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1886 – 2016
ONE HENRY BOOT
Henry Boot PLC
Annual Report and Financial Statements
for the year ended 31 December 2016
www.henryboot.co.uk
Stock code: BHY
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WELCOME TO OUR
2016 ANNUAL REPORT
Established in 1886, we are one of the UK’s leading land promotion,
property investment and development, and construction companies.
S T R A T E G I C B U S I N E S S
M A N A G E R
AREA
MANAGER
ASSISTANT DEPOT
MANAGER
REGIONAL
MANAGER
SENIOR DEVELOPMENTS
SURVEYOR
TRUSTEE
DIRECTOR
LAND
BUYER
ACCOUNTS
ADMINISTRATOR
SECRETARY
S A L E S & O P E R A T I O N S
D I R E C T O R
SENIOR PROJECT
MANAGER
SHEQ
ADVISOR
ACCOUNTS
ADMINISTRATOR
DEVELOPMENT
SURVEYOR
ACCOMODATION
CHARGEHAND
P R O J E C T
E N G I N E E R
ASSISTANT
HR ADVISOR
Y
T I T
N
O
R
A
Y
U
E
J
O
R
P
T Q
V
R
C
U
E
S
R
A
R
A M A N A G E
Y O F
R
A
T
E
A
R
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C
T
A D M I N I S
E
E
S
E
F I C
T O R
T
N I S
T I O
P
E
C
E
R
OUR CULTURE MEANS THAT WE HAVE
A UNIQUE AND COHESIVE APPROACH
TO DOING BUSINESS.
Read more about our One Henry Boot project on pages 14 and 15 and our People
on pages 40 to 42
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Quick content finder
Chairman’s Statement
Our Business Model
“ I am delighted to report a 22% increase
in profit before tax to £39.5m for the year
ended 31 December 2016.”
Our ability to deliver long-term value
for shareholders is underpinned by our
business model.
Read the Chairman’s Statement
on pages 06 and 07
Read about our Business Model
on pages 10 to 13
One Henry Boot
Segmental Reviews
In January 2016 we began a fresh
focus on how the Henry Boot Group of
Companies can better work together.
Land Promotion, Property Investment and
Development, and Construction.
Read about Land Promotion
on pages 24 and 25
Read about Property Investment and
Development on pages 26 and 27
Read about the One Henry Boot project
on pages 14 and 15
Read about Construction
on pages 28 and 29
We maintain a corporate website
containing a wide range of information
of interest to investors and stakeholders:
www.henryboot.co.uk
Watch the Henry Boot Business Model
video within the online year in review at
www.henryboot.annualreport2016.com
Contents
OVERVIEW
Investment Case
2016 Highlights
Group at a Glance
Chairman’s Statement
STRATEGIC REPORT
Business Model – Our Operations
Business Model – Group Financial Strength
One Henry Boot
Our Strategy
Segmental Case Studies
Key Performance Indicators
Segmental Reviews:
Land Promotion
Property Investment and Development
Construction
Financial Review
Risks and Uncertainties
Corporate Responsibility
GOVERNANCE
Board of Directors
Senior Management
Chairman’s Introduction
Corporate Governance Statement
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated Statement of
Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Principal Accounting Policies
Notes to the Financial Statements
SHAREHOLDER INFORMATION
Property Valuers’ Report
Notice of Annual General Meeting
Financial Calendar
Advisers
Group Contact Information
Our Group Locations
Glossary
Getting around the Report
Read more details
in this Report
Read more details at
www.henryboot.co.uk
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IBC
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 — Providing reliable earnings through cyclical markets with good visibility from the opportunities under control.
— Prudent debt levels and a disciplined approach to risk management.
— Reinvestment of cash generated in the construction segment into strategic land and commercial development
— We aim to provide dividend growth whilst maintaining three times cover to allow for investment in future
INVESTMENT
CASE
FIVE KEY DRIVERS
OF GROWTH
— Underlying profit produced within our three business segments:
— 11,888 acres of strategic land on 165 sites throughout the UK.
— Construction
— Land Promotion
— Property Investment and Development
assets to enhance returns to shareholders.
opportunities without diluting existing shareholders.
1 Good financial track record over the long term
2 A long established and efficient capital structure
3 Delivering residential communities
4 Delivering Commercial Opportunity
5 Shareholder Returns
— Dividend has increased by 180% over the last ten years.
bank is well positioned to benefit from this process.
with 16,417 secured planning permission plots.
output of 100 unit sales per year.
construction.
three years.
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— Our strategic land business has the scope to deliver 50,000 to 60,000 housing units over the next 10 to 20 years,
— Given the well documented housing shortages and the government’s desire for more housing delivery our land
— A commercial development portfolio with £800m plus of Gross Development Value is to be delivered over the next
— We should see the delivery of over two million sq ft of industrial and logistic space over the next five years through
our regional industrial developments sites at Markham Vale, Thorne, Southend Airport, Luton and the M62 corridor.
— A small but quickly growing jointly owned housebuilder with a land bank of over 600 units with a future planned
— Our long-term strategic aim is to create shareholder value through land promotion, property development, and
— Strong organic growth drivers and capital allocation across our three business segments.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 2016
HIGHLIGHTS
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
CONSISTENT
PERFORMANCE
Financial Highlights
Profit before tax
+22%
Net debt
-15%
Operating profit
+25%
£39.5m
£32.9m
£39.5m
16
15
14
13
12
£39.5m
£32.4m
£28.3m
16
16
16
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16
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15
15
15
15
14
14
14
14
14
13
13
13
13
13
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12
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£32.9m
£32.9m
£32.9m
£32.9m
£32.9m
£38.9m
£38.9m
£38.9m
£38.9m
£38.9m
£36.4m
£36.4m
£36.4m
£36.4m
£36.4m
£36.1m
£36.1m
£36.1m
£36.1m
£36.1m
16
15
14
13
12
£21.9m
£21.9m
£21.9m
£21.9m
£21.9m
£19.0m
£14.2m
£39.5m
£31.7m
£28.0m
£18.4m
£13.4m
Net asset value per
ordinary share
+5%
Earnings per ordinary
share
+23%
Dividends per
ordinary share
+15%
177p
16
15
14
13
12
21.5p
7.00p
177p
168p
152p
148p
139p
16
15
14
13
12
21.5p
17.5p
16.2p
16
15
14
13
12
8.6p
7.0p
7.00p
6.10p
5.60p
5.10p
4.70p
Highlights of the year
— Initial construction phase of the
Aberdeen Exhibition and Conference
Centre, at a cost of £333m, has
commenced.
— Completion of £35m Stocksbridge
development and commencement
of £35m Better Barnsley town centre
regeneration project.
— Over 16,000 strategic land plots with
planning permission, a further 10,000
plots in the planning process and
applications being prepared for another
10,000 plots in 2017.
— 70 properties completed by Stonebridge
Projects with an average sales value of
circa £266,000 per property.
— Record dividend of 7.00p, a 15%
increase.
— Creation of new Operations Board to
promote co-operation between all Henry
Boot Group companies.
— Commencement of the ‘One Henry
Boot’ project examining our culture,
purpose, vision and values.
Read more in the Financial Review
on pages 30 to 33
Read more about our ‘One Henry Boot’
project on pages 14 and 15
Read about Land Promotion
on pages 24 and 25
Read about Property Investment and
Development on pages 26 and 27
Read about Construction
on pages 28 and 29
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 GROUP AT
A GLANCE
EXPERTISE AND
EXPERIENCE
The strength of the business and our consistent growth is achieved through our Group
structure and diverse business segments.
Group Structure
Henry Boot PLC, the parent company, provides leadership, direction and support services to the business segments in a number of
areas, including health and safety, treasury and banking operations, accounts and payroll, company secretariat, pensions, legal, human
resources and training, public and investor relations, corporate communications, information communication technology and insurance.
Land
Promotion
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
Profit before tax
£39.5m
Group revenue
£306.8m
£11.0m
(£0.4m)
£17.7m
£84.4m
(£5.3m)
£51.2m
Read about Land Promotion
on pages 24 and 25
Read about Property Investment and
Development on pages 26 and 27
Read about Construction
on pages 28 and 29
Read more about Our Business Model
on pages 10 to 13
Read more about Our Strategy
on pages 16
£11.2m
£176.5m
Land Promotion
Land Promotion
Property Investment and Development
Property Investment and Development
Construction
Construction
Group Overheads/Eliminations
Group Overheads/Eliminations
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
OUR
SECTORS
LAND PROMOTION
PROPERTY INVESTMENT AND DEVELOPMENT
Hallam Land Management
Henry Boot Developments
Stonebridge Projects
The strategic land and planning
promotion arm of the Henry Boot
Group. 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.
Key sectors:
— Housing
— Sustainable communities
— Business parks
CONSTRUCTION
A major established leading force in
the UK with its considerable experience
and impressive reputation in all sectors
of property development.
The company has also built up an
investment portfolio of over £100m
in recent years.
A jointly owned company in the north of
England which develops family homes
that combine care, consideration
and attention to detail. The company
also provides high specification fully
serviced office space to small business
occupiers.
Key sectors:
— Retail, industrial, leisure, office space
Key sectors:
— Residential development
and commercial development
— Development partnerships
— Residential development
— Serviced office space
Henry Boot Construction
Banner Plant
Road Link (A69)
Specialising in serving both public
and private clients in all construction
and civil engineering sectors, we have
strong partnering relationships in the
education, healthcare and custodial
sectors, delivering new build and
refurbishment works on a long-term
strategic basis.
Offering a wide range of construction
equipment and services for sale and hire –
plant, temporary accommodation, power
tools, powered access, big air compressors
and serviced toilets. 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 has a 30-year contract
(nine years remaining) with Highways
England to operate and maintain the
A69 trunk road between Carlisle and
Newcastle upon Tyne. Works include
road resurfacing, bridge repairs, winter
preparation and routine maintenance.
Highways England pays Road Link
(A69) a shadow toll, which is a fee
based upon the number of vehicles
using the road and the mileage travelled
by those vehicles.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CHAIRMAN’S
STATEMENT
WELCOME TO THE
CHAIRMAN’S STATEMENT
I am pleased to report an overall strong performance during 2016, my first full year
as your Chairman.
“ Each of our three business segments
performed well, notwithstanding the
macroeconomic concerns after the
EU referendum result. As always,
the annual financial results and the
delivery of shareholder value over
the longer term is down to the talent,
commitment and hard work of all our
people.”
Jamie Boot
Chairman
I am delighted to report a 22% increase
in profit before tax to £39.5m for the year
ended 31 December 2016. Each of our
three business segments performed well,
notwithstanding the macroeconomic
concerns after the EU referendum result,
and we have built a strong pipeline of
schemes to be delivered over 2017-2019.
Retained earnings, offset in part by a
slightly higher pension scheme deficit,
resulted in the net asset value per share
rising to 177p from 168p with total capital
employed of £233.6m.
Hallam Land Management, our land
promotion business, continues to operate
in relatively stable market conditions. The
major UK house builders report that they
are replenishing land banks in line with
sales and the UK planning process was
largely unchanged over 2016. We continue
to have a good supply of permissioned
land for the house builders to draw on.
As noted in our 2015 Annual Report, 2016
saw the start of several larger commercial
developments for Henry Boot. Delivery of
major schemes at Aberdeen, Markham
Vale and York has progressed well in the
year and, in addition, we continue to work
on a number of smaller schemes. As many
of these projects are pre-sold, much of this
activity is reflected in 2016 turnover which
increased 74% to £306.8m. This increase
in activity also included 89 residential
completions at York and 70 completions
through our jointly owned house builder,
Stonebridge Projects.
The Construction segment once again
performed solidly, being underpinned by
the stable PFI income stream. Plant Hire
traded consistently well over the year and
although we saw slightly lower activity
from the Construction business, secured
contracts for 2017 will see activity move
forward once again.
Dividend
I am very pleased to report that the Board,
taking account of the strong result this year
and the positive outlook, is recommending
an increased final dividend of 4.50p per
share, giving a total for the year of 7.00p
(2015: 6.10p), an increase of 15% over
2015, and covered over three times by
earnings.
Payment of the final dividend is subject to
shareholder approval at the Annual General
Meeting and will be paid on 30 May 2017
to shareholders on the register as at 28
April 2017.
Our team
As highlighted in my previous report,
2016 saw the appointment of myself
as Chairman, three new Non-executive
Directors and promotions within our
Executive team. This new senior team
has worked productively together over
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 the course of the year. As always, the
annual financial results and the delivery of
shareholder value over the longer term is
down to the talent, commitment and hard
work of all our people. We aim to empower
and develop all our teams of talented
people to identify profitable schemes and,
on behalf of the Board and shareholders,
we thank them and look forward to
reporting on their further successes in
2017 and beyond.
Outlook
Our key strategic aim is to deliver value to
shareholders over the longer term. We are,
therefore, continually looking to acquire
new opportunities which create profit well
into the future. 2016 saw us increase both
the scale of our strategic land business
and the value of commercial developments
to be delivered over time.
2017 has started in line with our
expectations and the year ahead will see
us actively work on over ten commercial
development schemes, some of which
will take us through to 2019 and 2020.
Our strategic land business has a record
volume of sites and these sites are further
forward in planning terms than ever before.
Including sites with planning permission
already granted, those in the planning
process and sites where we anticipate
making an application within the current
year, we now have over 30,000 plots in
the pipeline. We continue to focus on the
profitable delivery of all these opportunities
and remain confident in our ability to
achieve this on behalf of our shareholders.
Jamie Boot
Chairman
21 April 2017
Recommended final dividend
4.50p
Turnover increased to over
£300m
Read the Financial Review
on pages 30 to 33
Read about the Board of Directors
on pages 50 and 51
Pictured ‘The Residence’, part of the
former Terry’s chocolate factory at York,
saw 89 residential apartment completions
during 2016.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 STRATEGIC
REPORT
Business Model – Our Operations
Business Model – Group Financial
Strength
One Henry Boot
Our Strategy
Segmental Case Studies
Key Performance Indicators
Segmental Reviews:
Land Promotion
10
13
14
16
17
20
24
Property Investment and Development 26
Construction
Financial Review
Risks and Uncertainties
Corporate Responsibility
28
30
34
39
The Directors present the Group Strategic Report
for the year ended 31 December 2016.
This report sets out how Henry Boot continues to
create consistent 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 8 to 45 has been
approved by the Board and signed on its behalf by
John Sutcliffe
Chief Executive Officer
Darren Littlewood
Group Finance Director
21 April 2017
Pictured 2016 saw completion of the £35m Fox
Valley retail park at Stocksbridge.
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BUSINESS MODEL –
OUR OPERATIONS
Open the flap
to read more
Our ability to deliver long-term value for
shareholders is underpinned by our business model.
Henry Boot operates across the whole property
value chain. We acquire land without planning
permission, obtain planning permission, develop
sites and maintain an investment portfolio.
Our people are at the heart of all that we achieve,
we develop skilled employees who deliver
profitable schemes with confidence.
Henry Boot PLC has six primary businesses, in three
segments:
Land Promotion
Hallam Land Management
Property Investment and Development
Henry Boot Developments and Stonebridge Projects
Construction
Henry Boot Construction, Banner Plant and Road Link (A69)
Investment into land acquisition and planning permission process
IDENTIFY OPPORTUNITIES
AND ACQUIRE LAND
OBTAIN PLANNING
PERMISSION
LAND
PROMOTION
PROPERTY INVESTMENT
AND DEVELOPMENT
LAND
PROMOTION
PROPERTY INVESTMENT
AND DEVELOPMENT
Hallam Land Management acquires mainly
agricultural land and then promotes it for its
highest value use. The use of agency and option
agreements, as opposed to buying all land
outright, means less expenditure on each asset,
allowing us to maximise the number of land
opportunities that we are involved in at any one
time. As investment is spread over many assets,
this reduces the overall risk of involvement in the
planning process and maximises the likelihood of
making a return on the capital invested.
Henry Boot Developments acquires mainly
brownfield land.
Gaining planning permission on land adds
immense value to its worth and is a crucial part
of the operations of both the Land Promotion
and Property Investment and Development
segments. Our high level of expertise in resolving
complex planning issues and our partnerships are
key enablers to achieving successful outcomes
in the promotion of sites through the planning
process. Maintaining close relationships with
key property advisers alerts us to potential
opportunities. Throughout the process, we work
closely with landowners, calling on the knowledge
and guidance of planning consultants and legal
advisers as required.
Hallam Land Management promotes land for
residential, commercial and retail consent.
Henry Boot Developments promotes land for
commercial development. Stonebridge Projects
promotes land for residential development.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 The businesses share ideas and working best practice with each other.
The six primary businesses within Henry Boot all operate
relatively autonomously within their respective business
segments, and it is rare that they will work on the same
assets. However, the businesses will work on the same
projects if the circumstances are right. For example, Henry
Boot Construction may act as a construction contractor for
the Property Investment and Development businesses, if it
tenders the best bid. The businesses share ideas and best
practice with each other.
The diversification of the Group activities strengthens the
business. Being involved in multiple sectors – residential,
retail and industrial development, construction and civil
engineering – means that we are not overly exposed to one
particular market. This enables us to weather the economic
landscape and deliver on our key objective of maximising
shareholder value.
Watch our Business Model video at
www.henryboot.co.uk
Read about our Group Financial Strength
on page 13
SALE
OF LAND
Cyclical
Revenue
DEVELOPMENT
OF SITE
LAND
PROMOTION
Once Hallam Land Management obtains
planning permission on a site, it is sold to a
developer, sometimes after infrastructure has been
installed. The amount of capital required to achieve
planning permission on a section of land is a very
small proportion of the total capital required for the
whole building process, from acquisition of land
without planning permission through to completion
of construction. This means that Hallam Land
Management is focused on maximising the most
profitable section of the housebuilding process for
the lowest amount of working capital.
Read more about Cyclical Revenue
on page 13
PROPERTY INVESTMENT
AND DEVELOPMENT
Unlike Hallam Land Management, when Henry
Boot Developments and Stonebridge Projects
gain planning permission for a site, they will develop
it themselves.
The ability that Henry Boot Developments
has to self-fund or source prefunding opens up
opportunities for the business. It means that they
do not require bank funding before agreeing to
development work and can commit to long-term
projects, such as complex multi-site regeneration
schemes.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
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CONSTRUCTION
Read more about
Recurring Revenue
on page 13
Recurring
Revenue
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
Our Construction division is formed from three
primary businesses: Henry Boot Construction,
Banner Plant and Road Link (A69). Henry Boot
Construction is a contractor specialising in serving
both public and private clients in all construction
and civil engineering sectors. Banner Plant offers a
wide range of services, and a high quality inventory
of equipment for hire and sale, such as temporary
accommodation, powered access equipment, tools
and non-man operated plant. Road Link (A69)
has a contract with Highways England to operate
and maintain the A69 trunk road between Carlisle
and Newcastle upon Tyne. Highways England pays
Road Link a fee based on the number of vehicles
using the road and the mileage travelled.
SALE OF
PROPERTY
Cyclical
Revenue
INVESTMENT
PORTFOLIO
Recurring
Revenue
PROPERTY INVESTMENT
AND DEVELOPMENT
Once a property is developed, it may be
immediately sold, generating significant revenue.
Properties may be retained by the business to form
part of the investment portfolio and may be sold at
a later time.
Read more about Cyclical Revenue
on page 13
PROPERTY INVESTMENT
AND DEVELOPMENT
A number of the finished property developments
are retained and managed by the Property
Investment and Development segment. The
property investment portfolio of Henry Boot
Developments is worth over £100m and
generates a sizable amount of rental income
each year.
Read more about Recurring Revenue
on page 13
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
12
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BUSINESS MODEL –
GROUP FINANCIAL STRENGTH
Bank funding
relationships
(only when
required)
GROUP
CASH
Investment into
land acquisition and
planning permission
process
P O TENTIAL
RECURRING
REVENUE
L
A
I
T
N
E
T
O
P
CYCLICAL
REVENUE
P
O
T
E
N
T
I
A
L
POTENTIAL
RECURRING REVENUE
The revenue from construction and the property
investment portfolio is regular and stable. This income
allows Henry Boot PLC to maintain long-term bank
funding relationships.
CYCLICAL REVENUE
Sale of land and property developments generates
cyclical revenue. These activities are riskier and give
varying amounts of profit through each economic cycle.
These profits, in good years, contribute significantly to the
stable profits from construction and property investment.
Investment into land acquisition and
planning permission process
Investing in the planning process and achieving planning
permission delivers significant value. However, the revenue
generated from sale of land and properties is not regular,
recurring income. Therefore, it would not be possible to
directly fund the Land and Property Development activity
through bank loans.
The only bank debts that the Group has are secured
against the investment properties and the housebuilding
inventory. A significant amount of equity has always been
retained in the business, which reduces the need for
borrowing. As a result of our financial structure, we can
invest in the more profitable areas of the business (strategic
land and property development) to maximise the value
generated while maintaining prudent gearing levels.
The property investment portfolio of Henry Boot
Developments is worth over £100m and generates a
sizeable amount of rental income each year. This recurring
revenue allows us to borrow money against the investment
portfolio at attractive rates, which may be invested into the
land and property development process. The Construction
segment is self-funded and cash generative. There is little
capital employed so income is used to invest in land and
development.
13
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
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ONE
HENRY BOOT
BETTER WORKING
TOGETHER
In January 2016 we began a fresh focus on how the Henry Boot Group of
Companies can better work together and ensure greater internal collaboration
between our companies.
The three teams of volunteers, with
representatives from all our companies,
are working with a third external
consultant, Slic Solutions Limited.
We involved volunteers as we want this
process of review to be drawing upon
experience from across the Group and
to benefit from the genuine thoughts and
feelings of our people.
By next year’s Annual Report we will be
able to present the results of this work.
Already, the ‘One Henry Boot’ project
has created a great deal of interest and
enthusiasm in the Group and we firmly
believe that this project will provide real
benefits to us all in the future.
The Board is committed to its role in
shaping, overseeing and embedding our
Vision, Values and behaviours.
Read more about our People
on pages 40 to 42
the perception audit. We then expanded
upon the project with a second
perception audit targeting a selection
of Henry Boot’s institutional investors
and analysts. This second survey was
conducted on our behalf by DuplexIR.
Our aim was to determine how well
the institutional investors and analysts
actually understood our business model
and how it worked, and what their
thoughts were in respect of our Purpose,
Strategy, Vision and Values.
Whilst the business (what we do) has
changed a lot in the past 130 years,
our culture (the way we do things)
has not. However, we realised that a
clearer communication of our business
model was essential and this year the
business model is presented in a new
format which we believe helps to explain
the crucial interaction between our
businesses and, therefore, the need
for a focus on Group working and co-
operation.
The ‘One Henry Boot’ project has now
been extended and we have created
three teams of employee volunteers
with the remit to consider the Vision and
Values of the Group as a whole. The
volunteers will also help bring the vision
and values to life by identifying real life
examples of behaviours in the workplace.
Our first course of action was to create
an Operations Board consisting of the
Chief Executive Officer, Group Finance
Director and Company Secretary
together with the four prime subsidiary
company Managing Directors and
the Managing Director of Stonebridge
Projects Limited, our jointly owned house
builder.
The meetings occur bi-monthly in
advance of the Henry Boot PLC Board
Meeting with the aim of updating the
Chief Executive Officer and Group
Finance Director on business matters
prior to the PLC Board Meeting, as well
as encouraging discussion on topics
including Group working and co-
operation.
We then rolled out these principles of co-
operation and collaboration as agenda
items to the subsidiary company board
meetings. Once more of our people
became aware of this focus we realised
a need to review our existing statements
of Purpose, Strategy, Vision and Values
and re-assess the communication of our
Business Model.
We called this important project ‘One
Henry Boot’.
The Board decided to engage an
external consultant, Infinite Global
Consulting Limited, to prepare and carry
out a perception audit. We wanted to
understand the thoughts and feelings of
our employees and of our key suppliers,
sub-contractors and customers as to
the Group’s Vision, Values and the Henry
Boot way of working. All employees were
given the opportunity to participate in
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
14
Pictured Our first team of volunteers met
at Dronfield in February this year.
25222.04 7 April 2017 12:14 PM Proof 12
“ Henry Boot engaged us to find
out how the Company is viewed
by both employees and the
external market. It takes a degree
of courage to ask people for their
frank opinions of your organisation,
but this invaluable information has
enabled the management team to
test whether the Company’s stated
Vision and Values are aligned with
its present situation, and thereby
inform Henry Boot’s strategy.”
Bruce Wraight
Infinite Global Consulting Limited
“ Henry Boot were one of the first
to see the merits of my approach
and their willingness to be an
‘early adopter’ proved very useful
and provided some valuable
information on how investors
and analysts respond to online
questioning – particularly when it
came to valuation approaches and
accounting for assets gains and
values.”
Ian Robinson
DuplexIR
“ I’m delighted to be working with
Henry Boot on this exciting and
inspiring journey to define, create
and embed their refreshed Vision,
Values, Behaviours and Henry Boot
Way. Its a joy to be working with
such enthusiastic and passionate
people. Their commitment is a great
testament to the importance they
place on this work and the benefit
they believe it brings for their
people, business, stakeholders and
shareholders.”
Karen Dunn
Slic Solutions Limited
15
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION OUR STRATEGY
” In my first business review since
taking over as Chief Executive
Officer on 1 January 2016, I am
very pleased to report that Henry
Boot PLC has delivered yet another
strong operational performance,
financial result and earnings per share
growth of 23%. Our strategy and
the Company organisation remains
unchanged, as do the key metrics by
which we manage and monitor our
business segments. 2017 has started
well in all our businesses and we
confidently look forward to a year of
further progress.”
John Sutcliffe
Chief Executive Officer
Purpose
We express our purpose through our key objective which is to maximise long-term shareholder value.
Strategy to achieve our Purpose
We shall promote land, develop and prudently invest in high quality property assets, and provide construction activities for the longer
term as explained by our Business Model. Our strategic priorities are flexible and regularly reviewed in order to deal with the vagaries of
the economic cycle and with prudent borrowing levels we seek to ensure the long-term security of our asset base and the ability to pay
dividends.
Business Initiative
How we’ll measure progress How our model supports this
Provide growing long-term shareholder returns
— Shareholder value
— Long-term financial strength
Create regular revenue streams through retained
property assets, rental income and construction
activities
Achieve long-term funding relationships with
financial partners and maintain prudent levels of
gearing at less than 50% of net assets
Create long-term cyclical revenue potential and
realisation through land promotion and property
development
Provide a long-term commitment to high levels of
dividend cover
Achieve a return on capital in excess of 10%
Recruit and retain the highest calibre of people to
meet our key objective
16
— Shareholders’ funds
— Resources
— Revenue
— Construction
— Return on capital employed
— Property investment
— Investment property
— Gearing levels
— Long-term financial strength
— Revenue
— Net assets
— Long-term revenue
— Land promotion
— Asset value creation
— Property development
— Earnings per share
— Long-term financial strength
— Dividend cover
— Profit
— Net assets
— Resources
— Construction
— Property investment
— Return on capital employed
— Property development
— Long-term success of
— Talented people
— Land promotion
businesses
— Individual performance
targets met
— Successful and motivated
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 LAND PROMOTION
CASE STUDY
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
MARSTON MORETAINE,
BEDFORDSHIRE
Hallam Land Management
The site of 61 acres was purchased in 2007 and we
secured an allocation in the Central Bedfordshire
(North) Site Allocations plan. This was adopted in
April 2011. The allocation included three elements:
— Residential development for 125 dwellings
— 17 acres for employment uses
— A contingency residential site for 320 dwellings
An application for the 125 dwellings and the 17 acres
of employment was submitted in December 2011 with
permission issued in September 2013. The area for
the 125 dwellings was marketed and sold to Bovis
Homes, completing in June 2014. There was not
sufficient market demand to sell the employment land.
By the start of 2014 the local authority’s housing
land supply position was slipping so it was thought
appropriate to bring forward the contingency site and
at the same time review the need for the large scale
employment site. At the time the local community
were also beginning a neighbourhood plan so we
needed to undertake a high level of community
engagement to bring the site forward in a different
form to the planned allocation.
An application for 365 dwellings, 1.5 acres for a care
home and 1 acre for business or community use
was submitted in January 2015. The application was
granted permission in December 2015. The sale of
this second phase to Barratt David Wilson completed
in June 2016.
Read about Land Promotion
on pages 24 and 25
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
17
25222.04 7 April 2017 12:14 PM Proof 12
PROPERTY INVESTMENT AND
DEVELOPMENT CASE STUDIES
MARKHAM VALE,
DERBYSHIRE
Read about Property Investment and
Development on pages 26 and 27
Henry Boot Developments
Markham Vale, our 200 acre employment park
being developed in partnership with Derbyshire
County Council, saw the continued acceleration of
development activity with over 700,000 sq ft of new
warehousing developed in the year. The 480,000 sq
ft distribution unit, pre let to Great Bear Distribution
Limited and forward funded by M&G, is the largest
unit developed on the park to date, and following
its completion in mid 2016, Great Bear contracted
to purchase a second 480,000 sq ft unit which
will be delivered in 2017. The national distribution
warehouse, comprising 225,000 sq ft of space,
for German automotive parts company, Ferdinand
Bilstein, was also substantially completed by the end
of the year to programme and contracts for a further
two units were being finalised at the end of the year
with both schemes expected to be delivered over the
subsequent year.
ABERDEEN EXHIBITION
AND CONFERENCE CENTRE
Henry Boot Developments
Following the grant of detailed planning permission, development and
funding agreements were unconditionally concluded with Aberdeen
City Council at mid-year enabling the development of the 800,000 sq
ft conference and exhibition centre, which incorporates a 10,000 seat
performance venue and 200 room, four-star hotel, to commence on site.
The 130 acre site will also eventually include a 400,000 sq ft business park
and a further two hotels, the first of which is already under contract and will
open in parallel with the exhibition centre. The initial phase of development,
funded through the City Council, represents an investment of over £330m
and is expected to be completed in 2019, enabling the existing exhibition
centre to relocate to this new facility adjacent to Aberdeen International
Airport. We remain actively involved in the subsequent business park
development in partnership with the City Council and will also be
responsible for bringing forward the redevelopment of the existing 50 acre
AECC site to the north of the city for a mixed residential and commercial
scheme once the relocation has taken place in 2019.
18
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
25222.04 7 April 2017 12:14 PM Proof 12
CONSTRUCTION
CASE STUDIES
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
WHARFEDALE VIEW, YEADON,
WEST YORKSHIRE
Read about Construction
on pages 28 and 29
Henry Boot Construction
Henry Boot Construction successfully delivered the
project to build the flagship Wharfedale View for
Leeds City Council, an extra care housing scheme
in Yeadon. The project was secured through the
YORbuild Framework.
The 45 self-contained apartments are part of the first
council owned and managed extra care scheme in
the city.
Henry Boot continued to invest in and develop
Building Information Modelling (BIM) through the
scheme. The Henry Boot design team modelled
the project utilising AutoCAD Revit software. They
also developed 4D simulations which were used for
progress reporting and to utilise BIM tools on a live
project.
LANCASTER UNIVERSITY,
LANCASHIRE
Henry Boot Construction
Henry Boot Construction has been selected as
contractor for the £9m spine remodelling project at
Lancaster University. Enabling works have already
commenced following completion of demolition and
site preparation.
The works include the removal of existing canopies
and supporting brickwork to provide improved
pedestrian flow. Alongside the construction works,
Henry Boot Construction will also be implanting an
extensive landscape and urban strategy.
The scope of the project spans from the Great Hall to
the George Fox building, and the construction works
are being phased over 18 months with completion in
early 2018.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
19
25222.04 7 April 2017 12:14 PM Proof 12
KEY PERFORMANCE
INDICATORS
FINANCIAL
KPIs
Each business segment within the Group is required to establish targets
at the beginning of each financial year. This allows us to establish a broad
range of financial indicators.
KPI
Performance
Future Aims
Profit before tax
Definition
A profitability measure that
takes looks at a company’s
revenue less all interest
and operating expenses
except for income tax.
16
15
14
13
12
Cash generation
Definition
Money available for
reinvestment after all other
costs of operating have
been paid.
(£14.2)
(£19.6)
Dividends per ordinary
share
Definition
A portion of company
earnings paid to
Shareholders.
Net assets
Definition
The value of company’s
assets less it’s liabilities.
Earnings per ordinary
share
Definition
The portion of company
profits allocated to each
outstanding share of
common stock.
16
15
14
13
12
16
15
14
13
12
16
15
14
13
12
£39.5m
£32.4m
£28.3m
A 22% increase
as higher levels of
property development
generated additional
profits.
Objective
To increase profit levels
over time.
£18.4m
£13.4m
16
15
£6.1
%
(£2.5)
(£0.3)
14
13
12
We continue to
reinvest retained
earnings in the
portfolio of land and
property development
assets.
Objective
To monitor cash
generated over time.
7.00p
6.10p
5.60p
A 15% increase to
7.00p as we continue
to move dividends to
new record high levels.
Objective
To generate growing
shareholder returns over
time.
5.10p
4.70p
£233.6m
£221.5m
£200.5m
£193.5m
£181.9m
21.5p
17.5p
16.2p
8.6p
7.0p
A 5% increase to net
assets achieved by
retained earnings from
higher profits offset by
dividends paid and an
increase in the pension
scheme deficit.
A 23% increase due to
higher retained profits
helped by additional
returns from property
development.
Objective
To grow the asset base
over time.
Objective
To increase returns over
time.
Read about Risks and Uncertainties
on pages 34 to 38
Read about Our Strategy
on page 16
Read the Financial Review
on pages 30 to 33
20
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 KPI
Performance
Future Aims
(7%)
16
15
18%
14
0%
13
12
13%
NAV per share
Definition
The portion of company
net assets allocated to
each outstanding share of
common stock.
16
15
14
13
12
Shareholder return
Definition
The share price
appreciation combined
with dividends paid
shown as an annualised
percentage.
Gearing levels
Definition
The ratio of net debt to
equity.
Return on capital
employed
Definition
The ratio of earnings before
interest and tax to capital
employed (total assets less
current liabilities).
Pension scheme deficit
Definition
A scheme’s liabilities
outweighing assets;
additional money required
to pay all pension benefits.
16
15
14
13
12
16
15
14
13
12
16
15
14
13
12
177p
168p
152p
148p
139p
52%
18%
18%
19%
14%
12%
A 5% increase during
the year, little change
to share capital;
therefore, benefits
from the increase in
retained earnings.
Share price reduced
10.0% over the
year, which coupled
with the increase in
dividends, gave rise to
a return over the last
three years of 9.4%.
Reduced following
returns from property
development. May
increase during 2017
as we reinvest in land
sites and property
development.
Objective
To increase shareholder
value over time.
Objective
To generate growing
shareholder returns over
time.
Objective
To monitor levels of cash
required over time.
12.2%
11.4%
14.4% We continue to achieve
a healthy improvement
in returns on utilised
capital and will continue
to monitor this area for
improvement.
Objective
To increase returns on
capital employed over
time.
8.3%
6.2%
Objective
To reduce the pension
scheme deficit over time.
£26.4m
£28.2m
£19.6m
£20.1m
£30.5m
A 35% increase in the
deficit due to a further
fall in the discount
rate applied to future
liabilities, despite
Company contributions
and an excellent
performance from the
scheme’s assets.
21
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION KEY PERFORMANCE
INDICATORS CONTINUED
NON-FINANCIAL
KPIs
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 as necessary.
KPI
Performance
Future Aims
Accident frequency rate
(AFR) – employees
Definition
Incidents reportable to the
Health & Safety Executive.
16 0
15
14
13
12
0
0
0
0
Accident frequency
rate (AFR) – including
subcontractors
Definition
Incidents reportable to the
Health & Safety Executive.
Personal development
(days)
Definition
Development days
provided by the Group.
Reportable accidents
Definition
Incidents reportable to the
Health & Safety Executive.
16
15
14
13
12
16
15
14
13
12
16
15
14
13
12
22
Another successful
year of zero reportable
incidents affecting
our directly employed
staff.
Objective
To ensure a reducing
number of reportable
health and safety
incidents.
Our ongoing education
of our subcontractors
and partners, and
the closer monitoring
of their working
practices continues.
This year was below
our high standards
but equivalent to
competitors and
industry standards.
A slight decrease
in the number
of development
days, reflective of
structural change
within resources.
New policies now in
place for learning and
development.
It is an ongoing priority
and focus of the
Group to commit to
ensuring health and
safety is paramount.
2016 saw an increase
in reportable incidents.
Target
Zero incidents and
to exceed industry
standards.
Objective
To ensure a reducing
number of reportable
health and safety
incidents.
Target
Zero incidents and
to exceed industry
standards.
Objective
To ensure that our
employees are trained
to the appropriate level
and are given adequate
opportunity to develop
their careers.
Target
To exceed 2016 figure.
Objective
To ensure a reducing
number of reportable
health and safety
incidents.
Target
Zero incidents and
to exceed industry
standards.
0.08
0.12
0.06
0.17
0.20
1,057
1,203
1,164
1,306
1,085
4
1
1
2
3
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Performance
Future Aims
KPI
Employee profile
Definition
The gender balance
percentage between all
our employees.
Employee figures as at
31 December 2016
BITC Environmental
Index (%)
Definition
Measuring environmental
management and
performance.
Considerate Constructor
Scheme
Definition
Promote and achieve best
practice under the Code
of Considerate Practice.
16
15
14
13
12
16
15
14
13
12
16
15
14
13
12
Recycling – diverted
from landfill (%)
Definition
To minimise the
environmental impact from
our business operations.
16
15
14
13
12
342
111
453
328
106
434
348
347
111
459
103
450
338
100
438
Males
Females
We have a gender
split of 75% male to
25% female. This has
altered during 2016 as
we work closely with
partners to encourage
under-represented
groups into the
industry.
94
94
94
97
95
Due to a realignment
in the scoring process
two years ago, we are
now classed as Gold
status. This has been
maintained for three
years now.
38.3
37.4
37.1
36.1
34.7
A slightly improved
score again in 2016.
Improvement has
been made for six
years in a row in
the five scoring
categories.
95 We have continued to
achieve a minimum
recycling rate of 95%.
95
94
Read about our Corporate Responsibility
on pages 39 to 45
94
93
25222.04 7 April 2017 12:14 PM Proof 12
Objective
To ensure a diverse
spread of gender within
all job roles in the Group.
Target
All individuals should
be treated fairly and
have access to equal
opportunities.
Objective
To be acknowledged
by a recognised body
as being a leader
in environmental
management.
Target
Regain Platinum status.
Objective
To be classified as a
‘good neighbour’ when
scored against the
Considerate Constructor
Scheme score of 50.
Target
Top score of 50.
Objective
To reduce the amount
of waste going to landfill
by recycling, reusing or
upcycling.
Target
To achieve a minimum
recycling rate of 95%.
23
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION SEGMENTAL
REVIEW
LAND
PROMOTION
Our business model in action: Creating long-term cyclical revenue potential and
realisation through strategic land promotion for a variety of different land uses.
“ During the year we sold 16 sites
comprising 1,609 plots, coupled with
land having consent for employment
use. We secured new planning
consents for some 5,800 plots during
the year and at the end of 2016, we
held a portfolio of 16,417 plots with
planning consent.”
Nick Duckworth
Hallam Land Management Limited
Total revenue
£51.2m
16
15
14
13
12
£8.8m
+10%
£51.2m
£46.7m
£39.0m
£37.6m
Profit before tax
£17.7m
-7%
£17.7m
£19.1m
£13.1m
£11.1m
£1.9m
See the Land Promotion Case Study
on page 17
16
15
14
13
12
24
Hallam Land Management Limited
Hallam Land Management Limited,
our strategic land promotion business
increased both the acres of land it held in
its portfolio and the number of consented
plots it had on that land, charts on page
25 show the year end position.
2016 started very positively. Ahead of
the EU referendum, Hallam Land had
exchanged or completed the bulk of its
2016 budgeted sales which ultimately
resulted in a pre-tax profit of £17.7m
(2015: £19.1m). Furthermore, we
exchanged several sites for completion
in 2017 and 2018. For the UK house
builders, the uncertainty caused by
the referendum vote initially created a
slowdown in land acquisition, however,
through the autumn, they re-entered the
land buying market, albeit with increased
hurdle rates in less attractive locations. In
the early months of 2017, house builders
continued to show strong interest in high
quality sites and good market areas. The
recent Housing White Paper is broadly
supportive of increased delivery of housing,
albeit with a focus on the affordable end of
the market.
During the year, we sold 16 sites
comprising 1,609 residential plots, coupled
with land having consent for employment
use at Lutterworth and Bridgwater and
land consented for a public house at
Cranbrook, Exeter. We secured new
planning consents for some 5,800 plots
during the year and at the end of 2016,
we held a portfolio of 16,417 plots with
planning consent, a 36% increase on
2015. Our total land interests at 31
December 2016 were 11,888 acres (2015:
11,061 acres), of which 2,405 acres (2015:
1,982 acres) had planning consent with
a further 1,078 acres (2015: 1,160 acres)
allocated for residential development;
the remainder we are promoting through
the planning permission and allocation
process.
Key Projects
The first six months of the year saw the
disposal of two successful schemes at
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Kettering and Marston Moretaine. The
East of Kettering scheme sits within the
5,500-unit strategic urban extension for
the town and outline planning consent
was granted in 2015. As is often the
case with large, strategic sites, in order
to successfully dispose of development
land once outline consent has been
achieved, a significant amount of time and
resource needs to go into delivering the
relevant service infrastructure to enable
house builders to build houses. In early
2016, final collaboration agreements were
secured with the service providers and
owners of the wider site, allowing 174
plots to be sold to Barratt with provisions
that require them to service our retained
land, comprising 264 plots.
The second significant sale of 2016
was at Marston Moretaine, a site which
we have owned since 2007 with a first
tranche sold in 2013. In September 2016,
we completed a second tranche for 180
plots, and a third tranche of 183 plots is
contracted for sale in 2017.
Though no further residential land was
sold at Cranbrook (the 3,500-unit new
community outside Exeter), residential
sales values remained strong and we
expect to see a further land sale here in
2018. At Kingsdown, our urban extension
at Bridgwater, the decision to build
Hinckley Point nuclear power station
brought with it increased interest in the
site. A parcel of consented employment
land was sold to the Homes and
Communities Agency to progress a starter
homes scheme, and a conditional contract
was entered into with Persimmon for 130
plots, which we expect to complete in
2017.
During 2016, we obtained a significant
planning consent, subject to Section
106 agreement, at Didcot for a 2,170-
unit scheme which sits within a 4,200-
unit housing site. We anticipate making
significant progress on this scheme during
2017, with a first, part-disposal expected
in 2018. The Didcot area has a strong
housing market with good potential for
family housing well within commuter
distance of London.
Outlook for 2017 and beyond
2017 has started well with 850 plots
exchanged for sale as we entered the year,
and a further 290 plots exchanged with
completion subject to detailed planning
consent. A further two sites are close to
exchange and we hope to complete these
sales during 2017.
We expect the house builders to remain
cautious about the implications of the
EU referendum and, therefore, selective
when purchasing land, however, we have
entered the year in a strong position.
We have a strong land portfolio with a
substantial number of sites available for
sale and, at this stage, we anticipate
that 2017 will be another year of steady
progress.
Pictured A full planning permission has been finalised at Buxton for
375 plots, with a sale agreement in place with a national developer.
Land bank
(acres)
11,888
16
1,749
15
1,804
14
1,819
13
1,791
12
1,765
+8%
10,139
11,888
9,257
11,061
8,166
9,985
7,932
9,723
7,246
9,011
Owned
Option and Promotion Agreements
Plots with planning
permission
16,417
16
15
14
13
12
12,043
11,547
10,438
6,296
Number of plots sold
1,609
16
15
14
13
12
253
1,107
1,177
Plots in planning
process
10,452
16
15
14
13
12
5,201
10,452
10,646
9,487
+36%
16,417
-9%
1,609
1,763
-29%
14,768
25
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION SEGMENTAL
REVIEW
PROPERTY INVESTMENT
AND DEVELOPMENT
Our business model in action: Investment assets giving year on year recurring revenue,
with property development creating long-term cyclical revenue.
“ We significantly increased our
residential activity in the year, starting
four material projects. The conversion
of the listed Terry’s chocolate factory
in York into 165 apartments is
progressing well.”
David Anderson
Henry Boot Developments Limited
“ We continue to strengthen the future
site portfolio and now have some 675
plots either secured or under option.”
Darren Stubbs
Stonebridge Projects Limited
+251%
£176.5m
+220%
£11.2m
Total revenue
£176.5m
16
15
14
13
£50.3m
£26.1m
£37.9m
12
£15.7m
Profit before tax
£11.2m
16
15
14
£3.5m
£4.6m
(£2.3m)
13
12
£1.9m
See the Property Investment and
Development Case Studies on page 18
26
Henry Boot Developments
Limited
Henry Boot Developments, our commercial
development business had one of its
busiest ever years in 2016. Of particular
significance was the finalisation of
development, funding and contractor
agreements for the new 800,000 sq ft
exhibition and conference centre, 10,000
seat performance venue and a 200-bed,
four-star hotel for Aberdeen City Council.
The construction of this initial phase,
costing £333m, began in mid-2016 and is
currently progressing on programme.
During 2016, we developed over 875,000
sq ft of new, pre-let and pre-sold, largely
industrial space and, furthermore, agreed
terms on a further two million sq ft, most of
which is expected to start or be completed
in 2017, including a second 480,000 sq
ft distribution warehouse for Great Bear
at Markham Vale. We also completed at
Markham Vale a 480,000 sq ft distribution
unit, pre-let to Great Bear Distribution
Limited, and a 225,000 sq ft unit for
automotive parts distributor, Ferdinand
Bilstein. Further smaller lettings and sales
were concluded at our industrial parks at
Thorne and Salford.
We continue to maintain a broadly based
development pipeline, with over 80,000
sq ft of retail warehousing completed at
Belper, Derbyshire, and in Livingston town
centre, benefiting from pre-let agreements
with Aldi, B&M Retail and Dunelm. We also
commenced the construction of a 110,000
sq ft Head Office scheme for Atkins PLC in
Epsom.
We significantly increased our residential
activity in the year, starting four material
projects. The conversion of the listed
former Terry’s chocolate factory in York into
165 apartments is progressing well. We
concluded 89 sales in the second half of
the year and anticipate completing that part
of the scheme in 2017. In Manchester city
centre, we secured planning permission
for a 540-unit private rented sector (PRS)
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Rental income
£6.7m
16
15
14
13
12
-7%
£6.7m
£7.2m
£6.2m
£7.3m
£6.6m
Number of plots sold
(Stonebridge Projects)
70 plots £18.4m
+71%
70
£18.4m
16
15
14
13
41
£12.3m
32
£10.0m
26
£6.5m
12
9
£1.8m
Plots
£m plot sales
Pictured Far Left Darren Stubbs (left) and
David Anderson (right).
Pictured Above Work commenced on the
new Head Office for Atkins PLC in Epsom.
Pictured Below Aerial view of Victoria
Gardens in Leeds, a development of 101
plots.
office investment in Bath, which has
potential as a future residential conversion
opportunity.
Outlook for 2017 and beyond
Contractual terms are in discussion or have
been agreed on a number of projects which
we expect to bring into our portfolio during
2017, providing us with a range of future
development opportunities.
Stonebridge Projects Limited
Stonebridge Projects, our jointly owned
housebuilding company, completed 70
sales in the year, up from 41 in 2015,
having begun to complete sales on both
the Headingley and Stocksbridge sites.
We continue to strengthen the future site
portfolio and now have some 675 plots
either secured or under option. We are
targeting 100 sales in 2017 and, subject
to obtaining the necessary permissions,
anticipate further progress in 2018.
27
25222.04 7 April 2017 12:14 PM Proof 12
development, which triggered unconditional
development and funding agreements
and the site purchase. We expect the
building phase of this scheme to begin
mid-2017. In Bristol, in partnership with
a local student housing operator, we
completed the conversion of a former office
building to create a fully let, 86-bed student
residential scheme to complement the
100-unit scheme in which we already hold
an interest. In Skipton, we obtained outline
planning permission for a 30-acre mixed
residential and commercial development
and, by the year end, had agreed terms for
the sale of the residential land element.
Though we saw a significant increase in
development activity in the year, we were
able to pre-fund projects including the
warehouse schemes at Markham Vale, the
PRS residential development in Manchester,
the office HQ development in Epsom and
the retail warehouse scheme in Belper, as
well as the initial phase of development
in Aberdeen, amounting to over £600m
in total. Therefore, internal funding was
only required for a number of our smaller
projects, helping us maintain prudent
gearing levels within the Group.
As well as delivering the major schemes
noted above we also secured high
quality, future development opportunities.
By December 2016, we had obtained
planning permission and commenced initial
infrastructure works at the 50-acre Airport
Business Park in Southend, developed
jointly with Southend Borough Council.
We entered into a joint venture agreement
for a strategic site in Huyton, Merseyside,
adjoining the M57/M62 motorway junction,
and purchased a high yielding city centre
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION SEGMENTAL
REVIEW
CONSTRUCTION
Our business model in action: Creating regular revenue to enable long-term funding
relationships with financial partners.
“ Following completion of the £35m
Fox Valley retail park at Stocksbridge,
we commenced phase one of the
£35m Better Barnsley town centre
regeneration scheme. We are also
delivering work for Manchester City
Council at Piccadilly Gardens, our
first project through the North West
Construction Hub framework.”
Simon Carr
Henry Boot Construction Limited
“ Banner Plant had a very successful
year. Our power tool depot in
Ossett, West Yorkshire, successfully
completed its first year of trading.”
Giles Boot
Banner Plant Limited
“ Financially, the contract performed
well in the year with traffic volumes
slightly ahead of 2015.”
Trevor Walker
Road Link (A69) Limited
Profit before tax
£11.0m
+11%
£11.0m
£9.9m
£10.1m
£9.0m
£8.6m
See the Construction Case Studies
on page 19
16
15
14
13
12
28
Henry Boot Construction Limited
Henry Boot Construction specialise in
serving both public and private clients
in all construction sectors, including civil
engineering.
After a good start, Henry Boot Construction
exceeded targeted profit levels for 2016. It is
also pleasing that the business started 2017
with a contracted workload of almost 90%
of its forecast activity, the healthiest order
position seen in recent years.
Following completion of the £35m Fox Valley
retail park at Stocksbridge, we commenced
phase one of the £35m Barnsley town
centre regeneration scheme. In addition, we
are delivering Snowhill Retail Park for Kier
Property and a new spa facility at Rudding
Park Hotel, Harrogate, which will be
completed in the first half of 2017.
Within the civil engineering sector, we
commenced work on: the Olympic Legacy
Park and the Advanced Manufacturing Park,
both for the University of Sheffield; a multi-
storey car park for B. Braun in Sheffield;
and we continue to be a major supply
chain partner on the 25-year, Amey PFI
Sheffield Highway Scheme. Finally, we are
working with Stonebridge Projects to deliver
infrastructure works on schemes in Leeds
and Stocksbridge and are refurbishing
the former Leeds Girls High School for
residential use.
We are carrying out structural works to
six tower blocks for Leeds City Council
through the YORbuild framework and were
appointed in 2016 to the new YORbuild2
North of England local authority framework.
We are also delivering work for Manchester
City Council at Piccadilly Gardens, our first
project through the North West Construction
Hub framework.
In the health and social care sectors we
delivered a 60-unit extra care housing
scheme for Leeds City Council and a
residential block for St Wilfrid’s Charity in
Sheffield. In 2017 we will deliver a further
60-unit extra care scheme for Newark &
Sherwood Homes and have won a place on
the Sheffield Teaching Hospitals NHS Trust
framework.
In the education sector, we were awarded
the Spine Remodelling project for Lancaster
University, the Mappin Street Building
refurbishment for the University of Sheffield
and phase one of the University of Hull
Sports Facility development. We have also
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 completed an over-roof project for the
University of Huddersfield, the refurbishment
of the Management School for the University
of Sheffield and the refurbishment of the
Grade II listed St Helena’s campus for the
University of Derby.
We remain cautious regarding risks to
construction activity due to the UK’s
decision to leave the EU, price pressures
on imported materials caused by exchange
rate volatility and EU related skilled labour
pressures. However, the business has a
good blend of both private and public sector
clients across a wide range of building and
civil engineering sectors, giving us a good
base to weather this market uncertainty.
Health and Safety
Health, Safety and Environmental
management remains of paramount
importance and we are fully committed to
actively finding ways of eliminating risks and
incidents. We were, therefore, delighted
that for the fifth consecutive year, our
construction related accident frequency rate
(AFR) for the directly employed workforce
was zero. This strong commitment to our
health and safety management culture
resulted in us winning a prestigious RoSPA
Gold Medal Award for seven continuous
years of Gold Award achievements.
Banner Plant Limited
Banner Plant had a very successful year
with turnover up 4.4%, net profit up 3.6%,
and net margin remaining strong at 11.6%.
Confidence in our markets saw capital
investment increase, with a 7.8% growth
in the hire fleet. Our power tool depot
in Ossett, West Yorkshire, successfully
completed its first year of trading and
on 3 April this year we announced the
acquisition of Premier Plant and Tool Hire
Limited (see note 14 on page 116).
All the individual departments contributed to
what was a record profit for the business,
however, we did see geographical variations
in demand. Derby and North Derbyshire saw
only modest activity growth, whilst West and
South Yorkshire were more buoyant.
The key challenges within plant hire are
the higher capital costs resulting from
the weaker pound, recent clean engine
technology requirements and the recovery,
through increased hire rates, of these higher
equipment costs.
Road Link (A69) Limited
The PFI contract to run the A69 trunk
road between Carlisle and Newcastle has
completed 21 years in operation and has
nine years to run. Financially, the contract
performed well in the year with traffic
volumes slightly ahead of 2015. Weather
conditions during 2016 proved to be
relatively benign and the road operated
normally throughout the year.
Outlook for 2017 and beyond
The constituents of the Construction
segment continue to provide very stable
returns from a low level of capital employed.
We do not expect that this will change in
2017 and the year has started well. The
contractual workload brought into the year
is encouraging, the plant business contract
count is currently running slightly ahead of
2016 and, at this stage, we expect another
solid performance from this segment of the
Group.
External revenue
£84.4m
16
15
14
13
12
£79.4m
£79.5m
£82.4m
£78.5m
£79.0m
Pictured Far Left Giles Boot (left), Simon
Carr (centre) and Trevor Walker (right).
Pictured Above A JCB Loadall capable of
lifting 4 tonnes, part of our evolving Banner
Plant fleet.
Pictured Left Our latest project with
Sheffield University, ‘The Management
School’.
29
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION FINANCIAL
REVIEW
FINANCIAL
REVIEW
These excellent Group results are a real credit to the talented people within our
business and those within the businesses with which we engage.
“Our mix of business streams
continues to demonstrate the benefits
of this broad-based operating model
working together to the benefit of our
Group.”
Darren Littlewood
Group Finance Director
Profit before tax
£39.5m
+22%
£39.5m
£32.4m
£28.3m
16
15
14
13
12
30
£18.4m
£13.4m
Read the Chairman’s Statement
on pages 06 and 07
Key highlights of our financial
performance in 2016
— Profit before tax increased by 22% to
£39.5m
— Basic earnings per share increased by
23% to 21.5p
— Dividends per ordinary share for the
year increased by 15% to a record
7.00p
— Return on capital employed increased
by 18% from 12.2% to 14.4%
Our long-term strategic approach to land
promotion and property development
has again generated results ahead of
management expectations, coupled with
our construction activities, these excellent
Group results are a real credit to the
talented people within our business and
those within the businesses with which
we engage. Against the current backdrop
of economic uncertainty, we have never
had greater clarity of our future land
transactions or the property development
and construction order books we hold.
Consolidated Statement of
Comprehensive Income
Revenue increased 74% to £306.8m
(2015: £176.2m) resulting from increased
activity within the property development
market from the commencement of the
new conference and exhibition centre
for Aberdeen City Council and sales of
residential apartments at the former Terry’s
chocolate factory in York. Gross profit
increased 17% to £62.3m (2015: £53.3m)
and reflects a gross profit margin of 20%
(2015: 30%), due primarily to: lower
margins on larger development schemes
and providing for a loss-making contract
we commenced in the year. Administrative
expenses saw an increase of £0.7m,
resulting from expected increases in staff
costs, we also anticipate further modest
increases going forward as we continue
to invest across all operating segments
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Revenue
£306.8m
16
15
14
13
12
£176.2m
£147.2m
£153.8m
£103.1m
Dividends per
ordinary share
7.00p
16
15
14
13
12
+74%
£306.8m
+15%
7.00p
6.10p
5.60p
5.10p
4.70p
to support the higher levels of operational
activity. Pension related costs increased
£0.1m (2015: £0.5m) as we increased
the lower auto-enrolment contributions
offset by reductions in the defined benefit
scheme service cost. Property revaluation
losses of £1.8m (2015: £2.0m) arose
from positive movements in the fair value
of certain existing and newly completed
investment properties of £3.9m, offset
by the recognition of valuation deficits
on certain other properties amounting to
£5.7m; most notably, a small trade park
site and a development site impacted
by the closure of a large adjoining retail
unit which continue to prove difficult to
redevelop profitably. Overall, operating
profits increased 25% to £39.5m (2015:
£31.7m) and, after adjusting for net finance
costs and our share of profits from joint
ventures and associates, we delivered
a profit before tax of £39.5m (2015:
£32.4m), an increase of 22%.
The segmental result analysis shows that
property investment and development
produced a significantly improved
operating profit of £15.1m (2015: £7.3m)
arising from the Aberdeen and York
schemes noted above. Land promotion
operating profit decreased slightly to
£18.6m (2015: £20.0m) as the prior year
benefited from higher returns on the
disposal of land we owned. Construction
segment operating profits increased
to £10.3m (2015: £8.9m) after positive
Pictured Residential plot sales now
exceed 1,200 at Cranbrook near Exeter.
results from all three businesses within this
segment. Our mix of business streams
continues to demonstrate the benefits of
this broad-based operating model working
together to the benefit of our Group. Whilst
we have greater foresight surrounding
the future, deal-driven transactions
from our land promotion and property
development businesses, financial results
can vary significantly from year to year,
however, these fluctuations are mitigated
by the relatively stable returns from the
Construction segment.
Tax
The tax charge for the year was £8.9m
(effective rate of tax: 23%) (2015: £7.5m
and effective rate: 23%), this again arises
because the net investment property
revaluation deficit is not tax deductible
until realised. We currently have a £2.7m
unrecognised deferred tax asset (2015:
£2.3m) which can be utilised to offset
future capital gains as they arise. Current
taxation on profit for the year was £8.9m
(2015: £5.6m), with the 2016 charge
benefiting from joint venture profits which
are included net of tax offset by the non-
deductible property revaluation deficit. The
deferred tax charge was £0.04m (2015:
£1.87m), arising due to the elimination of
any property revaluation deferred tax asset
and no deferred tax asset arising on the
increased pension scheme deficit due to
contributions having exceeded cumulative
charges to the income statement.
31
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION FINANCIAL
REVIEW CONTINUED
Earnings per share and
dividends
Basic earnings per share was 23%
higher at 21.5p (2015: 17.5p). Dividends
payable for the year increased by 15% to
7.00p (2015: 6.10p), with the proposed
final dividend increasing 18% to 4.50p
(2015: 3.80p), payable on 30 May 2017
to shareholders on the register as at 28
April 2017. The ex-dividend date is 27 April
2017.
Return on capital employed
(ROCE)
Increased pre-tax profits in the year
helped ROCE(1) improve to 14.4% in 2016
(2015: 12.2%). We continue to review
our strategic target rate of return and,
given that we are currently able to forward
fund and sell property development, a
target return of 12%-15% is considered
appropriate in the current operating
environment. We will continually monitor
this important performance measure over
the business cycle, given the potential for
market conditions to change quickly.
(1) ROCE is calculated as operating profit divided by,
total assets less current liabilities.
Finance and gearing
Net finance costs increased to £1.5m
(2015: £0.2m) due to a specific property
development financing arrangement
concluded in the prior year, and 2016
saw a return to a position which reflects
our net debt levels. Average borrowing
rates were similar to those of the previous
year although overall interest costs may
increase slightly in 2017 as we utilise
higher borrowings to support higher
development activity. It is also possible that
we will see a small rise in interest rates in
2017, although we do not believe this will
result in a material change to borrowing
costs. We expect to continue to invest in
both our land and property development
assets as we recycle capital into future
opportunities and anticipated development
activity.
£7.6m (2015: £8.6m) of funding which is
repayable from the future sale of residential
units on certain land development sites.
All bank borrowings continue to be from
facilities linked to floating rates or short-
term fixed commitments. Throughout the
year we operated comfortably within the
facility covenants and continue to do so.
Interest cover, expressed as the ratio of
operating profit (excluding the valuation
movement on investment properties and
disposal profits) to net interest (excluding
interest received on other loans and
receivables), was 28 times (2015: 23
times). No interest incurred in either year
has been capitalised into the cost of
assets.
We continue to hold an investment
property portfolio of around £100m against
which we can secure bank funding to allow
us to undertake property development and
land promotion, neither of which are easy
to fund using bank debt. Our investment
property assets continue to provide the key
covenant support for our £60m banking
facilities, which we extended in February
2017 by a further year moving the renewal
date to February 2020. In addition, we
have a £5m revolving loan facility within
Stonebridge Projects, our joint venture
house builder. This loan is secured against
house build work in progress and allows
us to continue to grow activity in this
business.
2016 year-end net debt fell by £6.0m to
£32.9m (2015: £38.9m) helped by cash
generated from operations. Gearing on net
assets of £233.6m fell to a conservative
14% (2015: net assets £221.5m; gearing
18%). Total year-end net debt includes
Statement of cash flows
During 2016, we increased operating
cash flows before movements in working
capital by £9.2m to £40.6m (2015:
£31.4m) and, after a net investment in
working capital of £12.0m (2015: £26.2m),
cash generated from operations was
£28.5m (2015: £5.2m). Our investment
in working capital shows a significant
reduction during the year arising from the
start of a number of large pre-sold and
forward funded property developments,
allowing us to recover our initial land and
planning investment at an early stage in
the build process. Cash outflows from
investing activities of £2.4m (2015: inflow
of £6.9m) arising from disposals of £9.9m
(2015: £23.4m) of investment property
and property, plant and equipment sales,
offset by new investment of £13.4m (2015:
£17.2m) in new property development,
plant purchases and investments in
joint ventures and associates. Dividends
paid, including those to non-controlling
interests, totalled £10.6m (2015: £9.7m),
with dividends paid to equity shareholders
increasing by 9%.
Statement of financial position
Investment property and assets classified
as held for sale were valued at £124.7m
(2015: £125.3m). The fair value of
completed investment property, including
assets held for sale, was £102.0m (2015:
£103.7m) and the value of investment
property under construction within
investment property was £22.7m (2015:
£21.6m) as we develop these assets into
investment properties.
Intangible assets reflect the Group’s
investment in Road Link (A69) of £4.9m
(2015: £5.8m). The treatment of this asset
as an intangible asset is a requirement
of IFRIC 12 and arises because the
Pictured A 480,000 sq ft distribution
warehouse completed for Great Bear at
Markham Vale in Derbyshire.
32
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 underlying road asset reverts to Highways
England at the end of the concession
period. Property, plant and equipment
comprises Group occupied buildings
valued at £6.5m (2015: £6.9m) and
plant, equipment and vehicles with a net
book value of £15.4m (2015: £14.1m);
this increase arose from continued
investment in new plant and plant delivery
vehicles. Non-current trade and other
receivables have reduced to £5.6m (2015:
£10.5m) due to a net decrease in long-
term housebuilder land sale payment
plans. Investments in joint ventures and
associates increased to £5.1m (2015:
£3.8m) as we continued to invest in
property development projects with other
parties where we feel there is a mutual
benefit to be gained. The non-current
deferred tax asset increased because of
the higher IAS 19 pension deficit. In total,
non-current assets reduced to £166.5m
(2015: £170.7m).
Within current assets, inventories were
£137.9m (2015: £138.9m) and saw
further investment in the land portfolio
to £107.9m (2015: £106.8m) although,
property development work in progress
decreased to £30.0m (2015: £32.1m).
Trade and other receivables increased to
£66.9m (2015: £54.4m) resulting from land
sales completions late in 2016. Cash and
cash equivalents reduced to £7.4m (2015:
£12.0m) but was again a result of cash
received in December which could not be
offset against short-term borrowing at that
time. In total, current assets increased to
£213.3m (2015: £205.4m).
Current liabilities decreased to £105.9m
(2015: £116.6m) as the portion of
debt classed as current decreased to
£33.3m (2015: £42.8m), helped by
recoveries made on property development
inventories. Trade and other payables
decreased to £61.1m (2015: £64.4m),
resulting from lower payments on account
relating to construction contracts.
Provisions increased to £6.7m (2015:
£5.7m) as previously classified non-current
provisions moved to current and continue,
Pictured Planning permission granted for
a 50,000 sq ft office development at ‘The
Silk Works’, Manchester.
in the main, to relate to infrastructure
planning obligations on two land
development schemes.
Net current assets increased to £107.4m
(2015: £88.8m). This increase is
predominantly due to increased debtors,
reduced creditors and lower borrowings
as we operate at a generally higher level
of activity and profit throughout the Group.
Non-current liabilities increased to £40.4m
(2015: £37.9m) after IAS 19 pension
liabilities increased to £26.4m (2015:
£19.6m).
Net assets increased by 5% to £233.6m
(2015: £221.5m) as the increase in
retained profits was offset by the increase
in the pension deficit and treasury share
purchases. Net asset value per share
increased 5% to 177p (2015: 168p).
Pension scheme
The IAS 19 deficit at 31 December 2016
was £26.4m compared to £19.6m at 31
December 2015 and was directly affected
by a further fall in the discount rate applied
to future liabilities to 2.8% (2015: 3.8%),
despite the Company’s contributions and
an excellent performance from the pension
scheme’s assets. As we have noted in
previous years, the application of a 4%
discount rate would result in a negligible
deficit and the 2016 scheme asset return
was comfortably ahead.
The pension scheme’s assets continue
to be invested globally with high quality
asset managers, using a broad range of
assets and diversification. The pension
scheme trustees regularly consider the
merits of both the managers and asset
allocations and, along with the Company,
review the returns achieved by the asset
portfolio against the manager benchmarks;
they then make changes, as the trustees
consider appropriate, in conjunction with
investment advice from KPMG.
Darren Littlewood
Group Finance Director
21 April 2017
33
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION RISKS AND
UNCERTAINTIES
MANAGING
OUR RISK
Effective risk management is essential to the achievement of our key objective and strategic initiatives.
Risk management controls are integrated across all levels of our business and operations.
The Group operates a system of internal control of risk management and operates a risk management framework. 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 listed below.
Read about the Risk Management Framework
on page 60
Risk and description
Mitigation
Change
during
the year
Health & Safety
Inherent risk within
construction activity
— Priority consideration of all Group and subsidiary board meetings
— Robust training, policies, procedures and monitoring
— OHSAS 18001 approved Health & Safety management system
— Internal independent Health & Safety department that conducts regular
random inspections
— Routine Director and Senior Manager safety inspections
— Regular externally reviewed mock incidents
Construction
Increased cost and lower
availability of skilled labour,
subcontractors and building
materials
— Quality training given to grow personnel internally
— Pool of approved and checked subcontractors subject to regular review
— Group purchasing arrangements and preferred supplier agreements
— Forward planning to increase ordering times and availability of materials
Environmental
The Group is inextricably linked
to the property sector and
environmental considerations are
paramount to our success. Stricter
environmental legislation will
increase development and house
building costs and therefore could
impact on profitability if capital
and land values do not increase
to reflect more efficient energy
performance
Development
Not developing marketable
assets for both tenants and the
investment market on time and
cost effectively
— 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
— Construction environmental risk is managed through the operation of an
ISO 14001 approved environmental management system
— Internal design helps mitigate environmental planning issues
— Record of awards given in respect of good safety and environmental
performance
— Environmental impacts addressed at main Board and each subsidiary
company board meeting
— Monthly performance meetings
— Defined appraisal process
— Monitoring of property market trends
— Highly experienced development team
— Flexible to market trends in development requirements
— Diverse range of sites within the portfolio
34
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Change
during
the year
Risk and description
Mitigation
Development
Rising market yields on completion
making development uneconomic
— Active asset management
— Monitoring property market trends
— Only develop when yields are stable
— Development subject to a ‘hurdle’ profit rate
— Larger developments pre-sold
Development
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
— 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
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
— 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 nearly 12,000 acres with aspiration to grow further
— Finance available to support speculative land purchases
— Well respected name within the industry that demonstrates success
— Long-established contact base
— Large land bank can help smooth short-term fluctuations
— 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
— We recognise cyclicality in our long-term plans and operate with a
relatively low level of debt
— 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 do have very good land banks and can be choosey
regarding what they buy and will target prime locations
Planning
Changes in Government or
Government policy towards
planning policies could impact on
the speed of the planning consent
process or the value of sites
— Large land bank can help smooth short-term fluctuations
— A high profit margin can be achieved when successful
— 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
Read about Our Strategy
on page 16
Read about our Business Model
on pages 10 to 13
Read about Health and Safety
on page 43
35
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION RISKS AND UNCERTAINTIES
CONTINUED
Risk and description
Mitigation
Change
during
the year
Planning
Increased complexity, cost and
delay in the planning process may
slow down the project pipeline
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
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
— 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
— Long-established successful operator
— Inventory of approximately 165 sites in progress throughout the UK
— Sites are typically greenfield and of a high quality
— 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
— Directors and shareholders share a common goal of less aggressive
leveraging than some competitors
— Current market conditions are supportive
— This risk is increased when unemployment falls and labour markets
contract
— Good long-term employment record indicates that good people stay
within the Group
— The Group encourages equity ownership
— Proven record of sharing profits with staff
— Succession planning is an inherent part of management process
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
— The Group has agreed three-year facilities with its banking partners, which
run to February 2020 and are backed by investment property assets
— Detailed cash requirements are forecast up to 15 months in advance and
reviewed and revised monthly
— Short-term positive cash balances are placed on deposit
— Group funding levels are prudent in relation to the Statement of Financial
Position
— As a PLC, access to equity funding is available should this be required
— This is an ongoing process with regular reviews of the assets and market
conditions to achieve best value
— Broad range of development opportunities to choose from
— Investment assets are seen as tradeable if required
— We have a record of recycling assets into funding for new developments
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
36
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Risk and description
Mitigation
Change
during
the year
Interest rates
Significant upward changes in
interest rates affect interest costs,
yields and asset prices and reduce
demand for commercial and
residential property
Counterparty
Depends on the stability of
customers, suppliers, funders and
development partners to achieve
success
Pension
The Group operates a defined
benefit pension scheme which is
closed to new members. 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
UK exit from European Union
The announcement of the UK exit
from the European Union resulted
in exchange rate fluctuations and
material price inflation. As we move
through the process we could see
further price inflation, reduced
market confidence, restrictions to
the supply of labour and increased
economic uncertainty
Cyber Security
Unauthorised access to systems,
hacking, malware and distributed
denial of service could all lead to
data loss, business disruption,
reputational damage or financial
loss
— Statement of Financial Position strength allows the Group to warehouse
sites in tough markets
— Long-term nature of land business helps smooth short-term interest rate
impacts
— Interest cover of over 30 times; gearing relatively low and therefore
significant scope to deal with interest rate rises
— The Group pays particular attention to the financial strength
of counterparties before contracting with them in order to mitigate
financial exposure
— 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 quoted investments including pooled
diversified growth funds
— 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
— A large proportion of raw materials are sourced from within the UK
— Strong history of performance and close working relationships with
customers encourages confidence
— Many subcontractors utilise locally sourced labour
— Weakness in sterling encourages outside investment
— Markets currently remain strong and the Group is UK focused
— Employee awareness updates distributed routinely
— Use of software and security products and regular updates thereof
— Detailed disaster recovery plans
— External vulnerability and threat management review
37
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION RISKS AND UNCERTAINTIES
CONTINUED
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.
Viability statement
Introduction
Henry Boot PLC’s business model and
strategy can be found on pages 10
and 16 in the Financial Statements.
These documents are central to the
understanding of the long-term business
model and we have operated the current
business model successfully over the past
15 years, and have a 130-year unbroken
history. The nature of the Group’s activities
tends to be very long-term, especially
in the land promotion business, and the
Group’s strategy and experience in this
sector has been built up over many years.
Over the last 11 years, the Group has
reported an average profit before tax of
£24m per annum, added almost £85m to
net assets (an increase of some 55%) and
paid 53p per share in dividends, all from
the trading segments it now operates,
and at no stage in the downturn, between
2008 and 2010, did the Company make
a trading loss. Analyst forecasts for the
viability assessment period indicate a
positive continuation of these financial
results, underpinned by the commercial
development and land opportunities we
already control.
The assessment process
The Group’s prospects are assessed
through an annual budgeting process led
by the main Board Executive Directors and
the boards of the individual subsidiaries. A
detailed annual budget is prepared prior to
the commencement of the current financial
year and re-forecasting takes place each
month throughout the financial year within
each business and is consolidated at
Group level. The two succeeding years
are also forecast, using predominately
known and controlled opportunities, to
assess the longer term viability of the
Group. As a largely deal-driven business,
it is considered inappropriate to attempt
to forecast further out via an extrapolation
of years one to three, albeit asset trading
and development is central to the Group’s
long-term strategy. Stress testing these
forecasts highlights that if economic
conditions worsen and developments and
land sales do not happen as envisaged,
we invest and borrow less and, whilst
profitability is lower, the stable construction
segment income and investment property
rentals cover most of our overhead costs.
Whilst we do not foresee it, only a very
long-term, unprecedented lack of liquidity
in the UK residential and commercial
property markets would cause any threat
to the viability of the Group.
Assessment of viability
The long-term strategy, the annual budget
and the two-year forecasts reflect the
Directors’ best estimates of the future
prospects for the business. We have also
reviewed a number of potential viability
risks to the Group and consider that the
following represent scenarios which, if not
carefully managed, could impact on the
Group’s viability:
Firstly, overtrading developments in
progress with the attendant increase in
leverage, at the same time as the property
cycle turns down, asset values are falling
and schemes have to be completed to
create best value. This creates a potentially
damaging scenario where debt is rising
and asset values are falling. Mindful of this
scenario, we have prudent debt levels
(even at maximum facility utilisation of
£60m) and we have pre-sold a significant
proportion of the current development
work in progress.
Secondly, a health and safety related
breach that causes a fatality (or similar
serious outcome). We manage this risk
through a very robust health and safety
policy, zero tolerance towards policy
breaches and treat health and safety
as the first matter for discussion on our
Company Board meeting agendas. Our
safety scores continue to be well into the
top quartile of the UK construction industry
and we have achieved a very safe working
environment for more than 20 years.
Viability statement
Based on their assessment of prospects
and viability above, the Directors confirm
that they have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities over the
three year period ending 31 March 2020.
Pictured Right: Having raised over
£25,500 for The Master Cutler’s Challenge
in Sheffield, we received an award for
‘Most Innovative Fundraiser’.
38
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CORPORATE
RESPONSIBILITY
CONFIDENCE
AND TRUST
Our reputation gives our customers, employees, stakeholders, suppliers, investors and
the communities in which we operate the confidence and trust to do business with us.
“ Henry Boot is a great place to work
and we are all proud to work here.
Our customers sing our praises too,
commenting that we go the extra mile
and that we can be depended on to
do a great job.”
John Sutcliffe
Chief Executive Officer
During 2016 we launched a key internal
communications plan which gave priority
to involving all our employees with shaping
our business going forward. Through our
Speak Up and Speak Out campaigns we
have encouraged our employees and other
stakeholders to develop and discuss ideas
to improve our ways of working (Speak
Up) and have reiterated our commitment
to deal with issues which may cause our
employees concerns by renaming our
confidential helpline (Speak Out).
We also joined BITC (Business in the
Community) who will be working with
us throughout 2017 to develop our
Responsible Business Strategy to support
both our business strategies and One Henry
Boot; this project sits with the Operational
Board to ensure consistency in approach
and deployment within all our operating
businesses.
We continue to face a number of
challenges; we must continue to act
fairly and responsibly, ensuring all our
stakeholders are provided with a safe
environment in which to work and making
positive progress by trading responsibly and
being a great employer.
Rachel White
Head of HR
39
What does Corporate Social
Responsibility mean to
Henry Boot?
Our commitment to being a sustainable
business underpins everything that we do;
this ethos is fully integrated into our day-
to-day operations and it is of the utmost
importance for us to demonstrate to our
stakeholders our approach and its impacts.
We consistently review and address the
key social, ethical and environmental
impacts of our operations in a way that
aims to bring value to all our stakeholders;
our programme supports our approach of
acting responsibly whilst we continue to
grow, with continuous improvement lying at
the heart of our business.
A responsible company is one which will
succeed and continue to grow and develop;
during 2016 we have worked collaboratively
to realign our values and behaviours to
develop a cohesive framework: ‘One Henry
Boot’. This will be rolled out in 2017 and
will be included in our annual report for that
financial year.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION CORPORATE RESPONSIBILITY
CONTINUED
PEOPLE
The Group’s employees are at the heart of all that we achieve. Our people are highly talented,
successful and motivated individuals who and essential to the success of the Group. We are
committed to ensuring that we have the right people working for us.
“ I was so surprised when I was
ushered in to the Boardroom with
everyone there to help celebrate
my 80th birthday. I love working
at Banner Cross Hall. It is always
enjoyable and I would get bored at
home. All the staff are so pleasant
and kind, I look after them and they
look after me.”
Pauline Dungworth
Canteen Assistant
Pictured Pauline Dungworth celebrating
her 80th Birthday with colleagues at
Banner Cross Hall.
Read about the One Henry Boot project
on pages 14 and 15
40
Our approach
Employee engagement and employee
satisfaction are crucial to continued
improvement and success across all of
our businesses. It is important we are able
to create an environment that enables us
to attract and retain the right people to
work at every level, who are committed
to working together, and who support our
core values.
Working at Henry Boot means working in
an inspiring and developing environment
where our people are a valuable asset;
we are committed to providing a working
environment in which our employees can
develop to achieve their full potential and
have opportunities for both professional
and personal development.
We have established policies for
recruitment, learning and the development
of our employees; we remain committed to
investing the time and resource to support,
engage and motivate our employees to feel
valued, to be able to develop rewarding
careers and want to stay with us, and we
recruit and promote from within wherever
possible.
As our businesses continue to develop
and grow, we understand that by retaining
and inspiring effective and committed
employees, we can continue to deliver
excellence to all.
Human rights
Henry Boot PLC is committed to the
UN’s Guiding Principles on Business and
Human Rights. Protecting and preserving
human rights is embedded in our culture
and is fundamental to our core values. This
is reflected in our policies relating to anti-
corruption, diversity, and whistleblowing,
coupled with our actions towards
our people, suppliers, clients and the
communities in which we operate.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 All employees
342
111
Male
Female
Directors
18
Gender pay equality
In advance of the adoption of the Equality
Act 2010 (Gender Pay Information)
Regulations 2017, which will place an
obligation on us to report on our gender
pay gap, we commissioned a report based
on our 2016 data to establish our baseline
early.
Our gender pay gap is currently 29.9%,
which for Henry Boot is reflective of the
ratio of men and women employed at just
over 3:1 rather than an issue relating to
how we pay our people.
We have a disproportionate number
of women in all roles and therefore our
data is skewed; we believe that without
a representative increase in the number
of women we employ, the gap will be
difficult to reduce. We have a number of
our high profile female employees involved
in initiatives to encourage women into
construction and its associated industries;
we also have a number of employment
policies in place around flexible working
which we hope will see our gender split
decrease over time and have a positive
impact on our gender pay gap.
Modern slavery
We recognise our responsibilities in relation
to our wide and varied supply chains, and
we actively engage with our suppliers to
ensure that they share our core values
and comply with relevant legislation. We
support and welcome the introduction
of the Modern Slavery Act 2015; this
legislation is in line with and complements
our core values and we applaud any
measures which seek to bring greater
transparency and scrutiny into our various
supply chains, in order to combat slavery
and human trafficking activities.
Read more details at
www.henryboot.co.uk
Diversity and inclusion
The approach of Henry Boot PLC
is underpinned by our belief that all
individuals should be treated fairly and
should have access to equal opportunities
regardless of their status. Our Equality &
Diversity Policy states that no prospective
employee should receive less favourable
treatment on the grounds of, amongst
other characteristics, disability. We have
continued the employment, wherever
possible, of any person who becomes
disabled during their employment with
us, and opportunities for learning, career
development and promotion do not
operate to the detriment of disabled
employees.
2
5
41
Male
Female
Pictured Henry Boot Construction
won the Team of the Year award for the
University of Derby, St Helena campus
project at this year’s Efficiency East
Midlands Building Communities Awards.
Senior managers
36
Male
Female
All figures are at 31 December 2016
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
CORPORATE RESPONSIBILITY
CONTINUED
As at 31 December 2016 the
active membership of the pension
arrangements stood at (employees):
The Henry Boot Staff Pension
& Life Assurance Scheme
Henry Boot PLC Group
Stakeholder Pension Plan
Road Link (A69) Limited
Pension Plan
Stonebridge Projects Limited
Pension Plan**
87
342*
5
15
* 47 employees within this total have invested their
residual salary from The Henry Boot Staff Pension
and Life Assurance Scheme into the Henry Boot
PLC Group Stakeholder Pension Plan
** Now a category within the overall Henry Boot PLC
Group Stakeholder Pension Plan.
Our pension arrangements
During 2016 we continued to operate
two pension schemes; employees are
members of either The Henry Boot Staff
Pension and Life Assurance Scheme
(defined benefit pension closed to new
members in 2004 and subject to a salary
cap from 2012) or the Henry Boot PLC
Group Stakeholder Pension Plan (defined
contribution pension).
Employees who are members of The Henry
Boot Staff Pension and Life Assurance
Scheme have the opportunity to join
the Henry Boot PLC Group Stakeholder
Pension Plan, investing their residual salary
i.e. the difference between their actual
salary and their capped pensionable salary
in The Henry Boot Staff Pension and Life
Assurance Scheme.
In 2016, we also offered our Henry Boot
PLC Group Stakeholder Pension Plan to
Stonebridge Projects Limited employees
in advance of their auto-enrolment date of
February 2017.
Henry Boot PLC has implemented the UK’s
auto-enrolment pension requirements;
this is provided by AVIVA. Employees are
informed of auto-enrolment and other
pension choices through letters and online
via the Group Intranet.
Our performance
As part of our push for excellence
amongst our employees, we have
robust recruitment procedures in place.
Continuing from 2015 we saw a further
increase in levels of recruitment in 2016
across all our businesses, and are
cautiously optimistic about the future. Our
turnover remains low at 12.4%.
We offer a wide range of learning and
development opportunities for our
employees across our businesses; we
believe that offering the right learning and
development opportunities will help to
ensure our employees feel supported and
equipped to carry out their role to the best
of their abilities. Our employees are
able to access a range of development
tools and job specific training appropriate
to their needs; we ensure that relevant
and appropriate training is provided as job
specific training covering the technical and
operational skills. We also offer individual
learning to support an employee’s personal
needs and provide mandatory training
in health and safety, first aid and manual
handling to ensure the welfare of our
employees is maintained.
In 2016 we delivered 1,057 (2015: 1,203)
taught training days; in addition to this and
in recognition of the diverse range of skills
within our workforce there was also an
unquantifiable amount of ad-hoc learning
and development which takes place on
a daily basis on our sites, in our offices
and depots. In response to employee
requirements and the further development
and enhancement of e-learning provision
we now deliver a range of courses by this
medium which allows our employees to
refresh specific technical skills from their
desks.
In 2016 we recruited 15 trainees and
apprentices across our businesses; all
trainees and apprentices are enrolled
on formal courses of education and
have development plans in place to gain
operational and technical knowledge
from mentors. Our preferred succession
planning method is one of in-house
development and growth; consequently
we also have a number of experienced
employees enrolled on formalised
education programmes to enhance their
skills and knowledge in anticipation of
career development and promotion within
the business in which they operate.
We anticipate an increase in the number
of apprentice recruits in 2017 primarily
as part of our succession plans but also
in response to the introduction of the
Apprenticeship Levy.
42
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 HEALTH
AND SAFETY
A fundamental commitment of the Company is to ensure that the health, safety and
welfare of the Company’s employees, stakeholders and the wider public is safeguarded.
“ We have modernised our overall
ethos toward health and safety
strategy. We recognise the need for
health and safety to be incorporated
into our wider holistic approach to
operations and we empower our
people to work within this framework”
Brendon Keown
Group Health, Safety and Environmental
Manager
Awards
Our approach
Henry Boot PLC continues to focus on
health and safety as our primary business
priority; we remain committed to providing
a safe and healthy working environment
for our employees, stakeholders and
contractors. We operate all our business
activities on the principle that good
management of health and safety is
fundamental in creating a safe and healthy
environment, and contributes to improving
our business performance. We expect
our managers to manage all aspects
of our business in a safe manner, and
employ practical measures to ensure our
business activities do not harm or pose
unacceptable risks.
We have developed practical and safe
systems of work which is borne out by the
Company’s exemplary safety statistics;
continuous improvement is a key driver
and we cannot stand still on this vital
area of risk management. All employees
receive health and safety training relevant
to the job role they perform. By developing
communications and knowledge in this
key area we are enabling our employees
to improve the way we recognise hazards
and reduce risk.
Our performance
We continue to benchmark our health and
safety performance against Constructing
Excellence Health and Safety Key
Performance Indicators; we are delighted
to report that for another year our Accident
Frequency Rate (AFR) for our directly
employed employees is again zero.
We have seen an increase in hours worked
contributing to an increase in our AFR to
0.17 per 100,000 hours worked including
our subcontractors (2015: 0.08); whilst any
increase is disappointing we are pleased
to report that our Accident Incidence
Rate (AIR) per 100,000 workers is above
industry average at 84%.
As a further check to ensure the Company
processes and procedures are robust,
and to test our procedures to the limit,
we commissioned a ‘mock trial’ which
was facilitated by law firm Nabarro LLP.
Undertaken in Autumn 2016, all key
decision-makers within our operational
businesses, Managing Directors, Directors
and Non-executive Directors were included
in the process. A full ‘de-brief’ was held
with those involved to communicate and
discuss the outcome and learn points from
this.
Following on from our commitment in 2015
to the IOSH No Time to Lose campaign,
in 2016 we supported the Breathe Freely
campaign which is a collaborative initiative
led by BOHS in partnership with key
organisations within the construction
industry. The provision of a healthy working
environment is one of our key objectives
and we are fully committed to supporting
the campaign’s aim of raising awareness
of the causes of work-related ill health and
disease, continuing to raise awareness
and sharing best practice to collectively
help improve well-being and reduce
occupational lung disease within the
construction industry.
We continue to receive recognition for our
efforts in managing health and safety and
we were again recipients of the RoSPA
Gold Medal Award, RoSPA Silver Award for
our project at Yeadon, CIOB Celebrating
Construction in South Yorkshire Health
& Safety Award and CIOB Celebrating
Construction in Humber & West Yorkshire
Health & Safety Award.
43
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION CORPORATE RESPONSIBILITY
CONTINUED
OUR COMMUNITIES
We are dedicated to supporting our communities both where we are based and
throughout our UK-wide operations.
Our approach
As a Group we contribute to the social
and economic impacts to the communities
in which we operate. With a nationwide
presence, and a regionalised focus in
Yorkshire, we offer support to a wide range
of charities and organisations of all sizes,
by working to provide them with donations
that are of most benefit to them and their
particular cause, whether it be a financial
donation or our wide and varied expertise.
Our areas of focus are:
— Charities and organisations local to our
business operations;
— Charities and organisations that support
educational improvements for children/
adults;
— Charities and organisations that support
social improvement through sport.
Where a request for support falls outside
of this criteria, we signpost the applicants
(if eligible) to South Yorkshire Community
Foundation where the Company has a
number of endowment funds which offer
grants. Further details are on our website.
Our performance
We continue to support and promote
a wide range of charitable giving and
community volunteering initiatives by
employees, focusing on activities that best
reflect the needs of their local community
and issues of direct significance for them.
Following on from our 2015 total of
£10,120.69, the organising Committee
attempted to double this total. We were
delighted to raise £24,558.82 in six short
months and were recipients of an award
for Most Innovative Fundraising for our
salary donation idea.
This year, the Group contributed £65,130
(2015: £32,600) to charitable causes;
£15,580 of which was through our Give
As You Earn payroll giving mechanism
(2015: £13,078). In addition, we also
raised a total of £2,458 for a variety of
charities through Dress Down Fridays at
our Sheffield office.
We again participated in The Master
Cutler’s Challenge, one of the largest
charity fundraising events in our home city
of Sheffield. Local businesses are invited to
participate and are given the opportunity
to transform a £50 investment into as
much fundraising for charities nominated
by the incumbent Master Cutler; in 2016
the charities were St Luke’s Hospice and
Rotherham Hospice.
During the summer of 2016 Henry Boot
Construction Limited and Banner Plant
Limited teamed up with The Sheffield
Children’s Hospital Charity in order to
safely deliver, as logistics donor, the art
installation ‘Herd of Sheffield’, which
was a total of 58 elephants all painted
by different artists and installed as a trail
around Sheffield. Henry Boot sponsored
two elephants: Henry the Constructor
which was painted by Deven Bhurke
and Heard Sheffield? by Temper. All
the elephants were auctioned and
raised a fantastic £410,600, with our
elephants being auctioned for £5,000
and £7,800 respectively. Whilst we were
unsuccessful in our own bids at auction,
we were delighted to receive a bespoke
small version of Henry the Constructor,
renamed Dave, after our colleague Dave
Woodhouse who coordinated our logistical
efforts, as a thank you from The Sheffield
Children’s Hospital Charity.
Pictured A well-earned rest and
refreshment with ‘Henry the Constructor’
safely in place at the Botanical Gardens,
Sheffield.
44
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
ENVIRONMENT
We are committed to protecting and enhancing the environment in the course of all our areas
of operations and are proud of our team’s expertise and enthusiasm in making this happen.
Our approach
We recognise that we have a responsibility
and an obligation to reduce the direct
impact of all our business operations on
the natural environment, both now and in
the future. Reducing our emissions is one
way in which we hope to achieve this. Our
aim is to create more sustainable ways of
undertaking our business operations to
conserve energy, save money and deliver
efficiency.
Our performance
Our priorities are to:
— Minimise waste produced;
— Increase recycling; and
— Improve energy efficiency and reduce
energy use.
Henry Boot Group C02 footprint 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
2016
Tonnes
2,060
1,133
3,193
Trend
2015
Tonnes
2,048
1,122
3,170
7.2 tonnes
CO2e
952
7.3 tonnes
CO2e
908
4,145
4,078
9.4 tonnes
CO2e
9.4 tonnes
CO2e
1 Employee numbers are based on the monthly average for the year
Carbon emissions by segment
2016
Intensity
Ratio
Tonnes
of CO2e
2.5
Henry Boot Group
CO2e emissions
Property investment
and development
2016
Tonnes
of CO2e
1,076
2015
Intensity
Ratio
Tonnes of
CO2e
2.11
2015
Tonnes
of CO2e
1,021
Land development
117
3.56
114
Construction
2,765
34.83
2,776
Group overheads
187
3.53
167
3.44
34.9
3.21
Total gross
controlled emissions
4,145
4,078
Intensity
Basis
Trend
per 1,000 sq ft of
investment property
with communal areas
per employee
per £1m of turnover
per employee
Our greenhouse gas emissions for the
year ended 31 December 2016 were
calculated in accordance with the GHG
Protocol Corporate Accounting and
Reporting Standard (2011 edition) and
emission factors from UK Government
GHG Conversion Factors for Company
Reporting 2016.
Our direct and indirect operational
greenhouse gas emissions are shown in
the tables below. 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.
Overall the Group’s greenhouse gas
emissions have increased by 2% when
compared with those of the previous year,
this equates to zero movement on tonnes
per employee.
For further information on our greenhouse
gas emissions please see our website:
Read more details at
www.henryboot.co.uk
“ We are committed to the highest
levels of environmental management
best practice to minimise the
environmental impact of our
business. Construction activities
operate to an Environmental
Management System, approved
to ISO 14001, which ensures that
the environmental impacts of the
business are minimised on every
project resulting in exemplar
environmental credentials and
performance.”
Richard Grafton
Head of Policy & Compliance
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION GOVERNANCE
Board of Directors
Senior Management
Chairman’s Introduction
Corporate Governance Statement
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
48
52
53
54
61
63
66
75
81
25222.04 6 April 2017 1:28 PM Proof 12
Pictured A CGI of our proposed joint venture £250m
Kampus Manchester development, building works
have commenced on site.
25222.04 6 April 2017 1:28 PM Proof 12
BOARD OF
DIRECTORS
Chairman
2015 and January 2016
saw the appointment of
Jamie Boot as Chairman,
three new Non-executive
Directors and promotions
within the Executive team.
The new Board team
has worked productively
together over the course
of the year.
Executive Directors
2
1
3
JAMIE BOOT
Chairman
JOHN SUTCLIFFE
Chief Executive Officer
DARREN LITTLEWOOD
Group Finance Director
1
2
3
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Non-Executive Directors
4
5
7
4
5
6
JOANNE LAKE
Deputy Chairman
JAMES SYKES
Non-Executive Director
GERALD JENNINGS
Non-Executive Director
7
8
PETER MAWSON
Non-Executive Director
RUSSELL DEARDS
Company Secretary
Read the biographies
on pages 50 and 51
25222.04 6 April 2017 1:28 PM Proof 12
6
8
49
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 BOARD OF
DIRECTORS
JAMIE BOOT
Chairman
Current Role
Non-executive Chairman since
January 2016. Appointed an
Executive Director in June 1985
and a Non-executive Director in
January 2016.
Committees
Nomination, Audit and
Remuneration.
Past Roles
Group Managing Director from
July 1986 to December 2015.
Managing Director at Henry
Boot Developments Limited and
Director at Henry Boot Homes
Limited.
Brings to the Board
Jamie has over 30 years’
experience as a director of
Henry Boot PLC and has been
a director of the Company’s four
principal operating subsidiaries.
Jamie’s role now sees him
responsible for the leadership of
the Henry Boot PLC Board and
having overall responsibility for
the management of the Audit,
Remuneration and Nomination
Committees.
DARREN LITTLEWOOD
Group Finance Director
JOANNE LAKE
Deputy Chairman
Current Role
Group Finance Director and
Executive Director since
January 2016.
Additional Roles Held
Director of the Company’s four
principal operating subsidiaries.
Past Roles
Group Financial Controller from
January 2008 to December
2015.
Brings to the Board
Darren qualified as a member
of the Chartered Institute of
Management Accountants in
2007 and is responsible to the
Board for all financial and risk
matters relating to the Henry
Boot Group of Companies. He
is heavily involved in investor
communications and, along
with John Sutcliffe, is also
responsible for communicating
strategy and results to both
private and institutional
investors.
Current Role
Non-executive Deputy
Chairman since January 2016.
Appointed a Non-executive
Director in October 2015.
Committees
Nomination, Audit and
Remuneration (Chairman).
Additional Roles Held
Non-executive Chairman of
Mattioli Woods plc, Non-
executive Director of Gateley
(Holdings) Plc, Non-executive
Director of Morses Club PLC,
Non-executive Director of
Accrol Group Holdings plc,
Trustee of The Hepworth
Wakefield.
Brings to the Board
Joanne has over 30 years’
experience in accountancy
and investment banking,
including with Panmure
Gordon, Evolution Securities,
Williams de Broe and Price
Waterhouse. She is a Chartered
Accountant and a Fellow of
the Chartered Institute for
Securities & Investment and of
the ICAEW, and is a member of
the ICAEW’s Corporate Finance
Faculty.
JOHN SUTCLIFFE
Chief Executive Officer
Current Role
Chief Executive Officer since
January 2016. Appointed an
Executive Director in October
2006.
Additional Roles Held
Chairman of the Company’s
four principal operating
subsidiaries. Member of
the CBI Yorkshire and the
Humber Regional Council and
a lay member of the Sheffield
University Finance Committee.
Trustee Director of Henry Boot
Pension Trustees Limited
acting as trustee for The Henry
Boot Staff Pension and Life
Assurance Scheme.
Past Roles
Group Finance Director from
October 2006 to December
2015. Group Finance Director
and Company Secretary
at Town Centre Securities
PLC and Finance Director of
Abbeycrest plc.
Brings to the Board
John has responsibility for
Group profitability and guides in
the achievement of the highest
level of return for a given level
of risk. He is also responsible
for communicating strategy
and results to both private and
institutional investors. John
also relays subsidiary strategy
back to the main Board. He is
also Director responsible for all
health, safety and environmental
matters.
50
50
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 JAMES SYKES
Non-Executive Director
GERALD JENNINGS
Non-Executive Director
Current Role
Non-executive non-independent
Director since March 2011.
Current Role
Non-executive Director since
October 2015.
Committees
Nomination, Audit (Chairman)
and Remuneration.
Committees
Nomination, Audit and
Remuneration.
Additional Roles Held
Chairman and Partner in
the London office of Saffery
Champness Chartered
Accountants which he joined
in 1987. He is a Non-executive
Director of Saffery 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 a partner in
the Private Wealth and Estates
Group at Saffery 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.
Additional Roles Held
Non-executive Chairman of
Social Communications (Leeds)
Limited, Non-executive Director
of the Ahead Partnership,
Non-executive Director of West
and North Yorkshire Chamber
of Commerce, Trustee Director
and Chair of PSL and Governor
at Leeds City College, President
of the Leeds Chamber of
Commerce and Director of G R
Jennings Properties Ltd.
Past Roles
Retail Portfolio Director at Land
Securities PLC.
Brings to the Board
Gerald has over 25 years’
experience in the retail and
property industry. Most recently
Gerald was responsible for the
delivery of the one million sq ft
Trinity Leeds retail scheme.
PETER MAWSON
Non-Executive Director
Current Role
Senior Independent Non-
executive Director since
January 2016. Appointed
a Non-executive Director in
October 2015.
Committees
Nomination (Chairman), Audit
and Remuneration.
Additional Roles Held
Non-executive Chairman of
Nexus Planning Limited, Non-
executive Chairman of Infinite
Global Consulting Holdings
Limited.
Past Roles
Chief Executive of Donaldsons
LLP and Chief Executive
of West Northamptonshire
Development Corporation.
Brings to the Board
Peter has a wealth of
experience in the management
and leadership of professional
service firms, together with
senior practitioner expertise
across the built environment,
from both public and private
sector perspectives.
RUSSELL DEARDS
Company Secretary
Current Role
Group General Counsel
since 2014 and Company
Secretary since September
2013.
Additional Roles Held
Company Secretary of the
Company’s four principal
operating subsidiaries.
Responsible for Legal,
Insurance, IT and secretariat
matters.
Past Roles
Head of Legal Services for
Barratt Developments in
2007 and Partner at Flint
Bishop Barnett Solicitors in
2011.
Brings to the Board
Russell qualified as a solicitor
in 1991 and now has over
25 years’ experience in law
with 11 years in the property
and construction industries.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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.
Appointment Date
Managing Director in 2000.
Appointment Date
Managing Director in 2009.
Brings to the Role
David Anderson, BSc (Hons), MRICS,
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.
Brings to the Role
Giles Boot, BA (Hons), 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.
Brings to the Role
Simon Carr, BSc (Hons), FRICS, has been
with Henry Boot for over 29 years. Simon
is a private sector board member of the
Sheffield City Region Local Enterprise
Partnership, the Sheffield City Region
Housing Executive Board and Sheffield
City Region Transport Executive Board. He
is the immediate past chair of the National
Federation of Builders and also sits on the
CBI Construction Council. Simon is also
a Non-executive Director of Wildgoose
Construction Limited.
NICK DUCKWORTH
Hallam Land Management Limited
DARREN STUBBS
Stonebridge Projects Limited
Appointment Date
Managing Director in 2016.
Brings to the Role
Nick Duckworth, MRTPI, began his career
in a private sector planning consultancy,
Phillips Planning Services, in 1990. He left
there in late 1992 and joined Hallam’s then
newly established Northampton office. In
1997 Nick set up the South West office of
Hallam in Bristol and became the Regional
Manager. He was appointed a Director in
2002.
Appointment Date
Managing Director (start of joint venture) in
2010.
Brings to the Role
Darren Stubbs 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 £25m. In 2010 he formed a
new house builder and property company,
Stonebridge Projects Limited, which is a
jointly owned company with Henry Boot
PLC.
TREVOR WALKER
Road Link (A69) Limited
Appointment Date
General Manager in 2005.
Brings to the Role
Trevor Walker, IEng MICE, 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 within Road Link
(A69) Limited in the early years, helping
to establish the company before his
appointment as General Manager in 2005.
52
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CHAIRMAN’S
INTRODUCTION
WELCOME TO OUR
CORPORATE GOVERNANCE REPORT
I am very pleased to present my first annual report on our corporate governance
approach and structure.
” I believe that strong governance
within Henry Boot keeps the
Company true to its historic identity,
promotes the values of today, and
supports and protects our vision for
the future.”
Jamie Boot
Chairman
I was appointed Chairman on 1 January
2016 after being the Group Managing
Director for 29 years. You place trust in me
and my fellow Board members and we are
committed to providing effective leadership
and high ethical standards.
I believe that strong governance within
Henry Boot keeps the Company true to
its historic identity, promotes the values
of today, and supports and protects our
vision for the future. I am responsible for
the leadership of the Board and ensuring
that it operates effectively. The Board itself
has clearly defined roles for each member.
The Executive Directors have overall
responsibility for the implementation of
strategy and the Non-executive Directors
constructively challenge management and
monitor the implementation of the strategy
within its risk and control framework.
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 markets in which we
operate.
There have been many changes to the
regulatory framework in which we work
and the Board has had to consider a
number of issues.
Modern Slavery Act
The Board has assessed the effect of the
Modern Slavery Act on its processes,
procedures and contracts in addition
to our relationships with suppliers and
contractors. Our Modern Slavery Act
statement can be viewed on our website
www.henryboot.co.uk. Our approach is
reviewed on an annual basis.
Market Abuse Regulation
The Board has reviewed the impact of
the Market Abuse Regulation including
its treatment of inside information; the
relationship with our stockbrokers and
analysts; the obligations of Persons
Discharging Managerial Responsibilities;
and the Company’s share dealing
code. We have taken appropriate
measures to ensure compliance with the
implementation of the EU Market Abuse
Regulation which came into effect from 3
July 2016.
Brexit
The Board are ever mindful of the effects of
Brexit on the UK, as the Government have
now triggered Article 50 to commence the
exit process. Our business operations are
based in the UK but we are fully aware
of, and continue to monitor and evaluate
possible impacts on the Company as
Brexit finally becomes a reality.
I am pleased to confirm that you have a
strong and experienced Board managing
your Company. We act in accordance with
the principles of good governance and in
your best interests.
This report sets out our governance
structures, processes and the work
undertaken by the Board and its
Committees throughout 2016.
Jamie Boot
Chairman
21 April 2017
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CORPORATE
GOVERNANCE STATEMENT
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.
During the accounting year under review, the Company, as a
premium listed company, was subject to the September 2014
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.frc.org.uk/publications.
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 has
been correctly applied.
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 absolute objective. Instead, 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 53 to 60.
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 seven Directors, two of whom are Executive
Directors, and the remaining five, including the Chairman, are
Non-executive Directors. All Directors served throughout 2016.
Biographies are shown on pages 50 and 51.
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 statement of purpose, business model and
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 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 Operations Board established in January 2016 focuses on
Group working, inter company co-operation and risk. This board
consists of the Chief Executive Officer, Group Finance Director,
and Company Secretary together with the four prime subsidiary
company Managing Directors and the Managing Director of
Stonebridge Projects Limited, our jointly owned house builder.
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;
— promoting the long-term success of the Group;
— capital structure and ensuring funding adequacy; and
— effective internal controls.
At its regular Board meetings there is a series of matters that are
dealt with, including a health and safety review, a finance review
including pensions, operational reviews on all the main trading
subsidiaries and a secretarial review encompassing corporate
governance, risk, shareholder matters, legal, 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 Group General Counsel
& Company Secretary. Operational decisions affecting each
subsidiary are taken by the individual subsidiary boards at their
meetings.
All Directors have access to the Group General Counsel &
Company Secretary and there is in place a written procedure for
all Directors to take independent professional advice.
The Group General Counsel & Company Secretary is responsible
for information flows between the Board, its Committees and
the boards of subsidiary companies. Formal inductions for new
Directors have been developed, along with continued professional
development training. The Group General Counsel & Company
Secretary also ensures procedures, regulations and law are
followed and advises the Board on governance issues. The
question of conflicts of interest is raised at every Board meeting of
the Company and its subsidiaries.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 How the responsibilities of the Board are divided
Chairman
— leads the Board in determining strategy and in the
Chief Executive Officer
— has overall responsibility for the implementation of strategy,
achievement of its objectives;
— facilitates the effective contribution of the Non-executive
Directors and constructive relations between Executive and
Non-executive Directors;
— ensures that the continued development needs of the
Directors are identified and addressed;
annual budgets, interaction with the City and market
forecasts;
— recommends Group strategy to the Board;
— responsible for the day-to-day leadership and management
of the operational activities of the Group in accordance with
overall strategy and policy as determined by the Board;
— has an oversight role and is available to all shareholders;
— runs the Company and its subsidiaries;
and
— has overall responsibility for the Committees.
Group Finance Director
— responsible for devising and implementing the Group’s
financial strategy, policies and risk;
— acts as Chairman of the Operations Board;
— acts as Chairman of the subsidiaries and attends the
subsidiary board meetings;
— responsible for Group health and safety matters;
— allocates responsibilities for the running of subsidiary
companies, finance, company secretarial, legal, insurance,
communications, HR and IT to the department heads or
subsidiary Managing Directors as applicable; and
— operational responsibility for managing the Group’s financial
affairs, including treasury and tax matters;
— day-to-day operational management is devolved to
management within each subsidiary business.
— attends the Operations Board meetings; and
— acts as a director of the subsidiaries and attends the
subsidiary board meetings.
Deputy Chairman & Independent Non-Executive Director
— deputises for the Chairman;
— constructively challenges the Executive Directors;
— considers proposals on strategy;
— ensures Board independence; and
— monitors the implementation of the Group’s strategy within
its risk and control framework.
Senior Independent Non-Executive Director
— constructively challenges the Executive Directors;
— considers proposals on strategy;
— ensures Board independence;
— monitors the implementation of the Group’s strategy within
its risk and control framework;
— acts as a sounding board for the Chairman and an
intermediary for other directors; and
— available to shareholders if they have concerns where
contact through the normal channels (the Chairman or the
Chief Executive Officer) has failed to resolve or for which
contact is inappropriate.
Independent Non-Executive Director
— constructively challenges the Executive Directors;
— considers proposals on strategy;
— ensures Board independence; and
Group General Counsel & Company Secretary
— supports the Chairman and Chief Executive Officer in
fulfilling their duties;
— available to all directors for advice and support;
— monitors the implementation of the Group’s strategy within
— keeps the Board regularly updated on governance matters;
its risk and control framework.
Non-Independent Non-Executive Director
— represents the interests of major shareholders;
— constructively challenges the Executive Directors; and
— considers proposals on strategy.
— ensures Group policies and procedures are maintained and
updated on a regular basis;
— attends and maintains a record of the matters discussed
and approved at Board and Committee meetings;
— attends Operations Board meetings; and
— Company Secretary of the subsidiaries and attends at the
subsidiary board meetings.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CORPORATE
GOVERNANCE STATEMENT CONTINUED
Board composition
57%
14%
29%
Non-Executive Chairman
Executive
Non-Executive
Non-Executive
board tenure
40%
0-5 years service
5+ years service
Board and committee meetings
Throughout the year, there were seven Board meetings. In addition, the Board also
delegates 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,
which in 2016 was held off-site in September. The Board has formally constituted
Nomination, Audit and Remuneration Committees. Each Committee and its members
are provided with accurate, timely and clear information and sufficient resources to
enable them to undertake their duties. Two Audit Committee meetings, one Nomination
Committee meeting, one Remuneration Committee meeting and the AGM were held in
2016. Attendance at the Board meetings and Committee meetings held during 2016
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. The Non-executive Directors learn more about the business
from a number of site visits throughout the year as well as meetings with department
heads of Henry Boot PLC and subsidiary company directors. 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 61 to 74 and such details form part of this Corporate
Governance Statement.
60%
Member
Jamie Boot1
John Sutcliffe2
Darren Littlewood3
Joanne Lake4
Gerald Jennings
Peter Mawson5
James Sykes
Role
Non-executive
Chairman
Chief Executive
Officer
Group Finance
Director
Deputy Chairman
and Non-executive
Director
Non-executive
Director
Senior Independent
Non-executive
Director
Non-independent
Non-executive
Director
Board
7/7
7/7
7/7
7/7
7/7
7/7
Audit Remuneration Nomination
1/1
1/1
2/2
2/2
2/2
2/2
2/2
2/2
—
—
—
—
1/1
1/1
1/1
1/1
1/1
1/1
7/7
2/2
1/1
1/1
1.
2.
Jamie Boot was appointed Non-executive Chairman of the Company on 1 January 2016 (having retired
from his previous position as Group Managing Director of the Company).
John Sutcliffe was appointed Chief Executive Officer of the Company on 1 January 2016 (having
relinquished his previous position as Group Finance Director of the Company). Attends the Audit
Committee meetings by invitation.
3. Darren Littlewood was appointed Group Finance Director of the Company on 1 January 2016.
Attends the Audit Committee meetings by invitation.
4.
Joanne Lake was appointed Deputy Chairman of the Company and Chairman of the Remuneration
Committee on 1 January 2016.
5. Peter Mawson was appointed Senior Independent Non-executive Director of the Company and
Chairman of the Nomination Committee on 1 January 2016.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Board effectiveness
The roles of Chairman, Jamie Boot, and the Chief Executive
Officer, John Sutcliffe, are clearly defined and they act in
accordance with the main and supporting principles of the Code.
The division of responsibilities of the Board of Directors is
summarised on page 55.
The Chairman is responsible for leadership of the Board and
ensuring it operates in an effective manner. 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 so as to be
effective.
The Chairman is in regular contact with the Chief Executive Officer
to discuss current matters and has visited Group operations
outside the scheduled Board meeting calendar, to meet subsidiary
company directors, managers and stakeholders.
The Board receives 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. 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 has
been developed and was launched in 2015 as part of succession
planning. Further leadership development training is now being
planned and rolled out.
Board balance
The names, responsibilities and other details of each of the
Directors of the Board are set out on page 50 and 51 with the
composition of the Board on page 55. The Board believes it has
an appropriate balance of Executive and independent Non-
executive Directors having regard to the size and nature of the
business. Jamie Boot was appointed Non-executive Chairman
and is regarded as non-independent. The Board viewed this
appointment as deemed appropriate due to Jamie’s longevity
of service, extensive knowledge and experience within the
Henry Boot Group. James Sykes was appointed to represent
the substantial shareholdings of the Reis family interests (see
page 76) and is not regarded as an independent Non-executive
Director. The combination of the experience and calibre of the
Non-executive Directors collectively, having regard to their diverse
backgrounds, experience and their varying lengths of service,
further enhances this balance and mitigates risk.
Board independence
The Company recognises the importance of its independent
Non-executive Directors remaining independent throughout their
appointment. It enables them to provide objective advice and
guidance to the Executive Directors through their wider business
experience and diverse backgrounds.
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 Group General Counsel
& 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.
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 Chairman and Senior Independent Non-executive Director 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 Chairman. The Non-executive Directors meet without the
Chairman to discuss the performance of the Chairman at least
twice a year.
A formal performance evaluation of the Executive Directors is
carried out at least on an annual basis and there was a formal
evaluation of the Board and its Committees in 2016.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CORPORATE
GOVERNANCE STATEMENT CONTINUED
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. The system of internal
controls is designed to manage, rather than eliminate, the risk of
failure to achieve the Company’s business objectives as 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 the Chief Executive Officer. 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, accounts and payroll, company secretarial,
pensions, legal, human resources and training, public and
investor relations, corporate communications, information
communication technology and insurance are managed
centrally and report functionally to the appropriate Company
officer (either an Executive Director or the Group General
Counsel & Company Secretary) responsible for that particular
operation.
— operations board — the Operations Board is a forum for
discussing risk and sharing best practice.
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;
the Board is satisfied with current arrangements, which will,
however, be kept under review.
Every review comprises a balanced, comprehensive and clear
analysis of:
— the development and performance of each subsidiary
company’s business during the financial year; and
— the position of each subsidiary company’s business at the end
of the financial year, consistent with the size and complexity of
the business.
The reviews include:
— analysis using financial key performance indicators; and
— where appropriate, analysis using other key performance
indicators, including information relating to environmental
matters and employee matters.
Read about our Internal Control and Risk management
framework on page 60
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Whistleblowing arrangements
The Company has operated a ‘whistleblowing’ policy and
arrangement for many years so that all employees of the Group
are able, via an independent external third party, to confidentially
report any malpractice or matters of concern they have regarding
the actions of employees, management and Directors and any
breaches of the Company’s Anti-Bribery and Corruption policy.
Anti-Bribery and Corruption Policy
The Company values its long-standing reputation for ethical
behaviour and integrity. Conducting its business with a zero
tolerance approach to all forms of corruption is central to these
values, the Group’s image and reputation. The Company policy
sets out the standards expected of all Group employees in
relation to anti-bribery and corruption and the Board has overall
responsibility for ensuring this policy complies with the Group’s
legal and ethical obligations and that everyone in our organisation
complies with it.
This policy is also relevant for third parties who perform services
for or on behalf of the Group. The Group expects those persons
to adhere to this policy or have in place equivalent policies and
procedures to combat bribery and corruption.
The policy is continually monitored and reviewed. An updated
policy was issued to all Group employees in 2016. 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 and further training is being delivered on all relevant topics.
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 89.
The Directors’ statement in respect of the business as a ‘going
concern’ is provided in the Directors’ Report on page 75.
Fair, balanced and understandable
The Board have assessed the tone, balance and language of
the Annual Report and Financial Statements, being mindful of
the requirements of the UK Corporate Governance Code and
the need for consistency between the narrative section of the
document and the Financial Statements. The Board’s formal
statement on the Annual Report and Financial Statements
being fair, balanced and understandable is contained within the
Statement of Directors’ Responsibilities which can be found on
page 81.
Shareholder relations
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, 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.
The attendance and participation of all shareholders at the AGM
is much encouraged. At the AGM held in May 2016, proxies were
received representing 71.77% of the number of shares in issue,
and is a demonstration of shareholders’ active involvement in the
affairs of the Company.
Further information for shareholders can be found in the Directors’
Report on pages 75 to 80.
Compliance Statement
The Company has complied with a vast majority of the provisions
of the September 2014 edition of the UK Corporate Governance
Code that are applicable to it for the year ended 31 December
2016. The following provision is where the Company is not strictly
in compliance with the Code. For the reason stated, the Directors
believe that the Company’s stance is justified in this respect.
D.2.3
The remuneration of the Non-executive Directors, including the
Chairman, is set by the Executive Directors. As Henry Boot PLC
is a smaller listed company, it is felt that is the most appropriate
approach.
Approved by the Board and signed on its behalf by
Russell Deards
Group General Counsel & Company Secretary
21 April 2016
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CORPORATE
GOVERNANCE STATEMENT CONTINUED
The Group operates a system of internal controls and risk management in order to
provide assurance that it is managing risk whilst achieving its business objectives.
The table below depicts our internal controls and risk management framework.
TOP DOWN
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
Operations Board
Co-operation framework
Review collaborative working risk and associated
controls. Feedback to Group Board and
Subsidiary Board level
Subsidiary Boards
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
BOTTOM UP
Independent
review
Review risk assessment
and reporting
Risk
assessment
Group centralised
operations
Specific risks and compliance
issues associated with health
and safety, treasury and
banking operations: accounts
and payroll, company
secretarial, pensions, legal,
human resources and
training, public and investor
relations, corporate
communications, information
communication technology
and insurance
Read about Risks and Uncertainties
on pages 34 to 38
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
NOMINATION
COMMITTEE REPORT
Statement from the Chairman of the Nomination Committee
Those serving as members of the Nomination Committee
(the Committee) for the whole of 2016 were Peter
Mawson (Committee Chairman), Jamie Boot, Gerald
Jennings, Joanne Lake and James Sykes. Biographies
of the current members of the Committee are shown on
pages 50 and 51.
Peter Mawson
Chairman of the Nomination Committee
I was appointed Chairman of the Nomination Committee
with effect from 1 January 2016.
The Nomination Committee plays a vital role within the business.
It ensures that the Company is headed by an effective Board
which is collectively responsible for the long-term success of the
Company.
Terms of reference
The terms of reference for this Committee 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. The terms of reference are reviewed
by the Committee each year.
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, experience, independence and
diversity 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 and
consultants where required to fulfil its responsibilities.
Meetings during the year
As a result of the changes at Board level in 2015 and the
beginning of 2016, the Committee met only once during the year.
Attendance at this meeting by the Committee members is shown
in the table on page 56.
Nomination Committee matters are also discussed at each Board
meeting.
Annual re-election by shareholders
The Company’s Articles of Association 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 provision that all
directors of FTSE 350 companies should be subject to annual
re-election. 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 50 and 51.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOMINATION
COMMITTEE REPORT
Statement from the Chairman of the Nomination Committee
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 appropriate
for the Group. The Committee is also responsible for long-term
succession planning at both Board and key senior management
level; taking into account the challenges and opportunities facing
the Group, and the skills and expertise required by the Board in
the future.
Board diversity
The Nomination Committee’s primary goal remains to identify the
most suitable candidates to join the Board and for other senior
positions within the Group. However, it also seeks to ensure that
in managing an appointment and in succession planning, it has
regard to the benefits of diversity, including but not restricted to
gender diversity and its impact on effective decision-making.
The Committee and the Board recognise the need to ensure that
the business reflects a diverse workforce, at all levels of seniority,
whilst always seeking to ensure that each post is offered to the
best available candidate.
Accordingly, the Board has agreed not to impose a quota
regarding gender balance, preferring instead to appoint strictly on
merit.
The Committee will ensure that it only works with executive search
firms which have signed up to the Standard Voluntary Code of
Conduct addressing gender diversity and best practice.
Letters of appointment
The letters of appointment for all Non-executive Directors clearly
set out the time commitment expected from each Non-executive
Director to ensure they satisfactorily perform their duties. Each
Non-executive Director confirms that they are able to allocate the
time commitment required at the time of their appointment and
thereafter as part of their individual annual effectiveness review
undertaken by the Chairman.
Approved by the Board and signed on its behalf by
Peter Mawson
Chairman of the Nomination Committee
21 April 2017
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 AUDIT COMMITTEE
REPORT
Statement from the Chairman of the Audit Committee
Those serving as members of the Audit Committee (the
Committee) for the whole of 2016 were James Sykes
(Committee Chairman), Jamie Boot, Gerald Jennings,
Joanne Lake and Peter Mawson. Biographies of the
current members of the Committee are shown on
pages 50 and 51.
James Sykes
Chairman of the Audit Committee
We all have many years of financial and business
experience and both Joanne Lake and I have relevant
accounting qualifications and experience.
Terms of reference
The terms of reference for this Committee 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. The terms of reference are reviewed
by the Committee each year.
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 results and annual financial 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);
— 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 each meeting. The Chief Executive
Officer and Group Finance Director were also present at these
meetings and attend by invitation. Attendance at these meetings
by the Committee members is shown in the table on page 56.
Audit Committee matters are also discussed at each Board
meeting.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 AUDIT COMMITTEE
REPORT CONTINUED
Committee activities during the year
In 2016 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 2016.
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 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.
Services received during the year related to the Group’s defined
benefit pension scheme and the amount paid for these services
equated to 13% of the amount paid for audit fees.
Having reviewed the new regulations set out in the EU Audit
Directive and Audit Regulation 2014, which took effect from 17
June 2016, the Committee have appointed KPMG to provide the
Groups taxation services for the year ended 31 December 2016
and thereafter.
In accordance with best practice, the Company also requires
its external audit 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.
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 and viability statement
The Committee reviewed and considered in depth papers relating
to the going concern and viability statement disclosures in the
Annual Report and Financial Statements. The Strategic Report
discloses the conclusion of these reviews on page 38.
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 accuracy 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Risk management and controls
Details of the key risks which the Group faces, 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 34 to 38.
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.
Approved by the Board and signed on its behalf by
James Sykes
Chairman of the Audit Committee
21 April 2017
Audit quality and approach to audit tender
The committee is considered to be effective, with members having
a broad mix of skills and experience to provide an appropriate
level of challenge when debating the reports, statements and
findings presented to them.
In reviewing the effectiveness of the external auditor, discussions
took place between the Audit Committee, the Henry Boot PLC
finance function and the subsidiary company management teams.
The Audit Committee considers PricewaterhouseCoopers LLP to
have conducted a high quality audit, having established effective
working relationships and having a good understanding of the
Group’s business. Furthermore, the Committee Chairman and
Committee conduct their own ongoing assessment through the
quality of the external auditors’ reports and the statutory auditors’
interaction with the Committee.
The Henry Boot PLC audit was put out to tender seven years ago
and PricewaterhouseCoopers LLP was awarded the work from
a shortlist of four firms who tendered. 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 was satisfied with the scope of the external audit
and with the work of the external auditors. Having reviewed
all services provided to the Group by the external auditors the
Committee are satisfied that the external auditors remain objective
and independent.
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 Audit Committee are authorised to fix their remuneration.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’ REMUNERATION
REPORT
Statement from the Chairman of the Remuneration Committee
Those serving as members of the
Remuneration Committee (the
Committee) for the whole of 2016
were Joanne Lake (Committee
Chairman), Jamie Boot, Gerald
Jennings, Peter Mawson and James
Sykes. Biographies of the current
members of the Committee are
shown on pages 50 and 51.
Joanne Lake
Chairman of the Remuneration Committee
On behalf of the Board and the Remuneration
Committee (the Committee), as Chairman of the
Committee, I am pleased to present the Henry Boot
PLC (the Company) Directors’ Remuneration Report
for the year ended 31 December 2016.
Executive remuneration outcomes for 2016
In the current market conditions, the 2016 results, with a 22%
increase in pre-tax profits, were very strong. In 2016 the combined
overall remuneration of the Executive Directors, on a like-for-like
basis reduced, by 15.2%, and 4.5% including the costs of our
Non-executive Directors.
The cohesive and consistent strategy aimed at creating
long-term shareholder value produced another strong result
in 2016. The markets in which our various businesses trade
were all continuing on an improving trend; however, these
markets may still create issues for the imprudent or unwary
operator and have to be managed with skill, care and
confidence.
2016 proved to be an even better result for the Group
than 2015, which in itself was the best performance since
2007 with:
— profit before tax increasing 22% to £39.5m;
— basic earnings per share increasing 23% to 21.5p;
— Return on Capital Employed increasing 180 bps to 14.4%;
— dividends for the year increasing 15% to 7.00p;
— dividend cover is now above our long-term goal of
three times;
— our strategic land portfolio increased in size again to
almost 12,000 acres with planning permission on over
16,000 units;
— we now have more active commercial developments in
progress than at any stage since 2007;
— our construction business has a strong order book for
2017 and our plant hire business continues to operate at
its highest level of utilisation than for many years.
Salaries were increased by 6.9% at 1 January 2017 and by 3.0%
at 1 January 2016 compared to an increase across the Company
in total of 5.0%.
Bonuses were paid in line with the Remuneration Policy approved
at the Annual General Meeting (AGM) in May 2015. Target profit
was set at £29m. The profit before tax of £39.5m exceeds the
target by 36.2% and gives rise to a bonus of 100.8% of salary for
the year ended 31 December 2016.
In addition, the Remuneration Committee set 18 targets, which
were the same for John Sutcliffe and Darren Littlewood. 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
85% of these targets resulting in a bonus of 8.5% of salary.
Therefore, the total bonus for each Executive Director is 109.3%
of salary.
LTIPS vesting, based on performance for the three years to 31
December 2016, were granted in line with the Remuneration
Policy adopted at the AGM in 2015. The performance criteria for
these awards are:
i. up to 33.3% of the award is dependent on growth in Earnings
Per Share being ahead of inflation;
ii. up to 33.3% of the award is dependent on the average Return
On Capital Employed;
iii. up to 33.4% of the award is dependent on Total Shareholder
Return compared with a comparator group of companies.
For these awards, the actual performance against the targets to
31 December 2016 was:
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25222.04 6 April 2017 1:28 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 i. Earnings Per Share growth was 159% against the target of
10% (being inflation plus 7%) and therefore, this part of the
award vests in full;
ii. Return On Capital Employed was 15% on average against the
maximum target of 13% and therefore, this part of the award
vests in full;
iii. Total Shareholder Return of 10.97% was below the median
when set against the comparator group and therefore this part
of the award does not vest.
Therefore, the award of LTIP shares to Jamie Boot is 61,744
shares, and John Sutcliffe 76,400 shares.
Consultation with shareholders
Whilst there has been no formal contact with shareholders
regarding the Remuneration Policy during 2016, the policy
remains fully in line with that which was approved by shareholders
at the AGM in 2015. The Remuneration Policy will be reviewed
and updated and then put to a shareholder vote again at the
AGM in 2018.
The application of Directors’ Remuneration Policy
for 2017
— With the exception of Darren Littlewood, the Executive and
Non-executive Directors were awarded a 3.0% uplift in basic
salary or fees for the year ending 31 December 2017, Darren
Littlewood was awarded a 16.7% pay rise following a review by
the Committee. The average across the workforce as a whole
was 5.0%.
— The bonus opportunity for the Executive Directors 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 prior years.
— LTIPS will be awarded under the 2015 scheme rules which
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 in
accordance with 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
2017. Specifically, this will arise if the Committee considers that
there has been a material mis-statement within the subsidiary or
Group Financial Statements; 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 2017.
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.
The report sets out payments and awards made to the Directors
and details the link between performance and remuneration
for 2016. The report, and this Chairman’s letter, is subject to
an advisory shareholder vote at this year’s AGM (please see
Resolution 3) with the exception of:
i.
ii.
the Total Shareholder Return graph;
the Executive Directors’ remuneration history and
remuneration change tables;
iii. the relative importance of spend on pay tables; and
iv. the consideration by the Directors of matters relating to
remuneration and the statement of shareholder voting.
The information set out on pages 68 to 74 of the Directors’
Remuneration Report is subject to audit.
Summary of the Committee’s activity during 2016
During 2016 the Committee:
— considered Executive Directors’ base pay and benefits for
2016 and 2017. Salary rises for the Executive Directors at
1 January 2016 were 3% and from 1 January 2017 have been
set at 3% for John Sutcliffe and £25,000 (16.7%) for
Darren Littlewood;
— conducted a review of the LTIP performance metrics and level
of reward for the year under review;
— conducted a review of the performance of the Executive
Directors for 2016 and against that background, set
performance targets for 2017;
— considered and approved the remuneration packages for John
Sutcliffe and Darren Littlewood with effect from 1 January
2017. For John Sutcliffe this was set at £387,523 and for
Darren Littlewood set at £175,000. The Committee anticipate
reviewing and uplifting the salary of Darren Littlewood each
year for the next three years at a rate of £25,000 per annum.
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.
Our Directors’ Remuneration Policy, which was approved at the
AGM on 21 May 2015, remains unchanged and is available to
view, and download, on the website:
Read more details at
www.henryboot.co.uk
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.
JOANNE LAKE
Chairman of the Remuneration Committee
21 April 2017
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’ REMUNERATION
REPORT CONTINUED
Annual Report on Remuneration
The following parts of the Directors’ Remuneration Report are subject to audit.
Single total figure of remuneration
The table below reports the total remuneration receivable by Directors in respect of qualifying services during the year.
Year ended 31 December 2016
John Sutcliffe
Darren Littlewood
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Year ended 31 December 2015
Jamie Boot
John Sutcliffe
John Brown
Michael Gunston
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Salary
and fees
£’000
376
150
80
42
42
42
42
774
Salary
and fees
£’000
365
249
57
41
41
10
10
10
783
Taxable
benefits
£’000
31
24
—
—
—
—
—
55
Taxable
benefits
£’000
30
24
—
—
—
—
—
—
54
Annual
bonus
£’000
411
164
—
—
—
—
—
575
Long-term
incentives
£’000
151
—
122
—
—
—
—
273
Annual
bonus
£’000
385
Long-term1
incentives
£’000
128
263
—
—
—
—
—
—
648
97
—
—
—
—
—
—
225
Pension
related
benefits
£’000
75
29
—
—
—
—
—
104
Pension
related
benefits
£’000
73
50
—
—
—
—
—
—
123
Total
£’000
1,044
367
202
42
42
42
42
1,781
Total
£’000
981
683
57
41
41
10
10
10
1,833
1 The value of long-term incentives has been adjusted from the average share price for the period 1 October 2015 to 31 December 2015 of £2.26 to the price on the day
the shares were issued of £1.97.
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.
The information in the single total figure of remuneration in the table above is derived from the following:
Salary or fees
The amount of salary or fees received in the year.
Taxable benefits
The taxable benefits received in the year by Executive Directors.
Annual bonus
The value of bonus payable and the calculations underlying this are disclosed on pages 69 and 70.
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 2016 valued at the average share price over the last three
months of 2016.
Pension related benefits
Pension related benefits represent the cash value of pension contributions or salary in lieu of
contributions received by Executive Directors at a rate of 20% of salary.
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25222.04 6 April 2017 1:28 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Individual elements of remuneration
Base salary and fees
Executive Directors
Salary effective from
John Sutcliffe
Darren Littlewood
1 January
2017
£
387,523
175,000
1 January
2016
£
376,236
150,000
Over the years 2014 – 2017 basic salary increases for the Chief
Executive Officer were 3.0%. For the Group Finance Director
increases in 2014 and 2015 were 3.0%. At 1 January 2016 Darren
Littlewood was appointed Group Finance Director and received a
remuneration package which the Committee anticipate reviewing
and uplifting over the years 2017-2020 at a rate of £25,000
per annum. Average salary increases for the wider employee
population were 3.8% from 1 January 2015, 4.4% from 1 January
2016 and 5.0% on 1 January 2017.
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.
Summary of bonuses earned for 2016
Non-executive Directors
Salary effective from
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
1 January
2017
£
82,400
43,709
43,709
43,709
43,709
1 January
2016
£
80,000
42,436
42,436
42,436
42,436
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 Independent Non-executive Director. Any newly appointed
Independent Non-executive Director is expected to serve for
an initial period of at least three years. Terms and conditions of
appointment relating to Non-executive Directors are available for
inspection at the registered office of the Company.
Bonus
The Executive Directors participate in an annual bonus scheme.
This is calculated by reference to pre-tax profits achieved in the
year compared to a target profit which takes into consideration
the year’s financial budget, City expectations and previous years’
profits.
Any bonus amounts are paid in cash and are subject to malus and
deferral provisions within the scheme.
Measure
Maximum
award as
% of salary
Targets and bonus potential for 2016
Actual
performance
Actual bonus value
achieved (% of salary)
Profit before tax
110%
% of target
90%
100%
120%
150%
2016
target
range
£26.1m
£29.0m
£34.8m
£43.5m
Bonus
payable as
% salary
10%
50%
90%
110%
John
Sutcliffe
Darren
Littlewood
£39.5m
100.8%
100.8%
Personal objectives
Bonus amount
achieved as % salary
Bonus amount earned
Maximum bonus as %
salary
Bonus amount achieved
as % maximum
10%
See commentary on page 70
8.5%
8.5%
109.3%
£411,226
109.3%
£163,950
120%
120%
91.1%
91.1%
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’ REMUNERATION
REPORT CONTINUED
Bonuses were paid in line with the Directors’ Remuneration
Policy approved at the AGM in May 2015. Target profit was set at
£29m, 16% ahead of the target set in 2015. The Remuneration
Committee also set 18 individual targets, which were the same
for John Sutcliffe and Darren Littlewood. These covered financial
measures such as the achievement of individual subsidiary
budgets, cash flow generation and health and safety and
environmental measures, a measure related to positive investor
feedback, and litigation risk. The Remuneration Committee
considers that the Executive Directors achieved 85% of these
targets resulting in a bonus of 8.5% of salary. The profit before tax
of £39.5m exceeds the target by 36.2% and this, combined with
the personal targets, gives rise to a bonus of 109.3% of salary for
the year ended 31 December 2016.
Details of the policy for future annual bonus awards can be found
in the Directors’ Remuneration Policy which can be viewed, and
downloaded, on the website:
Read more details at
www.henryboot.co.uk
31 December 2017 bonus targets
Profit before tax performance: 10% of salary payable on
achieving 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 maximum of a further bonus of 20% of salary may
become payable.
The profit before tax target is deemed to be commercially sensitive
and therefore will be disclosed retrospectively in the 2017
Directors’ Remuneration Report.
Personal objectives: up to an additional 10% of salary may
become payable to Executive Directors upon the achievement of
a number of personal objectives.
The objectives measured will be based on actions and
achievements which contribute to delivery of Group strategy.
Long Term Incentive Plan (LTIP)
The Committee has reviewed the performance criteria for the LTIP shares awarded in 2014, based on performance for years 2014,
2015 and 2016, which are expected to vest in June 2017. The LTIP shares in this award are subject to the following performance
criteria:
i. EPS growth ahead of inflation: EPS growth was 159%, which exceeded RPIJ growth by more than 156% and therefore this 33.3%
of the award became eligible;
ii. Average annual return on capital employed above 13%: this was 15% and therefore this 33.3% of the award became eligible;
iii. Total Shareholder Return (TSR) above the median for the comparator group: The Henry Boot PLC TSR for the three-year period was
10.97%, putting it below the median within the comparator group and therefore, this 33.4% of the award did not become eligible.
Together, these resulted in LTIP awards of: Jamie Boot 61,744 shares; and John Sutcliffe 76,400 shares; and gave rise to the award
values in the single total figure of remuneration at 31 December 2016 on page 68.
For Jamie Boot this award, and any grant of awards in 2017 and 2018, is on a pro rata basis to his retirement date of 31 December
2015 under the provisions for good leavers.
LTIP awards granted in the year
John Sutcliffe
Darren Littlewood
Type
of award
LTIP – nil cost option
% of salary
100%
Number
of shares
176,969
Face value
to grant at
£2.286
per share
376,236
LTIP – nil cost option
100%
70,555
150,000
Awards expected to be granted for the financial years 2017–2019 in 2017
John Sutcliffe
Darren Littlewood
Type
of award
LTIP – nil cost option
LTIP – nil cost option
% of salary
100%
100%
% of
award
vesting at
threshold
25%
25%
% of
award at
threshold
25%
25%
The performance criteria for these awards are laid out in the Remuneration Policy which can be viewed, and downloaded, on the website:
Read more details at
www.henryboot.co.uk
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
Pension entitlement
John Sutcliffe is a member of the Henry Boot PLC Group Stakeholder (Defined Contribution) Pension Plan (the Plan). Contributions are
made at 20% of salary and contributions to the Plan in the year were £18,812 (2015: £40,821). The annual allowance for tax relief on
pension savings applicable to John Sutcliffe in 2016 was £18,812 and he elected to receive a salary supplement in lieu of the employer
contributions over and above this level, which amounted to £56,435 (2015: £9,041).
Darren Littlewood is a member of The Henry Boot Staff Pension and Life Assurance Scheme (Defined Benefit) (the Scheme), his
accrued pension entitlement at 31 December 2016 was £22,270 and the pensionable salary available for use within the Scheme at 31
December 2016 was £56,755. Basic salary above this level is available for use within the Henry Boot PLC Group Stakeholder (Defined
Contribution) Pension Plan (the Plan). Contributions are made at 20% of available salary and contributions to the Plan in the year were
£13,987. The annual allowance for tax relief on pension savings applicable to Darren Littlewood in 2016 was £13,987 and he elected to
receive a salary supplement in lieu of the employer contributions over and above this level, which amounted to £4,662.
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 year in respect of services provided to the Company as a Director.
Payments made for loss of office
There were no payments made during the year in respect of loss of office to a Director.
Statement of Directors’ shareholdings and share interests
At 31 December 2016
At
31 December
2015
Legally owned
5,734,562
510,445
n/a
20,000
10,710
—
—
SAYE
(not subject
to
performance)
—
—
CSOP
(not subject
to
performance)
—
—
LTIPS
subject to
performance
measures
123,937
400,744
10,465
—
—
—
—
10,000
—
—
—
—
70,555
—
—
—
—
Legally
owned
5,799,302
543,769
24,694
20,000
10,710
—
10,000
Jamie Boot
John Sutcliffe
Darren Littlewood
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Share interests
as a % of
salary or fees
31 December
20161
14,485
491
133
92
49
—
46
Total
5,923,239
944,513
115,714
20,000
10,710
—
10,000
The share price at 31 December 2016 was 201.50p. The salary used for this calculation is that which commences on 1 January 2017.
1 As laid out in the Remuneration Policy, which can be viewed on the website:
Read more details at
www.henryboot.co.uk
Executive Directors are required to acquire shares outright to the value of 100% of basic salary. We note the NAPF recommends that a holding of 200% is more
appropriate. The Remuneration Committee believes 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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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
DIRECTORS’ REMUNERATION
REPORT CONTINUED
Directors’ shareholdings
The beneficial interest of the Directors in the share capital of the Company at 31 December 2016 was as follows:
Jamie Boot
John Sutcliffe
Darren Littlewood
John Brown
Michael Gunston
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
2016
Number of shares
Ordinary
5,799,302
543,769
24,694
Preference
14,753
—
—
2015
Number of shares
Ordinary
5,734,562
510,445
n/a
Preference
14,753
—
n/a
n/a
n/a
20,000
10,710
—
10,000
n/a
n/a
—
—
—
—
35,000
23,000
20,000
10,710
—
—
—
—
—
—
—
—
Between 31 December 2016 and 24 March 2017, being a date not more than one month prior to the date of the Notice of the AGM
there have been no other changes in the beneficial and non-beneficial interests of any Director.
Long term incentive plan awards
Performance shares
Plan
Date of
award
Market
price
at date
of award
At
1 January
2016
Awarded
during
the year
Vested
during the
year
Lapsed
during
the year
At
31 December
2016
Earliest/
actual
vesting date
Jamie Boot 2006 18/04/2013
2006 07/05/2014
2015 01/06/2015
171.0p
211.0p
228.6p
181,674
92,709
31,228
305,611
—
—
—
—
John
Sutcliffe
2006 18/04/2013
2006 07/05/2014
2015 01/06/2015
2015 21/04/2016
171.0p
211.0p
228.6p
212.6p
Darren
Littlewood
2015 21/04/2016
212.6p
Sharesave Plan
137,429
114,715
109,060
—
—
—
— 176,969
176,969
361,204
64,740
—
—
64,740
48,974
—
—
—
48,974
116,934
—
—
116,934
88,455
—
—
—
88,455
— 23/05/2016
07/06/2017
01/06/2018
92,709
31,228
123,937
— 23/05/2016
07/06/2017
01/06/2018
21/05/2019
114,715
109,060
176,969
400,744
—
—
70,555
70,555
—
—
—
—
70,555
70,555
21/05/2019
At
1 January
2016
Granted
during
the year
Exercised
during the
year
Lapsed
during
the year
At
31 December
2016
Exercise
price
Date from
which
exercisable
Plan
Darren
Littlewood
2014
10,465
—
—
—
10,465
172.0p
01/12/2017
31/05/2018
Company Share Option Plan
At
1 January
2016
Granted
during
the year
Exercised
during the
year
Lapsed
during
the year
At
31 December
2016
Exercise
price
Date from
which
exercisable
Plan
Expiry
date
2014
10,000
—
—
—
10,000
191.0p
01/10/2017
01/10/2024
Darren
Littlewood
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Market
valuation
on vesting
£
127,858
—
—
127,858
96,721
—
—
—
96,721
—
—
Expiry
date
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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
26 May 2016 the resolution put to shareholders on an advisory
basis to receive and approve the 2015 Directors’ Remuneration
Report was passed. The number of votes in favour of that
resolution was 93,896,403 (99.14% of votes cast), against
812,928 (0.86% of votes cast) and withheld 58,890 (0.00% of
votes cast). The total number of votes cast in respect of this
resolution represented 71.72% of the issued share capital.
Share price
The middle market price for the Company’s shares at 31
December 2016 was 201.50p and the range of prices during the
year was 169.63p to 228.88p.
Eight-year TSR performance graph
FTSE Small Cap Index
Henry Boot PLC
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c
-
1
4
n
-
1
5
c
-
1
5
n
-
1
6
c
-
1
6
D
e
J
u
Chief Executive Officer’s remuneration for the
previous eight years
Total
remuneration
£’000
Annual bonus
as a %
of maximum
LTIP vesting
as a % of
maximum
2016
2015
2014
2013
2012
2011
2010
2009
1,044
981
1,000
1,054
962
842
764
575
91.1
87.8
94.5
83.3
58.3
66.7
58.3
33.3
Ordinary dividends
Profit attributable
to owners of the
business
Overall expenditure
on pay
67
25
25
50
40
50
64
50
Percentage change in Chief Executive Officer’s
remuneration
The table below sets out in relation to salary, taxable benefits and
annual bonus the percentage increase in remuneration for
John Sutcliffe compared to the wider workforce. For these
purposes:
Percentage
change
Salary
Taxable benefits
Annual bonus 2015
Annual bonus 2016
Group
Managing
Director
3.0%
—
(4.3%)
6.8%
Note
1
2
2
Workforce
sample
5.0%
—
6.2%
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 2017
for the year ended 31 December 2016 and the figure is therefore
not available. Therefore, the information produced is for the bonus
comparisons paid in May 2016 for the year ended 31 December
2015. The workforce comparison is every member of staff who
received a bonus excluding the Chief Executive Officer.
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:
2016
£’000
9,211
2015
£’000
8,039
% change
14.6
28,259
23,041
25,743
24,857
22.6
3.6
73
25222.04 6 April 2017 1:28 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’ REMUNERATION
REPORT CONTINUED
Terms of reference
The terms of reference for this Committee 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. The terms of reference are reviewed by the
Committee each year.
Role of the Committee
The primary role of the Committee is to:
— review, recommend and monitor the level and structure of
the remuneration packages of the Executive Directors and
senior management;
— set and approve the remuneration package for the Executive
Directors; and
— determine a balance between base pay and performance related
elements of the remuneration package in an effort to align the
interests of shareholders with those of the Executive Directors.
Meetings during the year
The Committee met once during the year. Attendance at these
meetings by the Committee members is shown in the table on page
56 and further details can be found below.
Membership of the Committee
Those serving as members of the Remuneration Committee
(the Committee) for the whole of 2016 were myself (Committee
Chairman), Jamie Boot, James Sykes, Gerald Jennings and Peter
Mawson. Biographies of the current members of the Committee
are shown on pages 50 and 51. Gerald Jennings, Peter Mawson
and I are independent Non-executive Directors of the Board,
while Jamie Boot and James Sykes are Non-independent Non-
executive Directors.
The Committee consisted of five Non-executive Directors during
the financial year was comprised as follows:
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;
— 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:
Joanne Lake
Jamie Boot
James Sykes
Gerald Jennings
Peter Mawson
Adviser
Chief Executive Officer
and Head of HR
DLA Piper UK LLP
Independent
Yes
No
No
Yes
Yes
During 2016 John Sutcliffe, Chief Executive Officer, attended
meetings with the Committee, as requested, in order to assist
on matters concerning other senior Executives within the Group.
John Sutcliffe was not present during any part of the meetings
where his own remuneration was discussed.
Area of advice
Remuneration of staff, senior
Executives and management
Share scheme matters, the rules
for the 2015 LTIP Scheme.
The Remuneration Committee
considers that the advice DLA has
given throughout the year is legal
advice in compliance with relevant
legislation.
Approved by the Board and signed on its behalf by
Joanne Lake
Chairman of the Remuneration Committee
21 April 2017
74
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’
REPORT
The Directors’ Report for the financial year ended 31 December
2016 is detailed below.
Activities of the Group
The principal activities of the Group are land promotion, property
investment and development, and construction.
Strategic Report
In accordance with the Companies Act 2006, we are required
to present a fair review of the Group business along with a
description of the principal risks and uncertainties faced. The
Strategic Report for the year ended 31 December 2016 is set out
on page 8 to 45.
Corporate Governance Statement
The Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority 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 54
to 60.
Results for the year and dividends
The results are set out in the Consolidated Statement of
Comprehensive Income on page 90. The companies affecting the
profit or net assets of the Group in the year are listed in note 34 to
the Financial Statements.
The Directors recommend that a final dividend of 4.50p per
ordinary share be paid on 31 May 2017, subject to shareholder
approval at the 2017 AGM to be held on 25 May 2017, to ordinary
shareholders on the register at the close of business on 28 April
2017. If approved, this, together with the interim dividend of
2.50p per ordinary share paid on 21 October 2016, will make a
total dividend of 7.00p per ordinary share for the year ended 31
December 2016. Further details are disclosed in note 10 to the
Financial Statements on page 107.
Financial instruments
The Group’s policy in respect of financial instruments is set out
within the Accounting Policies on page 98 and details of credit
risk, capital risk management, liquidity risk and interest rate risk
are given respectively in notes 16, 23, 24 and 26 to the Financial
Statements.
Going concern and viability statement
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. Further detail is contained in
the Strategic Report on page 38.
Political donations
The Company made no political donations in the year or in the
previous year.
Directors and their interests
Details of the Directors who held office during the financial year
ending 31 December 2016 and as at the date of this Annual
Report and Financial Statements can be found on page 50
and 51.
At no time during the year has any Director had any interest in any
significant contract with the Company.
The interests of Directors and persons closely associated with
them in the share capital of the Company as at 31 December
2016, are disclosed in the Directors’ Remuneration Report on
pages 71 and 72.
Between 31 December 2016 and 24 March 2017, being a date
not more than one month prior to the date of the Notice of the
AGM, there has been no change in the beneficial interest of any
Director.
Details of Directors’ long-term incentive awards and share options
are provided in the Directors’ Remuneration Report on pages 70
to 72.
Directors’ service contracts and letters
of appointment
Details of unexpired terms of Directors’ service contracts and/or
letters of appointment of the Executive Directors proposed for
reappointment at the AGM on 25 May 2017 are set out in the
Directors’ Remuneration Policy.
John Sutcliffe and Darren Littlewood 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. The Directors’ Remuneration Policy can be viewed on the
website:
Read more details at
www.henryboot.co.uk
Employment policy and involvement
Employees
Employees are at the heart of all that we do; our culture ensures
that employees can grow, thrive and succeed. 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.
75
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’
REPORT CONTINUED
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 gender,
sexual orientation, race, ethnic origin, religion, age, disability or
marital/civil partnership status. Every possible effort is made by
the Group to retain and support employees who become less able
whilst in the employment of the Group. Full consideration is given
to the diverse needs of our employees and potential recruits and
we are fully compliant with all current legislation.
Succession planning is important to our ongoing success; it
is our preference to promote through the line from our current
workforce where possible. We have a competitive and engaging
employment offering which ensures that we have a low turnover
of employees but it is also attractive to external candidates
wishing to join our Group, including flexible working arrangements,
stakeholder pension plan, 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.
Employee engagement
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 plays in our ongoing
financial and operational success.
The Group tries to ensure that, so far as possible, employee views
are taken into account when decisions are made that are likely
to affect their interests. We regularly provide our employees with
information on matters of concern to them through a variety of
communication channels including manager briefings and news
items on our Group intranet to disseminate information to all
Directors and employees.
Employee communications
We utilise our ever evolving Group intranet to disseminate
information to all Directors and employees. Regular news items
and internal updates are issued on a frequent basis; collaboration
and inclusion are encouraged.
Employee share schemes
The Group encourages participation in employee share schemes
of the Company to share in the potential growth and any future
success of the Group. Details of employee share schemes are set
out in note 29 to the Financial Statements.
Directors’ indemnity provisions
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 to protect the individuals
concerned from the consequences of innocent error or omission.
76
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.
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 43.
Greenhouse gas emissions
The greenhouse gas emissions disclosures required by
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 are included within the Strategic Report on
page 45. This information is incorporated by reference into (and
shall be deemed to form part of) this report.
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 Guidance and Transparency Rules of the
Financial Conduct Authority.
Voting rights
over ordinary
shares
Number
% of issued
21,307,155
5,739,580
7,213,675
16.13
4.34
5.46
Rysaffe Nominees and
J J Sykes (joint holding)1
The Fulmer Charitable Trust2
Hargreave Hale Limited3
1.
2.
Rysaffe Nominees and James Sykes are joint registered holders on behalf
of various Reis family trusts and are therefore not included under the
beneficial interests of James Sykes set out in the Directors’ Remuneration
Report.
The shares of the Fulmer Charitable Trust, a recognised charity, are
registered in the names of Mr John Spencer Reis, Mrs Sally Anne Reis and
Mrs Caroline Mary Mytum as Trustees.
3.
Notified as indirect voting rights.
25222.04 6 April 2017 1:28 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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
25 May 2017 at 12.30pm. The notice convening the meeting
can be found on pages 139 to 143. It is also available at www.
henryboot.co.uk, where a copy can be viewed and downloaded.
Additional shareholder information
This section sets out details of other matters on which the
Directors are required to report annually, but which do not appear
elsewhere in this document.
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 29 to the Financial Statements. As at 24 March
2017, 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
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 Financial Conduct Authority.
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 29 to the Financial Statements. The Trustee
of the Trust, a subsidiary of the Company of which the Directors
throughout the whole of 2016 were Jamie Boot, John Sutcliffe,
Darren Littlewood and Russell 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. In respect of
the financial year of the Company ended on 31 December 2016,
the Trust has waived the right to receive from the Company all
dividends (if any) in respect of the shares held within the Trust.
Further details are provided in note 31 to the Financial Statements.
Future developments
Important events since the financial year end and likely future
developments are described in the Strategic Report on pages 8
to 45.
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 11) and authorising the Audit Committee
to fix their remuneration (Resolution 12) will be proposed at the
AGM.
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 89.
77
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’
REPORT CONTINUED
The Notice of the AGM on pages 139 to 143 includes the
following resolutions:
— an ordinary resolution (Resolution 13) to renew the authority of
the Directors to allot shares up to a maximum nominal amount
of £4,403,311 representing approximately one-third (33.33%)
of the Company’s issued ordinary share capital at 24 March
2017. The authority will expire on 24 August 2018 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 14) 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 £660,496 (approximately 5%
of the Company’s issued ordinary share capital at 24 March
2017). The authority will expire on 24 August 2018 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 15) to renew the authority of
the Company to make market purchases of up to 11,055,000
of its own issued ordinary shares (83.7% of the Company’s
issued ordinary share capital at 24 March 2017). 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.
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.
78
25222.04 6 April 2017 1:28 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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
25 May 2017 are set out in the Notice of AGM on pages 139
to 143.
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-
quarters 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 some or all of their shares in certificated form by
transfer in writing in any usual form or in any other form which the
Board may approve. Uncertificated shares must be transferred
by means of a relevant system, such as CREST. 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;
— 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.
In addition, the Board may refuse to register any transfer of shares
which is in favour of (i) a child, bankrupt or person of unsound
mind or (ii) more than four transferees.
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.
79
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 DIRECTORS’
REPORT CONTINUED
Appointment and replacement of Directors
The Directors shall not, unless otherwise determined by an
ordinary resolution of the Company, be less than three nor more
than 15 in number. Directors may be appointed by the Company
by ordinary resolution or by the Board. A Director appointed by the
Board shall retire from office at the next AGM of the Company but
shall then be eligible for 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 they were not appointed or reappointed at either
such AGM and they have otherwise ceased to be a Director and
been reappointed by general meeting of the Company at or since
either such AGM. The Company’s policy is that all of the Directors
should be, and are, subject to annual re-election.
The Company may, by ordinary resolution of which special
notice has been given in accordance with the Companies Acts,
remove any Director before their period of office has expired
notwithstanding anything in the Articles or in any agreement
between them and the Company. A Director may also be removed
from office by the service on them 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.
they are prohibited by law from being a Director;
ii.
they become bankrupt or makes any arrangement or
composition with their creditors generally;
iii. they are or may be suffering from a mental disorder as referred
to in the Articles;
iv. for more than six months they are absent, without special
leave of absence from the Board, from meetings of the Board
held during that period and the Board resolves that their office
be vacated; or
v.
they serve on the Company notice of their 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, Computershare Investor
Services PLC or to the Company directly.
Approved by the Board and signed on its behalf by
Russell Deards
Group General Counsel & Company Secretary
21 April 2017
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 STATEMENT OF
DIRECTORS’ RESPONSIBILITIES
Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and
the Financial Statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law, the Directors
have prepared the Group Financial Statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted
by the European Union (EU) and Parent Company Financial
Statements in accordance with IFRSs as adopted by the EU.
Under company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and
of the profit or loss of the Group and Parent Company for that
period. In preparing the Financial Statements, the Directors are
required to:
— select suitable accounting policies and then apply them
consistently;
— state whether applicable IFRSs as adopted by the EU
have been followed for the Group Financial Statements
and IFRSs as adopted by the EU have been followed for
the Parent Company Financial Statements, subject to any
material departures disclosed and explained in the Financial
Statements;
— make judgements and accounting estimates that are
reasonable and prudent; and
— prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and Parent
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Parent Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Parent Company 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.
The Directors are also responsible for safeguarding the assets of
the Group and Parent Company 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 Parent Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Fair, balanced and understandable
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 Group and Parent Company’s
performance, business model and strategy.
Directors’ responsibility statement
Each of the Directors, whose names and functions are listed on
pages 50 and 51 confirm that, to the best of their knowledge:
— the Parent Company Financial Statements, which have been
prepared in accordance with IFRSs as adopted by the EU, give
a true and fair view of the assets, liabilities, financial position
and profit of the company;
— the Group Financial Statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit of
the Group; and
— the Strategic Report and Directors’ Report includes a fair
review of the development and performance of the business
and the position of the Group and Parent Company, together
with a description of the principal risks and uncertainties that it
faces.
Approved by the Board and signed on its behalf by
John Sutcliffe
Director
21 April 2017
Darren Littlewood
Director
21 April 2017
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 25222 7 April 2017 2:46 PM Proof 12Independent Auditors’ Report84Consolidated Statement of Comprehensive Income90Statements of Financial Position91Statements of Changes in Equity92Statements of Cash Flows93Principal Accounting Policies94Notes to the Financial Statements102FINANCIALSTATEMENTSPictured The former St Helena Girls Grammar School in Chesterfield, refurbished and transformed to a new campus site for the University of Derby.Henry Boot AR2016 Financial Back.indd 824/7/2017 2:46:49 PM 25222 6 April 2017 1:27 PM Proof 12
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 2016 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
The Financial Statements, included within the Annual Report and Financial Statements (the Annual Report), comprise:
• the Statements of Financial Position as at 31 December 2016;
• the Consolidated Statement of Comprehensive Income for the year then ended;
• the Statements of Changes in Equity for the year then ended;
• the Statements of Cash Flows 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, 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 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, and applicable law.
Our audit approach
Overview
• Overall Group materiality: £2.9m which represents 0.9% of total assets.
Materiality
• Valuation of investment properties.
• Accuracy and valuation of construction contract balances.
• Completeness and accuracy of land development provision.
Audit scope
• Valuation of pension scheme liability.
Areas
of focus
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
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 mis-statement 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 mis-statement due to fraud.
The risks of material mis-statement 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
Valuation of investment properties
We focused on this area because the Group’s
investment property assets represent a significant
proportion of the assets in the Group Statement of
Financial Position.
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.
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.
How our audit addressed the area of focus
Regarding the completed investment properties valued by the external valuer
We tested the underlying data used by the external valuer by agreeing a
sample of lettings to our work on 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. Whilst
we identified that for certain properties an alternative yield assumption may
be taken, no material adjustments were identified.
Regarding the remaining properties valued by management
We selected a sample of valuations of investment property in the course of
construction 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.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 INDEPENDENT
AUDITORS’ REPORT CONTINUED
to the members of Henry Boot PLC
Area of focus
Accuracy and valuation of construction contract
balances
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.
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 mis-statement to the Financial
Statements.
Completeness and accuracy of land promotion provision
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.
How our audit addressed the area of focus
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
found that it was consistent with the supporting evidence obtained.
Our work over a sample of contracts included the following:
— meeting with in-house quantity surveyors to understand the status of
contract work and to understand how the cost to complete had been
calculated;
— agreeing key contract details to legal documentation;
— using computer assisted audit techniques to verify the occurrence of
all revenue billed during the year through agreeing amounts certified
by third parties to accounts receivable and cash;
— we also checked customer acceptance of the work undertaken,
considering the implications of any ongoing disputes which included
discussions with the Group legal department;
— assessing cost to complete schedules for reasonableness, primarily
by looking at historical budgeting accuracy; and
— 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 in-house quantity surveyors, correspondence with any
claimants and tested the out-turn on similar amounts previously provided for.
We also assessed 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 materially consistent with the actual outcomes.
No material adjustments were identified as a result of our testing.
We tested the costs to complete included in the provision by agreeing to
forecasts from management’s external cost consultants. This also included
agreeing the estimated timing of cash flows to these same projections.
We considered the historic accuracy of the Group’s forecast costs to
complete by comparing these forecasts with actual costs incurred to date.
We reconciled the movement in the provision between December 2015
and December 2016 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 also selected a sample of actual infrastructure costs incurred in the
year and agreed them to supplier invoices or completion certificates. 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).
No material adjustments were identified as a result of the procedures we
performed in this area.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 How our audit addressed the area of focus
We obtained the actuary’s report and we used our own actuarial experts to
assess the judgemental assumptions such as discount rate, inflation and
mortality rates, by comparing key assumptions to externally derived data,
as well as our own independently formed assessments, in order to assess
whether they were reasonable.
We have no exceptions to report as a result of this testing.
Area of focus
Actuarial assumptions used in accounting for defined
benefit pension scheme liabilities
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 liabilities under IAS 19.
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.
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 Promotion and Construction. The
Group Financial Statements are a consolidation of the 45 reporting units within these three business lines and the Group’s centralised
functions.
Of the Group’s 45 reporting units, we identified six which, in our view, required an audit of their complete financial information, either due
to their size or their risk characteristics.
Specific audit procedures over investment properties, inventories, borrowings, and property plant and equipment were performed for a
further four reporting units, and specific audit procedures were also performed over one joint venture company due to its contribution to
the Group’s investment in joint ventures and associates. 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.
The reporting units where we performed audit work accounted for 92% of total assets.
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 on the individual financial statement line items and disclosures and in evaluating the effect of mis-statements, 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
£2.9m (2015: £2.5m)
0.9% of total assets (2015: 0.7% 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 mis-statements identified during our audit above £145,000 (2015:
£125,000) as well as mis-statements 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 38, in relation to going concern. We have
nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to
the Directors’ Statement about whether they considered it appropriate to adopt the going concern basis in preparing the Financial
Statements. We have nothing material to add or to draw attention to.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 INDEPENDENT
AUDITORS’ REPORT CONTINUED
to the members of Henry Boot PLC
As noted in the Directors’ Statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing
the Financial Statements. 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.
Other required reporting
Consistency of other information and compliance with applicable requirements
Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
— the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are
prepared is consistent with the Financial Statements; and
— the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the Group, the Parent Company and their environment obtained in the
course of the audit, we are required to report if we have identified any material mis-statements in the Strategic Report and the Directors’
Report. We have nothing to report in this respect.
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.
— 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 position and 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.
— the section of the Annual Report on page 64, 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.
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
— the Directors’ confirmation on pages 34 to 38 of the Annual Report, in accordance with provision C.2.1 of
the Code, that they have carried out a robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance, solvency or liquidity.
We have nothing
material to add or
to draw attention to
— the disclosures in the Annual Report that describe those risks and explain how they are being managed or
mitigated.
— the Directors’ explanation on page 38 of the Annual Report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects of the Group, over what period they have done so and
why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
We have nothing
material to add or
to draw attention to
We have nothing
material to add or
to draw attention to
Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and the Directors’ statement in relation to the longer-term viability of the Group. Our review was
substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the
statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having
performed our review.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 ten further provisions of
the Code. We have nothing to report having performed our review.
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 Parent 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 mis-statement, 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 mis-statements
or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Directors’ Report, we consider
whether those reports include the disclosures required by applicable legal requirements.
Andy Ward (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Sheffield
21 April 2017
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Other income
Administrative expenses
Pension expenses
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 and associates
Profit before tax
Tax
Profit for the year from continuing operations
Other comprehensive (expense)/income not being reclassified to
profit or loss in subsequent years:
Revaluation of Group occupied property
Deferred tax on property revaluations
Actuarial (loss)/gain on defined benefit pension scheme
Current tax on actuarial loss
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
12
17
26
7
17
17
9
9
2016
£’000
306,806
(244,496)
62,310
40
(17,958)
(3,774)
40,618
(1,783)
647
—
39,482
156
(1,670)
1,523
39,491
(8,945)
30,546
30
3
(8,959)
428
964
—
—
(7,534)
23,012
28,259
2,287
30,546
20,725
2,287
23,012
21.5p
21.3p
2015
£’000
176,186
(122,855)
53,331
36
(17,235)
(3,689)
32,443
(2,009)
747
485
31,666
1,438
(1,617)
923
32,410
(7,460)
24,950
100
509
6,002
—
(1,439)
16
(4)
5,184
30,134
23,041
1,909
24,950
28,219
1,915
30,134
17.5p
17.3p
90
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 STATEMENTS OF
FINANCIAL POSITION
as at 31 December 2016
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Investments
Investment in joint ventures and associates
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
2016
£’000
Note
Parent Company
2015
£’000
2016
£’000
11
12
13
14
15
16
17
18
16
20
21
24
25
21
24
26
25
29
30
30
30
31
4,909
21,967
123,663
—
5,148
5,592
5,249
166,528
137,915
66,921
7,389
212,225
1,050
213,275
61,149
4,707
33,342
6,669
105,867
107,408
4,615
6,922
26,396
2,451
40,384
233,552
13,608
3,879
210,664
4,611
(1,071)
231,691
1,861
233,552
5,757
20,984
125,311
—
3,790
10,507
4,323
170,672
138,941
54,448
12,041
205,430
—
205,430
64,384
3,636
42,836
5,749
116,605
88,825
6,639
8,137
19,577
3,595
37,948
221,549
13,604
3,964
197,895
4,548
(345)
219,666
1,883
221,549
—
297
—
8,488
—
—
4,694
13,479
—
191,751
2,507
194,258
—
194,258
73,689
3,524
31,008
—
108,221
86,037
—
—
26,396
—
26,396
73,120
13,608
—
54,835
5,748
(1,071)
73,120
—
73,120
2015
£’000
—
168
—
3,021
—
—
3,772
6,961
—
197,711
10,135
207,846
—
207,846
82,600
3,600
40,478
—
126,678
81,168
—
—
19,577
—
19,577
68,552
13,604
—
49,608
5,685
(345)
68,552
—
68,552
The Parent Company made a profit for the year of £21,038,000 (2015: £7,357,000).
The Financial Statements on pages 90 to 93 of Henry Boot PLC, registered number 160996, were approved by the Board of Directors
and authorised for issue on 21 April 2017.
On behalf of the Board
J T Sutcliffe
Director
D L Littlewood
Director
91
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 STATEMENTS OF
CHANGES IN EQUITY
for the year ended 31 December 2016
Group
At 1 January 2015
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Proceeds on disposal of
treasury shares
Share-based payments
At 31 December 2015
Profit for the year
Other comprehensive expense
Total comprehensive income
Equity dividends
Realised revaluation surplus
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2016
Note
30
10
31
30, 31
30
10
31
30, 31
Share
capital
£’000
13,592
—
—
—
—
12
—
—
12
13,604
—
—
—
—
—
4
—
—
4
13,608
Parent Company
At 1 January 2015
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Proceeds on disposal of treasury shares
Share-based payments
At 31 December 2015
Profit for the year
Other comprehensive expense
Total comprehensive income
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2016
92
Attributable to owners of the Parent Company
Cost of
shares
held
by ESOP
trust
£’000
(550)
Property
revaluation
reserve
£’000
Retained
earnings
£’000
177,664
23,041
4,563
27,604
(7,664)
—
Other
reserves
£’000
4,425
—
6
6
—
117
3,355
—
609
609
—
—
Total
£’000
198,486
— 23,041
—
5,178
— 28,219
(7,664)
—
129
—
—
—
—
3,964
—
33
33
—
(118)
—
—
—
(118)
3,879
—
291
(7,373)
197,895
28,259
(7,567)
20,692
(8,318)
118
—
—
277
(7,923)
210,664
—
—
117
4,548
—
—
—
—
—
63
—
—
63
4,611
4
201
205
(345)
—
—
—
—
—
—
(959)
233
(726)
4
492
(7,039)
219,666
28,259
(7,534)
20,725
(8,318)
—
67
(959)
510
(8,700)
(1,071) 231,691
Non-
controlling
interests
£’000
1,988
1,909
6
1,915
(2,020)
—
—
—
(2,020)
1,883
2,287
—
2,287
(2,309)
—
—
—
—
(2,309)
1,861
Share
capital
£’000
13,592
—
—
—
—
12
—
—
12
13,604
—
—
—
—
4
—
—
4
13,608
Retained
earnings
£’000
45,256
7,357
4,563
11,920
(7,664)
—
—
96
(7,568)
49,608
21,038
(7,567)
13,471
(8,318)
—
—
74
(8,244)
54,835
Cost of
shares held
by ESOP
trust
£’000
(550)
—
—
—
—
—
4
201
205
(345)
—
—
—
—
—
(959)
233
(726)
(1,071)
Other
reserves
£’000
5,568
—
—
—
—
117
—
—
117
5,685
—
—
—
—
63
—
—
63
5,748
Note
8
10
31
30
8
10
31
30
Total
equity
£’000
200,474
24,950
5,184
30,134
(9,684)
129
4
492
(9,059)
221,549
30,546
(7,534)
23,012
(10,627)
—
67
(959)
510
(11,009)
233,552
Total
equity
£’000
63,866
7,357
4,563
11,920
(7,664)
129
4
297
(7,234)
68,552
21,038
(7,567)
13,471
(8,318)
67
(959)
307
(8,903)
73,120
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 STATEMENTS OF
CASH FLOWS
for the year ended 31 December 2016
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 joint ventures and associates
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of investment properties
Proceeds on disposal of assets held for sale
Interest received
Dividends received from subsidiaries
Dividends received from joint ventures
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
32
11
12
13
15
31
10
10
24
24
24
Group
2016
£’000
28,545
(1,141)
(7,405)
19,999
(606)
(1,836)
(10,181)
(800)
492
9,430
—
113
—
965
(2,423)
67
(959)
—
(39,128)
28,421
(8,297)
(2,309)
(21)
(22,226)
(4,650)
12,039
7,389
7,389
—
7,389
(32,684)
(7,580)
(32,875)
2015
£’000
5,208
(1,074)
(3,934)
200
(420)
(1,731)
(13,561)
(1,500)
325
7,791
15,275
701
—
—
6,880
129
—
4
(65,408)
75,571
(7,643)
(2,020)
(21)
612
7,692
4,347
12,039
12,041
(2)
12,039
(42,389)
(8,582)
(38,932)
25222 6 April 2017 1:27 PM Proof 12
Parent Company
2016
£’000
(1,889)
(3,154)
(6,370)
(11,413)
—
(231)
—
—
—
—
—
7,495
15,201
—
22,465
67
(959)
—
(30,000)
20,000
(8,297)
—
(21)
(19,210)
(8,158)
9,657
1,499
2,507
(1,008)
1,499
(30,000)
—
(28,501)
2015
£’000
(6,321)
(3,366)
(2,501)
(12,188)
—
(107)
—
—
—
—
—
8,109
10,099
—
18,101
129
—
4
(64,226)
74,226
(7,643)
—
(21)
2,469
8,382
1,275
9,657
10,135
(478)
9,657
(40,000)
—
(30,343)
93
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
PRINCIPAL
ACCOUNTING POLICIES
for the year ended 31 December 2016
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 as 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 Strategic
Report on page 38.
Joint ventures and associates
Joint ventures are all entities in which the Group has shared control with another entity, established by contractual agreement.
Associates are all entities over which the Group has significant influence but not control, generally accompanied by a share of
between 20% and 50% of the voting rights. Jointly controlled entities and associates are accounted for using the equity method of
accounting and are initially recognised at cost. 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 and associates are eliminated to the extent of the Group’s interest in them.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting
policies of the joint ventures and associates 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.
94
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 Consolidated 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.
95
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 PRINCIPAL
ACCOUNTING POLICIES CONTINUED
for the year ended 31 December 2016
Operating segments
The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating
segments of an entity. The Group has determined that its chief operating decision maker is the Board of Henry Boot PLC (the Board).
Management has determined the operating segments based on the reports reviewed by the Board in making strategic decisions.
The Board considers the business based on the following operating segments:
— Property Investment and Development, inclusive of property investment and development and trading activities;
— Land Promotion, 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 Consolidated
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 Consolidated Statement of
Comprehensive Income in the period in which it arises.
Investment property is derecognised 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 Consolidated 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%
96
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 nine years to run.
Leasing
Where the Group acts as a lessee in the case of operating leases, rentals payable are recognised on a straight line basis over the term
of the relevant lease.
Inventories
Inventories are stated at the lower of cost and estimated net realisable value and are subject to regular impairment reviews.
Inventories comprise developments in progress, land held for development or sale, options to purchase land and planning promotion
agreements.
— Property developments in progress includes properties being developed for onward sale.
— Land held for development or sale is land owned by the Group has 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 entered into with the landowners whereby the Group has the option to
purchase the land within a limited time frame. The landowners 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 landowners 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 Consolidated 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.
97
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 PRINCIPAL
ACCOUNTING POLICIES CONTINUED
for the year ended 31 December 2016
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 into account any market performance conditions and excludes the effect of non-market-based
vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 29.
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 29.
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 Consolidated 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 substantively 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.
The carrying value of the Group’s investment property is assumed to be realised by sale and the deferred tax is then calculated based
on the respective temporary differences and tax consequences arising from this assumption.
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 Consolidated 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.
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.
98
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 100). 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 Consolidated 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;
— 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 100);
— 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 Consolidated
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 Consolidated 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.
99
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 PRINCIPAL
ACCOUNTING POLICIES CONTINUED
for the year ended 31 December 2016
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle that obligation with an outflow of economic benefits and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
The land promotion 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, being taken into account in the Financial Statements.
Specific details of the Group’s provisions relating to land promotion and road maintenance can be found in note 25
on page 124.
Interest income and expense
Interest income and expense are recognised within ‘Finance income’ and ‘Finance costs’ in the Consolidated 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.
Dividends
Dividends are only recognised as a liability in the actual period in which they are declared.
Government grants
Government grants are recognised at their fair value in the Consolidated 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 95 to 98 and each is interpreted by management in the light of IAS 18 ‘Revenue’, IAS
11 ‘Construction Contracts’ and IAS 2 ‘Inventories’.
100
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 26 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 25 to the Financial Statements gives details of the sensitivity surrounding these estimates.
Impact of accounting standards and interpretations
At the date of authorisation of these Financial Statements, the following standards, amendments and interpretations to existing
standards are effective or mandatory for the first time for the accounting year ended 31 December 2016:
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 2014)
IAS 27 (amended 2014)
IFRS 10, IFRS 12 and IAS 28
(amended 2014)
IFRS 11 (amended 2014)
‘Annual Improvements to IFRSs 2010–2012 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’
‘Investment Entities: Applying the Consolidation Exception’
Effective from
1 July 2014#
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 July 2014#
1 January 2016
1 January 2016
‘Accounting for Acquisitions of Interests in Joint Operations’
1 January 2016
# Mandatory for annual periods beginning on or after 1 February 2015.
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 2016)
IAS 7 (amended 2016)
IAS 12 (amended 2016)
IAS 40 (amended 2016)
IFRIC 22 (amended 2016)
IFRS 2 (amended 2016)
IFRS 4 (amended 2016)
IFRS 9 (issued 2014)
IFRS 14 (issued 2014)
IFRS 15 (issued 2014)
IFRS 15 (amended 2016)
IFRS 16 (issued 2016)
* Not yet endorsed by the EU.
‘Annual Improvements to IFRSs 2014–2016 Cycle’
‘Disclosure Initiative’
‘Recognition of Deferred Tax Assets for Unrealised Losses’
‘Transfers of Investment Property’
‘Foreign Currency Transactions and Advance Consideration’
‘Classification and Measurement of Share-based Payment Transactions’
‘Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts’
‘Financial Instruments’
‘Regulatory Deferral Accounts’
‘Revenue from Contracts with Customers’
‘Revenue from Contracts with Customers’
‘Leases’
Effective from
1 January 2017*
1 January 2017*
1 January 2017*
1 January 2018*
1 January 2018*
1 January 2018*
1 January 2018*
1 January 2018
1 January 2016*
1 January 2018
1 January 2018*
1 January 2019*
A review of the impact of these standards, amendments and interpretations has been conducted and the Directors do not believe that
they will give rise to any significant financial impact.
In 2016, 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.
101
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS
for the year ended 31 December 2016
1. Revenue
Analysis of the Group’s revenue is as follows:
Activity in the United Kingdom
Revenue from construction contracts
Property development
House builder unit sales
Land promotion
PFI concession income
Plant and equipment hire
Investment property rental income
Other rental income
Other income
2016
£’000
55,347
147,496
20,109
51,058
11,265
12,772
8,250
509
306,806
40
306,846
2015
£’000
56,123
29,400
12,319
46,572
11,126
12,292
8,216
138
176,186
36
176,222
Contingent rents recognised as income during the year amount to £439,000 (2015: £449,000).
Other income relates to payments received under a debt agreement with the Export Credit Guarantee Department arising from
a long-completed contract that was not paid for at the time.
2. Segment information
For the purpose of the Board making strategic decisions, the Group is currently organised into three operating segments: Property
Investment and Development; Land Promotion; and Construction. Group overheads are not a reportable segment; however, information
about them is considered by the Board in conjunction with the reportable segments.
Operations are carried out entirely within the United Kingdom.
Inter-segment sales are charged at prevailing market prices.
During the year the Property Investment and Development segment made disposals to a single external customer amounting to 14.7%
of the Group’s total revenue. This related to a single high value contract which commenced in the year and will continue through to
2019. The segment has a number of other contracts in progress and is not reliant on any major customer individually. Revenue for the
prior year is derived from a large number of customers and no single customer or group under common control contributed more than
10% of the Group’s revenues.
The accounting policies of the reportable segments are the same as the Group’s Accounting Policies. The Group’s Principal Accounting
Policies are described on pages 94 to 101.
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.
102
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 2. Segment information continued
2016
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit/(loss)
Finance income
Finance costs
Share of profit of joint ventures
and associates
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
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit/(loss)
Finance income
Finance costs
Share of profit of joint ventures
Profit/(loss) before tax
Tax
Profit/(loss) for the year
Other information
Capital additions
Depreciation
Impairment
Amortisation
Decrease in fair value of investment
properties
Provisions
Pension scheme credit
Property
investment
and
development
£’000
176,232
314
176,546
15,105
936
(6,390)
1,523
11,174
(1,969)
9,205
10,278
203
—
36
1,783
—
—
Property
investment
and
development
£’000
49,939
320
50,259
7,346
2,135
(6,916)
923
3,488
(1,583)
1,905
13,625
183
(10)
52
2,009
—
—
Land
promotion
£’000
51,190
—
51,190
18,608
1,079
(1,955)
Construction
£’000
79,384
5,044
84,428
10,288
1,172
(484)
Group
overheads
£’000
—
639
639
(4,519)
22,649
(3,145)
Eliminations
£’000
—
(5,997)
(5,997)
—
(25,680)
10,304
—
17,732
(3,532)
14,200
29
18
—
—
—
831
—
—
14,985
(1,177)
13,808
993
601
—
—
—
—
(2,140)
—
(15,376)
(23)
(15,399)
—
—
—
—
—
—
—
—
10,976
(2,244)
8,732
5,371
3,200
203
1,251
—
870
—
2015
Land
promotion
£’000
46,706
—
46,706
20,039
666
(1,637)
—
19,068
(3,864)
15,204
Construction
£’000
79,541
11,076
90,617
8,930
1,394
(422)
—
9,902
(2,108)
7,794
13
13
—
—
—
1,785
—
4,871
2,842
203
1,193
—
1,033
—
Group
overheads
£’000
—
643
643
(4,649)
18,168
(3,391)
—
10,128
98
10,226
1,032
599
—
—
—
—
(2,579)
Eliminations
£’000
—
(12,039)
(12,039)
—
(20,925)
10,749
—
(10,176)
(3)
(10,179)
—
—
—
—
—
—
—
Total
£’000
306,806
—
306,806
39,482
156
(1,670)
1,523
39,491
(8,945)
30,546
16,671
4,022
203
1,287
1,783
1,701
(2,140)
Total
£’000
176,186
—
176,186
31,666
1,438
(1,617)
923
32,410
(7,460)
24,950
19,541
3,637
193
1,245
2,009
2,818
(2,579)
103
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
2. Segment information continued
Segment assets
Property Investment and Development
Land Promotion
Construction
Group overheads
Unallocated assets
Deferred tax assets
Cash and cash equivalents
Total assets
Segment liabilities
Property Investment and Development
Land Promotion
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
Impairment of land and buildings 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
Decrease in fair value of investment property
Cost of inventories recognised as expense
Employee costs
Amounts payable to Mazars LLP by Road Link (A69) Limited in respect of audit services
Profit on sale of property, plant and equipment
104
25222 6 April 2017 1:27 PM Proof 12
2016
£’000
195,830
136,378
32,104
2,853
367,165
5,249
7,389
379,803
17,646
20,893
33,888
2,457
74,884
4,707
33,342
6,922
26,396
146,251
233,552
2016
£’000
4,022
203
—
1,251
36
—
61
307
295
1,783
65,912
26,098
7
(506)
2015
£’000
193,445
136,491
27,013
2,789
359,738
4,323
12,041
376,102
19,334
20,865
37,217
2,951
80,367
3,636
42,836
8,137
19,577
154,553
221,549
2015
£’000
3,637
203
(10)
1,193
52
(485)
112
6
276
2,009
50,332
25,208
5
(296)
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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
2016
£’000
2015
£’000
95
114
209
—
—
28
28
237
90
101
191
49
20
10
79
270
In addition, fees of £13,250 (2015: £8,800) were paid to BDO LLP in their capacity as auditors of The Henry Boot Staff Pension and Life
Assurance Scheme.
4. Employee costs
Group
Parent Company
Wages and salaries
Share-based payment expense
Social security costs
Defined benefit pension costs (see note 26)
Defined contribution pension costs (see note 26)
Other pension costs
2016
£’000
19,137
510
2,322
2,464
1,220
90
25,743
2015
£’000
18,554
492
2,122
2,697
919
73
24,857
The average monthly number of employees during the year, including Executive Directors, was:
Property Investment and Development
Land Promotion
Construction
Plant hire
Parent Company
5. Finance income
Interest on bank deposits
Interest on other loans and receivables
Fair value adjustments on trade receivables
2016
£’000
2,690
306
346
(26)
197
8
3,521
2016
Number
66
33
172
117
53
441
2016
£’000
13
(88)
231
156
2015
£’000
2,775
297
342
(173)
178
9
3,428
2015
Number
59
33
175
115
52
434
2015
£’000
78
1,215
145
1,438
105
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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 25)
7. Tax
Current tax:
UK corporation tax on profits for the year
Adjustments in respect of earlier years
Total current tax
Deferred tax (note 17):
Origination and reversal of temporary differences
Adjustments in respect of change in UK corporation tax rate
Total deferred tax
Total tax
2016
£’000
1,097
128
387
56
2
1,670
2016
£’000
8,927
(23)
8,904
41
—
41
8,945
2015
£’000
1,087
155
310
59
6
1,617
2015
£’000
5,721
(127)
5,594
1,512
354
1,866
7,460
Corporation tax is calculated at 20% (2015: 20.25%) of the estimated assessable profit for the year.
As a result of the change in the UK corporation tax rate from 20% to 19% effective from 1 April 2017, substantively enacted on 26
October 2015, and from 19% to 17% effective from 1 April 2020, substantively enacted on 6 September 2016, deferred tax balances at
the year end have been measured at 17% (2015: 20% and 18%) being the rate at which timing differences are expected to reverse.
The charge for the year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:
Profit before tax
Tax at the UK corporation tax rate
Effects of:
Permanent differences
Tax losses for which no deferred tax asset is recognised
Adjustment in respect of earlier years
Adjustment in respect of change in UK corporation tax rate
Joint venture results reported net of tax
Effective tax rate
2016
£’000
39,491
2016
%
20.00
3.01
0.47
(0.06)
0.00
(0.77)
22.65
In addition to the amount charged to profit for the year, the following amounts relating to tax have been recognised in other
comprehensive income:
Current tax:
– actuarial loss
Deferred tax:
– property revaluations
– actuarial loss/(gain)
– cash flow hedge
Total tax recognised in other comprehensive income
106
25222 6 April 2017 1:27 PM Proof 12
2016
£’000
428
3
964
—
1,395
2015
£’000
32,410
2015
%
20.25
(0.22)
2.86
(0.39)
1.09
(0.58)
23.01
2015
£’000
—
509
(1,439)
(4)
(934)
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 21 April 2017 is £21,038,000 (2015: £7,357,000) and includes dividends received from subsidiaries of
£15,201,000 (2015: £10,099,000).
9. Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following information:
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
Amounts recognised as distributions to equity holders in the year:
Preference dividend on cumulative preference shares
Final dividend for the year ended 31 December 2015 of 3.80p per share (2014: 3.50p)
Interim dividend for the year ended 31 December 2016 of 2.50p per share (2015: 2.30p)
2016
£’000
30,546
(2,287)
(21)
28,238
2015
£’000
24,950
(1,909)
(21)
23,020
2016
(523,606)
2015
132,052,925 132,009,797
(177,320)
131,529,319 131,832,477
1,231,952
132,588,921 133,064,429
1,059,602
2016
£’000
21
5,006
3,291
8,318
2015
£’000
21
4,610
3,033
7,664
The proposed final dividend for the year ended 31 December 2016 of 4.50p per share (2015: 3.80p) makes a total dividend for
the year of 7.0p (2015: 6.10p).
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 £5,920,000.
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 £2,309,000 (2015: £2,020,000).
107
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
11. Intangible assets
Cost
At 1 January 2015
Additions at cost
At 31 December 2015
Additions at cost
At 31 December 2016
Accumulated impairment losses and amortisation
At 1 January 2015
Amortisation
Impairment losses for the year
At 31 December 2015
Amortisation
Impairment losses for the year
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
At 1 January 2015
Goodwill
£’000
4,070
—
4,070
—
4,070
2,103
—
203
2,306
—
203
2,509
1,561
1,764
1,967
PFI
asset
£’000
16,134
420
16,554
606
17,160
11,368
1,193
—
12,561
1,251
—
13,812
3,348
3,993
4,766
Total
£’000
20,204
420
20,624
606
21,230
13,471
1,193
203
14,867
1,251
203
16,321
4,909
5,757
6,733
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 Highways England based on the number and type of vehicles using the
road. The concession lasts for a period of 30 years and has a further nine years to run, at the end of which the road reverts to Highways
England. Whilst the impairment test demonstrates significant headroom, an impairment charge of £203,000 (2015: £203,000) has been
recognised during the year to reflect the fact that the PFI concession will revert to Highways England 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 Consolidated 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 Highways England’s financial year end and hence interim Financial Statements are prepared for
incorporation into these Consolidated Financial Statements.
108
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 12. Property, plant and equipment
Group
Cost or fair value
At 1 January 2015
Additions at cost
Disposals
Increase in fair value in year
At 31 December 2015
Additions at cost
Disposals
Transfers to assets held for sale
Increase in fair value in year
At 31 December 2016
Being:
Cost
Fair value at 31 December 2016
Accumulated depreciation and impairment
At 1 January 2015
Charge for year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2015
Charge for year
Eliminated on disposals
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
At 1 January 2015
Land and
buildings
£’000
Equipment
held
for hire
£’000
Vehicles
£’000
Office
equipment
£’000
7,187
—
—
100
7,287
—
(208)
(275)
30
6,834
—
6,834
6,834
412
—
—
(10)
402
—
(108)
294
6,540
6,885
6,775
27,490
4,057
(1,011)
—
30,536
4,048
(1,662)
—
—
32,922
32,922
—
32,922
18,423
2,562
(875)
—
20,110
2,860
(1,414)
21,556
11,366
10,426
9,067
4,894
1,203
(1,141)
—
4,956
1,404
(1,310)
—
—
5,050
5,050
—
5,050
2,579
712
(914)
—
2,377
762
(1,034)
2,105
2,945
2,579
2,315
2,550
528
(1)
—
3,077
432
(226)
—
—
3,283
3,283
—
3,283
1,621
363
(1)
—
1,983
400
(216)
2,167
1,116
1,094
929
Total
£’000
42,121
5,788
(2,153)
100
45,856
5,884
(3,406)
(275)
30
48,089
41,255
6,834
48,089
23,035
3,637
(1,790)
(10)
24,872
4,022
(2,772)
26,122
21,967
20,984
19,086
At 31 December 2016, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £73,000 (2015: £3,521,000).
Fair value measurements of the Group’s land and buildings
Land and buildings have been revalued at 31 December 2016 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 £6,540,000 (2015: £6,885,000).
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 £2,611,000 (2015: £2,869,000).
109
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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
6,480
6,540
2016
£’000
60
6,480
6,540
2015
£’000
60
6,825
6,885
Decrease
in fair
value in
year
—
(345)
(345)
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
5.72
2.34
12.51
8.15
6.98
10.35
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
385
1,060
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.
110
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
12. Property, plant and equipment continued
Parent Company
Cost
At 1 January 2015
Additions
At 31 December 2015
Additions
Disposals
At 31 December 2016
Depreciation
At 1 January 2015
Charge for year
At 31 December 2015
Charge for year
Disposals
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
At 1 January 2015
Office
equipment
£’000
682
107
789
231
(216)
804
545
76
621
92
(206)
507
297
168
137
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:
Level 1
£’000
Level 2
£’000
Completed investment property
Industrial
Leisure
Mixed-use
Residential
Office
Retail
Investment property under construction
Industrial
Land
Office
Retail
Total fair value
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Level 3
£’000
14,700
12,475
53,564
3,720
2,830
13,619
100,908
525
1,214
7,556
13,460
22,755
123,663
2016
£’000
14,700
12,475
53,564
3,720
2,830
13,619
100,908
525
1,214
7,556
13,460
22,755
123,663
Increase/
(decrease)
in fair value
in year
1,930
4,771
(5,429)
(593)
2,830
(6,295)
(2,786)
7
(898)
3,056
(1,027)
1,138
(1,648)
2015
£’000
12,770
7,704
58,993
4,313
—
19,914
103,694
518
2,112
4,500
14,487
21,617
125,311
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.
111
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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
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
Transfers between class
Increase/(decrease) in fair value in
year
At 31 December
Adjustment in respect of tenant
incentives
Market value at 31 December
Industrial
Level 3
£’000
Leisure
Level 3
£’000
Mixed-use
Level 3
£’000
Residential
Level 3
£’000
Office
Level 3
£’000
Retail
Level 3
£’000
2016
£’000
2015
£’000
12,770
7,704
58,993
4,313
— 19,914
103,694
99,117
1
—
(1)
—
—
—
—
—
11
—
(7)
—
—
—
—
4,491
959
39
(23)
(1,394)
—
—
—
(4,491)
1,930
14,700
—
14,700
276
12,475
(519)
53,564
315
12,790
1,371
54,935
—
—
—
(70)
—
(452)
—
—
(71)
3,720
—
3,720
2,970
—
—
—
—
—
256
7
(4)
(6,706)
(775)
—
—
—
1,322
—
4,197
46
(35)
(8,170)
(775)
(452)
1,322
—
1,602
91
(45)
(1,879)
(1,351)
(504)
7,292
—
(140)
2,830
(395)
13,619
1,081
100,908
(629)
103,694
—
2,830
331
13,950
2,017
102,925
2,571
106,265
112
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 2016 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 £99,205,000 (2015: £101,952,000). 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 2016 has been determined by the Directors of the Company at £3,720,000
(2015: £4,313,000). 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):
2016
Class
Industrial
Leisure Mixed-use
Valuation technique
Rental value per sq ft (£) – weighted average
Yield %
– low
– high
– weighted average
– low
– high
% discount applied to houses held under
assured tenancies
Yield
4.53
4.53
4.53
5.68
5.68
5.68
—
Yield
16.38
1.67
40.86
5.79
5.07
7.86
Yield
12.60
1.50
53.50
7.87
6.00
18.94
Residential
Sales
comparison
—
—
—
—
—
—
Office
Retail
Yield
19.46
19.46
19.46
9.05
9.05
9.05
Yield
13.89
9.09
21.41
4.84
4.53
7.65
—
—
25.00
—
—
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
2015
Yield
4.53
4.53
4.53
6.60
6.60
6.60
—
Yield
16.17
2.50
40.86
5.89
5.22
9.82
—
Yield
13.07
1.83
58.39
7.93
6.00
18.71
—
Residential
Sales
comparison
—
—
—
—
—
—
25.00
There is considered to be no inter-relationship between observable and unobservable inputs.
Retail
Yield
7.70
2.47
28.50
5.44
4.36
11.51
—
113
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
13. Investment properties continued
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) is 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
1,190
3,253
—
Industrial
898
2,820
—
Impact on valuation 2016 £’000
Leisure Mixed-use Residential
—
3,420
—
4,490
50
—
1,017
788
—
Impact on valuation 2015 £’000
Leisure Mixed-use
3,556
4,475
—
979
768
—
Residential
—
—
50
Office
147
146
—
Office
—
—
—
Retail
1,209
876
—
Retail
1,855
2,520
—
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 £8,250,000 (2015: £8,216,000). Direct operating expenses arising on investment property generating rental
income in the year amounted to £555,000 (2015: £540,000). Direct operating expenses arising on the investment property which did
not generate rental income during the year amounted to £1,103,000 (2015: £1,023,000).
At 31 December 2016, the Group had entered into contractual commitments for the acquisition and repair of investment property
amounting to £2,047,000 (2015: £776,000).
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 assets held for sale
Transfer to inventories
Transfers to completed investment property
(Decrease)/increase in fair value in year
At 31 December
Adjustment in respect of tenant incentives
Market value at 31 December
Industrial
Level 3
£’000
Land
Level 3
£’000
Office
Level 3
£’000
Retail
Level 3
£’000
2016
£’000
2015
£’000
518
7
—
—
—
—
—
—
—
525
—
525
2,112
4,500
14,487
21,617
42,443
1
—
—
—
—
—
—
(899)
1,214
—
1,214
2,314
—
—
—
—
—
—
742
7,556
—
7,556
3,532
84
(1)
(613)
—
—
(1,322)
(2,707)
13,460
—
13,460
5,854
84
(1)
(613)
—
—
(1,322)
(2,864)
22,755
—
22,755
11,731
137
(7)
(4,929)
(11,812)
(7,274)
(7,292)
(1,380)
21,617
—
21,617
114
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 13. Investment properties continued
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Rental value per sq ft (£)
Yield %
Costs to complete
per sq ft (£)
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
Land value per acre (£’000) – weighted average
– low
– high
Class
Valuation technique
Rental value per sq ft (£)
Yield %
Costs to complete
per sq ft (£)
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
Land value per acre (£’000) – weighted average
– low
– high
2016
Industrial
Residual
—
—
—
—
—
—
Land
Sales
comparison
—
—
—
—
—
—
—
—
—
120
120
120
—
—
—
218
107
1,382
2015
Industrial
Residual
—
—
—
—
—
—
Land
Sales
comparison
—
—
—
—
—
—
—
—
—
120
120
120
0.79
0.79
0.79
201
102
396
Office
Retail
Residual
26.00
26.00
26.00
6.50
6.50
6.50
74.89
74.89
74.89
—
—
—
Residual
12.39
9.00
24.00
6.65
6.50
6.94
105.60
31.46
138.86
—
—
—
Office
Retail
Residual
26.00
26.00
26.00
6.25
6.25
6.25
216.65
216.65
216.65
—
—
—
Residual
14.55
10.00
33.65
5.90
4.65
7.49
154.82
64.69
225.76
—
—
—
115
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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%
Impact on valuation 2016 £’000
Industrial
—
—
—
26
Land
—
—
—
156
Office
2,113
1,605
30
—
Impact on valuation 2015 £’000
Office
1,026
454
30
—
Land
—
—
1
105
Industrial
—
—
—
26
Retail
1,382
1,367
195
—
Retail
5,932
4,041
313
—
Investment properties under construction are developments which have been valued at 31 December 2016 at fair value by the Directors
of the Company using the residual method at £22,755,000 (2015: £21,617,000 ). 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 2015, 31 December 2015 and 31 December 2016
Fair value adjustments
At 1 January 2015
Provisions for losses
At 31 December 2015
Reversal of provisions for losses
At 31 December 2016
Carrying amount
At 31 December 2016
At 1 January 2016
At 1 January 2015
Total
£’000
35,772
(31,963)
(788)
(32,751)
5,467
(27,284)
8,488
3,021
3,809
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 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.
Amounts due from and to subsidiary companies are listed in notes 16 and 21 and details of all subsidiary companies are listed in
note 34. 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;
— Capitol Park Property Services Limited which is 5% owned by, and under board control of, Henry Boot Developments Limited;
— Waterloo Court Management Company Limited which is 17% owned by, and under board control of, Henry Boot Developments
Limited;
— Stonebridge Projects Limited which is 50% owned by, and under board control of, Henry Boot Land Holdings Limited; and
— 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.
Subsequent events
On 1 April 2017 Banner Plant Limited acquired the assets and on-going business of Premier Plant and Tool Hire Limited for £2.8m.
116
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 15. Investment in joint ventures and associates
2016
Group
Cost
At 1 January
Share of profit for the year
Additions
Dividends received
At 31 December
Joint
ventures
£’000
Associates
£’000
2,290
1,502
800
(965)
3,627
1,500
21
—
—
1,521
Total
£’000
3,790
1,523
800
(965)
5,148
Joint
ventures
£’000
2015
Associates
£’000
1,367
923
—
—
2,290
—
—
1,500
—
1,500
The Group’s share of its joint ventures’ and associates’ aggregated assets, liabilities and results are as follows:
Investment property
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net investment
Revenue
Administration and other expenses
Increase in fair value of investment properties
Operating profit
Finance (costs)/income
Profit before tax
Tax
Share of profits after tax
Joint
ventures
£’000
6,187
3,409
—
9,596
(2,639)
(3,330)
3,627
Joint
ventures
£’000
8,097
(6,504)
262
1,855
(98)
1,757
(255)
1,502
2016
Associates
£’000
—
1,530
66
1,596
(75)
—
1,521
2016
Associates
£’000
26
(1)
—
25
—
25
(4)
21
Total
£’000
6,187
4,939
66
11,192
(2,714)
(3,330)
5,148
Total
£’000
8,123
(6,505)
262
1,880
(98)
1,782
(259)
1,523
Joint
ventures
£’000
5,884
654
—
6,538
(948)
(3,300)
2,290
Joint
ventures
£’000
458
(175)
690
973
(50)
923
—
923
2015
Associates
£’000
—
1,500
—
1,500
—
—
1,500
2015
Associates
£’000
—
—
—
—
—
—
—
—
Details of the Group’s investments in joint ventures and associates are listed in note 34.
Total
£’000
1,367
923
1,500
—
3,790
Total
£’000
5,884
2,154
—
8,038
(948)
(3,300)
3,790
Total
£’000
458
(175)
690
973
(50)
923
—
923
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
2016
£’000
66,392
3,487
2,634
—
72,513
66,921
5,592
72,513
2015
£’000
50,270
12,326
2,359
—
64,955
54,448
10,507
64,955
2016
£’000
296
633
—
190,822
191,751
191,751
—
191,751
2015
£’000
73
672
—
196,966
197,711
197,711
—
197,711
Included in the Group’s trade receivables balance are receivables with a carrying amount of £5.1m (2015: £4.3m) 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.
117
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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
2016
£’000
4,145
230
515
247
5,137
2016
£’000
303
368
(21)
(2)
648
2015
£’000
3,337
693
130
164
4,324
2015
£’000
235
118
(17)
(33)
303
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
2016
£’000
46
4
4
34
560
648
2015
£’000
40
2
2
28
231
303
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 £2,390,000 (2015:
£4,248,000), of which £3,000 (2015: £1,688,000) has been provided in the year and £1,861,000 (2015: £nil) 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.
118
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 2015
Recognised in income
Recognised in other comprehensive income
At 31 December 2015
Recognised in income
Recognised in other comprehensive income
At 31 December 2016
Parent Company
At 1 January 2015
Recognised in income
Recognised in other comprehensive income
At 31 December 2015
Recognised in income
Recognised in other comprehensive income
At 31 December 2016
Accelerated
capital
allowances
£’000
303
53
—
356
266
—
622
Property
revaluations
£’000
939
(1,209)
509
239
(242)
3
—
Retirement
benefit
obligations
£’000
5,632
(670)
(1,439)
3,523
—
964
4,487
Other
timing
differences
£’000
249
(40)
(4)
205
(65)
—
140
30
(2)
—
28
—
—
28
—
—
—
—
—
—
—
5,632
(670)
(1,439)
3,523
—
964
4,487
257
(36)
—
221
(42)
—
179
Total
£’000
7,123
(1,866)
(934)
4,323
(41)
967
5,249
5,919
(708)
(1,439)
3,772
(42)
964
4,694
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 £2,670,000 (2015: £2,254,000). 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 20% to 19% effective from 1 April 2017, substantively enacted on 26
October 2015, and from 19% to 17% effective from 1 April 2020, substantively enacted on 6 September 2016, deferred tax balances at
the year end have been measured at 17% (2015: 20% and 18%) being the rate at which timing differences are expected to reverse.
18. Inventories
Property developments in progress
House builder land and work in progress
Land held for development or sale
Options to purchase land
Planning promotion agreements
2016
£’000
16,963
13,065
70,087
10,664
27,136
137,915
2015
£’000
24,249
7,873
73,916
9,274
23,629
138,941
Within developments in progress £294,000 (2015: £67,000) 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 £2,923,000 (2015: £2,340,000) 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.
119
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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
2016
£’000
2015
£’000
17,638
(4,656)
12,982
490,693
(477,711)
12,982
2,322
(6,529)
(4,207)
357,110
(361,317)
(4,207)
At 31 December 2016, retentions held by customers for contract work amounted to £1,614,000 (2015: £1,947,000). Advances
received from customers for contract work amounted to £4,656,000 (2015: £6,529,000).
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.
Assets classified as held for sale comprise the following:
Fair value
At 1 January
Transfer from investment property
Transfer from property, plant and equipment
Disposals
At 31 December
Adjustment in respect of tenant incentives
Market value at 31 December
Investment property
2016
£’000
—
775
275
—
1,050
—
1,050
2015
£’000
260
13,163
—
(13,423)
—
—
—
Assets classified as held for sale have been valued at 31 December 2016 at fair value by the Directors of the Company at £1,050,000
(2015: £nil).
21. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Deferred income
Amounts owed to related parties
Amounts owed to Group undertakings
Due within one year
Due after more than one year
Group
Parent Company
2016
£’000
54,077
3,263
1,368
7,010
46
—
65,764
61,149
4,615
65,764
2015
£’000
58,804
4,250
1,887
6,027
55
—
71,023
64,384
6,639
71,023
2016
£’000
1,340
333
773
—
—
71,243
73,689
73,689
—
73,689
2015
£’000
1,690
367
887
—
—
79,656
82,600
82,600
—
82,600
The Directors consider that the carrying amount of trade payables approximates to their fair value.
120
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 22. Government grants
Government grants have been received in relation to the infrastructure of one of the Group’s Land Promotions and three
of the Group’s property developments.
Grant income received relating to revenue grants are included within deferred income and released to the Consolidated 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 Consolidated Statement of Comprehensive Income during the year were £18,000 (2015: £ 917,000).
Grant income relating to capital grants is 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 Group’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 2016 this was £32.9m (2015: £38.9m). Equity comprises all components of equity and at 31 December 2016
this was £233.5m (2015: £221.5m).
During 2016 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.
In February 2015, the Group concluded negotiations with its 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. On 17 February 2017 we exercised our option to extend the facilities by one year to 17 February 2020. 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.
121
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
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)
Bank loans – floating rate (relating to Stonebridge Projects Limited)
Government loans
Bank overdrafts are repayable on demand.
Group
Parent Company
2016
£’000
—
32,684
7,580
40,264
33,648
4,323
2,967
—
40,938
33,648
7,290
40,938
2015
£’000
2
42,389
8,582
50,973
43,327
2,871
5,697
—
51,895
43,327
8,568
51,895
2016
£’000
1,008
30,000
—
31,008
31,008
—
—
—
31,008
31,008
—
31,008
2016
%
2.42
2.12
—
2.97
2.38
2.37
2015
£’000
478
40,000
—
40,478
40,760
—
—
—
40,760
40,760
—
40,760
2015
%
2.52
2.25
1.51
3.08
—
2.65
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 one to six months. These borrowings are secured by a fixed
and floating charge over the assets of the Group excluding those of Road Link (A69) Limited, Stonebridge Offices Limited and
Stonebridge Projects Limited.
Full and final settlement of the Road Link (A69) Limited bank loan was made on 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.
The Stonebridge Projects Limited revolving loan facility is secured by a specific charge over the freehold property of that company and
is guaranteed by Henry Boot PLC. The loan can be drawn against on a monthly basis and was first drawn against on 22 April 2016. The
loan is repayable from the proceeds of residential house sales with full and final settlement becoming due on 22 April 2019.
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 £2,381,000 (2015: £2,626,000) and £319,000 (2015: £319,000) respectively.
122
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 24. Borrowings continued
Government loans from the Homes and Communities Agency (HCA) were issued with a fixed level of interest of £398,000
(2015: £407,000); their fair values are £3,760,000 (2015: £4,163,000) (Education Campus) and £1,120,000 (2015: £1,474,000) (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 during 2013, being three years after the quarter date of the construction completion
of the first residential unit. Repayments of £300,000 (2015: £150,000) were made during the year. The repayments are calculated
at £8,000 per residential unit, are linked to the Land Registry House Price Index and are subject to certain minimum
repayment amounts.
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 commenced during the year upon the occupation of the first dwelling and follows for
each occupation thereafter until the total contribution sum is repaid in full. Repayments of £446,056 (2015: £nil) were made during
the year. 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 commenced during 2015 upon the occupation of the 1,151st dwelling.
Repayments of £354,808 (2015: £325,530) were made during the year. 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 of each year 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.
Other borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.
Based on approximate average borrowings during 2016, a 1.0% (2015: 1.0%) change in interest rates, which the Directors consider to
be a reasonable possible change, would affect profitability before tax by £406,000 (2015: £504,000).
The fair value of the Group’s borrowings is not considered to be materially different from the carrying amounts.
At 31 December 2016, the Group had available £32,500,000 (2015: £35,129,000) undrawn committed borrowing facilities.
123
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
25. Provisions
At 1 January 2016
Included in current liabilities
Included in non-current liabilities
Additional provisions in year
Unwinding of discount
Utilisation of provisions
At 31 December 2016
Included in current liabilities
Included in non-current liabilities
Land
promotion
£’000
Road
maintenance
£’000
4,606
3,595
8,201
831
2
(1,250)
7,784
5,333
2,451
7,784
1,143
—
1,143
870
—
(677)
1,336
1,336
—
1,336
Total
£’000
5,749
3,595
9,344
1,701
2
(1,927)
9,120
6,669
2,451
9,120
The land promotion 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 of. 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 promotion provisions would change and affect profitability before tax by £93,000 and £379,000 respectively (2015:
£111,000 and £390,000).
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 £129,000 (2015:
£146,000).
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, being taken into account in the Financial Statements.
Off balance sheet arrangements
The Group is currently undertaking the infrastructure of land promotions at Bridgwater and Cranbrook, spanning 122 and 53 acres
respectively (2015: 122 and 53). 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 94 and 24 acres respectively (2015: 86 and 23), and has subsequently recognised provisions
to the value of £7,783,000 (2015: £8,201,000), 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 of. The present value of the estimated cash flows relating to future disposals, amounting to
£5,885,000 (2015: £7,071,000), has therefore not been recognised in these Financial Statements.
124
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 26. Retirement benefit obligations
Defined contribution pension plan
The Group operates a defined contribution pension plan for all qualifying employees. The plan is administered and managed by Aviva
and the Group matches member contributions, providing a minimum of 4% (2015: 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 £1,220,000 (2015: £919,000) represents contributions payable to the plan by the Group.
Defined benefit pension scheme
The Group sponsors a funded defined benefit pension scheme in the UK. The scheme is administered within a trust which is legally
separate from the Group. Trustees are appointed by both the Group and the scheme’s membership and act in the interest of the
scheme and all relevant stakeholders, including the members and the Group employers. The Trustees are also responsible for the
investment policy for the scheme’s assets.
Existing scheme members continue to accrue benefits, but the scheme is closed to new entrants. Members accrue an annual pension
of either 1/45th or 1/60th of final pensionable salary for each year of pensionable service. Increases in pensionable salary are limited to
1% per annum. Once in payment, pensions increase in line with inflation. The scheme also provides a two-thirds spouse’s pension on
the death of a member.
Active members of the scheme pay contributions at the rate of either 5% or 7% of pensionable salary and the Group employers pay the
balance of the cost as determined by regular actuarial valuations. The Trustees are required to use prudent assumptions to value the
liabilities and costs of the scheme whereas the accounting assumptions must be best estimates.
The Group has not recognised any obligation under a minimum funding requirement as it is entitled to a refund of any residual assets
once all members have left the Scheme.
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 2015. The results of that valuation have been projected to
31 December 2016 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)
Retail Prices Index (RPI)
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
25222 6 April 2017 1:27 PM Proof 12
2016
%
n/a
3.00
2.00
1.00
2.00
2.00
2.80
2015
%
2.30
3.00
2.00
1.00
2.30
2.00
3.80
125
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
26. Retirement benefit obligations continued
Mortality assumptions
Retiring today (aged 65)
Male
Female
Retiring in 20 years (currently aged 45)
Male
Female
2016
Years
22.1
24.2
23.4
25.7
2015
Years
21.9
24.2
23.2
25.8
The mortality assumptions adopted are the Self Administered Pension Schemes (SAPS) tables with allowance for future improvements
in line with Continuous Mortality Investigation (CMI) 2015 with an annual improvement of 1% per annum.
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Rate of inflation
Rate of general increases in salaries
Liabilities discount rate
Rate of mortality
Impact on scheme liabilities
Change in
assumption
0.25%
0.25%
0.25%
1 year
Increase in
assumption
Increase by 3.4%
Nil*
Decrease by 4.0%
Increase by 3.7%
Decrease in
assumption
Decrease by 3.3%
Nil*
Increase by 4.0%
Decrease by 3.7%
* Increases in salaries above the 1% assumed would not affect the scheme liabilities as future increases in pensionable salaries are to be capped at a maximum of
1% per annum.
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of the scheme are as follows:
Service cost:
Current service cost
Ongoing scheme expenses
Settlement
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 losses/(gains) arising from changes in demographic assumptions
Actuarial losses/(gains) arising from changes in financial assumptions
Actuarial (gains) arising from experience adjustments
Actuarial losses/(gains) recognised in other comprehensive income
Total
2016
£’000
1,112
493
—
691
168
2,464
(12,528)
1,590
22,972
(3,077)
8,959
11,422
2015
£’000
1,308
328
(8)
951
118
2,697
723
(1,338)
(5,387)
—
(6,002)
(3,305)
126
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 26. Retirement benefit obligations continued
The amount included in the Statement of Financial Position arising from the Group’s obligations in respect of the scheme
is as follows:
Present value of scheme obligations
Fair value of scheme assets
This amount is presented in the Statement of Financial Position as follows:
Non-current liabilities
Movements in the present value of scheme obligations in the year were as follows:
At 1 January
Current service cost
Interest on obligation
Contributions from scheme members
Actuarial losses/(gains)
Liabilities extinguished on settlements
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 gains/(losses) on scheme assets
Employer contributions
Contributions from scheme members
Assets distributed on settlements
Benefits paid
Ongoing scheme expenses
At 31 December
2016
£’000
190,974
(164,578)
26,396
2015
£’000
170,214
(150,637)
19,577
2016
£’000
26,396
2015
£’000
19,577
2016
£’000
170,214
1,112
6,336
2
21,486
—
(8,176)
190,974
2016
£’000
150,637
5,645
12,528
4,435
2
—
(8,176)
(493)
164,578
2015
£’000
176,641
1,308
6,253
5
(6,725)
(562)
(6,706)
170,214
2015
£’000
148,483
5,302
(723)
5,158
5
(554)
(6,706)
(328)
150,637
127
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
26. Retirement benefit obligations continued
The categories of plan assets are as follows:
Quoted investments, including pooled diversified growth funds:
Equity
Synthetic equity
Diversified growth funds
Corporate bonds
Diversified credit funds
Cash and net current assets
Unquoted investments:
Direct lending
Collateralised loan obligations
At 31 December
2016
£’000
40,207
11,093
38,559
20,127
26,487
5,238
2015
£’000
47,407
11,997
44,768
19,110
10,071
7,706
10,835
12,032
164,578
9,578
—
150,637
Included in equities are 670,000 (2015: 1,295,000) ordinary 10p shares in Henry Boot PLC with a value at the year end of £1,350,050
(2015: £2,900,800).
The weighted average duration of the defined benefit obligation is 16.6 years (2015: 15.9 years).
The current estimated amount of total contributions expected to be paid to the scheme during the 2017 financial year is £3,565,000,
being £3,563,000 payable by the Group and £2,000 payable by scheme members.
The Company’s level of recovery plan funding to the scheme is £2,500,000 per annum, which will be reviewed at the next triennial
valuation. In addition to this, the Company contributes a further £260,000 per annum towards the administration expenses of the
scheme.
27. Operating leases
The Group as lessee
Minimum lease payments under operating leases recognised in the
Consolidated Statement of Comprehensive Income for the year
2016
£’000
295
2015
£’000
276
At 31 December 2016, 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
2016
£’000
299
879
578
1,756
2015
£’000
255
586
440
1,281
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.
128
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 27. Operating leases continued
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
2016
£’000
7,458
27,814
73,314
108,587
2015
£’000
6,507
26,170
67,558
100,235
28. 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)
2016
£’000
1,140
7,481
(2,215)
(154)
116
2016
£’000
44
42
2015
£’000
1,140
8,049
(2,333)
(180)
127
2015
£’000
38
41
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 key management personnel of the Group are the Board of Directors and members of the Senior Management team of wholly
owned subsidiaries, as presented on page 50 to 52. They are responsible for making all of the strategic decisions of the Group and its
subsidiaries, as detailed on page 4 and 16. The remuneration of the Board of Directors is set out in the Remuneration Report on pages
66 to 74. The remuneration of the relevant four (2015: four) members of the Senior Management team is set out below, in aggregate, for
each of the categories specified in IAS 24 ‘Related Party Disclosures’.
Short-term employee benefits
Post-employment benefits
Share-based payments
2016
£’000
1,228
32
—
1,260
2015
£’000
1,127
54
—
1,181
129
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
29. Share capital
400,000 5.25% cumulative preference shares of £1 each (2015: 400,000)
132,080,138 ordinary shares of 10p each (2015: 132,041,358)
Allotted, issued
and fully paid
2016
£’000
2015
£’000
400
13,208
13,608
400
13,204
13,604
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 of, be present
or vote at any general meeting of the Company.
Share-based payments
The Company operates the following share-based payment arrangements:
(i) The Henry Boot 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 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 2017. 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 2014 grant
Options
outstanding
at
31 December
2015
1,067,703
Options
granted
—
Options
lapsed
(78,738)
Options
exercised
(38,780)
Options
outstanding
at
31 December
2016
950,185
The weighted average share price at the date of exercise for share options exercised during the year was 196.82p (2015: 213.00p).
(ii) 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 set out
in the Directors’ Remuneration Policy which is available to view on the website: www.henryboot.co.uk/about-us/governance.
(iii) The Henry Boot 2015 Long Term Incentive Plan
This plan was approved by shareholders at an AGM held on 21 May 2015. Details of the Plan and the vesting requirements
are also set out in the Directors’ Remuneration Policy which is also available to view on the website.
In respect of (ii) and (iii) above, 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
2016
Number
903,060
(205,389)
(113,714)
297,524
881,481
2015
Number
1,293,278
(555,426)
(103,641)
268,849
903,060
The weighted average share price at the date of exercise for share options exercised during the year was 197.50p (2015: 234.00p).
130
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 29. Share capital continued
(iv) 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
2015
42,000
155,000
Options
granted
—
—
Options
lapsed
—
(10,000)
Options
exercised
—
—
Options
outstanding
at
31 December
2016
42,000
145,000
The weighted average share price at the date of exercise for share options exercised during the year was nil (2015: 225.88p).
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
217.4p
30.72% to 32.10%
3 years
0.57% to 1.26%
2.71% to 3.16%
CSOP
2011 grant
121.5p
121.5p
41.47%
3 years
1.67%
5.02%
CSOP
2015 grant
191.0p
191.0p
31.17%
3 years
1.23%
3.16%
Sharesave
2015
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 97.69p (2015: 106.75p).
Expense recognised in the Consolidated Statement of Comprehensive Income
The total expense recognised in the Consolidated Statement of Comprehensive Income
arising from share-based payment transactions
2016
£’000
2015
£’000
510
492
The total expense recognised in the Consolidated Statement of Comprehensive Income arose solely from equity-settled share-based
payment transactions.
131
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
30. Reserves
Group
At 1 January 2015
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
Increase in fair value in year
Deferred tax on revaluation surplus
Arising on employee share schemes
Unrecognised actuarial gain
Deferred tax on actuarial gain
At 31 December 2015
Profit for the year
Dividends paid
Premium arising from shares issued
Increase in fair value in year
Deferred tax on revaluation surplus
Realised revaluation surplus
Arising on employee share schemes
Unrecognised actuarial loss
Current tax on actuarial loss
Deferred tax on actuarial loss
At 31 December 2016
Parent Company
At 1 January 2015
Profit for the year
Dividends paid
Premium arising from shares issued
Unrecognised actuarial gain
Deferred tax on actuarial gain
Arising on employee share schemes
At 31 December 2015
Profit for the year
Dividends paid
Premium arising from shares issued
Arising on employee share schemes
Unrecognised actuarial loss
Current tax on actuarial loss
Deferred tax on actuarial loss
At 31 December 2016
132
Property
revaluation
£’000
3,355
—
—
—
—
Retained
earnings
£’000
177,664
23,041
(7,664)
—
—
Capital
redemption
£’000
271
—
—
—
—
Share
premium
£’000
3,951
—
—
117
—
Other
Capital
£’000
209
—
—
—
—
Hedging
£’000
(6)
—
—
—
9
—
100
509
—
—
—
3,964
—
—
—
30
3
(118)
—
—
—
—
3,879
—
—
—
291
6,002
(1,439)
197,895
28,259
(8,318)
—
—
—
118
277
(8,959)
428
964
210,664
—
—
—
—
—
—
271
—
—
—
—
—
—
—
—
—
—
271
—
—
—
—
—
—
4,068
—
—
63
—
—
—
—
—
—
—
4,131
(3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
209
—
—
—
—
—
—
—
—
—
—
209
Other
Retained
earnings
£’000
45,256
7,357
(7,664)
—
6,002
(1,439)
96
49,608
21,038
(8,318)
—
74
(8,959)
428
964
54,835
Capital
redemption
£’000
271
—
—
—
—
—
—
271
—
—
—
—
—
—
—
271
Share
premium
£’000
3,951
—
—
117
—
—
—
4,068
—
—
63
—
—
—
—
4,131
Capital
£’000
211
—
—
—
—
—
—
211
—
—
—
—
—
—
—
211
Investment
revaluation
£’000
1,135
—
—
—
—
—
—
1,135
—
—
—
—
—
—
—
1,135
Total
other
£’000
4,425
—
—
117
9
(3)
—
—
—
—
—
4,548
—
—
63
—
—
—
—
—
—
—
4,611
Total
other
£’000
5,568
—
—
117
—
—
—
5,685
—
—
63
—
—
—
—
5,748
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 30. Reserves continued
Property revaluation reserve
The property revaluation reserve represents the unrealised surpluses arising on revaluation of the Group occupied land
and buildings and is not available for distribution until realised on disposal.
Retained earnings
Retained earnings represent the accumulated profits and losses of the Group.
Capital redemption reserve
The capital redemption reserve represents the purchase and cancellation by the Company of its own shares and comprises
the aggregate nominal value of all the ordinary shares repurchased and cancelled.
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.
31. Cost of shares held by the ESOP trust
Group
At 1 January
Additions
Disposals
At 31 December
2016
£’000
345
959
(233)
1,071
2015
£’000
550
—
(205)
345
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 2016, the Trustee held 523,606 shares (2015: 177,320 shares) with a cost of £1,071,330 (2015: £344,787) and
a market value of £1,055,066 (2015: £397,197). All of these shares were committed to satisfy existing grants by the Company under
the Henry Boot PLC 2006 Long Term Incentive Plan, the Henry Boot PLC 2015 Long Term 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 dividends on the shares it holds.
133
25222 6 April 2017 1:27 PM Proof 12
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 NOTES TO THE FINANCIAL
STATEMENTS CONTINUED
for the year ended 31 December 2016
32. Cash generated from operations
Group
Parent Company
Profit before tax
Adjustments for:
Amortisation of PFI asset
Goodwill impairment
Depreciation of property, plant and equipment
Impairment gain on land and buildings
Revaluation 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)/loss on disposal of property, plant and equipment
Gain on disposal of investment properties
Finance income
Finance costs
Share of profit of joint ventures and associates
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
Decrease/(increase) in inventories
(Increase)/decrease in receivables
(Decrease)/increase in payables
Cash generated from/(used by) operations
11
11
12
12
13
3
4
14
3
3
5
6
15
12
2016
£’000
39,491
1,251
203
4,022
—
1,783
36
510
(2,140)
—
—
—
(506)
(647)
(156)
1,670
(1,523)
43,994
(4,048)
648
40,594
1,478
(7,515)
(6,012)
28,545
2015
£’000
32,410
1,193
203
3,637
(10)
2,009
52
492
(2,579)
—
—
(485)
(296)
(747)
(1,438)
1,617
(923)
35,135
(4,057)
334
31,412
(13,706)
(9,381)
(3,117)
5,208
2016
£’000
22,191
—
—
92
—
—
—
307
(2,140)
(5,467)
(1,858)
—
10
—
(22,695)
3,145
—
(6,415)
—
—
(6,415)
—
14,242
(9,716)
(1,889)
2015
£’000
7,539
—
—
76
—
—
—
297
(2,579)
788
1,688
—
—
—
(18,208)
3,391
—
(7,008)
—
—
(7,008)
—
488
199
(6,321)
33. Guarantees and contingencies
The Parent Company has guaranteed the performance of certain contracts entered into by Group undertakings in the ordinary course of
business.
The Parent Company has given cross guarantees to certain of the Group’s bankers and bondsmen in respect of facilities available to
Group undertakings in the normal course of business. Guarantees relating to bonds are impracticable to quantify.
In the opinion of the Directors, no loss is expected to arise in connection with these matters.
34. Additional information – subsidiaries, joint ventures and associates
Details of the Company’s subsidiaries, joint ventures and associates, all of which are incorporated in England and are consolidated in
the Group Financial Statements at 31 December 2016, are as follows:
Subsidiary name
Banner Plant Limited
Buffergone Limited
Capitol Park Property Services Limited
Chocolate Works York Management Company Limited
Comstock (Kilmarnock) Limited
First National Housing Trust Limited
Fox Valley Management Company Limited
Proportion of
ownership
100%
100%
5%
100%
100%
100%
100%
Direct or
indirect
Direct
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Activity
Plant hire
Construction
Property development
Management company
Land promotion
Property investment
Management company
134
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 34. Additional information – subsidiaries, joint ventures and associates continued
Subsidiary name
Hallam Land Management Limited
Henry Boot Biddenham Limited
Henry Boot Contracting Limited
Henry Boot Construction Limited
Henry Boot Developments Limited
Henry Boot Investments 1 Limited
Henry Boot Estates Limited
Henry Boot Inner City Limited
Henry Boot ‘K’ Limited
Henry Boot (Launceston) Limited
Henry Boot Land Holdings Limited
Henry Boot Leasing Limited
Henry Boot Nottingham Limited
Henry Boot (Manchester) Limited
Henry Boot Projects Limited
Henry Boot Swindon Limited
Henry Boot Tamworth Limited
Henry Boot Wentworth Limited
Henry Boot Whittington Limited
Investments (North West) Limited
Marboot Centregate Ltd
Marboot Centregate 2 Limited
Moore Street Securities Limited
Plot 7 East Markham Vale Management Company Limited
Road Link (A69) Holdings Limited
Road Link (A69) Limited
Road Link Limited
Saltwoodend Limited
Stonebridge Projects Limited
Stonebridge Offices Limited
The Residence (York) Management Company Limited
Victoria Gardens (Headingley) Management Company Limited
Waterloo Court Management Company Limited
Winter Ground Limited
Joint ventures and associates
Aytoun Street Developments Limited
Bigmouth Manchester Limited
Capital & Centric (Salford Quays) Limited
Henry Boot Barnfield Limited
I-Prop Developments Limited
Kampus Holdings Sarl
Kirklees Henry Boot Partnership Limited
Markey Colston Limited
Pennine Property Partnership LLP
Proportion of
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
61.2%
100%
100%
100%
50%
100%
100%
100%
17%
100%
Proportion of
ownership
50%
50%
5%
50%
50%
5%
50%
27.33%
50%
Direct or
indirect
Direct
Direct
Direct
Direct
Direct
Indirect
Direct
Direct
Indirect
Direct
Direct
Direct
Indirect
Direct
Direct
Direct
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct or
indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Activity
Land promotion
Land promotion
Inactive
Construction
Property investment and development
Property development
Property investment
Inactive
Property investment and development
Land promotion
Land promotion
Motor vehicle leasing to Group companies
Inactive
Property development
Property investment and development
Land promotion
Property investment and development
Property development
Property investment
Property development
Property investment
Inactive
Employee benefit trust
Management company
Holding company
PFI road maintenance
Inactive
Inactive
Property development
Property investment and development
Management company
Management company
Management company
Property investment and development
Activity
Property development
Property development
Property development
Property development
Property development
Property investment and development
Inactive
Property development
Property investment and development
135
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 SHAREHOLDER
INFORMATION
Property Valuers’ Report
Notice of Annual General Meeting
Financial Calendar
Advisers
Group Contact Information
Our Group Locations
Glossary
138
139
144
144
145
146
IBC
136
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Pictured Building works have now commenced on
our site at Lubbersthorpe, Leicestershire, where we
secured a planning permission for 4,250 homes, our
share being 1,593 properties, in 2013.
137
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION PROPERTY
VALUERS’ REPORT
THE DIRECTORS
Henry Boot PLC
Banner Cross Hall
Ecclesall Road South
Sheffield
S11 9PD
31 December 2016
Dear Sirs
City Point
29 King Street
Leeds LS1 2HL
tel +44 (0) 113 244 6440
fax +44 (0) 113 245 4664
www.jll.co.uk
HENRY BOOT PLC
Group property portfolio valuation as at 31 December 2016
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 2016. The valuations have been prepared in accordance with the
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 regarding the foregoing we are of the opinion that the aggregate Market Value of the freehold and leasehold interests owned by
Henry Boot PLC and its subsidiaries, as at 31 December 2016 is:
Freehold Properties
Leasehold Properties
Mixed Tenure Properties
TOTAL
£95,970,000
£9,550,000
£225,000
£105,745,000
In accordance with our normal practice, we confirm that our valuations have been prepared for the Directors of Henry Boot PLC and for
the purpose to which this certificate refers.
No responsibility is accepted to any third party in respect of the information or advice contained herein, except in circumstances where
our prior written approval has been granted.
Yours faithfully
SIMON CULLIMORE MRICS
DIRECTOR
FOR AND ON BEHALF OF JONES LANG LASALLE LIMITED
Jones Lang LaSalle Limited
Registered in England and Wales Number 1188567
Registered Office 30 Warwick Street, London W1B 5NH
138
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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 25 May 2017 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
2016.
Resolution 2
To declare a final dividend of 4.50p per ordinary share.
Resolution 3
To approve the Directors’ Remuneration Report for the year ended 31 December 2016.
Resolution 4
To reappoint E J Boot as a Director of the Company.
Resolution 5
To reappoint J T Sutcliffe as a Director of the Company.
Resolution 6
To reappoint D L Littlewood as a Director of the Company.
Resolution 7
To reappoint Ms J C Lake as a Director of the Company.
Resolution 8
To reappoint J J Sykes as a Director of the Company.
Resolution 9
To reappoint P Mawson as a Director of the Company.
Resolution 10
To reappoint G R Jennings as a Director of the Company.
Resolution 11
To reappoint PricewaterhouseCoopers LLP as auditors of the Company.
Resolution 12
To authorise the Audit Committee to fix the auditors’ remuneration.
Resolution 13
THAT pursuant to Section 551 of the Companies Act 2006, the Directors be and are generally and unconditionally authorised 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 £4,403,311, provided that (unless previously revoked, varied or renewed) this authority shall expire on 24 August
2018 or at the conclusion of the next AGM of the Company after the passing of this resolution, 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.
139
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION NOTICE OF ANNUAL
GENERAL MEETING CONTINUED
Resolution 14
THAT subject to the passing of Resolution 13 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 13 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.
ii.
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
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 £660,496,
and (unless previously revoked, varied or renewed) this power shall expire on 24 August 2018 or at the conclusion of the next AGM
of the Company after the passing of this resolution, 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).
Resolution 15
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.
ii.
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
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.
e.
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 24 August 2018; and
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
21 April 2017
140
Henry Boot PLC
Registered Office:
Banner Cross Hall
Ecclesall Road South
Sheffield
United Kingdom
S11 9PD
Registered in England and Wales No. 160996
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016
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 the close of business on 23 May 2017 (or, if the meeting is adjourned, at the close of
business 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. 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.
4. 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, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, no later than
12.30pm on 23 May 2017 (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).
5. As an alternative to completing the hard copy form of proxy, a shareholder may appoint a proxy or proxies electronically using the
online service at www.eproxyappointment.com. For an electronic proxy appointment to be valid, the appointment must be received
by Computershare Investor Services PLC no later than 12.30pm on 23 May 2017 (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).
6. 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 Computershare Investor Services PLC (ID: 3RA50) no later
than 12.30pm on 23 May 2017 (or, if the meeting is adjourned, 48 hours (excluding any part of a day that is not a working day)
before the time of any adjourned meeting). For this purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host) from which Computershare Investor Services PLC 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.
141
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION NOTICE OF ANNUAL
GENERAL MEETING CONTINUED
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.
7. 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.
8. 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.
b.
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
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.
9. 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 Financial Statements (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.
142
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 10. 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.
ii.
in hard copy, by sending it to the Company Secretary, Henry Boot PLC, Banner Cross Hall, Ecclesall Road South,
Sheffield S11 9PD; or
in electronic form, by sending it by email to cosec-ir@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).
11. 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.
12. 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
13. 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 cosec-ir@henryboot.co.uk.
No other methods of communication will be accepted.
14. As at 3 April 2017 (being the last practicable date before publication of this notice), the Company’s issued ordinary share capital
was 132,099,335 ordinary shares, carrying one vote each and representing the total number of voting rights in the Company.
143
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION FINANCIAL
CALENDAR
London Stock Exchange Announcements
Preliminary Statement of Results 2016:
24 March 2017
Half-yearly Results 2017:
25 August 2017
Pre-close Trading Statement 2017:
end January 2018
Annual Report and Financial Statements
Annual Report and Financial Statements 2016
(Available and online):
by 21 April 2017
Annual General Meeting
25 May 2017
Dividends Paid on Ordinary Shares
2016 Final dividend date (Subject to approval at AGM):
30 May 2017
2017 Interim dividend date (Subject to approval):
20 October 2017
ADVISERS
Chartered Accountants and Statutory Auditors
PricewaterhouseCoopers LLP
St Paul’s Place
121 Norfolk Street
Sheffield S1 2LE
Financial PR
Hudson Sandler LLP
29 Cloth Fair
London
EC1A 7NN
Bankers
Barclays Bank PLC
1 St Paul’s Place
121 Norfolk Street
Sheffield S1 2JW
Santander UK PLC
44 Merrion Street
Leeds LS2 8JQ
The Royal Bank of Scotland plc
2 Whitehall Quay
Leeds LS1 4HR
Corporate Finance
KPMG Corporate Finance
1 Sovereign Square
Sovereign Street
Leeds LS1 4DA
144
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Solicitor – Corporate
DLA Piper UK LLP
1 St Paul’s Place
Sheffield S1 2JX
Solicitor – Operational
Irwin Mitchell LLP
Riverside East House
2 Millsands
Sheffield
S3 8DT
Stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
25222 6 April 2017 1:27 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 GROUP
CONTACT INFORMATION
Land Promotion
Hallam Land Management Limited
Construction
Henry Boot Construction Limited
Registered office and Head office
Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD
Registered 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
Registered office and 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
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
Registered office
Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD
Head office
Callywhite Lane, Dronfield, Derbyshire, S18 2XS
t: 01246 299400
e: dronfield@bannerplant.co.uk
w: www.bannerplant.co.uk
Registered office
Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD
Hire centres
Chesterfield, Derby, Dronfield, Leeds, Rotherham and Wakefield
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
Road Link (A69) Limited
Registered office and Head office
Stocksfield Hall, Stocksfield, Northumberland NE43 7TN
t: 01661 842842
e: enquiries@roadlinka69.co.uk
145
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION OUR GROUP
LOCATIONS
NATIONAL
COVERAGE
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.
Head Office
Sheffield
Offices
Bristol
Dronfield
Glasgow
Leeds
London
Manchester
Northampton
Stocksfield
Hire Centres
Chesterfield
Dronfield
Derby
Leeds
Rotherham
Wakefield
146
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 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:
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.
IFRS
International Financial Reporting Standard.
Inventory value
The determination of the cost of unsold
inventory at the end of the accounting
period.
IOSH
Institution of Occupational Safety and
Health.
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).
Localism Bill
A bill to devolve greater powers to councils
and neighbourhoods and give local
communities more control over housing
and planning decisions.
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.
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.
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.
Return on capital employed
(ROCE)
A financial ratio that measures a
company’s profitability and the efficiency
with which its capital is employed.
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.
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.
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.
Pre-let
A lease signed with a tenant prior to
completion of a development.
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.
This Annual Report is printed by an FSC® (Forest Stewardship
Council), certified printer using vegetable based inks.
This report has been printed on Essential silk, a white coated
paper and board using 100% EFC pulp.
www.jonesandpalmer.co.uk
25222.04 7 April 2017 12:14 PM Proof 12
25222.04 7 April 2017 12:14 PM Proof 12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2016 Henry Boot PLC
Registered office
Banner Cross Hall, Ecclesall Road South
Sheffield S11 9PD United Kingdom
Registered in England & Wales No. 160996
t: 0114 255 5444
e: cosec-ir@henryboot.co.uk
www.henryboot.co.uk
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25222.04 7 April 2017 12:14 PM Proof 12
25222.04 7 April 2017 12:14 PM Proof 12