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Annual Report 2021
Contents
Strategic report
2021 in numbers
The Group at a glance
Chief Executive’s statement
Business model
Purpose, strategy and values
Key performance indicators
Section 172 statement
Our stakeholders
Responsible business strategy
and performance
Financial and operating review
Managing risk
Climate reporting
Non-financialinformationstatement
Goingconcernandviabilitystatement
1
2
3
5
6
7
10
11
16
39
55
71
81
83
Governance
Chair’sstatement
87
UKGovernanceCodecompliancestatement 89
90
Board of directors
95
Group management team
Directors’andcorporategovernancereport
98
126
Directors’ remuneration report
155
Other statutory information
Financial statements
Independent auditor’s report
Consolidatedfinancialstatements
Companyfinancialstatements
Shareholder information
Appendix – carbon emissions background
and terminology
160
170
206
215
217
We are a leading UK construction
and regeneration group. Our
purpose is inspiring talent to deliver
excellence in the built environment.
In 2021, we delivered record results,
maintained our strong balance
sheet and grew our order book.
We were independently recognised as
a leader for our environmental, social
and governance performance.
Strategic report
Governance
Financial statements
2021 in numbers
Trading ahead of pre-pandemic levels while
social and environmental value increased
Strong operating
performance
Financial strength and
shareholder returns
Social and
environmental value
£3,213m
Revenue
(2020: £3,034m) (2019: £3,0.71m)
£131.3m
Operating profit (adjusted*)
(2020: £68.5m) (2019: £93.1m)
£129.8m
Operating profit
(2020: £65.4m) (2019: £91.3m)
£8,614m
Secured workload
(2020: £8,290m) (2019: £7,593m)
£127.7m
Profit before tax (adjusted*)
(2020: £63.9m) (2019: £90.4m)
£126.2m
Profit before tax
(2020: £60.8m) (2019: £88.6m)
£291.4m
Average daily net cash
(2020: £180.7m) (2019: £108.9m)
92.0p
Total dividend per share
(2020: 61.0p) (2019: 21.0p)
01 _ Morgan Sindall Group plc Annual Report 2021
807
Apprentices and sponsorships for
graduates and national vocational
and professional qualifications
(2020: 761) (2019: 823)
35%
Reduction in Scope 1 and 2 carbon
emissions from 2019 baseline1
(2020: 10%)
71p
Monetary value of social activities
per £1 of project spend on 112
projects measured
(20202: 68p on 83 projects measured)
AAA
MSCI3 environmental, social and
governance rating
(2020: AA) (2019: AA)
* See note 2 to the consolidated
financial statements for alternative
performance measure definitions and
reconciliations.
1 Scope 1 emissions are direct from
owned or controlled sources and
Scope 2 are generated from purchased
energy. Scope 1 and 2 emissions in
2019 totalled 20,903 tonnes CO2e.
2 Data collection started in 2020.
3 MSCI provides decision support tools
and services for the global investment
community.
Property Services
£134m revenue
Morgan Sindall Property Services
provides responsive repairs and
planned maintenance for social
housing and the wider public sector.
morgansindallpropertyservices.com
The Group at a glance
Transforming
the built
environment
We are a group of five specialist and
complementary divisions, delivering
construction and regeneration
across the UK for the public,
commercial and regulated sectors.
Our c6,900 talented people work to create
positive change in the built environment and
long-term value for our stakeholders.
02 _ Morgan Sindall Group plc Annual Report 2021
Construction
Construction & Infrastructure
Fit Out
£1,520m revenue
£795m revenue
Morgan Sindall Construction &
Infrastructure provides construction
services in the education, healthcare,
commercial, defence, industrial,
leisure and retail markets and delivers
infrastructure projects in the highways,
rail, energy, water and nuclear markets.
Infrastructure also includes the
BakerHicks design activities based in the
UK and Switzerland.
morgansindallconstruction.com
morgansindallinfrastructure.com
bakerhicks.com
Overbury specialises in fit out and
refurbishment in commercial, central
and local government offices, as well
as further education.
Morgan Lovell provides office interior
design and build services direct to
occupiers.
overbury.com
morganlovell.co.uk
Regeneration
Partnership Housing
Urban Regeneration
£572m revenue
£203m revenue
Lovell Partnerships works in
partnerships with local authorities and
housing associations. Activities include
mixed-tenure developments, building
and developing homes for open market
sale and for social/affordable rent,
design and build house contracting
and planned maintenance and
refurbishment.
lovell.co.uk
Muse Developments focuses on
transforming the urban landscape
through partnership working and
the development of multi-phase
sites and mixed-use regeneration.
musedevelopments.com
Strategic reportGovernanceFinancial statements Chief Executive’s statement
A record year
“ 2021 has been an excellent year
for the Group. We had four
profit upgrades and delivered
a record set of results 42%
above our last peak in 2019. Our
achievement reflects the high
quality of our operations and the
huge talent and commitment
of our people, who I thank.”
John Morgan
Chief Executive
03 _ Morgan Sindall Group plc Annual Report 2021
Group revenue increased by 6% to £3,213m
(2020: £3,034m), adjusted operating profit by
92% to £131.3m (2020: £68.5m) and operating
margin by 180bps to 4.1% (2020: 2.3%). Trading
was substantially ahead of 2019 levels before
the pandemic (see page 1). We maintained a
strong balance sheet and increased our average
daily net cash by £110.7m.
We continued to win work throughout 2021:
the Group’s secured workload at the year end
was £8,614m, up 4% on the prior year (2020:
£8,290m). Over 46% (£3,975m) of this workload
is secured for 2024 onwards.
Our strong performance was due in part
to our relentless focus over many years on
being selective with contracts, managing risks,
delivering excellent projects, developing long-
term relationships and improving our quality
of earnings. This focus supports our strategy of
organic growth and will continue.
Just as vital to our success is our strong culture,
driven by our Core Values (see page 6). We view
all our stakeholders as customers, and we put
our customers first. We make sure we have
people with the right skills and qualities to help
us succeed both now and in the future, and we
motivate them to deliver exceptional projects
and customer service. We encourage our people
to challenge the status quo and think differently
so that the business can keep improving. Our
decentralised approach empowers our teams
and makes the business agile and resilient.
We have made good progress towards
delivering our objective of net zero carbon by
2030, which we announced last year, and are
pursuing Group-wide and divisional initiatives
to reduce carbon on our projects and offset
responsibly. I am very proud that, for the second
year running, we achieved an ‘A’ score from CDP1
for leadership on climate change, one of only
206 companies worldwide to do so. Also for the
second year running, CDP awarded us Supplier
Engagement Leader status in recognition of our
work with our supply chain to reduce carbon.
Being a responsible business has always been
part of our culture. Our Core Values were
established four decades ago and our strategy
to deliver social and environmental value was
formalised in 2008 with the introduction of our
five Total Commitments to: protecting people;
developing people; improving the environment;
working together with our supply chain; and
enhancing communities.
In 2021, we analysed the results of a diversity
and inclusion survey that we conducted
towards the end of 2020 across all employees
in the Group. We value diversity of thought,
perspective and experience to help us challenge
the status quo and drive innovation, and we
want everyone in the Group to feel included
and valued. The survey results indicated that
we need to do more to address inclusivity. As a
result, our divisions have introduced action plans
relevant to their business needs but broadly
aligned to changing behaviours, improving
recruitment and retention processes, promoting
construction as a career and supporting diversity
and inclusion in our supply chain.
See pages 16 to 38 for our performance in the
year against our targets across all our Total
Commitments.
1 CDP is a not-for-profit charity that runs the global
disclosure system for investors, companies, cities, states
and regions to manage their environmental impacts.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Chief Executive’s statement continued
“ Our underlying
commitment to
maintaining a strong
balance sheet and
substantial net cash
position continues to
allow us to make the right
long-term decisions for
the business.”
04 _ Morgan Sindall Group plc Annual Report 2021
Divisional performance
Construction & Infrastructure delivered a very
strong set of results, with operating profit
increasing 63% to £58.1m (2020: £35.7m)
despite revenue reducing 7% to £1,520m (2020:
£1,637m), while its margin was up 160bps to
3.8% (2020: 2.2%). Fit Out delivered another
excellent performance, with revenue, profit and
margin all increasing. Revenue grew 14% to
£795m (2020: £700m), while profit increased by
38% to £44.2m (2020: £32.1m) at a margin of
5.6% (2020: 4.6%). Property Services performed
well, delivering improved results on 2020 as
volumes recovered from the disruption caused
by Covid in 2020. Revenue increased by 20%
to £134m (2020: £112m) and operating profit1
increased 310% to £4.1m (2020: £1.0m). Its
operating margin1 of 3.1% represented an
increase of 220bps (2020: 0.9%).
In regeneration, Partnership Housing had a very
strong year, making significant strategic and
operational progress. Revenue was up 21% to
£572m (20202: £474m) while operating profit
increased substantially, more than doubling to
£33.2m, an increase of 108% (20202: £16.0m).
Its operating margin increased to 5.8%, up
from 3.4%2 and its return on capital was up to
21% in the year. Urban Regeneration made
good progress with its long-term regeneration
schemes and delivered an operating profit of
£12.1m in the year, an increase of 38% (20202:
£8.8m). The division’s return on capital employed
in the year increased to 13%.
1 Before intangible amortisation of £1.5m (2020: £1.2m).
2 Restated. All 2020 and 2019 comparative numbers,
including order book and capital employed, have been
restated to include the impact of the revised reporting
segments.
Across the Group, inflationary pressures and
supply issues have been a feature of most of the
year, although the impact has been managed
in most cases at a divisional and local level
without disruption to operations. General cost
inflation also placed some project budgets
under pressure, particularly in Construction
& Infrastructure. Inflationary pressures are
expected to continue into much of 2022,
however we expect that the impact will continue
to be minimised by focused sourcing through
our supply chain and ongoing operational
efficiency.
Upgraded divisional targets
To provide a framework for our next stage
of organic growth, we have upgraded our
medium-term targets for the divisions. The
targets, effective from 24 February 2022, relate
to revenue, operating margin, return on capital
employed and/or profit and are set out in the
operating review on pages 41 to 54.
Capital allocation framework
In 2021, we introduced a formalised capital
allocation framework for the Group:
maintaining balance sheet strength to
enhance our competitive advantage and win
future work;
ensuring downside protection – maintaining
a ‘buffer’ in the event of a macroeconomic
downturn;
maximising investment in the current business
to drive growth, specifically investment in
regeneration activities; and
maintaining an attractive dividend policy: we
expect dividend cover to be in the range of 2.0
times to 2.5 times on an annual basis, effective
from 2021 onwards.
Our capital allocation framework is designed to
balance the needs of all our stakeholders while
enhancing the Group’s market competitiveness
and capabilities and maintaining our financial
strength.
Our underlying commitment to maintaining a
strong balance sheet and substantial net cash
position continues to allow us to make the right
long-term decisions for the business.
Dividend
The final dividend has increased by 55% to
62.0p per share (2020: 40.0p), resulting in a total
dividend for the year of 92.0p per share (2020:
61.0p), an increase of 51%. This represents
dividend cover of 2.46 times and reflects our
result for the year, our strong balance sheet and
the Board’s confidence in the future prospects
of the Group.
Outlook for 2022
The Group is in its best shape ever. We continue
to make strong progress in our chosen markets,
with the size and quality of our secured
workload increasing in the year. This leaves us
well-positioned for the future and on track to
deliver a result for 2022 which is slightly above
our previous expectations.
John Morgan
Chief Executive
Strategic report
Governance
Financial statements
Business model
A balanced
business
delivering organic
growth and
long-term value
We are geared towards the UK’s
increasing demand for affordable
housing, urban regeneration and
investment in public, commercial
and social infrastructure.
We are diversified across key growth sectors.
We use cash from our construction activities to
invest in long-term regeneration schemes, which
in turn provide opportunities for construction.
Our decentralised approach allows our specialist
divisions to respond quickly to the needs of
their markets, while collaboration between them
enables us to deliver large, complex schemes.
Purpose, strategy and values 6
Our stakeholders 11
Responsible business strategy and performance 16
Financial and operating review 39
05 _ Morgan Sindall Group plc Annual Report 2021
Our valued resources
Talented people
Long-term client relationships
Technology for innovation, efficiency, safety
and security
High standards of health, safety and
wellbeing
Ability to build sustainably
Strong balance sheet and a significant
net cash balance
National network of supply chain partners
How we operate
nerate s c
e
G
s
a
h v i a short-term r
e
t
u
r
n
s
Construction
Construction & Infrastructure
Fit Out
Property Services
c o nstruction o
p
s
e
v i d
Pr o
p
o
r
t
u
n
i
t
i
e
s
e
g -ter m valu
Regeneration
Partnership Housing
Urban Regeneration
I
n
v
e
sts cash to cre a t e l
n
o
Value we create
Transforming the built environment Sectors contributing over
5% of Group revenue:
Excellence in delivery:
88% Perfect Delivery; 5 Star homes
Environmental value:
37% carbon reduction since 2019
Community/other public services (21%), Commercial (21%),
Education (15%), Mixed-tenure housing (12%),
Social housing (12%), Transport (11%)
Helping our people succeed:
535 promoted internally
Social value:
71p per £1 spent on 112 projects
Shareholder returns:
92.0p total dividend per share
226.0p adjusted* earnings per share
Strategic report
Governance
Financial statements
Purpose, strategy and values
Our purpose is inspiring
talent to deliver excellence
in the built environment
Our strategy is to pursue organic growth by focusing on
our well-established core strengths of construction and
regeneration
Our Core Values
drive our culture
We believe we can make
a difference by:
recruiting people with diverse
perspectives, who are passionate about
what they do and willing to challenge
the status quo;
creating places of exceptional quality
where people can live, work, learn and
play;
pursuing our strategy to reach net zero
carbon emissions by 2030;
adding value to the communities where
we work by procuring locally, providing
job and training opportunities, and
supporting local charities; and
being guided by our Core Values in
everything we do.
Our strategic priorities
The following priorities are essential to achieving our purpose and strategy:
Increase our quality of earnings,
through project selectivity,
operational efficiency and
investment.
Secure long-term workstreams,
through client and partner
relationships, repeat business,
negotiated work, frameworks,
long-term contracts and
regeneration schemes.
Excel in project delivery for our
clients, partners and the end users
of our buildings.
Maintain a strong balance sheet
and significant levels of cash
at all times.
Consistently deliver on our five
Total Commitments to being a
responsible business:
Protecting people
Developing people
Improving the environment
Working together with our
supply chain
Enhancing communities
The customer comes first
Talented people are
key to our success
We must challenge the
status quo
Consistent achievement is
key to our future
We operate a decentralised
philosophy
Key performance indicators 7
Responsible business strategy and performance 16
Financial and operating review 39
Principal risks 58
06 _ Morgan Sindall Group plc Annual Report 2021
Our Core Values, established in the 1980s
and embedded across our divisions, drive
the culture and behaviours that help us
implement our strategy and achieve our
purpose. They are interlinked: for example,
our decentralised approach empowers our
people to challenge the status quo, achieve
their potential and consistently deliver an
exceptional service for our stakeholders, all
of whom we regard as our customers.
See pages 105 to 109 for detail on how our
Board monitors our culture and how our
culture supports our strategic priorities.
Strategic report
Governance
Financial statements
Key performance indicators
Making good progress across our strategic priorities
19
20
21
19
20
21
19
20
21
19
20
21
202
21
192
202
21
21
19
20
21
Strategic priorities
Increase
our quality
of earnings
Key performance
indicators
Construction
operating margin
Infrastructure
operating margin
Fit Out operating profit
Property Services
operating profit
Partnership Housing
return on average
capital employed1
(last 12 months)
Partnership Housing
operating margin
Urban Regeneration
return on capital
employed3 (average
last three years)
Secure long-term
workstreams
Long-term secured
workload
07 _ Morgan Sindall Group plc Annual Report 2021
Performance
Medium-term targets and drivers
Performance commentary
2.8%
2.5%-3.0%
1.2%
1.8%
2.8%
3.2%
4.4%
£36.9m
£32.1m
£44.2m
3.5%
c£35m
£4.3m
£10m
£1.0m
10%
4.2%
3.4%
£4.1m
21%
5.8%
12%
Over 20%
6%
Up towards 20%
Our construction divisions exceeded their
medium-term targets, with the exception
of Property Services which continued to
be impacted by Covid. In regeneration,
there was significant profit growth,
particularly in Partnership Housing.
Partnership Housing’s return on capital
employed was above the medium-term
target, while Urban Regeneration’s
performance was impacted by a specific
non-cash impairment in a joint venture.
See pages 41 to 54 for detailed
commentary on each division’s
performance.
Priorities going forward
We will continue to
operate in our target
sectors and optimise
the substantial potential
for growth in our
regeneration markets.
We will also maintain
our commitment to
contract selectivity and
operational discipline.
To provide a framework
for future growth, we
have upgraded our
divisional medium-term
targets which will apply
from 24 February 2022
(see pages 44 to 54).
£7,593m
£8,290m
£8,614m
We monitor our secured workload for
the current year and beyond as well as
the pipeline of projects for which we are
‘preferred bidder’ (where we have been
verbally awarded the project but there is
no formal contract or letter of intent in
place).
We have a high-quality secured workload
with 46% secured for 2024 or later. Of
the total, 64% is with public sector or
regulated industry clients and, within the
Construction & Infrastructure division,
over 90% has been secured through
frameworks and partnerships.
We will continue to
focus on developing and
maintaining long-term
partnerships, working in
sectors where we have a
proven track record.
Strategic report
Governance
Financial statements
Key performance indicators continued
Strategic priorities
Excel in project
delivery
Key performance
indicators
Projects achieving
‘Perfect Delivery’4
Average daily net cash
Maintain strong
balance sheet
and significant
levels of cash
Protecting people
Lost time incident
rate (LTIR)6
Developing people Number of training
days8 per year per
employee
08 _ Morgan Sindall Group plc Annual Report 2021
Performance
Medium-term targets and drivers
Performance commentary
Priorities going forward
19
20
21
19
20
21
19
20
21
19
20
21
85%
90%
88%
Each division is responsible for driving
Perfect Delivery on its projects. Results
are regularly monitored, reported, and
reviewed at divisional board level.
Perfect Delivery performance dipped
slightly compared to 2020, impacted by
the significant increase in the volume of
work undertaken in 2021 while operating
within new site procedures introduced at
the start of the pandemic.
The divisions will
continue to drive
excellence by focusing
on quality of delivery
and customer
experience.
£108.9m
£180.7m
£291.4m
We have not set a target for this key
performance indicator, but our cash
levels are monitored on a daily basis.
Partnership Housing was awarded a
5 Star rating5 in 2021, based on feedback
from homebuyers including how satisfied
they are with the finish of their new
properties, the service received and
whether they would recommend Lovell
Partnerships to a friend.
Our average daily net cash increased
significantly compared to the prior year.
We will continue to
maintain a strong
balance sheet and
significant levels of cash,
which enable us to
make the right decisions
for the business.
0.217
0.23
0.23
0.29
For detailed commentary on our performance in delivering against
our Total Commitments, together with the actions we are taking and
our priorities going forward, see pages 16 to 38.
4.1 days
5 days7
2.3 days
3.5 days
10%
35%
37%
45%
Targets
30%7
30%7
Performance commentary
For detailed commentary on our performance in delivering
against our Total Commitments, together with the actions we are
taking and our priorities going forward, see pages 16 to 38.
Strategic report
Governance
Financial statements
Key performance indicators continued
Strategy
Key performance indicators
Performance
Improving the
environment
Reduction in Scope 19 and 210 carbon
emissions from 2019 baseline of 20,903
tonnes CO2e
Reduction in operational Scope 311 carbon
emissions from 2019 baseline of 6,339
tonnes CO2e
Supply chain (by spend) providing their
own12 carbon data
Reduction in carbon emissions from the
Group’s vehicle fleet from 2019 baseline
of 12,078 tonnes CO2e
Working with our
supply chain
Percentage of total invoices paid within
30 days
Enhancing
communities
Average monetary value of social activities
delivered per £1 spent
20
21
20
21
13
21
20
21
14
20
21
20
21
£589m
£500m7
25%
30%7
39%
64.8%
67.8%
70%7
85p per £1 spent7
68p per £1 spent on
83 projects measured14
71p per £1 spent on
112 projects measured
1 Return on average capital employed = adjusted
4 Perfect Delivery status is granted to Construction,
operating profit divided by average capital employed.
2 Restated. All Partnership Housing 2020 and 2019
comparative numbers, including order book and capital
employed, have been restated to include the impact of
the revised reporting segments.
3 Return on average capital employed = (adjusted
operating profit plus interest from joint ventures) divided
by average capital employed.
Infrastructure and Fit Out projects that meet all four
client service criteria specified by the division.
5 The 5 Star homes rating is the highest awarded by the
Home Builders Federation based on its National New
Homes Customer Satisfaction Survey. The 2021 rating
was awarded in March 2021.
6 Number of lost time incidents x 100,000 divided by the
number of hours worked. Lost time incidents are those
resulting in absence from work for a minimum of one
working day, excluding the day the incident incurred.
7 Total Commitment targets are for 2025 – see pages 17
to 35 for 2030 Total Commitment targets and horizon
ambitions.
8 A training day is a minimum of six hours of training.
9 Direct emissions from sources owned or controlled by
the Group.
10 Indirect emissions generated from purchased energy.
11 All indirect emissions not included in Scope 2 that occur
in limited categories of our value chain as measured by
the Toitū ‘carbonreduce’ scheme (see page 80).
12 Wider Scope 3 emissions outside of operational Scope 3.
See Appendix for further information.
13 Data collection started in 2021.
14 Data collection started in 2020.
Note: 2019 baseline numbers have been applied as 2020
performance was impacted by the Covid pandemic.
09 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Section 172 statement
Making informed decisions
The objective of the Board and Group management team, when taking
strategic, financial and operational decisions, is to promote the success
of the Group for the benefit of all our stakeholders, in line with their
directors’ duties as set out in Section 172 of the Companies Act 2006.
How our directors perform their duties
The Board sets the Group’s purpose, values
and strategy and ensures they are aligned
with our culture.
See pages 102 to 109.
The Board reviews the Group’s strategy and
conducts strategy reviews with each division,
to ensure the long-term sustainable success
of the business with good outcomes for all our
stakeholders.
See pages 102 to 103.
The Board sets the Group’s risk appetite,
assesses the principal risks that could
impact on our strategy, performance and
stakeholders, and reviews the mitigations we
have in place.
The Board engages directly or indirectly with
our stakeholders, monitors the impact of our
activities on multiple stakeholder groups, and
takes their interests and priorities into account
when making decisions.
See pages 11 to 15 and 102 to 104.
The health, safety and environment (HSE)
committee monitors our performance
against our five Total Commitments to our
stakeholders and wider society and reports to
the Board on its activities.
See pages 123 to 125.
Directors and senior managers undertake
training on directors’ duties and other relevant
topics.
See pages 55 to 70.
See pages 98 and 100.
Section 172 factor
Relevant disclosures
The likely consequences
of any decision in the
long term
The interests of the
Company’s employees
Purpose and strategy
Business model
Capital allocation framework
Pipeline of work
Divisional markets
Employee engagement
Protecting people
Developing people
Employee policies
The work of the HSE committee
Rewarding employees fairly
The need to foster the
Company’s business
relationships with suppliers,
customers and others
Supply chain engagement
Working together with our supply chain
Human rights and modern slavery
Client and partner engagement
Funder engagement
The impact of the
Company’s operations on
the community and the
environment
Community engagement
Enhancing communities
Improving the environment
Environmental policies
The work of the HSE committee
The Company’s reputation
for high standards of
business conduct
Non-financial information statement
Culture and values
Code of Conduct
Raising concerns
Board’s oversight of workforce policies and practices
Internal financial controls
19, 82, 100
6
5
4
40
44, 48, 51, 54
11
17
21
81
123
132, 140
13
32
19, 82, 109
13
15
14
35
25
81
123
81
6
109
108
120
15
155
156
156
10 _ Morgan Sindall Group plc Annual Report 2021
The need to act fairly
as between members of the
Company.
Shareholder engagement
AGM
Rights attached to shares
Voting rights
Strategic report
Governance
Financial statements
Our stakeholders
Understanding
our stakeholders’
priorities
The quality of our relationships
with our key stakeholders is
essential for the success and
growth of our business.
11 _ Morgan Sindall Group plc Annual Report 2021
We believe the best approach to developing
and nurturing long-term relationships is to base
them on trust, by maintaining regular dialogue,
listening attentively, being open and transparent
when giving information, and working
collaboratively.
As well as ongoing dialogue with our
stakeholders, we conduct a biennial ‘materiality’
survey with our employees and a selection
of clients, suppliers, trade associations and
investors about how they would prioritise
a range of responsible business ambitions.
The latest materiality survey took place in
2020 and the results aligned with our Total
Commitments and our continued support of
the UN Sustainable Development Goals (see our
2020 responsible business data sheet on our
website for more information).
Group and Board engagement
The Board engages directly with our people,
shareholders, analysts and funders, while our
divisions manage their relationships with their
people, supply chain, clients and partners
and local communities. In addition, our chief
executive regularly visits all parts of the business,
including offices and sites, and speaks with
employees, clients and subcontractors.
The executive directors supervise the divisions’
engagement with their stakeholders principally
through monthly board meetings with divisional
senior management teams and monthly
meetings with the Group management team.
The executive directors then update the Board
as appropriate.
Seepages102to104forhowtheBoard
considered the needs and concerns of our
stakeholders when making key decisions.
Our people
Who they are and why they’re
important to us
We directly employ around 6,900 people
across the Group. They possess a broad
range of expertise to support our clients
through all stages of the project life cycle, from
development to design, build, maintenance
and refurbishment. Thirty-seven per cent of our
people have been with the Group for six years or
more, accumulating technical experience and an
in-depth understanding of our values which they
can convey to newer recruits.
Their key priorities
A fair, respectful and safe environment to
work in; regard for their health and wellbeing;
investment in their personal development and
career progression; support for flexible working;
and an open and honest culture that promotes
diversity and inclusion.
How the Group engages with them
New starters receive formal induction
programmes which include introducing them
to our Core Values and Total Commitments.
Personal development conversations are held
throughout their careers with us. Our divisions
update their people on their business goals,
market conditions and operational performance
using newsletters, emails and briefing sessions.
Internal digital communications channels
include intranets, social media platforms such as
Yammer, Microsoft Teams and our staff benefits
portals. Employees are invited to submit ideas
via ‘innovation portals’ for ways of improving the
business or on specific topics such as carbon
reduction.
Annual conferences held by the divisions give
senior managers and functional heads the
chance to communicate key messages, and
our employees the opportunity to share ideas
and experiences with colleagues from different
roles and regions. Group-wide and divisional
forums focusing on issues such as employee
concerns and health and safety meet regularly
to exchange views and propose changes.
The divisions conduct regular employee surveys,
analyse the feedback, and communicate
the results to their employees together with
the actions to be undertaken in response.
Infrastructure, BakerHicks, Fit Out and Property
Services conducted employee surveys in 2021,
with the remaining divisions scheduling surveys
in 2022. Construction engaged with employees
via its newly launched People Forum which met
three times in 2021, while Partnership Housing
received feedback through focus groups and an
Investors in People (IIP) survey (following which
the division achieved a Gold IIP accreditation).
How the Board engages with them
The executive directors keep everyone informed
of the Group’s financial performance through
newsletters, emails and videos released to
coincide with the full-year and half-year results
announcements and will make people aware
of any external factors and significant events
that might have an impact. We offer a Group-
wide Savings-Related Share Option Plan (SAYE
scheme) that also helps to keep people engaged
with the Group’s performance and progress.
Over the years, we have seen a progressive
increase in participation in the scheme, with a
41% take-up in 2021.
Strategic report
Governance
Financial statements
Our stakeholders: our people continued
With regard to provision 5 in the UK Corporate
Governance Code 2018, we believe the most
effective way for the Board to engage with
our people is by distributing the responsibility
equally between all non-executive directors.
As part of their annual strategy reviews with
the divisions (see page 103), the non-executive
directors engage in project site visits and meet
with and are presented to by employees. Sites
visited by the non-executive directors in 2021
included: the Civic Centre Opportunities Site,
St Albans; the Barking Riverside Extension,
Essex; Coutts, London; Man Group, London;
The Mill, Canton, Wales; Lewisham Gateway,
London; and New Bailey, Salford. Presentations
from employees covered topics such as
sustainability, diversity and inclusion, training
and development, and updates on operations
in specific market sectors. In addition to the
strategy reviews, the non-executive directors
attended employee conferences held by the
divisions as well as the Group’s annual two-day
management conference.
Several of the divisional managing directors
presented to the health, safety and environment
committee in 2021 on safety and wider
responsible business activities within their
respective divisions (see page 124 for more
detail).
12 _ Morgan Sindall Group plc Annual Report 2021
Divisional strategy reviews by
non-executive directors in 2021
Non-executive director Division
Jen Tippin
Construction1 and
Property Services
Tracey Killen
Infrastructure1
Michael Findlay
BakerHicks1
David Lowden
Fit Out
Tracey Killen,
David Lowden
Partnership Housing
Malcolm Cooper
Urban Regeneration
1 Construction, Infrastructure and BakerHicks constitute the
Construction & Infrastructure division.
How we responded to feedback in 2021
Partnership Housing focused on ensuring
The following are examples of actions taken as a
result of feedback from employees:
each of its regions has a succession plan and
‘people plan’ in place.
Construction retained its periodical, all-
employee survey rather than replacing it with
more frequent ‘pulse surveys’; enhanced
its family-friendly policies and paternity and
maternity pay; and is testing an agile working
approach with site-based colleagues on a
project in St Albans.
Infrastructure launched an ‘adaptable
working’ approach; set up a new process that
enables employees to have regular career
conversations with their line managers;
relaunched its employee forum, ‘Let’s talk’,
appealing for underrepresented groups, such
as those who are paid weekly, to join; and is
training line managers to support colleagues
struggling with their wellbeing (see pages 19
and 21).
BakerHicks began a project to revitalise job
descriptions and create clear career pathways;
and held a variety of social and team activities.
Fit Out supported each of its teams in
developing bespoke action plans in response
to its all-employee survey, with common
themes including agreeing a communications
strategy and annual programme of events to
promote wellbeing.
Property Services enhanced the content
and frequency of its communications; and is
implementing ideas received through its new
‘Diversity of Thought’ innovation portal.
Urban Regeneration launched its volunteering
policy and a ‘buddy’ programme to support
new employees joining the business.
The Board was provided with a report at
its December meeting on the divisions’
engagement with their employees during the
year. The report was discussed in detail, and the
non-executive directors shared feedback from
their meetings with employees held during their
divisional strategy reviews. The Board noted that,
overall, the levels of employee engagement by
the divisions were good and that the employees
with whom the non-executives met were open,
positive and engaged, with the Group’s culture
coming across strongly and clearly.
The Board considered the effectiveness of its
selected process for employee engagement
and concluded that it should be continued, as
it enables the non-executive directors to meet
a broad range of employees from multiple
divisions and engage with them in a variety of
ways (at meetings and presentations or on site,
and without management present).
The Board was also presented with a report
on the findings of the Group’s diversity and
inclusion survey circulated in 2020 and how the
divisions were responding. See pages 23 and
24 for information on the survey results and the
divisions’ responses.
Read more on how we develop our
people and protect their health and
wellbeing(pages17to24).
Our stakeholders: continued
Supply chain
Who they are and why they’re
important to us
We have a national network of carefully selected
suppliers and subcontractors, ranging from
large organisations to small local firms, who are
aligned to our values and standards of delivery.
They are strategically important to the Group
as we depend on them to deliver our projects
efficiently and to a high standard. We view our
supply chain as long-term partners and work
together to overcome challenges, innovate and
improve.
Their key priorities
Work opportunities, including for smaller
businesses; prompt payment; a safe working
environment; fair treatment and respect.
How the Group engages with them
When appointing suppliers, we put in place
clearly written contracts setting out roles
and responsibilities along with agreed
payment terms. Our divisions monitor their
subcontractors’ performance against set criteria
and give constructive feedback. We hold a
Group networking event for suppliers every two
to three years and provide learning and support
through the Supply Chain Sustainability School
(see page 32). Our divisions communicate our
culture, values and standards to subcontractors
on our sites, and health, safety and wellbeing
and modern slavery are discussed in site
induction programmes and toolbox talks.
Fit Out has launched a new supply chain
portal which enables subcontractors to
monitor how they are performing on live
projects (see page 32).
13 _ Morgan Sindall Group plc Annual Report 2021
Our Group director of sustainability and
procurement assists in managing relationships
with those subcontractors and suppliers who
are common to more than one division.
Clients and partners
Who they are and why they’re
important to us
How the Board is kept informed
The executive directors receive information
on supply chain relationships at the monthly
divisional board meetings. The Board regularly
reviews the divisions’ payment practices and
health and safety statistics, together with the
Group’s strategies and actions to prevent
modern slavery.
In 2021, two non-executive directors, Malcolm
Cooper and Kathy Quashie, attended our
suppliers’ event, ‘Meeting the Challenge’, held at
Silverstone (see page 33).
How we responded to feedback in 2021
We have continued to invest in changes to
our payment systems and cash commitment
across all our divisions to shorten payment
terms for our suppliers. We have enhanced
our relationship management with the Morgan
Sindall Supply Chain Family members (see
page 32) to further promote collaboration, for
example sharing our pipeline of opportunities
and organising ‘lunch and learn’ sessions. In
addition, we have focused on providing our
supply chain with carbon education, for example
at the Meeting the Challenge event, the theme
of which was addressing climate change.
Readmoreonhowweworktogetherwith
oursupplychain(pages32to34).
We work with clients from the public,
commercial and regulated sectors (such as
water and transport) and our partners include
local authorities, landowners and housing
associations. In addition, we consider the needs
of the ‘end users’: those who will occupy or use
the spaces and infrastructure we create.
Long-term relationships with our clients and
partners are key to our organic growth strategy.
Where possible, we aim to secure work through
partnerships, frameworks or repeat business.
Their key priorities
Excellent customer service and experience;
technical knowledge and expertise; perfect
delivery of projects on time and to budget; a
positive, solutions-driven approach; to work with
a responsible and collaborative partner; help in
achieving sustainability, including lower carbon
output, in their projects and buildings; solvency,
cash resources and a strong balance sheet.
How we engage with them
Our divisions work to maintain long-term
relationships with their clients. Our national
coverage and decentralised approach enable
us to engage with clients and partners at a local
level and tailor our services as needed. Regular
dialogue helps us to understand their priorities
and expectations and ensure that we have the
skills and capabilities for their projects.
“The development provided us with the
best of both worlds – we were able to
buy a house that was surrounded by
idyllic countryside, while still being in close
proximity to all the amenities and transport
links we could ever need. Not only did we
fall in love with the property’s location, but
we also enjoyed being able to design our
interiors exactly how we wanted them
with the help of Lovell’s Inspirations team…
Having a fresh, blank canvas that we could
personalise and make our own before we
even moved into the property made the
buying process so easy.”
Toni Robinson and family,
Partnership Housing home purchasers,
Weston Woods, Cheshire
Strategic reportGovernanceFinancial statements Our stakeholders: clients and partners continued
Our clients’ priorities and objectives are
discussed with them at the start of each project
and we keep them informed throughout, making
sure the process is as smooth as possible.
We focus on the customer experience, for
example Property Services launched a new
‘customer charter’ in 2021 that covers topics
such as listening, respect and understanding
when engaging with residents. We ask for
clients’ feedback on project completion via
questionnaires and interviews. The results are
shared with the project teams and analysed by
the divisional managing directors to drive further
improvements. We monitor levels of satisfaction
using metrics appropriate to the divisions (see
page 8).
How the Board is kept informed
The divisional managing directors keep the
executive directors informed about client
relationships at their monthly meetings, who
then inform the Board of any matters of interest
such as key contracts or new relationships.
How we responded to feedback in 2021
On Construction’s project for Wintringham
primary school (see page 42), the staff at the
school were heavily involved in the design,
their input ensuring they had a space that met
their needs.
Fit Out has appointed dedicated social value
champions on key projects in response to
its clients’ increased focus on social value.
The division has also introduced ‘client
cornerstone’ training for its operational
teams, giving them the skills to gain a deep
understanding from each client of their key
objectives on their project.
14 _ Morgan Sindall Group plc Annual Report 2021
In response to demand to speed up the
construction of new homes, Partnership
Housing has been using a new and faster
modern method of construction. The i-House
is a prefabricated, watertight shell that
provides the ‘inner skin’ of a house ready
for follow-on trades such as bricklaying and
plumbing. The material used in the i-House
has an excellent thermal performance which
reduces heat loss.
Feedback requested from homebuyers by
Urban Regeneration resulted in the division:
bringing its customer service function back
in-house; developing an improved customer
relationship management system that digitally
generates paperwork within minutes of a
home demonstration or handover; and
quality enhancements to various customer
touchpoints. The changes were launched
on Urban Regeneration’s Lock 17 project
at Hale Wharf in Tottenham (see page 53)
and resulted in a 29% increase (to 81%) in
customer satisfaction for dealing with defects
and a 14% increase (to 86%) in satisfaction
with the condition of the property, compared
to the previous 12-month rolling period.
Urban Regeneration pioneered a virtual
sign-off process for the design concepts
on its project for the Marriott’s Moxy Hotel
and Residence Inn in Slough (see page 42)
in order to increase speed and efficiency,
as the Marriott team were based in multiple
locations. The interior designer used CGIs and
materials samples to produce design concepts
online, and once these were approved, full-
scale mock-ups of bedrooms and bathrooms
were built. These were the first Marriott hotels
in the world to be signed off in this way. The
attention to detail in achieving the highest-
possible standards through early sign-offs and
sample rooms were quoted as the best the
Marriott had ever seen.
“Salford City Council has been working with
Muse in delivering the long-term aspirations
of the Salford Central Plan. It’s been amazing
what we’ve achieved to date. I think it’s
even more exciting as we move on to the
major regeneration that will be happening
further down, at Crescent Salford, in taking
environmentally conscious development to the
next level and in truly leading from the front
in tackling and contributing to resolving the
climate crisis. This project [the Eden building] is
going to strengthen Salford City Council’s green
credentials for a number of reasons – not only is
it going to feature Europe’s largest living façade,
it is also going to operate solely on renewable
energy. This is really going to make it Salford’s
most iconic and pioneering and net zero
scheme in the city to-date.”
Sarah Ashurst,
Head of Investment and Programmes,
Salford City Council
Seepage27formoreinformationaboutthe
Edenbuilding.
Local communities
Who they are and why they’re
important to us
We view local communities as well as wider
society as a key stakeholder group. We can
generate social and economic value for local
communities through our construction and
regeneration schemes, while society more
broadly benefits from our focus on reducing
carbon emissions and pollution and increasing
biodiversity. Local residents are a potential
source of recruits and of suppliers with local
knowledge.
“We can see the new Glebe Farm School
being built from our house, we are literally
next door. It’s a big development but
Morgan Sindall are a delight to have as
neighbours. My son, Ben, has special needs
and Morgan Sindall has opened up the
site to him, allowing him to come in and
interview the workers on site to track how
the school is being built for his blog. They’ve
built my little boy up so much. Everyone
on the site knows his name, every morning
the guy who lets the lorries in waves to him.
They’ve given him a little Morgan Sindall
uniform of his own – it hangs up in his
room. It’s given everyone in the community
an insight into the development from the
inside.”
Rhian Evans,
resident near the Construction’s Glebe
Farm School site in Milton Keynes
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Our stakeholders: local communities continued
Their key priorities
Enhancements to the local surroundings
and quality of life that meet local needs and
requirements; buildings and developments that
are sustainable; a considerate constructor that
causes minimal disruption; and investment in
the local economy through job creation and use
of local suppliers and services.
How we engage with them
Our divisions have dedicated teams responsible
for liaising with local residents and communities
before and during our projects. Where
appropriate, they engage members of the local
community in consultation on the project’s
development; for example, Urban Regeneration
arranges planning consultations on all its
projects and phases. We partner with schools
to introduce construction as a career option.
Project teams in all divisions get involved in local
charities and events.
How the Board is kept informed
The Board is kept informed of the divisions’
community initiatives and any issues through
the executive directors’ board meetings with the
divisions.
How we responded to feedback in 2021
No material issues arose in the year.
Read more about how we engage with and create
valueforlocalcommunities(pages35to38).
Shareholders
Who they are and why they’re
important to us
Our shareholders provide the Group with funds
for investment in long-term growth. We value
the stewardship of our institutional investors
and the views of all shareholders and analysts.
Their key priorities
Robust financial and risk management; good
governance; effective communication of
strategy; share price growth; sound capital
investment decisions; a progressive dividend
policy; a responsible business that creates social
and environmental value; and a remuneration
policy that promotes sustainable growth.
How the Board engages with them
We keep all our shareholders updated via
regulatory newswires, our website and our
annual report. Our chair, senior independent
director and committee chairs are available to
meet with shareholders at any time.
The executive directors communicate regularly
with institutional shareholders and analysts
covering the Company’s activities through
private meetings and presentations following
our results announcements. Any written
feedback we receive following these interactions
is distributed to all members of the Board. In
addition, feedback and reports from Institutional
Shareholder Services, the Investment
Association and Pensions & Investment
Research Consultants are circulated to the
Board ahead of our AGM each year.
In 2021, our half-year results presentation was
delivered as an in-person event, with a live video
communications link that enabled investors and
analysts unable to attend in person to take part
in the live Q&A discussion.
All shareholders are invited to attend our
AGM and, outside of any pandemic-related
restrictions, we encourage everyone to attend
for the opportunity to meet and put questions
to the directors. In 2021, a closed AGM was held
as public gatherings were prohibited by the UK
government. Shareholders were notified of this
in advance and encouraged to appoint the chair
as proxy with their voting instructions. The chair
invited shareholders to email any questions
which would then be published on our website
in advance of the meeting (no questions were
submitted). Our 2022 AGM is intended to be
held as a live event on Thursday, 5 May (see
the Notice of Meeting on our website for more
detail).
The executive directors engaged with investors
during the year via email and meetings. Topics
covered included general information about the
Group, 2020 full-year and 2021 half-year results,
areas for growth, cash management and capital
allocation.
How we responded to feedback in 2021
All resolutions were passed at our 2021
AGM. The feedback received following the
full- and half-year results was very positive, and
additionally we received some very encouraging
feedback on our environmental performance.
The Group’s new capital allocation framework
and dividend policy were received positively by
investors.
During the year, our remuneration committee
consulted with our largest shareholders on
two proposed amendments to our executive
remuneration. See pages 126 to 128 for detail
on the feedback received and the committee’s
decision-making process.
Funders and performance
bond issuers
Who they are and why they’re
important to us
Our funders and performance bond issuers
provide us with access to competitively priced
banking, bonding and debt facilities. See page 39
for further information on the Group’s financing
facilities.
Their key priorities
Robust management of working capital and risk.
How we engage with them and
keep the Board informed
The Group’s finance director and director of
tax and treasury meet with our banks and
performance bond issuers following the
full-year and half-year results to update them
on the Group’s performance and discuss any
expectations they may have. These meetings
help us to maintain sufficient loan and bond
facilities. Our finance director reports to the
Board on any updates relating to the Group’s
funding requirements.
How we responded to feedback in 2021
No issues or concerns arose during meetings
with our funders and performance bond issuers
during the year that required consideration by
the Board.
15 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Responsible business strategy and performance
Our Total Commitments are a
strategic priority for the Group
What social value means for us
Social value is about supporting our people,
our supply chain and the wider communities in
which we work. Our Total Commitments help
us create social value by keeping people who
come into contact with our work safe and well,
developing our employees and subcontractors
through education and training, building long-
term supplier relationships and enhancing local
communities by providing training and work
opportunities and supporting local community
projects. The promotion of diversity and
inclusion is important to us, both within our
own organisation and through the creation of
opportunities for people who live locally to our
projects, including young people and those who
have been out of work for a long time.
Through our core activities of construction
and regeneration, we provide new, improved
and efficient housing, workplaces, health and
education facilities and national infrastructure.
Where we can, we procure locally and from
smaller businesses, which together with our
contribution towards upskilling people from
local communities, helps to create economic
resilience. In addition, the regeneration of towns
and cities attracts people and businesses to the
area and stimulates local economies.
Delivering on our Commitments
supports our purpose and helps
us achieve sustainable growth.
Our Total Commitments focus on the needs
of our stakeholders and the environment and
provide the framework for our responsible
business strategy.
Being a responsible business means conducting
our activities ethically, sensitively and without
causing harm to people or the environment. It is
about delivering social value and environmental
protection and enhancement that remain long
after we have completed our work.
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Improving the
environment
16 _ Morgan Sindall Group plc Annual Report 2021
In 2021, we delivered 71p of social value per
£1 spent through 112 projects, as measured
by our social value bank; trained 650 of our
Property Services engineers in domestic abuse
awareness; and paid 67.8% of our suppliers’
invoices within 30 days.
Improving the environment
We are a leader in our sector in addressing
climate change and have been independently
recognised as such. In 2021, we reduced our
Scope 1, Scope 2 and operational Scope 3
carbon emissions by 37% against our 2019
baseline of 27,242 tonnes CO2e and invested in
creating nine new woodlands on the Blenheim
Estate in Oxfordshire. We achieved an ‘A’ score
for leadership on climate change from CDP1
for the second year running, one of only 206
companies globally to attain this level. This is the
sixth year our leadership in this area has been
acknowledged by CDP. In addition, in January
2022, the Group was awarded ‘AAA’ under
MSCI’s2 environmental, social and governance
ratings, upgraded from ‘AA’; and in February,
we were awarded a Platinum ‘Carbon Reduce’
certificate from Toitū for having been measuring
our emissions for over 10 years and maintaining
our commitment to managing and reducing our
emissions.
Our people are highly engaged in our
commitment to achieving net zero carbon
emissions by 2030 and contribute through
their significant efforts to switch to low-carbon
solutions, for example when selecting fuel,
energy or materials.
1 CDP is a not-for-profit charity that runs the global
disclosure system for investors, companies, cities, states
and regions to manage their environmental impacts.
2 MSCI provides decision support tools and services for the
global investment community.
Using targets to drive and
track our performance
Our Total Commitments are driven by key
performance indicators (KPIs) and clear targets.
We regularly review our targets to ensure they
are sufficiently challenging and fit for the future.
Following a review in 2020, we updated our KPIs
and targets and used them to measure our
2021 performance.
Our performance in the year against our 2025,
2030 and horizon targets is set out on pages 17
to 38.
Our performance against our full set of
responsible business metrics is contained in our
responsible business data sheet, on our website.
Our Total Commitments are aligned with
the UN Sustainable Development Goals, the
following six being those where we believe
we can have the biggest impact:
Strategic report
Governance
Financial statements
Responsible business strategy and performance continued
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Protecting people
Improving the
environment
2021 performance
0.29
lost time incident rate1
2025 target
0.21
2030 target
0.18
Horizon ambition
Zero incidents
1 Number of lost time incidents x 100,000
divided by the number of hours worked. Lost
time incidents are those resulting in absence
from work for a minimum of one working day,
excluding the day the incident incurred.
17 _ Morgan Sindall Group plc Annual Report 2021
We want to provide our employees
and subcontractors with a safe
and healthy work environment
and support their physical and
mental wellbeing. Our goal is
that everyone who comes into
contact with our activities, on or
offsite,goeshomesafeandwell.
Health and safety
In 2021, the number of lost time incidents in the
Group increased to 134 (2020: 108; 2019: 127).
The number of RIDDOR1 accidents rose to 44
in 2021 (2020: 28; 2019: 41) and our accident
frequency rate rose to 0.09 (2020: 0.06; 2019:
0.08).
During the year, we continued to manage
the challenges posed by Covid and the
large number of changes to government
guidance, ensuring we remained aligned to the
Construction Leadership Council’s site operating
procedures. We were disappointed with our
safety performance as we always endeavour to
improve year on year. Our divisions responded
to the drop in performance experienced early
in 2021 by sharing learning and producing
targeted improvement plans. As a result, we
saw an improvement in performance during
the second half of the year, when the number
of RIDDOR accidents reduced by 37% and the
number of lost time incidents by 19%.
1 The Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013.
A large number of our accidents in 2021 were
caused by falls at the same level and being hit
by falling or moving objects. To reduce these
incidents, in addition to encouraging everyone
to be more aware of the basic risks, we have
applied principles of ‘safe by design’, where
safety is considered throughout the design
process so that safe behaviours become
instinctive. We have also undertaken campaigns
to prevent hand injuries and raise awareness of
the need to tether tools and maintain tidy sites.
Action taken to prevent accidents
Outlined below are examples of steps taken
by the divisions to increase awareness and
promote safe behaviours.
Construction: developed an animation,
‘Introduction to 100% Safe’ which is included
as part of site registration; produced new
visual safety standards and guidance;
continued to deploy its ‘observations tool’ to
identify trends and patterns; and developed
new ‘Behavioural Essentials’ e-learning
modules for its employees and supply chain
including how to design a safe site set up.
In response to an increased number of
underground services strikes in late 2020 to
early 2021, the division refreshed its standards
and guidance and launched a national training
campaign, and has since seen a reduction in
such incidents.
Infrastructure increased investment in its
‘human factors’ programme. Human factors
is about taking into consideration, when
planning a project, the tasks people are being
asked to undertake, the environment in which
they are working, and human and individual
characteristics that influence behaviours
at work. Effective planning can reduce the
likelihood of accidents resulting from human
error or interfaces between different trades.
The programme uses models such as AWIC
(Accessible, Workable, Intelligent, Correct),
a guide that helps identify any potential
for misunderstanding or error in a new
procedure; and CSHEL (Culture, Software,
Hardware, Environment, Live), a model that
takes into account that a human being is
rarely, if ever, the sole cause of an accident.
In 2021, Infrastructure: increased its human
factors training and awareness (40 human
factor practitioners were trained in the year);
applied its models to some of the division’s
more complex projects and specific risk areas
such as reducing hand injuries; piloted a trade
interface management tool; and introduced
new tools to investigate incidents and prevent
practical drift away from desired performance
levels.
To date, improvements have been identified
in the collection and analysis of data, while the
effect of the programme on the number of
incidents will be monitored during 2022.
Infrastructure introduced £200 contributions
for employees towards hearing tests and, if
needed, hearing aids. The offer is extended
to those who work in an operational
environment, currently wear a hearing aid
at work, or are referred by the division’s
occupational health partner.
Fit Out has run project-specific initiatives, such
as a challenge for engineering students to find
solutions to reducing hand-arm vibration and
hosting a seminar on noise reduction. The
division also provided free health screenings
to all employees.
Partnership Housing ran a health surveillance
programme in the year for its direct-employed
labourers, including the following tests:
hearing, vision, colour blindness, respiratory,
dermatology, musculoskeletal, hand-arm
vibration syndrome and blood pressure.
Keeping hands safe
Hand injuries accounted for a third of
injuries within Infrastructure in 2021.
These injuries are often caused by poor
perception of risk, lack of concentration,
or fatigue. To address this, the business
conducted a ‘Safe Hands’ campaign which
resulted in employees designing a pair of
safety gloves printed with the message
‘Don’t be an Oucher!’. The gloves use the
‘nudge’ theory to remind people to keep
their hands safe.
Responsible business strategy and performance: protecting people continued
In their 2021 strategy reviews with the divisions,
the non-executive directors reviewed the
divisions’ performance against the objectives
of the Group’s health, safety and wellbeing
framework which had been updated at the start
of the year (see page 124 for details).
Action taken to protect occupational health
All divisions are now accredited to ISO 45001,
the international standard for occupational
health and safety that provides a framework
to increase safety and enhance health and
wellbeing at work. Our occupational health
policies and standards cover all employees as
well as subcontractors working on our projects.
During the year, we increased our occupational
health surveillance with the end objective of
eradicating incidents of hand-arm vibration and
noise-induced hearing loss.
Construction organised online events and
blogs for its employees and supply chain
covering topics such as hand-arm vibration
management, dust management, skin care
and summer working, manual handling
and noise on site, and developed a series
of ‘Managers’ Guides’ for employees and
suppliers to promote occupational health
knowledge. With the support of a supplier,
the division held seven project-based dust
awareness sessions and trained 70 individuals
in its supply chain in formal ‘face fit testing’ of
dust masks.
In addition to progressing its human factors
programme, Infrastructure: produced and ran
a high-impact ‘Reducing the Risk’ safety film
in the year, showing actual and high potential
incidents; held safety forums for project
managers; and reviewed how it engages with
subcontractors on safety.
Fit Out launched a Safety Improvement Plan
in 2021 for its employees and subcontractors.
The Plan focuses on the division’s key causes
of accidents and high potential incidents:
movement and storage of materials,
housekeeping, management of floor voids
and slips and trips. The launch was supported
by a poster campaign with QR codes through
which ‘Toolbox Talks’ could be downloaded. Fit
Out’s high potential incidents reduced from 13
in 2020 to three in 2021.
Fit Out has also created a new role within
its safety team of ‘supply chain health and
safety manager, tasked with ensuring that
all suppliers comply with the division’s site
standards. The new manager works with the
project teams to understand their priorities
and produce a plan of action; this includes
site inspections and audits, engagement with
the directors of supplier companies where
necessary, and effecting change through
improvement planning, coaching support and
training. Progress will be regularly monitored
and reviewed.
Partnership Housing launched ‘L7 Minimum
Standards’ in the year to address seven areas
that most commonly lead to serious injury,
ill health or damage, such as excavations,
housekeeping, occupational health and
scaffolding.
18 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements Strategic report
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Responsible business strategy and performance: protecting people continued
“ Our Group Code
of Conduct states
our commitment
to the UN
Declaration on
Human Rights.”
Infrastructure: conducted a ‘Wellbeing and
Feeling Safe’ survey and in response to
the feedback ran new campaigns such as
‘Healthy Heart’; provided advice on optimising
conversations between employees and line
managers (see page 21); and introduced
‘Building better mental health’ awareness
training for line managers to help identify and
support anyone struggling with wellbeing.
Towards the end of the year, a follow-up
survey indicated that 93% of respondents felt
safe at work.
BakerHicks organised social activities to
keep people engaged and connected, such
as its #BakerHicksinBloom sunflower and
Photographer of the Year competitions, and
physical activity challenges that promote
health and wellbeing, such as Reach for the
Skye and Virgin Pulse GO.
Fit Out reviewed the performance of its
‘BeWell’ app and agreed goals and targets for
mental health first aid and awareness training.
Partnership Housing sponsored its employees
to undertake 50-mile walks, swims, runs
or cycles and collectively undertake 50
days of volunteering, to celebrate the 50th
anniversary of its first partnership.
Urban Regeneration held events such as
‘lunch and learn’ sessions, off-site team
building activities, ‘at-desk’ de-stress massages,
and photograph competitions. The division
also increased mental health first aid training
and the use and function of social spaces in
its offices.
As more people are working from home
more often, Construction, Infrastructure and
Partnership Housing each developed ‘adaptable
working’ policies, with toolkits and guidance to
help employees and managers agree working
arrangements that suit both the individual and
the business.
Human rights
We fully support human rights and do not
prevent or deter anyone who works for us from
joining or taking part in a trade union. In 2021,
we launched a new Group Code of Conduct
stating our commitment to the UN Declaration
on Human Rights and providing a framework
for how we should act when engaging with our
clients, colleagues and suppliers. The Code is
rooted in our culture, being structured around
our Core Values and Total Commitments. Every
employee received a copy direct from our chief
executive and was required to undertake an
e-learning module to help embed the Code’s
principles. The Code was circulated to the
members of our Supply Chain Family as we
expect them to apply the same standards in
their dealings with their clients, employees and
suppliers.
ReadmoreaboutourCodeofConductonpages81
and82andonpage100.
Physical and mental wellbeing
The pandemic has increased the challenges and
importance of maintaining physical and mental
wellbeing. We continue to offer our colleagues
a range of benefits that include access for
all employees to a digital GP service and an
employee assistance programme that provides
legal and counselling services. Sixty-one per
cent of our employees are covered for private
medical support and 81% for death-in-service
benefits. Our divisions provide mental health
first aid training and publish regular bulletins
containing tips and guidance on wellbeing
including links to national campaigns such as
Mental Health Awareness Day. Financial worries
can be a major source of stress, and, using a
third-party specialist, we provide employees
with an educational resource to help them
manage their finances. In December 2021, we
worked with the Financial Conduct Authority
during its annual loan fee fraud campaign to
raise awareness and protect our employees and
subcontractors from becoming victims. A toolkit
of materials, including posters, was shared
across divisions whose subcontractors are
statistically at higher risk of such fraud, including
Construction, Property Services and Partnership
Housing.
The following are examples of initiatives taken
by the divisions in 2021 to promote physical and
mental wellbeing:
Construction launched: a ‘Wellbeing Toolkit’
displaying all employee benefits in one place;
a ‘Sleep School’ app; and live webinars on
topics such as work/life balance, alcohol use
and exercise.
19 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Responsible business strategy and performance: protecting people continued
Preventing modern slavery
were assisted by our labour desk, run by
In late 2020, we took part in a modern slavery
pilot study along with some of our peers, to
develop a methodology for trying to identify the
extent of modern slavery in the construction
industry. An independent third party, &Wider,
conducted an anonymous survey among
subcontractors working on a number of projects
(including nine of our own) about their working
conditions.
Following the initial pilot survey, a number of
issues with the survey process were identified
such as that many of our projects are delivered
to short programmes: the call cycles for the
survey take place every six weeks and we may
have different subcontractors working on
our sites from one cycle to the next. We are
staying in touch with &Wider as they continue
to develop their survey for the construction
industry, to monitor whether it becomes
possible to apply the process on our larger
projects.
During 2021, we undertook the following to
manage our modern slavery risk:
commenced the evaluation of our labour
practices against the ELS BES 6002 Ethical
Labour Standard;
commenced our assessment for ISO
20400:2017 Responsible Procurement
registration;
included a section on modern slavery in our
Code of Conduct e-learning module;
five specialist recruitment agencies, in better
managing the risks of off-payroll working
and in remaining compliant when recruiting
contingent labour and temporary staff, by
providing second and third verification of
candidates. The agencies also ensured that
we maintained scrutiny of payment and
entitlements provided to workers hired
through the labour desk;
encouraged our divisions to use Sedex, an
organisation that audits working conditions in
supply chains, to review the labour practices
of their material suppliers;
prepared a guide for our site teams to help
to identify signs of modern slavery and the
questions they should ask if they suspect
there may be an issue;
clarified the support available for site teams
should an incidence of modern slavery be
suspected;
liaised regularly with the Gangmasters and
Labour Abuse Authority (GLAA);
liaised with Safecall (our raising concerns
helpline service provider) to ensure that their
teams are able to detect if a call relates to a
modern slavery issue, and with our site teams
to ensure that our raising concerns posters
are being displayed on all sites.
While no instances of modern slavery were
raised internally or via our whistleblowing
service, we assisted both the police and the
GLAA with their inquiries into two separate
allegations concerning right-to-work permissions
and modern slavery. Each of these inquiries
arose from isolated incidents in our supply chain
and no wrongdoing was identified on our part.
20 _ Morgan Sindall Group plc Annual Report 2021
Our 2021 modern slavery statement will be
published in June 2022. Further details on our
commitment to preventing modern slavery can
be found on page 109 and in our 2020 modern
slavery statement on our website.
Addressing domestic abuse
Property Services partnered with the Domestic
Abuse Housing Alliance (DAHA) to develop the
DAHA Contractors Accreditation by developing
systems and processes for identifying people
who may be at risk. The division became the
first contractor to receive formal accreditation,
evidencing how its frontline employees have
been able to detect signs of domestic abuse
when carrying out repairs. Property Services also
provided business support and advice to the
domestic abuse charity, Your Sanctuary, via the
Pilotlight charity and social enterprise support
scheme.
In 2021, Property Services trained 650
employees in identifying signs of domestic
abuse via 200 one-and-a-half-hour sessions.
The division runs four training modules
tailored for different roles.
Infrastructure launched a domestic abuse
policy and guidance in the year and engaged
an Independent Domestic Violence Adviser
(IDVA) to provide support to any employee
who may need it. The division worked with the
domestic abuse charity, Hestia, which helped
source the IDVA. The support offered extends
to all employees and also offers the facility
to allow a manager to make an additional
payment to an employee facing domestic
abuse, to help them to leave the home.
Strategic report
Governance
Financial statements
Responsible business strategy and performance continued
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Developing people
Improving the
environment
2021 performance
3.5
training days1 per employee
per year
2025 target
5 days
2030 target
6 days
Horizon ambition
7days
1 A training day is a minimum of six hours of training.
21 _ Morgan Sindall Group plc Annual Report 2021
We want an inclusive work
environment where everyone has
access to the knowledge, technology
and services they need to achieve
their personal ambitions, deliver
the best outcomes for our clients
and drive the business forward.
We are working to increase our
diversity and to ensure that no
discrimination occurs, however
unintentional it may be.
We recruit talented people and give them the
resources they need to perform well. These
include collaborative office environments,
flexible working arrangements, and training and
mentoring to help them increase their skills and
knowledge. We promote internally where we
can.
Training and career
development
During the year we provided an average of 3.5
training days per employee (2020: 2.3 days)
and sponsored 532 people completing national
vocational and professional qualifications (2020:
540).
Our divisions work with industry bodies and
initiatives to attract people into the industry.
These include Women into Construction and
the 5% Club, a national campaign to generate
opportunities for graduates and apprentices.
The table below shows the percentage of Group
employees making up the 5% Club.
Apprentices
New graduates recruited
Sponsored students
2021
231
61
44
2020
197
44
24
Total structured trainees
336
265
Percentage of total
employees1
5%
4.3%
1 Based on number of UK employees at 31 December.
We support our employees in progressing
their careers through personal development
plans, access to training courses that suit their
needs and interests, mentoring and ‘buddy’
programmes. General skills training includes
topics such as inclusive leadership, media and
presentation skills and assertiveness.
The divisions use their intranets to provide
access for their employees to a wide range of
learning and development resources, with some
divisions running online ‘Academies’.
In 2021, Infrastructure launched a new
range of learning resources to help people
boost their skills together with a suite of
videos, workshops and guidance called
‘It’s my conversation’ that aims to improve
the quality and outcomes of conversations
around development and careers between
employees and their line managers.
Partnership Housing launched seven new
e-learning topics to its Academy, on topics
such as safety and customer care.
We ensure that people are trained in new
technical developments and software to keep
their skills up to date and future-proofed.
For example, in 2021 we enrolled 12 people
from across the Group on an in-depth
CISL (Cambridge Institute for Sustainability
Leadership) carbon learning course run by
Cambridge University. In addition:
BakerHicks rolled out company-wide LinkedIn
Learning in the year, a library of instructional
videos to equip employees with the latest
business, technology and creative skills.
Partnership Housing trained 37 site
managers and assistant site managers in Asta
Powerproject to ensure they have the latest
digital skills for programming and project
management.
Responsible business strategy and performance: developing people continued
Property Services developed and expanded
its ‘people management training programme’
and is now offering 11 different modules
to line managers to improve their line
management skills.
Urban Regeneration ran one-to-one
coaching sessions as part of individual career
development and overall succession planning.
The division has been Investors in People
‘Gold’ accredited for the past 10 years.
Investing in secure and
innovative technology
We continue to invest in new technology to
enable people to attain high standards while
enjoying a better working experience. This
includes data analytics and business intelligence
as well as enhancements to business-specific
operational, procurement, commercial and
financial systems. In 2021, we invested £3.2m
in technology and business innovation. We
invested c£1m in transitioning more systems
to new cloud-based solutions for improved
efficiency, reliability and accessibility. Our
divisions invested c£2m in digital, commercial,
client engagement and responsible business
solutions – these included Property
Services’ goldeni software (see page 47) and
Construction & Infrastructure’s CarboniCa
carbon measurement tool (see page 27) along
with BIM (Building Information Modelling), risk
management and project management tools.
We have also continued to invest in the latest
security technology and strategies (see page 68
for information on how we manage cyber
security risk).
Employees identified within succession plans
are given further support such as one-to-one
business coaching and training in topics such
as site manager development, management
excellence, business leadership and
organisational resilience. At Group level, we run
an off-site leadership development programme
aimed at providing participants with enhanced
leadership and management skills. In 2021,
two cohorts (20 people in total) took part in the
programme, fewer than usual owing to social
distancing rules in place and the importance of
face-to-face interaction for this course. In 2022,
four cohorts are scheduled to take part (around
54 people in total).
Leadership training run by the divisions in 2021
included the following:
Construction developed a management and
leadership behavioural framework and rolled
it out to its entire senior management team of
c80 people.
Infrastructure introduced a ‘Stepping up to
Management and Leadership’ programme,
with 138 people taking part in the year.
BakerHicks introduced a ‘core competencies’
programme offering employees training in
modules such as ‘emotional intelligence’ or
‘range of influence’ to develop skills suited to
the roles they aspire to.
Fit Out launched a succession planning
initiative, assisted by an external specialist
agency, to examine what a leader in Fit Out
looks like. Bespoke development plans will
be produced for future leaders identified
through the process. The division also ran
an ‘exceptional leadership’ programme for
selected employees.
22 _ Morgan Sindall Group plc Annual Report 2021
“I left school at 16 and joined Overbury as
a management trainee. I started on site,
labouring, and looking back it was a fantastic
place to gain an understanding of our sites,
our teams and our product. I was sponsored
through college, and then through university,
where I studied quantity surveying. For me,
challenging the status quo is such a precious
Core Value of Morgan Sindall – it empowers
you, gives you a voice, and a complete forum to
be yourself. Overbury enabled me to
experience working within different positions
across the business. The trust the Group puts
into people who live by the Core Values shows
the level of opportunity within Overbury and
the Morgan Sindall Group. If you can prove you
can do it, it’s there for you.”
Olley Watson,
Managing Director, Overbury’s London-based
corporate partnerships and education team
Strategic reportGovernanceFinancial statements Strategic report
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Financial statements
Responsible business strategy and performance: developing people continued
Diversity and inclusion
Diversity of thought, perspectives and
experience is vital to our long-term success,
helping us to challenge the status quo and drive
innovation. We consider diversity in the broadest
sense, including age, gender, ethnicity, culture,
socio-economic background, disability and
sexuality.
Over the past decade, we have introduced a
number of initiatives across the Group, such
as flexible working and family-friendly working
practices, to attract more diverse employees. We
employ people from a variety of different socio-
economic and educational backgrounds and
when recruiting, we consider the future potential
of each individual candidate as well as their past
education and experience.
Our chief executive has made each division
responsible for devising its own diversity and
inclusion strategy.
We give full and fair consideration to job
applications made by disabled people, commit
to making reasonable adjustments to their
roles and responsibilities, and offer the training
and support they need to give them the same
opportunities for career progression as our
other employees.
In 2021, Property Services reviewed the
support it provides employees with a disability
or health condition that affects their role and
committed to introducing an informal ‘check
in’ to ensure that people’s changing needs
continue to be met.
We offer work experience, training and
apprenticeships in local communities where
we work; undergraduate sponsorships
and graduate training programmes; and
returnships for people who have had a career
break; all of which bring new and varied talent
into the business. We also engage with local
schools and colleges to encourage young
people to pursue careers in construction. See
pages 35 and 36 for more detail on how we
offer training and work opportunities to local
residents of our projects.
Our diversity statistics
The table below shows the gender split throughout the Group.
Board1
Senior management (Group management team)1
Group management team direct reports2
2021
2020
Men Women
Men
Women
5
10
60
3
1
21
5
10
54
2
1
10
All employees
4,904
1,605
4,668
1,496
Number of UK employees at 31 December,
on which data is based
6,509
6,164
1 John Morgan and Steve Crummett included in both Board and senior management numbers.
2 Excludes John Morgan’s direct reports as these are all members of the Group management team.
23 _ Morgan Sindall Group plc Annual Report 2021
23 _ Morgan Sindall Group plc Annual Report 2021
23 _ Morgan Sindall Annual Report 2021
Our representation of people from a Black,
Asian, or minority ethnic (BAME) background has
remained unchanged from 2020 at 15%, while
our female representation has increased slightly
from 24% to 25% (see table below left for the
numbers) and we recognise that we have further
work to do to ensure that we have a fully diverse
and inclusive business. Our key challenge is to
improve diversity in our senior management
teams and their succession pipelines. The
percentage of women who are direct reports
of the Group management team has increased
to 21% (2020: 14%). See pages 112 and 113
for more information on Board and Group
management team diversity.
Our gender pay gap
Our 2021 median gender pay gap based on
our April data is 29.6% (2020: 33.6% at April and
29.1% at November1). The gap remains high
and reflects a higher number of senior male
employees in the Group. We recognise that we
need to make further progress in helping more
of our female employees progress into senior
positions. Women make up 11% (2020: 10%) of
the upper pay quartile compared to 39% (2020:
40%) in the lower quartile. Although initiatives
have been introduced across the Group to
attract more women into the industry at junior
levels, and to develop and retain women who
already work across the Group, it will take time
for their careers to be developed into more
senior roles and therefore to reduce our pay
gap. See our gender pay gap report on our
website for more information.
1 Our 2020 data was impacted by a number of people
across the Group agreeing to reduce their salaries for
a two- or three-month period either due to the impact
of Covid and the number of people on furlough in April
2020. We therefore re-ran our data in November 2020
when the payroll data was not distorted by Covid-related
measures.
The outcomes of our 2020 diversity
and inclusion survey
In 2020, we surveyed all our employees to
understand how they perceive the Group in
respect of diversity and inclusion.
In 2021, the divisions communicated the key
findings to their employees together with
the strategies and actions they would be
implementing as a result. The results of the
survey varied between divisions, but overall
indicated that we need to do more work to
address our inclusivity.
In response to the feedback, the divisions set
up employee working groups and developed
strategic plans to drive diversity and improve
people’s sense of inclusion. While the actions
being undertaken vary according to the
specific business needs of each division, they
are broadly aligned to the following themes:
changing behaviours; recruitment and retention
processes; promoting construction as a career;
and supporting diversity and inclusion in
our supply chain. Examples of actions being
undertaken are summarised on the following
page.
Responsible business strategy and performance: developing people continued
Changing behaviours to
become more inclusive
Training and awareness programmes to
improve people’s understanding of inclusion
and how their behaviour can affect others,
including unconscious bias training and
diversity and inclusion leadership courses for
managers.
The launch of a campaign to increase
awareness of invisible diversity such as mental
health.
Programmes such as ‘Allyship’ and ‘Active
Bystander’ to encourage support for
colleagues from minority groups.
The formation of a diversity and inclusion
committee to gain feedback from employees
and explore areas for improvement.
Recruitment and retention
Review of existing policies and processes.
Improving wording on careers websites and
in job advertisements to remove barriers and
ensure the language is accessible to everyone.
Increasing diversity in graduate programmes
(Fit Out’s intake in 2021 were 50% women and
15% from a BAME background); BakerHicks’
graduate scheme welcomed six women (55%
of its graduate intake) into the business in
2021, more than in any single prior year.
New work/life balance initiatives such as
Urban Regeneration’s parental transition
programme to support male and female
colleagues in their journey to becoming
parents and its offer of paid leave for
employees undergoing IVF treatment or to
support their partners through the process.
Monitoring employees’ careers to ensure
everyone is being given the opportunity to
succeed.
24 _ Morgan Sindall Group plc Annual Report 2021
Promoting construction as a career
Promoting the industry and contributing to
social mobility in local communities through
outreach programmes for groups such as
schools, charities, long-term unemployed, ex-
offenders and veterans.
Construction developed partnerships in the
year with Working Families/Working Mums,
BPIC (Black Professionals in Construction) and
Build Force UK.
Property Services has partnered with the
Women’s Trade Network to attract women
into trade roles; piloted the ‘Phoenix’
programme with Westminster Council to offer
training opportunities to domestic abuse
survivors; and joined the Housing Diversity
Network mentoring scheme through which it
has enrolled five employees to date.
Partnership Housing works with Women in
Construction and BAME in Property to help
increase diversity in candidate pools.
Supporting diversity and inclusion
in our supply chain
Working with our supply chain to help
improve their recruitment practices and raise
awareness of the importance of inclusive
management.
Promoting procurement from smaller
businesses led by minority groups.
A full report on the divisions’ plans and activities
in response to the diversity and inclusion survey
was presented to the Board for consideration at
its December meeting and, following a detailed
discussion, the Board agreed to continue to
review the Group’s progress on diversity and
inclusion in 2022.
“I did an architectural engineering degree.
It looks at the systems within a building and
I found myself being drawn to the building
services modules, so when I had finished
my degree, I worked at an engineering
consultancy and that was it. I went on to study
for a Masters in environmental design and
engineering at UCL. Moving to BakerHicks was
a strategic move. I’d had some mechanical
experience but I knew I wanted to build on
that. I’ve been taken aback by how easy it is to
speak to someone senior at BakerHicks. I’ve
had knowledge shared – that genuine, easy,
free-flowing communication and contact with
people who are at a much more senior level
than you. That’s so unusual. I feel I can build a
whole career here… you have people who you
can talk to, to help you understand. That’s very
pivotal for someone in their career, to help
you learn and progress. You can carry it with
you and also pay it forward. One day, I’d like to
be able to give someone the same amount of
time and care that I received.”
Sochima Onyenemelu,
Mechanical Engineer, BakerHicks
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Responsible business strategy and performance continued
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Improving the
environment
Improving the
environment
2021 performance
35%
reduction in Scope 1 and 2 carbon
emissions from 2019 baseline1
45%
reduction in operational Scope 3
carbon emissions from 2019
baseline2
£589m
supply chain by spend providing
their own carbon data3
39%
reduction in carbon emissions from
the Group’s vehicle fleet from 2019
baseline4
2025 target
30%
2030 target
60%
2025 target
30%
2030 target
60%
2025 target
£500m
2030 target
£1bn
2025 target
30%
2030 target
60%
Horizon ambition
Horizon ambition
Horizon ambition
Zero emissions
Zero emissions
100%
of supply chain spend by spend
Horizon ambition
100%
ofvehiclefleetfullyelectric
1 Scope 1 is direct emissions from sources owned or controlled by the Group and Scope 2 is indirect emissions generated from purchased energy. The 2019 baseline was 20,903 tonnes CO2e.
A 2019 baseline has been applied as 2020 performance was impacted by Covid.
2 All indirect emissions not included in Scope 2 that occur in limited categories of our value chain as measured by the Toitū ‘carbonreduce’ scheme (see page 80). The 2019 baseline was
6,339 tonnes CO2e.
3 Wider Scope 3 emissions outside of operational Scope 3. See Appendix for further information.
4 The 2019 baseline was 12,078 tonnes CO2e.
We are acting to combat climate
change by working towards net
zerocarbonemissionsby2030and
reducing the level of carbon in the
projects and buildings we deliver.
We are focusing on increasing
biodiversity and reducing air
pollution, water usage and waste.
In 2021, we achieved a 73% reduction in
our total carbon emissions since we began
measuring them in 2010, and a 37% reduction
from our 2019 baseline. Our carbon intensity
(tonnes CO2e emissions per £m revenue)
reduced to 5.3 from 7.5 in 2020. By reducing our
gas oil consumption, we saved 3,217 tonnes of
carbon in our Scope 1 emissions. We replaced
598,200 litres of gas oil with hydrotreated
vegetable oil (HVO), an initiative led by our
Partnership Housing division for which HVO
constitutes 50% of its bulk fuel purchases.
While we have been successful in reducing
our Scope 1, Scope 2 and operational Scope 3
emissions, our challenge continues to be to
address our wider Scope 3 emissions, incurred
from our supply chain and the running of
buildings and infrastructure once handed over
to our clients. We are working with our clients
and supply chain to help them report and
reduce their emissions.
Seepage71forTaskForceonClimate-relatedFinancialDisclosures(includingclimatechangescenarios).
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Responsible business strategy and performance: improving the environment continued
Currently, 43% of our total Group fleet and 70%
of our car fleet are hybrid or electric.
Property Services, which accounts for 24%
of the Group’s fleet, replaced 22 (7.2%) of its
389 small/medium diesel vans with electric
in 2021, returning the rented diesel vans to
their owner. The switch will reduce carbon
emissions from the fleet by 52.8 tonnes CO2e
per year. Replacing the division’s 85 large
vans will depend on advances in technology,
as these vans currently require heavier
batteries which reduce the loads they can
carry. Property Services has committed to
switching all its small/medium vans to electric
by 2023, excluding any contracts where there
is an unusually high daily mileage. In addition,
the division is installing electric charging
points at all its offices, while also exploring the
possibility of installing charging points at the
homes of its engineers.
Partnership Housing is also working to ensure
all of its offices have electric charging points as
more employees switch to electric cars.
Telehandlers are a major source of emissions on
site for some divisions.
Partnership Housing introduced a policy in the
year to limit engine idling time and has trialled
an electric telehandler.
Construction used an electric telehandler on a
school project, saving 30 tonnes of carbon.
In this section, we address how we can reduce
carbon emissions in our own activities and help
reduce emissions in the design and operation of
buildings. On page 33, we describe how we are
working with our supply chain to reduce their
emissions.
Our roadmap to net zero
carbon emissions
Based on science
We have committed to a policy of achieving net
zero carbon emissions by 2030 based on our
Scope 1, 2 and operational Scope 3 emissions.
We drive progress using targets accredited by
the Science-Based Targets Initiative, and in 2021,
revised our targets to align with restricting global
warming to the lower limit of 1.5oC required in
the 2015 Paris Agreement and reinforced in the
2021 Glasgow Climate Pact. Our new targets
will be submitted to the Science Based Targets
Initiative for approval using the latest audited
emissions data.
Using science and modelling, we have calculated
the amounts by which we will need to reduce
our carbon emissions from specified activities
each year to achieve net zero by 2030, taking
into account the growth of the business over
the period. Our roadmap entails reducing travel
emissions, switching to alternative fuel and
renewable energy, achieving site efficiencies and
adopting and supporting new technologies.
Our carbon action panel consists of
representatives from each division and meets
four times a year to report on progress in
emissions reduction and share best practice
across the Group. During 2021, the panel
oversaw the implementation of our net
zero carbon strategy and the roll out of our
CarboniCa carbon measurement tool (see
page 27). An online database of project case
studies was developed, to improve information-
sharing on emissions reduction initiatives. This
database enabled us to further strengthen our
2021 CDP climate disclosure and achieve an
‘A’ score (see page 16).
Greener fuel and energy use
Our Scope 1, Scope 2 and operational Scope 3
emissions arise predominantly from bulk fuel
used on sites, our vehicle fleet and electricity
use. We have significantly reduced fossil
fuel emissions by reducing the use of diesel
generators, using solar-powered site cabins,
switching from gas oil to HVO and replacing
petrol and diesel-fuelled vehicles with hybrid
and electric. Currently, 72% of our electricity is
purchased from renewable sources, and we are
working towards 100% in 2022. A key factor of
many of Urban Regeneration’s schemes is to
develop areas around public transport nodes,
encouraging workers, residents and visitors to
use public transport rather than drive.
Our divisions are using HVO on as many site
vehicles as possible and encouraging their
supply chains to replace diesel with HVO in their
vehicles. HVO is made largely of vegetable oil
and waste animal fat and reduces emissions by
up to 90%. Partnership Housing is also rolling
out the use of HVO fuel to power the generators
on its sites.
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Property Services’ electric van fleet
Strategic reportGovernanceFinancial statements Responsible business strategy and performance: improving the environment continued
Driving innovation in carbon reduction
Infrastructure launched a ‘Great Green
From 1 January 2021, we introduced a Group-
wide internal carbon charge to drive innovation
in reducing emissions. The charge is based
on the volume of emissions incurred by our
divisions and the money raised has been placed
in a climate fund for investment in climate
change initiatives.
In 2021, our divisions developed climate change
strategies and action plans appropriate to their
respective needs. At our senior management
conference in October, seven teams put
forward ideas for carbon reduction projects and
a shortlist of projects are being reviewed for
potential investment from the climate change
fund.
Other carbon reduction initiatives in the year
included the following:
Construction developed a ‘Carbon Literacy
Project’ that will promote change in how the
Group, and the industry as whole, designs,
procures and builds in order to reduce carbon
emissions. The project, due to launch in 2022,
will entail training 30 employees to present to
clients, the supply chain and local schools and
communities.
During National Environment Week in
October, Construction launched a ‘10-tonne
carbon challenge’ to those working on live
sites to reduce emissions on their projects
by a minimum of 10 tonnes CO2e. As a result,
1,471 tonnes of carbon were saved on 14
projects using methods such as sourcing
lower-carbon steel, replacing reinforced
concrete with a lightweight steel frame,
and upgrading insulation and air tightness.
On many of these projects, we used our
CarboniCa tool (see below) to verify the
carbon savings.
27 _ Morgan Sindall Group plc Annual Report 2021
Challenge’ inviting employees to suggest
ways of reducing carbon in key areas such
as materials procurement, alternative fuels,
behaviour change, and site set up and
accommodation.
The CarboniCa carbon calculator
Our CarboniCa tool, developed by a team led by
one of our colleagues who is an expert in carbon
modelling (see box at right), and independently
verified to the RICS standard by engineering
and design consultancy, Arup, can be used to
promote lower-carbon designs to our clients.
CarboniCa calculates the total carbon emissions
of a project and building at an early stage of
the design, including carbon embodied in the
materials (incurred in production, transport
and waste) and projected emissions from
the building throughout its life cycle. The tool
highlights elements in the design that will result
in higher emissions and suggests lower-carbon
alternatives for the client, designer and supply
chain to consider. Having been piloted in 2020
by Construction, CarboniCa was rolled out to the
other divisions during 2021.
On Construction’s project to build a health
and community hub in Gorton, Manchester,
CarboniCa was used to save over 500 tonnes
of carbon through sourcing lower-carbon
steel.
Fit Out used the tool to demonstrate on its
current project for Arup that around 25% of
the embodied carbon would come from a
steel staircase in the design. The client opted
instead for a wooden version, reducing the
carbon footprint of this element of the project
from 18 tonnes CO2e to nearer four.
In 2021, 41 of our projects used the CarboniCa
carbon reduction tool.
Looking forward, we are developing a web-
based CarboniCa app that will be ready for use
by the second quarter of 2022. The app will
provide a secure platform on which to accelerate
our research and development and enhance
the tool’s performance across the Group. We
have pledged to use CarboniCa, or an equivalent
client-mandated tool, on all projects across the
Group valued over £10m from 1 January 2023.
The capability to build to
Passivhaus standards
A Passivhaus building requires very little energy
to achieve a comfortable temperature year
round, typically offering space-related heating
and cooling energy savings of up to 75%
compared to the average new build.
Construction is building a Passivhaus school
pilot project for the Department of Education
in North Lincolnshire.
BakerHicks has been involved in the design
of Passivhaus school buildings, including
North Muirton Primary School, the first
Passivhaus primary school in Scotland; two
of the business’s architects achieved certified
Passivhaus designer status in 2021, and more
are undergoing training.
Urban Regeneration obtained planning
approval for a 115,000 sq ft office building
at New Bailey, Salford, which will be the first
in the region to meet the UK Green Building
Council’s (UKGBC) ‘net zero’ in operation
targets. The Eden building, now under
construction, will be as resource-efficient as
possible with enhanced insulation in line with
“The problem that many people put down
on the table is that business and the
economy don’t go hand in hand with saving
the planet. But I just think that is a problem
to solve. And when we look at issues like
this pragmatically – what the business
wants to achieve and what’s better for the
planet – often there are solutions in there,
we just need to find them. CarboniCa is a
tool I created that allows users to answer
a series of simple questions which are
then converted into carbon data so they
can actually see the carbon involved in the
whole life cycle of their building. It then
suggests lower-carbon alternatives for a
more sustainable design and build.”
Tim Clement,
Head of Carbon and the Environment,
Morgan Sindall Construction
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the Passivhaus standard, improved ventilation,
an air source heat pump to provide low-
carbon heating and cooling and CO2 heat
pumps to provide highly energy-efficient hot
water. The building will be wrapped in one of
Europe’s largest living walls, which will help
cool the structure, improve the wellbeing of
its occupants and contribute to biodiversity.
Eden has been selected as a London Energy
Transformation Initiative Pioneer. Urban
Regeneration is working to define new
Passivhaus levels of performance to be
applied to all new homes in its developments.
The importance of low-carbon fit out
According to the UKGBC, the built environment
contributes around 25% of the UK’s total carbon
footprint. Additionally, 80% of buildings that we
will be using in 2050 have already been built.
While new buildings might be more energy
efficient, decarbonising existing properties
will have a much bigger impact on reducing
carbon emissions.
Fit Out’s design and build business designed
the London offices of ethical investment firm,
Generation Investment Management, to
reduce its environmental impact and reflect
the firm’s ethical ethos. New lighting and
air conditioning systems were installed to
increase energy efficiency, while reclaimed
timber, repurposed furniture and wall finishes
made from recycled paper, moss and bamboo
helped reduce the use of virgin materials. The
project achieved a SKA Gold environmental
rating.
Energy-efficient homes to reduce
carbon emissions and fuel bills
Partnership Housing has secured a contract
to retrofit 69 homes for Orbit Group (see
page 51) with the goal of increasing energy
efficiency. The division’s development for
LiveWest in Exeter (see page 51) will be the
first to meet the housing association’s new
sustainable homes standards. All homes
will be insulated to a higher standard than
required by building regulations and fitted
with solar photovoltaic panels to generate
their own electricity.
Property Services is leading a programme for
Basildon Council to install insulation to the
outside walls of council homes which helps to
maintain a constant temperature inside. Since
2018, the division has installed the external
wall insulation to 581 homes with c200 more
planned for 2022, together with double-glazed
windows and doors and eco-tech combi
boilers. As well as reducing emissions, the new
insulation will cut energy bills for residents.
“By insulating homes as much as possible in
construction, we can avoid the need to return in
years to come and add more. Similarly, installing
solar panels from day one means that all of
the necessary infrastructure is in place so that
they can be upgraded in future as technology
improves. Reducing electricity bills is a vital step
in tackling fuel poverty and we look forward to
the day when our rooftops can generate enough
electricity to meet a family’s entire energy needs.”
Adam Preece,
New Business Manager for LiveWest
28 _ Morgan Sindall Group plc Annual Report 2021
The potential for decarbonising construction
The ‘Circular Twin’ project was a theoretical exercise to explore what changes would need to be
made to the design of a building if the key priority was to reduce embodied and whole life carbon.
A school built by Construction five years previously was digitally redesigned, with the virtual, mirror
version achieving a reduction of more than two thirds in whole life carbon (67%) and almost three
quarters in embodied carbon (72%). The project was a collaboration involving architects Lungfish
and HLM, engineering consultancy Cundall and 25 supply chain partners, and demonstrated the
potential for reducing carbon in the built environment through the use of technology and new
ways of working.
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Transparent and responsible offsetting
Personal carbon pledge for employees
To achieve net zero carbon by 2030, we aim to
reduce our Scope 1, Scope 2 and operational
Scope 3 emissions by 60% and invest in
offsetting the residual emissions. We want to
be clear and transparent about how we offset.
We intend our investments in carbon removal
to be long-term, sustainable, multi-generational
and based in the UK. We expect the projects
that we invest in to achieve added benefits of
biodiversity, increase in natural capital and the
promotion of wellbeing.
In preparation for offsetting our residual
emissions, we have signed an agreement with
Blenheim Estate in Oxfordshire to create nine
new woodlands, planting more than a quarter
of a million trees across 138 hectares (see box
at right).
We are also investing in a scheme which will
match clients with ethical offset schemes in
communities local to their own construction
and regeneration projects. The scheme will
offer clients high-quality carbon credits and
the income raised will be used to support local
authorities and housing associations with home
improvements and to help address fuel poverty.
We have achieved a CDP ‘B’ score again this
year for our forest disclosure. We are unlikely to
be able to achieve a higher rating as we do not
produce timber products ourselves or manage
the production of timber as a raw material.
In 2021, our chief executive wrote to every
employee asking them to sign a personal carbon
pledge to make tangible changes to the way they
work that will help cut carbon. The pledge was
incorporated within an e-learning programme
on carbon and how it contributes to climate
change.
Improving biodiversity and
the natural environment
Biodiversity net gain (BNG) is an approach to
development that leaves biodiversity in a better
state than before, or ‘nature positive’. It typically
involves creating new habitats or enhancing
existing ones and begins with a survey of
the existing plot to establish a baseline. It is
anticipated that from Summer 2023, a minimum
of 10% BNG will be legally required for all
development projects in England.
We measure the biodiversity impacts on our
projects and target a net gain where we can.
A large element of our work is regenerating city
centres and developing areas of landscaped
public realm such as parks, canal sides and cycle
paths which help increase biodiversity, as well
as air quality and the wellbeing of local residents
and workers.
Urban Regeneration has set goals for
enhancing biodiversity on its developments
as part of its newly introduced sustainable
development action plan.
We are signatories to UK Constructors Declare
Climate and Biodiversity Emergency, and during
the year BakerHicks signed up to Architects
Declare and Engineers Declare. We are a
founder member of Get Nature Positive, a
campaign to engage businesses in protecting
natural resources and promoting biodiversity,
and a contributor to its Nature Handbook for
businesses.
Our largest current biodiversity project is our
woodlands scheme in Oxfordshire (see box
right).
In addition to the Blenheim project:
Construction commits to a BNG target on
every project and has been working with a
specialist consultancy to identify how it can
increase its BNG.
The business has trialled DEFRA’s new
Biodiversity Metric 3.0 (a tool that
measures nature losses and gains resulting
from development or changes in land
management) on a community engagement
project in Liverpool. The project involved
clearing a disused piece of land and planting
it with wildflower seeds to create a site for
the charity Blackburne House’s BEE You
project, which teaches young people the art
of beekeeping.
Having assessed the project in-house using
DEFRA’s tool, it was found to have achieved a
BNG of 1,424.7%.
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Offsetting carbon and
promoting biodiversity
at Blenheim
Over the next 25 years, the nine woodlands
we are planting at the Blenheim Estate in
Oxfordshire will absorb a total of 22,000
tonnes of carbon from the atmosphere.
Seven woodlands are being planted in
winter 2021/2022, with the remaining two
in 2022/2023. The 28 varieties of carefully
chosen trees will purify the air, their roots
will hold the soil of the sloping fields and
they will provide a home to birds, insects,
animals and fungi. A small percentage of
conifer will be planted to provide winter
habitats for wildlife. Clover-rich grass
seeding has already been completed,
which starts the carbon sequestering
and biodiversity increase straight away
before the trees are planted. We have also
completed our baseline soil and biodiversity
surveys which will be used to measure
increase in biodiversity over the coming
years. We are creating a forest school and
amphitheatre on the site, where people can
come to learn about biodiversity.
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We maintained our CDP ‘C’ score for our water
disclosure in 2021. We are reviewing what we
need to do over the next two to three years in
order to improve our water management.
The divisions look for different ways to reduce
water use on their projects.
At Glebe Farm school in Milton Keynes,
Construction is recycling water from the
machine that washes the wheels of vehicles
as they exit the site, meaning it only needs
to be filled with water once, at the start of
the project; and on its Novotel project in
Paddington Village, Liverpool, the division used
‘side stream filtration’ to flush the heating and
cooling systems as part of the commissioning
process, saving around 7,200 litres of mains
water per hour.
Infrastructure’s new site solar-powered
welfare cabin (see page 34) harvests
rainwater, a feature that the division worked
with the supplier to create.
Maintaining air quality
We aim to reduce the impact of our activities
on air quality. Our construction divisions’
environmental management systems contain
procedures to prevent pollution on our projects.
One way of achieving this is by switching to
cleaner fuel (see page 26).
Infrastructure introduced ‘telemetry’ on some
sites in the year, using drones rather than
vehicles to conduct detailed inspections of its
vast sites.
Property Services’ goldeni tool (see page 47)
monitors the air quality in homes and issues
an alert if a boiler needs servicing or replacing.
Initial analysis of the data is helping identify
properties at risk of damp and mould which
can impact air quality. The tool is also being
used to monitor air quality in Property
Services’ offices, which will provide a baseline
to ensure employees are working in a healthy
environment.
On its project The Spine, a multi-storey office
building in Liverpool, Fit Out ensured high
levels of air quality on site by using dust
cube air cleaners and air flushing to remove
pollutants, and by training its site operatives
in dust management. Materials were selected
for the project that had low ‘volatile organic
compounds’ (a type of pollutant) and the air
quality in the building was tested prior to the
client moving in.
Our net zero plan is based on the
following principles:
Report: ensuring all our relevant
carbon data is measured, reported
and independently verified; including
Scope 1, Scope 2 and operational
Scope 3 in our net zero boundary;
and using our new carbon charge
to measure the cost of carbon we
produce.
Remove: assessing various carbon
reduction initiatives to remove carbon
from our activities where possible.
Reduce: encouraging stakeholders
to reduce their own and the Group’s
emissions, through initiatives such as
supplier engagement (supply chain
portal) and employee engagement
(climate pledge and e-learning).
Replace: considering low-carbon
alternatives, such as electric vehicles,
and designing low- and zero-carbon
buildings, to replace carbon intensive
activities.
Offset: we will only offset any residual
emissions once removal, reduction and
replacement have been applied.
Natural spaces are a feature of Urban
Regeneration’s development schemes,
contributing to wellbeing for local residents
and workers as well as biodiversity. On its
Manor Road project in Newham, the division
is creating a two-acre linear park, while at
Stockport Exchange a 265 sqm green ‘living’
wall is being installed in a multi-storey car
park. The wall will enhance biodiversity, reduce
the ‘urban heat island’ effect and slow the flow
of extreme rainfall.
Various project-level initiatives across the
Group have included hedgehog houses and
highways, wildlife cameras, bug hotels, bee
bricks and bird boxes.
Using water responsibly
We do not use an extensive volume of water
in our operations and have not set targets for
water reduction. However, our aim is to reduce
our water usage, harvest rainwater where
possible, procure less water-intense materials
and use less water-intense equipment. To
reduce our reliance on fresh water, we use
recycled water for dust suppression, cleaning,
plant watering, toilets and industrial process
use. We use sustainable drainage systems in
our developments, which reduce surface water
flooding and improve water quality, and install
water-saving devices such as flow saver taps
in the new homes we build; Property Services
installed 1,205 showers in 2021 with integrated
water-saving devices.
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Reducing and recycling waste
In 2021, we reduced our total waste by 30% to
859,081 tonnes (2020: 1,223,394), of which 99%
was diverted from landfill. Our waste intensity
(total tonnes of waste produced per £m of
revenue) decreased by 34% to 267 (2020: 403).
Our construction waste reduced by 47% to
40,662 tonnes (2020: 77,360) and 97% of our
construction waste was diverted from landfill.
The amount of waste that we produce varies
according to the nature of our activities (for
example, tunnelling generates a higher volume
than constructing buildings). For our projects,
we mostly purchase products that have been
designed and manufactured rather than raw
materials.
We aim to support the circular economy
by reducing waste and recycling or reusing
waste that we cannot reduce. Our sustainable
procurement policy requires our employees to
adopt best practice (reduce, reuse and recycle)
in their buying decisions. We decided at the
start of 2021 to participate in a greater number
of manufacturer take-back schemes and to
improve our ordering and material selection with
waste reduction as an objective. For example, we
have worked with a supplier to return protection
boards to the factory after use for reconstitution
into new boards.
Our site waste management plans are
supported by our waste service providers,
resulting in the sharing of best practice and
lessons learned and increased opportunities
to reduce waste at source or recycle. In 2021,
we agreed a process for a new waste desk to
help us reduce and manage our waste more
effectively by consolidating the number of waste
service providers that we use and providing
access to waste liaison officers and improved
waste reporting systems. The desk will be piloted
in the Infrastructure business in the first quarter
of 2022.
During the year, the Group signed up to The
Pallet Loop, a circular economy pallet reuse
scheme for the construction sector. Pallets
are used to transport building materials and
are usually used once and discarded – fewer
than 10% are currently recycled. The Pallet
Loop replaces the single-use approach with a
system for returning pallets to be repaired and
reused, thereby cutting waste, timber use and
carbon. Pallet Loop pallets are made from 100%
FSC timber and engineered to be over 100%
stronger, allowing them to be reused multiple
times.
New initiatives by the divisions to reduce or
recycle waste included:
Construction joined the SCAPE public sector
framework’s ‘Construction Waste Portal’, a
platform that helps construction companies
predict, manage, reduce and prevent
construction waste.
On a project for the University of Glasgow,
Construction recycled 100 bar stools, 1,000
carpet tiles, 58 mattresses and 14 microwave
ovens.
Infrastructure worked with a supplier to use
a precast road safety barrier on a number
of projects for National Highways, reducing
waste and enabling quicker installation.
Fit Out and Partnership Housing have
replaced plastic site signage with recyclable
products.
Fit Out has worked with the online platform,
REYOOZ, to recycle unwanted materials and
furniture from its projects. On one project in
London, over £62,000 of goods were donated
to local causes.
The Pallet Loop
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Responsible business strategy and performance continued
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Improving the
environment
Working together
with our supply chain
We have built longstanding
relationships with our supply
chain partners. Together we are
always looking for innovative
ways to achieve quality for our
clientsandfulfilourresponsible
business goals. Where needed,
we work with our supply chain
partners to help them succeed.
Our supply chain partners play a fundamental
role in our resilience and success (see page 13).
Our Morgan Sindall Supply Chain Family of
suppliers and manufacturers, set up nearly
20 years ago, now has 413 members.
These relationships are critical to ensure that
we can maintain the supply of key materials
for our projects. We have Group-wide
procurement agreements in place that give our
subcontractors access to better pricing. In 2021,
81% of our supplier spend was through Group-
wide agreements (2020: 72%).
Our subcontractors are monitored for
performance against set criteria and given
feedback either to recognise their achievement
or, if appropriate, help them improve.
Construction, which holds regional award
ceremonies for its supply chain, held a national
event in 2021, presenting awards in nine
categories including safety, Perfect Delivery,
social value and innovation. Some divisions
award their subcontractors preferred status
when they perform exceptionally well.
Fit Out has 319 firms on its preferred
subcontractor list, having promoted 29 in
2021, which together account for 61% of the
division’s total subcontractor spend. During
the year, Fit Out launched a supply chain
portal for its subcontractors which was built
using their feedback and input. The portal
provides subcontractors with a real-time
overview of how they are performing on their
projects in areas such as health and safety,
risk assessments, environmental aspects and
snags.
We were a founder member of, and continue to
support, the Supply Chain Sustainability School
(SCSS) which provides free training in topics such
as waste management, energy management,
biodiversity, modern slavery, fairness, inclusion
and respect, mental health and wellbeing, and
community liaison.
In 2021, Construction and Infrastructure,
which each operate an online ‘Academy’ for
employees, extended their learning platforms
to their supply chains, and around 100
subcontractors to date have accessed the
training. Modules cover topics such as carbon,
technical training, and advance learning
required for access to certain sites such as rail.
Construction and Fit Out extended their
employee assistance programmes to their
subcontractors during the year, giving around
6,400 people access to a range of legal and
counselling advisory services.
Procuring locally, from
smaller suppliers
We use smaller, local suppliers and
subcontractors where we can.
Of Fit Out’s supply chain, 85% are classified
as small- to medium-sized businesses. On
one particular project in London, the division
sourced 75% of the project value from UK
manufacturers.
On Partnership Housing’s brownfield
regeneration (see page 35), 90% of the works
are being carried out by employees and
subcontractors who live within 15 miles of the
sites.
2021 performance
67.8%
of total invoices paid within 30 days
2025 target
70%
2030 target
80%
Horizon ambition
95%
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On its development of the old library site
in Slough (see page 53), 29% of Urban
Regeneration’s project spend was procured
locally while 51% was with small- to medium-
sized businesses.
On the Moxy Hotel and Residence Inn in
Slough, delivered by Construction on the
same development, 300 people working for
regional subcontractors were from the local
area.
Work Radar
Construction was a founding member of
the Work Radar scheme, launched in 2020,
which connects individual tradespeople,
microbusinesses and social enterprises with
large construction firms working on projects in
their area. Those who have signed up receive
alerts of local opportunities while contractors
are able to develop local supply chains. The
platform is funded by contractors’ subscriptions
and free for those who register to work. It is
being used by thousands of organisations
and is expected to address issues such as
skills shortages, unemployment and diversity
and to help reduce carbon emissions by
shortening the distances being travelled to
projects. As at 31 December 2021, a total of 129
tradespeople were registered with Work Radar,
175 microbusinesses and 10 social enterprises.
These figures include users not connected with
the Group.
Paying promptly
We aim to pay our suppliers fairly and have
worked hard to reduce our average days to pay
invoices, in line with the Prompt Payment Code.
Partnership Housing converted more of its
suppliers to electronic invoicing, from 61% of
invoices in 2020 to 76% in 2021, helping to
reduce payment times.
Working together on
sourcing supplies
Our strong supplier relationships have
continued to help us manage the reduced
availability of certain materials. We share our
project delivery requirements early enough
to allow advance planning, sufficient lead-in
periods, and for suppliers to build their capacity.
Partnership Housing has, where necessary,
purchased materials a little earlier than it
would normally have done to enable suppliers
to hold stock.
Working together to improve safety
On its Lewisham Gateway scheme, Urban
Regeneration worked with its supplier to
design a safety cage around the base of
cranes that would prevent people from
climbing them. A prototype was trialled and
has now been adopted by the supplier as its
new standard for all crane installations.
Working together on climate change
In 2021, we were again awarded Supplier
Engagement leader status by CDP for our action
to measure and reduce environmental risks
within our supply chain.
To help measure and reduce our indirect
Scope 3 carbon emissions (see page 25), we
are working with our supply chain to encourage
and assist them in measuring, reporting and
reducing their own emissions. In 2021, we rolled
out a new carbon portal to all our suppliers
that enables them to upload their emissions.
To date, 60 of 147 suppliers contacted (16%
of Group supplier spend) have submitted data
via the portal. As it was proving challenging to
collect data this way, due to our supply chain
being large, mobile and decentralised, we set
up a collaboration with three Tier 1 contractors
together with the SCSS, and now have 900
companies registering to provide data, with c200
having already submitted their data.
In 2021, we held an event for our Supply Chain
Family called ‘Meeting the Challenge’ on the
theme of how we can work together to tackle
climate change. The event brought together
1,000 suppliers, employees and clients at
Silverstone, and provided an opportunity for
our suppliers to meet with our procurement
and management teams, our clients, and each
other to share ideas about new products
and innovations and discuss other industry
challenges such as materials supply. Our
divisions exhibited tools such as CarboniCa
(see page 27) and goldeni (see page 47) and
Construction hosted a stand titled ‘Come and
speak to us about carbon’.
33 _ Morgan Sindall Group plc Annual Report 2021
33 _ Morgan Sindall Group plc Annual Report 2021
33 _ Morgan Sindall Annual Report 2021
Driving prompt payment of suppliers
Our divisions have reported the following
data under the payment practices
regulations for the six months to
31 December 2021.
Construction & Infrastructure, our largest
division by revenue, further improved
and reduced its average time taken to
pay invoices to 25 days from 27, with
98% of invoices paid within 60 days. Fit
Out reported its average time taken to
pay invoices as 23 days, with 97% paid
within 60 days, while Partnership Housing
reported 32 days as its average time to
pay, an improvement of one day from
the last reporting period, with 96% of
its invoices being paid within 60 days.
Property Services showed an average of
37 days to pay invoices, an improvement
of one day from the prior reporting period
and with 96% of invoices being paid within
60 days. Urban Regeneration paid 94% of
invoices within 60 days, taking an average
of 26 days to pay. We do not use any
supplier finance arrangements.
Responsible business strategy and performance: working together with our supply chain continued
During Supply Chain Carbon Week in
September, Construction circulated a digital
newsletter to 2,955 individuals within the
Group’s Supply Chain Family, informing
them of the carbon maturity framework and
the kind of data we will be requesting from
them to help us report our indirect Scope 3
emissions; how they can support us in our
10-tonne challenge; sustainability e-learning
modules available through the new online
supply chain Academy (see page 32); an
invitation to sign up to the Group’s carbon
pledge, adapted for the supply chain to
help them achieve Level 1 of the maturity
framework; and videos showing examples
of suppliers who have innovated to reduce
carbon.
Fit Out hosted a webinar for manufacturers
setting out practical steps for obtaining
environmental certificates for their products.
The live virtual event was addressed by three
industry experts and attended by around 70
people, with more requesting a copy of the
recording afterwards. The event generated
significant interest within Fit Out’s supply chain
and the division is planning further sessions
on the subject in 2022.
Partnership Housing developed written
guidance for its small- to medium-sized supply
chain partners on what will be expected of
them as the industry moves towards net
zero. The guidance includes: a description
of the Group’s science-based targets and
the data that our supply chain will need to
record; a ‘plant charter’ that sets out minimum
standards for non-road mobile machinery; a
recommendation to use HVO fuel; and tips on
reducing waste.
As a result of the event, Partnership Housing
has installed a solar hybrid generator on
two of its sites to date, and trialled a battery
generator and an electric telehandler.
Together with our supply chain we continuously
explore ways of reducing carbon in our projects.
These include reducing embodied carbon in
materials, consolidating deliveries, reducing
fossil fuel use and finding more sustainable
construction methods. Our supply chain was
instrumental in providing us with embodied
carbon data for our CarboniCa tool. We are
currently working with our supply chain on
logistical solutions ahead of the planned
expansion of low emission zones over the next
two to three years. We have also developed
a plant alliance with 32 companies, which is
assisting in driving the transition to HVO fuel
across the Group.
Construction worked with two suppliers on
the Summerdown special educational needs
school project in Eastbourne to source a
lower-carbon concrete. The alternative used
contains 70% ‘ground granulated blast furnace
slag’, recycled from the iron manufacturing
process, which is as strong and durable as
concrete but reduced the project’s carbon by
more than 52 tonnes. The CarboniCa tool was
used to calculate the carbon savings.
Construction has developed a ‘carbon
maturity framework’ to rank the progress of
supply chain partners in reducing their carbon
emissions. Level 1 indicates that key staff will
have received some training on carbon in
the built environment, while Level 5 signifies
science-based carbon-reduction targets in
place and circular economy thinking. The
rankings are designed not to reward or
penalise, but to identify where we can help
and advise subcontractors on improving their
own carbon performance.
34 _ Morgan Sindall Group plc Annual Report 2021
Eco-friendly site facilities
Sometimes hundreds of people may be working on a large infrastructure site, often throughout
the night. Having access to modern welfare units with a kitchen, canteen, office, hot water and
hygienic sanitary facilities is vital. Infrastructure worked with supplier Welfare Hire, to introduce
next generation mobile welfare units. Replacing traditional models, which predominantly run on
generators, these innovative eco-friendly facilities use lithium battery and solar hybrid power to
reduce noise pollution, fuel use and carbon emissions. The units have the capability to save more
than 1,000kg of CO2e per month.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Responsible business strategy and performance continued
Enhancing
communities
Protecting
People
Our Total
Commitments
Working together
with our
supply chain
Developing
people
Enhancing communities
Improving the
environment
2021 performance
71p
of social value per £1 spent
on 112 projects
2025 target
85p
per £1 spent
2030 target
90p
per £1 spent
Horizon ambition
£1.01
per £1 spent
35 _ Morgan Sindall Group plc Annual Report 2021
35 _ Morgan Sindall Group plc Annual Report 2021
35 _ Morgan Sindall Annual Report 2021
We want to leave a positive legacy by
improving the built environment and
creating social and economic value
for the communities where we work.
Through our core activities of construction and
regeneration, we deliver new, improved and
more efficient housing, workplaces, education
facilities and national infrastructure, and
regenerate towns and cities. In addition, we
contribute to local communities by procuring
locally, providing training and work opportunities,
and supporting community projects and
charities.
During 2021, our Group social value panel,
made up of representatives from across the
divisions, presented divisional social value
strategies to our Group director of sustainability
and procurement for inclusion in the Group
social value approach (see page 16), organised
the delivery of virtual work experience and met
to share best practice such as Property Services’
workstream for identifying domestic abuse (see
page 20).
Regenerating towns and cities
Our regeneration schemes revive town
centres with new housing, leisure, work and
retail facilities, and landscaped open spaces,
with a focus on developing brownfield sites
and underutilised public-owned land. Urban
Regeneration works with local communities,
local authorities and other stakeholders to
repurpose each town centre with the right mix
of uses according to its historical strengths and
characteristics. This is particularly important
as town centres are becoming less dominated
by retail, a trend that has been accelerated
by the Covid pandemic. Local economies
are stimulated as a regeneration scheme
progresses, through local procurement and the
attraction of people and businesses to the area.
The completion of the first phase of Urban
Regeneration’s development at Hale Wharf
in Tottenham (see page 53) has transformed
an underused waterside area to create
249 mixed-tenure new homes with public
spaces and walking routes. A new bridge
has improved movement for local residents
between the high street and Lea Valley,
provides easier access to transport routes and
creates attractive canal-side public realm.
Partnership Housing has acquired four
brownfield sites in the West Midlands
to deliver 709 multi-tenure homes, 48%
affordable, and high-quality open public
space. The division has secured £10.5m of
brownfield funding from the West Midlands
Combined Authority and obtained full
planning consent for all sites.
Partnership Housing built 3,130 new homes in
2021 and refurbished c7,150.
Local apprenticeships, work
and training opportunities
We endeavour to develop a genuine
understanding of communities where we work
that are in particular need of support. We run
social enterprises in these areas that provide job
and training opportunities for local young people
and disadvantaged groups, including people
who have been out of work for long periods of
time and ex-offenders.
Morgan Sindall All Together Cumbria is a
community interest company, owned by
Construction & Infrastructure, that works with
recruitment specialists to connect local people
in Cumbria looking for work with businesses
that need their skills.
Strategic report
Governance
Financial statements
Responsible business strategy and performance: enhancing communities continued
Property Services offers training in trades
and employability skills, structured work
experience, pre-apprenticeships and
employment opportunities to local residents
of its social housing schemes. To date, 100
residents in Basildon have completed the
‘BasWorx’ training initiative, 41 residents in
Westminster have completed the ‘CityFutures
Work to Learn’ programme and 12 residents
have taken part in Property Services’
‘employability academy’ for college students in
Yorkshire.
In addition to the social enterprises:
Construction offers dedicated learning
facilities called ‘Knowledge Quads’ on its
projects, where requested by the client.
The Quads focus on four key areas: ‘skills’,
‘education’, ‘employment’ and ‘discovery’. The
success of the Knowledge Quad on The Spine
project in Liverpool (see page 30) has led to
new facilities being established on projects at
Salford University and Kingsbrook Secondary
School in Buckinghamshire.
In Scotland, Construction has joined with
Tigers (Training Initiatives Generating Effective
Results Scotland) to create an apprenticeship
programme for local young people, some of
whom have experienced multiple barriers
into employment. The programme includes
a mix of classroom learning and onsite
training and provides technical, digital and
sustainability knowledge as well as personal
and employability skills. Across South Ayrshire
and Glasgow, 31 candidates have completed
their training and been employed by the
division as apprentices.
36 _ Morgan Sindall Group plc Annual Report 2021
36 _ Morgan Sindall Group plc Annual Report 2021
36 _ Morgan Sindall Annual Report 2021
Construction and Property Services have
joined the government’s Kickstart Scheme,
where employers are given funding to
create six-month work placements for 16- to
24-year-olds on Universal Credit who are at
risk of long-term unemployment. During the
year, Construction provided 10 placements
and Property Services provided 20. Roles
have varied between marketing, construction,
administration, customer service, gardening
and property maintenance.
Urban Regeneration launched a
comprehensive sustainable development
strategy in 2021 aimed at improving the life
chances of people who live in the areas it
develops. At the outset of every project, the
division, in conjunction with local community
groups and the local authority, develops a
detailed social value strategy, setting targets
based on meeting local needs. The strategy
includes offering training, apprenticeship
and employment opportunities to the local
community including those out of full-time
work or education. The division works closely
with its supply chain to help deliver the
strategy, commits to a project charter and
monitors and reports on performance using
the social value bank (see page 37).
Working with schools and colleges
We work closely with schools, colleges and
universities to encourage young people to
consider careers in construction, to help
increase diversity and address potential skills
shortages in the industry. Our activities range
from mentoring, STEM (science, technology,
engineering and mathematics) activities and
workshops to career talks, site visits and work
experience.
On its Repton project in Norfolk (see page 51),
Partnership Housing has worked with a non-
profit education trust (The Wensum Trust),
to sponsor two students from the local Acle
Academy which will lead to apprenticeships on
the scheme in 2022. In the longer term, the
division will be providing 11- to 16-year-olds with
on-site learning. The division has also organised
career talks for young people on next steps after
completing their GCSEs and virtual or on-site
work experience.
The Group has to date entered 42 formal
partnerships with schools – 21 through
Construction, nine through Infrastructure,
and 12 through Partnership Housing – that
pledge to support pupils with learning and
development so that they make career choices
that are right for them, the industry and the local
community. The partnerships commit to the
Gatsby benchmarks of good career guidance.
Gatsby is a charitable foundation committed to
strengthening the UK’s science and engineering
skills. A template of the schools partnership
agreement was rolled out across the Group
in 2021.
Social distancing restrictions introduced as a
result of the pandemic have not only interrupted
children’s education but also threatened
teenagers’ access to work experience. Our
divisions have used digital technology to
overcome this challenge.
Construction, Infrastructure, Property Services
and Partnership Housing have worked with
Speakers for Schools to offer virtual work
experience (VWEx) programmes. Speakers
for Schools is a charity that aims to give state
school students the same access to top
speakers and work experience as those from
fee-paying schools. Using Google Classroom,
the week-long placements task students with
projects such as designing a building, with
experts from the divisions providing guidance.
The students can develop skills such as
maths, digital design, science, English, art and
collaborative working. In 2021, 716 students
took part, up from 204 in 2020.
Property Services worked with the
Construction Youth Trust and Fulham Boys
School in the year on the Trust’s ‘Building
Brighter Futures’ programme, which aims
to help young people discover construction
and built environment professions that suit
their skills and interests. Volunteers from
Property Services ran virtual sessions for a
group of Year 9 students, introducing them to
the range of careers available in the industry;
challenging them to design a wellbeing space
in their school for students and teachers;
and giving guidance on budget, location and
sourcing materials. The students presented
their proposals to the school and Property
Services and a selection of ideas were
implemented.
Responsible business strategy and performance: enhancing communities continued
Community projects and charities
Our divisions regularly support local charities
and community schemes while working on their
projects.
Partnership Housing planted 100 trees at its
Ymyl Yr Afon housing development in Merthyr
Vale and invited local primary school children
to help plant the final 30. The trees were
planted as part of the Queen’s Green Canopy
initiative to mark the Platinum Jubilee in 2022.
The division also donated a bench, which
was installed on a polished concrete slab, for
residents and the wider community to enjoy.
We run corporate volunteering schemes where
employees are given a day’s paid leave per
year to volunteer with a registered charity. The
divisions support requests for charity donations
and offer financial contributions and goods in
kind, such as refurbishing community facilities
or volunteering on allotments and community
gardens. More than £124,000 was raised for or
donated to charities in the year by the Group.
Addressing local needs
Property Services, which carries out repairs and
maintenance to social housing, is well-placed
to help address local needs. The division runs
community initiatives that include:
Training engineers to detect signs of
vulnerability such as domestic abuse (see
page 20), poor living conditions, overcrowding,
hoarding, mental ill health, physical disability,
vulnerable children or language barriers. The
engineers relay significant issues to the local
authority so that they can organise help. In
2021, the engineers reported c700 cases of
vulnerability.
Virtual energy workshops for social housing
tenants, giving participants guidance on
making their homes more energy efficient and
paying energy bills and providing them with
access to the government’s Energy Redress
Scheme; during the winter of 2020–2021,
the division supported 371 households with
vouchers worth c£34,000 in total to help fight
fuel poverty.
A ‘digital inclusion’ scheme for residents in
sheltered housing schemes, to give them the
skills they need to keep in touch with friends
and family online as well as doing shopping
and other tasks. With the help of two of the
division’s Kickstart trainees, the first session
took place in November in Waltham Forest
and will be rolled out to other locations in
2022.
Property Services’ new goldeni software that
helps keep social housing on its schemes
healthy, legally compliant and more energy
efficient (see page 47).
Measuring the social value we create
We use a social value bank tool, developed with
Simetrica-Jacobs and aligned to HM Treasury’s
Green Book, to measure in monetary terms
the social, economic and environmental value
we add to local communities. In 2021, we used
the bank on 112 projects and it calculated that
we contributed 71p of social value for every £1
spent. Examples of social value delivered on
these projects included:
545 apprenticeships and training
opportunities for young people;
643 job opportunities for unemployed people;
407 job opportunities for local people;
7,979 hours supporting schools; and
9,620 hours community volunteering.
The social value bank has been adapted in the
year to encourage robust whole life assessment
and reduction of carbon and the adoption of
CarboniCa.
Property Services uses the ‘Wellbeing Valuation
Approach’ of external verifier HACT (Housing
Association Charitable Trust) to calculate
its social value impact. The HACT valuation
confirmed that between April 2020 and March
2021 (HACT’s reporting cycle), the division
achieved over £1.8m of social value, with every
£1 spent generating £12 in social value across its
contracts.
During the first year of phase two of
Urban Regeneration’s Lewisham Gateway
development, the division used a tool called
the Social Value Portal to measure over £61m
of social and economic value generated for
the local community. Key impacts included
£52m spent locally; 93,820 car miles saved; 40
hours’ career support sessions; 23 weeks’ work
experience; and £7,148 community support.
We have been working with Simetrica-Jacobs to
adapt our social value bank so that it is tailored
to our regeneration divisions. The new version of
the social value bank is being piloted by Urban
Regeneration and is expected to be rolled out in
the third quarter of 2022.
37 _ Morgan Sindall Group plc Annual Report 2021
Property Services engineer
Strategic reportGovernanceFinancial statements Responsible business strategy and performance: enhancing communities continued
The Catalyst Knowledge Quad, which will
provide multi-purposed bases on projects
providing training, education and employment
(see page 36 for information on Knowledge
Quads already in place on Construction
projects); and
Catalyst Community, of digital alumni: people
who have already benefited from the division’s
social value, employment and training activity
provided through its projects and will provide
skills and employment opportunities to new
participants.
The programme is scheduled for launch in the
second quarter of 2022.
The Catalyst Programme
Construction has developed a new initiative to
optimise its social value activity, support carbon
reduction and leave a positive lasting impact for
communities. The programme’s goals are to:
reduce harm to the planet;
improve people’s life chances; and
identify the value of Construction’s actions for
individuals and organisations.
To achieve these objectives, the programme will
introduce:
Catalyst Materials Marketplace, a web-based
platform to redistribute redundant materials
for use by local communities and other
projects;
Catalyst Outreach, a scheme that will
use Work Radar (see page 33) to identify
microbusinesses and social enterprises to
work with the division on its projects and
provide them with access to upskilling support
so that they can meet minimum standards
and secure work;
38 _ Morgan Sindall Group plc Annual Report 2021
Hackney Britannia
Construction put social value at the heart of two projects completed for Hackney Council in 2021.
A new secondary school and leisure centre were delivered at Hackney Britannia, a mixed-use
community development that forms part of the council’s plans to regenerate the area. During
the project, the team became involved in the Shoreditch Trust charity, events to support local
residents such as an ‘Elders Feast’, school careers talks and job fairs. They also worked with
Women into Construction to support 15 local women with mentoring, employment skills and
CV support.
£78m
social value
34
57
apprentices
new jobs created
800+
volunteer hours
Strategic reportGovernanceFinancial statements Financial and operating review
A strong performance across the Group
Financial performance
Revenue for the year increased 6% to £3,213m
(2020: £3,034m), with adjusted* operating profit
increasing 92% to £131.3m (2020: £68.5m).
This resulted in an adjusted* operating margin
of 4.1%, an increase of 180bps compared to
the prior year (2020: 2.3%). Reported operating
profit was up 98% to £129.8m (2020: £65.4m).
The net finance expense decreased to £3.6m
(2020: £4.6m) primarily due to the Group
drawing down on its committed bank facilities
as a precautionary measure in the prior year,
during the early stages of the pandemic.
Adjusted* profit before tax was £127.7m, up
100% (2020: £63.9m).
The tax charge for the year is £28.3m, which
equated to an effective tax rate of 22.4% and
was higher than the UK statutory rate of 19%
due to the effect of changing the tax rate used
to calculate deferred tax to account for the
future increase in the UK statutory rate to 25%
from 1 April 2023. The adjusted tax charge is
£23.5m (2020: £14.5m). Almost all of the Group’s
operations and profits are in the UK, and we
maintain an open and constructive working
relationship with HMRC.
The adjusted* earnings per share increased
108% to 226.0p (2020: 108.6p). Reported basic
earnings per share was 212.4p (2020: 99.8p).
The total dividend for the year increased 51% to
92.0p per share (2020: 61.0p).
Details on performance by division are shown
on pages 41 to 54.
Financing facilities
During 2021, the Group increased the size of its
main revolving credit facility by £15m to £165m,
and (with the agreement of the lending banks)
exercised an option to extend the maturity
date of the facility to 2024. Together with an
additional £15m revolving credit facility agreed
during the year, which also matures in 2024,
the Group has maintained a total of £180m
of available bank facilities. No drawings on the
facilities were made during the year. The banking
facilities are subject to financial covenants, all of
which were met throughout the year.
Steve Crummett
Finance Director
Revenue
Operating profit – adjusted*
Operating profit – reported
Profit before tax – adjusted*
Profit before tax – reported
Earnings per share – adjusted*
Basic earnings per share – reported
Year-end net cash*
Average daily net cash*
Total dividend per share
2021
2020
£3,213m
£3,034m
£131.3m
£68.5m
£129.8m
£127.7m
£126.2m
226.0p
212.4p
£65.4m
£63.9m
£60.8m
108.6p
99.8p
£358.0m
£332.8m
£291.4m
£180.7m
92.0p
61.0p
* See note 2 to the consolidated financial statements for alternative performance measure definitions and reconciliations.
39 _ Morgan Sindall Group plc Annual Report 2021
In the normal course of our business, we
arrange for financial institutions to provide
client guarantees (bonds) to provide additional
assurance that the client will have the ability
for the works to be carried out. We pay a
fee and provide a counter-indemnity to the
financial institutions for issuing the bonds. As
at 31 December 2021, contract bonds in issue
under uncommitted facilities covered £137.2m
(2020: £124.6m) of our contract commitments.
Further information on the Group’s capital
management strategy and use of financial
instruments is given in note 25 to the
consolidated financial statements.
Tax strategy
The Group’s tax strategy, which is approved by
the Board (see page 108), is published on our
website at morgansindall.com.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Financial and operating review continued
Secured workload
The Group’s secured workload1 at 31 December 2021 was £8,614m, an increase of 4% on the prior
year end (2020: £8,290m). The divisional split is shown below.
Net working capital
Net working capital is defined as ‘inventories plus trade and other receivables (including contract
assets), less trade and other payables (including contract liabilities) adjusted’. Net working capital has
increased by £51.9m to (£153.6m) as shown below:
Construction & Infrastructure
Fit Out
Property Services
Partnership Housing
Urban Regeneration
Inter-divisional orders
Total
2021
£m
2,715
897
945
1,498
2,574
(15)
8,614
2020
£m
2,537
410
970
1,445
2,929
(1)
8,290
Change
%
+7%
+119%
-3%
+4%
-12%
+4%
Inventories
Trade and other receivables2
Trade and other payables3
Net working capital
2021
£m
288.5
559.9
(1,002.0)
(153.6)
20201
£m
294.2
405.1
(904.8)
(205.5)
Change
£m
-5.7
+154.8
-97.2
+51.9
1 Includes the restatement to correct a historic error (see basis of preparation on page 174).
2 Adjusted to exclude capitalised arrangement fees of £1.0m (2020: £1.3m).
3 Adjusted to exclude accrued interest of £0.5m (2020: £0.4m).
1 Secured workload is the sum of the committed order book, the framework order book and (for the regeneration divisions
only) the Group’s share of the gross development value of secured schemes (including the development value of open
market housing schemes). The committed order book represents the Group’s share of future revenue that will be derived
from signed contracts or letters of intent. The framework order book represents the Group’s expected share of revenue from
the frameworks on which the Group has been appointed. This excludes prospects where confirmation has been received as
preferred bidder only, with no formal contract or letter of intent in place. Divisional comparatives for Partnership Housing and
Urban Regeneration have been restated to reflect the reorganisation of the Investments division.
Net cash
Operating cash flow in the year was an inflow of £117.6m, after reducing the capital employed
invested in regeneration activities by £10m (Partnership Housing: £10m and Urban Regeneration:
£23m). The net cash inflow for the year was £25.2m, resulting in closing net cash of £358.0m (2020:
£332.8m).
The average daily net cash* for the year increased by £110.7m to £291.4m (2020: £180.7m), providing
significant balance sheet strength and competitive advantage.
Cash flow
(£m)
200
150
100
50
0
29.1
-21.8
131.3
-52.7
31.7
117.6
-1.7
-28.3
87.6
Operating
profit1
Non-cash
adjustments2
Net capex
and finance
leases3
Other
working
capital
Other4
Operating
cash flow
Net interest
(non-joint
venture)
Tax
Free
cash flow
40 _ Morgan Sindall Group plc Annual Report 2021
1 Adjusted.
2 ‘Non-cash adjustments’ include depreciation £20.5m, movement of shared equity loans receivable £1.9m and share option
expense £12.1m; less share of equity accounted joint ventures £5.4m.
3 Includes repayment of lease liabilities £15.2m, purchase of property, plant and equipment £6.7m and purchase of intangible
fixed assets £1.3m; less proceeds on disposal of property, plant and equipment £1.4m.
4 Includes provision movements £26.4m, impairment of investments £1.2m, shared equity redemptions £2.1m, proceeds on
disposal of investment properties £1.9m, interest from joint ventures £0.6m; less gain on disposal of property, plant and
equipment £0.5m.
Strategic report
Governance
Financial statements
Financial and operating review continued
Construction & Infrastructure
Construction & Infrastructure
delivered a very strong set of
results in the year, with substantial
margin and profit growth.
Although revenue reduced to £1,520m (2020:
£1,637m), operating profit grew 63% up to
£58.1m (2020: £35.7m) with the operating
margin increasing to 3.8%, up 160bps on the
prior year (2020: 2.2%). Both Construction and
Infrastructure (including Design)1 contributed
strongly to this overall result.
Of the divisional revenue split by type of
activity, Construction accounted for 46% of
divisional revenue at £694m, with 54% being
Infrastructure1 at £826m.
The division also performed well in terms of
winning work and growing its future workload.
The secured order book at the year end was
£2,715m, up 7% compared to the prior year.
1 Design results are reported within Infrastructure.
Construction
Construction’s revenue increased 4% to £694m
(2020: £670m) while operating profit increased
167% to £21.9m (2020: £8.2m). The focus
on improved operational delivery, disciplined
contract selectivity and risk management
over many years, together with a favourable
project mix in the year, all contributed towards
increasing its operating margin to 3.2% (2020:
1.2%). The first half margin was 2.4%, which
increased to 3.9% in the second half primarily
due to a higher weighting of project completions
in the second half, particularly projects in the
education sector.
In addition, Construction had a very strong
year of winning work. The order book at the
year end was £810m, an increase of 58% on
the prior year (2020: £512m) and up 25% from
the half-year position (HY 2021: £648m). Of
the total, £599m (74% by value) is secured for
2022. Construction also had c£540m of work
at preferred bidder stage at the year end.
In line with the preferred risk profile of work
undertaken, c99% of the order book value is
derived through either negotiated, framework or
two-stage bidding procurement processes.
In education, Construction’s largest sector,
project wins included: a £61m project for the
University of Hertfordshire to build a new
home for its School of Physics, Engineering
and Computer Science; Maybole Community
Campus, a new £54m primary and secondary
education campus in South Ayreshire; a £23m
contract to build a new combined primary
school campus (Carnbroe and Sikeside) in North
Lanarkshire; and the new £31m Glebe Farm
School in Milton Keynes.
The division also won projects to expand
Horsforth School in Leeds (£5m) which will
create 365 new places, and Chantry Academy in
Ipswich (£3m) which will create 150 new places
and a facility for children with special educational
needs and/or disability (SEND). In addition,
Construction was appointed to deliver a number
of dedicated SEND schools, including the £18m
Freemantle secondary school in Woking, Surrey;
the £16.1m Summerdown School in Eastbourne;
and the £9.8m Salmon’s Brook Special School
in Enfield for children with social, emotional and
mental health needs.
Revenue (£m)
-7%
from 2020, +2% from 2019
19
20
21
Operating profit (£m)
+63%
from 2020, +80% from 2019
1,486
1,637
1,520
19
20
21
32.3
35.7
58.1
Operating margin (%)
+160bps
from 2020, +160bps from 2019
19
20
21
2.2
2.2
3.8
41 _ Morgan Sindall Group plc Annual Report 2021
Financial and operating review: Construction & Infrastructure continued
Completions in the year included the £7.6m
Castleward Spencer Academy primary school
in Derby, delivered via the public sector
procurement authority, SCAPE; and the £14.2m
Wintringham Primary Academy in St Neots,
Cambridgeshire.
In healthcare, Construction has been selected
to deliver the initial works as part of the wider
redevelopment of the North Manchester
General Hospital in Crumpsall, one of the
40 new hospitals pledged under the UK
government’s health infrastructure plan, and
appointed to build a new £13m facility for the
London Institute of Healthcare Engineering at
St Thomas’ campus, London.
In other sectors, project wins included: the
£107m Manor Road Quarter scheme in
Canning Town, London, a 34-storey, mixed-
use development of 355 apartments (50%
affordable) and 8,000 sq ft of commercial and
retail space, being delivered through Urban
Regeneration’s English Cities Fund joint venture;
and a c£18m manufacturing facility in East
Sussex for GW Pharmaceuticals. Completions
included a £48m, nine-storey Moxy Hotel and
Residence Inn in Slough (both Marriott hotels),
delivered through Urban Regeneration’s Slough
Urban Renewal joint venture, which opened
three months ahead of schedule; and Hackney
Britannia Leisure Centre (see page 38), set over
four storeys and featuring rooftop sports pitches
to make the best use of space.
Framework appointments included: the SCAPE
Construction frameworks to deliver education,
healthcare, housing and government building
projects across England, Wales and Scotland,
with a cumulative value of £5bn over four
years (two lots in England and Wales, valued
up to £7.5m and £7.5m–£75m, and two lots in
Scotland, valued up to and over £7.5m); Lots 4
(£7m–£14m), 5 (£14m–£25m) and 6 (£25m+) on
the new £1.6bn Public Buildings Construction
and Infrastructure (PB3) framework run by
public sector procurement organisation, LCH;
and the medium band (£6m–£12m) of the
Department for Education’s four-year, £5bn
construction framework.
Infrastructure
Although Infrastructure’s revenue was 15%
lower at £826m (2020: £967m) primarily due
to the timing of its project workload, operating
profit increased significantly, up 32% to £36.2m
(2020: £27.5m). This resulted in an operating
margin of 4.4%, up from 2.8% in the prior year
and was driven by strong operational delivery on
site and by the type of work.
The first half margin was 3.3%, while this
increased to 5.5% in the second half, benefiting
from work mix, efficiencies and final account
settlements on a number of projects.
42 _ Morgan Sindall Group plc Annual Report 2021
Sustainability at its core
Wintringham Primary Academy in Cambridgeshire was designed for maximum contact with
the outdoors. Each classroom faces a central courtyard containing a planted ‘grove’, providing
daylight from both sides. Vegetables and herbs are grown in the grove and made into soup, as
part of an approach that encourages children to love the environment. The school is built of
cross-laminated timber instead of steel, which is both sustainable and quicker to install.
“This school already has a fantastic impact on the children. It encourages them to learn and it
inspires them. The children are in awe of it but the teachers made it beautiful as well, because the
school has to have a heart, it has to have an identity and it’s really important that we the people
who work in it, give it that heart, and give it that identity. Morgan Sindall were really supportive
and they involved us all the way through. The process meant we were incredibly excited about it,
we could talk to our children about it as it was happening and it allowed them to become involved
and then it becomes much more yours. The experience just enhanced what we have already.”
Tracy Bryden,
Head Teacher
Strategic reportGovernanceFinancial statements Financial and operating review: Construction & Infrastructure continued
Infrastructure’s order book at the year end
was £1,905m, down 6% on the previous year
end (2020: £2,025m), however was up 1% on
the half year position (HY 2021: £1,894m). In
excess of 90% of the value of the order book is
derived through frameworks, consistent with the
strategic focus on long-term workstreams from
its clients.
The focus for the division remained on its key
sectors of highways, rail, nuclear, energy and
water.
In highways, work won included the
appointment by National Highways (formerly
Highways England) to the Concrete Roads
Programme – Reconstruction Works Framework,
a four-year programme worth c£130m to
repair or replace the concrete surface of
motorways or major A roads in England; and the
detailed design for the Carlisle Southern Link
Road by Cumbria County Council. In addition,
Infrastructure was awarded a place on National
Highways’ new Scheme Delivery Framework,
a £3.6bn, six-year programme to deliver vital
renewals to maintain safety and reliability;
the division was selected for the General Civil
Engineering Central Region. Work completed in
the year on enhancements to the M1 junction
23 and A512 scheme in Loughborough to
improve journey times and safety for motorists,
delivered for Leicestershire County Council
through the Midlands Highways Alliance.
In rail, Infrastructure secured a position as
one of three partners on Lot 1 of Transport
for London’s London Rail Infrastructure
Improvement Framework and was subsequently
awarded early contractor involvement works for
Surrey Quays and Surrey Canal Road stations. In
addition, the division was appointed as principal
contractor on Northumberland County Council’s
framework to build six new stations on the
Northumberland Line. The initial part of the
Northumberland project, which aims to restore
regular passenger trains between Ashington
and Newcastle by 2024, will see the conclusion
of comprehensive design and delivery plans for
the stations and bridges. Subject to government
confirmation of funding and approval of the
Transport and Works Act Order application, the
framework provides for the division to undertake
£40m of construction work, set to start in early
2022. Other wins included a £28m contract for
Network Rail to construct an extension to the
rockfall shelter over the railway line between
Dawlish and Holcombe in Devon; a c£9m
project to upgrade Maidenhead and Slough
Crossrail stations as part of Network Rail’s CP6
framework, Western region; and c£9m of station
upgrade and access-for-all schemes via the
Merseyrail framework. Work completed on: the
remodelling of London King’s Cross station; the
£160m Werrington Grade Separation project for
Network Rail to increase passenger capacity; and
the construction of the new Whitechapel Station
for Crossrail, including a new ticket hall and step-
free access.
In nuclear, the division secured a third term
extension to the Infrastructure Strategic Alliance
for Sellafield Ltd and continued to deliver
the £1.6bn Programme and Project Partners
contract, a 20-year programme to clean up the
legacy of early operations at Europe’s largest
nuclear site. Infrastructure also continued
its work on the 10-year Clyde Commercial
Framework for the Defence Infrastructure
Organisation.
In energy, National Grid awarded Infrastructure
a place on its RIIO-2 electricity construction EPC
(Engineer, Procure and Construct) framework
which involves the construction, refurbishment
and decommissioning of overhead line and
underground cable systems operating between
33kV to 400kV across its transmission network.
The framework, expected to be worth up to
£1.5bn, is for an initial term of five years with
an option for a two-year extension. The division
secured additional work as part of the Scottish &
Southern Electricity Networks (SSEN) overhead
lines framework. Work completed on a £31.9m
project in Cairngorms National Park to replace
overhead lines and transmission towers with
underground cables between Boat of Garten
and Nethy Bridge, the first project in SSEN’s
VISTA (Visual Impact of Scottish Transmission
Assets) initiative.
43 _ Morgan Sindall Group plc Annual Report 2021
Barking, Riverside
Infrastructure, working in joint venture, is
helping to connect communities in East
London through the 4.5km extension of the
Gospel Oak to Barking Overground line east
of Barking Station. The line will terminate
at a new elevated station in the main
square of the Barking Riverside residential
development. This infrastructure will
serve 10,800 homes being built at Barking
Riverside and provide the new community
with transport links to Central London. The
works include a 1.5km viaduct, terminus
station and new railway line, as well as
modifications to existing infrastructure.
The station will be a focal point of the local
community, with retail space and communal
areas. During 2021, work completed on the
viaduct, platforms, electrical systems, and
the station’s glazed façade. The line is due to
open to passengers in 2022.
Strategic reportGovernanceFinancial statements Strategic report
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Financial and operating review: Construction & Infrastructure continued
In water, work continued as part of the long-
term AMP7 framework with Welsh Water and
on the Thames Tideway ‘super sewer’ project
to expand London’s sewer network and help
prevent pollution in the Thames.
In the BakerHicks design business, projects
underway include: the provision of principal
designer advisory services on the Medicines
Manufacturing Innovation Centre (MMIC) in
Renfrewshire; a new advanced manufacturing
facility in Macclesfield to enable AstraZeneca
to meet demand for its cancer drug Zoladex;
an extension to GlaxoSmithKline’s Aseptic
Manufacturing Facility in Barnard Castle; the
provision of construction and design support
for Boehringer Ingelheim’s new biologicals
development centre in Biberach, Germany;
civil and structural engineering services for the
£42.5m Allander Health and Leisure Centre in
Bearsden, East Dunbartonshire; and the design
of a new substation in Barking which will power
10,800 homes, local businesses and a new rail
station.
Divisional outlook
The focus for Construction & Infrastructure
remains on contract selectivity and risk
management, operational delivery and
developing long-term relationships with its
clients.
The new medium-term target for Construction
has been upgraded, with a target of increasing
revenue to £1bn per year while maintaining
its operating margin within the previous range
of 2.5%–3.0% per year. Progress towards this
target is expected in 2022 with its margin
moving back to within its target range.
Infrastructure’s new and upgraded medium-
term target is to achieve revenue of £1bn per
year while delivering an operating margin within
the range of 3.5%–4.0% per year. Progress
towards this target is expected in 2022, although
due to the timing and nature of the business’s
project workload for the year, its margin is
expected to move back to within its target range,
off slightly lower revenue compared to 2021.
Construction
Infrastructure
Upgraded medium-term targets
Upgraded medium-term targets
£1bn
Revenue
£1bn
Revenue
2.5%–3.0%
Operating margin
3.5%–4.0%
Operating margin
Route map
Maintain margin quality over volume
Continue disciplined risk management
Use enhanced geographical presence to
grow market share
Market conditions
Balance sheet more important to clients
Cost and conversion risk presented by
inflation and resource availability, which
are being managed
Route map
Long-term relationships and workstreams
Continuous concentration on operational
efficiency
JVs only when clear competitive
advantage
Market conditions
Fairly strong market for infrastructure
Clients increasingly value strong
relationships and partnerships
Social, environmental and carbon
Stable market for our design business
agendas remain high
Increased framework opportunities
44 _ Morgan Sindall Group plc Annual Report 2021
44 _ Morgan Sindall Group plc Annual Report 2021
44 _ Morgan Sindall Annual Report 2021
Financial and operating review continued
Fit Out
Revenue (£m)
+14%
from 2020, -5% from 2019
19
20
21
839
700
795
Operating profit (£m)
+38%
from 2020, +20% from 2019
19
20
21
36.9
32.1
44.2
Operating margin (%)
+100bps
from 2020, +120bps from 2019
19
20
21
4.4
4.6
5.6
45 _ Morgan Sindall Group plc Annual Report 2021
Fit Out delivered an excellent
performance in the year, driven
by consistently strong project
delivery, a continued focus on
enhanced customer experience
and a high-quality workload.
With revenue increasing 14% to £795m (2020:
£700m), operating profit increased 38% to
£44.2m, a record result for the division. The
operating margin of 5.6% was up 100bps on
prior year (2020: 4.6%).
As with previous years, there was a second half
weighting to the operating margin (H1 2021:
5.1%, H2 2021: 6.0%) which was driven by
project mix and by the successful completion of
a number of contracts falling towards the end of
the year.
As expected, the proportion of revenue derived
from the commercial office sector reverted
back to more normal levels, contributing 76%
of revenue (2020: 66%), with work in the public
sector and for local authorities dropping back
to 16% of revenue (2020: 25%). The higher
education and retail banking sectors made up
the remainder as usual.
Kingsley Napley, London – fast-track fit out
Overbury transformed 55,000 sq ft of shell and core across six floors into a modern, activity-
based working environment that brought together three offices into one unified workforce
for leading UK law firm, Kingsley Napley. To meet the client’s crucial move-in date, the
team fast-tracked the fit out by working with their consultants and supply chain during a
10-week preconstruction period to prepare detailed design and construction programmes.
By coordinating these plans with the procurement of labour, materials and finishes, as well as
carrying out building surveys while the base build completed, the fit out works were guaranteed
to get going from day one.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Financial and operating review: Fit Out continued
Revenue outside of the London region increased
strongly to 42% of the total, up from 31% in
the prior period, however the London region
remained the division’s largest market at 58% of
revenue (2020: 69%). Looking ahead to future
periods, the proportion of revenue from the
London region is expected to revert back to a
more normal proportion of c70% of divisional
revenue.
In terms of type of work delivered in the
year, 80% related to traditional fit out work
(2020: 86%), while 20% related to design and
build (2020: 14%). The proportion of revenue
generated from the fit out of existing office
space increased slightly to 78% (2020: 72%),
with the fit out of new office space reducing to
22% (2020: 28%). Of the fit out of existing office
space, work was broadly split evenly between
refurbishment ‘in occupation’ and non-occupied
space.
The market for Fit Out’s services remains strong.
At the year end, the secured order book was
£897m, more than double the size of the order
book at the previous year end (2020: £410m)
and an increase of 54% on the position at the
half year (HY 2021: £581m). Within this total, the
division secured a number of larger contracts
which will generate revenue over a number
of years, giving the division better long-term
visibility compared to its usual project cycle.
Of the year-end order book of £897m, £528m
(59%) relates to 2022 and this level of orders for
the next 12 months is 36% higher than it was
at the same time last year. In addition to these
secured orders, the division had over £100m
of potential work ‘pending decision’ at the year
end, as well as in excess of £500m of tender
opportunities identified for the first quarter of
2022. The average value of enquiries received
through the year was around £4m.
Traditional fit out projects won in the year
included: 366,000 sq ft of office space at Five
Bank Street, Canary Wharf; 200,000 sq ft for BP
in North Colonnade, Canary Wharf; 200,000 sq
ft for BT in Bristol, awarded following completion
of a 186,000 sq ft project for BT in Birmingham;
150,000 sq ft of Cat A space in Thames Valley
Park, Reading; 93,000 sq ft of office, sales and
support facilities for MathWorks in Cambridge;
90,000 sq ft of Cat A space in Coventry for
landlord IM Properties; and 30,000 sq ft for
landlord Quadrature Capital in the Leadenhall
Building, London.
Project completions included Norton
Motorcycles’ new 70,000 sq ft state-of-the-art
facility in Solihull, and a 56,000 sq ft office in
Bristol for the BBC.
In design and build, significant wins included:
the Cat A fit out of 180,000 sq ft at Campus
Reading, one of the largest office developments
in the Thames Valley; Hutchison 3G UK/Three’s
new 117,000 sq ft workspace in Reading; nine
projects for space provider Instant Group,
creating 135,000 sq ft of lettable office space;
and 17,000 sq ft in Bracknell for big data
analytics provider, IRI.
Fit Out’s public sector portfolio continued to
expand in 2021 as the division secured: a
12,000 sq ft refurbishment of the North West
Regional Control Centre for National Highways
(formerly Highways England); a 60,000 sq ft fit
out for the University of Leicester via the Pagabo
framework; and multiple projects totalling
£51.8m under The Mayor’s Office for Policing
and Crime (MOPAC) framework with a further
£40.7m secured for 2022 and beyond.
Divisional outlook
Fit Out’s new and upgraded medium-term target
is to deliver average annual operating profit
through the cycle of £40m–£45m per year. For
2022, based on timing of projects in the order
book and the current visibility the division has
of future workload later in the year, Fit Out is
expected to deliver a performance which is
around the mid-point of this target range.
Fit Out
Upgraded medium-term target
£40m–£45m
Average annual operating
profit through the cycle
Route map
Retain market share in commercial office
and higher education market
Increase ratio of public sector business
Expand life sciences offering
Expand design and build offering
Drive high levels of repeat business from
large space occupier
Increase average job size
Market conditions
Market remains buoyant
Clients seeking to repurpose space for
the new working environment
Several large pre-let projects in
construction
46 _ Morgan Sindall Group plc Annual Report 2021
46 _ Morgan Sindall Group plc Annual Report 2021
46 _ Morgan Sindall Annual Report 2021
Financial and operating review continued
Property Services
Revenue (£m)
+20%
from 2020, +17% from 2019
19
20
21
Operating profit1 (£m)
+310%
from 2020, -5% from 2019
19
20
21
1.0
Operating margin1 (%)
+220bps
from 2020, -60bps from 2019
19
20
21
0.9
115
112
134
4.3
4.1
3.7
3.1
1 Before intangible amortisation of £1.5m (2020: £1.2m).
47 _ Morgan Sindall Group plc Annual Report 2021
Property Services performed
well in the year, delivering
improved results on the prior
year as volumes recovered from
Covid disruption in 2020.
Revenue increased by 20% to £134m and
operating profit1 increased 310% to £4.1m.
The operating margin of 3.1% represented an
increase of 220bps ahead of prior year.
The division has continued to focus on delivering
repairs and planned maintenance with a strong
social value offering, servicing public sector
housing through its integrated contracts with
housing associations and local authorities.
Although most of the division’s repairs contracts
were restored to more normal volumes in the
year following the impact of Covid in 2020,
planned maintenance activity was slower to
recover.
Investment continues in Property Services’
technology offering for managing repairs and
maintenance and planned activities, with a
significant focus on the provision of data insight
and the improvement of the all-round customer
experience. During the year, the division
launched its new software platform, goldeni (see
box right), that provides social housing landlords
and residents with real-time data to help ensure
their properties are healthy, compliant and
energy efficient. Of the overall investment in
goldeni, £0.6m was expensed during the year
and included in the operating result.
goldeni - helping to keep homes healthy and energy-efficient
Using discreet sensors, Property Services’ goldeni software collects data on temperature, air
pressure, light levels, humidity and carbon dioxide in homes. It monitors energy consumption, can
detect water leaks and offers practical advice such as opening more windows to prevent mould or
suggesting when a boiler needs servicing. By tracking which homes are using central heating too
often or too little, goldeni can help identify properties that need more insulation and help social
housing providers understand the prevalence of fuel poverty in their communities. goldeni is
already being used on social housing in Basildon, St Albans and Hammersmith and Fulham.
Strategic reportGovernanceFinancial statements Strategic report
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Financial statements
Financial and operating review: Property Services continued
Divisional outlook
Based on the current order book and pipeline
of opportunities, together with the division’s
operating model, the new medium-term target
for Property Services has been upgraded to it
delivering £15m operating profit per year.
This target will be delivered through both
revenue growth and continued margin
improvement and progress will be made
towards this in 2022.
At the year end, the secured order book was
£945m, down 3% from the prior year end
(2020: £970m) and down 3% from the half-
year position (HY 2021: £973m). Of this total, in
excess of 85% is for 2023 and beyond.
In addition (and not yet reflected in the order
book), the division was selected to deliver a
new 10-year contract with South East housing
association, Moat, to provide services to
11,500 homes across south east London, Kent,
Essex and Sussex. The contract is worth over
£200m and has the potential to be extended
by a further five years. Moat residents were
consulted extensively during the tendering
process, with over 1,000 providing feedback
on how Moat’s new partner could deliver
social value through the scheme. Contracts
are expected to be signed in the first quarter
of 2022 with the project to start in April 2022
following a three-month mobilisation period.
Property Services
Upgraded medium-term target
£15m
Operating profit
Route map
Revenue and margin growth
Targeting long-term contracts of 10 years
plus
Increasing use of technology as
competitive advantage
Market conditions
Large available market
Maintaining contract selectivity is key
Social value increasingly important
Barrier to entry increasing - market
consolidating
Labour shortages an issue
48 _ Morgan Sindall Group plc Annual Report 2021
48 _ Morgan Sindall Group plc Annual Report 2021
48 _ Morgan Sindall Annual Report 2021
Strategic report
Governance
Financial statements
Financial and operating review continued
Partnership Housing
Revenue (£m)
+21%
from 2020, +10% from 2019
Average capital employed2
(last 12 months) (£m)
-£11.2m
from 2020
191
201
21
520
474
572
201
21
167.0
155.8
Operating profit (£m)
+108%
from 2020, +53% from 2019
Capital employed2 at year end (£m)
+£25.0m
from 2020
191
201
21
21.7
16.0
33.2
201
21
130.6
155.6
Operating margin (%)
+240bps
from 2020, +160bps from 2019
Return on capital employed3
(last 12 months) (%)
191
201
21
4.2
3.4
5.8
201
21
10
21
1 Restated. All 2020 and 2019 comparative numbers, including order book and capital employed, have been restated to
include the impact of the revised reporting segments.
2 Capital employed is calculated as total assets (excluding goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and overdrafts).
3 Return on average capital employed = (adjusted operating profit plus interest from joint ventures) divided by average capital
employed.
49 _ Morgan Sindall Group plc Annual Report 2021
49 _ Morgan Sindall Group plc Annual Report 2021
49 _ Morgan Sindall Annual Report 2021
Partnership Housing had a very
strong year, with significant strategic
and operational progress made.
Revenue for the year was up 21% to £572m
(2020: £474m), with both mixed tenure and
contracting performing well. Split by type
of activity, mixed-tenure revenue was up
16% to £323m (56% of divisional revenue)
and contracting revenue (including planned
maintenance and refurbishment) was up 27% to
£249m (44% of divisional total).
Operating profit increased substantially, more
than doubling to £33.2m, an increase of 108%
(2020: £16.0m). The operating margin increased
to 5.8%, up from 3.4% supported by the higher
mixed-tenure and contracting revenue as
well as benefiting from continued operational
efficiencies.
During the year, the division experienced a
number of significant price increases in certain
product categories and some increases in
lead times for product deliveries to site. Any
additional costs attached to sourcing some
materials have generally been offset by a
combination of operational efficiencies and sales
price inflation.
The secured order book at the year end was
£1,498m, an increase of 4% on the prior year
end (20201: £1,445m).
The average capital employed for the last
12-month period was £155.8m, a reduction of
£11.2m on the prior year. The return on capital
employed increased to 21%, a much improved
performance and significantly in excess of prior
years. The capital employed at year end was
£155.6m, an increase of £25.0m from the prior
year end.
Mixed tenure
A key aspect of the division’s growth strategy is
to increase the number and size of its mixed-
tenure sites. Significant progress has been in
this area, with currently a total of 48 mixed-
tenure sites at various stages of construction
and sales (up from 39 at the prior year end),
with an average of 143 open market units per
site (up from 101 at the prior year end). Average
site duration is 48 months, providing long-term
visibility of activity.
Financial and operating review: Partnership Housing continued
During the year, 1,653 units were completed
across open market sales and social housing
(including through joint ventures), significantly
higher than in the prior year (2020: 1,216 units).
The average sales price of £249k compared to
the prior year average of £229k.
Work won included the regeneration of the
former Llanwern and Whiteheads steelworks
sites in Newport, valued at £105m and £85m
respectively. The two schemes, being delivered
in partnership with Pobl Group, have started
on site and will deliver a combined total of over
1,000 homes. Other significant wins included:
a £120m scheme with Abri housing association
to build 500 homes in Weymouth; and a 188-
unit development in Whalley, Lancashire with
Trafford Housing Trust. In addition, the division
exchanged contracts for the former site of a
Philips factory in Hamilton, South Lanarkshire
to develop 166 new homes (42 affordable) for
Clyde Valley Housing Association; and secured
planning permission for a further 766 homes
on its One Woolwich programme with the Royal
Borough of Greenwich.
50 _ Morgan Sindall Group plc Annual Report 2021
Converting brownfield sites
into new communities
Partnership Housing formed a strategic
partnership in 2019 with West Midlands
Combined Authority to unlock 4,000 homes
on brownfield sites. As part of the agreement,
the division pledged to deliver: high-quality
mixed-tenure housing; collaborative solutions
to meet local housing needs; opportunities on
brownfield land close to schools and public
transport; innovative construction solutions;
low-carbon technologies, with a pledge to build
zero-carbon homes by 2040; and local jobs
and apprenticeships to tackle youth and long-
term employment.
The former industrial site at Saints Quarter,
Steelhouse Lane, Wolverhampton, located
near the city centre and West Midlands
Metro, was the first to be identified as a
sustainable location for a new community. The
project delivered 151 mixed-tenure homes
in 32 months, c12 months faster than a
traditional open market housing scheme.
40% affordable housing
129 electric vehicle charging points and
830 sqm of solar panels
£14,000 investment in local community
organisations and initiatives
24 apprentice positions created or sustained
259 hours of work experience and
community or education engagement
90% of work procured from within 15 miles
using LM31, for every £1 spent, £2.32
generated for the local economy
Named as a good place to live after receiving
the government-endorsed Building for Life
accreditation
1 Local Multiplier 3 (LM3) is a tool which measures
how every pound spent on a project with suppliers,
subcontractors and employees can benefit the local
community. It calculates where and how the money is
re-spent and what proportion remains local.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Financial and operating review: Partnership Housing continued
Partnership Housing formally executed a new,
long-term joint venture in the year with West
Sussex County Council, with an initial 10 sites
(582 units) immediately under option. The aim
of the joint venture is to develop surplus land
owned by the council into new homes and
commercial premises that will generate funds
for reinvestment in frontline services. Preferred
bidder status was achieved in December 2021
for a similar long-term strategic joint venture
with Suffolk County Council. An initial five sites
will be committed to the joint venture, including
two significant urban extensions, potentially
delivering approximately 2,800 homes across
the county. Contract close is aimed for by Spring
2022.
Work started in the year on four new projects
with Together Housing Trust to deliver: 650
units in Pendleton, Lancashire; 244 in Kirk Ella,
East Yorkshire; 153 in Holmewood, Chesterfield;
and 175 in Howden, East Yorkshire. In the
Midlands, project starts included 234 homes
in Oldbury, 329 in Donnington and 123 in
Birmingham. Planning permission was secured
and work started on two sites acquired from
Homes England: 412 homes in Drummond Park,
Wiltshire; and 119 in Thorp Arch, Yorkshire.
Contracting
In contracting, the total number of equivalent
units built was 1,477, up from 978 in the prior
year.
Of the total divisional order book, the contracting
secured order book was 6% lower at £506m
(2020: £538m), of which £224m is for 2022.
Key contracting schemes awarded in the year
included: a £50m, 211-unit scheme at Tolworth
for Guinness Partnerships; a contract with
Norfolk County Council-owned Repton to build
400 plus homes in Norfolk; 301 homes at Crick
Road, Portskewett for Monmouthshire County
Council; and the appointment onto the Your
Housing Group framework, including the initial
award of a £25m, 216-unit scheme at Edge Lane,
Openshaw.
The division was awarded a refurbishment
project by Orbit Group to retrofit 69 homes
in Warwick to increase their energy efficiency.
Partnership Housing worked with Orbit to
secure £4m towards the project from the
Social Housing Decarbonisation Fund (SHDF)
demonstrator, run by the Department for
Business, Energy & Industrial Strategy (BEIS), to
improve the energy efficiency of social housing.
Work started in the year at Ringswell Avenue
in Exeter to provide 60 affordable homes for
LiveWest, the South West’s largest housing
association. The development will be the first
to meet LiveWest’s new sustainable homes
standards following the launch of its ‘Creating
Greener Futures Together’ strategy.
Divisional outlook
Partnership Housing has made significant
strategic and operational progress over
recent years, which has been evidenced
by its vastly improved financial results. The
market opportunity for the division remains
substantial and the pathway for its next stage
of development is set out in its new and
upgraded medium-term targets: firstly, to
generate a return on average capital employed
of up towards 25% and secondly, to deliver an
operating margin of 8%. In 2022, the average
capital employed is expected to increase
up towards c£190m and further progress is
expected.
Partnership Housing
Upgraded medium-term targets
25%
Return on capital employed
up towards 25%
8%
Operating profit
Route map
More and larger schemes
Increase number of mixed tenure
schemes
More UK geographical coverage
Market conditions
Market remains strong
Large partnership schemes coming to
market
Cost inflation currently offset by sales
inflation
Impact of challenges with materials and
trade resources being managed
The new West Sussex joint venture will
act as a platform to build a new South
Central Region
51 _ Morgan Sindall Group plc Annual Report 2021
51 _ Morgan Sindall Group plc Annual Report 2021
51 _ Morgan Sindall Annual Report 2021
Strategic report
Governance
Financial statements
Financial and operating review continued
Urban Regeneration
Revenue (£m)
+64%
from 2020, +69% from 2019
Capital employed2 at year end (£m)
-£16.8m
from 2020
191
201
21
120
124
201
21
203
100.8
84.0
Operating profit (£m)
+38%
from 2020, -39% from 2019
191
201
21
19.9
8.8
12.1
Average capital employed2
(last 12 months) (£m)
-£25.3m
from 2020
Return on capital employed3
(last 12 months) (%)
201
21
7
13
Return on capital employed3
(average last three years) (%)
20
21
124.0
98.7
21
12
1 Restated. All 2020 and 2019 comparative numbers, including order book and capital employed, have been restated to
include the impact of the revised reporting segments.
2 Capital employed is calculated as total assets (excluding goodwill, intangibles and cash) less total liabilities (excluding
corporation tax, deferred tax, inter-company financing and overdrafts).
3 Return on average capital employed = (adjusted operating profit plus interest from joint ventures) divided by average
capital employed.
52 _ Morgan Sindall Group plc Annual Report 2021
52 _ Morgan Sindall Group plc Annual Report 2021
52 _ Morgan Sindall Annual Report 2021
Urban Regeneration delivered an
operating profit of £12.1m in the year,
an increase of 38% on the prior year
(2020: £8.8m). The return on capital
employed in the year increased to
13%, based on the average capital
employed in the year of £98.7m.
Key contributors to performance were profit
and development fees generated from: the
Salford Central regeneration scheme, being
delivered by the English Cities Fund (ECF) joint
venture with Legal & General and Homes
England; the delivery of 520 new homes at New
Victoria in Manchester; a land sale at Hucknall;
the continuation of development at Phase 2 of
Lewisham Gateway; and completion of the first
phase at Hale Wharf in Tottenham via Waterside
Places, the division’s joint venture with the Canal
& River Trust (see page 53). Profits were also
earned from the sale of new homes at: Salford
Central; Wapping Wharf, Bristol; Griffon Fields,
Hucknall; Novus, Slough; Northshore, Stockton-
on-Tees; and Millbay, Plymouth.
The operating result also includes the
£5.6m non-cash impairment of the division’s
investment in the Bournemouth Development
Company, a joint venture with Bournemouth
Christchurch and Poole Council. The impairment
relates to one specific scheme within the joint
venture where construction cost inflation as well
as other factors have challenged the viability
of the scheme. Following the impairment, the
carrying value of the division’s investment in the
joint venture is reduced to £3.2m.
Adjusting for the impact of this impairment, the
return on capital employed for the year would
be 19%.
During the year, Urban Regeneration signed
a major deal at New Victoria, Manchester with
Morgan Capital investing £60m to take forward
a 150,000 sq ft office building, the second and
final phase of the £190m scheme. In addition,
agreements were exchanged for 96 affordable
homes designed to the Passivhaus ‘Classic’
energy performance standard at Salford
and a land sale was completed at Chester to
Progressive Living for the development of up
to 128 homes. The last remaining plot at Logic
Leeds was sold to MCM Investments.
Financial and operating review: Urban Regeneration continued
Significant new appointments included:
preferred development partner to West Sussex
County Council to deliver Horsham Enterprise
Park, a new, 18.5 acre neighbourhood situated
on a former Novartis site that will provide
up to 270,000 sq ft of offices, research and
development facilities, an ‘Enterprise Hub’,
up to 300 new homes (35% affordable), local
amenities and generous outdoor spaces;
preferred development partner to Barnet
Council to redevelop Bunns Lane car park
in London, which will provide c130 homes
for rent (50% affordable), commuter parking
and retail and leisure space; and, via the
Pagabo framework, development partner to
Scarborough Borough Council to deliver a new
bus interchange integrated into the town’s
rail station, a new commercial building for the
council, redevelopment of the council’s office
building, repurposing of a Victorian spa building,
and public realm. In addition, Bury Council
approved a joint venture with the division to
regenerate Prestwich village, with proposals
including a community hub, library, fitness suite
and performance area.
Construction began during the year on two
developments at Salford Central: a 175,000 sq
ft office for BT; and 115,000 sq ft of speculative
office space that will be ultra-low in energy
consumption and fossil-fuel free (see description
of the Eden building on pages 14, 27 and 28).
Work also started on two office buildings in
Birkenhead totalling 150,000 sq ft, both pre-let
to Wirral Council; residential-led schemes at
Islington Wharf (106 homes), Manor Road
Quarter (355 homes with 50% affordable) and
West Cliff Mansions, Bournemouth (44 homes);
and a 144-room Holiday Inn in Blackpool.
Enabling works began on Phase 2 of Hale Wharf
and Phase 3 of Brentford Lock West.
Residential developments completed included
256 new homes at Wapping Wharf, Bristol, 211
at Atelier and Valette Square in Salford Central
and 46 for rent at Treetops, Bournemouth. Work
also completed on a new Jobcentre Plus in South
Shields; a 45,000 sq ft office development for
Eli Lilly in Basingstoke; and the transformation
of the old library site in Slough, delivering a
Moxy Hotel and Residence Inn together with
64 apartments.
The division achieved a number of planning
consents in the year, including for: 1.4m sq ft of
mixed-use development at Birkenhead, Wirral;
312 new homes and public realm at Stoke
Wharf, Slough; 274 homes (51% affordable) at
Stroudley Walk, London; 212 homes at Montem
Lane, Slough; a 64,000 sq ft office development
and 400-space multi-storey car park at Stockport
Exchange; and One City Park, a 56,400 sq ft
office development in Bradford.
53 _ Morgan Sindall Group plc Annual Report 2021
Connecting communities at Hale Wharf, Tottenham
The first phase of Hale Wharf, delivered as part of the Waterside Places joint venture with Canal
& River Trust, has transformed an underused waterfront to create 249 mixed-tenure homes and
attractive public realm. The new Hale Wharf Bridge, extending across the river Lee Navigation,
connects local communities, provides easier access to transport routes and creates walking
routes for everyone to enjoy. The pedestrian bridge represents a vital part of Haringey Council’s
‘green and open space’ strategy, giving local residents of Tottenham access from the high street
to the Lea Valley. The Hale Wharf scheme is part of the Mayor of London’s Housing Zones
programme.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Financial and operating review: Urban Regeneration continued
Urban Regeneration’s development portfolio
continues to be both active and diverse, with
14 projects on site at the year end across
11 developments, totalling £980m gross
development value, and a further 17 projects
expected to start on site in 2022.
At the year end, the division’s regeneration order
book amounted to £2.57bn, a reduction of 12%
on the prior year end, and within this there is a
diverse geographic and sector split:
by value, 38% is in the North West, 52% in
London and the South East, 8% in Yorkshire
and the North East and 2% in the rest of the
UK; and
by sector, 52% by value relates to residential,
33% to offices, and the remainder is broadly
split between retail, leisure, and industrial.
Divisional outlook
Based on the current profile and type of scheme
activity across the portfolio, the average capital
employed for 2022 is expected to increase to
c£110m.
The medium-term target for Urban
Regeneration has not changed and is to increase
its rolling three-year average return on capital
employed up towards 20%. Good progress
towards this target is expected in 2022.
Urban Regeneration
Medium-term target
20%
Three-year rolling average return on
capital employed up towards 20%
Route map
Larger schemes
More efficient use of capital
Increase geographical coverage, with
focus on the Midlands and South West
Secure additional partnerships
Potential growth via The English Cities
Fund and wider relationship with Homes
England through its new position on the
Pagabo procurement framework
Market conditions
Demand side strong
Construction inflation challenging viability
of schemes
54 _ Morgan Sindall Group plc Annual Report 2021
54 _ Morgan Sindall Group plc Annual Report 2021
54 _ Morgan Sindall Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk
Our approach
to risk is based
on sound
governance
Risk is inherent in our business and
cannot be completely eliminated,
however our risk governance model
ensures that our principal risks
and robust internal controls are
under regular review at all levels.
Our operational teams are highly skilled in their
relative fields and valued for their ability to
identify and manage the risk embedded in our
day-to-day operations, and the mix of skills and
experience of our people is a valuable resource
at all key stages, from project selection, through
bidding to project delivery. A detailed system
of delegated authorities allows our people the
agility to perform while at the same time being
responsible and accountable for their actions.
Our senior management teams at divisional
and Group level, aided by our internal reporting
process, maintain oversight to ensure that all
actions and outcomes remain in line with our
expectations and risk appetite.
55 _ Morgan Sindall Group plc Annual Report 2021
55 _ Morgan Sindall Group plc Annual Report 2021
55 _ Morgan Sindall Annual Report 2021
Risk governance
Group Board
Responsible for setting the Group’s risk appetite and for ongoing risk management, including assessing the principal risks that threaten our strategy and performance.
Audit committee
Assists the Board in monitoring risk management and internal control and by conducting formal reviews of Group and divisional risk registers.
Divisional boards
Each division identifies the risks facing its business and takes measures to mitigate the
impacts. Senior managers take ownership of specific risks and ensure that tolerance
levels are not exceeded.
Risk committee
Consists of heads of key Group functions, including legal, company secretarial, IT,
finance, internal audit, tax, treasury and commercial. Identifies risks for the Group risk
register and reviews Group and divisional risk registers before they are presented to
the Board and audit committee. Ensures that inherent and emerging risks across the
Group are identified and managed appropriately.
Risk reviews
Twice a year each division carries
out a detailed risk review, recording
significant matters in its risk register.
Each risk is evaluated, both before and
after the effect of mitigation, as to its
likelihood of occurrence and severity of
impact on strategy. The Group head of
audit and assurance follows the same
process for identifying and reviewing
Group risks, conferring with the risk
committee.
Strategic planning
Risk management is part of our annual
business planning process. Objectives
and strategies are set to align with the
risk appetite defined by the Board. Any
changes are reviewed at the monthly
Group and divisional board meetings
to ensure matters are addressed in an
ongoing and timely manner.
Delegated authorities
Our finance director and Group head
of audit and assurance have produced
a schedule of delegated authorities
(updated in 2021) that assigns approval
of material decisions – such as project
selection, tender pricing and capital
requirements – to appropriate levels
of management. Board approval is
required before undertaking large or
complex projects. The approval system
is regularly reviewed.
Divisional reporting
The divisional risk registers record the
activities needed to manage each risk,
with mitigating activities embedded in
day-to-day operations for which every
employee has some responsibility.
Rigorous reporting procedures are
in place to monitor significant risks
throughout the divisions and ensure
they are communicated to the Group’s
board reporting and delegated
authorities process.
Internal audit
The Group head of audit and assurance reviews and collates the divisional risk registers and draws from them when compiling the Group risk register. An annual review across the
Group is undertaken, focusing on significant projects and trends, and areas of concern.
Read more about risk governance on pages 119 to 122.
Strategic report
Governance
Financial statements
Managing risk continued
Our risk profile
The Group’s risk profile continues
to be supported by a strong
balance sheet and secured
workload, and a continued
focus on contract selectivity.
Following initial Covid issues, all divisions are
fully operational. We recognise there may be
subsequent waves and remain vigilant. However
the Group is well placed to maintain future
activity without material disruption.
We have not had to make any significant
change to our business model or the markets
in which we operate as a result of Brexit, Covid
or increasing carbon regulations. Indeed our
markets have largely continued to receive
high levels of government support owing to
their contribution to the UK economy and
underlying demand. In addition, the Group has
demonstrated resilience and agility during these
periods, which provides comfort should future
events occur.
56 _ Morgan Sindall Group plc Annual Report 2021
56 _ Morgan Sindall Group plc Annual Report 2021
56 _ Morgan Sindall Annual Report 2021
This resilience is a result of a number of factors,
including our decentralised approach and ability
to respond quickly to change, and our long-
term focus on contract selectivity, high quality of
delivery, prudent risk management and strong
client and supply chain relationships (see pages
13 and 14). Should any further restrictions
come into place as a result of Covid variants, our
strict adherence to safe operating procedures,
together with the government’s clear directive
that construction activity should continue,
give us confidence that future activity can be
maintained without material disruption.
The macroenvironment
UK construction continues to benefit
from sustained government investment
commitments, confirmed in its Spending Review
and National Infrastructure Strategy, both of
which continue to support our business model,
particularly in housebuilding and regeneration
(primary UK areas targeted for growth) and
construction and infrastructure. In addition, our
diversity of offering protects the business from
cyclical changes in individual markets.
Materials availability and inflation
We have witnessed significant materials demand
and inflationary pressures as a result of the
discrepancy between high demand and lagging
supply, dwindling product stockpiles, logistical
challenges and a particularly busy housing
market.
Despite the considerable challenges presented
by these issues, our project teams have
managed the impacts well, resulting in minimal
disruption to our operations. Our supply chain
partners have been very supportive, due
partly to the Group’s standing in the industry
but also, importantly, to the excellent working
relationships and practices we have established
with them in recent years.
Our preferred and predominant two-stage and
negotiated procurement routes help significantly
by allowing early collaboration with the client
and supply chain and providing increased price
and programme certainty. Outside of these
arrangements, other options available include
contingency allowances and/or indexation
provisions on contracts. During construction, we
closely monitor the procurement and delivery
of materials and intervene with support for our
supply chain where required.
In limited cases, inflation has stretched budgets
and resulted in us, our clients and our partners
delaying decisions; however, our current order
book and predominant public sector focus do
offer some resilience, particularly as underlying
demand is still strong.
There is a risk that some supply chain partners
may be trading with strained finances as a result
of inflationary pressures compounded by the
introduction of the VAT reverse charge and
unwind of government pandemic measures.
Our teams are aware of this and are increasing
their due diligence as well as providing support
where appropriate. We do expect to see some
disruption during 2022, but not material.
Partnerships and public
sector clients
The divisions remain focused on long-term
partnerships, our favoured route to market
as it allows us to work with clients and in
environments where we have a track record
in delivery, thereby enabling more predictable
outcomes. In addition, a substantial proportion
of our regeneration schemes and construction
order book are supported by public sector
and regulated clients, via frameworks and
joint venture arrangements secured over the
medium to longer term. Our regeneration
activities consist mostly of lower risk, non-
speculative arrangements that ensure more
efficient use of capital, underpinned by a long-
term visible pipeline.
Divisional perspectives
Construction & Infrastructure’s long-term focus
on selecting the right projects has resulted in
its underlying margin and positive cash position
and reflects the work of the division over the
past few years to improve risk management
in all areas of its operation. Construction &
Infrastructure’s future order book predominantly
consists of public sector work via two-stage or
negotiated procurement routes.
Fit Out, while more susceptible to GDP and
macroeconomic fluctuations, also enjoys a high
level of two-stage/negotiated work within its
order book. Despite predictions of the demise
of the office as a result of the pandemic, the
division has not witnessed any significant change
in client behaviour; on the contrary, its order
book is at record levels and its pipeline shows
good visibility into the early part of 2022.
Strategic report
Governance
Financial statements
Managing risk: our risk profile continued
Property Services has resumed normal levels of
activity following Covid restrictions. Any future
challenges around access to properties should
be manageable by adhering to strict operating
procedures.
Partnership Housing and Urban Regeneration
continue to witness high levels of residential
demand with sales exceeding expectations
across a broad UK portfolio. Following the
challenges that accompanied the start of
the pandemic, the speed of decision-making
by potential partners for new development
schemes improved during 2020 and is now back
to normal levels. While we work closely with our
local authority partners, challenges relating to
planning delays continue to have the potential
to impact development programmes. Our work
in preparation for the government’s Building
Safety Bill, which will tighten safety regulations
for residential buildings, is well advanced, with
key divisions having reviewed and updated their
methodology and approach to ensure that
project specifications are compliant and quality
is maintained.
In the medium term, we are reassured that our
housing capability is geared towards the UK’s
underlying need for housing, and the fact that
the homes we build, aimed at the affordable
end of the market, remain in demand. This is
currently reflected in the high level of forward
reservations into 2022.
There are a number of macro uncertainties,
such as inflation, reductions in government
incentives and increases in interest rates that
could put pressure on our residential portfolio.
However, mortgage availability and employment
prospects remain positive and options are
available to help mitigate and manage any
negative fluctuations should they arise. The
majority of our schemes are subject to viability
conditions, are eligible for gap funding and
include profit-sharing arrangements which
reduce our risk. In addition, future phases can
be remodelled or deferred, the pace of build
can be accelerated or reduced, robust risk
and capital controls are in place to manage
exposure, and there is the possibility of further
government interventions to help stimulate the
market.
Financing
In terms of resourcing our medium- and long-
term plans, the Group remains in a strong
financial position (see pages 39 and 40 for detail
of our average daily net cash and committed
credit facility).
People
Voluntary employee turnover within the divisions
is at healthy levels and where we are recruiting,
we are witnessing significant interest in the new
positions we have created to help us achieve
our strategic objectives. A culture where people
feel included and empowered continues to be a
key ingredient of our success and initiatives such
as our commitment to reduce climate impacts
and tackle responsible business topics are
considered key in our ability to attract and retain
the talent we need to grow the business. Read
more on how we engage with and develop our
people on pages 11, 12 and 21 to 24.
This review should be read in conjunction with
the viability statement on pages 83 to 85.
57 _ Morgan Sindall Group plc Annual Report 2021
57 _ Morgan Sindall Group plc Annual Report 2021
57 _ Morgan Sindall Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk continued
Principal risks
Our principal risks are
those we consider the
most significant in terms
of potential impact to the
business and have been
extensively reviewed.
The risks have not changed
significantly: those that have
changed reflect UK macroeconomic
uncertainty and inflationary
headwinds that require navigating,
which the Group is well placed
to manage. The risk map at right
indicates the Group’s principal risks
(after mitigation) in terms of severity
and resilience. In 2021, the Board
conducted its annual review of the
Group’s risk appetite and concluded
that no significant changes had
occurred. The adjacent table
indicates our risk appetite and risk
velocity (the speed at which the risk
would impact the Group).
Risk appetite and velocity
Risk severity and resilience
Principal risk
Risk
appetite
Risk
velocity
Risk
category
Internal or
external
risk
Strategic priority
A Economic change and
Medium
Strategic
External
uncertainty
B Exposure to the UK
Medium
Strategic
External
residential market
C Climate change
Low
Strategic
External
D Health and safety incident Low
Operational
Internal
E
F
Talent retention and
attraction
Partner insolvency
or adverse change of
behaviour
Medium
People
Internal
Low
Internal
Financial
and
Operational
G Inadequate funding
Low
Financial
Internal
H Mismanagement of
working capital and
investments
Low
Financial
Internal
k
s
i
r
h
g
H
i
G
D
H
F
k
s
i
r
w
o
L
K
E
I
J
B
A
C
High resilience
Low resilience
Risk change key
Risk velocity
Increase
Stable
Decrease
PPP Within three months
PP Within one year
P Over a year
Poor contract selectivity
Medium
Operational
Internal
Strategy key
I
J
Poor project delivery
Low
Operational
Internal
K Cyber activity/Failure to
Low
Operational External
invest in IT
and internal
58 _ Morgan Sindall Group plc Annual Report 2021
Increase our
quality
of earnings
Excel project
delivery
for our clients
Consistently
deliver on
our Total
Commitments
Secure long-term
workstreams
Maintain a strong
balance sheet
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Economic change and uncertainty
Increase – Despite possible economic headwinds, our market sectors remain structurally secure which, together with our strong balance sheet and short- to medium-term secured workload, provides comfort.
We believe the quality and volume of our pipeline of opportunities and secured workload in both regeneration and construction will provide a level of insulation against any specific adverse market conditions
should they occur.
Principal risk and impact
Update on risk status
Mitigation
There could be fewer or less profitable opportunities in our chosen
markets including a decline in construction activity caused by
macroeconomic weakness and/or further UK lockdowns.
Allocating resources and capital to declining markets or less
attractive opportunities would reduce our profitability and cash
generation.
Responsibility:
The Board
The continued scrutiny of UK construction balance sheets
underpins our competitive position in the sector and gives
confidence to our clients, employees and supply chain.
The UK is expected to continue investing in areas that
complement our strategy, including affordable housing,
infrastructure and regeneration. Our business model is designed
to provide a mix of earnings across different market cycles.
The Group has shown strong credentials throughout the
pandemic and we expect to navigate any subsequent variant
waves without material disruption.
Our public and regulated sector focus, pipeline and order book,
coupled with a strong underlying demand for buildings in these
sectors, provides some comfort around inflationary challenges
provided government funding continues to accommodate price
increases.
The diversity of our operations protects against fluctuations in
individual markets while our decentralised approach enables our
divisions to respond quickly to change.
The Board regularly reviews the economic environment in which
we operate to assess whether any changes to the outlook justify
a reassessment of our risk appetite or business model.
We stress test our business plan against the current economic
outlook to ensure our financial position is sufficiently flexible and
resilient.
We are strategically focused on a high-quality order book
underpinned by a strong balance sheet and financial strength.
A high proportion of our secured workload is with public sector
and regulated entities via long-term arrangements, with a
healthy level of demand and typically preferential terms.
We continue to be very selective and our procurement
routes, margins, contract terms and secured workload remain
favourable.
We use analytical software to enhance our understanding of
our medium-term pipeline quality, enabling us to predict trends
more accurately and adjust our strategy in response.
59 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Exposure to the UK residential market
Increase – Government support for housing and the dynamics of underlying demand complement our product positioning. Cost inflation continues to challenge viability, although it has been manageable to
date. While government housing incentives have reduced, homebuyers continue to be supported by mortgage availability, employment levels (including high job vacancies), wage growth and loan-to-value ratios
which are favourable and expected to remain so over the short to medium term.
Principal risk and impact
Update on risk status
Mitigation
The UK housing sector is strongly influenced by government
stimulus and consumer confidence.
Inflationary pressures could challenge scheme viability, slowing
down our secured order book conversion.
If mortgage availability, affordability or consumer confidence is
reduced, this could impact on demand, make existing schemes
difficult to sell and future developments unviable, reducing
profitability and tying up capital.
Responsibility:
The Board
Executive directors
Divisional senior management teams
Residential sales and volumes have returned to pre-Covid levels
and, on certain schemes, we have accelerated build to meet
increased demand.
A rigorous, three-stage formal appraisal approval process is
undertaken before committing to development schemes and
capital commitments.
Some tapering is expected into 2022 but underlying demand
We work closely with public sector partners and government
is still expected to be healthy which, combined with the
geographical characteristics of our residential portfolio, should
help even out any regional imbalances, should they occur.
There continues to be clear government support for new
affordable housing, which supports our business model and
market positioning.
In Urban Regeneration, there are short-term viability challenges
to navigate while inflationary costs get absorbed into the
consumer market.
Negative housing dynamics such as a reduction in consumer
confidence (or the prospect of increased interest rates) could
impact sales; however, government stimuli, such as ‘Help to Buy:
Equity Loan’ and the recently introduced mortgage guarantee
scheme for properties up to £600k, complement our product
offering.
Constrained planning remains a frustration and has the potential
to delay our schemes. However, anticipated improvements in
the system could allow further efficiencies and the speed at
which we bring development forward.
There are some headwinds to navigate including the prospect
of a further increase in interest rates, although this is from
historic lows and expected to remain gradual if applied (all highly
uncertain as the government seeks various options to tackle
the post-pandemic economy). In terms of household inflation,
commentators suggest that this should ease in the second half
of 2022 which should help alleviate affordability issues.
agencies such as Homes England to secure extra development
funding if required.
We use mostly non-speculative, risk-sharing development
models, subject to viability conditions that lessen any negative
impacts from market fluctuations.
On selected large-scale residential schemes, we seek to forward
sell and/or fund sections to targeted institutional investors in
order to reduce risk.
Our residential portfolio has a wide geographical spread, offering
protection against regional market variations, and is geared
towards providing an affordable product.
Rather than building up a land bank, we prefer to target option
agreements with landowners that limit and/or defer long-term
exposure and boost return on capital employed.
We regularly monitor and forecast our pipeline of development
opportunities and secured workload, which includes monitoring
key UK statistics such as unemployment, lending and
affordability.
For a large proportion of current schemes in our portfolio, we
have the ability to slow down (or accelerate) build rates should
the need arise.
60 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Climate change
Stable – We have been recognised as leaders in our sector for our work in reducing carbon emissions (see page 16). However, there is still much to do as we progress towards our 2030 goal of net zero.
Principal risk and impact
Update on risk status
Mitigation
The Group’s key environmental impact is via the carbon emissions
and waste that we produce.
Our activities can be impacted by changes in temperature, high
winds from increasing severity of storms and flooding.
We have not needed to change our business model in response to
any longer-term impacts associated with climate change. However,
we do need to ensure that we can adapt to the changing needs of
our clients and maintain the necessary credentials to be awarded
work.
See pages 25 to 31 for more information on our broader
environmental performance..
Responsibility:
Executive directors
Group management team
Divisional senior management teams
Group climate action panel
We are considered leaders in our sector in addressing climate
change and have been independently recognised as such,
having received a leadership score of A from CDP (see page 71).
Our divisions are responsible for delivering relevant actions to
meet our net zero target and for day-to-day management of
climate-related risks and opportunities.
We introduced an internal carbon charge in 2020 to help
Our carbon action panel shares best practice on climate-related
encourage our divisions to reduce their own emissions. The
money raised will be used to fund future climate change
initiatives.
We are working with our supply chain to encourage and support
them in reporting their own emissions so that we can have a
better understanding of our wider Scope 3 emissions and can
introduce meaningful reduction plans.
During 2020, we introduced CarboniCa, a tool that calculates
building carbon footprints and lifecycle emissions and suggests
alternative lower-carbon methods. We are currently optimising
the tool with a software solution and discussing its future
development with leading industry and technology innovators.
Our credentials in responding to climate change ensure we can
support clients with the tools and capability needed to meet
their requirements and maintain and/or grow our work-winning
capability and market share.
We retain a cautious approach in using new products and
techniques to reduce the impact of climate change until
sufficiently proven. This is to avoid overpromising and possible
latent defects that could ultimately prove costly.
matters.
We have accredited science-based targets.
All our construction divisions have ISO 14001- compliant
environmental management systems in place.
Engaging with consultants and specialists during our project
planning phase to ensure that climate impacts such as flood risk
are considered.
Avoid building on floodplains and areas at high risk of increased
physical climate impacts and are actively involved in securing
pipeline projects relating to climate-change adaptation (such as
flood resilience projects).
Climate change presents opportunities for the Group including
government plans to increase spend in infrastructure,
repurposing existing buildings and the ability to attract clients
through our track record in delivering climate-related solutions.
Read more about climate-related risks and opportunities in our statement on Task Force on Climate-related Financial Disclosures (TCFD) on pages 71 to 79.
61 _ Morgan Sindall Group plc Annual Report 2021
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Governance
Financial statements
Managing risk: principal risks continued
We cause a major health and safety incident and/or adopt a poor safety culture
Stable – We were disappointed with our safety performance in the first half of 2021 and took steps to remedy this. As a result, we witnessed improvements during the second half, when the number of RIDDOR
and lost time incidents reduced.
Principal risk and impact
Update on risk status
Mitigation
Our number one priority is to protect the health and safety of our
key stakeholders and the wider public.
Health and safety will always feature significantly in the risk profile
of a construction business. We carry out a significant portion of our
work in public areas and complex environments.
Accidents could result in legal action, fines, costs and insurance
claims as well as project delays and damage to reputation. Poor
health and safety performance could also affect our ability to
secure future work and achieve targets.
Responsibility:
The Board
Group management team
Health, safety and environment committee
Divisional senior management teams
We continued to manage the challenges posed by Covid and
changes to government guidance, ensuring we remained
aligned to the Construction Leadership Council’s site operating
procedures.
We have applied the principles of ‘safe by design’, where safety is
considered throughout the design process.
The divisions took renewed steps in the year to increase safety
awareness and promote safe behaviours, including campaigns
to prevent hand injuries and remind people of the need to
tether tools and maintain tidy sites. Construction developed
an animation, ‘Introduction to 100% Safe’, and developed new
‘Behavioural Essentials’ e-learning modules for its employees and
supply chain.
We increased our occupational health surveillance with the end
objective of eradicating incidents of hand-arm vibration and
noise-induced hearing loss.
Our divisions will continue to share learning, innovation and best
practices and work together to reduce the overall number of
accidents, with the following initiatives being considered in 2022:
– Construction: visualisation of information and guides, which
the division has found to result in better uptake than text-
based versions;
– Infrastructure: shifting the focus from accidents to high
potential incidents;
– Fit Out: new safety improvement plan on the theme of ‘site
conditions’;
– Property services: prioritising reducing hand injuries, with
particular attention to cuts; and
– Partnership Housing: improving adherence to high-risk trade
supervisor-to-worker ratios and maintaining absolute focus
on root cause investigation and escalation procedures.
We have a Board health, safety and environment committee
that focuses on our health and safety culture to drive better
behaviour and performance.
Individuals in each division, and on the Board and Group
management team, are given specific responsibility for health
and safety matters.
Our Group health and safety forum meets quarterly, with
representatives from all divisions sharing share best practice and
exchanging information on emerging risks.
We have well-established procedures in place including safety
systems, audits, site visits, incident investigation and root-cause
analysis, monitoring and reporting, and reporting of near-miss
incidents and incidents that could potentially have resulted in
serious injury.
Our regular health and safety training includes behavioural
change, housekeeping on site and leadership engagement in
driving site standards.
Each division’s health and safety policy is communicated to all its
employees and senior managers are appointed to ensure the
policies are implemented.
We have developed major incident management and business
continuity plans, which are periodically tested and reviewed.
All divisions are accredited to ISO 45001 (see page 120).
We continue to offer our colleagues a range of benefits that
promote physical and mental wellbeing (see page 19).
Read more about our commitment to health, safety and wellbeing on pages 17 to 20.
62 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
We fail to attract and retain the talent we need to maintain and grow the business
Stable – Our current success is helping us attract and retain people, and we are focusing on increasing the Group’s diversity.
Principal risk and impact
Update on risk status
Mitigation
Talented people are needed to provide excellence in project
delivery and client service.
Skills shortages in the construction industry will remain an issue for
the foreseeable future.
If we fail to attract and retain the talent required to meet our
clients’ and other stakeholders’ expectations, this could damage
our reputation and our ability to secure future work and meet our
targets.
Responsibility:
The Board
Group management team
Divisional senior management teams
Read more about our commitment to developing people on pages 21 to 24.
Improvements continue to be made to the working environment
We give our people empowerment and responsibility together
and investment made in technology and leadership training.
We are responding to the challenge of an ageing employee
population and undertaking work to improve our diversity and
inclusion (see pages 23 and 24).
We are considered a leader in the sector in addressing climate
emissions, which should help attract younger recruits.
with clear leadership and support.
We offer them a strong Group culture and attractive working
environments, remuneration packages, technology tools and
wellbeing initiatives to help improve their working lives.
We conduct employee engagement surveys and monitor joiner
and retention metrics including voluntary staff turnover. We
carry out annual appraisals that provide two-way feedback on
performance and conduct exit interviews when people leave.
Our succession planning includes identifying and developing
future skills.
We provide training and development to build skills and
experience, such as our leadership development and graduate,
trainee and apprenticeship programmes.
63 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Partner insolvency and/or adverse behavioural change
Increase – Some partners may be trading with stretched finances following the pandemic and the unwind of government measures that were introduced to support business recovery. More recent inflationary
effects are likely to have increased the pressure on our partners’ balance sheets which could lead to a greater likelihood of failure.
Principal risk and impact
Update on risk status
Mitigation
An insolvency of a key client, subcontractor, joint venture partner
or supplier could disrupt project works, cause delay and incur the
costs of finding a replacement, resulting in significant financial loss.
There is a risk that credit checks undertaken in the past may no
longer be valid.
Responsibility:
Executive directors
Divisional senior management teams
As we are less able to rely on historical credit checks, our teams
have heightened sensitivity and are looking for signs of stress
that would enable early intervention and options to resolve; this
includes measures to gain greater control and transparency.
The reverse-charge VAT initiative has stretched many of our
supply chain partners’ balance sheets. However, the strength
of our balance sheet gives us the option to step in and cover
short-term supply chain issues, such as cash flow, if deemed
appropriate.
Our strategy has been to reduce payment days (our average
time to pay is 27 days), and our supply chain partners regard us
as dependable and responsible. In addition, we do not hold any
cash in the form of retention from our preferred supply chain
partners which helps reduce their cash flow pressures and the
likelihood of failure.
Our business model and order book are predominantly focused
on public sector and regulated industries and commercial
customers in sound market sectors, reducing the likelihood of a
material customer failure.
We carry out rigorous due diligence on commercial clients and
supply chain partners, obtaining where necessary relevant
securities in the form of guarantees, bonds, escrows and/or
more favourable payment terms.
We conduct a formal, multi-stage tender review and approval
process before entering into contracts, with a focus on client
payment behaviours and liquidity.
Formal due diligence is carried out when selecting joint ventures,
including seeking protection in the event of default by one of the
partners. Joint ventures require executive director approval.
We work with preferred or approved suppliers where possible,
which aids visibility of both financial and workload commitments.
We monitor our supply chain utilisation to ensure we do not
overstress their finances or operational resource.
We rigorously monitor work in progress, debts and retentions.
64 _ Morgan Sindall Group plc Annual Report 2021
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Governance
Financial statements
Managing risk: principal risks continued
Inadequate funding
Decrease – Our committed bank facilities and strong cash position provide significant headroom.
Principal risk and impact
Update on risk status
Mitigation
A lack of liquidity could impact our ability to continue to trade
or restrict our ability to achieve market growth or invest in
regeneration schemes.
Responsibility:
The Board
Group tax and treasury director
Divisional senior management teams
£180m of bank facilities are undrawn and are committed until
We have a Group-led, disciplined capital allocation process for
2024.
During the reporting period and for the foreseeable future,
our average net daily cash continues to be healthy and clearly
indicates the cash-backed nature of the business.
significant project-related capital, which takes into consideration
future requirements and return on investment.
We monitor our cash levels daily and conduct regular forecasting
of future cash balances and facility headroom.
Our balance sheet continues to provide assurance for our
Our long-term cash forecasts are regularly stress tested.
stakeholders and allows us to continue investing in regeneration
schemes while remaining selective in construction.
Mismanagement of working capital and investments
Decrease – Our strong balance sheet and cash position continue to support investment in long-term regeneration schemes and protect against economic downturn, allowing us to make the right long-term
decisions.
Principal risk and impact
Update on risk status
Mitigation
Poor management of working capital and investments leads to
insufficient liquidity and funding problems.
Responsibility:
Executive directors
Group tax and treasury director
Divisional senior management teams
Our ongoing focus on working capital management has enabled
us to maintain levels similar to prior years while continuing to
improve our supply chain payment practices and investment in
regeneration.
Our cash position is not supported by any form of supply chain
debtor finance and gives a clear indication of our financial health.
Our delegated authorities require that capital and investment
commitments are notified and signed off at key stages with
senior level approval.
We reinforce a culture within our bidding and project teams of
focusing on cash returns to ensure they meet expectations.
We monitor and manage our working capital with an acute focus
We continue to maintain a positive momentum in cash
on any overdue work in progress, debtors or retentions.
management in construction due to a combination of improved
returns, cash optimisation and cash conversion.
Our average net daily cash for the period demonstrates our
disciplined working capital management.
The government’s introduction of the VAT reverse-charge has
positively impacted our year-end net cash by c£66m.
We monitor cash levels daily and produce weekly cash forecasts.
We manage our capital on regeneration schemes efficiently, for
example through phased delivery, institutional and government
funding solutions, and forward funding where possible.
65 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Poor contract selectivity and/or bidding
Increase – The quality of our long-term secured workload should safeguard our future performance, allowing us to continue selecting the right projects.
Principal risk and impact
Update on risk status
Mitigation
In a volatile market where competition is high, a division might
accept a contract outside its core competencies or for which it has
insufficient resources.
Our order book consists of a high proportion of public sector,
regulated industry and framework clients with typically healthier
risk profiles and is secured in limited competition.
If a contract is incorrectly bid, this could lead to contract losses
and an overall reduction in gross margin. It might also damage our
relationship with the client and supply chain, leading to a reduction
in work volumes.
Responsibility:
Executive directors
Divisional senior management teams
We have not changed the sectors or markets we operate in
and are therefore unlikely to engage in a project outside of
our capability. In construction, a high proportion of our work
has been secured via negotiated and two-stage procurement
routes1.
Materials availability and inflation have been challenging in
It is part of our strategy and culture to be selective in our work.
We target optimal markets, sectors, clients and projects. We
limit our participation in open market bids, conducting a large
proportion of our projects via framework or joint venture
arrangements with repeat clients who share our values. This
provides a high probability of predictable and successful
outcomes.
When bidding, we aim for negotiated and two-stage
procurement routes1 that allow us early engagement.
the period, requiring significant additional management, but
have not resulted in any major issues. This is due largely to our
standing in the market, the dedication of our people and supply
chain (see page 33), and our focus on preferred procurement
routes.
Our divisions select projects according to pre-agreed types of
work, project size, contract terms and risk profile. A multi-stage
process of bid review and approval includes tender review
boards, risk-profiling and a system of delegated authorities to
ensure approval at appropriate levels of management.
In construction, inflationary influences have in general been
isolated to projects secured in the first quarter of 2021 and
starting in the second. The main impact has been the full
expenditure of project contingencies to accommodate the
inflation. Projects procured during and after the second quarter
have incorporated inflation allowances and supply chain
commitments.
We profile the skills and capabilities required for the project to
ensure that we allocate the right people.
Our divisions have processes in place to select supply chain
partners who match our expectations in terms of quality,
sustainability and availability.
We conduct a robust review of our pipeline and bids at key
stages, including rigorous due diligence and risk assessment,
and obtain senior level approval.
1 Negotiated and two-stage procurement routes allow us early engagement in the project and greater visibility and influence over pricing and programming.
66 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
Poor project delivery (including changes to contracts and contract disputes)
Stable – Our focus on project selectivity and the quality of our order book and supply chain partners reduce the probability of poor performance. Inflationary pressures increase the risk but are considered
manageable.
Principal risk and impact
Update on risk status
Mitigation
Changes to contracts and contract disputes could lead to costs
being incurred that are not recovered, loss of profitability and
delayed receipt of cash.
Failure to meet client expectations could incur costs that erode
profit margins, lead to the withholding of cash payments and
impact working capital. It may also result in reduction of repeat
business and client referrals.
Not understanding the project risks may lead to poor delivery and
could result in reputational damage and loss of opportunities.
Ultimately, we may need to resort to legal action to resolve
disputes, which can prove costly with uncertain outcomes as well
as damaging relationships.
Responsibility:
Executive directors
Divisional senior management teams
The high proportion of repeat, framework-related, two-stage and
negotiated work in our current order book continues to reduce
the likelihood of unforeseen changes and disputes. meaning we
are more likely to achieve sustainable and predictable outcomes.
There is a recognised shortfall in the construction labour market,
exacerbated by impacts from Covid and Brexit. However, in the
short term, while we have seen a limited number of issues, we,
together with our supply chain, are managing the situation.
Our divisions have worked closely with our supply chain for
many years, providing predictable workloads and prompt
payment. Maintaining good supply chain relationships has
helped us navigate labour and/or materials availability issues.
In advance of the proposed Building Safety Bill which primarily
deals with building regulations and fire safety, Construction and
Urban Regeneration have updated their methodology to ensure
that project specifications remain compliant. This includes a
complete refresh of design management and procedures,
increased onsite scrutiny and records and engagement of
independent fire consultants on more complex schemes.
We have well-established systems of measuring and reporting
project progress and estimated outturns that take into account
contract variations and their impact on programme, cost and
quality.
The strength of our supply chain relationships and preference
to work with selected partners reduces the probability of project
failure and helps to ensure we deliver predictable outcomes.
Where legal action is necessary, we notify the Board, take
appropriate advice and make suitable provision for costs.
Formal internal peer risk reviews highlight areas of improvement
and share best practice and ‘lessons learned’.
Various Perfect Delivery1 initiatives delivered in Construction and
Urban Regeneration focus on improvements in product quality
and predictability and client experience.
Regular formal and informal stakeholder feedback allows us
to intervene when required and refine our offering to provide
exceptional outcomes.
We continue to use and enhance our digital project
management tools and commercial metrics that highlight areas
for focus and provide early warnings, enabling early intervention
in the construction cycle.
Following the Grenfell Tower tragedy, all our divisions undertook
an in-depth analysis of their portfolios. Expert advice was sought
to review compliance with legislation at the time of construction
and in the context of amendments made to the building
regulations in 2018. Where there have been concerns over the
compliance of cladding materials or with the overall fire-safety
of buildings, appropriate remedial activity and expenditure has
been undertaken to rectify these.
In common with the rest of the industry, the Group will begin
paying the Residential Property Developer Tax in 2022.
1 Perfect Delivery status is granted to Construction, Infrastructure and Fit Out projects that meet all four client service criteria specified by the division.
67 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk: principal risks continued
UK cyber activity and failure to invest in information technology
Stable – To protect against increasing UK cyber-attacks, we invest in security controls and partners, including government security advisers.
Principal risk and impact
Update on risk status
Mitigation
Investment in IT is necessary to meet the future needs of the
business in terms of expected mobility, growth, security and
innovation to enable its long-term success.
During the period we achieved re-certification to ISO 27001 and
the government’s Cyber Essentials Plus Scheme.
We have enhanced our visibility of security metrics using new
It is also essential to avoid a significant cyber incident that could
cause reputational and operational impacts and/or a loss of data
or intellectual property that could result in significant fines and/or
prosecution.
There continues to be an exponential increase in criminal activity
and, while we are confident in our security strategy, it is continually
checked and challenged.
Responsibility:
The Board
Group management team
IT security steering group, reporting to the Group finance director
technology.
We have an established security improvement plan in place and,
to ensure we keep pace with change, have provided our security
steering group with additional funding to introduce new cyber
tools as needed.
All our people have undertaken cyber security awareness
training during the year.
We commission an external industry expert to conduct regular
cyber risk analysis on every device used in our network. The data
collected is independent of our other security systems and acts
as an audit of our security controls.
Big data, digital construction and analytics are at the forefront
of our latest technological developments and we continue to
develop the use of these. The next steps will be to develop
predictive tools to help identify issues early in the construction
cycle including programme, technical and commercial issues and
to enhance our current safety practices.
We have a dedicated Group team focused on providing a stable
and resilient IT environment with continued investment in core
infrastructure, security and applications. Our divisional IT teams
focus on business-specific product support.
We adopt best practices to secure our people and data. We
adhere to the National Institute of Science and Technology’s
Cybersecurity Framework.
We engage with industry-leading partners to adopt appropriate
technologies to protect the Group.
Our security steering group provides governance and oversight
of the Group’s cyber strategy and strength, resources and
funding.
We run regular audits using different parties (both technical and
non-technical) to confirm that our controls remain effective.
Audit reports are shared with the security steering group.
We train all our people in data protection and information
security including awareness and responsibilities.
Our investment in IT enables all our people to work remotely
with minimal inconvenience.
68 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Managing risk continued
Emerging risks
The Group’s strategic planning
process includes identifying
emerging risks that may affect our
ability to deliver our objectives
over the medium to longer term.
This is supplemented by additional reviews that
take place as part of our twice-yearly internal
risk management process and monthly Board
reporting, which focus on any matters likely to
impact the Group’s strategy.
We consider the following emerging risks to be
significant but not to require any adjustment
to our strategy. However, we will continue to
monitor these risks for any significant changes.
69 _ Morgan Sindall Group plc Annual Report 2021
Covid’s impact on office demand
Issue/risk
Update
Comment/outlook
Covid could potentially result in clients
reassessing the way they balance office
requirements with remote working.
This could impact the office market and, in
particular, reduce Fit Out’s proportion of office-
related work.
Fit Out’s record order book and engagement
The effects of the pandemic create
with its clients and consultants suggest that the
demand for office space will be maintained,
along with flexibility for remote working, due
to the business benefits and mental wellbeing
that result from social interaction.
opportunities when clients need their office
space reconfigured to accommodate the new
balance of office- and home-working.
Long-term scarcity of skilled labour in the industry
Issue/risk
Update
Comment/outlook
This is a UK-wide issue and, while the sector
works to broaden its appeal as a career option,
will require considerable government and sector
interaction to resolve.
This could impact our ability to deliver long-term
growth and/or disrupt project delivery.
It could lead to the ultimate resizing of the
industry and the Group.
There is ongoing government action, such
as incentivisation of school leavers and new
education schemes.
We are engaging with schools and local
communities to encourage people to join
the industry and provide training and work
opportunities (see pages 35 and 36). Our
diversity and inclusion initiatives (see pages 23
and 24) will increase the talent pool available.
As more young people join the sector and
develop their careers, the industry will in turn
become more attractive.
We have witnessed some short-term issues
but this has been largely mitigated by our
predominant two-stage procurement
approach; this enables early engagement of
the supply chain, which helps them manage
longer-term labour resourcing and planning.
The relationships our divisions have built up
with their supply chain helps mitigate the
effects of labour and/or materials availability
issues (see page 33).
Offsite, modular and new methods of
construction are already helping reduce the
need for onsite resource and assisting with the
skill gap/shortage.
Technology will also play its part in reducing
the need for site-based resource and
attracting people into the industry but will
require some upskilling to be undertaken.
Strategic report
Governance
Financial statements
Managing risk: emerging risks continued
Technology’s advancing pace
Issue/risk
Update
Comment/outlook
We do not adapt to (or adopt) new ways of
working, invest in technology or develop skills
and/or supply chain relationships that allow us to
compete in the future marketplace.
We fail to embrace innovative technologies to
increase efficiency for the Group and our clients,
resulting in a loss of competitive advantage and a
reduced ability to secure repeat business.
Our divisions generate, develop and manage
new technological tools and ideas that allow
them to remain competitive in their markets.
Where appropriate, these tools are shared
across the Group to facilitate continuous
improvement.
Our divisions continue to evolve their use of
data analytics, business intelligence tools, and
their respective operational, procurement,
commercial and financial systems (see page 22
for detail on our investment in technology.)
Microsoft collaboration tools have provided
seamless homeworking for all our people,
giving employees easy access to systems
whether working at home, on site or on the
move, and strengthening our cyber security.
We continue to increase our adoption of new
and sustainable methods of construction
across the Group, including prefabrication,
modular and offsite production techniques (via
our supply chain partners). We are remaining
cautious, however, to avoid any longer-term
defect and/or legacy issues.
Artificial intelligence, machine learning, IoT
(‘Internet of Things’), augmented reality,
robotics, exoskeletons, 3D printing, and virtual
reality are evolving within the sector but are
currently considered immature. We have taken
some initial steps into these areas and are
keeping a close eye on developments as they
are set to provide greater efficiencies and safer
working environments as they become more
established.
To reduce carbon emissions on our projects,
we are using on-site energy generation and
alternative fuels for our vehicle fleet and
generators. We have started designing low-
carbon buildings and are using more energy-
efficient construction methods according to
requirements.
We expect to accelerate our uptake
of alternative construction technology
significantly over the next few years, including
using alternative products, plant materials and
techniques.
Government’s approach to building safety
Issue/risk
Update
Comment/outlook
Costs arising from remediating any buildings
that fall in line with the criteria set out in the
10 January 2022 letter from the Secretary of State
for Levelling Up, Housing and Communities to
the residential property developer industry.
We have considered the scope of relevant
cases across our business and this review is
ongoing. It is possible that a relatively small
number of cases will be identified where we
have a liability leading to remediation.
While any costs incurred are not expected to
be material and will likely span a number of
years, the industry-wide solution to the issues
set out in the 10 January 2022 letter is still
being determined and therefore any liability
arising cannot be reliably estimated (see
page 200).
70 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Climate reporting
Task Force on
Climate-related
Financial
Disclosures
(TCFD)
‘Improving the environment’ is one
of our five Total Commitments which
are a strategic priority for the Group.
In this section of our strategic report, we provide
our comprehensive TCFD disclosure, including
details on climate change scenarios and how
they may affect our business in the short,
medium and long term.
We have included in our annual report
climate-related disclosures consistent with the
TCFD recommendations and recommended
disclosures. In certain instances, there may be
information reported outside of the annual
report which supports and provides additional
detail to the information below. The table below
sets out where information outside of that
included in this TCFD disclosure can be found.
We have received a climate change A score from
CDP for the second year running and further
details can be found in our CDP response at
www.cdp.net (requires registration to access).
71 _ Morgan Sindall Group plc Annual Report 2021
TCFD reporting pillar
Reporting reference
Governance
a) Describe the Board’s oversight of climate-related risks
and opportunities.
We outline the Group’s internal governance structure and how each relevant Board committee considers
climate-related issues. We also outline management’s role and how climate risks and opportunities are
considered across the business. See the section on governance on page 72.
b) Describe management’s role in assessing and
managing climate-related risks and opportunities.
See the governance report on pages 86 to 158 for further details about how the Group is governed and
actions taken by the Board during the year.
Strategy
a) Describe the climate-related risks and opportunities
the organisation has identified over the short, medium
and long term.
b) Describe the impact of climate-related risks and
opportunities on the organisation’s business, strategy
and financial planning.
c) Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2oC or lower scenario.
Risk management
a) Describe the organisation’s process for identifying and
assessing climate-related risks.
b) Describe the organisation’s processes for managing
climate-related risks.
c) Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall risk management.
See the governance section of our 2021 CDP response for information on our governance specific to climate
change.
We outline our climate-related risks identified over the short, medium and long term within this disclosure
(see section on our key risks on page 74). We also outline the opportunities that may benefit the Group (see
section on our key opportunities on page 75).
The impact of those climate-related risks and opportunities on our business are outlined within the risk table
on page 61 and the opportunities section on page 75 and are explored further within the scenario analysis
section on page 76.
Ultimately these risks and opportunities will impact upon our revenues, costs, assets and liabilities, and
as our understanding of the impact of these risks and opportunities deepens, our quantitative financial
disclosures in this area will increase.
We include a qualitative analysis of the resilience of our strategy within the resilience of our strategy section
on page 77. This explores the actions we are taking to mitigate and protect against certain risks and
opportunities, and areas which we are looking to further explore.
Our process for identifying, assessing and managing climate-related risks is set out in the approach to risk
management section of this disclosure on page 73. During the year we have worked toward developing a
deeper understanding of how climate-related risks may exacerbate or impact upon our wider view of our
risks and this is outlined in the approach to scenario analysis section of this disclosure on page 76.
For further details of our risk governance and management, including our disclosure on our principle risk
relating to climate change, see pages 55 to 70.
Metrics and targets
a) Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process.
We report on a wide range of metrics and targets to measure our impact on the environment, our
compliance with policy and regulation, and our wider societal impacts, which help us to monitor and assess
our impacts in key risk areas. These are outlined in more depth within the metrics and targets section on
pages 78 and 79.
b) Disclose Scope 1, Scope 2, and if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.
c) Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
Our commentary on our Total Commitment to improving the environment on pages 25 to 31 provides
details of our performance against our metrics and targets, sets out our key impact areas and our net zero
strategy, and provides case studies and detail around the actions being taken to improve our resilience to
climate change.
Our carbon reporting can be found within the Streamlined Energy and Carbon Reporting (SECR) disclosure
on page 80.
See our 2021 CDP response for additional information on our metrics and targets relating to climate change.
Strategic report
Governance
Financial statements
Climate reporting: TCFD continued
Governance of climate-related risks and opportunities
The Board considers the impact of climate change on our stakeholders as part of its annual strategic
review process and is responsible for overseeing the Group’s environmental performance. It reviewed
the Group’s climate-related risks and opportunities as part of its annual risk appetite review. The Board
delegates some elements of its responsibilities to its various committees.
Over the last 12 months, there has been an increased focus on climate-related matters at Board
level as the landscape continues to evolve with further regulatory developments and changes in
stakeholder expectations. The expertise of the Board has been further enhanced through regular
interaction with management on matters such as our net zero strategy.
The audit committee is responsible for supporting the Board in its responsibilities with respect to
climate change including overseeing compliance with climate change reporting and considering
climate change risks as part of the bi-annual review of principal and emerging risks. The audit
committee considered papers in December 2021 on the Group’s viability and going concern and TCFD
disclosure.
The health, safety and environment (HSE) committee is responsible on behalf of the Board for
considering the impact of climate change on the Group’s performance and for overseeing the Group’s
approach to mitigating our environmental impact.
The remuneration committee is responsible for determining our remuneration policy, including how
environmental, social and governance factors are considered in the policy.
Management is responsible for managing on a day-to-day basis climate-related risks and opportunities
faced by the Group and for delivering our roadmap to achieve the net zero strategy set by the Board.
Responsibility for implementation of our net zero strategy and ensuring appropriate actions are taken
to meet our Total Commitment targets is delegated by the Board to the Group management team.
Our Group management team is responsible for setting targets and key performance indicators for
our Total Commitments, which include action on climate change.
Our divisions are responsible and held accountable for monitoring progress against our
environmental targets and for determining their local roadmaps to achieving net zero, including
monitoring metrics and targets at a local level. They are also responsible for day-to-day management
of climate-related risks and opportunities.
A TCFD steering group, comprised of our head of audit and assurance, company secretary,
representatives from our divisions and representatives from our carbon action panel, monitored
progress against the TCFD requirements and the publication of our annual disclosure and reported to
the Group finance director and audit committee.
Our Group climate action panel is responsible for informing the Group management team,
the divisions and, ultimately the HSE committee on climate-related risks and opportunities and
appropriate management measures to be taken. The panel supports divisional teams in identifying
potential opportunities and developing innovative solutions to manage climate-related risks, such as
the Group’s carbon calculator, CarboniCa (see page 27).
72 _ Morgan Sindall Group plc Annual Report 2021
Short-term
0-1 year
Medium-term
1-3 years
Long-term
3+ years
Twice a year, each division carries out a
detailed risk review, recording significant
matters in its risk register. Each risk is
evaluated both before and after the effect
of mitigation. During the year, the divisions
assessed a ‘shortlist’ of climate-related risks
and opportunities to consider whether they
should be included in this biannual risk
assessment process.
Climate change is considered a principal
risk for the Group and its impact is
reviewed along with wider corporate risks.
Emerging risks such as shifts towards more
sustainable methods of construction and
emerging legal and regulatory frameworks
are also reviewed as part of this process.
Our Total Commitments, including carbon
mitigation initiatives and targets, are
monitored annually.
In order to satisfy ourselves that the Group
has adequate resources to continue in
operation for the foreseeable future, we
undertake an annual viability assessment
covering a three-year period commencing
1 January, which is in line with the Group’s
budgeting cycle (see pages 83 to 85).
The majority of our projects are generally
short- to medium-term in nature and are
likely to see similar climate impacts to
today. Our in-depth project risk reviews
ensure that project-specific environmental
risks such as fire and flood are assessed,
with each project including the
development of risk management plans to
minimise the impact of such risks.
Each of our divisions is certified to the
ISO 14001 Environmental Management
System which ensures that we have robust
risk assessment and risk management
processes in place around environmental
incidents and management.
Our long-term risks and opportunities
are assessed in line with our strategic
planning, which considers emerging
markets and changing client behaviours,
technologies, and legal, regulatory and
political changes. This process helps to
identify mitigation measures which may
need to be incorporated into our Group
strategy. These risks and opportunities
take into account our long-term carbon
targets, including science-based targets.
While our projects are generally short- to
medium-term, we recognise that the
projects we build and the developments
we put in place will need to be resilient
against a changing future. Our projects
therefore include environmental risk
assessments which consider the long-term
physical risk impacts on our developments,
to ensure that our buildings, infrastructure
and developments are and will be resilient
in a changing future.
Strategic report
Governance
Financial statements
Climate reporting: TCFD continued
Our approach to risk management
The Board has overall responsibility for determining the Group’s
risk appetite, ensuring that risk is managed appropriately and that
there is an effective risk management framework in place.
During 2021, we undertook a series of workshops to better
integrate climate-related risk management into our wider risk
management processes, deepen our understanding of these
risks, and assess the resilience of our strategy against a range of
climate scenarios. These actions have strengthened our depth of
understanding around climate-related risks and opportunities and
enabled us to identify gaps within our risk assessment process.
We have developed an internal register of climate-related risks
and opportunities to ensure that any material risks are identified
and managed effectively. This register identified 30 risks and
19 opportunities. Each of the divisions assessed the likelihood and
severity or benefit of each as part of their risk reviews in October.
At this stage of our analysis, we have not identified risks and
opportunities that are material to our business, however as our
understanding of scenario analysis and climate risk increases we
will continually revisit and readdress our considerations around
materiality.
Going forward, the Group head of audit and assurance will be
responsible for formally reviewing and managing the register of
risks and opportunities identified and to determine whether or not
they remain appropriate.
The adjacent table sets out the time horizons we use to manage
risk, and the risk management processes in place.
73 _ Morgan Sindall Group plc Annual Report 2021
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Financial statements
Climate reporting: TCFD continued
Our key risks
This table below summarises the broader climate-related risks and potential impacts faced by the Group. Mitigating actions can be found in the resilience of our strategy section of this disclosure on page 77.
Risks
Drivers
Timing of impact
Risk description
Transition
risks
Political and
regulatory
Short to
medium term
Increasing regulation and policy to mitigate climate change and air quality.
Potential impact on business
Loss of licence to operate
Penalties and fines
Increased operational costs
Negative stakeholder perception
Changes to building regulations to mitigate climate change, adapt to
climate change, or to drive a more circular and sustainable economy.
Revised design specifications and materials requirements leading to
increased costs, changes to standardised building methodologies and
alterations to the way we engage with our supply chain
Reputational
Medium to
long term
Carbon commitments are insufficient for client or investor expectations;
are not met, leading to reputational damage; or are costly to meet.
Increased spend required for climate change mitigation
Failure to win contracts, secure lending or attract investors
Market
and technology
Loss of competitive advantage by not keeping pace and using the latest
technology.
Failure to win contracts
Risk of adopting immature products or services.
Increased litigation or re-work risk from use of immature technologies or
services, increasing costs
Selection of low-carbon products or techniques results in supply chain
pressures and increases costs while sales values lag in the market.
The need to procure low-carbon products and services leads to changes
to budgeting and stretching of product viability, increasing overall
product costs whilst sales values do not increase
Long term
Trend toward building or improving existing structures replaces full builds.
Physical
risks
Acute and
chronic
Long term
Project and supply chain level exposures to increasing climate impacts
(floods, fire, water shortages, site-run off and pollution, high winds).
Failure to win contracts
Failure to provide services
Project delays and increased operating costs
Increased risk of environmental fines or penalties
Increased risk of re-work
Supply chain disruption or change to materials costs
Increased levels of unviable land (for example, flood plains) and reduced
building plots.
Increased cost of land
Increased sales prices and damage to reputation
74 _ Morgan Sindall Group plc Annual Report 2021
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Governance
Financial statements
Climate reporting: TCFD continued
Our key opportunities
Ensuring we incorporate climate-related opportunities into our strategy will help us to remain
competitive and potentially to improve overall market share. We have identified the following
opportunities for the Group:
Resource efficiencies and energy sources
We could achieve cost savings through increased operational and supply chain efficiencies from
waste, water and energy use reductions, and by transitioning to renewable and low-carbon energy
sources.
Products and services
By expanding our range of products and services to meet increased demand for climate mitigation
and adaptation projects such as flood defence systems and sustainable drainage, net zero buildings,
retrofit domestic heating solutions and electric vehicle charging points.
Resilience
We will increase our resilience by retaining and enhancing our leadership approach to climate
change through the development of tools and technology to assess the carbon impacts of buildings
and to ensure continued engagement from our supply chain. We also collaborate on research
and development projects for new technologies and ways of working to help minimise our climate
change impact further.
We have set an internal carbon charge to ensure resilience against potential legal and regulatory
changes and to develop an internal fund for investment in new carbon initiatives.
75 _ Morgan Sindall Group plc Annual Report 2021
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Governance
Financial statements
Climate reporting: TCFD continued
Our approach to scenario analysis
We have considered two very different futures, one which is aligned to the Paris Agreement and the other is ‘business as usual’. We have considered a time horizon to 2030 as the agility of our business models
means that many projects are short-term in nature and can respond to market changes quickly. However, our longer-term strategy and desire to achieve our net zero ambition in 2030 highlights the importance
of considering our risks and opportunities over a longer time horizon, and how our organisation may need to adapt in the longer term to meet future needs.
Details of the key considerations identified under each scenario are set out below.
Key attributes of scenario
Paris-aligned
Business-as-usual
1.5oC-2oC warming by the end of the century
Rapid policy and regulatory changes to drive decarbonisation
Widespread adoption of new technologies
Improved resource efficiency
Increased concern around sustainability
2.4oC-3oC warming by the end of the century
Low investment in technology
Increased resource-use intensity
Degradation of environmental systems
Increase in frequency and intensity of physical climate events
What will our clients
look like?
The future-conscious client will demand low resource-intensive products, energy-
efficient appliances and environmentally friendly developments that are beneficial for
health and wellbeing. The carbon impact of buildings and services will be considered
as part of purchasing decisions.
What will we need to
implement in terms of
design and materials?
Electric vehicle charging points will be required, and hydrogen gas or electricity will
replace natural gas as the primary method of heating. Materials used for construction
will be sustainable, result in the lowest amount of embodied carbon, and have the best
thermal properties to reduce energy intensity in use.
How will our developments
and construction be rolled
out?
More areas will be designated air quality zones and our operations will need to
operate on low-carbon energy sources. Our plant and fleet vehicles will need to be
electric and emit no harmful gases. There will be increased focus on the reuse of
materials and minimising waste, with trends towards the improvement of existing
structures, rather than full builds.
Clients will increasingly demand infrastructure which adapts to the changing needs
of the future such as flood-resilience projects or retrofit solutions to ensure buildings
and developments are capable of withstanding the extremes of the future. Clients
will increasingly want properties that are not on or near flood plains or will demand
properties that are resilient against such climate impacts.
Design parameters will need to take account of the demands of a warming planet
with significant changes to meteorological activities and increased temperature
fluctuations. Buildings and infrastructure will be increasingly subject to intense
storms and floods and will be required to withstand intense summer temperatures,
as well as having the insulation properties of today. Material prices may increase or
fluctuate, due to weather-related impacts on the supply chain, or alternatively may
result in operational delays to projects as a result of delayed materials sourcing. Water
shortages may be commonplace.
Sites will be subject to more intense levels of rain and flood, and increased summer
temperatures leading to operational delays and potential damage to works in
progress.
76 _ Morgan Sindall Group plc Annual Report 2021
We collaborate with sustainability consultants, engineers and
research bodies to assess the latest technologies and construction
methodologies and are aware of the need to develop the skills and
capabilities required for implementation. It is important to ensure
that lengthy research and technology processes are undertaken
prior to the adoption of new technologies, and we collaborate
with clients, insurers and the wider market to ensure acceptability.
Generally, we are led by the needs and requirements of our
clients, and we are expecting increased demand for low-carbon
developments and retrofit solutions such as the installation of
electric vehicle charging points and replacement gas boilers. Our
ability to be agile and adaptable means we are well positioned to
offer greener alternatives, and will help to ensure our positioning
as a sustainability leader, as and when the market shifts.
We have set science-based targets and have a net zero roadmap
in place to ensure we meet our mitigation targets. We comply
with a wide range of sustainability reporting requirements such as
GRI, CDP, MSCI and FTSE4Good. We have policies and processes
in place to reduce pollution, such as advocating the use of solar
and alternative fuels, and are working with our supply chain to
secure equipment with low-carbon solutions. We are transitioning
our company cars and commercial fleet to an electric fleet, and
are advocating electric plant hire and electric generators where
possible, which is likely to result in operational efficiencies. We
introduced an internal carbon charge in January this year to help
encourage our divisions to reduce their own emissions. The
carbon charge fund will be used to finance future climate-related
projects.
We have developed a carbon measurement tool, CarboniCa, to
help us and our clients to understand the carbon impact of the
buildings we design and develop. We can use CarboniCa to help
our supply chain reduce their environmental impacts and to
increase the resilience of resourcing (see page 27). Our carbon
action panel meets regularly to share best practice on the lowest
carbon materials and products, and our projects are increasingly
focused on minimising waste, which may result in operational
efficiencies.
Business-as-usual scenario
All of our buildings are built with longevity in mind, and we engage
with consultants and specialists during our project planning
phase to ensure that climate impacts such as flood risk are
taken into account. In many cases, uplifts are applied to current
climate models to ensure that our buildings, infrastructure and
developments are and will be resilient in a changing future. We
know that the climate impacts being witnessed today are often
unprecedented and more extreme than predicted and that the
latest climate modelling practices are being continually developed
over time. We will continue to apply best practice throughout our
projects.
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Financial statements
Climate reporting: TCFD continued
Resilience of our strategy
Our two scenarios are not intended to be forecasts of what the
future will look like, but enable us to assess the resilience of
our strategy within a range of potential futures and to identify
associated opportunities to ensure that we are ready to respond
when markets shift. In reality, we expect that over the next decade,
we will need to ensure risk mitigation and resilience against a
more centralised scenario, which incorporates aspects of both the
Paris-aligned, and business-as-usual strategy. Our analysis below
highlights the key aspects of our work which will mitigate expected
changes, and enable resilience within a range of potential futures.
Paris-aligned scenario
We carry out regular horizon scanning to consider changes to
regulation, legislation and policy. Our designs and buildings all
meet the latest regulatory requirements and will be adapted to
ensure the requirements of the Part L building regulations and
Future Homes Standard are met, where relevant. Our designs
and developments are frequently delivered to a BREEAM Excellent
rating and incorporate green living spaces and eco-building
designs. We are currently working to develop our first net zero
building (the Eden building), which will be completed in May 2023.
77 _ Morgan Sindall Group plc Annual Report 2021
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Financial statements
Climate reporting: TCFD continued
We avoid building on floodplains and areas at high risk of
increased physical climate impacts where possible, and are actively
involved in securing pipeline projects relating to climate-change
adaptation (such as flood-resilience projects). Our strong supplier
and client relationships enable collaborative partnerships with land
owners to ensure that potential increases in the cost of land are
mitigated where possible, and land costs are built into the sales
value of our projects, mitigating direct impacts to the Group.
Our operations may also be subject to more extreme weather
events. Our projects are generally short- to medium-term in
nature and may therefore not be impacted by the longer-term
climatic changes expected in a business-as-usual scenario,
however we are already seeing changes in some of the physical
climate impacts which could increasingly impact us in the future.
When bidding projects, we agree terms for managing risk or
include risk management contingencies to cover potential
climate-related events such as flood and extreme heat, and our
method of working is adapted to suit changing requirements. We
also ensure that risk assessments are carried out prior to work
commencement to ensure that we have appropriate protections
against the worst climate-related risks.
We know that our buildings and structures will require increased
protection against heating and cooling, and our projects are
designed and built in line with client demands and the latest
technologies, project scope permitting. However, with increased
requirement for cooling, we will need to stay ahead of cooling
technologies which do not have a detrimental climate impact, and
our collaborations and supply chain partnerships will help us in
this area.
Climate change may also result in increased pressure on our
supply chains and materials, either as a result of increased
demand, or from physical climate changes which alter levels
of production, for example for timber. A lot of our projects are
short-term, which helps to reduce the risk of significant price
fluctuations. In addition, we seek to try and ensure that materials
are forward bought where necessary and to ensure that the most
sustainable materials are incorporated into building specifications
during the project design phase where possible. We also aim to
minimise resource use where possible, use modular components
on our projects where appropriate, and diversify our procurement
dependencies, to provide resilience in the event that specific
resources become more stretched.
Collaborations
While many of our project specifications are determined by our
clients, we seek to drive demand toward a greener and more
sustainable built environment. Making climate-related changes
requires support and collaboration across a range of industries
and markets and may be driven by regulatory change. Our
collaborative approach will help us to be ready with low-carbon
options as and when the market shifts. We regularly communicate
with our clients, supply chain and wider stakeholders about
actions we are taking to mitigate climate-related impacts.
Actions we have taken in the last 12 months include:
working with insurers and mortgage providers to understand
whether new technologies and processes which support low-
carbon options will be accepted by the market;
liaising with research bodies, sustainability consultants and
engineering experts to ensure identification and awareness
of the latest building specifications and to identify areas that
may warrant further assessment and integration into our
methodologies;
supporting the Supply Chain Sustainability School which
provides our supply chain with materials to help them manage
their own climate-related regulatory and reporting obligations
and which helps us to manage the carbon footprint of our
supply chain;
our strong relationships with our supply chain also means that
we have greater visibility of materials, availability and pricing,
and ensures that we can use a diverse material palette to avoid
reliance on scarce materials; and
we are members of the Mayor of London’s Business Climate
Leaders Group which is helping to shape new climate-related
regulations and activities in the City.
78 _ Morgan Sindall Group plc Annual Report 2021
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Financial statements
Climate reporting: TCFD continued
Metrics and targets
We measure and manage a wide range of metrics which help us to assess how well we are doing
to minimise our risks in a changing future. These include metrics to measure our ability to meet our
carbon commitments, but also those relating to wider environmental and regulatory risks.
In order to meet these targets, as well as reducing our direct GHG emissions, we recognise that we
need to influence our clients, suppliers, subcontractors, and other partners along the value chain
more effectively. We are developing better ways of delivering products and services to help generate
lower-carbon emissions during project delivery and product life cycle. We have committed to use
CarboniCa on all projects with a value of £10m plus, by 2023.
To help our clients to make better-informed decisions to reduce the level of carbon in both the
construction and operation of buildings, we have therefore committed to completing life cycle
assessments, and providing clients with alternative carbon design options for all significant projects
by 2023 (where possible). We are also working with our supply chain to encourage and support them
in reporting their own emissions so that we can have a better understanding of our wider Scope 3
emissions and can introduce meaningful reduction plans. During 2019, we developed a carbon portal
for suppliers and produced guidance for our top 1,000 suppliers by spend to capture their Scope 1
and 2 data. Guidance on the importance of carbon emissions reduction as well as information to help
suppliers and subcontractors reduce their own emissions is provided. This data will help us achieve
our science-based targets.
Numerous underlying metrics support and complement our net zero target and our broader
Improving the environment Commitment, including reducing the carbon footprint of our divisions,
enhancing the natural value of the buildings we construct and develop, recycling and/or reusing
materials and reducing our waste.
Our metrics are tracked and monitored by each division. They are presented to senior management
on a six-monthly basis, with accountability at the local level. We continually review our metrics and
targets as needed, to ensure that the data we measure aligns with our strategy, and is providing the
information the business and our stakeholders need to effectively monitor our performance and
demonstrate our progress. See pages 16 to 38 for more information.
Details of the key performance indicators we assess and measure, and their connection to our key
risks and opportunities, are outlined in the adjacent table.
79 _ Morgan Sindall Group plc Annual Report 2021
Risks
Political and
regulatory
Scope 1, 2 and operational Scope 3 GHG emissions
Projects achieving BREEAM, CEEQUAL, LEED, SKA or other
relevant rating
Monetary value of fines for non-compliance with
environmental laws and regulations
Reputational
Carbon commitments noted above
Market and
technology
Hybrid or electric vehicles in fleet
Physical
Environmental incidents
Opportunities Resource
efficiency
Energy consumption
Electricity purchased from renewable sources
Gas purchased from renewable sources
Waste produced
Waste diverted from landfill
Products and
services
Resilience
Projects achieving BREEAM, CEEQUAL, LEED, SKA or other
relevant rating
Subcontractors requested to report their own emissions
Subcontractors with accredited science-based targets based
targets
Physical
Environmental incidents
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Climate reporting continued
Streamlined
Energy and Carbon
Reporting (SECR)
We support the Paris Agreement and have
committed to reduce our Scope 1 and Scope 2
greenhouse gas (GHG) emissions by 60% against
our 2019 baseline of 20,903 tonnes CO2e by 2030.
This report has been prepared in accordance with the
requirements of the measure-step of the Toitū carbon marks,
which is based on the Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard (2004) and ISO 14064-
1:2018 Specification with Guidance at the Organization Level for
Quantification and Reporting of Greenhouse Gas Emissions and
Removals. Where relevant, the inventory is aligned with industry or
sector best practice for emissions measurement and reporting. In
addition, GHG emissions are externally verified by Achilles to meet
the requirements of the Toitū ‘carbonreduce’ certification standard
(formerly CEMARS, the Carbon & Energy Management And
Reduction Scheme). Achilles is a global data validation company
that provides assurance services for GHG emissions data.
Emissions reported correspond with our financial year and include
all areas for which we have operational control in the UK, excluding
joint ventures. The materiality threshold has been set 5%1 with
all operations estimated to contribute more than 1% of the total
emissions included. No material emissions have been omitted.
Our total energy consumption used to calculate our 2021 UK
and offshore emissions was 103,892,314 kWh (2020: 90,802,086
kWh) and these total emissions reflect the emissions of our UK
operations.
1 The allowance built into the ‘carbonreduce’ accreditation that permits +/-5%
variance in the gross emissions total in case a miscalculation is discovered
following a carbon audit.
80 _ Morgan Sindall Group plc Annual Report 2021
Scope 2 – indirect emissions
(purchased energy)2
Total Scope 1 and Scope 2
emissions
Operational Scope 3 – other
indirect emissions (related
activities)3
Emissions are predominantly from bulk fuel used on sites,
our vehicle fleet and electricity use. In line with our science-
based targets, we committed to reduce our Scope 1 and
Scope 2 emissions by 30% against our 2019 baseline of 20,903
tonnes CO2e by 2025. Our Group director of sustainability and
procurement is responsible for overseeing the divisions’ delivery of
this target.
We submitted our second report for the Group under the Energy
Savings Opportunity Scheme (ESOS) in June 2019 and will make
our next submission in December 2023.
GHG emissions (tonnes CO2e)
2021
2020
2019
baseline
Scope 1 – operation of facilities1
11,243
16,031
18,124
2,352
2,789
2,779
During 2021, we implemented the following energy-efficiency
improvements:
continued to encourage the use of Microsoft Teams to increase
operational efficiency and reduce the need for travel;
continued to work with our energy broker to ensure the
robustness of our energy consumption data; and worked with
our divisions to improve the recording of purchased water
consumption;
reduced energy consumption in our offices, for example
through the use of LED and energy-efficient lighting;
implemented energy efficiency benchmarks on new equipment,
such as automatic computer shutdowns rather than
hibernation;
decarbonised our fleet, including cars, vans and telehandlers by
phasing out the least efficient models and purchasing or hiring
more fuel-efficient, electric or hybrid alternatives;
13,595
18,820
20,903
switched to hydrotreated vegetable oil (HVO) fuel where
possible;
increased our use of electricity on site, including the installation
3,502
3,970
6,339
of eco cabins; and
encouraged our employees to reduce their carbon footprint
from travel, for example by providing bicycle racks, showers
and other facilities on site, promoting car-sharing and capturing
shared car miles in our monthly reporting.
Total emissions
17,097
22,790
27,242
1 Direct emissions from sources owned or controlled by the Group.
2 Indirect emissions generated from purchased energy.
3 All indirect emissions not included in Scope 2 that occur in limited categories of
our value chain as measured by the Toitū ‘carbonreduce’ scheme.
Carbon intensity
2021
2020
2019
baseline
Total Scope 1 and Scope 2
emissions (tonnes CO2e)
Total Scope 1, Scope 2 and
operational Scope 3 emissions
(tonnes CO2e) (total emissions)
Revenue
Carbon intensity for Scope 1 and
Scope 2 emissions
Carbon intensity for total
emissions
13,595
18,820
20,903
17,097
22,790
27,242
£3,213m £3,034m £3,071m
4.2
5.3
6.2
7.5
6.8
8.9
Strategic report
Governance
Financial statements
Non-financial information statement
We aim to comply with the non-financial reporting regulations contained in sections 414CA and 414CB of the Companies Act 2006. Our divisions communicate Group and divisional policies to their employees
and supply chains. Our due diligence with regard to ‘environmental matters’, ‘employees’ and ‘social matters’ is driven by our Total Commitments, which are a strategic priority for the Group (see page 6).
Policies
Environmental
matters
Code of Conduct, published on our website: commits to caring for the environment.
Sustainable procurement policy: commits to being socially and environmentally conscientious
in our procurement.
Supplemental timber policy: requires procurement from sustainable sources.
Sustainable water policy: commits to building to the highest standards as those detailed
within the RIBA Climate Challenge 2030 water usage; retrofitting water-efficient kit; avoiding
procuring materials or equipment which require intensive water use in their manufacture,
installation or use; procuring water-efficient products; incorporating SuDS (sustainable
drainage systems); and advising on saving water.
Annual report page references
Due diligence, pages 25 to 31.
Impacts, pages 25 to 31 and page 80. Minimising our environmental impact increases
our ability to win work and attract talented employees.
Principal risks, page 61.
Employees
Code of Conduct: commits to conducting business in an open and ethical way in line with our
Due diligence, pages 11, 12, 17 to 24, 62, 105 to 109 and 123 to 125.
Core Values and Total Commitments.
Group health, safety and wellbeing management policy framework: incorporates the Group
occupational health and safety policy which commits to providing a safe and healthy working
environment for our employees and others involved in or affected by our works.
Divisional occupational health and safety policies: cover all employees and extend to our
subcontractors and suppliers working on our projects.
We are committed to providing a better built environment for all. A large proportion of our
work is for the public sector and therefore falls under the Public Services (Social Value) Act
2012.
Sustainable procurement policy: commits to being socially and environmentally conscientious
in our procurement.
Social matters
Impacts, pages 11, 12, 17 to 24 and 109. A diverse and qualified team of people helps
us win in our target markets and in pursuing innovative solutions for our clients.
Principal risks, page 63.
Due diligence, pages 35 to 38. Our divisions monitor their suppliers’ adherence to our
procurement policy, giving feedback or taking appropriate action as required.
Impacts, pages 35 to 38. We have developed a social value bank that monetises
activities that add value to local communities on our projects (page 37).
Social matters are not regarded as a principal risk. However, each division carries out
regular risk assessments to identify those areas of its business and markets that may
be susceptible to risk, and embeds appropriate procedures in its day-to-day operations.
81 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Non-financial information statement continued
Human rights
Policies
Annual report page references
Code of Conduct: states our commitment to the Universal Declaration on Human Rights,
providing equal opportunities, creating a diverse and inclusive workplace, and preventing
modern slavery in our operations and supply chain. It prohibits employing people either
directly or through third parties who we believe to be subject to forced labour and engaging
in any activities involving people or countries subject to UN, US, EU or UK sanctions. The Code
prohibits bullying, harassment, and discrimination on the basis of sex, pregnancy or maternity,
gender reassignment, sexual orientation, religion or belief, marriage and civil partnership, age,
race or disability; it requires fair and objective employment decisions based on merit.
Modern slavery policy: states the Group’s and its suppliers’ obligations with regard to human
trafficking, forced labour, recruitment fees, document retention, contracts of employment,
deposits, humane treatment, workplace equality, wages and benefits, working hours, freedom
of movement and personal freedom and the use of employment agencies.
Modern slavery statement: published on our website.
Whistleblowing policy and procedure.
Due diligence, pages 19, 20 and 105 to 109. Adherence to our Code of Conduct and
human rights related policies is regularly monitored and reviewed. Ultimate oversight
belongs to the Board, audit committee and our Group general counsel. The Board is
notified of any non-compliance alerted via the raising concerns facility, while divisional
HR leads and managers deal direct with individual cases as appropriate. We conduct
regular internal audits which would uncover any instances of non-compliance such as
anti-competitive behaviour, bribery or corruption.
Impacts, pages 20 and 109. See also our modern slavery statement on our website.
Human rights breaches are not considered a principal risk to the Group, although there
is a risk of breach by an overseas supplier and of people working on our sites without
the legal right to work in the UK. We require all suppliers to comply with legislation and
to carry out checks on rights to work, and we expect that they require the same of their
own suppliers.
Anti-corruption and
anti-bribery
Code of Conduct: states that we will not tolerate any form of bribery or corruption.
Bribery Act guidance note: provides guidance on the Bribery Act 2010 and how it is relevant to
the Group.
Group-wide dealing policy: clarifies to all employees regulations relating to the misuse of
Due diligence, pages 108, 109 and 120.
Impacts, page 109. There was no evidence of any systemic bribery and corrupt activity
in 2021.
inside information.
We do not regard corruption and bribery as a principal risk to the Group.
Dealing code: states directors’ and others’ obligations to comply with market abuse regulation.
Competition law compliance policy: clarifies requirements under the Competition Act 1998
and Enterprise Act 2002. Each division provides its employees with guidelines tailored to the
division’s activities.
Copies of our policies can be obtained from the Group’s company secretary on request. Our business model is set out on page 5 and non-financial key performance indicators on pages 7 to 9.
82 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Going concern and viability statement
Going concern
The Group’s business activities, together with the factors likely to
affect our future development, performance and position, are set
out in this strategic report.
As at 31 December 2021, the Group had net cash of £358.0m
and committed banking facilities of £180m which are in place for
more than one year. The directors have reviewed the Group’s
forecasts and projections, which show that we will have a sufficient
level of headroom within facility limits and covenants over the
period of assessment which the directors have defined as the
date of approval of the 31 December 2021 financial statements
through to 28 February 2023. After making enquiries, including
the review of sensitivities for plausible downside scenarios to the
forecasts, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Thus they
continue to prepare the annual financial statements on the
going concern basis. See page 174 for the going concern basis of
preparation in the consolidated financial statements.
83 _ Morgan Sindall Group plc Annual Report 2021
As per the business model, operating cash flows are assumed to
broadly follow forecast profitability in the Group’s construction
activities, but are more independently variable in regeneration,
driven by the timing of construction spend and programmed
completions on schemes.
The base case business plan includes the Group maintaining
positive daily average net cash for the entirety of the period
reviewed, with no drawings under its loan facilities. The Group
has £180m of committed revolving credit facilities, undrawn at
31 December 2021, of which £165m is committed until the final
quarter of 2024 and £15m is committed until the end of the first
quarter 2024. The £165m facility has a one-year extension option,
with the agreement of the lending banks. For the purposes of
testing viability, it is assumed that equivalent facilities are available
past these maturities as the Group has a track record of renewing
these facilities.
The impact of a number of plausible downside scenarios on the
Group’s funding headroom (including financial covenants within
committed bank facilities) have been modelled with consideration
of the Group’s principal risks that could have a direct impact on
operational cash flows.
Viability
As required by provision 31 of the UK Corporate Governance
Code, the directors have assessed the prospects and financial
viability of the Group and have concluded that they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of
the assessment.
This assessment took account of the Group’s current position and
the potential financial and reputational impact of the principal risks
(as set out on pages 58 to 68) on the Group’s ability to deliver the
Group’s business plan. This assessment describes and tests the
significant solvency and liquidity risks involved in delivering the
strategic objectives within our business model.
The assessment has been made using a period of three years
commencing on 1 January 2022 which is in line with the Group’s
budgeting cycle. This gives good visibility of future work as the
majority of the Group’s workload falls within three years and
enables more specific forecasting as the Group’s contracts follow
a life cycle of three years or fewer. There is inherently less visibility
over the expected workload beyond three years, and increased
uncertainty around the forecasted costs to deliver. Consequently,
it is deemed most appropriate to perform its medium-term
planning over a three-year period.
The directors have compiled cash flow projections incorporating
each division’s detailed business plans with an overlay of
Group level contingency. At Group level, the base case financial
projections assume modest revenue growth, and improvements
in both profit margin and return on capital employed in line with
the Group’s strategy and medium-term targets.
Strategic report
Governance
Financial statements
Going concern and viability statement continued
The table below gives an overview of the scenarios modelled and the mapping to the relevant Group’s principal risks.
Scenario
Reduced revenues in the construction divisions
The cash performance of the construction divisions is correlated to the levels of revenue achieved.
We have modelled a scenario of reduced revenue that could be caused by changes in the UK economic conditions
or the insolvency of a key client/partner.
Reduced margins in the construction divisions
The cash performance of the construction divisions is also correlated to the level of margin achieved by each
division.
We have modelled a scenario of reduced margins that could be caused by changes in the UK economic conditions
and also inefficiencies that could be a result of poor project selection, poor project delivery, resourcing issues,
health and safety issues and the impact of disruption that could be caused by cyber activity or climate change.
Principal risk mapping
Economic change and uncertainty
Partner insolvency and/or adverse behavioural change
Economic change and uncertainty
Poor project selectivity
Poor project delivery
We cause a major health and safety incident and/or adopt a poor safety culture
We fail to attract and retain the talent we need to maintain and grow the business
Climate change
Cyber activity
Working capital deterioration in the construction divisions
We have modelled a scenario including a deterioration of working capital in the construction divisions that could be
caused by delays in receiving payments from customers.
Mismanagement of working capital and investments
Partner insolvency and/or adverse behavioural change
Project delays and cost increases in regeneration divisions
We have modelled a scenario where there were project delays in respect of the regeneration divisions and also
reduced margins.
This scenario could be the result of changes in the UK economic conditions, including changes in the UK residential
market, and also inefficiencies that could be a result of poor project delivery, resourcing issues, health and safety
issues, or the impact of disruption that could be caused by cyber activity or climate change.
Economic change and uncertainty
UK residential market exposure
Partner insolvency and/or adverse behavioural change
Poor project delivery
We cause a major health and safety incident and/or adopt a poor safety culture
We fail to attract and retain the talent we need to maintain and grow the business
Climate change
Cyber activity
Severe downside case
All of the above
We have also modelled a scenario where all of the scenarios above are combined at the same time.
84 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Going concern and viability statement continued
There are no individual scenarios which are considered to materially impact the Group’s viability, and
our assessment included modelling the financial impact on the business plan of severe downside
scenario where the impact of a reasonably plausible combination of the divisional risks were applied
in aggregate.
In the event of this severe collection of scenarios occurring, there is still a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities.
In addition, the Board has considered a range of potential mitigating actions that may be available
if this worst-case collection of scenarios arose. These primarily include a reduction in investment in
working capital and the actions successfully deployed during the disruptions to the Group’s operations
during the first impact of the Covid pandemic in March 2020. These however exclude any further
government assistance.
As part of the sensitivity analysis, the directors also modelled a scenario that stress tests the Group’s
forecasts and projects, to determine the scenario under which the headroom would exceed
the committed bank facility. The model showed that the Group’s operating profit would need to
deteriorate substantially for the headroom to exceed the committed facility. The directors consider
there is no plausible scenario where cash inflows would deteriorate this significantly.
Based on the results of its review and analysis, the Board has a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as they fall due over the three-year period
of its assessment until 31 December 2024.
Assessing the Group's prospects beyond the review period, the directors consider that demand will
remain strong across all divisions. The Group has maintained a well-capitalised balance sheet, has a
strong order book and operates a resilient business model.
This strategic report was approved by the Board and signed on its behalf by:
John Morgan
Chief Executive
24 February 2022
85 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Strategic report
Strategic report
Governance
Governance
Governance
Financial statements
Financial statements
Financial statements
Governance
Chair’s statement
UK Corporate Governance Code compliance statement
Board of directors
Group management team
Directors’ and corporate governance report
– Nomination committee report
– Audit committee report
– Health, safety and environment committee report
Directors’ remuneration report
Other statutory information
87
89
90
95
98
110
115
123
126
155
86 _ Morgan Sindall Group plc Annual Report 2021
Chair’s statement
Dear Shareholder
I have pleasure in presenting the 2021 corporate
governance report. Throughout 2021, the Board
has remained focused on effective leadership
and promoting the long-term success of the
Group while ensuring that good governance is
embedded through our governance framework.
Our 2021 year-end results demonstrate the
continued resilience in our business model.
Our commitment to our business strategy
is resulting in organic growth and increased
market share which enables us to deliver long-
term sustainable value for the benefit of all our
stakeholders. Throughout the year, we remained
committed to our culture and values and
ensuring that we have considered the interests
of our stakeholders in our decision-making.
Board changes
Succession planning for the Board and the Group as a whole was
a key area of focus for the nomination committee. In order to
further the diversity and skill set on the Board, we were delighted
to announce the appointment of Kathy Quashie as non-executive
director. She joined the Board on 1 June 2021.
Board evaluation
The nomination committee conducted an internal evaluation of
the Board and its committees in 2021. The overall outcome of the
review confirmed that the Board continues to work well, with the
right issues being discussed and appropriate Board involvement in
key decisions. Further information on the process and outcomes
can be found in the nomination committee report.
The continuing focus this year has been to maintain the Group’s
strong financial position, through disciplined contract selectivity,
improved quality of earnings and operational delivery and
ensuring that our purpose, values, and strategy remain aligned
with our desired culture. For more information on our strategy
see page 6 and for the Board’s review of strategy, see pages 102
and 103. Our stakeholders’ views and how they are impacted are
important considerations in Board decision-making (see pages
102 to 104). The Board recognises that continuing effective
engagement across all our stakeholder groups will ensure the
continuing resilience of the business over the longer term. In this
report, we set out the principal decisions the Board made during
the year, together with the stakeholder groups we considered
during our discussions. Our section 172 statement can be found
in our strategic report on page 10.
Strategy review
The Board is committed to the delivery of its clear strategy
underpinned by our Core Values. In setting the strategy, the
Board recognises its duties and responsibilities to shareholders
and other stakeholders, including the communities in which
we operate. We believe that our purpose and supporting Core
Values continue to drive our strategy and our ongoing resilience
and progress in respect of each of our strategic priorities,
including consistently delivering on our responsible business
Total Commitments, set out in further detail on page 6.
Our people
The performance of our c6,900 employees and the large number
of subcontractors used by the divisions to deliver their projects are
key to our long-term success. The Board’s top priority remains the
health, safety and wellbeing of our employees and all those who
work on or visit our sites. Throughout the year, I have continued
to regularly attend the health, safety and environment committee
meetings which provide the Board with additional focus and
insight in respect of the Group’s health and safety performance.
87 _ Morgan Sindall Group plc Annual Report 2021
Michael Findlay
Chair
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Chair’s statement continued
I joined the Group because I was so impressed with the open and
transparent culture of the business that facilitates a decentralised,
empowering environment. Over the last five years as chair, I have
seen the Group go from strength to strength. I am proud of the
quality and professionalism of our teams who deliver a huge range
of projects, from repairs and maintenance of people’s homes to
large-scale infrastructure projects and supporting the regeneration
of cities and towns across the UK. Across the business, our people
are open, driven and dedicated to making the business better
and better. Employee engagement remains high on the agenda
of the directors and the divisional teams. The Board reviews the
outcomes and proposed actions of divisional staff engagement
activities and surveys and is responsible as a whole for engaging
with our employees, primarily as part of its annual strategy review
process. With the easing of government Covid guidelines and
restrictions during 2021, the Board was pleased to be able to
meet face to face with a number of employees during the year.
At our December meeting, we had a dedicated feedback session
including a review of the appropriateness and effectiveness of our
employee engagement mechanism for non-executive directors
(see page 113 for further details).
Diversity and inclusion
We remain committed to having a Board and employee base that
is diverse in its widest sense and we are continuing to work on
improving diversity and inclusion at all levels across the Group.
This includes ensuring that we recruit people from a range
of different socio-economic, educational and industry sector
backgrounds. The results of the diversity and inclusion survey
conducted in 2020 and management’s proposed response were
discussed in the early part of the year and supported by the
Board. The Board also reviewed, at its meeting in December, the
actions being taken throughout each of our divisions during the
year to increase diversity and inclusion. Further details can be
found on pages 23 and 24.
88 _ Morgan Sindall Group plc Annual Report 2021
Task Force on Climate-related Financial Disclosures
In the strategic report, we have reported fully under the TCFD (see
pages 71 to 79). The Group has a long-established responsible
business strategy and we pride ourselves in being leaders in
sustainability and reporting with transparency and openness
about our goals and how we will achieve them. Our actions to
combat climate change and reduce waste remain a key focus
of the Board and the Group. Our Total Commitments, set out
on page 6, continue to provide challenging targets to ensure we
work responsibly and conduct our activities ethically as well as
adding additional social value in the communities in which we
operate. We also announced our commitment to becoming a
net zero company by 2030, reflecting our continued dedication
to being a market leader in this area. We recognise that it will not
be possible to eliminate all embodied carbon from our activities
and we will be looking to continue to invest in projects such as our
partnership with Blenheim Estate (see page 29) to offset these.
Further detail on our strategy to achieve net zero, along with
the actions and initiatives we are currently taking are set out on
pages 25 to 29. The Board, supported by the health, safety and
environment committee, keeps our progress in achieving our Total
Commitment goals under review.
In conclusion, we continue to have a clear strategy, a strong
financial position and a great team of employees. This positions
us well to continue to capitalise on the UK’s growing need for new
housing, improved infrastructure and urban regeneration and to
create long-term value for all our stakeholders.
Michael Findlay
Chair
24 February 2022
“I joined the Group because I was
so impressed with the open and
transparent culture of the business
that facilitates a decentralised,
empowering environment. Over
the last five years as chair, I have
seen the Group go from strength
to strength.”
Strategic report for our performance in 2021
Nomination committee report 110
Key matters considered by the Board in 2021 102
Section 172 statement 10
Our stakeholders 11
Diversity and inclusion 23, 112
Improving the environment 25
Strategic report
Governance
Financial statements
UK Corporate Governance Code compliance statement
Applying the Code’s
Principles across
the business
As a UK premium-listed company, we have
adopted a governance structure based
on the Principles of the UK Corporate
Governance Code published in July 2018 (the
Code), which is available on the Financial
Reporting Council’s website at frc.org.uk.
Further details of how we have applied the Code’s Principles
and complied with its Provisions are set out in the directors’ and
corporate governance report, the remuneration report and, where
appropriate, cross references to our strategic report.
The Company has applied all the Principles, and complied with
all Provisions of the Code, except for Provision 38. The executive
directors’ pension contributions will be aligned with the majority
of employees from 1 January 2023 as set out on page 128 of the
remuneration committee report.
The strategic report discloses information on our engagement
with our employees, suppliers, customers and other stakeholders.
In line with the Companies Act 2006 Regulations, further
information on how the directors have performed their duties
under section 172 of the Companies Act 2006 is also contained in
the strategic report.
89 _ Morgan Sindall Group plc Annual Report 2021
Code Principles
This table provides an overview of where the application of Principles (A to R) of the Code have been
addressed in the annual report.
Board leadership and company purpose
A. Board effectiveness
B. Purpose, values, strategy and culture
C. Governance framework and Board resources
D. Engagement with stakeholders
E. Oversight of workplace policies and practices
Division of responsibilities
F. Role of the chair
G. Independence
H. External commitments and conflicts of interest
I. Key matters considered by the Board in 2021
Composition, succession and evaluation
J. Appointments to the Board and succession planning
K. Board composition and length of tenure
L. Board evaluation
Audit, risk and internal control
M. Financial reporting
External audit and internal audit – independence and effectiveness
N. Fair, balanced and understandable assessment
O. Risk management and internal controls
Remuneration
P. Remuneration philosophy
Q. Remuneration policy
R. Annual report on remuneration
98
105
99
11
108
100
101
101
102
111
110
113
117
117
119
130
133
143
Board of directors
As at the date of this report, the Board consists of the
chair, two executive directors and five non-executive
directors, each bringing a range of skills, experience,
knowledge, and background to Board discussions.
Each Board member has considerable experience in strategy development
and implementation, corporate governance, and regulatory requirements
which enables them to discharge their Board responsibilities and promote
the long-term sustainable success of the Group.
All of the non-executive directors, including the chair, are considered by the
Board to be independent in character and judgement and, as at the date of
this report, no cross-directorships exist between any of the directors.
90 _ Morgan Sindall Group plc Annual Report 2021
Michael Findlay
Chair
Appointed: October 2016
Committee membership: nomination (chair)
Independent on appointment: Yes
Responsibilities
Responsible for leadership and effectiveness
of the Board including succession planning,
diversity and inclusion, effective communications
with stakeholders and setting the meeting
agenda. Michael leads the nomination
committee.
Skills and experience
Michael has spent his career in investment
banking and advised the boards of many
leading UK public companies on a wide range of
strategic, finance and governance matters. He
also has significant public board experience.
Contribution to long-term success
The Board benefits from Michael’s extensive
experience in business and corporate finance
together with his expertise in property, risk
management and communications. His
contribution assists the Company in pursuing its
strategy, maximising the value of the business,
and delivering long-term, sustainable value for
all our stakeholders. Michael’s leadership of the
Board encourages a collaborative approach and
open debate by all Board members.
Current external roles
Michael is non-executive chair of London Stock
Exchange plc, a subsidiary of London Stock
Exchange Group plc, and non-executive director
of Royal Mail plc and Jarrold & Sons Limited. He
was appointed as chair of the Financial Conduct
Authority’s markets practitioner panel in July
2021.
Career experience
Michael was previously the co-head of
investment banking for the UK and Ireland
at Bank of America Merrill Lynch, senior
independent director at UK Mail Group PLC,
chair of Fin Capital Limited and a non-executive
director of The International Exhibition Co-
Operative Wine Society Limited.
Strategic reportGovernanceFinancial statements Board of directors continued
John Morgan
Chief Executive
Steve Crummett
Finance Director
Contribution to long-term success
The Board benefits from John’s in-depth
knowledge and experience of both the
construction and regeneration sectors. His
significant leadership and people management
skills continue to drive forward the Group’s
strategy to ensure quality of earnings and
grow the business organically for the benefit
of all our stakeholders. John is responsible for
ensuring that career opportunities within the
Group are accessible to people from a variety
of backgrounds so that we can recruit the best
people from a wide pool of talent.
Current external roles
John is chair of the Royal National Institute for
Deaf People (RNID).
Contribution to long-term success
The Board benefits from Steve’s considerable
experience in finance, audit, treasury, risk
management and information technology and
security. His expertise has contributed towards
the Group’s financial resilience and strong
balance sheet, which enables the Group to
make the right decisions for the long term. Steve
is responsible for the ongoing smooth running
of the Group’s financial operations and for
driving our strategy to achieve net zero carbon
emissions by 2030.
Current external roles
Steve does not currently hold any external
appointments.
Career experience
Steve was finance director of Essentra plc from
2008 to 2012, and audit committee chair and
non-executive director of Consort Medical plc
until 2020. He has previously held senior finance
roles with a number of listed companies.
Appointed: February 2013
Independent: No
Responsibilities
Steve leads the Group’s financial strategy and
has overall responsibility for corporate reporting,
finance, treasury, taxation, and IT. He contributes
to the development and implementation of the
strategy and policies approved by the Board.
Steve is chair of the Group’s risk committee and
leads the Group’s responsible business strategy
through the Group management team.
Skills and experience
Steve is a chartered accountant and has wide-
ranging financial, accounting and UK public
company experience.
Appointed: October 1994
Independent: No
Responsibilities
Responsible for leading the Group, developing
and implementing the strategy and policies
approved by the Board, embedding values
and culture, and driving diversity and inclusion
throughout the business. John leads the Group
management team.
Skills and experience
John co-founded Morgan Lovell in 1977 which
merged with William Sindall plc in 1994 to form
Morgan Sindall Group plc. He instituted and
champions the Group’s decentralised business
model that empowers the divisions to challenge
the status quo and keep innovating and winning
in their respective markets.
91 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements Board of directors continued
Malcolm Cooper
Non-executive Director
Tracey Killen
Non-executive Director
Contribution to long-term success
The Board benefits from Malcolm’s considerable
experience in construction, housebuilding
and infrastructure and his wide knowledge of
government policy and direction. Malcolm’s
knowledge and experience in the areas of
health and safety and the impacts of climate
change as well as in finance, audit, treasury,
and risk management, benefits the Board in his
respective roles as chair of the health, safety and
environment and audit committees.
Current external roles
Malcolm is senior independent director and
credit committee chair of MORhomes plc,
non-executive director and audit committee
chair at Southern Water Services Limited. In
September 2021 he was appointed as a non-
executive director of Local Pensions Partnership
Investments Ltd (previously an independent
member) before becoming chair of the audit
committee effective from 1 January 2022.
Career experience
Malcolm’s prior executive roles include
managing director of National Grid Property,
managing the sale of National Grid’s gas
distribution business, and global tax and
treasury director of National Grid. He was
previously senior independent director and
audit committee chair at CLS Holdings plc, a
non-executive director of St William Homes
LLP, president of the Association of Corporate
Treasurers and a member of the Financial
Conduct Authority’s Listing Authority Advisory
Panel.
Contribution to long-term success
The Board benefits from Tracey’s extensive
commercial, corporate responsibility, and
people management experience. Her depth of
knowledge and understanding of remuneration
issues and corporate governance relating
to remuneration enable her as chair of the
remuneration committee to lead on the Group’s
remuneration philosophy to ensure that we
motivate and retain executive directors of the
calibre required to deliver our strategy.
Current external roles
Tracey is a Fellow of Be the Business, a not-
for-profit organisation that helps firms across
the UK to improve their performance. She was
appointed a trustee for Dorset and Somerset Air
Ambulance from 14 September 2021.
Career experience
Tracey was executive director of people for
the John Lewis Partnership, where she was a
member of the executive team and responsible
for shaping and delivering a distinctive and
competitive employment proposition. She
was chair of the Golden Jubilee Trust for the
Partnership, providing opportunities for partners
and charities alike.
Appointed: May 2017
Committee membership: audit; health, safety
and environment; nomination; remuneration
(chair)
Independent: Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and control framework set by the
Board and lead the remuneration committee.
Skills and experience
Tracey has wide-ranging expertise in the retail
sector including the development of strategy,
business planning and corporate governance.
She has extensive corporate and main board
experience, including nomination, remuneration
and corporate responsibility board sub-
committees.
Appointed: November 2015
Committee membership: audit (chair); health,
safety and environment (chair); nomination;
remuneration
Independent: Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the Group’s
strategy within the risk and internal control
framework set by the Board. Malcolm leads
the audit and health, safety and environment
committees.
Skills and experience
Malcolm is a qualified accountant and treasurer,
and an experienced FTSE 250 audit committee
chair. He has an extensive background in
corporate finance and wide experience in
infrastructure, property and construction. He is
considered to have competence in accounting
as required by the Disclosure and Transparency
Rules and the Code. Malcolm has experience
in health and safety through his former role as
managing director at National Grid Property,
where he was responsible for land remediation,
demolition and construction and was a member
of the UK health and safety committee.
92 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements Board of directors continued
David Lowden
Senior Independent Director
Jen Tippin
Non-executive Director
Contribution to long-term success
David’s strong strategic understanding and
financial, marketing, and commercial skills,
gained through his many years’ experience
working in international businesses, are
invaluable to the Board as the Group pursues
its strategy for growth. David’s experience as a
senior independent director supports the chair
in the delivery of his objectives.
Current external roles
David is currently chair of the board of
PageGroup plc and senior independent director
at Capita plc. He was appointed as non-executive
director and chair-designate of Diploma plc with
effect from 19 October 2021 and became chair
with effect from the conclusion of Diploma plc’s
AGM held on 19 January 2022. David will step
down as chair of PageGroup on 30 April 2022.
Career experience
David was formerly chair of Huntsworth plc,
chair of the audit and risk committee at William
Hill plc, and senior independent director of
Berendsen, chair of the audit committee at
Cable & Wireless Worldwide plc and was chief
executive of Taylor Nelson Sofres plc having
joined as group finance director in 1999.
Appointed: March 2020
Committee membership: audit; nomination;
remuneration
Independent: Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and internal control framework
set by the Board.
Skills and experience
Jen has extensive strategic and commercial
experience developed through her career in
financial services and in the engineering and
airline sectors through her prior roles with
Invensys and British Airways. In addition, she
has wide experience in business leadership and
transformation, human resources, efficiency,
sourcing, supply chain management and
property, together with a deep understanding of
customer experience.
Contribution to long-term success
The Board benefits from Jen’s strengths in
consumer-facing markets and her insight into
information technology, people management
and complex supply chain management, all
of which are relevant to the Group’s strategy
to deliver long-term sustainable value to our
stakeholders.
Current external roles
Jen is the group chief people and transformation
officer for NatWest, responsible for the
execution of strategy, customer journeys,
investment, HR, efficiency, property and
procurement. She is a member of the NatWest
Group and NatWest Holdings’ executive
committee. She is also on the board of City
University, University of London where she
is a member of the council and chair of the
remuneration committee. In January 2022
she was appointed as a board member of the
Financial Services Skills Commission.
Career experience
Prior to joining NatWest, Jen spent 15 years
at Lloyds Banking Group in a variety of roles,
including as group director, people and
productivity where she was a member of their
group executive committee. Prior to that she
was the group organisation design and cost
management director, group customer services
director and MD business banking. Before
working in financial services, Jen worked in both
the engineering and airlines sectors. Jen has sat
on the boards of Lloyds Bank Corporate Markets
and Kent Community NHS Foundation Trust.
Appointed: September 2018
Committee membership: audit; nomination;
remuneration
Independent: Yes
Responsibilities
In addition to his responsibilities as a non-
executive director, David as senior independent
director supports the chair in the delivery of his
objectives and, together with the nomination
committee, ensures that an orderly succession
process is in place for the Board.
Skills and experience
David is a highly experienced non-executive
director, senior independent director, and
chair of UK-listed companies in several sectors.
He has experience in both financial and
general management through his prior roles
of finance director and chief executive, where
he supported growth and profitability through
the efficient design of business operations and
appropriate use of systems and processes.
93 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements Board of directors continued
Kathy Quashie
Non-executive Director
Appointed: June 2021
Independent: Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and control framework set by the
Board.
Skills and experience
Kathy has extensive strategic, commercial, and
digital transformation experience developed
through her career in the telecommunications
sector. She has also been a key advocate for
building a diverse and inclusive culture.
94 _ Morgan Sindall Group plc Annual Report 2021
Contribution to long-term success
The members of the Board attended the following meetings during 2021.
2021 Board and committee meeting attendance
Total number of meetings in 2021
Michael Findlay1
John Morgan
Steve Crummett
Malcolm Cooper
Tracey Killen
David Lowden
Jen Tippin
Kathy Quashie
Board
Audit
environment Nomination Remuneration
Health,
safety and
9
9
9
9
9
9
9
9
64
3
32
32
3
3
3
3
3
3
32
32
3
3
3
3
4
42
4
4
12
6
62
32
12
6
6
6
53
12
1 Michael Findlay attended all Board and nomination committee meetings during the year and was also present at all meetings
of the audit, health, safety and environment, and remuneration committees.
2 Attended by invitation.
3 Jen Tippin was unable to attend the remuneration committee meeting in June 2021, due to alternative commitments in her
executive role which could not be changed at short notice.
4 Kathy Quashie was appointed to the Board in June 2021 and attended all Board meetings from that date.
Kathy’s experience further broadens the
expertise on the Board. Her wealth of digital
and sales experience in particular adds valuable
knowledge and insight into Board discussions
and helps ensure that the Group’s continued
investment in digital capability meets the current
and future needs of the business in terms of
both innovation and security. In addition, Kathy’s
insight and knowledge of driving positive and
sustainable growth through inclusion is an asset
to the Group as we continue to progress our
diversity and inclusion programme.
Current external roles
Kathy was until December 2021 director of
enterprise indirect partnerships at Vodafone
where she was responsible for leading the
market channel for partnerships across the UK.
In January 2022, she was appointed as chief
growth officer at Capita plc where she will be
responsible for ensuring Capita has the right
business development competencies, systems,
and strategies to deliver on their organic growth
objectives.
Career experience
Prior to joining Vodafone, Kathy’s previous
leadership roles were with BT Group, T-Mobile,
Carphone Warehouse and TalkTalk Group.
She was previously a non-executive director of
the Enterprise Board of Transport for London
Museum and recognised in Empower Top
Executive Role model lists 2021.
Strategic reportGovernanceFinancial statements Group management team
The Group management team supports
the executive directors in implementing the
strategy and policies approved by the Board.
Meetings are chaired by the chief executive and focus on strategic
and operational matters affecting the Group as a whole. The team
also supports the directors in embedding our culture and core
values across the decentralised business, driving our responsible
business strategy, and ensuring that we are acting consistently
across the Group to promote diversity and inclusion.
John Morgan
Chief Executive
See page 91 for biography.
Steve Crummett
Finance Director
See page 91 for biography.
95 _ Morgan Sindall Group plc Annual Report 2021
Clare Sheridan
Company Secretary
Andy Saul
Group Commercial Director
Role
Role
Clare is responsible for ensuring sound
information flows to the Board and between
senior management and non-executive
directors and advising the Board on corporate
governance matters. In addition to her
governance responsibilities, Clare manages
the Group secretariat function, the insurance
programme, long-term incentive schemes,
pension arrangements, Group-wide employee
benefits and Group reporting on our
responsible business strategy and performance.
She is a member of the Board’s health, safety
and environment committee, the Group’s risk
committee and our social value panel; director of
the captive insurance company; and trustee of
the pension scheme.
Skills and experience
Clare is a member of the Chartered Governance
Institute UK & Ireland. She has been with
the Group for more than 20 years, and was
appointed as company secretary in 2014, having
previously been deputy company secretary.
Andy supports the divisions to develop and
implement effective commercial strategies
at preconstruction stage and within key
operational activities. He also offers advice
and assistance, acting as a critical friend to the
divisions throughout the life cycle of a project.
Andy is a member of the Board’s health, safety
and environment committee, the Group’s risk
committee and the Group health and safety
forum where he oversees the implementation
and monitoring of the Group’s health, safety and
wellbeing framework.
Skills and experience
Andy joined the Group in 2014. Previously he
was managing director of Bullock Construction
and prior to that, Andy’s career included 20
years with Kier Group, culminating in the role
of commercial director at Kier’s construction
division where he had overall responsibility for
the commercial and procurement functions.
Strategic reportGovernanceFinancial statements Group management team continued
Pat Boyle
Managing Director, Construction
Simon Smith
Managing Director, Infrastructure
Martin Lubieniecki
Managing Director, Design
Chris Booth
Managing Director, Fit Out
Role
Role
Role
Role
Pat leads the Construction business within
Construction & Infrastructure. He is responsible
for delivering sustainable growth, promoting a
safe and inclusive culture and creating inspiring
communities where we all live, work, learn and
play. He is a trustee of the Pagabo Foundation,
which raises awareness of mental health and
wellbeing for those working in construction.
Simon leads the Infrastructure business within
Construction & Infrastructure which focuses on
the rail, highways, aviation, nuclear, energy and
water sectors. In addition, Simon oversees our
in-house plant and engineering businesses. He is
responsible for delivering long-term, sustainable
growth in the division’s key sectors and ensuring
a safe, and inclusive working environment.
Skills and experience
Skills and experience
Pat has over 30 years’ experience in the
construction industry. He joined the Group in
2014 from Lend Lease, where he was head of
its public sector construction division. Prior to
this, Pat held various wide-ranging senior level
roles within Laing O’Rourke, including regional
director, group HR director and managing
director of Select Plant Hire.
Simon is a chartered quantity surveyor with 30
years’ multi-sector experience. Having joined the
Group in 2011, he was appointed as managing
director of Construction & Infrastructure’s
infrastructure business in 2017.
Martin is responsible for our BakerHicks
business, based in the UK and Switzerland and
offering design, engineering and project delivery.
BakerHicks specialises in multi-sector complex
infrastructure, process and built environments
across the full project life cycle. Martin is
responsible for developing and implementing
BakerHicks’ strategic plan, building a team of
exceptional individuals and managing overall
performance.
Skills and experience
Martin is a qualified chartered accountant
and has over 20 year’s property professional
services experience. He joined the Group in
October 2015 from Colliers International where
he was the UK chief operating officer. Prior
to this he had been the EMEA chief operating
officer for CBRE. Martin’s early career started at
PricewaterhouseCoopers and McKinsey before
taking senior roles at Sears Group and Hilton
International.
Chris has overall responsibility for the Fit Out
division, which includes the Overbury and
Morgan Lovell brands. He is responsible for
driving the strategy of excellence in operational
delivery and exceptional customer experience in
the division’s office fit out, refurbishment, design
and build, higher education and life sciences
projects.
Skills and experience
Chris has over 25 years’ experience in the Fit
Out sector having joined Overbury in 1994,
progressing through divisional management to
become managing director of Overbury’s Major
Projects team in 2003. He was appointed to the
Fit Out divisional board as chief operating officer
in 2010, before being appointed as overall
managing director in 2013.
96 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements Group management team continued
Alan Hayward
Managing Director, Property Services
Steve Coleby
Managing Director, Partnership Housing
Kate Bowyer
Managing Director, Urban Regeneration
Role
Role
Role
Alan is in charge of our Property Services division
which provides responsive repairs and planned
maintenance services to more than 200,000
homes and public buildings nationwide, for both
the public and private sectors. He is responsible
for the division’s strategic direction, building on
the service to deliver value-added activities that
better support social housing residents and
ensuring a sustainable and innovative business
for all clients and other stakeholders.
Skills and experience
Alan joined the Group in August 2017 with over
15 years’ experience in the sector. His previous
roles included positions both as finance director
and managing director in national building,
infrastructure and facilities management
businesses. Alan has experience across a range
of sectors including defence, health, corporate
and housing.
Steve leads our Partnership Housing business
operations, people and ventures. The division
provides innovative residential construction and
regeneration developments from decentralised
regional offices across the UK. He ensures
it places responsible business and trusting
partnerships at the heart of all its decision-
making.
From 1 April 2022, Kate will lead the division’s
regeneration activities across the UK. She is
responsible for delivering a range of commercial
and residential schemes with both public and
private sector clients to bring sustainable and
transformational change to towns and cities
across the UK.
Skills and experience
Steve joined the Group in April 2018, bringing
with him a wealth of knowledge and experience
in construction. Previously, he spent 25 years
at Laing O’Rourke, including as commercial
director of its European hub, managing director
of UK infrastructure, and managing director of
its UK construction business. Steve holds a RICS
fellowship.
Skills and experience
Kate joined the Group in November 2021. She
was previously the chief financial officer of The
Crown Estate, a £14bn property and land owner
and manager, leading its finance and business
technology teams. Kate joined The Crown
Estate in 2016 from intu Properties plc where
she had been director of finance. Kate qualified
as a chartered accountant with Coopers &
Lybrand (now PricewaterhouseCoopers) in 1995,
working in their Canadian and corporate finance
practices.
97 _ Morgan Sindall Group plc Annual Report 2021
Strategic reportGovernanceFinancial statements In order for our directors, particularly the non-executives, to discharge their responsibilities and
contribute constructively, it is important that they understand the business of each division and how
it complements the Group’s strategy and contributes to the delivery of our strategic priorities. (see
page 6: purpose, strategy and values and page 5: business model). Non-executive directors therefore
undertake a detailed induction programme on appointment (see page 111) and the Board meets
regularly throughout the year with divisional senior managers and their wider teams. Individual non-
executive directors undertake a strategy review each year with the divisions they are assigned to,
which includes meetings and site visits (see page 103). In addition to the formal strategy reviews, the
non-executive directors are actively encouraged to meet with divisional teams and visit their projects
during the year.
The Board ensures effective engagement with, and participation from, our shareholders and other
stakeholders in order to understand their views so that their interests and the matters set out in
section 172 of the Companies Act 2006 (see pages 10 to 15) are considered in Board discussions and
decision-making.
These engagement mechanisms are kept under review by the Board to verify that they are
appropriate and remain effective.
Strategic report
Governance
Financial statements
Directors’ and corporate governance report
Board effectiveness
The Board provides effective leadership through its oversight and review
of the business. To support the Board, we have a governance framework
in place that requires sufficient supervision at appropriate levels of the
organisation to drive performance of our strategy and ensure that risks
and opportunities are regularly assessed, monitored and managed.
The Board uses its four committees to manage its time effectively and, at each Board meeting, the
directors are made aware of the key discussions, recommendations, and decisions of the committees
by the respective committee chairs.
The nomination committee is responsible for ensuring that the Board and its committees are made up
of a combination of executive and independent non-executive directors, with the appropriate balance
of skills, experience and backgrounds to contribute to Board discussions and facilitate effective
decision-making. It is also responsible for annually assessing Board and committee effectiveness
through the Board evaluation process.
In addition, each individual director’s performance, including ongoing training, contribution and time
commitment, is reviewed annually to ensure they continue to fulfil their responsibilities to the Board
and contribute effectively. Such training includes access to the Company’s e-learning modules and
presentations on specific areas of focus or other matters of strategic importance delivered by the
Company’s advisers or internal and external specialists. In 2021, the Board was given deep-dive
presentations on information security, including the mitigation of cyber risk, and participated in
in-depth discussions on key areas which included capital allocation, diversity and inclusion, the
Group’s pathway to net zero and employee engagement.
98 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ and corporate governance report continued
Governance framework
One of our Core Values is our decentralised
philosophy which allows our divisions autonomy
to operate in a way that most efficiently meets
the needs of their respective markets and
stakeholders. This enables each division to
respond quickly and effectively to any changes
in its operating environment. We believe this
approach remains fundamental to each of
our complementary businesses’ continual
delivery of strategy and the long-term success
of the Group. Our governance framework is
therefore structured around supporting this
philosophy, facilitated by our long-established
culture of openness, transparency and individual
accountability.
The Board
The Board has ultimate responsibility for the management, governance, direction, and performance of the Group as a whole and ensuring that we conduct our business in
an open and transparent manner. The Board defines the Group’s purpose and sets the Group’s strategic direction and governance framework, determines our risk appetite
and works to deliver sustainable stakeholder value over the longer term. See page 100 for more detail on the role and responsibilities of the Board and the chair.
Chief executive
The chief executive, supported by the finance director, is
responsible for leadership of the Group, developing and
implementing strategy, managing overall Group performance
and ensuring an effective leadership team.
Board committees
The Board delegates certain matters to its committees. The Board and its committees are supported
by the company secretary who provides advice and assistance, particularly in relation to corporate
governance and training and induction. The appointment and removal of the company secretary is a
matter for the Board as a whole.
Risk
committee
Meets twice a
year to assist the
Board and audit
committee in
monitoring risk
management
including
climate risk and
overseeing the
internal control
framework.
See page 55.
Audit committee
Oversees the Group’s
corporate financial
reporting, the internal
controls and risk
management systems,
the work, findings
and effectiveness
of the internal and
external audit and the
appointment of the
external auditor.
See page 115.
Health, safety
and environment
committee
Oversees the Group’s
responsible business
strategy, targets and
performance with a
particular focus on
health, safety and the
environment.
See page 123.
Nomination
committee
Oversees Board
and committee
composition, Board
evaluation and
succession planning,
giving consideration
to diversity, including
development
opportunities for all
our employees.
See page 110.
Remuneration
committee
Responsible for
recommending overall
remuneration policy
and the setting of
remuneration for our
executive directors
and members of the
Group management
team.
See page 126.
Group
management
team
Meets regularly
to consider
operational
matters affecting
the Group as a
whole including:
health and
safety; strategy;
risk; the Group
budget; and
our responsible
business strategy.
See pages 95
to 97.
Divisional
boards
Each of our
divisions operates
autonomously
with its own
board of directors
that includes
the Group chief
executive and
finance director.
See page 100
for the
divisional
boards’
responsibilities.
Biographies of
the managing
directors of the
divisions are
set out on
pages 95 to 97.
Cross-divisional health and safety, HR and
commercial directors’ forums, IT security
steering group, and supply chain, social
value and climate action panels
Divisional representatives meet on a regular basis to focus on
specific topics and share ideas and best practice. The forums
assist the Board and Group management team in ensuring
good governance is adopted at all levels of the Group.
99 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ and corporate governance report continued
Board resources
Board and committee meetings are organised throughout the year and are structured to allow
enough time for open discussion. A formal programme of meetings is put in place each year to ensure
that the Board monitors and reviews all significant aspects of the Group’s activities. The agendas for
scheduled Board meetings are developed by the chair, chief executive and company secretary who
consider both the Board’s responsibilities, the current status of projects, strategic workstreams and
operational matters arising. Board papers are reviewed regularly to ensure they remain focused and
allow sufficient time for consideration and constructive contribution by all directors to each agenda
item. The Board papers provide an overview of performance covering a range of financial and non-
financial matters and are designed to assist the Board in reviewing performance against our key
performance indicators (KPIs); interim reports are circulated between the scheduled meetings. This
helps ensure that the resources integral to our business model are being maintained and that the
needs of our stakeholders are continuously monitored.
Despite the continuing pandemic, a relaxation in government guidelines meant that, after our
virtually-held February meetings, all of the pre-scheduled Board and committee meetings were held
in person, as were the meetings with the divisions for the formal strategy review process. The Board
and committees hold additional, ad-hoc virtual meetings as required and held three such meetings
in 2021, primarily to discuss and review the performance of the Group and approve required
announcements to the stock market. Board and committee papers are distributed electronically
in advance of each meeting to provide quick and secure access and minutes are circulated to all
directors after each meeting. If any director has any concerns about the operation of the Board or the
management of the business, they are encouraged to raise them so they can be discussed and that
any unresolved concerns can be recorded in the minutes. No such concerns were raised during 2021.
All directors have access to the advice and services of the company secretary and there are agreed
procedures by which directors can take independent professional advice, at the expense of the
Company, on matters relating to their duties. No such independent advice was sought by any director
during the year.
100 _ Morgan Sindall Group plc Annual Report 2021
Division of responsibilities
Responsibilities of the Board
In respect of the Group, the Board, assisted by its committees, is responsible for:
determining overall strategy and long-term objectives to align with our purpose;
ensuring that the divisions have appropriate strategies and resources in place and a culture that
drives the right behaviours;
monitoring of key performance indicators;
oversight of material social and environmental risks and opportunities;
approving the annual business plan and budget;
determining risk appetite and principal risks;
overall corporate governance arrangements, including establishing a framework of prudent and
effective controls which enable risk to be assessed and managed;
approving the financial results statements, annual report and accounts and other statutory
announcements; and
considering all policy matters relating to the Company’s activities, including any major changes of
policy.
Role of the chair
The chair is responsible for the overall effectiveness of the Board and for promoting a culture of
openness and debate at meetings which support well-informed and transparent decision-making
through constructive dialogue. To ensure accountability and oversight, there is a clear division of
responsibilities between the chair, chief executive and senior independent director, set out in writing,
approved by the Board and summarised on our website at morgansindall.com.
Responsibilities of the divisional boards
There is a clear division of responsibilities between the running of the Board and the running of the
business, set out in writing as follows:
matters reserved solely for the Board’s decision-making and the terms of reference of each of the
Board’s committees which are regularly reviewed and can be found on our website;
a schedule of delegated authorities, setting out which significant operational decisions the divisions
must refer to the Board for approval;
directors’ duties under the Companies Act 2006 and other legislation, which are communicated via
induction packs and e-learning modules; and
a Code of Conduct for all of our employees on the Group’s expected standards to prevent
misconduct and breach of ethical practices. The Code of Conduct and other supporting policies are
published on each division’s intranet and supplementary training is provided (see page 108).
Strategic report
Governance
Financial statements
Directors’ and corporate governance report continued
The divisions are responsible for setting their own five-year strategic plans and annual budgets, for
sign-off by the Board, for their operational performance and for managing relationships with their
stakeholders (see pages 11 to 15). In managing their operations, the divisions adhere to the schedule
of delegated authorities referred to above. The schedule clearly defines all key business issues and
levels of accountability, stating which decisions are significant to the Group and therefore need to be
referred for approval to: divisional managing directors; designated officers of the Group; the executive
directors; or to the Board as a whole. Each division then sets its own detailed procedures to cover day-
to-day operational matters within its own internal management systems to ensure decisions within the
delegated authorities are taken at the right level within the business. The executive directors, together
with the Group head of audit and assurance, who reports to the audit committee, are responsible for
monitoring the divisions’ compliance with the schedule of delegated authorities.
The executive directors meet with the divisional boards each month to review divisional performance
against their medium-term targets and strategic plan. In preparation for these meetings, the divisions
prepare a monthly board pack detailing performance against strategy and their KPIs and any issues
pertaining to their stakeholders. In turn, the Board receives an executive summary of the divisional
board packs as part of each set of Board meeting and interim papers. This ensures that the Board
is kept fully apprised of each division’s performance and any material issues arising with their
stakeholders. For example, during the first half of the year, the Board was kept regularly updated on
material and labour shortages in our supply chain and IT security through the newly-established IT
security steering group, while in the second half of the year, wider Group succession planning and
inflation were key topics. In addition, the Board normally holds informal meetings with the directors
and senior management teams of two divisions each year to allow the non-executive directors to meet
operational managers and discuss a range of topics in a less formal setting. In June and October 2021,
the Board collectively met with senior teams from Urban Regeneration and Construction respectively.
As part of these sessions, both divisions were asked to perform a teach-in for the Board on their key
clients, procurement process, key areas of client focus and any challenges. Members of the Board also
attended our Supply Chain Family event held in September (see page 33) to give them the opportunity
to meet members of the supply chain and find out how they are adapting their products and services
to address the impacts of climate change.
Independence
On pages 90 to 94, the Board has set out which directors are considered independent. As at 31
December 2021, 63% of our Board (excluding the chair) are considered independent. When our chair
was appointed to the Board in October 2016, he was considered to be independent. The tenure of
our non-executive directors is regularly reviewed as part of our succession planning process (see
pages 110 to 112) to ensure regular refreshment of the non-executive directors and to maintain
independence. The Board allocated time at the end of each of the six scheduled meetings held during
the year for the chair to meet with the senior independent director and non-executive directors
without the executive directors present. No material issues were raised in the year at any of these
meetings.
101 _ Morgan Sindall Group plc Annual Report 2021
External commitments and conflicts of interest
Prior to their appointment, new directors are asked to disclose any significant commitments they have,
together with an indication of the time involved, so that the Board can take these external demands on
their time into account and assess any potential conflicts of interest. We also have a process in place
through which all existing directors seek Board approval prior to accepting an external appointment.
Directors’ current external appointments are disclosed on pages 90 to 94. In accordance with this
process, during the year, the Board approved the appointments of Michael Findlay to the Financial
Conduct Authority’s markets practitioner panel, Malcolm Cooper’s change in role at Local Pensions
Partnership Investments Ltd, David Lowden’s appointment to Diploma plc, Jen Tippin’s appointment
to the Financial Services Skills Commission and Tracey Killen’s appointment as trustee for Dorset and
Somerset Air Ambulance. In connection with David Lowden’s appointment to Diploma plc, and prior
to its approval, the Board took into account David’s intention to step down as chair of PageGroup plc
prior to their 2022 AGM.
The Board has an agreed approach for dealing with directors’ conflicts of interest duties under
the Companies Act 2006, whereby a director is restricted from voting on any matter in which they
might have a personal interest unless the Board unanimously decides otherwise. Responsibility for
authorising conflicts of interest in accordance with the Company’s articles of association is a matter
reserved for the Board. For example, prior to the appointment of Kathy Quashie to the Board, the
Board assessed any potential conflicts of interest and took into account her external commitments
to satisfy itself that she had sufficient time to meet her Board responsibilities. In addition, the Board
undertook a review of potential conflicts of interest prior to Kathy’s appointment at Capita plc. In
December 2021, the Board undertook its annual review of potential conflict matters and confirmed
that it was aware of no situations that may or did give rise to conflicts with the interests of the
Company other than those that may arise from directors’ other directorships or employment as
disclosed on pages 90 to 94.
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Directors’ and corporate governance report continued
Key matters considered by the Board in 2021
In line with our governance framework and decentralised approach, our Board normally makes a
limited number of principal decisions during the year that are material to the Group as a whole.
The Board uses the Group’s purpose and strategic priorities as its framework for robust decision-
making and to ensure the long-term success of the business, recognising that each decision will not
necessarily result in a positive outcome for every stakeholder group. There were no material contracts
in 2021 that required referral to the Board under the matters reserved solely for the Board’s decision-
making, although each division required approval from the executive directors on certain contracts
over thresholds set out in our schedule of delegated authorities.
Throughout 2021, the Board had direct engagement principally with our employees and shareholders
and was kept fully informed of the material issues of other stakeholders through the executive
directors, reports from divisional management and external advisers (see pages 11 to 15).
An overview of the Board’s principal decisions during the year is set out below, including how the
Board acted to promote the long-term success of the Company for the benefit of shareholders while
having due regard to matters set out in section 172(1)(a) to (f) of the Act.
Determining the Group’s risk appetite
Action taken
Confirming the Group’s capital allocation
framework and dividend policy
Setting the annual Group budget
Action taken
Considered any changes to the Group’s principal risks
and emerging risks that could impact our long-term
strategic plans.
Considered the balance and breadth of the Group’s
activities to ensure we have a reasonable level of
protection against risks arising from uncertainties in
the macroeconomic environment.
Reviewed general market conditions and key trends to
identify and assess future risks and opportunities.
Conducted a detailed analysis of the risks associated
with information technology, including cyber security.
Outcome
Approved the appropriateness of the Group risk
appetite and the risk management framework to
provide long-term resilience for the business.
Consideration of stakeholders
See page 104 for more detail on actions taken by the
Board and how it took the needs and interests of our
stakeholders into consideration when determining the
Group’s risk appetite.
Action taken
Reviewed management’s proposed capital allocation
framework and introduction of a formal dividend
policy.
Outcome
Approved the capital allocation framework and the
implementation of a formal dividend policy of 2.0 to 2.5
times dividend cover.
Consideration of stakeholders
Prior to recommending dividend payments, the Board
considered the Group’s cash position, future cash
requirements, shareholder expectations and feedback,
and the need to provide shareholders with sustainable
returns over the longer term.
See page 104 for more detail on actions taken by the
Board and how it took the needs and interests of
our stakeholders into consideration when setting the
capital allocation framework and dividend policy.
Tracked performance of the Group budget against
agreed KPIs.
Reviewed Group and divisional budgets which form the
basis for setting the overall Group budget.
Reviewed general market conditions and key trends
that support the Group’s future growth (see pages 5
and 56 to 57).
Reviewed budgeted expenditure on training, health
and safety and employee wellbeing to ensure that it
was broadly equivalent to the prior year’s budget.
Reviewed the contribution that the budget will make to
delivery of the Group’s five-year strategic plan.
Outcome
Approved the Group budget, ensuring that it is suitably
stretching but achievable to contribute to the Group’s
long-term growth.
Consideration of stakeholders
In approving the budget, the Board considered
the impact on our employees, suppliers, clients,
shareholders and wider stakeholders.
Principal decisions
Strategy review
Action taken
Comprehensively reviewed progress against strategy,
tracking performance against agreed KPIs.
Reviewed divisional medium-term targets including
each division’s contribution to the overall Group
strategy and long-term strategic plan.
Monitored market trends and the macroeconomic
environment, referring to comparative data and client
insight.
Attended presentations from each divisional managing
director on their strategic plan including meetings with
employees and visits to some of their projects.
Reviewed each division’s contribution to the Total
Commitments and monitored the Group’s progress
towards our responsible business strategy and targets.
Reviewed the Group’s long-term financial outlook and
assessed and prioritised growth opportunities.
Outcome
Confirmed our strategy remains fit for the future
and our business model is sustainable, taking into
consideration future risk and opportunities.
Consideration of stakeholders
See page 103 for more detail on actions taken by the
Board and how it took the needs and interests of
our stakeholders into consideration when reviewing
strategy.
102 _ Morgan Sindall Group plc Annual Report 2021
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The following pages describe how the Board took our stakeholders into consideration when reviewing strategy and risk appetite and formalising our capital allocation framework.
Strategy review
The Group’s success depends on ensuring we maintain
good relations with our employees, clients and
supply chain. In approving strategy, the views and
interests of all our stakeholders are considered.
The Board conducted its formal review of each divisional
strategic plan during the second half of the year. Each non-
executive director (with the exception of Kathy Quashie who
was undertaking her induction programme) was allocated either
one or two divisions to review. As part of the process, and to
facilitate the assessment of the long-term sustainable success of
the Group and the impact and outcomes for key stakeholders,
the directors undertook a number of pre-meetings with their
allocated divisions. These meetings included:
a review of recent
a review of the division’s
operational and financial
performance including risk
management and safety
performance;
an overview of the division’s
market and pipeline of
opportunities;
a review of the adequacy of
resources to deliver on the
division’s strategic priorities;
meeting with employees
without management
present;
a review of the results of
employee engagement
surveys conducted;
outlook and medium-term
targets;
visiting one or two live
projects and meeting with a
variety of people, including
employees, subcontractors
and suppliers; and
reviewing the division’s
initiatives to reduce the
impact of its operations on
the environment and to
deliver added social value to
the communities in which it
operates.
The Board continues to adopt an alternative method to the three
suggested options for employee engagement as set out in the
Code, with this responsibility shared by all the non-executive
directors. Given the structure and culture of our business and the
size of our Board, we consider that this continues to be the most
effective way for the Board to engage with as many employees as
possible. This is why, as part of the strategy review process, the
directors meet with a wide range of employees to understand
their views about the division in which they work and the wider
Group, and to ascertain the degree in which behaviours are
aligned with the Group’s Core Values and culture. In particular,
this year, the directors focused on how well the agreed health,
safety and wellbeing framework had been embedded in each
business. The directors were pleased to observe that the
framework was fully embedded and that all employees take
their own safety and that of their colleagues seriously. Directors
also attended the annual divisional employee conferences,
held during the year either in person or virtually. Meeting with
employees provides insights on how Board decision-making may
impact employees so that this feedback can be factored into
future Board discussions and decision-making.
The Board then collectively held a strategy review day in October
where an overview of each division’s strategic plan and priorities
was undertaken by the whole Board. The non-executive directors
provided the Board with a summary of their observations and
opinions on the divisional plans so that the overall Group strategy
could be approved.
Employee feedback gathered was shared by the directors at
the Board meeting in December 2021. The feedback from the
non-executive directors confirmed that the Group has a strong
positive culture and that employees genuinely feel empowered
and are very positive and engaged. Everyone they had spoken
to was open and transparent and the non-executives did
not feel that there were any additional issues that needed to
be addressed or considered in decision-making that are not
currently addressed by the Board or by the divisions themselves.
The Board will continue to ensure that the Group’s decentralised
approach and positive culture is maintained and that adequate
processes and procedures are in place to ensure the safety of
employees and subcontractors working on our projects as well as
members of the public visiting them.
Through its proactive engagement with the divisions during the
formal strategy review process, and by rotating the divisions
between non-executive directors each year, the Board as a
whole gains an in-depth understanding of the key concerns and
issues of our divisions’ stakeholders. The Board will continue to
engage directly with stakeholders on certain issues, while wider
stakeholder engagement will continue to take place primarily
within the divisions (see pages 11 to 15) with the Board receiving
regular updates.
Following the pre-meetings, detailed review meetings were
held with each division, attended by the chair, chief executive,
allocated non-executive director and the divisional managing
director. At these meetings, the non-executive director provided
feedback on the division’s strategic plan, including how the
division’s stakeholders had been taken into consideration.
At the Board meeting held in December 2021, the Board
reviewed the employee engagement process and concluded
that:
the practical application of
policies and standards; and
the process used remains
appropriate and allows the
non-executive directors to
meet the broadest selection
of employees, given our
decentralised business.
the feedback gathered gives
the directors collectively
and individually a better
understanding of the points
of view of employees and
subcontractors working on
our projects;
it provides direct insights
into employees’ working
environments, their
behaviours and practices,
their attitudes and
approaches to colleagues
and other stakeholders and
103 _ Morgan Sindall Group plc Annual Report 2021
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Risk appetite review
In approving the risk appetite, the
Board considered the impact on
our employees, suppliers, clients,
shareholders and wider stakeholders,
in particular those identified in the
principal risks section on pages 58 to 68.
Each year, the Board reviews the nature and
extent of risk we are prepared to accept in the
pursuit of our purpose and strategy, taking
into account the potential consequences of its
decisions in the short, medium and long term.
In deciding risk appetite, the Board recognises
that a prudent and robust approach to
mitigation must be carefully balanced with a
degree of flexibility so that our decentralised
culture is not inhibited. Our risk appetite is
taken into consideration when setting strategy
and targets, making decisions, and allocating
resources, and is compared to current risk
levels to determine whether our mitigations
are sufficient. Specific limits and guidelines
for risk-taking are reflected in our governance
framework, structures and policies (for
example, the delegated authorities process).
In certain circumstances, we accept that
risks may result in some limited exposure,
but we will not pursue these unless returns
are reasonably probable and predictable
(for example, open market sales risks in our
residential developments). In order for the
Group to sustain a path of organic growth
while being able to maintain predictable
outcomes, the Board has continued to set
low-to-moderate exposure in the delivery of
operational targets, including those from both
construction and development programmes
(see page 58).
104 _ Morgan Sindall Group plc Annual Report 2021
In its discussions, the Board reviews the
economic environment in which we operate
and in particular the impact of its decisions on
our employees and our ability to continue to
attract and retain the necessary talent to grow
the business (see page 63). In addition, and
against this backdrop, the Board considers
the current profile of our construction
projects and development schemes, the
Group’s financial standing, the significance of
environmental, social and governance matters
to the business of the Group and our ability
to continue to provide a secure IT platform.
The Board as a whole is responsible for
reviewing the risks associated with information
technology security and they receive bi-
annual updates from the IT team overseen
by the Group finance director. There were no
material IT security issues identified in 2021.
Another significant topic is health and safety
risk mitigation and the protection of our
wider workforce which remain high priorities,
together with ensuring that our ‘Protecting
people’ Total Commitment target (see
page 17) is met and improved year on year.
The Board seeks to drive down health and
safety risk to as close as possible to zero (see
page 58).
The Board’s risk appetite review in October
2021 concluded that, overall, no significant
changes had occurred.
The audit committee assists the Board in
reviewing the effectiveness of the Group’s
internal controls and risk management
systems (see pages 119 to 122).
The framework is designed to:
maintain balance sheet strength to enhance
the Group’s competitive advantage and win
future work;
ensure downside protection by maintaining
a significant net cash ‘buffer’ in the event of
a macroeconomic downturn;
maximise investment in the current
business to drive growth; and
maintain an attractive dividend policy.
The Board will continue to assess the needs of
the business and the optimum balance sheet
structure within the context of the framework
described above, and any capital then
deemed surplus to these requirements may in
the future be returned to shareholders.
Implementation of a capital allocation
framework and formal dividend policy
In approving management’s proposed
capital allocation framework and formal
dividend policy, the Board considered
the needs of all stakeholders including
feedback received from investors
and the Company’s brokers.
Over the course of the first half of 2021,
the Board had several discussions on the
appropriateness of implementing a formal
capital allocation framework and formal
dividend policy, in particular to provide further
clarity for shareholders. In approving the
adoption of the capital allocation framework,
the Board ensured it was designed to balance
the needs of all stakeholders while protecting
the Group’s market competitiveness,
capabilities, disciplines and financial strength.
During its discussions, the Board took into
account feedback received directly from
investors and the Company’s brokers following
the announcement of the 2020 full-year
results.
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Purpose, values, strategy and culture
Our Group purpose, values and culture are set out on page 6. A strong culture is integral to our
purpose; it helps us not just to attract but also to retain the talent we need to conduct our business
responsibly and with integrity and to continue to be responsive so that we maintain the long-term
relationships we have built with many of our clients, supply chain and other stakeholders.
Our executive directors and senior managers promote the Core Values and Total Commitments
and ensure they are cascaded and embedded throughout the Group. The Core Values and Total
Commitments are explained to all new joiners across the Group as part of their induction programme
and they are reinforced through Group policies, various Group-wide e-learning programmes (see page
108) and at staff conferences. Our chief executive runs sessions on the Core Values as part of our
leadership development programme.
The Board as a whole is responsible for monitoring our culture to ensure it is maintained, and that
it continues to align to our purpose and strategy. In order to make a comprehensive assessment,
the directors meet with a wide range of employees as part of the strategy review process (see page
103). In addition, the Board receives regular reports on specific key performance indicators and
principal risks that are relevant to our Core Values and reviews them to detect any gaps between our
performance and our desired culture (see following table).
Overall, the Board is satisfied that the Group’s culture remains strongly aligned with our values
and has continued to play a vital part in achieving our strategic priorities and creating value for our
stakeholders.
105 _ Morgan Sindall Group plc Annual Report 2021
The customer comes first
We take a broad view of who our customers are,
ranging from the organisations that commission us
for projects, to all other stakeholders: our people,
our supply chain, our shareholders and local communities
where we work.
Strategic priorities:
What we monitor
Divisional customer
satisfaction surveys, client
ratings such as Perfect
Delivery1 statistics.
Biennial surveys with
stakeholders on responsible
business.
Feedback from suppliers.
The executive directors keep the Board updated with key
projects over a certain threshold. Additionally, the executive
directors update the Board with any material issues arising on
contracts which may impact a division or the Group as a whole.
Board action in 2021
Reviewed divisional board
summaries which include
information on key clients
and suppliers and the
performance of contracts.
Members from the Board
attended the Group Supply
Chain Family event held in
September (see page 33).
Strategic report
1 Perfect Delivery status is granted to projects that meet all four customer
service criteria specified by Construction, Infrastructure and Fit Out.
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Talented people are key to our success
We recruit, develop and retain those who can contribute most, both today and in the future. We ensure we have an attractive
culture, working environment, reward employees fairly, respect their rights and invest in developing their talent, promote
diversity and in wellbeing initiatives.
Strategic priorities:
What we monitor
Health and safety policies, practices and performance
Voluntary staff turnover
Number of apprentices and new graduates
Average training days per employee
E-learning responses
Lost time incidents
Board action in 2021
Regular monitoring of health and safety performance is a
priority for the Board and is the first agenda item at every
meeting. The Board noted some increase in incidents compared
to the prior year. In response, the Group launched safety
improvement plans and there was a reduction in lost time
incidents in the second half of the year.
The health, safety and environment committee received an
update on ongoing mental health awareness and wellbeing
activities being carried out across the divisions.
When possible, and as part of the strategy review process,
directors visit our sites to talk to managers and employees.
At its December meeting, the Board reviewed the feedback
received by directors from their engagement with employees
during the year. The Board also reviewed each division’s key
engagement and inclusion activities and was pleased to note
the high response rates to surveys as well as the breadth
of activities being carried out to gather new ideas, improve
wellbeing and develop a consistent approach to adaptable or
agile working (see pages 11 and 12).
106 _ Morgan Sindall Group plc Annual Report 2021
Absence days due to sickness per person per year
Succession planning and talent pipelines
Results from employee engagement surveys and resulting
actions taken
Diversity of our employees, including gender pay gap
information
Reviewed and approved our 2020 gender pay gap report, which
is available on our website. Our 2021 gender pay gap report will
be reviewed by the Board in the first quarter of 2022.
Discussed the results of our 2020 diversity and inclusion survey
(see pages 23 and 24), considered the divisions’ proposed
initiatives, and provided feedback and support for their
approach to managing employee development and increasing
diversity and inclusion across the Group.
Reviewed Group succession planning, including reports on
how the divisions are managing employee development and
addressing diversity and inclusion in the context of succession
planning.
Reviewed and approved our modern slavery statement for
publication on our website.
Considered wider pay across the Group to ensure it aligns with
strategy and is appropriate to attract and retain the right talent.
Health, safety and environment committee report
Nomination committee report
Directors’ remuneration report
Strategic report
We must challenge the status quo
There is always a better way of doing things. This is key
to ensuring that we can adapt, innovate and respond to
the needs of our customers and the communities in
which we work while ensuring we address our responsible
business commitments to retain competitive advantage.
Strategic priorities:
What we monitor
The Board receives information on various initiatives
being adopted across the divisions to support our Total
Commitments. For example, in 2021 we rolled out across
the Group our externally validated carbon calculator tool,
CarboniCa, which estimates, manages and reduces carbon
emissions throughout a project’s life cycle; and Property
Services launched goldeni, a software platform which helps to
bring efficiencies for the division’s clients and their tenants (see
page 47).
Board action in 2021
The health, safety and environment committee monitored our
progress in the year against our responsible business strategy
centred around our Total Commitment targets, performance
and action plans (environmental, social and governance
framework) for achieving our KPIs, including carbon reduction.
Health, safety and environment committee report
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Directors’ and corporate governance report continued
Consistent achievement is key to our future
Ensuring we get things right first time is a necessity and not an option.
We operate a decentralised philosophy
We empower our teams to deliver exceptional results for all our stakeholders.
Strategic priorities:
Strategic priorities:
What we monitor
Financial performance of each division
and of the overall Group
Perfect Delivery or other success
measures, e.g. Home Builders
Federation star rating, customer
experience questionnaires,
Net Promoter scores
Supplier relationships and payments
Average daily net cash
The executive directors monitor divisional performance on a monthly basis via
divisional board meetings and Group management team meetings.
Board action in 2021
Reviewed payment practices reporting
and divisional actions to continue
to maintain or improve on average
payment days.
Approved full-year and half-year results
announcements, and approved a final
and interim dividend payment.
Approved the introduction of a capital
Continued to monitor the resilience
of the supply chain, including the
availability of materials and resources.
The Board and audit committee
allocation framework and formal
dividend policy.
Reviewed Group and divisional
performance against strategy.
reviewed the divisional risk registers
and ensured they aligned to the
Group risk register and the Group risk
appetite.
Reviewed and approved the going
concern and long-term viability
statements.
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107 _ Morgan Sindall Group plc Annual Report 2021
What we monitor
The executive directors ensure the
divisions are addressing the needs
of their clients and markets, and
that decisions are not held up by
unnecessary bureaucracy.
Compliance with corporate policies
including the Group’s arrangements
to allow our employees and others
working on our projects to raise
concerns confidentially.
Board action in 2021
Held regular meetings with divisional
management and invited employees
to present at Board and committee
meetings.
Reviewed the work of the internal audit
to examine and identify any cultural
issues as part of its remit.
Approved the new Group Code of
Conduct to be issued across the Group
and to members of our Supply Chain
Family.
The Board reviews the appropriateness
of the delegated authorities to ensure
that the right authorities are in place so
that our employees can make decisions
appropriate to their experience and
competence.
A robust risk management process,
including processes to identify
emerging risks, is built into our
governance framework which is
monitored by the audit committee.
Reviewed our raising concerns
procedures and bi-annual reports
of the number and nature of
whistleblowing reports made during the
period.
Reviewed the results of e-learning
programmes.
Audit committee report
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Oversight of workplace
policies and practices
As a Group, we are committed to conducting
all of our activities to the highest standards of
integrity and honesty, and in an open and ethical
way. The Board reviews and approves all key
policies to ensure they align with the Group’s
purpose, strategy and values.
In 2021, the Board approved our new Code
of Conduct which replaced our ethics policy
and provides a framework for how we engage
with clients, colleagues, business partners,
suppliers and the wider communities in which
we work and sets out what our clients and
subcontractors can expect from us. The Code of
Conduct provides a clear summary of acceptable
and unacceptable behaviours and gives practical
guidance to help each employee live our Core
Values and achieve our Total Commitments.
Our Code of Conduct was also distributed
to members of our Supply Chain Family (see
page 19) and requires them to maintain
the standards set out in it within their own
businesses. Before accessing any of our sites, all
workers are instructed on the policies they are
expected to follow, including those in respect of
occupational health and safety, whistleblowing
and modern slavery.
The Code of Conduct covers the following areas:
maintaining a healthy and safe workplace;
caring for the environment;
anti-bribery and corruption;
competing ethically;
respecting others;
avoiding conflicts of interest;
communicating carefully;
maintaining financial integrity (including tax);
and
protecting company information.
The chief executive sent a copy of the Code
of Conduct to each employee and this was
followed up with an e-learning module on the
Code which also reaffirmed awareness of our
whistleblowing helpline, (raising concerns). As
at the date of this report, over 5,000 employees
had completed this e-learning module. A
number of supporting policies are available
on the Company’s and divisions’ intranets,
along with a suite of more in-depth e-learning
modules on key elements of the Code which
all new employees undertake as part of their
induction programme. Refresher courses are
issued periodically to existing employees to
ensure that our policies remain embedded into
our business practices. All employees across
the Group are required to complete modules
on compliance issues including: anti-bribery and
corruption; competition law; modern slavery;
data protection; market abuse regulation; and
information security. The Board directors also
complete all the compulsory compliance training
modules to give them a deeper understanding
of how the Code of Conduct and related policies
are embedded into the organisation. During the
year, each of the executive and non-executive
directors completed the Company’s new Code of
Conduct e-learning module, and directors who
had completed their market abuse regulation
training three years before completed a
refresher e-learning module. Other Group-led
modules focus on business specific topics such
as directors’ duties, and tax modules covering
VAT and the Construction Industry Scheme
(CIS), and these are undertaken by selected
individuals as needed. Each division undertakes
its own risk assessments and develops
additional training modules for their employees
as appropriate.
The Board will not tolerate any form of bribery
or corruption in our business practices and this
message is reinforced in our Code of Conduct.
We have an established policy framework
which aims to minimise exposure to bribery
and corruption and maintain a culture where
these behaviours are never acceptable. The
audit committee receives information from our
head of internal audit and assurance on our
policies and procedures in place to prevent
bribery and corruption and for detecting and
preventing fraud. We also require our suppliers,
subcontractors and business partners to have
similar policies in place and anti-bribery, ethics
and modern slavery are all referenced in our
standard subcontracts. If any breaches of
our policies are identified either through our
internal audit programme, our raising concerns
(whistleblowing) service, or any other channel,
they are investigated thoroughly, acted upon,
and any significant findings are brought to both
the Board and audit committee’s attention (see
page 109).
Our non-financial reporting statement on
pages 81 and 82 contains further information
on Group policies that drive good behaviour in
employee, social and environmental matters,
and the diligence with which we pursue them.
Our tax strategy
We take our obligations as a taxpayer seriously
and focus on ensuring that, across the wide
range of taxes that we deal with, we have the
governance and risk management processes in
place to allow us to meet all our continuing tax
obligations. The Board has overall responsibility
for our tax strategy, risk assessment and tax
compliance. Our tax strategy, which was last
approved by the Board in December 2021, is
available on our website.
We have an open and transparent relationship
with HMRC and seek to anticipate any tax risks
at an early stage, including clarifying areas of
uncertainty with HMRC as they become evident.
We keep HMRC informed of how our business
is structured and respond to all questions or
requests promptly.
108 _ Morgan Sindall Group plc Annual Report 2021
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Raising concerns (whistleblowing) review
Organisational culture plays a critical role in
ensuring that we work in an environment
where people are encouraged to raise any
concerns they have, and for those concerns
to be objectively considered and appropriate
actions taken to address them. The Group uses
a third-party operated, confidential service which
is available 24 hours a day to all our employees
and subcontractors who work on our projects
to raise any concerns about behaviours or
decisions that do not uphold the standards set
by our Code of Conduct. The service enables
people to report concerns anonymously and in
confidence, and can be accessed by telephone,
email, or via the service’s website. The hotline
reporting mechanisms are explained to all our
employees and subcontractors on induction,
repeated throughout our e-learning courses
and published on our intranets as well as on
office and site notice boards. A direct link to the
reporting page also appears on our intranets.
During 2021, the evaluation of our labour
practices against ELS BES 6002 Ethical Labour
Standard, which demonstrates our commitment
to eliminating any possibility of trafficking
or modern slavery in our supply chain, was
submitted for assessment. We are also hoping
to complete our registration for ISO 20400:2017
during 2022. These two actions will help to
demonstrate our commitment to sustainable
procurement.
Whilst no instances of modern slavery have
been raised internally or via our whistleblowing
service, we have assisted both the Police and
the Gangmasters and Labour Agency with
their inquiries into two separate allegations
concerning right to work permissions and
modern slavery. Each of these inquiries have
arisen from isolated incidents in our supply
chain and no wrongdoing has been identified on
our part.
See page 20 for further information on all our
activities during 2021. In our 2021 statement,
which will be approved by the Board prior to its
publication in the first half of 2022, we will be
reporting against the following KPIs: employee
training; investigations undertaken into reports
of modern slavery and remedial actions taken
in response; embedding the use of Sedex
across the Group; and evaluation of our labour
practices against ELS BES 6002.
The Group’s general counsel, with the assistance
of the company secretary and head of internal
audit and assurance, oversees the hotline. Twice
a year, the Board reviews our arrangements
for raising concerns to ensure they are suitably
robust and monitors all reports of non-
compliance with our procedures. In total, the
Group received 39 reports in 2021 (2020: 16), of
which 18 came via our raising concerns service.
This number is higher than in 2020 which may,
in part, be as a result of a return to more normal
operating conditions in our office locations
and also an increased number of telephone
complaints being flagged as a potential concern.
Overall, the number of reports received
indicates that the Group’s employees have a
good level of awareness of ethical issues and
are willing to speak up. In 2021, we received one
report per 275 employees versus one report per
350 employees for Safecall’s construction clients.
While no specific complaints were escalated
for Board attention during the investigation
process, or outside the Board’s normal review
timetable, the Board is satisfied that all reports
were correctly investigated and that, where any
further actions were needed in respect of the
issues raised, these had been dealt with and
resolved in an appropriate way. The top three
issues raised related to concerns over: HR
issues; breach of company policy; and dishonest
behaviour. The Board is satisfied that none of
the issues raised are systemic across the Group
and that they were isolated to individuals or
specific circumstances.
Modern slavery
We are committed to respecting the human
rights of our employees, subcontractors and
members of the communities in which we work.
We encourage our supply chain to prevent,
mitigate and address any threats to human
rights. Our Code of Conduct includes the
Group’s policy on respecting others including
our commitment to the Universal Declaration on
Human Rights and to prevent modern slavery in
our operations and supply chain. In addition, the
Group has a modern slavery policy, prohibiting
activities linked to slavery, servitude, forced or
involuntary labour and human trafficking and
a procurement policy requiring goods and
services to be sourced efficiently and fairly. The
divisions are responsible for their employee
and supplier relationships and compliance
with these Group policies. The divisions are
supported by the Group director of sustainability
and procurement, the Group commercial
director, the general counsel, company secretary
and the Group head of audit and assurance.
All new employees who join the Group take
our e-learning module on modern slavery and
our site induction includes ‘toolbox talks’ to
raise awareness of modern slavery for our own
employees and site operatives employed within
our supply chain.
The Board annually reviews the approach and
progress of work taken by management and the
divisions to identify areas where there is any risk
of human trafficking and modern slavery in our
business prior to the approval of the Group’s
modern slavery statement. The Group’s 2020
statement which was approved in early 2021 is
available on our website.
109 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ and corporate governance report continued
Nomination committee report
Dear Shareholder
I am pleased to present to you
the report from the nomination
committee for 2021. During
the year, we were delighted to
welcome Kathy Quashie to the
Board. Kathy’s skills, particularly
her extensive strategic, commercial
and digital transformation
experience, have broadened
the expertise on the Board, and
added valuable knowledge and
insight to Board discussions.
Membership and meetings
Members1
Member since
Attended/
scheduled
Michael
Findlay2 (chair)
Malcolm
Cooper
Tracey Killen
David Lowden
Jen Tippin
2016
2015
2017
2018
2020
3/3
3/3
3/3
3/3
3/3
1 Biographies of members are set out on pages 90, 92 and
93. John Morgan and Steve Crummett are not members
of the committee although they are invited to attend
meetings.
2 Michael Findlay is not permitted to chair meetings where
his own succession and performance are discussed.
110 _ Morgan Sindall Group plc Annual Report 2021
Key responsibilities:
Board and committee composition.
Identifying potential skills and
experience gaps.
Leading the Board appointment
process.
Reviewing succession planning for the
Board and Group management team.
Reviewing divisional succession plans.
Overseeing the Board evaluation
process.
The committee’s full role and
responsibilities are set out in its terms
of reference which are available on our
website.
Following the review by the committee of the
specific areas for discussion highlighted by the
2020 evaluation, the committee was considered
to be working well with good open discussion
including in relation to management succession.
It was agreed that the focus of the committee
would remain on succession planning at both
Group, executive and divisional levels as well
as improving diversity and inclusion across
the Group and on the main Board. The 2021
evaluation of the Board, which was carried out
during the year, concluded that the committee
was continuing to work well. It was agreed
the key focus areas going forward will remain
succession planning, in particular Group
management team (GMT) succession and
improving diversity and inclusion.
Board composition and
length of tenure
The composition of the Board and its
committees has remained a key area of focus
along with succession planning for the Board
and the GMT.
Annually, the committee reviews the
composition of the Board together with a
consideration of the skills, knowledge and
experience needed to deliver Group strategy,
both in the short and longer term. These reviews
include consideration of the size and structure
of the Board and its committees, the range of
expertise required and any gaps in skills and
knowledge identified, diversity in its broadest
sense, any feedback received from the annual
Board evaluation and the tenure of existing
Board members. As part of the 2021 review,
each Board member was required to complete
a self-assessment of their skills. The information
was then fed into a formal Board skills matrix to
enable the committee to monitor the balance
of skills, expertise and experience on the Board
against the Group’s strategic priorities. Following
the review, the committee concluded there was
a good mix of experience on the Board and
open dialogue that provides the appropriate
balance of support and challenge to the
executives.
The standard term for non-executive directors
is three years. Non-executive directors normally
serve for a maximum of nine years, through
three terms, each of three years’ duration. All
directors are subject to annual re-election by
shareholders at our AGM and the Board has
set out on pages 90 to 94 for each director the
specific reasons why their contribution is, and
continues to be, important to the Company’s
long-term sustainable success (further
information on the 2022 AGM can also be
found in the Notice of Meeting to shareholders
accompanying this annual report or on our
website). The committee also recommended to
the Board a renewal of both Malcolm Cooper’s
and David Lowden’s term for a further three
years each, as the Board continues to benefit
from their considerable experience in Board
discussions.
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Directors’ and corporate governance report: nomination committee report continued
Tenure of non-executive directors
as at 31 December 2021 (%)
16.7
16.7
16.7
16.7
16.7
16.7
0-1 years
1-2 years
3-4 years
4-5 years
5-6 years
6-7 years
Date of appointment
Expiry of current term
Michael Findlay
3 October 2016
3 October 2022
Jen Tippin
Tracey Killen
Kathy Quashie
1 March 2020
1 March 2023
5 May 2017
1 June 2021
5 May 2023
1 June 2024
David Lowden
10 September 2018
10 September 2024
Malcolm Cooper
9 November 2015
9 November 2024
Appointments to the Board and
succession planning
Following the review of succession planning in 2020, the
committee reported in the 2020 annual report that it would be
commencing a search for a new non-executive director. It was
agreed that the new non-executive would be an individual with
broad strategic commercial experience in a customer-focused
industry who recognised the importance of environmental, social
and governance matters to long-term value and an enhanced
corporate reputation, and that the new non-executive should
bring additional diversity to the Board to ensure an appropriate
mix of age, experience and backgrounds. In April 2021, on the
recommendation of the nomination committee, the Board
was delighted to announce the appointment of Kathy Quashie,
effective from 1 June 2021. Following her appointment, Kathy
undertook a detailed induction programme where she met with
the chair, chief executive, finance director, company secretary
and each of the divisional managing directors to broaden her
knowledge of the business and enable her to contribute effectively
to Board discussions and decision-making.
The committee takes into consideration the length of tenure of
each non-executive director in their succession planning and the
skills required for each of the committee chairs and is satisfied
that there is a sufficient balance of skills amongst the existing
non-executives to manage an orderly succession of the Board. The
committee recognises that careful planning will be required for the
replacement of Malcolm Cooper as chair of the audit and health,
safety and environment committees at the end of his final three-
year term in 2024.
Board appointment process
Nomination committee requests proposals from
independent search firms.
Nomination committee reviews and approves an outline
brief and role specification including time commitment
required and appoints a search firm to facilitate the search.
The chair and chief executive discuss the specification
with the search firm, who prepares an initial longlist of
candidates.
The chair and chief executive then define a shortlist of
candidates.
Candidates are interviewed by the chair and chief executive,
and a selection of the shortlisted candidates are then
interviewed by other Board members.
Following Board approval, based on a recommendation
from the nomination committee, the appointment of the
new director to the Board and relevant committees is
announced.
Once appointed, the new director undertakes a tailored
induction programme. The induction programme includes
meetings with the chair, company secretary, executive
directors, divisional management directors and site visits.
111 _ Morgan Sindall Group plc Annual Report 2021
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We follow the process set out above when
making Board appointments. We disclose the
name of the independent search firm and any
other connection they have with the Group
in the annual report published following the
search. Audeliss were appointed in connection
with the recruitment of Kathy Quashie. In line
with the Code, Audeliss have a commitment
to promoting diversity and ensuring access to
a diverse pool of candidates. Audeliss has no
connection to the Group or individual directors,
other than providing executive search services.
The committee formally reviewed succession
planning for the executive directors and GMT
during the year. The review took account of
the opportunities and challenges facing the
Group and the skills and expertise that will
be required in the future. Our chief executive
manages the formation of succession plans for
senior management which are overseen by the
committee. We seek to ensure that we have
identified appropriate opportunities for people
who are key to delivering our strategy and any
areas needing further development. Where we
have not been able to identify an immediate
successor for a role, we have short-term
contingency cover in place while the committee
monitors the external market, as well as training
and development for potential future successors
in the medium to longer term.
During the year, the committee also reviewed
each division’s plans to oversee how its
management is developing its own talent
pools for future succession. Delivering on
our purpose means that we must ensure we
continue to develop and retain a talented
team, together with a pipeline of successors,
as this is fundamental to achieving excellence
in project delivery and customer service.
112 _ Morgan Sindall Group plc Annual Report 2021
Our leadership development programme
provides core and consistent leadership training
for senior employees across the Group. In
addition, each division runs its own technical
and business training programmes to develop
the skills its business and its employees need.
These programmes range from apprenticeships
and graduate training to continued learning and
supporting employees through professional
qualifications (see pages 21 and 22 for more
detail).
Each division uses succession and development
planning tools appropriate to the size and
requirements of its business. As with succession
plans for the executive directors and GMT,
the divisional succession plans are structured
around planning for the short, medium and
longer term. Where practically possible, each
division considers its existing employees for new
roles and development opportunities and, in
2021, 535 employees across the Group were
promoted internally.
Diversity and inclusion
We believe that a diverse Board, reflecting a
broad mix of skills, backgrounds, perspectives
and experience, is critical for innovation and
will enable us to benefit from a wider range
of ideas and expertise. We consider diversity
in the broadest sense, including in terms of
age, gender, ethnicity, culture, socio-economic
background, disability and sexuality.
Board diversity
as at 31 December 2021 (%)
38
Women
Men
62
The Board meets the Parker Review target to have at
least one director from an ethnic minority background
by 2024. In addition, the Board meets the Hampton
Alexander Review target of ensuring women make up
at least 33% of the Board.
The chair leads the Board diversity agenda, with
the aim to continuously improve the diversity
of the Board. As a committee, we ensure our
selection processes for directors provide access
to a diverse range of candidates and will only
use executive search firms who have signed up
to the UK Standard Voluntary Code of Conduct
on Gender Diversity. Board appointments will be
made based on merit and objective criteria such
as the skills and experience needed, without
resorting to quotas but with due regard for the
benefits of diversity. Our full Board diversity
policy, which was approved during 2020 and
sets out our ambition to become exemplary in
our industry, can be found in the Governance
section of our website.
With our strategy focused on growing the
business organically and generating long-term
profit and social value, it is important that we
drive changes to ensure that we have diversity,
not only at Board level, but at all levels of the
business. While our Board diversity policy
applies to the Board and the GMT, it sets the
tone Group-wide and is reflected in the divisions’
policies. It establishes our commitment to
embracing diversity and inclusion within our
culture and values so that every employee
is given the opportunity to use their abilities,
skills and experience to help us deliver on
our strategic priorities. Improving diversity
and inclusion across all levels of the Group is
therefore critical to implementing our strategy.
A diverse, talented team will align us better to
our client base and to society as a whole, and will
help us make better decisions for our business
and our stakeholders.
The chief executive is responsible, on behalf of
the Board, for improving diversity and inclusion
across the Group and ensuring a fully inclusive
culture. We recognise that historically our
industry has not been attractive to a wide talent
pool of candidates, in particular female talent,
however, we are pleased that this is changing
and the Board is being kept apprised on each
division’s progress and initiatives to improve
diversity and inclusion (see pages 23 and 24).
While it will take time, we are committed to
levelling up diversity in its widest sense across
all levels of our organisation through the
identification of barriers which are unique to
our sector in order to drive changes to policies
and practices. We are working towards women
making up at least one third of our senior
management team (see page 23 for further
details of the gender balance of the GMT and
their direct reports). During 2021, we made
progress in increasing diversity among the GMT
direct reports which is now 26% female (2020:
16%), however gender diversity of the GMT itself
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Directors’ and corporate governance report: nomination committee report continued
remains low at 9% and increasing diversity and
inclusion, particularly at the level of the GMT
and their successors, is a key area of continuing
focus.
The Board as a whole reviewed the outcome of
the Group-wide diversity and inclusion survey
carried out in the fourth quarter of 2020; the
committee is responsible for monitoring the
impact of the divisions’ diversity initiatives. The
Board has continued to take an active role
in reviewing the divisions’ plans to improve
inclusivity and ensure all their employees are
fully engaged, and is pleased to note that, during
the course of 2021, the divisions continued
to work hard on their diversity road map.
Actions taken by the divisions to improve
workplace inclusivity have included reviewing
their recruitment strategies, organising
behavioural training, and providing opportunities
for employees to get together to discuss ideas
(read more on page 24). We have continued
to raise awareness among young people of
the variety of careers in the industry through
our engagement with schools and colleges to
help attract wider pools of potential talent. As
part of this engagement, we have interviewed a
cross-section of current employees to showcase
as real life and relatable examples of the variety
of backgrounds our employees have and the
career paths that are achievable (see examples
on pages 22 and 24). Going forward, the Board
will continue to review the Group’s progress
and consider what actions need to be taken to
ensure that we introduce more outcome-based
initiatives to enable us to measure the progress
we are making.
Developing people 21
Understanding our stakeholders’ priorities 11
113 _ Morgan Sindall Group plc Annual Report 2021
Board evaluation
The Board has undertaken internal evaluations of its performance for the last couple of years which comprised a detailed questionnaire and individual
reviews with each director to assess the effectiveness of the Board and committees, together with reviews of each director’s performance and their
contribution to the Board’s decision-making. The table below sets out details of actions undertaken in 2021 against the agreed actions from the 2020 Board
evaluation. Details of the outcomes and agreed actions from the 2021 evaluation are set out on page 114.
2020 Board evaluation – actions agreed and taken
2020 agreed actions
Actions taken in 2021
Once the Covid restrictions have been lifted, the
Board will arrange additional meetings with the
GMT.
Due to Covid, no separate meetings were held with the GMT but the Board met with all members
of the GMT at the senior management conference and held sessions with the senior teams of
Construction and Urban Regeneration during the year.
All directors remain responsible for employee
engagement and for getting a sense of how our
employees feel about the business, and each of
the non-executive directors will maximise their
opportunities for employee engagement in 2021.
During the year, a number of divisions will be
invited to give a presentation to the Board setting
out their current priorities and key challenges.
These sessions will allow non-executive directors
to meet with senior teams of those divisions where
they have not been involved in the divisional
strategic review process.
To ensure the Board’s skills remain appropriate for
the longer term, the directors will complete a skills
matrix based on broad general skills for review by
the Board as a whole.
Each committee will be responsible for reviewing
the areas for discussion highlighted for their
respective committees and agreeing any actions to
be taken.
The non-executive directors attended a number of online meetings during the year and in the
second half they held a number of face-to-face meetings as part of their divisional strategy reviews.
The re-introduction of face-to-face meetings enabled the non-executives to meet and engage with
various employees from across the Group.
Members of the Board attended our senior management conference held in October.
Members of the Board attended the Supply Chain Family event where they also had opportunities
to meet with employees.
Dedicated Board feedback session on employee engagement where the Board reviewed and
discussed divisional employee engagement activities, including results of employment engagement
and pulse surveys, to give a better understanding of any issues across the business and actions
being undertaken to address them.
The Board met with representatives from Urban Regeneration and Construction for informal
meetings in June and October.
The health, safety and environment committee were given presentations from representatives
from Construction, Infrastructure, Fit Out, Partnership Housing and Property Services, focusing on
safety performance and responsible business plans.
The nomination committee reviewed and approved the Board skills matrix at its meeting in
February 2021 and concluded that there was a good mix of experience on the Board.
Each committee reviewed its areas of discussion at the first meeting held in 2021 and the agreed
actions were taken as appropriate throughout the year (see individual committee reports for
further details).
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Directors’ and corporate governance report: nomination committee report continued
Details of the 2021 evaluation process is set out in the table below. The 2021 evaluation sought
feedback from the Board on the following topics:
overall Board performance;
progress on key strategic challenges identified during the 2020 evaluation;
the effectiveness of communications of our environmental, social and governance credentials;
the effectiveness of the Board’s engagement with the divisions and employees, the sharing of
feedback received and the consideration of this feedback in decision-making; and
progress to improve the use of technology and data across the Group.
2021 Board evaluation – actions agreed
Following the individual meetings with each director, the committee agreed it is confident that each
of the non-executive directors remains independent, will be in a position to discharge their duties
and responsibilities for the coming year and continues to be an effective member of the Board. In
accordance with the UK Corporate Governance Code, all directors will stand for re-election at the
forthcoming AGM.
As disclosed in our 2020 annual report, an external evaluation of the Board and its committees will be
commissioned in 2023.
Looking ahead
In 2022, the committee will continue to focus on:
The Board discussed the findings from the evaluation at its meeting in December 2021. Overall, the
Board concluded that the Board is working well, with the right issues being discussed and appropriate
Board involvement in key discussions. A number of areas were identified for the Board to focus on to
ensure the Group continues to deliver long-term value for all our stakeholders. They include:
succession planning for the Board and GMT;
reviewing succession planning in the divisional management teams; and
reviewing progress to further improve diversity and inclusion across the Group and the introduction
of more outcome-based initiatives.
succession planning;
Group culture;
ensuring Partnership Housing delivers its potential in accordance with its five-year strategic plan;
continuing to deliver on our Total Commitments and ensuring our performance against our
Commitments and social impact is communicated clearly.
We will report on the actions taken against these areas of focus in our 2022 annual report.
Michael Findlay
Chair of the nomination committee
24 February 2022
2021 Board evaluation process
The evaluation
questionnaire was
developed, based on
the key areas of focus.
The questionnaire
was circulated and
responses collated
and analysed by the
chair and company
secretary.
The chair discussed
with each director the
feedback received
and reviewed
each director’s
contributions with
them individually.
The senior
independent director
led the Board
appraisal of the chair’s
performance.
The chair presented
the key themes for
Board discussion at
the December 2021
meeting and agreed
actions to be taken.
The Board reviewed
the actions taken
following the
recommendations
from the 2020 Board
evaluation process.
The Board and the
committee confirmed
that they were
satisfied with the
contributions and time
commitment of each
non-executive director
and the chair.
114 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ and corporate governance report continued
Audit committee report
Key responsibilities:
Monitoring the integrity of the
financial results of the Company and
reviewing significant financial reporting
judgements contained therein
Reviewing the external audit process
and making recommendations to
the Board in relation to the external
auditor’s appointment/re-appointment/
removal.
Reviewing the Company’s internal
financial controls and internal control
and risk management systems.
Monitoring and reviewing the
effectiveness of the Company’s internal
audit function.
Reviewing the approach taken by the
Group to consider and address climate-
related financial risk.
The committee’s full role and
responsibilities are set out in its terms
of reference and are available on our
website.
This report sets out how the committee has
discharged its responsibilities and provided
assurance on the integrity of the 2021
annual report, along with an overview of the
committee’s main activities and insight into the
key focus areas considered during the year.
Over the year, the committee’s key focus was on
the integrity of: the Group’s financial reporting;
financial judgements; levels of materiality;
process of risk management and internal
controls; and providing appropriate challenge of
the assumptions and key judgements made by
management. In addition, the committee was
asked to provide its input into the four trading
updates released to the market in February,
April, July and November, each of which
provided positive upgrades to expected full-year
performance.
The committee follows a formal agenda at
each meeting to ensure that all elements of its
remit are covered and meetings are scheduled
in line with the Company’s financial reporting
timetable. As chair of the audit committee, I met
with the finance director and the external audit
partner individually during the year. In addition,
the committee held discussions with the
external auditor and the Group head of audit
and assurance, without the management team
present. No matters of significance were raised
during any of these discussions.
The committee’s authorities and calendar of
work remain in line with the requirements of the
Code, having regard to the recommendations
of the Financial Reporting Council (FRC) in its
guidance on audit committees.
Following the review by the committee of the
specific areas for discussion highlighted by the
2020 evaluation, the committee was considered
to be well chaired and working effectively. It was
agreed that the committee would: carry out
further detailed reviews of selected key risks
and emerging risks at each meeting; oversee a
review undertaken with the internal audit teams
to consider any improvements to the internal
audit processes; and continue to monitor any
changes to requirements following the Brydon
report and BEIS review. Further information on
each can be found later in this report.
The Board evaluation for 2021 also included an
evaluation of the audit committee (see page 114
for further details on how the evaluation process
was conducted). Overall, the committee is
considered to be operating effectively. Following
the 2021 evaluation, the committee agreed it
would continue to conduct risk deep dives at
each meeting and hold an annual meeting with
one of the subsidiary lead auditors.
Dear Shareholder
On behalf of the Board,
I am pleased to present the
committee’s report for the year
ending 31 December 2021.
Membership and meetings
Members1
Malcolm
Cooper2
(chair)
Tracey Killen
David Lowden
Jen Tippin
Member
since
Attended/
scheduled
2015
2017
2018
2020
3/3
3/3
3/3
3/3
1 Biographies of members are set out on pages 92 and
93. In addition to committee members, meetings are
regularly attended by the: chair of the Board; finance
director; company secretary; Group financial controller;
Group head of audit and assurance; and representatives
from the external auditor.
2 Malcolm Cooper is a qualified accountant and
experienced FTSE 250 audit committee chair. He
continues to have recent and relevant financial
experience for the audit committee of a company in the
construction and regeneration sectors.
All committee members during the year and up to the date
of this report are independent non-executive directors in
accordance with the Code, and the committee as a whole
has the competence, diverse skills and experience relevant
to the sector.
115 _ Morgan Sindall Group plc Annual Report 2021
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Key activities during the year
The committee’s key activities during the year are set out below, and further information on its work, including full descriptions of the risk management and internal control processes, is set out on the following
pages.
Activity
Actions taken
Outcomes
Financial reporting
External auditor
Considered the accounting policies and practices applied.
Reviewed the half-year and full-year financial and narrative statements and trading updates.
Undertook fair, balanced and understandable review of the 2020 annual report.
Reviewed significant accounting judgements for the 2020 audit.
Reviewed the 2020 viability assessments and management’s process and assumptions for assessing viability.
Reviewed the 2020 going concern statement and management’s forecasts and projections for 2021.
Conducted a review of the half-year 2021 going concern assessment and an initial review of the 2021 full-year
Advised the Board in relation to the fair, balanced and
understandable assessment of the Company’s position and
prospects.
Confirmed to the Board that the committee was satisfied
with the clarity and accuracy of the half-year and full-year
financial statements and that the going concern and viability
assessments were appropriate.
going concern and viability assessments.
Ensured the smooth handover from Deloitte LLP to Ernst & Young LLP.
Reviewed and monitored the independence and objectivity of the external auditor.
Evaluated the performance of the auditor during the 2020 audit and the effectiveness of the external audit
process following completion of detailed questionnaires by management and group and divisional finance
teams.
Monitored compliance with our Group policy on the engagement of the external auditor to supply non-audit
Recommended the appointment of EY as external auditor for
the financial year ended 2021.
Approved the audit fee for the year ended 2021.
Recommended the reappointment of EY for the year ended
2022.
services.
Risk management and
internal controls
Formally reviewed the effectiveness of the risk identification process and Group and divisional risk registers.
Conducted deep dives into key risk areas.
Reviewed the effectiveness of the Group’s internal financial controls and internal control and risk
management systems.
Monitored and reviewed the effectiveness and performance of the Group head of assurance in connection
with the 2021 agreed internal audit plan.
Reviewed the outcome of the external evaluation of the internal audit function.
Considered the potential impact of changes proposed by the government’s consultation ‘Restoring trust in
audit and corporate governance’.
Reviewed the appropriateness of the 2022 proposed internal audit plan.
Reviewed the TCFD statement and the Group’s approach to TCFD.
Advised the Board in relation to the outcome of its risk
management reviews, including its oversight of the risk
identification process, to facilitate the Board’s assessment of the
Group’s emerging and principal risks and risk appetite review.
The risk management and internal control systems were
considered to be effective.
Approved the 2022 internal audit plan.
Approved the Group’s draft 2021 TCFD statement including
details of the Group’s risks and opportunities in relation to
climate change and scenario analysis.
116 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ and corporate governance report: audit committee report continued
Fair, balanced and understandable
assessment
Application of accounting policies,
judgements and estimates
One of the key provisions of the Code is for the
Board to confirm that the annual report, taken
as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s position,
performance, business model and strategy (see
the strategic report from the inside front cover
to page 85).
To enable the Board to make this declaration,
a formal review is embedded in the year-end
process to ensure the committee and the
Board as a whole have access to all relevant
information and, in particular, management’s
papers on significant issues faced by the Group.
The committee receives a paper from the
company secretary detailing the approach taken
in preparing the annual report. The committee
and the Board as a whole receive drafts of the
annual report in sufficient time to facilitate
their review and enable them to challenge the
disclosures where necessary.
In carrying out its duties, the committee is
required to assess whether suitable accounting
policies have been adopted and to challenge
the robustness of significant judgements and
estimates reflected in the financial results.
This process involves reviewing relevant papers
prepared by the finance team in support of the
policies adopted and judgements and estimates
made and confirm that they remain appropriate
for the Group. The papers are discussed with
the finance director, the external auditor and,
where appropriate, the Group head of audit and
assurance. In addition, the committee reviews
the year-end report to the audit committee
from the external auditor based on the work it
performed and findings from the annual audit.
Financial reporting
The committee is responsible for reviewing
and reporting to the Board on the clarity
and accuracy of the half-year and full-year
financial statements. The key activities table
on the previous page sets out the actions
and outcomes of the committee’s reviews
undertaken during the year to ensure that
the financial statements present a ‘true and
fair’ view. In order to facilitate its reviews, the
committee receives regular reports from the
finance director, the Group’s financial controller
and the external auditor, who also regularly
attend meetings of the committee.
The directors are responsible for preparing
the annual report and accounts. In February
2022, the committee considered the 2021
annual report, including the preliminary results
announcement, and its detailed review of the
year-end position, by reference to the year-end
accounts, assisted the Board in making the
going concern statement set out on page 83. In
addition, the committee reviewed the significant
accounting judgements for the 2021 financial
statements (see below) and considered and
approved the key assumptions in the long-
term viability statement. This year, the key
assumptions in the viability statement included
modelling a series of separate downside
scenarios, which were individually mapped to
the principal risks on the Group risk register and
then combined to create an extreme downside
scenario, in order to provide a more detailed
disclosure of risks considered (see page 84 for
further information). The committee did not ask
the external auditor to look at any specific areas
during the course of conducting its audit.
117 _ Morgan Sindall Group plc Annual Report 2021
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Significant matters considered in relation to the financial statements
The following table shows what we consider to be the key accounting matters which required the exercise of judgement during the year. These are all
considered to be recurring matters.
Issue
Basis of assurance
Conclusion
Contract revenue, margin, receivables
and payables
The recognition of revenue and margin on
long-term contracts in the financial statements,
and the associated contract receivables and
payables require management to make
judgements and estimates.
Impairment of goodwill
Viability and going concern assessment
In addition to updates on the key contract issues at
Board meetings, at which management identify any
significant differences in contract valuations that exist
with either clients or suppliers, the committee has
reviewed the status of these key contract issues at each
audit committee meeting.
Based on its review and discussions with the
management team and external auditor, the
committee concluded that the treatment
of contract revenue, margin, receivables
and payables in the financial statements is
appropriate.
The value of goodwill is supported by a value-in-use
model prepared by the management team. This is
based on cash flows extracted from the Group budget
and strategic plan, which have both been approved by
the Board. The committee reviewed and challenged
the management team on the assumptions used in the
value-in-use model.
In order to satisfy itself that the Group has adequate
resources to continue in operation for the foreseeable
future and that there are no material uncertainties in
respect of the Group’s ability to continue as a going
concern, the committee considered the Group’s viability
statement, cash forecasts, including sensitivities to
risks that could reasonably impact the future operating
results, and available borrowing facilities.
Based on its review and discussion with the
management team and the external auditor,
the committee was satisfied that the value of
goodwill is appropriate.
Based on its review and discussion with the
management team and the external auditor,
the committee recommended to the Board
the adoption of the going concern statement
and the viability statement for inclusion in the
annual report.
As a result of its reviews as detailed above, the committee was pleased to advise the Board that the 2021 annual report and financial statements (the ‘annual
report’) is fair, balanced and understandable and provides the necessary information for our shareholders to assess the Company’s position, prospects,
business model and strategy.
External audit
Independence and effectiveness
The committee oversees the Company’s
relationship with the external auditor and
compliance with the requirements of the Code
and the Competition and Markets Authority
Order published in 2014 which requires all
public interest companies to conduct an audit
tender at least every 10 years and to rotate their
audits after at least 20 years. To ensure that the
external auditor remains independent of the
Company, the committee carries out an annual
assessment of the auditor’s independence along
with an appraisal of its qualifications, expertise
and resources. To fulfil these obligations, the
committee reviewed the external auditor’s
presentation of its policies and safeguards to
ensure its continued independence within
the meaning of all regulatory and professional
requirements and that the objectivity of the
audit engagement partner and audit staff had
not been impaired. In addition, key members
of the audit team will rotate off the Company’s
audit after a specific period of time.
Following a formal tender process detailed in
our 2020 annual report, Ernst & Young LLP
(EY) were recommended by the committee to
be appointed as the Company’s auditor with
effect from the Company’s 2021 audit and their
appointment was approved by shareholders
at our AGM held in May 2021. Deloitte LLP,
who had held office as the Company’s previous
auditor since 1994, ceased to hold office from
the conclusion of the AGM. Peter McIver was
appointed as the lead audit engagement
partner. Peter is a senior partner with over 30
years’ experience and has led EY’s London audit
practice and their Real Estate, Hospitality and
Construction audit team.
118 _ Morgan Sindall Group plc Annual Report 2021
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Following the committee’s review of EY’s policies
and safeguards, together with the Company’s
own policies on engaging the external auditor
for non-audit work (see below) and employment
by the Company of former employees of the
external auditor, the committee confirmed that it
was satisfied with EY’s continued independence
and objectivity.
As part of its responsibility for assessing
the effectiveness of the external audit, the
committee discussed the external audit plan
at the committee meeting held in August 2021
and reviewed progress against the audit plan at
the meeting held in December 2021, noting at
that time the scope of work to be undertaken
and the key audit matters being addressed
by the external auditor. At the meeting prior
to the announcement of the full-year results,
the committee reviewed the external auditor’s
fulfilment of the agreed audit plan and the
key areas of audit focus as described in the
independent auditor’s report on pages 160 to
169.
During the year, an internal evaluation of
the external audit process was undertaken,
having regard to the FRC’s Guidance to
Audit Committees and with the assistance
of the Group head of audit and assurance.
The review is undertaken in the early part
of the year following the conclusion of the
full-year audit and is carried out by way of
questionnaire circulated to senior members of
the Company and the divisions’ finance teams.
The feedback received in 2021, which covered
matters including the quality of the process,
the adequacy of resources employed by the
external auditor, its communication skills and
its independence, objectivity and professional
scepticism, was then reviewed by the committee
as part of its assessment of the external auditor’s
effectiveness. The review was carried out on
119 _ Morgan Sindall Group plc Annual Report 2021
Deloitte in relation to the 2020 audit and no
concerns arose in the course of these reviews,
which indicated that there were no issues with
the effectiveness of Deloitte as the prior external
auditor. EY shadowed the working of Deloitte
during the 2020 year-end audit to ensure a
smooth handover ahead of the 2021 audit.
The first review of the effectiveness of EY will be
undertaken following the conclusion of the 2021
audit in early 2022.
Policy on the auditor providing
non-audit services
The Company’s policy on the engagement
of the external auditor for non-audit related
services, which applied during the 2021 financial
year, complies with the FRC’s Revised Ethical
Standard. The policy is designed to ensure that
the provision of non-audit services does not
impair the external auditor’s independence or
objectivity or create a conflict of interest. The
policy applies to the Company and all its wholly-
owned subsidiaries and provides guidance on
the type of work that is acceptable or prohibited
for the external auditor to undertake, and
the process to be followed for approval. The
categories of services that are prohibited are in
line with the legislation and precluded Deloitte
(prior to when they ceased to hold office) and
now preclude EY (post their appointment) from
providing certain services, such as valuation work
and preparing accounting records and financial
statements. For other services not falling within
the prohibited services list, the external auditor
is eligible for selection by the Company provided
that its skills and experience make it competitive
and the most appropriate supplier of these
services. Permitted services can be carried out
by the external auditor subject to the advance
approval of the finance director or, if the fees for
such services exceed a threshold of £50,000,
the advance approval of the audit committee
chair. In addition, Deloitte and EY have their own
safeguards in place to confirm that non-audit
work prohibited by the FRC’s Ethical Standard is
not provided to the Group.
The committee monitors compliance with the
Company’s policy throughout the year and,
during 2021, neither Deloitte nor EY, during
their respective periods of office, provided any
non-audit services that required the approval of
the committee. There were no fees for non-audit
services incurred by EY during the year.
Reappointment of external auditor
Having regard to the considerations referred to
above, the committee has satisfied itself that EY,
the current external auditor with responsibility
for the 2021 financial year end, remains
independent and effective. As a result, the
committee has recommended to the Board that
a resolution proposing the reappointment of EY
as external auditor be put to shareholders at the
forthcoming AGM.
Risk management and
internal controls
The Group’s risk management process and
system of internal controls were in place for the
whole year and up to the date of approval of
the annual report and are in line with the FRC’s
Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting.
The audit committee is tasked with assessing
and reviewing the Company’s principal and
emerging risks and keeping the internal control
system under review.
Risk review
In August and December 2021, the committee
conducted a formal appraisal of the Group
and divisional risk registers, following detailed
reviews by the divisions and the risk committee.
This included an evaluation of the process by
which significant current and emerging risks are
identified. Risks are identified by the divisions,
escalated through the risk management and
Board reporting processes and consolidated
into a Group risk register as either principal or
emerging risks. Documented against each are
the matters the Company has in place in order
to prevent or mitigate any impacts. During
the year, the risk registers presented to the
committee included deep dives into key focus
areas relating to our principal risks, including:
economic uncertainty and the prospect of
longer-term inflationary pressures; materials
availability; partners’ stretched finances; our
preparedness for the upcoming Building Safety
Bill; and longer-term residential drivers. The
registers also included deep dives into a number
of emerging risks and scenarios, including
consideration of potential long-term impacts of
climate change challenges, the advancing pace
of technology and scarcity of skilled labour in the
industry.
Following its assessment at the year end, the
committee noted there was a slight increase
in risk predicated by; economic headwinds,
continued material/labour supply constraints
and the ‘prospect’ of a prolonged inflationary
period/base rate rise. The Covid principal risk
disclosed in the 2020 report was downgraded
following the implementation of safe working
procedures on our sites, the UK’s vaccination
programme and the easing of lockdown
restrictions, although Covid variants are
recognised as having the ability to disrupt.
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The committee therefore concluded that, while
there continues to be uncertainty in the UK
macroeconomic environment, the Group’s risk
profile remains relatively stable. This is due
primarily to the markets in which the Group
operates being predominantly in the public and
regulatory sectors, which the committee regards
to be structurally secure, coupled with continued
government support for the construction,
infrastructure and regeneration sectors. Our
order book quality and our robust working
capital management, which are reflected in
our strong cash position and balance sheet,
continue to support long-term decision-making
and ensure we continue to select projects that
match our risk appetite and are right for our
business.
Following its reviews, the committee reports to
the Board to facilitate the Board’s annual risk
appetite discussion.
Review of internal controls
The committee reviewed the effectiveness of
the Group’s system of internal controls which is
described briefly in the adjacent box. The review
includes assessing: the relationship between
the internal and external audit function; the
results of internal audit work; and the overall
effectiveness of the internal audit process.
As part of the year-end close procedures, a
historic accounting error was identified and
corrected (refer to basis of preparation, note (e)
to the financial statements on page 174). The
committee has considered the impact of the
historic accounting error and is taking action to
investigate the root causes of this matter, and to
rectify the related internal controls.
In addition, the committee was kept informed of
additional processes proposed by the executive
directors in preparation for new regulations
that may follow the government’s consultation,
‘Restoring trust in audit and corporate
governance’, particularly the more formalised
accountability of directors over internal controls
and the additional disclosures they will need to
make as a result.
Board risk appetite review 58
Principal risks (for details of the Group’s principal
risks and how they are being managed and
mitigated) 58
Emerging risks (for information on the procedures
in place to identify and monitor emerging risks) 69
The TCFD statement (for more information on
steps taken to ensure that material climate-related
matters are being properly considered in the
annual report) 71
120 _ Morgan Sindall Group plc Annual Report 2021
Internal controls
Financial
Financial reporting system – to ensure
the effective safeguarding of assets, proper
recognition of liabilities and accurate
reporting of profits; a comprehensive
budgeting and forecasting system,
regularly reviewed and updated; a
management reporting system, including
monthly divisional reports to the Board;
and financial reviews in the annual internal
audit plan to validate the integrity of
divisional management accounts.
Investment and capital expenditure –
detailed procedures and defined levels
of authority, depending on the value and
nature of the investment or contract,
in relation to corporate transactions,
investment, capital expenditure, significant
cost commitments and asset disposals.
Working capital – continual monitoring
of current and forecast cash and working
capital balances through a regime of daily
and monthly reporting.
Operational
Group structure – divisional boards, with
certain key functions such as tax, treasury,
internal audit, IT, pensions and insurance
retained at Company level; and a system
of delegated authorities to ensure that
decisions are made at the appropriate level
(governance framework page 99).
Tender, project selection and contract
controls – tenders reviewed in detail with
approval required at relevant levels and
at various stages from the start of the
bidding process through to contract award;
assessment of the financial standing of
clients and key subcontractors; and robust
procedures to manage ongoing contract
risks, with monthly operational reviews of
each contract’s performance including a
detailed appraisal of related commercial
performance via our cost and value process.
Compliance
Legal compliance – monitored by divisional commercial directors and HR managers, and
the Group commercial director and general counsel; training provided on health and safety,
competition law, bribery and corruption and market abuse.
ISO accreditation – includes 9001 (quality), 14001 (environmental), 45001 (occupational
health and safety) and 27001 (information security management).
Corporate governance framework and Group policies – written guidance and policies
(see pages 81 and 82 for more detail on our policies) at Group and divisional levels.
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Internal audit
The internal audit function is managed by the
Group’s head of audit and assurance, who
oversees the divisional heads of internal audit
and assists with risk management. The internal
audit function conducts its work to align with the
Internal Audit Charter, which has been drafted
in accordance with the recommendations of the
International Institute of Internal Auditors. The
internal audit function is subject to validation by
an independent, external organisation every five
years and its findings are reported directly to the
audit committee (see page 122).
Each year, in advance of the committee’s
approval, the annual internal audit plan is
developed from a consideration of the principal
and key risks, the prior cycle of internal audit
testing, management requests and input from
the committee. The 2021 annual internal audit
plan included 62 separate audits, c95% of which
were carried out on the operational activity of
the Group, including:
project – operational, commercial, change
management and risk (all business units);
development – approvals, risk and capital
structuring, partner performance, funding,
programme, return on capital, profit;
finance reviews – cash, debt, payroll,
management accounting (selected business
units); and
project performance reviews – commercial
and operational reporting and forecasting.
Other areas of focus included audits of cyber
security, design management, digital project
management and finance systems. In response
to the Covid pandemic, a number of internal
audits in early 2021 were carried out virtually
or, where possible and subject to safe working,
in person. However, once restrictions had been
eased and for the remainder of the year, the
audits were carried out face to face.
A subjective assessment of culture is embedded
into each individual audit. The internal audit
team retains an element of flexibility in the Plan
and uses business intelligence tools and metrics
to identify projects for review.
The internal audit function has developed
a process for formalising its view of the
effectiveness of the Group’s system of internal
controls (see page 120). The assessment
involves a comprehensive evaluation of the
control environment (on a three-point scale)
ranging from ‘effective’ through to ‘ineffective’.
For 2021, the internal audit function, based
on its proportion of audits, concluded that
the control environment as a whole was
appropriate to maintain an effective system of
internal control. There were a small number
of improvements suggested, which have been
implemented.
In obtaining an overview of the Group’s
performance, the internal audit function
also gains meaningful insight from its
functional colleagues in: health, safety and
environmental; IT and IT security; legal; company
secretariat; finance; tax and treasury; business
improvement; and HR, with whom it engages
on a regular basis. The internal audit process is
supplemented by a rolling programme of peer
group reviews (overseen by internal audit) in
Construction & Infrastructure and Partnership
Housing, which assist in the professional
development of the individual employees
concerned while providing a mechanism for the
cross-fertilisation of ideas and dissemination of
best practice.
At each meeting, the committee receives a
report from the Group head of audit and
assurance that includes details of audit
assignments carried out across the Group,
including: operational, project and financial
reviews; metrics showing progress made against
the audit plan; updates on Group and divisional
risk registers; a log of any concerns raised;
market soundings on macroeconomic and
sector conditions; and an update on the internal
audit resource.
For 2022, the audit plan will follow a similar
pattern of reviews as detailed above, focused on
areas the Board considers the most significant in
terms of risk and or materiality.
Independence and effectiveness
Each year, the committee assesses the
effectiveness of the internal audit function. In its
2021 internal assessment, the committee:
met with the Group head of audit and
assurance separately without the executive
directors present to discuss the effectiveness
of the internal audit function – no new matters
or issues were raised that had not already
been reported by the executive directors;
reviewed and assessed the audit plan;
reviewed whether necessary actions were
being taken promptly to address any failing or
weakness identified by internal control audits;
reviewed whether the causes of the failing
or weakness indicates poor decision-making,
a need for more extensive monitoring or
a reassessment of the effectiveness of
management’s ongoing processes; and
assessed the role and effectiveness of the
internal audit function in the overall context of
the Company’s risk management system and
whether the function is able to continue to
meet the needs of the Group.
The results of the latest assessment were
reviewed by the committee in December 2021,
and it was satisfied that: the internal audit and
internal controls were operating effectively; the
internal audit team was adequately staffed and
remained independent; and the risk to the audit
team’s independence and objectivity was low.
121 _ Morgan Sindall Group plc Annual Report 2021
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External assessment
The International Standards for the Professional
Practice of Internal Auditing introduced a
requirement for an external assessment of all
internal audit services to be concluded at least
once every five years by a qualified, independent
reviewer from outside the organisation. In the
first quarter of 2021, the committee appointed
Blackmores (UK) Ltd on behalf of the Company
to validate the Company’s internal assessment
against the requirements of the following
standards:
Looking ahead
In 2022, the committee will continue its focus on:
the integrity of the Group’s financial reporting;
risk management and internal controls; and
continuing to monitor the forthcoming
changes to legislation as a result of the
proposed reforms in the BEIS White Paper
‘Restoring trust in audit and corporate
governance’.
International Standards for the Professional
Practice of Internal Auditing
IA Code of Practice
Malcolm Cooper
Chair of the audit committee
24 February 2022
The purpose of the external assessment is to
help improve the delivery of the internal audit
service to the Group and is designed to identify
opportunities for development and enhance
the overall value of the internal audit function
to the Group. The external assessment was
overseen by Steve Crummett, following which
the results of the review were provided to
the committee. The committee then oversaw
the implementation of the (relatively minor)
recommendations.
122 _ Morgan Sindall Group plc Annual Report 2021
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Health, safety and environment committee report
Dear Shareholder
We recognise that we operate in
a potentially challenging industry
and that our divisions are faced
with a variety of health, safety
and environmental risks, some of
which are unique to the specific
work they each undertake.
Membership and meetings
Members1
Malcolm
Cooper2
(chair)
Andy Saul
Clare Sheridan
Tracey Killen
Member
since
Attended/
scheduled
2017
2015
2018
2020
4/4
4/4
4/4
4/4
1 Members’ biographies are disclosed on pages 92 and 95.
Although not a member of the committee, Michael Findlay
attends the meetings on a regular basis and attended all
the health, safety and environment committee meetings
in 2021.
2 Malcolm has in-depth knowledge and experience of
health and safety and the impacts of climate change from
his appointments at National Grid and Southern Water.
123 _ Morgan Sindall Group plc Annual Report 2021
Key responsibilities:
Monitoring the Group’s duties and
performance in relation to safety.
Reviewing the Group’s responsible
business strategy, initiatives, risk
exposure, targets and performance
against the Total Commitments.
Reviewing the impact of the Group’s
operations on the health and wellbeing
of employees.
Monitoring the impact of the Group’s
operations on the environment
and how the Group is adapting its
operations in the light of climate
change.
The committee’s full role and
responsibilities are set out in its terms
of reference which are available on our
website.
We therefore focus on controlling and managing
these risks to ensure we have the right
management and processes in place to promote
a positive health and safety culture throughout
the Group and protect everyone connected with
our activities.
The health, safety and environment (HSE)
committee undertakes various activities
throughout the year to monitor each division’s
performance against and compliance with our
health, safety and wellbeing framework, as we
want everyone who works for us to get home
safe and well at the end of each day.
Following the announcement of our
commitment to achieving net zero carbon by
2030, the committee has continued to support
the Board in monitoring compliance with
environmental regulation and progress against
our environmental targets. We are proud of
our historical achievements, our continued
commitment to embed sustainability throughout
our business operations, and the independent
recognition we have received from organisations
such as CDP. The committee will continue
to monitor how we work closely with our
stakeholders to meet the challenges that fighting
climate change will bring, as well as how we can
benefit from opportunities that come from an
ability to build sustainably over the long term.
Following the review by the committee of the
specific areas for discussion highlighted by the
2020 evaluation, the committee was considered
to be working well with broadly the right level of
information received and good debate on its key
areas of responsibility. It was agreed that, during
2021, the committee would: invite an external
perspective on the Task Force on Climate-
related Financial Disclosures (TCFD) ahead of the
Group reporting fully under these requirements;
request more data on trends, remediation and
follow-up actions taken to assist with monitoring
safety performance; and request more data
to demonstrate the improvement in safety
performance of the divisions over the last five
to six years. Further information on each can be
found later in this report.
The Board evaluation for 2021 also included an
evaluation of the HSE committee (see page 114
for further details on how the evaluation process
was conducted). Overall, the committee is
considered to be working well and focused on
the right topics. Following the 2021 evaluation,
the committee agreed it will: keep abreast
of the increasing and varied demands from
stakeholders on environmental, social and
governance (ESG) matters, including the ESG
approaches of peer group companies; and
identify ways in which we can reduce RIDDOR1
incidents further, including considering health,
safety and wellbeing practices in companies
outside our sector.
1 The Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013.
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Responsible business
The committee is responsible on behalf of the
Board for ensuring that the Group conducts
business in an ethical and responsible manner
and manages non-financial risks appropriately
and for overseeing material environmental
and social issues. Our responsible business
strategy is developed and agreed by the Group
management team, which is supported by
our Group health and safety forum, HR forum,
supply chain panel, social value panel and
climate action panel, each made up of specialist
representatives from across the divisions.
Our responsible business strategy is driven
by our Total Commitments which align to
six UN Sustainable Development Goals. The
committee assists the Board in monitoring
our performance and progress against each
of our Total Commitments and in particular
our Commitments to Protecting people
and Improving the environment. The Board,
nomination and remuneration committees,
through their activities, also assist in monitoring
and reviewing performance against our
Commitments to Developing people, Working
together with our supply chain and Enhancing
communities.
Responsible business strategy and performance
(for full details of our performance against each
Total Commitment)
124 _ Morgan Sindall Group plc Annual Report 2021
Protecting people
Our number one priority is to protect the health,
safety and wellbeing of everyone connected
with our business, including employees,
subcontractors and suppliers working on our
projects. Our ‘100% Safe’ ambition is supported
by creating a culture that promotes people’s
health and wellbeing and by ensuring that
our health, safety and wellbeing framework is
integrated into each division’s business strategy.
Within this overarching framework (see box
right), and with the support of the health and
safety forum, each of our divisions sets health
and safety goals and objectives each year so that
its individual performance can be analysed and
help drive continuous improvement.
However, despite the continuing efforts of all
our divisions, we are disappointed that we
have seen a deterioration in our overall safety
statistics compared with 2020 (see page 17).
The dominant trend of the RIDDOR accidents
in 2021 were slips and trips where we suffered
18 incidents (2020: 7) which have occurred
despite enforcing and maintaining high
standards of site presentation and nine hand
injuries (2020: four). All RIDDOR accidents and
high potential incidents were fully investigated
and learning was shared and reported to both
the committee and the Board. All our divisions
took steps to increase safety awareness and
promote safe behaviours during the year
focusing on their key accident causes, for
example Infrastructure conducted a ‘Safe Hand’s’
campaign in response to the increase of hand
injuries (see page 18) and as a result of these
initiatives we saw an overall reduction in the
number of RIDDOR and lost time incidents in
the second half of the year.
We did not undertake any site visits as a
committee as the non-executive directors
visited a number of sites as part of this year’s
divisional strategy reviews where each of the
non-executives observed and discussed with
employees how well the health, safety and
wellbeing framework had been embedded
in each division (see page 103 for more
details). However, over the course of our four
committee meetings held throughout the year,
we invited representatives from Construction,
Infrastructure, Fit Out, Property Services and
Partnership Housing to present their health,
safety and wellbeing plans in detail, along with
details of their division-specific areas of focus,
key activities and progress made.
Our divisional health and safety teams have
continued to work hard throughout the year
reviewing the risks and challenges that they
face, ensuring that induction training is effective
and that our employees, subcontractors and
suppliers working on or visiting our projects
are aware of our health and safety policies,
understand site-specific risks and follow the
correct health and safety procedures. With social
distancing restrictions being lifted during the
year, we were able to return to pre-Covid site
operating procedures, although our divisions
retained some of the new working practices
introduced in response to the pandemic as they
were beneficial to health, safety and wellbeing
as well as productivity for our employees and
supply chain partners.
In June, the committee conducted a detailed
review of the divisions’ mental health and
wellbeing activities as a follow-up to the deep
dive that had been conducted during the early
stages of the Covid pandemic. The review
showed how each division was continuing to
Health, safety and
wellbeing framework
Each division to have appropriate
arrangements in place to ensure
the continuous improvement for
occupational health and wellbeing.
Each division to contribute to a
collaborative Group approach and
agreed framework to address the
requirements of the Fire Safety Act.
Improve sharing of learning, innovation
and best practices across the divisions.
Embrace and integrate the
appropriate recommendations from
the Loughborough University Covid
research into divisional improvement
plans and monitor effectiveness on a
regular basis.
The committee approved the updated
health, safety and wellbeing framework in
2021 on behalf of the Board.
Strategic report
Governance
Financial statements
Directors’ and corporate governance report: health, safety and environment committee report continued
develop its programmes, enabling the Board
to ensure that appropriate levels of support
are being maintained for our employees and
subcontractors. Overall, the committee noted
the continuing good cultural ethos and drive
in all our divisions to improve and embrace
new safety initiatives and promote health
and wellbeing, and in particular, noted the
exceptional work Property Services has been
doing around identifying situations of domestic
abuse (see page 20).
Following the 2020 evaluation of the committee,
the committee’s papers were refreshed to assist
it in monitoring and challenging our divisions to
improve their safety performance.
Going into 2022, our divisions will ensure that
our teams continue to remain focused, follow
procedures and do not take unnecessary
risks. Each division has been asked to continue
to address the dominant trends in RIDDOR
accidents as part of their health and safety plans
and the committee will review and monitor this
throughout the year. Providing social distancing
restrictions are not reinstated, the committee
intends to carry out at least one site visit in the
second half of 2022.
Responsible business strategy and performance –
protecting people
Improving the environment
We are committed to caring for the environment
and to minimising the environmental impact of
our activities on the natural environment and
the communities we work in, both now and in
the longer term.
As part of its review of strategy and risks, the
Board considers the impacts of climate change
on our markets and operations. Further
narrative describing the Board and leadership’s
oversight and management of climate-related
risks and opportunities can be found in our
TCFD statement on pages 71 to 79.
The committee monitors compliance
with environmental regulations and our
environmental performance. In support of
this the committee receives updates on our
environmental KPIs, environmental audits and
the initiatives being undertaken by each division
to reduce the impact of its operations on the
environment. The committee also ensures we
continue with our clear and transparent path
to reducing our carbon emissions and reaching
our ambition of at least net zero by 2030 at the
latest. There were no environmental incidents to
report for the Group in 2021.
Looking ahead
In 2022, the committee will:
continue to challenge the divisions to seek
further reductions in the number of lost time
incidents and all accidents;
review high potential incidents;
review the divisions’ continuing actions to
help our employees maintain their health and
wellbeing;
review the Group’s environmental
performance, including risks and
opportunities in relation to climate change;
review our performance against our Total
Commitments;
review our responsible business strategy and
health, safety and wellbeing framework; and
where possible, undertake an in-person site
visit.
Malcolm Cooper
Chair of the health, safety and environment
committee
24 February 2022
To facilitate the committee’s review of the
Group’s performance against the Streamlined
Energy and Carbon Reporting (SECR) reporting
regulations, as well as reviewing the Group’s
disclosure under the four core elements of the
TCFD, the committee, during the course of 2021:
was briefed by the company secretary at the
June meeting on the TCFD requirements, the
Group’s position and actions being taken to
report fully against the TCFD requirements;
received a half-yearly and annual presentation
from the Group’s director of sustainability
and procurement on activities and progress
against all our Total Commitments;
received presentations and perspectives from
external advisers on responsible business,
best practice and emerging trends;
reviewed the Group’s scores against its peers
in both environment and social rankings,
including areas where our practices exceeded
those of our peers and where there are
further opportunities for improvement; and
arranged for representatives from the
committee to attend our Supply Chain Family
event (see page 33) which focused on climate
change and supply change resilience.
As a result of its reviews, the committee is
satisfied that a wide range of activities are being
undertaken across the Group to support our
Commitment to Improve the environment
and to combat climate change. The committee
will continue to monitor the Group’s progress
against its target of net zero by 2030 for Scope 1,
Scope 2 and operational Scope 3 emissions, and
its activities to increase biodiversity and reduce
water usage and waste on our projects.
Responsible business strategy and performance
– improving the environment
125 _ Morgan Sindall Group plc Annual Report 2021
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Financial statements
Directors’ remuneration report
Remuneration committee report
Dear Shareholder
I am pleased to present our
remuneration report for the year
ended 31 December 2021. This
report sets out how the Group
pays directors, decisions made
on their pay and how much they
have received in relation to 2021.
Membership and meetings
Members1
Member since
Attended/
scheduled
Tracey Killen
(chair)
Malcolm
Cooper
David Lowden
Jen Tippin2
2017
2015
2018
2020
6/6
6/6
6/6
5/6
1 Biographies of members are set out on pages 92 and 93.
Michael Findlay, John Morgan, Steve Crummett and Kathy
Quashie attended meetings by invitation.
2 Jen Tippin was unable to attend the meeting on 4 June
2021, due to alternative commitments in her executive
role which could not be changed at short notice.
Key objectives of the
remuneration committee:
To assess and make recommendations
to the Board on the policies for executive
remuneration and reward packages for
the individual executive directors.
Responsibilities:
Determining, on behalf of the Board, the
policy on the remuneration of the chair,
the executive directors and the Group
management team.
Determining the total remuneration
packages for these individuals, including
any compensation on termination of
office.
Approving the design of our annual
bonus arrangements and Long-Term
Incentive Plan (LTIP) awards, including
the performance targets that apply.
Operating within recognised principles
of good governance.
Preparing an annual report on directors’
remuneration.
126 _ Morgan Sindall Group plc Annual Report 2021
Executive remuneration in context
Our remuneration policy is designed to be
sustainable and simple, and to encourage the
effective stewardship that is vital to delivering
our strategy of creating long-term value for all
stakeholders.
We are committed to being open and
transparent in our approach to executive
remuneration and, as a committee, we strive
to keep remuneration arrangements clear,
consistent and simple, to facilitate effective
stakeholder scrutiny. Performance-related
components of remuneration form a significant
portion of the total remuneration opportunity,
with the maximum potential reward only
available through the achievement of stretching
performance targets based on measures that
the committee believes reflect the interests of
shareholders.
The extent of their responsibilities means
executive directors are well paid, but the policy
is designed to, among other things, ensure that
they are not overpaid. Reference points such
as the ratio of the chief executive’s pay to the
median pay for all employees and the policy for
wider workforce remuneration are important to
us, in addition to the use of external benchmark
data when considering executive pay levels. In
determining the remuneration of the executive
directors and senior managers, we consider
the performance of the business during the
financial year in question and over the longer
term, as well as the experience of our different
stakeholder groups. We are committed to being
open and transparent in our approach.
2021 consultation with shareholders
During the year, the committee consulted with
Morgan Sindall’s largest shareholders on two
proposed amendments: an amendment to the
methodology used to calculate the achievement
of the earnings per share (EPS) targets under the
2019, 2020 and 2021 LTIP cycles, and a lowering
of the pension contributions for executive
directors to align them with the broader
workforce rate. The sections below provide
further details on the proposed amendments,
the feedback received and our decision-making
process in both of these areas.
Amendment to LTIP EPS targets
As set out in the 2020 remuneration report, the
executive directors and wider leadership team
responded quickly to adapt to the new trading
environment created by the pandemic. The
Group continued to deliver shareholder value
during 2020, the first year of the pandemic, and
we were able to distribute an interim dividend
of 21p in December 2020 and a final dividend
of 40p in May 2021, significantly higher than
the 2019 total dividend of 21p. We achieved
an adjusted* profit before tax (PBTA*) of
£63.9m for 2020 – significantly higher than our
peers – and repaid all deferred taxes, monies
received under the furlough scheme and
employees who had voluntarily taken a salary
reduction (excluding the Board and the Group
management team). Our revenue over the past
three years has increased from £3,071m in 2019
to £3,213m in 2021, with PBTA* increasing from
£90.4m to £127.7m over the same period.
* See note 2 to the consolidated financial statements for
alternative performance definitions and reconciliations.
Strategic report
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Financial statements
Directors’ remuneration report: remuneration committee report continued
Despite this strong performance, executive directors’ total remuneration fell by 58% in 2020 as a
result of voluntary reductions in salary, no payout under the annual bonus scheme, and a significant
decrease from previous years in vesting levels for the 2018 LTIP. No adjustments were considered by
the committee, recognising both investor and broader stakeholder sentiment at the time.
The Group’s strong performance continued throughout the whole of 2021, resulting in a total
shareholder return (TSR, being share price growth plus dividends) of 69.6% being achieved this year
(which brings our total return to shareholders over the last five years to almost 300%, around 7 times
that delivered through an investment in the FTSE 250).
However, unlike at many comparable companies which have also recovered well from the lows
of the pandemic, our use of cumulative EPS targets (which capture EPS in every year of the three-
year performance period) in the LTIP would have had a disproportionate and unfair impact on the
experience of our executives over the next couple of years compared to peers, our shareholders and
wider stakeholders.
Consequently, in order to acknowledge the exceptional circumstances created by the pandemic
and ensure that executives remain adequately incentivised, the committee consulted with major
shareholders on amending the calculation of EPS performance targets for outstanding LTIP awards
from cumulative to point-to-point (i.e. capturing EPS in the final year of the three-year performance
period), with the revised targets continuing to be based on the same 6–13% p.a. growth used to
determine the original cumulative targets. A similar adjustment has been approved by the committee
in respect of other below-Board LTIP participants, as well as for other employees who are participants
in our Share Option Plan.
The table below sets out the current cumulative EPS targets alongside the new EPS targets, calibrated
on a point-to-point basis (i.e. based on EPS in the final year of the performance period).
Current targets
Cumulative EPS over the three-
year performance period (based
on the sum of EPS in all three years)
Threshold
512p
543p
450p
Stretch
584p
620p
485p
New targets
Point-to-point (based on EPS in only the
final year of the performance period)
Threshold
180.8p
192.0p
197.7p
Stretch
219.0p
232.6p
239.5p
LTIP award
2019 award
2020 award
2021 award
Under the revised approach, to avoid taking advantage of a low start point in 2020 for the 2021
awards, a ‘normalised’ 2020 EPS of 166.0p was used as the base for calculating the EPS growth for the
2020–2023 cycle (calculated using the mid-point between the Group’s forecast EPS in the February
2020 management accounts of 166.3p and the broker market consensus forecast as at February
2020 of 165.6p).
This is significantly higher than our actual 2020 EPS of 108.6p, and ensures that our new targets for
the 2020 award remain extremely stretching, being c53% higher than that if we had used the actual
EPS for 2020, and equivalent to 22% to 30% p.a. growth on actual 2020 EPS.
For the committee, the final decision around the EPS targets centred around two important – but in
this instance, competing – principles for executive pay:
(i) alignment of outcomes for executives, shareholders and broader stakeholder groups; and
(ii) avoiding making retrospective changes to the terms of awards. Both of these principles are clearly
important to investors, as evidenced by the range of feedback received.
Our view is that the committee is ultimately responsible for ensuring that the approach to
remuneration taken is fair and balanced, and both incentivises and rewards the delivery of our
strategy, to the benefit of all stakeholders.
Taking this into account, and following a robust discussion at its December 2021 meeting, the
committee unanimously supported the decision to proceed with the proposed amendments to EPS
targets. In addition, the committee’s other considerations in making this amendment included:
Although cumulative measurement rewards sustained growth, a single ‘bad’ year can impact the
vesting of three LTIP cycles, rather than a single cycle using point-to-point measurement. This is
appropriate where the downturn in performance is a result of management actions, but more
difficult to justify where it has been driven by factors outside of management’s control.
The growth rate on which the amended targets are based are no less challenging than originally
disclosed or intended.
Based on consensus estimates at the time of contemplating the proposals, moving to a point-
to-point measurement would mean that all outstanding LTIP cycles would have some chance of
vesting, thereby reinforcing a continued focus on growth. Our analysis at the time suggested that
the amendment would move anticipated vesting from either 0% (2019, 2020 cycle) or 100% (2021
cycle), to between 25% and 83% of maximum.
127 _ Morgan Sindall Group plc Annual Report 2021
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Financial statements
Directors’ remuneration report: remuneration committee report continued
The possible future outcomes on the EPS
metric for these cycles, following this revision,
correlate very well with the possible future
outcomes also on the LTIP TSR metric, as our
TSR performance against our benchmark
shows significant outperformance based on
our performance to the end of 2021 (see
chart below).
For the avoidance of doubt, no change is being
made to the TSR conditions for these LTIP cycles.
Shareholder return
to 31 December 2021
350
300
250
200
150
100
50
0
Last five years
Last three years
Last 12 months
Morgan Sindall
FTSE 250 xIT
In total, the committee received feedback from
11 shareholders during its consultation, with
the majority of respondents supportive of the
proposal and the underlying rationale for making
this adjustment. Opposition to the proposal
included two of our top ten shareholders,
with some respondents offering alternative
suggestions to the committee, including the
award of an exceptional LTIP in 2022.
The committee recognises that some investors
prefer to avoid any revisions to outstanding
incentive targets, and instead for discretion to
be applied only at the end of the performance
period. The committee considered, but had to
reject, this alternative approach as the LTIP
128 _ Morgan Sindall Group plc Annual Report 2021
rules, as currently drafted, do not permit the
application of upwards discretion, only the
ability to alter the performance condition if the
committee considers it appropriate.
The committee appreciates that some
shareholders may not support this decision or
may be wary about setting a precedent in this
area. However, our hope is that most investors
will see this amendment as it is intended by the
committee: a one-off adjustment to correct for
an exceptional, unforeseen event which our
remuneration structures were not designed
to accommodate, and which produces a fair,
equitable and aligned outcome for executives
and other stakeholders in a period during which
a very strong performance has been delivered.
2021 remuneration
2021
2020
2019
Revenue
£3,213m £3,034m £3,071m
Profit
before tax
adjusted*
Average
daily net
cash
Earnings
per share*
Share
price (end
of year)
£127.7m £63.9m
£90.4m
£291.4m £180.7m £108.9m
226.0p
108.6p
161.2p
£25.20
15.32p
16.20p
Changes to executive director
pension contributions
* See note 2 to the consolidated financial statements for
alternative performance definitions and reconciliations.
In light of recent changes in market practice
that seek to align the interests of executives,
shareholders and wider stakeholders, the
committee also consulted with investors on a
proposal to lower the pension level for current
executive directors to that offered to the
majority of employees (currently 6% of salary)
from 1 January 2023. The committee received
only positive feedback from shareholders on this
change, and accordingly we will be proceeding
with the harmonisation of pension contributions
at the end of the 2022 financial year.
Separately, the Group is currently undertaking
a review of pension contributions for all
employees across its different divisions, which
will be concluded in 2022. Regardless of the
outcome of this review, the committee will
maintain the principle of alignment between the
offering to executive directors and that to the
majority of employees going forward.
The Group has delivered a very strong
performance in 2021, delivering EPS growth
of 49% since 31 December 2018 (2018 EPS:
151.8p), which reflects our responsible business
approach, the quality of the work we have
won and our operational delivery. We have
been able to provide further support to some
of the vulnerable communities in which we
operate and have made long-term investments
to address the impact of climate change.
The strength of our balance sheet and cash
generation have remained high priorities for the
Board, enabling us to continue to do the right
thing for all stakeholders and ensure that we
select the right construction contracts and invest
in long-term regeneration schemes that will
secure future earnings.
Throughout the year, the directors have
continued to focus on our strategy, ensuring that
the business is in the best position financially
to withstand economic uncertainty, and able to
take advantage of opportunities as and when
they arise. Reflecting these positive results, the
executive directors will each receive a bonus of
125% of salary, of which 30% will be deferred
in shares for three years. LTIP awards granted
in 2019, which vest on three-year performance
to 31 December 2021 (two thirds on EPS and
one third on relative TSR), will vest at 100%. The
committee satisfied itself that this outcome
reflected the underlying performance of the
business over the relevant period.
The committee has not exercised its discretion
in respect of the annual bonus payable to
the executive directors for the year. As stated
above, the committee has amended the basis of
calculation for the EPS performance condition
for the 2019, 2020 and 2021 LTIP awards from
cumulative to point-to-point. For the 2019 cycle,
the committee is reassured that the amended
EPS target, which resulted in full vesting, was
also reflected in the relative TSR outcome,
which for the three-year period resulted in full
vesting on the basis of the Group materially
outperforming its peers and the full vesting TSR
level required under the LTIP.
ESG metrics
The committee has again reviewed whether
or not to introduce environmental, social and
governance (ESG) metrics to the incentives for
executive directors. ESG remains integral to the
delivery of our strategy and long term success;
however, the committee does not currently
believe that introducing explicit ESG metrics to
the incentives for the executive directors and
the wider Group would have any material impact
on their continuing to deliver against our Total
Commitments.
Strategic report
Governance
Financial statements
Directors’ remuneration report: remuneration committee report continued
In order to maintain a clear, transparent,
well-understood remuneration structure,
the committee has decided that additional
ESG performance conditions should not be
included in the incentives this year. However,
the committee has resolved to consider this
in greater detail over the course of the coming
year, and in conjunction with the upcoming
Policy review.
2022 remuneration
In setting the remuneration for 2022 for
the executive directors and the Group
management team, the committee considered
the remuneration offered to employees as a
whole and proposed changes. This included
considering the structure of remuneration
offerings within each division to ensure there
remains a strong rationale for how packages
evolve across the different levels of the
organisation. No material changes were made
to the remuneration structures in the divisions
during the year.
Although the committee has not engaged
directly with employees on remuneration, it
reviewed feedback received by the divisions
on remuneration at their employee forums.
Only a few employees raised questions about
remuneration and no fundamental concerns
were raised. The majority of questions related to
the pension arrangements and benefits offered.
The committee will trial a process for engaging
with employees on remuneration in 2022.
In addition to competitiveness and fairness
being a core principle of the remuneration
policy, there is a clear culture in the Group of
ensuring we offer competitive and fair pay to
all employees. Five of our businesses currently
pay the real living wage or above (two of
whom are accredited Living Wage Foundation
129 _ Morgan Sindall Group plc Annual Report 2021
employers). Our other three businesses are
looking to ensure that their direct employees
are paid the real living wage or above in 2022.
The committee also takes into consideration
the appropriateness of key pay ratios, including
the chief executive pay ratio. Full details can be
found on page 150.
Salaries of both the chief executive and finance
director will be increased by 3% with effect
from 1 January 2022, in line with the broader
workforce across the Group. Slightly higher
increases have been budgeted in one of the
Group’s divisions, reflecting a broader talent
review and the roll-out of a revised salary
matrix. The pension contribution for executive
directors will remain at 10% of salary for 2022,
to be reduced to 6% of salary with effect from
1 January 2023, and no changes have been
made to benefit provisions.
The executive directors will be eligible for an
annual bonus of up to 125% of basic salary, of
which 30% will be subject to deferral in shares
for three years. The bonus targets for 2022
are again based on adjusted profit before tax*
(PBTA*) for consistency and simplicity. For 2022,
the bonus trigger point for the annual bonus
will be 90% and the maximum trigger point will
change to 110% of budgeted PBTA*. Full details
of the targets will be disclosed in the 2022
remuneration report.
Executive directors will each receive LTIP awards
in 2022 equivalent to 150% of basic salary.
Any LTIP shares that vest will be subject to a
further two-year holding period post-vesting. For
2022, the committee will use a point-to-point
calculation for the EPS metric (two thirds of the
award), with a threshold 2024 EPS target of
226p and a stretch target of 259p. This range
has been determined through consideration
of a number of internal and external reference
points, including the very strong performance
in 2021, broker forecasts for the next three
years and typical growth rates in our sector.
In respect of the TSR metric (one third of the
award), the performance range will again
be median to median plus 10% per year
outperformance versus the constituents of the
FTSE 250 (excluding Investment Trusts) Index.
The committee believes that the stretch targets
are broadly equivalent to an upper quartile level
of performance.
Looking ahead
The 2023 AGM will mark the third anniversary
of the adoption of the current directors’
remuneration policy, which received 97.4%
support when passed at our 2020 AGM. In
accordance with UK reporting regulations,
we will be required to submit a new Policy to
shareholders for approval at this time. The
committee is therefore planning to conduct
a full review of the existing remuneration
arrangements during 2022 and will look to
engage major shareholders to seek their input
later in the year.
We will continue to monitor corporate
governance and market practice developments
throughout the 2022 AGM season, and will
consider the appropriateness of any emerging
trends for the Group.
In conclusion, the committee believes that,
overall, we have maintained a balanced and
considered outcome in respect of remuneration
with a clear link between performance and
reward. The remuneration outcomes, as
outlined throughout the report, clearly reflect
the factors detailed in provision 40 of the UK
Corporate Governance Code (see page 142 for
further information).
We value the support which shareholders
have provided, as reflected in the vote on
remuneration at our 2021 AGM which received
98.4% support. We hope to continue to receive
your support at the forthcoming AGM on
5 May 2022.
Tracey Killen
Chair of the remuneration committee
24 February 2022
Remuneration policy 133
Ensuring transparency of the remuneration policy
142
Annual report on remuneration 143
Single total figures of remuneration 143
Outstanding interests under share schemes 146
Other disclosures 148
Implementation of the remuneration policy for
2022 152
Strategic report
Governance
Financial statements
Directors’ remuneration report continued
Remuneration philosophy
The key principles of our approach to executive remuneration are to ensure that it:
aligns management and shareholder interests;
is competitive in the marketplace;
helps retain and motivate executive directors of the calibre required in order to deliver the
Group’s strategy; and
rewards growth in earnings over the long term, thereby driving growth in value to our
shareholders.
Chief executive
remuneration
Gender pay
gap reporting
£2,765,6471
single figure 2021
(2020: £1,094,909) (see page 143)
30%
mean gender pay gap
(2020: 30%2)
153%
change in total remuneration
from 2020
(2020: -58%)
100%
change in annual bonus received
from 2020
(2020: -100%)
100%
of 2019 LTIP award vesting
(2020: 43%)
30%
median gender pay gap
(2020: 29%2)
57%
mean bonus gap
(2020: 62%)
36%
median bonus gap
(2020: 42%)
For further information see
page 23.
Remuneration
across the Group
543,700,000
spend on total pay
(2020: £508,900,000)
87%
of employees received a pay increase
(2020: 69%)
3%
average pay increase across the Group
(2020: 2%)
71%
of employees received a bonus
(2020: 63%)
£9,577
average bonus paid
(2020: £7,155)
1 In 2020, the chief executive took a voluntary 20% reduction in base salary and pension contributions for a three-
month period from 1 April 2020 to 30 June 2020.
2 This figure was calculated using the methodology set out in the Gender Pay Gap Regulations; however, it was based
on our November 2020 payroll data rather than our April 2020 payroll data, which was the payroll period we are
required to report on under the Regulations. Based on the Group’s payroll data as at April 2020, the 2020 mean
and median gender pay were 33.7% and 33.6% respectively; however, the April data was impacted by the number
of people across the Group who had agreed to reduce their salaries for either two or three months to 30 June 2020
and the number of people on furlough. The November payroll data was not distorted by Covid-related measures and
therefore paints a more accurate picture.
130 _ Morgan Sindall Group plc Annual Report 2021
Summary of 2021
executive remuneration
John Morgan
(£m)
Steve Crummett
(£m)
2,766
3,000
2,500
2,000
1,500
1,000
500
2,210
2,500
2,000
1,500
1,000
500
1,095
878
0
2021
2020
0
2021
2020
Basic salary
Benefits
Pension allowance
Annual cash bonus paid in cash
Annual cash bonus deferred into shares
547
26
55
478
205
509
25
51
–
–
436
25
44
382
163
406
24
41
–
–
Value of long-term incentives vested
1,455
510
1,160
407
John Morgan
Fixed pay
Annual bonus
LTIP
Total
Steve Crummett
Fixed pay
Annual bonus
LTIP
Total
2021 Maximum
(excluding share
price growth)
£000
2021 Actual
(excluding share
price growth)
£000
2021 Actual
(including share
price growth)
£000
628
683
803
2,113
505
545
640
1,689
628
683
803
2,113
505
545
640
1,689
628
683
1,455
2,766
505
545
1,160
2,210
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Financial statements
Directors’ remuneration report: remuneration philosophy continued
2022 remuneration
The table below shows how we intend to operate the policy in 2022. The structure of the executive remuneration package ensures that executive directors have a vested interest in delivering performance over
the short and long term. The table below sets out how each element of remuneration links to strategy and the performance and retention periods for each:
Element
Link to strategy
Maximum
2022
2023
2024
2025
2026
2027
Fixed pay
Salary
Supports the attraction and
retention of the best talent.
Any increases are generally
in line with those for the
workforce as a whole.
Chief executive
£563,150 (+3%);
finance director
£449,150 (+3%).
Benefits
Pension
Market-competitive and cost-
effective benefits supports the
attraction and retention of talent.
Market-competitive.
Benefits provided.
10% of basic salary.
Pension paid.
Variable pay Annual bonus
Incentivises delivery of financial
and strategic targets.
Focuses on key financial metrics
and the individual’s contribution
to the Group’s performance.
125% of salary with 30%
of any bonus earned
deferred.
Targets for annual
cash bonus set at
start of the year.
Cash element of
bonus paid (up
to 70% of bonus
earned).
Nil cost options
issued (at least
30% of bonus
earned).
Nil cost options
vest.
LTIP
Rewards consistent long-term
performance in line with the
Group’s strategy.
Provides focus on delivering
superior long-term returns to
shareholders.
150% of salary.
LTIP awards
granted in March.
LTIP performance
conditions tested
Holding period
ends.
Additional
governance
Recovery and
withholding
Share
ownership
requirement
Post-
employment
All incentives.
Malus and clawback: misstatement, serious misconduct, error in calculation, corporate failure.
Ensures alignment between the
interests of executive directors
and shareholders.
200% of salary.
LTIP and deferred bonus
plan shares.
Holding requirement for LTIP shares and net deferred bonus nil cost options that have not vested or been
exercised. Required to hold equivalent of 200% of salary for year one post-employment, reducing to 100% of
salary in year two.
131 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ remuneration report: remuneration philosophy continued
Remuneration policy and practice
The table below illustrates how remuneration policy and practice compare across the different groups of employees.
Executive directors
Group management
team
Senior management
Wider workforce
Salary
Benefits
Pension
Short-term incentive
Long-term incentive
Basic salary levels take into
account market-competitive
levels. Any increases are normally
in line with those for the wider
workforce.
A range of market-competitive
benefits are offered in line with
the wider workforce.
Up to 10% of salary employer
contribution to the Morgan Sindall
Retirement Savings Plan (‘the
Retirement Plan’). For incumbent
executive directors, the
contribution will be reduced to the
wider workforce rate (currently 6%
of salary) from 1 January 2023.
Annual cash bonus plan linked
100% to Group performance. 30%
of the total award is deferred in nil
cost options.
Annual cash bonus plan linked
100% to divisional or Group
performance.
The LTIP is a share award with
performance linked to three-year
EPS and TSR performance
Basic salary levels are set in line
with market requirements or
subject to industry-wide working
rule agreements where applicable.
A range of market-competitive
benefits are offered. Individual
benefits received depend on role
and seniority.
Five of our businesses pay
employees the real living wage
or above. Construction and
Property Services are Living Wage
Foundation accredited employers.
Varies by division. Typical
employer contribution of 6% of
salary. Monthly-paid employees
are offered the Retirement Plan
and weekly-paid employees are
offered the opportunity to join
the B&CE’s People’s Pension. Both
plans are defined contribution.
Weekly-paid employees are
offered contributions in line
with the industry working rule
agreements.
Divisional or Group annual
cash bonus plan linked to
both business and personal
performance.
Senior management may be
offered share options under the
2014 Share Option Plan (2014
SOP).
Depending on role, a proportion
of employees will participate
in their divisional or the Group
annual cash bonus plan linked to
a mix of business and/or personal
performance.
Depending on role, employees
may be invited to participate in
the 2014 SOP. All employees
are invited to participate in the
Savings-Related Share Option
Plan.
132 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ remuneration report continued
Remuneration policy
This part of the report sets out the Company’s policy for the remuneration of executive and non-executive directors (referred to as either ‘the remuneration policy’ or ‘the policy’). The policy is determined by the
remuneration committee and is not subject to audit by the external auditor. The policy was last approved by shareholders at the 7 May 2020 AGM and received 97.41% of votes in favour. The policy is designed
to be straightforward and sustainable, and to encourage the effective stewardship that is vital to delivering our strategy of creating long-term value for all stakeholders. It promotes long-term sustainable
performance through significant deferral of remuneration in shares. Executive directors are expected to build and maintain substantial personal shareholdings in the business. The extent of their responsibilities
means executive directors are well paid, but the policy is designed to, among other things, ensure that they are not overpaid. The committee did not formally consult with employees in respect of the design of
the remuneration policy but will keep this under review.
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
There is no prescribed maximum annual increase.
Not applicable.
Current salary levels are presented on page 143.
The value of benefits is based on the cost to the
Company and is not predetermined.
Not applicable.
The travel allowance is £17,000.
Base salary
To provide competitive fixed
remuneration.
To attract, retain and motivate executive
directors of the calibre required in order
to deliver the Company’s strategy and
enhance earnings over the long term.
Benefits
To provide market-competitive levels of
benefits, including insured benefits to
support the individual and their family
during periods of ill health, accidents or in
the event of death.
Car or travel allowances to facilitate
effective travel.
Basic salary is reviewed annually by the committee or, if
appropriate, in the event of a change in an individual’s
position or responsibilities.
Salary levels are set by reference to market rates,
taking into account individual performance, experience,
company performance and the pay and conditions of
other senior management in the Group.
The committee will take into account the general
increase for the broader employee population but
on occasion may need to recognise, for example, an
increase in the scale, scope or responsibility of the role.
Current benefits include:
travel allowance;
private medical insurance;
annual health screening;
ill health income protection insurance;
life assurance;
holiday and sick pay;
employee assistance programme;
professional advice in connection with their
directorship;
travel, fuel, subsistence and accommodation as
necessary; and
occasional gifts, for example appropriate long-service
or leaving gifts.
Other benefits may be provided where appropriate in
line with benefits offered to other employees.
133 _ Morgan Sindall Group plc Annual Report 2021
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Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Pension
To provide a pension arrangement to
contribute towards retirement planning.
The Company will contribute to the defined contribution
pension scheme, The Morgan Sindall Retirement Savings
Plan (‘the Retirement Plan’) or to personal pension
arrangements at the request of the individual.
The Company may also consider a cash alternative (for
example where a director has reached the HMRC’s
lifetime or annual allowance limit).
Annual bonus
Rewarding the achievement of demanding
annual performance metrics.
Performance measures and targets are reviewed
annually by the committee.
70% of any bonus earned is payable in cash and 30%
is normally deferred for three years and satisfied in
Company shares. Dividends accrue during the deferral
period and may be paid in cash or shares at the time of
release.
The committee has discretion: (i) to override the
formulaic outturn of the bonus to determine the
appropriate level of bonus payable where it believes the
outcome is not truly reflective of performance; and (ii) to
ensure fairness to both shareholders and participants.
Any additional measures which may be introduced in the
future would be aligned to our strategy and we would
provide details at the relevant time.
Employer contributions are 10% of base salary
for existing directors. New executive directors
will receive an employer’s contribution in line
with that offered to the majority of employees
(currently 6% of salary).
Directors who are members of the Retirement
Plan may elect to exchange part of their salary or
bonus award in return for pension contributions,
where the Company will enhance the additional
contributions by half of the saved employer’s
National Insurance contribution.
Employer contributions will be aligned with the
majority of employees from 1 January 2023.
The maximum opportunity is 125% of base salary.
Financial targets incorporate an appropriate
sliding scale range around a challenging target.
Target performance will typically deliver up to 50%
of maximum bonus, with threshold performance
typically paying up to 15% of maximum bonus.
Performance targets
Not applicable.
All or a majority of the bonus
will be based on adjusted*
profit before tax (PBTA*),
set relative to the Group’s
budget or such other financial
measures as the committee
deems appropriate.
Financial targets will account
for not less than 80% of the
annual bonus.
A minority of the bonus may
be based on non-financial,
strategic and/or personal
objectives linked to the
strategic objectives of the
Group to provide a rounded
assessment of Group and
management’s performance.
134 _ Morgan Sindall Group plc Annual Report 2021
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Fixed elements
Purpose and link to strategy
Operation
2014 Long-Term
Incentive Plan
(LTIP)
To balance performance pay between
the achievement of financial performance
objectives and delivering sustainable stock
market out-performance.
Annual awards of conditional shares or nil (or nominal)
cost options are granted with vesting dependent on the
achievement of performance conditions over a three-
year period.
Maximum opportunity
150% of base salary.
To encourage share ownership and
provide further alignment with the
interests of shareholders.
Net LTIP shares vesting will typically be subject to a two-
year holding period, creating a total of five years between
the award being granted, and the first opportunity to sell.
Performance targets are reviewed annually by the
committee for each new award. Targets take account
of internal strategic planning and external market
expectations for the Group and are appropriate to
the economic outlook and risk factors prevailing at the
time, ensuring that such targets remain challenging in
the circumstances, while remaining realistic enough to
motivate and incentivise management.
The TSR performance condition is monitored on the
committee’s behalf by its advisers, while EPS is derived
from the Group’s audited financial statements.
Dividends that accrue during the vesting period may,
at the committee’s discretion, be paid in cash or shares
at the time of vesting. The calculation of the dividend
equivalent may assume the reinvestment of dividends.
The committee has discretion: (i) to override the
formulaic outturn of the performance targets to
determine the appropriate level of vesting of the LTIP
where it believes the outcome is not truly reflective
of performance; and (ii) to ensure fairness to both
shareholders and participants.
Any use of committee discretion with respect to waiving
or modifying performance conditions will be disclosed in
the relevant annual report.
135 _ Morgan Sindall Group plc Annual Report 2021
Performance targets
Awards are subject to
performance conditions
based on the Company’s EPS
and on relative TSR compared
to a group of UK-listed peers.
The committee has discretion
to introduce additional
performance condition(s) (to
complement EPS and TSR)
for up to one third of future
awards.
For both the EPS and TSR
conditions, no more than
25% of the awards will vest
for achieving threshold
performance, increasing to
100% vesting for achievement
of stretching performance
targets.
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Fixed elements
Purpose and link to strategy
Operation
All-employee
Savings-Related
Share Option Plan
(‘SAYE’)
To encourage share ownership
and provide further alignment with
shareholders.
This is an HMRC tax-advantaged plan under which
regular monthly savings can be made over a period of
three years and can be used to fund the exercise of an
option to purchase shares.
Maximum opportunity
Prevailing HMRC limits apply.
Performance targets
Not applicable.
The executive directors will be eligible to
participate in any other HMRC all-employee share
plans that may be implemented.
Options are granted at up to a 20% discount.
This scheme is open to all employees including executive
directors.
Non-executive directors receive a basic annual fee
in respect of their Board duties. Additional fees may
be paid to the chairs of the committees and the
senior independent director to reflect their additional
responsibilities. The non-executive directors’ fees are
reviewed by the Board rather than the committee.
The chair receives a fixed annual fee.
Fees are normally reviewed annually. The committee and
the Board are guided by fee levels in the non-executive
director market and may recognise an increase in certain
circumstances, such as assumed additional responsibility
or an increase in the scale or scope of the role.
Non-executive directors are reimbursed for reasonable
expenses and any tax arising on those expenses will be
settled directly by the Company. To the extent that these
are deemed taxable expenses, they will be included in
the annual remuneration report as required.
Non-executive directors may take independent
professional advice relating to their role as a director at
the expense of the Company.
Executive directors are expected to build up and
maintain shareholdings with a value set at 200% of basic
salary.
Until this threshold is achieved there is a requirement for
executive directors to retain no less than 50% of the net
of tax value of vested incentive awards.
For the non-executive directors, there is no
prescribed maximum annual increase.
Not applicable.
The Company’s articles of association (‘the
Articles’) provide that the total aggregate
remuneration paid to the chair of the Company
and non-executive directors will be determined
by the Board within the limits set by shareholders
and detailed in the Company’s Articles.
Not applicable.
Not applicable.
Non-executive
directors’ fees
Set to attract, retain and motivate talented
individuals.
Share ownership
guidelines
To provide close alignment between
the longer-term interests of executive
directors and shareholders in terms of the
Company’s growth and performance.
136 _ Morgan Sindall Group plc Annual Report 2021
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Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Post-employment
shareholdings
To encourage long-term alignment with
shareholders.
The committee requires executive directors to maintain
a level of shareholding for two years after stepping down
from the Board.
Executive directors will maintain the following
shareholdings after they have stepped down from
the Board:
Performance targets
Not applicable.
The committee will retain discretion about the
application of post-employment shareholding guidelines
in individual cases.
For the first 12 months, the lower of:
their shareholding at the time of leaving the
business (excluding individually-purchased
shares); and
200% of basic salary (this being the current
in-post shareholding guideline).
For the second 12 months (i.e. between
12 months and 24 months), the lower of:
their shareholding at the time of leaving the
business (excluding individually-purchased
shares); and
100% of basic salary (this being half of the
current in-post shareholding guideline).
At the end of 24 months, the directors will be free
to sell their remaining shareholding if they wish.
137 _ Morgan Sindall Group plc Annual Report 2021
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Existing arrangements
We will honour existing awards to executive directors, and incentives, benefits and contractual
arrangements made to individuals prior to their promotion to the Board and/or prior to the approval
and implementation of this policy. For the avoidance of doubt, this includes payments in respect of any
award granted under the previous remuneration policy. This will last until the existing incentives vest
(or lapse) or the benefits or contractual arrangements no longer apply. This does not apply to pension
contributions for any newly-promoted executive directors which will be aligned with the rate offered to
the majority of employees on promotion to the Board.
Service agreements
Executive directors
Executive directors have rolling service contracts that provide for 12 months’ notice on either side.
There are no special provisions that apply in the event of a change of control.
John Morgan
Steve Crummett
Date of service contract
20 February 2012
5 February 2013
The Company allows executive directors to hold external non-executive directorships, subject to the
prior approval of the Board, and to retain fees from these roles.
Non-executive directors
All non-executive directors have specific terms of engagement being an initial period of three years
which thereafter may be extended by mutual consent, subject to the requirements for re-election,
the Listing Rules of the Financial Conduct Authority (FCA) and the relevant sections of the Companies
Act 2006.
Appointment
letter date
Month/year
initial three-year term
was extended
Month/year
second three-year
term was extended
Michael Findlay
1 October 2016
October 2019
–
Malcolm Cooper
9 November 2015
November 2018
November 2021
Tracey Killen
5 May 2017
May 2020
David Lowden
10 September 2018
September 2021
Jen Tippin
Kathy Quashie
1 March 2020
1 June 2021
–
The non-executive directors are subject to annual re-election by shareholders.
138 _ Morgan Sindall Group plc Annual Report 2021
–
–
Termination provisions
Current executive directors’ service agreements are terminable on 12 months’ notice. In circumstances
of termination on notice, the committee will determine an equitable compensation package, having
regard to the particular circumstances of the case. The committee has discretion to require notice to
be worked or to make payment in lieu of notice or to place the director on garden leave for the notice
period. In respect of new hires, the initial notice period for a service contract may be longer than the
policy of a 12-month notice period, provided it reduces to 12 months within a short space of time.
In case of payment in lieu or garden leave, base salary, accrued holiday, employer pension
contributions and employee benefits will be paid for the period of notice served on garden leave or
paid in lieu. The committee will endeavour to make payments in phased instalments and to apply
mitigation in the case of offsetting payments against earnings elsewhere.
If a director leaves under a settlement agreement, life assurance cover may continue for up to
three months after a director leaves the Company, subject to the director not obtaining alternative
employment. In addition, the Company may agree that a director will remain covered under the
private medical scheme until the next policy renewal date or if a director is mid-treatment at their
leaving date until the course of treatment is concluded. The same provisions are available to all
employees in the Company who receive these benefits.
The annual bonus may be payable in respect of the period of the bonus scheme year worked by
the director; there is no provision for an amount in lieu of bonus to be payable for any part of the
notice period not worked. The bonus would be payable at the normal date. Leavers would normally
retain deferred bonus shares, albeit release would normally be at the end of the deferral period, with
committee discretion to treat otherwise.
Long-term incentives granted under the LTIP will be determined by the LTIP rules which contain
discretionary good leaver provisions for designated reasons (that is, participants who leave early on
account of: injury; disability; death; a sale of their employer or business in which they were employed;
statutory redundancy; retirement; or any other reason at the discretion of the committee). In these
circumstances, a participant’s awards will not be forfeited on cessation of employment and instead
will vest on the normal vesting date. In exceptional circumstances, the committee may decide that the
participant’s awards will vest early on the date of cessation of employment. In either case, the extent
to which the awards will vest depends on the extent to which the performance conditions have been
satisfied and a pro rata reduction of the awards will be applied by reference to the time of cessation
(although the committee has discretion to disapply time pro rating if the circumstances warrant it).
Leavers would normally retain vested LTIP shares subject to a holding period and these would
normally be released at the end of the holding period with committee discretion to treat otherwise.
Where an executive director leaves by mutual consent, the Company may reimburse reasonable legal
fees and tax advice costs, and pay for professional outplacement services.
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Directors’ remuneration report: remuneration policy continued
Recruitment remuneration
The committee considers the need to attract, retain and motivate the best person for each position, without paying more than is necessary.
External appointments
For external appointments, the committee would seek to align the remuneration package with the remuneration policy approved by shareholders, as follows:
Fixed elements
Base salary
Pension
Benefits
Annual bonus
LTIP
SAYE
Approach
The base salaries of new executive directors will be determined by reference to relevant market data, experience and skills of the individual,
internal relativities and their current basic salary. In the event that the committee elects to set the initial basic salary of a new appointee below
market, any shortfall may be managed with phased increases over a period of two to three years subject to the individual’s development in the
role.
New executive directors will receive Company contributions or cash alternative in line with that offered to the majority of employees (currently
6% of salary).
New executive directors will be eligible to receive benefits which may include (but are not limited to) travel allowances, private medical
insurance, ill health income protection insurance, health screening, employee assistance programme, life assurance, holiday and sick pay,
professional advice in connection with their directorship, travel, subsistence and accommodation as necessary, occasional gifts, for example
appropriate long-service or leaving gifts, and any necessary relocation and/or incidental expenses.
The Company may offer a cash amount on recruitment to reflect the value of benefits a new recruit may have received from a former
employer.
Maximum annual
grant value
The structure described in the policy table will apply to new executive directors, with the maximum opportunity being pro-rated to reflect the
proportion of the financial year served.
125% of base salary
New appointees will be granted awards under the LTIP on the same terms as other executives, as described in the policy table.
150% of base salary
New appointees will also be eligible to participate in all-employee share schemes.
Shareholding guidelines
New executive directors will be expected to build up a shareholding equivalent to 200% of basic salary in accordance with the terms set out in
the policy table.
Post-employment shareholding
The structure in the policy table will apply to new executive directors.
In determining appropriate remuneration, the committee will take into consideration all relevant factors to ensure that arrangements are in the best interests of both the Company and its shareholders. The
committee may additionally make awards or payments in respect of deferred remuneration arrangements forfeited on leaving a previous employer.
The committee will look to replicate the arrangements being forfeited as closely as possible and, in doing so, will take account of relevant factors, including the value of deferred remuneration; the performance
conditions; and the time over which they would have vested or been paid. Any such arrangements would typically have an aggregate fair value no higher than the awards being forfeited.
139 _ Morgan Sindall Group plc Annual Report 2021
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Internal promotion
In cases of appointing a new executive director
by way of internal promotion, the committee will
act in a manner consistent with the policy for
external appointees detailed on page 139 and
the provisions for existing arrangements, as set
out on page 138, will apply.
Shareholders will be informed of the
remuneration package and all additional
payments to a newly-appointed executive
director at the time of their appointment.
Non-executive directors
For the appointment of a new non-executive
director, the fee arrangement would be set in
accordance with the approved remuneration
policy at that time.
140 _ Morgan Sindall Group plc Annual Report 2021
retention of LTIP shares subject to a holding
period for leavers; and
the application of the post-employment
shareholding guidelines.
Malus and clawback
Awards under the annual bonus, the deferred
bonus and the LTIP are subject to malus and
clawback provisions which can be applied to
both vested and unvested awards. Clawback
provisions will apply for a period of three years
post vesting. Circumstances in which malus
and clawback may be applied include: for
overpayments due to material misstatement
of the Company’s financial accounts; gross
misconduct on the part of the award-holder; an
error in calculating the vesting outcomes; or in
the event of corporate failure. Participants in the
Company’s LTIP and deferred bonus scheme are
required to acknowledge their understanding
and acceptance of malus and clawback
provisions prior to receiving their awards.
The committee is satisfied that the recovery
provisions are enforceable.
Overview of remuneration
policy for other employees
While our remuneration policy follows the
same fundamental principles across the
Group, packages offered to employees reflect
differences in role and seniority. For example,
the remuneration package elements for our
Group management team are essentially the
same as for the executive directors with some
minor differences, such as lower levels of share
awards and a lower shareholding requirement.
Employees across the Group below Board level
may be eligible to participate in an annual bonus
arrangement. Long-term incentive awards
and/or discretionary share options may be
awarded to certain other senior executives and
employees, for which the maximum opportunity
and the performance conditions may vary by
organisational level.
All employees are eligible to participate in the
Group’s SAYE scheme and to join either the
Group’s Retirement Plan or the B&CE’s People’s
Pension. The Group also offers a broad range
of benefits that are open to employees with
eligibility for the different benefits determined
on seniority. Benefits offered include: private
medical insurance; digital GP service; income
protection; child care vouchers; holiday plus
scheme (option to purchase some additional
holiday); death in service; employee assistance
programme; and access to financial education.
Use of discretion
The committee will operate the incentive plans
in accordance with their respective rules, the
Listing Rules and HMRC rules where relevant.
The committee, consistent with market practice,
retains discretion over a number of areas
relating to the operation and administration of
certain plan rules. These include (but are not
limited to) the following:
who participates in incentives;
the timing of grant of awards and/or
payments;
the size of awards (up to plan/policy limits)
and/or payments;
where the result indicated by the relative
TSR performance condition should be
scaled back (potentially to zero) in the event
that the committee considers that financial
performance has been unsatisfactory and/
or the outcome has been distorted due to
the TSR for the Company or any comparator
company TSR being considered abnormal;
measurement of performance in the event of
a change of control or reconstruction;
determination of good leaver status (in
addition to any specified categories) for
incentive plan purposes;
payment of dividends accrued during the
vesting period;
adjustments required in certain circumstances
(for example, rights issues, corporate
restructuring and special dividends);
adjustments to existing performance
conditions for exceptional events so that they
can still fulfil their original purpose;
the release of deferred bonus shares for
leavers;
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Directors’ remuneration report: remuneration policy continued
Remuneration scenarios for the executive directors
The charts below provide an indication of the level of remuneration that would be received by each executive director under the following three assumed performance scenarios:
Below threshold performance
Fixed elements of remuneration only – base salary, benefits and pension
On-target performance
Assumes 50% payout under the annual bonus
Maximum performance1
Assumes 100% payout under the annual bonus (125% of salary)
Assumes 16.7% payout under the LTIP (aligned with threshold performance)
Assumes 100% payout under the LTIP (150% of salary)
1 Maximum shown both with and without the impact of share price appreciation on the potential value of long-term incentive awards. For the purposes of this illustration, three-year share price appreciation is assumed to be 50% in line with the
reporting regulations.
John Morgan
Chief Executive
(£m)
Maximum
+ 50% share
price growth
Maximum
On-target
Minimum
25%
30%
27%
32%
48%
£2,616
39%
£2,194
57%
31%
12%
£1,138
100%
£645
Steve Crummett
Finance Director
(£m)
Maximum
+ 50% share
price growth
Maximum
On-target
Minimum
25%
30%
27%
32%
48%
38%
£2,091
£1,754
57%
31%
12%
£912
100%
£519
0
500
1,000
1,500
2,000
2,500
3,000
£0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
Fixed
Annual bonus
LTIP
Notes:
Base salary levels are as at 1 January 2022.
The value of benefits has been estimated based on amounts received in respect of 2021.
The value of pension receivable is the equivalent of 10% of base salary.
141 _ Morgan Sindall Group plc Annual Report 2021
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Directors’ remuneration report: remuneration policy continued
Ensuring transparency of the remuneration policy
The following table summarises how the remuneration policy fulfils the factors set out in provision 40 of the 2018 UK Corporate Governance Code.
Criteria
Clarity
Remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce.
Simplicity
Remuneration structures should avoid
complexity and their rationale and operation
should be easy to understand.
Risk
Remuneration arrangements should ensure
that reputational and other risks arising from
excessive rewards, and behavioural risks that
can arise from target-based incentive plans, are
identified and mitigated.
Predictability
The range of possible values of rewards to
individual directors and any other limits or
discretions should be identified and explained at
the time of approving the remuneration policy.
Proportionality
The link between individual awards, the delivery
of strategy and the long-term performance of
the Company should be clear. Outcomes should
not reward poor performance.
Alignment to culture
Incentive schemes should drive behaviours
consistent with company purpose, values and
strategy.
142 _ Morgan Sindall Group plc Annual Report 2021
How the Company fulfils the criteria
Example
The committee is committed to providing open and transparent disclosures to shareholders, employees and
other stakeholders with regard to executive remuneration arrangements. The committee determines the
remuneration policy and agrees the remuneration of each executive director and the Group management team.
The annual bonus plan is based on PBTA*
which aligns with the published accounts.
The committee reviews the effectiveness of the remuneration policy and its alignment with strategy annually,
unless circumstances require additional review. The annual bonus plan, deferred bonus plan, 2014 LTIP and 2014
SOP are established by the committee and kept under regular review.
The remuneration report sets out the remuneration arrangements for the executive directors in a clear and
transparent way. We encourage shareholders to ask questions at the AGM and we consult with shareholders over
any proposed changes to the policy.
Our remuneration arrangements for executive directors, as well as those for employees across the Group, are
simple in nature and well understood by participants.
The LTIP is based on point-to-point EPS
and TSR.
Remuneration for the executive directors consists of fixed pay (salary, benefits, pension) and variable pay (annual
bonus plan and long-term incentive plan). No complex structures are used in our variable pay plans.
Targets are reviewed annually to ensure they are suitably stretching and do not encourage excessive risk taking.
Malus and clawback provisions also apply to both the annual bonus and long-term incentive plans.
The PBTA* and EPS targets are based on
the latest budget and market consensus.
Members of the committee are provided with regular briefings on developments and trends in executive
remuneration.
The possible reward outcomes can be easily quantified, and these are reviewed by the committee annually. In
addition, performance is reviewed regularly so there are no surprises at the end of period assessment.
The potential value and composition of the executive directors’ remuneration packages at below threshold, target
and maximum scenarios are provided in the remuneration policy.
The remuneration scenarios on
page 141 set out the potential range of
remuneration for the executive directors.
Annual bonus payments and LTIP awards require robust performance against challenging conditions that are
aligned to the Company’s strategy. The committee retains discretion to override formulaic outcomes to ensure
that payments under the variable incentives are appropriate and reflective of overall performance.
To trigger any element of the annual
bonus, 90% of budget must be achieved
and that will only trigger a 15% payment.
The variable incentive schemes and performance measures are designed to be consistent with the Group’s
purpose, values and strategy.
At the heart of the policy is a focus on the long-term success of the business. This reflects our culture which is
aligned to creating long-term value for all stakeholders.
Our values and unique culture are
critical to the Group’s long-term success.
Remuneration targets will only be
achieved if the Group consistently delivers
on our commitments to all stakeholders.
Strategic report
Governance
Financial statements
Directors’ remuneration report continued
Annual report on remuneration
The information provided in this section of the remuneration report which is subject to audit, has been highlighted.
Single total figures of remuneration (audited)
Executive directors
John Morgan
2021
2020
Steve Crummett
2021
2020
Fixed pay
Variable pay
Fees/basic salary
£000
Benefits
£000
Pension
contributions
£000
Total
fixed pay
£000
Annual
bonuses
£000
Value of long-
term incentives
£000
Total variable pay
£000
Total remuneration
£000
547
509
436
406
26
25
25
24
55
51
44
41
628
585
505
471
683
–
545
–
1,455
510
1,160
407
2,138
510
1,705
407
2,766
1,095
2,210
878
Notes:
The executive directors voluntarily took a 20% reduction in basic salary and pension contributions for a three-month period from 1 April 2020 to 30 June 2020.
Benefits relate to travel allowance, medical benefits, ill health income protection, employee assistance programme and life assurance.
As the market price on the date of vesting for the 2019 awards is currently unknown, the LTIP value shown is estimated using the average market value over the last quarter of 2021 of £23.75. The 2020 comparative figures for the value of the long-term
incentives and total remuneration have been revised from last year’s report to reflect the actual share price used for the vesting and the value of dividend equivalent shares awarded. Awards granted in 2018, which vested based on performance to
31 December 2020, are valued using the mid-market closing price on 5 March 2021, the date prior to the date of vesting (6 March 2021), of £18.00. (The mid-market closing share price on 8 March 2021 was £18.46.)
Annual cash bonus outturn (audited)
Annual bonus figures represent the full amount earned for 2021. Of this amount, 30% will be deferred in nil-cost share options for three years. The table below shows performance against PBTA* targets for
2021 representing 100% of the annual bonus potential:
Group PBTA* at 31 December 2021
Threshold target
£m
77.08
50% target
£m
82.0
Maximum target
£m
86.92
Actual performance
£m
127.7
Percentage
of maximum
%
100
143 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: annual report on remuneration continued
2014 Long-Term Incentive Plan – 2019 award outturn (audited)
Non-executive directors (audited)
LTIP awards granted in 2019 are due to vest on 4 March 2022. As set out in the table below,100% of
the 2019–2021 awards are expected to vest:
Performance condition
Weighting
Threshold
target
(EPS: 12.5%
vest, TSR:
25% vest)
Stretch target
(100% vest)
Actual
performance
Percentage
vesting
Adjusted* EPS in FY21
66.67%
180.8p
219.0p
226.0P
66.67%
Relative TSR (vs. FTSE 250
excluding investment trusts)
33.33%
Median
10% per year
outperformance
of median
22.8% per year
outperformance
of median
33.33%
Kathy Quashie4
Michael Findlay
Malcolm Cooper
Tracey Killen
David Lowden
Jen Tippin3
Fees1
£000
2020
171
65
56
56
38
–
Taxable benefits2
£000
2020
2021
–
–
–
–
–
–
–
–
–
–
–
–
2021
184
70
60
60
50
29
Total
£000
2020
171
65
56
56
38
–
2021
184
70
60
60
50
29
Total vesting
100%
1. The chair and the non-executive directors voluntarily took a 20% reduction in their fees for three months from 1 April 2020 to
As the market price on the date of vesting is currently unknown, the values shown are estimated using
the average market value over the last quarter of 2021 of £23.75, an 81% increase on the share price
at the date of grant of £13.10. Accordingly, c45% of the ‘value of long-term incentives’ figure shown in
the single-figure table on page 143 is a result of share price appreciation, amounting to c£653k and
c£520k for John Morgan and Steve Crummett respectively. As disclosed in the chair’s letter on pages
126 to 128, the committee amended the basis of calculation for the cumulative EPS performance
condition to point-to-point for the 2019 LTIP awards. The committee has not exercised any additional
discretion in respect of the achieved outcomes. The value of 2021 long-term incentives in the single-
figure table on page 143 does not include the value of any dividend equivalent shares that may be due
for the 2019 awards on the date of vesting.
The net awards received (after the deduction of tax and national insurance) will be subject to a
two-year holding period in which the director will not be able to sell the shares but will be entitled to
receive dividends and vote on the shares. The shares will be transferred to the director at the end of
the holding period.
30 June 2020.
2. Taxable benefits include taxable relevant travel and accommodation expenses for attending Board meetings and related
business. Any value disclosed is inclusive of tax arising on the expense, which is settled by the Company.
3. Jen Tippin joined the Board on 1 March 2020.
4. Kathy Quashie joined the Board on 1 June 2021.
The aggregate remuneration for executive and non-executive directors in 2021 was £2.8m (2020:
£1.4m). Aggregate remuneration comprises salary, fees, benefits, pension contributions and bonus
payments.
144 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: annual report on remuneration continued
Share awards granted during the year (audited)
2014 Long-Term Incentive Plan
On 5 March 2021, LTIP awards were made to the executive directors, which will vest subject to performance over the three financial years to 31 December 2023. Of these awards, 67% are subject to an EPS
performance condition and 33% are subject to a TSR performance condition, full details of which are included in last year’s annual report on remuneration.
John Morgan
Steve Crummett
Date of grant
Percentage of
salary awarded
Five-day average share
price at date of grant
5 March 2021
150%
£17.17
No. of shares
over which award
was granted
47,764
38,086
Face value
of award
Percentage of awards
vesting at threshold
£820,108 16.7% (12.5% for EPS element,
25% for TSR element)
£653,937
Performance period
Three financial years to
31 December 2023
As disclosed in the chair’s letter on pages 126 to 128, the committee resolved to amend the basis of calculation for the cumulative EPS performance condition to point-to-point for the 2021 LTIP awards. The
share price used to calculate the awards at the date of grant was based on the average share price for the five dealing days preceding the date of grant. The closing share price on 4 March 2021 was £17.56.
Deferred bonus share options
No annual bonus was earned in 2020 and therefore no deferred bonus share options were awarded in 2021.
145 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: annual report on remuneration continued
Outstanding interests under share schemes (audited)
Details of the executive directors’ interests in long-term incentive awards as at 31 December 2021 and movements during the year are as follows:
Performance shares
Date of award
No. of shares
outstanding as at
1 January 2021
No. of shares
awarded
No. of shares
vested
No. of dividend
equivalent shares
awarded
Total no. of
shares vested
No. of shares
lapsed
No. of awards
outstanding as at
31 December 2020
End of
performance
period
Date awards vest
John Morgan
Total
Steve Crummett
Total
Notes:
6.3.2018
4.3.2019
2.3.2020
5.3.2021
6.3.2018
4.3.2019
2.3.2020
5.3.2021
61,666
61,272
43,297
–
166,235
49,171
48,857
34,524
–
132,552
–
–
–
47,764
47,764
–
–
–
38,086
38,086
26,515
1,826
28,341
35,151
–
31.12.2020
–
–
–
–
–
–
–
–
–
–
–
–
61,272
43,297
47,764
31.12.2021
31.12.2022
31.12.2023
26,515
1,826
28,341
35,151
152,333
21,142
1,456
22,598
28,029
-
31.12.2020
–
–
–
–
–
–
–
–
–
–
–
–
48,857
34,524
38,086
31.12.2021
31.12.2022
31.12.2023
21,142
1,456
22,598
28,029
121,467
6.3.2021
4.3.2022
2.3.2023
5.3.2024
6.3.2021
4.3.2022
2.3.2023
5.3.2024
43% of the awards granted in 2018 vested due to the EPS and TSR targets being achieved. Three-year cumulative EPS for the Group as at 31 December 2020 was 421.6p, which resulted in 33% of the EPS element of the award vesting. The Group also achieved
a TSR of 0.8%, which exceeded the median of the comparator group and resulted in 63% of the TSR element of the award vesting.
Of the awards granted in 2019, 100% vested due to the EPS and TSR targets being achieved. The Group’s 2021 EPS was 226.0p, which resulted in 100% of the EPS element of the award vesting. The Group also achieved a TSR of 29.4% per year, which exceeded
the median of the comparator group by 22.8% per year and resulted in 100% of the TSR element of the award vesting. The net awards received (after the deduction of tax and national insurance) will be subject to a two-year holding period in which the director
will not be able to sell the shares but will be entitled to receive dividends and vote on the shares. The shares will be released to the director at the end of the holding period.
The awards of performance shares over 150% of salary granted in 2020 and 2021 are subject to a point-to-point EPS growth target and a TSR performance condition.
146 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: annual report on remuneration continued
Deferred bonus plan nil-cost options
No. of options
outstanding as at
Date of grant
1 January 2021 No. of options granted
No. of dividend
equivalent shares
awarded
No. of options
exercised
No. of options
lapsed
No. of options
outstanding as at
31 December 2021
Date from which
exercisable
6.3.2018
4.3.2019
2.3.2020
6.3.2018
4.3.2019
2.3.2020
14,967
14,872
9,758
39,597
11,934
11,858
7,781
31,573
–
–
–
–
–
–
–
–
1,031
15,998
–
–
–
–
1,031
15,998
822
–
–
822
12,756
–
–
12,756
–
–
–
–
–
–
–
–
–
14,872
9,758
24,630
–
11,858
7,781
19,639
6.3.2021
4.3.2022
2.3.2023
6.3.2021
4.3.2022
2.3.2023
John Morgan
Total
Steve Crummett
Total
Notes:
The mid-market price of a share on 31 December 2021 was £25.20 and the range during the year was £14.38 to £26.85.
No bonus was earned by the executive directors in respect of the 2020 financial year and, accordingly, no options were awarded under the deferred bonus plan in 2021.
The deferred bonus plan nil-cost share options granted on 6 March 2018 became exercisable on 6 March 2021 and on vesting, each nil-cost option granted carried a right to receive an amount linked to dividends paid. The dividend equivalent was settled
in Ordinary shares of the Company and was added to the original award. The share price used to determine the number of dividend equivalent shares was the closing middle market quotation on 5 March 2021 which was £18.00. The options and dividend
equivalent shares are exercisable until the tenth anniversary of their grant date.
Steve Crummett exercised his options granted on 6 March 2018 and the associated dividend equivalent shares on the 10 March 2021 at a sale price of £17.76 per share.
John Morgan exercised his options granted on 6 March 2018 and the associated dividend equivalent shares on 9 April 2021 at a sale price of £18.72 per share.
147 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report continued
Other disclosures
Remuneration committee meetings
The committee met on six occasions during the year. All members attended each meeting, except
Jen Tippin who missed one meeting due to not being able to attend as a result of pre-existing
commitments in her executive role which could not be changed at short notice. The chair of the
Board attended all meetings of the committee, the chief executive attended three meetings of the
committee, and the company secretary acted as secretary to the committee. The finance director
and Kathy Quashie attended one of the committee meetings. No person was present during any
discussion relating to their own remuneration.
Over the course of the year, the committee received advice on remuneration matters from
remuneration advisers Mercer|Kepler (Mercer) and, following their appointment, Ellason LLP (Ellason).
Ellason were appointed by the committee as the Company’s remuneration advisers in October 2021
following a competitive tender process. The committee has also relied on information and advice
provided by the company secretary and has consulted the chief executive (albeit not in relation
to his own remuneration). Both Mercer and Ellason are signatories of the Code of Conduct for
Remuneration Consultants, details of which can be found at remunerationconsultantsgroup.com, and
the committee is satisfied that the advice it receives – formerly from Mercer and currently from Ellason
– is independent and objective. The fees paid by the Company to Mercer during the financial year up
to their cessation of appointment for advice to the committee in relation to the above were £38,412
(2020: £14,660), on the basis of time and materials. Mercer also provided advice to the Company on
accounting for share awards but provided no other material services to the Company or the Group.
The fees paid by the Company to Ellason from their appointment date during the financial year were
£23,630 (2020: Nil). Ellason provided no other services to the Company or the Group.
Shareholder voting (audited)
At last year’s AGM held on 7 May 2021, the remuneration report (excluding the remuneration policy)
for the year ended 31 December 2020 was approved by shareholders. The following table shows
the results of the advisory vote on the 2020 annual remuneration report as well as the results of the
binding vote on the remuneration policy, which was last approved by shareholders at the 2020 AGM:
Voting for
Number of
shares Percentage
Voting against
Number
of shares Percentage
Total
votes cast
Votes
withheld1
33,718,309
98.36
560,488
1.64
34,278,797
5,623
34,252,837
97.41
911,648
2.59
35,164,485
191,258
Annual
remuneration
report
Remuneration
policy
1 Shareholders who have indicated that they wish to actively abstain from voting are counted as a vote withheld. A vote
withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ and ‘against’ a resolution.
Dilution and share usage under employee share plans
Shares required for the 2007 Employee Share Option Plan are satisfied by shares purchased in the
market via The Morgan Sindall Employee Benefit Trust (‘the Trust’) and shares for the Company’s
other share plans may be satisfied using either new issue shares or market-purchased shares. Our
present intention is to use market-purchased shares to satisfy these awards; however, we retain the
ability to use new issue shares and may decide to do so up to the dilution limits recommended by
the Investment Association (10% of issued ordinary share capital for all employee share plans over a
10-year period and, within this limit, no more than 5% of issued ordinary share capital for executive
or discretionary share plans). The outstanding level of dilution against these limits equates to 8.52%
(2020: 9.13%) of the current issued ordinary share capital under all-employee share plans, of which 0%
relates to discretionary share plans.
As at 31 December 2021, the Trust held 1,051,664 shares (2020: 278,383), which may be used to
satisfy awards.
148 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
Chief executive remuneration and performance graph
Historical pay vs performance
Historical TSR performance
The graph below shows the value to 31 December 2021of £100 invested in the Company on 1 January
2012 compared with the value of £100 invested in the FTSE All-Share Index and the FTSE All-Share
(Construction & Materials Index), these being indices of which the Company has been a constituent
over the period shown. The graph also shows the value of £100 invested in the FTSE 250 Index
(excluding investment trusts), the constituents of which are used for the purposes of the TSR element
of the LTIP. In all cases, the other points plotted are the values at intervening financial year ends.
1
1
0
2
r
e
b
m
e
c
e
D
1
3
t
a
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
700
600
500
400
300
200
100
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Morgan Sindall
FTSE All-Share Index
FTSE 250 Index (excluding investment trusts)
FTSE All-Share Construction and Materials Index GBP
149 _ Morgan Sindall Group plc Annual Report 2021
The graph below shows the TSR and PBTA* for the Company over the last 10 financial years. The chief
executive remuneration table provides a summary of the total remuneration received by the chief
executive over the last 10 years, including details of annual bonus payout and long-term incentive
award vesting level in each year. The annual bonus payout and long-term incentive award vesting level
as a percentage of the maximum opportunity are also shown for each of these years.
700
600
500
400
300
200
100
0
0
1
o
t
d
e
x
e
d
n
i
*
A
T
B
P
d
n
a
R
S
T
1
1
0
2
r
e
b
m
e
c
e
D
1
3
t
a
s
a
3,500
3,000
2,500
2,000
1,500
1,000
500
o
f
r
e
m
u
n
e
r
a
t
i
o
n
(
£
0
0
0
)
J
o
h
n
M
o
r
g
a
n
s
n
g
e
fi
g
u
r
e
l
i
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
0
Morgan Sindall TSR
Morgan Sindall PBTA*
John Morgan single figure
2012
Paul
Smith
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
John
Morgan
Total remuneration £000
1,327
671 507 519 905 1,467 2,447 2,555 2,599 1,095 2,766
Annual bonus percentage
of maximum
Long-term incentive award
vesting percentage of
maximum share awards
Long-term incentive award
vesting percentage of
maximum share options
26
30
–
–
80
100
100
100
93
–
100
49
n/a n/a
–
–
62
100
100
100
43
100
46
46
– n/a n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes:
The 2020 total remuneration has been revised from last year’s report to reflect the actual share price used for the vesting
and the value of dividend equivalent shares awarded under the 2014 LTIP (see page 143 for further information).
John Morgan was appointed chief executive on 5 November 2012, having previously been executive chair. He waived his
bonus entitlement in 2013.
Paul Smith resigned on 5 November 2012 and ceased employment on 31 December 2012.
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
Chief executive pay ratio
Financial year
2021
2020
2019
Chief executive pay ratio
Calculation
methodology
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
B
B
B
60:1
30:1
58:1
53:1
22:1
43:1
32:1
15:1
27:1
The lower quartile, median and upper quartile employees were determined based on the hourly-
rate data as at 5 April 2021, collected for the Group’s reporting under the gender pay gap legislation
(Option B). The gender pay gap data reviews the pay of all UK employees. This calculation methodology
was chosen as the data was readily available from our work in determining the gender pay gap.
Furthermore, with our decentralised business model and significant UK workforce, calculating the
single figure of remuneration for each employee (Option A) would be prohibitively time-consuming
and expensive.
The committee has considered the pay data for the three individuals identified and believes that it
fairly reflects pay at the relevant quartiles among our UK workforce. The three individuals identified
were full-time employees during the year. No adjustments or assumptions were made by the
committee, with the total remuneration of these employees calculated in accordance with the
methodology used to calculate the single figure of the chief executive for the 2021 financial year. The
table below sets out the remuneration details for the individuals identified:
Salary
Basic salary, £k
Total annual pay1 £k
Total pay2 £k
Chief executive
547
1,311
2,766
P25
34
46
46
P50
41
53
53
P75
79
85
85
The ratio of 53:1 is 141% higher than the median ratio of 22:1 in 2020. In 2020, the chief executive
received no annual bonus and only 43% of the long-term incentive awards vested. However, in 2021
the chief executive received 100% annual bonus and 100% of the long-term incentive award vested,
together with the long-term incentive award benefiting from significant share price growth over its
vesting period. For comparison, the pay ratio in 2019 when 93% of the annual bonus was paid and
100% of the long-term incentive awards granted in 2017 vested was 43:1.
None of the median employees in each quartile identified this year received benefits under the
Company’s long-term incentive schemes. With a significant proportion of the pay of our chief executive
linked to the Company’s performance and share price movements over the longer term, it is expected
that the ratio will depend a lot on long-term incentive outcomes each year, and accordingly may
fluctuate. The committee has therefore also produced pay ratios for basic salary and total annual pay
as shown in the table below.
150 _ Morgan Sindall Group plc Annual Report 2021
Ratio
Basic salary
Total annual pay1
Total pay2
P25
16:1
28:1
60:1
P50
13:1
25:1
53:1
P75
7:1
15:1
32:1
1 Total annual pay includes, where applicable, basic salary, annual bonus, pension, travel or car allowance and the cash value of
employee benefits received, such as death in service, private medical, group income protection, EAP, etc.
2 Total pay includes total annual pay plus the cash value of any long-term incentives received under either the 2014 LTIP or the
2014 SOP.
Percentage change in remuneration levels
The table below shows details of the percentage change in base salary, benefits and annual bonus for
the chair, the executive and non-executive directors over the last three financial years, compared to
the average percentage change for other employees of the Group over the same periods.
Percentage change
in base salary
Percentage change
in benefits
2020–21
2019–20
2020–21
2019–20
Percentage change
in bonus payment
2020–21
2019–20
Chair
Chief executive
Finance director
Audit & HSE committee chair
(M Cooper)
Remuneration committee
chair (T Killen)
Senior independent director
(D Lowden)
7.4%
7.4%
7.4%
-2.3%
-2.1%
-2.2%
6.8%
-3.7%
7.0%
-3.4%
7.0%
-3.4%
J Tippin
K Quashie
All employees
30.2%
n/a
2.6%
n/a
n/a
n/a
2.4%
3.2%
n/a
2.6%
-0.2%
n/a
100%
100%
n/a
-100%
-100%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4.8%
1.5%
8.0%
50.6%
-9.1%
The chief executive’s and finance director’s bonus decreased by 100% in 2020 due to the impact of
the Covid pandemic on the Group’s performance which meant that no bonus was paid. The chair,
executive directors and non-executive directors each took a voluntary 20% reduction in fees or salary
(as applicable) for three months from 1 April to 30 June 2020.
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
Relative importance of spend on pay
The table below shows pay for all employees compared to other key financial indicators.
Directors’ interests (audited)
The figures below set out the shareholdings beneficially owned by directors and their family interests
at 31 December 2021.
Employee remuneration
Basic earnings per share (adjusted*)
Dividends paid during the year
Employee headcount1
2021
2020
Change
£543.7m
£505.9m
226.0p
£32.3m
6,666
108.6p
£9.6m
6,736
7%
108%
236%
-1%
1 Employee headcount is the monthly average number of employees on a full-time equivalent basis. More detail is set out in
note 2 to the consolidated financial statements.
Shareholding guidelines (audited)
Through participation in performance-linked share-based plans, there is strong encouragement
for senior executives to build and maintain a significant shareholding in the business. Shareholding
guidelines are in place requiring the executive directors to build and maintain a shareholding in the
Company equivalent to 200% of base salary. Until this threshold is achieved, there is a requirement for
executives to retain no less than 50% of the net of tax value of vested incentive awards.
John Morgan
Steve Crummett
Percentage of salary
required under
shareholding guidelines
Percentage of salary held
at 31 December 2021
200
200
16,038
735
Michael Findlay
John Morgan
Steve Crummett
Malcolm Cooper
Tracey Killen
David Lowden
Jen Tippin
Kathy Quashie
31 December 2021
No. of shares
31 December 2020
No. of shares
4,173
3,479,537
127,098
10,000
611
4,000
1,000
–
4,173
4,106,058
164,579
10,000
611
4,000
1,000
–
There have been no changes in the interests of the directors between 31 December 2021 and
24 February 2022.
External appointments
At the discretion of the Board, executive directors are allowed to act as non-executive directors
of other companies and retain any fees relating to those posts. Neither of the executive directors
currently hold external appointments for which they are remunerated.
The share price used to value the shares as at 31 December 2021 was £25.20.
Payments to past directors or for loss of office (audited)
No payments were made during the year.
151 _ Morgan Sindall Group plc Annual Report 2021
Annual bonus
The maximum annual bonus potential for 2022 will be 125% of base salary with 70% of any bonus
earned paid in cash and the remaining 30% deferred in nil cost share options for three years. To
ensure that management is focused on the Group’s financial performance in 2022, 100% of the bonus
will continue to be based on a PBTA* target range set in relation to the Group budget. The annual
bonus, including the deferred shares, will be subject to malus and clawback provisions.
The targets for the forthcoming year are set in relation to the Group budget, which is considered
commercially sensitive. For 2022, the bonus trigger point for the annual bonus will be 90% and the
maximum trigger point will be 110% of budgeted PBTA*. Retrospective disclosure of the targets and
performance against them will be disclosed in next year’s remuneration report.
Long-term incentives
The committee intends to make awards to the executive directors under the 2014 LTIP in March 2022.
The awards to be granted in 2022 will be up to 150% of base salary. Two thirds of awards (100% of
salary) will be based on an EPS performance target with the remaining one third of awards (50% of
salary) based on the Company’s TSR performance. Further details on these performance conditions
are set out below.
Net shares vesting under LTIP awards granted in 2022 will be subject to a mandatory two-year holding
period at the end of the vesting period. All awards are subject to malus and clawback provisions.
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
Implementation of the
remuneration policy for 2022
Base salaries
In setting the 2022 base salaries, the committee considered the budgeted level of increases in base
salary for senior executives below Board level and the workforce generally, which averaged 3%. The
committee determined that the base salaries for John Morgan and Steve Crummett should increase
by 3% with effect from 1 January 2022. In confirming the salary increases, the committee took account
of the performance of each executive director and their respective responsibilities.
John Morgan
Steve Crummett
From
1 January 2022
£
563,150
449,150
From
1January 2021
£
546,742
435,958
Increase
3%
3%
Pension
The Company contributes up to 10% of base salary to a personal pension plan and/or as a cash
supplement. This is in line with the maximum pension contribution for the employee population.
Consistent with all employees participating in the Retirement Plan, relevant executive directors may
exchange part of their gross salary and bonus awards in return for pension contributions. Where
additional pension contributions are made through the salary exchange process, the Company
enhances the contributions by half of the saved employer’s national insurance contribution.
The majority of employees in the Group are entitled to a company pension contribution of up to 6%
of basic salary if they contribute 6% themselves. Senior employees within the Group are entitled to a
company pension contribution of up to 10% of basic salary as per the executive directors.
Following a review during 2021, and noted in the chair’s statement on page 128, the pension
contributions for existing directors will be aligned with those of the majority of employees from
1 January 2023.
152 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
EPS performance condition (two thirds of award)
TSR performance condition (one third of award)
Our very strong earnings performance in 2021 followed a challenging year in 2020 which was heavily
impacted by the pandemic. In order to set appropriate EPS targets for the 2022 cycle, the committee
considered a number of internal and external reference points, broker forecasts for the Company and
sector peers over the next two to three years, and typical growth rates in our sector. For the awards
granted in 2022, EPS targets will be based on a point-to-point assessment, with a threshold target of
2024 EPS of 226p and a stretch target of 259p. The committee is satisfied this range is appropriately
stretching given forecasts for the sector, and is broadly consistent with the long-term target range of
6–13% p.a. taking into account the recent volatility in EPS.
Vesting of the EPS component will be based on achievement against this range in 2024, and will
also be subject to review by the remuneration committee to ensure vesting is commensurate with
underlying Company performance, taking into account, for example, imposed tax changes.
The vesting range for the EPS targets is shown in the graph below:
ESP performance condition
TSR targets for 2022 awards will be expressed as an outperformance of median as per the last three
cycles.
The TSR comparator group will again be based on the constituents of the FTSE 250 Index (excluding
investment trusts). Full vesting will require 10% per year outperformance of comparator median, a
level which remains broadly equivalent to an upper quartile level of difficulty.
The target range for the TSR performance condition is shown in the graph below:
TSR performance condition
g
n
i
t
s
e
v
d
r
a
w
a
f
o
t
n
e
m
e
e
R
S
T
f
o
%
l
)
d
r
a
w
a
f
o
d
r
i
h
t
e
n
o
(
100%
75%
50%
25%
12.5%
0%
0%
10%
TSR % outperformance of FTSE 250 (excl. investment trust) median (per year)
226p
259p
2024 EPS (pence)
The committee has discretion to scale back (potentially to zero), vesting outcomes under the TSR
element in the event it considers that financial performance has been unsatisfactory and/or the
outcome has been distorted due to the TSR for the Company or any comparator company being
considered abnormal.
g
n
i
t
s
e
v
d
r
a
w
a
f
o
t
n
e
m
e
e
S
P
E
f
o
%
l
)
d
r
a
w
a
f
o
s
d
r
i
h
t
o
w
t
(
100%
75%
50%
25%
12.5%
0%
153 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Directors’ remuneration report: other disclosures continued
Fees for the non-executive directors
The committee determined that the chair’s fee for 2022 be increased by 3%, and the Board deemed
that the base fee for non-executive directors should also be increased by 3% in line with the increase
for wider employees across the Group. There will be no increases to the additional fees made in
respect of committee chairmanship or for acting as the senior independent director. Accordingly, the
annual fees from 1 January 2022 are as follows:
Chair
Non-executive directors
Base fee
Additional fees:
Audit committee chair
Health, safety and environment committee chair
Remuneration committee chair
Senior independent director
2022
£
2021
£
Increase
%
189,110
183,600
51,450
49,932
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
3%
3%
–
–
–
–
Non-executive directors do not receive pension contributions, private medical insurance, group
income protection insurance or life assurance and do not participate in any short-term or long-term
incentive schemes.
This report was approved by the Board and signed on its behalf by:
Tracey Killen
Chair of the remuneration committee
24 February 2022
154 _ Morgan Sindall Group plc Annual Report 2021
Strategic report
Governance
Financial statements
Other statutory information
The directors have pleasure in submitting
the Group’s annual report, together with the
consolidated financial statements of the Group
for the year ended 31 December 2021. This
year, the directors have produced the report in a
digital-first format, after taking into consideration
that the majority of our annual reports are
viewed online and that the requests for printed
copies have steadily declined to a minimal
number.
The strategic report is presented on the inside
front cover to page 85 (inclusive). The directors’
report required under the Act comprises this
report, the directors’ and corporate governance
report and the remuneration report, together
with explanatory notes incorporated by
reference.
The Board has chosen, in accordance with
section 414C (11) of the Act, to include in the
strategic report the following information that
it considers to be of strategic importance that
would otherwise be required to be disclosed in
the directors’ report:
an explanation of the steps the directors
have taken to foster the Company’s business
relationships with suppliers, customers and
others;
employment policies, employee consultation
and involvement;
disclosures concerning employment of
disabled persons;
additional details of the Group’s approach to
diversity and inclusion, and environmental,
social and governance disclosures;
disclosures concerning greenhouse gas
emissions, energy consumption, energy
efficiency action and an intensity ratio
appropriate for our business;
155 _ Morgan Sindall Group plc Annual Report 2021
the likely future developments in the business
of the Group;
detail on principal risks; and
details of research and development activities.
There were no significant events since the
balance sheet date. The management report as
required by the Financial Conduct Authority’s
(FCA’s) Disclosure Guidance and Transparency
Rules (Rule 4.1) comprises the strategic report
which includes the principal risks to our
business.
The table below shows the location in the annual
report of information required to be disclosed
under Rule 9.8.4 R of the Listing Rules (LR):
LR
Relevant information
9.8.4 (4)
Long-term incentive
schemes
9.8.4 (5) Waiver of emoluments by
a director
Page
152
130
9.8.4 (12) Dividend waiver by
Employee Benefit Trust
157
9.8.4 (13) Shareholder waiver of
future dividends
157
Directors
Biographical details are shown earlier in the
directors’ and corporate governance report. The
directors of the Company who served during
the year are shown on pages 143 and 144 in
the remuneration report. Further details of
directors’ contracts, remuneration and interests
in shares of the Company are also given in the
remuneration report.
The rules regarding the appointment and
removal of directors are contained in the
Company’s articles of association (the ‘Articles’).
The Articles require each director to submit
themselves for election by shareholders at
the first AGM after their appointment, and
for re-election every three years thereafter.
Notwithstanding the provisions in the Articles,
in accordance with the Code, all directors retire
and, assuming they wish to continue to stand,
offer themselves for election or re-election at the
Company’s AGM.
Annual general meeting
The AGM of the Company will be held on 5 May
2022 at 10.00am. It is intended that this will be
held as a live event at the offices of Slaughter
and May, One Bunhill Row, London EC1Y 8YY.
The Notice of Meeting is available to view on the
Company’s website in the Investors section at
morgansindall.com.
Powers of directors
Subject to the Articles, the Act and any
directions given by the Company by special
resolution, the business of the Company will be
managed by the Board who may exercise all
the powers of the Company, whether relating
to the management of the business or not. In
particular, the Board may exercise all the powers
of the Company to borrow money, to mortgage
or charge any of its undertakings, property,
assets (present and future) and uncalled capital,
to issue debentures and other securities, and to
give security for any debt, liability or obligation of
the Company or of any third party.
Directors’ indemnities
The Articles entitle the directors of the Company
to be indemnified, to the extent permitted by
the Act and any other applicable legislation,
out of the assets of the Company in the event
that they suffer any loss or incur any liability in
connection with the execution of their duties
as directors. Neither the indemnity nor any
applicable insurance provides cover in the event
that a director (or officer or company secretary
as the case may be) is proved to have acted
fraudulently or dishonestly.
In addition, and in common with many other
companies, the Company had during the year
and continues to have in place appropriate
directors’ and officers’ liability insurance in favour
of its directors and other officers in respect of
certain losses or liability to which they may be
exposed due to their office. The Company has
also indemnified each Board director and certain
directors of its Group companies to the extent
permitted by law against any liability incurred
in relation to acts or omissions arising in the
ordinary course of their duties. The indemnity
arrangements are categorised as a qualifying
third-party indemnity provisions under the Act
and will continue in force for the purposes of the
Act and for the benefit of directors (or officers
or company secretary as the case may be) on
an ongoing basis. The Company also had and
continues to have in place a pension trustee
liability insurance policy in favour of the trustees
of The Morgan Sindall Retirement Savings
Plan in respect of certain losses or liabilities to
which they may be exposed due to their office.
This constitutes a ‘qualifying pension scheme
indemnity provision’ for the purposes of the Act.
Strategic report
Governance
Financial statements
Other statutory information continued
Articles of association
The Company’s constitution, known as ‘the
articles’, is essentially a contract between the
Company and its shareholders, governing many
aspects of the management of the Company.
The articles may be amended in accordance
with the provisions of the Act by way of special
resolution by the Company’s shareholders.
The Company’s articles were updated during
the year to incorporate best practice, including
the requirements of the new UK Corporate
Governance Code, and to increase flexibility in
conducting hybrid (but not exclusively electronic)
shareholder meetings and they were approved
by shareholders at the 2021 AGM. No changes
to the articles of association are being proposed
at this year’s AGM.
Capital structure
During the year, 21,535 ordinary shares were
allotted to satisfy amounts under the Group’s
Savings-Related Share Option Plan.
As at 31 December 2021, the issued share
capital totalled 46,374,873 ordinary shares of
5p each. Further details of the issued share
capital are shown in note 22 to the consolidated
financial statements.
Power to issue and allot shares
At each AGM, the Board seeks authorisation
from its shareholders to allot shares. The
directors were granted authority at the AGM
on 6 May 2021 to allot relevant securities up to
an aggregate nominal amount of £772,625.75.
That authority will apply until the conclusion of
this year’s AGM or close of business on 6 August
2022, whichever is the earlier, and a resolution
to renew the authority will be proposed at this
year’s AGM, as explained further in the Notice
of Meeting to shareholders accompanying this
annual report.
156 _ Morgan Sindall Group plc Annual Report 2021
Special resolutions will also be proposed to
renew the directors’ power to make non-
pre-emptive issues for cash, as explained in
the Notice of Meeting to the shareholders
accompanying this annual report. The Board
confirms that the Company has not used this
authority in the last three years and there are no
immediate plans to make use of this provision.
Rights and obligations
attaching to shares
Subject to applicable statutes, shares may be
issued with such rights and restrictions as the
Company may by ordinary resolution decide
or (if there is no such resolution or so far as it
does not make specific provision) as the Board
as defined in the Company’s Articles may
decide. Subject to the Articles, the Act and other
shareholders’ rights, unissued shares are at the
disposal of the Board.
Subject to the Act, if at any time the share
capital of the Company is divided into different
classes of shares, the rights attached to any
class of shares may be varied with the written
consent of the holders of not less than 75%
in nominal value of the issued shares of that
class (calculated excluding any shares held as
treasury shares), or with the sanction of a special
resolution passed at a separate general meeting
of the holders of those shares.
The rights conferred upon the holders of any
shares shall not, unless otherwise expressly
provided in the rights attaching to those shares,
be deemed to be varied by the creation or issue
of further shares ranking pari passu with them.
Voting
Subject to any other provisions of the articles,
every member present in person or by proxy at
a general meeting has, upon a show of hands,
one vote and, upon a poll, one vote for every
share held by them. In the case of joint holders
of a share, the vote of the senior holder who
tenders a vote, whether in person or by proxy,
shall be accepted to the exclusion of the votes
of the other joint holders and, for this purpose,
seniority shall be determined by the order
in which the names stand in the register of
members in respect of the joint holding (the
first-named being the most senior).
No member shall be entitled to vote at any
general meeting in respect of any share held by
them if any call or other sum then payable by
them in respect of that share remains unpaid or
if a member has been served with a restriction
notice (as defined in the articles) after failure
to provide the Company with information
concerning interests in those shares required to
be provided under the Act.
No person has any special rights of control over
the Company’s share capital and the directors
are not aware of any agreements between
holders of shares which may result in restrictions
on voting rights.
Restriction on transfer of shares
There are no restrictions on the transfer of
securities in the Company, except:
that certain restrictions may, from time to
time, be imposed by laws and regulations (for
example, insider trading laws); and
pursuant to the Listing Rules of the FCA
whereby certain employees of the Company
require its approval to deal in the Company’s
shares.
The Company is not aware of any agreements
between holders of securities that may result in
restrictions on the transfer of securities or voting
rights.
Purchase of own shares
At the AGM on 6 May 2021, a resolution was
passed giving the directors authority to make
market purchases of Company shares up to
4,635,754 shares of 5p each at a maximum
price based on the market price of a share at
the relevant time, as set out in the resolution.
No purchases of shares were made during the
year pursuant to this authority. The authority
expires on the date of this year’s AGM or close
of business on 6 August 2022, whichever is
earlier. A resolution to renew this authority will
be proposed at this year’s AGM, as explained
further in the Notice of Meeting to shareholders
accompanying this annual report.
Strategic report
Governance
Financial statements
Other statutory information continued
Dividends and distributions
The Company may, by ordinary resolution, from time to time, declare dividends not exceeding the
amount recommended by the Board. Subject to the Act, the Board may pay interim dividends, and
also any fixed rate dividend, whenever the financial position of the Company, in the opinion of the
Board, justifies its payment. An interim dividend of 30p per share was paid on 26 October 2021 and
the directors recommend a final dividend of 62p, making a total for the year of 92p. Further details
can be found in note 7 to the consolidated financial statements on page 190. Subject to shareholder
approval at the 2022 AGM, the final dividend will be paid on 18 May 2022 to shareholders on the
register at close of business on 29 April 2022.
The Board may withhold payment of all or any part of any dividends or other monies payable in
respect of the Company’s shares from a person with a 0.25% interest if such a person has been
served with a restriction notice (as defined in the articles) after failure to provide the Company with
information concerning interests in those shares required to be provided under the Act. Other than
as referred to under ‘Morgan Sindall Group Employee Benefit Trust’ below, during the year there were
no arrangements under which a shareholder has waived or agreed to waive any dividends nor any
agreement by a shareholder to waive future dividends.
Morgan Sindall Group Employee Benefit Trust
Zedra Trust Company (Guernsey) Limited, as Trustee of the Trust, holds shares on trust for the benefit
of our employees and former employees of the Group and their dependants that have not been
exercised or vested. The voting rights in relation to these shares may be exercised by the Trustee and
there are no restrictions on the exercise of the voting of, or the acceptance of any offer relating to,
those shares. The terms of the Trust provide that any dividends payable on the shares held by the
Trust are waived unless to the extent otherwise directed by the Company from time to time. The Trust
waived its right to the 2020 final and 2021 interim dividend paid during 2021 and abstained from
voting at the AGM. Details of the shares so held may be found in the consolidated financial statements
on page 179.
157 _ Morgan Sindall Group plc Annual Report 2021
Substantial shareholdings
As at 31 December 2021 the following information has been disclosed to the Company under the
FCA’s Disclosure Guidance and Transparency Rules (DTR 5), in respect of notifiable interests in the
voting rights in the Company’s issued share capital:
Name of holder
abrdn plc
Numis Nominees (Client) Limited
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