Henry Boot PLC
Annual Report and Financial Statements
for the year ended 31 December 2019
Stock Code: BOOT.L
Safety
People
Delivery
Growth
WELCOME
TO THE HENRY BOOT PLC ANNUAL REPORT 2019
Empowering and developing our people sits at the core of our being. This focus shapes our values and
behaviours and is also a key aspect of our strategic priorities. Being purpose-led enables us to create
long-term value for our stakeholders and ultimately achieve our vision.
Strategic priorities
Read more about Our Strategy
on pages 26 and 27
Safety
People
Delivery
Growth
O u r strategy
Our purpose
To empower and develop
our people to create
long-term value and
sustainable growth for
our stakeholders*.
Our valu e s
Values
Our vision
Our people, partners
and communities continue
to trust our reputation,
respect our expertise
and value us for our
forward-thinking
approach.
Respect
Integrity
Loyalty
Collaboration
Delivery
Adaptability
* Our stakeholders are our shareholders, employees,
pensioners, customers and suppliers. More broadly,
we recognise our duties to the environment and the
communities in which we operate.
Read more about Our
Values on page 53
Read more on our website
henryboot.co.uk
IN THIS
ANNUAL
REPORT
BUSINESS OVERVIEW
Welcome and Introduction
Living our Vision
COVID-19 Update
Chairman’s Statement
Group at a Glance
2019 Highlights
Investment Case
STRATEGIC REPORT
Chief Executive Officer Update
Business Model
– Our Competitive Advantages
Market Review
Our Strategy
Segmental Reviews
– Land Promotion
– Property Investment and
Development
– Construction
Group Finance Director’s Review
Strategy Review
Key Performance Indicators
Risks and Uncertainties
Corporate Responsibility
OUR GOVERNANCE
Board of Directors
Senior Management and
Company Secretary
Chairman’s Introduction
Corporate Governance Report
– Division and responsibilities
– Board leadership and
Company purpose
– Composition, success
and evaluation:
– Nomination Committee Report
– Audit and Risk Committee
Report
– Audit, risk and internal control:
– Corporate Governance
Statement
– Remuneration
– 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
Notice of Annual General Meeting
Financial Calendar
Advisers
Group Contact Information
Glossary
Flap
02
06
08
10
12
13
16
18
21
22
26
28
30
32
34
38
42
44
51
64
68
70
72
75
84
88
94
96
99
100
100
112
117
120
130
131
132
133
134
144
184
193
193
194
195
People and culture
LAND PROMOTION
PROPERTY INVESTMENT
AND DEVELOPMENT
CONSTRUCTION
1
2
Identify opportunities and acquire land
Obtain planning permission
3a
Sale of land
3b Development of site
4a
Sale of
property
4b
Investment
portfolio
Cyclical revenue
Recurring revenue
GROUP
Bank
funding
Partnerships and Joint Ventures
THE HENRY BOOT WAY
Our commitment to being a sustainable business
underpins everything that we do and this ethos is
fully integrated into our day-to-day operations.
Read more about Our people
on pages 54 and 55
STRATEGIC PRIORITIES
Safety
We aim to be the
safest place to work
in our markets.
People
We intend to recruit and
retain employees who are
empowered to deliver the
growing business we aspire
to be.
CORE OPERATING MODEL
We have been in business for over 130 years and
we are valued for our expertise and forward-thinking
approach. The business model describes how our
three business segments successfully operate for the
combined benefit of the Group.
Read more about How we operate
on page 18 to 21
Watch the Business model video at
www.henryboot.co.uk/about-us/business-model
Delivery
We aim to invest
appropriately in all our
business segments
to achieve short-term
delivery.
CAPITAL STRUCTURE AND
FINANCIAL STRENGTH
We reinvest the cash generated from these activities
into strategic land and property development. Our
financial structure allows us to 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 generates a sizeable amount of rental
income each year which allows us to borrow against
the investment portfolio at attractive rates.
OPPORTUNITIES
We actively seek out new ways of working to
ensure we can continue to increase our opportunity
pipeline.
Growth
We aim to grow net assets,
increasing opportunity
for the long term.
Read more about our
Strategy Review on
pages 38 to 41
Read about Health and
Safety on page 57
Our
industry
Protecting the health, safety
and welfare of stakeholders
is a core priority for our
industry. We operate above
and beyond the required
standards and strive to uphold
these across all the Group’s
operations.
Read about our work
in the Community on
page 58
Our people
We invest in our people to
develop their skills, expertise
and individual potential to help
sustain a valuable talent pool
for now and the future.
Read more about Our
people on page 54
Read about how the
Board engages with
our people on page 76
Our
communities
We do not just operate within
a community, we work in close
partnership to create and
develop thriving projects that
will last for generations.
Our
shareholders
We focus on creating long-
term shareholder value
through strategic investment
and developing opportunities
that generate robust, reliable
earnings.
Read about our Investment
case on page 13
Read more about
Shareholder engagement
on page 77
01
01
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW BUSINESS
OVERVIEW
LIVING OUR
VISION
TECA
ABERDEEN
The Event Complex Aberdeen (TECA)
We completed the £333m TECA development in 2019.
The development brought a new 15,000 capacity arena
and leisure facilities to Aberdeen.
Link to strategy
Delivery
Generating value for Aberdeen
With 48,000 sq m of flexible event space the facility, benefiting
from excellent transport links through the neighbouring
Aberdeen International Airport and city bypass, is expected to
contribute an additional 4.5m visitors, £113m of visitor spend
and £63m net Gross Value Added to the Scottish economy
over 10 years. It will also result in the creation of 352 full-time
equivalent permanent positions by year 10 of operations.
£333m
Development
48,000 sq m
Flexible event space
02
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 This has been a huge
investment by the council
and I’m sure it is something
that will make people in the
city very proud.
Douglas Lumsden
Council Co-leader
03
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 BUSINESS
OVERVIEW
LIVING OUR
VISION
GLASS WORKS
BARNSLEY
The Glass Works project
In 2016 we commenced construction work on the Glass Works,
a Barnsley Town Centre regeneration scheme. The now complete
Phase 1 saw a new market and library delivered to the centre. We
now have been appointed contractor on Phase 2 of the scheme,
which will bring Barnsley centre a 100,000 sq ft retail space,
25,000 sq ft of cafés and restaurants, with a new 13 screen
multiplex cinema and ten pin bowling.
Link to strategy
Delivery
Generating value for Barnsley
To date, we have supported over 100 local training,
employment and community projects with over £250,000 worth
of funding. We have established the Barnsley Construction Skills
Village and Better Barnsley bond initiatives – both with the aim
of leaving a legacy beyond the completion of the project.
£42m
Phase 1 Contract Value
£88m
Phase 2 Contract Value
04
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Henry Boot have
already delivered fantastic results,
so we are pleased to have them
on board for the next phase of
the scheme. Their commitment
to not only the project but the
local community is outstanding
and they have made a significant
impact in terms of employment and
educational opportunities.
Steve Houghton
Leader of Barnsley Council
05
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW COVID-19
Update
Henry Boot performed strongly throughout 2019, which we are
pleased to outline in this announcement. However, it is clear that
the COVID-19 pandemic is having a material impact on the Group.
Therefore, we believe it is important to provide an update on the
unprecedented decisions and actions taken, which have all been
driven by our three main priorities:
• The safety and welfare of our people, our customers, our supply
chain, and the communities in which we operate
• Operational responses to the latest Government guidance,
together with feedback from our people, customers and supply
chain
• The long-term financial stability of the Group
1. Safety and welfare
In February, a Committee was formed to develop a COVID-19 action
plan and to monitor the impact on our Group. The Committee has
been agile to meet the needs created by this period of extreme
uncertainty, meeting almost daily since mid-March, with the action
plan being constantly refreshed to reflect changing circumstances.
Our office network is closed, and since the lockdown, our people who
can work remotely are doing so.
At the end of March, we paused work on our construction sites
and closed our plant sales centres, except where essential work
or supplies were being delivered to vital NHS sites. This allowed
us to carry out a review that ensured we are compliant with new
government guidelines, had the ability to gain feedback from
customers and suppliers, and crucially, that our people remained safe.
2. Operations
Following our review and the pause in construction activity, all of our
construction sites and plant sales centres are now open, adhering to
the strict precautions, which have naturally affected our output and
efficiency. The position is similar in the sites being operated by our
development business. However, all recently completed developments
are either pre-sold or let, and nearly all our committed developments
are also pre-funded or pre-let. Our jointly owned Leeds-based
housebuilder is also operating on all of its sites and, following the
change in the Government’s guidelines, has reopened its show
homes.
The reduced activity affecting construction, housebuilding and plant
hire has meant we are utilising the Government’s Coronavirus Job
Retention Scheme. A minority of our workforce have been furloughed
and their pay has been topped up to 100% by the Group. In recent
weeks, we have started to reduce the number of people furloughed as
we adapt to new working ways and productivity increases.
Our land promotion business continues to operate remotely, identifying
and promoting strategic land over the long term. There are several
contracted sales due to complete in the near future, and the majority
of these are with the UK’s major housebuilders.
3. Financial stability
The Group retains a very strong financial base, with a robust balance
sheet, and net cash at 30 April 2020 of £45m (31 December 2019:
£27m). In addition, we retain a secured, committed, undrawn banking
facility of £75m. This facility is subject to a restriction relating to the
value of investment property and deferred income and, at 30 April
2020, £51m of this facility was available to the Group.
In assessing the Group’s going concern and viability, we have
considered the potential impact of the COVID-19 pandemic on the
Group, and the effect of both a three-month and six-month UK
lockdown. This assumes that no activity is undertaken during 2020
unless it is already contracted, followed by a short to medium-term
recovery of the economy. Based on this assessment we believe the
Group will have adequate resources, liquidity and available bank
facilities to continue in operational existence for the foreseeable future.
We have also sought to reduce variable costs, and to preserve cash,
where possible. This includes making the following key decisions:
• Paying a reduced final dividend in recognition of the performance
for the year ended 31 December 2019 of 1.3p so that the full
year dividend payment for 2019 is 5.0p (56% of the 9.0p paid for
FY2018)
• Aligning the remuneration of our people with shareholders with
only half of all awarded bonuses, in relation to the FY2019, across
the Group being paid
• The Board’s executive and non-executive directors have taken a
20% reduction in salary and fees from 1 April
• Measures taken to actively manage cash and curtail both capital
and revenue expenditure
As noted in our operations update on 3 April 2020, the Group is
currently unable to quantify the impact of COVID-19 on its financial
and trading performance for the current year. As a result, we have
suspended all existing financial guidance until clarity returns.
There is no doubt that the COVID-19 pandemic is having a material
effect on our current operations, but we are on track in our plan to
safeguard our people together with maintaining operational capabilities
and to preserve our financial resources.
We have always been clear that we are a long-term business, and as
such we operate in markets that are dictated by long-term trends:
• The demand for residential development and the land needed to
provide much-needed housing
• The development of manufacturing and logistics assets, and
urban development concentrated on offices and residential
• Construction with a bias to public sector investment in areas such
as hospitals, education and urban regeneration
We believe these long-term trends and markets are sustainable and
we are determined in our strategy to make sure we play our part in
them in the future.
06
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Pictured: Woodcote Grove, Epsom – A new sustainable Headquarters for Atkins PLC
07
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Chairman’s
Statement
STRONG
POSITION FOR
THE FUTURE
JAMIE BOOT
Chairman
I am pleased to report that Henry Boot achieved another strong set
of results with profit before tax of £49.1m, which was slightly higher
than the previous year (2018: £48.6m). Earnings per share were
28.3p (2018: 28.3p), covering the proposed dividend over 5.6 times.
NAV per share increased to 239p (2018: 227p) and we finished the
year, having sold the majority of the mixed-use retail- focused assets
in our investment portfolio, with £27.0m in net cash. This was a
significant achievement considering the level of political and economic
uncertainty that affected the UK retail real estate markets during 2019.
It also means that we have a strong cash positive balance sheet to
withstand the impacts of the COVID-19 pandemic that we are all now
experiencing.
Once again, Hallam Land – our land promotion business – performed
exceptionally well, selling over 3,400 plots on 22 sites as the leading
UK housing developers traded well and replenished land banks with
quality sites in good locations. Hallam Land increased its site portfolio
to over 14,800 acres, and goes into 2020 with planning permission
for over 14,700 plots available to sell, all held at cost with no planning
gain value recognition until sale completion, and a further 10,600 plots
applied for and within the planning process.
Henry Boot Developments (HBD) – our property investment and
development business – successfully concluded The Event Complex
Aberdeen (TECA) on time and on budget. This £333m project was
the largest we have delivered, and it was great to see it used for the
BBC’s ‘Sports Personality of the Year’ programme. Currently, we are
committed to deliver 763,000 sq ft of manufacturing and logistics
accommodation, and 717 residential units, all of which have either
been pre-sold or pre-let. The majority of these residential units are
within our Kampus PRS scheme in the centre of Manchester, which
has been pre-funded. With a development pipeline of c£1.3bn, we
have ample opportunities for the future.
Stonebridge Homes – our jointly owned Leeds-based housebuilder –
achieved 159 unit sales (2018: 145 sales). Planning delays continue
to affect the speed at which we are able to grow output, and we are
looking to secure our first site in the North East, which is a natural
extension to our existing geographic focus.
Henry Boot Construction had a successful year; revenue from
construction activity was £89.7m (2018: £70.9m), and although
COVID-19 will cause significant disruption, we have a strong order
book with the added opportunity within the Partnership Homes
market, following the acquisition of Starfish Commercial in 2019.
Banner Plant had a more difficult year, having incurred a bad debt
when one of its largest customers failed, although the team replaced
most of the activity lost with this customer during 2019. Road Link
A69 continued to perform profitably, to expectations and in line with
the previous year.
Dividend
The Board has considered the financial position of the Company, and
its ability to withstand the uncertain economic conditions created
by COVID-19, very carefully. Notwithstanding our relatively strong
position, we believe that it is important in these uncertain times, and
for the long-term success of the business, to preserve cash. The
Board has therefore concluded that we should recommend a reduced
final dividend of 1.3p which, together with the 3.7p interim dividend,
gives a total of 5.0p (2018: 9.0p) for the year. We recognise the
importance of dividends to all shareholders and, rest assured, we will
keep returns to all stakeholders under review as the impacts of the
crisis unfold. Payment of the final dividend is subject to shareholder
approval at the Annual General Meeting (AGM) and will be paid on 6
July 2020 to shareholders on the register on 12 June 2020.
Our People
Our success in 2019 has, once again, been delivered against a
backdrop of political and economic uncertainty, which impacts on
the confidence that clients and customers require in order to make
positive decisions. In those circumstances, our people have performed
08
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW With positive cashflow, a short-term
focus on managing our cash reserves,
and contingency planning in place,
we have readied ourselves to come
through the pandemic.
Jamie Boot
Chairman
Net asset value per
ordinary share
239p
Earnings per
ordinary share
28.3p
p
9
3
2
p
7
2
2
p
3
0
2
p
7
7
1
p
8
6
1
p
1
.
2
3
p
3
.
8
2
p
3
.
8
2
p
5
.
1
2
p
5
.
7
1
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2
6
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7
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9
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2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Dividends per
ordinary share
5.0p
p
0
.
9
p
0
.
8
p
0
.
7
p
1
.
6
p
0
.
5
5
1
0
2
6
1
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2
7
1
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2
8
1
0
2
9
1
0
2
Read the Highlights on
page 12
Read our Governance
report on page 72
09
tremendously well to overcome the challenges and deliver a better
result than 2018. On behalf of the Board and all stakeholders, I thank
all our people for their efforts throughout 2019. Whilst COVID-19
will materially affect the Group’s results in 2020, I am sure that with
skillful management and the resolute contribution of everyone in our
Group, we will overcome the unprecedented challenges that will
arise, seeking out new opportunities along the way. I would also like
to take this opportunity to welcome Tim Roberts as our new Chief
Executive Officer and thank John Sutcliffe for his service to the Group
as Finance Director and Chief Executive Officer. John’s time with
Henry Boot has been extremely valued and I wish him all the best in
his retirement endeavours.
Outlook
We made significant strategic progress in 2019, achieving a strong
financial performance and, significantly, we disposed of most of
our mixed-use retail-focused assets. As a result, we ended the
year with a strong cash positive balance sheet. Trading in the new
year had started well, with a number of commercial and housing
developments on track, strategic land transactions confirmed and
a strong committed construction order book. Against this, there is
no doubt that the COVID-19 pandemic will cause a significant social
and economic impact. Our short-term priority is the welfare of our
colleagues, the continued robustness of our financial position, and
continuing to serve our customers and other stakeholders. With
positive cashflow, a short-term focus on managing our cash reserves,
and contingency planning in place, we have readied ourselves to
come through the pandemic. We are a long-term business, therefore,
our ambition for the business remains unchanged. With our new Chief
Executive Officer driving the business forward, we will continue to
empower our people, with both the financial and technical resources
to add to the pipeline of land, housing, construction and commercial
development opportunities, delivering sustainable growth and value
creation for all stakeholders.
Jamie Boot
Chairman
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Group at a Glance
EXPERTISE
EXPERIENCE
AGILITY
LAND PROMOTION
PROMOTIONPROPERTY INVESTMENT AND DEVELOPMENT
Hallam Land Management Limited
Henry Boot
Development Limited
Stonebridge Homes
Limited
Hallam Land Management
The strategic land and planning promotion
arm of the Henry Boot Group. Since 1990
we have been acquiring, promoting and
developing land with an outstanding record
in achieving planning permission.
Key sectors:
• Housing
• Sustainable communities
• Business parks
Henry Boot Developments
Trading as HBD, one of the most
progressive property companies in the
UK with its considerable experience
and impressive reputation in all sectors
of property development. Currently
the company has a commercial
development pipeline of over £1.3bn.
Key sectors:
•
Industrial, leisure, and commercial
development
• Urban generation
• Development partnerships
• Residential development
Stonebridge Homes
A jointly owned company (controlled
by Henry Boot PLC) in the north of
England, which develops family homes
that combine care, consideration and
attention to detail.
Key sectors:
• Residential development
Percentage of Group revenue
Percentage of Group revenue
Land Promotion Revenue
19%
Property Investment and
Development Revenue
51%
Cyclical revenue
Cyclical revenue
Recurring revenue
10
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Pictured: Butterfield Business Park, Luton – JV with landowners with potential
to provide 650,000 sq ft. of high quality light manufacturing and distribution.
CONSTRUCTION
Henry Boot Construction Limited
Banner Plant Limited
Road Link (A69) Limited
Henry Boot Construction
Specialising in serving both public and
private clients in all construction and civil
engineering sectors, in which we have
strong partnering relationships.
Key sectors:
• Housing
• Civil engineering
• Health, sports and leisure
• Commercial/retail
•
Industrial
• Custodial
• Education
Banner Plant
Offering a wide range of construction
equipment and services for sale and hire in
plant, temporary accommodation, power
tools, powered access, big air compressors
and serviced toilets.
The range of products continues to evolve
to meet customer requirements in modern
health and safety legislation. Primarily,
supply areas stretch from Yorkshire in the
north to the East Midlands and Birmingham
in the south.
Road Link (A69)
Road Link has a 30-year contract (six
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 mileage travelled by
those vehicles.
Percentage of Group revenue
Type of revenue stream:
Construction Revenue
30%
Recurring revenue
Recurring Revenue: This revenue stream is regular and
stable which allows the Group to maintain long-term bank
funding relationships.
Cyclical Revenue: This revenue stream is dependent
on each economic cycle. These profits, in good years,
contribute significantly to the Group’s stable profits overall.
Read more about our Business model on page 18 to 21
Read more about Our strategy on page 26 and 27
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
11
BUSINESS OVERVIEW 2019 Highlights
What we achieved
in 2019
Once again we delivered
another strong set of
results. Despite the
political uncertainty
during the year we
increased profit before
tax, grew net assets and
finished the year in a
cash positive position.
Darren Littlewood
Group Finance Director
Financial highlights
Profit before tax
£49.1m
m
4
.
5
5
£
m
6
.
8
4
£
m
1
.
9
4
£
m
5
.
9
3
£
m
4
.
2
3
£
Net cash (debt)
£27.0m
Group revenue
£379.7m
m
5
.
8
0
4
£
m
1
.
7
9
3
£
m
7
.
9
7
3
£
m
0
.
7
2
£
m
8
.
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3
£
m
2
.
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m
4
.
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1
£
(
)
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0
.
9
2
£
(
)
m
9
.
2
3
£
(
)
m
9
.
8
3
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(
5
1
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1
0
2
8
1
0
2
9
1
0
2
Net asset value per
ordinary share
239p
Earnings per
ordinary share
28.3p
Dividends per
ordinary share
5.0p
p
9
3
2
p
7
2
2
p
3
0
2
p
7
7
1
p
8
6
1
p
1
.
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p
3
.
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3
.
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p
0
.
9
p
0
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p
0
.
7
p
1
.
6
p
0
.
5
p
5
.
1
2
p
5
.
7
1
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1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
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5
1
0
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6
1
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7
1
0
2
8
1
0
2
9
1
0
2
Operational highlights
• The Group performed well against the
• Our jointly owned house builder Stonebridge
uncertain political backdrop
Homes achieved 159 sales
• Successfully delivered the £333m TECA
scheme, in Aberdeen, on time and on budget
• Strategic land increased its profit to £31.8m, by
successfully selling 3,427 plots
• Henry Boot Construction completed Phase 1 of
the £44m Glass Works in Barnsley Town centre
and has now begun on Phase 2 which is an
£88m retail and leisure regeneration scheme
• Successfully implemented a strategic
rationalisation of our investment property
portfolio, disposing of approximately £67m
primarily with a retail focus
Read the Financial
Review on page 34
Read the Segmental
Reviews on page 28
to 33
12
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW Investment Case
KEY GROWTH
DRIVERS
Good financial track record
over the long term
A long-established and
efficient capital structure
• Providing reliable earnings through cyclical markets with good
visibility from the opportunities under control.
• Prudent debt levels and a disciplined approach to risk
management
• Trading profit produced within our three business segments:
Land Promotion, Property Investment and Development, and
Construction
• Reinvestment of cash generated in the construction segment
into strategic land and commercial development assets to
enhance returns to shareholders
• We aim to provide dividend growth while maintaining at least
three times dividend cover to allow for investment in future
opportunities, without diluting existing shareholders by raising
new equity capital
Delivering residential
communities
Delivering commercial
opportunity
• Just under 15,000 acres of strategic land on 188 sites
throughout the UK
• Our strategic land business has the scope to deliver 60,000 to
70,000 housing units over the next 10 to 20 years, with 14,713
secured planning permission plots
• Given the well-documented housing shortages and the
Government’s desire for more housing delivery, our land portfolio
is well positioned to help deliver these much needed houses
• A commercial development pipeline of £1.3bn plus of Gross
Development Value, in addition to over £300m to be delivered
over the next three years
• A small but quickly growing jointly owned housebuilder with a
land portfolio of over 1,000 units and a medium-term planned
output of 250 unit sales
Shareholder returns
• Our long-term strategic aim is to create shareholder value
through land promotion, property development and construction
• Strong organic growth drivers and capital allocation across our
three business segments
• Great track record of total shareholder return (TSR). In the past
twenty years the company has a compound annual growth rate
(CAGR) of 15% Vs. an average 5% of the All Share Index
10 year TSR performance
FTSE Small Cap Index
Henry Boot PLC
500
450
400
350
300
250
200
150
100
50
09
10
11
12
13
14
15
16
17
18
19
13
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019BUSINESS OVERVIEW 14
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT STRATEGIC
REPORT
SAFETY
To provide a safe place to work in
all of the markets we operate in.
Chief Executive Officer Update
Business Model
– Our Competitive Advantages
Market Review
Our Strategy
Segmental Reviews
– Land Promotion
– Property Investment and
Development
– Construction
Group Finance Director’s Review
Strategy Review
Key Performance Indicators
Risks and Uncertainties
Corporate Responsibility
16
18
21
22
26
28
30
32
34
38
42
44
51
The Directors present the Group Strategic Report
for the year ended 31 December 2019.
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 16 to 61 has been
approved by the Board and signed on its behalf by
Tim Roberts
Chief Executive Officer
20 May 2020
Darren Littlewood
Group Finance Director
20 May 2020
15
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT STRATEGIC
REPORT
Chief Executive
Officer Update
JOHN SUTCLIFFE
In my final update to stakeholders, I am very pleased to report that the
Group has produced another resilient financial performance.
The economic and political backdrop was tricky throughout the year;
however, our very capable people navigated through those challenges
and delivered results slightly ahead of last year and broadly in line with
expectations.
Highlights in the year include the following. The completion of TECA,
our largest ever project, on time and budget during the year. The
strategic disposal of the major retail biased investment property
assets, which reduced rental income and profit slightly but generated
cash, and the Group ended the year with net funds of £27m. Finally,
Hallam Land replaced the politically delayed sale of a major scheme at
Didcot by re-phasing other sales.
The Board conducted a very thorough succession process
researching widely, considering our vision, values and culture to
identify and appoint my replacement, Tim Roberts. As I hand over, it is
a pleasure to welcome Tim to Henry Boot; I am sure he will continue
to positively develop and grow the business over the coming years.
Looking back over the last 14 years as Finance Director and latterly
Chief Executive of Henry Boot, I am proud of the resilience and scale
we have built into the Balance Sheet. We have built a safe working
environment, good job security, career progression and leadership
development opportunity for our people, with our vision, values and
long-standing culture to the fore. For stakeholders, we have achieved
this resilience without issuing large tranches of equity, but by reinvesting
profits, more than doubling dividends and adding significantly to NAV
per share. The COVID-19 pandemic is a challenge that no business had
envisaged and it will have an unprecedented impact on our activities.
However, we have more than doubled the strategic land acreage and
the potential commercial development portfolio is now valued at over
£1.3bn, on numerous sites across the UK. These opportunities have
been assembled without debt and I am pleased, given the situation we
are in, to be able to hand over a business in good shape, with strong
financial foundations allowing Tim the flexibility to consider the best
ways to grow the business in the future.
It has been an honour to serve on the Board of Henry Boot and I feel
very proud of the business we have helped to build to date. I have
worked with a fantastic team of skilled and committed colleagues who
rarely fail to deliver great outcomes to difficult commercial challenges.
I wish the Board, all stakeholders and all those colleagues every
success in the future. I will watch with keen interest as the business
goes from strength to strength.
John Sutcliffe
Chief Executive Officer
(to 1 Jan 2020)
I feel very proud of the business we
have helped to build to date. I have
worked with a fantastic team of skilled
and committed colleagues who rarely
fail to deliver great outcomes to difficult
commercial challenges.
Watch the CEO’s interview at
henryboot.annualreport2019.com
John Sutcliffe
Chief Executive Officer
16
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 STRATEGIC
REPORT
TIM ROBERTS
At the time of writing we are all facing a dominant challenge in
COVID-19. We are fortunate in that I take over the leadership of
Henry Boot from John Sutcliffe in a considered and planned manner,
and find the business operating well and in robust financial shape.
This puts us in a position to withstand the economic and social
disruptions that the UK will face. As our COVID-19 update stated, we
have made decisions that have been driven by three main priorities:
Financially we ended the year in a strong financial position with
£27.0m of net cash and no gearing, and at 30 April that had grown
to £45m. In order to manage our cash flow and maintain financial
stability, we have scaled back on capital expenditure, reduced our final
dividend, fully aligned to a reduced payment of all awarded bonuses in
relation to 2019 – which as John has set out was a good year – and
the Board has agreed to a reduction in salary and fees.
•
the welfare of our people, customers and the communities in
which we operate;
• operational responses to Government guidance together with
feedback from our customers and supply chain;
•
the long-term financial stability of the Group.
In line with our strategic priorities, safety and people, we promptly
closed our offices, sites and sales centres (except where were working
on vital NHS projects), with many people carrying on working from
home. The reduced activity has meant a proportion of our workforce
has been furloughed but made the decision that pay be topped up
to 100%.
The pause on construction sites has allowed us to review our
procedures and on selective sites we have recently resumed work,
adhering to strict precautions and at reduced output. This also applies
for our development business, although our measured approach to
risk means all recently completed development is either pre-sold or
let, and nearly all committed development is pre-funded or pre-let.
Though our land promotion business will be affected in the short
term by the pause in the housing market, they will operate remotely
identifying and promoting land to create long-term value.
I have joined a successful, long-term business, and I look forward
to shaping its strategy and leading a team which has extensive
operational skills in key markets such as residential, manufacturing
and logistics and urban development. I believe these are sustainable
markets and as a team we are determined to make sure we have the
financial resources and organisation capacity to operate profitably in
them in the future.
Again, my thanks to John, and I look forward to working with the
Board, my colleagues and all our various stakeholders to realise our
long-term ambitions in better times.
Tim Roberts
Chief Executive Officer
(from 1 Jan 2020)
I have joined a successful, long-term
business, and I look forward to shaping
its strategy and leading a team which
has extensive operational skills
Tim Roberts
Chief Executive Officer
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
17
17
Business Model
KEY RESOURCES
AND RELATIONSHIPS
Our people are at the heart of what we achieve
Henry Boot recognises that our people are a fundamental
aspect to the success and sustainability of the Group. It is their
expertise that executes our business model successfully and
delivers the value created by the business to our stakeholders.
Group strategy framework
In 2018, we developed our Group Strategy framework to
ensure there was an overarching and consistent business
plan in place. The business model we operate requires our
subsidiaries to have their own individual strategies, but the
centralised strategy framework allows flexibility in their different
operational markets. This provides the boundaries needed
to ensure there is clear alignment between implementing our
operations and creating value.
The ‘Henry Boot Way’
Our culture and behaviour is guided by The ‘Henry Boot Way’.
This allows us to create and sustain an open culture, where
our people can grow and thrive, upholding the standards that
are so important to all of us. It inspires excellence in everything
we do for our customers, our colleagues and aims to provide
satisfaction for all our stakeholders.
Read more about ‘The Henry Boot
Way’ on page 53
Effective governance
We align our dynamic business model with robust governance
systems to ensure we operate transparently and openly. We
set ourselves very high standards and strictly follow best
practice in all of our operations.
Read the Governance
Report on page 72
18
GROUP OPERATING MODEL
1
Identify opportunities and acquire land
Land promotion acquires mainly agricultural land. Property
investment and development acquires mainly brownfield land. Both
then promote it for its highest value use.
2
Obtain planning permission
Gaining planning permission on land adds immense value to its
worth. Hallam Land Management promotes land for residential and
commercial consent. Henry Boot Developments promotes land for
commercial development. Stonebridge Homes promotes land for
residential development.
3a
Sale of land
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.
3b
Development of site
Unlike Hallam Land Management, when Henry Boot
Developments and Stonebridge Homes gain planning permission
for a site, they will develop it themselves.
4a
Sale of property
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.
4b
Investment portfolio
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 £60m, having disposed of a number of assets in 2019, and
generates rental income each year.
Construction
Henry Boot Construction is a contractor specialising in servicing 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 truck 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.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT STRATEGIC
REPORT
BUSINESS MODEL
LAND
PROMOTION
PROPERTY INVESTMENT
AND DEVELOPMENT
CONSTRUCTION
1
2
Identify opportunities and acquire land
Obtain planning permission
3a
Sale of land
3b Development of site
4a
Sale of
property
4b
Investment
portfolio
Cyclical revenue
Recurring revenue
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.
GROUP
Bank
funding
Watch the Business Model video at
www.henryboot.co.uk/about-us/business-model
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
19
STRATEGIC
REPORT
OUR VALUE
GENERATION
Our people
Our employees deliver the core activities of our business
model. We invest a significant amount of time and
resource in their training and development to ensure
they are empowered in their roles. We apply the same
methods and dedication when we are recruiting to ensure
we attract the highest calibre of people within the Group.
Read more on Our
People on page 54
Communities
We have offices in ten locations across the UK but we
have projects which extend our community impact across
the country. Wherever we operate it is fundamental to us
that we develop strong relationships and partnerships
with our communities. This could be by using the local
supply chain on projects or volunteering our skill set to a
local charity.
Customers
We are committed to maintaining our long-standing
track record of customer satisfaction. We continue to
listen, understand and adapt how we can improve upon
what we deliver, so we are able to further enhance the
competitive advantage our Group brings to its customers.
Shareholders
Our priority is to protect the sustainability of our Group
for our shareholders. By operating transparently and
responsibly, we are able to create added value for our
shareholders, providing updates on performance and
changes to the strategic direction of the Group.
Read about our Corporate
Responsibility on page 51
OUR EXPERTISE
LAND PROMOTION
Hallam Land Management
• Identifying land with future potential.
• 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 promoting 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 probability of making a return on the capital
invested.
• Taking land through the complexities of the planning system.
PROPERTY INVESTMENT AND DEVELOPMENT
Henry Boot Developments and
Stonebridge Homes
• Acquiring and developing brownfield land or under-
performing property assets.
• Operating in diverse sectors to maximise development
opportunities.
• Developing partnership arrangements.
• Ability to self-fund or source pre-funding opens up
opportunities. The businesses can commit to long-term
projects, such as complex multi-site regeneration schemes.
CONSTRUCTION
Henry Boot Construction, Banner Plant
and Road Link (A69)
• Project delivery in both the public and private sector, on time
and within budget.
• Creating trusted relationships and repeat business.
• Supplying a wide range of plant equipment efficiently.
GROUP
• As a result of our financial structure, we invest in the more
profitable areas of the business (strategic land and property
development) to maximise the value generated while
maintaining prudent gearing levels.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
20
STRATEGIC
REPORT
Business Model
OUR COMPETITIVE
ADVANTAGES
LAND PROMOTION
‘The Henry Boot Way’
Capital structure
Our culture, ‘The Henry Boot Way’, means that we have a unique
and cohesive approach to doing business. We started ‘The One
Henry Boot Project’ so we could capture what The ‘Henry Boot
Way’ is about. We have defined three core elements of The
Henry Boot Way: Our Purpose, Our Vision and Our Values.
The property investment portfolio of Henry Boot Developments
generates rental income each year, which allows us to borrow
against the investment portfolio at attractive rates. The
Construction segment is self-funded and cash generative. We
reinvest the cash generated from these activities into strategic
land and property development. The revenues generated
from the sale of land and property development is not regular
recurring income, and it would not be possible to directly fund
these activities through borrowings. Our financial structure
allows us to invest in these more profitable areas of the
business to maximise the value generated while maintaining
prudent gearing levels.
Our relationships
Diversified businesses
Creating lasting relationships with clients, partners and
customers is fundamental to the way we do business. We
ensure landowners are guided through the planning system,
work with key property advisers to become aware of potential
opportunities and deliver on time to create repeat business in
each of the Group’s segments. Our reputation and success are
built on the relationships we create, and we take great care to
ensure we build on these for the future.
The Group’s three business segments operate across the whole
property value chain. Each segment is involved in multiple
sectors – residential, leisure, retail, industrial, office and civil
engineering – which means that we are not overly exposed to
one area of the market. This enables us to weather economic
fluctuations and deliver on our key objective of maximising
stakeholder value.
21
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
STRATEGIC
REPORT
Market Review
Pictured: New Lubbesthorpe – It was designed to be a sustainable new community that created an attractive new living and working environment. It will
be a compact, diverse, mixed-use and sustainable community of sufficient scale to support local facilities including shops, schools and places to work.
LAND PROMOTION
The market has evolved significantly since we entered it. Strategic
land was the domain of House Builders 30 years ago, securing
Option Agreements with landowners allowing them the right to
acquire land at a percentage of market value, once planning consent
was secured. Over the last 20 years the market has seen a wider
acceptance of Planning Promotion Agreements, similar to options but
requiring a sale of the freehold land with planning consent in the open
market, with a percentage of the receipt being paid to the promoter,
as their return. This evolution, coupled with the introduction, within
the planning process, of the 5-year land supply test in the last decade
liberating planning approvals more swiftly, has facilitated growth in the
number of strategic land developers, and we now operate in a more
competitive marketplace.
The housing market in 2019 remained resilient and land prices were
stable, despite the UK’s planned exit from the EU. Sales in the new
homes sector, as opposed to second-hand homes, were maintained.
with the underlying market for our land remaining strong. However,
the planning process remains very protracted and expensive and
accordingly sites in valuable market areas continue to be the most
sought after.
Our response
Despite this strong competition as evidenced in 2019, our performance
continues to be strong within the market. Operating from 6 offices
nationwide, our planning expertise is recognised across the country.
We have maintained our approach of securing sites that exceed 150
plots, and that will deliver a consent in a 5 to 10-year time horizon,
enabling us to maintain margins and returns. Additionally, the strong
financial position of the Group, and Hallam itself, ensures that we have
flexibility to make more capital-intensive freehold land purchases and
not rely solely on promotion and option agreements.
Annual Land value growth
UK greenfield land
UK urban land
UK house prices
140
120
100
80
60
40
20
0
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Source: Savills Research
Hallam Land Management is now a mature business with a project
portfolio numbering 188 sites at various stages in the promotion
process. With the UK political uncertainty removed in late 2019, we
saw some evidence of Central Government taking positive action
to push their housing agenda. Whilst this should assist our planning
negotiations with local authorities COVID-19 has caused a degree
of operational disruption to the planning system. The outbreak of
COVID-19 will have a significant impact on 2020 although, we do have
a number of contracts already exchanged for completion in the year
and, we remain confident that our Land Promotion business is well
placed to deliver solid results in the future.
22
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
LAND PROMOTION
STRATEGIC
REPORT
Pictured: Markham Vale – A prime new speculative industrial/warehouse unit,
with 55,000 sq ft inc offices.
PROPERTY INVESTMENT AND DEVELOPMENT
The overriding sentiment that existed within the UK property market
throughout 2019 was one of uncertainty. The ever-present issues
of the UK’s planned exit from the EU and the likely potential of a
General Election and possible change in Government dominated
the year. This, in turn, had a significant effect on the UK property
market. Occupiers and investors spent the majority of 2019 waiting
for more political clarity prior to committing to new agreements,
property acquisitions or property investments. Running in parallel to
this uncertainty has been a continuation of evolution of the different
property sectors we work in.
The retail sector continues to face huge challenges with out of
town and secondary shopping centres experiencing a year on year
reduction in footfall and sales. CVAs and/or administrations are
becoming more commonplace as the success and scale of online
shopping continues to increase. This in turn has impacted on occupier
and investor demand.
Demand for offices in the big 6 regional centres has continued to
remain strong. The flexible working space providers had a significant
influence over the total amount of office space take-up in 2019 and it
will be interesting to see if this sub-sector’s growth continues in 2020.
As has been the case for several years, the industrial sector continues
to perform well with record rents and exit yields being achieved in most
regions around the UK. We believe that occupier demand and investor
appetite in this sector will continue for the medium to long term.
Alternatives, such as the build to rent residential sector, continue
to perform strongly and are taking a larger share of the investment
market due to the assets typically having long-term, index linked
leases which provide a good hedge for pension scheme liabilities, in
addition to providing diversification.
Our response
With the General Election concluded we are seeing signs that the
uncertainly placed on the market is lifting. Our jointly owned house
building business, Stonebridge Homes, looks to be in a decent
Net yields %
All Property Types
All retail
All office
All industrial
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Source: IPD/JLL
position to be able to deliver homes in 2020. In particular, the start of
the year saw the UK housing market pick up and with the land bank
adding more secured permissions in 2019, we are well placed to
support current market conditions.
HBD is also well placed to work in the property sectors and
geographic locations where demand and growth is forecast to
continue. Our development pipeline, which as at 1 January 2020
shows a Gross Development Value (GDV) of £1.3bn, largely consists
of manufacturing and logistic sites, city centre regeneration projects
and city centre residential schemes (both build to rent and private
for sale). While we will be careful not to overexpose ourselves to one
sector or region, and we are mindful of the impact COVID-19 will
have on the current year, we are in a very good position to be able to
deliver robust commercial development returns from the opportunities
available to us.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
23
STRATEGIC
REPORT
Market Review
Market Review
Pictured: University of Hull’s £16 million sporting hub, which includes
a new international sports arena, sports pavilion and a state-of-the-art gym.
CONSTRUCTION
Generally, throughout 2019 our secured workload and healthy balance
sheet will allow us to deliver in the short term and continue to win work
for the future. Construction output continued to fall, with a weakness
in demand as a result of the ongoing political uncertainty, the UK’s
planned exit from the EU and resultant low levels of economic growth.
Against this background, Henry Boot Construction has seen a reduced
number of opportunities, increased competitiveness and a tightening
of margins. Our plant hire business, which is intrinsically linked to the
performance of the UK Construction market, also saw reduced orders
in 2019, particularly in Civil Engineering.
We anticipate that there will be increased public sector spending
in 2020 on housing, schools, hospitals, prisons and infrastructure.
We have also seen a regular pipeline of activity for new primary and
secondary schools through the Department for Education (DfE) and
the Leeds Local Enterprise Partnership (LEP) framework.
Private Rented and Build to Rent schemes are starting to emerge in
our operational area. In addition, our major project The Barnsley Glass
Works retail and leisure scheme, is a game changer for the town and
is bucking the national trend on investment in retail.
There has been significant industry debate in the year surrounding
reducing carbon emissions, emerging digital technologies, social value
outputs and modern methods of construction and our future strategic
objectives are being aligned to these themes.
The industry has seen the loss of several significant construction
companies in 2019 and there is now increased scrutiny from clients
on the financial strength of construction companies given the low
margins and risks associated with the delivery of complex projects.
Consequently, we believe that our strong balance sheet will become a
more compelling offer to clients.
Our response
We started 2020 with a healthy orderbook and are now actively
identifying and developing future business opportunities, which our
plant hire business could also benefit from.
United Kingdom Construction Purchasing
Manager’s Index
65
60
55
50
45
40
2014
2015
2016
2017
2018
2019
Source: Trading Economics – United Kingdom Construction PMI.
Moving forward we anticipate a continued commitment to public
sector spending, which complements our position on several public
sector strategic frameworks including DfE, Ministry of Justice and
more recently Crown Commercial Services
We are also seeing additional private sector clients emerge with
a move away from traditional models of procurement to a more
direct negotiated approach. This provides opportunities through
collaboration to minimise the risks involved in open procurement,
design and construction leading to greater certainty of out-turn cost.
We are monitoring the COVID-19 outbreak closely and continue to
work in line with Government guidelines, albeit at a reduced level of
productivity
24
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
STRATEGIC REPORT CONSTRUCTION
Operating nationally
With a total of 13 offices across the UK we are well
positioned to capitalise on new opportunities in all of
our business operations.
Link to strategic priorities:
STRATEGIC
REPORT
A growing land portfolio
Hallam Land Management and Stonebridge Homes both
look set to support an improved UK housing market. Their
land portfolios have a strong track record of growing and
replenishing in line with market conditions.
Link to strategic priorities:
GROUP
STRATEGIC
STRENGTHS
Diverse range of development projects
To reduce the risk from market volatility, we actively seek
to diversify our development project range. Currently, the
projects forecast in our development pipeline has a focus on
industrial, logistics and urban generation.
Link to strategic priorities:
£1.3bn GDV Development Pipeline
Our property development pipeline provides lots
of opportunity and places us in a good position to
be able to deliver robust commercial development
returns in the future.
Reputation to deliver work
We have a long-standing reputation of delivering work
throughout all of the companies within our Group.
This reputation is a key asset to the business
securing repeat and future work.
Link to strategic priorities:
Link to strategic priorities:
Build to rent schemes
Due to the lack of UK housing, build to rent schemes have
performed strongly and are taking a larger share of the
investment market. This is not new to our operations, but
we expect to see this opportunity of work grow for both
property development and construction.
Increase in public sector spend
Our construction business sits on a number of key
northern public sector frameworks. This puts us in a
good position to benefit from the anticipated increase
in public sector investment throughout the north of the
country.
Link to strategic priorities:
Link to strategic priorities:
Office space opportunity
While retail development has declined, we have seen an
increase in demand for office space, particularly in the
six largest Regional centres in the UK. This emerging
opportunity is one that we will explore to diversify our
project range.
Link to strategic priorities:
IDENTIFIED
TRENDS AND
OPPORTUNITIES
Read more about Our
Strategic Priorities
on pages 26 and 27
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
25
Our Strategy
FORMULATE
IMPLEMENT
MONITOR
Group strategic priorities
Our Group Strategic Priorities are outlined in the framework below. These key priorities were formed after reviewing the strategic direction of the
business while focusing on our Purpose and Vision. They allow our subsidiary companies’ individual strategies to be flexible and adapt to the
markets we operate in providing a consistent approach to the Group’s overarching strategy.
SAFETY
To provide a safe place
to work in all of the
markets we operate in.
GROWTH
To grow net assets,
increasing opportunity
for the long term.
26
struction
n
o
C
L
a
n
d
P
r
o
m
o
t
i
o
n
P
r
o
p
erty Investment a n d D e
v
elo p m ent
PEOPLE
Recruit and retain
employees who are
empowered to deliver
the growing business
we aspire to be.
DELIVERY
Invest in all our
business segments
to achieve short-
term delivery.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Pictured: Brookfield Garth, Hampsthwaite – A development consisting
of 36 new homes, which will be fully complete by the end of 2020.
Subsidiary strategic priorities
Each business segment defines its own strategy within the framework set by Henry Boot PLC. As the business model explains, while our
six primary subsidiaries will work together and share best practice on projects, they also operate autonomously. This requires them to have
formulated their individual strategies within the boundaries set. However, Strategic Priorities, Safety and People, will be Group led to ensure
consistency across all of our businesses
LAND
PROMOTION
PROPERTY INVESTMENT
AND DEVELOPMENT
CONSTRUCTION
To source and promote land through
the complexities of the UK Planning
System for the highest use value.
Through land ownership, or via agency
and option agreements, the business
conveys land, which has gained
planning permission, primarily to the
UK’s major housebuilders. A focus on
growing and replenishing the portfolio
will also be maintained. The two
key factors impacting this business
segment are the demand for houses
in the UK and the Planning System. To
achieve its purpose the business must
appreciate and consider how these
factors affect its sites.
• Gain planning permission and convey
land to UK housebuilders increasing
Hallam Land’s business performance
in the next 12 months.
Link to strategic priorities:
• To replenish and grow the strategic
land portfolio.
Link to strategic priorities:
• Seek out new investment
opportunities, which would also
increase future returns.
Link to strategic priorities:
To obtain, develop and invest in a
diverse range of property sector
opportunities, while flexibly adapting to
customers’ needs within the market.
With regional offices throughout the
UK, the business is very close to the
local markets when seeking out future
development pipeline opportunities.
Our joint venture housebuilding
company aims to continue to increase
housing delivery and to grow its land
portfolio to fuel longer-term activity.
To compete for and win construction
contract work in both the public and
private sectors, with a specific focus
on securing larger value contracts.
With very tight construction margins
it is important to continue to grow
our client base and to secure repeat
business opportunities. Our Plant Hire
business aims to continue providing a
high quality service and seek out new
depot locations to increase network
coverage.
• Quickly adapt to arising market
• Continue to bid and win construction
changes while ensuring delivery of
our existing committed development
pipeline.
Link to strategic priorities:
• To deliver £150m GDV from our
development opportunity pipeline
annually.
work with an appropriate profit
margin.
Link to strategic priorities:
• Grow revenues within the
Construction subsidiary by
concentrating on larger scale
contracts.
Link to strategic priorities:
Link to strategic priorities:
• Increase housebuilder output to
250 units per annum by 2021.
Link to strategic priorities:
• To grow the investment portfolio to
£120m.
Link to strategic priorities:
• To take pride and care in the service
we provide to our customers and
clients.
Link to strategic priorities:
27
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Segmental Review
LAND PROMOTION
NICK DUCKWORTH
Hallam Land Management Limited
Hallam Land Management had another very
strong year despite the previously mentioned
uncertain backdrop during 2019. Our UK
housebuilder customers saw continued strong
demand for new homes and were keen to
replenish their land banks in good market areas.
We secured £31.8m profit for the year (2018:
£28.5m) from selling 3,427 plots. Despite sales
achieved in the year, our consented portfolio
was 14,713 plots at the year end (2018: 16,489
plots) and we had 10,665 plots subject of
planning applications (2018: 11,929 plots).
Total revenue
£73.2m
Profit before tax
£31.8m
m
2
.
6
7
£
m
8
.
4
7
£
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2
.
3
7
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5
.
8
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8
.
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7
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9
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28
As our strategic land portfolio is held as inventory, accounting
policy requires these assets to be held at the lower of cost or net
realisable value. In accordance with this policy, no uplift in value can
be recognised within our accounts relating to any of the 14,713 plots
over which planning permission has been secured. Any increase in
value created from securing planning permission over these assets will
therefore only be recognised on disposal.
During the year, we sold 22 residential sites across all regions of the
UK and, unusually for Hallam, these sales did not include any large
site disposals. However, we continued to dispose of land at Market
Harborough, selling 118 plots, leaving a further 118 contracted in this
favourable market area, for disposal in 2020. In addition, we sold land
at Buckingham for a Premier Inn, Beefeater public house and Costa
Coffee drive thru.
The Company also secured a total of 1,651 units in new planning
consents (or consents subject to Section 106 Agreement (S106))
during the year, including at Bathgate (180 plots), Burdiehouse (115
plots), Derby (100 plots), Doncaster (650 plots), Hamstreet (80 plots),
Pagham (300 plots), and Worcester (450 plots). At the end of 2019,
the Company benefited from 2,348 acres (2018: 2,599 acres) of land
with planning consent (or consent subject to S106), with total land
interests of 14,898 acres (2018: 14,325 acres) across freehold, option
and planning promotion agreements.
Changes in the make-up of local government, arising from the local
elections last year, created uncertainty in several places, with new
administrations seeking to go against decisions previously agreed,
with little central government governance. This occurred at Didcot in
Oxfordshire, where we were unable to unlock, and dispose of, a 2,182
plot scheme and local centre with planning permission to the west
of the town. In the post-general election political climate, we hope to
finally secure this outline planning consent during 2020.
A major project that progressed very well during 2019 was at Eastern
Green, Coventry, where we have reached agreement with the Housing
Infrastructure Fund who will commit funding to deliver a grade
separated junction to access the site from the A45. We expect this
2,625 plot site, including 15ha of commercial development, a primary
school and a local centre, to secure a planning consent (subject to the
signing of a S106) during 2020, allowing the infrastructure works to
commence towards the end of the year.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Pictured: Doncaster – Edenthorpe, 79 acres was signed under Option in 2013.
Following a successful planning appeal 650 dwellings were granted consent in 2019.
Steady progress continued during the year at our longstanding
projects at Cranbrook (the new community near Exeter) and
Kingsdown, Bridgwater. We contracted to sell 315 plots at Cranbrook
to Taylor Wimpey; at Bridgwater, 142 plots were sold to Persimmon.
Both projects continue to perform well, and at Bridgwater we are now
working on re-planning some of the commercial land to deliver further
residential plots. At Cranbrook, we are in negotiation with a national
food retailer to provide a store in the town centre.
2020 started well with 1,268 plots exchanged for sale across 2020
and 2021. Our major house building customers, re-invigorated by the
general election result, continued to replenish land banks in the early
part of 2020. With a reduction in the number of successful planning
appeals made by our competitors, we have also seen renewed
interest and stiffer competition for our consented sites. COVID-19
will have a significant impact on 2020 although, we have a number
of transactions already completed or unconditionally exchanged with
major house builders for completion in 2020 and, we remain confident
that our land promotion business is well placed to deliver solid results
in the future.
Plots sold
3,427
3
7
5
,
3
7
2
4
,
3
9
6
1
,
2
3
6
7
,
1
9
0
6
,
1
Land portfolio (acres)
14,898
Agency and optioned
Purchased
5
2
3
,
4
1
2
6
5
,
1
3
6
7
,
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2
,
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2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
Plots in planning
process
10,665
Plots with planning
permission
14,713
8
6
7
,
7
1
9
2
9
,
1
1
5
6
6
,
0
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2
6
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2
7
1
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2
8
1
0
2
9
1
0
2
29
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Segmental Review
Segmental Review
PROPERTY INVESTMENT AND DEVELOPMENT
EDWARD HUTCHINSON
Henry Boot Developments Limited
DARREN STUBBS
Stonebridge Homes Limited
The property investment and development
segment achieved profits of £13.4m (2018:
£15.9m) on revenue of £192.2m (2018:
£221.5m) and which included six completed
schemes with GDV of £407m (1.15m sq ft).
The property investment and development segment achieved profits of
£13.4m (2018: £15.9m) on revenue of £192.2m (2018: £221.5m) and
which included six completed schemes with GDV of £407m (1.15m
sq ft). These included the successful completion and handover of
TECA to Aberdeen City Council (ACC) in August. This £333m project
was delivered on time and on budget, and was the culmination of
outstanding teamwork from all project stakeholders since Henry Boot
Developments’ selection as ACC’s preferred development partner in
2013. We also saw the completion of a new 92,613 sq ft purpose-built
office for Atkins in Epsom. We are proud of the finished building, which
achieved a BREEAM Excellent rating, and has already been put forward
for several regional property awards.
Other building completions achieved in the year include Markham Vale,
where we delivered a 55,000 sq ft design and build unit for Protec,
together with a 55,000 sq ft speculative unit. In addition, we finished
the development of 10 speculative units, comprising a total of 83,000
sq ft, at Butterfield Business Park, Luton. As at 31 December 2019,
approximately 50% of the combined speculative space at Markham
Vale and Luton was occupied and we will continue marketing the
remainder of the space either for sale or to let.
2019 saw us successfully implement a strategic rationalisation of
our investment portfolio. The sale of residual land holdings at Hull,
Rotherham and Tamworth completed, resulting in a cumulative receipt
of £1.3m. Sales of long-term investments also completed at The Mall
in Bromley, The Axis in Nottingham, Carver Street in Sheffield, and
Recticel, Stoke-on-Trent. The sale of these – largely retail-focused
assets – created a cash receipt of approximately £60m, and whilst this
reduces rental income and profit in the year, this allows us to rebalance
the make-up of the investment portfolio in accordance with our forward-
looking investment strategy. Our strategy will be to reinvest these
proceeds by either retaining completed developments in locations that
we think will improve, or to buy investments that have redevelopment or
significant refurbishment angles.
As we look ahead to 2020, we are currently developing a further nine
schemes with a GDV of £315m, some 763,000 sq ft of industrial space
and 717 urban residential units. All these developments are pre-sold,
pre-let or under offer. On our largest scheme in progress, Kampus in
Manchester, we expect to complete construction works and launch
this jointly owned scheme to the market in 2021. Kampus comprises
Committed Schemes
Scheme
Industrial
Luton, Eden Foods
Markham Vale, Aver
Pool, MKM
Southend, IPECO
Sunderland, Faltec
Sunderland, CESAM
Residential
Manchester, Kampus
Skipton, Bellway
Retail
Huyton, Aldi
Total for year
30
GDV
(£m)
10
23
4
13
12
17
79
216
14
230
6
315
Share of
GDV
(£m)
Commercial
(sq ft)
Residential
(Units)
10
23
4
13
12
17
79
11
14
25
73,528
297,018
15,000
121,815
124,441
131,622
763,424
44,000
–
44,000
3
107
18,750
826,174
–
–
–
–
–
–
–
533
184
717
–
717
Status
Pre-let
Conditional contract to forward fund
Pre-let
Sold under forward funding contract
Sold under forward funding contract
Sold under forward funding contract
Sold under forward funding contract
Sold under conditional contract
Pre-let
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Pictured: Kampus – £216M urban regeneration project to create a
new garden neighbourhood in Manchester City Centre
533 build to rent residential apartments together with 44,000 sq ft
of retail and leisure space in 20 units. Manufacturing and logistics
development continues at Airport Business Park, Southend, where we
are delivering a 121,815 sq ft unit for IPECO, together with associated
infrastructure works. At the International Advanced Manufacturing Park
(IAMP), Sunderland, where we completed the 131,622 sq ft Centre of
Excellence in Sustainable Advanced Manufacturing (CESAM) building
and a 124,441 sq ft building for Faltec in the first quarter of 2020.
Furthermore, we have many more opportunities within the development
pipeline with a potential GDV of c£1.3bn, around 70% of which is either
manufacturing or logistics space, with the rest dominated by urban office
and residential development. During 2020, we anticipate exchanging
contracts to allow design and build construction at our sites at Melton
Road, Leicester, Markham Vale and Wakefield Hub to commence,
albeit later than anticipated due to the impact of COVID-19. We also
hope to obtain planning consents and possibly commence construction
of speculative unit schemes at our manufacturing and logistics parks
at Preston East, Butterfield Business Park in Luton, and the Airport
Business Park in Southend. Decisions will be made on whether to
progress these schemes, in the light of occupier demand at the time.
Various other projects, such as Plymouth House in Bath (offices),
Cornwall House in Birmingham (residential), Cloverhill in Aberdeen
(residential) and, the joint venture, Island site in Manchester (offices) will
progress through the design stage during 2020, and we look forward to
these schemes contributing profits in 2021 and beyond.
Our jointly owned housebuilder, Stonebridge Homes, achieved 159
sales in 2019 (2018: 145 sales) and carried over eight reservations into
2020. Our 2020 target is made up from the existing active sites with the
expectation of two new sites that enter our delivery programme in early
2020. We anticipated that we would be able to deliver units from several
more land bank sites in 2020, but delays in the planning process,
compounded by COVID-19, will push delivery into 2021 and beyond.
2020, with the obvious caveat of COVID-19, had started well.
During 2019 we have added 222 units to the land bank with planning
permission, increasing it to 601 units (2018: 379 units). Longer term
secured sites, subject to obtaining planning permission, equate to
422 units (2018: 489 units). We hope to secure our first site in the
North East, a natural extension outside the Yorkshire region, in 2020.
The growth in the land bank now provides a fantastic opportunity
for the business to achieve its key strategic objective of becoming a
sustainable, multi-regional, premium housebuilding business.
Total revenue
£192.2m
Profit before tax
£13.4m
m
7
.
0
5
2
£
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5
.
1
2
2
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2
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2
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2
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9
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2
Plots sold
(Stonebridge Homes Limited)
159
5
4
1
9
5
1
9
7
0
7
1
4
5
1
0
2
6
1
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2
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2
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6
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9
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4
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1
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2
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1
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5
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3
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6
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9
1
0
2
31
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Segmental Review
CONSTRUCTION
GILES BOOT
Banner Plant Limited
SIMON CARR
Henry Boot Construction Limited
TREVOR WALKER
Road Link (A69) Limited
The construction segment achieved combined
profits of £9.4m (2018: £9.2m) and was
marginally ahead of our expectations in terms of
both turnover and profit margin.
In the commercial sector, we completed Phase 1 of the £44m Glass
Works Barnsley town centre regeneration and we are now well
underway with the £88m Glass Works Phase 2 retail and leisure
centre, which will continue into 2021. We recently completed a
complex of industrial units at Butterfields Business Park in Luton, and
a 55,000 sq ft unit at Markham Vale in Derbyshire for HBD.
Following the successful completion of the Grade II refurbishment of
St George’s Hall in Bradford, we are working to transform the existing
Opera North facilities in Leeds city centre, for completion in 2021.
We have also seen an increase in multi-storey housing opportunities
coming to market and are currently involved in developing the design
for a 364 apartment PRS scheme in Sheffield, for which we hope to be
on site in early 2021.
We remain active in the education sector where we have successfully
completed the new £10m sports development for the University of
Hull, and works continue on the Royce Institute for the University of
Sheffield and Brookfield Campus for the University of Leicester. We
delivered a new £5m extension to Longcroft School, Beverley, and
have recently commenced on site with the Axis Academy at Crewe
through the DfE Framework. Furthermore, we commenced our first
scheme for Leeds Local Education Partnership at Beeston Park
Primary School.
Works have begun on a three-year prison refurbishment scheme, and
on two court re-roofing schemes, for the Ministry of Justice. We have
several other projects in the pipeline, which we hope to progress from
project award to delivery on site.
In the health sector, we continue to be a framework delivery partner for
the Sheffield Teaching Hospitals NHS Foundation Trust where we are
refurbishing operating theatres at the Royal Hallamshire Hospital and
creating a new link bridge at Weston Park Hospital in Sheffield.
The civil engineering sector continues to deliver opportunities with
infrastructure works completed at Leeds Skelton Lake Services, a
road bridge installed for a new housing development in Chesterfield,
and enabling works carried out for a major project at the University of
Leeds.
We acquired a place on several high-profile public and private sector
frameworks during 2019 to complement our existing framework
activity including Crown Commercial Services (CCS), Pagabo and
Procure Partnerships. We secured our first project on the Pagabo
framework for a works department at Caenby Corner in Lincolnshire.
Recognising the importance and current underprovision in the
affordable housing market, we acquired Starfish Commercial in
December 2019 and are currently integrating it into our construction
business. We consider this to be an important market moving forward
with this small acquisition helping to support our growth aspirations in
this area. Starfish Commercial works with housing associations, local
authorities and house builders to deliver affordable and social housing
units, often through framework arrangements. It is currently building
homes on sites in Scunthorpe, Leeds, Nottingham, and Sheffield and
is a joint venture partner with Magenta Living providing affordable new-
build housing in North West England and Wales.
32
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Pictured: Glass Works – Phase 2, which will bring 100,000 sq ft of
retail and leisure and 25,000 sq ft of cafés and restaurants.
Although we have started the year relatively well, and already
have 88% of our order book for 2020 secured and are aware of
opportunities to win work for 2021 and beyond, clearly COVID-19 will
cause delays and a reduction in output on all our active sites.
Total revenue
£114.3m
Profit before tax
£9.4m
Banner Plant Hire saw a slight reduction in its results during 2019,
caused by difficulties experienced by a large customer who ultimately
failed post-year end, causing a bad debt cost of £0.2m. We continued
to operate in a highly competitive plant hire market, with pressure on
hire rates. The fundamentals of the business remain sound, capital
investment in new plant was 12% of the hire fleet. Redundant plant
disposals produced strong returns and cash inflows were ahead of
plan.
Apprenticeships represent 8% of our workforce and that programme
continues to have our full commitment. Looking to 2020, the quality
of the plant fleet, and efficient customer service, will help support the
business as it deals with the impacts of COVID-19.
Road Link (A69) that runs the A69 between Newcastle and Carlisle
under a Design, Build, Finance and Operate agreement, completed
another successful year in line with expectations. The contract has six
years to run until the hand-back to Highways England occurs.
m
3
.
4
1
1
£
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1
.
0
0
1
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0
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1
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0
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9
.
9
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4
.
9
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2
.
9
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m
5
.
9
7
£
m
4
.
9
7
£
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9
.
1
8
£
5
1
0
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6
1
0
2
7
1
0
2
8
1
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2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
33
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Group Finance
Director’s Review
DELIVERING
SUSTAINABLE
RESULTS
DARREN LITTLEWOOD
Group Finance Director
What we did in 2019
• Delivered another solid set of results despite
the political uncertainty
•
Increased profit before tax to £49.1m
• Grew net asset value per share by 5% to 239p
• Disposed of £67m of investment property
• Ended the year with net cash of £27.0m
The Group has again delivered a solid result and with significant
cash generation ended the year with net cash. UK housebuilders
continued to trade well and as a result, their appetite for good quality
residential development land remained high, resulting in an 11% profit
increase within our land promotion segment. The completion of The
Event Complex Aberdeen (TECA) and strategic employment sites
coming online at Sunderland, Luton and Southend-on-Sea helped our
property investment and development segment achieve its results for
the year, albeit the prior year did benefit from a full year’s contribution
from the TECA project.
Having disposed of £64.1m of completed Investment Property, mainly
comprised of mixed-use retail-focused properties, we will look to
reinvest at the appropriate time in property with potential for future
development, focused in the Industrial and Residential sectors. Where
possible, we will look to selectively retain assets delivered from our
£1.3bn pipeline of opportunities. We continue to take a long-term
approach to land promotion, and with over 14,000 residential plots
with planning permission, we estimate that we have over four years of
sales in stock working towards disposal.
34
While COVID-19 will have a significant impact in 2020, we
commenced the year with £107m committed property development
work, all of which is either pre-let, pre-sold or under offer, and we
have several land sales already exchanged awaiting completion. Our
construction business has a strong order book, now focusing on
opportunities for 2021 and beyond.
Consolidated Statement of Comprehensive
Income
Revenue decreased 4% to £379.7m (2018: £397.1m) resulting
from lower activity within the property investment and development
segment arising from the completion of the £333m TECA project
delivered in August, on time and on budget, offset by an increased
level of activity within Construction as we continue the delivery of The
Glass Works Phase 2, an £88m town centre redevelopment scheme
for Barnsley Metropolitan Borough Council. Gross profit increased
4% to £81.0m (2018: £78.0m) and reflects a gross profit margin
of 21% (2018: 20%). Administrative expenses increased by £5.6m
(2018: £1.4m), resulting from the continued expansion of Stonebridge
Homes, a modest level of wage inflation linked to employee retention
and the acquisition of Starfish commercial, a small affordable
housebuilder.
Pension expenses decreased by £1.5m (2018: increase of £1.6m)
as the prior year included a one-off provision of £1.5m relating to
Guaranteed Minimum Pensions.
Property revaluation gains of £2.4m (2018: loss of £0.1m) where the
net effect of uplifts of £5.6m (2018: £2.9m) in the fair value of certain
existing completed investment properties, largely in the industrial and
mixed-use categories, offset by the recognition of valuation deficits of
£3.2m (2018: £3.0m) on a number of other properties, most notably
retail-focused mixed-use assets.
Overall, operating profits decreased by 1% to £48.9m (2018: £49.2m)
and, after adjusting for net finance costs and our share of profits
from joint ventures and associates, we delivered a profit before tax of
£49.1m (2018: £48.6m).
The segmental result analysis shows that property investment
and development produced a reduced operating profit of £16.4m
(2018: £20.1m) arising from the final half year’s activity on The Event
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Summary financial performance
Total revenue
Property investment and development
Land promotion
Construction
Operating profit/(loss)
Property investment and development
Land promotion
Construction
Group overheads
Net finance cost
Share profit of joint ventures and associates
Profit for the year
2019
£’m
192.2
73.2
114.3
379.7
16.4
31.0
9.0
(7.5)
48.9
(1.2)
1.4
49.1
2018
£’m
221.6
74.8
100.7
397.1
20.1
27.9
8.9
(7.7)
49.2
(1.4)
0.8
48.6
Change
%
-13
-2
+14
-4
-18
+11
+1
+3
-1
+14
+75
+1
Complex Aberdeen and contributions from our Markham Vale, Luton
and Sunderland industrial developments, offset by £1.5m loss of
rent on investment property sales. Land promotion operating profit
increased 11% to £31.0m (2018: £27.9m) as we disposed of 3,427
residential plots during the year (2018: 3,573). Construction segment
operating profits remained broadly consistent at £9.0m (2018: £8.9m).
The nature of deal-driven property and land promotion businesses,
dependent upon demand from the major UK housebuilders and reliant
on the UK planning regime, is demonstrated in the movements within
our mix of business streams. We continue to show how the benefits
of a broad-based operating model brings stability in what are highly
fluid business environments. While we maintain a significant pipeline
of property development and consented residential plots, the variable
timing of the completion of deals in these areas does give rise to
financial results which can vary significantly depending upon when
contracts are ultimately concluded. We mitigate this through the blend
of businesses within the Group and our business model which, over
the longer term, will ultimately see the blended growth of the Group
delivered.
Tax
The tax charge for the year was £9.6m (effective rate of tax: 20%)
(2018: £8.2m and effective tax rate: 17%) and is higher than the
standard rate due to capital gains on the sale of certain investment
properties. We currently have a £2.1m unrecognised deferred tax
asset (2018: £3.5m), which can be utilised to offset future capital
gains if they arise. Current taxation on profit for the year was £9.2m
(2018: £8.2m), broadly in line with the standard rate of corporation tax.
Deferred tax was £0.4m (2018: £0.1m).
Earnings per share and dividends
Basic earnings per share were consistent at 28.3p (2018: 28.3p),
and, in light of the COVID-19 pandemic, total dividend for the year
decreased to 5.00p, 56% of FY2018 (2018: 9.00p), with the proposed
final dividend reducing by 78% to 1.30p (2018: 5.80p), payable on 6
July 2020 to shareholders on the register as at 12 June 2020. The ex-
dividend date is 11 June 2020.
Return on capital employed (‘ROCE’)
Slightly lower operating profit in the year saw a reduced ROCE(1) of
13.9% in 2019 (2018: 14.9%). While we routinely review our strategic
target rate of return, we continue to believe that a target return of 12–
15% is appropriate for our current operating model. We will continue
to 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 reduced to £1.2m (2018: £1.4m), helped by
financing returns from investments in associates. We saw a significant
shift from having net debt to net cash in 2019 as we disposed of
£67m of Investment Property and collected several deferred land sale
receipts. Average borrowing rates were broadly similar to those of the
previous year. We anticipate that interest costs will remain low through
2020 and the redeployment of our current net funds during the course
of the year will be subject to close monitoring in light of COVID-19
and our aim to preserve cash. We note the recent reduction in interest
rates during 2020, although this will not result in a material change to
our borrowing costs. We continue to carefully invest in both our land
and property development assets as we recycle capital into future
opportunities and development activity.
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 33 times (2018: 33 times). No interest incurred in
either year has been capitalised into the cost of assets.
Our agreed banking facilities remained at £72m throughout the year
and were renewed following the year end on 23 January 2020 with
a revised facility level of £75m, along with an accordion facility of
£30m, which can be called upon at the Group’s request. This facility
is subject to a restriction relating to the value of investment property
and deferred income and, at 30 April 2020, £51m of this facility was
available to the Group. The new facility with Barclays Bank PLC,
HSBC UK Bank plc and National Westminster Bank Plc runs for three
years and includes two one-year extensions, allowing the Group to
extend the facility to 23 January 2025, on the same terms, subject to
agreement by the banks.
2019 year end net cash was £27.0m (2018: net debt £18.4m)
resulting in the Group having no gearing on a net cash basis (2018:
net assets £302.3m; gearing 6%). Total year-end net cash includes
£2.9m (2018: £3.6m) of Homes and Communities Agency (HCA)
funding, which is repayable from the future sale of residential units. All
bank borrowings continue to be from facilities linked to floating rates
or short-term fixed commitments. Throughout the year we operated
comfortably within the facility covenants and continue to do so.
35
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Group Finance
Director’s Review
Cash flow summary
Operating profit
Depreciation and other non-cash items
Net movement on equipment held for hire
Movement in working capital
Cash generated from operations
Acquisition of subsidiary
Net capital disposals
Net interest and tax
Dividends
Other
Change in net cash/debt
Net debt brought forward
Net cash/(debt) carried forward
2019
£’m
48.9
2.6
(2.3)
(27.7)
21.5
(0.2)
52.9
(9.3)
(15.1)
(4.4)
45.4
(18.4)
27.0
2018
£’m
49.2
4.8
(3.3)
(28.4)
22.3
–
13.4
(11.3)
(13.6)
(0.2)
10.6
(29.0)
(18.4)
During 2019, cash generated from operations amounted to £21.5m
(2018: £22.3m) after net investment in equipment held for hire of
£2.3m (2018: £3.3m), and after a net investment in working capital
of £27.7m (2018: £28.4m). Our investment in working capital arises
from the continued growth in our house building land portfolio and
increased receivables on deferred receipts relating to strategic land
sales offset by lower levels of contracting activity.
Net capital disposals of £52.9m (2018: disposals £13.4m) arose
from sales of investment property and property, plant and equipment
of £69.0m (2018: £20.1m), which were offset by new investment in
property development and plant hire assets of £16.1m (2018: £6.7m).
Dividends paid, including those to non-controlling interests, totalled
£15.1m (2018: £13.6m), with those paid to equity shareholders of
£12.6m (2018: £11.1m) increasing by 13%.
After net interest and tax of £9.3m (2018: £11.3m), the overall
reduction in net debt was £45.4m (2018: £10.6m), resulting in net
cash of £27.0m (2018: net debt £18.4m).
Gearing levels
–
Change in net cash/debt
£45.4m
%
8
1
%
4
1
%
1
1
m
4
.
5
4
£
%
6
m
6
.
0
1
£
m
1
.
6
£
m
9
.
3
£
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
%
0
9
1
0
2
)
m
5
.
2
£
(
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
36
Statement of financial position summary
2019
£’m
Investment properties and assets classified
as held for sale
Intangible assets
Property, plant and equipment, including
right-of-use assets
Investment in joint ventures and associates
Inventories
Receivables
Payables
Other
Net operating assets
Net cash/(debt)
Retirement benefit obligations
Net assets
70.0
6.8
28.1
6.6
111.5
169.7
127.1
(98.5)
4.7
314.5
27.0
(23.0)
318.5
2018
£’m
121.0
5.1
26.2
6.7
159.0
155.0
114.9
(95.0)
3.5
337.4
(18.4)
(16.7)
302.3
Investment properties reduced in value to £70.0m (2018: £121.0m),
following the disposal of our mixed-use properties in Bromley,
Nottingham and Sheffield, all of which had a retail focus, and an
industrial unit in Stoke.
Intangible assets reflect the Group’s investment in Road Link (A69)
of £3.9m (2018: £4.2m) and goodwill of £2.9m (2018: £0.9m). The
treatment of the Road Link investment as an intangible asset is a
requirement of IFRIC 12, and arises because the underlying road asset
reverts to Highways England at the end of the concession period
in 2026. Goodwill in the year arises on the acquisition of Starfish
Commercial Limited, a small affordable house-builder acquired by our
Construction business.
Property, plant and equipment comprises Group occupied buildings
valued at £7.5m (2018: £7.9m) and plant equipment and vehicles with
a net book value of £20.6m (2018: £18.3m), including £6.1m now
classified as right-of-use assets under IFRS 16. Property, plant and
equipment, along with right-of-use assets, have increased following
new additions of £6.7m (2018: £5.8m), offset by the depreciation
charge for the year.
The new lease accounting standard, IFRS 16, became effective
from 1 January 2019. The adoption of IFRS 16 has resulted in the
recognition of right-of-use assets of £6.1m and lease liabilities of
£4.6m being brought onto the Group’s balance sheet. The impact
on the consolidated statement of comprehensive income has been
to reduce operating lease costs by £0.6m, and increase depreciation
by £0.5m and finance charges by £0.1m. The Group adopted IFRS
16 using the modified retrospective approach and therefore has not
restated the prior year.
Investments in joint ventures and associates decreased to £6.6m
(2018: £6.7m) as we continue to undertake property development
projects with other parties where we feel there is a mutual benefit.
We anticipate that these opportunities will continue to increase as we
finalise several schemes with interested parties partnering with us to
utilise our development expertise.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT STRATEGIC
REPORT
Inventories were £169.7m (2018: £155.0m) and saw an increase
in our house-builder land and work in progress to £36.3m (2018:
£22.5m) as we continue to invest in land, and carried nine stock
properties into 2020. Strategic land inventory reduced to £101.7m
(2018: £107.9m) as we disposed of land directly owned replacing
it with land held under agency agreements at a lower capital cost.
Inventories are held at the lower of cost or net realisable value, in
accordance with our accounting policy and, as such, no uplift in
value created from securing planning permission is recognised within
our accounts until disposal. Property development work in progress
increased to £31.7m (2018: £24.6m) as we invest in commercial
development work in progress.
Receivables increased to £127.1m (2018: £114.9m) due to increased
deferred land sales offset by a reduction in construction contract
receivables following the completion of the TECA project. Deferred
payment receivables remain a function of the number and size of
strategic land development schemes sold, and levels of construction
contract activity undertaken.
Payables increased to £98.5m (2018: £95.0m) with trade and other
payables and provisions broadly in line with the prior year, contract
liabilities increasing to £9.9m (2018: £2.8m), due to payments received
for work not yet undertaken, and current tax liabilities increasing to
£4.7m (2018: £3.9m).
Net cash included cash and cash equivalents of £42.3m (2018:
£10.9m) and borrowings of £10.7m (2018: £29.3m). In total, net cash
increased to £27.0m (2018: net debt £18.4m).
At 31 December 2019, the IAS 19 pension deficit relating to retirement
benefit obligations was £23.0m, compared with £16.7m at 31
December 2018, adversely affected by a reduction in the discount
rate applied to future liabilities to 2.0% (2018: 2.8%). The pension
scheme’s assets continue to be invested globally, with high-quality
asset managers, in a broad range of assets. 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 Trustee considers appropriate, in conjunction
with investment advice from ISIO (formerly KPMG Pension Advisors).
Overall, the net assets of the Group increased by 5% to £318.5m
(2018: £302.3m) from retained profits offset by the increase in
retirement benefit obligations and distributions to shareholders. Net
asset value per share increased 5% to 239p (2018: 227p) as we
continue to re-invest for the future through retained earnings.
Darren Littlewood
Group Finance Director
20 May 2020
37
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Strategy Review
A YEAR
OF SOLID
PROGRESS
Strategic Priority/Objective
Performance in 2019
Link to key
performance
indicators
Link to
key risks
Aims for 2020
Safety
Priority: To be the safest place
to work in all of the markets we
operate in.
Objective: Continual review of
our systems, ongoing training
and development, adoption
of best practice and keeping
abreast of change.
Read more about Health
and Safety on page 57
People
Priority: Recruit and retain
employees who are empowered
to deliver the growing business
we aspire to be.
Objective: Offer a wide
range of long-term career and
development opportunities
which attract new and retain
existing employees.
Read more about Our
People on pages 54 to 56
38
2019 saw a slight increase to
our Accident Frequency Rate
(AFR) score; however, this was
still in line with our competitors
and the standards set by the
industry. We continued to provide
training and development to all
our stakeholders to ensure our
workplace is a safe and healthy
working environment.
6 7
1 2
4 14
To reaffirm our strong health and
safety systems across the Group
and to constantly raise awareness
of safe working practices to
minimise risk. This will be especially
important in light of COVID-19 and
the new working practices evolving
from the CLC.
6 7
3 4
8 9
13 14
10
2020 will see the launch of
the Leadership Development
programme, which is aimed at
identifying and developing our
leaders for the future. A review of
our diversity and inclusion strategy
will be undertaken this year, to
ensure we continue to offer fair
opportunities to current employees
and those in the recruitment
process.
The Group increased its
headcount to 566, following the
acquisition of Starfish Commercial
Limited, and in line with overall
growth plans of the business.
2019 also saw the completion
of the Senior Leadership
Development Programme, which
was launched to strengthen
succession planning and further
develop leadership capabilities.
In total there were also 1,864
personal development days,
which reflects our commitment
to developing and nurturing our
employees.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Strategic Priority/Objective
Performance in 2019
Link to key
performance
indicators
Link to
key risks
Aims for 2020
Delivery
Priority: Invest in all our business
segments to achieve short-term
delivery.
Objective: Maintaining a
maximum gearing level of
30%, utilising available capital
efficiently.
Priority: Gain planning
permission and convey land to
UK housebuilders increasing
Hallam Land’s business
performance in the next 12
months.
Objective: To dispose of an
annually increasing number of
residential plots while market
conditions are supportive.
Priority: Quickly adapt to arising
market changes while ensuring
delivery of our existing committed
development pipeline.
Objective: To pre-fund and
pre-sell our development
opportunities to mitigate risk and
secure delivery.
Priority: Continue to bid for
and win construction work in the
North and Midlands.
Objective: Constantly monitor
the customers and markets in
which we operate, to compete
effectively and appropriately
balance our workflows within
these markets.
Priority: To take pride and care
in the service we provided to our
customers and clients.
Objective: To maintain a high
level of service and delivery,
while tracking the performance
measurements in place to review
levels of customer satisfaction.
Having disposed of a significant
amount of investment property
the Group ended the year in a net
cash position and therefore with nil
gearing.
4 5
3 5
13 14
Land promotion Profit Before Tax
increased by 12% in 2019, despite
there being a 4% decrease in the
number of plots sold throughout
the year. This was due to being
able to sell plots in good market
areas such as Market Harborough.
L1
L5
3 5
L6
11 12
13 14
We intend to retain a number of self
built property developments within
our investment property portfolio
and will look to acquire other
opportunistic assets should they
arise. We will maintain our policy of
operating within prudent levels of
gearing as we do so.
We enter 2020 positively with 1,268
plots already exchanged for sale.
While we were hopeful that the
conclusion of the General Election
would remove much uncertainty in
the market we are closely monitoring
the impact of COVID-19 which will
have a significant impact on land
sales this year.
In 2019 the percentage of pre-sold
and pre-funded decreased to 95%.
This was as a result of our decision
to undertake a small speculative
development of 10 industrial units
at our Butterfield Business Park
site in Luton.
D1
D2
3 5
D5
9 10
14
We aim to always mitigate our
risk by pre-funding and pre-letting
our development opportunities;
however, if we deem a speculative
development to be appropriately
risk/reward balanced then we will
consider the opportunity.
Construction saw another increase
in their turnover, which in turn
improved the year-end profit. This
was achieved by the conclusion
of key projects, such as Phase
1 of the £42m Glass Works, and
by operating in a wide range
of markets.
C1
C2
3 5
8 13
14
Constructions orderbook for 2020 is
already at 88% of full year
expectation, although the full impact
of COVID-19 on this is not yet
known. We also acquired Starfish
Commercial towards the end of
2019 to help us move into the
affordable housing market and grow
turnover levels in this expanding
market.
C1
C2
C4
1 4
8 14
Continue to provide a high level of
service to all of our clients. Look to
raise the standards and performance
scores above those achieved last
year.
In 2019 we scored 8.78 out of
10 for ‘how satisfied the client
was with the service of the
main contractor’. While the KPI
data published by Constructing
Excellence has now concluded,
we have continued to benchmark
our performance against existing
data. This score places us 22%
over the Constructing Excellence
Mean score.
39
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Strategy Review
Strategic Priority/Objective
Performance in 2019
Link to key
performance
indicators
Link to
key risks
Aims for 2020
Growth
Priority: To grow net assets,
increasing opportunity for the
long term.
Objective: Target a dividend
cover of over 3 times to grow net
assets and profitability through
reinvestment in strategic land and
development opportunities
Priority: To replenish and grow
the strategic land portfolio.
Objective: To increase the scale
and investment in land acres
and plots over time, with a focus
on increasing our investment in
owned land in those parts of the
country which create the highest
returns on capital employed.
Priority: Seek out new
investment opportunities which
would also increase future
returns.
Objective: Explore new
investment opportunities, such
as logistics and distribution, with
the primary focus remaining
on residential and mixed use
opportunities.
Dividend cover for 2019 of 5.66
times results from a heavily
discounted final dividend
compared to original management
expectation. This arises from
the uncertainty caused from
the outbreak of COVID-19 and
the requirement for us to take a
cautious approach to retain cash
at the current time to ensure that
we are well placed to deal with the
uncertainty surrounding the current
situation.
We saw a decrease of 11% in the
total number of plots with planning
permission and in the planning
process, partly due to the timing of
the General Election but generally
as local authority 5 year land
supplies become full and the timing
of planning application submissions
becomes more strategic. However,
we did see an increase to our
directly owned land acres and our
land portfolio acreage grew by a
further 4%, which places us in a
good position to continue to be able
to grow the number of opportunities
available to us to promote through
the planning system.
Residential markets continue
to be the main source of our
trade. We continue to explore
new opportunities and maintain
a stable amount of employment
and industrial acres of land in
our portfolio. During 2019 we
disposed of land at Buckingham
for a premier inn, Beefeater Public
House and Costa Coffee
drive-through in addition to our
normal residential sales.
1 2
3 14
3
L2
L3
3 5
L4
11 12
13 14
We continue to monitor the current
situation closely but at this time
remain focused on careful cash
management. As we emerge from
this unprecedented event we will
reassess our ability to pay dividends
compared to our requirement to
ensure that the business retains
sufficient working capital. As was
the case in 2009 following the
financial crisis, we hope to be able
to continue to maintain a level of
dividend distributions until such time
as clarity of the future returns.
To increase the conversion rate of
plots with planning permission and
continue to grow the number of
acres in the land portfolio.
L2
3 5
11 12
13 14
Take an active focus to researching
and acquiring new opportunities that
diversify our land sale opportunities.
40
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Strategic Priority/Objective
Performance in 2019
Link to key
performance
indicators
Link to
key risks
Aims for 2020
Growth
Priority: To deliver £150m
GDV from our development
opportunity pipeline annually.
Objective: To deliver at least one
long-term strategic employment/
industrial site from each of our
regional bases.
Priority: Increase housebuilder
output to 250 units per annum
by 2021.
Objective: Invest in our
housebuilding residential land
portfolio to ensure we have sites
available to deliver quality in
design and build while providing
a first-class customer experience.
We made good progress during
2019 towards achieving our
objective. New sites at Sunderland
and Luton became active in 2019
to join our long-standing site at
Markham Vale in Derbyshire.
D3
D4
3 5
6 11
13 14
We hope to see sites in Leicester
and Southend-on-Sea start to
deliver, in addition to those already
delivering results.
The number of plots in our jointly
owned land portfolio increased by
35% during 2019 to ensure we are
able to continue to grow in line with
our strategy. We also managed to
increase the number of units sold
to 159.
D6
D7
3 4
5 12
13 14
Priority: To grow the investment
portfolio to £120m.
Objective: Focus on investing in
the most appropriate sectors for
new development to minimise the
risk and maximise the return.
HBD sold over 50% of its
completed investment portfolio
during 2019. This was mainly
to rebalance the portfolio, as a
large proportion was placed in
the mixed-use category but with
a focus on the leisure and retail
sectors.
D1
D2
5 9
10 14
Priority: Grow revenues within
the Construction subsidiary by
concentrating on larger scale
contracts.
Objective: To actively pursue
contract values of between
£5m and £15m to benefit from
improving economies of scale.
Our average contract size tendered
increased significantly during 2019.
This was as a result of winning the
Glass Works Phase II contract, an
£88m town centre redevelopment
scheme for Barnsley Council.
C1
C3
3 5
8 13
14
Due to the substantial increase
in 2019, we expect the average
contract size tendered in 2020 to
decrease. However, we increasingly
continue to tender for contracts in
excess of £10m.
41
Following a pick-up in the UK
housing market at the start of the
year we are closely monitoring the
impact of COVID-19 on this part of
the business. It is crucial to continue
replenishing our land portfolio so that
we can increase the number of units
sold as we move forward; however,
we also need to carefully consider
the impact of COVID-19 on current
year sales in relation to the timing of
land acquisitions for future delivery.
To work towards rebuilding
the portfolio back to previous
levels. While doing this to remain
considerate towards the sectors we
invest in, to ensure we maintain a
balanced and risk weighted portfolio
of investments.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Key Performance Indicators
In line with the Group’s strategy, further review and development of our KPIs took place to ensure that there is transparency and a clear
understanding of how the Group’s performance is measured. This year we have refined our financial and non-financial KPIs, and present new
segmental KPIs, which specifically track the performance against their strategic objectives.
Financial KPIs
1
Profit before tax
2
Earnings per
ordinary share
3
Net assets
4
Return on
capital employed
5
Gearing levels
m
4
.
5
5
£
m
6
.
8
4
£
m
1
.
9
4
£
p
1
.
2
3
p
3
.
8
2
p
3
.
8
2
p
5
.
1
2
p
5
.
7
1
m
5
.
9
3
£
m
4
.
2
3
£
m
5
.
8
1
3
£
m
3
.
2
0
3
£
m
1
.
0
7
2
£
m
5
.
1
2
2
£
m
6
.
3
3
2
£
%
6
.
8
1
%
8
1
%
9
.
4
1
%
9
.
3
1
%
4
.
4
1
%
2
.
2
1
%
4
1
%
1
1
%
6
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
%
0
9
1
0
2
Non-financial KPIs
6
Personal
development days
7
Accident
frequency rate
8
Employee profile
Female
Male
9
Employee intake
10
Employee turnover
4
6
8
,
1
7
1
.
0
3
0
2
,
1
7
5
0
,
1
0
3
1
,
1
7
8
1
,
1
8
0
.
0
5
0
.
0
5
0
.
0
4
1
5
9
1
1
5
9
3
8
3
5
3
3
1
5
0
4
6
6
5
6
2
1
0
4
4
3
5
4
1
1
1
2
4
3
4
3
4
6
0
1
8
2
3
9
0
.
0
5
7
0
8
1
4
1
8
1
1
0
0
1
6
6
5
6
0
9
0
8
3
7
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
42
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Operational segmental KPIs
Land Promotion
L1
Profit before tax
L2
Land portfolio
12%
£31.8m
L5
Profit per plot
6%
£10,000
4%
14,898 acres
L6
Plots sold
4%
3,427
Property Investment and Development
L3
Plots with planning
permission
L4
Plots submitted for
planning permission
11%
11%
14,713
10,665
Read the Land Promotion
Review on page 28
D1
Total revenue
13%
D2
Profit before tax
D3
Committed GDV
D4
Total pipeline GDV
16%
75%
27 %
£192.2m
£13.4m
£107m
£1,251m
D5
Proportion of pre-sold/
forward funded
D6
Number of plots
sold (SH)
10%
159 plots
D7
Number of plots
in portfolio (SH)
18%
1,023 plots
8%
91.2%
Construction
C1
Total revenue
14%
£114.3m
C2
Profit before tax
2%
£9.4m
C3
Average contract
size won
288%
£15m
Read the Property
Investment and
Development Review
on page 30
C4
Constructing excellence
– service score
3%
8.78
Read the Construction
Review on page 32
43
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Risks and Uncertainties
MANAGING
OUR RISK
Effective risk management is essential to the achievement of our key priorities and strategic
initiatives. Risk management controls are integrated across all levels of our business and operations.
The methodology used is to initially assess the gross (or inherent) risk.
This is essentially the worst case scenario, being the product of the
impact together with the likelihood of the risk materialising if there are
no controls in place to manage, mitigate or monitor the risk. The key
benefit of assessing the gross risk is that it highlights the potential risk
exposure if controls were to fail completely or not be in place at all.
Both impact and likelihood are scored on a rating of one to five, using
a scoring matrix.
The Board has ultimate responsibility for risk management, internal
controls and review. Part of the Audit and Risk Committee’s role is to
ensure that the Group’s risk management framework and processes,
on which the Board relies, are working effectively.
COVID-19
Since the year end COVID-19 has emerged as a new principal risk
to the Group. We have taken immediate action to review the impact
of the pandemic and to establish mitigation processes to protect the
Group and its people. One principal action taken by the Board was to
establish a committee that meets daily to review current events and
ensure business continuity planning.
Further detail on our response to COVID-19 can be found on page 06
of the annual report with the financial impact considered in the going
concern and viability section on page 49.
Overview
As a Group, Henry Boot takes a cautious approach to risk, we aim
to be the safest place to work in the markets in which we operate,
to maintain financial strength through effective cash management
and invest prudently in pursuit of our strategic priorities.
The Group operates a system of internal control for risk management
within a structured framework. The long-term success of the Group
depends on the continual review, assessment and control of the key
business risks and emerging risks it faces.
While there is a formal process in place for reporting risks on an annual
basis, the process of risk identification, assessment and response
is continuous and therefore, if required, risks can be reported to the
Group’s Board outside of the annual process, should events dictate
that this is necessary and appropriate.
Risk appetite
The Group’s risk appetite and tolerance levels are reviewed annually
as part of the strategy review process and guide the actions we take
in executing our strategy. The Group has no appetite for safety related
risk or undue financial exposure and will not pursue additional income
generating or cost saving initiatives unless returns are in line with our
targeted return on capital.
Risk management framework
The principal components of the Group’s risk management framework
comprise the risk strategy, risk appetite and tolerance statement,
risk registers and the risk heat map. Although the process of risk
identification, assessment and response is continuous and embedded
within the day-to-day operations of each business segment, it is
consolidated, reported and reviewed at varying levels throughout the
Group on an annual basis as part of the strategy review process. The
Board reviews all principal risks including consideration of how risk
exposures have changed during the period and any emerging risks
arising from risk registers.
44
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT RISK
GOVERNANCE
Establish risk appetite
and strategy
RISK IDENTIFICATION
AND ASSESSMENT
RISK RESPONSE
AND REPORTING
Identify and
evaluate risk
Review, report
and revise
The Board
Oversight of all risk management within the Group is undertaken at the highest level by the Board
of Henry Boot PLC, which is delegated in general terms to the Audit and Risk Committee.
The Board of Henry Boot PLC will keep under review any of the top ranked risks across all subsidiaries at each Board
meeting throughout the year, and will reflect once a year on any substantial shifts within these risks within that year.
The Audit and Risk Committee
Reviews the adequacy and effectiveness of the Group’s internal controls and risk management systems.
Monitors and reviews internal and external audit.
Subsidiary Boards and PLC departments
Each subsidiary and PLC department have a nominated individual responsible for reviewing the risks within that
subsidiary/department on an annual basis. In general, this will be the Managing Directors (for subsidiaries) and the
heads of department (for the PLC), with input from other relevant designated employees as applicable.
I
)
Y
T
R
A
P
D
R
H
T
(
T
I
D
U
A
L
A
N
R
E
T
N
I
Risk heat map
The risk heat map illustrates the 14 principal risks identified by the
Board as having a potential material impact on the Group. The risks
have been plotted by the Group Board/Audit and Risk Committee
based on a common understanding of the risk appetite of the
Group. The risks are presented gross (before taking account of
mitigating actions).
Movements from the prior year’s ranking are indicated by the arrows.
1 Safety
8 Construction contracts
2
Environmental &
climate change
3 Economic
9
Property assets
10 Property development
4 People & culture
11 Land sourcing
5 Funding
6 Cyber
7 Pensions
12 Land demand
13 Political
14 Pandemic
5
t
c
a
p
m
I
4
8
1
12
3
14
10
11
13
6
2
9
7
Likelihood
45
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Our Risks
To enable stakeholders to appreciate what the business considers are the main operational
risks, they are presented in detail below.
Group risks
Risk and description
1
Safety
Inherent risk within all of our
businesses but most notably within
construction activity
2
Environmental and
climate change
The Group is inextricably linked
to the property sector, and
environmental considerations are
paramount to our success. The
legal, financial and reputational
damage which can occur from not
being compliant all carry significant
risk to the Group
3
Economic
The Group operates solely in the UK
and is closely allied to the real estate,
housebuilding and construction
sectors. A strong economy with
strong tenant demand is vital to
create long-term growth in rental and
asset values, while at the same time
creating a healthy market for the
construction and plant hire divisions
Change
during
the year
Link to Group
strategic
priorities
Mitigation
Align systems
and processes of
newly acquired
subsidiary
Growing
relevance and
impact of climate
change
Macroeconomic
uncertainty
• Priority consideration at all Group and subsidiary Board
meetings
• Robust training, policies, procedures and monitoring
• Construction operation is OHSAS 18001 approved Health
and Safety management system
•
Internal independent Health and Safety department
conducts regular random inspections
• Routine Director, senior manager or independent health
and safety inspections
• Regular externally operated mock incidents
• The interaction with the environment and the agencies that
have an overarching responsibility has to be positive at all
times in order to meet our obligations
• 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 Impact Assessments are carried out for all
construction activities. These detail the action required to
eliminate or reduce environmental impacts
• Strong Statement of Financial Position with no gearing and
a 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
• Banking partners continue to be supportive
Key
Change during the year
Group strategic priorities
Increased
Decreased
No change
Safety
Delivery
Read about Our strategy
on page 26
People
Growth
46
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Risk and description
4
People and culture
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
5
Funding
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 we operate
6
Cyber
Unauthorised access to systems,
hacking, malware and distributed
denial of service could all lead to
data loss, business disruption,
reputational damage or financial loss
7
Pension
The Group operates a defined
benefit pension scheme that is
closed to new members. While 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
Change
during
the year
Link to Group
strategic
priorities
Mitigation
Group now cash
positive with
renewed facilities
Growing
global risk and
increased use of
virtual servers
• This risk is increased when unemployment falls and labour
markets contract
• Long-term employment records indicate 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
• The Group has agreed three-year facilities with its banking
partners, which run to January 2023 and are backed by
investment property assets
• A good level of interest from the banks in tendering for the
renewed facilities in 2019, facility renewed January 2020.
• Detailed cash requirements are forecast up to 15 months
in advance, and reviewed and revised monthly
• As a PLC, access to equity funding is available should this
be required
• Employee awareness updates distributed routinely
• Use of software and security products and regular
updates thereof
• Detailed disaster recovery plans
• External vulnerability and threat management reviews
•
Internal mock attacks carried out
• Operation of Trustee approved Recovery Plan
• While pension schemes are a long-term commitment,
regulations require the Group to respond to deficits in the
short term
• The move out of gilts provides a cushion should interest
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
47
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Our Risks
Segmental risks
Risk and description
8
Construction contracts
Changes in terms and conditions
of standard contracts exposing the
Company to major financial and
design liability risks
9
Property assets
Not developing marketable assets
for both tenants and the investment
market on time and cost-effectively
10
Property development
Construction and tenant risk which
is not matched by commensurate
returns on development projects.
Tenants not taking up new lettings
due to economic uncertainty
11
Land sourcing
The inability to source, acquire
and promote land would have a
detrimental effect on the Group’s
strategic land portfolio and
income stream
Change
during
the year
Link to Group
strategic
priorities
Mitigation
• Preliminary commercial appraisal
• Directors closely involved
• Standard position set out in guide for staff
• Experienced legal and commercial management
• Project-specific tender risk register
• Use of PCSAs help to mitigate cost and risk
• 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 and over £1.3bn
pipeline of future opportunities
• 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
• Monthly operational meetings detail land owned or under
control, new opportunities and status of planning
• Acquisitions are 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 portfolio of 14,325 acres with aspiration to grow
further
• Finance available to support speculative land purchases
• Well respected name within the industry that
demonstrates success
• Housebuilder land portfolio at 1,172 residential plots
Key
Change during the year
Group strategic priorities
Increased
Decreased
No change
Safety
Delivery
Read about Our Strategy
Review on page 38
People
Growth
48
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Change
during
the year
Link to Group
strategic
priorities
Mitigation
Risk and description
12
Land demand
A dramatic change in housebuilder
funding sentiment and demand for
housing can have a marked change
on the demand and pricing profile
for land
13
Political
Political decisions, events or
conditions can have a significant
impact on the Group. Changes in
government or government policy
towards planning policies could
impact on the speed of the planning
consent process or the value of sites
Increased
certainty
around policy
and planning
following election
of majority
government
14
Pandemic
Outbreak of pandemic resulting in
health and safety risk to stakeholders
and reduced ability to undertake
activity.
Outbreak of
COVID-19
• The Group’s policy is to only progress land that 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 a growing trend; therefore,
demand for land will follow
• Housebuilders do have very good land portfolios and can
be picky regarding what they buy and will target prime
locations
• 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 a cost-effective and timely manner
• Large land portfolio 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, which reduced valuation risk in a downturn.
Therefore, though profits may be smaller if site values fall,
the Group should still achieve a good profit margin on sale
• A high level of employees within HBD, Hallam Land
Management and PLC can work from home
• Reduced levels of construction activity can continue
following Government guidelines
• Strong balance sheet supports ability to wait for recovery
• Significant cash generation when investing activity is
stopped
Going concern
Having undertaken a going concern review, the Directors have
considered the Group’s principal risk areas, including the potential
impact of the COVID-19 pandemic, that they consider material to the
assessment of going concern.
Following the recent outbreak of the COVID-19 pandemic the
Directors have further considered its potential impact on the Group.
They have stress tested the effect of both a three-month and six-
month UK lock down during which time minimal activity occurs.
After this no activity is undertaken during 2020 unless it is already
contracted, followed by a medium term recovery of the economy
thereafter. These models assume that no capital expenditure is
incurred other than that already committed and further investment in
all our business activities is curtailed. All discretionary spend including
recruitment is paused and dividends and employee bonuses are
reduced. Having started 2020 in a £27m net cash position, a position
which has been improved upon over the first part of 2020 with c£45m
net cash held by the Group and available facilities not drawn down of
£51m at 30 April 2020, the Directors have concluded that the Group
is able to suspend expenditure, allowing it to retain cash and position
itself well to face a recovery, although the impact of doing so on the
profit and loss account is damaging.
The Company meets its day-to-day working capital requirements
through a secured loan facility (see note 25 of the Financial
Statements). The facility was renewed on the 23 January 2020, at
a level of £75m, for a period of three years. The renewed facility
49
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Our Risks
includes an accordion to increase the facility by up to £30m, which
can be requested by the Company at a time of its choosing. None of
the modelling undertaken by the Directors gives rise to any breach of
bank facility covenants. However, as one of the covenants references
the loan to value ratio of the investment property portfolio the full
facility would not be available to the Group unless re-investment in the
portfolio was undertaken. The facilities also contain a covenant relating
to the ratio of EBIT (Earnings Before Interest and Tax) on a 12-month
rolling basis to senior facility finance costs. Our most severe downside
modelling, which reflects a near 55% reduction in revenue levels from
our pre COVID-19 budget for 2020, demonstrates headroom over
this covenant throughout the forecast period to the end of June 2021.
Should a breach of this covenant occur management would need to
obtain a waiver from the group’s bankers in order for the borrowing
facilities to continue to be available. However, in the most severe
downside scenario, no borrowing against the facility is envisaged,
principally as a result of the mitigating actions referred to above.
The Directors have therefore concluded that this does not cause the
Group any issue with Going Concern.
At the time of approving the Financial Statements the Directors expect
that the Company and the Group will have adequate resources,
liquidity and available bank facilities to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis of accounting in preparing the Financial
Statements.
Viability statement
Introduction
The business model and strategy of Henry Boot PLC can be found on
pages 18 to 21 and pages 26 and 27 in the Strategic Report. These
documents outline the long-term business model and are central to
the understanding of how the Group operates. We have operated the
current business model successfully since 2004 and have a 134-year
unbroken trading history. By their nature the Group’s activities tend
to be very long-term, especially in the land promotion business and
increasingly within property development. The Group’s strategy and
experience in all the markets in which we operate has been built up
over many years. Over the last ten years, the Group has reported an
average profit before tax of £32m per annum, added over £141m to
net assets (an increase of some 80%) and paid 63.25p per share in
dividends, all from the trading segments it now operates, and at no
stage in the last economic downturn, between 2008 and 2010, did
the company make a trading loss.
The assessment processes
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 agreed prior
to the commencement of the current financial year and reforecasting
takes place each month throughout the financial year within each
business and consolidated at a Group level. The two succeeding
years are also forecast, using predominantly 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. Furthermore, our strategic land promotion business
commenced 2020 with 14,713 plots with planning permission
50
which, at this year’s disposal rate of 3,427 plots would imply that we
have over four years of sales already in hand. It is also anticipated
that the property development pipeline of over £1.3bn GDV will be
delivered over a period extending beyond 5 years. Stress testing of
these forecasts, including scenario testing relating to the COVID-19
pandemic where a 3 month and 6-month UK lock down have been
modelled as described in the Going Concern statement on page
49. Our modelling assumes that the vast majority of deferred land
sale debtors falling due in 2020 of £18.0m as at 30 April 2020 will
continue to be received during the period either directly from the
debtors themselves or via the use of avalised promissory notes which
management consider a well-established settlement method facilitated
by UK banks. These models highlight that as economic conditions
worsen and construction activity, developments and land sales do not
happen as envisaged, deferred land sale receipts, reduced investment
and tight cost control sees the Group retain cash in the short to
medium term, although profitability would be significantly lower if the
aforementioned mitigating actions were required to preserve cash.
Assessment of viability
The long-term strategy: the annual budget and the two-year forecasts
reflect the Directors’ best estimates of the prospects for the business.
We have also reviewed several 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, in addition
to the COVID-19 pandemic risk discussed in the Going Concern
statement above.
Firstly, 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 over the last 20 years.
Secondly, 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 must 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 look to maintain prudent debt levels (even at maximum facility
utilisation of £75m) and we have pre-sold or forward-funded more
than 84% of the current development work in progress for 2020.
The Directors have also considered the potential impact of the
UK departure from the EU and whilst they accept that the current
economic uncertainty surrounding this creates a UK-wide market risk
they do not believe that this would lead to an extended downturn long
enough to cause the Group any issue with viability.
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 30 April 2023.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Corporate
Responsibility
CONFIDENCE
AND TRUST
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 this
approach and its impacts.
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.
For the year ahead we have committed to recruit a Responsible
Business Manager who will identify and coordinate all our community
engagement and investment activities, and oversee our commitment
to ESG reporting (Environmental, Social and Governance).
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 while we continue to grow, with continuous
improvement lying at the heart of our business.
Rachel White
Head of HR
51
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Corporate
Responsibility
Non-financial reporting
We comply with the new Non-Financial Reporting Directive requirements. Information on these matters has been provided across the report, with
a breakdown summary in the table below.
Reporting
requirement
Why it is important to
engage
Ways we engage
Stakeholders' key
interests
• Employee matters
• Respect for human
rights
• Anti-corruption and
anti-bribery
matters
• Human Rights
• Diversity
Our people are fundamental
to the Group’s success.
We recognise that their
opinions count towards
improving the workplace
and the continued
performance of the
business.
• Employee Surveys
• Career Opportunities
• Health and Wellbeing
• Workplace
initiatives
improvement
• Speak Up Campaign
• Working Group forums
• Training and apprentice
• Developing Group inter-
working relationships
• Diversity and Inclusion
programmes
•
Investors In People
CSR stakeholder
People
Read more on
pages 54 to 56
Health
and safety
Read more on
page 57
The welfare of our people
and stakeholders is
integral in our Values. With
commitment and structured
procedures in place, we
provide a safe working
environment to all the
communities we operate in.
To understand the changing
need and requirements
of the communities we
operate in. We are then
able to develop lasting
relationships which can
make a positive difference.
•
Internal management
systems
• Training courses
• Workplace and site
assessments
• Reducing the risk
of accidents at the
workplace
• Raising awareness of
procedures
• Endorsing Health &
safety initiatives set by
the Group
• Charity of the Year
initiative
• Developing lasting
relationships
• Group Charity
Committee
• Promoting awareness
of their purpose
• Community investment
• Raising funds to
initiatives
support their operations
•
Investor with South
Yorkshire Community
Foundation (SYCF)
• Sharing industry
knowledge and skills
•
Impact Assessment
and Action Plans
• Minimising the Group’s
emissions
• Assessment and
•
Remediation Strategies
• Maintaining our ISO
14001 standard
• Membership of BITC
Yorkshire & Humber
Impact of Group
activities on the wider
community
• Recycling initiatives
• Social matters
Our
communities
Read more on
pages 58 and 59
The
environment
• Environmental
matters
Read more on
pages 60 and 61
We engage environmental
management systems to
achieve our responsibility in
protecting and enhancing
the environment in all
business operations.
Read more about Non-financial
KPIs on pages 42 and 43
Read more about our Risks and
Uncertainties on pages 44 to 49
Read more about how we meet
the requirements of Section
172 of the Companies Act
statement on page 72
52
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
THE HENRY
BOOT WAY
Our culture ‘The Henry Boot Way’ means that we have a
unique and cohesive approach to doing business.
Read about How the Board
monitors culture on page 75
ADAPTABILITY
We seek to
positively challenge
what we do and
how we do it.
RESPECT
We think about
what we do, how
we do it and how it
will impact others.
DELIVERY
We deliver our best
quality work for
everyone, no matter
what.
OUR
VALUES
INTEGRITY
We operate fairly
and equitably in
everything we do.
COLLABORATION
We work in
partnership to make
things happen.
LOYALTY
We are committed
to giving back to
our communities.
53
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Corporate
Responsibility
OUR
PEOPLE
Our people are vital to the delivery of our
strategy and our engagement with our
employees is crucial to our continued success.
We strive to maintain a culture of inclusivity and 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 Values.
We remain committed to investing the time and resources 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.
Diversity and inclusion
We aim to create a fair, diverse and inclusive working environment,
while recognising the challenges that our sector has traditionally
suffered, particularly in relation to gender and ethnicity. We want
to provide a sustainable culture in which all our people can be
themselves at work so that they can thrive, add value and feel valued.
In 2019 we commissioned internal research by a specialist
consultancy to give us insight into how we can best make our
businesses fit for the future with a focus on diversity and inclusion.
We are keen to ensure that our diversity and inclusion strategy goes
beyond legal compliance, seeks to add value to our businesses, and
contributes to employee engagement and wellbeing. We will work with
our Employee Forums to commission further consultant-led initiatives
to achieve our objectives.
We have a policy framework that sets out our approach and our
standards; these will be fully reviewed in 2020 as a result of our
research and will allow us to remain current and take positive action
where necessary.
We continue to engage with under-represented groups through
various networks to encourage diversity of thought and approach
amongst our employees, and to open opportunities for under-
represented groups to experience our industry.
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.
The diversity policy in relation to the appointment of PLC Directors is
set out on page 93.
Our gender pay gap is currently 29.77%, which continues to reflect
the current ratio of men and women employed at just over 3:1 rather
than an issue relating to how we pay our people.
Gender diversity
Gender split
Senior managers
Directors
Female
126 (22%)
Male
440 (78%)
Female
13 (19%)
Male
57 (81%)
Female
3 (13%)
Male
20 (87%)
54
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT 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 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. We continue to forge links with local groups and educational
establishments to encourage diversity and to change perceptions, and
view our industry as a positive career choice.
We are not obligated by statute to report our gender pay gap as
we do not meet the required reporting thresholds; however, we will
continue to report voluntarily.
Health and wellbeing
Key challenges in society around physical and mental health have
promoted us to review how we support our people. We have recently
launched our SMILE platform, which is a wellbeing platform accessible
by all our employees, focusing on three strands: health, wealth and
lifestyle. We brought together all our benefits and wellbeing provisions
into one place so that employees can access information and support
at any time.
We, again, participated in Britain’s Healthiest Workplace and were
ranked as 18th in the medium-sized company rankings, and we are
committed to work on improving our position year-on-year.
Financial wellbeing
We focus on remuneration and benefits, which is a critical component
of our employee retention. We are committed to review our employee
packages in 2020 as part of a wider remuneration and reward review
to ensure that these are effective for our people and that we remain
competitive.
We operate three pension schemes; employees are members of 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), the Henry Boot PLC Group Stakeholder Pension
Plan (defined contribution pension) or the NEST scheme for Starfish
employees.
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
Pension arrangements
As at 31 December 2019, 94% of our employees
were actively contributing to a pension:
63
5
23
62
426*
salary, i.e. the difference between their actual salary and their
capped pensionable salary, in The Henry Boot Staff Pension and Life
Assurance Scheme.
We have implemented the UK’s auto-enrolment pension requirements
and our employees are informed of auto-enrolment and other pension
choices through letters and online via the Group Intranet.
In the year we also introduced company-funded Independent Financial
Advice for those reaching 55 years of age: the age at which they can
legally take their pension. We want to ensure that our employees are
in a fully informed position when making decisions about ongoing
employment towards the end of their careers.
In September 2019 we invited all eligible employees to participate in
the Company Share Option Plan (CSOP); 100% of those who were
eligible accepted this grant. We also invited all eligible employees
to participate in the Group’s 2019 Sharesave scheme, which allows
employees to contribute a maximum of £500 per month to one or a
combination of current Sharesave schemes; at the year-end 42% of
eligible employees had joined a Sharesave scheme.
Employee engagement
Employee engagement refers to the amount of energy, dedication
and focus people bring to their work. It is currently regarded as one
of the key ‘people’ factors that differentiate higher and lower levels of
organisational performance.
In the year we launched our annual Employee Engagement survey,
which was designed to build on the Values we developed as part of
the Henry Boot Way.
The survey received a response rate of 59%, with a Net Promoter
Score (eNPS) of 40, which is deemed to be outstanding.
Engagement is an output of a vast number of inputs, some tangible
others intangible and the engagement any person feels can vary
compared with others as we are all individuals and what we value
differs. We already have a solid foundation of engagement but there are
areas where we can make improvements. With the involvement of our
Employee Forums we will address these areas and anticipate greater
levels of engagement when we run the survey again later in 2020.
The Henry Boot Staff Pension
and Life Assurance Scheme
Henry Boot PLC Group
Stakeholder Pension Plan
Road Link (A69)
Limited Pension Plan†
Stonebridge Projects
Limited Pension Plan†
Starfish (NEST pension scheme)
Read more about how the
Board Engages with
People on pages 76 to 77
*
45 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.
†
Incorporated into the Henry Boot PLC Group Stakeholder Pension Plan.
55
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT
Corporate
Responsibility
Supply chain
We continue to build strong relationships with our key suppliers and
our wider stakeholder population. We are committed to securing
the services of predominantly local subcontractors and utilising local
suppliers to minimise the miles and emissions that working with us
produces.
Our performance
Attracting new talent and retaining experience gives us the ability to
compete successfully; growth across all our businesses has seen an
increase in headcount to 566 directly employed people across the
Group at the end of 2019.
We recruited a further nine apprentices in the year, which brings
our total number of current apprentices to 26. All our 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 a year-on-year increase in the number
of trainee and apprentice recruits, primarily as part of our succession
plans but also in response to the Apprenticeship Levy.
We have a relatively low level of employee turnover – the retention
and development of our internal talent remain critical to our success
– our turnover remains around the average for the UK at 16%. Our
high retention rates ensure that we have a solid base on which our
employees can grow, develop and achieve their potential; we have
key pathways in place for our apprentices and trainees to ensure our
talent pipeline continues to flourish.
During 2019 we continued to roll out our Senior Leadership
Development Programme (SLDP), and by the end of the year, we
had delivered individual development diagnostics to over 40 of our
senior management team: the majority of whom have now engaged
with coaches to develop their potential further. Towards the end of
2019, the Board committed to invest in a Leadership Development
Programme for our middle managers and rising stars; this will be
delivered throughout 2020 and demonstrates our ongoing investment
in our internal talent pool.
We delivered 1,864 learning and development 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 at our sites,
offices and depots. The coming year will see a renewed learning and
development provision being rolled out across all subsidiaries which
includes a focus on developmental outputs from SLDP, building
capacity and capability at all levels, provision of mentoring and other
interventions, which will seek to build resilience amongst our people.
56
Not only does Henry Boot support my
academic learning but enables me to join
external networks to put my skills into
practice. Most recently, Henry Boot has
assisted me in becoming Chair of the Young
Apprenticeship Ambassador Network for
Yorkshire & Humber, where I am leading
and developing a successful network. I’m
proud to be part of a company that invests
extensive amounts of time and resources in
providing opportunities for their apprentices.
Bradley Longford
Trainee Business & Marketing Assistant
Human rights
We are 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 Values. This
is reflected in our policies relating to anti-corruption, diversity,
modern slavery, rights to work and whistleblowing, coupled
with our actions towards our people, suppliers, clients and the
communities in which we operate.
Modern slavery
We have implemented and embedded a number of measures,
which seek to bring about greater transparency and scrutiny
into our various supply chains, in order to combat slavery and
trafficking activities. We continue to keep under regular review
our Human Trafficking and Slavery Statement (the ‘Statement’),
setting out the activities undertaken to reduce the risk of slavery
and trafficking activities being present within our business
operations. These measures include our Anti-Slavery Policy,
due diligence requirements, and mandatory contract clauses
seeking compliance by our supply chain with appropriate
anti-slavery measures. Additional measures have been put
into place to increase knowledge and vigilance throughout our
organisation and supply chains, include posters and awareness
cards across our sites. We will continue to regularly work with
our partners, contractors, suppliers and other stakeholders
to monitor our approach for effectiveness and consider any
changes or additional measures as appropriate.
Anti bribery and anti corruption
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, and 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.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT HEALTH
AND SAFETY
Our approach
Henry Boot PLC continues to focus on health and safety as a priority.
We remain committed to providing a safe and healthy working
environment for our employees and stakeholders. We operate all
of our business activities on the principle that robust management
of health, safety and wellbeing is fundamental to creating a safe
and healthy working environment, and contributes to improving our
business performance. Our leadership teams manage all aspects of
our business in a safe manner and instigate measures to eliminate or
minimise risk, and to minimise any environmental impact. Our ethos is
collaborative across the Group to ensure we obtain the best approach
towards achieving our ethical accountability, focused on protecting
people from harm in all Henry Boot Group of companies.
Brendon Keown, Henry Boot PLC
Group Health and Safety Manager
As a responsible business, a fundamental commitment of the Group
is to ensure that the health, safety and wellbeing of our employees,
stakeholders and the wider public is safeguarded, together with
protecting the environment in the course of all our areas of operations.
We are proud of our team’s expertise and enthusiasm in making this
happen, working collaboratively with our project teams and supply
chain to drive innovation and achieve best practice.
Our performance
Our Accident Frequency Rate (AFR) and Accident Incidence Rate (AIR)
performance in our Construction segment remains strong, and we are
delighted that for the eighth consecutive year, our construction related
AFR and AIR for our directly employed staff and operatives is zero.
We are also delighted to report a strong overall (including
subcontractors) AFR of 0.09 per 100,000 hours worked, and AIR of
189 per 100,000 workers.
This result is a combination of the effectiveness of our management
processes, continuous improvement and the Company’s Zero
Harm initiative.
We continue to benchmark our Construction segment Health
and Safety performance against Constructing Excellence Health
and Safety Key Performance Indicators (KPI), which show a KPI
performance of 98%.
As a responsible business, we are committed
to ensuring that the health, safety and wellbeing
of our employees, stakeholders and the wider
public is safeguarded, together with minimising
the environmental impact of our business
operations. This is done by applying robust
health, safety and environmental management
controls and best practice. Construction
activities operate to an Integrated Management
System, approved to OHSAS 18001, ISO
14001 and ISO 9001, which ensures that risks
are identified, minimised and, where possible,
eliminated, coupled with continually improving
Company performance.
Richard Grafton, Henry Boot Construction
Head of Policy and Compliance
In 2019, our Construction segment maintained approval to the
OHSAS 18001, ISO 14001 and ISO 9001 standards, which is
reviewed and audited by Lloyd’s Register Limited. This is supported
by other Company accreditations, including the Rail Industry Supplier
Qualification Scheme, and BSI Verification of our BIM processes to
PAS 1192-2. We also continue to be a Considerate Constructors
Scheme Partner.
Our strong health and safety management culture has resulted in the
Company securing a prestigious RoSPA Gold Medal Award for the
10th consecutive year resulting in a RoSPA Presidents Award. This
is alongside further industry awards including the RICS, Yorkshire
Property Awards, Insider Property Awards, Considerate Constructors
Scheme Award, LABC West Yorkshire Award and Generation for
Change (G4C) Awards.
57
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Corporate
Responsibility
OUR
COMMUNITIES
Our continued success depends on the
communities in which we operate, live and
work continuing to thrive and develop, and offer
opportunities to make a real difference.
We continue to 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 non-financial in the form of participation or
the donation of our time.
Our key criteria for charitable support are:
• Charities and organisations local to our business operations;
• Charities and organisations that support educational
improvements for children/adults; and
• Charities and organisations that support social improvement
through sport.
The Group also supports a number of investment funds which are held
and managed by South Yorkshire Community Foundation (SYCF); if a
charitable request does not fall within our stated criteria we signpost
relevant enquiries to SYCF. We can also use our funds with SYCF in
order to collaborate with other SYCF supporters to provide grants to
applicants who are assessed for eligibility by SYCF. Through SYCF we
were able to support the South Yorkshire Flood Disaster Relief Fund,
which raised a significant amount of money to support those affected
by the floods in November 2019.
We support an annual Charity of the Year that is elected by our
employees. We then host a variety of activities during the year to raise
money in support; in 2019 our Charity of the Year was MIND. Given
the focus on mental health both inside and outside of the workplace,
and recognising that our sector has a high level of young male suicide,
we were delighted to support such an important cause.
Through various fundraising endeavours we raised over £29,500 in
2019, and look forward to working with our 2020 Charity of the Year,
The Children’s Hospital Charity (Sheffield Children’s Hospital), to raise
even more.
58
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT We also continued a strategic partnership with our Sheffield
neighbours, St Luke’s Hospice, formerly our Charity of the Year in
2017. We were again headline sponsor at the Festival of Lights in
December where we provided financial sponsorship and employee
volunteers to serve mulled wine and mince pies.
Our involvement with Sheffield Business Together continues to grow.
In the year we were a key delivery partner to a project at Hunters Bar
Infant School in conjunction with other Sheffield Business Together
partners to assist with their #GoGoGreen campaign. We offered our
services as principal contractor for the project to build a living green
barrier around the school: a 60 metre long green barrier that is a
combination of ivy screens and other planting will improve air quality for
schoolchildren, reducing the amount of harmful pollutants they breathe.
There will be ongoing monitoring with the help of the University of
Sheffield to assess the impact of the green barrier over time.
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.
This year, we contributed £110,287.68 to charitable causes,
£20,079.84 of which was through our employees utilising our Give
as You Earn payroll giving mechanism. The Company matched this
pound for pound; both sums are reflected in the total figure.
We have a Charities Committee who meet on a fortnightly basis to
assess direct requests to the business for financial support. During the
year we have supported and donated to a whole variety of charitable
and good causes including:
• Yorkshire Ambulance Restart a Heart – we supported the
purchase of a life-saving defibrillator to be placed at a local
school;
• Whirlow Hall Farm, Sheffield – support for the 480 Club which
helps to fund local schools to attend residential trips at the Farm;
• Kelford School, Rotherham – a donation towards the
refurbishment of a workshop so pupils can make small wooden
items to sell;
• Junior Park Run, Olympic Legacy Park – we supported the
inception of the Junior Park Run at one of our previous projects;
• CBI Walk the Wall – we supported the Yorkshire CBI in their
fundraising for breakfast clubs in local schools; and
• The Better Together Project, Sheffield – sponsor of a Christmas
lunch for 100+ Sheffield residents who are lonely/vulnerable at
Christmas. The Group also provided a number of volunteers to
support the event.
Read more about How the Board Engages
with Communities on page 76
To work alongside a company with an ethos
centred around helping others, we’re confident
Henry Boot PLC will help raise an incredible
amount of money to help families in some of the
most difficult of times.
We want every child in our hospital to be
comfortable and have their own space to feel as
much like home as possible and Henry Boot will
help make this aim a reality.
Jen Everill
Corporate Partnership Officer at
The Children’s Hospital Charity
59
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Corporate
Responsibility
THE
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 priorities are to:
• Minimise waste produced;
•
•
• Raise awareness on environmental issues.
Increase recycling;
Improve energy efficiency and reduce energy use; and
We recognise there is always room for improvement and are actively
seeking out new initiatives which can improve upon the footprint our
Group leaves behind. The Group also has a responsibility to provide
education to local communities on the direct impact they have on the
environment.
Our approach
The Group 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.
Henry Boot Group CO2 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
1. Employee numbers are based on the monthly average for the year.
60
2019
Tonnes
2,207
870
2018
Tonnes
2,261
847
3,077
5.8 tonnes CO2e
1,037
4,113
7.8 tonnes CO2e
3,108
6.3 tonnes CO2e
1,059
4,167
8.4 tonnes CO2e
Trend
Fall
Rise
Fall
Fall
Fall
Fall
Fall
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019STRATEGIC REPORT Carbon emissions by segment
Henry Boot Group
CO2e emissions
Property investment
and development
Land development
Construction
Group overheads
Total gross
controlled emissions
2019
intensity
ratio
tonnes of
CO2e
2.15
1.73
23.00
2.14
2019
tonnes of
CO2e
981
57
2,934
142
4,114
2018
tonnes of
CO2e
993
59
2,960
155
4,167
2018
intensity
ratio
tonnes of
CO2e
2.00
1.72
17.00
2.45
Intensity
basis
per 1,000 sq ft
of investment property with
communal areas
per employee
per £1m of turnover
per employee
Trend
Fall
Fall
Fall
Fall
Our greenhouse gas emissions for the year ended 31 December 2019 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 2018.
Our direct and indirect operational greenhouse gas emissions are shown in the tables above. 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 decreased by 1.3% when compared with those of the previous year; this equates to a
reduction of 0.6 tonnes per employee.
For further information on our Greenhouse gas
emissions please see our website
61
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 62
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 OUR
GOVERNANCE
PEOPLE
Recruit and retain employees who
are empowered to deliver the
growing business we aspire to be.
Board of Directors
Senior Management and Company Secretary
Chairman’s Introduction
Corporate Governance Report:
– Division and responsibilities
– Board leadership and
Company purpose
– Composition, success
and evaluation:
– Nomination Committee Report
– Audit and Risk Committee Report
– Audit, risk and internal control:
– Corporate Governance Statement
– Remuneration:
– Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
62
68
70
72
72
75
84
88
94
96
99
100
100
112
117
63
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE OUR
OUR
GOVERNANCE
GOVERNANCE
Board of
Board of
Directors
Directors
2
1
3
4
5
1
2
3
4
5
TIM ROBERTS
Chief Executive Officer
JOHN SUTCLIFFE
Executive Director
AMY STANBRIDGE
Company Secretary
DARREN LITTLEWOOD
Group Finance Director
JOANNE LAKE
Deputy Chairman
64
64
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Henry Boot PLC Annual Report and Accounts for the year ended 31 December 2019
OUR
OUR
GOVERNANCE
GOVERNANCE
6
7
Replace Jamie
9
8
6
7
8
9
GERALD JENNINGS
Non-executive Director
PETER MAWSON
Non-executive Director
JAMIE BOOT
Chairman
JAMES SYKES
Non-executive Director
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Henry Boot PLC Annual Report and Accounts for the year ended 31 December 2019
65
65
Board of
Directors
JAMIE BOOT
Chairman
N
A
R
TIM ROBERTS
Chief Executive Officer
JOHN SUTCLIFFE
Executive Director
DARREN LITTLEWOOD
Group Finance Director
Date of appointment
June 1985.
Date of appointment
January 2020.
Date of appointment
October 2006.
Date of appointment
January 2016.
Independent
No.
Independent
No.
Independent
No.
Independent
No.
Brings to the Board
Key strengths:
• Extensive Group and
leadership experience
• Long-term track record in
delivering sustainable growth
to the Group
Jamie, who is a member of the
founding family, has over 30
years’ experience as a Director
of Henry Boot PLC. He has been
a Director of the Company’s four
principal operating subsidiaries
and his role now sees him
responsible for the leadership of
the Board.
Additional roles held
Previously Director of British
Land PLC, and Non-executive
Director of Songbird PLC.
Brings to the Board
Key strengths:
• Strong strategic and
corporate experience
accumulated as past long-
standing Director
•
•
Strong property and
leadership experience
Extensive experience in
delivering significant property
development projects
Tim joined Henry Boot as Chief
Executive Officer in January
2020. He 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. He is also
the Director responsible for all
health, safety and environmental
matters.
Additional roles held
Member of the CBI Yorkshire and
the Humber Regional Council,
Non-executive Director of Beal
Developments Ltd and Treasurer
at the University of Sheffield.
Trustee Director of Henry Boot
Pension Trustees Limited, acting
as trustee for The Henry Boot
Staff Pension and Life Assurance
Scheme.
Brings to the Board
Key strengths:
• Strong financial and
leadership knowledge
• Experience in implementing
and overseeing strategy
John joined the Company and
the Board in 2006 as Group
Finance Director and was
appointed Chief Executive Officer
in January 2016. He relinquished
the role on 1 January 2020.
John will remain in an advisory
position with the Company until
the end of May, at which point
he will retire and step down from
the Board.
Additional roles held
Director of the Company’s four
principal operating subsidiaries.
Brings to the Board
Key strengths:
•
In depth Group and financial
experience
• Establishing and delivering
strategy whilst protecting
assets in the Group
Darren joined the Group in
1999 prior to his appointment
as Group Finance Director in
2016. He became qualified as
a member of the Chartered
Institute of Management
Accountants in 2007 and is
responsible for all financial
and risk matters relating to the
Group. He is heavily involved in
investor communications and,
along with Tim Roberts, is also
responsible for communicating
strategy and results to both
private and institutional investors.
Committee Membership
N Nomination
A Audit and Risk
R Remuneration
Committee Chairman
66
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE JOANNE LAKE
Deputy Chairman
N
A
R
JAMES SYKES
Non-executive Director
PETER MAWSON
Non-executive Director
GERALD JENNINGS
Non-executive Director
N
A
R
N
A
R
N
A
R
Date of appointment
October 2015.
Date of appointment
March 2011.
Date of appointment
October 2015.
Date of appointment
October 2015.
Independent
Yes.
Independent
No.
Independent
Yes.
Independent
Yes.
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
business in Guernsey.
Brings to the Board
Key strengths:
• Significant strategic land
knowledge
• Sound financial background
and experience
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
particularly to Hallam Land
Management Limited.
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 Green
Man Gaming Holdings plc.
Brings to the Board
Key strengths:
• Extensive financial and
investment banking
experience
•
In depth knowledge on
strategy and governance
Joanne has over 30 years’
experience in accountancy and
investment banking, including
with Panmure Gordon, Evolution
Securities, Williams de Broe
and Pricewaterhouse. 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.
Additional roles held
Non-executive Chairman of
Nexus Planning Limited, Board
Representative for Paradise
Circus Project for the Great
Birmingham & Solihull Local
Enterprise Partnership, and Non-
executive Chairman of Infinite
Global Consulting Inc.
Brings to the Board
Key strengths:
• Wide-ranging experience
in senior leadership and
practitioner roles across the
built environment
• Property development and
planning knowledge in both
the public and private sector
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.
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, Non-executive
Director at PDR Construction
Ltd, and Director of G R Jennings
Properties Ltd.
Brings to the Board
Key strengths:
• Widespread industry
experience in retail and
property
• Successful track record
of delivering significant
development projects and
working with a wide range of
stakeholders
Gerald has over 30 years’
experience in the retail and
property industry. Amongst other
projects, Gerald was responsible
for the delivery of the one million
sq ft Trinity Leeds retail scheme.
67
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Senior Management and
Company Secretary
AMY STANBRIDGE
Company Secretary
NICK DUCKWORTH
Hallam Land
Management Limited
EDWARD HUTCHINSON
Henry Boot
Developments Limited
SIMON CARR
Henry Boot
Construction Limited
Date of appointment
October 2018.
Date of appointment
Managing Director in 2016.
Date of appointment
Managing Director in 2018.
Date of appointment
Managing Director in 2009.
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 1992 and joined
Hallam Land’s then newly
established Northampton office.
In 1997 Nick set up the South
West office of Hallam Land in
Bristol and became the Regional
Manager. He was appointed a
Director in 2002.
Brings to the role
Edward Hutchinson BSc (Hons),
MRICS, started his career
in quantity surveying before
quickly progressing into project
management. He joined Henry
Boot Developments in 2004 as
a Project Manager rapidly rising
to the position of Senior Project
Manager in 2006. Edward was
appointed a Director in 2012
and became Managing Director
in 2018.
Brings to the role
Simon Carr, BSc (Hons), FRICS,
has been with Henry Boot for
over 30 years. He is a Board
member and past national
chair of the National Federation
of Builders, a Board member
and past president of the
Yorkshire Builders Federation,
and is a member of the CBI
Construction Council. Simon
also sits on the Board of trustees
for the Wentworth Woodhouse
Preservation Trust and is a Non-
executive Director of Wildgoose
Construction Limited.
Additional roles held
Head of Legal (Commercial) at
Henry Boot PLC, Trustee of St
Luke’s Hospice, Sheffield.
Brings to the Board
Key strengths:
• Significant recent and
relevant legal and corporate
governance experience
• Robust knowledge on all
aspects of commercial law
Having obtained her
qualifications at the Universities
of Nottingham (LLB Hons) and
Sheffield (PG Dip LP), Amy
qualified as a solicitor in 2006
and as a Chartered Secretary
in 2019. She is an experienced
lawyer with a demonstrated
history of working in-house in the
public sector and construction
industry. With a broad range of
expertise across contract and
commercial law and practice,
construction matters, corporate
governance and compliance
matters, she has worked at
Henry Boot PLC since 2014.
68
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE GILES BOOT
Banner Plant Limited
DARREN STUBBS
Stonebridge Homes Limited
TREVOR WALKER
Road Link (A69) Limited
Date of appointment
Managing Director in 2000.
Date of appointment
Managing Director in 2010.
Date of appointment
General Manager in 2005.
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
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 housebuilder and property
company, Stonebridge Homes
Limited, which is a jointly owned
company with Henry Boot PLC.
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.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
69
OUR GOVERNANCE Chairman’s
Introduction
JAMIE BOOT
Chairman
The work of embedding the Henry Boot
Way has carried on throughout 2019
and has led to a number of important
initiatives that have been monitored and
encouraged by the Board.
Jamie Boot
Chairman
70
Dear Shareholders,
With the continued political and economic uncertainty that 2019
has brought, the Group has continued to perform well with some
challenges. The Board has been instrumental in assessing those
macro risks and the opportunities that may be presented, to set the
Group up well to move into the future. This is achieved through robust
risk assessment and management, and good governance through
the Board and its Committees to guide our management team in a
strategic way.
2019 saw us carrying out a detailed recruitment exercise to appoint Tim
Roberts as Chief Executive Officer of the Group; further details of this
process are set out in page 89. There have been no further changes
to the Board, and I (with the rest of the Board) look forward to adding
Tim’s knowledge and experience to our own.
UK Corporate Governance Code 2018
During 2019 the Board has taken positive strides towards recognising
the challenges and opportunities presented by the UK Corporate
Governance Code 2018. What has been gratifying is the extent
to which changes were already being implemented or called for
throughout the Group and within the Board. In particular, our focus on
culture, stakeholders (especially employees) and strategy were already
issues that we, as a Board, had been refocusing on and consolidating
our approach to. This Corporate Governance Report sets out our
progress to date and the further planned actions for 2020.
Strategy
This year, we have continued the important work of developing and
documenting our strategy for the Henry Boot Group. At an offsite
Strategy Day, the Board welcomed input from the Managing Directors
in reviewing, formulating and implementing the approach across the
Group to its overall strategy and how it links to key risks, performance
indicators, priorities and objectives. Further details of this can be
found on pages 38 to 43.
Culture
We have spoken often in previous years about the important work
carried out during the One Henry Boot project, and how it delivered
The Henry Boot Way and its three core elements: Purpose, Vision
and Values. The work of embedding the Henry Boot Way has carried
on throughout 2019 and has led to a number of important initiatives
that have been monitored and encouraged by the Board, which is
discussed further at page 75.
Our dedication to engagement with stakeholders
As part of our culture, in keeping with our Values of ‘Respect’, ‘Integrity’
and ‘Delivery’, it has been important for us as a Board to embrace
the ethos behind the requirements of section 172 of the Companies
Act. Set out throughout this Report are examples of how the Board
is working towards better engagement with all of its important
stakeholders to produce informed decisions taking into account their
views. For more information of how the Board actively considers the
Group’s various stakeholders in its decision-making, see pages 76 and
77. During 2019 we carried out a wholesale review of our approach to
Environmental, Social and Governance matters, and I will be reporting
further on the progress of this initiative in next year’s Report.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Stakeholder engagement is just one aspect that the Board needs to
consider when assessing the longer-term impacts of the decisions it
makes. As can be seen from a number of our business operations,
we are often operating in an environment where the impacts of the
decisions made will not manifest for a number of years, and the
cyclical nature of some of our businesses are strategically supported
by others. It is our function as a Board to ensure that all factors
relating to this are taken into account, to uphold a high ethical
standard of business conduct. We are very proud of our progress in
this area this year and of laying the foundations to develop this in the
years to come.
Workforce engagement
We often say that the backbone of the Group’s robust performance
is its excellent workforce, linking strongly to the culture of the Group.
The work carried out by the Engagement and Cooperation Working
Group (established as a consequence of the One Henry Boot project)
has produced some vital initiatives during 2019 to strengthen our
approach to employee engagement and, in particular, how matters
can be referred by employees to the Board (see page 78).
The following Report sets out our structure, governance processes
and key activities undertaken by the Board and its Committees during
2019. We welcome feedback from our stakeholders and I would
encourage you to get in touch with us on any governance matters.
Normally we would look forward to welcoming all shareholders to our
AGM in person. In light of the current COVID-19 pandemic and social
distancing rules, and to safeguard the health of our employees and
shareholders, we have regretfully taken the decision to hold our AGM
behind closed doors. I would strongly encourage shareholders to
appoint me as your proxy and submit your voting instructions (more
details on how to do this are set out on page 187), and also to submit
any questions you may have for the Board in advance, which we will
endeavour to respond to via appropriate means. I thank you all for
your understanding in this difficult time and look forward to seeing you
again soon.
COVID-19 response
Throughout this year’s Annual Report we have referred to the Group’s
response to the emergence of the COVID-19 pandemic. We have
been managing our response to all key stakeholders, including
our employees, who have demonstrated a robust and responsive
approach to dealing with the effects of the pandemic, which is truly
commendable at such a difficult time. As a Board we have been
working with the Coronavirus Committee (of which you can read more
on page 06) in closely monitoring all ongoing business continuity
matters relating to this issue which will no doubt continue to develop
throughout 2020.
Jamie Boot
Chairman
20 May 2020
Code compliance
During 2019 the Board and its Committees have been carrying
out extensive work to ensure wherever possible that compliance
with the Code can be achieved, improving its operations and
governance. This is demonstrated throughout this Corporate
Governance Report and, of particular note, are the Code
principles below with references to further detail as applicable.
Given our 130-year history as a family business, and as a FTSE
SmallCap company, we have adopted alternative solutions to
the provisions where we believe this is appropriate. The Code
recognises that good governance can be achieved by other
means, and the Board believes the approach we have taken
is the most appropriate for the Company and its shareholders,
while remaining consistent with the spirit of the Code.
Code principles
Division and
responsibilities
Read more on pages 72 to 74
Board leadership and
Company purpose
Read more on pages 76 to 81
Composition, success
and evaluation
Read more on pages 84 to 93
Audit, risk and
internal control
Read more on pages 94 to 98
Remuneration
Read more on pages 100 and 111
71
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Corporate Governance Report
Division and responsibilities
Governance structure
The Board’s commitment to excellent governance standards has
led to a wholesale review during 2019, identifying areas for changes
to be made in order to implement the requirements of the Code.
In the limited number of areas in which compliance with the Code
has not been achieved, the Board has carefully considered these
and balanced the requirements of the Code against other factors
relevant to the success of the Group as a whole, the position of
various stakeholders, or against the need to ensure sufficient time to
implement the requirements thoroughly. These areas are captured and
explained throughout this Report, and further details can be found at
page 99.
The Board
The Board consists of three Executive Directors and five Non-
executive Directors, including the Chairman. During 2019, Tim Roberts
was recruited as a replacement for John Sutcliffe on his retirement,
with Tim joining the Board with effect from 1 January 2020, and John
is due to step down from the Board on 31 May 2020. Biographies
are shown on pages 66 and 67. Roles and responsibilities for each
Director can be viewed on the website.
Read more details at
www.henryboot.co.uk
The Board maintains a formal schedule of matters reserved for its
decision. This was reviewed during 2019 and aligned with new
regulatory and best practice developments, and such matters being
brought to the Board now require consideration to be given to input
from stakeholders, assessment of key risks and links to strategy.
Key areas of Board responsibility include:
• Strategy and objective setting;
• Approving the Company’s half-year and full-year financial results
announcements;
• Culture and stakeholder engagement;
• Capital structure and ensuring funding adequacy; and
• The determination and monitoring of the Company’s principal and
emerging risks including the effectiveness of internal controls.
Specific areas considered by the Board
during 2019 are detailed on pages 80 and 81
Operational management of the subsidiary companies within the
Group sits with their respective boards and Managing Directors. The
Henry Boot PLC Board welcomes input from each of these Managing
Directors at its meetings on a rotational basis, to discuss business
plans and strategy, as well as at the Board’s Strategy Day.
72
Board Committees
AUDIT AND RISK COMMITTEE
Chair:
Joanne Lake
Members:
Gerald Jennings, Peter Mawson
Attendees:
May include other directors, representatives
of external and internal auditors
Agenda:
External and internal auditor work, monitoring of key
and emerging risks, review of full and half-year results
(including going concern and viability statements)
Read more on pages 94 to 96
Subsidiary Board Meetings
Read more about the subsidiary strategic
priorities on page 27
LAND PROMOTION
Hallam Land Management Limited
MD meeting attendees:
Nick Duckworth, two main Board Executives
and the Company Secretary
Key
Board oversight
Board delegation
Board support
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
BOARD OF DIRECTORS
NOMINATION COMMITTEE
REMUNERATION COMMITTEE
Chair:
Peter Mawson
Members:
Jamie Boot, James Sykes,
Joanne Lake, Gerald Jennings
Attendees:
May include Executive Directors and Head of HR
Agenda:
Review of Board and Committee effectiveness and
skills, succession planning, diversity and inclusion
Read more on pages 88 to 93
Chair:
Gerald Jennings
Members:
Joanne Lake, Gerald Jennings
Attendees:
May include other Executive Directors and Head of HR
Agenda:
Setting and applying Remuneration Policy including
salaries, bonuses (achievement and objective setting),
share scheme review and application, wider workforce
remuneration issues
Read more on pages 100 and 111
The day-to-day management of the Company’s subsidiary businesses and the responsibility for their operational decisions sits with
each respective Board of Directors, led by a Managing Director. Subsidiary company Managing Directors attend Group Board meetings
on a rotational basis to present their operational business plans and strategy.
PROPERTY INVESTMENT AND DEVELOPMENT
CONSTRUCTION
Henry Boot
Development
Limited
MD meeting
attendees:
Edward Hutchinson,
two main Board
Executives and the
Company Secretary
Stonebridge
Homes
Limited
MD meeting
attendees:
Darren Stubbs, and two
main Board Executives
Henry Boot
Construction
Limited
Banner
Plant
Limited
Road
Link (A69)
Limited
MD
meeting
attendees:
Simon
Carr, two
main Board
Executives and
the Company
Secretary
MD
meeting
attendees:
Giles Boot,
two main
Board
Executives and
the Company
Secretary
MD
meeting
attendees:
Trevor Walker,
and two
main Board
Executives
Operations Board
The Operations Board is an executive forum established
in January 2016, which focuses on Group working,
inter-company cooperation and risk.
Attendees:
CEO and the Group Finance Director, together with the four
main subsidiary company Managing Directors, the Managing
Director of Stonebridge Homes Limited and the Company
Secretary. Regular updates are fed back to the Board.
73
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Division and responsibilities
UK Corporate Governance Code 2018
The Board is committed to achieving high governance standards
and following best practice. Where we do not strictly follow
the Code, considerable thought is given to ensuring that our
approach aligns with the spirit of good governance, helps to
promote high ethical standards and sustains the success of the
Company over the long-term. The governance structures in place
are designed to reflect the individuality of the Company and the
composition of both its institutional shareholders and individual
shareholders, many of whom have family ties to the Company.
For this financial year, as a premium listed company, the Company
was subject to compliance with the UK Corporate Governance Code
2018 (Code). Further details of how the Code has been applied are set
out throughout this Corporate Governance section.
Board and Committee meetings
Throughout the year, there were seven Board meetings and a separate
offsite Strategy Day. In addition to this, and in order to effectively
carry out its duties, the Board delegates authority to Committees
to look after specific areas of responsibilities. The Board has
formally constituted Nomination, Audit and Risk, and Remuneration
Committees which operate within their agreed Terms of Reference.
These Terms of Reference have been updated during 2019 to ensure
compliance with the requirements of the Code. Each Committee is
provided with accurate, timely and clear information, and has access
to external consultants where necessary. Further details of each of the
Committees can be found on pages 71 to 73, and such details form
part of this Corporate Governance Statement.
Board composition
The names, responsibilities and other details of each of the Directors of
the Board are set out on pages 66 and 67. The Board believes it has
an appropriate balance of Executive, Non-executive, and independent
and non-independent Directors, having regard to the size and nature of
the business. There will be a period of five months during 2020 when
both Tim Roberts and John Sutcliffe are Directors on the Board, leading
to there being less than half the Board comprising of independent
Non-executive Directors during that time. This is an important aspect
of the handover of the role to the Group’s new Chief Executive Officer,
and is for a limited time only, following which the Board composition will
return to a Code compliant one. Further to review by the Nomination
Committee (see page 88), it is felt that the overall combination of
experience, skills, knowledge and lengths of service of the current
Board members provides an appropriate level of balance which
contributes to effective decision-making and helps to mitigate 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
challenge the Executive Directors through their knowledge of the wider
business environment and as a result of their diverse backgrounds.
The Non-executive Directors meet without the Executive Directors
present, usually the evening before the Board meetings and on other
occasions throughout the year.
As discussed in more detail in the Compliance Statement on page
99, Jamie Boot is regarded as non-independent having previously
served as Managing Director. James Sykes is also not regarded as
independent having been appointed to represent the substantial
shareholdings of the Reis family interests (see page 113). During 2019,
74
Board meeting attendance
Jamie Boot
Chairman
John Sutcliffe
Chief Executive Officer
Darren Littlewood
Group Finance Director
Joanne Lake
Deputy Chairman
James Sykes
Non-executive Director
Peter Mawson
Non-executive Director
Gerald Jennings
Non-executive Director
Board composition
Non-executive
57%
Non-executive Board tenure
6
7
7
7
7
7
7
Non-executive
Chairman
14%
Executive
29%
5+ years
40%
0–5 years
60%
in compliance with the provisions of the Code, Jamie Boot and James
Sykes stepped down from their positions on the Audit and Risk, and
Remuneration Committees. Joanne Lake was appointed as the chair
of the Audit and Risk Committee, and Gerald Jennings as chair of
the Remuneration Committee. Accordingly, all memberships of the
respective Committees are in line with the requirements of the Code.
Coronavirus Committee
A Committee comprising the Executive Directors of Henry Boot PLC,
relevant heads of department and other senior leaders throughout
the Group, was established in response to the emerging COVID-19
pandemic. Its remit is to direct the Group’s response to emerging
legislative, administrative and regulatory developments, stimulus
opportunities and developing practices, meeting on a regular basis,
and reporting actions and required decisions to the PLC Board
and Operations Board. Having been established in February 2020,
the Committee has with the supervision of the Boards, directed all
financial, operational and regulatory responses as required, which
have ensured the continued operation of the Group’s activities and
adjustments as required to the changing demands of the industries in
which it operates.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
OUR
GOVERNANCE
Board leadership and Company purpose
OUR CULTURE JOURNEY
In 2017 we launched an internal initiative called the ‘One Henry Boot’ Project. Its purpose was to define our culture, ‘The Henry Boot Way’,
and to focus on its three core elements: Our Purpose, Our Vision and Our Values. To deliver this project we asked for volunteers from across
the Group; this was to ensure we captured the thoughts of employees and could have a culture that reflected all. Since then we have been on
a journey to embed ‘The Henry Boot Way’ throughout our business and it remains a key element in our Group strategy.
PERCEPTION AUDIT
August 2016
The Board decided to engage with an external
consultant to carry out a Perception Audit. We
wanted to understand what our internal and external
audiences thoughts were to our culture, vision
and values.
DEFINED
‘THE HENRY BOOT WAY’
February to August 2017
The three Working Groups tasked themselves to review
and understand what the culture in Henry Boot means
to us. Some challenging, but important, conversations
took place as we defined ‘The Henry Boot Way’.
ADOPTION OF
‘THE HENRY BOOT WAY’
January to June 2018
Even though the business continued to adopt ‘The
Henry Boot Way’, we decided it was the right point
to launch externally. The external launch took place in
March 2018 and was met with positive feedback.
BOARD DISCUSSION AROUND THE
IMPACTS OF THE UK CORPORATE
GOVERNANCE CODE 2018
January 2019 to present
In 2019, the Board reviewed the challenges and
opportunities the UK Corporate Governance Code
presented. One of the main areas the Code impacted
upon was culture, which we were pleased to have
already considered in depth throughout this journey.
EMPLOYEE FORUM
September 2019 to present
An Employee Forum was established to provide a
link from employees to the Board. Five subsidiary
forums in place, with each of their Chairs sitting on an
overarching Group Forum. A Non-executive Director
attends this Group Forum and then relays information
back to the Board.
LAUNCH OF THE
‘ONE HENRY BOOT’ PROJECT
February 2017
In response to the feedback, which suggested there
was some misunderstanding to our values and culture,
we launched the ’One Henry Boot’ Project. Three
Working Groups were formed across the business to
capture our culture and the three key elements.
LAUNCH OF
‘THE HENRY BOOT WAY’
September to December 2017
After 6 months of hard work, we were ready to launch
‘The Henry Boot Way’ internally. We decided to split
the launch in two, internally and externally, to allow the
business time to process and embed.
EMBEDDING OF
‘THE HENRY BOOT WAY’
July 2018 to present
At the end of June 2018, the ‘One Henry Boot’
Project came to a natural conclusion after achieving
its purpose. This was by no means the end as we
continue to see ‘The Henry Boot Way’ embed in the
business and become integral in the way we operate
as a business.
BOARD MONITORING CULTURE
January 2019 to present
Monitoring our culture is always a priority for the
Board. In 2019 the Board tasked the business to find
initiatives which helped check and balance ‘The Henry
Boot Way’ and ensure the embedding process is still
taking place.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
75
75
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
OUR
GOVERNANCE
Corporate Governance Report
Board leadership and Company purpose
HOW THE BOARD ENGAGES WITH STAKEHOLDERS
This year, the Board formally adopted a Board Stakeholder Policy,
which was key in setting the existing status of current and future
engagement with all of the Group’s key stakeholders. These
stakeholders were identified through the ‘One Henry Boot’ project
as being those groups whose interests and views are vital to the
operation and culture of the Group. Work will be ongoing during 2020
to ensure those views are incorporated into the Board’s decision-
making procedures, as well as evolving ways in which methods of
engagement are made convenient to those stakeholders.
Nominated
Non-executive Director
For liaison between the Group
Employee Forum and the Board
Read about Employees
on page 78
Employee Forum
Discover the approach to this on
page 78
Site visits
Interactions with employees
throughout the Group
Community engagement
Group wide and reported to the Board,
including through engagement with the
Social Profit Calculator
EMPLOYEES
Forward business schedule
The Board’s agenda now flexes
to incorporate presentations
from Managing Directors and
department heads on key issues
throughout the Group
Matters reserved
for the Board
Reports from Group
subsidiary companies now
to contain consideration of
environmental issues
Environmental, social
and governance
See under Communities
and also on pages 58
and 59
Employee engagement survey
Read more about this on page 79
COMMUNITIES
Reserved matters
Approvals now require specific
consideration of stakeholder
engagement
ENVIRONMENT
Current environmental
assessment and reporting
See pages 60 and 61 relating
to this
Environmental, social
and governance
As a result of a Board decision
in 2019, work will be continuing
through 2020 to appoint
a Responsible Business
Manager, consolidate reporting
on these matters and launch
new initiatives
Read about Environment
on pages 60 and 61
7676
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
OUR
OUR
GOVERNANCE
GOVERNANCE
Investor roadshows
Take place annually with the Chief
Executive Officer/Group Finance
Director, and include structured
feedback sessions, which are
reported to the Board
Focused investor communication
(Via letters/telephone calls) regarding
significant ‘votes against’ and other issues
of interest to investors prior to AGM, also
reported to the Board
Regular Board updates
On investor and proxy
adviser sentiment collated
by management/brokers/PR
consultants
SHAREHOLDERS
Shareholder engagement
with family members
Done more informally through
family/other relationships with
Board members, on an ad
hoc basis
Pensioner’s lunch
Arranged by the Company and
attended by Board members
AGM
Formal and informal engagement
by all Board members directly
with shareholders
PENSIONERS
CUSTOMERS
(including Local
Authorities)
Pensions report
Presented at every Board
meeting as to performance of the
pension scheme
Ad hoc events for pensioners
and family members
Attended by Board members
Health and safety
Continuously monitored and
reported to the Board
Subsidiary engagement
Formal and informal feedback
methods carried out throughout
the Group
Awards
In conjunction with our clients
and customers, we represent our
joint success in schemes across
the Group through achievement
of numerous awards
SUPPLIERS
Interactions on site
Operations on site are part of
the observation and feedback
process
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
77
77
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Corporate Governance Report
Board leadership and Company purpose
EMPLOYEE ENGAGEMENT
It is often said throughout Henry Boot that
our employees are our greatest asset.
Ensuring that their views are communicated to the Board and considered
as part of its key decisions has been a significant focus for the Board
over the past couple of years, and with the impetus of the ‘One Henry
Boot’ project, a number of initiatives have been in progress, which have
come to fruition during 2019. Importantly, these lay the groundwork for
setting up effective lines of communication, which will strengthen this
engagement activity over the coming years and ensure that employee
perspectives are being taken into account wherever they can, and in
particular, are embedded within the decision-making process.
Employee Forum
In order to take forward some key initiatives that were identified as
part of the ‘One Henry Boot’ project, a number of Working Groups
were founded during 2018. They combined volunteers from all levels
throughout the Group, ensuring representation by all subsidiaries. One
of these Working Groups, focusing on engagement and collaboration
across Henry Boot, generated and developed a number of important
schemes to boost partnership working and workforce engagement
with management. A key part of this was establishing the idea of
Employee Forums, with each main wholly owned subsidiary (and
Henry Boot PLC) having its own Subsidiary Employee Forum (SEF),
the chair of each would meet to form the Group Employee Forum
(GEF). The following process was followed to achieve this:
It was very important for us to think of
ways we could ensure that all subsidiaries
felt engaged and had their voices heard.
By establishing individual subsidiary
forums, who each then nominated
representatives to discuss matters at
Group level, we felt this would ensure
that people throughout the organisation
would be easily able to access and speak
to their SEF members about issues that
were important to them.
Amy Stanbridge
Company Secretary and member of the
Engagement and Collaboration Working Group
Having been established during the latter half of 2019, the SEFs and
GEF have been carrying out the following activities:
Terms of Reference were produced by the Working Group for
the SEF and GEF
Having had an initial meeting, reviewing and refining their
Terms of Reference
A nominated Non-executive Director (Gerald Jennings) was
appointed by the Board to act as liaison with the GEF
Referring issues relating to individual subsidiaries to their
respective Managing Directors
The Operations Board was asked to comment on Terms of
Reference
Ensuring that discussions and their outcomes are captured
through various methods (Group intranet, Group newsletter)
for provision of information back to the workforce
Once Terms of Reference were approved, the Operations
Board were tasked with recruiting members from within their
own organisations
Inviting PLC management team members to attend GEF
meetings to discuss issues and obtain input
Initial SEFs were arranged, and they nominated their chair
Chairs of SEFs were asked to attend an initial GEF meeting,
attended by the nominated Non-executive Director
Progress and outcomes reported to the Operations Board
and PLC Board
Group strategic issues provided to GEF for discussion
(including proposed employee engagement survey, and
a report on consultation activities relating to equality,
diversity and inclusion)
The ways in which the GEF’s views have been considered during
Board decision-making and communicated to employees will be
developed further during 2020.
78
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Other employee engagement initiatives
Employee survey
Henry Boot’s key strategic priorities, which are centred around
safety, people, growth and delivery, can only be enhanced by
seeking feedback from our workforce and ensuring, where possible,
that we are addressing areas of concern that may be leading to
disengagement in the workforce. Henry Boot aims to achieve high
levels of engagement through a number of methods, to create a
culture and an environment where our people can be the best version
of themselves at work.
In late 2019 the Group commissioned a specialist employee survey
provider to undertake an anonymous employee engagement survey
that would seek to build on the work carried out on the ‘Henry Boot
Way’ and would provide us with a framework of questions that
could be repeated on an annual basis with little or no amendment in
order that we can assess progress. The survey consultants include
occupational psychologists and work design specialists, who were
instrumental in the question design and worked with the Engagement
and Collaboration Working Group to formulate the survey questions,
and were also shared with the GEF. The responses provide insight
into Henry Boot as a whole as well as individual subsidiaries, and
will be shared and discussed with the Operations Board, PLC Board
and Employee Forums, for feedback and development of ways of
addressing any key outcomes.
The Employee Forum gives a voice to
every person within the Group. It provides
a platform to share ideas and best
practices between departments, regions
and subsidiaries. Many of the suggestions
received relate to staff wellbeing, which is
vital for attracting and retaining the best
people. It’s great being part of a business
that continually asks its employees
‘How can we be better?’.
Jennifer McNamee
Chair of the Group Employee Forum
Diversity and inclusion
Being a diverse and inclusive workplace is a further strategic priority
that Henry Boot is keen to embrace linking to its main strategic
objectives. We aim to embrace the differences that people bring to
the table, whether that be due to gender, age, race, religion, ability,
social background or any other aspect of an individual that makes
them unique. It is recognised that the industries we work in have some
challenges relating to this issue and that, although increasing diversity
and inclusion will not occur over a short period of time, it takes
commitment, clear policies and goals, and investment in building
the talent pipeline. In late 2019 the Group commissioned a specialist
consultancy to undertake employee-led research into the current
I was delighted to be asked to be the NED
liaison with the Group Employee Forum.
The Board recognises and welcomes the
role the Forum will play in acting as a unique
and proactive conduit with the Group’s
employees. As the work of the Forum
gathers pace and momentum it will be
increasingly important in helping the NEDs
and Executive Directors understand the
concerns and issues employees may have
but more critically will help inform the Board
on strategic issues. I believe the Forum has
already seen its role as a means of upwards
and downwards communication, and I look
forward to working with the Forum as its
work progresses.
Gerald Jennings
Non-executive Director nominated to liaise with the GEF
attitudes and approach to diversity and inclusion at Henry Boot; this
was recognised by the Group as being a key area to develop and
strengthen. The report produced contains key areas of development
for discussion and agreement in order to take the Group’s approach
forward, which will be the subject of consultation with the GEF, PLC
Board and Operations Board throughout 2020, to commission further
consultant-led initiatives that will provide the building blocks for us to
develop our approach to this for the long-term.
Wellbeing
Employee wellbeing is a fundamental aspect to Henry Boot. We recognise
that it plays an important role in the success of any business but importantly
in creating a positive working environment where our people can thrive.
In 2019 the Board tasked a Working Group to review our wellbeing
offering and benchmark it against standards set in the industries we
work in. Whilst there was room for improvement, on the whole we
found our offering to be above average and had various provisions in
place which supports employees’ wellbeing.
One of the outcomes that needed to be addressed was that employees
were not fully aware of what provisions were in place. So it was decided
to create a platform called SMILE, which combined all of our wellbeing
offering into one place and made it accessible to all employees.
SMILE is an online platform which splits our wellbeing provisions into
three categorises: Wealth, Health and Lifestyle. The platform acts as a
support mechanism and help employees source and find the guidance
that they need.
We appreciate there are many aspects to wellbeing and whilst we use
the SMILE platform as an interface, the Board will continue to monitor
the wellbeing of all employees to ensure the Group continues to
provide a positive working environment.
79
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Corporate Governance Report
Board leadership and Company purpose
BOARD OVERSIGHT AND ENGAGEMENT
What the Board did this year
This year the Board restructured its agenda, introducing a Forward Business Schedule to ensure that strategic and governance issues of
importance were regularly brought to the Board, that they heard from more members of the executive team, and that consideration of strategy,
key risks and objectives were routinely included. This has resulted in a number of key areas of attention, as set out below, in addition to
operational and project-related points of focus.
Link to Strategy
What was reviewed and considered?
As one of Henry Boot’s crucial strategic objectives, it is vital that the health and safety
position of the various parts of the business continues to be brought to the Board on
a regular basis. As in previous years, the H&S reports of the Group’s health and safety
team are brought to every PLC Board meeting, reporting on incidents, mitigation and
near misses. An annual report for each subsidiary is also prepared by the Group’s Health
and Safety Manager ensuring continuous improvement objectives and initiatives are
considered by the Board.
An increasingly important area of focus for the Group this year, in order to continue the
good work and impact that has been brought about by the ‘One Henry Boot’ project.
It is one that is being progressed through a number of initiatives that have been subject
to Board review and approval throughout the year. This includes the activities set out
on pages 78 and 79 (Employee Forums, engagement surveys, diversity and inclusion),
which will, during 2020, translate into culture-related objectives and measures to ensure
that the focus on this is maintained.
The proposal for the acquisition, outlining the market for affordable housing opportunities
and alignment to the Group’s strategic objectives, was presented to the Board during
2019. This was followed by regular updates requiring Board input – monitoring the
outcomes of the acquisition due diligence activities, and requiring commercial decisions
prior to progression of the acquisition as a matter reserved for the Board.
Following the work done during 2018 consolidating the Group’s strategy, actions
continued throughout 2019 to follow up on agreed actions and maintain Board
discussions on key topics. Progress updates on strategy actions, strategic objectives
and KPIs that had been set during the 2018 financial year were reviewed by the Board
half way through 2019. The Board determined that horizon scanning, blue sky thinking
and challenging the subsidiary Managing Directors on their long-term strategy should
also form part of the Strategy Day. Further actions, objectives and KPIs arising from
the 2019 Strategy Day shall be taken forwards throughout 2020 (see more details on
pages 38 to 43).
With appointment of a Funding and Investment Manager for HBD, greater scrutiny
took place in relation to the Group’s investment property portfolio, to ensure that all
properties were fit for purpose and suited the Group’s strategic aims in relation to its
portfolio assets. This resulted in a number of assets being sold during the year, enabling
the Group to move into 2020 in a beneficial financial position. Although the Board were
conscious that this would mean a temporary departure from the Group’s strategy in
relation to its portfolio value, it was acknowledged to be a beneficial strategy in light of
the difficult economic position of the UK market, and would position HBD to be able to
refresh the portfolio with more suitable assets in the future.
Area
Health
and safety
E
Su
En
Co
C
Monitoring
culture
E
Sh
Approval of
Starfish acquisition
E
Sh
Co
Strategy Day
E
Su
Sh
P
En
Co
C
Investment portfolio
Su
Sh
80
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Area
Link to Strategy
What was reviewed and considered?
Aberdeen project
E
Su
Sh
En
Co
C
New joint broker
appointment
Sh
Pensions –
Triennial valuation
E
P
Given the scale of this critical project, the Board carefully monitored its progress during
the year. This included assessments of acceleration of the completion date, performance
of the main contractor and commercial decisions regarding the risks and mitigations
relating to the scheme. You can read more about this on pages 02 and 03.
As a matter reserved for the Board, the decision to appoint Numis Securities Ltd & Peel
Hunt LLP was one the Board carefully considered during 2019. Feedback from investors
was also obtained, which indicated that these brokers would be most suitable for the
size and industry of the Group, and also that a joint brokerage would be favourable. As a
result, the joint brokers were appointed during 2019.
The Board receive regular updates on the three pension schemes operated by the Group
– its defined benefit and defined contribution schemes (outlined on page 55). During
2019, the defined benefit scheme was the subject of a triennial valuation, the negotiation
and result of which were brought to the Board for update and consideration.
Key
Group strategic priorities
Stakeholders
Safety
Delivery
E
Employees
Su
Suppliers
Sh
Shareholders
People
Growth
En
Environment
C
Customers
Read about Our Strategy
on pages 26 to 27
P
Pensioners
Co
Communities
81
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019TitleOUR GOVERNANCE
OUR
GOVERNANCE
82
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
OUR
GOVERNANCE
BOARD
IN ACTION
This year, there has been more focus on offering the Board
opportunities to interact with different stakeholders across the
various operations of the Group. This has included:
• Board meetings held in regional offices with attendance by
employees where possible;
• Non-executive Directors attending ad hoc subsidiary Board
Meetings; and
• Executive Board member attendance at a number of charity
events organised throughout the Group, both in support of
the Charity of the Year and other charitable organisations.
Site visits
• A full day spent by the Board around the Barnsley Town
Council development, Glass Works Phase 2, and on site at
the Stonebridge development at Sherburn-in-Elmet;
• Following a Board meeting held in HBD’s Manchester office,
the Board met with its brokers, Numis and Peel Hunt, and
undertook a site visit at Kampus; and
• To mark the launch of The Event Complex Aberdeen,
the Board and other members of the Group attended
a presentation by HBD and participated in a
celebratory ceilidh.
The Management Conference that took place in 2018 across the
senior leadership of the Group brought together our key leaders to
discuss and debate a number of important strategic issues. This is
to be rescheduled on a biennial basis.
During 2020, this focus on engagement across the subsidiaries of
the Group will continue, with regional meetings being attended by
Non-executive Directors, in addition to Board meetings and site
visits, to give interaction with employees from across the Group.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
83
OUR GOVERNANCE Corporate Governance Report
Composition, success and evaluation
Board evaluation
Building on our evaluation activities in 2018, a further formal and rigorous performance evaluation was undertaken in 2019 for the Board,
its Committees, the Chair and each individual Director. The process and results are set out below.
Areas where the Board scored strongly:
• Diverse but relevant skills and/or experience
• Openness
• Collaborative and supportive approach
• Providing a good level of challenge
• Commitment and passion for the business
Process
STEP 1
Approach agreed in October 2019, to proceed with an
internal evaluation for 2019, with the prospect of an
externally facilitated evaluation in 2020 following Tim
Roberts’ appointment
STEP 2
Formalise questionnaire with Chairmen, which are then
issued with a two-week response period, and individual
interviews take place with Jamie Boot and Peter Mawson
(for Chair evaluations)
STEP 3
Questionnaire deadline, results collated and reports written
STEP 4
Review results with Board and respective Committees,
and agree actions for 2020. Review progress against 2019
actions
STEP 5
In May 2020, carry out mid-year review of progress against
2020 actions
84
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Progress during 2019
Action areas for 2020
2018 action areas
Board
• Develop a risk management strategy
including an agreed level of risk
appetite. Embed the new risk reporting
procedures and encourage identification
of emerging risks
• Key and emerging risks reviewed by the
Audit and Risk Committee during 2019,
and at the Strategy Day
• Subsidiaries due to include their key risks
in Board reports from 2020
•
Increase the focus on strategy ensuring
more regular review of the strategic
objectives
• Strategic objectives and SWOT analysis
reviewed at Board meetings and the
Strategy Day
• Consider the KPIs more regularly and
monitor performance against them,
particularly non-financial KPIs
• Strengthen engagement with
senior employees and progress the
stakeholder engagement policy
• A template for reserved matters has been
created, ensuring that the subsidiary
company considers how the project fits
into the overarching Group strategy
• Progress against KPIs reviewed at Board
meetings and the Strategy Day
• Financial KPIs included in every finance
report
•
Increased attendance at Board meetings
from senior management
• Employee Forum created with
Non-executive Director liaison
• Employee survey undertaken and results
to be presented and actions agreed
in 2020
• Board stakeholder policy approved in
July 2019
Risk
• Board calls to be arranged for matters
requiring Board approval, which could
not take place at a scheduled Board
meeting, to allow time for discussions
on risk
Strategy
•
Introduction of two shorter Strategy
Days throughout the year: one for
subsidiary strategies and one for the
PLC
Reporting
• Subsidiary reports to be aligned by
creating a template, with Board papers
to be standardised and include an
executive summary with a limited
number of pages sent to the Board
• CEO Board Report to be created for
each meeting
Engagement
•
Increased site visit opportunities to
be offered to the Board – whether
full Board planned visit or optional ad
hoc visits
85
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019TitleOUR GOVERNANCE Corporate Governance Report
Composition, success and evaluation
2018 action areas
Audit and risk
• Finalise and embed the new risk
reporting procedures and review on a
regular basis
• Undertake a comparison of the external
auditor’s risk assessment compared
with the internal view
Progress during 2019
Action areas for 2020
• The principal and emerging risks were
reviewed during 2019 Board meetings
Risk Reporting
• Subsidiary board reports will include
• The Board also reviewed the risks at the
their key risks
Strategy Day
• PwC feedback was taken on board at
the July meeting when considering the
Group’s principal and emerging risks and
suggestions noted
• PwC consideration of risks are included
in August’s Audit Strategy Memorandum
paper
External auditor risk assessment
• Feedback will continue to be sought
from the auditor in relation to the risks,
including the commentary in the Annual
Report
• Deep dive in to the risks around cyber/IT
• A session on cyber security measures
• Further evaluate the external auditor’s
effectiveness and value, including how
they are perceived internally
• Assess the effectiveness of the internal
audit function
and risks was held in the October 2019
Board meeting with the Head of IT
• An assessment of the external auditor
effectiveness is under discussion as part
of the audit tender process, with feedback
sought from internal stakeholders
• The independence and effectiveness of
the external auditors is confirmed on an
annual basis and disclosed in the Annual
Report
• An evaluation of the internal auditor was
carried out internally and the results
discussed at the August 2019 meeting.
This will continue on an annual basis
External audit
• Set expectations for the new external
auditor and robustly assess the audit
plan
• An annual review of their effectiveness
has been scheduled from March 2020
onwards
Internal audit
• Hold an extended meeting with the
internal auditors without the presence of
management
86
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Progress during 2019
Action areas for 2020
2018 action areas
Nomination
• Develop a Board Diversity Policy and
• Board Diversity Policy approved during
Group Diversity Policy
2019
• Creation of a Board Skills Matrix
• Completed and approved during 2019,
and will be reviewed annually and in light
of any new Board appointments
• Monitor external time commitments of
each Director
• This has been recorded and is updated
when changes are made. This will be
reviewed annually
• Continue monitoring the Senior
• Updates on the SLDP are given at most
Leadership Development Programme
Committee meetings and will remain a
focus
Remuneration
•
Increase the information provided to the
Committee to measure performance
against the annual bonus individual
target criteria for Executive Directors
• Work on this is ongoing and will be
reviewed during 2020
•
Increase reporting on pay levels and
bonuses across the Group, particularly
for senior management
• Completed in the July 2019 meeting, and
will be reviewed annually and in light of
any new Board appointments
•
Improve the administrative support
and establish a rolling annual forward
business schedule
• A forward business schedule has been
created and more detailed papers
provided
• Work is still ongoing with further
improvements to be made, particularly
ahead of the next Remuneration Policy
Equality, diversity and inclusion
• Monitor equality, diversity and inclusion
initiatives cross the Group to encourage
progress against diversity targets in the
Board Diversity Policy
Skills development
• Consider the future Group strategy
and the skills needed at Board level to
bridge any skills gaps
Succession planning
• Review at least annually the succession
plan for Executive Directors and senior
management and, in light of the SLDP,
invite Managing Directors of each Henry
Boot subsidiary to prepare a succession
plan for the senior leadership within their
business
Remuneration Policy
•
Increase stakeholder engagement
ahead of the next Remuneration Policy,
particularly with institutional investors
and employees
• Appoint external consultants for
Remuneration Policy guidance
Bonus scheme
•
Increase the information provided to
the Committee behind the individual
performance measures for the personal
objectives section of the annual bonus
• Align annual bonus objectives to the
Group’s strategic objectives
Reward strategy
• Gain further oversight into the reward
strategy of the wider workforce and
review appropriateness
87
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Board skills assessment
In line with the Code, the Nomination Committee is asked on an
annual basis to review a number of elements relating to the overall
effectiveness and composition of the Board and its Committees. One
of these elements concerns the skills, knowledge and experience
of the Board and its Committees. Accordingly, each member of the
Board and respective Committees was asked to complete a self-
assessment of their skills, knowledge, experience and understanding
of the Henry Boot culture.
In addition to corporate governance compliance, the skills assessment
ensures appropriate future strategic direction of the Board and its
alignment with strategic objectives, as well as its ability to monitor
the key and emerging risks facing the Group. It also enables the
Committee to monitor the ways in which its balance of skills,
knowledge and experience are impacted by any changes to the
Board, such as the retirement of John Sutcliffe and the appointment of
Tim Roberts.
Knowledge and experience
This portion of the assessment focused on areas relevant to the
Group such as Construction, Land Promotion, Property Investment
and Plant Hire, as well as more generic topics such as Public Limited
Companies, Financial Planning and Management and Stakeholder
Engagement.
Technical skills
In this section of the assessment, the technical skills of the members
were reviewed in relation to issues such as Corporate Governance,
Audit, Legal, Risk, Business Development, Communications and
Corporate Social Responsibility.
Cultural fit
It was also felt important to focus on the ways that the Board
members contributed to and aligned with the culture of the Group,
looking at issues such as Custodian of the Henry Boot Ethos and
Values, and Striving for Performance and Results. In all of these
matters, the scores of the Board were in the Very Strong category.
Composition, success and evaluation
NOMINATION COMMITTEE REPORT
PETER MAWSON
Chairman of the Nomination
Committee
Our investment in learning,
development, talent and succession
at all levels of the business is pivotal
in achieving our key objectives.
Peter Mawson
Chairman of the Nomination Committee
Review of the year
During 2019, the Committee met three times to consider a
wide variety of important issues and initiatives. This included
the appointment of Tim Roberts as Group CEO (further
details of which are set out on page 89), approval of the
Board Diversity Policy, monitoring of the Senior Leadership
Development Programme and launching the Leadership
Development Programme, and carrying out a Board Skills
Assessment. Details of these can all be found below.
Those serving as members of the Committee for the whole
of 2019 were Joanne Lake, Gerald Jennings, Jamie Boot,
James Sykes and myself. Within the year there have been no
changes to the composition of the Committee.
On behalf of the Board and the Nomination Committee
(the Committee), as Chairman of the Committee, I am pleased
to present the Directors’ Nomination Committee report for the
year ended 31 December 2019.
88
Henry Boot PLC Annual Report and Accounts for the year ended 31 December 2019
OUR GOVERNANCE
WITH PETER MAWSON
THE APPOINTMENT
OF TIM ROBERTS
What process did the Committee go through to
appoint a new Chief Executive Officer?
We selected an external executive search agency, through a
competitive process, to assist us. In conjunction with them, we
identified a large pool of internal and external candidates; the
internal candidates have undertaken our Henry Boot Senior
Leadership Development Programme (SLDP). From this, the
Succession Planning Working Group created a shortlist of
20 possible candidates. By conducting a series of informal
discussions and more formal interviews with members of the
Board, our external search partner and other consultants selected
to assist with the process, we further shortlisted to six, and
then carried out engagement sessions and meet and greets.
A full diagnostic session with our external consultants, covering
leadership behaviours and skills, personality profiling and strategic
abilities was also carried out. After a formal interview with the
final two candidates, the results of all of this analysis was brought
to the Nomination Committee for discussion and for a final
recommendation to be made to the PLC Board.
TIM ROBERTS
What attributes were fundamental to the
Committee when looking at this role?
It was key for us to identify the important characteristics
that we would be looking for in our successful candidate.
These comprised:
• Credibility in the market;
•
•
•
•
Strategic thinking and vision;
Cultural fit;
Leadership presence and style; and
Building relationships.
A number of these characteristics link to our Henry Boot
Values, which were at the forefront of our thinking when
carrying out our assessments.
What are your thoughts about the outcome
of the process and any lessons learned?
This process was undertaken over a period of around six
months, and I (and other members of the Board) feel it has
been a very thorough and worthwhile exercise, linking in
with the SLDP and the wider succession planning work that
had been taking place within the Henry Boot Group. It is
vital that we continue this into the future. It has ensured that
we have been able to objectively test all candidates against
a rigorous set of requirements.
Do you feel an external appointment
will benefit the Company?
In the past we have benefited greatly from having promoted
candidates from within the Group, bringing the benefit
of their knowledge and experience of our business.
However, the time felt right, having regard to best practice,
to rigorously follow our processes and policy regarding
external appointments, and to test the internal candidates
against the wider market. I feel that Tim’s appointment
brings a wealth of knowledge and experience into the
Group, to drive us forward into our next period of growth
and success.
Why is succession planning important
to the Committee/Company?
Succession planning at every level within the Group is vital to
our ongoing aim of further growth and success. Succession
should be treated with the same importance as growth
strategies and strategic business planning, creating a clear,
defined vision that ensures a smooth transition for all. Our
experience through the recruitment of Tim will shape our
future succession planning decisions and will ensure that we
have the right people in the right roles to deliver this.
89
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Composition, success and evaluation
Board skills assessment matrix
Each member of the Board was asked to self-assess against each skill, experience and knowledge category on each of the matrices that was
relevant to them, ranking themselves from Very Strong to Limited as compared to an expert in that field. In any category where the aggregated
ranking of the surveyed group was at or below the mid-point of the Good ranking, the Committee then considered the reasons for that
assessment and any actions that should be taken to address it (set out in further detail below).
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The data shown represents an average score of all Henry Boot PLC’s Board members
90
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
OUR
GOVERNANCE
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
91
91
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Composition, success and evaluation
Actions arising from the Board skills assessment
As a guide, the Committee considered four potential courses of action that it could consider against those points at or below the mid-point of the
Good ranking. These were:
1 Do nothing
2 Buy in expertise (short-term, targeted)
3 Build expertise from within
4 Recruit expertise
In relation to those areas highlighted as amber, the Committee discussed and agreed the following actions:
Area
Response
Action
Board
IT and cyber (skill)
Plant hire
(knowledge
and experience)
Third sector
(knowledge
and experience)
The Committee noted that in a
business of this nature, it should not
be considered unusual that its Board
members would not have expertise
in this area. They then considered
activities that would give assurance
as to the approach being taken by
the subject matter experts within the
business.
The members of the Board had
undertaken to attend subsidiary
Board meetings over the previous
few years to build expertise in
these areas, and felt that this was
supplemented by the other members
of the Board (the Chair and Executive
Directors) who had a substantial
knowledge of these areas.
Given that this was an area which
was of less potential relevance
to the Group, it was not felt that
development of knowledge and
experience in this area would be
required.
2
Buy in expertise
(short-term, targeted)
3 Build expertise from within
The Head of IT was requested to
provide a full report regarding the
cyber security measures in place
and being introduced for the Group.
Following this report, the Committee
considered whether any additional
external expertise should be sought
to provide further assessment of
these activities.
3 Build expertise from within
Continue to attend subsidiary Board
meetings, and to engage with the
subsidiary Managing Directors to
provide knowledge and information
relevant to Board decisions.
1 Do nothing
Continue to assess if more
knowledge and experience would be
required in the longer term.
Overall, the Committee noted that, given that potential modesty may have had an influence on the scores given by individuals as to their
proficiency in certain areas, and that in reality it was felt that their knowledge and skills were sufficient (and growing), there were no significant
areas of concern. The Committee’s view was that these represented less of an issue as to their ability to challenge practices throughout the
Group and felt confident that it could assess and identify areas of challenge. The Committee also felt that it could be an area to focus on in future
recruitment, where appropriate.
92
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Diversity policy
The Committee approved a Board Diversity Policy during 2019 which
is aligned to the recommendations of the Hampton Alexander Review
regarding gender diversity on Boards, and the Parker Review on
BAME Board representation. Importantly, the Policy addresses the
need for the Board to ensure that it is made up of an appropriate mix
of skills, experience and knowledge required to effectively oversee and
support the management of the Group, which is also addressed as
part of its skills assessment detailed above.
As described in page 79, a substantial focus for the Group in 2020
and beyond is its approach to diversity and inclusion. The Committee
recognizes the need for this to be carried through into the composition
of the Board and is committed to seeking to improve Board diversity
when appropriate opportunities arise. At 31 December 2019 we had
14% women on our Board. Figures for the number of women in senior
management positions and across the Group are shown on page 54. It
is recognised that there will be periods of change on the Board and that
the optimum diversity balance may not be achieved for period of time
while the Board is refreshed. However, it is our longer-term intention to
achieve this balance.
Board effectiveness and time commitment
The Committee discussed the skills, independence, length of tenure
and time commitments of all the Directors and reviewed the results of
the 2019 evaluations (see page 90 for more information) as well as the
board skills evaluation completed during the year. During this process,
we noted that Joanne Lake held directorships in other publicly listed
companies including a chairmanship at Mattioli Woods plc, although
she has stepped down as a Director at Green Man Gaming Holdings
plc. Joanne’s time spent at her other directorships now equates to,
on average, nine days a month (a reduction from 11 days per month
previously) and therefore the Committee agreed that this leaves
sufficient time to carry out her duties as a Director and as Chair of the
Audit and Risk Committee. We do not see any indication that these
other directorships negatively impact her contribution to the Group
and remain wholly satisfied with her performance and input.
Following the review, I can confirm on behalf of the Committee that
the performance of the Directors, the Board and its Committees,
continues to be effective and that all individuals show commitment
to their roles. As in previous years, all Directors (with the exception of
John Sutcliffe) will seek re-election at the upcoming AGM, biographies
are shown on pages 66 and 67.
Approved by the Board and signed on its behalf by
Peter Mawson
Chairman of the Nomination Committee
20 May 2020
Succession planning
As has been outlined in previous years, Henry Boot has been
providing a Senior Leadership Development Programme (SLDP)
through successive cohorts of its senior management during 2018–
2019. Our investment in learning, development, talent and succession
at all levels in the business is pivotal in achieving our key objectives:
• Delivering our purpose which is: “To empower and develop our
people”, and ensure that this applies at all levels including our
senior teams
• To strengthen our short and medium-term succession planning
across the whole business, while providing the foundations for
longer-term talent planning
• To provide the right level of development support to ensure that
we all continue to make the maximum contribution to the wider
business
At the end of 2019, the Nomination Committee received a report on
the progress and findings arising out of the SLDP, including identifying
broader trends for general adoption throughout the Group as well
as individuals highlighted as being important to succession planning
within the business.
In addition, the Committee has initiated the next programme which
is aimed at our next layer of Leaders. The Leadership Development
Programme (LDP) has one additional objective:
• To facilitate and foster cross Group working and learning
The LDP will take place within five cohorts during 2020 and will lead to
further development activities and succession planning outcomes as
a result. This important work sets the Group up well to identify its next
layers of talent and ensure that they are given the environment in which
to thrive.
Director recruitment process
As discussed in the Q&A regarding the appointment of Tim Roberts,
the Committee enlisted an independent executive search firm for
assistance in its recruitment of Tim Roberts and is committed to doing
so for all future recruitment exercises.
In addition, and as set out under Board Diversity Policy below, the
Board will work with external recruitment consultants to provide
support for Board appointments and will ensure that Non-executive
Director long lists include both women and BAME candidates.
Terms of Reference
All Committees reviewed and refreshed (where appropriate) their
Terms of Reference during 2019, to ensure Code compliance and
reflection of current practice. For the Nomination Committee, this
refresh included:
• Updating the wording to bring the Terms of Reference in line with
the Code to give an increased focus to diversity and inclusion, and
the additional reporting disclosures for this report;
• Stipulating that the Committee composition should comprise a
majority of independent NEDs and that the quorum should be two
independent NEDs; and
•
Increasing the minimum frequency of meetings from once to twice
a year.
The revised Terms of Reference are available on request.
93
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Audit, risk and internal control
AUDIT AND RISK COMMITTEE REPORT
JOANNE LAKE
Chairman of the Audit and
Risk Committee
On behalf of the Board and the Audit and Risk Committee
(the Committee), as Chairman of the Committee, I am pleased
to present the Directors’ Audit and Risk Report for the year
ended 31 December 2019.
Review of the year
The Audit and Risk Committee has this year progressed with
its internal audit activities, which are outlined below, as well as
tackling a number of issues such as the commencement of
the tendering exercise for the external auditor, and reviewing
and developing the Group’s approach to the assessment and
monitoring of risk.
Those serving as members of the Committee were Peter
Mawson, Gerald Jennings and myself (Committee Chairman).
Jamie Boot and James Sykes stepped down and members
of the Committee during the year, and on behalf of the
Committee would I would like to thank James Sykes for his
invaluable input and experience during his tenure as the
Chairman.
The Committee met four times during the year, with its March
and August meetings focusing on the approval of the full-year
and half-year results. The other two meetings covered issues
such as the internal audit plan and outcomes during 2019,
arrangements with external auditors and risk evaluation.
94
Internal audit
Given the size of the Group and extent of the internal audit activities
required, the Committee considers that an externally appointed internal
auditor is appropriate. This provides independence to the internal audit
activities as well as ensuring that any required areas of specialism and
knowledge of audit processes can be provided by the auditor.
During the year, the following internal audit exercises were carried out:
Topic
Procurement
Stonebridge
payroll
Management
information and
data quality
Health and
safety
Construction –
cross cutting review
Outline
Providing assurance to management
and the Audit Committee that effective
processes are in place in relation to
procurement of key suppliers and
contractors, which comply with good
practice.
Including a review of procurement activity
ensuring it is designed to ensure value for
money is achieved where appropriate and
is in line with the wider strategic needs of
the Group.
Relating to the key controls on the payroll
systems within the Stonebridge companies,
including consistency of the systems and
processes within Stonebridge and their
alignment to best practice and the wider
group (which was reviewed in 2018).
Providing assurance over the quality and
integrity of the data reported to the PLC
Board and its Committees.
Considering the Group’s health and safety
framework and the controls in place in
respect of work undertaken by contractors/
sub-contractors within the development/
construction activity. In addition, reviewing
internal health and safety procedures
including accident and incident reporting
and investigation.
Focusing on Henry Boot Construction
activity, including how construction projects
are approved and monitored through their
life cycle.
The results of this internal audit activity will be considered by the
Committee on an ongoing basis including any recommendations and
the overall status of the audit result.
Internal audit effectiveness review
In order to assess the effectiveness of BDO as its internal auditor
following its first full year of internal audits during 2018 and the first half
of 2019, the Committee commissioned the carrying out of a survey
throughout the Group. Upon presentation of the results of this survey,
the Committee agreed that the overall feedback on the effectiveness
of BDO was positive, particularly with regards to adding value to the
business and providing a level of assurance that standards within all
departments were as expected.
In relation to those areas where it had been suggested that there was
room for improvement, the Committee considered some criticism that
the internal auditors did not have specialist knowledge in some limited
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
areas, and lacked an in depth understanding of the business. The
Committee acknowledges this feedback and has committed to ensure
further upskilling of management on the role of the internal auditor
to reset expectations, as well as acknowledging that the knowledge
of the business by the internal auditor is in development and will
progress moving through 2020.
Audit quality and approach to audit tender
During the roadshows with investors carried out following the 2018
Annual Report publication, feedback was sought from investors
regarding attitudes of the market to the external audit tender process.
Feedback regarding market attitudes to the ‘big 4’ audit firms and
the approach to auditing was taken into account in the Committee
proposal documents and in the Group’s approach to the market. Non
‘big 4’ audit firms were invited to participate to ensure a balance of
approaches were assessed.
Areas in which the audit firms tendering were assessed were:
• Understanding the business
• People
• Approach
• Fees
• Team structure
• Sector experience
• Transition experience
• Added value/other comments
External audit tender process
Having carried out its engagement with investors, the Committee
approached a number of firms to assess interest and capability before
embarking on its tender process, which is outlined below:
1. 8 July 2019 – invitation to tender issued containing instructions,
information for tenderers regarding the Group and scope of the
audit services required, and other relevant documents
2. 15 July 2019 – recipients of invitation confirm willingness to
participate in process
3. September 2019 – opportunities given throughout the month
for interested participants to engage with the Board, key
management and finance team employees
4. 1 November 2019 – proposals to be submitted including:
a. Completion of template for submission of proposals
b. Draft terms of engagement
5.
November 2019 – submission panel comprising the Chairman of
the Committee, Chief Executive Officer, Group Financial Director,
Non-Executive Director and Group Financial Controller evaluated
the written proposals
6. 28 November 2019 – tenderers fulfilling the required criteria within
their written proposals invited to present to the Audit and Risk
Committee
7. December 2019 – provisional outcome of tender process
discussed with Board
8. February 2020 – recommendation for appointment of external
auditor presented for approval at Audit and Risk Committee and
for ratification by the Board
9. March to June 2020 – appointed auditor handover process
commences alongside incumbent auditor. Please see resolution
11 in relation to the appointment of Ernst Young
10. June 2020 – appointment of auditor comes into effect
A handover period during the audit of the 2019 financial results in
which the appointed auditor has been incorporated into the process.
This provides assurance to the Committee that a sufficient process of
onboarding and familiarisation can occur prior to the 2020 audit so as
to ensure a seamless transition to a new auditor, if necessary.
External audit effectiveness review
Due to the tendering process being carried out during 2019, which
involved an in depth analysis of both the incumbent and other audit
firms in relation to the range of issues outlined above, the Committee
felt that this provided a significant review of the activities and approach
of the incumbent external auditor. It will be developing a thorough
protocol in relation to the review of external auditor effectiveness
during 2020 to apply from thereon.
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
compromise 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. All other services below
this threshold are also monitored to ensure that the performance of
regulatory requirements is not impaired by the provision of permissible
non-audit services.
Non-audit services undertaken by PwC during the year equated to
8.7% of the amount paid for audit fees. This work was in relation to
the TSR comparator group, and a review of the Group’s half-year
results. It was felt appropriate that PwC undertake this work due to
their existing knowledge of the Group’s arrangements. Details of all
amounts paid to the auditors for audit services are set out in note 3
to the Financial Statements. KPMG continued to provide the Group’s
taxation services for the year ended 31 December 2019.
In accordance with best practice, the Company requires its external
audit partner to rotate every five years. The statutory auditor signing
the Audit Report is Ian Morrison, who replaced Andy Ward in 2018
having served for five years as audit partner.
The Committee members meet the audit partner and other members
of the audit team without management present to discuss any
potential areas of concern. There are no matters to report in relation to
this. The Committee also reviews a letter from the external auditors on
an annual basis outlining the measures taken by them to ensure that
their independence is not compromised. The Committee review the
safeguards and policies in place to maintain a high level of objectivity.
Following a review of all these elements, the Committee is satisfied
that the independence and objectivity of the external auditors is not
impaired and that the amount of non-audit fees is at a level which
does not compromise the overall quality and rigour of the work
undertaken.
95
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE OUR
GOVERNANCE
Corporate Governance Report
Audit, risk and internal control
AUDIT AND RISK COMMITTEE REPORT
Effectiveness of risk management and internal controls
Risk assessment and risk management reporting across the Group has continued to be monitored during the year. Details of the key risks which
the Group faces, the key controls in place to control those risks and the enhanced system of risk management adopted by the Company are
set out in more detail on pages 44 to 50. The Committee, and ultimately the Board, oversee these processes and review the risk reporting and
principal and emerging risks on an ongoing basis.
Significant issues
The Committee considered the following key accounting issues and matters of judgement in relation to the Group’s Financial Statements and
disclosures. In addition to these disclosures, the Independent Auditor’s Report on pages 122 to 125 discusses other key audit matters which
were also considered by the Committee.
Focus
COVID-19,
Going
Concern &
Viability
Matters considered
Following the outbreak of the COVID-19 pandemic, management revised the Group’s
expectation of cashflows and profitability for the next 15 months presenting this to the
Committee as a revised base case scenario, modelling a
3 month UK lock down, whilst acknowledging the existing uncertainty brought by the
pandemic.
Further to this, revisions were made to model a 6 month UK lock down, with
limited activity being undertaken, followed by a gradual return to work in a subdued
economy, representing management’s expectation of what a significant downside
scenario might look like.
Valuation of
investment
properties
Valuation of
inventory
Construction
contract
accounting
judgements
Valuation
of pension
scheme
liability
The investment property portfolio accounts for a large proportion of the Group assets
and the assessment is subject to a degree of judgment and assumptions.
In line with our accounting policy, investment properties are valued at fair value. Other
than houses, the portfolio is valued twice a year by external, independent valuers.
Assets under construction are valued by management at fair value using the residual
method.
Inventories are stated at the lower of cost and net realisable value.
Inventories comprise all the direct costs incurred in bringing the individual inventories
to their present state at the reporting date, less the value of any impairment losses.
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.
As explained more fully in our accounting policy on construction contracts, a
significant element of turnover is attributable to construction contracts.
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.
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.
Committee outcome
The Committee critically reviewed the
assumptions made by management in
formulating both their revised base case
scenario and the downturn revisions. The
Committee, having reviewed the output
of these models, concluded that they are
comfortable that the Group has adequate
resources, liquidity and available bank facilities
to continue in operational existence for the
foreseeable future
The Committee critically reviewed the valuations
and any key movements during the year.
Having discussed the valuations during the
meeting and considered PwC’s assessment,
the Committee was comfortable with the values
adopted.
During the year the Committee critically
reviewed the carrying value of inventories
and judgements in relation to recoverable
amounts. Following discussions with PwC,
the Committee was satisfied that the carrying
values are appropriate.
During the year, the Committee examined the
judgements and methodologies applied to
uncertainties and were in agreement with the
position adopted.
The Committee critically reviewed the
assumptions used by the actuary in
performing these valuations, in particular the
appropriateness of the rate of inflation used.
Subject to discussion and assurance from
the external auditor, the Committee was
satisfied with the appropriateness of the key
assumptions used to calculate the liability.
Terms of Reference
During 2019, the Committee reviewed its Terms of Reference in line with the scope of its operations, and the requirements of the Code, to ensure
that they remained appropriate. No substantive changes were indicated as part of that review and the Terms of Reference were reapproved, and
are available on request.
New banking facility
During 2019 the Company undertook an invitation to tender with a number of banks for proposals to replace the existing Group banking facility,
which is due to expire on 17 February 2020. Negotiations concluded towards the end of 2019 with Barclays Bank PLC, HSBC UK Bank plc
and National Westminster Bank Plc being the Company’s chosen banking partners. The new facility commenced 23 January 2020 on improved
terms. Full details of the new facilities can be found in note 25 to the Financial Statements on page 165.
Approved by the Board and signed on its behalf by
Joanne Lake
Chairman of the Audit and Risk Committee
20 May 2020
96
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Title
OUR
OUR
GOVERNANCE
GOVERNANCE
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Henry Boot PLC Annual Report and Accounts for the year ended 31 December 2019
97
97
97
Corporate Governance Report
Audit, risk and internal control
Risk management and internal controls
The Board is responsible for determining the nature and extent of
the Company’s principal risks, and for monitoring any emerging or
heightened risks. During the year, the Board agreed the principal risks
facing the Company and carried out a robust assessment of these
risks. See pages 49 and 50 for more details and the Company’s
viability statement.
Within its risk assessment matrix, the Board also reviews the
Company’s internal control arrangements pertaining to each risk, and
operates a system that is reviewed regularly for effectiveness. The
process 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 requires formal risk registers to be produced in
a structured format for every subsidiary and PLC department, to be
reviewed at least every six months and to be considered at each
subsidiary Board meeting. The Board is satisfied with the current
system in place and can confirm that no material weaknesses have
been identified 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 bimonthly
management meetings and formal bimonthly subsidiary company
board meetings. The latter are attended by the Board’s Executive
Directors. Formal lines of responsibility and levels of authority are in
place within each subsidiary company. Annual plans, budgets (for
three years) and performance criteria for each business are set by the
Executive Directors and performance against these targets is reviewed
regularly 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.
Centralised operations
Specific risks and compliance issues associated with Health and
Safety, treasury and banking operations, finance, 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 responsible for
that particular operation.
Internal controls
Each operation reviews its own system of internal controls and reports
twice a year to the Audit and Risk Committee:
Business procurement
All development appraisals, land purchases and 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.
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
certain aspects of operations, such as Health and Safety, with the
balance of the operations being governed by procedures set out in
contracts and risk assessment and mitigation measures typically set
out in project-specific documents such as Board reports and project
updates. The subsidiary company Managing Directors review and
report to the Audit and Risk 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 be kept under review.
Whistleblowing arrangements
The Company has a whistleblowing policy in place for all employees
of the Group, 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 Ethics, Anti-Bribery and Corruption, HR and
Governance policies. Employees are also encouraged to “speak out”
via a series of posters.
Governance Policies
Our Governance Policies (including ethics, whistleblowing, competition
law, gifts and hospitality, data protection and staff purchases) are
continually monitored and reviewed, with the latest refresh being
carried out in February 2019 for issue to all Group employees, external
suppliers and service providers.
Mandatory online training in relation to a number of areas including
data protection, prevention of the facilitation of tax evasion and
Competition Act compliance was carried out with all employees during
the year, and is scheduled for regular refresh alongside the Group’s
wider suite of e-learning. All policies reflect and refer to the Group’s
values, and further training will be delivered on all relevant topics as
appropriate.
The Anti-Bribery and Corruption, Anti-Slavery and Ethics Policies
are also relevant for third parties who perform services for or on
behalf of the Group. The Group expects those persons to adhere to
these policies or have in place equivalent policies and procedures to
combat bribery and corruption as well as the threat of slavery in their
supply chain.
98
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
CORPORATE GOVERNANCE STATEMENT 2019
Compliance statement
During 2019 the Board and its Committees have been carrying out
extensive work to ensure wherever possible that compliance with the
Code can be achieved, improving its operations and governance. The
Company has complied with all the principles of the UK Corporate
Governance Code 2016 for the year ended 31 December 2019 and
the vast majority of the provisions. This is demonstrated throughout
this Corporate Governance report, and of particular note are the
issues below with references to further detail as applicable. However,
as in previous years, there are some instances where the Company
has chosen to take advantage of the flexibility offered with the “comply
or explain” rule when applying certain provisions.
Given our 130-year history as a family business, and as a FTSE
SmallCap company, we have adopted alternative solutions to the
Provisions where we believe this is appropriate. The Code recognises
that good governance can be achieved by other means and the Board
believes the approach we have taken is the most appropriate for the
Company and its shareholders whilst remaining consistent with the
spirit of the Code.
Provisions 9 and 19
As previously disclosed, the Chairman was not independent on
appointment, having served as Group Managing Director and member
of the Board for 29 years. The Board continues to support this
appointment based on the extensive knowledge of the Group and
industry that Jamie Boot brings to the role and to Board discussions.
During the current climate of political and economic uncertainty, Jamie
offers a vast amount of experience, having weathered downturns such
as the financial crisis in 2008. He guided the Company successfully
through this period, reducing levels of gearing and bringing about
opportunities that the Company is still benefiting from today.
In order to mitigate independence concerns, three independent
Non-executive Directors were appointed at the time Jamie became
Chairman in 2015. It is this balance of Jamie’s experience, mixed with
the fresh, external perspective of the three independent Non-executive
Directors, that helps to provide a level of balance and challenge
around the boardroom table. As a family business that has been in
operation for over 130 years, it was also deemed appropriate for
Jamie to remain on the Board to represent the interests of him and his
family members.
Provision 11
The Board considers that there is an appropriate balance of
independent and non-independent Directors having regard to the
size and nature of the business. At the beginning of 2020 both
Tim Roberts and John Sutcliffe will be Executive Directors on the
Board, leading to there being less than half the Board comprising
independent Non-executive Directors during that time. However, this
is an important aspect of the handover of the role to the Group’s new
Chief Executive ensuring a smooth transition and allowing time for Tim
to familiarise himself with the Group and its operations, and following
this limited period the Board composition will return to a Code
compliant one.
Provision 15
The Nomination Committee reviews external time commitments of
all appointees on appointment, and this is reviewed and kept under
consideration on a continuing basis (see page 93 in the Nomination
Committee Report).
Provision 23
This year’s report includes increased disclosure on the work of
the Nomination Committee (see Report on page 93) including the
introduction this year of a Board Diversity Policy.
Provisions 24 and 32
In previous years, both Jamie Boot and James Sykes have served as
members of both the Audit and Risk and Remuneration Committees,
despite not being independent on appointment, due to their
considerable knowledge and experience in these areas. During 2019,
following shareholder feedback, the Nomination Committee took
the decision in conjunction with Jamie and James for them both to
step down as members of those Committees. To replace James as
Chair of the Audit and Risk Committee, Joanne Lake was appointed,
stepping down as Chair of the Remuneration Committee. Gerald
Jennings was appointed as Chair of the Remuneration Committee in
place of Joanne. All three of the Committees now have independent
Non-executive Directors as their Chairs, and there are now no non-
independent members of either the Audit and Risk or Remuneration
Committees. Jamie and James may be invited to attend meetings
of those Committees to provide the benefit of their knowledge and
expertise, and to promote the interests of shareholders, as applicable.
Provision 38
The pension contribution rate for Tim Roberts, the most recent
appointed Executive Director on the Board, has been aligned with
that of the wider workforce. It is noted that the contribution for Darren
Littlewood will require alignment and the Remuneration Committee is
committed to achieving this within the required timescale of 2022.
20% vote against – AGM
At the AGM in 2019, no resolution proposed received more than 20%
of the vote against them. To take into account previous votes against
received during 2018, the composition of the Committees has been
realigned with the Code, further details of this are set out above.
Approved by the Board and signed on its behalf by
Provision 14
The Board’s roles and responsibilities have recently been reviewed
and refreshed and approved by the Board, and is publicly available via
our website.
Amy Stanbridge
Company Secretary
20 May 2020
99
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
Statement from the Chairman of the Remuneration Committee
GERALD
JENNINGS
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 Directors’ Remuneration Report for the year
ended 31 December 2019.
Naturally, the Committee along with the Board and
management teams more generally, have been monitoring
the position regarding the unfolding COVID-19 pandemic.
In relation to remuneration issues, the Committee has been
very aware that maintaining the anticipated bonuses and
salaries for its Directors would not be desirable in the current
climate, where a proportion of the Group’s employees have
been furloughed and where the Group has had to take
difficult decisions regarding its cashflow and resulting dividend
payments. As a result, the Board has taken the decision
to award half of the anticipated bonus for all employees,
including the Executive Directors, in relation to its 2019
results. This difficult decision recognises that the Group
achieved a great result in 2019 that deserves recognition, but
also reflects the unprecedented economic position that Henry
Boot, like all other companies, faces in dealing with the effects
of this pandemic. In addition, the Board (both Executive
and Non-executive Directors) have agreed, ratified by the
Committee, to take a 20% reduction in their base salary or
fees (as applicable) for the duration of the most severe impact
of this pandemic. This position will be revisited later in the
year when more accurate forecasts of the effects can be
formulated.
In relation to the 2020 personal objectives for Tim Roberts
and Darren Littlewood, the position set out in the Report at
page 108 will remain under review to ensure that all objectives
continue to be appropriate to reflect the unfolding impact
on the Group. The Committee has reviewed and reflected
on whether any specific COVID-19 performance targets
should be included, but have concluded that the general
personal objectives previously agreed and set out within this
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.
Gerald Jennings
Chairman of the Remuneration Committee
report (such as achievement of safety objectives, developing
the Group’s strategy and succession planning) continue to
relate more widely to the successful operation of the Group
including the recovery of the business taking into account the
after-effects of this pandemic.
Review of the year
This year we have:
• Reviewed, recommended and monitored the level and
structure of the remuneration packages of the Executive
Directors and senior management;
• Set and approved the remuneration package for the
Executive Directors; and
• Determined 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.
The Committee met two times during the year, with full
attendance by all Committee members.
Those serving as members of the Committee for the whole of
2019 were Joanne Lake, Peter Mawson and myself (Committee
Chairman). Jamie Boot and James Sykes stepped down as
members of the Committee during the year, and I was appointed
as Committee Chairman in place of Joanne Lake – for further
details on this please see page 99. Biographies of the current
members of the Committee are shown on pages 66 and 67.
During the year John Sutcliffe, Chief Executive Officer, as well
as Jamie Boot, James Sykes and Tim Roberts, attended the
meetings with the Committee upon request, in order to assist
on matters concerning other senior Executives within the Group.
John Sutcliffe and Tim Roberts were not present during any part
of the meeting where their own remuneration was discussed.
100
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
OUR GOVERNANCE
Role of the Committee
The primary role of the Committee is to:
For these awards, the actual performance against the targets to
31 December 2019 was:
• Review, recommend and monitor the level and structure of the
i. Earnings Per Share growth was 36% against the target of 16%
remuneration packages of the Executive Directors and senior
management;
(being inflation growth plus 7%) and, therefore, this part of the
award vests in full;
• Set and approve the remuneration package for the Executive
ii. Return On Capital Employed was 17.44% on average against the
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.
Executive remuneration outcomes for 2019
In the current market conditions, the 2019 results remained
impressive, delivering £49.1m of pre-tax profit. In 2019 the combined
overall remuneration of the Executive Directors, on a like-for-like
basis, decreased by 7.9%, and 6.6% including the costs of our Non-
executive Directors.
Salaries of the Executive Directors were increased by 4.0% at 1
January 2020 and by 5.1% at 1 January 2019, compared to an
increase across the Company in total of 5.8% during 2019 and of
4.0% at 1 January 2020.
Bonuses had been calculated in line with the Remuneration Policy
approved at the AGM in May 2018, but have subsequently been
adjusted in accordance with the COVID-19 pandemic update (see
on page 06). Target profit was set at £43.0m. Upon recommendation
from John Sutcliffe and Darren Littlewood, which was accepted by
the Committee, this profit target was adjusted upwards to £45.0m to
reflect the goodwill created by the Starfish acquisition. This goodwill
adjustment is in addition to the Starfish trading loss of £2.0m taken
through the profit and loss account and within the £49.1m PBT result.
The effect of this goodwill adjustment is to reduce the bonus percentage
by 7.6%, where the overall bonus percentage before adjustment would
have been 71.3%, to a total of 63.7%.
In addition, the Remuneration Committee set individual targets as laid
out on page 107, relating to an additional 20% of salary potentially
awardable as bonus. The Remuneration Committee considers that John
Sutcliffe achieved 70% of these targets and Darren Littlewood achieved
77.5%.
Therefore, the total notional bonus for John Sutcliffe was 77.7% of
salary, and for Darren Littlewood was 79.2% of salary. In accordance
with the COVID-19 pandemic update, these bonuses were then
reduced by 50%.
Long Term Incentive Plan (LTIP) shares vesting, based on performance
for the three years to 31 December 2019, 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 and
indices.
maximum target of 13% and, therefore, this part of the award vests;
and
iii. Total Shareholder Return of 47.2% was below the median when
set against the comparator group and, therefore, no part of the
award vests.
Therefore, the award of LTIP shares to John Sutcliffe is 107,002
shares, and to Darren Littlewood 48,320 shares.
Consultation with shareholders
Whilst there has been no formal contact with shareholders regarding
the Remuneration Policy during 2019, it is in line with that which was
approved by shareholders at the AGM in 2018. The Remuneration
Policy will be reviewed and updated and then put to a shareholder
vote again at the AGM in 2021.
The application of Directors’ Remuneration
Policy for 2020
• Following a review by the Committee, John Sutcliffe was awarded
a nil% pay rise and Darren Littlewood was awarded a 12.5% pay
rise. The Non-executive Directors were awarded a 3.0% uplift in
basic salary or fees for the year commencing 1 January 2020. The
average across the workforce as a whole was 4.0% at 1 January
2020. The rise for Darren Littlewood relates to the final planned
increase set out within his four year transitional plan to Group
Finance Director and is in line with previous disclosures. The
Committee has undertaken to carry out a benchmarking exercise
of Darren Littlewood’s pay in comparison with market standards
during 2020. However, the position regarding the 20% salary and
fee reduction for Executive and Non-executive Directors in the
COVID-19 pandemic update will temporarily affect these figures
during 2020.
• 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, subject to exercise the Committee’s
description which is outlined on page 109.
101
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
Statement from the Chairman of the Remuneration Committee
Clawback and malus conditions will be applied to both the bonus and
LTIP elements of remuneration in 2020. Specifically, this will arise if the
Committee considers that there has been a material misstatement
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.
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 2019. 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. The Total Shareholder Return graph;
ii. 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 100 and 111 of the Directors’
Remuneration Report is subject to audit.
Summary of the Committee’s activity during 2019
During 2019 the Committee met twice and discussed a range of
matters relating to:
• Approval of Executive Directors’ base pay for 2020. The only
salary increase at 1 January 2020 was £25,000 (11%) for Darren
Littlewood to £250,000, which relates to his transition in role to
Group Finance Director and is in line with previous disclosures,
being the last of the scheduled increases that has been approved
of this nature. The figure takes into account feedback from
institutional investors and proxy agencies over the year; review
of senior management base pay for 2020 and monitoring wider
workforce remuneration, including information on average annual
salary increases across the Group and gender pay gap data, as
well as giving consideration to the Directors’ duties under s.172
of the Companies Act. As noted above, the position regarding
the 20% salary reduction for Executive Directors in the COVID-19
pandemic update will temporarily affect these figures during 2020;
• Review of Executive Directors’ performance against the Annual
Bonus criteria and LTIP metrics, and set targets and criteria for the
upcoming year;
• Approval of the grant of CSOP options to all eligible employees
across the Group;
• Alignment of executive pensions with those of the wider workforce
(page 99 contains more details on this);
• Commencement of work on a Group-wide Total Reward Strategy
to ensure alignment transparency, to ensure alignment and
transparency;
• Review of the Committee Terms of Reference (for more information
see page 103); and
• Evaluation of Committee performance in 2019 and agreed actions
for 2020 (set out on the Board Evaluation pages 84 to 87).
Compliance with the UK Corporate
Governance Code
The Committee has throughout the year been reviewing the
requirements of the Code and determining the actions it needs to take
throughout the organisation to ensure compliance. As stated above,
the Remuneration Policy will be updated during 2020, to be brought
for approval at the 2021 AGM. This process will be conducted in
conjunction with external remuneration consultants (the appointment
of which commenced during 2019) to ensure that all provisions and
principles of the Code are adhered to and that best practice is captured.
We are also anticipating a substantial degree of consultation with our
key stakeholders, most importantly our employees and shareholders,
regarding the provisions of this new Remuneration Policy. It is key that
the Committee is aware of and takes account of these views prior to
formalising its policy approach. This will also enable us to demonstrate
full compliance with provision 40 of the Code, particularly:
• Clarity – by promoting engagement with stakeholders as explained
above;
• Predictability – the range of potential outcomes arising as a result
of the Policy to be explained at the point of consultation and
approval;
• Simplicity – ensuring that outcomes are clear and can be
understood by a range of stakeholders, which will be the ultimate
test of its structure.
The Remuneration Committee is committed to achieving full
compliance with the Code as part of its further work during 2020,
and in particular, full compliance with provision 40, through its revised
Remuneration Policy. The areas in which compliance with this provision
can already be demonstrated include:
• Proportionality – the achievement of personal objectives relates
to the performance of the company and does not reward poor
performance; and
• Alignment to culture – personal objectives are reflective of the
Group’s core Values and its strategic objectives.
These are issues we are pleased to be developing further during 2020
to ensure our approach to remuneration is as robust, transparent and
effective as possible.
102
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
External Advisers
The Committee’s main advisers are set out below:
Adviser
DLA Piper
UK LLP
PWC LLP
Area of advice
Advice relating to share
scheme matters. The
Remuneration Committee
considers that the advice DLA
has given throughout the year
is legal advice in compliance
with relevant legislation.
Advice in relation to the TSR
comparator group.
Fees paid
£2,650
£3,000
Terms of Reference
All Committees reviewed and refreshed (where appropriate) their Terms
of Reference during 2019, to ensure Code compliance and reflection
of current practice. For the Remuneration Committee, this refresh
included:
•
stipulating that all the Committee should be independent NEDs
following the composition changes during 2019 and that the
quorum should be reduced from three to two independent NEDs.
The revised Terms of Reference are available on request.
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 24 May 2018, remains
unchanged and is available to view and download on the website:
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.
Gerald Jennings
Chairman of the Remuneration Committee
• Updating the wording to bring the Terms of Reference in line with
the 2018 UK Corporate Governance Code;
20 May 2020
•
In line with the Code, extending the Committee’s remit to cover
senior management and oversight of the wider workforce,
acknowledging additional reporting disclosures and the need for
discretion to override formulaic outcomes where appropriate; and
103
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE OUR
GOVERNANCE
Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
Remuneration at a glance
Executive Directors’ Remuneration Policy
Elements of Executive Directors’ pay
John Sutcliffe
2019
2018
Darren Littlewood
2019
2018
Fixed:
Base salary
Taxable benefits
Pension-related benefits
Performance-linked:
Annual bonus
Long-term incentive plan
Fixed:
Base salary
Taxable benefits
Pension-related benefits
Performance-linked:
Annual bonus
Long-term incentive plan
2019
54%
78%
7%
16%
46%
35%
65%
2019
58%
76%
9%
15%
42%
41%
59%
2018
40%
78%
7%
16%
60%
48%
52%
2018
44%
75%
10%
15%
56%
54%
46%
Single total figure of remuneration for Executive
Directors for year ended 31 December 2019
Key performance indicators (KPIs) performance
for year ended 31 December 2019
John Sutcliffe
508
153
287
948
Darren Littlewood
297
89
129
515
£’000
Annual bonus
Key
Profit
before tax
£49.1m
At or above stretch target
Between threshold and stretch target
Below threshold target
Fixed pay
Annual bonus
Long-term incentive
LTIP 3 year performance
Earnings
per share
Total
shareholder
returns
36%
47.2%
Return
on capital
employed
17.4%
104
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
OUR
GOVERNANCE
Annual Report on Remuneration
The labelled parts of the Directors’ Remuneration Report are subject to audit.
Single total figure of remuneration (Audited)
The table below reports the total remuneration receivable by Directors in respect of qualifying services during the year.
Year ended 31 December 2019
John Sutcliffe
Darren Littlewood
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Year ended 31 December 2018
John Sutcliffe
Darren Littlewood
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Salary
and fees
£’000
395
225
88
46
46
46
46
892
Salary
and fees
£’000
390
200
85
45
45
45
45
855
Taxable
benefits
£’000
34
27
—
—
—
—
—
61
Taxable
benefits
£’000
33
26
—
—
—
—
—
59
Annual
bonus
£’000
153
89
—
—
—
—
—
242
Annual
bonus
£’000
360
182
—
—
—
—
—
542
Long-term
incentives1
£’000
287
129
—
—
—
—
—
416
Long-term
incentives2
£’000
389
155
—
—
—
—
—
544
Pension-
related
benefits
£’000
79
45
—
—
—
—
—
124
Pension-
related
benefits
£’000
78
39
—
—
—
—
—
117
Total
£’000
948
515
88
46
46
46
46
1,735
Total
£’000
1,250
602
85
45
45
45
45
2,117
1. The value of long term incentives has been estimated using the average share price for the period 1 October 2019 to 31 December 2019 of £2.68.
2. The value of long term incentives has been adjusted from the average share price for the period 1 October 2018 to 31 December 2018 of £2.61, to the price
on the day the shares were issued of £2.53.
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 106 and 107
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 of the reporting year.
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.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
105
Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
Individual elements of remuneration
Base salary and fees
Executive Directors
Salary effective from
1 January
2020
£
430,460
395,000
250,000
1 January
2019
£
n/a
395,000
225,000
1 January
2018
£
n/a
390,000
200,000
Tim Roberts
John Sutcliffe
Darren Littlewood
On 1 January 2018, the basic salary increase for the Chief Executive
Officer was 0.64%, on 1 January 2019 the basic salary increase was
1.28% and, following the appointment of Tim Roberts, on 1 January
2020 the basic salary increase was 8.98%. At 1 January 2016, Darren
Littlewood was appointed Group Finance Director and received a
remuneration package which the Committee, following review, has
uplifted over the years 2017–2020 at a rate of £25,000 per annum.
Average salary increases for the wider employee population were
4.7% from 1 January 2018, 4.1% on 1 January 2019 and 4.0% on
1 January 2020.
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. As noted above, the position regarding the 20% salary
reduction for Executive Directors in the COVID-19 pandemic update
will temporarily affect these figures during 2020.
Benefits include the provision of a company car or a cash allowance
alternative, permanent health insurance and private medical insurance.
The value of benefits is not pensionable and is set out for each
Director in the table of Directors’ remuneration.
Non-executive Directors
Fees effective from
1 January
2020
£
90,176
47,740
47,740
47,740
47,740
1 January
2019
£
87,550
46,350
46,350
46,350
46,350
1 January
2018
£
85,000
45,000
45,000
45,000
45,000
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
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 fees
above are inclusive of the responsibilities for Nomination, Audit and
Risk, and Remuneration Committees, and the Senior Independent
Non-executive Director. Any newly appointed Non-executive Director
is expected to serve for an initial period of at least three years. Terms
and conditions of appointment relating to Non-executive Directors are
available for inspection at the registered office of the Company.
Bonus
The Executive Directors participate in an annual bonus scheme. This is calculated by reference to pre-tax profits achieved in the year compared
to a target profit which takes into consideration the year’s financial budget, City expectations and previous years’ profits.
Summary of bonuses earned for 2019 (Audited)
Measure
Profit before tax
Personal objectives
Bonus amount achieved as
% salary
Bonus amount earned
Maximum bonus as % salary
Bonus amount achieved as
% maximum**
Bonus amount awarded**
Maximum
award as
% of salary
100%
2019
% of target
90%
100%
120%
150%
2019
target
range
£38.7m
£45.0m*
£54.0m
£67.5m
Bonus
payable
as % salary
10%
50%
80%
100%
20%
See below
Actual bonus value achieved
(% of salary)
John
Sutcliffe
63.7%
Darren
Littlewood
63.7%
Actual
performance
£49.1m
14.0%
15.5%
77.7%
£306,915*
120%
79.2%
£178,200*
120%
64.8%*
£153,457.50
66.0%*
£89,100.00
*
Upon recommendation from John Sutcliffe and Darren Littlewood, which was accepted by the Committee, this profit target was adjusted upwards to £45.0m
to reflect the goodwill created by the Starfish acquisition. This goodwill adjustment is in addition to the Starfish trading loss of £2.0m taken through the profit
and loss account and within the £49.1m PBT result. The effect of this goodwill adjustment is to reduce the bonus percentage by 7.6%, where the overall bonus
percentage before adjustment would have been 71.3%, to a total of 63.7%.
** Amended figures taking into account 50% reduction in bonus as set out in COVID-19 pandemic update.
106
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Any bonus amounts are paid in cash and are subject to malus and clawback provisions within the scheme.
Bonuses were paid in line with the Directors’ Remuneration Policy approved at the AGM in May 2018. Target profit was set at £43.0m, 1.9%
ahead of the target set in 2018.
The Remuneration Committee also set individual targets as follows:
2019 personal objectives – John Sutcliffe
1
2
3
4
5
6
7
Create and lead the delivery of the Group’s strategy via the implementation of the Group’s key business priorities.
Communicate the Group’s Purpose, Vision and Values both internally and externally.
Develop and refine succession plans whilst progressing with identification and development of successors.
Support good health and safety practices around the Group, to reduce the risk of any major health and safety incidents occurring.
Attract new shareholders to the register and create stronger relationships with existing shareholders and analysts.
Support legal and regulatory compliance, and initiatives around the Group which meet related deadlines.
Endorse initiatives that reduce the gender pay gap and promote diversity within the Group.
2019 personal objectives – Darren Littlewood
1
2
3
4
5
6
7
8
Support delivery of the Group’s strategy via the implementation of the Group’s key business priorities.
Ensure no breach of bank covenants while improving and extending the Group’s existing and potential banking relationships.
Tendering the Group’s banking facility and having a renewal contract in place before the year end.
Improve financial reporting to the business, investment community and other stakeholders.
Engage with shareholders and analysts to create a stronger relationship to the Group.
Oversee the development of the finance team’s profile and skillsets.
Tendering the external audit service to achieve a recommendation for appointment before the year end and continued provision
of an effective internal audit service.
Manage the Group’s tax position and strategy efficiently.
The Remuneration Committee considers that John Sutcliffe achieved 70% of these targets, resulting in a bonus of 14% of salary and that
Darren Littlewood achieved 77.5%, resulting in a bonus of 15.5%. The profit before tax of £49.1m exceeds the target by 9.1% and this (with
the adjustment for Starfish as previously noted), combined with the personal targets, gave rise to a notional bonus of 77.7% of salary for John
Sutcliffe and 79.2% for Darren Littlewood, for the year ended 31 December 2019. In accordance with the COVID-19 pandemic update, these
bonuses were then reduced by 50%.
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: www.henryboot.co.uk.
107
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
Personal objectives: an additional 40% of salary may become payable to Executive Directors upon the achievement of several personal
objectives.
The objectives measured are based on actions and achievements which contribute to delivery of the Group strategy.
2020 personal objectives – Tim Roberts
1
2
3
4
5
6
7
Reviewing and develop Group strategy, identifying and implementing strategic smart objectives taking account of risk.
Communicating the Group’s purpose, vision and values both internally and externally.
To develop and refine succession plans whilst progressing the identification and development of successors.
Lead good health and safety practices around the Group to avoid any major health and safety incidents.
Attract new shareholders to the register, achieving positive feedback from meetings with existing shareholders and analysts by clear key
messaging and Investor Relations (IR) Policy.
Develop Environment Social and Governance (ESG) Policy, and support legal and regulatory compliance and initiatives around the
Group meeting related deadlines.
Develop the Diversity and Inclusion (D&I) Policy, promoting diversity, and reducing the gender pay gap.
2020 personal objectives – Darren Littlewood
1
2
3
4
5
6
7
8
Reviewing and develop Group strategy, identifying and implementing key strategic smart objectives for the Group.
Inform and develop strategy for each subsidiary, including key strategic smart objectives for Starfish and overseeing the integration of
that business into HBC.
Developing strategic influence within the business and profile within the wider industry.
Redeployment of working capital into key business activities with a focus on risk weighted returns.
Developing the Finance/IT/Communication team’s profile and skillsets, developing their integration across the Group.
Management and development of financial reporting within each business, to the Board and to the investor community.
Undertake a review of internal audit following the 3-year BDO programme and successful transitioning of the external audit from PWC
to EY.
Improve remuneration reporting requirements with clearer links to the objectives and priorities of the Group.
31 December 2020 bonus targets
Profit before tax has a weighting of a maximum of 80% of salary payable directly linked to specific financial targets.
The Committee will monitor these bonus targets throughout 2020 in line with the discretion granted to it in the Remuneration Policy to determine whether
they continue to be appropriate in light of the exceptional circumstances arising due to the COVID-19 pandemic and in circumstances where these original
measures and targets are no longer a fair and accurate measure of business performance.
Long Term Incentive Plan (LTIP)
The Committee has reviewed the performance criteria for the LTIP shares awarded in 2017, based on performance for the years 2017, 2018 and 2019,
which are expected to vest in June 2020. The LTIP shares in this award are subject to the following performance criteria:
i. EPS growth ahead of inflation: EPS growth was 36%, which exceeded RPI growth by more than 27% and therefore this 33.3% of the award became
eligible;
ii. Average annual return on capital employed above 13%: this was 17.44% and therefore this 33.3% of the award became eligible;
iii. Total Shareholder Return (TSR) below the median for the comparator group: The Henry Boot PLC TSR for the three-year period was 47.2%, putting it
below the median within the comparator group and therefore, this 33.4% of the award did not become eligible. The comparator group was comprised
of Vistry Group, CLS Holdings, Costain Group, U and I Group PLC, Galliford Try, Helical Reit, Keller, Kier Group, Low & Bonar, Marshalls, Morgan
Sindall Group, Norcros, Redrow, Speedy Hire, St Modwen Properties, UNITE Group, VP, WSP Global, FTSE All Share Index, FTSE Small Companies
Index and FTSE Construction & Materials Index.
Together, these resulted in LTIP awards of: John Sutcliffe 107,002 shares; and Darren Littlewood 48,320 shares; and gave rise to the award values in the
single total figure of remuneration at 31 December 2019 on page 105.
108
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
LTIP awards granted in the year (Audited)
John Sutcliffe
Darren Littlewood
Type
of award
LTIP – nil cost option
LTIP – nil cost option
% of salary
100%
100%
Number
of shares
145,042
82,619
Face value
to grant
at £2.72
per share
394,514
224,723
Awards expected to be granted for the financial years 2020–2022 in 2020
Tim Roberts
Darren Littlewood
The performance criteria for these awards is as follows:
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%
EPS growth
Return on Capital Employed
We strive to grow earnings per share faster than inflation. This should give rise to an ability
to grow dividends faster than inflation; a key driver to long-term growth in shareholder value.
We strive to achieve a 10% profit before tax return on balance sheet net assets. This should
give rise to at least two times dividend cover, thereby generating growth in the Group’s
retained capital to reinvest and grow. This is a further driver to long-term shareholder
value growth.
Total Shareholder Return (TSR) relative to
constituent companies of the FTSE Small
Companies Index
We strive to achieve high shareholder returns. TSR reflects the extent to which shareholders
and the market consider that the Company strategy is appropriate and is being implemented
and articulated well by the Executives.
The detailed performance metrics for these awards is as follows:
EPS growth
Return on Capital Employed
TSR
% linked to award
33.3
33.3
33.4
Threshold vesting of 25% of
maximum award
RPIJ + 3% per annum
Threshold for 100% of
maximum award
RPIJ + 7% per annum
Average three-year year ROCE of 10% Average three-year ROCE of 13% or more
TSR at or within the upper quartile
TSR at median or above constituent
companies of the FTSE Small
Companies Index
However, the Committee has noted feedback from its investors regarding awards to Executive Directors where the Company share price has
fallen over the preceding year resulting in an increased award when compared with the previous year. The Committee may use its discretion to
restrict the share price to a value no lower than that used in the previous year or restricting the award to a number no higher than that of the
previous year in order to address this issue, save in the case of an Executive Director joining the Board for whom no prior year comparative
exists.
Pension entitlement
John Sutcliffe is a deferred 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 £nil (2018: £nil). The annual allowance for tax relief on pension savings
applicable to John Sutcliffe in 2019 was £nil and he elected to receive a salary supplement in lieu of the employer contributions over and above
this level, which amounted to £79,000 (2018: £78,000).
Darren Littlewood was a member of The Henry Boot Staff Pension and Life Assurance Scheme (Defined Benefit) (the Scheme) up to 31 March
2019, following which he became a deferred member of the Scheme. His normal retirement date within the Scheme would be in 2042, aged
67. His accrued pension entitlement at 31 December 2019 was £25,839 and the pensionable salary available for use within the Scheme at
31 December 2019 was £57,897. 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 £16,225.
The annual allowance for tax relief on pension savings applicable to Darren Littlewood in 2019 was £16,225, and he elected to receive a salary
supplement in lieu of the employer contributions over and above this level, which amounted to £42,076. It is noted that the contribution for
Darren Littlewood will require alignment with the wider workforce and the Remuneration Committee is committed to achieving this within the
required timescale of 2022.
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.
109
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
Remuneration
DIRECTORS’ REMUNERATION REPORT
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 (Audited)
The following table sets out the shareholdings and share interests of the Directors in the Company as at 31 December 2019.
Number of
preference
shares held
14,753
—
—
—
—
—
—
Number of
ordinary
shares held
5,665,002
817,927
152,500
20,000
10,710
11,650
10,000
Number of
shares
legally owned
5,665,002
817,927
152,500
20,000
10,710
11,650
10,000
LTIPs
subject to
performance
measures
—
438,209
223,123
—
—
—
—
Legally
owned
shareholding
as a % of
salary or
fees1
20,040%
661%
195%
134%
72%
78%
67%
Share
interests
as a % of
salary or fees
20,040%
1,014%
479%
134%
72%
78%
67%
Total
5,665,002
1,256,136
375,623
20,000
10,710
11,650
10,000
Jamie Boot
John Sutcliffe
Darren Littlewood
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
The share price at 31 December 2019 was 319.0p. The salary used for this calculation is that which commences on 1 January 2020.
1. Details of Director shareholding requirements can be found in the Remuneration Policy, which can be viewed on the website: www.henryboot.co.uk.
Between 31 December 2019 and 20 May 2020, being a date not more than one month prior to the date of the Notice of the AGM, the only
change in the beneficial interests of any Director was for John Sutcliffe who sold 1,362 shares giving him a total of 816,565 shares.
Long Term Incentive Plan awards (Audited)
Performance shares
John Sutcliffe
Date of
grant
21/04/2016
24/04/2017
25/04/2018
30/04/2019
Plan
2015
2015
2015
2015
Market
price at
date of
grant
212.6p
241.2p
294.3p
272.3p
Darren Littlewood 2015
2015
2015
2015
21/04/2016
24/04/2017
25/04/2018
30/04/2019
212.6p
241.2p
294.3p
272.3p
At 1
January
2019
176,969
160,665
132,502
470,136
70,555
72,554
67,950
—
211,059
Grant
during
the year
Exercised
during
the year
— 153,740
—
—
—
—
—
— 145,042
153,740
145,042
61,294
—
—
—
—
—
—
82,619
61,294
82,619
Lapsed
during
the year
23,229
—
—
—
23,229
9,261
—
—
—
9,261
At
31 December
2019
Actual
exercise date
/earliest
vesting date
— 04/06/2019
24/04/2020
25/04/2021
30/04/2022
160,665
132,502
145,042
438,209
— 04/06/2019
24/04/2020
25/04/2021
30/04/2022
72,554
67,950
82,619
223,123
Market
Valuation
on
exercise
£
388,962
—
—
—
388,962
155,074
—
—
—
155,074
Sharesave plan
Plan
Darren Littlewood 2010
At
1 January
2019
6,666
6,666
Granted
during
the year
—
—
Exercised
during the
year
—
—
Lapsed
during
the year
6,666
6,666
At
31 December
2019
—
—
Exercise
price
270.0p
Date from
which
exercisable
01/12/2020
Expiry
date
31/05/2021
110
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE
Statement of voting at the last Annual General
Meeting (AGM)
The Company remains committed to shareholder dialogue and takes
an active interest in voting outcomes. At the AGM on 23 May 2019
the resolution put to shareholders on an advisory basis to receive and
approve the 2018 Directors’ Remuneration Report was passed. The
number of votes in favour of that resolution was 80,357,367 (84.93%
of votes cast), against 14,255,081 (15.07% of votes cast), and
withheld 32,495.
The total number of votes cast in respect of this resolution represented
71.05% of the issued share capital.
Share price
The middle market price for the Company’s shares at 31 December
2019 was 319.0p and the range of prices during the year was 233.0p
to 320.0p.
Ten-year TSR performance graph
FTSE Small Cap Index
Henry Boot PLC
500
450
400
350
300
250
200
150
100
50
09
10
11
12
13
14
15
16
17
18
19
Chief Executive Officer’s remuneration for the
previous ten years
Total
remuneration
£’000
948
1,250
1,277
1,118
981
1,000
1,054
962
842
764
575
Annual bonus
as a %
of maximum
64.8
76.8
99.2
91.1
87.8
94.5
83.3
58.3
66.7
58.3
33.3
LTIP vesting
as a % of
maximum
65
87
100
67
25
25
50
40
50
64
50
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
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 Chief Executive
Officer compared to the wider workforce. For these purposes:
Percentage
change
Salary
Taxable benefits
Annual bonus 2018
Annual bonus 2019
Chief
Executive
Officer
8.98%
—
(22.0)%
(14.7)%
Workforce
sample
5.8%
—
0.94%
13.6%
Note
1
2
2
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. The workforce comparison is every member
of staff who receive a salary excluding the Chief Executive Officer.
Note 2
The workforce comparison is every member of staff who received
a bonus excluding the Chief Executive Officer.
Ratio of Chief Executive Officer’s latest single
total figure of remuneration versus UK full-time
equivalent (FTE) employees’ remuneration
Year
2019
Method
Option A
25th
percentile
pay ratio
41:1
Median pay
ratio
27:1
75th
percentile
pay ratio
17:1
The method of calculation chosen for these ratios is Option A as this
option is generally recognised as being the most robust, statistically.
The same methodology used for calculating the single total figure for
the CEO has been used for calculating the pay and benefits of UK FTE
employees.
Relative importance of spend on pay
The following table sets out the percentage change in dividends, profit
attributable to owners of the business and the overall spend on pay
across our whole organisation:
Ordinary dividends
Profit attributable
to owners of the
business
Overall expenditure
on pay
2019
£’000
6,633
2018
£’000
11,936
%
change
(44.4%)
37,596
37,505
35,029
33,741
0.2%
3.8%
Approved by the Board and signed on its behalf by
Gerald Jennings
Chairman of the Remuneration Committee
20 May 2020
111
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
DIRECTORS’ REPORT
The Directors’ Report for the financial year ended 31 December 2019
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’s business along with a description
of the principal risks and uncertainties it faces. The Strategic Report
for the year ended 31 December 2019 is set out on pages 16 to 61.
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 the Corporate Governance section on pages 70 to 117.
Results for the year and dividends
The results are set out in the Consolidated Statement of
Comprehensive Income on page 130. The companies affecting the
profit or net assets of the Group in the year are listed in note 38 to the
Financial Statements.
The Directors recommend that a final dividend of 1.3p per ordinary
share be paid on 6 July 2020, subject to shareholder approval at the
2020 AGM to be held on 30 June 2020, to ordinary shareholders on
the register at the close of business on 12 June 2020. If approved,
this, together with the interim dividend of 3.70p per ordinary share
paid on 16 October 2020, will make a total dividend of 5.0p per
ordinary share for the year ended 31 December 2019. Further details
are disclosed in note 10 to the Financial Statements on page 149.
Financial instruments
The Group’s policy in respect of financial instruments is set out
within the Accounting Policies on page 140 and details of credit risk,
capital risk management, liquidity risk and interest rate risk are given
respectively in notes 18, 25, 26 and 28 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 pages 49 and 50.
Accountability and audit
Details of the Directors’ responsibilities and the Statement of Directors’
Responsibilities are contained on page 117. The Independent
Auditors’ Report is given on pages 120 to 128.
Fair, balanced and understandable
The Audit and Risk Committee and 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 117.
112
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 2019 and as at the date of this Annual Report and
Financial Statements can be found on pages 66 and 67. 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 2019, are
disclosed in the Directors’ Remuneration Report on pages 100 and 111.
Between 31 December 2019 and 20 May 2020, being a date not more
than one month prior to the date of the Notice of the AGM, there
has been one change in the beneficial interest of any Director, John
Sutcliffe sold 1,362 ordinary shares on 29 January 2020, 2019, see
page 110.
Details of Directors’ long-term incentive awards and share options are
provided in the Directors’ Remuneration Report on pages 108 to 110.
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 30 June 2020 are set out in the Directors’ Remuneration Policy.
Tim Roberts and Darren Littlewood (and, during 2019, John Sutcliffe)
each have a one-year rolling service agreement in accordance with our
policy on Directors’ contracts. Termination of these arrangements would
therefore be subject to their contractual terms and conditions that require
a notice period of one year to the Director. Contractual compensation in
the event of early termination provides for compensation at basic salary,
pension and benefits 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.
Training and development
Formal and tailored inductions are arranged for all new Directors and
continued development is monitored by the Chairman as part of the
evaluation process. During 2019, due to the appointment of Tim
Roberts, the Nomination Committee in conjunction with the Head of HR
developed a full programme of induction for Tim, including attendance
at Board and other meetings, training and other development to ensure
a seamless integration of Tim into the business.
Non-executive Directors are encouraged to familiarise themselves with
the Company’s business, and throughout the year they have regularly
attended subsidiary board meetings. This provides further insight into
the business, its culture and an opportunity to meet with the wider
senior management team in more informal situations. Site visits to
key developments and sites are scheduled throughout the year, you
can read more about the engagement with employees and other
stakeholders on pages 76 to 77.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Specific training requirements were considered as part of the Board’s
skills evaluation, details of which can be found on pages 90 to 92.
General updates on regulations and best practice are provided
through a mixture of briefings, Board papers and emails.
Relationship with stakeholders
Details of how we engage with stakeholders and uphold our Director’s
duties more widely under s.172 of the Companies Act 2006 can be
found on pages 70 to 71 and 76 to 77.
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. Details of how we seek to
promote and achieve this, including our policy on equal opportunities for
disabled applicants, are set out in the Corporate Responsibility section
on pages 54 and 55, the employee engagement report on pages 78
and 79 and Nomination Committee Report on pages 88 to 93.
Employee engagement
Details of our employee engagement activities can be found on pages 78
and 79.
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. This is supplemented by publications such as our regular
‘Boot World’ newsletter and Charity Newsletter. During 2020, the Group
will continue to review its intranet function and will be looking to introduce
other modes of communication throughout the Group in the form of an
online forum. The development of these functions will be developed in
conjunction with the Employee Forums and Working Groups.
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. From 2018, all eligible employees were invited to
participate in Sharesave and the Company Share Option Plan on an
annual basis. Details of employee share schemes are set out in note
31 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. 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 UK 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 57.
Shareholder relations
The Company actively communicates with its institutional and private
shareholders and values a two-way conversation on key Company
issues. It is this close relationship with shareholders that is viewed as
one of the Company’s particular strengths.
During the year a number of formal presentations were made by
members of the Board to institutional shareholders and feedback from
these meetings was provided to the Board by our stockbrokers. In
addition, informal feedback sessions regarding the Annual Report were
carried out with institutional investors. At every Board meeting an update
is given to the Non-executive Directors on any feedback from investors,
particularly after investor roadshow programmes. The Board receive
a report at every meeting on share movements during the period and
any market trends. 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. The website is designed to communicate with both
present and potential investors and includes all London Stock Exchange
announcements, investor presentations and press releases.
Greenhouse gas emissions
The greenhouse gas emissions disclosures required by the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
are included within the Strategic Report on pages 60 and 61. This
information is incorporated by reference into (and shall be deemed to
form part of) this Report.
Substantial interests in voting rights
Excluding Directors, as at 20 May 2020, being 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.
Rysaffe Nominees and
J J Sykes (joint holding)1
The Fulmer Charitable Trust
Unicorn Asset Management
Polar Capital
Voting rights over
ordinary shares
Number % of issued
20,722,155
5,739,580
6,830,000
4,176,337
15.56
4.40
5.13
3.14
1. 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.
2. 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.
These figures represent the number of shares and percentage held as
the date of notification to the Company.
Details of Directors holdings can be found on page 110.
113
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
DIRECTORS’ REPORT
Shares held by the Henry Boot PLC
Employee Trust
The Company has an established Employee Trust (the Trust) for the
benefit of the Group’s employees to satisfy existing grants by the
Company under various share-based payment arrangements. Details
of the Company’s share-based payment arrangements are provided
in note 30 to the Financial Statements. The Trustee of the Trust, a
subsidiary of the Company of which the Directors throughout 2019
were Jamie Boot, Tim Roberts, and Darren Littlewood, 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
2019, the Trust has waived the right to receive from the Company all
dividends (if any) in respect of the shares held within the Trust.
During the year the Trust has purchased 245,000 ordinary shares in
the Company in order to satisfy upcoming grants. Further details are
provided in note 33 to the Financial Statements.
Future developments
Important events and developments are described in the Strategic
Report on pages 16 to 61, and in particular in relation to the
COVID-19 pandemic update on page 6.
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, PwC, have carried out the audit of the 2019
financial results, with this being the last year of their ten year audit
appointment. As set out on page 95, the Audit and Risk Committee
have carried out a process of re-tendering for its external auditors, and
resolutions appointing Ernst and Young as auditors (Resolution 11)
and authorising the Audit and Risk 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 117. The Independent
Auditors’ Report is given on pages 120 to 128.
Annual General Meeting (AGM)
The health of the Company’s shareholders, as well as its employees, is of
paramount importance. In view of the UK Government placing restrictions
on travel because of the COVID-19 pandemic, shareholders will not be
permitted to attend the annual general meeting in person. Details of how
shareholders can access the Board’s company update, usually delivered
at the AGM, will be detailed on the Company’s website in due course.
114
The Board encourages shareholders to monitor the Company’s website
(henryboot.co.uk/investors) and regulatory news services for any
updates in relation to the annual general meeting that may need to be
provided. In the meantime, the Board encourages shareholders to submit
their proxy form as early as possible by post or electronically as detailed in
the notes to the notice of annual general meeting and the proxy form.
Ordinarily, ordinary shareholders are entitled to appoint any person as
their proxy to attend and to exercise all or any of their rights to vote
and to speak at the annual general meeting instead of the shareholder.
However, in view of the ongoing COVID-19 pandemic, the Company
is encouraging ordinary shareholders to appoint the Chairman as their
proxy (either electronically or by post) with their voting instructions as
shareholders or their proxies will not be allowed to attend the annual
general meeting in person. The deadline for doing this is set out in the
notes to the notice of annual general meeting and the proxy form. In
addition, the method of submitting questions to the Board is detailed
on the Notice of AGM. The Company is taking these precautionary
measures to safeguard its shareholders’ and employees’ health and
make the annual general meeting as safe and efficient as possible.
Accordingly, the AGM of the Company will be held on 30 June 2020
at Banner Cross Hall, Ecclesall Road South, Sheffield, S11 9PD.
The Notice of the AGM can be found on pages 184 to 192. 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 31 to
the Financial Statements. As at 20 May 2020, the ordinary shares
represent 97.00% of the total issued share capital of the Company
by nominal value and the preference shares represent 3.00% 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.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE The Notice of the AGM on pages 184 to 192 includes the following
resolutions:
• An ordinary resolution (Resolution 15) to renew the authority of
the Directors to allot shares up to a maximum nominal amount
of £4,439,086 representing approximately one-third (33.33%) of
the Company’s issued ordinary share capital at 12 May 2020. The
authority will expire on 29 September 2021 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 16) 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 £665,863 (approximately 5% of the
Company’s issued ordinary share capital at 12 May 2020). The
authority will expire on 29 September 2021 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 also confirm their intention that, in line with the
Pre-Emption Group’s Statement of Principles, no more than 7.5%
of the issued ordinary share capital of the Company (excluding
treasury shares) will be issued for cash on a non pre-emptive basis
during any rolling three-year period without prior consultation
with shareholders.
• A special resolution (Resolution 17) to renew the authority of the
Company to make market purchases of up to 13,317,260 of
its own issued ordinary shares (10% of the Company’s issued
ordinary share capital at 12 May 2020). 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.
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 them unless all calls
and other sums presently payable by them 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 30 June 2020
are set out in the Notice of AGM on pages 184 to 192.
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.
115
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE Corporate Governance Report
DIRECTORS’ REPORT
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 Act 2006 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.
Appointment and replacement of Directors
The Directors shall not, unless otherwise determined by an ordinary
resolution of the Company, be fewer 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 Act 2006) 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
116
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 Act 2006, 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 resolution of the Company’s shareholders.
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 the Company 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 by its order by
Amy Stanbridge
Company Secretary
20 May 2020
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE 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
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 in Board
of Directors, 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 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
• 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.
Tim Roberts
Director
20 May 2020
Darren Littlewood
Director
20 May 2020
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.
117
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019OUR GOVERNANCE 118
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 FINANCIAL
STATEMENTS
DELIVERY
Invest in all our business segments
to achieve short-term delivery.
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
120
130
131
132
133
134
144
119
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Independent
Auditors’ Report
to the members of Henry Boot PLC
Report on the audit of the financial statements
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 2019 and of the group’s profit
and the group’s and the parent company’s cash flows for the year
then ended;
— have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company’s financial statements,
as applied in accordance with the provisions of the Companies Act
2006; and
— 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.
We have audited the financial statements, included within the Annual
Report and Financial Statements (the “Annual Report”), which
comprise: the Group and Parent Company Statements of Financial
Position as at 31 December 2019; the Consolidated Statement of
Comprehensive Income, the Group and Parent Company Statements
of Cash Flows, and the Group and Parent Company Statements of
Changes in Equity for the year then ended; the Principal Accounting
Policies; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided to
the group or the parent company.
Other than those disclosed in note 3 of the financial statements,
we have provided no non-audit services to the group or the parent
company in the period from 1 January 2019 to 31 December 2019.
— Overall group materiality: £3,600,000 (2018: £3,500,000), based on 0.8% of total assets.
— Overall parent company materiality: £1,650,000 (2018: £1,600,000), based on 0.8% of total assets.
— The Group is structured along three business segments being Property Investment and Development, Land
Promotion and Construction. The Group financial statements are a consolidation of the 39 reporting units
within these three business segments and the Group’s centralised functions.
— Of the Group’s 39 reporting units, we identified four, which in our view, required an audit of their complete
financial information, either due to their size or risk characteristics.
— Specific audit procedures over intangible assets, inventories, borrowings, revenue, and property, plant
and equipment were performed for a further three 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.
— Valuation of investment properties (Group)
— Accuracy and valuation of construction and development contract balances (Group)
— Valuation of house builder work in progress inventory (Group)
— Actuarial assumptions used in accounting for defined benefit pension scheme liabilities (Group and parent)
— Carrying value of investments and intercompany receivables (Parent)
— Impact of COVID-19 (Group and parent)
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
120
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities,
including fraud
Based on our understanding of the group and industry, we identified
that the principal risks of non-compliance with laws and regulations
related to breaches of health and safety regulations, and we
considered the extent to which non-compliance might have a material
effect on the financial statements, and we considered the extent to
which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have
a direct impact on the preparation of the financial statements such as
the Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to the posting of inappropriate journal
entries to improve the Group’s result for the period, and management
bias in key accounting estimates. The group engagement team shared
this risk assessment with the component auditors so that they could
include appropriate audit procedures in response to such risks in their
work. Audit procedures performed by the group engagement team
and/or component auditors included:
— Discussions with management, including consideration of known or
suspected instances of non-compliance with laws and regulations
and fraud;
— Evaluation and testing of the operating effectiveness of
management’s controls with respect to construction and
development contracts designed to prevent and detect irregularities
or bias;
— Challenging assumptions and judgements made by management
in their significant accounting estimates, in particular in relation
to construction and development contracts, the valuation of
investment properties, the valuation of work in progress inventory,
and the actuarial assumptions used in accounting for defined
benefit pension scheme liabilities (see related key audit matters
below);
— Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations or posted by
senior management. Specifically, we tested journal entries which
inflated the group result for the period with unusual offset entries
and we considered whether any journals were posted by senior
management personnel.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial
statements, the less likely we would become aware of it. Also, the
risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and
any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all
risks identified by our audit.
121
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Independent
Auditors’ Report
to the members of Henry Boot PLC
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties – £70.0m – Group
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. This accounts for 88.2% of the value of the Group’s
investment property portfolio. 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 account
for 11.8% of the Group’s investment property portfolio and
are valued by management using the residual method of
valuation. This involves estimating the gross development
value of the property and deducting from this the gross
development costs to be incurred and an allowance for
anticipated development profits yet to be earned.
For all classes of investment property, a relatively small
percentage change in valuations of individual properties, in
aggregate, could result in a material impact to the financial
statements.
Regarding the completed investment properties valued by the external
valuer
We tested the 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.
We used internal valuations experts to assess the appropriateness of
management’s valuations, and 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. These were held at cost which we
corroborated by reference to legal agreements.
No material adjustments were identified as a result of our testing.
122
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Key audit matter
How our audit addressed the key audit matter
Accuracy and valuation of construction and
development contract balances – £40.9m – Group
We focused on this area because of the judgements
involved in estimating the stage of completion of
construction and development contract activity and in
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
and development contracts and a relatively small change
in the judgements applied, such as whether a provision
for remedial works is required, could result in a material
misstatement to the financial statements.
In order to address estimation uncertainty with respect to
assessing the stage of completion and costs to complete,
management undertake regular detailed cost assessments
which are reviewed and approved by appropriate persons.
We also note there is judgement involved in revenue
recognition on construction and development contracts in
particular where performance related incentive payments
are built into transaction prices. In determining the
appropriate treatment, management complete detailed
contract reviews for each contract entered into and use
past experience, external valuers, consideration of external
influences, and risk profile assessments on the nature of
each contract to assist in reaching their conclusions.
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:
— We met with in-house quantity surveyors to understand the status of contract
work and to understand how the costs to complete had been calculated;
— We tested controls over the contract acceptance and forecasting process;
— We tested controls over costs incurred in the year focusing on the approvals
process and the allocation of costs to the correct contracts;
— We agreed key contract details to legal documentation;
— We performed a recalculation of the revenue recognised in the year for a
sample of contracts;
— Tested the bills raised on construction and development contracts during the
year through to invoice and where possible, cash receipt;
— We also checked customer acceptance of the work undertaken, considering
the implications of any ongoing disputes which included discussions with the
Group legal department;
— Testing costs to complete schedules by selecting a sample of forecast costs
and agreeing the expected cost to supporting evidence. We also reviewed
costs to complete for reasonableness by looking at historical forecasting
accuracy on costs to complete;
— 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 by testing the outturn on similar amounts previously provided
for;
— We also completed site visits during the year; and
— We assessed management’s overall profit recognition methodology, including
a sample assessment of the accuracy of revenue and profit forecasts from
prior years.
No material adjustments were identified as a result of our testing.
123
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Independent
Auditors’ Report
to the members of Henry Boot PLC
Key audit matter
How our audit addressed the key audit matter
Valuation of house builder work in progress inventory –
£36.3m – Group
We focused on this area because the value of the Group’s
work in progress inventory with respect to the building
of houses represents a significant balance in the Group
statement of financial position and determining the carrying
value of work in progress inventory requires a high degree of
judgement.
The key judgements include forecasting future costs to
complete and selling prices which can be affected by
market conditions and unexpected events.
Actuarial assumptions used in accounting for defined
benefit pension scheme liabilities – £208.3m – Group
and parent
The Group and parent company have 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. 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.
Carrying value of investments and intercompany
receivables – £165.0m – Parent
We focused upon this area because the balances due from
the wider Group and the investments held by the parent
company in its subsidiaries are significant balances within
the parent company financial statements.
The key judgement is the underlying cash generation and
profitability of the wider Group which can be affected by
market conditions and unexpected events.
Our testing over the valuation of work in progress inventory included the following:
— We assessed the adequacy of controls over the approval of site forecasts, and
the authorisation and recording of costs, including testing of controls over the
allocation of costs to the correct sites.
— Visited a sample of sites to confirm the existence and condition of the work in
progress, and also to evaluate the reasonableness of the assessment of stage
of completion.
— Sample tested and agreed certain costs incurred during the year included
within work in progress to supporting evidence as well as reviewing the
proportion of that expenditure recognised as a cost of sale in the year in
respect of units sold. This included any land additions in the period.
— Tested the percentage completion of units across a sample of sites and
checked that forecasts have been appropriately updated for expected costs
and selling prices to completion. We also assessed the level of gross margin
achieved against those recorded previously and future forecasts.
— Assessed the historical accuracy of management’s forecasting.
— Performed an independent assessment of cost accruals and costs to
complete via enquiry and corroboration to supporting evidence.
No material adjustments were identified as a result of our testing.
We obtained the actuary’s report and we used our own actuarial experts to
assess the judgemental assumptions such as salaries increase, inflation, discount
rate, and mortality rates. We did this by comparing the key assumptions to
externally derived data, as well as our own independently formed assessments,
and we also assessed and challenged the methodologies used by management
in deriving the assumptions.
We have no exceptions to report as a result of this testing.
We assessed the recoverability of the intercompany receivables by reviewing the
underlying financial performance and profitability of the entities owing the parent
company.
We reviewed management’s impairment review on the investments in subsidiaries
held by firstly considering whether management’s assessment of impairment
triggers was appropriate, and we subsequently followed this up by reviewing
management’s forecasts and budgets prepared to consider whether an
impairment was required on an entity by entity basis.
We identified no issues with the carrying value of investments or amounts due
from wider Group entities in our testing.
124
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Key audit matter
How our audit addressed the key audit matter
Impact of COVID-19 – Group and parent
The ongoing and evolving COVID-19 pandemic is having a
significant impact on the UK economy in which the Group
operates. There is significant uncertainty as to the duration of
the pandemic and what its lasting impact will be on the UK
economy.
We have re-evaluated our risk assessment, including the going concern risk of the
Group. Based on the Directors’ assessment and our audit procedures thereon as
described below, we consider our original risk assessment to remain appropriate
and therefore consider going concern to be a normal risk for the Group.
In assessing management’s consideration of the potential impact on the Group of
COVID-19, we have undertaken the following audit procedures:
The impact of the COVID-19 pandemic has been treated as
a non-adjusting post balance sheet event for the Group and
Company.
— We obtained from management their latest forecasts that support the board’s
assessment and conclusions with respect to the going concern basis of
preparation of the financial statements;
The Directors have considered the potential impact to the
Group and Company of the ongoing COVID-19 pandemic
across the business.
In relation to the Group’s going concern assessment, the
Directors have prepared a ‘base case’ cash flow forecast
for the period to 30 June 2021 reflecting what they expect
the impact of the COVID-19 pandemic to be. They have
stress tested the cash flow forecasts reflecting what they
consider to be a plausible downside scenario resulting
from the direct and indirect consequences of COVID-19
as described in the Going concern statement on page 49.
This downside scenario included a six month ‘lock down’
period in the UK resulting in minimal trading activity during
the six month period as well as a reduction in investment
property valuations across its portfolio. As disclosed in the
Going concern statement on page 49, this indicated that the
Group would operate within its banking facilities throughout
the forecast period including complying with all banking
covenants.
— We reviewed the management accounts for the financial year to date and
checked that these were consistent with the starting point of management’s
forecasts. We also checked the arithmetical accuracy of management’s
forecasts for the period to 30 June 2021.
— We evaluated management’s base case forecast and downside scenario, and
challenged the adequacy and appropriateness of the underlying assumptions,
including the level and period of reduction in revenue and timing of significant
cash receipts, and confirmed management’s mitigating actions are within
their control and can be taken on a timely basis if needed. We reviewed the
composition of costs at a divisional level within the forecasts to ensure they
were prepared on a consistent and appropriate basis.
— We evaluated the level of forecast liquidity, including compliance with banking
facility covenants and the amount of the facility available that is linked to the
value of the Group’s investment properties.
Our conclusion in respect of going concern is included in the “Conclusions related
to going concern” section below.
We concur with management that the COVID-19 outbreak is indicative of
conditions that arose after the balance sheet date and therefore is a non-adjusting
post balance event. As such we concluded that management’s future assumptions
used in determining investment property carrying values and impairment
assessments relating to asset valuations performed as at 31 December 2019
should not be adjusted.
We have reviewed management’s disclosures in the financial statements in relation
to COVID-19 and post balance sheet event disclosures and are satisfied that they
are consistent with the risks affecting the Group, their impact assessment and the
procedures that we have performed.
125
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Independent
Auditors’ Report
to the members of Henry Boot PLC
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 structure of the group and the parent company, the accounting processes and controls, and the industry in
which they operate.
The Group is structured along three business segments being Property Investment and Development, Land Promotion, and Construction.
The Group financial statements are a consolidation of the 39 reporting units within these three business segments and the Group’s centralised
functions.
Of the Group’s 39 reporting units, we identified four 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 intangible assets, inventories, borrowings, revenue, and property, plant and equipment were performed for a
further three 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.
The work was performed by a component audit team for the four reporting units over which specific audit procedures were performed. All other
work was completed by the Group audit team.
The reporting units where we performed audit work accounted for 82% of assets, 96% of revenue, and 94% of profit before tax.
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 misstatements, both individually and in aggregate 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 materiality
£3,600,000 (2018: £3,500,000).
£1,650,000 (2018: £1,600,000).
Group financial statements
Parent company financial statements
How we determined it
0.8% of total assets.
0.8% of total assets.
Rationale for benchmark
applied
The key objective of the Group is to increase the
long-term shareholder value by maximising the value
of the 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.
The key objective of the Parent Company is to hold
investments in the various Group companies. As a
result, we believe total assets is the primary
measure used by the shareholders in assessing
the performance of the Parent Company and is
therefore the appropriate benchmark to use in
setting materiality.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £107,000 and £3,000,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £180,000 (Group audit)
(2018: £175,000) and £82,500 (Parent company audit) (2018: £60,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
126
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to
in respect of the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting
in preparing the financial statements and the directors’ identification of any material
uncertainties to the group’s and the parent company’s ability to continue as a going
concern over a period of at least twelve months from the date of approval of the
financial statements.
We have nothing material to add or to draw
attention to.
However, because not all future events or conditions
can be predicted, this statement is not a guarantee
as to the group’s and parent company’s ability to
continue as a going concern.
We are required to report if the directors’ statement relating to Going Concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK)
and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required
by ISAs (UK) unless otherwise stated).
127
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Independent
Auditors’ Report
to the members of Henry Boot PLC
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The directors’ assessment of the prospects of the group and of the principal risks that would threaten the
solvency or liquidity of the group
We have nothing material to add or draw attention to regarding:
— The directors’ confirmation on page 112 of the Annual Report 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.
— The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
— The directors’ explanation on page 50 of the Annual Report 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 to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal
risks facing the group and 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 UK Corporate Governance Code (the “Code”); and considering whether the statements are
consistent with the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit.
(Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
— The statement given by the directors, on page 117, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the 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 obtained in the
course of performing our audit.
— The section of the Annual Report on page 96 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
— The directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
128
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Other required reporting
Companies Act 2006 exception reporting
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
— certain disclosures of directors’ remuneration specified by law are
not made; 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.
Appointment
Following the recommendation of the audit committee, we were
appointed by the directors on 28 May 2010 to audit the financial
statements for the year ended 31 December 2010 and subsequent
financial periods. The period of total uninterrupted engagement is 10
years, covering the years ended 31 December 2010 to 31 December
2019.
Ian Morrison (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
20 May 2020
Responsibilities for the financial statements
and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Statement of Directors’ Responsibilities
set out on page 117, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
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.
129
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Administrative expenses
Pension expenses
Increase/(decrease) in fair value of investment properties
(Loss)/profit on sale of investment properties
Loss 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
Actuarial (loss)/gain on defined benefit pension scheme
Deferred tax on actuarial loss/(gain)
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
4
14
3
5
6
16
7
12
28
19
9
9
2019
£’000
379,693
(298,711)
80,982
(29,681)
(4,475)
46,826
2,370
(238)
(56)
48,902
494
(1,740)
1,448
49,104
(9,649)
39,455
(404)
(7,937)
1,350
(6,991)
32,464
37,596
1,859
39,455
30,605
1,859
32,464
28.3p
28.1p
2018
£’000
397,052
(319,052)
78,000
(24,065)
(5,975)
47,960
(92)
1,365
(36)
49,197
275
(1,698)
830
48,604
(8,229)
40,375
(153)
6,199
(1,054)
4,992
45,367
37,505
2,870
40,375
42,497
2,870
45,367
28.3p
28.0p
130
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Statements of
Financial Position
as at 31 December 2019
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investment properties
Investments
Investment in joint ventures and associates
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Contract assets
Trade and other receivables
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Current tax liabilities
Borrowings
Lease liabilities
Provisions
Net current assets
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
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
2019
£’000
2018
£’000
Note
11
12
13
14
15
16
18
19
20
17
18
23
22
26
13
27
23
26
13
28
27
31
32
32
32
33
6,823
22,015
6,085
70,002
—
6,634
17,238
4,538
133,335
169,749
19,085
90,777
42,303
321,914
70,763
9,876
4,680
9,981
2,052
5,315
102,667
219,247
6,148
717
2,585
22,965
1,681
34,096
318,486
13,717
2,993
293,593
6,390
(1,248)
315,445
3,041
318,486
5,077
26,161
—
120,975
—
6,686
11,915
3,487
174,301
154,980
42,772
60,225
10,856
268,833
77,475
2,794
3,897
24,119
—
5,724
114,009
154,824
2,792
5,096
—
16,710
2,215
26,813
302,312
13,715
3,397
276,999
6,347
(1,260)
299,198
3,114
302,312
Parent Company
2019
£’000
—
331
160
—
38,021
—
—
4,255
42,767
—
—
128,364
37,316
165,680
82,961
—
2,958
1,012
57
—
86,988
78,692
—
—
108
22,965
—
23,073
98,386
13,717
—
78,390
7,527
(1,248)
98,386
—
98,386
2018
£’000
—
459
—
—
34,086
—
—
3,115
37,660
—
—
170,586
5,741
176,327
74,463
—
1,340
16,022
—
—
91,825
84,502
—
—
—
16,710
—
16,710
105,452
13,715
—
85,513
7,484
(1,260)
105,452
—
105,452
The Parent Company made a profit for the year of £12,350,000 (2018: £19,367,000).
The Financial Statements on pages 130 to 181 of Henry Boot PLC, registered number 160996, were approved by the Board of Directors and
authorised for issue on 20 May 2020.
On behalf of the Board
Tim Roberts
Director
Darren Littlewood
Director
131
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Statements of
Changes in Equity
for the year ended 31 December 2019
Attributable to owners of the Parent Company
Share
capital
£’000
13,701
—
—
—
—
14
—
—
14
13,715
—
13,715
—
—
—
—
2
—
—
—
—
2
13,717
Property
revaluation
reserve
£’000
3,550
—
(153)
(153)
—
—
—
—
—
3,397
—
3,397
—
(404)
(404)
—
—
—
—
—
—
—
2,993
Retained
earnings
£’000
245,260
37,505
5,145
42,650
(11,161)
—
—
250
(10,911)
276,999
(154)
276,845
37,596
(6,587)
31,009
(12,621)
—
—
—
(1,856)
216
(14,261)
293,593
Cost of
shares held
by ESOP
trust
£’000
(1,240)
—
—
—
—
—
(429)
409
Other
reserves
£’000
6,121
—
—
—
—
226
—
—
Non-
controlling
interests
£’000
2,684
2,870
—
2,870
(2,440)
—
—
—
Total
£’000
267,392
37,505
4,992
42,497
(11,161)
240
(429)
659
226
6,347
—
6,347
—
—
—
—
43
—
—
—
—
43
6,390
(10,691)
(20)
299,198
(1,260)
(154)
—
299,044
(1,260)
37,596
—
(6,991)
—
—
30,605
— (12,621)
45
—
(598)
(598)
—
—
(1,856)
—
826
610
(14,204)
12
315,445
(1,248)
(2,440)
3,114
—
3,114
1,859
—
1,859
(2,445)
—
—
(1,343)
1,856
—
(1,932)
3,041
Total
equity
£’000
270,076
40,375
4,992
45,367
(13,601)
240
(429)
659
(13,131)
302,312
(154)
302,158
39,455
(6,991)
32,464
(15,066)
45
(598)
(1,343)
—
826
(16,136)
318,486
Group
At 1 January 2018
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2018
Change in accounting policy¹
Restated at 1 January 2019
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Acquisition of subsidiary
Purchase of minority interest
Share-based payments
At 31 December 2019
Note
32
10
33
32, 33
32
10
33
36
32, 33
1. The Group has adopted IFRS 16 retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the
specific transitional provisions in the standard.
Share
capital
£’000
13,701
—
—
—
—
14
—
—
14
13,715
—
13,715
—
—
—
—
2
—
—
2
13,717
Retained
earnings
£’000
72,242
19,367
5,145
24,512
(11,161)
—
—
(80)
(11,241)
85,513
(7)
85,506
12,350
(6,589)
5,761
(12,621)
—
—
(256)
(12,877)
78,390
Cost of
shares held
by ESOP
trust
£’000
(1,240)
—
—
—
—
—
(429)
409
(20)
(1,260)
—
(1,260)
—
—
—
—
—
(598)
610
12
(1,248)
Other
reserves
£’000
7,258
—
—
—
—
226
—
—
226
7,484
—
7,484
—
—
—
—
43
—
—
43
7,527
Total
equity
£’000
91,961
19,367
5,145
24,512
(11,161)
240
(429)
329
(11,021)
105,452
(7)
105,445
12,350
(6,589)
5,761
(12,621)
45
(598)
354
(12,820)
98,386
Note
8
10
33
32
8
10
33
32
Parent Company
At 1 January 2018
Profit for the year
Other comprehensive income
Total comprehensive income
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2018
Change in accounting policy¹
Restated at 1 January 2019
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 2019
132
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Statements of
Cash Flows
for the year ended 31 December 2019
Cash flows from operating activities
Cash generated from operations
Interest paid
Tax paid
Net cash flows from operating activities
Cash flows generated from investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of intangible assets
Purchase of property, plant and equipment
Purchase of investment property
Proceeds on disposal of investment in associate
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
Net cash flows generated from investing activities
Cash flows used in financing activities
Proceeds from shares issued
Purchase of treasury shares
Decrease in borrowings
Increase in borrowings
Principal elements of lease payments
– ordinary shares
Dividends paid
– non-controlling interests
– preference shares
Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at beginning of year
Net cash and cash equivalents at end of year
Analysis of net cash/(debt):
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Bank loans
Leases liabilities
Government loans
Net cash/(debt)
Note
34
36
11
12
14
33
10
10
26
26
13
26
Group
2019
£’000
21,525
(1,341)
(8,459)
11,725
(152)
(491)
(1,471)
(14,060)
1,500
365
22,542
44,550
494
—
53,277
46
(598)
(59,368)
43,777
(2,346)
(12,600)
(2,445)
(21)
(33,555)
31,447
10,856
42,303
42,303
—
42,303
(7,757)
(4,637)
(2,941)
26,968
2018
£’000
22,276
(1,434)
(10,054)
10,788
—
(417)
(1,464)
(4,906)
—
265
17,881
2,000
265
—
13,624
239
(429)
(46,113)
36,066
—
(11,140)
(2,440)
(21)
(23,838)
574
10,282
10,856
10,856
—
10,856
(22,422)
(3,220)
(3,573)
(18,359)
Parent Company
2019
£’000
46,478
(2,943)
(6,356)
37,179
—
—
(84)
—
—
—
—
—
5,552
17,180
22,648
45
(598)
(45,000)
30,028
(96)
(12,600)
—
(21)
(28,242)
31,585
4,719
36,304
37,316
(1,012)
36,304
—
(165)
—
36,139
2018
£’000
13,246
(2,740)
(8,602)
1,904
—
—
(122)
—
—
—
—
—
5,943
12,300
18,121
238
(429)
(30,000)
20,000
—
(11,141)
—
(21)
(21,353)
(1,328)
6,047
4,719
5,741
(1,022)
4,719
(15,000)
—
—
(10,281)
133
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Principal
Accounting Policies
for the year ended 31 December 2019
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 (‘IFRS’), IFRS IC 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.
Change in accounting policies
The accounting policies adopted are consistent with those of the previous financial year with the exception of the policy for Leases. This policy
has been updated following the implementation of IFRS 16 ‘Leases’. Further details can be found in the ‘Impact of accounting standards and
interpretations’ section below.
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
In January 2020, the Group concluded negotiations with three banking partners to put in place a £75m facility to replace the £72m facility we had
in place at 31 December 2019. The renewed facilities commenced on 23 January 2020, with a renewal date of 23 January 2023 and an option to
extend the facilities by one year, each year, for the next two years occurring on the anniversary of the facility. The renewed facilities, on improved
terms, maintain covenants on the same basis as the previous facilities.
Following the recent outbreak of the COVID-19 pandemic the Directors have further considered its potential impact on the Group. They have
stress tested the effect of both a three-month and six month UK lock down during which time minimal activity occurs. None of the modelling
undertaken by the Directors gives rise to any breach of bank facility covenants. However, as one of the covenants references the loan to value
ratio of the investment property portfolio the full facility would not be available to the Group unless re-investment in the portfolio was undertaken.
The facilities also contain a covenant relating to the ratio of EBIT (Earnings Before Interest and Tax) on a 12-month rolling basis to senior facility
finance costs. Our most severe downside modelling, which reflects a near 55% reduction in revenue levels from our pre COVID-19 budget for
2020, demonstrates headroom over this covenant throughout the forecast period to the end of June 2021.
At the time of approving the Financial Statements the Directors expect that the Company and the Group will have adequate resources, liquidity
and available bank facilities to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern
basis of accounting in preparing the Financial Statements. Further detail is contained in the Strategic Report on pages 49 to 50.
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.
134
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 The Board considers the business based on the following operating segments:
• Property Investment and Development, inclusive of property investment, property development, housebuilding and associated trading activities;
• Land Promotion, inclusive of land management, development and trading activities; and
• Construction, inclusive of its PFI company, social housing and plant hire 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 financing activities.
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 IFRS 9.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values
at the acquisition date.
Acquisition-related costs are recognised in the Consolidated Statement of Comprehensive Income as incurred.
Goodwill arising on consolidation of subsidiary undertakings is recognised as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
Goodwill is subsequently measured at cost less any accumulated impairment losses. Goodwill is subjected to an impairment test at the reporting
date or when there has been an indication that the goodwill should be impaired, any loss is recognised immediately through the 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.
Critical judgements and estimates
The critical judgements and estimates in applying the Group’s Accounting Policies that have the most significant effect on the amounts
recognised in the Financial Statements, apart from those noted below, relate to revenue recognition and inventories. These are referred to
on pages 137 to 139 and each is interpreted by management in the light of IFRS 15 ‘Revenue from Contracts with Customers’ and IAS 2
‘Inventories’.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, and that could have a material
adjustment to the carrying amounts of assets and liabilities over the ensuing year, are:
• Retirement benefit costs — the estimates used in retirement benefit costs are arrived at in conjunction with the scheme’s actuary and
advisers, those having the most significant impact being the liabilities discount rate, RPI and mortality rates. Note 28 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 14 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 27 to the Financial Statements gives details of the sensitivity surrounding these estimates.
135
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Principal
Accounting Policies
for the year ended 31 December 2019
Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer excluding amounts collected on behalf of third parties.
The Group recognises revenue when it transfers control over a product or service to a customer. Where consideration is not specified within the
contract and therefore subject to variability, the Group estimates the amount of consideration to be received from its customer. The consideration
recognised is the amount which is highly probable not to result in a significant reversal in future periods. Where a modification to an existing
contract occurs, the Group assesses the nature of the modification and whether it represents a separate performance obligation required to be
satisfied by the Group or whether it is a modification to the existing performance obligation.
The Group has some contracts where the period between the transfer of the promised goods or services to the customer and payment by the
customer exceeds one year. The Group adjusts its transaction price for the time value of money.
The Group’s activities are wide-ranging, and as such, depending on the nature of the product or service delivered and the timing of when control
is passed to the customer, the Group will account for revenue over time or at a point in time. Where revenue is measured over time, the Group
uses the input method to measure progress of delivery.
Product and Service
Construction contracts
Sale of land and
properties
Nature, timing of satisfaction of performance obligations and significant payment terms.
Typically, the Group’s construction contracts consist of one performance obligation, being delivery of the
construction works. However for certain contracts (for example where contracts involve separate phases or
products that are not highly interrelated) multiple performance obligations exist. Where multiple performance
obligations exist, total revenue is allocated to performance obligations based on the relative standalone selling
prices of each performance obligation.
Revenue attributed to each performance obligation is recognised over time based on the percentage of
completion, reflecting the enhancement in value of the customer’s asset. The percentage of completion is
calculated as the costs incurred to date as a percentage of the total costs expected to satisfy the performance
obligation. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances
change. Any resulting increases or decreases in estimated revenues or costs are reflected in the percentage of
completion calculation in the period in which the circumstances that give rise to the revision become known.
Losses are recorded in full when the unavoidable costs of fulfilling a contract exceed the economic benefits.
Any revenues recognised in excess of amounts invoiced are recognised as contract assets within current assets.
Any payments received in excess of revenue recognised are recognised as contract liabilities within current
liabilities.
Revenue from the sale of land and properties is generally a single performance obligation which is satisfied at
the point in time when control of the land and properties has passed, typically on legal completion when legal
title has transferred.
Variable consideration such as overages are estimated based on the amount of consideration the Group
expects to be entitled to, taking into account the terms which may give rise to variability and it is only recognised
where it is highly probable there will not be a significant future reversal. This is estimated at contract inception
and reassessed over the life of the contract.
PFI Concession
Revenue includes the fair value of consideration received or receivable on the sale of part exchange properties.
Revenue from the Group’s PFI concession is recognised at the point in time, by the calculation of ‘shadow tolls’
based on individual vehicle usage of the A69.
The concession is accounted for in accordance with IFRIC 12 ‘Service Concession Arrangements’ using the
intangible asset model.
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 plant and equipment hire is measured as the fair value of sales proceeds which relate to the
period of account.
Operating leases
(recognised as income
under IFRS 16 ‘Leases’)
Plant and equipment
hire (recognised as
income under IFRS 16
‘Leases’)
136
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Critical judgements and estimates in applying IFRS 15 Revenue from Contracts with Customers
The following are the critical judgements and estimates in applying accounting policies that the Directors have made in the process of applying
IFRS 15 Revenue from Contracts with Customers and that have the most significant effect on the amounts recognised in the Consolidated
Financial Statements.
Estimates in determining the recognition of revenue on construction contracts over time – construction 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 or external survey of the work performed and costs to complete.
Judgement in determining the recognition of revenue at a point in time on land sale contracts – there is often judgement involved in evaluating
when a customer obtains control of land during a sale, particularly where the contract includes licensing, risk or deferred payment term clauses.
In determining the revenue recognition the Directors consider the present right for payment, legal title, physical possession, risks and rewards of
ownership and acceptance of the asset in forming their opinion. Where necessary third party advice is taken.
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.
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.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with
a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating
expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed.
Lease liability: The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses an incremental borrowing rate which is
the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar economic environment.
Right-of-use assets: The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset and are now
presented within property, plant and equipment.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss in line with the
Group’s existing impairment accounting policy.
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 31. 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 31.
137
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Principal
Accounting Policies
for the year ended 31 December 2019
Intangible assets excluding goodwill
Intangible assets are stated at cost less accumulated amortisation and impairment. The PFI asset which is accounted for under IFRIC 12 ‘Service
Concession Arrangements’ 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 seven years to run.
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
– between 10% and 50%
• Vehicles
– between 10% and 25%
• Office equipment
– between 25% and 33%
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 14 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 it is disposed of at its carrying value.
Where specific investment properties have been identified as being for sale within the next 12 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’.
138
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
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
• Housebuilder land and work in progress includes construction of residential housing for onward sale
• Land held for development or sale is land owned by the Group that is promoted through the planning process in order to gain planning
permission, adding value to the land
• Options to purchase land are agreements that the Group 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, at which point inventory is reduced by the value
of the reimbursed cost. These costs are held in inventory at the lower of cost and estimated net realisable value
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.
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.
139
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Principal
Accounting Policies
for the year ended 31 December 2019
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.
Financial instruments
The Group retains such financial instruments as are required, together with retained earnings, in order to finance the Group’s operations.
Financial assets or financial liabilities are recognised by the Group in the Statement of Financial Position only when the Group becomes a party
to the contractual provisions of the instrument.
The principal financial instruments are:
• Trade and other receivables are measured initially at fair value and then amortised cost — where the time value of money is material,
receivables are amortised using the effective interest rate method (see Interest income and expense on page 137). IFRS 9’s simplified
approach to provisioning is used to calculate the Group’s lifetime expected credit risk;
• 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 137); and
• Borrowings — 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 that 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.
140
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 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.
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 27 on pages 168 and 169.
Retirement benefit costs
Payments to the defined contribution retirement benefit scheme are charged as an expense as they fall due.
The cost of providing benefits under the defined benefit retirement scheme is determined using the Projected Unit Credit Method, with actuarial
calculations being carried out at each reporting date. Actuarial gains and losses are recognised in full in the period in which they occur. They
are recognised within ‘Other comprehensive income’ within the Consolidated Statement of Comprehensive Income. The net periodic benefit
cost, comprising the employer’s share of the service cost and the net interest cost, is charged to the Consolidated Statement of Comprehensive
Income. The Group’s net obligations in respect of the scheme are calculated by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods. This is then discounted to present value and the fair value of the scheme’s
assets is then deducted.
Share 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.
Dividends
Dividends are only recognised in the actual period in which they are declared.
141
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Principal
Accounting Policies
for the year ended 31 December 2019
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 2019:
IFRS 16 (issued 2016)
IFRIC 23 (amended 2017)
IFRS 9 (issued 2017)
IAS 28 (amended 2017)
Annual improvements (issued 2017)
IAS 19 (amended 2018)
‘Leases’
‘Uncertainty over Income Tax Treatments’
‘Payment Features with Negative Compensation’
‘Long-term Interests in Associates and Joint Ventures’
‘Annual Improvements to IFRSs 2015–2017 Cycle’
‘Plan Amendment, Curtailment or Settlement’
Effective from
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
At the date of the authorisation of these Financial Statements, the following standards, amendments and interpretations were in issue but not yet
effective:
IFRS 17 (issued 2017)
IFRS 3 (amended 2018)
IFRS 9, IAS 39 and IFRS 7 (issued 2019)
IAS 1 and IAS 8 (issued 2018)
Amendments to IFRS (issued 2018)
‘Insurance Contracts’
‘Business Combinations’
Interest Rate Benchmark Reform
Definition of Material
References to the Conceptual Framework in IFRS Standards
* Not yet endorsed by the EU.
Effective from
1 January 2021*
1 January 2020*
1 January 2020*
1 January 2020
1 January 2020
A review of the impact of these standards, amendments and interpretations which are not yet effective has been conducted and the Directors do
not believe that they will give rise to any significant financial impact.
In 2019, 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.
Adoption of the following standards effective from 1 January 2019 are significant to the Group
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules
are therefore recognised in the opening balance sheet on 1 January 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the
lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities
on 1 January 2019 was between 2.5% and 3.0%.
For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately
before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.
Operating lease commitments disclosed as at 31 December 2018
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Add: finance lease liabilities recognised as at 31 December 2018
Add: adjustments as a result of a different treatment of extension and termination options
Less: adjustments relating to changes in the index or rate affecting variable payments
Lease liability recognised as at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
At 1 January 2019
£’000
2,430
(190)
4,428
277
(18)
6,927
2,361
4,566
6,927
.
142
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Land and buildings
Equipment held for hire
Vehicles
Total right-of-use assets
2019
£’000
1,916
4,428
294
6,638
2018
£’000
—
—
—
—
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
• Property, plant and equipment – decrease by £4,142,000;
• Right-of-use assets – increase by £6,487,000; and
• Lease liabilities – increase by £2,499,000.
The net impact on retained earnings on 1 January 2019 was a decrease of £154,000.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
• Reliance on previous assessments on whether leases are onerous;
• The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;
• The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts
entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an
arrangement contains a Lease.
143
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
1. Revenue
Analysis of the Group’s revenue is as follows:
Activity in the United Kingdom
Construction contracts:
– Construction segment
– Property Investment and Development
segment
Sale of land and properties:
– Property Investment and Development
segment
– Housebuilder unit sales
– Land Promotion
PFI concession
Revenue from contracts
with customers
Plant and equipment hire
Investment property rental income
Other rental income
2019
£’000
81,002
114,743
27,932
43,861
73,094
14,518
355,150
16,734
7,102
707
379,693
Timing of revenue
recognition
Timing of revenue
recognition
At a point
in time
£’000
Over time
£’000
2018
£’000
At a point
in time
£’000
Over time
£’000
69,008
173,003
—
—
—
—
—
—
1,282
37,672
74,727
14,832
—
—
27,932
43,861
73,094
14,518
81,002
69,008
114,743
173,003
—
—
—
—
1,282
37,672
74,727
14,832
370,524
16,858
8,854
816
397,052
159,405
195,745
128,513
242,011
Contingent rents recognised as income during the year amount to £326,000 (2018: £426,000).
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 sales to a single external customer amounting to 15.3% (2018:
36.1%) of the Group’s total revenue. This related to a single high value contract which commenced in 2016 and continued through to 2019. The
Construction segment made sales to a single external customer amounting to 10.8% (2018: 5.9%) of the Group’s total revenue. This related to
two high-value contracts which commenced in 2018 and continue through to 2021. The segments have a number of other contracts in progress
and are not reliant on any major customer individually.
The accounting policies of the reportable segments are the same as the Group’s Accounting Policies. The Group’s Principal Accounting Policies
are described on pages 134 to 143.
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.
144
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 2. Segment information continued
Property
Investment
and
Development
£’000
192,225
297
192,522
16,354
1,326
(5,701)
1,449
13,428
(1,205)
12,223
13,428
397
—
—
2,370
—
—
Property
Investment
and
Development
£’000
221,546
325
221,871
20,114
1,112
(6,149)
830
15,907
(2,047)
13,860
4,661
208
—
—
(92)
—
—
2019
Construction
£’000
114,255
10,886
125,141
9,045
965
(631)
Group
overheads
£’000
—
612
612
(7,535)
22,700
(2,884)
—
9,379
(2,145)
7,234
6,768
4,727
205
555
—
1,237
—
2018
—
12,281
(352)
11,929
866
754
—
—
—
—
(1,683)
Construction
£’000
100,698
2,229
102,927
8,932
867
(556)
Group
overheads
£’000
—
647
647
(7,784)
18,206
(2,679)
—
9,243
(1,836)
7,407
5,273
4,381
204
497
—
1,881
—
—
7,743
939
8,682
676
768
—
—
—
—
84
Land
Promotion
£’000
73,213
—
73,213
31,038
2,074
(1,304)
(1)
31,807
(5,947)
25,860
43
32
—
—
—
671
—
Land
Promotion
£’000
74,808
—
74,808
27,935
1,679
(1,103)
—
28,511
(5,285)
23,226
—
13
—
—
—
1,524
—
Eliminations
£’000
—
(11,795)
(11,795)
—
(26,571)
8,780
—
(17,791)
—
(17,791)
—
—
—
—
—
—
—
Eliminations
£’000
—
(3,201)
(3,201)
—
(21,589)
8,789
—
(12,800)
—
(12,800)
—
—
—
—
—
—
—
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit/(loss)
Finance income
Finance costs
Share of profit/(loss) of joint ventures
and associates
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Depreciation
Impairment
Amortisation
Increase in fair value of investment
properties
Provisions
Pension scheme credit
Revenue
External sales
Inter-segment sales
Total revenue
Operating profit/(loss)
Finance income
Finance costs
Share of profit of joint ventures and
associates
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Depreciation
Impairment
Amortisation
Decrease in fair value of investment
properties
Provisions
Pension scheme debit
Total
£’000
379,693
—
379,693
48,902
494
(1,740)
1,448
49,104
(9,649)
39,455
21,105
5,910
205
555
2,370
1,908
(1,683)
Total
£’000
397,052
—
397,052
49,197
275
(1,698)
830
48,604
(8,229)
40,375
10,610
5,370
204
497
(92)
3,405
84
145
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Notes to the
Financial Statements
for the year ended 31 December 2019
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 lease liabilities
Current borrowings
Non-current lease liabilities
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 (note 12)
Depreciation of right-of-use assets (note 13)
Impairment of goodwill included in administrative expenses (note 11)
Amortisation of PFI asset included in cost of sales (note 11)
Amortisation of capitalised letting fees (note 14)
Loss on sale of assets held for sale
Impairment losses recognised on trade receivables (note 18)
Property rentals under operating leases
(Increase)/decrease in fair value of investment property (note 14)
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
146
2019
£’000
198,024
164,300
42,667
3,417
408,408
4,538
42,303
455,249
32,321
19,663
39,583
2,216
93,783
4,680
2,052
9,981
2,585
717
22,965
136,763
318,486
2019
£’000
4,661
1,250
205
555
18
56
514
—
(2,370)
93,645
35,471
8
(1,106)
2018
£’000
238,809
152,573
34,637
2,772
428,791
3,487
10,856
443,134
31,300
31,974
25,553
2,173
91,000
3,897
—
24,119
—
5,096
16,710
140,822
302,312
2018
£’000
5,370
—
204
497
100
36
65
481
92
74,226
34,001
8
(891)
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 3. Operating profit continued
The remuneration paid to PricewaterhouseCoopers LLP, the Company’s external auditors, was as follows:
2019
£’000
2018
£’000
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
Other services
Total non-audit fees
Total fees
92
230
322
28
28
350
Non-audit services relate to a review of the Group’s half year results and the provision of the TSR comparator group report.
4. Employee costs
Group
Parent Company
Wages and salaries
Share-based payment expense
Social security costs
Defined benefit pension costs (see note 28)
Defined contribution pension costs (see note 28)
Other pension costs
2019
£’000
26,334
826
3,394
2,130
2,255
90
35,029
2018
£’000
24,173
659
2,934
3,739
2,198
38
33,741
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
Unwinding of discounting
2019
£’000
3,629
354
571
119
244
12
4,929
2019
Number
99
33
182
150
66
530
2019
£’000
49
176
269
494
92
134
226
23
23
249
2018
£’000
3,204
329
409
1,733
255
19
5,949
2018
Number
101
34
175
151
63
524
2018
£’000
32
56
187
275
147
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
6. Finance costs
Interest on bank loans and overdrafts
Interest on other loans and payables
Unwinding of discounting: trade payables and borrowings
Unwinding of discounting: provisions (note 27)
7. Tax
Current tax:
UK corporation tax on profits for the year
Adjustments in respect of earlier years
Total current tax
Deferred tax (note 19):
Origination and reversal of temporary differences
Total deferred tax
Total tax
2019
£’000
1,027
272
441
—
1,740
2019
£’000
9,057
184
9,241
408
408
9,649
2018
£’000
990
243
458
7
1,698
2018
£’000
9,017
(860)
8,157
72
72
8,229
Corporation tax is calculated at 19% (2018: 19%) of the estimated assessable profit for the year.
As a result of the change in the UK corporation tax rate 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% (2018: 17%) 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
Capital gains
Tax losses for which no deferred tax asset is recognised being £(184,000) (2018: £860,000)
Adjustment in respect of earlier years
Joint venture results reported net of tax
Effective tax rate
2019
£’000
49,104
2019
%
19.00
0.14
0.87
(0.16)
0.37
(0.56)
19.66
2018
£’000
48,604
2018
%
19.00
0.19
(0.31)
0.14
(1.77)
(0.32)
16.93
The tax charge in the year is higher (2018: lower) than the standard rate of corporation tax predominantly due to capital gains on the disposal of
investment property (2018: a prior year adjustment relating to non-taxable capital gains).
In addition to the amount charged to profit for the year, the following amounts relating to tax have been recognised in other comprehensive
income:
Deferred tax:
– actuarial loss/(gain)
Total tax recognised in other comprehensive (expense)/income
2019
£’000
1,350
1,350
2018
£’000
(1,054)
(1,054)
148
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 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
20 May 2020 is £12,350,000 (2018: £19,367,000) and includes dividends received from subsidiaries of £17,180,000 (2018: £12,300,000).
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
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
Basic earnings per share
Diluted earnings per share
2019
£’000
39,455
(1,859)
(21)
37,575
2019
No.
133,152,616
(537,214)
132,615,402
1,126,464
133,741,866
2019
28.3p
28.1p
2018
£’000
40,375
(2,870)
(21)
37,484
2018
No.
133,119,785
(533,309)
132,586,476
1,118,671
133,705,147
2018
28.3p
28.0p
The Group has two types of dilutive potential ordinary shares being: those share options granted to employees where the exercise price is less
than the average market price of the Company’s ordinary shares during the year; and expected future vesting of shares under the 2015 Long
Term Incentive Plan.
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 2018 of 5.80p per share (2017: 5.20p)
Interim dividend for the year ended 31 December 2019 of 3.70p per share (2018: 3.20p)
2019
£’000
21
7,691
4,909
12,621
2018
£’000
21
6,895
4,245
11,161
The proposed final dividend for the year ended 31 December 2019 of 1.30p per share (2018: 5.80p) makes a total dividend for the year of 5.00p
(2018: 9.00p).
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 £1,724,000.
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 £2,445,000 (2018: £2,440,000).
149
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
11. Intangible assets
Cost
At1 January 2018
Additions at cost
At 31 December 2018
Additions at cost
At 31 December 2019
Accumulated impairment losses and amortisation
At1 January 2018
Amortisation
Impairment losses for the year
At 31 December 2018
Amortisation
Impairment losses for the year
At 31 December 2019
Carrying amount
At 31 December 2019
At 31 December 2018
At 31 December 2017
Goodwill
£’000
4,973
—
4,973
2,015
6,988
2,712
—
204
2,916
—
205
3,121
3,867
2,057
2,261
PFI
asset
£’000
17,782
417
18,199
491
18,690
14,682
497
—
15,179
555
—
15,734
2,956
3,020
3,100
Total
£’000
22,755
417
23,172
2,506
25,678
17,394
497
204
18,095
555
205
18,855
6,823
5,077
5,361
During the year, the Group acquired the entire share capital of Starfish Commercial Limited, further information on the acquisition can be found in
note 36. The assets and liabilities acquired will be hived-up following the year end into the immediate parent company Henry Boot Construction
Limited, which sits in the Construction segment. The goodwill arising on the acquisition, which has a current net book value of £2,015,000,
represents the excess of consideration over net assets acquired and is subject to an impairment test at the reporting date. The cash generating
unit assessed for impairment is the legal entity Starfish Commercial Limited. Impairment calculations use pre-tax cash flow projections including
revenue growth which reflects the Company’s current pipeline of opportunities and management’s future expectations. Management estimates
discount rates that reflect current market assessments of the time value of money and risk specific to the cash generating unit of 3.5%.
The Group’s acquisition of the trade and assets of Premier Plant Tool Hire & Sales Limited, were immediately hived up into the immediate parent
company Banner Plant Limited, which sits in the Construction segment. The goodwill arising on the acquisition which has a current net book
value of £903,000 (2018: £ 903,000), represents the excess of consideration over net assets acquired and is subject to an impairment test at the
reporting date. The cash generating units assessed for impairment are the Leicester depots of Banner Plant Limited which were formerly Premier
Plant Tool Hire & Sales Limited only operational sites. Impairment calculations use pre-tax cash flow projections including revenue growth of 3.0%
per annum into perpetuity which reflects past experience and management’s future expectations. Management estimates discount rates that
reflect current market assessments of the time value of money and risk specific to the cash generating unit of 3.5%.
The Group’s investment in Road Link (A69) Holdings Limited is 61.2%. The goodwill arising on the acquisition which has a current net book
value of £949,000 (2018: £1,154,000) 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 six years to run, at the end of which the road reverts to Highways
England. Whilst the impairment test demonstrates significant headroom based on forecast levels of return being consistent with prior years, an
impairment charge of £205,000 (2018: £204,000) has been recognised during the year. This reflects 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.
150
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 12. Property, plant and equipment
Group
Cost or fair value
At 1 January 2018
Additions at cost
Disposals
Transfers to inventory
Decrease in fair value in year
At 31 December 2018
Transfer to right-of-use asset
Additions at cost
Acquisition of subsidiary
Disposals
Transfers to right-of-use asset
Decrease in fair value in year
At 31 December 2019
Being:
Cost
Fair value at 31 December 2019
Accumulated depreciation and impairment
At 1 January 2018
Charge for year
Eliminated on disposals
At 31 December 2018
Transfer to right-of-use asset
Charge for year
Transfer from/(to) right-of-use asset
Eliminated on disposals
At 31 December 2019
Carrying amount
At 31 December 2019
At 31 December 2018
At 31 December 2017
Land and
buildings
£’000
Equipment
held
for hire
£’000
Vehicles
£’000
Office
equipment
£’000
8,442
153
—
(200)
(153)
8,242
—
4
—
—
—
(404)
7,842
—
7,842
7,842
342
—
—
342
—
—
—
—
342
7,500
7,900
8,100
37,626
4,357
(3,015)
—
—
38,968
(4,528)
3,700
—
(2,934)
469
—
35,675
35,675
—
35,675
23,757
3,922
(2,791)
24,888
(967)
3,353
164
(2,585)
24,853
10,822
14,080
13,869
5,684
1,071
(823)
—
—
5,932
(680)
1,343
—
(1,205)
54
—
5,444
5,444
—
5,444
2,584
865
(630)
2,819
(89)
791
24
(997)
2,548
2,896
3,113
3,100
3,830
240
(145)
—
—
3,925
—
255
22
(892)
—
—
3,310
3,310
—
3,310
2,414
583
(140)
2,857
—
517
—
(861)
2,513
797
1,068
1,416
Total
£’000
55,582
5,821
(3,983)
(200)
(153)
57,067
(5,208)
5,302
22
(5,031)
523
(404)
52,271
44,429
7,842
52,271
29,097
5,370
(3,561)
30,906
(1,056)
4,661
188
(4,443)
30,256
22,015
26,161
26,485
At 31 December 2019, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£898,000 (2018: £331,000).
Fair value measurements of the Group’s land and buildings
Land and buildings have been revalued at 31 December 2019 by Jones Lang LaSalle Limited and Dove Haigh Phillips LLP in accordance with the
Practice Statements contained in the RICS Appraisal and Valuation Standards on the basis of market value at £7,500,000 (2018: £7,900,000).
Jones Lang LaSalle Limited and Dove Haigh Phillips LLP are professional valuers who hold recognised and professional qualifications and have
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 £4,507,000 (2018: £4,653,000).
151
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
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
7,440
7,500
2019
£’000
60
7,440
7,500
2018
£’000
60
7,840
7,900
Decrease
in year
£’000
—
(400)
(400)
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
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) are set out below:
Yield – movement by 0.5%
Rental value per sq ft – movement of £1 average
Buildings
Yield
6.41
2.34
16.25
8.66
6.75
15.23
Impact on
valuation
£’000
Buildings
430
1,163
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 12 months.
152
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 12. Property, plant and equipment continued
Parent Company
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Additions
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for year
Disposals
At 31 December 2018
Charge for year
Disposals
At 31 December 2019
Carrying amount
At 31 December 2019
At 31 December 2018
At 31 December 2017
13. Leases
Right-of-use assets
Land and buildings
Equipment held for hire
Vehicles
Office equipment
Lease liabilities
Due within one year
Due after more than one year
Contractual maturities of lease liabilities including future interest:
On demand or within one year
In the second year
In the third to fifth years inclusive
In more than five years
Total contractual cash flows
Future finance charges on lease liabilities
Present value of contractual cash flows
Office
equipment
£’000
1,015
122
(107)
1,030
84
(100)
1,014
456
217
(102)
571
209
(97)
683
331
459
559
2018
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
153
Group
Parent Company
2019
£’000
1,787
3,866
—
432
6,085
2,052
2,585
4,637
2,154
1,825
609
277
4,865
(228)
4,637
2018
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2019
£’000
—
—
70
90
160
57
108
165
61
89
22
—
172
(7)
165
Additions to the right-of-use assets during the 2019 financial year were £1,347,000 for the Group and £32,000 for the Parent Company.
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
13. Leases continued
The statement of profit or loss shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Land and buildings
Equipment held for hire
Vehicles
Office equipment
Interest expense (included in finance cost)
The total cash outflow for leases in 2019 was £1,420,000.
Group
Parent Company
2019
£’000
428
734
—
88
1,250
73
2018
£’000
2019
£’000
2018
£’000
—
—
—
—
—
—
—
—
36
24
60
5
—
—
—
—
—
—
The Group leases various offices, equipment and vehicles. Rental contracts are typically made for fixed periods of 4 to 10 years and may have
extension options.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease
components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to
separate lease and non-lease components and instead accounts for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as
security for borrowing purposes.
Until the 2018 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases, see the
accounting policies for details. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
• Amounts expected to be payable by the Group under residual value guarantees;
• The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the
case for leases in the Group, the lessee’s incremental borrowing rate is used.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and
adjusted against the right-of-use asset.
154
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 13. Leases continued
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability
• Any lease payments made at or before the commencement date less any lease incentives received
• Any initial direct costs, and restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the group
is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. While the Group
revalues its land and buildings that are presented within property, plant and equipment, it has chosen not to do so for the right-of-use buildings
held by the Group.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis
as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment
and small items of office furniture.
14. Investment properties
Fair value measurements recognised in the Statement of Financial Position
The following table provides an analysis of the fair values of investment properties recognised in the Statement of Financial Position by the degree
to which the fair value is observable:
Completed investment property
Industrial
Leisure
Mixed-use
Residential
Office
Retail
Investment property under construction
Industrial
Land
Retail
Total fair value
Level 1
£’000
Level 2
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Level 3
£’000
15,900
11,044
8,823
3,704
12,000
10,293
61,764
3,634
714
3,890
8,238
70,002
2019
£’000
15,900
11,044
8,823
3,704
12,000
10,293
61,764
3,634
714
3,890
8,238
70,002
Increase/
(decrease)
in year
£’000
(10,500)
267
(44,594)
418
(1,200)
(187)
(55,796)
3,363
—
1,460
4,823
(50,973)
2018
£’000
26,400
10,777
53,417
3,286
13,200
10,480
117,560
271
714
2,430
3,415
120,975
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.
155
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
14. 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 retail, 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
Transfers from investment property under
construction
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
2019
£’000
2018
£’000
26,400
10,777
53,417
3,286
13,200
10,480
117,560
126,604
1,989
—
—
—
(18,330)
4,500
1,341
15,900
—
15,900
115
64
(7)
—
—
—
95
11,044
231
11,275
90
51
(9)
(19,984)
(25,514)
—
772
8,823
77
8,900
—
—
—
(233)
—
—
651
3,704
—
3,704
88
—
—
—
—
2
2,284
—
115
(2)
(18)
— (20,217)
— (43,844)
—
(1,288)
12,000
—
12,000
—
(187)
10,293
157
10,450
4,500
1,384
61,764
465
62,229
4,207
387
(100)
(13,595)
—
—
57
117,560
1,502
119,062
156
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 14. 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 purchaser’s 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 accounting 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 2019 by Jones Lang LaSalle
Limited or Dove Haigh Phillips LLP in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards on the
basis of market value at £58,525,000 (2018: £115,777,000). Jones Lang LaSalle Limited and Dove Haigh Phillips LLP are professional valuers
who hold recognised and professional qualifications and have 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 2019 has been determined by the Directors of the Company at £3,704,000
(2018: £3,286,000). 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):
2019
Class
Industrial
Leisure Mixed-use
Valuation technique
Rental value per sq ft (£)
Yield %
– weighted average
– low
– high
– weighted average
– low
– high
% discount applied to houses held under
assured tenancies
Yield
3.97
3.75
5.50
6.26
5.14
8.64
Yield
12.40
1.67
45.05
4.49
5.32
7.86
Yield
36.21
7.50
63.39
9.78
6.25
12.00
Residential
Sales
comparison
—
—
—
—
—
—
—
—
—
25.00
2018
Class
Industrial
Leisure
Mixed-use
Valuation technique
Rental value per sq ft (£)
Yield %
– weighted average
– low
– high
– weighted average
– low
– high
% discount applied to houses held under
assured tenancies
Yield
3.96
3.49
4.53
5.52
5.44
7.36
—
Yield
12.49
1.67
40.86
4.71
5.24
7.86
—
There is considered to be no inter-relationship between observable and unobservable inputs.
Residential
Sales
comparison
—
—
—
—
—
—
Yield
14.11
2.70
63.39
8.16
5.25
12.00
—
25.00
Office
Retail
Yield
22.87
24.00
25.00
7.86
6.34
7.00
—
Office
Yield
23.28
19.46
24.97
7.48
6.65
6.79
—
Yield
15.86
11.00
21.40
5.62
4.80
7.50
—
Retail
Yield
15.71
11.00
21.41
5.48
4.67
7.60
—
157
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
14. Investment properties continued
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) is set out below:
Industrial
Leisure Mixed-use
Residential
Office
Impact on valuation 2019 £’000
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
1,298
3,935
—
1,117
847
—
436
248
—
—
—
50
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
Industrial
Leisure
Impact on valuation 2018 £’000
Residential
Mixed-use
2,266
6,561
—
1,048
839
—
3,257
4,064
—
—
—
69
772
556
—
Office
835
577
—
Retail
1,029
759
—
Retail
1,070
772
—
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 12 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 £7,102,000 (2018: £8,854,000). Direct operating expenses arising on investment property generating rental income in the year
amounted to £1,142,000 (2018: £331,000). Direct operating expenses arising on the investment property which did not generate rental income
during the year amounted to £183,000 (2018: £1,160,000).
At 31 December 2019, the Group had entered into contractual commitments for the acquisition and repair of investment property amounting to
£nil (2018: £nil).
Investment property under construction
Class
Fair value hierarchy
Fair value
At 1 January
Subsequent expenditure on investment property
Capitalised letting fees
Disposals
Transfers to completed investment property
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
Land
Level 3
£’000
271
7,002
—
(125)
(4,500)
986
3,634
—
3,634
714
—
—
—
—
—
714
—
714
Retail
Level 3
£’000
2,430
3,893
5
(2,438)
—
—
3,890
—
3,890
2019
£’000
3,415
10,895
5
(2,563)
(4,500)
986
8,238
—
8,238
2018
£’000
6,173
165
147
(2,921)
—
(149)
3,415
—
3,415
158
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 14. Investment properties continued
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Land value per acre (£’000)
Class
Valuation technique
Land value per acre (£’000)
– weighted average
– low
– high
– weighted average
– low
– high
Industrial
Residual
—
—
—
Industrial
Residual
100
100
100
2019
Land
Sales
comparison
487
99
2,168
2018
Land
Sales
comparison
103
103
103
Retail
Residual
1,271
1,271
1,271
Retail
Residual
448
200
994
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) is set out below:
Land value per acre – increase by 5%
Land value per acre – increase by 5%
Impact on valuation 2019 £’000
Industrial
—
Land
217
Impact on valuation 2018 £’000
Industrial
—
Land
163
Retail
194
Retail
—
Investment properties under construction are developments which have been valued at 31 December 2019 at fair value by the Directors of
the Company using the residual method at £8,238,000 (2018: £3,415,000). 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.
159
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
15. Investments
Parent Company – shares in Group undertakings
Cost
At 1 January 2018, 31 December 2018 and 31 December 2019
Fair value adjustments
At 1 January 2018
Reversal of provisions for losses
At 31 December 2018
Reversal of provisions for losses
At 31 December 2019
Carrying amount
At 31 December 2019
At 31 December 2018
At 31 December 2017
Total
£’000
35,772
(12,040)
10,354
(1,686)
3,935
2,249
38,021
34,086
23,732
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.
The improved net assets position of Henry Boot Developments in the current year gives rise to the reversal of provisions for losses previously
recognised. The impairment reversals are included in the Parent Company’s profit and loss.
Amounts due from and to subsidiary companies are listed in notes 18 and 23 and details of all subsidiary companies are listed in note 38. 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;
• Stonebridge Homes Limited which is 50% owned by, and under board control of (by virtue of majority voting rights), Henry Boot Land
Holdings Limited; and
• Stonebridge Offices Limited which is indirectly 50% owned by, and under board control of (by virtue of majority voting rights), 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.
16. Investment in joint ventures and associates
Group
Cost
At 1 January
Share of profit for the year
Disposals
At 31 December
Joint
ventures
£’000
2019
Associates
£’000
5,119
1,448
—
6,567
1,567
—
(1,500)
67
Total
£’000
6,686
1,448
(1,500)
6,634
Joint
ventures
£’000
4,313
806
—
5,119
The Group’s share of its joint ventures’ and associates’ aggregated assets, liabilities and results are as follows:
Joint
ventures
£’000
7,420
16,623
—
24,043
(14,203)
(3,273)
6,567
2019
Associates
£’000
—
99
7
106
(39)
—
67
Total
£’000
7,420
16,722
7
24,149
(14,242)
(3,273)
6,634
Joint
ventures
£’000
7,118
5,898
—
13,016
(7,897)
—
5,119
Investment property
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net investment
160
2018
Associates
£’000
1,543
24
—
1,567
2018
Associates
£’000
—
1,580
50
1,630
(63)
—
1,567
Total
£’000
5,856
830
—
6,686
Total
£’000
7,118
7,478
50
14,646
(7,960)
—
6,686
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 16. Investment in joint ventures and associates continued
Revenue
Administration and other expenses
Increase in fair value of investment properties
Operating profit
Finance costs
Profit before tax
Tax
Share of profits after tax
Joint
ventures
£’000
27,815
(26,478)
229
1,566
(103)
1,463
(15)
1,448
2019
Associates
£’000
115
(11)
—
104
(65)
39
(39)
—
Total
£’000
27,930
(26,489)
229
1,670
(168)
1,502
(54)
1,448
Joint
ventures
£’000
17,573
(17,011)
428
990
(164)
826
(20)
806
2018
Associates
£’000
28
—
—
28
(4)
24
—
24
Total
£’000
17,601
(17,011)
428
1,018
(168)
850
(20)
830
Details of the Group’s investments in joint ventures and associates are listed in note 38.
Material joint ventures and associates
The Directors considers Pennine Property Partnership LLP to be the only material joint venture or associate they hold an interest in. Pennine
Property Partnership LLP is a property development joint venture between the Group and Calderdale and Huddersfield NHS Foundation
Trust, the LLP is incorporated in England and the Group has ownership of 50%. The joint venture is accounted for using the equity method of
accounting.
The table below provides summarised financial information for Pennine Property Partnership LLP. The information disclosed reflects the amounts
presented in the financial statements of Pennine Property Partnership LLP and not the Group’s share of those amounts.
Summarised balance sheet
Investment properties (non-current)
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings (current)
Borrowings (non-current)
Net assets
Reconciliation to carrying amount:
Opening net assets 1 January
Profit for the period
Other comprehensive income
Closing net assets
Group’s share in %
Group’s share in £
Carrying amount
Summarised statement of comprehensive income
Revenue
Profit for the year
Pennine Property
Partnership LLP
2019
£’000
14,838
146
3,294
4,207
5,515
–
6,546
10,424
7,722
2,776
(74)
10,424
50%
5,212
5,212
2019
£’000
6,675
2,776
2018
£’000
14,234
314
403
367
996
6,600
–
7,722
6,434
1,313
(25)
7,722
50%
3,861
3,861
2018
£’000
665
1,313
161
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Notes to the
Financial Statements
for the year ended 31 December 2019
17. Contract assets
Construction contracts – Construction segment
Construction contracts – Property Investment and Development segment
Due within one year
Due after more than one year
2019
£’000
2,327
16,758
19,085
19,085
—
19,085
2018
£’000
1,344
41,428
42,772
42,772
—
42,772
Amounts relating to construction contracts are balances due from customers under construction contracts that arise when the Group receives
payments from customers in line with a series of performance related milestones. The Group will previously have recognised a contract asset for
any work performed but not yet invoiced. Any amount previously recognised as a contract asset is reclassified to trade receivables at the point at
which it is invoiced to the customer.
Contract assets have increased as the Group has provided more services ahead of the agreed billing schedule.
There were no impairment losses recognised on any contract asset in the reporting period (2018: £nil).
As a policy choice the Group does not recognise any assets arising from the costs incurred to obtain a contract.
18. Trade and other receivables
Group
Parent Company
2019
£’000
87,112
(724)
6,723
14,904
—
108,015
90,777
17,238
108,015
2018
£’000
63,448
(424)
5,575
3,541
—
72,140
60,225
11,915
72,140
Trade receivables
Loss allowance
Prepayments
Amounts owed by related companies
Amounts owed by Group undertakings
Due within one year
Due after more than one year
Amounts due after more than one year relate to trade receivables.
Group
Movement in the trade receivables loss allowance
At 1 January
Impairment losses recognised
Amounts written off as uncollectable
Amounts recovered during the year
Impairment losses reversed
At 31 December
The loss allowance as at 31 December 2019 and 31 December 2018 for trade receivables was determined as follows :
2019
0-30 days
30–60 days
60–90 days
90–120 days
120+ days
162
Expected
loss rate
%
0.4%
2.9%
1.7%
20.3%
15.6%
2019
£’000
307
—
1,053
—
127,004
128,364
128,364
—
128,364
2019
£’000
424
514
(11)
(19)
(184)
724
Gross
carrying
amount
£’000
81,826
1,281
1,723
133
2,149
87,112
2018
£’000
326
—
497
—
169,763
170,586
170,586
—
170,586
2018
£’000
491
65
(74)
(58)
—
424
Loss
allowance
£’000
295
37
29
27
336
724
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 18. Trade and other receivables continued
2018
0-30 days
30–60 days
60–90 days
90–120 days
120+ days
Expected
loss rate
%
0.1%
0.0%
0.2%
2.2%
30.2%
Gross
carrying
amount
£’000
56,748
4,776
490
270
1,164
63,448
Loss
allowance
£’000
64
1
1
6
352
424
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 repayable on demand, unsecured and are stated net of provisions for impairment of £5,402,000
(2018: £1,924,000), of which £3,654,000 (2018: £15,000) has been provided in the year and £180,000 (2018: £404,000) has been recovered
in the year. Expected credit losses are based on the assumption that repayment of the loan is demanded at the reporting date. Where there are
insufficient liquid assets the Parent Company considers the expected manner of recovery to measure expected credit losses. This might be a
‘repay over time’ strategy, or a fire sale of less liquid assets. Interest is charged annually at 3.5% (2018: 3.5%).
The Parent Company has no impaired trade receivables.
Credit risk
The Group’s principal financial assets are bank balances and cash, contract assets 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
loss allowances for doubtful receivables, estimated by the Group’s management based on prior experience and forward-looking assessments of
the economic environment in accordance with IFRS 9 ‘Financial Instruments’.
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.
19. 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:
Group
At 1 January 2018
Recognised in income
Recognised in other comprehensive income
At 31 December 2018
Acquisition of subsidiary (note 36)
Recognised in income
Recognised in other comprehensive income
At 31 December 2019
Parent Company
At 1 January 2018
Recognised in income
Recognised in other comprehensive income
At 31 December 2018
Recognised in income
Recognised in other comprehensive income
At 31 December 2019
Accelerated
capital
allowances
£’000
Retirement
benefit
obligations
£’000
Other
timing
differences
£’000
492
(27)
—
465
—
(213)
—
252
29
12
—
41
12
—
53
3,879
14
(1,054)
2,839
—
(285)
1,350
3,904
3,879
14
(1,054)
2,839
(285)
1,350
3,904
242
(59)
—
183
109
90
—
382
284
(49)
—
235
65
—
300
Total
£’000
4,613
(72)
(1,054)
3,487
109
(408)
1,350
4,538
4,192
(23)
(1,054)
3,115
(210)
1,350
4,255
163
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019
Notes to the
Financial Statements
for the year ended 31 December 2019
19. Deferred tax continued
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 £2,057,000 (2018: £3,452,000). 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 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% (2018: 17%) being the rate at which timing differences are expected to reverse.
Legislation in the Finance Bill 2020 seeks to retain the UK corporation tax rate at 19% which will lead to a remeasurement of the Group’s deferred tax
liabilities following substantively enacted. Management do not expect any significant reversal of deferred tax assets or liabilities in the next 12 months.
20. Inventories
Property developments in progress
Housebuilder land and work in progress
Land held for development or sale
Options to purchase land
Planning promotion agreements
2019
£’000
31,684
36,339
50,716
14,913
36,097
2018
£’000
24,602
22,510
58,827
16,458
32,583
169,749
154,980
Within property developments in progress £888,000 (2018: £207,000) 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 or sale, options to purchase land and planning
promotion agreements £712,000 (2018: £2,265,000) 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.
21. 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. The gain recognised after measurement at fair value less costs
to sell on the transfer of assets during the year was £2,463,000 (2018: £465,000).
Assets classified as held for sale comprise the following:
Fair value
At 1 January
Transfer from investment property (note 14)
Disposals
At 31 December
Adjustment in respect of tenant incentives
Market value at 31 December
Investment property
2019
£’000
—
43,844
(43,844)
—
—
—
2018
£’000
2,000
—
(2,000)
—
—
—
Assets classified as held for sale have been valued at 31 December 2019 at fair value by the Directors of the Company at £nil (2018: £nil).
22. Contract liabilities
Construction contracts – Construction segment
Construction contracts – Property Investment and Development segment
Due within one year
Revenue recognised that was included in the contract liability balance at the beginning of the period
Construction contracts – Construction segment
Construction contracts – Property Investment and Development segment
Revenue recognised from performance obligations satisfied in previous periods
Construction contracts – Construction segment
Construction contracts – Property Investment and Development segment
There were no significant changes in the contract liability balances during the reporting period.
164
2019
£’000
9,529
347
9,876
9,876
2019
£’000
2,673
—
—
—
2018
£’000
2,673
121
2,794
2,794
2018
£’000
3,225
—
—
—
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 23. 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
2019
£’000
61,315
8,826
1,844
3,684
1,242
—
76,911
70,763
6,148
76,911
2018
£’000
67,219
7,118
1,076
4,487
367
—
80,267
77,475
2,792
80,267
2019
£’000
1,394
470
345
—
—
80,752
82,961
82,961
—
82,961
2018
£’000
1,351
358
422
—
—
72,332
74,463
74,463
—
74,463
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Amounts due after more than one year include £1,986,000 (2018: £2,028,000) of deferred income and £4,162,000 (2018: £764,000) of trade payables.
Parent Company
Amounts owed to Group undertakings are repayable on demand, unsecured and bear interest at 2.0% (2018: 2.0%).
24. Government grants
Government grants have been received in relation to the infrastructure of one of the Group’s land promotions and one 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 £250,000 (2018: £840,000).
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.
25. 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 2019
this was £nil (2018: £18.4m). Equity comprises all components of equity and at 31 December 2019 this was £318.5m (2018: £302.3m).
During 2019 the Group’s strategy, was to maintain the debt to equity ratio below 30% (2018: 30%). 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 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 the option was
exercised to extend the facilities by a further year to 17 February 2020 and on 22 August 2017 an amendment was agreed to increase the facility
to £72m. 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 and continues to do so over forecast periods.
In January 2020, the Group concluded negotiations with three banking partners to put in place a £75m facility to replace the £72m facility we had
in place at 31 December 2019. The renewed facilities commenced on 24 January 2020, with a renewal date of 24 January 2023 and an option to
extend the facilities by one year, each year, for the next two years occurring on the anniversary of the facility. The renewed facilities, on improved
terms, maintain covenants on the same basis as the previous facilities.
The Group’s capital risk management disclosures are consistent with the parent company.
165
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
26. Borrowings
Bank overdrafts
Bank loans
Finance leases
Government loans
Due within one year
Due after one year
Contractual maturities of borrowings, including future interest, as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
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 Stonebridge Offices Limited)
Bank loans – floating rate (relating to Stonebridge Homes Limited)
Finance leases
Government loans
Bank overdrafts are repayable on demand.
Borrowings are recognised at amortised cost.
Liquidity risk
The Company’s objectives when managing liquidity are:
Group
Parent Company
2019
£’000
—
7,757
—
2,941
10,698
9,981
717
10,698
10,172
703
64
10,939
10,172
767
10,939
2018
£’000
—
22,422
3,220
3,573
29,215
24,119
5,096
29,215
24,486
2,688
2,574
29,748
24,486
5,262
29,748
2019
£’000
1,012
—
—
—
1,012
1,012
—
1,012
1,012
—
—
1,012
1,012
—
1,012
2019
%
2.30
2.41
3.54
2.87
—
0.07
2018
£’000
1,022
15,000
—
—
16,022
16,022
—
16,022
16,022
—
—
16,022
16,022
—
16,022
2018
%
2.34
2.28
3.26
2.57
2.53
0.79
• 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 Homes Limited.
The Stonebridge Offices Limited bank loan is secured by a specific charge over the freehold property of that company and is without recourse
to the rest of the Group. The loan was renewed on 11 December 2018 at a value of £2,512,000 and is repayable in quarterly instalments of
£37,500 that commenced on 11 December 2018, with full and final settlement becoming due on 10 December 2021. Following the disposal of
investment property this loan was settled in full on 16 December 2019.
The Stonebridge Homes 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 24 January 2022. On 25 January 2019 the
Stonebridge Homes facility was increased to £10,000,000 with full and final settlement becoming due on 24 January 2022.
166
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 26. Borrowings continued
Government loans from the South West of England Regional Development Agency (SWE) and Sedgemoor District Council (SDC) were issued at a
borrowing rate of nil%; their fair values are £nil (2018: £208,000).
Government loans from the Homes and Communities Agency (HCA) were issued with a fixed level of interest of £254,000 (2018: £304,000); their
fair values are £2,941,000 (2018: £2,956,000) (Education Campus) and £nil (2018: £408,000) (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 £231,000 (2018: £1,582,000) 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 £15,000 (2018: £329,000) 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 £408,000 (2018: £351,000) 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 2019, a 0.5% (2018: 0.5%) change in interest rates, which the Directors consider to be a
reasonably possible change, would affect profitability before tax by £79,000 (2018: £105,000).
The fair value of the Group’s borrowings is not considered to be materially different from the carrying amounts.
At 31 December 2019, the Group had available £72,000,000 (2018: £57,000,000) undrawn committed borrowing facilities.
Finance lease liabilities
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Gross finance lease liabilities – minimum lease payments:
No later than one year
Later than one year and no later than five years
Future finance charges on finance lease liabilities
Present value of finance lease liabilities
Finance lease liabilities were reclassified as lease liabilities under IFRS 16 from 1 January 2019 (note 13).
2019
£’000
—
—
—
—
—
2018
£’000
1,712
1,611
3,323
(103)
3,220
167
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
26. Borrowings continued
The present value of finance lease liabilities is as follows:
No later than one year
Later than one year and no later than five years
The carrying amount of the Group’s lease obligations approximates to their fair value.
27. Provisions
At 1 January 2019
Included in current liabilities
Included in non-current liabilities
Additional provisions in year
Utilisation of provisions
At 31 December 2019
Included in current liabilities
Included in non-current liabilities
2019
£’000
—
—
—
Land
promotion
£’000
6,062
3,847
2,215
6,062
671
(1,418)
5,315
3,634
1,681
5,315
Road
maintenance
£’000
1,877
1,877
—
1,877
1,237
(1,433)
1,681
1,681
—
1,681
2018
£’000
1,639
1,581
3,220
Total
£’000
7,939
5,724
2,215
7,939
1,908
(2,851)
6,996
5,315
1,681
6,996
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 reasonably possible change, land promotion provisions would change
and affect profitability before tax by £72,000 and £265,000 respectively (2018: £77,000 and £298,000).
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 reasonably
possible change, the road maintenance provision would change and affect profitability before tax by £179,000 (2018: £194,000).
168
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 27. Provisions continued
Off balance sheet arrangements
The Group is currently undertaking the infrastructure of land promotions at Bridgwater and Cranbrook, spanning 122 and 53 acres respectively
(2018: 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 costs being incurred throughout these periods.
The Group has historically disposed of 117 and 35 acres respectively (2018: 108 and 34), and has subsequently recognised provisions to the
value of £5,316,000 (2018: £6,062,000), 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 £1,772,000 (2018: £2,254,000), has
therefore not been recognised in these Financial Statements.
28. 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 5% (2018: 5%) 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 £2,255,000 (2018: £2,198,000) 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.
169
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
28. Retirement benefit obligations continued
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 2018. The results of that valuation have been projected to 31 December 2019
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 (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
Mortality assumptions
Retiring today (aged 65)
Male
Female
Retiring in 20 years (currently aged 45)
Male
Female
2019
%
2.80
2.00
1.00
2.00
2.00
2.00
2019
Years
21.9
24.2
23.0
25.3
2018
%
3.00
2.00
1.00
2.00
2.00
2.80
2018
Years
22.0
24.0
23.0
25.2
The mortality assumptions adopted are the Self Administered Pension Schemes (SAPS) tables with allowance for future improvements in line with
Continuous Mortality Investigation (CMI) 2017 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 3.9%
Increase by 3.9%
Decrease in
assumption
Decrease by 3.3%
Nil*
Increase by 4.2%
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.
170
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 28. Retirement benefit obligations continued
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of the scheme are as follows:
Service cost:
Current service cost
Ongoing scheme expenses
Past service cost
Net interest expense
Pension protection fund
Pension expenses recognised in profit or loss
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding amounts included in net interest expense)
Actuarial gains arising from changes in demographic assumptions
Actuarial gains arising from experience adjustments
Actuarial losses/(gains) arising from changes in financial assumptions
Actuarial losses/(gains) recognised in other comprehensive income
Total
2019
£’000
798
666
—
439
227
2,130
(15,106)
(724)
(1,606)
25,373
7,937
10,067
2018
£’000
1,031
483
1,500
565
160
3,739
4,451
(1,093)
—
(9,557)
(6,199)
(2,460)
In the prior year past service costs of £1.5m are in respect of GMP equalisation and are an estimate by the Directors following detailed
consultation with the scheme actuary. The entire charge is recognised in profit or loss.
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
Actuarial losses/(gains)
Past service cost
Benefits paid
At 31 December
2019
£’000
208,318
(185,353)
22,965
2018
£’000
186,785
(170,075)
16,710
2019
£’000
22,965
2018
£’000
16,710
2019
£’000
186,785
798
5,138
23,043
—
(7,446)
208,318
2018
£’000
197,365
1,031
4,875
(10,650)
1,500
(7,336)
186,785
171
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
28. Retirement benefit obligations continued
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
Benefits paid
Ongoing scheme expenses
At 31 December
The categories of plan assets are as follows:
Quoted investments, including pooled diversified growth funds:
Equity
Diversified growth funds
Diversified credit funds
Cash and net current assets
Unquoted investments:
Direct lending
Liability driven investment
Collateralised loan obligations
Special situations
At 31 December
2019
£’000
170,075
4,699
15,106
3,585
(7,446)
(666)
185,353
2019
£’000
34,882
—
69,018
2,024
24,764
23,887
22,007
8,771
185,353
2018
£’000
174,540
4,310
(4,451)
3,495
(7,336)
(483)
170,075
2018
£’000
45,891
11,593
61,458
1,322
21,959
—
21,567
6,285
170,075
The weighted average duration of the defined benefit obligation is 16 years (2018: 16 years).
The current estimated amount of total contributions expected to be paid to the scheme during the 2020 financial year is £4,217,000, being
£4,217,000 payable by the Group and £nil payable by scheme members.
The Company’s level of recovery plan funding to the scheme is £3,250,000 per annum and will increase by £100,000 per annum until the next
triennial valuation. In addition to this, the Company contributes a further £260,000 per annum towards the administration expenses of the
scheme.
29. Operating leases
The Group as lessee
Minimum lease payments under operating leases recognised in the
Consolidated Statement of Comprehensive Income for the year
2019
£’000
2018
£’000
—
481
At 31 December 2019, the Group had outstanding commitments for future aggregate minimum lease payments under non-cancellable operating
leases which fall due as follows:
2019
£’000
—
—
—
—
2018
£’000
472
1,521
437
2,430
Within one year
In the second to fifth years inclusive
After five years
172
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 29. Operating leases continued
Operating lease payments represent rentals payable by the Group for certain of its office properties. The rents payable are subject to
renegotiation at various intervals specified in the leases.
The Group as lessor
The Group has entered into commercial leases on its investment property portfolio which typically have lease terms between one and 25 years
and include clauses to enable periodic upward revision of the rental charge according to prevailing market conditions. Ordinarily, the lessee does
not have an option to purchase the property at the expiry of the lease period and some leases contain options to break before the end of the
lease term.
Future aggregate minimum rentals receivable under non-cancellable operating leases at 31 December which are not discounted are as follows:
Within one year
In the second to fifth years inclusive
After five years
2019
£’000
—
—
—
—
2018
£’000
7,783
23,026
79,184
109,993
30. 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)
2019
£’000
1,260
5,515
(2,128)
(156)
59
2019
£’000
42
46
2018
£’000
1,140
5,921
(1,922)
(155)
392
2018
£’000
43
45
Amounts owing by related parties (note 18) or to related parties (note 23) are unsecured, repayable on demand and will be settled in cash. No
guarantees have been given or received. No provisions have been made for impaired receivables in respect of the amounts owed by related
parties. Other than as disclosed above there a no further related party transactions with joint ventures and associates.
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 pages 66 to 69. They are responsible for making all of the strategic decisions of the Group and its subsidiaries, as
detailed on pages 10 and 11 and 26 and 27. The remuneration of the Board of Directors is set out in the Remuneration Report on pages 100 to
111. The remuneration of the relevant four (2018: 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
2019
£’000
1,597
13
44
1,654
2018
£’000
1,666
16
—
1,682
173
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
31. Share capital
400,000 5.25% cumulative preference shares of £1 each (2018: 400,000)
133,172,602 ordinary shares of 10p each (2018: 133,146,602)
Allotted, issued
and fully paid
2019
£’000
400
13,317
13,717
2018
£’000
400
13,315
13,715
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%, on 24 October 2017 at a price of 270.0p at
a discount of 10%, on 4 October 2018 at a price of 262.0p at a discount of just under 5.8% and on 3 October 2019 at a price of 224.0p at a
discount of just under 9.7%. These become exercisable for a six-month period from 1 December 2017, 1 December 2020, 1 December 2021
and 1 December 2022 respectively. There are no performance criteria attached to the exercise of these options which are normally capable of
exercise up to six months after the third anniversary of the Sharesave contract commencement date. The right to exercise options terminates if a
participating employee leaves the Group, subject to certain exceptions.
2018
October 2014 grant
October 2017 grant
October 2018 grant
2019
October 2017 grant
October 2018 grant
October 2019 grant
Options
outstanding at 1
January 2018
105,691
961,348
—
Options
outstanding at
1 January 2019
779,744
277,300
—
Options
granted
—
—
283,413
Options
granted
—
—
875,301
Options
lapsed
—
(181,604)
(6,113)
Options
exercised
(105,691)
—
—
Options
lapsed
(533,735)
(163,459)
(11,811)
Options
exercised
—
—
—
Options
outstanding at
31 December
2018
—
779,744
277,300
Options
outstanding at
31 December
2019
246,009
113,841
863,490
The weighted average share price at the date of exercise for share options exercised during the year was nil (2018: 316.81p).
(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.
174
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 31. Share capital continued
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
2019
Number
1,010,623
(47,830)
(241,095)
393,365
1,115,063
2018
Number
1,022,648
(122,189)
(140,288)
250,452
1,010,623
The weighted average share price at the date of exercise for share options exercised during the year was 253.00p (2018: 292.00p).
(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. The third grant of options under the plan was made to certain
senior employees (none of whom at the time were Directors of Group companies) on 6 October 2017 at an option price of 298.9p. The fourth
grant of options under the plan was made to certain employees (two of whom at the time were Directors of Group companies) on 14 September
2018 at an option price of 291.0p. The fifth grant of options under the plan was made to certain employees (two of whom at the time were
Directors of Group companies) on 3 October 2019 at an option price of 249.0p. There were no performance conditions imposed on either of
these grants.
2018
May 2011 grant
October 2014 grant
October 2017 grant
September 2018 grant
2019
May 2011 grant
October 2014 grant
October 2017 grant
September 2018 grant
October 2019 grant
Options
outstanding at
1 January 2018
16,000
65,000
149,747
—
Options
outstanding at
1 January 2019
16,000
35,000
148,910
289,341
—
Options
granted
—
—
—
291,403
Options
granted
—
—
—
—
446,848
Options
lapsed
—
—
(837)
(2,062)
Options
exercised
—
(30,000)
—
—
Options
lapsed
—
—
(14,220)
(19,916)
(2,010)
Options
exercised
(6,000)
(20,000)
—
—
—
Options
outstanding at
31 December
2018
16,000
35,000
148,910
289,341
Options
outstanding at
31 December
2019
10,000
15,000
134,690
269,425
444,838
The weighted average share price at the date of exercise for share options exercised during the year was 255.85p (2018: 314.59p).
175
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
31. Share capital continued
Fair value
Fair value is measured by a Monte Carlo pricing model using the following assumptions:
Weighted
average
exercise price
Nil
121.5p
191.0p
298.9p
291.0p
249.0p
172.0p
270.0p
262.0p
224.0p
Weighted average
share price
214.0p to 294.0p
121.5p
191.0p
309.0p
291.0p
249.0p
181.0p
300.0p
278.0p
248.0p
Expected
volatility
29.37% to 32.10%
41.47%
31.17%
30.37%
29.28%
29.25%
31.45%
30.30%
29.53%
29.25%
Expected life
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
Risk-free rate
0.14% to 0.94%
1.67%
1.23%
0.51%
0.91%
0.28%
0.82%
0.51%
0.99%
0.28%
Expected
dividend yield
2.71% to 3.24%
5.02%
3.16%
3.02%
2.90%
3.24%
3.16%
3.02%
2.90%
3.24%
LTIP
CSOP 2011
CSOP 2014
CSOP 2017
CSOP 2018
CSOP 2019
Sharesave 2014
Sharesave 2017
Sharesave 2018
Sharesave 2019
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 61.91p (2018: 75.99p).
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
2019
£’000
2018
£’000
826
659
The total expense recognised in the Consolidated Statement of Comprehensive Income arose solely from equity-settled share-based payment
transactions.
Property
revaluation
£’000
3,550
—
—
—
(153)
—
—
—
3,397
—
—
—
—
(404)
—
—
—
—
—
2,993
Retained
earnings
£’000
245,260
37,505
(11,161)
—
—
250
6,199
(1,054)
276,999
(154)
37,596
(12,621)
—
—
—
(1,856)
216
(7,937)
1,350
293,593
Capital
redemption
£’000
271
—
—
—
—
—
—
—
271
—
—
—
—
—
—
—
—
—
—
271
Other
Share
premium
£’000
5,641
—
—
226
—
—
—
—
5,867
—
—
—
43
—
—
—
—
—
—
5,910
Capital
£’000
209
—
—
—
—
—
—
—
209
—
—
—
—
—
—
—
—
—
—
209
Total
other
£’000
6,121
—
—
226
—
—
—
—
6,347
—
—
—
43
—
—
—
—
—
—
6,390
32. Reserves
Group
At 1 January 2018
Profit for the year
Dividends paid
Premium arising from shares issued
Decrease in fair value in year
Arising on employee share schemes
Unrecognised actuarial gain
Deferred tax on actuarial gain
At 31 December 2018
Change in accounting policy
Profit for the year
Dividends paid
Premium arising from shares issued
Decrease in fair value in year
Deferred tax on revaluation surplus
Transfer from minority interest
Arising on employee share schemes
Unrecognised actuarial loss
Deferred tax on actuarial loss
At 31 December 2019
176
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 32. Reserves continued
Parent Company
At 1 January 2018
Profit for the year
Dividends paid
Premium arising from shares issued
Arising on employee share schemes
Unrecognised actuarial gain
Deferred tax on actuarial gain
At 31 December 2018
Change in accounting policy
Profit for the year
Dividends paid
Premium arising from shares issued
Arising on employee share schemes
Unrecognised actuarial loss
Deferred tax on actuarial loss
At 31 December 2019
Retained
earnings
£’000
72,242
19,367
(11,161)
—
(80)
6,199
(1,054)
85,513
(7)
12,350
(12,621)
—
(256)
(7,939)
1,350
78,390
Capital
redemption
£’000
271
—
—
—
—
—
—
271
—
—
—
—
—
—
—
271
Share
premium
£’000
5,641
—
—
226
—
—
—
5,867
—
—
—
43
—
—
—
5,910
Other
Capital
£’000
211
—
—
—
—
—
—
211
—
—
—
—
—
—
—
211
Investment
revaluation
£’000
1,135
—
—
—
—
—
—
1,135
—
—
—
—
—
—
—
1,135
Total
other
£’000
7,258
—
—
226
—
—
—
7,484
—
—
—
43
—
—
—
7,527
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. This reserve in not distributable.
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.
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.
33. Cost of shares held by the ESOP trust
At 1 January
Additions
Disposals
At 31 December
2019
£’000
1,260
598
(610)
1,248
2018
£’000
1,240
429
(409)
1,260
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.
177
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
33. Cost of shares held by the ESOP trust continued
At 31 December 2019, the Trustee held 537,214 shares (2018: 533,309 shares) with a cost of £1,247,665 (2018: £1,260,185) and a market
value of £1,713,713 (2018: £1,282,609). 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. 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.
34. Cash generated from operations
Profit before tax
Adjustments for:
Amortisation of PFI asset
Goodwill impairment
Depreciation of property, plant and equipment
Revaluation (increase)/decrease in investment properties
Amortisation of capitalised letting fees
Share-based payment expense
Pension scheme (credit)/debit
Movements on provision against investments in subsidiaries
Movements on provision against loans to subsidiaries
Loss on disposal of assets held for sale
(Gain)/loss on disposal of property, plant and equipment
Loss/(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
Increase in inventories
(Increase)/decrease in receivables
Decrease/(increase) in contract assets
(Decrease)/increase in payables
Increase/(decrease) in contract liabilities
Cash generated from operations
11
11
12
14
3
4
15
3
3
5
6
16
12
Group
2019
£’000
49,104
555
205
5,911
(2,370)
18
826
(1,684)
—
—
56
(1,106)
238
(494)
1,740
(1,448)
51,551
(3,700)
1,363
49,214
(14,769)
(33,649)
23,687
(10,040)
7,082
21,525
2018
Restated
£’000
48,604
497
204
5,370
92
100
659
84
—
—
36
(891)
(1,401)
(275)
1,698
(830)
53,947
(4,357)
1,048
50,638
(10,177)
(6,980)
(11,840)
1,066
(431)
22,276
Parent Company
2019
2018
£’000
12,701
—
—
269
—
—
354
(1,684)
(3,935)
3,478
—
2
—
(22,732)
2,884
—
(8,663)
—
—
(8,663)
—
38,566
—
16,575
—
46,478
£’000
18,459
—
—
217
—
—
328
84
(10,354)
(389)
—
5
—
(18,243)
2,678
—
(7,215)
—
—
(7,215)
—
19,188
—
1,273
—
13,246
35. Guarantees and contingencies
The Parent Company has guaranteed the performance of certain contracts entered into by Group undertakings in the ordinary course of
business. These guarantees are impracticable to quantify.
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. At the year end amounts drawn against these facilities were £nil and £12.9m respectively.
In the opinion of the Directors, no loss is expected to arise in connection with these matters.
178
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 36. Business combinations
On 9 August 2019 the Group acquired 60% of the share capital of Starfish Commercial Limited for consideration of £540, the remaining 40%
was acquired on 23 December 2019 for consideration of £nil.
Starfish, who operates an office in Derbyshire, is a multi-tenure housing contractor, and is an established supplier to several Housing Associations
and Local Authorities. It has been delivering affordable and social housing units for the last four years, often via framework arrangements. Starfish
is also a joint venture partner with Magenta Living in a company known as Hilbre Homes, providing sustainable housing opportunities in the
Cheshire area. The Company’s position as an established provider of affordable and social housing enables Henry Boot Construction Limited to
take a step into this new operational area.
The goodwill arising on acquisition is attributable to the acquired reputation and customer base and economies of scale expected from the
combined operations. None of the goodwill is expected to be deductible for corporation tax purposes.
The following table summarises the consideration paid for Starfish Commercial Limited, the fair value of assets acquired, liabilities assumed and
the non-controlling interest at the acquisition date.
Business combinations
Consideration paid 9 August 2019
Cash
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Property, plant and equipment
Deferred tax
Trade and other receivables
Trade and other payables
Total identifiable net assets
Less: non-controlling interests
Goodwill
Total
2019
£’000
1
1
(152)
22
109
2,226
(5,562)
(3,357)
1,342
2,015
—
Acquisition-related costs of £64,000 have been charged to administrative expenses in the consolidated statement of comprehensive income for
the year ended 31 December 2019.
The assets acquired as part of the business combination are all considered to be at fair value and all receivables deemed to be fully recoverable.
The revenue included in the consolidated statement of comprehensive income for the year ended 31 December 2019 was £3,810,000. Starfish
Commercial Limited also contributed loss before tax of £1,834,000 over the same period.
Had Starfish Commercial Limited been consolidated from 1 January 2019, the consolidated statement of comprehensive income would show
proforma revenue of £7,790,000 and loss before tax of £4,418,000.
37. Events after the balance sheet date
Since the outbreak of the COVID-19 pandemic in the first quarter of 2020 there has been widespread disruption in the UK and consequently
for the Group. As the pandemic accelerated after the year end this event has been classified as a non-adjusting post balance sheet event. The
assessment on the ability of the Group to operate as a going concern is disclosed in the accounting policies on page 134.
Other disclosable events after the balance sheet date include the proposal of a final dividend for 2019 and refinancing of the Groups banking
facilities in January 2020, further information can be found in notes 10 and 25 respectively.
There were no other significant events since the balance sheet date which may have a material effect on the financial position or performance of
the Group.
179
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 Notes to the
Financial Statements
for the year ended 31 December 2019
38. Additional information – subsidiaries, joint ventures and associates
Details of the Company’s subsidiaries, joint ventures and associates, all of which are incorporated in England (unless otherwise stated) and are
consolidated in the Group Financial Statements at 31 December 2019, are as follows:
Subsidiary name
Banner Plant Limited
Brookfield Garth Hampsthwaite Management Company 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
Hallam Land Management Limited
HB Island Limited
HBGP Limited
Henry Boot Biddenham Limited
Henry Boot Construction Limited
Henry Boot Contracting Limited
Henry Boot Developments Limited
Henry Boot Cornwall House Limited
Henry Boot Estates Limited
Henry Boot Investments 1 Limited
Henry Boot Inner City Limited
Henry Boot ‘K’ Limited
Henry Boot Land Holdings Limited
Henry Boot (Launceston) Limited
Henry Boot Leasing Limited
Henry Boot (Manchester) Limited
Henry Boot Nottingham Limited
Henry Boot Projects Limited
Henry Boot Swindon Limited
Henry Boot Tamworth Limited
Henry Boot Wentworth Limited
IAMP Management Company Limited
Investments (North West) Limited
Kingsley Road Harrogate Management Company Limited
Marboot Centregate Limited
Marboot Centregate 2 Limited
Moore Street Securities Limited
Moorlands Cleckheaton Management Company Limited
Northfields Rotherham Management Company Limited
Plot 7 East Markham Vale Management Company Limited
Road Link (A69) Holdings Limited
Road Link (A69) Limited
St John’s Manchester Limited
Saltwoodend Limited
Starfish Commercial Limited
Stonebridge Offices Limited
Stonebridge Homes Limited
Victoria Gardens (Headingley) Management Company Limited
Weyland Road Management Company Limited
Winter Ground Limited
Woodside Park Newlay Estate Management Company Limited
Proportion of
ownership
100%
50%
100%
4.6%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
50%
53%
66.7%
61.2%
61.2%
100%
100%
100%
50%
50%
50%
50%
100%
50%
Direct or
indirect
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Direct
Direct
Direct
Indirect
Direct
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Activity
Plant hire
Management company
Inactive
Management company
Management company
Land promotion
Property investment
Management company
Land promotion
Property development
Property development
Land promotion
Construction
Inactive
Property investment and development
Inactive
Property investment
Property development
Inactive
Property investment and development
Land promotion
Land promotion
Motor vehicle leasing to Group companies
Property development
Inactive
Inactive
Land promotion
Property investment and development
Property development
Management company
Property development
Management company
Property investment
Property investment
Employee benefit trust
Management company
Management company
Management company
Holding company
PFI road maintenance
Property development
Inactive
Construction
Property investment
Property development
Management company
Management company
Property development
Management company
180
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 3 8. Additional information – subsidiaries, joint ventures and associates continued
Joint ventures and associates
Ansty Development Vehicle LLP
Aytoun Street Developments Limited
Bigmouth Manchester Limited
Cognito Oak LLP
Crimea Land Mansfield LLP
HBB Preston East Limited
HBB Roman Way Limited
Henry Boot Barnfield Limited
Hilbre Projects LLP
I-Prop Developments Limited
Island Site Limited Partnership
Island Site (General Partner) Limited
Island Site (Nominee) Limited
Kirklees Henry Boot Partnership Limited
Markey Colston Limited
Montagu 406 Regeneration LLP
Newmarket Lane Holding Limited
Newmarket Lane Limited
Newmarket Lane Management Company Limited
Pennine Property Partnership LLP
Road Link Limited
Proportion of
ownership
50%
50%
50%
50%
50%
50%
50%
50%
40%
50%
50%
50%
50%
50%
18.4%
50%
50%
50%
50%
50%
37.6%
Direct or
indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Activity
Land promotion
Property development
Property development
Property development
Land promotion
Property development
Property development
Property development
Construction
Inactive
Property development
Property development
Property development
Inactive
Property investment
Property investment
Property development
Property development
Management company
Property investment and development
Inactive
The address of the registered office of all subsidiaries, joint venture and associates is the same as the Parent Company, with the exception of:
Road Link Limited, Road Link (A69) Limited and Road Link (A69) Holdings Limited whose registered office is Stocksfield Hall, Stocksfield,
Northumberland, NE43 7TN.
Woodside Park Newlay Estate Management Company Limited, Fox Valley Management Company Limited, Moorlands Cleckheaton Management
Company Limited, Brookfield Garth Hampsthwaite Management Company Limited, Kingsley Road Harrogate Management Company Limited,
Weyland Road Management Company Limited and Victoria Gardens (Headingley) Management Company Limited whose registered office is 1
Featherbank Court, Horsforth, Leeds, LS18 4QF.
Henry Boot Barnfield Limited, HBB Roman Way Limited and HBB Preston East Limited whose registered office is 8 Kenyon Road, Lomeshaye
Industrial Estate, Nelson, Lancashire, England, BB9 5SP.
Kirklees Henry Boot Partnership Limited whose registered office is Legal Services, 2nd Floor Civic Centre 3, Huddersfield,
West Yorkshire, HD1 2WZ.
Markey Colston Limited whose registered office is Q1 Quadrant Way, Hardwicke, Gloucester, GL2 2RN.
Cognito Oak LLP whose registered office is Union Plaza (6th Floor), 1 Union Wynd, Aberdeen, Scotland, AB10 1DQ.
Ansty Development Vehicle LLP and Crimea Land Mansfield LLP whose registered office is Advantage House Poplar Way, Catcliffe, Rotherham,
S60 5TR.
Island Site Limited Partnership whose registered office is Guardsman Tony Downes House, 5 Manchester Road, Droylsden, Tameside, M43 6SF.
181
FINANCIAL STATEMENTSHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019 182182
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION SHAREHOLDER
INFORMATION
GROWTH
To grow net assets, increasing
opportunity for the long-term.
Notice of Annual General Meeting
Financial Calendar
Advisers
Group Contact Information
Glossary
184
193
193
194
195
183183
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION 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 Banner Cross Hall, Ecclesall Road,
South, Sheffield, S11 9PD on Tuesday 30 June 2020 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 2019.
Resolution 2
To declare a final dividend of 1.3p per ordinary share.
Resolution 3
To approve the Directors’ Remuneration Report (other than the part containing the directors’ remuneration policy) for the year ended
31 December 2019.
Resolution 4
To reappoint Timothy Roberts as a Director of the Company.
Resolution 5
To reappoint Jamie Boot as a Director of the Company.
Resolution 6
To reappoint Darren Littlewood as a Director of the Company.
Resolution 7
To reappoint Joanne Lake as a Director of the Company.
Resolution 8
To reappoint James Sykes as a Director of the Company.
Resolution 9
To reappoint Peter Mawson as a Director of the Company.
Resolution 10
To reappoint Gerald Jennings as a Director of the Company.
Resolution 11
To appoint Ernst & Young as auditors of the Company.
Resolution 12
To authorise the Audit & Risk Committee to fix the auditors’ remuneration.
184184
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Resolution 13
THAT the rules of the Henry Boot PLC 2020 Company Share Option Plan (CSOP), the principal terms of which are summarised in the Appendix
to this Notice of AGM and a copy of which having been produced to the meeting and initialled by the Chairman for the purpose of identification,
be and are hereby approved, the CSOP be and is hereby adopted and the Directors of the Company be and are hereby authorised to do all acts
and things which they may consider necessary or expedient to give effect to the CSOP.
Resolution 14
THAT the rules of the Henry Boot PLC 2020 Sharesave Plan (Sharesave), the principal terms of which are summarised in the Appendix to this
Notice of AGM and a copy of which having been produced to the meeting and initialled by the Chairman for the purpose of identification, be and
are hereby approved, the Sharesave be and is hereby adopted and the Directors of the Company be and are hereby authorised to do all acts and
things which they may consider necessary or expedient to give effect to the Sharesave.
Resolution 15
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
£4,439,086, provided that (unless previously revoked, varied or renewed) this authority shall expire on 29 September 2021 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.
Resolution 16
THAT subject to the passing of Resolution 15 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 15 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 £665,863,and (unless previously revoked,
varied or renewed) this power shall expire on 29 September 2021 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).
185185
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Notice of Annual
General Meeting
Resolution 17
THAT pursuant to Section 701 of the Companies Act 2006, the Company be and 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 13,317,260;
b.
the minimum price (excluding expenses) which may be paid for an ordinary share is 10p;
c.
the maximum price (excluding expenses) which may be paid for an ordinary share is not more than the higher of:
i. an amount equal to 105% of the average of the middle market quotations for an ordinary share as derived from the London Stock
Exchange Daily Official List for the five business days immediately preceding the day on which the purchase is made; and
ii. an amount equal to the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for
an ordinary share on the trading venue where the purchase is carried out;
d.
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 29 September 2021; 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
AMY STANBRIDGE
Company Secretary
20 May 2020
HENRY BOOT PLC
Registered Office:
Banner Cross Hall
Ecclesall Road South
Sheffield
United Kingdom
S11 9PD
Registered in England and Wales No. 160996
186186
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Notes
1. The holders of preference shares in the Company are not entitled to attend and vote at the AGM.
2. The right to vote at the meeting is determined by reference to the register of members. Only those ordinary shareholders registered in the
register of members of the Company as at the close of business on 26 June 2020 (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 ordinary 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. However, in
light of the COVID-19 pandemic situation, ordinary shareholders and their proxies will not be allowed to attend the meeting in person.
3. An ordinary shareholder is ordinarily entitled to appoint any other 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. However, in light of the COVID-19 pandemic,
ordinary shareholders are urged to appoint the Chairman of the meeting as his or her proxy as ordinary shareholders and their proxies will not
be allowed to attend the meeting in person.
4. 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.
5. A form of proxy is enclosed with the notice issued to holders of ordinary shares. To be valid, a form of proxy must be received by post 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 26 June 2020 (or, if the meeting is adjourned, 48 hours (excluding any part of a day that is not a working day) before the time of
any adjourned meeting).
6. As an alternative to completing the hard copy form of proxy, an ordinary shareholder may appoint the Chairman as his or her proxy
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 26 June 2020 (or, if the meeting is adjourned, no later
than 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting).
7. CREST members who wish to appoint the Chairman as his or her proxy 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 26 June 2020 (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.
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.
187187
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Notice of Annual
General Meeting
8. An ordinary shareholder which is a corporation may ordinarily 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. However, in light of the COVID-19 pandemic, such representatives will not be allowed to attend the
meeting in person and therefore corporations are urged to complete and return their form of proxies appointing the Chairman as their proxy.
9. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under Section 146 of the
Companies Act 2006 (Nominated Person):
a.
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 ordinary 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 ordinary shareholders of the Company.
10. A shareholder or shareholders having a right to vote at the meeting and holding at least 5% of the total voting rights of the Company (see
note 15 below), or at least 100 shareholders having a right to vote at the meeting and holding, on average, at least £100 of paid up share
capital, may require the Company to publish on its website a statement setting out any matter that such shareholders propose to raise at the
meeting relating to either the audit of the Company’s 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.
11. Any request by a shareholder or shareholders to require the Company to publish audit concerns as set out in note 10:
a. may be made either:
i.
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).
188188
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION
12. Shareholders ordinarily 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.
In light of the COVID-19 pandemic, any such questions should be submitted in writing to the Company by the following means no later than
12.30pm on 26 June 2020 (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):
a.
in hard copy, by sending it to the Company Secretary, Henry Boot PLC, Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD; or
b.
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.
Any such written request should clearly state the full name(s) and address(es) of the shareholder(s) raising such questions and, where the
request is made in hard copy form, it must be signed by the relevant ordinary shareholder(s).
13. The information required by Section 311A of the Companies Act 2006 to be published in advance of the meeting, which includes the matters
set out in this notice and information relating to the voting rights of shareholders, is available at:
www.henryboot.co.uk
14. Except as expressly provided above, shareholders who wish to communicate with the Company in relation to the meeting should do so
using the following means:
a.
telephone 0114 255 5444; or
b. email cosec-ir@henryboot.co.uk.
No other methods of communication will be accepted.
15. As at 20 May 2020 (being the last practicable date before publication of this notice), the Company’s issued ordinary share capital was
133,172,602 ordinary shares, carrying one vote each and representing the total number of voting rights in the Company.
16. The following documents will be available for inspection during normal business hours at the registered office of the Company from the date
of this notice until the time of the meeting. They will also be available for inspection at the place of the meeting from at least 15 minutes
before the meeting until it ends.
a. A copy of the rules of the CSOP.
b. A copy of the rules of the Sharesave.
c. Copies of the service contracts of the executive directors.
d. Copies of the letters of appointment of the non-executive directors.
A copy of the rules of the CSOP and Sharesave will also be available for inspection at the following address from the date of this notice until the
time of the meeting:
DLA Piper UK LLP
160 Aldersgate St,
Barbican
London
EC1A 4HT
17. Biographies for each of the directors are shown on pages 66 and 67 of the annual report for the year ended 31 December 2019.
189189
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Notice of Annual
General Meeting
APPENDIX TO NOTICE OF ANNUAL GENERAL MEETING
Summary of proposed new share option plans
Resolutions 13 and 14 propose a new Company Share Option Plan (“CSOP”) and new Sharesave Plan (“Sharesave Plan”) (together “Plans”)
respectively to replace the Company’s existing company share option plan and sharesave plan which are due to expire in June 2020 and May
2020 respectively.
It is not intended that the executive directors will be granted options under the CSOP since they participate in a separate long term incentive plan.
The CSOP and Sharesave Plan will be administered by the Remuneration Committee (“Committee”).
The total number of ordinary shares over which options to subscribe may be granted under all share option schemes of the Company, whether
on a discretionary basis or on any other basis, and issued or issuable under all other share schemes of the Company may not, in any consecutive
10 year period, exceed 10 per cent of the ordinary shares in issue from time to time. Lapsed and surrendered awards shall be disregarded for
this purpose.
The principal features of the proposed new Plans are as follows:
1. CSOP
As with the existing company share option plan, the CSOP will enable options (“Options”) to acquire ordinary shares in the Company
(“Shares”) to be granted to employees, and is intended to satisfy the conditions in schedule 4 to the Income Tax (Earnings and Pensions) Act
2003 (“Schedule 4”) such that options will qualify for certain tax advantages. The CSOP will also allow Options to be granted which are not
tax-advantaged.
1.1
Individual participation limit
The aggregate subscription price (at the date of grant) of all outstanding Options granted to any one participant which are qualifying
options under Schedule 4 may not exceed £30,000.
The aggregate market value (at the date of grant) of Shares over which Options may be granted to any one participant in any
one financial year of the Company under the CSOP will not normally exceed the amount of that participant’s annual basic salary
(excluding benefits in kind) for that financial year (or the preceding financial year if greater).
1.2
1.3
Eligibility
Any full time director or employee of a company in the Henry Boot group (“Group”) is eligible to participate in the CSOP. Actual
participation is at the discretion of the Committee. Options are personal to the participant and not capable of assignment except
that, on death, the Option holder’s personal representatives may exercise the Option within 12 months following the Option holder’s
death. Options shall be granted by deed with no consideration payable by the participant.
Exercise terms
The exercise price for each Share under Option will be the higher of the nominal value of a Share and the market value of a Share at
the date of grant.
An Option will normally be exercisable only within the period of three to 10 years after the date of grant.
Options may be exercised early where employment ceases due to the participant’s death, ill-health, injury, disability, redundancy,
retirement, the sale of the employee’s employing business or company out of the Group or, at the discretion of the Committee, on
the participant in question leaving employment for any other reason. In each of these situations (other than on death), the Option
must be exercised, if at all, by the expiry of the period of six months following the cessation of employment. In the case of death, the
participant’s personal representatives may exercise the Option within 12 months following the death. Where, in these circumstances,
exercise is permitted before the Option has vested in accordance with its terms, the extent to which an Option may be exercised
shall be calculated by the Committee by applying any relevant performance condition and then applying a pro rata reduction to the
number of Shares so determined, based on the proportion of the vesting period during which the participant was employed, unless
the Committee decides that such time-based reduction is inappropriate and determines to apply a lesser reduction (or no reduction).
If the employment ceases for any reason other than one specified in the previous paragraph, the Option will lapse, unless the
Committee in its discretion determines to permit exercise (within such time period and to such extent as the Committee in its
discretion determines).
Performance targets
The Committee may impose objective conditions as to the performance of the Group which must normally be satisfied before
Options can be exercised. Having granted Options and set a performance target, the Committee may vary the performance
target provided that the Committee reasonably considers that the performance target set no longer represents a fair measure of
performance and provided that any new conditions are no more difficult nor easy to satisfy. Since options under the Company’s
existing company share option plan are not granted to executive directors, and are granted on a company-wide basis, and it is
intended that this practice will continue under the CSOP, it is not intended that performance conditions will be applied to Options
granted under the CSOP.
190190
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION
1.4
Change of control and other corporate events
In the event of a takeover, amalgamation or reconstruction of the Company, Options may be exercised early under the CSOP
provided that where the event occurs before the Option has vested, the extent to which an Option may be exercised will be
calculated on the basis of the extent to which any performance conditions applicable to the Options have been satisfied as at the
date of the change of control (or other event), with the resulting number of Shares then reduced on a time pro-rated basis, unless the
Committee determines to apply a lesser reduction (or no reduction).
Alternatively, with the agreement of the acquiring company, Options may be exchanged for options over shares in the acquiring
company or in a company associated with the acquiring company.
1.5
Tax
The CSOP contains provisions that will ensure that any income tax and employee’s national insurance contributions that arise as a
result of the exercise of any Options will be payable by the participant. The Committee may determine that the participant shall also
be liable for any employer’s national insurance contributions which arise.
2. Sharesave plan
The Sharesave Plan is a savings-related share option plan pursuant to which eligible employees may be offered options (“Options”) to
acquire Shares at a price determined by the Committee which can be set at a discount of up to 20 per cent. of the market value of a Share
at the date of invitation to apply for an option. It is intended that the Sharesave Plan will satisfy the conditions in schedule 3 to the Income
Tax (Earnings and Pensions) Act 2003 (“Schedule 4”) such that Options will qualify for certain tax advantages.
2.1
2.2
2.3
2.4
2.5
2.6
Eligibility
All eligible employees and full-time directors of any company within the Group who have been with the Group for a period
determined by the Committee (not exceeding five years), are eligible to participate in the Sharesave Plan. All employees who are
eligible to participate must do so on similar terms although this may vary by reference to levels of remuneration, length or service or
other similar factors.
Savings contracts
Each participant must enter into a savings contract (“Contract”) approved by the Committee for a period of three or five years under
which he agrees to make monthly savings of an amount decided by him, subject to a minimum specified by the Committee which
may not exceed £10 (or such other minimum permitted by the legislation from time to time) and up to the maximum specified by the
Committee and permitted by the legislation (currently £500 per month).
Grant of Options
The number of Shares over which a participant will be granted an Option will be the number of Shares which, taking into account the
price payable on exercise of the Option, can be purchased with the amount saved under the Contract (which, subject to applicable
legislation and regulations, may include a bonus payable under the Contract).
Exercise of Options
Options may normally only be exercised during the six month period following maturity of the Contract and if not exercised by the
end of that period will lapse. This may be following the third or fifth anniversary of commencement of the Contract.
Leavers
Early exercise is permitted in the event of cessation of employment within the Group by reason of death, injury, disability, redundancy,
retirement, or the sale of the participant’s employing company or business out of the Group (but only to the extent of savings plus
any bonus accumulated in the related Contract up to the time of exercise). If a participant ceases to be employed within the Group
for any other reason within three years of the grant of an Option, that Option will lapse. If a participant ceases to be employed
within the Group for any other reason (except for reason of gross misconduct) more than three years from the grant of an Option,
the participant may exercise that Option within six months of so ceasing (but no later than the end of the six month period following
maturity of the related Contract).
Change of control and other corporate events:
Early exercise is also permitted (to the extent of accrued savings to date in the related savings contract) in the event of a change
of control, compromise or arrangement, or voluntary winding up of the Company. On a change of control, or compromise or
arrangement, with the consent of the acquiring company, Options may be exchanged so as to operate over shares in the acquiring
company (or a company associated with it).
191191
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Notice of Annual
General Meeting
3. Features common to both plans
3.1
Grant of Options
Options may only be granted under the CSOP, and invitations to apply for the grant of Options under the Sharesave Plan may only
be made, within the period of 42 days starting immediately after the end of a closed period within the meaning in the Market Abuse
Regulation (EU Regulation 596/2014).
Options may be granted at any other time if the Committee considers that exceptional circumstances exist to justify the grant at such
other time.
3.2
3.3
3.4
Without further shareholder approval, Options may only be granted within 10 years of shareholder approval of the relevant Plan.
Shares issued on exercise of Options
Shares allotted under the Plans will rank equally with the Company’s existing issued Shares (save that they will not qualify for any
dividends or other distributions by reference to a record date prior to the date of exercise of the Option).
Variation of share capital
In the event of a variation of share capital by way of capitalisation, rights issue, subdivision, reduction, consolidation or otherwise,
the number of Shares subject to a subsisting Option and the price payable on exercise may be adjusted in such manner as the
Committee determines (but subject to applicable legislation).
Amendments
The Committee may alter the Plans but certain amendments to the advantage of current or future participants cannot take effect
without shareholder approval, unless they are minor amendments to benefit the administration of the plan, or amendments which
are necessary or desirable to take account of a change in legislation or to obtain or maintain favourable tax, exchange control
or regulatory treatment for participants or the Company or other member of the Group. The amendments which will generally
require shareholder approval are amendments to the persons to whom Options may be granted, the provisions for determining a
participant’s entitlement to, and the terms of, Shares provided under the relevant Plan, the maximum and individual limits on the
number of Shares over which Options can be granted, the provisions for adjusting Options in the event of a variation of share capital
and the provisions for altering the terms of the Plan.
3.5
Pension rights
None of the benefits which may be received under the Plans shall be pensionable.
192192
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION Financial
Calendar
London Stock Exchange announcements
Annual Results 2019:
20 May 2020
Interim Results 2020:
21 August 2020
Pre-close Trading Statement 2020:
end January 2021
Annual Report and Financial Statements
Annual Report and Financial Statements 2019
(Available and online):
by 3 June 2020
Advisers
Chartered Accountants and Statutory Auditors
PricewaterhouseCoopers LLP
Central Square
29 Wellington Street
Leeds LS1 4DL
Bankers
Barclays Bank PLC
1 St Paul’s Place
121 Norfolk Street
Sheffield S1 2JW
HSBC UK Bank Plc
City Point
29 Kings Street
Leeds LS1 2HL
National Westminster Bank PLC
2 Whitehall Quay
Leeds LS1 4HR
Corporate Finance
KPMG Corporate Finance
1 Sovereign Square
Sovereign Street
Leeds LS1 4DA
Annual General Meeting
30 June 2020
Dividends paid on ordinary shares
2019 Final dividend date (Subject to approval at AGM):
6 July 2020
2020 Interim dividend date (Subject to approval):
16 October 2020
Financial PR
Hudson Sandler LLP
25 Charterhouse Square
London EC1M 6AE
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Solicitors – Corporate
DLA Piper UK LLP
1 St Paul’s Place
Sheffield S1 2JX
Solicitors – Operational
Irwin Mitchell LLP
Riverside East House
2 Millsands
Sheffield S3 8DT
Stockbrokers
Numis Securities Limited
Joint Corporate Broker
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Peel Hunt LLP
Joint Corporate Broker
Moor House
120 London Wall
EC2Y 5ET
193193
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION 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 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 350 4477
e: hello@hbd.co.uk
w: www.hbd.co.uk
Regional offices
Birmingham, Bristol, Glasgow, Leeds, London and Manchester
Stonebridge Homes Limited
Registered office
Banner Cross Hall, Ecclesall Road South, Sheffield S11 9PD
Head office
1 Featherbank Court, Horsforth, Leeds LS18 4QF
t: 0113 357 1100
e: sales@stonebridgehomes.co.uk
w: www.stonebridgehomes.co.uk
Head office
Callywhite Lane, Dronfield, Derbyshire S18 2XN
t: 01246 410111
e: hbc@henryboot.co.uk
w: www.henrybootconstruction.co.uk
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
Hire centres
Chesterfield, Derby, Dronfield, Leicester, Leeds, Rotherham
and Wakefield
Road Link (A69) Limited
Registered office and Head office
Stocksfield Hall, Stocksfield, Northumberland NE43 7TN
t: 01661 842842
e: enquiries@roadlinka69.co.uk
194194
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2019SHAREHOLDER INFORMATION 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.
Earnings per share (EPS)
Profit for the period attributable to equity
shareholders divided by the average number of
shares in issue during the period.
Gearing
Net debt expressed as a percentage of equity
shareholders’ funds.
IAS
International Accounting Standard.
IASB
International Accounting Standards Board.
IFRS
International Financial Reporting Standard as
adopted by the European Union.
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.
Retail Price Index (RPI)/Retail
Price Index ‘Jevons’ (RPIJ)/
Consumer Price Index (CPI)
Monthly inflation indicators based on different
‘baskets’ 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.
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.
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.
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.
Renewable energy
Energy which comes from natural resources,
such as sunlight, wind, rain, tides, waves
and geothermal heat, which are naturally
replenished.
Return on capital employed
(ROCE)
A financial ratio that measures a company’s
profitability and the efficiency with which its
capital is employed.
S106
Section 106 agreements (S106) are private
agreements made between local authorities
and developers. They can be attached to
a planning permission to make acceptable
development which would otherwise be
unacceptable in planning terms.
Subsidiary company
A company whose voting stock is more than
50% controlled by another company, usually
referred to as the parent company or holding
company.
A subsidiary is a company that is partly or
completely owned by another company that
holds a controlling interest in the subsidiary
company.
Total shareholder return (TSR)
Dividends and capital growth in the share
price, expressed as a percentage of the share
price at the beginning of the year.
Trading profit
The difference between an organisation’s sales
revenue and the cost of goods sold.
UK planning system
This system consists of the process of
managing the development of land and
buildings. The purposes of this process are to
save what is best of our heritage and improve
the infrastructure upon which we depend for a
civilised existence.
Henry Boot PLC
Registered office:
Banner Cross Hall, Ecclesall Road South
Sheffield, S11 9PD United Kingdom
Registered in England and Wales no. 160996
Tel: 0114 2555444
Email: cosec-ir@henryboot.co.uk
Stock Code: BOOT.L