesall Road South
Sheffield
S11 9PD
31 December 2014
Dear Sirs
henry boot pLc
Group property portfolio valuation as at 31 December 2014
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 2014. The valuations have been prepared in
accordance with RICS Valuation – Professional Standards (January 2014) published 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 regard to 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 2014, is:
Freehold properties
Leasehold properties
Mixed tenure properties
total
£96,779,875
£6,850,000
£225,000
£103,854,875
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 30 Warwick Street, London W1B 5NH
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aDDitionaL sharehoLDer 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 the 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.
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 2015, the ordinary shares represent 97.06% of the total issued
share capital of the Company by nominal value and the preference shares represent 2.94% 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 144 to 154 includes the following resolutions:
• an ordinary resolution (Resolution 14) to renew the authority of the Directors to allot shares up to a maximum nominal amount
of £4,399,683 representing approximately one-third (33.33%) of the Company’s issued ordinary share capital at 20 March
2015. The authority will expire on 20 August 2016 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;
• a special resolution (Resolution 15) 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 nominal value of such allotments does not exceed £660,000 (approximately 5% of the
Company’s issued ordinary share capital at 20 March 2015). The authority will expire on 20 August 2016 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
• a special resolution (Resolution 16) to renew the authority of the Company to make market purchases of up to 11,055,000
of its own issued ordinary shares (8.38% of the Company’s issued ordinary share capital at 20 March 2015). 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.
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:
• 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;
• 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
• 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.
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aDDitionaL sharehoLDer information continued
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:
• a resolution is proposed directly affecting the rights or privileges of the holders of the preference shares as a separate class;
or
• 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.
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
21 May 2015 are set out in the Notice of AGM on pages 152 to 154.
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.
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:
• in respect of only one class of shares;
• in favour of no more than four transferees;
• duly stamped or exempt from stamp duty;
• delivered to the office or at such other place as the Board may decide for registration; and
• 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.
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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 reappointment. 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 reappointed 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:
• the Company’s share schemes and plans; and
• 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.
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notice of annuaL generaL meeting
THIS DoCUMENT IS IMPoRTANT and requires your immediate attention. If you are in any doubt about the action you should
take, you should immediately consult your stockbroker, bank manager, solicitor, accountant or other independent professional
adviser authorised under the Financial Services and Markets Act 2000. If you have sold or otherwise transferred all your shares
in Henry Boot PLC, please forward this document and the accompanying Form of Proxy to the person through whom the sale or
transfer was effected, for transmission to the purchaser or transferee.
The Board of Henry Boot PLC considers all of the proposed resolutions to be in the best interests of shareholders as a whole
and accordingly recommends that shareholders vote in favour of all the resolutions proposed.
notice of annual general meeting
Notice is hereby given that the Annual General Meeting (AGM) of Henry Boot PLC (Company) will be held at Baldwins omega,
Brincliffe Hill, off Psalter Lane, Sheffield S11 9DF on Thursday 21 May 2015 at 12.30pm for the following purposes:
To consider and if thought fit, pass the following resolutions, which will be proposed as ordinary resolutions of the Company.
Resolution 1
To receive the Directors’ Report, Auditors’ Report, Strategic Report and the Financial Statements for the year ended
31 December 2014.
Resolution 2
To declare a final dividend of 3.50p per ordinary share.
Resolution 3
To approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration policy) for the year
ended 31 December 2014.
Resolution 4
To approve the Directors’ Remuneration policy contained in the Directors’ Remuneration Report for the year ended
31 December 2014.
Resolution 5
To reappoint J E Brown as a Director of the Company.
Resolution 6
To reappoint E J Boot as a Director of the Company.
Resolution 7
To reappoint J T Sutcliffe as a Director of the Company.
Resolution 8
To reappoint M I Gunston as a Director of the Company.
Resolution 9
To reappoint J J Sykes as a Director of the Company.
Resolution 10
To reappoint PricewaterhouseCoopers LLP as auditors of the Company.
Resolution 11
To authorise the Directors to fix the auditors’ remuneration.
Resolution 12
THAT the rules of the Henry Boot PLC Long Term Incentive Plan 2015 (LTIP), the principal terms of which are summarised in the
Appendix to this Notice of AGM and a copy of which having been produced to the meeting and initialled by the Chairman for the
purpose of identification, be and are hereby approved, the LTIP be and is hereby adopted and the Directors of the Company be
and they are hereby authorised to do all acts and things which they may consider necessary or expedient to give effect to the
LTIP.
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Resolution 13
THAT the amendments to the rules of the Henry Boot PLC 2010 Schedule 4 Company Share option Plan (CSoP) shown in the
marked-up copy of the rules of the CSoP presented to the meeting and summarised in the explanatory note of this resolution
on page 147 of the document of which this Notice of AGM forms part, be and are hereby approved and that the Directors be
and they are hereby authorised to do all acts and things necessary to carry such amendments into effect.
Resolution 14
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 £4,399,683, provided that (unless previously revoked, varied
or renewed) this authority shall expire on 20 August 2016 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).
To consider and if thought fit, pass the following resolutions, which will be proposed as special resolutions of the Company.
Resolution 15
THAT subject to the passing of Resolution 14 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 14 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 £660,000,
and (unless previously revoked, varied or renewed) this power shall expire on 20 August 2016 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).
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notice of annuaL generaL meeting continued
Resolution 16
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 20 August 2016; 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.
By order of the Board
r a Deards
Company Secretary
17 April 2015
henry boot pLc
Registered office:
Banner Cross Hall
Ecclesall Road South
Sheffield
United Kingdom
S11 9PD
Registered in England and Wales No. 160996
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147
explanatory notes about resolutions 4, 12 and 13 which we will be proposing at the agm
Resolution 4: approval of the Directors’ Remuneration policy
The Company obtained shareholder approval for its Directors’ Remuneration policy at its AGM in May 2014 and whilst it would
not normally need to seek fresh approval from its shareholders for its Remuneration policy until its AGM in 2017, the adoption
of the new long term incentive plan, which is the subject of a separate resolution at this year’s AGM (a description of which is
set out below), means that the Company also needs to propose a new Remuneration policy for its Directors to incorporate the
changes to the existing long term incentive plan made by the proposed new long term incentive plan. The key changes to the
Remuneration policy are set out in the summary of the proposed new long term incentive plan summarised in the Appendix to
this Notice. Approval of the new policy is sought in Resolution 4 and, if approved, the policy will take effect from the end of the
AGM and will replace the policy approved by shareholders in May 2014.
Resolution 12: Renewal of the Henry Boot plC long Term incentive plan
Resolution 12 is an ordinary resolution seeking the approval of shareholders to adopt a new long term incentive plan to
replace the Company’s existing long term incentive plan which expires in 2016.
The existing long term incentive plan was originally adopted in July 2006 for a period of ten years and therefore expires, and
no further awards can be made under it, after July 2016. Shareholder approval is now sought to adopt a replacement ten year
long term incentive plan. The new long term incentive plan will be similar to the existing plan, but will reflect current institutional
guidelines and market practice, for example in relation to change of control provisions, and will include malus and clawback
provisions under which awards may be reduced or taken back in whole or part if there has been any material misstatement of
accounts or misconduct by the participant in question. In the case of performance targets, it is proposed that, as now, these will
continue to be determined by the Remuneration Committee on an annual basis. Full disclosure of the performance targets used
are set out in the Company’s Annual Report and Financial Statements. The Remuneration Committee is committed to ensuring
that performance targets remain suitably challenging, as detailed on page 147 of the Directors’ Remuneration Report, which
was overwhelmingly approved by shareholders at the AGM held on 22 May 2014. Assuming shareholder approval is given for
the new long term incentive plan, no further awards will be granted under the existing plan.
A summary of the principal terms of the proposed LTIP is set out in the Appendix to this Notice.
Resolution 13: amendment of the Henry Boot plC 2010 Schedule 4 Company Share Option plan
In 2010, the shareholders of the Company approved the adoption by the Company of an HMRC approved company share
option plan (now called a Schedule 4 CSoP Scheme) (CSoP) under which employees and full-time Directors can be granted
tax-efficient options to acquire ordinary shares in the Company (shares) at an exercise price equal to the market value of a share
at the date of grant. In accordance with the Schedule 4 CSoP Scheme legislation, an individual may only hold outstanding
Schedule 4 CSoP Scheme options over a maximum of £30,000 of shares (such value being measured at the date of grant) at
any one time. It is proposed to amend the CSoP to allow non-tax-advantaged options to be granted in excess of this £30,000
limit, up to a maximum of 200% of annual basic salary. In all other respects, the rules of the CSoP will remain the same.
A copy of the proposed rules of the LTIP, and of the rules of the CSoP marked up to show the proposed amendments, will be
available for inspection at the registered office of the Company and at the offices of DLA Piper UK LLP, 3 Noble Street, London,
EC2V 7EE during usual business hours on weekdays (public holidays excluded) from the date of this Notice until the date of the
AGM and at the place of the AGM from at least 15 minutes prior to and until the conclusion of the AGM.
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notice of annuaL generaL meeting continued
appendix - Key features of the long term incentive plan 2015 (Ltip)
1. overview
Under the LTIP, employees and full-time Directors may be awarded rights to acquire ordinary shares in the capital of the
Company (Shares) subject to the achievement of performance conditions.
The LTIP will replace the existing Henry Boot PLC Long Term Incentive Plan which expires in July 2016 and no further
awards will be made under that plan following the approval of shareholders to the LTIP.
operation of the LTIP will be facilitated by the Henry Boot & Sons PLC Employee Trust (EBT) established by the Company
on 23 July 1990. The LTIP will be administered by the Remuneration Committee of the Company (Remuneration Committee)
which will make awards under the LTIP, and it is intended that the EBT will satisfy such awards using Shares which it will
either subscribe for from the Company or purchase in the market. The Trustee of the EBT is Moore Street Securities Limited,
a subsidiary of Henry Boot PLC, of which the directors are J E Brown, J T Sutcliffe and R A Deards.
2. Participation and grant of awards
All employees and all full-time Directors are eligible to be considered for the grant of awards under the LTIP. Awards will take
the form of nominal cost options (options) which will become exercisable (vest) subject to the achievement of performance
criteria.
Generally, options may only be granted in the six week period following the adoption of the LTIP and thereafter, only in the
six week period following the announcement by the Company of its results for any period. However, in circumstances which
the Remuneration Committee considers exceptional, awards may be made outside these six week periods.
3.
Individual participation limit
The maximum value of Shares over which an option under the LTIP may be granted to a participant (Participant) in
any financial year of the Company may not exceed 200% of his basic salary for that financial year (or for the preceding
financial year, if greater) unless circumstances arise which the Remuneration Committee believes justifies granting an
option in excess of this limit. The Remuneration Committee would only envisage overriding the 200% in limit in exceptional
circumstances such as where there was a need to do so to attract a new executive. However, notwithstanding the 200%
participation limit in the rules of the LTIP, the current intention is for options to remain within the existing policy limit of 100%
of basic salary as stated in the Directors’ Remuneration Report of the Company’s Annual Report and Financial Statements.
4. Performance targets
For options granted in 2014 under the existing long term incentive plan, the Remuneration Committee adopted new
performance targets pursuant to which one-third of the 2014 awards will vest based on profit growth, one-third based on
comparative TSR and one-third based on RoCE growth. Details are set out in the Directors’ Remuneration policy section
of the Directors’ Remuneration Report in the Company’s Annual Report and Financial Statements. The Remuneration
Committee intends to utilise those performance targets for awards to be made in the current financial year and for future
awards. Shareholder approval will be sought for any change to this policy which may be proposed prior to the next
occasion on which shareholders will vote generally on the Directors’ Remuneration policy.
To the extent that any specified performance conditions are not satisfied, options will lapse.
The Remuneration Committee retains discretion to amend the performance targets attached to options where events
happen or circumstances arise which cause the Remuneration Committee reasonably to consider that any performance
targets which apply no longer represent a fair measure of performance.
5. Exercise of options and retention of shares
options will normally vest no earlier than three years from the date of grant, subject to the achievement of performance
conditions and to continued employment.
An option will normally only be exercisable to the extent vested and, once vested, it will normally remain exercisable for up
to ten years from the date of grant, at the end of which period it will lapse.
Notwithstanding vesting of an option, and subject to a relaxation to enable the sale of such number of Shares as may
be required to meet any tax liability arising on exercise, and subject to certain other limited exceptions, Participants will
be required to retain any options that vest, or retain Shares acquired on exercise of vested options, for a period of two
years after the vesting date. Leavers will also, in principle, be subject to the same retention requirement, although the
Remuneration Committee will have discretion to determine that the retention requirement shall not apply, or shall apply for a
shorter period.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 149
6. Cessation of employment
Participants who leave employment with Henry Boot PLC Group (Group) will normally forfeit any unvested options.
However, if a Participant ceases to be employed within the Group as a result of death, ill health, injury or disability,
redundancy, retirement or by reason only that his employment is in a company of which the Company will cease to have
control or that his employment relates to a part of the business which is transferred to a person which is not a member of
the Group (good leaver), that Participant (or his personal representatives if he has died) will be allowed to retain his unvested
options which will vest, subject to the achievement of any applicable performance conditions, on the normal date as if that
Participant had continued in employment within the Group. However, the number of Shares in respect of which the option
will vest will then be reduced on a pro rata basis to take account of the period of time since the date of grant during which
the Participant was not an employee (unless the Remuneration Committee determines not to apply such pro-rating and to
allow vesting to a greater or lesser extent).
Notwithstanding this, the Remuneration Committee may instead determine that an option granted to a good leaver may
vest early when he leaves, to the extent to which, at the date of cessation of employment, the performance conditions
applicable to that option have been satisfied (as determined by the Remuneration Committee acting reasonably), and
on a pro rata basis taking into account the period of time which has elapsed since the option was granted (unless the
Remuneration Committee determines not to apply such pro-rating and to allow vesting to a greater or lesser extent).
To the extent that options held by a good leaver have vested or vest, they may be exercised for a period of six months (or
12 months in the case of death) following the date of cessation of employment, or following vesting if later, (or such longer
period as the Remuneration Committee determines) and will otherwise lapse at the end of that period.
A Participant who leaves for a reason other than one specified above will normally forfeit his unvested options, unless the
Remuneration Committee in its discretion determines to treat such Participant as if he were a good leaver.
Participants who are dismissed for gross misconduct will forfeit all unexercised options, whether vested or unvested.
The malus and clawback provisions summarised below will also apply to leavers.
7. Takeover
If there is a change of control of the Company, or a Court-sanctioned compromise or arrangement, or a voluntary winding
up, options will vest early. The number of Shares in respect of which options will vest will be calculated on the basis of
the extent to which the performance conditions applicable to those options have been satisfied as at the date of the
change of control (or other event). The resulting number of Shares will then be reduced on a pro rata basis to reflect the
reduced period between the date the option was granted and the date of the change of control (or other event), unless the
Remuneration Committee decides otherwise.
Where appropriate, for example in the case of an amalgamation or reconstruction of the Company, with the consent of
the acquiring company, Participants may be required or allowed to exchange options so as to operate over shares in the
acquiring company.
on the occurrence of any demerger, reorganisation, reconstruction or amalgamation or other transaction of the Company
which in the reasonable opinion of the Remuneration Committee may affect the value of any option, the Remuneration
Committee may vary or alter in any manner whatsoever the terms of any option so as to preserve the overall value of the
option. Such alteration may include amending any performance condition and/or the terms on which an option vests, and
may provide for immediate vesting in whole or in part on such event (but in the latter case taking into account the extent to
which any applicable performance conditions have been satisfied at the time of such event and the period of time since the
grant of the option).
8. Dividend equivalent
on vesting of options, Participants may be awarded additional Shares or cash equal in value/amount to dividends paid
during the performance period in respect of a number of Shares equal to the number in respect of which the option has
vested.
9. Malus and clawback
Awards may be granted on terms that the Remuneration Committee may decide at the time of vesting or exercise of
an option, or at any time before, that the number of Shares subject to the option shall be reduced on such basis as it
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSHAREHOLDER INFORMATION 150
notice of annuaL generaL meeting continued
determines to be fair and reasonable, if it determines that there has been a material misstatement in the audited accounts of
any company within the Group or in the consolidated accounts of the Company, or that the assessment of any performance
condition applicable to that option was based on a material error, or materially inaccurate or misleading information, or in
the case of action or conduct of the Participant which amounts to fraud or gross misconduct or has a material detrimental
effect on the reputation of the Group.
In addition, awards may be granted on terms that the Remuneration Committee may apply clawback to all or a part of a
Participant’s option in the circumstances set out above during the period of two years (or such other period not exceeding
two years as the Remuneration Committee may determine) following vesting of the option. Clawback may be effected by
requiring the transfer of Shares or payment of net proceeds of sale of Shares acquired on vesting/exercise.
10. Dilution limits
The number of new Shares over which awards may be granted under all of the discretionary plans operated by the
Company, including any awards made under the LTIP, may not, in any ten year period, exceed 5% of the number of Shares
in issue from time to time. In addition, in any ten year period, no more than 10% of the Company’s issued Shares may be
committed under all employee share plans operated by the Company.
For so long as institutional guidelines recommend, Shares transferred from treasury to satisfy awards will count as newly
issued shares for these purposes.
Awards and options which have lapsed or been surrendered will not count towards these dilution limits.
11. Taxation
Income tax and national insurance contributions (NICs) will be payable on the value of the Shares which a Participant
acquires on exercise of an option. Under the terms of the Plan, Participants agree to pay the income tax and NICs which
arise. To the extent permitted by law, such NICs may include employer NICs. It will be a condition of acquiring Shares that
appropriate arrangements are in place to ensure that the Participant’s employer is put in funds by the Participant to meet
these income tax and NICs liabilities.
12. Variation of share capital
In the event of any increase or variation of share capital by way of capitalisation, rights issue, sub division, consolidation or
reduction of share capital, or otherwise, the number and/or description of Shares over which an option has been granted
and the option exercise price may be adjusted by the Remuneration Committee as it determines to be appropriate.
13. Amendment of the LTIP
The terms of the LTIP may be amended by the Remuneration Committee.
However, certain amendments which would benefit Participants may not be made without prior shareholder approval unless
the amendments are minor amendments which are to benefit the administration of the LTIP or are necessary or desirable
to comply with or take account of applicable legislation or any change therein or to obtain or maintain favourable taxation,
exchange control or regulatory treatment for the Company (or any Group company) or for Participants. An amendment may
not normally adversely affect the rights of a Participant except with such Participant’s consent.
The provisions which may not generally be amended without shareholder approval are to: the basis for determining an
eligible individual’s entitlement (or otherwise) to be granted an option and/or to acquire Shares on the exercise of an option
under the LTIP, the persons to whom an option may be granted, the individual and overall limits on the number of Shares
over which options may be granted, the price at which Shares may be acquired under an option, and the adjustment of
options on a variation of share capital.
14. Term of the LTIP
The life of the LTIP will be ten years and no awards may therefore be made more than ten years after the date of the
approval of the LTIP by shareholders in general meeting.
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 151
15. Pension status
None of the benefits which may be received under the LTIP will be pensionable.
16. Changes To Directors’ Remuneration policy in the new LTIP
The introduction of the LTIP will result in the following key changes to the Directors’ Remuneration policy as compared to
that stated in the Company’s 2013 Annual Report & Financial Statements. These are all changes to the policy relating to the
long term incentive plan only:
16.1 in the policy table:
• the LTIP rules will permit grants up to 200% of salary (rather than 120%) on an annual basis. However, as noted
above, the intention is for awards to remain within the current policy of 100% of salary;
• there will be a two year post-vesting holding period during which employees and Directors will generally not be
able to dispose of the Shares acquired on exercise of options. This will in principle apply to leavers, although the
Remuneration Committee will have discretion to determine that the retention requirement shall not apply, or shall
apply for a lesser period; and
• malus and clawback provisions will apply as described above, and these will also apply to leavers.
16.2 in relation to the treatment of LTIPs in the table relating to the payment for loss of office policy, the Remuneration
Committee will have discretion if they consider it appropriate to allow a good leaver’s options to vest at the time
of cessation of employment (on a pro rata basis by reference to performance and time since grant to the date of
cessation).
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Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHYSHAREHOLDER INFORMATION
152
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 19 May 2015 (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, PXS, 34 Beckenham Road, Beckenham BR3 4TU, no later than 12.30pm on
19 May 2015 (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 19 May 2015 (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 19 May 2015 (or, if the meeting is adjourned, 48 hours (excluding any part of a day
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY 153
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.
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.
ii.
it may not require the shareholders making the request to pay any expenses incurred by the Company in complying
with the request;
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.
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154
notice of annuaL generaL meeting continued
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. As at 2 April 2015 (being the last practicable date before the publication of this notice), the Company’s issued ordinary share
capital was 131,990,492 ordinary shares, carrying one vote each and representing the total number of voting rights in the
Company.
23804.04 13 April 2015 8:14 AM Proof 8
Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2014www.henryboot.co.ukStock Code: BHY Henry Boot PlC
Annual Report and Financial Statements for the year ended 31 December 2014
www.henryboot.co.uk
Stock Code: BHY
155
annuaL generaL meeting
21 May 2015
DiViDenDs paiD on orDinary shares
2014 final dividend date (subject to approval at agm):
29 May 2015
2015 interim dividend date (subject to approval):
end october 2015
financiaL caLenDar
LonDon stocK eXchange announcements
preliminary statement of results 2014:
26 March 2015
first 2015 interim management statement:
early May 2015
half-yearly results 2015:
28 August 2015
second 2015 interim management statement:
mid November 2015
trading update 2015:
end January 2016
annuaL report anD financiaL statements 2014
anD haLf-yearLy report 2015
annual report and financial statements 2014
(available and online):
by 17 April 2015
half-yearly report 2015 (available and online):
early September 2015
aDVisers
chartered accountants and statutory auditors
PricewaterhouseCoopers LLP
St Paul’s Place
121 Norfolk Street
Sheffield S1 2LE
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
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
23804.04 13 April 2015 8:14 AM Proof 8
23804.04 13 April 2015 8:14 AM Proof 8
gLossary
We have used some terms in this
report to explain how we run our
business that might be unfamiliar
to you. The following list gives a
definition for some of the more
frequently used terms:
Localism bill
A bill to devolve greater powers
to councils and neighbourhoods
and give local communities more
control over housing and planning
decisions.
commercial property
This refers to buildings or land
intended to generate a profit, either
from capital gain or rental income,
such as office building, 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
net asset value per share (naV)
Equity shareholders’ funds divided
by the number of shares in issue at
the balance sheet date.
operating profit
Profit earned from a company’s
core activities.
option agreement
A legal agreement between a
landowner and another party for
the right to buy land within a set
time scale at the conclusion of a
satisfactory planning permission.
ordinary share
Any shares that are not preferred
shares and do not have any
predetermined dividend amounts.
An ordinary share represents
equity ownership in a company
and entitles the owner to a vote in
matters put before shareholders
in proportion to their percentage
ownership in the company.
planning promotion agreement
(ppa)
A legal agreement between a
landowner and another party
for a set time scale and financial
consideration to promote land
through the UK planning system.
ifrs
International Financial Reporting
Standard
pre-let
A lease signed with a tenant prior
to completion of a development.
inventory value
The determination of the cost of
unsold inventory at the end of the
accounting period.
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).
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.
subsidiary company
A company whose voting stock
is more than 50% controlled by
another company, usually referred
to as the parent company or
holding company. A subsidiary
is a company that is partly or
completely owned by another
company that holds a controlling
interest in the subsidiary company.
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.
trading profit
The difference between an
organisation’s sales revenue and
the cost of goods sold.
uK planning system
This system consists of the
process of managing the
development of land and buildings.
The purposes of this process are
to save what is best of our heritage
and improve the infrastructure
upon which we depend for a
civilised existence.
23804.04 13 April 2015 8:14 AM Proof 8
group contact information
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
Head office
Stocksfield Hall, Stocksfield, Northumberland,
NE43 7TN
t: 01661 842842
e: enquiries@roadlinka69.co.uk
Land Development
Hallam Land Management Limited
Head office
Banner Cross Hall, Ecclesall Road South, Sheffield,
S11 9PD
t: 0114 255 5444
e: info@hallamland.co.uk
w: www.hallamland.co.uk
Regional offices: Bristol, Glasgow, Leeds, London,
Manchester and Northampton
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
1, Featherbank Court,
Horsforth, Leeds,
LS18 4QF
t: 0113 357 1100
e: sales@stonebridgehomes.co.uk or
info@stonebridgeoffices.co.uk
w: www.stonebridgehomes.co.uk or
www.stonebridgeoffices.co.uk
Visit us online
For more information on Henry Boot PLC please visit our website at
www.henryboot.co.uk
Printed on Cocoon Silk 100.
A recycled paper containing 100% recycled waste and manufactured
at a mill certified with ISO 14001 environmental management standard.
Fully recyclable and biodegradable.
The pulp used in this product is bleached using an Elemental Chlorine Free process. (ECF)
23804.04 13 April 2015 8:14 AM Proof 8
Further copies of the 2014
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
e: cosec@henryboot.co.uk
www.henryboot.co.uk
23804.04 13 April 2015 8:14 AM Proof 8