30368 8 April 2021 11:30 am V030368 8 April 2021 11:30 am V0Henry Boot PLCRegistered office: Banner Cross Hall, Ecclesall Road South Sheffield, S11 9PD United KingdomRegistered in England and Wales no. 160996 Tel: 0114 2555444 Email: cosec-ir@henryboot.co.ukStock Code: BOOT.LFOCUSED ON KEY MARKETS AND SUSTAINABLE GROWTHHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 3,3Henry-Boot-AR-2020-strategic.indd 3,308/04/2021 11:43:0808/04/2021 11:43:08 Welcome to the Henry Boot Annual Report 2020OUR PURPOSETo empower and develop our people to create long-term value and sustainable growth for our stakeholders*. ABOUT USWe manage the combined effort and expertise of six primary businesses across three key markets, investing in our future to create long-term value and robust returns for all our stakeholders and partners.With our uniquely sustainable business model we have built a market-leading Group of Companies that source, develop and deliver across the whole property value-chain.We have been in business for over 135 years and we are valued for our expertise and forward-thinking approach. Read more on pages 08 to 09* 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.Operations during CV-19Throughout the pandemic the Group’s key priorities have been the safety and welfare of our people, our customers, our supply chain, and the communities in which we operate. In March 2020, the Group paused activity on construction sites and in plant hire depots to ensure the correct safety procedures were installed. Since then, all of the Group’s businesses have remained operational, collaborating closely with industry bodies such as the CLC, NFB, CBI and UK Government Ministers to ensure that our services continue safely. Read more on pages 44 to 45CONTENTSBUSINESS OVERVIEWWelcome and IntroductionIFCLiving our Vision04Chairman’s Statement06Group at a Glance08Our Key Differentiators102020 Highlights11STRATEGIC REPORTChief Executive Officer Update14Business Model18– Our Competitive Advantages21Market Context22Strategy Review26Our New Strategy Going Forward30Segmental Reviews– Land Promotion32– Property Investment and Development34– Construction36Group Finance Director’s Review38Key Performance Indicators42Our Response to CV-1944Section 172(1) Statement46Risks and Uncertainties48Our Responsible Business55OUR GOVERNANCEBoard of Directors68Executive Committee72Chairman’s Introduction74Governance at a Glance76Corporate Governance Report– Division and Responsibilities77– Board Leadership and Company Purpose80– Composition, Success and Evaluation91– Nomination Committee Report94– Audit and Risk Committee Report100– Audit, Risk and Internal Control102– Corporate Governance Statement105– Directors’ Remuneration Report106– Remuneration Policy111– Annual Report on Remuneration119Directors’ Report128Statement of Directors’ Responsibilities133FINANCIAL STATEMENTSIndependent Auditors’ Report136Consolidated Statement of Comprehensive Income144Statements of Financial Position145Statements of Changes in Equity146Statements of Cash Flows147Principal Accounting Policies148Notes to the Financial Statements157SHAREHOLDER INFORMATIONNotice of Annual General Meeting198Financial Calendar202Advisers202Group Contact Information203Glossary 204View our online Annual Report at: henryboot.annualreport2020.comWe maintain a corporate website containing a wide range of information of interest to investors and stakeholders. Go to: henryboot.co.ukSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Untitled-2 4-6Untitled-2 4-608/04/2021 12:24:2308/04/2021 12:24:23 30368 8 April 2021 11:30 am V0Strategic focus delivering sustainable growthStrong financial track recordOur business model is based on transforming land, property and development activities into sustainable, long-term value. Read more on pages 18 to 21The following key components of our business give us a strong position for the future: The Henry Boot Way of doing businessOur strong position for the futureStrong presence in markets with long-term drivers01Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OVERVIEWHenry-Boot-AR-2020-strategic.indd 1Henry-Boot-AR-2020-strategic.indd 108/04/2021 15:04:4408/04/2021 15:04:44 30368 8 April 2021 11:30 am V0The Henry Boot Way of doing businessOur people are vital to Henry Boot’s long-term success. By upholding a positive and inclusive culture, which is embedded in our day-to-day operations, it enables us to create and maintain long standing relationships with our customers and clients, and the communities we operate in. How this positions us well for the future:We believe that a strong culture is crucial to the sustainability of the business. It creates an environment which empowers our people to deliver the Group’s strategy, whilst continuing to attract and retain people who support our culture.46 2020 Employee Net Promoter Score (eNPS) Read more on pages 57 to 61We are focused on sustainable markets: industrial & logistics, residential, and urban development. Despite the short-term implications of the pandemic, we operate in market sectors with strong long-term growth trends. We are involved in multiple sectors which means that we are not overly exposed to one area of the market.How this positions us well for the future:We have extensive and embedded operational skills in our key markets, which leaves the business well placed to continue building upon the growing momentum within them.1,119plots in Stonebridge Homes land bank, of which 59% have either detailed or outline planning consentStrong presence in markets with long-term driversOur strong position for the future02Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 2Henry-Boot-AR-2020-strategic.indd 208/04/2021 15:05:0208/04/2021 15:05:02 30368 8 April 2021 11:30 am V0Strong financial track recordStrategic focus delivering sustainable growthWe have already secured significant opportunities within our three long-term markets and throughout 2020 the Group continued to grow our store of opportunities. After reviewing the Group’s strategy, we also identified key opportunities for development throughout our operations, which will support our strategic focus.How this positions us well for the future:Our key markets benefit from structural tailwinds, and with significant opportunities secured and identified, it will support the Group’s strategy and ability to deliver now and in the future.Our strategic land business is capable of delivering88,070residential plotsWe have prudent debt levels and a disciplined approach to risk management. Our strong balance sheet has kept Henry Boot in a good position throughout the pandemic. How this positions us well for the future:It allows us to make selective investments in our key markets, ensuring we can grow our development pipeline and continue delivering in the long term.£1.1bnHenry Boot Developments development pipeline Read more on pages 38 to 4103Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OVERVIEWHenry-Boot-AR-2020-strategic.indd 3Henry-Boot-AR-2020-strategic.indd 308/04/2021 15:05:2408/04/2021 15:05:24 30368 8 April 2021 11:30 am V0Empowering 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. Read more about Our New Strategy on pages 30 and 31 Our valuesOur strategyStrategic prioritiesValuesSafetyDeliveryPeopleGrowthRespectLoyaltyIntegrityCollaborationDeliveryAdaptabilityOur Purpose and CultureOur visionOur people, partners and communities continue to trust our reputation, respect our expertise and value us for our forward-thinking approach.Our purposeTo empower and develop our people to create long-term value and sustainable growth for our stakeholders** 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 on our website henryboot.co.uk04Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 4Henry-Boot-AR-2020-strategic.indd 408/04/2021 15:05:2808/04/2021 15:05:28 30368 8 April 2021 11:30 am V0All our operations are carried out in accordance with our six key values: Respect, Integrity, Loyalty, Delivery, Adaptability and Collaboration. Throughout the past 12 months in particular, these values have been imperative to our success, and our people continue to live by them in both their individual and collaborative roles.RespectIntegrityThroughout the pandemic, the Henry Boot Group has been highly committed to achieving a safe and adapted workspace for us all. They have achieved this by limiting the amount of people allowed into the offices and having rigorous cleaning routines. They have provided and implemented the wearing of PPE and installing screens to separate desks.Most employees are working from home, and the Group has recognised the challenges we have faced.Joanna Batten Buyer – Henry Boot Construction LimitedAs a result of CV-19, the business had to quickly adapt to revised working practices. In early 2020 a Coronavirus Committee was formed, and has continued to develop and implement measures in line with Government guidance.Following a brief pause in March, site operations quickly resumed working to the Henry Boot and CLC Site Operative Procedures (SOP). Recovery plans, emergency protocols and Office Operating Procedures have been developed to ensure we have robust protection measures in place at all our sites, depots and offices.Richard Grafton Head of Policy & Compliance – Henry Boot Construction LimitedLoyaltyDeliveryLoyalty to our people, partners, communities and the environments we work in has never been more important and we have worked hard to demonstrate our enduring commitment to everyone we work with. We have adapted and strengthened our charitable support to focus on the efforts made by our charity partners to support communities to respond to the challenges of the CV-19 pandemic. We recognise that our partners and communities have had to respond to rapidly changing circumstances in recent months, and we hope we have demonstrated to them that our loyalty is one thing that hasn’t changed.Jack Kidder Responsible Business Manager – Henry Boot PLCDuring CV-19, various apprenticeships and courses have been undertaken by a number of employees from all companies within the Henry Boot Group, many of whom have achieved qualifications during the past year.Henry Boot remains committed to supporting the development of its people, and this position hasn’t changed despite the current situation. The success of the business has always been, and continues to be, dependent on its people, and this is recognised across all subsidiaries within the Group.Craig Brown Apprentice & Learning Advisor – Henry Boot PLCAdaptabilityCollaborationFrom quickly convening a Coronavirus Committee featuring representatives across the Group, to activating our business continuity response, altering working protocols, and then reflecting on lessons learned that we could use to improve our working practices – the Group has really risen to the challenges posed by the pandemic. One of the key issues arising out of those lessons learned, and which also links strongly with our Group’s commitment to equality, diversity and inclusion, is our forthcoming agile working approach. We have consulted on this issue across the Group, and are formulating the best approach, which we anticipate will trigger further beneficial changes during 2021 and beyond.Amy Stanbridge General Counsel and Company Secretary – Henry Boot PLCIn 2020, the International Advanced Manufacturing Park (IAMP) was selected for a temporary NHS Nightingale Hospital. The IAMP was delivered in a joint venture between Sunderland City Council and South Tyneside Council, with Henry Boot Developments as delivery partner.Henry Boot Developments worked to complete the building ahead of schedule, along with the infrastructure to serve its new function. While we never imagined that The Innovation Centre would start its life as an NHS hospital, as a brand-new, world class building it offered itself as an ideal venue for its new purpose. In partnership with the councils, we adapted to the needs of the time and helped deliver the building in a condensed timeframe for the NHS.Tom Wheldon Director – Henry Boot DevelopmentsLiving our Values the Henry Boot Way05Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OVERVIEWHenry-Boot-AR-2020-strategic.indd 5Henry-Boot-AR-2020-strategic.indd 508/04/2021 15:05:3908/04/2021 15:05:39 30368 8 April 2021 11:30 am V0“ After an initial pause at the beginning of the pandemic, we began to rebuild momentum and our businesses made good progress towards recovery in the second half of the year.”Jamie Boot Chairman235pNet asset value per ordinary share1(2019: 239p)9.0pEarnings per ordinary share(2019: 28.3p)5.5pDividends per ordinary share(2019: 5.0p)Chairman’s StatementINVESTING FOR THE FUTUREHighlightsI am pleased to announce that Henry Boot delivered a robust set of results, achieving a profit before tax of £17.1m (2019: £49.1m) against the challenging backdrop of a global pandemic, and we maintained our strong financial position throughout 2020, with Net Asset Value per share1 remaining resilient at 235p (2019: 239p). After making selective investments in the Group’s focused three long-term key markets industrial & logistics, residential and urban development, net cash2 was preserved at £27.0m (2019: £27.0m), which improved post year-end to £38.5m at 28 February 2021 as a result of land completions and deferred receipts in the land segment. Unsurprisingly, the Group’s activity was impacted by COVID-19 (CV-19), which had a material effect on the Group’s commercial and financial performance for 2020. However, after an initial pause at the beginning of the pandemic, we began to rebuild momentum and our businesses made good progress towards recovery in the second half of the year. We have had an encouraging start to 2021, showing strong forward sales and a high order book.As reported in January’s trading update, our land promotion business, Hallam Land Management (HLM), continued to trade well, selling 2,000 plots (2019: 3,427) and in H2 disposed of a significant interest in a joint venture site in the Midlands, which contributed towards the Group’s 2020 profit. Henry Boot Developments (Henry Boot Developments) delivered schemes with a Gross Development Value (GDV) of £58m (Henry Boot Developments share £55m) during the year but, in response to the market, reduced its committed programme. Accordingly, having commenced 2020 with a pipeline having a GDV of £315m (Henry Boot Developments share £107m), this fell to £312m (Henry Boot Developments share £85m) by the end of the year. However, we have seen healthy demand for industrial accommodation and expect to grow our committed pipeline over the course of the current year. Stonebridge Homes also saw good demand for its premium houses; however, its growth was affected by slow planning decisions, partly as a result of CV-19. Despite this, the business completed the year ahead of target, having achieved 115 completions (2019: 159). Henry Boot Construction finished the year on 95% of planned site activity, and Banner Plant increased its activity to 95% of year-on-year sales. Road Link (A69) still generated encouraging returns despite seeing a decrease in traffic volumes due to CV-19 travel restrictions.Our relatively new CEO has undertaken a strategic review, which pleasingly reported that our business model is in good shape, so it is now about evolving our strategy. However, we want to be more explicit about our ambitions to grow, and to have more focus on our three key markets, which benefit from structural tailwinds. We have also identified synergies and efficiencies, plus ways to collaborate across the Group. An important part of the strategy is to formalise and coordinate our approach to Environmental, Social and Governance issues (ESG). 135 Henry Boot, whilst celebrating our 135th anniversary, is phase one of our new ESG strategy.The Group only utilised the Government’s Coronavirus Job Retention Scheme (CJRS) up to August of last year, and only ever had a minority of people on furlough, with the business topping up pay to 100%. After the Board reviewed full year performance and the net cash position, we made the decision to repay all furlough grants claimed under the CJRS, making a full repayment in February 2021. In addition, the Remuneration Committee has taken the decision, in line with the results achieved for 2020, to reimburse the 20% deduction from the CEO and the Group Finance Director’s salaries, to reflect the position that everyone at Henry Boot experienced in receiving 100% of their salaries whilst either at work or on furlough. This is also aligned to the treatment of Executive Directors along with employees in receiving 50% of their 2019 bonuses, a parallel that will be continued in relation to 2020 with Executive Director bonus increases being tied to those of the wider workforce. Our People Our people’s skills, determination, and expertise in our three key markets has proved fundamental to the Group’s 2020 performance 06Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 6Henry-Boot-AR-2020-strategic.indd 608/04/2021 15:05:4608/04/2021 15:05:46 30368 8 April 2021 11:30 am V0“ After an initial pause at the beginning of the pandemic, we began to rebuild momentum and our businesses made good progress towards recovery in the second half of the year.”Jamie Boot Chairman235pNet asset value per ordinary share1(2019: 239p)9.0pEarnings per ordinary share(2019: 28.3p)5.5pDividends per ordinary share(2019: 5.0p)and to maintaining our strong financial position in these challenging circumstances. Our teams have shown themselves to be agile and adaptable, adopting new ways of working and creating new efficiencies, which will continue to shape the Group’s future working practices. I believe an effective business can be measured by its agility to respond effectively to challenging environments, market uncertainty, and structural change. On behalf of the Board, I would like to thank everyone at Henry Boot for their dedication and hard work during this unprecedented period, which has allowed us to produce a robust set of results.Dividend The Board regularly reviewed the Group’s financial position and considered the impact of CV-19 on trading conditions when deciding whether to continue paying a dividend during the pandemic. Given the Group’s confidence in our strong balance sheet and that we operate in markets that will continue to deliver returns over the longer term, the Board has proposed to continue to pay a dividend and concluded to pay a final dividend of 3.3p, which together with the 2.2p interim dividend, gives a total of 5.5p (2019: 5.0p) for the year. Payment of the final dividend is subject to shareholder approval at the Annual General Meeting and will be paid on 28 May 2021 to shareholders on the register as at 30 April 2021.OutlookWhilst CV-19 had an impact on the Group’s 2020 performance, there was still resilient demand within the markets we operate in, leaving us optimistic for the year ahead. These remain unprecedented times; however, we begin the year in a strong financial position, with a resilient balance sheet, a portfolio with ample opportunities, and encouraging forward sales as our key markets recover. This leaves the Group feeling confident that we will be able to build on the momentum we saw in H2 2020 and continue delivering a high-quality service to our customers.Jamie Boot Chairman1. Net Asset Value (NAV) per share is an alternative performance measure (APM) and is defined using the statutory measures net assets / ordinary share capital2. Net cash is an APM and is reconciled to statutory measures in note 33.Pictured: Butterfield Business Park in Luton, boasting 45 acres of land ready for development. In partnership with The Crown Estate and Luton Borough Council, Phase 1 has been completed, with all 10 units already been taken up.07Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OVERVIEWHenry-Boot-AR-2020-strategic.indd 7Henry-Boot-AR-2020-strategic.indd 708/04/2021 15:05:5008/04/2021 15:05:50 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Group at
a Glance
The Group is split into three different business segments consisting of six primary
businesses. The parent company, Henry Boot PLC, exists to provide leadership,
direction and support in a number of areas to the businesses.
LAND PROMOTION
CONSTRUCTION
PROPERTY
INVESTMENT AND
DEVELOPMENT
HALLAM LAND
MANAGEMENT LIMITED
HENRY BOOT
DEVELOPMENTS LIMITED
HENRY BOOT
CONSTRUCTION LIMITED
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. Hallam
Land has a strategic land bank of
16,607 acres, focused on higher value
locations in the South and Midlands,
and in total has the potential to deliver
around 88,070 residential plots.
Revenue stream:
Henry Boot Developments is 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 £1.4bn.
Revenue stream:
A regional construction services
provider to both public and private
clients, offering creative, customer-
focused solutions and building strong
partnering relationships to ensure the
best outcomes for all projects.
Revenue stream:
STONEBRIDGE
HOMES LIMITED
Stonebridge Homes is a jointly
owned company (controlled by Henry
Boot PLC). It has built homes and
communities for over a decade and
specialise in delivering quality, high
specification properties in the Yorkshire
region. It has exciting plans for
sustainable growth that will soon see
the launch of new developments in the
North East of England and increase the
number of outlets in Yorkshire.
Revenue stream:
BANNER PLANT
LIMITED
Offering a wide range of construction
equipment and services for sale and hire
in plant, temporary accommodation,
power tools, powered access and big
air compressors. Primarily, supply areas
stretch from Yorkshire in the north to
the East Midlands and Birmingham
in the south.
Revenue stream:
ROAD LINK (A69)
LIMITED
Road Link has a 30-year contract (five
years remaining) with Highways England
to operate and maintain the A69 trunk
road between Carlisle and Newcastle
upon Tyne. 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.
% of Group revenue:
52
Number of employees:
294
% of Group revenue:
9
Number of employees:
28
% of Group revenue:
39
Number of employees:
118
08
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Key market sectors:
Type of revenue stream:
Industrial & logistics
Residential
Urban Development
Our market sectors
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 profits overall.
O
V
E
R
V
E
W
I
INDUSTRIAL
AND LOGISTICS
RESIDENTIAL
URBAN
DEVELOPMENT
Industrial sector experienced
high demand
The demand for industrial and logistic
warehouses has increased significantly
over the last decade as a result of
the rapid growth in online sales. The
pandemic has accelerated this demand
and it was the only sector to deliver
positive capital returns with investors
in 2020.
Read more on page 23
UK housing prices
continue to grow
In the second half of 2020 the UK
residential market witnessed resilient
demand, leading to housing prices
rising, as many households have re-
evaluated their housing needs. Despite
price growth, rising house prices have
been offset by falling mortgage rates.
Read more on page 24
People choosing urban
centres to live
People are moving to large urban centres
for work and the lifestyle on offer. 90%
of the UK population is predicted to be
living in urban areas exceeding 300,000
population by 2050. This will create
demand for good quality schemes for
people to work and live in, with build-to-
rent (BTR) playing an important element
of supply.
Read more on page 25
UK warehouses
take-up hit a record
of over
Total UK house
price growth for
2020 was
Private residential
rents increased
in the UK by
50m sq ft
in 2020.
Source: Savills
7.3%
the highest in
six years.
Source: Savills
1.4%
in 2020.
Source: ONS
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Key
Differentiators
OUR FOCUS ON MARKETS
WITH STRUCTURAL
TAILWINDS
OUR LONG STANDING
REPUTATION AND
RELATIONSHIPS
Read more on pages 22 to 25
Read more on pages 18 to 21
OUR ENGAGED AND
PROACTIVE PEOPLE
OUR PRUDENT
MANAGEMENT OF RISKS
Read more on pages 57 to 61
Read more on pages 48 to 54
OUR PORTFOLIO IS
EMBEDDED WITH VALUE
AND OPPORTUNITIES
OUR DEEP PLANNING
AND DEVELOPMENT
EXPERTISE
Read more on pages 32 to 37
Read more on pages 30 and 31
10
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
2020
Highlights
Financial highlights
Profit before tax
£17.1m
m
4
.
5
5
£
m
6
.
8
4
£
m
1
.
9
4
£
m
5
.
9
3
£
m
1
.
7
1
£
Net cash2/(debt)
£27.0m
m
0
.
7
2
£
m
0
.
7
2
£
)
m
9
.
2
3
£
(
)
m
0
.
9
2
£
(
)
m
4
.
8
1
£
(
6
1
0
2
7
1
0
2
8
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0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Group revenue
£222.4m
m
5
.
8
0
4
£
m
1
.
7
9
3
£
m
7
.
9
7
3
£
m
8
.
6
0
3
£
Net asset value per
ordinary share1
235p
p
9
3
2
p
5
3
2
p
7
2
2
p
3
0
2
p
7
7
1
m
4
.
2
2
2
£
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Earnings per
ordinary share
9.0p
p
1
.
2
3
p
3
.
8
2
p
3
.
8
2
p
5
.
1
2
Dividends per
ordinary share
5.5p
p
0
.
9
p
0
.
8
p
0
.
7
p
5
.
5
p
0
.
5
p
0
.
9
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
O
V
E
R
V
E
W
I
Highlights
• Revenue of £222.4m (2019: £379.7m) reduced as operations
saw lower demand affected by CV-19
• Profit before tax of £17.1m (2019: £49.1m) ahead of expectations
primarily due to land disposals and a resilient performance from
our operations in H2. EPS lower at 9.0p (2019: 28.3p)
• Robust NAV per share1 at 235p (2019: 239p) and strong net cash2
position at £27.0m (2019: £27.0m) resulting in nil gearing. Current
cash (at the end of February 2021) is £38.5m
• Proposed final dividend of 3.3p (2019: 1.3p), increasing the full
year dividend to 5.5p (2019: 5.0p) reflecting our current financial
position and confidence in our long-term markets.
• 135 Henry Boot launches our ESG strategy and celebrates our
135th anniversary
• An evolved strategy focusing on our three long-term markets:
industrial & logistics, residential and urban development, all of
which are driven by positive long-term trends
• Land promotion business sold 2,000 plots and interest in major
JV in the Midlands. Capital successfully recycled into growing the
landbank to 16,607 acres (2019:14,898 acres)
• Committed development of £312m (HB share £85m) – 88%
pre-sold or pre-let. Strong £1.4bn development pipeline
(HB share – £1.1bn) with 78% in industrial & logistics
• Stonebridge Homes performed ahead of target after completing on
115 sales in 2020 and secured 57% of their sales target for 2021.
Land bank increased to 1,119 plots including a site in Wakefield
secured for 149 plots
• Construction business recovered well in H2, performing ahead of
expectations with a turnover of £86.2m. Encouraging demand, led
by public sector customers, leading to full order book for 2021
• Good start to year, ahead of expectations on activity, order book
and forward sales in land, development and housebuilding
1. Net Asset Value (NAV) per share is an alternative performance measure (APM) and is
defined using the statutory measures net assets / ordinary share capital
2. Net cash is an APM and is reconciled to statutory measures in note 33 to the financial
statements.
Read the Financial
Review on pages 38 to 41
Read the Segmental
Review on pages 32 to 37
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30368 8 April 2021 11:30 am V0Henry-Boot-AR-2020-strategic.indd 12Henry-Boot-AR-2020-strategic.indd 1208/04/2021 15:06:2808/04/2021 15:06:28 30368 8 April 2021 11:30 am V0STRATEGIC REPORTChief Executive Officer Update14Business Model18– Our Competitive Advantages21Market Context22Strategy Review26Our New Strategy Going Forward30Segmental Reviews– Land Promotion32– Property Investment and Development34– Construction36Group Finance Director’s Review38Key Performance Indicators42Our Response to CV-1944Section 172(1) Statement46Risks and Uncertainties48Our Responsible Business55The Directors present the Group Strategic Report for the year ended 31 December 2020.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 Business Overview and Strategic Report on pages 01 to 65 has been approved by the Board and signed on its behalf byTim Roberts Chief Executive Officer16 April 2021Darren Littlewood Group Finance Director16 April 2021Henry-Boot-AR-2020-strategic.indd 13Henry-Boot-AR-2020-strategic.indd 1308/04/2021 15:06:3908/04/2021 15:06:39 30368 8 April 2021 11:30 am V0“The safety and welfare of our people, customers, supply chain, and the communities in which we operate, have been the key priorities in Henry Boot’s response to the CV-19 outbreak.”Tim Roberts Chief Executive Officer88,070Strategic land plots(2019: 77,144)Henry Boot Developments Pipeline GDV£1.1bn(2019: £1.1bn)Stonebridge Homes Total Land Bank 1,119 plots(2019: 1,023)2021 Construction Orderbook £80m(2020: £86m)Chief Executive Officer UpdateWELL PLACED FOR THE FUTUREJust over a year into my new role and I find myself very proud of the way our people have responded to the pandemic, along with many other institutions, businesses and communities across the country. It gives me added confidence that we are not only well placed in the three key markets we serve, together with our strong financial position, but that we also have a team that shows it can cope with significant change and uncertainty.The safety and welfare of our people, customers, supply chain, and the communities in which we operate have been the key priorities in Henry Boot’s response to the CV-19 outbreak and I’m relieved to say that the safety procedures we have installed have allowed us to continue operating safely. We have monitored infection rates closely using lateral flow testing, including in our largest construction site at Barnsley, and there is no data to suggest that the people who have been working on site and in our depots have been at greater risk. Whilst I want to thank everyone at Henry Boot, I would like to give special thanks to those who have worked on site or in our depots so effectively, away from the relative safety of home working.The Group utilised the Government’s CJRS due to the initial reduction in construction, housebuilding and plant hire activity but only ever had a minority of people on furlough, with the business topping their pay up to 100%. We stopped using the CJRS by August 2020 and paid back all furlough grants claimed under the scheme in February 2021, as we are confident activity levels have now stabilised.The Group also made various adjustments in response to further support the business during the pandemic. This included: reducing the Board’s executive and non-executive pay by 20% for six months; paying a reduced final dividend to shareholders for 2019; and only paying 50% of bonuses to employees and directors for the full year of 2019 in 2020. We also made the difficult decision to restructure our construction division, which included making some redundancies. In terms of operations, HLM performed well after the housing market recovered and was unexpectedly buoyant in H2. We sold 2,000 plots (2019: 3,427) on nine sites, achieving a profit per plot of £6,456, and exchanged on 1,744 plots that will provide profit for the Group in 2021. We invested £10.0m in our land bank growing it to 16,607 acres (2019:14,898 acres) and ended the year with over 15,000 plots where we have planning secured.Henry Boot Developments adjusted to the uncertain environment by slowing down development but still successfully completed on a total GDV of £58m (our share £55m), with 100% of these schemes either sold or let (£41m) or retained (£17m) in our investment portfolio. Towards the end of 2020, we started to increase our developments, particularly in response to growing industrial demand with commitments on 206,100 sq ft of industrial and logistic space. In H2 2021 we will complete on our 533-unit BTR Kampus scheme in Manchester, which has been forward-funded with us retaining a 5% equity stake. We also purchased two opportunities at a combined price of £12.6m during the year, Mabgate in Leeds, and St John’s College in Manchester with existing buildings of 60,000 sq ft and 27,000 sq ft respectively. We also entered into a development agreement on Phoenix 10 in Walsall, which adds a further 620,000 sq ft to our industrial and logistic offering. Committed development currently stands at £312m (Henry Boot Developments share £85m) and our development pipeline has been maintained at £1.4bn (Henry Boot Developments share £1.1bn), 78% of which is in industrial & logistics. Our jointly owned housebuilder, Stonebridge Homes, achieved 115-unit sales (2019: 159 sales), which was ahead of our target and, with a buoyant housing market, maintained a strong sales rate of 0.61 14Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 14Henry-Boot-AR-2020-strategic.indd 1408/04/2021 15:06:4408/04/2021 15:06:44 30368 8 April 2021 11:30 am V0“The safety and welfare of our people, customers, supply chain, and the communities in which we operate, have been the key priorities in Henry Boot’s response to the CV-19 outbreak.”Tim Roberts Chief Executive Officer88,070Strategic land plots(2019: 77,144)Henry Boot Developments Pipeline GDV£1.1bn(2019: £1.1bn)Stonebridge Homes Total Land Bank 1,119 plots(2019: 1,023)2021 Construction Orderbook £80m(2020: £86m)units per site per week during the year. 2021 has started well with sales already agreed on 69 units to date, well ahead of the business plan. However, growth in Stonebridge has been hampered by a slow process for getting planning on our land bank, partly caused by CV-19. We are addressing this by taking a more portfolio approach in planning terms to our 1,119 plot landbank (2019: 1,023 plots), helped by securing a site just before Christmas in Wakefield with planning for 149 plots. We are determined to grow this business so that it benefits from more operational scale and becomes a multi-regional premium housebuilder. Henry Boot Construction Limited delivered revenue of £86.2m (2019: £89.7m), which was significantly ahead of our expectation despite earlier disruptions from CV-19. During the year, we successfully secured a £40m contract to deliver a BTR scheme, and post year-end we started work on a £42.5m mixed use scheme both in the ‘Heart of Sheffield’. As a result, we now have a full construction order book for 2021, and with our public sector bias, expect to play our part in the Government’s plans to Build Back Better.Our balance sheet has remained rock solid, with no stranded assets needing to be written down. With £38.5m of cash in the bank (as at 28 February 2021), as well as committed and undrawn facilities of £75m, we are in a very strong position to fund our growth plans. However, like all businesses, we need to be clear about our strategic objectives, and there are also areas where we can develop our approach and skills. In this respect, I set out a summary of our evolving strategy together with a new approach to ESG in the next two sections, followed by the normal business review. I am confident that with a greater strategic focus on our three key markets, the growth prospects driven by existing opportunities within our portfolio, our strong financial resources, plus our highly engaged people, the outlook is very encouraging.Pictured: MV55 is a 55,000 sq ft warehouse located at Markham Vale, a 200-acre industrial and logistics development located at Junction 29A of the M1 in Derbyshire.15Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 15Henry-Boot-AR-2020-strategic.indd 1508/04/2021 15:06:4908/04/2021 15:06:49 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Chief Executive
Officer Update
Responsible Business
As a 135-year-old business, we understand sustainability and long-
term value creation. This year, we will formalise and coordinate our
approach to ESG as we launch our new ESG Strategy. This will
guide our business to deliver an ambitious and strategic approach to
ESG and align all our current and prospective responsible business
activities with a clear focus. Henry Boot would not be here today
without sustainability being at our core. The new ESG Strategy will
see us formalise ESG factors in our discussions of business risks and
opportunities and will allow us to measure our progress against clear
ESG objectives. We understand that now is a time for action and for
driving and communicating clear progress on these important factors.
The implementation of our ESG Strategy will take a two-phase
approach and will clearly align our responsible business ambitions with
key societal issues, with particular focus in the first phase on how we
will achieve Net Zero Carbon (NZC) and develop increasing equality,
diversity and inclusion in our business and the sector we represent.
135 Henry Boot is phase one of our ESG Strategy. This strategic
framework will guide us as we launch three long-term initiatives:
1. Our Pathway to NZC and enhancing our environmental
stewardship
2. Our new Equality, Diversity, and Inclusion Strategy
3. Our Community Partnership Plan to provide funds, time, resources,
and expertise to support our community partners
135 Henry Boot will see our business build on our strong foundations
of responsibility and create engagement with all of our stakeholders as
we address and respond to crucial issues faced by our communities
and environments.
Phase two of our ESG Strategy will launch in January 2022 and will be
influenced by further consultation and engagement with our people and
partners. This will ensure we focus on the most material issues and will
have regard to the United Nations Sustainable Development Goals that we
believe we can impact most positively. It will incorporate all of our existing
responsible business initiatives and guide us to achieve long-term ambitious
targets and create long-lasting and meaningful social value and impact.
We will also be ensuring alignment with the requirements of the Taskforce
on Climate-Related Financial Disclosures in preparation for the enhanced
reporting requirements, that will apply fully to our activities for the 2021
Annual Report and Accounts onwards.
To provide oversight and support to the Group’s ESG ambitions and
commitment, we have established a new Board Committee. The
Responsible Business Committee will support the business to embed ESG
factors into our Commercial Strategy. The Committee will be chaired by
Non-executive Director Peter Mawson. Our timeline for key initiatives is:
Responsible business strategy timeline
MARCH 2021
Phase 1 of our Responsible
Business Strategy – Launch of 135 Henry Boot and
the Community Partnership Plan
APRIL 2021
New Equality, Diversity, and Inclusion Strategy.
JUNE 2021
Our Pathway to Net Zero Carbon and enhancing
our environmental stewardship.
JANUARY 2022
Phase 2 of our Responsible Business Strategy
16
Whilst formulating our long-term ESG Strategy, I am pleased to report
that we have maintained our focus on supporting our people and
communities in the unprecedented circumstances of CV-19. Amid the
challenging working environment of a pandemic, we have:
• supported and maintained regular communications with our
people; our Employee Net Promoter Score (eNPS) has increased
to an outstanding score of 46;
• continued to provide support to, and work closely with the
communities in which we operate;
• collaborated with regulatory bodies including the Construction
Leadership Council, National Federation of Builders, Confederation
of British Industry and UK Government Ministers, to ensure our
services continue to adhere to best practice and guidance;
• directly supported the NHS Nightingale Hospital programme, as
a unit at our joint venture development scheme in Sunderland,
the International Advanced Manufacturing Park, was selected for
conversion into a temporary hospital, and
• our charitable giving programme donated a total of nearly £68,000
to 28 organisations who needed support during the pandemic.
We recognise this approach is a unique way to deliver our ESG
ambitions. However, we believe it will enable us to successfully embed
ESG factors within our business decision-making and activities and to
engage with our people and partners, in order to create a meaningful
strategic approach to responsible business and the social value
created through our operations. It is the Henry Boot Way!
Looking Forward
As I write, there are reasons to be cautiously optimistic; the successful
ongoing national roll out of the vaccine, infection rates falling and
the Government’s road map setting out some form of social and
economic recovery. Importantly over the last year, we have shown
that our business has adjusted and, whilst not immune, still offers a
resilient, viable and relevant business model.
As for the immediate outlook I am encouraged. We start the year
with strong forward sales and very healthy order books. Land plots
pre-sold last year, and sold at the start of this year, total 2,039, our
committed developments of £312m (HB share £85m) are already
88% presold or let (HB share 69%), sales have now been agreed on
57% of our housebuilding target for 2021, plus the year’s orderbook
for construction is fully secured. Just as importantly, with cash on the
balance sheet, together with a portfolio rich with opportunity, we are
ready to respond to signs of increasing demand in our key markets.
Moreover, our strategy focuses on growth in three long-term markets
– industrial & logistics, residential and urban development – that are
driven by long-term trends, which in a post pandemic world, we are
confident will endure. We also have a good record of serving public
sector clients in key regional construction areas, at a time when the
Government is looking to invest money in the regions.
We remain committed to working with our clients and various
stakeholders in building on the good start to the year and in realising
our long-term strategy.
Tim Roberts
Chief Executive Officer
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30368 8 April 2021 11:30 am V0Pictured: Phoenix 10 is a 44 acre site located in Walsall. The £114m project, including a £40m remediation contract, will deliver up to 620,000 sq ft of employment space. Remediation works are set to begin in 2021, subject to planning permission. Development is expected to start in 2023, with completion in 2027.17Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 17Henry-Boot-AR-2020-strategic.indd 1708/04/2021 15:07:1708/04/2021 15:07:17 30368 8 April 2021 11:30 am V0Business Model12345KEY RESOURCES AND RELATIONSHIPS GROUP OPERATING MODEL BUSINESS MODEL View the video explaining Our business model on our Corporate websiteOUR EXPERTISE OUR VALUE GENERATION Our people are at the heart of what we achieve Henry Boot recognises that our people are fundamental 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. Since then, using the existing framework, the Group has reviewed and refocused its strategy to concentrate on three key markets, which underpin the business model. The strategy is still flexible to our subsidiary’s different operational expertise, but it improves upon synergies and efficiencies within the Group, whilst still focusing on creating value for all our stakeholders. Read more about Our New Strategy on pages 30 and 31The ‘Henry Boot Way’ Our culture and behaviour are 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, and our colleagues and aims to provide satisfaction for all our stakeholders. Read more about ‘The Henry Boot Way’ on page 05Effective 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 771Identify opportunities and acquire land Hallam Land Management acquires mainly agricultural land and then promotes it for its highest value use. Henry Boot Developments acquires mainly brownfield land.2Obtain planning permissionGaining planning permission on land adds immense value to its worth.Hallam Land Management promotes land for residential, commercial and retail consent. Henry Boot Developments promotes land for commercial development. Stonebridge Homes promotes land for residential development.3aSale of landOnce 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.3bDevelopment of siteUnlike Hallam Land Management, when Henry Boot Developments and Stonebridge Homes gain planning permission for a site, they will develop it themselves.4aSale of propertyOnce 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.4bInvestment portfolioA 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 £80m and generates a sizeable amount of rental income each year.ConstructionHenry 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 trunk road between Carlisle and Newcastle upon Tyne. Highways England pays Road Link a fee based on the number of vehicles using the road and the mileage travelled.Bank fundingGROUPRecurring revenueCyclical revenue1Identify opportunities and acquire land 2Obtain planning permissionSale of property4a4bSale of land3a3bDevelopment of siteInvestment portfolioCONSTRUCTIONLAND PROMOTIONPROPERTY INVESTMENT AND DEVELOPMENTRecurring 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.LAND PROMOTIONBusinesses: 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 DEVELOPMENTBusinesses: Henry Boot Developments and Stonebridge Homes• Acquiring and developing brownfield land or under-performing property assets.• Operating in focused 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 urban development schemes.CONSTRUCTIONBusinesses: 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.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.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.18Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 18Henry-Boot-AR-2020-strategic.indd 1808/04/2021 15:07:2208/04/2021 15:07:22 30368 8 April 2021 11:30 am V012345KEY RESOURCES AND RELATIONSHIPS GROUP OPERATING MODEL BUSINESS MODEL View the video explaining Our business model on our Corporate websiteOUR EXPERTISE OUR VALUE GENERATION Our people are at the heart of what we achieve Henry Boot recognises that our people are fundamental 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. Since then, using the existing framework, the Group has reviewed and refocused its strategy to concentrate on three key markets, which underpin the business model. The strategy is still flexible to our subsidiary’s different operational expertise, but it improves upon synergies and efficiencies within the Group, whilst still focusing on creating value for all our stakeholders. Read more about Our New Strategy on pages 30 and 31The ‘Henry Boot Way’ Our culture and behaviour are 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, and our colleagues and aims to provide satisfaction for all our stakeholders. Read more about ‘The Henry Boot Way’ on page 05Effective 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 771Identify opportunities and acquire land Hallam Land Management acquires mainly agricultural land and then promotes it for its highest value use. Henry Boot Developments acquires mainly brownfield land.2Obtain planning permissionGaining planning permission on land adds immense value to its worth.Hallam Land Management promotes land for residential, commercial and retail consent. Henry Boot Developments promotes land for commercial development. Stonebridge Homes promotes land for residential development.3aSale of landOnce 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.3bDevelopment of siteUnlike Hallam Land Management, when Henry Boot Developments and Stonebridge Homes gain planning permission for a site, they will develop it themselves.4aSale of propertyOnce 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.4bInvestment portfolioA 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 £80m and generates a sizeable amount of rental income each year.ConstructionHenry 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 trunk road between Carlisle and Newcastle upon Tyne. Highways England pays Road Link a fee based on the number of vehicles using the road and the mileage travelled.Bank fundingGROUPRecurring revenueCyclical revenue1Identify opportunities and acquire land 2Obtain planning permissionSale of property4a4bSale of land3a3bDevelopment of siteInvestment portfolioCONSTRUCTIONLAND PROMOTIONPROPERTY INVESTMENT AND DEVELOPMENTRecurring 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.LAND PROMOTIONBusinesses: 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 DEVELOPMENTBusinesses: Henry Boot Developments and Stonebridge Homes• Acquiring and developing brownfield land or under-performing property assets.• Operating in focused 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 urban development schemes.CONSTRUCTIONBusinesses: 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.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.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.19Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 19Henry-Boot-AR-2020-strategic.indd 1908/04/2021 15:07:2208/04/2021 15:07:22 30368 8 April 2021 11:30 am V012345KEY RESOURCES AND RELATIONSHIPS GROUP OPERATING MODEL BUSINESS MODEL View the video explaining Our business model on our Corporate websiteOUR EXPERTISE OUR VALUE GENERATION Our people are at the heart of what we achieve Henry Boot recognises that our people are fundamental 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. Since then, using the existing framework, the Group has reviewed and refocused its strategy to concentrate on three key markets, which underpin the business model. The strategy is still flexible to our subsidiary’s different operational expertise, but it improves upon synergies and efficiencies within the Group, whilst still focusing on creating value for all our stakeholders. Read more about Our New Strategy on pages 30 and 31The ‘Henry Boot Way’ Our culture and behaviour are 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, and our colleagues and aims to provide satisfaction for all our stakeholders. Read more about ‘The Henry Boot Way’ on page 05Effective 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 771Identify opportunities and acquire land Hallam Land Management acquires mainly agricultural land and then promotes it for its highest value use. Henry Boot Developments acquires mainly brownfield land.2Obtain planning permissionGaining planning permission on land adds immense value to its worth.Hallam Land Management promotes land for residential, commercial and retail consent. Henry Boot Developments promotes land for commercial development. Stonebridge Homes promotes land for residential development.3aSale of landOnce 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.3bDevelopment of siteUnlike Hallam Land Management, when Henry Boot Developments and Stonebridge Homes gain planning permission for a site, they will develop it themselves.4aSale of propertyOnce 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.4bInvestment portfolioA 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 £80m and generates a sizeable amount of rental income each year.ConstructionHenry 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 trunk road between Carlisle and Newcastle upon Tyne. Highways England pays Road Link a fee based on the number of vehicles using the road and the mileage travelled.Bank fundingGROUPRecurring revenueCyclical revenue1Identify opportunities and acquire land 2Obtain planning permissionSale of property4a4bSale of land3a3bDevelopment of siteInvestment portfolioCONSTRUCTIONLAND PROMOTIONPROPERTY INVESTMENT AND DEVELOPMENTRecurring 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.LAND PROMOTIONBusinesses: 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 DEVELOPMENTBusinesses: Henry Boot Developments and Stonebridge Homes• Acquiring and developing brownfield land or under-performing property assets.• Operating in focused 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 urban development schemes.CONSTRUCTIONBusinesses: 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.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.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.20Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 20Henry-Boot-AR-2020-strategic.indd 2008/04/2021 15:07:2608/04/2021 15:07:26 30368 8 April 2021 11:30 am V0Business ModelOUR COMPETITIVE ADVANTAGES ENSURE LONG-TERM VALUE GENERATION Our long lasting relationshipsOur culture, ‘The Henry Boot Way’, means that we have a unique and cohesive approach to doing business. 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.Capital structure 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.Diversified businessesThe 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.21Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 21Henry-Boot-AR-2020-strategic.indd 2108/04/2021 15:07:3408/04/2021 15:07:34 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Market
Context
OUR MARKET
SEGMENTS
Henry Boot is focused on three sustainable
markets, where the Group already has a
strong presence and significant expertise:
industrial & logistics, residential and urban
development. Long-term trends such
as population growth, rising numbers of
households, shopping moving online and
near-shoring of supply chains, suggest these
three markets will continue to perform well,
albeit at different rates of growth over time. In
effect they benefit from structural tailwinds.
Our key market segments
Industrial & logistics
Residential
Urban Development
CV-19 impact
CV-19 has had a direct and indirect
impact on all of our markets. In
particular, industrial & logistics saw
positive growth, resulting in strong
demand for prime warehouses and the
residential market remained buoyant
and recovered well in H2 2020.
Read more about our response to
CV-19 on page 44
KEY LONG-TERM STRUCTURAL TRENDS IMPACTING OUR BUSINESS
Urbanisation
Demographics
By 2050 approximately 90% of the UK population is expected to
live in towns and cities of at least 300,000 inhabitants. Better job
prospects have continued to drive urbanisation in the UK over
the long term, with immigration strongest amongst those aged
20–35 before some young families start moving out prioritising
space and schooling. People do not choose to live in cities
merely to be close to work, but rather because of the lifestyle
benefits provided by accessibility to amenities, culture and
public transport.
In 2020 the total population of England was estimated to be
56.7m and this is expected to rise by 7.9% over the next 20
years to 61.2m. At the same time, by 2040, the number of
people aged 65 or above is expected to increase by 38.3% to
14.5m, accounting for 23.8% of the total population. The most
significant change in the working age population over the next
20 years is for 20 to 30-year-olds who are expected to increase
by 6.3% over the period. Demographics therefore provide
positive support for senior living and BTR aimed at young
professionals.
Technology
Environment
Advances in technology over the past decade have caused
disruption to how we live, work, shop and communicate,
resulting in many businesses needing to rethink their digital
strategies and offering. The emergence of new technology
impacts on a series of issues relating to not only how businesses
deliver their services, but also the environment in which they
do it in. This increases the requirement for property businesses
to be flexible and deliver services to their customers as well as
simply delivering a product to rent or own.
Growing energy, water and food demands, alongside
climate change and health events show the need to reverse
environmental degradation. In 2019, the UK became the first
major economy to legislate its commitment to produce net zero
carbon emissions by 2050. The built environment contributes an
estimated 40% of the UK’s carbon emissions, which increases
the pressure on businesses in that industry to adapt their
operations to become more sustainable.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
INDUSTRIAL & LOGISTICS
The industrial & logistics sector
performed with remarkable
strength in 2020
Market overview
In 2020 the UK industrial take up was over 50m sq ft, a record
performance for the sector. Despite CV-19, there was still strong
demand for big box warehouses, with the pandemic having a direct
impact on take-up with increased demand for space from online retail
companies as well as for storage space from a range of occupiers.
The sector has been supported by online retail sales over the past
decade, and after seeing a large increase in 2020 and the uncertainty
of high street stores reopening due to CV-19 restrictions, businesses
look set to push ahead their digital expansion plans.
Read more about Our New Strategy on page 30
What does Henry Boot have to offer:
• A long standing reputation and expertise in the sector, in
particular the Group’s 2,000,000 sq ft flagship scheme,
Markham Vale has been offering industrial & logistics solutions
since 2004
•
•
In response to the continued occupational demand, the
Group has committed to speculatively develop over 200,000
sq ft of industrial and logistic space and in total is committed
to developing £67m GDV across five sites in 2021
Industrial & logistics represents 78% of Henry Boot’s
£1.1bn development pipeline with the potential to deliver
approximately 10,000,000 sq ft of space
• Two further schemes were secured in 2020, Phoenix 10
Walsall, which has the potential to deliver units ranging from
21,000 to 415,000 sq ft, and Wakefield Hub, a joint venture
to develop a 2,000,000 sq ft distribution warehouse, which is
subject to planning
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Internet sales as a percentage of total
retail sales (ratio) (%)1
%
9
.
7
2
%
2
.
9
1
%
0
.
8
1
%
3
.
6
1
%
7
.
4
1
30
25
20
15
10
5
0
%
5
.
2
1
%
4
.
0
1
%
3
.
1
1
%
3
.
7
%
3
.
8
%
3
.
9
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Internet sales as a percentage of total retail sales (%)
Big Box take up – million sq ft2
1
.
0
5
2
.
5
3
8
.
7
3
3
.
7
3
2
.
4
3
4
.
4
2
2
.
6
2
2
.
5
2
1
.
4
2
3
.
1
2
9
.
9
1
60
50
40
30
20
10
0
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Total
Three-year rolling average
1. Source: Office for National Statistics
2. Source: Savills
23
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Market Insights
RESIDENTIAL
The UK residential market recovered
well in the second half of 2020
Market overview
After the initial disruption caused by the pandemic, the UK residential
sector recovered strongly in the second half of 2020. According to
Savills, annual housing price growth hit a six-year high of 7.3%, whilst
UK greenfield land values remained resilient with a modest 0.6%
decrease in the year. Low mortgage rates have continued to support
housing affordability with the average mortgage payment at around
30% of people’s take-home pay, the lowest in a decade. After the
Government extended the stamp duty holiday in England to June 2021,
and with the rollout of the vaccination programme, the outlook for the
UK residential market looks encouraging with the land demand from
housebuilders supporting this.
Read more about Our New Strategy on page 30
Land
What does Henry Boot have to offer:
• Hallam Land Management has six offices located across
the country and is well established and experienced in the
complexities of the UK planning system
• The Group has a strategic land bank of 16,607 acres, which
has the potential to deliver around 88,070 residential plots
• Stonebridge Homes, the Group’s jointly owned housebuilder,
offers further residential capabilities, with a total land bank
of 1,119 plots of which 59% has either detailed or outline
planning consent (657plots)
Land Values & Planning Consents1
150
140
130
120
110
100
90
450
400
350
300
250
200
150
10 10 11 11 12 12 13 13 14 14 15
15
16
16 17 17 18 18 19 19 20 20
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Q3
Q1
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Savills UK greenfield development land index (LHS)
England planning consents — ‘000 (RHS)
First time buyer affordability2
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
83
84
86
87
89
90
92
93
95
96
98
99
01
02
04
05
07
08
10
11
13
14
16
17
19
20
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Mortgage payments as % of mean take home pay
Long-term average
1. Source: Savills
2. Source: Nationwide
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30368 8 April 2021 11:30 am V0Market Insights URBAN DEVELOPMENT90% of the UK population is predicted to be living in urban areas by 2050Market overviewPeople are choosing to live in rental accommodation in prime urban areas, not only for work reasons but for better lifestyle options, with 56% of private renters aged between 25 and 44 years old. The BTR sector can capitalise on good rental growth prospects within the Private Rented Sector (PSR), which currently represents only 2% of total PRS stock. Construction has also seen an emergence in BTR and after CV-19 severely reduced construction output in Q1 2020, the largest contributor to the recovery was private new housing. Take-up of regional office space in 2020 was 40% below the five-year average reflecting the impact of CV-19. However, gains in supply in some markets were offset by falls in others as the overall vacancy rate remained relatively stable at 7.5%, comfortably below the five-year average of 8.1%.What does Henry Boot have to offer:• The Group has a strong presence in key cites identified as target areas for BTR schemes• In 2021, Henry Boot’s flagship 533-unit BTR development in Manchester, Kampus is set to be completed • Henry Boot Construction has secured two BTR schemes in the city centre of Sheffield. Both schemes will commence work in 2021 and we will continue to seek and secure further opportunities within this marketConstruction output in Great Britain: volume seasonally adjusted180709010011014013012010101111121213131414151615161717181819192020Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q1Q3Q3Q1Q3Q1Q3Q1Q3Q1Q3Changing trends in tenure215%10%5%20%25%30%45%40%35%Own outrightOwn with mortgageSocial rentersPrivate renters00010203040506070809101112131415161718191. Source: Office for National Statistics2. Source: GOV.UK25Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 25Henry-Boot-AR-2020-strategic.indd 2508/04/2021 15:07:5208/04/2021 15:07:52 30368 8 April 2021 11:30 am V0Our StrategyStrategic Priority/ObjectivePerformance in 2020Link to key performance indicators (see pages 42 and 43)Link to key risks (see pages 50 to 53) SafetyContinual review of our systems, ongoing training and development, adoption of best practice and keeping abreast of change.During the Group’s initial operational pause at the outbreak of CV-19, we engaged and consulted with contractors and our supply chain to enable our operations to continue safely and to maintain our robust health and safety standards. The Group’s 2020 accident frequency rate did very marginally increase to 0.10, but our rate is still in line with competitors and regulatory standards. 6 7 1 2 4 PeopleOffer a wide range of long-term career and development opportunities which attract new and retain employees.Despite CV-19 presenting challenges to our training and development offering, there was still a total of 1,420 personal development days. The total was reduced from 2019 due to readjusting our training offering to virtual capabilities, but as we enter 2021, we now have a balanced offering which reflects our commitment to developing and nurturing our people. 6 7 8 10 3 4 13 26Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 26Henry-Boot-AR-2020-strategic.indd 2608/04/2021 15:07:5908/04/2021 15:07:59 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Strategic Priority/Objective
Performance in 2020
Link to key
performance
indicators
(see pages
42 and 43)
Link to
key risks
(see pages
50 to 53)
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Delivery
Maintaining a maximum gearing level of 30%,
utilising available capital efficiently.
To dispose of an annually increasing number
of residential plots while market conditions
are supportive.
The Group maintained its strong financial position
throughout 2020 and after making selective
investments in our three focused markets, the
business ended the year in a net positive cash
position and nil gearing.
4 5
3 5
13
Land promotion successfully completed the sale
of 2,000 plots in 2020. Whilst CV-19 did materially
impact our performance, there was a resiliant demand
for land from housebuilders as the housing market
recovered. This has meant we began 2021 in a strong
position, having already exchanged contracts for the
disposal of 1,744 plots.
L1
L5
3 5
L6
11 12
13
To pre-fund and pre-sell our development
opportunities to mitigate risk and secure
delivery.
In 2020 all completed schemes were 100% either
pre-sold or pre-funded.
D1
D2
3 5
D5
9 10
Constantly monitor the customers and markets
in which we operate, to compete effectively and
appropriately balance our workflows within these
markets.
Construction activity did decrease due to the
disruption caused by CV-19 whilst we paused to
install the correct safety procedures on sites and
depots. However, activity did increase to 95% on both
construction sites and depots by the end of the year,
performing in line with our revised expectations.
C1
C2
3 5
8 13
To maintain a high level of service and delivery,
whilst tracking the performance measurements
in place to review level of customer satisfaction.
In 2020 we scored 9.13 out of 10 for ‘how satisfied
the client was with the service of the main contractor’,
which was a slight improvement from 2019. Whilst the
KPI data published by Constructing Excellence has
now concluded, we have continued to benchmark our
performance against existing data, this score places us
in the higher Upper Quartile performance.
C1
C2
1 4
C4
8
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our
Strategy
Strategic Priority/Objective
Performance in 2020
Growth
Target a dividend cover of over three times
to grow net assets and profitability through
reinvestment in strategic land and development
opportunities.
To protect our financial position and to ensure the
Group was well placed to deal with the uncertainty
of CV-19, the Group rebased its final 2019 dividend
payment. After considering our financial performance
the business has continued to pay a dividend at a
maintainable level, which ensures we have sufficient
working capital and are able to be opportunistic in
our markets whilst recognising the importance of
continuing to pay a dividend to our shareholders.
Link to key
performance
indicators
(see pages
42 and 43)
Link to
key risks
(see pages
50 to 53)
1 2
3
3
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.
Whilst we did increase the total number of plots we
have with planning permission, the pandemic did delay
some projects whilst planning authorities transitioned to
Virtual Committee meetings. However, we continued to
invest in new opportunities increasing our land portfolio
to 16,607 acres, with over 60% being located in prime
market areas in the South and have continued to secure
sales at pre-CV-19 prices.
L2
L3
3 5
L4
11 12
13
Explore new investment opportunities, such
as logistics and distribution, with the primary
focus remaining on residential and mixed use
opportunities.
Residential markets continue to be our primary focus.
We still have an interest in exploring new opportunities,
particularly in industrial & logistics where we will look to
do so on a partnership basis with our sister company
Henry Boot Developments.
L2
3 5
11 12
13
28
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Strategic Priority/Objective
Performance in 2020
Link to key
performance
indicators
(see pages
42 and 43)
Link to
key risks
(see pages
50 to 53)
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Growth
To deliver at least one long-term strategic
employment / industrial site from each of
our regional bases.
In 2020 industrial & logistics formed 90% of our
completed schemes, and with the sector continuing
to see strong demand throughout the pandemic, we
have committed to complete a further £85m GDV
in 2021.
D3
D4
3 5
6 11
13
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.
The housing market remained buoyant in 2020
and against resilient demand for new housing we
completed on 115 housing completions, which was
slightly ahead of targets. There were also a further 211
plots secured in the landbank, leaving us in a strong
position to achieve our growth aspirations although
planning has become notably more difficult.
D6
D7
3 4
5 12
13
Focus on investing into a variety of sectors
for new development to minimise the risk
and maximise the return.
At year-end, the investment portfolio had increased by
£12.7m, after retaining completed developments at
Huyton (£4.8m retail) and Luton (£12.2m industrial).
D1
D2
5 9
10
To actively pursue contract values of between
£5m and £15m to benefit from improving
economies of scale.
Our average contract size for 2020 was £13.6m,
which was primarily supported by securing a £40m
contract to deliver the Kangaroo Works, a 364-unit
residential build-to-rent project, part of the Heart of
Sheffield redevelopment scheme.
C1
C5
3 5
8 13
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30368 8 April 2021 11:30 am V0Our New StrategyGoing ForwardOUR STRATEGY IS DRIVEN BY LONG-TERM STRUCTURAL TRENDSOur strategy is focused around three key markets: industrial & logistics, residential and urban development. These markets are driven by positive long-term structural trends which we expect to give momentum to our future operational and financial performance. In this regard, the population of the UK continues to grow with the number of households rising, accentuated by the average size of households dropping. Supply of housing generally fails to meet the Government target of 300,000 new homes a year. At the same time, and whilst CV-19 might temper the trend short term, people are moving to large urban centres not just for work but also the lifestyle on offer. 90% of the UK population is predicted to be living in urban areas exceeding 300,000 population by 2050. This will create demand for good quality schemes for people to work and live in. BTR will be an important element of supply. Pre-CV-19 there has been a growth in demand for industrial & logistics, but with online sales up by c.40% over the last 12 months or so, take up, especially in big boxes, has been at record highs. This is likely to be accelerated by more onshoring.With focus on our three key markets, and within the framework of our existing four strategic pillars of Growth, Delivery, People and Safety, we have reworked our strategic priorities. Our values, which were developed as part of The ‘Henry Boot Way’, endure, and shape our culture.We have extremely skilled, experienced, and highly engaged teams focused on our three key markets. The vast majority of our £365m of capital is already employed in these markets and our aim is to gain greater scale by growing our capital employed to over £500m through achieving the following key medium-term objectives:• Land Promotion – Grow our market-leading land promotion business to sales of 3,500 plots per annum (currently 2,039 plots) with increasing emphasis on the Midlands and the South. Through a blend of freehold purchases, planning promotion agreements and options to purchase, we will leverage the significant expertise within HLM to unlock value through the planning process.• Development – Grow our development activities to £200m per annum with a broad split of two-thirds industrial and one-third urban residential (including BTR). We continue to manage market risk through pre-funding/sales/lettings and JVs. In the short term, we will be selective in committing to urban development, as markets adjust to a post CV-19 world. We remain positive that over the longer term, population growth will continue, and cities will outperform in terms of GVA output.• Investment – Double the size of our property investment portfolio to around £150m (currently c.£80m), again with a focus on our key markets. This will be achieved through a mix of buying income-producing buildings, with redevelopment or refurbishment potential and retaining certain of our own high-quality developments. The aim will be to create a recurring, resilient income stream with the added potential for capital growth which will show a total return of 6.0% p.a.• Housebuilding – Grow our premium housebuilding operations to an output of 600 units per annum, extending our regional presence from Yorkshire into the North East and the Midlands. To support this growth, we will build up a three to four-year landbank of sites, primarily via options to purchase, but also through selective freehold acquisitions. • Construction – Grow a profitable, cash generative business focused primarily on public sector projects in our existing regional markets. We believe we can play a valued role in the Government’s Levelling Up agenda and its Build Back Better plan for growth. Our emphasis will remain on repeat work generating above industry margins. We aim to start each financial year with a minimum of 65% of our order book secured.There are significant opportunities to grow in each of our three key markets and we have embedded value within our conservatively valued balance sheet. With over 16,000 acres of strategic land, a development pipeline of £1.4bn (Henry Boot Developments share £1.1bn), and £18m of developments we have identified for our investment portfolio, plus 1,119 plots in Stonebridge’s landbank, we have all the building blocks to deliver our ambitious plans for growth.We have a long track record of managing our gearing levels well. With a strong balance sheet, net cash of £38.5m (as at 28 February 2021), committed debt facilities of £75m and material retained earnings we are in a strong position to fund our growth strategy and, if required, will look to take a conservative approach to gearing, in a range of 10% to 20% of net assets.We are confident our strategy can generate attractive market returns (average ROCE between 10–15% p.a.), without high levels of financial gearing, and will lead to growth in our profits to beyond pre pandemic levels, enabling us to continue with a progressive dividend policy.Each of our divisions has a clear focus and is driven by specific financial and strategic targets. We have also established an Executive Committee (Ex Co) to facilitate greater collaboration and the development of existing cross-functional expertise serving our key markets. In addition, we have identified and intend to take advantage of opportunities to create further synergies and efficiencies in how we operate as a Group.As a modern, open, and progressive business, our aim is to attract, retain and develop a diverse range of talent. Our people strategy is at the heart of our business and together with the formation of Executive Committee (Ex Co) as a high-performing senior leadership team, it will allow us to continue to build on our positive culture and our strong operational record.Henry Boot celebrates its 135th anniversary this year and we are proud of our heritage. We have grown over the years with a clear culture of looking after our people and stakeholders, and in return, levels of team engagement within the business are very high. We understand the need for further commitment to deal with issues at the heart of ESG. We have also launched 135 Henry Boot, phase one of our ESG approach, which will be an integral part of the Group’s strategy going forward. PEOPLE30Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 30Henry-Boot-AR-2020-strategic.indd 3008/04/2021 15:08:0308/04/2021 15:08:03 30368 8 April 2021 11:30 am V0OUR FOCUS ON THREE CORE MARKETSGrowth in long-term attractive marketsGrowth in long-term attractive marketsDELIVERYSAFETYPEOPLEGROWTHIncreased profits Progressive Dividend PolicyLow Gearing Grow Net AssetsIncrease Total Shareholder Return (TSR)Increase Total Accounting Return (TAR)Increased Capital Employed Read more about our three core markets on pages 22 to 25Our three core markets Industrial & logistics Residential Urban Development31Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 31Henry-Boot-AR-2020-strategic.indd 3108/04/2021 15:08:0408/04/2021 15:08:04 30368 8 April 2021 11:30 am V0Segmental Review Land PromotionNick DuckworthHallam Land Management LimitedHLM performed well, achieving a £14.2m operating profit (2019: £31.0m) from selling 2,000 plots (2019: 3,427 plots), at an average of £6,456 per plot (2019: £10,000 per plot).During 2020, UK greenfield land values remained relatively stable with a decline of 0.6% in the year according to Savills Research. After suspending land buying in H1, the majority of the major national and regional housebuilders re-entered the market in H2 with land values increasing by 0.3% in Q4. This followed a strong recovery in new housing sales, leading to continued demand for our land, where encouragingly we received bids at pre-CV-19 prices. In 2020, disposals were made at various locations including, Wellingborough (600 plots), Lubbesthorpe (258 plots), Hatfield (189 plots), Ripley (200 plots) and Warton (109 plots). In addition, we also sold land in Buckingham for a Care Home and Doctors’ Surgery, and in Faversham for a Care Home and food store. Later in the year, we also disposed of an interest in a joint venture site in the Midlands, which made a major contribution to HLM’s performance. Significant strides forward were achieved at Didcot with Oxfordshire County Council securing an important infrastructure funding package which enabled it to reaffirm its support for our 2,170-plot scheme. We are hopeful that the final planning consent will be secured in 2021. Furthermore, we continued to make good progress at Eastern Green, Coventry where in November a resolution to permit planning permission was secured for 2,400 plots, 37 acres of commercial development, plus a primary school and community centre. This scheme requires a grade separated junction on the A45 to effect access, and a loan from the Homes and Infrastructure Fund (HIF) has been secured, with delivery expected during 2021/22.HLM secured further opportunities in its land bank during the year, increasing it to 16,607 acres (2019: 14,898) with just under 60% located in prime market areas in the Midlands and the South of England. Exciting new projects were secured including at Bicester with potential for c.2,300 plots, community centre and ancillary uses, Milton Keynes, Thirsk, Selby, Worksop, New Ash Green and Whitstable. In total, we invested £10m on acquiring positions in new sites and at the year-end held interests in land capable of delivering just over 88,000 potential residential plots.RegionPlotsScotland8,855North7,260North Midlands20,929South Midlands17,646South East11,782South West21,598Total88,070The pandemic did slow the preparation of local plans which, in turn, slightly delayed some projects, as local authorities were unable to process plans through to publication and public consultation. Nonetheless, planning authorities transitioned to virtual Committee meetings during the year, allowing HLM to continue to make progress on planning applications. We secured new planning consents (or consents subject to s106 Agreements) for a total of 2,708 plots during the year, which resulted in our consented portfolio increasing to 15,421 plots at the year-end (2019: 14,713 plots) and we also had 8,312 plots the subject of planning applications (2019: 10,665 plots). By the year end, our housebuilder customers had returned to the acquisition trail, so that we entered 2021 with 1,744 plots unconditionally exchanged for 2021/22 completion (2019: 1,268 plots).Operating profitProfit per plot £’000s£14.2m£6.5k£14.2m20202019201820172016£31.0m£28.0m£23.2m£18.6m£6.520202019201820172016£10.0£9.4£13.0£15.032Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 32Henry-Boot-AR-2020-strategic.indd 3208/04/2021 15:08:0908/04/2021 15:08:09 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Pictured top: Hallam
Land Management’s New
Lubbesthorpe site, located
in the Blaby District on the
edge of Leicester. The site has
planning permission for 4,250
plots, schools, community
facilities and employment, and
Hallam have promoted the site
alongside Barratt, David Wilson,
Davidsons and landowners the
Drummond Family and Trustees.
A further sale of 258 plots were
completed in 2020.
Residential Land Plots
With Permission
2020
2019
2018
2017
2016
b/f
14,713
16,489
18,529
16,417
12,043
Granted
2,708
1,651
1,533
4,281
5,983
Sold
(2,000)
(3,427)
(3,573)
(2,169)
(1,609)
c/f
15,421
14,713
16,489
18,529
16,417
In Planning
8,312
10,665
11,929
7,982
10,452
Future
64,337
51,766
44,051
40,844
32,630
Total
88,070
77,144
72,469
67,355
59,499
At Chatteris (1,000 plots), which previously had received a minded to grant permission, we signed the s106 and secured outline planning consent.
Bridport, which also had previously achieved Outline Planning Consent, cleared a Judicial Review in relation to our 760 plot and 10-acre commercial
scheme, this site now being the subject of sale negotiations. Planning applications covering a further 1,171 plots were also submitted during the year.
2021 has started well. In addition to the 1,744 plots exchanged, we have also unconditionally exchanged 450 plots at Worcester to Taylor
Wimpey and Redrow, and completed the disposal of 115 plots at Warton, Fylde. During January 2021, the Government published its next steps
on the enhancement of Building Regulations, the Future Homes Standard, and this will doubtless feature in future land negotiations. Nevertheless,
as evidenced by our Worcester transaction where returns were in line with expectations, plus the high element of forward sales, we are confident
about our prospects for 2021.
Plots sold
2,000
9
6
1
,
2
9
0
6
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Residential land plots
88,070
Plots in planning
process
8,312
Plots with planning
permission
15,421
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30368 8 April 2021 11:30 am V0Segmental Review Property Investment and DevelopmentEdward HutchinsonDarren StubbsHenry Boot Developments Limited Stonebridge Homes Limited Property Investment and Development delivered a combined operating profit of £4.9m (2019: £17.8m).In 2020, there was an acceleration in the recent divergence in property market performance with non-food retail and leisure assets severely impacted by trading restrictions for much of the year. According to the CBRE UK Monthly Index, commercial property values declined by 7.6% in 2020. Industrial was the only sector to deliver positive capital returns with investors attracted by secure income and continued rental value growth.In 2020, Henry Boot Developments completed on developments with a GDV of £58m (Henry Boot Developments share £55m), with £41m of these schemes having been sold and £17m having been let and retained in the Group’s investment portfolio. Industrial & logistics development formed 90% of our completed schemes and despite the pandemic, the UK market experienced high demand throughout 2020 with record annual take up. We have responded to this demand by committing to speculatively develop a total of 206,100 sq ft at Luton, Preston and Enfield. Additionally, we exchanged contracts on two new projects Phoenix 10; Walsall, which has the potential to deliver industrial and logistic units ranging from 21,000 to 415,000 sq ft, and Wakefield Hub, to jointly develop a 2,000,000 sq ft occupier led distribution depot, which is subject to planning. In total, the committed development pipeline includes nine schemes with a GDV of £312m (Henry Boot Developments share £85m) and 2,611,000 sq ft, of which 88% is either pre-sold or pre-let. This includes our 533-unit BTR scheme in Manchester known as Kampus, which is due for completion in Q3 2021 as well as approximately £67m (Henry Boot Developments share £52m) of new industrial & logistics space. All of the schemes are either already on site or are expected to commence in Q1 2021 and are all due for completion before the end of 2021.Committed SchemesSchemeGDV(£m)Share of GDV(£m)Commercial(sq ft)Residential(units)StatusIndustrialEnfield16856–SpeculativeMarkham Vale, Orion2222297–Pre-soldWakefield Hub, Kitwave8465–Pre-letPreston7467–SpeculativeLuton141482–Speculative6752567–ResidentialManchester, Kampus2161144536Pre-sold2161144536Land and otherWakefield Hub, Mountpark1582,000–Pre-soldSkipton, 1414–184Pre-sold29222,000184Total for year312852,611720% sold or pre-let88%69%Despite the challenges of CV-19, we have been successful in securing a number of new development opportunities. We have acquired sites at Mabgate in Leeds and St John’s College in Manchester for a combined price of £12.6m with existing buildings of 60,000 sq ft and 27,000 sq ft respectively. Both sites are fully occupied and offer good short-term income returns whilst providing excellent medium-term redevelopment opportunities in strong urban regeneration settings. Adding to our industrial & logistics pipeline we have secured a position on 83 acres of land at Todwick just off J31 of the M1. The site has been secured under a promotion agreement with a view to creating over 1,000,000 sq ft of space, with a GDV of approximately £90m. 34Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 34Henry-Boot-AR-2020-strategic.indd 3408/04/2021 15:08:2308/04/2021 15:08:23 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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was principally as a result of retaining two completed assets amounting
to £17.0m pre-let at Eden Farm, Luton (73,500 sq ft industrial unit)
and Huyton (19,000 sq ft foodstore). Rent collection finished the year
at 88% with the portfolio weighted average unexpired lease term now
12.9 years. Occupancy was at 84% as at 31 December 2020, although
this has subsequently increased to 94% following post period end
lettings at Blake House, Uxbridge and MV55, Markham Vale. We are
confident of being able to continue to grow the investment portfolio
from both retained developments and selective acquisitions with the
objective of increasing the overall value to around £100m in 2021 and to
approximately £150m over the medium term with a continued focus on
the industrial & logistics sector.
Our jointly owned housebuilder, Stonebridge Homes, had a
successful year, performing ahead of targets after achieving 115
house completions (90 private/25 affordable) (2019: 159), at an
average selling price for private units of £368k (2019: £268k). As
many households re-evaluated their housing needs, there was high
demand from house buyers in H2 and we maintained a strong sales
rate of 0.61 units per week per site over the year. Excluding April
and May, when we temporarily closed all our construction sites and
sales centres, the sales rate rises to 0.71. A price uplift of 2.7% was
achieved over anticipated budget prices on the 90 private units sold
in the year. We also secured a further 211 plots in the land bank
including a key site in Wakefield in December, which has outline
planning permission for 149 plots. The total owned and controlled
land bank is now 1,119 plots, which at the current sale rates is a
ten-year supply or four to five years supply, at our two-year forward
forecast sales rate.
We begin 2021 in good shape and, to date, have secured 69
reservations (40 private/29 affordable) out of a delivery target of 120
plots (75 private/45 affordable). With home reservations currently
running ahead of the comparable period last year, we continue to see
positive signs that the market remains stable, leaving Stonebridge
positioned to perform well and achieve its growth aspirations.
In addition to our committed schemes, we have a short to medium-
term development pipeline with a total GDV of £1.4bn (Henry Boot
Developments share - £1.1bn). All of these opportunities sit within
our three core sectors of industrial & logistics (78%), urban residential
(11%) and urban commercial (11%). The immediate focus on our
development pipeline will be to commence remediation works at
Phoenix 10, Walsall, capable of delivering 620,000 sq ft of industrial
space and starting construction of our 95-unit build for sale residential
scheme in Birmingham known as Cornwall House. At Wakefield Hub,
we have submitted a joint application with our development partner to
develop a 2,000,000 sq ft unit that will be pre-let prior to start on site,
which we anticipate commencing on site in Q3 this year. Also, on this
scheme post year-end, we will deliver a 260,000 sq ft pre-let industrial
unit on behalf of a German pharmaceutical company. Subject to
securing planning in mid-2021, work is expected to start on site in the
second half of 2021 with the total GDV in excess of £30m.
Having successfully sold the majority of the retail assets from our
investment portfolio in 2019, we have made further progress against our
revised strategy. The year-end value of the portfolio was £82.7m (2019:
£70.0m), which reflected a modest 2.3% valuation decline on a like-for-
like basis, outperforming the CBRE monthly index (-7.6%). The increase
Operating profit
£4.9m
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£58m
Stonebridge
Completions
115
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Pictured top: Located in
Manchester city centre, Kampus
is a £250m BTR scheme. The
site, is comprised of apartments,
shops, restaurants and bars, and
is set to complete in 2021.
35
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30368 8 April 2021 11:30 am V0Segmental Review ConstructionSimon CarrGiles BootTrevor WalkerHenry Boot Construction Limited Banner Plant Limited Road Link (A69) LimitedDespite the challenging operating environment, the Group’s construction segment, which also includes Banner Plant and Road Link (A69), achieved a combined operating profit of £6.5m (2019: £9.0m). Henry Boot Construction performed ahead of expectations, with turnover of £86.2m (86% in public sector), against a total UK construction output decrease of 12.5% in 2020. The Office for National Statistics showed a record 40.7% monthly decline in April 2020, UK construction activity recovered during the remainder of the year with December 2020 output only 3.5% below the pre-CV-19 February 2020 level. These national trends were broadly reflected in both Henry Boot Construction and Banner Plant where, after a brief pause due to the first national lockdown, year-end activity levels had both recovered to 95%. Our major £88.0m urban development scheme at The Glass Works, Barnsley, continued to progress at pace and is on schedule for handover this summer and works also continued on the £12.3m contract to transform the existing Opera North facilities in Leeds city centre, which is set for completion in 2021. Additionally, we signed a £40.0m contract to deliver the Kangaroo Works, a 364-unit residential BTR scheme and began works on a £42.5m mixed use urban development project, Heart of Sheffield, Block H. Both projects are located in the centre of Sheffield and start on site in Q2 2021. Unfortunately, our affordable housing business, Starfish Commercial, was materially impacted by CV-19 and we made the decision to place it into creditors’ voluntary liquidation in H2.Across several public sector frameworks, we completed three schemes with a total contract value of £8.2m, and throughout 2020 were active on a further six schemes at a total contract value of £35.5m. We secured our first project through the PAGABO framework and are taking another scheme through the pre-construction stage. We also secured a place on the new Crown Commercial Services framework in the North of England for projects up to £30.0m and a place on the NHS shared business services framework for projects up to £15.0m across our operational area.We have had a good start to the year securing new opportunities and are now ahead of our expectations having already secured a full orderbook for 2021. We are still receiving good tender opportunities and are well placed as the economy recovers through our presence on nine public sector national and regional frameworks, where we expect spend on construction projects will be maintained by the Government’s Build Back Better policy.Banner Plant’s performance was impacted by the pandemic, but after the initial pause to readjust our operations to CV-19, all the depots continued to trade and remained profitable. With activity levels stabilising towards the end of the year, we are optimistic trading will be in line with our expectations for 2021. Due to CV-19 travel restrictions, Road Link (A69) traffic levels have been impacted resulting in a decrease in returns in 2020 and whilst we expect traffic levels to recover through 2021, we anticipate they will not fully return to pre-pandemic levels. With five years remaining on the contract, the hand back process will commence shortly to return the management of the A69 to Highways England.Total turnoverOperating profit£115.9m£6.5m£115.9m20202019201820172016£114.3m£100.1m£81.9m£79.4m£6.5m20202019201820172016£9.0m£8.9m£9.6m£10.2m36Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 36Henry-Boot-AR-2020-strategic.indd 3608/04/2021 15:08:3608/04/2021 15:08:36 30368 8 April 2021 11:30 am V0Pictured: Kangaroo Works is a build to rent scheme in Sheffield within the ‘Heart of Sheffield’ masterplan. It will high-quality apartments, as well as five commercial units at ground level to provide active frontage to the streetscape, and is set for completion in 2023.37Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 37Henry-Boot-AR-2020-strategic.indd 3708/04/2021 15:08:4908/04/2021 15:08:49 30368 8 April 2021 11:30 am V0“The Group has delivered a commendable result against the challenging backdrop of 2020 and, having secured several investments in our key strategic markets, maintained its net cash position.”Darren Littlewood Group Finance DirectorFinancial ReviewThe Group has delivered a commendable result against the challenging backdrop of 2020 and, having secured several investments in our key strategic markets, maintained its net cash1 position at the same level at which it commenced the year. UK housebuilders recovered from the initial UK lockdown well and whilst several transactions were secured in H2, they were all contracted to conclude in 2021, resulting in a 54% decrease in operating profit within our land promotion segment, although providing a strong start for the new year. The completion of The Event Complex Aberdeen (TECA) during 2019 gave our property investment and development segment a tough comparative, even without the pause on new work in the year, resulting in a 72% decrease in operating profit for the year.Having disposed of £64.1m of completed Investment Property in 2019, mainly comprised of mixed-use retail-focused properties, reinvestment in property has started well with the portfolio now standing at £82.7m. This has been achieved through retention of self-constructed properties and, with a £1.4bn (Henry Boot Developments share £1.1bn) pipeline of opportunities, we can continue to retain choice assets and rebuild the portfolio, especially those in the industrial & logistics market. Land promotion remains a long-term investment with disposals in the year being derived from sites with an average length of ownership of 11 years. With over 15,000 residential plots with planning permission, we estimate that we have around five years of sales in stock working towards disposal and with a total portfolio covering 16,607 acres we estimate that this could deliver around 88,000 units, assuming they were all successful.Whilst the impact of CV-19 has continued into 2021, we started the year with land sales for 1,744 plots which have either already completed or are exchanged, awaiting completion. We also have committed property development work of £85m, 69% of which is pre-let, and our construction business has a full order book, now focusing on opportunities for 2022 and beyond.Consolidated Statement of Comprehensive IncomeRevenue decreased 41% to £222.4m (2019: £379.7m) as both the property investment and development and land promotion segments saw delays in transactional activity caused by the pandemic. In addition to this, there was lower activity in the property investment and development segment resulting from the completion in August 2019 of the £333.0m TECA project. The land promotion segment disposed of 2,000 plots (2019: 3,427), although this excludes land disposed of via the sale of our interest in a joint venture, which made a significant contribution to profit in H2. Construction segment revenue remained consistent as productivity on sites quickly recovered from the initial national lockdown and the A ROBUST SET OF RESULTSWhat we did in 2020The CV-19 pandemic had a significant impact on the Group’s financial performance during the year. However, despite this we remain positive about what we have achieved: • All operating segments remained profitable despite significant disruption and delays encountered• Reset the 2020 budget and market expectations following the outbreak of CV-19 and successfully delivered against this target• Increased the dividend on the prior year• Maintained the Group’s net cash position while securing additional investments in key strategic markets• Renewed banking facilities on improved terms• Established a strong order book and pipeline for 2021 and beyond38Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 38Henry-Boot-AR-2020-strategic.indd 3808/04/2021 15:08:5408/04/2021 15:08:54 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
“The Group has delivered a commendable
result against the challenging backdrop
of 2020 and, having secured several
investments in our key strategic markets,
maintained its net cash position.”
Darren Littlewood
Group Finance Director
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
Profit before tax
business continued delivery of The Glass Works Phase 2, an £88.0m
urban regeneration scheme for Barnsley Metropolitan Borough Council.
Gross profit decreased 50% to £40.5m (2019: £81.0m) and reflects
a gross profit margin of 18% (2019: 21%). Administrative expenses
decreased by £0.9m (2019: £5.6m increase) despite including a £2.0m
impairment of goodwill, as the business took measures to control
expenditure levels in the year which included a 50% reduction in staff
bonus payments, a 20% cut in salary and fees for main board Directors
and participating in the Government CJRS. Following the year end, and
having reviewed the Group’s result, the Board took the decision to repay
the CJRS monies received and to reimburse the 20% deduction from the
CEO and the Group Finance Director’s salaries to reflect the position that
everyone at Henry Boot experienced in receiving 100% of their salaries
whilst at work and on furlough.
Pension expenses of £4.6m (2019: £4.5m) are in line with the prior year
charge. Since the year-end, the Group has commenced consultation
with active members of the defined benefit pension scheme with a view
to closing the scheme to future accrual.
Property revaluation gains of £1.3m (2019: gains of £2.4m) were the net
effect of uplifts of £5.7m (2019: £5.6m) generated largely from increases
in the fair value of industrial assets, arising from the re-gearing of existing
leases and completion of assets under construction, offset by the
recognition of valuation deficits of £4.4m (2019: £3.2m) on a number of
other properties, most notably retail-focused mixed-use assets.
Profit on disposal of joint ventures and subsidiaries of £7.4m (2019:
£nil) includes the disposal of our 50% interest in a joint venture entity
in our land promotion segment, which gave rise to a profit of £6.2m.
In addition to this, Starfish Commercial Limited, a subsidiary in the
construction segment, was placed into creditor’s voluntary liquidation
giving rise to a book profit on disposal of £1.2m.
Overall, operating profits decreased by 65% to £17.5m (2019: £50.4m)
and, after adjusting for net finance costs, we delivered a profit before
tax of £17.1m (2019: £49.1m).
The segmental result analysis shows that property investment and
development produced a reduced operating profit of £4.9m (2019:
£17.8m) arising from industrial developments at Markham Vale, Luton,
Southend and Sunderland, offset by rent concessions (rent collection
standing at 88% for the year) and a £2.4m loss of rent on investment
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£’m
85.5
21.0
115.9
222.4
4.9
14.2
6.5
(8.1)
17.5
(0.4)
17.1
2019
£’m
192.2
73.2
114.3
379.7
17.8
31.0
9.0
(7.5)
50.3
(1.2)
49.1
Change
%
-56
-71
+1
-41
-72
-54
-28
+8
-65
-67
-65
Net cash1/(debt)
£27.0m
Net assets
£313.5m
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)
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0
.
9
2
£
(
)
m
4
.
8
1
£
(
m
6
.
3
3
2
£
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
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1
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39
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Financial
Review
property sales made in the prior year. Land promotion operating profit
decreased 54% to £14.2m (2019: £31.0m) as we disposed of 2,000
residential plots during the year (2019: 3,427). Construction segment
operating profits decreased to £6.5m (2019: £9.0m) as productivity
levels were affected by the pandemic and reduced road traffic volumes
impacted the Road Link (A69) PFI concession. The nature of deal-driven
property and land promotion businesses, dependent upon demand
from the major UK housebuilders, reliant on the UK planning regime
and dependent upon market confidence are demonstrated in the
movements within our mix of business streams. However, we continue
to show how the benefits of a broad-based operating model allow us to
dampen the impact in these cyclical markets during challenging times.
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
depending upon when contracts are ultimately concluded. We mitigate
this through the mix 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 £3.4m (effective rate of tax: 20%)
(2019: £9.6m and effective tax rate: 20%) and is higher than the
standard rate due to impairment of ineligible goodwill and a dry tax
charge on transfer of an asset from inventory to investment property
offset by joint venture profits presented net of tax (2019: capital gains
on the disposal of investment property). We currently have a £1.6m
unrecognised deferred tax asset (2019: £2.1m), which can be utilised to
offset future capital gains if they arise. Current taxation on profit for the
year was £3.1m (2019: £9.3m), broadly in line with the standard rate of
corporation tax. Deferred tax was £0.3m (2019: £0.3m).
Earnings per share and dividends
Basic earnings per share reduced 68% to 9.0p (2019: 28.3p) in line
with the reduction in profit for the year. Following a rebasing in 2019,
total dividend for the year increased 10% to 5.50p (2019: 5.00p), with
the proposed final dividend increasing to 3.30p (2019: 1.30p), payable
on 28 May 2021 to shareholders on the register as at 30 April 2021.
The ex-dividend date is 29 April 2021.
Return on capital employed (‘ROCE’)
Lower operating profit in the year saw a reduced return on capital
employed ROCE2 of 4.9% in 2020 (2019: 14.8%). While the current
return is impacted by the global pandemic, we continue to believe
that a target return of 10–15% is appropriate for our current operating
model and the markets in which we operate. We will continue to
monitor this important performance measure over the business cycle,
given the potential for market conditions to change quickly.
Finance and gearing
Net finance costs reduced to £0.4m (2019: £1.2m), helped by the
Group’s net cash surplus. We saw a significant shift from having net
debt of £18.4m to net cash of £27.0m in 2019 and have maintained
this cash reserve throughout 2020 ending the year as we started with
£27.0m. We anticipate that interest costs will remain low through 2021
as we look to redeploy our current net funds during the year in line
with our revised strategy.
40
Interest cover, expressed as the ratio of operating profit (excluding
the valuation movement on investment properties, disposal and joint
venture profits) to net interest (excluding interest received on other
loans and receivables), was 13 times (2019: 33 times). No interest
incurred in either year has been capitalised into the cost of assets.
Our agreed banking facilities were renewed on 23 January 2020
increasing to £75.0m from £72.0m. The facility includes an additional
accordion facility of £30.0m, which can be called upon at the Group’s
request. 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. On 19 January 2021 the banks agreed to the Group request
to exercise the first of these extensions extending the facility to
23 January 2024. These facilities remain undrawn at 31 December
2020 and 31 December 2019.
2020 year-end net cash1 was £27.0m (2019: net cash £27.0m)
resulting in the Group having no gearing (2019: no gearing). Total
year-end net cash includes £2.9m (2019: £2.9m) 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.
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 (investment)/disposals
Net interest and tax
Net dividends
Other
Change in net cash1
Net cash/(debt) brought forward
Net cash carried forward
2020
£’m
17.5
(5.1)
(1.0)
9.7
21.1
—
(9.5)
(6.8)
(3.6)
(1.2)
—
27.0
27.0
Restated
2019
£’m
50.4
1.1
(2.3)
(27.7)
21.5
(0.2)
52.9
(9.3)
(15.1)
(4.4)
45.4
(18.4)
27.0
During 2020, cash generated from operations amounted to £21.1m
(2019: £21.5m) after net investment in equipment held for hire of
£1.0m (2019: £2.3m), and cash generated by a net reduction in
working capital of £9.7m (2019: £27.7m increase). Our decrease
in working capital arises from collection of deferred land receipts
relating to strategic land sales offset by continued investment in our
house building land portfolio, property developments in progress and
strategic land interests.
Net capital investment of £9.5m (2019: net disposals of £52.9m)
arose from additions to investment property and property, plant and
equipment of £12.9m (2019: £16.1m), which were offset by disposals
of investment in property development, property, plant and equipment
and joint ventures of £3.4m (2019: £69.0m).
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Net dividends paid, totalled £3.6m (2019: £15.1m), with those paid to
equity shareholders of £4.6m (2019: £12.6m) decreasing by 63% and,
dividends to non-controlling interests of £1.2m, being offset by dividends
received from joint ventures during the year of £2.2m (2019: £nil).
After net interest and tax of £6.8m (2019: £9.3m), there was no overall
movement in net cash (2019: reduction £45.4m), resulting in net cash
of £27.0m (2019: £27.0m).
Statement of financial position summary
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 cash1
Retirement benefit obligations
Net assets
Less: Non-current liabilities
Capital employed
2020
£’m
82.7
4.3
25.9
5.8
118.7
200.8
85.6
(89.6)
7.4
322.9
27.0
(36.4)
313.5
51.4
364.9
2019
£’m
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
34.1
352.4
Investment properties increased in value to £82.7m (2019: £70.0m),
following the construction and retention of an industrial asset at Luton
and a retail asset at Huyton.
Intangible assets reflect the Group’s investment in Road Link (A69)
of £2.7m (2019: £3.0m) and goodwill of £1.6m (2019: £3.9m). 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 decreased in the year, following the Board’s decision
to place Starfish Commercial Limited, a company in the construction
segment, into creditors voluntary liquidation resulting in an impairment
of £2.0m.
Property, plant and equipment comprises Group occupied buildings
valued at £6.9m (2019: £7.5m) and plant, equipment and vehicles with
a net book value of £19.0m (2019: £20.6m), including £2.1m (2019:
£6.1m) of right-of-use assets under IFRS 16. Property, plant and
equipment, along with right-of-use assets, have decreased slightly as
new additions of £3.6m (2019: £6.7m) are offset by disposals and the
depreciation charge for the year. Right-of-use assets have decreased
in the year as the Group used excess cash to settle outstanding
finance lease obligations.
Investments in joint ventures and associates reduced to £5.8m (2019:
£6.6m) following a dividend distribution of £2.2m. 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.
Inventories were £200.8m (2019: £169.7m) and saw an increase
in our house-builder land and work in progress to £39.2m (2019:
£36.3m) as we continue to invest in land, and having carried 49
reservations (24 private/25 social) into 2021. Property inventory
increased to £44.4m (2019: £31.7m) having invested in short-term
income generating assets in Leeds and Manchester with medium-
term development opportunities and strategic land inventory increased
to £117.2m (2019: £101.7m) as we continue to invest in owned land
and land interests 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.
Receivables decreased to £85.6m (2019: £127.1m) due to a decrease
in transactional activity. 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 decreased to £89.6m (2019: £98.5m) with trade and other
payables broadly in line with the prior year, provisions decreasing to
£5.9m (2019: £7.0m) as strategic land provisions are utilised, contract
liabilities decreasing to £7.4m (2019: £9.9m), arising from payments
received for work not yet undertaken, and current tax liabilities
decreasing to £1.1m (2019: £4.7m) due to changes in the HMRC
payment regime.
Net cash1 included cash and cash equivalents of £42.1m (2019: £42.3m),
borrowings of £12.9m (2019: £10.7m) and lease liabilities of £2.2m (2019:
£4.6m). In total, net cash remained at £27.0m (2019: 27.0m).
At 31 December 2020, the IAS 19 pension deficit relating to retirement
benefit obligations was £36.4m, compared with £23.0m at 31 December
2019, adversely affected by a reduction in the discount rate applied to
future liabilities to 1.4% (2019: 2.0%). 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.
Overall, the net assets of the Group decreased by 2% to £313.5m
(2019: £318.5m) from retained profits offset by the increase in
retirement benefit obligations and distributions to shareholders.
Net asset value per share3 decreased 2% to 235p (2019: 239p).
Darren Littlewood
Group Finance Director
16 April 2021
1. Net cash is an APM (alternative performance measure) and is reconciled
to statutory measures in note 33 to the financial statements.
2. ROCE is calculated as operating profit divided by average total assets
less current liabilities.
3. Net Asset Value per share is an APM and is defined using the statutory
measures net assets / ordinary share capital.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Key Performance
Indicators
The KPIs listed below are measurements against the Group’s 2020 strategy performance.
Financial KPIs
1
Profit before tax
£17.1m
4
.
5
5
1
.
9
4
6
.
8
4
5
.
9
3
2
Earnings per
ordinary share
9.0p
1
.
2
3
3
.
8
2
3
.
8
2
5
.
1
2
1
.
7
1
1
.
0
7
2
6
.
3
3
2
0
.
9
3
Net assets
4
Return on
capital employed
5
Gearing levels
£313.5m 4.90%
5
.
8
1
3
5
.
3
1
3
3
.
2
0
3
7
.
9
1
4
.
5
1
8
.
5
1
8
.
4
1
nil%
4
1
1
1
0
9
.
4
6
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
0
0
Non-financial KPIs
6
Personal
development days
7
Accident
frequency rate
0.10
7
1
0
.
4
6
8
,
1
0
2
4
,
1
1,420
7
8
1
,
1
0
3
1
,
1
7
5
0
,
1
5
0
0
.
5
0
0
.
0
1
.
0
9
0
0
.
8
Employee profile
Female
Male
504
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
4
0
5
3
1
1
1
9
3
3
5
4
1
1
1
2
4
3
9
Employee
intake
42
1
4
1
0
8
10
Employee
turnover
104
4
0
1
0
9
8
1
1
0
0
1
0
8
3
7
5
6
2
4
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
42
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Operational segmental KPIs
LAND PROMOTION
L1
L2
L3
L4
Profit before tax
Land portfolio
Plots with planning
permission
Plots submitted for
planning permission
£14.0m
16,607 acres
56% decrease
11% increase
15,421
5% increase
8,312
22% decrease
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
L5
Profit per plot
6,456
35% decrease
L6
Plots sold
2,000
42% decrease
Read the Land promotion review on page 32
PROPERTY INVESTMENT AND DEVELOPMENT
D1
D2
D3
D4
Total revenue
Profit before tax
Committed GDV
£85.5m
56% decrease
£5.6m
58% decrease
£85.0m
21% decrease
D5
D6
D7
Proportion of pre-
sold/ forward funded
100%
9% increase
Number of plots
sold (SH)
115 plots
28% decrease
Number of plots
in portfolio (SH)
1,119 plots
9% increase
Read the Property investment and development review on page 34
Henry Boot
Developments
pipeline GDV
£1.1bn
-
CONSTRUCTION
C1
C2
C3
C4
Total revenue
Profit before tax
£115.9m
1% increase
£6.7m
29% decrease
Read the Construction review on page 36
Average contract
size won
£13.6m
9% decrease
Constructing
excellence
– service score
9.13
4% increase
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43
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Response
to CV-19
THE SAFETY AND
WELFARE OF ALL
STAKEHOLDERS HAS
BEEN A KEY PRIORITY
Overview
Throughout the pandemic, the Group’s key priority has been
the safety and welfare of our people, our customers, our
supply chain, and the communities in which we operate. In
March 2020, the Group paused activity on construction sites
and depots to ensure the correct safety procedures were
installed. Since then, all of the Group’s businesses have
remained operational, collaborating closely with industry
bodies such as the CLC, NFB, CBI and UK Government
Ministers to ensure that our services continue safely. The
business also made various adjustments in response to
support the Group and to protect its strong financial position
during the pandemic, aiming to treat all stakeholders fairly.
Coronavirus Committee
In response to the initial outbreak of CV-19, the Group set
up a Coronavirus Committee to develop an action plan
to ensure the business adapted to the pandemic and
protected the welfare of employees and stakeholders.
The committee has representatives from all the Group and
continues to meet weekly to assess Government guidance
and to provide regular updates to our employees.
Board’s oversight
The Board took all of the Group’s stakeholder requirements
into consideration when making decisions to protect Henry
Boot’s strong position. The Board has constantly fed into
the Coronavirus Committee’s action plan and continued
to liaise regularly with our people through the Group
Employee Forum.
Read more about the Board’s response to CV-19
on page 82
CV-19 timeline
(31 December 2019–2020)
PHASE 1: FIRST WAVE
28 Feb: UK confirms first case of the illness passed on inside the
country, and the global stock markets have their worst week since
the 2008 financial crisis.
11 Mar: WHO declares the virus a pandemic.
PHASE 2: FIRST UK LOCKDOWN
23 Mar: UK lockdown measures announced.
20 Apr: UK lockdown measures extended by three weeks.
PHASE 3: EASE OF LOCKDOWN
10 May: Plans for the easing of lockdown announced.
26 May: The WHO warns of ‘second peak’ as countries begin
to ease lockdowns.
PHASE 4: SECOND WAVE
8 Sept: UK bans gatherings of more than six people over fears
about a second wave.
12 Oct: UK announces a new three-tier system for CV-19
restrictions in England, with many regions in the North of England
immediately entering the higher tiers of restrictions.
19 Oct: Wales announces two week ‘firebreak’ lockdown.
PHASE 5: SECOND UK LOCKDOWN
The leaders of the UK’s four nations agree on plans for Christmas
that will allow three households to meet up indoors and outdoors for
five days from 23 to 27 December.
26 Nov: England’s new tier system is announced, to come into
force on 2 December.
2 Dec: The UK becomes the first country in the world to approve
the Pfizer/BioNTech CV-19 vaccine.
PHASE 6: THIRD UK LOCKDOWN
The Government announce that England will enter a third lockdown
from 5 January, with similar restrictions to the first lockdown in
March 2020, including school closures to all pupils except from
children of keyworkers and vulnerable children.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our response to CV-19
As a business, we have had to respond to the ever-changing situation. Our response both internally and externally has been coordinated by the
Group’s Coronavirus Committee, whose priority has been to protect our stakeholders and maintain the Group’s strong position.
PHASE 1: FIRST WAVE
PHASE 4: SECOND WAVE
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Description
• Coronavirus Committee formed, comprised of employees
from across the Group, to react to the changing situation and
protect the welfare of stakeholders.
• Early precautions were taken, increased measures in all
offices, sites and depots to prevent the spread of the virus.
Sanitising stations, signage and less touchpoints.
• Updates were regularly provided to employees, specifically
to advise employees not to attend face-to-face meetings or
gatherings, and to avoid unnecessary travel.
Description
•
In line with Government advice, reduced the office capacity
number to essential employees only and made it mandatory
for employees to work from home if possible, in their job role.
PHASE 2: FIRST UK LOCKDOWN
PHASE 5: SECOND & THIRD UK LOCKDOWN
Description
• All of the Group’s office network closed and the business
made a quick decision to pause activity on all construction
sites and close depots, except where essential work or
supplies were being delivered to the NHS.
Description
• After the announcement of the second lockdown the Group
office network closed down but construction sites and depots
remained open, adhering to the Henry Boot and CLC Site
Operative Procedures (SOP) in place.
• Collaborated closely with industry bodies such as the CLC,
• Several first aiders within the Group volunteered in supporting
NFB, CBI and UK Government Ministers to ensure the correct
safety procedures were in place once operations resumed.
• To protect the Group’s strong financial position and to
preserve cash, the Board made the decision to pay a reduced
final 2019 dividend, awarded only half of all awarded bonuses
and reduced PLC Board pay by 20%.
• Supported the NHS Nightingale Hospital programme,
after a unit at our joint venture development scheme, the
International Advanced Manufacturing Park, was selected
for conversion into a temporary hospital.
the NHS roll out of the Coronavirus vaccine.
PHASE 6:
Description
• After the announcement of the third lockdown in January
2021 the Group office network remained closed. However,
Henry Boot carried on after the Government confirmed that
construction and housebuilding activities were able to do so
during this lockdown.
• Work from home where possible mandate remained in place.
PHASE 3: EASE OF LOCKDOWN
Description
• All construction sites and depots resumed activity at reduced
output, working to the Henry Boot and CLC Site Operative
Procedures (SOP).
• The Group began a phased reopening of offices at a limited
capacity. New operating procedures for each office location
were implemented, and all employees were required to be
inducted back into the office.
• CEO Tim Roberts and the Coronavirus Committee delivered
a webinar to all employees. It provided an update on the
Group’s situation, outlined the changes caused by CV-19.
• The Company’s 100th AGM was delivered remotely for the
first time in Henry Boot’s history.
Beyond 2020
In January 2021 the UK entered a third lockdown after a severe
increase in CV-19 infections rates. The Government did however
confirm that construction and housebuilding activities should
continue during the latest CV-19 lockdown, allowing Henry Boot
to carry on, in line with CV-19 secure guidelines, delivering a
high-quality service to its customers and the communities in
which it operates.
CV-19 will remain an important focus and there are clearly still
challenges to face but, with the correct safety procedures in
place, we are confident we can continue operating in a safe
manner.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Section 172(1)
Statement
CONSIDERING STAKEHOLDERS
IN DECISION-MAKING
Our approach
We identified our key stakeholders during our work on the Henry Boot
Way in 2017, being those groups whose interests and views are
vital to the operation and culture of the Group, as embodied within
our Purpose:
“ To empower and develop our people to
create long-term value and sustainable
growth for our stakeholders.
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.”
Our strategy as contained at pages 30 and 31 considers very
carefully the interests and needs of a number of our key stakeholders
in the context of many macro trends. The needs of our customers,
for example, are a key driver to shape the focus of our strategic
approach, and alongside this the requirement for support of our most
important resource – our people – plays a large part in the Board
helping to guide the business in achieving its strategic aims.
As we explain in our Governance Report “How the Board engages
with stakeholders” (page 88), we think carefully about the methods
of engagement both directly with stakeholders and in the form
of information flow to the Board from subsidiaries, the Executive
Committee and others about stakeholder views and issues.
It is the aim of our Board and its Committees to always give proper
consideration to stakeholder interests when taking decisions, and
whilst recognising that not all decisions will be equally positive for
all stakeholders, it is nevertheless important for all issues to be
considered.
Board information
• Leadership and management receive training on Directors’
duties to ensure awareness of the Board’s responsibilities
• Our Board and senior leaders continually engage with
stakeholders (Set out stakeholder engagement section
on pages 88 to 89)
• Board papers on Reserved Matters include consideration of
stakeholder interests and relevant information relating to them
Strategic considerations
• s.172 factors considered in the Board’s discussions on strategy
– for example, ESG considerations (relating to environment,
communities and employees in particular) were
a strong focus in formulation of ESG Strategy
• Chair ensures decision making is sufficiently informed by
s.172 factors
• Links to purpose and vision as well as business model
Board decision making
• Outcomes of decisions assessed and further engagement and
dialogue undertaken – see example regarding CV-19 financial
response
• Actions taken as a result of Board engagement – see for
example the Employee Engagement section on page 86
• Action aligns with our culture, The Henry Boot Way –
Integrity, Respect, Delivery, Collaboration, Loyalty and
Adaptability
•
Future developments
In 2021, the template for all Board papers will include routine
s.172 considerations
• Key Performance Indicators linked to Strategy, such as the
Employee Net Promoter Score, to be introduced across the
Group
• Executive Committee has been reformed and will also factor
stakeholders into decision making and matters referred to
the Board
Section 172 considerations key
likely consequences of decisions in the long term
the interests of the Company’s workforce
the need to foster relationships with suppliers,
customers and others
impact of operations on the community and environment
high standards of business conduct
the need to act fairly between members of the Company
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Financial response to
the CV-19 pandemic
Strategy Day
ESG
Link to Section 172 considerations
Link to Section 172 considerations
Link to Section 172 considerations
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• The Board considered carefully the
shorter term and five-year strategic
objectives of the Group, taking into
account key areas of focus in light
of macro trends and stakeholder
requirements.
• The People Strategy was a major
component of the Strategy Days,
ensuring that the Group is thinking
about the best ways to attract and
retain its key asset – its people – to
deliver its strategy.
• Also important factoring into strategic
development was the wider impact
of the Group’s activities on the
environment.
Outcomes and actions
By reformatting its Strategy Day
approach for 2020, having two days of
discussion (the first of which included the
full Executive Committee), the Board has
had the opportunity to test out a number
of areas of key focus and development
for the Group’s Strategy from 2021
onwards. The outcomes of this can
be seen on our pages on Strategy
(page 91). The short and medium-term
strategic objectives will be brought
to the Board on a quarterly basis for
monitoring, in order to ensure continual
progression in delivery.
• Acknowledging that whilst the Group
achieved a great result in 2019 which
deserved recognition and that all
employees continued to work hard
during the difficult operating conditions
of 2020, the Board’s decision had to
reflect the unprecedented economic
position that Henry Boot, like all other
companies, faced in dealing with the
effects of the pandemic.
• The Board took into account market
sentiment regarding the suitability of
maintaining payments of dividends
and bonuses during extreme market
turbulence.
• The Board also considered the necessity
of ensuring the preservation of resources
required for the long-term sustainable
success of the Group when revenues
may be affected.
Outcomes and actions
The decision was taken that to maintain
the anticipated 2019 bonuses would be
challenging, where a proportion of the
Group’s employees have been furloughed
and where the Group had been required
to take difficult decisions regarding its cash
flow and resulting dividend payments. As
a result, half of the anticipated bonus for all
employees, including the Executive Directors,
was awarded in relation to its 2019 results.
The intention was to mirror the experience of
shareholders, as dividend levels were reduced
such that the total dividend paid in respect
of 2019 was half of its anticipated amount.
In addition, the Board (both Executive
and Non-executive Directors) took a 20%
reduction in their base salary or fees (as
applicable) for the duration of the most severe
impact of the CV-19 pandemic, until October
2020. However, as explained on pages 107
and 108 of the Remuneration Report, the
salary deduction to Executive Directors has
now been paid, mirroring the experience of
furloughed employees whose salaries were
topped up to 100%. The outcomes of these
decisions have been assessed with various
stakeholder groups and have overwhelmingly
been supported by those groups as being
appropriate and measured actions to take
given the prevailing circumstances at the time.
As is also explained within the Director’s
Remuneration Report on pages 120 to 121,
for 2020 the decisions regarding bonus
outcomes for Executive Directors have
also been taken to be consistent with the
approach for that of the wider workforce.
• The Board has committed to
more focused activity in 2020,
acknowledging that there was more
to be done in relation to addressing
concerns of the wider market and
stakeholders on ESG issues, and
recognising that previous practices
did not amalgamate our approach
in this area in such a way as to be
easily understood.
• Naturally by launching initiatives
relating to environmental, social and
governance issues, this will focus
initiatives on improving the Group’s
approach to community engagement
and environmental impacts.
• Henry Boot’s Values have always
reflected our desire to be a good
corporate citizen, and by launching
our Responsible Business Strategy
in 2021 the Board can re-emphasise
its commitment to those Values in
other tangible ways.
Outcomes and actions
The appointment of a Responsible
Business Manager during 2020 has
been instrumental in assisting Henry
Boot to be more strategic around its
approach to Environmental, Social
and Governance matters, as can be
demonstrated in the Responsible
Business section (see pages 55 to 65).
This has launched a more consolidated
approach to ESG issues for 2021,
through the first phase of our new
Responsible Business Strategy, 135
Henry Boot, and will lead to the launch
of phase two of our Responsible
Business Strategy in January 2022.
The Board has also confirmed the
formation of a new Board Responsible
Business Committee. This Committee
will provide oversight, scrutiny and
leadership on Henry Boot’s ESG
performance and ambitions.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Emerging risks
The Group believes that its emerging risks are inextricably linked to
emerging trends in our market place and more widely to global events.
Such trends include urbanisation, demographics, technology, political
and environment. Failure to keep pace with these changes could result
in additional risk exposure to the Group. Management have therefore
undertake horizon scanning exercises which form key considerations
in the Group’s risk and strategic planning.
CV-19
The impact of CV-19 on each risk and the mitigating
actions adopted in response are detailed on pages 50
to 53
CV-19 was added as a new principal risk in 2021, with the
Group establishing mitigation processes to protect the Group
and its people. As the impact of the pandemic is now better
understood, the principal risk has been removed and embedded
into the Group’s other principal risks, and given its importance is
separately considered against each principal risk presented in
this report.
Further detail on our response to CV-19 can be found on page
44 of the annual report with the financial impact considered in
the going concern and viability section on page 53 and 54.
Risks and
Uncertainties
MANAGING OUR RISKS
Effective risk management is essential
to the achievement of our strategic
priorities. Risk management controls
are integrated across all levels of our
business operations.
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 to 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 are 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
by management and the Audit and Risk Committee and guide the risk
process. 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 probable.
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 new risks arising
from the risk registers.
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Risk Governance
Risk Identification
and Assessment
Establish risk strategy
and appetite
Identify and
evaluate risk
Risk Response
and Reporting
Review, report
and revise
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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 has 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.
)
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Risk heat map
The risk heat map illustrates the 13 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
4 People & culture
5 Funding
6 Cyber
7 Pensions
9
Property assets
10 Property development
11 Land sourcing
12 Land demand
13 Political
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Likelihood
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49
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our
Risks
To enable stakeholders to appreciate what the business considers are the main
operational risks, they are presented in detail below.
Change
during
the year
Link to Group
strategic
priorities
Mitigation
Group risks
Risk and description
Impact of CV-19
1
Safety
Inherent risk within all of our
businesses but most notably
within construction activity
Ensure sites,
depots and
offices remain
safe and secure
environments
The impact of the
pandemic and
new government
guidance and
regulations
Growing relevance
and impact of
climate change
and net zero
carbon targets
Inability to meet
contractual
commitments and
wider operational
delays
Macroeconomic
uncertainty
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
50
• 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
• CLC guidelines being followed for enhanced
safety procedures
• Coronavirus Committee established to steer,
manage and communicate the Group response
• 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
• Responsible Business Manager appointed
• 135 Henry Boot project to define policy and strategy
• Net Zero Carbon working group established
• 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
• CV-19 largely results in delays rather than loss
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Key
Change during the year
Increased
Decreased
— No change
Group strategic priorities
Safety
People
Delivery
Growth
Read more
about Our New
Strategy on
pages 30 and 31
Risk and description
Impact of CV-19
Change
during
the year
Link to Group
strategic
priorities
Mitigation
—
Negative effects of
working remotely
on wellbeing and
mental health
—
Increase in cyber
threat as people
work remotely
Level of remote
working
Negative impact
on scheme
assumption’s
in particular the
discount rate
CV-19 impact on
assumptions
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
• 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
• Regular updates to employees through various
channels to keep up to date on CV-19 and its
impacts
• The Group has agreed three-year facilities with its
banking partners, which run to January 2024 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
• Five-year business plan created as part of
strategic review
• 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
• Looking to close scheme to future accrual
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our
Risks
Group risks
Risk and description
Impact of CV-19
8
Construction contracts
Changes in terms and conditions
of standard contracts exposing the
Company to major financial and
design liability risks
Increased costs
and delays to
programme
9
Property assets
Investment property asset are not
marketable and are without secure
tenancies. Valuations are volatile
10
Property development
Construction and client risk which
is not matched by commensurate
returns on development projects.
Clients not taking up new lettings on
speculative schemes.
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
52
Change
during
the year
Link to Group
strategic
priorities
Mitigation
Supply chain
delivery and
viability in current
environment
Tight margins in
the industry give
rise to additional
contract risk
Tenancy risk
Less interest from
clients to take
up speculative
developments in
some sectors
—
• 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 pre-construction services
agreements 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 £1.1bn pipeline of
future opportunities
• Portfolio strategy actively managed and
covenants regularly reviewed
• 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
• Highly experienced development team
• Flexible to market trends in
development requirements
Diverse range of sites within the
portfolio and over £1.1bn pipeline of
future opportunities
•
• 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 16,607 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 1,119
residential plots
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Risk and description
Impact of CV-19
Change
during
the year
Link to Group
strategic
priorities
Mitigation
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
Reflects
current level of
demand from
housebuilders
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
Planning process
delays
• 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 have very good land
portfolios and are selective, targeting
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
reduces valuation risk in a downturn.
Therefore, though profits may be
reduced if site values fall, the Group
should still achieve a profit on sale
Going concern
In undertaking their going concern review, which covers the period to
December 2022, the Directors considered the Group’s principal risk
areas, including the ongoing impact of the CV-19 pandemic, that they
consider material to the assessment of going concern.
CV-19 impacted the business by slowing down the activity levels
within 2020, particularly for the first half of the year. The second half of
2020 saw the Group returning to more normal activity levels which has
continued into the early part of 2021.
Following the third national lockdown and ongoing impact of CV-19,
the Directors have further considered its potential impact on the Group
in modelling a base case scenario. They have also modelled what they
consider to be a severe downside scenario to include a curtailment
of activity where no sales from the Construction or Developments
businesses are made unless already committed. For Hallam Land,
no sales are assumed in 2021 unless already contracted, with a
c.20% reduction in sales from the base case for 2022. For Stonebridge
Homes a 5% decline in house prices is assumed throughout the
assessment period and Banner Plant is assumed to mirror depressed
activity levels in FY20. This downside model assumes that acquisition
and development spend is restricted other than that already committed.
Having started 2021 in a £27.0m net cash1 position, a position which
has been improved upon over the first part of 2021 with c.£38.0m net
cash held by the Group and facilities of £75.0m, at 26 February 2021,
the Directors have concluded that the Group is able to control the level
of uncommitted expenditure, allowing it to retain cash and position itself
well in the event of a severe downside scenario, although the impact of
doing so on the profit and loss account would be unavoidable.
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 and extended in January 2021 by one year
to 23 January 2024 on the same terms as the existing agreement. The
facility includes an accordion to increase the facility by up to £30.0m,
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
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our
Risks
breach of bank facility covenants. The most sensitive covenant in our
facilities relates to the ratio of EBIT (Earnings Before Interest and Tax) on
a 12-month rolling basis to senior facility finance costs. Our downside
modelling, which reflects a near 14% reduction in revenue and near
36% reduction in profit before tax from our base case for 2021,
demonstrates significant headroom over this covenant throughout the
forecast period to the end of December 2022.
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 30 and 31 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 135-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 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 £32.0m per annum, added over £126.0m
to net assets (an increase of some 80%) and paid 60.25p 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, nor
during 2020 with the outbreak of CV-19, did the company make a
trading loss.
The assessment processes
The Group’s prospects are assessed through a three year forecasting
process led by the PLC Board Executive Directors and the Boards of the
individual subsidiaries. A detailed two-year bottom up budget is agreed
prior to the commencement of the current financial year, reforecast each
month throughout the financial year within each business and consolidated
at a Group level. As a largely deal-driven business, it is considered
inappropriate to attempt to prepare detailed bottom-up forecasts over a
longer-term period, so the Group has prepared a further forecast year using
a top-down financial model based on the Group’s historic track record
and long-term strategic forecasts. Although our strategic land promotion
business commenced 2021 with 15,071 plots with planning permission
which, at a five-year average disposal rate of 2,556 plots would imply
that we have almost six years of sales already in hand and a property
development pipeline of over £1.1bn Gross Development Value (GDV) to be
delivered over a period extending beyond five years, it becomes difficult to
accurately forecast the timing of transactions beyond year three.
We have stress tested our financial results based on the downside
scenario modelled to December 2022, as described in the Going Concern
statement on page 53 followed by an assumed return to planned levels
of activity for year three. Our modelling assumes that deferred land
sale debtors falling due in 2021 of £48.3m as at 26 February 2021 will
continue to be received during the period either directly from the debtors
themselves or via the use of debt purchase facilities or promissory notes
which management consider to be viable alternatives 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
long-term 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 forecast year reflect
the Directors’ best estimates of the prospects for the business and the
Directors consider a three-year period to be appropriate over which to
assess the viability of the Group. In addition to the downside modelled, 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 CV-19 pandemic risk
discussed in the Going Concern statement on page 53.
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 80% of the current development work in progress for 2021.
The Directors have also considered the potential impact of the UK EU future
trading relationship and whilst a trade deal is now in place 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 over the three-year viability period.
1. Net cash is an APM (alternative performance measure) and is reconciled
to statutory measures in note 33 to the financial statements.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Responsible
Business
135 HENRY BOOT
The First Phase of our Responsible Business Strategy
As we celebrate our 135th anniversary in 2021, our business is taking
the opportunity to look to the future and to our continuing commitment
to support our people, partners, places, and planet.
We take our responsibility seriously. From the building of Boot’s Folly in
1927 to provide work for local people at risk of unemployment, to our
significant efforts in recent years to create long-term and meaningful
social value for the communities and environments in which we work,
we have always been proud to demonstrate our commitment to
support the people we work with.
We recognise, however, that the needs of our communities and
environments are changing, and the time to step up our efforts and
collective responsibility is now. In our 135th year, we are excited
to respond to these challenges with strategic focus and renewed
commitment.
In 2017, our business undertook the One Henry Boot Project to
realise and define our workplace culture (the Henry Boot Way) and our
Purpose, Vision and Values. 135 Henry Boot is the next chapter in the
future of our responsible business story and is the first phase of our
new Responsible Business Strategy.
Read more about the Non-Financial Information Statement
on page 132
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135 Henry Boot will guide us as we launch and strategically align three
exciting long-term initiatives in 2021:
• Our Community Partnership Plan (launching in March 2021);
• Our new Equality, Diversity and Inclusion Strategy (launching
in April 2021); and
• Our Pathway to Net Zero Carbon (launching in June 2021).
Our Community Partnership Plan will find us collaborating with and
supporting our charity, educational, and community partners to create
meaningful and lasting impact on their amazing work. In doing so, we
will be engaging our people and partners to get involved and utilise
their skills, knowledge and experience to make a huge difference for
our communities.
Our new Equality, Diversity and Inclusion Strategy will find us engaging
our people and partners to ensure that our business (and the wider
built environment sector) is truly representative and that we offer all our
current and prospective people an authentically inclusive, accessible,
and forward-thinking workplace. It will support us to engage with
those who are under-represented and collaborate with partners to
identify and tackle the barriers to achieving a rewarding career in our
industry.
Our Pathway to Net Zero Carbon will find us building on our
impressive track record of incorporating environmental protection
into our commercial operation and will be an ambitious and engaging
plan to guide us to produce net zero carbon. It will also support
us to enhance our long standing efforts to reduce waste, protect
biodiversity, and continually improve our performance on working to
circular economy principles. We will set ourselves ambitious targets
and report on our progress against them annually. We will empower
our people and partners to share knowledge and collaborate to reach
solutions to the issues and problems posed by climate change and
environmental degradation.
Each of these three initiatives will have independent objectives and
as we deliver 135 Henry Boot we will be guided by five overarching
objectives:
• To launch our Pathway to Net Zero Carbon and build awareness
of the importance of sustainable business practices and the
circular economy.
• To take action to ensure our business is equal, diverse, inclusive,
and accessible.
• To work with key partners across the built environment sector
to create positive direction and thought on diversity within our
industry.
• To collaborate with our communities to understand and respond
to their challenges and requirements.
• To create long lasting social value and contribute to a fair and
just society.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Responsible
Business
Phase One
Phase One
Phase One
Phase Two
135 Henry Boot and the
Community Partnership
Plan (CPP) launched to the
business
135 Henry Boot and
CPP launched with the
Preliminary Results
Launch of new
Equality, Diversity,
and Inclusion Strategy
Launch of the Pathway
to Net Zero Carbon
Launch of Phase 2
of our Responsible
Business Strategy
March 2021
April 2021
June 2021
January 2022
to being a responsible business is led from the top and that we will
hold ourselves accountable to achieving and demonstrating progress
against our ambitions, targets and objectives. Leadership from the
Board on our Responsible Business Strategy will also ensure that key
financial and non-financial risks and opportunities linked with ESG
receive careful consideration and review. This will include interaction,
where necessary, with the Audit and Risk Committee for the review
and monitoring of any risks relating to ESG issues that require
input from our auditors or particular consideration in relation to risk
identification and management.
Our leadership commitment to responsible business is further
demonstrated by our CEO and Group Finance Director’s personal
objectives being linked to the delivery of our Responsible Business
Strategy. In 2022 and beyond, we will also be looking to set further
Group-wide KPIs and link these, where appropriate, to remuneration
outcomes in other ways.
135 Henry Boot will guide us as we build on our strong foundations of
responsibility and create excitement and engagement with all of our
stakeholders to address and respond to crucial issues faced by our
communities and environments.
Taking a two-phase approach to the delivery of our Responsible
Business Strategy will enable our business to be agile as we react to
pressing societal issues whilst also maintaining a long-term strategic
approach and ambition is shaped by consultation and engagement
with our people and partners. We believe 135 Henry Boot will
strongly position us to develop and launch the second phase of our
Responsible Business Strategy in January 2022.
The second phase of the Strategy will be influenced and shaped by
further consultation and engagement with our people and partners.
It will focus on the issues we collectively agree to be the most
material, and our vision and activity will incorporate the United Nations
Sustainable Development Goals that we determine are those we
can most positively impact. It will also incorporate all of our existing
responsible business initiatives and guide us to achieve our targets
and create long-term social value and impact.
The development and delivery of our Responsible Business Strategy
will be overseen and guided by our new Board Responsible Business
Committee. This Committee will ensure that our Group’s approach to
Environmental, Social and Governance (ESG) activity and ambition
is clearly incorporated within and complements our wider Group
strategy. It will demonstrate to all our partners that our commitment
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30368 8 April 2021 11:30 am V0OUR PEOPLEOur approachOur people are our greatest asset and are vital to our long-term strategic success and sustainability. Engaging with and developing our people is crucial to our continued performance and growth. We collaborate with all our people to enable them to achieve their best. We work to continually develop and maintain a culture of inclusivity that enables us to attract and retain the right colleagues to work at every level, who are committed to working as part of our team, and who support and represent our Values. We have also been delighted to maintain our Investors in People accreditation this year.We remain committed to investing the time and resources to support, engage and motivate our people to feel valued, to be able to develop rewarding careers, and want to stay with us. We recruit and promote from within wherever possible to provide the best possible progression opportunities. As our businesses continue to develop and grow, we understand that by retaining and inspiring effective and committed people, we can continue to deliver excellence to all.Support throughout the CV-19 PandemicThe CV-19 pandemic has posed many challenges for us all, and we have worked hard to ensure our colleagues have consistently been kept up to date with our response to the changing circumstances. This has included regular communications and interactive webinars to provide updates on health and safety protocols, the protection measures in place at all our sites, depots and offices, business performance and financial position, and positive news stories. We have also included regular resources and guidance on maintaining good physical and mental health and wellbeing to provide support through each stage of the pandemic.Health and Wellbeing There continues to be significant societal awareness of the challenges around maintaining good physical and mental health (which are likely to be exacerbated by the CV-19 pandemic) and we have an important role to play in promoting positive physical and mental wellbeing for our people. We continue to utilise our SMILE platform, which is a wellbeing platform accessible by all our employees, focusing on three strands: health, wealth, and lifestyle. SMILE brings together all our benefits and wellbeing provisions into one accessible location so that our employees can access information and support at any time. Although we opted not to take part in Britain’s Healthiest Workplace in 2020, in order to allow some of our people to focus on adapting to the alternative ways of working (including working from home) and responding to the pandemic, we will be looking to take part in this important initiative once again in 2021 and reviewing how we can build on our previously successful score and continuously strive to improve our performance. We will continue to develop and deliver resources focused on physical and mental health and wellbeing and will respond to the changing circumstances and issues faced by our people and wider society. 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. Our annual Employee Engagement survey continues to build on the Values we developed as part of the Henry Boot Way, and this year we had a response rate of 66% (59% in 2019) with an employee Net Promoter Score (eNPS) of 46 (40 in 2019), which demonstrates positive engagement with our employees and 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 constantly strive to build on our solid foundation of engagement but recognise there are areas where we can make improvements. We will continue to collaborate closely with our Employee Forums to address areas of strength and weakness to secure even greater levels of engagement when we run the survey again in the autumn of 2021. In addition to our Employee Engagement Survey, we also engaged our people with our Agile Working Survey. This important consultation intended to capture the views and experiences of our people as they worked throughout the pandemic and will shape our forthcoming Agile Working Policy which is due to be published in 2021. This Policy will inform and guide our people to make choices about their method and pattern of work to suit their individual needs wherever possible, and explore how agile working could be utilised for their role. In relation to employee engagement more widely and the role of the Board in this, please also see our Employee Engagement section on page 86. Gender diversityAll employeesFemale113Male391Senior managersFemale11Male80DirectorsFemale4Male2157Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020STRATEGIC REPORTHenry-Boot-AR-2020-strategic.indd 57Henry-Boot-AR-2020-strategic.indd 5708/04/2021 15:09:1808/04/2021 15:09:18 30368 8 April 2021 11:30 am V0Our Responsible BusinessEMPLOYMENT ENGAGEMENT SURVEYCreating a culture and environment where our people can be the best version of themselves at work.1RECOGNITION AND PROGRESSION2EMPLOYEE WELLBEINGWe received an average employee engagement score of 7.3 when our people were asked if they felt valued for their contribution.We will continue to strive to ensure that all our people are aware of and can access the guidance and support they need to progress in their career and feel positively rewarded and recognised for their contribution to our performance.Whilst we are pleased that our average employee engagement score for positive mental wellbeing was 7.3, we do recognise the significant ongoing challenges that the pandemic has created for our people.We will continue to review and introduce positive mental wellbeing initiatives for our people to promote and support their health and wellbeing.As part of the Employee Engagement Survey, we introduced a new platform – High Five – whereby our people could acknowledge and thank each other for individual contributions and effort.This platform has been widely adopted and has demonstrated the real sense of teamwork that underpins our workplace culture, the Henry Boot Way.The overall objective of conducting these surveys is to gain an in-depth understanding of our employees’ experience whilst working at Henry Boot.The report is focused on gaining feedback from employees so we can create a culture and an environment where our people can be the best version of themselves at work. The survey also captures our employees’ thoughts about our response to CV-19 and the current challenges that our people are facing due to the pandemic. This insight will feed into our ‘roadmap’ of recovery. The survey and our findings focuses on the Group as a whole and whilst we can look at the subsidiaries as separate entities, which will be beneficial for business specific feedback, we have opted to look at the scoring holistically as a Group to push for more collaboration, a collective responsibility and a joined-up approach to culture and engagement.Our process Facilitated by HIVE (our employee engagement partner’s), our annual Employee Engagement Survey housed a framework of 32 questions that were used to measure progress when compared with the responses within our first survey conducted during 2019. Some questions were based on those posed in 2019 to allow for statistical analysis of change; however, other questions were more focused on 2020 and specifically the pandemic.The survey results show that, despite the challenges posed by the pandemic and the necessary adaption of approaches to work, our people have remained resilient, optimistic and focused on working as a team to maintain delivering an exceptionally high standard for our clients and partners.The survey results and feedback are being carefully reviewed by our Board and Executive Committee to identify any areas where there is scope for increased engagement with, and support for, our people.Response rate, increase of 7% since last year 66%Our objectivesOur findingsKey outcomesOutstanding Group eNPS score of6 point increase since 201946We received an 8.6 employee engagement score when our people were asked whether their personal values are well suited to the Henry Boot Way and whether they felt proud to work for Henry Boot. The same score was achieved when our people were asked if the Group has adapted well to the challenges of CV-198.6We received an 8.9 employee engagement score when our people were asked if they had a good relationship with the other people in my team8.9Henry BootPLCHenry BootDevelopmentsLimitedHenry BootConstructionLimitedHallam LandManagementLimitedBanner PlantLimited32204222504154385766204060800eNPS (2020)eNPS (2019)Henry Boot Average (2020) = 46Henry Boot Average (2019) = 4058Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 58Henry-Boot-AR-2020-strategic.indd 5808/04/2021 15:09:2108/04/2021 15:09:21 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Financial Wellbeing
We are committed to ensuring that our people are well rewarded
for their hard work and have access to resources to support their
financial wellbeing.
We 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. This has been
pushed back into 2021, to allow us to assess and review the various
aspects of this important subject with our chosen external partner and
Employee Forums in a more structured way.
We operate two 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) and/or the Henry Boot PLC Group Stakeholder Pension
Plan (defined contribution pension). Employees who are members of
The Henry Boot Staff Pension and Life Assurance Scheme have the
opportunity to join the Henry Boot PLC Group Stakeholder Pension
Plan, investing their residual salary, i.e. the difference between their
actual salary and their capped pensionable salary, for 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.
Company-funded Independent Financial Advice is available 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 2020 we invited all eligible employees to participate in
the Company Share Option Plan (CSOP); 99.5% of those who were
eligible accepted this grant. We also invited all eligible employees
to participate in the Group’s 2020 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 62.9%
of eligible employees had joined a Sharesave scheme.
Diversity and Inclusion
We aim to create a fair, accessible, diverse, and inclusive working
environment, while recognising the challenges that our sector has
traditionally suffered, particularly in relation to gender and ethnicity
representation and diversity. 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. We believe that this will bring out the
best in our people and lead to long-term success and sustainability.
In 2020, in response to research we commissioned from a specialist
consultancy to give us insight into how we can best make our
business fit for the future with a focus on diversity and inclusion, we
established a cross-Group Diversity and Inclusion Steering Group. This
Steering Group is comprised of employees from across our subsidiary
businesses, regions of operation, and levels of seniority, and is
sponsored by the CEO and chaired by the Head of HR. The Steering
Group’s mission is to support our business to develop and deliver our
new Equality, Diversity and Inclusion Strategy which will be published
in April 2021.
Our Equality, Diversity and Inclusion Strategy will focus on five
key areas:
1. Inclusive culture (including leadership)
2. Increasing our diversity
3. Education and awareness
4. Success, progression, and development
5. Engagement approach with our communities and stakeholders
We believe this will strongly position us to create a truly fair,
accessible, representative, and inclusive workplace culture, add value
to our business, and contribute positively to the health and wellbeing
of our people.
Although we recognise that the ambitions and objectives in our
Equality, Diversity and Inclusion Strategy will take time to achieve, we
are fully committed to working with key partners to engage with under-
represented groups through various networks. We aim to encourage
diversity of thought and approach amongst our people, and to
open opportunities for under-represented groups to experience our
industry. We continue to forge links with local groups and educational
establishments to encourage diversity and to change perceptions
and influence others to view our industry as a positive career choice.
Examples of the networks we are members of and actively support are
Building Equality, Women in Property, the Considerate Constructor’s
Scheme and Business in the Community (BITC).
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 Board Diversity Policy is set out in more detail as part of our
Nomination Committee report on page 94. Our gender pay gap is
currently 28.44%, 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. 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 and will explore the
possibility to report on our ethnicity pay gap in the future.
We have a disproportionate number of women in all roles and,
therefore, our data is skewed; we recognise that without a
representative increase in the number of women we employ, our
gender pay gap will be difficult to reduce. The Equality, Diversity
and Inclusion Strategy will guide us to ensure our recruitment and
attraction processes attract a diverse talent pool and ensure our
workforce reflects the diversity of the communities in which we live
and work, by increasing opportunities and reducing barriers to under-
represented groups.
We hope that both our Equality, Diversity and Inclusion Strategy
and Agile Working Policy will successfully contribute to decreasing
our gender split over time and have a positive impact on our gender
pay gap.
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30368 8 April 2021 11:30 am V0Our Responsible BusinessLearning and Development Delivering a workplace culture and positive career experience that attracts new and diverse talent and retains experienced employees will give us the ability to compete successfully and ensure long-term sustainability. Our directly employed people headcount was 504 at the end of 2020. The Group has a relatively low level of employee turnover (the retention and development of our internal talent remains critical to our success), which remains around the average for the UK at 14%. Our high retention rates ensure that we have a solid base on which our people can grow, develop and achieve their potential.We recruited a further three apprentices in 2020, which brings our total number of current apprentices to 23 with a further 15 trainees. 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. Throughout 2020, eight of our employees completed their education programmes and a further five progressed onto the next level of their education programme. We have key pathways in place for our apprentices and trainees to ensure our talent pipeline continues to flourish. Throughout 2020, our senior leaders who have participated in our Senior Leadership Development Programme (SLDP) have continued to develop their own skills and knowledge and have, despite the limitations of the pandemic, been able to continue with coaching and mentoring activities. In early 2020, we held our first Leadership Development Programme (LDP) which was attended by eight of our middle managers and rising stars; this was successfully delivered and our original plan was to run this several times during 2020. However, this was not possible. We remain firmly and fully committed to ongoing development and investment in our internal talent pool, and with the help of our external partners we have pivoted our LDP to be an online virtual offering which we will be piloting in 2021. We delivered 1,420 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, 317 of our people undertook a form of health and safety training in 2020 (included in the overall number of learning and development days provided above), and via remote engagement during the pandemic. 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.60Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 60Henry-Boot-AR-2020-strategic.indd 6008/04/2021 15:09:2708/04/2021 15:09:27 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Health and Safety
One of our most important responsibilities as a business is making
sure that the health, safety and wellbeing of our employees, partners
and the wider public is safeguarded, together with protecting the
environment in all our areas of operations.
Our team are enthusiastic experts in this area and work hard in
collaboration with our project teams and supply chain to drive
innovation and achieve best practice.
Our performance
Our Accident Incidence Rate (AIR) and Accident Frequency Rate (AFR)
and performance in our Construction segment remains strong, and
our construction related AFR and AIR for our directly employed staff
and operatives is 0.
We are delighted to report a strong overall (including subcontractors)
AIR of 209 per 100,000 workers, and AFR of 0.10 per 100,000
hours worked. This result is a combination of the effectiveness of
our management processes, continuous improvement, and our
Zero Harm initiative. Whilst the KPI data published by Constructing
Excellence has now concluded, we have continued to benchmark our
Health and Safety performance using existing data. This shows a KPI
performance of 98%.
In 2020, 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.
We also continue to be a Considerate Constructors Scheme Partner,
registering the Barnsley Glassworks project as an ‘Ultra Site’ and the
Barnsley Library @ The Lightbox Project won a Gold Award in 2020
commended for our respect for the wider community, environmental
protection and championing the value of our workforce. Our strong
health and safety management culture has resulted in securing a
prestigious RoSPA Gold Medal Award for the 11th consecutive year
resulting in a RoSPA Presidents Award. This is alongside further
industry awards including the Constructing Excellence Health, Safety
and Wellbeing Award, Considerate Constructors Scheme Gold Award,
LABC Award for Library @ the Lightbox (best public service building)
and Generation for Change (G4C) Award.
Our Supply Chain
Our partnership with our supply chain partners is critical to our
success and we work hard to engage and collaborate with all of our
suppliers and partners to create and maintain long-term successful
relationships. We have a commitment to securing the services of
predominantly local subcontractors and utilising local suppliers to
minimise the miles and emissions that working with us produces,
which continues to be a strong and responsible approach for our
business. This has only been strengthened due to the impact of
CV-19 on supply chains, and the increasing value placed on creating
opportunities for local communities.
Human Rights
Our business is totally committed to supporting and working to the
UN’s Guiding Principles on Business and Human Rights. Protecting,
preserving and respecting human rights is fully embedded in our
culture and is fundamental to our Values. This commitment is reflected
in and demonstrated by our routinely updated policies including:
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• Modern Slavery
• Rights to Work
• Whistleblowing
In addition to our policies, we aim to demonstrate this commitment
through all our behaviour and actions towards our people, suppliers,
partners and the communities in which we operate.
Modern Slavery
We recognise that our industry is vulnerable to the impacts of modern
slavery and therefore 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 keep our Human Trafficking and Slavery Statement (the ‘Statement’)
under regular review and set out the activities we undertake to
reduce the risk of slavery and trafficking activities being present within
our business operations. These measures include enforcing our
Modern Slavery Policy, due diligence requirements, and mandatory
contract clauses seeking compliance by our supply chain with
appropriate anti-slavery measures. Following completion of a Modern
Slavery Assessment Tool (MSAT), we have signed up to the GLAA
(Gangmasters & Labour Abuse Authority) Construction Protocol.
In addition, we have been focused recently on working with Non-
Governmental Organisation (NGOs) and other supply chain bodies to
understand where our practices may be strengthened and are looking
forward to implementing some new measures throughout 2021.
We commit to collaborating closely with our people, partners,
contractors and suppliers to monitor our performance, share
knowledge and maintain vigilance throughout our business and
supply chains.
Anti-Bribery and Anti-Corruption
Delivering our services with a zero-tolerance approach to corruption in
any form is essential for us to demonstrate our Values, long standing
commitment to ethical behaviour and integrity, and to uphold our
reputation and image. Our Anti-Bribery and Corruption Policy sets
out the standards expected of all Group employees and supply chain
members 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 and
supply chain complies.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Responsible
Business
OUR PLACES
Our Approach
The Group’s success depends on the communities in which we
operate, live and work continuing to thrive and develop. We recognise
that the needs of our communities and environments are changing
and the time to step up our efforts and collective responsibility to
support them is now. In our 135th year, we are excited to engage our
people and partners to respond to societal needs with strategic focus
and renewed commitment.
Our Community Partnership Plan is a core element of 135 Henry
Boot and will find us collaborating with and supporting our charity,
educational, and community partners to create meaningful and lasting
impact on their amazing work. In doing so, we will be engaging our
staff to get involved and utilise their skills, knowledge and experience
to make a huge difference for our communities.
Our Response to CV-19
We recognise the significant and long-term impact that CV-19 has
had on our communities and the range of issues that it has caused for
many, but particularly the most vulnerable in our societies. Throughout
2020, we decided to focus our efforts and resources on supporting
the response of our charitable and community partners to the
pandemic and we engaged and collaborated with them to ensure our
support would have the best possible impact on their work.
Charity Partners
This year we continued to support a range of charity partners across
our areas of operation and offered our support through financial
donations, donations of time, and donations of materials and our
professional expertise. We have a Charities Committee who meet
on a fortnightly basis to assess direct requests to the business for
support, assessing each request to establish whether it aligns with
our Charitable Giving Pillars and the impact our support may have
to ensure our donations and engagement have the best possible
outcomes and impact.
We support an annual Charity of the Year that is selected by our
employees and we aim to host a variety of activities during the year
to raise money to support them. In 2020 our Charity of the Year
was Sheffield Children’s Hospital which provides services across a
significant geographic area in the north of the UK. This fantastic charity
aims to ensure that the services and support offered by the hospital
to young people and their families is of the best possible quality. They
fund research, cutting-edge medical equipment, improvements to the
hospital facilities, and bespoke provision for their patients and loved
ones. They are currently fundraising to complete a brand-new Cancer
and Leukaemia Ward. Given their coverage of many of the regions in
which we operate, and their ambitions to support young people to
give them the best possible quality healthcare and compassionate
support, we were delighted to partner with an organisation with
shared values and ambition.
62
As has been the case for many corporate charity partnerships, many
of our planned events and activities had to be postponed or cancelled
due to the impact of CV-19. We have therefore decided to extend our
partnership with the Sheffield Children’s Hospital until the end of 2021
and additionally chose to sponsor their annual Snowflake Campaign in
December 2020. We are excited to raise as much as possible for this
important cause throughout 2021.
In addition to our Charity of the Year, we have supported a range of
national and local charity partnerships and our support included:
• Becoming a Foundation Partner of Landaid (a national property
industry charity focusing on supporting young people affected
by homelessness) and collaborating with them to fund the
development of a new site for the Sheffield based youth
homelessness charity Roundabout.
• Donating to the National Emergencies Trust CV-19 campaign with
our donation being matched by the Big Give.
• Delivering the ‘Henry Boot 13 Gifts of Christmas’ campaign which
saw us supporting 13 food banks across our sites of operation
nationwide.
• Headline sponsoring the annual St Luke’s Hospice Festival of Light
campaign and event for the third time.
All our people are offered an annual volunteering day and, whilst it has
been difficult for many to utilise this in 2020 with opportunities being
greatly limited and our people’s health and safety being paramount,
we will be promoting opportunities throughout 2021 as part of our
Community Partnership Plan.
Despite the challenges, our people did undertake some highly
valued volunteering in 2020 and we supported them to assist local
communities affected by the pandemic, with employees using their
time to deliver prescriptions, read remotely to schoolchildren and
support the vaccination programme.
In November 2020, we consulted with a sample group of our people
by running a Community Engagement Survey which included
requesting their feedback and opinions on the Group’s support for
charities and communities. Based upon their responses, we have
re-framed our Charitable Giving Pillars to:
• Charities and organisations that support health, medical, and
educational improvements for children and adults;
• Charities and organisations that support those who are homeless
or rootless; and
• Charities and organisations that support improvements for the
environment and are tackling the effects of climate change.
We also gave our people the opportunity to nominate a grassroots
sports team for a donation via our Discretionary Sports Fund. We
recognise the importance of grassroots sports for communities and for
mental and physical wellbeing but are also aware of the lack of funding
that organisations often endure. Many of our people are directly
or indirectly involved in grassroots sport and we were delighted to
distribute a total of £5,000 to 20 employee nominated local sports
teams throughout 2020.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Pictured: The Group has continued its partnership with
The Children’s Hospital Charity, and selected them as
Charity of the Year for 2021. The level of support we were
able to offer in 2020 was reduced due to the pandemic, and
plans are being put in place to resume events and activity
over the coming months.
The Group also maintains several investment funds with South
Yorkshire Community Foundation (SYCF). We collaborate closely
with the SYCF (and are a member of their SY100 Supporter Scheme)
to ensure our funds are used to support grassroots charities and
community organisations whose purpose aligns with our Charitable
Giving Pillars. We can also use our funds in order to collaborate with
other SYCF supporters to provide grants to applicants assessed for
eligibility by SYCF.
We are a founding member of Sheffield Business Together (SBT) and
continue to offer our financial and people resources to support the
work of this responsible business coalition. SBT’s total leverage value
of completed projects in support of charity, community, and voluntary
organisations in 2020 was a fantastic £86,644.00.
This year, we contributed £98,160.00 (£110,287.68 in 2019) to
charitable causes. This figure is slightly lower than that achieved
in 2019 due to the significant impact on our ability to fundraise for
our Charity of the Year through fundraising events and employee
fundraising. Our commitment to donate to charitable causes continues
to strengthen and we look forward to supporting our charity partners
in the future and collaborating with them to ensure our donations have
the best possible impact on their work.
£21,463.00 of the total funds donated in 2020 were through our
employees utilising our match funded Give as You Earn payroll giving
mechanism.
“Henry Boot took part in a great opportunity
to inspire our key worker students who
are studying in the classroom. One of
my students has since told me that they
now want to work for Henry Boot as a
Paralegal!”
Education Partners
We recognise that young people are the future of our business.
Collaborating with our partners in the education sector to showcase
our business and sector and give young people valuable and
authentic workplace engagement is paramount for their and our long-
term success; if they can see it, they can be it.
We also recognise the disproportionate impact that the CV-19
pandemic has had on young people and the challenges that they
have faced from school closures and social distancing. We have been
proud to maintain our support for the career education programmes
of our education partners. We have committed to ensuring these
partners have our long-term support to provide young people with
valuable and interactive workplace experience, engagement, and
education as we build back from the impacts of the pandemic.
We have adapted our engagement opportunities and collaborated
with a range of educational partners and charities across our areas of
operation and examples include:
• Being a Cornerstone Employer for the D2N2 Enterprise Partnership
– supporting a range of education providers across North
Derbyshire.
• Empowering several of our employees to become Enterprise
Advisors within the Sheffield City Region and working with local
schools to provide them with valuable guidance and support.
• Volunteering with the National Literacy Trust for digital reading
sessions and the Words for Work Conference.
• Supporting St Luke’s Hospice Biz Kids Programme, which aims
to encourage enterprise and business skills for primary school
children whilst fundraising for the vital services of St Luke’s
Hospice.
• Hosting a digital Takeover Day for our landmark development
‘The Glassworks’ in Barnsley.
• Supporting a range of schools with remote learning opportunities
National Literacy Trust Partner Primary School
and digital engagement.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Our Responsible
Business
OUR PLANET
Our Approach
We recognise the increasing risk and damage that climate change
and environmental damage poses. Our commitment to protecting
the environments we operate in has long been inherent in the way we
work, however we acknowledge that all businesses must step up their
ambition and act now to protect and preserve the environment and
our planet for future generations.
In June 2021 we will be unveiling our Pathway to Net Zero
Carbon. This ambitious plan will look to build on our long standing
environmental protection measures and will further address our direct
and indirect environmental impacts. Importantly it will guide us as we
strive to produce net zero carbon and support us to be ambitious and
progressive as we reduce our emissions, protect our environments
and biodiversity, and engage all our people and partners to create a
better planet for us all.
We will also work with our charity and education partners to educate,
engage, support and learn from them as we assist with their efforts in
addressing the impacts of climate change. This year we have established
a Henry Boot Environment Fund as part of our charitable giving
programme which will provide grants to our charity, community and
education partners to support their efforts to address climate change.
Our Performance
The tables below demonstrate the reduction in our CO2 footprint
and carbon emissions throughout 2020. Whilst we recognise that
this significant reduction is in part due to the restrictions associated
with the CV-19 pandemic, we will strive to continue to reduce our
emissions and carbon footprint and report on our annual progress
against our targets as we deliver our Pathway to Net Zero Carbon.
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.
Total energy consumed was 11.6 MWh’s (10.8 MWh’s scopes 1 and 2).
In 2020 we established a Net Zero Carbon Taskforce. This group of
employees is drawn from across our subsidiaries and represents the
regions we operate in and different levels of seniority in the business.
The Taskforce, which is sponsored by two members of our Senior
Executive team, has responsibility to develop and deliver our Pathway
to Net Zero Carbon and to ensure all our people are engaged,
informed, and empowered to contribute to our efforts.
Our Pathway to Net Zero Carbon is being prepared with support from
specialist environmental consultancy Anthesis. Anthesis are specialists
in corporate sustainability strategies and their support will ensure our
Pathway is ambitious, strategic, and measurable. They are supporting
the development of our Pathway to ensure we make the best possible
impact in tackling climate change, engage our partners, and adapt
our commercial operations to protect our planet. We are keen to
demonstrate our intent to build on our existing efforts and act now to
preserve the environments we work in and alongside, and we believe
the support of Anthesis will ensure our Pathway has great impact and
the support of all our stakeholders.
We also recognise that the risk of climate change is one that faces all
businesses and that solutions to the many challenges it poses requires
collaboration and teamwork. We have recently joined and routinely
contribute to the Yorkshire Climate Action Coalition (a coalition of
like-minded businesses who are ambitiously focused on addressing
their environmental impact) and regularly collaborate with membership
organisations (including the CBI and BITC) on this issue.
We are also proud to work to circular economy principles wherever
possible and ensure that we limit waste, reuse materials, and recycle
as much as we can. We are proud to be signatories of BITC’s ‘Waste
to Wealth’ pledge and initiatives to deliver a resource-efficient,
low carbon built environment which supports the Government’s
Construction 2025 Strategy. Our Construction business continues
to maintain approval and work to the ISO 14001 Environmental
Management System.
2020
Tonnes
1,918
644
2019
Tonnes
2,443
870
2,562
4.7 tonnes CO2e
796
3,357
6.2 tonnes CO2e
3,313
5.8 tonnes CO2e
1,091
4,404
8.1 tonnes CO2e
Trend
Fall
Fall
Fall
Fall
Fall
Fall
Fall
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Carbon emissions by segment
Henry Boot Group
CO2e emissions
Property investment
and development
Land development
Construction
Group overheads
Total gross
controlled emissions
2020
intensity
ratio
tonnes of
CO2e
14.22
1.44
22.84
1.64
2020
tonnes of
CO2
552
45
2,649
111
3,357
2019
tonnes of
CO2
1,120
57
3,085
142
4,404
2019
intensity
ratio
tonnes of
CO2e
2.46
1.73
27.01
2.14
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
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Our carbon emissions for the year ended 31 December 2020 were calculated in accordance with the March 2019 BEIS ‘Environmental Reporting
Guidelines: Including streamlined energy and carbon reporting guidance’ and the EMA methodology for SECR Reporting (2019: 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 carbon 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 carbon emissions have decreased by 23.8% when compared with those of the previous year; this equates to a reduction of
1.9 tonnes per employee.
For further information on our Carbon emissions please see our website
Climate Related Financial Disclosure
Our business is aware, and in support of, the Task Force for Climate
Related Financial Disclosure’s (TCFD) recommendations for the
reporting of climate related financial information. It is a priority for
us to share relevant, consistent, and useful information with our
shareholders and partners and we are carefully assessing the risks
and opportunities that climate change could create for our business.
We will begin reporting against the recommendations of the TCFD in
2022 and will be preparing for this throughout 2021. In doing so, we
will be taking the following steps:
• Being led by our Responsible Business Committee – This new
Committee will assume executive oversight of the Group’s
environmental sustainability performance and ensure that our
forthcoming Pathway to Net Zero Carbon and the actions we take
to enhance our environmental stewardship are ambitious, strategic,
incorporate the views and contributions of our people and partners,
and that progress is regularly communicated with our stakeholders.
• Establishing a TCFD Steering Group – This Steering Group will be
comprised of representatives from core functions across our Group
and will support the Responsible Business Committee (whom it
will report to) to oversee the preparation for reporting against the
TCFD recommendations to ensure our approach is comprehensive
and consistent across the Group. The Responsible Business
Committee and TCFD Steering Group will collaborate to assess the
risks and opportunities that climate change pose to our business
(considering the variation in risks and opportunities in different
climate change scenarios).
• Publishing our Pathway to Net Zero Carbon which will guide us as
we reduce our emissions (using our 2019 emissions as our baseline)
and build on our existing performance to take actions to protect and
preserve our planet. We will be carefully assessing our impact and
will routinely publish our progress against our targets to reduce our
emissions, protect biodiversity and limit waste and resource use.
Please see below for more details on the actions we will be taking
to report in alignment with the four focus areas of the TCFD
recommendations.
Governance
• Responsibility for our TCFD reporting will be overseen by the
Responsible Business Committee.
• Supporting and reporting to the Committee will be a cross-Group
TCFD Steering Group comprised of representatives from core
business functions.
Risk Management
• The Responsible Business Committee and TCFD Steering Group
will undertake a climate scenario analysis to best understand
the potential risks and opportunities climate change poses and
incorporate our response to these within our risk management
framework, liaising as necessary with the Audit and Risk Committee.
Strategy
• The Responsible Business Committee will collaborate with the
Board, and provide input to the Strategy Days in particular, to
ensure that the approach to our climate-related activities integrates
with, and is fundamentally incorporated into, the development of
our short, medium and long-term commercial strategies.
Metrics and Targets
• Our Pathway to Net Zero Carbon will guide us to reduce our
carbon emissions across Scopes 1, 2 and 3.
• We will also be incorporating additional metrics to develop our current
measurement of resource use, waste, and biodiversity protection
and enhancement, and consider how these metrics will also be
incorporated within our performance measurement arrangements,
including for remuneration outcomes, in the forthcoming years.
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30368 8 April 2021 11:06 am V1Henry-Boot-AR-2020-governance.indd 66Henry-Boot-AR-2020-governance.indd 6608/04/2021 14:30:4408/04/2021 14:30:44 30368 8 April 2021 11:06 am V1OUR GOVERNANCEBoard of Directors68Executive Committee72Chairman’s Introduction74Governance at a Glance76Corporate Governance Report:– Division and Responsibilities77– Board Leadership and Company Purpose80– Composition, Succession and Evaluation91– Nomination Committee Report94– Audit, Risk and Internal Committee Report100– Audit, Risk and Internal Control102– Corporate Governance Statement105– Directors’ Remuneration Report106– Remuneration Policy111– Annual Report on Remuneration119Directors’ Report128Statement of Directors’ Responsibilities133Henry-Boot-AR-2020-governance.indd 67Henry-Boot-AR-2020-governance.indd 6708/04/2021 14:31:0908/04/2021 14:31:09 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Directors
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TIM ROBERTS
Chief Executive Officer
AMY STANBRIDGE
General Counsel and
Company Secretary
DARREN LITTLEWOOD
Group Finance Director
JOANNE LAKE
Deputy Chair
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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GERALD JENNINGS
Non-executive Director
PETER MAWSON
Non-executive Director
JAMIE BOOT
Chairman
JAMES SYKES
Non-executive Director
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30368 8 April 2021 11:06 am V1Board of DirectorsJamie BootTim RobertsDarren LittlewoodJoanne LakeJames SykesPeter MawsonGerald JenningsAmy StanbridgeChairmanChief Executive OfficerGroup Finance DirectorDeputy Chair and Non-executive DirectorNon-executive DirectorSenior Independent Director and Non-executive DirectorNon-executive Director and Designated Non-executive Director for Workforce EngagementGeneral Counsel and Company SecretaryNRANNRANRANDate of appointmentJune 1985.Date of appointmentJanuary 2020.Date of appointmentJanuary 2016. Date of appointmentOctober 2015.Date of appointmentMarch 2011.Date of appointmentOctober 2015.Date of appointmentOctober 2015.Date of appointmentOctober 2018.IndependentNo.IndependentNo.IndependentNo.IndependentYes.IndependentNo.IndependentYes.IndependentYes.Brings to the BoardKey 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 BoardKey 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 is responsible for developing and implementing Group Strategy and has ultimate responsibility for Group profitability. Tim leads on engagement with all the Company’s stakeholders, including interaction with investors and employees. He is also the Director responsible for all health, safety and environmental matters.Additional roles held Director of the Company’s four principal operating subsidiaries.Brings to the BoardKey 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.Additional roles held Non-executive Chair of Mattioli Woods plc, Non-executive Director of Gateley (Holdings) Plc, Non-executive Director of Morses Club PLC, Non-executive Director of Honeycomb Investment Trust PLC.Brings to the BoardKey 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 Price Waterhouse. She is a Chartered Accountant and a Fellow of the Chartered Institute for Securities & Investment and of the ICAEW, and is a member of the ICAEW’s Corporate Finance Faculty.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 BoardKey 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 Nexus Planning Limited, Board Representative for Paradise Circus Project for the Greater Birmingham & Solihull Local Enterprise Partnership and Non-executive Chairman of Infinite Global Consulting Inc.Brings to the BoardKey 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 P.D.R Construction Ltd and Director of G R Jennings Properties Ltd.Brings to the BoardKey strengths:• Widespread industry experience in retail and property. • Successful track record of delivering significant development projects and working with a wide range of stakeholders.• Extensive experience in asset management.• A variety of executive and non-executive roles over the years within the private, public and third sectors.Gerald has over 30 years’ experience in the retail and property industry and the delivery of major development projects and adding value through proactive asset management. Additional roles held Trustee of St Luke’s Hospice, Sheffield & member of Business in the Community’s (BITC) Yorkshire and Humber Board.Brings to the BoardKey strengths:• Significant legal, compliance, regulatory and corporate governance experience.• Robust knowledge on all aspects of commercial law and practice.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. Amy has worked at Henry Boot PLC since 2014, becoming Company Secretary in 2018 and General Counsel in 2021.Committee MembershipN NominationA Audit and RiskR Remuneration Committee Chair70Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 70Henry-Boot-AR-2020-governance.indd 7008/04/2021 14:31:3208/04/2021 14:31:32 30368 8 April 2021 11:06 am V1Jamie BootTim RobertsDarren LittlewoodJoanne LakeJames SykesPeter MawsonGerald JenningsAmy StanbridgeChairmanChief Executive OfficerGroup Finance DirectorDeputy Chair and Non-executive DirectorNon-executive DirectorSenior Independent Director and Non-executive DirectorNon-executive Director and Designated Non-executive Director for Workforce EngagementGeneral Counsel and Company SecretaryNRANNRANRANDate of appointmentJune 1985.Date of appointmentJanuary 2020.Date of appointmentJanuary 2016. Date of appointmentOctober 2015.Date of appointmentMarch 2011.Date of appointmentOctober 2015.Date of appointmentOctober 2015.Date of appointmentOctober 2018.IndependentNo.IndependentNo.IndependentNo.IndependentYes.IndependentNo.IndependentYes.IndependentYes.Brings to the BoardKey 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 BoardKey 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 is responsible for developing and implementing Group Strategy and has ultimate responsibility for Group profitability. Tim leads on engagement with all the Company’s stakeholders, including interaction with investors and employees. He is also the Director responsible for all health, safety and environmental matters.Additional roles held Director of the Company’s four principal operating subsidiaries.Brings to the BoardKey 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.Additional roles held Non-executive Chair of Mattioli Woods plc, Non-executive Director of Gateley (Holdings) Plc, Non-executive Director of Morses Club PLC, Non-executive Director of Honeycomb Investment Trust PLC.Brings to the BoardKey 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 Price Waterhouse. She is a Chartered Accountant and a Fellow of the Chartered Institute for Securities & Investment and of the ICAEW, and is a member of the ICAEW’s Corporate Finance Faculty.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 BoardKey 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 Nexus Planning Limited, Board Representative for Paradise Circus Project for the Greater Birmingham & Solihull Local Enterprise Partnership and Non-executive Chairman of Infinite Global Consulting Inc.Brings to the BoardKey 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 P.D.R Construction Ltd and Director of G R Jennings Properties Ltd.Brings to the BoardKey strengths:• Widespread industry experience in retail and property. • Successful track record of delivering significant development projects and working with a wide range of stakeholders.• Extensive experience in asset management.• A variety of executive and non-executive roles over the years within the private, public and third sectors.Gerald has over 30 years’ experience in the retail and property industry and the delivery of major development projects and adding value through proactive asset management. Additional roles held Trustee of St Luke’s Hospice, Sheffield & member of Business in the Community’s (BITC) Yorkshire and Humber Board.Brings to the BoardKey strengths:• Significant legal, compliance, regulatory and corporate governance experience.• Robust knowledge on all aspects of commercial law and practice.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. Amy has worked at Henry Boot PLC since 2014, becoming Company Secretary in 2018 and General Counsel in 2021.71Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 71Henry-Boot-AR-2020-governance.indd 7108/04/2021 14:31:4808/04/2021 14:31:48 30368 8 April 2021 11:06 am V1Executive CommitteeAdditional Executive Committee MembersNick DuckworthEdward HutchinsonSimon CarrGiles BootDarren StubbsRachel WhiteHallam Land Management LimitedHenry Boot Developments LimitedHenry Boot Construction LimitedBanner Plant LimitedStonebridge Homes LimitedHenry Boot PLCDate of appointmentManaging Director in 2016.Date of appointmentManaging Director in 2018.Date of appointmentManaging Director in 2009.Date of appointmentManaging Director in 2000.Date of appointmentChief Executive in 2010.Date of appointmentHead of HR in 2015.Brings to the roleNick Duckworth MRTPI began his career in a private sector planning consultancy, Phillips Planning Services, in 1990. He left there in late 1992 and joined Hallam 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 roleEdward 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. In January 2021, he became a board member of the Yorkshire Board of Landaid.Brings to the roleSimon Carr CBE, BSc (Hons), FRICS has been with Henry Boot for over 30 years. He was recognised in last year’s Queen’s Birthday honours list, receiving a CBE for services to the construction industry and charity. He is a board member and past national chair of the National Federation of Builders, 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.Brings to the roleGiles 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 roleDarren Stubbs has a wealth of experience in the housebuilding industry and a proven track record in delivering successful housing developments, spanning a 35-year career. He started work at Tay Homes plc at the age of 16 and just seven years later he was Managing Director of his own Leeds-based housebuilding company. Darren formed a new housebuilding company, Stonebridge Homes Limited, in 2010, which is a jointly owned company with Henry Boot PLC.Brings to the roleRachel White joined Henry Boot PLC in 2001 as a graduate trainee. She has held a number of roles in the HR team, before taking the role of Head of HR in July 2015. Rachel has responsibility for HR, Employee Benefits, Reward & Remuneration, Learning & Development and Payroll. Rachel is also a Trustee Director for Henry Boot Pension Trustees Limited, which oversees the Henry Boot Staff Pension and Life Assurance Scheme, and is a member of the Governance Committee for the Henry Boot PLC Group Stakeholder Pension Plan. Rachel leads on the development of our People Strategy to meet the requirements of our subsidiary businesses including succession planning and talent management. She also leads on Diversity & Inclusion, Wellbeing and Employee Engagement.In 2020 Henry Boot reshaped its senior leadership team by forming an Executive Committee, to lead the business not only in continuing the Group’s track record of delivering strong commercial returns but also to broaden the debate on important strategic objectives and help deliver their implementation more effectively.72Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 72Henry-Boot-AR-2020-governance.indd 7208/04/2021 14:32:0208/04/2021 14:32:02 30368 8 April 2021 11:06 am V1Additional Executive Committee MembersNick DuckworthEdward HutchinsonSimon CarrGiles BootDarren StubbsRachel WhiteHallam Land Management LimitedHenry Boot Developments LimitedHenry Boot Construction LimitedBanner Plant LimitedStonebridge Homes LimitedHenry Boot PLCDate of appointmentManaging Director in 2016.Date of appointmentManaging Director in 2018.Date of appointmentManaging Director in 2009.Date of appointmentManaging Director in 2000.Date of appointmentChief Executive in 2010.Date of appointmentHead of HR in 2015.Brings to the roleNick Duckworth MRTPI began his career in a private sector planning consultancy, Phillips Planning Services, in 1990. He left there in late 1992 and joined Hallam 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 roleEdward 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. In January 2021, he became a board member of the Yorkshire Board of Landaid.Brings to the roleSimon Carr CBE, BSc (Hons), FRICS has been with Henry Boot for over 30 years. He was recognised in last year’s Queen’s Birthday honours list, receiving a CBE for services to the construction industry and charity. He is a board member and past national chair of the National Federation of Builders, 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.Brings to the roleGiles 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 roleDarren Stubbs has a wealth of experience in the housebuilding industry and a proven track record in delivering successful housing developments, spanning a 35-year career. He started work at Tay Homes plc at the age of 16 and just seven years later he was Managing Director of his own Leeds-based housebuilding company. Darren formed a new housebuilding company, Stonebridge Homes Limited, in 2010, which is a jointly owned company with Henry Boot PLC.Brings to the roleRachel White joined Henry Boot PLC in 2001 as a graduate trainee. She has held a number of roles in the HR team, before taking the role of Head of HR in July 2015. Rachel has responsibility for HR, Employee Benefits, Reward & Remuneration, Learning & Development and Payroll. Rachel is also a Trustee Director for Henry Boot Pension Trustees Limited, which oversees the Henry Boot Staff Pension and Life Assurance Scheme, and is a member of the Governance Committee for the Henry Boot PLC Group Stakeholder Pension Plan. Rachel leads on the development of our People Strategy to meet the requirements of our subsidiary businesses including succession planning and talent management. She also leads on Diversity & Inclusion, Wellbeing and Employee Engagement.Tim RobertsChief Executive OfficerDarren LittlewoodGroup Finance DirectorAmy StanbridgeGeneral Counsel and Company Secretary73Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 73Henry-Boot-AR-2020-governance.indd 7308/04/2021 14:32:1408/04/2021 14:32:14 30368 8 April 2021 11:06 am V1“ Stakeholder engagement during a period of huge uncertainty and change is without doubt crucial to maintain confidence and support during these immensely trying times, and so has naturally remained a significant focus for the Board this year.” Jamie Boot ChairmanChairman’s IntroductionDear Shareholders,Undoubtedly no report on activities in 2020 could be composed without considering the impact that was felt by the CV-19 pandemic, and that is equally true in respect of the ways our governance had to adapt to ensure best practice in response to the challenges posed by the pandemic. We have had to be more mindful of the views of our stakeholders; more alive and reactive to immediate risks and considerations requiring difficult decision-making; and more aware than ever that the strong culture of our business, as embodied in our values, will carry us through this crisis. Within that context, it is notable that we have welcomed our new Chief Executive Officer Tim Roberts in 2020, at a time when the demands of that role could not have been greater. I must commend him on rising to the challenge of not only integrating very well into the Board and the wider business and introducing a number of new governance improvements, but also steering the ship with a steady hand during the immense pressures brought to bear by CV-19. Thanks again also to John Sutcliffe, who remained with us as an Executive Director to assist with Tim’s induction into the business, and then retired in May 2020 with all of our best wishes. UK Corporate Governance Code 2018Whilst the bulk of our work to implement the requirements of the Corporate Governance Code took place during 2019, there were some issues that remained for us to resolve during the course of 2020 as identified in our last report, and we are continuously striving for self-improvement in the area of general good governance. This was supported by an internal audit of governance compliance in 2020, and the refreshed outcome of our overall review of Code compliance is on page 105.ESGOur focus on the arena of responsible business has taken a huge leap forwards this year with the appointment of a Responsible Business Manager, and you can read more about the exciting developments on this on pages 55 to 56. As a Board, we are increasingly conscious of the need to improve our disclosures around environmental, social and governance activities, and how these link closely with our approach to risk within the business and achievement of our strategic objectives. Our business has always prided itself within its culture of being a good corporate citizen, and I feel very gratified that we will now be able to demonstrate this more clearly through our new initiatives and reporting frameworks, which will only develop over time. StrategyThis year with the guidance of Tim Roberts we have focused in even more thoroughly on our short-medium and longer-term strategic objectives for 2021 and beyond, through two Strategy Days carried out towards the end of 2020. Whilst the main strategic direction of the Group has not changed, this has allowed us as a Board to provide greater oversight of the key areas of strategic focus reflecting also on any macro trends presented within the industry. More details on this can be found on pages 30 to 31.CultureWe have often spoken in previous reports of the culture of Henry Boot, as embodied through our purpose, vision and values in the Henry Boot Way. At no time have our attributes around Respect, Adaptability and Collaboration been required more than now, and as a Board we have been keen to monitor how these have been enacted and are felt across the Group during the pandemic. You can read more about how we do this on pages 84 and 85. 74Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 74Henry-Boot-AR-2020-governance.indd 7408/04/2021 14:32:2108/04/2021 14:32:21 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
“ Stakeholder engagement during a period of huge
uncertainty and change is without doubt crucial
to maintain confidence and support during these
immensely trying times, and so has naturally
remained a significant focus for the Board this year.”
Jamie Boot
Chairman
O
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Our dedication to engagement with stakeholders
Stakeholder engagement during a period of huge uncertainty and
change is without doubt crucial to maintain confidence and support
during these immensely trying times, and so has naturally remained
a significant focus for the Board this year. Formal consultation (such
as remote investor presentations and consultations with major
shareholders regarding the new Remuneration Policy), as well as
informal feedback from other stakeholders such as employees, has
been vital especially in circumstances where people are likely to feel
more disconnected from the business. Our report on stakeholder
engagement activities on page 88, and our section 172 statement on
page 46, provide a detailed insight into the ways in which we have
ensured that engagement has been tailored to adapt to the needs of
our stakeholders in this shifting environment, and has been factored
into important decision-making.
The following report sets out our structure, governance processes
and key activities undertaken by the Board and its Committees during
2020. We welcome feedback from our stakeholders and I would
encourage you to get in touch with us on any governance matters.
Whilst we were hoping to be able to hold our usual gathering for the
AGM this year, in light of the ongoing social distancing rules regarding
large gatherings, and to safeguard the health of our employees and
shareholders, ordinary shareholders and their proxies are kindly
requested not to attend in person, as the number of permitted
attendees is likely to be restricted. 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
199), 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.
Code compliance
During 2020 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 135-year history as a family business, and as a FTSE
Small Cap 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 77 to 79
Board leadership and Company purpose
Read more on pages 80 to 90
Composition, success and evaluation
Read more on pages 91 to 99
Jamie Boot
Chairman
16 April 2021
Audit, risk and internal control
Read more on pages 100 to 104
Remuneration
Read more on pages 106 to 127
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Governance
at a Glance
Highlights
Promoting long-term success
• The Board met frequently to consider numerous issues arising due to the outbreak
of the CV-19 pandemic, and required responses to ensure sustainable long-term
stability for the Group
• The Strategy Days in November 2020 focused strongly on the strategic focus
and direction of the Group including key focus on ESG and related matters
• Engagement of a Responsible Business Manager has established a focused
direction for the development of sustainable success metrics in the future, linking
strongly to Group strategy, also involving the establishment by the Board of a new
Responsible Business Committee
Read more about Our New Strategy 30 on page 31
Remuneration
• Preparation for the revised 2021 Remuneration Policy commenced in summer
2020 with a review of existing provisions, Code requirements and best practice
• With specialist external advice, Director’s Remuneration Policy and outcomes have
been debated and key stakeholders consulted
• Code compliance measures have driven the production of a Policy and associated
Report on Director Remuneration which achieves excellent governance standards
Read more about Remuneration on pages 106 to 127
Diversity
87.5% increase in Board meetings
and Committee meetings from 2019,
many to discuss issues arising from
the CV-19 pandemic
Consultation with stakeholders in
relation to the new Remuneration
Policy reached 69.55% of
shareholders, as well as the
Group Employee Forum
• Work has commenced to implement our 2019 review of Diversity and Inclusion
across the Group
• A Diversity and Inclusion Steering Group has been established, with Group-
wide representation
• The Nomination Committee has been focussing in on actions the Board can
The D&I Steering Group is composed
of 17 members from across the
Group’s main trading companies,
with a split of 47% female 53% male
participants
take to implement its Board Diversity Policy
Read more about Diversity Policy on page 97
Workforce Engagement
• New engagement methods were established in reaction to the CV-19 pandemic,
in order to ensure cohesion and consistency across the Group
• Group Employee Forum continued to meet regularly with the designated
Non-executive Director and to refer decisions to the Board
• Assessment of workforce views on key topics has been maintained throughout
2020 with key outcomes shaping decisions on policy development
Read more about Workforce Engagement on page 86
Gerald Jennings on the Group
Employee Forum: “It is important
that we, as the Board, hear the views
of employees and at the same time
proactively ask employees for their
views on key issues.”
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30368 8 April 2021 11:06 am V1Corporate Governance Report Division and responsibilitiesUK Corporate Governance Code 2018The 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; five separate Board calls on single urgent matters; and two Strategy Days, one involving the Board and Executive Committee, and one for the Board alone. All members of the Board attended all of these meetings. 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 2020 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 above Committees can be found on pages 78 and 79 and such details form part of this Corporate Governance Statement. In addition, for 2021 the Board established a new Responsible Business Committee to support the Board and Executive Committee of the Group with the development, delivery, and evaluation of the Group’s new Responsible Business Strategy, to advise on proposed changes to reporting and governance, and to incorporate Environmental, Social and Governance (ESG) ambitions and targets in the Group’s commercial strategy. Reporting on the activities of this Committee will commence in next year’s Annual Report and Accounts. The number of Committee meetings are reported in each Committee report, and all members attended all Committees during 2020. Board compositionThe names, responsibilities and other details of each of the Directors of the Board are set out on pages 70 and 71. The Board believes it has an appropriate balance of Executive and Non-executive, and independent and non-independent, Directors having regard to the size and nature of the business. There was a period of five months during 2020 when both Tim Roberts and John Sutcliffe were Directors on the Board, leading to there being less than half the Board comprising independent Non-executive Directors during that time. However, this was an important aspect of the handover of the role to the Group’s new CEO, and was for a limited time only, following which the Board composition returned to being Code compliant. Further to a review by the Nomination Committee (see page 94), 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 102, 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 129). Accordingly, all memberships of the respective Committees are in line with the requirements of the Code. Board meeting attendanceJamie BootChairmanTim RobertsChief Executive OfficerDarren LittlewoodGroup Finance DirectorJoanne LakeDeputy ChairJames SykesNon-executive DirectorPeter MawsonNon-executive DirectorGerald JenningsNon-executive Director12121212121212John SutcliffeExecutive Director(unilt May 2020) 6Board compositionNon-executive Chairman14%Executive29%Non-executive57%Non-executive Board tenure0–3 years14%3–6 years57%9+ years29%6–9 years0%77Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 77Henry-Boot-AR-2020-governance.indd 7708/04/2021 14:32:2708/04/2021 14:32:27 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Division and responsibilities
Governance structure
During 2020, the Board’s activities in relation to good governance have
been focused on embedding the changes brought about during its
2019 Corporate Governance Code review, and adapting as required to
the changing circumstances brought about by CV-19 in an effective and
compliant manner. This concluded at the close of 2020 in an internal
audit of corporate governance, and in the limited number of areas in
which compliance with the Code has not been achieved, the Board has
either committed to adjusting measures to ensure full Code compliance
or 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 on page 105.
The Board
The Board consists of two Executive Directors and five Non-executive
Directors, including the Chairman. During 2020, Tim Roberts stepped
into the role as CEO with effect from 1 January 2020, and John Sutcliffe
provided transitional support to Tim for the first five months of 2020,
stepping down in his revised role as Executive Director from the end
of May 2020. Biographies are shown on pages 70 and 71. Roles and
responsibilities for each Director can be viewed on the website:
Read more on details at henryboot.co.uk
The Board maintains a formal schedule of matters reserved for
its decision. This remains under frequent review to align 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;
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, Group Finance Controller
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 100 to 102
Subsidiary Board Meetings
• approving the Company’s half-year and full-year financial results
LAND PROMOTION
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 2020
are detailed on pages 82 and 83
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 Group’s Strategy Days.
The functions of the Operations Board, established in January 2016
to review Group working and collaboration, strategic initiatives and
risk, were revised and reframed during 2020, with the forum being
re-established as the Group’s Executive Committee. Continuing
members are the CEO, Group Finance Director, four main subsidiary
company Managing Directors and the Chief Executive of Stonebridge
Homes Limited, with the Head of HR and General Counsel and
Company Secretary being added as members of the Executive
Committee during 2020.
78
Hallam Land Management Limited
Attendees:
Nick Duckworth, two main Board Executives
and the Company Secretary
Key
Board oversight
Board delegation
Board support
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
BOARD OF DIRECTORS
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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 94 to 98
Chair:
Gerald Jennings
Members:
Joanne Lake, Peter Mawson
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 106 to 127
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
Developments
Limited
Attendees:
Edward Hutchinson,
two main Board
Executives and the
Company Secretary
Stonebridge
Homes
Limited
Attendees:
Darren Stubbs, and two
main Board Executives
Henry Boot
Construction
Limited
Banner
Plant
Limited
Road
Link (A69)
Limited
Attendees:
Simon
Carr, two
main Board
Executives and
the Company
Secretary
Attendees:
Giles Boot,
two main
Board
Executives and
the Company
Secretary
Attendees:
Trevor Walker,
Simon Carr
and John
Sutcliffe
Executive Committee
Reformulated from the existing Operations Board in December
2020, to broaden the debate and discussion amongst the senior
team and to ensure wider strategic objectives and initiatives are
being set alongside the Group’s commercial targets.
Attendees
The CEO, Group Finance Director, the four main subsidiary
company Managing Directors and the Chief Executive of
Stonebridge Homes Limited, the Head of HR and the General
Counsel and Company Secretary.
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30368 8 April 2021 11:06 am V1Corporate Governance Report Board leadership and Company purposeENABLING LONG-TERM SUSTAINABLE SUCCESSHenry Boot’s long-term success is founded upon a clear purpose and supporting strategy, which considers the views and needs of its many stakeholders. Details of the Board’s contribution to the long-term success of the Company whilst ensuring responsible governance, strategy implementation and oversight of operations is set out below. Read more about how the Board considered the views and needs of the Group’s stakeholders on pages 88 and 89Contributing to the Group’s strategy in its dedicated Strategy Days Read more on page 47Supporting Henry Boot’s long-term successOversight of the Group’s sustainable business model Read more on page 18History of managing gearing, and the balance sheet, effectively through the cycle Read more on page 21Consideration of the risks and opportunities facing the business Read more on page 48Committed to engaging with the workforce Read more on page 86Formulation of a new approach to Environmental, Social and Governance matters, through the development and launch of the 135 Henry Boot project Read more on page 5580Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 80Henry-Boot-AR-2020-governance.indd 8008/04/2021 14:32:2808/04/2021 14:32:28 30368 8 April 2021 11:06 am V181Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 81Henry-Boot-AR-2020-governance.indd 8108/04/2021 14:32:3708/04/2021 14:32:37 30368 8 April 2021 11:06 am V1Corporate Governance Report Board leadership and Company purposeBOARD ACTIVITIESWhat was on the Board’s agenda this yearThe Board has a Forward Business Schedule to ensure that important strategic and governance issues are regularly brought to the Board; that they hear from more members of the executive team; and that consideration of strategy, key risks and objectives are routinely included. Issues relating to the strategy of the business, stakeholders, governance and risk are scheduled for discussion by the Board, alongside the routine items on health and safety, financial matters and Group operations.How the Board responded to the CV-19 pandemicThe Board recognised that its approach to governance had to flex in order to adapt to the challenges and changing landscapes presented during the early days of the CV-19 pandemic. This included:• Board meetings moving to virtual platforms• One-off Board meetings• Receiving regular updates from the CEO on immediate operational issues arising from the CV-19 pandemic• Supporting the establishment of a Coronavirus Committee to oversee and implement business continuity measures Read more about our response to CV-19 on pages 44 and 45Support from the Board CommitteesAudit and Risk Committee• liaison with the previous external auditors, PwC, in relation to ongoing issues regarding the sign off of the 2019 financial results due to temporarily stricter auditing practices in place• a more frequent review of the risk register generally, and consideration of any specific risks arising in relation to the pandemic• adjustment to the onboarding of new external auditors, EY, to commence their work with the 2020 half-year resultsRemuneration Committee• responsive to impact of market volatility and investor sentiment in relation to remuneration objective setting and outcomes throughout the year• making difficult remuneration decisions impacting on Executive Directors and the wider workforce (see also s.172 statement on pages 46 and 47). How the Board contributed towards the Group’s strategic directionWhilst the Board is considering strategic direction throughout the year, this becomes an area for specific focus on the Board’s Strategy Days. The Board met twice to carry out the Strategy Day business, on one occasion with the Executive Committee, to discuss short and longer-term strategic objectives and areas of focus. A number of the Board’s key strategic decisions specifically demonstrate compliance with section 172 of the Companies Act 2006 and are set out on pages 46 and 47. Naturally, the Board ensures that strategic objectives and stakeholder considerations are addressed in all Board decisions and governance processes, and some further areas looked at this year demonstrating this are:82Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 82Henry-Boot-AR-2020-governance.indd 8208/04/2021 14:32:4508/04/2021 14:32:45 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
O
U
R
G
O
V
E
R
N
A
N
C
E
Area
Health and safety
E
Su
En
Co
C
Diversity and Inclusion
E
Su
En
Co
C
Kangaroo Works and
Heart of the City Block H
E
Su
En
Co
C
CEO induction
and embedding
E
Su
En
Co
C
Starfish liquidation
E
Su
En
Co
C
Link to Strategy What was reviewed and considered?
Though this is always a key consideration for the Group, as one of Henry Boot’s core
strategic objectives, it has doubtlessly been even more of a focus during 2020 due to the
CV-19 pandemic. The Board received regular updates on the ways in which the various
parts of the Group had been required to adapt to manage the requirements brought about
by the pandemic, most notably the stringent operating protocols that were necessary
in order for construction sites and depots to remain operational. This is set against the
Group’s usual backdrop of good governance and striving for continuous improvement in
the areas of Health and Safety generally.
The Board has had key oversight this year of the Group’s developing initiatives in the area
of diversity and inclusion, commencing with a review of the externally-sourced report of
the Group’s approach in early 2020. This has culminated in the establishment of a Diversity
and Inclusion Steering Group to direct the implementation of the recommendations in the
review. Alongside this, the Board has been considering its own approach to increasing
diversity and inclusion, which you can read more about on page 97.
Henry Boot Construction’s tendering activity throughout 2020 has remained strong and
the Board have considered two crucial schemes in the heart of the construction division’s
operating area of Sheffield, in the Kangaroo Works and Heart of Sheffield Block H scheme.
Both are substantial schemes which also contribute to the wider economic and social
redevelopment of Sheffield City Centre, and the Board carefully considered the ways in
which these schemes advanced the Group’s strategic core markets of residential and
urban development.
Though the induction process for Tim Roberts commenced in 2019, with the assumption
of his role as CEO from the start of 2020 the Board have been instrumental in welcoming
Tim and working with him to develop his knowledge of the business and understand his
priorities and strategic goals for the Group. Though no doubt interrupted by the CV-19
pandemic, Tim’s focus has remained on delivering his ‘First 100 Days’ priority agenda and
working with the Board to ensure mutual agreement of aims; similarly, the Board (through
the Nomination Committee) has monitored the onboarding and embedding process to
optimise the best induction for Tim into the Group.
During 2020, as the impacts of the CV-19 pandemic on various parts of the Group
became evident, the Board had the difficult task of determining that Starfish Commercial
Limited, acquired by Henry Boot Construction during 2019, should be placed into
creditor’s voluntary liquidation. Though Starfish’s operations were strongly linked to one
of the Group’s core markets of residential development, the company was not performing
in line with expectations, and CV-19 materially impacted its operations to the extent that
it was unable to recover to a sustainable level. Accordingly, the decision was taken to
discontinue Group funding to the company, leading to its liquidation.
Group strategic priorities
Safety
Delivery
People
Growth
Read more about Our New Strategy
on pages 30 and 31
Stakeholders
E Employees
Su Suppliers
Sh Shareholders
En Environment
C Customers
P Pensioners
Co Communities
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30368 8 April 2021 11:06 am V1Corporate Governance Report Board leadership and Company purposeOUR CULTURE Our Culture The Henry Boot Group adopted its Purpose, Vision and Values in 2017 after extensive work had been carried out through numerous Group employee engagements – this is referred to as the ‘Henry Boot Way’. By approaching the definition of our culture in this way, we ensured that we could capture the thoughts of employees through a ‘bottom-up’ approach, 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. The Board recognises that not only does it have a key role to play in living the Values itself, but also in monitoring the way in which those Values and the overall culture of the Group is embedded within its strategy and general approach to business.THE HENRY BOOT WAY OF DOING BUSINESS Our valuesOur purposeTo empower and develop our people to create long-term value and sustainable growth for our stakeholders*Our strategyThe Henry Boot Way84Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 84Henry-Boot-AR-2020-governance.indd 8408/04/2021 14:33:0208/04/2021 14:33:02 30368 8 April 2021 11:06 am V1HOW THE BOARD MONITORED CULTURE IN 2020ActionLink to cultureEngagement surveysFollowing the engagement of a specialist employee survey provider in late 2019 and as reported on in last year’s report, the Board and subsidiary boards reflected on the outcomes of the main employee survey, and referred them to the subsidiary employee forums for review and discussion. Further surveys on specific issues, such as the CV-19 pandemic response, and the proposed approach to agile working, have also been carried out in 2020 and the results considered by the Board. A repeat of the main employee survey was also carried out from 2020, which the Board reviewed and considered in relation to the next required steps arising.Employee forumAs described on page 86, the Group and subsidiary employee forums provide a key method of employee engagement on a number of issues including cultural matters and perceptions throughout the Group. This is fed up to the Board through the designated Non-executive Director appointed to liaise with the Group Employee Forum, so that the entire Board can benefit from hearing the feedback and respond to issues as necessary. Coronavirus CommitteeEstablished in February 2020, and comprising both Board and non-Board members, this mechanism enabled feedback from the Group to be filtered up to the Board on various measures taken, such as communications methods and remuneration outcomes. WebinarsArising from the Coronavirus Committee’s desire to employ different engagement methods during CV-19 pandemic, taking into account the complexities of engagement during widespread remote working, the Group utilised live webinars with Q&A functions, featuring Board and non-Board members. One example was “CV-19: Planning for the Future”, giving updates on the business during the height of the pandemic, the response undertaken to date and the route to recovery. Following the webinars, feedback on the key messages was also shared with the Board. Strategy DaysThe Group’s People Strategy, alongside the wider strategy of the businesses, was discussed – with issues such as attraction and retention of employees linking to key strategic objectives and with the Board and Executive Committee considering how this could enable the delivery of the key strategic objectives.Cultural assessment The Board plans to work with its external auditors, EY, on some further cultural assessment engagement during 2021 to complement its main employee survey outcomes. OUTLOOKClearly work on monitoring the culture of the Group will continue to evolve and adapt to the changing circumstances of our working arrangements, and also take into account the outcomes of ongoing and future engagement methods. The Board’s establishment of a Responsible Business Committee (see page 56) will be yet another strand of connection to the wider workforce and to the embedding of Henry Boot Way culture-related activities from 2021 onwards.85Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 85Henry-Boot-AR-2020-governance.indd 8508/04/2021 14:33:0208/04/2021 14:33:02 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Board leadership and Company purpose
EMPLOYEE ENGAGEMENT
As we often state, Henry Boot’s greatest assets are its people and as
such are a key focus across the organisation, including at Board level, to
ensure that employee views are being taken into account. Following some
crucial work carried out by the Engagement and Cooperation Working
Group (formed to implement a key action arising from the One Henry Boot
initiative), we have established two key methods of direct Board employee
engagement, also demonstrating compliance with Provision 5 of the Code:
•
•
the founding of a Group Employee Forum;
the appointment of a designated Non-executive Director of the
Board to liaise with the Forum.
We also refer to employee engagement in a number of ways in our
Responsible Business report on pages 57 to 61, and in this section,
we outline further the ways in which that engagement has specifically
taken place with the Board.
Employee forum
As we described in our Annual Report and Accounts for 2019, in that
year we first established our Group and subsidiary Employee Forums.
Each main wholly-owned subsidiary (and Henry Boot PLC) set up its own
‘Subsidiary Employee Forum’ (SEF), the Chair of each of which meets
to form the ‘Group Employee Forum’ (GEF). This initiative has continued
throughout 2020 and, despite the natural challenges presented by the
CV-19 pandemic (which Gerald Jennings, the designated Non-executive
Director liaison with the GEF speaks about opposite), the GEF has had
significant input on a number of matters, which are outlined here.
Outcomes
A number of the key issues discussed, some of which have been
referred up to the Board or elsewhere throughout the Group for
resolution and/or discussion and feedback, are outlined here:
Case study: Group wide webinars
It became quickly apparent during the CV-19 pandemic that
employee engagement methods and frequencies would need to
be revisited, taking into account the complexities of engagement
during widespread remote working, and one of the ways this was
achieved was through live employee webinars with Q&A functions.
These featured Board and non-Board members, and in particular
members of the Group Employee Forum who have been helping to
steer on matters such as the Group’s agile working approach. This
form of engagement, being much more personal and interactive,
has meant both a greater visibility for employees of the Group’s
approach on key strategic issues, but also greater visibility of senior
leaders across the workforce in a more interactive forum.
• Executive Remuneration – the consultants appointed by the
Remuneration Committee, Korn Ferry, attended a GEF meeting to
discuss various elements of Executive Director remuneration and
the approach being taken for the updated Remuneration Policy
being proposed for 2021, to aid understanding and also explain
the alignment with the Group’s wider remuneration policy – the
latter being an issue that continues to be in development for 2021.
• ESG – the Group’s newly appointed Responsible Business
Manager attended a GEF meeting, to discuss to Group’s proposed
approach to environmental, social and governance matters and the
development of the longer-term Responsible Business Strategy.
• Agile Working – GEF members were canvassed for their views
on the Group’s proposed approach and asked to contribute to the
consultation activities (through surveys and webinars) being carried
out widely across the Group. GEF members remain involved in the
ongoing approach to this issue to ensure that the diverse needs of
employees are considered.
Other issues raised and responded to related to issues such as HR
policy and rewards, office management, financial and IT Group systems.
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 which 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.
“2020 presented challenges for all and
understanding the impact of CV-19 has
been fundamental to helping employees
navigate the changing environment.
Through the use of webinars with live Q&A
functionality, we have effectively been able
to see how people have been adjusting to
the pandemic’s restrictive conditions and
receive feedback that has helped shape
and improve our engagement methods for
the long-term.”
Darren Littlewood
Chair of the Coronavirus Committee
86
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30368 8 April 2021 11:06 am V1WITH GERALD JENNINGS(Designated Non-Executive Director responsible for GEF liaison)Q: What were some of the key highlights for the past year?A: The Forum members have worked well together and have shown an eagerness to be involved in strategic issues. I have been pleased to see a two-way dialogue between the Forum and the Board, which has been a good start to the engagement I have been keen to encourage. Introducing the new Chief Executive, Tim, to the Forum members has opened up a new means of proactive communication, which has worked well and has been effective. Towards the end of the year our newly recruited Responsible Business Manager spoke at a Forum meeting and there was a very constructive discussion around the ESG agenda. In the same way the Forum has been active in inputting into issues such as agile working. A new initiative has been opening a discussion with the Forum around Remuneration and consulting on Executive Director’s rewards. As Chair of the Remuneration Committee, I was able to arrange for the Forum to speak with our Remuneration Consultant to deepen the Forum’s understanding. Q: How did the CV-19 pandemic affect employee engagement? A: Clearly CV-19 had an initial impact on the activities of the Forum and the ability to meet in person. As with much of the Company’s business, however, the Forum quickly adapted and regular meetings took place digitally. There was, relatively, little disruption to the effectiveness of the Forum and it was noteworthy that Forum members continued to be engaged and keen to discuss and debate key business matters. Q: What areas does the Board want to focus on in the future? A: It is important that we, as the Board, hear the views of employees and at the same time proactively ask employees for their views on key issues. I want to ensure we have an effective two-way dialogue. Some of the key issues include: how we continue to work through, and out of, the pandemic; how we improve our workforce reward structure; feedback on strategy particularly in relation to our culture; and how we improve our ESG outcomes in relation to key areas of Diversity and Inclusivity, tackle climate change and continue to be a business that employees are proud to work for. In late 2019 the Group commissioned a specialist employee survey provider to undertake an anonymous employee engagement survey which would seek to build on the work carried out on the ‘Henry Boot Way’ and would provide us with a framework of questions which could be repeated on an annual basis with little or no amendment in order that we can assess progress. The Board reviewed the outcomes of the 2019 survey during 2020 and also asked for the results to be disseminated to the Group Employee Forum to discuss with their members separately. A slightly revised version of this survey was then issued for 2020, building on the key themes but looking to maintain consistency in questions for a comparable result. The responses provide insight into Henry Boot as a whole as well as individual subsidiaries, and will be shared and discussed with the PLC Board, Executive Committee and employee forums, for feedback and development of ways of addressing any key outcomes. More detail on this is found in our Responsible Business report on pages 55 to 65.Diversity and InclusionBeing a diverse and inclusive workplace is a further strategic priority that Henry Boot is keen to embrace linking to its main strategic objectives. We welcome 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 which makes them unique. It is recognised that the industries in which we work 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. The Board takes a keen interest in the development of the Group’s initiatives in this area, which are described more on page 59 within the Responsible Business report, and is also through the Nomination Committee looking at ways to align the wider Group approach with that of the Board. More about this is described in the Nomination Committee report on page 97. Diversity and Inclusion will also form a key cornerstone of the work to be carried out by the newly formed Responsible Business Committee.WellbeingIn the 2019 Annual Report and Accounts, we outlined the launch of the SMILE platform that had taken place during the year, which combines all of our wellbeing offering into one place and makes it easily accessible to all employees.SMILE is an online platform which splits our wellbeing provisions into three categories: Wealth, Health and Lifestyle. The platform acts as a support mechanism and helps employees to source the guidance that they need, and is described further in the Responsible Business report at page 57.Naturally during 2020 employee wellbeing has been particularly pertinent given the difficult circumstances presented by the CV-19 pandemic, which is something that has been closely monitored by the Coronavirus Committee through surveys and other data, and fed back to the Board. The Committee has also been looking at lessons learned arising from the pandemic, some of which represent potential improvements to working practices which will feed into our wellbeing offering, and this will be reported in relation to our 2021 performance.87Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 87Henry-Boot-AR-2020-governance.indd 8708/04/2021 14:33:0808/04/2021 14:33:08 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Board leadership and Company purpose
HOW THE BOARD ENGAGES WITH STAKEHOLDERS
In 2019, 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.
E Employees
Co Communities
P Pensioners
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
GEF meetings attended by
Nominated Non-executive
Director.
Planned in-person meetings
between the whole Board and
GEF postponed due to social
distancing and will be revived
in 2021.
Board members attended
subsidiary board and other
meeting opportunities
throughout the year.
The CEO and Group Finance
Director both participated in
the webinars to employees.
Group Employee Forum
(GEF) and Nominated
Non-executive Director
(discover more information
on this on pages 86 to 87)
Nominated Non-executive
Director fed back any
issues arising and decisions
required by the Board on
issues presented by the
GEF.
Attendance by Board at
subsidiary meetings
Different forms of
engagement
interactive communications
including webinars with
Q&A sessions have been
used to engage with
employees on a range of
matters this year.
Employee engagement
surveys
Due to the CV-19 pandemic,
these have been carried out
more frequently throughout
the year (read more about
this on pages 86 to 87).
Subsidiary board MDs and
department heads attended
Board meetings to discuss
issues relevant to their
company and key issues
throughout the Group.
The wider Board were kept
aware of the webinars,
were able to attend them
and received feedback on
issues arising afterwards.
Results of employee survey
including actions arising
are brought to the Board
following completion for
review and agreement of
next steps.
Environmental, social
and governance
(see more about this under
our Responsible Business
section on pages 62
and 63)
The Board have proactively
been informed about and
debated ESG trends and
forthcoming developments
and what the response
from Henry Boot will be,
including as part of the
Strategy Days.
The Responsible Business
Manager has met routinely
with the Board and presented
at Board meetings since being
appointed.
The CEO and Group Finance
Director have been proactively
involved in the development
and initial delivery of the
Group’s Responsible Business
Strategy.
Formation of a Responsible
Business Committee, with
Board Directors as members,
will be carried out during 2021.
Reserved Matters
Approvals now require
specific consideration of
stakeholder engagement.
Community engagement This is now being
considered more widely
under the banner of ESG.
C Customers
(including local authorities)
Method
Info flow to Board
Direct Engagement
Board members (impacted by
Subsidiary engagement Formal and informal
Usually arranged by the
Company and attended by
CV-19 in 2020).
Wherever possible these are
attended by Board members.
Pensioner’s lunch
Ad hoc events for
pensioners and family
members
Pensions report
Presented at every Board
meeting as to performance
of the pension scheme.
Awards
feedback methods are
carried out throughout
the Group, methods
of further engagement
being considered by the
Executive Committee.
In conjunction with our
clients and customers, we
represent our joint success
in schemes across the
Group through achievement
of numerous awards.
En Environment
Sh Shareholders
Su Suppliers
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Environmental, social
and governance
(see more about this under
our Responsible Business
section on pages 64
and 65)
The Board have proactively
been informed about and
debated ESG trends and
forthcoming developments
and what the response
from Henry Boot will be,
including as part of the
Strategy Days.
The CEO and Group Finance
Director have been proactively
involved in the development
and initial delivery of the
Group’s Responsible Business
Strategy.
Formation of a Responsible
Business Committee, with
Board Directors as members,
will be carried out during 2021.
Investor Roadshows
Structured feedback
sessions are reported to
the Board.
Focused investor
communication
Outcomes of any investor
consultations are reported
to the Board.
Current environmental
assessment and
reporting
Matters Reserved for the
Board
Reporting requirements and
methodologies form part
of reports to the Board in
relation to formulation of
the Group’s Responsible
Business Strategy.
Reports from Group
subsidiary companies now
contain consideration of
environmental issues.
Regular Board updates Provided in relation to
investor and proxy advisor
sentiment collated by
management / brokers / PR
consultants.
Shareholder engagement
with family members
AGM
Take place annually with the
CEO and Group Finance
Director (carried out via virtual
meetings during 2020).
Undertaken via letters/
telephone calls regarding
significant ‘votes against’
and other issues of interest
to investors prior to AGM,
in particular during 2020
focused around the revised
Remuneration Policy.
Done informally through family/
other relationships with Board
members, on ad hoc basis.
Usual formal and informal
engagement by all
Board members directly
with shareholders sadly
compromised due to CV-19.
Read more about the AGM on
page 89.
88
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Health and Safety
This is continuously
Interactions on site
Operations on site are part
monitored and reported to
the Board.
of the observation and
feedback process.
Sh Our engagement through the
Annual General Meeting
The Board carefully considered the best method of engagement
with its shareholders due to the inability to hold an in-person
AGM in 2020. The slightly delayed AGM in June 2020 welcomed
questions to be submitted by shareholders in advance, and proxy
voting in advance of the meeting was strongly encouraged, with
an online presentation containing business updates presented
by the CEO available. Though the Board was saddened to
be unable to welcome shareholders in its usual manner, it felt
that the format adopted provided appropriate avenues for
engagement, and will be adopting a similar format for the 2021
AGM, as set out in the Notice of Annual General Meeting on
pages 199-201.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
During 2020, this was reviewed and further developed to ensure that methods of engagement were significant and relevant, whilst taking into
account the substantial logistical issues presented by CV-19 and social distancing. Work will be ongoing during 2021 to ensure that stakeholder
views are more clearly incorporated into the Board’s decision-making procedures (as shown in our section 172 statement on pages 46 to 47), as
well as evolving ways in which methods of engagement are made convenient to those stakeholders.
O
U
R
G
O
V
E
R
N
A
N
C
E
E Employees
Co Communities
P Pensioners
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Group Employee Forum
Nominated Non-executive
GEF meetings attended by
Environmental, social
The Board have proactively
The Responsible Business
(GEF) and Nominated
Director fed back any
Nominated Non-executive
and governance
been informed about and
Manager has met routinely
Non-executive Director
issues arising and decisions
Director.
(discover more information
required by the Board on
on this on pages 86 to 87)
issues presented by the
GEF.
Planned in-person meetings
between the whole Board and
GEF postponed due to social
distancing and will be revived
in 2021.
(see more about this under
our Responsible Business
section on pages 62
and 63)
and what the response
from Henry Boot will be,
including as part of the
Strategy Days.
debated ESG trends and
with the Board and presented
forthcoming developments
at Board meetings since being
Pensioner’s lunch
Ad hoc events for
pensioners and family
members
Pensions report
appointed.
The CEO and Group Finance
Director have been proactively
involved in the development
and initial delivery of the
Group’s Responsible Business
Strategy.
Formation of a Responsible
Business Committee, with
Board Directors as members,
will be carried out during 2021.
Attendance by Board at
Subsidiary board MDs and
Board members attended
subsidiary meetings
department heads attended
subsidiary board and other
Board meetings to discuss
meeting opportunities
issues relevant to their
throughout the year.
company and key issues
throughout the Group.
Different forms of
The wider Board were kept
The CEO and Group Finance
engagement
aware of the webinars,
Director both participated in
interactive communications
were able to attend them
the webinars to employees.
including webinars with
and received feedback on
Q&A sessions have been
issues arising afterwards.
Reserved Matters
Community engagement This is now being
Approvals now require
specific consideration of
stakeholder engagement.
considered more widely
under the banner of ESG.
used to engage with
employees on a range of
matters this year.
Employee engagement
Results of employee survey
surveys
including actions arising
Due to the CV-19 pandemic,
are brought to the Board
these have been carried out
following completion for
more frequently throughout
review and agreement of
the year (read more about
next steps.
this on pages 86 to 87).
Usually arranged by the
Company and attended by
Board members (impacted by
CV-19 in 2020).
Wherever possible these are
attended by Board members.
Presented at every Board
meeting as to performance
of the pension scheme.
Awards
C Customers
(including local authorities)
Method
Info flow to Board
Direct Engagement
Subsidiary engagement Formal and informal
feedback methods are
carried out throughout
the Group, methods
of further engagement
being considered by the
Executive Committee.
In conjunction with our
clients and customers, we
represent our joint success
in schemes across the
Group through achievement
of numerous awards.
En Environment
Sh Shareholders
Su Suppliers
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Method
Info flow to Board
Direct Engagement
Environmental, social
The Board have proactively
The CEO and Group Finance
Investor Roadshows
Structured feedback
Take place annually with the
and governance
been informed about and
Director have been proactively
sessions are reported to
CEO and Group Finance
the Board.
Director (carried out via virtual
meetings during 2020).
Focused investor
communication
Outcomes of any investor
Undertaken via letters/
consultations are reported
telephone calls regarding
to the Board.
Health and Safety
Interactions on site
This is continuously
monitored and reported to
the Board.
Operations on site are part
of the observation and
feedback process.
(see more about this under
our Responsible Business
section on pages 64
and 65)
debated ESG trends and
involved in the development
forthcoming developments
and initial delivery of the
and what the response
Group’s Responsible Business
from Henry Boot will be,
Strategy.
including as part of the
Strategy Days.
Formation of a Responsible
Business Committee, with
Board Directors as members,
will be carried out during 2021.
Current environmental
Reporting requirements and
assessment and
reporting
methodologies form part
of reports to the Board in
relation to formulation of
the Group’s Responsible
Business Strategy.
Matters Reserved for the
Reports from Group
Board
subsidiary companies now
contain consideration of
environmental issues.
Regular Board updates Provided in relation to
investor and proxy advisor
sentiment collated by
management / brokers / PR
consultants.
Shareholder engagement
with family members
AGM
significant ‘votes against’
and other issues of interest
to investors prior to AGM,
in particular during 2020
focused around the revised
Remuneration Policy.
Done informally through family/
other relationships with Board
members, on ad hoc basis.
Usual formal and informal
engagement by all
Board members directly
with shareholders sadly
compromised due to CV-19.
Read more about the AGM on
page 89.
Sh Our engagement through the
Annual General Meeting
The Board carefully considered the best method of engagement
with its shareholders due to the inability to hold an in-person
AGM in 2020. The slightly delayed AGM in June 2020 welcomed
questions to be submitted by shareholders in advance, and proxy
voting in advance of the meeting was strongly encouraged, with
an online presentation containing business updates presented
by the CEO available. Though the Board was saddened to
be unable to welcome shareholders in its usual manner, it felt
that the format adopted provided appropriate avenues for
engagement, and will be adopting a similar format for the 2021
AGM, as set out in the Notice of Annual General Meeting on
pages 199-201.
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30368 8 April 2021 11:06 am V1Corporate Governance Report Board leadership and Company purposeBoard performance reviewBuilding on our evaluation activities in previous years, a further formal and rigorous internal performance review was undertaken in 2020 for the Board, its Committees, the Chair and each individual Director. The process and results are set out below. ProcessSTEP 1Board discussed and agreed preferred approach in October 2020, to proceed with an internal performance review for 2020.STEP 2Questionnaire content agreed with Chairs, which were then issued with a two-week response period and individual interviews arranged with Jamie Boot and Peter Mawson (for Chair and individual member evaluations).STEP 3Questionnaire deadline, results collated and reports written.STEP 4Reviewed results with Board and respective Committees, and agreed actions for 2021. Reviewed progress against 2020 actions.STEP 5In May 2021, carry out mid-year review of progress against 2021 actions.Areas where the Board scored strongly:• Diverse but relevant skills and/or experience• Openness• Collaborative and supportive approach• Provide a good level of challenge• Commitment and passion for the business90Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 90Henry-Boot-AR-2020-governance.indd 9008/04/2021 14:33:1908/04/2021 14:33:19 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Composition, success and evaluation
2020 action areas
Board and Audit and Risk
Strategy
Introduction of two shorter Strategy Days
throughout the year; one for subsidiary
strategies and one for the PLC.
Reports
CEO Board report to be created for each
meeting.
Progress during 2020
Action areas for 2021
Two Strategy Days were carried out during for
November 2020, one to involve the Board and
Executive Committee, one for just the Board.
Strategy
Ensure there is a regular update to the Board
on progress against the 2020 Strategy Day
actions.
CEO Board Report now included for each
Board meeting agenda.
Reports
Ensure that stakeholder engagement and
views are built into Board reporting more
robustly.
O
U
R
G
O
V
E
R
N
A
N
C
E
Reports
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.
Initial work on this commenced during early
2020. All subsidiary reports now have an
executive summary and the papers have been
slimmed down. To be continued during 2021.
Reports
Work with the Executive Committee to
develop consistency and brevity of subsidiary
reporting and ensure that they contain clear
and concise summaries.
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.
Board calls were arranged for items needing
approval particularly in response to the
changing requirements presented by the CV-19
pandemic and the shifting of dates relating to
results.
Stakeholder engagement
Increased site visit opportunities to be offered
to the Board.
Board is given a forward schedule of site
meetings, subsidiary meetings and other
engagement opportunities in each Company
Secretarial Report.
Engagement
Facilitate more opportunities for Board
members to engage more widely with
employees from across the Group, not just at
Board meetings.
Risk review
Detailed review of principal and emerging
risks and the mitigation measures in place.
Review commenced in January 2020, for
reporting in the 2019 annual report and
accounts, along with setting the risk appetite
statement and risk approach for the Group.
Risk review
Continue ongoing review of risk appetite,
principal and emerging risks and the
mitigation measures in place.
This is set to be reviewed again towards the
end of 2021 in conjunction with EY, who
are carrying out a detailed risk mapping
exercise with BDO to identify risk owners and
mitigations.
Expectations set during tender process for
selection of EY as new audit partner.
Audit plan assessed at Committee meeting in
October in depth, with challenges made to risk
assessment criteria and materiality thresholds.
Meeting held at commencement of August
Committee meeting between Committee
members and BDO.
Risk mapping
Undertake a risk assurance mapping exercise
in conjunction with internal/external auditors.
External audit
Evaluate first full financial year audit carried
out by EY to identify any pinch points or
lessons learned.
Internal audit
Tendering the position of internal auditor, and
considering the approach and content for
internal audit for 2022 onwards.
External audit
Set expectations for new external auditor and
robustly assess the audit plan.
Internal audit
Consider whether to hold an extended
meeting with the internal auditors without
management present.
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91
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Composition, success and evaluation
2020 action areas
Nomination
Equality, diversity and inclusion
Monitor equality, diversity and inclusion
initiatives across 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 Senior
Leadership Development Programme (SLDP),
invite Managing Directors of each Henry Boot
subsidiary to prepare a succession plan for
the senior leadership within their business.
Progress during 2020
Action areas for 2021
D&I is a strategic priority forming part of the
personal objectives for the CEO, the MDs and
other senior managers.
Engaged the services of external advisers in
late 2019 to undertake research into D&I across
the Group. Results of the research shared in
July 2020 (delayed due to CV-19).
Following this, a D&I Steering Group was
set up with the purpose of addressing areas
highlighted by external advisers, sharing ideas
and discussing priorities to develop a Group
Equality, Diversity & Inclusion Strategy.
As part of the December meeting, the
Committee considered areas where further
action is required to implement the Board
Diversity Policy.
As part of its annual review, the Committee
considered upweighting the technical skills of
the Board in relation to IT and D&I.
With regards IT, a strategy is in development to
strengthen internal expertise over time.
With regards D&I, extra learning and
development activities for the Board are to be
arranged.
Much of the focus has been on succession
planning for certain individuals, with additional
Committee meetings arranged throughout
the year to review and agree a plan for these
individuals.
An annual review of succession plan and
update on the SLDP and Leadership
Development Programme (LDP) considered at
December Committee meeting.
Equality, diversity and inclusion
Continue to monitor and support Equality,
Diversity and Inclusion initiatives across the
Group with the corresponding link that this
represents in providing progress against
diversity targets in the Board Diversity Policy.
Skills development
Continue to consider the future Group
strategy and the skills needed at Board level
to bridge any skills gaps.
Succession planning
Continue to review at least annually the
succession plan for Executive Directors and
senior management and, in light of the SLDP,
invite the Executive Committee to prepare
a succession plan for the senior leadership
within their teams.
92
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
2020 action areas
Remuneration
Advisors
Appoint external consultants for
Remuneration Policy guidance.
Progress during 2020
Action areas for 2021
Korn Ferry appointed in June 2020 to lead
the work required for the refresh of the
Remuneration Policy and other associated
workstreams.
Disclosure
Considering appropriate levels of disclosure in
relation to the new Remuneration Policy and
its application, as well as reporting against
Code compliance achieved this year.
O
U
R
G
O
V
E
R
N
A
N
C
E
Stakeholder engagement
Increase stakeholder engagement ahead of
the next Remuneration Policy, particularly with
institutional investors and employees.
Engagement with Group Employee Forum has
commenced, with two meetings having been
held to discuss personal objectives and overall
remuneration approach (the latter including
Korn Ferry).
Stakeholder engagement
Ensure that stakeholder engagement and
views are built into Committee reporting more
robustly, in particular employee views (linking
in to the Employee Forum as applicable).
Engagement with institutional investors in
respect of the revisions to the Remuneration
Policy took place during late 2020, with more
planned in Q1 2021.
As part of the work being undertaken by Korn
Ferry, reviews are to be undertaken of a number
of remuneration issues of Executive Committee
/ subsidiary director remuneration packages
including pensions, bonus objectives and LTIPs.
Work is planned to continue on this throughout
further areas of the workforce during 2021.
Personal bonus objectives for 2020 for
Executive Directors and members of Executive
Committee have identified areas of alignment
with the Group’s strategic objectives.
This will be reviewed and strengthened further
for the 2021 targets.
The Committee reviewed and approved the
breakdown of measures behind the overall
targets for the 2020 personal objective targets
for Executive Directors.
Reward
Gain further oversight into the reward
strategy of the wider workforce and review
appropriateness.
Strategy
Align Annual Bonus objectives to the Group’s
strategic objectives.
Strategy
Increase the information provided to the
Committee behind the individual performance
measures for the personal objectives section
of the Annual Bonus.
Wider workforce remuneration
Continue to gain further oversight into the
reward strategy of the wider workforce and
review appropriateness, seeking to align
where appropriate with the approach across
the Group and with Senior Management.
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30368 8 April 2021 11:06 am V1“ As a Nomination Committee, we are looking ever more closely at the development of talent within the business, through our next generation within the Leadership Development Programme. I am positive about the impact this has, not only on our understanding of the strength and depth of talent we already have within the Group, but in bringing on a more diverse pipeline of talent for the future.”Peter Mawson Chairman of the Nomination CommitteePeter MawsonChairman of the Nomination Committee5 5Jamie BootJoanne LakeCommittee memberCommittee member5 55 5James SykesGerald JenningsCommittee memberCommittee member5 55 5Nomination Committee attendance key Meetings attended Eligible meetingsCorporate Governance Report Composition, success and evaluationReview of the yearDuring 2020 the Committee met five times to consider a wide variety of important issues and initiatives. This included review of the embedding process for Tim Roberts as incoming CEO in 2020, succession planning activities, review of the Board Diversity Policy and its implementation, 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 2020 were myself, Joanne Lake, Gerald Jennings, Jamie Boot and James Sykes. 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 Report for the year ended 31 December 2020.Henry Boot PLC BoardNomination CommitteeIdentifying skills and experience gaps Read more on page 95Leading appointmentsReviewing effectiveness and effecting change Read more on page 97 Read more on page 95Ensuring succession planningAssessing core skills and commitment Read more on page 97 Read more on page 96Maintaining effective Board and Committee composition NOMINATION COMMITTEE REPORT94Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 94Henry-Boot-AR-2020-governance.indd 9408/04/2021 14:33:3908/04/2021 14:33:39 “ As a Nomination Committee, we are looking ever more closely at
the development of talent within the business, through our next
generation within the Leadership Development Programme. I am
positive about the impact this has, not only on our understanding of
the strength and depth of talent we already have within the Group,
but in bringing on a more diverse pipeline of talent for the future.”
Peter Mawson
Chairman of the Nomination Committee
Board skills assessment
In line with the requirements of 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
behaviours.
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 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, and was
altered from the 2019 assessment by the
division of the previous category relating to
‘Residential’ into ‘Public’ and ‘Private’.
Technical skills
In this section of the assessment, the
technical skills of the members were
reviewed and in 2020 was expanded to
include ‘Customer Relations’, ‘Diversity
& Inclusion’, ‘Environment’ (split out from
Health, Safety and Environment), ‘Business
Continuity’ and ‘Crisis Management’, to
reflect stronger areas of emphasis within
the industry.
Cultural fit
Focusing on the ways that the Board
members contributed to and aligned with
the culture of the Group, this portion looks
at issues such as ‘Custodian of the Henry
Boot Ethos and Values’, and ‘Striving for
Performance and Results’. This portion of
the assessment was unaltered for 2020
and in all of these matters, the scores
of the Board were in the ‘Very Strong’
category.
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Board skills and assessment matrix (% of Board members)
Each member of the Board was asked to self-assess against each knowledge and
experience and technical skills 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).
Knowledge and experience
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* The data shown represents an average score of all Henry Boot PLC’s Board members
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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:
Board
Area
IT and cyber (technical skill) The Committee noted that in a
Response
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 commercial relevance to the
Group, it was not felt that development
of knowledge and experience in this
area would be required.
Plant hire
(knowledge
and experience)
Third sector
(knowledge
and experience)
Action
2
Buy in expertise
(short term, targeted)
3 Build expertise from within
To be reviewed further by Executive
team, particularly in light of additional
potential requirements arising out
of changes to working practices, to
determine a strategy which will bring
additional assurance to the Board.
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 felt that there were no significant areas of concern. The Committee’s view was that these matters 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.
96
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 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. 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; whilst 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
In addition, the Committee initiated during 2020 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
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Provision of the LDP 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. The LDP was
intended to take place within five cohorts during 2020 – however,
as with many activities, its delivery was disrupted by the CV-19
pandemic. However, during 2021, some rearranged virtual (and
hopefully in person) programmes will recommence to deliver this
important initiative.
Terms of reference
During 2020, 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. Some minor amendments
required to bring the Terms of Reference in line with the suggested
model precedent produced by the Chartered Governance Institute
were proposed and adopted as part of that review the Terms of
Reference were reapproved, and are available on the Company’s
website.
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
B.A.M.E. 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. The policy is available
to view at www.henryboot.co.uk/our-responsibility
As described on page 59, a substantial focus for the Group in 2021
and beyond is its approach to diversity and inclusion, an area which
has significantly progressed during 2020. The Board is keen to
promote and contribute towards the delivery of the Group’s Equality,
Diversity and Inclusion Strategy to be launched in 2021, and is
considering the ways in which it can do so, in areas such as:
• Opportunity within the Group
• Succession and development through the SLDP and LDP
– promoting transparent succession and development
structures within the Group that have the incidental benefit
of promoting greater diversity through retention of diverse
employees, with the eventual aim of creation of a pipeline
of succession towards appointment to senior levels of
management and to the Board
• Total reward strategy across the Group – promoting greater
transparency on the outcomes of progression throughout
the Group, enabling retention
• Reverse mentoring – diverse spokespeople throughout the
Group engaging with senior managers and the Board to
give feedback on issues of importance, perceptions of the
approach to diversity and any concerns
• Education of teams/line managers/stakeholders
• Participation in training – to be rolled out throughout
the Group and to involve the Board, on issues such as
unconscious bias
• Being champions for the promotion of D&I throughout
the Group
The Committee recognises the need for diversity and opportunity
within the business to be carried through into the composition of
the Board and is committed to seeking to improve Board diversity
when appropriate opportunities arise. It is recognised that there will
be periods of change on the Board and that the optimum diversity
balance may not be achieved for periods of time while the Board
is refreshed. However, it is our longer-term intention to achieve this
balance. The Board is also looking at other ways in which this may
be achieved in the short to medium term.
Some other specific measures that the Board has taken in relation
to the achievement of its Diversity Policy are:
• ensuring the inclusion of equality and diversity-related personal
objectives for Executive Directors – which can be seen in the
Directors’ Remuneration Report on page 126; and
•
in relation to the refreshed terms of the Remuneration Policy
(see page 108), the removal of the strict Non-executive Director
shareholding requirement that previously existed, to remove
barriers to Board members from more diverse backgrounds.
As with the Group’s wider Diversity and Inclusion agenda, this is
a long-term approach and will require further development and
enhancement over the forthcoming years, which the Committee is
very keen to support.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Composition, success and evaluation
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 2020 Board performance review (see pages 90 to 93 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. Joanne’s time spent at her
other directorships now equates to, on average, 10.5 days a month
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 will seek re-election at the
upcoming AGM, biographies are shown on pages 70 and 71, and a
further summary of Board roles and responsibilities can be found on
our website at henryboot.co.uk.
Peter Mawson
Chairman of the Nomination Committee
16 April 2021
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30368 8 April 2021 11:06 am V199Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 99Henry-Boot-AR-2020-governance.indd 9908/04/2021 14:33:5808/04/2021 14:33:58 30368 8 April 2021 11:06 am V1“ During a period of turbulence it is vital that the Audit and Risk Committee plays its part in helping to weather the difficulties and manage the risks involved, which we have done through these challenging times.”Joanne Lake Chair of the Audit and Risk CommitteeCorporate Governance Report Audit, risk and internal controlJoanne LakeChair of the Audit and Risk Committee7 7Peter MawsonGerald JenningsCommittee memberCommittee member7 77 7Audit and Risk Committee attendance key Meetings attended Eligible meetingsAUDIT AND RISK COMMITTEE REPORTReview of the yearOn behalf of the Board and the Audit and Risk Committee (the Committee), as Chair of the Committee, I am pleased to present the Directors’ Audit and Risk Committee Report for the year ended 31 December 2020.The Audit and Risk Committee has this year progressed with its internal audit activities, which are outlined below, as well as onboarding and embedding the practices of the new external auditor, Ernst & Young LLP (EY), and reviewing and developing the Group’s approach to the assessment and monitoring of risk. Naturally, there were many additional challenges placed on the agenda of the Committee arising out of the CV-19 pandemic, requiring additional engagement with PwC in relation to the audit of the 2019 results, and ensuring sign-off of these for publication. As a result, the Committee met seven times during the year, with its March and August meetings focusing on the approval of the full-year and half-year results (though a further meeting in relation to the full-year 2020 results was required due to ongoing uncertainty created by the pandemic). The other four meetings covered issues such as the internal audit plan and outcomes during 2020, onboarding and embedding arrangements with EY as the new external auditors, and risk review and evaluation. Those serving as members of the Committee were myself (Committee Chair), Peter Mawson and Gerald Jennings. 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, a position which is currently held by BDO LLP (BDO). 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. Due to pressures brought to bear across the business during 2020, a number of internal audit activities have been deferred to 2021, however the following internal audit exercises were carried out during the year:100Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 100Henry-Boot-AR-2020-governance.indd 10008/04/2021 14:34:1508/04/2021 14:34:15 “ During a period of turbulence it is vital that
the Audit and Risk Committee plays its part
in helping to weather the difficulties and
manage the risks involved, which we have
done through these challenging times.”
Joanne Lake
Chair of the Audit and Risk Committee
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Topic
IT Infrastructure
Treasury
and Budget
Management
HR and Payroll
Corporate
Governance
Outline
This review provided independent
assurance as to whether appropriate
controls are in place to mitigate the key
risks over IT Infrastructure and meet the
needs of key business stakeholders.
Specifically, it reviewed the design and
operation of IT infrastructure in place at
Henry Boot PLC and Stonebridge Homes,
as well as the plans for future Banner Plant
infrastructure.
The purpose of this review was to ensure
that adequate and effective controls are
maintained over the processes relating to
treasury, cash and budgeting within Henry
Boot PLC.
Providing assurance as to the adequacy of
the framework established within the Group
to manage HR processes. The audit also
reviewed the HR processes and controls
within Stonebridge Homes.
This review focussed on ensuring that
adequate and effective controls are
maintained over the processes relating to
the corporate governance arrangements
within Henry Boot PLC. The review
considered whether the processes in place
were appropriate and aligned to good
practice principles. More on the outcomes
of this can be found in the Compliance
Statement on page 105.
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. In 2020, BDO carried out a follow
up exercise in relation to the results of the internal audit activities from
2019 and presented a mid-year review to the Committee, to ensure
that follow up activities had been carried out.
Internal audit effectiveness review and re-tendering
In order to continue to assess the effectiveness of BDO as internal
auditor, the Committee commissioned the carrying out of a further
survey on the effectiveness of the internal auditors within the Group in
2020. 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 departments were
as expected, with no significant issues being raised.
During 2021 the Committee will tender the role of internal auditor, as
BDO’s tenure will reach three years during this period (the duration
of the initial appointment), and is considered best practice. The
tender process to be followed will largely mirror that used to tender
for the external auditors during 2019, comprising an invitation to
tender process, interview and submission of proposals, evaluation
and Committee approval. This will be reported on further in the 2021
Annual Report and Financial Statements.
Embedding of external auditor
EY was formally appointed as external auditor of the Group in June
2020, having demonstrated during the tender process the team’s
experience of transitioning large listed clients. From appointment,
EY has been provided with full access to Group management, has
attended Committee meetings, reviewed previous auditor working
papers and undertaken work on the Group’s half-year results. They
have performed transition, planning and interim audit work ahead of
the year-end.
External audit effectiveness review
The full review of the effectiveness of the external auditor will be
carried out in July 2021, at which point the new external auditor, EY,
will have effectively been carrying out its functions for 12 months.
The process employed for carrying out this review will be reported in
the 2021 Annual Report and Accounts and will form the basis of the
Committee’s review process going forwards.
Extent to which external auditor challenged
management
The external auditor has provided robust challenges around areas of
complexity or judgement, including contract, property and inventory
valuations, as well as going concern and viability. Their procedures
and findings are detailed in their report to this committee.
Independence of the external auditor
In order to ensure the independence of the external auditor, the
Committee monitors the non-audit services provided by it to the
Group and has adopted a policy on the provision of non-audit services
by the external auditor with the objective that such services do not
compromise the independence or objectivity of the external auditor.
The Committee is required to approve services provided by the
external auditor 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.
EY did not provide any non-audit services to the Group during the
year. Details of 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 2020.
In accordance with best practice, the Company will require its external
audit partner to rotate every five years, this being the first year to
which this relates. The statutory auditor signing the Audit Report for
2020 is Victoria Venning.
The Committee members meet with 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
auditor on an annual basis outlining the measures taken by it to ensure
that its 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 auditor 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.
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101
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Audit, risk and internal control
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 manage and mitigate those risks and the enhanced system of risk management adopted by the
Company are set out in more detail on pages 48 to 54. 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 136 to 143 discusses other key audit matters which
were also considered by the Committee.
Focus
Valuation of
investment
properties
Valuation of
housebuilder
inventory
Construction
accounting
estimates
Matters considered
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, completed 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 of inventories is determined by reference to expected future
sales value and costs to complete assumptions which are subject to estimation.
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.
Committee outcome
The Committee critically reviewed the
valuations and any key movements during
the year. Having discussed the valuations
during the meeting and considered EY’s
assessment, the Committee was comfortable
with the values adopted.
During the year, the Committee critically
reviewed the carrying value of housebuilder
inventories and judgements in relation to
recoverable amounts. Following discussions
with EY, 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.
Terms of Reference
During 2020, 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. Some minor amendments required to bring the Terms of Reference in line with the suggested model
precedent produced by the Chartered Governance Institute were proposed and adopted as part of that review and the Terms of Reference were
reapproved, and are available on the Company’s website.
Approved by the Board and signed on its behalf by
Joanne Lake
Chair of the Audit and Risk Committee
16 April 2021
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30368 8 April 2021 11:06 am V1103Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020OUR GOVERNANCEHenry-Boot-AR-2020-governance.indd 103Henry-Boot-AR-2020-governance.indd 10308/04/2021 14:34:3008/04/2021 14:34:30 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 48 to 54 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 which 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 bi-monthly
management meetings and formal bi-monthly 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, strategic
objectives and budgets 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 January 2021 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
CORPORATE GOVERNANCE STATEMENT 2020
Compliance statement
During 2020 the Board and its Committees have been continuing its
work to embed the requirements of the Code and improve wherever
possible its operations and governance. The Company has complied
with all the principles of the UK Corporate Governance Code 2018
for the year ended 31 December 2020 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.
work commenced with the first Group-wide employee survey in late 2019,
with results reported to the Board in early 2020. This has been repeated in
early 2021 and will give rise to a base of metrics and KPIs against which
culture can be monitored from this year. This will also include work with EY
to use their cultural assessment survey tool to monitor ways in which the
‘Henry Boot Way’ has been embedded and is viewed since its introduction.
Remuneration Policy –
Provisions Three, 33, 34, 36, 40 and 41
During 2020 there have been a number of ongoing remuneration
actions in place to meet the requirements of the Code, alongside the
required update to the Remuneration Policy to be brought to the 2021
AGM. These related to:
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Given our 135-year history as a family business, and as a FTSE Small
Cap 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 a
member of the Board for 30 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 guided the Company
successfully through previous such downturns, 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 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 135 years, the Board remains confident 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 were Executive Directors on the
Board, as well as Darren Littlewood, during John’s handover period
to Tim, leading to there being less than half the Board comprising
independent Non-executive Directors during that time. However, this
was an important aspect of the handover of the role to the Group’s
new Chief Executive Officer, 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 returned to a
Code compliant one.
The following sections set out some areas of non-compliance
that were identified by the Group’s internal auditors, BDO, as
also referred to in the Audit and Risk Committee Report on
pages 101, together with measures identified for addressing
them. By highlighting and reporting on these matters, the
Report therefore ensures full compliance with the requirements
of the Code to ‘comply or explain’.
Provision 1
Whilst there is reference to how governance contributes to the
development of the strategy, there has previously been no explicit
reference to how the governance structure contributes to the
achievement of the strategy. This is now addressed in the section 172
statement on pages 46 to 47, detailing the ongoing supervision that
the Board will undertake in relation to the achievement of short- and
medium-term strategic objectives.
Provision 2
An action was recorded in the 2019 Annual Report and Accounts to
support achievement of Principle Two of the Code, to ‘provide culture
metrics associated with the One Henry Boot project’. These have not been
recorded and monitored to date. As we set out on pages 86 to 87 this
• The completion of the Remuneration Policy with remuneration
consultants, Korn Ferry, in aligning remuneration to strategy and culture
and recording how Executive remuneration has been determined.
• Engagement with shareholders/investors on the updated
Remuneration Policy.
• Aligning policies with incentive structures across the Group.
• Reviewing the fees of Non-executive Director’s and the share scheme
remuneration package to meet the requirements of the Code.
These actions are all in progress and will be completed during
2021 as a result of the work carried out with Korn Ferry and the
implementation of the new Remuneration Policy, as reported in the
Director’s Remuneration Report on pages 106 to 127.
Provision 5
Provision Five of the Code outlines that the Board should make clear how
the interests of stakeholders have been considered in decision making.
In July 2020 the Board approved the Stakeholder Policy that had been
drafted to identify stakeholders to the Group and the level of required
engagement. An action to document the stakeholder impact within all
decision papers will be in progress during 2021 (as highlighted within
the section 172 statement on pages 46 to 47), to document fully that all
relevant stakeholders are properly considered in decision making.
Provision 7
Provision Seven of the Code outlines that the Board should ‘take
action to identify and manage conflicts of interest… and ensure
that the influence of third parties does not compromise or override
independent judgement’.
Whilst new Directors are required to complete a request for information
form on appointment, the request for information form did not specifically
ask that the appointee records any perceived conflict of interest, which is
the typical approach taken in similar listed organisations.
The Terms of Reference of the Nomination Committee also did not
state the requirement to review the independence status of the Board.
As a result, there was a risk that conflicts of interest and threats to
independence may not be identified and captured to support the
requirements of the Code. These changes to the required processes
have now been implemented.
Provision 28
The 2019 Annual Report includes a description of the principal risks to
Henry Boot PLC, and an explanation of how these are being managed
or mitigated. In relation to emerging risks, the Annual Report notes
‘Board reviews all principal risks including consideration of how risk
exposures have changed during the period and any emerging risks
arising from risk registers’.
However, there is not a direct reference as to how emerging risks are
identified and managed and the Terms of Reference for the Audit and
Risk Committee does not make reference to how emerging risks are
considered.
A clear reference to how emerging risks are identified and managed is
now contained within the Risk Management section on pages 48 to 54.
20% vote against – AGM
At the AGM in 2020, no resolution proposed received more than 20%
of the vote against it.
Amy Stanbridge
Company Secretary
16 April 2021
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30368 8 April 2021 11:06 am V1“During a trying time for our sector, I am proud of the way we have been able to be responsive and adapt our approach to the changing environment we operate in as a Committee, as well as setting up the Remuneration Policy to steer us in the forthcoming years.”Gerald Jennings Chairman of the Remuneration CommitteeCorporate Governance Report RemunerationGerald JenningsChairman of the Remuneration Committee6 6Joanne LakePeter MawsonCommittee memberCommittee member6 66 6Remuneration Committee attendance key Meetings attended Eligible meetingsDIRECTORS’ REMUNERATION REPORTOn behalf of the Board and the Remuneration Committee, I am pleased to present the Directors’ Remuneration Report for the year ended 31 December 2020.This report is split into three sections: the Remuneration Committee Chairman’s Statement, the Remuneration Policy and the Annual Remuneration Report. Our Remuneration Policy will be put forward for shareholder approval at the 2021 AGM and there will be an advisory vote on this Statement and the Annual Remuneration Report.Review of the yearDuring 2020 the Committee met six times to consider a wide variety of important issues and initiatives. Naturally during this period, and as referenced in last year’s Annual Report and Accounts, a large portion of our focus was on responding to the issues raised by the CV-19 pandemic. Also, as we discuss on these pages, a significant proportion of time was spent on preparation of the refreshed Remuneration Policy. Details of these can all be found below.In summary, the key activities of the Committee during 2020 have included:• Reviewing, consulting with shareholders on and revising our Remuneration Policy• Review and consult with shareholders on the operation of the Remuneration Policy for FY21• Considering the impact of CV-19 on the operation of the Remuneration Policy for executives and all employees• Considering the outturn of the annual bonus and the LTIP • Review and approval of salary increases• Review and approval of bonus awards• Determining the grants under the LTIP• Considering and approving the Directors’ Remuneration ReportThose serving as members of the Committee for 2020 were myself, Joanne Lake and Peter Mawson. Within the year there have been no changes to the composition of the Committee. Biographies of the current members of the Committee are shown on pages 70 to 71.During the year, the CEO, GFD, Chairman and other Non-executive Directors attended the meetings with the Committee upon request, in order to assist on matters concerning other senior executives within the Group. No Executive Director or member of management were present during any part of the meeting where their own remuneration was discussed.106Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 106Henry-Boot-AR-2020-governance.indd 10608/04/2021 14:34:4308/04/2021 14:34:43 “During a trying time for our sector, I am proud of the
way we have been able to be responsive and adapt our
approach to the changing environment we operate in as
a Committee, as well as setting up the Remuneration
Policy to steer us in the forthcoming years.”
Gerald Jennings
Chairman of the Remuneration Committee
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Role of the Committee
The primary role of the Committee is to:
• Review, recommend and monitor the level and structure of the
remuneration packages of the Executive Directors and senior
management;
• Set and approve the remuneration package for the Executive
Directors; and
• Determine a balance between base pay and performance-related
elements of the remuneration package in an effort to align the
interests of stakeholders more widely (including shareholders)
with those of the Executive Directors.
Our response to CV-19
The year has been dominated by the impact of the CV-19 pandemic
on the business and the Committee has worked hard to ensure that
the Remuneration Policy has been applied in a way that is aligned to
the experience of the stakeholders in the business.
Recognising the need to conserve cash in the business, the Board
voluntarily reduced salaries and fees by 20% from 1 April 2020, for
the duration of the most severe impact of the pandemic. Salaries and
fees were reinstated in full on 1 October 2020 as business operations
recovered to near-normal levels. Following the year end, the decision
was taken to repay in full these salary reductions for Executive
Directors, to mirror the experience of the wider workforce in having
received 100% of salary during the pandemic.
As noted in last year’s report, despite excellent profit performance in
2019, the final dividend paid for 2019 was reduced by 50% and the
Executive Directors’ 2019 bonuses were also reduced by 50%.
For employees, although Henry Boot furloughed staff during the most
severe period of CV-19, salaries were topped up to 100%.
The Group has not taken direct Government support under the CCFF
or CBILS schemes. We did benefit from furlough money under the
Coronavirus Job Retention Schemes. However, having recognised
that the Group was in a position to be able to afford to pay this money
back, the money taken in relation to Group companies was repaid in
early 2021.
While there have been some redundancies, these relate to our pre-
CV-19 planning for ongoing efficiency and cost reduction plans, rather
than being due explicitly to the impact of CV-19 on our business.
Alongside this, the Board has taken the decision to recommend a
dividend of 3.3p for approval at the Company’s AGM in May, taking
the full year dividend to 5.5p. This represents a 10% uplift from the
full year dividend paid in respect of 2019’s results, and is an outcome
that has been taken into account by the Committee when determining
remuneration outcomes for 2020, including, as noted to the side, the
2020 bonus outturn for Executive Directors’ being proportionately
scaled back.
We have not made any adjustments to the terms or previously granted
LTIP awards and believe that with discretion applied to scale back the
annual bonus, the policy has operated as intended.
Performance in 2020 and
Executive remuneration outcomes
As with many other companies, 2020 represented a turbulent year of
trading for the Group, though achievement of a more modest profit
before tax demonstrated that the Group’s performance remained
buoyant, and also sustained the Group’s positive cash position in
existence at the outset of 2020.
The Committee delayed the setting of the PBT element of the annual
bonus targets for FY20 due to the considerable uncertainty caused
by the pandemic. Following careful consideration of the business
plan stretching targets were set at the half year. These recognised the
significant likely reduction in profitability over the year, but were set at
a level which required very significant improvement in performance in
the second half of the year to deliver the best possible outcome for
shareholders for the year as a whole and to ensure that the business
would emerge from the crisis in optimum shape.
Based on the strong performance over the second half of the year,
the formula-driven outturn against the PBT bonus target would
have delivered a bonus at between a target and stretch level of
performance. Having reviewed this outcome, the Committee
considered that it would be appropriate to scale back the bonus
payable (for the second year running) and determined that, on this
basis, a bonus should be payable to the Executive Directors. The
Committee’s thinking in this regard is discussed further below:
• Treatment of employees during CV-19 – Henry Boot furloughed
employees during the most severe period of CV-19, this included
a period where our construction sites paused for a limited period
of approximately one week whilst appropriate working practices
were established. For the most part of 2020, all our construction
sites and plant hire depots have remained open and operational.
Salaries for all furloughed employees were, however, topped up to
100%. While there have been some redundancies, these relate to
our pre-CV-19 planning for ongoing efficiency and cost reduction
plans, rather than being due explicitly to the impact of CV-19 on
our business.
• Shareholder experience – Whilst Henry Boot did pay a reduced
final dividend in 2020 for FY19, we are paying a dividend in 2021
for FY20. As a reminder, the Committee used discretion to also
halve the bonuses for the FY19 year (for all employees including
Executive Directors) in light of the dividend reduction. This was
despite FY19 having been the second most profitable year ever,
after 2017 and, looking back, we were relatively unusual in scaling
back last year’s bonus for the dividend reduction (most of our
peers did not).
• Government support – The Company has not taken direct
Government support under the CCFF or CBILS schemes. We did
benefit from furlough money under the Coronavirus Job Retention
Scheme. However, having recognised that the Company was in
a position to be able to afford to pay this money back, this has all
now been repaid.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
Considering these factors and wider company performance (and
recognising in particular that we scaled back last year’s bonus) the
Committee considers that a scaled-back bonus payment was an
appropriate outcome. A consistent approach has been applied
to wider employee bonuses and the Committee believes that this
outcome is fair and proportionate, particularly when looked at across
both of the last two financial years.
Full details of the approach taken to the bonus payments are set
out later in the report.
The 2018 LTIP awards vested subject to EPS growth, ROCE and TSR
performance conditions over a three year period to 31 December
2020. As a result of performance over the period the award will vest at
27.81%. No adjustments were made to the performance conditions
in the light of CV-19. The Committee were comfortable with the result
and believe that the outcome is appropriate. Further details are set out
on page 122.
New Remuneration Policy
The current Remuneration Policy was approved by shareholders at
the 2018 AGM. The 2021 AGM marks the third anniversary of this
shareholder approval and, in line with UK reporting regulations, the
Committee is bringing a new Policy to shareholders for approval
this year.
The main changes to the Policy are to simplify it where possible and
to update it for changes to market best practice, the UK Corporate
Governance Code and investor guidelines. The key changes are to:
The application of Directors’ Remuneration
Policy for 2021
As part of the Policy review, the Committee considered the total
remuneration packages for the Executive Directors with a particular
focus on the GFD’s package.
Base salary
Following this review the CEO received a salary increase of 1% with
effect from 1 January 2021, in line with the average increase for the
workforce.
In the case of the GFD despite recent phased salary increases which
increased his salary from £150,000 to £250,000, the Committee noted
that the total remuneration (including pension, bonus and LTIP) was
still below the lower quartile of prudent market benchmarks. Given
the Committee’s concern regarding attracting and retaining the best
candidates, whilst not paying more than necessary, the Committee
has determined that there should be one further increase to the salary
for the GFD from £250,000 to £300,000 to reflect his experience more
accurately, the market rate for his role and his outstanding contribution
to the business. Following feedback from the proxy advisory firms
we consulted, the Committee has decided to stagger this increase.
Accordingly, as a first step we have increased the salary from
£250,000 to £275,000 with effect from 1 January 2021 and there will
be a further £25,000 increase effective from 1 January 2022, subject
to individual and Company performance. Any further increases over
the remainder of the Policy period would be in line with the average
workforce increase, barring genuinely exceptional circumstances.
•
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increase the shareholding requirement for the GFD from 150% to
200% of base salary and to add post-employment shareholding
requirements
reduce pension contribution for current and future Executive
Directors to align to the workforce rate. For the GFD the pension
will reduce from 20% of salary to the workforce rate (currently 8%)
from 1 January 2022
Annual bonus
The annual bonus will be operated in line with the new Policy. The
Executive Directors will have a maximum annual bonus opportunity
of 120% of salary. The annual bonus will be assessed against financial
measures (for two thirds) and strategic objectives (for one third). Two
thirds of the annual bonus will be paid in cash, one third of the bonus
earned will be invested into shares and deferred for three years.
• add a deferred share element to the annual bonus
•
reduce the policy limit in the Long-Term Incentive Plan from 200%
to 175% of salary
Our Directors’ Remuneration Policy is closely aligned to the
achievement of the Company’s business objectives and to the long-
term interests of our shareholders. A full summary of the changes, and
the reasons for these changes, are set out on pages 111 to 112 and
the full Policy is set out on page 113 to 115.
During the year the Committee will review the appropriateness of using
Environmental, Social and Governance measures within the bonus
plan (and possibly the LTIP). This will be considered in line with the
Board’s broader thinking in relation to the business strategy, as set
out in other parts of this Annual Report.
LTIP award
As a part of the Remuneration Policy, the Committee reviewed the
grant levels under the LTIP within the new reduced Policy limit of
175% of salary and has determined that the normal grant level for
the CEO should increase from 100% to 125% of base salary. There
will be no change to the grant level for the GFD. The proposed LTIP
opportunities are designed to drive and reward management for
achieving the stretching performance conditions, linked to the long-
term strategy. For the FY21 award we have determined that the same
mix of EPS, ROCE and TSR measures will be retained with one third
weightings for each. Performance targets are appropriately stretching
and set out in this report.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Closing remarks
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.
I hope that you will be able to support the Directors’ Remuneration
Report and Remuneration Policy at this year’s AGM.
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Gerald Jennings
Chairman of the Remuneration Committee
16 April 2021
Stakeholder consultation
In 2020 and early 2021 the Remuneration Committee consulted
with major family and institutional shareholders and proxy advisory
firms to seek their views on the proposed Remuneration Policy and
implementation. During the consultation, the major shareholders were
supportive of our proposed changes to the Remuneration Policy. In
relation to the operation of the Policy for FY21, shareholders were
also broadly supportive. However, as noted on page 108 we have
staggered the salary increase for the GFD following feedback. I would
like to thank those consulted for their participation in this consultation
process. The Remuneration Committee will continue to monitor
developments in corporate governance and market practice to ensure
that the Policy and its implementation continues to be in line with
best practice and investor guidance. The timeline for our stakeholder
consultation was as follows:
AUGUST 2020
Group Employee Forum consultation with Gerald Jennings
to discuss the remuneration strategy and Executive Director
objectives; Committee reviewed the existing Remuneration
Policy and any gaps with market practice
OCTOBER 2020
Group Employee Forum meeting with Gerald Jennings and
Korn Ferry dedicated to discussing the Remuneration Policy;
Committee discussed the Remuneration Policy framework, and
reviewed and agreed the first consultation letter
NOVEMBER 2020
First consultation letter sent out to major family and institutional
shareholders and proxy agencies
DECEMBER 2020
Committee reviewed investor feedback and changes were
made to the draft Remuneration Policy
JANUARY 2021
Gerald Jennings gave an update to the Group Employee Forum
with any changes to the Remuneration Policy and its proposed
implementation; Committee reviewed and agreed the second
consultation letter
FEBRUARY 2021
Second consultation letter sent out to major family and
institutional shareholders and proxy agencies
MARCH 2021
Committee reviewed final investor and employee feedback and
approved the Remuneration Policy
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30368 8 April 2021 11:06 am V1Corporate Governance Report RemunerationRemuneration at a glanceExecutive Directors’ Remuneration PolicyElements of Executive Directors’ payChief Executive Officer — Tim Roberts (2019: John Sutcliffe)202020192020%2019% Fixed:6454 Base salary8578 Taxable benefits87 Pension-related benefits716 Performance-linked:3646 Annual bonus10035 Long-term incentive plan—65Group Finance Director — Darren Littlewood202020192020%2019% Fixed:6158 Base salary7376 Taxable benefits99 Pension-related benefits1815 Performance-linked:3942 Annual bonus7641 Long-term incentive plan2459Single total figure of remuneration for Executive Directors for year ended 31 December 2020Key performance indicators (KPIs) performance for year ended 31 December 2020497Darren LittlewoodTim Roberts71547456303259147£’000 Fixed pay Annual bonus Long-term incentiveAnnual bonusProfit before tax £17.1mKey At or above stretch target Between threshold and stretch target Below threshold targetLTIP 3 year performanceEarnings per share (76)%Total shareholder returns (12)%Return on capital employed 12%110Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 110Henry-Boot-AR-2020-governance.indd 11008/04/2021 14:34:4508/04/2021 14:34:45 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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• Alignment to culture – Henry Boot’s distinctive company culture
has been taken into consideration with the incentivisation of the
Executive Directors to continue to develop the Group with our
people at the forefront of our strategies, whilst formulating a Policy
to drive sustainable long term growth.
Changes to the Directors’ Remuneration Policy
The following changes have been made to the Remuneration Policy.
Base Salary
The salary cap which stated that salaries would be no higher than the
median rate of the upper quartile of the FTSE Small Cap, has been
removed to simplify the Policy and because this limit is significantly
higher than any salaries that we intend to pay during the Policy period.
Pension
Pension rates for Executives will be aligned with the wider workforce.
Any new Executive Director appointed will have a pension rate in line
with the wider workforce, currently 8% of salary. This represents the
amount that most employees are able to contribute to the pension
and that it is equitable for the Executive Directors to participate. The
current pension rate for the CEO is 8% of salary. The GFD’s pension
contribution will be retained at the current 20% of salary rate until
31 December 2021 and then reduce to the workforce rate. This
reduction will take place a year earlier than the recommended date in
the Investment Association guidance.
Annual Bonus
In line with market best practice, we are introducing compulsory
bonus deferral, one third of the bonus earned will be invested into
shares and deferred for three years. In addition, a formal discretionary
override has been introduced into the Policy and recovery and
withholding provisions have been broadened to include reputational
damage and corporate failure. To simplify the bonus scheme, the
reference to an “exceptional maximum bonus” opportunity (120%
of salary) has been removed and, instead, is now described as the
“maximum” which is what, in reality, the exceptional maximum has
always been (i.e. it has been the point at the top of the performance
range at which the maximum bonus has been payable which has in
the past, and will continue to be in the future, reflective of exceptional
performance).
The pay-out schedule is now based on a sliding scale between
threshold and maximum, in line with general market practice.
The specific split between financial and non-financial measures (80:20)
has been removed to allow for greater flexibility. The majority of the
bonus will continue to be based on financial measures. We would like
some flexibility in the Policy to have a slightly higher weighting on non-
financial strategic and in due course ESG measures, and so propose
that the Policy should state simply that a majority of the bonus should
be based on financial measures.
REMUNERATION POLICY
This section of the report sets out the
Company’s policy on the remuneration
of Directors which will be put to a
binding shareholder vote at the 2021
AGM. Subject to shareholder approval,
the Policy will take effect from the date
of the 2021 AGM and is intended to
apply for three years.
The Company policy on remuneration is designed to ensure that
Executive Directors earn sufficient remuneration to be motivated to
achieve our strategy with the addition of appropriate incentives, aligned
to our vision and strategic objectives, that encourage enhanced
performance without excessive risk.
The Committee annually reviews market practices and levels of
remuneration for directors in similar roles within companies of
comparable size and complexity. This review considers remuneration
within our wider workforce, pay increases awarded and bonus levels
generally in the Group, with the aim that we reward all employees fairly
according to their role, performance, the economic environment and
the Group’s financial performance.
The Policy has been tested against the six factors listed in Provision
40 of the UK Corporate Governance Code:
• Clarity – the Committee has made alterations to the Remuneration
Policy to make it clearer, including a simplified annual bonus
structure. The elements of the Remuneration Policy were described
clearly to investors during the consultation process, to the
workforce during the engagement with the Group Employee Forum
and are set out in this report.
• Simplicity – remuneration structures have been simplified. All
structures are as simple as possible whilst providing a strong link
between reward and performance and avoiding reward for failure
• Risk – the Remuneration Policy has been designed to discourage
inappropriate risk taking including a balance between short-term
and long-term elements, as well as bonus deferral, recovery and
withholding provisions, in addition to in-employment and post-
cessation shareholding requirements. To avoid conflicts of interest,
Committee members are required to disclose any conflicts or
potential conflicts ahead of Committee meetings. No Executive
Director or other member of management is present when their
own remuneration is under discussion.
• Predictability – elements of the Policy are subject to caps and
dilution limits. An illustration of pay levels for different levels of
performance are shown in the scenario charts in the notes to
the Policy table. The Committee has the discretion to adjust the
formulaic outcomes of the incentive arrangements if the outcome is
considered inappropriate.
• Proportionality – There is a broadly equal balance between
fixed pay and incentives and there is also a broadly equal balance
between short-term and long-term incentives, reflecting the
importance of both short-term and long-term performance.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
Long-Term Incentive Plan (LTIP)
The maximum limit has been reduced from 200% of salary to 175%
of salary.
Recruitment and leaver treatment
The Policy regarding buyout awards and payments for loss of office
have been updated to reflect latest market practice.
Performance conditions will be applied on a like-for-like basis on any
buyout awards and awards will resemble forfeited arrangements as far
as is practicable.
Leavers will no longer be able to receive lump sum payments if a
contract is terminated. Payments for loss of office will be phased over
the notice period and subject to mitigation and offset against earnings
elsewhere.
Non-executive Directors
We are committed to a culture that promotes equality and diversity.
As a result, the requirement for Non-executive Directors to build up a
shareholding to the value of 50% of the base fee, has been removed
from the Policy to ensure that no potential Non-executive Director
candidates are unable to take the role due to this requirement.
However, we will continue to encourage Non-executive Directors’ to
build up a meaningful shareholding in Henry Boot where possible.
The previous Policy stated that the performance measures for the
LTIP would include EPS, ROCE and TSR with the weightings for any
measure not exceeding 50%. We have removed the stipulation of
which particular measures should be used and instead stated that
these will be linked to the business strategy, albeit at this stage there is
no intention to move away from this mix of measures.
To strengthen the alignment of interest between shareholders and
executives, to the extent awards vest the value of dividends payable
over the vesting period will be added, usually in the form of an
additional award of shares.
As per the annual bonus, the recovery and withholding provisions have
been broadened and the discretion to adjust the formulaic outcome
has been formally introduced.
Shareholding Requirements
In line with market best practice, we have increased the shareholding
requirement for the GFD from 150% to 200% of salary so that both
Executives must build up a shareholding equivalent to 200% of salary.
A post-cessation shareholding requirement has been introduced. Any
Executive Director leaving the Company will be required to retain the lower
of the shares held at cessation of employment and shares to the value of
200% of salary for a period of two years. Market purchased shares by
the individual will be excluded from this requirement and the requirement
will only apply to LTIP awards made after the May 2021 AGM.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
POLICY TABLE
Element
Salary
Purpose and link to
strategy
Core element of the
Executive Directors’ fixed
remuneration reflecting
the role, experience and
set in part by reference to
comparable companies in
the FTSE and appropriate
relativities within the broader
executive team.
Benefits
These are provided on a
market competitive basis
to assist in recruiting and
retaining Executive Directors.
Pension
To provide a contribution
towards retirement income.
Performance
measures
None.
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Operation
The Committee reviews base
salaries annually, taking into
consideration:
i.
the value of the individual
to the Group, their skills,
experience and performance;
ii. pay increase levels in the
Group and more generally
in the marketplace; and
iii. the Group profitability and
Opportunity
Salary increases will normally
be in line with the workforce
average. The Committee will
consider any increase above
this level very carefully in the
following circumstances, for
example:
i.
relevant commercial factors;
ii. increasing scope and
responsibility;
prevailing market conditions.
iii. promotional increases; and
iv. falling below market
positioning.
Executive Directors currently
receive:
Set by reference to normal
market practice.
None.
i. a car allowance;
ii. private health insurance;
iii. permanent health insurance;
iv. death in service cover; and
v. the offer of participation in the
SAYE Scheme.
The Committee reviews the level
of benefit provision from time
to time and has the flexibility to
add or remove benefits to reflect
changes in market practice or the
operational needs of the Group.
The cost of providing benefits
is borne by the Company and
varies from time to time.
Executive Directors are eligible for
membership of the Henry Boot
PLC Group Stakeholder Pension
Plan (defined contribution
pension scheme) or a cash
supplement in lieu of this.
None.
The current CEO and any new
Executive Director will receive a
pension contribution in line with
the rate applying to the majority
of the workforce, currently 8%
of salary.
The Henry Boot Staff Pension
& Life Assurance Scheme
(defined benefit pension scheme)
is closed to new members,
however internal promotees to an
Executive Director will retain any
existing membership.
The current GFD will receive a
pension contribution of 20% of
basic salary, which will continue
until 31 December 2021 and
then this will reduce to be in line
with the contribution rate for the
majority of employees.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
Element
Annual bonus
Purpose and link to
strategy
To incentivise the delivery
of financial performance,
operational targets and
individual objectives over
the financial year.
Opportunity
The maximum bonus
opportunity is 120% of salary.
Operation
Targets are reviewed annually
and any payment is determined
by the Committee after the year
end based on targets set for the
financial year.
Two thirds of the annual bonus
will be paid in cash, one third of
the bonus earned will be invested
into shares and deferred for three
years (during which time the
shares cannot be sold). Malus
and clawback provisions apply.
Long-Term
Incentive Plan
The Long-Term Incentive
Plan provides a clear and
strong link between the
remuneration of Executive
Directors and the creation
of value for shareholders
by rewarding the Executive
Directors for achieving
longer-term objectives
aligned closely to the
business strategy and
shareholders’ interests.
Up to a maximum of 175% of
salary in any year.
Award levels would not be
increased above 125% of salary
in the case of the CEO and
100% of salary in the case of
the GFD without first consulting
with our major shareholders.
Conditional share awards are
granted annually to Executive
Directors.
Awards vest after the third
anniversary of grant subject to
performance conditions and
continued service.
To the extent awards vest, the
value of dividends payable
over the vesting period will be
added, usually in the form of an
additional award of shares.
After awards vest, subject to
selling sufficient shares to pay
tax, shares must be held for a
further two years.
Malus and clawback conditions
apply.
Performance
measures
The majority of the
bonus will be based on
financial metrics.
No more than 10%
of the maximum
bonus opportunity will
payout for threshold
performance and no
more than 50% for
target performance.
Payout between
threshold, target
and maximum will
be calculated on a
straight-line basis.
The Remuneration
Committee has the
discretion to adjust
the formulaic outcome
of the bonus if they
believe the outcome
does not accurately
reflect business
performance.
Performance conditions
and targets will be
set each year linked
to business KPIs in
line with the strategy,
or a measure of total
shareholder return.
The Remuneration
Committee has the
discretion to adjust
the formulaic outcome
of the bonus if they
believe the outcome
does not accurately
reflect business
performance.
No more than 25% of
the award will vest for
threshold performance.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Element
Shareholding
guidelines
Purpose and link to
strategy
Direct share ownership by
Executive Directors aligns
their long-term interests to
those of shareholders.
Non-
executive
Director fees
Fee levels are set in order to
recruit and retain high calibre
Non-executive Directors
with the relevant experience
required to achieve success
for the Company and its
shareholders.
Operation
During employment Executive
Directors are required to build
and maintain a shareholding
equivalent to 200% of base
salary. Executive Directors are
expected to retain at least 50%
of any LTIP awards or deferred
bonus awards until holdings
reach the required level.
Post-cessation of employment
Any Executive Director leaving
the Company will be expected to
retain the lower of the shares held
at cessation of employment and
shares to the value of 200% of
salary, for a period of at least two
years. Market purchased shares
purchased by the individual
will be excluded from this
requirement and the requirement
only applies to awards made after
the May 2021 AGM.
The fees of the Chairman are
determined by the Committee
and the fees of the Non-executive
Directors are determined by the
Board (minus the Non-executive
Directors).
Non-executive Directors are not
eligible to participate in any of
the Company’s share schemes,
incentive arrangements or
pension schemes.
Opportunity
Not applicable.
Performance
measures
None.
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Non-executive Directors are
paid a basic fee.
None.
Additional fees may be paid for
chairing committees or taking
additional roles such as the
Senior Independent Director
or Director responsible for the
Employee Voice.
Non-executive Directors are
encouraged, but not required,
to build up a shareholding in
Henry Boot.
Notes to the Policy table
Explanation of the performance
measures chosen
The Committee has the discretion in
exceptional circumstances to change
performance measures and targets part-
way through a performance year if there is a
significant event which causes the Committee
to believe the original measures and targets
are no longer a fair and accurate measure of
business performance.
Malus and clawback
The Committee has discretion to claw back
awards made under the annual bonus
plan and LTIP in the event of a material
misstatement in the audited consolidated
accounts of the Company, a material error
in assessing any performance condition,
employee misconduct, serious reputational
damage or corporate failure. In these
circumstances the Committee has discretion
to reduce or cancel deferred awards, or
require the participant to repay some or all
of the value delivered from a bonus or LTIP
awards, at any time up to the third anniversary
of vesting of LTIP awards or payment of
annual bonus.
Statement of consideration
of employment conditions
elsewhere in the Group
Differences in policy from the wider
employee group
Henry Boot PLC aims to provide a
remuneration package that is market
competitive, complies with statutory
requirements and is applied fairly and
equitably across employees of the Group.
Where possible, the Group operates the same
core remuneration principles for employees as
it does for Executive Directors.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
These are:
• We remunerate fairly for each role with regard to the marketplace, consistency across comparable roles and consistency across each
company within the Group.
• We remunerate people at a level that the Group has the ability to meet which is sufficient to retain and motivate our people to achieve our
shared long-term goals.
Bonus arrangements across the Group normally have a similar structure to the Executive Directors in that the main target measure is Group
profitability. The level of bonus potential varies across all Group companies.
Participation in the LTIP Scheme is extended to the senior management beyond the Executive Directors at the discretion of the Board. In line
with the Non-executive Directors, share ownership amongst the wider workforce is encouraged but there is no formal requirement to hold shares.
Furthermore, we also encourage long-term employee engagement through the offer of a SAYE Share Scheme and CSOP Scheme to all eligible
employees.
Employee engagement
Employee engagement on remuneration matters by the Committee is conducted through the Group Employee Forum (GEF). The GEF consists of
employees from across the businesses and provides an opportunity for employees to voice their views and raise concerns. The GEF is attended
by the designated Non-executive Director and Remuneration Committee Chair, Gerald Jennings, who acts as a conduit between the Board and
the workforce, and ensures a two-way dialogue. During the Remuneration Policy consultation, two meetings were held with the GEF to discuss
the overall remuneration approach and the Executive Directors’ objectives, the latter meeting included our advisors, Korn Ferry, which the GEF
members welcomed both in terms of understanding the background to the remuneration decisions and the potential outcomes, alongside
strategic rationale. In addition, every December, the Head of HR presents a report to the Committee summarising matters relating to the wider
workforce, relative levels of pay between companies in the Group, changes to other working conditions and changes within the make- up of the
workforce. Information from both the GEF and the Head of HR report is considered when setting and implementing the Directors’ Remuneration
Policy. You can read more about the work of the GEF on page 86.
Consideration of Shareholder Views.
In 2020, the Remuneration Committee consulted with major family and institutional shareholders and proxy advisers to seek their views on the
proposed Remuneration Policy and implementation. During the consultation, the major shareholders were supportive of our proposed changes
to the Remuneration Policy and so we have proceeded with the planned changes. In relation to the operation of the Policy for FY21, shareholders
were also broadly supportive. However, as noted in the Chairman’s Statement, following shareholder feedback we staggered the salary increase
for the GFD over two years. The Committee is thankful for shareholders’ participation in this consultation process. The Remuneration Committee
will continue to monitor developments in corporate governance and market practice to ensure that the Policy and its implementation continues to
be in line with best practice.
Illustration of the application of the Remuneration Policy
The graph shows total remuneration under the new Policy, illustrating the minimum pay (fixed pay), on-target pay and maximum pay
(assumptions are set out in the table below).
Minimum
Target
Maximum
Fixed pay comprised of base pay as of 1 January 2021, benefits paid in FY20, and pension contributions in FY21.
Fixed pay and 50% of maximum bonus and LTIP opportunity.
Fixed pay and maximum payout under the bonus and LTIP. This scenario also includes an additional element illustrating
the impact of 50% share price growth on the LTIP.
£1,841,444
£1,569,717
%
5
3
%
3
3
%
2
3
£1,037,131
%
6
2
%
5
2
%
9
4
£504,545
%
0
0
1
£660,500
%
1
2
%
5
2
%
4
5
£358,000
%
0
0
1
£1,100,500
£963,000
%
9
2
%
4
3
%
7
3
Minimum
Target
Maximum
Minimum
Target
Maximum
Tim Roberts
Darren Littlewood
Fixed Pay
Annual Bonus
LTIP
50% share price growth on LTIP
£2,000,000
£1,800,000
£1,600,000
£1,400,000
£1,200,000
£1,000,000
£800,000
£600,000
£400,000
£200,000
£0
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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Recruitment Remuneration Policy
This table sets out the Company’s policy on recruitment of new Executive Directors for each element of the remuneration package. Non-
executive Directors are recruited on an initial three-year term and receive a fee but no other benefits.
Remuneration element
Base salary
Benefits
Pension
Bonus
LTIPs
Buyouts
Internal appointees
Policy on recruitment
The Committee will typically offer a salary in line with the Policy whilst also considering the experience, ability to
implement Group strategy, and the wider economic climate and pay and conditions throughout the Group, in order
to facilitate the hiring of candidates of the appropriate calibre required to implement the Group’s strategy.
The Committee will offer benefits in line with the Policy for existing Executive Directors; however, the Committee
has the flexibility to consider other benefits from time to time, including relocation expenses.
Contribution levels will be set in line with the Company policy.
The Committee will offer the ability to earn a bonus in line with the Policy (maximum 120% of base salary). Bonus
opportunities will be pro-rated for new employees that join during the year.
The Committee will offer LTIPs in line with the Policy in the year of joining.
The Committee’s policy on “buying out” existing incentives granted by the Executive’s previous employer will
depend on the process of recruitment and be negotiated on a case-by-case basis. The Committee may make
an award in order to “buy out” previous incentives but it will only be made if it is considered necessary to attract
the right candidate and there will not be a presumption in favour of doing so. The award will in any event be no
larger than the award forfeited and will resemble the arrangements forfeited as far as applicable and performance
conditions will apply on a like-for-like basis.
Any remuneration awards previously granted to an internal appointee to the Board will continue on their original
terms. In the same way, if an appointee is accruing benefits in the Henry Boot Staff Pension and Life Assurance
Scheme these will continue as before.
Payment for the loss of office policy
The table below sets out the policy on exit payments. Treatment of different elements under the Policy may vary depending on whether the
Executive is classified as a “good” or a “bad” leaver. “Good leaver” status occurs upon the cessation of employment for a compassionate reason,
such as death in service; ill health; injury; disability; retirement; redundancy or for any other reason determined by the Committee.
The Committee will ensure that a consistent approach to exit payments is adopted and there is no reward for poor performance and any liability
to the Group is minimised/mitigated in all areas. Where a compromise agreement is required, the Committee would consider contributing to the
reasonable costs of legal and other expenses relating to the termination of employment and pay reasonable amounts to settle potential claims.
Remuneration element
Base salary/fees and
benefits
Pension/salary in lieu
of pension
Bonus
LTIP Awards
Base salary/fees and benefits will be paid over the notice period subject to mitigation. Compensation will be
phased over the notice period. If the Executive finds a new role prior to the end of the notice period, payments will
be offset against earnings from the new role.
Pension contributions and any payments in lieu of pension will be provided over the notice period.
For a good leaver, any bonus payment would be at the discretion of the Committee and would be pro-rated to
the time employed in the year that employment ceases. Any payment would be paid at the same time as other
Directors, subject to the original performance criteria deferral and malus and clawback.
It is normal for awards to lapse on cessation of employment unless the Company and Committee agree that the
Executive is a good leaver. Good leavers will be treated in accordance with the rules of the LTIP scheme which
has been approved by shareholders. Their awards are prorated for the proportion of the performance period
that has elapsed. Any prorated shares vest at the normal vesting date and are subject to the same performance
conditions as other LTIP award holders. The Committee retains discretion to allow vesting at the time of cessation
of employment on a prorated basis. Good leavers will be subject to the clauses in the LTIP Scheme related to
holding periods, malus and clawback.
In the event of a change of control, Directors affected will be treated in accordance with the rules of the LTIP
Scheme. Any early vesting as a consequence of a change of control would be based on the Committee’s
assessment of the performance conditions and would take into account the vesting period that has elapsed at the
time of the change of control.
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30368 8 April 2021 11:06 am V1Corporate Governance Report RemunerationService contractsTim Roberts and Darren Littlewood each have a one-year rolling service agreement in accordance with our policy on Directors’ contracts. Termination of these arrangements would therefore be subject to their contractual terms and conditions that require a notice period of one year from either party. Contractual compensation in the event of early termination provides for compensation of basic salary, pension and benefits for the notice period, which would be payable on a phased monthly basis.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, subject to a maximum of three terms totalling nine years; however, they may be terminated without compensation at any time.Policy on external appointmentsThe Company recognises that Executive Directors may be invited to become Non-executive Directors of other companies and that this can help broaden the skills and experience of a Director. Executive Directors are permitted to accept one external appointment with the approval of the Board. Any remuneration earned from such appointments is retained by the Executive. 118Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-governance.indd 118Henry-Boot-AR-2020-governance.indd 11808/04/2021 14:34:5208/04/2021 14:34:52 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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ANNUAL REPORT ON
REMUNERATION
The following section provides details of
how Henry Boot’s Remuneration Policy
was implemented during the financial
year. The labelled parts of the Directors’
Remuneration Report are subject to audit.
The Remuneration Committee
The role of the Remuneration Committee as well as members, meetings
and key activities during the year are set out on page 106-107
External Advisers
During 2020, the Committee agreed that it was appropriate to carry
out a formal tender process in relation to its advisers, and following a
robust process, the Committee appointed Korn Ferry as its advisers
with effect from 11 June 2020.
During the year the Committee received independent advice on
Directors’ remuneration from Korn Ferry. The company is a member
of the Remuneration Consultants Group and adheres to its Code of
Conduct which requires its advice to be objective and impartial.
The fees paid to Korn Ferry for providing advice to the Committee in
relation to Directors’ remuneration was £38,549. Korn Ferry had no
other connection to the Company. The Committee is satisfied that the
advice it received is objective and independent.
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 30 June 2020 the
resolution put to shareholders on an advisory basis to receive and approve
the 2019 Directors’ Remuneration Report was passed. The number of
votes in favour of that resolution was 91,440,756 (94.07% of votes cast),
against 5,762,073 (5.93% of votes cast), and withheld 31,839.
The total number of votes cast in respect of this resolution represented
72.98% of the issued share capital.
The current Remuneration Policy was approved at the AGM on
24 May 2018. The number of votes in favour of that resolution was
79,610,196 (87.38% of votes cast), against 11,493,781 (12.62% of
votes cast), and withheld 1,395,563.
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 2020
Tim Roberts³
John Sutcliffe4
Darren Littlewood
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Year ended
31 December 2019
John Sutcliffe
Darren Littlewood
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Salary and
fees
£’0001,2
387
151
221
81
43
43
43
43
1,012
Salary and
fees
£’000
395
225
88
46
46
46
46
892
Taxable
benefits
£’000
35
15
28
1
—
—
—
—
79
Taxable
benefits
£’000
34
27
—
—
—
—
—
61
Pension-
related
benefits
£’000
34
33
54
—
—
—
—
Total fixed
£’000
456
199
303
82
43
43
43
—
121
43
1,212
Pension-
related
benefits
£’000
79
45
—
—
—
—
—
124
Total fixed
£’000
508
297
—
—
—
—
—
805
Annual
bonus
£’000
259
—
147
—
—
—
—
—
406
Annual
bonus
£’000
153
89
—
—
—
—
—
242
Long-term
incentives5
£’000
—
65
47
—
—
—
—
Total Variable
£’000
259
65
194
—
—
—
—
Total
Remuneration
£’000
715
264
497
82
43
43
43
—
112
—
518
43
1,730
Long-term
incentives6
£’000
251
113
—
—
—
—
—
364
Total Variable
£’000
404
202
—
—
—
—
—
606
Total
Remuneration
£’000
912
499
88
46
46
46
46
1,683
1. The Board voluntarily reduced salaries by 20% from 1 April 2020, for the duration of the most severe impact of the pandemic. Salaries and fees were reinstated in
full on 1 October 2020. For Executive Directors, the total salary waived was £43,045.98 for the CEO and £25,000.00 for the GFD. These salary reductions for Tim
Roberts and Darren Littlewood were repaid, to mirror the experience of the wider workforce In having received 100% of salary whilst furloughed, after the year end.
2. The Chairman’s fee and the Non-executive Director’s fees were reduced by 20%. The fee reductions were not reinstated.
3. Tim Roberts was appointed to the Board as CEO on 1 January 2020.
4. John Sutcliffe stepped down from the CEO role on 31 December 2019. He remained on the Board in an advisory role until 31 May 2020 when he stepped down
from the Board.
5. The value of long-term incentives has been calculated based on the average share price for the period 1 October to 31 December 2020 of £2.53. No part of the
award is currently attributable to share price appreciation. No discretion was applied due to share price.
6. The value of long-term incentives has been adjusted from the average share price for the period 1 October 2019 to 31 December 2019 of £2.68, to the price on
the day of vesting of £2.35. No part of the award is currently attributable to share price appreciation. No discretion was applied due to share price.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
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 on page 119 is derived from the following:
Salary or fees
Taxable benefits
Annual bonus
Long-term incentives
Pension-related benefits
The amount of salary or fees received in the year (excluding the amount waived in relation to the CV-19
pandemic).
The taxable benefits received in the year by Executive Directors.
The value of bonus payable and the calculations underlying this are disclosed on pages 120 and 121.
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 represent the cash value of pension contributions or salary in lieu of contributions
received by Executive Directors at a rate of 8% salary for Tim Roberts and 20% of salary for Darren
Littlewood and John Sutcliffe until his resignation from the Board.
Individual elements of remuneration
2020 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. John Sutcliffe was not
eligible to receive a bonus for 2020.
Profit (£m)
% of salary payable under bonus (out of 80% of salary)
Profit Before Tax
Threshold
£12.0m
10%
Target
£13.3m
40%
Maximum
£20.0m
80%
Actual
achieved
£17.1m
65.5%
The Remuneration Committee also evaluated the performance of the Executive Directors against the 2020 personal objectives, noting the progress
that had been made against the difficult backdrop of the CV-19 pandemic, and also that certain objectives would be required to continue into future
years given their status as longer-term outcomes. In that context, the proportion of objectives achieved was assessed as follows:
2020 personal objectives – Tim Roberts
Objective Details
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.
Total (out of max 40%)
120
Performance against objective
New five-year business plan signed off by Board following
in-depth strategic review
Score
15/16
Good communication throughout the business during
pandemic
Greatly improved external coverage
New ExCo formed with better diversity
Succession plans completed and good progress with
new hires
Group adjusted very well to CV-19 risks
Full H&S review completed, KPIs agreed and actions
identified
Positive feedback from brokers/PR on shareholder views
Further work needed to develop IR approach
ESG specialist appointed to the senior team
D&I policy initiated
Board ESG policy to be presented to the Board in
Summer 2021 after significant work in 2020
Good progress made on broader D&I agenda but further
work needed on a more diversified talent pipeline
3/4
4/4
3/4
2/4
4/4
2/4
33%
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2020 personal objectives – Darren Littlewood
Objective Details
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.
Total (out of max 40%)
Performance against objective
New five-year business plan signed off by Board following
in-depth strategic review
Score
11/12
Full strategy review for each subsidiary completed
and presented to the Board
3/4
Determined that the Starfish venture should be liquidated
Strong relationships created with ExCo members
3/4
Chaired the CV-19 Committee and led the ExCo group
Good external networks with active membership of the
CBI, and local chambers of commerce
Review completed for borrowing limits of subsidiary
companies
Full review of risk completed in each subsidiary and
presented to Audit and Risk Committee
Have significantly raised profile of the support functions
across the Group
4/4
2/4
New financial reporting systems incorporated within the
subsidiaries
2.5/4
Better reporting of Strategic KPIs
One significant new investor added
Thorough review of internal audit process completed
2.5/4
New auditor bedded in
Improved Directors’ Remuneration report in line with
Code and all relevant Reporting Requirements
3/4
31%
The Remuneration Committee considers that Tim Roberts achieved 33% out of a maximum 40% of these targets, resulting in a bonus of 33%
of salary for the personal element and that Darren Littlewood achieved 31% out of a maximum 40%, resulting in a bonus of 31% of salary.
As detailed in the Chairman’s letter, the Committee exercised discretion to scale back the formulaic bonus payable.
The table below sets out the calculation for the bonus payable based on the formula and then the bonus payable after the Committee used
discretion to reduce this amount.
The level of the scale-back was derived from a halving of the bonus (consistent with the approach last year) and then increasing this amount by
22%, which was the level of the percentage increase under the Group-wide profit share scheme for FY20.
Executive Director
Tim Roberts
Darren Littlewood
Formulaic payout
under profit element
(max 80% of salary)
65.5%
65.5%
Payout under
personal element
(max 40% of salary)
33%
31%
Total formulaic
payout of bonus
(max 120% of salary)
98.5%
96.5%
Total payout
before Committee
discretion
(£)
£424,003
£241,250
Total payout
following
Committee
discretion
£258,641.83
£147,162.50
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121
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
Long-Term Incentive Plan (LTIP)
The Committee has reviewed the performance criteria for the LTIP shares awarded in 2018, based on performance for the years 2018, 2019 and
2020. The LTIP shares in this award were subject to the performance criteria set out in the table below. Based on performance, the award will
only pay out under the ROCE element.
Performance condition
EPS growth
ROCE
TSR1
Total vesting (out of 100%)
Weighting
Threshold
(25%
vesting)
33.3% RPI+3% p.a.
33.3%
10%
Median
33.4%
TSR: -4%
Maximum
(100%
vesting)
RPI+7% p.a.
13%
Upper quartile
TSR: 10%
Actual
performance
-76%
12.34%
Below median
TSR: -12%
Payout of
element
(max out of
33.3%/33.4%)
0%
27.81%
0%
27.81%
1. The TSR comparator group was comprised of the FTSE Small Companies Index.
LTIP awards granted in the year (Audited)
LTIP awards were granted during the year to Tim Roberts and Darren Littlewood on 22 June 2020. The Committee considered the level of the
share price at the date of grant and determined that the award level should proceed at the usual 100% of salary level. However, in the event that
there are windfall gains, or where payouts are not commensurate with performance, the Committee would use discretion to scale back awards
on vesting:
Tim Roberts
Darren Littlewood
Type of award % of salary
100%
100%
LTIP – nil cost options
LTIP – nil cost options
Face value
of grant at
£2.56 per
share
£430,179.84
£249,835.52
% of award
vesting at
threshold
25%
25%
Number of
shares
168,039
97,592
The awards are subject to the following performance conditions which will be measured over the three-year period ending 31 December 2022:
EPS growth
Return on Capital Employed
TSR
% linked to
award
33.3
33.3
33.4
Threshold
(25% of max)
RPI + 3% per annum
Average three-year ROCE of 10%
TSR at median or above constituent
companies of the FTSE Small
Companies Index
Maximum
(100% of max)
RPI + 7% per annum
Average three-year ROCE of 13% or more
TSR at or above the upper quartile
Pension entitlement
Tim Roberts receives a salary supplement in lieu of pension contribution equivalent to 8% of salary, in line with the workforce rate.
Darren Littlewood is a deferred member of The Henry Boot Staff Pension and Life Assurance Scheme (Defined Benefit) from 31 March 2019.
His normal retirement date within the Scheme would be in 2042, aged 67. The annual allowance for tax relief on pension savings applicable
to Darren Littlewood in 2020 was £4,000. He elected to receive a salary supplement in lieu of the employer contributions which amounted to
£50,000 following which he chose to contribute £4,000 into the Henry Boot PLC Group Stakeholder Pension Plan through a salary sacrifice
arrangement. Darren Littlewood’s pension contribution will be retained at the current 20% of salary rate until 31 December 2021 and then reduce
to the workforce rate. This reduction will take place a year earlier than the recommended date in the Investment Association guidance.
John Sutcliffe is a deferred member of the Henry Boot PLC Group Stakeholder Pension Plan. Contributions are made at 20% of salary and
contributions to the Plan in the year were £nil (2019: £nil). The annual allowance for tax relief on pension savings applicable to John Sutcliffe in
2020 was £nil and he elected to receive a salary supplement in lieu of the employer contributions over and above this level, which amounted to
£32,916.70 (2019: £79,000).
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.
122
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 and connected persons in the Company as at 31 December
2020. The Executive Directors are subject to a shareholding requirement of 200% of salary under the new Policy which is subject to shareholder
approval at the 2021 AGM.
O
U
R
G
O
V
E
R
N
A
N
C
E
Jamie Boot2
Tim Roberts
John Sutcliffe3
Darren Littlewood
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Number of
ordinary
shares held
5,665,002
170,067
816,565
186,507
20,000
10,710
19,900
13,200
LTIPs
subject to
performance
measures
—
168,039
277,544
248,161
—
—
—
—
Number of
ordinary
shares as a
% of salary
or fees1
15,861%
100%
n/a
173%
106%
57%
105%
70%
Total share
interests as
a % of salary
or fees
15,861%
198%
n/a
403%
106%
57%
105%
70%
Total
5,665,002
338,106
1,094,109
434,668
20,000
10,710
19,900
13,200
The share price at 31 December 2020 was 255p. The salary used for this calculation is that which commences on 1 January 2021.
1. Details of Director shareholding requirements can be found in the 2018 Remuneration Policy, which can be viewed on the website: henryboot.co.uk.
2. Jamie Boot also holds 14,753 preference shares.
3. John Sutcliffe’s shareholdings are shown as at the date he stepped down from the Board on 31 May 2020. LTIP amounts for John Sutcliffe shown have not yet
been pro-rated to take in to account his leaver date.
Between 31 December 2020 and 31 March 2021, being a date not more than one month prior to the date of the Notice of the AGM, there were
no changes in the beneficial interests of any of the current Directors.
Tim Roberts
John Sutcliffe
Darren Littlewood
Market
price at
date of
grant
22/06/2020 256.17p
Date of
grant
24/04/2017
25/04/2018
30/04/2019
241.2p
294.3p
272.3p
241.2p
24/04/2017
294.3p
25/04/2018
30/04/2019
272.3p
22/06/2020 256.17p
Plan
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
At 1
January
2020
–
–
160,665
132,502
145,042
438,209
72,554
67,950
82,619
–
223,123
Grant
during
the year
168,039
168,039
Exercised
during
the year
–
–
— 107,002
—
—
—
—
— 107,002
48,320
—
—
—
—
—
—
97,592
48,320
97,592
Lapsed
during
the year
–
–
53,663
—
—
53,663
24,234
—
—
—
24,234
At
31 December
2020
168,039
168,039
–
132,502
145,042
277,544
–
67,950
82,619
97,592
248,161
Actual
exercise date
/earliest
vesting date
22/06/2023
24/04/2020
25/04/2021
30/04/2022
24/04/2020
25/04/2021
30/04/2022
22/06/2023
Market
Valuation
on
exercise
£
–
–
251,455
—
—
251,455
113,552
—
—
—
113,552
Sharesave plan
Tim Roberts
Plan
2010
At
1 January
2020
—
Granted
during
the year
7,594
Exercised
during the
year
—
Lapsed
during
the year
—
At
31 December
2020
7,594
Exercise
price
237p
Date from
which
exercisable
01/12/2023
Expiry
date
01/06/2024
Share price
The middle market price for the Company’s shares at 31 December 2020 was 255p and the range of prices during the year was 185p to 342p.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
Ten-year TSR performance graph
The chart below shows the TSR for the Company compared to the FTSE Small Cap Index over ten years. The FTSE Small Cap index has been
chosen as Henry Boot is a constituent of the FTSE Small Cap index.
)
d
e
s
a
b
e
R
(
)
£
(
l
e
u
a
V
450
400
350
300
250
200
150
100
50
0
10
11
12
13
14
15
16
17
18
19
20
Henry Boot PLC
FTSE SmallCap Index
CEO remuneration for the previous ten years
Year
Total Remuneration
Annual bonus
LTIP
(£’000)
(% of max)
(% of max)
2010
764
58.3
64
2011
842
66.7
50
2012
962
58.3
40
2013
1,054
83.3
50
2014
1,000
94.5
25
2015
981
87.8
25
2016
1,118
91.1
67
2017
1,277
99.2
100
2018
1,250
76.8
87
2019
912
64.8
65
2020
715
50.0
nil
Percentage change in Directors remuneration2
The table below sets out in relation to salary, taxable benefits and annual bonus the percentage increase in remuneration for Directors compared
to the wider workforce from 2019 to 2020. For these purposes:
Chief Executive Officer1
Group Finance Director
Jamie Boot
James Sykes
Joanne Lake
Gerald Jennings
Peter Mawson
Workforce
Salary/fees
0%
11%
3%
3%
3%
3%
3%
3.99%
Taxable
benefits
0%
0%
N/A
N/A
N/A
N/A
N/A
0%
Annual
bonus
N/A
(51.1)%
N/A
N/A
N/A
N/A
N/A
(40.81)%
1. Tim Roberts was appointed CEO on 1 January 2020 therefore there is no previous year comparative to calculate a change.
2. John Sutcliffe stepped down from the CEO role on 31 December 2019. He remained on the Board in an advisory role until 31 May 2020 when he stepped down
from the Board. John Sutcliffe has been excluded as he left the company during the year and so a comparison to the previous year would not be representative.
CEO pay ratio
The table below illustrates the ratio between CEO pay for 2020.
Year
2020
2019
25th
percentile
pay ratio
26:1
41:1
Median pay
ratio
18:1
27:1
75th
percentile
pay ratio
11:1
17:1
Method
Option A
Option A
In line with legislation, the analysis has been calculating using Option A based on the single total figure for the CEO on page 119 and pay
and benefits for UK FTE employees. The Committee selected Option A as the method of calculation as it is generally recognised as the most
statistically robust and is consistent with the 2019 reporting.
The pay and benefits for UK employees was calculated on 18 March 2021 using the same method as used for the single total figure. Furloughed
employees were included in the calculation but as salaries were topped up to 100% this had limited impact on the calculation. No estimates or
adjustments have been made.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
The median CEO pay ratio has decreased since 2019 but there are several reasons why the ratio for 2020 may not be representative of a
typical year. In 2020, members of the Board voluntarily reduced salaries by 20% for the duration of the most severe impact of the pandemic
and although some employees were furloughed salaries were topped up to 100%. In addition, as Tim Roberts was appointed to the Board as
CEO on 1 January 2020, his first LTIP grant will not be eligible to vest until 2023. As such the ratio for 2020 may under-emphasise current pay
differentials. However, the ratio is considered to be consistent with the pay, reward and progression policies within the Company.
Salary/wages
Total remuneration
25th
percentile
£24,720.00
£27,447.00
50th
percentile
£34,145.00
£39,245.50
75th
percentile
£51,141.81
£63,479.37
O
U
R
G
O
V
E
R
N
A
N
C
E
Relative importance of the 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
2020
£’000
7,319
11,921
31,125
2019
£’000
6,633
37,596
35,029
%
change
10%
(68)%
(11)%
Implementation of Remuneration Policy in 2021
Executive Directors
Base salary and fees
The CEO will receive a base salary increase of 1% effective 1 January 2021, in line with the wider workforce. The GFD will receive a salary
increase of 10% effective 1 January 2021, this is the first part of a two-stage increase to reflect his experience, the market rate for this role and
his outstanding contribution to the business since his appointment.
Tim Roberts
Darren Littlewood
01 January
2021
£
434,764
275,000
Salaries effective from
01 January
2020
£
430,460
250,000
Change
%
1%
10%
Pension
Darren Littlewood will continue to receive a salary supplement in lieu of pension of 20% of salary until 31 December 2021, following which his
salary supplement in lieu of pension will reduce to 8% of salary, this representing the pension contribution that most employees are able to
contribute to the pension. Tim Roberts will receive a salary supplement in lieu of pension of 8% of salary.
2021 bonus
The maximum bonus opportunity for Executive Directors is 120% of salary. The 2021 bonus will be based two thirds on financial measures
and one third on strategic objectives. In line with the new Policy, 10% of the bonus will payout for threshold performance, 50% at target. The
profit targets are considered to be commercially sensitive and will therefore be disclosed retrospectively in next year’s report. An overview of the
strategic objectives for each director is set out below.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
Remuneration
2021 personal objectives – Tim Roberts
1
2
3
4
5
6
7
Implement Group strategy, identifying strategic smart objectives, taking account of risk
Communicating the Group’s strategy, vision and values both internally and externally
Develop senior leadership team and review Group remuneration
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
Promote an open, diverse and progressive organisation and reduce the gender pay gap
2021 personal objectives – Darren Littlewood
1
2
3
4
5
6
7
Formulate and communicate Group strategy, implementing and monitoring key strategic smart objectives for the Group
Inform and develop IT strategy for each subsidiary business and the overarching Group
Developing strategic influence within the business and profile within the wider industry
Developing the Finance/IT/Communications 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 three-year BDO program and successful transitioning of the external audit from
PWC to EY
Support the development of an Environmental, Social and Governance (ESG) Policy
Two-thirds of any bonus earned will be payable in cash and for the remaining one third of the bonus, Executive Directors will be required to invest
this into shares which must be held for three years.
LTIP Awards expected to be granted for the financial years 2021–2023 in 2021
The Committee also reviewed the grant level under the LTIP within the new, lower, policy limit of 175% of salary. Recent grant levels have been
100% of salary and as part of the overall review the Committee has determined that the normal grant level should increase to 125% of base
salary for the CEO and maintain the current grant level for the GFD (100% of salary). The proposed LTIP opportunities are designed to drive
and reward management for achieving the stretching performance conditions, linked to the long-term strategy, and we are comfortable with the
slightly higher award level for the CEO, recognising his position as leader of the business and key driver of the success of the long-term strategy.
After the increase, the Committee is satisfied that the CEO’s total remuneration will continue to be positioned between the lower quartile and
median for companies of a similar size and sector. This is a market positioning that we are comfortable with, taking into account the other career
benefits of working for Henry Boot.
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 % of award at threshold
25%
25%
125%
100%
EPS
Return on Capital Employed
Total Shareholder Return (TSR) relative to
constituent companies of the FTSE Small
Companies Index
We strive to grow earnings per share sustainably over the long-term. 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.
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.
These three performance criteria provide a good balance between financial and stock market performance.
The EPS targets represent growth from a 2020 EPS of between 144% and 211% and are considered by the committee to be stretching in light of
the business plan and the market outlook.
The ROCE range has been reduced slightly from prior years recognising the continuing impact of the COVID pandemic on the business during
2021 in particular.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
The detailed performance metrics which will be measured over the three-year period to 31 December 2023, for these awards is as follows:
Weighting
33.3%
33.3%
33.4%
Threshold target
(25% of maximum)
22p
9%
Maximum target
(100% of maximum)
28p
12%
Median performance Upper quartile performance
01 January
2021
£
91,078
48,218
Fees effective from
01 January
2020
£
90,176
47,740
Change
%
1%
1%
EPS in 2023
Return on Capital Employed (average over 3 years)
TSR relating to the FTSE Small Cap Index
Awards will be subject to a two-year holding period post vesting.
Non-executive Directors
Chairman fee
Base Non-executive Director fee
Approved by the Board and signed on its behalf by
Gerald Jennings
Chairman of the Remuneration Committee
16 April 2021
O
U
R
G
O
V
E
R
N
A
N
C
E
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
DIRECTORS’ REPORT
The Directors’ Report for the financial year ended 31 December 2020
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 2020 is set out on pages 16 to 65.
Corporate governance statement
The Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority require certain information to be included in a corporate
governance statement in the Directors’ Report. Information that fulfils the
requirements of the Corporate Governance Statement can be found in
Governance on pages 74 to 133, and also within this Director’s Report.
Results for the year and dividends
The results are set out in the Consolidated Statement of Comprehensive
Income on page 144. The companies affecting the profit or net assets of
the Group in the year are listed in note 36 to the Financial Statements.
The Directors recommend that a final dividend of 3.3p per ordinary
share be paid on 28 May 2021, subject to shareholder approval at the
2021 AGM to be held on 20 May 2021, to ordinary shareholders on
the register at the close of business on 30 April 2021. If approved, this,
together with the interim dividend of 2.2p per ordinary share paid on 16
October 2020, will make a total dividend of 5.5p per ordinary share for
the year ended 31 December 2020. Further details are disclosed in note
10 to the Financial Statements on page 162.
Financial instruments
The Group’s policy in respect of financial instruments is set out
within the Accounting Policies on page 154 and details of credit risk,
capital risk management, liquidity risk and interest rate risk are given
respectively in notes 17, 24, 25 and 27 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 53 to 54.
Accountability and audit
Details of the Directors’ responsibilities and the Statement of Directors’
Responsibilities are contained on page 133. The Independent
Auditors’ Report is given on pages 136 to 143.
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 133.
128
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 2020 and as at the date of this Annual Report and
Financial Statements can be found on pages 70 and 71. 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 2020, are
disclosed in the Directors’ Remuneration Report on pages 106 to 127.
Between 31 December 2020 and 31 March 2021, being a date not
more than one month prior to the date of the Notice of the AGM, there
has been no change in the beneficial interest of any current Director.
Details of Directors’ long-term incentive awards and share options are
provided in the Directors’ Remuneration Report on pages 122 to 127.
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 20 May 2021 are set out in the Directors’ Remuneration Policy.
Tim Roberts and Darren Littlewood each have a one-year rolling service
agreement in accordance with our policy on Directors’ contracts.
Termination of these arrangements would therefore be subject to their
contractual terms and conditions which require a notice period of one
year to the Director. Contractual compensation in the event of early
termination provides for compensation at basic salary, 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 2018 Directors’ Remuneration Policy
can be viewed on the website, with the proposed 2021 Directors’
Remuneration Policy being set out on pages 111 to 118.
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. Commencing in 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 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 and other management
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 ordinarily scheduled throughout the year though in 2020 these
were negatively impacted by the CV-19 pandemic. You can read more
about the engagement with employees and other stakeholders on
pages 86 to 89.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
O
U
R
G
O
V
E
R
N
A
N
C
E
Specific training requirements were considered as part of the Board’s
skills evaluation, details of which can be found on pages 95 to 96.
General updates on regulations and best practice are provided
through a mixture of briefings, Board papers and emails
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 are set out responsible business section on
pages 57 to 60, the employee engagement report on pages 86 to 87
and Nomination Committee Report on pages 94 to 98.
Employee engagement
Details of our employee engagement activities can be found on pages
86 to 87.
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 2021, 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
30 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 Responsible Business section on page 61.
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 46 to 47 and 88 to 89.
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.
Our largest institutional and family shareholders were also consulted
in the months leading up to the publication of the Remuneration
Policy. As a result of feedback received, changes were made to
the Policy and its implementation for 2021. 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, 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 64 to 65. 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 31 March 2021, 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.
Voting rights over
ordinary shares
Number % of issued
Rysaffe Nominees and
J J Sykes (joint holding)1
Unicorn Asset Management Limited
The Fulmer Charitable Trust2
The London & Amsterdam Trust
Company Limited
Polar Capital
20,722,155
6,830,000
5,739,580
5,525,936
4,176,337
15.56
5.13
4.40
4.15
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 123.
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
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
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 2020 were Jamie Boot, Tim Roberts,
Darren Littlewood and Amy Stanbridge (John Sutcliffe resigned on
31 May 2020), 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 2020, 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 250,000 ordinary shares in
the Company in order to satisfy upcoming grants. Further details are
provided in note 32 to the Financial Statements.
Future developments
Important events since the financial year end and likely future
developments are described in the Strategic Report on pages 16 to 65
and in note 36 to the Financial Statements.
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 newly-appointed external auditors, Ernst & Young LLP, have
carried out the audit of the 2020 financial results. Resolutions
re-appointing Ernst and Young as auditors (Resolution 12) and
authorising the Audit and Risk Committee to fix their remuneration
(Resolution 13) will be proposed at the AGM.
Accountability and audit
Details of the Directors’ responsibilities and the Statement of Directors’
Responsibilities are contained on page 133. The Independent
Auditors’ Report is given on pages 136 to 143.
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 gatherings due to the CV-19 pandemic, ordinary shareholders and
their proxies are kindly requested not to attend the AGM in person, as
the number of permitted attendees is likely to restricted. 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.
The Notice of the AGM can be found on pages 198 to 201, which also
details methods of shareholder engagement to take place in conjunction
with the AGM. It is also available at 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 30 to
the Financial Statements. As at 31 March 2021, the ordinary shares
represent 97.08% of the total issued share capital of the Company
by nominal value and the preference shares represent 2.92% 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.
The Notice of the AGM on pages 198 to 201 includes the following
resolutions:
• An ordinary resolution (Resolution 14) to renew the authority of
the Directors to allot shares up to a maximum nominal amount of
£4,440,364 representing approximately one-third (33.33%) of the
Company’s issued ordinary share capital at 31 March 2021. The
authority will expire on 19 August 2022 or at the conclusion of the
next AGM, whichever is the earlier, but it is the present intention of
the Directors to seek annual renewal of this authority. The Directors
do not have any present intention of exercising the authority.
• A special resolution (Resolution 15) to enable the Directors to
continue to allot equity securities for cash in connection with a rights
or other issue pro rata to the rights of the existing shareholders, but
subject to certain exceptions, and for any other purpose provided
that the aggregate nominal value of such allotments does not
exceed £666,054 (approximately 5% of the Company’s issued
ordinary share capital at 31 March 2021). The authority will expire on
19 August 2022 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 16) to renew the authority of the
Company to make market purchases of up to 13,321,093 of its own
issued ordinary shares (10% of the Company’s issued ordinary share
capital at 31 March 2021). 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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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 him unless all calls and other
sums presently payable by him in respect of that share have been paid.
In addition, holders of default shares (as defined in the Articles) shall not
be entitled to vote during the continuance of a default in providing the
Company with information concerning interests in those shares required to
be provided (following relevant notification) under the Companies Act 2006.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights in respect of the
resolutions to be considered at the AGM to be held on 20 May 2021
are set out in the Notice of AGM on pages 198 to 201.
Dividends and distributions
The Company may, by ordinary resolution, declare a dividend to be
paid to the shareholders but no dividend shall exceed the amount
recommended by the Board. The Board may pay interim dividends
and also any fixed rate dividend whenever the financial position of the
Company justifies its payment in the opinion of the Board. If the Board
acts in good faith, none of the Directors shall incur any liability to the
holders of shares with preferred rights for any loss they may suffer in
consequence of the payment of an interim dividend on other shares.
Variation of rights
The Articles specify that the special rights attached to any class of
shares may, either with the consent in writing of holders of three-
quarters of the issued shares of that class or with the sanction of a
special resolution passed at a separate meeting of such holders (but
not otherwise), be modified or abrogated.
Transfer of shares
Under and subject to the restrictions in the Articles, any shareholder
may transfer some or all of their shares in certificated form by transfer
in writing in any usual form or in any other form which the Board may
approve. Uncertificated shares must be transferred by means of a
relevant system, such as CREST. The Board may, save in certain
circumstances, refuse to register any transfer of a certificated share
not fully paid up. The Board may also refuse to register any transfer of
certificated shares unless it is:
•
in respect of only one class of shares;
• duly stamped or exempt from stamp duty;
• delivered to the office or at such other place as the Board may
decide for registration; and
• accompanied by the certificate for the shares to be transferred and
such other evidence (if any) as the Board may reasonably require to
show the right of the intending transferor to transfer the shares.
In addition, the Board may refuse to register any transfer of shares
which is in favour of (i) a child, bankrupt or person of unsound mind or
(ii) more than four transferees.
Repurchase of shares
Subject to the provisions of the Companies 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 less than three nor more than 15 in
number. Directors may be appointed by the Company by ordinary
resolution or by the Board. A Director appointed by the Board shall
retire from office at the next AGM of the Company but shall then
be eligible for reappointment. The Board may appoint one or more
Directors to hold any office or employment under the Company for
such period (subject to the Companies 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
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Corporate Governance Report
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 make any arrangement or composition
with their creditors generally;
iii. they are physically or mentally incapable of acting as a Director, in
the opinion of a registered medical practitioner who is treating them;
iv. a court makes an order that they are prevented from exercising
their powers or rights by reasons of their mental health;
v. 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
vi. 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
16 April 2021
The following table sets out where stakeholders can find relevant Non-Financial information within this Annual Report, further to the Financial
Reporting Directive requirements contained in sections 414CA and 414CB of the Companies Act 2006. Where possible, it also states where
additional information can be found that support these requirements.
Reporting requirement
Business Model
Principal risks and impact of
business activity
Non-financial KPIs
Employee Engagement
Human Rights
Social matters
Anti-bribery and corruption
Environmental matters
Relevant Henry Boot policies
and procedures
Board Diversity Policy
Board Stakeholder Policy
Modern slavery statement & Policy
Rights to Work
Whistleblowing
Board Stakeholder Policy
Anti-bribery and Corruption Policy
Board Stakeholder Policy
Where to read more
in this report
Business Model
Risks and Uncertainties
Audit and Risk Committee Report
Strategy
Key Performance Indicators
Our Responsible Business
Our People
Corporate Governance Report
Our People
Our Responsible Business
Our People
Our Planet
Page
18–21
48–54
100–105
26–29
42
55–56
57–59
88–89
61
55–65
61
64–65
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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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 elected
to prepare the group and parent company financial statements in
accordance with International Financial Reporting Standards (‘IFRSs’)
in conformity with the Companies Act 2006
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.
Under the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, group financial statements are required to be
prepared in accordance with IFRSs adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. In preparing
the Financial Statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8
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.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors’ report, directors’
remuneration report and corporate governance statement that comply
with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Parent Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in
other jurisdictions.
Fair, balanced and understandable
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group and Parent Company’s performance, business model and
strategy.
Directors’ responsibility statement
Each of the Directors, whose names and functions are listed in Board
of Directors, confirm that, to the best of their knowledge:
that the consolidated financial statements, prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and IFRSs adopted
pursuant to Regulation(EC) No 1606/2002 as it applies in
the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Parent Company and
undertakings included in the consolidation taken as a whole; and
•
that the Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business
and the position of the Parent Company and undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
Approved by the Board and signed on its behalf by
Tim Roberts
Director
16 April 2021
Darren Littlewood
Director
16 April 2021
Accounting Policies, Changes in Accounting Estimates and Errors
and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable
and prudent;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Group and Parent Company financial position and financial
performance;
•
•
in respect of the Group financial statements, state whether
international accounting standards in conformity with the
requirements of the Companies Act 2006 and IFRSs adopted
pursuant to Regulation(EC) No 1606/2002 as it applies in the
European Union have been followed, subject to any material
departures disclosed and explained in the financial statements;
in respect of the Parent Company financial statements, state
whether international accounting standards in conformity with the
requirements of the Companies Act 2006, have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis unless
it is appropriate to presume that the Parent Company and/ or the
Group will not continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and Parent
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and Parent Company and
enable them to ensure that the Financial Statements comply with the
Companies Act 2006.
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133
30368 8 April 2021 11:07 am V0Henry-Boot-AR-2020-financials.indd 134Henry-Boot-AR-2020-financials.indd 13408/04/2021 14:37:0408/04/2021 14:37:04 30368 8 April 2021 11:07 am V0FINANCIAL STATEMENTSIndependent Auditors’ Report136Consolidated Statement of Comprehensive Income144Statements of Financial Position145Statements of Changes in Equity146Statements of Cash Flows147Principal Accounting Policies148Notes to the Financial Statements157Henry-Boot-AR-2020-financials.indd 135Henry-Boot-AR-2020-financials.indd 13508/04/2021 14:37:2308/04/2021 14:37:23 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Independent
Auditors’ Report
to the members of Henry Boot PLC
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 2020 and of the group’s profit for the year then ended;
•
•
the group financial statements have been properly prepared in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union;
the parent company financial statements have been properly
prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006 as
applied in accordance with section 408 of the Companies Act 2006;
and
•
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Henry Boot PLC (the
‘Parent Company’) and its subsidiaries (the ‘group’) for the year ended
31 December 2020 which comprise:
Parent Company
Parent Company statement
of financial position as at
31 December 2020
Parent Company statement of
changes in equity for the year then
ended
Parent Company statement of cash
flows for the year then ended
Related notes 1 to 38 to the financial
statements including a summary of
significant accounting policies
Group
Group statement of financial
position as at 31 December 2020
Consolidated statement of
comprehensive income for the year
then ended
Group statement of changes in
equity for the year then ended
Group statement of cash flows for
the year then ended
Related notes 1 to 38 to the
financial statements, including a
summary of significant accounting
policies
The financial reporting framework that has been applied in their
preparation is applicable law and International Accounting Standards
in conformity with the requirements of the Companies Act 2006 and,
as regards the group financial statements, International Financial
Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union, as regards the parent
company financial statements, as applied in accordance with section
408 of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are
independent of the group in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
136
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of
the directors’ assessment of the group and parent company’s ability to
continue to adopt the going concern basis of accounting included:
•
In conjunction with our walkthrough of the Group’s financial close
process, we confirmed our understanding of management’s Going
Concern assessment process and also engaged with management
early to ensure all key risk factors we identified were considered in
their assessment;
• We obtained management’s going concern assessment, including
the cash forecast and forecast covenant calculation which covers
the period to 31 December 2022. The Group has modelled a base
scenario and then a severe but plausible downside scenario in their
cash forecasts and covenant calculations in order to incorporate
unexpected changes to the forecasted liquidity of the Group.
• We have tested the factors and assumptions included in each
modelled scenario for the cash forecast and covenant calculation
and we have considered the impact of CV-19. We considered
the appropriateness of the methods used to calculate the cash
forecasts and covenant calculations and determined that they were
appropriately sophisticated to be able to make an assessment on
going concern.
• We considered the mitigating factors included in the cash forecasts
and covenant calculations that are within control of the Group. This
includes review of the Company’s non-operating cash outflows. We
also verified the credit facilities available to the Group.
• We have performed reverse stress testing in order to identify what
factors would lead to the Group utilising all liquidity or breaching the
financial covenant during the going concern period.
• We reviewed the Group’s going concern disclosures included
in the annual report in order to assess that the disclosures were
appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group and Parent
Company’s ability to continue as a going concern to 31 December 2022.
In relation to the group and parent company’s reporting on how they have
applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the group’s ability to continue as a
going concern.
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30368 8 April 2021 11:07 am V0Overview of our audit approachAudit scope• We performed an audit of the complete financial information of six components and audit procedures on specific balances for a further five components.• The components where we performed full or specific audit procedures accounted for 94% of Profit before tax, 97% of Revenue and 93% of Total assetsKey audit matters• Valuation of contract balances and associated revenue and profit recognition• Valuation of house building inventories• Valuation of investment propertiesMateriality• Overall group materiality of £1.9m which represents 5% of normalised profit before tax. Due to the impact of CV-19 on the business, our materiality is based on the average profit before tax over the past three years.First year transition• The year ended 31 December 2020 is our first as auditor of the Group. We commenced transition subsequent to our appointment on 30 June 2020. Our transition activities focused on evaluating key accounting judgements and the Group’s accounting policies, undertaking a review of the predecessor auditor’s files to consider the nature, timing and extent of audit procedures performed in the prior year to be satisfied with the comparatives presented and understanding and walking through the key processes of the Group.An overview of the scope of the Parent Company and group audits Tailoring the scopeOur assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors when assessing the level of work to be performed at each company.In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 45 reporting components of the Group, we selected eleven components, which represent the principal business units within the Group.Of the eleven components selected, we performed an audit of the complete financial information of six components (“full scope components”) which were selected based on their size or risk characteristics. For the remaining five components (“specific scope components”), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. The reporting components where we performed audit procedures accounted for 94% of the Group’s Profit before tax, 97% of the Group’s Revenue and 93% of the Group’s Total assets. For the current year, the full scope components contributed 71% of the Group’s Profit before tax, 92% of the Group’s Revenue and 85% of the Group’s Total assets. The specific scope components contributed 23% of the Group’s Profit before tax, 5% of the Group’s Revenue and 8% of the Group’s Total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of profit before tax, revenue and total assets tested for the Group. Of the remaining 34 components that together represent 6% of the Group’s Profit before tax, none are individually greater than 1% of the Group’s Profit before tax. For these components, we performed other procedures, including analytical review and testing of consolidation journals and intercompany eliminations to respond to any potential risks of material misstatement to the Group financial statements.The charts below illustrate the coverage obtained from the work performed by our audit teams.Profit before tax (or adjusted PBT measure usedFull scope components71%Specific scope components23%Other procedures6%RevenueFull scope components92%Specific scope components5%Other procedures3%Total assetsFull scope components85%Specific scope components8%Other procedures7%All audit work performed for the purposes of the audit was undertaken by the Group audit team.137Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020FINANCIAL STATEMENTSHenry-Boot-AR-2020-financials.indd 137Henry-Boot-AR-2020-financials.indd 13708/04/2021 14:37:2508/04/2021 14:37:25 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Independent
Auditors’ Report
to the members of Henry Boot PLC
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our 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) that we identified. These
matters included 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 were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
Key observations communicated to the
Audit Committee
Based on our audit procedures we have
concluded that the contract balances, revenue
and profit recognised in the year are not
materially misstated.
Risk
Valuation of contract balances
and associated revenue and
profit recognition
Refer to the Audit & Risk Committee Report
(page 102); Accounting policies (page 150);
and Note 1, 17 and 22 of the Consolidated
Financial Statements (page 157, 175,177)
The Group has reported revenues from
construction and development contracts
for the year of £123.9 (2019: £195.7m).
The Group has reported contract assets of
£13.3m (2019: £19.1m) and contract liabilities
of £7.4m (2019: £9.9m).
For Construction and Development contract
activity the performance obligation is
satisfied over time. This means that revenue
is recognised by measuring the progress
towards completing the performance
obligation satisfactorily. This assessment
requires management to estimate the stage of
completion of Construction and Development
contract activity and assess costs to
complete. Forecasting is highly subjective and
is an area that could lead to misstatement of
revenue, profit and related construction and
development contract balances either through
error or management bias.
Our response to the risk
For a sample of contracts, we evaluated
management’s revenue and profit recognition
and the related contract assets and liabilities
by performing the following procedures:
• We performed walkthroughs to understand
the key processes and identify key
controls;
• We agreed key contractual terms to
customer contracts;
• We agreed total revenue for the contract to
the signed contract and approved variation
orders;
• We held meetings with in-house surveyors
to understand the status,performance to
date of the contracts and the basis for the
cost to complete assumptions made;
• We challenged management’s forecast of
costs to complete by analysing historical
forecasting accuracy through reviewing the
movement in forecast margins to their final
actual margins on completed contracts;
• We obtained post year end contract
valuation schedules to identify unfavourable
margin movements and where necessary
that this post year end informaiton was
reflected in the year end assessments;
• We tested a sample of costs incurred in
the year to third party supporting evidence
and validated that the cost had been
allocated to the appropriate contract;
• We recalculated the percentage
completion of the project and the revenue
and margin recognised in the year;
• We tested the amounts invoiced on
contracts to underlying payment
applications/certificates and to cash receipt
where possible and assessed any contract
assets for recoverability; and
• We discussed projects with in-house
surveyors and the Group legal department
to identify any claims that may impact on
cost to complete.
For those sample projects that were
incomplete at the balance sheet date, we
also performed a virtual tour to gain a deeper
understanding of the projects and to evaluate
the stage of completion.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Key observations communicated to the
Audit Committee
Based on our audit procedures we have
concluded that the inventory balance and
profit recognised in the year are not materially
misstated.
Risk
Valuation of House Building
inventories
Refer to the Audit & Risk Committee Report
(page 102); Accounting policies (page 153);
and Note 20 of the Consolidated Financial
Statements (page 177)
The Group holds house building inventories of
£39.2m (2019: £36.3m).
There is a risk that the carrying value of WIP
and land in relation to the housebuilding part of
the Group is misstated. Inventory is held at cost
less amount recognised within cost of sales.
The carrying value of inventories is therefore
determined by reference to expected future
sales value and cost to complete assumptions
which are subject to estimation.
Our response to the risk
For a sample of development sites, we
performed the following procedures:
• We performed walkthroughs to understand
the key processes and identify key controls;
• We held meetings with in-house surveyors
to understand the status and performance
to date of the sites and the basis for the
sales and cost to complete assumptions
made;
• We verified sales price assumptions against
recent market activity and to consider if
recent market activity provided an contra-
evidence;
• We compared the estimated and actual
costs and margin for completed sites
to assess the historical accuracy of
management’s forecasting and to evaluate
the appropriateness of the forecast margin
for incomplete sites at the balance sheet
date;
• We agreed a sample of costs incurred
during the year (included as additions to
work in progress) to third party invoices
as well as reviewing the proportion of that
expenditure recognised as a cost of sale in
the year in respect of units sold.
• We agreed a sample of land additions in the
period to third party agreements and cash
payment;
• We tested the allocation of costs incurred
during the year to confirm that these were
allocated to the correct site; and
• We assessed the completeness of inventory
provisions by performing sensitivity analysis
on active sites and post year end sales
activity.
For those sample projects that were not
substantially complete at the balance sheet
date, we visited sites to gain a deeper
understanding of the sites and evaluate the
stage of completion.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Key observations communicated to the
Audit Committee
Based on our audit procedures we have
concluded that the investment property balance
and fair value movement recognised in the year
are not materially misstated.
Independent
Auditors’ Report
to the members of Henry Boot PLC
Risk
Valuation of investment
properties
Refer to the Audit & Risk Committee Report
(page 102); Accounting policies (page 152);
and Note 14 of the Consolidated Financial
Statements (page 168 to 172)
The Group has holds Investment property of
£82.7m (2019: £70.0m).
There is a risk that the carrying value of
investment properties is misstated, given
the uncertainties inherent in the valuations
including estimated rental values, yields, cost
to complete and land values per acre.
Our response to the risk
For a sample of investment properties, we
performed the following procedures:
• We performed walkthroughs to understand
the key processes and identify key
controls;
• For completed investment property valued
by an external valuer, we assessed the
appropriateness of the valuations, with the
assistance of our EY Valuations specialists.
We assessed these through reading the
external valuer reports and testing the
underlying data used by the external
valuer in forming their valuation including;
benchmarking, validating key assumptions
to supporting third party evidence or
market activity and considering contrary
evidence; and
• For a sample of properties in the course
of construction, valued by management,
we agreed rental assumptions to pre
letting agreements, tested a sample of
costs incurred to third party invoices and
evaluated the appropriateness of costs to
complete.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Other information
The other information comprises the information included in the annual
report set out on pages 1 to 133 other than the financial statements
and our auditor’s report thereon. The directors are responsible for the
other information contained within the annual report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
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 course of
the audit or otherwise appears to be materially misstated. If we identify
such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in
the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the
other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements and those reports have
been prepared in accordance with applicable legal requirements;
the information about internal control and risk management
systems in relation to financial reporting processes and about share
capital structures, given in compliance with rules 7.2.5 and 7.2.6 in
the Disclosure Rules and Transparency Rules sourcebook made by
the Financial Conduct Authority (the FCA Rules), is consistent with
the financial statements and has been prepared in accordance with
applicable legal requirements; and
•
information about the company’s corporate governance statement
and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2,
7.2.3 and 7.2.7 of the FCA Rules.
Our application of materiality
We apply the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £1.9 million, which is
5% of normalised profit before tax. Due to the impact of CV-19 on
the business, our materiality is based on the average profit before tax
over the past three years. We believe that normalised profit before tax
provides us with an appropriate basis for materiality and is the most
relevant measure for stakeholders as it is a focus of both management
and investors. The predecessor auditor determined materiality to be
£3.6 million, based on 0.8% of total assets in the prior year.
We determined materiality for the Parent Company to be £1.6 million,
which is 2% of equity.
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment
of the Group’s overall control environment, our judgement was that
performance materiality was 50% of our planning materiality, namely
£0.95m. We have set performance materiality at this level as this is the
first year of our audit.
Audit work at component locations for the purpose of obtaining
audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality.
The performance materiality set for each component is based on
the relative scale and risk of the component to the Group as a whole
and our assessment of the risk of misstatement at that component.
In the current year, the range of performance materiality allocated to
components was £0.19m to £0.95m.
Reporting threshold
An amount below which identified misstatements are considered as
being clearly trivial.
We agreed with the Audit Committee that we would report to them all
uncorrected audit differences in excess of £0.1m, which is set at 5% of
planning materiality, as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
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141
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Independent
Auditors’ Report
to the members of Henry Boot PLC
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in:
•
•
the strategic report or the directors’ report; or
the information about internal control and risk management
systems in relation to financial reporting processes and about share
capital structures, given in compliance with rules 7.2.5 and 7.2.6 of
the FCA Rules
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit
• a Corporate Governance Statement has not been prepared by the
company
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in
relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the group and company’s
compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set
out on page 133, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors 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 and 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.
Auditor’s 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 auditor’s 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.
Explanation as to what extent the audit was
considered capable of detecting irregularities,
including fraud
IIrregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud.
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. The extent to which our
procedures are capable of detecting irregularities, including fraud is
detailed below.
• Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 53;
However, the primary responsibility for the prevention and detection of
fraud rests with both those charged with governance of the company
and management.
• Directors’ explanation as to its assessment of the company’s
prospects, the period this assessment covers and why the period is
appropriate set out on page 54;
• Directors’ statement on fair, balanced and understandable set out
on page 133;
• Board’s confirmation that it has carried out a robust assessment of
the emerging and principal risks set out on pages 48 to 53;
• The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set
out on pages 102 to 104; and;
• The section describing the work of the Audit and Risk committee
set out on pages 100 to 102
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the group and determined
that the most significant frameworks which are directly relevant
to specific assertions in the financial statements are those that
relate to the reporting framework (International Financial Reporting
Standards adopted pursuant to Regulation (EC) No.1606/2002
as it applies in the European Union, the Companies Act 2006 and
UK Corporate Governance Code) and the relevant tax compliance
regulations in the UK.
• We understood how Henry Boot PLC is complying with those
frameworks by making enquiries of management, Internal Audit,
those responsible for legal and compliance procedures and the
Company Secretary. We corroborated our enquiries through
our review of board minutes and papers provided to the Audit
Committee.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Victoria Venning
for and on behalf of Ernst & Young LLP, Statutory Auditor
Manchester
• We assessed the susceptibility of the group’s financial statements
to material misstatement, including how fraud might occur by
meeting with management from various parts of the business to
understand where it considered there was a susceptibility to fraud.
We also considered performance targets and their propensity
to influence efforts made by management to manage earnings.
We considered the programmes and controls that the Group has
established to address risks identified, or that otherwise prevent,
deter and detect fraud; and how senior management monitors
those programmes and controls. Where the risk was considered
to be higher, we performed audit procedures to address each
identified fraud risk. These procedures included testing manual
journals and were designed to provide reasonable assurance that
the financial statements were free from material fraud and error.
• Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations. Our
procedures involved journal entry testing, with a focus on manual
consolidation journals, and journals indicating large or unusual
transactions based on our understanding of the business; enquiries
of Group management and Internal Audit; and focused testing,
as referred to in the key audit matters section above. In addition,
we completed procedures to conclude on the compliance of
the disclosures in the Annual Report and Accounts with the
requirements of the relevant accounting standards, UK legislation
and the UK Corporate Governance Code 2018.
A further description of our responsibilities for the audit of the financial
statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s
report.
Other matters we are required to address
• Following the recommendation from the audit committee, we were
appointed by the company on 30 June 2020 to audit the financial
statements for the year ending 31 December 2020 and subsequent
financial periods.
• The period of total uninterrupted engagement including previous
renewals and reappointments is one year, covering the year ending
31 December 2020.
• The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company and we
remain independent of the group and the parent company in
conducting the audit.
• The audit opinion is consistent with the additional report to the
audit committee
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143
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Pension expenses
Increase in fair value of investment properties
Loss on sale of investment properties
Loss on sale of assets held for sale
Share of profit of joint ventures and associates
Profit on disposal of joint ventures and subsidiaries
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit for the year from continuing operations
Other comprehensive expense not being reclassified to
profit or loss in subsequent years:
Revaluation of Group occupied property
Actuarial loss on defined benefit pension scheme
Deferred tax on actuarial loss
Total other comprehensive expense not being reclassified to profit or loss in
subsequent years
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the Parent Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Parent Company
Non-controlling interests
Basic earnings per ordinary share for the profit attributable to owners of the Parent
Company during the year
Diluted earnings per ordinary share for the profit attributable to owners of the Parent
Company during the year
1 See ‘change in accounting policies’ on page 148.
2020
£’000
222,411
(181,944)
40,467
(28,791)
(4,552)
7,124
1,266
(97)
—
1,756
7,426
17,475
721
(1,117)
17,079
(3,354)
13,725
(651)
(15,713)
3,089
(13,275)
450
11,921
1,804
13,725
(1,354)
1,804
450
9.0p
8.9p
Restated1
2019
£’000
379,693
(298,711)
80,982
(29,681)
(4,475)
46,826
2,370
(238)
(56)
1,448
—
50,350
494
(1,740)
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
Note
1
4
14
16
37
3
5
6
7
12
28
19
9
9
144
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Statements of
Financial Position
as at 31 December 2020
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
2020
£’000
2019
£’000
Parent Company
2020
£’000
2019
£’000
Note
11
12
13
14
15
16
18
19
20
17
18
23
22
26
13
27
23
26
13
28
27
30
31
31
31
32
4,318
23,818
2,110
82,723
—
5,840
7,194
7,342
133,345
200,789
13,328
65,032
42,125
321,274
72,727
7,430
1,129
2,941
603
4,852
89,682
231,592
2,346
9,969
1,613
36,445
1,076
51,449
313,488
13,718
2,342
288,514
6,404
(1,176)
309,802
3,686
313,488
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
—
182
137
—
38,021
—
—
7,347
45,687
—
—
135,640
31,615
167,255
93,110
—
386
1,421
54
—
94,971
72,284
—
—
86
36,445
—
36,531
81,440
13,718
—
61,357
7,541
(1,176)
81,440
—
81,440
—
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
The Parent Company made a profit for the year of £552,000 (2019: £12,350,000).
The Financial Statements on pages 144 to 195 of Henry Boot PLC, registered number 160996, were approved by the Board of Directors and
authorised for issue on 16 April 2021.
On behalf of the Board
Tim Roberts
Director
Darren Littlewood
Director
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Statements of
Changes in Equity
for the year ended 31 December 2020
Attributable to owners of the Parent Company
Group
At 1 January 2019
Change in accounting policy¹
Restated at 1 January 2019
Profit for the year
Other comprehensive expense
Total comprehensive income/
(expense)
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Acquisition of subsidiary
Purchase of non-controlling
interest
Share-based payments
At 31 December 2019
Profit for the year
Other comprehensive expense
Total comprehensive income/
(expense)
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2020
Note
31
10
32
35
31, 32
31
10
32
31, 32
Share
capital
£’000
13,715
—
13,715
—
—
Property
revaluation
reserve
£’000
3,397
—
3,397
—
(404)
—
—
2
—
—
—
—
2
13,717
—
—
—
—
1
—
—
1
13,718
(404)
—
—
—
—
—
—
—
2,993
—
(651)
(651)
—
—
—
—
—
2,342
Parent Company
At 1 January 2019
Change in accounting policy¹
Restated at 1 January 2020
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
Profit for the year
Other comprehensive expense
Total comprehensive expense
Equity dividends
Proceeds from shares issued
Purchase of treasury shares
Share-based payments
At 31 December 2020
Note
8
10
32
32
8
10
32
32
Retained
earnings
£’000
276,999
(154)
276,845
37,596
(6,587)
31,009
(12,621)
—
—
—
(1,856)
216
(14,261)
293,593
11,921
(12,624)
(703)
(4,664)
—
—
288
(4,376)
288,514
Share
capital
£’000
13,715
—
13,715
—
—
—
—
2
—
—
2
13,717
—
—
—
—
1
—
—
1
13,718
Cost of
shares held
by ESOP
trust
£’000
(1,260)
—
(1,260)
—
—
Other
reserves
£’000
6,347
—
6,347
—
—
Non-
controlling
interests
£’000
3,114
—
3,114
1,859
—
1,859
(2,445)
—
—
(1,343)
1,856
—
Total
equity
£’000
302,312
(154)
302,158
39,455
(6,991)
32,464
(15,066)
45
(598)
(1,343)
—
826
(1,932)
3,041
1,804
(16,136)
318,486
13,725
— (13,275)
1,804
(1,159)
—
—
—
(1,159)
3,686
450
(5,823)
15
(615)
975
(5,448)
313,488
Total
£’000
299,198
(154)
299,044
37,596
(6,991)
30,605
(12,621)
45
(598)
—
(1,856)
826
(14,204)
315,445
11,921
(13,275)
(1,354)
(4,664)
15
(615)
975
(4,289)
309,802
—
—
—
(598)
—
—
610
12
(1,248)
—
—
—
—
—
(615)
687
72
(1,176)
Cost of
shares held
by ESOP
trust
£’000
(1,260)
—
(1,260)
—
—
—
—
—
(598)
610
12
(1,248)
—
—
—
—
—
(615)
687
72
(1,176)
Other
reserves
£’000
7,484
—
7,484
—
—
—
—
43
—
—
43
7,527
—
—
—
—
14
—
—
14
7,541
Total
equity
£’000
105,452
(7)
105,445
12,350
(6,589)
5,761
(12,621)
45
(598)
354
(12,820)
98,386
552
(12,624)
(12,072)
(4,664)
15
(615)
390
(4,874)
81,440
—
—
43
—
—
—
—
43
6,390
—
—
—
—
14
—
—
14
6,404
Retained
earnings
£’000
85,513
(7)
85,506
12,350
(6,589)
5,761
(12,621)
—
—
(256)
(12,877)
78,390
552
(12,624)
(12,072)
(4,664)
—
—
(297)
(4,961)
61,357
1.
The Group adopted IFRS 16 ‘Leases’ retrospectively from 1 January 2019 but did not restate comparatives for the 2018 reporting period, as permitted under the specific transitional
provisions in the standard.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Statements of
Cash Flows
for the year ended 31 December 2020
Cash flows from operating activities
Cash generated from operations
Interest paid
Tax paid
Net cash flows from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of intangible assets
Purchase of property, plant and equipment
Capital expenditure on 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
Proceeds on disposal of investment in joint ventures
Interest received
Dividends received from joint ventures and subsidiaries
Net cash flows from investing activities
Cash flows used in financing activities
Proceeds from shares issued
Purchase of treasury shares
Repayment of borrowings
Proceeds from new borrowings
Principal elements of lease payments
– ordinary shares
Dividends paid
– non-controlling interests
– preference shares
Net cash flows used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
33
35
11
12
32
10
10
Group
2020
£’000
21,136
(728)
(6,597)
13,811
—
(283)
(924)
(11,962)
—
279
627
—
2,798
512
2,200
(6,753)
15
(615)
(1,942)
4,153
(3,024)
(4,643)
(1,159)
(21)
(7,236)
(178)
42,303
42,125
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
Parent Company
2020
£’000
(5,578)
(2,232)
(4,477)
(12,287)
—
—
(54)
—
—
—
—
—
—
3,665
7,897
11,508
15
(615)
—
—
(67)
(4,643)
—
(21)
(5,331)
(6,110)
36,304
30,194
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
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147
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Principal
Accounting Policies
for the year ended 31 December 2020
The principal Accounting Policies adopted in the preparation of the Group’s 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, England, United Kingdom S11 9PD.
Basis of preparation and statement of compliance
The Consolidated Financial Statements of the Group and the Financial Statements of the Parent Company have been prepared in accordance
with International Accounting Standards in conformity with the Companies Act 2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 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 Group’s definition of operating
profit. In the current year, we have reclassified ‘share of profit of joint ventures and associates’ into operating profit. This is to reflect that our use
of joint ventures and associates has gradually moved such that they are now integral to our business model and underpin our core operational
business activities. The Directors therefore believe that classifying these lines into operating profit provides more reliable and relevant information
to the users of the financial statements. For comparability purposes, the prior year amounts have been restated, leading to operating profit
increasing from £48.9m to £50.4m. There is no overall impact on profit before tax or the balance sheet.
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 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 to
the effective date of 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
Following the third national lockdown and ongoing impact of CV-19 the Directors have further considered its potential impact on the Group
in modelling a base case scenario. They have also modelled what they consider to be a severe downside scenario to include a curtailment of
activity where no sales from the Construction or Developments businesses, are made unless already committed. For Hallam Land, no sales
are assumed in 2021 unless already contracted, with a c20% reduction in sales from the base case for 2022. For Stonebridge Homes a 5%
decline in house prices is assumed throughout the assessment period and Banner Plant is assumed to mirror depressed activity levels in 2020.
This downside model assumes that acquisition and development spend is restricted other than that already committed. Having started 2021
in a £27m net cash position, a position which has been improved upon over the first part of 2021 with c£38m net cash held by the Group and
facilities of £75m, at 26 February 2021, the Directors have concluded that the Group is able to control the level of uncommitted expenditure,
allowing it to retain cash and position itself well in the event of a severe downside scenario, although the impact of doing so on the profit and loss
account would be unavoidable.
The Company meets its day-to-day working capital requirements through a secured loan facility (note 25). The facility was renewed on the 23
January 2020, at a level of £75m, for a period of three years and extended in January 2021 by one year to 23 January 2024 on the same terms
as the existing agreement. The facility 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. The most sensitive
covenant in our facilities relates to the ratio of EBIT (Earnings Before Interest and Tax) on a 12-month rolling basis to senior facility finance costs.
Our downside modelling, which reflects a near 14% reduction in revenue and near 36% reduction in profit before tax from our base case for
2021, demonstrates significant headroom over this covenant throughout the forecast period to the end of December 2022.
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 53 to 54.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Operating segments
The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments
of an entity. The Group has determined that its chief operating decision maker is the Board of Henry Boot PLC (the ‘Board’).
Management has determined the operating segments based on the reports reviewed by the Board in making strategic decisions.
The Board considers the business based on the following operating segments:
• Property Investment and Development, inclusive of property investment, 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 ventures 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 a financial asset or financial 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 151 to 153 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Principal
Accounting Policies
for the year ended 31 December 2020
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, as the benefit is transferred to the customer, 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.
Land and properties are treated as disposed when control of the asset is transferred to the buyer. Typically, this
will either occur on unconditional exchange or on completion. Where completion is expected to occur significantly
after exchange, or where the Group continues to have significant outstanding obligations after exchange, the
control will not usually transfer to the buyer until completion.
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 in the period in which it was earned. 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 rental 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’)
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 is the input method. The assessment of the final outcome of each contract is determined by regular review of
the revenues and costs to complete that contract by an in-house or external survey of the work.
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 lessor in the case of operating leases, rentals receivable are recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same basis as rental income.
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.
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 30. At each reporting period date, the
Group estimates the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact
of the revision, if any, is recognised in the Consolidated Statement of Comprehensive Income with a corresponding adjustment to equity reserves.
SAYE share options are treated as cancelled when employees cease to contribute to the scheme. This results in accelerated recognition
of the expenses that would have arisen over the remainder of the original vesting period.
Details regarding the determination of the fair value of share-based transactions are set out in note 30.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Principal
Accounting Policies
for the year ended 31 December 2020
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 five 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 recorded in OCI and credited to the revaluation reserve. However, to the extent that it
reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit or loss. 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 profit or loss in 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’.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 capitalises 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.
Critical judgements and estimates in applying IAS 2 Inventories
The following are the critical judgements in applying accounting policies that the Directors have made in the process of applying IAS 2 Inventories
and that have the most significant effect on the amounts recognised in the Consolidated Financial Statements.
Judgement in determining the carrying value of work in progress inventory – there is often judgement involved in forecasting future costs to
complete and selling prices which can be affected by market conditions and unexpected events. In determining the carrying value the Directors
consider previous experience, communications with suppliers and market trends in forming their opinion. Where necessary third party advice is
taken.
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, or fair value in the case of
Investment Property, 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Principal
Accounting Policies
for the year ended 31 December 2020
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, based on rates
that have been enacted or substantively enacted at the reporting date. 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 151). IFRS 9’s simplified
approach to provisioning is used to calculate the Group’s lifetime expected credit loss;
• 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 151); and
• Borrowings — see below.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of
outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.
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 and amortised 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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. Onerous contracts are provided for at the lower of costs or
termination.
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 the lower of the cost of fulfilling the contract or terminating the contract.
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.
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
The Group recognises a liability to pay a final dividend when the distribution is authorised and the distribution is no longer at the discretion of the
Group. Under UK company law a distribution is authorised when it is approved by the shareholders. An interim dividend is recognised when paid.
A corresponding amount is then recognised directly in equity.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Principal
Accounting Policies
for the year ended 31 December 2020
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 2020:
Amendments to IFRS (issued 2018)
IFRS 3 (amended 2018)
IAS 1 and IAS 8 (amended 2018)
IFRS 9, IAS 39 and IFRS 7 (amended 2019)
‘Reference to the conceptual framework’
‘Business Combinations’
‘Definition of material’
‘Interest rate benchmark reform’
Effective from
1 January 2020
1 January 2020
1 January 2020
1 January 2020
At the date of the authorisation of these Financial Statements, the following standards, amendments and interpretations were in issue but not yet
effective:
IFRS 16 (amended 2020)
IFRS 4 (amended 2020)
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(amended 2020)
IFRS 3 (amended 2020)
IAS 16 (amended 2020)
IAS 37 (amended 2020)
Annual Improvements (issued 2020)
IFRS 17 (amended 2020)
IAS 1 (amended 2020)
IAS 1 (amended 2021)
IAS 8 (amended 2021)
‘CV-19-related rent concessions’
‘Extension of the temporary exemption from applying IFRS 9’
‘Interest rate benchmark reform’
‘Reference to the conceptual framework’
‘Proceeds before intended use’
‘Costs of fulfilling a contract’
‘Annual improvements to IFRS standards 2018 - 2020’
‘Address implementation challenges’
‘Classification of liabilities as current or non-current’
‘Disclosure of accounting policies’
‘Definition of accounting estimates’
Effective from
1 June 2020
1 January 2021
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
1 January 2023
A review of the impact of these standards, amendments and interpretations has been conducted and the Directors do not believe that they will
give rise to any significant financial impact.
In 2020, 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
1. Revenue
Analysis of the Group’s revenue is as follows:
Activity in the United Kingdom
Construction contracts:
– Construction1
– Property Investment and Development2
Sale of land and properties:
– Property Investment and Development2
– Housebuilder unit sales2
– Land Promotion3
PFI concession1
Revenue from contracts
with customers
Plant and equipment hire1
Investment property rental income2
Other rental income - Property Investment
and Development2
Other rental income - Land Promotion3
1. Construction segment
2. Property Investment and Development segment
3. Land Promotion segment
2020
£’000
90,596
33,301
9,964
38,222
20,890
10,868
203,841
14,448
3,280
720
122
222,411
Timing of revenue
recognition
At a point
in time
£’000
Over time
£’000
2019
£’000
Timing of revenue
recognition
At a point
in time
£’000
Over time
£’000
—
—
90,596
33,301
81,002
114,743
—
—
81,002
114,743
27,932
43,861
73,094
14,518
—
—
—
—
159,405
195,745
9,964
38,222
20,890
10,868
—
—
—
—
79,944
123,897
27,932
43,861
73,094
14,518
355,150
16,734
7,102
588
119
379,693
Contingent rents recognised as investment property rental income during the year amount to £258,000 (2019: £326,000).
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 Construction segment made sales to a single external customer amounting to 22.0% (2019: 10.8%) of the Group’s total
revenue. This related to two high-value contracts which commenced in 2018 and continue through to 2021. The segment has a number of other
contracts in progress and is not reliant on any major customer individually. In the prior year, the Property Investment and Development segment
made sales to a single external customer amounting to 15.3% of the Group’s total revenue. This related to a single high value contract which
commenced in 2016 and continued through to 2019.
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 148 to 156.
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
2. Segment information continued
Property
Investment and
Development
£’000
85,487
296
85,783
12,977
(11,024)
2,929
4,882
4,377
(3,638)
5,621
1,864
7,485
2020
Construction
£’000
115,912
500
116,412
15,200
(9,872)
1,175
6,503
812
(638)
6,677
(1,898)
4,779
Land
Promotion
£’000
21,012
—
21,012
12,319
(4,402)
6,247
14,164
212
(390)
13,986
(2,898)
11,088
Revenue
External sales
Inter-segment sales
Total revenue
Gross profit
Administrative expenses and pension
Other operating income/(expense)
Operating profit/(loss)
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Depreciation of plant, property and
equipment and right-of-use assets
Impairment
Amortisation of intangible assets
Increase in fair value of investment
properties
Provisions
Pension scheme credit
Revenue
External sales
Inter-segment sales
Total revenue
Gross profit
Administrative expenses and pension
Other operating income/(expense)
Operating profit/(loss)
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Other information
Capital additions
Depreciation of plant, property and
equipment and right-of-use assets
Impairment
Amortisation of intangible assets
Increase in fair value of investment
properties
Provisions
Pension scheme credit
Group
overheads
£’000
—
647
647
32
(8,106)
—
(8,074)
11,532
(2,171)
1,287
(422)
865
631
754
—
—
—
—
(2,233)
2,779
3,368
2,218
570
—
1,209
—
Restated1 2019
Construction
£’000
114,255
10,886
125,141
18,208
(9,163)
—
9,045
965
(631)
9,379
(2,145)
7,234
6,768
4,727
205
555
—
1,237
—
Group
overheads
£’000
—
612
612
50
(7,585)
—
(7,535)
22,700
(2,884)
12,281
(352)
11,929
866
754
—
—
—
—
(1,683)
Eliminations
£’000
—
(1,443)
(1,443)
(61)
61
—
—
(16,212)
5,720
(10,492)
—
(10,492)
—
—
—
—
—
—
—
Eliminations
£’000
—
(11,795)
(11,795)
(68)
68
—
—
(26,571)
8,780
(17,791)
—
(17,791)
—
—
—
—
—
—
—
Total
£’000
222,411
—
222,411
40,467
(33,343)
10,351
17,475
721
(1,117)
17,079
(3,354)
13,725
15,370
4,572
2,218
570
(1,266)
1,338
(2,233)
Total
£’000
379,693
—
379,693
80,982
(34,156)
3,524
50,350
494
(1,740)
49,104
(9,649)
39,455
21,105
5,910
205
555
(2,370)
1,908
(1,683)
11,960
420
—
—
(1,266)
—
—
Property
Investment and
Development
£’000
192,225
297
192,522
25,389
(11,110)
3,524
17,803
1,326
(5,701)
13,428
(1,205)
12,223
13,428
397
—
—
(2,370)
—
—
—
30
—
—
—
129
—
Land
Promotion
£’000
73,213
—
73,213
37,403
(6,366)
—
31,037
2,074
(1,304)
31,807
(5,947)
25,860
43
32
—
—
—
671
—
1 See change in accounting policies on page 148.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
2. Segment information continued
Segment assets
Property Investment and Development1
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
1.
Includes investment in joint ventures and associates of £5,840,000 (2019: £6,634,000).
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)
Low-value and short-term operating leases
Increase 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
Gross profit on sale of equipment held for hire
Gain on sale of other property plant and equipment
Loss on disposal of right-of-use assets
2020
£’000
217,863
151,988
32,447
2,854
405,152
7,342
42,125
454,619
35,292
11,934
37,554
3,651
88,431
1,129
603
2,941
1,613
9,969
36,445
141,131
313,488
2020
£’000
3,585
987
2,218
570
30
—
481
68
(1,266)
45,815
32,289
11
(854)
(85)
89
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
(1,014)
(126)
34
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
3. Operating profit continued
The remuneration paid to Ernst & Young LLP (2019: PricewaterhouseCoopers LLP), the Company’s external auditors, was as follows:
Fees payable for the audit of the Company’s annual Financial Statements and Consolidated
Financial Statements
Fees payable to the auditors and their associates for other services:
– audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Other services
Total non-audit fees
Total fees
2020
£’000
2019
£’000
147
273
420
—
—
420
92
230
322
28
28
350
Non-audit services in the prior year related to a review of the Group’s half year results and the provision of the TSR comparator group report.
4. Employee costs
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
Group
Parent Company
2020
£’000
22,837
975
2,761
2,160
2,293
99
31,125
2019
£’000
26,334
826
3,394
2,130
2,255
90
35,029
2020
£’000
3,351
391
396
(105)
286
15
4,334
2019
£’000
3,629
354
571
119
244
12
4,929
Included within employee costs is £820,000 of furlough grant income from the Government’s Job Retention Scheme introduced in response to the
CV-19 pandemic. Since the year end the Group has made repayment of all furlough grants received, further details can be found in note 36.
The average monthly number of employees during the year, including Executive Directors, was:
2020
Number
115
31
184
145
68
543
2020
£’000
292
220
209
721
2019
Number
110
33
182
150
66
541
2019
£’000
49
176
269
494
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: trade receivables
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
6. Finance costs
Interest on bank loans and overdrafts
Interest on other loans and payables
Unwinding of discounting: trade payables and borrowings
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
2020
£’000
632
119
366
1,117
2020
£’000
2,824
245
3,069
285
285
3,354
2019
£’000
1,027
272
441
1,740
2019
£’000
9,057
184
9,241
408
408
9,649
Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the year.
In the Spring Budget 2020, the Government announced that from 1 April 2020 the main rate of UK corporation tax would remain at 19% (rather
than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020; deferred tax balances at the year end
have been measured at 19% (2019: 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 £297,000 (2019: £184,000)
Adjustment in respect of earlier years
Joint venture results reported net of tax
Effective tax rate
2020
£’000
17,079
2020
%
19.00
2.60
1.40
(1.74)
0.33
(1.95)
19.64
2019
£’000
49,104
2019
%
19.00
0.14
0.87
(0.16)
0.37
(0.56)
19.66
The tax charge in the year is higher (2019: higher) than the standard rate of corporation tax predominantly due to impairment of goodwill which is
ineligible for tax relief and dry tax charges on the transfer of assets from inventories to investment property offset by joint venture profits presented
net of tax (2019: capital gains on the disposal of investment property).
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
Total tax recognised in other comprehensive expense
2020
£’000
3,089
3,089
2019
£’000
1,350
1,350
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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
16 April 2021 is £552,000 (2019: £12,350,000) and includes dividends received from subsidiaries of £7,897,000 (2019: £17,180,000).
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
2020
£’000
13,725
(1,804)
(21)
11,900
2020
No.
133,176,230
(486,654)
132,689,576
690,392
133,379,968
2020
9.0p
8.9p
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
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 2019 of 1.30p per share (2018: 5.80p)
Interim dividend for the year ended 31 December 2020 of 2.20p per share (2019: 3.70p)
2020
£’000
21
1,724
2,919
4,664
2019
£’000
21
7,691
4,909
12,621
The proposed final dividend for the year ended 31 December 2020 of 3.30p per share (2019: 1.30p) makes a total dividend for the year of 5.50p
(2019: 5.00p).
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 £4,400,000.
Notice has been received from Moore Street Securities Limited waiving its right as corporate trustee for the Employee Share Ownership Plan
(‘ESOP’) to receive all dividends in respect of this and the previous financial year.
Dividends paid to non-controlling interests during the year amounted to £1,159,000 (2019: £2,445,000).
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
11. Intangible assets
Cost
At 1 January 2019
Additions at cost
At 31 December 2019
Additions at cost
Disposals at cost
At 31 December 2020
Accumulated impairment losses and amortisation
At 1 January 2019
Amortisation
Impairment losses for the year
At 31 December 2019
Amortisation
Impairment losses for the year
Eliminated on disposal
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
At 31 December 2018
Goodwill
£’000
4,973
2,015
6,988
—
(2,015)
4,973
2,916
—
205
3,121
—
2,218
(2,015)
3,324
1,649
3,867
2,057
PFI
asset
£’000
18,199
491
18,690
283
—
18,973
15,179
555
—
15,734
570
—
—
16,304
2,669
2,956
3,020
Total
£’000
23,172
2,506
25,678
283
(2,015)
23,946
18,095
555
205
18,855
570
2,218
(2,015)
19,628
4,318
6,823
5,077
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 (2019: £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’s 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 £746,000 (2019: £949,000) 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 five 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 £203,000 (2019: £205,000) 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.
In 2019, the Group acquired the entire share capital of Starfish Commercial Ltd which sits in the Construction segment. Further information on
the acquisition can be found in note 35. The goodwill arising on the acquisition, which had a net book value of £2,015,000, was fully impaired in
the year and disposed of following the decision by the Directors to place Starfish Commercial Ltd into voluntary liquidation.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
12. Property, plant and equipment
Group
Cost or fair value
At 1 January 2019
Additions at cost
Acquisition of subsidiary
Disposals
Transfers to right-of-use asset
Decrease in fair value in year
At 31 December 2019
Additions at cost
Disposals
Transfers from right-of-use asset1
Decrease in fair value in year
At 31 December 2020
Being:
Cost
Fair value at 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for year
Transfer to right-of-use asset
Eliminated on disposals
At 31 December 2019
Charge for year
Transfer from right-of-use asset1
Eliminated on disposals
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
At 31 December 2018
Land and
buildings
£’000
Equipment
held
for hire
£’000
Vehicles
£’000
Office
equipment
£’000
8,242
4
—
—
—
(404)
7,842
131
—
—
(651)
7,322
—
7,322
7,322
342
—
—
—
342
85
—
—
427
6,895
7,500
7,900
38,968
3,700
—
(2,934)
(4,059)
—
35,675
2,201
(2,780)
4,789
—
39,885
39,885
—
39,885
24,888
3,353
(803)
(2,585)
24,853
2,235
1,781
(2,475)
26,394
13,491
10,822
14,080
5,932
1,343
—
(1,205)
(626)
—
5,444
707
(932)
616
—
5,835
5,835
—
5,835
2,819
791
(65)
(997)
2,548
822
195
(723)
2,842
2,993
2,896
3,113
3,925
255
22
(892)
—
—
3,310
86
(129)
—
—
3,267
3,267
—
3,267
2,857
517
—
(861)
2,513
443
—
(128)
2,828
439
797
1,068
Total
£’000
57,067
5,302
22
(5,031)
(4,685)
(404)
52,271
3,125
(3,841)
5,405
(651)
56,309
48,987
7,322
56,309
30,906
4,661
(868)
(4,443)
30,256
3,585
1,976
(3,326)
32,491
23,818
22,015
26,161
1 Right-of-use assets are transferred to property, plant and equipment where the lease obligation has been settled and the Group retains ownership of the asset.
At 31 December 2019, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£1,437,000 (2019: £898,000).
Fair value measurements of the Group’s land and buildings
Land and buildings have been revalued at 31 December 2020 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 £6,895,000 (2019: £7,500,000).
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 £4,554,000 (2019: £4,507,000).
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
12. Property, plant and equipment continued
The following table provides an analysis of the fair values of land and buildings by the degree to which the fair value is observable:
Freehold land
Buildings
Total fair value
Level 1
£’000
—
—
—
Level 2
£’000
—
—
—
Level 3
£’000
60
6,835
6,895
2020
£’000
60
6,835
6,895
2019
£’000
60
7,440
7,500
Decrease
in year
£’000
—
(605)
(605)
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 – improvement by 0.5%
Rental value per sq ft – increase of £1 average
Buildings
Yield
6.41
2.34
16.25
8.86
6.75
15.23
Impact on
valuation
£’000
Buildings
415
1,130
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
12. Property, plant and equipment continued
Parent Company
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Additions
Disposals
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Charge for year
Disposals
At 31 December 2019
Charge for year
Disposals
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
At 31 December 2018
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
1,030
84
(100)
1,014
54
—
1,068
571
209
(97)
683
203
—
886
182
331
459
2019
£’000
—
—
70
90
160
57
108
165
61
89
22
—
172
(7)
165
Group
Parent Company
2020
£’000
1,655
—
8
447
2,110
603
1,613
2,216
654
655
901
151
2,361
(145)
2,216
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
2020
£’000
—
—
48
89
137
54
86
140
57
49
39
—
145
(5)
140
Additions to the right-of-use assets during the 2020 financial year were £512,000 (2019: £1,347,000) for the Group and £37,000 (2019: £32,000)
for the Parent Company.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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)
Group
2020
£’000
434
436
10
107
987
91
2019
£’000
428
734
—
88
1,250
73
Parent Company
2020
£’000
2019
£’000
—
—
32
24
56
5
—
—
36
24
60
5
The total cash outflow for leases in 2020 was £3,024,000 (2019: £1,420,000) for the Group and £67,000 (2019: £96,000) for the Parent
Company.
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.
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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 (note 3).
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 carrying amount
Level 1
£’000
Level 2
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Level 3
£’000
31,550
9,427
7,260
4,106
11,450
14,937
78,730
1,629
—
2,364
3,993
82,723
2020
£’000
31,550
9,427
7,260
4,106
11,450
14,937
78,730
1,629
—
2,364
3,993
82,723
Increase/
(decrease)
in year
£’000
15,650
(1,617)
(1,563)
402
(550)
4,644
16,966
(2,005)
(714)
(1,526)
(4,245)
12,721
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
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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
Carrying value
At 1 January
Subsequent expenditure on investment
property
Capitalised letting fees
Amortisation of capitalised letting fees
Disposals
Transfers to assets held for sale
Transfer from inventory
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
2020
£’000
2019
£’000
15,900
11,044
8,823
3,704
12,000
10,293
61,764
117,560
35
—
—
—
—
245
12,240
3,130
31,550
—
31,550
15
—
(9)
—
—
—
—
(1,623)
9,427
233
9,660
92
—
(19)
—
—
—
—
(1,636)
7,260
40
7,300
—
—
—
(8)
—
—
47
90
—
—
—
—
4
—
(2)
—
—
—
193
90
(30)
(8)
—
245
—
410
4,106
—
4,106
—
(687)
11,450
—
11,450
4,800
(158)
14,937
288
15,225
17,040
(564)
78,730
561
79,291
2,284
115
(18)
(20,217)
(43,844)
—
4,500
1,384
61,764
465
62,229
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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 2020 by Jones Lang LaSalle
Limited in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards on the basis of market value at
£75,185,000 (2019: £58,525,000). Jones Lang LaSalle Limited 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 completed 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 2020 has been determined by the Directors of the Company at £4,106,000
(2019: £3,704,000). 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):
2020
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
4.14
0.56
8.70
5.20
2.48
6.27
—
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
14.96
1.67
45.05
6.25
5.20
8.93
Yield
26.61
7.50
63.39
8.75
9.65
12.00
Residential
Sales
comparison
—
—
—
—
—
—
—
—
25.00
2019
Residential
Sales
comparison
—
—
—
—
—
—
Yield
36.21
7.50
63.39
9.78
6.25
12.00
—
25.00
Office
Retail
Yield
24.33
19.46
26.50
8.38
5.92
10.81
—
Office
Yield
22.87
24.00
25.00
7.86
6.34
7.00
—
Yield
15.10
10.00
21.40
5.42
4.83
9.00
—
Retail
Yield
15.86
11.00
21.40
5.62
4.80
7.50
—
There is considered to be no inter-relationship between observable and unobservable inputs.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 2020 £’000
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
2,930
8,409
—
731
663
—
398
277
—
—
—
50
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Tenancy discount – increase by 1%
Industrial
Leisure
1,298
3,935
—
1,117
847
—
Impact on valuation 2019 £’000
Residential
Mixed-use
436
248
—
—
—
50
708
510
—
Office
772
556
—
Retail
1,464
1,097
—
Retail
1,029
759
—
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 £3,280,000 (2019: £7,102,000). Direct operating expenses arising on investment property generating rental income in the year
amounted to £608,000 (2019: £1,142,000). Direct operating expenses arising on the investment property which did not generate rental income
during the year amounted to £179,000 (2019: £183,000).
At 31 December 2020, the Group had entered into contractual commitments for the acquisition and repair of investment property amounting to
£310,000 (2019: £nil).
Investment property under construction
Class
Fair value hierarchy
Carrying value
At 1 January
Subsequent expenditure on investment property
Capitalised letting fees
Disposals
Transfers to completed investment property
Increase in fair value in year
At 31 December
Adjustment in respect of tenant incentives
Market value at 31 December
Industrial
Level 3
£’000
Land
Level 3
£’000
3,634
8,386
46
—
(12,240)
1,803
1,629
—
1,629
714
—
—
(714)
—
—
—
—
—
Retail
Level 3
£’000
3,890
3,247
—
—
(4,800)
27
2,364
—
2,364
2020
£’000
8,238
11,633
46
(714)
(17,040)
1,830
3,993
—
3,993
2019
£’000
3,415
10,895
5
(2,563)
(4,500)
986
8,238
—
8,238
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171
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
14. Investment properties continued
Information about fair value measurements using significant unobservable inputs (Level 3):
Class
Valuation technique
Rental value per sq ft (£)
Yield %
Cost to complete per sq ft (£)
Land value per acre (£’000)
Class
Valuation technique
Land value per acre (£’000)
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
– weighted average
– low
– high
Industrial
Residual
2.28
2.28
2.28
5.20
5.20
5.20
29.95
29.95
29.95
—
—
—
Industrial
Residual
—
—
—
2020
Land
Sales
comparison
—
—
—
—
—
—
—
—
—
—
—
—
2019
Land
Sales
comparison
487
99
2,168
Retail
Residual
1.46
1.46
1.46
5.00
5.00
5.00
6.08
6.08
6.08
—
—
—
Retail
Residual
1,271
1,271
1,271
The sensitivity analysis to significant changes in unobservable inputs relating to fair value measurements (Level 3) is set out below:
Yield – improvement by 0.5%
Rental value per sq ft – increase by £1 average
Cost to complete – increased by 1%
Land value per acre – increase by 5%
Land value per acre – increase by 5%
Impact on valuation 2020 £’000
Industrial
Land
669
1,588
200
—
—
—
—
—
Impact on valuation 2019 £’000
Industrial
—
Land
217
Retail
300
1,104
130
—
Retail
194
Investment properties under construction are developments which have been valued at 31 December 2020 at fair value by the Directors of
the Company using the residual method at £3,993,000 (2019: £8,238,000). 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
15. Investments
Parent Company – shares in Group undertakings
Cost
At 1 January 2019, 31 December 2019 and 31 December 2020
Adjustments
At 1 January 2019
Reversal of provisions for losses
At 31 December 2019
Reversal of provisions for losses
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
At 31 December 2018
Total
£’000
38,021
(3,935)
3,935
—
—
—
38,021
38,021
34,086
The improved net assets position of Henry Boot Developments in the prior year gave rise to the reversal of provisions for losses previously
recognised. The impairment reversals were 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 and its subsidiary Road Link (A69) Limited which is 61.2% owned by Henry Boot Construction Limited;
• Plot 7 East Markham Vale Management Company Limited which is owned by, and under board control of, Henry Boot Developments Limited;
• Capitol Park Property Services Limited which is 5% owned by, and under board control of, Henry Boot Developments Limited; and
• Stonebridge Homes Group Limited and its wholly owned subsidiaries (as indicated in note 38) which is 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
Dividends received
Disposals
At 31 December
Joint
ventures
£’000
2020
Associates
£’000
6,567
1,671
(2,200)
(350)
5,688
67
85
—
—
152
Total
£’000
6,634
1,756
(2,200)
(350)
5,840
Joint
ventures
£’000
5,119
1,448
—
—
6,567
The Group’s share of its joint ventures’ and associates’ aggregated assets, liabilities and results are as follows:
Investment property
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net investment
Joint
ventures
£’000
12,656
16,611
1
29,268
(20,321)
(3,259)
5,688
2020
Associates
£’000
—
154
2
156
(4)
—
152
Total
£’000
12,656
16,765
3
29,424
(20,325)
(3,259)
5,840
Joint
ventures
£’000
7,420
16,623
—
24,043
(14,203)
(3,273)
6,567
2019
Associates
£’000
1,567
—
—
(1,500)
67
2019
Associates
£’000
—
99
7
106
(39)
—
67
Total
£’000
6,686
1,448
—
(1,500)
6,634
Total
£’000
7,420
16,722
7
24,149
(14,242)
(3,273)
6,634
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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
17,927
(16,198)
103
1,832
(185)
1,647
24
1,671
2020
Associates
£’000
85
—
—
85
—
85
—
85
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
Total
£’000
18,012
(16,198)
103
1,917
(185)
1,732
24
1,756
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 (non-current)
Net assets
Reconciliation to carrying amount:
Opening net assets 1 January
Profit for the period
Other distribution
Closing net assets
Group’s share in %
Group’s share in £
Carrying amount
Summarised statement of comprehensive income
Revenue
Profit for the year
174
Pennine Property
Partnership LLP
2020
£’000
15,045
146
235
475
(4,377)
(2,568)
8,956
10,424
710
(2,178)
8,956
50%
4,478
4,478
2020
£’000
745
710
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
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
17. Contract assets
Construction contracts – Construction segment
Construction contracts – Property Investment and Development segment
Due within one year
Due after more than one year
2020
£’000
2,051
11,277
13,328
13,328
—
13,328
2019
£’000
2,327
16,758
19,085
19,085
—
19,085
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 decreased as the Group has provided fewer services ahead of the agreed billing schedule.
There were no significant impairment losses recognised on any contract asset in the reporting period (2019: £nil).
The Group does not recognise any assets arising from the costs incurred to obtain a contract as the related amortisation period would have been
less than one year.
18. Trade and other receivables
Trade receivables
Loss allowance
Prepayments
Amounts owed by joint ventures and associates
Amounts owed by Group undertakings
Due within one year
Due after more than one year
Group
Parent Company
2020
£’000
53,269
(691)
4,987
14,661
—
72,226
65,032
7,194
72,226
2019
£’000
87,112
(724)
6,723
14,904
—
108,015
90,777
17,238
108,015
2020
£’000
265
—
891
—
134,484
135,640
135,640
—
135,640
2019
£’000
307
—
1,053
—
127,004
128,364
128,364
—
128,364
Amounts due after more than one year relate to trade receivables. Amounts are discounted to present value and are due for payment between
January 2022 by June 2023.
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 2020 and 31 December 2019 for trade receivables was determined as follows:
2020
0-30 days
30–60 days
60–90 days
90–120 days
120+ days
Expected
loss rate
%
0.8%
0.9%
4.2%
14.0%
8.0%
2020
£’000
724
481
(214)
—
(300)
691
Gross
carrying
amount
£’000
46,800
2,810
359
114
3,186
53,269
2019
£’000
424
514
(11)
(19)
(184)
724
Loss
allowance
£’000
381
25
15
16
254
691
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
18. Trade and other receivables continued
2019
0-30 days
30–60 days
60–90 days
90–120 days
120+ days
Expected
loss rate
%
0.4%
2.9%
1.7%
20.3%
15.6%
Gross
carrying
amount
£’000
81,826
1,281
1,723
133
2,149
87,112
Loss
allowance
£’000
295
37
29
27
336
724
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 £1,584,000 (2019:
£5,402,000), of which £3,000 (2019: £3,654,000) has been provided in the year, £166,000 (2019: £180,000) has been recovered in the year
and £3,655,000 (2019: £nil) was written off. 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 2.85% (2019: 3.50%).
The Parent Company has no significantly 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:
Accelerated
capital
allowances
£’000
Retirement
benefit
obligations
£’000
Other
timing
differences
£’000
465
—
(213)
—
252
(167)
—
85
41
10
—
51
17
—
68
2,839
—
(285)
1,350
3,904
(69)
3,089
6,924
2,839
(285)
1,350
3,904
(69)
3,089
6,924
183
109
90
—
382
(49)
—
333
235
65
—
300
55
—
355
Total
£’000
3,487
109
(408)
1,350
4,538
(285)
3,089
7,342
3,115
(210)
1,350
4,255
3
3,089
7,347
Group
At 1 January 2019
Acquisition of subsidiary (note 36)
Recognised in income
Recognised in other comprehensive income
At 31 December 2019
Recognised in income
Recognised in other comprehensive income
At 31 December 2020
Parent Company
At 1 January 2019
Recognised in income
Recognised in other comprehensive income
At 31 December 2019
Recognised in income
Recognised in other comprehensive income
At 31 December 2020
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 £1,596,000 (2019: £2,057,000). 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.
In the Spring Budget 2020, the Government announced that from 1 April 2020 the main rate of UK corporation tax rate would remain at 19%
(rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. As a result deferred tax
balances at the year end have been measured at 19% (2019: 17%), being the rate at which timing differences are expected to reverse. 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
2020
£’000
44,368
39,192
57,898
14,757
44,574
2019
£’000
31,684
36,339
50,716
14,913
36,097
200,789
169,749
Within property developments in progress £909,000 (2019: £888,000) 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 £1,434,000 (2019: £712,000) 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 to sell on the
transfer of assets during the year was £nil (2019: £2,463,000).
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
2020
£’000
—
—
—
—
—
—
2019
£’000
—
43,844
(43,844)
—
—
—
Assets classified as held for sale have been valued at 31 December 2020 at fair value by the Directors of the Company at £nil (2019: £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.
2020
£’000
7,280
150
7,430
7,430
2020
£’000
9,433
—
—
—
2019
£’000
9,529
347
9,876
9,876
2019
£’000
2,673
—
—
—
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
23. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Deferred income
Amounts owed to joint venture and associates
Amounts owed to Group undertakings
Due within one year
Due after more than one year
Group
Parent Company
2020
£’000
62,076
4,665
3,549
4,072
711
—
75,073
72,727
2,346
75,073
2019
£’000
61,315
8,826
1,844
3,684
1,242
—
76,911
70,763
6,148
76,911
2020
£’000
1,255
371
1,616
—
—
89,868
93,110
93,110
—
93,110
2019
£’000
1,394
470
345
—
—
80,752
82,961
82,961
—
82,961
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Amounts due after more than one year include £1,873,000 (2019: £1,986,000) of deferred income and £473,000 (2019: £4,162,000) of trade payables.
Parent Company
Amounts owed to Group undertakings are repayable on demand, unsecured and bear interest at 2.85% (2019: 2.0%).
24. Government grants
Government grants have been received in relation to the infrastructure of one of the Group’s land promotions, one of the Group’s property
developments and furlough grant income from the Government’s Coronavirus Job Retention Scheme.
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 £820,000 (2019: £250,000).
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.
Since the year end the Group has made repayment of all furlough grants received. Further details can be found in note 36.
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 2020
this was £nil (2019: £nil). Equity comprises all components of equity and at 31 December 2020 this was £313.5m (2019: £318.5m).
During 2020 the Group’s strategy, was to maintain the debt to equity ratio below 30% (2019: 30%). This level was chosen to ensure that we can
access debt relatively easily and inexpensively if required.
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. On 19 January 2021 the banks agreed to the Group’s request to extend
the facility to 23 January 2024. The facilities were undrawn at 31 December 2020 and at 31 December 2019.
The Group’s secured bank facilities are subject to covenants over loan-to-market value of investment properties, interest cover, EBIT 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.
The Group’s capital risk management disclosures are consistent with the parent company.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
26. Borrowings
Bank overdrafts
Bank loans
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)
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
2020
£’000
—
9,969
2,941
12,910
2,941
9,969
12,910
3,195
9,969
—
13,164
3,195
9,969
13,164
2019
£’000
—
7,757
2,941
10,698
9,981
717
10,698
10,172
703
64
10,939
10,172
767
10,939
2020
£’000
1,421
—
—
1,421
1,421
—
1,421
1,421
—
—
1,421
1,421
—
1,421
2020
%
1.56
—
—
2.24
—
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
• 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. On 22 December
2020, the loan facility was amended so that the proceeds of residential house sales are no longer set off the loan balance.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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 (2019: £nil).
Government loans from the Homes and Communities Agency (HCA) were issued with a fixed level of interest of £254,000 (2019: £254,000); their
fair values are £2,941,000 (2019: £2,941,000) (Education Campus) and £nil (2019: £nil) (Phase II Road Infrastructure).
As a result, the Company has no exposure to interest rate changes in relation to these borrowings. The Company’s exposure to indexation risk
may result in an increase in the value of repayments, causing the loans to be settled at an earlier date.
The Government loans were received to fund specific residential construction expenditure.
Repayment of the SWE loan commenced during 2013, being three years after the quarter date of the construction completion of the first
residential unit. Repayments of £nil (2019: £231,000) 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 upon the occupation of the first dwelling and follows for each occupation thereafter
until the total contribution sum is repaid in full. Repayments of £nil (2019: £15,000) 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
£nil (2019: £408,000) 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 2020, a 0.5% (2019: 0.5%) change in interest rates, which the Directors consider to be a
reasonably possible change, would affect profitability before tax by £4,000 (2019: £79,000).
The fair value of the Group’s borrowings is not considered to be materially different from the carrying amounts.
At 31 December 2020, the Group had available £75,000,000 (2019: £72,000,000) undrawn committed borrowing facilities.
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27. Provisions
At 1 January 2020
Included in current liabilities
Included in non-current liabilities
Additional provisions in year
Utilisation of provisions
At 31 December 2020
Included in current liabilities
Included in non-current liabilities
Land
promotion
£’000
5,315
3,634
1,681
5,315
129
(1,508)
3,936
2,860
1,076
3,936
Road
maintenance
£’000
1,681
1,681
—
1,681
1,209
(898)
1,992
1,992
—
1,992
Total
£’000
6,996
5,315
1,681
6,996
1,338
(2,406)
5,928
4,852
1,076
5,928
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 £51,000 and £193,000 respectively (2019: £72,000 and £265,000).
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 £171,000 (2019: £179,000).
Off balance sheet arrangements
The Group is currently undertaking the infrastructure of land promotions at Bridgwater and Cranbrook, spanning 122 and 53 acres respectively
(2019: 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 (2019: 117 and 35), and has subsequently recognised provisions to the
value of £3,845,000 (2019: £5,316,000), 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 £1,369,000 (2019: £1,772,000), has
therefore not been recognised in these Financial Statements.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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% (2019: 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 £2,293,000 (2019: £2,255,000) 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 2020
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
2020
%
2.80
2.20
1.00
2.20
2.20
1.40
2020
Years
21.8
24.1
22.8
25.3
2019
%
2.80
2.00
1.00
2.00
2.00
2.00
2019
Years
21.9
24.2
23.0
25.3
The mortality assumptions adopted are the Self Administered Pension Schemes (SAPS) tables with allowance for future improvements in line with
Continuous Mortality Investigation (CMI) 2019 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 3.6%
Nil1
Decrease by 4.1%
Increase by 4.4%
Decrease in
assumption
Decrease by 3.4%
Nil1
Increase by 4.4%
Decrease by 3.8%
1
Increases in salaries above the 1% assumed would not affect the scheme liabilities as future increases in pensionable salaries are to be capped at a maximum of
1% per annum.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
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 losses/(gains) arising from changes in demographic assumptions
Actuarial gains arising from experience adjustments
Actuarial losses arising from changes in financial assumptions
Actuarial losses recognised in other comprehensive income
Total
2020
£’000
795
576
150
433
206
2,160
(13,898)
2,265
—
27,346
15,713
17,873
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
Past service cost
Benefits paid
At 31 December
184
2019
£’000
798
666
—
439
227
2,130
(15,106)
(724)
(1,606)
25,373
7,937
10,067
2019
£’000
208,318
(185,353)
22,965
2020
£’000
235,143
(198,698)
36,445
2020
£’000
36,445
2019
£’000
22,965
2020
£’000
208,318
795
4,098
29,610
150
(7,828)
235,143
2019
£’000
186,785
798
5,138
23,043
—
(7,446)
208,318
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 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 credit funds
Cash and net current assets
Unquoted investments:
Direct lending
Liability driven investment
Collateralised loan obligations
Special situations
At 31 December
2020
£’000
185,353
3,665
13,898
4,186
(7,828)
(576)
198,698
2020
£’000
39,934
62,892
2,826
28,521
31,626
21,608
11,291
198,698
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
The weighted average duration of the defined benefit obligation is 17 years (2019: 16 years).
The current estimated amount of total contributions expected to be paid to the scheme during the 2021 financial year is £4,200,000, being
£4,200,000 payable by the Group and £nil payable by scheme members.
The Company’s level of recovery plan funding to the scheme is £3,350,000 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.
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185
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
29. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are disclosed
below:
Parent Company
Management charges receivable
Interest receivable
Interest payable
Rents payable
Recharge of expenses
Transactions between the Company and its remaining related parties are as follows:
Purchases of goods and services
Close family members of key management personnel (amounts paid for IT services)
Related companies of key management personnel (amounts paid for Non-executive Director services)
2020
£’000
1,963
3,377
(1,802)
(156)
51
2020
£’000
49
43
2019
£’000
1,260
5,515
(2,128)
(156)
59
2019
£’000
42
46
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 significant provisions have been made for impaired receivables in respect of the amounts owed by
related parties. Other than as disclosed above, there are 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 70 to 73. They are responsible for making all of the strategic decisions of the Group and its subsidiaries,
as detailed on pages 8 and 9 and 26 to 31. The remuneration of the Board of Directors is set out in the Remuneration Report on pages 106 to
127. The remuneration of the relevant four (2019: 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
2020
£’000
1,271
19
203
1,493
2019
£’000
1,597
13
44
1,654
186
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
30. Share capital
400,000 5.25% cumulative preference shares of £1 each (2019: 400,000)
133,181,537 ordinary shares of 10p each (2019: 133,172,602)
Authorised, allotted,
issued and fully paid
2020
£’000
400
13,318
13,718
2019
£’000
400
13,317
13,717
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. During the year 8,935 ordinary shares (2019: 26,000) were
issued in satisfaction of share option exercises.
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 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%, on 3 October 2019 at a price of 224.0p at a discount of just under 9.7% and on 5 October 2020 at a price of 237.0p at
a discount of 6.0%. These become exercisable for a six-month period from 1 December 2020, 1 December 2021, 1 December 2022 and
1 December 2023 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.
2019
October 2017 grant
October 2018 grant
October 2019 grant
2020
October 2017 grant
October 2018 grant
October 2019 grant
October 2020 grant
Options
outstanding at
1 January
2019
779,744
277,300
—
Options
outstanding at
1 January
2020
246,009
113,841
863,490
—
Options
granted
—
—
875,301
Options
granted
—
—
—
312,039
Options
lapsed
(533,735)
(163,459)
(11,811)
Options
exercised
—
—
—
Options
lapsed
(66,456)
(27,342)
(124,794)
—
Options
exercised
—
—
(3,935)
—
Options
outstanding at
31 December
2019
246,009
113,841
863,490
Options
outstanding at
31 December
2020
179,553
86,499
734,761
312,039
The weighted average share price at the date of exercise for share options exercised during the year was 260.50p (2019: nil).
(ii) 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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
30. Share capital continued
In respect of (ii) 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
2020
Number
1,115,063
(176,301)
(311,640)
451,085
1,078,207
2019
Number
1,010,623
(47,830)
(241,095)
393,365
1,115,063
The weighted average share price at the date of exercise for share options exercised during the year was 235.00p (2019: 253.00p).
(iii) 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. The sixth grant of options under the plan was made to
certain employees (none of whom at the time were Directors of Group companies) on 5 October 2020 at an option price of 237.0p There were no
performance conditions imposed on either of these grants.
2019
May 2011 grant
October 2014 grant
October 2017 grant
September 2018 grant
October 2019
2020
May 2011 grant
October 2014 grant
October 2017 grant
September 2018 grant
October 2019 grant
October 2020 grant
Options
outstanding at
1 January
2019
16,000
35,000
148,910
289,341
—
Options
outstanding at
1 January
2020
10,000
15,000
134,690
269,425
444,838
—
Options
granted
—
—
—
—
446,848
Options
granted
—
—
—
—
—
416,316
Options
lapsed
—
—
(14,220)
(19,916)
(2,010)
Options
exercised
(6,000)
(20,000)
—
—
—
Options
lapsed
—
—
—
—
—
—
Options
exercised
(5,000)
—
(4,183)
(5,860)
(7,432)
—
Options
outstanding at
31 December
2019
10,000
15,000
134,690
269,425
444,838
Options
outstanding at
31 December
2020
5,000
15,000
130,507
263,565
437,406
416,316
The weighted average share price at the date of exercise for share options exercised during the year was 253.00p (2019: 255.85p).
188
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
30. 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
263.0p
172.0p
270.0p
262.0p
224.0p
237.0p
Weighted average
share price
241.0p to 294.0p
121.5p
191.0p
309.0p
291.0p
249.0p
263.0p
181.0p
300.0p
278.0p
248.0p
263.0p
Expected
volatility
29.37% to 36.57%
41.47%
31.17%
30.37%
29.28%
29.25%
38.07%
31.45%
30.30%
29.53%
29.25%
38.07%
Expected life
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
Risk-free rate
0.00% to 0.94%
1.67%
1.23%
0.51%
0.91%
0.28%
0.00%
0.82%
0.51%
0.99%
0.28%
0.00%
Expected
dividend yield
2.14% to 3.24%
5.02%
3.16%
3.02%
2.90%
3.24%
2.61%
3.16%
3.02%
2.90%
3.24%
2.61%
LTIP
CSOP 2011
CSOP 2014
CSOP 2017
CSOP 2018
CSOP 2019
CSOP 2020
Sharesave 2014
Sharesave 2017
Sharesave 2018
Sharesave 2019
Sharesave 2020
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 76.64p (2019: 61.91p).
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
2020
£’000
2019
£’000
975
826
The total expense recognised in the Consolidated Statement of Comprehensive Income arose solely from equity-settled share-based payment
transactions.
31. Reserves
Group
At 1 January 2019
Change in accounting policy
Profit for the year
Dividends paid
Premium arising from shares issued
Decrease in fair value in year
Transfer from non-controlling interests
Arising on employee share schemes
Unrecognised actuarial loss
Deferred tax on actuarial loss
At 31 December 2019
Profit for the year
Dividends paid
Premium arising from shares issued
Decrease in fair value in year
Arising on employee share schemes
Unrecognised actuarial loss
Deferred tax on actuarial loss
At 31 December 2020
Property
revaluation
£’000
3,397
—
—
—
—
(404)
—
—
—
—
2,993
—
—
—
(651)
—
—
—
2,342
Retained
earnings
£’000
276,999
(154)
37,596
(12,621)
—
—
(1,856)
216
(7,937)
1,350
293,593
11,921
(4,664)
—
—
288
(15,713)
3,089
288,514
Capital
redemption
£’000
271
—
—
—
—
—
—
—
—
—
271
—
—
—
—
—
—
—
271
Other
Share
premium
£’000
5,867
—
—
—
43
—
—
—
—
—
5,910
—
—
14
—
—
—
—
5,924
Capital
£’000
209
—
—
—
—
—
—
—
—
—
209
—
—
—
—
—
—
—
209
Total
other
£’000
6,347
—
—
—
43
—
—
—
—
—
6,390
—
—
14
—
—
—
—
6,404
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
31. Reserves continued
Parent Company
At 1 January 2019
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
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 2020
Retained
earnings
£’000
85,513
(7)
12,350
(12,621)
—
(256)
(7,939)
1,350
78,390
552
(4,664)
—
(297)
(15,713)
3,089
61,357
Capital
redemption
£’000
271
—
—
—
—
—
—
—
271
—
—
—
—
—
—
271
Share
premium
£’000
5,867
—
—
—
43
—
—
—
5,910
—
—
14
—
—
—
5,924
Other
Capital
£’000
211
—
—
—
—
—
—
—
211
—
—
—
—
—
—
211
Investment
revaluation
£’000
1,135
—
—
—
—
—
—
—
1,135
—
—
—
—
—
—
1,135
Total
other
£’000
7,484
—
—
—
43
—
—
—
7,527
—
—
14
—
—
—
7,541
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. This reserve is distributable to the extent it does not arise from
revaluation gains.
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
This reserve was carried forward from previous accounting framework, and represents accumulated unrealised revaluation gains. This is
distributable only when the related investment is sold or impaired.
32. Cost of shares held by the ESOP trust
At 1 January
Additions
Disposals
At 31 December
2020
£’000
1,248
615
(687)
1,176
2019
£’000
1,260
598
(610)
1,248
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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
32. Cost of shares held by the ESOP trust continued
At 31 December 2020, the Trustee held 475,574 shares (2019: 537,214 shares) with a cost of £1,175,526 (2019: £1,247,665) and a market value
of £1,213,715 (2019: £1,713,713). All of these shares were committed to satisfy existing grants by the Company under 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.
33. Cash generated from operations
Group
Parent Company
Profit before tax
Adjustments for:
Amortisation of PFI asset
Goodwill impairment
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Revaluation increase in investment properties
Amortisation of capitalised letting fees
Share-based payment expense
Pension scheme credit
Movements on provision against investments in subsidiaries
Movements on provision against loans to subsidiaries
Loss on disposal of assets held for sale
Profit on disposal of property, plant and equipment
Loss on disposal of right-of-use assets
Loss on disposal of investment properties
Gain on disposal of joint ventures and subsidiaries
Finance income
Dividends received from subsidiaries
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
Decrease/(increase) in receivables
Decrease in contract assets
(Decrease)/increase in payables
(Decrease)/increase in contract liabilities
Cash generated from operations
11
11
12
13
14
3
4
15
3
3
3
5
6
16
12
2020
£’000
17,079
570
2,218
3,585
987
(1,266)
30
975
(2,233)
—
—
—
(939)
89
95
(7,426)
(721)
—
1,117
(1,756)
12,404
(2,201)
1,159
11,362
(31,285)
39,800
5,757
(2,052)
(2,446)
21,136
Net cash is an alternative performance measure used by the Group and comprises the following:
Analysis of net cash:
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Bank loans
Leases liabilities
Government loans
Net cash
26
26
13
26
42,125
—
42,125
(9,969)
(2,216)
(2,941)
26,999
2019
£’000
49,104
555
205
4,661
1,250
(2,370)
18
826
(1,684)
—
—
56
(1,140)
34
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
42,303
—
42,303
(7,757)
(4,637)
(2,941)
26,968
2020
£’000
(162)
—
—
203
56
—
—
391
(2,233)
—
3,818
—
—
3
—
—
(3,666)
(7,897)
2,172
—
(7,315)
—
—
(7,315)
—
(11,852)
—
13,589
—
(5,578)
31,615
(1,421)
30,194
—
(140)
—
30,054
2019
£’000
12,701
—
—
209
60
—
—
354
(1,684)
(3,935)
3,478
—
—
2
—
—
(5,552)
(17,180)
2,884
—
(8,663)
—
—
(8,663)
—
38,566
—
16,575
—
46,478
37,316
(1,012)
36,304
—
(165)
—
36,139
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
34. Guarantees and contingencies
The Parent Company has guaranteed the performance of certain contracts entered into by Group undertakings in the ordinary course of
business. 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 guaranteed against these facilities were £nil and £10,736,000
respectively.
In the opinion of the Directors, no loss is expected to arise in connection with these matters.
35. Business combinations
On 9 August 2019 the Group acquired 60% of the share capital of Starfish Commercial Ltd for consideration of £540, the remaining 40% was
acquired on 23 December 2019 for consideration of £nil.
Starfish, which 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 was 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 enabled Henry Boot
Construction Limited to take a step into this new operational area.
The goodwill arising on acquisition was attributable to the acquired reputation and customer base and economies of scale expected from the
combined operations. None of the goodwill was 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 2020
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 were 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 were 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 Ltd been consolidated from 1 January 2019, the consolidated statement of comprehensive income would show
revenue of £7,790,000 and loss before tax of £4,418,000.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
36. Events after the balance sheet date
In January 2021 the nation entered a third lockdown as a result of the CV-19 pandemic. While clearly this has impacted the Group’s operations,
there has been no materially negative impact on the Group’s results to date.
On 26 February 2021 the Group repaid all furlough grants claimed under the Government’s Coronavirus Job Retention Scheme. The total amount
claimed and repaid was £0.8m, all of which related to the 2020 financial year. As the decision to repay was taken after the year end, this event
has been classified as a non-adjusting post balance sheet event.
Executive Directors voluntarily reduced salaries by 20% from 1 April 2020 to 1 October 2020, for the duration of the most severe impact of
the pandemic. Following the year end these salary reductions for Executive Directors were repaid in full, to mirror the experience of the wider
workforce in having received 100% of salary during the pandemic.
The Group has commenced consultation with active members of the defined benefit pension scheme in 2021 with a view to closing the scheme
to future accrual.
Other disclosable events after the balance sheet date include the proposal of a final dividend for 2020, further information can be found in note 10.
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.
37. Disposals of joint ventures and subsidiaries
The Group has completed on two disposals during the year:
a) Starfish Commercial Ltd
On 14 September 2020 the Group, through its subsidiary Henry Boot Construction Limited, placed its wholly owned subsidiary Starfish
Commercial Ltd into creditors voluntary liquidation.
Sales proceeds
Book value of net liabilities
Sales costs
Profit on disposal
2020
£’000
—
1,262
—
1,262
b) Ansty Developments LLP
On 12 November 2020 the Group, through its subsidiary Hallam Land Management Limited, disposed of its interest in Ansty Developments LLP
for a total consideration of £6,250,000.
Sales proceeds
Book value of net assets
Sales costs
Profit on disposal
2020
£’000
6,250
—
(86)
6,164
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 2020, are as follows:
Subsidiary name
Banner Plant Limited
Brookfield Garth Hampsthwaite Management Company Limited1
Buffergone Limited
Butterfield Quad Management Company Limited
Capitol Park Property Services Limited
Chocolate Works York Management Company Limited
Comstock (Kilmarnock) Ltd.
Proportion of
ownership
100%
50%
100%
100%
4.6%
100%
100%
Direct or
indirect
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Activity
Plant hire
Management company
Inactive
Management company
Management company
Management company
Land promotion
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notes to the
Financial Statements
for the year ended 31 December 2020
38. Additional information – subsidiaries, joint ventures and associates continued
Subsidiary name
First National Housing Trust Limited
Fox Valley Management Company Limited1
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 Limited1
Marboot Centregate Ltd
Marboot Centregate 2 Limited
Moore Street Securities Limited
Moorlands Cleckheaton Management Company Limited1
Plot 7 East Markham Vale Management Company Limited
Road Link (A69) Holdings Limited
Road Link (A69) Limited
St John’s Manchester Limited
Saltwoodend Limited
Stonebridge Homes Group Limited1
Stonebridge Offices Limited1
Stonebridge Homes Limited1
Victoria Gardens (Headingley) Management Company Ltd1
Weyland Road Management Company Limited1
Willow Crest Cawood Management Company Limited1
The Willows Whinney Lane Management Company Limited1
Winter Ground Limited
Woodside Park Newlay Estate Management Company Limited1
Proportion of
ownership
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%
66.7%
61.2%
61.2%
100%
100%
50%
50%
50%
50%
50%
50%
50%
100%
50%
Direct or
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
Indirect
Activity
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
Holding company
PFI road maintenance
Property development
Inactive
Holding company
Property investment
Property development
Management company
Management company
Management company
Management company
Property development
Management company
1 Stonebridge related entities are included as subsidiaries due to the Group’s additional voting rights, having two of the three director appointments.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
3 8. Additional information – subsidiaries, joint ventures and associates continued
Joint ventures and associates
Aytoun Street Developments Limited
Bigmouth Manchester Limited
Cognito Oak LLP
Crimea Land Mansfield LLP
HBB Preston East Ltd
HBB Roman Way Limited
Henry Boot Barnfield Limited
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
MVNE 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%
50%
50%
50%
50%
18.4%
50%
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
Activity
Property development
Property development
Property development
Land promotion
Property development
Property development
Property development
Inactive
Property development
Property development
Property development
Inactive
Property investment
Property investment
Property development
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.
Comstock (Kilmarnock) Ltd. whose registered office is 48 St. Vincent Street, Glasgow, G2 5HS.
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, Willow Crest Cawood Management Company Limited, The Willows Whinney Lane Management
Company Limited and Victoria Gardens (Headingley) Management Company Ltd 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.
Island Site Limited Partnership whose registered office is Guardsman Tony Downes House, 5 Manchester Road, Droylsden, Tameside, M43 6SF.
Crimea Land Mansfield LLP whose registered office is C/O Harworth Group, Advantage House Poplar Way, Catcliffe, Rotherham, S60 5TR,
United Kingdom
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195
30368 8 April 2021 11:07 am V0Henry-Boot-AR-2020-financials.indd 196Henry-Boot-AR-2020-financials.indd 19608/04/2021 14:38:1408/04/2021 14:38:14 30368 8 April 2021 11:07 am V0SHAREHOLDER INFORMATIONNotice of Annual General Meeting198Financial Calendar202Advisers202Group Contact Information203Glossary204Henry-Boot-AR-2020-financials.indd 197Henry-Boot-AR-2020-financials.indd 19708/04/2021 14:38:3308/04/2021 14:38:33 Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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 Thursday 20 May 2021 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 2020.
Resolution 2
To declare a final dividend of 3.3p 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 2020.
Resolution 4
To approve the Directors’ Remuneration Policy contained in the
Directors’ Remuneration Report for the year ended 31 December 2020.
Resolution 5
To reappoint Timothy Roberts as a Director of the Company.
Resolution 6
To reappoint Jamie Boot as a Director of the Company.
Resolution 7
To reappoint Darren Littlewood as a Director of the Company.
Resolution 8
To reappoint Joanne Lake as a Director of the Company.
Resolution 9
To reappoint James Sykes as a Director of the Company.
Resolution 10
To reappoint Peter Mawson as a Director of the Company.
Resolution 11
To reappoint Gerald Jennings as a Director of the Company.
Resolution 12
To reappoint Ernst & Young LLP as auditors of the Company.
Resolution 13
To authorise the Audit and Risk Committee to fix the auditors’
remuneration.
198
Resolution 14
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 £4,440,364 , provided that (unless previously revoked,
varied or renewed) this authority shall expire on 19 August 2022 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 15
THAT subject to the passing of Resolution 14 and pursuant to Section
570 of the Companies Act 2006, the Directors be and are generally
empowered to allot equity securities (within the meaning of Section
560 of the Companies Act 2006) for cash pursuant to the authority
granted by Resolution 14 as if Section 561(1) of the Companies Act
2006 did not apply to any such allotment, provided that this power
shall be limited to the allotment of equity securities:
a. in connection with an offer of equity securities (whether by way of a
rights issue, open offer or otherwise):
i.
to holders of ordinary shares in the capital of the Company in
proportion (as nearly as practicable) to the respective numbers
of ordinary shares held by them; and
ii. to holders of other equity securities in the capital of the
Company, as required by the rights of those securities or,
subject to such rights, as the Directors otherwise consider
necessary,
but subject to such exclusions or other arrangements as the Directors
may deem necessary or expedient in relation to treasury shares,
fractional entitlements, record dates or any legal or practical problems
under the laws of any territory or the requirements of any regulatory
body or stock exchange; and
b. otherwise than pursuant to paragraph a. of this resolution, up to an
aggregate nominal amount of £666,054,
and (unless previously revoked, varied or renewed) this power shall
expire on 19 August 2022 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).
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Resolution 16
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 13,321,093;
b. the minimum price (excluding expenses) which may be paid for an
ordinary share is 10p;
c. the maximum price (excluding expenses) which may be paid for an
ordinary share is not more than the higher of:
i. an amount equal to 105% of the average of the middle market
quotations for an ordinary share as derived from the London
Stock Exchange Daily Official List for the five business days
immediately preceding the day on which the purchase is made;
and
ii. an amount equal to the higher of the price of the last
independent trade of an ordinary share and the highest current
independent bid for an ordinary share on the trading venue
where the purchase is carried out;
d. the authority hereby conferred shall expire at the conclusion of the
next AGM of the Company after the passing of this resolution or, if
earlier, on 19 August 2022; and
e. the Company may make a contract to purchase ordinary shares
under the authority hereby conferred prior to the expiry of such
authority which will or may be completed or executed wholly or
partly after the expiry of such authority.
By order of the Board
Amy Stanbridge
Company Secretary
16 April 2021
HENRY BOOT PLC
Registered Office:
Banner Cross Hall
Ecclesall Road South
Sheffield
United Kingdom
S11 9PD
Registered in England and Wales No. 160996
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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 18 May 2021 (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 view
of the UK Government placing restrictions on gatherings due to
the CV-19 pandemic, ordinary shareholders and their proxies
are kindly requested not to attend in person, as the number of
permitted attendees is likely to restricted.
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
Coronavirus pandemic, ordinary shareholders are urged to appoint
the Chairman of the meeting as his or her proxy to ensure that
their vote is counted, as ordinary shareholders and their proxies
are discouraged from attending the meeting in person, due to the
number of permitted attendees being likely to be restricted.
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 18 May 2021 (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 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 18 May 2021 (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).
Proxymity Voting – if you are an institutional investor you may also
be able to appoint a proxy electronically via the Proxymity platform,
a process which has been agreed by the Company and approved
by the Registrar. For further information regarding Proxymity,
please go to proxymity.io. Your proxy must be lodged by 12.30pm
on 18 May 2021 in order to be considered valid. Before you can
appoint a proxy via this process you will need to have agreed to
Proxymity’s associated terms and conditions. It is important that
you read these carefully as you will be bound by them and they will
govern the electronic appointment of your proxy.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Notice of Annual
General 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 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 18 May 2021 (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.
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 CV-19 pandemic, the number of permitted
attendees is likely to be restricted and therefore corporations are
urged to complete and return their form of proxies appointing the
Chairman as their proxy to ensure their vote is counted.
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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.
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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:
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 7 April 2021 (being the last practicable date before
publication of this notice), the Company’s issued ordinary share
capital was 133,210,939 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. Copies of the service contracts of the executive directors.
b. Copies of the letters of appointment of the non-executive
directors.
17. Biographies for each of the directors are shown on pages 70 to 71
of the annual report for the year ended 31 December 2020.
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).
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.
b.
c.
to do so would interfere unduly with the preparation for
the meeting or would involve the disclosure of confidential
information;
the answer has already been given on a website in the form of
an answer to a question; or
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 arrangements set out in this notice regarding the
AGM, any such questions should be submitted in writing to the
Company by the following means no later than 12.30pm on
18 May 2021 (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.
b.
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.
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: henryboot.co.uk
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
Financial
Calendar
London Stock Exchange announcements
Annual Results 2020:
23 March 2021
Interim Results 2021:
13 September 2021
Pre-close Trading Statement 2021:
end January 2022
Annual Report and Financial Statements
Annual Report and Financial Statements 2020
(Available and online):
by 16 April 2021
Advisers
Chartered Accountants and Statutory Auditors
Ernst & Young LLP
1 Bridgewater Place
Water Lane
Leeds LS11 5QR
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
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Annual General Meeting
20 May 2021
Dividends paid on ordinary shares
2020 Final dividend date (Subject to approval at AGM):
28 May 2021
2021 Interim dividend date (Subject to approval):
15 October 2021
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
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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: 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: 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: stonebridgehomes.co.uk
Head office
Callywhite Lane, Dronfield, Derbyshire S18 2XN
t: 01246 410111
e: hbc@henryboot.co.uk
w: 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: 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
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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020
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.
ESG
Environmental, Social and Governance
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).
Net asset value per share (NAV)
Equity shareholders’ funds divided by the
number of shares in issue at the balance
sheet date.
Operating profit
Profit earned from a company’s core
activities.
Option agreement
A legal agreement between a landowner
and another party for the right to buy land
within a set time scale at the conclusion of a
satisfactory planning permission.
Ordinary share
Any shares that are not preferred shares and
do not have any predetermined dividend
amounts. An ordinary share represents
equity ownership in a company and entitles
the owner to a vote in matters put before
shareholders in proportion to their percentage
ownership in the company.
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.
Retail Price Index (RPI)/
Consumer Price Index (CPI)
Monthly inflation indicators based on different
‘baskets’ of products issued by the Office of
National Statistics.
Return on average 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.
TCFD
Task Force on Climate-related Financial
Disclosures’ (https://www.fsb-tcfd.org/)
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.
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Welcome to the Henry Boot Annual Report 2020OUR PURPOSETo empower and develop our people to create long-term value and sustainable growth for our stakeholders*. ABOUT USWe manage the combined effort and expertise of six primary businesses across three key markets, investing in our future to create long-term value and robust returns for all our stakeholders and partners.With our uniquely sustainable business model we have built a market-leading Group of Companies that source, develop and deliver across the whole property value-chain.We have been in business for over 135 years and we are valued for our expertise and forward-thinking approach. Read more on pages 08 to 09* 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.Operations during CV-19Throughout the pandemic the Group’s key priorities have been the safety and welfare of our people, our customers, our supply chain, and the communities in which we operate. In March 2020, the Group paused activity on construction sites and in plant hire depots to ensure the correct safety procedures were installed. Since then, all of the Group’s businesses have remained operational, collaborating closely with industry bodies such as the CLC, NFB, CBI and UK Government Ministers to ensure that our services continue safely. Read more on pages 44 to 45CONTENTSBUSINESS OVERVIEWWelcome and IntroductionIFCLiving our Vision04Chairman’s Statement06Group at a Glance08Our Key Differentiators102020 Highlights11STRATEGIC REPORTChief Executive Officer Update14Business Model18– Our Competitive Advantages21Market Context22Strategy Review26Our New Strategy Going Forward30Segmental Reviews– Land Promotion32– Property Investment and Development34– Construction36Group Finance Director’s Review38Key Performance Indicators42Our Response to CV-1944Section 172(1) Statement46Risks and Uncertainties48Our Responsible Business55OUR GOVERNANCEBoard of Directors68Executive Committee72Chairman’s Introduction74Governance at a Glance76Corporate Governance Report– Division and Responsibilities77– Board Leadership and Company Purpose80– Composition, Success and Evaluation91– Nomination Committee Report94– Audit and Risk Committee Report100– Audit, Risk and Internal Control102– Corporate Governance Statement105– Directors’ Remuneration Report106– Remuneration Policy111– Annual Report on Remuneration119Directors’ Report128Statement of Directors’ Responsibilities133FINANCIAL STATEMENTSIndependent Auditors’ Report136Consolidated Statement of Comprehensive Income144Statements of Financial Position145Statements of Changes in Equity146Statements of Cash Flows147Principal Accounting Policies148Notes to the Financial Statements157SHAREHOLDER INFORMATIONNotice of Annual General Meeting198Financial Calendar202Advisers202Group Contact Information203Glossary 204View our online Annual Report at: henryboot.annualreport2020.comWe maintain a corporate website containing a wide range of information of interest to investors and stakeholders. Go to: henryboot.co.ukSHAREHOLDER INFORMATIONHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Untitled-2 4-6Untitled-2 4-608/04/2021 12:24:2308/04/2021 12:24:23 30368 8 April 2021 11:30 am V030368 8 April 2021 11:30 am V0Henry Boot PLCRegistered office: Banner Cross Hall, Ecclesall Road South Sheffield, S11 9PD United KingdomRegistered in England and Wales no. 160996 Tel: 0114 2555444 Email: cosec-ir@henryboot.co.ukStock Code: BOOT.LFOCUSED ON KEY MARKETS AND SUSTAINABLE GROWTHHenry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2020Henry Boot PLCAnnual Report and Financial Statements for the year ended 31 December 2020Henry-Boot-AR-2020-strategic.indd 3,3Henry-Boot-AR-2020-strategic.indd 3,308/04/2021 11:43:0808/04/2021 11:43:08